The bursting of the housing bubble shook up the Puget Sound real estate market, causing the normal movement of wealthy buyers to slow dramatically.
As the recovery kicks in, so does spending. But many well-heeled residents are choosing to remodel rather than to relocate. And many younger families — even affluent ones — are forgoing purchasing a house and renting instead, for more mobility and less risk.
The changes are healthy in some ways, experts say. Spending to renovate is better for the economy than no spending at all. But the hesitation about purchasing may indicate there’s going to be a new “normal” for an unknown length of time.
Climbing out
And that means a long slog for those who lived off the Puget Sound’s hyper-fueled housing market of years past.
“We built a couple of houses in Medina, but the high-end market has about 10 builders for every project that wants to be done,” said Guy Bennett, president of Seattle-based high-end building firm Fine Structures Inc. “Most of it seems to be renovations, and not so much new construction.”
What the Great Recession did not change was the geography of the region’s most desirable neighborhoods.
Medina 98039 again ranks No. 1 for among the Puget Sound region’s 226 ZIP codes (see top 25 list of Wealthiest ZIP Codes, page 20). The Puget Sound Business Journal’s demographic data provider, The Nielsen Co., pegs Medina’s 2010 average household net worth at $830,068, down just 1.4 percent from 2009.
And as home to Bill Gates and others who have made their fortunes in the tech sector, Medina’s not likely to lose its top spot anytime soon.
In addition to Medina, other hubs of wealthy families — especially waterfront areas — are still attracting home buyers. But those buyers aren’t in any rush, since the amount of desirable inventory is low. Many are willing to wait for better homes to come on the market; they know they can’t quickly turn around and sell a property.
“There’s a lot of buyers, just not a lot of urgency,” said Shawn Filer, a luxury real estate broker at Northwest Real Estate Group, of Seattle. “People for whom the (housing) market doesn’t really matter ... they can be picky. They already have their dream home, so they can afford to wait.”
Even luxury neighborhoods felt the downward pressure from the storm of foreclosures. According to Windermere Real Estate
’s annual luxury market report, more than one out of 10 of the Puget Sound area’s million-dollar-plus home sales last year were short sales or bank-owned properties. Sales of distressed properties for homes overall were about three times greater than the year before.
So instead of buying into a shaky market, many people are aiming their housing dollars at improving what they’ve got. They’re installing espresso machines in their kitchens or rigging their iPads to control all of their home electronics, according to brokers, interior designers and builders.
Susan Marinello, a high-end home designer, said the trend extends to second homes as well. She estimated that on average, instead of buying homes, wealthy families are spending $300,000 to $1 million to redecorate or furnish vacation homes.
Marinello said her clients are focused on quality interiors, even if their home is on the smaller side, since they’ll stay put in their home as long as the real estate market stays slow.
“Our clients are committed, more than ever, to purchasing quality,” she said. “They may only complete a room 75 percent, but the pieces chosen will be lasting and transcendent of trend. People want quality …. quality is luxury.”
Another alternative to moving, for some particularly well-off homeowners in wealthy enclaves, is to extend their privacy zone by buying up the property next door when it hits the market.
Rentals rising
Meanwhile, younger householders in the wealthiest ZIP codes aren’t always living in houses they own.
“Those people are becoming high-end renters,” said Filer.
Recent hiring booms at Amazon, Microsoft and other tech companies have young people flocking to rent and own in popular Seattle neighborhoods such as Green Lake, Queen Anne, Madison Valley and Capitol Hill.
“People in the younger age category, they likely relocated to Seattle for the tech jobs,” Filer added. “They’re not from here. They don’t have roots. They don’t have a problem taking a job offer in Palo Alto (Calif.) and taking off.”
Indeed, experts believe rents in the Puget Sound region are poised to shoot up by a third, as demand for quality apartments rises faster than the pace of new construction.