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 'supply'

Crosscut: Seattle Population is Nowhere Near Current Capacity

By The Tim on August 11th, 2009 at 1:04 PM · 44 Comments

Interesting article over on Crosscut today: Why Seattle won’t grow as fast as planners say

If Seattle’s current estimated population is 602,000 and we add the hypothetical 180,000 and you get 782,000 people by 2040 — considerably short of the 1.2 million that some claim are on the way.
…
The assumption is that right now, without changing or increasing any zoning at all, Seattle has the capacity to provide housing for up to 800,000 people without changing the rules to make buildings more dense like the proposed multifamily update or up zoning single family neighborhoods. Theoretically the capacity is already there.

Whichever means of calculating you use, it turns out we aren’t anywhere near capacity.
…
According to Seattle’s own numbers from January 2005 through March of 2009, over 28,000 housing units have been added to Seattle’s stock either built (16,504 units) or permitted and at various stages of construction (11,721 units). Seattle in just 51 months has reached 60 percent of its 20-year target. At this rate we’ll add over 110,000 units under current zoning by 2024, over twice the rate needed to fulfill our targets.

It should be noted that this article is focusing on Seattle proper, not the entire metro area. That being said, the author points out some interesting facts that would seem to point to continued downward pressure on home prices, even in the “close in” in-city neighborhoods.

It is also worth mentioning that I made similar points back in 2007 that apply on a county-wide basis.

→ 44 CommentsCategories: News
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Poll: Which is likely to generate the strongest downward pressure on Seattle-area home prices going forward?

By The Tim on July 26th, 2009 at 12:05 AM · 27 Comments

Please vote in this poll using the sidebar.

Which is likely to generate the strongest downward pressure on Seattle-area home prices going forward?

  • Bank-owned inventory coming on the market. (33%, 66 Votes)
  • Currently stalled new construction being built. (2%, 4 Votes)
  • Currently vacant new construction hitting the market. (1%, 2 Votes)
  • Tighter financing / down payment requirements. (31%, 61 Votes)
  • Continued layoffs at local employers. (31%, 62 Votes)
  • The expiration of the $8,000 tax credit in November. (2%, 3 Votes)

Total Voters: 198


This poll will be active and displayed on the sidebar through 08.01.2009.

→ 27 CommentsCategories: Polls
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Seattle-Area Housing Oversupply Still Increasing

By The Tim on July 13th, 2009 at 9:41 AM · 42 Comments

One set of data we like to check in on occasionally is the big picture of local housing supply and demand, measured by comparing the total number of housing units to the total number of households. You may recall the last time we checked in on this data back in March: Local Housing Oversupply Could Disappear by July 2010…

Good news everyone!

The latest population estimates for King County have been released by the Census Bureau, and at the present rate of population growth, we’ll be able to use up all of our excess housing inventory by July of next year…

…if all residential construction across the county completely ceased after July 2008, that is.

Our previous excursions into this data have been based on Census Bureau estimates, which are unfortunately not very timely. However, the Washington State Office of Financial Management keeps its own sets of estimates which are much more current. In fact, their latest release a few weeks ago provides data through April of this year.

Here’s an updated chart of housing supply (total housing units) and demand (total households) for the 3-county Puget Sound region, indexed to 2000:

Puget Sound County Housing Supply & Demand

Across King, Snohomish, and Pierce counties, a total of 147,591 new households have been added since 2000. During the same time, 184,378 new housing units have been built, amounting to an oversupply of 36,787 housing units.

Here’s a look at the raw number of housing units and households that were added to the region each year:

Puget Sound County Housing Supply & Demand

Only 2004 and 2005 had people moving here faster than new housing stock was coming online, and 2006 more than made up for the discrepancy in short order.

Here’s the indexed chart for King County only:

King County Housing Supply & Demand

In King County, we’ve added 65,443 households and 90,157 housing units over the past nine years, for a total oversupply of 24,714 housing units.

Here’s the year-by-year chart for King County:

King County Housing Supply & Demand

Here in King, only 2005 saw a larger addition of households than housing units. Even between 2008 and 2009, 3,304 more housing units were added than new households.

So it would seem that rather than working through our local housing oversupply, we’re still adding to it.

→ 42 CommentsCategories: Features · Statistics
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Which is Larger: Pent-Up Demand or Pent-Up Supply?

By The Tim on April 9th, 2009 at 8:48 AM · 142 Comments

Whenever local real estate professionals are quoted in the paper lately, it seems that one line we’ve been hearing repeated a lot is about the alleged loads of “pent-up demand” out there.

The thinking goes that there are hundreds thousands upon thousands of potential buyers out there that are “waiting on the sidelines” or “sitting on the fence,” and as soon as the housing market starts to pick back up again, they will all rush in at once and the market will be hot hot hot once again, and the opportunity for good deals will have passed.

Let’s explore that theory, shall we? In the chart below I have plotted total yearly closed sales for 2000 through 2008. The bars are centered on the 2000-2002 average (23,106), to give us an approximate visual of how each year compares to the pre-bubble housing market.

King County SFHs: Pent-Up Demand

The “pent-up demand” that the local real estate salespeople love to talk about so much is represented in that big dip in 2008, where sales fell over 30% below our 2000-2002 baseline.

However, the chart also tells a story that you never hear real estate salespeople talk about… From 2003-2006, demand was far above the baseline, with average excesses of 30% for four straight years. This is what I like to refer to as “borrowed demand.”

The total borrowed demand from 2003-2006 was 27,798 sales. The demand shortfall in 2008 was a mere 7,115 sales, enough to “pay back” 26% of the borrowed demand of the bubble years.

Is there some pent-up demand? Probably a little bit, but in reality, the amount of pent-up demand out there will likely still be dwarfed by the amount of borrowed demand that still must be paid back.

Of course, this all completely ignores the other side of the equation: “pent-up supply.” The chart below plots new listings in the same manner as the closed sales chart above.

King County SFHs: Pent-Up Supply

Wow, so during the bubble years, supply was actually slightly lower than the baseline (44,581), averaging 4.3% under the 2000-2002 average from 2003-2005. In 2006-2008, supply has been about 11% under average.

Looked at in the same way as the pent-up demand picture, we’re currently sitting on between 15,000-20,000 homes across the county that represent pent-up supply.

So, to sum up: The borrowed demand from the bubble years has still left us with a demand deficit in excess of 20,000 sales, while the lower than usual new inventory of the last few years has built up a pent-up supply of around 15,000 homes.

Admittedly, this is a rather coarse method of investigating the issue of pent-up demand and pent-up supply, but it’s probably the best we can do with the limited hard data that is available. I’m interested to hear what you think about the issue, especially if you’re an agent that has been using “pent-up demand” as a scare tactic to attempt to “get buyers off the fence.”

→ 142 CommentsCategories: Statistics
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Local Housing Oversupply Could Disappear by July 2010…

By The Tim on March 19th, 2009 at 12:57 PM · 39 Comments

Good news everyone!

The latest population estimates for King County have been released by the Census Bureau, and at the present rate of population growth, we’ll be able to use up all of our excess housing inventory by July of next year…

…if all residential construction across the county completely ceased after July 2008, that is.

Here’s an updated look at our supply and demand situation, indexed to 2000.

King County Housing Supply & Demand

Unfortunately, supply data for 2008 will not be released until August, and in reality construction of new housing units did not come to a complete stop after July 2008, so we will undoubtedly still be sitting on a housing oversupply.

What amazes me is that even in the current economic and lending environment, I am still seeing plenty of in-progress new construction, even including batches of those nasty compact townhomes that have become such a blight on some Seattle neighborhoods.

Running some quick numbers, if the population growth rate holds steady, and the construction of new housing units drops by 25% of the 2000-2007 average, it will take until 2017 before we work through the oversupply.

If new construction drops by 50%, we absorb the oversupply by 2012.

If new construction drops by 75%, we absorb the oversupply by 2010.

Keep in mind, that these figures merely state how long it will take us to get back to roughly the same overall housing vacancy rate we had in 2000, which was by most measures a relatively balanced market. Once we work through this oversupply, it is not likely that double-digit appreciation is going to spring back up out of nowhere, unless new construction has completely halted and stays that way for year after year.

So the big question is, how much has new construction really dropped by in the Seattle area? Are we looking at two years of an oversupplied housing market, or eight?

→ 39 CommentsCategories: Statistics
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Housing Shortage or Overbuilt—A New Look at Supply and Demand

By The Tim on November 5th, 2008 at 10:28 AM · 57 Comments

There has been some talk lately about the overall housing stock in the Seattle area, and whether construction has been able to keep up with population growth, or if there is a housing shortage that will lead to another housing boom in a few years. So I thought now would be a good time to revisit an old post from October 2006—Big Picture: Supply vs. Demand.

For the charts below I have taken data on the number of households and the number of housing units from the annual American Community Survey results from 2000 through 2007.

Here’s what the housing supply and demand picture looks like for King, Snohomish, and Pierce counties combined, indexed to 100 in 2000.

Puget Sound Housing Supply and Demand
Click to enlarge

Puget Sound housing supply increased 12.1% from 2000 to 2007, while the number of households increased only 7.6%. In terms of raw numbers, population increased by 92,911 households during that time, while 151,710 housing units were added, resulting in an oversupply of 58,799 housing units for the 7-year period. In other words, from 2000 through 2007, 1.6 new housing units were constructed for every new household.

Here’s the same data as above, broken down by county:

Puget Sound Housing Supply and Demand by County
Click to enlarge

Surprisingly, the overbuilding was most dramatic in King County, where 74,608 housing units were added for a mere 35,905 households, providing 2.1 new housing units for every new household. Snohomish and Pierce were roughly the same as each other, coming in at 1.4 and 1.3 new housing units per new household, respectively.

Here’s a slightly different take on the data, showing the percent occupancy rate from 2000 through 2007 for each of the three counties.

Puget Sound Housing Occupancy by County
Click to enlarge

Occupancy has been steadily declining this decade in all three counties, with 2007 setting a low point in King County that has not been matched since the 1970 Census.

So please, tell me again how there’s a housing shortage in the Seattle area. I enjoy fairy tales.

→ 57 CommentsCategories: Statistics
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