An Uptick in Downtown? Snap-up options for smart consumers as the in-city market sets the stage for a refresh in 2021

Market analysts say an Inflection Point for In-City Condominiums is in play.

The strongest headwinds caused by COVID-19 in 2020 were in urban centers across the country. According to S&P/Case-Shiller reports, Downtown Seattle was not sheltered, despite the Seattle metro area commanding the highest aggregate median home price increases in the U.S. for most of the year.

Early research by Realogics Sotheby's International Realty (RSIR) through year-end 2020 indicates that downtown Seattle resale condominium listings (NWMLS #701) would report a 15 percent decrease in unit sales for the year, including a nearly 50 percent decrease in closed sales for December 2020 compared to 2019. However, pending sales (new buyer contacts for purchase) in December 2020 are now 32 percent higher compared to the previous month and, interestingly, condominium resales managed to retain prices that are effectively flat. The average price is $650,000 or an average of $756 per square foot in 2020 compared to a median price of $639,000 or $765 per square foot in 2019, an improvement of $650,000 or an average of $756 per square foot in 2019. However, what is more remarkable is that inventory levels have risen to a 10-year high in 2020, peaking in September 2020 with 292 active listings, although a seasonal pullback (combined with improved sales absorption) as of year-end 2020 has current inventory levels below 200 units. Interestingly, the cumulative time for average listings to remain on the market is roughly the same as 75 days in December 2019 and the value delta between the initial request price and the closed sales price still retains an average 9-10 percent discount.

“It’s a buyer’s market now downtown but perhaps not for long, at least not for the most preferred inventory,” says Dean Jones, President and CEO of Realogics Sotheby's International Realty. “Not all condominiums are created equal and it stands to reason that savvy buyers will purchase the best first, while the section is good, the prices are the sharpest and interest rates are at historic lows.”

A recent sales surge is a reaction to historically low-interest rates as many wait-and-see investors gradually move out after the U.S. Presidential elections, and as customers feel more secure in building roots as new COVID vaccines ease pandemic issues by 2021. Meanwhile, with local tech stocks, the U.S. stock markets are setting new benchmark highs, generating a wealth impact and liquidity that is trickling into demand for housing. The recently passed Fed Stimulus Bill is another booster, adding much needed confidence to consumer spending.

Jones states that in December, new construction pre-sales have picked up, now that many high-rise projects are approaching completion and hard hat tours are being offered. According to Ami Bumia, Sales Director for SPIRE, in one project, the 343-unit SPIRE condominiums located at 600 Wall Street in Belltown, four new pre-sales have been achieved so far in December and another four offers are on the table. In April 2021, the 39-story high-rise has occupancy expected.

Ami Bumia remarks that strong site visibility for new construction would attract interested buyers of new condominiums.

“It’s making a significant difference to showcase the level of quality in the new construction in person and of course, experience those incredible views firsthand,” adds Bumia. “I think we’ll see a flight to quality in early 2021 as sophisticated buyers target the top-shelf listings—but we’ll also see a real movement of renters choosing to become homeowners now that mortgage rates have brought more inventory within reach. I think a lot of renters that moved out during COVID will come back as owners.”

It is helpful for developers to talk with or give some additional incentives to brokers and sellers. For instance, she says that there is no Homeowner association dues in 2021 and confirmed buyers and sellers are found more alignment in the price after months of testing the waters.

“The reality is we’ll see these buyer advantages deplete as the inventory does, especially for the most desirable homes,” says Bumia. “My buyers have reconciled the market conditions and are planning ahead—they know downtown Seattle is poised for a recovery and so, they know timing the market means making a move sooner than later.”

Many localities are experiencing a revival in urban economies. Recently Mansion Global posted an article about the New York City real estate market on April 26, 2013. (The team is among the top 3 teams all over the country). Luxury buyers are buying property at the most distressed level of the market.

Jones agrees: “Deals beget deals”.

He notices that opportunistic consumers are flooding, including parents who support their children to purchase their first home or potential empty nests to protect their retirement home. He also sees more buyers from California looking to avoid their tax on state income, which is expected to grow more. And, while more people may leave the city of Seattle in 2020 than move in, experts feel that once workers and customers feel secure in the midst of a new vaccine, the trend may easily reverse direction. In reality, GeekWire reports that Seattle added 2.2 tech employees, based on "inflow-outflow ratio" data given by LinkedIn profiles, for each one that left from March to October of this year.

“My buyers have reconciled the market conditions and are planning ahead—they know downtown Seattle is poised for a recovery and so, they know timing the market means making a move sooner than later,” says Bumia.

“It’s understandable that some urban tech employees would explore an alternate address during COVID given the convenience of walking to work didn’t apply with most folks working from home—no wonder the exurban markets saw such a boon of rental and purchase activity,” suggests Jones. “But those urban tech campuses are not going anywhere, and most will be welcoming back employees by mid-2021, so I think the demand to live in the city center will increase with this population return, which will support retailers, restaurants, and the like—it’s an urban reboot.”

Jones thinks City of Seattle will benefit greatly from the new mayor's programs. After these difficult years, he assured that the recent graffiti had "hope and healing" in the city.

According to resale brokers of Realogics Sotheby's International Realty, there has been an increase in broker/buyer tours during December. Similar trends are also occurring in apartment towers, where free offers are luring tenants to agree to lease agreements.

Realogics Sotheby's International Realty's resale brokers confirm that there has been a significant increase in broker and buyer tours in December. Similar trends are also occurring in apartment towers, where free offers are luring tenants to agree to lease agreements.

According to Jones, the overall project is starting, while scaling back. He gives an outlook on some condominium projects that were originally set to start with presales. As construction projects must be penciled in in the pipeline, the construction debt beginning to tighten making it harder to make space on the books for new projects.

“My sense is what you see on the market is we what we get for the next few years,” adds Jones. “We saw this same pullback in 2010 after the credit crisis and resulting recession—it took five years to get new inventory delivered. When it comes to high-rise construction, demand can rise much quicker than supply.”