I noticed last September, while walking in downtown Seattle that the super-duper award wining low income reclamation project had lots of for rent sign in windows.
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These would be good opportunities for investors looking for a stream of rental income in a good project.
As for a drop in median home sale prices: this statistic is notoriously subject to distortion by shifts in the distribution of the properties sold vs the distribution of all properties in the market. Thus, if in a certain month, or for several months, there is a higher concentration of lower valued properties being sold, then the median price drops. This could be true even if most of the properties being sold show increases over the price paid by the previous owner.
To get a good reading on the market, look at one of the proprietary series of home price indices based on repeat sales. In the larger markets, Case-Schiller-Weiss type indices are available, and some have separate indices for different segments of the market (low, medium, and high end properties). I'm not sure what's available for Seattle, but you can get a "free" reading by looking at the publically available OFHEO HPI at http://www.ofheo.gov/HPI.asp