Deflation Land

Equinox Inspired Condominium Homes!

2008-11-18T22:47:00.000-08:00

Matt Goyer has a thread with some doomed Equinox bagholders, so I decided to post some pix I took of the complex on my walk to work this past Saturday.

One theme stands out: this is an incredibly flimsy and poorly-built complex.

Look at the styrofoam walls go up!

I have one thing to say to buyers of these units: sold to you!

This is nearby on Eastlake, not sure what name it has, or what "lifestyle" they are going to embrace here (urban kayaking? dinner parties? drinking wine with girls?) I post it to show the scale of the projects STILL GOING IN OH MY GOD on Eastlake these days.

I have seen a sign

2008-11-18T22:21:00.000-08:00

Seven months ago I abandoned Deflation Land to welcome my 2nd daughter, Claudia Bea, into the cruel world. Her arrival has put a real crimp in my walking about town, especially to work, and photoblogging it.

I had some stuff to do in the office this weekend, so I walked in from my Crown Hill rental on Saturday.

I saw something important:

The nut on Phinney Ridge has finally taken down his obnoxious $750,000 sign.

This is a sign.

I must photoblog Seattle's decline.

Casey Serin in Seattle

2008-04-02T20:28:00.000-07:00

I've had these photos for a while, and I figured I would post them up here at some point. This is for the sake of the cult of Casey Serin hagiographers and historians, who may document this for future generations yet unborn.

I have the dubious honor of being perhaps the last person to see Casey alive before he returned to Sacramento to face the music last summer. When I heard that he was returning from Australia via Seattle, I contacted him to ask if he had time for breakfast or lunch, my treat.

On the morning of July 4, I picked him up in West Seattle, where he was staying with an investor contact of his (whom I did not meet). I would have offered him my couch, but my wife shot that one down. Even though we had both read his blog religiously from the very beginning, she was disturbed by having a semi-stranger stay with us. OK.

I took him to Lowell's in the Market and bought him breakfast. The Athenian was closed for the holiday. He ordered a Dungeness crab omelette and some green tea. I felt bad that I forgot to bring him a coupon we clipped for a free 12 oz juice smoothie at Jamba Juice. I meant to help him out with that one, sorry, Casey.

It was a little spooky, like spending time with a man on Death Row. He was going home, to family and financial turmoil, which we both knew was grim. I didn't bust his castinets at all, my plan was to give him the hospitality due strangers, for the sake of meeting a 'net celebrity. We talked about tech startups and how the RE bubble would wind down (me: apocalyptic, of course). Aside from the foreclosures, and the obvious fraud, and his various other known sins, he's not a bad guy, really.

I dropped him off at SEA-TAC, where he somehow got his hands on a rental car and headed to Oregon and Sacramento. I made sure to photograph him with my "hoopty", my loyal 18-year old BMW ragtop. She was enjoying the July sun that day.

Casey, if you're reading this, I have to commend you for appearance on the "Dr. Phil" show, and for not breaking down. That is the whole point of these shows, the lurid displays of pathos and maudlin personal confessions. Dr. Phil beat you down -- of course -- and you took it like a man, no tears. Good work, sir, you're on the mend.

Car campers sneaking back into Ballard

2008-03-31T21:14:00.000-07:00

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

2008-03-31T20:54:00.001-07:00

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.

Chilly Saturday

2008-03-29T22:40:00.001-07:00

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.

Seattle's own Block 37

2008-03-27T21:22:00.000-07:00

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.

Guest post by my friend Tom

2008-03-25T20:29:00.000-07:00

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.

Neighbors

2008-03-25T20:13:00.000-07:00

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.

Aircraft carrier

2008-03-24T22:59:00.001-07:00

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

2008-03-24T22:37:00.000-07:00

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?

Got HELOC?

2008-03-23T22:20:00.000-07:00

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

2008-03-23T21:44:00.000-07:00

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!

Rollin Street aspirational marketing

2008-03-20T21:38:00.000-07:00

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

2008-03-20T21:15:00.000-07:00

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!

The problem with Eastlake

2008-03-18T21:29:00.000-07:00

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

2008-03-18T21:15:00.000-07:00

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

Another.

Two more. Photoblogging at its best!

And another.

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

Eastlake is in trouble

2008-03-18T21:03:00.000-07:00

Condo for-sale signs everywhere on Eastlake just south of the University Bridge.

Here's some more. The fliers advertise a mix of units, cheap and expensive. Well, they're all overpriced, of course.

Meanwhile, the next wave of supply is ready for market soon:

NOW LEASING. Hmm, was this the original plan? I honestly don't know.

Conclusion from a Saturday morning walk: Eastlake is in trouble.

The bulls are gored!

2008-03-17T07:23:00.000-07:00

As a tribute to the bulls on Wall Street, here is a bull elk I saw in Olympic National Park yesterday.

This is just west of the Elwha trail, about 1/4 mile before the spur trail to the Lillian River. I was day-hiking to the end of the Lillian trail, about 12mi RT.

See the hoof up in front?

Got HELOC?

2008-03-17T07:07:00.000-07:00

Visitors to the upper-Fremont neighborhood just south of the zoo have seen 4702 Fremont Ave. Clearly, the homeowner is waiting for his price.

I sent this photo to Ben's bubble blog last year, and I was surprised to see that the sign is still up. Zillow's own algorithm says this shack is only worth $661, 500, and that it's losing value.

The owner purchased it for $269K back in 1998. I think this house is headed back to this price. The owner is either trolling for cash from a RE idiot (which I salute), or he's already sold the house to himself via the miracle of cash-out refis and HELOCs. My search on the King County Recorder's site comes up empty.

Beauty only skin deep

2008-03-15T15:09:00.000-07:00

Here we see some typical glue-and-sawdust tenement townhouses going up in the formerly nice neighborhood of Phinney Ridge. These units will likely be priced in excess of $400K per unit. Look at that build quality!

Here's an almost-finished tenement block directly across from the west entrance of the Woodland Park Zoo. The lot is one of the better locations in the city, facing the park and the Zoo on one side, and the Olympics and the Sound off to the west. It's fair to guess that these will be some of the pricier townhouses in the city. The builder at least included some windows in his design for once.

Oh no! We see that even these high-end boxes have a dirty little secret!

"Dust thou art, and unto dust shalt thou return ..."

Car camping cluster on Phinney Ridge

2008-03-15T14:55:00.000-07:00

I walk to work from Crown Hill to downtown 3 times a week, a distance of 6.5 to 7 miles, depending on the route. As a dedicated hiker, I can put up 30+ mile days routinely, it's what I love to do.

In 2006, I noticed a lot of campers and vans parked in the industrial strip off Ballard, the "Free-Lard" region near 8th and south of Market. Ballard noticed this, and kicked them out. Now I see a cluster of them on Phinney Ridge:

This is near the north entrance of the zoo, along Phinney Ave.

These vehicles are all inhabited, and clustered close together. Of course, there is plenty of broken glass in the parking areas nearby. I'm not saying that these people are breaking into cars, but I wouldn't put it past them.

The camping clusters in Ballard were eventually broken up because of the drug use and crime that accompanied them. Concerned citizens and residents of Phinney Ridge would do well to do the same. Send them to Portland!

Phinney Ridge goes downhill

2008-03-15T14:36:00.000-07:00

What is the matter with Phinney Ridge? I had thought it was a nice neighborhood, with real craftsman SFHs, decent shops, good bars. The new housing up there is horrid!

Let's start with the Fini condos. This is what they deem worthy to sit on the top of the ridge. This faux-facade cutesy neighborhood look makes me think of Celebration, FL. "Oooh, is this what cities look like?"

Continuing south, in what should be a nice neighborhood, we find some more townhouses. Same standard design. Did someone publish the design for these things in Popular Science as a gift to the world? Same design, but with different finishes outside and in. That's what differentiates them. So what is the name for this disaster? "Lukewarm Ovaltine"?

The rocks above the sidewalk signify that these are highly refined, dignified townhouses, well worth the money. Remember, townhouses are made for people who can't afford condo dues.

The tour is not over yet. Remember, same design, different finishes. I ask, if there is a God who loves us, why does he allow this to exist?

All units are for sale! You can have the privilege of living in townhouse luxury in one of Seattle's better neighborhoods.

The use of slate tiles for exterior decoration will be like 1970s avocado linoleum or wood panelling. It seemed like a good idea at the time, now we're just so embarrassed by it all.

Other options in N Seattle besides renting

2008-03-06T22:11:00.000-08:00

You could live in one of our lovely hotels:

Or in your car, like this fellow (whom I have observed smoking a glass pipe). He's been here a long time now, many months, made it through the winter, between the Greenwood Market and Fred Meyer.

Or you could suck it up and BUY a place. Here's a beauty on 85th Street for only $540,000:

This last one was also featured in the photo section on Ben's fabulous Housing Bubble Blog. Seriously, click on the pic to see it in its full glory.

Any of these options is preferable to the shame of renting. Any of them.

The eternal march of Progress

2008-03-06T21:51:00.000-08:00

A bowling alley once stood here. Blue-collar family entertainment. Off the lanes was an inexpensive bar with a tiki theme and a rousing karaoke night. Gone now, displaced by the commodity driven by zero-down loans and rampant speculation: real estate.

A few blocks away, at 85th and 8th Ave NW, they race to finish these before the mortgages fall through. These shacks are probably listing for $375-$400K.

Before and after wonderful luxe "finishes" are added, off Holman Rd, not far from Dick's Drive-in:

Down 105th, we see an entire world constructed of this sawdust glueboard crap.

Culminating in the fabulous Dwell townhouses, which will one day burn down in a multi-fatality tenement tragedy:

Cultural anthropologists of the future: this is how we lived in 2008, in Seattle, WA, in good times. We manufactured houses out of wasteboard crap, and sold them to people without any money, using zero-down ARMs. Yes, our culture and standards were utter rot.