On the other hand, Seattle sure does feel awful bubble-like lately, doesn’t it? There’s so much construction happening everywhere that I’m reminded of Seattle in 2000, or 2008. And worse, it’s all aimless, unfocused construction of the kind where everyone is building the exact same type of building over and over again—luxury condos, with retail on the ground floor—and some of them are certainly doomed to fail. How much retail-on-the-ground-floor does Seattle need? Shouldn’t we be smarter about growth, and consider holistically what this city needs? Even worse, all of the construction is aimed at the wealthy, and in today’s America, we all know that there are only a limited number of wealthy people to go around.
I call your attention to the post because Paul’s remarks do a good job of illustrating how most people think about housing supply and demand.
Paul is absolutely right to sense the outward manifestations of, if not a bubble, then at least a general frothiness in the Seattle real estate market. Cranes are everywhere. 10,000 units opened this year and nearly 15,000 will open in 2015. Housing prices are rising. Houses are getting multiple bids, often well above asking price. Coincidentally, housing prices are now almost exactly where they were when Seattle Bubble author Tim Ellis started his blog in 2005.
However, none of that proves we’re in a “bubble” per se. My best read of the market right now is that we have low supply and high demand driving prices up. In 2007, there were over 12,000 single-family homes on the market in King County. Today there are just 3,000, despite the increase in population. Real estate bubbles are typically fueled by large numbers of people borrowing easy money to buy a home that everyone assumes will appreciate wildly. Today, relatively few people qualify for a mortgage and even fewer can find a house to buy (in Seattle, anyway).
Also, to my eye there appear to be far fewer “luxury” developments than the last housing boom. What I see are mostly apartment buildings targeted at renters, not ornate condos like Escala in Belltown. I do agree that the style of multi-housing is fairly monotonous: 6-story “breadboxes” with retail on the ground floor. But that has more to do with the zoning codes than anything else. Will all that retail fill up? Hard to say. There are only so many tanning salons and Potbelly sandwich shops to go around (and many retail categories, from travel agents to bookstores, simply no longer exist). In the long run, though, I’m not sure how much it matters. On Capitol Hill, the auto repair shops of yesteryear have been converted to serve truffle fries and roasted brussel sprouts. Spaces can be adapted.
I also think it’s interesting to say that some of these developments are “doomed to fail.” Fail for whom? We overbuilt in 2000 and 2008, but the housing stock that was created during those periods was all filled up by 2003 and 2011, respectively. Some developers took it on the chin, no doubt, but that’s the game. Meanwhile, Seattle got more housing. In the long run, yesterday’s luxury housing becomes tomorrow’s middle-income housing.
Again, I don’t bring this up to pick on anyone. I think Paul’s expressing a common sentiment when it comes to real estate development. I just think it’s worth considering the costs and benefits of development from a few different angles.