April 10, 2014

Amazon is fueling a home-buying frenzy

It's wild out here right now.

All these “multiple offers.” Word has it there were 40 for one home in Ballard recently (apparently because the sellers didn't go with “pre-inspections”).

That's the most I've heard (so far) and too many!

In my first new DJC column on residential real estate I want to look at what's going on up on Capitol Hill, since that's my base.

In a word: Amazon.

So how does Amazon fuel the frenzy of “review offer dates” and “pre-inspections” on Capitol Hill?

All those new employees moving here from around the world need homes. Even if they came a year or two ago and rented (Amazon's big hiring flow into South Lake Union kicked in back then), some turn smartly to buying (with a mortgage payment equal to or less than rent).

They're buying. And they, as a bloc, can afford Capitol Hill. And Queen Anne. Everywhere else too, but Capitol Hill and Queen Anne form an arc of what's closest to South Lake Union.

Beacon Hill is in there too, for its proximity. But Beacon Hill's stock in general is smaller homes, and there are tight zoning restrictions on what it is and what it can become retail-wise. It ain't Cap Hill or Q Anne, but Beacon Hill is holding a position as a first-choice overflow location for those priced out of Capitol Hill (and the Central District) by the you know whos...

And to many (such as younger “digital natives”), Q Anne ain't Cap Hill. Q Anne is statelier, a bit older, not as eclectic. Cap Hill has that too, in North Capitol Hill. It also has the nearly endless selection of restaurants flooded day and night with young people in Pike-Pine, a classic Creative Class mecca. It has the 12th Avenue area near Seattle U. Soon it will have light rail (and even a trolley!). And Broadway. Drop in a Linda's restaurant at 19th & Mercer and poof: It's bursting at the seams with customers (and a neighboring restaurant quickly expands).

The place is fun!

Now these “multiple offers” are even hitting $1-million-plus homes.

That, by the way, touches on the synergy for retailers on Capitol Hill, as well as commercial property owners and business owners. All these higher-income residents — and their new modern townhomes going in where they can — are feeding the retail and restaurants, and seeding more to come.

Here's what's causing the multiple-offers phenomenon: super-low interest rates; Seattle's relatively low unemployment (Amazon!); the influx of new residents from elsewhere (and a whole lot to come); the aftermath of the worst recession since the Depression that pushed prices way down; pent-up demand; and low inventory.

What's a pre-inspection? Paying $400 to $650 to professionally inspect a home BEFORE you submit an offer so that your offer bears the advantage of NOT having the uncertainty for the seller of an inspection contingency. That's EACH bidder paying that much, non-refundable.

This “low inventory” thing threw me for a while. Seems like the same number of homes out my window as last year and the year before. If anything a few more (townhomes). As you surely have already divined, what matters is the inventory of homes that are for sale. The ones people are willing to sell.

The expectation a couple of years ago was that as the clouds of the recession started thinning, home prices would start to rise and homeowners who were waiting until they “could” sell would pull the trigger. Each uptick of prices would bring out more sellers — aka more inventory.

So far, there are not all that many pulling that trigger.

By the way, my favorite broker feels strongly that 40 offers on one property is about 37 too many. Start the listing at a higher price, so that 39 people don't go away mad.

Hope that helped. Good talkin' with ya. Back to the wilds for a bit.

Joe Nabbefeld is a Realtor with Windermere Capitol Hill. You can reach him at http://www.RealSolutions.biz. He was the DJC's commercial real estate editor back in the late 1990s and early 2000s.