Hey, what do you think the chances are of WA houses sustaining HIGHER prices than CA houses long term? lol!

..Maybe Ballard might, but for sure not WA as a whole.

Again, if the San Diego median is almost at the Seattle median – Houston won’t be the only one with a problem.

Let’s face it… while some of us understand why it’s nice here, the vast majority of people would rather be looking at sun, silicon and sand.

San Diego affordability is under 5%. At least that was the number I consistently read when I was down in SD.

Shug?? You didn’t put any $$$ down on your house? Does that sucker have an ARM on it too?

I think Meshugy is a thinking person who tries to present his point of view in a reasonable manner. I don’t see anything wrong with that. I have very good friends who agree with his viewpoint.

One thing I disagree on is that the fact that August had higher sales is relevant. Here in Snohomish county we had about 12% higher closed sales in August than in July this year and last year, and checking the pending sales for the last 6 years, 4 out of 6 had higher pending sales in August than in July, so I don’t think it is significant that sales were higher in August than in July this year. Maybe King county is different and normally sells more homes in July than August, but I imagine that higher August sales are pretty common there, too.

Of course prices won’t drop here cus we are different..
http://www.bellinghamherald.com/apps/pbcs.dll/article?AID=/20060923/BUSINESS10/609230322/1001/NEWS

“Bellingham, as well as much of the Puget Sound, is returning to a more normal real estate market,” Crellin said. “In Bellingham’s case, the home prices have risen dramatically, making it appear that homes are overvalued”

Everybody has their viewpoints. He may “slant” his offerings, but he’s not doing it in a fashion that I personally would consider “troll” like, but that’s just my opinion.

I moved to Seattle back in March from California, with the idea of starting anew in a more “approchable” real estate market than whence I started. I am/was/would be a first time home buyer. Originally a bay area native, I left full well believing that there was a bubble (in cali), and that soon a lot of overleveraged people would be put into some very uncomfortable postions. I got to seattle to discover prices going through the roof, and everybody saying it was “healthy and normal” growth. Anyway, my BS dectetor started ringing pretty loudly, and I started doing my own research. Eventually I stumbled upon this blog, which has been a terrific source of information from both sides of the fence. There is 2 sides to every story, and even though I have formed my opinion about the real estate market here, I’m still open to being wrong, and hearing viewpoints from people who are willing to debate intelligently. I for one look forward to what meshugy has to say because it tickles my own doubts which in turn forces me to understand what I belive to be true, and therefore, to me anyway, his ’slanted’ arguments are welcome…Even though I’m pretty sure he’s wrong. =)

I agree and I find it really interesting that you are willing to admit the possibility…

ANDY:

You have be be following this blog long enough to understand… if you want to browse through the last 3 months of blogs then you’ll understand…

Shugy actually presents good info and accurate info, it’s the spin that makes it interesting… is your glass half full or halfway to empty?

Totally sheds new light on the Seattle overvalue %age.

Looks like we can up them BOTH by another 20%.

thanks for pointing out that pertinent info Anon.

You’re unbelievable M.

Get this straight please: It is the homeowners who bought in the past couple years under shaky financial circumstances and need to bail during the fallout who will NOT be fine.

All other homeowners will be fine. Duh.

However, it will be the “not fine” homeowners who will determine the direction for the market.

Quit putting words in our mouths M.

Any idiot knows that if you own your home free and clear, or have a mortgage that you can easily pay, or do not need to sell, you’ll be fine.

Those are not the homeowners this discussion is about.

Is there any possible way for you to understand this key point?

I don’t think anything I’ve ever said is extreme. If you go back, you’ll see that I’ve always said that the boom could not be sustained. I feel the most likely scenario will be a return to normal 3-6% appreciation. In the worst case a few years of flat appreciation.

Poorly timed flips and people who over leveraged with ARMS will get burned…but I feel that while those scenarios will be more likely as the market slows, the vast majority of homeowners will do just fine.

If inventory consistently rises throughout the winter and sales plummet next spring, then we could defintly see some negative appreciation. I still don’t think that’s likely…but possible. Sales actually went up in August and were only behind 2005 sales by 1% or so. As long as the buyers keep showing up, prices will hold.

(sorry…I accidentally posted this in the open thread.)

Did you want us to praise shugy?

To be honest, as of late, shug’s post are starting to be less extremist…

where as before it was NO BUBBLE at all, now it’s SOFT LANDING… and people now argue it won’t be soft…

am I right shug?

I think you missed this: House Prices in America : Valuation Methodology

It’s quite funny — people on here, including Tim, love to gang up on meshguy whenever he posts. But when he points out, with complete accuracy, that Tim misinterpreted the Global Insight report in terms of what is means for Seattle’s median values…well, let’s just say you could hear a pin drop in here — LOL — not even a correction from Tim!

House prices tracked closely with rents until about 1997 in Seattle and then took off, especially starting in 2003 when the global credit default swap market exploded and banks threw their risk management textbooks out the window.

that could be true, but it may be just a nominal value because of inflation, but the real value could still be low.

Also, the notion that long and gradual declines are ahead is a bunk. The housing market essentially morphed into a stock market from 2004 onwards and the huge gains came from speculative investment based on credit excess, not a fundamental or heated market as in past house run-ups. Therefore, the decline will be equally fast and large. Don’t expect slow and long declines. Expect to see about 20% right off the bat and then a slower depreciation as things bottom out, perhaps in mid 2008 to 2009. Then the base could take years to fully form before another gain. Hence the notion that it could easily take 10 years to reach todays valuations is very real, and it may even take more. Look at the stock market for hints. There are periods of 20 years of essentially sideways movement, in a market where things unsually “only go up”.

Peace

Let us count the ways:

Recession or Depression is on the way – See yield curve and the run to bonds.

Lending standards will tighten up –See the current Senate Panel hearings on Assessing Non-Traditional Mortgages.

There will be a lack of qualified buyers. Those who bought a house over the last few years will be underwater and will not be able to move up to a bigger or better home. They will be lucky to just hang on. The tightening of the lending standards will cause a lack of qualified first time buyers.

Massive job loss in the real estate and real estate related industries. There will be job losses in other sectors due to the slow economy. For example, see Ford and GM.

Foreclosures will hit record numbers and there will continue to be a record number of homes on the market.

Commodities will fall.

Hedge funds will collapse.

FED will devalue the dollar to prop up the markets but the fed will be pushing on a string when it comes to interest rates and the GDP.

Crime rate will soar.

The value of a house will be cut in half. This may not be totally reflected in price, due to a drop in the value of the dollar.

You will know that you are at the bottom of the cycle when the Times (there will be no PI) runs articles telling you it’s a bad time to buy a house (~2012).

It will then be a good time to buy a house.

Correct again!

The more the gov’t helps us, the harder it is to do it withoug gov’t help.

You can apply this to housing, and college loans.

Why is college so expensive? Gov’t artificially increases the demand for college by injecting money into the mix. Also, as interest rates fall, the cost of college goes up. We have seen this since the peak in interest rates in the early 80s.

I wonder if college will become less expensive as interest rates rise. My guess is that it will do exactly that, provided you control for gov’t “help.”

This is another credible organization with a similar take. The figures make sense if housing prices have to come down to match incomes.

Actually, I think that back in the 50’s and 60’s (before the creation of Fannie Mae), homes were much cheaper than that. Like 1-1.5X income.

It was when the gov. started “helping” people afford homes in the 70’s that they became more expensive.

Looks like the more “help” we get, whether from lower rates, downpayment “help”etc.,the more outrageous prices become.

Wonder how much longer the gov. and banks will be willing to “help us out”, as we’ve proved ourselves to be a nation of financially clueless debtors.

Hopefully, they’ll stop “helping” us soon.

With globalism, wages are capped.”

BINGO!

This time the “overshoot” will be negative as RE becomes a pariah and the association of RE with pain sinks into the “herd”.

I was in Huntington Beach during the 1989-95 CA bust and all the early numbers in Orange County at the beginning of the bust were way too optimistic.

And this one is MUCH worse….

Depends on inflation. If the dollar crashes, homes could cost 5x what they cost today. But the economy would be in ruins.

Wrong.

Housing is a multiple of incomes, not a matter of money supply. If the excess money supply (inflation) found its way to INCOMES, then housing would increase.

With globalism, wages are capped.

The normal multiple of home price to income is in the 2-3X range. Only recently has that changed. The 1980s Yuppification of America pushed the ratio into the 4X range, but this latest rage has pushed multiples into the 8-15X range.

Look for rollbacks in prices.

Do not see RE prices getting back to anywhere NEAR where they are now in the next decade, or even the next TWO decades.

This whole run up has just been an unbelievable puke party and we’re about to start taking the medicine.

The news now is coming in fast and furious, it escalates every day it seems. that ole proverbial snowball metaphor.

I think you missed this: House Prices in America : Valuation Methodology

Interpreting the Data

Users sometimes misinterpret the valuation metrics by assuming that a particular degree of overvaluation implies that house prices are
destined to decline by that amount. So, for example, the observation that Reno, Nevada is overvalued by 46 percent is mistakenly taken to
mean that prices there are headed for a 46 percent
drop.

This would not necessarily be correct for the following reasons. First, housing markets tend to adjust very gradually and price declines, when they occur, have historically averaged 14 quarters in duration. Because house prices determinants
generally improve over that time (especially
population density and incomes) we observe that price declines are about one-half the initial degree of overvaluation (see Appendix C in House Prices in America: Valuation Update). Secondly, we caution against over interpreting the metrics since
the historically normal dispersion of valuations is quite wide. Specifically, our model has a standard deviation in house price valuations of +/-13 percent, meaning that any valuation between 13 percent overvalued and 13 percent undervalued
should be considered statistically normal.

Finally, we acknowledge that the estimates of over, or undervaluation will vary with periodic updates, as will the percentage threshold used to
identify “extremely overvalued” markets. These changes, though slight, reflect two things. First,
various “input” data are revised as more current, and accurate, information become available. For
example, the house price data are revised with each quarterly update. Second, the model is reestimated
each quarter to incorporate all available information. As such, the “historic relationships” between home prices and other factors will also
change somewhat.

Last Aug. Seattle was considered overvalued by 26% now it’s 33%.

Bellingham was at 46%, now it’s over 50%.

These surveys just get more and more dire the longer this goes on.

Now some places are considered over 100% overvalued! (Naples FLA for one). I don’t remember seeing any in that bracket a year ago.

This just seems like a really insane time to even consider buying a house.

It was nice, not your typical Ballard poop-box, but it was nothing special.

Time will tell. I think it is certain that we will at LEAST get a 15% ‘adjustment’.

-Jack