This week, Jim Reppond discusses the Seattle Condo Market and specifically special incentives being offered by condo developers to entice buyers. Creative financing, discounts and other special offers may make this the right time for buyers to act. Are you ready for the condo lifestyle? Check out this video referenced by Jim in this special Podcast.
Jim Marks: Hello and welcome to the Seattle Real Estate Podcast. I'm your host Jim Marks of Virtual Results, and with me as usual, I have Jim Reppond, The Seattle Specialist and Founder of the Reppond Team; the number one producing Coldwell Banker Bain team in all of Seattle. Jim, it's great to have you here.
Jim Reppond: Hey, it's great to be here Jim.
Jim Marks: Jim, today I'd like to leverage your expertise in the Seattle real estate market to talk about a segment of the market that has really grown over the last few years, the Seattle Condo Market. I'd like you to talk about some of the developments, why a buyer who hasn't considered a condo might want to and how the market is changing? Later, I would like to help our listeners recognize the opportunities that this market has to offer. Sales have such a strong market over the past few years that sellers really haven't had to offer incentives to buyers in order to attract sales.
Now, it seems that some of the larger developments, downtown, for example are offering attractive financing and some other incentives to help move their inventory.
First Jim, can you explain the attraction of condo living and why a buyer who hasn't considered buying a condo may want to?
Jim Reppond: Sure Jim. It's really a different lifestyle than living in a single family home and a lot of people had a negative feeling about condos 10 or 20 years ago. They were worried that it was going to be noisy and they were worried that their neighbors were going to be intruding in their lifestyles and what most people have found is that it actually offers a lot of benefits for someone who has a busy lifestyle or someone who prefers not to get involved in maintenance or someone who really can appreciate a lot of amenities that some of these condo developments have.
So, it's not for everyone. There are issues around shared types of decisions. You know some places allow pets, some don't. Some of them allow rentals, some don't. That type of thing, but it's actually – I have a long clear explanation of what is a good idea of good condo owner and when you might want to consider it on YouTube and I'll put it on the link on theseattlespecialist.com blog site for our listeners to refer to later.
Jim Marks: Jim, explain to me why somebody would consider a condo now as opposed to a single family residence?
Jim Reppond: Well, the market has changed a bit, Jim, and there's some incredible opportunities now that weren't there just five or six months ago. As everyone knows the market has slowed down a bit. There are some new figures that just came out, we'll talk about that later; but it has hit the developers of new condos in an especially unique way.
A lot of single family home sellers are not in a position where they have to sell their home and so, if the market slows down a little, they just back off if they are not going to be able to get their price. The developers of new construction and particularly a new condo construction have to sell those units, and they plan out their finances for years in advance with new projects as building permits and lots of hoops they have to go through.
So, they have to finish up a project to get on to the next one. Of course, no one anticipated the slow down that happened and now they are sitting on inventory that they need to get rid of and clear out in order to open up their lines of credits for other projects. So, sellers and developers of new projects especially downtown Seattle are offering some incredible incentives that were not there just a few months ago.
So, this is a great time and there are some incredible buyers out there on some of the developments downtown and around Seattle in general.
Jim Marks: Tell us about some of your favorite condo developments and the incentives that may be being offered to buyers at this time by the developers?
Jim Reppond: You bet, there are probably half-a-dozen downtown that are really good. I think probably one of the best buyers right now is at the base of “Queen Anne” and “The Luxe” and that particular unit and this is for just a short time. If someone is buying an over $500,000 unit, they will give a $40,000 reduction on off anything of this price. If it's an under $500,000 they will do a $20,000 reduction. On top of that, they will give $7,500 bonus if you use their preferred lender which is Countrywide which is who we know is Trevor Bennett – he is one of the best.
So, it's an incredibly good opportunity, you could really literally get in there and as long as you have got whatever you're going to be using for down payment, have everything paid for and get a super reduction on price at the same time. Another good one is in the International District, “The Tobira” which is a really good location if you need to be near Anne track field (ph), you like it to be near the stadium, we've got Qwest Field that is just down the road or if you just like the International District, its wonderful neighborhood close to downtown. They are offering $10,000 credit for anybody who uses their preferred lender. They just did a price reduction too.
So, they're not offering anything off the top of that, but their prices are lower and there are almost gone there is not many left there, we've sold several in both of these places. “The Lumen”, which has been around for a while, they are offering what's called a buydown for people who use their preferred lender. It's a two-one buydown; I don't know if you are familiar with that term but a 2-1 buy down is where the first year they take 2% off of the loan.
So, if you've got a 6% loan it would be say 4% and the second year it would be bought down by 1%, so it would be at 5% and then the rest of the life of the loan it would be at its original 6%; but it gets your payments lower for the first couple of years and it is set, it's not like an arm that moves around the rate could really go high, it is set at whatever its current interest rate is now which is great, it's typically about 6% right now.
Jim Marks: Yeah that sounds like attractive financing.
Jim Reppond: It is. Another good one that's downtown is the “Carbon 56” and that's just off the Denny triangle actually right behind the Westlake 2200. It's kind of a new edgy project.
It's great for younger people that like open loft styles and kind of rough finishes and stuff. It's a little bit at a lower price point, but they are also offering credits for people who use their preferred lender. A lot of these are tied to the lender and again if you understand the reasoning behind why they are doing, it makes sense. The lenders are just as motivated to get these done too because, again, they want to open up the lines of credit for the developers.
So, they're working with developers to come up with something as sort of a win-win where they both have a little bit of a sacrifice and lose a lit bit of their profit in order to get the properties moving. Those are a few, “Mosler Lofts” is offering again some discounts. “The Parc”, I think, will have a lot because it's just coming online right now and a lot of people brought into those when they were thinking they would invest in them and flip them with a big profit margin.
Now, they're realizing with the increase in inventory and the slow down of the market, they are probably not going to get that much of a profit and some of them have come down dramatically. Those are just a few, “Expo 62” doesn't really have incentives right now but I think that they may soon and, “The Domain”, I'm thinking probably will as well.
Jim Marks: It sounds like a lot of opportunity for condos.
Jim Reppond: Yes, and I think this is sort of a unique window because some of these developers are really looking at a timeframe of trying to get things closed out before the end of the year. You've got both tax and financing reasons to finish things at the end of the year so that you can begin again. I know some of these will be going away in a short period of time.
So, it's a great time, if you have been thinking about it and holding out and say, “I'm not going to wait for prices to drop,” this is the window.
Jim Marks: Great. Well, that tells us a little bit about the Seattle condo market and how some of the creative financing is going on and the different incentives that the developers are offering buyers. Let's talk a little bit about the market in general. As usual, our readers like to know what is happening in the Seattle real estate market. Can you tell us how the market is doing since our last podcast?
Jim Reppond: Sure, actually the timing for that question is great Jim because yesterday the Northwest Multiple Listing Service released their monthly figures and for the first time in 20 years, there has actually been a decrease in the medium price in King County for the homes, slight decrease down 5.7% from October of 2006 to October of 2007.
So, the media is having a frenzy with that because they have been trying to say that there is going to be a decrease for years and for the first time in 20 years they have got it; but, of course, they are not focusing on the whole story and part of that is that the reality is so many people are now going to condominiums as a living lifestyle that the entry price point for a condominium is a lot lower.
So, when you talk about medium home sales and you include condos and single family homes, yes, the price has gone down because the type of housing is a lesser priced type of housing. If you remove that, it was down about 0.97% from a year before. It was just single family homes and in fact for Seattle it's exactly the same as it was in October a year ago $475,000.
So, yes, we are about where we were before but there is a lot more condos being sold and that's the news.
Jim Marks: So, how are the actual sales figures as far as units moved compared to the last time we spoke?
Jim Reppond: Well, the single family homes are starting to move pretty good again and this is a recent development since just the last Fed funds cut rates by a quarter point; but the condo sales are still slow downtown and again that's why some of these incentives are starting to perk up all over the place. We will see more of those as that happens downtown. So, we will also see more inventory.
Jim Marks: So, the fed cut that we spoke about, I believe, two podcast ago, probably a month, has made a difference in the Seattle market?
Jim Reppond: A little bit. Jim, to be honest the last Fed funds cut 0.25%, the half point we talked about then; but the one that happened since then is the one that seemed to open the gates a little bit more. There was actually a slight increase right after it which is common because funds tend to flow towards bonds right after a rate cut but then within a few days, it loosened up again and the reality is that the amount of activity in terms of sales and enquiries on properties perked up a good bit right after that.
Jim Marks: Jim, as usual, just valuable information for our listeners and that wraps up this episode of The Seattle Real Estate Podcast. Now, before we finish, as usual, I would like to remind our subscribers that they can influence the content of this Podcast by submitting questions or suggestions for topics for The Real Estate Podcast to The Reppond Team Blog at www.seattle-realestate.com. Jim, again, a really informative podcast, and thanks so much for your time.
Jim Reppond: No, thank you Jim, I look forward to it each time.
Jim Marks: This has been the Seattle Real Estate Podcast featuring Jim Reppond. Thanks for listening.