I’ve been working on my stats to see how 2007 is doing so far. From my experiences of last week I know that there are multiple offers for decent homes close to Microsoft. The two we were interested in both had more than one offer.
While I am updating my stats based on the same criteria I used on March 2nd, given my recent experiences, I decided to check the new stats against properties within two miles of Microsoft. I used a two mile radius, so some of the properties are in Redmond and others in Bellevue. In my experience, buyers who want to live close to Microsoft do not make a distinction regarding whether the house is in Redmond or Bellevue, as long as it is easy to get to work.
While you may not work at Microsoft, it is likely a good investment to buy near there anyway. It’s a stronger market than most of King County. I will test the appreciation levels along with my stats this month.
But while I was doing them I came across this interesting tidbid. All properties within a two mile radius of Microsoft sell better. I can’t say they sell higher, as view property still sells a lot higher than non-view property, and is also a strong investment option. But for property priced under $600,000 (all residential types including townhomes and condos), the rate of absorption says current inventory in Kirkland, Redmond and Bellevue equals a 20 day supply of listings. Within two miles of Microsoft, there is only a 3.75 day supply of inventory. So they are selling at over five times the rate of the area generally.
I’ll try to get my pie charts up this week, similar to those of March 2, but generally there is a 30 day supply of inventory under a million dollars and a 100 day supply over a million. I didn’t do the Microsoft Zone inventory at all price levels,but will likely do that as a separate study, since I find it interesting to check the market at it’s highest and lowest levels of movement.
Age of property does not appear to be a factor, as people are choosing more by location than age of house. So if a popular location has lots of older houses, then that is what sells. Condition of house is very important and remodeling is definitely a plus and pushing prices up, but age of property alone does not appear to be a factor.
When you get over $1.6 million generally in the area (Redmond, Bellevue, Kirkland) the rate of absorption skyrockets. Current inventory equalling a 127 day supply, using the average rate properties are selling, based on March and April sales. So still a glut of high priced homes. More property than people buying them.
The most popular price range, selling at a much higher rate than inventory is coming on is $400,000 to $600,000. But no price range outside of the Microsoft Zone is selling at the same rate of those within a two mile radius of Microsoft. Consequently, I would expect the appreciation rate to be higher there as well. I’ll try to do some tests of appreciation rates for different neighborhoods. Most “neighborhoods” follow the elementary school. But radius of Microsoft is “a neighborhood” from a valuation standpoint.
For those wondering where those people come from, many are employees who lived further away until now, but want to move closer in after the troubles they had this winter.
Excellent post, much awaited and exactly what I am seeing too. I would infact extend the *same* arguement to some other areas as well: Rose hill kirkland, education hill redmond, english hill redmond, woodbridge resale in redmond.
Ardell do the stats argee with this statement of mine?
And hey the reason people want to get closer to work is because the *HORRIBLE* traffic.
It’s hard to do Zone stats because it isn’t just defined by proiximity in miles. Often it has to do with which roads lead to work from the house itself.
Rose Hill Kirkland depends, as some back up to the businesses on 85th some are too close to the Freeway, so I can’t generalize about Rose Hill.
The one with the mass confusion last week was a split, so price seems to be more important that style and updates also more important than style.
Yeah. Especially with the hiring frenzy at Microsoft and the people moving in California, it is going to go further up. This year too, we will see double digit appreciation if the market continues to be strong like this.
Haha, maybe you need to change the title on the blog to something like “a Real Estate guide for those areas immediately surrounding Microsoft, and an occasional aside about Seattle”.
Typical asset bubble induced mass mania… nothing new here folks.
I’m glad you guys were able to get Lereah out of there! Man, talk about a credibility problem.
Michael Adler,
What bubble are you talking about? There are still plenty buyers – not speculators- and not enough houses for everyone. Strong employment gains and rising rents. wHAT EACTLY ARE YOU TALKING ABOUT??
Ardell,
how are you doing at other Seattle area neighborhoods?
MS, is it the case that the areas in Ardell’s sample are relatively free of speculators? You’d think the double digit appreciation would have attracted quite a few. I don’t know much about the eastside market, but in Seattle there has been quite a bit of flipper and investor buying in the $300-$500K range, especially in popular neighborhoods like Ballard, Greenlake and Maple Leaf – and apparently in some of the Downtown condo towers as well, based on the number of resale listings. Is there a particular eastside community that the flippers seem to have migrated to?
Well, to answer my own question, I just checked out the homes available withing a 2 mile radius of MS in the $4-600K range and sure enough, there were very few that were last purchased less than 2 years ago – and none I saw were purchased less than 9 months ago.
Hard to say going forward if that trend will continue since looking at past flips isn’t necessarily a good predictor of future flips. But it’s very different from the neighborhoods I listed above where anywhere from 10 to 50% of the inventory on a particular street has been sold at least once in the previous 2 years.
I was wondering why you chose exactly two miles. Why not more or less? What makes the difference between two and anything else? Do you think somebody would walk four miles daily? As for going by car, making very short trips doesn’t make sense for the engine as it is not usually recommended by the manufacturers.
Joe,
I used two miles for stats because I used Microsoft as the center point of the radius search. Going further would be fine in some directions, but not across Lake Sammamish. 1.5 miles from Microsoft seems to be more of a selling point than 3 miles…so I went to 2 which took me through most of this side of Lake Sammamish.
Also, in recently showing property, I saw better property at lower prices sitting that were say in Woodinville vs. 1.5 to 2 miles, and 1.5 to 2 miles were getting multiple offers. So there isn’t as much as a bid up of property values once you get past a certain point. Not that the prices there are going down, but clearly not the same market activity.
Bill Waters,
Flippers can and should but generally don’t. The improved properties I have seen were done by the owners. Some did the improvements before selling, but bought back in 1999 or so and did not buy them to flip them.
Flippers like to buy the lowest cost properties, and so usually don’t focus on areas with the highest appreciation. Also investors rarely will get into a bidding war, so a buyer planning to occupy will almost always beat an investor in a multiple offer situation.
And short hold period is not an indication. I just bought some staging furniture from a guy who only owned a year or so and them moved. He made $100,000 on a condo/townhome, but he made no improvements. He relocated back to CA. So short hold alone and increased value does not necessarily mean Flipper in the Microsoft Zone. Often just someone transferring in and out.
Bobby,
Newer townhomes do exceptionally well in Seattle neighborhoods. It’s hard for me to do stats there because it’s harder to find apples to apples. There are so many old homes there that need work, and those that don’t need work bid out and sell well. So mixing them all together to get averages, really doesn’t tell a story.
On the Seattle side, most anything $450,000 or less sells and most with multiple offers. What I see are a lot of people wanting more for less and not finding it. Lots of lookers, but fewer buyers except those who can only spend less than $450,000 or more than $850,000. In between there is a lot of frustration.
A lot of the premiums for certain neighborhoods are not holding strong. People relocating here do not make the distinctions that people from Seattle make, and so are will to buy in Maple Leaf, Greenwood, Phinney or Ballard, rather than Green Lake, to get more house for the money. Local buyers are more willing to pay premium prices for certain neighborhoods.
Regarding comment #4, while I sell just as many properties in Seattle as Eastside, this is a multiple agent platform. I was originally asked to report on Eastside Real Estate, and so I still do from time to time. All of the other agent writers here are Seattle. Maybe they will all weigh in on their experiences.
I am seeing hundreds of buyers in Seattle looking and looking without buying. Not unusual for this time of year as many are waiting for Spring to arrive and for more inventory and choices.
I can do radius of any point if anyone wants me to do Seattle. Just tell me where you want me to do “two mile from”.
I’ve been spending some time in Edmonds Bowl getting a property ready for market. Spent some time in Shoreline valuing a couple of properties. Saw just about anything under $450,000 in North Seattle from September 06 through about three weeks ago. But nothing is quite as fun to watch as “The Zone”. It’s always moving and moving up. A very interesting market to follow.
Just to clarify, I wasn’t using “short hold period” as a sole criteria, just a starting point since few people purposely leave a house empty for years on end while pulling a remodel. Usually it’s short hold period, currently vacant, and owner has more than one property usually purchased less than 2 years apart (IE: they’re not planning on claiming 2 yrs occupancy cap gain exemption in all of their homes, though some may). Clearly if someone has purchased 5 properties in a year and they are all vacant it’s unlikely they’re doing anything other than flipping.
Short hold, multi-property flipping is more common in the neighborhoods I listed as a portion of recent and current sale listings.
Also, I’m not seeing any aversion by flippers to high appreciation neighborhoods – most of the areas have been appreciating quite well for 3 years now, so just about any investor buying in the past year is buying into what has been a high appreciation area. Sure, a more experienced (lucky?) flipper is going to buy in areas before they appreciate rather than after, but not all can. Looking at what non-occupying investors have been scooping up over the last 9 months, many are paying top dollar for properties that have already seen a substantial increase in value.
I agree they like to buy the lowest cost properties, but in places like Loyal Heights, that’s going to be a $400K+ fixer that was worth $250K in 2003. No easy way around that.
Back in 2004 there were some awesome buys in high priced areas. But more recently I’ve seen several flips of worst location in high priced areas. The investors did not do well on those.
they aren’t investors, they’re speculators.
Had a builder call me a couple of weeks back who was totally gutting a Green Lake house and trying to factor resale value before starting the project. I agree Michael that he is “speculating” that if he does X to the property he will get Y in return.
In new construction, that clearly would be a “spec house”. Never heard that term regarding a remodeled home, but I agree. An investor keeps the properties he buys for a longer time, rents them out and later hopes for appreciation as well at time of sale. A “Speculator” speculates he can “flip” them quickly.
That said, I have often received calls from “investors” and never received a call from someone saying, “Hi, I’m a speculator and I’m looking for…” 🙂
I like the term “specuvestor” or – “FB” which is more appropriate.
I thought this was funny. Just after I wrote that comment regarding not having heard people referred to as “speculator”, I walked into my partner’s office. He was selecting Kirkland Condos to show to a client. He pulled one up and said, this owner is obviously “a speculator”. It was someone who bought at a pre-construction price and then put it on market as soon as it was completed, it never having been lived in.
Not sure if he used the term “speculator” because he had just read the comments to this post. Didn’t ask.
But I would confirm that those who buy pre-construction condos and then put them on market as soon as the project is built are indeed “speculators”. Though I would say that “speculator” is a type of “”investor” as in all speculators are investors, but all investors are not speculators.
Michael Adler is probably a 20 something with a Mcjob who’s frustrated the market has yet to correct. We’re looking at another year of double digit appreciation in 2007 so reserve that Uhaul and move to the midwest if you want to own a home. One day you will learn the stupidity of market timing, one day.
Ardell,
What do you think of areas around greater Seattle in terms of investment?e.g. the development in the Northgate area or the light rail construction in Rainier Valley and Beacon Hill areas make these areas seem like prime locations for investment. For people like me who work near downtown Seattle, buying something close to Microsoft might be a nightmare for everyday commute. So I am looking for something closer to downtown which would also appreciate at a good rate.
I’m not sure what impact the light rail will have, as those areas have been trying to capitalize on the fact that the light rail is coming for a couple of years, somewhat successfully.
It could be like a stock that goes up when word gets our of a pending new product. Often by the time the new product is released, the stock price has already accounted for it by speculators.
Are you talking single family or condo or townhome? What price range?
I like the area between Green Lake and Northgate, always have, but not too close to Aurora. Big lot small house that needs work is better than better house on small lot. Be wary of “half-lots”. Think of the dirt as the appreciating asset and the house as the depreciating asset.
Beacon Hill and Rainier Valley have been good investments. We had clients who did a couple of flip projects later 2004/ early 2005 on houses they paid $120,000 for and sold for about $300,000 in Beacon Hill on the Mt. Baker side.
I don’t like to rely on appreciation alone in most areas. Some component of improving the property before you sell it is the safest bet in most areas, even if it is just changing it from ugly to not ugly, overgrown vs. landscaped, all pink walls inside (just saw two like that) to updated paint colors.
Updating does not have to be expensive. It just has to look better when you sell it, than it did when you bought.it . Best values being in good shape as to structure, roof and systems, but ugly.
We found better values off Lake City than anywhere else in the last five months or so. Up around 125th.
Shoreline is hard to call. Some really cheap stuff there and I’m wondering if the school issue once resolved will let loose some stagnant appreciation there. My understanding is that they announced that they were going to close a school or two, but didn’t announce which schools. That put everyone in a “wait and see” position. I haven’t checked on that for a couple of months, but once the uncertainty of the school issue is resolved, that could cause a slight blip up for areas where the school not closing is confirmed. Or if the school that closes is the “worst” one, that area could go up if assigned to one of the better existing schools. Talking elementary school here.
Whether you use the schools or not is irrelevant. School issues affect land value.
Hi Ardell,
Thanks for your reply. I am looking at single family homes and townhouses in the 500,000. I was taking a tour of the Northgate area and noticed a great house today built in 2006 which was priced at 579,000. I came back and looked at other houses in that area and noticed that most of the houses in that area have been unsold for over 3 months. Not sure why that would be, but that sure seemed like a red flag.
After Northgate, I took a small tour of the Beacon Hill area and the prices there were closer to my price range. Beacon Hill would also be much closer to work for me, so I am giving that area some serious thought
What is your opinion on appreciation of property near the East Gate area? While the commute on 520 from the East side to downtown for work seems like a nightmare, I don’t mind taking 90 as much. So I just looked online for houses in the Factoria and East Gate area and noticed some great houses. I also heard that a new mall is coming up in that area, do you know anything about that?
Tell me something about your housing needs and not just the “investment” part of it. Do you have children? Do schools matter to you? Age of children if you have them. If you don’t have children, I’d stick to Seattle for sure. If it is just for you, I’d do a small house on a big lot in a better area of Seattle. I can post a few samples of sold homes. But give me an idea of how many people will live in it and if you have children or plan to have them. A lot of the townhomes are not suited to people with more than one child.
While the investment is a consideration always, first you have to find the right kind of lifestyle and then factor in the investment side.
Holding my comments re Eastgate until I know if you have children going to school.
Where do you work Neha? I’ve been thinking about doing some posts called “ARDELL takes the bus” and posting on how long it takes to get from different places to Downtown Seattle. I was going to start with some “Express” lines. I haven’t been on a bus since I moved to the West Coast. Was waiting for the nice weather.
Both my husband and I work in the South Downtown area. We don’t have any children yet and are looking for a decent size house with at least two bedrooms. We like an open floor plan and the floor plans for the newer town homes haven’t looked that great so far. I would prefer having a single story house as compared to a 3 story town home. That’s why we started looking at places like Northgate and Maple Leaf for single family homes.