Seattle Bubble

I received the following in an email from a reader:

About the condo—comment article… the real issue is not the really cheap/ugly/tasteless and likely unlivable condos (apartments). Nor is it the equally horrible “townhouses.” It is about greed and lack of public (government) oversight and control.

The developers wanted the money, the government wanted the taxes and fees. The people were too busy raking in the first real money the bulk of Seattle has ever seen in history… to say HEY, what the heck are you doing.

Sad, the city I have loved for years is nearly off my list. No wonder the lovely, polite, civil people have turned rude and nasty (in a Northwest passive-aggressive kind of way).

This kind of behavior and housing greed has ruined many cities in this country…

How about opening a dialog on how to take back our city and stop being passive-aggressive whiners and start being organized and vocal about KEEPING our fabulous city just that.

This is not about money or affordability, it is about planning and demanding our rights as residents of a wonderful, (almost) world class city and LIVABILITY.

So what do you think? Has greed and lack of government oversight ruined the culture of Seattle? If so, can anything be done about it, or is it too late?

I’m interested to hear what people think about this topic.

Picked this up from Aubrey Cohen’s blog. Lawrence Yun, Chief Economist for the NAR and well-known real estate seer has confirmed what our local press and real estate folks have know for years: Seattle really is special! It’s about jobs and Microsoft millionaires. Why didn’t we think about that?!?!

Seattle a “superstar” market
Seattle is becoming a “superstar” market, where housing costs may never settle back into historical relationships to incomes, a national analyst declared on Tuesday.

Speaking at the annual conference of the National Association of Realtors, association Chief Economist Lawrence Yun used comparisons of mortgage payments to incomes to put much of the nation in a positive light.

“If anything, middle America appears to be under priced,” he said.

Some coastal cities where the payments and incomes are less in balance may be overpriced, Yun said.

An article in Fortune magazine recently predicted Seattle housing prices would fall 19.5 percent in five years, while rents would increase 19.2 percent, to bring prices and rents back into their historic relationship. (See this story.)

But it’s also possible that some are joining the ranks of international cities like London, Paris, San Francisco and New York, where costs are less tied to incomes, he said. “Now I’m beginning to think: Miami, Seattle, are they becoming superstar markets?”

Many wealthy baby boomers are moving to Miami, Yun said. “In Seattle, Microsoft millionaires are there.”

While the Seattle area’s job market is still strong, Yun said the affordability crunch caused by rising home costs would slow sales and cause prices to plateau.

“I feel that the Seattle market is very healthy in terms of the local job market conditions,” he said. “I don’t see any prolonged price declines.”

Now remember, this is from the guy who has provided the following forecast of Pending Sales - in which even when he possessed 9 of the 12 months of data, he still couldn’t get the annual forecast right… (Chart courtesy of Paper Economy)

Addendum by The Tim:

Elizabeth Rhodes also made sure to point out the “superstar” quote as well. It’s also worth mentioning that this “superstar” thing seems to have become a yearly ritual. The first sighting of the label came a mere month after I started the blog, in September 2005. Then it was repeated a year later in October 2006.

It’s really just a variation on the refrain that Seattle is becoming a “world class city,” a claim that we’ve addressed here before, and I still don’t buy. Seattle’s nice, but it can be both a nice city and stupidly overpriced at the same time. In fact, I contend that is exactly what it is.

(Aubrey Cohen, Seattle Real Estate News Blog, 11.13.2007)
(Elizabeth Rhodes, Seattle Times, 11.14.2007)

If I were the egocentric type, I’d probably think that none other than the P-I’s Bill Virgin is a Seattle Bubble reader. A mere five days after I dispelled the notion that Seattle is “world class,” Bill delivers the exact same message to a broader audience in today’s column: So what makes a world-class city?

Is Seattle a world-class city?
…
During the heady days of No. 1 livability rankings and magazine covers and pop-culture references in music, movies and TV shows, Seattle got to thinking of itself as not just world-class but world-centric.
…
So should anyone care about whether Seattle is world-class?In fact, there is an aspect to world-class status that goes well beyond meaningless exercises in civic pride (or, some would argue, overly and unjustifiably inflated ego) that does matter, at least in the realm of business and economics.
…
Which brings us to the question of how Seattle stacks up as a world-class city in the business sense.

The answer: Maybe not as well as we used to believe.

Just about every discussion of the economic fortunes of this region focuses on two companies: Boeing and Microsoft — with considerable justification.
…
And after that, what other sectors are there of which we can boast world-class status? Natural resource businesses like timber and fishing no longer figure prominently in the regional economy, much less nationally. Seattle never did emerge as a biotech center the way boosters hoped.

Interestingly, one sector in which Seattle has emerged as a leader is one in which it had not traditionally been a significant player — retailing. Such is Starbucks’ status that it has influenced the direction of another giant, McDonald’s, while Costco on a national level has forced none other than Wal-Mart to react to it.

Still, the portfolio is a little thin in terms of making Seattle a world-class business center. That’s probably just fine with a lot of people. But if Seattle does aspire to world-class status as an economic development strategy, it’s got some work to do, beyond merely boasting how darn great we are.

If you have to tell everyone you’re world-class, maybe you really aren’t.

Ding ding ding! We have a winner. Bill “gets it.” Seattle is a nice city, but any way you look at things, it falls short of the “world class” title.

(Bill Virgin, Seattle P-I, 04.16.2007)

My car is so great. It has a built-in CD player, a driver’s seat with four independent adjustments, a tasteful spoiler, a spacious trunk, climate control, a powered sunroof, and gets over 30 miles to the gallon. It’s comfortable, good-looking, and fun to drive. My car is comparable to a BMW or a Lexus, and is a great fit for me. Did I mention how much I like it? I mean, BMW or Lexus are a good fit for some people, but they don’t really fit my style. You know though, it really is surprising how cheap it was for me to buy, considering how much other luxury cars go for these days…

So why am I rambling on about my car? What could this possibly have to do with home prices in Seattle?

Every once in a while someone tries to make the case that high home prices in Seattle are justified (or even that prices are too low) on account of what a swell city this is. Their argument goes something like this:

Seattle is so awesome! In fact, Seattle is so swell that it is completely reasonable to compare home prices here to cities such as New York and San Francisco, where homes are much more expensive! Seattle is after all a hip, up-and-coming world class city, probably even the hippest, most up-and-coming world class city around. So you see, it totally makes sense for home prices to shoot through the roof around here. We’re just catching up to other comparable cities.

I definitely agree that Seattle is a great place to live. Much like my car, Seattle has many attributes that I really like: low pollution, beautiful scenery, proximity to nature, and a decent job market, to name a few. That being said, comparing Seattle to New York or San Francisco is just as ridiculous as comparing my Saturn SL2 to a BMW or Lexus. They’re just not in the same league.

Although I already knew this was the case, since I don’t travel much (never been to New York, Boston, San Diego, and have only visited San Francisco once), it didn’t really personally hit home with me until my recent business trip to Chicago. Even though I only spent one afternoon cavorting about and seeing the sights, I was immediately struck with the impression of “this is what a real world class city looks like.”

These are a few of the things I noticed (and later researched) about Chicago.

Chicago

• Density: 12,604 people per square mile (source)
• Extensive Rail system, with 8 different lines running through the heart of downtown (source)
• Over 2,100 acres of waterfront parks bordering the downtown core (Lincoln Park, Millennium Park, Grant Park, Burnham Park), over 2,800 acres of waterfront parks total
• 16 major sports teams, with 28 total championship wins (source)
• Strong blues, soul, jazz, and gospel music scene. Birthplace of House music. (source)
• World famous government center (Richard J. Daley Center), world famous skyscraper (Sears Tower)

Now here’s how Seattle compares in those same categories.

Seattle

• Density: 6,901 people per square mile (source)
• Patchwork rail system, with an independent monorail, various street cars, disconnected, infrequent north-south routes, and various in-progress light rail lines. (source)
• 18.1 acres of waterfront parks bordering the downtown core (Waterfront, Myrtle Edwards, Olympic Sculpture), over 600 acres of waterfront parks total
• 6 major sports teams, with 4 total championship wins (source)
• Alternative music scene. Birthplace of grunge. (source)
• World famous landmark (Space Needle), well-known market (Pike Place Market)

If I had thought of it, I would have asked some Chicago natives whether they think Seattle is an “up-and-coming world class city.” I bet they would have laughed at me.

While I was researching this post, I came across the Wikipedia page on world class cities (or “global cities” as they are referred to on Wikipedia). It cites an “inventory of world cities” compiled by a university group in England. In their list, cities can have up to 12 points, with 10-12 point cities being considered “alpha world cities,” and so on down the list. Here is the summary of the US Cities categorized on their list:

Alpha world cities (full service world cities)

• New York (12 points)
• Chicago (10 points)
• Los Angeles (10 points)

Beta world cities (major world cities)

• San Francisco (9 points)

Gamma world cities (minor world cities)

• Boston (6 points)
• Dallas (6 points)
• Houston (6 points)
• Washington, D.C. (6 points)
• Atlanta (4 points)
• Miami (4 points)
• Minneapolis (4 points)

Seattle shows up way down the list with 2 points, having “some evidence of world city formation.” Another categorization is quoted that lists “well rounded global cities” (such as New York, San Francisco, and Chicago) and “worldwide leading cities” (including Miami, Atlanta, and Denver), but Seattle is nowhere to be found on their list.

I mention these lists only to demonstrate that when I say “Seattle is not comparable to San Francisco or New York,” it’s not because I have some grudge against the city that I call home. I am not alone in my assessment of Seattle as a small city. It’s not my biased opinion, it’s a fact.

Again, I want to reiterate that I like it here. Seattle is great, and I am happy to call it home. But let’s be honest, it is disingenuous to compare Seattle to New York or San Francisco. Let’s enjoy Seattle for what it is instead of pretending it is something that it’s not.

Much in the same way that I would not pay $40,000 for a Saturn sedan, I am simply not willing to shell out $450,000 for an average house in Seattle.

Update: It seems I’ve got an ally in Seattle P-I columnist Bill Virgin.

In the last few days I’ve run into a few comments in various discussions about Seattle real estate that have caught my attention:

Dean Jones, Condo Marketer:
“You might cringe at condos that sell for $2,000 a square foot. But it would be twice that in New York. We’re still, relatively speaking, a bargain.”

Bob, Urbnlivn commenter:
“When I look at the prices in New York, Tokyo, Hong Kong and London where new apartments can routinely fetch $1500 per sqft, Seattle still isn’t that expensive but it is getting there.”

Emkorial, Ars Technica Forum Member:
“Seattle is a MAJOR city. Like LA and NYC.”

What I find interesting about these comments is the tendency to justify Seattle home prices by comparing Seattle to large, major cities. Is this a valid comparison? Is Seattle really a major city like LA or NYC?

Usually when people refer to a city as “large” they are referring to the sheer population of the city. However, population density also has something to do with it, because otherwise any city that expanded their boundaries enough could claim to be a “major” city. So we could rephrase the question to ask: “What cities most closely match Seattle’s population and density?”

To answer that question, I made a list of a handful of major world cities and a number of large-ish US cities. Here are the population, land area, and population densities of each:

I have highlighted the six closest cities to Seattle in each separate category: population (orange), land area (green), and density (yellow). When looking only at population, Seattle is most similar to cities such as Las Vegas, Vancouver, Milwaukee, Portland, Cleveland, and Sacramento. When comparing land area, St. Louis, Cleveland, Baltimore, Milwaukee, Sacramento, and Las Vegas are all fairly close. Lastly, when you compare density (which the chart is sorted by above), Seattle is comparable to Los Angeles, Baltimore, Buffalo, Detroit, Cleveland, and Milwaukee.

There are two cities on the list that are similar to Seattle in population, land area, and density: Cleveland, Ohio and Milwaukee, Wisconsin.

Keep in mind that I am not attempting to compare all available statistics (such as income, economy, home prices, etc.) for these cities. I simply wanted to determine which cities Seattle should be compared to when discussing city size.

And now we know the answer: Cleveland and Milwaukee.

Update: Some people pointed out that my “highlight the three next highest and the three next lowest” method does not meet the rigorous scientific standard that the readers of this site deserve. Therefore, in the interest of science, I present this updated chart:

In this chart I have highlighted cities that are ±20% of Seattle in each category. As you can see, Cleveland and Milwaukee are still a close match to Seattle, with the city of Baltimore, Maryland joining the list.