Once again, Seattle ranks among the top 10 markets in the influential Emerging Trends in Real Estate by the Urban Land Institute and the consultancy PwC. For 2015, it ranks No. 8 overall based on the tech industry, highly skilled workforce and attractiveness to millennials. “Seattle is one of the top capital destinations outside the…More
Category: Real estate
Seattle house prices rose 10.6 for the year as of March, according to the Standard & Poor’s/Case-Shiller home-price index, and the increase between February and March was among the best in the 20-city survey. This sector, which was at the heart of the recession and the excesses that caused it, is finally healing. So today’s question concerns how this turning point is affecting you.
Read on for the best business stories of the week and the haiku…More
Jobless claims are moving higher and new reports show weakness in manufacturing and (continued) problems in housing. The Wall Street Journal wonders if the economy faces a “spring stall.” You can’t count on it, but you can’t count it out.
The European crisis is getting worse again. China has slowed down. At home, one of the biggest problems is continued job cuts by government. The closest event to the Great Recession was the 1981-82 recession. But coming out of that, the Reagan administration spent big to raise public-sector employment. States hadn’t been hobbled by 30 years of tax cuts and tax limitation measures. This time, the public sector has lost nearly 200,000 jobs and, the Economic Policy Institute argues, those “these extra government jobs would have helped preserve about 500,000 private sector jobs.”
A housing recovery won’t come until at least 2020, one more reason to pivot the economy away from its dependence on this sector. Another problem: The jobs that have been created since the end of the recession have disproportionately gone to those at the top and bottom of the income range. Those in the middle have been left behind.More
Amazon’s agreement to buy three blocks in the Denny Triangle and build three towers, each with 1 million square feet of office space, is a project any city would envy at any time. Coming while the general economy is still struggling to heal from the Great Recession — a bust that vaporized Washington Mutual, one of downtown Seattle’s most important corporate headquarters — it’s breathtaking.
To be sure, if every major plan ever noodled over, permitted or announced actually happened, many American skylines would look like New York or Chicago. One could almost say that about the grand plans for the Denny Triangle that went “poof” with the collapse four years ago.
Still, this is not a speculative project. It’s backed by a headquarters company that has already filled up its expansive new urban campus adjacent to downtown in South Lake Union. Amazon has the capital and the need to make this real. It’s a tremendous vote of confidence in Seattle, a sign of how much real headquarters of big companies matter (as opposed to “suitcase headquarters” with few jobs) and an urban-reset project in a walkable, transit-oriented area.More
Five big banks have agreed to a $25 billion settlement over mortgage abuses. There’s much reason to be suspicious about the deal. About $20 billion is supposed to be “spent” by Bank of America, JPMorgan Chase, Citigroup, Ally Financial and Wells Fargo to help underwater homeowners refinance and give relief to others in danger of foreclosure. What this really means is open to question. Only about $5 billion in bank money is really involved, a slap on the wrist. It’s unclear whether second liens will be addressed.
The best journalism on this issue has been committed by the blog Naked Capitalism. It points out that the settlement includes “roughly $17 billion is credits for principal modifications, which as we pointed out earlier, can and almost assuredly will come largely from mortgages owned by investors. $3 billion is for refis, and only $5 billion will be in the form of hard cash payments, including $1,500 to $2,000 per borrower foreclosed on between September 2008 and December 2011.”
We’ve now set a price for forgeries and fabricating documents. It’s $2000 per loan. This is a rounding error compared to the chain of title problem these systematic practices were designed to circumvent. The cost is also trivial in comparison to the average loan, which is roughly $180,000, so the settlement represents about 1 percent of loan balances. It is less than the price of the title insurance that banks failed to get when they transferred the loans to the trust. It is a fraction of the cost of the legal expenses when foreclosures are challenged. It’s a great deal for the banks because no one is at any of the servicers going to jail for forgery and the banks have set the upper bound of the cost of riding roughshod over 300 years of real estate law.
As the Seattle Times‘ Eric Pryne reports, King County housing is more affordable than any time in the past 17 years. It’s a great time to buy, if you can.
Therein lies the down side. Lower prices are necessary to make the market function in an ailing real-estate economy. They also represent de-facto deflation for house owners, and threaten to put more underwater, owning more on their mortgages than the house is worth. Many are saddled with debt and many can’t qualify for mortgages because lenders have tightened standards. Inventory in some areas outstrips demand.
Here’s the Friday poll:More
Good-news seekers can take some comfort in the fact that, so far, we’ve avoided a major commercial real-estate crash. This is no small thing when measured against economists’ fears of the past two years and a dire warning from bailout watchdog Elizabeth Warren. True, Seattle, like many cities, faces very high vacancy rates and CRE has taken down several smaller Washington state banks. But things could have been far worse.
In Fortune magazine, Heidi N. Moore reports that the economy is outrunning the worst, at least for now. “The only question now is how long it can keep up the sprint while the ghosts of boom-time leverage haunt the sector, and $1.4 trillion in loan maturities loom three years over the horizon.”
Government help for the financial markets has played a big role in maintaining confidence. Here’s the argument of the bulls:
…investors in commercial properties and buyers of commercial mortgage-backed securities believe that the commercial real estate market will continue to suffer until it hits a bottom, but it will never crash in the way that the residential market collapsed. They believe that commercial real estate will be an example of how a market can take the hits and keep on ticking, that not every spot of trouble results in a crisis, that an industry can actually, somehow, stop a crisis if it acts early enough and has enough support.
It’s not just the big banks that are doing very well. So is the unregulated shadow banking system, including hedge funds. According to the New York Times, the pay of the top fund managers made a staggering recovery last year. One made $4 billion betting on the recovery of…the financial sector. (No, this is not an April Fool joke).
How to take this? “We bet on the country’s revival,” the manager, David Tepper, said. Well, not really. He bet the assets of his elite clients on the fact that American taxpayers would be risking their living standards for years to come in order to rescue the bad bets and swindles of the banking sector. (And this is not a partisan concern: No. 2 on the list was George Soros, big backer of the Dems).
The problem is that it’s difficult to know how these powerful players are using their money to actually encourage real recovery, or just trading bets and benefiting from the federal bailout (e.g., being corporate welfare queens, or the bankers to them). Hedge funds are famous for buying and merging companies, encouraging offshoring, etc., all of which destroy jobs. Meanwhile, they’re barely overseen by regulators and played a significant role in the panic.
In any event, I’m sure the millions of unemployed and underemployed Americans, the people whose wages have stagnated for years and worry about job losses and foreclosures, wish them well.More
Top of the News: Job No. 1 in the recovery continues to be, well, jobs. The federal Bureau of Labor Statistics has compiled metro employment numbers for November, with Kennewick-Pasco-Richland turning in the best jobs performance for the nation: 3,600 jobs added year-over-year.
At the bottom: El Centro, Calif. and Yuma, Ariz., with unemployment of 29.2 and 21.1 percent. Phoenix, capital of low-tax, light-regulation Arizona, lost more than 110,000 jobs, 6 percent of the workforce. Seventeen metros nationwide recorded unemployment of 15 percent or higher. And of course the actual rate is probably much higher, when accounting for discouraged workers and the underemployed.
Seattle unemployment rose to 8.8 percent (166,000 without work), vs. 5.7 percent in November 2008. Longview shot up to 12.9 percent. You can view the entire report here.More
Top of the News: The economic elites and much of business journalism tend to discount the potential for a General Motors bankruptcy, which could come as early as this weekend. After all, the American economy is all about financial plays at its worst, and shimmering technology at its best.
This may be premature complacency. While it’s difficult for Northwesterners to appreciate the vast economic footprint of GM, consider this scenario: Boeing, diminished by years of job cuts and factory closings, seeks Chapter 11 and will come out smaller and perhaps still uncompetitive.
Even that doesn’t get at the role of GM in the Midwest, with a still vast network of suppliers from steel to machine tools to parts. Together, they provide the bulk of jobs that provide wages with high multipliers. They prop up municipal budgets. GMAC, while somewhat detached from GM now, is continuing sore in the financial crisis.More