Seattle Bubble

A few more articles from this week about how dramatically the local real estate market has slowed.

Puget Sound Business Journal: Construction defaults rise in Seattle area

The latest data on local new-home sales and construction-loan delinquencies illustrate the market forces underlying the growth in mechanics’ lien filings.

Delinquencies of single-family construction loans in the Seattle/Bellevue/Everett marketplace have risen to 11.4 percent of outstanding loan balances during the second quarter, according to data from Oakland, Calif.-based consultant Foresight Analytics.

That’s only slightly better than the median delinquency rate of 11.6 percent among the nation’s 100 largest metro areas. The Tacoma market is even more distressed, with 15.6 percent of single-family construction loans delinquent.

With respect to commercial and condominium construction loan delinquencies, both the Seattle/Bellevue/Everett (5.6 percent) and Tacoma (8.7 percent) vicinities fared worse during the second quarter than the top 100 markets combined (4.9 percent).

Falling new-home sales and values underlie much of the construction loan foreclosure activity.

Over 1 in 10 residential construction loans have gone delinquent? Yikes. So much for Seattle-area builders learning from the lessons of Florida, where they went through this same mess two years ago.

Tacoma News Tribune: Downtown condo sales at a crawl

How’s the market for condominiums in downtown Tacoma?

“What market?” says Judy Mayfield, head of sales for The Esplanade, the 162-unit project on the Foss Waterway, now nearing completion.

After two years of extolling the virtues of the nine-story luxury project, Mayfield and her staff have yet to close a deal on a single unit.

Tacoma’s condo market has suffered even more in the mortgage meltdown than other sectors of real estate.
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Condominium developers and brokers remain convinced the condos are a good deal – in fact, they say, what with low interest rates and high inventory, they are a better deal than ever.

The problem, they say, is getting people to commit in such uncertain times.

“The timing couldn’t have been worse,” Mayfield said. “Had the market not turned in the past year and a half, we would definitely have sold out by now.”

Translation: “We were really counting on suckering 162 flippers into buying luxury condos in Tacoma on the false hopes that they could sell them for a profit in the perma-hot housing market. Now that the market has cooled and everyone realizes that nobody wants to actually live in luxury condos in Tacoma, we’re screwed!”

Seriously. Who sat down at the drawing board and said “one hundred and sixty-two luxury condos in Tacoma—sounds like a great plan!” Perhaps it was the same sage that decided a good plan would be to build an 86-unit townhome complex in Kenmore, then market it with pictures of sandy beaches and palm trees.

Does anyone out there still think the rental market will be tight as a growing number of these completed condo and townhome projects switch to rentals after attracting no buyers for months on end?

(Brad Berton, Puget Sound Business Journal, 10.03.2008)
(Rob Carson, Tacoma News Tribune, 10.10.2008)

The Tacoma News Tribune reports on a $7.2 million shortfall in the city budget, thanks to a 36% drop in expected real estate taxes:

The City of Tacoma may have to delay or slow construction on some projects in order to patch a projected $7.2 million shortfall from real estate taxes this budget cycle.

The shortfall represents a 36 percent drop from what the city expected to generate from real estate taxes: Officials budgeted for about $19 million of the $45 million fund from real estate taxes this biennium, but now project only about $12 million will come by the end of the year.

The drop comes because of a slower real estate market: Taxes collected from real estate sales are lower than expected, meaning there likely won’t be enough money to cover the projects slated for this biennium.
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On the list of possible cuts, according to City Manager Eric Anderson: deferring maintenance on City Hall, and eliminating $400,000 for major repairs to city buildings and seismic upgrades to fire stations around the city.
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Anderson told the City Council during an August study session that the city could also buoy the capital budget with funds from other areas, but that could be a dangerous proposition if the market doesn’t bounce back.

Hey no worries. It’s probably a safe bet to assume things will bounce back any day now. I hear we’ve been at the bottom since February or so.

I have a couple of RSS feeds from real estate sites that I use to monitor listings that might be of interest to me.  They are targeted at a couple of neighborhoods, and focused on homes that are likely to be mid-century modern.  Over the past couple of weeks, I had noted that the volume of new listings had really dropped off.  I mean, there was almost no activity. I attributed it to the market slowing down - figured it was just a late summer phenomenon.

Then I checked them this morning, and was surprised to find five or six new listings on each.  What was going on?  So I headed over to Redfin to check to see what Seattle had in the way of new listings overall (side note:  what did we ever do before Redfin!?).  What I found there was pretty interesting:

• There were 108 new listings in Seattle yesterday, versus 123 in the last three days and 350 in the last week.  The rate of new listings was double the average of the last three, seven, or fourteen day period!

• I figured this might be some sort of statistical anomaly - so I checked Bellevue too.  It looks almost exactly the same:

Checked Tacoma too. Same story:

I’m not sure what might be going on.  I thought that listings were more likely to come on to market early in the month, not late in the month - but they seem to have exploded on the last day of the month.  I see three possible explanations:

1. It’s normal.  The drop off just reflects the fact that homes sold.  (I don’t personally think this makes sense.  Homes aren’t selling all that quickly, and I don’t think it would explain the big difference between the one and 3 day average)
2. There was some sort of glitch in the feed from NWMLS and new listings didn’t get posted for a couple days
3. What I initially surmised:  that sellers had been waiting to see what happened with the Housing Recovery Bill and decided that since it was signed,  it was a great time to jump back into the market.

What say ye?  Any other perspectives?