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Has Seattle Reached a new Plateau?

A reader going by the name Angie has been making some comments on a couple of posts the last few days that merit further discussion:

…the fact is that in some places in the US all but the very rich have been priced out forever! NYC, coastal southern California, San Francisco, etc, etc. It’s been that way for a long time…but it wasn’t always that way. At some point whatever factors converge, demand forever exceeds supply, and the rest is history.

We’re landlocked like SF and the weather is arguably better. The local economy has diversified enough to keep the town afloat consistently. I’ve long thought that the prices here are headed into San Francisco territory–out of reach of the average Jane and Joe once and for all. Priced out forever!

I think housing in Seattle really is entering the realm of “permanently unaffordable” to average earners…

“Serious limited supply” is exactly what I’m talking about. Unless we get housing density like New York City, there is no way the city of Seattle is going to be able to house all the people who are projected to come here in the next 10 years. Supply is always going to be less than demand.

Angie touches on a number of points that have been discussed here before. The crux of the argument Angie is presenting seems to be that housing supply is not keeping up with demand, and as a result Seattle has crossed a threshold of affordability, reaching a sort of permanently high price plateau. (Angie, if I have mischaracterized your argument, please correct me.)

I have a few problems with Angie’s hypothesis (most of which are covered in the posts linked by Matthew in reply to Angie).

First, I don’t think you can reasonably argue that “supply not keeping up with demand will keep prices rising” while simultaneously ignoring the fact that during the years of highest appreciation, supply exceeded demand. In fact, from 2000 to 2005, an average of approximately 841 housing units were constructed in King County every month. During that same time frame, only 339 new households (net) moved to King County. The increase in supply exceeded the increase in demand (which by the way, was not driven by job growth) by more than double, Seattle was in the midst of the dot-com/9-11 economic fallout, and yet prices increased by a healthy 7% per year (average).

The only explanation for that is easy lending + speculation. If prices were inflated by psychological factors, why would (presumed) economic factors keep them at an already artificially high level? Who is to say that the next 10-20 years of actual “positive fundamentals” hasn’t already been factored into today’s prices, giving them plenty of space to fall back down to earth?

My second issue with Angie’s tale is the assumption that supply will not be able to keep up with demand in the near future (10 years). Consider the 6,000 to 10,000 new condos that will hit downtown by 2010. Drive just a few minutes out of Seattle proper, and consider the dozens and dozens of cookie-cutter housing developments in progress scattered throughout south Snohomish County and east King County. Are there really going to be that many people moving here? Show me the data, because as I showed above, the only hard data I can find shows that construction is exceeding population growth by a good margin. Construction in the Puget Sound seems to actually be accelerating, not tapering off.

Another problem is that Angie’s comments seem to be referring solely to Seattle proper. While the city itself may be somewhat “landlocked,” King, Pierce, and Snohomish counties are fairly well-connected to each other, geographically speaking. Furthermore, outside of Seattle and Bellevue (but still inside the Urban Growth Boundaries) the counties are nowhere near capacity as far as single-family home development goes. Look out your window the next time you fly out of Seatac, and compare the density below to what you see as you fly over the north-east coast, or the south SF Bay Area. There’s simply no comparison.

In my opinion, the easiest way to see that things are seriously out of whack is to look at the price to buy compared to the price to rent. In a sustainable market, the price-to-annual-rent ratio for housing is generally 11 or 12 (source). In King County right now it’s around 24.

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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.

57 comments:

  1. 1
    MisterBubble says:

    From Angie’s original post:

    Unless we get housing density like New York City, there is no way the city of Seattle is going to be able to house all the people who are projected to come here in the next 10 years. Supply is always going to be less than demand.

    This is just silly.

    First, Angie assumes that we need density “like New York City” to support the future Seattle population. That’s an absurd overstatement, unless Seattle is projected to overtake Manhattan as the cultural, financial and urban capital of America in the coming decade.

    Next, note the most important word in her post: projected. A lot of people (myself included) think that Mayor Nickel’s population-growth “projections” are politically motivated and unsupported by fact (at worst), or naive extrapolations from the dot-com boom (at best). In any case, there’s no historical basis for the numbers that I’ve heard…and certainly no historical basis to believe that housing supply won’t be able to keep up.

    Finally, “supply is always going to be less than demand.” Obvious twaddle. Tim deals with this from a factual perspective very well, but just from a logical perspective, this is the equivalent of arguing “because I said so.” Great for toddlers, not so good for adults….

  2. 2
    Marc says:

    “Who is to say that the next 10-20 years of actual “positive fundamentals” hasn’t already been factored into today’s prices, giving them plenty of space to fall back down to earth?”

    I highly doubt that the residential real estate market as a whole, let alone at the local level, is sophisticated enough to price in 10-20 years of anything, let alone anticipated “positive fundamentals.” The reality of the real estate word we now live in is that residential markets are driven by individuals making seemingly long term decisions on a relative whim.

    I do not doubt for a second that “easy lending” is the leading cause of this change, however, that should not cloud the underlying new reality: the housing market has fundamentally changed and will never be the same again because developments in technology have dramatically increased the knowledge base on which decisions of homeownership and lending are made. People can easily find houses to buy and lenders to lend while lenders can much more easily and rapidly qualify borrowers and collateral and more importantly, obtain the capital necessary to fund loans. As long as the cash spigot is turned on, the real estate market will, on balance, go up. Periodic re-trenching is normal and to be expected.

  3. 3
    Affluent Bitter Renter says:

    “We’re landlocked like SF and the weather is arguably better.”

    LOL! I grew up near Palo Alto. I like the Northwest, but to argue that the weather is a plus vis a vis the Bay Area is ludicrous.

  4. 4
    Bob Barker says:

    I actually think that comparisons with the SF Bay Area are quite useful. They also represent something of a double-edged sword in this case.

    On the one hand, it is indeed the case that housing prices in the most desireable parts of the Bay Area have become unaffordable for anyone making even significantly above the median income. This is particularly true of SF, the South Bay (aka Silicon Valley) and Marin County. Still, there is some reason to question if these price levels are sustainable. Housing prices have already begun to fall in SF and other areas of the inner Bay Area. Perhaps more importantly, there has been an utter collapse in the market in the far outer suburbs which I find foreboding, to say the least.

    In any case, the notion that anything is ever permanent in the world of economics is on its face ridiculous. There is a tendency to always extrapolate from very short-term experience in order to make generalizations that, if considered in a longer time frame, are completely unwarranted. This seems to me to be the more fundamental problem with statements about “permanent unaffordability.”

  5. 5
    Affluent Bitter Renter says:

    Yeah – if you think that prices in the Bay Area have reached a permanently high plateau, a family member has a condo in Fremont (the Bay Area city, not the Seattle neighborhood) that she will happily sell to you at the “permanently high plateau” price.

  6. 6
    biliruben says:

    People can easily find houses to buy and lenders to lend while lenders can much more easily and rapidly qualify borrowers and collateral and more importantly, obtain the capital necessary to fund loans. – Marc

    Anyone who cares about “ease and rapidity” when the subject regards lending of hundred of thousands of dollars is someone I want dup.., er, do business with!

    Marc, are you in the market for a Shoreline rambler, per chance? Bridge in Brooklyn? Swamp land in Florida?

    And if you haven’t been paying attention, that spigot is barely trickling these days.

  7. 7
    SunTzu says:

    I would ask what makes NYC and SF the way they are?

    The three boroughs of NYC has 8 million people. It is the indisputed financial capital of the world. Let’s just name off some companies: NYSE, NASDAQ, Goldman Sachs, Lehman Brothers, JP Morgan, Citibank… that is just a few top companies. Let’s not forget the hedge funds and the legal industry (NYC is also legal industry’s capital) that supports that city. Not to mention GE/NBC, McGraw Hill, and all other media, marketing (Madison ave) companies. So I would say you have some really top notch companies around to support new comers and pay them really great salaries to buy expensive houses and condos.

    SF has 4.1 million people. Again, let’s name off some companies around that city: Google, eBay, Apple, Cisco, Sun, Intel, Yahoo, AMD just to name a few. On top of those the greater SF has some respectable financial companies as well: Barclay, BoA, WellsFargo. Plus a ton of legal firms: Morrison Foster, Heller Ehrman. World class univerisities: Stanford, Berkeley. Plus the resulting spin-off startups from the labs of those universities and let’s not forget the venture capital firms that incubates those startups. Every one of listed above can provide a new comer entrepreneur with millions of dollars and thus buying power for houses, condos…..

    Seattle has 3.3 million people. What do we have? Boeing, MSFT, Amazon, Starbucks, and WaMu. Boeing is manufacturing guess how well it pays? Starbucks is the coffee equiv of McDonald’s–totally service. Amazon is a bright spot, while it creates some software jobs but it’s no better than a webberized Target. That leaves MSFT which is a monopoly but its not minting millionaires like it used to. WaMu is no better than a juiced up S&L thrift and mind you that stock is also in holding pattern.

  8. 8

    BLOGGERS ON SEATTLE BUBBLE HAVE ALWAYS MADE A POINT: YA CAN’T RENT NEW PURCHASES OF OLD HOMES IN SEATTLE FOR A PROFIT

    Once you cross that magic $2000/mo line, your renters dry up.

    Why should they pay your $3500-4500/mo newer mortgage on a $600K home, when they can buy a condo or suburb home in the $2000/mo mortgage range?

    It would be money down the proverbial sewage line. San Francisco has the same problem, rents can’t go up. The only landlords with $600K homes that can afford it, are ones that bought 10-20 years ago, and $2000/mo barely covers even their costs.

    Its just the costs of maintaining old delapidated infrastucture housing [most of internal Seattle] get’s totally cost prohibitive, even for landlords collecting 1/2 rent that bought in years go.

    Have any of you tried to modernize an old 1920s [let alone 1950s house] house to take new appliances without having to tear the walls apart and re-wire the whole house, let alone the rusted plumbing throughout….ya might as well blow it up and build a new glueboard home in its place!

  9. 9
    Chris says:

    I think a factor missing here is housing is becoming more expensive because of hidden inflation that shows up in construction prices – namely transportation costs. If replacement costs continue to rise at the same rate relative to income, most new jobs will not have the incomes needed to support new housing in high-cost, infill development. while unit prices may not move much, price per SF will have to increase, and people will live in less space

  10. 10
    Old Ballard says:

    Thank you Sun Tzu,

    Your break down of the three cities is outstanding. I lived in NYC for two years. I lived on the lower east side on Ave. D off St. Marks. I was there for the Thompson Square riots when the Mayor evicted 10,000 homeless people from the park. I doubt we need that kind of density. Trying to compare Seattle to NYC is like comparing the Metro Politian Museum of Art to the Seattle Art Museum. The only reason anyone in Seattle makes the comparison is that they’ve never been to NYC. I would like to see a break down of the top ten or twenty cities in the United States. What would be on the list?

    • Number of Fortune Five Hundred Company.

    • Medium individual income.

    • Medium household income.

    • Total private capital.

    • Rate of home ownership.

    • Rental rates.

    • Number of income earners per household.

    • Population growth.

    I’m sure the list could go on and on.

  11. 11
    The Tim says:

    That would be an interesting read, for sure. Probably a lot more work than I’m interested in doing, though. It sounds like what you’re looking for might be similar to the things I found when I was researching this post, which focused primarily on Seattle vs. Chicago.

  12. 12
    John says:

    Seattle is no NYC or SF or LA but it is a top 15 tv market.

    It is possible that the devaluation of the US Dollar, which is inflation, contributes to the inflation of home prices. USD has lost 40% of its value in the past few years. Foreigners have certainly bought up many apartments in NYC. I don’t know about here though.

  13. 13
    urban exile says:

    Angie overlooked a critical differentiator between Seattle and NYC or SF…rent control.

    In NYC, it’s widely assumed that rent control imposes an artificial scarcity that only exacerbates the city’s high rents and real estate prices (don’t know if this is also the case in SF or not?).

    So, besides a growing housing supply that exceeds population growth, we also have the free market that should ultimately find an equilibrium.

  14. 14
    JohnnyBigSpenda says:

    I think its about ‘cheap money’…. people bought because they could. Thats what american’s do. There’s no reason to buy a $55,000 SUV, but they do. There’s no reason you ‘need’ that house in Wallingford… but many think they do. When rates were 4.75% and now they’re 6.75% for the same thing, the price of the exact same house just got a lot more expensive to carry… With less options like interest only and 5/1 ARMS with discounted rates, its obvious that cheap money has generally become more scare. The dip in house prices will come, the people who were living on the edge during the good times will definitely not make it through the bad times… everyone else will end up pissed that they bought their place for too much, but eventually, they’ll sell and get over it… its easy to forget if the cash from your corporate job just keeps rolling in and you’re making payments on your next ‘correctly priced’ house… whatever that is.

  15. 15
    MacAttack says:

    Sure, Seattle’s weather is better than SF… if you’re a slug :)

  16. 16
    jon says:

    Where did you get the numbers for new households? I ask because the average household size is going down, so the number of houses used for the same population is going up.

  17. 17
    Sen says:

    About rent control, yes, there is also rent control in San Francisco, with a similar effect as NY. There are many rent-controlled apartment buildings that more and more seem to have three distinct groups of tenants: 1) people who’ve been living in their apts for a long time and will continue to live there for a long time especially since their rents are so much cheaper than the monthly payments for buying anything, 2) well-paid people (during the doc.com boom they all seemed to be in high tech) moving in paying MUCH higher rents than group 1, and 3) young people who stay a little while.

  18. 18
    stephen says:

    I doubt many owner occupied houses are bought for investment reasons at this point. Only a moron doesn’t think that the odds are likely that prices will go down and definitely against prices going up anytime soon.

    Many of us cringed at buying in a crappy market, took our time and tried to get the best deal we could.

    If/when it goes down we can go for a tax break :-)

  19. 19
    Angie says:

    Damn! Come back a few days later to find Tim’s got a twist in his knickers!

    You’re not mischaracterizing my arguments, Tim—but your counterargument misses the target.

    I’m talking about city of Seattle—within in the city limits. You counter with population numbers about King County. How do those break down by municipality?

    Bob Barker (loved you on The Price is Right, BTW) draws the right parallel to the Bay area. Whatever’s going on w/ RE prices in the city limits of SF is nothing compared to what’s going on out in the ‘burbs down there. Same principles are at work here: the city is the main economic engine, lots of people need to commute to downtown for their jobs, living close to the center is attractive because you don’t have to sit on the freeway for 3 hours a day. Demand to live close in is always going to exceed supply, not least because (bless Sound Transit’s heart for trying) we will never have a public transit system that will efficiently move people into downtown from the outer ring suburbs.

    I thank my lucky stars every day that Seattle is NOT New York City and indeed we’d be out of here in a proverbial New York minute if it comes to that. But all the snark about Seattle’s economic base forgets to mention that we’re also a major port city and a biotech hub. And, again, the biggest city in the NW quadrant of the country. If someone wants to go to medical school in Wyoming, Alaska, Montana, or Idaho, they come here. Trauma cases from all over this quadrant of the country get airlifted here. The UW just announced that grant money brought in by researchers exceeded $1 billion/year for the first time.

    Affluent Bitter Renter (whose pseud cracks me up) makes the same mistake as Tim. Yep, weather in Palo Alto is definitely better than here. But SF proper has different weather than Palo Alto, more like the coast, foggy and cool all summer. (Now that I think about it, PA’s weather isn’t dissimilar to eastern Washington–a lot dryer because of the mountains keeping it away from the water.) Here in Seattle, unlike SF, we generally get some sun in the summertime. Last night’s Biblical torrent notwithstanding.

  20. 20
    BelRenter says:

    As a New Yorker (at heart if not in location) I don’t understand what Angie means by all but the rich being “priced out forever” in NYC. One of the reasons I can’t bring myself to buy in Seattle right now is the cognitive dissonance that results when I consider I can buy a SFH for the same price in my old Brooklyn neighborhood!

  21. 21
    The Tim says:

    Jon, decreasing household size was factored in. I cited my reference for the figures (which was the US Census Bureau) in the original post titled “Big Picture: Supply vs. Demand, linked with the words “supply exceeded demand” in the post.

    Angie, I’m heading to bed now, but I’ll respond to your comment in the morning.

  22. 22
    supercanuck says:

    UW absolutley is the best research institution in the country, but OHSU (in Portland, OR) is ranked #4 nationally in primary care. UC Denver is #3.

    http://grad-schools.usnews.rankingsandreviews.com/usnews/edu/grad/rankings/med/brief/mdprank_brief.php

  23. 23
    Dave says:

    I woudl like to comment on the statement that Seattle is “Biotech Hub”. It is not. It is hyped here – and MANY other places – that biotech will come in and we will become a major industrial center. We will not. We are miniscule compare to the liek of San Fran., New Jersey, San Diego, etc. Anyone who puts the idea that Seattle wil eb saved by Biotech is delusional. We lost 3 of the 4 largest biotech employers due to buyouts last year, and AMGEN , the other major biotech in Seattle, is laying off 10% of their enitre workforce. Add to that info that Biotech employs really small numbers of peopel when it does exist means Seattle is nto a hosuing magic bullet. Here it is a niche market for maybe 6-8,000 people total (unless you want to discuss the chronically underpaid univeristy employees). Ask anyone in Biotech how easy it is to get a job in Seattle – they will reply that it really isn’t.

    Dave

  24. 24
    Bob Barker says:

    It seems to me that a distinction needs to be made in terms of the type of housing we are talking about. I’ll concede this much to Angie: SFHs in places like Wallingford and Queen Anne are insulated from significant depreciation by their HIGHLY desireable location and by the fact that not a lot of new single family houses are being built–or can be built–in those neighborhoods. I would not, however say the same thing about condominiums or houses even slightly further out (think Lake City or Northgate). Condos are really vulnerable in this regard because lots of them can be built on very small plots of land. The going rate of $400 – $500 per sq. ft. or even more in some neighborhoods seems totally out of whack.

    Also, I would point out that housing inflation here is unlikely to reach the levels seen in the Bay Area in the near term, or even the long term. First, because the current crisis guarantees a long period of stagnation, if not outright deprection. And second, because, lets face it, Seattle is not the Bay Area. The summers in SF notwithstanding, I don’t see how one can even begin to compare Seattle weather with the BA. For one thing, the darkness here in the winter is just a non-starter for so many people I know.

    More importantly, as many others have noted, the infrastructure for growth in the BA is incomparably stronger. Someone above posted about UW being the best research institution in the country. That statement is just patently false. The BA has both Berkeley and Stanford, not to mention the top-ranked UCSF medical school. The red-herring about federal research grants has to do more with the fact that UW has a med. school and Berkeley doesn’t.

    I think someone else summarized earlier much better than I could the differences in the business infrastructure, and the bottom line is pretty much the same as with research institutions.

    Finally, as I noted before, prices are coming down even in overpriced SF. How much? Probably not dramatically, but I could easily imagine several years of stagnation.

  25. 25
    Sen says:

    “the housing market has fundamentally changed and will never be the same again because developments in technology have dramatically increased the knowledge base on which decisions of homeownership and lending are made.”

    I wonder myself to what extent the housing market has fundamentally changed, but this argument sounds like what used to be said about the stock market, that it had fundamentally changed because the internet revolutionized access to information. The problem with this is that easy access to information doesn’t seem to make people more rational, because so much info is worthless.

  26. 26
    Marc says:

    Sen,

    I agree that more info does not make people more rational, in fact far from it. My point about the housing market being fundamentally changed is that home ownership today is completely different from the first 9 decades of the last century. This is due largely to expansion of home lending which is due, in turn, to a number of different reasons ranging from anti-discrimination laws and federal involvement in secondary markets to greater private involvement in secondary markets and better underwriting technologies. The reality is that more and more people now realize that the “American dream” of homeownership is feasible, in particular members of minority groups.

    The industry needs to learn from its “irrational exuberance” of the last several years and adhere to more reasonable practices (to put it mildly). But make no mistake, the zero down loan at 5.99% is not got gone forever. Now that buyer’s have tasted that low hanging fruit, they’ll eventually clamor for more. And some lender somewhere is just itching for a chance to sell it to’em with a sweet little yield spread.

  27. 27
    Consistently Missing One Thing says:

    What all of you gleeful “the sky is falling and home market is crashing” posters consistently over look is that IN CITY homes (yes, that’s Seattle) are virtually bubbleproof. I understand that the guy that runs this blog lives in Kenmore. You’re probably still pissed that you couldn’t live in a desirable in-city neighborhood like Wallingford, Ballard, Madison , Queen Anne, Phinney, Ravenna etc. I’d be mad too if I was stuck out in the sticks. These neighborhoods are more bubble proof than towns like yours because there is no more room to build and they are close to downtown.

  28. 28
    The Tim says:

    Angie said,

    You’re not mischaracterizing my arguments, Tim—but your counterargument misses the target.

    I’m talking about city of Seattle—within in the city limits. You counter with population numbers about King County.

    I’m not sure how you think that I “missed the target,” when I specifically addressed the issue of Seattle proper vs. King/Sno/Pierce in the post. What matters to me is now what happens in specific highly localized neighborhoods, but what goes on in the region as a whole.

    Your average homebuyer isn’t so picky about which neighborhood they live in that they will pay 2-3x the price for a house. Obviously the neighborhoods that are primarily for the wealthy today will remain so in the future. If that’s your whole point, I guess we agree.

  29. 29
    B&W Nikes says:

    Good point Sun Tzu. Among other things (oh maybe like both those cities have a track record of building urban homes for more than a century where Seattle has about ten minutes of sketching), comparing Seattle to NYC or SF forgets that they were both international financial centers pre-dot anything. Those initial numbers were even a little too nice to show the more extreme differences. Just look at the huge difference in real population density:
    Seattle pop. 582,484 @ 6,901/sq mi
    San Francisco pop. 744,041 @15,834/sq mi
    NYC pop. 8,214,426 @ 27,083/sq mi
    …and adjust the pricing with demand for space accordingly adding in that those two cities are jammed full of high paid professionals who manage the wealth and operations of huge international entities. There’s no reason Seattle should suddenly approach either of those two cities in cost. Maybe we fancy ourselves in the position of being a wealthy resort community with the same kind of artificial status driven prices I think we’re a little too big of a town for that. It doesn’t mean we ain’t got what we’ve got, because nowhere else comes close. I’d just like someone to explain where the huge infusion of cash will come from to support the pricing here in mudtown if it’s going to continue to stay high.

  30. 30
    biliruben says:

    But make no mistake, the zero down loan at 5.99% is not got gone forever. Now that buyer’s have tasted that low hanging fruit, they’ll eventually clamor for more. And some lender somewhere is just itching for a chance to sell it to’em with a sweet little yield spread.M

    For the sake of our country’s future, I sure hope you are wrong, Marc.

    The waves of millions upon millions of foreclosures and destroyed dreams and family financial ruin rushing like a tidal wave towards the shores of the American Dream will be a horrific wake-up call that when you try and get something for nothing, you often end up with worse than nothing.

    Save some money, THEN buy a house.

  31. 31
    The Tim says:

    CMOT said,

    I understand that the guy that runs this blog lives in Kenmore. You’re probably still pissed that you couldn’t live in a desirable in-city neighborhood like Wallingford, Ballard, Madison , Queen Anne, Phinney, Ravenna etc. I’d be mad too if I was stuck out in the sticks.

    Hah. That’s rich. Yeah, I live in Kenmore. At the moment it’s a matter of convenience, because of certain huge financial benefits. If I could live anywhere in the Seattle area that I wanted though, I’d have at least 5 acres just north of Woodinville, in unincorporated Snohomish County.

    For me to want to buy a home in King County it would have to be a combination of an incredible house on a stunning lot for a ridiculously low price. I’m just not interested in putting down roots in a county with such a messed up government and extreme public nanny mindset. But that’s a topic for other blogs.

  32. 32
    disgruntledengineer says:

    Sorry to nitpick but Harvard is the best medical research institution in the country, UW is #6 or so. However, for primary care, UW is the best in the country. It’s been this way for at least 6 years.

  33. 33
    Marc says:

    biliruben,

    No thanks on the Shoreline rambler. I’m sure it’s nice but I’m quite happy in Magnolia. It’s taken stints in the U-District, Wallingford, Kirkland, Ballard, and most recently, three years on Queen Anne, to realize you can’t beat Magnolia.

    Here’s hoping Magnolia was inadvertently left off of Consistently Missing’s “bullet-proof” list of close-in neighborhoods.

  34. 34
    biliruben says:

    Magnolia?

    Sorry I didn’t realize you were in your 80s, Marc. Those fit octogenarians are hot! And lookin’ for love.

    Go get ’em, tiger.

  35. 35
    Bob Barker says:

    Sometimes I find the Seattle notion of what “in-city” means to be completely lacking in perspective. I’d include the citation from CMOT if I knew how to do that with this program. In any case, you’ve got to have a really short-term perspective to call living in Kenmore as living “out in the sticks.” Not really travelled much, eh? If you look at the major metropolitan areas in California, they go on for miles and miles. SF to SJ is 50 miles or so, and almost the entire region is now considered “in city.” The fact that you can’t build any more SFH’s in Wallingford only means that what’s considered urban will merely expand. Or to put it another way, some day in the not too distant future Lynnwood will be hip. :)

    On the other hand, one should be careful when making arguments based on population densities. While SF city is indeed very densely populated, the south bay is not. Housing in the south bay is among some of the most expensive in North America, and yet San Jose is still less densely populated than Seattle. Go figure.

  36. 36
    Angie says:

    Obviously the neighborhoods that are primarily for the wealthy today will remain so in the future. If that’s your whole point, I guess we agree.

    Somewhere around here I mentioned my best friend’s parents, the ones who’re my role models? Back when they bought a house in Montlake— maybe 0.5 mile from the UW campus and 2 blocks from the Arboretum—it was a sketchy part of town and everyone thought they were crazy for having anything to do with that neighborhood. Things have, um, changed a bit since then.

    The Central District and Leschi (yes, Leschi) used to be among the few neighborhoods where working- and middle-class black people were permitted to buy. You can guess what effect that had on housing prices. What’s the story now?

    Fifteen years ago the neighborhood I’m in was all but given up for dead. In the 9 years we’ve lived here it’s gentrified so much it’s practically unrecognizable….and well-off two-income couples I know can’t afford houses here.

    Used to be that Broadmoor, Madison Park, and north Capitol Hill were places where the rich people lived. Now there are a whole raft of additional neighborhoods that are considered “primarily for the wealthy”, and in NO part of the city is housing affordable or likely to become so in the future.

    I live in SE Seattle, the last bastion of affordable housing in town, and even all the way down to Rainier Beach and Skyway things are starting to gentrify. Give ’em a few years and it’ll be Columbia City all the way down the Rainier corridor. Why? It’s close in! No I-5 commute required.

  37. 37
    jcsc says:

    I don’t know if any of you are familiar with Chicago, but Lincoln Park is currently a pretty affluent area. It was very affluent, the affluent fled and the neighborhood became dangerous and inexpensive. After people became disenchanted with their commutes, the pattern reversed itself. A good investor knows that the present and the past do not necessarily predict the future. We are currently in a phase where urban areas have become desirable after a decade of falling violent crime. In the last few years, violent crime has been increasing rapidly in urban areas. Will empty nesters continue to live downtown if violent crime rises? The urban trend is also coinciding with an increase in single person households, which don’t have the same buying power as dinks.

  38. 38
    Bob Barker says:

    jcsc makes a good point, which could be followed up by the observation that the new phenomenon of downtown living hasn’t really been tested yet in Seattle. While it might seem glamorous in principle, I’m not convinced that empty-nesters moving out of 3,000 sq ft houses are going to be willing to permanently adjust to a cramped 800 sq ft apartment, ahem, condo.

  39. 39
    biliruben says:

    Angie – the bubble in Seattle started 10 years ago. It is hard to differentiate the causes or the permanence of “gentrification” built on cheap, easy money speculation and flipping.

    We will find out.

    You should also go take a look at what the population of Seattle-proper was in 1960. When you do, you will notice it’s almost exactly what the population of Seattle-proper is now. Makes you question your assumptions a bit, no?

  40. 40
    Consistently Missing One Thing says:

    Not to mention the fact that Tim is obviously a republican. That alone is a huge strike against any of your opinions. You should change the name of your blog to “King County Bubble” – as I think we’ve documented that without all of the data from the outlying areas your argument wouldn’t amount to jacksquat. When’s your next lunch with Tim Eyman?

  41. 41
    The Tim says:

    Sorry, not interested in responding to empty ad hominem attacks.

  42. 42
    biliruben says:

    Actually, CoMIT, the only thing propping up the YOY change is Bellevue and Kirkland. Seattle is barely treading water.

    Also, if you ignore facts presented by those who’s political views differ from yours, you are going to miss a ton of useful info.

    I’m generally considered a pinko-commie-bastard in most circles, but I don’t make the absurd and costly error of mistaking messenger for message.

  43. 43
    Logan Bowers says:

    Population migration is not the only factor that affects the demand for housing. Lifestyle changes do as well. For example, I know many young Microsofties that can afford way more house than someone their age typically could and pay a premium for posh, urban living. I also know young Microsofties that are happy to have 2-4 roommates and can consequently afford any outlandish rent for the place they want since it is split across so many people. Those demographics simply didn’t exist 10 years ago but are now significant.

  44. 44
    Angie says:

    It is hard to differentiate the causes or the permanence of “gentrification” built on cheap, easy money speculation and flipping.

    From what I’ve witnessed in my little pocket of gentrification, the causes include a sea change in demographics. Lots of well-educated, reasonably successful young families moved down here because N. Seattle was too expensive, outcompeting (or buying out!) people who were less well off. As for permanence…when I said “virtually unrecognizable”, I meant the changes in the landscape and building stock. Hopefully any economic downturn will not be accompanied by the collapse of the new and improved buildings as well. (All bets are off if the Seattle fault goes kablooie.)

    You should also go take a look at what the population of Seattle-proper was in 1960. When you do, you will notice it’s almost exactly what the population of Seattle-proper is now
    And in 1960, a quarter of the population were baby boomers, the eldest of which had just entered high school. Inasmuch as the number of children in Seattle proper has been declining in recent years (significantly, because living here is so expensive!), one can surmise that the number of households represented by those similar population numbers is somewhat different.

  45. 45
    biliruben says:

    The area you want to defend as reasonably priced keeps getting smaller, Angie. Now the North Side will see declines but the central district is bubble-proof?

  46. 46
    deepcgi says:

    How much are we going to pay for a Whopper in this mythical future? How much is the manager of Burger King going to make? Are we going to bus him in from Idaho? Or are all Burger King Managers going to share one condo in a bad neighborhood? As a matter of fact, what’s the difference in working at Burger King in glorious Seattle rather than Boise?

  47. 47
    Peckhammer says:

    “I’m not convinced that empty-nesters moving out of 3,000 sq ft houses are going to be willing to permanently adjust to a cramped 800 sq ft apartment, ahem, condo.”

    Exactly my thoughts. While I could live in 800 square feet, I need a 1200 square foot garage for my tools, motorcycles and cars.

  48. 48
    Angie says:

    No, bilirubin–at the invocation of gentrification and its causes/effects, I’m just reporting what I’ve seen up close and personal, which is down here in Columbia City.

    The north side of town is already out in the stratosphere and it ain’t coming back to earth. The south end will be attractive to the demographic I described (young upwardly mobile couples) for a long time to come because it’s close in and more affordable than the north end. Less well-off people will continue to be outcompeted and the south end will continue to gentrify.

  49. 49
    biliruben says:

    If I were a young, highly educated couple, confronted with a choice of a mortgage payment of $2500/mo, which is what your PITI would be for a nasty, small fixer in south Seattle; say something like this:

    http://www.redfin.com/stingray/do/printable-listing?listing-id=502406

    …I’d use some of those smarts and rent for the same amount something with 3 times the space and beautiful views in a better neighborhood. Say something like this:

    http://www.redfin.com/stingray/do/printable-listing?listing-id=502406

    Wouldn’t you?

    That’s if you are smart, and don’t allow yourself to be deluded by the some sweet-talking Realtor(tm).

  50. 50
    biliruben says:

    Woops. The second link should be this:

    http://seattle.craigslist.org/see/apa/415276469.html

  51. 51
    Marc says:

    Biliruben,

    You didn’t know I was 80? I just saw your comment and I loved it. Reading my description of Magnolia and the neighborhoods I’ve lived in does make 80 sound about right.

    Truth be told, I won’t be old enough to run for president until 2012. As for the seniors, yes there are a lot of long-time homeowners here but as soon as they passon the kids are selling the ol’family homestead as fast as they can. My block is well on its way to completely turning over to a younger generation which means houses are being updated and (hopefully) property values will go up.

    What my wife and I love and why we think Magnolia was a good investment is because it’s a little cheaper than Queen Anne but nearly as well located, and more importantly, it’s like the a 50’s tv show around here. Kids ride around on bikes with nary a parent in sight and the local Ace Hardware is a happening place.

  52. 52
    biliruben says:

    Okay, Marc. I’m sold. How much to buy into that Magnolia style of 50s livin’?

    I’d like one of them historic officer’s row houses with a view up in the park, please. And keep my PITI under 2K.

  53. 53
    biliruben says:

    I’ll take this one!

    … unless you just snapped it up?

  54. 54
  55. 55
    Angie says:

    Aw, Bili, you crack me up. Clearly you and I have very different ideas of what consitutes a “fixer”.

    My first house? Which I think might have been the last house in Seattle to sell for under $95K? To let you know how this place looked, let’s just say: the exterminator we hired to make sure that the rats were actually *gone* asked us how long it had been abandoned. (In fact, it had never been unoccupied.) When my husband and I fixed it up, random people would stop their cars in the middle of the street to cheer us on. No joke. When we lived there it was a stop on the garden tour. Now we’re renting it out.

    Our current house was half-painted, with no heaters, both toilets off the stacks, light fixtures removed, all kinds of half-assedness when we bought it. We worked on it for a couple of weeks before it was safe to let the kids inside. It’s shaping up to be just as cute as the other one, but with a big backyard (including half a dozen mature fruit trees. Want some plums?)

    That Mead St place is just sorta plain. No telling what that rental looks like on the outside. A few cans of paint and $200 worth of light fixtures and the interior of the former can photograph just like the interior of the latter.

    I’m thinking you’d like this place better. Pretty on the inside, $40K less, and hey, we could meet for coffee at Geraldine’s. And you wouldn’t be paying someone else’s mortgage for them!

  56. 56
    biliruben says:

    And you wouldn’t be paying someone else’s mortgage for them!

    Aw, Angie.

    Did you have to be so obvious?

    I was nurturing a fantasy here.

  57. 57
    Susan says:

    Angie’s comments are interesting. However, she seems to be buying into the official urban myth that demand exceeds supply, in part because we are “landlocked” and there are insufficient lots on which to build. Developers also point to land use laws and zoning as preventing higher density in areas they want to condo-ize.

    City and county officials like Greg Nickle$ and Ron $im$ lie to us. They tell us we have to put up with the destruction of the Pike-Pine corridor, replacing historic buildings housing funky shops with God-awful condos. Nickle$ tells us that Seattle taxpayers must subsidize the Urine-Allentown development of South Lake Union. These officials and their developer clients insist that we tolerate more hideous condos on Capitol Hill and put up with the destruction of the low-rise, single-family character of our close-in urban neighborhoods.
    We are SICK OF THIS!

    We in the targeted neighborhoods: Wallingford, the U District, Fremont, Ballard, Phinney Ridge, Greenwood, West Seattle, etc, are getting tired of waking up to new holes in the ground
    where old houses used to be. We hate seeing our low-rise, single-family, funky historic neighborhoods being destroyed.
    The Big Lie is that we have to “take more density” in order to prevent the destruction of the green corridor between the ex-urbs and Snoqualmie Pass. The truth is that Sammanish Plateau-like developments are still being built. Under $im$’ and Nickel$’ plan, we lose our neighborhoods AND the remaining wilderness areas outside established cities. The target neighborhoods get destroyed AND we have solid swath of suburbia from Bellevue to Roslyn.

    Government officials say we must “take higher density” in order to accomodate several hundred thousand new residents coming to Puget Sound in the next few years and to build up demand for mass transit.

    But the density is confined to the hit neighborhoods that are not home to members of the Seattle City Council or the King County Council. The condos and McMansions that produce “density” provide tens of millions of dollars in profits for Ron $im$’ and Greg Nickle$’ developer buddies. I wonder what kind of lucrative jobs $im$ and Nickle$ will get in the development industry when they leave politics?

    The targeted neighborhoods I listed have some of the highest density in the entire state.
    We don’t need any more.

    May I suggest that Redmond, Medina, Bellevue and Mercer Island take greater density?.Just look at the wasted space in Lake Hills in Bellevue, for example. All those ugly little 60s and 70s split-level houses should be pulled down and replaced with high rise condos.

    We need greater density in Seattle city neighborhoods like Magnolia, Laurelhurst, Leschi, Seward Park, Hawthorne Hills, Blue Ridge, Crown Heights, Broadmoor, Mt. Baker, Sand Point, the fancy east side of Lake City, Sunset Hill, Olympic Manor, Alki, areas around Carkeek Park, Fauntleroy, and other high income neighborhoods.

    Those of us who live in the targeted neighborhoods are sick of losing hundreds of our old buildings to condos and McMansions. Enough already!

    Susan

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