Seattle Bubble

Here’s the NWMLS press release that accompanied yesterday’s numbers: Pending Sales Up 4.1 Percent From Year Ago, Total Inventory Unchanged

Home sales around Western Washington during September rose 4.1 percent from a year ago, reversing a 19-month pattern of declines. Members of Northwest Multiple Listing Service reported 5,982 pending sales (offers made and accepted, but not yet closed), a gain of 234 transactions from a year ago. The totals cover 19 counties in the MLS service area.

NWMLS data show the last system-wide uptick in pending sales was February 2007 when members reported a 4.8 percent gain from the previous year.

In other key indicators of housing activity, Northwest MLS reported tightening inventory with a double-digit drop in the number of new listings added during September compared to 12 months ago, and total inventory at month end that matched year-ago numbers. Figures also show area-wide softening of prices compared to a year ago.

So the industry-promoted message this month is “focus on the increased sales and flat inventory.”

Let’s take a look at the newspaper writeups about yesterday’s data from the NWMLS. Let’s see how our local reporters did at staying on message.

[Read more →]

Time again already for another inbox-clearing story roundup.

First up, the Seattle City Council is apparently in a development-regulating mood lately. Not only are they tackling the ugly townhome issue, now they’re going after “megahomes” as well.

After years of complaints about suburban-sized homes that devour lawns and encroach on neighbors, the Seattle City Council plans next month to consider limiting the size of some larger homes in single-family neighborhoods.

But changes that politically are palatable enough to pass may not quiet neighbors’ objections entirely.
…
With roughly 65 percent of Seattle zoned for single families, politicians historically have been wary of changes affecting so many homeowners.

A proposal crafted by City Council President Richard Conlin, which the council is expected to discuss next month, may be a starting point.

On smaller single-family lots, his proposal would reduce a home’s maximum footprint to provide larger buffers and more green space between properties.

With energy prices shooting through the roof lately, and the prevailing winds blowing in the “green” direction, this seems to be a case of “to little, too late.” I think that like the SUV, the days of dominance for the McMansion are fading.

But that’s not the only new housing issue the Seattle City Council is taking up. They also took a vote on Monday regarding relocation assistance for condo conversions.

Developers who convert apartments into condos would have to pay some moderate- and low-income Seattleites considerably more in moving expenses under a measure approved Mondy by the City Council.

The council voted 8-0 to increase the amount of relocation assistance that developers pay from $500 to three times the monthly rent, for tenants making 80 percent of local median income or less.

The measure would also require developers to pay more in relocation help to some elderly tenants or others with special needs. The legislation goes to Mayor Greg Nickels.

The council also gave developers a break Monday: They would more easily qualify for an affordable housing tax break by including condos or apartments affordable to moderate-income residents under another measure approved by the council.

Because you know the condo-conversion wave is just getting started, after all. Developers are just going crazy, building as much as they possibly can…

…or maybe not.

Kemper Development has pushed back the timetable for its proposed Lincoln Square expansion in downtown Bellevue by at least 15 months.

The company had planned to break ground on the high-rise, mixed-use project by next spring. But Chairman and Chief Executive Kemper Freeman Jr. said Monday that construction won’t start until summer 2010 at the earliest.

He attributed the delay to the slowdown in the local condo market and to logistic complications the company would have encountered if it had expanded Lincoln Square while it was building a major addition to its Bellevue Square mall across Bellevue Way Northeast.

“We thought we could do it all at once,” Freeman said. “We finally said, ‘That’s nuts.’”

But hey, let’s end this post on a positive note. I bet you didn’t know that Ballard is still totally immune to the housing bust. Well, it is.

Despite the constant drumbeat of housing doom and gloom reported nationally, Ballard’s single-family home market is still rosy but has a few faded blooms.

Nationwide, home values have dropped nearly15 percent in one year. Florida’s market is swamped with listings and Las Vegas real estate investors lost their shirts.

However, according to Multiple Listing Service statistics in the Ballard zip codes 98107 and 98117, the average selling price is only down about 8 percent.

Inventory of single-family homes and townhouses for May and June is 222, nearly double that of last year’s listings, and average time on the market is now two months, twice last year’s. Still, area realtors and lenders say the market is relatively strong.

“The best stuff, like a sweetheart of a house on a pretty street in a nice neighborhood is getting full price, sometimes higher,” said Michael Busacca, a realtor with Skyline Properties’ Northgate office.
…
“The media beats us up,” complained realtor Kevin Isaminger of Re/Max in Bellevue, who has listings in Ballard, and West Seattle where he lives. He said potential buyers lack confidence in the local market due to pessimistic news reports of troubled markets in other regions.

That darn media.

(Jennifer Langston, Seattle P-I, 06.30.2008)
(Angela Galloway, Seattle P-I, 06.30.2008)
(Eric Pryne, Seattle Times, 07.01.2008)
(Steve Shay, Ballard News-Tribune, 06.30.2008)

Here are a few recent stories that have been covered elsewhere and are worth at least mentioning here.

Latest foreclosure statistics: Seattle P-I, Foreclosures in Seattle higher, but much lower than nation’s

The Seattle area had about twice as many foreclosures in May as it did a year earlier but continued to have a far lower foreclosure rate than the country as a whole, according to new reports.

King and Snohomish counties had a combined 881 trustee-sale notices and bank repossessions in May, one for every 1,219 households, according to RealtyTrac, an Irvine, Calif., company that tracks foreclosures. The area’s rate put it 148th out of 229 metro areas the company ranks.

FHA tries to ride in to the rescue housing bubble (they’re a little late for that). Coverage:

• Seattle Times, Number of FHA loans jumps locally
• Seattle P-I, FHA is waiting to give you a loan

The much-vaunted commercial real estate market is apparently showing signs of weakness as well: Seattle Times, Commercial real estate brokers worry about Seattle buildings

After climbing for years, are office lease rates in downtown Seattle getting ready to turn south?

Some commercial real-estate professionals think so.
…
More than 2 million square feet of new office space — the equivalent of 1 ½ Columbia Centers — will come on the market in greater downtown next year. Almost none of it is pre-leased.

And lastly, Christine Gregoire is taking her turn beating the dead horse that is Countrywide. Where was she when they were busily pumping the housing bubble up with all of these ridiculous loans? Not running for re-election, that’s where. Coverage:

• Consumer Smarts (P-I Blog), State wants to yank Countrywide’s license
• Seattle P-I, State accuses Countrywide of bias
• Seattle Times, State accuses Countrywide of discriminatory lending
• Rain City Guide, What do Governor Gregoire’s actions mean for local Countrywide employees and short selling homeowners?

Did I miss any recent stories that should have been included?

(Aubrey Cohen, Seattle P-I, 06.13.2008)
(Elizabeth Rhodes, Seattle Times, 06.13.2008)
(Aubrey Cohen, Seattle P-I, 06.16.2008)
(Eric Pryne, Seattle Times, 06.26.2008)
(Phuong Cat Le, Consumer Smarts (P-I Blog), 06.25.2008)
(Phuong Cat Le, Seattle P-I, 06.26.2008)
(Susan Kelleher, Seattle Times, 06.26.2008)
(Jillayne Schlicke, Rain City Guide, 06.25.2008)

Here’s an interesting story that popped up over the weekend and had people emailing me and discussing it in the comments and forums. A downtown luxury condo building named Escala is having trouble moving the last 70 units (of 270, so roughly 25%), so to try and juice up their sales, they’re raising prices. Yes, you read that right: raising prices.

Developer Lexas Cos. said this week that on June 5 it will raise the asking prices 3 to 7 percent for about 70 unsold units that have been on the market since last spring.

Another 22 units that will be released for sale May 1 also will have higher price tags.

Lexas principals John Midby and Eric Midby said prices are going up partly to send a message to prospective buyers: If they’re waiting to buy until prices drop, they’re reading the local market wrong.

And they have until June 5.

“We look at the underlying fundamentals and see a different picture than those that have been scared off by the national trends,” John Midby said. “It doesn’t match the psychology that’s pervasive in the market, even in Seattle.”

Seattle’s economy is strong, he said. Housing prices here have held up fairly well while those in much of the rest of the country have plummeted.

Stupid? Arrogant? Crazy like a fox? Or perhaps… genius?

Even our allegedly unbiased friend Glenn Crellin at the Washington Center for Real Estate Research doesn’t see the logic in this move:

“We are trying to create value for our current buyers and take [potential buyers] off the fence,” Midby said of the price increases.

But Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University, suspects those are not the only reasons.

“It is surprising that they are increasing prices to that degree unless there’s something else going on,” he said.

Lexas may feel an urgent need to move units, Crellin said: “A developer has to sell them because the carrying costs on a project that size are enormous.”

High-end downtown condo projects are particularly vulnerable to the real-estate market’s slowdown, he said, because many prospective buyers who are looking to move downtown from big, expensive suburban homes are having more trouble selling those houses quickly.

Matt Goyer over at Urbnlivn has some additional analysis:

Here are the number of $500,000 to $5 mil condos sold over the past few years in downtown:

2005: 134
2006: 129
2007: 207
2008: 45 so far

Currently there are 189 units in that price range active on the MLS. There are certainly more than this because not all new construction inventory is in the MLS.

So it looks like downtown Seattle is track to sell about as many luxury condos as it did in ‘05 or ‘06, which would mean about 90 more this year. Apparently Escala thinks that pretty much all of those will be from them. Good luck with that.

On the other hand, an article in the Puget Sound Business Journal this weekend claims that the condo supply downtown is “expected to dry up.”

With 40 condominium projects in the pipeline for downtown Seattle one might expect a glut of new units on the market. But tight-fisted lenders and hesitant buyers, both reacting to the nationwide credit crunch, have severely hobbled the once high-stepping market.

The pace of development has slowed so sharply that local experts predict a shortage in 2010 that could drive prices up. One consultant forecasts delivery of just 189 new units that year — down from an average of 1,100 anticipated in each of the prior three years.

Behind the prediction: No new condo project has broken ground downtown since the last two buildings — 275-unit Escala and 204-unit Equinox — got under way last summer, said the consultant, Dean Jones, president of Realogics Inc., a Seattle-based condo research and marketing firm.

Since it can take as long as two years to build a high-rise condominium tower, the dearth of new construction is pushing delivery into 2011 — assuming those projects, which represent more than half of the 40 in the pipeline, can find financing.

So it looks like that nifty rendering of Seattle’s 2010 skyline might be a bit off. So are the developers at Escala on to something, or off their rockers? I suppose by the end of the year we’ll know.

(Eric Pryne, Seattle Times, 04.26.2008)
(Matt Goyer, Urbnlivn, 04.27.2008)
(Jeanne Lang Jones & Kirsten Grind, Puget Sound Business Journal, 04.25.2008)