(The Center Square) – Washington’s housing market is loosening with more homes coming onto the market and fewer buyers closing deals than a year ago.
The shift is visible at the high end of the Seattle-area market, where listings of multimillion-dollar homes have surged – fueling speculation that Washington’s changing tax landscape is prompting wealthy residents to sell and establish residency elsewhere.
Overall, the market is cooling across price ranges, Washington’s population continues to grow and there is little evidence of a mass exodus. For now, taxes appear to be one factor in a broader shift in Seattle real estate.
Much of the concern surrounds a new 9.9% state income tax on households with annual income above $1 million. Gov. Bob Ferguson signed the legislation in March, but the tax does not take effect until 2028, with the first returns due in 2029. Hedge fund founder Brian Heywood and other opponents gathered more than 500,000 signatures for Initiative 645, a repeal measure that has qualified for the Nov. 3 ballot.
Real estate brokers told The Center Square that some of their wealthy clients are establishing residency in lower-tax states rather than waiting to see what voters decide. Meanwhile, the Seattle-area housing market is giving buyers more leverage.
More homes, higher mortgage rates
At the end of July, Northwest Multiple Listing Service reported 24,888 active listings across its 27-county service area, up 19.8% from a year earlier. King County inventory rose nearly 24%.
Pending sales across the region fell 7.2% year over year, while closed sales declined 3.2%. The result was 3.74 months of inventory, up from a year earlier but still below the four to six months generally considered a balanced market.
Seattle remains one of the country’s most expensive markets. Redfin put the city’s median sale price at about $899,000 in the three months ending in July. Homes took an average of 12 days to sell, compared with 10 days a year earlier. Meanwhile, the region’s median sales price was $640,000 in July, down 1.5% from a year earlier.
Listings of King County homes priced above $2 million rose nearly 84% from Jan. 1 through May 14 compared with the same period in 2025. In Seattle, new listings rose 85%. Kirkland listings more than doubled, while Bellevue, Sammamish and Redmond also posted increases of 70% or more.
At the very top of the market, NWMLS data showed King County listings of homes priced at $5 million or more up 40% year over year in March. Pending sales rose 78% and closed sales increased 66.7%.
Meanwhile, the average 30-year fixed mortgage rate was 6.66% as of Aug. 27, according to Freddie Mac – more than two percentage points higher than the rates many homeowners locked in during the pandemic.
Kristin Clark, a Seattle managing broker with Compass, has found that some homeowners who held onto properties during the pandemic-era market are ready to move. Many had mortgages at 2.5%, 3% or 4% and were reluctant to give up those rates, while today’s rates have made it harder for buyers to absorb that inventory.
At the same time, Clark said she is hearing more conversations about taxes and residency among affluent homeowners, many of whom were already considering relocating.
“Tax policy doesn’t necessarily create the move,” she told The Center Square, “but it can accelerate it.”
Seattle’s technology layoffs and broader economic uncertainty are other factors to consider, said Rian Watt, executive director of the Economic Opportunity Institute. Plus, he argued, homes are selling.
“The sale of high-priced homes is not itself good evidence for wealth flight,” he told The Center Square.
The tax question
Washington’s tax landscape has changed significantly in recent years. The state already taxes certain long-term capital gains. Beginning with tax year 2025, the first $1 million of taxable Washington capital gains is subject to a 7% rate, while gains above $1 million are taxed at 9.9%.
That tax is frequently conflated with the new income tax – and the distinction matters for real estate. Washington’s capital gains tax does not apply to the sale of real estate, thanks to a Department of Revenue exemption.
Meanwhile, Cornell sociologist Cristobal Young, whose research examines millionaire migration, estimates Washington’s new income tax could result in a net loss of about 1.9% of the state’s million-dollar-plus earners – or about 475 people out of an estimated 25,000.
State Sen. Jamie Pedersen, D-Seattle, the chief legislative architect of the new income tax, has said he sees little evidence of an impending millionaire exodus. He has pointed instead to other elements of Washington’s tax structure, including the estate tax, as concerns raised by businesses and wealthy residents.
So far, the state’s population numbers don’t show a mass departure. The U.S. Census Bureau estimated Washington’s population at 8 million in July 2025, up 3.8% from the 2020 population estimates base. The state’s Office of Financial Management also reports positive net migration every year since 2020.
Washington is losing residents to other states, but the migration patterns are more complicated than movement from a high-tax state to states with lower taxes. California and Oregon, for example, have been major sources of people moving into Washington while also receiving significant numbers of Washington residents.
Clark said the coming months could provide a better test of how much the tax debate is influencing the housing market.
If luxury listing activity changes significantly after the November vote, that could provide stronger evidence that tax policy is influencing sellers’ decisions. If listings continue on the same trajectory regardless of the outcome, other factors such as interest rates, employment, demographics and delayed life-stage moves may deserve more weight.
“A listing tells me someone decided to sell,” Clark said. “It does not tell me why.”
