Seattle Bubble

A few more articles from this week about how dramatically the local real estate market has slowed.

Puget Sound Business Journal: Construction defaults rise in Seattle area

The latest data on local new-home sales and construction-loan delinquencies illustrate the market forces underlying the growth in mechanics’ lien filings.

Delinquencies of single-family construction loans in the Seattle/Bellevue/Everett marketplace have risen to 11.4 percent of outstanding loan balances during the second quarter, according to data from Oakland, Calif.-based consultant Foresight Analytics.

That’s only slightly better than the median delinquency rate of 11.6 percent among the nation’s 100 largest metro areas. The Tacoma market is even more distressed, with 15.6 percent of single-family construction loans delinquent.

With respect to commercial and condominium construction loan delinquencies, both the Seattle/Bellevue/Everett (5.6 percent) and Tacoma (8.7 percent) vicinities fared worse during the second quarter than the top 100 markets combined (4.9 percent).

Falling new-home sales and values underlie much of the construction loan foreclosure activity.

Over 1 in 10 residential construction loans have gone delinquent? Yikes. So much for Seattle-area builders learning from the lessons of Florida, where they went through this same mess two years ago.

Tacoma News Tribune: Downtown condo sales at a crawl

How’s the market for condominiums in downtown Tacoma?

“What market?” says Judy Mayfield, head of sales for The Esplanade, the 162-unit project on the Foss Waterway, now nearing completion.

After two years of extolling the virtues of the nine-story luxury project, Mayfield and her staff have yet to close a deal on a single unit.

Tacoma’s condo market has suffered even more in the mortgage meltdown than other sectors of real estate.
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Condominium developers and brokers remain convinced the condos are a good deal – in fact, they say, what with low interest rates and high inventory, they are a better deal than ever.

The problem, they say, is getting people to commit in such uncertain times.

“The timing couldn’t have been worse,” Mayfield said. “Had the market not turned in the past year and a half, we would definitely have sold out by now.”

Translation: “We were really counting on suckering 162 flippers into buying luxury condos in Tacoma on the false hopes that they could sell them for a profit in the perma-hot housing market. Now that the market has cooled and everyone realizes that nobody wants to actually live in luxury condos in Tacoma, we’re screwed!”

Seriously. Who sat down at the drawing board and said “one hundred and sixty-two luxury condos in Tacoma—sounds like a great plan!” Perhaps it was the same sage that decided a good plan would be to build an 86-unit townhome complex in Kenmore, then market it with pictures of sandy beaches and palm trees.

Does anyone out there still think the rental market will be tight as a growing number of these completed condo and townhome projects switch to rentals after attracting no buyers for months on end?

(Brad Berton, Puget Sound Business Journal, 10.03.2008)
(Rob Carson, Tacoma News Tribune, 10.10.2008)

Here are a couple of recent stories to drive home the point that the Seattle area economy is not in fact magically separate from the national/international economy, as some have made it out to be over the last few years.

Brad Wong, Seattle P-I: Tough economy forces cutbacks for area residents

The economic shocks to the nation’s banks, stock markets, credit industry and real estate business have forced Seattle-area residents to review their finances and save what they can.

Thoughts about how to pay for bills — from mortgages and rent to higher food and gas prices — have consumed area residents fearful their quality of life could diminish.

As residents — including those not in immediate dire straits — hatch new plans to weather the turmoil, even young people said they are learning how quickly national problems can affect daily life.

Donna Gordon Blankinship, AP: WA people worried but not desperate about economy

People worried about the economy are more likely to seek help paying their bills or feeding their families than turning to suicide or violence as one man did in Los Angeles this week, mental health experts in Washington state said Tuesday.

“I don’t think the average response to the downturn in the economy is more people thinking of suicide because they can’t pay their bills,” said Kathleen Southwick, executive director of the Crisis Clinic in Seattle.

Southwick said her nonprofit agency’s 24-hour crisis line has not seen an increase in calls these past few weeks, but the “211″ non-emergency line has seen about a 50 percent increase in the number of people calling to find out where they can get help paying the rent and keeping the lights on.
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The last time the help line saw such a sharp increase in calls was a few years ago “when the tech bubble burst,” Southwick said.

So much for the theory that we’re better prepared to weather the storm than we were when the dot-com bubble popped. Who could have guessed that seven years of pretending everything is fine and that we’re magically immune wouldn’t be enough to stop economic calamity from arriving in Washington State?

Editor’s Note: The following is a guest post from Seattle Bubble regular “perfectfire.” Thanks for taking the time to put together such a useful guide! Also be sure to check out this related post from February: How To: Use Craigslist & RSS to Find a Great Rental

My wife and I just signed a contract on a rental house after searching for about a month. It was stressful and difficult because the rental ad space is so fractured. There are smatterings of listings all over the place. Some listings are at several different places, some at just one. A lot of listings aren’t deleted when the house is of the market. The biggest source of listings has an awful, awful search experience. A lot of landlords want to hide the location of their house for some reason.

Anyway, I have a friend that is also looking for a rental house so I sent this email advice to them.

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Here’s the NWMLS press release that accompanied yesterday’s numbers: Pending Sales Up 4.1 Percent From Year Ago, Total Inventory Unchanged

Home sales around Western Washington during September rose 4.1 percent from a year ago, reversing a 19-month pattern of declines. Members of Northwest Multiple Listing Service reported 5,982 pending sales (offers made and accepted, but not yet closed), a gain of 234 transactions from a year ago. The totals cover 19 counties in the MLS service area.

NWMLS data show the last system-wide uptick in pending sales was February 2007 when members reported a 4.8 percent gain from the previous year.

In other key indicators of housing activity, Northwest MLS reported tightening inventory with a double-digit drop in the number of new listings added during September compared to 12 months ago, and total inventory at month end that matched year-ago numbers. Figures also show area-wide softening of prices compared to a year ago.

So the industry-promoted message this month is “focus on the increased sales and flat inventory.”

Let’s take a look at the newspaper writeups about yesterday’s data from the NWMLS. Let’s see how our local reporters did at staying on message.

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Time for September market statistics from the NWMLS.

The NWMLS press release will be posted at this link when it goes up.

Here is your summary along with the usual graphs and other updates.

Here’s your King County SFH summary:

September 2008
Active Listings: up 5% YOY
Pending Sales: up 15% YOY
Median Closed Price*: $415,000 - down 7.8% YOY

Here is the updated Seattle Bubble Spreadsheet, and here’s a copy in Excel 2003 format. Click below for the graphs and the rest of the post.

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