Seattle

Some cities will be safe and quite immune from a property death spiral right? Take the beautiful US city of Seattle. An area of 3.4million people, prosperous and home to gems like Microsoft, Boeing Aircraft, Amazon, RealNetworks etc.

This isn't the America of the pick up truck resplendant with gun rack and a neigbour named Cooter or Bill-Bob. This is diversified manufacturing, R&D, savvy, smooth, scenic. The original homes of Hendrix, Quincy Jones, Nirvana and Pearl Jam.

Housing Market Looks Sickest in Cities That Once Seemed Immune

SEATTLE — Few believed the housing market here would ever collapse. Now they wonder if it will ever stop slumping.

The rolling real estate crash that ravaged Florida and the Southwest is delivering a new wave of distress to communities once thought to be immune — economically diversified cities where the boom was relatively restrained. 

In the last year, home prices in Seattle had a bigger decline than in Las Vegas. Minneapolis dropped more than Miami, and Atlanta fared worse than Phoenix.

The bubble markets, where builders, buyers and banks ran wild, began falling first, economists say, so they are close to the end of the cycle and in some cases on their way back up. Nearly everyone else still has another season of pain.

“When I go out and talk to people around town, they say, ‘Wow, I thought we were going to have a 12 percent correction and call it a day,’ ” said Stan Humphries, chief economist for the housing site Zillow, which is based in Seattle. “But this thing just keeps on going.”

Seattle is down about 31 percent from its mid-2007 peak and, according to Zillow’s calculations, still has as much as 10 percent to fall. Mr. Humphries estimates the rest of the country will drop a further 5 and 7 percent as last year’s tax credits for home buyers continue to wear off. 

Is this going to be SE QLD in 2014?

Megan and Ryan Dortch tried to sell their one-bedroom Eastlake condo for $325,000 two years ago. They rejected an offer of $295,000 as inadequate. A year later, they relisted it for $289,000, then $279,000, which was less than they paid. Without a sale at that price, they could not afford to buy a place big enough for them and their new baby.

They have given up on real estate. They are renting out their old apartment at a small loss every month, and living in a rented house. “I don’t expect the market to get better,” said Ms. Dortch, 31, a customer service consultant.

Neither does Gene Burrus, another frustrated seller who became a landlord. “Rent is so cheap it doesn’t make sense to buy now,” he said. He might reconsider if 10 or 15 percent more comes out of the market.

Note. Rents in Ireland have dropped by over 27%  from peak 4 years ago as house prices are down 50%.

And the definition of a deflationary spiral? Waiting (to buy anything) until prices drop next week, when next week comes waiting another etc etc

Maybe that is why belief in a bottom is as elusive now as fears of a top were in 2006.

“We would love to have a house,” said Dan Cunningham, a 41-year-old renter. “I have more than enough for a down payment. I’m preapproved for a loan. But I have to have confidence it’s not going to lose another 20 percent.” He plans to wait until he sees prices rising before making any offers.

In April 2008 Seattle's unemployment rate was still a low 4% as property prices were coming off their 2007 highs. But when the property crash started to bite, it started to climb, thats when the feedback loop starts.

Unemployment now sits at 9.1%, houses are down 30% with another 10% downside expected.

The sector that had the bulk of the job losses? You guessed it, Construction.

Refs.

1. Bureau of Labor Statistics, Economy at a Glance, Seattle-Tacoma-Bellevue, WA
2. Bureau of Labor Statistics, Construction, Seattle-Tacoma-Bellevue, WA

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