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Tuesday, December 20, 2005

Follow-Up: Anecdotal Evidence, Pt. 4

Data has been posted online regarding the condo that sold last month. It seems that they got just what they were asking, a cool three hundred thousand, which you will recall is $19,000 more than the unit next door sold for just two months earlier. Dang.

I'll keep my eyes open as new properties are put on the market in my neighborhood.

Housing Predicted To "Cool Off" In 2006

Housing in the Northwest has continued to experience a climb in prices this year as other parts of the nation have stalled, but some are starting to see some cracks in the foundation, and predict that next year the housing market will "cool, but not collapse."

Nationally and locally, the sizzling housing market has been one of the major props of the economic recovery. Homebuilding has turbocharged the Northwest construction industry: As of November, 19.5 percent of all new jobs created over the previous 12 months in Washington and Oregon were in construction, even though that sector accounts for just 6.2 percent of all jobs.

Housing activity has also aided the region's lumber industry and boosted retail and professional-service jobs (all those new homes have to be furnished and paid for, after all). Soaring values have allowed consumers to tap the equity in their homes to support their spending: Last year, funds from home equity hit $599.5 billion and accounted for nearly 7 percent of all disposable income, according to the Federal Reserve.
So what's in store for housing next year? Will growing pressure on consumers slow down appreciation? One economist actually admits this is likely:
But as mortgage rates creep higher and the Fed continues to tighten interest rates, nearly all observers expect the housing market to cool off next year. The big question is how fast it will do so.

"A year ago, I was saying 'No, we're not in a bubble — fundamentals are driving it,' " said William Conerly, a Portland-based economist. "Now, I think we are.

"So many people are buying houses for investment purposes, or they're buying a vacation house because their stocks haven't been doing very much and they see everyone else getting rich in real estate."
I think it will be interesting to see what happens. If you have any specific predictions for the Seattle area in 2006, feel free to share them here.

(Drew DeSilver, Seattle Times, 12.20.2005)

Monday, December 19, 2005

Puget Sound Economy Powered by "Magic"

Okay so that headline was a bit of hyperbole, but I'm allowed to have a little fun now and then. I just couldn't help it after reading about the "Horizons Economic Forecast breakfast" in Pierce County:

With two weeks remaining, 2005 looks to have been a year of healthy, strong and fruitful economic results. Next year looks good, but not quite as good.

Such was the message delivered Thursday at the Tacoma-Pierce County Chamber's 18th annual Horizons Economic Forecast breakfast.

The theme of the morning was magic, evidenced by a pair of strolling magicians as well as tricks – money and fire suddenly appearing – performed by master of ceremonies Joseph Beaulieu, senior vice president of Venture Bank.
What's the economic forecast? Why it's magic! More jobs, more money, happy times for everyone! Why? Because we say so, that's why. And that "bubble" thing? Don't worry your little head about that.
Lawrence Yun, managing director of quantitative research for the National Association of Realtors, said an increase in corporate profits in 2006 will mirror an increase in available jobs.
Yun lambasted reporters who have fostered an irrational fear of the "housing bubble," wherein high home prices are said to be likely to implode.

"Scary news sells papers," he said.

Yes, price growth is softening elsewhere, he said. But "in this region, prices are actually accelerating."

And in fact, he predicted, the number of new-home sales will mark the fifth consecutive year of record growth. Prices will reach another all-time high.
If a representative of the National Association of Realtors says it, it must be true. Okay, I've had my helping of sarcasm for the day now.

(C.R. Roberts, Tacoma News-Tribune, 12.16.2005)

Thursday, December 15, 2005

Follow-Up: Anecdotal Evidence, Pt. 3

Here's another update on the properties I've been following in my neighborhood. The house I was watching never did sell, it would seem. After stagnating on the market for over three months and lowering the asking price by 8.5%, there still were no takers for the "cozy" house. I would guess that the owner was making an attempt to cash in on the real estate madness, and since they weren't able to get a ridiculous sum out of some sucker they decided to take their ball and go home, so to speak.

Furthermore, the neighboring condo that went up for sale (a few weeks after the first condo I was watching closed) has supposedly sold (according to the sign out front, and the fact that it's no longer on the MLS), but the information indicating how much it sold for hasn't been posted online yet. I'll update you when I find out.

Wednesday, December 14, 2005

Construction Hiring Dips In WA In November

With unemployment holding steady last month at 5.6%, the Seattle Times brings us the details of the employment numbers' relation to housing:

For the past year, the construction industry has been the main driver of economic growth in the state, accounting for a whopping 19.4 percent of all new jobs. Not so in November.

In what may be a sign of an impending cooling in the state's red-hot housing market, construction firms hired 400 new workers last month compared with 2,400 during November 2004 and notably less than the average 1,075 monthly gains of the past year.
Although some anonymous commenters on this blog believe that the claims of construction accounting for ~20% of recent new jobs are "bogus," that doesn't change the reality that construction has been a major driving force in Washington's economic recovery. And as such, I find it interesting and possibly meaningful that November saw such a relatively small number of new construction hires. Does this mean Washington has finally seen the peak of its housing market?
"It's hard to tell what's going to happen," said Rick Kaglic, chief economist at the Employment Security Department. "We'll need a few more months of data to know if the long awaited slowdown is upon us."

Homebuilders assure it's not.

"If homebuilders have one complaint, it's the backlog of work they're facing, not a decline in demand," said Sam Anderson, executive officer of the Master Builders Association of King and Snohomish Counties.
I'm going to reserve judgment until I start seeing more signs than just one month of unusual numbers. If we start seeing numbers like this persist for 6 months then I'll start to believe that we're seeing a turn around. As I'm fond of saying, only time will tell.

(Josh Goodman, Seattle Times, 12.14.2005)

Sims: King County RE Tax Revenue Down

I was reading through a story about the King County Council's 9-0 (4 absent) vote to increase county spending by $3.8 million on "pet causes" when I stumbled upon an interesting line:

Sims, though, said real estate tax revenue is down.
Considering all the stories I've been posting about government revenue going through the roof thanks to the housing boom/bubble, I find that a bit hard to believe. Either King County's real estate tax revenues are declining while Washington State and nearly every local government within it is experiencing increasing revenue, or Ron Sims is just plain wrong. Also worth mentioning is a story I posted back in October which states in reference to King County: "Now, after several years of depressed revenues, sales-tax, property-tax and real-estate excise-tax payments are up." If someone knows where I can access county budget records to uncover the answer, I'd love to hear.

In non-bubble related news, I found the following bits about Sims' reaction to the spending amusing:
He said it erodes the "fiscal discipline" shown by the county in reducing its general fund by $137 million over the past five years to deal with revenue shortfalls.
"A veto is pretty dramatic."

"I'm not interested in having warfare with the council," he said. "At the same time, I am not interested in having to make serious cuts in the budget because of our appetite" for spending.
So, to sum up; Ron Sims is against excessive spending, and he might even do something to stop it. Maybe.

(Neil Modie, Seattle P-I, 12.14.2005)

Friday, December 09, 2005

Housing Moving Further Out Of Reach

Ooooh, I can see the future. In a story tomorrow that has a very familiar theme, the Seattle P-I takes a look at the affordability of housing (both buying and renting) for lower income families in Seattle.

Last year, the housing affordability gap — the difference between what lower income workers can pay for homes and what typical homes cost — got even wider, according to the report, "Communities Count: Social and Health Indicators Across King County."

The rising cost of housing in Seattle threatens to reshape the city proper, forcing poorer families to outlying towns and ultimately threatening Seattle's economic diversity and vitality, said Stephen Norman, executive director of the King County Housing Authority.
That sounds an awful lot like the point I was making back in August:
So what does this all mean? If housing prices, and especially rent, keep going up, people working low-wage jobs will be faced with two choices: become homeless or move to a cheaper city.
But wait, there's more... Continuing from tomorrow's P-I article:
In the 1990s, Seattle stood out as one of only five major cities among 23 in which the home ownership rate fell, in a study by the Washington, D.C.-based Brookings Institution. The national ownership rate rose to 66 percent.

Seattle's low rate could create problems around the city, because a home is the main tool that lower- and middle-income families use to accumulate wealth, said Nicolas Retsinas, head of Harvard University's Joint Center on Housing Studies. "If those opportunities don't exist in cities, that is more incentive for them to go farther and farther out."
Are the people out there that are literally banking on continuing double-digit appreciation even stopping to consider what would have to happen for 15-20% gains to continue much longer? I believe that economic reality will eventually set in here in Seattle. Either housing costs will come back down out of orbit, or we'll lose our low-income workforce.

(Paul Nyhan, Seattle P-I, 12.10.2005)

Some Economist: Housing Driving NW Economy

Here's a report on the opinion of yet another "senior economist," this one from California.

Keitaro Matsuda, senior economist for Union Bank of California, issued his December 2005 Economic Update for the Pacific Northwest on Wednesday.
• While the largest number of new jobs has come from the trade and transportation sector, construction was the fastest-growing industry, up 8.1 percent in the state over the past year.

• Washington has been ranked ninth among the 50 states in terms of home-price appreciation in the third quarter, up 15.6 percent. Last year, Washington placed 21st.

"There is no doubt that the Pacific Northwest economy will maintain considerable momentum in 2006," Matsuda wrote. "How the region will ultimately fare next year is likely to depend, to a large extent, on the strength of its housing market."
Mr. Matsuda seems quite optimistic about the economic forecast of the Pacific Northwest, although even he admits that recent improvements are largely being driven by the housing market. If the housing market turns, there goes our "spectacular" job growth.

(C.R. Roberts, Tacoma News-Tribune, 12.08.2005)

Wednesday, December 07, 2005

Pierce, Thurston Target New Construction

Here's a pair of stories about local governments' plan to up fees and permit costs for new construction. In Thurston County it's "lot approval" while in Pierce County it's "traffic fees." Any way you cut it, it's more taxes. Says the Olympian about Thurston County:

And with $1.8 million in services the county can't afford to pay for in 2006, they’re eager to free up the $700,000 to spend on something else.
So, in spite of the fact that tax assessments are rising, and county revenue is bubbling over, they're still coming up $1.8 million short? Hmm. And in Tacoma:
The legislation, requested by the County Council and proposed by County Executive John Ladenburg, aims to reduce traffic congestion at key roads and intersections.

It would charge as much as $3,300 per new house – depending on the location – and raise about $189 million over 20 years to help widen roads and install traffic signals, among other improvements.
Because more people moving in apparently doesn't equal more people paying existing taxes that support roads and traffic improvements. We need more money for that.

(Jennifer Latson, The Olympian, 12.07.2005)
(Aaron Corvin, Tacoma News-Tribune, 12.07.2005)

Tuesday, December 06, 2005

South Sound Inventory Up, Prices Down

KOMO News and The Olympian must not have gotten November's numbers last night like everyone else. Well, they've got them in hand now, so here for your reading pleasure (or frustration) are a couple more takes on November's numbers, including a specific look at the South Sound, where prices were particularly stagnant:

The holiday season, colder weather and rising interest rates combined to cool South Sound's hot real estate market slightly in November, Realtors said.

Sales for the month were down 4 percent compared with last year and, for the second time this year, the median monthly sales price dropped from the month before.
As demand dropped with the temperatures, a positive result for potential buyers was the year's largest inventory of homes for sale last month. The inventory was 1,095 homes, up from 827 the same time last year.
People (realtors anyway) always say "they're not making any more land." Apparently in the South Sound, they are. I jest, but hey, if the realtors can oversimplify things, so can I.

(KOMO News, 12.06.2005)
(Jim Szymanski, The Olympian, 12.06.2005)

November: Home Prices Keep Rising — Sortof

November numbers were released today by the Northwest Multiple Listing Service. You can check out the raw numbers here in PDF format, or you've got your pick of four local papers and their commentary on what the numbers "mean":

Much like the movie "Groundhog Day," the latest news on local home sales may sound like a rerun of the previous months — no slowdown in the market despite fierce competition, rising prices and higher interest rates.

But the number of properties that buyers can choose from is down substantially from last year. These are not the conditions that foretell the bursting of a real-estate bubble.
Executive summary: Prices still 15% higher than a year ago, but stagnating since about August of this year, with combined sales of $349,950 in August, and $350,000 in November. I probably have just as much qualification to offer analysis of these numbers as any of the newspaper reporters writing these articles, which is to say "none at all." I guess we'll just see what happens.

(Elizabeth Rhodes, Seattle Times, 12.06.2005)
(Kristen Millares Bolt, Seattle P-I, 12.06.2005)
(Clayton Park, King County Journal, 12.06.2005)
(Barbara Clements, Tacoma News-Tribune, 12.05.2005)

Monday, December 05, 2005

King County Job Growth To Outpace Nation?

Business leaders seem optimistic about business growth prospects in the Puget Sound area, and as a result expect to see a "soft landing" in housing:

A national economist predicted Thursday that job growth in King County will continue to outpace the nation as a whole next year.

The forecast by Alison Lynn Reaser, chief economist for Bank of America's Investment Strategies Group, underscores the findings of a new survey of business executives from throughout the county who expressed optimism about the local economy in 2006.
Reaser said she expects a "soft landing" for the U.S. housing market in 2006 in the form of a slowdown in rising home prices from the breakneck pace of "double-digit" growth seen throughout the country, including the Puget Sound region, this year.
Certainly if the jobs keep coming, the worst case scenario for housing is likely a gradual slow-down to more sane levels of appreciation. Realistically though, who can say with any certainty what the job market will look like a year from now?

(Clayton Park, King County Journal, 12.02.2005)

Friday, December 02, 2005

"Bubble? The only answer right now is no."

At an "economic symposium" Wednesday, Washington's Employment Security Department chief economist Rick Kaglic explained his belief that the state economy is cruising along just dandily:

The local and national housing boom as well as The Boeing Co.'s recovery have finally kicked Washington's economy into high gear, according to the chief economist for the state's Employment Security Department.

Rick Kaglic told those gathered for an economic symposium Wednesday in Olympia that the state's economy "has been clicking on all cylinders" since last year.
I wonder what kind of cylinders "click." Maybe its a veiled reference to something not being quite right. Or maybe he's just mixing metaphors. Anyway, point taken—the state economy is doing well.
Although government and transportation hiring have done their part in the state's recovery, Kaglic named the construction trade and the housing boom as the real heroes in Washington's recovery.

While construction jobs represent a relatively modest 6 percent of all state jobs, they accounted for 20 percent of the payroll growth during the last year, he said.

"And the impact of the construction industry doesn't end with building homes," he said.

The booming housing market reverberates through the retail, insurance and – of course – real estate sectors as well.

"If you buy a home, you typically want to fill it with stuff," Kaglic said of the retail impact.

Kaglic linked the last four years of economic expansion to the refinancing of homes that pumped some $600 billion of equity into the national economy last year and the fact that "the retailers simply won't let us stop" spending.
So, Washington State's economy is in good shape, but a large portion of its improvement in the last few years has been a direct result of the real estate boom. 20% of new jobs directly attributable to housing, and who knows how many others due to increased retail sales thanks to the "housing ATM."
Kaglic and other housing experts at the symposium didn't think the Seattle-Tacoma area was experiencing a housing bubble that would pop any time soon.

In fact, Sam Anderson, executive officer of the Master Builders Association of King and Snohomish Counties, was blunt about the bubble.

"Are we in a housing bubble?" he asked. "The only answer right now is no."

Median housing prices – meaning half of all prices are higher, half lower – have climbed to the mid- and upper $300,000s in King and Snohomish counties and just under $250,000 in Pierce County. But Anderson didn't think the market would collapse.
So, if I'm understanding the logic here correctly, the state economy has housing (and low interest rates) to thank for a large part of its recovery, but we're not in a bubble, because state economists and homebuilders don't think we are. Mmm-kay.

(Barbara Clements, Tacoma News-Tribune, 12.01.2005)

Thursday, December 01, 2005

Snohomish County Pre-Spends Expected Revenue Gains

Here's another update for you on local municipalities spending the increased tax revenues from the real estate boom. This time Snohomish County reports in, with a stellar plan to pre-spend expected revenue gains from real estate excise taxes:

Snohomish County will begin identifying renovation projects at the Evergreen State Fairgrounds thanks to an expected increase in real-estate excise taxes collected from home sales.

The County Council unanimously has approved about $400,000 in the 2006 budget to begin improvements at the Monroe-area fairgrounds, which initially were constructed in the mid-1940s.
If you don't see anything wrong with this plan, then I would surmise that you might be a politician.

(Christopher Schwarzen, Seattle Times, 11.30.2005)

Tuesday, November 29, 2005

Excise Tax Battle Heats Up

The battle over proposed changes in the real estate excise tax is heating up, and depending on which side you listen to, the change would either drive prices up, or drive prices down.

The Washington Association of Realtors has launched a $1 million campaign aimed at squashing a proposed tax increase on real-estate sales.

"We are committed to doing whatever it takes to prevent any increase," said Steve Francks, the association's executive vice president. "I've never seen our members this mobilized."

The group has started running TV, radio and newspaper ads warning that the tax increase would cost homeowners thousands of dollars in "hard-earned equity" when they go to sell.

But in their fight, the Realtors face an unlikely foe: the typically anti-tax Building Industry Association of Washington (BIAW).

The homebuilders group, which — like the Realtors association — wields a lot of clout in Olympia, supports the increase because it would be used to replace so-called "impact fees" that local governments assess on new construction.
Homebuilders have long viewed impact fees as onerous and unfair.

Tom McCabe, the BIAW's executive vice president, said impact fees require new homeowners to pay for roads, parks and schools that everyone uses.

It makes more sense, he said, to spread that burden more widely by taxing all real-estate sales.
The trouble with listening to either of these groups is that while they are masquerading as "consumer interest" groups, they both clearly have only their own interests in mind. The realtors claim that replacing impact fees with excise taxes would drive up house prices, but if this were true, wouldn't that be good for them, since they would make higher commissions? On the radio yesterday I heard a BIAW spokesman claiming that the change would cause house prices to decrease, since expensive impact fees on new construction would go away. But if the builders aren't going to pocket at least some of that difference, why would they care?

Realtors want to "protect" sellers, builders want to "protect" buyers—they both claim to be interested in protecting people, but (pardon my cynicism) what they're really interested in is protecting themselves.

(Ralph Thomas, Seattle Times, 11.28.2005)

Monday, November 28, 2005

Seattle #10 Best Apartment Investment

Seattle is a good place to put your money if you want to invest in apartments, or at least so says the Center for Real Estate Studies:

The Seattle area has been ranked No. 10 on a list of the nation's top markets for apartment investing.

The Center for Real Estate Studies bases its ranking on forecasts for growth in rental rates and median sales prices.

In Seattle, rents are expected to increase 2.1 percent over the two-year period ending Sept. 30, 2007, according to the study. The median sales price per unit in the Seattle area during that period will be $88,500, the center said in a news release.
Increasing rents would mean lower supply and/or more demand. More demand seems plausible, if recent local population growth trends continue, but supply seems to be skyrocketing just as fast. Of course, 2.1 percent over a two-year time span is actually less than the average rate of inflation. Perhaps that was factored into the study, but it doesn't indicate it this article.

(Puget Sound Business Journal, 11.28.2005)

Sunday, November 27, 2005

Number Of Realtors Surges

While the median price of Seattle-area homes has skyrocketed and the number of active listings on the market has decreased, the number of realtors out there trying to sell them has surged in recent years:

The nation's sizzling housing market has attracted droves of home buyers, but it has also drawn many who are looking to get a piece of the action in another way -- by joining the growing ranks of real estate agents.

Consider this: as of Nov. 18, Washington state had a total of 40,680 licensed real estate agents and brokers, including 17,185 in King County.

That's a real estate agent or broker for every 105 King County residents -- counting both adults and kids.

Nationally, one in every 266 adults are real estate agents, the National Association of Realtors reports. The Chicago-based organization says it has more than 1.2 million members.
Okay, that's comparing apples to oranges, which is rather annoying, but still you can get the picture that Washington has way more real estate agents per capita than the rest of the country.
In Washington state, the total number of licensed real estate agents and brokers has increased by 7,839 so far this year, through the first three weeks of November -- an average net gain of more than 712 new agents a month, said Chris Anthony, a spokeswoman for the state Department of Licensing.

In 2004, the number of licensed real estate agents and brokers in Washington state grew by 8,438 -- an average increase of 703 a month.

In 2003, the number of licensed real estate agents and brokers in this state rose by 1,533 -- an average increase of only 128 a month.
8,000 new real estate agents per year. Does Washington State's housing market justify that?

(Clayton Park, King County Journal, 11.27.2005)

First-Time Buyers Come Up Short In Seattle

Thanks again to a faithful reader for pointing out an article that slipped under my radar during the holiday. The Seattle Times reports on the growing costs of housing in the Seattle area, and how many people are being priced out of the market:

Despite earning wages higher than the national average, Seattle-area buyers increasingly are being priced out of the single-family home market — one of the most expensive in the nation, according to just-released sales statistics.

The median price of a single-family home in the combined Seattle-Bellevue-Tacoma area was $325,000 in the third quarter, according to the National Association of Realtors. That's 50 percent higher than the national average.
In fact, the NAR's numbers reveal that Seattle-Bellevue-Tacoma combined is the most expensive metro area north of San Francisco and west of Washington, D.C.
Now that's a rather amusing way to draw the border. When you think about it though, what major cities really exist outside the area they just defined? Chicago is pretty much it. Of course that doesn't change the fact that it's still really flipping expensive to try to buy a house around here.
King County buyers earning the median wage now have just 85 percent of the income needed to buy the median priced house, Crellin said.

And because home prices are rising faster than wages, first-time King County buyers now have just 47 percent of the income to buy a starter house. Crellin defines that as a single-family home priced 15 percent under the median, or around $276,000.
This sounds pretty much like what I've been saying, actually.

(Elizabeth Rhodes, Seattle Times, 11.26.2005)

Tuesday, November 22, 2005

Land Sale Provides Seattle Times' Only Profit

It seems that if not for the real estate bubble, the Seattle Times would have continued their recent in-the-red streak:

The Seattle Times Co. has posted a $24 million one-time gain on its books from the June 2004 sale of 6 acres of South Lake Union real estate.
In January, Times Co. officials said their Seattle paper had lost $12 million in 2004. They cited that loss, and growing losses over the four previous years, for eliminating about 100 jobs, raising the single-copy price to 50 cents from 25 cents and cutting back distribution to outlying areas of the state.

For The Times Co., the one-time gain means its flagship paper, The Seattle Times, will show a profit in 2005.

"Technically, it will cause us to show a gain for 2005," company spokeswoman Jill Mackie said, "but that is the result of a one-time transaction and does not speak to the profitability of our operation." Mackie said that without the land sale, The Times would have posted a loss for the year.
Maybe they should get out of the newspaper business and form an REIT. Heh.

(Bill Richards, Seattle Times, 11.22.2005)

Monday, November 21, 2005

Detached Rental Proposal Considered

The city of Seattle is considering a proposal that could ever so slightly ease the financial pain that come with soaring housing costs by allowing detached rental apartments in single-family-zoned neighborhoods:

...detached rental apartments and backyard cottages have long been outlawed in Seattle's traditional single-family neighborhoods. Some have worried they'll cause parking problems, erode neighbors' privacy and eat up back yards.

They're currently only allowed in areas with multifamily zoning, such as New Holly, but Mayor Greg Nickels is working on a proposal to allow them in all southeast Seattle neighborhoods. There, residents concerned about affordable housing have embraced the idea.

It's a scaled-back version of a plan that was nixed by the Mayor's Office.
Of course, as with any change, there are those who are opposed in a vehement, dramatic fashion:
Wallingford resident Greg Hill modeled what would happen if everyone on his street built a detached rental unit in his or her back yard. What was once a collective reservoir of green open space became a crowded row of tenementlike buildings.

"It just becomes a ghetto — there's no open space, there's no gardens," Hill said. "There won't be any tomato growing going on in the city if this passes."
That would be too bad. I like home-grown tomatoes. On the other hand, there is clearly some potential benefit here for first-time homeowners:
Tom Smith, 38, who works in business development for community radio station KEXP, said it was a "huge struggle" to find a house he could afford within the city limits.

He felt lucky to get a small, 1950s-era home near Columbia City. But it could prove to be an even better deal if the city allows him to convert the two-story garage, which he currently uses for storage, into an apartment.

"I would be psyched," he said. "It's really tough to get a house in Seattle as a first-time home buyer, and having a detached (rental) would make it a much easier proposition."
Would the change really have a noticeable effect one way or the other? It seems doubtful, but that certainly won't stop people from getting emotional and upset on both sides of the issue.

(Jennifer Langston, Seattle P-I, 11.21.2005)

Friday, November 18, 2005

State Revenue Continues To Bubble

Here's the latest installment of "Government Revenue Bubble," courtesy of the Tacoma News-Tribune:

Washington's hot economy, still surging with a mighty assist from construction and real estate sales, will boost state income by more than $300 million, forecasters said Thursday.

But in the same breath, economists warned of a slowdown, and Gov. Christine Gregoire and key legislators cautioned against a spending spree in the upcoming legislative session.

"There's a lot of risk out there," said state budget director Victor Moore.

It's a tempting target: The new revenue update, reflecting the fourth quarterly revenue surge in a row, brings the state's reserves to more than $1.4 billion, roughly 5 percent of the state budget.

Chief economist ChangMook Sohn's new analysis for the state Revenue Forecast Council presumes a cooling of the red-hot housing market and consumer spending, and projects continuing high oil prices.

The housing bubble hasn't popped yet, but a cool-down probably is imminent, Sohn said. National housing starts dropped 5.6 percentage points last month, he noted.

"There are many signs that housing is peaking," he said. "We have been expecting that for a long time."

In Washington, the real estate and construction sector are responsible for half of the new $304.9 million windfall announced by the council. The state will collect another $100 million just from the tax on real estate transactions.
We'll see if they can resist the urge to sink the money into recurring expenses. I have to say I'm quite surprised and somewhat suspicious that the Governor-for-now "cautioned against a spending spree." Usually there's nothing the government enjoys more than spending our money (on programs that are for our own good, of course).

(David Ammons, Tacoma News-Tribune, 11.18.2005)

Crystal Ball Predicts Seattle Slowdown

No, seriously. That's right, a "national housing expert" is predicting that Seattle will see a slowdown in the housing market in the next few years. He saw it on his crystal ball, it seems.

The housing market in the greater Seattle area "will be heading downward" in the next two years, a national housing expert told a gathering of real estate agents and home builders in Bellevue on Thursday.

But the prediction isn't as bad as it sounds.

If you disregard 2005 and 2004 when the greater Seattle housing market "went nuts," the home sales forecast for this area next year would be one of the best on record, said Stanley Doubinis, chief economic forecaster for Maryland-based Crystal Ball Economics Inc.
Maybe it's just me, but I have a hard time taking someone seriously when they have the words "Crystal Ball" on their business card.
The escalation of home prices in King County "might drop back to single-digit increases" next year, "but retrenchment (in prices) is not likely," said Doubinis.
How can we be in a position to "drop back to single-digit increases" and not be in a bubble?
Doubinis said he expects the Seattle-area housing market to fare better next year than housing markets in many other parts of the country because of the Puget Sound region's strong employment growth, which is increasing four times faster than the national rate.

J. Lennox Scott, chairman and CEO of Bellevue-based John L. Scott Real Estate, said Doubinis' forecast pretty much matches his company's expectations for the coming year.

"We're also predicting a historically strong market next year" that will be only "slightly off the all-time best year (2005)" in terms of the number of homes sold, Scott said.
Sounds like someone who has something to sell, personally.

(Clayton Park, King County Journal, 11.18.2005)

Thursday, November 17, 2005

State Excise Tax Change Proposed

Realtors are gearing up for a fight in Washington State over a proposed change to real estate excise tax law:

The Washington Association of Realtors has launched a $1 million advertising campaign to warn home sellers of a proposed tax increase on the proceeds from their home sales.

A buyer of a new home could find the purchase price increased "by an average of $9,000," according to the campaign, although the ads don't specify the size of the home in the example used.

The media campaign began Wednesday, funded in part by a $750,000 grant from the National Association of Realtors. It is designed to build public opposition to a proposed change in the real estate excise tax, or REET. With advertisements running on local television and radio stations and in area newspapers, the effort is targeting a bill introduced in the last session of the state Legislature by Rep. Judy Clibborn, D-Mercer Island.
That's amusing. If the real danger were to property buyers of having to pay more, why exactly would the realtors care? It seems more likely to me that they're concerned that the actual sale price of homes might fall, as buyers would be unwilling to pay thousands more. Lower sale price = lower commission = realtors spending a million dollars to fight this. Which is not to say I support the change, it's just an observation.
Currently, the state real estate excise tax, paid by the seller at closing, is 1.28 percent of the final price of a property of any type, with counties and cities liable for meeting the requirements of the state's Growth Management Act able to tack on an addition one-half of a percent. In King County, that means an effective tax rate of 1.78 percent on every property transaction.

Under Clibborn's bill, backed by home builders and the Association of Washington Business, school districts would be permitted to assess an additional quarter percent and cities four-tenths of a percent in lieu of the impact fees currently assessed against new residential construction. It would be up to each jurisdiction to decide whether to assess the excise tax or the impact fees.
Like I said, the cost is paid by the seller. It's not necessarily the case that the buyer will be willing to just front it. So anyway, how does all this translate into real dollars?
For instance, new single-family residential construction in the fast growing Kent School District, be it a small rambler or a faux chateau, currently comes with a $4,050 impact fee that is divided among the School District, local municipalities and other taxing districts.
With the proposed increase in the REET, the builder would be off the hook for the up front impact fees. But every home seller, in the case of a $300,000 home, could wind up with a $7,290 tax bill.
I'm shedding a tear for the person selling a $300,000 home—worth just $225,000 two years ago—who has to pay an extra $3,240 in taxes.

(Morris Malakoff, King County Journal, 11.17.2005)

Gas Prices Linked To Housing Patterns?

Considering how much gasoline has surged in price in the last few years, it's no surprise that so many people are talking about it. But will rising gas costs really have an effect on where people choose to live? Are the outlying suburbs of the Seattle area—currently experiencing record growth—in for falling prices if the cost of gasoline continues to climb? A writer for the Seattle P-I ponders these and similar questions:

During the past year, the Consumer Price Index, the most popular measure of inflation, rose by 3.5 percent in the Puget Sound region, according to the Bureau of Labor Statistics. Gasoline and utility natural gas prices jumped 35.1 percent and 17.2 percent, catching area residents on the road and in their homes with higher prices.

That could have some interesting consequences for the region, from commuting patterns to the staffing of local businesses.
As steady double-digit home price increases push home buyers farther from city centers in search of affordable housing, the ability of Seattle's middle- to low-income workers to get here, and get by, is being compromised.
The article focuses primarily on inflation, pointing out that prices in the Seattle area are growing slightly slower than the rest of the nation. However, gas prices accounted for an unusually large portion of the total figure for inflation. Surely if gasoline cost $10 per gallon a large number of people would rethink the hour-long commute to work. At what point will enough people change their patterns for it to be noticeable though?

(Kristen Millares Bolt, Seattle P-I, 11.17.2005)

Wednesday, November 16, 2005

Jobs Plentiful In Snohomish County

Though I don't agree with the argument that the Seattle area is special and immune to future housing pain, I'm not the type to ignore evidence that supports such claims. Case in point, Snohomish County's hot and growing job market:

Snohomish County is on fire - at least in terms of job growth.

The county produced 16,200 jobs between October 2004 and October this year, an annual growth rate of 7.4 percent - tops in the state, according to the state Employment Security Department.

Fueled by rehiring at the Boeing Co. and the insatiable demand for new homes, the county's growth rate was more than double the state average of 2.9 percent and more than five times the national average of 1.4 percent.
Of course, with some portion of those new jobs being a result of the crazy housing market, arguing that the job growth definitely means bubble immunity would seem to be at least a bit circular.

(Mike Benbow, Everett Herald, 11.16.2005)

Tuesday, November 15, 2005

Deals On Fixers Or At Auction?

Parts two and three of King 5's housing report focus on creative ways of making your money stretch that don't include option-ARMs or other "creative" financing options. However, the reports aren't directed at people buying a house to live in, but rather they're written as how-to guides for real estate investing.

If you're handy with tools and don't mind working hard in your spare time, you might consider investing in a "fixer-upper" and making a little extra cash in a booming local housing market.

In part two of our "Red Hot Real Estate" series, we’re looking at the opportunities, challenges and pitfalls of this type of real estate investing.

There is certainly an opportunity to make money this way, especially when property values go up as we've seen them go up in the last year, 20 percent and more in some areas of western Washington.

But be careful. The experts say it may be a harder, riskier, more complicated business than you think.
I'd just like to say... wait for it... wait for it... Duh. Okay, moving on.
It's a sidewalk property auction featuring trustee sales of foreclosed real estate and it happens every Friday morning.

And at the end of the day, the highest bidder owns the home... as is.

The crowd at the auction is a mix of real estate regulars, like Dean Street, and newcomers, like Carl Thompson and Dante Hill, drawn by a hot market and the possibility of sweet deals.

"This is the American dream, to come down here and strike it rich," said Thompson.

Harlan Moore, of Key Foreclosures, agrees.

"It's the stock market," he said, "just like the 90's, everybody wants in. Property is the new Yahoo stock."
What an amusing comparison for someone happily investing in real estate to make. Yahoo stock price (adjusted) in February 1999: $38/share. December 1999: $108/share. Today: ~$38/share. Now that sounds like a piece of action I want in on.

In other news, King 5 News really needs to find a better copy editor. The original articles are littered with grammatical errors, typos, and missing words. They forgot to capitalize Washington, for goodness' sake.

(Allen Schauffler, King 5 News (part 3), 11.15.2005)

What Your Money Buys Around Here

I suppose a more accurate title would have been "What The Bank's Money Loaned To You At An Adjustable Rate Buys Around Here." That would have been a bit unwieldy though. So just how much can the overextended family buy in Seattle's bubble-rific market? That's the question King 5 News takes on in part one of a three-part real-estate series:

If you've tried to buy or sell a house in Western Washington in the last year you know that the real estate market has been crazy, superheated, with prices going up every month.

But what do you get for your money?

We took a look at what was listed one day recently in three Western Washington counties to see what was available in the half-million dollar range, at the median price for that county and the low end of the scale.

We started with an area that has some of the most expensive residential real estate in the country.

Hang on to your wallet, on Mercer Island, we found a smallish four bedroom, two-bath, 50-year-old home listing for $519,000.

It was the cheapest house for sale on the island [and it] needed some work.
That same half a million would buy you an 18-acre piece of the Cascade foothills far from the bright lights, in Carnation.

Or in the city, a 100-year-old South Seattle home with two bedrooms, and two baths and a lot about a 50th the size of that Carnation property.

Or you can buy into the upper end of a booming urban condo market.

In much of Snohomish County, your home-buying dollar will go much farther, where you can find something pretty nice for $500,000.
Because most people have $100,000 laying around for a down payment, and $2,400 a month to spend on a mortgage. Right.
The median

You'll have to be flexible even in the quarter million range. We found a cute, older home in Auburn for example, priced at $249,000, but it's just half a block from a busy, commercial street.

Another option: $240,000 buys a two-story, three-bedroom townhome in Bellevue. And you're bumping into small lots and very small homes in Seattle or more space, more choices, in the southern suburbs.

Outside the big cities, median price options look remarkably similar across three counties and three prices, $381,000 in King, $270,000 in Snohomish and $267,000 in Pierce County.

In Federal Way, the median home price will get you a backyard pool and three bedrooms just down the street from a saltwater view.

In Lakewood in Pierce County, the median buys three bedrooms, two baths and a home in need of a little updating. But its a tidy, 20-year-old home for a couple or small family.

The same description fits a solid home in Everett, or one we found between Mill Creek and Snohomish.
Yeah, those sound like pretty median houses. Which would be great if the median family making the median wage could actually afford it. Or if the median family worked out in the sticks in Federal Way or Snohomish. But this isn't the Seattle Traffic blog, so I'll keep further comments on that to myself.

(Allen Schauffler, King 5 News, 11.14.2005)

Monday, November 14, 2005

Seattle "Under-Condo'ed" - Not For Long

Clearly if you are able to read a local paper, you are aware of Seattle's amazing immunity to real estate woes past, present, and future. Logically then, Seattle would be a great place to build more condos, which historically are the most in danger of losing value in a falling market. Lucky for us, more condos is exactly what's in store:

"Seattle is a somewhat under-condo'ed city, I think. As a growing city, I think it's an indicator of maturity in an urban city like Seattle that we're now capable of supporting a number of condominium developments. And I think when you compare us to a lot of the other major cities around the country, we have a lot of room to grow in this area," says David Thyer, president, R.C. Hedreen Co.

Take a look at a city like Vancouver, B.C.

It’s very similar to Seattle in many ways, except downtown domiciles.

About 22,000 people live in downtown Seattle. In Vancouver, it's about 73,000.
If you want to talk Vancouver, B.C. comparisons, I think it's only fair to consider the thoughts of someone actually from Vancouver:
Downtown Vancouver appears to prosper, but in the complex world of city building, appearances can be deceiving. I am not for a moment questioning the prospering part — the whole world is scrambling to live and play on our downtown peninsula, with its paradisiacal combination of mountain and ocean vistas, parks and urbanity.

[Vancouver director of central area planning Larry] Beasley and his senior staff recently confirmed to me that in the nearly five years of the new century, development applications have been made for only 700,000 square feet of new office towers in downtown Vancouver.

In this same period since Jan. 1, 2001, they have approved 7 million square feet of new condos. Many of us wonder if a 10-to-1 ratio in favor of condos is in our city's best long-term interest. While all three of our municipal political parties are maintained by donations from downtown condo developers, even our politicians are getting worried about this extreme skew.
The office-development market in downtown Vancouver — for all intents and purposes — is dead, even while it is reviving strongly in Toronto, Calgary, Ottawa and, yes, Seattle. Your city has hung on to a large number of its banks and corporate head offices, while Vancouver never had them in the first place, or they have headed to the suburbs and Alberta in the face of a severe and mounting anti-business ethos from our governing, extreme-left "Coalition of Progressive Electors" municipal party.

Downtown Vancouver faces the dismal prospect of fewer and fewer sites having the proper size and location for office towers. This will fix our destiny as a shortsighted residential resort, not the diverse and lively mixture of living and work that is a real downtown.
Let's hear it for condos!

(Tim Robinson, King 5, 11.14.2005)
(Trevor Boddy, Seattle Times, 10.23.2005)

Saturday, November 12, 2005

Bubble Collapse Imminent: Seattle Still Immune

National economists are waking up to the reality of a housing bubble, stating in a report that a downturn in the housing market could mean a million lost jobs. But what about here in Seattle? The Seattle P-I adds their own reporting to the AP report:

Much of the nation has had a lovely real estate boom for the past five years, but the house party is almost over, and the cleanup won't be pretty.

That's the word from economists and investors who have watched housing prices march ever higher.

"The collapse of the housing bubble will throw the economy into a recession, and quite likely a severe recession," warned a July report by the Center for Economic and Policy Research.
Oh yes, it's been so lovely, hasn't it? Just so rosy and wonderful. Unless you're a first-time homebuyer trying to get into the market. Then it pretty much sucks. Too bad for you.
The dire warnings aren't region-specific — beyond hitting most places where home values have appreciated most. But many experts on the Seattle-area economy have suggested that the elements of a classic bubble — one in which prices could be expected to suddenly reverse directions — aren't apparent here.

Not that a sudden drag in the national economy wouldn't be felt here, perhaps at least flattening the 10 to 15 percent gains housing prices have shown annually in recent years.
Ah yes, it's my favorite news-reporting tactic: Referring to unnamed "experts" in order to back up the picture you're trying to paint. Don't worry, the worst that will happen is for prices to "flatten." The sky is definitely not and will definitely not be falling.
Others point to simple supply and demand. Bubbles have their own psychology — a neighbor tells you at a party that her house has tripled in value, and you feel like an idiot for renting — but supply and demand operates on logic, which has to kick in at some point.

Such factors could affect the Seattle market, though the region's heavily tech-influenced economy has continued to attract young, well-educated people to the region — keeping market pressure on the limited number of homes available.
And what about that loss of a million jobs? Will none of those be in Seattle? Of course not, the influx of young well-educated people is sure to continue forever! There's never been a better time to buy!
Another indicator of a bubble — unsold homes sitting on the market — also points down nationally. The ratio of inventories to sales has been rising rapidly in recent months and now stands at its highest level since 1996, according to Wachovia Corp.

That's another area where Seattle projects a different picture than the national numbers.

The supply of houses on the market in King and Snohomish counties in October declined by 10.7 percent and 2.7 percent, respectively, compared with October 2004. That drove the median price paid for a house up by 20 percent in the two counties, to $390,000 in King, and to $258,600 in Snohomish.
Maybe I'm just naïve, but isn't that how Boston or New York looked a year ago? Wouldn't that just mean that Seattle is lagging behind the bubble dynamics of the rest of the country, as opposed to not being in a bubble at all?

(Seattle P-I Staff and News Services, Seattle P-I, 11.12.2005)

Thursday, November 10, 2005

Poll: A Bubble In Seattle?

A reader suggested and created the following polls:

Do you think the greater Seattle area is in a bubble?

How will prices change in 2006 for the greater Seattle area?
I'd be interested to know what people are thinking.

Wednesday, November 09, 2005

Realtors See "Softer, But Still Bouyant" Market

How about one more take on those October figures? This time let's throw in a bit of anecdotal evidence from realtors while we're at it, courtesy of the Seattle Times.

Puget Sound-area home sales and prices remain strong, according to the latest statistics, but anecdotally, real-estate agents say the usual fall slowdown is well under way.

That may spell good news for buyers frazzled by the summer's superheated market.

"What we're seeing and feeling is that the market is still strong, but there's more balance than we've seen in prior months," said Chris Pauling, president of Prudential Northwest Realty Associates. "Buyers aren't selling their first-borns to get a house."

David Milot, co-owner of Re/Max Metro Realty, concurred. "The market is a little bit softer than it has been, but it's still buoyant," Milot said.
That's nice. "Softer." An excellent choice of words. It feels so... non-threatening. So perhaps there is a bit more weakening than the usual figures would show. However, could this just be a symptom of the usual fall slowdown? Only time will tell.
"We're also seeing more open houses and more price reductions," he said.

Besides the customary slowdown in advance of the holidays, two other factors may be affecting sales.

One is the uptick in mortgage rates. Last month the national average for a 30-year fixed-rate loan was 6.21 percent, according to HSH Associates, a mortgage-information provider. That's half a percentage point higher than the year's lowest rate, which was posted in February. That rate increase pushes a monthly house payment up $79 on a $250,000 mortgage. Seattle's current 30-year rate is 6.35 percent.

The other factor is the continuing high price of gas. Coupled with traffic congestion, it's causing buyers to think carefully about how far they're willing to drive. That keeps prices solid in close-in locations.
Trying to figure out just how much factors like these are affecting the market seems a bit like peering into a crystal ball, to me. Which is not to say that I don't expect reporters to do just that, however. I would still be reluctant myself to point to any of the evidence offered so far and say that we've hit the peak in Seattle and are finally starting on our way down.

(Elizabeth Rhodes, Seattle Times, 11.09.2005)

Another Take On October

It seems that the nature of October's numbers depends on who you ask. The Puget Sound Business Journal sees a slight weakening in the bubble's armor:

With the first three quarters of the year resulting in some of the hottest residential real estate trends ever, the housing market in Western Washington saw a slight shift toward buyers in October. But officials with the Northwest Multiple Listing Service said activity is still robust, prices are still increasing and sellers remain in control.

The number of houses on the market at the end of October was at its highest level all year, and the number of sales pending increased 6.85 percent, the first time the growth rate has fallen short of double digits in 2005.

Prices for closed sales in October still rose 20 percent or more in most of the listing service's coverage areas compared with a year ago, listing service officials said in a news release.

Brokers added 10,853 listings to inventory during October across Northwest's original 15-county market, compared to the year-ago total of 9,375 new listings. New listings in Okanogan and Whatcom counties, added to the listing service's territory in August, brought the 17-county figure up to 11,405, officials said.

The new listings meant buyers had a choice of 22,925 properties in 15 counties, about 3 percent less than a year ago. In the four-county Puget Sound region, inventory still lagged year-ago volumes in King County (down 16.3 percent) and Snohomish County (down 7.4 percent), while Pierce and Kitsap counties registered gains, according to the release.
So, more listings were added than a year ago, but total inventory was still down, and prices are still 20% higher than a year ago. Perhaps I'm missing something, but this doesn't quite smell like the slowdown I've been waiting for. Though the higher number of added listings is certainly a number to watch, I'm not predicting anything just yet.

(Puget Sound Business Journal, 11.07.2005)

Tuesday, November 08, 2005

Juggernaut Plows Onward In Thurston County

October sales data is in for Thurston County, and prices just continue to soar, posting a 34 percent year-on-year gain:

The October median price of just under $250,000 is the latest in a series of consecutive monthly record highs.

The $249,900 figure was 34 percent higher than last year's $186,000, and was almost $14,000 more than the median sales figure reported in September.

In September 2005, the median sales price for a home in Thurston County was $236,290.

"We are still seeing a strong market," Wilkins said.
Strong, yes. Sustainable? I would be inclined to think not.

(Rolf Boone, The Olympian, 11.08.2005)

Monday, November 07, 2005

Forbes: Seattle 8th Richest City

A reader sent in this link to a Forbes story about the "Richest" cities in the US. In Forbes' list of the 10 "richest" Seattle comes in at #8. However, I'm a bit suspicious of their methods though, since they list the Median Income of Seattle as $46,650, when the latest figures I've seen for King County list the median income at $55,000. Additionally, #2 on their list is Anchorage, Alaska, so I'm taking this one with a big grain of salt. Of course, don't forget that even if you take the "8th richest" to be true, the same magazine rates Seattle as the most over priced city in the country in spite of our "richness."

(Forbes, 10.27.2005)

Thursday, November 03, 2005

Cashing Out On The Bubble

If you own property right now that you bought before the latest surge in prices, is now the time to cash out? That's the question that this article tackles, starting with an example of a local couple who did just that.

For Joan and Mike Whitney of Snohomish, Wash., outside Seattle, moving wasn't in the cards until about a year ago, when talk of a housing bubble in the area began to make Mike nervous. "A bubble seems obvious when you read that speculators are buying one in four properties, and people are paying off their credit-card debt with home-equity loans," he says.
Well, those are signs of people doing stupid things with their money, anyway. If there is a critical mass of those people then that's when I think we'll see a bubble bursting.
Despite the talk of a bubble bursting, it's more likely that home prices will continue to head up, but at a slower pace. Economic fundamentals -- strong demand and a tight supply of housing -- continue to push prices higher. In fact, some areas that have experienced relatively slow appreciation, such as Kansas and Utah, are beginning to pick up steam, says Patrick Lawler, chief economist for the Office of Federal Housing Enterprise Oversight. Mortgage interest rates, which are still close to their 40-year lows, are contributing to the momentum.

That said, it could still be a good time to ponder a move, especially if you live in the Northeast, upper Midwest or along the West Coast -- the areas most vulnerable to a pop, or at least a fizzle. On average, home values appreciated nearly 15% nationwide from July 2004 to July 2005, and that can't last forever. Neither can the annual gains of up to 30% in some of the more torrid coastal markets, says Tom Kunz, president and chief executive officer of Century 21. Kunz believes gains of 5% to 8% a year are more realistic. David Lereah, chief economist for the National Association of Realtors, expects price increases for 2005 to average 11% for existing homes and 4% for new ones.
But remember, Seattle is special, so there's no need to worry your little head. Forget selling. There's never been a better time to buy!

(Pat Mertz Esswein & Dave Lindorff , Kiplinger's Personal Finance, 10.2005)

Apartment Complex Sale Prices Soaring

As has been pointed out on this blog in the past, it isn't just the personal residential real estate market that's in bubble territory in Seattle. Huge corporations have been buying and selling entire apartment complexes at record rates, resulting in (of course) dramatically increasing prices:

For anybody who's lost a bidding war for a house in Seattle, here's a small consolation: Some of the biggest real-estate magnates in the world are enduring the same experience as they try to buy into the region's hot housing market.

In what brokers are calling "a perfect storm" of economic circumstances, investors from Australia to Bellevue are pouring money into Seattle-area apartment complexes, breaking sales records and driving up prices because they see rents about to take off.

Some $2.1 billion worth of apartments have changed hands in the Seattle metro area this year, triple the level of two years ago, and the traditional year-end flurry of sales hasn't even happened.
Considering that rents have been increasing at a much slower pace than real estate prices, I just don't see where the return would be.

(Tom Boyer, Seattle Times, 11.03.2005)

2,000 Acre "Mini-Cities" Debated In Snohomish

Snohomish County is considering a proposal to allow supposedly "self-contained" communities. The Everett Herald reports on a public hearing last night:

The mini-cities - built as large housing and commercial developments - are called fully contained communities, and continue to suffer criticism for not being fully contained.

Such developments would require at least 2,000 acres of rural land in an area at least a mile from other urban areas under proposed county rules.

Half the land must be protected as a natural buffer, and one job must be provided for each house, condo or apartment.

"The biggest problem they always have is employment," said Grady Helseth, a developer from Snohomish.

Without jobs that pay enough to cover their mortgages, thousands of residents would be forced to commute to job centers in established cities.
And thousands of non-residents will commute to the "contained community" from cheaper neighborhoods to work the low-wage jobs. This is beginning to sound pretty much the same as a normal (uncontained?) community.
"There is no need for a new city in the rural area," said Kristin Kelly, spokeswoman for the anti-sprawl group Futurewise and the Pilchuck Audubon Society.

Kelly said officials are dreaming if they think people will live and work only within the development's confines.
I would have to agree. Also, what is to stop "investors" from purchasing homes in these fantasy communities and further driving the prices up above what the pre-planned jobs can support?

(Jeff Switzer, Everett Herald, 11.03.2005)

Wednesday, November 02, 2005

Bigger = Better?

When it comes to houses, it seems most people have the American sentiment of "bigger = better = I want" ingrained into their subconscious. The Seattle P-I takes a look at how this mentality is shaping the Seattle residential landscape:

During the past 10 years, about 2,400 single-family homes have been razed to make way for apartments, condos and larger homes. With strong demand for in-city housing and few vacant lots, older homes are now disappearing three times faster than they did a decade ago -- with 368 demolished last year.

Some neighborhood activists -- who support increasing density and building affordable housing in urban villages -- see little public benefit in replacing modest homes with expensive single-family behemoths.
Builders say the trend is fueled by simple economics and a healthy demand for larger homes inside Seattle. As traffic gets worse, some people want to return to the city, but not to a two-bedroom bungalow with tiny closets and bad wiring.

"If there wasn't a market for these houses, nobody would be building them," said Greg McGar, a contractor who paid $492,000 for a Ballard home last year, according to property records. He knocked it down and is building two four-bedroom homes on the oversized lot.
Of course there's a market right now, but will there be in 5 years? How likely are these homes to retain their value when a leveling off in real estate comes? I've always thought that one of the sacrifices of living in or near a big city was having a smaller home. I guess some people have enough money to have it both ways though. Either that or they have a "great" zero-down interest-only loan so they can "afford" it. I'd be curious to see if this trend continues when today's easier-than-breathing financing dries up.
Some neighbors are happy to see eyesores torn down and replaced with nicer homes that boost property values, said Jim Morse, a contractor who recently tore down a small rental on 28th Avenue Northwest and is building a three-story home there.

Others hate change, he said.

"You can give people hundred-dollar bills all day long, and some people aren't going to like it," he said.

"In reality, we're improving the neighborhood by getting rid of old, dilapidated housing."
Congratulations Jim Morse, you win the prize for stupidest analogy of the week!

(Jennifer Langston, Seattle P-I, 10.24.2005)

Tuesday, November 01, 2005

Don't Wait To Buy?

Writer Tom Kelly offers an opinion piece in the Everett Herald in which he takes a very matter-of-fact tone. To hear him tell it, there's no question, prices will not decrease in the Puget Sound:

Is there significant merit in waiting for the local housing market to cool before jumping in to buy a home? While that question may be on the minds of many consumers, the reality of a significant drop in home prices and a rise in inventory is rather remote.
The idea of "saving my money until home prices come down" has probably become a contradiction in terms - at least for the foreseeable future. Yes, housing is cyclical but it usually does not go backward for very long, if at all. The additional money you save now probably will not offset the appreciation (albeit slower than today's torrid pace) you would have accrued had you found a way to purchase a local home sooner rather than later.
If it were as certain as Mr. Kelly makes it sound, why would I even have created this blog? Either I'm a total idiot, or Mr. Kelly is making things sound a bit more definite than they are. Perhaps he's a realtor. *wink*

(Tom Kelly, Everett Herald, 10.23.2005)

Monday, October 31, 2005

Seattle Residents Fleeing To Ellensburg?

Okay, so that title was a bit overdramatic. But that's the job of a "reporter" right? Heh. Anyway, about 100 miles east of Seattle on I-90, the Ellensburg area is experiencing its own real estate boom, with new homes popping up at a record pace:

Building permits issued for new homes in Kittitas County outside city limits hit an all-time high of 286 in 2004, an increase over the 235 issued in 2003.

The 2004 record level was reached and exceeded on or about Oct. 19, according to Darryl Piercy, director of Kittitas County Community Development Services.

"It's definitely a continuation of the trend we've seen in the last few years," Piercy said. "This area is tremendously attractive if you live in the Puget Sound area where your faced with traffic congestion, a large population and crime."
I'm not familiar enough with real estate lingo to know whether 286 permits means 286 homes, or 286 projects (which could each be multi-home), so I'm not sure how big a number we're really talking about here, but it's apparently enough to get noticed frequently by the locals. Speaking of locals, it seems that quite a few of the new homes aren't going to be inhabited by them:
Piercy estimated 20 to 25 percent of new homes are second or vacation homes.

Bob Hansen, a 31-year veteran in real estate, said if the nation's economy doesn't change dramatically, the boom trend could continue through 2006, at least.
He said a Seattle resident looking to retire in the Kittitas Valley can sell their $300,000 to $400,000 home and come here, buy acreage in the country and build a new home. The demand is high for three- to five-acre rural lots.

"They want to get out of the mess over there," Hansen said. "It's the lifestyle they are after."
Or is it the relatively cheap land that they think will appreciate considerably in the coming years? When I hear "second or vacation home" lately, that tends to be translated in my head as "investment home." Good thing a "dramatic" change in the nation's economy is so unlikely. Right?

(Mike Johnston, Ellensburg Daily Record, 10.22.2005)

Follow-Up: Anecdotal Evidence

Way back in early September I made a post with the details of two properties in my neighborhood that had recently been put on the market.

The house in question has still not sold, and has now been languishing on the market for over 10 weeks. The price has been dropped from $350,000 to $319,950 (an 8.5% drop), but there have apparently still not been any takers. In my opinion they're still asking way too much in a painfully obvious attempt to take advantage of the peak, but I'm no expert (which should go without saying). I will keep you posted.

The condo I was watching closed on October 6th, for a total of $280,950—$6,000 (2%) over the asking price. The total length of time from listing to closing for the condo was approximately one month. Apparently this inspired the owner of the neighboring unit because within the past seven days the condo next door (parcel # 8035550060) has gone up for sale, with an asking price of $300,000. I'll keep an eye on this one as well.

Wednesday, October 19, 2005

Thurston County Continues Upward

Nothing shocking going on here, just more confirmation of local neighborhoods still on the rise. Specifically, this story is about Thurston County.

South Sound's booming housing market and recovering economy are contributing to record gains in Thurston County property values.

For the second year in a row, Thurston County set a record for gains in residential property tax assessments.

This year's overall 12 percent gain beat last year's 8 percent gain, which was a record dating back to at least 1999, according to Dennis Pulsipher, the county's chief deputy assessor. Such gains are reflected in 108,000 assessment notices scheduled to be mailed Wednesday to property tax payers.
Those lucky tax payers!

(Jim Szymanski, The Olympian, 10.18.2005)

Tuesday, October 18, 2005

Kitsap County Continues To Soar

You may recall last month that over on the other side of the Sound Kitsap County made King County's gains look small, and in the month of September they've done it again, with Silverdale posting a 36.7% year-on-year increase.

Doney said the demand for affordable housing continues to increase, but that demand has the perhaps unintended affect of driving prices up, pushing south the line between affordable neighborhoods and higher priced ones.

A year ago in September, of the 19 Kitsap County areas measured by the listing service, Silverdale was the ninth most expensive. This September it came in sixth.

In Central Kitsap 108 homes sold during September, up 21 from the same month a year ago. More than half of those were in East Central Kitsap, where the median price jumped from $189,000 to $249,975, a 32.3 percent increase.
Affordability has left the building.
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CK Home Prices Jump

October 16, 2005

While the usual suspects -- Bainbridge Island and North Kitsap -- continue to see housing price increase, Silverdale appears to gaining momentum.

"I think it comes down to affordable housing," said Cathy Doney, a broker in the Silverdale Reid Real Estate office.

The median home price in Silverdale was $312,250 in September, compared to $228,495 in the same month a year ago, according to figures released by the Northwest Multiple Listing Service.

The 36.7 percent median Silverdale home price increase matches the rise on Bainbridge Island, where the median home price jumped from $416,250 to $569,000.

Doney said the demand for affordable housing continues to increase, but that demand has the perhaps unintended affect of driving prices up, pushing south the line between affordable neighborhoods and higher priced ones.

A year ago in September, of the 19 Kitsap County areas measured by the listing service, Silverdale was the ninth most expensive. This September it came in sixth.

In Central Kitsap 108 homes sold during September, up 21 from the same month a year ago. More than half of those were in East Central Kitsap, where the median price jumped from $189,000 to $249,975, a 32.3 percent increase.

Apparently, the view of Seattle had an impact last month as well. Prices in the Manchester/Retsil area of South Kitsap jumped 48.5 percent, from $191,950 to $285,000.

The median price in East Bremerton went up 16.3 percent to $223,750, while West Bremerton at $157,500 saw a 6.2 percent jump.

Doney said the demand for affordable housing will eventually create higher home value increases in Bremerton, too.

In terms of total volume, buyers spent a total of about $164 million on 493 homes during September, and average of $333,114, a 10.3 percent rise in sales and a 22.2 percent increase in average price.

Kitsap County's 18.6 percent overall median home price increase $221,000 to $262,000 was 11th highest in the areas the Northwest Multiple Listing Service covers. Mason County median prices increased 20.9 percent from $145,000 to $175,250.

The median home price was $349,898 in King County, $245,000 in Pierce County and $285,000 in Jefferson County.

By Steven Gardner
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(Steven Gardner, Kitsap Sun (free sign-up req.), 10.16.2005)

Monday, October 17, 2005

Sunday Comics Bubble Humor

I failed to mention this before, but I'm actually on vacation right now, through October 30th. So expect posts here to be sporadic, but I will try to get in an update every few days. Although it doesn't have anything to do with Seattle specifically, I thought some of you might enjoy this comic I saw in the Sunday paper. Click it to view a larger version.
Opus - 10.16.2005
(Berkeley Breathed, Washington Post, 10.16.2005)

Friday, October 14, 2005

Schools Want A Piece Of RE Tax Revenues

Here's another update on the continuing focus on the "spend or save" question when it comes to property & real estate tax revenue windfalls. The Seattle Education Association chimes in on the side of "spend," requesting a big piece of the pie.

The Seattle Education Association (SEA), which represents the district's teachers, instructional aides and office staff, called on the City Council and Mayor Greg Nickels to set aside for the district $25 million a year for the next five years. The city expects to collect about $55 million more than analysts had predicted in sales, business and real-estate taxes by the end of next year.
While the city is not immediately acquiescing to the request, it seems the debate isn't whether to spend or save, but rather just how to spend.
Nickels' spokeswoman, Marianne Bichsel, said the city has sustained $120 million in budget cuts over the past three years, and that the higher-than-expected revenue should be used to restore funding to public safety, transportation and human services.
Great idea. Then we can go through the exact same budget cuts a few years from now when the real estate money tree shrivels up and dies.

(Sanjay Bhatt, Seattle Times, 10.13.2005)

Tuesday, October 11, 2005

Yet Another Real Estate Search Site

Fun! New! More ways to research how best to throw huge piles of money you don't really have into the local real estate market!

Finding the home of your dreams can take months of research. But thanks to new online tools -- including aerial maps that incorporate residential listings -- potential home buyers now have a wealth of information at their fingertips.

Today, Kirkland-based HouseValues Inc. will throw some of its muscle behind online aerial maps with a free service called HomePages that allows consumers in 120 cities to peruse house listings, previously sold homes, nearby parks and other information with a bird's-eye view. It joins a host of other online real estate mapping services -- including, Redfin and Trulia -- that are hoping to change the way people find local real estate information.
I'm beginning to think that Tom of Seattle Property News may have been onto something when he said "Is there a regional bubble in online real estate sites?"

(John Cook, Seattle P-I, 10.11.2005)

Monday, October 10, 2005

Fancy $500,000+ Beach Community

We're venturing a bit further outside the Seattle area than usual for this story, but I thought it was interesting enough to merit that. From the Gray's Harbor paper, The Daily World comes this story about an up-and-coming planned community of half-million to million-dollar homes in Pacific Beach:

On a cliff in the woods overlooking the Pacific, seven picturesque beach houses have emerged.

In the next few years, developer Casey Roloff plans to build 393 more, plus classy cafes, coffee shops, retail stores and parks — transforming this once-vacant mass of forest land a mile south of Pacific Beach into a town unlike any other on the West Coast.

Seabrook emphasizes sustainable development and the cozy community feel that is central to the new urbanist movement. Garages are placed behind homes in alleys, leaving more prominent space for walking paths and pedestrian-only streets. Lots are smaller — but community-owned areas, like parks, amphitheaters and benches — are designed to be accessible from every home. And instead of building gated mansions along the ocean, homes will be balanced with community space, trails and a pedestrian bridge.
It's quite a nice-sounding vision. One wonders if there is really that much demand for such a place in Pacific Beach. Can the local economy support such a grand vision?
About 325 families have placed refundable $5,000 deposits to get on the waiting list for Seabrook. Of those investors, Roloff estimates around 60 percent are from Washington. But people from Florida, Arizona, New York, Idaho and California have also reserved houses, which currently range from $475,000 to $700,000 — almost double the price at which the homes were being offered in June 2004. A few Harborites have even reserved.
Like 90 percent of the people considering buying into Seabrook, Alison Kruse, a Covington homemaker, is looking for a second home.
Yowza, that's a lot of "investors." How many people are buying with intent to actually live there for at least a portion of the year, and how many are hoping to sell in a few years? At any rate, it sounds like it would make a fun ghost town to visit 50 years from now. I kid, I kid.

(Kaitlin Manry, The Daily World, 10.08.2005)

Friday, October 07, 2005

County Council Candidates Talk Housing

County Council candidates in Snohomish are taking notice of the housing market insanity and (of course) attempting to gain votes based on their position on the matter.

The hot real estate market and its expensive "starter castles" are a key hurdle for the homeless, first-time home buyers and senior citizens, several Snohomish County Council candidates agreed Thursday at a forum on housing.

But should the county jump-start the condo market or roll back property taxes? Candidates diverged on what the next step should be to make housing more affordable in the county.
While I think it's a good thing for public officials to take notice of the continually growing problem, I don't really think that a county council is really in a position to reign in the madness. Also, I'm not so sure about that assertion regarding the homeless—are the only choices home ownership or going homeless?

I give them credit for keeping the issue in the public awareness, but I sense that it's all just a bunch of talk. How unlike politicians.

(Jeff Switzer, Everett Herald, 10.07.2005)

More Takes On September Figures

The usual suspects have chimed in this morning with their detailed stories (as well as graphs, figures, and photographs) reacting to the September sales figures.

Elizabeth Rhodes in the Times:

For the third straight month, there were more sales but fewer homes to choose from in King and Snohomish counties, compared with the same period a year ago, according to September sales numbers released yesterday by the Northwest Multiple Listing Service
Brad Wong in the P-I:
After losing one Seattle house in a bidding war, Rachel Schulenburg spent part of Thursday touring a three-bedroom brick Tudor in Magnolia, which is listed for $615,000.

Schulenburg, 32, arrived from Chicago on Oct. 1 after her husband had landed a job with a Seattle insurance company. "We're definitely excited," she said after visiting the house. "But the multiple-offer thing is frustrating. It's something we're not used to."

But new residents such as Schulenburg, and younger adults remaining and buying in the Seattle region, kept the real estate market strong in September, as the median sales price of a single-family house in King County grew to $381,250, the Northwest Multiple Listing Service reported Thursday.
And finally, Clayton Park with the King County Journal:
Home prices on the Eastside shot up to an all-time high in September, breaking the record set the previous month, the Northwest Multiple Listing Service reported Thursday.

In southeast King County, overall home prices dipped in September compared with August, but remained considerably higher than prices a year ago.
Each article has its own angle on the numbers, with Rhodes speculating on the disparity between faltering prices in Boston, D.C., and California, and Seattle's still-burning market, and both Wong and Park looking forward to increased activity next month brought on by the Microsoft class-action lawsuit payout. I could easily make each one into its own post, but since they're all centered around the September figures, that seemed redundant.

(Elizabeth Rhodes, Seattle Times, 10.07.2005)
(Brad Wong, Seattle P-I, 10.07.2005)
(Clayton Park, King County Journal, 10.07.2005)

Thursday, October 06, 2005

September Prices Mostly Flat Vs. August

Home sales figures for the month of September have been released for the Northwest, with Pierce County's combined (house & condo) median price posting a 19.5% gain year-on-year to $245,000, and King County's median price (house only) gaining 15.5% year-on-year to $381,250.

Interestingly, that is a 1% decrease from August 2005's $385,000 high for King County. However, it would seem that September 2004's $330,000 was a fairly flat as well, gaining only $1,000 from August 2004's $329,000. So, while we may be in a bubble, it would seem that it is not so strong that it can bubble its way right through the slow fall months. I'm sure some would argue that this is evidence that we're not in a bubble at all.

For the record: I still can't afford, with my above-median salary, the ~$2,200 monthly that the median house would cost me.

(Jack Keith, Tacoma News-Tribune, 10.06.2005)
(Brad Wong, Seattle P-I, 10.06.2005)

A Seattle Real Estate Investor's Story

The Wall Street Journal's Real Estate Journal takes an in-depth look at a local real estate investor in a multi-part, fourteen-month series:

Considering that I just found this (thanks to Ben Jones' The Housing Bubble 2), of course I haven't read it all. I do find the story told by the series of headlines to be interesting in itself, though. Quoting the final article in the series:
Lately, Mr. Jones has been chewing on a question that's plagued most U.S. homeowners and real-estate investors: Are we in a housing bubble? "We're in one in Seattle," he says. "We're not necessarily in one nationally."

A bubble commonly refers to markets where home prices have been driven up to unsustainable levels, often in part by aggressive investors.

For Mr. Jones's purposes, a "bubble" means a market in which sales prices are rising faster than rents. Since he started with only enough resources to buy single-family houses (versus multi-family properties), he says, the rents he can fetch don't yet cover his mortgage and related expenses. And, with housing prices rising, he can't currently afford to buy another house or building where rents don't outpace his carrying costs. So, for now, he's not looking in Seattle.
Meanwhile, he says, he will make money on renting his Seattle homes eventually. Apartment rents in Seattle are expected to increase 10% between March 2005 and the end of 2007, according to Seattle research firm Dupre + Scott. (The company doesn't track single-family rentals). If he succeeds in generating larger chunks of cash to finance deals in a cooler Seattle market or at a multi-family building that promises immediate cash flow, he'll buy there again.
There's probably a couple hours worth of reading in the entire series. Enjoy.

(Jane Hodges, Real Estate Journal, 10.05.2005)