Are Falling Seattle Home Prices Good News? Redfin's Chief Economist Has Answers.

[00:00:09] Hello and welcome to the latest edition of Seattle Nice, the only podcast that tells you what's really happening in Seattle politics. I'm David Hyde, thrilled to welcome back to this podcast after her brief hiatus, the one, the only, Erica C. Barnett of Publicola. Hello, it's good to be back. And political consultant and substacker Sandeep Kaushik. Hey, David. I'm not sure about the substacker part, but hey.

[00:00:33] A aspiring substacker. Today, we're talking about the Seattle housing market with a PhD economist and the chief economist at Redfin, Daryl Fairweather. She's also the author of Hate the Game, Economic Cheat Codes for Life, Love, and Work, and a podcaster at the Fairweather Report. Welcome to the podcast, Daryl Fairweather. Hi, thank you for having me.

[00:00:56] So I just wanted to start out by asking a kind of general question about what's happening with the Seattle housing market right now. I saw a headline saying something like, Seattle's housing market is dropping faster than any other, prices are dropping faster than any other place in the country. So is that right? And what's going on? Yeah, Seattle's housing market is weak.

[00:01:21] There are many more sellers than there are buyers, and that is what's causing this drop-off in sales and also the decline, or at least the leveling off of prices, which is, I think, just a very different market than what Seattleites got used to pre-pandemic or even during the pandemic, when Seattle was always at the top of the list in terms of demand and price increases. So, yeah, Seattle has fallen from grace a bit in terms of price increases.

[00:01:51] But, you know, if you're trying to buy a house in Seattle, it's a good thing that prices are finally starting to moderate. And just as a follow-up, can you talk about some of the factors that are going into that? I mean, is it that the economy is cooling? Is it that the AI bubble is starting to burst? That's been a big factor in tech jobs here in Seattle. What's the reason for that happening? Yeah, I think – so mortgage rates are quite high compared to what they were during or before the pandemic.

[00:02:21] We thought mortgage rates were going to come down a bit this year. They did for a little bit. But then the conflict in Iran started, and that sent oil prices and mortgage rates up. And that's impacting every market in the entire country because everybody needs a mortgage in order to buy a home. But it does have a bigger impact in more expensive markets. The impact of mortgage rates on mortgage payments isn't linear. It actually increases the more expensive the house is. And so that hurts more in an expensive market like Seattle.

[00:02:51] And, you know, some people are able to navigate around those mortgage rates by using cash. And in San Francisco, for example, their housing market is quite strong because their economy is strong with the AI boom. But Seattle's tech scene seems to be more in decline. You know, Amazon has been doing layoffs. Other tech companies have been doing layoffs. The impact of AI seems to be more a scale back or at least like not this hiring frenzy that was happening in the 2010s.

[00:03:18] So without people moving into Seattle with these high paying jobs and also the current residents being up against high mortgage rates and high prices, that has caused a slowdown in the market. Obviously, we've seen this leveling off in prices, fewer home sales, maybe at the upper end, you know, kind of people making high end tech money. There's been, you know, that the actual kind of fundamentals of the economy are kind of depressed.

[00:03:45] But those seem like to me like shorter to maybe midterm factors. What's the long term outlook for housing in the Seattle market? Is it really is this leveling off something we should expect to continue or are we basically still fundamentally in a market that over the long term is going to see rising prices? I think the leveling off will continue.

[00:04:14] The dynamic that we saw in the late 2010s was driven by so much hiring and so much population growth, especially of high earners in the Seattle area. And it was up against supply constraints. And the late 2010s, Seattle did not have, you know, the zoning that it has now. There's more movement now to get more housing developed. So that should be better for supply. And also there isn't this demand pressure from so many people moving in. I don't think that's going to change.

[00:04:43] I don't think Amazon is going to reverse course in terms of how many tech workers they're hiring. I think that the slowdown in hiring is is going to continue. And unless there is some other big employer that steps up and starts hiring a ton, then I would expect it to lay off to level off. I mean, I know Seattle had like booms and busts related to employment in the past with Boeing being a big driver of employment.

[00:05:08] And then that kind of fading off and then Amazon stepping in and Microsoft stepping up to bring more talent to the area and drive the economy. So we'll see if there's some other emerging sector on the horizon. But for now, I think that things will level off and we'll probably see prices continue to grow slower than incomes. Right now, income growth is a bit weak, but earlier in the year it was looking stronger.

[00:05:34] So I guess that's just another factor is are people's incomes going to keep up or are going to continue to increase even though these companies aren't hiring as much as they used to. So if housing prices kind of mid to longer term are going to go up at a slower pace than income, then we're really going to see a slow rise in affordability and housing affordability in terms of home buying. Is that right? Yes. Yes.

[00:06:03] This will be a slow reset in terms of housing affordability. Mortgage rates will probably come down too. And unlike in the past when lower mortgage rates just meant more buyers and still not enough sellers, when mortgage rates come down, it will bring more sellers to the table because sellers have been reluctant to give up their record low mortgage rates because if they bought again, they'd have to buy at a high mortgage rate as well.

[00:06:26] So I think the next time mortgage rates fall, we'll see more of a balanced reinvigoration of the housing market that leads to more sales, but not necessarily higher prices. And that lack of price growth, I anticipate will be slower than wage growth, which will, yeah, improve affordability. But we've already gotten to this place where affordability has gotten so bad that I think it will – I don't know if people will really feel like things are getting better for them because they might not have noticed how bad things got in the first place.

[00:06:55] And are you talking about all parts of the market from rental housing to single-family homes to apartments to sort of luxury homes or luxury apartments? Or is this going to be kind of uneven? I'm mostly thinking about for-sale housing. The rental market usually follows the for-sale market because it's just like demand for housing and the economy and stuff like that.

[00:07:19] But recently there's been this divergence between rental affordability and for-sale affordability. Because mortgage rates went up so much, it is more expensive to buy a one-bedroom condo on a monthly basis than it is to rent a one-bedroom apartment. And the gap could be like hundreds of dollars a month. I think that gap is going to narrow where rents are going to go up as mortgage payments start to fall until they come more into alignment with one another.

[00:07:50] Yeah, I have to say, I mean, there was a recent Seattle Times article that said that we have one of the biggest gaps between, you know, that makes it, you know, essentially impossible for any renter to even consider buying a house. And so as we're talking about things like affordability in terms of the housing market, I mean, it feels very, very distant from what the experiences of most people I know, which is, you know, it is really expensive to rent here.

[00:08:19] It is impossible to buy. And, you know, and I guess I'm just sort of curious. I mean, you know, just an anecdote. My next-door neighbors where I live just had to move out because their rent went up to $4,500 a month. And they, you know, they rent a small house. So, you know, are there any sort of strategies that you see on the horizon or any, you know, signs that rental prices are going to actually come down? Because that is not been the trend.

[00:08:49] And when they dipped in Seattle, it's been very, very temporary. Yeah, so I think this is what I was getting at before, which is that prices got so expensive really during the pandemic. And then a little bit after the pandemic, like in like 23, 2024, that even though things are going to get slightly better every single year, it doesn't mean that we're going to get back to pre-pandemic affordability.

[00:09:14] And if that's what people are measuring it against, like if you're going from $2,000 a month rent to $3,000 a month rent, then I'm telling you, oh, the next month or next year, it's going to be $2,995. It doesn't really feel like things are getting meaningfully better. So, yeah, I think that the reason why Seattle's housing market is doing so poorly is because so many people can't make it work here anymore.

[00:09:43] They have to move somewhere else to have an affordable lifestyle. And as people leave, then, you know, less population that in and of itself drives down prices, but not enough for those people to stay in the first place.

[00:09:58] And just a quick follow-up, have you seen, you know, nationwide, have you seen any policy strategies that have worked to, you know, to maybe at least keep rents a little more on an even keel, you know, regardless of sort of what else is going on in the economy? Yeah, what happened in Austin, I think, is a good example. During the pandemic, Austin was the hottest migration destination. People were leaving tech hubs all around the country to move to Austin. That drove up prices and rents really fast.

[00:10:28] But because Austin had cleared the way for new housing development, there was a lot of new construction, and then prices fell. They didn't fall back to pre-pandemic levels, but they did, like, kind of meet halfway between the heights of what prices were during the pandemic and what they were before the pandemic. And so in the end, you know, you're left with at least a more affordable situation than what they were headed towards. And it really is because they developed so much housing.

[00:10:54] Now, some people, like, spend that as a negative thing because people who maybe bought in 2022 are not able to sell for what they bought it for. For the most part, you know, people's home equity has still gone up if they bought before the pandemic. So compared to Austin, I guess, how do we compare to Austin in terms of housing starts and construction? I mean, obviously, we went through a phase where we built a lot of housing in Seattle.

[00:11:19] And but, you know, we recently had a couple of people close to the development community on the podcast who are pointing out to us that housing starts, you know, and multifamily housing in particular. Those construction permits and all that stuff has just fallen off a cliff, right? Like that there was just a massive drop off 80 percent or something.

[00:11:45] And so they're obviously advocating certain policy solutions to help try to try to prime the pump and jumpstart that. But but where do we stand Seattle in terms of where we are now and where we've been in terms of housing starts relative to other peer cities? Hey, Seattle nice listeners. Seattle politics got you low.

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[00:12:43] That's Ikes.com. Yes. I mean, Austin is number one in terms of the amount of housing that they develop. And that's true. That was true before the pandemic. It was true during the pandemic, even when everyone else was building as much as they possibly could. And it's still true now, even as construction broadly has slowed down. It's still stronger in Austin than it is in other places.

[00:13:10] So they just have a policy landscape that makes it easier to build in Austin than it is in Seattle. And yeah, I remember when I lived in Seattle, I would see cranes in the sky all the time building condo towers downtown. But it still was not enough at the time.

[00:13:30] And also a lot of that housing was one bedroom or studio apartments, which is great if you're a young person earning a lot of money in tech, but not great if you are, you know, a middle class or upper middle class, even family trying to buy a home to accommodate your growing family. So part of it is like the wrong kind of housing. There wasn't enough of that missing middle.

[00:13:55] Although there has been progress there, especially when it comes to upzoning single family housing to allow for more additional dwelling units and duplexes and that kind of housing. We talk a lot about government policy on this podcast and how it affects the housing market. That's kind of what we've been hinting at here, comparing us to Texas and that sort of thing. Zoning, red tape, blah, blah, blah. But of course, there are other factors that affect affordability.

[00:14:19] And we know that productivity gains in the housing sector have really lagged other parts of our economy in terms of apartments or single family homes. And on a recent episode, not having an economist with us, I suggested that perhaps AI could help with affordability in the future. But I don't know anything about economics or architecture or home building. Or AI. So I was out of my depth. Or AI. Out of my depth.

[00:14:47] And so I was pilloried on this podcast for having the audacity to make that suggestion. I still think I was onto something, but I'm curious what an expert like yourself thinks. There are some areas where I think AI will be helpful in terms of the technology behind modular housing. I think AI will make that sector more efficient and hopefully bring down prices of that type of modular housing. But we need the policy to change, too.

[00:15:17] In the Road to Housing bill, which was passed by Congress, I think it's going to the Senate now, there are a lot of new policies around modular and manufactured housing to make it easier to finance and deliver on site because it's been treated differently because it's been kind of demonized. I don't know if that's the right word. Because it's association with, like, trailer parks. But that is starting to change at the federal level. And we also need things to change at the local level.

[00:15:45] And Seattle's already done this in terms of legalizing ADUs. But if they could make it more efficient to apply for permits, get permits approved, maybe some of that technology could be incorporated into the review process or even the application process, then that could bring down the amount of time between buying land and then that land actually getting developed into housing. Right. So what you're saying is that it's both. We have to look at big changes to government policy.

[00:16:14] But there can also be greater efficiencies in the housing market that could bring down costs, which have just also skyrocketed just since COVID in the last few years, right? Yes, yes. But a lot of, like, the development of housing is labor that I don't think can be replaced by AI to, like, doing the plumbing, the electricity, that kind of stuff. Those are jobs that probably won't get replaced by AI.

[00:16:42] And, yeah, so I don't think it's going to be a uniform increase in efficiency. They're probably going to be bottlenecks to developing more housing even with better technology in certain parts of the development process. Yeah. And I will just point out, David, that we did note, I believe, and I've written about the fact that, you know, the departments in the city that are,

[00:17:05] you know, the issue permits have said they're going to use AI, but permit times have been cut in half for a lot of housing, you know, related permits. So we actually have cut down a lot on that even without AI. Whether AI will produce more efficiencies, I mean, I guess remains to be seen, but I think that's a pretty minor part of the actual housing development process that happens right at the beginning.

[00:17:30] So, I mean, I don't know what kind of efficiencies you were thinking of when you were saying that AI was going to make housing cheaper, but I think, you know, that's – I think that's pretty speculative. I'll just repeat that I think that's pretty speculative. That's fine. We shouldn't relitigate it, but I'm glad to have been proven right. Do you have a question? Well, I would say you're proven wrong, actually. That's fine. Well, I don't know. I mean, maybe – because you said that happened pretty recently.

[00:17:55] And one theory that I have is that with AI chatbots, politicians, when they ask their – when they ask ChatGPT, how do we make housing more affordable, ChatGPT will help out these politicians and policymakers to get them to the right solution faster. So maybe there's some behind-the-scenes stuff that AI is doing that we don't even know about. I'll bring up some other things since we're talking about it. But when it comes to designing homes, when it comes to architects, when it comes to remodeling homes,

[00:18:22] all of those places are areas where AI is already involved. And, you know, it's just the beginning, for better or worse, of the kinds of efficiencies that AI might introduce. So, yeah, you're right, Erica. You said involved. You didn't say efficiencies. You're right, Erica. You're right. The existence of AI does not demonstrate efficiency and cheapness. I just want to point that out. The fact that it's inserted into everything does not mean that it is actually – Not necessarily. What I said was there's the possibility. Let's not get off – let's not get way off of it. All right. All right.

[00:18:52] What I said was there's the possibility that AI could – My housing is an interesting example because, you know, I mean, that is something that has been discussed, like, in this region. And we've kind of made progress on it. But as you said, Daryl, I mean, it is very much still kind of demonized. And I don't exactly know why. I mean, there's a lot of potential for it, I think, here in Seattle. But we've just never gotten over that hump. Yeah. Yeah. I think part of it might be the association with trailer parks.

[00:19:22] Another part of it might be that the resistance to losing some jobs. Because if you're saying all this housing is going to get built off-site, that might mean less work for laborers who live in the city of Seattle. Or – yeah. So, yeah. I can see why there's been political opposition. And there have been bumps in the road on the modular stuff. A couple of years ago, there was a significant – I forget their name, but they were a modular housing startup provider. Lock, I think.

[00:19:51] Yeah, here in the area. Lock house. And they were constructing – it's a – I know this because I'm on the DESC board, right? And it was a DESC building that was – that the city and others wanted to experiment funded through this company that was doing modular stuff. And, of course, in the middle of it, they went belly up, right? And financially, and there was a huge scramble to kind of then – you know, it was an experiment. And it was a failed experiment with these folks.

[00:20:20] And it ended up costing, you know, the affordable housing community, you know, money to kind of fill back in. So, it's just – when you have kind of situations like that, it creates a lot of caution. Yeah. Yeah. About going forward with these new technologies or what have you. So, there's a lot of talk. I'm from Houston originally. And, you know, Houston famously has no zoning.

[00:20:46] I mean, they do have land use regulations, but they don't have formal zoning. Whereas, I would say Seattle is kind of the opposite. We have maximal zoning. And any increase in zoning, you know, density is incredibly controversial. And I'm just curious, you know, do you see – where do you think a happy medium is sort of between the Houston model and the Seattle model where, you know, we fight over every square inch of land use?

[00:21:14] Yeah, I don't think Seattle could ever physically become like Houston because of just the nature of its geography. The city of Seattle, in terms of square miles, is pretty small compared to Houston. And it's bounded by the sound and by bridges. And it's just kind of difficult to have that sort of sprawl unless you're talking about sprawl out into the other suburbs, which is outside of the domain of the city. Maybe it's more like King County policy at that point.

[00:21:43] But I think that, you know, the happy medium is really thinking through where people are going to be living and how they're going to get to work. You don't want to just have a free-for-all where people can build housing wherever, where you also have a city dependent on cars like you do in Houston.

[00:22:03] I think that Seattle would be better off if they were very thoughtful about investing in public transit, which they are doing, and making sure that there is lots of housing density near those transit stops so that we can increase the population, increase housing without putting a strain on traffic and make quality of life still improve even with an increase in population.

[00:22:26] You know, on this issue of density, I mean, activism among homeowners has really centered on trying to, you know, prevent dense new housing. And one of the arguments is that it's going to harm property values. And I'm curious if you've ever seen that borne out in another city that has densified. Do property values of homeowners go down or up, or is it neutral? Well, you can see this in Austin, right? Like, Austin had this increase in population.

[00:22:53] It drove up home values, and then they built a lot of homes, and home values did come down. But that means that it's more affordable to buy a home in Austin. So, yeah, there is this inherent tension that if you want to make home prices more affordable, then you have to build more housing. But home prices being more affordable means that when other existing homeowners go to sell, they're not going to be able to get as high of a price as they could have gotten had there been no increase in supply in the first place.

[00:23:21] But for people who intend to stay in Seattle, it doesn't do them any good if they sell their home for a higher price, but then they have to go buy their next home at an even higher price. So, yeah, I guess if all we're trying to do is just increase the value of people's homes, then we shouldn't be building more housing. But I don't think that's the policy goal we should have in mind.

[00:23:42] I mean, we don't want people to feel like their home has gone down in value to the point they're underwater on their mortgages because that can harm the housing market and harm the broader economy. But it's okay if people's home values don't go up more than 5% every single year like it was in the 2010s. Is it true that the main thing kind of driving up housing prices, based on what you've been saying, is kind of the money flowing like a fountain from the tech sector?

[00:24:09] San Francisco's, you know, fountain is more robust right now. And so they're continuing to go up and ours is starting to dry up a bit. And so that's affecting the housing market, despite all these other things that we're looking at. That's the big deal in these expensive cities? That's the story of Seattle. So, yeah, in the late 2010s, Seattle benefited from an inflow of migration from San Francisco.

[00:24:37] So people were leaving San Francisco and moving to Seattle because they were both tech hubs. People did this because they could earn nearly as much money in Seattle as they could in San Francisco, but their housing costs would be much lower than it would have been in San Francisco. So for as expensive as Seattle got in the late 2010s, San Francisco was even more ridiculously expensive. And also more companies were relocating to Seattle or Seattle-based tech companies were doing really well at this time, bringing in more tech talent.

[00:25:05] And that did, you know, increase the incomes of people in the area, increase the population. But without an increase in housing supply, that just means there are more people with more money competing for the same number of housing units. And what's different now is that, yeah, there isn't this inflow that was present back then. People, tech workers are kind of able to work from anywhere now. So they're not just trading off San Francisco versus Seattle. They can really live anywhere across the country.

[00:25:29] And prices went up so much in Seattle that even people who might have thought Seattle was affordable in the 2010s, they can't afford it anymore, especially if they didn't buy a home already. If they're up against higher rents, then they're probably thinking about how can they maintain their quality of life. And if they can't do it in Seattle, they'll do it somewhere else.

[00:25:50] And my follow-up to that is, and it seems like the city's, one of the ways in which the city is thinking about trying to address this is to say, look, let's tax these folks more so that we can create more affordable housing through, for example, Seattle's new social housing developer just bought its first building, 61 million bucks. That's around $406,000 per unit, apparently. So that's one of the ways in which the city is trying to address the problem.

[00:26:21] How should we think about that in terms of what are the pluses and minuses of that approach for trying to increase affordability? Yeah, so Seattle, I mean, I've talked a lot about the tech sector and these high-income workers, but there are also plenty of people who live and work in Seattle who don't earn these six-figure tech salaries, and they still need a place to live, and they're important contributors to the economy.

[00:26:43] I mean, maybe they work in the public sector, or maybe they work in healthcare or something else, and their wages just haven't kept up with the cost of housing. And in order for Seattle to have a cohesive social fabric, you want these people to be able to still be able to afford to live in the places where they work. You don't want them commuting in from far away. It's going to be harder and harder to recruit these types of essential workers.

[00:27:09] So I think that's where a social housing program can meet the needs of a city that market-rate housing just isn't designed to meet. I think social housing can address these problems of, we know that there are these people who we want to live and work in our communities, but they have nowhere to live. So let's provide them a place to live that is affordable on the salaries that they're able to earn.

[00:27:41] So when we talk about housing locally, we're very – we tend to be – and look, Erica, David, and I are all Seattle residents, but we tend to be very, very city of Seattle focused, right, and pay much less attention to what's going on in the suburbs, right, regionally in terms of housing.

[00:28:00] And the reason I bring this up, maybe one of my most sort of heretical views, and I'm not even sure how strongly I believe this, but is one of the constraints we have on housing construction regionally is growth management, right, the Growth Management Act. We have a kind of arbitrary – it's there for reasons – but an urban growth line, right, that restricts on the other side of the urban growth line you can't develop and build housing.

[00:28:28] And I've often wondered, like, what if you move the urban growth line three miles farther out? Like, would that spur a huge wave of housing construction in the suburbs that could ease housing prices? So I guess my question is how have the suburbs been doing here in terms of housing construction relative to Seattle?

[00:28:47] Is there something there where, you know, maybe we can redefine our balance around sort of sprawl versus density kind of questions and make some gains in terms of housing affordability? Yeah, I'm not sure, like, how many housing units have been developed in the suburbs versus in the city of Seattle.

[00:29:07] But I will say that, like, you can kind of get into this trap if you keep moving out the urban boundary because that results in longer commute times. And then you're kind of saying, well, instead of densifying close to where people work, we're going to just have people work farther away. And then those people end up, yeah, commuting longer. And if they're paying for gas on top of their mortgage, then maybe they're not actually doing any better or maybe their quality of life isn't any better.

[00:29:35] So I think having those boundaries in place can kind of be a forcing factor to densify. But at the same time, there, like, isn't a lot of available land in the urban core. You have to redevelop single-family housing into multifamily housing if you're going to effectively densify. And that is just slower and harder to do than taking a plot of land and building a bunch of homes on it.

[00:29:57] So I would say if you are going to, like, take undeveloped land and develop it, make it as dense as you can, have a transit line that goes to that area. Otherwise, it's not necessarily going to improve quality of life for the people who end up living in those homes.

[00:30:13] Sandy, I kind of had the opposite spin on that question in my notes, which was, you know, how these restrictive housing policies that we have here in Seattle caused harmful suburban sprawl in our forests outside of the city. But, you know, that's just that's a different perspective, I guess. I think we're saying the same thing that, like, I think you want to reduce sprawl. I think that sprawl is an easy solution that doesn't actually solve what you want to solve.

[00:30:42] And to be clear, I don't want us to end up as, like, Houston is a big, sprawling city, right? They have no zoning, you know, and that's not what I'm suggesting here. I just do wonder, though, if there's stuff we could do to spur greater housing construction in the suburbs that might overall have a significant positive impact on affordability. Well, Sandy, if I'll just note that you and I and David, as you said, we all live in the city.

[00:31:10] Would you want to be one of those people that's forced out into the, you know, the Issaquah Highlands or North Bend or and drive into... Only if there's light rail. Yeah. If there's light rail, maybe. There will be in maybe 400 years. I don't even have light rail now, and I'm apparently never going to get it, according to this new Sound Transit. So anyway.

[00:31:33] You know, going back to just kind of Seattle's general attitude towards density, I mean, we are currently considering amendments to our comprehensive plan, which guides development and, like, where development can be and how much development. And our new mayor, Katie Wilson, has proposed amending the previous version of it to basically extend. So right now there's sort of density.

[00:31:58] More density will be allowed within a half a block of frequent transit stops, which to me is just, like, mind-bogglingly stupid that it's that small. But the idea of extending this is incredibly controversial. It might not happen. We're talking about doing these incremental little, you know, allowing three- to six-story development right around, you know, existing nodes of commercial activity.

[00:32:24] And I'm just curious, how, you know, if we do all that, you know, in the context of what you've seen in other cities, is that going to make any difference? And understanding that you haven't read the comprehensive plan and are just, you know, going off my description, you know, pretty incremental increases in density, allowing three-story apartment buildings and stuff like that.

[00:32:46] Yeah, I mean, it sounds like it's going to be great for the people who are lucky enough to live in one of those housing units that's only half a block away from transit because they'll be able to get to work quickly. They'll probably be paying high rent, though, or high home prices because it doesn't sound like there's enough supply to really improve affordability. But I guess, yeah, it sounds very incremental.

[00:33:11] Like, we're heading in the right direction, but you've got to push farther if you really want to improve affordability. I have just maybe a basic question about the Seattle market right now. If one were in a position to be able to borrow enough money to actually buy a house here or rent, given the current prices, would you have any advice for them? Would you be better off renting or buying a home? Like, which is a better financial decision?

[00:33:39] I mean, it really depends on how long you intend to stay in the home. If you're laying down roots and you intend to stay there for at least five years, then that's usually when owning a home beats renting. Even if currently rents are cheaper than mortgage payments, eventually mortgage rates will come down. You'll be able to refinance. And then also eventually, as you pay off your mortgage, you're going to be building equity, which you don't have the opportunity to do as a renter.

[00:34:04] So, yeah, I think it's less about, like, where home prices versus rents are headed because I think rents are going to start to catch up with home prices in the long run. That's just, like, the dynamic when it's cheaper to rent, more people rent, and then eventually rents go up. So just because it's a little bit cheaper right now doesn't mean in the long run it will be. I think in the long run those things will probably be more aligned to the point where it's really about how long you stay versus, you know, whether you're renting versus owning.

[00:34:31] Are there ever times where it would make more sense to just wait to buy a house and keep renting? I mean, if you don't have money for a down payment, if you think that you're going to get a windfall. No, based on the fact that the gap between what you might be able to pay in rent and the cost of buying a home is so great that you're like, well, until that gap closes, it's better to wait.

[00:34:57] The problem with waiting until the gap closes is that by that point, like, we probably are going to – you're going to be paying more in rent. Like, it's just so hard. It's just difficult to time. I usually advise people not to try to time the dynamics of the housing market or even the economy because that's hard to predict and you probably know more about your own personal readiness to buy than you do about where the economy is headed.

[00:35:22] And in the long run, those things will equal – like, the advantage of renting will start to fade and the advantage for home buying will go up because that's just how things get normalized in the long run.

[00:35:33] If you were – if you had a crystal ball and you knew that, you know, 2027 is the year where rents are going to start to go up faster than mortgage payments or that's the year that rents are going to be more expensive than mortgage payments, then, yeah, you'd probably want to make the jump like a couple months before that shift happens. But it's just hard to know exactly when that moment happens.

[00:35:57] And then that's when everybody wants to buy and then you're going to be competing against other buyers and it might just be more difficult to get an offer accepted or you might have to pay over asking price. You might get outbidded by somebody paying in all cash. So there's always going to be tradeoffs.

[00:36:11] This is a debate I've been seeing a lot, you know, kind of online on social media and stuff between, you know, some more center-left, I don't know, abundancy kind of, you know, left-of-center commentators and then more kind of movement-left types.

[00:36:27] And that's about this debate about, like, so Seattle's a city where we built a lot of housing over the last decade plus, but a lot of that housing was high-end, you know, kind of luxury, higher rent, higher cost housing. And, you know, the argument I hear is that's still okay as long as you're boosting housing supply.

[00:36:53] Like one side of the argument is as long as you're boosting housing supply and building a lot of housing, even if it's at the higher end of the income scale, the overall – the studies say that the overall impact of that over time is that it actually increases housing affordability. Whereas the other side says, no, you're just building high-end housing. You're creating a bunch of displacement where you're pushing out poor people and it's a big net negative.

[00:37:19] We need to have more public sector interventions to create housing for people of more modest means, right? And, Daryl, how do you see that whole debate? Yeah, so fundamentally there just aren't enough homes for everybody who wants to live in Seattle. And that's why prices went up. I mean, they're down right now in terms of for-sale house prices because fewer people want to live in Seattle right now.

[00:37:45] But in general, the reason prices got as high as they did was because there were more people who wanted to live there than there were housing units available. And when you have a dynamic where there are more people than there are housing units, the people who get housed are the people who have the most money to spend because they're the ones who are going to outbid or outpay people with lower incomes.

[00:38:06] So if you had enough housing for everyone, kind of like irrespective of what the quality of that housing is, then you wouldn't have this dynamic where affluent people are displacing lower income people. Now, even if you had just free market housing and you just got rid of all zoning restrictions and you moved to like the Houston model, you're still going to have people whose incomes do not meet their – or are not high enough for them to be able to afford adequate housing.

[00:38:36] And that has to do more with inequality and it has to do with maybe wages not increasing enough for certain sectors of the economy, which could happen. And that's why there's, I think, always a role for social housing because social housing is just how you help people who are low earners. It's a form of redistribution of income in my mind. You can give people money or you can give them a place to live.

[00:39:01] And if you give them a place to live, then you're meeting their basic need and they have more money left over for other things in their lives. So, yeah, I think we should be building – I think we should allow for both free market housing at whatever price point makes sense for the developers, for them to be in the market to build housing. But we should also think about the public's role in meeting the needs of its most vulnerable citizens, which might not just fall out of free market housing even if we clear the way for free market housing.

[00:39:32] But doing nothing makes things worse. Like just not building any housing doesn't prevent displacement. It can actually exacerbate it because then you have affluent people buying up older properties that could have been going to lower income people. So it's not the luxury development itself that causes the displacement. It's the fundamental scarcity of housing in the first place. What about price controls? What about rent stabilization? What's your take on that?

[00:39:59] You mentioned – we've talked about social housing, but what about price controls? I think price controls in the free market are counterproductive. They can actually lead to less development of housing because people don't want to get in the business of being a landlord if they can't raise rent to cover their costs. So saying that, I think that Seattle does have very strong tenant protections, and I think tenant protections are important. Like your landlord should maintain the property.

[00:40:26] They should give you notice with ample time if they're going to raise your rent, and you should be able to get long leases so that you can lock into a rental rate that makes sense – where you're not constantly having to move because your landlord is increasing rent. So I think price controls are like a very blunt instrument, and we should just be thinking more about how do we make sure that tenants aren't being exploited by landlords by the virtue of them not being able to afford to move.

[00:40:57] Daryl Fairweather, thank you so much. I learned so much on this episode. Yeah, thank you for having me. Thanks, Daryl. Thank you for coming on. That's it for another edition of Seattle Nice. She's Erica C. Barnett. He's Sandeep Kaushik. I'm David Hyde. Our editor is Quinn Waller. And thanks, everyone, especially our Patreon donors, for listening.