Seattle Condo Review: Blog with News & Advice about Seattle Condos

Conversions and Rental Market Report

Dupre + Scott Apartment Advisor has reported on the rental market for King County and Seattle for March 2008. Here are some interesting highlights from their report.

1. In March, 4.1 percent of King County apartments and 3.1 percent of those in Seattle were vacant, only up a smidgen from March 2007 when vacancies were at 3.9 percent in the county and 2.8 percent in Seattle and still less than half of the 2003 vacancy rates.
2. One big reason vacancies have started increasing is that the housing slump has dramatically slowed down new conversions of apartments into condominiums.
3. 2006 conversion bonanza: conversions hitting the market went from 900 in 2003 to 1,800 in 2004; 3,600 in 2005 and more than 6,000 in 2006 -- fueled the drop in the vacancy rate during those years. But conversions fell to 2,800 last year (subtracting 1,200 units that started to convert, then reverted to rentals) and just 168 units have converted or are scheduled to convert so far this year.
4. Conversions in the past three years outpaced new development by a total of 5,400 units.
5. Apartment rents averaged $1,026 in King County and $1,071 in Seattle in March 2008, up about 8.5 percent in both cases from March 2007.

Overall, this is good news for condo owners who are already renting out their units or considering renting them out in the near future.  For renters, it appears that while rents won't be going down anytime soon, they are not likely to be continuing to increase as much as they did last year.

-Wendy

Elektra- Does your condo building come with VRUs?

In recent news, owners at Elektra condominiums are getting upset over VRUs (Vacational Rental Units) in their building which they believe violate the city's zoning law and have enlisted the city help.  Even though VRUs are mentioned in the Elektra ownership agreement, the Department of Planning and Development's (DPD) position is that the city codes override anything in the owners' contract.  Now, VRU owners are appealing the DPD's decision.  A decision will be made by DPD in a few months.

Personally, I think it's reasonable for owners to rent their property for longer periods like 6 months to a year.  However, if the units become a high turn-around accommodation for non-residents, it changes the dynamic of the condo.  I can totally understand Elektra owners' concerns.  I would prefer to know who my neighbors are instead of meeting random people in the elevator all the time.

More about Elektra Condominiums:

Elektra is one of the older high-rise condominiums in downtown Seattle (1400 Hubbell Place).  Built in the late 1950's, the building comprises 200 units with studio, one bedroom and two bedroom floor plans.  Studios start at a little over 300 square feet, one bedrooms range from 400's-900 square feet and two bedrooms are from 660 to as high as 1,400 square feet for the penthouse units.  One bedroom's start in the low $200,000's and two bedroom's start in the low $300,000's.  Due to its accessible price point and location, this building is one of the top choices for first-time home buyers and investors.  However, the unattractive part for this building is the the exterior and interior common areas.  They look dated and apartment like.

-Wendy

Poll Result- Sellers

So what are SCR readers planning to do with their condos before the fall? Our recent poll suggests most sellers who are planning to list their property will be doing so within the next few weeks or in the summer.  If this is representative, we are most likely going to see an increase in inventory on the market.  This is not unusual since inventory usually picks up in the spring and summer anyway.  However, there are still a moderate number of homesellers waiting to see how the economy performs and is willing to wait till listing their units.  60% of the respondents are happy where they are and not looking at selling their condo anytime soon.

-Wendy

Tower Spacing News

A lot has been discussed regarding the unpleasant tower spacing between Cosmopolitan and 1918 8th Ave. Kiro 7 News will be featuring an investigative report about problems with Seattle's urban density. This program may enlighten those who are thinking abour purchasing a highrise condo in the dense downtown area. The program is scheduled to air on Monday, March 3, at 6.00pm.

Read more on Cosmo Seattle and Seattle PI.

-Wendy

Western and Blanchard: Reader Survey Results

We had quite a handful of readers participating in the Western and Blanchard survey. Here are some highlights and key takeaways from the results. __________________________________________

Summary:

1. Close to 2/3 of the participants feel that there are too many planned amenities for this project. I wonder if they are more concerned about higher dues that are associated with more amenities or they simply do not need them.
2. Not surprisingly, 58% of the participants find that the location is a major selling point. It is really hard to argue about the location when it is only a couple of blocks from Pike Place Market.
3. 65% feel that a finger print scanner at the front entrance is a neat feature but not important to them.
4. 40% feel that the reputation of the developers is extremely important to them. With all the reports about leaky condos and delays in construction, I would have imagined more homebuyers would find that as a major consideration.
5. Out of the various green features (green roof, solar powered common are lighting, high efficient heating and recycled builidng materials), 64% picked high efficient heating.
6. Half of the participants are willing to pay $10,000 for air-conditioning in their unit.   

For full survey results, click here.

-Wendy

Leaky Condos...nope, not Fake Stucco

Matt has a interesting post on an acid leak in the Trace Lofts garage (albeit, residents were warned the ongoing construction would require people to park at their own risk). Around the same time, a homebuyer commented that 5th and Madison had broken water pipes on the 2nd and 3rd floor. While helping a friend to move into his Mosler lofts home, one of my clients saw wood floors being ripped up in the townhome units and big drying blowers were brought in to dry off the floor. Apparently, there were some water issue in the units.

Having a few leaks isn't a huge deal, no new building is flawless which is why we have construction warranties and typically the first year of any new building includes a good amount of repair work.  The bigger question is to what extent are these the beginnings of a more issues for Trace, Mosler, or 5th/Madison?  We'll have to wait and see.  At the very least, it's probably another reason to consider the developers' warranties when comparing projects. 

-Wendy

Quick Review of the Seattle Condo Market in 2007

Five things we now know that we didn't know before the end of 2007.

1.)  The housing crash did not happen in Seattle despite constant media reports, bearish pundets, and market crises in most other regions of the US throughout 2006.

2.)  It is possible for one of the nation's top mortgage companies, American Home Mortgage, to stop funding approved loans leaving some homebuyers unpleasantly surprised at their closing appointments.

3.)  In Seattle, the biggest portion of new construction inventory, approximately 3500 units is proposed for 2010. However, these inventories may not all come through.

4.)  Homebuyers care deeply and intensely about how developers communicate with them on the delays for their condo and aren't afraid to blog, post, and comment about it. Some of those developers and marketers will probably get more skepticism on their future projects.

5.)  Most buyers went into wait and see mode in late 2007 and, for the most part, sellers didn't budge, took their properties off the market, or made symbolic price reductions.

Five things we suspected were true in 2007 but now we know for sure.

1.)  Seattle strong job growth is keeping the demand up.

2.)  Retiree (65 and above) and baby boomers formed the largest group of home buyers for new condo projects in downtown Seattle.

3.)  There is material demand for previously untested hotel/condo combo projects in the Seattle market.

4.)  Apartment-to-condo conversions decreased the supply of rentals and local job growth pushed up previously stable rental prices. 

5.)  The days of easy double digit appreciation and speculative flipping are over (at least for the next few years).

Five things we need to know as soon as possible if we want to know what is going to happen for Seattle condo market in the long term.

1.)  Will buyers re-enter the market in the first quarter of 2008 or will they continue to wait and see?

2.)  Will sellers continue their relative discipline and patience or will they start a price race to the bottom?

3.)  Will Seattle's employers maintain their growth or will they be affected by slower economic growth as seen in other regions in the country?

4.)  Will rental properties raise rents enough to make waiting less attractive than buying?

5.)  Will the sub-prime mortgage mess spread to the rest of the mortgage industry?

-Wendy

Condo Purchase Post Mortem Analysis

In a recent post, we looked at three projects completed last year and how closely the developers delivered on what they promised. Nothing beats hearing first-hand experience from homeowners who actually bought into these condos. I interviewed three buyers and summarized their responses below.

Two of these homeowners were represented by me and one is an SCR reader for whom I worked on a different subsequent property. If buying a pre-sale condo as your primary residence is one of your New Year's resolutions, you may want to get some insights from some folks who preceded you in the Seattle condo market.

Mosler Lofts

1.) What sold you on this condo?
    
Primarily the location but also the price per square foot and the particular unit available.

2.) How closely did the developer deliver (concept, compared to the rendering, architectural design, model unit versus your unit, overall finishes etc.)
         
Very accurate on the concept. Did not review a model unit but floor plan was pretty close to the actual.

3.) How was the overall buying process for you?
         
Unsatisfactory delays and poor communication by developer and developer's agent.

4.) Do you have any advice for first time new construction buyers?
          
Review the developer's track record and also the developer's agent. Negotiate upfront remedies for delays and/or be prepared for them.

Sales Center Visit Experience

Most buyers focus on the location, building, amenities, and unit floorplans when considering a new condo purchase. What many have learned is that finding out the information you need can be made much easier (or more difficult) based on how well the sales center is organized and managed.

Did you feel wowed, pampered, and delighted by one particular sales center? Share your feedback and vote for your favorite sales center (even if you didn't end up buying, you're welcome to recognize a particularly satisfying visit).

-Wendy

Survey Summary: Seattle's Best Looking New Project

The results are in from the latest SCR poll: best looking new project in Seattle. The top choices were AVA and 1521. 

-Wendy

Seattle's Best Looking New project

Fifteen Twenty One               Escala                             AVA

        1 Hotel                        Olive 8                      Four Seasons

 

Mortgage Meltdown?

A month ago, American Home Mortgage, one of the nation's top 50 mortgage companies stopped funding loans leaving some homebuyers unpleasantly surprised at their closing appointments. Countrywide recently announced that they will be eliminating around 500 jobs nationwide as they try to ride out the liquidity shortage. Yesterday's news reported that Capitol One is shutting down their mortgage division GreenPoint which specializes in Jumbo loans (loan that are above $417,000).

So what is going on with the mortgage/lending industry? Is the sky falling? Should we all sell immediately and start renting? As a homebuyer, what should you know and prepare for? I had the chance to talk to Rick Davis, Mortgage Banker with First Horizon to get his insights and point of view:

1.) So what started this whole volatility in the lending/mortgage industry?

The real estate and mortgage industries have been partying for 5 years, and now it's time for the hangover. The pendulum has swung from one extreme to another. After making aggressive loans to marginally qualified buyers, we're now trying to restore some sanity to the lending process. The unfortunate fact is that things will likely get worse before they get better.

The secondary market has gone away for many types of loans, putting a shock wave through the industry and creating the "Liquidity Crisis." This crisis has forced the mortgage industry to retreat back to the old ways of doing things-full documentation loans with strict guidelines.

2.) What can buyers expect when they are applying for a loan?

The loan application process has not changed, but the levels of documentation required have become more stringent for almost every loan program. Buyers should expect to work with an experienced, professional lender who is capable and equipped to interpret the market for them, and discuss how it impacts their particular situation.

With loan guidelines changing weekly, buyers should expect to have an in depth discussion with their lender about their loan program and qualifications: Is their approval for a program that has been changing (e.g. stated income, interest only or 100% financing)? What is their time-line for buying a condo and what is the likelihood that their loan approval may change during that time frame? Begin with a strategy and plan not just for your home loan, but for your home buying process as well.