Is Downtown Seattle Poised for a Real Estate Comeback?
a lot of trends that have been going on since pandemic lockdowns first started are continuing: A central location is less of a priority, and suburbs are heating up more than ever. But as amenities return to denser, urban areas and some return to offices, downtown condos are back on the rise—and the market is likely only going to get more competitive from here.
The story is not entirely straightforward, and won’t be for a while. Since sales are reliably different each month of each year, year-over-year stats tend to be more telling for things like sales prices and market demand. But 2020 was, to put it mildly, bonkers. There’s still plenty to learn from last month’s numbers.
Pockets of King County are building momentum, but prices in outlying areas are growing a lot faster—a trend that started far before the pandemic but increased as buyers turned away from the city. King County had a 6.7 percent increase in median sale price compared to this time in 2020, according to the Northwest Multiple Listing Service, while Pierce, Kitsap, and Snohomish Counties saw prices rise between 16.6 percent and 18.4 percent. Pretty much everywhere is on fire in those three counties, but a few areas where high prices are meeting high sales include north Pierce County around Fife and Sumner and the southern parts of Tacoma. Matthew Gardner, chief economist at Windermere Real Estate, notes massive changes in Mountlake Terrace as well.
There are a few factors at play: Many businesses are only requiring a partial return to offices, and it’s easier to have a lousy commute for three days than five. Because you get more home for less money, some buyers, Gardner says, were able to pay all cash from the profits they made on selling a home closer to town.
This is not to say that more central locations aren’t having their moments. Northeast Seattle, with its shiny new light rail stations, is still cooling off after a frenzied year. But price-wise, most King County hot spots are outside of Seattle: The Eastside saw a 22.6 percent increase in sale prices, especially concentrated in the Newcastle and Issaquah area and in Kirkland. Outside of the ritzy highlands, Renton sale prices jumped 20.2 percent, with an even bigger increase in closed sales at 34.7 percent.
A sea change for downtown condos
As people have sought out more space, condo prices have stayed pretty stagnant all year, especially in Seattle proper. But as many reasons to live downtown come back—offices, entertainment, bars, restaurants—moneyed buyers are flooding back. NWMLS data shows that pending sales increased 36.7 percent in downtown and Belltown, and closed sales soared a whopping 126 percent.
But demand never left, and those sales numbers are not even the highest this year. In the spring and summer, prices in the area dropped but demand kept rising as downtown living became more affordable to many people who were priced out. While that ship has pretty much sailed now—congratulations, anybody who bought before this month—it adds more economic diversity to downtown in the longer term.
“What we saw when the pandemic hit was a massive increase in supply,” says Gardner. “There was a lot of concern that people were just going to be fleeing downtown because of coronavirus and that was going to cause a collapse in the market.” When condo prices started to adjust in response to high inventory and low demand, he notes, something different happened.
“I think there were a lot of people that before the pandemic had always wanted to move downtown, but they couldn't afford it,” he explains. “And all of a sudden we started to see that that price [change] occurring, all of a sudden they could. So that demand got back-filled.”
Still, after months of increased sales, inventory is starting to decrease, which could drive up prices more. While from the outside it looks like new condos are getting built all the time, most of that construction is luxury rentals. With high construction costs and an uncertain market, developers and builders are holding back more than usual, says Realogics Sotheby’s International Realty CEO Dean Jones.
“I think we’re heading into another year of ascension where there’s only going to be more people coming downtown and there’s going to be a very finite amount of supply,” he says. Two downtown condo buildings are currently in presales, and after those units are finished and occupied in 2022, he thinks it will “likely take several years” for any significant supply of new apartments or condos to return.
These year-to-year changes are compared to a truly abysmal 2020 for condos, and we still have a pretty uncertain future in terms of having to leave the house. But at the very least, the numbers indicate downtown is returning to something much closer to its pre-pandemic state, for better or for worse.
Of course, condo sales aren’t limited to downtown, but few other Seattle neighborhoods have the same sample size. West Seattle in particular is taking a condo price nosedive: Despite a 6.8 percent increase in median sales price overall, condo prices dropped almost 10 percent since this time last year. Condo prices are ticking up in Northwest Seattle neighborhoods like Fremont, Greenlake, and Ballard, with a 10.5 percent jump in median sales price.
Elsewhere, beach homes leave a mark
Some have taken greater work-from-home opportunities as a chance to leave city life behind entirely—and a lot of them apparently ran to the beach. Closed sales along the Pacific Coast went way up over the spring, and while purchases have decreased, the prices have not. Pacific County, which includes Long Beach, saw price increases of more than 40 percent year over year each month since July. Other coastal locales have seen dramatic changes of their own: Jefferson County, which includes Port Townsend, continues the steep increases it's been seeing all year at 20.7 percent. Clallam County, which contains Port Angeles, Sequim, and Neah Bay, saw its biggest jump of the year this month at 29.7 percent.
While you’d think San Juan County would be running with this pack, that market already exploded a little too hard. After a frenzied 146 percent increase in sales and 47.3 percent price hike back in April, things have finally calmed down, with a 46.1 percent decrease in closures and prices holding steady.
The big real estate picture
How fast is Seattle growing compared to other areas? The Case-Shiller home price index crunches numbers for metropolitan areas throughout the country, and while they lag behind a few months, it can lend a bigger picture of what the city looks like on the national stage. Numbers for July were released at the end of September, and the Seattle area had the third-highest year-over-year jump in home prices compared to other major metropolitan areas at 25.5 percent, compared to a 19.7 percent increase nationally.
What about the rent?
There’s more of the same in the rental market: Bigger jumps outside Seattle than in it. Apartment List calculates a 12 percent jump in Seattle rent from this time last year, but the surrounding areas are seeing even bigger changes, including Kent, Everett, Redmond, Bothell, and Lynnwood. Tacoma and Bellevue both increased by nearly 19 percent.
While Seattle’s rent is still higher than Renton or Kent, rents are noticeably higher in Bellevue, Redmond, Kirkland, Bothell, and Issaquah.
You have to take rental data with a larger grain of salt than sales data—the record-keeping requirements are much less strict and there’s not a lot of cold, hard data to work with. Companies that calculate monthly data skew toward numbers in larger, luxury buildings, but it’s still useful for looking at big-picture trends, especially if the source weighs data against more reliable (but slower-moving) census data.