balancing acts and bottlenecks: how Seattle’s economy and housing market are adjusting to a new normal | Seattle Fall 2025 Landscape

The rennie podcast is about the real estate market and the people connected by it. Tune in for monthly discussions making sense of the latest market data.

EPISODE #81: BALANCING ACTS AND BOTTLENECKS: HOW SEATTLE’S ECONOMY AND HOUSING MARKET ARE ADJUSTING TO A NEW NORMAL | Seattle Landscape Fall 2025

Join Ryan Berlin (Head Economist and VP Intelligence) and Will Ye (US Market Intelligence Analyst) as they explore the  Fall 2025 Seattle rennie landscape —our semi-annual report on the trends shaping Seattle’s housing market and economy. From slowing job growth and renewed inflation pressures to thinning housing supply and flat rents, they examine how the city’s market is shifting and where signs of recovery are emerging.

⁠Featured guests:

⁠Ryan Berlin, Head Economist and Vice President of Intelligence
⁠
William Ye, US Market Intelligence Analyst

Fall 2025 Seattle rennie landscape

About the rennie landscape

The rennie intelligence division has just released its semi-annual publication, the rennie landscape, which provides thoughtful, contemporary analysis of the myriad factors impacting the housing markets of Metro Vancouver, Seattle, the Central Okanagan, and Greater Victoria. The commentary in the rennie landscape is lively, and the insights are objective and data-driven. Key stakeholders in the real estate industry—including developers, realtors, commercial brokers, and institutional investors—rely on the rennie landscape for its succinct review of the latest trends that matter to our market.

We’d love to answer your real estate questions. Email us at intel@rennie.com or leave a voicemail, and we’ll try to respond in future episodes. 

Transcript

The market can't really be that bad if, uh, the intelligence guy has bought in this market, right?
⁠The past six months have been eventful.
⁠And so what that all means is that last year is definitively going to be the peak of supply for the Seattle market.
⁠Are things actually slowing down? If they are, by how much?
⁠You know, we've sort of been accustomed to this idea of the housing market being down in the dumps. It's not everywhere where you look, though.
⁠That is the biggest driver to stability in the market.
⁠It's controversial, but I think we can't really deny that it's been effective.
⁠Which they seem, the way they've been imposed, it seems pretty illegal.

Introduction:  Welcome to The rennie Podcast, where we talk about the real estate market and the people connected by it. Our goal is to empower you to make informed decisions and provide context for the real estate world around you. We hope that with every episode, you'll become a little more knowledgeable and a lot more curious.

Ryan Berlin: Welcome to The rennie Podcast. I'm Ryan Berlin, Head Economist and Vice President of Intelligence here at rennie, and after six months, I'm joined once again by Will Ye, who's our US market analyst, up from Seattle.

Will Ye: Yeah. Thanks for having me.

Ryan Berlin: How are you, Will?

Will Ye: I'm good. I'm good. Um, always glad to, uh, have the opportunity to be here. I, I love talking the market and, you know, last six months since the last time I've been here, I feel like it's sort of like an outlet for me to, to speak. Or else, I kind of sort of tend to, uh, bore my wife with all the details. So, I'm sure-

Ryan Berlin: [laughs]

Will Ye:... you know, bless her she, she humors me. But, uh, I'm glad to, uh, to be here today. Yeah.

Ryan Berlin: We should do this more often then.

Will Ye: [laughs]

Ryan Berlin: Just to s- just to spare her.

Will Ye: Yeah. [laughs]

Ryan Berlin: Um, and you just bought a house.

Will Ye: I did.

Ryan Berlin: Congratulations.

Will Ye: I did. Very exciting. Uh-

Ryan Berlin: Yeah. Down in Seattle?

Will Ye: I've been telling... Yeah. And, uh, I've been, you know, I've been telling my analysts that, you know, the market can't really be that bad if, uh, the intelligence guy has bought in this market. Right? So, uh, it's not like I've been seeing-

Ryan Berlin: That's good advice.

Will Ye: Not like I've been singing, uh, the market's praises exactly, but, uh, yeah. It's been exciting.

Ryan Berlin: Cool. So, you're here for a reason. We're recording this podcast. Um, and today is all about the rennie Landscape.

Will Ye: Mm-hmm.

Ryan Berlin: Um, our Seattle edition. So, I think anyone who listens to this podcast or watches us on YouTube, um, has some familiarity with, with the rennie Landscape. We just recorded an edition of the pod, uh, to talk about the Vancouver Landscape, so this is a focus on the Seattle market. So, for those of our listeners and watchers that don't know what The rennie Landscape is, in a nutshell, what is it?

Will Ye: Yeah. So, I mean, we put out a lotta content regularly just to keep our, um, readers up-to-date on the market. The Landscape is really like our signature report of the year. Comes out twice a year, and it covers a lot of the sort of external factors that, um, are the content, and really most real estate, traditional real estate reports don't cover. So, things like the labor market, demographics, inflation. All these sort of broader macro forces, and-

Ryan Berlin: Mm-hmm

Will Ye: ... how that relates to what's happening on the ground in Seattle and housing markets. It's written in individual sections. Uh, it reads great narratively from front to back. Um, but you can also just pick out your favorite sections. For this edition, for the people listening, there's a really fantastic map I think in the housing section that just shows areas of relative, uh, performance based on sub-market in Seattle.

Ryan Berlin: Mm-hmm.

Will Ye: And so, uh, even if you're listening to this, I would encourage you to check that out, um, just visually.

Ryan Berlin: Awesome. And, yeah, so the report will be available on our website. You can go to landscape.rennie.com/seattle and check it out. You can see all the content there. You can jump around, and just dive into the stuff that you're interested in, or read it front to back. Super. So, let's talk about the actual... Let's get to the content of this. The past six months have been eventful to say the least. That being said, some of the uncertainty we were feeling at the beginning of the year has eased a little bit, and we've sort of now watched the national conversation in the US evolve from some concerns about an overheating economy, to questions about a slowdown. Like, are things actually slowing down? If they are, by how much? Where is it going? So, this is kind of the backdrop for our discussion today, and, and sort of an overarching, you know, theme throughout this edition of The Landscape. As part of this episode here, we wanna talk about three, you know, broad topics that are all somewhat related. First, we're gonna talk about something that sounds quite pedantic on the surface, the downward revisions to job estimates in the US. If you're listening or watching this, you probably were vaguely aware of it, because President Trump really didn't like the revisions, and took some drastic action, firing the head of the, the BLS. Where that all goes remains to be seen at this point. But there were significant downward revisions to job estimates, and it raises a question of, how healthy is the labor market? So, we'll talk about that today. We'll also touch on where we see US inflation going, um, through this year and into next year, and then in the context of housing, what does that mean for mortgage rates?

Will Ye: Yeah.

Ryan Berlin: And third, we'll take a look at the Seattle market, to, uh, identify where... You know, there are some differences in performance, because not all parts of the market are performing, uh, similarly. So, to start, let's, let's start with the job market-

Will Ye: Yeah

Ryan Berlin: ... more, more broadly.

Will Ye: Great place to start, yeah.

Ryan Berlin: And, and yeah, the job market, you know, in, in context of discussions around real estate, super important.

Will Ye: Yeah.

Ryan Berlin: Right?

Will Ye: Yeah.

Ryan Berlin: Like, when people wanna know what's happening in housing, the questions often go right to, like, you know, how are sales trending? Or how much inventory is available, or what are prices doing? But underpinning all of that is an aggregate ability and willingness to afford housing.

Will Ye: Yeah.

Ryan Berlin: Or to pay for housing.

Will Ye: Yeah.

Ryan Berlin: And so all that comes from the labor market. Are people working? Are they earning money? So on and so forth. So, at the start of this year, I mean through last year and into this year, the U- like broadly speaking, the, the, the labor market in the US was-... if not unstoppable, like, just really firing on all cylinders, so-

Will Ye: Yeah. I remember being here in the spring just talking about how, how great it was doing. Yeah.

Ryan Berlin: Totally, yeah.

Will Ye: Yeah.

Ryan Berlin: The numbers were, like, off-the-charts good.

Will Ye: Yeah.

Ryan Berlin: What's changed?

Will Ye: So maybe, I think we can start by, again, just really driving home why the employment numbers matter. You mentioned, as a little bit pedantic, the downward revisions. Uh, I'll just give you some context to start, right? So over the past two years, the US has added, on average, about 190,000 jobs per month. These are jobs that, you know, brand-new positions that didn't exist previously, right? Uh, and that's important because at the same time, the US population has also been steadily expanding, right? So last year through, uh, foreign migration, we added about 2.4 million residents. The year before that, 3.7. That's a lot of people, and, you know, these people, you know, they need jobs, right? N- not all of them are gonna be of working age or, you know, looking for, uh, exposition, but definitely a lot of people who come to the US come here for the job opportunities for, for the labor market.

Ryan Berlin: Mm-hmm.

Will Ye: And so you can see that if we're not adding new jobs in proportion to the number of people who are coming to the US, that can create a problem very quickly, right? Um, you would expect that if we're not keeping pace that the unemployment rate would rise. And-

Ryan Berlin: So this is, yeah, assuming... It's an issue because we're assuming people are primarily moving to... With the, exception of asylum seekers, and we're talking about legal migration here, people are coming for opportunity. They're looking to work. So-

Will Ye: Yeah.

Ryan Berlin: If, if job, if the number of jobs being added isn't keeping pace with that growth, presumably then we have a lot of people who really want to work, but can't find work.

Will Ye: Exactly, so you can imagine three million residents, but the same amount of jobs, either those people just... They're here and they can't find a job, or they're competing with the same pool of people-

Ryan Berlin: Mm-hmm

Will Ye: ... who are already here, and that would drive the unemployment rate up-

Ryan Berlin: Right

Will Ye: ... um, drastically, right? And to your point earlier, unemployment is one of the biggest drivers of  real estate, right? When people are out of a job, they, you know, they slow their spending, but they also have trouble making their mortgage payments, right? And that has all sorts of effects on, uh, sales and prices, um, both locally and nationally.

Ryan Berlin: Totally, and I, I've said it many times before, but I'll always take a... If I had to choose one over the other, I'll take a situation where the unemployment rate is lower but interest rates are higher-

Will Ye: Yeah

Ryan Berlin: ... versus the opposite, where-

Will Ye: Right

Ryan Berlin: ... you have low interest rates, which, hey, if you got your job, and you're a homeowner, a prospective home buyer, you know, yeah, that situation could work out for you. But you look at the, from a, from a, like, more broadly, the stability of a market and the health-

Will Ye: Yeah

Ryan Berlin: ... of a housing market, you want as many people working as want to be working, effectively, get that unemployment rate down.

Will Ye: Mm-hmm.

Ryan Berlin: And that is the biggest driver to stability in the market-

Will Ye: Right

Ryan Berlin: ... 'cause if people can afford their payments, um, then that's a good thing.

Will Ye: Yeah, yeah.

Ryan Berlin: No matter where rates are, right? So-

Will Ye: Yeah, exactly, yeah. So that's the context, and so far this year, then, you know, based on the initial readings of jobs created year-to-date, August, we had thought that we had added about a million jobs so far. The Bureau of Labor Statistics who put out those numbers, they regularly go back and revise those numbers as, you know, better information comes in. Typically, that's the sort of thing that maybe only you and I would pay attention to.

Ryan Berlin: Mm-hmm.

Will Ye: It's not usually headline news. You know, but this year, the revisions have been the highest, uh, on record ever, right? So we started the year off believing that we had added about a million jobs up until August. After the final revisions, that number has shrunk to just 600,000, so that's a downward revision of nearly 40%, right?

Ryan Berlin: Mm-hmm.

Will Ye: And so that's 400,000 jobs that we thought that we had added to the economy but that, uh, never really materialized when we actually got the more accurate data.

Ryan Berlin: That underscores this notion that's really resonated with me recently, which is that all knowledge is provisional, right? And so that is especially true in the world of, whether we like it or not, in the world of data gathering and statistical measurement and analysis. And so in this case now, we have our, our reality, the, our perception of reality-

Will Ye: Yeah

Ryan Berlin: ... has changed.

Will Ye: Yeah.

Ryan Berlin: So we have an unemployment rate now that is a little bit higher, but not very high.

Will Ye: Yeah.

Ryan Berlin: Like, where does it sit right now?

Will Ye: Yeah, so actually that's the surprising thing. Like, even though job creation has slowed so much, and actually in July and August, uh, total employment actually contracted, uh, we've seen that the overall headline in unemployment rate has actually been super firm. So in August, it was, uh, 4.3.

Ryan Berlin: Mm-hmm.

Will Ye:

So it's barely nudged up from August of last year, which was at 4.2, and historically that's still a super tight-

Ryan Berlin: Mm-hmm

Will Ye:... uh, unemployment rate, right? And so, you know, there's a few things that are happening here, but I think the main thing is that with the federal administration's new stance on immigration, you know, it's, it's controversial, but I think we can't really deny that it's been effective, right? So there's been a lot of studies and, uh, estimates that have come out this year showing that net migration this year, uh, the highest number I've seen puts it at around 400,000, um, and as low as negative-

Ryan Berlin: Right

Will Ye: ... negative 400, 500,000, right? And so that's way, way different-

Ryan Berlin: [laughs]

Will Ye:... than what we saw the past two years, which, were elevated, right? But also meant that we actually need to create less jobs per month to maintain the unemployment rate, because less people are coming in.

Ryan Berlin: That's right.

Will Ye: Yeah, so it's just this funny thing happening right now where we're seeing lower migration, but that's actually kept the unemployment rate-

Ryan Berlin: Mm-hmm

Will Ye: ... fairly steady in the short term.

Ryan Berlin: I don't want to jump ahead too far, but it also underscores this, uh, idea that [laughs], you know, the, there isn't a lot of idle labor-

Will Ye: Mm-hmm

Ryan Berlin: ... that needs to be employed. You know, an unemployment rate of 4.3%, like, y- w- that, that's effectively full employment.

Will Ye: Yeah. Yeah.

Ryan Berlin: Um, you know, it could be, could be a little bit lower than that, but w- we'll talk about tariffs in a bit, but we talked about reshoring manufacturing and wanting to bring employment to the US. Well, employment's, employment is there.

Will Ye: Yeah, yeah.

Ryan Berlin: And if, and if you're reducing migration, the- there's not much more you can squeeze out of that, that orange, right?

Will Ye: Yeah, yeah.

Ryan Berlin: So, so it's interesting that we- we've had this downward re- revision in jobs. The unemployment rate, there's, like, nothing concerning about where it's at, barely moved, and it's low. So beneath that, that headline unemployment rate-

Will Ye: Mm-hmm

Ryan Berlin:... what have you seen that is...... concerning-

Will Ye: Yeah

Ryan Berlin: ... if you will.

Will Ye: Yeah, so to your point, like, 4.5% is sort of, uh, there's a base level of unemployment that you would expect just even in the tightest markets, right? There are people who are just naturally between jobs. You know, you can imagine someone's moving maybe to a different state, uh, maybe they're having a career change.

Ryan Berlin: Mm-hmm.

Will Ye: Or even, like, as we just mentioned, like, they're new to the country or they just recently graduated. They take some time to situate themselves in the labor market, right? And that's, that's natural. But we can actually look at the characteristics of the currently unemployed just to see if that tells us anything else about where the overall rate is headed. And when we do that, we actually see that the share of long-term unemployed, uh, has actually jumped quite a bit in the last year. So these are people who have been looking for a job for over 27 weeks, that's half a year, and who want a job and s- are unable to, to find a position, right?

Ryan Berlin: Mm-hmm.

Will Ye: And so that share has risen from a historical average about 20% to, uh, 27% as of August.

Ryan Berlin: Right.

Will Ye: Right? And so you can imagine, like, this is supposed to be a, a tight labor market, right? But if a quarter of the unemployed, 27%, can't find a job even after six months, six months is a long time to go without a paycheck, right?

Ryan Berlin: Mm.

Will Ye: That tells a lot, tells us a lot about the underlying health of the, the labor market, even if the overall rate hasn't risen. And if we see this continue to progress or extend, we would expect that the unemployment rate would start to rise maybe, um, early next year.

Ryan Berlin:  Right. So in all of this, so the, the, the direction of change here, I mean, we, there's no... Uh, the final narrative hasn't been written on, on the h- the evolution of the labor market at this point. We're gonna have to wait until we get into next year. And we'll talk about a few other things that, that will impact it, but the changes we are seeing, if anything, are... In the labor market, are at the margin disinflationary. So that's kind of the, as we see it now, the direction that, that, that part of the economy is moving in. And I wanna just pivot into a discussion about inflation and interest rates. And I wanna start with inflation, and I wanna start with tariffs.

Will Ye: Yeah.

Ryan Berlin: 'Cause, uh, I mean, there's not as much conversation around them. There's not as much, um, havoc being caused by them i- in an obvious way-

Will Ye: Mm-hmm

Ryan Berlin: ... because we're not having a slew of new announcements come from this administration. Although, we know that they have just applied new tariffs to timber and lumber and furnished goods. President Trump has now re-escalated the trade conflict with China.

Will Ye: Mm-hmm.

Ryan Berlin: So I don't think the, the converse- the, the... At least until, um, the, ultimately, the Supreme Court rules on the legality of the tariffs in November-

Will Ye: Yeah

Ryan Berlin: ... which they s- they seem... The way they've been imposed seems pretty illegal-

Will Ye: Mm-hmm

Ryan Berlin: ... but, you know, we'll, we'll s- we'll see what that ruling is there. But let's say they continue to persist, right? I guess we have an understanding of maybe how, how that'll manifest in our economy based on what we're seeing in the data to date. We look at tariffs. We look at the trade tensions that exist between the u- US and, and so many parts of the world.

Will Ye: Yeah.

Ryan Berlin: How is that showing up in prices-

Will Ye: Yeah

Ryan Berlin: ... to this point?

Will Ye: Yeah. Well, I was actually reading the Vancouver edition of the Landscape. Uh-

Ryan Berlin: It's a great read.

Will Ye: And [laughs] it's very envious in the inflation portion of, uh, that edition that you guys had, you know, all but declared victory over inflation here in Canada.

Ryan Berlin: [laughs]

Will Ye: Don't have quite the-

Ryan Berlin: A little bit of hubris there.

Will Ye: [laughs] Don't have quite the, uh, same good news to bring my American listeners here. In April, inflation was at about 2.3%. So, you know, Ryan, we were very so close to that, uh, two percent central bank target.

Ryan Berlin: Yeah.

Will Ye: But also in April, as you know, was Liberation Day and all the associated tariffs, right? And so, you know, it took some time to pass through, uh, to prices, but we always expected that those pressures would eventually show up in the data.

Ryan Berlin: Mm-hmm.

Will Ye: Over the summer, that's, that's really manifested. And we know that the recent bout of inflation, which has ticked up to 2.9% as of August, comes from a lot of these tariff pressures. Because when we look at the components of inflation, it's all of the most import-reliant items that are seeing the highest increases, right?

Ryan Berlin: Surprise, surprise.

Will Ye: So I'll give you, I'll give you a familiar, maybe a painful, example for Seattleites, and that's-

Ryan Berlin: [laughs]

Will Ye: ... uh, coffee beans, right?

Ryan Berlin: Right.

Will Ye: So, you know, the idea with tariffs is that, uh, you're taxing foreign production to incentivize producers to come and, and, and produce it here, uh, in the US, right? Fortunately, there are a few items that just no matter how, how much you tax them, it's just not feasible to produce-

Ryan Berlin: [laughs]

Will Ye: ... in the US, right? So coffee beans is a great example. We've, we import over 99% of all of our, uh, coffee beans. It's just simply not hot enough in the US to, to grow them effectively. About a third of those come from Brazil, which currently is facing a 50% tariff.

Ryan Berlin: Yeah.

Will Ye: And so you can imagine all of those... You know, if you imagine a Starbucks. If you own a Starbucks, and they're buying coffee beans, they're feeling that price pressure very immediately, and they couldn't turn to a domestic source of coffee beans if- even if they really wanted to, right?

Ryan Berlin: Right.

Will Ye: And so, uh, over the past year, uh, if you've noticed the cup of coffee, the price of a cup of coffee going up, it's because coffee beans prices have gone up 20%, uh, in a single year, right? And we're seeing that across, um, many categories. So, like, furniture, bananas, jewelry, all these sort of items that traditionally have come, um, from foreign sources-

Ryan Berlin: Mm-hmm

Will Ye: ... are s- posting the highest gains, uh, year over year.

Ryan Berlin: So that's really interesting. I mean, it's, like, very... I don't know, very, like, logical and intuitive consequence. Because the tariffs are still in place and we, we don't know what the path for them looks like going forward, questions about where inflation will go-

Will Ye: Mm-hmm

Ryan Berlin: ... from here. So what are your thoughts on that?

Will Ye: Yeah, so I mean, I mentioned earlier we're beginning to see, uh, that pass through. I guess the question now is on the magnitude and how long, uh, this uptick in inflation will last for.

Ryan Berlin: Mm-hmm.

Will Ye: It's interesting 'cause the Federal Reserve, in September, cut rates by 25 basis points, right? And that signals that they believe that they're not too worried about inflation, that's gonna be a one-time pass through. Same time, based on what we're looking at, um, we do expect that that pass through to take some time to conclude, even if it is a one-time event.

Ryan Berlin: Mm-hmm.

Will Ye: Yeah. Um-

Ryan Berlin: I mean, I think, just not to interrupt, but I mean, you go back to COVID-

Will Ye: Yep

Ryan Berlin: ... and, you know, I was one of those people, admittedly, that said inflation was transitory, and it was. It's just that I thought it was going to be in transit-

Will Ye: Yeah

Ryan Berlin: ... for less time.

Will Ye: I feel like I haven't heard that word in a while. It's kind of taboo now.

Ryan Berlin: Transitory?

Will Ye: Yeah [laughs].

Ryan Berlin: [laughs] Yeah. I think people shied away from it.

Will Ye: Yeah.

Ryan Berlin: But it sort of... It came, and it, and it went and it had very real impacts.

Will Ye: Mm-hmm.

Ryan Berlin: But that's what we're looking at here potentially, is, you know, another situation where inflation is transitory. So, there's a bit of a surge for a period of time, then it levels out. Prices are permanently higher-

Will Ye: Yeah

Ryan Berlin: ... but they're not rising at a continuously higher rate.

Will Ye: Right, right. The other scenario is that, you know, inflation sort of spirals out of control, as sort of a self-fulfilling prophecy that, that happen- that tends to happen in markets sometime.

Ryan Berlin: Mm-hmm.

Will Ye: The Federal Reserve thinks, or at least seems to be signaling, that they think that the economy is cool enough that that won't play out. However, when we look at something called the Producer Price Index... So, our viewers will be li- familiar with the, uh, Consumer Price Index, which is the CPI. Uh, you can think of the PPI, as the name suggests, as inflation for firms and businesses and manufacturers before those items get produced, then, you know, arrive at the checkout or on the shelves, right? Uh, historically, when businesses, uh, face rising costs for their inputs, they'll tend to... They ha- they have two choices, right? They can either raise prices on consumers and pass that cost along, or they can not raise prices-

Ryan Berlin: Mm-hmm

Will Ye: ... and take the loss in their margins and make less money. And Ryan, you know that firms don't like to make less money, right? And so-

Ryan Berlin: No, or negative money.

Will Ye: Yeah, and so wherever possible, firms will tend to pass along any increases in expenses that they see, uh, to the consumer.

Ryan Berlin: Mm.

Will Ye: We really saw that in 2020 during the pandemic. If you remember, there was a lot of, um, supply chain issues, so a lot of firms were having- were paying, uh, these exorbitant prices just to get their goods across the Atlantic.

Ryan Berlin: Mm-hmm.

Will Ye: At the same time, everyone was in hiding during the pandemic, and so demand was really low. And so we saw that inflation for producers actually outpaced inflation for consumers, right? It just meant that they weren't fully passing along those costs because they, they weren't able to. Afterwards, after supply chains normalized and demand returned a little bit, we saw that consumer inflation outpaced producer inflation, right? And so they were sort of making up for that backlog of, uh, pressures that they weren't able to release earlier. We're seeing the exact same thing happen now in the second half of 2025. So, producer prices are again outpacing consumer prices.

Ryan Berlin: Mm-hmm.

Will Ye: What that means is that they're eating some of those costs. Not all of them, because we see prices creeping up somewhat, um-

Ryan Berlin: Like some coffee, bananas-

Will Ye: Exactly

Ryan Berlin: ... certain sectors, certain products.

Will Ye: Exactly. But, uh, the fact that that spread is still negative-

Ryan Berlin: Yeah

 Will Ye:... suggests that there's still more to come.

Ryan Berlin: Right.

Will Ye: And I wouldn't trust the firms', you know, call it, uh, selflessness to, to avoid, uh, passing those along.

Ryan Berlin: You, you and I have chatted about this off camera, about, um, producers not passing on, uh, these costs to consumers. And to this point, to a huge extent-

Will Ye: Mm-hmm

Ryan Berlin: ... maybe because they're sort of waiting to see what the tariff structure looks like going forward and, like, how much permanence is there to that? Or is all this gonna go away?

Will Ye: Yeah.

Ryan Berlin: Again, I think, you know, in November, and I can't remember if it's early or end of the month, we'll find out very soon whether any of this is legal-

Will Ye: Mm-hmm

Ryan Berlin: ... um, and whether these tariffs will continue to be in place.

Will Ye: Yeah.

Ryan Berlin: Pending that ruling, i- it could be, if they're seen as legal, you know, I, I wonder if we will see at that point, like, a surge in consumer price inflation. Because at that point now, you know, producers know, um, w- we can't continue to eat these, these, these cost escalations.

Will Ye: Yeah.

Ryan Berlin: And of course, when we talk about the, the pass off from producers to consumers of, of inflation, we're just talking about a delay here, um, in, in inflation, but not a permanence of it, right?

Will Ye: Mm-hmm.

Ryan Berlin: Like, it still very much could be transitory. We're just at the leading edge of it-

Will Ye: Yeah

Ryan Berlin: ... at this point. All, all of this then, uh, I think about all of this, uh, in the context of, of mortgage rates in the housing market.

Will Ye: Yeah.

Ryan Berlin: And, like, what does it mean, right? Like, we care about inflation for a whole bunch of reasons, but when we talk about housing, we care about inflation because we really care about what it does to interest rates. And as you mentioned, the Federal Reserve, uh, lowered the federal funds rate by 25 basis points recently. So, that means short-term interest rates, like adjustable rate mortgages, um, lines of credit, those types of things become a little bit cheaper, but it doesn't necessarily say anything about longer term interest rates.

Will Ye: Yeah.

Ryan Berlin: The Federal Reserve also does try to influence longer term interest rates. So ones, for example, that you might have on a fixed rate mortgage contract, and the way the Federal Reserve impacts those longer term rates is through programs of quantitative easing or tightening.

Will Ye: Mm-hmm.

Ryan Berlin: And that basically means that they're just participating in the purchase and sale of government debt. So, with quantitative easing, the Federal Reserve, if they want longer term interest rates, and for example, mortgage rates to be lower, to sort of help stimulate the economy, they will purchase US treasuries. They'll purchase longer term government debt that'll drive the price of that debt up and the yields down.

Will Ye: Mm-hmm.

Ryan Berlin: And then that passes through typically to fixed rate mortgages. On the flip side, they can engage in a process called quantitative tightening, where they either let their debt holdings expire when they mature, or they sell them off. In that case, that tends to add the margin, push down the, the price of debt and raises the yield on it.

Will Ye: Yeah.

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Ryan Berlin: [Music] So, what is the Federal Reserve doing on that front? What's their stance at the moment, or their, um, expected course of action going forward as it relates to quantitative easing or tightening, and what that means for mortgage rates?

Will Ye: Yeah. So I'll, I'll back up a little bit in terms of, uh, the last time easing was deployed, right? And so, it's, you mentioned, it's usually used in times of, like, severe financial stress. Uh, it started in '08 during the housing crisis. The last time was in 2020 during the pandemic, and that was the greatest deployment of quantitative easing-

Ryan Berlin: Mm-hmm

Will Ye: ... that we've ever seen. Some of our viewers may have heard this term, uh, printing money. In a way, uh, that does describe what the Federal Reserve does. They, you know, create money to purchase long-term bonds, right? But in order for it to be effective the next time another, you know, financial, uh, crisis arises, they need to sort of dial back the money that they've already released into the market so that they can redeploy it when they need it again.

Ryan Berlin: Hmm.

Will Ye: Right? And so, what we're seeing right now is exactly that, so they're trying to reduce their total asset holdings, right? The problem is that it sort of rounds, runs counter to what they're doing with short-term rates, as you-

Ryan Berlin: Yeah

Will Ye: ... mentioned earlier. Yeah. So, short-term rates, they're, they're cutting rates. They cut last month. They're expected to continue cutting through the end of the year. Same time, they're doing quantitative tightening, which is pushing up long-term rates, right?

Ryan Berlin: Mm-hmm.

Will Ye: And so, you can sort of think of it as pushing the brake and the accelerator at the same time in a car. They, these things tend to move in opposite directions.

Ryan Berlin: Mm-hmm.

Will Ye: So it's just very interesting. It's, it's necessary work to do quantitative tightening, but it is a bit counterproductive to their rate decisions.

Ryan Berlin: Mm-hmm.

Will Ye: And, you know, all things being equal, to bring it back to mortgage rates, it means that mortgage rates won't fall as much as they otherwise would off the back of those cuts, right? As you mentioned, the cuts don't directly impact long-term borrowing rates, and therefore mortgage rates, but they do have an effect on them. But because the Federal Reserve is allowing about $95 billion worth of bonds to roll off their balance sheet every month-

Ryan Berlin: Mm-hmm

Will Ye: ... that's really sort of in the way of, uh, for those rate cuts.

Ryan Berlin: Yeah. So, it's sort of a mixed bag in terms of, at the macroeconomic and, uh, quasi-policy level, if you wanna talk about th- th- the Federal Reserve and its, uh, stance on monetary policy at the moment. When you look at everything that's happening, it's hard to, you know, in your mind, I think, clearly understand how all of this is impacting housing.

Will Ye: Mm-hmm, mm-hmm.

Ryan Berlin: Right? 'Cause some things are s- some trends that we're seeing are supportive of housing market activity. Others most definitely are not. So let's, let's turn to that to close out here, and talk about housing more specifically, and let's really, let's get into the, the, the Seattle marketplace.

Will Ye: Yeah.

Ryan Berlin: And we'll start with supply before we get to the other end of the spectrum, which is the, the demand side. We'll talk about rental and ownership. In terms of supply right now, um, are we seeing a lot more? Are we seeing stagnation? What are developers doing?

Will Ye: Yeah. It's actually kind of a funny picture right now. So, last year, we saw that completions of residential units actually hit an all-time high in Seattle, or, uh, in the Seattle region.

Ryan Berlin: Mm-hmm.

Will Ye: So, more units than in the region history, uh, were delivered last year, right? At the same time, when we look at every single other forward indicator for, uh, supply, uh, they're all massively down. So, when we look at units currently under construction-

Ryan Berlin: Mm-hmm

Will Ye: ... they're down 25% year-over-year. When we look at, uh, permitting activity, uh, it's also down significantly year-over-year, and has been, uh, depressed for many years now. And so, what that all means is that last year is, uh, definitively going to be the peak of supply for the Seattle market. Can confidently project that year-over-year for the next, for the foreseeable future, we're gonna see fewer and fewer residential units come to the market, right? And we're already sort of seeing some of those effects show up in, you know, rental rates, uh, housing prices, transaction activity. It's, it's an interesting thing, 'cause, you know, we've been four years into some of these macro trends. But those macro trends are impacting local construction, and that in turn i- is also driving some of these, uh, differences, uh, in regions.

Ryan Berlin: Right. And so, in, in Seattle, let's talk about rents for a moment. We're getting to the point, as you said, where there's likely to be... I mean, it's hard to see another path here forward, but there will be less new supply being delivered to the market. That on its own could push rents up, could push home prices up. But to this point in the rental market, how, how is it evolving? Because I think, you know, we look at markets, eh, throughout the US and throughout Canada, and we have seen some softening-

Will Ye: Yeah

Ryan Berlin: ... over the past year. You know, part of that, I think, is related to falling interest rates, which makes... Interest rates that have come off from their recent peaks, which has made, uh, home ownership more attainable-

Will Ye: Mm-hmm, mm-hmm

Ryan Berlin: ... at the margin. But wha- how is, how is the Seattle market evolving? And if that's too broad, what's happening within the region?

Will Ye: Yeah. So on the, on the rental side, it's interesting 'cause, you know, I mentioned earlier that, uh, completion search peaked last year. Um, a lot of those projects were sort of dreamed up of during, uh, the low rate environment of 2021.

Ryan Berlin: Mm-hmm.

Will Ye: Obviously, rates have come up since then. Um, rents at the time in 2021 were also appreciating, um, just like crazy. So, it was about, uh, 8% year-over-year rental appreciation in 2021. Today, that's about 1.3% in Seattle wide.

Ryan Berlin: Mm-hmm, mm-hmm.

Will Ye: So, at the same time where financing costs are increasing, uh, the future potential of-

Ryan Berlin: Mm-hmm

Will Ye: ... rents for developers are decreasing, right?

Ryan Berlin: Yeah.

Will Ye: So you can imagine why they're pulling back, um, on construction. And we're seeing areas in Seattle sort of reflect that pullback. So, we can take Lake Union as, as an example, right? So, Seattle wide, I mentioned seeing 1.3% rent appreciation. Uh, Lake Union has posted an increase of 3.9%, so, you know, almost three to four times higher than the broader region. A big part of that is because there has been no rental product-... uh, under construction in Lake Union since the first half of last year. Same time, uh, Amazon, which is the biggest employer-

Ryan Berlin: Mm-hmm

Will Ye: ... in that area, instituted a return-to-office policy late last year. And so, you have no new supply coming to market while people are trying to get back closer to the cores, and that's driving, um, a lot of rental appreciation in, in that area, right?

Ryan Berlin: Mm-hmm.

Will Ye: And we're seeing that sort of across the board. Um, you know, rents are sort of diverging from '21, '22, when sort of across the board it was sort of a rising tide lifts all boats sort of situation-

Ryan Berlin: Yeah

Will Ye: ... where we were just seeing rental appreciation across it.

Ryan Berlin: So you're saying supply and demand matter.

Will Ye: They definitely matter, yeah. [laughs]

Ryan Berlin: I'm validated as an economist. Maybe one other point too, I think in the report you, you note that in Greater Seattle rental rates have gone up relatively modestly in the past year, 1.3%, but wages have been growing faster.

Will Ye: Yeah, yeah.

 Ryan Berlin: So, so at the margin, uh, rents are still high, but renting is, is more affordable today than it was a year ago.

Will Ye: Exactly. And you can't really... You haven't been really able to say that about inflation over the past year.

Ryan Berlin: Yeah.

Will Ye: Like wage increases haven't really kept pace-

Ryan Berlin: Yeah

Will Ye: ... with inflation over the past several years. And so, you know, most households have been feeling that pinch.

Ryan Berlin: Yeah.

Will Ye: Um, so it's great that, at least for now, uh, you're right, Seattle average income increased about 2.7% year-over-year, so should definitely help with, uh, some wallets in the area.

Ryan Berlin: So, the, the fact that, you know, you touch on h- households, um, yes, maybe struggling al- financially a little bit more more recently, home sales are down throughout the region-

Will Ye: Mm-hmm

Ryan Berlin: ... I'd say, you know, not surprisingly-

Will Ye: Yeah

Ryan Berlin: ... because e- even though interest rates have, mortgage rates have eased, they haven't... They're, they're not where they were-

Will Ye: Yeah

Ryan Berlin: ... pre-pandemic.

Will Ye: Yeah, yeah. They're, they're depressed, constrained, subdued, take your, take your euphemism, right?

Ryan Berlin: [laughs]

Will Ye: Um, it's been that way for, like four years now. So the broader market, um, is down about 30 to 40%.

Ryan Berlin: In terms of-

Will Ye: Um-

Ryan Berlin: ... uh, sales counts.

Will Ye: Sales counts compared to-

Ryan Berlin: Okay

Will Ye: ... historical averages.

Ryan Berlin: Right, okay.

Will Ye: Right? But to really identify and see if there's any, like pockets of performance, we assessed sales count totals from, uh, the first half of this year and compared them to the first half of, uh, 2019, which is often seen as, uh, the last normal year before all of the pandemic-related, uh, distortions. And, uh, if you, uh, for our listeners, if you turn to the print edition of The Landscape, you'll see sort of a heat map where we show some of that relative performance.

Ryan Berlin: It's a great map. It's a great map.

Will Ye: What we actually see is that, um, a lot of areas, particularly north of the Seattle core, so thinking of areas like Ballard, Green Lake, and then east into Kirkland-

Ryan Berlin: Mm-hmm

Will Ye: ... sale counts are actually up year-over-year-

Ryan Berlin: Wow

Will Ye: ... between 5 to 15%-

Ryan Berlin: Right

Will Ye: ... versus 2019 totals.

Ryan Berlin: Yeah.

Will Ye: Uh, very surprising. You know, those areas tend to be, uh, the desirable areas, but they're n- also not, you know, top of the market in terms of, uh, prices.

Ryan Berlin: Right.

Will Ye: And so these areas are really high in demand from, you know, well-to-do, relatively affluent families.

Ryan Berlin: Upper middle class?

Will Ye: Yeah, yeah. Um, that, you know, have done actually relatively well over the past few years with some of the equity gains and are maybe looking to stay close to the cores but, you know-

Ryan Berlin: Mm-hmm

Will Ye: ... also want just a little bit more affordability or a little bit more space. And for... it's, you know, the market's been depressed for four years, and over that time, you know, a lot of life changes has happened. So just naturally, you know, families getting bigger, people are getting married. Um, so that sort of activity has really kept sales counts in that area quite firm, and even actually, uh, like I mentioned, up from the 2019 totals. We can contrast that to south of Seattle proper, so areas like Renton-

Ryan Berlin: Mm-hmm

Will Ye: ... um, which are traditionally the much more, uh, affordable, uh, sub-markets in Seattle.

Ryan Berlin: Mm-hmm.

Will Ye: These areas have buyers that traditionally are more rate-sensitive, right?

Ryan Berlin: Yeah. Right.

Will Ye: They feel the pinch of not only inflation over the past years, but also higher mortgage costs directly translate into like a ceiling of how much one can afford on a mortgage payment.

Ryan Berlin: Yeah.

Will Ye: In these areas, sales are down anywhere between 30 to 40%, um, sort of, sort of in line with what we're seeing with the broader market, right?

Ryan Berlin: Mm-hmm.

Will Ye: So it's just interesting that, you know, we've sort of been accustomed to this idea of the housing market being down in the dumps. It's not everywhere we look, though, so it's, it's important to be, uh, detailed when we're looking at this kinda thing.

Ryan Berlin: Right. So, so fair to say, there, there's obviously pockets of performance and, and relative sluggishness in, in both rental and ownership-

Will Ye: Mm-hmm, mm-hmm

Ryan Berlin: ... um, at the moment. Just to wrap up here, um, there's a lot in this report, maybe hard to summarize-

Will Ye: Yeah

Ryan Berlin: ... in a sentence.

Will Ye: Yeah.

Ryan Berlin: But what's like a, like broadly speaking, what would you want listeners and watchers-

Will Ye: Sure, yeah

Ryan Berlin: ... to sort of take away?

Will Ye: I think if I had to pick sort of one theme or running, running thread throughout the report this year is that, you know, we've been many years into some of these. We've been talking about the same macro trends for a long time now. So far, headline numbers haven't raised any alarm bells, right? But sort of wherever we look, from labor to inflation to the housing market is a great example that we just talked about, we're sort of seeing the beginnings of, uh, stress and strain sort of building underneath. So, you know, I think if you are a buyer in today's market, for example, going back to the housing example, and you're looking for a home in like Ballard, Green Lake, and you're operating with the assumption that sales counts are 40% below historical averages, when in fact they're up 10 to 15%, I think you're doing yourself a really big disservice, right? And I think that's goes with the labor numbers, right? If you're making a big financial decision over the next year and you're looking at the unemployment rate and you're saying, "Hey, the labor market's tight, I can do this," you might want to take a pause when you consider some of the, uh, share of long-term unemployed, like we, we mentioned earlier, right? And so, um, I really think now is a time to sort of, uh, look past some of the headlines. Um, you know, that's always the case. You know, obviously we're, we're in this work and we, we like to dive into details, but I think now more than ever, uh, really, uh, can provide a lot of value.

Ryan Berlin: Right. And, um, for those of you that, that don't know, Will doesn't just write the rennie Landscape. Um, he, he frequently publishes, uh, commentary on, uh, goings on in the housing market, in our economy as it relates to policy. And that content all goes to rennie.com. So you can go there and you can read what his thoughts are on the latest jobs numbers, if they ever release those data again, 'cause right now they're not. Inflation, same thing there. Um, or on, you know, the, the Federal Reserve's stance on, on monetary policy. So all of that's on rennie.com, um, as is the rennie Landscape, um, at landscape.rennie.com/seattle. Um, thanks for being here, Will.

Will Ye: Yeah, thanks for having me. I'll see you next spring.

Ryan Berlin: [laughs]

Will Ye: Yeah. [laughs]

Ryan Berlin: Hopefully before then, yeah. We should do this more often.

Will Ye: Yeah, yeah.

Thank you for joining us on The rennie Podcast. If you'd like to learn more or to subscribe to intelligence updates, go to rennie.com/intelligence.

⁠The rennie podcast was created as another way of sharing our passion for homes, housing, community, and cities. We hope that this will spark the same curiosity in you that we have for everything real estate.

Our rennie intelligence team comprises our senior economist, market analysts, and business intelligence analysts. Together, they empower individuals, organizations, and institutions with data-driven market insight and analysis. Experts in real estate dynamics, urban land economics, the macroeconomy, shifting demographics, and data science, their industry-leading data acquisition, analytical systems, and strategic research supports a comprehensive advisory service and forms the basis of frequent reports and public presentations, covering the Vancouver, Kelowna, Victoria, and Seattle marketplaces. Their thoughtful and objective approach embodies the core values of rennie.