Great work!!

I love the graphs it is great to see data busting market myths.

I have a few questions.

1. Do you have stats for the gap between average and median home values?

2. What % of the upper end of your market is custom built homes?

3. What do the graphs look like using average home values vs. job growth?

4. Why did you use pending sales vs. closed sales?

The graphs are great! I think I am going to work up similar ones for my market.

Disgruntled,
Its my new years resolution to be the a kinder gentler poster.

I’m surprised you didn’t do your usual picking of quotes to take some cheap shot back at Tim or some other poster. As far as your “common sense” argument, that is about the weakest, most dense statement…I can’t even describe it. How can you say that after reading 6 months of your comments–as well as shug’s, trackbike’s (mia), financerugu, dalas (mia)–of demanding the “hard evidence” you so nonchalantly disregard. This whole housing market makes no “common sense.” kaleetan, it also takes a bit of common sense to realize that homes are not priced where they should be, and that people who are not able to afford a home, should not be tricked into utilizing shady financial tools to provide the false sense of ownership. How’s that for common sense? All this work to provide hard numbers for you, and all you do is say “duh, common sense?” What a joke.

Tim, There might not be “hard evidence” that more jobs are directly related to home buying demand, but common sense would tell you that a stong job market is good for local real estate and likewise a bad job market is bad for local real estate( detroit ).

Do you not agree?

Its fine for journalists to use these common assumptions in their articles.

But then again, Seattle is different. It’s 70 degrees year round and hardly rains. Plus, it’s really close to nice beaches. Everyone wants to live there. That’ll keep prices up forever! ;)

A few quick correlations between change in sales and change in employment:

Just the simple pearson correlation: is -0.42, meaning they are inversely correlated.

If you assume that there would be a 6 month lag between getting a job and buying a house the correlation is -0.12.

Of you assume a year lag, you get a slightly positive 0.15 correlation.

Kaleetan,

I agree completely. However, job growth is often cited as at least a major part of reason that home prices will continue to climb, despite the fact that there is no data to show any correlation. Here are three random quotes from articles we have posted about in just the last few months:

Seattle real estate professionals and economists agree that the city’s job creation, relative lack of speculators and the fact that its boom never rose as high as other places kept its housing market healthy.
- 01.17.2007

We still have job growth and a shortage of lots here, so we have just not had a problem with standing inventory.
- 12.30.2006

Availability of jobs props up the housing market, and the job outlook for Western Washington continues to be extremely healthy.
- 10.15.2006

The purpose of this post was to point out that such claims are nothing more than hot air. There is no evidence that shows more jobs = more home buying demand. Not only does job growth not explain home prices on its own, it doesn’t explain home prices at all. Not even a little bit.

Negative job growth implies that some people are losing their jobs. Maybe people without jobs are more likely to flip properties to make money. More flippers increases demand and results in higher prices.

The only thing that can sustain prices long term is income. How much income are these new jobs providing? Housing prices that are not supported at the base level of income will topple.