The spring sales season has sprung a surge in penthouse sales at Realogics Sotheby's International Realty. Since March 2012 there have been eleven such sales resulting in more than $26 million in real estate transactions (including closed and pending sales). Our sales ranged from just below $1 million to several penthouses fetching more than $4 million and upwards of $1,400+ per square foot. Below is an overview of the penthouse properties recently sold and a list of remaining inventory in that category:
Since the New Year our luxury high-rise communities have experienced a dramatic return in demand for higher price points in what our brokers are calling a "flight to quality". In fact half of the sales have occurred in one building – Fifteen Twenty-One Second Avenue – where 17 sales representing $32 million in transactions have occurred (both closed and pending) since January, according to the NWMLS.
It appears that consumers are recognizing new penthouses represent a very finite group of unique homes and they don’t come around that often – think "urban waterfront". There hasn’t been a significant ground breaking on a new community since 2007 and as a result there’s no new inventory on the horizon. This discussion was captured in a recent article written by Eric Pryne at The Seattle Times and in our blog.
All of these homes have since sold with the exception of a few homes where our sellers elected to defer our sales efforts given the collective assumption there would be price escalation as the new construction inventory burned off. These penthouses were destined to sell in 2012 – The Puget Sound Business Journal reported in January in their Morning Call blog that our penthouse slideshow was their most popular story in 2011.
The significance of luxury condo sales got me thinking… just how many condominiums priced above $1 million have occurred since the height of the housing bubble and how does that compare to the volume of sales in single family neighborhoods that surround the city?
If we analyze the total volume of closings above $1 million since 2007, we learn there’s been approximately 1,418 residences that sold in the central Seattle area that runs from about the I-90 corridor north to the Montlake Cut and from Lake Washington west to Puget Sound (including Magnolia but excluding West Seattle). We learned that 414 of these sales occurred within multifamily (condos and townhome) buildings whereas the balance (1,004) were single family residences. This means about 30% of the market share for luxury homes above $1M is in the format of condominiums.
The above graphic illustrates the rise of luxury condominium sales downtown Seattle, which closely follows the new construction development pipeline as high-end projects like Four Seasons, Fifteen Twenty-One Second Avenue and Olive 8 delivered in the peak years of 2008 and 2009. Given the years of presales for what is effectively a new product category - it was expected that a higher volume of closings would occur when these buildings were completed. But since this boom the trend has continued to strengthen year-over-year despite the recession (2012 totals are annualized). Perhaps that’s because more established, affluent buyers are less sensitive to macroeconomic conditions and financing. And as the surrounding single-family home markets recover more and more would-be downsizers and empty-nesters are able to make a move now that there’s greater liquidity in the marketplace. At the same time, we’ve witnessed an increasing trend for second home ownership. Consumers seem more confident now that prices have stabilized and the fortunate few that can afford to buy a sky palace find little benefit in waiting any longer.
There is little on the horizon for new construction, which means sought-after penthouses will most certainly experience some appreciation if demand continues to expand. So we turn our attention to other in-fill, high-end new construction opportunities in more boutique developments. A shining example is The Enclave at Lake Union (soon to be reintroduced as The Residences at Fairview). The next development cycle could very well kick off in 2012 with this 21-unit luxury town home development on the eastern shore of Lake Union. Presales will start in the low $1 million range for more than 2,500 sq. ft. And given the robust high-end condo sales this past spring, I’d say the timing for a summer sales launch is perfect – stay tuned.
Also, with penthouses quickly selling out it makes sense the sub-penthouse category will see some movement. In quick step, broker Nate Short just introduced a brand new bank-owned listing at The Bellora for a cool $950,000. At nearly, 2,000 square feet this listing is going to sell quickly!