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Seattle's surprising place for housing bargains: Downtown

caption: Downtown Seattle is shown from the Space Needle on Monday, July 25, 2022.
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Downtown Seattle is shown from the Space Needle on Monday, July 25, 2022.
KUOW Photo/Megan Farmer

If you’re looking to buy a home in Seattle, there’s a surprising neighborhood where homes are $100,000 cheaper than the city average: downtown Seattle.

That is a big change. For years, you could bet on the fact that homes in downtown Seattle would be more expensive than the city average. That’s because people were willing to pay more to live near work and cultural amenities.

Since the pandemic, however, that reliable pattern flipped on its head, according to an analysis by real estate data company Property Shark.

“It's not like, 'That's it, downtowns are dead now, prices are going to plummet,' or anything like that," said Eliza Theiss with Property Shark. "But for now, the premium that you were paying for a downtown home has disappeared in a lot of places and you can actually buy cheaper compared to the rest of the city.”

Theiss says this pattern is common in tech-driven cities of the western U.S. — Seattle, San Diego, Portland, Los Angeles, Denver. Similar patterns can also been seen in Chicago, Dallas and Alberquerque.

L.A. is at one extreme. Homes in downtown L.A. used to be more expensive, but now they’re $350,000 cheaper than the rest of the city. Downtown Dallas also fell behind, but homes there are only $12,000 cheaper than other neighborhoods in the metro area.

Sitting right in the middle of this trend is Seattle, with its downtown discount of $100,000.

caption: Office buildings have also dropped in value in downtown Seattle.
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Office buildings have also dropped in value in downtown Seattle.
KUOW Photo/Joshua McNichols

Several developments might have contributed to this trend.

The main change is likely remote work. There's less demand for homes near jobs. Even as some companies, like Amazon, require workers to come in three days a week, many employees stay away from the office as much as they can.

The lack of office workers downtown has led businesses to close, so there's less to do downtown. That's led to fewer people and increased visibility of public drug use, which gives rise to concerns about public safety.

Another factor could be increased supply. Since 2016, nearly 10,000 new homes have been built in Seattle's downtown core, according to city officials. Another 4,000 have been permitted but not yet built. That increased housing supply puts downward pressure on home prices.

One additional factor in play could be that most homes built in downtown Seattle are condos, and condos are expensive to build, due in part to liability risks in the state of Washington. Those costs get passed on to homebuyers when the market demand will allow it, making downtown condos expensive to buy.

Expensive homes have lost the most value, according to the St. Louis Federal Reserve Bank. And so, because downtown has more expensive homes to begin with, it suffers disproportionately from these trends.

Whatever the reason, the result is potential good news for homebuyers who believe downtown will eventually recover.

But lower home sale prices could decrease the incentives for developers to build new homes, or to convert unused office buildings into apartments.

RELATED: Downtown Seattle's 'zombie' office buildings could get second life as apartments under new rules

Just because homes are cheaper in downtown compared to the average city home, it doesn't mean downtown homes are the cheapest in the city.

Buyers can still get sticker shock when they see downtown Seattle home prices. Prices have risen there significantly since the pandemic, despite a relatively small dip in 2023. But, over that same time period, price increases in the rest of the city have left downtown in the dust.

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