Real estate: Foreclosures weigh on rebound Chris Gunther uses an excavator to prepare a driveway for a concrete pour at Wynstone, Quadrant Home’s new development in Federal Way. The company has made several changes to help drum up business, including possibly moving into the multifamily-home business. Economist and forecaster Dick Conway, who has spent three decades tracking the national and local economies, doesn’t mince words when asked about the state of the nation.“The economy is just a mess, and some people say it’ll be a mess for another five years,” Conway said. “I tend to be a little more optimistic, but so much depends on politics.“That mess, unfortunately, is helping to hold back recovery here, and 2012 isn’t likely to be much better than 2011.The region’s tailwinds — surging employment at Boeing, a stable information-technology industry, a strong export sector — will run up against stiff headwinds: the wheezy housing market, Europe’s long-running debt crisis, slowing economies in Asia, and the prospect of continued political uncertainty and partisan stalemate at home. Washington and the Puget Sound region probably will continue to be a little better than the country as a whole. The state Economic and Revenue Forecast Council, for instance, projects both payroll employment and inflation-adjusted personal income in Washington will grow 1.2 percent next year, versus 1.1 percent for the nation as a whole.
But “a little better” may not be enough to make much of a difference in people’s lives — not the 286,100 Washingtonians who reported being out of work last month, the uncounted thousands more who are underemployed, or the nearly 63,000 who have dropped out of the labor force entirely over the past 2 ½ years.
“We need a catalyst to propel the economy into a virtuous growth cycle,” Conway said. “But it’s hard to find anything out there that’s going to jolt us out of this. It’s going to be a slow slog.”
Here’s a closer look at some of the key drivers of the Puget Sound-area’s economy, and the factors likely to shape their performance next year.
Exports
The export sector has been one of the few local bright spots, and that’s a good thing. As Conway said, “If we’re going to grow, we have to look for export markets, because the fastest-growing markets aren’t here — they’re outside our borders.”
Through the first nine months of 2011, Washington exports were running nearly 24 percent above the 2010 level. Transportation equipment — primarily airplanes, of course — is the state’s biggest export category: Through September, some $19.5 billion worth had been shipped overseas.
But the second-biggest export category may surprise urban Puget Sounders: agricultural products, worth nearly $8 billion in the first nine months of this year.
Anderson Hay & Grain of Ellensburg, one of the state’s top agricultural exporters, has barely noticed the recession. CEO Mark Anderson said demand for hay and straw has been stable in the company’s established markets, such as Japan and South Korea. Meanwhile, newer markets such as China and the United Arab Emirates are growing.
“There’s a pretty good commitment on (China’s) side to rural development in general and to a strong dairy industry and self-sufficiency in fresh milk,” Anderson said.
The third-generation, family-owned company has benefited from high prices for hay and other commodities, as well as from the generally weak dollar. China’s yuan, for example, has gone from about 6.6 to the dollar at the beginning of the year to 6.3 now, making U.S. goods cheaper for Chinese buyers.
Anderson said a sudden strengthening of the dollar or devaluation of his customers’ local currencies would hurt business. Beyond that, he said, the company’s biggest challenge from the recession has been higher freight costs: With fewer imports coming into the United States, fewer empty shipping containers are available to take Anderson’s products back overseas.
Eric Schinfeld, president of the Washington Council on International Trade, pointed to two trade-policy developments with special meaning for Washington. The new U.S.-South Korean free-trade agreement could lead to 10,000 extra jobs in Washington over five years, he said; South Korea already is the state’s fourth-biggest export market.
And Russia, one of Washington’s fastest-growing trading partners, is set to join the World Trade Organization next year. That could benefit not only the state’s wheat and apple producers, but also the aerospace, infotech and even coffee industries, Schinfeld said.
Manufacturing
Manufacturing is more significant in Washington than in most states — mostly, though not entirely, because of aerospace. Boeing alone added more than 8,000 jobs in the state this year.
A slew of new airplane orders and an ambitious increase in the pace of production likely mean more aerospace jobs are on the way. Local employment also would receive a boost if Boeing decides to complete its Air Force tankers here rather than in Wichita, Kan.
For the rest of the state’s manufacturing sector, though, healthier business may not lead to fatter payrolls. Take Kent-based Flow International.
Flow makes ultra-high-pressure waterjets used to cut anything from paper and glass to steel plates, and for stripping paint and other coatings. The company lost money for two years during the downturn as sales plunged, but returned to profitability in the fiscal year ended April 30 on a 24.6 percent jump in sales. In the past six months, Flow has made more than four times as much money as it did in all of its last fiscal year.
How many jobs does Flow plan to add to its 300-plus local workforce? Not many.
Like many companies, Flow slashed its payroll during the recession and revamped operations for greater efficiency. As a result, CEO Charley Brown said, “We’re able with our current employee base to do more than we were able to before.”
That same dynamic is helping Flow sell more cutting tools and spare parts.
“As we’ve come out of the recession,” Brown said, “people who’d reduced their workforces and now have demand returning to what it was before (are) trying to meet it with more efficient production rather than by hiring more people.”
Flow’s customers also may have been swayed by a couple of rich tax breaks meant to spur capital investment, including one that allowed businesses to write off 100 percent of the purchase cost of new equipment. While that particular break expires Saturday, other, more limited breaks will continue into 2012.
Housing
More than anything else, the housing bust was responsible for turning a mild recession into the worst slump since the Great Depression. Housing remains the economy’s biggest millstone.
Despite an uptick in sales of distressed properties by lenders or owners behind on their mortgage payments, plenty more are in the foreclosure pipeline, said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University.
“You have an inventory of properties that are at least 90 days past due on their mortgages that, at the current foreclosure rate, will last at least four years,” Crellin said. “With that number of distressed properties out there, price appreciation in the near term is unlikely.”
Indeed, the median sales price for King County houses last month, $321,700, was 13 percent less than the median price in December 2010. Bank-owned houses accounted for 20 percent of all King County sales, up from 14 percent in November 2010.
That makes for a tough environment for homebuilders such as Bellevue-based Quadrant Homes. For years, the Weyerhaeuser subsidiary had targeted first-time homebuyers; its message, President Ken Krivanec said, was “more house, less money.”
But with fewer people able to qualify for mortgages and many of those gun-shy about buying, Quadrant has had to revamp its business. “We knew that Quadrant couldn’t wait for a turnaround to succeed,” Krivanec said.
The average Quadrant home now is smaller, and the company lets buyers customize nearly every aspect, from floor plans to door handles. An array of programs also takes some of the perceived risk out of buying a house — from paying up to six months of mortgage payments if buyers lose their job, to helping them sell or rent their existing house.
Krivanec said he was “encouraged about the possibilities” of the new strategy in 2012. But he has other options: Though Quadrant always has built just single-family homes, Krivanec said the company is studying the possibility of moving into the multifamily market.
“We’re open to it,” he said. “When I make a decision, I’ll get back to you.”
Retail
After falling year-over-year for nine consecutive quarters, taxable retail sales in the four-county Puget Sound region began to turn back up in the second half of 2010.
This year, first-half sales were up almost 2 percent from the same period in 2010, and retail strategists Pat Johnson and Dick Outcalt say the improvement is poised to continue in 2012.
The main reason: Consumers are feeling better about the economy. Consumer confidence, a leading indicator of retail sales, has strengthened for four consecutive months, and it has been buoyed locally by Boeing’s upturn and recent job gains.
“Consumer confidence in the Northwest, from Vancouver, B.C., to Eugene, is jumping right out of its skin,” Outcalt said. He expects confidence to remain elevated for three to five years, and surpass that of the nation as a whole.
However, not all retailers will benefit. There’s been a trend for years away from middle-market merchandisers, toward both upscale stores and discounters. That trend accelerated during the recession, as big-box chains from Circuit City to Linens ‘N Things have failed while the Nordstroms and Dollar Trees of the world have thrived. (The owner of Sears and Kmart said this week that as many as 120 underperforming stores would be closed.)
“If you’re a retailer in the middle — with what we call ‘popular price points’ — it’s been dangerous, and we don’t see that changing,” Johnson said. “Customers are either choosing to trade up or they’re looking for a bargain.”
Retailers also need to pay attention to events in Washington, D.C. Though Congress this month agreed to extend long-term jobless benefits and a payroll-tax cut, the extension only runs for two months.
Both programs pump significant amounts of money into the local economy. Emergency unemployment payments to Washington workers totaled $1.81 billion in 2011, or 0.6 percent of the state’s total personal income, according to an analysis by consulting firm IHS Global Insight. That was the eighth-highest share in the country.
The state Employment Security Department estimated that 40,000 unemployed workers would have lost benefits by the end of January, and 20,000 more in February, if not for the two-month extension.
But Congress will begin revisiting the issue next month, raising the prospect that hundreds of millions of dollars in spendable cash will vanish from the local economy.
“If they can’t come to an agreement to extend the payroll-tax cut and extend unemployment benefits,” forecaster Conway said, “it’ll take us even longer to get out of this recession.”
This holiday season, Quadrant Homes wants to make sure every pair of feet in Seattle is protected from the elements. To that end, Quadrant, one of Washington State’s largest home builders, is once again calling on community members to bring new pairs of socks to any Quadrant Community Sales Office or Design Studio for their “Toasty Toes Tube Sock Drive” benefiting Seattle’s Union Gospel Mission. Donors will receive free passes to the Space Needle. Donations are accepted now through Friday, December 2.
“One of our key company values at Quadrant Homes is community involvement,” said Quadrant Homes president Ken Krivanec. “We’re glad we can help again in that regard by providing warm clothing to those in our community who are less fortunate.”
The Mission plans to hand out over 20,000 pairs of socks this year through a variety of programs. In every year of participation, Quadrant has donated several thousand pairs of socks to the Mission. In the final week of this year’s campaign, the mark stands at well over a thousand.
“Quadrant Homes came to us and asked, ‘How can we help?’ Then, year after year, they continue to pour resources and support to meet the needs of the homeless in our community,” said Jeff Lilley of Seattle’s Union Gospel Mission. “Their contributions not only take the edge off of a brutal winter, but they are bringing hope to thousands who otherwise would have none.”
Quadrant Homes believes in corporate responsibility, and employees regularly support the community through grants, sponsorships and volunteer activities.
Quadrant Homes announced today the Quadrant Smart Move Advantage program, offering qualified homebuyers who purchase a new Quadrant home a three-year lease guarantee on their existing home. For homebuyers, that means a guaranteed rent payment every month, allowing people the freedom to buy the home of their dreams now and sell later.
The Smart Move Advantage program is the newest addition to what Quadrant Homes calls its Quadrant Customer Assurance Package. This collection of innovative offerings aims to boost consumer confidence and remove the hurdles facing today’s homebuyers, allowing them to take advantage of one of the best buyer’s markets in decades. In addition to Smart Move Advantage, the package also includes Quadrant’s mortgage payment protection program, homebuyer solutions and the Quadrant Built Your Way Promise.
“We understand that selling and buying a home is challenging in this market,” Quadrant Homes President Ken Krivanec said. “With programs like Smart Move Advantage, we’re working with our customers to help them find ways to make the buying process easier and provide them peace of mind about this very important decision. With the safety net of a guaranteed lease on their existing home, mortgage payment protection in case of involuntary job loss and our innovative Built Your Way promise, we want homebuyers to know that we’re with them every step of the way and that they can buy with confidence in today’s market.”
Quadrant Customer Assurance Package
The Quadrant Customer Assurance Package includes four distinct programs.
• Smart Move Advantage. Under the terms of this program, qualified homebuyers who purchase a new Quadrant home receive guaranteed rent for three years. Whether or not there is a tenant, homebuyers receive their rent no matter what – even if the tenant doesn’t pay. And everything is taken care of – from advertising the property as a rental to screening potential tenants to maintaining the property. Even gas and electric bills are covered under this program.
• Mortgage Payment Protection. Quadrant Homes offers every qualified buyer the benefit of 24 months of mortgage payment protection upon closing. Should the homebuyer involuntarily lose their job during that time period, Quadrant Homes will cover up to six months of payments (up to $2,000 or $2,500 depending on the Quadrant community). These payments include principal, interest, taxes and insurance paid directly to the lender.
• Homebuyer Solutions. Quadrant Homes offers potential homebuyers a free personal credit analysis and consultation. In just a few minutes, Quadrant’s homebuying credit consultants can help potential homebuyers discover their purchasing power, how much house they can afford and determine what the monthly payment on that house would be. This credit consultation is increasingly important as consumers explore ways to tap into today’s historic low mortgage rates.
• The Quadrant Built Your Way Promise. If a homeowner isn’t completely satisfied with their home on completion, or if it was not built to their order, they don’t have to buy it, period.
Quadrant Homes, a subsidiary of Weyerhaeuser Real Estate Company, and the Weyerhaeuser Giving Fund will award multiple grants totaling $24,000 to four different non-profit organizations serving Quadrant Homes’ communities in King, Pierce and Skagit counties.
Earlier this year, the Weyerhaeuser Giving Fund partnered with Quadrant Homes’ Charitable Contributions Advisory Team to issue a call for grant applicants in two key areas: food banks serving the greater Puget Sound, and programs that promote the well-being of active duty or veteran armed forces members, firefighters, or law enforcement staff who serve to protect Quadrant Homes’ communities.
Following a rigorous review process, Quadrant Homes and the Weyerhaeuser Giving Fund awarded grants to the following organizations.
• Air Force Reserve Care and Share Society
• Skagit County Community Action Agency
• The Emergency Food Network of Tacoma and Pierce County
• Maple Valley Food Bank
“These grant awards are part of an ongoing commitment here at Quadrant Homes to charitable giving, and part of our culture as a company” said Ken Krivanec, president of Quadrant Homes. “The four organizations we have selected are providing vital services in our communities, and we are happy to be able to help them continue these efforts.”
Quadrant Homes is one of Washington State’s largest single-family homebuilders, and is committed to supporting the needs of its customers and communities through volunteerism and giving to various non-profit organizations. So far this year, Quadrant Homes has given $38,875 in grants and sponsorships, and volunteered 277 hours in the communities they serve.
About Weyerhaeuser Giving Fund
The mission of the Weyerhaeuser Giving Fund is to nourish the quality of life in Weyerhaeuser’s communities, and foster understanding that sustainable forests meet important human needs. Since 1948 Weyerhaeuser’s philanthropic programs have directed more than $213 million to the communities where Weyerhaeuser employees work, live and play.
Quadrant Homes offers electric car charging stations. Quadrant Homes said Tuesday it will now offer home buyers the option of having an electric vehicle charging station installed in their new home.
The company’s first residential charging station has already been installed in a new showcase home in Quadrant’s Elliot Landing development in Kent.
Quadrant Homes President Ken Krivanec said Quadrant is the first production home builder to offer the option of installing a charging station. The units will cost $1,635 to install, Krivanec said.
“The Puget Sound area is known for being a community of innovators and early adopters,” Krivanec said. “The purpose is to show how the charging unit fits in the home and how easy it is to access.”
The Puget Sound area is an early market for electric vehicles. Some 2,000 charging stations are being installed throughout the area under a new $230 million federal program that will create network of 14,000 electric vehicle charging stations in six states and the District of Columbia. The network, which will include 18 metropolitan areas in Washington state, Oregon, California, Arizona, Texas and Tennessee, is expected to be completed late this year.
Quadrant is working with Schneider Electric as the charging station installer. The units are able to charge a car within four to eight hours. Additionally, the charging stations will allow users to postpone charging to take advantage of off-peak utility rates and offer protection from power outages and electrical faults. The units can automatically resume charging once power is restored.
Living up to its reputation as an industry leader and demonstrating a continued commitment to sustainability, Quadrant Homes has become the first production builder in the Northwest to offer Electric Vehicle Charging Stations as a choice for their buyers. “We are thrilled to be part of the next generation of transportation, and excited to offer our customers clean, green technology right in their homes,” said Ken Krivanec, president of Quadrant Homes. “Earlier this year, we showed our commitment to sustainable construction by building all of our homes according to Northwest ENERGY STAR specifications; with the addition of the EV charging station option, Quadrant is continuing that commitment.”
EV charging infrastructure is expanding throughout the Puget Sound, with 2,000 units slotted for installation by the end of the year. With Level 2, indoor residential EV chargers now available to Quadrant homeowners, residents have the opportunity to reduce their energy use, save money and decrease their carbon impact on the environment. The Level 2 stations are produced by Schneider Electric, and are capable of charging a car in about four to eight hours.
An EV charger is currently on display in the garage of Quadrant’s Bellevue Design Studio, and the first home unit has already been installed in Quadrant’s Elliot Landing community in Kent.
Key features of the Schneider Electric residential EV charger include:
• Delayed charging option enables users to postpone charging to take advantage of off-peak utility rates.
• User-friendly LED display indicates charging time and battery charge level.
• Ground fault monitoring and protection enables the unit to detect electrical faults and provides protection from power outages and lost connectivity. Unit automatically resumes vehicle charging once power is restored.
• More details can be found at the Schneider Electric website.