Seattle’s booming tech economy has altered the regional real estate market over the last decade, with home prices moving steadily upward in the face of low inventory and high demand.
But a recent spate of layoffs combined with tumbling tech stock valuations now may be putting downward pressure on the Seattle real estate market, which has seen some of the nation’s steepest price drops and a sizable increase in housing supply.
“There are people who are just looking around at the economy and the tech sector especially, and thinking that maybe their job isn’t secure, or that they’re not going to get as much wealth over the next couple of years as they previously thought they were,” Redfin Chief Economist Daryl Fairweather told GeekWire. “Those are things that can weigh on housing markets where there are a lot of tech employees.”
Around 150,000 residents in Seattle’s King County worked in computer and mathematical occupations, or 1 out of 8 people, the Seattle Times reported last month.
Thousands of those workers are part of the ongoing layoffs affecting companies big and small. Amazon axed around 10,000 positions, with more cuts possibly coming, while Meta — which employs more than 8,000 in the Seattle — slashed 13% of its workforce.
Several Seattle-area startups have also trimmed staff in recent months amid the broader tech market downturn.
“People aren’t going to make the decision to buy a home when they are fearful about their job,” Fairweather said, adding that those who were literally laid off can’t get a mortgage because lenders require a stable income.
The recent stock price drops may also be affecting tech workers’ ability to purchase a home.
Stock compensation often plays a large part of a salary base for tech workers in Seattle, said Doug Sayed, founder and managing principal at Applied HR Strategies Inc., a compensation consulting firm based in Seattle. Any stock price decline might have an outsized impact on their overall finances.
Amazon, which employs more than 75,000 people in the Seattle area, saw its stock price sink more than 50% since the start of the year, wiping away gains made over the pandemic. An index of the top 100 publicly traded tech stocks is down more than 38% this year.
Many tech employees were able to rely on stock to help purchase home over the past several years. But now they have less income coming in because their restricted stock units (RSUs) are now worth less, said Lars Phillips, a partner at Avier Wealth Advisors, which works closely with Amazon employees.
Seattle’s median sale price has dropped from $891,000 in May to $810,000 in November, according to data from Redfin. That’s a 9% decrease, the largest drop between May and November in five years.
The region’s housing supply, which experts often point to as the main reason for the lack of affordability, is on the rise. Listings increased 165% year-over-year in November, according to the Northwest Multiple Listing Service.
The layoffs could spark more outflow of people from the region and add supply to the market, said Tyler Gardner, a broker at Windermere Real Estate.
“If some laid off tech workers were to sell and relocate, that influx of inventory would be helpful in providing prospective buyers more options, which could help bring some of the steep prices down further,” he said.
Rent prices are down 3.4% month-over-month and 0.6% year-over-year, according to Apartment List data. That was the second highest month-over-month decline in all the U.S.
“That goes to show that it’s not just demand for homes,” Fairweather said, in regard to the rent price decrease. “There’s just less money in the Seattle economy overall.”
The broader real estate market has been weakening throughout the year. Borrowing costs are on the rise as the Federal Reserve looks to tame inflation. Mortgage rates recently eclipsed 7% for the first time in two decades.
“The biggest factor is higher mortgage rates, because that’s impacting every market in the whole entire country,” Fairweather said. “Seattle also has the disadvantage of being a very expensive market. Changes in mortgage rates add up to thousands of dollars a month in mortgage for some of the some of the higher end homes here.”
Additionally, Seattle’s housing prices have not quite dropped in line with the rise of rates, Phillips added.
“If you work at a tech company here in the greater Seattle area, you’re really getting hit on all sides,” he said.