CommunityMarket conditions August 10, 2020

Could New Seattle Tax Prompt Amazon to Consider Moving?

 

Once again, Seattle is attempting to leverage a tax on big businesses in the city, potentially ruffling the feathers of some of the city’s corporate behemoths. On Monday, July 6, the city council passed its latest big business tax proposal titled “JumpStart Seattle.” This might just be the last straw for Amazon, according to Windermere’s Chief Economist, Matthew Gardner.

If enacted, the proposal will raise over $200 million a year for the city. It will generate revenue through a tiered system of taxation on companies with payroll expenses over $7 million, although the tax only applies to the salaries of higher income employees. Employers in the lowest bracket will be taxed 0.7% of annual salaries between $150,000–$399,999, and 1.7% of annual salaries exceeding $400,000. The city has devised a separate tier for companies with annual payroll expenses over $1 billion, likely designed specifically with Amazon in mind. Employers in this tier will be taxed 1.4% of annual salaries between $150,000–$399,999, and 2.4% of annual salaries exceeding $400,000.

The tax is similar to the proposed head tax that was passed and quickly repealed by Seattle in 2018 due to the same fears of driving business out of the city. Initially, the proceeds from the new tax will be used to address needs related to coronavirus, but eventually the funds will be directed toward addressing homelessness and housing issues in Seattle.

The problem with the new tax, according to Gardner, is that it wasn’t applied regionally.

“As much as these [taxes] might make sense, they need to be applied on a regional, not citywide basis,” Gardner told KIRO Radio host Dave Ross.

By not coordinating the tax with nearby cities like Redmond and Bellevue, Seattle has only further incentivized Amazon to grow investments in new hubs outside of the city. Notably, after the near-miss with the head tax of 2018, Amazon moved many of its employees and operations to nearby Bellevue in 2019.

Gardner doesn’t approve of Seattle’s attempt to autonomously grapple with this issue. “All it does is it functions to push people out,” he said.

According to CNBC, in June 2020 Amazon announced it would lease 111,000 square feet of workspace for employees in Redmond. Bellevue, meanwhile, is to be the site of a newly built 43-story tower for Amazon operations.

While Amazon hasn’t made any official announcements regarding its plans for future operations in the region since the new tax was passed, Gardner expects we’ll be hearing from them soon. “I think there’s no doubt that we’re going to hear several announcements over the next couple of weeks of some massive expansion by Amazon into Bellevue.”

Though the tax will likely go into effect in 2021, it will not begin collecting money until 2022. Until then, it’s anyone’s guess whether Seattle can entice Amazon to stay put, or if the allure of lower taxes on the Eastside will see Amazon relocating for good.

 


This post originally appeared on GettheWReport.com

Market conditions April 21, 2020

Western Washington Real Estate Market Update

The following analysis of the Western Washington real estate market is provided by Windermere Real Estate Chief Economist, Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere agent.

 

A MESSAGE FROM MATTHEW GARDNER

Needless to say, any discussion about the U.S. economy, state economy, or housing markets in the first quarter of this year is almost meaningless given events surrounding the COVID-19 virus.

Although you will see below data regarding housing activity in the region, many markets came close to halting transactions in March and many remain in some level of paralysis. As such, drawing conclusions from the data is almost a futile effort. I would say, though, it is my belief that the national and state housing markets were in good shape before the virus hit and will be in good shape again, once we come out on the other side. In a similar fashion, I anticipate the national and regional economies will start to thaw, and that many of the jobs lost will return with relative speed. Of course, all of these statements are wholly dependent on the country seeing a peak in new infections in the relatively near future. I stand by my contention that the housing market will survive the current economic crisis and it is likely we will resume a more normalized pattern of home sales in the second half of the year.

 

HOME SALES

  • There were 13,378 home sales during the first quarter of 2020, a drop of only 0.2% from the same period in 2019, but 27% lower than in the final quarter of 2019.
  • The number of homes for sale was 32% lower than a year ago and was also 32% lower than in the fourth quarter of 2019.
  • When compared to the first quarter of 2019 sales rose in eight counties and dropped in seven. The greatest growth was in Cowlitz and Lewis counties. The largest declines were in Island and Snohomish counties.
  • Pending sales — a good gauge of future closings — rose 0.7% compared to the final quarter of 2019. We can be assured that closed sales in the second quarter of this year will be lower due to COVID-19.

 

 

 

HOME PRICES

  • Home-price growth in Western Washington rose compared to a year ago, with average prices up 8.7%. The average sale price in Western Washington was $524,392, and prices were 0.4% higher than in the fourth quarter of 2019.
  • Home prices were higher in every county except San Juan, which is prone to significant swings in average sale prices because of its size.
  • When compared to the same period a year ago, price growth was strongest in Clallam County, where home prices were up 21.7%. Double-digit price increases were also seen in Kitsap, Skagit, Mason, Thurston, and Snohomish counties.
  • Affordability issues remain and, even given the current uncertain environment, I believe it is highly unlikely we will see any form of downward price pressures once the region reopens.

 

 

DAYS ON MARKET

  • The average number of days it took to sell a home in the first quarter of this year dropped seven days compared to the first quarter of 2019.
  • Pierce County was the tightest market in Western Washington, with homes taking an average of only 29 days to sell. All but two counties — San Juan and Clallam — saw the length of time it took to sell a home drop compared to the same period a year ago.
  • Across the entire region, it took an average of 54 days to sell a home in the first quarter of the year — up 8 days compared to the fourth quarter of 2019.
  • Market time remains below the long-term average across the region. This is likely to change, albeit temporarily, in the second quarter due to COVID-19.

 

 

CONCLUSIONS

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

Given the current economic environment, I have decided to freeze the needle in place until we see a restart in the economy. Once we have resumed “normal” economic activity, there will be a period of adjustment with regard to housing. Therefore, it is appropriate to wait until later in the year to offer my opinions about any quantitative impact the pandemic will have on the housing market.

 

ABOUT MATTHEW GARDNER

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.

 


This post originally appeared on the Windermere.com Blog