‘You can’t build on water’: Coastal markets remain strong 

As mortgage rates rise and housing prices fall, real estate markets in some areas remain relatively strong. A common factor? Water.

Real estate agents on opposite coasts don't see demand going away anytime soon, particularly in the local markets they serve.

"We are surrounded by a body of water," says Dave Jones, co-owner of two Windermere offices in Pierce County, an area that includes Tacoma — the state's third most-populous city — situated on the Puget Sound.

Despite dire headlines about falling home prices, demand for property isn't going to dry up, even if higher interest rates might have some people feeling queasy. "You can't build on water," Jones says. "That demand is always going to be there."

Will Langley, principal broker at BHHS Keys Real Estate and Knight & Gardner Realty in the Florida Keys, says much the same about his market.

"What has buffered us in this market, in my opinion, is our extremely low inventory," he says. "Whereas most places around the country have been building up and out, we have a height limit of basically no more than three stories. And we can't build out, because we can't build over the water. So our land is all taken."

The pandemic seemed to only make the Keys' strong market even stronger, and Langley chalks that up to a couple of reasons.

First, a roadblock just south of Miami in the early days of the pandemic made the Keys "the largest gated neighborhood in the country," he says, with only residents and essential workers able to pass through.

"That obviously had a major impact on our tourism economy, and many businesses felt the brunt of that roadblock, but I think a lot of people felt safe and protected by it," Langley says. "And when that roadblock came up after Memorial Day of 2020, our market just exploded. People wanted to be here, and we saw a demand that we had never seen … People came here with their briefcases just loaded with money to spend on real estate."

Another factor that leads to market strength in the Keys is its beautiful location.

"I think people were pent up, and they decided they wanted a lifestyle change, or they wanted to finally live their dream and buy their vacation house down in the Florida Keys," he says. "Or they realized, hey, I can work remotely, looking at the water out of my backyard in the Florida Keys."

Back on the West Coast, Tacoma is not only geographically well-situated, it's also an appealing option for commuters and remote workers, Jones says.

"I like to call us Silicon Valley 2.0 in Seattle," he says of the major city just north of Tacoma in King County. "We have Amazon up there, and we have Boeing and Google, and these tech companies that now offer work from home. That provides opportunities for people to look for maybe a more affordable place to live that's 30-40 minutes away down the I-5. A lot of times they land in Tacoma."

Though Jones sees the Tacoma market remaining strong, he's already seeing some shifts in terms of who is buying.

"There's still pretty sharp demand for first-time homeowners and those $500,000 and below homes," he says. "But if you look at the 600s and luxury markets, that's where I think we're going to see some slowing down, and I think we're already seeing that."

But that's to be expected, Jones adds.

"Home prices are going to come down a bit," he says. "We've been running pretty hot, so I think that's just a natural response. We couldn't keep going like that forever."