Concern for Seattle’s Housing Crisis is Rising
By Dean Jones, President & CEO of Realogics Sotheby’s International Realty
April 5, 2018
Downtown condo resale inventory is anemic and price points in Seattle below $500,000 are vanishing.
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Downtown Seattle witnessed fewer condominium resales during the first quarter of 2018 compared with the prior year, largely because there were fewer homes to choose from. The lack of supply is further raising concerns about an affordability crisis. Currently, there are only 44 resale homes available for sale in an urban center of more than 80,000 residents, with most priced above $1 million. Meanwhile, median home prices are rising at 19-percent per year, according to analysis of Q1-2018 data compared to the prior year.
PICTURED ABOVE AND BELOW: Median resale prices of downtown condominiums are now $700,000, just 11-percent less than the median home price of a single-family home in the City of Seattle.
“Rapidly rising prices are the hallmark of a sustained supply and demand imbalance,” notes Dean Jones, President and CEO of Realogics Sotheby’s International Realty (RSIR). “We have some new presale developments on the horizon but it takes years to deliver these high-rise homes. In the interim, this new supply will do little to impact the current crisis and prices continue to rise.”
PICTURED ABOVE: The first quarter of 2018 reveals a concerning trend as only a third of condominiums priced below $500,000 were sold while price points above $3 million doubled.
Jones points to several recently introduced condominiums that drew long lines and almost instantaneous reservations for presales, especially at price points below $700,000. In order to pencil at these values with construction costs rising by double-digits per year, developers are designing more studios and urban one bedrooms with in-line kitchens and treating parking and storage as optional.
“We just need more housing within the conforming loan limit of $667,000 in King County so homebuyers can enjoy much lower (i.e. 5-percent) down payments options and more attractive interest rates than with jumbo loans,” adds Jones. “This run on entry level home prices is also the target of first time homebuyers as many renters increasingly eye ownership, while purchasing can be similar to prevailing leasing costs. The rising interest rates are only exasperating the situation.”
Some new alternative housing options can be found in new construction of townhomes in the surrounding neighborhoods, albeit these are relatively few in quantity. The City of Seattle has been averaging fewer than 750 new townhome units per year sold across dozens of neighborhoods, scores of developments and throughout the entire city. That same unit count could be found within just two high-rise condominium towers on the same block in downtown Seattle and without the commute.
PICTURED ABOVE AND BELOW: The City of Seattle is averaging about 750 new townhome and single-family home sales per year, but is witness to a diminishing number of sales at price points below $750,000, with no such new home sales occuring in 2018 below $500,000 – not surprisingly, the median home prices are rising.
The search for affordable price points at all property age groups and within reasonable commute times have proven to become more and more daunting in recent years. The following heat map compares single family homes in the City of Seattle by price point and clearly illustrates the depletion of options at entry levels and an intensifying glow of price points now fetching more than $1 million.
Similar trends can be found in the city center with condominiums. The following graphics depict the volume of home sales and the effects on the median price per sq. ft. at different price points. The most significant impacts are indeed at values below $750,000 where the aggregate sales are in clear retreat and prices are rising the fastest.
PICTURED ABOVE & BELOW: Data compiled by William Hillis, Research Editor and Publisher for RSIR illustrates the dramatically vanishing lower price points in the City of Seattle, especially below $500,000.
Dean Jones, President & CEO of Realogics Sotheby’s International Realty is also a founding member of The FutureCast Forum, a collaborative of independent opinion leaders who explore current and projected market fundamentals that are materially influencing the Seattle/Bellevue metro area. Founding members and guest columnist provide timely insights on the state of the economy; commercial, residential, and retail development; evolving demographics; wealth management considerations; government policies; lifestyle trends and international interests that are reshaping our skyline into a global city on the rise. For more information, visit Seattlein2020.com.