On 11 March the World Health Organization (WHO) declared a Coronavirus pandemic as the new type of virus, COVID-19, has been affecting an increase number of people across the world. A global phenomenon of this magnitude, which has put the populations of entire countries on several continents in lockdown, is set to have a major impact on real estate markets. While it is still early to estimate the Coronavirus global impact on real estate, some markets are already seeing initial signs of deterioration.
One such market is the Seattle real estate market. After the Coronavirus spread reached the US, it hit the hardest the State of Washington in general and the City of Seattle in specific. Just within a few short weeks after COVID-19 landed in the Emerald City, its impact on some aspects of the Seattle housing market have been well pronounced.
How the Coronavirus Has Affected Airbnb Seattle
The COVID-19 pandemic’s effect on the Airbnb rental business in Seattle has been immediate and very negative. We at Mashvisor, a real estate investment software company based in Campbell, CA, have calculated the main Airbnb data figures to evaluate exactly how big this impact has been.
- Airbnb Occupancy Rate: 74.4%
- Airbnb Daily Rate: $130
- Airbnb Rental Income: $2,885
- Airbnb Occupancy Rate: 54.0%
- Airbnb Daily Rate: $133
- Airbnb Rental Income: $2,246
Our Seattle real estate market analysis reveals that the Airbnb occupancy rate dropped by 20.4 percentage points between March 2019 and March 2020. This decline from a really high level of 74.4% compared to the rest of major cities in the US housing market to 54.0% year-on-year marks a decrease of 27%.
It is only natural that the detrimental impact of the Coronavirus will be first felt by Seattle Airbnb investment properties. The volume of visits to Seattle and the number of Airbnb reservations are drastically falling as more and more international and domestic travelers are afraid to move, while some even face various travel bans. In an effort to stop the further spread of COVID-19 or simply in fear for their own safety, numerous frequent Airbnb guests are cancelling their previous bookings or not making new ones within the Seattle real estate market, as well as the vast majority of other major global cities.
Mashvisor’s data on the Seattle Airbnb daily rate shows that it has remained relatively unchanged between March 2019 and March 2020. However, without the Coronavirus pandemic, a higher increase than the observed 3% would have been expected, to reflect the overall inflation rate and the simultaneous strong growth of the short term rental business.
In terms of Airbnb income, it dropped by as much as 22% between March 2019 and March 2020 in the Seattle real estate market. This is the consequence of the major decline in the Airbnb occupancy rate which Seattle vacation homes have experienced.
It is important for real estate investors to keep in mind that this major impact of the Coronavirus on the Airbnb Seattle business reflects just a few weeks of actual cases in the Emerald City. The further consequences and developments are yet to be seen.
What Is COVID-19’s Impact on the Traditional Rental Market in Seattle
To this point there has not been such an obvious negative effect of the spread of the Coronavirus within Washington on the long term rental business in the Seattle real estate market. As tenants live in these properties on a long-term basis and consider them as homes, the impact is expected to not be as considerable as in the case of Seattle Airbnb in the future as well.
Regarding the near future, Enrique Jevons, Regional Director of the Seattle Office of Mynd Property Management, expects agent showings to start to decline. New real estate investors who are now considering buying an investment property in the Seattle housing market should also be prepared for scarce – if any – open houses in the Seattle metro area.
Another expert, Anderson Franco, Landlord/Tenant Attorney, expressed his concern about the Coronavirus’s putting mom-and-pop landlords at risk of mortgage defaults. Many renters are losing their jobs as a result of the shutdown caused by the COVID-19 pandemic. This will naturally make it difficult or even impossible for them to pay rent and increase the likelihood of evictions. From the point of view of real estate investors and landlords, this amounts to lost rental income and a higher risk of a foreclosure.
Franco also highlights the fact that in response to the heightened risk of mortgage defaults, Seattle City Council member Kshama Sawant called for an emergency moratorium on rent-related evictions. While this is positive news for renters amid the general sense of despair, that’s not the case for investors in traditional rental properties in the Seattle real estate market. Such an eviction moratorium benefits tenants who are at risk of an eviction, while the effect on large rental property owners is negligible. Nevertheless, it could seriously threaten mom-and-pop landlords who depend on the rental income from their investment properties to pay the monthly mortgage.
Here are the main figures on the Seattle rental market in March 2020 as computed by Mashvisor’s investment property calculator:
How the Coronavirus Pandemic Has Impacted the Overall State of the Seattle Housing Market
It is still early to observe any major changes in the general state of the Seattle real estate market. Jen Cameron, VP of Coldwell Banker Bain and Founder of Luxury Marketing Specialists (LMS) as well as a broker, confirms that Seattle remains a seller’s market at the moment. The local housing market is currently characterized by strong activity, low inventory, high demand from property buyers, and historically low interest rates. Cameron reminds Seattle property sellers that they need to be well aware of the fact that they have different choices about how to go about marketing their homes for sale. Meanwhile, virtual tours are an excellent strategy to avoid unnecessary personal contact at this unstable times in the Emerald City.
According to Mashvisor’s Seattle real estate market analysis, the median property price equals $690,024 at the moment. The average price per square foot of Seattle real estate properties for sale, on the other hand, is $532.
Doug Brien, CEO of Mynd Property Management, has some comments on the US real estate market as a whole, which hold true for the Seattle housing market as well. Similar to the US in general, the Seattle real estate market is well-positioned to weather the Coronavirus storm. For one, mortgage rates have bottomed to historic lows. Furthermore, during an emergency meeting in early March the Federal Reserve cut interest rates even further. This means that purchasing homes – as well as buying investment properties – has become more affordable to a larger number of first-time homebuyers and real estate investors. According to Brien, if there ever were a time to enter the home buying market as an occupant or an investor, that time is now. Moreover, during a global crisis like the Coronavirus pandemic, investors are reminded that investing in hard or real assets is the safest bet.
Similarly, Jeffrey Brown, Bellevue Branch Leader with Axia Home Loans, is also having a positive forecast for the long term effect of COVID-19 on the Seattle housing market. He doesn’t expect the current health crisis to impact Seattle area real estate in any meaningful way. The growing companies, rising incomes, higher rents, net job in migration, and lack of new inventory factors point to a bull market in real estate in the Seattle area.
According to Brown, in the short run, this COVID-19 crisis could open up a number of opportunities for both property buyers and sellers who embrace the chaos and move ahead through this time. Depending on how people react, it could temporarily slow down the market in the short run, but that hasn’t happened yet. He even believes that real estate may lead the people of Seattle out of the COVID crisis and get things back to normal in the Emerald City.
Currently property buyers are seeing an increase in purchasing power with the drop in interest rates to lows not seen since 2008, according to Brown. That low cost of money is driving buyers to get more aggressive with offers for the same monthly payment. These low rates are expected stay throughout the rest of the year through the election cycle as the Fed brings more liquidity to the market. It really could be the best of all worlds for both buyers and sellers over the next 6 months in the Seattle real estate market.
This is a summary of how the Coronavirus pandemic has impacted the Seattle real estate market to this point and what rental property investors might expect in the coming weeks. We at Mashvisor will continue watching all US housing markets and reporting the latest developments in them.
To stay informed about all real estate news, keep reading Mashvisor’s real estate investing blog.