In the first quarter of 2018, the Bay Area housing crisis reached an even more extreme level. Our Open Listings study in February found that home affordability was even becoming a problem for six-figure salaried technology workers across Silicon Valley.
So, where are these workers headed?
According to recent data crunched by LinkedIn, Bay Area workers are most likely to relocate to Seattle in the past year.
We wanted to see the impact of this migration on the Seattle area housing market and decided to take a closer look at how home sale prices around top tech companies in King County stacked up in Q1 2018 versus Q1 2017.
- In addition, we looked at public salary data from Paysa to get the average salaries of software engineers working for each company at these locations to see how affordable it would be for these workers to live within a 20 minute commute to their workplace.
- We estimated the monthly cost of owning a home by using the mortgage payment for a 30-year year fixed loan with a 4% interest rate.
- We also added property tax to this figure based on the local rate to paint a more accurate picture of what a monthly payment would look like.
12% increase in housing prices for Seattle homes near tech companies
Of the areas we analyzed near the biggest tech companies in the Seattle area, home sale prices have increased 12% on average since Q1 of last year.
The median home or condo sale price near Amazon, Microsoft, and the other ten technology companies we looked at for Q1 of 2017 was $590,000, but since Q1 2018, median sale prices in the areas we analyzed has risen to $660,000.
These median sale prices include many condos and townhouses, which are often cheaper than single family homes for sale across King County, which are now going for a median price of $725,000.
Furthermore, in Q1 of 2018, the average percentage Seattle homebuyers are paying above listing price has jumped to 6%, compared with the average 3% above listing price that homebuyers paid in Q1 2017.
Closings were also way up through Q1 of this year versus last year. Across the areas we looked at, 16,660 properties were sold to those looking to live near Seattle tech campuses in 2018, compared to the 12,825 properties sold in 2017.
Biggest home price jumps for Microsoft & Amazon employees
Across the areas we analyzed, home price increases were fairly consistent year-over-year, hovering between 10-14%.
However, tech workers looking for homes near Microsoft’s Redmond headquarters are looking at the biggest jump in prices (14%).
While current prices are still relatively low in Redmond ($630,000) compared to prices across King County, they’ve jumped $75,000 from the $550,000 median they were selling for in the area last year.
This may be largely due to a lack of supply -- with Redmond having the lowest number of properties sold of the areas we looked at.
Amazon workers are also looking at an increase in home prices to live nearby the company’s South Lake Union urban campus. The median home price there went up by 13%, or $74,500 from last year.
The company has previously reported that only 15% of their workforce at its urban headquarters live in the same zip code and 20% walk to work.
Meanwhile, tech workers looking to find a home downtown near Zillow’s Russell Investment Center headquarters actually saw the lowest increase in home sale prices -- with prices in the area up $62,250 or 10%.
Are Seattle tech salaries enough to cover housing costs?
We used lenders' standard 28% rule as a barometer for evaluating whether or not tech workers in Seattle could really afford to own a home within a non-stressful commute distance from their offices on their salary.
In San Francisco, we previously found that workers at Apple, Twitter and Facebook would need to pay more than 28 percent of their income on mortgage payments for a home near work. Therefore, many of these workers wouldn’t be approved for a mortgage in these areas in today’s housing climate.
So...how does Seattle compare?
Of the Seattle area companies we analyzed, only technology workers at Zillow (32%) and Nintendo (31%) would be looking at housing payments that are over the 28% barometer to live near their offices.
Those at Zillow searching for a home within a 20-minute commute are currently looking at home sale price medians of $671,250. Of the areas in Seattle that we analyzed, this was the third highest median sale price.
Meanwhile, those working out of Nintendo’s Redmond office would be looking at homes that fetch a median sale price of $660,000. But, with the lowest average salary for software engineers of the companies we looked at (according to Paysa), it pushed company employees above the 28% threshold when it comes to the percentage of monthly income they would need to spend on mortgage payments.
Apple, Google and Facebook's Seattle workers find some relief
Meanwhile, Apple, Google, and Facebook's Seattle-based workers’ wallets are doing much better on the housing front compared to their Bay Area headquarters due to comparable salaries to their Silicon Valley counterparts and not-yet-so-crazy housing prices.
- After putting 20% down, a 30-year monthly mortgage payment on a home in Silicon Valley (at a 4% rate and with property tax included), would set a software engineer at Apple back $5,211 a month -- 33% of their monthly $15,667 pre-tax income.
- Compare those prices to a home nearby work in the greater Seattle area, which would set Apple workers there back $2,944 a month -- 20% of their monthly $14,761 pre-tax income.
- Despite a $188,000 salary in the Bay Area, an Apple software engineer has only $10,456 left in pre-tax monthly income after housing costs. Comparatively, Apple engineers on a $177,135 salary in Seattle have $11,817 left in pre-tax, monthly income after housing costs.
- After putting 20% down, a 30-year monthly mortgage payment on a home in Silicon Valley would set a software engineer at Google back $4,947 a month -- 32% of their monthly $17,667 pre-tax income.
- A home near Google's Fremont campus in the Seattle area would be $3,255 a month for a Google worker -- 19% of their monthly $17,115 pre-tax income.
- A Google worker on a $212,000 annual salary in the Bay Area has $12,048 left in pre-tax, monthly income after housing costs. Comparatively, a Google worker on a $205,379 annual salary in Seattle has $13,860 left in pre-tax, monthly income after housing costs.
- After putting 20% down, a 30-year monthly mortgage payment on a home in Silicon Valley would set a software engineer at Facebook back $5,431 a month, making up 29% of their monthly $18,417 pre-tax income.
- For Seattle workers living near Facebook's Westlake office, this same payment would be $3,085 a month -- 16% of their monthly $18,722 pre-tax income.
- A Facebook worker on a $221,000 annual salary in the Bay Area has $12,986 left in pre-tax, monthly income after housing costs. Comparatively, a Facebook worker on a $224,667 annual salary in Seattle has $15,638 left in pre-tax, monthly income after housing costs.