Resale Values Increasing by 13.9-Percent as New Construction Dwindles
Summer temperatures are heating up and so is demand for downtown Seattle condominiums. So why was there an 8.9-percent decrease in total absorption in downtown Seattle (NWMLS# 701) in May? The reason is there were no new construction closings last month, whereas there were last year. When looking at resales alone, the market posted a commensurate increase, rising 8.5-percent to 51 sales. Regardless, median home prices rose across the board, increasing 8.8-percent overall, but a staggering 13.9-percent when singling out resale properties.
“Based on current absorption, Downtown Seattle is effectively sold out until the next decade,” said Dean Jones, President and CEO of Realogics Sotheby’s International Realty (RSIR). “We expect prices to continue rising as buyers outpace supply.”
Jones notes that there are currently only two new construction developments under construction in downtown Seattle: the 107-unit Gridiron Condominiums in Pioneer Square and the 382-unit NEXUS Condominiums in the burgeoning East Village district of the Denny Triangle. While these two buildings will deliver 489 units, in 2017 and 2019, respectively, brokers indicate there are only 135 remaining units available. That means nearly three quarters of the total supply of future condominiums are already presold.
“What we see is what we get until at least 2020,” adds Jones. “There’s not much relief in the resale market either, as selection is anemic and buyers grapple with historically low supply.”
According to the NWMLS, there are only 41 resale condo units on the market in downtown Seattle today with a median asking price of $1,195,500 or $919 per square foot on average. This is spiked by a higher number of more expensive units. Currently there are just 18 units offered below $1 million and shockingly, only 4 units are listed below $500,000. In fact, there are more homes listed above $1 million than below it. Year-to-date, homes priced up to $500,000 found buyers in less than a week with an average of just 11 days on the market overall. Unsurprisingly, many experienced multiple offers with price escalation. A lack of new construction for sale has even compelled the sale of the fabled penthouse shell unit at Millennium Tower, which sold for $7,500,000 after more than ten days on the market.
A recent report by O’Connor Consulting Group reveals the issue – developers are overwhelmingly preferring to build apartments for rent vs. condos for sale. The downtown Seattle submarket has already digested approximately 14,000 new housing units since 2010 and another 14,000 are forecast to delivery by 2020. What’s out of balance, however, is the only 10-percent of this total supply is likely to be offered for ownership.
“More than 90-percent of what’s being built is for rent and not for sale,” suggests Jones. “More condos are in the pipeline but they’ll be offered at higher prices and won’t close until after 2020.”
From a broader perspective, the Seattle metro area commanded similar median home price increases at 12.3-percent, according to S&P/Case-Shiller Home Price Index. That’s the fastest-growing home prices in the nation for seven months in a row.
“My advice is to buy in presale,” said Michael Cannon, Sales Director for NEXUS Condominiums. “It’s the only way to lock in your future home at today’s prices and limit the exposure for rising construction costs or competing with multiple offers in the months and years ahead.”
Cannon says presales are no different than booking a flight well in advance – consumers benefit from introductory pricing and preferred selection.
"My clients who are bullish on Downtown growth and love the in-city lifestyle have bought into NEXUS years in advance for this exact reason," said Dehlan Gwo, broker with Realogics Sotheby's.
“Our presale buyers enjoy the solace of planning ahead,” adds Cannon. “They can sit back, relax and watch the skyline rise knowing that they’ll own their slice of it.”