As Amazon plants HQ2 flags, Seattle's housing market shudders
Amazon.com Inc.'s announcement last week that it will add new headquarters in New York and Virginia, far from its hometown, injects new uncertainty into the already slowing Seattle market.
Seattle home sales are already down this year compared with last and home price growth has eased. Price cuts are becoming more common and bidding wars more scarce. Rental landlords are struggling to lure tenants, promising perks like free rent and $2,500 Amazon gift cards.
Amazon has increased its head count in Seattle to 45,000 people from roughly 5,000 over the last eight years. At the same time, home prices have increased roughly 50%, driven by the expansion of Amazon and other technology companies.
There are a range of reasons for the slowdown over the last six months, but one has been anxiety over Amazon's growth in the city, local brokers say.
While Amazon will remain in Seattle and is expected to keep adding jobs there, the Long Island City, N.Y., and Crystal City, Va., locations are likely to divert the spotlight and could slow that momentum.
"If you've got that much going on and you're really trying to get New York and Virginia up and running, you have a tendency to ignore Seattle, " said Greg Willett, chief economist at RealPage Inc., an apartment-data company.
In addition to slower hiring, some Amazon employees could decide to move to one of the new headquarters. According to Redfin, a Seattle-based real-estate brokerage, if one in 20 Amazon employees in the city were to list their homes that could lead to a roughly 10% increase in listings in the area.
Daryl Fairweather, chief economist at Redfin and a former behavioral economist at Amazon, said buyers who relocated to Seattle from the Northeast may decide to move back home. She said one friend who works at Amazon already has her mom calling and asking if she's going to relocate back to the Washington, D.C., area.
On balance, however, economists and real-estate agents said the Amazon news is benign compared with the negative effect that rising interest rates and high prices are having in deterring buyers. In October, the median home value in the Seattle metropolitan area grew 7.1% from a year earlier -- the slowest pace of appreciation since January 2013, according to Zillow.
The announcement of the HQ2 winners could even provide a small boost to Seattle's slowing housing market.
For one, the winning cities are just as, if not more, expensive than Seattle, alleviating fears there would be an exodus of Amazon employees to a new location where housing is more affordable.
"If Amazon had announced it was moving to a location where homes were more affordable, it may have been compelling for someone to leave," said Seattle Redfin agent Jessie Culbert.
Zillow saw a roughly 400% increase in online searches for listings in the Long Island City and Crystal City areas on the day Amazon announced the HQ2 winners. But only a small share of those searches have come from Seattle and most have come from people already living in those metropolitan areas, perhaps curious to see if the announcement has helped boost their home values, said Aaron Terrazas, a senior economist at Zillow.
Real-estate agents also note that the impending second-headquarters announcement created a climate of indecision and they are hopeful that more people will now move forward.
"Now that we have the announcement I think that degree of certainty will help people move forward in their process," Ms. Culbert said.
The greater impact may be on the apartment market because Amazon employees tend to be young urban dwellers who live in the high rises in and around the downtown core, said Matthew Gardner, chief economist at Seattle-based real-estate brokerage Windermere.
Thousands of luxury apartments have sprouted in the Seattle area in recent years with amenities ranging from mountain and water views to buildings that advertise "salmon-safe" practices.
Rents in downtown Seattle and the South Lake Union area, near Amazon's headquarters, have actually fallen about 2% this year, according to RealPage. Rents rose about 3% nationally during the same period. About 3,000 more units are also expected to begin construction early next year.
"If there's any more immediate effect it could be on the apartment market because they're building an awful lot of apartments downtown," Mr. Gardner said. "That could cause rental rates to see some kind of compression."
