Downtown Seattle Condos | Blog & Reviews by Wendy & Marco

2012 Seattle Condo Market in Review - The Year of Dwindling Inventory

As we start off 2013, every year in January we like to take a quick pause to take a look back and recap the major events, trends, and milestone from the previous year and for the heck of it, make some forecasts and predictions for the upcoming year.

Trends of 2012 and Events Worth Noting

We saw our condo market absorption rates increase and inventory dwindle to the point nearly all segments of our Seattle condo market were leaning toward a seller’s market with less than three months of inventory. 

Multiple offers returned but interestingly enough we did not see a sharp incline in pricing. This is likely due to buyers who were much more conservative and resistant to overpaying in light of the recent market crash. This could also be due to more stringent appraisal review practices by lenders, which many applaud.

2200 Condominiums in South Lake Union reached the largest construction defect settlement in state history with its developer for $26 million dollars.

We saw the return of investor buyers. An increase in all cash purchases seemed to indicate investors gained confidence in spending again.

Many newer condominium buildings entered litigation with their developers in accordance with the Washington State Condominium Act’s construction warranty time frames. This further limited available condo units on the market because units that are for sale in buildings with pending litigation have a very hard time obtaining buyer financing.

Client Question of the Week: Long Market Times for Condos in Newer Buildings?

Client Question of the Week: “I'm considering selling in the new year but I am seeing long market times in some newer buildings and that concerns me, I thought things were picking up and getting better for condo sellers in Seattle?”

Dear Scared To Sell:

This is a common question these days, and it comes down to a condo unit's ability to be purchased and the risks associated with its purchase.  Condo ownership is a wonderful thing, but like any real estate purchase (house, townhome, land, floating home, etc.) there are risks to that investment. The newer buildings you are seeing with long market times likely are those in the middle of their warranty investigations or those in the various phases of litigation with their developers.

Unfortunately, this is common with new construction condominiums.  Due to the Washington Condominium Act, which was intended, I think, to protect the condo buyer in new construction, developers of new condo buildings have to provide a warranty for certain aspects of a building's construction against defects. Sounds like a great thing right? Well, since our condo buildings are built by humans, none of them are built perfectly. So things do come up that need to be repaired, replaced, fixed etc.  There are limits to how long an HOA can hold a builder/developer accountable for certain construction defects.  I'm not an attorney so my specific knowledge is limited to the exact terms of the state statute, but basically what this results in with nearly every new condo building in our city, is that something in a building will result in a dispute on whose role or responsibility it is to fix it.  If the HOA and the developer do not agree, a motion is filed by the HOA to protect their right to sue if they can't come to agreement.

2200 Condominiums in South Lake Union Settles with its Developer

After approximately two years of warranty investigation work and negotiation, the 2200 Residential Homeowner Association and the 2200 Master Association (that represents the hotel, retail and the Whole Foods) received an early holiday gift of sorts. A settlement was reached for the 2200 Association's claim for repair of construction defects. The settlement summary was discussed with owners at the annual meeting of the HOA held earlier this week. The $26 million dollar settlement represents what is rumored to be the largest construction defect settlement of its kind in the state for a residential condo building.

This settlement comes at a good time for the owners in the 2200 complex who have been somewhat limited from being able to refinance or sell condo units for some time due to the fact the resale certificates and condo questionnaires needed by lenders disclosed issues related to the construction defects and its mediation.  These can now be changed, which should open up some possibilities for sales and refinances to happen since buyers and their lender might be more confident about the long term financial health of the building and the HOA.

Early indications are that the 2200 community will start to see the work start some time in 2013 but it’s not known exactly when, nor exactly how long the work will take.  It also remains to be seen which of three condo towers will be first and if a full wrap of each building will be needed. The board indicated at the meeting they will be working hard with the project contractor to try to make the repairs as efficient as possible and with the least amount of impact on the residents and businesses within 2200 as possible. It is not yet officially known who that contractor will be.

Although none of us owners at 2200 are looking forward to the inconvenience of the repair work that follows, it is likely that the settlement amount will cover the expenses of the needed repairs and there will not be a need for additional funds from the owners through an increase in dues nor a special assessment, which is the silver lining to the whole thing and a relief for many. In fact, the new budget for 2013 reflects a decrease in dues now that the settlement has been finalized.

By Marco Kronen with Seattle Condo Review: A guide to Seattle Condos exclusively for buyers and sellers

Olive 8 Update - Including its Debut on Top Chef Seattle

You may or may not already know but the Bravo show, Top Chef, was recently filmed in Seattle for season 10, which is now airing.  The chefs compete in a number of challenges that feature local cuisine, restaurants, and events in the host city. The show also puts the chefs up in a posh residence for their stay during the competition.

Guess where the chefs stayed? Downtown Seattle’s Olive 8 Condominiums! The “cheftestants” all lived in a unit on the 38^th floor of the Olive 8 tower giving this condo a great national stage to be seen on. The program showcases Olive 8 with scenes of the chefs lounging around, using the gourmet kitchen and shows off the beautiful view as the chefs sit out on their private deck. Olive 8 was a good choice, I would say.

So what’s going on at Olive 8 in terms of condo sales you might ask? Here is the latest update on Olive 8’s Developer owned condo units:

• 90% sold
• 196 closed sales
• 9 pending sales in November
• 19 developer owned units left: 10 one bedrooms and 9 two bedrooms (all on floor 30 or above)

There are also a couple of units being sold by individual owners (resales) in the building:

• 1 active resale unit
• 2 pending resale units

Client Question of the Week: Is the VA Loan Program Available for Condos?

This week, new clients of mine wondered what their options were for a downtown condo that would qualify for the VA loan program. The Department of Veteran Affairs loan program is available to those military veterans and active duty personnel that have accumulated enough service time to be eligible for the favorable terms afforded by this loan program.  Benefits over conventional loan programs include market interest rates, reduced down payment requirements, no monthly mortgage insurance, as well as more flexibility with debt to income ratios and closing costs.

What’s the catch? Condominium buildings must go through the VA's condo project approval process.  Similar to the FHA approval process, an HOA would need to provide supporting documents verifying the eligibility of the condominium community as a whole.  No longer can an individual condo owner seek VA approval if they are either refinancing or selling their condo.  It's all or nothing.  VA looks at things such as overall financial health of the HOA, percentage of rental units, percentage of units that are delinquent on dues, and level of insurance protection, to name a few.  Currently, very few VA approved condominium buildings exist in the downtown core of Seattle.  Newer condo projects in the Downtown, Belltown, Midtown and South Lake Union area especially, lack this VA approval.  So it can be challenging for those wanting to use the VA loan program to find options in our already low inventory market.

September 2012 Condo Sales Stronger than Expected

I finally got around to analyzing the September Seattle condo sales data!  Below are some interesting observations and those beloved charts.

• Last year we saw a drop in sales from August to September of over 20%.  
• This year we saw as many sales in September as we did in August.
• Prices are holding steady.  Median prices have been exactly $250,000 for the last three months.
• Inventory continues to be tight at about 40% fewer listings than September 2012.
• Capitol Hill / Madison / Central saw the biggest strength with sales jumping 35% versus the previous month.

So overall, we saw a nice September with some encouraging signs that the Seattle condo recovery continues to plod forward.

 

FHA Changes Mean Help for Condo Buyers, Sellers and HOAs

The Federal Housing Authority (FHA) recently changed several of its outdated and controversial guidelines, which might help those looking to buy or sell a condo.  Rule changes are “temporary” but include things such as increases to the allowance on percentage of commercial space within a condo project, increased flexibility on percentage of delinquent HOA dues, less liability for HOA Board Members who sign off on the FHA application, as well as allowances for increases in the number of units that can be rented at one time or owned by one person in a building. All of these changes have the ability to help condo buildings, condo owners, and of course buyers who are using FHA loans.

A recent article in the Seattle Times summarized some of the key relaxed guidelines the FHA recently announced.   I wanted to share this article with you and go into more detail about how it affects us here in Seattle. If you are a buyer, seller, or HOA board member, and FHA has been a topic of recent discussions, you might want to revisit it. As of September 13^th you now have more options so I’d take another look to see if your condo building or one you thought about buying in might now be in a position to get FHA approval.

Amazon Buying Vulcan's South Lake Union Buildings They Currently Lease

Well this is certainly some good news for us downtown dwellers as it looks like Amazon is buying the 11 buildingsthey lease in South Lake Union that Vulcan recently announced they were selling.  The PSBJ is indicating the sale will be for a reported $1.16 billion.  This recent news by Vulcan that they planned to sell the buildings caused a bit of a stir in the SLU and Downtown neighborhoods since everyone was wondering how the sale of those building might affect the area with a new owner coming in.  But this may put fears at ease knowing Amazon is the potential buyer. Nearby condo buildings such as 2200 Westlake, Carbon 56, Enso, Veer Lofts, and Cosmopolitan have been enjoying new vibrancy from the restaurants, bars, services, and the like all popping up mainly due to the new larger tenants coming into the area.  Amazon obviously being one of the main draws of these new businesses.

Read the PSBJ article here:  Amazon to pay $1.16B for 11 Seattle buildings

By Marco Kronen with Seattle Condo Review: A guide to Seattle Condos exclusively for buyers and sellers.

Client Question of the Week: My condo's tax assessed value went down, does that mean my condo value decreased?

Recently a client emailed me a great question that we felt many people would benefit from knowing the answer to.

“Marco, I recently received a tax assessment notice in the mail and it showed my condo value has gone down since I bought it earlier this year. But I'm seeing condo prices in the area are increasing. Should I appeal to the tax assessor’s office to increase my tax assessment to be more in line with recent market sales, as I'm afraid this might hurt my condo's value now and in the future? I realize this might mean my annual taxes may go up, but I'm just not sure what is best.”

Great question!

Vulcan Putting Amazon Headquarter Buildings Up for Sale in South Lake Union

Vulcan Real Estate recently announced that they put the 11 building Amazon campus in South Lake Union up for sale. Their reason? The sale will allow them to continue to build on the remaining 30 acres they own in the neighborhood and it will help to diversify their portfolio by liquidating some of the office space they own. Right now, they are constructing a new apartment building, the Stackhouse, and the next phase of the UW Medical Research facility in the area. And, announced yesterday, they will be starting construction in January on a two building expansion for Amazon at Westlake and Mercer. More info here and here.

What this likely means for the South Lake Union neighborhood in the future is more development, more businesses moving in, and, who knows, maybe a condo building will be in the mix. Only time will tell what Vulcan will do with their remaining land in the area but we can be sure that whatever they do will continue to help this neighborhood grow and expand.

By Marco Kronen with Seattle Condo Review: A guide to Seattle Condos exclusively for buyers and sellers