As a former Belltown resident, I’ve wondered when the downtown Seattle Condo market would begin to tumble. When I bought a unit in Avenue One 4 years ago, it was one of only 2 projects being built in the area, mine and Cristalla. Since then, condo projects began popping up in the Seattle skyline faster than you could blink.
In the past few years before the sub-prime crisis, the City of Seattle loosened guidelines to allow condo builders to build taller buildings, thus more units to sell per project. Soon, developers were buying every downtown lot they could get their hands to begin a new building.
Many of these units were under construction during the beginning of the recession and some are still under construction now. As financing for high-end condo becomes more difficult, I felt this market was one set to tumble. Here are the factors that work against these downtown condos.
- Too many projects means too many homes for the market. Combine this with all of the resales in the area and you risk oversaturatng the market. Simple supply and demand.
- Many of the new projects being built were high-end or mixed use condos that fell outside of Fannie Mae and Freddie Mac guidelines. Non-conforming loans used to be easy to get but are all but gone now.
- New Fannie Mae an FHA guidelines makes condo warranties harder to get (SEE DETAILS OF NEW FHA GUIDELINES HERE)
- Many of the high-end condos are “Condotels” which are mixed use condos and hotel useage. These are very difficult to finance.
One of the few things working for this market is the earnest money deposits that many of these builders implemented. When I purchased my place in 2005, the earnest money was 5% of the purchase price, which is a pretty hefty commitment. I found this to be standard for the market. However, several colleages, customers and friends of mine who all had money in a new project were willing to forefeit their money rather than close at the original contract price. This isn’t good news.
I’ve been quietly wondering and waiting for this market to crash, but have been surprised by how resilient this market has been. Are the developers getting help from their banks? Is the demand for these homes high enough to overcome all of the objections I mentioned above? There’s no question that the living experience in Downtown Seattle is unlike anywhere else in Washington. My short lived residence in Avenue One hosted some of my fondest memories as a young adult I’ve had to date. My wife and I met during the construction of building, lived in it for two wonderful years and decided to sell in 2007 right after we got married to start a family in the suburbs of the Eastside.
Driving to downtown Seattle on the viaduct during a summer sunset is still one of my favorite views in the state. Water and mountains to the left, striking skyline on the right and all the colors in the sky to remind us why we love Washington state so much. I worry that these neighborhoods will fall hard when the time comes, but I sure hope I’m wrong.
RELATED NEWS (Lumens Project goes to foreclosures)
FIRST NOTICE OF LUMENS PROJECT IN FORECLOSURE
2005 Seattle Times Article on Downtown Condo Market
UPDATE
I was just informed that two different condo projects will have auctions this weekend, the Brix condos in Capitol Hill and The Gallery in Belltown. This information was given to me from Anne Hartshorn from Windermere.
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