The Seattle Times released an article entitled “High-end home sales booming as tech execs, foreign buyers bid up prices” on January 22, 2016 that cites research provided by Realogics Sotheby’s International Realty (RSIR) indicating that the number of luxury home sales in key Eastside areas increased 15 percent year-over-year. The neighborhoods with the most activity continue to emanate north and south from West Bellevue – the epicenter of the luxury housing market – where the median home prices within the broader market increased by 17.4% overall.
Dean Jones, President & CEO of RSIR, joined by many other market experts familiar with these trends, has confirmed that a major catalyst is foreign buyers, most notably from China. Just one year ago, it was estimated that Asian homebuyers represented perhaps 20 to 40 percent of home sales above $1 million on the Eastside, as indicated by the New York Times article, “In Suburban Seattle, New Nests for China’s Rich.” Today, that percentage may even represent the majority in some neighborhoods, especially as price point increases.
“Our brokers suggest that nowadays at least half, if not a strong majority of the showings at our luxury Eastside listings are to Chinese,” said Jones. “And as the Chinese New Year approaches, we predict a very active season ahead.”
The Seattle Times article referenced a particular finding of interest by RSIR: the distinctive waterfront neighborhood of Newport Shores in Bellevue attracted 13 sales during the past two years that exceeded $3 million and 86% of the surnames on these newly recorded titles appear to be on Mainland Chinese origin. There were no such sales in 2011, 2012 or 2013.
As the most preferred neighborhoods of Medina, Clyde Hill and Meydenbauer become more and more expensive, buyers are exploring alternative markets further north, such as Kirkland and Juanita, and further south toward Newport Shores and the north end of Mercer Island. This stretch of waterfront is what Sanjay Bhatt refers to as the “Gold Coast” in the article.
Keeping pace with the luxury markets, Sammamish, on the I-90 corridor immediately east of Bellevue, increased at the third highest growth rate of the region. This demand is largely driven by schools, lifestyle and commute times and seemingly diminishing affordability. The expense of primary markets is likewise driving savvy buyers to explore additional secondary markets such as Issaquah and Newcastle.
A number of observations were offered by RSIR’s Research Editor and Publisher, William Hillis, whose charts may be found below. Hillis affirms that luxury homes at these prices have been selling and will increasingly be sold throughout King County (see chart, “Proportion of Home Sales Over $3 Million in King County” below). He advises that the distinctiveness of these select Eastside communities – due to waterfront access, views, and proximity to shopping and work – affords them greater concentration of such homes than are currently found elsewhere in the county and state. Aware of the unique attributes of the Gold Coast, buyers and sellers alike know what to expect at negotiations, while a seller outside this area faces more uncertainty.
To illustrate, in the charts below, Hillis compares average days-on-market trends in current active listings at or higher than $3 million with those that sold in 2015. “In Seattle, look at the market time before sale of the sold listings (longer than the shortest three communities) versus the duration of the active listings: only shorter than the longest (Hunts Point, where homes did sell after longer exposure times),” said Hillis. “These suggest that a seller in Seattle who offered a home at these prices has generally either concluded the sale within three months, or it lingered on until the listing contract expired.”
“In Mercer Island and Hunts Point, that home may have stayed on the market for 120 or 200 days respectively, but ultimately sold for within [what the charts on deviation from sale price tell us is] 3 to 6 percent from the offered price,” Hillis continued. “Luxury homes in Bellevue, Kirkland and Medina sold more quickly than those in Seattle.”
Despite the increased home sales in this region, the median home price for the area actually declined slightly, an occurrence explained by a higher number of lower-priced homes sold, as demand typically rises from the bottom up. These luxury homes are not commodities. Each are unique and offer different values (more or less waterfront, more or less views, etc.) so they are difficult to summarize statistically.
On sale-to-list price deviation, Hillis notes that there was greater competition among buyers in 2015 than 2014. But while prices across the spectrum in the Puget Sound region kept within a half percentage point of seller’s offers, luxury home sellers often allowed reductions of 3.5 to 4 percent on the final sale. Hillis believes that luxury sellers were asking higher prices in 2015 to test the waters. “Most sellers don’t expect a full price offer unless there are multiple buyers, which is rare at luxury price points,” he said.
These concessions in the luxury home market were more than balanced by offsetting double-digit increases in West Bellevue for all price points. This also explains why there were 9.5 percent more homes for sale at this higher price point as of December 2015 as compared to the previous year. Sellers are simply more optimistic.
Believing that the number of Chinese buyers will continue to expand, RSIR recently collaborated with Tiger Oak Publications to launch the region’s first all-Mandarin magazine, Seattle Luxury Living, which generated a front-page article in the Seattle Times and was a featured story on the Perspectives blog by Sotheby’s International Realty®.