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Housing consultant Ivy Zelman via the New York Times:

…home prices are going back down.

Moody’s chief economist Mark Zandi via Bloomberg:

I think we’re going to see another leg down.

And Goldman Sachs chief economist Jan Hatzius:

Our current working assumption is a 5%-10% drop in home prices through the middle of 2010.

Note that these forecasts are all nationwide. In most parts of the country home prices began falling a good year before Seattle, and had fallen further than Seattle before the inefficient, expensive, and economically stupid tax credit put the brakes on the full return to affordable housing.

If nationwide average home prices do indeed drop another 5-10% in the coming year, I suspect that Seattle area home prices will probably be down 10-15%.

Oh and by the way, in case you didn’t see the news; as expected, a couple weeks ago Congress passed an extension and expansion of the idiotic tax credit. The move was tacked onto a completely unrelated extension of unemployment benefits to assure that no congressman could vote against it (crap like that should be illegal), and is estimated to cost another $10 billion that we don’t have (so you can expect it to cost at least $20 billion). Oh, and just for kicks they threw $33 billion in tax refunds to homebuilders into the bill, too. Because the national debt just wasn’t big enough already. Super!

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State	Percent
Washington	26.3%
Utah	25.0%
Arizona	21.3%
Nevada	20.0%
Oregon	19.5%
Georgia	19.2%
California	17.8%
Florida	16.3%
Michigan	13.2%
Maryland	10.8%
Colorado	10.6%

This week we looked over the numbers to determine which states have the most stress in their banking sector. For the ranking, we added together the number of institutions that are on the Unofficial Problem Bank List and failures since 2008 and divided by the number of institutions headquartered in the state and failures since 2008. Interestingly, Georgia is not the top ranked state. Here is the top 10 list; actually top 11 as Maryland and Colorado are in a virtual tie. Please note that we only ranked states with at least 15 institutions headquartered within their borders, as we did not want the ranking influenced by a small banking market.

Washington State leads the way with more than 26 percent of its banking industry either under formal enforcement action or having failed. No wonder the esteemed governor wrote a letter to the state’s congressional delegation complaining about bank regulators (see Wall Street Journal article).

Here’s a map of Washington’s 23 troubled banks, according to Calculated Risk’s unofficial list, as well as Washington’s three recently-failed banks (via the FDIC), and WaMu, which the FDIC lists as a Nevada bank.

View Washington’s Troubled Banks in a larger map

Hat tip: Puget Sound Business Journal

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Here’s a link to this month’s NWMLS press release: Tax credit spurs big surge in Western Washington home sales

Before we get into the roundup, I’d like to take a moment to quote an excerpt from the monthly NWMLS data post from May, which was titled Huge Gap Opening Between Pending and Closed Sales (a subject that I first brought to your attention in August of last year).

The disconnect between pending sales and closed sales grows ever larger. … Something is becoming extremely fishy about the pending sales data.

…it is good to keep in mind when you start reading news reports in the coming weeks about the market supposedly picking back up. It’s an illusion.

Here’s a graphical representation of the 2009 sales illusion:

Pending sales peaked at 2,447 in June, while so far closed sales have not made it higher than 1,758—a nearly 30% discrepancy. So far this year there have been at total of 20,025 pending SFH sales in King County, but only 12,986 actual closed sales. In other words, more than a third (35%) of pending sales have yet to materialize into closed sales. That difference is typically well under 10%.

Find me a newspaper that reported this growing issue last August.

Click below for this month’s roundup of gawking at the tax credit.

Eric Pryne, Seattle Times: Tax credit brings house buyers out in October in King, Snohomish counties

Home sales in the Seattle area reached new highs for the year in October, a burst real-estate professionals attributed in large part to the $8,000 federal tax credit for first-time buyers.
…
On the Eastside, the tax credit has helped spur sales in neighborhoods south of Interstate 90, said Thadine Bak, broker in Windermere’s Bellevue South office.

It also has created what she called “trickle-up” buyers: Homeowners looking for new, often more expensive homes once they sell their houses to first-timers. There has been a burst of interest recently in houses in South Bellevue in the $600,000-$700,000 price range, Bak said.

Eastside sales increased partly because sellers are getting more realistic in pricing their homes, said Mona Spencer, broker in John L. Scott’s Redmond office: “They’re finally getting it.”

But the impact of the federal tax credit can’t be understated, she added: “It gives [buyers] an incentive to go out and look.”

Once again, Eric’s reporting does a good job of sticking to the facts. Home sales are up thanks to the tax credit.

Gerry Spratt, Seattle P-I: Pending home sales spike, MLS report says

Pending homes sales were up more than 64 percent in Seattle and almost 71 percent in King County in October over the same period a year ago as first-time homebuyers rushed to beat the Nov. 30 expiration of an $8,000 federal tax credit, according to the latest numbers released by the Northwest Multiple Listing Service.

In the entire 19-county MLS coverage area, pending sales were up nearly 63 percent year-over-year and the median home price was down 7.2 percent to $269,995 — the smallest drop since June 2008. Inventory fell 17.39 percent from last year to 38,159 — the lowest level since December 2008.

Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University said the pending sales number is good indicator of market activity, but can be misleading.

“We need to understand that some, and perhaps many, of those pending will never close, and if they are pendings on short-sale properties they may close, but not for a long time,” Crellin said in an e-mail. “That said, the surge in pending sales in October was clearly driven by buyers claiming the tax credit who wanted to be able to close by the end of November. It’s probably even more spectacular than it looks, because I suspect that most of those contracts were written in the first half of the month, giving the buyers at least 45 days to close.”

Okay, first off, there was no “surge in pending sales in October.” Pending sales were virtually flat for the month. They “surged” year-over-year because typically pending sales tend to decline slightly from September to October, and last year they dropped off dramatically:

Secondly, as mentioned above, pending sales are about as useful a measure of actual market action these days as “open house traffic.”

Mike Benbow, Everett Herald: Snohomish County home sales shoot up 35%

Home sales in Snohomish County exploded last month as buyers rushed to beat a deadline that they thought might end an $8,000 tax credit.

Home sales in the county rose 35 percent from a year ago and pending sales ballooned 91 percent as first-time buyers hurried to close their deals by the end of this month, the Northwest Multiple Listing Service reported Thursday.

“I had my best month in 20 months,” said Meribeth Hutchings, a Windermere broker in Lake Stevens who is also on the board of the listing service.

She added that Thursday’s House vote to extend the first-time buyer credit and expand it to other people was great news.

It’s always “great news” when the federal government blows tens of billions of dollars that we don’t have to boost your special little industry. Maybe I can get Congress to pass a giant handout to bloggers, next.

Kelly Kearsley, Tacoma News Tribune: Closed sales of homes rise in Pierce County

Pending and closed home sales increased significantly in Pierce County last month as first-time homebuyers scrambled to take advantage of a tax credit that was set to expire this month, according to Northwest Multiple Listing Service figures released Thursday.

Pierce County’s pending home sales – where an offer has been accepted – spiked 55 percent from the same time last year to 1,174. It’s not the most pending sales in a month for this year, but it’s a significant uptick from last October.
…
The threat of an expiring tax credit did create some urgency for buyers who wanted to get a deal closed before the end of November, said Kevin Mullin, incoming president of the Tacoma-Pierce County Association of Realtors.

“It’s first-time homebuyers, definitely. They are still making up the lion’s share of the market,” Mullin said.
…
The national real estate industry pushed to expand and extend the housing tax credit. Locally real estate professionals hoped it would help spur more sales.

“It can’t hurt anything,” said Larry Bergstrom, president of Crescent Realty in Spanaway.

Well hell, if “it can’t hurt anything,” I still say we should bump it up to $1 million, and make it permanent. Start lobbying your senators and representatives now.

Rolf Boone, The Olympian: Home sales, median prices decline

Thurston County’s median home price fell more than 11 percent from October 2008 to October 2009, the second time this year that prices in the county have dropped by more than 10 percent, according to Northwest Multiple Listing Service data released Thursday.
…
Burger Professionals owner and broker Doug Burger said median prices fell because of the number of houses going through foreclosure or the short-sale process. A short-sale occurs when the lender agrees to accept less for the house than the value of the mortgage. It is that downward pressure on prices that has forced some sellers who are not in default to also lower their prices, Burger said.

“The average Joe had to compete with these prices,” he said.

How sad for the average Joe seller. Funny how I don’t recall reading this kind of pity for the average Joe buyer back in the days of bidding wars and waived inspections.

(Eric Pryne, Seattle Times, 11.05.2009)
(Eric Pryne, Seattle Times, 11.06.2009)
(Gerry Spratt, Seattle P-I, 11.05.2009)
(Mike Benbow, Everett Herald, 11.06.2009)
(Kelly Kearsley, Tacoma News Tribune, 11.06.2009)
(Rolf Boone, Olympian, 11.06.2009)

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The Seattle-area economy is definitely more diverse than it was in the ’70s, but Boeing still dominates the employment base by the numbers.

A 2003 table from the Greater Seattle Chamber of Commerce shows Boeing employing more people than the next six-largest Puget Sound companies combined (Port of Seattle, Alaska Air, Microsoft, UW, Safeway, and the VA).

Here’s a crude visual of the size of Puget Sound’s top 10 employers based on the Chamber’s 2003 data linked above:

Here is some more recent data on Boeing, Microsoft, and Amazon (which was listed by the Chamber of Commerce as the 9th-largest local employer as of 2003).

Total Puget Sound Jobs
Boeing: 73,357 (46% of total headcount)
Microsoft: 40,224 (44% of total headcount)
Amazon: 10,850 (assuming 50% of total headcount)

And keep in mind that the numbers listed above are only those directly employed by Boeing itself. Many thousands more local jobs are directly tied to Boeing in companies that supply Boeing with parts and services.

In short, there’s clearly a lot at stake for the local economy (and by extension the local housing market) when it comes to Boeing’s long-term plans.

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From the real estate news source Inman News: Final push for tax credit

Real estate industry trade groups are mounting a final push for an extension of the first-time homebuyer tax credit, with Sen. Johnny Isakson planning to tie the issue to an extension of unemployment benefits.
…
In testimony before the Senate Banking Committee today, Isakson, R-Ga., said he plans to introduce an amendment to legislation extending unemployment benefits that would make the current $8,000 tax credit available until June 30.

Isakson’s amendment would raise the income limits for the credit to $150,000 for individuals and $300,000 for a couples. The existing tax credit can’t be claimed by individuals making more than $95,000 or couples with adjusted incomes of more than $170,000.
…
The estimated cost of his latest proposal would be $16.7 billion over five years, Isakson said, citing the Joint Committee on Taxation.

So apparently the latest plan is to pull a common DC trick and tack the bill onto something else that would be political suicide to vote against. This disgusting ploy usually works, and if they pull off adding it to the unemployment bill, it is almost guaranteed to be passed. Also, considering that the current credit is probably going to cost in excess of $15 billion versus an original estimate of $6.6 billion, it seems likely that if passed, this proposal would cost us another $30 billion or more that we don’t have.

Next up we have a different outlook on the credit, via Calculated Risk: Home Buyer Tax Credit DOA?

From Reuters: White House skeptical on renewing home buyers credit
…
And more from Reuters on the widespread fraud: IRS warned again of U.S. homebuyer credit fraud
…
From Diana Olick at CNBC: HUD Hints on Home Buyer Tax Credit . Olick reviews Donovan’s testimony and writes:

[T]hat sounded more like a “No” to me than a “Yes.”

And Rex Nutting at MarketWatch reviews many of the arguments against the tax credit: Kill the wasteful home-buyer tax credit

Note in the second story CR points out that the IRS “has opened 107,000 civil cases related to the credit.” If we go by the NAR estimate that around 1.9 million buyers “will take advantage of the $8,000 tax credit this year,” the 107,000 civil cases represent a potential fraud rate of over 5%. Who could have guessed that when the government starts handing out free money, people would race to game the system?

I apologize for the overload of posts recently regarding the $8,000 tax credit, but I feel strongly this is an important issue related to real estate. The tax credit is wasting money, harming potential buyers by hampering the natural correction of the market, and helping to push the rental vacancy rate higher, which causes further pain for local and regional banks. The government needs to stop trying to prop up a broken market and let home prices fully correct.

Here is the contact info for our senators. I encourage you to call or fax them and encourage them to vote against any form of extension, renewal, or expansion of this wasteful and counter-productive spending spree.

Patty Murray
Phone: 202.224.2621
Fax: 202.224.0238

Maria Cantwell
Phone: 202.224.3441
Fax: 202.228.0514

[This story was corrected on 10/20 at 11:00 AM to indicate that the 107,000 civil cases opened by the IRS represent potential fraud, not necessarily actual fraud.]

Another of our reporters is working on a story on commercial real estate investment. I recognize that your blog follows residential real estate more closely, but I know many of the people reading it are doing so for investment purposes.

I would be thrilled if you would once again publish our question form.

I do have something to offer as some sort of a way to square things: our reporter Phyllis Fletcher did a 10-minute feature piece the other day on the fallout when people are evicted in order to make way for new development that never happens.

For those that do not remember, back in June I posted a similar request, which resulted in an interesting story about downtown office space.

This month’s questionnaire concerns commercial real estate investment decisions.

Just a few years ago an investment in commercial real estate looked like a sure thing. Now it’s a different story. What decisions are you making now because of the market downturn?

If you’ve got any recent experience in commercial real estate investment, head over to the KUOW question form and drop them a line. When the story is posted (presumably in a few weeks), I’ll be sure to post an update.

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There is no delight in watching the budget deficit soar. The $1.4 trillion deficit in the completed 2009 fiscal year to September is the highest ever in the U.S. in sheer dollar figures, and the highest since the Second World War if measured in relation to the overall economic pie. It’s a huge burden to the future generation and could easily cause interest rates to rise much sooner and quite sharply. Washington needs to come out with a credible plan to reduce the deficit over time.

However, one area where federal taxpayer dollars have effectively been utilized is in providing a homebuyer tax credit. The key to any future sustainable economic recovery lies in home values stabilizing or, better yet, a return to a historical appreciation rate of 3 to 5 percent each year. The bubble prices crash landed. All the excesses have already been removed. In fact, one could legitimately argue that home values have overshot downward.
…
It would be an utter pity if the housing market, just at the cusp of self-sustaining recovery, rolls downhill again. That could indeed happen if potential buyers step back and inventory again climbs. Falling home values – independent of whether overcorrecting is happening or not – will bring back all the associated collateral damage.

A much happier scenario would be that the buying momentum continues for few additional quarters such that inventory falls back down to the normal 5 to 7 months, a level consistent with home value stabilization. Once that is accomplished, the consumer “fear factor” of waiting and waiting for a lower price later down the road will no longer be part of home buying decision.
…
For that happy scenario to play out, a time extension on the home buyer tax credit is critically needed.

Unfortunately the full post is available only to registered members of the real estate professional’s social network ActiveRain. If you for some reason have a desire to read the whole thing, drop me an email and I can email it to you.

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NWMLS press release, October 5, 2007:

Trying to time the market is “a fool’s game,” remarked one MLS director. “If you are buying a home to live in for more than three years, then buy the one you love, not the one that you can save $25,000 on,” advises Matt Deasy, general manager at Windermere Real Estate/East Inc. in Bellevue.

J. Lennox Scott, chairman and CEO of John L. Scott Real Estate said now is “an ideal time for buyers.”
…
“The time is right for buyers on the sidelines to step forward. They have many more home choices now than in the past few years,” observed [Windermere broker] Marcie Maxwell.

Seattle P-I, October 5, 2007:

One month of lower prices doesn’t mean much, said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University.

“I think it is suggestive that there is some real softness in the (Seattle) market,” he said. “But at the same time, I think we’ve got a more resilient housing market than in many parts of the country.”
…
Matthew Gardner, a Seattle land-use economist who works with developers, does not put much weight on the Seattle median-home price, particularly because it excludes most sales of new condos, he said Friday.

Actually, year-to-year increases of about 4 percent in the median price across King County and the 19 counties in the listing service were higher than Gardner anticipated, he said. He expects a leveling off — with increases of roughly 3 percent — for a couple of years.

“We need to get through this backlog of inventory,” he said. “Also, we need to start allowing time for wages to catch up.”

Tacoma News Tribune, October 6, 2007:

Agents on Friday, however, largely portrayed Pierce County’s one-month price decline as more anomaly than trend and what’s to be expected in a market normalizing after the boom years of 2004 and 2005.
…
Buyers shouldn’t view one month of lower prices as a sign that more are on the way, said Bill Riley, owner of Gateway Real Estate. Riley is vice president-elect of the Washington Realtors, which plans to launch a campaign this month encouraging buyers to purchase now rather than wait.

“This is not a start of a decline. We’ve never seen a decline in such a strong fundamental market,” he said, pointing to expected job growth…

Everett Herald, October 6, 2007:

“It looks like the market has kind of taken a deep breath and just corrected itself a little bit,” said Nathan Gorton of the Snohomish County Camano Board of Realtors.
…
“It’s a good time to be a buyer right now.” … “I talk to a lot of buyers’ agents whose customers are saying they just want to sit back right now because they don’t think it’s a good time to buy a home,” he said. “They think, ‘Oh my gosh, the market is falling apart.’ Nothing could be further from the truth.”

For comparison, here were my comments about these stories at the time:

It will be interesting to watch the increasingly ridiculous gyrations of local real estate salespeople as the market continues its downward path, and they come up with more and more outrageous statements that fly in the face of reality. It looks like the bubble deflation show has finally rolled into town.

Indeed it has been an entertaining show, and trust me; it ain’t over yet.

First up, an excerpt from the NWMLS press release itself: Northwest MLS brokers agree "there’s a lot to be optimistic about"

“There’s a lot to be optimistic about,” according to one director of the Northwest Multiple Listing Service upon reviewing summary statistics for September’s housing activity. The report shows a big jump in pending sales compared to a year ago (up almost 27 percent), continued drops in inventory (down 17.7 percent versus a year ago) and brisk demand for homes at the lower end of the price spectrum.
…
Joe Spencer, president and COO of John L. Scott Real Estate, estimates up to 10 percent of pending sales do not close because they’re caught in the short sale cycle. Still, he comments, “There is a lot to be optimistic about.” He cites interest rates that are now in the high four percents as bordering “on being epic” and the federal tax credit as stimulants to the market.
…
Activity at open houses is reported to be brisk in many areas…

Sweet! The return of the ever-popular “open house traffic” metric of market health. I love it. Also classic is the heavy focus on the pending sales stat, which has been rendered practically meaningless in the past year. FYI, that 10% estimate is way too low. I’d put it around 20-25%.

Anyway, click below to read the rest of this month’s reporting roundup, in which the incredible surge and uplifting rally is detailed by the enthusiastic local press corps.

Eric Pryne, Seattle Times: King County home sales surge in September, but prices continue to fall year-over-year

Matt and Priscilla Karwoski bought their first house last month: a new, three-bedroom town house in West Seattle. One factor: the $8,000 tax credit the federal government approved for first-time buyers this year.
…
The $8,000 credit has helped fuel a surge in home sales, nationally and locally. Closed sales of single-family homes in King County were up 14.3 percent in September from the same month last year, the Northwest Multiple Listing Service reported Monday.

It was the fourth consecutive month of year-over-year gains.

But the tax credit is scheduled to expire Nov. 30. After that, some observers say, home sales could drop again, just as auto sales plummeted after the federal “cash-for-clunkers” program ran its course.
…
As for the $8,000 tax credit, it wasn’t the decisive factor, he [Matt Karwoski] added — but it was a factor.

Eric quoted a few thoughts from me on the current state of the market in today’s article. If you’re interested I have posted the full text of my comments to Eric. It is interesting to note that the buyer profiled in today’s article admits that $8,000 tax giveaway was not “the decisive factor.” Here’s another potential buyer in the comments on the Times’ site:

The $8,000 tax credit is one of the big reasons I’m trying to buy a home before November 30. … Without the tax credit I’d be willing to watch things for another year decline.
…
I even had some friends who bought a house a month before his wedding because of the tax credit. The bride already had a condo, but the groom bought a house, got the $8,000 and they have the condo rented out on a 2 year lease.

Another example of today’s $8,000 tax credit-inspired buyers being either borrowed demand or purchases that would have happened anyway. What a complete waste of a program.

John Stang, Seattle P-I: King County home sales surge, but pitfalls remain

Seattle-area house sales continued to show signs of life in September. But the magic economic window to encourage homes sales is closing.
…
Coldwell Banker Bain Managing Vice President Ron Sparks crowed about the report in the listing service news release.

“Our market has certainly come a long way since this time last year,” Sparks said. “For all the challenges that remain, it would be difficult to not appreciate the reemerging market vitality that continues to build even as the summer buying season closes.”

Crellin said it remains to be seen whether all of the currently pending sales will translate into closed sales. He said the turnaround time for short sales — in which a banks agrees to accept less than its owed as part of a sale to avoid the costs of foreclosure — has jumped from 4.5 weeks a year ago to 9.5 weeks today, according to Campbell Communications of Washington, D.C.

Short sales also have helped keep down prices, Dick Beeson, a director of the Northwest Multiple Listing Service, in the news release.

“Because there are so many short sales and bank owned property sales, it was inevitable that prices would fall slightly,” he said.

I can’t help but feel that Crellin’s being pretty disengenuous here. We’re not just looking at a time delay. We’re looking at a large number of completely failed pending sales. As of September there are now 4,887 “orphaned” single-family pending sales in King County for 2009. There is absolutely no way that those are all going to eventually translate into closed sales. I’ll be surprised if even half of them do.

Mike Benbow, Everett Herald: Prices down, but home sales up 9 percent in county

Snohomish County home sales rose for the fourth straight month in August, aided by falling prices and a rush by first-time buyers to beat the deadline for an $8,000 tax break.

There were 755 homes sold in the county last month, a 9.1 percent increase from a year ago, The Northwest Multiple Listing Service reported today.
…
The tax break was also a big issue, said Bob Maple, an Everett broker for John L. Scott Real Estate.
…
The tax credit, that’s what’s driving sales,” Maple said. “Nearly all of our business has been from first-time buyers.”

…first-time buyers that probably would have bought in 2010 or 2011, had a free money giveaway not pulled them into the market before they were otherwise prepared to take the leap.

C.R. Roberts, Tacoma News Tribune: Real estate rallies, agents say

We’ve already hit the bottom and we are no longer there.

So say real estate professionals who have reviewed the latest numbers, out Monday, from the Northwest Multiple Listing Service.

“It appears that we’ve seen the bottom, and we’re starting to climb out,” said Bill Riley, an owner of GMAC Real Estate in Puyallup and president-elect of Washington Realtors.

“People now know they can buy a house and it will be worth more down the road,” he said Monday. “I wasn’t sure last month, but we are definitely in an upswing. There’s a possibility we can see the price of homes increase in 2009.”
…
According to Dick Beeson, a Windermere broker and a director of Northwest MLS, the latest numbers reflect “a lot of pent-up demand. A lot more people are realizing closed sales.”

The demand for homes, he said Monday, “is there. It’s just getting the darn things to the point where they’re actually closing – and that’s starting to happen. I think it’s pretty close to a trend. More people are getting into the market and off the fence.”

Nice. Another explicit bottom call for the scrapbook.

Rolf Boone, The Olympian: Home sales start Rally, agents say

Pending home sales in Thurston County rose more than 11 percent in September, a sign that first-time homebuyers rushed to take advantage of an $8,000 tax incentive program before it expires next month, South Sound real estate agents said Monday.
…
Windermere Olympia real estate agent Gregory Moe agreed that the tax incentive program has boosted pending sales. Moe said he recently worked with a buyer who wanted to buy specifically to take advantage of the program.
…
Although the housing market is improving, the lack of local employment is holding the market back, he said.

Huh, so people without jobs can’t buy houses? Go figure.

(Eric Pryne, Seattle Times, 10.05.2009)
(Eric Pryne, Seattle Times, 10.06.2009)
(John Stang, Seattle P-I, 10.05.2009)
(Mike Benbow, Everett Herald, 10.06.2009)
(C.R. Roberts, Tacoma News Tribune, 10.06.2009)
(Rolf Boone, Olympian, 10.06.2009)

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• Nearly 7% (and rising) of FHA loans are currently in default (source).
• The FHA has cash reserves of less than 2 percent (and falling) of the total value of loans they guarantee (source).
• FHA currently makes about 23% (and rising) of all mortgages in the USA (source).

Here are those first two points presented graphically:

I’m trying to imagine a realistic, plausible scenario in which the FHA isn’t essentially doomed to be the next big Federal bailout, and I’m afraid to say, I’m coming up empty.

The best news to derive from Friday’s announced failure and sale of DuPont-based Venture Bank came in the form of a report from a Seattle TV and radio station.

But the news – that no other banks in Washington were in trouble and facing closure – was very wrong.

I believe that the remark above is referring to this report from KOMO news, which contained the (false) claim that “as of right now, there are no other banks in financial trouble in the state.”

Yes, Venture did fail.

But yes again, in fact, there are other banks in the state that might also fail.

Scott Jarvis, director of the state Department of Financial Institutions, said Monday that he thinks he knows how that incorrect information was relayed to the public.

“The consumer reporter called Brad,” Jarvis said. (That would be Brad Williamson, head of banks at DFI.)

The reporter asked if any other banks were in trouble. Williamson – on Friday evening – answered, “We are not closing any more banks this week.”

“Somehow that got translated for the 11 o’clock news that there are no other banks in trouble,” Jarvis said.

“The truth is that we did not close any more banks on Friday,” he said.

And he continued, “There is considerable strain on our banking system attributable to the expansion we had in commercial real estate growth.”

With Ben Bernanke out there claiming that “the recession is very likely over,” it will be interesting to see how many more local banks continue to fail under the continued financial stress of non-performing construction loans.

(C.R. Roberts, Tacoma News Tribune, 09.15.2009)

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Even as the economy may be starting to recover, banks across the country are confronting a worsening outlook for their construction loans, an area that boomed for much of the decade.

Reports filed by banks with the Federal Deposit Insurance Corporation indicate that at the end of June about one-sixth of all construction loans were in trouble. With more than half a trillion dollars in such loans outstanding, that represents a source of major losses for banks.
…
Foresight’s estimates of the proportion of problem construction loans in the 20 largest metropolitan areas has one surprise: the one with the largest proportion of troubled loans is Seattle, where the recession has started to pinch.

According to the graphic attached to the story, over 30% of construction loans in Seattle are currently in delinquency. Yikes.

In related news, the Mastro bankruptcy is progressing, with the situation becoming seemingly more complicated with each update.

And, speaking of the commercial real estate market, Russell Investments just purchased the 42-story former WaMu Center for close to two thirds off what it cost to build just three years ago. Yowza.

It’s certainly an interesting time in the real estate and financing scene here in Seattle. How far we have come from just a year or two ago when everyone seemed to think that Seattle was bulletproof.

First up, an excerpt from the NWMLS press release: Northwest MLS brokers report brisk activity, multiple offers, "irrational delays" by lenders

Pending sales around Western Washington during August jumped nearly 21 percent from a year ago and inventory dropped more than 18 percent, according to new figures from Northwest Multiple Listing Service. MLS member-brokers say those indicators, along with signs of stabilizing prices, set the stage for brisk activity in the next few months as first-time buyers try to take advantage of the Nov. 30 deadline for tax credits.

“The typical August cool down in the market did not happen this year,” observed NWMLS director Kathy Estey, managing broker at John L. Scott’s office in downtown Bellevue. She said agents are busy with both first-time and move-up buyers and they’re reporting multiple offers on homes priced up to $700,000.

Brokers reported 7,539 pending sales (offers made and accepted but not yet closed) for August, up 20.7 percent from a year ago. That volume outgained July’s total by 260 transactions.

In the four-county Puget Sound region, pending sales of single family homes and condominiums (combined) surged 25.7 percent from a year ago.

I’m only going to say this once in this post, since I get tired of repeating myself. The “pending sales” statistic published by the NWMLS has become virtually useless. It has of little to no use in reliably predicting actual closed sales volume this year.

That said, given that the NWMLS led off their press release with the big headline pending sales nonsense, it is (sadly) no surprise that a number of lazy local media outlets dutifuly repeated their breathless claims.

Read on to find out which local press outlets were basically just press release rehash factories this month, and which ones spent some time to do some actual reporting.

Eric Pryne, Seattle Times: August home sales strong in Puget Sound region but median prices continue to sag

Pending house sales — offers that have been accepted by sellers but haven’t yet closed — were up 31.5 percent from August 2008, continuing a trend that began in April. But there is growing skepticism about the significance of that number, because more sales are taking longer to close or aren’t closing at all.

Another month of solid reporting from Mr. Pryne at the Times. He also digs a little more into the numbers in his Saturday story: Pricey areas see big growth in home sales. Kudos to Eric.

Gerry Spratt, Seattle P-I: Pending home sales spike, according to MLS report

Pending sales for single-family homes in August were up 31.5 percent in King County and 23.9 percent in Seattle over the same period last year, the biggest jump of the market recovery that started last fall, according to a report from the Northwest Multiple Listing Service.
…
Michael Simonsen, chief executive of Altos Research, in Mountain View, Calif., said the increase in pending sales is not a strong indicator of a long-term recovery, but rather is the result of the federal government’s $8,000 first-time home buyer tax credit and low interest rates.

“It’s the same trend we’ve seen nationally,” Simonsen said. “There’s some organic change there, but it’s largely driven by the stimulus.”

A disappointingly lazy headline and lead-off paragraph, but at least Gerry Spratt did go out and talk to someone who isn’t selling homes. Mike Simonsen’s a nice, level-headed numbers guy, and it’s good to see him being quoted. Still though, on balance, I miss Aubrey Cohen.

Amy Rolph, Everett Herald: Snohomish County home sales holding steady

Pending sales were up 28 percent in August over the same month in 2008 as buyers take advantage of tax incentives.

The Snohomish County housing market seems to be saying one thing: Recovery is coming. It’s just not here quite yet.

Home sales stayed the course in August, with listings and median prices down from 2008 and pending sales increasing.

That means trends mostly held steady through spring and summer months, real estate’s prime selling time.

Wow, what an insight. Recovery is… coming. Someday. Eventually.

C.R. Roberts, Tacoma News Tribune: Monthly home sales look positive

More homes sold in Pierce County in August than a year before. More sales were pending. The median price was down.

“It’s good stuff,” said Dick Beeson, a real estate broker and a director of the Northwest Multiple Listing Service.
…
“It really starts to show some higher confidence,” Beeson said. “It’s the best overall month I’ve seen. Pending sales are up, inventory down, closed sales up, median price as well.”

He characterizes the local market as being U-shaped.

“We are at the far right end of the U,” Beeson said. “We’ve done the hard work. We’re not out of the trough, but definitely everything points up.”

Another super quote for those collecting vintage Beesons. “Definitely everything points up.” Better buy now, or you’ll be priced out forever! Again!

Rolf Boone, The Olympian: Home sales end long fall

August was the best month for Thurston County home sales in more than two years: It was the first month since early 2007 that the number of homes sold increased from the year before.

Home sales here last month rose 10.8 percent to 336 units from 303 units in the same period last year, the first year-over-year increase in combined sales of single-family residences and condominiums since February 2007, according to Northwest Multiple Listing Service data released Friday.
…
“We are back to a healthy market trend,” said Mark Kitabayashi, president-elect of the Thurston County Realtors Association.

I always find it odd that one would define as “healthy” trends that point toward high-priced items getting even more expensive and out-of-reach for potential buyers.

Here’s a bonus link for our readers up north out of Whatcom County: Whatcom County sees another quiet month in home sales

(Eric Pryne, Seattle Times, 09.04.2009)
(Eric Pryne, Seattle Times, 09.05.2009)
(Gerry Spratt, Seattle P-I, 09.04.2009)
(Amy Rolph, Everett Herald, 09.05.2009)
(C.R. Roberts, Tacoma News Tribune, 09.05.2009)
(Rolf Boone, Olympian, 09.05.2009)

Recall this article from June: Tacoma Luxury Condo Project Headed for Foreclosure

The Esplanade, a nine-story condominium on the west side of the near-downtown Thea Foss Waterway, has until Aug. 21 to escape from the imminent foreclosure, said sources close to the project who were not authorized to speak publicly.

Just 10 of the 162 housing units in the building at 1515 Dock St. have been sold, and none of the retail spaces on Dock Street or facing the waterfront walkway has been leased.

According to the the Notice of Trustee sale filed with Pierce County (pdf), the developer (Thea Foss Holdings, LLC) has outstanding obligations of $48,532,793.62 on the project.

Saturday, the Tacoma News Tribune reported that the “winner” at Friday’s courthouse auction was the bank: IStar Financial wins Esplanade

…when the short bidding was done, the lender for the eight-story Esplanade condominium, IStar Financial Inc. of New York, emerged the auction’s winner with a price of $7 million.

Some two dozen spectators watched as attorney Greg Fox read the lengthy auction documents in a light rain outside the second-floor entrance to the government building and then began the auction process about 10:15 a.m.

The sole outside bidder, Northwest businessman Chuck Tomas, halted his bidding at $6.1 million as the bank successively topped each of his bids.

Take a minute to let that sink in…

There was one bidder. The maximum bid was $6.1 million. In other words, the true open market value on this condo project is roughly 87% lower than the outstanding debt. Of course, with over $48 million debt owed on the project, the bank refused to sell for what the market was willing to pay, and bought the project back themselves.

The units that have sold so far went for an average price of $532,350. An open market value of $6.1 million for the whole project puts the average value of the 151 remaining units at just over $40,000 each.

Yowza.

In somewhat related news, Mike Mastro agreed over the weekend to move into Chapter 7 bankruptcy (previous Mastro stories) which most likely means that the dozens of projects his company has fallen behind paying for will not end up in a similar public foreclosure auction situation, thus continuing to mask their true market values.

(John Gillie, Tacoma News Tribune, 2009.08.22)
(Puget Sound Business Journal, 2009.08.21)

Here are a few transcribed excerpts.

Scarborough: “Are we out of the woods when it comes to toxic assets?”
Warren: “No.”
Scarborough: “How bad is it still?”
Warren: “…by and large, the toxic assets that brought us to this point are still on the books of the banks.”

Buchanan: “Are you saying that if they mark to market, and these assets were priced at what they’re really worth now, these banks would still be under water?”
Warren: “…once the folks changed the accounting rules… that means you can carry them on your books at a higher level than the market would treat them. And now the problem is the banks say: ‘In fact, why do I want to sell them? Because if I sell them, I can’t sell them at that value, I’m gonna have to sell them down at the lower market value. That means I have to recognize the loss.’ Recognize enough losses, and some of them are going to be gone.

Buchanan: “If all these banks, or an awful lot of these great big banks are under water if you price their assets what they’re worth, you could have a second big hit here, couldn’t you?”
Warren: “You could have real trouble.”

Warren: “If the idea behind rebuilding the economy is: ‘let’s use a lot of the bad practices we’ve used over the last five years, and see if maybe we get a little bubble going…’ I have to say, much of what is wrong and needs to be fixed is not rocket science.”

The blunt truth is that the policies that have been enacted in response to this financial crisis to date are nothing more than “extend and pretend,” where we hope that the banks can just fake it until the economy somehow magically rebounds.

“A year ago, it was a better deal to rent,” says Andres Carbacho-Burgos, an economist at Economy.com “Now you have a significant number of areas, especially those hit the hardest by the correction, where, when you compare prices to rents, you’d be led to believe it’s a good time to buy.”

A significant number — but not everywhere. At TIME’s request, Economy.com ran the numbers for 54 metro areas and compared their current price-to-rent ratios to what their ratios have been over the past 15 years. The result: in 21 cities, renting still looks to be the better bargain. Among the renter-friendly outposts are Baltimore; Raleigh and Charlotte, N.C.; Salt Lake City; San Antonio; Trenton, N.J.; Philadelphia; Honolulu; Seattle; and Portland, Ore.

Of course, this is the same publication that published the now-infamous Home $weet Home issue at the height of the bubble in 2005, so it’s probably a good idea to take their advice with a large grain of salt.

That being said, the rent-vs-home-price analysis is a generally sound concept, and our latest update on this metric does show the ratio 19% above its 1990-2001 average. Unless there is some reason that Seattle is a considerably more desirable place to live than it was in 2001, Seattle home prices probably do still have a ways yet to fall.

(Barbara Kiviat, TIME, 2009.08.20)

The Northwest economy is on the verge of recovery and with it — transformation.

Economists expect the recession to end in the next year, but not without some long-term changes.

This week we’re looking at lasting alterations to the region’s economic landscape. Nowhere is that more apparent than in the real estate market.

That used to be the one investment middle income families in the Northwest could rely on. So what does the future hold for real estate?

Olympia Correspondent Austin Jenkins looks for answers in the first part of our series “The New Normal.”
…
Will we ever see home prices inflate at a double-digit pace year-over-year?

Real estate blogger Tim Ellis, for one, hopes the answer is no.

Tim Ellis: “To me it’s sad that so much of our local economy was based on people selling other people houses for twenty percent more than they sold last year.”

Ellis is the man behind the popular blog SeattleBubble.com . He hopes this recession serves as a course correction for the Northwest economy. He yearns for back-to-basics economic engines like Boeing airplanes and Microsoft software.

Tim Ellis: “As opposed to people whipping themselves into a frenzy over how they’re going to get rich on their house.”

Ellis need not worry about a return of the frenzy says Tom Potiowsky, economist for the state of Oregon.

Tom Potiowsky: “It just naturally is going to be a much slower growing market.”

I like the forward-looking angle he took in this piece, but I don’t necessarily agree with Austin’s conclusion that “buying a home will still be a good investment.” Buy a home because you want a place to live to call your own, not as some sort of vehicle to build wealth. The only way a house is an investment is when you purchase a cash-flow-positive rental. But I digress.

I think Austin definitely touched on some interesting topics in his piece. In the time since I spoke with Austin, I picked up a little book called Reset: How This Crisis Can Restore Our Values and Renew America, which touches on some of the same topics, and as an added bonus turns the stars and stripes into a bar chart on the cover.

Despite it being only 70-some pages long, I haven’t made the time to sit down and finish reading Reset yet, but so far I’m appreciating the outlook presented within. It feels similar to the topic we touched on back in February when we discussed the “great reset.”

Looking toward the future with an optimistic perspective on how we can make our way back to a productive society that is not addicted to debt is a subject I hope to visit more frequently in the coming months.

The Obama administration, in a major shift on housing policy, is abandoning George W. Bush’s vision of creating an “ownership society” and instead plans to pump $4.25 billion of economic stimulus money into creating tens of thousands of federally subsidized rental units in American cities.

The idea is to pay for the construction of low-rise rental apartment buildings and town houses, as well as the purchase of foreclosed homes that can be refurbished and rented to low- and moderate-income families at affordable rates.

Analysts say the approach takes a wrecking ball to Bush’s heavy emphasis on encouraging homeownership as a way to create national wealth and provide upward mobility for low- and working-class families, especially minorities. Housing and Urban Development Secretary Shaun Donovan’s recalibration of federal housing policy, they said, shows that the Obama White House has acknowledged that not everyone can or should own a home.

So far, so good. I’m not personally a big fan of most of Obama’s policies to date, but this is a concept I can get behind (in principle, at least). The federal government played no small part in the inflation of the bubble with policies that encouraged home ownership above all else, even well before the Bush administration.

One quote in the article really grated on me, however:

“I’ve always said the American dream should be a home – not homeownership,” said Representative Barney Frank, chairman of the House Financial Services Committee and one of the earliest critics of the Bush administration’s push to put mortgages in the hands of low- and moderate-income people.

Pardon me? I don’t think so.

Barney Frank in 2003:

So let me make it clear, I am a strong supporter of the role that Fannie Mae and Freddie Mac play in housing… I believe that we, as the Federal Government, have probably done too little rather than too much to push them to meet the goals of affordable housing and to set reasonable goals.

Barney Frank in 2005:

You’re not going to see the collapse that you see when people talk about a bubble and so those of us on our committee in particular will continue to push for home ownership.

So please, spare us the “I’ve always said” BS, Barney.

Hat tip: Market Ticker

A legal battle between rival creditor banks over developer Michael Mastro Sr.’s real estate holdings is breaking out in federal bankruptcy court — a dispute that affects creditors’ ability to recoup their loans and sheds light on the extensive amount of property Mastro had amassed in the years before his financial trouble began.

Cascade Bank, Sterling Savings Bank, Golf Savings Bank and Washington Trust Bank, together owed more than $40 million by Mastro, have asked the court for permission to pursue their claims against him outside the bankruptcy proceeding. That would allow them to pluck their properties out of bankruptcy, foreclose on them and sell the properties to possibly recoup some of their losses.

But other creditors that are petitioning to force Mastro into involuntary Chapter 7 bankruptcy argue that a single proceeding would put all creditors, including individuals, on equal footing.

The banks — Columbia State Bank, Venture Bank and First Sound Bank — filed to put Mastro into liquidation in July, and Mastro has challenged the move. Until the court decides on whether Mastro can be forced into involuntary bankruptcy and whether some creditors can opt out, all legal proceedings are frozen.

The article also includes a list of some of Mastro’s multi-million dollar debts on various major projects around the area. One notable exclusion from the list was Northshore Townhomes, an 86-unit townhome complex in Kenmore featured on these pages last month. Mastro’s company owes $24 million to HomeStreet bank on that project.

If Seattle’s current estimated population is 602,000 and we add the hypothetical 180,000 and you get 782,000 people by 2040 — considerably short of the 1.2 million that some claim are on the way.
…
The assumption is that right now, without changing or increasing any zoning at all, Seattle has the capacity to provide housing for up to 800,000 people without changing the rules to make buildings more dense like the proposed multifamily update or up zoning single family neighborhoods. Theoretically the capacity is already there.

Whichever means of calculating you use, it turns out we aren’t anywhere near capacity.
…
According to Seattle’s own numbers from January 2005 through March of 2009, over 28,000 housing units have been added to Seattle’s stock either built (16,504 units) or permitted and at various stages of construction (11,721 units). Seattle in just 51 months has reached 60 percent of its 20-year target. At this rate we’ll add over 110,000 units under current zoning by 2024, over twice the rate needed to fulfill our targets.

It should be noted that this article is focusing on Seattle proper, not the entire metro area. That being said, the author points out some interesting facts that would seem to point to continued downward pressure on home prices, even in the “close in” in-city neighborhoods.

It is also worth mentioning that I made similar points back in 2007 that apply on a county-wide basis.

However, today I learned of an interesting feature that Google seems to do a much better job at than any of the current competitors: Foreclosure search.

Over on the left side the first option is “Listing type” which allows you to check “Non-Foreclosure” or “Foreclosure.” Here’s a look at the Magnolia / Queen Anne / Ballard / Fremont area:

Note that when you are zoomed further out, far fewer homes appear on the map. You have to zoom in to about the level shown above before it shows you all of them.

The downsides are that apparently Google is pulling this data from a variety of sources, “foreclosure” may mean anything from homes that have received the initial notice of default to fully bank-owned houses, and some of the addresses are only approximate, with the full details behind a third party pay wall. Either way, it’s still interesting to poke around with.

Hat tip: Calculated Risk

[Update: Here's a link to the press release on NWMLS.com: Northwest MLS brokers say housing market is recovering, but still "spongy". My favorite part is "July's unseasonably hot weather curtailed activity for several showings and open houses, as brokers and agents said buyers and sellers postponed tours, saying it was just too hot." "Several" people may have delayed their home shopping by a few days, and that's even worth mentioning? Wow.]

Before we get into this month’s news reports crowing about the increase in sales, here’s a little chart that shows the time between when pending sales went negative year-over-year and when the median price went negative year-over-year.

Pending sales had been negative for over two years before prices began to fall. Keep that in mind when you hear claims that a few months of year-over-year positive sales data is allegedly a sign that prices will stabilize in the short term. Not likely.

Here’s another chart, this one showing the year-to-date change in the median price, both in 2008 and 2009:

Does the fact that prices have risen from their March low indicate price drops are over? Probably not.

Read on for this month’s reporting roundup from the Times, P-I, Herald, News-Tribune, and Olympian.

Eric Pryne, Seattle Times: King County home sales climb to 2-year high

The median price of a King County single-family home that sold in July was $384,000 — down 2.9 percent from $395,000 in June and down 13.7 percent from $445,000 in July 2008. No turnaround evident here.

But closed sales — which reflect demand — were up more than 10 percent from the same month last year, surging to their highest level since August 2007.
…
“If we’re not quite there [at the bottom] yet, I think we’re nearing it,” said Ron Sparks, managing vice president in the Bellevue office of Coldwell Banker Bain.

Perhaps prices aren’t rebounding just yet because buyers’ perceptions haven’t caught up with market realities, he said — just as stubborn sellers kept prices relatively high in early 2008 despite declining sales and growing inventory.

Market forces eventually prevailed: Median prices plummeted during the second half of last year.

Well, perhaps somebody’s “perceptions haven’t caught up with market realities,” yet anyway.

Aubrey Cohen, Seattle P-I: Home sales up more than 10 percent in King County

King County house sales surged by more than 10 percent in July from a year earlier, according to a new report.
…
“I’m delighted to see the volume of home sales up from a year ago,” said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University. “That’s good news, but it’s obviously coming at the expense of some of the values of the properties.”
…
In a news release accompanying the report, listing service members said July’s weather curtailed potential sales, because people found it too hot to look at homes.
…
First-time buyers are apparently motivated by the federal $8,000 tax credit for first-time purchases that close by the end of November, Crellin said.

“Anything that’s going on is to some extent artificially influenced by the tax credit,” he said. “I’m delighted that it’s there, but in the absence of that incentive to bring people into the market I don’t know where we’d be.”

All that the incentive is doing is continuing to borrow more demand from the future. The exact same thing that low rates and loose financing did during the boom, but to a lesser degree.

Mike Benbow, Everett Herald: Snohomish County home sales up 19% in July

Home sales in Snohomish County rose in July for the second straight month, buoyed by a drop in prices and a federal tax break set to end in November.

Closed sales rose nearly 19 percent last month after rising about 1 percent in June, making agents hopeful that the real estate market had broken a two-year downward spiral.
…
A continuing fall in home prices certainly helped sales. The combined median price of single-family homes and condominiums was $292,000 in July, a drop of more than 12 percent from a year ago.

Duh. This is exactly what has happened in other markets where prices started falling before they did in Seattle. When prices get low enough, sales pick up. Of course, prices keep falling until they get to a point that is actually supported by the local economic fundamentals—a point Seattle has not yet reached.

C.R. Roberts, Tacoma News Tribune: 21% more home sales pending than a year ago in Pierce County

More home sales closed in Pierce County in July than were closed in any month since August 2007.

Nearly 21 percent more sales – of single-family homes and condominiums – were pending than were pending a year ago.

“I’m a happy camper at the moment,” said Windermere Real Estate broker and Northwest Multiple Listing Service director Dick Beeson on Wednesday.

“It’s good news on a lot of levels,” he said.
…
“It tells me, number one, that buyers are getting smarter, they’re taking action, they’re getting off the fence,” Beeson said. “Number two, the median price has stabilized. We’ve literally stayed the same. With buyer demand going up, and inventory going down, we’re getting back to a near-normal market.”

When a salesman tells you that you’re “making a smart move,” isn’t that usually a cause for concern? And what’s with using the worthless pending sales number in the headline? Major credibility hit there for the News Tribune.

Rolf Boone, The Olympian: Thurston County: Sales fall last month, but pending deals rise 13 percent

Thurston County home sales fell from June to July, although the number of homes sold last month still was much higher than in most recent months, according to Northwest Multiple Listing Service data released Wednesday.
…
One explanation for the home-sales drop from June to July was the long July 4 holiday weekend, real-estate agent Blake Knoblauch said Wednesday. Knoblauch, of Greene Realty Group, expects sales to pick up in August and September as first-time buyers take advantage of the $8,000 tax-credit program before it expires later this year, he said.

Again with the pending sales data in the headline. Tsk.

Here’s one more added bonus chart. Pending sales and closed sales for King County SFH so far this year:

It looks like the change in closed sales is lagging the change in pending sales by about two months. From February to May, pending sales increased 78%. From April to July, closed sales increased 72%. If the pattern continues to hold, this month will probably see between about 1,800 and 1,900 closed sales, with September coming in lower.

(Eric Pryne, Seattle Times, 08.05.2009)
(Eric Pryne, Seattle Times, 08.06.2009)
(Aubrey Cohen, Seattle P-I, 08.05.2009)
(Mike Benbow, Everett Herald, 08.06.2009)
(C.R. Roberts, Tacoma News Tribune, 08.06.2009)
(Rolf Boone, Olympian, 08.06.2009)

First up, local discount brokerage Findwell (a Seattle Bubble advertiser) announced today that they are partnering with Estately to provide a more user-friendly search experience. Sounds like it should be a good match for both parties. A good search tool was the one (big) thing that the Findwell site lacked in its competition with Redfin. I think they could attract more people to use it if they put it more prominently on the front page, but this definitely seems like a step in the right direction to me.

Secondly, Seattle’s all-industry real estate blog continues to evolve beyond its pure blogging roots. Yesterday founder Dustin Luther unveiled a newly polished, more commercial site design as well as their very own home search tool. Personally, their new search feels clunkly to me compared to the offerings that have been available for years from Redfin and Estately. With the real estate search market as saturated as it is (especially here in Seattle), I think Dustin’s got a pretty difficult uphill battle on this one.

So what’s your opinion of the Findwell / Estately partnership and Rain City Guide’s new look and search tool?

Flashback to April 26, 2005: Orders fly in for Boeing 787

Currently the 787, due to enter service in 2008, has a two-year head start on the A350.

November 7, 2006: “Good, steady progress” on 787 as Boeing works to lighten up

Boeing’s 787 is on schedule. Early practice production is going smoothly. A plan to take off extra weight is in place. And the new jet’s boost to airline operating economics will be significantly better than originally projected.

That was the vigorously upbeat status report Monday from 787 program chief Mike Bair.

With the airplane less than a year from its first flight, the program is under intense scrutiny for early signs of the kind of disastrous stumbles that have led to two-year delays on the Airbus A380 superjumbo.

But if Bair is feeling the pressure, it isn’t showing.

July 8, 2007 (7-8-7): A Dreamliner comes true: Boeing’s 787 debuts today:

The Dreamliner has been elevated to a worldwide stage because it uses parts produced around the world and shipped to Everett for assembly. It’s also the first Boeing plane built extensively with composite plastic parts.

And while today is devoted to a celebration, the plane’s real test will come in August or September when it’s scheduled to make its maiden flight.

Fast-forward to July 22, 2009: Boeing 787 may not fly this year:

The structural flaw that delayed the first flight of the 787 Dreamliner is more complex than originally described by the company, and the plane’s inaugural takeoff is likely at least four to six months away, say two engineers with knowledge of Boeing’s problem.

“It’s got to take at least three to four months just to get something installed on an airplane,” said a structures engineer who has been briefed on the issue. “It’s definitely a costly fix to go and do this work.”

A second engineer, who is familiar with the details of Boeing’s construction method, said the fix must first be made on the nonflying test airplane in the Everett factory. Assuming that’s successful, it will take another month or two to install the fix on the first airplane to fly.
…
If Boeing’s initial fix fails to divert enough of the load away from the stress points, the delay in first flight could extend beyond six months, pushing the date out into 2010.

“There’s no guarantee that what (Boeing) is doing will work,” the second engineer said. “If the testing or analysis shows it doesn’t get rid of the load, then the engineers are back to square one.”

Doh. On the up side, maybe the recession will be over by the time the 787 is actually ready to ship to customers.

Also, I’m curious… How many people here really believe that the 787 was truly on schedule from 2005 through 2007? Having worked in engineering at a company whose primary business is manufacturing, I am well aware of the marketing and politics that goes on behind the scene. I wouldn’t be surprised if the original “timeline” was driven largely by marketing, with the engineers insisting that they needed much more time, but ultimately being ignored.

(Dominic Gates, Seattle Times, 04.26.2005)
(Dominic Gates, Seattle Times, 11.07.2006)
(Kirsten Orsini-Meinhard, Seattle Times, 07.08.2007)
(Dominic Gates, Seattle Times, 07.22.2009)

Seattle area’s (King/Snohomish) unemployment rate (not seasonally adjusted):

And here’s a graph that I created for Sound Housing Quarterly, which shows the percentage change year-over-year in various job categories, also for King/Snohomish:

If you take out construction, finance/real estate, and retail, the number of jobs in the Seattle area only dropped by 0.75% from June ‘08 to June ‘09. Including those sectors, it fell 3.97%.

Note that the flattening in the line for construction in above chart does not indicate that the job losses have subsided, merely that the rate of job losses is no longer accelerating. As of June, the number of construction jobs in the Seattle area had fallen around 15% year-over-year for three months in a row.

Source: Washington State Employment Security Department

The developer of the region’s tallest luxury condo towers says it’s cutting prices an average of 20 percent in hopes of kick-starting sales.

Only 43 of the 539 units at Bellevue Towers in downtown Bellevue have sold since closings began in January, according to county records. “We’re trying to respond to the marketplace and to what our buyers have been telling us for the last four to six months,” Mark Edlen, a principal with developer Gerding Edlen, said Monday.

Bellevue Towers is one of more than a half-dozen high-rise, high-end condo projects in downtown Bellevue and downtown Seattle that have recently been finished or are nearing completion.

Sales or presales at all have been anemic. Gerding Edlen’s announcement is perhaps the most dramatic response so far to the realities of the new, chillier marketplace.

In Seattle, a spokesman for Vulcan Real Estate said prices of all 136 units at its almost-finished Enso condominium in South Lake Union also are being reduced, but would not say by how much.

Most other developers have been reluctant to cut prices across the board. But some have been quietly settling for far less than list price on a negotiated, case-by-case basis, said James Stroupe, a Windermere Real Estate agent who specializes in condo sales.

You may recall that Bellevue Towers was the subject of some lousy reporting by a different Seattle Times reporter back in February.

Of course, not everyone thinks that price reductions are necessary to move the ridiculous oversupply in the high-end condo market…

At Olive 8 in downtown Seattle, county records indicate only 28 of 229 units have closed. But David Thyer, president of developer R.C. Hedreen, said his firm has no plans to cut prices.

“We’re not inclined to discount the product to generate sales,” he said. “We’re long-term players. We have the support of the hotel [a new Hyatt occupies Olive 8's bottom 17 floors]. We’re going to wait this out.”
…
At Escala, another luxury downtown Seattle condo tower near completion, Eric Midby, of Lexas Companies, said the developer has no intention of reducing prices.

For those that don’t remember, Escala is the development that employed the ingenious strategy of raising prices to entice buyers back in April of last year.

(Eric Pryne, Seattle Times, 07.13.2009)

• Findwell: Lumen Condos Sell Out at Auction
• BizTalk (PSBJ): Lumen condos sell at auction
• Urbnlivn: Lumen Auction Results + Video – All Sold Except 1

Final bids averaged around 40% over the starting bids, but about 40% under the previous listing price.

Redfin was profitable last month, all while maintaining our 97% customer satisfaction. The business has been growing by leaps and bounds, in part because the real estate market has had a small rally this summer, but in part because we’ve started to figure out how to prosper in down markets too. What has made the difference for Redfin hasn’t been any one breakthrough that we could have pinned our hopes on, but a combination of small adjustments:

1. Giving consumers a choice of agent, and unlimited home tours.
2. Publishing agent reviews, which increased demand 36% in a single month.
3. Simplifying the agent choices we offer consumers, which increased demand a further 16% in a single month.
4. Generating referral revenues from customers in outlying areas that we can’t afford to serve ourselves.
5. Figuring out Google optimization, which drove a 300% increase in traffic year over year, though that growth is now slowing.

It’s nice to wonder how much more profitable Redifn can be once the market really recovers. But since real estate is a seasonal business, we’ll have plenty more ups and downs in our fortunes along the way.

TechCrunch has an interesting take on the news: Redfin Turns Profitable, Real Estate Industry Shudders

Redfin CEO Glenn Kelman said his company just turned profitable. Since I was sitting next to him on the panel, I asked him off microphone what revenues were. He said the run rate is around $15 million. 2007 revenues were $5 million, 2006 revenues were $1 million.

That’s great news for everyone except the real estate industry. The Seattle-based startup represents buyers and sellers in home real estate transactions for far less than the entrenched industry rates that take 5%-6% of the sale price of a home and split it between buy and sell brokers.
…
Disruption is never fun for those being disrupted. The DOJ is hitting the real estate industry from one side, and Redfin is hitting them from the other. The result? A better deal for the rest of us.

Indeed. Which is why I would like to take a moment to congratulate Redfin for sticking it out in a tough time and turning out a great service in an industry that sorely needs some healthy competition.

A longtime, prominent Seattle developer is facing a mounting string of legal actions as he struggles to pay off millions of dollars in loans at dozens of banks across the Pacific Northwest.

Michael Mastro Sr., for years among the most successful commercial developers in the Puget Sound region, is quickly becoming a source of concern at banks — both because of their direct exposure and because of what his troubles say about the potential pain still ahead in the commercial real estate market, according to people familiar with the matter.

Mastro, and his company, Mastro Properties, owe about $500 million to more than 25 banks in Washington and Oregon, including local banks, such as HomeStreet Bank, and national lenders such as Wells Fargo and Bank of America, according to a Mastro company associate and other people familiar with the matter.

Mastro values his assets at more than $600 million — more than enough to cover his debts — and he expects to recover. But court documents and people familiar with the matter indicate he presently appears to lack the cash flow to make loan payments.

It’s interesting to contrast today’s market with what we were seeing just three short years ago…

Spec development, as in constructing an office building without pre-lease commitments on the gamble that it will attract tenants upon completion, is the new buzzword among real estate developers in downtown Bellevue.

Developers of at least four different office tower projects proposed for the city’s central business district are scrambling to be next in line after Lincoln Square developer Kemper Freeman Jr. to begin construction.
…
With no new office buildings set to be ready for occupancy on the Eastside until at least the summer of 2007, available office space in downtown Bellevue will likely become even more difficult to find as the local economy continues to improve.

Incidentally, one of the specific projects mentioned in the 2006 article about Bellevue office space was in the news today as well.

2006: More downtown Bellevue builders gambling on spec development

The proposed 15-story, 311,000-square-foot Summit 108 Building (the project’s working title) would replace the much smaller six-story Summit Ridge building, which was built in 1971.

Canadian developer Bentall Capital is prepared to begin construction of the new Summit 108 Building as early as this coming June, said Gary Carpenter, the executive vice president who heads Bentall’s U.S. operations.

The new building could be ready for occupancy as soon as March 2008, he said.

“At the present time, we believe we will be going spec” with the project, Carpenter said.

“Any additional office building other than your own is a concern,” as a developer, Carpenter said. “Fortunately, the (Bellevue office) market has the strength to absorb it.” even if it must compete for tenants with several other new buildings, he said.

2009: Stalled Bellevue tower site won’t be eyesore

Developer Bentall Capital is halting work on Summit III, a 15-story office building in downtown Bellevue, and says construction may not resume for two or three years.

But the developer vows the site won’t become another unsightly hole in the ground. It might even be attractive.

Between now and mid-September, Bentall plans to finish all the tower’s street-level surroundings according to plan — sidewalks, street trees, a plaza, fountains, flagpoles, benches, a sculpture.

Only the footprint of the tower itself will be fenced off, said Gary Carpenter, executive vice president, and that fence won’t be chain-link but an architect-designed, 10-foot wall.

How quickly things can change.

(Kirsten Grind & Jeanne Lang Jones, Puget Sound Business Journal, 07.10.2009)
(Eric Pryne, Seattle Times, 07.10.2009)

So far readers have contributed 48 stalled and/or slowed residential developments in the greater Seattle area. The greatest concentration by far is in the Bothell area, which may be due primarily to the fact that that’s where a few especially prolific contributors live (including myself).

Again, anyone can contribute to this map, just load it up in Google and add the stalled / slowed residential construction sites (SFH or condo) near you.

In related news, Eric Pryne over at the Seattle Times has a story up today about one of the larger stalled developments in the Bothell / Kirkland area that has been foreclosed on: Seattle-area homebuilder losing projects to foreclosure .

One of the Seattle area’s most prominent homebuilders has lost most of one new Eastside housing development to foreclosure, and expects to lose another big property.

Most of Conner Homes’ upscale, partly built Bentley subdivision in Bothell was sold at auction last month after the company defaulted on a $24.8 million loan, county records indicate.

Another auction has been scheduled in October for 35 acres Conner owns and once planned to develop in North Bend. The builder hasn’t made loan payments on that land since at least December, according to a foreclosure notice filed with the county last week.

For anyone interested, I pulled the foreclosure notices off the King County Records website. Here’s the foreclosure notice for the Bothell / Kirkland development (pdf), and here’s the one for North Bend (pdf). I guess someone forgot to tell Conner Homes that the bottom was in February.

Below is the current stalled development map. Please feel free to keep adding to it. FYI, I’m planning on doing a bit of a redesign to the site in the not-too-distant future, after which features such as this map will have a more accessible permanent home.

View Stalled/Slow Seattle Construction in a larger map

First up, the NWMLS press release that accompanied yesterday’s numbers: "Aware and prepared buyers" help boost Western Washington home sales during June

“Encouraging” seemed to be a common response from brokers upon reviewing the June activity summaries from Northwest Multiple Listing Service. The report shows inventory continues to shrink, pending sales increased more than 19.5 percent from a year ago, and median prices system-wide are up 4.4 percent since January.

“The positive movement in our real estate market year over year is really very encouraging,” remarked Ron G. Sparks, managing vice president of Coldwell Banker Bain. Compared to 12 months ago, the Puget Sound region has nearly 7,000 fewer homes listed for sale, and nearly 1,200 more homes under contract, he noted, adding, “In anyone’s book, that’s substantial improvement.”

J. Lennox Scott, chairman and CEO of John L. Scott Real Estate, echoed those comments. “It’s encouraging to see that pending sales are at their highest since the credit bubble burst nearly two years ago,” he stated. While the median home price is down approximately 10 percent from a year ago, median prices have flattened over the past seven to nine months, he noted. “This is an indication that the $8,000 tax credit is working and the market has reactivated itself in the more affordable and mid price ranges,” Scott believes.
…
“There is a definite upsurge in sales activity, from a pending sales perspective and a “lookers becoming buyers” perspective,” observed NWMLS director Dick Beeson. Agents are reinvigorated that buyers can and will make decisions more today than any other time over the past 12 months, according to Beeson, the broker at Windermere Real Estate/Commencement Associates in Tacoma.

Beeson believes mortgage rates remaining low, declining inventories, and the recent stretch of warm, dry weather helped spur some buyers to act.

This month’s release is conspicuously lacking in the bottom calls and “buy now or you’ll be sorry” sentiment that has permeated previous NWMLS publications. They almost seem to have become less certain of immenent recovery, even as the sales finally begin to pick up. Could they perhaps be looking at the bigger picture and realizing that even once the bottom is in, the market is likely to roll along the bottom for years?

Or maybe I’m just reading too much into it.

Before we get into this month’s news reports, here’s a quick graphical representation of how far off closed sales are from pending sales so far this year:

The April to June rise in closed sales actually looks rather similar to the February to April rise in pendings. Pendings rose 67% from February to April, and closed sales rose 65% from April to June. Interesting, for sure.

If the pattern holds for the next two months with the 16% pending rise from April to June carrying over into closed sales from June to August, August will see roughly 1,900 closed sales (a 25% YOY increase). That feels a little higher than I’d expect to see, but I certainly wouldn’t put it outside the realm of possibility.

Read on for this month’s reporting roundup from the Times, P-I, Herald, News-Tribune, and Olympian.

Eric Pryne, Seattle Times: June home sales are highest in King County since Oct. 2007

A new report provides the strongest evidence yet that buyers are starting to return to the local real-estate market.

The number of closed sales of single-family homes in King County in June was up 4 percent over June 2008 — the first year-over-year increase since the market peaked nearly two years ago, the Northwest Multiple Listing Service said Monday.
…
June’s increase in closed sales came after two months in which pending sales — offers accepted by owners but not yet closed — were up compared with the same months a year earlier.

Real-estate professionals said closed sales eventually would follow suit, and that they were lagging because the large number of “short sales” — sales for less than what owners owe on their homes — were taking longer to process.

Pending house sales were up again in June, nearly 25 percent ahead of June 2008.

I chatted briefly with Eric about the numbers again yesterday, and got another quote in this month’s article, in which I allude to the regional shift in sales that I will be posting on later this week.

Aubrey Cohen, Seattle P-I: House sales up in King County

Countywide, 1,655 county houses sold in June — an increase of 4 percent from June 2008 and 26 percent from this May and the highest total since October 2007. Seattle had 597 house sales in June — up 10.8 percent from a year earlier and 28 percent from May and the most since August 2007.

“That’s definitely good news. I’ve been waiting to see something like that,” said Andrew Gledhill, an associate economist at Moody’s Economy.com. “It would probably be about three to four months of seeing these kinds of positive returns before I’d put much stake in it.”

Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University, said buyers were taking advantage of lower prices and trying to ensure deals close before the Nov. 30 expiration date for the federal $8,000 first-time buyer tax credit.

“There’s some bottom feeding going on,” he said. “I think prices have fallen enough that there are some absolute bargains out there.”

Crellin did not draw any conclusions about the state of the market from the June report, saying: “It is a positive sign, but that’s really all that we can say that it is.”

Is it just me, or has Crellin significantly toned down the boldness of his claims lately? Also, it’s nice to see a comment like Gledhill’s making it into the first few paragraphs of Aubrey’s article. Too often we get a single month of upward-trending data and all the news reports are crammed full of real estate agents declaring that the bottom is here.

Surprisingly, neither the Times nor the P-I jumped on the $20,000 one-month increase in the SFH median. I can’t help but wonder if Eric & Aubrey’s real estate reporting is being influenced at least a little bit by this site. Whether it’s due to Seattle Bubble or not, I gladly welcome the more even-handed reporting.

Amy Rolph, Everett Herald: Hopeful trend for housing market

The housing market in Snohomish County showed signs of recovery in June, driven by first-time buyers shopping for homes at burst-bubble prices.

The Northwest Multiple Listing Service reported that pending sales in June increased 30 percent over the same month last year, giving real estate agents a reason to hope that a full recovery isn’t far away.

More than 1,190 sales were pending in June, up from 915 last year. Pending home sales also increased in May and April in Snohomish County, compared to the same months in 2008. However, completed home sales increased less than 1 percent in the county compared to June 2008.

I thought we hit the bottom months ago. How can recovery now be “not far away”? It’s interesting to see the mental shift at play here. I wonder what the agents will be saying if sales and prices dive down in the second half of the year like they did last year.

Kelly Kearsley, Tacoma News Tribune: Pierce County shows signs of life in real estate

The residential real estate market in Pierce County is perking up for the summer as more people move from simply looking at homes to actually making offers on them.
…
Local real estate agents said low interest rates, first-time home buyer credits and the prospect of good deals are spurring some hesitant shoppers to take action.

If that reasoning sounds familiar (more people buying homes thanks to lower prices), it’s because that’s what we’ve been predicting would happen for some time:

I am betting that the double-digit YOY drops in sales will not last beyond the first or second quarter, but will eventually flatten out and maybe even show YOY gains. My sales prediction is based largely on an assumption that home prices will continue to fall as well, eventually coming down to a level that is able to attract more buyers.

Ding, we have a winner.

Rolf Boone, The Olympian: Home sales stage best month of ’09

The Thurston County housing market had its best month of the year in June as home sales rose above 300 units for the first time in 2009 and nearly matched total sales in June 2008, according to Northwest Multiple Listing Service data released Monday.

Single-family residence sales, excluding condominiums, performed even better last month – rising 1 percent to 303 units from 299 units in June 2008, the data show.

South Sound real estate agents attributed the June increase in home sales to wider acceptance of tax incentive programs for first-time home buyers and a slight increase in mortgage interest rates that spurred some buyers to action.

As 30-year mortgage interest rates rose higher, some prospective buyers jumped in to buy now rather than wait for interest rates to rise again, said Mark Kitabayashi, president-elect of the Thurston County Realtors Association. Last week, Freddie Mac reported that mortgage rates averaged 5.32 percent nationally. Earlier this year, rates dipped below 5 percent but have climbed in recent weeks.

“People on the fence got off the fence,” he said.

That darn fence. Someone should just go and burn it down or something. All those darn buyers sitting up there selfishly destroying the local housing market. Tsk.

(Eric Pryne, Seattle Times, 07.06.2009)
(Eric Pryne, Seattle Times, 07.07.2009)
(Aubrey Cohen, Seattle P-I, 07.06.2009)
(Amy Rolph, Everett Herald, 07.07.2009)
(Kelly Kearsley, Tacoma News Tribune, 07.07.2009)
(Rolf Boone, Olympian, 07.07.2009)

Let’s kick things off with some good news via Aubrey Cohen at the P-I. Looks like the state’s irresponsible plan to pre-distribute $8,000 tax credit is dead in the water, thanks to the IRS.

SeattlePI.com: State clarifies state of tax credit loan plan

There has been a lot of information circulating in the past few months regarding a possible Tax Credit bridge loan program that would have potentially “monetized” the currently available $8,000 federal tax credit for qualified first time homebuyers. This potential program would have allowed these first time homebuyers to actually come to the closing table with their credit in hand, as opposed to waiting to have these funds available until after closing.
…
On June 2, 2009, the IRS formally declined this request citing long-standing regulations requiring refunds be paid only to the person or persons filing the tax return. Due to significant financial risks associated with the Tax Credit bridge loan program and recent guidance published from the Department of Housing and Urban Development, the Commission discontinued the development of the Tax Credit bridge loan program.

Next up, a bit of humor from SmartMoney.com, who you may recall last October labeled Seattle as “in the best shape for a rebound.”

SmartMoney.com: 5 Housing Markets That Have Further to Fall

In the Northwest, median home prices are down but they remain above the national average. Portland’s prices fell 2.1% in March. Home prices in Seattle were down 2.0% for the month.
…
The Pacific Northwest bubble was among the last to burst, which could mean the market will be among the last to recover.

And here’s a handful of additional stories for you to digest this post-holiday Monday morning…

Seattle Times: Landmark Smith Tower mostly vacant

Thanks to the recession and Washington Mutual’s collapse, there’s no shortage of vacant office space in downtown Seattle. One of the emptiest buildings also is one of the region’s best-known and most-loved.

The 95-year-old Smith Tower, once the tallest building west of Chicago, is at least 70 percent vacant, according to online listings and commercial real-estate databases.
…
Walton Street bought the 257,000-square-foot Smith Tower for $43 million in April 2006, when the market was nearing its peak and the tower was 92 percent occupied, according to its previous owner.

Less than a year later the new owner sought — and ultimately received — city approval to convert the entire building to condos, a move prompted, in part, by the impending departure of the tower’s two largest office tenants.
…
When the downtown condo market began to cool later in 2007, Walton Street scaled back its condo-conversion plans to just the top 12 stories.

But it hasn’t pursued permits for that scenario for more than a year, city records indicate.

The Smith Tower has always been my favorite building in downtown Seattle. It’s a shame to see it sit unused like this. I actually like the idea of converting it to condos, although I’m not sure there would be all that much appeal to live in Pioneer Square…

Seattle Times: Lynnwood’s City Bank gets tighter scrutiny

City Bank of Lynnwood, hurt by heavy lending to developers and homebuilders, on Thursday became the latest local bank to submit to tighter oversight from federal and state regulators.

It signed an agreement, called a cease-and-desist order, that requires City Bank to shrink the volume of nonperforming loans and foreclosed real estate it’s carrying on its books; reduce its dependence on brokered deposits; increase its capital levels; and make other operational and organizational changes.

Puget Sound Business Journal: Lexas believes condo buyers will show up

Call him a contrarian. Escala developer Eric Midby expects to move ahead with a pair of high-rise hotel and condominium towers at a time when nearly every other developer has decided to sit out this market because of the recession.

Midby, a principal and development manager at Lexas Cos., is betting that by getting the company’s next condo project under way now, he can exploit a two-year gap in the delivery of new condominium units in downtown Seattle that starts next year.

“We firmly believe that Seattle very soon is going to have a shortage of housing, that all the units in downtown will fill up and there will be continued demand,” Midby said.

Seattle Times: Property taxes: Appeals shoot up is King, Snohomish Counties

Homeowners complained in near-record numbers about high valuations last year. Appeals of property values shot up more than threefold in King County, from 3,767 in 2007 to 13,156 in 2008. The last time there were that many appeals was 1991, when a sluggish real-estate market followed several years of rapidly climbing home values.

Appeals also increased in Snohomish County last year — from 1,688 to 2,347.

Appeals resulted in lowered values about half the time in King County and about a third of the time in Snohomish County, according to the assessors.

I remind any Seattle Bubble readers that are considering appealing their assessment that S-Crow posted a useful “how-to” on this process that would be a good starting point.

West Seattle Blog: City Council townhouse talk in West Seattle: Less (rules) is more?

…As in, less (fewer) restrictions could mean more variety in housing units. Or, so said the architects from whom City Councilmember Sally Clark and her Planning, Land Use and Neighborhoods Committee heard at Youngstown Arts Center Tuesday night.
…
The West Seattle meeting addressed only a slice of the Multi-Family Code Update, townhouses and “low-rise” zoning in particular.

And finally, here’s a national story on the subject of “strategic defaults,” which we have been discussing lately.
Wall Street Journal: New Evidence on the Foreclosure Crisis

What is really behind the mushrooming rate of mortgage foreclosures since 2007? The evidence from a huge national database containing millions of individual loans strongly suggests that the single most important factor is whether the homeowner has negative equity in a house — that is, the balance of the mortgage is greater than the value of the house. This means that most government policies being discussed to remedy woes in the housing market are misdirected.
…
…the focus on subprimes ignores the widely available industry facts (reported by the Mortgage Bankers Association) that 51% of all foreclosed homes had prime loans, not subprime, and that the foreclosure rate for prime loans grew by 488% compared to a growth rate of 200% for subprime foreclosures.
…
…although only 12% of homes had negative equity, they comprised 47% of all foreclosures.

Yow.

What started as a fun project turned into a nightmare for a builder in Kenmore.

Ken Youch, with Kenmar Construction, is happy to give tours of any one of the million dollar houses he has built in Kenmore.

“They’re absolutely beautiful homes that we built when the market was booming. This is my very first attempt at spec building,” he said.

It is also his last. Like many builders across the Puget Sound, Youch is losing a lot of money on these three sister homes. All were priced over one million dollars and now they’re going at about $500,000 lower.

The houses in question are 7320, 7328, and 7332 on NE 150th St in Kenmore, for which the builder is asking $674k, $679k, and $699k, respectively (as a side note, KIRO clearly has a different definition of “cheap” than I do). Cumulative days on market for each of the three properties is in excess of 440. He purchased the lots in April and July 2007 for $262,500, $265,175, and $267,200.

July 2007. If that rings a bell to anyone, it might be because it was the peak month for Seattle-area home prices. Granted, we only know that thanks to the benefit of hindsight, but even at the time the writing was on the wall for anyone paying attention.

Are we supposed to feel sorry for this builder for getting caught up in the mania and failing to do his research before jumping in head first to an expensive and risky venture like this? That seems to be the angle of this piece, but to be honest, I’m not feeling it.

At least he hasn’t gone into foreclosure yet, so he must have the financial strength to stand behind his risky move. Also, he doesn’t appear to be angling for a bailout, so while I question his business sense, I respect his apparent willingness to take responsibility for his decisions.

Tacoma News Tribune: Downtown condo sales at a crawl

How’s the market for condominiums in downtown Tacoma?

“What market?” says Judy Mayfield, head of sales for The Esplanade, the 162-unit project on the Foss Waterway, now nearing completion.

After two years of extolling the virtues of the nine-story luxury project, Mayfield and her staff have yet to close a deal on a single unit.

Translation: “We were really counting on suckering 162 flippers into buying luxury condos in Tacoma on the false hopes that they could sell them for a profit in the perma-hot housing market. Now that the market has cooled and everyone realizes that nobody wants to actually live in luxury condos in Tacoma, we’re screwed!”

Apparently they were even more screwed than we might have guessed. Here’s a story from yesterday’s Tacoma News Tribune: $80 million Esplanade project faces foreclosure

An $80 million Tacoma waterfront condominium project, caught in the financial whirlpools of the recession, faces foreclosure by late August unless the developer can find new sources of funding.

The Esplanade, a nine-story condominium on the west side of the near-downtown Thea Foss Waterway, has until Aug. 21 to escape from the imminent foreclosure, said sources close to the project who were not authorized to speak publicly.

Just 10 of the 162 housing units in the building at 1515 Dock St. have been sold, and none of the retail spaces on Dock Street or facing the waterfront walkway has been leased.

According to the Notice of Trustee sale filed with Pierce County (pdf), the developer (Thea Foss Holdings, LLC) has outstanding obligations of $48,532,793.62 on the project. If I’m reading the document correctly, it looks like their financing required them to pay in full on February 1st. Apparently they thought they would have sold enough units by then to cover their costs. Obviously after having sold just just six percent of the units in over two years, they came up a little bit short.

(John Gillie, Tacoma News Tribune, 06.24.2009)

Here’s the resulting piece: It’s a Tenants Market for Downtown Seattle Office Space

There may be signs of recovery in the region’s housing market, but not so for the region’s office market. A recent survey from Price Waterhouse Coopers says commercial property values in Seattle are expected to decline up to 15 percent this year, that’s more than the national average. The survey predicts the market will remain in recession for two more years.
…
[Large downtown Seattle landlord UNICO's Chief Financial Officer John] Lamb says it’s going to be a while before the market begins to stabilize. He says vacancy rates will continue to rise, and don’t be surprised if some commercial office buildings in Seattle end up facing foreclosure.

Also, last Friday’s “weekday” discussed the residential market, with : Short Sales, Foreclosures and First Time Home Buyers

Friday’s program had the same guests that were on the program in early May that we mentioned here: real estate agent / appraiser Richard Hagar, Urban League housing director Linda Taylor, as well as new guest certified financial counselor Andrea Misiano.

They discuss foreclosure / refinancing rescue scams, including some good advice for first-time buyers—take the emotion out of the home-buying process. I haven’t been able to listen to the entire program, but apparently there was also some questionable advice mixed in this time, including the claim that (according to a Seattle Bubble reader) “it’s better to get the low interest rate than the “one-time” lower house price.” In any case it’s overall worth a listen when you can make the time.

Kudos to KUOW for continuing to give the local real estate market some decent, thoughtful coverage that goes beyond the usual “ra-ra” pro-industry pieces that have been all-too-common in most news sources.

First up, from the Puget Sound Business Journal: Seattle, Bellevue luxury condominium towers are slow to fill up

Three-quarters of the new condos at five major buildings in Seattle and Bellevue are unsold, leaving developers in a high-stakes battle to unload millions of dollars worth of homes.

The units — at Fifteen Twenty-One, the Four Seasons Private Residences, Olive 8, Bellevue Towers and Washington Square Towers — represent the majority of large condos that have opened here in the past 18 months. In many cases, dozens of pre-sale agreements booked by developers have failed to come to fruition.

County records show just 317 units have recorded closed sales out of the 1,321 offered at these five projects, which is fewer than some of the developers had expected to sell at this point.

The monthly NWMLS stats really don’t give us a complete picture of just how over-supplied the local condo market truly is. I’m still working on compiling the Condo Sales Status Project. There’s a lot of info out there.

You may recall the free advertising given by the Seattle Times to the Thorton Creek condos back in March for their “if you lose your job we’ll pay your mortgage” promotion. Another story about the development in yesterday’s paper contained an interesting bit of information:

Seattle Public Utilities recently completed the stream-restoration channel as part of a new development that brings more than 100 condos, 278 apartments, senior housing, a 14-screen movie theater and more retail space to the North Seattle neighborhood.

Lorig and Stellar Holdings say they’ve rented about 50 of the apartments, which exceeds their goal to date. The market has been slow for the condos, however, with only one unit sold, said Stephen Holt, partner at Lorig in charge of the project.

No word on whether that one sold unit was a result of their big promotional push in March. A representative for the developer has offered to talk with me, but unfortunately I have yet to find room in my schedule.

Here’s another update. Recall the October ‘08 post Former WaMu Pres. Tries to Flip Mansion. As it turns out, he was finally successful: Ex-WaMu exec unloads Seattle mansion

Looks like former Washington Mutual President Steve Rotella has been given a lesson in lost value, sort of like the shareholders who watched their stock tank in the months before the bank collapsed last year.

Rotella and his wife, Esther, just sold their Capitol Hill mansion for $4.7 million, according to King County property records, about $1.5 million less than they listed it for after WaMu failed nine months ago.

We’ll end today’s post on an upbeat note from BusinessWeek.

Two big factors will help bolster Seattle housing prices in the next few years: stringent building restrictions and basic geography.

City officials kept a tight rein on development during the boom. … An isthmus, Seattle is hugged by the Puget Sound on the west and Lake Washington on the east.

With such constraints, Seattle doesn’t have a significant supply of homes on the market.
…
Some areas of Seattle are on the mend already, with houses even sparking bidding wars.
…
Building restrictions—and the city’s unique geography—should help lift prices.

It would appear that the writers of BusinessWeek seem to think that the city of Seattle proper is completely insulated from real estate trends in Snohomish County, the Eastside, or south of Lake Washington. Interesting theory. Good luck with that.

(Jeanne Lang Jones & Kirsten Grind, Puget Sound Business Journal, 06.19.2009)
(Michelle Ma, Seattle Times, 06.19.2009)
(Kirsten Grind, Puget Sound Business Journal, 06.18.2009)
(BusinessWeek, 06.18.2009)

Airbus extends air show order lead over Boeing

Airbus has now racked up $11.5 billion in orders and agreements this week, well ahead of Boeing, which notched up its first air show order on Wednesday — a $153 million deal with Japan’s MC Aviation Partners for only two jets.

Boeing shrugged off the Airbus announcements, saying the company doesn’t save up orders to announce at air shows.

Emotionless Boeing considering labor stability for 2nd 787 line

Chicago-based The Boeing Co. says that when it decides where to put a second 787 line, it will do so without emotion and will take labor stability into account.
…
Boeing’s vice president of airplane programs, Pat Shanahan, said that the decision on where to put a second 787 assembly line will not take a long time.
…
“There are opportunities that we need to assess and I’ve worked there for 24 years, I like the people in Seattle, I grew up in Seattle, It’s a great community, but when you have the customer telling you you’re making it really hard to choose your product because when we buy it you can’t give it to us,” said Shanahan.

Qatar Airways CEO blasts Boeing, may cancel orders for 787

“The writing is in the wall for Boeing, and they don’t care,” Qatar Airways CEO Akbar Al Baker told Dow Jones at the Paris Air Show. “They’re too busy having lunches and dinners.”
…
“Boeing doesn’t realize how much they’re hurting their customers’ plans,” he said. “They’re very much mistaken if they think we’re going to give them much more time on the issue.”
…
“Unfortunately, Boeing is not run by commercial people,” Al Baker told a group of journalists here yesterday afternoon. “Boeing is run by bean counters and lawyers. We have some serious issues with them, and if they do not play ball with us, they will be in for a serious surprise.”

Managing the drones: Boeing forms unmanned aircraft division

Boeing is forming a Seattle-based division to focus its efforts to win contracts to supply unmanned aircraft.

Boeing has a broad portfolio of unmanned systems, but has yet to win a major contract from the Pentagon. Boeing’s unmanned aircraft include the ScanEagle, Integrator, Phantom Ray, Hummingbird A160 and HALE.

Boeing still directly employs 73,760 people around the Puget Sound—roughly 40% more than Microsoft and Amazon combined. I certainly hope that Boeing doesn’t decide to begin migrating the majority of its operations elsewhere, and I’m not in a position to judge whether talk from large airlines about switching to Airbus is just corporate posturing, but you can bet that if either of those things do happen, the local economy (and by extension, the housing market) will feel it.

After dropping from 7.9% to 7.0% from March to April, King County’s unemployment rate shot up a full point to (barely) reach a new high of 8.0% in May.

Here’s a look at King, Pierce, and Snohomish:

Pierce has been above 10% for three months running now.

Huffington Post columnist Jason Linkins writes today about an e-mail sent by Rep. Todd Akin (R-Mo., not Ala. as the headline reads) regarding the United States’ missile defense plans.
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Akin doesn’t specifically mention Seattle, but his e-mail did include a map of the city and the expected effects of a 10-kiloton nuclear blast centered over South Lake Union.

The map they mentioned seemed a little familiar to me…

Left: Congressman Todd Akin’s 2009 map of possible North Korean nuke on Seattle
Right: Seattle Civil Defense Manual’s 1950 map of possible USSR nuke on Seattle

Hey, at least the 2009 hypothetical North Korean bomb isn’t dropping practically right on top of Ballard like the hypothetical 1950 USSR bomb was. Apparently Paul Allen’s Vulcan real estate ventures are now a higher priority target than a Scandinavian fishing neighborhood.

Even in a hypothetical nuclear disaster, the historic legacy of the overpriced Ballard craftsman will be preserved. Phew!