Real Estate Analyst says Seattle one of highest risk markets
Here is an interesting analysis from John Burns Real Estate - who, from what I can tell, are in the business of selling market analysis and consulting services to builders.
Their contention is that markets that are at historical extremes on affordabilty (mortgage/income) and building activity (permits) are most at risk of a downturn. Guess what! Seattle made the top, right quadrant. Wait - that's not a good thing? It means we're overpriced AND oversupplied?
Oh, and also pay attention to that little "E/P" number. It is employment growth over permits, which is the figure they use to predict speed of price recovery. A bigger number is better, and at 1.3, Seattle is about average, so it doesn't appear we'll be especially resilient either (just like we weren't in 2001)
Click image for link to source
Their contention is that markets that are at historical extremes on affordabilty (mortgage/income) and building activity (permits) are most at risk of a downturn. Guess what! Seattle made the top, right quadrant. Wait - that's not a good thing? It means we're overpriced AND oversupplied?
Oh, and also pay attention to that little "E/P" number. It is employment growth over permits, which is the figure they use to predict speed of price recovery. A bigger number is better, and at 1.3, Seattle is about average, so it doesn't appear we'll be especially resilient either (just like we weren't in 2001)
Click image for link to source
Comments
Anyway, even if you buy that line, here's a 9 out of 10 overpriced score? Isn't that like an 'A' except really bad?
One more good reason to rent.
Seattle has 44,200 new jobs and 3.2% growth rate.
San Francisco has 25,100 new jobs and 2.7% growth rate.
LA has 44,600 new jobs and 1.1% growth rate.
San Diego has 8,600 new jobs and .7% growth rate.
etc, etc.
It's quite clear that Seattle has the jobs, which is driving demand. We created nearly the same amount of jobs as LA, which is obviously a much, much larger area. That really says it all: we have big city job growth and no where to put all these people. Hence a huge demand for housing and skyrocketing prices.
Just curious -- what's the source of this data?
In the last 10 years, LA has added a million jobs with 3 times the labor force. San Diego 250K and Seattle barely 200K and about the same size labor force.
It's pretty much a wash.
It's meant to be a somewhat bullish article for builders, right? Seattle is both very overpriced and oversupplied. Even so builders will do well compared to resellers due to new job growth? I don't quite get why builders would do better. Either way, the article is saying the market is a bit sketchy at this point.
Actually - I don't think it is meant to be bullish. It's meant to be comparative across markets - and in this case, Seattle does not compare well. The point (which Shug completely misses) is that on a relative basis, Seattle is building faster vs. job growth, and is historically more unaffordable - than most other markets.
What that says is, you miss the point. It's the number of new units relative to jobs created that matters. that's the "e/p" ratio - where seattle is at the LOW end. in other words, we have 1 new home permitted for every 1.3 jobs. With our average household size, there are PLENTY of new homes being built for those jobs.
I do see that it's "historically" more unafforable, but on the key ratio it's saying 1.2 is "balanced" and the Seattle number is 1.3. Not that troubling in other words if you're think economic growth forecasts are solid.