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 'incentives'

Weekend Roundup: Fence-Sitters, Incentives, Office Vacancies

By The Tim on January 12th, 2009 at 5:55 AM · 47 Comments

Here are some stories from the last few days that didn’t make the cut for their own posts.

Aubrey Cohen, Seattle P-I: Home buyers getting off the fence

“There’s still a lot of people who have jobs and a lot of people who’ve moved into the market area and have been sitting, waiting to have the opportunity to buy,” said Bill Riss, chief executive of Coldwell Banker Bain real estate.

Riss and other area real estate professionals argue the time to buy is now, and say they are starting to hear from more buyers.

“It’s not often you have a market where the rates are down and the prices are down at the same time,” said Deborah Arends, an agent with RE/Max Northwest Realtors.

Henry Samonte, an agent with John L. Scott Real Estate, said he saw a big uptick in calls from buyers and visitors to his listings last weekend.

“It seems that people are coming out of the woodwork,” he said.

Later in the article there’s also a great quote from a recent east coast transplant giving the classic renting is “putting your life on hold” canard. People, listen. It’s a roof over your head. No need to get so dramatic.

Yoshiaki Nohara, Everett Herald: Home sellers get creative with incentives

Perfetto Espresso wants to sell coffee, tea — and a house.

A display below the espresso stand’s menu features a two-bedroom, one-bathroom house. It’s up for sale for $279,000 in Shoreline. The house is minutes from the coffee shop in Mountlake Terrace near I-5.

The deal comes with an incentive.

“Free Coffee for 1 Year! Up to $10 per day for anyone who finds a buyer for our house,” part of the display reads.
…
Malchow said he and his wife, Amy, bought the 700-square-foot house in 2002 for about $169,000. The couple with three children moved into a bigger, four-bedroom house in Shoreline in 2006. They started renting out the first house.

The first house’s value climbed to about $315,000 at its peak in 2006, and it has been losing value since the housing bubble burst, Malchow said. The problem is that the Malchows get about $1,200 per month from renters while their mortgage costs them about $2,000 per month. They pay the difference out of their pocket.

According to my (admittedly rough) calculations, they’re still about $50k overpriced. Good luck to them, but the real incentive for buyers in today’s market is an attractively priced property, period.

Eric Pryne, Seattle Times: Downtown office markets may soon see vacancy rates in the teens

Here’s some solace for the region’s office market as landlords face a bleak 2009: In downtown Bellevue, and perhaps downtown Seattle, this downturn probably won’t be as deep as the one that followed the dot-com bust, several industry prognosticators say.

Vacancy rates in the two downtowns will climb well into the teens this year as companies downsize and new office buildings — some still lacking even a single signed tenant — come on line, according to new reports from brokerages Cushman & Wakefield and Grubb & Ellis.

The current guess is that things won’t be as bad as 2001-2003. Of course, six months to a year ago, the guess was that things wouldn’t drop here at all, so you may want to take the predictions of these local economists with a grain of salt.

(Aubrey Cohen, Seattle P-I, 01.11.2009)
(Yoshiaki Nohara, Everett Herald, 01.11.2009)
(Eric Pryne, Seattle Times, 01.08.2009)

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Link Roundup: Incentives, Economic Woes, Alt-A, and More

By The Tim on August 4th, 2008 at 10:11 AM · 28 Comments

Here are a few stories from the last week or so that are worth pointing out.

First up a TV report from KOMO News: “Open House” — sign of the times in Snohomish County

Real estate agents in Snohomish County are now resorting to a “shock treatment” for slouching home sales in their area.

Realtors advertised more than 400 open houses over the weekend. Agents say they hope playing the numbers game adds-up to more home sales.

“It’s to get the public excited about all the great listings they can see out here today,” said Rich Williamson, President of the Snohomish County Association of Realtors. “It’s a chance to see more homes than they ever saw in one day or one weekend.”
…
Chris Lamoreaux says the housing market story is more than just numbers.

“We’re going fight the media that’s been negative about the housing market,” he said. “The real estate market in Snohomish County and the Puget Sound is excellent.”

That darn media, always being so negative about the housing market. I wonder if anyone can find me a quote from a real estate agent thanking the media for all the positive press when the housing market was gangbusters? Let me know if you come up with anything.

Moving to the opposite end of the Sound, down in Thurston county the “incentives” are flowing strong. The Olympian reports: Home sellers turn to incentives to draw buyers

A new Honda scooter, a trip to a Caribbean destination and a chance to win free gasoline are just some of the incentives that South Sound real-estate agents are using to entice prospective buyers in a slower housing market.

Some agents, though, are split on whether such incentives and other marketing efforts are worthwhile. Re/Max Four Seasons broker and owner Dean Stohl says the best approach for home sellers in this cooler housing climate is to think carefully about the sale.

“The most important ‘non-gimmick’ are sellers pricing the property competitively and making sure it is in ‘tip-top’ condition before putting it on the market,” he said.

Still, some agents are rolling out increasingly creative hooks to land that next sale because sales have cooled since the piping-hot years of 2005 and 2006.

Sounds like Dean Stohl has it figured out. Good luck to all those salesmen thinking that the prospect of paying 30 years of interest on a scooter will sell houses, though.

Another great column from the P-I’s Bill Virgin popped up last week as well: Economic woes could run deep in the region

As large and influential as those companies [Washington Mutual, Weyerhaeuser, Starbucks, Costco] are, there are less-visible layers of small and medium-sized companies that also keep the region’s economy moving.

Or not.

Those smaller outfits are dealing with the pressures and headaches of a slowing economy, some generated by the same factors plaguing large companies, others the result of cutbacks and retrenchments by larger companies with which those smaller firms do business.
…
“In today’s deteriorating economic climate, the ranks of companies feeling the pinch are growing,” writes Michael Newsome, a principal with Seattle-based investment banking firm Zachary Scott, in a recent newsletter. “Even in a fairly buoyant Northwest economy, we are entering a period of rationalization that will cut across industries. For a number of companies, depressed consumer confidence, ballooning energy costs, restricted credit access and, before long, higher interest rates will trigger sufficient financial distress to mandate restructurings and, in some cases, business sales or outright liquidations.

It’s nice to have at least one voice of realism in the local press. Too bad it seems like nobody is listening. Most people would rather believe that pink ponies will dance through the streets of Seattle forever and ever than consider the possibility that economic slowdown might actually affect us here.

Here’s one a few people pointed out. The latest top-ten list from Forbes’ Matt Woolsey is America’s Most Overpriced ZIP Codes. Guess who gets #3?

3. Seattle, Wash.

Downtown
ZIP code: 98104
Purchase-to-rent spread: 30.3

Until recently, Seattle has been held up as the example of a city immune to price drops as its market posted price increases from 2006 to early 2008. But as transaction volume has slipped and prices have flattened or fallen in many neighborhoods, the downtown area, near Pioneer Square, which experienced some of the most rapid price escalations during the boom, particularly in condos, appears vulnerable to correction.

Hooray for Seattle.

Lastly, here’s one from the national news scene. New York Times: Default rates for “alt-A” loans increasing

The first wave of Americans to default on their home mortgages appears to be cresting, but a second, far larger one is quickly building.

Homeowners with good credit are falling behind on their payments in growing numbers, even as the problems with mortgages made to people with weak, or subprime, credit are showing their first, tentative signs of leveling off after two years of spiraling defaults.

The percentage of mortgages in arrears in the category of loans one rung above subprime, so-called alternative-A mortgages, quadrupled to 12 percent in April from a year earlier. Delinquencies among prime loans, which account for most of the $12 trillion market, doubled to 2.7 percent in that time.

But I thought subprime was contained.

(Eric Schudiske, KOMO News, 07.28.2008)
(Rolf Boone, The Olympian, 08.04.2008)
(Bill Virgin, Seattle P-I, 07.30.2008)
(Matt Woolsey, Forbes.com, 07.29.2008)
(Vikas Bajaj, New York Times, 08.04.2008)

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Seattle’s Condo Market: Where are the buyers?

By The Tim on May 26th, 2008 at 2:17 PM · 28 Comments

It’s official: The Seattle condo market has hit finally a wall. Here’s a little article from the Puget Sound Business Journal on Friday that goes into all the details:

With more than 400 condominiums under construction in a faltering housing market, Seattle-based Vulcan Real Estate has decided to sweeten the deal for potential home buyers.

In the coming weeks, Vulcan will roll out incentives aimed at buyers living and working in South Lake Union, where it has three condo developments under construction.

While its incentive plan is still in the works, one of its perks will be to pay a chunk of the closing costs for buyers who are currently renting at a Vulcan property and want to buy in the neighborhood, said Lori Mason Curran, real estate market research manager for Vulcan, Microsoft Corp. co-founder Paul Allen’s real estate investment company.

“There has definitely been a slowdown in condo sales at all projects in Seattle,” said Mason Curran, who declined to release Vulcan’s pre-sale figures.

Vulcan’s move is a reflection of the slowdown in the housing market across the Puget Sound region that’s given prospective condo owners the upper hand. Developers of condos, fighting stagnant sales, are offering more perks than ever to potential buyers — including cars, vacation packages and, in one case, Vespa scooters.

So, if I inVest in a Vulcan, I can get a Vacation and a Vespa? Sorry, couldn’t help myself. With the number of projects still scheduled to come online in the next few years, I think it’s going to take a lot more than a few worthless “incentives” to move these things. I’m talking price drops. Serious price drops.

The push to bring buyers in the door is a striking indication that the market for condos has stalled and buyers, reacting to a string of bad news about the economy across the country, are still waiting out the tumultuous market.

“We have a substantial amount of buyers out there, but they are all on the fence,” said Matthew Gardner, whose consulting firm Gardner Johnson works with Vulcan.

“The last thing anyone wants to do is buy in a market that is declining.”

Indeed, which is exactly what they would be doing today. Also, I really wish we could get past the nonsense that the downturn is somehow due to all the “bad news,” as if people would just go out and buy those houses and condos if only the media would just quit making up all these nasty lies and scaring the buyers. Give me a break.

(Kirsten Grind, Puget Sound Business Journal, 05.23.2008)

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Pierce County Home Builders Feeling the Pinch

By The Tim on May 5th, 2008 at 10:32 AM · 4 Comments

Yesterday’s Tacoma News Tribune had an article about new construction in outlying areas, which is becoming front line of the Puget Sound housing bust. In short: it ain’t pretty for builders.

Facing fewer buyers and many, many homes for sale, South Sound builders are pulling back and getting extra promotional.

Builders have slowed construction schedules in recent months, cut prices, offered their biggest-ever incentives and even rented out finished homes that couldn’t find a buyer.

…builders are looking to unload even more of what’s built and empty. In March, 1,485 new homes, excluding condos, were listed for sale.

It used to be that half of the homes sold by Soundbuilt, one of the area’s largest builders, were properties with homes either under construction or yet to be built, said Gary Racca, owner of the Puyallup company.

Uncertainty about the economy, however, means consumers are holding off, and now 90 percent of the company’s sales are on ready-to-move-in homes. But completing homes without a committed buyer can be risky, because the builder fronts the cost and often has to secure and pay to finance the construction.

The company has launched a first-time promotion: a price guarantee, which allows someone to buy a not-yet-constructed home at a locked-in price and ensures that if Soundbuilt lowers prices on other similar houses in the subdivision, the buyer will get the same discount.

Of course, they’re still confident that all they need to do is “get the momentum back” with a few discounts and incentives here and there, then they can get back to jacking up the prices.

(Devona Wells, Tacoma News Tribune, 05.04.2008)

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Developers spell “price drop” I-N-C-E-N-T-I-V-E-S

By The Tim on October 29th, 2007 at 8:59 AM · 46 Comments

Elizabeth Rhodes hits us this morning with a fun little morsel: Developers dangle discounts, toys to lure home buyers. (I wonder why this article wasn’t in the big weekend real estate section? Hmm… Edit: It would appear that the answer to that question is that they were saving it for the front page [pdf].)

Puget Sound-area new-home developers, motivated by an increasingly soft real-estate market, are resorting to something they haven’t done in years. They’re enticing buyers, like Matt Orlando, with big TVs, motorcycles and other inducements.

The deal sweetener that eased Orlando into his first home was a $3,000 credit toward closing costs on a one-bedroom condominium in Veridian Cove, an extensively refurbished new conversion in North Seattle.

The first year’s homeowners dues, at $197 a month, also were waived.

“I feel like I won the lottery,” says the Shoreline Community College instructor. “They were basically giving me $5,000 to move into a beautiful place I could afford.”

Incentives started appearing in late summer and are the best they’ve been in more than a decade. Indeed, until this year, builders could count on selling many new homes before they were even built.

Now there’s a four- to 13-month inventory in King and Snohomish counties of new houses, town houses and condominiums available, according to New Home Trends, a Bothell data-research firm. That’s spawned a goody-laden battle for buyers.

In other words, they’re dropping prices without actually “dropping prices.”

If this story sounds familiar, it’s because the exact same thing has unfolded in other markets all across the country over the last few years. It’s one of the surest signs that a housing market is transitioning from “boom” to “bust.” The builders are no dummies, they know that it is time to get out. The only problem for them is that they’re all trying to get out at the same time.

This will be interesting to watch unfold.

(Elizabeth Rhodes, Seattle Times, 10.29.2007)

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News Quickie: Sellers Getting Desperate Out There

By The Tim on October 16th, 2007 at 9:05 AM · 6 Comments

A pair of articles today from the Seattle P-I and King 5 News focus in on those poor, poor sellers that actually have to work to sell a home in today’s slow market. No longer are run-down shacks full of years of accumulated junk being bid up to ridiculous heights. Now, you actually have to clean out your crap, paint a few walls, steam-clean the carpets, take decent pictures, and—oh yeah—knock a few thousand (or a few tens of thousands) off the price.

A year ago, buyers regularly bid above asking prices, waived stipulations such as inspections and used escalator clauses, which raise offers over competitors’ bids up to a set ceiling. Now, good homes in nice neighborhoods with realistic asking prices still can get multiple offers, but many sellers put more time and money into fixing them up, offer more incentives and accept more conditions, including offers contingent on sale of another home.

These days, it would take twice as long to sell the current number of homes on the market in Seattle and King County as a whole at their current sales paces than it would have a year ago. Seattle had 50 percent more homes on the market in September than a year earlier, while the countywide increase was nearly as large. Pending sales, which can be the best indicator of recent market activity, declined by more than 25 percent in Seattle and 30 percent countywide.

Update: Matt Goyer over at Urbnlivn points out a Baghdad Bob-style denial of reality from a condo marketer quoted in the P-I article. “Prices have not been cut.” Wait, yes, they have.

How about trying some of those good ol’ incentives to lure in an unsuspecting victim buyer?

Selling a home in the Seattle area has become tricker. What used to sell in one week can now take months. Home sellers are going to more and more extremes, offering enticing incentives to hook a buyer.

Those boom days when homes in Seattle could be sold in a matter of hours are for the most part over. Residential homes can languish on the market for months, so sellers are relying on incentives to try and seal the deal.

I expect a lot of languishing to carry on through the winter, and probably throughout next year.

(Aubrey Cohen, Seattle P-I, 10.16.2007)
(Roberta Romero, King 5 News, 10.16.2007)

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