When rents dip, I dip, you dip, we dip.
"When rents dip, I dip, you dip, we dip." gollykim/gettyimages.com

According to Mike Rosenberg, the Seattle Times business reporter, rents in King and Snohomish counties are finally falling "significantly" for the first time in a decade. By significant, he means a 2.9 percent drop "as compared to the prior quarter." Rosenberg suggests that the market is removing some power from landlords and transferring it to renters because the number of empty apartments is growing. All of this sounds like supply and demand have not been de-linked and deformed by unknown forces. The region's housing market is behaving with the same orderly principles that direct the growth of a tree: the amount of water in the ground, carbon in the air, light arriving from the star. Some woman in Wallingford is said to be very happy about paying $1,400 a month for a one-bedroom apartment instead of $1,500.

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But here is the bad news for everyone who is not feeling it like this Wallingford woman: Construction in and around Seattle could slowdown at exactly the moment the market needs to build more and more apartments.

If we are to follow the market urbanist's logic through to the end (and this is indeed the logic that dominates the region's housing policies and politics), then developers must not just build furiously when rents are rising but, more importantly, as they are falling. If that sounds like nonsense to you, then you can finally see one of the many flaws (or contradictions) of a market-driven housing program. The value of the empty apartments in the Seattle area will be preserved or protected by a slowdown in construction. Why? Because that's precisely what falling or stabilizing prices communicate to developers and bankers: slow-the-fuck-down.

Rosenberg:

Developers and banks that lend money for new construction have taken notice of the market cooling. While tons of new buildings are already approved or under construction now, the pipeline for future projects that exist only on paper is shrinking.

Greg Smith, CEO of developer Urban Visions, said he just turned down an offer to build a new high-rise because construction costs have risen so much and rents are no longer keeping pace.

But a market urbanist will know that now is not the time to decrease or restrict the supply. We are indeed just getting this party started. There's plenty of room and demand for much greater increases in density. And the urbanist is right on this point. But their ally against the dumb low-density program of NIMYBYs, the developer, was never really motivated by the ideas or noble principles of urban density. They were in the business of making the fastest money possible. And so, when prices are signalling a "cool-down," they can only see this as retarding the recovery an investment.

The fact that a slowdown is soon following a cool-down shows supply and demand are not a solid couple.