Economic Update for Washington State and the Greater Seattle Metro [Video]

This presentation the Economic Update for Washington State and the Greater Seattle Metro was giving at the Vision Leadership Conference and used my slides to record a quick summary of how our economy at the National, State and local King County and Snohomish County. With some specifics about Seattle and Everett. We talk about GDP, Consumer Confidence, Unemployment, Spending, Output, Major Employers, Boeing, Recovery, Personal Income, Vechile Sales, Housing Permits, Multi Family Housing, Home Prices, Home Values, Home Trends, Real Estate Statistics, Supply and Demand, Months of Supply, Foreclosures, Foreclosure Inventories, Notice of Trustees Sale, Scheduled for Auction, Bank Owned, REO, Short Sale, Average Price, Median Price, Mortgages, affordability, lack of inventory, interest rates, investors, investor demand, and finally moving from surviving in the local real estate market to thriving.

Economic Update for Washington State and the Greater Seattle Metro Video:

Video Transcript:

Hey. What’s going on, everyone? Anton Stetner, here with the Real Estate
Solutions Group. I gave this talk a while back for the Vision Leadership
conference that we had here. It was actually really cool. Myself and Dan
Rike were up on stage. We had the Seattle Seahawks Blue Thunder Band right
behind us. It’s actually the only time I’ve ever been able to talk about
something that’s economics and it actually turned into just a powerhouse.
We’d say something cool then they’d pound out some drums.

What I wanted to do real quick is just quickly go through and review this
presentation for you guys. One of the things that we really wanted to talk
about in regards to this economic update is, it’s not all rosy. It’s not
all perfect, but there is some good data coming out, that’s showing
fundamental stability for the overall U.S., here in the state of
Washington, and the greater Seattle Metro, where I work. That’s what we’re
going to present today.

What’s going on right now is real GDP growth here in the U.S., has
basically – it’s slow but it’s moving in a positive direction. You can see
right there that it dipped in late 2008 or early 2009, and that we’ve been
trending in a slight upward direction. U.S. GDP and unemployment, the
economy is now producing more than its pre-recession output with fewer
jobs. I know all of you are feeling this. I’ve been feeling it, too. We all
are doing more with less, for less money. We’re all working harder and
smarter.

Another good thing that’s been happening is U.S. unemployment rate is
starting to dip. You could see that it peaked right there in probably mid
to late 2009, and since then it has been on the decline. Consumer
confidence, consumer confidence sometime there in 2009 hit a bottom. That’s
been trending in an upward direction.

The unemployment rate for the state of Washington is approximately 8.3%,
showing a similar thing to what’s been going on at the national level,
trending in a downward direction. We’re seeing a similar trend in King
County, at 7.1%, which is lower than the state rate. Then, Snohomish County
is showing very similar numbers to the state. One of the good things that
have also been happening is, in Washington, we’ve got major employers.

We’ve got employers like Microsoft, Amazon. We’ve got major universities.
We’ve got Boeing, with one of them being our hugest new major employers,
especially for us that are located here in the Puget Sound. In Snohomish
and King county, you’re seeing that Boeing, right now, has over seven years
of commercial orders on its books. So, what a lot of us have been feeling
that here, in the greater Everett area, is there’s just been a huge hiring
frenzy going on.

Washington state employment is expected to recover slightly faster than the
overall U.S. economy. The personal income for Washington state residents is
also recovering slightly faster than the rest of the U.S. One of the things
that’s very interesting to see is that vehicle sales have started to come
up again, once again, them bottomed sometime in 2009. When you see vehicle
sales trending in an upward direction, what it is, is people are feeling
more secure. They’re feeling more stable, so what they’re going to do is
they’re going to go spend some money on buying that new car.

Washington state housing permits are unbelievably low. This is one of the
things that I want to point out, that housing permits have not been this
low since the 50’s. You can see here, in the late 60’s and the 80’s, we
definitely had a dip. But we’re below those levels right now. So, I think
this is a great area of opportunity in the foreseeable future for
investors, builders, developers to be getting back out there and putting
more product.

As you can see, this is another way of looking at housing permits. The
previous one was on the state level. This is just kind of the Puget Sound
area, looking at Skagit, Kitsap, Thurston, Snohomish, Pierce, and King
counties, and you can see the pre-boom or the start of the boom there in
2001. You can see us go through, and we peaked at about 30,000 units. Then,
in 2007, as our mortgage crisis started to hit and things started to
unwind, you can see the permits plummeting after that.

Another area that’s been starting to perform well is multi-family. You can
see, when you look at the end of the graph here, towards the 2010 that it’s
starting to trend in an upward direction, multi-family being one of the
sectors for commercial that’s actually performing well. The rest of the
commercial environment is lagging probably one to two years behind
residential. We’ve got to get the jobs back. Everyone has got to feel
secure.

Then, once all that is done, we start building more office buildings and
needing more retail space. The reason multi-family is performing so well is
because of the actual foreclosure crisis. So, you’ve got people that have
been foreclosed on in a specific property, that are now displaced but they
still have to live somewhere. They still have money. So therefore, you’re
seeing the increase in need and demand for multi-family housing.

Washington state single family home prices, this is the Case-Shiller index
and it’s showing that the Seattle Metro is showing price stabilization.
Now, I think the Case-Shiller index definitely lags a little bit there, so
I actually like this one a bit letter. This is data straight out of the
AWMLS, which represents most of the state of Washington. It’s showing a
definite price stabilization happening there in May. When you look at May
versus June, you can see that May versus June over a one year period, is up
3.7%.

Also, when we look at the year-to-date numbers, we’re showing that the
prices are bottoming in some locations and definitely showing stabilization
in others. Why is that, specifically? It’s specifically because of supply
and demand. What you can look at here, is over a two year period you’ve
seen the number of for sales decrease by over 20% in the state, while the
number of under contracts have shot up by over 100%.

Washington State is reflecting what we’re seeing here in the greater
Seattle Metro. There used to be 12.4 months of supply. Months of supply can
be thought of in multiple ways. It can be thought of as the number of
sellers per buyer. So, in other words, if there are 12.4 months that means
there are 12.4 sellers for every one buyer. Conversely, you could also
think of it as if no new homes came on the market today, it would take you
12 months to sell through the inventory.

They call six months a neutral market. So, above six months is definitely a
strong buyer’s market. When you get below six months, you start to move
into a seller’s market. So, the state at 4.1 is in a seller’s market. The
reason for that is, we go back and we look at those building permits, is
we’re plain just not building enough houses, and our foreclosure
inventories here in the state of Washington are declining. So, you see the
red line, that’s the total number of bank-owned properties that are
available in the state of Washington is on the decline, while the number
scheduled for sale has been declining, also.

We do expect the number scheduled for sale to pick back up, for there to be
more foreclosures because we feel this was artificially held down due to
the robosigning and all the legislation and political pressure that’s been
happening in relation to foreclosures. But we are seeing the same trend in
King County with foreclosure inventories. Once again, the bank-owned
properties are declining, and the number scheduled for sale. The same trend
is also showing up here in Snohomish County.

King County, when we look at the months of supply, what a decline. I mean,
we’ve gone from 8.7, to 9.7, to 10 months back there in July, all the way
down to 2.2 months’ worth of supply. So, King County right now is in a very
strong, hardcore seller’s market. Expect to see multiple offers in that
below $400 price range. One of the reasons for that is just this simple
supply and demand graph. You can see the number for sale properties over
the last two years has declined by almost 37%, while the number of under
contracts has gone up by 96%. The total number of properties sold has
increased by almost 16%. So, the market is just plain improving.

Looking at King county closed sales for May, what’s happened basically
there is you can see that the average price – we’ve circled over here –
when we compare May versus May, is up 1.4%, however, year-to-date, it’s
still down 4.1%. Now, let’s put some perspective in with these numbers.
That number used to be a lot greater. We used to be depreciating multiple
percent per month. So, as it’s showing less of a decline over a six month
period than one to 2% per month, it’s showing that the rate of depreciation
is slowing, and therefore indicating a bottom. You can also see this in
Snohomish County, too.

So, Snohomish County, we went from 11.9 months’ worth of inventory, all the
way down to two, so once again, hardcore seller’s market, there. I don’t
think we’ve been in this busy of a seller’s market. Even in 2005, I think
we had a slightly higher level of inventory. The Snohomish County supply
and demand graph, looking at this, you can see the number of for sale
properties has declined by almost 39%. The number of under contracts is up
by 126%, holy cow, while the number of sold properties is up by almost 23%.

The reason we think that Snohomish County is performing better than King
County would b strictly affordability. It’s a little bit cheaper to live in
Snohomish County than it is in King County. Let’s look at the closed sales,
there. You can see that the average price for May versus May is up 2.2%,
year-to-date, down 1.7%, holy cow. That’s showing almost a bottom. You can
see there, the median price is actually showing a slight increase.

So, let’s put this into some perspective, let’s kind of talk about really
what’s going on, here. Bread used to be about $.67 back in 1989. 2011,
bread was about $2.78. Gas right now, gas is even higher than this, right
now, because once again, this is still from 2011, with gas right now being
in in the mid $3’s. New car, used to be $15,000. Today, it’s $30,000.

Here’s the thing I want you to focus on, though. In 1989, it used to be
$94,000 at 10% interest. Your monthly payment was around $825. Today, if
you had $166,000 property, which is the median price for the whole nation,
and your mortgage was 4.45%, your monthly payment would be only $837. So,
literally, you’re able to purchase a home and realize that interest rates
are actually slightly lower this year in 2012, than when this slide was
made. You’re able to purchase a home today with the same monthly payment
you would have had in 1989.

Why is our market improving? Because, of historically low interest rates.
We’re seeing a lower number of foreclosures, decreasing unemployment,
affordability of housing, strong investor demand. One thing that’s very
interesting in the greater Seattle Metro is we’re starting to see lots of
investor demand, because stuff is cash flowing because of the cheap money.
Also, due to the lower number of foreclosures and lack of [inaudible
00:13:00], we’re seeing a lack of inventory.

If there’s demand and there’s a lack of supply, that is improving the
market and causing our price stabilization. Now, I don’t want to say this
definitively is the bottom, but it definitely feels like it. Unless some
major things come along where the market doesn’t build enough stability,
this will definitely be the bottom of our local real estate market.

So, what do I really want you guys to do? I want you to think about moving
from that surviving to thriving. So, this is a little graph I took from the
book called “Shift.” What happened in the early 2000’s, as our real estate
market took off, is the amount of available income shot up. Okay, that’s
that first line. As the available income shoots up for the real estate
industry, the number of agents, loan officers, people in title, escrow, and
construction shoots up, too. Okay?

When the market peaked, now our market peaked locally in about mid-2007,
all of a sudden, that level of income started to decline. We went from
thriving to surviving. Too many people were inside the real estate industry
for not enough income. What happened was, as the available income went up,
every UPS driver, every bank teller, everyone who wasn’t in the industry
just jumped in.

I feel, though, that we are at the bottom, near the bottom, or really close
to it. So what’s happening is I want each and every one of you to grab your
unfair share of this local market. So, as the market rises with you, and
the amount of available income goes up, you naturally rise with it.

Hey, here’s how you guys can connect with me on the internet. I’m Anton
Stetner with the Real Estate Solutions Group. Please subscribe above,
comment below, and we will update you more as we go. Thanks, a lot.

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