Seattle’s Housing Rental Boom

A little over a year and a half ago, I wrote a blogpost  that got blown up a bit, on analysis of scraped Craigslist data that gave estimates on Seattle’s apartment prices. It was pretty easy to see how much of an impact each neighborhood’s location had on the price of an apartment in Seattle, with places like Belltown, Downtown, and Capitol Hill attracting the highest figures.

I wanted to come back last year and model prices again and never got around to doing it until a month ago, after also personally moving away from Seattle for over a year now. What I’ve found is absolutely astonishing in terms of growth and price inflation. But maybe I’m just new like everyone else to this city explosion phenomenon.

A couple of interesting graphs struck my eye. Here’s a comparison graph of the distribution of rent per month for unique apartments/housing in Seattle between the rental data that I scraped back in December of 2014 compared to this past month.

Blue represents July 2016 and Green represents Dec. 2014 in terms of a distribution of the monthly price of rent
Blue represents July 2016 and Green represents Dec. 2014 in terms of a distribution of the monthly price of rent

The difference is pretty sizable. In a span of a year of a half you can clearly see the median and mean of the July 2016 distribution of rent has moved to the right. Also the distribution of rental prices back in December 2014 was narrower than the July 2016 distribution. It looks like a higher quantity of premium housing has flooded the market with new apartment units being built. Since premium housing is usually associated with more one bedroom apartments, let’s look at the distribution of one-bedroom apartment prices.

Comparative Distribution of Studio and One Bedroom Apartments
Comparative Distribution of Price of Studio and One Bedroom Apartments

By eye-balling it, it looks like the gap between the center of each distribution in the one bedroom graph is wider than the overall comparative distribution graph. What about change in overall volume of apartments on Craigslist. Are there more one-bedroom apartments on the market now compared other sized units when looking at percentages between now and 1.5 years ago?

Comparative Percentage Quantities of one-bed, two-bed, three-bed apartments
Comparative Percentage Quantities of one-bed, two-bed, three-bed apartments

Interesting, so in July of 2016 we’ve seen a sizable increase in one bedroom places vs two bedroom places. This may be biased because of the timeframe that I scraped the data, but I don’t necessarily think it could cause such a high swing change. This could be the cause of one bedroom apartments being a luxury among new young professionals, brand new lonely Amazon tech workers, and an indicator of apartment units catering to newly arrived and rich transplants; industry workers that have moved from different cities to Seattle.

Looking more into building development, I did a quick check into Seattle’s Building Permits dataset and looked at the frequency of multi-family units being constructed throughout the years.

Building Permits Issued by Year of Multi-Family Unit Construction in Seattle
Building Permits Issued by Year of Multi-Family Unit Construction in Seattle

The x-axis is years (formatted weirdly by Google Sheets) and the y-axis is frequency. You can see the initial peak in 2007 followed by a huge ramp up in the past few years of new construction. The dip at the end is the incomplete year of 2016.

So Seattle’s been building a lot. Not at all surprising because of the high demand of housing, but the newer construction essentially allows for more higher premium housing that also probably skews the distribution of prices to the right. This also allows for more people like my friend Tom to choose newer housing over older housing for rent. His current landlord is raising his rent on his one-bedroom from 1600 to 1800 dollars, yet with the availability of newer buildings he has the options and ability to move out as Seattle continues to build.

I re-ran the same regression analysis that I did in the first Seattle blog post on around six thousand rows of newly scraped Seattle rental data and also graphed comparisons of the base feature level prices of each neighborhood.

Seattle Neighborhood Base Prices from Dec 2014 to Now
Seattle Neighborhood Base Prices from Dec 2014 to Now

Essentially these prices are apartment location costs without factoring in beds, baths, square footage, etc… The increase to me is pretty crazy. Almost every neighborhood has increased in price by an average of 25-30% over a period of 1.5 years. The next graph is the increase by percentage.

Percentage Increase in Prices Per Neighbourhood
Percentage Increase in Prices Per Neighborhood

The biggest increases have come from neighborhoods not actually around in the downtown area but rather in outer regions like West SeattleGreenlake, and Madison Park. This could be due to the increase in real estate demand due to single-family homes versus condos and apartment buildings being built in downtown. Or maybe the locations of West Seattle and Greenlake were undervalued a few years ago and caused prices to rise as prices in downtown and Capitol Hill areas were too expensive? Downtown prices itself have risen at a normal rate comparatively.

But the biggest speculation might be when rental prices may actually plateau instead of rising year after year. In San Francisco, rental prices have already hit a limit and while landlords don’t want to decrease the premium pricing, they have offered more incentives of free rent in order to keep monthly rent from actually going down. Also the expected revenue from developers where they forecasted rent to increase or at least stay the same would create losses in their businesses.

But how does industry really affect growth of a city. Amazon’s stock has doubled itself in the past three or four years which leads to extraordinary growth and new buildings that look like biospherical sci-fi environments.

Amazon's Stock Growth in the last two years
Amazon’s Stock Growth in the last two years

In the end I wanted to look at real-estate pricing too but that data ended being a little harder to pull. Real estate speculation in Seattle has boomed along with the rental increase, but it’s hard to see where both home valuation and rental prices will stop increasing. While Seattle has been one of the fastest growing cities for the past few years, the city has also done a decent job of planning for the growth and building as many units to avoid significant growth pain that caused San Francisco such a huge housing crisis in the past few years. San Francisco and Seattle are alike in that their geographic urban area cannot effectively expand like more of the sprawling cities that are experiencing rapid growth.

Personally, I was looking at real-estate in Seattle to buy but didn’t the trigger. Buying a condo or house now at the current price is to assume that rental prices will continue to go up and when looking at the monthly mortgage rates for the homes I was looking at, they were only slightly lower than market place rents in the same area. If this is indicative of a Seattle housing bubble, then maybe all that needs to pop it is Amazon’s stock to plateau over the next year instead of continuing to go up and to the right.

Seattle itself is also mainly a tech city that just had one of it’s first/biggest real exits last month with the Apple acquisition of Turi, a machine learning company started by a professor at UW who came from Carnegie Mellon. Though it seems like Carlos Guestrin, the UW progressor, could have probably gone anywhere and gotten his startup acquired. But while startup land hasn’t been that successful yet for Seattle, other large companies have been creating big satellite sites in the city to take advantage of all of the talent coming out of the university and the existing area. Facebook has opened a brand new amazing looking headquarters on Dexter Ave and Lyft, Uber, Apple, and more have all opened offices there in the past year.

It’s interesting to observe the expansion of a city like Seattle and cross it’s fingers that everyone ends up happy throughout it’s growth.

5 comments

    1. Sorry, I replied earlier from a mobile device but it looks like it didn’t work for some reason.

      For 2D I use Adobe Illustrator and Photoshop. For 3D I use Lightwave 3D and am starting to play with Cinema 4D.

  1. I’ve only lived in the area for a few years and in one place. Is there actually somewhere one can rent even a studio apt for less than $200/mo? Or is this is due to the erroneous nature of data found on Craigslist? Why include it?

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