King County Appreciation "Middling"

More evidence that King County is nearing the top of its market comes this weekend from a report that places King County's appreciation in the bottom third of 15 counties across Western Washington.

Fueled by bidding wars and a shortage of houses for sale, King County's single-family home prices shot up 15.43 percent last year, better than 1 percent a month.

With prices climbing so fast and so furiously, the county's homeowners can be forgiven if they assume they're leading the appreciation parade.

But they should think again.

While King County is indisputably Western Washington's economic driver, its home appreciation was only middling last year compared with surrounding counties.

Leading the pack was Skagit County, where single-family homes appreciated 26.93 percent, followed by Mason County at 24.55 percent and Thurston County at 23.31 percent. Granted, the base prices were lower in the counties that appreciated more, but for buyers there, that meant even greater sticker shock than King County buyers experienced.

Of 15 mostly Western Washington counties, King County ranked in the bottom third, according to the Northwest Multiple Listing Service, which recently released its annual analysis of home-sales data.

As buyers are priced out of King County, they're just shifting into Snohomish, Pierce, and even all the way up to Skagit County, where many homes have climbed up into the $400,000 to $600,000 range.

But it's not deterring some buyers, particularly those from outside the county.

"They're willing to pay a high price because they're able to afford more here than where they came from," Reichert said. "We know there are a lot of people who live here and commute to Everett or even to Seattle. And for a lot of people, this area is desirable because it's a rural, small-town atmosphere with strong schools."

It seems that home "ownership" is so ingrained in some people that they're willing to do whatever it takes to avoid renting. I wonder what it is going to take to knock some sense back into these people.

(Elizabeth Rhodes, Seattle Times, 01.28.2006)

Bainbridge Realtor Predicts "Even Sharper Rise"

As if to offset the words of a local economist in a separate story by the same reporter, here come the predictions of a realtor on what 2006 holds for Bainbridge Island real estate:

While the national housing market is showing signs of slowing down after a fast-paced year, the Bainbridge market is still picking up speed.

"I expect the market to be strong in '06," said Lois Boubong, a realtor at Prudential's Winslow office, who recently completed an analysis of the island's housing market. "No bubble is going to burst anytime soon."

The average housing price on the island rose 14 percent last year, with the median price increasing by 22 percent, Boubong reported.

Homeowners and buyers can expect more of the same this year – or an even sharper rise. It's good news for home sellers, but could make for grim house hunting, especially for renters and middle- and lower-income buyers.

"You can never predict the future, but if the economy continues to stay strong – and we think it will – we'll continue to see a rise in prices," Boubong said.

Because realtors are definitely unbiased market observers. You really have to love how many stories out there quote these guys as if their word is gospel. But then again, who else is really going to have a good feel for the market if not realtors? Realtors and economists are about the only "authorities" that are really available out there on the topic, and they each have their own slant they want to put on things. The trick is in trying to read between the lines, I suppose.

(Tristan Baurick, Bainbridge Island Review, 01.28.2006)

Excess Climbs High In Bellevue

Forget $200k for 500ft². Coming in 2008 to downtown Bellevue: $400k for 700ft² (that's $571/ft² for you math whizzes out there).

A longtime cornerstone of downtown Bellevue, the old Puget Sound Energy headquarters, is coming down this week to make way for twin condominium towers the developer anticipates will be one of the region's most energy efficient new residential projects.

Called Bellevue Towers, the project at the corner of 106th Avenue Northeast and Northeast Fourth Street, will feature 565 condominiums atop retail shops, a restaurant and parking. The 42- and 43-story towers are to be completed in the fall 2008. Condo prices are projected to range from $400,000 to $7 million for units 700 to more than 6,000 square feet.

Bellevue Towers is one in more than a dozen new residential projects turning downtown Bellevue from a shopping and business core into a 24-hour live-work environment. That transformation is one reason Bellevue Towers' developer, Gerding/Edlen Development of Portland, was attracted to the city, spokeswoman Margo Spellman said.

We'll see if the city still just as attractive for this kind of excess in 2008.

Gerding/Edlen principal Scott Eaton said he hopes Bellevue Towers will appeal to buyers interested in architecture and sustainability.

"We're absolutely passionate about the design of this project," Eaton said. "Inside and out, this is going to be a project appreciated by people who are interested in architecture and who care immensely about design."

...and who have far more money than sense.

(Elizabeth Rhodes, Seattle Times, 01.28.2006)

Northwest Economist: "Slow Deflation" Coming

Tom Cox, a "prominent Northwest economist" and host of the PBS program "Serious Money," gives the Northwest a "mostly sunny" economic forecast, but with a notable exception regarding housing:

The Northwest will continue to see an influx of people, particularly from California, seeking the region's relatively well-paid jobs.

But don't expect a steady flow of new residents to continue the sound's fast rise in home prices, Cox advised.

"The bubble's not going to burst," he said. "But we're going to have a slow deflation."

While the future of the region's economy looks rosy, Cox stressed that the Northwest is not immune to national trends.

He said "consumers are tapped out" by credit card debt, second mortgages and other overspending habits.

"There were more bankruptcies than college degrees over the last few years," he said. "Credit's stretched tighter than Joan River's neck. I think the day of reckoning is upon us."

It is nice to hear that someone out there actually sees something other than champagne and roses in the future of housing. I guess the realtors didn't pay this guy enough money *wink*.

(Tristan Baurick, Bainbridge Island Review, 01.28.2006)

State RE Spending Proposed

An answer is shaping up to the question of what is going to happen to all the extra revenue that the state has been raking in thanks to the real estate boom/bubble. If Representative Larry Springer has his way, a big chunk of the (presumably) continuing flow of cash from real estate taxes will be used to fund housing programs.

The hot housing market has been very, very good to state coffers, contributing largely through real estate taxes to a $1.45 billion surplus.

So, a few Democrats figure, it's time to share some of the benefits with those less likely to be enjoying the boom: those needing affordable housing, including farm workers.

House Bill 2418 would spend $25 million each year for the next four years from collections of the real estate excise tax. In the first year, about $8 million would be set aside for an on-farm housing loan program and rental vouchers for migrant and seasonal workers. That sum could change through amendments.

The rest of the money would be set aside for programs ranging from housing for those with developmental disabilities and victims of domestic violence.

It is only a matter of time before all the excess funding being brought in by real estate is spent away by the politicians. And of course when/if real estate slows back down you know they will be complaining about a budget deficit.

(Leah Beth Ward, Yakima Herald-Republic, 01.27.2006)

Developers Fight Tall Condo Tax

Roughly two weeks ago, the city of Seattle released news of a plan to Tax condos for "Affordable Housing". Today news breaks of the developers firing back:

Downtown Seattle condominium developers punched holes Wednesday in a City Council-sponsored study suggesting that they could pay more for affordable housing and still reap big profits from taller buildings.

The developers said the study undervalued land and construction costs by millions of dollars and assumed that developers could get more favorable financing arrangements, which together radically overstated their profits.

The study compared proposals to charge some developers more for affordable housing and require costlier "green" buildings, in exchange for allowing them to build taller skyscrapers in parts of downtown and the Denny Triangle.

When more realistic numbers are used, condo developers said, the annual return they could expect under some proposed changes drops to 15 percent or lower, not the 30 percent to 40 percent claimed previously.

Of course, given that they're obviously going to be opposed to anything that trims their profit margins even in the slightest, take their figures with a grain of salt. Much like the whole excise tax battle, both sides have an ax to grind, and the truth is somewhere in between.

(Jennifer Langston, Seattle P-I, 01.26.2006)

Good News / Bad News For Seattle Condos

More news on downtown Seattle condos comes today via the Seattle P-I, and it's a good news / bad news sort of thing.

All signs point to go in the completion of downtown Seattle's recovery from the last economic downturn — but if developers aren't careful, they could overbuild and be left in the lurch.

Builders also should be careful not to dogpile too much on the luxury market, which has been the focus of a spate of condominiums proposed in downtown, with nearly 20 buildings in the pipeline.
...
"Affordability has basically nose-dived," said Hessam Nadji, a senior vice president and chief marketing officer of Marcus & Millichap Real Estate Investment Brokerage Co. "And that is going to be a hindrance, limiting growth, because it will prevent companies from moving here."
...
"Some of these prices are pretty hefty," said Kate Joncas, Downtown Seattle Association president, referring to local condo market prices. "Who are these people?"

Market analysts say the answer is twofold: baby boomers, who are becoming empty-nesters and jettisoning their suburban homes; and their children — members of the "echo boomer" generation born between 1979 and 1995 — some of whom are fattening their down payment with their parents' wealth.

That question (who are these people) has been on mind a lot lately, too, with regard to the overall housing craziness around here lately. I'm a pretty reasonable guy that makes an above-average salary, and who is smart with money. Why is it then that there's no way I can afford a house, or even a condo really? Something just doesn't add up.

(Kristen Millares Bolt, Seattle P-I, 01.25.2006)

Stale Listings Increasingly Cancelled/Relisted?

An anonymous reader sent me the following email:

I have to stay anonymous with this. I just got an e-mail from an appraiser that sends in good information to me from time to time. It appears that agents are doing this old trick to manipulate exposure for their listings that are languishing. This means that listing numbers are not accurate. Ouch.

On the NWMLS this is a main page message to Realtors (here is the pasted response):

Attention:

Once again, NWMLS is seeing an increase in the practice of cancelling and relisting property. In most circumstances, the practice is a violation of NWMLS Rules. Rule violations of this nature are easy to identify, and NWMLS will initiate disciplinary proceedings against agents and brokers who cancel and relist properties, except in accordance with the following guidelines:

• Agents do not have the ability to cancel and relist property without the aid of their broker or the broker’s designated staff.
• You may never cancel and relist a property without a new listing agreement and new listing input sheets fully signed and initialed by the parties.
• You may not cancel and relist a property, even with a new listing agreement and new listing input sheets, unless there is a material change to the listing (e.g., a significant change in the price of the property, a remodel, a change in zoning, or a change in ownership).
• You may not cancel and relist a property in order to make it appear as a new listing when it is not or to make changes to the property information contained in the listing. For example, it is a rule violation to input a new listing with an insignificant price change, even if the seller executes a new listing agreement.
• In almost all cases, changes to a listing should be made on either Form 18, Amendment to Exclusive Sale and Listing Agreement (price changes, extension of listing) or Form 19, Status Change Input Sheet (changes in status, changes to property information contained in the listing, changes to marketing remarks, etc.).

If it is true that there has been "an increase in the practice of cancelling and relisting property," might that be an early sign of a turning in the NW market? What are your thoughts? Has anyone else seen this posting or any evidence of an increase in this practice?

Seattle Not Historically Immune To Price Drops

Here's a blast from the past, courtesy of Tim from Snohomish Co. Real Estate. Source: Seattle Times. Dateline: January 10, 1991. Headline: Falling Home Prices Hit Eastside Hardest:

Home prices on the Eastside have slid 12 percent since last summer and are expected to fall that much more before heading back up.

The drop from Bothell to Coal Creek has been more severe than elsewhere in the Puget Sound region. The phenomenon that caused the slump was the same force behind the area's boom of 1988-89: new-home construction.

When home sales dropped regionally last spring, builders were forced to cut prices faster and farther than many homeowners selling existing homes. Many homeowners can wait - or choose not to sell in a slow market - while builders must sell to pay off construction loans. Interest on those loans totals $2,000 to $3,000 a month per home.

Some people seem to think that home prices can't/won't fall around here, and that they never have. Well, the second part definitely isn't true. Just thought that should be pointed out.

(Michele Matassa Flores, Seattle Times, 01.10.1991)
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Rents Still Rising In Seattle

Rising housing costs have been steadily leading to higher rents in the Seattle area:

After enjoying years of discounts, Seattle-area renters should brace themselves for the thought of opening their wallets a little wider when they see their landlords in 2006.

In a trade-off to a rebounding regional economy, apartment rents are expected to rise as much as 5 percent because of more jobs, more job seekers and a limited supply of rental units.

In its 2006 annual report, Marcus & Millichap outlined those trends and said the average amount a tenant will pay this year will be $813 per month.

Asking rent — or the amount a landlord ideally wants — is expected to climb 2.9 percent to $846 per month. The real estate investment brokerage company defines the Seattle area as King, Snohomish and Pierce counties.

This is a topic that has been touched on many times here already, and this article doesn't really offer any new insight into the whole thing, but it did bring up a thought I've been pondering in the last few days.

Last year, about 3,000 rental units were converted into condominiums, according to Marcus & Millichap.

While new rental units are expected to be ready late this year, experts said there was little new construction or apartment planning during the 2001 to 2003 recession.

That is contributing to the pinch.

So, while we're just now experiencing the effects of low levels of building from '01 to '03, then if the market does slow back down again in the next few years, the building boom of the last few years will turn into a huge excess supply in around 2010 or so, leading to not only reductions in home sale prices, but also some serious discounts on rents. Good news for renters, bad news for homeowners and landlords—if it happens.

(Brad Wong & Angela Galloway, Seattle P-I, 01.20.2006)