SmartMoney: Seattle in Best Shape for a “Rebound”

Although the local media can be a pretty good source of amusing overly optimistic predictions, they certainly don’t have the monopoly. Check out this entertaining article from SmartMoney magazine: Home Prices: Now for the Good News

We dug into [the PMI risk index] as well as other forecasts and analysis to determine which markets are in the best shape for a rebound? We also talked with housing experts to learn which kinds of neighborhoods and suburbs are thriving. Our search led us to 25 metropolitan areas that look particularly promising, and there are more than a few surprises. Here, we profile seven of the best-looking markets; for the full list of 25, see November’s issue of SmartMoney magazine.


The Emerald City is that rare major metro area near the coast that is not on a nausea-inducing roller-coaster ride. While home prices in Florida and Southern California are in a free fall, homeowners here are experiencing a gentler landing. Of course, that’s partly because the ride up was not as euphoric—home prices here peaked at 65 percent above January 2003 levels, compared with more than 95 percent in Los Angeles. Thanks to well-paying mega-employers like Microsoft, and Boeing, unemployment remains under 4 percent. That, in turn, has kept median sales prices from falling far. Just as encouraging: Only 11.5 percent of local homeowners who bought within the past five years have negative equity on their property, well below the national average of 29 percent, according to the real estate services firm Zillow. That indicates there won’t be a flood of foreclosures and short sales around the corner.

Among Seattle’s neighborhoods and suburbs, yesteryear’s star performers—affluent areas like the Victorian-studded Queen Anne district or Redmond, home of Microsoft—are beginning to slide back a bit. The most resilient part of the region lies across the Duwamish River from downtown, in West Seattle. The small community is directly accessible by only one bridge. That can lead to traffic snarls, but many residents simply bike 20 minutes to jobs downtown. On weekends the relative seclusion means the 2.5-mile Alki Beach promenade along Elliott Bay doesn’t get too crowded. As long as people like great views of water, mountains and city skylines, “those homes will always maintain their value,” says local broker Febe Cude. Dave and Alison Keith recently sold their two-bedroom townhome in West Seattle for $289,000, up more than 25 percent from their purchase price four years ago. They plowed that windfall into a home in the same neighborhood with twice the living space and a fenced-in yard, for $429,000. “You’re always nervous, but I feel like things are holding up well here,” Alison says.

Wow, where to begin. First off, Seattle metro unemployment hasn’t been “under 4 percent” since April, so apparently this list is based on six-month-old data. Of course, employment is largely irrelevant anyway, since the data shows that job growth was entirely disconnected from price gains in the boom years.

As far as the percentage of homeowners underwater goes, as long as home prices keep dropping (which they have, by 7.5% since April), that number is going to go up, as are foreclosures.

Lastly, when their so-called “expert” has convinced them that the “most resilient part of the region” is West Seattle, it throws pretty much everything they say into question. West Seattle, home of some of the biggest price flops around. West Seattle, where the median price per square foot is off around 17% from the peak, according to Redfin (vs. around 15% for Queen Anne, or 7% in Shoreline).

Sorry SmartMoney, but when compared with the facts, this article comes across as anything but smart.

(Brad Reagan & Elizabeth O’Brien, SmartMoney, 10.17.2008)

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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
    rose-colored-coolaid says:

    Well of course West Seattle is the best part of Seattle. Think about it, the ocean is to the west and ocean front property is always more desirable (don’t tell the people up and down the WA/OR coast whose $95,000 homes corrode away due to the salt infused air).

    Regardless, if you’ve never actually visited Seattle, it would be obvious from a map (or indeed, the name) that West Seattle has more water front, and thus will weather the housing storm. Why would they need to consult facts when the results are predetermined?

  2. 2
    gglockner says:

    Isnt’ Febe Cude pictured on Redfin’s pages? So this quote didn’t come from one of the usual shills for the real estate industry.

  3. 3
    The Tim says:

    Good catch, gglockner. It would appear that Febe Cude is actually a Redfin direct agent, which makes the claim about West Seattle even more bizarre.

  4. 4
    Scotsman says:

    My guess is the “smart money” doesn’t read SmartMoney. Real journalism in the popular press seems to be dead. Spell Check did wonders to improve the average man’s written presentations. Fact Check still requires some effort.

  5. 5

    If you’ve invested money based on Smart Money’s stock picks, you’d have been broke by now…And although I consider the article to be just plain wrong, I also happen to love West Seattle, and have seen much better houses there for the money than in places like Ballard.

  6. 6
    The Tim says:

    Oh I don’t doubt that there are some great deals to be had in West Seattle (compared to the rest of the Seattle area). I just don’t see any data that supports the claim that it is “the most resilient part of the region.”

  7. 7
    Fripp says:

    My wife and I have been focusing on the West Seattle area for the last two years. We also love the area but still think it is extremely overpriced. I don’t see why it would hold up better than places like Queen Anne, though. That bridge makes for a commuting nightmare in the mornings, and with the unresolved viaduct issues, who knows how bad it will get.

  8. 8
    Interloper says:

    So, Smart Money apparently thinks that affordability of home prices has little impact on their “rebound” potential.

    The PMI U.S. Market Risk Index doc attached to the article lists Seattle as the 81st out of 100 cities on “Affordability”, lower than places like San Francisco and San Diego.

  9. 9
    Another Tim says:

    Not only are the comments about housing in West Seattle suspicious, I’m also questioning the 20 minute “bike ride” to downtown. I think it takes 20 minutes by car. I can only imagine how long it takes going the reverse route on a bike.

  10. 10


    Looks like I won’t renew it, thanks Tim.

    I see the Paulson bailout efforts seem to be like adding cement blocks to the victim organised crime threw over the pier….DOW ended DOWN 515 today.

    But that doesn’t affect Seattle’s real estate prices, just the rest of the country’s.

  11. 11
    victorchai says:

    Another Tim // Oct 22, 2008 at 1:39 pm

    Not only are the comments about housing in West Seattle suspicious, I’m also questioning the 20 minute “bike ride” to downtown. I think it takes 20 minutes by car. I can only imagine how long it takes going the reverse route on a bike.
    10 min to port, then take water taxi, and then 10 min to downtown?

  12. 12
    deejayoh says:

    Here’s a quick look at the current crop of failed flips in West Seattle. I haven’t checked all these out – but I found 17 that look like losers in the 77 SFH listings that were 2006-08 purchases (22% underwater). The first one is the worst failed flip I have seen yet – and it even says what the previous owners paid in the listing!

    % loss / link to RedFin listing

  13. 13
    WestSideBilly says:

    The comment about Alki not being crowded is laughable. I suppose it’s accurate in January, but not in July.

    20 minutes to bike downtown is doable if you live fairly close to the bridge – it’s only about 5-6 miles. If you live west of the ridge or further south, 25-30 minutes is probably more realistic.

  14. 14
    Denny Retrograde says:

    Whaddya mean, Amazon’s “mega-employer status” won’t keep us well propped up?

    Oh, dear: “Amazon forecast confirms investors’ worst fears” on Marketwatch this afternoon:{4F1ED672-9F68-40C8-9C97-A95EBD86F851}

  15. 15
    TJ_98370 says:

    Hey Tim,

    KIRO 7 just aired a story indicating that Genie, in Redmond, just laid off 500 people. Isn’t that the company you used to work for? Wow!

  16. 16
    TJ_98370 says:

    Maybe my previous post was in bad taste. I just thought it would be of interest. You did indicate that you quit voluntarily.
    Fell free to delete it ………..

  17. 17
  18. 18

    I love living in West Seattle but it’s not perfect. I doubt anyplace is. I dread thinking about what it will be like when the viaduct comes down.

  19. 19
    The Tim says:

    Sad about Genie. Not too surprising though, unfortunately. Even though they told us they were growing “smart” and planning for the next downturn, they still seemed to be growing too fast. They also laid off people back in July.

    Genie’s parent company Terex has been slammed pretty hard lately. Given that they manufacture construction equipment, I suppose that shouldn’t be too much of a surprise. Terex stock (TEX) closed at $16.72 today, down 82% (!) from the July ’07 peak of ~$92. Ouch.

    Oh, and yes, I did leave of my own volition, on good terms.

  20. 20
    Esol Esek says:

    Warning – dont buy on the flatland of West Seattle that is not on the hill. That is a prime spot for a tidal wave wipeout a la Banda Aceh. This city is only really a hundred years old, and has had neither the megaquake or megawaves that we can have. Same goes for Ocean shores and Westport and any other beachfront locale. Enjoy, but those are sand spits for a reason.

  21. 21
    S-Crow says:

    Sad about Genie. Snohomish Co. small businesses are having it tough too. If I recall correctly, Milgard Windows is closing their shop in Marysville according to the Everett Herald.

  22. 22
    mydquinn says:

    Tim, let me encourage to quit relying on the analysis showing that there is no relationship between employment and the housing market. 1) It simply does not adequately control for things, like the wealth effect. If your are going to do an analysis like that, you need to be doing some sort of multiple regression to be taken seriously. 2) It also fails to take variation WITHIN the job market into account. For example, the question is not how many total jobs are added/subtracted, but rather how many stable/high-paying jobs are being added/subtracted. 3) The time period being analyzed also seems relatively short. As I have previously said, we have some more pain ahead and Seattle Bubble has been a useful resource. However, if you are going to lay out evidence, you need to do it properly.

  23. 23
    The Tim says:

    Fair enough. I appreciate constructive criticism like that, thank you. I will see what kind of information I can get my hands on to do the types of analysis you mentioned.

    I do want to point out however, that at least I’m doing some sort of data-based analysis. The people quoted in articles like this are just spouting out declarations as if they are fact, when they have provided no data to back it up. I feel it is necessary to call people on garbage like that.

    If an article like this is going to make the claim that low unemployment will keep median home prices from falling, I want to see the data that backs up such a claim.

  24. 24
    WestSideBilly says:

    I love living in West Seattle but it’s not perfect. I doubt anyplace is. I dread thinking about what it will be like when the viaduct comes down.

    Last weekend’s inspection should give you a pretty good idea. It took me close to an hour to get from Fauntleroy/35th to Green Lake, vs 15-20 minutes on a normal Saturday afternoon. I-5 was a parking lot, 1st ave was a mess, and Alaska Way (surface) was a zoo (though I imagine that to be a worst case because most of the people did not know where to go).

    Thankfully, we don’t have to worry about it shutting down because none of our elected officials can do much of anything about it.

  25. 25
    ElPolloLoco says:

    Exactly… the Viaduct is West Seattle’s elephant in the room. The room is on the third floor, the house wasn’t built to code, and the floor is already sagging and creaking alarmingly.

    You might as well turn West Seattle into a leper colony if the surface-street evangelists get their way.

  26. 26
    Ben says:

    With respect to unemployment and housing prices, I commented on that in another blog:

    Basically, I think that it is possible for unemployment to have an effect on house prices, but the effect is almost impossible to measure because other effects with different frequencies affect house prices far more.

    The end result is the same though – you cannot use unemployment numbers to talk about house prices because there is not enough correlation on the surface, even though they are a contributing factor.

    BTW – if somebody else on the site could help me out I would appreciate it. I seem to recall something in a blog in the past couple of years where somebody said that bubbles were for bathtubs and problems with banks don’t mean much locally. Does somebody have a link to that thread?

  27. 27
    David McManus says:

    This is going to be an ugly Friday. DOW futures down 550.

  28. 28
    stephen says:

    Deejayoh, this one was actually 500k in 2006, sold for 320k in aug and now down to 269k. Some one should put this one out of it’s misery :-)

  29. 29
  30. 30
    deejayoh says:

    Stephen –
    If you check the built date on that one it was 2008 – so it looks like the 2006 sale was a property that was torn down to make way for townhomes

    Still, this last sold in Aug ’08 – now they are asking 16% less? In 2 months?

  31. 31

    Wow – I don’t understand all of the negativity towards West Seattle. Have you seen the monthly appreciation reports? Or, honed in to some of the stronger neighborhoods, such as North Admiral? You might be interested in knowing that zip code 98116 has shown appreciation over the past few months when many neighborhoods (such as Queen Anne and N. Capitol Hill) have shown consistent depreciation. In addition, North Admiral neighborhood (a small segment of West Seattle), is one of the strongest markets in Seattle. So, while West Seattle as a whole has had it’s up’s and down’s, there are many parts of West Seattle that remain strong.

  32. 32
    The Tim says:

    $/sqft stats from Redfin

    98116 (West Seattle)

    98119 (Queen Anne)

    98112 (N. Capitol Hill)

    Looks to me like they’re all headed down.

  33. 33
    patient says:

    Interresting graphs in the sold vs list price but for appreciation purpose I guess only the sold are of any interrest.

  34. 34
    buyStocks says:

    when the word “strong” is used = Realtor alert, Realtor alert

  35. 35
    deejayoh says:

    Zillow’s neighborhood report on the Admiral district:
    Home Value Index: $512,500
    1-Yr. Change: -$26,500

  36. 36

    My biggest gripe about West Seattle (which is not isolated to West Seattle) are the “ugly townhomes” that have been allowed to be thrown up in place of nice older homes and I’m concerned the City (our fine Mayor lives in WS btw) has allowed to much density to exist considering our roads and traffic.

    I still really enjoy it in WS for the shops, walking around, restaurants…etc. It’s great as long as you don’t have to leave. ;)

  37. 37
    Rebecca Carlson says:

    I think the point of your graphs was to prove my points wrong. Yet, a graph on list price vs. sold price really isn’t speaking to appreciation. Nonetheless, according your charts, the 98116 zip code seems to show the strongest trends the past few months (supporting my earlier point), with more homes selling above their list price; whereas 98119 and 98112 are selling just at or below their list price.

    And Rhonda, I totally agree with your points about the townhomes. (Ballard is also a victim of this problem.) There are few that I think are great, but the majority are cookie-cutter ugly! And the bridge really isn’t that bad – I’ve lived in West Seattle for 14 years and have only had a few days during that time when it was truly bad.

  38. 38
    buyStocks says:

    It’s very hard to take somebody seriously who refers to any real estate market right now as “strong”, but i’m trying to keep an open mind here. Your earlier point was that admiral area was appreciating over the last several months, which these graphs and zillow data do not support. You mentioned appreciation reports, where are those?

  39. 39

    […] a story eerily similar to SmartMoney’s “best shape for a rebound” article Forbes once again places Seattle #1 on their own list of Real Estate Markets Most Likely To […]

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