Thursday, October 26, 2006
Prowse & Company News - October 2006
Download the October Newsletter
Wednesday, October 25, 2006
Location of Poulsbo’s New City Hall
I’ve been both a participant and an observer in the public campaign about the location of our new city hall, and I’ve sometimes wondered what all the debate is about. I’ve doubted whether my own point of view was valid. After all it is just a building - one that other than city employees, or citizens with a grievance or a court date, or contractors with a project, or local politicians, or news media, or ..., we don’t use much. Wonder why we would ever care about where the city’s hall is anyway?
For me it began with a suspicion that something was wrong with the City wanting to build city hall on a site that no one else seemed to want to purchase. It’s been more than 10 years since the Olympic Resource Management built that contemporary office building at the corner of 10th and Lincoln, yet despite a continuous stream of development along either side of State Highway 305 in the ensuing period, there have been no takers for that sloped property between Olympic Resources and the Fire Station, at least not until the City Council agreed unanimously that it was the ideal site for a new city hall. I hear that there was at least one previous offer for the property, but for reasons that have never been discussed, the purchaser backed out.
What was it that the City and their legion of advisers and consultants knew that no commercial enterprise was capable of understanding? Well for starters the city was on a mission to find a suitable site for a new city hall, and it needed to be done before the election of 2005. With the building of the WalMart complex at Olhava, the City realized that the tax revenue projections were about to undergo a radical increase, one that would allow the City to devote about $500,000 of additional revenue annually to paying off bonds for a new city hall over the next 20 years. Yes - a new City Hall is only possible because of WalMart. During 2005, the City selected the 10th Avenue site with essentially no public discussion, only opening up the discussion in late 2005 to public comment on how that site should be developed.
The plans for developing a municipal campus on the 10th Ave site were expensive - outrageously so I thought. Although the building was a pretty standard $300 per square foot, the site development costs, dealing with slopes and wetlands, raised the overall costs to well in excess of $425 per square foot for the facility. This appears to be glossed over in recent discussion. Why should the community pay $425 per square foot for a building that could be done for $300 per square foot on other sites, for example the Norm Dicks Center in Bremerton?
Also the contract for purchase of the property delayed the soils testing required for construction until after the purchase was completed. No business would agree to such a condition. Must have been national security that dictated that.
At the recent town meeting it was amusing that the 10th Avenue proponents stated that there would be little economic impact from loss of city hall downtown, since they assessed that most city employees pack their own lunch and eat it at their desks. These guys were engineers and see the world from an engineer’s perspective. I know because I was trained as an engineer and eat my lunch at my desk. I also know that most of the rest of human race does not ascribe to such standards. That’s why restaurants are open for lunch.
I was very much in favor of the City buying the office building on 7th Ave for the next city hall. I’m pragmatic and could see that $millions could have been saved doing this. It could have been a highly functional solution, regardless of the aesthetic loss. The City has never articulated all of the public improvement projects currently competing on the agenda with the city hall project, so that the citizens could see what they are losing by building a new city hall for approximately twice the cost of the 7th Avenue building. I don’t understand the argument that new construction is the only possible solution for a new city hall. So much for my point of view.
While eating my lunch at my desk recently, I pondered why should city hall remain downtown. The City’s web site portrays for the world to see a picture of Mt Rainier in the background behind two marinas and the old Poulsbo downtown - you know, the one that will do just fine when the town government moves to its new digs in 10th Avenue. The City’s logo says Viking City and portrays a Viking ship on the water - seen any of that on Highway 305 or on Viking Way or at the Olhava WalMart? Well I guess not - only downtown, where the Viking Fest Parade is held, where everyone comes on the 3rd of July for Fireworks, where they come to buy the Poulsbo Bread, where they celebrate the festival of spring, where all the architecture aims to be Norwegian. It would seem that the City government is at least invested in this concept in name - is that where it ends - in name only?
Councilman Mike Regis lectured us at one City Council meeting that we don’t recall the history of Poulsbo - that when the community grew other activities moved out of downtown to where they could better serve the community. The high school was his example, and he was right about that. In Chicago, where they have thousands of business centers, many functions of the community have moved out of downtown - schools have widely disbursed for instance. But City Hall, with its magnificent Picasso in the plaza, remains down town, just a few blocks from the Water Tower and relics of the great fire. The city government is invested in preserving the history and character of the city. Where should our city government be to invest itself in the history and character of our city?
For the Editorial Staff of the Herald and others who rely on the argument that only the 10th Avenue homework is done - that the argument for a downtown city hall lacks a critical study and therefore does not merit consideration, let us remember that the $500,000 analysis of 10th Avenue was authorized behind closed doors in a non-competitive, urgent press for legacy and political accomplishment, and that the site selected had been shunned by commercial development for years. The City is fully capable of colossal mistakes - you might recall the purchase of the Morris property as an example, yet you would bet on their completed analysis over a concerned citizenry that doth protest? Why?
Tuesday, October 17, 2006
NAR - Buyers are returning to the Market
It’s probably time we put a little positive spin on all of this hand wringing over the real estate market. In mid 2006 the National Association of Realtors (NAR) published a comprehensive report on the Seattle Real Estate market.
This report paints the strong economic outlook of the Greater Seattle area in great detail. Some of the more enlightening information in the report regards mortgage servicing costs versus income ratio. With the ratio of average home price to average income climbing from 2 to about 3 in the Seattle area since 2000, you would think that the percentage of income people spend on mortgage service would also have climbed significantly - but this ratio has remained remarkably close to the historical average of 20% - currently it is about 23% in the Seattle area, close to the national average of 22%. Lower loan fees and interest rates have kept the percentage of income used for mortgage payments down in spite of rising prices. Since the NAR report was published, interest rates have actually declined about half a percent, making this ratio even more favorable now than it was in mid summer.
David Lereah, NAR’s chief economist, said the housing market is showing signs of life and that sales may be leveling out. “Many potential home buyers who have been taking a wait-and-see attitude or taking their time and being methodical in the search process are being enticed by lower home prices,” he said. “Given a positive economic backdrop of lower interest rates and job creation, we expect sales activity to pick up early next year.”
Then NAR article also said that the current scenario presents a unique opportunity for buyers. “The supply of homes on the market is the highest we’ve seen in over 13 years, and mortgage interest rates are experiencing an unexpected decline,” said NAR President Thomas M. Stevens, senior vice president of NRT Inc. “The 30-year fixed rate is hovering around 6.3 percent, and sellers in most of the country are now showing a willingness to negotiate. While this changing market is a great time to buy, it’s become increasing important for parties on both sides of the real estate transaction process to have professional representation.”
The 30-year fixed-rate mortgage will probably average 6.5 percent in the fourth quarter but will trend up modestly in 2007. The one negative aspect of this effort to hold down the total cost of debt service is the trend towards adjustable rate mortgages, now at about 47% of all new loans. Buyers cannot count on home value appreciation in the near term to allow future refinancing to avoid the rising payment scheme of some adjustable rate mortgages.
The unemployment rate should average 4.8 percent in the fourth quarter. Inflation, as measured by the Consumer Price Index, is expected to be 3.4 percent for all of 2006, while growth in the U.S. gross domestic product is forecast at 3.3 percent. Inflation-adjusted disposable personal income is likely to grow 3.4 percent for 2006.
The strong economic picture in Seattle and in Kitsap County as well, coupled with a plentiful supply of homes on the market throughout Kitsap County, certainly reinforces the scenario that now is a good time to be a buyer.
Statistics not compiled or published by NWMLS
