Seattle Housing Buzz

I’ve compiled 1st quarter and March condo performance numbers for Seattle’s condo market on my Seattle condo blog. The results include citywide and downtown core neighborhood figures.

The condo conversion bill that was given a last chance two weeks ago in the Senate has finally met its end…at least for this legislative session. Supporters of the bill, including both the Senate and House, should use the off season to plan a concerted effort for the next legislative session.

Related SHB Articles:

• Condo Conversion Bill Reprieve
• Compromise Be Damned
• Condo Conversion Makeover

Last Month’ s Pending Sales Surpassed February by 16 Percent

KIRKLAND, Wash. (April 5, 2007) - With warmer temperatures, the residential real estate market seems to be heating up around Western Washington, according to the latest report from Northwest Multiple Listing Service. Figures released today show its members reported 9,340 pending sales of single family homes and condominiums during March, the highest volume since August 2006, when brokers notched 10,022 pending sales.

Inventory continues to rise - and so are prices.

Brokers added 12,073 news listings of single family homes and 2,208 new listings of condominiums to the NWMLS inventory during March, bringing the total number of active listings to 34,463. Even though the selection is almost 1.5 times larger than a year ago when inventory totaled 23,533 listings, both asking and selling prices continue to rise.

NWMLS figures show the median price for sales of single family homes that closed last month across its 19-county market area was $345,000, up more than 13 percent from a year ago. Condominiums that sold and closed last month fetched a median price of $252,000, for an increase of 10.7 percent compared to twelve months ago.

In the four-county Puget Sound region, Snohomish County experienced the sharpest price hikes. The median price for last month’s closed sales of single family homes (excluding condos) was $382,500, up about 16 percent from the same month a year ago; condo prices jumped 25.7 percent, rising from $189,970 to $238,796.

Pending sales area-wide lagged the year-ago total of 10,289 transactions, but compared to February, there were about 1,300 more pending sales (offers made and accepted, but not yet closed) for a 16 percent gain. ”

Read more »

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”.

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

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.

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%.

The NWMLS January 2007 update was recently released highlighted by a slow January start:

Members of Northwest Multiple Listing Service reported rising inventory, slower but an improving pace of sales, and rising prices compared to a year ago. The mood is upbeat:

• Demand will outpace inventory in the second and third quarters of 2007, predicts one MLS director;
• The 2007 real estate market kicked off much stronger than anticipated, remarked another broker;
• When the sun came out, so did the buyers, according to another MLS director.

January is typically a month of strong listing activity and this year was no exception. MLS members added 11,719 new listings to inventory during the month, nearly 1,300 more new listings than twelve months ago. That volume boosted the month-end total to 30,700 offerings of single family homes and condominiums, a 39 percent jump over a year ago.

Condos did exceptionally well:

• In King County, condos accounted for more than 29 percent of last month’s pending sales.
• The median price for January’s closed sales of condos in King County was $274,900, up $45,000 (19.6 percent) compared to twelve months ago.

The update can be viewed on my website.

The Housing Affordability Index (HAI), as calculated by WSU’s Washington Center for Real Estate Research, continues it’s downward spiral. Figures for 2nd quarter 2006 show the HAI for King County is 70.4, down from 1st quarter’s 77.1. It’s even tougher on first-time home buyers who have an HAI of 39.4.

Housing Affordability Index measures the ability of middle income family to carry the mortgage payments on a median price home. When the index is 100 there is a balance between the family’s ability to pay and the cost. Higher indexes indicate housing is more affordable.