Real-estate bargains in the mist

It's being called a liquidation. A fire sale. A chance to "cash out the entire stock, wipe it off the books in less than an hour."

What's being sold here? Furniture? Oriental rugs? Leftover Halloween candy?

Try affordable housing.

This Sunday, a homebuilder plans to auction off 17 Issaquah Highlands condos, at starting bids less than half the list prices of a few months ago.

If you're lucky — if there isn't a rapid-fire bidding war — you might pick up a brand-new, carpeted one-bedroom with 9-foot ceilings, patio, parking space and washer/dryer for a price not seen around here in a decade: $95,000.

And they said the housing crisis would never reach us.

Suddenly auctioning off real estate is all the rage. Mostly because it isn't selling so well any other way.

That includes the cheap stuff. What's unusual about this auction is that the condos at Vista Park Ashford were built to satisfy an affordable-housing requirement for the Issaquah Highlands mega-development.

To buy one you had to agree to live there, and prove you had moderate income — $65,000 or less to buy a one-bedroom condo, $73,000 or less for a two-bedroom.

In return, prices were capped. At what was thought to be a reasonable rate back in crazy 2007: about $215,000 for a nice but no-frills one-bedroom.

Then the mortgage meltdown hit. The no-money down loan packages that drew in first-time buyers went up in smoke. About 15 percent of the units haven't sold.

The builder, D.R. Horton, has lost money for six consecutive quarters and seen its stock price lose 75 percent of its value. It decided it needed to make the empty condos go away. Fast.

So the income restrictions have been lifted. Anyone can buy them now (though you still have to live there).

"This is strictly a liquidation," said Mike Russo, a manager for the Real Estate Disposition Corporation, the auction company. "I don't remember that we've auctioned off affordable housing before. It's a sign of how hard the times are in the real-estate business."

It might be a boon for the public, though.

Arthur Sullivan runs an Eastside local government group called A Regional Coalition for Housing, or ARCH, which oversees the Vista Park Ashford condos. He said the condos weren't subsidized, so the public doesn't stand to lose anything. Government got the builders to cap the condo prices in exchange for letting them build higher-priced homes elsewhere in the Highlands.

"It's unfortunate for the builder — they were doing the right thing," he said. "But their loss will be the public's gain. If these condos end up going for $100,000 or so, well, that will really be some affordable housing!"

We'll see what happens at the Sunday auction (for more info see www.auctiontoday.com). Potential bidders trooping around the buildings Tuesday in the Issaquah mist were dubious.

"My husband thinks this auction is a big marketing scam," said Marla Volpe, of the Sammamish Plateau. "Just a way to get a lot of buyers worked up."

Russo insists it is not.

"They built these during the boom and they're going to take a big hit," he said. "A lot of these condos will go for less than they paid to build them."

Isn't it amazing the gyrations we go through?

Houses once defied gravity. The prices were so weightless the government felt it had to step in to pull some back toward the earth.

We just smashed past that level in what feels a lot like free fall.

Danny Westneat's column appears Wednesday and Sunday. Reach him at 206-464-2086 or dwestneat@seattletimes.com.