Link Roundup: Condos So Bright, I Gotta Wear Shades

While I was enjoying a relaxing weekend with my visiting brother-in-law, playing a copious amount of Xbox 360 and Wii games, the local press was going into overdrive with the real estate booster articles. It’s not worth my time or yours to have separate posts for each of them, so here is a link roundup. (Danger: Sarcasm ahead.)

The first three reports in today’s roundup were spawned by an upbeat report on the local condo market that was released by none other than our hero, Glen Crellin.

Elizabeth Rhodes, Condos a bright spot in housing market:

Overlooked for years as a significant housing source, condominiums are now a rapidly growing presence providing a ray of sunshine in an otherwise gray local housing-sales scene.

The condo market is healthier than the detached-house market, and prices are holding their own. Those are the key findings from an analysis released Friday of the Seattle-area condominium market by Glenn Crellin, director of Washington State University’s Center for Real Estate Research.

It was pointed out to me by a reader that the online edition of the Times article was peppered by as many as six ads for local home sellers (I never see ads, thanks to Firefox + Adblock Plus). See a screenshot to the right (click to enlarge). The ads are clearly determined by scanning the text for keywords, but it was still amusing that ads for Prudential Realty, Polygon (houses), John F. Buchan (houses), Olive8 (condos), Brix (condos), Bellevue Towers (condos), The Burnsteads (houses), and ZipRealty were covering the page as people viewed the upbeat report about how great our market really really is. Really.

Aubrey Cohen, Seattle’s housing holding up in market:

The Seattle area’s housing market is stronger than the nation’s, and condominiums have held up better than houses. Still, the market is slowing, economists said at a forum Friday.

Thank the economy for the area’s vigor, Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University, said at the annual forecast breakfast sponsored by Williams Marketing, a Seattle firm that works with housing developers.

Hmm, Williams Marketing… now where have we heard that name before… Oh yeah, only in about every P-I real estate article, that’s where. So, the Washington Center for Real Estate “Research” is teaming up with a condo marketer to tout our area’s great market? How terribly surprising.

Debra Smith, Condo prices in county up 65 percent in 7 years:

Buyers balking at buying a condominium take note: It’s a better investment than people often think, according to a report released Friday.

The price of condos in Snohomish County rose nearly as fast as single-family homes, and in King and Pierce counties, condos performed better, according to the report by director Glenn Crellin of the Washington Center for Real Estate Research at Washington State University.

Psst… here’s an investing secret: Past performance does not guarantee future results. Pass it on.

Elizabeth Rhodes, Rebound talk is big at Realtors annual gig:

Lennox Scott has worked through many market cycles in the decades he’s been in real estate and predicted many months ago that the Seattle market would slow.

So he’s not surprised that it has. Nor is he particularly worried about, calling it no more than “an adjustment phase.”

Florida’s Palm Beach County, north of Miami, currently has a 50-month supply of homes for sale.

Las Vegas is also in dire straits for sellers with a two-year supply.

Both had market forces Seattle never had: runaway homebuilding plus thousands of investors who flooded those markets hoping to get rich quick by buying and flipping houses.

Ahh, the old reliable “compared to the absolute worst markets in the country, we’re not half bad” argument. Is it just me, or does it seem like Lennox Scott has turned the volume up a few notches on the “don’t call it a real estate bust” album? He’s being quoted all over the place lately.

Mike Benbow, Housing glut less severe in the Northwest:

Under normal circumstances, Conerly said, first-time buying candidates save for a down payment, work on clearing up their credit and eventually jump into the market. “In 2002, there were cheap mortgages and people were able to buy a year or two ahead of time,” Conerly said. “We weren’t creating additional demand, we were just borrowing from the future.”

Speculators were increasingly investing in houses, with many people entering the market to quickly resell the house for more money, a technique called flipping.

After overbuilding in 2003 and 2004, building eased up. In 2005, the number of new homes dropped to about 58 for every 100 new people, which is a number pretty close to normal demand. Last year and this year, the number has dropped even further, to about 42 per 100, which is well below normal demand, Conerly said.

Nationally, there are about 1.5 million houses too many, Conerly said, adding he doesn’t expect a turnaround in the national housing market until 2009. “We’re not working off the overhang very fast,” he said.

But he said things are different here, mostly because we’ve been under-building relative to our population growth for two years.

“We’ve not fully worked off the number of houses we built, but we will work it off faster than the national average,” Conerly said. “This area is going to have continued growth for quite some time.”

This article has the least amount of cheerleading of the bunch, and at least offers some actual statistics and doesn’t just parrot the usual real estate mantras. However, we’re still being fed the “better than the national average” and “continued growth” type of lines, apparently intended to ease any fears that we will experience a downturn at all. Given the figures they gave about the rate of building 2003-2007, and assuming that the present rate of building and population growth keeps up (a big assumption), we’re still looking at 3-years’ worth of new construction oversupply. But don’t worry, we’ll work it off “faster than the national average,” so everything will be okay.

(Elizabeth Rhodes, Seattle Times, 11.17.2007)
(Elizabeth Rhodes, Seattle Times, 11.17.2007)
(Aubrey Cohen, Seattle P-I, 11.16.2007)
(Debra Smith, Everett Herald, 11.17.2007)
(Mike Benbow, Everett Herald, 11.19.2007)

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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.

43 comments:

  1. 1
    BubbleBuyer says:

    As a relative new comer to the area I was amazed at the number of new condo developments in the area. I expected to see them downtown but took a drive through Ballard over the weekend and they are sprouting up everywhere, like mushrooms after a rain storm.

    I guess the optimists will say they provide relatively affordable housing close in to downtown while the pessimists will argue that they are overbuilding especially given the credit contraction.

    Personally, if I have to listen through the wall to my fat neighbor beat up his wife or the ugly neighbors having sex I’d prefer to be renting versus making mortgage at 2 times the equivalent rent.

  2. 2
    Brian says:

    Not sure I have such a low opinion of the type of people I would live next to in Ballard, but I would agree that it’s not the best idea to be buying something that would cost 2x as much in housing payments as renting.

    My wife and I are relatively new to the area as well and we have seen inventory numbers increase since we arrived last year. With all the new building, I can’t imagine we’ll say any different next year.

  3. 3
    deejayoh says:

    The condo market is healthier than the detached-house market, and prices are holding their own. Those are the key findings from an analysis released Friday of the Seattle-area condominium market by Glenn Crellin, director of Washington State University’s Center for Real Estate Research.

    I wonder why they don’t provide the source for this data? I went over to the WCRER web page and expected to find it, but it’s nowhere to be found.

    http://www.wcrer.wsu.edu/default.aspx

  4. 4
    Denny Retrograde says:

    I adored the full-color, 11-page marketing insert Williams put in the paper. It has “articles” by Leslie, Crellin etc. and features glamorshotz-style photos of various contributors.

    I apologize in advance for the long post, but a pdf of the actual insert isn’t available, and thought it too juicy not to share in some detail.

    The cover is a graphic of an oak tree bent but strong against the wind. The trunk is labeled “Condos,” and the thickest roots are named “85,000 New Jobs Added Last Year,” “Growing Number of Single-Resident Households,” and “A Major Gateway to China, Japan & Korea.” Deeper down are smaller root branches labeled “Microsoft,” “Costco,” “Starbucks,” “Natural Beauty,” and my favorite, “WA State Wineries.”

    Fave excerpts:

    “…we have no room or time for pessimism, only the realistic expectation of continued growth…” Terry Thompson, Owner, Impex Development, p. 4.

    “Condominiums in Seattle: A Market Approaching Maturity” was the title of Crellin’s piece on p. 5. Maturity – feh. He gives his work history some interesting detail: “By the late 1970s I had become an economist on the staff of the National Association of Realtors…”

    Opposite Williams’ full page thank-you to Wells Fargo for being Williams’ Preferred Lender for its four newest buildings, oh! look! An “article” by Wells Fargo Senior Economist Scott Anderson, Ph.D. “Seattle is laying the groundwork for another decade of expansion […and] is likely to remain a beacon of light.” p. 7.

    The headshot with the heaviest use of ‘dazzle’ effects is that of Williams VP Warren Ballard, who in a piece decrying legislation to curb condo conversions writes, “most developers are good people, trying to build good housing…the kind of housing their own children could afford and enjoy.” p. 11.

    It’s a kitsch classic.

  5. 5

    GRIDLOCK TODAY AND A RECESSION IN 2008?

    The Bush economy is really rosy. $100/barrell oil will spur our aerospace economy on. Outsourcing of Microsoft jobs just ain’t gonna happen.

    That’s why this area will grow and incomes too. Seattle area real estate has nothing to worry about at all. Why look at the recent stock market surge.

  6. 6
    your landlord says:

    Oh, there you are. I’ve been looking for you everywhere. Listen, I need to raise your rent 10% this year. If you think about it, it is really very fair. I didn’t raise it at all last year. You know what with taxes going up…….

  7. 7
    Mama says:

    your landlord, that’s funny. You have a point though. But life won’t be quite so easy as a landlord — I’ve noticed a lot of nice houses for rent on craigslist lately…6-7 months ago you had to search real hard to find one…I don’t know that any of them are properties that didn’t sell (I’ve seen a few condos posted “for rent” that I know were for sale in the last 4 months)…I suspect at least some of them are and more are coming

  8. 8
    your landlord says:

    Believe me, the landlord’s life is never easy. I don’t know from Craig’s List, but I did fill a vacancy earlier this year. Maybe it was only serendipity, but the tenant pool was unbelievably bigger and more qualified than what I saw in ’05. And I did get my bump.

  9. 9
    CliveL says:

    PNW featured on HBB.

    “‘Builders are being beaten up so badly,’ said Callaghan, an agent in Lynnwood. ‘It’s like having a gun pointed to their head. They just need to get out of that standing inventory, step back and regroup.’”

    “Drive 35th Avenue SE from Everett to Mill Creek and see a glut of new developments, most offering enticements to potential buyers. For several miles, nearly every cross street and side road contains two or three signs plunked in the ground advertising new homes in the area.”

    “In a healthy market there is usually about a year’s supply of vacant lots. Right now there are 22 months of inventory in the county, according to New Home Trends. The inventory of homes under construction has doubled since last year to about a 61/2-month supply.”

    “Competition for buildable land had been stiff. Developers paid top dollar for vacant land, and in order to make a profit, they have to build and sell a house for a certain price.”

    “‘It got to the point property kept going so high it began shutting out a lot of people,’ said Vern Holden, a broker in Mill Creek. ‘When an entry level home is $500,000 — come on, half a million for a newly married couple to buy a house? It could only go up so far and it did.’”

    “Buyers, however, shouldn’t expect those deals to stick around much longer, said Todd Britsch, president of New Home Trends. For buyers, now may be the best time, he said. Many of the incentives will likely disappear after the first of the year. Sales typically slump in the fall and pick up each spring.”

    “‘Builders are very, very nervous,’ he said. ‘Buyers are sitting on the fence waiting on the shoe to drop and the market to absolutely collapse. It’s not going to happen.’”

    I like Todd Britsch’s confidence, pink ponies will return in spring.

  10. 10
    Peter Taylor says:

    “but the tenant pool was unbelievably bigger and more qualified than what I saw in ‘05. And I did get my bump”

    I’d better run out and buy a house or I might have to deal with the big bad scary landlord! Oh teh noes!!!1!!!

  11. 11
    NostraDamnUs says:

    Methinks Seattle’s about to hit the same predicament w/condos as San Diego – once prices topped out in San Diego (about 3 years ago or so, in most areas), there was a rush of condos built in the downtown area of SD, which could be gotten relatively inexpensive due to a tremendous supply.

    There was some article in the PI not that long ago that talked about a massive flurry of condos being built in the Seattle area as well..

    So if you like ‘urban living’ and don’t mind paying $400/month for your HOA, have at it!

  12. 12
    RG says:

    As an interesting note to the condo craze, the aprtments I live in now, West Ridge Park Apartments off Delridge in West Seattle, are now being held up in renovations and will likely not go on the market as condos.

    See this post on the West Seattle Blog…http://westseattleblog.com/blog/?p=4192

    This is the first sign I’ve seen where repartments happened even before the conversion got into full swing.

  13. 13
    your landlord says:

    “I’d better run out and buy a house or I might have to deal with the big bad scary landlord!”

    If every piece of unwelcome information is perceived as a stupid, blunt threat, you are not going to absorb very much information.
    Try to get a grip.

  14. 14
    your landlord says:

    I go too far. Sorry about the get a grip comment.

  15. 15
    B&W Nikes says:

    Hey Landlord, thanks for the warning! That’s more advance notice than I’ve usually received, you’re a good one! Not that I’m encouraging you to gouge me or anything, but you could raise my rent by 10% for 6 or 7 consecutive years before you’d have me bumped up to the cost of a monthly mortgage payment for a comparable housing unit at 2007 prices. And if we were still in that old 680 sq foot 1br we had, you’d be able to bump us 10% for 10 years! Things are looking pretty good, aren’t they!

  16. 16
    patient says:

    C’mon landlords please hike the rents to match the insane home prices so we all are finally forced to leave this area. Let’s see how well the real estate market will hold with no renters and no potential buyers.

  17. 17
    your landlord says:

    “Things are looking pretty good, aren’t they!”

    For both of us. Now about these late night visitors you’ve been having……

  18. 18
    your tenant says:

    Hi landlord,

    That’s cool. I wasn’t planning on staying in your crappy rental, anyway. There are three troubled flippers on the same block, all renting brand new townhomes with granite countertops and stainless steel appliances, for about what I’m paying you now!

    Good luck with that rent increase.

    -your tenant

    P.S. Oh…landlord? Don’t even *think* about keeping my deposit, mmkay?

  19. 19

    Speaking of Aubrey Cohen, he phoned me this morning. I guess I’m his “go to” guy for real estate agents with a different perspective. He asked me about claims and descriptions that agents and sellers use, and if any of these claims made me laugh or cry. I’m sure that most of what I said will be sanitized, but I basically told him that agents and sellers lie about all sorts of things, from calling laminate floors “gleaming hardwood” to calling the Central District Madrona and Leschi and calling Skyway Lakeridge and Earlington and how certain code words meant other things, like cozy=350 sq ft, and rustic=teardown and “walk to amenities” means there’s a nearby adult video store or crack house.

  20. 20
    rose-colored-turkaid says:

    I’ve noticed a general trend, but haven’t sat down and graphed it up. I would however call it a law of housing, and it looks like this.

    SFH Appreciation > Condo Appreciation

    If I understand the > symbol, this means that condos will always do worst over the long haul than SFH. I think it’s because there are two parts. Land generally appreciates faster than inflation. Whereas housing almost always depreciates (by appreciating slower than inflation).

    Seems to me if condos are beating SFHs today, I would run for the hills before buying a soon to be crashing condo.

  21. 21
    Gary says:

    Hello, I think that this is a great forum and enjoy reading it daily.
    I have also been stunned at the housing price run-up here and I ALMOST bought a house about 6 months ago but thought better of it mostly because a good friend of mine is in RE and warned me to wait.
    ( I know, shocking the agent did this right? ) In any case I was told that they really would know where the market was going by the March – April 2008 time frame. ( In other words, continue waiting now is not the time )

  22. 22
    Your Tenant said, says:

    That water heater that broke and damaged all my property and then caused me to slip and fall…tell YOUR liability insurer to pay up or I will sue for triple damages ;-)

  23. 23
    deejayoh says:

    Speaking of Condos – anyone else noticed the ads that seem to be blanketing the TV for the west seattle condos. Looks like a bad conversion, and they are pumping them on TV. First time I’ve seen that.

  24. 24
    your landlord says:

    Don’t even think about trying to rent those townhouses. There’s no space for your “gro-lights”.

  25. 25
    mike2 says:

    In my opinion, condos are holding up a hell of a lot better than I would have guessed, so far, anyway.

    2 years ago, I would have expected condos to be leading the market down once the tide turned, however I’m seeing more RedFin listings for underwater SFH than condos at this point.

    One of the conversion projects I’ve been tracking since it sold last year is in the 9000 block of Greenwood Ave. Absolutely bottom of the barrel, tiny 1980’s apartments that underwent a quick and dirty conversion at the top of the market. Resales have been nothing short of spectacular during months 12-18, though now units are listing at less than summer prices. Still $220K for a 700 sq ft 1 bedroom that rented for $725/month is insane.

    Ultimately, these are $100K units that, I can only assume due to dismal affordability conditions, are still selling at a premium over the initial prices.

    But as they say, bubbles go on longer than any logical person could anticipate.

  26. 26
    Grivetti says:

    mike2 = aka Michael Horowitz…

    Good to see you back Meshugy!!!

  27. 27
    MacAttack says:

    Down here in Portland there are 3X the number of rentals on Craigslist – hundreds a day.

  28. 28
    Angie says:

    My take on the condo thing is that they’re still way more affordable than SFH. They’re probably attracting first time buyers. I think it’s unlikely that condos will ever get on par with SFH. (rose-colored, if your turkey is still rosy, put it back in the oven! Invest in a meat thermometer, my friend. You will be glad you did!)

  29. 29
    EconE says:

    The Airline magazines are completely plastered with condo ads for Seattle.

    Not only do I get cheap rent in my homogeneous new high-rise condo but they subsidize my airfares also!

    Thanks Vulcan!

    p.s. loved the Rollins and Enso ads.

    Oh…I should probably also thank the Cosmopolitan, Olive 8, Escala, Fini, Canal Station, 1, Trio, Carillon Vista, Brix, Equinox and a WHOLE slew of others that have also purchased flight mag advertising over the last couple months!

  30. 30

    On the other hand, there are SO many new condo developments not yet finished that it’s bound to have some impact on prices. My thinking is that once prices start to really drop significantly, condo prices will drop at a higher percentage than single family homes, partly because there will be such a glut of them.

  31. 31
    Joe Kennedy says:

    C’mon The Tim! First it’s the darn Realtors blaming the market on “the media” now it’s you blaming the blue sky on us too! As a Realtor (until my dues expire) and a Publisher (probably for life), I’m on both sides of this fence, but I can honestly say none of this is my fault – I take no credit or blame. I’ve been agreeing with you for the past year +, but don’t play the R game and start generalizing. You might be interested in a post that I wrote today about Realtors and “the media” at http://blog.eastsidebusiness.com/2007/11/19/so-the-condition-of-the-real-estate-market-is-the-medias-fault/

  32. 32
    Scotsman says:

    Yup, the only reason condos continue to move is their affordability. Since there always seem to be those who HAVE to own, and condos are the only affordable choice, that market will carry on until the very end of the cycle.

    Meanwhile, my cousin, who had to move out of his condo into a SFH because his first child was on the way, is currently $130K underwater (counting sales costs) on his Redmond “dream house.” Closed Sept. 2006. Perfect timing! Should have kept the condo- at least he could afford that.

  33. 33
    deejayoh says:

    I will bet E Rhodes (and G Crellin!) that condos decrease more off the peak than SFH in king county – and that both go down.

  34. 34
    Jon says:

    “My take on the condo thing is that they’re still way more affordable than SFH. They’re probably attracting first time buyers. I think it’s unlikely that condos will ever get on par with SFH.”

    Actually, the strange thing is that a LOT of condos in Seattle are not THAT much more affordable than SFHs. Given a choice between a $350K 1BR condo and a $479K SFH (two listings I saw today and both equally nice), I’d sure as hell not pick the condo for a difference of only $129K.

  35. 35
    george says:

    Everything is rosy because:

    A) SF Houses aren’t selling here or anyplace else
    B) “supply of condos priced at more than $500,000 is above eight months in King County.”
    C) Thousands of condo conversions
    D) Just over 100 new condos built in 2006 but forecast is for 6000 or so more from now to 2010
    F) Condo flipping/speculation basically over
    G) None of the above

  36. 36

    Anyone who thinks the condo market is great needs to drive over to Magnolia (not exactly poverty row) and watch the prices falling with each passing week.

  37. 37
    Hunter says:

    Cant see how the condo market is a “bright spot” with prices already dropping and Vulcan to unleash thousands more downtown in the next 2 years. I am curious at Tim’s opinion about SFH values specifically speaking in Seattle – not king county – and by SFH, i referring to stand alone house not zerolot townhomes. Let’s face it – residential land inside the city is limited and it seems with any available land they are just throwing up as many townhouses as possible. Or instead of fixing up older houses, they are tearing down one house and building 4 townhouses in their place. It seems that these factors would make SFH (again not townhouses) a better option – and i appreciate the posts that point out this may not be the best choice at 2x rent. Still believe that SFH will appreaciate faster than the glut of townhouses and condos on the market.

  38. 38
    Matthew says:

    DJO-

    I agree. Before all is said and done, the condo market is going to be absolutely annihilated in the Seattle area. Once SFH values drop back in line, the overbuilt condo market is going to be decimated.

  39. 39
    B&W Nikes says:

    Not only is the city condo pricing ridiculous, take a look at in city townhome pricing. It’s common to take a modest city lot and prop up 4-8 townhomes listed for nearly the same price each as the former sfh that occupied the lot did. For most of the units, the design and construction is not that good quality. Maybe it is the lack of in city townhome inventory that plays the unique card, but there are ridiculous things happening with these units that defy even condo logic.

  40. 40
    WestSideBilly says:

    It’s hard to consider a townhome unique when there are 7 identical units attached to it.

  41. 41
    explorer says:

    Condos are holding their prices that same as SFH’s. That does not mean they are selling. Particularly conversions. My previous apartment (1980’s building), was converted and put up for sale last month. Started at $250K, one bedroom, thin walls, shared unsecured garage, bogus measurments of 653 sq.ft. HOA of $200. Not ONE of the units converted so far have sold. The price of my unit has only dropped $5K, and still no takers.

    So, I was lucky enough to find a 2BD triplex rental, same neighboorhood, with my own garage and utility room for HALF the cost of buying that joke of a conversion. People are not that despirate to buy something that is obviously overprisced.

    Your landord, you can’t raise my rent, as you were the one who insisted upon the lease. Next year, you will not be raising my rent either, I bet. MY landlord bought it 10 years ago. They are one of the few who are not greedy, and they get long-term tenants in return.

  42. 42
    Angie says:

    Actually, the strange thing is that a LOT of condos in Seattle are not THAT much more affordable than SFHs. Given a choice between a $350K 1BR condo and a $479K SFH (two listings I saw today and both equally nice), I’d sure as hell not pick the condo for a difference of only $129K.

    “Only” 129K? That amount is nothing to sneeze at.

    I’ll bet it’s exactly this line of thinking that made most people overreach with zany financing.

  43. 43
    uptown says:

    Well, since there are now 199 rentals on CL listed as Queen Anne, I wouldn’t want to be a landlord.

    If you want to buy, you can take your pick in QA of overpriced units that aren’t moving.

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