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Wednesday, February 20, 2008

Last Call for Sprawl?

posted by on February 20 at 12:15 PM

Consider these two developments. First, this Texan exurb.

Big Dallas seemed to be knocking on little Lavon’s door. Thousands of lots were laid out and hundreds of houses built, as developers tried to meet what seemed to be an insatiable appetite for inexpensive single-family homes. Land values soared, the population hit 2,500, and by November, the city was finally flush enough to afford a full-time police department.

But that was when the knocking stopped. Banks were no longer giving mortgages to anyone who could fog a mirror. “For sale” signs went up and stayed up. Weeds, not houses, sprouted on the scraped-earth plots.

Unlike many other states with housing troubles, Texas as a whole is booming, continuing to attract new residents and create jobs. But across the state’s outermost exurbs, formed by waves of new housing, building has ground almost to a halt.

Second, this mega-development proposed between Redmond and Duvall.

Redmond Ridge East — 337 acres east of Redmond, on Novelty Hill — is part of a development plan that goes back to the 1980s and was caught up in litigation over traffic for much of this decade…. Quadrant Homes… announced Friday that it started selling the first of what will eventually be up to 800 homes.

The project was planned in a much different market than today’s. In January, the inventory of houses for sale in the Redmond area was up almost 60 percent from a year earlier, while sales were down nearly 40 percent, according to the Northwest Multiple Listing Service. Countywide, inventory increased about 56 percent and sales dropped almost 31 percent.

The slowing market has affected the project, however, most notably in its range of homes. Two or three years ago, such a project probably would have focused just on houses from $700,000 to $900,000, Reece said. Now, it includes smaller houses with prices as low as $550,000, he said.

This development and others like it present a litmus test for the future of Seattle’s housing market. Thousands of new condos are opening in and around downtown, and thousands more are on the way. But suburban developments like this one, lowering prices, will compete with the downtown high rises. (Of course, downtown buyers are less likely to have kids like the suburban buyers, and Seattle’s market differs from Dallas’s—there’s a semi-autonomous Eastside economy.) However, we’ve been told again and again that Seattle’s housing remains in demand—like Texas—and that even if prices drop, demand will stay high. But is there enough demand to fill the sprawl and the tall? Will one of them stand vacant for a decade while the market catches up?

If the tract developments go vacant while condos fill up, that’s a promising sign for density advocates.

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On first glance that doesn't really make sense, I guess because I'm perhaps not factoring in other "amenities" that might come with a $550K crackerbox in bum-fuck Redmond - what? - do you get, like, a yard with that?

But, add in the commuting costs, even to, say, MSHQ, along roads that were already at-capacity 10 years ago (I know, part of 220 was widened east of Redmond, but how close is it to capacity NOW? - and we're going to add another 800+ round-trips per day?), the time costs of that commuting, the relative inaccessibility of the area itself - nearest retail services are either in Redmond proper, or, up on the plateau, etc., etc., and it all adds up to not-such-a-great-deal as compared to a similarly priced domicile in the city, which, while smaller sq, would be much closer to jobs, shopping, banks, hospitals and other vital services.

Posted by COMTE | February 20, 2008 12:39 PM

I am eagerly anticipating the condo market crash.

Posted by Greg | February 20, 2008 12:45 PM


Put your hands up, cuz this rollercoaster has reached the top!

Posted by happy renter | February 20, 2008 1:01 PM

happy renter is the wind beneath my wings

Posted by Bellevue Ave | February 20, 2008 1:11 PM

"Semi" autonomous Eastside economy?

You really need to get out more.

Living in Seattle has really warped your perspective.

Bellevue/Redmond have zero need for Seattle. In fact I wish the eastside was its own county.

Then we'd see some real perspective on who depends on who.

Reality Check

Posted by Reality Check | February 20, 2008 1:32 PM

Right RC, 'cause those daily a.m. traffic jams in the WESTBOUND lanes of I-90 and 520, and subsequent p.m. backups on the self-same EASTBOUND lanes are just folks going the long way around the lake to-and-from their jobs in Kirkland and Renton.

Posted by COMTE | February 20, 2008 1:49 PM

You been served, @5.

Posted by Will in Seattle | February 20, 2008 1:52 PM

Prices "as low as $550,000" - it gives me the opportunity to ask: Correct me if I'm wrong, but that translates to a 5-grand mortgage. Who can afford that? No one I know.

Posted by Madashell | February 20, 2008 2:34 PM

Good point, 8.

A $550k house by the 'traditional' affordability rule of thumb would require a $137k annual salary and a downpayment of $110k.

Posted by happy renter | February 20, 2008 2:41 PM

@8, it would be closer to 3 grand a month--with a decent interest rate loan.

Posted by AC | February 20, 2008 2:53 PM

I am actually working on this project and other Quadrant jobs and I am getting the impression that they are starting to get really desperate. But I am not sure that even needs to be said

Posted by me | February 20, 2008 3:02 PM

Actually, they bumped up the VA and FHC loan limits to $850K (going by memory here), so you could still lock in a 6 percent 30 year loan with 5 percent down (vet) or 10 percent (non-vet).

Posted by Will in Seattle | February 20, 2008 3:31 PM

The Atlantic has an interesting article this month arguing that urban real estate will do better than suburban real estate in the future.

If you buy the argument, suburban sprawl has a poor future.

Check it out--

Posted by CCSea | February 20, 2008 6:10 PM

@6 and @7

Don't think so.

Those backups exist in both directions. To imply that the east side is not autonomous and depends on Seattle is f'n laughable.

Which companies support the high cost of living in King county? And where are they located again? And the consulting firms that make a living off said companies? What city are they based out of? Who exactly supports who?

Posted by Reality Check | February 20, 2008 8:18 PM

People buying $550K houses are most often not first-time buyers. They've got equity in their existing home and can make a substantial down-payment.

That said, get out and about the area and you'll be amazed at the number of houses that cost far more than that. So clearly a lot of people are making that kind of cash -- perhaps we just travel in the wrong circles.

And Reality Check has it right: I know a lot of Eastsiders who live and work there and only hit Seattle for Seahawks or Mariners games, or when visitors come to town. Semi-autonomous? No longer. Not with many of the largest private employers in the area, and not when the number of Seattle-to-Eastside commuters is rapidly approaching those traveling in the other direction.

Posted by bigyaz | February 20, 2008 10:43 PM

5 & 6

Ya'll are high as fuck. The traffic coming from Seattle to the Eastside in the AM and back in the PM is soooo much worse than the reverse. I ride the 545 Sound Transit every day and it blows my mind why anyone would live in Seattle and commute to the Eastside. But people do it every day. Just check out the different in the Friday PM commute...going to the Eastside is a breeze while the slog back into Seattle is backed up all the way to MSFT.

Posted by Eastside Por Vida | February 21, 2008 10:22 AM

Sorry 5, didn't mean to call you out in the previous post...I meant 6 & 7.

Also, as to the prices of the are forgetting that most of the people buying these cribs are dual wage's not one dude pulling down 150K a year but maybe a guy making 65K and his wife doing about the same. When you have 2 incomes it makes affording housing easier.

Posted by Eastside Por Vida | February 21, 2008 10:28 AM

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