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 'Kenmore'

Northshore Townhomes: A Case Study in Bubble Mania Development

By The Tim on July 23rd, 2009 at 9:00 AM · 48 Comments

Northshore Townhomes Sandwich Signs

Regular readers may recall past mentions on these pages of Northshore Townhomes, an 86-unit townhome complex in my north Kenmore neighborhood.

The story of Northshore Townhomes is a classic tale of bubble mania. The 6-acre parcel was purchased in 2002 for $1 million by well-known local developer Mike Mastro (via an LLC), but development did not begin in earnest until 2006, breaking ground in the midst of the real estate frenzy (condo prices were up over 24% year-over-year in November that year).

Now, Kenmore is nice, but it’s not exactly near the top of most people’s lists when they are thinking about where they want to live around Seattle. Is Kenmore really the best market in which to build 86 new townhomes priced $280,000 to $400,000, with a feature list that includes “the finest finishes throughout” and “chic cabanas with table, bar, and rollout lounges”? And even if Kenmore is a good place for such a development, does it make sense to put it half a block from a major auction house? Obviously not, but during the bubble everything was being snatched up with bidding wars as soon as it came on the market, so in the mind of the developer it was probably a no-lose proposition.

As construction on Northshore neared completion in early 2008, the marketing began to ramp up. A flashy website came online, sandwich boards were strewn about the neighborhood, billboards were placed all along Bothell / Lake City Way, and promotions were launched. Everything looked great, except for one thing… There were no buyers.

Northshore Townhomes | Kenmore, WA
Northshore Townhomes | Kenmore, WA

As 2008 wound to a close, not a single unit had sold. Signs and online offers advertising units for rent began to pop up along side the still-listed units that were for sale. Of course, this simply provided an even greater disincentive to any possible buyers.

By early 2009, the days of speculators gobbling up properties in hopes unloading on a greater fool for a massive profit were long gone, and Northshore had been left in the lurch. Mastro finally completely gave up trying to sell the townhomes, and the entire complex became rentals. According to a May deed of trust (pdf) filed with King County, Mastro’s company owes $23.6 million on the property. With rents at the complex averaging around $1,700, it will take at least 30 years to pay off the construction (assuming 100% occupancy and ignoring maintenance costs and taxes).

Northshore Townhomes | Kenmore, WA
Northshore Townhomes | Kenmore, WA

Today, the ridiculous marketing website has gone dark, the sandwich boards that used to proclaim “NEW TOWNHOMES FROM $279K” have new “NOW LEASING” labels taped over them, and the front door of the former sales center has a slot cut into it for the rent drop. Renters are moving in, but with rents that average 16% higher (in terms of $/sqft) than other nearby apartments, it’s no surprise that the complex is slow to fill up.

We recently posted a link to a Puget Sound Business Journal story about Mike Mastro’s mounting financial troubles. Kenmore’s Northshore Townhomes is just one example of Mastro’s major market miscalculation. $24 million here, $10 million there, pretty soon you’re talking about some real money.

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Spec Builder Spectacularly Miscalculated Market

By The Tim on June 26th, 2009 at 9:14 AM · 15 Comments

KIRO radio ran a mildly interesting piece about a spec builder in my neighborhood with especially poor timing: Local spec homes sit empty, cheap.

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.

7320 NE 150th St Kenmore, WA 98028The 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.

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Failed / Stalled Mixed-Use Developments Around the Sound

By The Tim on May 15th, 2009 at 5:00 PM · 52 Comments

From today’s Olympian: Housing project in foreclosure

Thurston Highlands, one of the largest proposed mixed-use developments in the state, has emerged as the biggest example of how the economic crisis has had a corrosive effect on development.

Through its trustee, the project’s primary lender, Frontier Bank, has started foreclosure proceedings on the 1,250-acre property after saying a loan was in default. The trustee is scheduled to auction the property to the highest bidder on the Thurston County Courthouse steps June 5.

Steve Chamberlain, a local developer and the managing member of the property owner, Thurston Highlands Associates LLC, said he secured interim financing totaling $12 million to start developing the property with the intent of refinancing in three years, when the project moved into the construction phase.

But Frontier Bank of Everett, facing its own fallout from the financial meltdown, was unable to lend more money. In March, Frontier signed a cease-and-desist order to change its lending practices after a review by the Federal Deposit Insurance Corp. and state Department of Financial Institutions concluded that it was undercapitalized. No other banks were willing to step forward.

Meanwhile, over in my neck of the woods, Kenmore Village: a “new lifestyle village in Downtown Kenmore” has been put on hold, pending a recovery in the economy and the housing market.

Likewise, Woodinville Village, a “classic European village square infused with the wine ambiance of the Napa Valley,” which has been in development since at least 2004, has been practically stalled out for over a year. Their latest project progress photo (below) is two years old, but is a fairly accurate representation of what the site looks like today.

Woodinville Village

There’s not exactly a central source we can go to for information on how many such projects are currently permitted, cleared, and now merely awaiting an economic recovery to begin cranking out even more condos and townhomes. If you’ve got one of these projects in limbo in your neighborhood, share it in the comments.

(Christian Hill, The Olympian, 2009.05.15)

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Massive Condo Oversupply on the North End

By The Tim on March 4th, 2009 at 11:50 AM · 29 Comments

In keeping with the old cliché that “all real estate is local,” let’s take a moment to look at one local market: Kenmore townhomes and condos. I selected Kenmore because it happens to be where I live, so I am pretty familiar with the area and what projects have been built over the last couple years.

Here’s a summary of five major projects in Kenmore that have been built / converted since

Trail Walk Condominiums – 2007 conversion – 180 units – ~69% sold
Northshore Kenmore – 2008 new construction – 86 units – 0 (?) sold – (more in this forum thread)
Coventry Place Condominiums – 2007 conversion – 96 units – ~82% sold
Vermont Condos (website defunct) – 2008 conversion – 54 units – ~6% sold
Copper Lantern Homes (low income) – 2009 new construction – 0 sold

5-Project Total: 449 units, ~57% sold.
Total Unsold Units: ~157

From October through January, there were a grand total of 59 closed sales of all types (SFH, townhome, condo) in all of Kenmore reported by the NWMLS. That’s an average of about fifteen sales per month. In other words, just between these five townhome/condo projects, Kenmore has over ten “months of supply.”

It’s even worse if you only look at condo sales, of which there were a grand total of two in January. Two.

Meanwhile, over in Woodinville, a 2006 condo conversion called Timber Ridge has at least one unit on the market at half of what it sold for in 2006.

2006 sale price: $200,900
Current asking: $99,900

Half off. I shouldn’t be surprised, but somehow I still am.

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Anecdote: Bailing on Kenmore Townhomes (Too Late)

By The Tim on July 1st, 2008 at 9:34 AM · 17 Comments

Okay, when I saw this this morning, I just had to mention it. There’s a little 8-unit townhome complex in my neighborhood (Kenmore) that I have mentioned on here a number of times in the past. Most recently, two of the eight units were up for sale. As of this morning, four of the eight are on the market. Here’s a brief summary:

Unit Last Sold Sold For Asking On Market
#2 (7212) 01/2002 $209,950 $339,500 39 days
#5 (7218) 10/2005 $280,950 $345,000 75 days
#6 (7220) 12/2005 $300,000 $335,000 21 days
#7 (7222) 09/2001 $234,950 $339,500 1 day

These nearly-identical 2 bed / 2.25 bath units are between 1,418 and 1,578 square feet and come with $191 a month in dues that apparently just pays for building upkeep (as in, there are no shared areas).

Just around the corner, a developer has dumped thirty-three 2 bed / 2.25 bath 1,325 square foot units on the market for $279,000 (according to their sandwich board signs anyway) as part of an 84-unit complex. These new construction units sport a nice shared park with a hot tub and all that rot, for monthly dues of just $142. Oh, and this ridiculous-looking ad that has been on their website for a month now claims that they’ll furnish it, too.

Anybody think the used townhomes around the corner have much chance of selling at $340k? It’s like watching a super-slow-motion train wreck.

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Anecdotes: Kenmore Condo Battle Heating Up

By The Tim on June 2nd, 2008 at 10:45 AM · 67 Comments

The condo battle in my neighborhood (Kenmore) seems to be heating up. In April I mentioned a nearby townhome in an 8-unit complex that went up for sale at $360,000, 20% higher than any unit in the complex has ever sold for in the past, and a mere $30k less than a unit just up the hill with a sweet view (which incidentally has been sitting unsold on the market for 290 days now).

Totally HOT, Totally NEW!Unfortunately for our hopeful seller, their townhome has sat on the market for over 45 days now with no bites. Even worse, 10 days ago one of their neighbors decided to sell… with a $20,000 lower asking price ($340,000). Uh oh. Of course, they’re not idiots, so they have responded by lowering their price to $345,000. Unfortunately for Seller #1, Seller #2 bought for $71k less than Seller #1 and is using Redfin, so they can presumably afford to drop the price quite a bit further.

And in a bit of bad news for both of these folks, a brand new townhome complex is opening up just around the corner with asking prices that are lower still, plus far nicer amenities. A similar 2 bed, 2.25 bath, 1,300 square foot unit in the “Totally Hot Totally New” Northshore Kenmore complex (which I mentioned on the forums) has an asking price of “just” $300,000. For $335,000 you can get nearly 1,500 square feet and an extra bedroom.

Of course, this all assumes that you are in the market for a $300k+ townhome. In Kenmore. Granted, as the Northshore Kenmore website so proudly proclaims, we are “Just 12 Miles from Bellevue Square,” but having lived in the neighborhood for over four years now, I have to say I’m just not feeling it like the smiling couple mysteriously floating in front of the seaplane apparently are.

What kind of amusing home listing action have you seen in your neighborhood?

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