The Condo Revival - An In-City Turning Point as Buyers Return to City Living
As home prices in the Seattle metro area continue to rise, affordability has become an increasingly elusive goal, as has timed the market for developer incentives and today's historically low, but rising, interest rates. According to The Seattle Times, condominium sales in Seattle increased 121.2% year-over-year, while median prices increased 4.5% compared to April 2020.
“It’s a perfect storm for savvy homebuyers that know how to spot the opportunity,” said Dean Jones, President and CEO of Realogics Sotheby’s International Realty (RSIR). “The fundamentals are creating FOMO (fear of missing out) as the preferred inventory at the sharpest prices are the first to go—once these units are absorbed, so will be the incentives, and a new growth cycle is upon us.”
This year, more than 100,000 tech workers will be encouraged to return to work at Amazon, Apple, Microsoft, Facebook, Expedia, and other urban employers. And this is already having an impact on the demand for in-city apartments and condominiums. Even the long-term trend of Californians as the top inbound buyer demographic has returned, drawn by the Evergreen State's more favorable tax structure and economic opportunities.
What a difference a year makes.
From The Seattle Times: Rents rise again in Seattle after pandemic plunge →
According to the Northwest Multiple Listing Service (NWMLS), pending sales activity in downtown Seattle resale condominiums has nearly doubled year over year so far in 2021, while inventory has plummeted. Jones recalls market conditions a decade ago, when the market was still recovering from the Great Recession and offering some of the best home-buying opportunities. Market analysts believe it will be several years before new towers are built, as it was back then.
“I believe what we see is what we get for inventory for now,” added Jones. “The challenge with high-rise construction is the demand can rise much quicker than supply—it can take three to four years to go from concept to closings with these buildings and we’ve seen how quickly the market can change.”
Developers are facing higher construction costs and tighter lending for larger projects, especially as current market values do not support a new start. According to Realogics Sotheby’s International Realty research that tracks current and pending condominiums in Seattle, there are 15 condominium buildings in the city limits that were recently built or are under construction with occupancy between 2018 and 2023 and a total of 2,256 units, with approximately half of this new supply already sold and closed or under contract.
Due to the limited supply, future condominium conversions, such as the recently announced Goodwin in Belltown, are a possibility. Condominium conversions are buildings that were previously used as rental apartments that are now available for individual ownership. Other options include making reservations, which are essentially first rights of refusal, to buy a presale property like The Graystone on First Hill, which will be completed in late 2022, giving prospective homeowners plenty of time to plan ahead, including selling their current home.
The increased demand is not limited to Seattle; boom-burbs are also experiencing strong sales growth. For example, Jade Residences in Kirkland has already found buyers for 72 of the 136 units, many of which were sold during the pandemic, and is perfectly timed for the economy's full reopening amid the Village at Totem Lake lifestyle center. The building will be ready for occupancy in the fall of 2021.
Another market trend that has been observed is that would-be sellers of resale condominiums in downtown Seattle are now more encouraged to sell, either to upgrade in the current market or to switch lifestyles entirely.
“The added buyer demand downtown is creating liquidity for sellers to plan forward in other buildings where they can lock in a presale and time their move later this year,” said Ami Bumia, Realogics Sotheby’s International Realty’s Executive Director of Sales for New Developments. “After spending the last year working from home in their in-city condominium, some are ready for a change of scenery.”
One appealing option is to live on the beach. Prospective buyers who live in a downtown Seattle high-rise are looking into Infinity Shore Club Residences on Alki Beach, according to Bumia. The 37-unit waterfront building has been dubbed a "horizontal high-rise" due to its concrete and steel construction, robust amenities, and penthouse-level quality throughout.
“After the pandemic, there’s certainly a buyer group that would prefer to live in a low-density, more boutique scale community,” added Bumia. “There’s also a lot of excitement for West Seattle now that there’s a fix to the bridge in the works and commutes will be quick to downtown job centers, either by car, bike, or even the West Seattle foot ferry that’s in service.”
According the NWMLS data in this Trendgraphix chart, resale condominiums are witness to a 92.4 percent increase in pending sales year-to-date in 2021, while new inventory is trailing by an increase of just 13.9 percent.