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Jim Forman of Seattle’s KING-5 News reports:
“The signs of Western Washington’s slowing housing market are out there. Everywhere, you see houses that have been on the market for a while.

And just when you thought the housing market couldn’t get any worse, some local cities come under scrutiny for their home prices.

An unflattering list says Western Washington is now home to some of the most overvalued real estate in the nation.

The financial services group National City found that home prices are falling sharply in most of the country, but the bubble hasn’t burst in the Northwest.

From Olympia to Bellingham, National City says home prices are overvalued from 29 percent on the low end to 44 percent at the high end in Bellingham, which is the 5th most overvalued market in the nation.”

Bottom line:
Local municipalities and county governments need to immediately reign in their spending because lower property values will soon lead to lower property appraisals used to determine these jurisdictions’ main revenue source, property taxes.
As home sales dry up that would give consumers the ability to sell their existing property to move into another, new home construction will stop all together, meaning construction, permitting fees and sales taxes all dry up.
Western Washington’s overvalued real estate means that this area is on the precipice to see some major corrections in real estate values, tax revenues and the economic issues that have taken the rest of the nation by storm. Look out for rough times ahead!

This writer spoke about this very issue on the Yelm Community Blog August 15, 2007 in a warning specifically to the Yelm City Council during their then-upcoming budget process. That story was titled after a quote of then-mayoral-candidate Ron Harding during the 2005 election, “HAS THE BEST INTEREST OF THE ENTIRE CITY BEEN SERVED?”
On July 31, 2005, then Mayor Pro-Tem Ron Harding was quoted in the Tacoma News Tribune stating Anyone in elected office really has to serve the best interest of the entire city.

With Western Washington’s real estate still some of the most overvalued in the nation and a deepening meltdown occurring in our economy, Mayor Harding’s State of the City announcements on February 12th for a new City Hall and Yelm Community Recreation Center look doubtful any time soon.
Indeed, this writer wrote to the city’s Community and Government Relations Coordinator Cindy Teixeira this week requesting the following information on the Recreation Center:

1. Has this center been funded?
2. If so, via what source(s)?
3. If not, what are the intended source(s) of funding:
city coffers, voter bonds, other?
4. Timeline on funding/construction?

Her response was “the community center project is in the beginning stages of planning.

As we work through the planning process this year, we will consider all available options for the best possible direction to make the community center project successful.

As the details are worked out we will continue with outreach to the community.”

That tepid answer speaks volumes in light of the souring economic environment, more upcoming area funding needs, real estate downturn and other city projects in the hopper.

According to National City Bank’s Economics Housing Valuation Analysis, Thurston County and the Olympia area have a median house value of $262,500 and a valuation of 32.2%. Pierce County and Tacoma have a median house value of $284,500 and a valuation of 33.6% indicating these two areas still have a long way to go in real estate value adjustments.

And reported last week are the hard times in the restaurant industry.

And “Mortgage delinquencies hit 23-year high”

I would say the city had best take a hard look at cuts in its budget for the remainder of the fiscal year if they did not plan for a revenue downturn of at least 20% from last year!
That would “serve the best interest of the entire city”, in this writer’s view.


Posted by Steve on March 8, 2008 at 9:44 am | Permalink

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