Cynthia Creasey and Mack McCoy bought a four-bedroom house in Ballard in 1988 for $116,000. She loved its spaciousness, its lush garden and the suburban feel of their neighborhood.But McCoy, who grew up in Manhattan, longed for the city life. So the couple recently decided on a lifestyle change — and reaped a financial windfall in the process. They sold the house for $700,000, bought a two-bedroom condominium downtown for $450,000 and pocketed the difference.
The couple’s hefty payoff came from Seattle’s booming real estate market, which pushed median home prices to records in Seattle and King County in June.
Prices for single-family houses in King County increased nearly 16 percent in June, compared with the same month last year. And although lower overall, prices for condominiums actually outperformed that percentage gain slightly, according to a monthly report Thursday from the Northwest Multiple Listing Service.
In Seattle, house and condominium prices combined rose 11.5 percent. Increases were steepest on the Eastside, where houses and condominium prices jumped 25 percent compared with June sales last year.
Homes with prices over $1 million were still receiving multiple offers, as in past months, real estate agents said.
Creasey and McCoy, both agents for Lake & Co. Real Estate, are among those taking advantage of the robust housing market to try out downtown living.
Although Creasey, 53, and McCoy, 51, have showed and sold many condominiums as part of their work, actually moving from a four-bedroom house into a two-bedroom condo was daunting.
Squeezing into the cozy condo on Denny Way, between First and Second avenues, meant getting rid of about a quarter of their accumulated furniture and collections and putting much of the rest in a rented storage unit.
The condominium includes garage parking for one vehicle, but McCoy had to lease a parking space nearby for their second car. The condo has plenty of windows, but no air conditioning. During a recent stretch of hot weather, the wide-open windows let in fresh air, but also traffic and street noise that kept Creasey awake some nights.
She also could hear the crashing, clanging and hollering of kids who use the alley behind her condo for a skateboard park.
“I’m happy to say that when I yell out the window at them, they leave,” she said.
But on the bright side, the community deck at the condominium complex offered the couple a breathtaking view of the Fourth of July fireworks over Elliott Bay this week — and they don’t have to mow or weed it.
If they have time in their busy schedules, they can walk to the theater, the ballet or a neighborhood bakery.
“Both the house and garden now seem like a huge extravagance,” Creasey said. “It was a big investment of time and money. I enjoyed it — and it was a burden.”
According to the multiple listing service numbers, 988 condominium sales closed in June 2005, and 987 closed this year. The median price jumped from $214,000 to $250,000 year-over-year.
The climbing condominium prices pushed the couple to make the move downtown a little earlier than they were planning.
“We thought it might be out of reach if we waited too long,” said Creasey. “Condos have been going up in price faster than our house.”
Kari Gran, an agent with Windermere Real Estate who specializes in downtown condominiums, said the spike in prices is caused by a lack of inventory. She expects that to change as some of the thousands of units that are planned start becoming available — as many as 6,500 more in Seattle by 2010, according to some estimates. Nearly 50 condominium projects are currently planned for completion by then, according to a report from Realogics.
Gran said most of the first-time condo buyers she sees now are younger people who want to live in an urban environment.
“They understand that they aren’t getting a big space, a yard or a garage, but they are getting the ability to walk out the door and go do something in the city,” Gran said. “It is more a matter of lifestyle. That is what I have sold to people.”
Less common, Gran said, are people such as Creasey and McCoy who are trading longtime homes in Seattle neighborhoods for downtown living.
“People have accumulated a lot of things and they don’t want to part with all of it,” she said. “It is difficult to move from thousands of square feet to much less than that.”
But Gran said she expects that to change as larger condominiums are built as part of the next wave of construction.
A new, 40-story project at 1521 Second Ave. will offer larger units — more than 1,700 square feet — priced from $700,000 and into the millions. It’s expected to be completed in 2009.
“It’s certainly not affordable housing, but a lot of Seattle homes have gotten to be that expensive,” said Gran.
She suggests that people who are thinking of selling their neighborhood homes and moving downtown in the next few years should start looking around now and planning ahead. She even suggests renting downtown first for a while.
“It’s not your traditional way of living; it is a lifestyle,” she said.
WHAT ABOUT TAXES?
Unless the windfall is especially large, homeowners making a profit on the sale of their home should be able to avoid taxes on their gain, Seattle real estate lawyers Casey Scherer and John O’Donnell said.
The federal capital gains tax — 15 percent for most taxpayers — is calculated on the difference between the purchase price of the home (plus the cost of major renovations or improvements) and the sales price (minus real-estate agent commissions and other selling costs). But for a married couple that has lived in the home for any two of the previous five years, then $500,000 of the gain is tax exempt (the exemption is $250,000 for a single person).
Let’s say a qualifying couple bought a house for $100,000 and spent $50,000 on a kitchen remodel and other improvements. That makes their cost basis $150,000. If they sell the house for $715,000 and pay $65,000 in real-estate commissions and selling costs, their net sales price is $650,000. Their capital gain is the difference between $150,000 and $650,000 — or $500,000, which is exactly covered by the exemption, and they would pay no tax. If they sold the house for more, they would pay tax on the amount of their gain in excess of $500,000.
In case the Internal Revenue Service asks questions, homeowners should save the receipts for improvements they make and also keep the records of the purchase and sale.