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  #241  
Old Posted Jul 31, 2014, 3:17 AM
alki alki is offline
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Originally Posted by mhays View Post
You say new housing moves rents for existing buildings up, then you conflict with that by saying construction can also stabilize rents or move them down.

Your fee-based recipe is exactly what would make Seattle a divide of rich and poor. It would help a few people but raise housing prices substantially for most renters. "Doing something" doesn't have to mean moving backwards.

All rentals are unknown quantities. We can only ask the owners, whether it's one at a time or comprehensively as the brokerages attempt. So far the owners are clamoring to build micros and saying they're generally full. That's a pretty good sign.
I think the problem is you see the supply/demand equation as a fixed number. I see it as a very fluid one that changes over time. When demand is high, new housing raises the rental rate bar higher. Owners of older bldgs take advantage of the higher rental bar and move their rents up accordingly.

Conversely, if supply exceeds demand, then rates can stabilize or go down.

Again, charging fees depends on the overall goals of the city.

Again, micros may prove to be a huge success. However, that future is still unknown. Not enough construction or activity. As a person who has built and managed property, I don't think they will be successful. That's my opinion.

Last edited by alki; Jul 31, 2014 at 4:15 AM.
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  #242  
Old Posted Jul 31, 2014, 4:05 AM
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When demand is high, new housing raises the rental rate bar higher. Owners of older bldgs take advantage of the higher rental bar and move their rents up accordingly.
This makes little sense. If demand is high, how do you know that owners of older buildings are not simply raising their rents because, um, demand is high? Do you have any specific reason to believe that they would not raise rents if new housing was not built but demand was increasing at the same rate? It seems more likely that you've just noticed two different things that should coincide with an increase in demand - new supply being built and existing supply increasing in value.
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  #243  
Old Posted Jul 31, 2014, 4:16 AM
mhays mhays is offline
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I see the supply/demand equation as a fixed number? That's a new one. Everything I'm talking about is predicated on a growth scenario, and constant flux.

As Gordo says, the other point makes little (or no) sense. In a high-demand period, landlords of older buildings are raising prices because renters are clamoring for housing, not because nicer buildings gave them confidence.
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  #244  
Old Posted Jul 31, 2014, 4:19 AM
alki alki is offline
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Originally Posted by Gordo View Post
This makes little sense. If demand is high, how do you know that owners of older buildings are not simply raising their rents because, um, demand is high? Do you have any specific reason to believe that they would not raise rents if new housing was not built but demand was increasing at the same rate? It seems more likely that you've just noticed two different things that should coincide with an increase in demand - new supply being built and existing supply increasing in value.
Of course owners of existing owners are raising rents because demand is high. Making it easier for them........the higher rents of new units. No one in real estate likes to lead the market. Existing owners prefer having the new guy lead the market. It helps them stay full.
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  #245  
Old Posted Jul 31, 2014, 4:28 AM
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Originally Posted by mhays View Post
I see the supply/demand equation as a fixed number? That's a new one. Everything I'm talking about is predicated on a growth scenario, and constant flux.
If so, then why did you make this comment:

You say new housing moves rents for existing buildings up, then you conflict with that by saying construction can also stabilize rents or move them down
.

Why don't you see that the supply/demand equation can change over time, resulting in lower or higher rents?
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  #246  
Old Posted Jul 31, 2014, 4:40 AM
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Of course owners of existing owners are raising rents because demand is high. Making it easier for them........the higher rents of new units. No one in real estate likes to lead the market. Existing owners prefer having the new guy lead the market. It helps them stay full.
If no one in real estate likes to lead the market, then why are new buildings asking higher rents?

Perhaps what is "making it easier" for them to raise rents is simply a tight rental market and has nothing to do with new units coming online?

Do you think that current rental prices would be lower or higher right now if we could go back in time three years and stop all development, while keeping all other variables the same? Existing owners wouldn't have any new buildings leading the market, so do you think they'd be asking less now and we'd be seeing even crazier rental open houses? 60 people lining up to apply for the unit with an owner too scared to lead the market and increase the price?
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  #247  
Old Posted Jul 31, 2014, 5:11 AM
mhays mhays is offline
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Originally Posted by alki View Post
If so, then why did you make this comment:

You say new housing moves rents for existing buildings up, then you conflict with that by saying construction can also stabilize rents or move them down
.

Why don't you see that the supply/demand equation can change over time, resulting in lower or higher rents?
Hmmm. Read my sentence again. It describes two conflicting concepts by you. You already know I disagree with the first point. Some people might infer that I agree with the other point, which I do. If you look at my other posts that should be clear...I've harped on the idea that keeping supply ahead of demand will help keep prices in check, and changes in the supply/demand equation means prices can move up or stabilize/fall.
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  #248  
Old Posted Jul 31, 2014, 5:18 AM
alki alki is offline
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Originally Posted by Gordo View Post
If no one in real estate likes to lead the market, then why are new buildings asking higher rents?

Perhaps what is "making it easier" for them to raise rents is simply a tight rental market and has nothing to do with new units coming online?

Do you think that current rental prices would be lower or higher right now if we could go back in time three years and stop all development, while keeping all other variables the same? Existing owners wouldn't have any new buildings leading the market, so do you think they'd be asking less now and we'd be seeing even crazier rental open houses? 60 people lining up to apply for the unit with an owner too scared to lead the market and increase the price?
Why are you taking every comment I make as an absolute? Sure a developer would prefer not to lead the market but not at the expense of not doing any construction.

The same thing that is causing new units to be built.....demand..........is what also spurs existing owners to raise rents.

Quote:
Do you think that current rental prices would be lower or higher right now if we could go back in time three years and stop all development, while keeping all other variables the same?
That's a straw man argument. No one is suggesting there should be no development. All that I am arguing is that its not just supply and demand that causes rents to go up long term. The more important factors are land, labor and material costs.
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  #249  
Old Posted Jul 31, 2014, 5:24 AM
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Originally Posted by mhays View Post
Hmmm. Read my sentence again. It describes two conflicting concepts by you. You already know I disagree with the first point. Some people might infer that I agree with the other point, which I do.

That's just it it.......they are not conflicting.......over time, both concepts will play a role in rental prices.


Quote:
If you look at my other posts that should be clear...I've harped on the idea that keeping supply ahead of demand will help keep prices in check, and changes in the supply/demand equation means prices can move up or stabilize/fall.
Yes, you've harped on the idea that keeping supply ahead of demand will keep rents in check. In a planned economy, that may be possible. However, in a free market economy, what is the formula you would use to first predict demand two years down the road and then keep supply ahead of that demand? How would you factor in construction rates, lending practicing etc.? How would you get developers to follow the formula, not building too many or too few units?
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  #250  
Old Posted Jul 31, 2014, 5:53 AM
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I agreed that a new building can raise neighboring existing rents on a very localized basis by making a neigbhborhood more desirable, but not on a broad basis. You've put the idea out there without any such context I've seen, as if it's a broader market dynamic. That would conflict with the tendency of any widening in the supply/demand equation to flatten or reduce prices. As for "setting a bar" on pricing, that's a sub-dynamic at most, and has more to do with one building jockeying against its neighbors.

Put all that together and you've suggested that new construction raises prices, and also said it can keep prices in check. That's what's inconsistent.

As for new construction, of course there's no good prediction. It's all opinion-based cost/risk/return models by each developer and financier. But here's the key: keep the entitlement process in check, and avoid piling on extra costs, and developers will tend to stay well ahead of demand, and compete with each other at lower price points than they would otherwise. That faster the process the more nimble they can be.

I didn't say supply will always stay ahead of demand (better defined as what demand would be at a given price...price fluctuation always keeps supply ahead in real terms). But with Seattle's amount of buildable land (at least for now), developers can build a lot of supply if they want to. They'll want to if the economics work, which gets back to avoiding the extra fees. But raise development cost by 5% and maybe it won't make sense to build until the resulting scarcity moves rents that much above where they'd otherwise be.
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  #251  
Old Posted Jul 31, 2014, 3:22 PM
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Originally Posted by alki View Post
The same thing that is causing new units to be built.....demand..........is what also spurs existing owners to raise rents.
Yes, exactly.

Quote:
Originally Posted by alki View Post
That's a straw man argument. No one is suggesting there should be no development. All that I am arguing is that its not just supply and demand that causes rents to go up long term. The more important factors are land, labor and material costs.
Ok, so you're basically just arguing that the supply and demand of land, labor, and material costs are the most important factors? I can't disagree there, though I'd certainly lump the supply/demand of inputs in with the overall supply/demand of housing. The cost of inputs will affect the supply of outputs provided. I assumed that would be obvious.
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  #252  
Old Posted Aug 1, 2014, 3:17 AM
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I assumed that would be obvious.
You would think.
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  #253  
Old Posted Aug 1, 2014, 3:36 AM
alki alki is offline
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Originally Posted by mhays View Post
I agreed that a new building can raise neighboring existing rents on a very localized basis by making a neigbhborhood more desirable, but not on a broad basis. You've put the idea out there without any such context I've seen, as if it's a broader market dynamic. That would conflict with the tendency of any widening in the supply/demand equation to flatten or reduce prices. As for "setting a bar" on pricing, that's a sub-dynamic at most, and has more to do with one building jockeying against its neighbors.

Put all that together and you've suggested that new construction raises prices, and also said it can keep prices in check. That's what's inconsistent.
I have explained this concept every which way I can imagine. You seem to have a block in place while extrapolating in ways I never intended and did not expect. Maybe we can get back to this discussion later.

Quote:
As for new construction, of course there's no good prediction. It's all opinion-based cost/risk/return models by each developer and financier. But here's the key: keep the entitlement process in check, and avoid piling on extra costs, and developers will tend to stay well ahead of demand, and compete with each other at lower price points than they would otherwise. That faster the process the more nimble they can be.

I didn't say supply will always stay ahead of demand (better defined as what demand would be at a given price...price fluctuation always keeps supply ahead in real terms). But with Seattle's amount of buildable land (at least for now), developers can build a lot of supply if they want to. They'll want to if the economics work, which gets back to avoiding the extra fees. But raise development cost by 5% and maybe it won't make sense to build until the resulting scarcity moves rents that much above where they'd otherwise be
.
What I was trying to show you is that you have a very idolized view of how real estate works. Its very difficult to predict what supply will be needed to keep rental prices from going up significantly, [or down for that matter] two years down the road. For the past three years, Seattle has been in a favorable position when it comes to job and economic growth. That may be changing.

Boeing has announced its moving out some jobs. Microsoft is doing layoffs. Amgen is closing down its facility here. Amazon/Bezos has made investors very unhappy with earnings and a lousy profit margin. Investors are upset with the cost of Amazon's bldg program. Does that mean Amazon's huge job expansion and building program may have hit a speed bump? If so, what does that mean for Seattle.....will that put a dent in Seattle's growth prospects at least in the short term.....the next 2-5 years?

Real estate has way too many moving parts to be very predictable. So the whole notion of developers keeping in front of supply going forward so that rents remain in check is a bit pollyannish IMO.
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  #254  
Old Posted Aug 1, 2014, 4:35 AM
mhays mhays is offline
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So why do you want to make it worse? What do you have against the 90% of renters (or whatever the number) don't live in subsidized units?

If you have any clue at all about development, you know that fees disincentivize new supply and make it more expensive. You've already admitted that new supply helps in the supply/demand equation that helps keep prices down.
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  #255  
Old Posted Aug 1, 2014, 6:59 AM
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Early Looks at The Commons, Rubix & Dunn Automotive Building

Thursday, July 31, 2014, by Sean Keeley







http://seattle.curbed.com/archives/2...e-building.php
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  #256  
Old Posted Aug 7, 2014, 9:51 PM
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Wonder if "The Commons" is just north of the CH library on Harvard. If so, that would be a long-vacant lot gone.
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  #257  
Old Posted Aug 7, 2014, 10:30 PM
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Wonder if "The Commons" is just north of the CH library on Harvard. If so, that would be a long-vacant lot gone.
I think you mean the Rubix. Just checked google and it shows it as the vacant lot. So I think you're right.
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  #258  
Old Posted Aug 7, 2014, 11:17 PM
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Thanks. Yes, the Rubix.
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  #259  
Old Posted Aug 13, 2014, 3:54 AM
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Developers vying to build Capitol Hill Station housing+retail say properties are overvalued

Posted on Tuesday, August 12, 2014 - 7:01 am by Bryan Cohen

http://www.capitolhillseattle.com/20...re-overvalued/
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  #260  
Old Posted Aug 13, 2014, 5:30 AM
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