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Condos, a Bright Spot in Seattle Housing Market

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RISMEDIA, Nov. 20, 2007-(MCT)-Overlooked for years as a significant housing source, condominiums are now a rapidly growing presence providing a ray of sunshine in an otherwise gray local housing-sales scene.

The condo market is healthier than the detached-house market and prices are holding their own. Those are the key findings from an analysis released Friday of the Seattle-area condominium market by Glenn Crellin, director of Washington State University’s Center for Real Estate Research. Compared with a year ago, single-family home sales are down about 25% in King and Snohomish counties, while condo sales are down a more modest 15%, Crellin noted.

He also found that median prices for King County condos increased slightly faster than county house prices between September 2000 and September 2007 — a 77.8% increase for condos compared with 77.2% for houses.

“People think single-family homes appreciate better than condos do, and we’re not seeing that in King County,” Crellin said.

“Crystal balls in real estate are typically very cloudy and imprecise, but it appears the condominium markets, both resale and new development, should outperform their single-family competition in Greater Seattle, with the possible exception of the high-end market.”

He surmised that sales in that segment may suffer if buyers, who typically are not first-time homeowners, have difficulty selling their current houses.

Housing analysts for many years paid scant attention to condominiums because data about them were incomplete. But in the past few years that has changed, giving a clearer picture of their growing prominence and importance.

In 2002 condominiums made up 22% of King County’s home sales. By 2006, that had grown to 26%, according to the Northwest Multiple Listing Service.

Most local condo purchasers are either first-timers buying entry-level units or older empty-nesters with enough equity from previous homeownership to buy premium-price units.

The MLS’ numbers demonstrate condominiums’ importance in providing a solution to the housing-affordability problem.

The median price of condos sold in King County this year is $286,000. That’s 37% less than the median for single-family houses, $459,500.

Buyers who purchased at those median prices, making a 10% down payment and paying the current 6.63% interest rate, would have a $1,649 monthly condo mortgage payment compared with a $2,649 house payment. The mortgage payment does not include monthly dues for condo owners of several hundred dollars.

“In King County the typical first-time home buyer has only 37 percent of the income required to purchase the starter family home,” Crellin observed. “Since the median price condominium sold in September was one-third less than the median home price home, condos remain a very attractive option for first-time buyers.”

Single women, in particular, are strong buyers of attached housing, a recent National Association of Realtors study found. They chose some form of it, including condos and town houses, almost 40% of the time.

“The superluxury condo market of downtown Seattle has stolen the headlines, while converted rental units and more modest new construction throughout the market is more representative of what potential buyers will encounter in the marketplace,” Crellin said.

One concern among industry watchers has been the role of investors. In some parts of the country, they snapped up 40% of new condominiums. When real estate in those areas soured, many investors walked away from their purchases. That sent values spiraling down.

Leslie Williams, owner of a condominium-marketing company in Seattle bearing her name, said investors have made up about 20% of local purchasers. That’s why “we didn’t have the same fallout that some of the other areas have, like Nevada, California, Florida,” said Williams, who’s marketing $525,000-and-up condos in downtown Seattle’s new 5th and Madison condo tower.

“I’ve had three sales this week at 5th and Madison, all full price,” she said. “That tells you the market is pretty healthy.”

Mike Scott, whose firm, Dupre+Scott Apartment Advisors, tracks the multifamily market, says it’s inevitable that condos’ market share will increase — and understandable that it has already done so.

“If you look at new multifamily construction, so much of it is urban multifamily mixed use, and I don’t mean just in downtown Seattle. It’s in Renton, Kent, all the suburban markets,” Scott said. “That was one of the major points of the Growth Management Act — higher density, more infill and urban-type construction, and it’s materializing now.”

Even in the face of a housing slowdown, there’s been no halt to investors’ desire to purchase apartment buildings for conversion to condominiums, he added. “Generally speaking, higher density multifamily housing is going to be a much more common component to our market than it’s been historically,” Scott concluded.

Copyright © 2007, Seattle Times
Distributed by McClatchy-Tribune Information Services.

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