Category: Real Estate

Reader Feedback | Seattle Times Newspaper

Q:
I am moving from Miami to Seattle. Luckily I sold my house in Miami Beach last year. I plan to rent in Seattle since I believe that this market is behind other metro areas by 9-12 months before prices begin to drop in Seattle. Do you think prices will drop returning to more affordable ratios income vs median house prices? Please do not tell me about the great job market. Places like Boston are just as strong in the tech sector and they have seen prices fall 10% YOY. Thank you.
Mon, May 21, 2007 3:23 pm
andy

seattle
A:
We have not seen such drastic decline in values 8 percent in Miami alone for a number of reasons. The biggest of which is that we did not see such rampant speculation by investors/”flippers” boosting prices to extreme levels. Areas that did not increase as much are not likely to decline as much if at all.
Matthew Gardner
Tue, May 22, 2007 12:40 pm

Wow, Matthew Gardner is smoking crack! I don’t know what market he’s looking at, but in my searches for property, at least 50% of properties for sale over the median King Country price were owned for less than two years and had their prices increased 50%-100% which is the mark of the flipper property.

This one personal, about Magnolia

The invasion of Magnolia by the land snatchers was not a “shock and awe” campaign. Initially, it was gradual — a house demolished here, another there, to be replaced by three- and four-story McMansions. The neighborhood was changing, as all neighborhoods will over time.

I didn’t like it, but I told myself that change is inevitable. It can be good. It can revitalize a neighborhood, but Magnolia as I have known it is being destroyed by land snatchers who seize houses only to demolish them. This change is not good.

In recent years, the land snatchers have become rapacious. In the last year alone, I have witnessed the demolition of at least six homes within blocks of my house. The charming traditional homes of Magnolia, the elegant Tudors and the modest cottages, are now an endangered species. I drive down a street in my neighborhood, looking at houses I have long appreciated, and all I see are possible — no, probable — demolitions.

This one from the editors of the Seattle Times

If you’ve ever had the sun blotted or your view blocked by a house on steroids, you’d understand the unneighborly feelings that a megahome can engender.

Trulia hindsight is a neat little mashup between maps and building data, it animates over time showing when houses were built over the last hundred years. (it turns out that most of Capital Hill here in Seattle was filled in by 1930, for example).

Megahomes multiplying, but how big is too big?

In an area with little land to build new houses, residents are fighting the megahome — McMansions that balloon to the edges of their properties, three-story giants that block views from quaint craftsman bungalows.

Seattle is considering new laws to limit the size of houses replacing those torn down on single-family lots. In Bellevue, residents came to a meeting with city staff Wednesday night to complain of huge homes that block out the sun and “overpower” the neighborhoods.

Yes, yes, so yes. Every time that we see a nice house with nicely scaled houses all around it, we have to do the math in our heads to figure out what a 3 story behemoth next door would do to our views, privacy and light. It’s happened to several of our friends and to us in our last house to a lesser extent. I would also like to see the extermination of the “buy a house, build 4 townhouses” style of development that is also rampant. The city should get serious about zoning to either maintain neighborhoods as single family, reasonably-sized homes, or they should designate neighborhoods as targets for high-density zoning and compensate the local homeowners appropriately. Right now, it is a higgly-piggly where high-density building (houses built to the edges of their lots, town-homes and condo developments are going into the middle of established single-family neighborhoods and destroying them like a cancer from the inside out.

Las Vegas is growing significantly faster than the puget sound region, but that didn’t prevent a huge slide in prices due, in a big way, to flippers.

“We had seen real evidence of what was possible in this crazy, inflated market, and we just wanted to get a piece of that investment equity,” Schwartz said.

But when home prices unexpectedly took a backward step, many investors seeking to cash in quickly were left “upside-down,” or owing more on their mortgages than what their homes were worth.

The result was a glut of homes in the marketplace, communities spotted with empty houses and for sale signs — and a foreclosure rate in Nevada that leads the nation as owners unable to sell became saddled with unbearable debt payments.

Associated Press: Vegas flippers flop as market cools off

’cause they show you the last sales date and price of any house you are looking for. What do I see? That about 3/4 of the houses coming on the market in central Seattle over $600,000 were purchased within the last 24 months and have been marked up 30%-50% over their last sales price. Now I didn’t do any formal research on this. It is based on me picking a couple dozen houses for sale off the website, but I did cover Magnolia to View Ridge, Queen Anne to Northgate.

What does that mean? Well, I guess it depends. Does it mean that the market is constricting? That non-flipper-scum can no longer afford a new house so they are staying put? Does it mean that the increases in Seattle home prices are being driven by investors and not real people? Does it mean that the Seattle housing market is as strong as ever? I have no idea, but I think it is more the former than the latter given the housing market in the rest of the country.

It’d be nice to see some of the “real” media locally spend some time to actually evaluate the data; rather than jumping on the newest announcements and trying to correlate them against nothing else. Otherwise, they’re just blogging AP wire stories and not doing their jobs as journalists.

Hot market woes:
Tactics in place to deter buyers from flipping (Seattle Times)
Finding an apartment is harder — and pricier (Seattle Times)

If flippers can still flip then people must be willing to pay for flipped properties and if it is getting harder to find rentals, then it is still paying off for those apartment-to-condo conversions.

Or is it?
Could it also be that builders are trying to discourage flipping because it is getting harder to sell their inventory? If everything sold, it wouldn’t really matter if there was some flips, would it? Could it also be a sign that the flipping exuberance is getting a little over the top? The final death throes? Could it be harder to find a rental because the housing market is pricing out many more people and it no longer makes any economic sense to buy?

Can Seattle justify it’s housing costs?
When you think of crazy housing costs, you think of New York City, San Francisco, London, Paris, Tokyo and other World Class Cities. Can Seattle justify itself cost-of-living-wise in regards to the other cities? The Seattle Bubble blog doesn’t think so, the Seattle PI doesn’t think so, and neither do I. Having grown up in an alpha world city (Chicago) and lived in a beta world city (San Francisco), I can say that Seattle is not a world city. (Wikipedia page on world cities) Seattle has always struck me as a cross between Pittsburgh (where I went to college) and San Francisco (where I lived right after college). Like Pittsburgh, it is a relatively small town with distinctive neighborhoods separated by geography. Also like Pittsburgh, it is a company town (Microsoft and Boeing vs. PPG and Heinz). Seattle reminds me of San Francisco because of its proximity to nature, location on the water, vistas and large percentage of urban hipsters.

To my mind, it is that company-town thing that most disqualifies Seattle as a world-class city. I can’t swing a cat without hitting a current or former Microsoft or Boeing employee. These companies constantly come up in conversation with any other local. A world-class city is diverse. Seattle is not diverse, and with its current housing prices, it is becoming less diverse over time.

Speaking of jobs
I came across the Seattle Bubble blog this morning. Very cool. On there I found a post from last year that I still find relevant: Let’s Talk Jobs. This post reiterates some of the things that I have been saying and makes some new points as well. We, in Seattle, are constantly told that because the economy is growing and jobs are being created that the we aren’t in a bubble and we shouldn’t expect prices to stop growing EVER.

This, of course, makes absolutely no sense.

The era of the Microsoft millionaires paying extravagant prices of property is over: MS has moved from options to grants (dropping the number of shares granted drastically in the process), MSFT has been flat for seven years (and Vista didn’t help), and they company is capping raises BELOW the cost of living increases from year to year. Microsoft continues to hire into the region, but in much lower amounts than in previous years. Most of Microsoft’s growth is now overseas.

Most of the new jobs being created in the region are IN REAL ESTATE. We are becoming a region whose business it is to make houses to sell to each other, or to refurb and flip existing houses. That is simply and obviously unsustainable.

Will you ever be able to buy a house?
Priced out Forever attacks this fallacy on a national scale.