Seattle's Urban Single Family Housing Market - 12 Month Perspective

June 12, 2000

Dear Clients & Friends,

As the stock market continues its erratic volatility, the urban Seattle housing market appears to be influenced by this uncertain climate, but not so much so that demand has been substantially influenced. As a matter of fact, demand seems to be surprisingly stable. Supply, however, has been steadily increasing and by sufficient amounts to send the Strand™ Index down below the 1450 level for the first time since last year.

Please note that this is not likely to be just a seasonal swing as the decline in the Strand™ Index is also the longest and steepest drop in a number of years and supports the idea that we are in the early stages of the long term cycle's slow period. This slow period historically lasts about six years. This is the point at which increasing debt can put a company at great risk.

Typically, when we experience a contraction in the regional housing market, three segments feel the pinch before others: 1) neighborhoods at the geographic fringes of development, 2) condos and townhouses, and 3) the high ticket housing market.

This time around, however, I believe that the high ticket housing market may actually cushion our fall. Although I don't think that the high end is immune from this contraction, there has been so much asset growth in the stock market over the past decade from which our regional economy has benefited, that there may be sufficient wealth to keep the local real estate economy stoked for a bit longer than otherwise would be experienced.

At the peak and fall of the long-term cycle ten years ago, the third quarter of the year proved to be painful for sellers. I expect that this next quarter will slow but not quite so dramatically as this point in the long term cycle, ten years ago.

Please review the graph and table below that detail the patented Strand™ Index for the urban housing market for the past 12 months. This index measures market strength by tracking changes in supply and demand. As mentioned above, you will notice that although demand remains strong, the supply has been steadily increasing. We are now well into the period where competitive pricing of your listing is critical for successful marketing.

Regards,
Robert Rothstein
Housing Market Analyst

Seattle's Urban Single Family Housing Market - 12 Month Perspective Ending June12, 2000