Seattle Housing Buzz

What seemed dead a few weeks ago is being given a second chance. The Senate has attached the condo conversion bill to another affordable housing measure. If passed, it will go into House-Senate reconciliation as the House’s version of the affordable housing measure does not include the conversion bill.

However, the Senate’s version of the the condo conversion bill (SB 5031) is far more restrictive than the earlier compromised bill in the House (SHB 2014). Under the Senate’s bill:

• Eliminates the $500 cap on relocation assistance, allowing municipalities to set their own limits
• Requires a 120 day notice to tenants (currently 90 days)
• Developers many not begin construction during the 120 notice period or until the last tenant moves out

The bill does not include a conversion cap which the bill’s sponsor and tenant advocates were pushing for.

I, for one, am relieved the conversion cap was not included. You don’t fix one issue (tenant displacement) by hampering another (reducing the availability of affordable housing with a cap). Conversions, as a whole, have provided many first-time buyers the opportunity for homeownership. This is a good thing.

Now, I don’t work with conversion developers, but the restriction on construction seems draconian. I can understand it adds to the stress of the current tenants but it only serves to ultimately impact the cost of the conversion, and thus, increasing the sales price for buyers, many of whom are first-time homebuyers.

I’m not unsympathetic to tenants. In fact, I applaud the legislature in taking action. I’ve been a tenant far longer than I’ve been a homeowner.

I was displaced by a landlord who only gave me one-month’s rent worth of relocation assistance (he sold the property). Not enough to cover the costs of moving and acquiring another rental. I also lived in an apartment that was converted to condos. These things are part of life. And, that provided me the impetus to take matters into my own hands and become a homeowner.

Though, there is a need to help those who don’t have many options. Increasing the relocation assistance amount as well as helping tenants relocate, I think, are more useful remedies than placing a cap on conversions or limiting developers from beginning construction work.

As I was writing my newest condo review post on my condo blog, it struck me that I had more to say about the condo / hotel projects planned or under construction in Seattle. So much so, my mind started to rant and I thought it best to let it out on this blog rather than on Seattle Condos and Lofts.

In writing my the post for AVA - a 38-story condo/hotel project, I had counted eight new condo/hotel projects in the downtown core. These include the newly opened Madison Tower (Hotel 1000) and the 2200 (Pan Pacific), those under construction - Olive8 (Grand Hyatt) and Four Seasons, and those on the drawing board - 2nd & Pike, 600 Denny (Hyatt Place), 1 Hotel and AVA (Executive).

The question is, has Seattle reached a saturation point with increased hotel rooms through hotel expansion (e.g. the Sheraton) as well as the addition of at least 8 condo/hotels? In a recent article in the Puget Sound Business Journal, Brett Matteson of Columbia Hospitality stated Seattle’s condo/hotel market is at the point of “saturation”. And, one of the developers interviewed is moving ahead “cautiously”. Neither of which sound very positive to me.

In numerous articles developers state that for success and survival they’ll need to differentiate themselves from one another. But, they’re not. This is Seattle not NYC or even Orlando with its mega-themed resorts. Is there really a difference between the Grand Hyatt, Sheraton, W and Four Seasons besides the price tag? Valet, room service, business center, free wi-fi, restaurants, bars, spas…same amenities just packaged differently. How much does a business traveler or tourist need in parka-wearing Seattle?

The Residences at the Four Seasons has the edge. It’s the Four Seasons afterall, with its $2,000/sq ft condo price tag (smallest unit is 1,000 sq ft). The 1 Hotel project is now officially “1 Hotel & Residences” and AVA’s jumped on the bandwagon with its homes being referred to as “The Residences” and “The Estates”. That’s differentiating?

There may be one other exception. Apparently, Ivanka Trump was in Seattle surveying the city for the newest (er, gaudiest) Trump hotel & condo combo.

The other thing about these condotels is their prices essentially all start at the same price point - around $500,000 for a low-level one-bedroom unit with views of the building across the alley. Two-bedrooms start around $800,000.

I agree with experts who state that with Seattle’s stable economy and future growth potential, the market can absorb the number of new units expected in the next 3-5 years. I disagree, though, once the cost of those units are added to the equation. There is some serious overestimation about the income level and purchasing power of Emerald City denizens. I’m not fortune teller, but my magic eight ball is telling … drats, “reply hazy, try again”.

The vote for the condo-conversion bill, with support from various stakeholders, did not come to be. Frank Chopp, Speaker of the House, wouldn’t allow the bill to come to the floor for a vote, per the PI. Apparently, it didn’t make the cut off date to pass legislation. Read the full article - Efforts to protect tenants fail.

Recently, Seattle and much of the its Puget Sound neighbors have seen a proliferation of condo conversions. This has been a boon to first-time home buyers as conversions have been among the most, if not only, affordable in-city housing available.

The media, of course, focuses on the negative aspects of conversions - the displacement of tenants, particularly the elderly and low-income tenants. And, they have a point. Current laws only require developers to provide a 90 day notice, and for low-income tenants, $500 towards moving costs.

That imagery and special interest groups help get several bills into the legislature this year. I favor more compensation to displaced tenants but the early version of the bills were drastic - increased assistance payments to $2,500, implemented conversion caps, increased the notification period to 120 days, and banned construction work during the 120 day notification period.

According to the Seattle PI, the legislature and community interests have come to a compromise on legislation to place restrictions on condo conversions. The compromised version is watered down from the initial bills but still provides more assistance to dislocated tenants. Some of the changes include:

• Caps required payments to no more than 3 months rent (currently $500)
• Allows certain cities & counties to cap conversions if rental vacancy rates fall below 5% & with a net loss of rentals the previous 12 months
• Allows cities & counties to increase required payments to elderly & special needs tenants

For more info: Substitue House Bill 2014 & Substitute Senate Bill 5031

Related post: Cost of Conversions

Seattle Condos and Lofts (SCL) is pleased to announce that King5.com, the NBC affiliate in Seattle and part of Belo, has selected the SCL blog to provide content for King5.com’s new condo section. King5.com receives over 6-million visitors per month giving Seattle Condos and Lofts tremendous exposure.

SCL is the top-ranked condo blog in the Northwest and among the most visited consumer-focused real estate blogs in Washington (per Alexa). Additionally, SCL regularly out-paces industry blogs such as RSS Pieces, Real Estate Tomato and TransparentRE (per BlogTopSites).

Housing Activity “Rejuvenating” Around Western Washington

KIRKLAND, Wash. (Mar. 7, 2007) February housing activity began to show signs of a rejuvenating market, according to observations from brokers and the latest numbers from Northwest Multiple Listing Service.

Figures for February show system-wide gains in both pending sales (offers made and accepted, but not yet closed) and sales prices compared to a year ago. Results were mixed among the 19 counties in the MLS service area, but together they reported a 4.8 percent increase in year-over-year pending sales for February.

Prices for last month’s closed sales of single-family homes and condominiums jumped 14.4 percent from twelve months ago. The median price for last month’s completed transactions was $324,000. That was $40,800 more than at this time last year.

The condominium market shows continued strength, with pending sales rising 13.7 percent from a year ago. Prices for condo sales that closed last month were 20 percent higher than twelve months ago.

Inventory also rose from year-ago levels, climbing more than 40 percent, but brokers are not convinced the buildup means a tilt to a buyer’s market. In many counties, the month’s supply ratio is less than five months (a supply of six months or greater is generally considered to be a buyer’s market).

In King County there is currently a 2.6 month’s supply of single family homes and only about a two month’s supply of condominiums (see chart).

NWMLS director Ken Bacon, the broker at Windermere Real Estate in Redmond, said the market is changing from one that slightly favored sellers to a strong seller’s market. “We are now seeing multiple offers on many of our listings,” he reports, adding second quarter inventory will not be able to keep pace with demand. As a result, Bacon said they have resumed training agents on both buyer and seller strategies in multiple offer situations.

“Housing sales in February continue to show signs of regeneration, especially in the more affordable price ranges and in neighborhoods that are close to the job centers in Seattle and Bellevue,” said J. Lennox Scott, chairman and CEO of John L. Scott Real Estate. He expects the activity in the more affordable markets will cause a “chain reaction of sales up the price points in the coming months.”

MLS members notched 8,043 pending sales last month, up from 7,673 a year ago and the largest volume since October. Condo sales surged 13.7 percent from a year ago.

“The news is good and getting better,” commented NWMLS director Dick Beeson, the broker/owner at Windermere Real Estate/Commencement Associates in Tacoma. He said the market is settling in, adding “it is as balanced as I have seen since 2000.”

Inventory continues to build in Pierce County, Beeson reported, with condos accounting for a growing share of inventory in Pierce County. Condo listings are up 66 percent from a year ago, while prices for condos that sold there last month rose 19.5 percent. For last month’s closed sales of single family homes in Pierce County, prices rose 12.5 percent.

Beeson noted buyers are waiting to see what’s new on the market, but then are paying close to list price. His office reports lighter traffic at open houses, but attributes it to growing numbers of buyers who shop online for preliminary information before touring.

Last month’s closed sales lagged year-ago totals, reflecting the slower activity during the past few months when the region was battered by flooding, windstorms and snow.

Prices on last month’s completed transactions showed considerable variation, ranging from double-digit gains (in eight counties) to double-digit declines (in two counties).

Mason County reported a 23 percent jump in the sales price of single family home sales (excluding condominiums) last month, the highest percentage increase among the 19 counties in the MLS system. Homes in that county fetched a median selling price of $192,400. That compares to a median sales price of almost $430,000 for single family home sales that closed in King County last month, where prices were up 9.4 percent.

Condominium prices in King County jumped 24.6 percent from a year ago. The median sales prices for last month’s closed sales was $285,250, which compares to the year-ago figure of $228,950. Area-wide, the median price for condos that sold last month was $252,000, up $42,000 (20 percent) from a year ago.

Low interest rates and job growth will continue to sustain a healthy housing economy throughout the Puget Sound region, according to Lennox Scott.

Inventory - Feb 2007:

Northwest Multiple Listing Service is the largest full-service MLS in the Northwest. Based in Kirkland and owned by its member brokers, it currently encompasses nearly 2,100 companies with more than 26,000 sales associates. Together, they serve 19 counties, mostly in western Washington, plus Grant, Kittitas and Okanogan counties in the central part of the state.

One of Windermere’s newest agents is Michael Schrepfer and the Seattle PI’s real estate reporter, Aubrey Cohen, is following Schrepfer’s progress as he travails through his new career. It’s a quaint idea and hopefully both will continue with the project (the PI has profiled other people as they began new endeavors).

When I started in the business 3 years ago there were approximately 10,000 agents in King County. That number has now risen to 14,000. This is a tough time for people entering the profession that historically has a high failure rate, particularly at a time with slowing market conditions.

Per a Seattle PI article, the Office of Federal Housing Enterprise Oversight (OFHEO) states housing prices in King & Snohomish Counties are continuing upward but at much slower pace.

The price of houses in King and Snohomish counties rose 1.5 percent in the last quarter of 2006 [compared to 3rd quarter 2006], according to the Office of Federal Housing Enterprise Oversight. That was the lowest quarterly appreciation since the first three months of 2004 — down from 3.8 percent in the third quarter and 4.4 percent in the second — and put the area 139th out of 381 metro areas the office analyzed.

Though prices did increase 14.5% compared to 4th quarter 2005. Another statistic from WSU’s Washington Center for Real Estate shows King County’s median price rising 12.8% for 4th quarter 2006 compared to the same period in 2005, but the number of sales dropping 17%.