On the show today we talk… Seattle Market Update with Todd Britsch of Metrostudy!
– Website: Metrostudy.com
– The last podcast we did with Todd is a SeattleInvestorsClub.com/47
– Pork Belly in Portland
– Seattle Is Dying Video
Show notes with Todd Britsch of Metrostudy
The Vantastic Life is…
– just outside of Bryce Canyon National Park
We had Todd on the show back in back in October in episode 47.
What’s happening in the market right now?
Actually my phone quits down when the market improves.
If you remember… the last time we talked, the news was fueling a panic.
Now we are 6-7 months later. In 2019 the market has completely flipped, and that Amazon didn’t go to New York for the 2nd headquarters.
But it ended up going to Bellevue instead.
That means there’s almost 16k people that will go to Bellevue.
But I find that the Amazon people are not in the million dollar Bellevue crowd. They are in the $850k high end.
I don’t think that people are going to move from Seattle to Bellevue.
But the new people are going to move to Renton, and all the way up to the south end of Snohomish county.
Amazon has 5600 job currently posted for Seattle, and that doesn’t include Bellevue.
And we haven’t talked about Facebook bringing people in.
Indeed.com seems to be the best place to find into on job stats.
I feel like the single family are moving and the townhomes needs to catch up.
Yeah, the Chinese buyers have left, and when the Amazon people are out of the townhome market.
Caution is the ultimate word if I’m looking in Seattle.
If I’m looking at something in Seattle, I’m going to walk in a mile in every direction to make sure there are no homeless camps.
I have a family member that is a clean heroine addict, and they will tell you that what Seattle is doing is the worst thing to do.
And this was addressed in the Seattle Is Dying post.
Yeah, this is something you need to consider.
Your non-owner occupied homeowners are not there anymore. But that could change once the US and China come to a trade agreement.
I used to work for the largest Chinese broker called Homelink International.
We have a hard time attracting buyers because our cash flow isn’t so great.
Does that make sense to you?
They are buying in that $500k range, but not buying in that higher range right now.
Another thing is the whole up-zone thing. All of a sudden my phone is ringing off the hook.
People got a spanking, and are trying to get rid of fulling permitted deals that are available.
I had pulled some numbers last quarter for the townhome project… King County had a two year supply of townhomes that were on the market (available and being built). With things that are going up there’s about a 4 year supply that are selling, under construction, or moving dirt.
We are holding steady at 8-10 thousand per month of new people coming into Seattle.
Does that put us in an OK spot?
Right now, if you do the math. Roughly 3k people into King County. 2 of those are living together. That’s 1500 units. 50% home ownership rate. That’s 700 new units needed per month in King County.
But that doesn’t mean we’re going to sell that many homes because the prices are so high.
Once people get the lay of the land they will move around to what will fit their lifestyle.
The demand is still around 1500-1800 homes every month. Which is great!
Last year we saw a 9-10% reduction in median sales price.
I’m worried that investors are going to jump into the market thinking that it will go back up to that number. I think it will go back up, but don’t bet on it going to that same number.
We’ve still lost the predictability of the market.
Right now it’s so hard to price houses because the comps are all over the place.
You can’t really use the comps from the fall of 2018.
Brokers that want to look good are under pricing homes because they want to look good. Then the house sells at 40-50% above the list price, and people think it’s going back to before.
When I’m going back… I don’t go back farther than December 2018. And if I can’t find anything I’ll look before July to do research.
We saw list price drop more than sales price.
You have to have a new metric and underwriting for the comps.
I think we have to wait about 60 days to get a new bearing on the market, do you agree?
We are talking about all of the things that have impacted us…
What do we need to be watching right now?
I’m still watching job growth. The inverted yield curve, which has predicted every recession back to the 60’s.
The 2 and the 12 year treasure yields have not inverted yet.
You are starting to see the media saying triggers are leading into a recession. Some say yes, some say no.
There is always a recession coming. Just because they happen.
When there is a recession in the next 12-24 months, Seattle is going to skip over it. We are going to be ok because of all of the companies that are growing in the PNW.
Now there are some larger concerns with equity groups, and private banking groups, who are borrowing money, and lending it to people that can’t get loans at banks.
The amount of debt that these companies are taking on… is staggering.
Then you have fully leveraged companies, with debt sold off to secondary market. If there is a recession you’ll start to see these companies be strapped for cash.
Banks are lending money to REITS and private equity groups that are turning around and lending money to people and businesses that can’t get loans.
What types of businesses are they buying?
All over the board! Very few are actually real estate related.
How is the commercial market going in Seattle?
Vacancy rates are still low, and class a rates are still some of the highest in the country.
At our last Tuesday mastermind in Burien I thought I was at the wrong place, but it was our meeting!
Maybe we can twist Todd’s arm to come down sometime.
Just give me an urban aged all and I’m good.
We may slow down in the PNW, but I don’t see anything looming outside of the secondary banking that we talked about.
A slow down actually wouldn’t be a bad thing. It would be good news for people who know what they are doing.
Are we saying that it’s the bumpy ness that we need to get through?
I’m feeling pretty good as a builder right now. Or optimistic.
New construction fell so rapidly for the 3rd and 4th quarter. Very steep numbers. Markets don’t do that, unless a large company goes out of business. But it was everyone acting to fear!
Do you think that tech is causing the market to move faster because of the speed of information?
I’m going to pick on millennials. 76% of millennials read the headlines and not the content. Not good!
You’re going to just be believing the click bate, and not getting the actually info.
This is how people are getting their media these days, but they need to do their due diligence.
If you’re just listening to this podcast in August, your prime buying widow is over.
It’s going to take at least 6 months for people to realize what’s happening.
Even with sales falling as far as they did, and listing being up, we still only have 1.4 months of homes on the market. 3-4 months is a normal market.
We have a lot of inexperienced agents who don’t know how to price homes properly when comps are hard to come by.
No kidding! Make sure you use a use an experienced agent.
In general, we are lucky to be in this market. We are cautiously optimistic?
Yes. I’m not going to factor in appreciation in 2019. That said, I’m still going to have a few subdivisions that are going to do that.
If you anticipate a 10% price bump because there’s not inventory, that can change overnight. We can have 30 listings come on in a neighborhood overnight.
I think it’s a good opportunity to get a lift on a pre-hab. Buy off market, clean it up, and throw it back on. Get a nice hit rather than going all the way.
I kinda like that. Don’t be tearing down walls. Fix it up a little bit.
Buyers have changed over the years. They were buying fixer uppers, but now they want it move in ready. You need to take it a little further than the pre-hab that I was doing, but not do the full flip.
You can thank me later. Or not.
Last year the first quarter was very good and we’re doing better than that this year.
Do you like the up-zones?
Yes, but you have to know each neighborhood, and know the inventory intimately.
The builders really took a hit, so you have to be careful.
Yeah, it’s crazy! The townhomes trickle down.
You’re going to be stuck paying fees, and the fees in Seattle are ridiculous! This will stay until the city council changes.
I really like Seattle, West Seattle, and Everett. The Everett waterfront is getting a major facelift, and prime!
Cation: the 3rd and 4th quarter are going to be good compared to last year. But be careful, there is a threshold.
This market we are going into is going to be even harder than the last year.
I still love what you have said about walking your property a mile in every direction.
Thank you, please join us for a burger on Tuesday.
I’d love to listen to others!
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