I would like to highlight a post from over on the forum that I think should be read by more people. It was written by my friend Catherine (a.k.a. “Dove”), and posted to the thread How did you first learn of the National Housing Bubble? (Although it really speaks well to the Seattle market specifically.)
It was a long awakening, for me. I put “2004″ in the poll, but depending on how you call it, it could’ve been a year earlier or later.The first sign of trouble came when we’d been married a couple years, living as poor grad students in an apartment, and I started dreaming about getting a house. Nothing fancy, really – like maybe one of those cute little cottages with a tiny yard that Need Lots Of Love. Surely an itsy bitsy house couldn’t be that much, right? Cue realtor.com telling me what a funny little girl I was. That sent my spidey sense tingling a bit – if tiny crappy houses are that much, who the heck can afford a house to raise a family in? Strike 1. That was 2003 or 2004 I think.
Strike 2 came when I first got a job as an engineer – and a good one – and my husband and I started making plans about where to live. My family had recently moved, and now both our families were in the midwest. We wanted to live close, so we eyeballed houses in Denver, just for planning purposes. And promptly realized that they were extremely affordable. That tiny crappy fix-er-up I’d wanted? Less than my annual salary. Big New House For Big Family? We could totally swing it. Heck, save aggressively for a couple years and we could almost buy it outright.
I quickly flipped the page back to Seattle to see if the same was true here, but no dice. Apparently a mansion in Denver is worth about the same as a mud hut in Seattle. We still couldn’t afford *anything*. We promptly resolved to rent, save aggressively for a couple years, and then move to Denver, which is where we’d rather live anyway. This was 2005.
I’d heard that big cities were supposed to be expensive, but this was rediculous. I mean, it’s not like Denver is that much different from Seattle in terms of size and opportunities. Saving and moving seemed obvious. In fact, why wasn’t everyone doing that? I suspected again that something was wrong. Strike 2.
Throughout that year I began actually watching the housing market – planning to buy in the eventual future, I figured I should get a better feel for how it worked. And as I thought about things, I began to put a lot of stuff together very quickly. (1) We can afford a pretty nice apartment, with tons of money to spare. Seems like we ought to be able to afford a crappy house. But we can’t. That seems . . . odd. There ought to be some sort of in between transitional product, right? They should be pretty comparable, right? (2) Actually, come to think of it, we’re pretty well off – I make more than a lot of friends and neighbors and relatives all of whom are homeowners, and I can’t afford a house. What gives? (2) And actually, come to think of it, who the heck is buying all of the houses? Where do all the normal people live???
More complaints confirm it isn’t me. My brother in law has trouble with his house and then more trouble with his house and then a little more trouble. My co-worker is crying about how she can’t afford the low-end condos. My *boss* is considering buying a townhome full of 70’s shag. And she’s not your run-of-the-mill manager, either–she’s gotta make twice what I do.
As soon as I saw a suggestion somewhere that there was a housing bubble, it all clicked. The market that had smelled so funny for years now made sense. That was maybe a year ago. If not immediately convinced, I definitely acknowledged that it was a strong possibility. Any desire I had to buy a house evaporated overnight.
The final straw actually came recently when someone on that blog pointed out that rent prices were out of whack with housing prices. For some reason, I’d never thought to check that – I’d just always assumed those markets would pace each other. A quick run by Craigslist confirmed it.
That cute little crappy house I’d wanted? Rents for about the same as my apartment. Perhaps a bit more, $200 or $300 more. Psshaw. Shopping around a bit more, I saw nice houses go by at decent rents. And it suddenly dawned on me that if I wanted to, I could live anywhere in Seattle. Fancy condos downtown? Check. I could make rent. 5 bedroom houses? No sweat. Fancy Vacation Homes On The Water With Stunning Views? Ahhh… I might not want to pay for it, but the mechanics says I could afford to live there full time. (Not that I’m going to – still sticking to plan A, but still . . .)
Quick check on the real estate market and . . . yup, I still can’t afford the mud huts.
That’s it, I decided. That market’s hosed.
I think Catherine hits the nail on the head. If the Bull Cadre gets their wish and home prices in Seattle continue to defy all logic and reason… at least I’ll already have some local friends when I move to Denver.
Exactly. My wife and I came to the same realization and have been fighting off the real estate agents we worked with as they get more aggressive trying to find buyers…
We’ve come to the conclusion that our quality of life is far better not owning at this point in time… We’re saving to buy outright, or close to it as well.
Thanks for posting that article. It’s almost like I wrote it myself.
The analysis side of this gets really grim the further a person digs. When is the elasticity going to have plainly visible effect on this market? It’s just whack.
I (HEART) Denver. I can’t believe I moved to this miserable place.
Maybe you should buy RE in Denver now before all of the Seattle equity locusts start migrating.
Why don’t all of you just get out of Seattle? I hear Texas is cheap too. Why stay in Seattle if it sucks so much? Makes no sense to me.
Geez, this reminds me of a conversation I had in summer 2004.
Newly married couple at the table (she’s a teacher, he’s a lawyer) They were looking for a house and she exclaims “can you believe STARTER homes are now going for $280K??? that’s so much money!”
Thanks, Tim. I’m flattered. :)
So true.
The wishing price from builders on (crap-box construction, mostly) townhouses is pretty laughable.
Here’s a hint: some of them are worried about reducing their inventory, and are pretty motivated to do rebates, extras, etc. This from someone I know connected with the building industry (companies which build a lot of townhouses nationally, but also including King county).
What they are really doing is masking PRICE REDUCTIONS, sometimes substantial.
To anyone who is thinking that the townhouse is the new starter house (at > $400,000 to more than half a mil) — make SURE you hit them up for every discount, kickback, upgrade, and extra option you can think of. They’re motivated.
Merger Dog said…
Why don’t all of you just get out of Seattle?
Good point M.D. I ask my husband why we can’t do that very thing each week, however his work transfered the family here and for now we will stay, renting the whole time.
The traffic, the wind storm, power outages, over crowded schools, extra expesive gas and food prices..Ugh.
At least housing is super expensive and in need of repair.
What’s not to love?
Also, the builders can rent a crappily built townhouse. They can’t rent a lot. So, why not build, if anything they will take a hit, but it’s better than nothing, I’m sure thats how they look at it.
Schools are overcrowded everywhere as well as food and gas being uberexpensive. This is coming from my experience in Chicago. The only difference between here and there, is the rain and the uberexpensive housing.
Why don’t all of you just get out of Seattle?
No need when one can rent for 1/3 to 1/2 the cost of buying, pocket the savings, and be in a perfect situation to buy after this joke corrects itself.
And it suddenly dawned on me that if I wanted to, I could live anywhere in Seattle.
Bingo! You can even rent a small mother-in-law home on an estate in Laurelhurst, like a friend of mine…
… or dare I say, right next door to Meshugy in Ballard? Don’t worry, he works on the caste system, won’t talk to you because you’re a Troglodyte renter with fleas, but still.
WELCOME TO THE NEW WORLD ORDER HOUSING ECONOMY
By the way, very nice letter.
They say, if America downsizes and globalizes it wages to outsourced Asian and South American type wages; we should all soon make about $1/hr.
This may sound negative to you ostridges with your heads in the sand, but its a real possibility and soon too.
I know, we outsource all our car, computer and aircraft manufacturing for cheap labor and this frees America up to get college educated and invent all these high tech gizmos.
Well, the World Economic Forum just announced the results, America has dropped from 1st place to 7th place in technolgical innovation. This is with a domestic college system that has “unlimited” visas for foreign students. No wonder U of W’s GPA entrance requirement is an ungodly 3.7, the university is foreign overpopulation clogged [KOMO or KING would never admit this fact].
Even the Wall Street Journal news is admitting (not just on editorials either), globalism in America is a complete failure. The college jobs in America are being sold to the lowest world bidder and inventions are going down the tube. Have any of you tried the new Vista O/S lately, lol? That new improved car you drive and brag about has a 1900 internal combustion engine design invention. Automobiles are dinosaurs, technologically speaking. Plasma TVs were invented in the 60s, so was the computer, internet and the mouse.
So, how can we prop up this hosed real estate market in Seattle? I give up, but it sure isn’t reduced wages [check out the latest BLS listings on the to 25 TOP jobs in America for 2007, p.s., you'll need a BA degree and a broom or hamburger spatula].
I really believe the only reason lower incomes have bought Seattle Homes, when professionals with degrees and experience can’t touch them is “old money”. These impoverished lucky ones got big inheretence chunks and finally got to buy a house, or lived with mom and dad until they died, then took over the house [same thing].
The problem with “old money” is it quickly runs out.
America is like a steam locamotive boiler tank with globalism outsourced holes/leaks in its steam tank, its real estate sales are barely puttering down the tracks, but the “old money” steam, most of the sales depend on, is running low fast.
“This is with a domestic college system that has “unlimited” visas for foreign students… the university [of washington] is foreign overpopulation clogged.”
Sure. http://www.washington.edu/admin/factbook/taba7a.pdf
The college jobs in America are being sold to the lowest world bidder and inventions are going down the tube
I whole-heartedly disagree… You forget about the $580 Billion dollar defense budget, It’s sustained the U.S. economy for most of the 20th century…
U.S. military-pentagon inventions sold to the private sector…
-The Computer (designed for radar tracking), ergo… the Integrated Circuit Chip, transistors, etc…
-The Satellite (designed for military communication), launched on ICBM technology, gave birth to the telecommunications industry.
-The Internet (Cold War overly redundant communication system)
… the list goes on and on…
There’d be no Boeing without the military, there’d be no Microsoft without the military, there’d be no Google, Verizon/Singular/T-mobile, etcetera and so on…
The Pentagon serves as an economic engine, less so a military one, people forget this…
M.I.T. gets a huge chunk of its grant money from the military so do tons of universities…
Its an inefficient economic driver, but its kept America’s tech-prowess going.
Code-monkey jobs? let ‘em go overseas, who cares. Rarely does stuff like that revolutionize economies.
Code-monkey jobs? let ‘em go overseas, who cares. Rarely does stuff like that revolutionize economies.
If all of your entry level jobs go overseas, you’ll see a smaller and smaller pool of qualified mid-level employees. People don’t walk out of college with 10 years experience. They have to get that experience somewhere. Now your choice is to be one of the lucky few who lands a management job (managing something you have no practical information about), or you join the burger flippers and baristas.
Farming out the entry-level work (if you consider software development, financial consulting, and medical consulting to be entry-level), and educating increasingly larger numbers of foreign students vs. domestic students will eviscerate our upwardly mobile workforce.
The Pentagon (supported by that shrinking upwardly mobile workforce) can develop velcro and nuclear bunker busters all it wants, but that innovation will shrink as the US has to start paying back debts and cuts military spending.
The gradual evaporation of middle-class employment (which is what farming out manufacturing and white-collar jobs is doing) will revolutionize the global economy, but not in a good way for the US.
“Well, the World Economic Forum just announced the results, America has dropped from 1st place to 7th place in technolgical innovation.”
Why would you waste your time studying law, medicine or engineering when you can out-”earn” all those professions by speculating in the asset bubble du jour?
The gradual evaporation of middle-class employment (which is what farming out manufacturing and white-collar jobs is doing) will revolutionize the global economy, but not in a good way for the US.
Couldn’t have said it better myself! In the short-term, it benefits both the lower and upper classes, as lower classes get lower prices at Walmart. But as the jobs disappear for the lower classes, they eventually are worse off in the long run, and then Walmart sales are down, hurting the stores and shareholders, and the downward spiral continues . . .
Related to this topic–I have been reading engineering trade rags for the past 20 years now since I was in college, and there is virtually always a shortage of engineers predicted a few years out. So I would wait a few years and see if it came true. Never have seen these predicted shortages come true in the past 20 years. And then a few weeks ago we have Billy Bob Gates begging congress for an increase in H1B visas, because heaven knows we just don’t have enough software engineers here? Give me a break!
I learned that the corporate powers have a vested interest in keeping the supply of skilled workerbees high as it keeps the wages down. So it’s good propaganda to tell kids that we always need more engineers. Not that I’m against engineering at all or suggesting that more people study it. But when major companies (Boeing, Microsoft) are now outsourcing white-collar jobs to third-world countries (remember, these are the middle-class-supporting jobs that were supposed to stay here and not get exported) like India and Russia, what’s the real future look like for high-paying (non-gov’t) jobs stateside?
How many of you are aware of Boeing’s design center in Russia where they employ several hundred people? Can you imagine this happening even 40 years ago during the Cold War? And you can pay for 2-4 skilled workers offshore for every one here, do the math.
“Always, low prices” invaribly leads to “lower standard of living” which is the dirty little secret that those in charge are loath to admit.
NOTE: Not trying to turn this into a walmart-bashing, what they are doing as a corporation is merely symptomatic of what is happening across almost every sector of our economy.
And for the people who did buy recently and overpaid, how are they better off? Little or no equity, little or no money saved for a rainy day, probably not much going towards retirement.
People moan about gas going up 50 cents, higher health insurance, groceries, education, etc. But permanently insane house prices are seen as a good thing??!
If you have an EECS from Berkeley, I seriously doubt you will have any trouble landing a $60-70k entry level job before graduation. Management consulting firms and i-banks still love to recruit at top schools and all the kids flock to their info sessions. If you are smart and making a lot of money is your goal, you are not going to be disappointed.
If you have an EECS from Berkeley, I seriously doubt you will have any trouble landing a $60-70k entry level job before graduation. Management consulting firms and i-banks still love to recruit at top schools and all the kids flock to their info sessions. If you are smart and making a lot of money is your goal, you are not going to be disappointed.
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That’s correct:)
What’s a “maket”?
Oh, jeez. Thanks for pointing that out, wtf. Doh!
Catherine- you have hit the nail on the head and here’s why:
http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html
In today’s Seattle market it may take 20 years to see a profit or a reason to buy. This doesn’t even take into consideration that one might tire of the view and choose to live somewhere else.