The nation’s hottest housing markets include cities in Washington, Utah and Texas, according to the latest government figures. North Carolina markets also have moved onto the chart.

Rank Metro area One-year gain Five-year gain

1. Wenatchee, Wash. 15.7% 79%

2. Provo-Orem, Utah 14.4% 50.6%

3. Grand Junction, Colo. 14.1% 65.6%

4. Ogden, Utah 14% 42%

5. Salt Lake City, Utah 13.4% 60.2%

6. Idaho Falls, Idaho 11.7% 49.7%

7. Austin, Texas 9.7% 28.8%

8. Beaumont, Texas 9.4% 33.3%

9. Asheville, N.C. 9.4% 55.5%

10. Billings, Mont. 9.1% 49.7%

11. Logan, Utah 9.1% 31.2%

12. Yakima, Wash. 8.8%
37.9%

13. Spokane, Wash. 8.8% 69.4%

14. Hickory, N.C. 8.6% 22.5%

15. San Antonio, Texas 8.4% 39.5%

16. Houma, La. 8.3% 43.7%

17. Charlotte, N.C. 8.1% 28.5%

18. El Paso, Texas 7.9% 54.5%

19. Seattle 7.8% 67.2%

20. Durham, N.C. 7.8% 27.7%

Source: Office of Federal Housing Enterprise Oversight. Updated January 2008, with data as of third quarter.

We noticed your ad/gimmick both on your website and in the Issaquah press regarding the neighbourhood we happen to live in called TROSSACHS in Sammamish. We both find this advertisement/gimmick rather childish and embarassing from our point of view. This does absolutely nothing to enhance our feeling about possibly calling you if we required a realestate agent. I might suggest (my husband own his own marketing firm by the way) that your advertising be more professional if your intent is to attract new business. Just a thought.

Mary & Jake K.

But thanks for increasing search engine optimization tools for me here.

Hah! Guess what? This blog, like most, uses rel nofollow, thus making your spam attempts 100% pointless. I should have guessed that you had some misguided self-interest in commenting so much here. But please, don’t let that stop you from posting further nonsense. I’m really enjoying the show.

Tell me, what kind of house cash-flows at these prices and rents?

Somebody is certainly very scared. It comes across very clearly in his posts.

get 115% cashout subprime loans and default.

You want to know some other American traditions?

- Buying a house with a price that is three times your annual income.
- Working harder, spending less, saving more and not falling for get rich quick schemes.

Anyone ever see Jim Cramer’s predictions and stock picks from 2/29/00?

Same story. Different asset.

You’re exactly the kind of guy that makes people think RE agents are scumbags.
Be sure to check out his site. It’s the very definition of egomania.

I wonder how many renter clients you’re losing by your posts here (Emphesis on CLIENTS). Have a nice day.

You could have gone to Vegas in 2005, put down $6k down on 18 and you would be up approximately $210k. I saw 18 come up. You missed a huge opportunity.

Or maybe you are suffering from hindsight bias with maybe a touch of recency effect and anchoring bias thrown in to spice things up.

http://www.lifehack.org/articles/lifehack/7-stupid-thinking-errors-you-probably-make.html?ph

“The prices of houses seem to have reached a plateau, and there is reasonable expectancy that
prices will decline.” (Time, December 1st 1947);

“Houses cost too much for the mass market. Today’s average price is around $8000—out of
reach for two-thirds of all buyers.” (Science Digest, April 1948);

“If you bought your house since the War… You have made you deal at the top of the market…
The days when you couldn’t lose on a home purchase are no longer with us” (House Beautiful,
November, 1948);

“The goal of owning a home seems to be getting beyond the reach of more and more
Americans. The typical new house today costs $28,000.” (Business Week , September 4 1969);

Be suspicious of the ‘common wisdom’ that tells you to ‘Buy now… because continuing
inflation will force home prices and rents higher and higher.’”(NEA Journal, December, 1970);

• “ The median price of a home today is approaching $50,000…. Housing experts predict that in
the future price rises won’t be that great.” (National Business, June, 1977);

“the era of easy profits in real estate may be drawing to a close.” (Money, January, 1981);

“In California… for example, it is not unusual to find families of average means buying
$100,000 houses… I’m confident prices have passed their peak.” (John Wesley English and
Gary Emerson Cardiff, The Coming Real Estate Crash, 1980);

“The golden-age of risk free run-ups in home prices is gone.” (Money, March 1985);

• “If you are looking to buy, be carful. Rising home values are not a sure thing anymore.”
(Miami Herald, October 25, 1985);

“Most economists agree… [a home] will become little more than a roof and a tax deduction,
certainly not the lucrative investment it was through much of the 1980s.” (Money 1986);

“We’re starting to go back to the time when you bought a home not for its potential money
making abilities, but rather as a nesting spot.” (Los Angeles Times , January 31, 1993);

“Financial planners agree that houses will continue to be a poor investment.” (Kiplinger’s
Personal Financial Magazine, November 1993);

“A home is where a bad investment is.” (San Francisco Examiner , November 17, 1996);

“Your house is a roof over your head. It is not an investment.” (Everything You Know About
Money Is Wrong, 2000);

So Lake Hills Renter, you were saying? (Emphasis on RENTER).

If the period goes to 12/31/2010, and the parameters show that defined real estate in the defined region is sitting at 79% of its peak value, but we still have 14 months left on the bet, do I get to declare victory?

I don’t like gambling and this is totally unenforceable, so I would be in for a gentleman’s bet, but not this one. I get to write his column for 2 months (if he still has it). If I am wrong, I’ll schlepp mortgages for a week.

OK, what are the parameters? Is it just Western King County, or do we get Kitsap, Pierce, Sno-ho, and Thurston? South Hill/Orting area of Pierce County looks like a lock for at least a 70% cut.

Do we index this in the relative strength of the US Peso according to the USDX?

Who calls the price?

Does Steve have an “out?” Does he get to take a mulligan if we get a depression, credit crisis, massive bank failure, currency crisis, trillion dollar tax hike, etc?

Depending on how we define our terms, this could be the easiest $5K since I shorted Bear Stearns at $140.

I just want to let you know that I don’t have time to keep checking back every day to respond to each comment about my column, so this will be last post on this topic.

I will check back occassionally to see what the mood is here.

My predictions are based on personal experience and my gut instincts, not on chart analysis. In the stock market chart watching is called “technical analysis” .. some people swear it works, others prefer fundamental analysis.

The Seattle area is a highly desirable housing market and over the long run it will go up. But real esate is a cyclic business. There are ALWAYS ups and downs. The problem is that most people forget about the “down” part during the housing booms.

But over the long term (10 years or more) real estate will always go up in value, just like the stock market always goes up in value over the long haul.

Some of you are hoping for a real estate depression, but I think you will be dissappointed.

However, if you want to a buy a home, the next couple of years will be your best opportunity of this decade to get a good deal.
Wait until next Spring, or later, when the inventory will increase and create a stong buyer’s market.

You may be able to find a desperate seller and pick up a house for below market value — which was something that never happened during the boom.

Best of luck to everybody.

Steve

Steve, with all due respect you’re just stating the obvious. If you own a home, why would you care about the appraised value of it (ignoring property taxes for now) unless you actually plan to sell it?

You really haven’t provided any fundamental argument for home prices to appreciate once they’ve depreciated 20% other than “house prices always go up”.

Personally, I have no idea what’ll happen to house prices in the future but I have yet to read an argument that’s convinced me one way or the other.

Steve, I’m not going to take you up on your bet (not that you offered) but I *do* think you need to clarify the bet a little.

I assume you’re talking about MEDIAN price, NOT inflation adjusted, in KING COUNTY for SFR? Or is condo/land included? Or are you talking about Case Shiller numbers for “Seattle” which is actually King, Snohomish and Pierce, IIRC.

I think this bet will actually run pretty close, and I’d probably say you’ll likely win it given King country SFR, median prices. Having said that, if you lower the wager amount a bit you’ll likely get a lot of takers from this blog and you could make some good cash!

Maybe you should look into buying housing futures from the Chicago Mercantile Exchange :)

Real estate is a LONG term investment. You should never plan to buy a house unless you plan to hold it for at least 7-10 years.

The “flippers” can make money if you get in and out fast enough, but that is NOT how you normally make money in real estate.

Short term price fluctuations are not a problem as long as you have a 10 year + time horrizon.

Even people who bought at the peak of the market in 2006 will be fine if they are still in those homes 10 years from now, because even if those prices drop 20% in value over the next couple of years, 10 years from now I am totally confident that home prices will be higher than they were at the peak of the market in 2006.

In the short term there will be some people taking losses, but for most owners this price drop is irrelevant as long as they don’t plan to sell for the next 5-7 years.

And I keep hearing people say that real estate has never gone up this fast before. I was in the 1989-90 housing boom and I saw house prices double in 2-3 years. Again, this does not match the overall housing stats that you see published, but I am talking about real world home prices in the neighborhoods where I worked.

I will bet you $5,000 that my predictions are correct.

We each put $5,000 into an interest bearing escrow account and on December 31, 2010 we will review the housing price data for the Puget Sound region.

I am betting that average home prices do not decrease by more than 20%.

If you think I’m wrong, put up your money.

Steve

50%? No way. My gut tells me that won’t happen. Listen to my gut!

However, I have a feeling that the people that have indicated they are willing to take up your bet are interpreting the statement as saying “Seattle price declines will be lower than everywhere else.” If that’s what you meant, then I can’t say I agree.

I guess the ambiguity is in what you meant by “other parts.”

Hmmm….that might be something that is worth looking into. I guess all we need to do is define our parameters and make sure there is a legal way to discharge the escrow.

Steve, I might take you up on this.

If someone had told you back in 2000 that house prices would double, you would probably think that was stupid. I know I would have. For some odd reason, it’s OK to accept a 100% increase, but not OK to accept a 20% decrease. One is normal, the other is absurd.

You’re probably right, though. Boeing, Microsoft, mountains, jobs. Blah blah blah.

The Tim is right to ask that the comments be separated from the main content. If I were to tell everyone I enjoyed dolphin burgers, then I wouldn’t want the newspapers to refer to this as a dolphin-burger-eating kinda blog!

Dolphin is delicious by the way. But that’s beside the point.

Finally, Steve wrote: “I am saying the same thing today that I have been saying all year: Prices will come down about 10-20% and then the market will flatten out for a few years and eventually it will start up again.”

This has been roughly my line of thinking too. My thoughts are that 10% will happen quickly, 20% will take a few years and then we’ll just sit there barely moving for a few years. Ultimately with inflation taken into account, and over a long period of time I’m guessing we’ll see “real” declines of about 30%, +- 10%.

Dude,

Sorry, but you are just wrong. Right now, this year 2007, several national home builders have held 19 state, “fire sale” sale of the century with 35% price reductions. Do think that they are “comfortabe” selling 35% off, or that they were forced to with todays market conditions?

You are basically saying that “Seattle is special” The same thing that all of the other “special places” said (CA, AZ, FL, et al).

I’ve recently looked at homes for sale in Kitsap county, I see homes at 2005 prices now. I bought 10 of your basic rental, 3 bed, 1 bath, 1100 sqft homes in 2005 for $180k to $195k. I sold in 2006/2007 for $220 – $235k. When I looked the other day, the same basic home is now selling for $180k on the low end, and $220 on the high end. That sure looks like 10 – 20% in decline to me.

Another recent example. I bought a 2000 sqft 4/3 new home in 1999 for $131k, sold in 2006 for $292k. As of today, I can buy a brand new 2000 sqft home 4/3 in the same town for $249k, that’s ball park 15% drop in what it takes to buy a new home.

And as far as buildable land, from 2004 to 2006 land went up from 10k per acre to 100k per acre in my town. That’s 1000%, you don’t think that their is quite a lot of room for land prices to come down?

One last point that I’d like to make, as Seattle is special as long as people move ot the area. Who is doing the moving? CA is in the midst of a crash, so won’t that limit the “feeder” market for Seattle just a touch? And if the feeder line quits coming to Seattle and there are fewer buyers, can’t that possibly, just maybe, put a scrunch on the Seattle market, just maybe ;-)

Happy commuting. Tony

“I am talking about dropping from the very peak of the housing prices during the boom. For example, if you bought a house in 2005 and saw it increase in value by 20 percent during 2006 and then prices dropped 20 percent during 2007-2008, you have not really “lost money” on your house. You’re just back to the price you paid for it in 2005.”

buy house in 2005, simple math pay 100K increases by 20% is worth 120K, market corrects downward 20% = lose of 24K, house is now worth 96K.

Of course none of this counts all the fees that one has paid and will never see again. I understand why people feel that people in real estate are one step above the used car salesman.

So they only way the price will go down by 20% is if homebuilders are comfortable reducing their prices by 20% and still keep building new houses. I doubt there is that much margin. Land prices could theoretical go down, but with people moving into the area, why would a landowner drop the price of buildable land?

My prediction is for a slight drop, like the 7% discounts people are talking about, to clear inventory and then small increases for inflation until the rest of the country recovers.

As I have said before, this has all happened before.

Yes speculative bubbles and crashes happen all of the time, but they not all created equal. I don’t know how you can think that the mass of sub-prime and crazy Alt-A loans, negative savings rate, and 1% fed funds rate haven’t made this situation appreciably different than ‘89-’90. How about the biggest national deficit ever, loss of manufacturing jobs, and an economy heavily reliant on consumer spending? Does any of this stuff matter at all?

“As I have said before, this has all happened before.

Foreclouses will be in up in many areas of the country, but they won’t be as bad in this area.

Prices will drop here, but they won’t drop as much as in other parts of the country.

You can bet on it.

In fact, I’ll gladly put a few thousand into escrow for a couple of years if somebody wants to bet me that I’m wrong.”

Be a little more specific and I’ll be glad to pony up a few grand and bet you, hotshot. You’re dead wrong.

Could you please tell me how 14-75% price declines do not qualify as a “major housing crash?” It was your most likely scenario after all…

First off, 2% for 7 years is a total decline of 13%, while 5% for 15 years is “just” ~54%. Just wanted to clarify the math here.

Secondly, I guess it’s a difference in definition of terms. I’d consider a 54% decline spread out over 15 years to be a slow deflation and more of a “prolonged housing recession.” I see a “major housing crash” as being 20%+ per year for 2-5 years.

Allow me to support my definitions with the dictionary:
crash: v. (def. 6) – to collapse or fail suddenly
crash: n. (def. 21) – a sudden and violent falling to ruin

Neither of those sounds anything like what I have “predicted.”

Prices will drop here, but they won’t drop as much as in other parts of the country.

You can bet on it.

In fact, I’ll gladly put a few thousand into escrow for a couple of years if somebody wants to bet me that I’m wrong.

Steve, I don’t think anyone here has ever said that prices in the Seattle area would drop just as much or more than elsewhere in the country. Just that they will drop.

You said:
“I’ve never personally predicted a ‘major housing crash’ for Seattle.” If anyone disagrees with that statement, I encourage you to browse through the archives and find the posts that show otherwise.

I’d like to call your attention to your most likely scenario from a few weeks ago of where our market is headed:

“The way things are headed as of right now, I expect we’ll see a Japan-style housing downturn. Prices declining 2-5% per year for 7-15 years, eventually shaving off all of the gains of the bubble, and then some. Mild recession (as reported by the government statistics, anyway). Tighter lending standards persist, making it very difficult to get a house without 20% down in cash. Overall public sentiment shifts from “renting is for suckers” to “buying into a declining market is for suckers.”
Likelihood: 50%”

Could you please tell me how 14-75% price declines do not qualify as a “major housing crash?” It was your most likely scenario after all…

The early 1990’s is the flat phase, followed by the up phase in the late 90’s and early 2000’s and followed by another flat phase. If you look at a 50 year chart you will see what I mean.

hmmm. here’s 42 years. a grand total of 1 step. not exactly repeated I’ll leave it to the jury

Thanks for coming by though!