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January 2017

The Answer to Why Condo Prices Are So High

GridironThese crazy prices—it’s not a demand problem, it’s a supply problem.

This may not be news to some, but this recent article from the Seattle Times further illustrates what I have been saying is the issue for a long time now and that is that there are simply not enough condos for sale for buyers to choose from.

According to the article, Seattle has the 2nd “tightest” real estate market in the entire county with regard to inventory.  Only behind San Francisco.  Further, with inventory levels being 14.3% lower last year in 2016 than they were in 2015, this tells me that people aren’t selling their condos (and houses), and builders just aren’t building enough to offset the shortage.

For buyers in today’s Seattle condo market, it’s competitive, expensive, and frustrating at times.  So what can you do??  Well one thing you can consider are pre-sale condominium purchases.   These are condos that are not yet completed and are under construction. You can select a unit, lock in pricing, and secure a unit that will be completed in the future.  The benefit is that not every buyer can do a pre-sale. So it cuts down on your competition.  Even though the pricing can seem expensive, it’s an option a buyer can consider to avoid the hyped up bidding wars that are being encountered often on condos listed on the market.  In the end, even though a buyer is likely paying more for a pre-sale than they might for re-sale today, it still may be a better option than fighting to find a condo for 6 months to a year while pricing is going up, in the meantime.   

Currently, in Seattle, there are only three pre-sale condo options that are actively selling their condos and each has pros and cons.  In a previous blog post we covered them.  They are Nexus in the Downtown/Denny Triangle area,  Gridiron in Pioneer Square (pictured in this post) and Hendon condos in the Phinney Ridge neighborhood.  All the other cranes and construction sites you see all over the city are either building office space, medical research facilities or rental apartment buildings.  So, you can see even for new construction condo options, the choices are very limited.  There are potentially 3 more condo projects breaking ground in 2017, but until they do, we never really know if they will be built and if they will be condos. We are the 2nd tightest real estate market in the county. Wow.

By Marco Kronen with Seattle Condo Review: A guide to Seattle downtown condos.

Great news for 2200 Westlake Condos in South Lake Union! Lending Just Got Way Easier

900_lenora_012200 Westlake is a condominium community that consists of 3 towers built in 2006 in South Lake Union/Denny Triangle. The main floor of two of the towers contains retail space and the third tower contains the Pan Pacific Hotel and a Whole Foods Market. These amenities are what make living in 2200 so fabulous and convenient including the ability to order services from the hotel such as room service. However, the amount of the commercial space is also what, in the past, has made getting a mortgage loan in this condominium very challenging.

For lending on condominiums, most banks and credit unions underwrite their loans following the guidelines determined by the federal lending institutions of Fannie Mae and Freddie Mac. One of those guidelines puts a cap on the percentage of commercial space a condominium project can have. In 2200's case, they are 42% commercial due to the Pan Pacific Hotel, the Whole Foods as well as the hand full of other retail spaces. This will trigger the lenders to have to get an exception for this non-conforming guideline, which can be done in some cases, but it typically requires that the borrower is stellar (if not near perfect) on all of the other loan requirements such as needing to have a high credit score, low debt to income ratio and having at least 20% to 25% down payment.  Which when buying a $500,000-$2,000,000 condo, is a huge chunk of money to have. This can rule out quite a few potential buyers from qualifying for a loan in this building.

What changed? Well, 2200 Westlake has received its Project Eligibility Review Service (PERS) approval from Fannie Mae. Condominium buildings that go through the lengthy process of submitting all of the required documentation for a PERS approval from Fannie are eligible for additional approval flexibility on some requirements, including having more than 25% commercial or non-residential use space as part of the condo project. Which is why, even though 2200 has a higher than accepted commercial space percentage, it still received the approval. They evaluate the condo building on it's other merits, in lieu of just letting one item that doesn't meet the general guidelines cause the condo project to be rejected. Once a building has the PERS approval, that approval is accepted by many lenders and their investors meaning that when your lender goes to determine if a loan is possible in 2200 Westlake, they will see that Fannie has approved it and will be able to approve the loan despite the high commercial space percentage that would have otherwise made the loan more difficult if not impossible.

2200 Westlake's PERS approval is good through 6/12/18 (18 months), at which time another approval/extension will be needed.  So, if you were thinking about selling your condominium at 2200, your potential buyer pool just got way larger. Additionally if you have wanted to buy  there but couldn't get a loan in the building in the past, now is a great time to revisit those plans. We are of course here to help so give us a shout if you'd like additional info or would like to look further at your options.

 By Marco Kronen with Seattle Condo Review: A guide to Seattle downtown condos.

Condo Developments Breaking Ground in 2017 in Seattle and Bellevue

6 Condo Buildings Breaking Group 2017As we forge into 2017 it is a good time to take a look at what major condominium building projects are in the pipeline to start construction in 2017 both in Bellevue and Seattle. It isn't a long list, there are only 6 projects slated for development, and one of those might still be apartments. If all of the building get built and are indeed sold as condominiums, 1,677 new construction units would come to market.

Here are the upcoming Seattle condo projects:

According to PSBJ, during the last condo building boom  3,765 units were under construction in the greater Seattle area alone so we are no where those numbers in this cycle.  With the hiring boom and in-migration coupled with foreign investors, this inventory should be able to be absorbed quickly if the economy stays the course.

 By Marco Kronen with Seattle Condo Review: A guide to Seattle downtown condos.