Luxury Homes Above $1 million Skyrocket as Brokers Warn of Affordability Crisis
Condominium sales in downtown Seattle rose by 10.7-percent in January 2017 over the previous year while median home prices climbed by 47.9-percent and set a new benchmark at $668,000, according to NWMLS data compiled by Realogics Sotheby’s International Realty (RSIR). An imbalance of supply and demand is also noted by properties spending fewer days on market, which dropped 55.9-percent from an average of 111 days in January 2016 to just 49 days last month.
“January’s price climb may be a harbinger of what’s to come this year as expanding demand struggles with a lack of inventory,” said Dean Jones, President and CEO of RSIR. “Unless more condo supply is added, median home prices will keep rising. Unfortunately, the overwhelming preference of developers have been to build apartments rather than condominiums.”
Jones is especially concerned about price points below $500,000, which dropped from 15 sales in January 2015 to just 9 sales a year later in downtown Seattle. Currently, there are only 43 condominiums listed for sale in downtown Seattle and just 3 of these are priced below $500,000. The median asking price of condominiums listed for sale is $1,049,000, according to the NWMLS.
“High rental prices are driving more tenants to explore homeownership but they are finding little to choose from, especially at more affordable price points,” adds Jones. “Condos priced below $500,000 are selling twice as fast as they are being added to inventory.”
Since 2011, more than 12,000 apartment units have been delivered in downtown Seattle compared to just 866 new condominium units. Only two new condo projects were delivered in the past six years, which include the 168-unit LUMA Condominiums on First Hill and the 698-unit Insignia Condominiums in the Denny Triangle. All homes at LUMA have been sold and only two homes remain available at Insignia. Since completion last summer, at least 16 resales have occurred at Insignia, booking an average of 18-percent higher prices when compared to the presale prices.
Robust sales have encouraged other developers to move forward with condominiums. Vancouver-based Burrard Group will break ground this month on the highly anticipated NEXUS condominiums at 1200 Howell Street, a new 41-story, 382-unit high-rise with first occupancy expected by mid-2019. Not surprisingly, more than 80-percent of the new units have already been reserved for priority pre-sale.
Such pent-up demand was certainly underscored last June when brokers opened a NEXUS Preview Center. During the first weekend, more than 500 eager buyers funneled through, some spending the night before to beat the line.
“We continue to see strong interest for condominiums in downtown Seattle,” said Michael Cannon, Sales Director for NEXUS. “All the fundamentals are all in place: there’s tremendous job growth; rising home prices; steep rents, and inflation to further motivate buyers.”
Market confidence can also be found in the resale market. It’s now commonplace for luxury condominiums to top more than $1,000 per sq. ft. with some fetching more than $1,600 per sq. ft. A third of the homes closed in January 2017 were more than $1 million, including a top sale at 1000 1st Avenue, which closed at $4 million.
Luxury condos are among the fastest-growing segment in the downtown Seattle market. Sales of homes priced above $1 million were 267-percent higher in January 2017, increasing from just 3 sales in 2016 to 11 last month.