I’ve been keeping a close eye on the Eastside market

Meanwhile, our kids have been raised as tenants, our stuff in storage. (We had bought in Seattle in 1990, too high, but did it for the dog. Prices stagnated in Seattle until 1997. We went overseas and foolishly sold our house in 1998; we then came back in 2003 to a very different Seattle.)

Now, we want a dog, are tired of landlords and being tenants. We will move somewhere other than Seattle, which has bad schools, too much congestion, and is not special in the suburbs. We can’t bring ourselves to return to one of the islands–our first house in ‘89 was on Bainbridge–as our Seattle friends and family suggest.

Don’t know how long it will take for prices to come down (Oh, I too get daily notices of price drops from Redfin, but these houses are still pretty grim.), but I fear that if there is a big price drop, we’ll all be hurting because the economy will probably be in recession.

We just can’t wait much longer as we are getting too old and weary. And we want our kids to have a home of their own before they grow up, and we want a dog. We’ve decided to try not to live our micro lives by macro trends or macro guesses.

We are ready to buy, probably not in Seattle as we can’t wait any longer. Our kids have gone 9 years now as tenants.

A house is a place to live, not an investment. And we don’t like the attitude of landlords, want a dog, and are sick of telling our kids to be careful of the property because it doesn’t belong to us.

Now that your YOY graph is going into negative territory you’ll want to change where the Month axis is shown.

If the chart is being done in Excel right-click on the vertical axis, select Format Axis, then change the setting for Category (X) axis Crosses at: to a negative number. In the case of your chart use -35.

Hope that helps.

I think it depends on the mix of sellers. Some people just want to cash in, and maybe downsize or move somewhere cheaper. They’re not desperate, and they don’t *need* to sell.

Others, however, MUST sell. Foreclosure, divorce, death, etc. It is the MUST sell people that are willing to lower prices because they must sell. Those people will drive the prices down.

In San Diego in 2006, things were obviously looking shaky in the summer. However, sellers were still bullish. Their properties were the best ones, had the corner lots, the granite and so on. The ones that needed to sell (I know of one personally) left their properties on during the winter and got desperate once the spring season came and the want-to-sells also listed their properties.

In fact, the seller I’m referring to took 9 months and 3-4 price reductions (of about 100K) before the property sold. Each reduction is a “loss” in the mind of the confused seller, even if they’re making tons of money compared to when they bought it. What brings them down faster is the NEED to sell.

As long as they still have a profit, they are not going to capitulate. For those who are in worse shape, they will hand over more of their paychecks and dig into their savings before they give up on their homes. This will take awhile.

I bought a house in July of 2003 when the market was supposedly at 3 months of supply. It was certainly not a solid sellers market as the statistic would imply. It wasn’t a solid buyers market either. In fact, it felt pretty well balanced to me. There was no particular rush to find a place, and I put an offer in for lower than the sales price and got it accepted. Oh, BTW, they paid closing costs too. That was pretty standard at the time, IIRC. Oh, and I found out near the closing time that the property was entering foreclosure as the sellers had not paid the mortgage in 6 months. They lost jobs and had to move out of state. Hardly a hot sellers market…

Right now, there are just tons of properties out there and I get an email every day telling me about price reductions of properties on my “watch list”. Yet, the MOS is supposed to indicate a slight sellers market. Nonsense.

As an aside, in the properties I watch (Issaquah/Sammamish, 400-600K) I am now getting 1-2 price reductions a day on average. This has changed from about .5 a day just a few weeks ago. Hardly scientific, but I’m seeing the asking prices drop significantly. Of course, I’m in jumbo land (other buyers, not me!) and so I imagine that this segment of housing is going to continue to act to compress the market. Interestingly, this is happening at the same time as the first time buyers can’t get 100% loans, so it seems we’re looking at price pressure from the top *and* the bottom of the market.

The secondary mortgage market has taken a major hit, which has resulted in tightened lending standards. Many would-be home buyers are now truly priced out of the market and the results of this development are just beginning to be felt and show in the statistics.

Affordability is the elephant in the living room that cannot be ignored forever. Loose lending standards and easy credit has lead to the real estate boom we have experienced the last few years and many people have bought homes they really cannot afford. Real estate sales financing is a different game now and there will be downward pressure on prices.

Curious, was the 50K below strategy suggested by your agent (if you had one).

Thanks!

http://seattlepi.nwsource.com/business/331159_housing11.html

though, this light may not find its way over to the seperate building reserved for the RE section

http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html?ex=1189656000&en=3297558dbd771a23&ei=5070

On second thought, that might explain a thing or two. Like that bit about asking for directions when you’re lost…?

One of the things that makes the Seattle Bubble so fun to play in is that it’s such a boy’s club. All the dudes being so dudely! A refreshing change from my usual virtual hangouts. And numbers to boot!

I strap on a pair every morning. Well, it’s more like hoisting them up, but the process has the same apotropaic effect.

…

Hey, how ’bout that Weyerhauser news? Looks like the building materials industry is battening down the hatches.

debt = testosterone
common sense is for "kitties"
(chest thump)

Sounds like great plan to me—back to reality. How old will you be if you can happen to pay it off? I don’t think paying off your mortgage was part of the equation for most house buyers in these parts for the past five years.

Or maybe I’ll strap on a pair and keep working and paying my mortgage every month until the darn house is 100% mine. How does that sound for a plan ladies?

But what would be the point of this?

Well, you could consider that ratio to be a measure of the flux in the market. Number of houses entering the market vs. number leaving. I still think that’s interesting—it’s always higher than one, averaging more like 1.5, so generally one third of of houses that are listed, what, vanish into thin air? Get pulled from the MLS and relisted later at a lower price (thus counted among “new listings”)?

Even so—I don’t think any of the the data portend the sky falling.

SKR, congrats on the new addition to your family. My advice would be to sit tight where you are for a while for a couple of reasons. One, if you’ve just had a baby, there’s enough upheaval in your life already. Wait until at least one adult in the family gets a full nights’ sleep most nights, and preferably both adults, before making a big decision like buying a house. Two, who knows how this is going to shake out, why not sit tight and watch for a while? Prices will probably drop somewhat (though my guess is not by >30%). Best of luck to you and your family.

The bigger picture is the Seattle market is looking dicey. You can’t get giddy at the price increase while at the same time ignore the negatives.

Today WaMu CEO said the housing industry is headed for a near perfect storm. A disaster can be a cumulation of events. Right now, the unemployment is low. I will give you that, but with the job losses in the housing industry, that can change.

Moreover, I think it’s significant that these figures relate to SFH only. My expectation is that the potential for things to get really bad is even greater in the condo market, where lots of new units are coming on line in the next few months.

You’ve got a good point, Bob. I will definitely keep an eye on the condo stats, but I choose to stick to the SFH metric since it provides a consistent comparison for the readers. One thing that bugs me about the papers is how they pick and choose which stats to highlight each month. It’s Seattle proper one month, then King County next month, then King/Pierce/Sno the next. It gets confusing.

Also, the problem with looking at condo inventory and sales is that a lot of it goes on outside the radar of the NWMLS. Most new condo projects only list one of each model on the MLS, and handle all the sales internally, so it’s a lot harder to track. The MLS condo action is almost entirely resales, which of course are going to get interesting in and of themselves.

I also covered a few other reasons for the lack of condo posts here.

I am in a rental home now but would like to buy a home if possible. The home will not be for investment. I would like to have a place of my own to live and I hope to be there for 8-10 years at least.

I can put all the gains from the previous home in the bank and continue renting and part of the rent will be paid off by the interest earned on this gain or I can put the gain towards a home and pay mortgaes. I can afford the mortgage. The former makes financial sense but as long as the house prices do not go down more than 30%, I will be okay buying too. I can second guess your advice to some one like me, but still what do you think ?

“You’re crowing about a drop in pending sales and a rise in listed sales. Percentages are part of the story, but not all of it. I took your MLS data and charted the ratio of pending to listed from Jan 2000 to Aug 07. There’s some jumpiness in the data, but in general it looks like a high of 2.25 listed to pending in summer of 01, to a low of just over 1.0 in spring of 05. Today’s numbers are 1.8 listed/pending—on an upswing from spring of 05, but not off the charts in any way.”

In fact, she’s completely misread the data. I went back and looked at the spreadsheet, and the only way you can come up with these figures is if you take the ratio of “NEW listings” to “pending sales.” But what would be the point of this? What matters is the ratio between the total number of houses sitting on the market and pending sales, and that figure is currently, as indicated in the original post, at 4.9 months.

Moreover, I think it’s significant that these figures relate to SFH only. My expectation is that the potential for things to get really bad is even greater in the condo market, where lots of new units are coming on line in the next few months.

I like your analogy, but unfortunately it breaks down because the bubbleheads had nothing to do with this market breaking down, nor running over their own dog. it’s more like this:

Some fool decides to play with his dog in the street. Someone says, “Hey, that probably isn’t wise. You’re dog could get hit by a truck and killed. Maybe you should do the sensible thing and not play in the street with your dog.”

But the dog owner is just having too much fun playing with his dog in the street. “There’s just so much room! And tennis ball goes for, like, ever! And have you seen the view at the end of the road? There’s the tip of the Space Needle! This is the bestest, most specialist street in all the land!”

Other dog owners see just how much fun the original dog owner is having, and soon he is joined by thousands of dog owners, all playing with their dog in the street.

But little did anyone know that a giant Mac truck from Sub Prime Trucking and Freight was out of control and careening towards all the dogs in the street. The carnage is awful, terrible, “horribile visu”. Everyone feels sad for the dog owners. But everyone is there to watch this unheralded bloodbath; how can you not? And of course the guy who gave the first warning is there to say, “I told you so…”

But maybe this story would be better if you exchanged the dogs for ponies…

Hold onto that median price increase. Because that’s the last thing you’ve got.

Whoa. Put the antlers away, big fella.

Those percentages are what they are. Not good if you’re in the RE or mortgage industry, which I’m not. But I don’t take percentages to be the be-all and end-all, ever—there is always a bigger picture. As I said, I don’t take these to mean the sky is falling.

Meanwhile, 5 percent YOY appreciation in sunny Seattle.

Question for the investment property owners: do you plan to wait until that drops to 1 or 2 percent? Or goes south? Or get out now?

“No place will be immune,” said Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California in Berkeley. “Inventory is increasing and the demand side is falling off. The psychology has become negative”… Home prices will decline 5% to 10% from last year’s peak in New York and San Francisco, and by more than that in Washington. Prices in second-home markets, including the Hamptons in New York, and Aspen, Colorado, also may fall, depending on the size of this year’s Wall Street bonuses, he said. Prices may start to drop in the NYC Metro area beginning in the fourth quarter of this year and continue falling 1% to 7% per quarter through 2008, according to estimates from Zandi… “People are adjusting their dream prices back to reality,” said Saatchi. “If they want to sell in this market, they have to drop the price”…

NEVER IN SUCH A BEAUTIFUL DAY AS TODAY…..

Keep eating mushrooms Seattleheads………it’s really not a very difficult equation..is it?

Good luck on timing the market. Perhaps you will prove the empirical research wrong or luck out by timing it perfectly.

“Demersus said,

on September 10th, 2007 at 2:00 pm

Where BubbleBuyer today? He sounds very familiar, like someone who bought in Ballard.”

I’ve been in Seattle since the early ’90s. I arrived after a big run-up in prices (blamed widely on Californians cashing out equity and migrating north). Prices have been skyward-bound since, whether or not some benchmark or other proclaims that it’s a “buyer’s market”. Fifteen years is a long time to sustain a “seller’s market”!

In terms of affordability, no, I don’t think it’s been a buyer’s market for quite some time, and (as you all celebrated so roundly of late) I don’t believe it ever will be again. Notably missing in Tim’s entry above is a factoid reported in the Times, that the median SFH price topped $500K in this set of numbers. "golly".

price range

One bedroom $309,000-$379,000
…ARM?
One bedroom with study alcove $325,000-$389,000
…I/O maybe?
Large one bedroom $359,000-$399,000
…yeah, neg-am will get you in the door
Two bedroom $479,000-$549,000
… JUMBO-rama!!!

No wonder that place looks like its falling apart before they even put it together (haven’t seen anyone pound a nail on that thing in months), God help those trying to squirrel out of their contracts, can’t say I blame them.

In the ‘burbs, however, it look like a buyers market.

Still waiting for those prices to go down though…hmmm….

In terms of listings exceeding sales, you are correct on that one. Safe to say most of the unsold units either languish on the market, reduce price until they sell, or get pulled. Foreclosured units generally are not on the MLS.

IMO, the change in inventory is the key indicator as to where price goes. I did some analysis a while back showing how changes in inventory correlate to changes in price that was posted here, in case you are interested.

This buffoon mortgage broker bought a $750K home that plummetted to $600K; so the answer? Turn it in to a brothel:

http://wcbstv.com/topstories/local_story_252232548.html

Its a real story and very humorous, there’s a video of it too.

any sign of dropping value will probably shake more of them out. any of them that have owned for more than a few years will be able and possibly ready to price aggressively if they expect things to go downhill for a while.

maybe we’ll be talking about the evils of speculating investors rather than aggressive lenders