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Thursday, August 31, 2006

Condos: Mini -> Micro -> Nano

Downtown Seattle: decent jobs, passable entertainment, increasingly unaffordable housing. So what's the solution? According to today's P-I, the time has come for the incredible shrinking condo.

Park two of GMC's biggest Sierra pickups next to each other. That's a lot of truck, but a small condominium — at least by Seattle standards.

But a local developer is betting Seattle urbanites are primed to carve out their own two-truck chunks of Belltown. The moda condos, set to break ground in October, promise "New York-style living," with units as small as 296 square feet that start at $149,950.

"I think there's unmet demand for affordable new construction in downtown," said developer G. David Hoy, president of HMI Real Estate Inc. "I also believe downtown needs more diversity."
You have to respect a guy that can so artfully spin what is essentially a glorified dorm room with phrases like "affordable new construction" and "diversity." I guess this is what it takes to get into a home downtown. I don't doubt that there will be plenty of people anxious to get their very own 296 square feet of American Dream™.

I think I'll get a few steps ahead of the curve, and look into opening an outlet where I can sell the affordable housing of the future.

(Aubrey Cohen, Seattle P-I, 08.31.2006)


Anonymous said...

>"I also believe downtown needs more diversity."

LOL. I guess there are some that would buy that.

I met a guy here recently who does condo conversions who told me that he does it to "provide affordable housing for those that would otherwise be unable to afford it"

after getting to know him a bit, it was obvious he understood that the conversion market was the last remaining area to make a quick buck, that it had nothing to do with the "less fortunate".

Still, this is America and there is nothing wrong with people making money on condo conversions or mini condos, or anything else they may be stupid enough to purchase.

It is unfortunate the way people market their products, but ultimately it's "buyer beware".

Anonymous said...

This article was hilarious...

Yeah, I guess if you want a dorm room with a monthly payment of around $900, its a good idea, you can get a 30 yr fixed, etctera.... but come on! 300 sq/ft? Its a hotel room!

Ughh, this type of gonzo development really does forsake fundementals, condo's are terrible investments because they're not tied to the land value on which they're located. That and they're basically apartments and what's to keep your neighbors from renting out to Rave DJ's, dropping E and dancing all night to the latest Oakenfold mix...

This feeds on the "gotta get into something before I'm priced out forever" fear marketing strategy that's served the greedy Realtor masses...

Anonymous said...

I forgot to mention that my friend was "pissed" that he had to pay tentants $500 to get them to move out.

Ah, gentrification.

Anonymous said...

One thing nobody seems to really care about - there's no laundry facilities in those places. While some may find it's not that big a deal, for me it's a gigantic pain in the ass to have to haul everything down to the laundromat, make change, and guard the washer and dryer for a couple of hours.

I think Neo in the first "Matrix" movie had a nicer place than those stacked coffins.

Anonymous said...

I'm sorry, but that's not "NY-style living". For that, the unit has to be a fourth-floor walkup with ventilation via airshaft.

Anonymous said...

There is laundry, its in the bathroom. for real look at the article at the bottom.

Anonymous said...

Damn! So there is. That's one small stacked washer/dryer.

Maybe I'll have to buy one after all. Then when I die, they can simply remove it from the building and bury me in it.

Anonymous said...

Want scary? Check out the comments attached to the story.

After the fifth repetition of "oh well, that's just what real estate costs in Seattle today..." I felt myself throwing up in my mouth a little bit.

But then I ran across the 6+ comments from people who "just don't need a McMansion...", and were perfectly happy living in their studio apartment. And the one guy whose principle complaint was that he didn't have room for his wrestling mat? Yeah. Clearly we're dealing with the upper-crust of the Seattle intelligentsia.

My theory: as long as stupid people believe that 10-15% inflation in property values is inevitable, this bubble will continue.

Anonymous said...

it will be funny to see what they say when it finally pops.

Anonymous said...

Look how these people rationalize the decision to live like this

"I like having everything in just one room,"

"It was easy to clean,"

"I didn't really have money for furniture, so whatever I did have, it just instantly filled it up."

"People around the world live in places a lot smaller,"

Anonymous said...

when I die, they can simply remove it from the building and bury me in it.

LOL...the ultimate crade-to-grave conversion!

Anonymous said...

come on guys. I'm getting flamed over there. Help a fellow bubble brother out and drop some stats on these fools for me.

Anonymous said...

I think it's funny on the PI's posts when people refer to the greedy and money hungry developers in this case. Just because the units are priced $500 a square foot, does not mean that their profit margins changed AT ALL. Construction supplies, land, labor, etc. have all increased significantly, and people should be happy that the developer thought of one way to produce a product that some people can actually afford, even if it is small. Would you rather have $500 a square foot 2,000 sq. ft. units that very few can afford, I'm guessing not.

David Aldrich said...

Construction supplies, land, labor, etc. have all increased significantly, and people should be happy that the developer thought of one way to produce a product that some people can actually afford

What you said is indicative of a greater problem. There is a ceiling to real estate prices, a ceiling that we are bumping up against and this will cause prices to level or drop, or plummet. When average families can no longer afford housing because it costs $500/square foot, and after you exhaust all the possibilities of cutting up the pie into smaller and smaller slices, the game is over.

What's next? A 150 sq. ft. condo priced at $75,000?

Anonymous said...

Construction supplies, land, labor, etc. have all increased significantly,

They are up, but I think the amount varies depending on region.

I think you can build in Texas for $100 sq/foot.

Which is why people will migrate from expensive cities (like seattle) if they can't get the housing they need/want at a price they can afford somwhere else.

I have friends that just moved to Austin, because they don't want to be house poor here, and they want to pay off a mortgage in 15 years.

Anonymous said...

What's next? A 150 sq. ft. condo priced at $75,000?

No, 50 and 100-year mortgages, like they have in Japan.

Seriously, I've already heard ads on the radio for 50-year mortgages.

And, stupid, me, a year ago I refi'd my 30-year fixed at 6.75% with 23 years left to a 15-year fixed at 5.625%--with extra payments, should be done in 10-11 years--what WAS I thinking?

Well, i'll tell you: my objective is to get the monkey off of my back as soon as possible. If the RE bubble really corrects like a lot of people think it will, you won't even be able to get a job at Home Despot, as all of the people now building new homes will be clamoring just to work somewhere, and that will be their best shot (they can tell a screw apart from a nail). But I digress . . .

I'm not optimistic about my future earnings--not due to anything inherent in myself, but due to the current global conditions which are leading to (as of yet unseen) economic ugliness which will cause unemployment to skyrocket. The sooner my house is paid off, the less pressure on me, as then I'll only have to keep paying King Ron $400-500/mo. (projected) to live in my own home. Don't need a 6-figure income to do that! I could actually work at HD and manage to keep my house--now I don't want to do this, but if you study what happened during the Great Depression, people were incredibly lucky just to have a job, ANY job.

How long could most of today's house buyers keep living in their house if they lost one or both incomes? One month? Six months? A year???

I was unemployed for 6 months a few years ago, and I was able to pay for my mortgage, utility bills, groceries and gas on my unemployment compensation. Makes it really easy to sleep at night!

Anonymous said...

Anonymous said...
"People around the world live in places a lot smaller,"

You're quite right. One major difference is that they don't pay 300k for the place and are able to make them out of cheaper local alternatives.

I recently read or heard that there was less true homelessness in may countries we'd call Third World as there's more leniancy on (less zoning restrictions) alternative ways of making a home for oneself.

Really, I think people are somewhat cornered by zoning, tempting finances etc into a real estate "lifestyle" (creative financing, high personal debt etc.) that's way above many people's means.

Anonymous said...

""Joe" is a homeowner who did not want to give his full name for this story because he’s ashamed to admit that he soon won’t be able to afford his monthly mortgage payments."

poor Joe...

MSM is reaching critical mass.

Anonymous said...

"There was plenty more going on behind the scenes they didn't know about, either: that their broker was paid more to sell option ARMs than other mortgages; that their lender is allowed to claim the full monthly payment as revenue on its books even when borrowers choose to pay much less; that the loan's interest rates and up-front fees might not have been set by their bank but rather by a hedge fund; and that they'll soon be confronted with the choice of coughing up higher payments or coughing up their home. The option ARM is "like the neutron bomb," says George McCarthy, a housing economist at New York's Ford Foundation. "It's going to kill all the people but leave the houses standing."

Anonymous said...

Nolaguy said...

"I think you can build in Texas for $100 sq/foot.

I have friends that just moved to Austin, because they don't want to be house poor here...."

I was transferred to Seattle a year ago. Before that we lived in a place called Round Top 70 miles east of Austin. Austin is similar to Seattle in some ways...

1) Progressive town (new age, vegetarians, pro-envirnoment, etc.)
2) A lot of highly skilled high tech workers
3) Lots of water (large river/large lake)
4) Lots of sports (biking, rowing, etc.)
5) BAD traffic (grew too fast)
6) Most expensive housing in state
7) Active music scene (lots of musicians/clubs/etc.)
8) Long stretch of "bad weather" (hot summer)
9) Lots of hills in town
10) Major university (U of T) "in town"

From mid September to mid May the weather is nice and comfortable (puntuated with a handful of cold days). But from mid May to mid as hell with little relief.

When we moved a year ago from our place prices were exactly $100/Ft2. So much for the argument that $400/Ft2 is "just what it costs today to construct a house". Builders have been making a killing in this bubble.

Anonymous said...

I've been to Austin a few times. I loved it. Great music, scenery and people.

My friends are worried about the hot summers, but they are looking at it as a trade-off: 6 months of gray, for 3 months of heat.

They bought a smaller home (small for Texas!) in a downtown neighboorhood near UT. Sort of like Wallingford.

They both work in technology and commutes will be minimal.

Their new place has a pool, so they are excited to be sun worshippers.

Price?: $250,000

Anonymous said...

one thing to remember about Texas though, high property taxes...I think 3% is about normal

Eleua said...

When I lived in suburban Dallas, my property taxes were routinely 2.3% of the assessed value.

Assessed values usually went up, even if property values were declining.