Construction costs did rise when building was at it's peak last summer. Copper, Steel and Concrete prices increased dramatically. Last June...Copper was trading for close to $4 per pound...today it is around $2.50.
In addition...warehouse stocks for both short and long term are between 2x and 4x the levels that we saw during 2005-2006.
What does that mean? Construction material prices cost less now. Going to HD or Lowes and telling me that copper pipe and sheetrock are still the same price is a futile argument. The big boys aren't shopping at Lowes. They don't get the department store prices...they get something more in line with "world prices"
Will 2007 be the year of the condo downtown.
If we are honest with ourselves I think that we can say no...it won't be...and quite possible some drastic falls. It is just like the 500k+ condos that are out there that you mention.
I feel that the number of investors was underestimated but only time will tell. All one needs to do is look towards the 2200 westlake project as a barometer that shows how all these condos just aren't selling...nor renting for the prices being asked. I think that this will become a trend. The MLS does not accurately represent the units that are for sale...and it also doesn't reflect the large amount of builders that have units coming on line soon.
Will 2007 be the year of the condo?
Lets see what happens when funny money loans dry up and what near term actions are taken globally after this past weekends G7 meeting.
Ben
· 2 years ago
Just a comment on 2200 - Many have been on the market for awhile, some with several price drops, and they will be there for some time to come as long as sellers expect to realize up to a 60% return which the market won't support. If agents & sellers were more realistic, perhaps 2200 resales would be fairing better. I suspect more developers may turn away from high-end condos...the commercial market is tight at the moment.
brain
· 2 years ago
I don't see how one can claim that $1m is the low end of the market. The more I read real estate articles in Seattle (and also the NY Times and Boston Globe) the more I realize that any statistics being bandied about vary from "somewhat accurate" to "no idea where that number got pulled from". This of course happens all the time in other venues, but I feel as though it is far more dangerous economically to be guilty of cloudy numbers when it comes to real estate.
Bob
· 2 years ago
Whether there will be a condo crash depends on supply and demand. But I just think the prices haven't reached the point where most people think are absolutely ridiculous. When I look at the prices in New York, Tokyo, Hong Kong and London where new apartments can routinely fetch $1500 per sqft, Seattle still isn't that expensive but it is getting there.
Don't underestimate the determination of people who want to own something, no matter how misguided you think they are. It is not impossible to save enough for a down payment before the age of 30. Earning an average of $40k from the age of 21-30 is already enough and many in technology earn much more.
Chris
· 2 years ago
"Whats changed so quickly?"
The pipeline for debt financing. Unless you're bringing in a pension fund/hedge fund, etc, financing is becoming really difficult. In seattle, the change seemed to occur around the summer from what I gather from bankers and mortgage brokers. the fundamentals haven't changed all that much, but underwriting standards follow the domino effect
Matthew
· 2 years ago
Comparing New York, Tokyo, Hong Kong and London to Seattle is ludicrous. Do you realize what the population density of those cities as compared to Seattle?
The TIm
· 2 years ago
In case anyone was actually wondering, but too lazy to look it up, here are the population densities of the aforementioned cities:
New York: 10,316/km Tokyo: 5,796/km Hong Kong: 6,295/km London: 4,761/km
Seattle: 2,665/km
One of these things, is not like the others, One of these things, doesn't belong...
mattgoyer
· 2 years ago
What cities do have similar population densities? What's the population density of Vancouver? Do you have a source with more info?
They have a lot of available inventory coming online too. I'm thinking more and more it's time to get out of the market and instead rent a condo.
EconE
· 2 years ago
Per Wikipedia...the population Density of Vancouver is 5252/sq km.
Donna
· 2 years ago
I'm a non-Seattleite who is in the middle of buying a small downtown condo as a vacation home, so maybe I can provide a different perspective. Although I've been following the commentary in this and other blogs and in the press on the future of the Seattle real estate market, and in particular the condo market, I'm still buying. My reasons are as follows: 1) I want it. Seattle is the nearest big city to me. The price per square foot in Vancouver, New York, San Diego, etc., has no relevance for me, because I can't normally get to those places for the weekend. 2) I can afford it. I make a good living, but I'm not spectacularly wealthy. There are many, many, many people who make more than I do. I'm not buying this as an investment, I'm buying it to use. I'm aware there's a risk that the market will decline, but there's nothing I can do about that. I want a place in downtown Seattle, and I'm willing to accept some risk in order to get it. I could rent, but it just wouldn't be the same. It's a purely emotional purchase, but then most luxury purchases are. I bet there are a lot of people like me.
Bob
· 2 years ago
I know Seattle isn't as crowded as the other cities. But I am only looking at the prices and what people are willing to pay until they say, no way. There has to be middle class in those cities and they are using more of their paychecks to cover their mortgages.
The Tim
· 2 years ago
Population Densities of a few cities:
New York, NY 10,316 Hong Kong 6,295 San Francisco, CA 6,111 Tokyo 5,796 Vancouver, BC 5,252
Chicago, IL 4,867 Boston, MA 4,457 London 4,761 Philadelphia, PA 4,202 Los Angeles, CA 3,165
Seattle, WA 2,665 Detroit, MI 2,647 Cleveland, OH 2,381 Milwaukee, WI 2,400 San Jose, CA 2,014
Sacramento, CA 1,617 Las Vegas, NV 1,604 Portland, OR 1,533 Houston, TX 1,344 Phoenix, AZ 1,188
The Tim
· 2 years ago
That's people per km, by the way.
brain
· 2 years ago
Ummm, these stats would be more useful if someone could post the ratio of people to km2, or 1 person per _____ km2.
I can walk across the Boston zip codes in 30 minutes if I get walk signs at all the traffic lights. It would take me all freaking day to walk from South Park to Shoreline.
brain
· 2 years ago
Land Areas of the cities above (all in km2):
NYC 785 Hong Kong 1,104 San Francisco 121 Tokyo 2,187 Vancouver, BC 114
Chicago 588 Boston 125 London 1,579 Philadelphia 350 Los Angeles, CA 1,215
Seattle 217 Detroit 359 Cleveland 201 Milwaukee 249 San Jose 453
Suddenly these places aren't ranked in the same order. And it is amazing to realize how small NYC is compared to some major international cities.
The Tim
· 2 years ago
This discussion inspired me to do a more detailed comparison of population, land area, and density for these cities and a few more. You can see my full findings in this post.
Ben
· 2 years ago
The comparison to population densities to major cities is somewhat irrelevant as those are cities with multi-million people population to tiny Seattle. More useful would be to also integrate housing unit supply among other factors. Nonetheless, I'm skeptical about the demand and available buyer pool for the number of higher priced units under construction. Besides Seattle, Bellevue is building upwards of 1000 million-dollar plus units.
Chris
· 2 years ago
Population density of the city is not helpful, the metro area is more informative. LA and SF Bay have very dense metro areas because of land constraints, which helpls bolster prices. Even that only gets you so far. Run a OLS regression on that. Would be curious
Keep in mind the numbers thrown out are for NEW construction of high-end downtown highrises. Not average across the city or region. The demand of high income individuals relative to supply is the stat you really want Bubble people. Take Seattle's market areafor high end condos - say Alaska to Oregon east to montana, and divide the number of people earning say $200k/year by the number of high-end condos in the market area. Use Fed Reserves Survey of Consumer finances to get the former. Bet you Seattle comes fares well.
Chris
· 2 years ago
Second thought. Find out what marketing firms work with the developers and learn their assumptions on demand. they may not be correct, but when you go to a bank/fund for 100 million in financing, you better have some good marketing studies to back it up
jo
· 2 years ago
Population density means jack on it's own.
I'm originally from Cleveland which has roughly the same density of Seattle...and you can pick up a house for 50k in Cleveland.
All Comments
In addition...warehouse stocks for both short and long term are between 2x and 4x the levels that we saw during 2005-2006.
What does that mean? Construction material prices cost less now. Going to HD or Lowes and telling me that copper pipe and sheetrock are still the same price is a futile argument. The big boys aren't shopping at Lowes. They don't get the department store prices...they get something more in line with "world prices"
Will 2007 be the year of the condo downtown.
If we are honest with ourselves I think that we can say no...it won't be...and quite possible some drastic falls. It is just like the 500k+ condos that are out there that you mention.
I feel that the number of investors was underestimated but only time will tell. All one needs to do is look towards the 2200 westlake project as a barometer that shows how all these condos just aren't selling...nor renting for the prices being asked. I think that this will become a trend. The MLS does not accurately represent the units that are for sale...and it also doesn't reflect the large amount of builders that have units coming on line soon.
Will 2007 be the year of the condo?
Lets see what happens when funny money loans dry up and what near term actions are taken globally after this past weekends G7 meeting.
Don't underestimate the determination of people who want to own something, no matter how misguided you think they are. It is not impossible to save enough for a down payment before the age of 30. Earning an average of $40k from the age of 21-30 is already enough and many in technology earn much more.
The pipeline for debt financing. Unless you're bringing in a pension fund/hedge fund, etc, financing is becoming really difficult. In seattle, the change seemed to occur around the summer from what I gather from bankers and mortgage brokers.
the fundamentals haven't changed all that much, but underwriting standards follow the domino effect
New York: 10,316/km
Tokyo: 5,796/km
Hong Kong: 6,295/km
London: 4,761/km
Seattle: 2,665/km
One of these things, is not like the others,
One of these things, doesn't belong...
They have a lot of available inventory coming online too. I'm thinking more and more it's time to get out of the market and instead rent a condo.
New York, NY 10,316
Hong Kong 6,295
San Francisco, CA 6,111
Tokyo 5,796
Vancouver, BC 5,252
Chicago, IL 4,867
Boston, MA 4,457
London 4,761
Philadelphia, PA 4,202
Los Angeles, CA 3,165
Seattle, WA 2,665
Detroit, MI 2,647
Cleveland, OH 2,381
Milwaukee, WI 2,400
San Jose, CA 2,014
Sacramento, CA 1,617
Las Vegas, NV 1,604
Portland, OR 1,533
Houston, TX 1,344
Phoenix, AZ 1,188
I can walk across the Boston zip codes in 30 minutes if I get walk signs at all the traffic lights. It would take me all freaking day to walk from South Park to Shoreline.
NYC 785
Hong Kong 1,104
San Francisco 121
Tokyo 2,187
Vancouver, BC 114
Chicago 588
Boston 125
London 1,579
Philadelphia 350
Los Angeles, CA 1,215
Seattle 217
Detroit 359
Cleveland 201
Milwaukee 249
San Jose 453
Sacramento 252
Las Vegas 293
Portland 377
Houston 1,558
Phoenix 1,231
Suddenly these places aren't ranked in the same order. And it is amazing to realize how small NYC is compared to some major international cities.
Keep in mind the numbers thrown out are for NEW construction of high-end downtown highrises. Not average across the city or region. The demand of high income individuals relative to supply is the stat you really want Bubble people. Take Seattle's market areafor high end condos - say Alaska to Oregon east to montana, and divide the number of people earning say $200k/year by the number of high-end condos in the market area. Use Fed Reserves Survey of Consumer finances to get the former. Bet you Seattle comes fares well.
I'm originally from Cleveland which has roughly the same density of Seattle...and you can pick up a house for 50k in Cleveland.