Monday, March 31, 2008

Car campers sneaking back into Ballard

Saw a few this morning.  My walking route takes me down 9th Ave NW to Leary, where I catch the Burke-Gilman now that it's light enough for the bikes to see me.  In the dead of winter, when it's dark out, I usually go up and over Phinney Ridge.  I walk from north of 85th Street to downtown Seattle, three times a week.

Here's one:

And another:

See if I can get a better angle on this second one; she's in good shape for her age.

Chutzpah!  Camping out right in front of the sign itself! 

I think I'm warming to these people.

No-land homes

Here's a development underway in Ballard by my favorite builder, Noland Homes.  Oh, I don't know much about them personally or care if they live or die, all I know is that they build overpriced townhouses and condos all over Seattle and that their name is funny.

Noland Homes ... condos, townhouse tenements ... as in no-land homes.  I love it!

As I walked into work this morning (~6.5 mi), I saw this listing in the houseboat community along Westlake Avenue.  It's in here somewhere.

Only $700K for a houseboat.  I wonder if Noland Homes built it.  Because.  It's a house boat.

I'll be here all week.

Saturday, March 29, 2008

Chilly Saturday

I had planned to visit Paul Allen's condo sales center at Denny & Westlake today, perhaps the Mecca and Medina of Seattle condo marketing religion. Instead, the cold weather limited my range, and it will have to wait for another, more sunny, Saturday.

Specifically, it was too cold to hike all the way from the Seattle Aquarium to the sales center, with this little sweetheart on my back:

She's getting over a cold, so we enjoyed the Aquarium together, grabbed lunch, she fell asleep in her Kelty Kids backpack, and I contented myself with visiting a few bookstores in Pioneer Square. Wessel and Lieberman has a nice copy of Hayek on Hayek if anyone is interested. I'll return to pick it up if you don't!

I did swing over to Site 17 again. Still counting 10 lockboxes:

For the sake of my readers, I snapped pix of a few of the other strange quotation plaques on the outside of the building. Clearly, living here takes on a much greater import than I had thought.

Neighborhood, yes. Nice neighborhood. On the short walk over to Site 17, I witnessed the open-air drug market now on Western. HINT: among the itinerant day-laborers on Western Ave, the ones that are not Mexican are either junkies or dealers. I think my daughter even figured this one out.

Site 17, and condo conversions throughout the city, especially the junk in places like Fremont, you are on notice. Those of you who bought into this ponzi are currently underwater.

Thursday, March 27, 2008

Seattle's own Block 37

In 1989, an entire city block in the Chicago Loop was demolished for redevelopment.  The 1990-91 recession killed those plans, and Block 37 would remain vacant for 17 years.  This block was in the central core of the city, some of the most valuable urban RE in the country.  And it sat, and sat.  The city put an ice rink in each winter, but the hole in the city was startling.

The Block 37 experience now comes to Seattle via the 1 Hotel and Residences.  "Luxury with a conscience"! 

Sorry, folks, but it's almost April, and a project of this size will not come together for 2009.  Or 2010.  Or 2011.  The current project will fail.  The hole will be a grand embarrassment in our city center until someone shells out the money to fill it.  It will be a while.

Instead, Seattle gets a nice hole in the ground.  Where has the condo-tel model been proven?  Miami?  It has not been proven anywhere; rather, it is an obvious sign of out-of-control leveraged speculation and a blow-off top of the bubble.  When they started announcing luxe condo-tels here in Seattle, I knew we had peaked.

What happens next?  Mark my words, this project will be cancelled.  The lenders will pull any construction loans, specuvestors will pull their deposits, and this gets killed.  This will not survive the credit crunch and general deflation underway.  

If we get a cold winter, I guess we could go skating.  Or we could fill it with water and spear sturgeon.  My idea!  Credit, please.

More nauseating Green Marketing.  Consume!  Consume!  You are surely among the elect.

The only consolation for this disaster is that only a parking lot was demolished for the sake of this hole.  In Chicago, we wrecked an eclectic block of theatres and an old landmark, the sort of block that brings a lot of character to a modernist city landscape.

Only now, with the Californization of the Chicago Loop, in the greatest credit bubble of all time, has Block 37 been redeveloped with a condo and retail mix.  I liked the old Block 37, and would trade the new one for it in a heartbeat.

Tuesday, March 25, 2008

Guest post by my friend Tom

My friend Tom Johnson is one of the shrewdest people I know, a smart investor, and very good with money.  We've discussed the RE bubble quite a bit, while following and speculating in the torrid bear equities market.  

Tom has spent some time digging around in the data-porn of Zillow, combing through the wreckage of Las Vegas, and he sends us these notes.

Of course, no post in Deflation Land is complete without a pic, and Tom didn't provide any.  So I'm including the final, climactic photo from my Easter walk in the rain to Everett.  Enjoy!

How bad is it in Las Vegas?
Let’s look at the micro, instead of the macro.
Right now, the magic number seems to be $150,000.  That’s what it takes to sell a house in Vegas.  Let’s look at a typical house for sale for that price in Henderson, Nevada, perhaps the nicest part of the valley.
122 BOYSENBERRY LN - $149,900
This was likely just reduced, as Zillow lists the property for sale at $179,500.
The house is now bank owned, and the sale history goes like this: $73,350 in ’98, $220,000 in ’06, $189,385 in ’07 when the bank took posession.  Zillow puts the peak value of the house at $260,000 or so, in March of ’06 (approx.) so the previous owners bought very close to the top.  For whatever reason, the bank now owns the house.
Now let’s look at the neighborhood.
The house immediately to the north sold in ’06 for $208,500.  In ’98, it sold for $107,000.  Let’s use that as a baseline: let’s assume that in ’98 the house was worth 30% more, and it is today.  That puts the value today at $217,500, not too far off of the Zillow guess of $230,000.
Let’s look at the house to the south.  It’s on a smaller lot.  It sold for $92,500 in ’98, which agrees with the quick assessment.  If the house to the north is worth $150,000 then their house must be worth less than that.  Let’s assume it’s worth the same - $150,000.
Zillow says it’s worth $219,500, or 46% higher than it’s likely worth.
Let’s look at the next house down, the same size lot. Zillow thinks this one is worth $199,000.  It last sold for $245,000 in 2006, at the peak.  So the owners are underwater.  The question is, how much?
Assuming the same price as the houses for sale on the block, we can figure that they are approximately $95,000 underwater on the house, not the $46,000 that Zillow suggests.
Let’s look at the next one – sold in ’05 for $250,000.  Zillow thinks it’s worth 207,500.  So again, according to Zillow, underwater by 42,500.  According to the market, closer to $100,000.
The next one – sold for $112,000 in ’99.  So, of the 5 houses we’ve looked at so far, this is only the 2nd that has positive equity.  Figure it is also worth around $150,000.
At the end of the block, we see another listed from Windermere at $150,000.  It too was listed for sale at $184,900 and didn’t sell.  Sold in ’06 for $250,000.
So on this single block, we have positive equity of about $90,000 and negative equity of around $400,000.
Much of this debt hasn’t been reflected in the official numbers, and with the January sales hitting Zillow, their estimates are reflective of those dire numbers (down almost 20% January year-on-year.)
That is to say,  the decline from January to March, in my estimation, has equalled that of the decline so far, in absolute terms.  In percentage terms, it’s EVEN HIGHER.
It’s getting worse, not better in Las Vegas.  How low can it go?
Keep in mind, that these two houses were listed at higher prices for two months (since January) at prices at least 10% lower than Zillow’s estimates.  And they didn’t sell.  So at the very least, the Zillow estimates for Las Vegas right now are 10% too high for two months ago.  Look at a map, and calculate the lost equity that isn’t reflected in owners’ hearts and minds, and then ask what they will feel when their $220,000 suburban house reverts back to a value of $150,000 or less.  What happens then?  Will people be more or less likely to pay off loans that were taken out at the peak?
All of this bad debt has yet to be written off.  It’s coming.


One side effect of the bubble is what dumb things your neighbors may have done, what bizarre "improvements" they did with HELOC money.  This house in Lynnwood seems to have grown ... another house!

Does this help or hurt the neighbors?  Would a new roof and some siding on the original house been enough?

Well, you can say, at least they are making improvements, right?  At least they're not putting up one of these:

Close-up detail.  Was this a "Trading Spaces" or HGTV show experiment?

This wall makes a strong case for drunk driving.

Monday, March 24, 2008

Aircraft carrier

OK, I need to come clean.  There's a reason I hiked 25+ miles to Everett on Easter Sunday in the rain.  

I did this last year, too.  But I forgot to bring my camera.

This lovely home was the object of my obsession.  It haunted me in dreams for a year.  It is situated on Mukilteo Speedway (WA 525) on the hill descending towards town and the ferry docks to Whidbey.  It has a nice view of Puget Sound.  Here's a shot from street-level:

Wait a second, what is that gray plane right in front of the house?  Can we get a better look, please?

Is it a tennis court?  A private runway?  A flight deck from a carrier?  What remarkable facilities do the nouveaux riches of Mukilteo have at their disposal?

Turning ... turning ... at last!  I see now.  It's a monstrous, armored cesspool, full of stagnant water and green sludge.  It's fortified like this to make sure that babies don't fall in.

Maybe I should do my hike again in the summer to see how it smells!

Mukilteo McMansion madness

Where I come from, it is common for buildings such as a three-flat to have a high-quality facing brick on the facade, and a lower-quality structural brick on the sides.  In a row of city houses, the side walls are close to and facing other buildings, so it it customary to use a cheaper brick.

Little did I know that the same economics apply to the garish McMansions of Mukilteo!  Look at this Spanish sty:

No windows, no design elements, just sweet, sweet siding.  Clearly, these people have a great deal of money and taste.

Here's another one nearby.  Could this be a new, emergent school of architecture?  Could barren Seattle have found culture at last?

Why do homedebtors always have so many vehicles lying about?

Sunday, March 23, 2008


Living large in Lynnwood, WA.
This house was for sale, but there was no flier, or I'd probably be making fun of the price right now.

Easter walk to Everett

Easter Sunday I walked from N. Seattle to Everett, about 26 mi, in the rain.  I took a largely residential route, steering clear of bike paths or Highway 99.  North Greenwood up to the city limits at 145th St is bursting at the seams with inventory, which I'll document in a later visit.

North of Seattle, in Shoreline, I saw my first ECO VILLAGE ever:
This is how they live, these eco-villagers.  You can join them if you like, there's plenty for everyone.  I wonder how those solar panels are working out on a typical wet day like this?

Here's a huge shack I saw along the greenbelt on the north end of Edmonds.  I sure hope that a super Mormon lives here with a fantastic family with 12 kids.  It's probably just some deeply-leveraged speculator.

And then there is Lynnwood, lovely Lynnwood, WA.  This house seems to have developed a series of painful swellings along the corners and on the two columns up front.  Moisture?  Equity deposits?

They also had this in the yard.  Do I plant pansies or snap peas in these?  Do we burn lamp oil in them for the Olympic Games?  Are they valuable?  Will college boys take them?

And here's the next-door neighbor, yikes, what a dump:

Lynnwood is strange, a series of cookie-cutter cul-de sacs with the same suburban houses, filled in with pockets of appalling, Pierce County-style conditions.  Be afraid!

Thursday, March 20, 2008

Rollin Street aspirational marketing

I aspire to live and laugh in a fabulous endless melting-pot marshmallow beach party!

I aspire to the virtue that comes only from correct, approved, highly conspicuous consumption!

I aspire to have taste and to be active and outgoing, achieving personal bliss through wine purchases and kayak rides on Lake Union.  But first I must purchase a condo with an ARM.

I ASPIRE TO HAVE IT ALL, to BE David Duchovny, with Pam Grier on my arm, both of us clad in leather and designer denim, picnicking with wine, a rustic woolen blanket, and a retro lux car that demonstrates my obvious superiority to you 3-series and E-class herd animals!  PAUL ALLEN SIGN ME UP!

Actually, I think the first pic is from a pending disaster on Eastlake.  The funny thing about it is how they have hung this marketing banner on a chain-link fence at the work site.  "These are the sort of folks who will live HERE."  The RE bubble is a cynic's heaven.

Seattle bubblicious fence 2

As the Seattle RE market continues its slide downhill, we have a new champion for a bubblicious fence!  Site 17 in Belltown, welcome to Deflation Land!

This building was a $1100 1-bed rental when I arrived in Seattle during the dotcom heyday in 2000.  It went condo, and now has 10, count-em, 10, lockboxes.  Another perspective:

Part of condominiumization involves applying a thick layer of pretentiousness.  By buying into this disaster, you are experiencing a great aesthetic achievement!

Our former champion, the Athena in Lower Queen Anne, has only 4 lockboxes as of this morning.  No contest!

Tuesday, March 18, 2008

The problem with Eastlake

The problem with Eastlake isn't a glut of condos or CRE.  It's that this glut is about to be buried by yet another glut.  The existing residents are jumping ship trying to escape the area, before all of this comes online:

Another very large project.  IIRC, this one takes up most of a full city block.  Make no small plans!

Meanwhile, the amenities that actually made Eastlake once a fun neighborhood are disappearing.  Here's the old Daly's, once a great place to get a burger and a tasty shake.  In a world of IO/ARMs, all real businesses and places of high and low culture must make way for debt-leveraged RE ventures.

So what's the problem with Eastlake?  

I think I found it.

Eastlake is in trouble - CRE

Walk through Eastlake, and see the flurry of FOR LEASE signs up for commercial RE.  Oh my.


Two more.  Photoblogging at its best!

And another.

Both residential and commercial RE are in desperate straits in Eastlake these days.