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Monday, June 12, 2006

McMansions Cramp Kirkland's Style

Sorry I'm a bit behind. I've had a busy weekend. This story was posted last Thursday, and while it might not directly relate to bubble issues, it's still interesting to consider. Summary: McMansions in Kirkland may be getting out of hand .

As Kirkland becomes a destination for new luxury homes — many taking maximum advantage of the lot space — residents worry that the new houses are changing the feel of their communities.

The concerns have led the city to take a hard look at the rules for determining how large homes can get. Proposed changes will be presented at a public hearing tonight.

The issue is not unique to Kirkland. Across Puget Sound, communities are seeing small homes on modest lots being replaced by much bigger homes that often seem out of scale and overwhelming to neighbors.
...
To [Loren] Spurgeon, [chair of the city's Market Neighborhood Association,] more out-of-scale homes mean fewer people can afford to live in Kirkland, making the city less diverse.

"It's improving the value of the homes, but the blowback from it is that retired folks are unable to continue to live here," Spurgeon said.

Others have mixed feelings. Russel Smith has lived in his home on Seventh Avenue West since 1967 and, while he's not happy that his taxes have increased, he said the new homes improve Kirkland's appeal.

"It is changing the quality of life," he said. "I've lived here since 1967, and back then it was a town of little bungalows that were thrown up quickly for the ship workers. I didn't think it looked too nice."
Hmm. I think he's got a point. Here's my plan: Every home within a 5 mile radius of each of King County's downtown centers should be no less than a $350,000 condo or a $700,000 McMansion. All apartment complexes should be converted, and all small old houses should be torn down and replaced with more "appealing" homes of no less than 3,000 square feet. Also, no home (condo or house) is allowed to be without granite countertops. If we implement my plan, King County will have the most appealing cities on the planet! It's foolproof!

(Lisa Chiu, Seattle Times , 06.08.2006)

44 comments:

matt said...

Interesting article, what I like about these kind of 'Times articles is the somewhat obvious tip-toeing that is done to avoid any mention that bubble-growth may have somekind of adverse affect on the communities as a whole...

seattle price drop said...

"New Guidelines Could Reduce Interest-Only Loans"

from Sunday Seattle Times:

"Within weeks, a team of regulators led by the Federal Reserve and the Comptroller of the Currency is expected to issue new guidelines for mortgage lenders that could end up reducing the number of interest-only and payment-
option loans being offered."

June 11, Seattle Times, page E1

biliruben said...

Guidelines? Guidelines!?!

The folks doing the most egredious lending don't give a twaddle about no stinking guidelines.

seattle price drop said...

LOL yeah I know, but maybe it's a start? there are some pretty hairy loan stories coming out right about now.

At some point, perhaps somebody somewhere will be forced to act?

softwarengineer said...

HOUSE PRICES IN AMERICA BY GLOBAL INSIGHT & NATIONAL CITY JUST LISTED SEATTLE 34.1% OVER-VALUED, IN ITS JUNE 2006 REPORT

For those of you that need to see to believe, here's the URL from CBS MarketWatch:

http://www.globalinsight.com/gcpath/1Q2006report.pdf

What does that mean for McMansions? Let's put it this way, if you can get 5.25% on a 1 year CD, save your down payment and rent it out for a few years. Bargains will come later, but sellers will be reluctant to sell cheap until their property lays vacant for about 6 months.

Happy renting.

Anonymous said...

weird, that overvaluation report has Seattle at $344,000, thought we've seen that number before in another stat sheet, anyone?

PepeDaniels said...

If citizens don't take a stand on this now and in the future, there will be a very real impact on your community.

The wild building explosion of condos etc. will ruin views, make traffic even worse than it is and tax the existing infrastructure. Whatever sanity you've had in Seattle will quickly dissapate.

In Florida as I'm sure other places, there's this kind of wild west mentality about development -as if just adding another 1000 people to some neighborhood is all good without any consideration about what its impact is likely to be.

It's important to remember that many of these developers do NOT care a lick about your problems in Seattle. They want to build and get paid - they care nothing at all about infrastructure issues once they're gone.

seattle price drop said...

Thanks for that PDF softwareengineer.

Seattle is on page 13 for those who don't like the hunt and peck.

meshugy said...

The report says that:

When prices do fall from overvalued levels, they typically fall by about half the overvaluation, DeKaser said. The correction usually takes three and a half years.

So will we see 17% drop in prices in three and a half years? That would take us back to 2005 prices...maybe a little more.

ser said...

pepedaniels-

let 'em build and build and build. they need to make their money while they still can.

The housing bubble has already ruined communities and the American economy to boot.

At least with the overbuilding there'll be plenty of cheap properties around when the sh#t hits the fan.

Municipal govts will be able to stop talking about funding for "below cost housing" etc.

Build like there's no tomorrow.

biliruben said...

So will we see 17% drop in prices in three and a half years? That would take us back to 2005 prices...maybe a little more.

That's what I expect, though it isn't going to evenly distributed.

The bottom third will likely see just a 10% drop. The middle third about a 20% drop, the top third a 30% drop.

And of course Ballard a 70% drop.

This is because credit will tighten significantly, and it will be harder for first-timers to stretch their budgets to afford making the jump to a mid-priced starter. Also, it will be harder for all those in the low and medium-end who bought with little equity to move up.

The Ballard drop won't have anything to do with finances. It will be solely due to all the lousy neighbors.

PepeDaniels said...

Interesting article on marketwatch.com

http://tinyurl.com/mvqc3



Follow the link there to the research page. There you'll see that Seattle is no Miami in terms of being overbuilt, developed etc. coming in at 64% (follow the link to read the full report) but still only edges out often reported and overdeveloped Phoenix by just %10.

By the way, the NYTimes article in this weeks Sunday paper looked pretty good.

Anonymous said...

Another 8 Central Banks tightened late last week.

Can you say "Bye-bye liquidity"?

Of course, that won't affect us here in Seattle.

We're immune to presence or lack of liquidity.

biliruben said...

With all this rain, we will never, NEVER, lack in liquidity, and anyone who says otherwise is a fool.

Anonymous said...

LOL good one Bili..How true.

Lack of liquidity will NOT affect the PNW.

We trully ARE different here.

So move along folks. Nothing to see here.

Stock market crashing, global monetary tightening, RE crashing all over the world. Seattle market safe.

meshugy said...

And of course Ballard a 70% drop.

ha ha...and Bill Gates will move his mansion to the gold paved streets of Bot-Hell!

Anonymous said...

I am sure there were people complaining in 1960s about how some historic buildings were torn down to make room for newer, taller ones. Let's not go back to riding horses.

lars_lahar said...

"NEVER, lack in liquidity"

And liquidity will be pumped further if/when Rainier blows.

ser said...

The PDF showing Seattle at 34% overvalued is interesting.

I've been watching these over-valued charts all year.

Has anyone else noticed that with each new chart, the amount of overvaluation increases?

Seattle, for instance was at 25% over on the chart i saw a couple months ago.

Any bets on when seattle will reach the 45% over-valued valuation?

My bet is Aug or Sept.

biliruben said...

I don't live in Bot-Hell, 'Shugy

I live in Whoreline just around the corner from Fake Forest Snark.

Or is it Poorline? Boreline? Snoreline?

biliruben said...

And btw, you do understand that rising % and falling % are different, right?

If a 200K house rises 50% it is now worth 300K.

If that 300K house subsequenty falls 50%, it is not worth 200K again. It is worth 150K.

I don't know if it was your error or the authors, but I figured I'd give you a heads-up in case you were counting your chickens. Something you would never do, I know. Just being cautious.

biliruben said...

Also, taking their "historical" precedents as good predictors of the future is a very silly thing to do.

Just because the oil patch fell x amount doesn't mean much.

You need to take a long-term view.

Long-term, houses have appreciated less than 1% per year for the last century, after inflation.

Put that into calculator and choke on it. All markets correct, and housing doesn't measurably appreciate over time. It's a horrible investment, once you take out the wealth transfers from the poor to the rich that the feds force on us.

Do away with the mortgage interest deduction, now!

meshugy said...

I live in Whoreline just around the corner from Fake Forest Snark.

No wonder you're so bitter...Soreline is just a big refugee camp for people who got priced out of Ballard.

:0)

Regarding the globalinsight report...I can't really say I can take them very seriously. They didn't even get the median price for Seattle right. Did they us USA today as their source? Oi vey...

Anonymous said...

I'm one of the Meshugy defenders, but I think Biliruben wins today's round! Ding Ding.

PepeDaniels said...

ser said...
The PDF showing Seattle at 34% overvalued is interesting.


Thanks for the input ser. I haven't been watching it for any time period so it's interesting that you're seeing it going up and up...worth checking out if anyone believes stuff isn't going up to overvalued levels

seattle price drop said...

Agree with getting rid of the mortgage interest deduction.

Also would very much like to see a hefty capitol gains put back on RE. It was there the last time I sold. I lived through it and was happy enough with the profit I made after owning 7 years.

Has anyone else noticed that a lot of the price mark-ups the last couple years have been precisely the amount allowed by the new cap. gains? 250K single/500 married

Anonymous said...

to filter the meshugy commments, simply...

1) click on the 'said...' next to his name and minimize...

2) enjoy the blog Troll-free

sick of 'shugy said...

WOW!!! thanks Anon!! You Rock!!

Christina said...

Stock market crashing, global monetary tightening, RE crashing all over the world. Seattle market safe.

I know this was a sarcastic remark. I do believe that Seattle-area housing is overpriced, and 34% sounds about right for some areas (mine is closer to 29-30% -- inventory is comparatively low within Seattle, and prices aren't dropping yet, though of course they will).

I have a fellow homeowner friend who is giving prospective housebuyers advice to "get in while they can," and I personally think this is irresponsible or ignorant. She is not in real estate. I'm telling folks to build their downpayment, or else move to St. Louis or Indianapolis or some dying city.

2002 through 2004 had relatively low price appreciation, 2005 isn't a typical year for appreciation (15%), so I'm thinking there's got to be some depreciation in the forecast.

My question: do people pay a premium to live in a sustainable city that's not so likely to be fucked over by an oil crisis? Can we expect some areas to always be overpriced because of their location and breadth of economic diversity, and some areas to always be underpriced because they have tornados, floods, or hurricanes every 2-3 years?

Anonymous said...

Think a LOT of it is the "desirabilty" factor. And much of that is based on weather.

How else to explain FLA? Before the boom, people were moving there in droves. Even young people.

And they didn't even have an economy to speak of. But RE was CHEAP compared to other areas of the country and the weather well-liked by many.

Seattle's not at the top of the weather-desirable places, but it's not at the bottom (Buffalo!) either.

Anonymous said...

The above is why, when CA. tanks, a lot of people will move there rather than stay in Seattle.

seattle price drop said...

Looks like "guidelines" are finally becoming "regulations". It's a start.

See the article "FHA Finalizes "Anti-Flipping Fraud" rules. The rules take effect July 7.

http://realtytimes.com/rtcpages/20060612_antiflipping.htm

cosmos said...

When prices do fall from overvalued levels, they typically fall by about half the overvaluation, DeKaser said. The correction usually takes three and a half years.

So will we see 17% drop in prices in three and a half years? That would take us back to 2005 prices...maybe a little more.


I suspect the drop will be closer to the full 34%, on average. Why? Because not only will there be a flood of foreclosures and people dumping investment property, interest rates are going to fly high. Add to that inflation eating up more of people's income. To bring homes into the affordable category, it will take far more than a 17% drop.

sammy said...

I agree Eliz. Anyone who thinks this disconnect can go on forever or only correct "a lttle" is a wishful thinker or not thinking it through, IMO.

The credit bubble is just too huge.

marin_explorer said...

When prices do fall from overvalued levels, they typically fall by about half the overvaluation, DeKaser said.

Interesting. From the data I've seen, overvalued real estate eventually reverts to wage-supported prices. If it's really overpriced, why would it only go halfway? Of course, it might stagnate for a long time until wages catch up--and inflation cuts into home "values".

Anonymous said...

Isn't there such a thing as an "overcorrection" when big bad bubbles burst?

IMO this credit bubble is one of the biggest and baddest of all times.

PepeDaniels said...

Christina said... My question: do people pay a premium to live in a sustainable city that's not so likely to be fucked over by an oil crisis?

I don't know if Seattle's so sustainable with it's current public transportation setup? Better than some areas but it doesn't seem to have the public transit system quite hacked yet? That's why I've been surprised at the slow move toward a better rail system here?

Relatively speaking, there's money here and people are smart enough to realize we've got to move toward something different. If it can't happen here, it makes me wonder about other cities with less money or smarts frankly?

By the way, if all of those Californian's move her to "save it" from a burst RE situation, do you think traffic's going to improve or start looking even more like a South Cal. freeway!!??

I've lived in NY state as well as Florida. Arguably Florida's the most uncomfortable of the three places (Summer) but frankly (yes it's raining again out there) this is the most depressing weather system I've ever lived in.

I'm a short timer here due to the overall grey quality of life here and the relatively insular personalities people so often seem to have. Ironically, I'm pretty liberal and yet I feel like I've seen the far side of it - the limits of it in some way here?

I don't want to offend anyone but even some Seattle natives won't argue with you on those points (people are polite here afterall! haha).

For those couple of reasons alone, I consider it kind of overrated and definately overpriced here.

The positives are the natural beauty of tne NW and the generally civic way of life here. People are well educated and that has a good effect on the quality of life.

Just my thoughts - hopefully I didn't offend anyone (constantly apologizing is a trait of East coasters here if you hadn't caught on - we know we're offensive!!!)

Anonymous said...

Pepe-

Quite sure christina did not intend to say that Seattle is an energy conscious place. At least, thats not how I read it.

I mean really, we're all about cars here. the more cars the better.

Seattle has no intention of ever fixing that problem. for the past 40 years, every time a solution is debated, it gets nixed.

I assume she was referring to some other place, unmentioned.

And PS you're right, it's not so liberal here. And don't buy into the "we're so smart" PR campaign either.

Seattle is just about boosterism, pure and simple.

PepeDaniels said...

Anonymous said

Pepe-
Quite sure christina did not intend to say that Seattle is an energy conscious place. At least, thats not how I read it.


Yeah, I was throwing out more of a question about it myself. I think you're right though about cars and boosterism!

I guess all cities do it to some extent.

My favorite BS statement from Gov. Bush in Florida last year came after yet another area had been demolished by a hurricane -

"That's the price you pay for living in paradise"

No seriously, he said that.....

Much of the beauty of old Florida is paved over with endless, mind numbing strip malls with crack addicts wandering around like zombies in a forgotten video game.

I guess just about anything is game after hearing that one.

Christina said...

I don't know if Seattle's so sustainable with its current public transportation setup? Better than some areas but it doesn't seem to have the public transit system quite hacked yet? That's why I've been surprised at the slow move toward a better rail system here?

Quite sure christina did not intend to say that Seattle is an energy conscious place. At least, thats not how I read it.

I mean really, we're all about cars here. the more cars the better.

Seattle has no intention of ever fixing that problem. for the past 40 years, every time a solution is debated, it gets nixed.

I assume she was referring to some other place, unmentioned.


Me too. I suppose there's "work smarts" with myopic thinking. Buy a one-bedroom condo in Belltown for $500,000 and supposedly never need a car again. Buy a two-bedroom condo in Lynnwood for $250,000 and buy a big SUV to take you everywhere you need to be. Eat up rising gas costs, rising insurance costs, hang out longer in traffic with the other single-occupant vehicles, eat out more or nuke frozen dinners because you're too tired to make food.

Even the smarmy millionaires in Belltown, Capitol Hill, Queen Anne, and Montlake are still at risk of cancer, just like the people in the east part of West Seattle.

Cancer = freedom.
Congested highways = freedom.
Pollution = freedom.
Interest-only mortgages = freedom.
ARMs = instant route to equity.

I'm going to fantasize what Seattle and its housing market would be like if everyone, just for one day, had the gift of forward-thinking, or considered for a nanosecond the possibility of getting cancer, or considered "freedom" as being untouched by the stupidity of others.

BTW, what are the cities that have their energy-consciousness act together and what are the premiums of living in those cities?

The Tim said...

BTW, what are the cities that have their energy-consciousness act together and what are the premiums of living in those cities?

Get ready for a real laugh. Seattle was ranked as the 8th most "sustainable" city out there!

The rest of the top ten:

1. New York
2. Boston
3. San Francisco
4. Chicago
5. Philadelphia
6. Portland
7. Honolulu
8. Seattle
9. Baltimore
10. Oakland

This discussion sounds like a good one for Seattle Traffic.

marin_explorer said...

Get ready for a real laugh. Seattle was ranked as the 8th most "sustainable" city out there!

Right, "sustainable" has become a marketing "buzz word", robbed of its true meaning. By contrast, smaller towns with local business that sustain their populations would rank far higher than overblown metro centers.

PepeDaniels said...

REskeptic said...
Get ready for a real laugh. Seattle was ranked as the 8th most "sustainable" city out there!


Frightening when you think about how far we have to go. NYC, Baltimore etc. aren't bad really. It seems like Portland's got quite a leg up on Seattle.

S. Florida is nothing but a waiting line to nowhere - as oil/gas prices go up it's hard not to see the public transportation issue effecting quality of life issues and then prices?

Anonymous said...

I want to respond to: "Here's my plan: Every home within a 5 mile radius of each of King County's downtown centers should be no less than a $350,000 condo or a $700,000 McMansion"
we're in the market of buying a house in Kirkland, we currently own a condo in downtown Kirkland and would love to stay, where do you find 700K McMansions? can someone point me to a 700K house in downtown Kirkland that does? all the McMansions I've seen in DT Kirkland are over 1 Million!!! if you can find me a 700K nice house, I'll buy it now! the market is ridiculous!

last night we went to see a house on 3rd ave south, 2100sqft (seems like 1900 or so, but anyhow...), built in 1997, it's very nice, cottage like house, condition is like new, guess how much is the asking price, 800K!
the house was sold for 390K something back in 1997 (imagine the builder built it and made profit out of it back then), sold in 2003 for 550 something, now they're asking for 800K!
I want to scream!
here's the ML: S26093841 if anyone wants to take a look.