Seattle Area Real Estate Growing at RIDICULOUS Speeds

Downtown Seattle A Top Performing Market Yet Few Condos Ahead

The Seattle metro area wrapped up the year with the auspicious honor of the nation’s fastest-growing home prices, according to a recent report by S&P/Case-Shiller. The closely-watched index tracks the resale properties of single-family homes throughout the tri-county area and is a leading indication of the regional housing trends. Nowhere, however, does high demand and limited supply challenge home buyers more than in downtown Seattle, says local market pundits.

“Downtown Seattle is effectively sold out,” said Dean Jones, President and CEO of Realogics Sotheby’s International Realty. “Considering there are more than 70,000 people living downtown and only 40 resale condominiums on the market, it’s no wonder median home prices have hit $650,000. The median asking price of a resale unit today is almost $1 million, while the total inventory has shrunk 30-percent year-over-year.”

You would think the lack of housing would mean a gold rush of new condo towers but you’d be wrong.  Jones points to a dearth of new condominium development in the recent cycle; more than 13,000 housing units were delivered between 2011 and 2016 yet only 866 units, or 6-percent, were offered for sale.  Among those, the 698-units at Insignia in Belltown and the 168-units at LUMA on First Hill have sold.  Furthermore, resales of these newly delivered towers are fetching an average of 18-percent increases over presale prices.

 Source: Realogics, Inc. This graphic illustrates the total number of new construction housing units delivered in the year of substantial closing along with the current status of developer-owned inventory. It also projects the trends for median home prices and total unit absorption of all inventory in the market, including resales and new construction. Potential inventory in 2020 is not confirmed as future projects have not officially announced nor broken ground. E&OE.

Source: Realogics, Inc. This graphic illustrates the total number of new construction housing units delivered in the year of substantial closing along with the current status of developer-owned inventory. It also projects the trends for median home prices and total unit absorption of all inventory in the market, including resales and new construction. Potential inventory in 2020 is not confirmed as future projects have not officially announced nor broken ground. E&OE.

The Puget Sound Business Journal coined it perfectly: “And Then There Were None”.  The headline refers to the fact that the last condominium at Insignia went pending today, according RSIR broker Sam Cunningham who sold the unit. The article also describes the overwhelming preference for developers to build rental housing over condominiums, given the high rents and shockingly low cap rates investors are willing to pay for these trophy assets.

“Savvy investment groups see the future and they want a piece of the skyline,” said Jones. “They view Seattle as the next San Francisco, which makes sense seeing how many Bay Area interests are building up our Silicon Forest.”

Jones is closely watching the growing urban campuses of Amazon, Facebook and Google closely, which are building millions of square feet of office space and now Apple is expanding in the area as well.

A flood of tech jobs and a thriving metropolitan lifestyle is drawing thousands of Millennials to downtown Seattle. In fact, Millennials are the largest and fastest-growing demographic in Seattle and it stands to reason many will want to rent for now. “But for how long?” questions Jones.

To be sure, Seattle is a very expensive place to rent. Research group Nested has crunched the numbers and ranked the Emerald City in 5th place based on cost of rent (compared to incomes) behind San Francisco (1), New York City (2), Boston (3) and Washington, DC (4). Despite the boom of apartment towers, Zumper says one bedroom rents in Seattle have gone up another 8.5-percent in February over the past year, topping $1,790 per month.

“The way I see it, these surrounding apartment towers are full of tomorrow’s homebuyers,” adds Jones.  “Renters may not realize they’re waiting at the elevator with their future competition to buy homes. The smart money would take the stairs – now.”

 NEXUS Interior

NEXUS Interior

Michael Cannon, Sales Director for NEXUS Condominiums, believes many consumers are doing just that. He’s been accepting reservations on new units offering buyers a first right of opportunity to purchase the condominiums when they are released for sale. The demand, which includes many homes having second positions, resulted in the majority of the condo tower being snapped up even before the presales have begun. The 41-story tower is expected to break ground this month and deliver 382 homes by mid-2019. Currently, it’s the only high-rise for purchase into 2020. As a result, a blossoming number of buyers in the coming years may find slim pickings for sale and higher prices ahead.

“We’ve seen a lot of interest, especially in our more affordable price points below $600,000 as renters seek to become homeowners,” said Cannon. “They recognize that a 5-10-percent down payment and low interest rates makes the cost of ownership similar to paying rent in today’s market. The benefit of buying presales today is you can lock in the price now and not close for another 30-months.”

Cannon also points out April 15th is just around the corner when thousands of city dwellers will look at their tax return and contemplate the benefits of home ownership.

“Homeownership is the only way to lock in your housing costs while enjoying tax deductions and the opportunity for capital appreciation,” adds Cannon. “It certainly appears that NEXUS and our homebuyers share a great sense of timing.”

The public sales debut for NEXUS is scheduled for March 18th with prices ranging from below $500,000 to more than $3 million. If you're a prospective buyer for NEXUS, feel free to contact me for more details and information. 

Austin Schneider | austin.schneider@rsir.com |Realogics Sotheby's International Realty

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