The Seattle housing market has proven to be resilient during the coronavirus pandemic. According to Realtor.com’s Housing Market Recovery Index, the Seattle metro area crossed the benchmark for recovery back in June 2020 and has been doing well ever since. As of October, the Index sits at around 120.
Really, the Seattle housing market is thriving. To be named the #1 best real estate market in a study carried out during COVID-19 is a pretty great accomplishment. Mashvisor’s data also shows that Seattle real estate investors are continuing to enjoy a good return on investment on rental properties:
Mashvisor’s Real Estate Market Statistics – October 2020
- Traditional Rental Income: $2,328
- Traditional Cash on Cash Return: 2.1%
2020 has been a generally positive year for Seattle real estate. But what will 2021 look like? Here are our Seattle housing market predictions for next year.
Related: The Effect of the Coronavirus on the Seattle Real Estate Market
#1. 2021 Will Not See Droves of People Leaving the Seattle Housing Market
Seattle is the 18th largest city in the United States, by population. Not only is it a large city, but it’s quite infamous for being expensive, having the 9th highest cost of living in the nation. So many are speculating whether or not the Seattle housing market will be negatively impacted by the “urban exodus” – the move from large cities to smaller, suburban and rural areas in search of more space and, more importantly, affordability.
Such a loss of population would probably mean a drop in Seattle home prices as there would be less demand for real estate and a simultaneous rise in housing inventory. Additionally, this could mean a loss of renters for real estate investors.
However, the Seattle housing market forecast on this front tells us this is not likely to happen. It hasn’t actually been happening in 2020 as many suspected and it probably won’t happen in 2021. The evidence? Well, it turns out, not only is there no mass exodus, but people are actually leaving places like San Francisco for Seattle. So if this was keeping you from buying an investment property in Seattle, there’s no need to worry.
#2. Inventory Will Remain Low in 2021
It’s clear that the Seattle housing market 2021 won’t see a boost in inventory due to out-migration. And in general, most experts predict that the housing inventory shortage will continue to be an issue for Seattle next year.
Looking at Realtor.com’s data for the current housing market (September 2020), we can see that active listings sit at 6,028 for the Seattle metro area. This is a 26% year over year (YoY) drop. This drop is likely due to the fact that homeowners in the Seattle real estate market are jumping on the low mortgage rates and refinancing or they are still waiting out COVID-19, the presidential election, or even the wildfires.
Even if these homeowners were to flood back into the market in 2021, it probably won’t be enough listings to boost the housing inventory in the Seattle real estate market significantly.
#3. Demand for Seattle Real Estate Will Continue Rising
Although everyone expected demand for real estate and home sales to plummet across the US housing market due to COVID-19, it simply hasn’t. In the Seattle housing market, as in much of the US, low mortgage rates are driving demand as they are aiding some buyers to get more affordable mortgages. These buyers – specifically millennials and first-time homebuyers – are not letting the chance to get historically low mortgage rates pass them by.
The mortgage rate forecast for 2021 is that rates will remain low. Fannie Mae predicts that they will go as low as 2.9% next year. With this, the Seattle housing market prediction is that demand and home sales will continue to rise, driven by low mortgage rates.
#4. Seattle Home Prices Will Continue Rising
In the Seattle housing market forecast 2021 is rising prices.
Referring back to Realtor’s data, we can see that the median list price for the Seattle metro area in September 2020 has actually gone up:
- Median List Price: $628k, up 5% YoY
Even more remarkable, Seattle recorded a 7% YoY increase in house prices in July, the second-largest gains among the top 20 cities tracked by the S&P CoreLogic Case-Shiller Index.
The Seattle housing market prediction for prices? These house price trends are likely to continue in 2021. The combination of high demand and low inventory is sure to make it so.
Looking at Zillow’s Seattle real estate market forecast for house price appreciation, this prediction is confirmed. Zillow sees property values going up by 5.6% from now through August 2021.
It is important to note that any areas hit by wildfires may see a drop in home prices from now until next year, however.
#5. The 2021 Seattle Housing Market Will Remain a Seller’s Market
It goes without saying that if high demand and low housing inventory are putting pressure on house prices, you have yourself a seller’s market. Although COVID-19 had many predicting that major markets like Seattle would fall into a buyer’s market quickly, this simply has not been the case. Days on market is one indicator of a seller’s market and currently, it is 35 (down 18% YoY) for the metro area.
With Seattle real estate market trends expected to essentially continue on the same trajectory, a seller’s market is in the 2021 forecast. The Seattle housing market is not likely to go through any kind of cooling-down phase in the foreseeable future.
Related: Will the 2021 US Housing Market Be a Buyer’s Market or a Seller’s Market?
#6. As Affordability Becomes More of an Issue, Rental Demand Will Surge
Although affordability continues to be an issue for local residents, it does have a positive aspect for Seattle real estate investors. Owning a rental property in Seattle does mean high demand which translates into good occupancy rates and cash flow. Currently, the renter population is around 55% according to NeighborhoodScout. Mashvisor’s data shows that the price to rent ratio is currently 27. This means residents find it much more affordable to live in a Seattle rental property than buying their own homes.
With the Seattle housing market predictions 2021 of rising prices and no major exodus, it is very likely rental demand will continue to rise.
#7. The Seattle Housing Market Will Not Crash in 2021
Another prediction brought about by the coronavirus was the bursting of housing bubbles all across the nation and a housing market crash. So will the Seattle housing market crash in 2021? Not likely.
For this to happen, a large amount of inventory has to hit the market at the same time that demand drops – drastically so. This would cause house prices to plummet. However, demand is still rising and inventory still remains tight. As these trends will continue into 2021, there is no housing market crash in sight.
#8. These Are the Best Neighborhoods in Seattle for 2021
There are plenty of good reasons for investing in Seattle real estate in 2021. But you want to make sure that your new Seattle real estate investment is located in a profitable neighborhood. Our next prediction will help you with this. Here are the best places to invest in real estate in Seattle. The neighborhoods on this list were selected because they currently offer rental property investors good cash on cash return in 2020 and are expected to do so in 2021.
#1. Highland Park
- Median Property Price: $440,000
- Price per Square Foot: $314
- Price to Rent Ratio: 14
- Traditional Rental Income: $2,673
- Traditional Cash on Cash Return: 4.4%
#2. North Queen Anne
- Median Property Price: $296,000
- Price per Square Foot: $645
- Price to Rent Ratio: 16
- Traditional Rental Income: $1,550
- Traditional Cash on Cash Return: 3.8%
#3. Genesee
- Median Property Price: $822,500
- Price per Square Foot: $370
- Price to Rent Ratio: 18
- Traditional Rental Income: $3,775
- Traditional Cash on Cash Return: 3.0%
#4. Maple Leaf
- Median Property Price: $875,000
- Price per Square Foot: $360
- Price to Rent Ratio: 19
- Traditional Rental Income: $3,890
- Traditional Cash on Cash Return: 2.9%
#5. Jackson Place
- Median Property Price: $762,000
- Price per Square Foot: $399
- Price to Rent Ratio: 19
- Traditional Rental Income: $3,308
- Traditional Cash on Cash Return: 2.8%
#6. Little Saigon
- Median Property Price: $638,725
- Price per Square Foot: $498
- Price to Rent Ratio: 22
- Traditional Rental Income: $2,383
- Traditional Cash on Cash Return: 2.5%
#7. Uptown
- Median Property Price: $539,250
- Price per Square Foot: $664
- Price to Rent Ratio: 18
- Traditional Rental Income: $2,445
- Traditional Cash on Cash Return: 2.5%
#8. Beacon Hill
- Median Property Price: $769,990
- Price per Square Foot: $316
- Price to Rent Ratio: 22
- Traditional Rental Income: $3,024
- Traditional Cash on Cash Return: 2.2%
#9. Northgate
- Median Property Price: $641,225
- Price per Square Foot: $490
- Price to Rent Ratio: 26
- Traditional Rental Income: $2,053
- Traditional Cash on Cash Return: 1.8%
#10. Roxhill
- Median Property Price: $547,000
- Price per Square Foot: $466
- Price to Rent Ratio: 23
- Traditional Rental Income: $1,946
- Traditional Cash on Cash Return: 1.8%
Ready to Start Your Search for a Seattle Investment Property?
If you want to get your hands on a Seattle investment property today to enjoy some of the benefits it will bring in 2021 (cash flow and appreciation), start your search here at Mashvisor.
Learn More: How to Find Investment Property in the Seattle Real Estate Market