Yet another great editorial from Bill Virgin: Once considered recession-proof, Seattle no longer is
Recessions, Seattle has long believed, were phenomena that happened to other, less fortunate, less blessed and, frankly, less gifted parts of the world.
…
Until now.As recently as the first half of 2008, you could find plenty of people who believed that the old model would continue to hold, that Seattle would be largely immune to the slowdown afflicting the rest of the nation. A series of major layoff announcements by the high-profile big companies that were supposed to carry us through may have been enough to chase away such comforting notions. Diversity is a nice thing to have in an economy, but it’s not of much use when every sector is ailing and when every corner of the globe is in trouble.
As usual, I recommend you read the whole thing.
Bill has been one of the few local commentators that has consistently provided a voice of reason on the subject of the local housing market and economy—even during the boom years. It will be a real shame to lose Bill’s perspective if/when the P-I closes.
Ray Pepper » Feb 3, 2009 at 11:55 am
If Bill moves on we can always plug the hole with Steve Tytler. His predictions seem to be coming true everyday…. Either way I will send Bill a 500 Shirt. It will make any seperation far more acceptable.
Groundhogday » Feb 3, 2009 at 2:22 pm
I remember discussing this very point a couple of threads back… what if Seattle was actually hit worse than some other places?
Cris » Feb 3, 2009 at 3:18 pm
Eastside living people are really making good money in Seattle. Owners are okay to rent rather than selling.. Half of the inventory has been pulled out from list just to rent. Owners are okay to eat the tax rather than selling for lower price.
I dont think Seattle Eastside will ever see the dramatic price decrease. Maybe another 7% until 2010 is the worst it will see.
pfft » Feb 3, 2009 at 3:28 pm
” dont think Seattle Eastside will ever see the dramatic price decrease. Maybe another 7% until 2010 is the worst it will see.”
is this some kind of joke?
WestSideBilly » Feb 3, 2009 at 3:50 pm
I smell troll.
I also see several pink ponies prancing playfully in the pasture.
softwarengineer » Feb 3, 2009 at 3:52 pm
CRIS REMIND ME OF AMERICA’S BRAINLESS CHAMBER OF COMMERCES
They are against the Buy American provision in the stimulus bill, they allege it will hurt our economy….what are they smoking?
I heard last night that the much smaller country of Germany exports more than America, yet importing far more than we export with horrifying debt is good for the American economy?
Ask the rest of the world if America’s Buy American clause in the stimulus is good and the clear headed honest ones will say, Hades yes….
Why is it protectionist for America to want to export more or make their own stuff [especially with government money] and to a country like Japan or China it is their economic policy?
Japan fell into a decade+ “L” shaped recession [its still going on], yet we imported much from them during their hopeless real estate recession. Our “L” shaped depression is gonna be far worse gang, we don’t export hardly anything and our real estate tanked like Japan’s.
Pierce County Resident » Feb 3, 2009 at 7:39 pm
No economies or industry are recession proof. The recession is now affecting the health care industry. There has been a marked decreased in spending for capital expansion, and as a result our in-house carpenters have been getting laid off. With the decrease in patient visits, clinic staff is being downsized. This is at an organization which has a diverse patient base (private companies and military folks from the 2 large military bases south of Tacoma). There will be no industry and no regional economies that will dodge the recession bullet.
Blagojevich-4-a-Cabinet post » Feb 3, 2009 at 8:15 pm
Ancient Rome people!! They began to import more than they exported, and lost their sense of patriotism. They DIDNT fall overnight, but they eventually bit the dust. Ever hear of the term “Trade Deficit”?
As for Cris, its hard to say how far the Eastside will come down. Although he could be to at least some degree correct. I am not sure if it will come down as far as most other places in our area but it will come down more than 7%.
redmondjp » Feb 3, 2009 at 9:18 pm
Cris,
Out of four brand-new houses built down the street from me in 2005 (2 miles from Microsoft), one has already been foreclosed upon and has resold for 20% less than it did new, and house #2 is now in foreclosure.
I’m not too good at math, but 20% > 7% and prices continue to fall . . .
what goes up must come down » Feb 3, 2009 at 10:24 pm
You just waking up to the fact we have a trade deficit, hello rip van winkle.
David Losh » Feb 3, 2009 at 11:42 pm
To be brief, I’m sensing there is a mass exodus from Seattle.
Why would Californians stay here when prices of property have collapsed? For that matter I have talked with thousands of people who came here for the “work.” If the work becomes shakey where would be the next job source be? What part of the country will the migrating work force head to?
alex » Feb 4, 2009 at 5:12 am
redmondjp,
Do you mind pointing out which 2 houses those are?
thanks!
Cheap South » Feb 4, 2009 at 5:21 am
“Why would Californians stay here when prices of property have collapsed? For that matter I have talked with thousands of people who came here for the “work.” If the work becomes shaky where would be the next job source be? What part of the country will the migrating work force head to?”
Exactly – what I wrote many times before. Seattle = jobs, jobs, jobs…….
Once upon a time, people were also flocking to Detroit.
Ooops » Feb 4, 2009 at 6:07 am
This is a nice article: http://eastcoasteconomics.wordpress.com/2009/01/07/the-fed-bank-borrowing/
The Fed if you look carefully has increased money supply by 600 times? Pretty neat stuff.
So they should have the money to start paying for the planes, software and more. So are people worried about massive inflation when this deflationary period is over? Also with so much money floating around dropped by Helicopter Ben – do you feel there will be more bubbles?
I mean people need to park the money somewhere. Now it is treasuries. Next thing is what? In any case pretty powerful stuff.
DavidB » Feb 4, 2009 at 6:30 am
“Eastside living people are really making good money in Seattle. Owners are okay to rent rather than selling.”
Is it just me or do others read that and think that those 2 sentences don’t make much sense? OK, I can guess what an “Eastside” living person is but the way this is worded it sounds like us living in Seattle should be bowing down to our Eastside Overlords who are gracious enough to rent us somewhere to live!
How is “good money” being made off rentals these days? I just gave my notice to move to my apartment manager and she said she told me the rental market is very soft and they’ve had to lower rents in my Magnolia building and they still haven’t been able to get renters.
There’s no way that anyone is going to be able to rent a house they bought in the past 6 years and generate enough income to pay the mortgage, insurance, taxes, maintenance, etc. Of course it depends how much they financed.
Renting may be a short term option if you think the market will turn around in the next year or so but the home owner will be bleeding money in most cases. If any sellers tried that option last year then I’m sure they’re sorry that they didn’t just sell considering the market dropped over 10%! I expect the market will drop this year by at least 10% so hanging onto a house you don’t need is a really stupid idea!
Jeff » Feb 4, 2009 at 8:38 am
NYT had a “What 300K buys you” feature posted to their site today. Granted its showing a Seattle house boat, but the prices per square foot in this city continue to surprise me:
Lake Union, $797
Lake Placid, $543
Santa Barbara, $332
http://www.nytimes.com/2009/02/04/greathomesanddestinations/04gh-what.html?_r=1
singliac » Feb 4, 2009 at 9:30 am
You got my hopes up with that Santa Barbara price per square foot. It is definitely not representative of the city as a whole. I barely saw anything under $2M on Zillow, and the average was $4M. :(
Pretty lame story for the New York Times. “Hey, let’s pick out a few outliers and publish them to get some ad revenue.” I guess it worked.
gitano » Feb 4, 2009 at 9:36 am
You would have to be crazy to pay 300k for a houseboat and i do not believe that moorage for that thing is only $282 and if you lose your moorage than you are screwed and have no where to put this eye sore. Better off buying a quality sailboat for that price so when all goes to hell you can sail away and be in a islad paradise!
Groundhogday » Feb 4, 2009 at 9:47 am
The nice things about Seattle back in the early 1990s when I lived there:
1) west coast diversity, food, big city amenities without the overpopulation and traffic of the Bay Area.
2) Very affordable relative to CA
3) Outdoor stuff in close proximity
Negatives:
1) Weather sucks most of the year
The problem is that over the past 15 years Seattle has become a lot more congested, traffic is horrible, and the city is no longer affordable. If people lose their jobs, will they fight to stay in Seattle? That remains to be seen.
Pegasus » Feb 4, 2009 at 10:28 am
The answer to everyone’s problems……
http://www.cornify.com/
Scotsman » Feb 4, 2009 at 10:33 am
Amazing- and so easy to use! I feel better already!
patient » Feb 4, 2009 at 11:03 am
Cris comment is such a troll comment that I wasn’t going to care responding but since the subject got discussed why not expose how utterly flawed it is:
“Eastside living people are really making good money”
oh really?
According to the US census data for Kirkland, Bellevue and Redmond the median household income in those cities combined are about 10% higher than King County as a whole and we are talking median household incomes below $70k (2000) even with generous salary increases it should endup below $100k
per household.
US census: http://quickfacts.census.gov/qfd/states/53/5335940.html
“I dont think Seattle Eastside will ever see the dramatic price decrease. Maybe another 7% until 2010 is the worst it will see.”
Oh yeah, look at this december 2008 data compiled by The TIm:
“The cumulative MOS for Seattle proper continued to push further into buyer’s market territory, coming in at 7.59 in December. The Eastside as a whole shot back up again month-to-month to a new record high of 13.04.”
Cris, if you believe in your own predictions you will be sorely disappointed. The Eastside will crash hard.
anony » Feb 4, 2009 at 11:12 am
Pornography, prostitution, malt liquor, fortified wine, and heroin. All recession proof.
TheHulk » Feb 4, 2009 at 11:45 am
“Owners are ok to rent rather than selling”.
Yeah, that ship was sailing in 2008 when everyone thought the market is softening a little bit and we werent officially in a recession. Even after a horrendous year and a pathetic “peak selling spring/summer season” we are officially YOY at least 12% down (Case Schiller November). A couple of months more and we will be 15% down.
Considering that relatively houses on eastside sold for at least 450K in the bubble days, we are talking about at least a 67.5K loss on a heavily leveraged loan without taking into account the 6% transaction costs of getting rid of the house. Even if the great eastsiders are making 100K a year (not taking into account taxes), I wonder how much longer they can keep fooling themselves.
Robert » Feb 4, 2009 at 12:05 pm
I continue to be amazed that CEOs and management run companies to the ground still stay as CEOs. Wow. And now they also pay themselves partially from the bail out fund. Great. That’s almost like communism in the soviet era.
I wish the govt allowed the companies to fail by buying them out and then actually spinning them off as private entities – that is selling their shares. Probably there would be ineffciencies here as well.
Still – I wish there was some feedback loop for those guys who wreck the economy. I mean GM was not run to ground by this economy but in 2005 they were still under the water and they knew it and did nothing.
When I lived in FL Palm Beach Post was making fun writing that now janitors are buying 1 mill villas. I asked one Wall Street analyst – and he said that I should not worry because those derivatives will all be sold abroad and they know about this. I mean people knew sthg was wrong. Even the fact that this web site got started means that people were sniffing this was foul. And CEOs of those banks are unqualified to run the companies if they are not able to see this risk.
Dave » Feb 4, 2009 at 2:12 pm
Absolutely. Exodus in coming.
Why? Many high tech people are from “away”. Without family ties to the area why stay if you don’t have to? Especially those with families moving closer to other family members might be a deal breaker if breadwinners lose jobs.
A weird fact I just found out. Seattle has the highest (or one of) percapita possession of undregraduate/graduate degrees. Guess what – Seattle kids have one of the lower rates of progressing from high school to university and graudating. Those degrees in Seattle? Mostly transplants.
Dave Lincoln » Feb 4, 2009 at 2:52 pm
What Ancient Rome people? You mean, like, the Romans? Come to think of it, you don’t see any of them around anymore, even in Italy.
Dave Lincoln » Feb 4, 2009 at 2:57 pm
Add to that Federal government employee…
undertaker, excuse me… “gravesite engineer”
plastic surgeon (c’mon, people always need bigger tits)
global warming alarmist (? you say “no”, but I’ve seen a lot of em lately)
spam distributor (the real spam, not that cheesy electronic stuff)
ElPolloLoco » Feb 4, 2009 at 3:03 pm
One reason might be that a lot of people are starting to predict a serious financial collapse on the part of California’s state government. Serious enough to cause significant social unrest. I don’t know how credible those predictions are but they have an uncomfortably familiar ring of truthiness to them.
Sniglet » Feb 4, 2009 at 3:11 pm
Actually, I think banking CEOs were behaving quite rationally. Any executive that tried to stay out of the big credit game of the last decade would have been fired since his division (or firm) would necessarily have been underperforming peers. When all the other banks are raking in big profits with dodgy loans and securities you CAN’T just stand back and accept a low rate of return: your shareholders would crucify you.
The same principal applies to many other careers. In recent years, you simply couldn’t even remain employed as an appraiser if you were going to be highly conservative in your estimates.
Frankly, I think everyone deserves the blame for this mess…
http://surkanstance.blogspot.com/2008/10/blame-little-people.html
dogwood » Feb 4, 2009 at 3:11 pm
“I dont think Seattle Eastside will ever see the dramatic price decrease. Maybe another 7% until 2010 is the worst it will see.”
Have I missed something here? Yesterday’s Zillow report showed the most dramatic price declines have been on the Eastside, not Seattle proper.
How do you back up your assertion that a current ~20% YOY price decline on the Eastside is going to magically slow to no more than a 7% decline over then next 2 years? And in the face of MSFT layoffs? And despite Case-Shiller data that show YOY price declines are accelerating, not slowing? And in an environment of increasing foreclosures?
This sounds a lot like “Seattle may not be special after all, but the Eastside is” – again without a shred of evidence to back it up.
Mkkby » Feb 4, 2009 at 10:13 pm
That is not correct. The money supply is not growing as fast as money is being destroyed by de-leveraging. The result is deflation:
http://globaleconomicanalysis.blogspot.com/2008/01/money-supply-trends-are-deflationary.html
Mkkby » Feb 4, 2009 at 10:18 pm
“I dont think Seattle Eastside will ever see the dramatic price decrease. Maybe another 7% until 2010 is the worst it will see.”
Dear clueless wonder: This blog has shown the opposite in detail every month since the peak. Seattle city is showing the most resilience. East side is sliding the fastest. Read up before making unsubstantiated comments.
Mkkby » Feb 4, 2009 at 10:30 pm
It was smart to collect huge fees lending money to anyone with a pulse, ONLY because the loans were sold off to clueless investors. It was not smart for bank CEOs to buy their own trash and get dragged down the drain.
Sorry, but I’ve heard that argument. It’s a CEO excuse that makes no sense.
Mkkby » Feb 4, 2009 at 10:48 pm
“Bill Virgin: Will Recession Hit Seattle Harder than Elsewhere?”
I didn’t find this article interesting. Who cares how Seattle stacks up against the rest of the state? The more relevant question is how does Seattle stack up to the rest of the US, or the world. Honestly, I’m sick of how the local media acts like nothing exists outside our little world.
Compared to the rest of the US, Seattle is in better shape. Yes, there have been highly visible layoff notices. But 10-20k layoffs at Boeing and Microsoft are against a backdrop of 150-200k employees. Nothing is recession proof, but these are the stronger companies in the economy. Seattle housing will continue to go down 1% a month until when ever this mess ends. But that’s nothing like the 3-4% case-shiller declines in the cities where construction/speculation dominated the economy.
Plymster » Feb 5, 2009 at 12:26 am
“When all the other banks are raking in big profits with dodgy loans and securities you CAN’T just stand back and accept a low rate of return: your shareholders would crucify you.”
Maybe, but a CEO is paid to lead, not follow the other lemmings off the cliff. There were numerous well-respected economists and investors who foresaw this mess – Krugman, Stiglitz, Schiff, Roubini. Not one of the top banksters even admitted these guys might have a point.
The Financial CEOs lied, obfuscated, and dithered while looting their shareholders for all they could. The excuse that their shareholders would have fired them for doing the right thing is paper thin. How many CEOs have you heard of who got fired for this reason?
And let’s talk about your bogus “Blame the Little People” post.
These are ordinary people, who are paying bank fees with the expectation that the bank is not steering them into an unsustainable loan. These are not financial gurus. Face it, most consumers don’t have time to learn about appraisals, monetary policy, credit default swaps, etc. Instead they trust their buyers agent, the bank (who used to have a vested interest in the loan being paid back), and federal regulations against predatory lending.
Add in a complicit media screaming “BUY NOW OR BE PRICED OUT FOREVER!!!”, and it’s easy to see why a hairdresser making $30k/year might think she could afford a $500k house, especially when one of her clients, an immigrant maid making $30k, just did the same thing with no problem.
Cris » Feb 5, 2009 at 4:46 pm
my 7% estimate is for 98033, 98034, 98005 and 98004 zips. Yes they had big hits in 08 and the house I am sniffing to buy was 900k in 08. Now it is 735k. But I seriously do not think it will have the same decrease as last year in 09. My estimate for that house is another 40k to 60k for 09 and it would stop there.. maybe not?? ;) all the buyers I have reached so far in these zip codes do not care about what we are talking here.. They still can afford the houses. this was my experience so far..