Seattle Bubble

I have to point out this self-congratulatory piece of work from Seattle Times editor-at-large Mike Fancher. It serves as a sort of introduction to the “Home Values” series, and actually seems to sum up their goals pretty well.

Housing sticker shock used to take our collective breath away; now it seems to bring just a very deep sigh.

The Seattle Times offered its first annual look at home prices in King and South Snohomish Counties in 2000, calling the report “Sticker Shock” to reflect how we all reacted to what was happening. In recent years, we’ve changed the name.

“I guess we are all over the shock now and have been calling it ‘Home Values’ the last couple of years,” said Becky Bisbee, Times business editor.
…
“This is one of those packages that only we do,” Bisbee said. “Anyone who owns a house or is thinking about buying or selling would find it fascinating and invaluable.
…
[Times Real Estate Reporter Elizabeth] Rhodes said the idea for today’s story was “based on the concern people have that the housing market is cooling, and the ‘bubble’ bursting. National stories are saying this. But all real estate is local, so it made sense to explain to readers what’s happening here. And economists say Seattle doesn’t have a ‘bubble.’

“The bottom line is that appreciation may be falling, but house prices aren’t. They’re consistently up, something we’ve seen annually for at least two decades. That’s the proof that our market isn’t tanking,” she said.

It would appear that the Times has discovered a three-phase business plan in which step two is something other than ‘???’ …

1. Provide data on the housing market.
2. Spin data in as positive a light as possible.
3. Profit!

Hey, whatever works I guess. I think it would do their readers a much better service if they provided access to the raw data, rather than just the pre-packaged maps and charts that they deem worthy of public consumption.

Then again, the readers aren’t really the customers, so much as they are the product that is being sold to the advertisers. I wonder who the Times’ biggest customers are?

(Mike Fancher, Seattle Times, 05.20.2007)

The Seattle Times will be hosting a “Live Q&A on residential real estate” with Elizabeth Rhodes (real estate cheerleader) and Matthew Gardner (local economist) tomorrow from noon to one o’clock. Presumably this is some sort of online chat thing, although the announcement isn’t clear.

You can ask a question in advance via a web form, although I’m sure there’s no guarantee that they will choose to address your question.

I’ll try to take lunch during that time so I can maybe get in a question. Any advice on what would be best to ask?

The real estate reporting/advertising machine kicked into high gear this weekend at the Seattle Times, where they launched a whole new section of reports on local “home values.” The headlining article, titled Home prices: from sizzle to simmer, contains a fun mix of truth and empty assurances.

With real-estate markets across the country reeling, Seattle-area homeowners may have a hard time getting any sympathy from distant relatives when they talk about how much the market has cooled off here.After 2 ½ years of double-digit increases, King County’s single-family home appreciation peaked early last year. But at 16 percent for the year, the increase in home prices for 2006 handily beat the previous five years’ annual average: 9 percent. The same was true in the southern half of Snohomish County.So far this year, King County’s appreciation rate has dropped to 13 percent.It remains to be seen if the housing market is seriously cooling off or merely taking a breather before prices shoot up again.

So they admit that it’s still unclear where the market is going, and yet later in the article they quote the following wild prediction as though it were fact:

“Seattle will have a period of time when home-price gains are positive but modest — less than income growth — and that will allow affordability to catch up,” Fannie Mae’s Berson concluded.

Of course, we’ve already done the math on the “catch up” scenario, and it doesn’t look pretty. When you update to more recent data in the “Catch Up” sheet of the Seattle Bubble Spreadsheet, you can see that even with “modest” appreciation of 4%, and generous wage increases of 6%, it will take at least 20 years for affordability to “catch up.”

In the late 1990s, King County’s tech-fueled economy added nearly 300,000 jobs. Bingo! House prices shot up.Then in 2001, the nation entered a recession that “affected the Seattle-King County area more dramatically than most of Washington’s other areas, rural or urban,” according to Cristina Gonzalez, an economist for the Washington State Employment Security Department.The recession lasted until early 2004; during that downturn the county lost more than 120,000 jobs, and unemployment hit 6 percent. Annual home-price appreciation during much of that time coasted at 4 percent or so — roughly half of what it had been in the late ’90s.

Apparently Ms. Rhodes & Mr. Mayo don’t see any fundamental problem with home prices continuing to rise at 4%, despite the Seattle area being in a “more dramatic” recession than the rest of the country. Yikes. Although they seem to be attempting to show that the latest home price surge has only been post-2004, what they really demonstrated is that even as far back as 2001 home price gains were seriously outpacing incomes.

At least they close the article with a brief glimpse of the real root of the problem:

So why is [Seattle economist Dick] Conway predicting that appreciation won’t go double-digit for a third year running?Because of a sharp drop in affordability, said Conway, co-author of the Puget Sound Economic Forecaster newsletter. House prices have increased much faster than wages, effectively locking the homeownership door for many moderate-wage earners and first-time buyers.

Bingo. Once the “must buy houses” mania dies down, it all comes down to fundamentals, which are seriously out of whack no matter which way you slice it.

More of my take on the Times’ “Home Values” series will be forthcoming later today.

(Elizabeth Rhodes & Justin Mayo, Seattle Times, 05.21.2007)

That’s right, it was finally time to take the plunge and move the site over to WordPress. The upshots of the move are more flexibility and the dedicated domain name SeattleBubble.com. The downsides are that I’m sure a bunch of links won’t work, and it will probably take me a few weeks to iron out all the kinks.

Make sure you update your links. The new address is http://seattlebubble.com/blog/ -or- http://seattlebubble.com/.

Please let me know if you find anything that is awry. I will be working to improve things as I am able.

You’ve heard these stereotypes about renting, circulated by people and organizations with a financial interest in selling you a mortgage:

• Renting is for poor people.
  and,
• Renters don’t get involved in their community.

Here’s a specific example of these arguments, courtesy of the NAR:

Low- and moderate-income families, as well as minorities, are the groups that homeownership eludes the most.
…
Homeowners are motivated to stay abreast of local issues to protect their investment.
…
In turn, involvement in community quality-of-life issues helps prevent crime, improve childhood education and support neighborhood upkeep.

- NAR, Homeownership Talking Points

I mention these because a semi-related story in today’s Seattle Times caught my attention. In the first three paragraphs it gives a strong counterpoint to these talking points we often hear repeated by those in the home sales business. (emphasis mine)

On the 40th floor of a Seattle skyscraper, in a nondescript hearing room, a young Queen Anne couple sat on one side of a long table. On the other side sat their opponents — lawyers defending a city permit to tear down an old church next door to the couple’s rented house.On this particular day, the Queen Anne couple, Tyler Crone and Jorge Barón, looked far less like the working parents of a 3-year-old daughter and 15-month-old son and more like who they also happen to be: Yale-educated attorneys, one with a master’s in public health, both on a mission. There the couple sat, confident, attired in suits, with briefcases of exhibits — and armed with witnesses who pounded home a single, emotional message: Don’t poison our children with a toxic cloud of lead dust.

Bill Merkle, a real-estate broker involved in the deal to develop the church property, watched the spectacle with frustration, having never before seen such formidable neighborhood resistance to a demolition.

Surely there was a typo. That doesn’t sound like renters at all.

Or maybe it’s time to rethink the view that renters are somehow inherently unfortunate, lazy, ignorant, and/or stupid.

(Sanjay Bhatt, Seattle Times, 05.17.2007)

Just a quick note to point out that Seattle’s riverside neighbor to the south—Portland—has its own housing bubble blog: Portland Housing Blog.

Drop on by and leave Clint a comment or two.