Housing Bubble Time Warp

Here are a few quotes from newspaper articles in October, November, and December about the housing market:

October
[A]: “I fully expect things to pick up the first part of the year.” Although the pace of sales has slowed, there are no clear indications that overall prices are going to decline, real estate analysts say. Data released yesterday support their view.

November
[B]: …industry analysts said [the] housing boom seems to be coming to a quiet end. The balloon isn’t bursting, they said, but it’s losing steam.

[C]: …sales of existing homes and condominiums declined … last month. Even with the decline in sales, the median price of an existing home sold last month rose [year-over-year].

December
[D]: sales … declined in the month of November. … The median price for a home sold last month was up from a year ago. … “The current pace of home sales activity remains historically strong. … I truly believe the housing market will continue to expand. But rather than the double-digit price appreciation we’ve seen, we might see that drop to a 5 or 6 percent appreciation sometime toward the end of next year.”

Nothing new, right? It’s pretty much more of the same—what we’re used to reading whenever the local rags start talking about real estate in the greater Seattle area.

Only, there’s a few details I didn’t mention about the above quotes. They’re from last year, they’re not from the local rags, and they’re not referring to Seattle.

On a suggestion from reader John Law the II, I went searching for news reports from a year ago about the nationwide housing market (quotes C & D), and for good measure I pulled a few quotes from San Diego as well (A & B). What I found bore an eerie similarity to the kinds of things we’ve seen printed in the local press regarding the Seattle market the past few months.

So, a year ago the “experts” were predicting continued (but slowing) appreciation, with no price declines. Let’s see how well those predictions held up.

San Diego, October 2005: “Although the pace of sales has slowed, there are no clear indications that overall prices are going to decline, real estate analysts say. Data released yesterday support their view.”

San Diego, December 2006: “San Diego County housing prices slipped 6.9 percent last month, the biggest year-over-year drop on record.”

Nationwide, December 2005: “‘I truly believe the housing market will continue to expand. But rather than the double-digit price appreciation we’ve seen, we might see that drop to a 5 or 6 percent appreciation sometime toward the end of next year.'”

Nationwide, November 2006: “…the median price for a home sold dropped to $221,000 in October, a decline of 3.5 percent from a year ago. That was the biggest year-over-year price decline on record.”

Obviously this doesn’t prove anything about what is going to happen here in Seattle in the coming year. However, given the theory that the housing market in the Northwest lags California (or the nation as a whole) by about a year, I think it’s an interesting comparison.

At the very least it just goes to show you that the so-called “experts” either didn’t know what they were talking about, or were intentionally misleading the press. So why should we believe what they’re saying today regarding Seattle’s market, when the numbers seem to be saying something else?

(Emmet Pierce/Roger M. Showley, San Diego Union-Tribune, 10.18.2005)
(Emmet Pierce/Roger M. Showley, San Diego Union-Tribune, 11.12.2005)
(Martin Crutsinger, Associated Press, 11.28.2005)
(Charlie Herman, ABC News, 12.29.2005)
(Roger M. Showley, San Diego Union-Tribune, 12.13.2006)
(Martin Crutsinger, Associated Press, 11.29.2006)

  

About 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.

34 comments:

  1. 1
    Matthew says:

    if this isn’t a wake up call to Meshugy and the other Seattle housing bulls, I don’t know what is.

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  2. 2
    meshugy says:

    Hi Tim…that’s an interesting look at other markets. However, your model is flawed because you only cherry picked markets that have declined. Plenty of markets are doing stellar right now:

    Idaho (average 17.5 percent gain), Utah (17.4 percent), Oregon (16.9 percent) and Arizona (16.4percent).

    Fort Lauderdale (10.3 percent annualized quarterly gain), Naples, Fla. (10.8 percent), Los Angeles (7.4 percent), metropolitan Washington, D.C. (3 percent), Seattle (14.8 percent) and San Antonio (9.9 percent).

    Rate this comment: Thumb up 0

  3. 3
    The Tim says:

    What can I say? You caught me dude. I cherry-picked the entire nation as a whole in order to make an obviously invalid point.

    Clearly, your list of random states and cities that have appreciated in the last year invalidates my entire post.

    Rate this comment: Thumb up 0

  4. 4
    Grivetti says:

    However, given the theory that the housing market in the Northwest lags California (or the nation as a whole) by about a year, I think it’s an interesting comparison.

    Do you even read the blog at all Meshugy? or do you just skim it and fire off nonesense?… Its not about the Idaho/Oregon/Arizon-Washington dynamic, its about he California-Washington dynamic… Equity from Cali is settling in WA, driving up Real Estate… that was the point!!!

    Dude, you’re infuriating because you’re the worst cherry picker of Real Estate data… so hypocritical

    Rate this comment: Thumb up 0

  5. 5
    AndyMiamiBeach says:

    using Ft Lauderdale and Naples as appreciating markets is a grave mistake. Ask folks in those cities that have had homes on the market since last year. Look at invetory levels vs. last year. Prices in those markets will fall by 40% over the next two years.

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  6. 6
    Grivetti says:

    The fact that Meshugy ONLY looks at YOY median appreciation speaks to his inability/ignorance or incuriousity regarding the affects of the Greenspan credit-bubble…

    So when he sees spiking YOY medians, he automatically assumes that its a healthy market, but if he were to bother doing a single ounce of investigation, he’d find places like D.C. and Arizona in a virtual housing freefall…

    Rate this comment: Thumb up 0

  7. 7
    MisterBubble says:

    There’s a time-honored rule for dealing with trolls: starve them, and they die.

    Actually, Meshugy is such a self-parody at this point that there isn’t much benefit to addressing him. He re-hashes the same three or four talking points, and then disappears when someone calls him on his crap. The net result is that other people read this blog, see us having “debates” with him, and assume that he has some sort of valid insight.

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  8. 8
    john_law_the_II says:

    good job.

    what this post shows shug, is that the sky can be sunny and suddenly a storm can come out of nowhere.

    the fundies were looking good in many areas, we were assured that everything was adjusting but stable, yet look what happened.

    Rate this comment: Thumb up 0

  9. 9
    seattle_slow says:

    “Actually, Meshugy is such a self-parody at this point that there isn’t much benefit to addressing him.”

    Well, he’s more of a parody of a parody if you ask me.

    Actually, once Shug capitulated and purchased in Ballard, he’s found himself in a position of needing to defend his decision to buy. Cognitive dissonance theory would predict this type of behavior.

    I actually enjoy the shugster. Seriously. He gets everyone all fired up and occasionly he’ll add some value from the other side. No harm, no foul.

    Rate this comment: Thumb up 0

  10. 10
    Wanderer says:

    Inddeed, the shug rarely says anything that is just flat wrong and cherry picks only slightly more than people on the other side. What I found the most entertaining in this thread was “accusing” him of using YOY median stats when he is normally slammed for using MOM figures.
    I happen to think he is wrong about the future trends, but it is hard to get mad at a guy that is right FOR THE MOMENT. I have always been impressed with the strong responses that he gets and I have never been able to put my finger on it fully. I think it has to do with how he starts off all of his posts with a nice greeting. Is it a genuine kindness that just seems out of place … or is it a patronizing and sarcastic jab? Either way, it seems to really get under people’s skins. That is fascinating.

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  11. 11
    MisterBubble says:

    “it is hard to get mad at a guy that is right FOR THE MOMENT”

    It’s easy to be right “for the moment” when your only argument is that things haven’t changed “yet”….and that’s all that Meshugy does.

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  12. 12
    Grivetti says:

    but it is hard to get mad at a guy that is right FOR THE MOMENT.

    A broken clock is right twice a day…

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  13. 13
    meshugy says:

    Hey guys,

    I’ve been very busy these days, so I can’t answer all my fan mail. Sorry about that….I know you’d all love to discuss housing till the sun comes up. But unfortunately I only have time for a post or two a day.

    It is funny though that people now are criticizing me for not posting more….for months people criticized me for posting too much. I guess you can’t win…

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  14. 14
    MisterBubble says:

    Meshugy, it’s OK. In fact, take more time off. We’ll understand.

    After all….it’s hard to sell homes during a slowing market!

    Rate this comment: Thumb up 0

  15. 15
    SeattleMoose says:

    You just gotta love Baby Blue….I would find the board dull without him.

    Too many bears can be boring without some bull (er I mean a bull).

    Rate this comment: Thumb up 0

  16. 16
    seattle long term owner says:

    Shugy is a homeowner and he’s backing his views with his monetary future… have to respect that…

    I think he’s too smart to be in denial… but denial is a very powerful force… can’t be underestimated…

    Anyway, when shugy lists his house for sale, then you know the roof is caving in tomorrow…

    A real investor can only watch the numbers fall so far before reality sinks in…

    We’ll see which one shug is…

    Rate this comment: Thumb up 0

  17. 17
    Anonymous says:

    I Just wonder if Shug didn’t spew his regurgitated, repetitious manutia, how many posts would there be each day with valid points.
    I don’t think there would be much to read.

    Rate this comment: Thumb up 0

  18. 18
    rentalbliss says:

    Why does it feel like this is the beginning of the end of shugy posts. Now everyone is just saying there final parting words.

    Rate this comment: Thumb up 0

  19. 19
    Nolaguy says:

    All of the markets that Meshugy quoted as “doing steller right now” have not had any price appreciation in 6 months.

    That’s right. All of the appreciation in the current YoY gains happened in the first 6 months of 2006. Seattle is included in that trend.

    So while Meshugy is technically correct (there is YoY appreciation) – the trend does not really show that “markets are doing stellar right now”.

    Check it out for youself:

    http://www.housingtracker.net/

    It uses MLS data.

    So I would have to ask Meshugy: How would you describe a market that is flat or slightly declining for the last 6 straight months?

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  20. 20
    Nolaguy says:

    One correction: HousingTracker is for *asking* prices.

    If the markets were “stellar”, wouldn’t people ask for more?

    Rate this comment: Thumb up 0

  21. 21
    The Tim says:

    Nolaguy,

    To be fair, that describes a normal market most years. The argument I’ve been making is based on sales and inventory, since (as evidenced by other markets) median price is the last thing to change.

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  22. 22
    stephen says:

    A real investor can only watch the numbers fall so far before reality sinks in…

    This attitude is why the credit bubble trashed the housing market.

    A house is not an investment, it is your home.

    Rate this comment: Thumb up 0

  23. 23
    Peter Taylor says:

    Regarding Michael/Meshugy – I think it’s good to have dissenting voices and he does do his research. So, please keep posting Michael.

    Thanks for posting those trends Tim! My wife and I were discussing our timeline for buying a house last night as our current lease is up in August. We were bemoaning our situation because we would like to have our own space that we can design however we like, but looking at that data it looks like this could possibly be one of the worst times in history to buy.

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  24. 24
    john_law_the_II says:

    Los Angeles slowed down to a 2.6% YOY gains.

    Rate this comment: Thumb up 0

  25. 25
    Slinky says:

    Meshugy et al,

    Take the San Diego newspaper comments from year ago, the Seattle (or wherever outside so-cal) newspaper comments from now, and line them up with newspaper comments from the early 1980s regarding housing markets being overblown.

    You’ll find them to be remarkably similar. Apologies since I’m sure some of y’all have seen this before:

    http://njrereport.com/80sbubble.htm

    This all happened 20 years ago. If you randomly pick two of those headlines from each year and substitute “Seattle” or “Washington DC” or “San Diego” for “New York” or “New Jersey” in those headlines would probably sound just the same as the ones The Tim just posted. I’m guessing that we’re at the equivalent of 1987.

    Especially interesting are the following:
    * “‘Investment; Japanese Plunge into US Realty’ with ‘Japanese firms will continue to buy in this country for the simple reason that there is such an absolute scarcity of available property in Japan.’ ” November 23, 1986 Swap “Japanese” and “US” for “California” and “Seattle” and what do you have?

    *”The Windfall Profits in Insider Flips” August 30, 1987 La plus ca change….

    * “Battle over Condo Conversions Heats Up,” September 8 1988

    So: The market response that characterized the housing crash in the late 1980s looks eerily like what we’re seeing now, with California leading the party. I concur with Matthew that if this isn’t a huge waving red flag in the toreador’s hand for the housing bulls, I don’t know what would be.

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  26. 26
    seattlechix says:

    Wow, you guys here are thoroughly infected by a serious troll in Meshugy.

    Why are Seattle men such limp wristed beings? Why not tell Meshugy to take a dam@ hike!

    To the people who enjoy Meshugy’s posts…get a life…trolls suck…Mesugy is a troll…therefore….he ________.

    I wish men up here would be MEN and tell it like it is. Anywhere else and a troll like this would be booted from the board.

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  27. 27
    mydquin says:

    [Meshugy] re-hashes the same three or four talking points, and then disappears when someone calls him on his crap.

    ….as opposed to meshugy’s detractors who have only one talking point… ad hominem attacks? If you have facts or analyses, post them. If not, then please avoid cluttering the debate.

    Rate this comment: Thumb up 0

  28. 28
    mydquin says:

    Since we are playing the “then & now” quotation game, here is another relevant comparison.

    October 20, 2006: “Since real estate trends in the Northwest are said to lag California by six months to a year,…”

    Dec 13, 2006: “However, given the theory that the housing market in the Northwest lags California (or the nation as a whole) by about a year, I think it’s an interesting comparison”

    Are we slipping and sliding? At this rate, we should be lagging California 1 year to 18 months by March. Heck, if you just keep extending that lag, then the bursting bubble predictions will eventually be right. I keep hearing this “Seattle Lag” assumption, but I have not seen substantive analyses to support that view. Would someone care to map Seattle RE prices onto Calfifornia & national RE prices for the last 25 years or so? A proper time series regression analysis would also be helpful.

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  29. 29
    seattlechix says:

    mydquin, another Meshugy defender -pathetic. People like you are why he exists.

    And, why don’t you map your own #’s.

    Rate this comment: Thumb up 0

  30. 30
    Anonymous says:

    Mydquin says “Heck, if you just keep extending that lag, then the bursting bubble predictions will eventually be right.”

    So you admit that we are in a housing bubble and it is eventually going to burst. I agree with you completely.

    It’s the fundamentals! The bubble is bursting across the country in “bubble-proof” areas like Boston, LA, SF, but not in Seattle because “we are different”.

    As I continue to rent and save my money, I can wait a couple of years for this to play out and buy your house at a greatly reduced price after your suicide loan adjusts.

    p.s. I really like granite and travertine.

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  31. 31
    The Tim says:

    mydquin,

    You’re really stretching if you’re trying to say that “six months to a year” is substantially different than “about a year.” Last I checked, “about a year” falls in the range of “six months to a year.”

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  32. 32

    […] Housing Bubble Time Warp […]

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  33. 33
  34. 34
    sf_boomerang says:

    Hey Tim!

    I’t s been about a year since there was much discussion on this thread. How about an end-of-2007 retrospective?

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