Building permits for 1,550 new residential units in Ballard have been issued in the past 18 months by Seattle's Department of Planning and Development, and there's more to come.

Much of that development has been in the form of condominiums and town homes.

According to Gunnar Hadley, a realtor with Ballard Windermere, 60 percent of everything sold here for the first five months of the year were condominiums and town homes. Hadley, who specializes in condo sales, called that an "impressive" statistic.

"That's truly crazy," he said. "There's clearly a massive demand here."

While real estate sales are sluggish around the nation, Seattle, and especially Ballard, seems to be one of the exceptions, he said.

"You can be going 120 miles per hour and slow down to 90, but you're still going 90," Hadley said.

The average price of a new condo in Ballard ranges from around $189,950 all the way up to $1.2 million. The demand seems to be on the extreme ends, Hadley said. For one major development in Ballard, he's sold all the lowest and highest priced units and almost nothing in between.

Condominium sales and prices in the rest of King County are also outperforming last year, according to a recent report by Northwest Multiple Listing Service. Condo sales were up 6.1 percent compared to 2006 for the first six months of the year and prices jumped 15.6 percent.

New units in Ballard are being sold to a "diverse mix," Hadley said. College students, singles, retired couples and people with "average paying jobs" are buying the new homes.

Town homes here are typically selling at a little above and slightly below $459,000, said Brent Sanders, a realtor with Ballard Windermere who specializes in town home sales. They are selling quickly, he said, and are typically not on the market for much more than a week.

Most of the new residents are commuting to jobs in downtown Seattle, the University of Washington or the eastside to companies like Microsoft, realtors here said.

Ballard is in the midst of a town home boom, predominately south of 65th in multi-family zones, with the exception of a few portions of 24th and 85th. That's where many of the older single-family homes are being torn down and replaced with three or four town home units.

It's what realtors call the "highest and best use" of the land, said Sanders. The zoning in Ballard hasn't changed dramatically since the 1980s, but the cost of land has surpassed the worth of many of the older homes, making it lucrative for homeowners to sell.

Town homes have been built here consistently for at least the past decade, but Sanders thinks there is an end in sight.

"Eventually we will run out of dirt," he said.

In the meantime, homeowners will continue to flock here, predicted Lauren Martin, a developers' representative for The Northlake Group, a company that's converting more than 100 Ballard apartments into condominiums. The units range in price from $249,900 to $899,900.

"Ballard is just hot - it's one of the hottest," Martin said. "It has such a unique feel."

It's why The Northlake Group purchased seven apartment buildings in the neighborhood, making up nearly 42 percent of all condo conversions in Ballard since January 2005.

According to Dupre and Scott Apartment Advisors, there have been 242 apartment-to-condo conversions in Ballard from January 2005 to May 2007.

Ballard is one of the fastest growing neighborhoods outside of the downtown center and more homes are being built, but rentals are also being lost, largely to conversions. The city planning department reports that 124 residential units have been removed in Ballard in the past year-and-a-half.

The city's rental vacancy rate is down to the lowest it's been in several years, about 2 percent, but Martin said eventually it's bound to "level out." She predicts the conversion trend will continue for another 18 to 24 months until the thousands of new condos already under way are built.

At that point, the condo supply should start to satisfy demand and developers will start building apartments instead of condos, she said.

But Nichole Poletti, property manager for Ballard Realty, said that construction and land costs have escalated to the point that it's no longer financially feasible to build apartments in Seattle.

Based on a recent seminar she attended, developers would have to charge about $3 a square foot in rent to make a profit on new construction. That means a 650 square foot unit would rent for around $1,950 a month, while an average older unit that size in Ballard now rents for $790.

Rental prices have gone up 8 percent to 10 percent this year alone in Ballard, but there is still a demand and units are being rented before they are even vacated, said Poletti.

She spends a lot of her time trying to find rentals for people who have been displaced as their building goes condo. Some ask to sign longer leases because they're afraid it will happen all over again.

But since many of the displaced have lived in their rentals several years, some for decades, they are often out of touch with the current rental market and can't afford what's out there, Poletti said. For instance, one woman was paying $700 a month for a 1,000 square foot apartment just east of 15th Avenue Northwest on Market Street.

"You would never be able to find something like that in Ballard anymore," said Poletti. "It's almost shocking what you can get for your money."

Real-estate experts and developers say that conversions are being driven by Seattle's job growth and hot housing market, which is in strong demand for condos in neighborhoods like Ballard. They also say conversions increase home-ownership opportunities, since most are cheaper than new construction.

But John Fox of the housing advocacy group the Seattle Displacement Coalition, said conversions not only dwarf the number of rental units, but force people out of their communities. It's particularly difficult for seniors and low-income, he said.

Fox said the city has lost 4,700 rentals to conversion since 2005.

Since condo laws currently fall under the state Legislature's jurisdiction, city leaders say there is little they can do as far as regulation. A bill that would have required landlords to give tenants better relocation compensation and three months notice, rather than 90 days, failed to pass this legislative session.

Fox said the city should take more creative action locally. Give non-profits and current tenants first right of refusal to purchase the property, form review committees in districts for site-by-site control and demand the replacement of units lost at comparable rates.

"There's an absence of concern," said Fox. "It's a disregard of the existing social and economic conditions of these communities."

To download a map detailing housing in Ballard go here

http://hosted.robinsonnews.com/PDF/BallardHousingMap06-July07.pdf

(This is a 3.6 MB file)

Rebekah Schilperoort may be reached at 783.1244 or rebekahs@robinsonnews.com