Condo Cheerleading Continues

A pair of articles over the weekend joined forces to paint a rosy picture of the Seattle home market in general, and the Seattle condo market specifically. First, a proud moment for the "Seattle is Special" crowd, with this mention in a national article about slowing home sales:

The correction in the U.S. housing market continued in June, with inventories rising to a nine-year high while price appreciation slowed to the weakest pace in 11 years, the National Association of Realtors reported last week.
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Some local markets, including the Seattle area, remain very strong.

Of course what set of rah-rah real estate stories would be complete without our favorite local reporter Elizabeth Rhodes (and her apparent lackey Justin Mayo). This week's beneficiary of Ms. Rhodes' unbridled housing optimism is the "handsome" and "strong" condo market:

How much do Puget Sound-area condominiums appreciate compared with single-family houses?

Are they significantly more affordable than houses?

Which size condo is a better investment around here: a studio or one with two bedrooms?

Questions like these have long intrigued condominium buyers, but no comprehensive answers were available because there had been no in-depth analysis of condo appreciation and supply.

This year, The Seattle Times did such an analysis, based on data from the King and Snohomish county assessors. The Times analyzed condominium data in much the same way it has done for its annual report on single-family home values.

Some of the condo results are surprising.

Take appreciation. Lore relegates condos to default housing, if you will, for people who can't quite swing a house purchase. But buyers apparently don't feel that way.

Demand has caused condos to appreciate handsomely, thank you.

Since 2000, King County condominiums have outperformed single-family houses two out of five years. And even when they haven't, their appreciation has been strong.

In 2005, for example, the county's single-family houses appreciated 16.3 percent per square foot. Condos climbed a healthy 13.5 percent.

Here's the kicker: Last year, the median price per square foot for condos in King County was $211 — or $4 more a square foot than houses in the county.
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"It's not a second-class form of living — no, not at all," said Marilyn Hill, who with her husband, Don, recently bought a one-bedroom-plus-den unit on the 22nd floor of Cristalla in downtown Seattle.
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"A condo is a different mentality than being in a home," Marilyn Hill said. "You have to think entirely differently."
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In the Seattle area, there are three main categories of condo owners: first-time buyers, often singles; empty nesters ready to downsize; and investors. They'll have a lot more to chose from in the coming years, [Matthew] Gardner, the economist, said.

There is significant condo construction in Bremerton, Bainbridge Island, Everett, Federal Way, even Bellingham. Downtown Seattle is expected to add more than 8,000 units over the next four years.

Gardner thinks the county's strong job growth guarantees that the area won't be overbuilt.

What I find most interesting about this report is what it doesn't say. Notice that at the end they tacked on a passing mention of "investors" as one of the "three main categories of condo owners." Why didn't their "in-depth analysis" reveal what percentage of condos are being bought by these "investors"? Or maybe it did, and they didn't feel like reporting the result? If they're a "main category" of purchaser, how much of an affect will it have on the supply when large numbers of them get cold feet and start to take out their money? And how does strong job growth "guarantee" that we won't have an oversupply of condos? Frankly, this report raises more questions than it answers.

(Rex Nutting, MarketWatch, 07.29.2006)
(Elizabeth Rhodes & Justin Mayo, Seattle Times, 07.29.2006)

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