State of the Market! Realogics Sotheby's International Realty Compares Region's Affordability to Other Pacific Rim Cities

Not so Bad — Seattle MSA is Effectively Twice as Affordable Compared to Vancouver, BC

It’s a new year, and that means that market pundits will review the year-end statistics. Despite the news from media headlines about meteoric increases in home prices around the Seattle metro area, we may actually still be undervalued. That’s the view of analysts at Realogics Sotheby’s International Realty, who have been studying the data for their year-end report. When dividing the median home prices (what we need to pay) into the median household incomes (what we earn), we find that the Pacific Northwest remains relatively affordable in comparison with the other West Coast gateway cities of Vancouver, BC, San Francisco, and Los Angeles.

Above: RSIR explored the latest median home prices for 2015 of the West Coast gateway cities and related that to the most recent data on median household incomes to compare the relative unaffordability of each market.

Even upon isolating the specific market areas to include all housing types (condos, townhomes, co-ops and single-family or detached homes), RSIR found that the Seattle Metro Area (Seattle-Bellevue-Everett) and both the cities of Seattle and Bellevue are still far more affordable than their West Coast peers in the U.S., and certainly less expensive than the Vancouver, B.C. region.

“It’s a function of relatively high incomes in the region while corresponding home prices have not escalated as much as they have in other West Coast markets,” said William Hillis, RSIR’s Research Editor and Publisher. “We can expect to be catching up now that we are experiencing increased demand from foreign nationals, and it’s likely that we will start seeing more renters become homebuyers in the years ahead.”

Hillis notes that Vancouver, San Francisco, and Seattle have long enjoyed foreign direct investment from Asia, mostly from China, and as such have become what urban planner Andy Yan in Vancouver has called “hedge cities.” In a hedge city, the local price of real estate is not just influenced by local income or population growth, but by external demand forces like international homebuyers. Perhaps the most shocking revelation is that the benchmark value of a detached home in the Vancouver metro area is now $1.248 Million—up 24.3% in one year according to a new report by The Vancouver Real Estate Board and as reported in theVancouver Sun (January 7, 2016).

Furthermore, if you isolate the single family market in Vancouver the effective cost of ownership is just shy of Hong Kong—the most expensive real estate market in the world.

“Clearly, Vancouver is one of the most unaffordable markets in the world based on prevailing incomes, but its residents are global citizens—just like London, New York City and Hong Kong,” adds Hillis.  “Even though prices here are rising, the Seattle area can and does attract similar buyers without as much of an affordability gap, offering its renowned quality of life with better prospects for capital appreciation. These are all reasons why we’ve become more favored over the more typical, more expensive West Coast gateways.”

To be sure, the Seattle/Bellevue area has witnessed a significant rise in international home buying, especially from China.  A year ago, China Daily accurately prognosticated the market demand by Chinese nationals hinting that Seattle may be “globally undervalued” (“Fengshui in Seattle: City’s real estate draws Chinese”).

In response to the trends, RSIR has played a leading role connecting homebuyers on both sides of the Pacific Ocean with their Asia Services Group (ASG) – a team of brokers specialized in the languages and logistics when working with a foreign buyer. The group recently sponsored the region’s first all-Mandarin magazine called Seattle Luxury Living as published by Tiger Oak Publications. ASG also built a custom WeChat app with adSage targeting the WeChat social media platform’s subscriber base of 600 million (and growing) in China and around the world. RSIR executives recently released a video documentary on the trends for foreign direct investment and immigration called East Meets West. 

Nowhere locally has the influence of foreign buyers been more evident than in West Bellevue (NWMLS #520), where 2015 ended with a median home price of $1,080,000, according to NWMLS data. That’s a 17.4% increase from 2014, and nearly 88% higher than the 2011 median home price of $575,900.

Hillis believes the recent turmoil in China’s equities markets will only drive more emigration and foreign direct investment to North America, especially to rising markets like the Seattle/Bellevue metro area. The recent corrections in the Shanghai Stock Exchange and regulations on housing reminds Chinese nationals that their economy (and their personal investments) are very much influenced by the government.

“We’ve been discovered,” said Hillis. “Global wealth is always flowing to emerging markets, and considering the relative value and lifestyle proposition we offer, it isn’t surprising that more and more foreign buyers are drawn here. Real estate in America is considered a blue-chip investment that you can enjoy. You can’t live in a stock portfolio.”

NOTE: Information was obtained by sources deemed reliable but cannot be guaranteed. E&OE.