Seattle Condo Market Update and Analysis

The figures for condos in Seattle came in from the Northwest Multiple Listing Service for the 2nd quarter 2007 with some interesting signs. 

Some takeaways from my point of view:

1. We are still seeing a fairly balanced market showing stable pricing and healthy sales activity.
2. Looking at specific neighborhoods or buildings, buyers looking for highly sought after neighborhoods or buildings will still pay top dollar but may not have to worry as much about escalation clauses and multiple offer situations. 
3. Looking at the overall Seattle numbers, buyers looking for more common or less popular properties will have more time to prepare their offers and will likely have some wiggle room if they find the list price too aggressive.
4. June year-over-year growth in new listings added to the market (a key driver in holding or even lowering prices) was far smaller than April and May year-over-year growth.  This suggests prices as they are now may remain stable or appreciate mildly for the foreseeable future.

The Seattle condo market seems to be expanding with both more buyers and sellers; we are seeing the volume of both new listings and closed sales outperforming first half of 2006.  By end of June 2007, the total active (existing and new) listings on the market was 1,332 (671 Resale condominiums + 661 new construction condominiums), just about double the first half of 2006 largely due to all the new projects launched this year.  Sold listings showed a more modest increase of a little over 25% from 2006 to 2007 growing from 1472 to 1853.  This should not be too worrisome given the extreme seller power we saw in the first half of 2006.   (See the chart below for Belltown condo pricing over the last 5 years courtesy of  Zillow).

   

Back to the NWMLS data, approximately 40% of the new construction projects are found in Belltown/Downtown Seattle area. April 2007 showed the highest increase in additions to inventory -- 56% more added to the market versus April 2006.  June 2007 showed a smaller 33% increase in new inventory compared to June 2006 which might indicate the beginnings of a soft landing for the volume of new units hitting the market.  (Translation: unless new listings surge in July and August, nervous buyers waiting on the sidelines for major price reductions may decide it's time to pull the trigger.)

The amount of inventory closed on a monthly basis is more modest than the amount of inventory coming on the market on a monthly basis (although May 2007 saw a ~70% increase in closed sales compared to May 2006).  This would further confirm the market's shift towards a balanced status with buyers who are open to less popular neighborhoods / buildings gaining the upper hand and buyers looking for popular condos in fair fight.

Ultimately, the Seattle condo market continues to buck the national trend with more purchases this year than last year and growth in inventory appearing to stabilize.  I'll probably do an article in the next few weeks about why I think this is the case.  Stay tuned.

-About Wendy

Technorati Tags: Seattle condos, Seattle Real Estate, Seattle real estate news

Comments

[Joe]

You post numbers from zillow? LMAO
How can you even pretend to believe their numbers? You should really look into your sources, or stop trying to steer statistics in your direction so you can swindle some other poor sap into believing now is a good time to buy.

Markets work on the principle of supply and demand. When prices are high, the supply increases. Investors sell existing inventory with the hope of maximizing earnings. And people who normally wouldn’t participate in the market get involved to capitalize on the opportunity. For example, I have associates at work who are building homes as a side business. I have other associates who are settled in the area, but who have put their home on the market to make a quick buck before the market tumbles. All of this activity increases the available inventory.

As the inventory increases, the pool of potential buyers dwindles. Most buyers can no longer afford the product. Investors won't purchase a product when they sense the market has peaked. And financial institutions tighten their lending standards when they sense that prices may decline.

Once a market has reached the peak, the ONLY thing that can reduce inventory is a decrease in prices. Housing prices must come down so that casual home builders and opportunistic sellers will loose the incentive to add homes to the inventory, and so that average wage earners will be able to afford the product. Once housing prices have become affordable, median wage earners will begin purchasing the product, lending institutions will ease their lending standards, and investors will return to the market. Then the trend continues, another bubble.

HOUSING IS NOT AN INVESTMENT. SINCE 1890 THE MEDIAN PRICE HAS INCREASED WITH INFLATION. NO MORE, NO LESS.

[Wendy]

Hi Joe, Thanks for stopping by and appreciate your passion and point of view. I did want to clarify a few things:

1. Almost all of the analysis is produced from raw data provided by the Northwest Multiple Listing Service. I credited Zillow for the one pricing chart which shows the historic pricing trend in Belltown (i.e., focus on the historic slope of the line and not the specific values on the Y axis or future trends).

2. Your argument that increased inventory automatically leads to price reductions doesn't seem to appropriately take into account demand growth offsetting and potentially outstripping inventory growth. E.g., even though inventory went up compared to last year, Seattle condo prices continued to rise.

I don't have a crystal ball but the numbers over the last 6 months suggest the market is fairly balanced and has been appreciating comfortably.

As I mentioned at the end of this post, I'll be doing a summary of some of the drivers of Seattle's market performance in a few weeks.

Thanks!

[Jaisn]

Joe, I would love to see the info on median housing price appreciation relative to inflation since 1890. Any links?

[Ken]

Granted, I've been thinking this each month since January... I agree the data looks promising so far but let's see if it continues to hold up next month.

It's hard not to be concerned about the troubles the rest of the country is experiencing so I'll be interested in seeing what Wendy comes up with in her future post on why Seattle is so special.

[Chris]

Here's one graphic representation

http://graphics8.nytimes.com/images/2006/08/26/weekinreview/27leon_graph2.large.gif

[mathguy]

the best thing to do would be to look at the pricing trends in Seattle and compare it to employment growth and population.

[Brad]

Dang Joe, Wendy told you what was up! You may want to consider doing a bit more research and cooling down just a tad before clicking "post".

~30 years ago my father in law purchased two average homes in Magnolia for around $50k each. They are both now worth at least $600k to $650k.

Seems like a solid investment that outpaced inflation to me.