In Seattle and Portland - also Bellingham, Bremerton and Eugene - the ratio of home prices to rents is so high that regular investments in rental property are not a good bet. Investors can either buy single-family homes and divide them into multiple rental units, or can pursue higher-income renters. In Seattle, the latter isn’t a bad idea; 45 percent of the population is renting, and the high average income - $65,000 - means there are a large number of software engineers at upper-pay levels who can afford high rents.
The cyclical risk of the high-rent strategy, however, means that investors should plan no more than a five-year horizon.
In Seattle, further price increases won’t lead to a highly over-priced market that could crash - there’ll be a soft landing - but in Portland an eventual price decline is quite likely because price are already high. That doesn’t mean you shouldn’t invest in Portland, just that you need to have an exit plan and stick to it.
In Seattle, I don’t buy that SFH supply will catch up with demand. They aren’t building more SFH in Seattle unless they tear down and existing home. The land is built out and geography creates limitations.
West: There’s the Sound, so unless they build homes on water you aren’t adding supply there.
North: Land exists, but I-5 is the only highway N/S which makes commuting horrible.
South: Land exists, but there’s the same issue with I-5 as the only highway. There is light rail to the South which helps.
East: Lake Washington is huge and creates a natural barrier. I-90 and 520 and the only two highways that cross it, so traffic bottle necks. You don’t have to go too far before the commute is undesirable.
It is less or more dramatic than SV? For example, price per sqft of Cupertino vs Fremont is about 2:1. In Austin, similar ratio 78759 (near Arboretum) vs 78660 (Falcon Pointe) is about 2:1.
According to Zillow, sub markets in Austin are in different temperature:
Warm: Cedar Park
Balanced: Pflugerville
Cool: Avery Ranch
I haven’t compared price/sq ft by suburb. If definitely varies within the city. In general, anything south is cheaper. You have to go a ways north before prices start to fall. There was an article I posted awhile ago that rated the hottest neighborhoods. It was based on % appreciation and average DOM… Most of the hot areas are just N or Lake Union and the canal. Bellevue is probably the closest to Palo Alto. It’s downtown has better density though.
For the purpose of the study, millennials were defined as those born between 1981-1992, excluding those born between 1993-1996 because they were still teenagers. Population and salary information was collected from the Census Bureau data between 2012 and 2017.
Study is passe’
Millennials are flighty. Another recent study using just 2017 data suggests the westward trend has faded in recent years, in favor of areas like New Haven-Milford, Connecticut; Madison, Wisconsin; and Syracuse, New York.
