Here’s how topsy-turvy our housing market has been this past year-plus. I have been asked this question more than a few times this summer/fall by consumers on the fence: “Did I miss my window?”
Now you may think I am referring only to homeowners, as in did they miss the peak of the market to sell their home at top dollar. That answer is a resounding “no” – at least for now. The market may go into a brief lull – as it does during this quarter and into early next year. Just as seasons change and buds become blooms again, the housing market and its price appreciation will almost certainly continue to blossom (to wear out that flowery metaphor) by the time we get to March.
I also heard the same question from buyers this year. They wonder if they missed their opportunity to buy before interest rates rise along with home values. And that answer appears to be “yes.” The Federal Reserve, which has been buying mortgage-related securities for more than a year to artificially keep interest rates low, has signaled a desire to taper its bulk purchases within the next month or so. This has prompted rates for everything from car loans to mortgages to inch higher and will likely continue an upward trajectory through at least mid-2022. (A 30-year mortgage in our area could be had for about 3.125%, up from about 2.875% a month ago. Rates also depend on an applicant’s personal financial situation and other factors.)
While early to mid-spring was frenzied – featuring waves of cash-carrying buyers with their contingency-absent offers – the housing environment settled down to a somewhat civilized pace by September and likely for the next few months.
To be sure, the market is still leaning heavily in the sellers’ favor and listings are slimmer than a strand of spaghetti. But most people I speak with say this is only the quiet before the next wave – like an ebb before the next high tide of buyers and rising prices.
Economists believe, however, that as interest rates rise, fewer buyers will be able to afford those $750,000+ homes and sellers will have to rethink their listing price or accept contingency clauses along with longer timelines to sell.
One economist said that once mortgage rates hit 4%, the tide will finally shift toward a more balanced market, where listings will stay on the market longer and the competition will be less stiff. The question is: When will rates have a “4” in front of that percentage sign?
We are watching along with many of you.
EASTSIDE GROWTH
This newsletter started 2021 raving about the explosive growth across the Eastside and there is no sign of a letup.
At every turn, we are reading of more plans for office space in Bellevue, Redmond and surrounding locales to accommodate the anticipated return of workers to tech giants Microsoft, Facebook, Google and other players. Puget Sound Business Journal this month described Bellevue’s real estate market as “arguably the West Coast’s hottest.”
We already anticipate 25,000 new Amazon employees to be based in Bellevue within a few years, but nearly every week a company is announcing the addition of 500 workers here or 1500 workers there. Amazon alone reportedly employs more than 50,000 office workers in our region and is seeking to fill about 12,500 open positions – at corporate and tech offices as well as in three local fulfillment centers.
“We have a lot of people in Seattle,” Amazon CEO Andy Jassy said this month at the GeekWire Summit, “but we also have a lot of people in Bellevue and it is where most of our growth will end up being.”
Amid increased demand for office leases in Bellevue, plans for more space are on the horizon. Construction could start as soon as 2022 on an ambitious three-tower project known as Cloudvue. As part of the project, developers are sketching out plans for a pair of office towers at least 41 stories tall on a 4.6-acre lot where Northeast 8th Street meets 110th Avenue Northeast. The third tower is expected to comprise more than 500 units in a combined luxury residential tower and hotel 54 stories high in what would be the tallest housing structure in Bellevue. Estimated opening is 2026.
The anticipated flood of tech workers to the Eastside will attract many from higher-priced markets like Silicon Valley and ensure a continued hot housing market. Homes in exclusive areas like Newport Shores in Bellevue (pictured atop our newsletter) will likely see prices soar when those properties hit the market.
LINKING THE REGION
Amid great fanfare, SoundTransit this month opened three new Link light rail stations in North Seattle. The corridor east of I-5 from the University District to Northgate will no doubt see a resurgence in real estate activity as people return to offices and resume on-campus education.
Now may be the best time to buy in that area before prices jump. Among all homes sold this year in the swath from Northgate to the UDistrict, the chart below shows a consistent last four months of about $500 per sq. ft. on an average of 16 sales a month, according to the Northwest Multiple Listing Service.
Homes are selling at about $750,000 today, off the all-time high of $797,500 in March 2017. With the addition of the light rail, which can whisk passengers from the UDistrict to Westlake in under 10 minutes, the prospect of finding a deal in this part of the city will soon end. Buyers will likely snap up any home to be within walking distance of the new transportation hubs. Who needs a car?!
Coincidentally, one of my listings currently is in the UDistrict, three blocks from the rail station. Check out this oasis in a bustling city at UDistrictCondo.com.
BY THE NUMBERS
>> New U.S. Census figures show Black Diamond is the fastest-growing city in King County by percentage. The small city – named after the Black Diamond Coal Mining Co. of California – grew 15% to a population just shy of 6,000. Newcastle had a healthy 4.2% growth spurt over the past 10 years, while neighboring Bellevue added 1.2% for a 2020 population of 149,900.
>> A new survey found that 73 million Americans reside within a community association. The Foundation for Community Association Research indicates the number of new condominiums and homeowner associations is expected to add 4500 this year to the existing total of 344,500, or about 25% of all U.S. housing stock, in so-called common-interest communities.
>> Homes listed by a real estate agent on the Multiple Listing Service sell about 17% above those sold by individual owners or through other means. Bright MLS, which serves the mid-Atlantic states, reviewed more than 440,000 residential sales over two years to generate the analysis.
>> More people are living in the heart of Seattle. The population rose 60% in the past decade to just under 99,000 in the area that comprises downtown, First Hill and Capitol Hill west of Broadway, according to estimates from mapping software firm ESRI. A separate report shows 52,400 occupied residential units in this same area. Both figures are record highs for Seattle. The city predicted a record 6415 new residential units will be completed this year in downtown, with another 5564 units expected to be built in 2022.
>> A global survey of 900 residential buyers showed 19% moved house during the pandemic. Out of a subgroup planning to move in the next 12 months, 38% of them are looking at city locations and 33% are opting for the suburbs. Eighty-four percent of buyers said energy efficiency of a future home is important to them. The Knight Frank survey covered 49 global markets.
>> Seattle is on pace to have one of the slowest annual growths in apartment-unit construction in the U.S. RENTCafe reports the city is on target to produce 19% fewer units this year (7574) compared with 2020, making it the second-largest decline among the top 109 metro areas analyzed. The production is the lowest for Seattle since 2017.
>> The gap between escalating home prices and incomes continues to widen for most households. According to the Real House Price Index published by First American Financial, Seattle was among five markets with steep year-over-year affordability drops. The Emerald City declined 20.1%, second only to Phoenix, which dropped 22.7%. The index measures the price changes of single-family properties adjusted for the impact of income and interest rates on consumer homebuying power.
>> As the percentage of flipped houses remains low (4.9% in Q2, down from 6.8% a year ago), profit margins continue to shrink, according to ATTOM Data Solutions. The gross-flipping profit of $67,000 in Q2 translates into a 34% return on investment compared to the original acquisition price, its lowest point since Q1 of 2011, when the housing market was recovering from a price slump brought on by the Great Recession.
>> ATTOM examined more than 33 million home sales between 2013 and 2020 and determined October was buyers’ best month to get a deal. Homes sold in this month had the lowest price premium, 2.9% nationally. December (3.4% above market value) and November (3.9%) were next. Deals in May sold for the highest premium, 11.5%, followed by June (9%) and July (8.8%).
OCTOBER HOUSING UPDATE
The local housing market continues its seasonal cooling as we begin the gray days of fall and winter. There is less of everything – less intensity in the number of offers amid fewer buyers in the market and, unfortunately, a scant number of active listings for consumers to consider.
Many buyers have taken to the sidelines to live their lives until possibly next year. That has helped to push the number of active listings (homes on the market as of Oct. 1) mostly higher, but the improved figures are still well off last year. For example, there are 40% fewer homes available today than a year ago (2391 vs. 3970) across all home types in King County, including 45% fewer listings in Seattle and a whopping 58% fewer on the Eastside.
“The fever in the housing market has broken,” says Ali Wolf, chief economist of building consultancy Zonda. “There have been buyers that have just been beat down for the last six months – and after losing so many homes and going through the emotional roller coaster [of a rejected offer], they’ve decided to stop searching for now.”
Amid less competition and an increase in the number of homes for sale, prices are generally falling month-to-month. The median price on any home type in King is $745,000, down 3.5% from August but 6.7% higher year-on-year. Seattle median prices were down 4.9% in the past month alone to $765,000 and up a miniscule 0.7% since this time in 2020. Eastside prices remain resurgent, up 2% in the last month and 27% in the past year to a median of $1.12M.
It’s a similar tale for single-family homes as a subset of the market. New listings are up 6.3% since August across the county and up 10% among what’s actively available Oct. 1 vs. Sept. 1. Prices are lower month-to-month for single-family homes – down 2.9% in both King County ($825,000) and Seattle ($850,000) but up 1% on the Eastside ($1.31M).
Condo sales are in a similar boat, with new listings higher – by 4.3% across King and up 17% in Seattle and the Eastside – while active listings dropped 3.3% in the county thanks to a 27% dip on the Eastside. Median condo prices were up 1.9% month-to-month in King ($466,501), up 4% on the Eastside ($586,000) and 5.2% higher in Seattle ($505,000).
The combination of buyers leaving the market, which brings down demand, and the slow but steady increase in new listings has improved supply. The increase in competition among sellers for those fewer active buyers may lead to price reductions for the next few months.
Inventories improved fractionally. There is now 0.7 months of inventory across all homes in King County, up from 0.6 in August. Seattle saw its figure rise from 0.9 to 1.0, the first time the city has had total inventory at or above one month since February (1.3). Eastside inventories are the lowest in the county, now at 0.4 months for all home types, unchanged from August, with the areas east and west of Lake Sammamish at 0.3. Single-family home inventory in King stands now at 0.6 months, up from 0.5 a month ago. There was 0.9 months of condo inventory in the county, down from 1.0, with Seattle at 1.5 months today.
In a rare event, median prices fell across all local counties month-to-month. As noted, King led the decline, down 3.5% from August to September for all home types ($745,000), followed by Snohomish County, off 2.6% ($650,000). Pierce ($500,000) and Kitsap ($494,500) median prices each fell 1% month-to-month. Similarly, single-family home prices fell for the month, with King ($825,600) and Snohomish ($675,000) both off 2.9%, followed by Pierce down 1.6% ($506,650) and Kitsap off 1% ($500,000). Year-to-year, single-family median prices remain higher, led by a 19% jump in Kitsap, 18% higher in Snohomish, up 16% in Pierce and 9.6% in King.
Click here for the full monthly report.
CONDO NEWS
Now that Spire has opened its doors – Seattle’s biggest unveiling this year – eyes will turn their gaze to the next big condo achievement. Graystone (pictured, courtesy Realogics Sotheby’s) is inching toward topping off its 31-story First Hill edifice in what will be an extraordinary luxury condo.
The Graystone brain trust have planned first-class amenities, including top-floor indoor and outdoor lounges with fireplaces, an exhibition kitchen with private dining room, media room, and fitness center with a see-through waterfall that flows just outside in a park-like setting. There are more owner benefits on the drawing board through the building’s on-site management team at Columbia Hospitality.
Buyers only need to put down a refundable $5,000 deposit to hold a unit. Doing so, locks in today’s home prices that will likely only appreciate by the time move-in takes place in early 2023. Prices start in the mid-$500,000s and are expected to exceed $3M for higher-floor, three-bed units when they become available.
Interested in learning more about the 271-unit gem climbing into the sky at 800 Columbia Street? Contact me for more info and schedule a visit to the sales gallery with your own real estate representative (me!).
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The story about Nexus has been chronicled here – at the, well, nexus of I-5, Denny Triangle and downtown. The condo celebrates its second anniversary in February and, yet, the building has never come close to full occupancy.
A combination of events – economic upheaval, temporary office closures and misunderstandings with owner-residence declarations – have caused many homes to either hit the resale market or become a rental property soon after purchase. Some consumers walked away from their planned purchases and lost their initial deposits.
Among the 389 units, 16 are actively for sale, six are under contract and another 43 homes have sold so far in 2021. That’s 17% of the entire housing stock in the building either on the market or sold this year. And that’s on top of the 30 homes we recorded for sale this time last year. Unofficially, five units are available now for rent.
Sale prices currently range from $425,000 for a 428 sq. ft., 13th-floor studio to $2.189M for a 1529 sq. ft., 2-bed, 2-bath penthouse.
Nexus is a nice, amenity-rich building but in an area of town that needs more time to mature and reach its expected greatness.
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Friends at KODA recently shared updated pricing on some units in the brand-new condo. I previously offered my take on the 17-story high-rise in the Japantown section of the International District. The amenities are first-rate. I am happy to provide you a tour of the building and select units still on the market.
LUXURY LIVING
I can’t explain this but September and October introduced some of the most intriguing luxury listings we have ever showcased in this newsletter. Take your time and soak up a wonderful array of residential eye candy.
Bay Vista is a seldom-mentioned luxury condominium sitting right behind the KIRO studios in Belltown. It is home to the highest-priced condo sale in Seattle history, $12M (2019). And now, a 2-bed, 1.75-bath, 2577 sq. ft. home (about half the size of the record sale) is on the market. This is an 18th-story home with dramatic Northwest views, two home offices, two balconies and two parking spaces. Deuces are wild! List price: $3.8M, or $1475/sq/ ft.
Just two blocks south, Seattle Heights features what is arguably the best-looking condo home on the market today. That’s where you can find a stunning 2-bed, 2.5-bath, 3049 sq. ft. penthouse covering half of the top (25th) floor. The interiors are first class and contemporary and include a light and bright chef’s kitchen, hardwood floors and five-piece ensuite bathroom. Purchased in 2018 for $2.64M, the owner is seeking $4.99M, $1640/sq. ft., or an 89% markup after 45 months’ ownership.
Looking for a century-old, classic mansion? Check out this 6-bedroom, 5.75-bath, 7413 sq. ft., four-level Mission style home on the south slope of Queen Anne. It was the longtime home of the Brace family, the patriarch being a well-known lumber baron in the Pacific Northwest and city councilman until his 1918 death in the house at age 57. The mansion, built in 1904 of old growth timber from the Brace company mill, is more commonly known as the Brace/Moriarty house and is a designated City of Seattle landmark. The family sold the property in the 1970s to James Moriarty, a local physician who owned it until 1985. The place is now seeking only its sixth owner in 117 years. Enjoy the craftsmanship of the home, including the seven lace-like arches and deeply recessed porch that greet you. Original hardwood box beams, period lighting and six fireplaces adorn this stately home, and, yet, many rooms are contemporary and inviting after renovations were undertaken at the turn of this century. You won’t find a more historic – and still livable – home in the city. List: $5.2M, $701/sq. ft.
If you immerse yourself in one listing among many great ones this month, this is THE one. It is a 4-bed, 4-bath, 7470 sq. ft. single-story home in Shoreline – and it’s an instant classic. The listing description says it all: “Recognized as one of the most significant homes in the PNW of the 20th century, the Arthur Erickson designed Wright House on 6 acres in the Highlands has been rebuilt as a meticulous reimagining for the 21st century. A masterpiece of restoration with space and light…” Originally constructed in 1979 and once the home of philanthropists Charles Bagley Wright and Virginia Bloedel Wright, the home underwent a complete (and reportedly $4M) facelift in 2018-2020 and apparently never lived in since. The reflecting pond in the rear of the home outshines the contemporary creation inside, in my view. List: $8.5M, $1138/sq. ft.
You don’t often see a home that has more garage parking spaces than bedrooms. This Lake Sammamish waterfront property is one – a special one. It includes a two-vehicle garage for the 1-bed, 1.5-bath, 1100 sq. ft., two-story home with private dock. It’s not about what’s inside but what’s all around you – immaculate, landscaped patio with chimney fireplace and 60 feet of sandy beach. List price: $3.698M, $3362/sq. ft.
There is nothing quite like the smell of cedar. This unique custom cedar house in Kirkland can be your forever home. It’s a 4-bed, 2.25-bath, 3940 sq. ft., two-story beauty that is all of two years old. It’s breathtaking for both the cedar fragrance and for the stunning views that are offered through the tall windows and 16 skylights. Plus, there are 20 solar panels powering the property and a 3-bed, 2-bath, 1400 sq. ft. accessory dwelling unit that is the original 1950s home and since renovated – an ideal setup for multigenerational living or for a rental. Owners are seeking $3.3M, $838/sq. ft.
Finally, this 4-bed, 2.5-bath, 2360 sq. ft., two-story home with finished basement offers 100 feet(!) of waterfront access along Whalers Cove, Meydenbauer Bay in Bellevue. It’s the first time the two-lot, 0.7-acre parcel has been on the market in 60 years and the listing is being positioned as an opportunity to build anew. List price: $9.288M, $3936/sq. ft., down from the initial sale price of $9.8M when the property hit the market in September.