Shoreline Bank gets shut down

Great community bank that just couldn’t get through this period to better times. They were an excellent supporter for lots of non-profits in Shoreline and Lake Forest Park, and the board and investors were all local folk. Really too bad…and the acquiring bank? Out of SoCal – never heard of them. Will be interesting to see what happens here with the branches and employees.

What to do with Grandma’s house?

For eighty years this was the family home.  Grandma and Grandpa settled here in the 30’s; Mom was born here; holidays were spent in the dining room and on the front porch.  Lots of memories in This Old House.  Now Grandma has passed away…what to do? 

Sometimes this is a purely emotional decision; when this happened in my family, my father chose to keep the house for a few years — nearly 10 — until the pain of letting go of his mother’s long time home had grown less severe.  Since that happened just before the boom-boom aughts, it worked out okay (he sold in 2006, pre-bubble). 

Other times, there’s a desire to keep the home in the family for someone to use — a grandchild, or perhaps the children of the grandparent. 

I had a call the other day from a college friend, who long ago had left his small California hometown in his tracks to pursue his fortune elsewhere.  After a stint in Law School, and some time working in a high level position in Washington, he was ensconced in high paying consulting gig.  When Grandma passed away and his mother made it known that she’d like to live in the family home, he offered to buy it from the estate — for cash.  After all, it wasn’t a big amount of money to him and it would allow mom to stay in the home.   No investment motivation — just wants to do something nice for mom. 

However, I look down the road a bit.  If he buys the house for today’s value — $85,000 — and in 20 years, somehow it’s worth $200,000 — there could be resentment when his mom’s estate has nothing to pass onto my friend and his two siblings.   He’ll own the house and get 100% of its then considerable value (deservedly; he’s laying out the cash now). 

I suggested an alternative:  Instead of buying the place, use the cash to fund the purchase for his mom; act as her bank.  Have her pay whatever nominal amount of interest the IRS requires to avoid gift taxes (3%?).  So for $250/month she gets to own the house; he gets to enable that.  And if she wants to sell it at any point, or if she leaves it to her estate, there’s no issues about him getting too much of a benefit for the bargain — since he has no profit motivation here anyway, it’s not the bargain that he wants.  In addition, he relieves himself from having any of the burdens of ownership (liability, maintenance, tax payments, etc).  He just gets to grant his mom’s wish to keep the house in the family.

Sure, it’s a bad thing she lost her home…

But is Washington Mutual really the predator?

Why no mention of what culpability the son, who took the $500,000 in loan proceeds and didn’t make her payments for her, has in the loss of her home?  Without that initial refinance, none of the subsequent refi’s would have been even necessary.  He’s like the prodigal son — got his inheritance early.  The only thing is, the prodigal’s dad had lots of cattle left over and this poor woman is living in a little apartment now.

Lies, Damn Lies, and Statistics

I spend part of the day yesterday at Real Estate Bar Camp, held at Seattle’s Lake Union Armory (very cool building which I’d never been in on the South Lake Union waterfront — Soon to be the new Museum of History and Industry). 

One of the sessions I sat in was hosted by Stan Humphries of Zillow — he presented on the data that is available on Zillow, and the “State of Seattle’s real estate market” — at least as it can be evaluated from behind a computer screen.  Zillow has lots of data behind its site, most of it culled from County Assessor’s public records.  It allows a user — for FREE — to sort the data in a variety of ways — by area, and by a number of different criteria.   From the Zillow home page, click on the LOCAL INFO tab at the top.  

One of the criteria I hadn’t seen before is as shown below in this graph — the percentage of homes sold at a gross gain in sales price, compared with the prior sale.  The figure has been steadily dropping since early 2008, but still — 87% of homes that sold last month (or last quarter, I can’t quite tell) sold for more than their prior sale.  That doesn’t mean a profit was made — the homeowner may have remodeled or otherwise upgraded the home, and of course, there’s the costs to sell that are typically around 8% of gross sales price — but still I think it’s interesting.  Not EVERYONE is losing money…in fact, it appears in Seattle, that 86.4% of the sellers are still making some…


seattle home values

Zero Lotline Townhome Sales Stats



BUILT 2007+            
Area Active Pending Sold 3/1/09 to 5/20/2009 #/day #/month #months supply
140  West Seattle 77 15 33 0.41 12.38 6.22
380385  Rainier Valley 40 14 16 0.20 6.00 6.67
390  Madison Park to I-90 43 16 24 0.30 9.00 4.78
700 Cap Hill, Queen Anne, Magnolia 46 9 14 0.18 5.25 8.76
 705  Northwest Seattle (Ballard, Greenwood) 97 42 62 0.78 23.25 4.17
710  Northeast Seattle (Ravenna, Lake City) 25 12 19 0.24 7.13 3.51
  328 108 168 2.10 63.00 5.21

As predicted, inventory is SHRINKING!  Lots of sales and lots of pendings in this property category.    Supply in north Seattle is down to about four months, which most folks say is a “heathly balance.”   Caveat — the “Active” numbers may not include sites where the builder has one or two units out of four or six available.  But those sales of unlisted units won’t show up in my stats, which I pulled from our NWMLS database.

Has to make the construction lenders — Sterling Savings, Citybank, Evergreen Bank, and their ilk — very pleased. 

I think May and June closed sales will even higher, until inventory is totally gone.  And you know what happens when supply goes down and demand stays constant…

Homestreet Bank

Heard a rumor today that Homestreet Bank, which I knew as Continental Savings back in the “old” days, was getting its cease and desist from the FDIC.  This would be a huge bummer, but I did predict it in my 2009 forecase, paragraph three:  here.

Homestreet has a terrific residential mortgage operation, one of the best and most productive in the region.  But somehow they got deep into contruction and other development lending, and now have an ugly balance sheet where their assets roughly equal their non-performing loans. 

Update:  Homestreet’s release on the issue, this afternoon (5/15): 

Seattle’s Zero Lotline Boom-Bust…Boom?

5403 3rd NW Townhomes
5403 3rd NW Townhomes
It’s been like selling water in the Sahara these past few weeks in the townhome biz. 
RPA has processed 31 townhome sales in our office alone in the past 45 days, most of which are still pending for May and June closings.  This after a scary 4Q 2008 and 1Q 2009 where sales were incredibly hard to come by.  In the city of Seattle (excepting W. Seattle) there were 44 closed sales in March, and 45 in April.  Yes, this is well below the same period’s sales in 2006, 2007 and 2008, but it’s the highest volume we’ve seen in nine months..and the pending figures are such that I wouldn’t be surprised to see 60+ closings in this market area in May, and more in June. 
Current listed inventory is 225 units — four months supply and dropping.
Factors in play:
  • Prices have come down.  From peak pricing in mid-2007, there’s been a 15%+ drop in values.  For the normal developer, working off a 8-10% net margin, that makes current pricing a losing proposition at the values which they paid for the land.  This, and in many of the more marginal neighborhoods where there is a TON of product, the lenders are letting the builders short sale units, effectively subsidizing the buyers’ purchases at even lower prices;
  • Financing is incredible.  Not only are market interest rates low, but nearly all of this inventory is under the $506,000 FHA loan limit, making these a 3.5% down payment purchase.  Since these are NOT condos, there is no premium on the pricing, and no presale requirement for a complex.  It’s just like buying a house.  And many lenders are helping out by throwing cash to the buyers for loan buydowns and closing costs.  Sterling (which holds the construction loan on the units above) is paying nearly $20,000 to give the buyers a permanent fixed rate of 3.875% — over a point below current market pricing;
  • Supply is declining.  There have been nearly no new loan commitments made in the city for construction financing since early 2008.  Most of what is being built today are projects that had financing in place prior to that time.  Once these are built out, there will be almost nothing new brought to market until lenders start lending, AND townhome prices increase again to the point where the value of the developable land again exceeds the value of whatever’s on the property today – the little rental house, or run down duplex.  Could be years. 
  • Prices have upticked in the past 60 days.  In one project, the pricing between the first sales in early February, and the last sales, in late April, were up nearly 4%.  I’m not predicting that will continue, but I think it shows that prices have at least stabilized. 

Definitely encouraging to the beleaguered builder in this town. 


Banks rebound?

Sterling Savings Bank
We have borrowed a lot of money from Sterling Savings Bank over the past five years on our construction projects.  Yet despite our perfect record of repayment, somehow they’re still having troubles.  Go figure!

Well — I think the worst is behind them, and I think many of the well managed small construction lenders in our area, in Seattle, have gotten their arms around their loan losses.  I’m not saying some of these banks aren’t going down — some are.  I would bet against Homestreet, Seattle Savings Bank, and Horizon Bank, for example. 

But Sterling, (STSA), trading at 2.60 today, could double with a positive earnings announcement — and I think they’ve been doing a lot to move their builder product, including ours, off their books.  They have been offering up to $20,000 in buyer credit, and interest rates fixed at 3 7/8%, which has moved over 70 units in Seattle this month.  Sterling is here to stay.  At least my kids should be hoping so, because I’ve got their educational IRA’s invested in the stock.  🙂

Another regional bank is Banner Bank, in Woodinville (BANR).  Traded down below $2, now it’s at $2.37.  I just like them, and they seem to be considering new loans, including an apartment project for us.  Considering new loans is a good sign.

Citybank, in Lynnwood (City with a “y”– CTBK), went the deepest into land in Snohomish County and has been hammered.  But trading near a dollar, and now at $3.76, they’ve come back a bit. 

None of this should be considered investment advice, but these three banks, at least in my conversations with their people, seem to be doing what it takes to get their ships righted.  Time will tell.