The latest sign of the scorching market: Some people are reserving condos while they’re under construction and flipping them for a healthy profit once they open.
Just how hot is the Seattle real-estate market? People are now reserving condos under construction and then flipping them for a six-figure profit before they even open.
Matt Goyer, a local real-estate broker and blogger, combed through some recent sales at the new Insignia high-rises in the Denny Triangle. He found several brand-new condos that their owners reserved during construction over the last couple of years and just sold again before ever living in them.
The condos fetched an average of $637,000, up from their original purchase price of about $526,000 — a profit of 21 percent.
“I think it is remarkable that in just a few years, they’ve appreciated enough in value to cover the costs of selling and make a decent profit,” Goyer said. “It’s also remarkable that the buyers of the flips aren’t fazed by the price increases.”
Welcome to the peak summer buying season of the Puget Sound region’s priciest year ever for real estate.
Seattle’s median price for a single-family home hit $650,000 in July, up 13 percent in the past year, according to data released Thursday by the Northwest Multiple Listing Service. The city’s typical house now sells for 63 percent more than five years ago, adding an extra quarter-million dollars to the cost.
The trend is similar for King County as a whole, where house prices are up 14.4 percent from a year ago to $555,000.
Both Seattle and King County saw July prices drop slightly from their record highs of June, though the region saw a similar dip from June to July last year —which turned out to be a temporary breather before prices began surging again.
One small sign that this year could be different is that the number of homes available to buy has finally stopped dropping.
To the north, Snohomish County’s median home price topped $400,000 for the first time, setting a record for the third straight month. Prices there are now up 11.6 percent in the last year.
To the south, Pierce County’s prices surged 15.4 percent in the last year, the most of any county in the region, to $285,000. It’s the latest sign that rising prices in King County are spilling over to more affordable places.
An exception was Kitsap County, where prices dropped slightly in July vs. a month ago, and are up only 3.8 percent in the past year, settling in now at $290,000.
John L. Scott Real Estate released a market update Thursday that predicted the current “frenzy” conditions in the Puget Sound region would likely continue through at least summer 2017.
“We are virtually sold out, and each new property on the market is getting instant action,” the firm said.
That helps explain how the Insignia condos grew so much in price from the start of construction to the time of opening.
Bree Al-Rashid, a Redfin agent who sold one of the condos that sold again before the original buyer ever lived in it, says the trend of flipping new-construction homes is especially appealing to foreign buyers and investors because they are usually sold initially for a set price, avoiding a bidding war.
“It’s a less risky investment than flipping homes that have been on the market before,” Al-Rashid said.
Condos have been especially competitive in Seattle as buyers look for a cheaper option than single-family homes. The number of condos available has plummeted, pushing King County condo prices up 18 percent in the last year. A couple of months ago dozens of buyers camped out overnight to reserve space in a rare new downtown condo complex that won’t be open for another three years.
The lack of inventory in general continues to be a prime driver for rising prices for all types of homes, as there remain far more qualified buyers than available homes.
But there are glimmers of hope for homebuyers. July was the second straight month that saw mildly positive news on the number of homes available for sale. Compared to last year, the total house inventory for King County was flat — meaning it’s still historically low, but at least it’s not getting worse. It was the first time in two years that the inventory level didn’t fall on an annual basis.
At the same time, the number of home sales in the county dropped slightly from a year ago, indicating the balance of power between sellers and buyers might be starting to shift a little.
“We might actually be starting to move very slowly back toward a more balanced market,” OB Jacobi, president of Windermere Real Estate, said in a statement.
And real-estate researchers at Metrostudy released a report this week showing that job growth and new residents moving into the Seattle region have both slowed; if those trends continue, it could help slow the rate of price increases, though not until next year.
Looking across King County, the areas with the highest home-price increases in the last year continue to be cities that were late to the current boom: Renton-Benson Hill was up 31 percent, Enumclaw up 27 percent. Also rising quickly were North Seattle, Lake Forest Park, Kenmore, Des Moines and Redondo, all up 21 percent.
And home-value bumps continue to slow on the pricey Eastside, relative to the rest of the county, at least. Home costs there are now $750,000, up 10 percent in a year and a little below the record set two months earlier.
Lastly, two of the most expensive regions actually saw prices drop in the last year: Redmond-Carnation, and Queen Anne-Magnolia. Up north, the far east part of Snohomish County saw prices drop a little, too.