Summary of the Spring 2001 edition of
The Central Puget Sound Real Estate Research Report
Vol. 52, No. 1

By Judith Dailey
Editor & Publisher

This issue contains three reports that provide an in-depth analysis of issues that have a critical impact on the local real estate market: Boeing employment, the 2000 Census and housing affordability.

Real Estate Excise Taxes
According to the Department of Housing & Urban Development, excise taxes in King County for 2000 increased 9.8 percent over 1999, but were down 6.9 percent during the first quarter of 2001 compared to last year. In Snohomish County, the situation was reversed with excise taxes in 2000 down 7.6 percent compared to 1999, but up 10.3 percent in the first quarter. Pierce County showed a modest increase in excise taxes, up 4.6 percent in 2000 and a significant increase of 42.1 percent in the first quarter of 2001.

Home Sales
Property Dynamics reports 6,329 condominium units were added in King County during 1999, 2000 and the first quarter of 2001 in 301 projects (including additional phases of existing developments). In Snohomish County, 2,169 units were added in 152 projects, and in Pierce County, 617 units were added in 67 developments. Downtown Seattle remains the highest priced market for condominium units, although Property Dynamics reports a slight decrease in price during the first quarter of 2001. One-bedroom units continue to do well in that area. Other markets have seen prices continue to increase while demand is greatest for three-bedroom units.

According to John L. Scott, Inc. the demand for affordable single-family homes is frenzied. The number of new listings in the three-county area was 13.6 percent higher during the first quarter of 2001 compared to the first quarter of 2000, while the number of closed sales increased 9.7 percent. The data from the Northwest Multiple Listing Service show a decrease of 1.8 percent in the average price paid in King County. Snohomish and Pierce Counties report a slight increase of 1.4 to 2.2 percent in average sales price.

Apartment Trends
Dupre + Scott Apartment Advisors finds some softening in the apartment market with overall vacancies up slightly from 3.8 percent to 3.9 percent. With the projected new construction in King County, Dupre + Scott expects a rise in vacancies there, particularly on the Eastside and in Seattle. Rents are 5.6 percent higher in the three-county region than they were a year ago, well ahead of inflation.

In terms of value, Cain and Scott, Inc., report that sale prices climbed in 2000 while the total volume of sales declined. The overall cap rate declined to 8.0 percent and the gross rent multiplier at 7.2 was down from the high of 7.5 experienced in 1999. Like Dupre + Scott, Cain and Scott expect the apartment market to continue to soften and some higher-end buildings to be converted to condominiums.

Non-Residential Market Trends
The first quarter of 2001 shows a definite slowing in the office market according to CB Richard Ellis with the regional vacancy rate rising to 7.1 percent. In downtown Seattle, the rate rose to 6.0 percent, while the Eastside is experiencing vacancies of 5.1 percent and the Southend, 11.7 percent. Asking rates are softening and actually fell in downtown Seattle. Despite these trends, another 6.9 million square feet of office space is planned.

The industrial market, by contrast, appears stable despite a rise in the average vacancy rate from 3.0 percent to 4.5 percent in the first quarter of 2001. CB Richard Ellis anticipates the large spaces available now will be occupied by mid-year.

The hotel market has benefited from continued demand showing slight gains in average room rates according to Wolfgang Rood Hospitality Consulting. Occupancy levels have declined, particularly in the downtown Seattle market, reflecting the 1,500 new rooms added in the past three years. Construction continues in Seattle with 460 new rooms to be added this year. Bellevue and the Eastside, however, showed some gains in 2000 both in occupancy level (71.8 percent) and average daily room rate ($112.83).

Building Activity
According to the Department of Housing & Urban Development, the number of building permits issued for housing fell 4.7 percent from 19,152 in 1999 to 18,289 in 2000 for the tri-county area. Sub-markets showing growth in permits were multifamily units in King County (up 6.2 percent) and multifamily units in the City of Seattle (up 43.7 percent).

The Builders’ Report prepared by New Home Trends shows that the number of sales per builder increased in the past two quarters to 19.42 and that the currently available inventory as of mid-March 2001 was up only slightly over the previous year.

According to the King County Office of Regional Policy and Planning, the number of recorded plats/lots in 2000 held steady at about 3,300 with most of the activity in Bear Creek and Renton. In the first quarter of this year, the number of new plats/lots recorded decreased 8 percent from the same period last year, but the number of filings were up by 20 percent. In Snohomish and Pierce Counties, by contrast, both the number of plats/lots applied for and the number recorded dropped in 2000, as reported by New Home Trends. The profile of activity in individual cities within each county compiled by New Home Trends compares the price and lot size of new homes built since January 2000.

Economic Activity
According to the Washington State Department of Employment Security, the tri-county area appears headed for stable but modest growth during 2001. Unless there are further disruptions, the impact of rising energy costs have been factored into manufacturing employment with several plants already closed. Overall, the tri-county population grew by 0.8 percent with unemployment edging up to the highest levels seen since 1996. Non-farm jobs grew by 2.7 percent in the past year contributing to a rise in average wage per job of 2.6 percent (King County), 3.6 percent (Snohomish County), and 5.1 (Pierce County).

© 2002 The Central Puget Sound Real Estate Research Committee
PO Box 644861  Pullman, WA  99164-4861
phone (800) 835-9683    fax (509) 335-7863  e-mail  wcrer@wsu.edu