Median Home Price of Downtown Seattle Condos Rose 13.36% in 2016; Renters are “Vying and Buying”
A report by Realogics Sotheby’s International Realty (RSIR) in collaboration with Caliber Home Loans and real estate appraisal firm O’Connor Consulting Group determined an aggregate $60 million in income tax deductions were missed in 2016 by 12,562 tenants that occupied newer apartment units built since 2010 in downtown Seattle alone. This new rental supply compared to just 866 new condominium units delivered during that same period, all of which are sold. Rising demand to own a downtown condo and tight supply spurred a 13.36% year-over-year median home price increase last year. Had these aforementioned tenants owned their homes they might have enjoyed equity gains of more than $600 million, says experts.
“Capital appreciation offers a 10:1 benefit ratio over interest deductions right now,” said Dean Jones, President and CEO of RSIR. “As rents and condo values rise, renters are further motivated to become homebuyers.”
Jones admits that condo selection is anemic – especially at attractive price points where mortgage payments are similar to prevailing rents. By example NEXUS, a 382-unit condominium high-rise experienced sales on 286 units by its public sales debut weekend on March 18 and 19, promptly selling out of inventory priced below $900,000.
The buy vs. rent analysis assumed an average apartment rental size of 750-sq. ft. and explored a like condominium having a median value of $625,000. Assuming a 5% down payment, which is possible for approved credit and conforming loan limits, the principle and interest on a typical loan would average about $3,200 per month excluding HOA dues. Now provided the borrower had a taxable income of $100,000 per year and approximately $25,000 in interest payments were deducted, the average tax savings would be around $5,000 per annum over renting a similar home. Researchers acknowledge every tax payer has a different profile so numbers provided therein are subject to change. The report also trended more modest equity gains of 8% year-over-year, or $50,000 on a typical $625,000 one bedroom home while the broader market posted even greater gains at 13.36%.