No housing woes in booming Washington state

By Jim Christie

SAN FRANCISCO (Reuters) - While California suffers in the housing crisis, the economy of nearby Washington state is flourishing with strong job growth and some of the highest appreciation in home prices in the nation.

The outlook for Washington's economy is bright because so many people are moving there in response to help-wanted advertisements. Seattle, the state's biggest city, is an especially hot job market, boosting confidence of sustained growth.

Microsoft co-founder Paul Allen's Vulcan Inc., for instance, sees few obstacles to turning Seattle's South Lake Union area into a thriving residential neighborhood, given Washington state's economic strength.

Lori Mason Curran, market research manager at Vulcan Real Estate, expects 135,000 people will move into the Seattle market over the next five years, propelling demand for housing that Vulcan's property unit is building in South Lake Union.

Vulcan Real Estate's foray into building office property in the industrial and warehouse area "on spec," or without guarantees of leases, will also pay off because of healthy population and job growth, she predicts.

"Seattle is really, really strong on both fronts," she told Reuters during a telephone interview on Tuesday.

Brisk hiring, especially by manufacturers, builders and software companies, is propelling that growth, said Victor Moore, the state's budget director.

"It's the high-paying industries ... There's been a steady demand from employers," Moore said.

Their growth is helping Washington, unlike California and some other states, put aside concerns about a housing slump, at least for the near term, added state Treasurer Michael Murphy.

"With employment really strong, there is less likelihood of having defaults on mortgages," he said, noting Washington's housing sector is avoiding contagion from mortgage market turmoil arising from "subprime" borrowers unable to make their loan payments.

In contrast, the foreclosure rate in nearby California, whose motto is the Golden State, surged to the second highest in the nation in August, according to a report released on Tuesday by RealtyTrac, a leading real estate data provider.

U.S. residential construction fell to a 12-year low in August, according to a government report showing a 2.6 percent drop in housing starts. The data was released on Wednesday before Wall Street's opening bell. In the Northeast, housing starts slid 37.7 percent in August, while in the West, housing starts fell 18.4 percent, the Commerce Department said.

STRENGTH ACROSS THE STATE

While growing payrolls keep Washington's housing market intact, they are also swelling state coffers.

ChangMook Sohn, chief economist for Washington's Economic and Revenue Forecast Council, projects $281.5 million more than initially expected for the state's 2005-2007 and 2007-2009 budget periods -- raising the state surplus to more than $1.5 billion -- thanks to continued strength in housing from strong payroll growth across the state.