Which is the better investment?

On February 21, 2025, The Seattle Times published an article highlighting a surprising trend in Seattle’s housing market. Condo prices are surging, while demand for alternative housing such as townhomes, backyard cottages, and ADUs is growing rapidly.

According to the Northwest Multiple Listing Service (NWMLS), King County’s median condo price hit $600,000in January, reflecting a21% increasecompared to last year. In Seattle, condo prices jumped even higher, reaching $689,975, up 28% year-over-year. The Eastside saw a similar surge, with median condo prices climbing nearly 29% to $734,900.

Despite these price hikes, the overall condo market is not necessarily booming. Many lower and mid-priced condos are sitting on the market for 60 days or more, according to Seattle-based RE/MAX Gateway. However, high-end condos priced over $1 million are selling at a much faster pace.

Why Seattle’s condo prices are rising rapidly

  • Limited Supply: Seattle has experienced significant population growth, leading to increased housing demand resulting in a limited supply that drives up prices.
  • High Construction and Land Costs: The escalating costs of land acquisition and construction have made it financially challenging for developers to build new condominium projects.
  • More First-Time Buyers: Many first-time buyers turn to condos as their best entry point into homeownership. This increased demand is driving prices higher, especially for mid-range units.
  • Urban Growth & Demand: Seattle’s population is growing, and more people want to live in central locations, driving up condo prices.
  • Rising Interest Rates: Higher mortgage rates make single-family homes even less affordable, pushing more buyers toward condos.

Hidden costs of condo ownership

While condos offer a lower upfront price than single-family homes, they come with additional costs that many buyers do not anticipate.

  1. Homeowners Association (HOA) Fees
    • The average HOA fee in Washington is around $388 per month, but Seattle condos often have higher fees depending on the building and amenities.
    • In Seattle, HOA dues for 1-bedroom condos can range between $224–$265 per month, while 2-bedroom units may cost anywhere from $200 to $994 per month.
  2. Property Taxes
    • Seattle’s property tax rate in King County is 0.85%.
    • For a $600,000 condo, annual property taxes are approximately $5,100.
  3. Rising Costs Leading to Sales
    • HOA dues in Seattle have been increasing, with some areas experiencing doubling fees over the past year.
    • Many condo owners, especially those on fixed incomes, are selling due to the rising costs of HOA fees and property taxes.

Key factors to consider when choosing between a condo and an ADU

If you are considering homeownership in Seattle, it is worth weighing the long-term costs and benefits of an ADU versus a condo. While condos offer convenience, they also come with high HOA fees, property taxes, and less flexibility.

On the other hand, ADUs offer full ownership, lower costs, and the potential for passive rental income. With Seattle’s changing housing policies, now is the perfect time to explore ADU options.

Our take: Why ADUs are becoming a smarter alternative

While condos remain a viable option for some buyers, many are turning to ADUs and backyard cottages as a more affordable, long-term investment.

How It Compares to a Condo

  • Full ownership: Homeowners typically have complete control over their property, including any ADUs, without the oversight of an HOA. This autonomy allows for greater flexibility in property use and modifications.
  • No HOA fees: Since ADUs are part of a single-family property, they usually do not incur separate HOA fees. This absence of monthly dues can lead to significant long-term savings for homeowners.(disclaimer: ADUs generally have no HOA fees, but if the main property is in an HOA community, restrictions may apply. Check your HOA rules for compliance.)
  • More living space for the price: The cost of a detached ADU (DADU) can be comparable to or lower than a condo, without shared walls, noise, or restrictions.
  • Rental income potential: Many homeowners are choosing to build ADUs instead of buying condos because they can generate rental income, making them a better investment.

Citations:

Housing Market Data: Northwest Multiple Listing Service (NWMLS), January 2025

Seattle Condo Prices: Seattle Times, February 2025

ADU Regulations: Seattle Department of Construction & Inspections

HOA Fees & Trends: Seattle Agent Magazine, My Seattle Home Search

Property Taxes: SmartAsset

Rising HOA Costs: Wall Street Journal