Until recently, the Seattle area has been considered more insulated from the doom and gloom experienced by many other parts of the country. I’d like to think so. You would like to think so. The Real Estate Gurus would like to think so. The author of The Secret would like to apply the Law of Attraction and make it so…………..You know where I’m going with this: The economics of the Northwest are not exempt from the huge macro-economic problems faced by the general economy. And, yes, I will use the new lay-offs at Microsoft as yet another indication that even the high tech sector is finally feeling the contraction in our market. Ultimately, it’s the real-life phenomena of what economists call “the multiplier effect” that’s accelerating the contraction of our local economy:
It’s the old rule-of-thumb: Every job at Boeing multiplies into seven other local jobs. The calculation for Microsoft is around three other local jobs. I’ve personally witnessed this as I’m sure you have. Almost all of the businesses here in Kenmore that I patronize have recently laid-off employees. The irony is these owners have business, but they simply cannot afford the overhead of employees. And here’s the sobering fact: most economists I’m listening-to say it’s going to get worse before it gets better. For example, according to a report published yesterday by the Northwest MLS:
“The industry is facing multiple disconnects,” said ULI Senior Resident Fellow for Real Estate Finance Stephen Blank. “Many property owners are drowning in debt, lenders are not lending, and for many (industry professionals), property income flows are declining. There is an unprecedented avoidance of risk. Only when financing gets restructured will pricing reconcile, giving the industry a point from which to start digging out of this hole.”
And here are a few snippets from the SeattlePI’s Aubrey Cohen, Lowest home sales of decade:
Total sales of houses and condominiums in King County were down more than 36 percent from 2007 and the lowest of any year this decade, according to a report Thursday from the Northwest Multiple Listing Service.
Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University, said the listing service numbers match what he expects to show in a year-end report he plans to release Feb. 12.
And the article goes on with Lennox Scott, self proclaimed industry spokesman, who as always is saying this is a great market for step-up and first time home buyers.
But Crellin took a different view, saying: “I think 2009 is going to be a very challenging year.”
Foreclosures probably will increase as payments reset upward for people who bought homes in 2006 using loans with artificially low payments for three years or charged interest only over that time, Crellin said. Microsoft’s Thursday announcement that it was laying off 1,400 people immediately as part of 5,000 job cuts over the next 18 months didn’t help, he said. “Many of the Microsoft jobs are folks that would otherwise be active in the ownership housing market.”
Here’s my sense of the market given all the information I’ve been reading: We haven’t reached the bottom yet. I believe we are not going to see a rise in real estate sales until the whole financial system stabilizes which is going to take many months to occur. In the mean time, the local market is going to be tough.
It’s not the greatest news especially if one is trying to sell a house. It is an opportunity for buyers to start doing research if they are interested in purchasing, but I have a sense that buyers are going to remain reluctant to buy until some semblance of confidence comes back into the market place.
Utterly Confused courtesy of inju
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