Sales are slow for new and existing luxury condominiums.
Olive 8, the luxury project in downtown Seattle, placed an ad in last weekend’s Seattle times and sent out a mass email to prospective buyers with a special offer designed to boost their own sales in a time of economic pessimism.
In their ad, Olive 8 correctly attributes slow sales to
psychological factors. David Thyer, president of Olive 8’s developer RC Hedreen, is loosely quoted in the ad,”…concern about the economy has many people taking a
‘wait and see’ attitude. People are afraid that they may buy a house today and find that it’s been reduced in price later this year”.
Data reported in the Seattle Times indicates that our local
real estate market is slowly picking up, but this is less evident in our luxury home market than it is in other segments of our housing market. People buying luxury homes usually have more flexibility in buying or selling a home, so even though our market is turning, luxury home sales will recover more slowly than other types of home sales.
So Olive 8 is offering some
price protection to their buyers. If you purchase a home at Olive 8 and prices for other units with the same floor plan are reduced before your purchase closes, then
your price will also be reduced. This kind of purchase price protection is
good for buyers and for our housing market. Buyers can rest assured that they won’t lose equity before construction is completed, and this peace of mind could encourage more home sales.
Interesting article at
SeattlePI.com today. It’s entitled,
Economist: Seattle-area home prices manageable for typical workers. The chief economist for the National Association of Realtors,
Lawrence Yun, spoke recently in Bellevue and named Seattle an up-and-coming “
Superstar City” where average home prices are not directly dependent on average income for the area.
Many people think that if the average person or family cannot afford an average home, then people will stop buying homes. But despite the recent building frenzy, the population in
Seattle continues to outgrow the supply of housing. There are enough people earning above-average incomes that the
prices of homes in Seattle will remain stable until we build a lot more affordable housing.
The only way to make housing more affordable in Seattle is to
build more of it. Our greater community, our “Superstar City”, needs to continue increasing density in order to
maintain economic diversity.
The best way to increase density is to build more
LEED-certified mixed-use high-rise towers in the city’s core neighborhoods and allow
more density for high-quality LEED-certified townhomes in low-rise residential neighborhoods, and much
more public transportation on rails is also necessary, but that’s another post for another day…
Regarding yesterday's Seattle Times article:
City may buy back land it sold to VulcanDevelopers should pay a significant portion of the cost of new infrastructure, but not all of it. The developer (in this case,
Vulcan) should pay for mitigation of environmental impact and should pay much of the costs of new roads, new mass transit and new utility service. However, it's appropriate for the city or other municipal authorities to use tax revenues to help pay for upgrades and improvements (like a new power substation) in order to provide services for tax payers.
Funding for new infrastructure in the South Lake Union neighborhood comes from various sources, including the City of Seattle, Vulcan, existing property owners and new property owners in the neighborhood. This is as it should be.
People and businesses that own property in new developments should absorb a larger portion of the cost of infrastructure improvements because they will benefit more than other tax payers. This is exactly what’s happening in
South Lake Union. In addition to paying property taxes, residential and commercial property owners in South Lake Union are paying for new infrastructure through a
Local Improvement District (LID). Over the coming years, the LID will collect $25 million from all property owners in the neighborhood to help pay for the new streetcar. A similar mechanism is being used for funding improvements to the utility infrastructure in the neighborhood.
Increasing density and combining residential and commercial developments are effective means for reducing urban sprawl, minimizing the use of single-occupant vehicles and enhancing the quality of life for all Seattleites. The mixed-use development in South Lake Union is accomplishing these goals and has won the coveted 2006 Urban Land Institute's
Award for Excellence, and all the new residential properties are designed to be
LEED-certified. This is the best type of new development that can be done, and since our population is growing, we need new development.
We all share the benefits, so shouldn't we all share the costs?
Market Update January 2007I'm back! After a long hiatus, The Seattle Real Estate Blog is back in action! To start off, let's get up to speed with current market conditions.
Following are a couple of links to sites that I find very useful when researching economic data. I use them when I want to find out what other experts think will happen with our economy and real estate market in the near future.
When reviewing these sites, please keep in mind that real estate markets are primarily local markets, and factors that affect the health of our Seattle market are primarily local. National trends frequently paint a poor picture of what is happening in any one local market.
Of course, interest rates and a few other factors will affect all real estate markets in the country, but the effects will be different in each region. For example, an increase in interest rates would be far more detrimental to a slow real estate market like that in Sarasota, Florida, but would casue far less damage to a market like Seattle that continues to have healthy appreciation rates. (Fortunately, mortgage rates have been going down for the last couple of months. See below.)
Links From UW to Various Financial Reports and UpdatesReport from the King County Association of RealtorsAs you can see from these reports, the real estate market is expected to continue to be very healthy, though appreciation rates and sales volumes are settling to a more sustainable level. We have a very long ways to go before appreciation rates and interest rates return to historical averages, and the movement is currently very slow. In fact, interest rates for mortgages have been going down a little over the last couple of months. Appreciation rates are still very healthy for homeowners and pre-sale buyers in Seattle, and are still daunting for first-time homebuyers.
4 Segments of Seattle's Urban MarketAs I promised today in
my blog post at the Seattle Post-Intelligencer, the statistics I pulled for a current market report are below. Please visit the
Seattle Real Estate Professionals for analysis the following stats, and post a comment here if you would like more info about any aspect of Seattle's real estate market.
I only looked at the market in the neighborhoods where I do most of my business:
Belltown, Queen Anne, Ballard, Fremont, Wallingford, Roosevelt, Ravenna, Montlake, Capitol Hill, Pioneer Square, Mount Baker, Leschi, Madrona and the Central Area. And I divided the market into four segments based on price:
less than $300k, $300k - $699k, $700k - $999k and over $999k.
homes priced under $300,000# current listings: 81 condos + 3 houses = 84 ttl
avg DOM for curr listings: 45 days
# new listings in last 30 days 43
# sold in last 30 days 52 condos + 4 houses = 56 ttl
avg DOM for homes sold in last 30 days: 29
# new listings in June 14
# sold in June 8 houses + 73 condos = 81 ttl
avg DOM for June solds: 34 days
homes priced $300k - $699k# curr listings: 81 condos + 3 houses = 441 ttl
avg DOM for curr listings: 57 days
# new listings in last 30 days 203
# sold in last 30 days 57 condos + 96 houses = 153 ttl
avg DOM for homes sold in last 30 days: 39
# new listings in June 85
# sold in June 148 houses + 79 condos = 227 ttl
avg DOM for June solds: 27 days
homes priced $700k - $1mil# curr listings: 28 condos + 55 houses = 83 ttl
avg DOM for curr listings: 74 days
# new listings in last 30 days 25
# sold in last 30 days 1 condos + 22 houses = 23 ttl
avg DOM for homes sold in last 30 days: 47
# new listings in June 20
# sold in June 36 houses + 6 condos = 42 ttl
avg DOM for June solds: 48 days
homes priced over $1mil# curr listings: 20 condos + 54 houses = 74 ttl
avg DOM for curr listings: 118 days
# new listings in last 30 days 20
# sold in last 30 days 2 condos + 5 houses = 7 ttl
avg DOM for homes sold in last 30 days: 59
# new listings in June 15
# sold in June 16 houses +3 condos = 19 ttl
avg DOM for June solds: 101 days
Neighborhood Report - Capitol HillSeattle’s real estate market continues to
thrive in
spite of the nay-sayers’
dire bubble predictions.
Other markets around the country are
cooling or are already
flat, but that’s
not the case with
Seattle’s real estate market.
Seattle’s strong demand for mid-level and high-level
employment and the
geographic restrictions on our housing supply work together to create a
shortage of housing. The recent easing of
height restrictions on high-rise condominiums and
increased density allowed in a number of Seattle’s urban neighborhoods will help
ease the tension in our real estate market, but the full effects
won’t be felt for a few more years. Even then, there will be
only so much room between Lake Washington, Elliot Bay and the communities north and south of Seattle.
Our local
economy doesn’t show signs of cooling any time soon. In an article for the Seattle
Post-Intelligencer,
John Cook explains that
venture capital investment is
higher in our state right now than its been in
five years.
Dan Richman recently wrote another article for the
Post-Intelligencer where he talks about the
stability of our
labor market.
The continued
strong demand for homes is evidenced by the
high appreciation rates that homeowners and investors continue to enjoy.
Multiple offers to purchase condominiums are still making many transactions look like
sealed bid auctions, and the average
time it takes
to sell a house continues to be
historically low.
Capitol Hill is a particularly strong market because of the innovative
new condos being constructed there, and also because of its
popularity among Seattle’s left-leaning
urban professionals, hipsters and anyone else who wants to enjoy the central
location, live music venues, clubs, bars, funky retail shops and pedestrian-friendly
density.
From
June 27 through today,
three multifamily properties,
25 houses and
87 condominiums sold or were under contract. During the same period
last year,
five multifamily properties,
22 houses and
54 condominiums sold. This means that overall
sales volume has increased on Capitol Hill by 42%.
The
median price for
Capitol Hill condos that sold this month was
$313,450. Capitol Hill
houses that sold this month had a median price of
$729,000. The median price for Capitol Hill
condos that sold during the same period
last year was
$262,500, and the median price for
houses that sold during this month
last year was
$652,011. Over the last year, the
median price of condos on Capitol Hill has
increased by 19.4%! The median price of
houses appreciated by
a respectable
11.8%.
This is
great news for anyone who already
owns a home on Capitol Hill, but it’s
not so great for
renters who want to buy their own home instead of helping their landlord get rich.
First-time homebuyers would do well to
buy a home as
quickly as possible so they
don’t get priced out of Seattle’s housing market and so that they can start
reaping the benefit of Seattle’s historically high appreciation rates.
The Long TailHyperion published a book by
Chris Anderson, the Editor-In-Chief of
Wired Magazine, entitled
The Long Tail. This book discusses a new theory that could replace the steadfast
80/20 Rule in business.
Simply stated, the
80/20 Rule dictates that
80% of the
benefit one receives in life comes from
20% of the
effort they put forth.
This rule is
applied to business by explaining that
80% of your
revenue will come from
20% of the
products or services you sell.
Real estate agents have also observed that 80% of the return on marketing efforts comes from 20% of the marketing we do.
The goal of any motivated entrepreneur is to
determine which 20% of the marketing or products or services
bring 80% of the benefits, then spend 100% of your effort on what was once only 20% of your activities. Capisce?
Chris Anderson’s theory,
The Long Tail, explains that
80% of a businesses revenue
no longer comes from 20% of the products or services sold. If the 80/20 rule is described by a
bell curve of the products a particular company sells, where the
highest point of the curve represents the sales volume of the
most popular product and the
lowest point of the curve represents the sales volume of the
least popular product, The Long Tail theory concerns the
long tail on the end of the bell curve.
That long tail is
new to business;
it wasn’t there before. Or more accurately, it wasn't nearly as long before. The Long Tail is so long that there is
more revenue generated by selling the products that appeal to more
unique tastes, even if the
quantity sold of each product is
far less than the quantity sold of the most popular product.
The Long Tail supports
niche marketing. In fact, it promotes the idea of marketing to
a number of niches simultaneously. As Chris Anderson points out,
Netflix and
iTunes are two
perfect models of
The Long Tail. They both earn far
more revenue from the relatively
obscure titles in their inventories than they earn from Hollywood releases or songs from the Top 40.
A
vast inventory is easy to maintain if it can be stored
digitally, but can The Long Tail apply to
service providers like real estate agents? If you’re
RE/Max,
Coldwell Banker,
Windermere or
John L. Scott, perhaps you could have a
stable of agents who
specialize in
various niche markets. But
what about individual agents? Should we aim our marketing activities at the
greatest common denominator, or should we
target a niche?
I believe that the
best way we can
serve our clients is to
specialize in a geographic area and only a few types of properties.
For me, it’s the residential houses and condos in
Seattle’s urban neighborhoods. I’m a specialist here, and that means I can provide far better service for my clients in Seattle than an agent from Tacoma who is trying to cover the tri-county area.
The
80/20 Rule applies at
every level. Does
The Long Tail apply to
small businesses and
individual entrepreneurs, or does it only apply to
larger companies?
