The road to home buying in Seattle is often dotted with potholes, speed bumps or even dead ends. Inventories are low, prices are high and our lives are made worse by a pandemic and economic earthquake never before seen.
How in the heck is someone to get on the property ladder with all of these stressors?
The 20- and 30-somethings who arrived in the Emerald City with great promise are building savings and (possibly) stock options in hopes of eventually moving out of their rentals. Many have the same aspirations as other Americans – find a life partner or spouse, perhaps have a child or two and identify a bigger place to live.
At the basic level, they wish to build a foundation for financial success through homeownership. You know: Living the Dream! And the later one starts to acquire net worth in a home, the more difficult it becomes – especially in this pricey market.
The issue, for many, is that the property ladder appears to be missing the first rung. There is a real shortage of affordable homes throughout Seattle/King County. Even in March and April, amid a pandemic, sellers were receiving multiple offers on single-family homes and mutual acceptance was happening within a week in some cases.
For buyers, it can be like a game of Whac-a-Mole, except instead of one player there are sometimes 20 at once swinging mallets at that varmint with the first person to hit the mole dead-on getting the prize – a new house. The odds of winning are slim because of supply-demand constraints, hence the need for an injection of fresh inventory.
New construction projects take time and money (a lot of money!). Look at all of those high-rise buildings popping up in Denny Triangle and elsewhere. Building new – either apartments or condos – requires outlays for bank loans to cover the land purchase, architectural and engineering consultants, labor (of which there are big shortages), construction materials (including tariffs), regulatory fees, just to name a few items.
These higher costs put upward pressure on home prices. In many cases, a new downtown condo must sell for $1,000 a square foot to make it worth a builder’s trouble. That’s $700,000 on a typical 700 sq. ft. unit, a price tag many buyers are unwilling – or unable – to accept.
There is one overarching intangible against building for buyers rather than renters in Seattle – condominium liability laws that allow homeowners to sue developers for construction-related defects. In April 2019, the state revised its liability laws to effectively ease legal exposure to condo builders over workmanship claims. Now, homeowners must prove an alleged breach is more than simply a technical defect and has caused (or will cause) physical damage to the home or presents an actual safety risk.
Even with the updated law, the number of new condo projects is mainly confined to deep-pocketed developers (most based outside the U.S.) who are willing to take the risk for high reward. With that reward often comes a lofty price tag for buyers.
The safer bet for local developers has been to build apartments and townhomes. The gleaming, new high-rises for rent within walking distance of Amazon HQ, for example, typically offer 9- or 10-foot ceilings, walls of windows, luxury finishes and a full array of amenities – just like the newer condos but for lease rather than purchase. This will allow developers to recoup costs over many years of rent revenue. (Unlike condo homes, apartments typically charge for extras such as parking and storage.)
In the 1990s, Seattle witnessed a wave of condo conversions (at least 67, by my count). First Hill Plaza was among the biggest to convert from an apartment, adding 139 units in 1990 to the city’s inventory. But the conversion market dried up by 2007 amid the Great Recession and stricter liability laws.
One traditional conversion is currently in the works, believed to be the first for Seattle in more than a decade. The Goodwin, a 34-unit condo, will take over what was previously The Volta, a 10-year-old apartment building on 1st Avenue in Belltown.
Without a wide selection of new and affordable condos, what are people eyeing? Many are looking at purchasing a townhome, an option that has released pressure off condo conversions.
Townhomes offer more autonomy, greater privacy and yet are sometimes part of a dues-paying community that may use fees to cover costs for some utilities, landscaping and building maintenance. Some communities are quite nice in how they are configured to blend into a neighborhood.
Take McGraw Square at Queen Anne. This 57-home community started accepting residents in January 2019 and has about 12 unsold homes, priced from $1 million, in a range of 1362-1724 square feet and more affordable ($738-$856/sq. ft.) than many downtown condos of similar size.
Across Seattle – from Lake City to Leschi – there are roughly 225 townhomes on the market (as of this writing) with a median size of 1420 sq. ft. and price of $680,000, or $479/sq. ft. That’s a decent option compared with most condo homes in the city, where median figures are 867 sq. ft., $550,000 and $634/sq. ft. of currently listed inventory.
Townhomes can be found almost anywhere across the city but there are concentrations on the market today in Ballard, West Queen Anne, Capitol Hill (near East Madison Street), the Central District, North Beacon Hill, Columbia City, parts of West Seattle and White Center. And what’s nice is that 63% of all townhomes for sale were built in 2019 or 2020 – or are under construction.
The return of construction workers to project sites this May brings a sigh of relief to developers, their team of skilled laborers and buyers seeking greater options on the housing front.
(Data as of May 5, 2020. Please contact me for updated listings for condos and townhomes in Seattle and surrounding areas. Thanks!)