I just read a great article today about apartment developers who face a potential supply bubble.  It highlighted some very important points that are worth considering as we examine the next 5-7 years in the Seattle market. We are in massive cycle of apartment development.  Just this last year, we’ve seen an incredible amount of new projects get underway. Developers, builders and investors are trying to take advantage of the rise in rental rates and the current demand for rental units in Seattle.

The question for our market is, with all the new apartments projected, when will we begin to see an over-supply? With an improving housing market, investors and banks have to be worried about finishing their projects right when the housing market has picked up steam. It seems logical that if the employment conditions continue to improve in Seattle, then the increase in income per household will follow. Seattle has a healthy job market right now. We have a young educated workforce who are taking advantage of high paying jobs. In my opinion, it is only a matter of time before we see more demand for purchases fuled by a limited-supply of condos. So the real question is – Are we creating a new kind of housing bubble? Will an over-supply of apartments be the next cycle that banks, developers and builders wish they could forget?

My opinion:

As rental rates continue to rise, a natural condition in the housing market begins to take shape. High rent influences home purchase demand when leasing begins to exceed the cost of owning a home. As rents rise and developers continue to take advantage of the situation, it will encourage buyers to give home ownership a try.  Inversely, if apartment supply comes quickly then rents have a likely hood of decreasing due to excess supply and competing projects. In my opinion there will be a steady cycle of home ownership demand due to high rents. This will come before we reach an over-supply of apartments.  What do you think?

If you want to participate in our recent survey, tell us where you think the next Seattle condo project will come from – What Will Be Seattle’s Next Condo Project?