Seattle’s Condo Market: Where are the buyers?

It’s official: The Seattle condo market has hit finally a wall. Here’s a little article from the Puget Sound Business Journal on Friday that goes into all the details:

With more than 400 condominiums under construction in a faltering housing market, Seattle-based Vulcan Real Estate has decided to sweeten the deal for potential home buyers.

In the coming weeks, Vulcan will roll out incentives aimed at buyers living and working in South Lake Union, where it has three condo developments under construction.

While its incentive plan is still in the works, one of its perks will be to pay a chunk of the closing costs for buyers who are currently renting at a Vulcan property and want to buy in the neighborhood, said Lori Mason Curran, real estate market research manager for Vulcan, Microsoft Corp. co-founder Paul Allen’s real estate investment company.

“There has definitely been a slowdown in condo sales at all projects in Seattle,” said Mason Curran, who declined to release Vulcan’s pre-sale figures.

Vulcan’s move is a reflection of the slowdown in the housing market across the Puget Sound region that’s given prospective condo owners the upper hand. Developers of condos, fighting stagnant sales, are offering more perks than ever to potential buyers — including cars, vacation packages and, in one case, Vespa scooters.

So, if I inVest in a Vulcan, I can get a Vacation and a Vespa? Sorry, couldn’t help myself. With the number of projects still scheduled to come online in the next few years, I think it’s going to take a lot more than a few worthless “incentives” to move these things. I’m talking price drops. Serious price drops.

The push to bring buyers in the door is a striking indication that the market for condos has stalled and buyers, reacting to a string of bad news about the economy across the country, are still waiting out the tumultuous market.

“We have a substantial amount of buyers out there, but they are all on the fence,” said Matthew Gardner, whose consulting firm Gardner Johnson works with Vulcan.

“The last thing anyone wants to do is buy in a market that is declining.”

Indeed, which is exactly what they would be doing today. Also, I really wish we could get past the nonsense that the downturn is somehow due to all the “bad news,” as if people would just go out and buy those houses and condos if only the media would just quit making up all these nasty lies and scaring the buyers. Give me a break.

(Kirsten Grind, Puget Sound Business Journal, 05.23.2008)

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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

28 comments:

  1. 1
    Sorin says:

    I’ve been watching the prices for Canal Station in Ballard ever so slowly tick down. They have Phase II that is just opening up now as well. Looks like 18 MLS listings at present in Phase I, some of which have been active since last year. That’s not counting any of the for sale units at NoMa and Hjarta. Belltown and just about every other neighborhood around seem well saturated, with numerous additional building completing later this year. Price drops and incentives seem to be a given for the foreseeable future.

    It definitely looks like financial idiocy to buy a condo in Seattle right now.

  2. 2
    Rentersarelosers says:

    Also, I really wish we could get past the nonsense that the downturn is somehow due to all the “bad news,” as if people would just go out and buy those houses and condos if only the media would just quit making up all these nasty lies and scaring the buyers. Give me a break.
    ………………………………

    The downturn is a natural correction to an overheated market.

    What the Media does do is create overeaction and that goes both ways, up and down.

    The Media is quite effective in instilling greed and fear in the population. They will print anything to sell their rag and beat it to death until something comes along to replace it.

  3. 3
    george says:

    Now Matthew Gardner says there are a “substantial amount of buyers out there,” except it sounds like none of them are actually buying condos? Here’s one of Matthew Gardner’s memorable predictions about the condo market, from last July:

    “A: Real-estate economist Matthew Gardner follows the Seattle condominium market closely, and he’s confident that new condo prices will not drop. In fact he says, “It won’t happen.””

    http://blog.seattletimes.nwsource.com/elizabethrhodes/2007/07/will_condo_prices_fall_1.html

  4. 4
    economist says:

    The downturn is a natural correction to an overheated market.

    In other words, owners are losers. Better change your handle.

    While its incentive plan is still in the works, one of its perks will be to pay a chunk of the closing costs for buyers who are currently renting at a Vulcan property and want to buy in the neighborhood

    Anything to keep the price declines out of the stats. That is so 2006.

  5. 5
    hzg says:

    “We have a substantial amount of buyers out there, but they are all on the fence,”

    We’ve all heard so many real estate clichés over the years. I really don’t understand this one. It’s subterfuge. A buyer on the fence is not a buyer. A buyer doling out money is a buyer. Yes, there are people. There are even people with money. But, they arn’t on any fence. They’re not on the sideline. They just arn’t buyers. They choose not to buy. That makes them not a buyer. They choose not to buy because the risk to reward is too high. Interviewers, please, don’t stand for this one. It’s absurd.

  6. 6
    Amazon Employee says:

    True. On Wednesday & Thursday Vulcan is having an Amazon employee only ‘open house’ at their little sales center at Denny & Westlake to get us to bite. Their e-mail promised special incentives as presumable walk-to-work homebuyers. Free food/drink so I’m going, but I’ll be dammed if I’m buying.

    Why buy near the SLUT when you can rent in non-Vulcan controlled neighborhood, Cascade, for a place that’s a third of what my monthly mortgage payment would be for a comparable home? Money in the bank…

  7. 7
    Jackson Wallace says:

    sell me the condos and the houses in this area at 2002 prices. Then I’ll consider buying, but maybe I’ll still wait. Those prices would at least be reasonable. Seattle is full of houses selling for a over a million right now in areas with nothing available under 700k. That’s a bunch of delusional greedy aholes snooting about. I’ve even heard stories about idiots buying 600k downgrade homes before their 1m homes sell. Hardy har har. This area has been wracked by the greed of many smug dumpies who are about to watch their retirement go up in smoke. Burn baby burn.

  8. 8
    Jason says:

    I work for a company that’s about to relocate to SLU. I’m going to a happy hour offering “special deals” for employees interested in the various condo projects under construction there. I’m not expecting much but I’ll write in with the details.

  9. 9
    george says:

    Jackson, I don’t think it will be that bad, but you may be right.

    George Soros is saying the US housing decline isn’t even halfway there yet, and that it will overshoot the downside the same way it went crazy on the upside. This always happens in housing declines since no sane person wants to buy before it bottoms.

    What’s the opposite of irrational exuberance? That’s where we’re headed and Seattle is not missing out.

  10. 10
    AndySeattle says:

    I would love to hear the report back from the Amazon folks who attend the Vulcan ‘Happy’ hour. I wonder just how much Vulcan is counting on you guys to buy up their wares. 50% of the vacancies? 20%?

  11. 11

    BAD NEWS BLAMED CONSERVATIVE TALK RADIO HOST

    I was listening to conservative KVI this morning (I listen to liberal radio too) and Kirby Wilber piped up there was still housing sectors (he didn’t explain where) that were going up double digits, then FOX news gave a news report that home prices were recently collapsing in massive chunks.

    I imagine Kirby blames his own MSM FOX news syndicate owner for all this horrifying bad news on price collapses killing housing sales….LOL

  12. 12
    Teacher_Greg says:

    Possible options for the opposite of “irrational exuberance”:
    * A healthy fear of the unknown (people with 30 year fixed loans)
    * Rational cynicism (Bubble readers)
    * Desparate despondancy (Real Estate professionals)

  13. 13
    vboring says:

    re: overcorrection

    i wonder. if we really are 6 months behind the national trend, national stats will turn positive before the local ones do.

    when this happens, all of the media coverage will be about the improving national picture.

    could this help improve sentiment and reduce the impending overreaction in Seattle? maybe turn it into stagnation or slow growth instead of an outright free fall?

  14. 14
    Thaxter says:

    “Intracorp believes that offering a reward has more impact than simply dropping the price of a condo.”

    What is at play here, do you think? Why not just drop the price? I would rather have a lower-priced condo than a lot of frills. Why don’t they want to simply drop prices?

  15. 15
    vboring says:

    lowering prices destroys comps, makes previous buyers mad and leads to the expectation of further price drops in the future.

  16. 16
    vboring says:

    also, $30k in upgrades may only cost them $15k while a $30k price drop costs them $30k.

  17. 17
    b says:

    thaxter –

    that goes into comps and pisses off current owners. they will eventually lower prices when incentives fail to work, just like all the shitty condo projects down here in silicon valley last year. why anyone would want to buy one even at the lower price is beyond me, these vulcan condos have like $500+ HOA dues monthly, which are only going to end up increasing over time. Condos are a combination of the worst aspects of both renting and owning, sign me up!

  18. 18
    Garth says:

    Thaxter,

    Because things have some margin attached are less expensive to give away than cash, and because the price of the unit remains intact for the purpose of comps and keeping existing purchasers happy.

  19. 19
    Aaron Smothers says:

    I wonder what the trend is with the condos on the Eastside.

    I drive by “Urbane” http://www.urbane-redmond.com/ in Redmond almost every day. This little 22-unit condo project, located at 160th Ave NE and NE 83rd St (at the nucleus of “downtown” Redmond) has been on my radar since Feb 2007 when I hear about it first.

    Back then it was supposed to have been ready by Fall 2007.

    Last week I checked the website of an investment company which seems to have a stake in this project: http://www.kauri.com/_projects/details.php?id=13
    This site says that the project is anticipated to be completed in march 2008.

    As of now: I see no sign of “Urbane” being dwelt in. Parts of the building still look incompletel

    And guess what: when I drove by the area yesterday, I saw a roadsign “Urbane” signboard saying “Now leasing”!

    Change of plans?

    AS

  20. 20
    EconE says:

    Who in the hell wants to pay 400k-500k per bedroom in what’s little more than a slightly dressed up apartment?

    Flippers are gone. Those were the buyers for the most part. I’m betting that the banks are chomping at the bit to foreclose on the developers so they can firesale the units themselves to make up for all the option-arm’s they wrote in South Central L.A.

  21. 21
    Aaron Smothers says:

    > Aaron Smothers // May 27, 2008 at 10:26 am

    > I drive by “Urbane” http://www.urbane-redmond.com/ in Redmond almost every > day. This little 22-unit condo project, located at 160th Ave NE and NE 83rd St (at > the nucleus of “downtown” Redmond) has been on my radar since Feb 2007
    > when I hear about it first.

    > Back then it was supposed to have been ready by Fall 2007.

    > Last week I checked the website of an investment company which seems to
    > have a stake in this project: http://www.kauri.com/_projects/details.php?id=13
    > This site says that the project is anticipated to be completed in march 2008.

    > As of now: I see no sign of “Urbane” being dwelt in. Parts of the building still
    > look incompletel

    > And guess what: when I drove by the area yesterday, I saw a roadsign “Urbane” > signboard saying “Now leasing”!

    And this ad appeared on CraigsList this morning– two bedroom unit ready to rent for $2050!
    http://seattle.craigslist.org/est/apa/696971628.html

    Change of plans?

    AS

  22. 22
    Tsuru says:

    And guess what: when I drove by the area yesterday, I saw a roadsign “Urbane” signboard saying “Now leasing”!

    I drive by those all the time too. They are very, very ugly – there is chicken wire all over the place on those things. And you either get a view of medical examination rooms in the clinic on the East or the Liquor Store on the West.

    But you’re right, they have “now leasing” signs everywhere. I was out in Woodinville and I saw one in front of the Tavern beside Chateau St. Michelle! Must be desperate for renters.

  23. 23
    Lake Hills Renter says:

    Looks like the “Coming Soon!” luxury condos for the elderly on 156th isn’t going to happen any time soon. They ran Angelo’s (and excellent garden shop that had been there since I moved here) and out up signs for the new condos a year or two ago. Then nothing…and nothing…and nothing — just an empty lot. I noticed yesterday that the lot was full of gardening supplies and plants again, but the building was still boarded up. That’s gotta be some expensive land to sit on.

  24. 24
    Lake Hills Renter says:

    Er, that should say “They ran Angelo’s out and put up…”. The lot is on 156th between 20th/Northup and 24th, just north of Wells Fargo.

  25. 25
    explorer says:

    “We have a substantial amount of buyers out there, but they are all on the fence,”

    I just insert “potential” between “of” and “buyers.” That makes a heck of a lot more sense. The rest is wishful thinking without serious price drops in ANY neighboorhood right now.

    EconE also has a good point. Seems the “incentives” and the promotions they are doing now, in lieu of price breaks, might address Flippers (in the developers minds), more than owner-occupied.

    It will take another 6 months to a year before we see anything realistic out of the developers. Then we potential buyers might have something to discuss.

  26. 26
    Joel says:

    LHR,

    I just noticed the gardening supplies too. Have you noticed the builder’s sign on the lot just west of the lovely Champagne condos? Do they think they’re going to put up more condos there or something?

  27. 27
  28. 28

    […] last night’s Amazon-only Vulcan open house, a reader wrote: I work for Amazon and just got back from Vulcan’s exclusive […]

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