A report released by Realogics Sotheby’s International Realty (RSIR) suggests an approaching supply and demand imbalance for luxury condominiums in downtown Seattle. With dwindling inventory, median home prices and sales volumes for homes valued above $1 million have already increased by 10% in 2012 over 2011 yearend totals, according to the report. “There’s no question we are witnessing a gold rush in the city as buyers vie for preferred properties,” said Dean Jones, Principal of RSIR, the brokerage firm that participated in more than two-thirds of the $1 million+ condo sales in the center city during 2012 per Trendgraphix research.
Picture above: Olive 8“Demand for the most sought-after high-rise residences, such as penthouses and west facing homes with view protection, can rise much quicker than the supply considering the protracted construction schedules. Selection is anemic and we’re years away from delivering any new, high-end condominium towers. Construction lenders remain gun shy of large, for-sale projects – even if they may be economically justified today.”
Picture above: Fifteen Twenty-One Second AvenueThe report states at least 44 condominiums priced above $1 million closed in downtown Seattle year-to-date 2012, (NWMLS area #701) averaging $836 per sq. ft. and with a median home price of $1,550,000 (statistics do not include several off-market transactions). By yearend 2011, 42 such homes closed representing $760 per sq. ft. and a median home price of $1,420,000. According to public records, the most popular buildings this year include Fifteen Twenty-One Second Avenue and Olive 8, which together represented 30 of the 44 luxury home sales in 2012. Only 5 homes priced above $1 million remain unsold in each development. They are now 97% and 92% sold, respectively. Brokers at RSIR say the brisk sales of luxury homes downtown is a product of improving consumer confidence as median home prices climbed and inventory plummeted. The report also points to increasing sales of single family homes in surrounding neighborhoods – up 16% compared with 2011, which creates greater liquidity for move-down buyers to purchase downtown. Meanwhile sky-rocketing rents and record low interest rates have encouraged more consumers to buy vs. lease. And according to Jones, discretional purchases prompted by lifestyle trends and high income taxes in other states spurred a rise in second homeownership, benefitting the marketplace. “We’ve sold many homes to Californian’s who will spend a little over six months a year in a new condo in Seattle and then winter down south,” said Jones. “I can see that trend increasing. Among the income tax-friendly states, Washington offers a West Coast lifestyle while our compelling market fundamentals provide for a savvy, long term investment.” Under Proposition 30, wealthy Californian’s earning more than $1 million per year are now digesting a personal income state tax rate of 13.3% retroactively for 2012, which is the top combined tax rate in the nation. Such a tax burden effectively promotes the allowance of $11,000 per month to own a primary home elsewhere instead of paying higher income taxes in California. As demand rises, supply for luxury condominiums remains finite. According to the NWMLS there are just 14 active resale condominiums available in downtown Seattle valued above $1 million with approximately 50 new construction units that remain unsold in the category. But upon filtering this inventory for either penthouse or preferred westfacing condominiums the preferred selection is limited to fewer than 20 homes and suggests less than a year of supply, says Jones. The Residences at Fairview, a community of 21 zero lot line homes along the eastern shore of Lake Union. With a ground breaking scheduled for early 2013 new residents could occupy in the same year unlike a condo tower that takes years to deliver, according to the developer. “We like to think of The Residences at Fairview as a horizontal high-rise because of our construction quality, views and amenities – we’re seeking a similar buyer profile,” said Mike Yukevich, a partner in Trinity Real Estate, who is developing the property. “Considering our homes offer access to the lake with moorage options, the product will always be unique and we’ll be providing the market with a compelling alternative to condo-commoditized product. Given the scope and scale of the project, we’ve secured construction financing and are prepared to go forward without presales.” The 2,500 to 5,000+ sq. ft. homes will start at $1.3 million – to learn more, please visit www.FairviewLakeUnion.com.