Rain City Guide

The Unintended Consequences of Growth Management

Steve, thanks for your comment. I’d have to say that I’m not surprised that the population of Seattle, the incorporated city area, has not risen much since 1965. By 1965 the city was built out border to border. If it couldn’t expand its borders, then the only way to increase its resident population would be by increasing density. That’s an urban planner way of saying tear some existing housing down and build something else with higher housing density, e.g. high rise condos relacing low rises, like in Belltown, or small-lot townhomes replacing larger-lot conventional homes, like in Greenwood. The offset to that is more business expansion, large or small, that through re-zoning gradually consumes previously residential space, thereby reducing the number of housing units. That increases the number of people working in the city, but not necessarily the number of residents. Sounds like the city of Seattle is about at a balance point.

In the last 50 years the population growth in residential terms had to go to the suburbs, and created the ‘greater Seattle’ that we see today. As I recall, Bellevue was just incorporated in 1953, and by the end of the ’70’s it and Kirkland were almost fully built out. With their borders confined, the growth moved on to Redmond, Woodinville and the Plateau. Then in the 80’s we got concerned about ’sprawl’ and passed the Growth Management Act

The Unintended Consequences of Growth Management

Craig, the article linked in my original post did not have that title, as I have pointed out – ‘Colin, Gene picked that article with that title, not me’. My original intent was to point out that there was some very good food for thought in that article which didn’t seem to have gotten the attention it deserved.

I have to admit to getting a bit tired of having people tell me that I said something that I didn’t, or that I favor something that I don’t. I would be delighted to hear that someone thinks we should try to better understand the consequences of these acts, and maybe learn something that would be useful going forward.

I tried to give a constructive response to Gene’s fair challenge, but that seems to have gotten lost. Oh well…

The Unintended Consequences of Growth Management

Gene, neither I nor the Cato Institute work have said or implied that “it’s all urban planning’s fault” and I would appreciate your not trying to put those words in my mouth. And it is often true that ‘factual errors’ are in the eye of the beholder. My own bias is to take with a grain of salt the notion that the government knows what’s good for me, and try to stir up a little debate on the issues. Let’s see what some other folks have to say.

The Unintended Consequences of Growth Management

Gene, I appreciate your comments and your note that this study is not brand new – it is in fact part of a series of studies and articles that started coming out in late 2007, but it doesn’t seem like we have paid much attention here, perhaps because our share of the bust came later than for most cities. I think we should be careful not to link the rate of foreclosures too directly to the bubble price cycle we’ve seen. The major foreclosure pits have been driven by two fundamental causes – first: overbuilding, like Las Vegas tract houses and south Florida condos, where a lot of the foreclosure burden is falling on the builders (if you build more houses than you have people, you’re going to have a pricing problem), and second: high job loss, as in places like Detroit, where the burden falls directly on the homeowner. Neither of those causes is particularly linked to growth management.

The point of these articles (here is the link to Part 2 of the interview: (realtytimes.com/rtpages/20091112_growth.htm) – and by the way, I think the single link thing may be RCG/Dustin policy, not a WordPress limit) is that 1. Growth management/urban planning was a significant contributor to the problem, along with several other major factors, and 2. The process we have chosen of forced urbanization is not necessarily at all what a majority of homeowners want, nor is it necessarily an efficient solution to the problems it purports to solve.

My personal belief is that here in our greater Seattle area we have been permitting vertical condominium developments in preference to horizontal residential developments to a degree which leaves us with an oversupply of condominiums and a looming shortage of single family homes. What we are trying to sell is not matching what a lot of people want to buy, and I think it’s going to bite us.

Are We Facing A Housing Shortage?

David and Jerry,

You are right that this post is about a possible housing shortage – specifically in single family homes. And I am not at all sure the the encouraging signs is see are price rise or an uplift in the mis of prices – the latter may be then more likely. But the Months Supply numbers are giving us some interesting numbers to chew on. I did a little study last week on months Supply in King County and in a couple of specific neighborhoods:
Four months supply in the middle price ranges feels to me like it is getting pretty tight. Perhaps a sniff or rising prices will prompt more people to put their houses on the market and squash it, and maybe we’ll start seeing inventory building up again in the Fall. I’d just like us to be careful when we talk about oversupply or undersupply to specify whether we are talking about single family houses or condominiums – those seem to be increasingly two different worlds.

Are We Facing A Housing Shortage?

Separate reply to Tim on housing oversuppy. I have some concerns about how precise or fuzzy the tie is between the # of households statistic and the # of housing units statistic.

First, there are always some vacant housing units as new ones wait to be sold and as people have to move before getting their places sold or rented – just as there are always some people between jobs and unemployed. Might be an interesting study about rates of vacancy in houses and condos over time, but that is for another day.

Second is how minor the apparent difference is between the two measures, and how systematic it looks over time. Looks like it has grown systematically from 0 (meaning the indexes were force-matched at 2000, with not indication of what the ‘oversupply’ number of units was then) to about 3% today. I’ll post this same comment over on Tim’s blog and see if we can get some more insight on what the measures mean.

Are We Facing A Housing Shortage?

Tim, you do elegant and thorough work, and I have read your previous posts on your own blog on March 19th and July 13th2.
However, your analysis doesn’t match my impressions in the field, nor does it seem to fit with what we see in the data on Months-Supply for single-family homes in King County.

So I wrote the post to fit a long standing impression I’ve had that we were barely keeping up on housing supply for houses vs condos, and that maybe the construction drop has finally pushed us over the edge. Let’s see what other comments and insights we get. We always learn a lot when a bunch of smart folks chip in.

The Buyers are out, and trying to buy, but...

Ardell #4 and James #7, I guess I have to disagree: Ardell – Your last sentence in comment #4: “A short sale is a house that is not really for sale. I’m surprised they allow them in the mls for that reason.”

A short sale is a house for sale, and both the seller and the lender can have very legitimate reasons for wanting to do it. And the buyer may benefit too, although in general most of us don’t like the market effect of aggressive pricing To deny them the use of the MLS would serve no one well. The MLS is a great market clearing service, and the last thing we need is a bunch more private transactions where no one knows what the real price ought to be. And we don’t need a bunch more foreclosure auctions and REO’s on the market.

But it does take significant effort on the part of the listing agent ensure up front that the short sale is a reasonable offering that the lender could and should sign off on – is the seller truly insolvent, are there 2nds and liens that would tangle it up, is PMI an additional player, has the seller talked to an attorney to ensure they understand their rights and obligations, can I show as listing agent that I have achieved the highest market price offer I can. And can we beat the foreclosure clock?

I agree that there are some properties that are so emcumbered by multiple loans and liens that it is unlikely that all parties could come to agreement before the hammer falls – and a competent listing agent should help the sellers figure that out and not add one more misery to their lives. A competent buyers agent should be able to dig most of that out pretty fast too, and advise their buyer to steer clear.

I apologize for the soapbox oratory here – I think we got a bit off topic

The Third Bubble ...

I don’t have any additional data right now. I assume the NWMLS count of agents in King is all NWMLS member agents whose broker office address is in King County. Presumably the state WA DOL could come up with number of active licensees on the same basis, i.e. where the license is hung, but I don’t see a way to find that out on the DOL public site.

The Third Bubble ...

Sally, your comments on agent earnings match my impression from several years ago. Do you have any info on what the bar is for a top 10% agent these days – like 2008? Still $150k, or dropped significantly?

The Third Bubble ...

What a great set of comments on these thought provoking numbers.

I certainly agree a lot of ‘agents’ are hanging in while doing something else, are licensed assistants, or are part time – perhaps while a spouse has the main job income. But I like Craig’s comment that those are all “kinda inconsistent with “the professions”.” I doubt many of us would want to trust anything serious to a doctor or lawyer who wasn’t ‘fully engaged’ in the profession. Note I was careful to not say ‘full time’ in the traditional sense because I know of fine, younger, usually women doctors who deliberately choose a reduced schedule to accomodate family needs. Not all the old standards work in our evolving world.

If the standard is be ‘professional’ and to establish some standards of competence – i.e. training and experience – then we ceertainly have a ways to go.

I would love to see some stats on what % of agents in our area did no or one transaction last year, and what % of all transactions is done by the top 10% of agents. Being in the top 10% is a good goal in most businesses, even one as cluttered as this one.

By the way, I ran the calcs again, and with the May stats showing improvement on volumes, my projected average King County agent income moved up smartly from $19,000 to $21,000

Are We Brewing A Bubble In Seattle?

Galen, my comment is in the context of Robert Cote’s post on 4/29 when he said “this is nothing more than a reworded version of “land, they aren’t making any more of it.”” The point is that we don’t have many large tracts of land in King County on which we are allowed to build, so for all practical purposes “they ain’t making any more of it”.
Buildable land can be a good investment, depending on your time horizon, and depending on the price. From what I’ve seen, prices of buildable lots have been climbing pretty fast, but that’s not my market, so I can’t give worthwhile data or anecdotes. Nominally, if houses were going up 10%/yr and construction costs were holding steady, then those lots would probably be rising 30%/yr – they’d be the appreciating component. But with both permitting costs and materials costs escalating too, maybe land is just coming along with the overall residential market – the sum of land, permitting and construction costs somehow still has to fit under the market umbrella.

Teaching Effective Blogging to Realtors?

Great idea. Any chance you’ll do one in Seattle with open registration instead of company sponsored?