May 30, 2023 - Real Estate

It's far cheaper to rent than own in Seattle right now

Share of properties where it's cheaper to rent than to own
Data: Redfin; Chart: Alice Feng/Axios

If you're looking to buy a home in Seattle instead of renting, you're likely to pay a hefty premium.

Driving the news: The typical home in Seattle was 88% more expensive to buy than rent in March, a Redfin analysis found.

  • That's the fifth biggest cost premium between owning and renting in the country, behind only San Jose, San Francisco, Oakland and Anaheim.
  • According to Redfin, 0% of homes in Seattle were less expensive to buy than rent in March, versus 19% of homes nationwide.

Why it matters: Homeownership is one way people build wealth and equity. When it becomes more difficult to buy a home, it cuts off financial opportunities for a large portion of the population.

What they're saying: The rise in mortgage rates in the past year "has increased the homeownership premium to the highest level since the 2006 housing bubble," per Redfin's analysis.

  • That in turn has "widened the gap between buyers and renters" and made homeownership unattainable for many, the Seattle-based online real estate brokerage said.

Zoom in: "Nowhere is the housing affordability crisis more severe than in pricey coastal markets like the Bay Area and Seattle, where a jump in mortgage rates can mean a homebuyer’s monthly payment goes up by thousands of dollars," per Redfin.

By the numbers: The median estimated monthly mortgage cost in Seattle was $6,040 in March, compared to $3,208 for the median monthly rent.

Yes, but: Because homeownership has become so expensive in Seattle and other coastal markets, "they’re now seeing home prices come down faster than nearly anywhere else in the U.S.," the Redfin report said.

The big picture: In the long run, owning a home still provides substantial benefits, Windermere chief economist Matthew Gardner told Axios Seattle.

  • Those perks include not having to worry about a landlord raising rents, as well as building equity as your property value rises over time and you slowly pay down your mortgage principal, he said.
  • He said that people shouldn't overextend themselves to buy now — but at the same time, those who can afford it shouldn't give up on their dream houses just because interest rates are high.
  • "I still think for a majority of people — certainly not everyone — it is more advantageous to own than it is to rent," Gardner said.

What we're watching: Gardner predicts interest rates will go down over time, making refinancing a good option for new homeowners to lower their mortgage payments in the future.

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