Written by William Hillis, Research Editor, RSIR
“Should the trend since April continue on the back side of the peak home-buying season, it is possible that Seattle’s monthly home price trend could actually turn negative.”
This in fact is exactly what happened, with the Seattle index slipping by 0.28 percent monthly in September. That is not a steep slide, but to put it into context, the Seattle index has been positive for 31 consecutive months. Furthermore, Seattle home prices continue to lead the nation on a year-over-year basis, now for 13 months straight. As reported in the S&P Dow Jones press release, “Seattle, Las Vegas, and San Diego reported the highest year-over-year gains among the 20 cities. In September, Seattle led the way with a 12.9 percent year-over-year price increase, followed by Las Vegas with a 9.0 percent increase, and San Diego with an 8.2 percent increase.”
For prospective homebuyers hoping for a break in the price trend, one swallow doesn’t make a summer. All other Pacific Coast gateways have endured at least one month on the down side since the end of 2014 (San Francisco has seen seven such months). So this could certainly be just a breather on the way to yet-higher prices throughout the Puget Sound region.
Seattle Times has reported findings from HSH.com, a mortgage and consumer loan information company, showing that to afford a mortgage, households in the region (including Seattle, Bellevue, and Everett) need annual incomes of $93,400. According to the Times, this implies that an $11,000 raise from each household’s actual income would be required to qualify. Such a result reflects the combination of an acute housing shortage with the widening wealth-and-pay gap that has been pushing would-be homebuyers further and further out of the city. Even those with resources to buy may be obliged to await new construction, as the competition among buyers of existing homes drives prices out of reach.
In response to this demand, Burrard Group recently added 28 new units to the NEXUS Condominium Tower priced below $700,000 by reconfiguring larger units on the 28th through 35th floors, and making available studio units located in the above-grade parking structure of the building. Representatives of Burrard Group and RSIR reported that they sold all of these newly released units during their Encore Sales Event held on November 18th, 2017. That’s not surprising given the lack of condominium inventory. RSIR estimates that 94-percent of the 27,000 housing units projected to be delivered in downtown Seattle during the current decade are built for rent and not for sale; and 85 percent of the 496 condominiums under construction with occupancy planned by 2020 are already presold.
“Prospective buyers frustrated by the lack of selection and competitive bidding of resale inventory are increasingly turning to new construction reservations and presales as a solution,” said Dean Jones, President & CEO of RSIR. “While these buyers often have to wait months or years for their new home, this provides time to plan ahead with confidence, as they know they’ve locked in their future home and cemented their purchase price. There’s a certain comfort that comes from drawing this road map and then preparing for the move.”
Jones believes some presale buyers are also experiencing a sort of double-equity gain, as they are enjoying rising prices within their current home that has yet to be sold while benefiting from likely increases within their new home being purchased before completion.
“It’s yet another benefit of exploring presales within this rising market,” adds Jones.
To be sure, the S&P Case-Shiller Home Price Index is a measurement of resale properties within the tri-county area, and doesn’t include new construction or condominiums. While it’s a helpful barometer of the overall real estate market, many in-fill markets, such as downtown Seattle condominiums, are experiencing even greater rates of appreciation. RSIR notes that the median home price of a resale condominium in downtown Seattle has been increasing by more than 30-percent for the past several months and new construction values are now commonly setting new benchmark values.