It’s a seller’s market for Capitol Hill condos

8472109857_e8e6896826You can’t afford a house on Capitol Hill. How about a condominium?

From a sheer price standpoint, the Hill’s condos are more affordable than its houses. Of the 41 Capitol Hill condo’s listed on Redfin.com, the median price is $325,000, compared to a $1.1 million median price for single family houses in the same area. Most of the condos are clustered along Melrose’s condo-row and the western bank of Capitol Hill, which offer some of the best views in the neighborhood.

According to Condo broker James Stroupe’s numbers, there are 83 condos currently on the market in Capitol Hill that range from $84K to $4.7 million. However, 65 of those are pending. With no new condos coming on line, that means having cash on hand is king for condo shoppers. Stroupe tells CHS that a recent Capitol Hill condo sale only offers from cash buyers were even considered.

“We’re seeing more foreign (buyers),” Stroupe said, adding than many are first time home owners with lots of cash on hand from tech jobs, particularly at Amazon.

So far, there aren’t more condos coming into the market. It comes down to profit — there’s just more money to be made in apartments. Stroupe said in order for the condo market to bounce back, including new construction, apartment rents in the neighborhood have to stop their meteoric rise.

The recently completed building now known as the Vox at 15th and Pine was once intended to be a condo project before the lure of a healthy rental market prompted a change in plans

The recently completed building now known as the Vox at 15th and Pine was once intended to be a condo project before the lure of a healthy rental market prompted a change in plans

“Rents have to flatten out so there’s less incentive to build apartments,” said Stroupe, who is the co-founder and director of Realogics Sotheby’s International Realty. “Then the numbers work better for condos … developers need more incentives to build.”

Since apartment demand still appears to be outpacing new apartment construction, those searching for condos will find similar hurdles to getting in a new place: rising prices in a competitive market, which leaves many within the neighborhood few options to stay.

Seattle condos coming online peaked in 2007 — Stroupe said things still haven’t recovered since the recession. Part of the reason has to do with the warranty window, when developers and residents hash out upgrades and maintenance to the building, oftentimes through litigation. Most banks won’t lend to buyers interested in buildings under litigation. Fannie Mae-backed financing is out for those looking to refinance or buy in a building with outstanding lawsuit.

Brix, which opened on Broadway in 2009, was one of the last major condo projects to go up in Capitol Hill. Within a year after opening, the developers Schnitzer West put the 40 unsold units up for auction. As of today all the units are full, but don’t expect any new Schnitzer condos soon. According to a company representative, Schnitzer left the condo business after Brix and all those who specialized in multi-family development have left the company.

In other parts of the city, there are some signs that condo construction is making a comeback, albeit a timid one. For the time being, it seems there are few condos and even fewer condo deals on Capitol Hill.

24 thoughts on “It’s a seller’s market for Capitol Hill condos

  1. People who snagged a Brix condo at auction were smart/lucky and must be sitting on some healthy equity. It’s also a very well built building unlike most of the stick builds that are going up now.

    I would expect many of these new apartment buildings to convert to condo in 5 years – or whatever the threshold is for conversions.

  2. Interesting, but I’d like to see how the prices compare when association dues are included in cost. A lot of the condos I’ve seen on market have dues of $300 to $500. That money can make for a quite big change in the mortgage one could cover.

    I know the argument is made that that the cost of dues is close to that needed to maintain a residence, but is that really the case?

    • My experience is that the association dues are reasonable when compared to typical expenses of ownership. There’s a lot of variation but my condo dues include:
      * water/sewer
      * trash
      * general maintenance
      * cleaning of public areas
      * landscaping
      * cooking gas
      etc.

      For a single family home the above list has to cost a couple-few hundred / month.

      • … and perhaps most important:
        * building insurance
        * fund for future projects (like replacing the roof in 20 years – stuff that homeowner’s might not be saving for on an individual basis)

        • Exactly. Insurance is a huge part of most associations monthly dues and are are also a big hit on individual homeowners, who are required to carry insurance assuming you have a mortgage.

          State law requires condo associations to disclose their replacement reserves to all potential buyers. Larger Associations must have a Reserve Study done annually. Although condo associations do not have to collect sufficient funds for future repairs there is a lot of evidence that associations with sufficient funds to cover repairs without needing special assessments have much higher resale prices than those that expect lump sum assessments. So in the long run, higher monthly dues are a bargain.

          • A huge issue for condo assiciations is getting the residents to approve monthly dues that are sufficient to build reserves for future projects. Typically nobody wants their dues to go up. Then when a big repair or project becomes necessary, it requires a special assessment of thousands. Then everyone who can’t afford the big assessment puts their unit up for sale, and trashes the resale value trying to undercut the other identical units for sale.

            Another “gotcha” is that developers in new bldgs set their dues at levels that are insufficient to adequately carry the normal expenditures. When they eventually turn the bldg management over to the association to begin self-governing, they realize their income won’t cover actual expenses. Then they have to raise HOA dues to cover “real life”. Which everyone resists.

            It’s sort of like a microcosm of Local, State, and National governments taxation, isn’t it?

    • I bought a newer condo in the middle of the Hill about a year and a half ago. Including my HOA dues and mortgage, my monthly payments are well under what my place could be rented for right now (easily $250 less a month, but probably closer to $500 given that I have two (!!??) garaged parking spots). When I bought my place I was literally being priced out of the rental market on the Hill, and I feel incredibly lucky that I bought exactly when I did otherwise I would have had to of moved to god knows where.

  3. Well I’ll offer a counter data point.. I have a large condo on the hill in a great location, in an older building with great architecture but old finishes. Tried to sell it a few months ago and it would not sell for enough to cover what I paid in 2008- which was a good deal at the time and around bottom of market. Feedback was the condo buyers only want the very generic brand new granite countertops look etc. So that was interesting. Mine is more of a New York style place. I’ll be testing the market again at some point, but the reporting on a condo frenzy isn’t quite this straightforward- depends on the unit apparently. I’d expected it to sell asap for a profit based on media, but that was not the case, and for me holding is far better than taking a loss so I won’t sell it until/unless the market pays enough to make selling worthwhile. The buyers were also looking at townhomes- hard for me to understand as I’m a city person and these new townhomes are not my style- but that seems to be the key competition.

    • Hmm. I’d guess that it isn’t all look. Older building = higher risk. People in the market for a condo typically don’t want to worry about possible repairs and associated costs and so a new or recently renovated building is highly attractive. You also have to have a washer/dryer in the unit, which many older buildings don’t and all newer buildings do.

      • Yes. Newer condos in the Capitol Hill area that are well managed and in good shape are on the market for a matter of days before they are snapped up. Older buildings, especially conversions and co-ops generally sell slower. Buyers want the amenities of the newer building. As charming as some of these older buildings are, good insulation and earthquake resistant construction are great selling points. So is parking and washer/dryers.

        • I live in a 100 yr old condo bldg on the hill. In the last 6 months all units for sale have sold within a week and at asking price. Many of our units have some modern updates but not all and none of them have washer/dryers in the units. If your unit isn’t selling right now I think you might want to consider making some cosmetic changes to it like new kitchen appliances and counter tops.

          • I have a washer dryer and entire laundry room actually:) Cosmetic finishes- just not in a position to do that, and would rather people pick out what they want next themselves. It has almost all new appliances. Really depends on the unit.

    • Most buyers fall into either of two categories: those who want a deal because they plan on renovating a condo to their own taste, and those who want everything done, so they don’t have to do much at all other than paint, etc. If your kitchen and baths are not nicely updated, then your place was likely overpriced. In 2008, the market was on the way down, but prices were still pretty up there. The true bottom of the market was determined to be around August 2011, FYI. Anyone who bought then should be very happy with their decision. Location is important too, as is pet policy. Some 60% of Seattleites have pets, so buildings not allowing dogs are screwing themselves in my opinion. And if your condo is near amenities like grocery stores, restaurants, transit centers, etc. you should score some bonus points there. And of course views fetch a premium, and there are plenty of awesome view condos on Capitol Hill in both older/classic and newer buildings.

      • We have an open pet policy. It’s in a perfect location near the 15th commerce corridor b/w there and Broadway/ coming light rail. Difference from many units also is it is large, so competes with homes/townhomes, and higher price point than the little units. Anyway, for now I’m staying in it as I really love it. Also has some Sound/mountain views, 2 parking spots off street, etc. I was really surprised it did not sell right away, but found that what I could get elsewhere for houses wasn’t as nice anyway so glad I stayed for now. Will be interesting some time in next year to see how it goes. I don’t think the original post talking about cash offers was exaggerating- I had someone consider that here, and get a townhome instead (was for his kid), and when I looked at homes in the east side Chinese were buying little surburban homes sight-unseen through agents with all cash- I couldn’t compete against that. It’s very weird- the US started a new immigration policy that if foreign investors spend a certain amount of money in real estate here they can get citizenship, and it is pricing out normal working Americans. Bizarre times. So, the result for now: I stay put.

    • Wish I was in a position to buy because that’s exactly the type of unit I would want! If I see one more Home Depot cherry-cabinet/granite-counter/stainless-steel “luxury” renovation package I will barf.

  4. “Stroupe tells CHS that a recent Capitol Hill condo sale only offers from cash buyers were even considered.”

    Does that mean that only institutional investors are buying the properties? Or do lots of first time home owners buy with cash?

    • Not from personal experience, but I think you can apply for a home loan directly from your bank. So if you know you’d need 300k, you can apply for that loan yourself and then use that cash to buy the condo. But I’m not sure what you’d use for collateral before you actually buy the property.

      • Institutional buyers, foreigners and investors with cash. I’m sure a number of amazon employees with fully vested stock options in a fistful of cash. Cash is plenty, it has to go somewhere, preferably hard assets. This market is tough for those who have to finance a mortgage.

        • You’re probably right. I’m thinking about what my parents did with their cars, but now that I think about it, it probably wouldn’t work for a loan that size if you didn’t have anything to secure the loan against. They probably used their home in the car loan.

    • I think it is more likely what was meant was that only offers which did not have a contingency for financing approval were being considered. That doesn’t mean the would-be purchaser isn’t getting a loan, it means that the deal is not contingent on getting a loan. In this type of deal if the buyer is unable to get a loan on the property, (i.e. they cannot go through with the purchase) they lose their earnest money to the seller.

      This move is risky in a condo purchase (compared to house), because some lenders will not finance a condo in buildings with too low of a percentage of owner-occupied units.

      • Exactly. Everyone isn’t walking in with $300k cash. When you only allow offers without contingency clauses, you weed out a lot of buyers who could possibly drag out your sale for a month or two, only to have it fall through.

  5. Pingback: A rowhouse mini-explosion in Capitol Hill helping to transform single-family home blocks | CHS Capitol Hill Seattle

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