The in-city condominium market continues to demonstrate increasing demand with a noted spike in pending sales thanks to a return of presales at new construction projects like Insignia and The Residences at Fairview. We noted in an earlier blog that the improved consumer confidence and rising rents coupled with low interest rates and corrected home values have encouraged many renters to consider buying. This is a trend that we feel will continue to expand.
Despite new construction inventory finally being added to supply the overall trends with new listings continue to decline. We know there is a shadow inventory of units that are held by investors that were unable to sell during the downturn and fortunately found renters to sustain their properties. These are the most likely candidates for new supply as median home prices rise and these patient investors are finally able to sell for a profit.
For the first time since the market downturn we’re actually seeing an increase in total units being offered for sale. This is largely due to new construction inventory being added but also due to rising confidence that would-be sellers can be successful in finding buyers.
Buyers are clearly back with a dramatic increase in pending sales. This isn’t surprising given that new construction inventory was introduced to a marketplace starving for something new. Of the 80 pending sales in October 33 were from Insignia giving us a peak into the values being attained at this new development (the first of its kind in downtown Seattle since the Great Recession deferred or canceled more than a dozen new condominium towers). Based on what’s being listed it would appear Insignia is achieving in excess of $700 per square foot with recent sales ranging from $413,000 to more than $2,400,000 – these are values that pencil new construction projects so we will likely be hearing about more for-sale projects in the near future.
A key observation is that 15 pending sales topped $1 million, which suggests greater liquidity in the surrounding single family home markets as move down buyers are finally able to make their move. We’re noting a trend for impressive values being achieved north of $900 or even $1,000 per square foot in the resale marketplace, especially at highly sought after building such as Fifteen Twenty-One Second Avenue. The top pending sale is at the Four Seasons Private Residences (#1704) for a two bedroom, two bathroom condominium of 2,120 square feet asking $2,988,000 or $1409 per square foot. This condominium is proudly represented by Scott Wasner of Realogics Sotheby’s International Realty. Only one condominium is a pending short sale indicating that the measure of distressed properties in downtown Seattle is truly an exception as opposed to the rule like it was only three years ago.
In terms of closed sales we’re holding to seasonal norms but expect an increase in the coming months as the bounty of recent pending sales finally close. Most notably (again) was Four Seasons where a one bedroom, one and a half bathroom resale condominium closed at more than $1,600 per square foot – a sales value not achieved in downtown Seattle since before the Great Recession.
Median home values are generally rising but a higher volume of lower priced units have kept the statistical achievement just shy of $400,000, which is lower than recent years. While the media may suggest this means home prices have declined, they haven’t. To the contrary, we’re seeing more confidence in the market but also acknowledge that many renters are choosing to buy, which makes the lower priced homes even more attractive (hence the higher volume of sales).
There are only 29 unsold new construction units remaining from the last development cycle – that’s less than 1% of the inventory on the market five years ago at the height of the condo boom. Today we are perfectly centered in the dearth of new supply because projects like Insignia only commenced a year ago so we are waiting for their first delivery in mid-2015. Given the rising demand and the lack of immediate supply we expect that median home prices will continue to rise and bidding wars that are commonplace below $500,000 will start to become more common at higher price points. The positive market fundamentals will also encourage new condominium developments to move forward as several projects that were planned during the last development cycle are being positioned to join the current development pipeline as for-sale inventory.