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Sunday, April 30, 2006

Seattle Bubble Notion "Put To Rest"

Sometimes I can't help but wonder if the local real estate reporters are being paid to push the "buy now!!!" mentality around here. For example, today's article which comes right out in the headline and urges us to act fast!

As of March 1, 29 properties were available. Three more were added during the month. All 32 sold, resulting in a sales rate of 110 percent based on first-of-the-month inventory. That's the way the real-estate industry calculates market activity.

And so it continues to go in close-in Seattle and Eastside neighborhoods, as scores of well-qualified buyers like the Maxwells outnumber properties for sale, particularly those priced under $500,000.

This is forcing buyers into lightning-fast decisions and bidding wars that reward sellers with thousands of dollars over their asking price, real-estate agents report.

It's also keeping King County prices climbing, putting to rest any notion that ours is a "bubble market" where prices will stall or even fall. That's happening in cities such as Miami, where rising inventory of for-sale properties is giving buyers room to negotiate.

In King County, however, the number of homes for sale fell 6 percent last month compared with March 2005, according to the Northwest Multiple Listing Service.
Well I guess that's it then. The bubble question has been "put to rest" because the prices are still climbing. I guess I'll just shut down this blog right now. Because who cares if home prices have soared far above most normal people's ability to pay and are continuing to rise? That's perfectly normal, natural, and good. No bubble here, no sir.

(Elizabeth Rhodes, Seattle Times, 04.30.2006)

How Are People Affording Seattle Homes?

In a discussion this weekend over at RCG, contributor Galen Ward commented that "Home prices will probably be flat until inflation prices back to 'normal' levels." To which I replied that currently "in King County a family making the median household income has just 45% of the income necessary to afford the median-priced home," and that "For wages to catch up with prices, we would need a median income in King County of $77,000."

Another RCG contributor, Ardell DellaLoggia, responded with the following argument:

The Tim,

I never understood the median income vs. median purchase price analogy. If, as you say, King County has increased by 70% since 2000, doesn’t the average family then have a large downpayment from the sale of their current home? A "family" is not usually a first time buyer scenario. Most "families" already own a home that they purchased for much less than its current sale price.

When someone factors the income needed to purchase a home, do they assume zero down or 20% down?

If a young couple purchased a home in 2000 for $250,000, that home would now be worth $425,000, using your 70% increase since 2000. Now that they need a larger home, they have a substantial downpayment. Even if their income stayed the same or only moderately increased, if they bought the first home with zero down, they now can afford more as they won’t need a second mortgage.
I attempted to post the following reply this morning, but for some reason it has not shown up yet. Since I'm impatient, I'm posting it here.
Okay Ardell, let's do some math.

First I'll look at your hypothetical couple that cashed out a $425,000 home. So they make $175,000 on the sale (assuming they haven't been cashing out on their equity with a HELOC or refinancing their credit card debt into the mortgage, which in my opinion is a pretty big assumption...), minus commission (assuming they use an agent), minus whatever other fees or taxes there are... Let's say they walk away with $150,000, which I think is a pretty generous estimate.

Now, you said that they need a larger home, so you know they're not going to find it at the same price they just sold for, so let's say the new place they find is $475,000 - again a pretty modest estimate. They put down $150,000, and get a mortgage for $325,000. At an interest rate of 6.25%, their monthly mortgage payment would be roughly $2,000. That is not even considering taxes, insurance, and other costs of owning.

If this family is making the median household income in King County ($55,114), their gross monthly income is ~$4,600. The historical definition of affordable is 30% of gross income. That would be $1,380 for the median family, which is incidentally almost exactly what the monthly payment would be on a $225,000 loan at 6.25% (their old house). However, the $2,000/month mortgage payment is 45% higher than what would be "affordable" for them. For this family to be able to afford $2,000 per month, they would have to be making $80,000 per year, meaning that their current income is just 69 percent of what is necessary to afford the upgrade.

All that said, I also take exception to the way you just totally write off first time buyers. Tell me, how can the market continue to grow if no new buyers are able to join the party? Are you saying that the market is totally sustainable by simply having existing homeowners trading houses back and forth? Who is being sold to when people leave the market (old folks moving into apartments/group homes, death, speculators cashing out, people moving away, switching to renting, etc...)?

For the first time buyer, the above numbers are even worse. Even if you assume they have $81,000 laying around for a 20% down payment on the median $405,000 house, the monthly payment comes out to $2,000, so they're in the same boat as the family that is "upgrading" and cashing out on their appreciation.

I restate my position that the only way that many (most?) people can "afford" a house in today's market is through "exotic" financing. Unless mommy buys a house for you, that is. I welcome you to provide actual numbers that show otherwise.
So how about it? Can Ardell or anyone else out there demonstrate a scenario to me where the "average" family in our area is able to reasonably afford a home without "creative" financing or a large cash gift from mommy and daddy?

Friday, April 28, 2006

Rain City Bubble Boosters Club

Our local real estate blog Rain City Real Estate Guideby realtors, for realtors (my subtitle, not theirs) tackled the topic of a Seattle bubble today. "Eastside Specialist" Chuck Reiling places himself firmly in the "Microsoft will protect us" camp with his post:

The second kind of bubble, let's call it Type II, seems to occur when there is a limited supply of homes relative to demand, and people start bidding up the prices, i.e. being willing to pay more, in order to get the home they want in the place they want. Jobs and commute times and schools seem to be the big drivers in this. These forces are at work in San Francisco and Los Angeles and San Diego, and they are at work here. In our greater Seattle and east side area, we are blessed with a very strong economy, and continue to enjoy relatively low mortgage interest rates. But we have very restrictive state and local growth management laws and land use ordinances, and building is not keeping up with demand.
So what should we expect now? First, prices will probably go quite a bit higher. The competition for good houses is intense, and the good economy is feeding good incomes - people are willing to stretch to get the home they want. Second, this 'bubble' will probably not burst. Type I speculative bubbles do seem to burst, and they make great news stories. Type II demand-driven bubbles don't seem to burst, they just seem to pause while the world catches up. Ours doesn't seem ready to pause yet.
There's really nothing new there that we haven't gone over again and again, but it still amazes me that some people really truly believe that Seattle's current prices are actually justified and sustainable in the long term. The claim that "prices will probably go quite a bit higher" was especially flabbergasting to me. Even with the suicidal financing options out there right now, people are still stretching themselves to the max to afford current prices. What could possibly drive them "quite a bit higher"?

I encourage you to share your thoughts with Chuck in the comments section on his post—just try to be nice, okay?

In other news, I have archived the delightfully witty blog There is no housing bubble!, since the original site vanished from the Internet without explanation a few weeks ago. I miss it already.

Update: RCG contributor Galen Ward chimes in with a post outlining his opinion on the bubble:
I think both sides are taking a foolish black-and-white approach to the bubble question; clearly there are some indicators that there is a real estate bubble, but the consensus seems to be that the risk of home prices plummeting is low. Home prices will probably be flat until inflation prices back to “normal” levels. My concern is that if house prices do pop precipitously, there are going to be serious consequences for home owners and non-homeowners alike.
...The one argument I do not buy is that our land use laws are making property more expensive; builders are cranking out hundreds units and making loads of money on each unit, meaning they could continue profiting even at lower price levels.
Again I'd like to reiterate my request that my readers exercise civility and friendliness when commenting on these posts.

(Chuck Reiling, Rain City Real Estate Guide, 04.28.2006)
(Galen Ward, Rain City Real Estate Guide, 04.29.2006)

Disclosure Loopholes Highlighted

The Tacoma News-Tribune sheds light on a problem with state law that could become more of an issue as foreclosures become more common in the coming years.

"Opportunity knocks!" proclaimed a real estate handbill about a five-bedroom home on two acres selling for $288,750.

But here is what you won't find on the advertisement for the property on Canyon Road East: State and local government agencies suspect the site, once an illegal landfill, is contaminated with corrosive wastes, solvents and dangerous metals, among other hazardous substances.

The owner — a lender that foreclosed on the property — doesn't have to disclose that to prospective buyers under an exemption in state law. Yet under state and federal law, anyone who buys the land could be obligated to clean it up.
In a hot real estate market, buyers might be tempted to waive residential real estate disclosure requirements.

Don't do it.
Duh. I have to say I still don't understand how people could get so worked up about getting a house that they would totally waive inspection. We're talking about the biggest and most important purchase many people will make in their lifetimes, and at the height of the mania last year and in '04, people were walking into it completely blind. Thankfully as foreclosures ramp up, the mania ramps down, so regardless of state law, the problem will be self-correcting.

(Susan Gordon, Tacoma News Tribune, 04.26.2006 )

Thursday, April 27, 2006

Housing Prices A "Simple" Problem

P-I Columnist Bill Virgin makes light of the housing situation in today's column, titled How to rein in housing prices? It's simple. The thrust of the article is a sarcastic proposal to make it illegal to profit from the sale of a home. However, he makes some interesting claims that I can only assume he's serious about...

Folks around here hardly need an invitation to commence remarking about the prices of homes in this market. Wrote one reader: "How can the average price continue to escalate so radically beyond the means of the average household income? I would hope there is some correction on the horizon — though I confess I've been amazed that housing prices have continued on the current course for as long as they have."

Amazement is close to becoming a permanent condition around here; for nearly two decades people have been looking at housing prices and presuming that at some point we'd run out of corporate executives or well-paid lawyers or prematurely retired software millionaires to fuel the run-up.

But in two decades, it seems, we haven't. The median price of closed sales on homes and condominiums was $365,000 in King County in March, according to the Northwest Multiple Listing Service; in Seattle the median price was $407,000, on the Eastside more than $476,000. Each of those numbers reflects a double-digit percentage increase from the same month a year ago.

Obviously there's enough demand to keep prices as high as they are, and climbing, just as there is still plenty of demand for gas even at more than $3 a gallon.
Okay first off, what is Bill talking about when he says that housing prices have been running up "for nearly two decades"? Even as recently as 2001 housing was still relatively affordable for people making the median wage around here. The real explosion in prices didn't hit until the easy money started flowing. It is the zero down, interest-only, exotic loan extravaganza (not "well-paid lawyers" and "software millionaires") that is creating the "demand" Bill refers to, and propelling prices into the stratosphere (relative to wages). When the easy money dries up, the appreciation party will be over.

Secondly, it's almost as if Bill was reading this blog yesterday, because he seemed to directly respond to the "is Seattle special" question:
Seattle housing prices are going to be higher than other places on the map, given the geographic and regulatory constraints and the attractiveness of the region as a place to live.
It's true that prices in Seattle are going to be higher than say, Yakima, but that certainly doesn't mean that the current ridiculously high prices are justified or even destined to stick around much longer. Seattle is attractive, but I hate to break it to you Bill—it's not magic.

(Bill Virgin, Seattle P-I, 04.27.2006)

Wednesday, April 26, 2006

Super Special Seattle

The topic of whether or not our area is somehow immune to a bubble was suggested by a reader. I made a very similar post back in September, but readership and participation has grown quite a bit since then, so now would be a good time to post it again.

As markets across the country begin to sputter and slow this spring, here in Seattle inventory continues to be low and prices are still climbing. This of course gives fuel to those that argue that the Seattle area is somehow special, and has unique characteristics that will protect it against any real estate price corrections. Although I agree that Seattle is a wonderful place to live (why else would I be here?), I also recognize that every locale has a list of unique characteristics.

However, I am still an open-minded kind of person, and I know full well that there are lots of people around that look at other markets in the country and see a bubble, but think that Seattle is either not in a bubble or has special protection against a bubble bursting (i.e. - price decreases). So, let's hear from you. Does Seattle have a secret ingredient that makes it special and immune to a price correction in real estate (Microsoft, Boeing, "limited supply," special desirability, etc.), or are we just behind the curve?

Tuesday, April 25, 2006

What's Your Seattle Bubble Timeline?

With the numbers we've been seeing for the last few months, it is clear that Seattle is not the red-hot market that it was a year ago. What is still not clear though is just where we are in the boom/bust cycle. Many theories have been suggested recently in the comments about how soon Seattle will turn, how extreme the turn will be, etc. I'm curious to know what kind of timeline you expect the Seattle area housing market to follow in the next 5-10 years. Here's my (very) rough guess:

  • 2006
    • In most parts of King County appreciation slows to a crawl through the end of the year. The closer to Seattle you get, the more stagnant the appreciation. Near the end of summer and into fall, inventory begins to build slightly. Realtors and newspapers proudly proclaim a "soft landing."
  • 2007
    • Inventory stacks up at an increasing pace, prices are level in some areas, slightly declining in others. By the end of the year, prices in some areas are approaching 2004 levels. Realtors still in denial.
  • 2008-2010
    • Prices continue to decline at slightly less than the rate they appreciated in 2001-2005. By summer of 2010, prices are at or near 2002-2003 levels for most areas and holding steady.
Of course, what will really happen depends on so many factors (interest rates, strength of the dollar, foreign investors, lending practices, etc...) that it's impossible to really predict with any certainty, but that doesn't stop it from being fun. So what's your predicted timeline?

Monday, April 24, 2006

No Foreclosure Deals... Yet

In a real estate advice column this weekend, Everett Herald reporter Steve Tytler explains the difficulty of finding good foreclosure deals in Seattle's still-at-least-lukewarm market:

Question: Where can I learn about investing in foreclosures?

D.E., Renton

Answer: There are some truly extraordinary bargains to be found in the foreclosure market. Unfortunately, finding these bargains is like finding a needle in a haystack. I know, because I have tried to find them myself. To listen to the late-night TV real estate hucksters, you'd think people in foreclosure are just waiting to give their house away for half its fair market value. Nothing could be further from the truth.

Think about it for a minute. If you lost your job and fell behind on your mortgage payments, are you going to hand me the keys to your house just because I've shown up on your doorstep to save you from foreclosure? Probably not. Most people want to keep their homes, and in the vast majority of cases, they find a way to come up with enough money to head off the foreclosure auction.

Or if they can't raise the money, they put their home up for sale through a real estate agent and attempt to recoup as much of their equity as possible before the foreclosure auction.
It's true that as long as the market is at least a little warm, there just aren't going to be many deals in foreclosures. However, I think we all know what will happen when things level off and/or start to decline—combined with rising interest rates... That will be the time to be in the market for foreclosure properties.

(Steve Tytler, Everett Herald, 04.23.2006)

Sunday, April 23, 2006

Tacoma Condo Explosion Coming

Is Tacoma being set up for a big fall when the housing party finally ends? Quite possibly—especially when it comes to condos downtown.

A tally of downtown projects by real estate consulting firm McCament and Rogers for the City of Tacoma shows 774 residential units are currently being built in 13 different projects around downtown. In planning and design phases are 1,014 additional units. Hundreds more housing units are in less formal planning stages. Those under-construction and planned units will join 997 condominiums and apartments built downtown since 2000.

That's 2,785 units — something akin to adding a city the size of Steilacoom in downtown Tacoma.

According to sales people and developers, many of those projects are selling or being rented at a brisk pace.
Even with the tax benefits and the gentrifying downtown, some real estate sales people wonder whether the market can absorb the hundreds of units that will go on the market beginning next fall through the summer of 2007.

Privately they say they're concerned that the biggest projects — such as the 183-unit Esplanade just under construction on the Foss Waterway — are too big to enter the market all at once when so many other projects will hit the market at the same time.
And even more privately (as in—they wouldn't admit it to a newspaper) they're concerned that I think that by the time these units are ready, the whole market will have tanked and none of them will be selling... Or at least that's what they should be concerned about, methinks.

(John Gillie, Tacoma News Tribune, 04.23.2006)

Saturday, April 22, 2006

Some Kinda Email

Once in a while you read something and you think: "Is this for real?" That's the reaction I had yesterday when I received this email (name changed to protect the... well just as a courtesy):

Hello Timothy,

With interest I read your post regarding the "real estate bubble". Regardless of what happens with the bubble the longer you wait to purchase a home the harder it will become. The only time I would agree that it would be appropriate to wait would be if you feel the bubble will burst and prices/values will fall.

Nothing in anyones crystal ball says anything about values falling in the Northwest, the primary reason being supply and demand. Here in (Mr. F's) County our market is cooling. Even at that if we only have a 10% appreciation this year it is still great news for homeowners. So my recomendation would be to buy now not later. In not buying now you are loosing appreciation and tax writeoffs. As I tell most new buyers, just get on the up escalator! Once there at least what you currently own is appreciating at the same value as most of the homes around you so it will be easier when you are ready to sell and buy the next one.

Good luck, you obviously are putting a lot of thought behind your decisions..............good job!

Mr. F

Web Page: (real estate website owned by Mr. F)
Blog: (real estate blog owned by Mr. F)
Though I'm not sure which particular post he may have been referring to, I have to say that this guy certainly has chutzpah if he thinks that one poorly-spelled email can somehow convince me that there's never been a better time to buy!!! There's some pretty classic quotes in there though. I think my favorites are "Just get on the up escalator!" and "Even...if we only have 10% appreciation..."

Here is the response I sent him:
Mr. F,

I have to say, I'm shocked, shocked I tell you, to learn that someone in the business of selling real estate would recommend that I buy now. Seriously though, we could certainly qualify for some kind of loan that could get us into a home in our area at this time. However, I'm not interested in "exotic" or "creative" financing. And right now that's the only way we even could afford a house.

Believe me, I've run the numbers many different ways, and right now our money is doing just fine in "escalators" that haven't just experienced the largest and fastest run-up in history. Despite your claims, and despite how much I love it here, there is nothing magically special about the Pacific Northwest that makes us immune to market correction, and I feel that one is coming—in the relatively near future. I suppose only time will tell which one of us is right.

Thanks for your comments and good luck in your work.

I wonder what inspired Mr. F to email me in the first place?

In other news: I miss Arrested Development

Friday, April 21, 2006

Construction Buoys State Job Market

Here's a pair of mostly glowing articles about just how stupendous our state's job market is, and how much better it's getting every day.

The roaring construction and aerospace industries helped Washington add 7,900 jobs last month, pushing the statewide unemployment rate back down to 4.6 percent.

That matched January's jobless rate, before an influx of new job-seekers bumped it up to 4.8 percent in February. The last time the state's jobless rate was this low was November 1999.

"Washington employers hired workers at a near-frantic pace in March," said Greg Weeks, director of the state Employment Security Department's work force-data branch. "A lot of industries were growing. This is a very hot labor market."
However, the Seattle metro area is still about 5,800 payroll jobs shy of its December 2000 peak.

The state's construction industry continued to hit above its weight. Construction accounts for less than 7 percent of the state's payroll jobs but generated more than a quarter of the new jobs added last month.

However, most observers expect high prices and rising interest rates will cool the nation's — and region's — housing boom.
I'm certainly not going to say that having more jobs available is a bad thing. However, these jobs that are being added hardly seem like the kinds of jobs that are going to afford people houses in King County. Actually, a large amount of the new jobs continue to be in providing houses:
The construction industry reported the strongest growth, adding 2,100 jobs in March. New construction jobs statewide reflect the "surprising persistence" of the housing boom, Weeks said. Construction jobs increased by 3,600 in January and by 2,400 in February.

"As an economist, I keep thinking the rise in interest rates will have an impact on the housing market, and I'm wrong," he [Weeks] said.
Oh, I don't think you're wrong Mr. Weeks. I think the market is just making one last gasp before the frenzy finally dies. By the time construction is completed on all these houses and condos that these thousands of new jobs are building, I think we will be experiencing a very different market.

(Drew DeSilver, Seattle Times, 04.19.2006)
(Dan Richman, Seattle P-I, 04.19.2006)

Thursday, April 20, 2006

Excuses In Olympia

Here it comes... with the housing market in Olympia beginning to experience more signs of a slowdown than anywhere else in the Puget Sound, it's time to bring out the excuses. The order of the day? Gas prices.

Thurston County's real estate market has been one of the state's hottest because median prices here are lower than in Pierce and King counties. This has lured many buyers to South Sound, but it increases their commutes to jobs in Pierce and King counties.

David Schaffert, chief executive of the Thurston County Chamber of Commerce, worries that rising gasoline prices could slow South Sound home sales if buyers decide the higher commuting costs might wipe out potential savings on the cost of a Thurston County home.

"This used to be less of an issue when gas was $1.50," Schaffert said.

"With higher prices, you have to wonder how it will affect our home development."
Maybe gas prices will be the breaking point, but the little detail that they just love to ignore is that despite the fact that "median prices here are lower than in Pierce and King counties," they're still too high to be sustained once the easy money dries up. If people are so stretched that an extra $50-$100 in gas each month is going to break them, maybe they didn't have any business spending so much on a house in the first place.

(Jim Szymanski, The Olympian, 04.16.2006)

Tuesday, April 18, 2006

Inman Good For A Laugh

We've already done the March numbers to death, but the late story from Inman News caught my attention for its amusing headline and subtitle:

Northwest real estate sales slide
Inventory growth helps lift home prices

Home sales in western Washington fell 9.1 percent in March from a year ago, as prices posted another month of double-digit gains, according to the latest figures from the Northwest Multiple Listing Service.
That's some pretty interesting logic. Increasing supply and decreasing demand "helps lift home prices." It would seem that more appropriate subtitle would have been "Prices up despite increased inventory." But hey, that's just me.

(Inman News, 04.18.2006)

Venting About Housing In Seattle

Here's a "Reader's View" editorial from the Seattle Times that I bookmarked a while back and apparently lost in the shuffle.

In my small neighborhood, I can point out several recent density actions. You decide if they were for the better or for the worse.
  • On the corner of Norman and Bradner in the Mount Baker neighborhood, two single-family houses were razed to make room for 10 — yes, 10 — townhouses. These townhouses are priced in the $400,000-plus range. This is affordable housing for whom?
Were bus routes added to handle the new riders? No. Were the streets widened to handle more traffic? No. Were the parking lots in the neighborhood shopping areas expanded to handle more cars? No. Were any neighborhood city streets improved? No.

As far as I can tell, the infrastructure has not changed to accommodate the increased density.
Where are the affordable houses for those middle-income people who can't afford the median price of a home? What if they prefer not to pay $300 a square foot for a condo? What about the possibility of rent control? How many more people will be homeless as a result of the density building plan?
The piece is pretty short—I've quoted nearly all of it here. Ms. McCarthy doesn't seem to have a single point she's trying to make, but is rather expressing general distress at the state of housing and density in Seattle. Obviously I agree that middle-income people don't really have an affordable option for buying a home in Seattle right now, but I don't know where she's coming from with the comments about rent control. Last I checked rent is pretty affordable right now, and despite what the papers say, I haven't seen it creeping up. It's certainly frustrating not being able to afford a house, but renting is still a very viable alternative.

(Meg McCarthy, Seattle Times, 03.25.2006)

Monday, April 17, 2006

Introducing Seattle Traffic

I would like to take an opportunity to introduce my newest blog, Seattle Traffic. I have "quietly" added a link on the sidebar under "Sibling Sites", but I thought it would be worth mentioning in a post all its own. Seattle Traffic is an idea that I had been tossing around for a few months now, and I finally made the time to get it off the ground last weekend. The format is pretty much the same as this blog, but I'll be focusing on a different important local topic—traffic, parking, transit, and other related things.

Since I'm now running two blogs whose purposes are to highlight two big problems in Seattle, some may get the impression that I am not fond of this area. Nothing could be further from the truth. My purpose in running both Seattle Bubble and Seattle Traffic is to bring people together to work toward solutions to two of Seattle's biggest problems. I'm even already mulling the idea of making a Seattle blog trinity by adding a third blog dedicated to all the Awesome things about Seattle...

We'll wait and see how well I can handle just two blogs first, though.

Homeowner Friends Do It Right

This weekend my wife and I had the pleasure of visiting with some friends (I'll call them R & L) that live down in the Olympia area. I was somewhat uneasy going into it, because they recently purchased a home, and R also occasionally reads this blog, so they know where I stand on the wisdom of such a decision at this particular point in time. As we turned into the brand new development onto GPS-uncharted roads, I became even more uneasy, imagining huge price tags for sardine-can houses and construction that isn't built to last.

As we got the grand tour of their (thankfully well-built) new digs, R filled me in on the lengthy process they went through to get into their new home. The more I found out about their purchase, the more relieved I was. Most importantly, they put 20% down. Also, they actually locked in the purchase in late 2004 at a considerably lower price than current neighboring units are being sold for (but they didn't have to start paying the mortgage until 2006). Furthermore, though it doesn't have to do with financing, another smart move was that they got a lot on the edge of the development that backs a protected "green belt," so they have a decent sized back yard, bordered by a layer of trees, a creek, and a surprisingly natural looking retention pond—all safe from future development. While I still think that renting is a better choice right now, R & L did everything right in their purchase, and will be secure even if a serious housing downturn takes place.

We are friends with another couple, J & J, who bought recently, and they too took the necessary steps to protect themselves. You see, most of my friends have this thing that has evaded the majority of the population when it comes to housing in the last five years... it's called common sense. Since common sense seems to be such a rare quality when people consider housing these days, I thought I would summarize the important steps that R & L and J & J took to ensure ongoing financial stability in their respective home purchases. Again, I highly recommend you rent for the time being, but if you simply must buy a home, here are the steps to take to protect yourself:

  • Put 20% down & get a fixed-rate loan.
  • Set monthly payments at no more than 75% of what you can comfortably afford to spend on housing right now.
  • Choose a home that you would be happy living in for 10 years minimum.
If you choose to neglect any of the above items when buying a home, you will be at risk for financial and emotional hardship in the future. R & L know someone that lives down the street from them and listened to the lender that told them to use "creative" financing to stretch beyond their means to get into a house. They've been in their house for less than a year, and already they are facing foreclosure.

If you find that you can't do each of the things on the above list, then just don't buy right now. It's that simple.

Sunday, April 16, 2006

Westneat Clues In—Seattle Wildly Unaffordable

Ever since I started (so long ago, I know) this blog I've been wondering—what does it take to get "mainstream" reporters in Seattle to sit up and realize that housing has gotten out of control around here? Well it looks like I finally got my answer. For Seattle Times columnist Danny Westneat, it takes a big round number like $400,000 to finally get his attention.

My first house, which I bought in Seattle back in 1995, seemed impossibly expensive at the time.
The price? $98,000.

This month, the median Seattle home price passed $400,000. It got me wondering: What does that number mean? What if I were 30 today, and just setting out to tap my roots into Seattle? Would I be able to?

Adjusted for inflation, $98,000 in 1995 is about $130,000 today. So I began a search for the $130,000 Seattle house — the same house I barely afforded eleven years ago.

I found it. There was only one. It's shown in the photograph above.

It's no charming bungalow, that's for sure. The city has barred anyone from entering the property.

What's left of the burned-out shell sits on a car-strewn lot in one of the Seattle area's most crime-ridden neighborhoods, near Roxbury in White Center.

It sold recently for $125,500, making it the cheapest house with a Seattle address in at least a year.

"We had six or seven offers," recalls Ken Knoke, the agent who sold it for Prudential Northwest Realty. "They were buying it for the dirt. You can't usually get dirt around here for that price."

He added that my search for anything resembling 1995 Seattle, even adjusted for inflation, was futile. No way I'd find even a mobile home parked on a postage-stamp patch for $130,000.

He was right. A dingy, single-wide manufactured home in Boulevard Park with no street frontage goes for $160,000. A double-wide near the charred house is $177,000.

There is a three-bedroom for $125,000 on the plateau east of Renton. But it comes with a warning: "Please stay out! This home is unsafe to enter. Call agent for help."
Welcome to reality, Mr. Westneat. For once we are on the same page. First time buyers have been priced out for a while now. Of course the problem is, many of them don't realize that they're priced out, and happily take on "exotic," "creative," or as I like to call it, "suicidal" financing. How someone making $50,000 is able to convince themselves that a "starter house" is worth $300,000 I'll never understand.

(Danny Westneat, Seattle Times, 04.16.2006)

Saturday, April 15, 2006

Seattle Rents Predicted To Climb

Looks like at least some people are finally cluing in to the fact that jumping on the home ownership bandwagon might not be the best financial proposal out there and they're better off renting.

After several years of flat rents and high vacancies, the local apartment market is tightening, thanks to folks like Seattleite Matt Rivett. He's a 32-year-old aerospace engineer who ran the numbers on renting versus buying earlier this year after his first foray into house hunting.
Why buy, he reasoned, when steep house prices and rising interest rates make owning so much costlier than renting. That wasn't true a few years ago, and renters then chose ownership in droves.

Instead Rivett's happily committed to a rental duplex near Ballard that has "a beautiful view, all the amenities, for about half of what a mortgage would have been in a neighborhood further out, in a house I wasn't particularly fond of," he said.

Bucking the siren call of homeownership puts Rivett on the cusp of a trend that apartment expert Mike Scott says is one of the factors causing demand — and hence rents — to rise.
Okay, so rents are finally going to be creeping up in our fair town. Seems to me like they have quite a ways to go to catch up to housing, though. As Mr. Rivett points out, you can rent for quite a bit less than half of what a mortgage on a similar abode costs. Interestingly, the article cites the cause of increasing rental demand primarily as "the improving economy" and claims supply is being reduced due to "the condominium-conversion trend." "High housing prices" are mentioned only as "another factor." Well for this blogger they're the factor.

(Elizabeth Rhodes, Seattle Times, 04.15.2006)

Friday, April 14, 2006

Taller Downtown = "Affordable" Downtown

In case you missed it last week, the downtown building height / "affordable housing" saga finally came to somewhat of a conclusion.

The repeal of the CAP initiative Monday was unanimous and underwhelming—an anticlimactic finish for a once-sacrosanct law that limited downtown building heights for almost 20 years. So uncontroversial was the new law, proposed by onetime CAP campaigner Peter Steinbrueck, that the only matter left to settle Monday was how much money to make residential developers pay toward affordable housing: The mayor wanted $10 per square foot; Steinbrueck, and affordable-housing advocates like Real Change and the Seattle Alliance for Good Jobs and Housing for Everyone (SAGE), wanted $20. In the end, Steinbrueck (more or less) got his way: a tiered system in which the fee, called an "affordable housing bonus," increases on floors above the current limit, for an average per-foot bonus of $18.94. The bonus, though contentious, will only pay for about 600 new affordable units downtown (2,600 once an uncontroversial $10 bonus for commercial buildings is factored in)—one reason Steinbrueck called it "a very small contribution toward the very large and growing gap in downtown affordability."
I think that when city officials use the word "affordable" they must mean something different than the way that I interpret that word. I have a feeling that the only real measurable change that will come out of all this will be taller buildings downtown.

(Erica C. Barnett, The Stranger, 04.06.2006)

Thursday, April 13, 2006

Seattle A "FairValue"

A commenter pointed out this article on CNN Money a few days ago regarding overpriced coastal housing markets:

Some of the most overheated U.S. housing markets did become a little less overvalued during the fourth quarter of 2005 — but homes there didn't actually fall in price.

Other factors, such as rising income, combined to increase what Local Market Monitor president Ingo Winzer calls the equilibrium value — what the typical house should sell for . Winzer compares the equilibrium value to actual prices to compute the percentage overvalued.
The more overvalued a market is, the more likely it will regress toward its equilibrium, according to Winzer. He also says that the greater the overvalue, the larger the correction will be and the longer the time period before the market starts growing again.

An overvalue of 40 percent or more indicates very high risk of correction, he says.
So, according to Ingo's secret formula, Seattle-Tacoma is only 8% overvalued, ranking as a "FairValue" and not likely to "regress." Not surprisingly, I find myself unconvinced. Though I do wonder what the numbers would look like if they focused more on just King County. The figure given in their table for "Seattle-Tacoma's" actual home price is a mere $311,000. That's probably correct for such a broad area, but as we all know thanks to the huge headlines last week, King County's median home price of $405,000 is 30% higher than that, and 41% higher than the "equilibrium" value.

In other news, I'd appreciate it if the tone of the comments was taken down a notch. There's no reason to get snippy with one another. Also, I happen to quite like Seattle. This is not the "We Hate Seattle" blog. If you just want to complain about the town, you can start your own blog for that. Thanks.

(Les Christie, CNN Money, 04.07.2006 )

Wednesday, April 12, 2006

Newsflash: Rapid Appreciation Not All Good

Peter Callaghan must have missed the memo. A local reporter actually covering the dark side of increasing home prices . Holy cow, I think I might faint.

Homeowners seem to enjoy the breathless stories about superheated real estate markets. Pierce County, for example, saw an 18 percent increase in the median price in the last year. In King County it was 12.3 percent; in Thurston, 24.9 percent.

It's nearly always covered as good news. Apparently we all feel that much richer, given that many people's personal wealth is tied up in their homes. We tell stories about how much houses in our neighborhoods are going for with a "can-you-believe-it?" shake of the head. No matter when you bought – last year or last century – it's worth more now than it was then.

The news isn't so good for the folks who haven't been able to buy a house because they're poor or young or coming here from places where prices aren't so nutty. They certainly have a different reaction to the news.

A rising tide raises all boats, which is cool as long as you have a boat but not so cool if you're standing on the beach.
No one wants the price of housing to stagnate or decline, not even those who have hopes of becoming owners. But bad stuff results from repeated double-digit increases. At the risk of bringing everyone down, here's why:
  • It makes it even more difficult for people to buy homes. Despite lottery advertising, the American Dream is not winning the lottery, it's owning your own home.
Granted it's a pretty short article and doesn't go into any real depth on the serious issues of high home prices, but it's better than the ra-ra real estate pieces we're normally limited to. Although considering my own position as well as the nature of many comments on this blog, I have to disagree with his assessment that "no one wants the price of housing to decline." I think plenty of us do in fact want just that.

(Peter Callaghan, Tacoma News Tribune, 04.09.2006 )

Tuesday, April 11, 2006

Super Smart Seattle

So maybe Seattle isn't attracting CEOs and high-level professionals, but let not your heart be troubled. Seattle's skyrocketing house prices will be carried along by college graduates!

College graduates are flocking to America's big cities, chasing jobs and culture and driving up home prices.

Seattle, a new analysis shows, is on the top of the educated citizen heap, and last month passed $400,000 mark in median home prices, compared with a national average of $151,000.*

Though many of the largest cities have lost population in the past three decades, nearly all have added college graduates, an analysis by The Associated Press found.*
Seattle was the best-educated city in 2004 with just over half the adults having bachelor's degrees. Following closely were San Francisco; Raleigh, N.C.; Washington and Austin, Texas.
"The largest predictor of economic well-being in cities is the percent of college graduates," said Ned Hill, professor of economic development at Cleveland State University. To do well, he said, cities must be attractive to educated people.

*(The bold bit was not in the original AP article, and the italicized bit was left out of the P-I-contributed article.)
So according to Ned, Seattle is predicted to have the best economy in the nation. That's a great theory and all, but if it's true, I'm still wondering why wages have been going down in Seattle... Can anyone explain that to me? Anyone?

Seattle: Where college graduates come for lower wages and expensive housing!

(Stephen Ohlemacher, Associated Press via Seattle P-I, original , 04.10.2006)

Monday, April 10, 2006

Is Seattle Attracting Good Jobs?

Some of the recent discussions in the comments have centered on job growth in Seattle. In a comment on the most recent post, T.S. made the following claim:

The job situation is misleading. While there may be low unemployment, which is good, the newly created jobs are simply not high-paying enough to support the current housing market. Unless all the jobs being created are executive positions, that is, which I don't think is the case.
This comment reminded me of an article that was still in my inbox and hadn't been posted yet. The headline is When it comes to attracting CEOs, Seattle's not as pretty as she used to be.
At a recent meeting attended by local investors, a principal with a Seattle-based venture capital firm described the challenge he faces convincing top CEO types to move to Seattle to lead his ventures. His primary competition seems to be Silicon Valley, where a robust venture market chases the same business leaders.

Ask a typical Seattleite, though, and he'd be surprised the contest is even close. Seattle or Silicon Valley? He'll tell you that the Silicon Valley is all about expensive homes, snarled freeways and an embarrassingly low espresso-stand-per-capita ratio. Bad schools, smog and crime, too. Offered a choice, any CEO-for-hire would accept the invitation to Seattle without a thought, right?

It turns out not to be so anymore. According to our local venture firm principal, traffic is becoming a major Achilles' heel for our region — to the point where it spooks some CEO targets away before they get to the interview. After all, CEOs measure the same things anyone would: affordability of housing, lifestyle, quality of schools for their kids, commute distance to work, etc. Apparently, our traffic is nastier now. In the beauty contest to attract CEOs, it looks like Miss Silicon Valley is leading.
Perhaps we can concede the traffic mess to Miss Silicon Valley. But we must have the other parts of the contest won, right? How about affordable housing? Surely we have expensive California beat on that one.

Well, not so much anymore. Our rising housing prices have now put Seattle neck and neck with our competitor to the south. Call this part of the contest a draw.

How about schools? We all know about the crowded and underfunded California public schools.

Guess again. Seattle's schools just aren't what they used to be, apparently.
Let's also not forget the power of our delightful estate tax to drive away business leaders. Remember, the hard facts show that wages in our area are either growing very slowly, or actually decreasing. Where are the hard numbers that demonstrate Seattle's supposedly booming economy? Sheer numbers of new jobs are nice and all, but if they all pay less than the median there's no way that new jobs are going to sustain the housing growth we've seen.

Sure, we all love Seattle, but what does Seattle have to attract strong businesses and keep them here? Does Mr. Hoban's point extend beyond just CEOs to good, smart people in general, and even whole businesses? I think it does.

(Tom Hoban, Snohomish County Business Journal, 04.2006) Seattle Immune To Bubble

Eileen Tefft over at Rain City Real Estate Guide pointed out that has ranked Seattle (together with Portland) as one of the top ten "bubble blowers" — places that they say "appreciation should continue to grow."

The overall news out of the Pacific Northwest isn't great. The area lost jobs in the tech bust and is still recouping. But in terms of housing price appreciation, the thing these cities have going for them is a restriction in supply. Tight controls on development have prevented the normal progress of builders going farther out from the city core to find cheap land in the suburbs. Hence, demand stays high for available units. (Forbes Magazine lists Seattle as the most overpriced place to live in the country; Portland was third on the list.)

"Portland and Seattle have really benefited from California's growth," says Richard Gollis, principal of San Francisco-based real estate consultants The Concord Group. "Portland is starting to see the next generation of housing product, which is large-scale, high-density projects in downtown. The same thing is happening in Seattle. People who moved there 20 years ago for the tech market are older now and have a different lifestyle."
Granted that's only a two-paragraph explanation, but I find myself unconvinced... I see plenty of new construction around here. I'd be surprised if people are moving here faster than new houses/apartments are being built. Furthermore, the claim that Seattle has "really benefited from California's growth" is certainly true, but what happens when that growth dries up? Even on's own list, Los Angeles and Sacramento are in the top ten "bubble busters" where "values [can be] expected to decline" and not a single California city made the "bubble blowers" list.

Of course, since Rain City Real Estate Guide is by realtors, for realtors, Ms. Tefft agrees wholeheartedly with's analysis:
Interestingly, sales are down, but so is inventory. In March 2004, there were 7,156 homes for sale countywide. March 2005's inventory was 5,244 homes. This March recorded a further drop, to 5,100. This is the pinch that causing the rise in prices.

At the same time, the local economy is growing and employers are adding jobs, bringing more potential buyers to the area. So the competition for available homes is strong and prices are reacting accordingly.

We agents have been experiencing this hot market all spring as we did through most of last year, possibly feeling the market fluctuations first. We're out there in it, pricing homes to reflect the low inventory and coaching buyers for the best positioning in a multiple offer situation. I just watched the price of an Eastside condo jump $20,000 in a two week period!
Rah, rah, rah... gooooo home prices! But seriously, even as the local economy continues to grow, unless wages start to make significant gains, there will come a point where home sales will falter because people just won't be able to afford them. Personally, I think we are very close to that point. One way or another, 2006 is going to be an interesting year.

(Pat Curry,, 03.01.2006)
(Eileen Tefft, Rain City Real Estate Guide, 04.07.2006)

Friday, April 07, 2006

March Sales Figures Roundup

Okay let's try to group the rest of the March articles into one post. The Seattle P-I assures us that everything is perfectly normal.

Pending home sales in Seattle and King County fell again in March, while home prices continued to climb. Real estate experts said the declining sales shouldn't be cause for concern and likely reflect a "normalizing" of the market after many years of strong sales.
More significant, some say, is the reduction in home listings, a reflection of the housing shortage that is also helping drive up prices.
Cute. "Normalizing." Well at least they didn't say that there's a buyer frenzy. And I love how a 3-5% reduction in listings is "more significant" than a 8-10% decrease in pending sales. Yeah, I'm buying it... wait, no—I'm not.

The King County Journal takes it a step further and leads the cheer for the supposedly still-booming market:
Median home sales prices jumped more than $20,000 in one month's time in southeast King County and almost $12,000 on the Eastside, shattering housing market records.

In southeast King County, the median price for closed sales of homes and condos in March rose to $314,975, up from $294,000 in February and the previous record high of $309,000 set in January.

On the Eastside, the median price of single-family homes and condominiums whose sales closed in March rose to $476,475, smashing the "old" record median price of $464,500 set just the month before.

Northwest Multiple Listing Service officials, who released the March report Thursday, and local real estate agents attribute the surge in home sales activity this past month to the growing economy, relatively low interest rates, "attractive financing" options, and an increase in available properties to choose from.
"Attractive" if you don't care about prudent investing for the future, I suppose. And what's with the phrase "surge in home sales activity"? Again, pending residential home sales in King County were down 10.6% from March '05. I guess since it's a smaller negative number than February (-14.56%), that constitutes a "surge." Weee!

Bucking the trend, the Tacoma News Tribune actually dares to report signs of the slowdown:
Homes are coming onto the market and basically sitting there in many parts of Pierce and King counties, according to a new report released Thursday.

But being on the market longer doesn't mean the homes are any cheaper.
That's a refreshing bit of relatively balanced reporting on this month's numbers. Of course, the slowing signs are a bit harder to ignore in Pierce County, with a 27% increase in listings and a 10% decrease in pending sales.

 ListingsPending SalesClosed SalesSale Price
'06'05% chg'06'05% chg'06'05% chg'06'05% chg

You can run, but you can't hide, Seattle. The real estate slowdown is at your doorstep and you can only deny it entrance for so long.

(Kathy Mulady, Seattle P-I, 04.07.2006)
(Clayton Park, King County Journal, 04.07.2006)
(Barbara Clements, Tacoma News Tribune, 04.07.2006)

Perplexing March Reporting

Let's take a look at our friend Elizabeth Rhodes' more lengthy article in today's Seattle Times, where she paints a picture of a Seattle area real estate market that is still super-hot and doesn't know the meaning of slowdown. I usually try to limit article quotes to just a few paragraphs but this one has so many gems I'm going to have to break my usual rules.

Ann Dickhoff's house purchase typifies a milestone in more ways than one.

Like many other parents of adult children, Dickhoff was afraid her son would be priced out of homeownership in his hometown.

So last month she helped him buy a North Seattle rambler, gulping as she paid $409,000 — or $89,000 more than she shelled out a year earlier for a nicer house half a block away.

In doing so, Dickhoff helped fuel the buyer frenzy that's pushed the median cost of King County single-family homes past $400,000 for the first time.

Still, median prices in some neighborhoods are much higher than that, seriously undercutting affordability and turning the hunt for a moderately priced home into blood sport.
Where to start? First off, for her "typical" example, she's choosing someone who has no problem plunking down for a $400,000+ house that's not even for them, but for their kid? Maybe I'm just really out of touch with King County, but that doesn't seem at all typical to me. Secondly, is there really still a "buyer frenzy" in King County? Again I direct you to the NWMLS March data. Here are the pertinent figures for March in King County:

 ListingsPending SalesClosed SalesSale Price
'06'05% chg'06'05% chg'06'05% chg'06'05% chg

Ms. Rhodes seems to be talking only about the "Res." figures in her article, so look at those figures in particular. Specifically, check out the double-digit negative numbers in the "Pending Sales" and "Closed Sales" "% change" columns. Despite the fact that the number of listings was down just 2.75%, the number of sales decreased by at least four times that amount. That sure doesn't look like a "buyer frenzy" to me. Moving on.
Dickhoff and her husband, Walton, an administrator for the National Oceanic and Atmospheric Administration, had to pay $320,000 last year to snag a small Greenwood-area bungalow for her mother. "That was our wake-up call," she said, to climbing prices and the possibility that homeownership for her kids was in jeopardy.

Indeed that's a serious possibility for many residents, according to Washington State University's Center for Real Estate Research. Average-wage workers, in particular, are susceptible to the double whammy of rising house prices and rising interest rates.

In the past year, the average interest rate on a 30-year, fixed-rate loan has climbed half a percentage point to 6.5 percent.

The WSU center's latest affordability index reveals that King County buyers earning median wages have just 80 percent of the income needed to afford a median-priced house. First-time buyers have 45 percent.

In January, Ann Dickhoff, a nurse at Swedish Medical Center, began hunting for a house to buy for son Paul, 21, a cheese maker at Pike Place Market, to live in with roommates. A real-estate agent warned her the first one she bid on would sell for more than its $400,000 list price.

So the Dickhoffs bid $416,000 — and added a $30,000 escalator clause in case a bidding war broke out.

It did, and they lost that house to a $450,000 all-cash offer.

That made clear to her that "the market was taking off, and if we were ever going to buy something for the kids to live in, we'd better make a move."

They quickly did, landing for $409,000 a newly refurbished 1950s three-bedroom with a spacious new garage.

Still, if the market weren't so hot, "we wouldn't even have looked at it," Dickhoff confided. The house is on busy Greenwood Avenue North, and the street noise is significant. Plus a newer townhouse development has consumed its entire backyard.
Did you notice in there how she barely made a passing mention to the fact that first-time buyers making median wages have just 45% of the income necessary to afford a home? Do reporters like Ms. Rhodes not see that as a huge problem? Granted my perspective may be a bit skewed being a potential first-time buyer and all, but doesn't that deserve more than a half-sentence mention in an article like this? Furthermore, did this example family, the Dickhoff's, do any serious research into the current market before jumping in with both feet to buy their kid a house? Seriously, "the market was taking off"?!? Sweetheart, the market took off two years ago, and it's been riding the appreciation wave since, but sooner or later (probably sooner) it is going to land. Maybe it will be a soft landing, but if people like the Dickhoff's truly "typify" the King County home buyer, I'm afraid it'll be rough indeed.

(Elizabeth Rhodes, Seattle Times, 04.07.2006)

Times' Report Not Consistent With Figures

I could be missing something here, but yesterday's blurb in the Seattle Times about the March sales figures seems to me to be blatantly misrepresenting the facts.

Western Washington home prices continued to climb last month as 17 of 20 counties reported price increases of 20 percent or more compared with a year earlier. That's according to the Northwest Multiple Listing Service, which released March sales numbers today.
I honestly have no idea what sales numbers Ms. Rhodes is looking at, because as you can see for yourself (pdf), the NWMLS figures track 17 specific counties (and apparently 3 more classified under "others"), of which only 10 "reported price increases of 20 percent or more compared with a year earlier," 5 (and "others") reported price increases ranging from 2.90% to 18.09%, and 2 have not been tracked individually for an entire year. Furthermore, as I said yesterday, on the whole listings are up, and "pending sales" are down. Of the 17 counties that are individually tracked, only King, Lewis, Cowlitz, and Kittitas saw reduced inventory.

Something's fishy about Ms. Rhodes' blurb.

(Elizabeth Rhodes, Seattle Times, 04.06.2006)

Thursday, April 06, 2006

Pierce Also Feeling Slowdown

Moving a little further north, it appears that Pierce county is noticing the slowdown as well, though not to quite the same degree as Thurston.

More homes are hitting the market and staying there, as housing prices continue to climb, according to new numbers released today by the Northwest Multiple Listing Service.
The biggest change was in the number of homes on the market. While inventory shrunk 5 percent in King County, the total number of homes in Pierce County increased by 23 percent when compared with the same number in March of 2005.

The inventory in Thurston County jumped by 77 percent, according to the report.

"People are taking a bit longer to decide, and even with the increase in inventory, there hasn't been a reduction on selling prices," said NWMLS director Dick Beeson, broker at Windermere Real Estate/Paragon in Tacoma. Beeson called the traffic at local houses "pretty decent."
Looking at the NWMLS numbers (pdf), what I find interesting is that the total number of listings is up 6.79%, while pending sales are down 8.94%. I'm no economist, but I would think that type of situation would put downward pressure on prices. 2006 should indeed be an interesting year.

(Barbara Clements, Tacoma News-Tribune, 04.06.2006)

Slowdown Marches Northward Through Olympia

As I've been following the other bubble blogs over the past year or so, it has seemed like the housing slowdown is slowly moving from the south to north and east to west, with our state being at the trailing end of market realities. In the recent months, I've seen articles first about slowing in San Diego, then LA, then Sacramento, then Portland/Vancouver, and now... Olympia.

The South Sound real estate market is beginning to evolve from a seller's market to more of a buyer's market as inventory levels rise and home prices decline, according to Olympic Multiple Listing Service data released Wednesday.

Active home listings in March stood at 1,047, well above the 568 active listings for last March, the data showed.

As a result, the median price of a home dropped slightly from $248,475 in January to $244,575 in March.

"We are seeing some stabilization in pricing based on the inventory in the marketplace," said Olympic MLS Manager Jerry Wilkins.

Still, the March median price of $244,575 was up 22 percent over the same period last year, according to the data.
Of course, "was up 22 percent over the same period last year" sounds a lot better than "is stalled at the same level it was five months ago in October." It will be interesting to see how they spin it if this keeps up for another half a year and the "same period last year" was the same or higher.

(Rolf Boone, The Olympian, 04.06.2006)

Tuesday, April 04, 2006

Homebuyers Need More Power

A friend forwarded me this link that he received in an email from his credit union. Can't afford a home? Fear not, BECU can wave their magic wand and increase your buying power!

Is Your Dream House Just Beyond Your Price Range?
posted Apr 04, 2006

Home prices have increased tremendously over the past several years. Whether you're looking for your first home or would like to buy a nicer home, it seems that no matter what your price range is, the house you really want always costs a bit more. Well, there is some good news.

BECU offers several home loan programs that are designed to increase your 'buying power' by either allowing you to qualify for a larger loan amount or reducing your monthly payments. You can save thousands on closing costs too! BECU's home loan closing costs are consistently lower than other lenders.
Super, so if I can't afford a house, we can just play with "the numbers" until I can! That's definitely a recipe for success... Clearly I'm old fashioned, because I just don't see the underlying wisdom behind intentionally biting off more house than you can chew. Surely prudent saving and spending within a realistic budget is better in the long term, right?

Less (monthly payment) is More (house). Greed is Good. Debt is Wealth.

(BECU, 04.04.2006)

Monday, April 03, 2006

Vashon Island's Affordability Future

A group of developers and community leaders got together last week in Vashon Island to peer into their crystal balls and predict that area's future...

Developer and Vashon Island Chamber of Commerce president Tom Bangasser said at last week's Vashon Maury Island Community Council meeting, "People who buy property (on Vashon) to develop it because they can are going to drive the population."

He was speaking about his interest in analyzing the population capacity of the current Vashon zoning plan.

The comment came in the context of a presentation Bangasser made to VMICC about 45 benchmarks created by King County to trace progress in meeting desired outcomes for the county of the Growth Management Act (GMA) of 1990.
Realtor Emma Amiad, asked to speak about benchmark #21, "Supply and demand for affordable housing," said, listing eight quick points:
  • Supply and demand for affordable housing: lots of demand, no supply.
  • Homelessness: persisting.
  • Apartment vacancy rate: virtually zero.
  • Affordability gap: huge.
  • Home ownership rate: + -80 percent.
  • Trends of costs: up.
  • Public dollars spent: almost none other than Vashon Household.
  • Rental housing units affordable to low income: almost none.
Then, in a satirical turn, she moved from that relatively bleak vision as she told a short fable about Vashon in 2016, in which Dockton became a condo paradise because Vashon town's growth was limited by the lack of water availability.

Also in the fable was a tour, "McMansion Tour," also called "Starter Castle Showdown," conducted by the Chamber to contribute to its income stream, and open only to houses of 10,000 square feet in space.

She also envisioned Burton and Vashon becoming upscale meccas for regional shoppers and tourists, and she included a new bus service to bring the Island's work force into town from Tacoma and Southworth.

By contrast, Amiad offered a second fable, one in which small family businesses thrived and affordable cottage home developments as well as accessory dwelling units were in evidence.

And part of the vision was that all the structures were built "green" and capped at 5,000 square feet for a new or remodeled house.

And finally, power would be generated by wind, solar and wave action with Vashon's power system a model for other Washington rural towns.
I guess I'm just ignorant, because I don't really see how "green" building and wind power are going to keep housing costs under control. Sure, they're both noble goals that are great to strive for, but what do they have to do with the price of homes? The only connections I can imagine would seem to put upward pressure on home prices. But hey, whatever floats your boat, Vashonites.

(Vashon-Maury Island Beachcomber, 03.29.2006)

1315 1st Ave Defies Seattle's Bubble

Here's an... interesting story about the "tacky little building at 1315 First Ave."

In the high-stakes game of downtown real estate, the tacky little building at 1315 First Ave. was surely doomed. A group of heavyweight developers, including a billionaire, a wealthy venture capitalist, and a former Seattle mayor, aimed their wrecking ball at Peaches, Kitten, Trixie, and the rest of the struggling dancers at the Lusty Lady theater. They and their nudie house were about to become the next victims of the condofornication of Seattle. Then the inconceivable happened: In a city where rapacious new development effortlessly bulldozes fading history, someone said no to money. Christto Tolias and his family, longtime owners of the century-old, mostly vacant structure housing Peaches and other strippers at the popular peep-show theater, refused to sell the property to ex-Mayor Paul Schell and his fellow hotel/condo developers.

An attorney with knowledge of the deal says the rejected offer was "several" millions of dollars. Stunning as that seems, Tolias made money anyway. Schell and partners in the new 21-story, $120 million Four Seasons hotel and condo tower at First Avenue and Union Street had to regroup, then make Tolias another offer—for air rights above the Lusty building. In the end, the big developers not only didn't get their prized property, they paid the defiant Tolias $850,000 for thin air.
So what would motivate a downtown land owner to hold on to their property rather than sacrifice it to the relentless drumbeat of progress and piles of free bubble money? Why, nekkid girls, of course. So now we know.

(Rick Anderson, Seattle Weekly, 03.23.2006)