Seattle Bubble

The post you are about to read is true. The names have been change to protect the… Well, mainly because I don’t want to start a blog war. For this same reason, I have not provided links to the posts I mention. They are available for verification upon private request.

By now, most sensible people know that the proclamations of national real estate sales spokespersons should be given little to no weight. The most visible example of course is NAR “Economist” David Lereah, who consistently spews positive predictions, despite market realities to the contrary.

Of course, “all real estate is local,” right? So David Lereah’s national predictions are fairly meaningless to us anyway. To get a feel for the local market, most people are inclined to turn to their friendly neighborhood real estate salesperson. However, is the friendly neighborhood real estate salesperson any more likely to be open, honest, and/or correct about what is happening in the local housing market, and where it is headed? Let’s take a look at a few recent examples.

As January drew to a close, area Realtor “Marzipan” stated of the local housing market that inventory had “shrunk over the last month” and that supply was “tighter, not in excess of the demand.” When the data for January became available from the NWMLS, it turned out that (King County res + condo) inventory actually rose 11.7%, with 3,744 new homes coming on the market (supply) and just 2,492 pending sales (demand). Keep in mind that as a member of the NWMLS, Marzipan has access to the data before it is published to the general public. Why she chose to make a verifiably false statement about inventory and demand is anyone’s guess.

In another recent episode, real estate agent “Homestar” reprinted a verifiably false headline from the Seattle Times, and used it as the subject of an entire post. Referring to October - December of last year, the headline claimed that “Housing sales fall in 40 states; but not in Northwest.” In reality, year-over-year sales declined 8-12% in the last three months of 2006 over the entire region covered by the NWMLS, continuing a trend that began in November 2005.

When called out on his inaccurate assertion, Homestar did not step up to correct the error. In fact, he appeared to ignore the issue all together. However, another local real estate salesperson, “Carol” readily stepped up in an apparent attempt to defend Homestar. Her tactic was to mount personal attacks and divert the discussion to home sales price, which she continued to harp on despite repeated attempts to point out the simple fact that the headline was in error. Carol utterly refused to acknowledge that the headline claim about sales was demonstrably false.

These are just a few of the most recent examples. Anyone who cares to spend some time reading the archives of the near-innumerable local real estate sales blogs is sure to find many other instances of verifiably false data being presented as fact to an unwitting public. In my experience, local real estate “professionals” are no more reliable than national PR talking heads when it comes to providing honest, accurate assessments of the present housing market.

If they can’t even manage to honestly convey things that have already happened, why should we believe their predictions of what is going to happen? In my opinion, we shouldn’t.

Dow, Nasdaq, S&P500

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Microsoft & Boeing

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Update: By request, here is a graph of today’s stock performance for a handful of other locally-based companies.

Other Seattle-Area Companies

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For those of you keeping score at home:

• Boeing: -1.95%
• Microsoft: -4.12%
• Amazon: -5.00%
• Starbucks: -3.94%
• Nordstrom: -7.59%
• Costco: -3.48%
• Washington Mutual: -2.25%

Some immunity.

Seattle home prices can’t possibly fall, because we’ve got one of the best job markets in the country! At least, that’s how the argument goes… but according to the latest claims from Forbes, that argument might not hold much water.

Oklahoma has inspired its share of songs and one memorable musical. But it’s not exactly a top destination for recent college graduates looking for work. Usually, 22-year-olds flock to cosmopolitan cities like New York and San Francisco, assuming that’s where they’ll find the most opportunities for work (and, let’s be honest, a social life). But they might be heading in the wrong direction. Oklahoma City made it on to our list of the 25 best American cities to get a job. New York’s ranking? No. 75.

Of course, if you want a job in finance, you should still consider New York–Warren Buffett notwithstanding. And while Oklahoma City surely has a thriving arts community, the major metropolitan areas are probably your best bet if you want a career in theater. Our list looks only at statistics; we don’t focus on which areas are best for specific careers. And for the second time in a row, the big cities performed poorly. While Washington D.C. is fifth on the list (down from No. 1 last year), Chicago (No. 82), Los Angeles (No. 88), San Francisco (No. 86) and Boston (No. 83) couldn’t even break the top 75.
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So where should you look for work? We wouldn’t rule out New York or Los Angeles; highly educated job-seekers should be able to find opportunities there. But the major metropolitan areas will probably never shine on this list. Despite high median incomes, they are generally plagued by unemployment, expensive housing and low job growth.

Coming in at number 34 on the full rankings, Seattle out-performed many of the larger cities. Keep in mind though that this is the same source that five months ago predicted Seattle home prices will shoot to the moon.

It should also be noted that #1 on the list is Raleigh, NC, home of Research Triangle Park. Raleigh is a strong competitor to Seattle when it comes to technology jobs, and if you put any stock in Forbes’ calculations (which I’m not saying I do), they currently come out on top by a long shot.

Seattle’s a great place with a strong job market (at the moment), but you’re only fooling yourself if you think we’re unique, special, and invulnerable to serious housing market declines because of it. The point I’m trying to make is that there are plenty of places around the country with job markets as good as or even better than Seattle. A good local job market obviously won’t hurt the housing market, but it won’t save it, either.

(Hannah Clark, Forbes, 02.16.2007)

There are lots of great conversations going on over at the Seattle Bubble Forums, why don’t you join in too? Here’s a sampling of what’s going on over there:

• Alan offers some perspective on half-million-dollar homes.
• A couple of threads toss out predictions for 2007
• Matthew points out that stocks may be headed for a big fall.
• Shack asks how long would it take for a flatlined market to return to “normal?”

These are just a few of the conversations that are going on. So why don’t you head on over and add your voice to the discussion?

If the owner of the Smith Tower gets what they want, you can add yet another condo to dozens already planned for downtown’s future. Walton Street Capital is hoping to convert the Smith Tower into condos:

Ninety-three years after Pioneer Square’s Smith Tower was built as an elegant business address, its new owner hopes to turn the 38-story landmark into residential condominiums.

Chicago-based Walton Street Capital filed papers with the city Wednesday to begin what could be a months-long process of getting approval to redo the tower as housing.

It seems that living in old buildings is more charming — and practical — than working in them.
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“We bought it, frankly, as an office building, and it wasn’t until we found out we would lose the two largest tenants in the building that we really looked carefully at what our options were,” [Walton Street representative Michael] Allmon said. “We’ve just become excited about the possibility of changing its use.

“It’s important that all possible current and future uses be explored in the preservation of this iconic tower,” he added.
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Allmon believes a condominium-ized Smith Tower would have little trouble competing with the dozen or so swank condo developments under construction in downtown Seattle.

“I think this really is a category unto itself,” he said.

I personally think it would be pretty awesome to live in the Smith Tower (that is of course if I worked anywhere near downtown). It’s always been one of my favorite buildings in Seattle. I made a crude LEGO model of it (crude compared to this one), and it is featured prominently in the only painting my wife and I own.

On the other hand, they’ll most likely be ridiculously expensive luxury condos, far out of reach for most people, and besides that, does downtown Seattle really need yet another tower full of condos, on top of the 49 others in the works? Really?

(Amy Martinez & Elizabeth Rhodes, Seattle Times, 02.22.2007)

Illustration: James McFarlane
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Question: How many of the Seattle-area’s much-vaunted Boeing jobs will fail to materialize with the collapse of a $2.2 billion order?

Question: Are predictions about Microsoft job growth perhaps just as “overly aggressive” as Vista sales forecasts (according to CEO Steve Ballmer)?

Just curious.