The official NWMLS stats for downtown Seattle condominium sales actually outperformed our estimates published in our blog post earlier this month. The trends for fewer listings, higher sales and escalating median home prices continued through May 2012. The following graphs have been updated and the encouraging data has spurred several developers to dust off their plans for new construction in what appears to be the official start of the next development cycle.
A dramatic reduction in new listing activity, which continues to track far below prior-year levels, is illustrated in the above chart. This dynamic is caused, in part, by greatly reduced new construction inventory (not all unsold new construction inventory is listed on the NWMLS) and may also be a product of would-be sellers looking ahead to rising market values and choosing to defer a sale at this time. Fortunately, the strong demand for rental housing affords patient home sellers the option of renting now and waiting for a better day to sell. In downtown Seattle, quality condominiums can fetch $2.50 to $3.00 per square foot per month. Currently, there are only 16 condominiums listed for lease in downtown Seattle ranging from $1,500 to $9,500.
Not surprisingly, the number of condominiums for sale in downtown Seattle is only a fraction of what it was in the past. In addition to a reduced number of resale units being added to the inventory, there has not been a time in the past 15 years when downtown Seattle was not adding new condominium supply.
The volume of pending sales (purchased but not yet closed) surged during the traditional spring sales season but more recently in May 2012, new contracts appear to be trending lower as perhaps, buyers are finding fewer options available. A lack of new listings will most likely slow the absorption in the marketplace.
Tracking closely behind the surge in pending sales from the spring buyer’s season, closed sales have recently outpaced prior years and have now eclipsed the peak in 2010 when the Feds offered first time homebuyers a tax credit, which stimulated buying (or at least pulled forward significant demand from the second half of 2010 into the first half of the year). As median home prices rise, would-be sellers should be more encouraged to list their homes for sale, offering additional supply. And it is possible that apartment converters will reenter the market.
Median home prices in downtown Seattle have clearly been stabilizing since 2011. For the most part, new construction developments have found their market and most are posting increased sales volumes at newly established values. Several developments have also been increasing prices. Meanwhile, fewer REO and short sales allow a higher volume of new construction home values to account for a larger share of the market activity. Our research suggests that distressed sales in downtown Seattle account for only 15-20% of the marketplace, which compares favorably with the outlying areas where bank-owned and short sales comprise upwards of 50% of the sales. Accordingly, the median home values downtown have now passed $450,000 and it seems likely that in-city condo values will continue to trend higher than in prior years.
The above graph clearly illustrates the current dearth of new construction inventory being delivered to Seattle’s center city marketplace. In the aftermath of the 2007-2009 economic downturn and the credit crunch that followed, no additional groundbreakings have occurred since the summer of 2007 so there have been no additional unit deliveries in recent years. Of the 21 downtown projects (approx. 3,282 units) built during the development boom (2007-2010), fewer than 170 developer-owned condominiums (approx. 5% of the housing supply built during the period) remain available for purchase at this time, not including resales. Four of the projects, which were planned as condominiums (representing 777 units), converted to an apartment use and the majority of those units have since been sold to REIT’s, reducing their likelihood of reverting back to condominiums. Interestingly, only 32 units – The Volta – were actually foreclosed and have since been auctioned to a new owner, which is expected to operate the building as an apartment community.
The lack of new supply and improving fundamentals has led to rumors that some new construction condominiums may be on the horizon. Most recently The Daily Journal of Commerce confirmed that B.C. based Bosa Developme nt will break ground on Insignia – a twin tower, 710-unit condominium tower located in the Denny Regrade bound by 5th and 6th streets and Battery and Bell streets adjacent to the impending Amazon.com campus.
At an estimated cost of $350,000,000 to $400,000,000 Insignia would be the city’s largest and most costly for-sale development and officially kicks off the next development cycle. This bold move indicates that developers are feeling much more confident about the trajectory of the in-city housing market hinting that prices will continue to rise. The estimated completion is set for early 2015 solidifying a five year hiatus of new condominium deliveries in downtown Seattle. The nature of high-rise development is such that takes several years of construction to deliver the inventory allowing other, more boutique developments to meet some of the demand in the interim. Perhaps the most anticipated example is The Residences at Fairview on Lake Union.
Watch for new information on this 21-unit luxury town home development on the website at www.FairviewLakeUnion.com.
DISCLAIMER: Information has been obtained from sources deemed reliable but cannot be guaranteed. Viewers are encouraged to perform independent due-diligence before relying on information contained in this report. E&OE.
About Realogics Sotheby’s International Realty: Representing the greatest number of new construction and resale property closings by total dollar volume among brokerage offices in the Seattle metro markets according to Trendgraphix for Q1-2012, Realogics Brokerage, LLC (DBA Realogics Sotheby's International Realty) has emerged as a leading sales and marketing company in the Seattle area. Visit www.RealogicsSothebysRealty.com.
EDITORS NOTE: For high-resolution photography or statistical information, please contact Andrea Savage at 206.448.5752 or Andrea.Savage@RealogicsSothebys.com