A Broker’s Perspective

This is a guest post from RPA agent Doug Holman, aka “Townhome Guru“:  

Whew, townhome bashing seems to be en vogue these days.  Like it or not, townhome builders and townhome buyers are here to stay.  City officials want density and some semblence of affordable housing.  Young, upwardly mobile, 20 and 30 somethings, along with downsizers, want urban centric, short commute, low maintenance homes.  Builders will fill that void.  Based on some of the blogging I’ve read, you’d think townhome buyers were some of the dumbest rocks in the garden.  Which leads to my question.  Are townhome buyers getting a bad deal?  In hopes of answering my own question I’ve turned over a few statistical rocks to size up what buyers pay for as far as amenities.   Here’s what I did.  I culled sold townhome sales between June 9th and December 6th (about 6 months) for years 2005, 2006, and 2007.  I did this for a MLS area known as 705 which covers an area north of Lake Union, south of 85th Street, and west of I-5 to the sound.  This includes Greenlake, Wallingford, Ballard, Fremont and points in between.  It’s a geographic area with plenty of townhomes along with plenty of single family homes, that my named demographic would likely consider a purchase target in addition to townhomes.  I compared how many square feet were purchased, price per foot, average sales price and median price.  I massaged the data in two ways.  Not to prove a point but to minimize bad data.  I eliminated any townhomes or single family homes where the builder or seller failed to include square footage information.  I also only used single family homes that were a style “10,” or rambler, where footage figures most accurately represent actual living space and not unfinished basements.  I eliminated a waterfront single family sale that was a data skewer. What I found was not surprising to me, or likely any real estate shopper who has spent a weekend fishing to see what $400,000 would buy.  The 3 year, average square feet of a townhome sold in years 2005-2007 (June 9-Dec 6) was 1522 square feet.  The average square feet of a single family home for the same 3 year period was 1161 square feet.  It goes without saying that the townhomes had higher averages of bedrooms and bathrooms, typically 3 bed, 2 bath minimum versus 2 bed, 1 bath for the single family homes.  I haven’t included those figures due to space constraints.  Averages sales prices for townhomes in area 705 were 354,000 (2005), 433,000 (2006) and 412,000 (2007).  That’s 240, 289, and 282 dollars per square foot.  Townhome prices, by multiple metrics, are trending down.  Average sales prices of single family homes in area 705 were 323,000 (2005), 373,000 (2006), and 409,000 (2007).  That is 298,351,356 per square foot.  Single family rooms were a relative good deal in 2005 but have jumped dramatically since.  Conclusion.  People pay for what they want.  Townhome buyers sacrifice yard and elbow room for new finishes, more bedrooms and baths, for a square foot price significantly lower than single family homes.  A per foot price that is trending down.  Single family home buyers sacrifice some livable space, bedroom and bathroom totals for a bigger piece of terra firma, and the more traditional concept of home ownership.  The price single family home buyers is still is trending up.  I sell a fair number of townhomes each year so yes, I have a vested interest in believing in the product.  And statistics will tell you whatever you shape them to say.  I’ve tried to create an accurate comparison to two different choices available to the everyday Seattle buyer.  A townhome is not the right lifestyle for me.  I’ve got 3 kids under the age of 10.  But for many it’s a great solution.  It allows scores of individuals to get their foot wedge in the real estate door without committing to the suburbs before their time. To imply that these real estate shoppers are stupid or foolish en masse, is to tell them that they don’t know what they want.    Closed sales from June 9^th through December 6^th, 2005, 2006, 2007, for new construction townhomes and single family (style 10 ramblers).  NWMLS area 705.  Closed sales without square footage figures eliminated.  No less than 60 closed sales for any category. 

I was reading an article in the Seattle PI online last week, entitled “Townhouse Market Slows.”   

This topic of the main article wasn’t really news to me, as one of our sister companies (Real Property Development Company, LLC) develops zero lotline townhomes and we’ve seen a slowdown that is beyond just “seasonal” since late September.  We’re a little builder, a few projects a year, but as brokers and property managers we also sell and manage a number of these somewhat unique properties in greater Seattle.  So we’re definitely in that market — in fact one of our agents who lists much of our inventory, Doug Holman, has his Zillow profile set as “Townhome Guru.”

So while the article itself wasn’t newsworthy to us or anyone else in the biz, the comments were quite revealing.  It started off as a discussion of townhome pricing, then moved into talk about the relative quality of the townhomes themselves, and finally into a discussion of whether townhomes are the “right” infill product.  A few contributors bashed them, then some townhome owners piped in saying how much they love them.  A few nuggets: 

Yeah, …the “forest” of townhomes built north of 85th Street, from I-5 to Aurora are just atrocious. I don’t know why anyone would purchase there, either. I can just imagine driving home in my SUV, trying to squeeze into those tiny little driveways and jamming myself into my microscopic parking space, just to go upstairs and watch TV. There’s no where to walk to from that area of town, no sense of wanting to be a part of the community. Yuch. You might as well live in Mont Lake (sic) Terrace.

And in response:

…the new townhomes in North (85th and up), West (Delridge), and the Lake City areas of Seattle provide a great opportunity for first time buyers and lower income buyers. These residences can be purchased starting in the low $300’s, they are energy efficient, often have forced air and radiant heating, brand new everything, a warranty, the insurance and taxes are less than a regular (older) house and there are no association dues. If one was to attempt to purchase a single family house in these same neighborhoods…. they’d be looking at a house built in the 1920’s,30’s,40s; that could need a new roof; rewiring; plumbing; has uneven/slanted flooring that makes you feel like you are walking in a fun house; a “mildewy” interior odor; a crack in the foundation; asbestos based siding; single paned windows; an oil tank buried in the yard; etc

and…

I love my townhouse! And I’m not a first-time buyer either. My husband and I sold our quarter acre lot with its 1929 farmhouse to move to a less demanding home and property…

So there are some mixed feelings on this type of property, but clearly for those who are buying them, it’s working out.  These units are still selling, even in this changed market, and at prices per square foot that are much lower than nearly any other housing option (<$300 as compared to most conversion or new condos at > $375).  They’re not nearly as cool as San Francisco’s row houses (here’s one “blue collar neighborhood” where a good friend bought in ‘96, for $400,000 — look at the east birdseye view), but I think it’s a huge upgrade, in most cases, from the dilapidated rental stock that they replace.  And it works in the spirit of meeting Seattle’s density goal, which I think is good too.

Our office manager bought one of our units early last year, at 92nd and Stone, in the north part of the “forest” noted above.  She cut 45 minutes each way off her commute to our Maple Leaf office (she was in Mill Creek prior) with this $330,000 unit, and she also picked up two extra bedrooms and two baths over her prior apartment (total of 4 br, 2.5 bth).  Which works well, as since her purchase she’s gotten been married, and her second child is due in two weeks!  So she loves it.  Here’s her site’s before and after: 

It wasn’t as nice as it looks here; rented for thirty+ years, two huge dogs, truckloads of debris:

And during demo:  

And now:

I’ll blog soon and talk about a typical site that we purchase for townhome development; why we purchase it; and how it fits into Seattle’s zoning.   It will be a chance to share some of the packet of photos I just received from the King County Archives — pictures of homes that we’ve bought and are preparing to demolish.  They tell a good story about how these sites have evolved over the past 100 years.