On the show today we have… a 2020 Seattle Market Update with Todd Britsch – Ep. 104!
Listen on: Apple Podcasts | Stitcher | Spotify
Show Links:
– Level Capital website
– 2019 podcast with Todd – seattleinvestorsclub.com/73
– 2018 podcast with Todd – seattleinvestorsclub.com/47
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Show notes for 2020 Seattle Market Update with Todd Britsch – Ep. 104!
The Vantastic Life is…
– is in Frisco CO near Copper Mountain!
Here’s your 2020 Seattle Market Update!
Joe is in Frisco Colorado, Julie is in Seattle Washington, and Todd is in…
Todd is now with Level Capital, after moving on from MetroStudy. He’s the senior Vice President, and director of research.
Private vertical funding that works with small to mid sized builders in WA, and then expanding.
Julie
What makes you want to decided to get into different markets?
Todd
The licensing is what keeps us out of areas. Like Las Vegas is one that’s really hard to work with. But the rest of the west coast we will be joining very shortly.
Julie
What is your target borrowers?
Todd
1-150 units. But we are looking at a broader borrowers
30% LTV and 80% of construction. And we are trying to get people to 8%.
Something that brought me here… hard money will charge points on extensions and then your rates jump up. Our loans are 9 months and sometimes 12. And we are .5 point to a point for extensions.
We don’t want to take advantage of the market. We want a long term relationship.
At first I didn’t see a fit. I want to take care of the market and the builders.
Then I got a call later on with a proposal to take care of the market and builders as part of Level Capital.
Julie
How can people get in touch?
Todd
LevelCapital.com
Todd.Britsch@LevelCapital.com
Julie
We love to plug all the holes in our world of helping investors and builders, and maybe there’s a fit for us to work together in the future.
I’m looking forward to hearing more~!
What we look forward to with Todd are his economy expertise!
When you think about our local economy what is the top impactful event that has already occurred that impacts our local housing market at this time?
Todd
The space that Amazon has taken up, and Facebook in Bellevue as well.
Julie
Will Facebook impact Seattle homes?
Todd
Yes and no.
As we bring really high quality people into Seattle, they start to break off and create their own start ups. That’s what will impact Seattle.
Julie
The booming job growth seems like we can’t keep up with as regards to housing.
How are we doing with the shortage of housing?
Todd
It’s big!
With the resale we are about a 1 month supply or below.
Thurston county has an issue with the Mazama gopher. Builders don’t want to go in there because of it. It’s not from the area.
They are just an in ground gopher.
The issue is that’s it’s an endangered species, and it can shut down a whole building project.
Julie
Wow! I didn’t think we were going to talk about gophers!
Where do you see the fastest growing counties for builders? Where should they focus on…
Todd
It’s pretty wide spread right now. King and Snohomish counties are driving the construction market.
King was up 72% for the 4th quarter of 2018.
The first time we talked was about the down turn coming.
On our last podcast (73) we talked about how it was going to get hotter.
This was primarily driven by King and Snohomish counties.
Julie
We are talking about new homes available?
Todd
Sales velocity of new construction.
Julie
Town homes were sitting for a while.
Todd
You are right. King was up around 80-90% last year. Seattle (West/South/North/Central)
West Seattle has picked up again. North Seattle is doing great! Central Seattle is down 6%. Seattle city council is at fault because of the crime, poop on the streets. People are leaving Seattle because of this.
Julie
If you’re a builder… do you want to be the 4 pack of townhomes, or what…?
Todd
I have to come at it from all angles… it’s undesirable to live in the Central area of Seattle.
Julie
Do you think people will want to live in a hybrid backyard house thing?
Todd
Year, there lies one of my issues. There hasn’t been a study on that behavior of the infill. The Seattle city council could have a huge impact on that type of housing.
We need this, but we are doing in an area where people aren’t wanting to live right now (because of the homeless situation).
Julie
You’re right, you don’t want to put all of your eggs on one basket.
Affordable housing is such an issue right now. Do you think Seattle is going to pass a law, like Oregon where there’s not single family parcels.
Todd
I think that’s what Portland did. No single family zoning.
We will probably get to that point.
If you look at Walingford or Greenlake, it’s not something that the residents want to see.
Julie
How about apartments. And the potential for rent control..?
Todd
It’s again the downtown core makes me nervious. There are some 60k units in the pipeline that might not come out of the ground.
I love apartments and townhome in areas outside of Seattle. I just don’t see the affluent buyer wanting to live downtown right now.
It costs way too much to develop and build these days for us to have a rent control.
The millinials are getting out of Seattle because they can’t raise kids there.
Julie
How much of an impact was it that people didn’t want to compete anymore. Because they feel like they are overpaying.
I just sold a new construction for 10% over asking.
Todd
If we go back and look at 2018 there were 4-5 issues that collided. There was buyer fatigue, everyone was pissed off. Amazon hiring also started to slow down because they were shuffling people around departments. The rate of job growth dropped down. We also had interest rates that bumped up.
There was a guy that was writing for the Seattle Times that was writing about a housing crash, and he didn’t know what he was talking about. But people read that.
Julie
Where are we as a comparison here in 2020… is there anything out there that’s causing anxiety?
Todd
Feeling aren’t real. Do some research. With that said… there are some issues that are occurring that could cause a slow down. Probably not like 2018, but a slowdown could happen.
We are still bringing in 10k people per month into the Puget Sound. We have job growth, and we have a housing shortage.
Let’s talk about low inventory with job growth. We are going to see bidding wars. But we could hit a hard ceiling. Could…
If we see a 7% appreciation rate, we are fine. If we hit double digits we are in trouble.
If we look at interest rates… a lot of people think they are going to stay low. This is because of the 10 year treasuries.
What no one is talking about is… the Fed is going to introduce a 20 year treasury note. This could relieve the pressure on the 10 year treasury.
Because of this I wouldn’t be surprised if interest rates go up to 4-5%.
Julie
Do you have any recommendations for where people can get good data on this stuff?
Anything that you put out…
Todd
At this point, I do not. At Level they have giving me the funding to put together an internal data product. This would be for our borrowers. That’s the cool part!
Julie
There you go! I like that!
Todd
We had a project that I did an analysis on… we would make money but the builder would go bankrupt. We shared that with the builder. He decided to move on with the project. He may have to rethink some things.
Julie
Anything else that you’d like to share with us today? Where would you be looking…
Todd
There are opportunities everywhere, but there are also danger zones. If your neighborhood is turning into a high risk area… I like the East Side, east of I5. But you have to be careful where you’re buying dirt.
There is so much inventory where builders paid top dollar in April of 2019, and there is a lot coming on the market.
You have to be very cautious this day age.
Pay attention to the China virus. Just the perception could slow the market. I think that China is underreporting the deaths that have occurred.
I’m watching the bond market. Ford Motors has been downgraded.
There’s enough out there within the market that makes me nervous.
Julie
It’s possible that the China virus makes people want to buy in the US even more. Maybe not for themselves but for their children or grandchildren to get over here.
Todd
I heard hearsay that they’ve put together a vaccine. Which would be good.
Let’s say that’s true, I think you are absolutely right, there’s a flood of China money coming here!
Julie
The Chinese like to buy in 17 cities that they like to buy. Those are actually lower price points where 80% of them want to buy. Places like Texas.
I think there’s a misconception that the Chinese buyers want to buy high priced homes.
Todd
Yeah, we are seeing that the Chinese middle class is moving over.
Julie
Well, I think tech is becoming more and more interesting with how people decide to buy houses.
Anything that you want to add on top? Light rail… is that baked in?
Todd
I think we will see some upzoning surrounding those areas. Right now the residential is starting to go in.
Julie
One of my buddies has a 640 until in Shoreline that I’m going to have call you.
Anything else that we should layer on… it’s interesting that you said “don’t go off feelings”.
Todd
I will say this. If I were building in an area where, say North Seattle/downtown I’m going to build a single family where it can be broken up or rented in a portion. This will give people income potential.
Julie
Actually a house that I just sold had that setup. It was easily convertible to a dual income house.
Hit me up if you want to see this at julie@seattleinvestorsclub.com. Weaver Construction (one of my favorites) did this.
We haven’t seen a lot of appraisals on that stuff.
Todd
We haven’t seen a lot on that. There are development issues. Like the water system out at the road could be a problem.
Julie
Do you know anyone who’s an expert on that topic?
Todd
I don’t, but I bet someone on the podcast does.
Julie
My concern is that people are building up 3-4 units in the back of a single family.
Todd
I do see some pretty ugly product out there.
Julie
If you are a builder listing today… and you want great rates with an extra set of eyes… checkout Level Capital and Todd.
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