On the show today we have… a 2020 Seattle Market Update with Todd Britsch – Ep. 104!
– Level Capital website
– 2019 podcast with Todd – seattleinvestorsclub.com/73
– 2018 podcast with Todd – seattleinvestorsclub.com/47
– Get signed up today for the biggest, baddest real estate expo in the PNW – PNWRealEstateExpo.com – prices will go up soon!
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.
What makes you want to decided to get into different markets?
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.
What is your target borrowers?
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.
How can people get in touch?
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?
The space that Amazon has taken up, and Facebook in Bellevue as well.
Will Facebook impact Seattle homes?
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.
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?
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.
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…
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.
We are talking about new homes available?
Sales velocity of new construction.
Town homes were sitting for a while.
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.
If you’re a builder… do you want to be the 4 pack of townhomes, or what…?
I have to come at it from all angles… it’s undesirable to live in the Central area of Seattle.
Do you think people will want to live in a hybrid backyard house thing?
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).
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.
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.
How about apartments. And the potential for rent control..?
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.
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.
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.
Where are we as a comparison here in 2020… is there anything out there that’s causing anxiety?
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%.
Do you have any recommendations for where people can get good data on this stuff?
Anything that you put out…
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!
There you go! I like that!
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.
Anything else that you’d like to share with us today? Where would you be looking…
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.
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.
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!
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.
Yeah, we are seeing that the Chinese middle class is moving over.
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?
I think we will see some upzoning surrounding those areas. Right now the residential is starting to go in.
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”.
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.
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 [email protected] Weaver Construction (one of my favorites) did this.
We haven’t seen a lot of appraisals on that stuff.
We haven’t seen a lot on that. There are development issues. Like the water system out at the road could be a problem.
Do you know anyone who’s an expert on that topic?
I don’t, but I bet someone on the podcast does.
My concern is that people are building up 3-4 units in the back of a single family.
I do see some pretty ugly product out there.
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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