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

Seattle Condo Market Update

The April numbers are in and there's good news and bad news.  Let's start with the bad news.

• For the first time in a long time, median prices in Belltown dropped.  If you remember my last update in March, we saw median prices rise over 13% versus March 2007.  In April, we saw median prices drop by 7%.  We'll have to see how the next few months play out to determine if this is the adjustment we've all been waiting for so that buyers on the sidelines can come back in or if prices drop further.

The good news:

• April over Apil inventory (April 2008 as a proportion of April 2007 inventory) has come down compared to March over March numbers.  In March, Belltown inventory was 51% higher than March of 2007.  In April, Belltown inventory was 41% higher than April of 2007.  If this trend continues, it would suggest that there while we are certainly seeing more units on the market than last year, there does appear to be a ceiling in terms of how much more supply is entering the market and as a result (all else equal), we will have a floor on how low prices will ultimately go. 

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

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

Belltown Recovery?

It's still very early but I noticed there was a slight uptick in activity in the core Belltown resale market in December. 

In November, there were only two 2BR units in the $400-600K range in Belltown that went from Active to Contingent. In December, there were four units that went from Active to Contingent status (note: Decembers are historically a slower month than Novembers).

Perhaps this is an early indicator that some buyers, who seemed to be price inelastic over the last few months, are starting to pull the trigger once again. 

Stay tuned.

-Wendy

Where in Seattle will the investor money go in 2008?

Seattle Condo Market Update

As we move into the last quarter of the year, let's examine the numbers. Overall for the month of October, inventory in Seattle remains higher than same time last year by 76.15% with a total listings of 1,573 condos. Median closed price is still holding up at 10.61% higher than Oct 2006.

Pending sales have slowed down for Capitol Hill/Madison Park/Central and Queen Anne/Lake Union/Magnolia areas by 9.52% and 38.71% respectively versus the same time last year. The Belltown/downtown area on the other hand is showing an increase in pending sales by 42.86% compared to a year ago with more than half of the pending sales coming from new construction condos. However, median closed price in Belltown/downtown area dipped by 19.66%, this is due to a higher number of lower price range condos sold last month compared to a year ago.

Many industry experts argue that with the low interest rates and the increase in the month of inventory, this last quarter presents a good opportunity for home buyers.

Moving into a the slower season with Thanksgiving around the corner and many buyers deferring their searches till next year, market activity will most likely slow down for the rest of the year.

September update

-Wendy

Seattle Rental Market

Let's face it. With the exception of the high end of the market, the mainstream downtown condo mid-market is not really moving. In fact, increasing numbers of patient home buyers are worried prices will retreat further the moment after they buy. As a result, more and more sellers are tired of waiting for a buyer and opting to become these waiting buyers' landlords rather than raise the white flag and make huge price reductions. 

Moreover, those sellers who have experimented with dropping selling prices aren't seeing much change in buyer activity anyway. Much of the market is on lock-down mode and it seems most buyers have made up their minds that they're not getting in this year regardless of the numbers. It would appear as though there have only been 2 speeds in downtown Seattle condos for the last few years, fast and stop.  As an example, only one 2BR condo less than $500K was sold in Belltown in September and another one in October.

The optimistic owners are quietly taking their units off MLS and hoping buyers return to the market at the same time in the Spring to compete against each other for the most desirable units next year (probably in May/June). In fact, 15% of those who took the recent SCR poll as of the time of this post believed prices will rise in the Spring and another 15% believed prices will be steady but inventory will move more quickly.

SCR Reader Poll: Will it be a happy Spring 2008?

Seattle Real Estate news

If you're like many homebuyers sitting on the fence and wondering what is going to happen to the downtown condo market, here's an interesting article from the Seattle Post Intellingencer.

 

Some interesting data:

• 83 percent of the more than 1,200 new downtown condo units that came on line in 2007 have been sold.
• All of the more than 1,400 downtown units built from 2000 through 2006 have sold, according to market research firm Realogics.
• Half of the approximately 1,600 condos Gardner expected to hit the market in 2010 still are looking for financing.
• The state Office of Financial Management estimates the population of downtown Seattle -- the commercial core, South Lake Union, Belltown, the Denny Triangle and Pioneer Square -- grew by 31 percent from 2000 through April 1, 2006.

-Wendy

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.

Condo Investments - Not for the Faint of Heart

A lot of my clients are experienced investors. However, I also work with first-time investors as well. For those folks who aren't planning on using their new property as a primary residence and haven't bought and sold investment properties before, there are some things I generally go over before we even consider touring the first unit: 

• Buying a property for zero down and renting it out expecting you'll make a monthly income after dues, taxes, and expenses is highly unlikely to happen. Perhaps you can find a really under priced dated unit and are able to do the renovations yourself but in general, investors experience short term losses and reap their profits in the medium to long term at selling time. 
• Especially if it's primarily an investment property, buying a pricey unit today that is in a hot building may not leave a lot of head room for appreciation a few years out. Consider units that are attractively priced and/or in areas that are still developing (and priced accordingly).
• Run the numbers. Make sure you whip out your Excel and see what your monthly costs, taxes, and expected resale value will be to see if the figures pencil out. If the numbers don't work out on paper, they probably won't in real life either.

Hope this helps!

-About Wendy

Upsizing from Condo Living

I've been recently working with some clients to move out of their condo. Initially, they thought they would still have a few more years before moving out of their lovely two bedroom condo in Belltown.  Subsequently, reality set in that it was going to be extremely hard to continue squeezing two adults, a home office, a future baby, and tons of stuff accumulated over the years into their 900 square foot living space. With the prices continuing to escalate for entry level single family houses near the city; they knew they would have to make it happen soon and get out of the perpetual “there might be something else better out there” search syndrome while they could still afford a bigger place.   

They ultimately made the decision to put in an offer for a house in Fremont about a 5 minute drive away from Belltown. Some of the questions that I helped them grapple with included: which neighborhood is already liveable today but is also going to be an increasingly desirable area in the future with good room for price appreciation? I did a lot of analysis looking at the comps, potential job growth in the different areas, price per square foot trends, future traffic issues, etc. One tool that I used as part of their search was the Zillow heat map which is pretty useful to take a look at the overall price per square foot for the different neighborhoods. Here is the heat map for Seattle.

 

Belltown Market Analysis

May 2007 data came in fairly strong - despite all the pessimists who were forecasting a steep decline in the making. In Belltown/Downtown, inventory shot up from 120 active listings in May 2006 to 308 active listings in May 2007. While this may seem like a major increase, closed sales went up by almost the same percentage from 26 sold in May 2006 to 67 sold in May 2007.

In contrast, Queen Anne, Lake Union, and Magnolia and Capitol Hill, Central, and Madison Park had active listings increase at a higher rate year over year than closed sales.

Seattle Condo Expo Update

Sponsored by the Seattle Times and The Seattle Post Intelligencer, the “Mega Open House”, Seattle Condo Expo and Realtor Symposium took place yesterday with approximately 2,500 visitors. The expo included exhibitors from many of the high profile new construction projects in the core of Seattle as well as Bellevue.

The main highlight was the presentation given by Senior Principal and land use economist, Matthew Gardner, and Blaine Weber, principal from Weber + Thompson Architects.  Matthew touched on the inventory coming on the market as well as the outlook for the next few years. Here is some interesting data he presented (Here is my own analysis from May 12th):

• The average project size for new construction is around 150 units for 2007-2009 inventory and 300 units for 2010 inventory.

• Condos completing in 2007 are mostly sold out. 50% of 2008 inventory is reserved and 9% of 2009 inventory is reserved.

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

Seattle Real Estate Update

According to data released by Dupre + Scott to the Seattle PI, a typical Seattle rental house now costs $1,604 a month, up 4.6% from a year ago. In general, the trend is similar to that for apartments. Apartment-to-condo conversions decreased the supply of rentals and an increase in local job growth are some of the reasons for the increase in rental prices. Read more.

Seattle Mayor Greg Nickels has plans for a $300 million “Civic Square” that will include a 32-story condo and office high-rise. Read more.

(Update 03/28/2008 :Civic Square will feature an open plaza with an amphitheater, water features, retail space, a Metro/Light Rail station and a 40-story office & residential tower. The curved lower 22-levels will house office space and the upper 17-levels will be condominium homes.)

-Wendy

Technorati Tags: Seattle condos, Seattle real estate news, Downtown Seattle condos, Civic Square development, Condos in Seattle

Homeless shelter in Belltown?

I received this flyer today in my building. I'm not sure if this is true. If it is, it could be a cause for concern for Belltown residents and investors. Has anyone else heard anything about this?

UPDATE : I called up the planning department today and they couldn't tell me what the building will be used for. I left the applicant a voice message and will post an update if I hear from him.

UPDATE#2:  Based on Gil's last comments below, it looks like the future of this land is still up in the air and there were misunderstandings due to land use action signs not being updated on the property.  Also, I should point out that my previous use of the term "cause for concern" may have been too loaded.  Frankly, I am most interested in a transparent community development process where all stakeholders have an opportunity to participate.  I respect everyone's right to their own opinion on the matter. 

-Wendy

Technorati Tags: First United Methodist Church, Belltown Video, Belltown homeless, Moda condo

New construction's impact on existing resale pricing

How are all the new pre-sale projects impacting existing resale condos? I recently posted a poll and more than half of voters felt that the new construction is only going to increase the resale units’ prices; approximately 35% of the voters felt that it will have a negative impact on the resale unit, and with  9.2% felt that it is not going to have any impact.

Feel free to participate in the latest SCR poll on the right hand side of this page and vote for the most attractive architecture of all the Belltown/ downtown condos.

-Wendy

Technorati Tags: presale value, resale value, new construction condo, resale condo, investment talk, market opinion, seattle condo market, avenue one

Rent a condo or hotel?

A 900 Sqft 2BR in new condo PARC and a 750 Sqft 1BR in new fancy hotel/condo OLIVE 8 cost about the same to purchase. Which one do you think will command higher rent?

The concept of a hotel/condo is fairly new in Seattle and some investors wonder if they would be better off going with a classic condo or hotel/condo hybrid given that you can get a bigger classic condo for the same price as a smaller hotel/condo – not to mention lower dues.

Currently, there is not enough data to test the market response on condo/hotel rentals so I posted a poll to ask readers which type of residential living they think will command a higher rent, a classic condo or hotel/condo hybrid. I used a 2BR in The Parc in Belltown and 1BR in Olive 8 as an example.

The result was quite interesting. 62% of the readers believe that a one bedroom in Olive 8 will command a higher rent.

-Wendy

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Technorati Tags: Rent apartment, The Parc, Olive 8, condo rental, condo hotel rental, rental investment, investment talk, Belltown condos, downtown condos

Love versus numbers

We know hotel/condo living is still fairly new in Seattle. However, it has been receiving a relatively good response from the market. I was curious to get some more perspective on how home buyers view this type of residential living. I had a chance to chat with Armen, who bought a unit in a hotel/condo recently. Here are some of his replies to questions that I asked him.

1.) What made you pick a hotel/condo over a condo?

Very convenient, I love the fact that you can order in at 2 in the morning and go down to the  gym without driving!

2.) How did you pick the between the different hotel/condos?

I always enjoyed working with Williams Marketing staff (Javilla especially) and got an invitation from their site for a presale offer.

3.) How was your experience in the sales center?

Sales center was awesome; Diane, Carrie and Pamela are awesome!

4.) When you were picking the unit, what were you looking for?

I really didn't put much thought into it, my friends and I decided to get two bedrooms, to have more square footage!

5.) If you were to do it all over again, what would you have done differently?

Nothing, really!

6.) Anything else that you would like to share with SCR readers?

You have to LOVE the project you are buying, otherwise the price will never make sense!

Armen’s last answer highlights an interesting point. Essentially, he seems to be pointing out that price per square foot is not really the key pricing driver. I’m curious to hear how SCR readers feel about Armen’s “ Love” test versus a more by “ the numbers approach.”

-Wendy

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Technorati Tags: Hotel/condo, Home buying, investment talk

Best ROI Poll Results

I posted this poll two weeks ago asking SCR readers which Seattle condo projects would get the best 3 year ROI.  The condo projects included were Cosmopolitan, The Martin, Mosler Lofts, Trio, Parc, Lumen, Enso, Rollin, Veer Lofts, and Escala. 161 votes came in and here are the results.

The majority of readers feel that Mosler Lofts will represent the condo that will get the best 3 year ROI followed by Lumen. (If you have the chance to drive along Mercer St, you will see Lumen construction are moving at very fast pace.)  Escala, a new condo that just had their preview event last Thursday, came in third. Trio, The Martin and Rollin came in at the bottom three.

Mosler Lofts          25.3%

Lumen                 16.9%

Escala                 12.7%

The Parc               9.6%

Veer Lofts             9.0%

Cosmopolitan         8.4%

Enso                    7.8%

The Martin            3.6%

Rollin                   3.6%

Trio                     3.0%

Thanks for participating in this poll.  I’ll have a new one on the right hand side of this blog every couple of weeks.

-Wendy

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Technorati Tags: Cosmopolitan, Veer lofts, The Martin, Enso, Rollin, Escala, Mosler Lofts, Lumen, Trio, Condo poll, real estate investment, condo ROI

Why are Mosler investors smiling?

I just posted this poll a couple of days ago and it looks like SCR readers are big fans of Mosler Lofts.  Vote below and we'll see if everyone else agrees.

Which Seattle condo project will get the best 3 year ROI?

Parc Mosler Lofts Lumen Trio Enso Veer Rollin Martin Cosmopolitan Escala

Web Polls by Vizu

-Wendy

Technorati Tags: Parc, Trio, Lumen, Mosler Lofts, Enso, Veer Lofts, Rollin, Martin, Cosmopolitan, Escala, Belltown condos, Midtown condos, downtown condos, South Lake union, south lake union condos, discovery center