I really like this overview. It has real promise.

What words did you isolate to measure as distressed or distressful?

Thanks

Perhaps you might explain what you mean by having an algorithm measuring “distressed language”? Do you mean this is a measurement of semantics?

You have been at the forefront of delving into the nonsense going on behind the sunshine being spewed by the RE industry. This entire RE market needs more full disclosure and objective measurement, and you’ve certainly helped with that. Why is your algorithm proprietary? Why not share the algorithm with us so we can understand it ourselves?

Today I did a search for “reduc*”, it’s 10+.

Oh also I searched eastside instead of the entire area.

Los Angeles: 125

Angie,

It’s not just a straight percentage. I didn’t make it totally clear, but, it’s based on the ratio, but it’s not just a straight ratio.

They call educated technicals, like most of us here on Tim’s blog, “Bubbleheads”.

I take offense at that ludicrous title [especially since we have at least three time their intelligence per capita], so here’s what I call them: “The Soft-landing Morons”.

On that rent vs. own calculator notice that the House Appreciation % doesn’t change regardless of the number of years you hold the house. That’s too bad; it’s a crippling flaw of an otherwise great calculator. Another crippling flaw is that increases in rent are not considered; rent stays constant, even for 30 years. I think if the calculator properly accounted for inflation, and assuming there’s a bubble now, the breakeven time for Seattle, after which buying becomes better than renting, would be closer to 10 years.

Like I said before go to Craigslist and type in Reduced in the RE section, repeat that every couple of weeks and see if the list gets bigger or smaller. You must have your head buried in the sand if you think that RE is not prime for a downward correction. If you bought many years ago and don’t plan on selling for many years than why even pay attention to this blog, unless you are one of the people who psychologically ties their good feelings to the supposed value of their house. In the latter case the bubble deflating will make you anxious and make you steadfastly deny that there is a bubble.

I played around with it. It seems to have a flaw. Putting in numbers for a typical Seattle house, it shows that the house would appreciate at just 0.5% annually starting from 10 years ago (the supposed start of the housing bubble) and ending 10 years hence; the help info claims that this is the annualized rate of inflation. Seems to me that inflation has been far higher than that during the last 10 years and is likely to be even higher in the future. This flaw favors renting but is mitigated by the fact that you can rent an equivalent Seattle house cheaper than the calculator estimates.

If you put 20% down and don’t sell for 20 years, buying beats renting for any locale I tried. The house price doesn’t affect that result much, since most factors are percentages. Really the holding time is how many years longer you expect to live (unless you plan to be homeless after you sell), and when you switch houses you incur a significant cost (5% to 10%, say). So according to the calculator, renters who want to eventually buy and expect to live another 20+ years and plan to seldom move should buy a house now, unless they think they can time the market (i.e. buy near the bottom)—which is historically tough to do *but* may well be easier this time around—or unless they think they can make a significantly better return than the calculator assumes, which is “bonds which accumulate interest at the Congressional Budget Office’s projected rate for that year”.

I’m surprised that you don’t have Los Angeles listed…They should be holding their own right up there with the best of them!

What are these dolts going to do when interest rates hit double digets.

What will the flip side of sub prime look like then?

Any chance you can figure the DSI for Austin?

Sure, no problem. Austin, TX DSI: 67

Thanks!

They don’t teach the dark side (foreclosure) of real estate and lending in real estate school. The students were aching for as much information as possible on how to ward off the trustees sale and how to help distressed sellers.

Tim, I used one of your charts during my opening comments and gave you full credit.

The DSI uses an original proprietary algorithm to measure the ratio of listings using distressed language compared to the total number of listings in the Seattle area.
Essentially the value of this “index” is a percentage, right? How do you get values over 100?

From Ben Jones HBB on 17 Sept 07

Nervous Sellers Missed the Boom

The Olympian and the Columbian newspapers are quoted.

so, it looks like another metric showing that we tending in the direction of a deflating bubble.

it may be worthwhile to only look at new listings each month to avoid the averaging impact of old listings.

also, since there is anecdotal evidence that distressed people are going to craigslist more instead of MLS to avoid realtor costs that they would have to pay out of pocket, we might want to consider try to account for that somehow. either by looking at just the relative number of craigslist postings and assume they are distressed or look for explicitely distressed craigslistings

i still prefer the consumer credit metric, but understand that that sort of info is probably closely guarded. average regional credit rating trends would give the same info, delayed 2-3 months. as would changes in voluntary consumer spending or confidence. new car sales would also be a good metric. people struggling to pay their mortgage probably won’t go out and buy a new car, so decreasing sales would indicate increasing distress

anybody know of any publicly available debt/creditworthiness/consumption/consumer confidence/car sales data broken down to the city scale?

i’m sure these things are all closely tracked and have been for decades, so we’d have a solid history and comparability across markets

the DSI is cool and all, but if we don’t know what it looked like before the bubble in

“How easy will it be to sell this place if you must sell in a soft market”?

Even if you are crazy enough to be buying today, ask yourself this question. That $500K little Ballard crap-box with 1/2 of its square footage underground, Asbestos siding, and no usable garage may have been hot in the last few years, but when it is a real buyers market, you will be sorry.

The same goes for choosing neighborhoods. Be careful about ‘transitional’ neighborhoods as they are the first to get hit in a declining market.

“Every day my girls get a year older”

Wow! I’m suprised they’re still alive, I would expect them to have a lifespan of what… 80 days?

Sounds like you found a gem of a realtor there–congratulations! It reminds me of some store clerks who will volunteer the dates of future sales so you can save 20-50% by waiting a few days.

DSI for select other cities as of September 17, 2007:

Boston: 86
Las Vegas: 111
Sacramento: 121
Miami: 136
San Diego: 168
Phoenix: 170

could you track the same index for markets in other stages of their bubbles?

another measure of distress appears to be increasing consumer credit. hopeful owners start relying more on their credit cards when their mortgage becomes a problem, so an increase in local consumer credit indicates increased mortgage distress.

i don’t know how high of resolution data is available for that, though. possibly none.

I know the market is bad and way overpriced. I asked this guy how the market has been and he was more bearish than I was!!! Says sales have completely fallen off the cliff. This guy has been doing this since 1977 so he knows what is going on. He let us know he’s in it for the long haul and not going anywhere whether we bought now or 3 years from now it doesn’t matter and actually advised us to wait until at least next summer or longer if we could. He “walked” us through the MLS showing how long these homes were on the market & most of them are going to chase the bottom if they don’t get on the ball with some reductions. Many have been listed for like 1-2 YEARS! Anyway, he says right now we can easily find/close on a house that is 10-20% off listing price but would be better off waiting even longer. Sounds like things are getting pretty bad up north and will continue to get better but will take time. Also says there is about 8-10 months of supply to work through.

“Similarly, Ivana Crecco of Camelot Realty in Hackensack, N.J., said she is not working with any buyers who don’t have a down payment and a decent credit score.

‘I won’t waste my time, because I know the deal won’t go through,’ she said.”

This is the trend that is so telling of the impact that the Sub Prime mess has created. Good times!

http://www.raincityguide.com/2007/09/17/the-flip-side-of-the-sub-prime-story/

See the proof:

http://www.topix.net/content/kri/2007/09/many-buyers-suddenly-find-mortgage-cash-drying-up

The article states in part:

“…Lenders say there is still plenty of money available for homebuyers with strong credit scores, sizable down payments and healthy incomes…”

Hey, sizable down payments on $200K homes were totally out-of-reach, how in Hades to Seattle buyers swing the $500K home down payments, let alone the more stringent credit checks to qualify you.