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There’s A Glut Of Homes For Sale And Rent In Seattle

A report from GeekWire. “Mountain View, Calif. passed a tax similar in structure to Seattle’s head tax Tuesday. It will charge businesses up to $149 per employee, raising millions of dollars to help the city tackle issues like housing costs and traffic. Larger companies will have to pay more per employee than small ones, with Google paying 60 percent of the tax revenue.”

“But Redfin CEO Glenn Kelman stressed that Seattle has made strides toward correcting its housing crisis that San Francisco has not. ‘There’s this narrative of despair where we haven’t done anything and can’t do anything and I really take exception to that,’ he said. ‘I think that HALA was actually a major step forward. The reason that Seattle home prices have started to soften is because there’s been so much construction in the city. Rents are not rising because there’s a glut of homes for sale and for rent and I never thought I would say that but it’s almost directly because the city worked with builders to solve a problem.'”

“The cost of housing in Seattle is dropping dramatically. Home prices have declined $80,000 from their record high in the spring and rents have flatlined. But that doesn’t mean that the Seattleites most in need are seeing relief. It’s still one of the nation’s most expensive places to live, and affordable housing construction has not kept pace with the number of people who need it.”

From The Olympian. “Sales of single-family homes slowed for the fourth consecutive month in October, although there were still plenty of signs that the local housing market remains strong, according to new Northwest Multiple Listing Service data.”

“Sales slowed in October, just as they did in September, August and July. Windermere Olympia owner Steve Garrett thinks several factors are at work: Some of the slow down is seasonal, some of it is due to slightly higher mortgage interest rates, and finally this: It had to happen.”

“‘Something had to give,’ he said. ‘We couldn’t maintain the pace we were at.'”

“In other words, the local housing market has gone from frenzied to something approaching a more normal market, Garrett said. That transition is being played out a little more dramatically in King County, the data show.”

This Post Has 39 Comments
    1. This is behind a paywall:

      Slower market means homebuyers have ‘newfound ability to negotiate’

      OLYMPIA – Seven months of steadily rising housing inventory reversed course in October when Northwest Multiple Listing Service (MLS) brokers added the fewest new listings since February, according to a new report. MLS members believe the onset of wintry weather and transition to the holiday season are factors, but suggested the slower pace also signals improving conditions for house-hunters…

      1. If all else fails, blame the weather.

        BTW, what “wintry” weather have they had yet, other than the ubiquitous rain? I haven’t heard about any blizzards, or any snow/ice at all for that matter, at the populated elevations where the houses are.

        1. We’ve had some off and on rain, but nothing that you could describe as ‘season ending’.

          There’s the normal slowdown on the buyer’s side – kids are in school, holidays are coming up – but absolutely no different than any other year. They’re just throwing out excuses.

  1. ‘The reason that Seattle home prices have started to soften is because there’s been so much construction in the city. Rents are not rising because there’s a glut of homes for sale and for rent and I never thought I would say that but it’s almost directly because the city worked with builders to solve a problem’

    Oh yeah, you supply and demanders solved the problem all right. Still, how come it came a to a screeching halt, all across the country, at the same time?

    The thousands of FB’s in Seattle, and you’ll be the biggest one, will be begging for the gubermint to “save us from our glut”!

    1. …but it’s almost directly because the city worked with builders to solve a problem’

      OMG, too funny. That’s like catching your gf cheating and hearing her declare “I spent the weekend in his hotel room just talking. Nothing else happened. Honest!” – i.e. A test of how stupid you are.

      The city has been gorging itself on collecting fees of every kind from developers and expanding its budget as fast as possible. Falling housing prices is the last thing the Seattle city government wants.

    1. Anonymous
      Zillow are such optimists.

      I gave up looking at Zillow quite a while ago. A lot of zips have no data at all. Going to start listening again to radio show “Real Estate Live”, 11 on Saturday mornings, 790 AM to hear the spin. The mortgage guy would tell it like it was but the RE agents were completely full of it, lots of hardy har hars, always a good time to buy.

      LV realtor, good info, but still soft-pedals a bit:
      Las Vegas Real Estate Market Update (October 2018)

      1. Wanted to add, I also look at the Biggerpockets forum every once in a while. I’ll be sure to avoid this fine person when I look for my next rental:

        Realtor from Las Vegas, NV
        replied 5 months ago
        Not true Mary, so not true..  
        Very few people at small local joints are making 50-60k..  Maybe a random senior bartender or cocktail waitress..  Dealers definitely don’t make close to that..  Supervisors don’t even make that..  
        Some higher end casinos like Bellagio, Aria, Wynn will make 80k+, but this is a select few places, and a select few certain jobs..  
        Your AVERAGE couple, say a dealer at Excalibur and a front desk clerk at Circus Circus will pull in a total of $70-75k which isn’t terrible, but not enough to support a drastic rise in prices from where we’re at..   For every Wynn team leader making $80-100k, there’s hundreds of Kwik E Mart cashiers making $9 an hour..  
        The place to be in this town right now is developing these new apartment buildings that are going up everywhere..  Fleecing all the locals for $1400+/month for a 2 bedroom apartment is like taking candy from a baby..  The people renting these have no other options, because they don’t make enough $, cant save up for a down payment, and credit is typically no good..

  2. Ben if you had to summarize your hypothesis of why home sales have halted across the country, is it primarily psychological?

    Do you think rising mortgage rates was the tipping point? The fact that Freddie and Fannie went about as far as they can go with DTI mortgages of 50% over a year ago and they’ve hit a wall? All of the above?

    1. As I’ve said, nothing particular happened. A little bit higher rates. Recall the recent Boston article with a UHS saying “we hear about prices falling in Seattle and California and we’re afraid it’s going to spread here”.

      A mania is psychological. A mania with trillions of dollars in financing is what we have here. Last decade how many times did we read comments like “it was like someone flipped a switch” or “one day the phone stopped ringing”?

      And at the same time I’ve been finding reports of price reductions for well over a year. The San Francisco price reduction percentage is the same as it was a year ago. IMO, the media/REIC just kept a lid on it for as long as they could.

      And when it starts to eat into their commissions, here comes the “stop being so unrealistic sellers!” that we see almost every day now.

      1. “… the media/REIC just kept a lid on it for as long as they could….”

        Of course Lawrence Yun and those jolly fellows of the REIC will spin as “We are so surprised”, “No one could have predicted this”, “Our data was tainted by a rogue employee working at the NAR”,

      1. A beach doesn’t look like a humongou$ rock …

        Poindexter says, mo$t mania$ are comprised of individual chiclet $ized piece$ con$isting of x1 main $ort of ingreedient$ …

        Foghorn Leghorn: “eh, I say, that’$ a joke son!”

  3. The Chinese speculators have left Seattle…its all downhill from here…I could see a 30-40% price correction. Keep in mind, as many have said, Seattle was the biggest bubble market around this time

    1. In the US a few months ago. There was a time when it was Manhattan or Miami Beach. It’s always the same – shortage shortage GLUT!

      It’s amazing that Hong Kong was the hottest residential market on the planet just a few months ago and now they can’t get bids on foreclosures.

  4. I just got an email about this:

    2174 Redondo Ln
    Bullhead City, AZ 86442
    4 beds 2 baths 1,574 sqft

    Date Event Price $/sqft Source
    11/8/2018 Listed for sale $85,000 -19% $54 Homepath
    7/11/2018 Sold $105,000 — $67 Public Record

    Homepath is Fannie Mae’s REO program. The July sale was likely the trustee sale, meaning they were owed 105k on it and now put it on the market for 20k less.

    1. US Oil Enters Bear Market on Rising Inventories, Worries of Oversupply
      Wall Street Journal-4 hours ago
      “In view of the latest price slump and the oversupply that looks set to materialize next year, OPEC is thinking about cutting back oil production,” Commerzbank …

  5. Our town just passed a measure banning Short term rentals (STRs) like Airbnb. This will free up over 250 properties and potentially make homes and rents more affordable. Consequences are we now face a huge lawsuit from the San Fran lawyers who represent the people/companies who own those properties.

    1. Dave,
      Your town may be challenged by the companies that profit so much off the locals doing STR’s, and even win this battle, but I expect they will eventually lose ground in the bigger war that’s going on.

      The STR/AirBnB explosion has caused not seen before disruption all over the country in residential areas. There’s plenty of backlash in almost everyplace affected, and I expect local governments, driven by homeowners impacted negatively, to ‘catch up’ to the new reality in the years ahead as they figure out how add zoning and ordinances that survive the big company challenges (and sometimes generate more revenue for them).

      1. Wanted to chime in here. I am managing a luxury apartment complex. We are in the lease up phase and we have about 5-10% of the units in short-term rentals. Our occupancy is now above 75%, but we only opened about 6 months ago. The short-term rental is somewhat of an experiment for our property management group. I’ve learned a ton about the ins and outs of people doing these things. One thing that is very telling about Airbnbs is that the addresses are all hidden. I suspect there will be some large municipality that will get involved and get a court judgment against Airbnb from prohibiting any listing that falls within a ring-fenced geographic area where local ordinances prohibits short-term rentals. Right now it’s a game of whack-a-mole as Airbnb hosts obscure the location of their listing to skirt local zoning regulations. Airbnb has every incentive to be lax on enforcing no Airbnb listing clauses because that impinges on their revenue. Should be interesting in the next year.

        1. Interesting info there OAM, and I do agree.

          I think the reason we haven’t had much in the way of regulation to date (outside of obvious vacation homes like along the Gulf Coast, Tahoe, etc) is that until recently when AiRBnB/VRBO/HomeAway etc came along, the “friction” of doing so was so high that it was really uncommon, and thus no need to regulate what hasn’t happened.

          Combine the above ‘platforms’ that automate all the marketing/payment handling/etc with the economy of the last 10 years that has left lots of people looking for a side-hustle, just plain short on money, or looking for ROI Better than absurdly low interest rates and … boom .. the STR explosion.

          An explosion followed by the debris and fallout of negative impact and changing demands on neighborhoods/high density buildings/etc, leading to the backlash that is clearly building.

          Not to mention plenty of people who have been doing ‘technically illegal’ things like renting an apartment (or several at the same time) under pretext of living there and running them on AirBnB without telling anyone.

          1. You hit the nail on the head. I will tell you that there is a guy who is running this STR thing in multiple cities across the US and the world. He has no ownership and he basically does this based on volume. He goes into a place and sets up 6-8 units in an area and then hires a local individual to basically clean and turn the unit and handle all the communication. Then he goes out and does it again. I saw his income statement and it was $350k last year. I estimate that he maybe takes home 20% of that, but not bad for passive income and a completely asset-lite strategy.

  6. Old people are broke. Good thing they have a house that young people are begging to buy!

    Baby boomers face more risks to their retirement than previous generations
    These generation members hold less wealth, are deeper in debt and will face higher expenses than retirees a decade older than them, according to a new report by the Stanford Center on Longevity.
    “Boomers who run out of funds towards the end of life will either fall back on children, who by then will be in their 50s and 60s, or the social safety network,” said Jialu Streeter, a research scientist at Stanford.

    1. Good thing the boomers are bequeathing such healthy governmental finances to the younger generation. There should be plenty of extra money in the kitty to shore up the social safety net after all that increase in defense spending and unpaid tax cuts.

  7. Just got the new Redfin data for the Folsom area for October. Volume is down 18% from last month and 37% from last year. But median price and price per square foot is still up from last month and last year. Sounds to me like maybe only the nicest stuff is selling now, but it hasn’t been discounted much yet. Real price capitulation has not gotten rolling yet, everyone is HODLing.

  8. Hi folks, I took a gamble and bought some Redfin puts yesterday after seeing the Zillow results. Bought Nov $15 puts @0.95. Redfin is reporting earnings today so there’s still time left if anyone wants to join me. Warning: I usually strike out on bets like this. Just watch Redfin somehow pull out great numbers …

    1. Boom! After hours trading makes me think you have done well. Nice one.

      The 3 day weekend may push prices lower in the present climate as well. Tell us your exit price.

      1. Well my break-even at expiration (not including commissions) is 14.05 and it’s trading after hours at 13.94 right now. Even with the time premium that doesn’t sound like much of a gain. Still, better than losing the whole 1 grand I spent (which has happened to me many times), and who knows if it’ll suddenly reverse course tomorrow. If I can double my money (ie, @$1.80) I’ll exit for sure. Will be up at market open to check.

          1. I don’t like the way things are looking at all. Price going back up :(. Entered an order for $1.50 – let’s see if it hits.

          2. Getting screwed. Calls are down big but puts are down as well. Stock now at 14.61 and the ask is now 0.75, I guess this is the time premium kicking in. Will lower my bid to 1.00 and try to get out unscathed. A bit like selling a house without being underwater 🙂

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