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 'Olympia'

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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Plummetting Real Estate Excise Tax Revenue Drags on City, State

By The Tim on April 14th, 2009 at 9:53 AM · 9 Comments

According to a pair of reports released yesterday, the real estate slowdown is still a serious drag on state and local revenues, thanks to significant sagging in real estate excise tax collections.

From the latest state revenue collection report (pdf):

Collections [for the March 11, 2009 – April 10, 2009 collection period] were $8.7 million (17.8%) below the March forecast.

Most of the forecast variance was in the real estate excise tax (REET), which came in $7.9 million (29.4%) below the forecast.

March REET taxable activity reported by the counties is down 47.5% year-over-year.

Meanwhile, the city of Seattle announced a series of cuts (pdf) to attempt to close the rather large budget hole created by flagging excise tax collections. The kicker is on page 8:

Cumulative Reserve Subfund (REET) Status

If I’m interpreting this document correctly, that’s an over $20 million budget shortfall—almost 30%—entirely due to real estate excise taxes (REET). Ouch.

The good news is now that home prices are approaching reasonable levels again, sales volume is likely to pick up, which will bring excise tax collections up as well.

Hat Tips to West Seattle Blog and The Olympian’s Politics Blog.

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Declining Real Estate Sales Hitting State Revenues

By The Tim on February 18th, 2008 at 10:42 AM · 22 Comments

Looks like that slowdown in state government revenues that Washington State’s chief economist ChangMook Sohn has been consistently warning us about really has come to pass.

Sharp declines in predicted revenue from the real estate excise tax and a mild national recession have led the state’s top economist to downgrade his revenue forecast by $423 million.

But Washington’s economy will not fall into recession because of strong growth in aerospace, high tech and international trade, said ChangMook Sohn, executive director of the state’s Economic and Revenue Forecast Council.

“The outlook for the state economy is significantly brighter than for the U.S. but we will be affected by the national slowdown as well as our own housing market problems,” Sohn said Friday.
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Though lawmakers had been predicting a decline in projected revenue for some time, the news came as a blow to Democrats who had hoped to pass a supplemental budget that would leave more than $1 billion unspent.

Most now concede that that level of savings is no longer realistic.

That $423,000,000 drop in the forecast is compared to the previous forecast, which was made only three months ago. Will our lawmakers continue to ignore the obvious warning signs, and spend Washington into a corner, even as revenues continue to decline? Probably.

Don’t forget, while the housing bubble has been inflating revenues, our state’s legislative and executive branch have been spending it just as fast. Since 2004, state spending has increased 33 percent (source). I don’t think it’s likely that they’ll suddenly start cutting back as revenue growth slows to a halt and possibly reverses. But I’m cynical.

(Chris McGann, Seattle P-I, 02.15.2008)

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Gregoire: “The economy is strong. Buy your home.”

By The Tim on January 29th, 2008 at 9:37 AM · 22 Comments

Everybody’s pal Christine Gregoire gave a pep talk to the Washington Realtors last week in which she made some interesting comments.

Gov. Chris Gregoire told about 400 Washington Realtors on Thursday that she has been working to meet goals the group has for transportation, affordable housing, education and quality of life.

Gregoire, who spoke a day after Republican gubernatorial challenger Dino Rossi went before the group, cited a report in Fortune magazine and said the state is a good place to do business. She also offered encouragement for an industry slowed amid recession fears.
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“The only thing we have to fear is fear itself,” Gregoire said, quoting former President Franklin Roosevelt and referring to national recession fears. “It is a very frustrating time, I know, for you, and it is for me. … I’m struggling to get the message out to Washingtonians. The economy is strong. Buy your home.”

From the Associated Press account of the same meeting:

Addressing the politically powerful Washington Realtors, the Democratic governor said she sometimes wishes people wouldn’t watch the evening news because of all the “doomsday” talk of a home mortgage meltdown and a pending recession.

Gregoire said that in actuality, the state economy has seldom been so strong, with record low unemployment, 222,000 new jobs created in the past three years, and national publications praising the business climate here.

She conceded that the national news is having a psychological effect on home buyers, even though there are relatively few mortgage failures here.

“This is a very frustrating time,” the governor said, adding “Our economy is strong — buy your home. … There is no good reason for a slowing of home purchasing in the state of Washington today.”

Now why do you suppose Mrs. Gregoire would promoting the idea that Washington State residents go out there and throw caution to the wind, ignore the warning signs of declining prices, and jump into that real estate market right now? Obviously one likely reason is the usual pandering of politicians telling people what they want to hear. In this case, the people in question are a room full of “professionals” whose income depends on suckers consumers continuing to buy homes all the way down the declining price slope.

I think there may be another reason though. I think Mrs. Gregoire may really be on the Realtors’ side here, not just talking the talk. Here’s a story that appeared in yesterday’s P-I… (emphasis mine)

Gov. Chris Gregoire and leading Democrats in the House and Senate have reached one early agreement in this year’s budget negotiations: It’s time for a reality check.

Anticipating a bleak revenue forecast, they’ve agreed to start looking for places to trim the $33 billion budget they passed last year. They say they want to have their priorities in order in case the slowing economy forces them to find efficiencies or even cut programs altogether.
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Gone are the halcyon days of a skyrocketing real estate market and a ballooning economy that had led to back-to-back-to-back upward adjustments in the state’s revenue forecasts.

And gone is the free and easy feeling about spending, the unflinching commitment to “targeted investments” that Democrats have enjoyed for the past three years.
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Gregoire already has called for frugality this election year and has asked lawmakers to adopt her budget that leaves $1.2 billion unspent.

But her budget also calls for $244 million worth of new spending.

Is it really any surprise that Mrs. Gregoire, who has overseen a 33 percent increase in state spending since taking office (source), would want people to ignore the “doomsday talk” and just buy, buy, buy? What do you suppose has enabled spending to increase by so much? Could it perhaps have been the high-flying home prices and red-hot pace of home sales in 2004-2006 (every one of which puts more money into the state coffers)?

And now Mrs. Gregoire wants us to ignore reality so she and her pals can fund their pet projects. Yeah, that sounds like a great reason to keep this bubble alive. Who’s with me?

(Brad Shannon, The Olympian, 01.25.2008)
(Associated Press, KGW.com, 01.25.2008)
(Chris McGann, Seattle P-I, 01.28.2008)

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Seattle Market Playing Catch-Up, Government Not Riding to the Rescue

By The Tim on January 28th, 2008 at 9:39 AM · 18 Comments

Here’s a few quickies to start off your Monday morning.

First up, Seattle’s market got a mention in the LA Times on New Year’s Eve while I was cavorting about the country. Note that this was a week or two before the NWMLS statistics for December came out, showing a year-on-year price decline.

It’s the kind of house that a year or two ago would have been snapped up in days: a refurbished rambler in a woodsy residential neighborhood minutes from downtown.

The asking price: $559,000.

But after seven weeks, Kristen and Al Dittmaier have not received a single offer on their Wedgwood home.

“I really believed there would be no problem selling,” Kristen Dittmaier said. “But the whole feel of the market has changed. We might have to drop the price.”
…
Of 20 major U.S. metropolitan areas, all but three — Seattle, Portland, Ore., and Charlotte, N.C. — experienced a decline in real estate values this October compared with last October, according to the Standard & Poor’s/Case-Shiller composite price index, released last week.

Home prices have fallen most in the Midwest, Southwest, Florida and California. In Los Angeles, prices fell 8.8%; in New York City, 4.1%.

Seattle prices increased 3.3%, but that was the smallest year-to-year rise for the city in more than a decade. The annual appreciation in Seattle has been slowing for more than a year and a half. Some economists say it’s only a matter of time before Seattle joins the national slump.

Next up, Aubrey Cohen points out the “not-so-fine print on the conforming loan limit:”

It appears conforming loans still would be capped at less than $500,000, under the economic stimulus package deal announced last week.

The deal would raise the cap from $417,000 to 125 percent of a metro area’s median home price, with a ceiling of $730,000, according to Congressional leaders.

The Seattle area had a median home price of $394,700 in the third quarter of 2007, according to the National Association of Realtors. That would put the new cap at $493,375, an increase of $76,375 (18.3 percent) from the current level.

And lastly, get ready for a shock: slowing sales means lean times for real estate sales offices. Shocking, I know. But it’s really happening in Olympia.

A slower Thurston County housing market has been felt by not only buyers and sellers but also South Sound real estate professionals.

Exit Northwest Realty decided last month to vacate its 5,000-square-foot office on Martin Way in Olympia because it had become too expensive to rent in a slower market, co-owner and broker Steve Cahill said.

The real estate company had occupied the space for about 18 months, but now will retreat to a Shelton office while it looks for smaller, cheaper office space in Olympia, Cahill said.

“We have to change the way we do things and get leaner,” Cahill said.

Golly, if I didn’t know any better, I’d say the bubble around here has finally burst.

(Tomas Alex Tizon, Los Angeles Times, 12.31.2007)
(Aubrey Cohen, Seattle Real Estate News, 01.27.2008)
( Rolf Boone, The Olympian, 01.18.2008)

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State Legislature wants to “help people… get into a home.”

By The Tim on January 14th, 2008 at 9:39 AM · 35 Comments

As 2008 gets rolling, your lawmakers are getting back to the business of budgets and lawmaking in Olympia. Of course, with this being an election year you can expect to hear a lot of talk about “doing something” to address the latest hot issues that are on everyone’s mind.

So what is one of the biggest issues they intend to “do something” about this year? You guessed it… the “housing crisis.”

Legislative leaders tried to keep expectations to a minimum this week as they prepared to convene Monday for the 2008 session.
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A good portion of their energy will go toward responding to big events from 2007: fallout from the housing crisis…
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Sen. Majority Leader Lisa Brown, D-Spokane, said her caucus has prepared a package of housing and home security bills and plans to begin working on them in the first weeks of the session.

“There have been a lot of successes in our state, the economy has been strong, unemployment rates have been low, but people are starting to feel an sense of uncertainty,” Brown said.

Awesome. So like we all already knew, our state is special and strong and all that, but our legislators are going to work hard to pass laws and spend our tax money to address “feelings.”

“They are feeling a sense of political uncertainty, they don’t know what will happen in the coming year. They are feeling a sense of economic uncertainty as they hear bad news and when they look at their own bottom line, things can be deteriorating.”

Oh. I guess it’s not just feelings, but actual financial hard times, even for people in our own special corner of the country. But I thought we were immune.

House Speaker Frank Chopp, D-Seattle, agreed that the state needed to address housing security.

“There is nothing that comes closer to the American family than their home,” he said. “We’ve got to help people … to get that leg up in order to get into a home, and to help them through the difficult times.”
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“Our goal is to help people with those very basic checkbook issues that they are struggling with or are concerned about … immediately,” Brown said.

Can someone please explain why it should be the government’s responsibility to help people own a home, or to deal with “basic checkbook issues” when they have frittered away their money and their home equity on plasma TVs and SUVs? I’m just not feeling it here. Seems to me that people should be responsible for their own “checkbook issues.”

Here’s a crazy concept: Don’t buy stuff you cannot afford.

(Aubrey Cohen, Seattle P-I, 01.10.2007)

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