I’m amazed by Seattle King County Realtor’s Association’s prophetic powers. On Monday, they sent out an email titled “Why Do High Home Prices Hinder Growth”? As if on cue, Amazon announced on Thursday that it plans to build a second headquarters in another city, which will serve as the home base for 50,000 employees.
Housing is the reason. According to Zillow’s Home Value Index, Seattle’s median home price has increased from $350K to $700K over the past 6 years. Back in 2011, the interest rate was around 4.75%. The monthly payment on a $350K mortgage (I’m being lazy and assuming $0 down for the sake of simplicity) would have been around $1,800. Today, mortgage payments on a $700K loan would be in the $3,000 range.
Similarly, Seattle Times reports that local renters are now paying 57% more compared to 6 years ago.
Have average salaries at Amazon increased at the same rate as housing prices? If not, today’s new hires are getting a worse deal than colleagues who joined Amazon 6 years ago. Unless Amazon is willing to keep upping its compensation packages to match housing price growth, with time, the same job offer will yield less and less disposable income until candidates located elsewhere find it infeasible to move to Seattle.
HQ2 is happening because Amazon has no other choice. It needs more employees. The employees need housing. It’s not possible to lure 50,000 more new hires to Seattle without paying increasingly high salaries, which just give newcomers more ammunition to bid up prices as they compete with one another for housing. The only solution is to locate these jobs elsewhere.
This could be good news for Seattle. Our housing market needs some relief from years of persistent upward pressure.
The problem is, what if the HQ2 city becomes Amazon employees’ preferred destination because it has better schools? (It probably does. Did you know that Washington is the nation’s second worst when it comes to student absenteeism? And Seattle Public Schools is the 5th worst among 200 big city school districts in terms of black vs white achievement gap.)
Or less congested roads? (Ditto. We’re #23 out of 1064 worldwide cities in terms of bad traffic.)