I attended the Community Breakfast hosted by the Seattle Chamber of Commerce yesterday titled “Housing Trends and Impacts on the Puget Sound Economy,” featuring Diane Sugimura, Director, City of Seattle Department of Planning and Development; Peter Orser, President, Quadrant Homes; and Bill Fleckenstein, President, Fleckenstein Capital. The perennial questions, “has the housing bubble burst” and “is the economy headed toward recession” were again hashed over. This morning’s Seattle Times headline, “One not-so-rosy view of Seattle-area home prices,” featured a story covering the event. In truth, the questions were not answered because no one really knows. The other markets with gloom and doom real estate trends used for comparison were last year’s high flyers, Las Vegas, Miami and San Diego. Mr. Fleckenstein stopped short of making any actual predictions about where our market is headed. He did have some timely comments on the sub-prime lending market and a veiled pronouncement about upcoming events that will further impact this sector of the lending market. Mr. Fleckenstein also presented the audience with a handout that illustrated the impact of home equity borrowing on overall national economic growth over the past decade. The results are not surprising. The graph illustrated that to a great extent Americans have been living on borrowed wealth capturing the wave of home equity growth. If the real estate market continues to stall there will be many, many Americans underwater on their home loans and personal wealth. Needless to say this will result in further increases in personal bankruptcies and home foreclosures, negatively impacting the real estate market and economy. Quadrant Homes as merchant builder continues to serve that sector of the market that for the time is hopefully insulated from a price downturn — affordable single family homes — boasting 6 starts and 6 closings per day. Mr. Orser’s point that buyers need to closely monitor their spending between loan application and closing to avoid a disqualifying event illustrated the homebuilder’s sensitivity to his customer’s needs. Occasionally, I am contacted by a disgruntled home buyer who has lost their loan due to post-application borrowing. It is a difficult situation to deal with especially if an existing home sale is moving toward closing. None of the panelists or audience professed owning a crystal ball. Our local economy remains strong. Let’s hope that last quarter’s increase in foreclosures; changes to the sub-prime lending market and national real estate trends have minimal impact on our Puget Sound real estate market.

The Federal Trade Commission issued an updated Franchise Rule today. The update amends the Franchise Rule originally promulgated in 1978. The purpose of the amendments is to harmonize state and federal disclosure rules. A further goal of the new rules is to account for changes in the marketing of franchises and to address certain franchise-relationship complaints of franchisees aired during the amendment proceedings. The amended rules also acknowledge the substantial difference between a “business format” and a “business opportunity” franchise and separates the requirements for each. The new rules have phased-in effective dates. On July 1, 2007 franchisors have the option to follow the new rules or the applicable existing rules. After July 1, 2008 franchisors will be required to follow the amended rule. An overview of the amendment will be outlined in future posts.