It seems that your predictions up until this point were about 6 months premature, particularly in the case of sales price drops which really only started happening in September or so. We’ve got a long way to go before approaching your 2004 valuations guess.

The easiest prediction you made, that the realtors would still be pooping rainbows, has of course proven true.

Interestingly, markets in higher end neighborhoods in Seattle proper seem to be among the slowest to reverse, which seems to be the opposite of your prediction, Tim.

Here’s my guess at this point for Seattle:

2008: -15% valuations
2009: -5% valuations
2010: 0 – +5% depending on how tight credit markets stay.

Nope, no overextension for us.

Yes, Coronado IS a very special place. It is one of the very few places I would actually live in California (San Luis Obispo, Diablo, Coronado, and Lake Tahoe).

As I am sure you understand, when I say “special,” I am referring to how people think the laws of economics, mathematics, and bubble phenomenon do not apply to them.

Coronado, as you are probably aware, sells for 13-17x median income. It’s a jewel, but an expensive one at that. I hope you are not overextended.

Dude, if you call Coronado home, you are very, very blessed.

E

BTW, I was a P-3 pilot, and spent a month in Coronado back in ‘96. It was one of the best months of my life. Unfortunately, the wife spent the entire time chucking her guts, due to her pregnancy with our eldest.

Being a Coronado native, it IS a special place. Does that mean it justifies the ridiculous housing prices? No.

OT, but were you with one of the S-3 or helo squadrons at NASNI?

Some of those cities (e.g. Boston) are much bigger than Seattle. Others (e.g. Phoenix) have housing markets that have already begun to implode.

Seattle is just battling its usual inferiority complex — we’re going to have a “world-class” housing bubble too (even if we have to start a bit later in the game).

This market is not being driven solely by California money although that is a large component. In-migration is a factor, with people coming from all over the country to Seattle for a host of reasons. Many of these people have degrees from top-tier schools and are coming to Seattle to take commensurate jobs. They drive a large portion of the market. Another part of the equity arbitrage are people taking their equity from outlying communities and moving to closer-in communities. Outlying communities have seen just as large of a run-up as other places in the wider Sound region and that translates into thousands of dollars of equity for down payments (for those smart enough to recognize it).

It would be a mistake to underestimate the effects of Asian money in the Seattle market as well. Though there are few metrics to reference, it is a very real element in the market. Seattle is a pan-Asian city and that phenomenon will not abate so long as the US stays in the Bretton Woods II arrangement that we have with the Asian economies. An adjustment of the the renminbi or a banking crisis in Asia (as happens all too frequently) could stagger this to some degree but it would probably be a hiccup rather than a structural realignment. Many Asian families buy houses and condos for their children to live in while they go to school. The UW is roughly 30% Asian with similar numbers at other schools, I would assume. That makes for a healthy bit of activity.

When a weakening happens, I believe it will start further out, where there are not land use controls (nor general appeal) as pronounced as in Seattle proper. There is a huge amount of value in being able to get downtown in 15 minutes for work. That’s why we bought in Ballard/Loyal Heights. (disclaimer: no SUV stroller, just a black lab and i’ll take drip coffee any day). Traffic functions as a geographical constraint in the same way that actual physical boundaries and water rights do.

Anyhow, these are just a few comments. I have been watching this blog (and the housing bubble) since before I bought a house. We paid mid-$400s for a mid-century rambler with 1150 SF above and full basement below with 300 SF finished rec room, garage and covered patio. It’s less than five minutes to the beach at Golden Gardens and 15 minutes to almost any location in the city when it isn’t rush hour. I figured the dirt underneath the house was worth at least $300k, meaning the house only had to contribute $50/SF. I think that it probably does. The neighborhood is immaculate and friendly. We are on a fixed 30 year loan with 25% down. Our payments are about $500/month above what we would pay for a comparable rental. We can afford it. In a rental market run-up, $500/mo. can get wasted away pretty quickly. We didn’t come close to stretching ourselves financially. I think there are a lot of other people like us out there too. There are people in this town that make a lot of money and some that know what they are doing with it too. If there is a downturn, I plan on adjusting my basis in real estate by buying distressed properties to offset any loss we might take.

$5 is quite a trim from $244.

Anyone remember the tech bubble? Anyone? When the big names were all burning and crashing, Juniper Networks (JNPR) was soaring to new heights. In the depths of the descent for the tech sector, JNPR was bid up to $244/share. JNPR was “special” and did not have the “same metrics” as the rest of the techies. CNBC treated JNPR like they did GOOG when it was released. Believe me, it was a darling.

Well, that story ended with JNPR going from $244 to under $5 in a very short time. It turns out that JNPR was not so special, and the “metrics” used to measure a company’s worth applied to JNPR just like everyone else.

JNPR is under $20 today.

Seattle is the last domino in the chain. We will fall into an environment that has NO support for real estate, unlike Boston, Florida, and San Diego. Those markets are being cushioned by a “hopeful” economy.

Nope, when Seattle goes, it will go with a huge bang.

Bubbles are bubbles. They are all the same. We are not special.

BTW, it never fails…everywhere I go, everyone thinks they are special. I’ve heard it about Seattle, San Francisco, Coronado, Silverdale, Poulsbo, Bainbridge Island, Bellingham, etc.

I’ve heard it about stocks (back up 6 years). The NAZ (5100 to 800), MSFT, JNPR, INTC, GOOG, YHOO, AMZN, LRCX, CDWC, AMAT, NTAP, CMGI, GLW, KKD, ENE, CSCO, GTW, DELL, RMBS, MU, etc. Every last one of those, at one time, or still does think that classical valuations do not apply to them. They were all mercilessly pimped by CNBC and the Wall Street Industrial Complex. They all lost significant value.

It will happen. We are witnesses to it.

I am in Bellevue.

Here’s the inventory for the in-city zips I check on seattle-realestate.com:

Fremont:April 13- 54 properties
April 23- 59 “

Ballard:April 13- 121 properties
April 23- 138″

Inventory looks to be going up for the first time since last Fall. It was dropping thru the winter.

Well, if the Seattle area is NOT special, then what would explain the persistent tightness of our market even as many other regions are starting to hurt?

If you check the #s on the Housing Tracker site you’ll see that Seattle has a fraction of the inventory of comparable cities:

As of 4/21/06

Seattle: 3,382

Portland: 4,534

Boston: 6,763

Raleigh-Druham: 8,765

Minneapolis: 16,142

Orlando: 19,481

Phoenix: 22,096

Chicago: 31,564

Atlanta: 41,392

San Francisco has us beat at: 1,873

We have one of the tightest markets in the country…that’s for sure. But how long will it last?

Sound about right?

Why is the Seattle area seeing such a resiliant real-estate market despite all the weakness growing across the country? Are we truly “special”?

Isnt’ this just precious?

(I’ve driven cars that didn’t cost that much.)

Designed for running, but most often seen in front of people wearing polar fleece, sipping coffee at the local Starbucks.

Aw c’mon, Canadians are T-riffic!

yep, that’s me….it’s actually pretty nice being bland.

What the hell is an SUV stroller anyway?

All I’m saying is that it’s real easy to find interesting stuff behind these facades.

Find me a Vegan Seattle-ite who hits Yoga daily but is also a gun nut with an arsenal of vintage Colts, and I’ll show you exciting…

Or find me somebody who brags about listening to KEXP but also has a KVI sticker in their back window…

Or a computer programmer who drives a monster truck, but also enjoys hitting the neighborhood coffeehouse book club…

polar fleece, SUV strolelr at the Starbucks? *yawn*

Tue Apr 25, 10:42:54 AM PDT

+++++++++++++++++++++++++++++++++

Time for a check-up?

Yeah, right. And the little snarky part about “popping out 1.5 kids” wasn’t a generalization, now was it? I mean, you literally saw multiple families with “1.5 kids”, right? That wasn’t intended AT ALL to generalize about certain swaths of the population, was it?

And even if you weren’t generalizing (which you clearly were), your observation of people as “bland” purely upon sight is about as elitist as it comes. Because you stopped and had in depth conversations with all these people and found out all their individual hopes and dreams as humans, right?

Give it up.

Idiots here think don’t understand why the Taliban wants to blow us away too – I mean, didn’t they see the Canadian flags on our backpacks?

The Chinese higher-ups are pretty good about “changing direction and focus” when they feel it’s neccessary.

They’re also good at “damage control” and planning for and anticipating the future, both near and far.

And remember, a lot of the ruckus that we see here- like the peasant riots over gov’t. land takeover- most Chinese never even see that stuff.

It’s kept off TV and out of the papers. The infrastructure there is medieval in most places. So communication from one rural area to the next is not great.

In the meantime, so many Chinese are moving ahead economically from what they ever dreamed possible 10 years ago, that there’s a general “good times” buzz in many places.

Hard to argue things are not getting better when your town finally has indoor plumbing, electricity and cell phones (after decades of one general use public phone for the whole town).

Swift economic progress and an undeniable uplift of living standards from sub-par to basic, has a way of pacifying crowds.

I will be very surprised if China explodes into civil unrest in the next 20 years.

I think China’s on a pretty solid footing right now, both domestically and internationally and they will be a fierce economic competitor.

Nick is waaaayyyy too hostile, probably the kind of kid who got his ass kicked all the way through high school and now feels he can be tough on a message board, it cracks me up to read his posts.

I live in Queen Anne, yes, I rent. One thing I have noticed and agree with is that YES, people are VERY, VERY SMUG in Seattle. Disgusting actually. People are always patting themselves on the back here: “we are the most literate, we have the highest amount of college grads, we have a lot of parks, we, we, we”…it gets tiring being a normal person here.

Please, do tell. What are you seeing out there?

Does anybody make 20% downpayments anymore?

When you build your entire economy on speculation, debt, and cheap oil, you are just begging for trouble.

I agree that China is more screwed than we are, if this scenario comes to pass.

Oh Contrare.

I assure you, it’s occuring right now.

Regards,
Your friendly escrow “front row seat” market watcher.

I hope I’m wrong but too many things tell me this could be all too right…

You need to learn the difference between a generalization and an observation. Go back and read what I said: I mentioned some people that I saw (bland people, living bland lives, blandly), and said that they were bland. That’s an observation. Nothing to get worked up about, see?

A generalization, Nick, would be (for example) saying that “Nick and his entire family are bland people, because they live in Seattle.” See? I’ve never met you, Nick. Nor have I met your family. And yet, I would be calling you bland, categorically. That’s how generalizations work.

So, Nick, until I see you, ambling down the street with a double-wide stroller, polar fleece and venti vanilla lattes, perhaps you should assume that you’re not in the group that I’m talking about, and chill out, OK?

San Francisco is, by far, the smuggiest place in the US. The South Park episode I refrenced, absolutely nailed it.

I lived there for several years, and it was painful. I never believed so many could pat themselves on the back, so often, over so little.

Bainbridge is humble by comparison (and Bainbridge is pretty darn smuggy).

I couldn’t help but think of this.

Seattle is, by far, the second “smuggiest” city in the USA.

Judging from the graph, it looks like about 60%. Was about 30% in 1955.

This is meaningless unless you provide us with a reference point. What was it in, say, 1986.

But evidently you DO need to be a judgemental, condescending asshole in order to label an entire set of people as “bland”. Please please please fill us all in on how distinctive and noteworthy you and your children are. We’re all just dying to hear how we can join Seattle’s condescending, cultural elite.

Highly recommend the new Harpers (May 2006 – not online), for the cover article: “The New Road to Serfdom: An Illustrated Guide to the Coming Real Estate Collapse.”

Not for the weak of heart. One interesting statistic: mortgage debt in the U.S. is now about 90% of the GDP (this means “more people owe more money to banks than at any other time in history”) and is “on track to surpass the size of America’s entire gross domestic product by the end of the decade.”

Re: Central Kitsap

I was born and raised on Navy money in Kitsap County.

The myth that CK is “different” because we have steady Navy income is just that – a myth.

Silverdale has a median income of $48K/household/year. Not bad, but certainly not the kind of thing that floats homes anywhere from 5x to 15x income. The newer developments are coming in at $350K+.

You are assuming the Navy money is the driver of local real estate – and it is, to a limited degree.

I was a USN officer for 10 years. I made more money that my submariner counterparts (I was an aviator). My squadron had 75+/- officers, all but 6 with flight pay (extra $700/mo), and only 3 of us owned a house – the Commanding Officer, the Ops O, and one of the very junior officers.

I was the Admin Div O, and was the first person you would see in case you got into debt trouble. All but one was an enlisted member.

Keep in mind, the only thing I was dealing with was child support and car loans. I never saw anyone get into a mortgage situation.

Now, EVERY COMMISSIONED OFFICER and just about every enlisted member at E-5 and above, has a house at $250K or above. Everyone thinks they are going to retire here.

I think you have a bubble in the Navy part of Kitsap, just like Braindead Island, and the rest of Metro Seattle. Rents are going out at a small fraction of ownership cost, and Squids use creative financing just as much, if not more, than the regular population.

If interest rates climb, and ARMs readjust, the ability to pay will go down. This is where the Navy salaries kill you. Prices will come down, while the cost to own them go up, but the income stays the same. If the VHA (variable housing allowance) goes down, in response to plummeting prices, the problem compounds.

The Navy has a MUCH higher divorce rate than the rest of the population, and one of the quickest ways for an officer to end his career, is to get into financial trouble.

I see CK as a trap door, waiting to spring. Bummerton has the highest crime rate in the state, due to the Navy influenced drug culture. Poulsbo is no bargain either. It is becoming a poor-man’s Bainbridge, and the Seattle money will dry up very easily as the job market becomes tougher and the King County RE market tanks.

There is no “special” place that is immune to the coming bubble. Interest rates will hit the entire population that uses US dollars, even those in Silverdale. The underlying math is universal.

There is a pecking order for Navy towns. Submarine towns are the best, followed by aviation towns. Surface towns are just hell holes (Charleston, Bremerton, parts of San Diego, No-fuk, Bayonne, etc.)

$400K in Silverdale has to make you ask, WTF?

I’ve been broaching the subject with strangers for several months now. And consistently got a “that’s nutty, housing is not going down” response.

Until this past week. Three out of the 4 people I spoke with agreed with me! And one was a realtor! I asked her what was going on with the market and she said “It’s plateaued.”

Another had a daughter in Financial Planning. Her daughter told her that the FP’s had a big meeting in Boston and they are all preparing for a recession and that housing is going to “tumble”.

Another person was advised by a realtor friend in Seattle to sell her house now and wait to make a new purchase because housing is going down.

Once enough people who have not been bubble watchers BECOME bubble watchers this could start unravelling quickly.

I think inventory’s going to be building through the summer and by Fall it will be clear that the housing extravaganza is over.

Where it goes from there is anybody’s guess.

But I do think the gains of 04/05 will be wiped off the top pretty quickly. Like within a year.

It’s random, but all we need is one good shake-up, and housing prices will topple like the million-dollar shacks teetering on cliffs over Puget Sound.

There are just too many seismically unsafe houses in the PNW….should a serious earthquake take place, a number of homes will be totalled. Market values will sink in response.

Yikes. Someone has an SUV stroller….

For the record, Nick, “real” people live “real” lives with “real” children in communities all over the world with neither sport-utility strollers, nor polar-fleece banality.

You don’t need to be bland to have kids. (You just need to have children in Seattle, apparently.)

However, other areas are showing the same sort of activity:

Area 710: Ravenna/U District/Sandpoint

March 2003: 335 listings/165 pending sales

March 2006: 210 listings/156 pending sales

Area 140: West Seattle

March 2003: 507 listings/187 pending sales

March 2006: 268 listings/240 pending sales

Same sorts of trends that you seen in Ballard. People were saying there was a bubble back 2003 and that it would burst soon. Now we are so far beyond the #s of that era. Inventory down a third and sales are the same or more. So prices have skyrocketed and seem to be still creeping up. Even if we get back to those 2003 #s, we’ll still have a long way to go to crash. But I suppose under the right conditions it could happen very fast.

‘m

Always with the disgusting generalizations. What you so condescendingly refer to as “blandness” is real people living real lives with real children. Screw you and your elitist attitude.