It had to happen. Sooner or later, all those Belltown condos sprouting up like boy bands would lose their sizzle. The tears, the screams, the fainting, the multiple-offer frenzy, and same-day bidding wars of a few years ago have cooled to a relaxed, reasonable, adult top-40 kind of market. It's not exactly a condo glut: According to the Multiple Listing Service, condo listings were up 20 percent from February 2002 to 2003, yet they're on the market much longeran average of 79 days compared to 63 days.
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What John L. Scott realtor Edward Krigsman sees is "a lot of inventory compared to buyers." As a result, he estimates condo prices have dropped 15 percent to 20 percent over the past two years (although they're firmer at the competitive low end). Buyers are in "an unusually privileged position [with] the luxury of time" to find what they wanteven if the market isn't one of rock-bottom steals and bargains. It's soft, but not marshmallow-soft.
Take the example of Krigsman's client Mark Lindquist, a noted novelist (Never Mind Nirvana) and Pierce County deputy prosecutor, who just found the Pioneer Square loft of his dreams. "I'd been looking for seven months," he explains. "And you hone in on what you're looking for in the course of that. Because I was so specific about what I was looking for, very few came on the market. I saw so many places that weren't right."
He paid the full asking price of $317,000 for 1,000 square feet in a 103-year-old building, with parking, in a prime location just a stone's throw from his favorite book storeElliott Bay. (That certainly makes for convenient author readings.) "I wouldn't call it a bargain price, but it was a fair price. This is what I was looking for. In my quest here, I did talk to other people who were looking. And if you're less particular about what you're looking for, you can get a bargain." What would his loft have sold for during the new-money dot-com hysteria? "I wasn't in the market during those go-go years. It's a whole different market [now], obviously." But something closer to $400,000 wouldn't be a bad guess.
The moral of the story, which Krigsman supports, is a kind of picky, go-slow approach to condo shopping. Developers have still more buildings in the pipeline (some unhappily initiated back to the precrash, pre-Sept. 11 period). On the resale side, there are fewer choices in older red-brick buildings, which tend not to be plagued with water leakage. Among newer resales, however, motivated sellersout of work, reduced to one paycheck, or looking for a better job far from Seattleare coughing up their own money to close deals, further benefiting buyers. Either way, shoppers also have the benefit of ultralow lending rates.
Speaking of stories, what about Lindquist's next novel? "I'm hoping to finish it this year. It's set in Seattle. I actually wanted to write the final draft while I'm living in downtown Seattle." And now he will. A case of life into art? "Exactly."
It's madness out there. Just when you think mortgage rates couldn't possibly get any lower, they get lower still. It seems like everyone and their dog is refinancing right now. It's a sport; it's a hobby; it's the new national pastimeand one of the few bright spots, for banks and borrowers alike, in our glum local economy.
"It's as busy as it's ever been," says First Horizon Home Loans' Dan Blair, particularly as his existing clients with fixed-rate mortgages have seen rates drop below the 6 percent barrier. Borrowers have more options, Blair acknowledges, and they can certainly shop around for rates, but he sees most customers stick with their present lending institution to avoid the paperwork hassles of changing banks.
Among Blair's busier, if not entirely typical, clients is Alex Black, a Shoreline realtor who recently did three refis in a single day! The history of his trio of deals tells you something about how the refinance market is working for recent and first-time home buyers: House No. 1, purchased in 1999 for $223,000 at a 7.5 percent fixed rate, was literally Black's house No. 1. Refinancing that residence led to house No. 2 at $194,000 (with the cash savings going into the new down payment). Refinancing those two houses, now used as rental properties, led to house No. 3 at $270,000. (Granted, most of us stick with house No. 1 and put that freed-up money into, say, a new kitchen or college fund.)
Successive refis have kept Black at about the same monthly mortgage payment while steadily increasing his home size. "People are realizing they can move up," he notesin his case from a 1,290-square-foot starter home to a 3,100-square-foot residence where he and his wife can more comfortably raise their first child (with another on the way).
Back in '99 when he was self-employed, Black recalls, he resented how his mortgage required a 20 percent down paymentmoney he took out of a stock market that would soon begin its grinding plunge. Nor did he anticipate that rates would also begin their submarine dive. "You can imagine today how I feel about that," he says. "The [lower] rates were kind of icing on the cake."
Today, Black has opted for three adjustable-rate mortgages (ARMs), with rates hovering in the 4s and upper 3s, depending on how they're structured. With various lender and Federal Housing Administration assistance programs, he sees ARMs as ideal for cash-poor but creditworthy first-timers in the Seattle market's supercompetitive lower end. (Less aggressive types will probably stick with fixed rates.) If that sounds like a realtor talking, well, it is a realtor talkingbut at least he's walked the talk into his own nice North End home.
Revenge of the Renters
Remember when overpaid young dot-commers were jacking up the price of apartments during the tech boom? What a difference a few hundred million in lost Nasdaq wealth can make. Landlords are no longer sitting so high and mighty. Some now actually deign to return tenants' phone calls andgasp!ensure that apartments have heat and hot water. With Seattle apartment vacancy rates around 7 percent, explains Mike Scott of Dupre + Scott Apartment Advisors, "It's definitely a shopper's market."
Over at Capitol Hill's Rent Tech, apartment broker Wazhma Samizay says, "There's such a huge surplus of vacancies. There's a lot more move-in specials than there has been in the past." Landlords are forgoing the last month's rent in advance, or allowing that payment (and often the damage deposit) to be paid in installments. In newer buildings, Samizay laughs, they're giving away DVD players and free dinner couponsanything to attract tenants. "It's unreal."
Not only are rents being reduced, but rent-reduction deals for existing tenants have become commonplace. One example is Seattle Weekly's own famously tall, funny design director, Karen Steichen, who went hunting for a swank new bachelorette pad in the Uptown area of Queen Anne. Finding an abundance of reasonably priced nice places with OWC, views, and hardwood floors, she mentioned her moving plans to her North End landlordwho promptly lopped $100 off her $750 rent! The new rate was locked in for the next 9 monthstoo good a deal to pass up.
Capitol Hill apartment manager J.J. Kiser has seen just about every unit turn over in her two small vintage buildings. Her Gen-Y and Gen-X tenants are out of work, she says; they're doubling and even tripling upor moving back in with their parents. And her vacancies can remain on the market for months. It's not like the old days, when tenants came running as soon as she hung the For Rent sign: "Before, they were glad to beat the other five people to the door." Now, the few lookers are trying to lowball her on the rent.
And, according to Dupre + Scott's forecast for 2003, things are only going to get better for renters. Vacancy rates are expected to climb higher, with rents expected to sag 10 percent to 20 percent during the same period. The analysts conclude: "In fact, some of the rent concessions and reductions in the market this year may be repricing, not just a temporary incentive." Bad news if you're an investor who owns an apartment building. But if you're a renter, start haggling now and get a long-term lease if you canthe market is expected to shift by year's end.
Bottom Feeding at the Top
Everyone who's looking to ditch their landlord and trade up to a starter home knows that the housing market remains brutal on the bottom end. But it's a little different on the high end. Being well-off is always nice, but being well-off in the current economy is especially rewarding. Even as $250,000 buys you less and less in Seattle, $1 million can get you more and more.
The high-end home market has been hit hard by the collapse of the Internet bubble and its many ripple effects. As a result, "generally speaking, it is a buyer's market" at the high end, says Alan L. Pope, a Redmond appraiser and real-estate consultant. "Instead of 'pinnacle' values, homes are selling at 'conservative' values."
This past September, for example, Marc Y. Reguera and his family were able to trade up from Madison Park to Broadmoorthe gated golf-club community near the Arboretum in Seattle. He paid $859,000 for the house, just 1 percent more than the house sold for two years before. (In other words, the price had gone up less than the already minuscule rate of inflation.) "I really feel I got a great deal on this house," says Reguera, a manager in the finance department at Microsoft. Broadmoor, he says, is "more family-oriented" than his previous neighborhood on East 41st Street, "there's more yard space, more privacy."
Tellingly, the home's previous owner arrived in Seattle in the middle of 2000, when a certain economic optimism still reigned. He was here to open a Seattle branch of the giant executive head-hunting firm Heidrick & Struggles. But less than two years later, after the dot-com disaster, Heidrick shut its Seattle office, and the headhunter left town. Hearing about the impending sale through friends, Reguera stepped in and got the house a few days before it went on the market. "I feel like it was underpriced," he says.
But for the bona fide, everything-must-go, fire-sale close-outs, you've got to head out to the farther-flung reaches of the Eastside, where supplies of brand-new million-dollar mansions have far outstripped current demand. Last month, for example, at the upscale Lake of the Woods development near Woodinville, one Microsoft manager took a $265,000 bath on his homeselling it for $1.03 million, or 20 percent off what he paid two years ago. (The buyer could not be reached.)
For well-heeled buyers, the liquidation sales could get even better. One Eastside real-estate broker, who did not want to be identified, says that sellers are still not reconciled with reality. "We're due for more price adjustments," she says. Several languishing listings have already suffered price reductions of $1 million or moreas much as a third off the original asking price. Yet, looking ahead, consultant Pope believes "much of the loss in value from the height of the market" has been realized, and that the decline is "probably not going to occur much longer." Which means you better get in now: There's only a little time left to score your million-dollar bargain.
Mark D. Fefer