King County Appreciation "Middling"

More evidence that King County is nearing the top of its market comes this weekend from a report that places King County's appreciation in the bottom third of 15 counties across Western Washington.

Fueled by bidding wars and a shortage of houses for sale, King County's single-family home prices shot up 15.43 percent last year, better than 1 percent a month.

With prices climbing so fast and so furiously, the county's homeowners can be forgiven if they assume they're leading the appreciation parade.

But they should think again.

While King County is indisputably Western Washington's economic driver, its home appreciation was only middling last year compared with surrounding counties.

Leading the pack was Skagit County, where single-family homes appreciated 26.93 percent, followed by Mason County at 24.55 percent and Thurston County at 23.31 percent. Granted, the base prices were lower in the counties that appreciated more, but for buyers there, that meant even greater sticker shock than King County buyers experienced.

Of 15 mostly Western Washington counties, King County ranked in the bottom third, according to the Northwest Multiple Listing Service, which recently released its annual analysis of home-sales data.

As buyers are priced out of King County, they're just shifting into Snohomish, Pierce, and even all the way up to Skagit County, where many homes have climbed up into the $400,000 to $600,000 range.

But it's not deterring some buyers, particularly those from outside the county.

"They're willing to pay a high price because they're able to afford more here than where they came from," Reichert said. "We know there are a lot of people who live here and commute to Everett or even to Seattle. And for a lot of people, this area is desirable because it's a rural, small-town atmosphere with strong schools."

It seems that home "ownership" is so ingrained in some people that they're willing to do whatever it takes to avoid renting. I wonder what it is going to take to knock some sense back into these people.

(Elizabeth Rhodes, Seattle Times, 01.28.2006)

Bainbridge Realtor Predicts "Even Sharper Rise"

As if to offset the words of a local economist in a separate story by the same reporter, here come the predictions of a realtor on what 2006 holds for Bainbridge Island real estate:

While the national housing market is showing signs of slowing down after a fast-paced year, the Bainbridge market is still picking up speed.

"I expect the market to be strong in '06," said Lois Boubong, a realtor at Prudential's Winslow office, who recently completed an analysis of the island's housing market. "No bubble is going to burst anytime soon."

The average housing price on the island rose 14 percent last year, with the median price increasing by 22 percent, Boubong reported.

Homeowners and buyers can expect more of the same this year – or an even sharper rise. It's good news for home sellers, but could make for grim house hunting, especially for renters and middle- and lower-income buyers.

"You can never predict the future, but if the economy continues to stay strong – and we think it will – we'll continue to see a rise in prices," Boubong said.

Because realtors are definitely unbiased market observers. You really have to love how many stories out there quote these guys as if their word is gospel. But then again, who else is really going to have a good feel for the market if not realtors? Realtors and economists are about the only "authorities" that are really available out there on the topic, and they each have their own slant they want to put on things. The trick is in trying to read between the lines, I suppose.

(Tristan Baurick, Bainbridge Island Review, 01.28.2006)

Excess Climbs High In Bellevue

Forget $200k for 500ft². Coming in 2008 to downtown Bellevue: $400k for 700ft² (that's $571/ft² for you math whizzes out there).

A longtime cornerstone of downtown Bellevue, the old Puget Sound Energy headquarters, is coming down this week to make way for twin condominium towers the developer anticipates will be one of the region's most energy efficient new residential projects.

Called Bellevue Towers, the project at the corner of 106th Avenue Northeast and Northeast Fourth Street, will feature 565 condominiums atop retail shops, a restaurant and parking. The 42- and 43-story towers are to be completed in the fall 2008. Condo prices are projected to range from $400,000 to $7 million for units 700 to more than 6,000 square feet.

Bellevue Towers is one in more than a dozen new residential projects turning downtown Bellevue from a shopping and business core into a 24-hour live-work environment. That transformation is one reason Bellevue Towers' developer, Gerding/Edlen Development of Portland, was attracted to the city, spokeswoman Margo Spellman said.

We'll see if the city still just as attractive for this kind of excess in 2008.

Gerding/Edlen principal Scott Eaton said he hopes Bellevue Towers will appeal to buyers interested in architecture and sustainability.

"We're absolutely passionate about the design of this project," Eaton said. "Inside and out, this is going to be a project appreciated by people who are interested in architecture and who care immensely about design."

...and who have far more money than sense.

(Elizabeth Rhodes, Seattle Times, 01.28.2006)

Northwest Economist: "Slow Deflation" Coming

Tom Cox, a "prominent Northwest economist" and host of the PBS program "Serious Money," gives the Northwest a "mostly sunny" economic forecast, but with a notable exception regarding housing:

The Northwest will continue to see an influx of people, particularly from California, seeking the region's relatively well-paid jobs.

But don't expect a steady flow of new residents to continue the sound's fast rise in home prices, Cox advised.

"The bubble's not going to burst," he said. "But we're going to have a slow deflation."

While the future of the region's economy looks rosy, Cox stressed that the Northwest is not immune to national trends.

He said "consumers are tapped out" by credit card debt, second mortgages and other overspending habits.

"There were more bankruptcies than college degrees over the last few years," he said. "Credit's stretched tighter than Joan River's neck. I think the day of reckoning is upon us."

It is nice to hear that someone out there actually sees something other than champagne and roses in the future of housing. I guess the realtors didn't pay this guy enough money *wink*.

(Tristan Baurick, Bainbridge Island Review, 01.28.2006)

State RE Spending Proposed

An answer is shaping up to the question of what is going to happen to all the extra revenue that the state has been raking in thanks to the real estate boom/bubble. If Representative Larry Springer has his way, a big chunk of the (presumably) continuing flow of cash from real estate taxes will be used to fund housing programs.

The hot housing market has been very, very good to state coffers, contributing largely through real estate taxes to a $1.45 billion surplus.

So, a few Democrats figure, it's time to share some of the benefits with those less likely to be enjoying the boom: those needing affordable housing, including farm workers.

House Bill 2418 would spend $25 million each year for the next four years from collections of the real estate excise tax. In the first year, about $8 million would be set aside for an on-farm housing loan program and rental vouchers for migrant and seasonal workers. That sum could change through amendments.

The rest of the money would be set aside for programs ranging from housing for those with developmental disabilities and victims of domestic violence.

It is only a matter of time before all the excess funding being brought in by real estate is spent away by the politicians. And of course when/if real estate slows back down you know they will be complaining about a budget deficit.

(Leah Beth Ward, Yakima Herald-Republic, 01.27.2006)

Developers Fight Tall Condo Tax

Roughly two weeks ago, the city of Seattle released news of a plan to Tax condos for "Affordable Housing". Today news breaks of the developers firing back:

Downtown Seattle condominium developers punched holes Wednesday in a City Council-sponsored study suggesting that they could pay more for affordable housing and still reap big profits from taller buildings.

The developers said the study undervalued land and construction costs by millions of dollars and assumed that developers could get more favorable financing arrangements, which together radically overstated their profits.

The study compared proposals to charge some developers more for affordable housing and require costlier "green" buildings, in exchange for allowing them to build taller skyscrapers in parts of downtown and the Denny Triangle.

When more realistic numbers are used, condo developers said, the annual return they could expect under some proposed changes drops to 15 percent or lower, not the 30 percent to 40 percent claimed previously.

Of course, given that they're obviously going to be opposed to anything that trims their profit margins even in the slightest, take their figures with a grain of salt. Much like the whole excise tax battle, both sides have an ax to grind, and the truth is somewhere in between.

(Jennifer Langston, Seattle P-I, 01.26.2006)

Good News / Bad News For Seattle Condos

More news on downtown Seattle condos comes today via the Seattle P-I, and it's a good news / bad news sort of thing.

All signs point to go in the completion of downtown Seattle's recovery from the last economic downturn — but if developers aren't careful, they could overbuild and be left in the lurch.

Builders also should be careful not to dogpile too much on the luxury market, which has been the focus of a spate of condominiums proposed in downtown, with nearly 20 buildings in the pipeline.
...
"Affordability has basically nose-dived," said Hessam Nadji, a senior vice president and chief marketing officer of Marcus & Millichap Real Estate Investment Brokerage Co. "And that is going to be a hindrance, limiting growth, because it will prevent companies from moving here."
...
"Some of these prices are pretty hefty," said Kate Joncas, Downtown Seattle Association president, referring to local condo market prices. "Who are these people?"

Market analysts say the answer is twofold: baby boomers, who are becoming empty-nesters and jettisoning their suburban homes; and their children — members of the "echo boomer" generation born between 1979 and 1995 — some of whom are fattening their down payment with their parents' wealth.

That question (who are these people) has been on mind a lot lately, too, with regard to the overall housing craziness around here lately. I'm a pretty reasonable guy that makes an above-average salary, and who is smart with money. Why is it then that there's no way I can afford a house, or even a condo really? Something just doesn't add up.

(Kristen Millares Bolt, Seattle P-I, 01.25.2006)

Stale Listings Increasingly Cancelled/Relisted?

An anonymous reader sent me the following email:

I have to stay anonymous with this. I just got an e-mail from an appraiser that sends in good information to me from time to time. It appears that agents are doing this old trick to manipulate exposure for their listings that are languishing. This means that listing numbers are not accurate. Ouch.

On the NWMLS this is a main page message to Realtors (here is the pasted response):

Attention:

Once again, NWMLS is seeing an increase in the practice of cancelling and relisting property. In most circumstances, the practice is a violation of NWMLS Rules. Rule violations of this nature are easy to identify, and NWMLS will initiate disciplinary proceedings against agents and brokers who cancel and relist properties, except in accordance with the following guidelines:

• Agents do not have the ability to cancel and relist property without the aid of their broker or the broker’s designated staff.
• You may never cancel and relist a property without a new listing agreement and new listing input sheets fully signed and initialed by the parties.
• You may not cancel and relist a property, even with a new listing agreement and new listing input sheets, unless there is a material change to the listing (e.g., a significant change in the price of the property, a remodel, a change in zoning, or a change in ownership).
• You may not cancel and relist a property in order to make it appear as a new listing when it is not or to make changes to the property information contained in the listing. For example, it is a rule violation to input a new listing with an insignificant price change, even if the seller executes a new listing agreement.
• In almost all cases, changes to a listing should be made on either Form 18, Amendment to Exclusive Sale and Listing Agreement (price changes, extension of listing) or Form 19, Status Change Input Sheet (changes in status, changes to property information contained in the listing, changes to marketing remarks, etc.).

If it is true that there has been "an increase in the practice of cancelling and relisting property," might that be an early sign of a turning in the NW market? What are your thoughts? Has anyone else seen this posting or any evidence of an increase in this practice?

Seattle Not Historically Immune To Price Drops

Here's a blast from the past, courtesy of Tim from Snohomish Co. Real Estate. Source: Seattle Times. Dateline: January 10, 1991. Headline: Falling Home Prices Hit Eastside Hardest:

Home prices on the Eastside have slid 12 percent since last summer and are expected to fall that much more before heading back up.

The drop from Bothell to Coal Creek has been more severe than elsewhere in the Puget Sound region. The phenomenon that caused the slump was the same force behind the area's boom of 1988-89: new-home construction.

When home sales dropped regionally last spring, builders were forced to cut prices faster and farther than many homeowners selling existing homes. Many homeowners can wait - or choose not to sell in a slow market - while builders must sell to pay off construction loans. Interest on those loans totals $2,000 to $3,000 a month per home.

Some people seem to think that home prices can't/won't fall around here, and that they never have. Well, the second part definitely isn't true. Just thought that should be pointed out.

(Michele Matassa Flores, Seattle Times, 01.10.1991)
Registration required, or use this trick.

Rents Still Rising In Seattle

Rising housing costs have been steadily leading to higher rents in the Seattle area:

After enjoying years of discounts, Seattle-area renters should brace themselves for the thought of opening their wallets a little wider when they see their landlords in 2006.

In a trade-off to a rebounding regional economy, apartment rents are expected to rise as much as 5 percent because of more jobs, more job seekers and a limited supply of rental units.

In its 2006 annual report, Marcus & Millichap outlined those trends and said the average amount a tenant will pay this year will be $813 per month.

Asking rent — or the amount a landlord ideally wants — is expected to climb 2.9 percent to $846 per month. The real estate investment brokerage company defines the Seattle area as King, Snohomish and Pierce counties.

This is a topic that has been touched on many times here already, and this article doesn't really offer any new insight into the whole thing, but it did bring up a thought I've been pondering in the last few days.

Last year, about 3,000 rental units were converted into condominiums, according to Marcus & Millichap.

While new rental units are expected to be ready late this year, experts said there was little new construction or apartment planning during the 2001 to 2003 recession.

That is contributing to the pinch.

So, while we're just now experiencing the effects of low levels of building from '01 to '03, then if the market does slow back down again in the next few years, the building boom of the last few years will turn into a huge excess supply in around 2010 or so, leading to not only reductions in home sale prices, but also some serious discounts on rents. Good news for renters, bad news for homeowners and landlords—if it happens.

(Brad Wong & Angela Galloway, Seattle P-I, 01.20.2006)

Venture Capital Pours Into Real Estate Tech

Remember the late 90's? Remember all the money that was being thrown around at virtually anyone who could use a computer and form a complete sentence? Well the 90's are over. Now you have to do more than form a complete sentence and use a computer to get millions of dollars in funding for your wild idea. Now you have to relate your idea to real estate.

Those days have returned for at least one fast-growing Seattle Internet company. Zillow.com, the highly secretive online real estate startup that was started by former Expedia executives, recently pulled in $26 million in venture capital financing, according to my story. I discovered the financing -- one of the largest in a Seattle Internet company in the past year -- in a filing with the state. Last October, Zillow announced that it raised money from Benchmark Capital and Technology Crossover Ventures. But at the time, it didn't say how much.

Now, we know. Total financing in the year-old company, which at this time last year was a germ of an idea, stands at $32 million. The Wall Street Journal, which featured Zillow.com in a story late last week, also cited that figure. So did BusinessWeek.

That's a pretty big war chest for a company that won't say what it is doing.

Maybe if I had a more positive attitude, I could turn my tech knowledge into millions of dollars in funding for a real estate website. Or instead I could just keep posting on this blog about how ridiculous things have gotten lately. I think I'll do that.

(John Cook, Seattle P-I Blog, 01.18.2006)

For Sale: Mercer Island Home - $40 Million

Here's one just for laughs. Have a look at the real estate market from the top. Way up at the top—$40,000,000 on Mercer Island:

It's the ultimate trophy property: a five-bedroom, Mediterranean-style lakefront home on Mercer Island where your neighbors include Paul Allen and Mike Holmgren.

Asking price: $40 million. Time on market: 15 months and counting.
...
So who are these people, why aren't they in a rush to sell — and what do their mid-eight-figure pads look like? We went on a cross-country tour of homes that have been on the market for close to a year or more and found sellers such as a former radio-station owner, a retired Seattle-area couple and plenty of people who made their money in the real-estate market. Our visits let us into a private art wing with steel doors that drop from the ceiling, a 70-foot saltwater swimming pool and a sweeping vista over Michael Eisner's Aspen-area house way, waaaaay below.

We also found prices that didn't seem to compute.

At $40 million, for example, Chuck and Karen Lytle's home on Mercer Island is priced more than five times the high sales price on that island.

The Lytles put their home on the market after a Saudi sheik, a friend of their lighting designer, toured the property in 2004 and expressed interest in buying it. He never did, but more than a dozen people have since viewed the home on Lake Washington, said listing agent Wendy Lister.

So far, the semiretired Lytles haven't had an offer. The asking price could be one stumbling block. The home is on the water, but doesn't have the great views of downtown Seattle that can be seen from homes at higher elevations on the island. Local brokers say $32 million is a fair opening offer.

Talk about trying to make the most out of the bubble. Zowie. They're trying to bump their asking price by a dollar amount that's more than 99% of houses in Seattle even cost. Hey, if they find some sucker out there though, more power to them, I suppose. Whatever.

(Amir Efrati, Wall Street Journal via King County Journal, 01.17.2006)

"Affordable Housing" Funded By Bubble

Sorry, I've been a bit behind lately. I'm changing jobs in two weeks, so I've been busy at work trying to finish my projects and such. Let's start off my catch-up with an article from the Spokane Spokesman-Review that takes a look at state finances and low-income housing:

State analysts estimate that more than half of Washington's $1.4 billion budget surplus stems from real estate transactions. Now a bill in the Legislature would use some of that money to build housing for low-income residents.

"This massive increase in values has really highlighted the affordable housing crisis," said Rep. Timm Ormsby, D-Spokane, a co-sponsor of the bill. "I think it's our responsibility to try to eliminate some of the accompanying pressure that goes along with it."

The bill would pay for $100 million worth of low-income housing projects in the next four years. The bulk of the funding would go to the state's Housing Trust Fund, which has a backlog of $45 million in projects that could serve 2,300 households across the state, housing advocates said. Last year, two-thirds of all applications to the public fund were denied because of a lack of money, advocates said.

If only things hadn't gotten so out of hand to begin with, then there wouldn't be such a problem with affordable housing in the first place. Anecdote: Directly to the left of the property I'm living on in Kenmore a brand new apartment complex just opened up. Going rate for a two-bedroom: $950. If you had two people working full-time at minimum wage, that $950 would be nearly half of their combined monthly income. Considering the jobs available in Kenmore, it's no wonder that the one-acre property directly to our right has a big "notice of proposed land use action" sign indicating that it is going to be developed into a low-income housing project. Not trying to "prove" anything, just pointing out how expensive it is around here.

(Benjamin Shors, Spokane Spokesman-Review, 01.16.2006)

"More Fear" In Seattle Sellers?

The Seattle P-I and the Eastside Business Monthly both take a look at the newly-released NWMLS report on 2005. The reports are full of the usual ra-ra real estate talk:

"In the past, the market has absorbed home price increases with household income growth," said J. Lennox Scott, chairman and chief executive of John L. Scott. "Well, we had household income growth in 2005, but appreciation rates were higher than that, therefore we needed the low interest rates."
...
In 2005, even King County's price increases were outpaced by those of Snohomish, Pierce and Kitsap counties, though none of those three counties' median home sale prices broke $300,000 in the year-end tallies. In all four of the counties, the typical house sold for slightly more than its listed price.

Only 12.5 percent of the 67,237 single-family homes sold in 2005 in those four counties went for less than $200,000; Kitsap's prices jumped the fastest, rising 20.8 percent to $250,000 from $206,900 in 2004.

But there is also a hint of realism and a dying down of the hype:

"A lot of the sellers that we deal with are unrealistic, so we're seeing a lot of listings come onto the market overpriced," said Ryan Thompson, a John L. Scott Realtor in Seattle.

"There were a lot of multiple offers in the summer and fall when buyers had a 'devil may care' attitude, but there is more fear on their part now."

The result is that sellers are beginning to recalibrate prices after their homes sit without selling.
...
"Developers have followed the curve and are starting new developments because condos are so hot ... but I don't see how demand can continue like this."

Thompson credits investors for some of the heat in the downtown condo market, noting that "even some agents do this on the side."

I think 2006 may well be a defining year for the Seattle housing market.

(Kristen Millares Bolt, Seattle P-I, 01.18.2006)
(Eastside Business Monthly, 01.18.2006)

Hiring/Layoff Trends Paint Conflicting Pictures?

We're always looking at the MLS numbers and interest rates, but what are some other signs that we can keep our eyes on locally to get a feel for the direction of the housing market? The hiring/layoff trends of certain industries are a good thing to watch. I received an interesting email from a reader on this subject, in which he said:

Our office has received two résumé's over the past two weeks from employees laid off by Chicago Title. More recently, Stewart Title has laid off sales staff according to others we know in the business. I've always thought in my mind that one of the primary bellwethers for a market is to watch the Title companies.

On the other side of the coin, the Puget Sound Business Journal claims that local banks are having a hard time finding people to hire:

With job growth on a roll in the Puget Sound area, local banks say it's getting harder to fill a wide range of positions, and salaries are ticking up, especially above the entry level.

Buoyed by the housing boom, a spate of startup banks has emerged over the past two years, and companies ranging from Washington Mutual Inc. to the upstart West Sound Bank have been rapidly building branches and searching for employees to fill them.

Pinched between this demand for labor and a shortage of loan officers and other experienced workers, local banks now say they are forced to conduct nationwide searches for new employees, offer higher salaries, and hire less-experienced candidates with hopes they will learn on the job.

So which is it? Are the banks giving us a sign that the housing market is healthy and only going to keep going up, or are the title companies sounding a quiet warning that we're on the brink of a downward trend? Your thoughts?

(Justin Matlick, Puget Sound Business Journal, 01.13.2006)

Bainbridge Building Bonanza

Yup, that headline is already old, after just two uses. But it is still descriptive of what's going on over on Bainbridge Island, where the condo building craze is being described as a "gold rush."

Some call it coincidence; others say it's by design. At least six condominium projects simultaneously under construction in Winslow will add some 350 units here by the end of the year.

They'll constitute about a 50 percent increase more than the 775 units here now, according to estimates from the Kitsap County Assessor's Office and the city of Bainbridge Planning Department.

Because Bainbridge Island is overflowing with jobs, causing a strong demand for additional housing... wait.

Jim Kennedy, lawyer and associate broker with Deschamps Realty & Associates, isn't among those celebrating the surge in condominium building. He doubts high demand will continue or that condo prices will increase as fast as other investments.

"The demand for condos in Winslow will be reduced over the next several years," he said. Many people who move to Bainbridge don't want to live in high-density units, he said. They want single-family homes and a piece of the island's much-envied rural lifestyle.

Sounds like this guy actually has his head screwed on straight. But if there's money to be made, condos will be built, regardless of the future sustainability of the condo forest. Not that it's necessarily wrong for the builders to take advantage of an opportunity to make money, but I think the real suckers (and facilitators) here are the people who buy them. In a lot of ways I see parallels to a pyramid scheme.

(Rachel Pritchett, Kitsap Sun, 01.15.2006) Registration required, or use this trick.

Bellingham Building Bonanza

This story is a bit outside of my normal geographical range, plus it was covered by Ben on Saturday, but I wanted to at least touch on it here. Up in Bellingham building is far outpacing population growth:

It has become almost conventional wisdom that Bellingham and Whatcom County have been growing fast in recent years. But that growth appears to be more in homes than people.

From 2000 to 2005 Whatcom County gained a new home for every 1.58 new people - 30 percent fewer people per home than the county total in 2000, according to the state Office of Financial Management.

"I keep telling people I don't see explosive population growth," said Hart Hodges, director of Western Washington University's Center for Economic and Business Research. "I do see a heck of a lot of building."

I'm putting Bellingham on my "places to watch" list for when things finally settle down. I imagine there will be some killer deals up there.

(Aubrey Cohen, Bellingham Herald, 01.15.2006)

Affordable Homes Vanishing In Olympia

Think you can move outside the Seattle area to find a reasonably priced home, but still stick around the Puget Sound? Think again.

South Sound's supply of affordable homes is vanishing.

Last year, home sales priced at between $140,000 and $200,000 dropped an average of 42 percent compared with the year before, while home sales priced at $400,000 or higher rose 125 percent, according to Olympic Multiple Listing Service data.

The data shows that the pickings are particularly slim for homes priced lower than $140,000.

Maybe it's just me (and I'm not meaning this as some kind of slight), but I don't really see what there is in the south sound / Olympia area to justify paying $245,000 for a home. In Seattle at least people can point to all the tech companies, the city attractions, the sports teams... What does Olympia have to attract those prices, other than proximity to Seattle?

"We're seeing some real erosion in that segment of the market, and trying to find anything under $200,000 is a real challenge," said Jeff Crandell, the designated broker with Lacey-based Abbey Realty Inc.

Jeff Pust, general manager of Van Dorm Realty Inc. of Olympia, said the lack of lower-priced homes is either eliminating first-time buyers from the market or forcing them to look for homes outside the county.

Ding. "Eliminating first-time buyers" is exactly what's happening all over the Puget Sound. I offer myself as anecdotal evidence of that fact.

(Rolf Boone, The Olympian, 01.13.2006)

Economy-watcher: "Yes and No" Seattle Bubble

Here's yet another blue-sky prediction for 2006 that takes the "our prices haven't risen as fast/much as other areas, so therefore we're not in a bubble" angle:

Economy-watcher Michael Parks suggests that people worried about a housing bubble in the Puget Sound region get a little perspective.

Sure, house prices have climbed a healthy 14.5 percent over the past year in Seattle, Bellevue and Everett.

They've risen 108.1 percent over the past 10 years, the editor and publisher of Marple's Pacific Northwest Letter told business executives attending a U.S. Bank-sponsored breakfast Thursday.

But compare those figures with the much greater 18.8 percent one-year jump in Los Angeles and Long Beach (181.4 percent over a decade) and the 18.4 percent increase in San Jose (185 percent over a decade), and our area's growth seems reasonable.

So despite the fact that the housing market has been making unsustainable gains unmatched by any before in history, it's no big deal because hey, it's not as dangerous as LA. Sweet.

(Melissa Allison, Seattle Times, 01.13.2006)

Taxing Condos For "Affordable Housing"

Local blogging star Stefan Sharkansky points out an interesting disconnect between the city of Seattle's stated goal of "making housing more affordable" and their actions, which are apparently to give a little and take a lot:

Seattle City Councilman Peter Steinbrueck wants to inspire more people to live downtown by "making housing more affordable"

How will Steinbrueck accomplish this goal? By raising taxes on developers who increase the supply of housing "City seeks cut of profits of high-rises for public"

If the city raises building heights downtown, Seattle developers stand to reap whopping profits on high-rise condos and can afford to contribute more toward expanding affordable housing, a study released Wednesday found.

The study, commissioned by City Councilman Peter Steinbrueck, offers a rare glimpse into the economics of downtown development in today's hot market.

Give the developers a little more (vertical) space to build in—that part sounds like a good idea. Affordable housing comes when there is no shortage of supply. But then charge them out their ears for using that extra space—that just don't make no sense. From the P-I article:

Steinbrueck said the study justifies his proposal to require downtown housing developers who want to build above a minimum height to contribute $20 a square foot toward an affordable-housing fund. Nickels has proposed charging $10 a square foot.
...
Sharon Lee, executive director of the Low Income Housing Institute, said that with private developers selling average condos for $600 a square foot, charging $20 for affordable housing is a drop in the bucket.

"This is a ... giveaway to be talking about adding floors and floors of market rate and luxury housing," she said. "We think $20 is too low."
...
Charging developers $20 a square foot for affordable housing would yield an estimated 32 percent rate of return. That's less than what developers could expect today but well above the 20 percent that many developers require before risking their money on a project.

Yes, more taxes is clearly the answer to the problem of high housing prices in Seattle. As a matter of fact, "more taxes" is the answer to pretty much any problem.

To the man whose only tool is a hammer, every problem looks like a nail.

(Stefan Sharkansky, Sound Politics, 01.13.2006)
(Jennifer Langston, Seattle P-I, 01.12.2006)

Gambling On Office Space In Bellevue

Here's another tidbit about commercial real estate in the Seattle area. Quite appropriately, the headline uses the word "gambling" to describe what's going on with office buildings in Bellevue:

Spec development, as in constructing an office building without pre-lease commitments on the gamble that it will attract tenants upon completion, is the new buzzword among real estate developers in downtown Bellevue.

Developers of at least four different office tower projects proposed for the city's central business district are scrambling to be next in line after Lincoln Square developer Kemper Freeman Jr. to begin construction.
...
It's a gambit that can cost a developer dearly if the expected tenant demand for office space turns out to be less than anticipated by the time the building is completed.

In past office development cycles, some developers have wound up losing their buildings to foreclosure. In at least one case, a prominent Seattle developer lost his home when the local office market went bust in the late 1980s.

Good thing there's no chance of that happening again. Heh. How soon we forget.

(Clayton Park, King County Journal, 01.08.2006)

Realtors: Bubble Talk Not Trendy

This article doesn't really relate directly to the Seattle area, but it was in a Seattle area paper, and there's a tidbit in there that I thought was rather amusing, so I decided to post it here anyway.

Mark Nash, a Coldwell Banker broker and real estate author whose book "1001 Tips for Buying & Selling a Home" is a helpful guide for consumers considering the residential market, has compiled a list of what's in for housing this year - [and] what is definitely out.

The list is a result of input from Realtors around the country who, in turn, have solicited feedback from home buyers and sellers as they visit homes.

Leading the out column had nothing to do with tasteless interiors or boxy exteriors. Topping the chart was any further discussion about a possible housing bubble. Most analysts concur that no national bubble exists, including David Lereah, the National Association of Realtors' chief economist, that any bubbles must be regional and point to poor local employment figures as the reason.

There will be flat appreciation in some areas, but sales will remain strong nationally, Lereah said.

How sad for me. I guess this and other bubble blogs are "out." So says the all-knowing Realtor big wig David Lereah and his "Realtors around the country." What a shock that Realtors would be tired of hearing about a bubble. What a complete shock.

(Tom Kelly, Everett Herald, 01.08.2006)

One More December Take

The Olympian comes in a day late to the party with what I would call a cautiously pessimistic report on December's numbers:

Fewer homes sold in South Sound
Market has room to slide, real estate watchers say

After 11 months of red-hot South Sound home sales in 2005, sales dropped by double digits in December, raising the possibility that the market is beginning to cool.

In December, Thurston County home sales dipped 13 percent, with 293 homes sold compared with 337 homes sold in the same period a year ago, according to preliminary data released by the Olympic Multiple Listing Service.

I say "cautiously pessimistic" because later on they shovel out the usual "it's slowing down but it's still great" lines that everyone oh so loves to repeat:

But even if the market isn't as hot as it has been, it still compares favorably to a time when mortgage interest rates hovered around 10 percent or higher, said Mick Piephoff, a real estate agent with John L. Scott Olympia.

"Even if it slows down just a bit, it will still be a great market historically," he said.

I just love how all the quotes in articles like these are from real estate agents. What else are they possibly going to say? "I'm about to soil my knickers because any minute now the whole market is going to run off a cliff." Yeah, right.

(Rolf Boone, The Olympian, 01.07.2006)

Press Optimism Beginning To Fade?

With the lull that has set in on housing this winter in the Seattle area, the news reports about the dead time are almost more interesting than the housing news itself. For example, take the four stories in today's papers about December's housing numbers. Here are the headlines:

Housing prices keep rising as sales slow
     Elizabeth Rhodes, Seattle Times
Home sales are cooling with the weather
     Kristen Millares Bolt, Seattle P-I
Area home sales taper off
     Mike Benbow, Everett Herald
Home sales fall, but prices up
     Barbara Clements, Tacoma News-Tribune

Surprisingly, two out of the four local papers actually have headlines that are more negative than positive, one is fairly neutral, and only one is still stubbornly upbeat. This is quite a turn from the usual "everything's going great" face that they all seem to put on. Could this be a sign that there are finally some cracks appearing in the Seattle real estate market? From the P-I:

It was a banner year for real estate prices in the Puget Sound area, and December was no exception, according to statistics released Thursday by the Northwest Multiple Listing Service.

But a drop in pending sales — offers made and accepted, but not yet closed — across 16 of the counties measured by the listing service indicates that people are pulling back from the real estate market. It's the beginning of a cool-down.

Clearly no bubble is bursting, real estate experts agree. Rather, there is a slowdown in the market that will eventually put a damper on home-sale price increases, even as the demand for homes continues to outstrip the supply of them.

I love the logic that because clearly things are "cooling down" slowly right now, that means that there definitely won't be a "bursting bubble" effect at all. I'm not saying there will be (all I know for sure is that recent price gains cannot possibly continue), but I think that the logic presented by the "real estate experts" is rather suspect.

(Elizabeth Rhodes, Seattle Times, 01.06.2006)
(Kristen Millares Bolt, Seattle P-I, 01.06.2006)
(Mike Benbow, Everett Herald, 01.06.2006)
(Barbara Clements, Tacoma News-Tribune, 01.06.2006)

Commercial RE Rode High In 2005

Taking a bit of a break from the residential real estate world, let's have a look at the commercial real estate picture. 2005 was good to commercial real estate:

Retailers in the Seattle and Bellevue area gobbled up store space at the fastest pace since the 1990s, responding to a strong regional economy and reports the Puget Sound area didn't have as much retail space as other areas in the country.
...
Prime storefront space in downtown Seattle and Bellevue is nearly 100 percent occupied, virtually every shopping mall has expanded or is about to, and nearly a dozen suburban and semi-rural towns are building new retail districts as part of mixed-use projects.

The article is light on numbers, so it's hard to say what kind of change prices saw, but I think it's safe to say that now that vacancy is near zero, rents will be going up if they aren't already. Lucky retailers.

(Tom Boyer, Seattle Times, 12.28.2005)

Tacoma's Top 2005 Story? Home Prices

The Tacoma News-Tribune recaps the year's top stories, and the ever-climbing cost of buying a house tops out their list:

This was the year of the homeowner.

Despite rising interest rates and housing bubble warnings, home prices in the South Sound continued to soar.

The median sale price for a home in Pierce County hit $250,000 last month. Can it be that just four years ago it was $159,000?

Good time to be a homeowner, horrible time to be a prospective home buyer. Will 2006 bring the winds of change?

(Jack Keith, Tacoma News-Tribune, 12.29.2005)

Thurston County Real Estate In 2005

Okay, I've got a bit of catching up to do. First up is a look back on the year's numbers in Thurston County:

The blistering pace of the South Sound real estate market continued in 2005, with the percent increase in number of homes sold and in median prices reaching double-digit territory for the January to November period, according to regional data.

But as hot as the Thurston County real estate market has been the past few years, real estate experts expect the market to cool off somewhat next year.

As I've said before, one thing I know for sure is that double-digit increases cannot possibly continue indefinitely. Next year is as good a year as any to start to see some cooling off around here.

(Rolf Boone, The Olympian, 12.25.2005)