We’re venturing a bit further outside the Seattle area than usual for this story, but I thought it was interesting enough to merit that. From the Gray’s Harbor paper, The Daily World comes this story about an up-and-coming planned community of half-million to million-dollar homes in Pacific Beach:
On a cliff in the woods overlooking the Pacific, seven picturesque beach houses have emerged.In the next few years, developer Casey Roloff plans to build 393 more, plus classy cafes, coffee shops, retail stores and parks — transforming this once-vacant mass of forest land a mile south of Pacific Beach into a town unlike any other on the West Coast.
Seabrook emphasizes sustainable development and the cozy community feel that is central to the new urbanist movement. Garages are placed behind homes in alleys, leaving more prominent space for walking paths and pedestrian-only streets. Lots are smaller — but community-owned areas, like parks, amphitheaters and benches — are designed to be accessible from every home. And instead of building gated mansions along the ocean, homes will be balanced with community space, trails and a pedestrian bridge.
It’s quite a nice-sounding vision. One wonders if there is really that much demand for such a place in Pacific Beach. Can the local economy support such a grand vision?
About 325 families have placed refundable $5,000 deposits to get on the waiting list for Seabrook. Of those investors, Roloff estimates around 60 percent are from Washington. But people from Florida, Arizona, New York, Idaho and California have also reserved houses, which currently range from $475,000 to $700,000 — almost double the price at which the homes were being offered in June 2004. A few Harborites have even reserved.
…
Like 90 percent of the people considering buying into Seabrook, Alison Kruse, a Covington homemaker, is looking for a second home.
Yowza, that’s a lot of “investors.” How many people are buying with intent to actually live there for at least a portion of the year, and how many are hoping to sell in a few years? At any rate, it sounds like it would make a fun ghost town to visit 50 years from now. I kid, I kid.
(Kaitlin Manry, The Daily World, 10.08.2005)
“Like 90 percent of the people considering buying into Seabrook, Alison Kruse, a Covington homemaker, is looking for a second home.Yowza, that’s a lot of “investors.”
No kidding! I checked the area out a few months back, and the investor-driven prices were very apparent. How many “second homers” (or investors) will stick it out when the market corrects?
Btw, I can’t help but wonder why your blog has so few comments–despite the quality of your articles. Do that few Seattlelites follow the bubble–or perhaps scoff at the whole idea? Since I no longer live there, I don’t have a good pulse on the area anymore. That may be a pertinent topic for discussion–the current real estate sentiment there: what do people believe? That could be a useful reality-check.
Well, I came over from thehousingbubble2 blog. I am following this blog as well, as I have a vested interested in that my wife and I are looking for an upgrade house ( we currently own in Greenwood) but are discouraged at the moment on the lack of quality in the price range we are looking at. I have no desire to leverage myself to the gills and personally believe we are in for a reduction or at least a flattening ( in nominal dollars ) for a few years…but then again, a lot folks from cali must still be moving up here…
REskeptic,
Thanks for the suggestion. I just may use it.
Do that few Seattlelites follow the bubble–or perhaps scoff at the whole idea?
I know smart people, who don’t discount a bubble, who are continuing to buy.
In fact, a friend who had been looking for 5 years, but couldn’t get herself to pull the trigger due to bubble fears, finally bought in Greenwood last month. She was getting tossed from her apartment, and needed someplace to live.
I think people buy into the idea that Seattle is somehow different. To a certain extent this might be true. We have fallen behind other hot markets in the list of riskiest places to buy in the last couple of years, where we used to be in the top ten, and Seattle is still white-hot, where other markets are flattening or declining.
My best guess: a peak in 8-12 months, and a 10-20% decline by the end of 2007. We will see a recovery in nominal 2004 prices by 2010.
So if you buy now and are willing to stay put for 5+ years, you aren’t really risking too much.
I think people buy into the idea that Seattle is somehow different. To a certain extent this might be true.
Hmm…perhaps, but people say the same thing about Vancouver, San Francisco, Monterey, and Santa Barbara, not to mention my “neck of the woods” (Marin).
So if you buy now and are willing to stay put for 5+ years, you aren’t really risking too much.
How about losing all of your equity? It’s definitely a possibility around here, but perhaps Seattle hasn’t overheated quite so much. Still, let’s say you take a $500K fixed mortgage at 5.7%. That’s roughly $2900/mo. plus taxes. Then, let’s suppose the market tanks in a couple of years, dropping a plausible 30% (remember Vancouver last time). Option 2, you wait and save more for your downpayment, let’s say $40K more, and a 30% smaller principal. Add the original 20% down to what you saved, and your principal is now $280K.
That’s now only $1862/mo. at 7%. Plus lower property taxes.
If this scenario is at all plausible, the risk I see is a possible loss of equity, and the difference between paying interest now on an overpriced home or waiting for a market correction. Of course, it’s all hypothetical, and left to individual judgement. Yet, given this scenario, you’ll pay $88,376 on interest alone by the end of 2008. That’s $206,440 more over 30 years–money possibly better invested. Tack on the higher property taxes too.
Yeah, I’m risk averse and refused to take out more than a 200K mortgage in this crazy market. That way 5 years down the road, when I go to get a bigger house closer to the city, even if all values drop 40% across the board and stay there, I win.
Your calculations don’t include the fact you have to live somewhere. Unless you already own a home free and clear, it will cost rent, likely for a place not as nice as you could own.
I know I couldn’t find a place to rent for under what mortgage/taxes run me, that was as nice as my house.
I certainly agree I with you that wouldn’t be snagging a 700K house and a 500K mortgage in this market.
Your calculations don’t include the fact you have to live somewhere. Unless you already own a home free and clear, it will cost rent, likely for a place not as nice as you could own.
Yes, that’s true–my mistake. The rent situation depends on where you live, and around here it was very reasonable due to a speculator-induced glut. At the time, definitely a better value for the money.
As the movie goes… “if you buid it they will come.” And come they are to Seabrook. With division one nearly sold out and the second phase well under way, Seabrook is showing no signs of slowing down or the effects of the dreaded “bubble.”
The reality is that the customer base who can comfortably afford a second home on the coastline is not going to be as adversely affected by an uptick in interest rates as us mere mortals and in some cases are paying cash for these properties.
If the success of the other Casey Roloff-led Bella Beach development in Lincoln City is any indication, I would not hold your breath waiting for a ghost town.