First-time buyers find ray of hope in condos
Seattle Times staff reporters
When she settled on a theater career, Yasmine Kiss made peace with her trade-off. She'd be doing something she loved, but she'd never make big money, and that would have consequences.
"I always knew the only way I could ever afford a house was to stair-step ... just keep leap-frogging myself into home ownership," said Kiss, 31, an assistant stage manager for the Seattle Opera.
She's done exactly that. She bought a small studio in a vintage Queen Anne building, fixed it up and sold it three years later for $70,000 more than she paid. She turned around last year and bought a Capitol Hill cottage for $345,000.
It's no secret that first-time buyers of moderate means have long seen condominiums as their steppingstone to buying a house — perhaps their only chance at ownership.
But never has it been as true as it is now.
In 2003, buyers earning the King County median household income, $58,135, could afford the median-priced detached house in 30 areas. By 2005, house prices had risen so much that median-income households could afford a house in just 15 areas.
Last year that shrank to two areas — Auburn and Enumclaw — even though median incomes had risen to nearly $66,000, according to state statistics. Add in the sole affordable area in the southern half of Snohomish County, Everett, and buyers were still priced out.
However, with condominiums the world was wide open.
Thirty-one of 49 areas in King County and South Snohomish County were affordable to median-income households, including some where houses have been out of their reach for some time now, such as Magnolia and Ravenna in Seattle, and parts of Bellevue, Edmonds and Bothell.
"Condos and town houses are becoming the dominant thing people can get into, especially first-time buyers," said Mike Skahen, owner of Lake & Co. Real Estate in Seattle. "Houses are going to be what you end up in once you've had your condo or town house."
Last year the median price of a detached house in Magnolia was $619,000, and the income needed to afford it was $148,836.
To buy a condo in the same neighborhood required a salary less than half of that — $59,389 — for a unit at the median price of $246,995. (Median means half cost more, half cost less.)
However, condo numbers can be deceptive.
Take cost. The Seattle Times analysis found that often the lower sales price was because condos were smaller. Yet on a square-foot basis, they were often more expensive — and sometimes a lot more expensive — than houses.
Detached houses in the Green Lake and Wallingford neighborhoods, for example, sold for a median $350 and $360 a square foot last year, respectively. Condos in those neighborhoods went for a median $433 a square foot — or about 20 percent more.
Appreciation can also be deceptive. On a square-foot basis, the prices of King County condos have gone up about the same as houses over the past five years. Houses had an annual appreciation rate of 9.6 percent in that time frame. Condos' annual appreciation rate was 10.8 percent.
But in 2006, condo appreciation in some neighborhoods shot up.
In a year when countywide house appreciation reached 16 percent, condos in Rainier Valley/Beacon Hill/Skyway appreciated 27.6 percent. Kirkland condos gained 43.5 percent. Those on Mercer Island a jaw-dropping 57.2 percent.
What's going on here?
Two factors can seriously skew some of these numbers.
One is a small number of sales on which to base appreciation.
The second is a rapid increase in the number of newer condos (built new or converted from apartments), which because of construction and other costs are almost always more expensive than older resales. Mercer Island is a good example of both factors.
Last year just 92 condo units sold on the island. Half were built or renovated between 2004 and 2006. Subtract those and Mercer Island's appreciation drops from 57.2 percent to 20.6 percent.
Seattle real-estate economist Matthew Gardner advises buyers and owners not to over-analyze appreciation numbers.
"The most crucial thing we have to consider is our houses are our houses — not our piggy bank," said Gardner, principal of Gardner Johnson, an economic advisory firm.
"Looking at real estate as an asset No. 1 and a home No. 2 is shortsighted," he said because high appreciation rates can't be sustained long term.
But for buyers such as Yasmine Kiss, appreciation isn't the first criterion.
Finding an affordable home was her goal. That she was able to parlay her initial studio into her recent cottage purchase was a hoped-for bonus.
Before moving to Seattle, Kiss lived in Chicago. One of her regular customers at the Starbucks where she worked gave her some sage advice.
One day Kiss asked him what she should do with $1,000 she'd earned from a short-term theater job. He suggested she start a retirement fund — a preposterous idea, she thought, for a 20-year-old. He returned the next day with a written plan showing how she could be a millionaire by the time she retired.
"I could have gone on vacations and bought gizmos, but in the back of my mind was the fact that in my profession there is no pension plan," Kiss recalls.
She took his advice, eventually building her retirement account to $11,000.
Some $10,000 of it eventually became the down payment for the Queen Anne studio she bought in 2002. She'd watched it online for months, buying only when it dropped from $120,000 to $103,000.
There wasn't a lot Kiss could do to improve the sunny, 400-square-foot, top-floor unit in the 1930s building, but she did what she could.
She tiled the bathroom floor, installed a closet system in the walk-in closet (the unit's best amenity) and painted the place cheerful colors.
"I believe that's what sold the apartment," she said.
After intensive looking, Kiss landed her Capitol Hill cottage. It's one of eight, connected by cobblestone walkways, that were built decades ago as military housing. They're now a condominium community.
Her home's biggest untapped amenity may be its unfinished basement.
But Kiss likes her cottage so much that she may not worry about fixing up her basement and trying to stair-step to a bigger place.
"It's nice to have a home," she says simply.
Copyright © 2007 The Seattle Times Company