Seattle Downtown Condo Market Review, Get It While You Can!

For November 2012 the story remains the same in downtown Seattle – few new listings, a trending slowdown in both pending and closed sales, and dramatically rising median home prices led by a gold rush of luxury and new construction condo sales. The following graphs were based off the NWMLS database. A slight uptick of 40 new listings were added to the marketplace as sellers buck the trend of not listing before the holiday season – perhaps to take advantage of the lack of inventory and impressive sales absorption. ­Still many sellers may opt to holdout until the spring sales season when preferred new construction inventory, which has dominated the marketplace, will be all but sold out and all the while median home prices creep upwards. The total number of active listings is comprised of 70 resale properties with a median asking price of $499,500 or an average of $493 per sq. ft., which points to higher prices ahead. Meanwhile new construction adds only 82 remaining homes at even higher median price points and no new supply for years to come. So with just 152 total units available for purchase (not including a rising trend of off market transactions) downtown Seattle may well be facing its lowest inventory in more than a decade. The lack of supply has already impacted pending sales as would-by buyers either suspend their search in hopes for new supply in the New Year or opt to lease an apartment. Numerous RSIR brokers have suggested that buyers are becoming increasingly frustrated by the lack of choice and the commensurate rise of median home prices. These statements suggest that new listings timed for the New Year could meet some pent up demand. The declining pending sales outlined above set up for slowing closed sales ahead. Although down sharply from October the total closed sales are tracking above historic norms since the market correction. Year to date 2012 downtown Seattle is tracking about 13% ahead of 2011 for total absorption, which is a little surprising considering the market tends to slow down when inventory runs low. Most notable is rise in median home prices, which in November reached $455,000 – a new high watermark for 2013 and within a just a few percentage points of the robust spring 2011 when new construction projects that included Escala and Olive 8 reset their pricing and the market was heavily dominated by new construction price points. In November 2012 more than half of the closed sales were comprised by new construction and we believe that trend will continue into 2013 when much of the remaining 82 homes are closed out. With corrected prices within reach of most resales, consumers prefer new construction features and warranties over resale properties. Of the recently closed sales sold price to list prices are trending upwards at 97.80% and distressed sales, once as much as 30% of the in-city marketplace, comprised just 3 of the 30 closed sales. Time on market has averaged about a third less in 2012 compared with 2011 with just 37 days on market. Given the market trends developers are more and more achieving full asking prices even after raising prices. Looking ahead it seems unlikely that median home prices will retreat – 2012 will be the year that the condo market in downtown Seattle turned around and we think 2013 will witness a rebound in median values that could trend above $500,000 and average values that are north of $500 per sq. ft. If pricing continues to rise further we could find an increased number of resales enter the market as consumers that bought in 2006 and 2007 (and have been stuck with their properties during the market correction), may finally be able to exit and either buy up or simply move on. Included in this profile are “accidental landlords” – investors that purchased during presales with the hope to flip their condominiums for a quick profit in 2007 and 2008 only to find their home worth less than once hoped. Fortunately, the rapidly rising rental market over the past few years allowed these investors to successfully tread water while resale values returned. A measured number of investors selling off would be good news for inventory-starved consumers and brokers alike while those renters take solace in the fact that thousands of new apartment units will soon be delivered in the city. The lack of new for-sale development since the credit crisis in 2008 created a pinched pipeline of new condominiums for at least the next two years. Other than the INSIGNIA condominiums being constructed by Bosa Development in the Denny Regrade, there are no other new for-sale projects contemplated in the center city. Meanwhile new luxury developments just outside of downtown Seattle, such as The Residences at Fairview, are poised to start construction and will actually be the first to deliver. It remains possible however that some apartment towers being developed could convert to condominiums (especially if the rents table given the significant supply of apartment housing coming online). And if the trends hold for rising median home prices and continued recovery for homeownership it would be expected that new condominium towers will again pencil provided that construction financing loosens up. Either way it will be several years before new high-rise inventory arrives so we’re anticipating a very inflationary resale marketplace and robust sales for any well positioned town home developments that may be on the peripheral of downtown. Meanwhile the flight to quality trend first introduced in THE COLLECTION Magazine continues – see an update press release here. Since March 2012 there have been 45 closed (or pending) condominium sales in downtown Seattle priced above $1 million with a median sale price of $1.55 million or about $860 per sq. ft. That’s an average of 4-5 sales per month, which is up significantly from prior years. What’s also noteworthy is more than half of these high-end sales have occurred in Fifteen Twenty-One Second Avenue with 21 transactions, followed by Olive 8 with 9 transactions and then Escala in third place having 4 transactions. Other popular high-end buildings such as The Sanctuary and Harvard & Highland on Capitol Hill also sold out this year. Today there are currently only 14 luxury resale condominiums listed for sale in downtown Seattle priced above $1 million with many noted sales of recent at Madison Tower, One Pacific Tower, Millennium Tower and The Concord. Meanwhile, preferred new construction buildings like Fifteen Twenty-One Second Avenue and Olive 8 have only five $1 million+ homes left in each community. And based on recent sales activity and historic market share, it would seem these popular buildings would sellout first by the spring 2013 leaving the remaining homes priced above $1 million at The Four Seasons Private Residences and Escala. Realogics Sotheby’s International Realty is proud to have represented two-thirds of the closed sales valued above $1 million in downtown Seattle since the market made its notable comeback in March 2012.