It is no secret that Seattle is undergoing a shortage of housing inventory and that the anemic levels of homes available for sale are shifting market fundamentals: more and more new residents flock to the Emerald City’s thriving tech core, most of the new development projects in the pipeline are apartments offered for rent rather than for-sale condominiums, and as a result, home prices continue to grow at unprecedented rates.
According to a recent GeekWire article, increasing home prices are locking many low- and middle-income Americans out of homeownership, as wage growth lags behind the growth of rents and home prices, which rose 20 percent and 41 percent, respectively, between 1990 and 2016. One issue influencing affordability is that we simply are not “building enough multi-family housing to meet the needs of Americans.” To be sure, national numbers reveal that while the construction of single-family homes increased by 8.6 percent from 2016 to 2017, “new construction on multifamily buildings declined by 9.7 percent to 354,000 units in 2017.”
Tightened inventory—and other factors such as a strong economy and population growth, among others—have kept Seattle atop the nation’s home price growth for twenty consecutive months, as the latest S&P CoreLogic Case Shiller Home Price Index revealed a 13.1 percent year-over-year increase as of April 2018.
In a special report entitled The Seattle Pivot, Realogics Sotheby’s International Realty recently had a look at condominium trends in the downtown core, covering what may very well be a paradigm shift in consumer trends from renting to home purchase. As research by O’Connor Consulting Group revealed, apartment demand unexpectedly fell in the second half of 2017, while sales of single-family homes and condominiums “swelled by more than 5,000 units—rising from 40,825 homes closed in 2016 to 45,949 in 2017.”
The report also says that from the first quarter of 2016 to the first quarter of 2018, condominium sales and single-family homes sold for below $700,000 in Seattle fell from 1,454 to just 951 units, representing a 35% decrease in the opportunity of attainably priced homes. When building new development projects, a $700,000 price point is a real challenge for developers, except when they invest in building multi-family projects.
Multi-family opportunities in the form of condominiums are more readily prepared for efficient scale and pricing, but as of the report, there were just 46 resale condominiums offered below $700,000 in Seattle with only three projects to add to inventory until 2020. Demand for these homes was on display most recently in the KODA unit reservation event, which drew long lines and 95% reservations on its opening weekend in late February 2018.
RSIR notes that there are ten known high-rise condominiums on the horizon in Seattle, with potential apartment-to-condominium conversions (as was the case in the recent announcement of SPIRE), anticipated to deliver between 2018 and 2022. This will bring over 3,000 new for-sale units, though over 20% of this inventory has already been presold or reserved. These numbers are much higher than 2017, in which no new condominiums were delivered, yet remain far below the past condo cycle from 2005 to 2010, when nearly 5,000 new units were added to the market.
The Emerald City’s growth can be seen in a viral time lapse video taken from the Space Needle that documents three years of construction in Seattle’s skyline: