NWMLS: Home Prices Hit Another Record as Sales Slow

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April market stats were published by the NWMLS yesterday. Before we get into our monthly stats, here’s a quick look at their press release.

Housing inventory improves, but market still favors sellers
Northwest Multiple Listing Service reported strong gains in the volume of new listings its members added during April (up 13.6 percent from March), but inventory remained well below the supply needed for a more balanced market. MLS leaders say the lopsided market is prompting some anxious buyers to take ill-advised risks.

J. Lennox Scott, chairman and CEO of John L. Scott, Inc. described April as “another grand slam month for housing,” adding, “The market is more intense than a year ago. We are still seeing 80 percent of the homes coming on the market sell within the first 30 days.”

Scott said “virtually all new listings are selling, many with multiple offers in all the market areas in King, Snohomish, Pierce and Kitsap counties in the price ranges where 90 percent of the sales activity is happening.” Heavy open house traffic and multiple offer situations are keeping brokers extremely busy, he added.

Gotta love that immeasurable “open house traffic” that they always love to quote. Seriously though, Lennox. Settle down just a little.

CAUTION

NWMLS monthly reports include an undisclosed and varying number of
sales from previous months in their pending and closed sales statistics.

Here’s your King County SFH summary, with the arrows to show whether the year-over-year direction of each indicator is favorable or unfavorable news for buyers and sellers (green = favorable, red = unfavorable):

April 2016 Number MOM YOY Buyers Sellers
Active Listings 2,600 +20.5% -13.4%
Closed Sales 2,153 +12.7% -8.5%
SAAS (?) 1.45 +1.1% +5.7%
Pending Sales 3,031 +5.4% -11.1%
Months of Supply 1.21 +6.9% -5.4%
Median Price* $540,000 +1.6% +12.5%

Indeed, the market is still tilted strongly toward sellers, but for the last few months the supply and demand trends have been inching back toward a more favorable market for buyers. Inventory saw another uptick in April, and the year-over-year drop shrunk significantly again from -21 percent in March to -13 percent in April. Sales also continued to slow as both pending and closed sales are down around ten percent from a year ago for the second month in a row.

That said, the median price still rose to another new high. Remember though that before the last bubble burst, sales were declining for nearly two years and inventory was climbing for about a year before home prices finally started to decline as well. So even if we are at a turning point right now, don’t expect price gains to go away this year.

Here’s your closed sales yearly comparison chart:

King County SFH Closed Sales

Closed sales were up from February, by about the same amount as last year. The year-over-year drop in closed sales was about the same as last month.

Here’s the graph of inventory with each year overlaid on the same chart.

King County SFH Inventory

Total inventory is at its lowest April level on record. On the flip side, the 20 percent month-over-month increase in on-market inventory is the largest gain on record.

Here’s the supply/demand YOY graph. “Demand” in this chart is represented by closed sales, which have had a consistent definition throughout the decade (unlike pending sales from NWMLS).

King County Supply vs Demand % Change YOY

The blue demand line is shooting back toward buyer’s market territory, but we’ve had false starts before in 2013 and 2010 with similar trends. It will be a while before we will be able to tell if this is more than just another slight blip.

Here’s the median home price YOY change graph:

King County SFH YOY Price Change

Year-over-year price growth dipped from a record-breaking 21 percent in March to a less ridiculous but still pretty absurd 13 percent in April.

And lastly, here is the chart comparing King County SFH prices each month for every year back to 1994 (not adjusted for inflation).

King County SFH Prices

Once again there has never been a better time to sell your home.

April 2016: $540,000
July 2007: $481,000 (previous cycle high)

Here’s this month’s article from the Seattle Times: Home prices charge ahead, driving some buyers farther afield

0.00 avg. rating (0% score) - 0 votes

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.

106 comments:

  1. 1
    GoHawks says:

    I thought this line summed up the market perfectly:

    “Total inventory is at its lowest April level on record. On the flip side, the 20 percent month-over-month increase in on-market inventory is the largest gain on record.”

  2. 2

    By GoHawks @ 1:

    I thought this line summed up the market perfectly:

    “Total inventory is at its lowest April level on record. On the flip side, the 20 percent month-over-month increase in on-market inventory is the largest gain on record.”

    I’m not sure a 20% gain is all that great given you’re starting from a record small number!

    One stat that stuck out for me is the number of new listings for the year is down about 120 units (King County SFR). Even with much higher prices sellers still are not putting enough houses on the market to meet demand.

    Numbers from NWMLS but not compiled by or guaranteed by the NWMLS.

  3. 3
    SFraz says:

    https://twitter.com/NatashaKIRO7/status/728735754852155392
    Natasha Chen of Kiro 7: Made this infographic to show how FEW condos are being built. The WA Condo a act is one reason behind this. Have you had trouble shopping for condos, with not enough supply of them on the market?

  4. 4

    RE: SFraz @ 3 – From the article:

    “In the search for ways to increase the supply of all housing in the area, some developers have suggested that the Revised Code of Washington needs to be changed, in the way that it describes a condo warranty.

    It states a condo must be:

    (a) Free from defective materials;

    (b) Constructed in accordance with sound engineering and construction standards;

    (c) Constructed in a workmanlike manner; and

    (d) Constructed in compliance with all laws then applicable to such improvements.”

    Those are not really tough standards.

    Maybe apartment owners having buildings built are better at monitoring the construction? I remember back in 2007-2008 there were several condos in Snohomish County being re-sided because the vinyl siding had not been put on properly. Hardly a tough thing to do, but when a developer is building to sell they may not care as much. Anyway, those type of situations are what drive up the premium, and if the premium isn’t as high on apartments it’s probably because of fewer defects, not that the apartment owners says: “Oh, that’s okay I have to spend $X,XXX,XXX.XX to fix the contractor’s mistakes.

  5. 5
    ESS says:

    Of the various years that Tim has plotted on the Monthly King Co. SFH Inventory chart, which year (if any) closely represents what is considered a “normal” and “healthy” market – the four month supply that everyone seems to think is the best numerical balance between buyers and sellers?

  6. 6
    sleepless says:

    By Kary L. Krismer @ 4:

    RE: SFraz @ 3 – From the article:

    “In the search for ways to increase the supply of all housing in the area, some developers have suggested that the Revised Code of Washington needs to be changed, in the way that it describes a condo warranty.

    I don’t think “though” building codes is what keeps developers from building. Building codes were taught 10 years ago, nevertheless, they were able to build more. I think the problem is government regulations that don’t allow to build more – build higher or more units on the same subdivision. If you want to live in the urban area you can forget about SFH, all you get either a townhome or a condo. I am fine with that, we need to build more condos and townhomes in the cities. More high raises. It sucks to see 4-5 story apartments popping up in DT Bellevue. We need 20+ story apartments, not 4-5 stories. Build higher in the city – problem solved. If people are fine living like sardines in the city, why not let them. We need more units, higher rises and more townhomes in the city area. I am fine with living SFHs in suburbs.

  7. 7
    boater says:

    RE: Kary L. Krismer @ 4
    I doubt there ia much difference between condo and apartment builds. I suspect many apartment buildings are built to flip just like condos. The difference is the residents. Apartment dwellers who don’t like something wait until the end of the lease and move. Condo owners sue. Less lawsuits equals lower premiums for apartment building owners.

  8. 8

    By boater @ 7:

    RE: Kary L. Krismer @ 4
    I doubt there ia much difference between condo and apartment builds. I suspect many apartment buildings are built to flip just like condos. The difference is the residents. Apartment dwellers who don’t like something wait until the end of the lease and move. Condo owners sue. Less lawsuits equals lower premiums for apartment building owners.

    Well first, the types of defects we’re talking about here are not likely the type of thing a tenant is going to complain about. You might have moisture so bad it’s actually getting inside a unit, but that would be extreme.

    Also, you’re ignoring the apartment owner. If they have a building that needs $1,000,000+ in repairs because it’s leaking or has other envelope issues, they are not going to just sit by and do nothing. As I mentioned in the other thread when this came up, a new condo association is probably going to be less likely to sue because they don’t have the funds (in part because the developer set the dues low to attract buyers).

    I’m very skeptical of these articles thinking they are just some builder association trying to influence the legislature. If you think about it, with the market being what it was no one probably even thought about building condos again until maybe 2012. What I don’t know is the rental income and multiples used in a low interest environment for valuing an apartment building, but I have a hard time believing that the combined value of condo units wouldn’t be significantly higher than the value of an apartment building, and more than offset the cost of insurance (assuming those numbers are accurate).

    Finally, I wonder what the law is regarding converting an apartment to a condo–if that gets around the statute referenced? If the price of condos does go significantly higher a lot of those buildings built as apartments will be converted (which is another reason I’m skeptical of the articles–they seem to be BS).

  9. 9
    Doug says:

    The Tim, are you able to breakout monthly sales into new home vs. existing? Are you similarly able to breakout the active listings?

  10. 10
  11. 11

    By Doug @ 9:

    The Tim, are you able to breakout monthly sales into new home vs. existing? Are you similarly able to breakout the active listings?

    There were 265 new construction sales at a median of almost $700,000. 265 is also less than last year, which is surprising.

    Of the actives, just over 500 are new construction. That seems surprisingly high, and makes the total active listing number seem even more pathetic, but there were more new listings this year than last.

    Numbers from NWMLS sources, but not guaranteed.

  12. 12

    RE: GoHawks @ 1

    Your Logic Reminds Me of Oil Prices

    They say it went up 21% in prices, but YTD its PLUMMETED 70%….Kansas City is still suffering from 2007’s real estate collapse [50%], prices never recovered there to date too…..I can prove this with my historical property tax records.

    Seattle has lucky devil [with gold spoons in their mouths] CASH BUYERS [not investors] scooping up anything for any price…..this is savvy investing? LOL

    Who needs Boeing or MSFT?

  13. 13

    RE: Kary L. Krismer @ 11
    New Construction PROFIT

    With oil still down 70% the last 12 months, building materials MUCH CHEAPER too?

    I bet new home builders won’t show us their new material invoices….their prices are outrageous too.

  14. 14
    Justme says:

    RE: Kary L. Krismer @ 4

    I agree with Kary’s comments 4 and 8 that the condo defect law has little to do with lack of condo build.s.

    Wen some condo builder association is making such claims, it is simply a case of “never let a good crisis go to waste”. That principle is used among those who have propaganda to spread and agendas to further.

  15. 15
    ESS says:

    By Justme @ 14:

    RE: Kary L. Krismer @ 4

    I agree with Kary’s comments 4 and 8 that the condo defect law has little to do with lack of condo build.s.

    Wen some condo builder association is making such claims, it is simply a case of “never let a good crisis go to waste”. That principle is used among those who have propaganda to spread and agendas to further.

    __________________________________________________________________________________________________________

    If your analysis is correct, then the construction powers and those who buy these apartment buildings have decided that there are more long term profits in building and renting these apartments than building and selling condos. Which I guess is good if that is a prognosis for the future of Puget Sound Real Estate and the rental market.

    On the other hand, legal entanglements are expensive , so maybe there is something to the reluctance of builders to construct condos. I used to tell my friends that with the arithmetic addition of each lawyer to any given legal matter, the cost of that matter increased geometrically. And insurance companies exist to make money, and numerous insurance claims only raises the price of doing business with higher premiums.

    Interestingly, most of these apartments that are coming on line are studios through two bedroom apartments. Perhaps these apartments will alleviate the current housing shortage for all these millenials, but assuming they get married and have kids, another housing shortage will be looming in the near future. These little apartments will not cut it for many of them in the future when they finally settle down.

  16. 16

    RE: softwarengineer @ 13 – The price something sells for is not dependent upon what it costs–unless it costs more to make than what it could sell for, in which case it is not made at all.

    If the builders can sell out all their new product at a median of $700,000 they are going to do that even if Weyerhaeuser started giving away wood for free.

  17. 17
    Som says:

    I live close to this house https://www.redfin.com/WA/Bellevue/4220-160th-Ave-SE-98006/home/2086979

    When it came to the market, the next following 7 days were crazy for the neighborhood. I saw many hopeful American families, some with middle school kids, dreaming that this is it. Newport high here we come. Then I saw broker exclusive hours. I saw Bentley, Lambo, Porsches, you name it. I also heard them talking loudly on phone….I could not make out what they were saying…some jive that sounded like “chowmein chowmein lomein hu jintau”.

    The house went pending for $200K above askin,, all cash. I’ll let you guess who the buyer was.

  18. 18
    Basho says:

    I just saw a house go pending at a price 40% above what it appraised at when it was sold a year ago. For the prior transaction, when the appraisal came back too low the transaction price had to be reduced. The seller didn’t make any material upgrades.

    The countywide figures aren’t showing the, perhaps unprecedented, surge in prices in certain areas of Seattle and Bellevue.

    In the coming months, we’ll find out how many homeowners want to take advantage of this market. I just received a notice from a neighbor who bought at the last top; his house is going on the market this month.

  19. 19
    Som says:

    RE: Basho @ 18 – In the words of our great philosopher Ho Lee Fuk, “Sum ting is def wong”.

  20. 20
    GoHawks says:

    RE: Som @ 17 – Som, why the stereotypes?

  21. 21
    Cap''n says:

    RE: GoHawks @ 20

    Because Som is a fuvking racist.

  22. 22
    Blurtman says:

    This old Sammamish log cabin sold for $492k. Tear down? A million dollar home can be built on that site. Is there money to be made?

    3 beds 1.75 baths 1,761 sqft

    Lot: 0.25 acres
    Single Family
    Built in 197

    http://www.zillow.com/homes/58-211th-Pl-SE,-Sammamish,-WA-98074_rb/

  23. 23
  24. 24
    Dave says:

    RE: Cap”n @ 21

    Som is funny Cap’n, and these days it’s important not to confuse Tribalism with Racism.
    Big fooking difference, the McCarthyism being carelessly used these days is getting scary.

    Remember Long Duk Dong in Sixteen Candles (1984) or Fook Me and Fook Yu in Austin Powers (1997)? Oops, I forgot about yellow lives matter (2015). I’m over 40 so I’m an Oldie. Nevermind.

    /end hangover coffee rant.

  25. 25
    Deerhawke says:

    One perspective on why so few condos are being built. I worked for a firm that looked into this in 2012 and 2013. Most of what I learned came from lawyers, insurance brokers and envelope consultants.

    Between 1998 and 2008, 100% (yep that means all) new condos in Seattle were sued for construction defects. Including the ones with world class envelope specialists who supervised all stages of construction. But oddly none of the old apartment buildings that were condo conversions were sued.

    Here is the history. When Seattle had a big real estate run-up in the 80’s, all kinds of California/Arizona firms moved up here to take advantage. They built the same style of architecture as they built in California and Arizona and it was a disaster. The envelopes were terrible and soon the condo associations were trying to find redress. Law firms stepped in and got large settlements from the insurers, who had foolishly charged the same kinds of premiums that they had in California and Arizona. They got hammered. The insureres stayed in the business, but priced in the additional risk and required envelope consultants who required particular kinds of envelopes. Problem solved, right?

    Wrong. The law firms who originally had to be convinced to take on the construction defect litigation by that time really counted on the cash-flow. They had built up big highly-specialized legal teams dealing with this area of practice. When business began to tail off because builders were building much more robust, fully-inspected envelopes, they were not willing to let it go. Instead, they added an outbound marketing operation to their practice. They would track the end of construction for each condo building and track the membership of each condo board. Toward the end of year 4, each member of each condo board would suddenly receive dozens of registered letters from different law firms.

    The pitch was pretty much the same. Did you know that if you don’t file suit within six years, you could lose the opportunity? And did you know if you do not, you could personally be sued and that it could lead to personal bankruptcy? Here is how we can help and why you should choose us….

    So there was always a suit and always a very long, drawn-out and expensive settlement. Insurance premiums came to reflect this fact. Basically the premium for each condo complex was the absurd cost of defending a suit and paying a settlement, plus any potential repairs, plus the markup of the insurance company.

    And of course, the older buildings that had been converted to condos were not sued because they were generally past the statute of repose (six years) and so there was no potential recovery for the law firms.

    The cost of condo insurance for new construction was completely prohibitive and of course no financial institution would extend financing without that insurance.

    So those companies that had built condos built apartments instead. The thought for many was that they might eventually convert them to condos after the 6-year statute of repose. But many of those companies found ready buyers for their apartment buildings. Insurance companies, pension plans, and annuity firms wanted assets in Seattle’s booming apartment market and were willing to pay a premium.

    Recently there have been some new condo projects. The first were entirely self funded and self insured, generally by non-US entities using non-US money. Recently I have seen some others that were not, so perhaps insurance is starting to become available again at reasonable rates. I have not done any recent research on this market, so I am not sure how these other companies are able to build condos here.

    But this does give you some idea of the reason why we have seen so many apartments built and so few condo projects. It is all about the inevitability of lawsuits and the resulting cost (and availability) of insurance.

  26. 26
    Basho says:

    Deerhawke, thank you for sharing your perspective.

    Do you think that the statutory condominium warranty exceeds what commercial clients demand for apartments/commercial real estate?

    I don’t know what terms are typical throughout the industry, but I’ve seen commercial clients get warranties on just about every part of the building. Structural elements and certain components of the building envelope can have warranties of 20+ years. For major mechanical and electrical systems, there might be both a warranty and a service agreement that effectively limits the clients downside.

    Without hard numbers (e.g. insurance costs $100,000/unit), I’m skeptical of claims that the statutory condominium warranty is excessively burdensome.

  27. 27
    Action says:

    RE: Deerhawke @ 24

    Very interesting, thanks for the insight Deerhawke.

    So we could start to see a glut of condos come onto the market in 6 years if the owners decide to convert them… Anyone know the process for converting apartments to condos and how long that takes? Do they have to evict tenants prior to recording the condominium? This could potentially make a big boost in inventory in the region a few years down the road that wouldn’t show up in the building permits or housing starts numbers.

  28. 28
    Doug says:

    Polling the group to get your collective thoughts on this. I think it should be about $675k-$710k. It has no garage and only a tiny storage closet outside.

    The realtor knows it’s way overpriced, but the builder insisted on listing it at $1.027mm.

    https://www.redfin.com/WA/Seattle/1629-42nd-Ave-E-98112/unit-B/home/105435918

  29. 29
    AJT says:

    RE: Doug @ 27
    That screams toppy to me.

  30. 30
    Som says:

    RE: Cap”n @ 21 – I know I was wong and I am still wong. Go figure. I love my peeps.

  31. 31
    Justme says:

    RE: Deerhawke @ 24 – Very interesting post. So you are saying that CA/AZ companies starting in 1980s built lots of Seattle condos using CA/AZ building designs, but that these buildings did not withstand Washington/Seattle weather over the years. Which makes you wonder whether WA building codes were followed or not?

    Do you have any web references for the statement that 100% of all condo projects finished between 1998 and 2008 filed lawsuits against builders? Any 1998-2008 newspaper articles to that effect? Do you mind telling us the name of the law firms that specialized in such suits? I did some searching myself and I could find any big-picture stories that contained such information.

    Also, it seems like a pretty big loophole that the 6 years are from the construction ending date (or maybe move-in permit issue date) rather than the sales date. Why does the condo law not speak to that? If this is indeed correct then, yeah, lots of recent apartment buildings will probably be resold as condos once the 6-yr limitation has expired.

  32. 32
    Justme says:

    RE: Doug @ 27 – I looked on google streetview and I can’t even see this bldg. Was this a very fast teardown job?

  33. 33

    RE: Justme @ 30

    It was such a huge problem that there was a change (reduction) in the scope of defects covered and some other changes offering the builders a bit of relief. I remember back in 2004-early 2005 there were a slew of attorneys sending out letters to condo associations to get their claims filed before the new and more restrictive rules went into effect. It caused some huge problems for owners who were trying to sell during that time as in preparation for these (sometimes largely bogus) suits, there was a HUGE laundry list of any and all possible defects in the resale certificate packet for resale transactions in progress.

    I remember one where they sent a questionnaire to every owner asking them to list anything they could possibly think of that might be “wrong” and added all of that to a quick construction inspection. Basically there was not anything wrong with the building. But there was a time limit by which they had to file a complaint or lose the ability to do so. Scary letters pouring in from attorneys urging them to complain/sue now before it was too late. So everyone basically complained…just in case, rather than lose the ability to do so because of the deadline.

    After 2005 you saw them less (as to filing of, though many filed in time lasted through 2008 before fully resolved, as Deerhawke indicated). The new changes better reflected the specific issues the State was trying to address, mainly water intrusion.

    There are provisions for condo conversions as well. You just don’t hear about that as much as most of that is already resolved before the first converted condo is sold.

    It’s very dry reading, but you can find most of it, including the condo conversion rules, here:

    http://digitalcommons.law.seattleu.edu/cgi/viewcontent.cgi?article=1863&context=sulr

    That link is not all inclusive, but does contain the RCW references that you can pull to research it more fully.

  34. 34
    Bob says:

    I smell a top in all markets, including real estate. Wage inflation is outpacing the GDP deflator.. This has caused corporate profits to drop hard the last four quarters. The trend is in and accelerating. The impact of low interest rates has completely run its course. When the layoffs start, housing demand will drop like a rock. Time to wake up.

    My prediction is many companies will be announcing cutbacks over the next six months.

  35. 35
    whatsmyname says:

    RE: Bob @ 33
    “The impact of low interest rates has completely run its course.”
    The FED raised rates, and the economy slows. No news here. The question is how hard a landing will they allow.

  36. 36
    Blake says:

    By whatsmyname @ 34:

    RE: Bob @ 33
    “The impact of low interest rates has completely run its course.”
    The FED raised rates, and the economy slows. No news here. The question is how hard a landing will they allow.

    Agree with Bob, but whatsmyname… Who do you mean by “they?” The Fed? Monetary policy is largely ineffective now. IMHO they= Mr. Market and it teaches hard lessons. China’s in for a very hard landing and when they are forced to devalue the yuan all he’ll will break loose! This year… next? Soon…

  37. 37
    whatsmyname says:

    RE: Blake @ 36 – I mean the FED.

  38. 38
    AJT says:

    RE: Blake @ 36

    I agree Blake. I think China will go two ways. Either hard landing or Japan style stagflation. Either way China has some issues that will wash up on our shores.
    I attached an article that I think nicely explains why China’s “great ball of money” that was created to avoid any pain from the global recession has OVER inflated RE prices in top cities around the globe (and obviously Seattle). In summary, money doesn’t sit idle and if the Chinese do not trust their gov constantly interfering with markets causing artificial prices the Yuan will find safer assests, aka, foreign RE. All the talk of our super strong job market, cycles, local tech companies (which some think is bubbly) are all relevant and not likely to change anytime soon, but when China does actually have to confront their parabolic debt growth just watch what happens to the demand (and possibly supply side if foreign nationalists are forced to sell to cover risks at home) side of our RE market. I see this as the only realistic factor of the equation that can quickly change the price environment in the near term.
    http://www.bloomberg.com/view/articles/2016-05-08/why-china-is-so-prone-to-bubbles

  39. 39
    Action says:

    RE: AJT @ 38

    What makes you think Chinese investors will liquidate their overseas RE assets first? The overseas RE is their lifeboat for when SHTF in China…

  40. 40
    piggyshooz says:

    Re Madison park new construction price, hard to say without seeing in person; however that unit will very likely go for more than $900K, wouldn’t be surprised if $1.0M. Teardown houses on non conforming lots are selling for $1.0-$1.2M in Madison park and given the location and not being on a high traffic street.

    FWIW, I looked in Madison park for a year and recently purchased.

  41. 41
    AJT says:

    RE: Action @ 39
    Action, that is a great question. First I must say I have no idea how circumstances will unfold but here is one of many possibilities.
    I will use a US citizen as an example. Citizen had money invested at home and overseas. The overseas investments may have been acquired outside lawful methods (or not), remember it is illegal for more than $50k a year to leave China per year. Say the citizens investments at home are starting to tank and may require coverage or the IRS (insert communist government) wants “their” share of investment the US citizen would be inclined/forced to sell foreign assests. Remember we are dealing with a communist government that can and will reach out and touch its citizens in ways that make us cringe.
    Think Japan in the 90’s. I seem to remember chatter about the Japanese “taking over the world” back then.
    Again I have no idea how this will play out but I do think it is a grey swan that can affect or normalize some of these hot RE markets around the globe.

  42. 42
    Deerhawke says:

    Another perspective on the real estate statistics in this month’s report.

    I am a spec builder who works in the 705/710 neighborhoods of Seattle north of the ship canal. There is absolutely no sign of slowing activity on the dirt side of the business.

    Buildable teardown lots are getting bid to absurd levels. Part of the reason is that some couples have been outbid so many times on new construction that they have decided to buy the lots themselves and hire a builder to build their dream home. Whether they can keep their construction costs under control will determine whether this is a good idea or not. But the result is clear. Often several spec builders will be bidding on a lot and will be bidding in the same general (rather inflated) range. Then a homeowner (with a custom builder in tow) comes in $50K to $100K above them. They don’t have to pay attention to the 1/3 ratio of land to finished product that Ardell has written about.

    The other part of the picture is the rise of presale realtors. I am finishing 2 very nice single-family homes in 705. About 8 weeks before being finished, I was contacted by an agent over the phone who told me he was the coordinator for a group of presale realtors. They had sent someone to the city to copy my elevations and floorplans and had been tracking my progress. They sent someone out to photograph my projects– not just on the outside, but on the inside as well (they took pictures through the windows). The agent asked me if I was ready to sell yet and would consider a presale bid.

    He explained that their business plan was to market themselves to people who are relocating to Seattle or who had been outbid in multiple offer situations. They then research what is coming on the market as new construction, contact the builder and try to find a match to put together a deal. There are five agents and a coordinator in this one office that do nothing but pre-sales. They each sell 1-2 single family houses or townhouses each month and one experienced agent in the group does double that.

    I asked what was in it for me. The answer is a premium price. He asked me to name my price including an additional $25-50K. I put my thumb on the scale pretty heavily and told him premium prices for both houses.

    I didn’t think about it much until the following week when I got a call from a different agent at a different agency. Same spiel and the same business plan.

    Long and short of it. The house that was more finished of the two sold at a premium price two weeks ago. The other one is seeing fairly heavy traffic and we are still three weeks before going to market.

    And then last week I got a call from another agent yet who was inquiring about a project that is toward the end of permitting but where we have not even broken ground yet. Would I be interested in discussing an offer?

    I had discussions with other builders and they confirmed that they knew all about this and had sold most of their new Seattle single family homes this way. (“Oh. This is new for you? Didn’t you know?”)

    Since,
    1) there are at least a dozen of these transactions a month and
    2) most/all of these transactions do not show up on the MLS, and
    3) these are all high $-value sales,

    it makes me question:

    1) the number of actual sales that have taken place (more)
    2) the actual amount of inventory (more)
    3) the real median price in Seattle and the real median price in King County (more and more)

  43. 43
    Eile says:

    Chinese will sell their houses here when the price is starting to drop. Just like what’s happening in Hong Kong. Remember hong kong is one of the most expensive place to buy a house.

    http://www.businessinsider.com/hong-kong-housing-bubble-is-bursting-2016-4

  44. 44
    Justme says:

    RE: Ardell DellaLoggia @ 33

    Thanks for the added info. My understanding is then that there has ALREADY been a reduction in the scope (in 2005) of the condo construction defect law, making HOA-initiated lawsuits less likely than before 2005. This was not mentioned by Deerhawke. It also makes the following claim more suspect:

    >>Between 1998 and 2008, 100% (yep that means all) new condos in Seattle were sued for construction defects.

    Deerhawke, since the reduced-scope law was in effect 2005-2008, projects finished during those years seem unlikely to have a 100% lawsuit rate. I still have not seen anything but anecdotal evidence of the 100% number. What is my point? Well, exactly what I wrote earlier:

    >>When some condo builder association is making such claims, it is simply a case of “never let a good crisis go to waste”. That principle is used among those who have propaganda to spread and agendas to further.

    ADDENDUM:

    Now, all that being said, I think the main reason for so many more apartments being built than condos since 2008 or so, is that there was no demand for anything much during 2008-2011. At the same time, the apartment builders have been building mostly class A (high-end) projects, probably not simply because that is where the apartment end-user demand is, but because they have also had an eye on future condo-conversions. Conversion from Class A units presumably would have a higher probability of being profitable than from low-end projects. Fear of lawsuits or not.

  45. 45
    greg says:

    By Eile @ 42:

    Chinese will sell their houses here when the price is starting to drop. Just like what’s happening in Hong Kong. Remember hong kong is one of the most expensive place to buy a house.

    http://www.businessinsider.com/hong-kong-housing-bubble-is-bursting-2016-4

    But that can’t happen here, we have stuff and things.

    And don’t forget we are the next SanFranCouver Kong.

  46. 46
    Blake says:

    By AJT @ 38:

    RE: Blake @ 36

    I agree Blake. I think China will go two ways. Either hard landing or Japan style stagflation. Either way China has some issues that will wash up on our shores.
    I attached an article that I think nicely explains why China’s “great ball of money” that was created to avoid any pain from the global recession has OVER inflated RE prices in top cities around the globe (and obviously Seattle). In summary, money doesn’t sit idle and if the Chinese do not trust their gov constantly interfering with markets causing artificial prices the Yuan will find safer assests, aka, foreign RE. All the talk of our super strong job market, cycles, local tech companies (which some think is bubbly) are all relevant and not likely to change anytime soon, but when China does actually have to confront their parabolic debt growth just watch what happens to the demand (and possibly supply side if foreign nationalists are forced to sell to cover risks at home) side of our RE market. I see this as the only realistic factor of the equation that can quickly change the price environment in the near term.
    http://www.bloomberg.com/view/articles/2016-05-08/why-china-is-so-prone-to-bubbles

    That’s a good article AJT… thanks.
    Last year, $674 billion fled China… and they also spent over $600 billion defending their currency! That was about 20% or their foreign reserves, so that cannot continue very long… David Stockman refers to them as “the Red Ponzi” and it does not look very sustainable. The Chinese central planners may want to engineer a “soft landing,” but capital flight and currency speculators will probably have the last say! There will be a correction and settling of accounts. The yuan was devalued just a fraction last summer and it set off market panic around the world… we may see them devalue by 10-20% and the market reactions will be much more severe.

    whatsmyname @37… Yes, I thought you meant the Fed when you wrote: “The question is how hard a landing will they allow.” I think many people assume the Fed and central banks have more power than they do…. no one wants a hard landing, but markets (people) tend to overreact due to fear and uncertainty…

  47. 47
    ess says:

    By Eile @ 42:

    Chinese will sell their houses here when the price is starting to drop. Just like what’s happening in Hong Kong. Remember hong kong is one of the most expensive place to buy a house.

    http://www.businessinsider.com/hong-kong-housing-bubble-is-bursting-2016-4

    ————————————————————————————————————————–

    They say all politics are local – hopefully all real estate is also local, and we won’t have a catastrophic drop in prices in Seattle as apparently is happening in some Chinese Cities.

    It appears from the photo with the article that much of the housing that sells in Hong Kong is in cramped high rise condos . As mentioned before, Seattle doesn’t have much of a condo market due to legal difficulties, thus most of our market is focused on the single family residence.

    Information provided by Deerhawke indicates that competition for single family houses , and the land to build new housing, at least north of the Ship Canal is so fierce that buyers are paying a premium for housing before construction has been completed. Regardless of how many single family houses are packed onto mini Planned Unit Developments, new single family housing, as well as existent stock can not keep up with the demand from those who have delayed buying, as well as new residents who have moved to the area, and continue to do so. And new houses on the East Side are occupying larger, not smaller lots. It is my understanding that the availability of buildable lots in the Seattle area will be exhausted in a few years. There isn’t the mass construction of single family houses in the Puget Sound area that recently transpired in the Las Vegas area. Touring that area, it was mile after mile of new construction. Nothing like that is taking place here.

    Is there a chance that demand and prices will cool off in the immediate future? Of course. But absent a catastrophic economic decline, a decrease of population, and a wave of high rise condo construction throughout the Seattle area, we shouldn’t have the wild price swings that accompany Chinese real estate. There is a shortage of available housing in Seattle and about Seattle that isn’t about to go away any time soon.

    Furthermore, there will be plenty of foreign investors that can weather the price decreases of both housing and stocks, and will still wish to relocate in this area, especially as Vancouver BC prices continue to escalate into stratospheric heights. Compared to the Vancouver BC experience, our housing prices are downright inexpensive.

  48. 48
    David B. says:

    RE: ess @ 46 – “Compared to the Vancouver BC experience, our housing prices are downright inexpensive.”

    I predict that Vancouver, BC will be a city that suffers a dramatic decline in its real-estate prices. The level that prices have been bid up to there is simply ridiculous and will not be sustained over time.

  49. 49
    Justme says:

    RE: ess @ 46

    >>It appears from the photo with the article that much of the housing that sells in Hong Kong is in cramped high rise condos .

    I did a somewhat unscientific, but data-based, assessment of condo sizes in HL by looking at http://www.century21global.com/for-sale-residential/Hong-Kong

    350+ (5055)
    400+ (4802)
    450+ (4304)
    500+ (3905)
    550+ (3539)
    600+ (3191)
    650+ (2794)
    700+ (2580)
    750+ (2407)
    800+ (2112)
    850+ (1849)
    900+ (1661)
    950+ (1483)
    1000+ (1322)

    This is how you read the numbers: There were 5055 listings (on this site) over 350ft2. There were also 1322 listings over 1000ft2.

    More importantly: The median size of these 5055 HK condos is somewhere in the 700-750ft2 range. I think calling this “cramped” compared to Seattle condos, especially highrise ones, is NOT accurate.

    Just because there EXISTS small condos in HK does not mean ALL of them are small, and the ,edian certainly is not small.

  50. 50
    David B. says:

    RE: Action @ 27 – “Anyone know the process for converting apartments to condos and how long that takes? Do they have to evict tenants prior to recording the condominium?”

    Tenants of apartments being converted to condos need 120 days’ notice minimum in the state of Washington, and in the City of Seattle may be eligible for relocation assistance as well:
    http://www.tenantsunion.org/en/rights/condo-conversion

    Whether or not it comes to eviction depends on whether the tenants leave voluntarily or choose to stay put and force the issue. Plus there’s the option of coming to a private agreement with tenants (which typically involves paying them money if they agree to leave sooner than 120 days).

    Moreover, if any tenants are under leases, those leases must be honored. (The only way to legally end them early involves signing a new agreement with the lessees in which they agree to void the lease and depart sooner, typically in return for being paid a sum of money.)

  51. 51
    greg says:

    RE: ess @ 46

    ess have you got some examples or data….. “new houses on the East Side are occupying larger, not smaller lots” .
    I ask this because everything I have seen indicates otherwise. Some of the locations that have “big lots” are where builders are including portions of the access lane/road as part of the lot. Others back to or are sited on wetlands. Infill development is pretty much marginal/ high cost sites… I have not seen lots getting bigger, of course they have to meet zoning and as new contruction moves into “green field” sites, zoning changes tend to equal larger sites. Almost all the close in “infill” development is subdividing existing lots when ever it can be.. There is no trend to large lots that I am aware of. However I do see lots of lots getting a lot smaller.

    As to speculator monies,
    I figure if the Chinese money is going to run we will see it run from the hottest markets first , Vancouver may be our best canary , if the market changes there it might be time to either sell RE or take a larger cash position to ride out any craziness.

    don’t know what the landing will look like, but I get the feeling we will be very lucky indeed to ride out the whole global asset bubble without feeling some pain. I do not believe we have some secret sauce that is lacking elsewhere.

  52. 52
    Eile says:

    RE: Justme @ 49

    Hong Kong is 90% condo because they don’t have land like us. Condo is mostly 400 to 1000 sq. ft. even in seattle.

  53. 53
    AJT says:

    RE: greg @ 51

    I too think Vancouver is a more reliable canary but i would also put SanFran in there to a slightly lesser degree
    http://www.marketwatch.com/story/could-the-san-francisco-real-estate-market-finally-be-slowing-down-2016-04-15

  54. 54
    Justme says:

    RE: Eile @ 52

    I know, just wanted to show with real data that the Ess claim is not accurate. Greg is also taking Ess to task for claiming “new houses on the East Side are occupying larger, not smaller lots” with no data.

  55. 55
    Deerhawke says:

    Re: JustMe @ 44

    It would be hard to actually document how many of the Seattle condo projects were actually sued where this went to court and therefore left a documented record. Most of the time you receive a demand letter and it ends up leading to a damned expensive settlement. I have been sued a couple of times and it never went beyond the stage of a demand letter. In one case I settled. In the other case I told them to do their worst and threatened to counter-sue. When they realized there would be no easy settlement, they walked away. In both cases, no public record.

    I spent time and money with lawyers, insurance professionals, envelope consultants and bankers and there seemed to be consensus on the basic facts. However we are now seeing some small and medium sized condo projects, so clearly builders are finding their way around the insurance problem.

  56. 56
    SeaSquirrel says:

    Re: Deerhawke @ 42

    This is very interesting info, thanks for sharing! We’ve been looking for SFH north of the ship canal for about 18 months. We’ve done the usual: lots of pre inspections, crazyish bids (most recent was several weeks ago in Tangle Town/Greenlake listed at $950k, where we bid 20% over list price with 30% down, waived all contingencies; were 1 of 13 offers and winner was 30% over list, all cash).

    I’ve started to approach tradespeople I see working on homes under construction. Last week an electrician gave me the name of the builder of the new Ravenna home he was working on, and told me to call him to see about putting in a presale offer. Sounds like I’m the type of home buyer who would be interested in seeing what these presale realtors offer.

    We’re having a preinspection done tonight on a Bryant home, and the selling agent told us there have already been 6 preinspections. Doesn’t phase us any more. :-)

  57. 57
    Action says:

    RE: David B. @ 50

    Thanks David B. I did a little research and found that as well.
    http://www.seattle.gov/dpd/codesrules/codes/condominiumconversions/default.htm

    They also have to pass inspection.

    Overall seems like a fairly quick process, maybe 6 months, to be able to bring a latent supply to market.
    The question is when will these new apartments begin to get converted? I’d assume after the 6 year statute of limitations runs out, but also after rents stop going up and vacancy rates increase.

    Still I’d argue that even including apartment construction, there are not enough new housing units being built in the Seattle area to keep up with the population growth. Also when the millennial tech workers that are moving here in droves decide that they want to stay in the area and start a family, they are going to want SFRs, not 1-2 bedroom apartments/condos.

  58. 58
    greg says:

    RE: Justme @ 54

    the burden of proof goes to whoever made the claim.

    But it is not a big deal, i am completely fine with ess not providing anything at all. this is just an informal forum about RE where we nonprofessionals talk rubbish.
    (the pros should hold themselves to a much higher standard)

    anyone making a financial decision based on internet forums needs their head examined. Most of the posts are people simply stating what they want to be true. Oh and i am not claiming i am special i am just another punter voicing a mix of opinion and fact.

  59. 59
    Action says:

    By AJT @ 41:

    RE: Action @ 39
    Action, that is a great question. First I must say I have no idea how circumstances will unfold but here is one of many possibilities.
    I will use a US citizen as an example. Citizen had money invested at home and overseas. The overseas investments may have been acquired outside lawful methods (or not), remember it is illegal for more than $50k a year to leave China per year. Say the citizens investments at home are starting to tank and may require coverage or the IRS (insert communist government) wants “their” share of investment the US citizen would be inclined/forced to sell foreign assests. Remember we are dealing with a communist government that can and will reach out and touch its citizens in ways that make us cringe.
    Think Japan in the 90’s. I seem to remember chatter about the Japanese “taking over the world” back then.
    Again I have no idea how this will play out but I do think it is a grey swan that can affect or normalize some of these hot RE markets around the globe.

    Interesting theory. I’m not so sure that the Chinese RE investor has the same thought process and motive as an investor in the US. A US investor investing in RE abroad, is either looking to diversify or chase a higher return in exchange for higher risk. If they get scared, then yes they dump the foreign investments first. I don’t think it works the same vise versa. Many Chinese investors are investing in real estate abroad out of fear that they will lose money if they keep it in China. Their stock market is manipulated by the gov and there are not many safe places to put money in China. These homes they’re buying abroad also provide a place for them and their children to live in the future with clean air, water and good schools.

    http://www.forbes.com/sites/wadeshepard/2016/03/29/the-real-reasons-why-the-chinese-love-throwing-money-into-the-housing-market/#6dceaff25692

  60. 60
    ESS says:

    RE: Justme @ 49

    I guess it is just how one defines cramped. To me, 750 sq feet is rather small, especially if one has a family.

  61. 61
    ESS says:

    By Justme @ 54:

    RE: Eile @ 52

    I know, just wanted to show with real data that the Ess claim is not accurate. Greg is also taking Ess to task for claiming “new houses on the East Side are occupying larger, not smaller lots” with no data.

    You are right – there is no data – it is just a matter of observing the size of the new construction for the large single family houses on lots (not townhomes, not PUDs and not air condos), and those lots seem bigger than the ones I am used to seeing in Seattle which are four to five thousand feet in size.

  62. 62
    ronp says:

    RE: Deerhawke @ 25 – yes, really interesting – thanks!

  63. 63
    ESS says:

    By SeaSquirrel @ 56:

    Re: Deerhawke @ 42

    This is very interesting info, thanks for sharing! We’ve been looking for SFH north of the ship canal for about 18 months. We’ve done the usual: lots of pre inspections, crazyish bids (most recent was several weeks ago in Tangle Town/Greenlake listed at $950k, where we bid 20% over list price with 30% down, waived all contingencies; were 1 of 13 offers and winner was 30% over list, all cash).

    I’ve started to approach tradespeople I see working on homes under construction. Last week an electrician gave me the name of the builder of the new Ravenna home he was working on, and told me to call him to see about putting in a presale offer. Sounds like I’m the type of home buyer who would be interested in seeing what these presale realtors offer.

    We’re having a preinspection done tonight on a Bryant home, and the selling agent told us there have already been 6 preinspections. Doesn’t phase us any more. :-)

    —————————————————————————————————————————-

    Interesting post – it must be very difficult to want to buy a house in this environment. We bought further north when the market wasn’t so competitive, and were able to hold on to two of the three houses we had bought for ourselves and convert them to rental houses in a ten year period. Years ago I actually had a friend who lost money when he sold his Greenlake house. Those days are long gone!

    Assuming competition continues for these houses, how long do you keep on bidding on houses? Is there a point where you decide enough is enough? Do you continue to rent, hoping there is a future decrease in the prices of housing, or do you expand your search to less expensive areas north or south? If you do expand, how far north or south are you willing to look? What are the reasons that you would look into or reject an area that is close, but not exactly where you wish to buy? Do you consider condos instead of single family houses as an alternative?

    Good luck in your search.

  64. 64
    herrbrahms says:

    RE: SeaSquirrel @ 56 – Squirrel, I think it’s time for you to reevaluate the whole enterprise you’re engaged in, lest you make the most expensive mistake of your life.

  65. 65
    ronp says:

    RE: SeaSquirrel @ 56 – Why not look farther north? What do you find so appealing about Greenlake-Bryant? Short commute? Schools? Sidewalks? We love NE Seattle and would only move to a more walkable neighborhood, but prices just seem insane currently.

  66. 66
    Deerhawke says:

    Re: Sea Squirrel

    I think you are referring to 5716 Woodlawn. Nice house but I was also surprised that it got bid up that high. If you are decisive and know what you are looking for, you can find your own Presales by driving the neighborhoods you are interested in. Portapotties are a dead giveaway.

  67. 67
    Blurtman says:

    Old versus new?

    Old:
    $1,098,800
    111 210th Pl NE,
    Sammamish, WA 98074
    4 beds 4 baths 4,360 sqft
    $252/sq.ft.
    Built 2004
    0.41 acres

    New:
    $1,259,990
    21337 NE 2nd Ct,
    Sammamish, WA 98074
    5 beds 4 baths 4,494 sqft
    $280/sq.ft.
    .15 acre
    New construction

    Quite a premium on the new home. Less land, but who goes outside anymore? And it is NEW!!!

  68. 68
    bingo says:

    RE: Deerhawke @ 55

    ” so clearly builders are finding their way around the insurance problem. ”

    For one, insurance carriers are offering the wrap coverage again, but it is expensive. One of the large Condo projects in Downtown Seattle recently paid $8,000/door for coverage. Certainly Buyers would have rather seen that money spent on hard surfaces, cabinets & appliances but Builders can’t take the exposure to future liability. Somebody has to pay for the laws we enact.

  69. 69
    Ross says:

    By Justme @ 49:

    RE: ess @ 46
    […]
    More importantly: The median size of these 5055 HK condos is somewhere in the 700-750ft2 range. I think calling this “cramped” compared to Seattle condos, especially highrise ones, is NOT accurate.
    […]

    One thing to keep in mind is that HK listings divide up the common space evenly across all units. So a building with 100 units and 10,000 sqft of common space with apportion 100sqft bonus to each unit. So the median square footage is perhaps overstating the space by 5-15%.

  70. 70
    Som says:

    I miss 2015.

  71. 71
    Doug says:

    RE: Justme @ 32 – Yes, I think it was done in 6 months.

  72. 72
    Justme says:

    RE: Doug @ 71 – Thx Doug, that is a very fast construction time.

  73. 73
    GoHawks says:

    Amazon hitting $700.

  74. 74
    ESS says:

    By GoHawks @ 73:

    Amazon hitting $700.

    And they added 3500 employees in Wa state last quarter. Wonder how many of those new hires are from out of state and will be entering the Puget Sound real estate melee? Here come more people to bid up real estate prices!

  75. 75
    SeaSquirrel says:

    Thanks for the comments on our situation.

    Deerhawke, we did look at 5716 Woodlawn and almost bid, but backed away. We were bidding on 5202 Wallingford.

    ronp, why are we willing to pay such a premium for being close in? Sometimes we wonder. :-) We highly value walkability and minimizing time in the car, and have always loved those areas (my parents lived in View Ridge for years).

    herrbrahms, I hear you about the big financial stake!

    One factor for us is we already own a SFH, in Phinney Ridge. So we are one example of folks who want to put our current house on the market (i.e., add to the meager inventory), but are stuck because we haven’t found another house to move to. We’ve thought about selling first, but haven’t gone there yet. We are willing to pay a big premium for a home right now only because we are assuming that we will make a big premium when we turn around and sell our Phinney home. It’s a bit of a gamble, but feels like a good bet right now.

    We put in an offer on a Bryant place this morning. So maybe this afternoon we’ll have an offer accepted?

  76. 76
    David B. says:

    RE: herrbrahms @ 64 – 100% agreement on that. I’d *never* want to waive standard contingencies on an offer. They’re there to protect me. Any market where one has to do such things to get a house is by definition a market in which I don’t want to buy a house. In such a situation, I’d opt to continue renting and wait until things improve for buyers.

  77. 77
    David B. says:

    RE: Action @ 57 – “Still I’d argue that even including apartment construction, there are not enough new housing units being built in the Seattle area to keep up with the population growth. Also when the millennial tech workers that are moving here in droves decide that they want to stay in the area and start a family, they are going to want SFRs, not 1-2 bedroom apartments/condos. ”

    Right now, maybe not. Wait until the economic downturn hits and units being constructed are still in the pipeline. Rents should fall.

    Families in New York City commonly raise children in apartments. Nothing says they can’t do it here, too. There’s also plenty of room to build new housing of all kinds in Seattle — including single-family homes — if the relevant NIMBY issues are addressed. For example, the so-called “skinny houses” that were banned in the 80s could be re-legalized. That would provide an affordable option for many new families and others who do not want or can not afford a larger house or lot.

    The real question is whether the political will exists to facilitate creating the needed housing supply.

  78. 78
    Anonymous Coward says:

    RE: David B. @ 77 – “Families in New York City commonly raise children in apartments.” Yes, but are those 2 bedroom apartments?

  79. 79
    greg says:

    RE: SeaSquirrel @ 75

    I am sure you know this already but worth mentioning just in case…

    You can sell your current home and include a clause to allow you to rent your home from the buyers for any amount of time you like. Of course too long and you lose a bunch of people.

    (we have done a version of this once or twice on FSBO deals)

    Of course it is not an ideal solution, but it would allow you to make cash offers….

  80. 80
    Mike says:

    Here’s a house I looked at in 2012 and didn’t make an offer on because it was too close to a busy street and my wife didn’t like the back yard. It doesn’t appear to have any updates since the last sale aside from some flooring. 74% gain in under 4 years! 18% ($103K) over asking for what is a very modest 2 bedroom 1 bath house in original 1950’s condition. That “third bedroom” advertised is in the basement and it’s non-conforming due to lack of egress.

    https://www.redfin.com/WA/Seattle/1509-NW-96th-St-98117/home/289266

  81. 81

    RE: Kary L. Krismer @ 16
    Remember When Price Gouging Gasoline Was Bad?

    I guess if you are right, our memory span is like Alzheimer s.

  82. 82

    King County Proposition for $.25B School Money

    Needed 60% to pass…..it only got 59.7% to date….schools get no money because it failed?

    Where’s the MSM on this story anyway….hiding it?

  83. 83
    Marcel says:

    By Som @ 17:

    I live close to this house https://www.redfin.com/WA/Bellevue/4220-160th-Ave-SE-98006/home/2086979

    When it came to the market, the next following 7 days were crazy for the neighborhood. I saw many hopeful American families, some with middle school kids, dreaming that this is it. Newport high here we come. Then I saw broker exclusive hours. I saw Bentley, Lambo, Porsches, you name it. I also heard them talking loudly on phone….I could not make out what they were saying…some jive that sounded like “chowmein chowmein lomein hu jintau”.

    The house went pending for $200K above askin,, all cash. I’ll let you guess who the buyer was.

    Kary L. Kismer would say you are making this up, and/or pulling it out of your —, and/or merely repeating what others have said on this blog, and/or are full of crap and/or you can’t substantiate this claim without having verified their passport, legal papers, and/or a DNA examination.

    I and may others beg to differ. Thank You for providing even MORE evidence of what others have witnessed and seen in our market. You are just another person in the long lists of others who’ve done the same.

    By Som @ 19:

    RE: Basho @ 18 – In the words of our great philosopher Ho Lee Fuk, “Sum ting is def wong”.

    L.O.LLLL! Not racist, but that was funny. If merely for the cleverness of it!

  84. 84
    David B. says:

    RE: Anonymous Coward @ 78 – 2 bedrooms is enough for a family of 3. One bedroom for the parents, and the kid gets his own room. There’s such a thing as 2BR single-family homes as well; this number of bedrooms is not unique to apartments.

  85. 85
    redmondjp says:

    RE: Mike @ 80 – That ‘stretching the truth’ about the number of bedrooms is really grating, but we all know how well a certain organization (which is #1 in lobbying in Olympia by $ amount, as reported on the news yesterday) protects their own. I see this all the time and it no longer surprises me. Buyer Beware . . .

  86. 86
    greg says:

    RE: redmondjp @ 84

    Redmondjp, who is the biggest lobby group by dollars this time?

  87. 87
    Blurtman says:

    RE: Mike @ 80 – Unabashedly retro and it seems to work.

  88. 88
    Justme says:

    By ESS @ 74:

    By GoHawks @ 73:

    Amazon hitting $700.

    And they added 3500 employees in Wa state last quarter. Wonder how many of those new hires are from out of state and will be entering the Puget Sound real estate melee? Here come more people to bid up real estate prices!

    The above has no data reference and lots of bubbly optimism. I went looking and found an article from yesterday:

    http://www.seattletimes.com/business/amazon/full-time-jobs-at-amazon-grow-at-rapid-pace-in-first-quarter/

    Here is the problem: How many of these 3500 statewide jobs are engineering/corporate jobs in Seattle? Probably not all that many. A good chunk of those hires are in the new fullfillment center in Kent, WA., and in other fullfillment centers. Following a link in the article, to Jan 19 article (I cannot post two links, I get moderated):

    QUOTE: Amazon.com has begun hiring 1,200 people as it staffs up a newly built warehouse in Kent that’s highly reliant on robots.

    QUOTE:: Amazon has five fulfillment centers, in Bellevue, Seattle, DuPont, Sumner and now Kent. Three of them — Kent, Sumner and DuPont — are highly automated.

    Conclusion: I think the bubbly optimism about Amazon jobs and housing demand is not warranted, as many of these jobs are not in Seattle, anyway. Nor will they pay well enough to afford Seattle or Eastside housing.

  89. 89

    By redmondjp @ 84:

    RE: Mike @ 80 – That ‘stretching the truth’ about the number of bedrooms is really grating, but we all know how well a certain organization (which is #1 in lobbying in Olympia by $ amount, as reported on the news yesterday) protects their own. I see this all the time and it no longer surprises me. Buyer Beware . . .

    Nice anti-Realtor claim, totally based on nothing. Among the Realtors, the NWMLS and the DOL, probably only the Realtors would fine an agent for doing such a thing. The NWMLS maybe would, but I doubt it.

    The entity that should really care is the seller, because that is not generally in their interests to over-state a listing in that manner. In the super-hot areas though I will admit buyers tend to overlook such things as they are running over one another to get their offer accepted.

  90. 90

    RE: redmondjp @ 84

    I have this issue right now and am not sure how I am going to approach it.

    County Records from the time it was built roughly 75 years ago has always called it a 3 bedroom dwelling. There is no basement. Two bedrooms are up stairs and one is on the main floor. The bedroom on the main floor has a huge “window opening” in the building. But the window itself is a little over half top to bottom a fixed piece that doesn’t open. The rest of the opening top to bottom is a roughly 18″ wide double hung window including the frame. When you open that portion of the window that opens, it is not to current code as to width.

    So here’s my question. If the “window” is glass and wide enough but the fireman or owner or occupant would have to break the glass to get out… :) I do think my buyer clients will have to replace the window so that when it opens the opening is in compliance. But does it make sense to ask the seller to change it if it is not a basement, the County clearly calls it a bedroom in it’s current design, but it does not meet the current code for Seattle AND there was more than one offer?

    I have a safety concern, so at minimum will likely recommend the buyer replace it. But that bedroom is currently occupied by a tenant and the purchase is subject to the existing lease. Might be difficult to change it before that lease expires.

    This is what I happen to be working on today. :)

  91. 91
    Mike says:

    By Blurtman @ 86:

    RE: Mike @ 80 – Unabashedly retro and it seems to work.

    I’m still a little shocked. That’s ~ $6,500/mo in appreciation on a home where the mortgage would have been around $1900/mo. Talk about having the house pay you to live there! Funny part is every house on that street has sold at a discount up until now because it’s one of the main roads in and out of the neighborhood and isn’t as quiet as other streets.

  92. 92
    kenmorem says:

    RE: Ardell DellaLoggia @ 89

    IMO, just because something isn’t to code shouldn’t mean the seller needs to bring it to code before selling.

    i mean, knob and tube isn’t to code. most houses (pre-1980) in seattle aren’t to code for seismic design. and i’m sure there’s about 50 other things that are commonly not to code.

  93. 93

    RE: kenmorem @ 91

    I fully understand that, but usually I personally will address anything that is a safety issue whether I represent the buyer or the seller, even if I have to pay for it myself.

    Safety is not merely a “to code” issue.

    We haven’t seen the tenant. I somewhat jokingly suggested I might have to measure his/her hips before deciding what to do. :)

  94. 94
    ESS says:

    By Justme @ 87:

    By ESS @ 74:

    By GoHawks @ 73:

    Amazon hitting $700.

    And they added 3500 employees in Wa state last quarter. Wonder how many of those new hires are from out of state and will be entering the Puget Sound real estate melee? Here come more people to bid up real estate prices!

    The above has no data reference and lots of bubbly optimism. I went looking and found an article from yesterday:

    http://www.seattletimes.com/business/amazon/full-time-jobs-at-amazon-grow-at-rapid-pace-in-first-quarter/

    Here is the problem: How many of these 3500 statewide jobs are engineering/corporate jobs in Seattle? Probably not all that many. A good chunk of those hires are in the new fullfillment center in Kent, WA., and in other fullfillment centers. Following a link in the article, to Jan 19 article (I cannot post two links, I get moderated):

    QUOTE: Amazon.com has begun hiring 1,200 people as it staffs up a newly built warehouse in Kent that’s highly reliant on robots.

    QUOTE:: Amazon has five fulfillment centers, in Bellevue, Seattle, DuPont, Sumner and now Kent. Three of them — Kent, Sumner and DuPont — are highly automated.

    Conclusion: I think the bubbly optimism about Amazon jobs and housing demand is not warranted, as many of these jobs are not in Seattle, anyway. Nor will they pay well enough to afford Seattle or Eastside housing.

    ___________________________________________________________________________________________________________

    While operations may be highly automated, it still remains that Amazon increased their Washington State employment by 3500 people. Furthermore, they are building office buildings as fast as they can near Lake Union, one assumes that they are going to fill those office buildings with workers that will earn more than minimum wage. Is anything set in stone? No – but there are no guarantees in life once you put your feet on the floor when getting up in the morning.

    If one believes that we are in a great real estate bubble that is in danger of bursting, one can either choose not to buy, or if they own, sell and repurchase when prices go down. But as far as I can tell, the situation is much different than the last meltdown. You have rents that support the prices of the housing, and not enough housing for all the people pouring into this area. I have owned some sort of housing either as a rental or a place to live in as of the age of 22, and those investments have done well for me over the years. Those investments worked because they made sense both in the good times and bad.

    Personally I would never pay amazing amounts that some of the east side and Seattle real estate is commanding. Too much money tied up in a personal residence. Good luck to those people – I am not one that takes any satisfaction in falling prices, because if that happens – everyone suffers. Even the person that hopes that prices fall in order to enter the real estate market often is filling out his or her unemployment claim, and really has no chance to buy anything in a economic recession. Sometimes it isn’t “the other guy” that gets the pink slip when the economy falters.

  95. 95
    redmondjp says:

    By greg @ 85:

    RE: redmondjp @ 84

    Redmondjp, who is the biggest lobby group by dollars this time?

    WA REALTORS PAC

    http://www.kplu.org/post/realtors-teachers-plumbers-control-top-washington-political-action-committees

    And way to defend your profession, Kary, I knew I could count on you! You are a lawyer and of all realtors should know better – what is the legal definition of a bedroom, Kary? Or does that depend upon whether you represent the buyer or the seller?

  96. 96
    Mike says:

    By Ardell DellaLoggia @ 92:

    RE: kenmorem @ 91

    I fully understand that, but usually I personally will address anything that is a safety issue whether I represent the buyer or the seller, even if I have to pay for it myself.

    Safety is not merely a “to code” issue.

    We haven’t seen the tenant. I somewhat jokingly suggested I might have to measure his/her hips before deciding what to do. :)

    Above grade is less of an issue especially if it’s wood sided. 2 of the 3 main floor bedrooms in my house had no egress windows (or for that matter, windows that any adult could fit through without seriously hurting themselves). We had new large egress windows put in for those rooms. It’s the basement rooms that require a dig out and cement sawing for egress that pose an issue.

  97. 97

    By redmondjp @ 93:

    Kary, I knew I could count on you! You are a lawyer and of all realtors should know better – what is the legal definition of a bedroom, Kary? Or does that depend upon whether you represent the buyer or the seller?

    And I knew I could count on you to be non-responsive to my prior post. Find someplace where any Realtor organization has promoted overstating the number of bedrooms or bathrooms a house has. Or let’s get more specific to your allegation and show how they somehow lobby to permit such misrepresentation without consequence.

  98. 98
    Hamlet says:

    A realtor specializing in condos told me that newer condos (post 2000) were better than older condos, because of improved construction technology. This means that newer condos …

    * Are more earthquake safe.

    * Are quieter. They’re more likely to use “party walls” — walls that have a space between them, so the noise from one unit doesn’t travel to another.

    Is this not so? Are newer condos not better than older ones?

    I live in an older condo in Los Angeles (early 1960s), built as a rental, then converted to condos in the late 1970s. The walls are thin. I can hear my neighbors.

    I was hoping if I bought a newer condo (thinking of moving to Seattle) I can be assured that it would be quieter and more earthquake safe. The 1994 quake down here was not pleasant.

  99. 99

    RE: Hamlet @ 98 – I’m not sure when building codes have changed regarding earthquakes, but in general newer buildings are built to higher standards than older ones. That would be a good thing to research! I’ll see what I can find out.

    As to the walls, for probably at least 30 years some condos have been built to higher standards for noise. I don’t believe though that is code, so I’m not sure how you would verify that a particular building was built with higher noise standards. Note though that I used to own a condo that was built in the early 60s apparently as a hotel for the World’s Fair that would then be converted into apartments and was later converted into condos in the 70s. It had rather good sound-proofing. I used to work at night and would play music in the early morning hours without complaint, louder music at other times, and was never bothered when I was sleeping by anything inside the building. It may be just something you need to test by getting access to neighboring units.

  100. 100
    Justme says:

    RE: ESS @ 94

    QUOTE (ess): While operations may be highly automated, it still remains that Amazon increased their Washington State employment by 3500 people. Furthermore, they are building office buildings as fast as they can near Lake Union, one assumes that they are going to fill those office buildings with workers that will earn more than minimum wage. Is anything set in stone? No – but there are no guarantees in life once you put your feet on the floor when getting up in the morning. ENDQUOTE.

    What is happening here is that I debunked your unsourced pie-in-the-sky bubbly claims with some real references and additional data that tell a much more nuanced story, and your response is to move the goalposts from suburban Kent or WA State as a whole, to Lake Union, Seattle and then start shifting the goalposts around some more, again based on zero data.

    Here are the questions people should ask themselves:

    1. When Amazon campus is done, does that automatically mean more hiring, or does it mean consolidation of existing employees from rented office space to the new buildings?

    2. How many employees does Amazon have in currently RENTED office space in Seattle? Any data?

    3. Is it likely that Amazon will expand employment greatly in their highest-cost location?

    Give some real answers to that, and we have the beginning of a real discussion.

  101. 101
    Matt says:

    RE: Justme @ 100

    1. Yes
    2. Not sure, but not that important– AMZN is on a plan to grow it’s engineering numbers massively. To know that all you have to do is ask an Amazon engineer how many people they have brought in over the past few years. Ask them how much time they spend interviewing candidates. Have you noticed the growth of Google and Facebook in SLU? What about Expedia moving their campus to an area only reasonably accessible from Ballard and Queen Anne? What about Uber, Apple, etc? Do you really think there isn’t going to be a massive growth in tech workers wanting to live in Seattle proper?
    3. Yes. Barring a collapse of their business or a complete shift in strategy (for AMZN thus far it has been grow grow grow), why wouldn’t they fill out the offices they have built?

    As per your comment about debunking the previous poster: you really didn’t. You took an article and extrapolated the numbers (most likely incorrectly) to fit your narrative. The fulfillment centers might be growing more rapidly than corporate– it is easier to grow unskilled positions after all– but that doesn’t mean corporate isn’t growing at a slow rate. If AMZN adds only 2K engineers per year over the next 5 years (and all indications is that the growth will be faster), that’s $150 million/year more salary floating around Seattle.

  102. 102
    Blake says:

    RE: Matt @ 101
    Matt wrote: “If AMZN adds only 2K engineers per year over the next 5 years (and all indications is that the growth will be faster), that’s $150 million/year more salary floating around Seattle.”

    You’re assuming $75k/yr for these new jobs? Let’s say these are 20-30-somethings… Would they even be able to afford to buy a house in Seattle? downpayment…? … or just rent?

    I think it is mistake to look at Amazon’s growth the last few years and just project it onward and upward… They are a retailer and highly dependent upon consumer spending. In case you haven’t been paying attention, US retail sales have been dropping every month so far this year!
    https://ycharts.com/indicators/retail_sales
    … but hey! This is Seattle and we’re talking about High Tech!! We don’t need no stinkin’ consumers… it’s the New Economy!! ;-)

  103. 103
    Matt says:

    RE: Blake @ 102

    I did the math wrong– thanks for the correction. It’s actually $1.5 billion more salary around the Seattle area assuming a lower-bound estimate of $150K/year for 10,000 new employees. So those people should be able to afford a house on one income (at least for now), but there will often be a second income too.

    The growth in employment by Amazon is not around its retail business. Amazon is diversifying massively– cloud, media content creation, improved delivery infrastructure, devices, etc.. This is of course built from the money gained in their retail business, but I don’t think the slower consumer spending is as much of a risk to Amazon continuing to grow over the next decade as one might expect. If you look at the financial sheets from Amazon, you’ll see that their razor thin margin is more a result of massive (maybe excessive) re-investment in its own growth than of lack of revenue. This means Amazon has a cushion where it can still grow (though not as rapidly) even with falling retail revenue.

  104. 104
    Corndogs says:

    By Kary L. Krismer @ 2:

    Even with much higher prices sellers still are not putting enough houses on the market to meet demand.
    .

    Real Estate is not a commodity like used automobiles. All people need a place to live. If a seller puts his house on the market he is often looking to find another in the same geographical area, therefore there is no net change to the demand. To influence demand, a new listing would have to be by a seller who is leaving the area, becoming a renter, dying or if they are an investor (owning more than the one property they live in). To understand demand it’s more important to look at the other factors, like…,Is the geographical area bounded by water making further building expansion difficult? (think Seattle/San Francisco). Is there high international demand for properties in the market? Are there good rental alternatives? Is commuting outside the region feasible?, etc… very naive to think that buyers are just waiting for prices to go high enough that people are going to sell. Doesn’t work that way, not many people have a spare house laying around to sell when prices go up or an affordable housing alternative.

  105. 105

    By Corndogs @ 104:

    Doesn’t work that way, not many people have a spare house laying around to sell when prices go up or an affordable housing alternative.

    To a great extent it does. Remember the involuntary landlords from 2009 and on? Remember the people who retired at the wrong time and didn’t have the nest egg in their home that they were hoping for? Those people could sell now (although the former group would impact rentals).

    We’re only talking about maybe an extra 3,000 or so units coming on the market to make things significantly better. That’s not a huge number.

  106. 106
    redmondjp says:

    Two opposing trends which affect local housing prices – on the one hand, levels of venture capital financing have been dropping and there is more emphasis on startup profitability:

    http://www.bloomberg.com/news/articles/2016-05-16/tech-startups-come-up-with-some-creative-definitions-for-profitable

    On the other hand, the Chinese are still looking to expatriate their wealth into dollar-denominated US real estate:

    https://www.theguardian.com/business/2016/may/16/chinese-pour-110bn-into-us-real-estate-says-study

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