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.

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)

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.

View/Hide the entire article
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

sgardner@kitsapsun.com
Hide the entire article

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

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.

(Berkeley Breathed, Washington Post, 10.16.2005)

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)

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 HousingMaps.com, 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)

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)

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)

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:

• A First-Time Landlord Launches His Investment
• A Landlord Struggles To Find Qualified Renters
• Landlord Finds a Renter After Some Concessions
• A Landlord Experiences His First Repair Problems
• Our Landlord Searches For His Next Investment
• Despite Market Research, Our Investor Loses Out
• Landlord Takes a Risk With His New Property
• Can Our Landlord Score 20 Properties By 2020?
• Couple Shares Passion for Investing
• Landlord Has No Regrets After Year of Investing

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)

$400,000+ Homes Selling Fast In Olympia

Olympia is feeling the heat of the "real estate boom" in the form of more and more home prices jumping above the $400,000 mark.

Sales of South Sound's most expensive homes are growing faster than any other price range, statistics from Olympic Multiple Listing Service show.

Through September, there were 109 sales of homes worth at least $500,000 compared with 39 last year, a gain of 179 percent. Last month alone, the sales of homes worth at least $400,000 were up 126 percent, according to the listing service.

It's not that a horde of new millionaires has shown up to buy South Sound homes, said Dennis Adams, broker for Adams Real Estate Company.

Rather, high demand for South Sound homes has pushed the value of many homes higher than $500,000 in the past year, he said.

The median home sales price for the area is $238,000, which itself seems high for the area, but where are all the buyers of the $400,000 and $500,000 homes coming from? Who has $2,500 to $2,800 a month to spend on a home in Olympia? Are there really that many $80,000-$100,000 jobs down there? Hmm.

(Jim Szymanski, The Olympian, 10.06.2005)

Downtown Seattle Office Rents On The Rise

I have made it clear that I personally believe that real estate in the Seattle area is overvalued. However, I hope that I have also made it clear that the purpose of this blog isn't to skew the facts or present "my side" of the story, but rather to provide a resource for those seeking general information on the subject. Is there or isn't there a housing bubble? Only time will tell of course, but in the mean time I hope to provide stories from both sides of the issue, so everyone can decide for themselves what they should do with respect to housing and real estate.

In that spirit, I would like to highlight a comment made on yesterday's post by Dustin of Seattle's Rain City Real Estate Guide.

Since you're discussing the "business climate" of Seattle, I thought I would balance the discussion with this article:

Seattle buildings filling up; some rents on the rise

I think it speaks to the business climate in Seattle much more clearly than one company's experience.

I agree that one business moving out of town is not indicative of an entire "climate." I posted the story merely because it related to my earlier posts. I appreciate Dustin drawing my attention to this story, as it passed under my radar. I'll have to upgrade my radar. Here's a quote from the article:

Expanding companies have gobbled up more than a million square feet, the equivalent of a typical downtown office tower, according to a report from real-estate brokerage Cushman & Wakefield.
...
Top-tier class-A buildings such as Two Union Square and Bank of America Tower are getting so full that landlords have raised rates by $2 to $5 a square foot, said Wende Sauvage, a Cushman & Wakefield associate specializing in downtown Seattle.

While it's the first time in years that the words "rent increase" have been uttered in downtown Seattle office buildings, rents are more than $10 below the highs of 2000 and well below the $35 a square foot developers say they need to start the next wave of office buildings. The average class-A space rented for $26.96 a square foot in the third quarter, Cushman & Wakefield said.

That sounds like a local economy that's in pretty good shape, which is definitely necessary for protection against "price corrections" in real estate. Does this mean Seattle is not in a bubble, or that we are safe from the bursting effects even if we are in a bubble? I certainly don't know the answer to that question, and I don't think anyone truly can. As I said, only time will tell. But that doesn't mean it isn't fun to speculate in the here and now. *smirk*

(Tom Boyer, Seattle Times, 09.29.2005)

Quickie Follow-Ups

Just a couple of short follow-ups on previous posts. For starters, recall previous discussions about Seattle's affordability as it relates to the business climate, as well as the speculation about what would cause a high-tech exodus. Today we find at least one example of a high-tech company deciding that Seattle just isn't worth it:

GiftCertificates.com is closing its Seattle headquarters and moving to Omaha, Neb.

The closure, which is expected to occur by the end of the year, will help the seller of online gift certificates cut annual costs by about $1 million.
...
Omaha certainly is cheaper than Seattle, with a median home price there of $137,300. That compares with a median price of $385,000 in King County. With cheaper housing, GiftCerficates.com can attract candidates at lower salaries, Barefield said.

Also, add this one to the various discussions about whether local governments will spend or save the increased revenue that the real estate boom has brought. With the election for King County Commissioner coming up in November, current Commissioner Ron Sims is posturing as a fiscal conservative, encouraging saving increased revenue rather than spending it. No doubt an attempt to win back some votes he likely lost with his abhorrent handling of the elections department.

Positioning himself as a fiscal conservative while running for re-election in November, Sims proposed an ordinance yesterday that would put a priority on saving over spending.
...
Now, after several years of depressed revenues, sales-tax, property-tax and real-estate excise-tax payments are up.

At the very least it's a clever campaign move.

(John Cook, Seattle P-I, 10.05.2005)
(Keith Ervin, Seattle Times, 10.05.2005)

P-I Editorial Board Makes A Funny

There's not much to this short editorial in today's Seattle P-I that follows up on last Friday's "Seattle not in a bubble" story. It's nothing though if not good for a short laugh:

A Post-Intelligencer headline a few days ago reinforces a common narrative: "Seattle may escape housing bubble." The cost of a home may be a problem for much of the country, but not here. We're special. We don't need to worry.
...
But there's one scenario that ought to be considered: What if it's the Easy Credit Bubble that just popped? Will Seattle escape that, too?
...
Gross says the economy will weaken when the "house ATM starts running out of fresh new $25,000-$50,000-$100,000 home equity loan dollar bills."

That's why we will escape the bubble here in Seattle. We've been using the decade-long housing boom to build individual equity, instead of cashing out or borrowing to the hilt. Right?

Yes, I am so sure that for some unexplainable reason, Seattle residents are much more fiscally responsible than people everywhere else in the country. Few if any of them have taken equity out of their homes. Right.

(P-I Editorial Board, Seattle P-I, 10.05.2005)

What Does A Million Buy?

The King County Journal takes a look in a pair of stories today at the arbitrary big round number $1,000,000 and how much house it buys in the Seattle area these days.

County records show a little over 4,600 homes in King County with an assessed value of at least $1 million. That's better than one out of every 100 homes in the county.

And as anyone who has shopped for a home recently can tell you, the assessed value of a home is often much lower than the price you'd pay to actually buy it.

There are currently 926 homes and condominiums on the market with asking prices of $1 million or more in King County, said Cheri Brennan, a spokeswoman for the Northwest Multiple Listing Service.

I could be wrong, but I don't think that one out of every 100 people in King county are millionaires. But thanks to creative financing, you can "afford" a million-dollar-home on a barely over average salary!

But when it comes to shopping for a home, a million bucks won't buy anything close to what it used to, particularly on the Eastside and in Seattle.

Case in point: A Mercer Island home on the 4000 block of 85th Avenue Southeast sold in May for $1.15 million by a seller who purchased it 12 months earlier for only $435,000, county assessor's office records show.

That same home, which was renovated last year before being put back on the market, sold in 1997 for $215,000, according to county records.

Even with the recent improvements, that home, which has four bedrooms, 2½ baths and sits on a quarter-acre lot, would fall short of most people's definition of a mansion.

No wonder this market has so many people drooling on themselves when they think about buying and selling real estate. But remember, Seattle is not in a bubble. Nope.

(Clayton Park, King County Journal, #2, 10.03.2005)