Seattle Bubble

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)

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)

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)

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)

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)

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)