Seattle Bubble

News & discussion about real estate & the housing bubble in the Seattle area.

Seattle Bubble - News & discussion about real estate & the housing bubble in the Seattle area.

Entries Tagged as 'Grind'

More on the Possible Mastro Bankruptcy

By The Tim on August 15th, 2009 at 5:14 PM · 17 Comments

Kristen Grind over at the Puget Sound Business Journal had another great article about the unfolding mess with local developer Mike Mastro: Rival banks battle over Mastro bankruptcy

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.

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PSBJ: Local Banks Feeling the Regulatory Squeeze

By The Tim on May 18th, 2009 at 1:55 PM · 5 Comments

Over at the Puget Sound Business Journal, reporter Kirsten Grind posted an interesting story today on their recently-launched BizTalk blog: Crackdown on HomeStreet Bank comes as a surprise

Washington state regulators don’t seem to have much patience these days for our struggling community banks and are increasingly slapping them with cease-and-desist orders to force a turnaround at the institutions.

On Friday, not one, but two of our banks said they were being held on a tighter leash by regulators, including Seattle-based HomeStreet Bank.

For anyone who’s counting, we now have six banks statewide that are working under stricter regulatory rules. That’s a lot, by the way. It wasn’t so long ago that the state had no struggling banks and a cease-and-desist order was something out of the 1980s savings and loan crisis lore.

The post goes on to mention some good news for HomeStreet: increasing mortgage volume and deposits.

If you’d like to discuss the HomeStreet issue in further detail, be sure to check out the forum thread started earlier today by a HomeStreet customer, who writes:

I switched over to Homestreet about a year and a half ago when I decided not to support the large, failing and decidedly insolvent (without tax dollars) bank that I had been using (BOA). A lot of my decision was based on reading their CEOs repudiation of risky loan making and guarantees that Homestreet had not engaged in any of that behavior.

Imagine my disappointment when this nonsense showed up in my mailbox.

Personally, I’ve been doing my primary banking through a local credit union (Prevail) for about the last six years now, and have found the experience to be quite satisfying. Perhaps the stories just aren’t hitting my inbox, but I haven’t heard of any of the local credit unions receiving C&Ds or being in danger of going under…

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More Unfounded Starry-Eyed Nonsense from Lawrence Yun

By The Tim on March 2nd, 2009 at 9:40 AM · 173 Comments

Discredited NAR mouthpiece Lawrence Yun paid Seattle a visit on Friday to spout some more of his trademark wish-based forecasting. The Puget Sound Business Journal and the P-I both had brief write-ups of his presentation.

From Aubrey Cohen’s write-up in the P-I:

“We believe that the home prices have already fallen to what could be justifiable,” economist Lawrence Yun said, noting that mortgage payments for a typical household buying a typical house last year were back to 1998 levels, as a percentage of income.

“One may even argue that home prices are underpriced,” he said, because that calculation was based on higher interest rates than current rates.

This statement is so bizarre and nonsensical it’s hardly even worth refuting. As a number of readers pointed out over in the forums, Yun appears to be using national stats for income and home prices, which causes income to be skewed high by the cities (where home ownership levels are lower) and home prices to be skewed low by the rural regions.

Here in the Seattle area, the affordability index—which is calculated using local home prices and local incomes—is still well below its historical level. As I explained in Bottom-Calling: Affordability Index Forecast, home prices will have to fall roughly 40% from their peak to get us back in line with a level that “could be justifiable.” As of January, prices had fallen just over 20% from the peak. So we’re about halfway there.

(Aubrey Cohen, Seattle P-I, 02.27.2009)
(Kirsten Grind, Puget Sound Business Journal, 02.27.2009)

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Signs of the Times

By The Tim on December 2nd, 2008 at 10:32 AM · 66 Comments

I thought I’d lump a few “sign of the times” type of stories into a single post, since it gets old after a while constantly reading (and writing) posts that are basically just slight variations on the “the real estate market is slow” theme.

Here’s another interesting piece from Kirsten Grind over at the Puget Sound Business Journal about reductions and shifts in the real estate agent job market over the last year.

Since the end of last year, about 2,800 Washington agents have abandoned the business, a decrease of about 9 percent, and hundreds more have put their licenses on hold, according to the state’s Department of Licensing.
…
“I think everyone was expecting some sort of rebound in the third and fourth quarter,” said Russell Hokanson, chief executive of the Seattle-King County Association of Realtors.

“But just when it seemed we were coming out, we had another meltdown in the stock market in September and October and that hit consumer confidence again.”

The article also points out an interesting trend that many agents are moving to smaller, brokerages in an attempt to cut costs during these lean times. Maybe it’s just me, but I think Kirsten Grind has been on a roll lately with interesting and insightful articles. Far better than the usual rehashed press releases we get from the Times. And I’m not just saying that because of this article.

Meanwhile, yet another Seattle condo project is headed for the auction block…

Here’s a scene that would have been unheard-of a year ago.

Back then, the condominiums at Press on Capitol Hill were selling in the $300,000s or $400,000s. But for the past couple of weeks, big red “Auction” signs have adorned the building — and bids for some of the condos inside will start at roughly half their original price when they are auctioned off later this month.

As one Press Condominiums resident Brian Gruneir noted Friday, there was an air of desperation a couple of weekends ago, when teenagers stood on nearby corners holding eye-catching red auction signs with arrows pointed toward the Press’ two buildings at Belmont Avenue and Pine Street.

I’ve been watching the county records to see how much the Seventeen07 condos ended up going for in their recent auction, but data has not yet been posted. Also, Quadrant homes is “holding off on further selling” for their “The Ridge at Gig Harbor” development, and D.R. Horton is auctioning off nearly 100 Puget Sound houses with “starting bids as low as $89,000.”

Lastly, I posted this one on the forums, but thought it was worth sharing on the front page as well. This large billboard has been on display right next to southbound I-5 in Tacoma all year. My wife took this picture last Wednesday as we drove down to my parents’ for Thanksgiving:

Overly Optimistic

It would appear that sales projections for 2008 at Soundbuilt Homes were at least two times too high. Unless they are holding out some secret weapon for Christmas, I doubt they’ll be selling another 442 homes before the year is out to make use of that lonely fourth digit. Oh well.

(Kirsten Grind, Puget Sound Business Journal, 12.01.2008)
(Kery Murakami, Seattle P-I, 12.01.2008)

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Washington Banks Hit With More Bad Loans

By The Tim on November 18th, 2008 at 1:35 PM · 10 Comments

Kirsten Grind had an interesting piece about local banks in the Puget Sound Business Journal last Friday: Bad loans rising at Washington banks

Bad loans are up dramatically at Washington state banks, surpassing the national average and reaching levels that local banking experts say are unprecedented.
…
Washington banks historically have seen lower levels of problem loans than their counterparts across the country. But their heavy construction lending has hit them hard in the wake of the housing slowdown, said Brad Williamson, director of the Division of Banks at the Washington State Department of Financial Institutions, which regulates state banks.
…
How bad is it? Since the height of the housing market in the middle of 2006, Washington state’s 97 banks — both publicly traded and private — have seen their problem loans jump from an average of 0.42 percent to 2.71 percent of all assets, according to the most recent data available from the Federal Deposit Insurance Corp. That compares with a national average of 1.89 percent.

As a counterweight to bad loans, regional banks are bulking up with more capital, which acts as a buffer to the problem loans. And most publicly traded banks across the Puget Sound region are considered well capitalized.
…
But a well-capitalized bank can still fail, and several already have. Both Washington Mutual and IndyMac, of California, were well-capitalized by federal regulatory standards in their last quarterly reports before their historic failures this year.

The basic message seems to be that local banks are in slightly more pain than the national average in terms of bad loans, but that bad loans aren’t a particularly useful predictor of bank failures.

I was surprised to read that local banks actually have a higher percentage of bad loans than the national average. That would seem to fly somewhat in the face of the “Seattle is special” mantra of many local economists.

(Kirsten Grind, Puget Sound Business Journal, 11.14.2008)

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Job Growth Turning to Losses, Rents Holding Steady

By The Tim on September 15th, 2008 at 9:25 AM · 57 Comments

Here’s a pair of interesting articles from the Puget Sound Business Journal this weekend.

Puget Sound job growth slowing to trickle

The [Puget Sound] Economic Forecaster, published for the last 15 years and used by companies and governments across the region, is predicting the four-county region will add just 5,900 jobs in the third quarter of this year, boosting employment a fraction of a percent to 1.86 million.

In the fourth quarter, the region is expected to lose 4,100 jobs — a 0.22 percent decrease from the previous quarter — ending the year with employment of 1.856 million.

That’s in contrast to the 2.9 percent annual growth rate in 2007, compared with 2006. The region added 51,500 jobs in 2007. Conway expects a growth rate of 1.7 percent in 2008.

“We’ve seen the economy all of a sudden go limp recently, largely because of the collapse of the housing and credit markets,” said Conway, who also is the senior member of the Governor’s Council of Economic Advisors.

Much of the slowing job growth can be traced to the construction and financial sectors, which have been shedding jobs statewide over the past few months.

I thought our strong local economy was based on Boeing and Microsoft, not this shakey construction and financial stuff that’s been causing so much trouble everywhere else. Well, that’s what they were telling us anyway.

But if you’re a landlord, fear not. “Experts seem comfortable with rent levels.”

Residential Real Estate: Demand from Puget Sound area renters sustains a ‘landlord’s market’

…experts crunching local rental-unit supply and renter-demand projections seem comfortable with the rent levels expected over the coming year or two.

Even with a surge in unsold homes and condos competing in the rental arena, the consensus counts on sufficient rental-minded residents to keep vacancies and rents at landlord’s-market levels.

Residential real estate distress nationwide, in fact, is actually giving something of a boost to the local rental arena, observed veteran rental agent Michael Wilson, broker/owner at Windermere Property Management in Seattle. The relatively healthy local employment scene is still attracting newcomers, he said, “but they’re nervous about buying, so they’re renting instead.”
…
Meanwhile, the Seattle vicinity remains one of the most attractive markets for savvy apartment investors able to identify and provide what renters want today, added Bob Hart, president of Beverly Hills, Calif.-based Kennedy Wilson Inc.’s hyperactive KW Multifamily division.
…
Despite the slightly lower prices investors have been willing to pay for apartment properties here and elsewhere of late, Hart said, it would take a real economic calamity to significantly diminish renter demand.

Oh, good. Luckily, there’s no economic calamity on the horizon, whatsoever. Erm… wait…

(Kirsten Grind, Puget Sound Business Journal, 09.12.2008)
(Brad Berton, Puget Sound Business Journal, 09.12.2008)

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