Getting Their Butt Kicked, Too
The Seattle PI reports from Washington. “There was no denying the Seattle-area’s real estate funk at Williams Marketing’s annual forecast breakfast Friday. Kicking off the event, Williams President Leslie Williams noted that area real estate professionals were feeling good a year ago about how the market was holding up much better than others. ‘Now Seattle’s getting their butt kicked, too,’ she said.”
“The Federal Housing Finance Agency announced Friday that the Seattle area’s limit on loans Fannie and Freddie may buy will be $506,000 next year, down from this year’s temporary limit of $567,500. Brad Blackwell, national sales manager for Wells Fargo Home Mortgage, said the Seattle area’s run-up and decline is similar to California’s, just a year later. Mortgages above these caps are harder to come by because there’s no secondary market for them, meaning lenders have to keep the loans in their portfolios, Blackwell said.”
“Blackwell also said he was holding off on his own planned purchase of a second home in Boulder, Colo., because prices were still too high. ‘The developers and builders have not yet come to grips with the extraordinary amount of inventory that will be coming on the market in the next 12 to 24 months, and they’re holding their prices too high,’ he said.”
“October’s swoon also affected prices, with the median sales price of a King County house dipping below $400,000 for the first time since February 2006. The median, $392,000, was down 12 percent from a year earlier and 5.5 percent from September. Seattle’s median house price was $416,000, also the lowest since February 2006 — and down 12 percent from a year earlier and 2.4 percent from September.”
“The median Seattle condo price was $287,450, down 8.8 percent from a year earlier and 7.3 percent from September. ‘We’ve seen nicer houses at more reasonable prices than some of the crazy overpriced houses that had bidding wars before,’ said Scott MacColl, of Seattle.”
“It was a good time to buy, he said, and didn’t worry about the prospect of prices going down more after he bought. ‘If you continually look over your shoulder, you’re not going to be happy,’ he said.”
“‘We’re thinking about keeping our house and renting it out,’ MacColl said outside of a Mount Baker open house in late October.”
“For Dave Morton and Kristine Kitayama, the thought of trying to sell their Seattle home was the main reason they hesitated buying a new one, even though they like their chances. ‘We feel like our house would probably sell quickly — for certainly less than we’d get a year ago,’ Morton said.”
“Many frustrated would-be sellers are pulling their houses and condos off the market and renting them out, according to local property managers. ‘We’re getting a lot of that,’ agreed Dean Foggitt, broker at Brink Property Management in Bellevue, which manages rental houses and condos. ‘When your property’s been on the market for 180 days and you haven’t had a nibble, you’ve got to look at options.’”
“But people turning to the rental market may find their homes don’t rent as quickly or fetch as much as they hoped. The homes put up for rent instead of for sale and new condominiums bought in recent years with the intent of renting them out are driving up the area’s vacancy rates and slowing rent increases, according to local experts. ‘There are a lot more properties coming available,’ Foggitt said. ‘As a result, they’re not able to demand maybe the rents that they’re hoping for.’”
“Scott Greve became a landlord in 2002. He now owns eight rental homes in the Seattle area with his fiancee, including a condo in downtown Seattle’s new Cosmopolitan building, he said. Greve has noticed developers putting rental units into the market and lower prices in recent months, and that worries him. ‘Any time there’s more competition at your level, you have to think of a way to make your situation more attractive, and I’m concerned that that might involve a price decrease on the rent side,’ he said.”
“Dupre + Scott Apartment Advisors…blamed rising vacancies on a narrowing gap between rents and home prices. The average rent in the Puget Sound region is $996, up 7 percent from a year ago and 26 percent from three years ago, the firm noted. The median King County condo price was $275,000 in October, down 1.8 percent from a year earlier.”
“‘As a result, the mortgage payment on the median-priced condominium is now just 35 percent higher than the average rent in King County,’ Dupre + Scott said. ‘That’s still a wide gap, but it’s half what it was a year ago. And it’s near the point where consumers can justify switching to ownership.’”
“Developers opened 2,500 new apartments in buildings with at least 20 units last year in King, Pierce and Snohomish counties, and are forecast to open 2,620 this year and 6,700 in 2009. ‘Do we need all these units? Yes,’ Dupre + Scott said in their October report. ‘We just don’t need them so soon.’”
The Seattle Times from Washington. “Washington Mutual suffered an ugly death, leaving thousands without jobs, homeowners facing foreclosure, a civic crater in Seattle and a 100-year-old institution flushed away by miscalculation and greed. But perhaps nobody is angrier than shareholders, who were wiped out when federal regulators arranged the sale of the thrift’s assets to JPMorgan Chase for $1.9 billion.”
“One employee, who spoke on condition his name not be used because he was still working for WaMu, said he knew of veterans who had accumulated stock for as much as 25 years and never sold it. They were wiped out. Few are talking openly about it, this person told me. Many were frugal, loyal and proud of this company and were trying to build something that would last for another 100 years.”
“Although WaMu went public in 1983, its shares took off during the housing boom when they seemed like a surefire growth stock. This attracted no shortage of speculators. Many shareholders are too embarrassed by their losses to speak for the record. One, who did not want to be identified, said he lost $250,000.”
“‘The drop from $40 to $3 is unfortunate, but the writing was on the wall about that. Plus, that is part of the risk of investing. The part that neither I nor others can accept is the drop from about $3 to zero, plus the fact that the bank was dismembered rather than sold whole is shocking,’ he said.”
“This isn’t just about losing Washington Mutual. This is about how they and the rest of them destroyed my portfolio. They brought on this financial crisis,’ said Judy Bumbarger-Enright, a school librarian in Vancouver, Wash. Her nest egg is down 40 percent. She’s got a lot of company.”
The Bellingham herald from Washington. “Even by October standards, it was a very slow month for residential sales in Whatcom County. Gragg Miller of Coldwell Banker Miller-Arnason said the economic volatility the past couple of months also was a factor. ‘We had some spookiness of the stock market prior to October, but this was the first time we really saw it hit this hard here,’ Miller said.”
“Bob Jorgenson, a real estate agent with Coldwell Banker Evergreen Olympic Realty, said the county’s housing market remains stable because so many jobs here are tied to state and local governments. ‘People are realizing they still have jobs and still have the ability to buy a house,’ he said.”
“However, the Thurston County job market has taken a hit in recent months. Last month, 316 home sales were divided among 1,107 active real estate licensees in Thurston County, including agents, associate brokers and designated brokers, according to state Department of Licensing data.”
“Brian Fowler bought a house last month, paying about $230,000 for a three-bedroom, two-bathroom house in Olympia. Fowler said he wasn’t concerned about the economy. Instead, he was tired of paying rent and needed to accommodate his growing family, he said. He and his wife researched homes during the time they rented, then spent two months looking for a house when they decided to buy. They also took advantage of the current buyer’s market and paid less than the asking price for the house. Fowler couldn’t recall the listing price but said it was between $235,000 and $250,000.”
“‘I was paying rent for something that wasn’t mine,’ Fowler said about his time as a renter.”
The Mountain Town News on Canada. “Financial troubles are slowing the work at Revelstoke Mountain Resort, the major new ski area that was opened last year. While the details are still being sorted out, marketing director Ashley Tait told the Revelstoke Times Review, the Nelson Lodge is still to be completed, but the timing has shifted. Some staff members have been shed.”
“‘What you need to know is that we were overspent and in a very tough position,’ Rod Kesleer, chief operating officer, told the Revelstoke City council at an Oct. 27 meeting.”
“At Canmore, meanwhile, the $135 million Solar Resort & Spa has gone into receivership. Construction had stopped in September after the K2 Developments was unable to secure the final $3 million in financing. Of the 214 units, 50 remained for sale, sources told the Rocky Mountain Outlook.”
The Vancouver Sun from Canada. ” British Columbia’s jobless rate now stands at 5.1 per cent, the highest since December 2006, and represents 8,200 fewer full-time jobs than were available in September. That drop was the biggest for any Canadian province last month, the federal statistics agency said.”
“‘I think what we are facing right now is a very noticeable decline, obviously, in residential construction and when you look at a lot of that decline it’s in the multi-family side,’ Keith Sashaw, president of the Vancouver Regional Construction Association, said in an interview. ‘A lot of the developers just can’t get access to funding, or if they do, it’s very expensive. I [also] think the average consumer is sitting back and waiting until this issue gets sorted out before making decisions on whether to buy, and those kinds of things.’”
“‘We are going to be down, no doubt about that, but 2007 was just nuts. It was basically unsustainable at that point anyway, and we were projecting a moderation in activity off of 2007 just because it was a hyperactive market at that point,’ Sashaw said.”
“The development company Rize Alliance has put the brakes on its plans to demolish the old Cecil Hotel. Rize Alliance plans to build a 21-storey residential tower containing 166 apartments on the site. City council approved the plan in September but the state of the world’s money markets has caused Rize to slow down.”
‘Luke Harrison, a spokesman for Rize Alliance, said the expected cost of the development is in excess of $50 million. However, the company isn’t in any great hurry to market the suites. ‘We had thought we’d go to market at the end of this year, but a couple of things have slowed us down,’ Harrison said. ‘The civic strike (last year) held us up, but now we are waiting to see if there’s going to be a correction in the price of Vancouver housing. There has been a feeling that prices were getting to be unaffordable here.’”
The North Shore News from Canada. “Affordable housing dominated the debate at the final City of North Vancouver all-candidates meeting on Wednesday night. Neilson said all the speakers were erring towards NIMBYism. ‘I hear, ‘I don’t want towers,’ and ‘I don’t want coach houses,’ said Kelly Nielson, running for the first time, ‘and right now our seniors are being taxed out. Secondary suites let them stay near their families who can care for them.’”
“‘We have to preserve what rental stock we have. We keep hearing that more and more densification will help. Does anyone really believe that more $900,000 condos are going to help?,’ said Incumbent Bob Fearnley.”
“‘I am a renter,’ said Mary Trentadue. ‘And I don’t want to live in a tower. I want to live in a small house on the ground floor. Without affordable housing we are losing families, seniors and young people.’”
The Burnaby News Leader from Canada. “A new analysis of migration patterns inside B.C. upsets the notion that small-town folks are increasingly flocking to big cities. It found that from 2001 to 2006, Vancouver saw a net outflow of 25,560 B.C. residents. All other regions saw a net gain, and communities outside the big urban centres posted the largest increase, more than 17,000 people.”
“‘The largest of B.C.’s CMAs, Vancouver represents more than half of the provincial population,’ the B.C. Stats report says. ‘Also, as the third largest city in Canada, Vancouver is a primary destination for immigrants and inter-provincial migrants to B.C. However, individuals often move to Vancouver first, only to continue on to other parts of the province after a short stay.’”
The Globe & Mail. from Canada. “The glass and steel towers of waterfront condos have long dominated not just the skyline of downtown Vancouver, but also the residential construction industry in the Lower Mainland. But the era of the high-rise is coming to a close, the behemoths falling prey to a dramatic slowdown in the housing market.”
“For speculative investors, however, the drop in prices is lethal. Until last year, speculative demand begat rising prices, which begat new projects, which begat a new round of speculative buying, a lovely spree of what looked to be risk-free profits. Then came price stagnation.”
“The evaporation of double-digit price gains, and much higher debt-leveraged returns on investment, has killed off the class of buyers looking to flip condos. ‘Speculators have entirely left the market,’ says Jennifer Podmore Russell, managing director of a real estate consultancy based in Vancouver.”
BC Local News from Canada. “Detached house prices have fallen 9.8 per cent since May in Greater Vancouver and 6.5 per cent in the Fraser Valley, new real estate statistics for October show. The downturn has now erased all gains in the first few months of the year, carving $50,000 off the average Metro Vancouver home since the real estate market peaked this spring. Selling prices of condos in October are now down eight per cent since May.”
“Attached townhomes and duplexes are down 6.4 per cent in Greater Vancouver and 9.2 per cent in the valley in the past five months. ‘In some areas of the Fraser Valley, the number of days on the market has doubled in the past year, putting more pressure on sellers to lower their asking prices,’ said Kelvin Neufeld, president of the Fraser Valley Real Estate Board.’
“Sales were down 48 per cent in October from a year ago in the Fraser Valley and 55 per cent in Greater Vancouver. ‘It’s definitely a buyer’s market,’ said Dave Watt, president of the Real Estate Board of Greater Vancouver.”
“Even at the lower levels, Fraser Valley properties are still on average double the price they were five years ago and Greater Vancouver homes are 70 per cent above October 2003 levels.”
“While blue skies and picturesque lakes certainly drew people to this valley, its postcard-perfection hasn’t been enough to stave off the effects of worldwide economic trouble. The first signs came when water-cooler talk changed from estimating real estate gains to lamenting losses in retirement plans and higher costs for just about everything.”
“And then came the more literal signs. For Sale boards started to pop up in front of houses and never left. Home owners and speculators who once bragged it only took a week or so to sell their houses or condos are now just boasting ‘reduced’ or ‘new price’ on their sale signs.”
“While economists were slow to acknowledge what most could surmise by a walk through their neighbourhoods, there are now significant rumblings of a slump in prices for houses this side of the border. Some are going so far as to call it a housing recession, as realtors and sellers are already well into contingency plans that will allow them to ride out the storm.”
“Ian Share, of the Century 21 office in Glenmore, has seen a sharp decline in sales, although he said he remains busy. The problem, as he sees it, is that sellers are having a hard time adjusting to the market. A house that may have flown off the market a year ago for a cool $500,000 isn’t going to have the same appeal today as buyers have far more to choose from and are taking their time.”
“While his focus is on North Glenmore, Lake Country and Phoenix, Arizona, he says only the latter market is seeing eager buyers. Share tapped into the Phoenix market successfully to pursue an opportunity he saw resulting from the U.S. financial crisis. ‘The conclusion you can start to draw is that the real estate market is adjusting and correcting massively and that the buyers that are willing to step up to the plate are few and far between,’ he said. ‘Generally they consist of investors picking up rental properties and other clients who are relocating here for work.’”
“Share was the listing agent on one of only two homes that sold in Lake Country (excluding Carrs Landing) last month—118 were listed. While the lack of sales may be disturbing, Share pointed out it’s actually the pricetag changes that are the most dramatic, citing the two Lake Country listing sales examples.”
“‘One was originally listed for $549,000 and sold for $400,000—that’s a difference of $149,000,’ he said. ‘The other was originally listed for $449,000 and sold for $351,500—that’s a difference of $97,500.’”
“In the months leading to the dry spell, Share added only nine single family homes sold and the average price difference from the original list price to the sold price was $37,966, whereas this last month the average price difference was $123,250. ‘Even though we’re been reassured that our banking system is solid and that our economy is ticking along nicely…in my opinion we’re crazy to think that Canada is impervious to some sort of significant adjustment in our economy and in the real estate market,’ he said.”
“For contractor Robert Tissington, building, buying and selling homes has been a way of life for as long as he can remember. His first house—among several properties he owns and can’t currently sell—was purchased in Kelowna’s North End a few years ago for about $200,000. He added a carriage house to it for about $130,000 and got ready to move into another place.”
“When he listed his property with a real estate agent, he was told to list somewhere in the area of $700,000, which he thought to be quite high, but competitive. It didn’t move. His price dropped by nearly 10 per cent and it still didn’t move. With that, he decided to take it off the market. ‘A year ago I thought selling it for about $550,000 would have been brilliant, but it’s the type of property you hang onto,’ he said. ”
“His property is a good rental—a market that’s not shrinking—and will continue to earn as the real estate market fluctuates. In the meantime, he didn’t see the point of putting his life on hold waiting for the property to sell. ‘The amount of tire kickers you have to go through—the people who want to see all the houses, but aren’t prepared to buy, even if they think they are—just aren’t worth it,’ he said.”
“He’s comfortable with the idea of riding out the changes in the meantime, and as a contractor thinks he sees a lot of opportunity in the current market—if not to sell, to buy. Tissington said that the current market should have been expected, as Kelowna functions on a six-year cycle. ‘Prices peak and everybody lists when they sense it’s the end of cycle and then there’s a glut of houses on the market,’ he said. ‘The last one was in 2001, and before that in 1993-94.’”
“When he bought his house for $212,000, that seemed like an incredible amount of money for an old house, but he pointed out it was worth the investment. ‘This whole economic situation is running alongside what may have been a natural price adjustment anyway,’ he said.”
