The erosion of the fantasy money folks are “making” on their houses in the overpriced markets is nigh. Man, it’s gonna be painful to watch the implosion.

I notice the empties by looking at the photos on the MLS.

I like your way better!

Housing crash, here we come! Hang on for the ride!

If you see a bright patch of yellow, look closer. On one road I drive regularly in 98115) I spotted 5 new vacant properties. All older bungalows with no cars, no garbage cans, no signs of life at all. Level of disrepair varies, but none are in “good” shape. Everything else for sale on the street is going for $450K minimum.

Put your money in CD’s. 4.8% for 3 mos. last I checked. and probably going higher as we speak.

You can sell at any time? really? That might be true at this exact moment but not in the near future. When you are trying to sell your house with all the other lemmings, good luck on that one.

And you can’t count the $$ tied up in your house; either your down payment or any supposed equity you have gained as living expenses. It’s not liquid – it’s more like a boat anchor at this point.

As far as investing, no I am certainly not an expert but every day is a new learning experience. The money I have saved has been the direct result of being self employed most of my life.

For long term investing, take a look at http://www.berkshirehathaway.com. I stay away from speculation, and try to take a contrarian stance on most things.

As far as having difficulty finding a home to rent and being kicked out – I can agree with you there. I have owned homes my whole adult life until coming West in 2003. I have never had a good landlord experience.

but,if you have patience and can wait it out, now is the time.

Prices are going down in San Diego. The market has been flat for nearly 2 years and is finally starting to tank. It’s not nearly as bad as Florida, AZ, Vegas or DC.

Sand Diego prices are up 4.3%YOY.

See: Harvard report sees no losses from slowed sales

Is that really true? I thought prices had turned around there.

Another question for you guys–especially those of you who seem to have invested so well in the past (6 years of living expenses? In the words of M.C. Hammer, I cannot touch that.) The question – where would you recommend investing now if you believe the economy is headed toward downturn and inflation? I think cash is going to be a loser before long, obviously real estate is out as an investment, so . . . where to go?

Me too….nice feeling isn’t it? Actually my wife quit her job and watches our son full time.

I’m talking about Seattle…San Diego is one of the most ridiculously overpriced markets in the world.

There are very, very few nice 3 bedroom single family homes to rent in areas I’d like to be in (N.Seattle). Believe me, I looked. You’re always looking at an outdated dump on a busy street. Additionally, the few that are available are getting sold off at an accelerated rate. There were four rentals within a few blocks of me when I first moved in last year (all were tiny dumps). In that time two have been sold off, longterm renters kicked out and had to move. I have a friend who has been renting houses for a decade…he has to move every three years because of rent increases or because the house gets sold. I feel much better knowing I can stay where I am. Plus, the rapid appreciation in home prices means I can sell at any time and come out way ahead.

Sorry, but you are flat out wrong. We rented a house in San Diego for $1500/mo which was recently listed for $525,000. The mortgage on that house at 7% int with 0 down, with taxes would be about $4,325 per month. There isn’t nearly enough in tax savings or any other benefit to make up the difference.

After that, we rented a condo downtown for $1795/mo, which was listed at $579,000, or a payment of $4,685.

I don’t know what kinds of dumps you’ve rented in the past, but both of those places were very nice and not apartment complexes.

We rented a luxury apartment downtown when we first moved there for in 2003 for $1900/mo. The quality of life was excellent too.

While we were paying $1500-1800 a month, there were lots of 2 bedrooms available in the $800-1300 price range that might meet your description. But add $500 to those prices and get anywhere near buying ability?

I don’t think so.

And Yes, I realize that buying here is slightly less than San Diego, but not by that much.

My wife and I rent an apartment downtown Seattle. It’s $2250 per month, on the 14th floor with sound and unobstructed Rainier view. At 1200 sq feet, it would easily go for $879,000.

That payment would be $6681/mo. Then penthouse is “only” $3500. Still way below.

Yes, it’s a lot. But it’s built better than any condo I’ve ever seen. Its’ also a lot cheaper than anything in San Diego with that sq. footage and view.

>….and rentals never compare in terms of quality. They’re always severely outdated, in poor locations, etc.

See above.

>nothing with completely remodeled kitchen, basement, deck, landscaping, etc. that we have now.

the house we lived in had all that and more. Brand new hot tub – even a heat lamp for outside evening dining.

Unfortunately they got caught up in the speculation like so many other unfortunate people such as yourself and got in so far over their heads that they couldn’t give our deposit back. We sued them and won, and are currently putting a lein on their property.

>about a lower quality of life in a rental.

I can afford to go out and by myself a new Vespa LX 150 scooter every MONTH with the money I am saving. How’s that for quality of life? If my wife and I both lose our jobs today, we can live for 6 years on our savings – and at our current spending level.

How is that for quality of life?

To me, the absence of anxiety and excess pressure is what it’s all about. A ginormous mortgage, 2.5 kids and a minivan – not so much.

You have a poor understanding of money, Meshugy. Consider these two points (both completely undebatable):

a) You haven’t saved anything more than the principle you’ve paid on your mortgage. Everything else is dream money — until the day that you sell.

b) If you’re right, and your home is worth 70k more than you paid for it in 2010 (five years from the day that you bought it), that’s a mediocre annualized return:

I’ll be extremely conservative, and assume that you paid 300k for your home in 2005. If it’s worth 370k in 2010, that’s a 23% increase in five years, which works out to only 4.2% annually (for comparison, right now, my savings acccount is returning 4.5% APR. And I don’t pay for mortgage insurance, property taxes, maintenance fees, or girl scout cookes to the neighborhood rugrats).

I pay rent to Washington Mutual.

My home is essentially worthless until it’s paid off by me or if someone bought the home for what THEY think it’s worth to them.

Unless a homeowner’s house is free n clear of encumbrances, they are paying rent too. Except that the fancy word for it is called a mortgage.

————————

In other news, it was fun participating in the highly charged and humorous posts over at Rain City Guide (agent central)this evening. All about commissions, marginalization of agents and more

If you’re talking about the difference between renting comparable single family homes, it’s a lot less then $1500 more to own per month. Closer to $500….and rentals never compare in terms of quality. They’re always severely outdated, in poor locations, etc. We compared rentals last year when we bought….there was nothing with completely remodeled kitchen, basement, deck, landscaping, etc. that we have now. In most cases you’re talking about a lower quality of life in a rental. Let’s face it, most landlords do as little as possible. A fresh coat of paint is usually the most you can hope for. Apartments can be better…but if you want a single family home renting is usualy pretty crummy.

I think the market will flatten out and that prices won’t drop. But even if they do drop, it will take a lot longer then 2 or 3 years for it to happen. If you look at San Diego (arguably the most investor infested, exotic loan mad city in the US), you’ll see that despite rising inventory, prices are still rising. The median price in San Diego was up this month. In Seattle we’re not even back to 2004 #s yet….never mind any sort of real pile up of inventory.

No one can say what will happen in the next few years. But if I look back at the decision to buy, it has been a very good decision for us. We bought in April 2005….since that time MLS records show 50K increase in the median price of Ballard (where I live) and a 65K increase for all of Seattle. Comps in my area indicate that our house is worth about 70K more then we bought a year ago. If we don’t see one bit of appreciation for the next 5 years…we still have done really well. There’s no way we could have saved 70K in one year by renting.

http://www.nytimes.com/pages/magazine/index.html

Do tell us more about the coming Microsoft meltdown.

What do you mean?

BTW, I read in the Post Intelligencer last week that most of the new engineers for the new Boeing planes will be Russians, working at Russian sites.

The RE section of the Seattle Times got thicker again today.

Yeah. Ya know what’s funny about that? People who want to live in a place generally want to see it before they buy it.

Call me a skeptic, but I’ll wager that the vast majority of those “pre-sales” are to market speculators.

That’s like saying “the sky is blue” or “it does occasionally rain here in Seattle”

Thanks for stating the obvious.

>so you have to bet on rapid appreciation which might be ending soon.

might be ending soon? ya think?

>But these variables don’t matter nearly as much for a residence…especially a long term residence.

Sure, ‘d rather pay $1500 more per month and buy now rather than waiting 2-3 years when prices are more in line with fundamentals.

>if you look at the local market, developers seem to be very bullish. Especially in Ballard which has something like 6 huge condo projects which have either broken ground or will soon.

Exactly. The same cycle as in Phoenix, San diego, Vegas, etc… Again, we’re just a little late to the party and obviously have blinders on.

All I can say is that they better have presold all those units because in a few months a few of them may go out of business and we’ll start to see the pendulum swing back the other way.

Todays condos and condo convertions are tomorrows apartments and section 8 housing.

>A friend of mine has access to the NWMLS and said the huge bump in Ballard sales last month was due to mass selling of the new (unfinished) condos.

Yeah, realtors are wonderful. God love em’

Every home I have ever owned has been an investment as well as a place to live. To do otherwise is foolish.

I’m not saying loose money….but there’s a fundamental difference in gaining wealth from your residence and gaining wealth from an investment property. Even if your house is only appreciating 3% a year, it’s still a good long term investment. But an investment property must either appreciate quickly or generate more income through rent then it costs to carry. That’s much more difficult to do…and the current market conditions are not as favorable to investment properties. With the current high prices you can forget about covering the carrying cost with rent..so you have to bet on rapid appreciation which might be ending soon. But these variables don’t matter nearly as much for a residence…especially a long term residence.

So when you see real estate big wigs getting out of the market, I don’t necessarily think it means it’s time to sell your house. And if you look at the local market, developers seem to be very bullish. Especially in Ballard which has something like 6 huge condo projects which have either broken ground or will soon. A friend of mine has access to the NWMLS and said the huge bump in Ballard sales last month was due to mass selling of the new (unfinished) condos.

ROFL

Every home I have ever owned has been an investment as well as a place to live. To do otherwise is foolish.

Some people will spent more time shopping for an automobile than understanding the home buying process. Yet a car cannot increase in value.

It doesn’t take much research to understand that now is not the time to be buying a house in King County. Nor was last year, or even 2004. Coming from San Diego, 2003-2005 were not years to buy a home in that county.

In San Diego, it was harder to tell we were in a bubble beause there WERE NOT OTHER AREAS in the united states that were seeing massive bubbiliciousness. You could still see the 35+ cranes downtown, hyper low interest rates, insane financing options and hear someone discussion real estate on the street or at lunch at least 5 times a day.

It’s too late for folks in San Diego – the time to sell has already passed.

It is as if a meteor is headed for Russia, however people on the other side of the world are ignoring it because some say it won’t effect them. Those people will be wrong.

>Just because Buffet is getting out of real estate, it doesn’t mean it’s a bad time to buy a house to live in.

Absolutely. There’s no reason to follow that mans logic. The worlds greatest investor is obviously off his knob. Why would you trust someone who adds a ZERO to your investment in his company, Berkshire Hathaway, every 10 years?

>I seriously doubt Buffet is selling his own residence.

If you knew anything about Buffett you’d know he’d never do that. Your house is probably worth more than his is. You can drive right up to his house and ring the doorbell.

>I didn’t buy my house to make money…I think the idea of your average person “making” money on their house is a recent phenomenon.

Not even close. I purchased my first house in 1991 for $68,900. I sold it in 1996 for $120,000. I was in my next house for 1 year, sold it for $15,000 profit. In 97′ I purchased for $229, and sold for $350,000 in 2000. The next few years were flat in Florida due to economic recession/downturn, the market was flat for awhile. Purchased condo for $189,000, sold 2 years late for $234,000 and moved to San Diego.

> think you can still do that in the current market.

Sure, if you have a TON of equity in your existing home – now is a great time to sell and possibly upgrade.

However, if you haven’t been in the market the past 5 years, now is not a good time to buy and hold – primary residence or not. Why would anyone take on a $3500 mortgage when they can rent a nicer place for $2K/m?

When people are purchasing a car, they get militant about the price. They fume and argue to save $500 bucks.

We’re talking about hundreds of thousands of dollars of savings, just by being a little patient, and a little less meshuguna.

>But buying and selling for profit is pretty sketch right now.

Not if you “buy right” and move it within 60 days. Buying and holding is a much riskier move at the moment.

Just watch folks. The same thing that’s happening in other cities will happen here. The media has finally caught on and the train has left the station.

He is NOT a big real estate investor. If you want to read a great article from a guy who is a very smart analyst at PIMCO read this:

http://tinyurl.com/jht5o

It is chock full of great info that you should consider.

Same as it is for me, and 95% of the people I know who have bought or sold a house in the last 5 years.

When I went looking for my current house back in 2002 besides looking for all the things I wanted in a house, I did make sure to consider the neighborhood’s “potential”, for the following reasons: I didn’t want to be the most expensive house on the block (which I’m not, even after my renovations), my “quality of life” is improved by having a nice neighborhood; and because I wanted to increase the chances that my home’s price would rise (at least with inflation). Anything else that I get from my home is gravy. I’m not over-leveraged (I fall under the 25% guidelines for housing expenses) and am not in danger of having a ARM adjust to the sky.

BTW – Despite being labeled a troll and a cheerleader here, I’ve cautioned a couple of friends not to buy a home if they think they’ll be moving in under 5 years. I’m not blind to the risk in the market and how you have to factor in closing/transaction costs.

For anyone who’s interested, here’s an article that I think aptly describes why it’s so easy for people to draw the wrong conclusions from what they read in the media (applies to most subjects, real estate included). A quote: “The more we rely on the popular media to inform us, the more apt we are to misplace our fears.

I agree with that…I think a lot of folks are conflating professional real estate investing (for profit) with personal home buying (just a place to live). Just because Buffet is getting out of real estate, it doesn’t mean it’s a bad time to buy a house to live in. I seriously doubt Buffet is selling his own residence.

I didn’t buy my house to make money…I think the idea of your average person “making” money on their house is a recent phenomenon. For me, a house is a longterm “quality of life” investment. I think you can still do that in the current market. But buying and selling for profit is pretty sketch right now.

For example, MLS 25164473. Zip shows:
Price Increased: 05/24/06 — $489,990 to $494,990
Price Reduced: 05/25/06 — $494,990 to $489,990
Price Increased: 05/26/06 — $489,990 to $494,990

But NWMLS’ Property History shows:
Date | New Status | Old status | New Price | Old Price
05/24/06 Active Active 494,990 489,990
04/28/06 Active Active 489,990 459,990
04/28/06 Active Pending 459,990 459,990
11/21/05 Pending Active 459,990 459,990
11/02/05 Active 459,990

According to the MLS there’s been no price or status changes since 5/24. Yet, Zip is showing price changes on 5/25 and 5/26. All changes to an MLS listing is retained in the MLS property history chart.

Another item I noticed, Zip is showing CDOM of 220 while MLS is 62. I guess since pending status means the property is no longer on the market, the MLS is not calculating the 5 mos when the property was in pending status. When the buyer backed out on 4/28 it went back to active and the CDOM clock started ticking again.

Right now, I’m a little skeptical about Zip’s price tracker. I also noticed that licensed agents are supposed to get Zip’s approval before accessing their website per their TOU (I didn’t). One wonders why Zip has this TOU when the other company sites don’t.

Redfin actually provides this as part of their site, which I think is an interesting statistics when determining whether a home is priced appropriately for the neighborhood, and/or if the house you’re looking at is more or less likely to see appreciation if/as the neighborhood around it appreciates. I probably wouldn’t buy a home if 100% of the homes in the zip code/10-block radius sell for less (unless I was a zillionaire buying a penthouse and didn’t care about money).

And, while I regularly get bashed by SPD for daring to contradict the “50% reduction in home prices are imminent” assertion, I have to agree with the statement that more homes being price reduced, and more homes are selling for at or below asking is a sign that appreciation and the market are slowing (at least). However, to temper the idea that this translates into a meaningful reduction in the median/average price of homes let me offer the following scenario.

Let’s say that at this point next year the figures show a 2-3% (inflation-level) appreciation in median home sale prices for KC. But SPD finds statistics that show “50% price drops” for more than “25% of the homes”? How would one reconcile this data? To me it simply means that realtor is right that the price reductions were not a sign that home prices were headed downwards, but merely that overly greedy sellers temporarily flooded the market with ridiculous hopes for YOY appreciation greater than the 15% that KC saw the year they tried to sell your house.

Looking at the monthly listing price/sales price of homes is just too “micro” to draw strong conclusions, imho. It’s might be enough to be a data point/leading indicator, though. The strong opinions on this blog not-withstanding, I don’t think anyone outside of a few super-investors (Buffett) are consistently right on entire market trends. So I’d probably put the opinions of anonymous (ahem) blog posters right at the level of predictions from my Magic 8 ball.

Personally, I think there are a lot of mixed signals from the market right now (YOY appreciation, longer sales times, price reductions, more inventory, more remodeling, higher interest rates, slowing economy, potential for lowering interest rates, etc.). Even within areas that are still seeing price appreciation there are homes that stay on the market, lots of new homes/condos still to come, etc. I would agree that the risk is too high to be flipping or getting caught up in a bidding war. I wouldn’t shy away from buying a house “like the plague” as advised by most of the people here, though.

From Another F@CKED Borrower (I am having deja vu of F@cked Company):

“I am starting to get into rough times financially. My
mortgage is going up an extra 900 a month leaving my mortgage to $3400 a month. My bills monthly with
everything food, gas, utilities, etc. total to almost 6800 a month. credit card bills are 800 a month. My husband and my income total together is only 4500 a
month. We made bad decisions by refinancing alot [sic] in
the last two years and the closing cost, prepayment penalty fees ate up alot [sic] of our equity. I paid off our cards and unfortunately have run them up again to get cash to pay bills and stuff. We will now just be
concentrating on paying our mortgage and some bills and I have been trying to get an extra job with no
success. So my credit card bills will be behind in a couple of months and unless a miracle happens, it will be delinquent. I want to know what I should do. If I should just pay what I can monthly or claim
bankruptcy? Total CC bills is 30,000. Please advice [sic].”

I can’t stomach coming here any longer because I can’t stand reading his drivel.

True, spd did after I pointed it out. But in spd’s subsequent post he/she went back that the inaccurate 50% price reduction argument. Also, about those increases…when I counted, 4 of the nine were single family homes, not townhomes. The other 5 were towhnhomes, but they went up and at least one increased twice…they never went down.

Call it the typical response, but as long as the properties are selling at increasing values, it’s irrelevant whether the listing price goes up or down. To me, the true barometer of the market is the sold price not the list price, and it’s still trending upwards at this time. That’s why I said they were overpriced. If you think otherwise, then keep your head in the sand.

Rather than making the…it’s the same old drivel remarks…lets see your analysis and data. At least post something of subtance.

Moving on…
When I do a CMA for a seller, I give a range rather than a specific value. Sellers almost always choose the top of the range. Understandably, they want to maximize their net profit.

Many times, agents may loose the listing unless they list at the seller’s inflated price. If I know at the time they sign the listing agreement the price is too high, I’ll make them sign a post-dated price reduction form. When that date comes, the price is automatically reduced.

What a bunch of LIARS they are! They are trying to bring the Seattle market down! Their realtors are all bitter renters!

go back and read spd’s note. she clearly states that a bunch of townhomes went UP in price by a few thousand.

who’s not reading correctly?

Um, think you need to take a closer look at that price reduction list. I don’t call 50K price drops “a few thousand”.

Plus, some one made the comment that we should be looking at sold price trends, not asking price trends as a better barometer of where the market is headed.

So what if there’s a price drop, if the properties are still selling at increased values, it’s still a strong market. My interpretation with 98105 is that they were listed high to begin with and are coming down to market level, not that they were at market level and are being reduced below that, since the sold values have appreciated.

“the real accurate metrics are the opinions of renters on blogs. they are the experts.”

Now, that’s funny. Thanks!

The information isn’t sketchy (so far as I know)…the analysis is sketchy.

I don’t mean to malign SPD too much, because I tend to agree with him/her. The thing is, I have my doubts as to why properties are frequently re-priced on the MLS. You see lots of adjustments up-and-down in increments of only a few thousand dollars, and that kind of thing makes me think it’s a realtor price-manipulation game.

I’d have to have more of an insider perspective to be comfortable interpreting these kind of small-scale statistics. Bigger trends, however, are much harder to hide.

Bottom line: I believe that tracking the housing market on anything less than a yearly basis is questionable.

Looking at the median, it’s easy to say Seattle hasn’t seen a big run up. But there are hundreds of specific examples in hot neighborhoods where individual houses have sold for 100% more than they did just 3 years ago.

The median stats are very misleading.

MLS #: 26077896

2819 NE 117TH ST

Maybe now, on top of everything else, Zip Realty has taken to lying to us about the market?

Trying to make it look WORSE than it actually is?!

Anyway, my message here has always been, if you are thinking about buying a home in Seattle, do your homework first. Talk to realtors, bankers who are honest (keep looking til you find one, they ARE out there) and go on the web to watch for trends on the MLS.

Despite what you may hear about the “hot Seattle market”, it’s not as hot or scary as it once was.

So don’t freak yourself out into thinking you have to “buy now or be priced out forever”.

Slow down and Take your time.

To me it just looks like facts, plain and simple. No?

If not, why not? How is a report on the number of price reductions “sketchy”?

To me it indicates that we have reached the top and it is here.

Who the heck cares if median goes up for a couple more months? We’ve reached the top folks, or that many homes would NOT be price reduced.

This is how some people end up getting stuck in a home they cannot sell but want to be rid of: they can’t see the blatant signs that the top has been reached.

They try to bail only when it’s perfectly OBVIOUS to anybody but the braindead that the TOP was 6 months ago.

And they join the crowd of panicked sellers on the way down.

You should know by now that the NWMLS numbers are rather easily manipulated. Any individual piece of data released by realtors should be taken with a box of salt. Instead, we need to focus on the trends in the data, and as many people here have noted, those trends don’t make much sense at the moment: rising inventory, slowing sales, rising prices. Cookie-cutter articles from USA Today, and hyper-specific analysis of individual NWMLS press releases don’t change these facts.

I don’t generally agree with the calls to ban you, but I do think that you’re an exceptionally devious troll. You consistently post links to micro-economic tripe and rah-rah journalism with little (read: no) analysis. For example, today, you’re getting your panties in a bunch over SPDs (admittedly equally sketchy) micro-analysis of sale prices, and now you’re resorting to arguing about (of all things) month-over-month trends in prices.

In any case, Meshugy, if you aren’t a troll, I think you need to step away from the computer. Go outside. Take a walk. Get a hobby. It’ll do you good.

Them’s fightin’ words. I should ban you right now.

;^)

Great price drop news for those of you who are contemplating stretching to buy a house:

Prices in Seattle are coming down faster and harder now. Rather than the “10K off after a month on the market”, we are now starting to see 30- 50K off within 40 days.

Examples:

4809 University View Pl:
Original Asking Price: 689,500
43 DOM dropped to 649,000

4703 4th Ave NE:
OAP: 699,950
after 39 DOM: 669,950

4753 5th Ave NE:
OAP: 599,959
after 20 DOM: 549,950

DO NOT STRETCH to buy a house. The next step is lower initial asking prices which should start by this summer. And the higher interest rates go, the lower asking prices will be.

Fri Mar 17, 04:27:53 PM PST

Well, it’s almost summer and have prices gone down?

March Median price for Seattle was $407. The May Median was $415. An 8K gain in just two months…

I think it’s pretty clear that Price Drops research has little correlation with what’s actually happening in the market. I’m sure we’ll see a genuine slowdown at some point. It has to happen…but we can’t fool ourselves into believing it’s happening right now. When we see a huge pile up of inventory and median price drops we’ll know it’s started. Right now we’re aren’t even close…