Seattle City Buzz

The old Rainier Brewery in the Georgetown neighborhood was acquired by the Sabey Corp. Sabey plans to convert the landmark designated, 5.5 acre property into new condominium housing.

A while back I wrote a post about the human cost of conversions with the new owner/developers only needing to provide 90 days notice and $500 to displaced tenants. It looks like the increasing number of conversions, and thus, more displaced tenants, who undoubtedly are unable to afford to purchase the snazzy conversions, are getting noticed by the politicos. From the PI’s Forced Out Tenants article:

(State Senator) Fairley’s plan would ban construction, remodeling or repairs during the required advance notice period for conversion or until at least 12 hours after the last tenant moved out. It also would increase the minimum payment to $2,500, then adjust it each year for inflation.

It would allow cities to cap the number of apartments that could be converted to condos each year and extend the notice period from 90 to 120 days.

I personally don’t fully support the current proposal, but I applaud steps to protect tenants and to fairly compensate them when they’re displaced due to a conversion. Conversions, after all, is a business venture so it does need to be economically feasible to the developer and to provide needed housing units for would-be home owners.

Interesting tidbit in the Seattle PI about marketing condos, which in Seattle range from an 80’s throwback at Onyx to aiming towards spirituality to the enticing the “Hitchcock demographics” at Escala.

It must work since the marketing geniuses are coming up with them. Though, in reading blogs and comments about the Onyx’s cheesy South Beach theme, lots of people are poking fun at them too.

On the other hand, not all people are grasping at the lifestyle the marketers are selling, as some projects appear to be stagnant. Rumor has it a current Belltown project replaced it’s marketing team recently.

The Seattle Times recently reported that condos in King County has surpassed single family homes in appreciation. Part of the reason is due to a new mentality about condo living, that it’s no longer for people who can’t afford single family homes. As new condos are being built in downtown areas, it’s becoming a lifestyle choice.

In the first six months of this year, condos in King County have appreciated 21.9 percent a square foot compared with the same period in 2005. That’s slightly faster than the 19.7 percent that single-family homes appreciated in the first half of this year.

Seattle’s strong housing demand & lack of adequate supply for units under $400,000 has seen a rise in condo conversions. To meet the demand, developers have found it less expensive and more profitable to convert apartments into condos. Some of the conversions this year include:

• Asia
• Harwood
• Epic
• Mezzo
• Residence at 5th Avenue
• Urban Terrace
• Plaza del Sol
• The Morgan
• Onyx
• Cooper Square
• La Toscane
• Maison
• Biscayne
• francisFremont
• Taylor Anne
• Residence at 500 Elliott
• Site 17
• Pacific Rim and more.

The Seattle Times wrote about the other side, the tenants who are being displaced and the inconvienence and cost of moving. For every silver lining (another homeowner) there is a dark cloud (someone being forced to move out of their home). Owners only need provide 90 days notice, and for low-income tenants, $500 toward moving.

Higher prices and higher rates are putting the squeeze on first time homebuyers and Seattle’s housing market is no exception. CNNMoney.com recently profiled this issue and provided some advice as well.

What a difference a year makes when you’re in the market for a new home, especially if you’re a first-time buyer.

Thanks to a combined jump in mortgage interest rates and home prices, a starter home in many areas of the country could cost you several hundred dollars more per month today than if you bought it last year.

Nationwide, median home prices rose at annual rate of more than 10 percent in the first quarter of 2006, according to the National Association of Realtors.

Meanwhile, rates on adjustable rate mortgages, the most common for first-time buyers, are up more than a percentage point.

According the WSU’s Center for Real Estate Research the Housing Affordability Index for King County is 80%. That means the typical family only has 80% of the income to purchase a median-priced home. For 1st time buyers in King County, it’s even lower at 44.7%. Less than 1/2 of 1st time buyers can afford a home in King County. ¹

1 Washington State University - “Washington Home Sales Stabilize While Affordability Sags”.

Last night at the Benaroya Hall was the inaugural Downtown Seattle Realtor Symposium + New Construction Condo Showcase. Sponsored/organized primarily by Urban Condominiums and Realogics, the event featured presentations & panel discussions by representatives the Seattle Times, Windermere Onsite, HomeStone Mortgage, Weber+Thomson, Downtown Seattle Association, The Justen Company, Gardner-Johnson and a few others. The Seattle-PI wrote an article about the event titled Booming development set to change Seattle’s look.

The reception featuring free wine and appetizers by Wolfgang Puck, provided Realtors, investors, developers and media an opportunity to mingle and view models of the various downtown projects including a 3-D model of downtown showing where the new projects will be located (similar to Vulcan’s South Lake Union model).

The Condo Showcase presentation was a bit bland in that very little information about the new projects were provided. Mainly, they just mentioned the expected construction and occupancy dates, location and number of units. Some of the speakers detailed design and building features. Most were tight-lipped or simply stated…”go to our website”. For such a hyped event, it was a bit anti-climactic.

There were bright spots and I found some of the speakers and topics about the future housing market for the downtown area fascinating. Keep in mind, the presenters are from the real estate, building, financing and marketing industries so naturally the view points may be a tad biased.

Where to Build?

A vast majority of the future projects will be constucted in the Midtown and Denny Triangle areas north of the downtown core. Available land and changes to the city’s zoning make the northend attractive to developers. Realogics and Weber+Thomson presented a nifty 3-D animation of the area and the Seattle-PI posted it on their website (note, it’s a large PDF file).

In the Year 2010

One speaker I found to be the most objective and knowledgeable was Matthew Gardner of Gardner-Johnson. Mr. Gardner whose background is economics, discussed the future housing outlook for the downtown areas and interest rates. By 2010 most development experts are asserting nearly 10,000 new housing units will be built in the downtown, Midtown, Belltown and Denny Triangle areas. Gardner provided a more realistic number of approximately 6,500 to 6,800 units will be added, noting there are forces that may constrict construction. These forces include rising labor and land costs, consumption of building materials (post-Katrina rebuilding and China’s rise) and lack of available labor and cranes. Apparently, there is a finite number of cranes and Seattle is in short supply.

Gardner touched on the “bubble” topic as well. He mentioned that Seattle should be able to absorb about 2,000 to 2,400 new units per year, but with the external factors noted above, housing supply will be constrained with only about 1,500 units available per year for the next 4-5 years. This combined with job growth and decrease of short term interest rates that’ll reduce rates on 3 and 5 year ARMS, Gardner predicts the downtown housing market will remain strong.

(On the job market, there are some shifting already going on, that will increase workers in the downtown core. Washington Mutual is completing it’s new office tower (retaining employees in downtown), Starbucks is building a new facility, and Safeco is relocating over 1,000 employees from the U-District & Eastide to downtown. Also, Amgen is adding 550,000 sq ft to it’s Pier 89 site potentially doubling it’s workforce).

Mortgage Rates - Where art thou going?

Another interesting speaker was Keith Tibbles of HomeStone Mortgage. Tibbles mentioned that on June 28th the Federal Reserve Interest Rate is likely to rise another .25% to 5.25%. Which, theoretically doesn’t bode well for housing sales. He did explain that the past 4 Fed cycles lasted 9 months each and at the end of those cycles, mortgage rates were cut. He suggested we are now overdue for a mortgage rate adjustment.

He also spoke about the yield curve inversion, stating that when long-term interest drops below the short-term rate, the economy tends to slow down, thus sparking the Feds to adjust rates to stimulate the economy. This writer doesn’t know very much about yield curve inversion, but a brief tour of Google suggests this is an oft debated topic.