Looking Into Downtown's Future

Is downtown Seattle destined to become populated with nothing but luxury condos and low-income housing? If taxes and fees for building downtown keep going up, some see that as Seattle's future.

As the Seattle City Council prepares to vote on reshaping downtown Seattle with taller buildings, a heated debate remains over how much residential developers should pay to maintain affordable housing downtown.

Builders who want to profit from taller skyscrapers would contribute to a fund used to create housing affordable for $11-an-hour workers such as Allen and other low-income residents.

Business interests, neighborhood groups and even some low-income housing builders worry that if the city imposes fees that are too high, it could frustrate goals to concentrate new residents downtown.

Additional expenses for affordable housing, environmentally friendly buildings and underground parking could disproportionately hurt developers trying to build less lucrative apartments or condos aimed at the middle class, some argue.

"It guarantees downtown will have only luxury or subsidized housing, which ... will not make a healthy neighborhood," said Kate Joncas, executive director of the Downtown Seattle Association.

Certainly if the appreciation of the last five years were to continue, and the City Council imposed more and more fees, that would seem to be a likely outcome. Of course, appreciation isn't likely to continue this break-neck pace, so a two-caste system seems rather unlikely. Come to think of it, I seem to have heard this argument somewhere else...

(Jennifer Langston, Seattle P-I, 02.23.2006)

Mobile Homes Disappearing In Seattle's Bubble

While most home "owners" are nothing less than thrilled about skyrocketing real estate prices, mobile home owners are having the land sold out from under them as land owners cash in on Seattle's bubble.

Our state is facing a mobile home space crisis. Exploding real estate prices are making the land too valuable for this moderate-to-low income way of life.

According to state figures, 115 parks have closed in Washington since 1989.

In the past year, nine parks have sold or are up for sale in the Puget Sound area, where land prices have risen the most.

Six hundred twenty one families in our area now must find another place to move their mobile homes, 167 in King County alone.

I guess it's not really surprising, as all sorts of low-cost residential options have been replaced with sardine subdivisions and chicly condos.

(Wayne Havrelly, KIRO 7, 02.21.2006)

Renting "May" Be Better Even In Olympia

Here's an insightful headline from The Olympian: Renting may be better for first-time buyers. Yes, that's "may be better." Heh.

Is it better to rent than to own, particularly as the median price of a home in Thurston County keeps climbing and now approaches $250,000?

Renting offers the advantage of flexibility and a landlord who will take care of repairs; home ownership brings the reward of increased equity and a tax write-off.

But as the difference between the average cost to rent and a typical mortgage payment widens, some experts say renting could be a better option for prospective first-time buyers.
...
Taylor, a former Ohio resident who lived in Tacoma for four years and has spent a year in Olympia, describes the prospect of West Coast property ownership as "nightmarish."

Property values are "grossly inflated," homeowners' insurance has become more expensive, and lots are getting smaller, he said.

"I wouldn't be able to sneeze without offending my neighbor," said Taylor, 38, who works as a shipping and receiving clerk for Office Depot in Kent.

You don't say.

(Rolf Boone, The Olympian, 02.19.2006)

Everett Condo Buyers Anxious To Spend

Readers of this blog know that up-and-coming condos in Bellevue will cost $400k for 700ft², but what about up in Snohomish County? Well, your $400,000 won't go much further, netting you a mere extra 100ft², and hopeful residents of Everett's fancy new waterfront condos aren't batting an eye.

But last week, Olsen said the condominiums would begin at about $400,000 for the smallest floor plan of 800 square feet. Larger floor plans of about 2,000 square feet, which Olsen said would be the most sought after, will run between $600,000 and $800,000.

For some on the waiting list, the cost of a waterfront home is virtually never too high.

"I intend to spend about $1 million," Everett resident Ron Spelhaug said. "I'm ready; I'll do it tomorrow."

There's a saying that comes to mind... something about more money than sense... More power to you, I guess.

(Krista J. Kapralos, Everett Herald, 02.19.2006)

More Mortgage Co. Shrinkage

Another local mortgage firm has been shrinking lately. Mortgage Investment Lending Associates, Inc.'s staff has shrunk by roughly 17% since January.

Rising mortgage rates and the slowing housing market nationwide have caught up with Mortgage Investment Lending Associates Inc., which has reigned as one of the region's fastest-growing companies.

Better known simply as MILA, the wholesale mortgage lender has reduced its work force by about 120 people since Jan. 1.
...
The lending company now employs about 600 people, according to company estimates.

So much for that "fastest-growing" title, I guess. Maybe they should think about getting into the foreclosure business.

(Eric Fetters, Everett Herald, 02.15.2006)

San Francisco A Warning To Seattle

Here's a good one to chew on. Is Seattle's housing market poised to become as ridiculous and unlivable as San Francisco? Could be...

The ripples of San Francisco's housing crisis don't stop at the city limits. When the working poor — receptionists, day care providers, retail salespeople and housekeepers, for example — flee the city, pressure increases on them and their employers. Commutes extend time away from both the job and home. Cities lose middle- and lower-wage earners, decreasing not just economic diversity but sometimes racial diversity as well, census figures show.

In San Francisco's case, those effects extend more than 800 miles north to Seattle, where city officials use San Francisco's housing data as both a grim forecast and scared-straight therapy session.

"We all know we don't want to have a housing unaffordability situation as San Francisco does," said Adrienne Quinn, director of the city of Seattle's Office of Housing. "We don't want to become that."

But it is the direction Seattle is headed. Rents in the eastern Puget Sound region have risen 35 percent over the past 10 years, according to the U.S. Department of Labor. In Seattle alone the jump is closer to 40 percent — compared with 50 percent over the same period in San Francisco.

Well we can't have it both ways, people. Housing prices shooting up and up can't be both good and bad at the same time. Either it's good because all you homeowners out there are essentially making money from nothing, or it's bad because fewer and fewer people can afford to live. Whoever wrote this article though definitely seems to believe the latter. Here's a grim prediction:

"The housing situation here in San Francisco is this: If you are making less than $100,000, housing is not affordable. It's in crisis. It's not available for working class, lower class. The number of evictions is skyrocketing. ...

"It's almost as if two parallel cities are happening. The very poor (and) the very rich. What you see in (San Francisco) you will see in Seattle. It's clashing social strata."

I would like to know why people that are that hard off don't do whatever they can to move to a cheaper place. If the city I lived in became completely unaffordable to me, I would use any means necessary to move to a place I could afford. Anyway, also worth mentioning is Stefan Sharkansky's take on this article over at Sound Politics:

Oddly, the article does not contain the two most important words for understanding San Francisco's unusually high housing prices: RENT CONTROL. ... Both forms of rent control offer perverse incentives for a dweller to remain in their current home longer they would otherwise. Thus the supply of available housing is artificially suppressed, thereby raising prices for anybody who is seeking housing. Seattle would do well to learn from this experience and in general to think about the consequences of obstructing a free market in its quest to make housing more affordable (to some).

So what do you think? Is Seattle heading toward the unpleasant situation found in San Francisco? How does rent control factor into the situation? Will San Francisco and Seattle's housing markets ever pop? Will I ever stop asking stupid questions and just go to bed?

Well I know the answer to at least one of those questions—the last one—and the answer is yes.

(Mike Lewis, Seattle P-I, 02.16.2006)

Housing Affordable... Or Maybe Not

The Washington Center for Real Estate Research at Washington State University recently released a study on housing affordability across our State, and the results were decidedly unsurprising. The Tacoma News-Tribune reports on the study in the classic "good news / bad news" style:

Pierce County scored 104 on WSU’s Housing Affordability Index, where 100 is the break-even point and higher scores mean buyers have more than enough income to buy a home. A score of 104 means a typical family has 104 percent of the income needed to buy an average home – 4 percent more than required.

In contrast, King County’s affordability score is 80.1, meaning the typical family there earns only about 80 percent of the income needed to own an average home. King County’s median home price – the midpoint of all sales – is $390,000.

Bear in mind, that's the good news—that the "typical" family in King County has 80 percent of the required income to buy a home. Then we get to the bad news:

“More troublesome is the inability to find affordable starter homes,” said Glenn Crellin, the research center’s director.

For the entire state, the first-time buyer affordability index for the fourth quarter stood at 55.8 percent, meaning those buyers on average have about half the needed income to buy a lower-priced home. The typical first-time buyer could afford the typical starter home in only three counties, all in Eastern Washington.

So basically, if you have a home already, you can sell it and cash in on its outrageous "value," therefore making another similarly inflated house "affordable." But if you're like me, and you don't have an overpriced asset lying around to help you out, you're pretty much out of luck. Like I said, what a decidedly unsurprising finding.

(Jack Keith, Tacoma News-Tribune, 02.16.2006)

Update: There's another slightly more in depth story over at the Seattle P-I.

Despite rising prices, higher mortgage rates, declining affordability and fears that a "housing bubble" may be about to burst, the number of homes sold in Washington continued to rise in the final quarter of last year, the Washington Center for Real Estate Research at Washington State University reported Wednesday.

But cold weather and high energy costs slowed the rate of growth to 2.9 percent in the final quarter, compared to the final quarter of 2004, the center said.

(Nicholas K. Geranios, Seattle P-I, 02.15.2006)

Seattle-Based WaMu Shrinks As Housing Cools

Although cooling in the housing market may not have reached Seattle just yet, some of its effects are being felt here:

Responding to the cooling housing market, Washington Mutual Inc., the largest U.S. savings and loan, said on Wednesday that it was laying off 2,500 support employees in its mortgage unit.

The Seattle, Washington-based company said it was also reducing the number of mortgage processing offices to 16 from 26 and sending some of the work to "lower cost domestic and offshore locations."

I don't think this would be a good time to be in the mortgage or realty business, as far as job security is concerned.

(Wire Service, Reuters, 02.15.2006)
(Associated Press, via Forbes, 02.15.2006)

Follow-Up: State RE Spending Passes House

A few weeks ago, you may recall, a bill was being proposed in the state legislator to spend away much of the state revenue gained thanks to the real estate boom. Yesterday that bill passed the House.

OLYMPIA — The House approved a $100 million expansion of the state's housing program Saturday.

The proposal would pump $25 million into the Housing Trust Fund from the state treasury each year for the next four years.

The money would go for rental vouchers for low-income people, services to the homeless, housing for victims of domestic violence, weatherization projects, farmworker housing and development of affordable housing.

"The increasing gap between incomes and housing prices has led to a major housing crisis in our state," said Rep. Larry Springer, D-Kirkland, the prime sponsor.

"Much of the additional state revenue we have seen this past year is directly linked to the real-estate boom. It only makes sense that we reinvest this money to offset the high price of housing."

Actually, it only makes sense to me to save the money for the proverbial rainy day, when the bubble finally bursts. But hey, that's only one of many reasons I'm not a politician.

(David Ammons, Seattle Times, 02.12.2006)

Condo Fees Scaring Off Builders

More downtown condo drama rises to the headlines... in Olympia. It's pretty much the usual debate... cities want more condos, builders want lower fees, cities want more condos and more fees.

OLYMPIA — A developer planning to build 100 condominiums downtown says city, school and development fees are too high and could kill the project.

Jim Potter of Seattle said he faces fees that could top out at $7,000 per condo unit, or $700,000 for the five-story project, envisioned for a parking lot on Columbia Street between Fourth and Fifth avenues.

City officials have made new downtown housing a top priority, and Potter's condo project is considered critical to boosting downtown's vitality.

"The big issue remaining is we have these impact fees," Potter said. "We can't make the project work at $7,000 a unit."
...
Some cities, such as Renton, offer the option of waiving impact fees as an incentive to attract housing developments to targeted downtown areas.

"We knew attracting condos to downtown could be a tough sell without some sort of (financial) incentive," said Alex Pietsch, Renton city administrator. The incentive has lured two condo projects, totalling [sic] about 87 units, he said.

Of course the builder is motivated by higher profits, not some altruistic desire to keep the cost of housing lower. Perhaps they're thinking ahead, knowing that while $7,000 extra tacked onto the price might not be enough to scare off buyers right now, it may well be by the time the project is finished.

(Jim Szymanski, Katherine Tam, & Rolf Boone, The Olympian, 02.10.2006)