Someone else said it, but I’ll say it too: we need to change the focus to answer the questions being asked here. its not a questions of ‘if’….its a question of ‘how much?’ ‘where?’ ‘when?’ …

lets get back to the facts and try to position ourselves to take advantage of the down cycle… ie. buying low, selling high… which would mean: buy when the herd is selling… everyone here talks a big game, but at the end of the day no one has the nuts to actually buy.

I read this blog because many people actually post DATA to back up their PREDICTIONS concerning a market. If you or anyone else believes there is no bubble and housing prices in Seattle will increase in the next two years why not just say so and then add some data which supports said arguement. I am sure there is data out there that does support that arguement, then people can judge the data and not you.

Calling a place a supercity means nothing. I mean what type of economics is that? Are people trying to equate Supersize to Supercity? It is true if you order a Supersize meal at McD’s it costs more but where is the parrallel to SuperCity?

i hope people can atleast pause to consider the flipside to every arguement that is raised here whether pro or con bubble.

A few predict 80% drops, some predict no drops… most believe somewhere in between …. I like your extreme comments and hope you take the time to make them as constructive as possible (with the audience of bubble heads in mind…. hint: they need small spoonfuls at a time to diverge from the path they (unquestionably) believe in.

You want true stories on Seattle area real estate?

My best friend has a friend who’s had his MountlakeTerrace home on the market for over a year now. Its one one of those small Seattle shacks built on a cement floor [ya know, the kind when you need plumbing done the pipes are buried in cement and you need a jack hammer]….probably worth $180K in my book tops, even before the bubble. But its assessed at $325K, so it was on the market for months unsold, its down to $275K….still no takers. My friend’s friend will lose money with more price decreases (he paid $245K plus closing costs and $$$tons$$$ of fix up maintenance ever since to get it on the market years ago); but he’s tempted to just bite the bullet and lower it to $225K to perhaps sell, before it gets even worse.

Another true story of Seattle Pink Pony land. He has a business cohort (medical PhD with years of experience) who works for his company, that just bought a larger Seattle old fashion “2 x 4 construction”, that leaks heat like a cracked barn…she bought the larger $600K home with another high paid professional. Not only are the two professionals barely paying the house payments, last winter the heating bills nearl bankrupt the two of them [they almost broke out in a fist fight over the bills].

My bubble brain friend tried to talk her out of it, she wouldn’t listen, now she’s in denial and won’t talk about it any more.

The recent home buyers in Seattle are all in denial.

It may be obvious, but still needed to be said, for those who are not aware. Yes, without efficent public transport no medium to large city can claim to be more than mediocre, IMO.

I owned a house and then a condo in two different cities for 9 years prior to moving here. I moved from less expensive RE markets and saw very little appreciation in the properties I owned. I can’t afford to buy anything here I am willing to live in long term without using a significant portion of the capital I’ve spent a decade saving and investing as a down payment. I spent about six months trying to understand why housing prices are so much higher here than the last two places I lived and eventually came to the conclusion that the RE market here is in a bubble. I’m not going to put a large percentage of my savings into an asset that I think will a) lose value and b) increase in value only at the rate of inflation after losing said value. I admit that it is possible that I am wrong and always open to evidence that explains current valuations without the need for a bubble. I have also set a deadline by which prices must have fallen to a level I can afford (or my income has risen) or I will move to a less expensive part of the country.

Why the hell would Seattle ever aspire to be a super star city. It’s great the way it is and that is the primary reason I chose to move here from down south.

….Right now, it’s just a graph of Yun’s predictions over time. You have to know that he’s wrong to know why the graph is interesting…..

As DJO pointed out, the chart Tim posted above doesn’t make it really clear that the charted numbers are annualized predictions per month. The graph by itself is significant because of the downward trend. NAR keeps adjusting annual sales forecasts downward as the year progresses.
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An anomaly also noted is that the graph posted above does not match the actual numbers for Existing Home Sales posted at the NAR site. (the point I was trying to make in a previous post) Using those numbers would put a more negative slope on the graph.

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“Man…..you guys are a bitter, angry lot. Are you all suffering from seasonal affective disorder? Wow.”

If you ever wondered what the saying “The pot is calling the kettle black” means this is an excellent example.

He said that Seattle was different from other places in the country, with the RE market fundamentals here being OK while in other markets they are out of whack (What???).

He also said that prices here are still cheaper than California, which I have a really hard time believing (unless you are comparing San Francisco to Spokane).

I simply can’t believe that reporters aren’t challenging any of these fallacies — whatever happened to investigative journalism?

The only remaining question is which houses fall officially within the “superstar” boundaries. It’s pretty safe to say that neighborhoods located in Tacoma, Everett and Bremerton are not “superstar” class, but what about Kent, Mountlake Terrace or Juanita?

I think The Tim should give up on the whole bubble argument and instead focus on figuring out where the thin red line between “superstar” ends and mediocrity begins. Then we can finally understand how this market really works.

What Will Your Home Be Worth in Five Years?

Cut through the fog of whipsawing values and vacillating views with the most reliable indicator of all — rental rates. Plus, the areas where prices will tumble the most…

…But once the fervor fades, prices must fall to restore their normal, long-term relationship with rents. Rents exercise a kind of inevitable gravitational pull on prices. The ratio of prices to rents “behaves much like price/earnings ratios for stocks,” says Yale economist Robert Shiller. “Like P/Es, price-to-rent ratios are mean-reverting.” In other words, while prices soar from time to time, sending the ratio to exceptional heights, sooner or later the relationship is bound to return to its historical average….

http://finance.yahoo.com/real-estate/article/103872/Real-Estate:-Buy,-Sell,-or-Hold;_ylt=AqQ7KBOK8yqkz0gaSa1OpOu7YWsA

Man…..you guys are a bitter, angry lot. Are you all suffering from seasonal affective disorder? Wow.

Hmm. Don’t know where you’re getting the bitter, angry vibe from, “Sassy.” That is a pretty funny comment though, coming from the Director of Public Relations for a major local real estate company. I’m surprised you have the time to troll a blog like this.

That attitude makes me want to see real estate people hurt BAD.

Ah Seth. Missed the reference, he and I aren’t on a first name basis. I’m not in the business of defending his columns. Full disclosure, I was eyeballing the numbers off the chart which seems to misstate the latest forecast.

As to the difficulty of forecasting – I’d agree that yes, shorter is generally easier – but forecasting stocks and home sales seem apples to oranges in comparison. In any case I am primarily being critical of Yun and the NAR. Calculated Risk produced a pretty accurate forecast (of 5.6-5.8mm homes) way back in December 2006 but the NAR just can’t, even though it’s their job. I think the difference is not being in the Realtor’s pocket.

Yeah. Best bet for a permanently high plateau would be buying a piece of the Montana Rockies.

Back to your first point, I was comparing a 12 month look at sales to a 3 month look at earnings (not stock price). Anyone can have an opinion, but generally forecasting longer is harder than forecasting shorter.

I also doubt the NAR has the resources to put into forecasting that the big brokerage houses do.

Shall I assume my unchallenged points are, well, unchallenged? (of course I know better)

2. 13% error in one year sales forecast for real estate sales is egregious. (Wonder what the forecast error for one quarter’s earnings on major financial stocks was this quarter?)

Well, lets see…
– he’s forecasting sales – not stock price. Quite a bit easier to task, IMO.
– 10 downward adjustments? Notice a trend? Yun obviously doesn’t!
-13% off? We don’t know how much the were off until the year is done, but they started at 6.42mm, now down to 5.5mm. that’s a 28% reduction and I still don’t think they’ve found the bottom

2. 13% error in one year sales forecast for real estate sales is egregious. (Wonder what the forecast error for one quarter’s earnings on major financial stocks was this quarter?)

New question. With hundreds of billions (trillions?) of 401K money going into the stock market this past 7 years, why are we only minimally above the 2000 high?….and why doesn’t stock expert Seth take a look at that one?

Score one current employee not living like a millionaire. The salary is decent, but not fantastic, and that’s after nearly 5 years. The idea that Microsoft is full of millionaries is rediculous. There’s too many people willing to work for less for salaries to really skyrocket.

So now he now says there’s a bubble? I thought he blamed “the media” for “unfounded consumer concerns.”

However, actual MOS has nothing to do with it – remember, his is a forecast, not a linear extrapolation (or at least it shouldn’t be if you have a shred of insight)

Yeah, I meant to write “sales”, not “MOS”, sorry.

I guess it is possible that [Yun's] last forecast could indeed be correct but he would be 1 for 12 because the forecast has changed every time. And the likelihood is that all are wrong (and that next month’s forecast will be lower yet again) is very high.

I’m not suggesting that Yun is right — I agree with the basic premise of your post. I’m just saying that the graph is missing a trace. TJ_98370 provided the missing information; if this were added as a trace to the same graph, the point would be absolutely clear.

Right now, it’s just a graph of Yun’s predictions over time. You have to know that he’s wrong to know why the graph is interesting.

Charting the Housing Spin

When you say “culture” you mean the kind found in a petri dish right?”

Of course that’s what the post means. After all, we ARE a biotech hub! :)

…more culture than you can swat a stick at.

When you say “culture” you mean the kind found in a petri dish right?

Hey, we have Ballard- who else has that? Lutesisk forever!!

The “Forecast” chart above indicates that 5,900,000 existing homes sold in Sept 07 and 6,050,000 homes sold in Aug 07.
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Actual data (see link) indicates that 5,040,000 existing homes sold in Sept 07 and 5,500,000 sold in Aug 07. The “Forecast” chart is consistantly wrong all the way back to Feb 07.
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NAR Sales data

MisterBubble said,
on November 14th, 2007 at 3:37 pm | EDIT
Uhm…maybe I’m missing something, but I don’t think that graph tells me much of anything. It gives me a plot of Yun’s predictions over time — to make the argument that he’s wrong, there would have to be another trace, containing the actual MOS values for the same time periods.

Yeah, it might not be entirely clear. In context, these are Yun and Leareah’s 12 forecasts for total sales for 2007. We won’t know the real number until the end of the year, so I guess it is possible that his last forecast could indeed be correct but he would be 1 for 12 because the forecast has changed every time. And the likelihood is that all are wrong (and that next month’s forecast will be lower yet again) is very high.

However, actual MOS has nothing to do with it – remember, his is a forecast, not a linear extrapolation (or at least it shouldn’t be if you have a shred of insight)

Google is probably minting many more millionaires at this point, and that isn’t bolstering the bay area real estate market. Wishful thinking is fun, but I wouldn’t make financial decisions based on it.

Seattle Home Prices Decline 3.5%
Seattle Bubble News
Nov. 14 2008
by Homer Loss

Seattle- Home prices declined since Nov of 2007 in record fashion. Seattle home prices declined 3.5% and foreclosures soared 118%. Housing analyst Joe Blow said Yun’s “superstar cities” comment probably marked the top of the housing bubble in Seattle. Yun left the NAR in April of 2008 to spend more time with this family. NAR President Joe Schmoe says Yun is no longer with the company and his statements are no longer recognized by the company. “He doesn’t work for us anymore” says Joe Schmoe.

Thanx for sharing the Robert Schiller’s article. It’s definitely worth reading. I had trouble with the sites search engine (probably something I am doing wrong) so I posted a link here.

The Myth of “Superstar Cities”
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……Many people view the superstar city theory as confirming their hunch that, despite the current slowdown in home prices elsewhere (particularly in the United States), investors can expect to make huge long-term gains by buying homes in these cities, even though the homes there are already expensive. But, as I have said in my debates with the authors, if one reads their paper carefully and thinks about the issues, one would see that there is no reason at all to draw such a conclusion.
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Why should home values in glamour cities increase forever? Gyourko, Mayer, and Sinai justify their claim by arguing that these cities really are unique. They have only limited land, and if one assumes ever-increasing GDP and rising income inequality, there will always be more and more wealthy people to bid up prices in these scarce areas….
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…..How much might we expect a home in a famous city to outperform other real estate as a long-term investment? The answer: not much at all……
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……According to the Coldwell Banker Home Price Comparison Index, which compares the price of a standard 2,200 square-foot four-bedroom house across cities, the most expensive city in the US is Beverly Hills (the legendary home of movie stars). The standard home there is 4.25 times as expensive as one in an average city in the US. Assuming that quadrupling of relative value occurred over a hundred years, the excess return on investment amounts to only 1.5% per year – hardly the kind of performance that real estate enthusiasts are expecting…..
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…….Most of the popular attention that the “superstar cities” theory has received merely reflects the psychology of the housing boom that we have been seeing, as well as a wishful thinking bias. People want to believe that the boom will continue, and that their investments in their favorite city are thus special and exciting. But there is no generally applicable reason to make aggressive investments in superstar cities. On the contrary, there are many reasons to worry about investing in such places.
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This seems to me to be another way of saying, “the price declines I see will likely be short”. But wait… Is any kind of price decline possible in Seattle? That’s just crazy talk!!!

“Yun said the affordability crunch caused by rising home costs would slow sales and cause prices to plateau.”

A “permanently high plateau” perhaps? Now where have I heard *that* before? ;)

Major Seattle broker firms calls Lawrence with panic in their voices:
- Hey Lawrence, we are in a dire situation up here in Seattle, the market is slipping from our hands! I’m sure you do understand the seriousness of this! The special and immune cards will be useless forever! Please help!

Lawrence:
-Ok I’ll see what I can do.

Lawrence checks the numbers and realizes that the Seattle market IS seriously overvalued and disconnected from fundamentals. Normal platitudes will not do this time. He’s lost for a moment but then remembers the little sign “For emergencies only” on the frame behind his desk. He smashes the glass and takes out a book called “The most desperate measure of all”. He opens the cover and inside is one sentence: “Claim super stardom!”