For example: $500,000 going to $1 million is considered a 100% increase in price, yet $1 million going to $500,000 is only a 50% decline. Therefore, the same amount going down is only half the percent going up. So when they talk of “only” 10 or 20% reduction, remember this perspective.

Also, the bubble will be popped not by normal economic dynamics, but the shear fact that homes are unaffordable to the vast majority of people and currently people are only buying by taking out mortgages that require their left limb and a lifetime commitment of debt (i.e. 50 yr mortgage anyone?). These lending practices are rapidly being zeroed in on by the Fed and the media. You’ll soon see pressure to stop the risky lending…once it starts to pop, it can’t help but drop to where people can really afford them…and that means with full doc loan and 20% down.

Yes Seattle had some huge appreciation in the past, and so far there has not been any bust. If you’re all waiting for the first one in the history, I guess what’s better time than now?

As far as buying into condos even at “busted” price, it just keeps on reminding me of that post regarding condos in vancouver.

John Talbot Builders, in an effort to get out of SD quickly, is offering condos at 190K- new owners just have to finish the floors.

Thank you, I also feel sorry for me. I guess there is just too much uncertainty, we may have Japanese style deflation if housing crashes the economy and the Fed will have to lower their rate to zero for a decade trying to recover. On the other hand the history tells us that nominal prices in Seattle do not go down, and since I will pay nominal dollars when buying a house, I do not care about the inflation adjusted value when I sign a contract to buy a house.

Doesn’t seem like it will come down much, when you factor in inflation.

Sell Now! thinks it will fall all the way back to 1997 value, but I don’t agree.

I’m not sure why you think bubble theory has a speed component, but regardless, I think it will be a long, slow trip down. 2010 is what I’m targeting, and a median housing price around $240K, adjusted for inflation (~275K in 2010 dollars maybe).

I think incomes will come up, rents will come up, and housing prices will come down, but not all the way down to the beginning price – around 1997-8.

You might be able to find a bargain from a panic seller where it would make sense to buy before that, but I think it’s too much to hope for some sudden crash, and suddenly sweet homes with views are being given away for a song next year.

I was reading Sell Now! last night and the author thinks low end will only decline 10%, medium end 20%, and high-end 30%.

Thank you for the link, we are looking at the same data

HOUSE PRICE GROWTH PER ANNUM

1976 – 15.0%
1977 – 21.1%
1978 – 30.3%
1979 – 17.1
1980 – 9.5
1981 – 1.0
1982 – 0.7
1983 – 3.0
1984 – 3.4
1985 – 3.4
1986 – 3.1
1987 – 4.9
1988 – 7.0
1989 – 16.3
1990 – 27.1
1991 – 3.1
1992 – 2.1
1993 – 1.8
1994 – 2.7
1995 – 2.4
1996 – 3.2
1997 – 6.1
1998 – 9.5
1999 – 8.5
2000 – 8.2
2001 – 6.7
2002 – 4.8
2003 – 4.2
2004 – 8.9
2005 – 17.1

1976 – 1980 compounded price increase: ~ 133% (~26% per year average)
1986 – 1990 compounded price increase: ~ 71% (~14.2% per year average)
2001 – 2005 compounded price increase: ~ 49% (~9.8% per year average)
1998 – 2005 compounded price increase: ~ 91% (~11.4% per year average)

From my above calculations I see that today’s bubble is the smallest based on the “per year average” price increase. Moreover, today’s Seattle bubble is much smaller by any measure when compared to the 1980 Seattle bubble. After 1980 the nominal prices never crashed. Also, usually one would expect the prices to come down fast if prices went up fast. If today’s Seattle bubble grew since 1998, the one would assume that it may take a very long time for it to deflate, which is probably going to happen via wage inflation with nominal prices slowly decreasing or not decreasing at all. Any way you look at it, bubble theory implies fast price acceleration, 1998-2005 is not fast.

Again, I only see the bad news based on this data to me, a renter. I am screwed, I missed the fast price increase. Doesn’t anybody have better news for renters? I think there are many of us here on this blog.

From the homepulse data here:
http://patrick.net/wp/?p=220

I see only 2 years of big growth; 1989 and 1990. Recently we’ve been hitting steady median price growth since 1998. Granted, none as crazy as 1990, but 8 years vs. 2.

So we went from 95K to 141K in 2 years, but with little or no appreciation for years before or after. About a 50% gainer.

In the latest bubble we went from 174K to 333K – nearly a Double Bubble(tm) has been blown. If you extend it up into 2006, it is truly a Double Bubble.

Double the bubble, double the trouble.

Check out LAs data. They had a more sustained bubble and got nailed with 6 straight years of substantial real price declines.

It seems that the only course of action for me, a renter, is to wait for my wages to catch up with housing prices, right? My hope of QUICK housing prices crash may not come true in Seattle.

House Poor http://www.amazon.com/gp/product/0060873221/qid=1148323470/sr=2-1/ref=pd_bbs_b_2_1/103-3878801-1824661?s=books&v=glance&n=283155

I don’t really find this book particularly useful, however I did find an interesting page, which listed the chart of all the housing boom and bust for the last 20+ years in US. It listed Seattle real estate boom for 1978 at 51 percent, and 1990 at 38%, and there has not been any bust according to the chart. All of the busts it has listed have been in California, Alaska and New England area. Whether or not you believe the chart, although the number for appreciation is pretty large for last few years, but 51% and 38% boom are still pretty substantial.

Uhm…not to put too fine a point on it, zzyzx, but who really cares what your “expectations” are?

Affordability indices aren’t perfect, but they’re objective metrics that can be calculated easily for historical data. As used here, they’re a perfectly valid representation of what’s going on in the housing market — the median home is becoming less and less affordable for the median income family.

The fact that you don’t think that the median income family should be able to afford the median home is irrelevant.

Concerned renter – yes, we’ve had bubbles before but not nearly the size of the one we are currently in.

If you look at other extreme bubbles of the past, such as Japan, or LA in the early 90s, prices did indeed go down. In Japan, about 50%, and in LA around 25%, iirc.

It takes a long time for these bubbles to work their way out of the system, however.

Even though in 2004 I knew we were in a bubble, I bought anyway because I knew it could be 2010 before we worked the froth out of the Seattle bubble. I simply bought small, and well within my means. I don’t recommend doing that now, as the clock as officially begun to tick, imho.

My guess is that we will see real (infl. adj.) 2001 prices in 2010 in Seatte. That’s my timeline for moving up to a house I want to die in.

That’s what I get for talking before doing the research. I was wrong on this point. A lot of major cities as late as last year had that.

That comparism seems a bit off to my eyes. Comparing medium house sold to average income isn’t fair. Why?

Housebuying has always been a middle class and higher activity. When you’re making minimum wage or thereabouts, you rent, no matter what city you live in. Therefore, the median houseprice is not on the same scale as the average income. The former removes all of the cheap options from the equation but the average income includes their salaries.

Yes this is useful for figuring out how prices are changing based on inflation, but I never had the expectation that someone making the average salary would be able to buy the average house in a major metropolitan region. The fact that has been true (and that the median home price as late as 1997 was under 200k? What other city had that?) skews expectations.

Let’s say we are expecting 25% correction. As I read WSJ today, they claimed that the inflation is here to stay. Well, let’s say we have a somewhat high inflation of 4% per year. Let’s say house prices stay the same for 5 years or maybe they go down 6% over the period of 5 years. Here we go, now the wage inflation caught up with the house prices. What’s a renter to do? Wait for the house prices to go down some 6% over 5 years? It is not a huge drop.

The above numbers are just illustration, please do not pick on my rough calculation. The main point is that according to OFHEO data nominal prices never went down since 1975. I also checked what the prices did since 1963 – same thing, they just don’t go down in Seattle. Sure, the real prices (adjusted for inflation) do go down. But it does me no good. Please tell me I am wrong or I messed up in a big way somewhere. Otherwise I just feel that I have to be a renter for many more years.

By the way, check the price gain of this bubble. According to OFHEO price data, this bubble is actually smaller than what it was before, much smaller. Thank you.

I’ve noticed that for the past couple weeks it hasn’t dropped much after the weekend.

Usually it goes down early week then starts climbing again around Wed.

That pattern may be changing. If it does, that’s when the pile up could begin to occur big time.

Are Americans going to be floated forever by whoever is backing them up?

I really wish we could get more info and insight on this aspect of the bubble.

It’s a really important IMO.

There’s a blurb about on the Seattle PI RE link.

Isn’t that a federal govt. institution? Thanks a lot Fed for encouraging this mess.

Over the year, I’ve seen articles that put Seattle at a low of 26% correction and a high of 46% correction, depending on who was doing the calculations.

In city has appreciated MUCH more than a simple 19% would justify.

Note that the median home price has been trending upward at about $75k per half-decade. True locals will tell you that even that rate of appreciation is nuts (reflecting some frothy gains in the 90s), but for now, let’s assume that this is “normal” for King County.

Based on this observation, deviation from normal growth started in late 2003, and has continued until now. In that time, median home prices increased by $100k.

Again, if we assume that the 94-2003 growth rate was “normal,” we should then expect that the median King County home is really worth only ~$325k. This implies that a correction of about $75k is in order.

What does $75k work out to? 19 percent.

Again and again, no matter what metric we observe, we see overvaluation of between 20-30%. So tell me again…who doesn’t beleive there’s a bubble?

I’m looking forward to news of Fannie/Freddie and all the foreign backers of our bad loans.

Anybody have news or links to that kind of info?

It does feel like we are beginning to experience the beginnings of a pile up. Or a marked slow down in sales.

Maybe word is finally getting out to Seattle buyers that the market is turning and they can afford to wait.

There’s certainly been a lot of warning lately from the media.

King County: 7,556
Seattle: 2,192

On May 1st it was:

King County: 6,977
Seattle: 2,010

Not the huge increases you’re seeing in California and Florida. But it’s definitely trending upwards. But still far below “normal” for Seattle.

For example: May 2003

King County: 12,295
Seattle: 3,169

Way more houses back in 2003….

Also, it’s worth looking back at Sept. 2005

King County: 7,496
Seattle: 2,089

There were almost as many houses for sale back Sept as now. So I don’t think we’re “tanking” yet…just yoyoing

‘m

This is a pretty ominous sign since much of the prediction for Seattle I’m sure was based on it’s fairly stable inventory while other bubble areas were growing by double digits MOM. Now it seems we may be starting to join them.

Everytime I look at inventory (which is daily) I now notice a continual increase in houses for sale. Therefore, it’s clearly beginning to slow down here. If sales fall for May and inventory continues to rise, well then it’s only a matter of time till Seattle is on the same trajectory as the rest of the West Coast on a path to bubble hissing (or popping). Either way, double digit growth is not sustainable.

Enjoy.