The commercial market has experienced declines to the short extent that the residential market has. I had no idea that vacancy rates in Pioneer Square were close to 25%. This article talks about that market and Starbucks selling their building.

Seattle Times
Business / Technology
Originally published August 8, 2011 at 6:16 PM | Page modified August 9, 2011 at 12:05 PM
Starbucks sells Pioneer Square office buildings for $125 million
With a vacancy rate of 21 percent, Pioneer Square has the biggest chunk of empty office space in downtown Seattle.
By Christine Harvey
Seattle Times business reporter
Starbucks closed a $125 million deal Monday with real-estate investment firm Spear Street Capital for two office buildings in Pioneer Square.

The connected buildings, at 505 First Avenue and 83 South King Street, are about 70 percent leased and had been on the market since May, said Stacey Krum, spokeswoman for Starbucks.
Anchor tenants include data-storage company Isilon Systems, brokerage company Sharebuilder and Nuance Communications, a speech and imaging software firm.

Starbucks purchased the King Street building in 2006 for $28.7 million and began building the seven-story First Avenue building in 2007 — when it was opening seven stores a day. A year later when the recession hit, it decided it wouldn’t need the space and began looking for tenants to lease the offices to.

John Grassi, president of San Francisco-based Spear Street Capital, said the company was attracted to the investment because of the neighborhood’s historic charm and its location — between the viaduct and CenturyLink Field. He said he expects tenants to be a mix of technology, media and traditional companies.

With a vacancy rate of 21 percent, Pioneer Square has the biggest chunk of empty office space in downtown Seattle, according to Officespace.com. Rent averages about $24 per square foot — $3 less than downtown’s average and the second-lowest behind Queen Anne and Magnolia.

John Heimbigner, regional director for the online real-estate database, said the space emptied by Amazon.com and the Walt Disney Internet Group make up about 60 percent of Pioneer Square’s office vacancy. Heimbigner said the area is “turning for the better but has a long way to go” before it recovers.

http://seattletimes.nwsource.com/html/businesstechnology/2015856108_starbucks09.html

Christine Harvey: 206-464-3263 or charvey@seattletimes.com

Lets keep an eye to see what moves Starbucks is making next. They have done an exceptional job creating jobs and building one of the best loyalty brands in the US.

Seattle Real Estate Tyler Freed

By Dominic Gates
Seattle Times aerospace reporter

Jim Albaugh predicts rapid growth and says the company will outsource less work in the future. But he says no decision has been made about where to build the successor to the 737 jetliner.

Albaugh confirmed that initial production of the 787-9 horizontal tail will be done at the Developmental Center beside Boeing Field.
Boeing Commercial Airplanes chief Jim Albaugh foresees such rapid growth in the next few years that he says Puget Sound-area workers needn’t fear competition from the company’s burgeoning East Coast manufacturing site.

Many of Boeing’s almost 76,500 local workers are concerned about the area’s diminished role on the company’s latest plane, the 787 Dreamliner, and worry that the next jet will be built somewhere else.
That anxiety will be aired starting Tuesday when an administrative law judge in Seattle begins hearing a National Labor Relations Board (NLRB) complaint that Boeing put its second 787 final-assembly line in South Carolina instead of Washington state to retaliate for past strikes. That would violate labor laws.

But Albaugh, in an interview one day before Friday’s ceremonial ribbon cutting at that plant in North Charleston, S.C., insisted that plans for future jets and a big expansion of Boeing’s output on existing jet programs mean plenty of work for everyone.

“Our issue is not going to be where you put work,” Albaugh said. “It’s going to be how can you find workers to support all the production that we have, whether that’s here or Charleston.”

He said the Puget Sound region is “top of the list” of locations to be considered for the next new airplane Boeing builds.
Yet, he foresees Boeing Charleston developing into a “center of excellence” for manufacturing aircraft sections that, like the 787, are made out of carbon-fiber-reinforced composite plastic.

Albaugh said Boeing will do less outsourcing of work in the future. And he confirmed that production work on the tail of the next model of the 787 Dreamliner will be brought back in-house to Seattle. In addition, Boeing plans to boost production of current jets by 40 percent at its Renton and Everett factories and stretch local resources to the limit.

“We’ve hired 3,000 people here since the fall of 2009, and we’re going to hire several thousand more,” Albaugh said. “I feel very positive about where Boeing is going and where Puget Sound is going.”

In fact, his figure understates the boom in aircraft manufacturing work. At a time when many businesses are still facing recession, Boeing’s total work force in Washington, including defense-side employees, is up almost 4,700 in the past year.
READ THE REST OF THE ARTICLE:

Seattle Real Estate Tyler Freed

A few more people than usual will be out on the streets of Finn Hill, North Juanita and Kingsgate early Wednesday morning.

By Keith Ervin
Seattle Times staff reporter

A few more people than usual will be out on the streets of Finn Hill, North Juanita and Kingsgate early Wednesday morning.

Some will unveil banners welcoming the communities to Kirkland.

Others, wearing the uniform of the Kirkland Police Department, will bring a larger law-enforcement presence to an area King County sheriff’s deputies now patrol.

One of the biggest municipal annexations in King County in years will take place just after midnight Tuesday, adding 31,000 people to the Eastside city of 48,000.

“I’m just very happy that it’s finally happening,” said Kingsgate resident Toby Nixon, a former state legislator who co-authored the 2009 Voters’ Pamphlet statement in favor of annexation, and who is running for City Council.

“It’s huge. I’m very excited,” said Jane Hague, who represents Kirkland and most of its new territory on the Metropolitan King County Council.

FULL STORY

Seattle Real Estate Tyler Freed

One of Australia’s largest homebuilders is entering the U.S. market with a bet on King, Snohomish and Pierce counties.
By Eric Pryne

Seattle Times business reporter

One of Australia’s largest homebuilders is jumping into the Seattle market.

Henley Properties said Monday it plans to build 500 houses in King, Snohomish and Pierce counties by the end of 2012. That would make it one of the area’s largest builders.

This is the firm’s first U.S. venture. “Henley is making a bet the region is poised for recovery,” said Peter Hayes, the company’s managing director.

Local real-estate observers said Henley’s arrival is a vote of confidence in the Seattle market, where new-home construction fell sharply during the recession and is just beginning to recover.

“All the fundamentals are strong here, even though we’re still working our way through the recovery,” said Allison Butcher, spokeswoman for the Master Builders Association of King and Snohomish Counties.

Land-use economist Matthew Gardner said Henley’s announcement is encouraging, but he cautioned that new construction must compete for the foreseeable future with a growing number of bank-repossessed homes now for sale that are depressing prices.

But Hayes said lower construction costs allow Henley to build new houses at competitive prices.

Henley is 50 percent owned by Sumitomo Forestry, a giant Japanese homebuilder that has been active in the Seattle area for several years through a joint venture with longtime Bellevue builder Bennett Homes.

Sumitomo ended up with full ownership of the joint-venture properties as a consequence of the housing downturn, Hayes said, and is transferring management of those parcels to Henley. The Australian firm is building out those subdivisions at a pace of 15 to 20 houses per month, he said.

Henley also plans to start building houses under its own brand, starting with a 54-lot subdivision in Kent that it bought in October for $5.55 million from Kirkland developer Yarrow Bay Communities.

Twelve model homes will be built there to showcase Henley’s designs, Hayes said. Henley also is buying other properties in Renton and elsewhere, he said.

Eric Pryne: 206-464-2231 or epryne@seattletimes.com

Seattle Real Estate Tyler Freed

Bellevue and other Eastside cities are growing increasingly diverse, but just how diverse might be a surprise to some who still think of those communities as white and well off.
By Nancy Bartley and Justin Mayo
Seattle Times staff reporters

Bellevue’s increasing diversity
Bellevue has a statue of Mahatma Gandhi at its library, and an office for an East Indian consulate is in the works.

The city’s Crossroads neighborhood has “a mosque, temple and Christian churches right here in one little nook,” said the Rev. Tom Belleque of St. Louise Catholic Church. “When they named this area Crossroads, they didn’t know how appropriate it would be.”

As anyone might have guessed, Bellevue and other Eastside cities are growing increasingly diverse, but just how diverse might be a surprise to some who still think of those communities as white and well off.

The 2010 census data show that 40.8 percent of Bellevue’s population are minorities, up from 28.2 percent 10 years ago. And every neighborhood in Bellevue has at least 20 percent minority representation.

By contrast, Seattle’s minority population rose only slightly, from 32 to almost 34 percent during the past 10 years, and some of its neighborhoods — Ballard, Magnolia and Alki among them — have fewer than 20 percent minority residents.

The affluent Somerset area in Bellevue is a pocket of diversity where more than 38 percent of the population is Asian. Crossroads residents are 64 percent minority.
Immigration certainly plays a role in the increase in Bellevue’s minority population, said Bellevue demographer Gwen Rousseau.

According to a 2009 city survey, 30 percent of Bellevue’s population was foreign-born. Among those, 42.9 percent, or more than 16,000, entered the U.S. in 2000 or later.
Often, immigrants move to Bellevue and the Eastside after they’ve arrived to work at Microsoft or other local tech companies.

Asians are the largest minority group in Bellevue. Sixty-eight percent of Asians who are employed in Bellevue work in management or professional occupations, compared with 60 percent of the employed whites and 21 percent of the employed Hispanics. About half of the employed Hispanics work in the service industry, according to a city survey a few years ago.

The change hasn’t just been in Bellevue. Redmond’s minority population has just about doubled since 2000, from 10,663 to 21,095. Now, about 39 percent of the city’s residents are minorities, up from 24 percent 10 years ago.

And minorities now comprise 25 percent of Bothell’s population, compared with 15 percent in 2000.

Schools are a draw
So what is it about the Eastside that’s attracting minorities?

The quality of the schools is a draw for Eastside neighborhoods, Rousseau said. The June 2010, U.S. News & World Report ranked Bellevue School District’s International School 10th in the nation and Newport and Bellevue high schools were within the top 100. And Newsweek ranked five schools in Bellevue within its top 100.

Read the rest of the article here

Seattle Real Estate Tyler Freed

I saw this article this morning on Twitter from the Seattle Times

The Seattle-area housing market’s big plunge
Here’s a snapshot of the market on its way up in 2005, near its peak in 2007, and three years after the fall in 2010.

By Eric Pryne
Seattle Times business reporter

Back in 2005, houses were selling like smartphones. Prices were climbing.

In some months you could count the number of homes repossessed in each of the four counties on your fingers and toes — with a pinkie or two to spare.

Median prices peaked in 2007, but sales already had begun to tail off as the bow wave of the Great Recession slammed into Seattle. In 2010 the real-estate market still was struggling in its
backwash, a new report from the Northwest Multiple Listing Service indicates.

Sales? Down about 50 percent from five years ago.

Prices? Still falling, although not as rapidly as in 2008 and 2009.

For an excellent snapshot of the market check out the rest of the article

Seattle Real Estate Tyler Freed

Meet the Millennials: Our most educated generation faces a most challenging time

Ushered in with the first Baby on Board signs in the early 1980s, Millennials were cocooned, coddled and chauffeured by their parents. Today, the kids are coming of age in the worst economy since the 1930s.

By Bob Young

JASON YU is hiding out from the Great Recession, first at his parents’ Woodinville house, then at Stanford University.

Yu started prepping for the SATs in fifth grade. He graduated from the University of Washington with a 3.7 GPA, a bachelor’s degree in applied math, and a touch of anxiety.

Skeptical about the kind of work he could get this year, Yu moved home for five months before shoving off to graduate school in Palo Alto.

“I felt like I could get a $35,000- or $40,000-a-year job,” says Yu, 22. “But after working so hard I felt I could strive for something more.”

Yu’s attitude is not uncommon among 20-somethings in the so-called Millennial Generation.

They expect to get jobs befitting their hard work and talent, says Susan Terry, director of the UW’s Career Center.

Ushered in with the first Baby on Board signs in the early 1980s, Millennials were cocooned, coddled and chauffeured by over-protective parents, correcting for the hyper-individualist, anti-child times they grew up in.

Think about pop culture of the 1960s and ’70s, says Neil Howe, a historian, demographer and author of six books about Millennials. Children were evil in movies such as “Rosemary’s Baby,” “The Exorcist” and “The Omen.” The frontiers of science focused on contraception. Birth rates plummeted.

Then came the soft-focus dawn of the “era of worthy children.” Next thing you know, movies were about “Three Men and a Baby.” The percentage of fathers present at the birth of their children climbed from 20 percent in the late 1970s to 85 percent today. Every kid got a trophy. Some planned their resumes, as Howe says, before they got their braces off.

Then the recession laid waste to best-laid plans. More than a third of 18-to-29-year-olds are now unemployed, according to the U.S. Bureau of Labor Statistics — up significantly from a decade ago.

About one in eight over age 22 have “boomeranged” back to a parent, reports the Pew Research Center.

Along with these sobering numbers comes a popular storyline: Fragile, over-programmed Millennials are ill-equipped for adversity, with their constant calls to mom, need for Facebook breaks and great expectations.

But Millennials are often misunderstood, says Howe.

Look at LeBron James, the 25-year-old NBA star and his prime-time, mega-hyped announcement that he was leaving his hometown team in Cleveland to join buddies Dwyane Wade and Chris Bosh in Miami.

Hoop legend Michael Jordan said he couldn’t imagine doing the same; he’d try to dunk on rivals Larry Bird and Magic Johnson, not join them.

But James’ decision was classic Millennial, says University of Washington professor David Domke — and he’s not talking about James’ look-at-me antics.

Millennials grew up watching “Barney and Friends” and basking in the electronic group hugs of social networking. They’re very team-oriented. It’s no surprise, Domke says, to see James “getting his band together” in the quest to win a championship. (Remember, Millennials launched the Spice Girls, whose debut single bounced to the refrain “If you wanna be my lover, you gottta get with my friends.”)

Underestimate them at your peril, says Howe, who has advised organizations from Nike and Ford to the U.S. Army and Harvard University. They are the biggest, most tech-savvy and likely to be the most-educated generation in American history.

“Companies that succeed will embrace them,” says Boeing recruiter A.J. Dale.

If the 16 Millennials we talked to are any indication, they’re not so much “spoiled” and “fragile” as “optimistic” and “persevering.”

EVERY GENERATION declares war on its parents, Igor Stravinsky once said.

Obviously, Igor never met Millennials, who are known for trusting, texting and “friending” their parents. But his point is well-taken. To understand a generation, you need to know who came before.

First, a disclaimer. Howe acknowledges that dividing lines are inexact. It’s hard to say with certainty that every 28-year-old is a Millennial and every 29-year-old is a Gen-Xer. But research — from Pew and Gallup polls to the Centers for Disease Control and Prevention — show how key events and common characteristics link generational cohorts, creating a collective identity for them.

While they differ slightly on the years that frame recent generations, Howe and the Pew center agree on the basic personalities that define them.

Probably no generation has received as much fanfare as the GI Generation, or Greatest Generation. Born before 1925, they saved the world from Hitler in World War II. With a strong sense of team play, they promoted peer solidarity through unions (whose U.S. membership peaked in 1948) and new government social programs.

They were followed by the ultra-conformist Silent Generation (born 1925 to 1942), who gave us solid, though gray “organization men.” The Silents went home to manicured suburbs that seemed to stifle egos but promoted stable, long-term careers and friendly reliability.

The Silents gave rise to the boisterous individualism of Baby Boomers (1943-1960), named for the spike in birth rates that began after World War II. Focused on inner vision, Boomers questioned authority, trusted no one over 30, and crowded into “culture careers,” such as teaching and journalism. They’re proud of their work ethic and need to infuse careers with mission and meaning.

Generation X (1961-’81) survived rampant divorce, latch-key childhoods, devil-child movies and the sexual minefield of AIDS. Criticized as slackers who thought “Reality Bites,” they were hardened by grunge and hip-hop to become workplace “free agents” who embraced risks. They excelled as entrepreneurs.

Which brings us to the Millennials, who were born as abortion and divorce rates ebbed, and grew up with attachment parenting and politicians who defined issues in terms of their effects on children. With “helicopter moms” hovering over them, they were sheltered and risk-averse. (Under Millennials, 14 of the CDC’s 15 youth-risk indicators — including sexual activity, drug use and attempted suicide — have declined. Only obesity has increased.)

Called Generation Y and Echo Boomers, the labels didn’t quite work for Howe. He coined the term “Millennial” for those who came of age at the time of a rare event, the turning of a millennium.

Millennials are defined, he says, by seven core traits: special, sheltered, confident, team-oriented, conventional, pressured and achieving.

More broadly, Pew notes they are the first “always-connected” generation, far more likely to create a profile on a social-networking site (75 percent) than to get tattooed (40 percent). (Check out Pew’s “How Millennial Are You?” quiz at http://pewresearch.org/millennials/quiz/.)

Domke, 43, used to be one of those annoyed by the Millennials’ obsession with social media, smart phones and texting. But he came to understand that just as Boomers were shaped by TV, the Millennials are defined by their use of personal technology. “They interact with the world, they don’t just receive it.”

“This is a can-do generation,” adds Domke, voted the UW Class of 2008′s favorite professor. “These students want to be great. They’re searching for a way to be what I call ‘epic.’ ” That explains, in part, their overwhelming support (66 percent) for Barack Obama in the 2008 election.

MANY PEOPLE agree that Millennials work hard and excel at multi-tasking. But they do have some issues — besides being dependent on spell-check and unable to differentiate between the words “loose” and “lose.”

“They could perhaps be seen as a little needy,” says Boeing’s Dale, a Gen-Xer fluent in Lady Gaga. Some need to improve their emotional intelligence, she says, and aren’t great at reading nonverbal cues, perhaps a product of their immersion in video games.

Because they’re also lacking in “soft” work skills — such as proper dress and manners — Boeing offers training in business and dining etiquette. Dale tells of the Millennials who come in and IM (that’s Millennial for sending an instant message) an executive they’ve never met. Managers have to explain to them that may not be the best first step to take with the big wigs.

And while they have a strong work ethic, the UW’s Terry says, they’ve been told time and again how gifted they are and tend to expect more of an immediate return on their efforts. This comes across — particularly to Boomer co-workers — as a sense of entitlement.

In her 2006 book, “Generation Me,” psychology professor Jean Twenge labeled them the most narcissistic bunch in modern history. Wall Street Journal editors call them Generation E, for “entitled.”

Jason Yu says he doesn’t feel entitled; his decision to forgo a $35,000 salary is strategic.

“I’m not convinced I can get a good job with just a bachelor’s,” says Yu, who would like to work as a management consultant. He considers grad school a “solid plan” and thinks he saved his parents money by doing undergrad work at UW instead of a private college.

And to be clear: If he can’t get into a desirable career after Stanford, he’ll view a “crappy job as better than no job.”

FOR THOSE already out in the job market, the results are decidedly mixed.

“I always worked hard for my trophies,” says Nichole Cunningham, who started interning with the Everett AquaSox at 15 and over the next six years performed almost every job for the team, including dressing as mascot.

Cunningham graduated early, with honors, from Washington State University. She moved back to her mom’s and dove into a temp job for a software company. That turned full-time, and three years later she was still living with her mom (“my best friend”), texting her daily. Like 83 percent of Millennials, Cunningham sleeps within reach of her cell phone, which doubles as her alarm clock.

She felt trapped, at times, in a job that paid less than she wanted. But she was eager to learn new skills like e-mail marketing. As for the low pay, she did something about it, supplementing her income with about $10,000 a year in weekend gigs she picked up, mostly from Craigslist. She took part in focus groups, greeted people at promotional events, tested software, even spoke pirate as a “Morganette” for Captain Morgan’s rum.

Cunningham, 26, landed a new job in online marketing, with a substantial raise, and moved into her own apartment. She’s saved enough for a down payment on a house.

“I plan on retiring early,” she says. “I wasn’t going to let the economy affect me.”

Shaid Marley, also 26, has figured out her ideal job: park ranger. But in this economy, with only an associate’s degree in criminal justice, she sees her chances as “slim and none.”

Her parents raised her to expect nothing to come easy. While other kids at Hazen High in Renton wore $200 jeans they’d soon outgrow, she mowed lawns to pay for her $500 car. “Being from a lower-middle-class family, I had to work for everything I’ve gotten,” she says outside a job fair at Qwest Field on a brilliantly sunny day. “I will do anything. I will flip burgers, work in a hotel.”

Marley had just quit her customer-service job in Bellingham to live with her boyfriend in Renton, a move that leaves her a little nervous. She’s got a car loan, student loan and credit-card debt. Her best lead two weeks after the job fair is waitressing at Applebee’s.

But she’s excited to start a step-by-step plan. She’ll learn medical transcription so she can work flexible hours at home. Then, it’s back to school for a bachelor’s in forestry and conservation. That, she figures, will open doors in parks and recreation. “I have high hopes,” she says.

Erik Fuchs just wants to get back to where he was, financially speaking.

Fuchs, 26, had gone a year without work in his hometown of Fresno, Calif. So he packed up his pickup and moved into his aunt’s one-bedroom apartment in Edmonds, sleeping on her living-room floor. He was ready to sling his tool belt over his shoulder, if need be, and go stand outside Home Depot.

It’s quite a turnaround. Fuchs started working at 13, building fences on weekends with his father. Fresh out of high school he landed a coveted gig as a union electrical apprentice at $20 at hour. He moved on to wiring schools, airports and streetlights up and down the San Joaquin Valley.

As the recession deepened he went without work for months. His father died. His girlfriend suffered a miscarriage, and they broke up. Fuchs wanted to break out of Fresno and his depression.

He doesn’t want to be a drain on his aunt and uncle. But he doesn’t want to jump at Jack-in-the-Box just yet. “If it gets to the point where I can’t buy my own bar of soap,” he says of his last unemployment checks, then he’ll take any kind of work.

The recession has been hard on men, who’ve suffered most of the job losses, particularly those in construction and manufacturing. Studies show that persistent problems have haunted young people who enter the workforce in recessions or depressions, according to The Atlantic. They’ve earned less and have more problems with drinking and depression.

ALL 16 OF the Millennials we interviewed are feeling some pressure, probably no one more than Surafel Wodojo, 20.

There’s the weight of a sibling rivalry with his sister, an electrical engineer at Boeing. There’s the financial squeeze of college, even with six roommates and a part-time job. And there’s the added responsibility he feels as an immigrant.

“You’ve got the whole village to make proud back in Ethiopia,” where he and his parents emigrated from in 1997.

Wodojo feels ashamed to ask his parents for help or even eat their food. “I’ve gone through so many emotions,” he says. “Why is God putting me in this situation? What did we do to deserve this?”

He stooped to something he never thought he’d do. “I applied at Jack-in-the-Box,” he says. “They didn’t even hire me.”

A junior, Wodojo plays on the soccer team at Pacific Lutheran University and still dreams of making it a career. But right now he’s thinking about taking a year off to pay down his student loans. “I have so much debt to my name,” he says.

Somehow the Millennials remain quite confident.

“I’ve always been blessed,” says Marley. “I’ll work hard.”

Even though he believes the middle class is shrinking, Fuchs still thinks he’ll do better than his parents.

Wodojo is probably the most optimistic of all. “That’s why you come to America,” he says.

He has too many ideas to be kept down by the recession, he says. “I know I’m going to be successful. It’s more about timing for me. I just want to get past this rough patch, get my degree and get out into the world.”

Some worry that the Millennials’ trademark confidence is setting them up for a hard fall. Time magazine editor Nancy Gibbs reminds us what Aristotle said: “Youth is easily deceived because it is so hopeful.”

But count Gibbs as another with faith in the Millennials. She believes they “know something we don’t about the inventions that will emerge from their networked brains, the solutions that might arise from a generation so determined to bridge gaps and work as a team.”

The kids will be all right, Howe agrees. “The optimist usually ends up achieving better results than the pessimist.”

Sure enough, Fuchs scored a job assembling light-rail cars in Mukilteo at $15 an hour. He was also cooking at a restaurant three nights a week, trying to save enough money to fly back to Fresno, fill a rental truck with his stored furniture and bring it to an apartment he hopes to rent.

The light-rail job is scheduled to last just a year. But for now, Fuchs is relieved — though exhausted. “I like building things and sweating,” he says. “I’m beat, man. I’m beat.”

Bob Young is a Pacific Northwest magazine staff writer. Cliff DesPeaux is a Seattle photographer.

Seattle Real Estate Tyler Freed

Mortgage trends to watch at year’s end

By HOLDEN LEWIS

Bankrate.com

Related

Mortgage rates will remain low, getting a home loan will continue to take a long time and refinancers will be tempted by mortgages with zero-closing costs.

Those are some of the trends industry insiders may see as the year closes out.

Mortgage rates have dipped to modern record lows this fall. In the spring, economists warned that rates would be rising by now.

At the end of March, the Federal Reserve wrapped up an initiative intended to drive down mortgage rates by buying $1.25 trillion worth of mortgage-backed securities. The consensus view throughout the mortgage industry was that rates would rise steadily through the end of this year.

Instead, mortgage rates fell steadily through the summer and into the fall. Now, economists speculate the Fed might start buying Treasury securities to drive long-term interest rates even lower. The speculation seems to have put a cap on mortgage rates.

“I see rates low and I see them continuing low for a pretty long period,”says Paul Anastos, president of Mortgage Master, a lender based in Walpole, Mass.

A.W. Pickel, CEO of LeaderOne Financial, a mortgage bank based in Overland Park, Kan., says he doesn’t see how rates could go much lower.

“The mortgage interest rate should be inflation plus cost of funds. That should put us in the 4s, which is where it is,” he says.

With rates at record lows, borrower frustration is at record highs. It seemingly takes forever to get a home loan, especially a refinance.

“Underwriting turn times are absolutely awful across the board right now,” says Dan Green, loan officer for Waterstone Mortgage in Cincinnati. “Many lenders are recommending 60-day (rate) locks right now, just because of volume.”

The process is particularly brutal for homeowners who have home-equity loans or home-equity lines of credit. Before they can refinance, these borrowers have to persuade their equity lenders to resubordinate, or agree to keep the loan in second-banana status.

Rates are low, but relatively few people are refinancing their jumbo loans because underwriting is strict, Anastos says.

Jumbos are not guaranteed by Fannie Mae or Freddie Mac. Consequently, jumbo rates are higher because they pose more risk to the lender.

The average 30-year fixed-rate mortgage rose 9 basis points, to 4.51 percent. A basis point is one-hundredth of a percentage point.

Seattle Real Estate Tyler Freed

Days numbered on 6% FHA concessions
By Kenneth R. Harney

Syndicated columnist

WASHINGTON One of the key attractions of FHA home-mortgage financing is going, going, but not quite gone. Sellers and buyers who move fast can still make the most of it.

Sometime this summer, the Federal Housing Administration plans to slash maximum “seller concessions” from 6 percent of the home price to 3 percent.

Seller concession rules allow buyers to look to the property seller to pay for a variety of services and taxes connected with the transaction loan-origination and local transfer fees, appraisals, inspections, closing and escrow costs among others though not the down payment.

Say you’re buying a $200,000 house. If you are using FHA financing, under current rules you can structure the contract so that the seller agrees to pay all closing costs and even some repairs the house needs at settlement, up to 6 percent of the price or $12,000.

On a $400,000 house, allowable concessions go to $24,000. That’s huge, especially if you struggle to come up with a 3.5 percent down payment and you’re not sure where you’ll find the closing and repair money.

Contrast that with Fannie Mae or Freddie Mac conventional financing, where seller concessions generally are limited to 3 percent. For many buyers, the extra negotiating flexibility built into the FHA program makes the choice between programs a no-brainer.

When FHA officials announced the policy change earlier this year, they said the long-standing 6 percent maximum “exposes the FHA to excess risk by creating incentives to inflate appraised value.”

That would occur when sellers agree to pay buyers’ closing and other expenses but merely tack those costs onto the final sale price of the house. Rather than agreeing to a $200,000 price as in the example above with $12,000 worth of concessions, the final contract price of the house would instead be $212,000.

If an appraiser did not detect and report the price boost, FHA would effectively be insuring a mortgage on a house worth less than the sale price.

In fact, since the rules allowed a 6 percent seller concession and the down payment was just 3.5 percent, FHA would be insuring an underwater loan from the start.

To limit further possible losses, FHA decided to cut the concessions limit in half. In its announcement, it said the change would occur in “early summer” after publication of a Federal Register notice and a public comment period.

But Lemar C. Wooley, an FHA spokesman, confirmed May 19 there has been no Federal Register announcement.

Since comment periods frequently run for 60 days followed by a review period, it appears any start date for the change has slipped to late summer at the earliest.

Wooley said in an e-mail that “early summer may be stretching it, but I’m told that we do still expect it this summer.”

Why does the timing matter? Whatever you might think of FHA’s existing seller concession rules, the fact remains: Concessions of 6 percent are still allowed, and will be until FHA announces they’re not.

Buyers and sellers who have a legitimate need to build concessions into their contracts can still do so, but they need to know the clock is ticking.

Smart real-estate agents and loan officers already are putting out the word: If a sale deal needs the 6 percent FHA feature, get the contract put together as fast as possible.

Abbie Higashi, national designated broker for ZipRealty of Emeryville, Calif., said she understands and supports the FHA move but that until the change takes effect, agents should “do the deals now” if more than 3 percent concessions would help the sale go through.

Paul Skeens, president of Colonial Mortgage Group in Waldorf, Md., said he is advising loan applicants to request a “good-faith estimate” upfront that provides for the seller to pay 100 percent of closing costs and prepaid fees “so that in cases where the buyer doesn’t have much more than the down payment, that’s the only cash they’ll need to close” on an FHA loan before the policy change.

Skeens said he’d prefer FHA adopt a “sliding scale” approach to concessions, with higher concessions allowed on lower priced homes, and the lowest concessions allowed on high-priced properties.

Since closing and loan expenses generally represent a larger percentage of the total transaction on lower-priced houses, he believes the new 3 percent rule across the board “will have a much heavier impact on the people FHA traditionally has served,” who are buying modest priced houses and have limited cash resources.

Kenneth R. Harney: kenharney@earthlink.net

Copyright © The Seattle Times Company

Seattle Real Estate Tyler Freed

Seattle’s Todd Pacific Shipyards stays afloat in a sinking industry
By Susan Gilmore

THERE SHE WAS: one of the state’s most influential legislators, a 69-year-old grandmother fitted with a hard hat and goggles and climbing a narrow, icy ladder while dodging sparks from a welding torch on a cold December afternoon.

Why do that?

For state Sen. Mary Margaret Haugen, who chairs the powerful Senate Transportation Committee, the answer was simple. It was her chance to get a good, close look at a Seattle institution, Todd Pacific Shipyards, and the work it’s doing now on the contract to build the next state ferry. “It’s extraordinary, what’s going on,” said an impressed Haugen during a tour with colleagues. “This is a shipyard that produces family-wage jobs. I’m very pleased.”

The tour was just the latest volley in a publicity blitz staged by Steve Welch, the soft-spoken yet high-energy CEO who’s become the biggest cheerleader for the new ferry and for the company that’s building it.

Three months earlier he’d escorted Gov. Chris Gregoire on a similar tour, trailed by dozens of reporters who were handed flash drives depicting Todd’s ferry success.

“For the next 50 years you’ll be able to tell friends and family, I had something to do with it. You’ll get bragging rights,” he told Haugen and the crowd.

Its burly piers jutting into the chill waters off Seattle’s Harbor Island, the 28-acre Todd Pacific Shipyards offers plenty for locals to be proud of. With nearly a hundred years of history on the waterfront, it’s part of our maritime culture. And while shipyards around the country are closing as the shipbuilding and repair industry dwindles, Todd is an anomaly. It continues to thrive.

Busy building the new state ferry and holding a contract to build at least two more, it’s also working full steam repairing ships for the Navy and the Coast Guard. The Coast Guard icebreaker Healy, the length of 1 ½ football fields, is at Todd now for major repairs — a contract worth $12.5 million. There is so much work on Navy ships from the Bremerton and Everett naval shipyards — half of Todd’s income comes from repairing Navy ships — that Todd has satellite operations there.

In large part because of its government contracts, Todd posted first-quarter revenue in 2009 of $34.6 million — a 90 percent increase from the same period the year before.

Numbers like that have gotten the attention not only of state officials like Haugen but of others who praise the company’s ability to continue paying good wages to blue-collar workers who’ve steadily lost jobs to the American Gulf Coast, where labor is cheap, and to Asian yards, where it’s even cheaper.

“It’s an important success story for Seattle’s waterfront,” says David Olson, a political scientist at the University of Washington.

Good wages and plenty of work stand out at a time when the local economy at large is anything but secure. But Todd veterans know only too well that their boats float largely thanks to government contracts. And those come and go on the tides of global economics, practical realities and political priorities.

Still, the story of how Todd has managed to chart a course through labor contracts and shareholder expectations, creditors, competitors and a pile of demands from both government and private customers is a lesson in survival worth telling.

WALKING THROUGH the shipyards at Todd invites an assault on the senses. Bright flashes from welding machines slice the air, trucks clatter over asphalt delivering tons of steel to the berths where workers in steel-shanked boots crawl over ships in various states of construction or repair. Cranes strut up to the sky. One immense dry dock stretches more than 800 feet into Puget Sound. Huge pieces of metal, many parts of the ferry project, lay scattered in the sheds where workers can stay out of the rain. It’s so noisy inside, workers must wear ear protection.

But always, work stops at 11 for lunch, and there is quiet for a time.

Inside the main office, the walls are a kind of shrine to the array of boats that Todd has either built or repaired. Alaska ferries and Washington ferries. Fishing and tug supply boats. Submarines. Navy ships. There’s a picture of the USS Shoup, a Navy destroyer commissioned in Seattle in 2002 and homeported in Everett. There’s the Pacific Glacier, a fishing boat built at Todd in 1974 and the state ferry Coho.

It’s an infinitely more complex place than it was when William H. Todd, a Brooklyn boilermaker, founded the company in 1916. With a group of colleagues, he bought New York’s largest ship-repair facility, then expanded it to the West Coast, purchasing Seattle Construction and Dry Dock Co. By 1920, the rapid growth of automobile traffic from the Olympic Peninsula had put a strain on the “mosquito fleet” of small steamboats. Todd made the strategic decision to develop a new specialty: converting the steamboats to large, seaworthy ferries.

Todd continued to grow and diversify, particularly during the two world wars, when shipbuilding was at a premium and Todd, as a key player, expanded around the country, running yards from the East Coast to the South and up the West Coast from Los Angeles. It started hiring skilled workers, many who spent their entire working lives at Todd and passed on the passion to children and grandchildren.

During World War II, Todd’s ranks reached their zenith at 57,000 workers when the shipyard built, converted or repaired 23,450 ships — mostly for the U.S. government. But when the war ended, so did demand for much of Todd’s work, and the next few decades would be as full of ups and downs as a stormy sea.

In the 1970s, the company got a boost from state contracts to build two big, double-ended ferries and from Navy contracts for frigates and destroyers. But then came the ’80s. The frigate contracts dried up, other Navy contracts failed to turn a profit, and some ships Todd had counted on fixing were scrapped instead.

Todd was forced into bankruptcy court and filed for protection under Chapter 11; the corporation ended up closing all its shipyards, sparing only Seattle’s.

State lawmakers gave Todd an advantage by passing a law requiring that all new ferries be built in the state, but it was no guarantee of survival.

The company’s biggest challenge came when dissident shareholders nearly took over. Patrick W.E. Hodgson, who was CEO of Todd Pacific at the time, said his allies formed the so-called Todd Shareholders Protection Committee and won a proxy fight against the dissidents, keeping control of the company.

“It was just putting all your fingers in the leaks and bringing common sense,” says Hodgson, who lives in Toronto and is chairman of the Todd parent corporation’s board of directors.

If the shareholders’ committee hadn’t stepped up, “this would be real estate,” current CEO Welch says. “What was more remarkable is that afterward, most creditors were paid 100 cents on the dollar.”

Welch, 52, came to Todd in 1994 from King Broadcasting, where he worked as a financial officer. A Missouri boy, he had no maritime background but says he was drawn to Todd because the investors, many out of Seattle, were trying to resurrect the shipyard. “That led me to an industry where the focus was on good management and not on escaping the debt monster,” he says.

The next few years were a mix. Todd won a $182 million contract to build three Jumbo Class ferries — the Tacoma, Wenatchee and Puyallup — in the late 1990s. At the same time it won a five-year, $79 million maintenance contract with the Navy. And five years ago it won a contract worth up to $133 million to repair and maintain the Navy’s Puget Sound-based aircraft carriers. The announcement of that victory came, though, after word that Todd was laying off 500 workers because the Navy canceled a plan to overhaul a large supply ship.

Today, Todd employs about 800 workers, many of whose fathers and grandfathers worked here, too. “We want to become the best shipyard on the West Coast,” Welch says. “It’s an unusual business. You can see our project. It’s right there. How many businesses can you touch your project?”

JEFF TITUS is a machinist and shop steward at Todd. Before him was his grandfather, a pipe fitter, and then his dad, who worked for Todd until he died of Lou Gehrig’s disease. Titus wears his father’s name on his hard hat, and the company helps the ALS walk he takes every year in memory of his dad. “Todd is a great family,” Titus says.

It’s a common theme from the men and women who scurry around the new 64-car state ferry Chetzemoka.

Brandon Corkum, 33, has been working at Todd for five years. His father and grandfather worked for Todd, too, and he hopes his 16-year-old son will join the company in two years, making theirs a four-generation Todd family. “Todd is my home,” he says.

Teresa De La Rosa, on the other hand, didn’t know anything about Todd — much less shipbuilding — when she left work as a train conductor in France, returned to Seattle and signed up for a welding class at Seattle Central Community College. She put herself on an apprentice list and was sent to Todd. Now she’s an apprentice boilermaker learning how to weld and working on the new ferry, one of the few women in the yard. “I’m working with people who have over 35 years’ experience, and it’s an honor to work with such talented people,” she says.

De La Rosa, 38, is part of an apprentice program that Welch says will help replenish the ranks of his company’s graying workforce, whose average age is 49. It’s also true that the state contract for the new ferry required Todd to have 12 percent of its workers in the apprenticeship program; the number goes up to 15 percent for the next two ferries.

The job can be scary: Workers climb tall cranes and go down deep holes. They’re constantly around cold, murky water, handling tools and materials that can burn, stab, cut or crush. You can get filthy fast.

“It’s romantic in a really gritty way,” says Welch. “People who work here, they work hard.”

But the pay is good. Journeymen can make $21 to $24 an hour, and with benefits it’s up to $30 an hour. With overtime, Todd workers can make $50,000 a year. Apprentices can make up to 90 percent of the same wages.

With 10 labor unions, there are plenty of rules and plenty of opportunities for strife. But in 2008, Todd struck a new five-year wage agreement calling for an average increase of 4.5 percent each year at a time when many Puget Sound workers were facing pay cuts.

While such a deal is huge in keeping the labor peace, it’s more than that.

George Robertson — who worked as a “frigate baby” back in the day — retired at the end of 2007, then came back to help build the new ferry as a machinist boss. The work, Robertson explains, is “in my blood. It’s what I was put on earth to do.”

On the water surrounding the shipyards, workers can watch the state ferries travel between Seattle and the Kitsap Peninsula. “I can recall things I did to them,” he says. “You can take pride in what you do.”

TODD WILL need more than worker pride and labor peace to keep going. It is, after all, an anomaly. And the business faces many challenges — not only competition from other shipyards but also uncertainty about future contracts from government departments looking to tighten budgets.

There is, too, the remaining cleanup of contaminated Harbor Island. Todd has said it spent $30 million on the effort and has won several environmental awards for its work. Heather Trim, with People for Puget Sound, an environmental group focused on protecting the Sound, says “there’s no big red flags” on the yard.

The biggest issue is finding work.

Economist Dick Conway says the shipyard industry continues to shrink, so much so that the state Department of Employment Security no longer identifies shipbuilding as a separate category of manufacturing.

Todd has some local competition from Dakota Creek Shipyards in Anacortes, J.M. Martinac Shipbuilding of Tacoma and Nichols Brothers Boat Builders on Whidbey Island. But Todd was the only one to bid for the three new 64-car ferries; Nichols Brothers just emerged from bankruptcy protection.

And while the build-in-Washington law helps, it’s not a slam dunk. The state rejected Todd’s first bid on a smaller, 50-car version of the new ferry for Port Townsend, for instance, saying it was too high.

And questions remain about whether such an arrangement gives the state the best deal they could make. Todd is “competent and economically sensible,” says Bob Distler with the state Transportation Commission. “But when you know you’re the only game in town you might not sharpen your pencils as much as if you have competition.”

Others say the state could get better prices if it opened bidding to companies in, say, the Gulf Coast, where not only labor but essential materials like steel are far cheaper.

In the Port Townsend ferry case, Welch countered that the state estimates were not detailed enough to have a fix on the true cost, and that the state created a tall order with demands for quick completion while employing a high number of apprentices who could not work as fast as experienced tradespeople.

For now, the most challenging problem facing Todd is finishing the Port Townsend ferry by the June deadline. The financial incentive is huge: For every day Todd is late, it will have to pay a $6,000 penalty. For every day the boat comes in early, the shipyard could earn $10,000.

But even if it brings the ship in on time, the larger question looms. Two years from now, will there be work for Brandon Corkum’s son and the next generation of boatbuilders here?

Susan Gilmore is a Seattle Times staff reporter. Alan Berner is a Times staff photographer.

Seattle Real Estate Tyler Freed