The Condo Market in Seattle in Sizzling

The Seattle condo market is heating up. As we start to see the rental market cool off, real estate developers are opting to build condos with a whopping 6,000 units slated for completion over the next few years in the Seattle-Bellevue area.

This influx of condos could create more homeownership opportunities, especially for young adults, first-time homebuyers, and older generations wanting to downsize. However, while condos are generally a more affordable option than single-family homes, they still are not cheap.

Land pricing, labor shortages, construction material costs, and high standards in place for building condos equates to a 600-square-foot, one-bedroom unit starting around $600,000. To give an example, Capitol Hill’s Solis project has 445-square-foot units starting at about $450,000 with 870-square-foot units running up to $950,000. Luxury development The One88 in Bellevue has condos running from $825,000 for a one-bedroom to $3 million for its biggest units.

To breakdown monthly condo costs, if you were to buy the median condo today in Seattle and put 20 percent down, you’d need $100,000 upfront and approximately $3,000 per month for the mortgage, taxes, insurance, and HOA dues. It’s a much higher price compared to the average Seattle apartment, which costs about $1,950 per month. Compared to single-family homes, however, condos appear to be a more desirable option. The median cost for a condo in Seattle is $505,000 while a house is $669,000.

Builders are actively cashing in on this new housing trend. In Seattle alone, there are over 5,000 units in the works. While some of these projects are new proposals, others are apartment projects that they are now converting into condos. In some cases, already-opened apartments are teasing to alter units into condos to address the condo shortage and the current high supply of apartments not meeting demand. For example, as recently as last year, only 350 condos were on the market in King County. And as tens of thousands of new apartments became available in Seattle over the past year, rents have essentially stopped rising. For example, apartment rents are up 2.5 percent, single-family homes are up 2.9 percent, and condo prices are up 11.3 percent in King County.

Seattle’s condo shortage becomes very apparent when looking at other major cities. Only 19 percent of homes for sale are condos in the Emerald City, while New York’s condo inventory sits at 52 percent, Chicago 48 percent, Washington, D.C. 41 percent, and San Francisco 37 percent.

To address the shortage, King County condos have more than doubled in the past year. But experts say that the condo market could also be the next housing sector to cool off. With rising inventory but sales that have dropped by 30 percent, condo prices could stall and some of the planned projects may not get built or switched to apartments and/or offices.

Another potential issue with condo sales are that they are snatched up by investors who “park their money” and in some cases let the condos sit empty while driving up market costs. At Realogics Sotheby’s International Realty, about 30 to 40 percent of condos are sold to investors. Most rent them out, while others are saving them as second homes or for their children.

It’s important to look at every aspect of the market when buying, and clearly condos are no exception. We are always happy to discuss the pros and cons of condo living before you purchase a home in the area, and encourage you to contact us if you are seeking advice. For a more in-depth look at the rise of condos in the Seattle area, visit SeattleTimes.com.