Seattle housing market is ‘driven by true demand and true limited supply’

It’s an increasingly difficult market for first-time home buyers in Seattle, but it’s not a bubble.

That’s the word from Zillow’s Chief Economist Svenja Gudell who recently gave the Seattle City Council an overview of the housing market.

Related: Mayor Ed Murray proposes to double Seattle’s housing levy to $290 million

Gudell tells KIRO Radio there are distinct signs that signify a housing bubble. One is speculation, or people buying homes just for the investment.

“I don’t think we’re seeing a ton of speculation in the Seattle market. People actually want to live in these homes that they’re searching for,” she said. “We’re still seeing an elevated amount of cash buyers but fewer now than we did two years ago.”

“These increases in prices that we’ve been seeing is not driven by investors just trying to flip homes over and over,” she said. “It’s driven by true demand and true limited supply.”

Gudell’s data shows how tough it is for buyers. The inventory is very low. It’s a seller’s market and buying is incredibly competitive, often with 5-10 offers on every sale.

So if you own a home and consider selling, that seems like good news. But it’s not great news if you want to turn around and buy another home in Seattle. Those people don’t want to be a part of that tough buyer’s market – and that’s why inventory stays low. They just stay in their home and renovate.

Sure, there are cranes all over the place building new housing inventory, but Gudell notes the construction boom isn’t that big in the grand scheme of things.

“We’re currently building a lot at the medium to high-end – so a lot of luxury homes are being built and expensive homes in general,” she said. “And [builders] are not really targeting too many homes right at the median price or even below that. But if you’re a first time home buyer, that’s the type of home you’re going for.”

The median is $533,000 right now. That’s up 14 percent from a year ago. And if you want to avoid private mortgage insurance fees and put 20 percent down on your home, that equates to about $100,000 down. If you’re in the low-income bracket and trying to buy in Seattle, that’s just out of reach.

That’s what the Seattle City Council will be grappling with while tackling affordable housing and skyrocketing rent. Over the next several weeks, the council will be reviewing Mayor Ed Murray’s proposed Seattle Housing Levy.

The current levy expires at the end of 2016. The mayor’s proposal would aim $290 million towards affordable housing – that’s twice the size of the current levy.

The council will hear more details on the mayor’s housing levy proposal next week. Council members will then have several weeks to review and amend it before deciding whether to send the plan to voters in August.