Not even a panoramic water view, 24-hour concierge, and on-demand Tesla rentals can dodge a slowing real estate market.
The Emerald, a 40-story luxury condo tower two blocks from Pike Place Market, recently reduced the prices of some of its condos by 10% to attract buyers hit by rising interest rates and economic malaise.
Nearby at the Spire of Belltown, shoppers drawn to the rooftop fitness room or fully automated parking system can also get a discount. The building offers a year of homeowners association fees and credits of up to $15,000 towards closing costs or buying a cheaper interest rate from their lender.
The deals signal a broader trend in the cooling housing market. Fewer and fewer people are buying homes and prices are starting to stabilize or fall.
Of Seattle homes listed for sale on Tuesday, 29% of condos and 31% of single-family homes saw a price drop, according to Zillow.
“It’s just about meeting the market where it is and responding to buyers,” said Josh Nasvik, general manager of Polaris Pacific, which markets the two condominiums.
Deals are not unheard of in the world of high-rise condo sales. But this year, rising interest rates, lagging tech stocks and general economic uncertainty are pushing buyers to seek more affordable options or keeping them away altogether. This leaves sellers – whether condo developers or average homeowners – with less leverage.
“Seattle this summer experienced one of the sharpest market reversals anywhere in the country,” said Jeff Tucker, chief economist at Zillow. “Globally, the condo market is seeing the same thing, so condo sellers are trying to get creative.”
At the same time, “With today’s higher mortgage rates, that means for some buyers, condos might be the only affordable option at this point,” Tucker said.
For every 1% increase in interest rates, a home buyer can afford about 10% less for a home. The average interest rate on a 30-year mortgage is 5.5%, up about two and a half points from the same period last year.
The condo market has been up and down over the past two years as demand and prices for single-family homes skyrocketed. Some buyers left in search of more space, and others no longer cared about living near their place of work. While demand for condos rebounded from an early pandemic slump, prices never climbed to the cost level of single-family homes.
But the general slowdown affects both types of houses.
Pending condo sales were down 25% in Seattle and 44% in the Eastside in June, compared to the same period last year, according to the Northwest Multiple Listing Service. The number of condos still on sale at the end of June was up 3% in Seattle and 71% in the Eastside.
Prices fell from May to June; the median condo sold for $538,700 in Seattle and $622,400 in the Eastside. In downtown Seattle and Belltown, the median price was essentially flat from a year ago and down 16% from May.
The local condo market was last hit in 2019 when a glut of condos were for sale.
This year’s price drops are far less dramatic than in 2010, after the Great Recession, when some downtown towers slashed prices by 45-50%, but they’re also a far cry from the scene of shoppers camping out. Seattle to reserve new condos in 2016.
About 70% of the condos at The Emerald and half in Speyer have sold out, according to Nasvik.
Discounts are more common for buildings that are ready to move into, while developers whose towers are still under construction may try to wait for greater buyer demand in the coming years, said Dean Jones, owner of Realogics Sotheby’s International. Realty.
As the market slows, sales are lagging behind initial assumptions at Koda, a new tower in Chinatown’s international district where about half of condos have sold.
The developer is now offering price reductions of 5 to 10 percent on condos, said Erik Mehr, whose company leads sales of the building. Prices start at around $350,000 for studios, but the most high-end units cost around $1 million.
“We felt like our pricing was pretty accurate and fair in the market, but over the last few months things have changed. So we tried to adjust accordingly,” Mehr said.
At Nexus, a Denny Triangle tower completed two years ago where studios start around $450,000, about 90% has sold. With so few condos for sale, the developer isn’t offering any offers, Mehr said.
Luxury condo developers aren’t the only ones making deals.
Individual condo sellers are slashing prices, offering to pay a year’s worth of HOA fees or paying to lower a buyer’s interest rate, said Andy Friedman, agent for John L. Scott.
Friedman listed a one-bedroom Ballard condo in April that drew an offer within days. When that buyer failed and the condo came back on the market in June: the crickets.
Friedman said the condo is already listed for $5,000 below its appraised value.
“We have to adapt to a new normal,” Friedman said. “It’s difficult for sellers who signed up a month or two ago because they still think they have the winning lottery ticket.”