At the rate that news stories are suddenly pouring in on the local housing downturn, you would think that the slowdown just came out of nowhere and surprised everyone. Now that the local press has finally woken up to reality about the housing market, there have been too many articles for me to cover each one with a separate full-length post.
Rather than going with a “link roundup” format, I’m going to go a different route today, and just post a bunch of really short posts all in a row. Scroll down the main page to check them all out.
In related news, the slowdown has become big enough news that even the local talk shows are discussing the topic. This morning I caught part of the “Kirby & Co.” show on AM 570, where co-host Carleen Johnson mentioned the eight homes for sale on a single street in her neighborhood, many of them for sale since late spring. 25-year-old co-host Matt Haver told of his desire to get into the housing market, but lamented that he was priced out, and was told by his father that he would be “crazy” to get into the current market.
I called in with a plug for Seattle Bubble, and commented that A) anyone could have seen this coming since home prices were bid up to ridiculous heights thanks to easy lending, and B) by this time next year, home sellers are going to be longing for the market of 2006. I wish I had been able to record it, because I think I made my points fairly well.
Anyway, scroll down for today’s local bubble news quickies.
Jump to the bottom to add your comment. ↓
61 responses so far ↓
1
casey1167
// Oct 16, 2007 at 9:24 am
The Tim on AM 570…
It would be really interesting to know how much your hits spike today.
2
The Tim
// Oct 16, 2007 at 9:29 am
I doubt I’ll see that much effect. It was pretty early this morning, at about 6:20 AM. How many people are really listening at that hour? And of those people, how many are awake enough to remember a web address that some random caller plugged a couple of times?
3
casey1167
// Oct 16, 2007 at 9:43 am
Well, Orbusmax got a huge bump a few year back from a mention on KVI, so you never know. And old Matt Drudge when from zippo to a Sunday night radio show after a couple mentions on Rush… But you are right, who would be listening to KVI at 6:20 AM? Well, maybe people like yourself?
4
rose-colored-coolaid
// Oct 16, 2007 at 10:09 am
First, I prefer this format. I think it will keep comments more organized over the old massive news update.
Second, those news stories may have just been published, but the wise authors surely knew a crash was coming months or years ago. I’m sure these clairvoyants wrote their articles then, and were just waiting to publish until the right time. But nobody wants to get scooped, so once one paper published their backlog of housing crash stories, the other papers had to dive in immediately.
But that’s just my take.
5
econ101
// Oct 16, 2007 at 10:38 am
Sales for September are down 30%… this is off the offician NWMLS report. Yes, it has slowed and it’s mostly because now you actually have to show proof you can afford a mortgage & put money down (you assume some risk upfront).
It’s not as bleak as “The Tim” would have you believe.
6
The Tim
// Oct 16, 2007 at 10:57 am
econ101,
Yes, sales have slowed 30% from last year. On top of the 20% drop from Sept. ‘05 to Sept. ‘06. For the lowest September sales on record. As I pointed out in my latest stats post (which comes straight from the NWMLS figures):
That being said, I still wouldn’t classify the present situation as “bleak,” but probably more like “rapidly descending.” I think that by this time next year we’ll have a much better idea of what “bleak” looks like.
7
CliveL
// Oct 16, 2007 at 11:00 am
This is bleak, as per Treasury Secretary Henry Paulson,
In his most somber assessment of the crisis to date, Paulson said that the housing correction is “not ending as quickly” as it had appeared it would and that “it now looks like it will continue to adversely impact our economy, our capital markets and many homeowners for some time yet.”
Link: http://www.msnbc.msn.com/id/21322471/
8
CKT
// Oct 16, 2007 at 11:28 am
What a change of heart for Paulson. Only three months ago he had this to say:
“In terms of looking at housing, most of us believe that it’s at or near the bottom,” he told Reuters. “It’s had a significant impact on the economy. No one is forecasting when, with any degree of clarity, that the upturn is going to come other than it’s at or near the bottom.”
from here:
http://money.cnn.com/2007/07/02/news/economy/paulson_housing.reut/
Looks like he’s decided to stop drinking the Kool Aid and face reality. Who in their right mind could possibly have thought that this mess hit bottom three months ago?
Heck of a job, Paulson-ee. Heck of a job, indeed…
9
Lumpeninvestor
// Oct 16, 2007 at 12:19 pm
http://dfi.wa.gov/consumers/news/2007/mortgage_rate_increases.htm
Just heard a radio spot (on 2 different radio stations, all in the 30 minutes driving in to work) that reiterates the article at the above link, and points people to the dfi.wa.gov web page.
This is just emphasizing that we are NOT immune around here. The mindset will change, and then the fear will start.
10
TT
// Oct 16, 2007 at 12:26 pm
Well,
Folks it hitting us hard in Arizona. I did it the right way, (so I thought). I put down 20% on 30 year ARM, thought it was priced right but now its ugly. Lost my job, found one back here in Seattle, can’t rent the house, no one to rent to. So now comes the hard decision, I can’t afford two housing payments. Plus my house in Arizona has lost 25% of its value and I don’t believe it will be back for at least 5 years. So I am doing the math and have talked with the bank, they won’t deal so I am letting them take the house back and I plan on saving half of what the mortgage payment was and in 5 years I think I will be in better economic shape. Hit to the credit rating, yes. But cash is king.
That’s my sad story and now that I have made my decision I am sleeping better at night. If business can do it and get tax write-offs then I am not going to go into a moral depression over it.
11
econ101
// Oct 16, 2007 at 1:00 pm
come on tim… pessimism in the form of blogs filled with resentment isn’t helping. Educate people instead on being responsible so next time around the down cycle isn’t as “bad”…
12
Joel
// Oct 16, 2007 at 1:09 pm
What blogs are you talking about?
I can personally vouch for The Tim and say that his blog has helped educate me on the reality of real estate and real estate bubbles.
Why so much resentment? Are you a realtor or underwater homeowner?
13
EconE
// Oct 16, 2007 at 1:16 pm
Pessimism Econ101?
No…just watching a slow motion trainwreck from the sidelines and documenting every last “crunch”. You on the other hand seem to be riding in the caboose sipping a drink and are now the king of the hit and run troll comments yet you name yourself Econ101 to try to fool people into thinking you have some credibility.
Back of the line.
14
econ101
// Oct 16, 2007 at 1:43 pm
EconE - yes, I am selling my property, and it is not selling as fast as I’d expect it. Tim isn’t helping my sales.
And Joel - I never said you should not listen to what is being said here - all I’m saying is "dog"ing about the situation (e,g, this blog) doesn’t encourage people to think. It only serves one purpose - to instill fear.
15
rose-colored-coolaid
// Oct 16, 2007 at 1:58 pm
econ101,
You haven’t a clue man. People will be fearful regardless of whether or not this blog exists. If you want a rational market, fear must be balanced against greed. That’s how all functional markets work. There was no fear for the last 5-10 years in real estate (depending on where you count), and look what happened.
You should be thankful some of us (like yours truly) are interested enough in seeding fear that we might some day soon return to normal market conditions.
Oh, and if you’d read this blog a year ago you would have seen this coming, cashed out, and been sitting on the sidelines like the rest of us. You’re just mad you didn’t become a troll until it was too late.
16
notabull
// Oct 16, 2007 at 2:00 pm
“EconE - yes, I am selling my property, and it is not selling as fast as I’d expect it. Tim isn’t helping my sales.”
Here’s what isn’t helping your sales:
-Mortgage credit crunch means that people that can’t afford your house, can’t get an unaffordable mortgage any more
-Houses just are not affordable.
-The soaring market and crazy loans brought demand forward, so there are really not a lot of people that want to buy a house out there. The “fundamental” demand has not changed, but a lot of this years buyers bought last year, and so on.
-Overbuilding compared to population and household growth.
If your property is not selling as fast as you expect, perhaps the situation is indeed worse than you expect? And perhaps other more “bleak” assessments of the situation are closer to reality than yours?
My advice to you (having been a home owner and home seller before) is to lower your price before everyone else does. Everyone else is lowering their prices, and you can see it all around you. Houses *are* selling, and houses will always sell. But you’ll need to lower your price to get it sold. Simple Economics 101. Best of luck.
17
econ101
// Oct 16, 2007 at 2:08 pm
coolaid - there’s no such thing as “you would have seen it coming”, but I guess someone had the ‘inside scoop’ on the future.
I’m not mad at all. I have gotten surgical with my pricing (thanks for reminding me - notabull), and have dropped my price quite a few times already and am on par with some 3 bedroom properties that still are holding their value in the area where I live. It’s a new 2004 home from an excellent builder in Washington state, and it is in immaculate condition - you can not tell it apart from a brand new 2007 home. We’re DINKs, and the home had no damage of any kind…
I don’t really give a rat’s ass if it sells immediately or not - I’ll rent it out if I see no reaction in the next 2-3 months…
If you “saw it coming”, may I use some of your powers and could you foresee when the market will stabilize so I know whether to rent or not? :) Pretty please with sugar on top - predict the future for me.
18
Alan
// Oct 16, 2007 at 2:25 pm
Tim isn’t helping my sales.
Have you hired Tim to help sell your property? Why would you expect him to act in your financial best interest?
Maybe you think that Tim is somehow hurting the sale of your property. If so, I think you greatly overestimate his influence. This blog is just documenting the fall — not creating it.
19
Alan
// Oct 16, 2007 at 2:30 pm
If you “saw it coming”, may I use some of your powers and could you foresee when the market will stabilize so I know whether to rent or not? Pretty please with sugar on top - predict the future for me.
The market will lose 8-10% of its value a year for the next three years. Good luck.
20
econ101
// Oct 16, 2007 at 2:35 pm
Alan - you don’t think your (or Tim’s) word creates realities? It is an interesting outlook on language you guys have…
21
explorer
// Oct 16, 2007 at 2:36 pm
So, Econ101, you would rather rent it out at a loss indefinately until the market “stabilizes,” thereby taking the real risk of loosing even more, rather than lower your price significantly BELOW par, but yet still likely more than you will net minus the loss by renting?
Hey, if you can afford to take that hit…You have a strong financial psyche. Either that, or your payments are really low… and you might benefit by the tax deduction.
Just speculating like you are. No one knows, but the odds are not good. Good luck.
22
redmondjp
// Oct 16, 2007 at 2:59 pm
Econ101:
Please educate us on why it makes sense to rent out your place instead of selling it right away. Have you run through any financial scenarios on this? Do you think the market will turn around next year?
BTW I’m not baiting here–these are serious questions.
23
on topic
// Oct 16, 2007 at 3:28 pm
econ101,
it seems like it is do or die time for you. the housing market goes comatose during the winter here and by spring everyone will realize the market is heading south.
so, it sounds like a 10% price drop today or a 10% price drop in the spring plus carrying costs from hanging on to it over the winter.
if you bought in 2004 it seems like you should be able to absorb a 30% price cut and still break even, so a 10% cut should be acceptable, if not ideal.
24
Alan
// Oct 16, 2007 at 3:31 pm
Please educate us on why it makes sense to rent out your place instead of selling it right away. Have you run through any financial scenarios on this? Do you think the market will turn around next year?
I’m going to bait. Econ101 is going to rent it out in a few months if it doesn’t sell for the same reason he didn’t sell last year before the market started to go south.
Alan - you don’t think your (or Tim’s) word creates realities? It is an interesting outlook on language you guys have…
Have you been reading “The Secret”?
And how is this for an ultimatum: If I can’t afford to buy a house at a sane price in a few years then I am going to move to another part of the country. I bet there are just as many potential buyers who think like me as there are potential sellers who think like you. Any guesses on who has the strategic advantage?
25
TT
// Oct 16, 2007 at 3:32 pm
Wow!! People are really something. Instead of having a serious discussion about the current difficult situation its the typical meanness of the day. The situation is bad for many of us, people who didn’t do the no down payment or only interest payments. Not asking for anyone to feel sorry for us, just be real about the situation. If you want to go out and buy a MacMasion for $700,000 here in Kirkland with no yard right on 124th ave more power to you. But I am going to rent and sock away a lot of cash for the next 3-5 years and then look for a remodel or some land.
I see prices going down for the next 3 years for many reasons, so to you who want to buy now, more power to you.
26
laxtosnoco
// Oct 16, 2007 at 4:13 pm
Every time I see Econ 101’s name at the top of posts it makes me think of GW’s quote at a recent press conference:
QUESTION: Do you think there’s a risk of a recession? How do you rate that?
BUSH: You know, you need to talk to economists. I think I got a B in Econ 101. I got an A, however, in keeping taxes low and being fiscally responsible with the people’s money. (His college transcripts later revealed that Bush took Econ 1 twice during his sophomore year and received a C- twice. Don’t get me started on the accuracy of his ‘fiscal responsibility’).
Anyway, I wanted to respond to Econ101’s repeated comments that we are fools by trying to time the market while waiting for prices to drop. I agree that trying time the market isn’t generally a good investment strategy. However, unlike in other financial markets, you can’t spread the purchase price for a house over time in an inflated market. Spending $400k to buy in at the top for a house is a lot riskier than plugging $1000 a month in my 401k even though I might think the stock market is overvalued. I continued to invest in stocks during the height of the stock market bubble, but I never would have borrowed $400 grand to buy the NAZDAQ index.
Additionally, I think you’re misinterpreting a lot of our situations. Like many people on this board, I’m waiting to buy until purchasing makes sense for my long term financial plan. Beyond putting 20% down, I want to make sure I have a healthy nest egg set aside so my wife will be able to stay home with our (future) children. Having that cushion is more important to me than owning a home; it’s not about waiting around for a magic 20% or 80% price drop.
Finally, I know it sometimes seems like we Bubbleheads are sitting around and gloating about the drop in prices and increase in foreclosures. Trust me, we really don’t want to see people suffer, but some of us have gotten tired of hearing about dumb we were for not busting our budgets to get into a house. Based on current trends, I suspect the gloating is going to get a loss worse as the housing market worsens. It might be healthier for you to take a break from the blog until your house sale closes.
27
TJ_98370
// Oct 16, 2007 at 4:30 pm
Well said laxtosnoco.
28
Joel
// Oct 16, 2007 at 5:01 pm
I never said that you did say that. What I am saying is that you’re wrong about him “"dog"ing” and not encouraging people to think. He definitely isn’t instilling fear either. He’s merely reporting the facts with good data and reasonable analysis. It would seem that you’re purposely trying to mischaracterize what The Tim is doing because you’re angry about your property not selling (apparently) and you want to discredit him. Otherwise I don’t see how you could characterize this blog as “"dog"ing and instilling fear”.
29
Matthew
// Oct 16, 2007 at 9:09 pm
Since when is truth telling “instilling fear”???
There should be more blogs like this that speak the truth and deal with empirical data instead of worthless RE rhetoric.
Econ101, go find another blog to whine on, the housing situation is only going to get worse and your whining is only going to get louder.
30
econ101
// Oct 16, 2007 at 9:15 pm
Yes Matthew, The Tim knows the truth….
31
just_checking
// Oct 16, 2007 at 9:18 pm
Econ101 - How about posting the MLS link to your property ? Perhaps we could take a look and offer reasons on why it is not selling.
You will probably get better feedback here than from a realtor.
32
The Tim
// Oct 16, 2007 at 9:22 pm
econ101, if you’ve got such a problem with the content of this blog, I encourage you to go start your own blog, where you can pretend that the market is as rosy as you want. I’ll even link to it from here, just like I did for the spamming spammer Tim Dunn and his “SeattleBubble?” site.
Speaking of which, he’s been awfully quiet lately. Hmm…
33
econ101
// Oct 16, 2007 at 9:37 pm
MLS ID 27064499
Tim - you get to be right on your own blog man.. I’d never argue that there is a Seattle bubble - best I could hope for is to poke a hole or two in your truth ;).
34
The Tim
// Oct 16, 2007 at 9:58 pm
I have to say, econ101, I’m impressed. I didn’t expect you to post the MLS# here. But since you did, I have a couple of honest questions. I’m not trying to be antagonistic, but rather I am truly interested in understanding the mindset of a house seller.
Why do you think you deserve to sell for an amount that would equate to an average of 13.25% appreciation, per year?
If you really want to sell, why don’t you drop the price by $50,000? You would still be sitting on an average of around 10% appreciation per year, for doing essentially nothing.
35
disbelief
// Oct 16, 2007 at 10:22 pm
Hmm, nice house, nice lot…….
Yet maybe it’s just not worth $569K? I would see what comparable houses are listed for in the area and try to go a bit (noticeably) below that.
PS- I am not one of those that thinks there will necessarily be an absolute crash in house prices, but do feel it’s pretty clear there is a good change of prices dropping 10% to 20% across the board in the coming two years or so.
If you are set on selling, then given the odds, you would likely be better off dropping the price now to get it sold - IMHO. If you have gained considerable equity since 2004, so much the better for you :-)
But don’t regard this blog as a bunch of raving lunatics or rationalizations - I think the trends are now indicating that posters here are much more connected to reality than those that have a great stake in the real estate market. Among all the regular posters I have been reading here for the last year or so, there are many who have intelligent and insightful observations. aside from all of the data presented here, which you may question-two simple facts should convince that Seattle is poised for a considerable decline: 1. the fact that house prices have clearly over-shot the purchasing power of the average buyer ( for an “average” home that is), and 2. that it is clear that there has been significant “exotic” / no doc financing in the Seattle area as well.
I wish you good luck, and hope that you consider the advice you are getting here.
36
EconE
// Oct 16, 2007 at 10:29 pm
Tim….I also am impressed that someone would actually post their house for our critique. I think that it deserves a thread on its own as this is a first for SB. Not a thread for people to “instill fear”, but rather a thread to offer honest critiques. For example…when Zillowing Econ101’s house…not for the value but rather for the aerial shot…I noticed that it was in very close proximity to a golf course yet it was not mentioned in the Redfin Listing.
I would consider this an excellent selling point even though I don’t golf.
I can’t comment on price as everybody knows on SB…I follow the condo market and don’t have my finger on the pulse of the SFR market.
37
christiangustafson
// Oct 16, 2007 at 10:58 pm
Tim, I had a friend hear you on the radio this morning, and then accuse me of calling in as “Tim”. I guess you are my voice twin.
What Econ101 does not realize is that this blog is one of the most upbeat, hard-analysis HB blogs out there. Tim is an engineer. Tim is also a nice guy. He prefers patient analysis over bombast.
My personal sentiments on the bubble tend much more towards those of Keith of HousingPanic, i.e. I’m laughing daily at the carnage and folly of the homedebtors, but dreading the impact of their fraud and insatiable greed on the rest of us (sensible people). I desire maximum pain for all who crash and burn in the coming years, including keeping the full tax liability in place for 1099s. But that kind of harshness is out of tune here, you see, except for a bout of extreme creepiness by Meshugy some time back, SBB is a nice place.
And Econ101, you didn’t have to be a psychic to see the housing boom for what it is, a ponzi scheme and classic bubble. I’ve known it since 2003. Any bubble blog has been over the rent/buy ratios, debt-to-income ratios, etc. It was all so "golly"ed obvious, which is why we long-time bubbleheads (or armchair economists) have worn out our tongues warning anyone who would listen about this. Read the entry on Wikipedia if you still don’t get it.
38
econ101
// Oct 16, 2007 at 11:16 pm
Tim - look, I have no trouible, as I think I stated before to get surgical with the price. But why blow away the equity so quickly on the account of selling it tomorrow? And who is to say if I did drop anoter, ok maybe not 50k, but let’s say 30k, that someone will bite? I’ve been monitoring similar listings - stuff is moving, but at a very glacial pace…
50k? That’s harsh man… I’ll test out at this price for a bit, see wat happens… then go down again. There is a point where the rubber meets the road…. Just no telling what it is. At least I aint pretending.
39
b
// Oct 16, 2007 at 11:49 pm
econ101,
you “blow away the equity” because the equity does not actually exist. its a figment if your imagination. its better to take your lumps now and put the actual cash you can get into an appreciating asset than sit on it hoping the losses will cut themselves for you.
40
Goldeneye
// Oct 16, 2007 at 11:52 pm
Tim,
I have been looking at certain houses the last couple of weeks and am seeing sellers undercutting each other. For example, take a look at MLS # 27176090 and 27164671 - both are in the same community and just a couple of houses away from each other. Yet the larger house of the two (which came to the market after the other house) is priced *lower* than the smaller house.
I have personally visited both homes and the larger house is definitely a better deal (has slab granite counter tops in the kitchen, brand new appliances, etc) while the higher priced smaller house has none of the bells and whistles and comes with a “repossessed” fridge. Its a no-brainer that the seller for the smaller yet higher priced house must now lower his price if he needs to attract some of the dwindling buyers to his house.
I was wondering (and I think someone else also pointed out), we should have a section on this web page about such price drops. When enough data has been accumulated, we can use the data to figure out how much price cuts are happening around here. What do you guys think?
BTW: This is happening in Redmond, just 1.5 miles from Microsoft’s Redwest offices.
41
notabull
// Oct 17, 2007 at 7:16 am
Econ101,
Thanks for listing your MLS#. That’s a gutsy and upfront thing to do on a blog like this.
I see a few problems with you getting a quick sale:
1) There are just a TON of listings in your price range in that area. I did a search on RedFin for 3/2 houses with 2250+ sq feet betwen 450 and 600K. Wow - you’re in a sea of inventory out there.
2) Your listing price is in the middle, or even towards the middle-to-top of the price range for that “sea” I talked about above. I didn’t look at any of the pictures of the inside, so perhaps your house is nicer. Perhaps it isn’t. Doesn’t really matter, as when you’re presented with that many seemingly similar options you’re bound to start focusing on price along with everyone else in this “buyers market” which people are beginning to accept is upon us.
3) Location. While I’m sure it’s very nice out there, what I’ve seen in pretty much every other bubble that’s burst in the country is that the outer areas get hit first. If I can have a home in Sammamish/Issaquah for the same price as your house (which I can, easily, $/sq ft) then why am I going to travel further? While inventory is low, people will willing to go out further just to get in to the market, but when inventory grows the price pressure is seen on the outskirts first. I saw this in San Diego where I just moved back from. If anything, it’s likely to get worse where you are, and it’s likely to be worse, for you, than the media states it is for the area in general.
4) OK, I looked at your pictures. You talk about greenbelt and views, but I don’t see that. All I see is pictures of your house and the surrounding houses. It makes me feel like you’re right up close to all the other houses, which you are, but you’re also up against greenbelt. Can I see that please? If I *am* going to move out of the city, then I’d like to see the trees, mountains, etc. I think some of your pictures could be changed to highlight the space around you, and not the other houses.
5) Appeal to the man of the house too. Throw in the projector and the rest of the media room stuff. But don’t refer to the screen as “installed”. The lady might think that means it’s not removable! Maybe something like “Media room equipment and furniture comes with house if buyer wishes” or something like that. I mean, how much would it really take to replace that stuff anyway? Maybe 5-10K, which is a small price reduction.
Ultimately, though, it’s the price. I search for 500-600K and saw a ton of places. “Wow”, I muttered to myself. So I reduced my range to 450-550 to see what’s out there. Still a lot of places of similar size and appearance to yours. Note that your house is not on that second search of mine. Honestly, if you need to sell this place soon, you should start dropping it. Perhaps 10K a week (or two) until someone bites, but I think your first drop should be larger, like 20K. That will get your below 550K so you’ll turn up in some more searches.
Best of luck.
42
george
// Oct 17, 2007 at 7:17 am
CORRECTION: All Real Estate Used to be Local
http://www.pbs.org/newshour/bb/business/july-dec07/jitters_10-16.html
“DAVID HALE: I think we have to wait and see how far house prices fall. As Rob just indicated, we’re down 4 percent year on year. The Chicago Mercantile Exchange now has a futures contract for house prices projecting in the year ahead a further price decline of 5 percent to 6 percent.
If that comes to pass, that means a price decline of 10 percent. A few bearish economists are warning about a 20 percent price decline. We can probably live with 5 percent; 10 percent is a challenge; 20 percent might finally set the stage for a consumer downturn.
The fact is, the whole situation is unprecedented. There has not been a decline in America’s National House Price Index since 1933. We’ve had many regional downturns, very severe 15 years ago in Los Angeles, very severe 20 years ago in Houston. But we’ve not had since the Great Depression a year-on-year decline in the National House Price Index.”
43
TT
// Oct 17, 2007 at 9:06 am
Tim,
Keep up the good work. I will reading you daily. Right now I am going through this real estate nightmare. Time heals all, so for us its renting and savings. At least we have good jobs and time.
44
The Tim
// Oct 17, 2007 at 9:31 am
casey1167 said,
For what it’s worth, the “unique visitors” count did jump up a bit yesterday. Ended up with nearly 3,600 visitors, compared to the recent weekday average of 3,000-3,100.
45
Alan
// Oct 17, 2007 at 9:46 am
econ101,
If you really are here to learn and provide insight into the market then welcome. I spent many months trying to understand why this market was so expensive and asking questions like:
- How are these prices supported?
- Am I really earning that much less than everyone else?
Like most of the people who have been here a while, I’ve come to the conclusion that the current prices are simple unsustainable and that they will fall. It is as impossible to predict when a bubble will pop as when it will begin, but it seems that prices are going to start dropping.
Housing prices are set at the margin. When there is a large supply of buyers in the market then only the buyers who are willing to pay the most will get to buy a property. A buyers has to be more aggressive in his offer than the next guy to get a property.
When there is a large supply of sellers, then only those sellers who are willing to sell for the least (with respect to house quality) will get to sell. Sellers have to be more aggressive than the next guy to get the property sold.
It is those aggressive prices that set market prices. A common theme we discuss here is that many people will follow the market down. As they see comps fall, they will lower their price with them, but so does everyone else so it doesn’t help. You have to get ahead of that curve.
I’d also like to talk for a moment about loss aversion. Humans seem to have a strong natual bias to avoid immediate losses even if an immediate loss will is less than a probable future loss. I’m told this is very common with stocks. Instead of selling a bad stock when it drops 10% below the initial investment, people will often hold onto it until it drops even further in the vain hope it will bounce back, even if there is obvious news that the stock is in trouble. It is also a common mistake in poker by new players. New players will think of all of the money they have put into a pot and continue to put more money in with obviously losing hands just so they don’t have to voluntarily give up “their” money.
According to redfin, you bought your house for $390k in 2004. If you listed it for $450k, you would still be netting $60k over only three years. Compare that to the amount of money you put down and figure out the annualized return. I bet it would crush any mutual fund you could find. My advice is to be ecstatic about getting such a great return (in addition to living for free during that time period) and don’t sweat that extra $50k-100k that you think is yours but is really in the pot in the middle of the table in the poker game of real estate. Fight your instinct for loss aversion.
Of course, this is all presupposed on the conclusion that prices are going to drop. If you have a convincing argument that prices will continue to rise, then we would all love to hear it. If your only argument amounts to your gut telling you truthiness, then expect to be ridiculed.
46
deejayoh
// Oct 17, 2007 at 10:35 am
Econ101 -
I looked up your listing on ZipRealty. It shows it has been on the market 180 days with no price reductions, which is not consistent with this statement:
47
Onlooker
// Oct 17, 2007 at 11:04 am
I like Ziprealty for that very reason. Why doesn’t Redfin list price reductions? Ziprealty seems to have a lot more stats. Although I find that Redfin does a better job of listing past sales in the area, plus the sale history of the home itself.
Having to visit different sites is kind of a pain. I feel like a REALTOR®© doing all this hard work!
48
Does the NAR & the Big Brokers really want to fight The Blogosphere? | Rain City Guide | A Seattle Real Estate Blog...
// Oct 17, 2007 at 11:41 am
[...] blogs about their very own listing for sale and soliciting advice from the general public? For example, this case at Seattle Bubble from blogger “Econ101″. (a little more than halfway down [...]
49
SunTzu
// Oct 17, 2007 at 12:09 pm
This is a great blog. Tim has done a great job, but then what really makes it a level-headed, truth-seeking, and useful site as it is are all the contributors. I read this blog daily because while I knew there was a bubble before, but I was alone and this site provided intellectual support.
With that said, econ101, your house is nice, clean, and well-built. However, IMHO the location is too far away to warrant the price you’re asking. For that kind of price a person can purchase a house that’s much more closer to the city where it is more convenient, since most people’s jobs are in or near the city. Imagine a snow storm that took out power like last year or trying to get home in that kind of weather. Granted that some people like to get away from the city and live closer to nature but personally I wouldn’t pay close to 600K for your place. Tim’s suggestion of dropping 50K is too generous. I’d ask for a 20-25% reduction at least, after all the house is in a cookie cutter community with small spacing in between houses.
To paraphrase Benjamin Graham: price and value are two different things; the price you pay doesn’t necessarily reflect the value of the thing. To me, the value of a house is determined by the material, workmanship, and location.
50
biliruben
// Oct 17, 2007 at 3:48 pm
Econ101 - Not to put too fine a point on it, but houses that sold this summer that are the same number rooms and approximately the same square footage as you sold for 50-100K less than your asking.
The key in a declining market is to not chase the market down. Slash the price and maybe you’ll luck out and find a few buyers willing to bid it up.
If you wait too long, the market may force you under-water.
But Is that a signed Texas A-Rod Jersey?
Is it included!?!
In that case, raise the price!
51
biliruben
// Oct 17, 2007 at 3:53 pm
And I notice another house listing for the same price and nearly the same size over the hill that’s on 9 acres!
If I were going to live in East Bumblefuk, I would want some land.
52
Erik
// Oct 17, 2007 at 5:25 pm
I haven’t used ZipRealty before, but like the idea of being able to track price adjustments. As I am mostly trying to follow the market for academic purposes, however, I don’t want to register for the site if they’re going to start calling me to try to talk me into looking at/buying houses. Can anyone who has used the site ease my concerns or warn me away from Zip? Thanks!
53
laxtosnoco
// Oct 17, 2007 at 5:47 pm
Erik, fill in dummy information for Ziprealty and other sites (set up an e-mail knowing it will be spammed and enter a fake phone #).
“Hello, Osama we have a great deal for you.” “Osama, did you know now is a great time to buy?” etc. etc.
I know its juvenile, but every once and a while I clean out my spam e-mail inbox and it makes me laugh when I see all of the real estate come-ons.
54
NotaBull
// Oct 17, 2007 at 6:24 pm
“I haven’t used ZipRealty before, but like the idea of being able to track price adjustments. As I am mostly trying to follow the market for academic purposes, however, I don’t want to register for the site if they’re going to start calling me to try to talk me into looking at/buying houses.”
Give a fake phone number, and ignore the emails. That’s what I did - it’s no big deal.
55
tenzi
// Oct 17, 2007 at 7:00 pm
This is an intresting listing, price reduction $150,000.
MLS#27117978
I guess this does says something about our market in WA state!:)
56
Gear
// Oct 17, 2007 at 9:50 pm
I use http://www.johnlscott.com to keep track of what is on the market in the areas that my wife and I are interested in. Today I noticed that the website started showing all the property that has sold in the last few months in red. I was wondering if anyone else here uses that website and why you think there was a change. Maybe they are trying to create demand.
57
just_checking
// Oct 17, 2007 at 10:17 pm
Econ101 -
Thanks very much for taking up my offer and posting the MLS. You have gotten a lot of suggestions that you should atleast read and try to see from the buyer’s side.
Now w.r.t to your house - your main competitor across the parkway is at $495K, bigger sq ft, slightly smaller lot.
Also, I know that quadrant and other builders are still selling in the ridge area
Snoqualmie ridge hs earned a reputation for long commute. This is from watercooler talk at office.
Finally as Tim rightly pointed out, looking for a 13.5%/Yr
appreciation is a …tad optimistic to say the least.
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just_checking
// Oct 17, 2007 at 10:17 pm
MLS # for the competitor - 27157865
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Dave
// Oct 17, 2007 at 10:28 pm
Econ 101
I have to ask - why would I buy a house for as much as I could buy an in-city house for (maple leaf, northgate, etc.). To be an hour or so further from work (one way)? Come on - prices are dropping on house in Shoreline because they are too far away.
You are going to have to drop that price a huuuggggeee amount - unless there are a large number of snoqualmie ridge people looking for a macro cookie cutter house on a micro lot.
Oh - by the way your house has been listed about 6 months. It was listed when the market was still going strong (April to June) - and it didn’t sell then. Why in the world do you think it is going to sell now?
I am asking honestly - we just bought - do you really think someone is going to pay that much for it? I predict you will sell at between 425,000.00 and 450,000.00.
Slightly above jumbo terrritory, so that someon with equity can come in and get for less than jumbo.
My two cents - debate as you wish.
Dave
60
CliveL
// Oct 17, 2007 at 11:18 pm
Checkout out MLS#: 27185478. It is ready to sell for a loss. Bought in June 2005 for $719,950 and asking today $699,000. It is across the street from Econ101 and on the golf course.
61
Joel
// Oct 22, 2007 at 1:06 am
Econ101: Here’s a story of a realtor who was in a similar situation as you.
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