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Bubble Link Roundup

Dang, my inbox has been flooded with stories lately. Here’s a recap of some of the more interesting ones related to the local housing market. Click below to read tales of rising rents, flaming hot office markets, expensive and stale listings, virtual property tours, disappearing mortgage options, booming condos, and more!

This one’s pretty long, so here’s a table of contents so you can jump straight to any of the stories that particularly interest you.

First up, it’s the usual scare-mongering from the Times about the coming renter-pocalypse. Only this time, it’s Snohomish that the renters will be priced out of. Because, you know, rental rates will just keep on skyrocketing, beyond anyone’s ability to pay. That’s how rent works.

Kirsten Orsini-Meinhard, Rental rates on rise:

Snohomish County apartment hunters, get ready to clean out your wallets.

Rents are ballooning in many cities, even surpassing increases in some areas of Seattle.

Lynnwood, South Everett, Edmonds and Mukilteo are leading the pack, with rents jumping by as much as almost 14 percent in the past year and reaching an average of almost $900 a month in some cities.

The New York Times has picked up on the fact that Seattle’s lateness to the economic recovery party, and lateness to the housing market slowdown have made it a great place to invest those commercial dollars—for now.

Kristina Shevory, Investors Lining Up for Pieces of Seattle’s Comeback:

The Seattle office market has made a spectacular recovery in the last few years. As a result many real estate investors want to park their money there.

Seattle is now on every investor’s shopping list. This year, the city was deemed the best place in the country to buy and sell office buildings in the Urban Land Institute’s annual survey of real estate professionals. Office vacancies are at a six-year low of 7.7 percent, and downtown landlords are getting as much as $50 a square foot annually, according to Grubb & Ellis, a real estate brokerage firm.

It is a big change from a few years ago. Seattle’s economy, hammered by the tech bust and a drop-off in jet orders after the Sept. 11, 2001 attacks, was on life support. Computer programmers, who had fielded multiple job offers only a year before, were suddenly out of work. Tens of thousands of people were laid off. Vacancy rates for offices topped out at 18 percent, rents sank to $26.30 a square foot and new construction ground to a halt.

Then, three years ago, Seattle emerged from its economic deep freeze. Companies resumed hiring, developers started building and the port handled record cargo shipments. The recession, which hit Seattle harder and lasted longer there than elsewhere in the country, was finally over.

The current construction surge might eclipse the last one. There are now 31 projects, with more than 7.5 million square feet of space, on the books in the city. In a previous construction boom that ended in 2001, more than four million square feet of office space was built.

I thought this one was interesting, because the columnist actually spent a few minutes to do some actual research and discovered the reason that all those trendy new townhomes have nearly unusable garages.

Bruce Ramsey, Seattle returns to an era of mattress-filled garages:

The newest trend in Seattle housing — the townhouse — has led to the rebirth of an old architectural form: the unusable garage.

An architectural form newly popular, the townhouse offers homeownership at less than the price of a comparable new house. This one sold last year for about $375,000. It is in a cluster of four, which is the most common package: two buildings, one behind the other.

One building is along a quiet street and the other on an alley. Each building has two townhouses and two garages. The right way to do the garages would be two facing the street and two facing the alley — the right way, that is, if the owners were expected to put cars in them. But this project has all four garages facing inward, into a constricted “auto court” between the buildings.

The unit I visited was next to the driveway connecting the auto court to the alley. To use its garage, the owner would have to drive from the alley and back into a narrow, one-car opening with a turn as if parallel parking. Exiting would require a similar maneuver.

The owners don’t do this. They park on the street.

Why build unfriendly garages? The builders say the city makes them do it. The city allows a townhouse project to have only one driveway to the street, and if the property abuts an alley, they have to use that.

Here’s yet another indication of the serious slowdown that is already underway down in Pierce County. Luckily for us, Seattle is special and won’t see this kind of stagnation. Ever.

Devona Wells, Dream homes, few takers:

Known for having some of the biggest houses and miles of shoreline, the Gig Harbor area holds another, less desirable distinction: Pierce County’s largest supply of for-sale homes.

Gig Harbor’s inventory of such houses and condominiums stood at 9.7 months in July, according to statistics compiled by Northwest Multiple Listing Service director Dick Beeson. The number measures how long it would take to sell every home that’s listed, putting Gig Harbor deep into a buyer’s market.

And hundreds more homes are planned.

Developers and real estate agents point to several factors that contribute to today’s depth of supply beyond a general market malaise, including prior buyer hesitation over construction of the second Narrows bridge and a tucked-away location that makes it difficult to commute beyond Tacoma.

CNN Money makes a big deal about this $3.1 million home and all the “interest from prospective buyers” in an online world that I highly doubt people with that kind of money spend their time in. In any case, it should be interesting to keep an eye on the house in question, to see how long it sits on the market, and how much it eventually sells for.

Jessica Dickler, Real $3.1M mansion causes a virtual stir:

Gone are the days of browsing through the newspaper in search of houses on the market. Now, most potential buyers look online and and view slide shows. But soon they’ll be walking virtually through homes and even sneaking a look at what’s in the refrigerator.

That’s what Coldwell Banker is banking on. The real estate firm has created a brightly colored, three-dimensional reproduction of a $3.1 million property on Mercer Island, Wash. in Second Life.

The newly constructed house Mercer Island, currently listed for sale by one of Coldwell Banker’s Seattle outposts, is attracting a lot of interest from prospective buyers within the virtual community, despite its hefty price tag.

Rolf Boone of the Olympian gives us a real-life example of the kind of difficulties people are now encountering as they try to find financing for their home purchase.

Rolf Boone, Options for mortgages narrow in South Sound:

Nate and Lee Szczublewski of Olympia experienced firsthand the rapidly changing requirements of qualifying for a home loan when they bought their first house in May.

The Szczublewskis, who used to rent an apartment in Hattiesburg, Miss., moved to South Sound to be closer to Lee Szczublewski’s parents.

They moved here in October and soon found their first home with real estate agent Ted Leland of Abbey Realty.

Qualifying for a home loan, however, wasn’t easy for the Szczublewskis because of increasingly tighter lending standards, or the outright elimination of certain riskier mortgage products.

“It felt like it changed a million times in three months,” Lee Szczublewski said about their mortgage.

The Szczublewskis, who have good credit, first qualified for a mortgage that didn’t require a down payment, Leland said.

But that didn’t last long, he said. Suddenly, the Szczublewskis needed to come up with a down payment of five percent, he said.

“Another week and they would’ve had to put 10 percent down,” Leland said.

Even over in Kitsap, it would seem that condos are booming. One wonders how many of these purchases are by “investors.”

Josh Farley, Can Kitsap’s Condo Boom Continue?:

The numbers affirm what those frequenting downtown waterfronts on Bainbridge Island and in Bremerton already know: Condos in Kitsap, like everywhere else in Washington, are real estate’s hottest ticket.

The median condominium price in Kitsap County jumped from $186,450 a year ago to $320,075 in July, a 72 percent increase, according to Northwest Multiple Listing Service numbers released last week.

Of course, those numbers are helped by projects like the 180-unit Harbor Square on Bainbridge and the 78-unit Harborside in Bremerton, which put plush, upscale dwellings a short walk from Seattle ferry runs.

Lastly, I will leave you with an amusing pair of syndicated headlines that ran together in the Seattle Times’ weekend real estate section.

Market meltdown? Try a correction
Mortgage-industry shakeout is really a return to normal

Be careful what you wish for. A true “correction” and “return to normal” would shave at least 25% off of today’s home prices in King County.

(Kirsten Orsini-Meinhard, Seattle Times, 08.08.2007)
(Kristina Shevory, New York Times, 08.08.2007)
(Bruce Ramsey, Seattle Times, 08.08.2007)
(Devona Wells, Tacoma News Tribune, 08.05.2007)
(Jessica Dickler, CNN Money, 08.09.2007)
(Rolf Boone, The Olympian, 08.12.2007)
(Josh Farley, Kitsap Sun, 08.12.2007)
(Jack Guttentag, Seattle Times, 08.11.2007)
(Dan Seymour, Seattle Times, 08.11.2007)

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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

17 comments:

  1. 1
    Garth says:

    The WSJ today has a fantastic article called One Family’s Journey
    Into a Subprime Trap

    http://online.wsj.com/article/SB118722072707499017.html

    It had some great overall numbers that I had not seen before:

    “7% of 32 million U.S. households studied as of December owed more than their homes were worth, based on computer estimates of the property values. An additional 4% had home equity of 5% or less.”

  2. 2
    rose-colored-coolaid says:

    This is all tongue in cheek:

    First, Gig Harbor is selling poorly because they have a toll bridge. Prior to the new Narrows opening, we heard nothing. Now it cost $3 to cross, ergo the market collapses. I offer this as a warning about the dangers of a toll on 520.

    Second, of course the Szczublewskis cannot get financing. I can’t even spell or pronounce that name. How could I verify they even exist? How is this any different than Mister Mxyzptlk

    Finally, this is a wonderful headline Tim : “Market meltdown? Try a correction”. Yes I would like to try a correction. Thank you very much. Does it cost extra, or does it come with the Market meltdown?

  3. 3
    EconE says:

    Damn. That is a boatload of articles Tim.

    I love the one about the townhomes that don’t use their garages. How true. I have a friend that has a townhome just north of 85th between I-5 and Aurora and he also parks on the street. In fact…it’s easier to street park around the 2200 complex than it is to find parking up there.

    Oh…and can I get a side order of fries with that Market Melt(down) ;o)

  4. 4
    wtf says:

    Wow, that Virtual Home thing looks pretty hokey. I wonder if they have a Pink Pony avatar.

  5. 5
    Orion says:

    Yeah, check out the pics of the Virtual Home compared to the real one, looks pretty lame in computer graphics, everything looks so… fake. It’s probably pretty cool for a video game, but I doubt it will make any difference in the sale. I’m suspicious of the claim of interest from these so called “prospective buyers within the virtual community.” Tim’s right, anyone who can really afford the mortgage on a 3.2 million dollar home is probably not wasting their time in Second Life. Even if there were a handful, what are the odds they would want to buy that particular house? I think having those ipix views where you can spin around inside rooms can be effective, because you can see that actual room (with bit of distortion, but not too bad). Plus you don’t have to join a video game community and figure out how to work inside it. Second Life is just not meant to be a marketing tool. It did get them some press though, so mission accomplished there, but the second seller to try this will have wasted their money.

  6. 6
    faster says:

    Of course there’s a pink pony avatar for Second Live. You can see (and buy) it here:

    You can see and buy it at the SL Exchange.

    http://www.slexchange.com/modules.php?name=Marketplace&file=images&ItemID=147498

  7. 7
    Nude says:

    What is with all the Pink Pony stuff?

  8. 8
    MisterBubble says:

    Why build unfriendly garages? The builders say the city makes them do it. The city allows a townhouse project to have only one driveway to the street, and if the property abuts an alley, they have to use that.

    Wait…why is it that the bureaucrats can so effectively regulate the number of driveways that our modern row-housing must have, but they can’t regulate the width of those driveways, to make sure that they’re usable? This story doesn’t make sense.

    I don’t know about the rest of you, but I smell a kernel of truth, buried in a big ol’ sewer snake of bullshit. If I had to guess, I’d wager that the city “requirements” were heavily influenced by the lobbying of certain development interests….

  9. 9
    wreckingbull says:

    MB is correct.

    The right way to build these quad-plexes is to have them sit on a high foundation above the parking area, so there is a single, open garage with 4 places to park.

    For the builders, this would be a much more expensive way to build, and it also loses a bedroom. (They all have a third bedroom behind the garage) The builders would then only be able to market a 2-bedroom which costs more to build.

    Parking is becoming an real nightmare. For every townhome that goes up, there are 4-8 more cars getting parked on the street. Take a street in Ballard such as 57th, between 24th and 30th, and you now have dozens of these things on a street which used to only have single family homes. It is getting ugly.

  10. 10
    Chris says:

    Can’t do it. Wouldn’t be fee simple. would have to pay condo insurance, which is a very high fixed cost so the cost per unit it astonomical

  11. 11
    MisterBubble says:

    “Parking is becoming an real nightmare. For every townhome that goes up, there are 4-8 more cars getting parked on the street. Take a street in Ballard such as 57th, between 24th and 30th, and you now have dozens of these things on a street which used to only have single family homes. It is getting ugly.”

    Yup. This p*sses me off like nothing else. Mayor Developer won’t be happy until he’s turned every neighborhood into the dysfunctional mess that is Capitol Hill.

    Whyever would we need parking in Seattle? When everyone can ride one of their pink ponies to work along the Burke-Gilman, cars will be obsolete!

  12. 12
    redmondjp says:

    You do realize that the purposeful lack of parking at these condo/townhome developments is occurring with the full blessing of the Seattle City Council and under the watchful, approving eye of King Ron, don’t you?

    Their not-so-secret plan is to make it so hellish to drive/park a car in the city that it will force people to use alternate forms of transportation. Yeah, that’ll work!

    Plus, as has been mentioned, it allows the developers to make more money.

    And over here in Redmond I have seen the same setup on those townhomes facing each other, with a single narrow driveway into the complex and the garages facing each other. If you drive a Honda Fit, you may actually be able to pull into the garage w/o backing up and straightening out (and keep in mind that the Fit is a full-sized car in some third-world countries).

  13. 13
    Grvetti says:

    Their not-so-secret plan is to make it so hellish to drive/park a car in the city that it will force people to use alternate forms of transportation. Yeah, that’ll work!

    Smith Tower condo conversion… nuff’ said. Last time I checked, Smith tower had no underground parking complex… maybe I’m wrong, but I doubt it. Even if they had condo’s starting at $200,000, I still wouldn’t move in because it basically means you’re burdened with a car situation that isn’t feasible. Personally, its not my idea of good time walking to the corner store in Pioneer square at night…

  14. 14
    wreckingbull says:

    Chris,

    That is excactly my point. Townhome owners are getting a free ride today when it comes to the real cost of living in these places. When the piper will be paid is when joint maintenance or repair work is needed and there is no single insurance policy nor maintenance fund. It will be a real mess.

  15. 15
    The Tim says:

    Grvetti said,

    Last time I checked, Smith tower had no underground parking complex…

    So what you’re saying is that you have a sinking feeling about finding parking near the Smith Tower?

    Wokka wokka wokka.

  16. 16
    uptown says:

    would have to pay condo insurance, which is a very high fixed cost so the cost per unit it astonomical

    If it looks like a condo & smells like a condo…
    They have no problem building townhomes as condos in CA. It’s long past time for Seattle and WA to get their act together and pass a standard condo law that works, and stop building these future slums.

  17. 17
    Chris says:

    …I wonder how long it will be until Steinbrueck wants to landmark it

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