Posted by: Timothy Ellis (The Tim)

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

20 responses to “"Home Prices To Climb Substantially"”

  1. Anonymous

    even if they were 100k gigs they would still be hard pressed to afford the average priced home in this area.

    Oil rising and interest rates aren’t the only economic problem. How about the fact that the dollar is now viewed worldwide as a bad investment? Also, the 1.2 trillion in re-adjusting ARM’s in 2007 should make quite an impact as well.

    Rate this comment: Thumb up 0

  2. Anonymous

    Pope anticipates Puget Sound-area home prices to climb substantially this year and next, mostly because the region’s major employers, including Boeing, are doing very well

    Utter and complete NONESENSE!!!! I’d like to know who’s paying Mrs. Rhodes to puppet this ridiculous notion. You can add a gazillion jobs, if they’re not paying well into the 6-figures, no one, I mean no-one from Boeing will throw down 500K+ for your average dingy moldy northend Craftsman, NO ONE!.

    Unless they’re completely insane and grab one of those ‘funny-money’ mortgages that’s quickly withering on the vine, which by reading this articles about dimestore fools mumbling ‘gotta get in, gotta get in’ over and over again, isn’t too surprising.

    I find it absolutely crazy that this suckers lining up for bidding wars/no-inspection mob scense aren’t reading anything about these crappy pyramid scheme loans they’re signing onto. When in god’s name did this nation decide its alright to jump feet first into a situation outside the 20% 30yr. fixed realm.

    Pope’s a snake-oil salesman, nothing less, nothing more.

    Rate this comment: Thumb up 0

  3. meshugy

    Since the MLS #s for April will be out on Friday, I think it’d be fun if everyone made some predictions.

    Here’s mine:

    Inventory is rising in most areas, but still tight compared to a normal market.

    Prices are still creeping up, but not at the staggering pace of April 2005.

    Queen Anne/Magnolia area will see little or no appreciation, all other areas will continue to catch up until they top out at around 430K median price.

    ‘m

    Rate this comment: Thumb up 0

  4. Eleua

    I read this and thought I would summarize.

    “Despite all the fundamentals moving against the housing market, we expect substantial appreciation, despite historical precedent.”

    Of course they expect substantial appreciation when the economy is raging, stagnating, or contracting.

    All bull, all the time.

    I mean “bull” in every sense of the word.

    Rate this comment: Thumb up 0

  5. Anonymous

    My predictions for King County:

    Sales will be up slightly, month-over-month, but significantly (>= 10%) down, year-over-year. Inventories will be slightly (<5%) down, year-over-year.

    Median single-family prices will be up over last month (and last year), but will not top $415k, reflecting a slowing month-over-month growth rate in appreciation.

    Elizabeth Rhodes will write a fawning article, fellating the intrepid North Seattle frat boy who purchases a half-million dollar bungalow with an I/O ARM and a liberal infusion of cash from mommy and daddy, encouraging her readers to get their “investments” while the getting is good….

    Rate this comment: Thumb up 0

  6. Mikhail

    Unfortunately, I think that real-estate bears (like me) will continue to be on the defensive in the Seattle area for a couple quarters yet, at LEAST. Until we start seeing listing volumes really grow substantially, and hear of people struggling to sell their homes, my acquaintances are still going to keep thinking I am barmy.

    I can talk till I am blue in the face, but all my theories as to why we are skating on thin ice won’t matter until the numbers actually start to change. Maybe I will just have to suffer as a pariah for another year or so…

    Rate this comment: Thumb up 0

  7. meshugy

    Looks like it’s still pretty competitive in Ballard. This house just sold on April 19th:

    8034 22ND AV NW 98117 two

    3bdr/1b 1240sq ft

    Asking: $425K
    Sold: $451K

    Rate this comment: Thumb up 0

  8. emcityjill

    I am probably totally behind the curve here, but you analytical, data-heads who haven’t perused the HBSC January report oh-so-catchily entitled A Froth Finding Mission (NOTE: it’s a very large .pdf file, 1.9MB) really should pick it up. Since I’ve already admitted to being mathematically challenged, I won’t pretend to understand half of what I just read. That’s why I visit blogs like this one, where I can sift through crusty curmudgeons and nauseating Pollyannas, and find translations by knowledgeable folks who present informed opinions. Perhaps even more interestingly, there’s an Excel spreadsheet that HSBC provides, called HomePulse which will actually give you home valuation data by metropolitan area or state, including median house prices, rent, and incomes all the way back to 1975!

    It’s frustrating not having a clue what to do with such good information. I feel like a chimp who just found a banana shaped TV remote in the jungle.

    I found both of these links in this article on the New Economist web site. It’s undeniable that the UK is watching the US housing boom with more than a little interest, and seemingly they’re substantially less optimistic about the situation than Americans by and large.

    If most of you have already discussed this stuff ad nauseum, don’t shoot! I looked through the Seattle Bubble archives to see if this HSBC report had already been a topic, and didn’t find that it had.

    Happy number crunching!

    Rate this comment: Thumb up 0

  9. The Tim

    That’s some good stuff, emcityjill, and no, I hadn’t seen it before. According to their comprehensive report, Seattle was 34% overvalued in 2005, the 12th-most overvalued city in the nation! I’ll have a look over this and probably make a post about it later.

    Thanks!

    Rate this comment: Thumb up 0

  10. Mikhail

    Is there a link to the HSBC spreadsheet? I’ve seen the report but didn’t notice how to get the spreadsheet (other than subscribe to HSBC).

    Rate this comment: Thumb up 0

  11. Mikhail

    Sorry. I found the link to the spreadsheet:

    http://www.research.hsbc.com/midas/Res/RDV?p=pdf$sessionid$=6zOnlnEmxv6TSI|BSINU5CN&key=dpc74ypkpv&n=122667.XLS

    Rate this comment: Thumb up 0

  12. Mikhail

    This HSBC report is definitely interesting. However, it is still lacking some key data I would like to see to determine “frothiness”.

    - Housing construction trend data for the Puget Sound.
    - Mortgage type trend data for the Puget Sound (e.g. % of option ARMs, 100% interest, negative amortizations, etc).
    - Trend data on the % of down payment in puget sound area.
    - Trend data on the number of investment purchases in the Puget Sound vs home occupiers.

    I suspect that we may see a high correlation to the degree of bust a given region experiences and the prevalence of dodgy mortgages that had been issues. It would be interesting to see how our region stacks up.

    Rate this comment: Thumb up 0

  13. seattle price drop

    The ‘New Economist” article provided by Emcityjill is exactly the kind of concern I’ve been seeing on the CNBC “Worldwide Exchange”.

    Foreign economists have been watching the US housing market with alarm for months now. They’ve been saying all along that it’s going to take down the US economy.

    Too bad Americans couldn’t have acted a bit more responsibly over the past few years. But, who the heck cares about ANYTHING else, economic, social, political, etc., as long as you’re “getting rich” off your inflated home value TODAY. To h*ll with the future.

    The fact that so many Americans still can’t see the harm in this is beginning to disgust me to no end.

    Rate this comment: Thumb up 0

  14. seattle price drop

    Mikhail-

    S Crow has reported over and over on this site and his own about risky mortgages in the Puget Sound.

    I believe the percentage is around 70%.

    That sounds plenty high enough to me to cause some damage.

    As to the amount of “investment” properties, haven’t seen any %’s for that.

    Rate this comment: Thumb up 0

  15. SeattleMoose

    emcityjill

    Good stuff and thank you. This report just confirms my prediction of 20 to 40% price decreases in Seattle with the “bell curve” weighted more heavily towards the 40% side (avg 34%).

    It is going to be ugly here in latte-land.

    Rate this comment: Thumb up 0

  16. S Crow

    Seattle Price Drop -

    I want to clarify the 70% you mentioned.

    The 71%** I state is from our internal company stats for the closed home sale(not refinance) transactions we handled in 2005 as an escrow firm–**100% financed ARMs, many with pre-payment penalties ensuring difficulty in refinancing in a flat or declining market.

    Professionally I hope the run continues, but personally, sometimes I wonder if we are the gateway to a lot of borrowers demise. Business ethics is tested everyday in real estate. It is a very difficult business to be in when you must maintain a professional neutrality, (it’s our job in escrow) yet internally, your heart aches for these people that are putting themselves too much on the limb financially.

    Real Estate and housing in general is a fun business to be in for a variety of reasons, but some business aspects and ethical lines that are crossed creates stress that can take it’s toll on you.

    Lending in general has gotten out of hand, in many ways–such that I can’t discuss on a Blog. It is not debatable.

    Rate this comment: Thumb up 0

  17. BN

    Just a quick chime in on that “100K”
    jobs.

    You have to consider that the salary
    for software professionals with
    4-5 year experience is around 70-80K.
    Throw in a spouse who also works
    in the same IT field and you have
    easily got 140-160K/year.

    I agree that not everyone is an IT
    person, but there are quite a few in
    this area.

    As mentioned earlier, the real sign
    of a slowdown is “rising inventory”.
    Unfortunately we are not there yet :(

    Rate this comment: Thumb up 0

  18. Anonymous

    s crow, just curious about what kind of risk your company takes on when they deal with the glut of 100% ARMS?

    Do you sell that risk upstream, ala Fannie Mae/Freddie Mac?

    Rate this comment: Thumb up 0

  19. S Crow

    Anon-

    Escrow companies such as ours close real estate refinance and purchase-sale transactions. We are not lenders.

    However,there is arguably no participant in a real estate transaction that has more of a front row seat than that of escrow: we see the loans we close and, generally, the financial snapshots of the parties involved. It is a very unique perspective. If you want to know what’s going on in the market, unbaised, talk with your local independant escrow firm (one not owned by a broker, lender or title company)or r.e.appraiser.

    Rate this comment: Thumb up 0

  20. Anonymous

    thanks s crow, I think I knew that about escrow companies, I just wasn’t sure, if like you said, you were tied to a broker, etc…

    Yeah, I can definitely see how you’re getting a first-hand look at the implosion, look forward to hearing from you as things get even more ‘zany’ RE-wise here in Seattle

    Rate this comment: Thumb up 0

Leave a Reply

Do you want a nifty avatar picture next to your name, instead of a photograph of Tim's dog? Just sign up with Gravatar, and make sure to use the same email address in the form below. It's that easy!

Sorry, you have already posted the limit of 5 comments on this post.

Archives

Find us on Google+