Amazon, Go

Okay, okay, let’s talk about Amazon HQ2

Everybody is talking about it, and it’s definitely going to have some kind of effect on the local economy in Seattle, so even though it’s a bit late, let’s talk about Amazon’s HQ2.

Unless you’ve been living under a rock, you’ve no doubt seen the news that Amazon is seeking to build a second headquarters somewhere “in North America” that “will be a full equal to our current campus in Seattle.” GeekWire has been covering the story extensively (including a data-based city analysis by yours truly), so if you need to catch up on the facts, head over there. For the discussion here, let’s focus on the possible impact this development will have on the Seattle-area real estate market.

Amazon, Go?

It’s quite interesting that Amazon’s big announcement came just a couple weeks after this big feature piece in the Seattle Times: Thanks to Amazon, Seattle is now America’s biggest company town

Amazon’s extraordinary growth has turned Seattle into the biggest company town in America.

Amazon now occupies a mind-boggling 19 percent of all prime office space in the city, the most for any employer in a major U.S. city, according to a new analysis conducted for The Seattle Times.

Amazon’s footprint in Seattle is more than twice as large as any other company in any other big U.S. city, and the e-commerce giant’s expansion here is just getting started.

The swarms of 20-somethings crowding into South Lake Union every morning represent an urban campus that is unparalleled in the United States — and they have helped transform Seattle, for better or worse. Amazon’s rapid rise has fueled an economy that has driven up wages and lowered unemployment, but also produced gridlock on the roads and sky-high housing prices.

And while Seattle’s booming economy is often attributed to a wide variety of factors, increasingly, it’s all about one company.

Amazon now occupies more office space than the next 40 biggest employers in the city combined.

There is no doubt that Seattle’s fortunes have become increasingly dependent on the continued growth and prosperity of Amazon in recent years. Prior to this announcement, when I thought about what might trigger another housing market decline in the Seattle area, the first thing I thought of was the possibility of hard times at Amazon. I don’t have specific data to back it up, but I do believe that the current boom in home prices is heavily influenced by the large influx of high-paying jobs that come with large grants of Amazon’s soaring stock.

The Eye of Sauron

Ironically, the soaring home prices that Amazon is certainly at least partially responsible for may be one of the very reasons they are searching for a new home. Redfin CEO Glenn Kelman speculates that the high cost of living in Seattle is in fact the primary motivation for Amazon’s wandering eye.

It’s the Cost of Living, Stupid

Amazon’s departure isn’t, as some have speculated, about Seattle’s taxes. We don’t really have any. And other tech giants’ plans to expand in Seattle in lieu of San Francisco is really part of the same trend. All of these companies are expanding into new cities for a variety of reasons, but a big one has been to follow the talent to a lower cost of living. This began with folks leaving San Francisco for Seattle years ago, and now some in Seattle are leaving for places like Portland, Denver and Nashville.

Amazon claims that HQ2 will be merely a “full equal” to the current Seattle headquarters. Of course to long-time Seattlites, that promise may sound similar to Oklahoma City shyster Clay Bennett’s promise that he would make a good faith effort to keep the Sonics in Seattle. And we all know how that turned out. If Amazon finds significantly greener pastures somewhere else, why would they keep growing operations here?

It’s far too early to know how this is all going to play out, but if Amazon significantly slows their hiring growth here in Seattle, I suspect that at the very least we will see the real estate market here slow down to a more balanced market with modest price appreciation. If they start to contract their Seattle footprint… look out below.


About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

112 comments:

  1. 1
    toad37 says:

    Thanks The Tim, this topic is fascinating. Look forward to the comments. :))

  2. 2
    GoHawks says:

    A more balanced market sounds fantastic.

  3. 3
    Blake says:

    This will take some years to play out but I predict that in the next recession AMZ will lay off many if their expensive Seattle-based programmers and staff and as the economy recovers hire at some lower cost American sites … but mostly overseas.

    We may be near peak AMZ employees here!
    Yes this will affect the housing market here… significantly!

  4. 4

    I don’t see this being in any way similar to the Sonics. We pretty much knew what their plans were as soon as that deal went through.

    As to the cause of the decision, that could be something as benign as wanting geographic separation in the event of a major event here (sort of like data centers are backed up geographically), or some perceived shortcoming with Seattle like infrastructure (including traffic) or moronic government. Unless Jeff Bezos comes out and says why, I’m not sure of the purpose of speculating.

  5. 5
    N says:

    By Blake @ 3:

    This will take some years to play out but I predict that in the next recession AMZ will lay off many if their expensive Seattle-based programmers and staff and as the economy recovers hire at some lower cost American sites … but mostly overseas.

    We may be near peak AMZ employees here!
    Yes this will affect the housing market here… significantly!

    And of course during a down turn one of the top incentives for working at Amazon is diminished – Stock Grants! Not as attractive when the stock is down 30% as opposed to up 30-60% year after year and it translates to less money to buy housing, especially with the salary limits Amazon has.

  6. 6
    Weasel says:

    RE: Kary L. Krismer @ 4

    #1 They’re probably doing for several reasons, as you mention to diversify their office locations – in datacenters we have two (or more) of everything, when it comes to people and office locations, companies often do the exact opposite – one location, and often limited duplication of skills between people – ironic since people are the most unreliable cog in any system.

    #2 Housing prices potentially getting to the point where its affecting their ability to attract talent, makes sense to open shop somewhere new and undervalued.

    #3 Transit, Amazon didnt exactly position it self well for transit in Seattle, nowhere near King Street, or Link, if they simply moved down the south end of town, pumped some money into Sound Transit to provide something above a subpar service, that would give them access to a much larger talent pool/cheaper places for people to live. But that doesnt solve problem #1, I would not be surprised if the location they choose is well away from the PNW/Cascadia subduction zone and volcanoes. The South East has just proven it self a big “weather risk”. So that leaves the mid west and the north east, and they did say North America, so is Canada on the menu?

    my 2c worth.

  7. 7
    QA Observer says:

    By Weasel @ 6:

    RE: Kary L. Krismer @ 4

    #2 Housing prices potentially getting to the point where its affecting their ability to attract talent, makes sense to open shop somewhere new and undervalued.

    #3 Transit, Amazon didnt exactly position it self well for transit in Seattle, nowhere near King Street, or Link, if they simply moved down the south end of town, pumped some money into Sound Transit to provide something above a subpar service, that would give them access to a much larger talent pool/cheaper places for people to live. But that doesnt solve problem #1, I would not be surprised if the location they choose is well away from the PNW/Cascadia subduction zone and volcanoes. The South East has just proven it self a big “weather risk”. So that leaves the mid west and the north east, and they did say North America, so is Canada on the menu?

    my 2c worth.

    It is exactly #2 and #3 as you and Kary have described. I lived in DC during the 2000’s and watched the same story unfold as the money pendulum swung from private spending/investments (2003-2007/8) to government spending and expansion (2008-2011). Traffic got so horrible, the NOVA/DC metro area started experiencing net emigration. Businesses had a hard time trying to attract talent. Cost of Living and Quality of Life are still big sells!

    I remember NBC4 DC doing a segment on the “extreme commuters”. There were folks that worked in the metro area, but had a house with a proper yard some 3-4 hours away. One can locally see this happening now. I don’t feel bad for these folks like the ones you see slugging along from Everett to Seattle and beyond. They have chosen that Rat Race path.

    This emigration has already begun here, just not in earnest yet. However, once tech takes a dump and lightens up a bit (decrease in private spending) the fall may be a little more extreme as there are not many government industries locally that will get the benefit of the pendulum [deficit] once it comes the other way, except for say Bremerton or Silverdale.

    That is my 3 cents.

  8. 8
    uwp says:

    I understand how this makes headlines, but it’s insane to think what Seattle would look like with another 50,000 Amazon employees.

    Look at that article from the Seattle Times. Amazon has 8.1 million sq/ft of Seattle office space, more than the next 40 companies combined. 20% of the total available space! They are currently planned to get to 12 million total. Do people think Amazon was going to double that amount again? Is that even possible?

  9. 9
    Jamie says:

    It was not fun having this news drop in the week between my listing and offer review, but I still got two offers (out of five) in the $80k+ neighborhood over asking. My stomach has been eating itself all summer in preparation to sell hoping some disruption like this wouldn’t happen. I’m pretty grateful I didn’t wait until next Spring to list.

    (I asked the pre-inspection question about a month ago. I ended up doing it and discovered a mild repair with the sewer that would have turned into major concern for buyers’ inspections that I was able to get ahead of. No offers had inspection contingencies, and all waived the buyer verification period. Windermere as seller rep has an addendum to the purchase agreement reiterating to buyers that the seller inspection is for information/disclosure only and they should get their own inspection done, which relieved my liability concerns. What a time to be alive.)

  10. 12
    Anon says:

    They won’t leave Seattle : the reason is skilled software work force. The may move other jobs: logistics, etc…

  11. 13

    By sleepless @ 10:

    By Jamie @ 9:

    No offers had inspection contingencies…

    How dumb the one should be to wave the inspection. If this is not a sign of a bubble then I don’t know what is…

    I would agree it is stupid to waive an inspection, but note it sounds like the seller made their inspection report available to the buyers. Relying on a seller’s report is also bad, but probably not quite as bad as going without any inspection. Again I’ll repeat the story of my buyer who backed out after discovering that his inspection didn’t begin to match the seller’s inspection. On the bright side, if he had not done his inspection and bought the property he would have had a clear path to suing the seller after completing the expensive repairs in the manner he thought best.

    And again I will note that this is an area most agents simply don’t understand. On a recent multiple offer situation approximately 50% of the buyer offers crossed off the information verification language which benefits the seller! (Paragraph w of Form 21–the Purchase and Sale agreement.). It’s monkey see, monkey do out there.

  12. 14
    Jay says:

    People need to live somewhere and I don’t believe people are immediately going to stop moving into Seattle. Surely this is a long term and very unpredictable situation with quite a few ups still in place. Isn’t their still a big lack of inventory? Isn’t the demand situation going to take at least a few more years to play out? Didn’t Amazon agree to fill the remaining 1/3 of commited office space? Didn’t an Amazon board member state they will still continue to grow in Seattle. Who know what happens 2-3 years from now? I believe the Economy is the biggest factor. Who can predict that timing???

    Thoughts?

    Thoughts?

  13. 15
    wreckingbull says:

    RE: Kary L. Krismer @ 13 – I’d really like to learn more about the inspector certification process. I have never had a good one, and often had to point out things to the inspector myself, to which they just gave me a blank stare. These were things such as rotting joists, water intrusion stains, and foundation post problems. Do any good ones exist?

    I would imagine that only those who were former remodel carpenters or contractors have what it takes to be a good one. Perhaps someday I can find a decent one.

  14. 16

    RE: wreckingbull @ 15 – To a large extent you are right. They tend to be jacks of all trades and masters of none. Even some of the best ones I know have their shortcomings. We do use one who got into the business during the downturn because his construction business (fairly high end homes) was off. He’s good. And we have another where a buyer’s agent sent me their report without my having asked for it. It was the most detailed report I’ve ever seen, and I remembered him when we decided to drop another inspector from our list.

    But yes I’ve seen a lot of really bad inspectors. The story I frequently repeat is the inspector who was incorrectly calling out the type of flashing used by the roofing contractor in a recent project, even though that was the type specified by the building architect during the original construction. But even worse, he completely missed a fairly significant amount of rotting siding that was at ground level!

  15. 17
    Brian says:

    By wreckingbull @ 15:

    I would imagine that only those who were former remodel carpenters or contractors have what it takes to be a good one. Perhaps someday I can find a decent one.

    Seems like if you have a carpenter/contractor buddy, it would be a good idea to ask them to help. My uncle was a carpenter and I’d trust his quality of inspection as much as, if not more than, any professional inspector. Especially in this market where inspectors are/were in crazy demand and there’s probably a lot of noobies out there.

  16. 18

    By Brian @ 17:

    Seems like if you have a carpenter/contractor buddy, it would be a good idea to ask them to help. My uncle was a carpenter and I’d trust his quality of inspection as much as, if not more than, any professional inspector. Especially in this market where inspectors are/were in crazy demand and there’s probably a lot of noobies out there.

    The only problem with that is the standard forms do not allow that–they need to be a licensed inspector (although the buyer can do their own inspection, but not with help from third parties). Also, the agent who lets such a person in the door would be subject to discipline from the Department of Licensing (as would probably the contractor).

    The applicable contract language is: “The inspection must be performed by Buyer or a person licensed (or exempt from licensing) under Chapter 18.280 RCW.”

    Speaking of which, here is a link to the statutes governing inspectors. Note though there are a lot of administrative rules too which cover the nuts and bolts of the inspection (e.g. they are not required to cycle on/off circuit breakers, etc.)

    http://app.leg.wa.gov/RCW/default.aspx?cite=18.280

  17. 19
    Toad37 says:

    Does Dallas make the most sense for HQ2 or is TX too conservative for Bezos?

    Can you imagine how busy the realtors will be in the chosen city?!

  18. 20
    N says:

    By Toad37 @ 19:

    Does Dallas make the most sense for HQ2 or is TX too conservative for Bezos?

    Can you imagine how busy the realtors will be in the chosen city?!

    Everyone seems to have their own #1 pick, often based largely on where they have lived or are familiar with. I’m also biased but think Atlanta will be on the short list for a variety of reasons including one of the top tech schools in the country surrounded by tech companies in a walkable, urban neighborhood, 16 fortune 500 companies to poach talent from, the biggest airport in the country, big movie industries, a state with a history of giving incentives to attract companies.

  19. 21
    Erik says:

    RE: Jamie @ 9
    You’d probably make even more money next spring. I would think it’s unlikely to see a drop in housing prices from this, but who knows.

  20. 22
    Brian says:

    By Kary L. Krismer @ 18:

    The only problem with that is the standard forms do not allow that–they need to be a licensed inspector (although the buyer can do their own inspection, but not with help from third parties). Also, the agent who lets such a person in the door would be subject to discipline from the Department of Licensing (as would probably the contractor).

    Yeah, sorry should have clarified, I meant as a buyer.

  21. 23

    RE: Brian @ 22

    I see buyers with contractors vs inspectors ALL THE TIME. Especially in old houses in Bellevue where the buyer is going to do a 90% remodel and replace most of what exists.

    This as a pre-inspection. If the buyer expects the seller to respond to the findings, then a different story. But if the inspection is not for negotiating repairs or price changes with the seller the only issue is accessing areas you are not expected to go in during a “buyer showing” such as the crawlspace and the attic.

    A few other “too intrusive” issues, but I am seeing more and more undisclosed “pre-inspections” by who knows who. Buyers don’t want the Seller’s agent to be able to disclose “there were 5 pre-inspections” as they think that influences and boosts price. So I am seeing a lot more “secret inspections” these days.

  22. 24
    Deerhawke says:

    Amazon is totally killing its competition. It is a very healthy company. Its decision to set up another management base is a long-term move with long-term consequences. Keep that in mind.

    Amazon is going to continue to hire like crazy in this area for the next few years. I talked to one manager recently about this development and she just waved it off as irrelevant– too far into the future to talk about. She is worried about filling the positions she has open and has coming up. She also said that anybody who bought into the idea that there would be two co-equal headquarters was out of touch. Companies don’t work that way and Bezos certainly doesn’t run his company with a Co-CEO.

    And remember that Microsoft is once again on the move and is aggressively hiring. And Expedia, and Facebook and Google are hiring (in part by poaching from Microsoft). And all of the medical and tech startups that are here are also hiring.

    Do I think Seattle will see a slowdown that is worse than the national economy.? Unlikely.

    On the other hand, could there be a national slowdown that will have an effect on us? Of course. Any number of things could happen that could make this real estate market slow down. This recovery is really long in the tooth. The stock market looks really crazy and is sorely in need of a healthy correction. The whole national economy may head into a recession.

    But overall, I still think Seattle is in a better position to go into a recession and come out of a recession than other US cities.

    If you really want to talk about the kind of thing that could really put a kink in Seattle’s economy and real estate market, let’s look south at Mexico City and think about what it is digging out from today.

  23. 25
    Nick says:

    I feel like most of the HQ2 headlines are knee-jerk reactions, and the reality here in Seattle will be very muted. It’s not as though Amazon is a “one-state-pony”.
    Worth noting that as of 2016, the number of Amazon’s full time jobs were spread across the US.
    ~27,000 in Washington
    ~20,000 in California
    ~11,000 in Kentucky
    and 5000-10,000 in IND, TENN, PA, Texas, AZ, VA, SC, FL (Via Garland Potts/Seattle Times).
    Seems likely that Amazon just boosts an existing state presence, and is successfully using “HQ2” as “bid-bait” for those states/cities to give nice incentives.
    Just my $0.02…

  24. 26
    Justme says:

    RE: Deerhawke @ 24

    I have to laugh. Can you make up your mind? You are all over the map with your “hire like crazy” BUT “unlikely worse than the national economy” AND “in a better position to go into a recession and come out of a recession than other US cities”. Looks like you have all the bases covered, does it not?

    Look, dude, if you are so certain about rise of Seattle house prices, I suggest you offer the buyers of your latest Greenlake/Tangletown mansion to undo their purchase. Are you going to do that?

  25. 27

    By Ardell DellaLoggia @ 23:

    RE: Brian @ 22

    I see buyers with contractors vs inspectors ALL THE TIME. Especially in old houses in Bellevue where the buyer is going to do a 90% remodel and replace most of what exists.

    . . .

    A few other “too intrusive” issues, but I am seeing more and more undisclosed “pre-inspections” by who knows who. Buyers don’t want the Seller’s agent to be able to disclose “there were 5 pre-inspections” as they think that influences and boosts price. So I am seeing a lot more “secret inspections” these days.

    Using a contractor to get bids would be entirely different, but after mutual acceptance (if not before) you would need seller permission to do that. Probably a grey area prior to making an offer–particularly on fixers.

    As to your last paragraph, I have no idea what those buyers are thinking keeping their pre-inspection secret. Other buyers knowing about pre-inspections is a good thing because the other buyers will be less likely to make an offer. It’s not like the other buyers are going to say: “Oh boy! A pre-inspection is being done. I better bid more!”

    The best time to do a pre-inspection is on the weekends where even more buyers know that you are doing one.

  26. 28

    By Deerhawke @ 24:

    She also said that anybody who bought into the idea that there would be two co-equal headquarters was out of touch. Companies don’t work that way and Bezos certainly doesn’t run his company with a Co-CEO.

    Well there is what Bezos said in the Amazon press release:

    “We expect HQ2 to be a full equal to our Seattle headquarters,” said Jeff Bezos, Amazon founder and CEO.

    Note that doesn’t mean a second set of corporate officers–what would be possibly impossible, but in any case not a good thing to do.

  27. 29
    Deerhawke says:

    RE: Justme @ 26

    Amazon has a tremendous hiring backlog. The backlog has gotten longer over the past year. They literally cannot hire fast enough and it is one of their main constraints. That is probably one of the reasons for this second HQ idea. Some people who will not relocate to Seattle (too far from friends and family) might relocate to Atlanta or Raleigh/Durham or wherever.

    Let’s assume that Amazon does go through with the second headquarters plan. How long will it take to get that under way? If it goes really, really fast, there might be some employment there in three years and a substantial effect in year 4. In the meantime between now and 2024, Amazon will continue to grow like topsy and so will Seattle.

    Seattle tends to go into a recession well after the national economy does. Seattle also comes out somewhat later, but on a faster and steeper recovery path. That is exactly what happened in this most recent crunch.

    I am not certain about prices in Seattle– nobody is. But I am generally bullish. And that is why I am buying and developing for the next year. I am voting with my checkbook.

    And FYI, I already did offer the buyers of my house the ability to back out. We had four other agents ask to write a back-up offer and I wanted to make sure they were solid. They are.

  28. 30
    Deerhawke says:

    RE: Kary L. Krismer @ 28

    To be honest, from an organizational perspective I do not understand why they would talk about a second headquarters. But maybe what this will actually become is a search for other bases while the HQ stays here. Whole divisions moved to Atlanta. Whole divisions headquartered in Denver. Etc.

    Maybe they are talking about the HQ2 concept because it is a lot less scary than talking about mytosis being the first stage toward metastasis.

  29. 31
    Justme says:

    By Deerhawke @ 29:

    RE: Justme @ 26

    Seattle tends to go into a recession well after the national economy does. Seattle also comes out somewhat later, but on a faster and steeper recovery path. That is exactly what happened in this most recent crunch.

    And FYI, I already did offer the buyers of my house the ability to back out. We had four other agents ask to write a back-up offer and I wanted to make sure they were solid. They are.

    (1) So you think this is an intrinsic property of Seattle that will occur every time there is a recession? It really must be different here…but what is the exact mechanism and why is it intrinsic?

    (2) Was that offer-to-withdraw before or after the HQ2 announcement was made? You should try again today…

  30. 32

    By Deerhawke @ 30:

    RE: Kary L. Krismer @ 28

    To be honest, from an organizational perspective I do not understand why they would talk about a second headquarters..

    I do think it may pertain to the database center type thinking, where you want your tech centersdiverse so that a natural disaster doesn’t severely impact your operations. Think about it also like call centers. United Airlines doesn’t want to not to be able to book reservations simply because it snows in one city. They want to not take reservations just because they want to provide poor customer service!

    Quite frankly I can’t get my head around what Amazon does with all those people, but to the extent they deal with current operations of the websites, they do need duplication. Imagine the uproar if people couldn’t stream a movie just because Seattle had a major Cascadia event! ;-)

    Or another way of thinking about this. One of the things that makes Redfin a real estate company and not a tech company is that they have all their tech in one place. A tech company would spread that out. Here Amazon is clearly a tech company, and they seemingly are carrying out the geographic distancing to more than just their tech.

  31. 33
    Blake says:

    By Deerhawke @ 29:

    Amazon has a tremendous hiring backlog. The backlog has gotten longer over the past year. They literally cannot hire fast enough and it is one of their main constraints.

    And they also gave a terrible reputation as a place to work… Money isn’t everything. Everyone I know who worked for AMZ hated it and were much happier after they left.

    btw: Don’t forget that AMZ is retail and retail is highly cyclical.
    https://www.nakedcapitalism.com/2017/09/200pm-water-cooler-9202017.html
    Retail: “Amazon.com Inc., far from dominating the retail sector, is actually the weakest of the big U.S. players based on operating results, Moody’s Investors Service said Wednesday” [MarketWatch]. “Amazon’s stock has outperformed rivals, but it’s mostly based on the company’s growth story, and particularly the success of its cloud business, Amazon Web Services, [Charlie O’Shea, Moody’s vice president and lead retail analyst] wrote in a new report.” And this: “Estimates for the Amazon Prime membership base are also wildly inflated, O’Shea said, with some pundits betting the figure is as high as 85 million. Amazon itself has never provided a number, other than to say it is in the tens of millions.”

  32. 34
    ess says:

    Excuse my cynicism, but my guess is that Amazon has grown so big that there was an understanding that there was no way their current headquarters that is being constructed in a restricted area could accommodate all the new workers they needed. And by calling it a second headquarters, rather than just another center, that will get communities and the states they are in to trip all over themselves providing benefits to land the facility. It is happening already in this case, and it has happened with companies with a much smaller impact than this Amazon project will have.

    And a positive byproduct of this announcement is not only to get the local political foes of big corporations off of Amazon’s back, but to approach Washington State for more benefits. Boeing is an excellent model for that approach and Amazon has learned their lesson well. If one needs more space, and it isn’t going to happen because of physical constraints – why not put it out there as a second HQers and see what goodies one can get? It is not only excellent business practice, but a common sense approach.

    And Deerhawke is correct – it would take years for Amazon to get headquarters number two up and running. We won’t wake up one morning and discover that there is no traffic on the roads and Amazon has cleared out during the night and the South Lake Union area is a ghost town.

    Furthermore, potential home buyers as well renters complaining of high rents may view the impending implosion of the Seattle real estate market with a certain amount of glee and hope. But the reality will be much different for everyone, and sometimes one may not want to see the results of what they hope for.

    A reduction of Amazon employees will have a ripple effect. Rents will be lower, but not dramatically so. Even in the last meltdown, our rents were reduced by 15%, and it took a bit longer to rent the premises. Not the fire sale that everyone is dreaming of.

    Many of the current purchases for homes were made with all cash or substantial down payments. Those houses may sell for less if the owners absolutely need to leave the area, but it won’t be the wholesale destruction of the housing market fueled by zero down purchases with buyers who had no hope of keeping up the payments even with their jobs as the last housing crash produced.

    And all those folks that are hoping for wholesale declines in rents and prices, there is one problem. With dramatic declines – there is going to be a dramatic increase of unemployment. Many people will lose their jobs – not only in tech, but also in construction that are impacted by the loss of residential and commercial projects, and the ripple effect that always transpires throughout the economy when one section suffers a downturn. And guess what – rather than the person eagerly anticipating getting a great deal on a house or a fabulous reduction in rent- it is that person who may receive a pink slip. Everyone always believes it will be the other guy that suffers with a layoff – guess what – it can happen to you. Dreams of buying a house or getting lower rent are replaced by the nightmare of not having any income at all, and having to make drastic changes to one’s lifestyle that will have these folks pining for overpriced real estate and rental prices if this area really does suffer a major economic downturn. And it will be the lower middle class that will suffer the most if it all does hit the fan.

  33. 35
    Eastsider says:

    RE: Blake @ 33 – Taking away AWS, AMZN stock is worthless IMHO.

  34. 36
    StupidLifeDecisions says:

    By Jay @ 14:

    People need to live somewhere and I don’t believe people are immediately going to stop moving into Seattle. Surely this is a long term and very unpredictable situation with quite a few ups still in place. Isn’t their still a big lack of inventory? Isn’t the demand situation going to take at least a few more years to play out? Didn’t Amazon agree to fill the remaining 1/3 of commited office space? Didn’t an Amazon board member state they will still continue to grow in Seattle. Who know what happens 2-3 years from now? I believe the Economy is the biggest factor. Who can predict that timing???

    Thoughts?

    Thoughts?

    My thoughts are that people do indeed need to live somewhere, however where they live has to be affordable.

    Not that anyone cares, but I did state a while back that tech was starting to look at the mid-west. amazon will not be the only company to do this. Our real estate market is way too closely tied to tech, which is why I don’t think it’s smart to be bullish on the real estate market here.

    amazon is probably going to get hit with a lot of costly game changers all at once and it will probably coincide with an economic downturn, so I would expect them to downsize in Seattle in the next few years.

    Obviously, I am not a real estate expert like some of the posters here are, but I do know a little something about economic cycles, irrational markets, publicly traded companies and regulation.

  35. 37
    sfraz says:

    RE: Blake @ 33 – Agree. Anyone who works (ed) there is miserable until they leave. Takes Big Brother to a whole new level. Also have a bad rep regarding future employment in the area. If you have survived more than 2 yrs there, you must not be a good team player, and would poison the soup in a new environment. Biggest Ponzi scheme in the world. “Amazon’s business model is beginning to break down – that it’s e-commerce model is under attack from all angles by well-capitalized, more profitable retailers like Walmart and its cloud computing business is being attacked aggressively by traditional software development and applications companies like MSFT, IBM, GOOG and ORCL.

    On a year over year LTM basis, the amount of cash burned by AMZN has increased 89.2%, from negative $2.476 billion to negative $4.685 billion. – this seek’s Short Seller’s Journal shows why this statement is fact. Recently subscribers have cleaned up on Chipotle (CMG), Sears (SHLD), Beazer (BZH) and others. This week’s issue shows why AMZN will eventually be a home run short.” http://investmentresearchdynamics.com/the-accounting-ponzi-scheme-is-catching-up-to-amazon/

  36. 38
    Kmac says:

    By ess @ 34:

    And Deerhawke is correct – it would take years for Amazon to get headquarters number two up and running. We won’t wake up one morning and discover that there is no traffic on the roads and Amazon has cleared out during the night and the South Lake Union area is a ghost town.

    I think both you and Deerhawke are correct. It will take several years to see any potential slowdown from this, unfortunately.

    By ess @ 34:

    ……… but it won’t be the wholesale destruction of the housing market fueled by zero down purchases with buyers who had no hope of keeping up the payments even with their jobs as the last housing crash produced.

    Consider for a minute that it was flippers that caused the meltdown, not poor people with bad credit and zero down loans. After it started, they were definitely a contributing factor, but the cause? Not so sure.
    https://qz.com/1064061/house-flippers-triggered-the-us-housing-market-crash-not-poor-subprime-borrowers-a-new-study-shows/

  37. 39
    ess says:

    RE: Kmac @ 38

    https://qz.com/1064061/house-flippers-triggered-the-us-housing-market-crash-not-poor-subprime-borrowers-a-new-study-shows/

    Interesting article, Kmac. My only question is if this market is being driven by what they define as “flippers”, or buyers who are going to reside in the house, but have to compete against other buyers in a housing shortage as in the Seattle area. Wonder if there is any way to determine if there is an increase of owners that have more than one house in the Puget Sound area.

    If there is any serious flipping going on, one assumes that it is up in the Vancouver BC area, where there are constant complaints about empty neighborhoods. Haven’t heard anything like that here – although I imagine there are empty houses here and there.

    But as they say – I guess we will have to wait and see how all of this plays out.

  38. 40
    ess says:

    Kmac

    And while we are on the subject of flipping – an oldie from ST. Note the date.

    http://www.seattletimes.com/business/real-estate/flipping-real-estate-without-getting-burned/

  39. 41
    Kmac says:

    RE: ess @ 39

    Flippers not driving market now, but were when referencing the early to mid 2000’s run up.

    A lot of these All Cash purchases are really debt in disguise. Other real estate (2nds) and unconventional financing arrangements on out of sight properties probably account for a large percentage of All Cash offers.

  40. 42
    sfraz says:

    This time it’s different. Never seen anything like this. FB and debt donkeys underwater. http://www.zerohedge.com/news/2017-09-20/everything-bubble-ready-pop

  41. 43
    Hugh Dominic says:

    RE: ess @ 34 – pretty good reply. On this topic:

    “And Deerhawke is correct – it would take years for Amazon to get headquarters number two up and running.”

    The process of getting HQ2 started will involve migrating a chunk of the Seattle workforce there. Amazon is a weird place with a big emphasis on retaining its culture. The only way to do that is to hire people into a place that has been seeded with Amazon veterans.

    Once HQ2 is identified and the first building leased, you will see invitations to move there plastered all over SLU.

  42. 44

    By Kmac @ 38:

    Consider for a minute that it was flippers that caused the meltdown, not poor people with bad credit and zero down loans. After it started, they were definitely a contributing factor, but the cause? Not so sure.
    https://qz.com/1064061/house-flippers-triggered-the-us-housing-market-crash-not-poor-subprime-borrowers-a-new-study-shows/

    Stories of that have been posted before, but at least that one links to the actual study. I’ll need to read that but I’m very skeptical. Determining how many people own multiple properties is so difficult it’s virtually impossible, unless maybe you’re looking for properties owned by people with relatively unique names like mine. Also, that they site to the percentages of foreclosures by people of different credit scores is also suspect, because that is probably normal. When there are very few foreclosures it seems rather obvious that a high percentage of foreclosures would be from people with low scores. And then finally, again credit scores are relatively bad predictors of foreclosures, which is possibly all their study shows.

    But again, I look forward to reading the study now that I know where it can be found.

  43. 45

    By Kmac @ 41:

    RE: ess @ 39

    Flippers not driving market now, but were when referencing the early to mid 2000’s run up.

    A lot of these All Cash purchases are really debt in disguise. Other real estate (2nds) and unconventional financing arrangements on out of sight properties probably account for a large percentage of All Cash offers.

    I’m not sure what you base your flipper stats on, but one thing I will note from my periodic dipping into listing properties needing to be flipped is that the flippers are now seemingly relying more on hard money loans over cash now than in the past. I suspect that’s a sign of more people getting into the business because they think this is a good time to do so. I would argue just the opposite, because now it’s harder to find the right property at the right price.

  44. 46
    Deerhawke says:

    RE: Kary L. Krismer @ 32

    Kary, I think it is a good point that Amazon needs to have backup capability. I am sure they have had McKinsey or Bain’s consultants through to look at corporate governance in case of disaster. In the case of Seattle, I think everybody has read the New Yorker piece so we know that the Cascadia fault will give us a force 9 earthquake like the one we had in 1700. In fact we are overdue. But really it could be something as simple as snow. It wasn’t something we were ready for in 1991 and it cost Greg Nichols his job in 2009. I doubt we are ready for it now. Diversification is just a smart move for a number of reasons.

    But it really isn’t a question of whether Amazon will have one more headquarters, but whether they will have multiple headquarters for different divisions. I am reminded of the trick you see played at charity auctions where two bidders are going nuts for one item. Once the auctioneer has squeezed every possible penny from the first bidder, he announces that, magically, there is another identical item available for bidder number 2. And of course they want it too.

    RE: ess @ 34

    Really smart post. I agree completely.

    My reading of Amazon’s announcement is just an acknowledgement that the level of growth that they have planned cannot fit within Seattle. They are going to be expanding here for at least the next 4 years on their planned growth path. They will be buying and developing property. They will be leasing property. They will continue to hire as many good people as they can. A lot of those people will become disenchanted and go to other Seattle/Bellevue tech-related employers. After that, we should expect that their growth here in Seattle will slow down substantially and could plateau. Will head-count go into reverse like with Boeing? Possible, but given their pace of growth, kind of unlikely.

    But by that time, say 2021, something else (or many something elses) could be driving growth.

  45. 47

    RE: Deerhawke @ 46 – I don’t know how big the Weyerhaeuser campus building is, but if they could expand there and then maybe somewhere up north and/or east that would be really nice for their employees house buying and commuting.

    That though wouldn’t deal with disaster preparation.

  46. 48
    N says:

    http://www.marketwatch.com/story/investors-this-is-your-last-warning-about-the-us-stock-market-2017-09-20

    There are stories like this every day it seems now, but an interesting discussion anyways to think how things would look if we do have a 45% market correction. How would a 45% drop in Amazon stock affect Real Estate. Even though the article says by historical standards a 45% drop would not lead to an undervalued market others are pointing to other measures to declare the market is not overvalued.

  47. 49
    Sid says:

    By sfraz @ 37:

    RE: Blake @ 33 – Agree. Anyone who works (ed) there is miserable until they leave. Takes Big Brother to a whole new level. Also have a bad rep regarding future employment in the area. If you have survived more than 2 yrs there, you must not be a good team player, and would poison the soup in a new environment. …..

    Yeah, that’s why I think they have a big backlog of hiring and are not able to fill positions in Seattle with local talent.

  48. 50

    RE: Blake @ 3
    Yes Blake

    They’ll do it to us in stealth and lies; just like Boeing destroyed our Manufacturing Engineering in Seattle; then transferred all our aerospace secrets to Japan [for higher pay too] the last couple decades.

  49. 51

    RE: Sid @ 49
    You Say Real Jobs?

    Like 40 hour weeks and health care???

    LOL….they count P/T with no health care a real job now….PATHETIC open border progressives and rhinos….

  50. 52
  51. 53

    By Kmac @ 38:

    Consider for a minute that it was flippers that caused the meltdown, not poor people with bad credit and zero down loans. After it started, they were definitely a contributing factor, but the cause? Not so sure.
    https://qz.com/1064061/house-flippers-triggered-the-us-housing-market-crash-not-poor-subprime-borrowers-a-new-study-shows/

    Okay, I’ve now had a chance to skim the study.

    The first thing that’s apparent is that the authors of the article about the study didn’t read more than the first few pages. The second thing is they failed to understand it. The study doesn’t once mention the term “flip,” “flipper,” or “speculator.” It does deal though with real estate investors, which would include landlords.

    Second, they determine who is a real estate investor from credit report information, looking for more than one first mortgage, and also apparently the lack of GSE insurance (not sure that shows in credit reports, but I’ll take their word for it).

    I still have some issues with the study, but they are not as great. The idea that real estate investors would be more likely to default is not that much of a stretch. First, I know a few people who did buy multiple properties prior to the peak, and their investments didn’t seem that great to them in 2009-2010. Other than maybe Ray, I don’t know of any who defaulted, but that some would isn’t surprising, particularly if they lived in a true non-recourse state. But beyond that, if they were rentals, the rental market was impacted too, and it’s very possible that they would have no choice but to default. I’ve mentioned in the past that I had at least one bankruptcy client who was in that situation many years ago after having invested in rentals in another part of the country. Finally, some of these people with more than one first mortgage may have bought planning on letting their new house go into default–that was a problem early on.

    So anyway, if you substitute the word investor for flipper, increased defaults would not be all that surprising.

  52. 54
    Blake says:

    By Sid @ 49:

    By sfraz @ 37:

    RE: Blake @ 33 – Agree. Anyone who works (ed) there is miserable until they leave. Takes Big Brother to a whole new level. Also have a bad rep regarding future employment in the area. If you have survived more than 2 yrs there, you must not be a good team player, and would poison the soup in a new environment. …..

    Yeah, that’s why I think they have a big backlog of hiring and are not able to fill positions in Seattle with local talent.

    I’ve worked in IT for 25+ years and I’m at a fairly senior level now where I’ve interviewed a lot of ex-AMZ programmers for jobs. It is an abusive environment to work and I don’t think it is sustainable… nor is their current business model. They are killing competition with loss leaders and eventually will start to try to exploit their monopoly/oligopoly position and start raising prices to make PROFIT. Imagine… what happens then? Walmart, CostCo and others are not sitting still…

    I dropped my Prime membership last year and my wife and mother are dropping theirs now. There are a lot of things people are fine with buying online/remotely (like books!), but people also like to shop and browse. I think AMZ is near saturation and competition is heating up. They’ll be looking to cut costs in the years ahead and I think that employees in Seattle will be seen as expensive compared to the midwest … or Bangalore!

  53. 55
    Deerhawke says:

    RE: N @ 48

    I would be the first to say I don’t really understand what is going on in the stock market. It has been a really long bull market and it seems overdue for a substantial correction.

    And I don’t know where you got your 45% correction figure from, but I assume your analogy is the long bull market in the 90’s being followed by a 40%+ correction in the S&P during late 1999-early 2003.

    But remember that not all asset classes correct simultaneously.

    A lot of the people who cashed out of stocks during 2001-2003 dumped it right into the real estate market. That (along with shoddy bank lending practices) kept the party going in the real estate market until mid-2007.

    So if you naturally assume that a drop in the stock market will immediately lead to a drop in real estate values, think again. Recent history shows that it could work in the opposite direction.

    There is a lot of money sloshing around the world right now. It is always seeking a return. If it is not going into stocks, where is it going to go?

  54. 56
    Sid says:

    RE: Blake @ 54
    While I think Amazon has a tough working environment which hurts them in hiring, I’m quite bullish on them as a business vs Costco and Walmart.

  55. 57
    N says:

    RE: Deerkhawke @55

    The 45% correction comes from the story I linked. Their claim is that to bring the S&P 500 P/E ratios back to their historical norm of around 14.5 would require a 45% correction and they further assert at least a significant part of the run up to 24 times earnings is a result of central bank policies over the last ten years.

  56. 58
    Deerhawke says:

    RE: Blake @ 54

    Blake, I have been reading that Amazon’s business plan is unsustainable since at least 2004. They are scary to competitors precisely because they keep changing their business plan. If I heard they were moving into building houses, I would put my retirement plans on the fast track.

    I think many people would agree that Amazon has taken the abuses of Microsoft’s stacked ranking system under Balmer and made it worse. It sounds like a truly terrible place to work. The people I know who work there talk about leaving constantly. The people I know who left Amazon left because 1) they were made to leave or 2) they didn’t have a life any more or 3) because they are thinking about having kids and that seems impossible while working at Amazon. But still all of the people I know who left Amazon have stayed in the area. Two took jobs on the East side.

    Amazon has been great at recruiting tech and management talent into this area, many of whom no longer work there. There isn’t any reason to believe that is going to change in the next few years.

    Just as all the folks who left Microsoft stayed on to found and invest in new tech startups, the long-term legacy of Amazon is not just who they are hiring and bringing into the area. Longer term it is who stays on in the area after Amazon to become part of the Seattle’s money and tech infrastructure.

  57. 59
    Deerhawke says:

    RE: N @ 57

    Got it. Ok, lets assume there is a 45% stock market correction on the order of 99-03. Investors will get disgusted looking at their portfolios. Their next thought might be to buy gold. But then they will remember that gold doesn’t pay any kind of dividend. It is a purely speculative play.

    So then the next thought is…. hey, what about real estate? Even if I get a crappy cap rate, that is better than nothing and with leverage and appreciation, that could actually work out to be OK.

    I watched this logic play out for my friend. He dumped his tech stocks in 2002 and still has the apartment building.

  58. 60
    Pauly says:

    By N @ 57:

    RE: Deerkhawke @55

    The 45% correction comes from the story I linked. Their claim is that to bring the S&P 500 P/E ratios back to their historical norm of around 14.5 would require a 45% correction and they further assert at least a significant part of the run up to 24 times earnings is a result of central bank policies over the last ten years.

    The latter part has to be true at least to some degree. There is simply more money out there that needs a home. But then maybe a 24 P/E is the new norm after uncle sam printed $4 trillion. It’s certainly nowhere near 2008 levels…

    http://www.multpl.com/

  59. 61
    QA Observer says:

    I just learned this evening that a certain local tech company, voted last year as a “Top 100 Company To Work For”, is planning on letting go up to 25% of their staff. Reason: decrease in venture capital flow, decrease in mobile marketing contracts, and pessimistic outlook in the 4th quarter and beyond.

    This is kind of surprising considering we are in a tech hub and that not all tech companies are drinking the bull market Kool-aid. Could there be cracks forming in the impermeable tech floor?

  60. 62
    Justme says:

    By Deerhawke @ 55:

    RE: N @ 48

    But remember that not all asset classes correct simultaneously.

    A lot of the people who cashed out of stocks during 2001-2003 dumped it right into the real estate market. That (along with shoddy bank lending practices) kept the party going in the real estate market until mid-2007.

    Oh, so you remember that after 2001, stock deflation + forced record low interest rates led to housing inflation. But you have forgotten that in 2008-2009, EVERYTHING deflated at the same time until FRB enacted the largest asset inflation push in human history. This time, everything will deflate again, and it is going to be even worse than 2008-2009.

  61. 63
    Matt P says:

    RE: Pauly @ 60

    We’ll see if it stays that way with reverse QE coming. They’re starting to roll assets off the balance sheet starting Oct 1st.

  62. 64
    Justme says:

    It’s been 36 hours, and not a peep on this thread about the highly significant FRB (Fed) decision yesterday to start QE unwind next month, with an initial balance reduction of $10B/month, and with the rate of change increasing to as high as $50B/month over time. The announced plan is to run this process “in the background”, meaning that it will be automatic (on auto-pilot, if you will).

    That ought to poke a big hole in the Seattle bubble. Combine QE-unwind with the Amazon HQ2 plans, and we have the recipe for a drastic change in Seattle housing prices.

  63. 65
    toad37 says:

    RE: Justme @ 64 – Possibly, or maybe just a more balanced market? That sure would be welcome.

  64. 66
    MGSpiffy says:

    Re: justme@64, MattP@63

    Any idea what the QE unwind will do to interest rates, given that I have a choice to go after a mortgage loan in the next couple weeks, or wait 4-8 weeks?

  65. 67
    Deerhawke says:

    RE: Justme @ 62

    It seems to me that the Fed decision to unwind QE is a very small incremental step. How long will it take to unwind their bond position? Decades. Of course it will be running in the background. It mostly is background.

  66. 68
    Matt P says:

    RE: Deerhawke @ 67

    I beat justme by 12 mintues, but it’s not an insignificant number. It starts small, 10 billiom a month, but will hit 80 billion a month within 1 year. They are going to stop buying mortgahe backed securities which is huge. 80 billion a month is nearly a trillion a year of money going poof from the economy. It will definitely have an effect.

    Their balance sheet is 4.5 trillion, so it would only take 5 years including the rampup to clear it all, not decades. They won’t clear it all, but they will do enough to shrink some of the bubbles without popping them at least they hope to not pop them anyway.

  67. 69
    uwp says:

    RE: QA Observer @ 61

    Do you want to give the name? What does it matter? Most of us are (somewhat) anonymous here anyway.

    Do they employ many people? Those “Best Places to Work” lists often include businesses with <100 people.

  68. 70
    Blake says:

    By Matt P @ 68:

    RE: Deerhawke @ 67

    I beat justme by 12 mintues, but it’s not an insignificant number. It starts small, 10 billiom a month, but will hit 80 billion a month within 1 year. They are going to stop buying mortgahe backed securities which is huge. 80 billion a month is nearly a trillion a year of money going poof from the economy. It will definitely have an effect.

    Their balance sheet is 4.5 trillion, so it would only take 5 years including the rampup to clear it all, not decades. They won’t clear it all, but they will do enough to shrink some of the bubbles without popping them at least they hope to not pop them anyway.

    From what I read, it is highly unlikely the Fed will unwind even half their balance sheet. In fact, I would bet that 3-5 years from now the Fed may have even MORE than $4.5 trillion on their books! The Fed has been raising interest rates not because of rising inflation – it’s not – but because (1) they want to have some room to cut rates when the economy turns south and (2) because they are concerned about asset bubbles (as they have mentioned in their recent meeting minutes). Likewise, by unwinding some of their balance sheet now they will force rates up (they hope) and put a damper on asset speculation and also give them some room to buy more in the near future as needed. Recall that the Fed’s role in the past has been to cause recessions… don’t be surprised if they pursue these policies (raising rates and dumping bonds) and push the economy into a recession!

    The odd thing is, over the last year they started to unwind QE and rates did not rise! They rose when Trump got elected because the market expected a huge Trump stimulus, but rates then went down again and are quite low because there is no inflation and too much savings looking for some yield whatsoever… and investors are scared.
    See any inflation? https://fred.stlouisfed.org/series/M2V
    Monetary policy is failing…
    https://www.stlouisfed.org/on-the-economy/2014/september/what-does-money-velocity-tell-us-about-low-inflation-in-the-us
    “This implies that the unprecedented monetary base increase driven by the Fed’s large money injections through its large-scale asset purchase programs has failed to cause at least a one-for-one proportional increase in nominal GDP. Thus, it is precisely the sharp decline in velocity that has offset the sharp increase in money supply, leading to the almost no change in nominal GDP (either P or Q).

    So why did the monetary base increase not cause a proportionate increase in either the general price level or GDP? The answer lies in the private sector’s dramatic increase in their willingness to hoard money instead of spend it.” (end quote)

  69. 71
    N says:

    Pauly @ 60:

    When you mention a possible new norm, my first thought goes back to as little as 4 years ago when everything (pundits included) were telling us long term gains in the market would be no more than 3-4%, the good days were gone. What a difference a few years makes.

  70. 72
    whatsmyname says:

    By Justme @ 64:

    It’s been 36 hours, and not a peep on this thread about the highly significant FRB (Fed) decision yesterday to start QE unwind next month, with an initial balance reduction of $10B/month, and with the rate of change increasing to as high as $50B/month over time. The announced plan is to run this process “in the background”, meaning that it will be automatic (on auto-pilot, if you will).

    That ought to poke a big hole in the Seattle bubble. Combine QE-unwind with the Amazon HQ2 plans, and we have the recipe for a drastic change in Seattle housing prices.

    The unwind plan was spelled out in June, and reiterated in July. The bigger news was that they put off the rate hike.

  71. 73
    whatsmyname says:

    By Matt P @ 68:

    I beat justme by 12 mintues, but it’s not an insignificant number. It starts small, 10 billiom a month, but will hit 80 billion a month within 1 year. They are going to stop buying mortgahe backed securities which is huge. 80 billion a month is nearly a trillion a year of money going poof from the economy. It will definitely have an effect.

    Their balance sheet is 4.5 trillion, so it would only take 5 years including the rampup to clear it all, not decades. They won’t clear it all, but they will do enough to shrink some of the bubbles without popping them at least they hope to not pop them anyway.

    I’m not sure how big the near term effect will be. The plan will top out at $50B/mo. third quarter next year. The unwind during the first 12 months will be $300B total, then $600 after that.. It would take about 7 and a half years, although as you say, they won’t clear it all. Significantly, the MBS portion will be 40% or $120B. This is about 6.7% of recent new issue averages of $1.8T; or about 1.3% of the $9T MBS market.

  72. 74
    Matt P says:

    Sorry, I had my numbers wrong – $50 billion per month once the rampup finishes. $20 billion per month in MBS and $30 billion per month in treasuries. The next rate hike was always going to be in December. Rates haven’t risen yet naturally because no one believes that the fed will do that they say they will because they have waffled so much in years past. If they do follow through with the QE reverse, they will rise. Time shall tell.

    6.7% is pretty decent cut if it takes some of the speculation out of the housing market. It’s that extra slack that really drives up the prices and not people just looking for a house to live in. That free money floating around has to go somewhere. I doubt we’ll see 2007 recession levels, but it will probably cause the rapid price rises to level off although not in all markets since real estate is highly regional.

  73. 75
    whatsmyname says:

    RE: Matt P @ 74 – That 6.7% goes into new issues, but your risk to rate is really spread across the full MBS bond market. You’re chasing bond buyers, not house buyers. So how much of an interest premium do you need to replace 1.3% of MBS bond buyers/holders? I will speculate that in this environment, not much.

  74. 76

    RE: uwp @ 8
    In Seattle Our Real Estate Rules Don’t Quite Apply to Amazon or any big Corporation for that Matter

    Build Huge Empty Apartments or Warehouses and leave ’em empty means one thing to the very rich elite, a huge tax write-off…it pays to vacate in their cases…..ask Trump. Trump’s new tax plan would include possible dissolution of these loopholes albeit lower base tax tables. Time will tell.

  75. 77

    By softwarengineer @ 76:

    Build Huge Empty Apartments or Warehouses and leave ’em empty means one thing to the very rich elite, a huge tax write-off…it pays to vacate in their cases…..ask Trump. Trump’s new tax plan would include possible dissolution of these loopholes albeit lower base tax tables. Time will tell.

    I hope you don’t charge people for tax advice. While there are some pretty nice tax benefits to low income housing, even those investments wouldn’t make sense if the property were vacant. Other properties even less so.

  76. 78
    Kmac says:

    It’s amazing the amount of people that think ‘write offs” means free money for the rich. [roll eyes]

  77. 79
    Justme says:

    People who think QE had no effect on asset prices are delusional. Likewise, people who think that QE UNWIND will not have any effect on asset prices (and mortgage rates) are equally delusional.

    There are other factors, such as whether trouble in other parts of the world will create a flight to the (perceived) safety of dollar-denominated debt. But given what happened in US MBS 2007-2008, i think many foreign investors may be gun-shy.

    RE: Matt P @ 63

    MattP: You are hereby recognized for bringing up the topic. I did not refresh late enough before I sent off my own comment.

  78. 80
    whatsmyname says:

    By Justme @ 79:

    People who think QE had no effect on asset prices are delusional. Likewise, people who think that QE UNWIND will not have any effect on asset prices (and mortgage rates) are equally delusional.

    I don’t think anyone is saying that. I think you are applying a binary solution to a proportional problem. In effect, dropping a couple-few trillion to stabilize a collapsing situation will have much larger effect than pulling 120 or 300 billion out of a somewhat stabilized situation over a year’s time, even if you plan to later raise that to 600 billion and keep doing it, (plans can always be changed). Actually, this would be true even if the situations were equal. But, of course, they are not.

    What do you think a 25bp or even a 50bp change in mortgage rates will do to the housing market? – what about 12bps?

  79. 81
    greg says:

    RE: N @ 5

    a downturn is the best time to get stock awards /options. they get issued at a low price . the worst time is times like now. with stock super high there is a lot less upside.

    a couple of few years getting low priced stocks is a huge win.

  80. 82

    By Kmac @ 78:

    It’s amazing the amount of people that think ‘write offs” means free money for the rich. [roll eyes]

    Or similarly getting upset about refunds. Seemingly they’d be happy if the person/entity underpaid the entire year and then had to pay a large percentage of their tax on April 15. I remember Cheney getting $1.9M back upset a lot of people, even though it just meant he had overpaid.

    http://www.nbcnews.com/id/12318056/ns/politics/t/bush-cheneys-tax-returns-made-public/

  81. 83
    toad37 says:

    RE: Justme @ 79

    “The Fed lied for 8 years about raising rates. Bernanke lied to Congress with regard to the monetization of the debt. Yellen will lie about unwinding and normalization. She will retire and drop it into the next Fed Chairs lap.”

  82. 84
    wreckingbull says:

    RE: Kary L. Krismer @ 82 – Federal tax withholding is a newer concept, introduced during WW2. Most of the sheeple really have no idea how much tax they are paying, and I mean that literally. Could you imagine the pitchforks and torches that would come out overnight if it were repealed? What do you mean I have to cut a check for $20,000 on April 15th!?!? The could buy me a new car FFS!!! Brilliant social engineering on the behalf of the US government, I suppose.

  83. 85
    Kmac says:

    I would love to see an end to payroll withholding.
    Writing a large check on 4/15 just might wake some people up.

    Not Amazon specific, but applies to other [local] tech companies:

    https://www.bloomberg.com/gadfly/articles/2017-09-22/corporate-cash-isn-t-doing-much-but-hiding-debt

  84. 86
    ess says:

    By wreckingbull @ 84:

    RE: Kary L. Krismer @ 82 – Federal tax withholding is a newer concept, introduced during WW2. Most of the sheeple really have no idea how much tax they are paying, and I mean that literally. Could you imagine the pitchforks and torches that would come out overnight if it were repealed? What do you mean I have to cut a check for $20,000 on April 15th!?!? The could buy me a new car FFS!!! Brilliant social engineering on the behalf of the US government, I suppose.</blockquote

    Wreck

    The reason why federal income taxes are collected on a regular basis is that many individual are living paycheck to paycheck, and would not have the ability to pay their taxes in a lump sum.

    But federal income taxes but a small part of the equation, especially for those who pay little or no federal income tax. Not only are there dozens of other taxes that we all pay on a constant basis for almost everything, but those taxes are verbally transformed into different names as to not alarm the populace as to how much they are actually forking over. And most of those taxes are paid with federal after tax dollars, thus for every dollar of other taxes to be paid, the individual may have to earn $1.10 – $1.30 in income depending on their tax rate to pay for those taxes that are not tax deductable. And the hours wasted (a tax on our time, or a tax insofar as one has to hire a professional to help them navigate the tax system) is almost incalculable.

    Rather than list all the taxes individuals pay (either directly or indirectly through the goods and services they obtain), the following article has a very nice list of taxes (although called all sorts of other names to calm the populace).

    http://theeconomiccollapseblog.com/archives/a-list-of-97-taxes-americans-pay-every-year

    It would be interesting to figure out exactly how much we pay in taxes if everything was included. One would guess that a taxpayer in even the lower tax brackets are paying 50% or more of their income to taxes when all the hidden taxes are also added in.

  85. 87

    By Kmac @ 85:

    I would love to see an end to payroll withholding.
    Writing a large check on 4/15 just might wake some people up.

    You should try being self-employed. The IRS in their infinite wisdom requires estimated payments on 4-15, 6-15, 9-15 and 1-15. So that means that in the 60 day period between 4-15 and 6-15 you have to pay 50% of your estimated taxes, plus whatever you owed for the prior year.

    4-15, 7-15, 10-15 and 1-15 apparently was too difficult for them to figure out.

  86. 88
    Kmac says:

    RE: Kary L. Krismer @ 87
    I am self employed and deal with all you have mentioned.
    If I anticipate a better income this year over last year, I use the safe harbor rule for minimum tax payments. (pay last years tax due this year will normally exempt you from penalties due to underpayment this year).

    Regardless, my experience has been if I play catch up by Dec 31st, I have never had a tax penalty for underpayment, even if was “officially” due much earlier. For what it is worth, your mileage may vary going this route.

  87. 89
    Kmac says:

    RE: ess @ 86

    I couldn’t agree more, except Michael Snyder isn’t something a reasonable person should tune into for realistic analysis.
    He is a doomsayer in everything he does. I think he lives in the Maltby (Snohomish County) area, but not 100% sure.

    edit: Never mind, I see he is running for Congress in Bonners Ferry ID. I think he USED to be a local doom celebrity ;-)

  88. 90

    RE: Kmac @ 88 – Good to know in case I accidentally miss a payment sometime.

    BTW, back when I was an attorney my malpractice insurance was due on May 15th, right in the middle of the first two estimated tax payments. That time of year was always a real drain on the bank account!

  89. 91
    ess says:

    By Kmac @ 89:

    RE: ess @ 86

    I couldn’t agree more, except Michael Snyder isn’t something a reasonable person should tune into for realistic analysis.
    He is a doomsayer in everything he does. I think he lives in the Maltby (Snohomish County) area, but not 100% sure.

    edit: Never mind, I see he is running for Congress in Bonners Ferry ID. I think he USED to be a local doom celebrity ;-)

    Don’t know who the fellow is – all I know is that he had a very handy list of (almost) all the taxes we have to pay in one form or another.

    As per his political views – we in the Puget Sound don’t have too much to brag about when it comes to comparing our elected government officials to others. Exhibit A – Seattle City Council.

  90. 92
    sfraz says:

    RE: uwp @ 8 – I hear NY is the chosen one. Almost certain.

  91. 93
    justme says:

    A bit of a technology/FAANG stock meltdown today. Facebook and Netflix down 4.4% at this time, Amazon. Microsoft and Google are down around 1.7%. Not pretty for the bubblemongers, whether stock market or housing market.

  92. 94
  93. 95
    justme says:

    RE: sfraz @ 92

    I’d be shocked if NYC turns out to be the choice for Amazon HQ2. Jeff Bezos cannot be THAT delusional, can he?

  94. 96

    RE: justme @ 95 – What are the vacancy rates in The Freedom Tower?

  95. 97
    greg says:

    RE: wreckingbull @ 84

    our taxes are fine. the myth that americans pay high taxes is a myth. there are dozens of studies that compare total taxation. It turns out we do fine, even with our multi trillion dollar wars and our insanely large military…
    below link reveals the truth, we pay damn low taxes….
    http://www.taxpolicycenter.org/briefing-book/how-do-us-taxes-compare-internationally
    this is brookings a once left leaning group that shifted to the right with its funding a decade or so ago source watch reveals it is heavily funded by the rightwing…

  96. 98
    Kmac says:

    I never understood what it matters what everyone else pays.
    The counties in WA all do that to justify raising rates on everything….
    “But just look what King County is charging….. We are only going to raise you to within 10% of that (and you should feel like you are getting a deal)”

  97. 99
    Deerhawke says:

    RE: justme @ 95

    I lived in NYC during the 80’s and I had a great time there. But it has gotten absurdly expensive and amazingly congested. If Amazon were already based in NYC, they would look at Seattle and see it as a wonderful place to have a 2nd headquarters because (relatively) it is so inexpensive and so blessed with transportation options.

    Remember that Bezos was living in New York when he decided to found Amazon and drove to Seattle to start it.

  98. 100
  99. 101
    wreckingbull says:

    RE: greg @ 97 – Go back and read my post again. It had nothing to do with taxation rate. It had to do with the withholding system intentionally designed to obscure it.

    If you really want to start comparing taxation rates across developed companies, as it seems you do, wouldn’t it be better to include the value received for those taxes as part of the equation? I do.

  100. 102
    ess says:

    By Deerhawke @ 94:

    The bowing and scraping begins…

    https://www.nytimes.com/2017/09/25/technology/wooing-amazon-second-headquarters.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=second-column-region&region=top-news&WT.nav=top-news

    Of interest are the politicians who are totally against any reduction of the corporate tax rate, but are willing to give away hundreds of millions of public dollars if they can land the Amazon HQers and the ability to spend the taxes from not only those jobs brought in by Amazon, but the jobs and various fees and taxes created by the Amazon operation.

  101. 103
    Erik says:

    RE: Kmac @ 98
    That’s the difference between someone that judges vs someone that perceives. I percieve. I feel I get a goodseal when I pay less than all the neighbors.

  102. 104

    RE: Deerhawke @ 99

    I don’t think NYC specifically, but New York is a big place…and often includes parts of Jersey.

    https://finance.yahoo.com/news/newark-perfect-amazons-new-headquarters-134533291.html

    Were you being snarky with the latter? “…they would look at Seattle and see it as a wonderful place to have a 2nd headquarters because (relatively) it is so inexpensive and so blessed with transportation options.” I have a weak snark detector. Hopefully you weren’t serious that Seattle’s transportation options trump NYC’s.

  103. 105
    uwp says:

    The problem with these state/city competitions is the logical end-game of cities offering more and more until there is only $1 of benefit to the city. Because, hey, it’s still something!

    What is the economic cost of 30 cities across the US devoting whole task forces to wooing Amazon when only 1 wins?

  104. 106
    Brian says:

    Hey Tim, could we get an update on the housing tiers performance sometime soon? Curious how the high tier is performing vs the low tier.

  105. 107
    N says:

    https://wolfstreet.com/2017/09/25/lenders-loosen-mortgage-standards-as-demand-falls/

    Fannie Mae’s report:

    Lenders further eased home mortgage credit standards during the third quarter, continuing a trend that started in late 2016. In particular, both the net share of lenders reporting easing on GSE-eligible loans for the prior three months and the share expecting to ease standards on those loans over the next three months increased to survey highs.

    Lenders’ comments suggest that competitive pressure and more favorable guidelines for GSE loans have helped to bring about more easing of underwriting standards for those loans.

  106. 108
  107. 109
    justme says:

    RE: Erik @ 103

    I perceive that Erik has created a distinction without a difference.

  108. 110
    SevenEagles says:

    Two things:
    1. I’m guessing Amazon wants a fully operating HQ well outside Seattle’s seismic zone.
    2. Read Richard Florida’s “Creative Class.” Companies like Amazon need smart, energetic, and creative managers. Smart, energetic, and creative people want to live in a smart, energetic, and stimulating environment. They ain’t moving to Wenatchee or Spokane, folks.

  109. 111
    Dana says:

    Grew up there; was used to a 45 minute drive from Capitol Hill to the ski lift. No smog to speak of. No traffic jams anywhere but Alaskan Way and Rte 99. No all-night sirens on the freeway. No riot gear needed for the cops. Seattle is geologically and meteorologically unfit for the kind of expansion it’s enduring. Be careful what you wish for…..

    PS to Amazon: How about Detroit?

  110. 112
    Blake says:

    Unbelievable! It seems we have come full circle to 19th century “company towns.” Americans are so ignorant of US history…
    https://www.ajc.com/news/local-govt–politics/amazon-ceo-jeff-bezos-offered-mayorship-new-city-for-company-hq2/A582jo1rvyLlMte3sSEaPK/
    “Stonecrest Mayor Jason Lary said Wednesday he will seek state legislation to install Bezos as the unelected leader of Amazon, Ga. — if the company chooses to bring its giant corporate hub called HQ2 to the area.”

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