Buying in a Softening Real Estate Market
Up until last month, I had been happily renting a great condo in the Lower Queen Anne area of Seattle. I had owned another condo until 2003 but sold it because of an extremely loud construction project breaking ground next door (another condo building). Rent was extremely reasonable at about $1300 a month, and when compared to the payments on a presumed purchase price of about $360,000, it was a comfortable living situation for someone who had just taken a 50% paycut to start their own company. A couple of months ago, however, the owner of the condo decided to move back to Seattle from North Dakota and hence, back into the condo. I was given plenty of notice and looked feverishly for a place to buy during the following two months, but the Seattle real estate market just didn’t produce anything I wanted for under a half million bucks.
During the last couple of weeks of my tenancy, I found an extremely nice place to purchase. It was a condo in the newly converted Queen Anne High School building. It’s a historical building like no other in Seattle and the unit I put a deposit down on had a great view of the Space Needle and was well situated in the building. Truly a one of a kind if you place great importance on historical significance in your living quarters. There were two problems with the unit, however, which caused me to bail out only a few days before my 20-day contract-binding window: it was just over $400k for 655 square feet and it wasn’t going to be ready until January or February. So even if I was able to rationalize living in such a small place, I’d have to move into an apartment for a few months while I waited for the unit to be done. Moving once sucks. Moving twice really sucks.
It was a tough decision to bail out, but since that day several weeks ago, I’ve noticed some things in the Seattle real estate market which have convinced me I made the right decision:
1. When I reserved my unit about 50 days ago, the building was about 20% sold out. Today, they are reportedly about 30% sold out. Not great. One of the problems with this building is that some of the units are really, really great but others seem borderline unlivable to me. It’s not a knock on anyone involved in the project and it’s not a knock on people who have already purchased units. It’s just the nature of the building. I’m no real estate expert but I just can’t see some of these less desirable, viewless units going for between $400k and $800k. Also, the stated dues were an affordable $271 a month but who knows how much a grand old building like this will really cost to maintain.
2. The condo I had been renting was an 800 square foot two bedroom unit but it felt bigger than that. The apartment I just moved into is a one bedroom 700 square foot place and it’s just too small. College-level math tells us that 655 square feet is less than 700 square feet, and common sense tells us that dropping $400k on a place that feels too small is not good for the soul. In this unit’s favor, it did seem like a “big” 655 square feet, but still.
3. In the last few months, I’ve noticed a serious softening of the real estate market around here. I am a total do-it-yourselfer when it comes to searching for places. I have an up-to-the-second RSS powered custom search set up on WIndermere which alerts me multiple times per day as well as other saved searches on Coldwell Banker Bain, Redfin, and Prudential Northwest. Nothing gets by me. Lately I’ve noticed properties staying on the market a lot longer and prices being reduced much faster and more drastically. There’s a listing on Redfin right now that has just been reduced by $129k in one fell swoop ($729k down to $600k!). Some properties still go quickly but many — even in great neighborhoods — do not.
4. There are a lot of condo conversions going up around Seattle and I’ve found most of them to be selling a lot less briskly than the builders had anticipated. I try to check these things out the first day they are open because I am generally only interested in the top floor, primo units, and it’s been very interesting to watch the pace at which they’ve been selling. You come in on the first day and the selling agent is super-enthusiastic, telling you how quickly they are going to sell and how all the prices are firm and will remain so until the building sells out. Then — on three separate occasions for me — the agent e-mails a few weeks later offering to cut the price. Sometimes it’s only by $10k or so, but on one occasion, it was a drop from $440k to $395k… and it was the best unit in what I think is a pretty nice building.
So the question I’m asking myself now is, what’s the best way to buy in a softening (but not plummeting) real estate market? Seattle is not like a lot of other markets around the country in that we rarely seem to actually lose value, but rather we climb and then level off. That said, my feeling is that a lot of the prices out there over the last several months have gotten slightly ahead of themselves. Now seems like a good time to find a property, get $25k-$75k knocked off and settle into a decent deal.
My problem is that I’m really only interested in living in Queen Anne, I need between 800 and 1200 square feet, and a view of either Puget Sound or Lake Union is a must. I just visited another condo conversion this week and found a top floor unit I love with a view of Lake Union and Lake Washington, but it’s about $30k too high in my opinion. The agent is going through her “confident phase” right now and if it sells, good for her. But I’ve let her know that the moment she’s willing to come down $30k, I’m in.
So here is a question for readers: has anyone ever proactively sought out a piece of property that wasn’t previously for sale? I ask because I could probably narrow down the list of buildings I want to live in to about 25 or so. Given that, is it a viable strategy to spend a weekend or two contacting every resident at each of those buildings and asking if they want to sell? And if so, what’s the best way to do that? Just send an actual letter via U.S. mail to the “resident” at each unit number? I know it sounds like a lot of work, but it really feels like it could be done in a few days and the payoff could be nice. Any success stories or advice on this sort of thing? And of course, anyone have a condo in Queen Anne they want to sell? :)