I scored “okay” for 2008’s list — not bad, considering that in retrospect, the depth and breadth of all that happened was totally unpredictable.
So without ado, my 2009 outlook:
1. SEATTLE REAL ESTATE: Sales volume will be up substantially in the first quarter (Q1 2009 vs. Q1 2008), and for the year. I’m going to guess 15%. For reference, 2008’s closed units were 60,233 in the entire NWMLS area (MLS sales only; doesn’t include foreclosures or FSBO’s – stats pulled from NWMLS). 26520 agents at year’s end = 2.271 sales/agent. I’m guessing there will be 22,000 agents at the end of 2009 (as they roll over their two year renewal requirement, they’ll simply not bother), and units at a 15% increase will = just under 70,000.
2. SEATTLE REAL ESTATE PART II:Prices. I’m always asked this. “How is real estate?” Asked with the same emotion as when your kid is really sick, and they ask “How IS he doing?” I really don’t know. I am telling our investors and buyers not to count on any appreciation — which is the same message I’ve always given, btw. For investors, it’s wise to assume ongoing income/expenses at flat levels. For buyers, find what you want and buy it. It’s a really good time to sell your slightly depressed starter house and buy up to the “permanent home” which is surely depressed even more in real dollar terms. And like the investment property, if you are comfortable making the payment, which won’t change, and you love the house…the value going up or down is suddenly far less relevant.
3. Banks: We have a lot of community banks that went long into bad land deals in Snohomish and Pierce Counties. Citybank, Frontier, Renton First Federal, and of course, Sterling Savings (which is more regional) have all reported huge loan loss provisions (when a loan starts to get bad, or goes into default, the FDIC requires the bank reports the potential loss even before the asset is taken back and resold). What will be an interesting play is working with these banks with their REO property (REO is real estate owned…what a property becomes after the bank forecloses on it at the trustees sale). A bank that loaned $500k on a new construction house has probably already booked the loan to $350,000 by the time it becomes REO. If they sell it for $350,000, they replenish their capital, and have no further loss. If they sell it for $250,000, they have only another $100,000 loss, and they get that precious capital back. There’s great opportunity there for that new buyer. The banks in Seattle that focused on Seattle will fare far better — Evergreen Bank, for example. I don’t think any of these banks are “not” going to make it…except maybe Homestreet, in Bellevue.
4. Sports:It’s going to be a long rebuild for the Montlake Dawks. Stanford will beat them again this year! yeah! And they’ll improve, like the real estate market, but only slightly. Four wins? As for basketball, look for Seattle University to rekindle their former glory at their soon-to-be-new home in the Key.
5. Microsoft, Starbucks, Amazon, Boeing:I have close friends who work at all these companies…so I read and hear a lot about these businesses. I like what MSFT and SBUX have done with the hard cost cutting — just like Zillow made some smart cuts earlier this year that won’t in any way affect their long term ability to perform. I think these public companies’ stocks will be up by year’s end. I’ll throw some numbers at this, as of today’s close and 12/31/09: MSFT (18 >> 24); SBUX (9.65 >> 15); AMZN (50 >> 80); BA (43 >> 60). I’m bullish, but things have been pounded down so far and each of thse guys has a bit of a corner on their markets.
6. Oil: I like $2.00 gas as much as the next guy (I have a friend who paid $133 in ID a few weeks ago!). But there has to be some reversion to the mean on this. Gas will be closer to $3.00 than $2.00 by year’s end. It’s kind of interesting that the memory of $4.00 gas earlier this year has caused Americans to continue to drive a bit less — first decline in miles driven EVER.
7. Barack: After his coronation earlier this month, and with all of the expectations, I’m hopeful he’ll deliver. I was on the fence a bit before voting for him, and I have my reservations, of course — any free marketeer would, I think – but I like his decisiveness so far and he seems to be earnestly working for some practical solutions to this economic mess. I think his public opinion ratings will continue to be high through 2009 as he does his thing. Maybe the honeymoon even lasts for a few years.
8. Seattle P.I.: I’ve always like the PI, although I’m a Times subscriber (since they moved to the AM) b/c they had the best sports photographer in the world, my friend Rod Mar. But they’re going out of business. Look for a local hero, a white knight, and an activist to join together and keep the Globe spinning. (Rich and Nick, get to it! And hire Rod.)
9. Unemployment:For the glass half full crowd, even 7% unemployment means 93% of those who want to work, are working. Job losses will increase, is the general consensus. I’d bet that’s right. But ours is also an incredibly nimble, dynamic, and powerful economy. I wouldn’t be any more surprised to see us back in the saddle, with employment still in single digits, by year’s end. To be sure, this “recession” is a generation shaping event. In a way, my generation (at 43 this month, I’m on the ridge between Boomer and Echo) has a sense of what this is about. Our grandparents told us about the Depression, and our parents might have reinforced some of that frugality (I know both generations in my family did, on both sides of our family). But for the rest of us — that is, anyone under 35 or 40 — life without the cell phone/plasma/pc/newer car/high speed access/Diner’s club car — it’s almost unimaginable. To save more, to work harder, to spend less — these are all good things. If we get through this with some of those ethics instilled or re-instilled, that will be a bright silver lining. And I can’t help but think back nine years, when all was “LOST!” in the dot-com bust…and how quickly we managed to reassemble the pieces.
10. The Viaduct: Seattle’s “tunnel” project, the solution to the decrepit viaduct, will get greenlighted. Work won’t begin until 2011, but we’ll have a solution funded, and in place. After so much talk about all the different options, we’ll beat the “inevitable” 7.7 quake to tearing down what’s there.
Note I’m just a real estate broker, and I don’t have any special expertise in any of these non-real estate areas. This is not a recommendation to buy or sell any particular stock. Just for fun, people!
