Thanks everyone who attended our meetup on February 9th! Realogics let us explore the recently released units at Sanctuary (4 of which are now pending) and also gave a presentation about Seattle’s condo inventory, apartment prices, and left Matt wondering when he can sell his condo.
Here’s a bit of a recap:
- No condo projects are being built in Seattle in the near term. We are all painfully aware of this fact :).
- The developer-owned condos that are currently for sale are what you can buy in new construction, and that inventory was basically cut in half last year. It just continues to sell down.
- Many, many apartments are in the pipeline (~22,000 total planned, ~6,000 of which are currently under construction). Only about 70% of those will actually come to fruition.
- The apartment building spree is spurred by positive fundamentals: Apartment vacancy rates are currently quite low, on the order of 3.5%. Plus, apartment lease rates are steadily rising and expected to increase on the order of 3% to 5% year-over-year.
- Most of what is being built currently is smaller and more efficient, presumably because Gen Y (the perceived market influencers) will give up space for quality and/or location.
Here’s what was new to me:
- A breakdown of Belltown 1-bedroom lease rates in 2011 shows that units built between 1990 and 2000 leased at ~$1.77/sf; units built from 2000-2011 leased at ~$2.16/sf, and the newer units built from 2005-2011 leased at ~$2.30/sf.
- On average, newer construction units rent at 5-7% more than previously built apartments.
- Current rates for Downtown apartments average $3/sf, Capitol Hill apartments average $2.30/sf.
- Rollins Street Flats is the only newer construction apartment building from the last wave that is still owned by a development group and could conceivably turn condos. It won’t though because it also demands the highest lease rates in Seattle, and is far too profitable as a rental.
And here are a few off-the-cuff remarks from the discussion that I jotted down, take them as you will:
- Apartments built today are 10-15% smaller than previous.
- Condos are a bad word because developers for the most part got burned with the market downturn.
- Capitol markets are acting like sheep, unwilling to break from “perceived desirability” trend. Everyone is building the same apartment product.
- Right now we’re building rental property that will probably stay rental.
- There’s too much money chasing too few opportunities in the apartment realm.
- The “wait-and-see” home buyer is probably going to sit tight for now and continue to wait-and-see.
- Positive sales activity we’re seeing right now could be an emotional over-correction to the past two years, or could be a real upswing. It will take 6 months to see (ie. 2-3 quarters of positive upswing in the market & news before average buyer will re-engage).
- Are continued low interest rates enough to drive demand up in purchasing real estate? It helps, but probably more about jobs.
- In the next 12-18 months we’ll see jobs and politics choose a direction which will drive what happens with the economy/real estate.
Matt chimed in with the all-important question: “All I want to know is when can I sell my condo?” What I remember from that conversation thread is that if you are a condo-owner who wants to sell their condo for what they bought it for at the peak, that might never happen. However, if you are a condo owner willing to accept the realities of pricing in today’s market, you should be able to sell in the next year or two — especially as new construction inventory continues to dwindle, and no new inventory is introduced.
Thanks again to the team at Realogics for hosting the meetup at Sanctuary; including special thanks to Dean and Chris who presented. Plus, thanks to all of our readers who attended! Our next meetup is probably coming up sooner than Matt and I realize — but we’re still not sure where it will be hosted. Any requests or suggestions?
Update: Here’s the presentation!