How hot is downtown Seattle? Is it expected to continue?

Question

A friend has a unit in a high rise in downtown Seattle. She also has a 2-yr-old and covid isn't doing her any favors.

She is concerned with Covid, protests, fires, etc that the market for a downtown condo will not continue to be favorable. She reached out to the agent who sells most of the units in the building and has a cash buyer for her.

I've asked her to get a list of every unit that has sold in the building for the last 3-6 months, so we can start from there.

Anyone local with any insights on the market potential?

William Jenkins · Answer

@Michael Haas - Markets vary obviously, but I wouldn't be too sure that there is a "HUGE" meta trend ahead for millennials and condos/apartments.  I think that trend is coming to an end.  Reasons:

1. COVID accelerated the work from home movement. Millennial buyers are more likely than other generations to partake in this. Living in sub optimal conditions to be close to work is no longer necessary.

2. COVID destroyed the vibrancy that draws millennials to the City. What good is living in a trendy area if nothing is happening. Some of this will come back, but I think more than you think will be gone for good.

3.  Millennial buyers are now getting older.  That means kids and then eventually the suburbs for schools.  That takes priority over being withing walking distance of 2 brew pubs, an Asian fusion restaurant, and a whisky bar.

On point 3, I've argued for a long time that Millennials aren't really that different from any other generation.  You start sharing and apartment, graduate to your own condo/apartment, and then move to a house.  We are shifting to the "move to a house" part of that process from what i am seeing.  COVID isn't the main cause but it is accelerating the process.

Disclosure:  Born in 1981 so according to most definitions I am a millennial.

Michael Haas · Answer

Thanks @Mindy Jensen for the mention and @Brandon Vukelich for the recommendation. Covid has resulted in a lot of negative buyer perspective towards condos, but I expect that this will be a shorter term impact and we will see a little bit of a rebound in the condo market next year as folks warm back up to living in smaller spaces. Remember, before Covid hit living small was a HUGE meta-trend for millennial buyers and boomers downsizing.

What is her timeline? We're moving into the holidays, which is a slow time in the Seattle market, so we've got more than one headwind working against a successful sale. If she needs to move quickly or decides to work with a brokerage that doesn't have creative financing solutions,it may make sense for her to take a fair cash offer and a quick close.

Would you like to do an intro for me so I can talk through her options in more detail? Cheers!

Michael Haas · Answer

@William Jenkins well said, all great points, but I think you misunderstood my comment a bit. To clarify those two key points:

1. Living Small Trend: This is alive and well even with Covid, and although condos and townhome's are one way the trend manifests itself it is by no means the only way. Small getaway cabins and tiny homes have continued to be a hot commodity. My wife and I lived in a 8 ft by 20 ft tiny home in the woods for two years, and that "small" lifestyle is looking more appealing in a Covid world, not less. Our Airbnb Getaway cabins are also booked back-to-back at higher rates than we were asking for pre-covid. Just my opinion, but I think that Covid is making urban density less attractive, not necessarily the small living spaces themselves.

2. Timing of the Trend: We're actually 100% on the same page here. I didn't say "huge trend ahead" as you said, i said "pre-Covid" this was happening. The current living small shift had its beginnings in the financial crisis of 2008-2012, so although there's nothing new here, its worth stating that the trend does tends to gain popularity as the economy worsens.

Hope that clarifies things a bit. I would not say condos are easy to sell right now - they aren't, but if the price is right and the marketing is on-point everything sells eventually.

Daniel Alhadeff · Answer

Seattle condo pricing is dropping as people are moving away from the downtown core at an accelerated rate.  This will present a buying opportunity if one is willing to hold on for the long term as the market will eventually come back and the Seattle City Council eventually gets turned over.  When real leadership that is friendly to small business and public safety returns, we will see the downtown core also return to its once vibrant state.  Currently, the opposite is happening.

Thanks,Daniel

Mindy Jensen · Answer

@Michael Haas, @Ryan Xu, @Brandon Vukelich

Sherief Elbassuoni · Answer

@Mindy Jensen, after Covid, more and more people are leaving downtown Seattle to suburb areas because they can work from home, and they want to keep a good distance from neighbors. Things will improve a little after Covid in downtown Seattle, but we do not expect it will go back to pre-Covid.

Seattle is not so landlord-friendly. We also saw that the appreciation in downtown Seattle is not as high as other areas around Seattle, so buyers started to shift their focus to east and south Seattle.

I agree that listing the condo is a good idea.

Please let me know if you or her has any comments or questions and I can help with that.

Thanks

Jenny Moore · Answer

@Mindy Jensen  Your friend may be wise to exit if she is concerned about her lifestyle for her family in downtown. Our team regularly checks in on the "temp" of properties in the core. Things are cooling down because of many of the comments made from people on this thread. That being said, if she keeps it or sells, sounds like it would be an issue of her peace of mind moving forward. It's good she has you to help her through the process!

William Jenkins · Answer

@Michael Haas - We are in agreement on almost everything.  My only difference is on the continuation of the tiny home movement.  For remote airbnb and vacation properties, I agree that they will continue to be popular.  On a vacation or family trip, being close together is great with small children.  I have a 2 and 5 year old and they would both have the time of their life in a tiny house out in the woods.

Living full time in a tiny house however is another story.  Millennials have been drawn to full time tiny houses because of (1) financial reasons and (2) freedom.  As they get older, make more money, and have kids that reasoning will disappear.  People will always want more space if their budget dictates.

@Ryan Xu - I'm not in your market and don't know the ins and outs, but it is interesting that you think mid range condos will suffer a price drop while luxury will remain strong.  In general, I've always thought of (and seen) luxury suffering first and then that softness moving down to middle and lower tier properties.

Adrian Chu · Answer

Seattle is a tech industry hub. The tech industry has disproportionately more employees working from home full time right now.  So people feel like they have more options and no longer have to compromise on their living situation.  Instead of living in a tiny condo/townhome/apartment in the city, they could choose to go to the suburbs and get a single family home or something with more space for the same price.

The long term impact of this is a paradigm shift in the way people work.  I believe that most people currently working from home will transition onto a part-time WFH/part-time at the office model.  As a result, commute times won't be as bad as there will be fewer people on the roads, and since it would only be for 2 or 3 days a week, people are willing to make that compromise.

People who can afford to live comfortably in the city will continue to do so.  Homes above $900,000 up to around low $3 millions or so in city are still increasingly popular.

If your friend no longer wants to live in the city and if the unit does not make sense as a rental, then I would recommend they sell it and move on.

Ryan Xu · Answer

All correct. WFH, political/safety concerns are accelerating the change in the Seattle downtown market.

I've seen a lot of Millennials selling downtown properties and buying on the eastside. They bought them for easier commute before covid, to avoid the Seattle traffic.

Now large firms moving to the eastside and allowing WFH for another year. Also, the historic low interest and high price happened in the past few months. It all makes people easier to make the decision to move. Almost all Millennials who live in Seattle are either moving or consider moving.

It is not hard to expect average condos and townhomes to have a price drop. Luxury ones will be fine for a while. An inventory increase is in happening. We will keep seeing a continuous appreciation for DT Seattle only if the following happens: 1. high inflation, 2. The city suddenly takes care of the increasing homeless issue and PD issue

(I understand homeless people are the ones who need the most help, but letting them take over the city hurt normal residents' safety is not helping. Also, we all need cops. Sadly one of my clients got abused and robbed during daytime last week, and the cops didn't show up for15 mins)

Furthermore, a huge amount of new apartment buildings constructing around the eastside. Most of them going to be finished before 2022. Just think about it.

How hot is downtown Seattle? Is it expected to continue?

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