Posted by: The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

81 responses to “Mortgage Woes “Not Happening in Seattle””

  1. explorer

    Gardner is the REIC’s mouthpiece, and has been the go-to guy for many years for both the PI an Seattle Times.

    Before this current bubble, He seemed alot alot more balanced and independant, at least when he used to focus as much on commercial RE. That article made up my mind once and for all he is a complete shill.

    Thanks for calling him out on it in the Sound Off Tim.

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  2. Grvetti

    Dirty Dirty Facts!!!

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  3. Matthew Gardner

    I continue to find your site interesting for in part, but amusing for the greater part. Two points that I would make are that the statement concerning foreclosure rates was applicable to the city of Seattle and not the MSA. Even if we were discussing King and Snohomish counties, one might suggest that 1,400 or so foreclosures in a 596,000 unit market is actually statistically insignificant (0.2%) and pre-forclosures in decline!

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  4. TJ_98370

    There are none so blind as those who will not see.

    Seattle / Puget Sound region is not immune from the mortgage default problems currently being experienced by many other areas of the country.

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  5. Chris

    They’ve got their eye on us here.

    But don’t worry, it’s mostly just because we’re “amusing.”

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  6. biliruben

    Mr. Gardner. Thanks for stopping by. Glad we could amuse you. Your “forecasts” tend to do the same for me.

    I assume you have taken an economics class or two, you must be familiar with the term ‘lagging indicator,” of which foreclosures are one. Using them as a prediction tool is less funny and more plain sad.

    Second, you should also know that making absurd predictions of ever-rising prices with 100% confidence falls under the purview of shills and morons, not unbiased “economists”.

    I look forward to you providing many future chuckles in the future, but feel sorry for the chuckle-heads who might take your forecasts as having actual value. The of victims who’s financial future you are complicit in destroying personally wouldn’t allow me to sleep at night. Where’s your conscience?

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  7. Garth

    He is right about the data, a 4x increase in an insignificant number is still insignificant.

    Many of the sub prime defaults never even make their first payment, here in seattle there are far fewer low cost housing options that these loans are being used for in other parts of the country. It is pretty difficult to get a 1/2 million sub prime loan.

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  8. Grvetti

    Defaults on Some `Alt A’ Loans Surpass Subprime Ones

    Ain’t the subprimes doing the cheif amount of damage, time for ROUND 2! “Alt-A’s Strike Back!”

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  9. Thaxter

    “Even if we were discussing King and Snohomish counties, one might suggest that 1,400 or so foreclosures in a 596,000 unit market is actually statistically insignificant (0.2%)…”

    Gardner makes a good point here and I don’t see that mocking him or disagreeing with his view point is useful. Let’s see how it plays out. I tend to think that the greater macroeconomic effects of falling financials in the nation at large will eventually trickle down to Seattle. Our local economy is not immune to the greater economy and cannot obtain the same labor and profit results in a closed-loop system.

    It seems apparent that right now, in the Seattle metropolitan region, we are still seeing a hugely overvalued market without a significant markdown of prices. However, we will also continue to see rising inventories and less sales. Something has to give over time, but at the present, we see no local bending or adjustment to the larger national economic picture, simply because there is no immediate need to bend to it.

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  10. Joe

    Mr. Gardner you sir are an idiot.

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  11. Matthew

    Do these idiots not realize that the credit crunch and tightening lending standards have just barely begun to impact financing? Its easy as hell to report yesterday’s news, why Mr. Gardner, don’t you look ahead at what is going to happen during the rest of the year once the massive amounts of ARMs reset and people are no longer able to obtain financing for one of the nation’s most overvalued regions.

    My guess is that foreclosures are going to keep rising. I’m sure that someone in the RE industry will say that the amount of foreclosures here will be “insignificant” because they will not be at the same level of So Cal or some other region they decide to compare us with.

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  12. AndyMiami

    The national real estate and credit bubble is only beginning to unwind and the credit and equity markets are finally in a panic selling mode that may just take the economy into negative growth. Mr Gardner should take a little time and maybe travel to other areas/cities to see what is already happening. Seattle is not immune, unfortunately, it’s a matter of time when defaults begin to rise and real estate values fall. Seattle may not experience a Miami collapse, but there will be a correction and many people will feel less wealthy, even in this special place.

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  13. Amused

    “1,000 foreclosures on a 596,000 unit market is not significant”

    mmmmm…let’s think about that statement for just a second. How many sales do we have each month – let’s say give or take 5,000.

    How would you characterize 1,000 foreclosures a month on a total of 5,000 sales?

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  14. biliruben

    I owe Mr. Gardner an apology.

    I note now he doesn’t even have an advanced degree in economics, so perhaps he hasn’t even heard or understand the term lagging indicator, or any other economics term for that matter. He certainly seems ignorant of terms like “Supply” and “Demand”, given his complete disregard of the record levels of homes on the market and declining sales.

    He main guilt is one of simple lack of education and sorrowful ignorance, with the minor fault of not alerting the press of his obvious lack of ability to perform any sort of meaningful analysis.

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  15. Garth

    It should be noted this blog is 2 years old and the entire time the premise has been that eventually “something has to give”.

    Inventories are up a little, buyers get to do an inspection now, and overpriced properties stay on the market longer, but houses are still being sold at good prices.

    Look at data for Naples Florida for a reality check if you think a huge crash is coming here.

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  16. EM O'Grady

    You border on irresponsible journalism by quoting such an uninformed statement as that made by Mr. Gardner. A land-local use economist has absolutely no view into the retail residential lending practices in this – or any region. As a 30 year veteran of both national and regional lending, I am available to give you the details about the extent of predatory and subprime lending being practiced locally. In addition, you have rather wrecklessly ignored the demise of one of the nation’s top sub-prime lenders, BASED HERE IN THE SEATTLE REGION – MILA – Who’s owner won the Ernst & Young Entrepreneur of the Year Award just a few years ago. The second major local presence involved, both locally and nationally in sub-prime lending is Washington Mutual, who, when it acquired Long Beach Mortgage, it acquired one of the top sub-prime lenders in the country. And let’s not forget the NAACP class-action lawsuit against Washington Mutual for sub-prime lending. Feel free to contact me – as have numerous national publications – if I can help you see past Mr. Gardner’s ignorance.

    EM O’Grady

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  17. deejayoh

    Party on Garth!

    I had to say it…

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  18. uptown

    With the rate prices have gone up over the last 2 years, the foreclosure rate should be almost zero. If you can sell your house for more than you paid for it, why would you not sell once you’re in preforeclosure?
    The answer is: they can’t sell to cover the loans, which means they’re underwater in a supposedly hot market.

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  19. deejayoh

    oh – and as provider of that chart, I have to say – while I disagree with the statement that “It’s not happening in Seattle to any degree whatsoever,” I would agree it’s fair to say that while we have seen an decided increase in foreclosures, the volume is not material. Additionally, I think the trend in NODs bears watching, as despite what you see in the Credit Suisse analysis, the volume of NODs seems to be dropping locally which could presage a drop in foreclosures.

    That said, I think the bigger issue is the impact that the national trend has on the overall lending market – which I believe is making it harder for buyers to qualify in every market. Taking 10 or 20% of buyers out of any market is significant, and I think that is what is happening.

    As to sourcing Washington Federal as a indicator of what is going on in the local market… I think that’s totally irresponsible. They probably have totally different lending requirements than the market as a whole over the past 4-5 years. That’s like saying all cars are good quality because Honda’s are highly rated.

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  20. Garth

    Using the subprime % data here:

    http://seattletimes.nwsource.com/html/realestate/2003621595_homeforum18.html

    And the earlier statement in this thread that seattle is a 596,000 unit market, less than 2500 mortgages are at risk.

    Not much of an impact.

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  21. MisterBubble

    “He is right about the data, a 4x increase in an insignificant number is still insignificant.”

    He’s full of chocolate. Not to put too fine a point on it.

    There’s no such thing as an “insignificant number”. Numbers are numbers.

    Changes in numbers can be significant or insignificant. Numbers themselves cannot.

    Matthew Gardner: better to stay silent, and have people think you are a fool…..but I guess that isn’t an option for you, is it?

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  22. MisterBubble

    Oh….by the way? Those feisty, Realtor(tm) brand Real-Estate professionals sold another big chunk of homes between 4 and 5 AM this morning.

    Either that, or someone has set up a computer to flush stale entries automatically at the same time each day.

    (Wanna guess which one it is?)

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  23. bighead

    While I’m not an economist (and have had 0 training in statistics), the implication that because .2% is small, it is statistically insignificant seems pretty golly stupid to me. I thought that statistical significance was tested based on the probability that a number could happen by chance. From that graph, it seems that it is a very statistically significant number.

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  24. Mike2

    Being in foreclosure and being at risk of foreclosure are different.

    If you cut your timeframe short enough, you can successfully argue that there will be 0 foreclosures.

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  25. Garth

    Those numbers are statistically insignificant both before and after, it has nothing to do with the changes.

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  26. softwarengineer

    INVESTORS SHRUG OFF SUBPRIME LENDING WOES

    The stock market didn’t today. See the proof:

    http://biz.yahoo.com/ap/070726/wall_street.html?.v=52

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  27. CCG

    Can’t you bears see that it’s different this time? Clearly, housing prices in Seattle have reached a permanently high plateau.

    Anyone who doesn’t buy, now, will be priced out forever. Anyone who does buy will be rewarded with a lifetime of riches as their properties continue their double-digit annual price increases for all time.

    Renters, and those born in future generations, will be unable to afford a $10M starter home in 5 years. They will live in tent cities, and Hondas.

    Unlike every asset bubble in all history, this one will never slow down, or pop. The gains are permanent.

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  28. Garth

    CCG, how much do you think a hypothetical house south of northgate and north of safeco that recently sold for $500,000 will sell for in a couple of years?

    There will always be a peak, the question is if it is a “bubble” how much will prices drop after when it “pops”.

    If you look at the real estate market estimated to be overvalued by 100% last year (Naples Florida) their prices have dropped by about 13% over the last year. The same reports estimated Seattle at about 24%.

    The Seattle area has a lower level of exposure to subprime loans, bad transportation infrastructure, a booming job market, and a much lower percentage of investors vs homeowners then the markets where prices are down for the year.

    The bears on seattlebubble need at least twice that big a crash, and that is not going to happen.

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  29. MisterBubble

    Prove it, Garth.

    I’ll make it easy for you: tell me the statistical test you would use to “prove” significance in this situation.

    C’mon man…show me your authority.

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  30. Garth

    I said they are not significant, which in the statistics I have taken generally means less than 5% (depending on the data quality) usually less than 1% and possible by chance.

    I dont know why washington’s foreclosures dropped a year ago when the rest of the country started rising, and these recent increases remain well unders 1% as well and within the historical numbers for Washington, so it is possible by chance, I could claim it was an increase in divorces just as easily as you can blame subprime, the numbers are too small and there are too many factors to prove anything.

    Why do you think they are significant at .3%?

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  31. Garth

    Two years in seattlebubble readers want cheap houses to buy now :)

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  32. MisterBubble

    “I said they are not significant, which in the statistics I have taken generally means less than 5% (depending on the data quality) usually less than 1% and possible by chance.”

    Less than 5% of what, Garth?

    C’mon, man…this is freshman statistics. You’re making some pretty bold statements…surely you know freshman statistics, right?

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  33. MisterBubble

    Tim: the relevant question is not whether the current number of foreclosures is “significant.” That can’t be quantified. The question is whether the change is significant.

    Unless the seasonal fluctuation in the number of foreclosures is very large in this part of the country, it is unlikely that a 400% change in foreclosures is insignificant.

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  34. deejayoh

    I’ll make it easy for you: tell me the statistical test you would use to “prove” significance in this situation.

    I don’t think this is an argument about statistical significance, is it? We aren’t talking about samples. We know the entire population. So according to my freshman statistics (do they teach statistics to freshmen these days?) the number is significant. But the real question is one of materiality – is 0.3% a significant figure when it is applied to foreclosures as a percent of total mortgages. That’s a matter of opinion. I don’t think it is, based on comparisons to other markets. Others may have arguments as to why it is – which it would be nice to be seen put forth…

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  35. MisterBubble

    I agree with you completely, Deejayoh. I’m looking at the one thing that we can quantify (the 400% change), and saying that it’s probably significant. I don’t know for sure, because I don’t have enough information to do the test.

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  36. Garth

    400% is from a chart on seattlebubble with wide data variations and projected (pre) data merged with actual data. Show me some real numbers like total number of forecloseures each month in king county.

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  37. MisterBubble

    Oh…and we are talking about samples. We’ve taken two samples of foreclosures — one from four months ago, and one today, and we’ve compared them, and found a 400% difference.

    (The assumption is that foreclosures are the result of some sort of underlying statistical process, and that our month-to-month observations of the number of foreclosures is a sample.)

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  38. deejayoh

    MisterBubble said,
    on July 26th, 2007 at 12:58 pm

    Oh….by the way? Those feisty, Realtor(tm) brand Real-Estate professionals sold another big chunk of homes between 4 and 5 AM this morning.

    Either that, or someone has set up a computer to flush stale entries automatically at the same time each day.

    (Wanna guess which one it is?)

    I’ve been watching this with some interested. Not hourly, but just the trend of falling inventory since Monday.

    I checked back against Tim’s spreadsheet and see that in more “normal” years (2002-04) inventory seemed to fall between June and July. In the bubbliest years (2005-06) it grew 6% each year. Given typical seasonality, it’s not outside of norms that Kingco SFH might fall. Still a long way to go to hit ~9500 – so I’m reasonably certain it won’t, but if it did I don’t thing it wouldn’t mean much. July 06 inventory was 6,900 units – so it will still be up 40-50% Y2Y no matter what.

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  39. carlislematthew

    “I don’t see the reason for all the apparent hostility toward Garth, who has simply made a few level-headed points, and asked some perfectly valid questions”

    It’s easy to get all worked up when someone suggests that prices may not come down to a level at which one *already* decided was overpriced at the time. I get the impression that some people on this forum REQUIRE prices to go down hugely so they don’t feel so foolish that they didn’t buy back in 2002/2003.

    Me? I’ll be fine if the prices stay at current levels or if they go down. I’d prefer the latter of course…

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  40. Alan

    I don’t log into the forums from work or I would post this there. Maybe I will do so anyway tonight.

    Having independent sources of information is useful. When you look at inventory on a real estate site you are really looking at a sample of the inventory that is based on the listings hosted by that agency. Plus, if you are only looking at a single source your data is subject to manipulation by the owner of that data source.

    Windermere is one of the largest RE companies in the area. John L Scott is another.

    John L Scott says that there are 11091 SHF for sale in King County.

    http://johnlscott.com/PropertyList.aspx?GroupID=48687785

    Something funny is going on at Windermere. I bet our new forum contributor ‘sid’ works with Windermere and I also bet that Windermere shows KC-SFH dropping below 10k on Monday.

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  41. Garth

    For the numbers to mean anything. The whole year would be your first sample, and you would compare it to the previous year (your second sample) month by month to see if there is an increase, not take a 4 month period and claim a 400% increase.

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  42. Who Knows News :: Seattle and the Puget Sound

    [...] local land . are rapidly coming to an end though, even in Seattle. King County Median Home Price.Mortgage Woes “Not Happening in Seattle” [...]

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  43. Mike2

    I dont know why washington’s foreclosures dropped a year ago when the rest of the country started rising,

    With the type of appreciation this area was experiencing and the banks willingness to lend to anyone it is amazing that foreclosures weren’t at 0 last year.

    Aside from death or complete mental incapacity ANYONE could have sold or re-fi’d out of foreclosure in 2006.

    The mortgage companies (Countrywide in particular) have made it no secret that they expected owners to use their equity to make interest payments. Predictably, the kink in this cunning plan was that house prices don’t always go up.

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  44. Alan

    I say take the maximum of the set. There is no listing service that contains all properties on the market. The one with the largest number has the most complete set of listings.

    Although they may just have more stale listings.

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  45. Alan

    I agree with you about 50%, Garth. YOY inventory increases are more meaningful than MOM, DOD, or HOH increases. But that does not mean you have to collect an entire years worth of data before you can make any meaningful inferences. For example, a single month of inventory observations compared to sales observations over that same period can provide a very good idea of where the market is in terms of supply and demand. Also, comparing inventory to historical peaks can provide useful information before you gather an entire year’s worth of data.

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  46. deepcgi

    The bigger question is, are people increasing their total debt? In California and Florida, credit card debt is increasing at a substantial rate. An obvious side effect of denial.

    I lived in Japan in the mid 1980s and have a friend with a home he bought that year. He tells me he was quite excited when his property

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  47. deepcgi

    The bigger question is, are people increasing their total debt? In California and Florida, credit card debt is increasing at a substantial rate. An obvious side effect of denial.

    I lived in Japan twenty years ago. I have a friend with a home there. He tells me he was quite excited when his property finally returned to his original purchase price – 16 years after he bought it. The trouble is, with inflation, he’s still not there, yet. Not by a long shot.

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  48. wreckingbull

    Gardner made a pretty meaningless point, regardless of its accuracy.

    Yes, we are not experiencing the forclosure crisis of the rest of the country.

    Here is why this does not really say much:

    1. A local forclosure crisis cannot really happen until appreciation stops. As Mike2 pointed out, I don’t understand how there were any forclosures in the last year. Will appreciation stop? Pierce County votes yes. I vote yes too, although we are not quite there yet.

    2. Even if forclosures continue to rise here, I don’t see that putting real pressure on prices. I argued this point with long-lost Baby-Blue a long time ago. It is tight credit, (a result from the national forclosure crisis) that will put downward price pressure on Seattle real estate. We have not yet seen the effects of this, but will shortly.

    Easy credit fueled the boom, tight credit will smother it.

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  49. Garth

    Alan,

    I didn’t really mean you needed a years worth of data, rather that july 2006 should be compared to july 2007 to look for an increase, not march 2007 through july 2007.

    There are too many factors in the recession in Japan to compare well to Seattle, and California and Florida residents took out a far greater percentage of subprime and assorted ARM mortgages over the last few years and their default rates more than double that of Seattle.

    I think for people in Seattle with houses bought within the last five years using an ARM, the biggest potential risk is not making money or generating a small loss instead of the free down payment they were hoping for, but not foreclosure and bankruptcy.

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  50. Old Ballard

    “Also, the subprime market in the Puget Sound area represents less than 7 percent of loans, and of those less than 7 percent are in some kind of distress, Gardner said”.

    Joint Center for Housing Studies of Harvard University, Table W-9 Affordability Product Market Shares by State: 2006

    Washington State: 30% Interest Only, 12% Payment Option.

    There are maybe five counties in Washington that can support a housing bubble King, Snohomish, Pierce, Spokane, Skagit. I have doubts that Garfield County pop. 2,451 will bring much to the table.

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  51. Alan

    Garth,

    Fair enough.

    I think people who bought five years ago may see no loss. People who bought six months ago may see a signficant loss (where significant might be 30k-200k depending on purchase price and location).

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  52. B

    Garth,

    I’m inclined to agree, at least for the buyers who did not get into other debt/HELOC trouble during the last 5 years (HELOC defaults are a big nationwide problem, I’ve been reading), and who have a reasonable DTI. Of course, even a slight recession affecting the region could throw predictions way off.

    I think you make a good point about “not making money”. Not making a mint (on paper) from a house is perfectly fine, and is in fact the normal case. However, I think there were quite a number of people who bought on exactly that assumption. When this all washes out, I think a protracted period of no-appreciation (e.g. loss in real terms) and the friction of loan/transaction/property tax/maintenance costs will erase any and all potential gains for most buyers.

    If a place was bought for the standard (and valid) emotional reasons, as a shelter and a place to live over a period of years, then 0% to slightly negative appreciation shouldn’t matter much. Let’s hope these are all high-income professionals with little financial risk. However, for those who speculated, I think it will be shown that they would have done far, far better to invest in something more productive than real estate.

    Now, I have to get back to watching my landlord clean the gutters and mow the lawn..

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  53. terry smith

    i dont think this housing mess is going to amount to much there saying after 2009 i dont buy it. there talking lowering the rates again this fall. it will pass

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  54. Garth

    Microsoft did 50 billion in revenue for the year, Boeing 17 billion for the quarter. These are growing global businesses with contracts for huge amounts of future revenue that are hiring tons of well paid employees. I would gamble against a recession even getting started any time before 2012
    As for mortgages I like numbers from subprime, since you have some info on what is going on and generally the price range they are utilized for (There are few subprime loans on million dollar houses) all these other instruments are impossible to analyze well from publicly available numbers because they are currently being used by sophisticated investors, cash poor speculators and buyers without a clue at different ratios in different markets.

    Empirical data leads me to believe that there are far fewer cash poor overextended individual real estate investors in Seattle as the mortgage to rent numbers don’t allow for the cash flow to keep extending and speculating. I went to Western, 90% of my friends from school live in Seattle and the rest live in southwest Washington. A couple of them living in Vancouver have purchased several properties each refinancing and renting along the way for mortgage payment cash flow. Of those in Seattle nobody has purchased anything other than a primary residence, you just can’t do it.

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  55. rose-colored-coolaid

    We are the Tail on the Dog. For this reason, we will have a more severe correction than most other areas. Miami may have been more over priced, but they first crashed a year ago while financing was easy and fear was low. By Christmas when it becomes clear we are crashing too, things will not be so rosy.

    The upside to this is that while the carnage will come faster, it might end sooner. My 2cts

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  56. Alan

    Garth,
    I’m a Microsoft employee and am priced out of this market. Don’t count on us to keep the prices up.

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  57. Joel

    I’m a Microsoft employee and am priced out of this market. Don’t count on us to keep the prices up.

    Seconding this.

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  58. Grvetti

    Microsoft did 50 billion in revenue for the year, Boeing 17 billion for the quarter. These are growing global businesses with contracts for huge amounts of future revenue that are hiring tons of well paid employees. I would gamble against a recession even getting started any time before 2012

    *yawn*

    Well as a Boeing drone getting paid ~100K/yr, I am priced out of this market… actually let me put it this way, I am priced out of this market using a traditional fixed product.

    Sure I could buy a one bedroom condo in Ballard’s neverending condo construction (No Ma(n) Ballard?), but that’s not what I want, I’m have no fear of being priced out forever and seeing what I would have to do to ‘buy in’ to the ‘dream’ currenlty is a lifestyle hit I want no part of.

    Instead, I’m taking my folks to Hawaii for the 50th, upgrading my ski/scuba gear and not worrying about that tab when I go out to eat… oh yeah, I’m also living comfortably in Seattle.

    I’m sure I’m not alone.

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  59. deepcgi

    Prices cannot remain flat. Not if the fundamentals are the problem. If people can’t afford a mortgage on a median priced home with their salary alone, the prices must change. Stagnation is impossible.

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  60. explorer

    Garth, on that point, you seem to be living in a bubble yourself. You certainly cannot gereralize on one local, and one semi-local –Boeing has actually DECREASED it’s total employment in WA St. since they relocated their HQ to the Chicago area, and expanded their production facilities in other states. The Renton and other East-Side facilities are a shell of their former selves, and all the remaining action is in Everett now… Even if you throw in Paccar, you still cannot ignore the MEDIAN income in the county you are talking about.

    For KIng county, Boeing is less of a factor, since most of the jobs are in Snohomish County. The MEDIAN income in King Co. is around $68-70K based upon the last stats reported. So, using that as a base, NO ONE can afford anything but a 300+ sq. ft studio condo, or at BEST a dinky 1 BD conversion in King Co. That also makes BIG assumptions that they are not using ARM’s and have a big chunk of cash for the down payment.

    If you qualify your assumptions by anectdotal evidence from your immedated circle, that can be worse than misleading, especially when you don’t take into account the median wage. I could also say that, based upon some folks and overheard and read conversations, the a few Microsoftes have made MULTIPLE speculative purchases that have skewed the stats….

    Renting, even with the recent spike, STILL makes more sense to most who have watched the madness of crowds flock to the tulips for some years now.

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  61. Lake Hills Renter


    I’m a Microsoft employee and am priced out of this market. Don’t count on us to keep the prices up.

    Seconding this.

    Third.

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  62. PDX Renter

    Can’t you bears see that it’s different this time?

    Yes! The business cycle has been defeated!

    I also wanted to mention that over half (50.39%) of the homes in Seattle are rented, not owner-occupied (according to Sperlings). If it is not investors/speculators who own these homes, who is it then?

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  63. PDX Renter

    The MEDIAN income in King Co. is around $68-70K based upon the last stats reported.

    I would like to add that 81% of people living in Seattle WA make less than 75k. So 80% of the hard-working people of Seattle cannot afford anything but a 300 sf studio or a crackerbox in King County.

    Doesn’t seem sustainable to me…

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  64. PDX Renter

    A quote from dollarcollapse.com I thought you all would enjoy…

    Most financial bubbles are pretty easy to spot: An asset class climbs way beyond what old-fashioned valuation measures used to define as reasonable, market participants start acting like idiots, and pundits rationalize the madness with learned “new era” theories.

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  65. Old Ballard

    Boeing profits matter little to every day people. Most of the major parts for the new “Dream Liner” are made over sea and shipped here to be assembled. The two shops here in Ballard making small parts for Boeing are 12.50 an hour jobs. Try paying the rent on that. Mark my word on this one. Boeing will not go on a drunken hiring spree for their new jet. Tired news.

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  66. Garth

    Tim, that thread was one of the first one’s I read here :)

    The boeing jobs here related to the dreamliner are either $12.50 assembly or expensive engineering and IT jobs.

    You can’t find parking at microsoft, and they drive a lot of business for local vendors as well.

    If you are an individual in this market and you want to buy housing, in most cases you can only afford a condo. A couple renting at the median income can buy a house with some lifestyle adjustments. I don’t know the eastside that well anymore, except thinking that the prices are high.

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  67. Alan

    A couple renting at the median income can buy a house with some lifestyle adjustments.

    I’m just a simple software developer and don’t understand these fancy real estate terms. What does “renting at the median income” mean?

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  68. Garth

    Alan,

    Making about ~$60,000 a year each and renting.

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  69. Alan

    Garth,

    A household making $120k is around the top 1% of incomes. The median incomes we state are for household income — which already accounts for dual incomes. You do not get to take the median household income and double it. Every new person here makes that same mistake.

    A household income of $120 should, according to traditional metric, be buying around a $360k house. Maybe $480k if they stretch. One out of a hundred families in Seattle (which includes 1 person families) can afford this.

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  70. Denny Retrograde

    Re: Boeing and Microsoft as bulletproof drivers of the local economy, it would be clever to think of who is placing jet orders, and who has been buying MSFT Vista etc. Companies are spending the credit they acquired a year ago to keep up with the Joneses (airlines and aircraft leasing agencies have to stay positioned with their peers to keep looking like players, while corporate honchos preen over who’s upgraded to Vista). Easy corporate credit is drying up fast, so these products will be repriced like this: if airlines and leasing companies decide they can’t afford the volume of finished product on these orders – voila, renegotiated orders and cancellations, followed by Boeing slowdowns and layoffs. As corporations tighten their belts (only 5% of companies nationwide do not rely on easy credit for daily operations), many may find no business justification to upgrade the MSFT doohickeys they already own. MSFT would then have to tighten its belt too. The credit crunch effects will start hitting pretty soon, and these may be some of its effects. Just sayin’.

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  71. deejayoh

    Here is an interesting contrast to the article referenced above, from the SF Chronicle.


    LIVING THE AMERICAN NIGHTMARE

    FORECLOSURES ON THE RISE: As the housing market softens, a combination of consumer naivete and aggressive lending means owners with subprime loans are increasingly getting sucked down a financial black hole

    It points out that the Bay Area has only seen 2,200 foreclosures in the 2nd quarter – in a market that must be 4-5x as large as ours, this is not too material – but the author digs quite a bit deeper into the underlying trends rather than brushing them off as not mattering.

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  72. deejayoh

    and by the way – that article appeared on the FRONT PAGE of the Chron. Not buried way deep in the business section

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  73. sniglet

    True, sub-prime mortgages haven’t been used as much in Seattle as elsewhere in the nation, but many other indicators demonstrate that our region has been participating in the new era of exotic financing.

    A thread on the Seattlebubble forum outlines how 33% of all Seattle area loans issued in 2006 were of and interest-only or negative amortization variety. This would seem to indicate that quite a few people are stretching themselves beyond what they can afford. If credit tightens what will happen if 80% of these buyers (i.e. people who have been relying on interest only and neg-am loans) vanish from the market?

    scariest data ever: 33% of Seattle mortgages are IT/neg-am

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  74. Pgniss Mcgee

    While we’re talking about lawsuits, lets look at the state of Washington. in 2004, as a low-income renter, I was offered a free seminar, set up by Wa state, on home buying, conducted by Countrywide and a local RE guy who I wont name. Once the seminar basically told me that RE in Seattle was about to explode, and it was, Countrywide sat me down, and tried to get me into an ARM loan. I was interested in a 30-year fixed, but they said that the lowest fees were attached to the ARMs. They just kept circling the lowest initial monthly payments…”see, little jimmy, this is all you’ll have ot pay…” Then I said “Wow, gee willickers, ms countrywide, what a pal you are..” Then the RE guy found out I had a big down, and was getting major wood about it, which kind of made me suspicious. I had some disputes with my gf about where we wanted and could afford to move, so we didnt, and now I’m just waiting it out. While I should’ve prob bought, I’m sure glad I didnt buy with an ARM, and I cant believe the state of WA set up this fleecing of low-income tenants. I’d be fascinated to know what percentage of people in that program lost their homes, or are about to.

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  75. “Turmoil,” “Fear,” & “Uncertainty” Bursting Seattle’s Bubble | Seattle Bubble — News & discussion about real estate & the housing bubble in the Seattle area.

    [...] like a bit of a different tune than Mr. Gardner was singing in July last year: “It’s not happening in Seattle to any degree whatsoever,” local land-use economist Matthew [...]

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