Prices cut in luxury apartment towers in Seattle as housing market slows

Not even the panoramic views of the water, the 24-hour concierge and on-demand Tesla car rentals can avoid a slowdown in the real estate market.

The Emerald, a 40-storey luxury residential tower two blocks from Pike Place Market, has slashed the prices of some of its apartments by 10% to lure buyers who have been hit by rising interest rates and economic hardship.

Nearby, at Spire in Belltown, buyers attracted by the rooftop fitness room or fully automated parking system can get a discount, too. The building offers a year’s worth of homeowners association fees and credits of up to $15,000 to close costs or purchase a cheaper interest rate from the lender.

The deals point to a broader trend in the cold housing market. Few people are buying homes, and prices are starting to stabilize or fall.

Among the Seattle homes for sale Tuesday, 29% of condominiums and 31% of single-family homes were slashed, according to Zillow.

“It’s just a matter of meeting the market where it is and responding to buyers,” said Josh Nasvik, managing director of Polaris Pacific, which markets the two apartment buildings.

Deals are unheard of in the world of high-rise sales. But this year, rising interest rates, plunging tech stocks and general economic uncertainty have driven homebuyers looking for more affordable options or kept them on the sidelines altogether. This leaves sellers – whether they are apartment developers or ordinary homeowners – with less leverage.

“This summer, Seattle experienced one of the sharpest market shifts anywhere in the country,” said Jeff Tucker, chief economist at Zillow. “Broadly, the apartment market is seeing the same thing, so the people selling condominiums are trying to be creative.”

At the same time, Tucker said, “With mortgage rates soaring today, that means for some buyers, apartments may be the only affordable option at this point.”

For every 1% rise in interest rates, a home buyer can afford 10% less for a home. The average 30-year mortgage rate is 5.5%, about two and a half points higher than this time last year.

The apartment market has seen its ups and downs over the past couple of years as demand and prices for single-family homes have skyrocketed. Some buyers went in search of more space, and others were no longer interested in living near their workplace. While demand for apartments has recovered from the early pandemic recession, prices have never risen to the level of single-family home costs.

But the broader slowdown affects both types of homes.

Pending condo sales fell 25% in Seattle and 44% in the East Side in June, compared to the same time last year, according to the Northwest Multiple Listing Service. The number of apartments still for sale at the end of June was up 3% in Seattle and 71% in the East Side.

Prices fell from May to June. The average condo sold for $538,700 in Seattle and $622,400 in the East Side. In downtown Seattle and Beltown, the median price was essentially flat from a year ago and down 16% from May.

The local apartment market last received success in 2019 when there was an abundance of apartments for sale.

The price cuts this year have been much less dramatic than in 2010, after the Great Recession, when some downtown towers slashed prices by 45%-50%, but they’re also a far cry from the spectacle of buyers camping out in Seattle to book. New apartments in 2016.

About 70% of the apartments in The Emerald and the other half in Spire have been sold, according to Nasvik.

Dean Jones, owner of Realogics Sotheby’s International Realty, said discounts are more common for buildings ready to move in, while developers whose towers are still under construction can wait for more buyer demand in the coming years.

With the market slowing, sales were delayed on initial assumptions at Coda, a new tower in international Chinatown where about half of the apartments have been sold.

Eric Mehr, whose company leads sales in the building, said the developer is now offering price cuts of between 5% and 10% on apartments. Prices start at around $350,000 for studios, but high-end units run around $1 million.

“We felt that our prices were very accurate and correct in the market, but over the past few months, things have changed. So, we tried to adapt accordingly,” Mehr said.

In the Nexus, the Denny Triangle Tower finished two years ago as studios start around $450,000, about 90% sold out. With few apartments left for sale, Mehr said, the developer is not offering any deals.

Luxury apartment developers aren’t the only ones signing deals.

Andy Friedman, an agent for John L.

Friedman listed Ballard’s one-bedroom apartment in April which directed a show within days. When that buyer fell and the apartment was back on the market again in June: crickets.

The apartment is already listed for $5,000 less than its appraised value, Friedman said.

“We have to adapt to the new normal,” Friedman said. “It’s hard for sellers who listed a month or two ago because they still think they got the winning lottery ticket.”