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Saturday, September 19, 1981

Tuesday Open Seas

Arrr, this be yer open thread for today, ye scurvy sea dogs. Post yer random links and off-topic tales here.

43 comments:

Peckhammer said...

Lease wins out over condos

I remember that during the last bubble, every wanker on the street was murmuring about day trading. And in our contemporary bubble, the pawns are going on and on about condo flipping.

It has been my experience that the real money is made at the ignition point, not where the smoke wafting out into the eyes of the public is accumulating. By the time the public is using stock or real estate colloquialisms, the fire has probably been extinguished. Those closest to the fire have already moved on, but it takes a while for the smoke to clear -- and by then, a lot of people are wondering how they got burned.

IOW, if you want to know where the real estate market is heading, you look at what the developers are doing, not the borrowers. Case in point, from this morning's PI article linked above:

Developers have abandoned plans to raze the Qwest Building, at 1915 Terry Ave., and build two 28-story condo towers on the site. Instead, they will lease the 291,179-square-foot building to a single occupant, whom they declined to name.

The developers filed plans with the city in August to replace the 53-year-old building with two 28-story condo towers, but decided not to build because they had concerns about the current market and found a tenant to lease the entire building for more than 10 years, Wilson said Monday.

Condos have sold well and appreciated faster than single-family homes in recent months. But Wilson pointed to nervousness about the national housing market, rising interest rates and, in particular, the large number of condo projects under construction, built or planned in Seattle.

"I think in the near term you're going to see more properties that are slated for condos not become condos," he said. "The people that are already out of the ground are certainly going to complete their projects. I think the people in the early planning stages may not move forward."

matt said...

Nice snag peckhamer...

link needed reparied...

This quote struck me...

"Williams, whose firm helps develop, market and sell condos and who once looked into converting the Qwest Building into condos.

"The issue is that right now financing is tightening up,"


Well wait a second! The issue is tightening up of finance? Pa-shah!! Rampant condo appreciation is due to savvy 20-something Micro$oft employees and empty nesters throwing money around downtown condos like beads at Marti-Gras, right? Streets are paved with gold I tell ya'!

Obviously they haven't been listening to Greg Nickels bizarre utopian fantasy of us all living ontop of each other by 2040, adding another million people to the downtown core and all that hooplah.

Again, as I always say, money talks and B.S. walks, and it looks like the developers have seen the obvious writing on the wall, that and I can see them hawking it to venture capital money from the shelled-out bubble enclaves of San Diego and Miami, empty condos as far as the eye can see ala 'Omega Man'

I'm just wondering what the poor fool who bought a broom-closet condo in Belltown's going to be thinking when this all falls apart.

synthetik said...

Aye, more e'idence that this is verily about credit than simply the housin' market. Arrr.

As a wee land lubber down in ye San Diego I remembers thar war a lot o' bailin' condo de'elopers in late 2005 and early 2006 but it had nothin' t' do with credit - at least from me crows nest.

Tis' much later in the voyage now, credit is gettin' tighter and tis' goin' t' get mightily ugly - and fast. Aye, me parrot concurs.

arrr. Gold dubloons ar goin' fer $600 on ounce matey!

deeplennon said...

Anybody else notice that king and sno co's added over 1k in inventory in from 8/20-9/18?

http://bubbletracking.blogspot.com/2006/09/tracking-seattleking-snohomish.html

We're currently gaining inventory at a greater clip than any other western market profiled on that site both in gross listings and especially percentage wise, which is in line with the 'Seattle is the last to the party' school of thought.

And what is with all the Meshugy hate lately? At least he brings data to back up his P.O.V., which is whole helluva lot more than most posters on this blog. A real estate shill? That's laughable.

Lake Hills Renter said...

So as I was passing the subdivision-in-construction on the way to work this morning, a question came to mind -- don't they build normal houses any more? Every single house I see under construction these days are huge mega-McMansions crammed right next to each other. What happened to 3-bedroom houses with a yard? Bigger isn't always better, at least to me. Am I really that much in the minority these days?

OK I see the conspicuous consumers, I am bored now said...

What happened to 3-bedroom houses with a yard? Bigger isn't always better, at least to me. Am I really that much in the minority these days?

They're still around, at least in major cities (not suburbs) -- I have one. Most people, I gather, like to have bigger houses to clean and higher heating bills. It shows everyone they have money. And... sixty years ago, at the dawn of the postwar era, those three-bedroom houses were purchased in the suburbs, in newly rezoned farmland areas.

If you have a waist under 32 inches, and you think 1200 sq. ft is enough for a family of four, you're in the minority for sure.

Anonymous said...

"The developers have found a tenant to lease the building for 10 years".

TEN years!

But...but...I thought RE would pick up again in 2-5 years???

That's it in a nutshell. People who are REALLY looking at this mess know that RE is toast for much longer than 2-5, or the most recent, 5-7 years.

mik said...

super blog you guys are running here. Moocho thanks! I live in AK, just a few hours north, in a small town of Sitka, with a bubble as big as they get. Young families cannot afford to live here anymore - they simply cannot afford housing.
OK, but my question is about SEA. My wife and I are seriously thinking of moving to the big city and would like to get a condo to start with.
1.I can't seem to find info any recommendations on what areas around SEA are decent to live in with lower property taxes.
2. Also, what do you think would be a good timing to start shopping for a condo? (Given the uncertainties in the market today Any advise is appreciated! - Mik

plymster said...

"And what is with all the Meshugy hate lately?", says deeplennon.

Arr. "What's with the Meshugy love?" says I. He beats his drum of the same posts more than he beats to quarters and offers true information. The scurvy knave adds naught to the discourse, and drags barnacles onto the deck and calls 'em pearls. His siren song leads homedebtors to the crushing black oblivion of Davy Lereah's locker! His words are as deadly as a score of cannon off yer starboard bow.

Side not with this bilge rat, deeplennon, lest ye grease yer soul with the blood-debt of a thousand lubbers.

War's me grog!?!

meshugy said...

don't they build normal houses any more?

Problem is the land is so expensive...they're paying 300K just for the land so they need to make a fat return. So they either build a McMansion (which sell let hot cakes...although I hate them) or the divide the lot into 4 townhouses.

I would never buy a new house...the old ones are built much better and are a much better value.

Anonymous said...

1.I can't seem to find info any recommendations on what areas around SEA are decent to live in with lower property taxes.

Darrington sounds nice

Anonymous said...

I would never buy a new house...the old ones are built much better and are a much better value.

Unless its 900 sq. ft., has one bathroom, and the stucco is sloughing off the sides, oh wait that's a regular house in Ballard ;-)

sue said...

Mik-

Pretty hard to follow the true story with condos right now in Seattle. They are not listed on most RE sites in their entirety.

You could start by following Zip Realty to see how prices are stalling and coming down.

Foreclosure and pre-foreclosure condos also end up on the Craigslist occassionally.

I'd try to follow the market for at least another year via the internet to watch how far and fast prices are falling.

Anonymous said...

Just on CNBC:

The mount of equity people have pulled out of their homes to "buy stuff" has fallen rapidly in the past few months-: -45%.

Even I was surprised by that number. Looks like peo[ple are catching on fast.

Eleua said...

'shug,

You have finally posted something that is entirely agreeable.

I'm checking Revelation to see if this is a sign of the Apocalypse.

E

matt said...

Even I was surprised by that number. Looks like peo[ple are catching on fast.

I seriously doubt if 'people' are catching on fast, I think the home ATM's run out of cash. People are like financial water, the run downhill until the reach their minimal energy (financial) configuration...

Peckhammer said...

"I would never buy a new house...the old ones are built much better and are a much better value."

Yeah, cuz we know that seimic codes, energy codes, electricty codes, plumbing codes and buidling codes in general held builders to a higher standard in 1920. LOL! Please... buy a clue!!!

Anonymous said...

"Just on CNBC:

The mount of equity people have pulled out of their homes to "buy stuff" has fallen rapidly in the past few months-: -45%.

Even I was surprised by that number. Looks like peo[ple are catching on fast. "

I doubt they are catching on.....just running out of equity to be tapped.

Anonymous said...

anyone having trouble accessing Ben Jones' blog today (Tue, ~12pm)?

seattle price drop said...

"Old houses are much better value than new".

Umm... 500K for 1000 sf VS. 400K for 2500sf...

Which looks like "better value" to you?

I'll agree that older homes were built to last.

problem is, americans could give a hang about establishing a "family homestead" that'll be occupied for generations by them and theirs.

That being the case, the new homes are a far better "value" and when new home prices start crashing, look out below, old home sellers.

meshugy said...

Yeah, cuz we know that seimic codes, energy codes, electricty codes, plumbing codes and buidling codes in general held builders to a higher standard in 1920.

Every older house we looked at had all that stuff done. Our inspector told us pretty much everything built after 1950 is pretty chincy. Builders just stopped caring...the earlier stuff was built by skilled crews with huge old growth wood. Now you get sheet rock, particle board, and it costs 5 times as much. Any builder will tell you it will cost you a fortune to build a house with the same quality as a 20s Craftsman. Even with mold on the roof and holes in the walls. those houses have great bones.

meshugy said...

Sales show older homes are gaining value faster

New homes may have the latest of everything, but as an investment, a new house simply does not bring the returns that an older home does. Countywide over the past five years, new houses have posted 4.8 percent annual appreciation, while older homes saw about 7 percent.

In the past year, new houses appreciated 7.5 percent compared with old houses' 10.4 percent.

Based on cost per square foot, the most accurate measure of home appreciation, King County's new houses are actually 20 percent cheaper than older resales.

So if you want more house for your money, buy new. If you want something that will appreciate faster, buy a resale.

Old houses had a median square-foot price of $186.59, significantly above new construction's $156.11.

Anonymous said...

Do those figures in thatstory take out the cost of land?

Because, Meshugy, you said earlier that the land was the reason it's so expensive...

So is it the land or is it the structure?

synthetik said...

>In the past year, new houses appreciated 7.5 percent compared with old houses' 10.4 percent.

I think it's safe to say they aren't taking old houses out of the city and relocating them to the sticks.

It's obviously the land under those houses thats causing an increase in value.

Anonymous said...

It doesn't help that "new construction" means "particleboard townhouse" these days. I would pay a premium for a home that isn't going to fall over in a strong wind, too.

Builders don't build cracker-box townhomes because they have to do it to make a profit (i.e. the "land is SO expensive" argument)...they do it because they're looking to maximize their profits, and the city does nothing to prevent them from squandering the resource.

If the city simply refused to approve four-way subdivisions of lots, there would be a different style of development in this city. Instead, we get the greediest possible version of development that meets the mayor's definition of "density."

Anonymous said...

I am having trouble with Bens blog as well.

meshugy said...

So is it the land or is it the structure?

both...an older house will be worth more per sq/ft then a new house on the same lot.

the land's value is location (proximity to amenities, views, etc.) In good inner city areas, the land is too valuable to just build a 1500 sq ft house on. they need to maximize the lot and use as much of it as they can. hence mcmansions and townhouses.

Lake Hills Renter said...

Umm... 500K for 1000 sf VS. 400K for 2500sf. Which looks like "better value" to you?

Depends on who you ask. What do I need 2500sf for? Way too much to clean and heat. I'll take a 1000sf with a yard. Bye bye suburbs for that, though. Not that that's a bad thing.

uptown said...

Townhouses are cheaper to build than a small condo building and since no HOA is required (the lot is subdivided for townhouses) the builder is less likely to get sued by the homeowners for construction problems.

I'd prefer a well built condo building (hate stairs) with the HOA to keep the units up. I expect a lot of these new townhomes will not be kept up and will become the slums of the future.

Anonymous said...

anon 3:06:

hey dumbass -

i think we can all agree that eventually zoning laws have to be put in place to create "additional" land "area" to increase the supply of residences to meet the demand. the reason why i think the other anon refers to the developers as "greedy" is because they purposely split the area into 4 townhouses, and then practically price the 4 units as much as 4 INDIVIDUAL HOUSES in an area just a 1/4 mile out. i'm going with the argument that the developers are GREEDY as opposed to them doing us, the average consumer, a favor by providing more housing. you really think they're doing us a favor? you obviously have a different opinion on the motivation of the developers. the profit they receive kills both the new and current homeowner by raising the prices to uncontrollable and unfundamental highs...blah...blah...blah...

Anonymous said...

It's funny you think margins change so drastically just because more homes are being built. I assume based on this mindset that you haven't developed or built a subdivision yourself.....

Anonymous said...

anon 3:55:

no i haven't. i'm not a subdivsion developer nor claim to be. a simple extrapolation of some of my previous dealings with people, along with simple extrapolations from current observations of housing market prices leads me to believe that when i see multiple (and i do mean lots and lots of multiple) single house lots being split into 4 townhome lots, and with the townhomes being priced ridiculously, that something is awry. i don't think it takes an experienced subdivision developer to realize that. just look at the damn prices! sheesh! "i feel like i'm taking crazy pills here..."

Anonymous said...

Zipcounts for GreenLake (98103) and Ballard (98107):

98103: Sept.9: 151....Sept.19: 169

98107: Sept.9: 110....Sept.19: 122

I know I know M., they're all crappy overpiced places in bad locations, otherwise they'd be selling like hotcakes instead of piling up.

We know the drill.

dash_point said...

Problem is the land is so expensive...they're paying 300K just for the land so they need to make a fat return.

Oh btw, has anyone considered how much land prices have been pushed up by speculation, particularly waterfront property? I made that conclusion after doing a search for land last summer. I also remember a few articles to that effect. And no, not every .25 acre residential zoned lot is $300K. I may just take that route someday.

meshugy said...

98117 (loyal heights) shows just 24 reduced.

Most are real winners like this one:

1611 NW 80TH ST

Good luck!

meshugy said...

You've got the # wrong for 98107. Only 24 reduced. 124 total listings.

meshugy said...

and wrong on 98103 too...only 45 reduced. 170 listings total.

Anonymous said...

Meshugy's getting so riled about the coming crash that he's not reading posts correctly.

calm down, take a deep breath, you told us months ago your loan was a "good one" and you were fine no matter what happened, right?

You just do this for entertainment, right?

Anonymous said...

You're scraping the bottom of the barrel here with the "older homes being built to seismic codes"thing, M.

I can truthfully say, I have never been in a home in Seattle that was "built to seismic codes" or retrofitted to seismic codes.

Ridiculous.

seattle price drop said...

According to Dataquick, San Diego's median is now back to 2004 prices.

Aug. 2004: 483K
Aug. 2005: 493K
Aug. 2006: 482K

Actually, I guess it's lower than '04 by a smidge.

Article is at Calculated Risk.

Peckhammer said...

"Now you get sheet rock, particle board and it costs 5 times as much"

I'll take sheetrock over plaster any day. Repairs are way easier, and access to the wall cavity for access to electrical and plumbing is made simpler. As to particle board, I am not necessarily a huge fan it(1), but I am a fan of plywood. Plywood outperforms your beloved old growth wood in everyway imaginable -- and with a much thinner dimension. A stick-built house with plywood sheathing will be stronger in the ways that matter as compared to the materials of the past.

Add to the advantages above the fact that modern housing is more energy efficient, has more than one electrical outlet per room, modern plumbing, earthquake fasteners, oh... and granite counter tops!

(1)Not a huge fan, but it still makes for a stonger house. The type of particle board used in modern housing is stronger in the ways that matter, compared to sheathing with boards.

Anonymous said...

For the more tech savvy person, newer housing provides something that a lot of people really overlook currently, but will have to consider strongly as electronics (particularly computer systems and modern entertainment systems) get more sophisitcated: grounded power.

I won't consider a house without a grounded and properly wired power system.

Spokes said...

One of the reasons that older homes "appreciate" faster than newer homes is because money is being thrown at them to get that appreciation. (Mesh' talked about a bunch of money that was thrown at his house before he bought it, and that is a perfect example of how "renovation" is tagged as "appreciation" when, in fact, the net to the owner is most likely negative). Yet another example of how expense is not calculated in the equation. Lies, damn lies, and statistics...