Link Roundup: Taxes, Fraud, & Layoffs (oh my)

There have been a lot of local real estate stories this week that are worth mentioning, but aren’t big enough to merit their own post. So it’s time for another link roundup.

Tax Assessments & Government Revenue
First up, while tax assessments may be falling in Pierce and Snohomish, it looks like they’re still on the rise in King County. Aubrey Cohen reports for the P-I: With house prices down, why are tax assessments up?.

The King County Department of Assessments recently sent Brian White a notice saying his Phinney Ridge house was worth 12.5 percent more this year than in 2007.

“We’re not thrilled, but it was not unexpected,” White said Monday, noting the increasing popularity of his neighborhood.

But the jump in value seemed to contradict the fact that the median price of a house sold in May was down 2.7 percent from a year earlier in Seattle and 6.2 percent countywide, according to the Northwest Multiple Listing Service.

Also note Aubrey’s follow-up blog post: Banging … head … against … wall.

Speaking of tax revenues, Washington state’s interim chief economist Steve Lerch predicts a continued downturn in the state economic picture thanks to the real estate bust. Rachel La Corte with AP reports via the Seattle Times: WA state income down $167 million next 3 years.

Washington’s treasury will take a $167 million revenue hit over the next three years due to the weakening economy, the state Economic and Revenue Forecast Council was told Thursday.

Steve Lerch, the state’s interim chief economist, told the council that sales and business taxes are down and real estate excise tax collections have seen a significant decline.

Lerch said that on the real estate tax collections, “we are forecasting what would essentially be the worst downturn we’ve seen in the past 25 years.”

Uh-oh, I hope the AP copyright police don’t come knocking on my door. Here’s another story on the same topic from the Olympian: State forecast indicates economic slowdown will linger. Also, if like me you were wondering after reading this article “what happened to ChangMook Sohn,” the answer is that he’s running for state treasurer.

Even Seattle Has its Share of the F-word (Fraud)
Here’s a real shocker: 6 from Seattle-area indicted in crackdown on mortgage fraud.

Six Seattle-area people have been indicted by a federal grand jury in connection with “Operation Malicious Mortgage,” a national takedown of mortgage-fraud schemes that has resulted in more than 400 arrests nationwide and losses estimated at more than $1 billion — nearly $8.4 million in the Seattle case alone.

Those indicted included a disbarred lawyer, a former bank-loan officer and a mortgage broker, according to the U.S. attorney’s office. Others include the owner of several shell corporations that “flipped” houses as part of a scheme using unqualified “straw” buyers who allowed inflated loans to be made in their names, only to default on the mortgages, the indictment says.

The case is among 144 prosecutions involving 406 people nationally.

But I thought Seattle was squeaky-clean? No fraud or flipping here, just Microsoft employees with money burning a hole in their pocket, looking to buy a modest $800k 3 bedroom. Actually the shocker is that it only involves 406 people nation-wide. Here’s hoping that they’re just getting started. + Home $weet HomeShutdowns and Layoffs
Expect to see more stories like this as the slowdown gets rolling here in the Pacific Northwest: Developer Barclays North will fold, says founder.

Battered by the national housing slump, developer Barclays North, a real-estate powerhouse whose sales once topped $45 million, will fold July 4, the Lake Stevens-based firm announced Wednesday.

The closure, which follows a months-long scramble by founder and CEO Patrick McCourt to placate lenders, shows how the nation’s real-estate downturn is rippling through the local market.

Barclays North typically took large undeveloped parcels of land, obtained all the necessary permits and resold the tracts to major homebuilders.

But Barclays entered this year in default with at least 56 creditors and faced a barrage of lawsuits this spring as some lenders exhausted their patience.

And along those same lines, it’s time for yet another round of layoffs at WaMu. The Times and P-I both have stories on that one today.

Washington Mutual Inc. cut another 1,200 jobs Thursday, including 260 in Seattle, the third such round of layoffs in less than a year.

While the number of employees to be cut isn’t as large as the two most recent reductions, it’s still a reflection of the company’s continuing struggles in dealing with the mortgage finance mess and WaMu’s losses stemming from rising loan delinquencies and defaults.

“We will do what we must to return the company to profitability faster and to restore shareholder value,” WaMu Chief Executive Kerry Killinger said in a letter to employees.

And Killinger suggested the company might not be done cutting.


(Aubrey Cohen, Seattle P-I, 06.18.2008)
(Rachel La Corte, Associated Press, 06.19.2008)
(Brad Shannon, The Olympian, 06.19.2008)
(Mike Carter, Seattle Times, 06.20.2008)
(Drew DeSilver, Seattle Times, 06.20.2008)
(Bill Virgin, Seattle P-I, 06.20.2008)

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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.


  1. 1
    obelus says:

    What?! I thought that everyone was moving into Seattle because All the jobs were here and that would keep RE going and going! Well, let’s calculate the loss to the Seattle economy from those lost 260 jobs: Avg. salary in King County about $50K . That times 260 is about $13,000,000 lost payroll. Ouch. and they have only just begun.

  2. 2
    David McManus says:

    Queue RAL or Nostrad-bag stating how this it’s all the media’s fault and this is all just hype.

  3. 3
    rose-colored-coolaid says:

    Dave, is that what they’ve been arguing all this time? Not disagreeing with you, I’m just impressed that anyone was able to pull a cogent thought out of their random mutterings.

    About tax assessments: it’s completely impossible that there might be a conflict of interest when assessments are made, right? Because it’s not like the same organization making the assessment can gain any value from a higher assessment…

  4. 4
    deejayoh says:

    Word of the Day: “homallucinations, or the ability to convince oneself that while the price of everyone else’s home will fall, your neighborhood is clearly different.

    I’ll leave the usage examples to others…

  5. 5
    Scotsman says:

    Hey Tim- all you need to wrap up that nice little collection of good news is an article saying that we’ve finally hit bottom. Then everyone can get back to talking about how quickly;y prices will go up …..!

  6. 6
    vboring says:


    it is now sunny and warm, therefore the RE markets are gonna get hot.

    nothing convinces people to make major poor financial decisions quite like pleasant weather.

  7. 7
    rose-colored-coolaid says:

    vboring, that cannot be correct. If warm weather were the key, why hire sign wavers? Why offer plasma TVs and automobiles with a purchase? Shoot, why the heck did Seattle prices bubble at all if nice weather is what gets sales?

  8. 8


    Evidently, the wine was the truth serum.

    She told me business is totally slacking off, as prices are down about 15%, material costs are way down [no buyers for building materials out there] and agreed with me; its far worse right now than the 1990 Housing Bubble ever was.

    The wine tasting went well too, I found a new red wine that’s very tasty, although the $50 a bottle stuff was the best……I went with the $11 a bottle, very close in quality for about 1/5th the price. Sounds like comparing cheaper Midwest homes to Seattle homes….lol

  9. 9


    My friend’s mom didn’t like her assessment for taxes either. Apparently, she just hired her own assessor and he/she determined per square footage and lot size comparable sales with about a mile of her home recently. She attached this to her dispute with the county and not only did it not go to a court hearing [its slam dunk you get money back if you include personal refuting assessor paperwork, hardly no ones does this]; they went back a few years and paid her back taxes overpaid too [they can go back up to 5 years]. She got a huge check from the county and a big smile on her face.

    Ohhhh….ya think your home is worth less if you pay less property tax….now I’m rolling on the ground laughing. You won’t get a penny less or a penny more, no matter what those county assessors overcharge you.

  10. 10
    vboring says:

    maybe 90% of home purchase decisions are made during the 8 weeks of pleasant weather.

    financing arrangements, escrow, and whatnot just take such random amounts of time that it makes it look like sales happen year round.

    today is a sarcastic day, if anyone cares.

  11. 11
    patient says:

    “nothing convinces people to make major poor financial decisions quite like pleasant weather”

    I think it’s the opposite. I think people need something to comfort them when the weather is poor and decide to buy something they don’t need or decide that a new home will probably make the mhappy and lift them out of the weather depression. It might look like it’s the good weather since there is a lag from deciding to actually finding and closing on a home which can make it happen on the warmer season. In summer people are happier and don’t need any comfort purchases. Just happy consumption as good food, vacation trips, some nice new clothes etc but no big ticket items.

  12. 12
    explorer says:

    Wasn’t Friday the 13th LAST week? Residual effects…

  13. 13
    david losh says:

    I’d like to address fraud for a minute. It’s been interesting to me that people claim cheap money made prices go up. As you point out here daily there are economic conditions that determine property values. Just because mortgage money is cheap does not transalate into values going up. They are two seperate things.
    I talk with people every day who spent way too much for properties. I can’t help them, but wonder how an appraiser hit the numbers that were paid for the property. In a year or two property prices going up by $100K to $200K makes no sense for a $400K property. It had to be fraud, and as a part of the conspiracy theory crowd, it had to be orchestrated.

  14. 14
    Ray Pepper says:

    David… 911 was the trigger. There are always triggers to all bubbles. In an effort to preserve the Capital Mkts we got the “Greenspan Put” ..Demand surpassed output……Then we overbuilt………..Now we are in correction for the next 5-7 years…

    History is being written as we speak…Fraud will always be present..ALWAYS!! Its never a problem as long as people are making money…Now that the buffet is over and the finger pointing has begun…

  15. 15
    david losh says:

    What? You can’t over build. Even if you did it would only lower prices not raise them. The demand is obviously there or the amount of units turned would have slowed. They didn’t slow, it stopped. We can pick August 15th 2007 as the day the units stopped churning and people woke up.
    That’s not a market correction. The Real Estate market just stopped like turning off a light switch.
    People don’t want to rent. These people here don’t want to rent. It’s a matter of affordability. If we over built then prices go down, which they will, but in the mean time prices were run up to astounding levels.
    I remember looking at a cracker box house in Ballard for a quarter of a million dollars and asking who would pay that much. In five years it went up in price to a half a million dollars. There was something definitely wrong there. Don’t even get me started on Nevada, Arizona, or New Mexico. Land there is free.
    So really, how did it happen? You can’t blame money. You can’t blame the price of money, it’s a seperate thing. It’s fraud on a grand scale and people should be jailed. The courts should be clogged with the great number of people who were sold a false idea of value. Our system is set up to have checks and balances. This isn’t high school where it’s OK because everybody else did it. It’s fraud.

  16. 16
    Alan says:

    I think that maybe I should be worried about my mental health when the things David Losh says make a lot of sense to me.

    You can “overbuild” housing. If the supply increases to the point where new construction cannot be sold for more than it takes to produce then housing has been overbuilt. In economics 101 they would cally it a supply surplus.

  17. 17
    Ray Pepper says:

    David I was ACTIVELY involved in all this run-up. I purchased homes in Nevada, Texas, and Oregon during the early run. The homes I bought were all new for 139k-165k. When the homes were finally completed they were up 40%. Some I sold but it was far too early. Two I sold for 188k after closing at 153k. BIG MISTAKE at the time…. They ran up to 240k …The exact same home I can buy now for about 185k. I have traded stocks for 2 decades and began to do the same with homes.

    I stopped buying when I could no longer find any under 150k. Many people continued buying. Developments stopped selling to investors. It was all demand. Demand dimished as prices continued to escalate. Our investment teams all pulled out and many of us now just have rentals and many sold. Either way holding or selling was the right decision. The homes cannot be built now for what we paid for them.

    It was a great ride and now we just look for GEMS and continue to hold cash. 6 months ago I loaded up on 110k of EGHT at .98…….Its a GEM that I believe will hit 2.00 by EOY and then I’m back to concentrating on homes. The MKT I find far more fascinating now and I continue to find many Gem-Like stock picks……..

    Call it fraud. I call it speculation. Just like the stock market and the buying of stocks. Many make money and many lose.

    Timing and doing your DD is (and was) everything. Just like the 2000 tech bubble. ALL ABOARD……………………………..!!! EVERYONE OFF…………………….

    Ray Pepper

  18. 18
    mking says:

    Just because mortgage money is cheap does not transalate into values going up.

    i cant believe a RE professional does not understand the link between low rates and increased values. most RE buyers are not cash buyers. they HAVE to watch their monthy cash flow, so they look at payments. the purchase price of the house becomes secondary to the monthly payment. when people realize that due to cheap mortgage rates they can afford more house, they bid up the house prices. when banks stop paying attention to the ability of buyers to pay back loans, b/c the banks are going to securitize the loan to offload the risk, the pool of buyers goes up, and teaser rates and negative interest rates increase the problem, as that lets people buy more house than they can afford based on artifically low monthly payments.

  19. 19
    david losh says:

    OK pepper you made money and got out. I sold my last property March 2007. My most stubborn investor sold in July 2007 in a panic to unload.
    How do hedge funds, who have all the resources in the world, lose money? How is it all a surprise when a guy, not even in the Real Estate business, is running a bubble blog?
    Where were the real estate professionals?

  20. 20
    Ray Pepper says:

    actually I only sold two. I still have many as rentals. I never buy or sell everything at one moment in time. Just like stocks. I sell 1/4 then maybe 1/2…and so on…I usually sell a property or a stock to free up cash for the next venture… I still hold currently 17 properties both commercial and residential.

    The “real estate professionals” were busy selling the homes. Personally I have always been an investor 1st. I only got my Real Estate license to save 3% when I sold and to get the 3% when I bought. I would have NEVER gotten a license if there were 500 Realty and Red Fin type Brokerages. Most Agents I know never bought rentals. They are not investors. Very far from it. I would like to use the term “paper pushers.”

    As for Tim running a blog I cannot comment. The current collapse in the mkt I assure you, and everyone it to will correct itself. The cost of materials to build homes and infrastructure will only go up. Most of my remaining properties I have are for my retirement. I will let many go over the next decade and continue to move cash around into other properties and the markets.

    I have only had 1 investor file for bankruptcy but that was due to illness and pure foolishness of not carrying health insurance. The rest of us continue to wait and wait until the bleeding becomes arterial. There will be temporary blips up but Cash is king this decade.

    Timing is everything. Research and effort. I don’t fly every 4 weeks to Nevada and Arizona to take up the sun. Well maybe a little. Its all research. Just like our mkts here. Every Buyer must spend the time to dig. The GEMS are popping up as they always will. We can’t buy everything but the ones we do Buy can handle any kind of mkt downturn.

    I just bought our New office location in Tacoma. 8221 South Park. 3 year contract at 268k. 40k down. Owner pays taxes and insurance for 3 years or I cash him out early for 260k. Its a HUGE Historic home in a commercial area off I5. Its zoned commercial and M/F with an apt. A Pure GEM. It took me a year to get it but the seller finally saw it my way.

    Effort friends…Before you invest in anything take the time and do your DD. How do hedge funds and investors lose all this money? I will tell you……As an RN for over 10 years there are many great ones and many horrible. Nurses that do NOT wash their hands when they enter your room and spread infections…Don’t get me started…I was an infection control supervisor. In every profession there are incompetents, unethical, and useless people.

    In the end they will always lose.

    Ray Pepper

  21. 21

    “Nurses that do NOT wash their hands when they enter your room and spread infections…Don’t get me started…I was an infection control supervisor. In every profession there are incompetents, unethical, and useless people.”

    Maybe there are useless, lazy, and incompetent nurses, but I think the Real Estate industry maybe lends itself a little more to fraud?

  22. 22
    uptown says:

    Re: WaMu

    4 days after the announced layoffs of 1,200, and Washington Mutual has 1,427 jobs open on their website. Doesn’t look like they’re going out of business just yet.

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