Condos Stage a Comeback; First Presales in a New Development Cycle Begin Closing

Following a five year absence of condominium development the first presales at Insignia have begun closing in July 2015. The 700+ unit twin tower was the first large condominium project to break ground and commence presales in 2012 as the in-city housing market signaled a rebound and Bosa Development kick started a new cycle of for-sale development. The last major development was Escala, which broke ground in 2007 and delivered in 2009/10 amidst the Great Recession. Until recently, developers have focused on building apartments, noting that the region’s robust job growth has attracted many new residents that prefer to rent, helping to drive up lease rates despite the fact thousands of new apartments have been delivered and more are in the pipeline.

The Daily Journal of Commerce recently tapped Realogics Sotheby’s International Realty (RSIR) to evaluate the success of Insignia and what this means for the in-city housing market ahead. Reporter Nat Levy noted that the only substantial condominium projects being developed currently are the Insignia in Belltown and LUMA on First Hill.

“About half the condos being developed are already presold,” said Jones. “Values are rising for both new construction and resales alike, which will be needed to pencil new condominium projects ahead. Consumers need to recognize that their purchasing power is dwindling as inventory shrinks and interest rates expand. What we see is what we get for new supply until the market values support new towers. Without this new inventory, the market will only get tighter and more expensive.”

Jones says high rents and low capitalization rates means apartments are selling at similar prices with the typical condominium. So unless a developer is targeting a luxury segment and builds a tower that will command the premium necessary to edge out apartments, consumers will find fewer condos to choose from, especially at more affordable price points. That means higher prices ahead.

Meanwhile, RSIR has suggested that it may actually be less expensive to own than to rent. RSIR has partnered with Caliber Home Loans on an educational platform called #NoPlaceLikeOwn to help renters understand the market fundamentals and explore ownership opportunities. Consumers are encouraged to register for upcoming events and market information.

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