Monday Open Thread (2012-11-26)

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Here is your open thread for Monday November 26th, 2012. You may post random links and off-topic discussions here. Also, if you have an idea or a topic you’d like to see covered in an article, please make it known.

Be sure to also check out the forums, and get your word in the user-driven discussions there!

NOTICE: If you have comments to make about politics or economics that do not somehow directly relate to Seattle-area real estate, they may be posted in the current Politics & Economics Open Thread. If you post such comments here, they will be moved there.

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.


  1. 1
    softwarengineer says:

    Would You Go to These 2nd Mortgage Extremes

    To keep an ugly AT&T Cell Phone Tower out of your back yard?

  2. 2
    No Name Guy says:

    “Seattle’s apartment boom extends far beyond Ballard. Nearly 8,400 units are under construction in the city now — the largest number in at least 20 years, according to Dupre + Scott.”

    “Tenants are gobbling up new apartments almost as quickly as developers finish them. Pillar Properties, the multifamily subsidiary of Seattle’s venerable R.D. Merrill Co., opened its 234-unit Lyric complex on Capitol Hill Nov. 1.

    It’s already 50 percent leased, says Billy Pettit, vice president of investments. And rents so far are averaging nearly $2,000 a month, more than Pillar had projected.”

    It’ll be a race – will all the new supply drive down rents when it comes on line (my prediction given the sheer volume of apartments in the pipeline), which will tend to keep more people as renters, or will that INSANE 2k a month rent drive folks to buy starter homes in places (like south Sno Co) with good transit to down town? IMO certainly some will choose the latter, but it’s a question of how many relative to those who can be induced to stay as renters.

    In any event, the gross manipulation of interest rates by the Fed will keep whipsawing renters cum owners back and forth, as well as builders, going from the all SFR / condo all the time of the go go bubble years to the now all apartments all the time.

  3. 3
    softwarengineer says:

    RE: No Name Guy @ 2

    When Kids Come Into These Families

    They’ll most likely need more room and the decision will be made for them.

  4. 4
    whatsmyname says:

    By No Name Guy @ 2:

    In any event, the gross manipulation of interest rates by the Fed will keep whipsawing renters cum owners back and forth, as well as builders, going from the all SFR / condo all the time of the go go bubble years to the now all apartments all the time.

    There is a statement begging for an explanatory mechanism. Do declining rates push renters and builders into owner occupancy mode, while the “for rent” market is stimulated by declining rates? Or is it the other way round?

  5. 5
    Blurtman says:

    If you are sitting on the fence about seeing Springsteen, get off now. Great show at the Rogers Center last night in Vancouver. How this 63 year old can do what he does is beyond me. He even had a plucked from the audience Santa up on stage for Santa Claus is coming to town. RIP Clarence. But Clarence’s nephew did a great job on sax. And Bruce is touring with a robust horn section this time out.

    Don’t think twice. Go see him in Portland on Wednesday if you can.

  6. 6
    Pegasus says:

    RE: Blurtman @ 5 – Springsteen Sucks! Did he sing any Obama songs like he did on his political tour in Ohio? The Boss and Bronco Bama!

  7. 7
    Blurtman says:

    RE: Pegasus @ 6 – :>) Springsteen had been very anti GW Bush going back quite a while. In fact, he sings about robber barons destroying his town, etc. I hope he likes my Kill The Bankers song. It is bascially a take off of Barnacle Bill the Sailor, with a Kill the Bankers refrain.

    Personally, I transitioned from the Dead and Hot Tuna, etc. into the ’80’s music back in the day, with a particular fondness for Echo and the Bunnymen, X, Meat Puppets, etc., and having grown up in the Garden State, bailed on the Boss after The River. And I am as jaded as they come. But he does put on one amazing show. It’s only rock and roll, and I like it.

  8. 8
    No Name Guy says:

    RE: whatsmyname @ 4

    The TL / DR version is: The gross rate manipulation by the Fed mis allocates capital and creates complex cross currents that I think will result in substantial instability in the rental / owner occupied markets that will have the relative merits of rent versus buy switching back and forth on a fairly rapid basis compared to historical norms.

    The slightly longer version: The legacy of rate manipulation is what we have today. Very little apartment supply was brought on line from the mid 00’s forward until within the last year or two since everyone built SFR / Condos during that time. Combine this lack of supply and with the housing crash pushing many into rental, this results in the high current rents. Those high current rents, combined with the recent past extremely poor SFR market, pushed builders to go all in on apartments. That doesn’t do anything for rents today since the lead time for apartments is so long, but it will in a year or two once that huge stack of supply hits the market. At that point, rents will crash and the pendulum of relative affordability will swing yet again. So, to answer directly, is it one way or the other: It is, or will be both, IMO, just depending on the time frame, and it’ll switch around rapidly in the coming years, possibly several times.

    That rapid switching back and forth of relative affordability will create further uncertainty in the owner occupied market, further depressing demand as some to many people wait for some long term trend clarity.

  9. 9
    softwarengineer says:

    RE: No Name Guy @ 8

    Speaking of Current Subsidized Zombie Interest Rates [Fueling the 2013 Fiscal Cliff by Making Longterm CD 401Ks a Joke?]

    This blogger summed it for me on how to solve the 2013 Fiscal Cliff in the next 35 days:

    “…Lock all the Congressmen into a large room and tell them that unless they come up with a viable, sustainable plan of action for the fiscal policy of America, they all are fired (or they have to give up their pension, benefits and go onto Obamacare and their own 401K) Think they might get to work?…”

  10. 10
    whatsmyname says:

    RE: No Name Guy @ 8
    Here’s a nice chart for you so that you can see some real swings in multifamily construction. (Hint, the action is in the decades before 1996.) It’s not King County specific, but that just goes more to the whole “interest rates caused it” thing.

    Complex cross currents is a dodge, not a mechanism. Apartment starts pretty nearly stopped along with all speculative construction (including SFR) starting in late 2008 because short term construction lenders quit committing to loans when they saw there were no long term lenders to take them out. It is absurd to think that a more broken financial system or higher rates would have incented anyone to earlier apartment construction. Demand has been proved, money opened up. People are building houses again too, you know.

    Ignoring the fact that both SFR and apartment builders were forced to pull back at the same time anyway, almost no builders (especially developers) are equipped to cross over between single and multifamily. Only a few cross between condo’s and apartments. Skill sets are too different. Some go broke; others wait on the sidelines for the market and the financing to come around again. This idea that they go all in back and forth to the quickest money is just wrong on the facts. The swings are the market, and markets are messy.

    The rental market and rents were pretty weak when the house market peaked. So sure, there is a contrast visible, but it’s a few percentage points at the margin. Now the rental market is strong. If you are right that people will think twice about buying, that just enhances rent pressure and smoothes the cycle for apartment owners. Don’t get me wrong; there is a surplus developing- it will exert downward pricing pressure. There will be deals for some, but the oscillating rent crash will play a bit like the foreclosure tsunami.

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