From a small northwestern observatory…

Finance and economics generally focused on real estate

Archive for the ‘Seattle’ Category


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If you’re in business in Western Washington (as we are), then the quarterly Puget Sound Economic Forecaster by Dick Conway and Doug Pedersen is must-reading. The latest issue just hit my desk, and given the current state of flux, it’s worth reviewing.

You have to get to the back page to find what I consider to be the most interesting graphic — a chart of Puget Sound Leading Economic Indicators dating back to the early 1970’s. The era is marked with 5 recessionary periods — 1974, the “hic-cup” recessions of 1979-1982 and 1990-1992, the “9/11” recession (which really started in late 2000) and the current mess, which dates to 2007. Intriguingly, in each of these periods, the index turns downward well before the beginning of the recession. Of more interest, the index turns upward well before the end of the recession (as it has now) and turns into a sustained multi-year period of growth which carries it to a new peak. If you’re a chartist (as I am) this is interesting stuff.

C & P note that the Puget Sound region — despite its famed economic health — actually had a somewhat worse time than the nation as a whole during this recession. We lost 7.4% of our jobs during this period, compared with 6% for the U.S. They suggest this means that the region will trail the nation as a whole coming out of the recession. I concur with them that the region lost disproportionately in construction and finance.

Written by johnkilpatrick

December 22, 2010 at 1:01 pm

…and yet another Seattle-centric post

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I had the real pleasure of serving as Editor of the Central Puget Sound Real Estate Report for a number of years, a job which I gladly passed off to Matthew Gardner a couple of years ago. This is the 60th year of publication for this fine report. As local real estate markets continue to roil, it serves as a great touchstone for researchers, investors, and others with an interest in this market.

For more information or to subscribe, contact Glenn Crellin at the Washington Center for Real Estate Research, Washington State University,, or visit their web site,

Written by johnkilpatrick

March 26, 2010 at 2:24 pm

For the Seattle-ites out there

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The latest issue of the Conway-Pedersen Economic Forecaster just hit my desk today. It’s a “must read” for anyone doing business in the Pacific Northwest. Their lead article is titled “Are We There Yet” and asks if the recession is over.

Of course, “recession” is more than just a feeling, it’s defined by a set of numbers (technically, two consecutive quarters of negative GDP growth). However, as they so aptly put it, “At the end of a recession, when the economy is in flux, numbers can get squirrely.”

We concur. The Blue Chip Economic Indicators rofecast a positive GDP growth for the US of 3.1% this year. However, employment growth for the State of Washington — normally one of the economic leaders — is forecasted for a negative half percent. Ouch. (Actually, national employment is also forecasted at -0.5% this year, since employment growth and GDP growth are not linked at the waist.)

They conclude with the observation that, “While the recession may be over, there is much work to be done before the economy recoups its losses…Our projections indicate that Puget Sound employment will not return to its pre-recession level until the end of 2012.”

For more information, or to subscribe to their very valuable newsletter, visit their web site,

Written by johnkilpatrick

March 25, 2010 at 1:58 pm

Posted in Economy, Seattle

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Just a quick note — just got my regularly scheduled e-mail newsletter from Dr. Bill Conerly ( If you have any interest at all in Washington/Oregon economy issues, he’s a must-read.

Written by johnkilpatrick

March 15, 2010 at 1:51 pm

Seattle Mortgage Bankers

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I don’t get to visit with these folks as often as I’d like (maybe…. twice in… forever?), but they had a great luncheon meeting yesterday on HUD multi-family and health care finance. As dull as that topic sounds, HUD lenders are almost the only game in town for these sectors, and as such the “deal” volume at HUD has exploded.

Also, unfortunately, the “bad deal” flow has dramatically increased. HUD is seeing a rapid increase bad loans — not the same sort of levels we see in the sub-prime housing market or even in the conventional commercial market, but given the high degree of underwriting on these projects, HUD usually expects a loan-loss problem in the fraction-of-a-percent range. Thus, when loan losses start approaching 2%, it’s time for a lot of serious soul searching.

We had heard some vicious rumors out of the east coast that HUD was “shutting down assisted living lending”. Well, that’s apparently not true. However, there are a few obvious problems in the “New Normal” (I’m increasing stealing that phrase to describe the post-recession financial reality). Based on what I heard yesterday, I think HUD multi-family borrowers are going to see three significant issues:

1. The pipeline is a LOT longer. They haven’t done this on purpose, but the volume of deals coming thru the door at HUD is disproportionately large compared to the number of underwriters. (I saw this in the residential FHA/VA market back in the early 1980’s, when FHA money was the only game in town for start-up homebuyers, and it took longer to process a loan than it did to build the house!)

2. Underwriting criteria will be more subjective, and borrowers with little track record will face significant scrutiny.

3. Terms will be more severe. In the case of assisted living, the LTV went from 90% to 75% (although the Loan-to-Cost is still 90%) and DSCR is now 1.45, up from 1.1. This is mainly reflective of the significant problems in the assisted living market.

On the positive side, some programs are being slightly liberalized (232 program, for example). All in all, though, HUD multi-family borrowers will have a somewhat tougher time in the future than they had in the immediate past. Will this change down the road? Probably. I would expect that eventually we’ll see a return to somewhat easier money, but not until HUD works through the loan-loss problems and the conventional market becomes competitive again.

Written by johnkilpatrick

March 3, 2010 at 3:25 pm

Seattle CFA Society

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Tomorrow we’ll send out the latest issue of The Greenfield Advisor, our periodic e-mail newsletter. Back “in the day….” when we were called Mundy Associates, the firm’s newsletter was entirely printed and called The Mundy Insider. In deference to the trees we’re saving (the subscription list now runs in the thousands), our current newsletter is entirely via e-mail. If you’d like a subscription — and they’re free — just drop us an e-mail to You’ll be added to the list. You can also simply download a .pdf of the file from our website,

The current issue focuses mainly on this year’s Economic Forecast dinner, held this month by the Seattle CFA Society. I make it a point to attend every year, and we generally take a few folks with us. The speakers are top-flight, and the information was terrific. For more details and my “take” on what they had to say, please check out the newsletter.

Written by johnkilpatrick

February 28, 2010 at 12:46 pm

Posted in Economy, Seattle

4/21/09 — From a Seattle Perspective

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Ironically, I’m writing this sitting in a hotel room in Baltimore.

As many of you know, the Seattle Post-Intelligencer newspaper is one of this year’s recession casualties. However, many of their staff, with much help from their loyal followers, have created a very good on-line news source for Seattle-ites. We wish it well, along with many more like it around the world.

My good friend, Chuck Wolfe, contributed an editorial today. Whether you’re from Seattle or not, I encourage you to read it here. His comments can be generalized to any community facing a changing development dynamic.

Written by johnkilpatrick

April 21, 2009 at 5:11 pm

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