The Flathead Beacon reports from Montana. “The economic outlook for Flathead County and Montana closely parallels that of the national economy: A long, slow recovery from a recession deeper and more damaging than anything Americans have grappled with in a generation. That was the future described by Paul Polzin and Patrick Barkey, two economists with the University of Montana. ‘Economists are surprisingly pessimistic’ about the recovery Barkey said. Referring to the downturn as a ‘net worth recession,’ it was unique in that it targeted consumers’ personal wealth, wiping out some $17 trillion in household assets across the United States. ‘It’s not that consumers don’t have confidence,’ Barkey said. ‘It’s that there’s not enough fuel in the tank.’”
“This recession was broad in its global effect, as well as the many different economic sectors it damaged. And unlike other economic downturns, Montana proved less immune to the decline than is normally the case – particularly with regard to housing, which he predicted would not recover to pre-recession levels.”
“‘It’s just been exactly the same in Montana in housing as the national average,’ Barkey said. ‘In this recession, the U.S. and Montana have been moving much more in sync than is commonly thought.’”
From Business Week. “When times were good in Seattle and job opportunities and the promise of stock options lured new residents, this rainy northwest city became one of the country’s most desirable—and expensive—places to live. The high cost of living became difficult last year as thousands in the area were laid off and the jobless rate climbed to 9% in December. To the relief of those leasing apartments, the average monthly rent in the Seattle area dropped 13.8% in 2009, the steepest decline of all U.S. metros, according to new data.”
“At the same time, hundreds, and in some cases thousands, of new units were being added in many rental markets. Apartment owners had to compete with new constructions, condo rentals, and home rentals.”
“In Seattle, the Rollin Street Flats, an 11-story luxury complex in the South Lake Union section with 208 apartments, started leasing to renters last spring. The property was originally developed as a condominium but, like others in the area, was converted to rental units. It is currently 92% leased.”
The Seattle Times in Washington. “Seattle’s downtown vibe lives in Belltown. It’s got the condo high-rises, hip restaurants and busy nightclubs. The new boulevard, planners hope, will bring a positive, 24-hour element to the neighborhood. The goal is to ‘feel safe and comfortable whether you’re walking through it at 10:30 in the morning — or 2:30 in the morning after leaving a club,’ said Patrick Donohue, project manager.”
“As trendy as Belltown’s reputation is, crime has long been a problem. Assaults, drug deals and robberies top the list, according to statistics from the Seattle Police Department. Adrian Lambert, 26, moved to Belltown last May so he could walk to work at a nearby pet-food store. After living in Boston and New York, he said he wanted that vibrant city feel. Belltown seemed to fit. But he soon saw what was lacking — a central gathering point. So he supports the boulevard.”
“Now, Lambert said, ‘people come from out of town, get blackout drunk and leave, maybe without hitting a pedestrian.’”
“This is Sam Buck’s stamping ground. The San Juan Islands, an archipelago 25-by-30-square miles, off Northwest Washington, is where he grew up and, for the last 22 years, sold real estate. But these days Buck is not riding so high. Rather than shepherding two or three clients a week in his Suburban, as he did at the peak of the islands’ market in 2006, he’s now driving around two or three a month.”
“Three years of declining activity has caused a logjam of unsold homes on the islands, which is driving down prices. In dollar terms, total sales have plummeted 64 percent over the same period, according to the Northwest MLS. Meanwhile, the median price of a single-family house sold in San Juan County has dropped from a high of $563,250 in 2007 to $443,500 last year — a 21.3 percent drop.”
“Buck alone is sitting on 65 property listings valued at more than $90 million. ‘We’re not in a panic — not yet,’ he says, uneasily. ‘People here are just hanging on by their finger tips. No (real-estate) office in the last year and a half has been making money.’”
“Debbie Dardanelli, an agent who has lived on San Juan Island for 27 years, has a total of six clients interested in possibly buying. And they’re on the fence. ‘They’re just keeping an eye on the market and are interested in how low it’s going to go,’ she says. ‘This is the first time we’ve seen it like this here. Everybody’s on edge.’”
“Recreational tourism and real estate are pillars of the economy, so the islands’ livelihood is more tied than ever to the outside. What that means is that until the economic health of the mainland recovers, particularly in the Northwest, the real-estate market will continue to drift. ‘We thought we were a niche market (for second homes) and wouldn’t be affected like a major metropolitan area. But it turns out we are affected,’ says Sam Buck.”
“‘Definitely a lot of people are just stopping projects or waiting to continue when things pick back up,” says Cory Brizendine, owner of West Point Custom Homes. ‘It’s taking longer than everybody thought.’”
“Brizendine has been fortunate. He, and his five employees, are building a multimillion-dollar house and remodeling another high-end home. Working exclusively for very affluent clients is his niche. ‘This is a great market to be in,’ says Brizendine, who moved to San Juan Island from Oregon in 2006. ‘I feel blessed to have this big opportunity to be working for the wealthy. The economy doesn’t affect them much really. What’s the difference between $40 million and $38 million?’”
The Anchorage Daily News from Alaska. “Alaska’s key construction industry is expecting less spending again this year, continuing a gradual decline that began before the national recession started. The overall decline of the past few years is mostly due to a decline in home-building activity and commercial building projects, according to a review of ISER data from the past few years.”
“In recent years, construction employment peaked at about 18,600 jobs in 2005, averaged over the entire year. By last year, employment had dipped to about 16,500 — still about one in every 20 jobs in the state.”
“‘If you are a dirt contractor (working on road projects), it’s a good time to be in business. If you are a building contractor, we’ve seen a steady decline in that work in the last few years, and it will decline more,’ said John MacKinnon of the Associated General Contractors of Alaska, which commissions the annual ISER report.”
The Vancouver Sun in Canada. “Real estate sales in January eased off the frenetic pace markets saw in December across British Columbia, the B.C. Real Estate Association reported. While overall provincial market in January represented a sea change from the doldrums of early 2009, buyers seem to be coming sated. ‘We saw a dramatic rebound in sales since last January, and that pace of sales that we saw in December, and during the last quarter, was unlikely to be sustained through 2010,’ Cameron Muir, the association’s chief economist said.”
“With sales still elevated, the provincial average price hit $491,571 in January, up 19 per cent from the same month a year ago. ‘Mortgage rates are still low,’ Muir said, so on the basis of monthly payments, ‘housing is still more affordable than it was at the previous peak in the first quarter of 2008.’”
The Canadian Press. “The federal government should avoid major surgery and make only minor adjustments to deal with fears of overheating in Canada’s housing market, a number of leading economists said. Some solutions being floated — doubling the minimum down payment to 10 per cent, or reducing the maximum amortization period from 35 to 30 years — could do more harm than good, the economists said. Bank of Nova Scotia economist Derek Holt said such radical surgery could cause home prices to crash and shake confidence in the consumer sector, a key driver of the fragile economic recovery. ‘We want some sort of micro-surgery, not (taking) a pickaxe to the problem,’ said Avery Shenfeld, chief economist with CIBC World Markets.”
“One measure, according to TD Bank deputy chief economist Craig Alexander, would be to tighten the ‘income test’ banks use to assess whether a prospective homeowner can meet monthly mortgage payments. Already, banks build in a cushion in handing out floating mortgages by judging credit worthiness based on the borrower’s ability to make payments on the three-year rate, not the variable rate — about a two percentage point difference. Alexander said that could be increased to the still higher five-year posted rate.”
“A variation would be for banks to judge ability to meet payments not just on the mortgage but on all outstanding debts of a prospective homebuyer. Yet another idea would be to deny government-backed insurance on mortgages for investment properties, thereby dampening speculation.”
“Economists believe such measures could help deflate any housing bubble without bursting it. ‘It’s not in the interest of either buyers or lenders to have boom-bust cycles,’ said the TD’s Alexander. ‘That’s the lesson from the U.S. experience. If you have the wrong incentives and you don’t have regulations, you end up in a place you don’t want to be.’”
The Montreal Gazette in Canada. “So there no doubt that Canada’s housing market is in a bubble, right? Wrong. All the agonizing over a possible bubble is actually very strong evidence that we don’t have one.”
“We do have an overheated market, and that means prices could stall or ease down within the next year. But that’s exactly what they should do in a normal real-estate cycle, points out economist Michael Gregory of BMO Capital Markets. After all, widespread worry about a bubble is the opposite of what drives a real one: the disappearance of normal caution, replaced by a near-universal delusion that no matter how costly an asset, it’s a good buy because prices can only go higher.”
“There’s simmering worry about a Canadian housing bubble, based on the remarkably fast rebound of house prices here after a brief, violent crash triggered by the 2008 U.S. financial crisis. This week, the concern got more visibility when the venerable Wall Street Journal, where big Canadian stories are rare, belatedly discovered it in a front-page article.”
“Gregory believes there is no evidence of the kind of speculative activity that always accompanies a bubble. We don’t see speculators flipping homes for a fast buck or people buying two or three homes, hoping to sell later for a profit. Gregory notes that once supply rises enough to satisfy demand more adequately, price gains should cool. And that’s just what is starting to happen as listings rise and home construction rebounds.”
“His prediction: talk of a housing bubble, which has become a bit of a bubble itself, should deflate by summer.”
From CTV in Canada. “Vancouver’s economy is certain to explode while the Games are on. Hotels have long been sold out and visitors are spending heavily in restaurants and shops. But whether the billions of dollars spent leading up to the Games and the global spotlight on Vancouver translate into a long-term boost for the local economy remains a crucial unknown. Bank of Montreal economist Doug Porter said a review of past Games in Calgary and Montreal shows a small positive impact on jobs and retail sales ‘which soon wears off.’”
“Experts don’t credit the Winter Olympics for soaring prices of the city’s real estate. A recent study by the University of British Columbia showed Olympic host cities don’t experience a real estate boom or bust as a result of the Games. ‘While construction employment dramatically increases in the period prior to the Games, house prices are the same as they would be in the absence of the Games,’ said Tsur Somerville, one of the study’s authors.”
“According to Mr. Somerville’s research, Vancouver’s economy will quickly revert back to its regular rhythms once the Games are over. ‘We do not find support for the argument of host city backers that the Olympics delivers positive economic benefits, nor of the arguments made by opponents that there is some post-Olympic bust.’”
The Houston Chronicle. “When a group of visionary Vancouver high-rollers had a ball attending the Winter Olympics in California’s Squaw Valley in 1960, they returned home hellbent upon duplicating the experience in their own British Columbia backyard. Whistler, which came to be named for the high-pitched screeching sound made by the ubiquitous little high-country critters called marmots, opened for business in January of 1966.”
“The inaugural Olympic race will be the men’s downhill Saturday. The global economic downturn would have inflicted a good bit of pain on Whistler’s merchant class even without the Olympics factor, and most seem to concede there will be no immediate windfall profits emanating from the Olympics. ‘January and early February were worse than last year at the same time,’ said Samantha Depatie, who works the cash register at Whistler Kitchen Works. ‘But hopefully the next few weeks will be better.’”
“‘It’s been a really rough year, for sure,’ added Niki Drury at the Love’s Nest, which is located directly across from the just-completed Whistler’s Medals Plaza, where each day’s champions will receiver their baubles. ‘There have been a lot less people coming up, and definitely a lot less American dollars floating around. We’re hoping it’s the calm before the storm, but we have no idea what to expect.’”
“The skiers , of course, aren’t interested in any of that. For them, it’s about the quality of the snow and the architecture of the runs. Defending super combined gold medalist Ted Ligety admitted he’d have liked a more challenging setup . If that’s a criticism, so be it. The people of Whistler who saw the Olympics as their destiny are just delighted Ligety’s in town to chase more gold. For them, it’s all downhill from here.”
From Time Magazine. “On the eve of the Winter Olympics’ opening ceremonies, the waterfront condo complex in Vancouver that is housing more than 2,700 Olympic athletes and team officials is winning almost universal praise from its guests. ‘It’s blown us away, to be honest,’ says U.S. speedskater Chad Hedrick. ‘They really went big on this. It’s a million-dollar view, for sure.’”
“Paid for, thank you very much, by the taxpayers of Vancouver. More than any other project in recent Olympic history, the $1 billion residential complex represents the risks that urban governments face when trying to host one of the world’s biggest parties. The city planned to invest about $47 million in the project back in 2006. However, cost overruns and the recession forced Vancouver to step in and bail out the private developers who were charged with financing the project.”
“The city avoided the humiliation of welcoming the world with a half-built Olympic Village, but at a great price: in early 2009, new Vancouver mayor Gregor Robertson declared that taxpayers were ‘on the hook’ for the $1 billion project. The city could recoup its investment if the developer sells enough million-dollar condos to Vancouver residents after the Olympics are over. That may have been a reasonable expectation in the real estate go-go days. Metro Vancouver housing prices have rebounded from the worst recession lulls — year-over-year condo prices were up 15% in January — but it’s still not the best time to be betting on real estate.”
“‘Things could still be peachy and wonderful,’ says Chris Shaw, an ophthalmology professor at the University of British Columbia and a vocal Olympic critic. ‘But they might not be. The whole Village fiasco leaves the city with fairly dangerous exposure.’”
