Looks like the market for developers of multi-unit buildings in Tacoma is coming to a grinding halt, much like the area’s housing appreciation.
After seemingly countless delays, extensions, redesigns, reconfigurations and rethinkings, a proposed boutique hotel on downtown Tacoma’s Foss Waterway faces a deadline Monday.
The hotel’s Seattle developers must produce all the permits, designs and financial commitments to the Thea Foss Waterway Development Authority or face the prospect that after more than four years of trying, the hotel simply won’t fly.
The authority, which wants to sell the land on which the hotel project would be built, and Tacoma civic leaders pray the project is a go, but the hotel has been a tough deal since its conception.
The 50-month gestation period for the 100-room hotel that also includes 22 condo units illustrates how emerging competition, changing market conditions and national trends can make what seems like a sure thing into a difficult project.
In recent months, those same factors plus tighter financing, a deflating national housing market, a local oversupply of condominiums and new caution even among high-flying developers put the brakes on what was a kind of gold-rush development market in Tacoma.
“A couple of extra points on the interest rates, slower sales and more cautious bankers can make it a much harder task for developers,” said Bob Levin, whose job with the City of Tacoma is to encourage new development in the city.
The article goes on to list a handful of projects (mostly condos) that are described as “dead or dying,” “in an induced coma,” or undergoing an “extreme makeover.” I thought that the market for condos in the Seattle-Tacoma-Everett area was severely under-tapped. I thought that we learned from the mistakes of markets like those in Florida. With all the unsatiated demand out there, how can there possibly be an “oversupply” and “slower sales”?
When the housing slowdown hit Southern California, they said “that’s 1,000 miles away, it won’t happen here.” When the housing slowdown hit Northern California, they said “that’s still 750 miles away, we’re safe up here in Seattle.” When the housing slowdown hit Portland, they said “they’re 200 miles away, our economy will keep us safe.” When the housing slowdown hit Tacoma, they said “heh heh, well, that’s getting a little too close for comfort… but it’s still 30 miles away, and totally unrelated to Seattle. Seriously. I hope?”
(John Gillie, Tacoma News Tribune, 07.22.2007)
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22 responses so far ↓
1
softwarengineer
// Jul 24, 2007 at 11:29 am
THE CONDOS WERE HIT HARD BY THE LAST SEATTLE REAL ESTATE BUBBLE
The $50K condos people were grabbing up in 1979 became a financial joke by the mid to late 80s bubble; stagnating or decreasing in price, with many converted to apartment glut. New stick homes in Everett, i.e., were plummetting in price down to around $60K about that time too, 3 bdrms with 1/2 acres too.
The difference is, wages weren’t stagnating like today. Most loans were fixed rates, not this hybrid subprime arm and leg carnage we’ve seen in most of the 2000 Seattle market. Yes, there are some comparisons, but today’s Condo investment value with inventory surge, coupled with looming foreclosures like we have never seen since the Great Depression because of too loose money….makes my head spin. I do hope I’m wrong.
2
Buceri
// Jul 24, 2007 at 1:02 pm
Some economists claim that Mr. Greenspan will go down as a popular guy instead of an efficient head banker. He moved the stock bubble to the real estate bubble and created a pretty amazing 7-9 years. But now we are starting to see damage. Money tightening started recently; but many websites still advertise $450,000 loans for $1200/month or so. And there is only one way those number could do the magic.
Off topic; yesterday Marketplace on NPR interviewed the UPS CEO; he was asked about the US economy since UPS is an excellent gauge. He said they had already commented on a slow down 3 months ago; when pressed what was he seeing currently, he did not want to answer. The follow up question was; is it difficult/unfair that you are seen as a gauge for the economy?
Anyway, the numbers keep on showing growth; but most people (exclude attorneys and doctors) feel like crap.
Sorry, the whole post is off topic but this is what came to mind after reading Softwarengineer’s post.
3
deejayoh
// Jul 24, 2007 at 1:12 pm
I remember a mid-80’s joke:
Q: what are two things you can’t get rid of?
A: Herpes, and a condo in downtown Seattle.
4
Joel
// Jul 24, 2007 at 1:15 pm
Some anecdotal stuff: I was driving around Bellevue looking for houses for rent and I noticed a lot more for sale and open house signs than usual. Not exactly ARMageddon levels, but it seems like a sudden jump.
Additionally there’s this pretty big condo conversion that got finished a few months ago right near where I live. It looks like they have a lot of units although there are only 3 or 4 on the MLS at a time. Every Sunday they have balloons and signs out touting “affordable luxury” (2 bedrooms for $370k is affordable?). Anyway as of 2 days ago they started using one of those sign jiggler people. You know those people that just stand on the corner holding a sign advertising something while shaking it (”it” being the sign or themselves or both). The thing is the guy holding the sign looks like your stereotypical homeless guy. I mean, maybe if their message is, “We’re so affordable even this guy can live here,” I guess that would make sense. Otherwise, I think they might have to rethink their marketing strategy. I normally associate those sign jiggling campaigns with going out of business sales and places desperate to bring in customers.
5
RottedOak
// Jul 24, 2007 at 1:58 pm
One sign spinner is nothing. When the slowdown first hit San Diego, there were sign spinners everywhere. Condo complexes would have 3-4 each to cover all the approach vectors. Spinners would compete to come up with moves to draw more attention (spin the sign behind your back, throw it in the air, etc.). It was quite the bull market — for sign spinners, that is, not housing.
As the bust deepened, the builders began to realize that sign spinners weren’t helping much and cut into their already shrinking profits, so there aren’t so many now. I imagine that Seattle will follow San Diego in this with the same lag time that’s shown up for other housing-related trends.
6
mike2
// Jul 24, 2007 at 2:00 pm
Ha, last summer those sign jiggler guys were on every corner near the entrance to Laurelhurst advertising $500K for $1800/month.
7
BanteringBear
// Jul 24, 2007 at 2:05 pm
I’ve just got to laugh every time I see condos and townhomes ’starting’ at $359k. This is more money than most first time buyers can afford, yet they are starter homes. Is there even a single market in the country where median income supports starter homes in this price range? Seattle certainly doesn’t. Builders are slowly finding this out, and will lead the market down as they have to cut prices to unload this garbage.
8
CKT
// Jul 24, 2007 at 2:05 pm
For those of you who haven’t seen this yet, YOY increase in Pierce County median price for SFH+condos for June was only 0.82%. I posted a figure about this here in the forums.
9
MisterBubble
// Jul 24, 2007 at 2:19 pm
“Builders are slowly finding this out, and will lead the market down as they have to cut prices to unload this garbage.”
I wonder how long it’s going to take, and how ugly the situation will have to become to get them there.
“Professional” landlords in this town routinely make me laugh with their crookedness and wishful thinking (i.e. how many landlords in Seattle continued to insist on 1999 rents in 2002? I walked away from many.) I can’t imagine what it’s going to be like when the money that stands to be lost is real, and unrecoverable.
People in this burg seem to think that it’s their divine right to get rich off of real estate.
10
biliruben
// Jul 24, 2007 at 3:13 pm
I was very impressed with the talent levels of the sign spinners in SD last August. Behind the back, twirling over their heads - almost carnival-level!
I guess by that time they had had a lot of time to practice, but the spinners I saw on my bike ride from Shoreline to Snohomish last weekend reminded me of a comment by Marques Johnson a number of years ago. After his co-analyst made a statement that one of the long litany of untalanted Sonics power forwards we went through after Kemp left was a “poor man’s Charles Barkley” Marquis said something like:
“Well maybe not a poor man’s Charles Barkley; maybe a homeless person’s Charles Barkley.”
What’s my point?
I miss Marques, and Snohomish County’s Sign spinners could learn something from those all-stars in SD!
11
Orion
// Jul 24, 2007 at 3:19 pm
I’ve been aware that a lot of condo projects were in the works simultaneously in Tacoma, most of them are still being built and have yet to hit the market. The thing is, it seemed like all these developers were targeting the high end demographic. Tacoma has traditionally been a working class city and there are still a lot of houses left over from the post WWII era which are tiny. Maybe Tacoma will attract a whole bunch of wealthy condo buyers (who will most likely have to make the commute to their job in Seattle or Bellevue) but I have my doubts. That’s at least 2 hours a day commuting by the way (I’ve done it). It’s been noted on the Housing Bubble Blog that developers aren’t interested in market research, they target the wealthy buyers because that’s where the most profit is to be had. However I think developers are all competing for the same small slice of the demographic pie. No one is interested in building affordable housing these days (granite countertops not required).
12
biliruben
// Jul 24, 2007 at 3:29 pm
Thrice All American
I want to tell you about my hometown
It’s a dusty old jewel in the South Puget Sound
Well the factories churn and the timbers all cut down
And life goes by slow in Tacoma
People they laugh when they hear you’re from my town
They say it’s a sour and used up all place
I defended its honor, shrugged off the put downs
You know that you’re poor, from Tacoma
Buildings are empty like ghettos or ghost-towns
It gives me a chill to think what was inside
I can’t seem to fathom the dark of my history
I invented my own in Tacoma
There was nothing to put me in love with the good life
I’m in league with the the gangs guns, and the crime
There was no hollow promise that life would reward you
There was nowhere to hide in Tacoma
People who built it they loved it like I do
There was hope in the trainyard of something inspired
Once was I on it, but it’s been painted shut
I found passion for life in Tacoma
Well I don’t make it home much, I sadly neglect you
But that’s how you like it away from the world
God bless California, make way for the Wal-Mart
I hope they don’t find you Tacoma
Tacoma Native, Neko Case (2000)
13
Joel
// Jul 24, 2007 at 3:48 pm
I had driven by the jiggler multiple times and once I saw a what looked like a woman walking away with his sign. I thought maybe he had been fired for not jiggling with enough intensity, but it looks like he still had his sign, so I think she was jiggler number 2. We’re halfway to SD levels of jiggling!
14
MisterBubble
// Jul 24, 2007 at 4:19 pm
Offtopic question: why are so many homes being removed from the MLS between 4 and 5 AM every morning?
Looking at the log (thanks Tim!), I can’t help but notice that on 7/23, inventory dropepd by 16 between 4 and 5 AM. The next day, at the same time, it dropped by 26!
Those Realtors ™ sure are night-owls, aren’t they?
15
Alan
// Jul 24, 2007 at 4:21 pm
Can you believe this drop in KC-SFH? 10127! Inventory hasn’t been this low since the 6pm on the 19th of July! It looks like the bubble theory has been disproved. Everyone back into the pool.
On the other hand, check out this short term runup:
07.20.2007 15:00 10,147
07.20.2007 16:00
07.20.2007 17:00 10,174
07.20.2007 18:00 10,187
07.20.2007 19:00 10,189
07.20.2007 20:00 10,197
50 homes in only 5 hours! At that rate, there will be over 50,000 SFH on the market in KC by the end of December this year!
What was that you just said? I shouldn’t put so much weight on short term observations? Nonsense!
16
MisterBubble
// Jul 24, 2007 at 4:23 pm
How ironic, Alan…
17
Buceri
// Jul 25, 2007 at 5:12 am
Here in Tampa, the jigglers are just “holders”. Many 2 condos per corner pointing at different directions. They wear huge straw hats, sunglasses, sunscreen, and all they do is wave. If you move too much with 90° and 85% humidity, you won’t make it to lunch time.
By the way; I’ve read yesterday that some conversions here have converted back to rentals the units that did not sell. So you could be the only owner on your floor. That has to be an interesting home owners association meeting.
18
TacomaTroll
// Jul 25, 2007 at 8:59 am
As a longtime Tacoma native,I have to agree with Orion.
I see all these multiple “high end” condos being built with prices from 500K to 1 Million. For pete’s sake, this is TACOMA!!, who in the hell is gonna spend that kind of money to live in a downtown that has LITTLE in the way of recreation and culture. For that kind of money Id buy a SFH with a beautiful view in old town or the north end.
19
Jesse
// Jul 25, 2007 at 11:10 am
Love that neko song.. nice one biliruben
20
biliruben
// Jul 25, 2007 at 11:57 am
Yeah - it’s my wife’s idea of a jolly old lull-a-bye for our wee one to go nite-nite to.
I’ve started saving for up for therapy. ;)
21
Grvetti
// Jul 25, 2007 at 12:36 pm
Condo Craze
Times are a changin’…. it seemed like just yesterday…
“Those who sell the downtown projects say several factors are driving the housing boom and attracting buyers…downtown’s new restaurants, museums and other amenities have made the neighborhood more attractive to empty nesters and young couples alike.”
All right, can we all agree to put the “empty nester” myth to bed? I know REIC, it was such an attractive talking point, like a cozy fire and a good book… but it was lie.
RIP “Condo Craze”
22
explorer
// Jul 25, 2007 at 2:22 pm
“Orion said, …It’s been noted on the Housing Bubble Blog that developers aren’t interested in market research, they target the wealthy buyers because that’s where the most profit is to be had. However I think developers are all competing for the same small slice of the demographic pie. No one is interested in building affordable housing these days (granite countertops not required).”
I can second that with the new owner/developer of my soon to be converted apt. Building. He has the external and internal surveyors coming soon, but has expressed classic buyer’s remorse to one of the current tenants: “Why does everyone not feel some sympathy for me? I have taken a huge risk…”
Well, it was a fully LEVERAGED risk, with the rents guaranted and paid to his lender (I looked up the property filings). His real concern is that by the time things are luxurized, there won’t be many takers, and his estimated profit may in fact be half to 2/3 what he greedily envisioned.
This guy is a local developer, who has been doing this for over two decades. Another example of greed overtaking reality, and the "golly" the torpedoes mindset.
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