Playing Hardball in a Soft Market

Today, Black has opted for three adjustable-rate mortgages (ARMs), with rates hovering in the 4s and upper 3s, depending on how they're structured. With various lender and Federal Housing Administration assistance programs, he sees ARMs as ideal for cash-poor but creditworthy first-timers in the Seattle market's supercompetitive lower end. (Less aggressive types will probably stick with fixed rates.) If that sounds like a realtor talking, well, it is a realtor talkingbut at least he's walked the talk into his own nice North End home.

Revenge of the Renters

Remember when overpaid young dot-commers were jacking up the price of apartments during the tech boom? What a difference a few hundred million in lost Nasdaq wealth can make. Landlords are no longer sitting so high and mighty. Some now actually deign to return tenants' phone calls andgasp!ensure that apartments have heat and hot water. With Seattle apartment vacancy rates around 7 percent, explains Mike Scott of Dupre + Scott Apartment Advisors, "It's definitely a shopper's market."

Over at Capitol Hill's Rent Tech, apartment broker Wazhma Samizay says, "There's such a huge surplus of vacancies. There's a lot more move-in specials than there has been in the past." Landlords are forgoing the last month's rent in advance, or allowing that payment (and often the damage deposit) to be paid in installments. In newer buildings, Samizay laughs, they're giving away DVD players and free dinner couponsanything to attract tenants. "It's unreal."

Not only are rents being reduced, but rent-reduction deals for existing tenants have become commonplace. One example is Seattle Weekly's own famously tall, funny design director, Karen Steichen, who went hunting for a swank new bachelorette pad in the Uptown area of Queen Anne. Finding an abundance of reasonably priced nice places with OWC, views, and hardwood floors, she mentioned her moving plans to her North End landlordwho promptly lopped $100 off her $750 rent! The new rate was locked in for the next 9 monthstoo good a deal to pass up.

Capitol Hill apartment manager J.J. Kiser has seen just about every unit turn over in her two small vintage buildings. Her Gen-Y and Gen-X tenants are out of work, she says; they're doubling and even tripling upor moving back in with their parents. And her vacancies can remain on the market for months. It's not like the old days, when tenants came running as soon as she hung the For Rent sign: "Before, they were glad to beat the other five people to the door." Now, the few lookers are trying to lowball her on the rent.

And, according to Dupre + Scott's forecast for 2003, things are only going to get better for renters. Vacancy rates are expected to climb higher, with rents expected to sag 10 percent to 20 percent during the same period. The analysts conclude: "In fact, some of the rent concessions and reductions in the market this year may be repricing, not just a temporary incentive." Bad news if you're an investor who owns an apartment building. But if you're a renter, start haggling now and get a long-term lease if you canthe market is expected to shift by year's end.

Bottom Feeding at the Top

Everyone who's looking to ditch their landlord and trade up to a starter home knows that the housing market remains brutal on the bottom end. But it's a little different on the high end. Being well-off is always nice, but being well-off in the current economy is especially rewarding. Even as $250,000 buys you less and less in Seattle, $1 million can get you more and more.

The high-end home market has been hit hard by the collapse of the Internet bubble and its many ripple effects. As a result, "generally speaking, it is a buyer's market" at the high end, says Alan L. Pope, a Redmond appraiser and real-estate consultant. "Instead of 'pinnacle' values, homes are selling at 'conservative' values."

This past September, for example, Marc Y. Reguera and his family were able to trade up from Madison Park to Broadmoorthe gated golf-club community near the Arboretum in Seattle. He paid $859,000 for the house, just 1 percent more than the house sold for two years before. (In other words, the price had gone up less than the already minuscule rate of inflation.) "I really feel I got a great deal on this house," says Reguera, a manager in the finance department at Microsoft. Broadmoor, he says, is "more family-oriented" than his previous neighborhood on East 41st Street, "there's more yard space, more privacy."

Tellingly, the home's previous owner arrived in Seattle in the middle of 2000, when a certain economic optimism still reigned. He was here to open a Seattle branch of the giant executive head-hunting firm Heidrick & Struggles. But less than two years later, after the dot-com disaster, Heidrick shut its Seattle office, and the headhunter left town. Hearing about the impending sale through friends, Reguera stepped in and got the house a few days before it went on the market. "I feel like it was underpriced," he says.

But for the bona fide, everything-must-go, fire-sale close-outs, you've got to head out to the farther-flung reaches of the Eastside, where supplies of brand-new million-dollar mansions have far outstripped current demand. Last month, for example, at the upscale Lake of the Woods development near Woodinville, one Microsoft manager took a $265,000 bath on his homeselling it for $1.03 million, or 20 percent off what he paid two years ago. (The buyer could not be reached.)