Got a few interesting stories for you today.
First up, from the Puget Sound Business Journal: Seattle, Bellevue luxury condominium towers are slow to fill up
Three-quarters of the new condos at five major buildings in Seattle and Bellevue are unsold, leaving developers in a high-stakes battle to unload millions of dollars worth of homes.
The units — at Fifteen Twenty-One, the Four Seasons Private Residences, Olive 8, Bellevue Towers and Washington Square Towers — represent the majority of large condos that have opened here in the past 18 months. In many cases, dozens of pre-sale agreements booked by developers have failed to come to fruition.
County records show just 317 units have recorded closed sales out of the 1,321 offered at these five projects, which is fewer than some of the developers had expected to sell at this point.
The monthly NWMLS stats really don’t give us a complete picture of just how over-supplied the local condo market truly is. I’m still working on compiling the Condo Sales Status Project. There’s a lot of info out there.
You may recall the free advertising given by the Seattle Times to the Thorton Creek condos back in March for their “if you lose your job we’ll pay your mortgage” promotion. Another story about the development in yesterday’s paper contained an interesting bit of information:
Seattle Public Utilities recently completed the stream-restoration channel as part of a new development that brings more than 100 condos, 278 apartments, senior housing, a 14-screen movie theater and more retail space to the North Seattle neighborhood.
Lorig and Stellar Holdings say they’ve rented about 50 of the apartments, which exceeds their goal to date. The market has been slow for the condos, however, with only one unit sold, said Stephen Holt, partner at Lorig in charge of the project.
No word on whether that one sold unit was a result of their big promotional push in March. A representative for the developer has offered to talk with me, but unfortunately I have yet to find room in my schedule.
Here’s another update. Recall the October ‘08 post Former WaMu Pres. Tries to Flip Mansion. As it turns out, he was finally successful: Ex-WaMu exec unloads Seattle mansion
Looks like former Washington Mutual President Steve Rotella has been given a lesson in lost value, sort of like the shareholders who watched their stock tank in the months before the bank collapsed last year.
Rotella and his wife, Esther, just sold their Capitol Hill mansion for $4.7 million, according to King County property records, about $1.5 million less than they listed it for after WaMu failed nine months ago.
We’ll end today’s post on an upbeat note from BusinessWeek.
Two big factors will help bolster Seattle housing prices in the next few years: stringent building restrictions and basic geography.
City officials kept a tight rein on development during the boom. … An isthmus, Seattle is hugged by the Puget Sound on the west and Lake Washington on the east.
With such constraints, Seattle doesn’t have a significant supply of homes on the market.
…
Some areas of Seattle are on the mend already, with houses even sparking bidding wars.
…
Building restrictions—and the city’s unique geography—should help lift prices.
It would appear that the writers of BusinessWeek seem to think that the city of Seattle proper is completely insulated from real estate trends in Snohomish County, the Eastside, or south of Lake Washington. Interesting theory. Good luck with that.
(Jeanne Lang Jones & Kirsten Grind, Puget Sound Business Journal, 06.19.2009)
(Michelle Ma, Seattle Times, 06.19.2009)
(Kirsten Grind, Puget Sound Business Journal, 06.18.2009)
(BusinessWeek, 06.18.2009)
Hugh Dominic » Jun 20, 2009 at 12:04 pm
Thanks Tim.
Wtih so little movement on SFHs over $600-700K and a glut of high end condos, this fall should be interesting for the upper end of the market….I am seeing a lot of houses sit for a long, long time in the North Seattle neighboorhoods I am watching…
S-Crow » Jun 20, 2009 at 1:58 pm
I don’t think anyone would complain of a gain such as that realized in the Rotella sale.
wreckingbull » Jun 20, 2009 at 2:11 pm
Did anyone hear Matthew Gardner interviewed on KUOW Friday? It’s a great time to buy a condo according to him. The ‘long-term’ prospects look great!
The best part of the interview is he was asked about the trend of developers turning more vacant condos into apartments in an attempt to recover their costs. His reply? It will never happen since renting them would not come close to covering their construction costs. I don’t think he realized, but that small, innocuous statement summarizes exactly why these things are not selling. It’s the P/E, stupid.
Marc » Jun 20, 2009 at 2:27 pm
I caution my clients to be wary of purchasing a downtown (Seattle or Bellevue) condo anytime in the near future. It’s only a question of when, not if, one of these big towers goes belly up. They’ve got tremendous numbers of unsold units and very poor prospects for future sales.
My partner and I recently won a case against Washington Square for violating the Interstate Land Sales Full Disclosure Act and Washington’s subdivision statute. We’ve got a ton of clients and know of several other attorneys who also have a ton of clients dealing with Olive 8 on very similar facts (and arguably much more egregious facts). They’re closings have been extremely slow and I don’t envy the position they’re in. However, they’re probably a little better off than a project like Bellevue Towers or the Bravern which are friggin huge but haven’t sold squat. The guys behind the Bravern (Schnitzer) have multiple projects that have brutally slow sales (e.g., Gallery in Belltown). My guess is that the main thing keeping them going is very deep projects and construction lenders who desperately don’t want to foreclose and have to deal with the towers.
george » Jun 20, 2009 at 2:47 pm
New SINGLE FAMILY homes will gradually reduce their inventories over the next year. Some of that will be bank owned inventory. Condominiums are another story and that picture is not very bright. There are some real problems there and the big one is the 70% presale requirement. Many of these buildings are doing “portfolio loans” just to get the sale closed. This is a case where the underlying construction lender makes a loan out of their own funds. The problem is that if you go to resell and you do not have the 70% “presale” requirement met or the building is over 50% nonowner occupied your purchaser cannot get a new loan. and that lender on your “portfolio Loan” has no incentive to make a new loan. In essence you are trapped in this building with no exit for a very long time. Maybe 10 years or longer until “secondary market” financing becomes available. The press really hasn’t picked up on this problem and it is asking a lot of the general public to understand how all this works. Once enough people have been burned and are trapped in these units with no way of selling the press will probably pick up the story.
Softwarengineer » Jun 20, 2009 at 3:32 pm
AN OLD 1986-1990 SEATTLE BUBBLE JOKE
Getting rid of a Seattle Condo is like trying to get rid of Herpes.
Jonnny » Jun 20, 2009 at 3:35 pm
It’s absolutely impossible that any powerful land owners in Seattle would have a friend or two at Business Week. Impossible I tell you!
WebX » Jun 20, 2009 at 5:14 pm
I’m renting a condo unit at Madison Tower at the moment, and am amazed just how empty the building is. According to RedFin, many of the 2-bedroom units in the building are completely empty / staged / ready for sale. Yet, not moving at all.
With the rental market in such a bind now, I’m paying about half what the previous tenant was – I can’t imagine how the owner can even pay down principal on the unit given current downtown rental amounts.
So it looks as if even the 2- 3- year old “luxury” condo projects are having trouble with folks who made ‘investment’ purchases. Thankfully for the developer, they were all sold in that particular building during the bubble.
Scotsman » Jun 20, 2009 at 8:40 pm
A couple down the street has dropped the price on their empty home from $850K to $650K, or $180/square foot for 4 year old high end construction. It had been competing with the new spec house across the street which has even higher finish levels, but less land- a wash value wise. Matching $650K puts the house across the street at $160/square foot, probably very close to or just over cost during the end of boom when it was built.
Here we go- I get the sense from these and other homes for sale on the street that critical levels have been breeched, and sellers are in a race to get out. There are two other similar homes that have been on and off the market. How soon before one of them drops their price? Rents won’t cover half of what a standard mortgage would be.
Summer selling season? It’s almost July- sell now or own it forever.
meme » Jun 21, 2009 at 1:39 am
Here http://seattle.bizjournals.com/seattle/stories/2006/10/02/daily24.html is an old article from late 2006 about the Olive 8 project. It claims that 160 out of 198 condos were already sold. I guess that turned out not to be true.
Kary L. Krismer » Jun 21, 2009 at 6:39 am
RE: meme @ 10 – A lot of them are trying to get out, or possibly just forfeiting their earnest money. It’s the latest growth field practice for attorneys.
ella » Jun 21, 2009 at 7:46 am
RE: meme @ 10 –
Sold or Closed?
Kary L. Krismer » Jun 21, 2009 at 7:48 am
RE: ella @ 12 – I’m not that familiar with the project, but I doubt it was even built back then, so it would be sold, not closed.
anony » Jun 21, 2009 at 9:58 am
“An isthmus, Seattle is hugged by the Puget Sound on the west and Lake Washington on the east”
Maybe that’s why they won’t build a 520 bridge replacement. If they can get rid of those pesky bridges that argument might actually make sense.
searayman » Jun 21, 2009 at 10:05 am
Good article in the Atlanta Journal on how Realty Trac counts foreclosures
http://www.ajc.com/business/content/business/stories/2009/06/21/realtytrac_foreclosures.html
bob » Jun 21, 2009 at 10:09 am
RE: Marc @ 4 –
Hi Marc,
would you be able to provide info on the sales/closings at Gallery going slow? The word in the neighbourhood is that they are doing ok (probably spin), but if you had some info, it would be great. Belltown is interesting – the redfin alerts show some places reducing price at $10 or $5, while others wait a while and go down $40K.
David Losh » Jun 21, 2009 at 10:10 am
I came across this blog while researching a comment for here: http://tinyurl.com/nsv4ln
Can we include some of these in the hole in the ground post you’re working on?
I mean just because some one dumped a bunch of crap into the hole does that mean it’s any more of just a hole in the ground?
David Losh » Jun 21, 2009 at 10:22 am
OK, you changed the url, but it’s an itty little word rather than the regular. You have to add the ty on the end.
The name aside it really is a good collection of carpy product.
WebX » Jun 21, 2009 at 10:58 am
RE: Marc @ 4 – have you seen the Stranger article called “Schnitzer Hits the Fan”? http://www.thestranger.com/seattle/schnitzer-hits-the-fan/Content?oid=1220669
Marc » Jun 21, 2009 at 11:31 am
RE: bob @ 16 – Bob,
According to the condo declaration of the Gallery Condos there are 236 units. According to a search for warranty deeds from Gallery Condominiums, LLC on the King County public records website, Gallery has apparently conveyed over 60 but under 70 units. Some people check the King County Parcel Viewer to track sales of condos but that seriously undercuts the number of sales becuase there’s a very significant delay before closed sales show up on that site. In my experience, the county public records site is much more useful because, when a deed is recorded at closing, it shows up very quickly, sometimes same day or the next business day.
You can also check out this article from the Stranger that discusses Schnitzer’s projects: http://www.thestranger.com/seattle/schnitzer-hits-the-fan/Content?oid=1220669.
Marc » Jun 21, 2009 at 11:35 am
WebX,
You just beat me to the punch on the Stranger article :-)
Marc » Jun 21, 2009 at 11:44 am
I understand Schinitzer is having troule with landing new or keeping existing retail/commercial tenants at The Bravern. I’ve heard from a fairly reliable (althoug not directly involved) source that Schnitzer had to give away the farm to land its anchor tenant, Nieman Marcus. Supposedly they gave them effectively free rent for an extended number of years in order to get the new store. If this is true, it’s no wonder the Neiman Marcus guy quoted in a relatively recent Seattle Times article was so “excited” to be coming to Seattle.
S. Marty Pantz » Jun 21, 2009 at 1:17 pm
“An isthmus, Seattle is hugged by the Puget Sound on the west and Lake Washington on the east. ” That writer must be a recent transplant here. It’s “Puget Sound,” not “THE Puget Sound.” We don’t say “the Lake Washington,” or “the Seattle.”
treaty » Jun 21, 2009 at 3:52 pm
By wreckingbull @ 3:
Man, I was listening to the beginning of that on my commute in on Friday… (interesting listen for those that missed it: http://www.kuow.org/program.php?id=17792)
Had me yelling at the radio. Wish someone would have called in with a reality check…
stephanie » Jun 22, 2009 at 8:54 am
I love the comment abou there being bidding wars already on some property. I’m sure there are- if a house is listed at 1/2 of it’s current value, I bet a number of people would make an offer! Of course, it’s still selling for WAY under 2006-2007 values….
Brad » Jun 22, 2009 at 11:12 am
I guess some of these luxury condos are 2 bedroom, but I always wondered, even in the boom times, about the crazy supply of one bedroom/studio condos being built with $500k+ target prices in Seattle. Are there really that many people who want to take on a 30 year debt obligation on a property it’s basically impossible to raise even one child in?
You’d be closing in on 30 fast by the time you could save a down payment, transaction costs would make it hard to break even if you only stayed 5-7 years (barring crazy bubble appreciation) and you’d have to hold it for nearly 15 years at 6%+ yearly rent inflation before it would cash flow as a rental. The numbers just don’t work.
I would *maybe* consider a 2 bedroom condo at the prices they’ve been trying to sell studios for.
WestSideBilly » Jun 22, 2009 at 11:25 am
By S. Marty Pantz @ 23:
The author probably went to Ohio State.
Esol Esek » Jun 22, 2009 at 11:59 am
This winter is going to be really interesting as all winters for RE in Seattle usually are when the glum takes hold.
Plus the stock market is going back in the tank, and all the new lower tax assessments that just got mailed out will start lighting fires under boomers to get that retirement out of the truly nice homes in this city, as they realize the economy isnt bouncing back. Any MLS search will show tons of homes over 500k all over the city, and the million dollar homes are sitting out there like geeks at a jocks and cheerleader party.. Before long 350k will be the new 500k.Good deals are moving this spring, but people are expecting to get a good deal.
Kary L. Krismer » Jun 22, 2009 at 12:08 pm
By Brad @ 26:
Sounds like excellent planning to me. “Sorry honey, we can’t have a kid . . ..” ;-)
Inthemarket » Jun 22, 2009 at 6:00 pm
I listened to Mr. Gardner’s NPR broadcast as well and am curious what the people above took issue with? It seems to me that this is an excellent time to buy, at least in downtown Seattle, as from what I’ve been seeing the market has basicallhy levelled off in the last few months. Of course I’m looking in the $250-$300K range, so maybe you’re talking about higher end units?
By the way Kary…funny comment on the “sorry honey…we can’t have a kid”. To the original poster I doubt those in the market for those units are concerned about where to put children, particularly given there isn’t a school within miles. Most prospective and current owners in those neighborhoods (Belltown, Market, Uptown…) are more likely seeking to avoid the little urchins.
voight-kampff » Jun 22, 2009 at 8:12 pm
I walked away from my earnest money at olive8.
it turned out to be the least risky thing to do.
what goes up must come down » Jun 22, 2009 at 8:26 pm
Inthemarket — give me some of what he is smoking.
Marc » Jun 23, 2009 at 12:42 pm
Voight-Kampff,
I can respect your decision. However, if you haven’t had the Interstate Land Sales Full Disclosure Act explained to you and how it may or may not apply to Olive 8, then I think you would be well served by getting that legal counsel before walking away. I would be happy to discuss it with you offline if you’d like.
Blogging Innovation » Jun 23, 2009 at 10:24 pm
We live on Alki Ave and there are two 10-unit condo buildings (20 units total) that have been trying to sell their units for nearly two years and out of the 20 units only two units have been occupied (10% of the total units).
I believe at least one of the two buildings is going up for auction soon.
@innovate
Aaron » Jun 23, 2009 at 11:40 pm
I am a BusinessWeek subscriber and couldn’t believe when I read the article – I am so upset I want to cancel my subscription. The author must be lazy and or/live far, far away. How can you say Seattle has limited inventory? I have been watching the market since moving to Seattle in January 2008. My real estate agent told me I was crazy not to buy at the time, but I had a feeling something was wrong, and sure enough I would have lost at least 20% already on a condo I almost bought (fortunately the inspection fell through!). I just signed a new lease on a townhome near downtown – fully remodeled but the owner could not sell it (not sure what he wanted). I’m renting it for $1,500/month, now why would I buy something comprable for $450k+? I’m going to rent and bank a big down payment for when the market goes back to where it should be. I knew something was seriously wrong when I moved here from New York City and the condo prices here were almost the same. Love this blog – glad I’m not the only one thinking this way. Maybe I’m wrong, but I can’t bear to watch friends and coworkers jump on “great deals” right now when Seattle hasn’t seen the beginning of the worst. Why risk when you can rent for so little? Shifting to looking at rentals was very interested. For starters, I saw many over the homes I’ve been watching over the past year being rented. And talk about inventory – there is so much to rent you can name your price.