I’ve been seeing the word “Recession” a lot in the news and I have several people ask me about it in terms of buying or selling a house. So I took the opportunity to call up Matthew Gardner, the Chief Economist for Windermere. Side note: Windermere is the only Real Estate company in the region that has their own economist, so it was a nice resource to have at my disposal.
Now as a non-economist going in, I was actually more nervous about what could happen in the Pacific Northwest before I had our conversation.
• We cover the basic concepts of a recession.
• Is this the same thing as in 2008?
• What does this mean for the big tech companies like Microsoft and Amazon?
• How will this effect real estate in the PNW?
• Should you tap the brakes if you were thinking about buying a house?
• Here’s a link to Gardner’s blog if you want more info from him.
Here’s some analysis from our Windermere | Midtown marketing team.
Unless you are an economist, navigating the different things you hear about the economy can be difficult and knowing what types of shocks set off a recession is important so let’s keep this simple. By definition a recession is not some horrific and devastating event, it is simply an economic contraction for two consecutive quarters. This means a contraction in growth of GDP, affecting consumer spending which makes up about 70% of our economy so you can see how this would have noticeable impacts. Recessions are expected to occur about every 5 years and currently we have been in a growth period for 10 years, so it is reasonable to expect an upcoming recession.
This country has overcome 47 recessions in its history, yet even just the word recession ignites fear in many. This is conceivable given the great recession we endured 10 years ago in 2008 and 2009. Though, it is important to understand that not every contractional period will be as intense as it once was before. There are different shocks that can set off a recession, in 2008 it was housing which effects a huge component of our economy. Though those wounds are still fresh, Windermere’s Chief Economist Matthew Gardner believes that this anticipated upcoming recession will be much less fierce.
Now we should focus on what the shock will be this time that sets off our next recession. In an era of social media and various platforms to utilize to help a topic blow up it is easy to see an acceleration of a subject and a bit of whipsawing that presidential tweets can stir up. Our current position with the ongoing trade war with China is a widely talked about issue that could quite likely be our next shock.
So, let’s break this down- China is patient, their first ever trade war with Russia waged for 200 years. The US on the other hand, works in 4-year increments over the election period. Situations like we are in right now come down to a matter of who is going to blink first? Gardner feels it may very likely be us. Businesses like predictability and certainty and right now, in a trade war with one of our major trading countries and working through tweets- this is something we lack.
So, what does this mean for Seattle?
In the past recessions have had an overly intense impact on Seattle, specifically the .com recession in 2001. However, Gardner highlights that this is going to merely be a general economic slow-down and Seattle won’t be overly affected by this because of its diverse employment base. There will be a decline in consumer spending at large, however Seattle has many home-based companies-Amazon for example that will make up for their loss of local sales globally.
Recession is coming. Is it still a good time to buy a home? Housing is not the driving force behind this recession and is not likely to crash this time around. If you are looking to build your wealth a great way would be investing in Seattle real estate. Believe it or not right now interest rates are low- far below what they have been in the past where we have seen interest rates as high as 20%, currently you can get an interest rate as low as 4.5%.
For Seattle specifically, the robust economy and its geographic features can support higher real estate prices. From various big home-grown companies like Starbucks, Costco and Amazon to its geological characteristics like being surrounded by water and mountains. These attributes appreciate home prices- an attractive trait for potential investors. People pay for location and Seattle has much to offer that drive up prices and continues to bring people in.
If you are debating whether now is the time for you to invest in real estate, Gardner has shared his economic standpoint on the 3 major criteria you should consider which I will share with you: 1. Are you secure in your job? 2. Are you comfortable with the debt you would be taking on and the mortgage payment? And lastly 3. Do you plan to stick around for at-least 7 years? Real estate is still the American dream and investing in it while interest rates are low could be your way of vastly securing wealth.
You can reach out to Ron directly at email@example.com
Believe it or not, the bottom 50% of American households represent only 10% of the country’s wealth. Put another way, the wealthiest 10% of Americans are worth more than the other 90% of people combined. Think about that for a minute. The raw numbers are laid out in a fascinating article in the Wall Street Journal.
The WSJ revived this study because the collective net worth of the country just passed $100 trillion for the first time. There have been countless books and articles written on the growing income inequality and multiple theories of why things are the way they are, but I wanted to take a few minutes to explore the mindset I believe is behind this amazing statistic.
How do you think about wealth?
Just so we’re on the same page, let me define what I mean by wealth. If you had to liquidate everything you own into cash, what would that number be? Sell everything in the asset column and pay off all the debts. In my definition, wealth equals net worth.
At a fundamental level, most high net worth individuals think of money as tool to make more money while low net worth people view money as the fuel needed to survive. You’ve heard the cliche, “Money to burn…?” That’s basically what low net worth people are doing. Working a job to generate income that gets burned off by the day to day expenses of living: rent, food, utilities, family, and entertainment.
Meanwhile, when you talk to a person in the high net worth category, it’s striking how differently they think about wealth. They talk about deploying capital into opportunities that will make them more money. They are constantly weighing the risk and reward of opportunities. To them, money is only a tool and can be scaled bigger or smaller depending on the circumstances.
Now I know what you’re thinking, “well if I had a few million dollars to spare, I’d go out and deploy the heck out of that cash…” But that’s the thing. It’s not necessarily the millions in reserve that make this possible, it’s the mindset.
Let’s think about this at a different scale. I was recently watching a video by internet marketing guru Gary Vaynerchuk – or “Gary V” as he’s commonly known. If you’re unfamiliar with Gary, he is a sought after motivator and speaker. He’s raw, likes to curse a lot, and hustles his butt off.
The video I watched was Gary V talking to some college football players about what he calls “flipping.” It’s a pretty simple concept. Find an item that you know a lot about, at a price that you know is low, then turn around and flip for a profit. It could be anything from sneakers to wine; from computers to Disney memorabilia. To prove his point, Gary V, who’s worth approximately $50 million, will go scour garage sales in New Jersey to find items he can flip. He makes videos for his social media channels of the trips where he will buy a Disney stuffed animal for $0.50 that he can turn around and sell on eBay for $20. To me, it’s a great example of a low risk way to exercise his high net worth mindset.
He’s training his mind to look for opportunity. To use his money to make more money.
As you get comfortable with the concept, you just move up in stakes until you can see the opportunity in a business or a building. It’s really more about the mindset than the dollar amount.
There was one other thing from the WSJ article that I found intriguing. For that bottom 50% of the people, the biggest opportunity for them to build wealth was through Real Estate. It’s the only asset class that you can live in. I say that a little bit tongue in cheek, but it’s really true. You can’t exactly move into your stock portfolio.
Here’s where the mindset we spoke of earlier can really be your friend. If you can think of where you live as an asset in addition to lodging, it’s the start of wealth building. If you’ve been stuck being a renter, just find a way to become an owner – even if it’s not your dream place right now. Having that ownership stake will empower you to build wealth and help you ladder up as you start to use your assets as tools to make more money while you live there.
You can reach out to Ron directly at firstname.lastname@example.org
By Ron Upshaw and Logic Amen.
I’ve spent a good chunk of my life living in “transitional neighborhoods.” At least that’s what they were called when I bought in.
Now these areas are being referred to as a “gentrifiable census tracts.”
Seattle is now the 3rd most gentrifying city in America according to a new study cited in the Seattle Times.
Just so we’re on the same page, Dictionary.com defines gentrify this way: “to alter (a deteriorated urban neighborhood) through the buying and renovation of houses and stores by upper or middle-income families or individuals, raising property values but often displacing low-income families and small businesses.”
As a person who only recently even entertained the idea of white privilege, let alone understand and accept it as a reality, I use to operate under the following assumptions:
1) Ignore the past. My first instinct, upon reflection, was to not even consider thinking about the historical significance of a neighborhood. I looked at it only as the current set of circumstances and if there was an economic opportunity for me.
I did not stop to ask who lived in this area historically? What is the heritage of this place? Does that story have value?
2) Don’t be the first guy in. If I’m honest, I typically waited until there was some momentum in a neighborhood before I jumped in. I would tell myself, “This might not be the safest place in the world right now, but things are trending in the right direction. In 5-10 years, this house is going to be a gold mine.”
And by “right direction,” I meant the continuation of the gentrification of the area. Property values going up because people were investing in the community. To me, the racial and historic mix of those investing was of no consequence. All that mattered to me was that the values went up.
3) Don’t focus on the losers. In every equation like neighborhood gentrification, there are winners and losers. I don’t know if I did it consciously, but I always focused on the winners. The people I saw buying in low, making improvements, then cashing out high. That’s the club I wanted to be a part of.
I can’t say that I gave much thought to the families that may have called this street home for generations that can no longer afford to live in the house they grew up in. Some people are happy to sell and make a handsome profit, but there are many who feel squeezed by the increase in property taxes and leave begrudgingly. Many even feel coerced by the force of the market’s invisible hand.
The more I’ve lived, the more I’m trying to evolve and open my mind to see more nuance to the things I take from granted. To that end, I reached out to a friend of mine and asked him to respond to my mindset from his perspective.
By way of introduction, the counterpoint is authored by Logic Amen. Logic is a journalist and weekly commentator for 91.3 KBCS. Educator and recording artist who created The Griot Party Experience to create safe places for marginalized people to heal via storytelling.
The story of how the Black seed was weeded or weed the Black seed to meet the white need…
I often tell people there is power, healing and strength in telling your story. The story of how gentrification impacted Black and Brown people in the central district of Seattle is a great example how storytelling can be used to heal old wounds, resolve conflict and lay the blueprint to building a better future.
A brief story of the relationship between the Black and Brown people and the Central District of Seattle, Washington…
The central District aka the “CD” is the second oldest community in Seattle. The international district or China Town is the oldest. The CD was also the Mecca for the Black upper, middle and working class. The CD became a robust bastion of Black and Brown intelligence and talent. The CD became the home of Quincy Jones, Bruce Lee, Jimi Hendrix, The Black Panthers, and Ernestine Anderson. Ray Charles documented how the CD was a major stop in the Chitlin Circuit. The CD was home to a robust financial community where Black owned businesses decorated the blocks. The CD was home to Garfield high school where Bruce Lee, Quincy Jones and Jimi Hendrix attended. Garfield was Washington state’s first school to break the color barrier with an enrollment of 50% or more Black students. This was Seattle prior to the 80s and 90s. It was the United States’ proverbial Hiram Abiff laying in a shallow grave in the northwest corner of the country.
As Black and Brown people began moving in, white people’s xenophobia, white supremacy, and racism were triggered. They attempted to redline the area which included gerrymandering and other exclusionary tactics until the white people conceded and fled in droves. They didn’t want to share the CD with Black and Brown people. This impacted the value of the property because with Black and Brown people comes the profile that you’re slumming it. We were dirtying up the proverbial country club pool water. It was common in the Jim Crow era that when Black and Brown people got in the pool, white people would get out. This did not change when we moved into “their” protected safe places to congregate, spread mayonnaise and pass the Grey Poupon. They headed across the water to Mercer Island, Issaquah, Kirkland and Everett. They drove south on the I-5 corridor to Renton, Kent, Federal way, Tukwila and west to West Seattle. When the white residents left, they took the property value with them.
White residents deserted the CD and the community became financially deficient. The CD became the epicenter of predatory policing where law enforcement came thru like broken contraceptives spreading their unethical practices around like a virus. The Clinton Administration rewarded the Black and Brown vote with Weed and Seed with a side of Three Strikes you’re out legislation. This led to not only predatory policing, but also predatory arrests, convictions and unjust sentencing assigned at a disproportionate rate to the predominantly Black and Brown citizens. This was the CD in the 80s and especially the 90s where I was harassed by law enforcement for having a dirty license plate and no litter bag in my car. People were getting racially profiled, harassed, stopped and detained for suspended licenses, no tabs and minor non moving traffic violations that often resulted in arrests. Too many of my comrades, loved ones and friends were pulled over while walking and riding a bike. The CD became fundraising for the Seattle Police Dept. The monitoring and supervision of the CD became job security for people who worked for the city of Seattle. Black and Brown businesses suffered because the CD became profiled as a high crime community which was instigated by how law enforcement labeled our behaviors, and this influenced how they engaged us. A gang became known as when three or more of us were gathered. Lack of job opportunities facilitated by institutional racism resulted in Black and Brown people abusing drugs and alcohol.
Gang activity flourished because they found profits in selling illegal street drugs. Street entrepreneurs from California migrated to Seattle because Seattle was labeled a new market to sling crack. Seattle is a port and military city thus many poor Black and Brown people had come to the Sea for resources and to escape poverty. Seattle has been known to have more resources than its competitive big and mid-sized cities. With this migration came the Crips, the Bloods and the BGDs. Seattle did not allocate resources to address the needs and health of the CD during this era. As with any place where there are a predominate number of Black and Brown bodies: there is a loss of empathy and compassion. Restorative and social justice is deemed inferior to punitive consequences for unwanted behavior. Contrary to popular racist stereotypes: Black and Brown people do not like or appreciate crime or poverty. Thus, Grandparents wanted out and financial opportunist sought to fund their mass exodus. You see…as a result of government policy, predatory policing and the latent discrimination in real estate: Property in the CD was cheap but was prime soil to go anywhere in Seattle—especially Downtown Seattle and neighboring communities that were home to Microsoft and emerging dot com businesses. Grandparents wanted out of the CD because of the crime and predatory policing. They sold their property for far less than it was worth. No one took the time to educate this community of homeowners who were custodians of a legitimate cultural landmark in Seattle. There was not a concerted effort to educate the Black and Brown home owner. The ruling class didn’t want us to win. The value was in them winning and us losing. So, the majority white real estate venture capitalists proceeded to flip homes like it was a pop culture trend. It was modern day colonialism. White owned interests built their future on the graves of deceased Black and Brown owned businesses. Starbucks started the purge and yoga studios lobbed cherries on top of the white American pie, while white owned cannabis dispensaries set up shop to profit on the same block that we were arrested on during weed and seed. All puns intended. The more white people, the absence of predatory policing. They stand on the block and smoke their weed without being harassed. They run thru the hood in the middle of the night but don’t get stopped and frisked for violating a non-sanctioned curfew like We did.
As I write this, I get sad. I mean tears on the edge of my eyelids sad… threatening to jump. Because too many of these white real estate venture capitalists are attracted to some vintage homes on prime soil. But there is more to the story and I am confident the people in power don’t tell them the story I just told you for the same reason the leaders in military don’t tell soldiers the entire story when they occupy a foreign country. If they told you they were there primarily there for resources and not the welfare and history of the natives…they would be less likely to follow directions. Perhaps if they knew the whole story white real estate venture capitalists would have done more to protect the cultural identity of the CD and thus show compassion to a displaced and oppressed people. The question now is: Now that you know…What are you going to do?
Indeed. What are we going to do? I can’t speak for everyone, but I would like to be part of the solution and not part of the problem.
As I type this, my house is in a city that is barely majority white: 50.2% to be exact. By the next census, it will be a white minority. Like all homeowners, I want the value of my house to go up. I want the schools to be strong so that children get a good education. I want there to be successful restaurants, bars, and local businesses.
As for what I intend to do? I think my biggest contribution can be in educating people about their options in real estate. I have represented people from many different nationalities buying and selling real estate, and knowledge truly is power.
We live in an area on the rise. There is a lot of wealth, power, and competition in play right now. I don’t know of a way to stop the march of development, but I can do my part to be more respectful of the past. I can do my part to fight hard for people to get what’s theirs, and to never be a part of being a predatory mindset when it comes to the place people call home.
Gentrification is happening, it’s up to all of us to shape it in a just and fair process for as many people as possible.
You can reach out: email@example.com
I recently had lunch with a good friend of mine who’s about to have a baby girl. Through the course of our conversation I said, “Have you ever thought about buying a house for your baby?”
There was a bit of an awkward pause, and she responded, “What do you mean?”
I then started to tell her about the concept of buying a rental property for your child as a legacy asset. It could be used to pay for college. It could be a place to live when they turn 18 (or 21). It could be sold to launch a business, or it could be held as a rental.
Most new parents I know have an existential moment pretty early in the pregnancy where they wake up in a cold sweat worried about how they will pay for it all.
If you’re an Eastsider, you are living in an interesting time… at least from a Real Estate perspective.
I’m talking, of course, about the announcement from Amazon to build their largest building in the entire company in Downtown Bellevue. After that information was released, it was also uncovered that there are plans for a Phase 2 companion building next door that puts something north of 10,000 Amazonians to the east of Lake Washington.
Couple that with the construction of the light rail corridor slicing its way from I-90 through Bellevue, and a perfect storm is brewing for Real Estate opportunities.
Now here’s the part where I need to insert a disclaimer. The ideas I’m about to present are not for everyone. I get that. It’s going to take a little imagination and an open mind. Ok, so what are we talking about?