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Sunday, July 16, 2006 - Page updated at 12:00 a.m.

The Housing Squeeze: Only nine areas in King County left for middle-income buyers

Seattle Times staff reporters

Restaurant manager Jason Cheung and his archaeologist wife, Amber Earley, were in for a shock last year. Longtime renters in North Seattle's Ravenna and Northgate neighborhoods, they found that having two good jobs wasn't enough to buy them a house in those areas.

In fact, with the King County median house price rising 16.3 percent last year, it seemed this middle-class couple's chances of owning a single-family house anywhere in Seattle were slipping away.

Throughout the county, buyers earning solidly middle-class wages have been increasingly unable to find what are traditionally thought of as middle-class houses because escalating prices mean the pool has been shrinking dramatically.

King County's median household income in 2003 was $57,857, which allowed buyers easy accessibility to 28 areas — seven within Seattle city limits — whose median home prices were $256,000 or less, a Seattle Times home-price analysis showed. Median means half are more; half are less.

Fast forward to last year: House prices shot up, but incomes barely rose, so median-income buyers found even fewer neighborhoods where they could afford the median-priced home — just nine in the county, including one in the city.

Specifically, the only area in Seattle where median-income folks could afford the median-priced house was the residential/industrial/commercial swath south of downtown that includes Georgetown and South Park. That's where Cheung and Earley snagged a well-kept, three-bedroom house in their price range — under $250,000.

How much money do you need?


Here's the minimum household income you needed to buy a median-priced home last year in these areas, assuming a 20 percent down payment and a 30-year fixed-rate mortgage at 5.87 percent (the national average for 2005).

Queen Anne: $135,309

Central Bellevue: $129,406

Green Lake: $107,838

W. West Seattle: $104,421

Lake Sammamish: $104,206

East Ballard, Bothell, Central Area: $90,811

Lake City, Beacon Hill: $76,281

Source: Seattle Times analysis of King County assessor's data

Justin Mayo

If houses in Georgetown and South Park continue to appreciate rapidly — the area appreciated more than any other in the King-South Snohomish County region last year — they likely will fall off the median-income-earners' list of possibilities, just as others have.

"Neighborhoods like Renton that used to be thought of as affordable no longer are," said Denny Bullock, Renton branch manager of Prudential Northwest Realty.

In 2003, two of Renton's neighborhoods were on the affordability list. Both have dropped off.

"Now Renton is a bedroom community of Bellevue," Bullock said. "Everything just keeps spiraling."

The affordability squeeze was repeated in the 22 areas that make up the southern portion of Snohomish County. Middle-class buyers there found that the pool of areas affordable to them shrank from 10 in 2003 to four last year.

Prices keep soaring

"Superstar" Seattle market has grown faster than U.S. market for decades.

Of course, if moderate-income buyers instead choose a condominium or less-expensive house (often a fixer-upper), the possibilities are greater.

But for how long? King County's single-family-home prices shot up 19.7 percent in the first six months of this year, compared with the same period in 2005, according to The Times analysis. It's based on price per square foot, considered the truest measure of housing cost.

As the residential real-estate market cools in other parts of the nation, one question is why Seattle's market remains robust. Money magazine predicts homes in the Seattle-Bellevue-Everett area will appreciate 10.5 percent between this June and next. That's twice the rate predicted for the country overall.

Home prices are often described in simple terms as products of supply and demand, but several factors — land availability, job and population growth, and interest rates — make the housing market more complex.

Professor Chris Mayer, director of the Milstein Center for Real Estate at New York's Columbia Business School, says Seattle outperforms other major cities because it's relatively unusual.

"Seattle is one of a handful of places I've written about and referred to as a 'superstar city,' " Mayer said. "It's not quite in the same league as San Francisco and New York, but if you look at census data, house prices in Seattle have grown faster than the national average for 50 years, from 1950 to 2000."

So major home appreciation "is a pattern that's been going on for a long time," Mayer said.

He defines superstar cities as people magnets because of their attractiveness and amenities.

"But being attractive isn't enough," he said. "It's also necessary to limit supply." That's happened here for two reasons.

Limited land supply

Restrictions push housing prices higher.

Shrinking afffordability

In 2005, nine areas were affordable to buyers in King County who earned the median income. Four were affordable to those in Snohomish County who earned the median household income.

Snohomish County, 2005

  • Everett
  • Paine Field
  • Intercity/Fairmount
  • Snohomish/Snohomish River Valley


King County, 2005

  • South Park/Georgetown
  • Burien
  • Boulevard/Riverton
  • SeaTac
  • Green River Valley
  • Des Moines
  • Twin Lakes
  • Auburn
  • Enumclaw

First: Seattle is essentially out of land on which detached houses can be built.

Second: The state's Growth Management Act effectively limits supply by restricting where homes can be built.

"When you restrict construction you inherently raise the prices of homes," Mayer said. "So it ends up being the case that the only people who can afford to live there are people with higher incomes. I'm not saying this is good or bad or desirable, but it is an outcome of restricting new construction."

Plenty of King County residents can afford houses. The percentage of households earning more than 150 percent of median income — that would be more than $90,000 today — grew faster than any other income category between 1990 and 2004. It now accounts for almost one-third of all households, a county study found. They number almost 250,000.

Newcomers abound

Job market lures out-of-staters, who drive prices up.

But Mayer says having well-off local residents isn't the whole story.

"In superstar markets, including Seattle, you can tie the price of housing to the incomes of the wealthiest Americans — not just the people who live in those cities right now," he said.

"This means house prices can grow faster than the incomes of existing residents if there are new residents from outside the metro area who can afford to move in and buy those houses."

That's happening here. Puget Sound's already strong economy is growing — a trend expected to continue at least through 2009 with the addition of 140,000 jobs, according to Conway Pedersen Economics.

This growth has made Washington one of the top 10 states attracting more people than they're losing, the state's Economic and Revenue Forecast Council reports.

Californians account for roughly 30 percent of our newcomers. Their state's housing prices make Seattle's look like a fire sale and nearly guarantee that California homeowners arrive here equity-rich. Just one example: Late last year, San Francisco's median home price was $825,000 — more than double Seattle's.

"In a regional sense, it's job growth that's driving housing demand and house-price growth the most," King County demographer Chandler Felt observed. "The demand is there and continues to be there."

Mortgage-rate factor

Higher interest adds yet another jolt to monthly bill.

Rising interest rates are making the situation worse, said Glenn Crellin, director of the Center for Real Estate Research at Washington State University.

Crellin compiles a "housing affordability index," which factors in housing costs, mortgage rates and local annual income.

At the end of 2003, the King County index was 116.9. That meant a median-income family had almost 17 percent more income than the bare minimum required to buy the median-priced house.

By the end of 2005, King County's index had dropped to 80.1. That meant that a family fell almost 20 percent short of the income needed to buy the median-priced house.

In Snohomish County, late last year median-income families made 95 percent of what they needed to buy a median-income house; in Pierce County, they made 104 percent.

But first-time buyers everywhere were hammered. In 2003 King County novices had 65.6 percent of the income needed to purchase a low-priced "starter home." By the end of 2005, that had fallen to 44.7 percent.

"That tells me the typical household looking to purchase their first home has severe problems," Crellin said. "It's a long-term cycle we're dealing with."

Thirty-year mortgage rates are now 6.81 percent, up from 2003's record-low 5.83 percent. That rise translates, for example, to an extra $154 a month in house payments, presuming a $250,000 mortgage.

Plotting the hunt

Finding a home takes hard-headed planning.

With affordability shrinking, real-estate agents such as Robin Tomazic find a big part of their job is helping buyers plan a strategy.

A John L. Scott agent, Tomazic begins by asking what areas they're willing to live in, how far they're willing to live outside the Seattle/Bellevue core, and whether they're willing to take on a fixer.

"If someone is saying they have to live close in and can't do work, I have to ask, are you being realistic in wanting a single-family home? You might have to look at a townhouse or condo," Tomazic said. "Or they may have to move further out. I'm saying Tukwila, Burien are not so far away. Will you consider those?"

Even then, Seattle buyers whose budgets top out at $275,000 — last year's affordable limit adjusted to reflect this year's appreciation — will have a challenge.

To get a single-family house, they may have to go farther afield to towns where the median detached-home prices are below that figure, as reported by Northwest Multiple Listing Service data.

From Thurston County north to Skagit County, they are: Bremerton in Kitsap County; Sedro-Woolley and Concrete in Skagit County; Yelm, Rainier and Lacey in Thurston County; and South Tacoma, South East Tacoma and Parkland in Pierce County. Rural northwest Snohomish County also makes the cut.

Another option is using one of the many loan programs geared to those of moderate means. For example, BECU (formerly Boeing Employees Credit Union, but now open to anyone) offers a new program called Home Loan Relief.

Intended for median-income first-timers, it requires no down payment or mortgage insurance while offering a below-market interest rate and reduced closing costs.

(It's not the only deal out there. The nonprofit Washington Homeownership Center maintains an extensive file of special loan and down-payment assistance programs. For information go to www.homeownership-wa.org or call 866-600-6466.)

BECU's Todd Pietzsch says Home Loan Relief has helped several buyers who otherwise couldn't afford a home. The easy part was getting them qualified. Harder was finding a home to buy.

"But where there's a will, there's a way — honestly," Pietzsch said. "What I tell people is that if you want to own a house, you will. Maybe it's finding a fixer-upper or getting a part-time job for a while."

For Amber Earley and Jason Cheung, the nonnegotiables were a nonfixer, single-family house with two bathrooms. Negotiable was the neighborhood.

That's how they ended up migrating from North Seattle to the South Park neighborhood due west of Boeing Field.

"I had a vague idea of it as a sketchy neighborhood, but I didn't know anything until we started looking," Earley said.

What they found was an older neighborhood with houses mostly from the 1920s through 1950s, a main street with a couple of popular eateries, and exactly the house they were looking for under $250,000.

The neighborhood "still has crime and unfortunate dealings," Earley said, but it has a strong community association.

"It's really quiet, we know all our neighbors and they're all really friendly," she said. "It's just a nice community."

And they can still call Seattle home.

"We're in the city ... barely ... but we're in it," she said with a laugh.

Elizabeth Rhodes: erhodes@seattletimes.com

Justin Mayo: jmayo@seattletimes.com

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