I just got off the phone with the producer of the Brian Suits show over at KVI (570AM). Brian will be discussing yesterday’s P-I article, and thanks to a heads-up from Eleua, I’ll be a guest for a part of the discussion. Tune in at 3:00. They have a web feed for those of you still at work.
Update: I was on the air for roughly the first five minutes of the program. The discussion was primarily driven by Brian’s questions, so I wasn’t able to work in as many points as I would have liked, and I certainly could have said “uh, um, er…” a bit less, but this site definitely got some decent free advertising.
Here’s the portion of the program I was on for:
Only three callers were able to get in a word before the topic transitioned to something else. Here are a few highlights:
John in West Seattle:
I conduct six or seven real estate purchases a week and I see the problem with your guest, the facts of the Seattle market do not fit his theory. … Real estate values are subjective, they’re based upon what people want for their own reasons. There is no objective value that can be placed at any given location or time. … Housing prices go up because that’s what people are willing to pay. … People are speculating when they buy real estate, they hope it will appreciate in value over the years, but in a strict sense of speculation, that would apply to investment properties.
He sounded fairly angry, and he also called the Global Insight study “hogwash.” If I had been able to respond to “I conduct six or seven purchases per week” John (i.e., a real estate agent), I would have pointed out that he is correct, real estate values are subjective. However, home prices have very suddenly spiked up at a historically unprecedented pace in the last five (or so) years.
Has Seattle suddenly become far more subjectively desirable during that time? No. I have covered this nonsense argument in a number of posts, most notably A Question Of Affordability, last November.
Gary on a cell phone:
The “hogwash” comment is absolutely dead on. It’s just a function of the market. People pay what they’re willing to pay, and people sell what they can sell for. A couple factors that make our market higher than a lot of other areas are at least two things: One is a lack of transportation infrastructure, and the other thing is the Growth Management Act
The transportation argument would perhaps partly explain why Seattle proper is so expensive, but unfortunately for Gary’s argument, pretty much the entirety of King, Pierce, and Snohomish counties have seen similar spikes in home prices over the last five years. As far as his Growth Management claim, I’ve covered that here and here.
Scott on a cell phone
I’ve been in the lending side for the last ten years. … Seattle is over-inflated. If you talk to any banker, lending institution, they will tell you, their biggest worries are the big metropolitan areas: San Francisco, Seattle, Los Angeles… where you’ve had such growth in the appraised value. … There are a lot of realtors out there who are over inflating the value of these homes. … The bubble may not burst, but there will be a serious deflation in the next few years, and it’s gonna be based on the fact that the lenders have had enough.
Scott’s points were pretty much right on. He sounded like somebody that has a pretty good grasp of what’s going on before our very eyes with the interplay between home prices and lending.
I have audio of the segments of the show with the callers. If you’re interested in hearing it shoot me an email. Hopefully I’ll have another chance in the future to get the word out.