My Model

Thanx for the response.

As for my mom, she is just attempting to find a safe place to put her money and still get a “reasonable” return. She’s very risk averse.

She’s also got a very respectable amount invested in municipal bond mutual funds like Blackrock National (MANLX) which looks like it’s taking a dive, Legg Mason Managed Municipals, and Seligman National Municipal (SNXEX).

It looks like I need to get smart on this stuff. I suspect broker’s don’t always have their clients best interests in mind when making suggestions.

I’ve been around. May is always scheduled nuts-to-butts for me, so I don’t have a lot of free time. Also, I find this new format to be not as user friendly as the previous format, and I desparately miss the open threads.

The 10 year bond is the bond that most closely influences mortgage rates. As the 10 year bond sells off, the yield rises. This pulls mortgage rates higher.

Today’s action was epic, which occured on top of an epic three week assault on bonds. If you look at the 10 year bond (ticker ^TNX on yahoo), you will see a relentless march of the yield upward. I think there have only been two down days in the past 3 weeks. That is huge.

Today, the bond jumped well over 5% in an extremely convincing fashion. Who knows where it goes tomorrow, but it sure looks like we are going to take out 5.25% easily within a few weeks. If today’s action repeats itself, we will be there by Tuesday.

As for your mom’s purchase…what is her goal? If she goes to sell her bonds, she will realize a large capital loss. as rising rates mean lower prices. If she holds them to maturity, she gets what she signed up for in whatever the US$ is valued at the time (inflation loss).

As for me, I’m not buying bonds. I’m not buying anything that doesn’t represent a declining price of the underlying asset (puts).

E

Again, thanks for making our point!

Thanx for the explanation. I will play with it.

The reason I asked was that on your Supply and Demand YoY graph, “active listings” are going up sharply while “active listings trend” is going down. Seems counterintuitive.

Where you been?

I’m not sure I understand the implications the 10 year Treasury Notes action today.

My mom was talked into buying $30K of 4 yr and 6 yr US Government Agency Bonds as of yesterday. Is this a good thing?

I’m using the Excel Trendline function to add a 6th-order trendline. This basically means that Excel tries to come up with an equation in the format of:

Ax⁶ + Bx⁵ + Cx⁴ + Dx³ + Ex² + Fx + G = y

Actually now that I look at it more closely though, I think maybe a 4th-order trendline would be a better fit. I’ll probably play around with it this month and see what I come up with. You can open the spreadsheet yourself and play with different types of trendlines (polynomial, moving average, etc.) to see what they look like. The page linked above gives a decent overview of what each one does.

How are the “trend” lines derived on the above graphs?

A short explanation as to what the trend lines really represent would be helpful (maybe just to me).

Has anyone seen the action on the 10 year bond this morning?

http://finance.yahoo.com/q/bc?s=%5ETNX&t=5d

Enjoy, and go easy on ‘Shug. He is going to need some serious therapy when this finally sinks in.

Can anyone with their head in the sand provide one good reason for the run up in real estate prices in Seattle? Oh, and that one reason must be a reaon that was not used by Florida, Arizona, etc. In other words, you cannot use a reason that others used to justfiy their bubble that burst. Provide one reason that is unique from all other real estate run ups?

Gardner said he considers six months the threshold for an oversupply of homes on the market and doesn’t expect an oversupply in the next couple of years.

Seattle home sales shoot up

The city’s May inventory was enough to supply 2.5 months of sales at the May rate, up from 1.9 months a year earlier but far below the 5.4 months that has been the average national level for the past two decades, according to Molly Boesel, an economist with the mortgage giant Fannie Mae. King County’s supply is about 3.2 months.

At 3.2 months supply for KC, and only 2.5 months in Seattle, we’re not even halfway to a mild buyers market of 6 months supply. It will take years of steady increase before we reach a buyers market. May happen, but we’re most surely not anywhere near it yet.

We have even more in the 90s:

REAL ESTATE SALES GAINING MOMENTUM
AREA SEES 31 PERCENT INCREASE

The number of houses on the market in the association’s three-county area has steadily increased from 19,000 homes at the end of 1991 to 26,000 in July.

Good point, shug. It’s always easier when you make our arguments for us.

It refers to records kept by the “Puget Sound Mulitple Listing Association” which used books to track inventory. I think, with the introduction of the “computer” the rate of record keeping has crept up just a bit, taking considerable friction out of the system.
– and with it many duplicate and/or obsolete inventory records. In other words, tThose historical numbers may be true – but I don’t believe they are really comparable to today. If you doubt that – note the part of the article with the quote “I’ll tell you something that illustrates the pace of listings,” says Jeanne Erdahl, a broker for William A. Bain of Issaquah. “We ran out of key boxes. I have never heard of the industry running out of key boxes before.”

Um, you ran out of key boxes with 11k listings, but not with 22k? huh?

ACTIVE LISTINGS SALES REPORTED AVERAGE SALE PRICE
1990 11,734 3,161 $153,821 ;
1989 13,159 3,949 $116,173 ;
1988 18,092 3,338 $106,502 ;
1987 18,539 3,342 $ 97,643 ;
1986 22,589 3,856 $ 91,536 ;

SOURCE: Puget Sound Multiple Listing Association

Owner occupied housing units (from census and ACS)
______1990/2005
King__ 362.0/456.3 (+26%)
Pierce 129.4/175.1 (+35%)
Snoho 113.8/170.0 (+49%)
Total 605.2/801.4 (+32%)

Ok, so we are to believe that in the past, we “routinely” saw 25k listings, which is 4% of the housing base – yet in today’s market, yet when the housing stock has grown by a third, we haven’t even approached that number in the interim?

I mean, good job dredging sumthin’ (anything!) up that might support your assertion – but um, nope, sorry. no cigar.

Like that explanation means anything to the Meshugy.

http://bigpicture.typepad.com/comments/real_estate_/index.html

The trend is down in price, up in inventory. The trend will continue.

I said that April would be the peak. I may be off a month or two. It’s all good brotha! I said we wouldn’t see YOY declines until late 07 early 08.

My name is Matthew, not Mathew, spelled like the apostle.

Go back to the 90s and you see double that # with no drop in prices.

But now you’re pulling out an article from the 80s, that doesn’t actually provide any real data, but rather an offhand mention of a big round number.

Also, during the time referred to in the article (“several years” before 1989) home prices were barely increasing, 1-3% per year at best.

Hi Tim…your just not looking at the right data. King County SFH inventory has been about double it’s current #s in the past. And the tri-county stats have been far higher as well. This 1989 article laments the days when the “normal” tri-county #s were around 25,000:

THE SEATTLE AREA’S REAL ESTATE PARADOX WHILE THE MARKET IS VERY HOT, LISTINGS REMAIN LOW AND AGENTS’ RANKS GROW

Between January and July, the number of homes listed with MLS (a solid indicator of homes on the market at any given time) shrank from 12,686 to 12,056. That’s less than half the 25,000 homes that normally were on the market several years ago, said Jack Johnson, executive director of the association.

Windermere is reporting that we have just broken the 9,000 barrer for SFR on the market in King County, clocking in this afternoon with 9,009 offerings.

Champagne corks are flying everywhere.

When asked for comment, Meshugy responded that “it pretty much normal” (sic)

We hit a new all time median Res price record for KC: $469K!

I really think that you are actually doing this on purpose to generate discourse, and you truly do understand simple supply/demand. The Seattle housing market will not escape the drastic downturn that the housing industry/credit bubble will inject into the US (and maybe the WW economy). Seattle is one year behind the curve. And there are other cities in a similar position (Portland, Charlotte). The key is the rapid increase in inventory. Has anyone ever tracked what is happening in Seattle in terms of the rapid rise in “for sale” signs vs. other periods when there was an increase in inventories. My guess, Seattle’s rate of increase is a new historical high. Just wait until all the condo projects come on line. Lastly, the median price is such a lagging indicator. Look at the relationship of inventories/demand/median price for the cities that are now in free fall….housing bubble bursts are not immediate. The upcoming recession will also push the Seattle market over the edge…good luck and good night..

Lesson: if you are going to lamely ride the coattails of Tim’s analysis, at least take the time to understand what it means :D

Go back to the 90s and you see double that # with no drop in prices.

Incorrect.

There was never a time when King County SFH inventory was “double” its current range of 8,000-9,000. The only data I have ever seen shows that SFH + condo inventory for King, Snohomish, and North Pierce County hovered in the 13,000 to 17,000 range through the ’90s.

As I said in the post, we have already long since passed the record inventory of the ’90s. Using the SFH+condo metric for the 2.5-county region, we are now sitting at roughly 22,986 homes on the market.

Wild hyperbole is one thing. But blatantly false assertions about verifiable facts just don’t fly.

Well, houses were up only 5%. Condos (per shug) were up 74%. Do we think that just MAYBE one or more of those big condo buildings opened for occupancy? Sales for those buildings are processed all at once, when the building receives its occupancy permit – not as they occur. So if you have a couple 200 unit buildings open up – guess what!

Given that the SFR number looks like the rest of the market, I’d put more emphasis on that one.

Funny, Cohen seemed to be less excitable than Rhodes last month. This month they have flip-flopped.

Look at the data. Sales down inventory up to astronomical highs.

No, it pretty much normal. Takea look at inventory in the pre-boom years of 2000-2003 an you’ll see that 8,000-9,000 is normal. Go back to the 90s and you see double that # with no drop in prices.

Prices stagnating
Uh…Res prices are up nearly 10% YOY, and climbing every month. There was a $4k increase from April to May. Nice…

sitting on a precipice just waiting for the sellers to blink before starting their slow, unstoppable decline for the next hundred years.

Are you saying that the KC prices have peaked in May? Are you predicting a drop in Junes #s?

Your house is just a home, Meth. You better be investing well in diverse holdings to balance out that dog in Ballard.

I’ve got all sorts of investments…most returning 50% or more right now. The house we have right now is actually really nice and we like it a lot. I think we’ll keep it for a long time.

Maybe you need to round to the next whole number?

Fact: Prices in King Country will continue to appreciate at an average of 12% a year forever. In fifteen years, the median sales price will be $2.5 million.

Fact: Inventory in King County will also continue to grow at 40% a year. In fifteen years, there will be 3.5 million homes on the market.

Given the land management acts and the fact that there were only 800 thousand residences in KC in 2005, many homes will be on the market two or three times at once. Everyone with half a brain will be jumping on the hot, hot, hot trend of “pre-flipping” where you sell a house before you buy in an effort to reduce the hellish $25k annual property tax holding costs.

Unfortunately, sales will also drop 9% a year to just 700 pending sales. And those figures will be inflated since many of them will be the same housing quickly chaining backwards through investors until it lands on the unlucky sap who accidently purchased from the original listing.

KingCo SFR: 9.59%
Seattle SFR: 9.66%

Ummmm…. I’m not seeing double digits. Can someone check my math?

anyone?

you so funny shug. yer right, it’s just like last year, with more inventory and less sales.

kind of like cake and poop, instead of cake and ice cream.

Good thing Ballard’s neo-fascist Realtor brigaes have instituted ‘no sell’ laws that keep people from listing their homes in order to maintain super-low inventory!!!

nee-ner-nee-ner!!!

Look at the data. Sales down inventory up to astronomical highs. Prices stagnating; sitting on a precipice just waiting for the sellers to blink before starting their slow, unstopable decline for the next hundred years. Well okay – 8 years, but who’s counting.

Your house is just a home, Meth. You better be investing well in diverse holdings to balance out that dog in Ballard.

We hit a new all time median Res price record for KC: $469K!

Did you see the sales stats for Seattle? 74.25% YOY increase in Condo sales! That’s just jaw dropping….I can’t believe what I’m seeing. People said there were too many condos being built, but it’s now clear that they can’t build them fast enough. I think if you’re a middle income person, condos are now the only option. Hence the massive sales.

Amazing that we’re still seeing super hot double digit appreciation after all this time. Mathew said we’d be seeing price DROPS starting last month, but the prices keep spiraling ever higher. And Billi said we’ll start seeing YOY drop in July. Hard to see that happening with houses flying off the market at this rate. At this point it clear that predictions for a crash this year in Seattle were way off the mark. The market is cooking at about the same rate as last year. Very little has changed…

% change YOY is cumulative. As long as it’s above 0 the volume is increasing. So even if it goes up 20% one year, then drops to 1% the next year, sales are still up 21% over the starting rate.

Inventory up 40.65%
Sales up 5.24%
Median price up 9.66%
Pending Sales down 5.36%