For the love of your favorite entity, ALOT is not a friggin’ word! Look it up! It’s “A LOT”. A is a word, as well as a letter, and LOT is a word. ALOT is not a word, it’s an indication of idiocy!

You seem have employed a strategy where you’re interests are directly opposed to those of the government and a majority of americans. This might seem a clever contrarian move except that you are dealing with a fiat currency controlled by a government having some degree of accountability to the people. That doesn’t seem prudent to me. Here’s hoping your holiday gifts included a good quality lube.

Because a house will always sell in a reasonable amount of time at market price, by definition.

A “reasonable time” in the housing market might be a month. At 50% off, realtors could sell houses within minutes, to make a lot more in commissions overall. If the housing market was as liquid as the stock market, where assets sell in seconds, then I could agree with you.

Normally, I think you’re nuts, but what your saying now is humorous and fairly accurate. Of course there is a ‘bubble’ in bubble blogs right now. Historical trends for bubble blog posting has gone from as low as 0 in 1985 to much higher today.

In fact, it’s been increasing exponentially in recent years, and anything that is not sustainable will end eventually.

As a defender of bubble blogs; however, I disagree with your timing. Perhaps, bubble blogs in other cities have peaked, but Seattle tends to follow these trends by about a year. Like all bubbles, this one is likely to go on longer than we expect, and most likely will not peak until late 2008…after the dead cat spring bounce and a slow summer selling season.

Oh yeah…I think it has to be an investment to be a bubble, otherwise it’s a fad. So unless people are making a vast profit for their insights on this blog, it’s a fad. If they are making fortunes, then I’m being underpaid.

As a bear, I am not saying that prices will go down some amount at some point in time. I am saying that they will go below the point where I first started flapping my gums about bubble valuations. Big difference.

In other words, they are confusing being right about direction alone with being right about direction and MAGNITUDE.

anyone here who doesn’t believe the bubble growth is over, should be ignored. Its now time to wade through the mess of data to predict the rest of the cycle.

Because a house will always sell in a reasonable amount of time at market price, by definition. Realtors cannot move the market price down, any more than they can move it up. That’s determined by the buyers and sellers. So is the sales volume.

I’d be more than willing to take my chances. I find it highly unlikely that this will happen in the current environment.

So if you find property that is selling for 25% less than recently sold comparable properties, how can you be so sure that it’s not a good deal?

Yeah, I wouldn’t be so sure. If prices had quintupled in the last ten years, I’d be a lot more sure. But many houses on the Eastside are priced at a doubling. That’s about 7% annual appreciation. In the past, house prices have kept pace with inflation in the long run. What has inflation really been in the last 10 years, during which time gas prices have doubled? Plus the mere anticipation of out of control inflation in the future can drive up prices of houses now. Is out of control inflation a distinct possibility in the future, with massive federal debt, peak oil, a horrible president and two wars active? It sure is.

Prices may drop another 25%, but I’m not too worried about a negative bubble.

Seattle house prices have jumped up 30% in short order before, only to flatline nominally and give up the gains so slowly via inflation that I’d rather not rent that long while waiting.

Affordability issues aside, I think most people who have the ability to reason can understand that just because a property was way overpriced last year at 600K doesn’t mean it isn’t still overpriced at 450K. Nice sales pitch, though. Keep on hammering.

With 20% down on a $260K home the mortgage payment including taxes and insurance is about $1500 with a 30 year fixed at 6%, easily doable on a 65K income with no other debt and employer paid health insurance

A $360K home would be about a $2000 payment – now that would be stretching it on a median income, IMO, since that would be one full paycheck. Still, even with a rugrat or two, if you can’t live comfortably on $2000 a month outside of your house payment you’ve got a big problem with money management

My assumptions of having no debt and 20% down may not be representative of the typical househunter of years past but it’s going to be tough to get a loan anymore without those characteristics at least until the smoke clears in the banking world (2010?)

Of course you could probably rent a $360K home for around $1200 a month, but that’s another story, Seattle has a great supply of rentals – too bad San Francisco doesn’t have that “problem”

The average Joe cannot afford a 600k-450k house. At a median household income of $65k, the average Joe with a family (including dual incomes) can afford $195k to $260k if he streches.

Why wouldn’t realtors always want to (list at 20% below market value)? The lower commissions would be made up in spades by higher volume.

Plus, if the can convince the owner into listing 20% too low, they can call up their brother or best friend to make some easy money.

I call a 30% drop in popularity over the next 2 years

Probably true. When prices really start falling, this blog will be about as popular as the blogs about rising prices when prices were rising.

By the way, “Moe Ron” is a joke name. Sort of like “I. P. Freely” or “Amanda Hugankiss”.

Now, go tell your wife you are looking for Amanda Hugankiss on the internet.

What if http://www.seattlebubble.com/blog’s popularity is a bubble right now?

I call that we will see the peak of popularity of this blog and that the beginning of a slowly deflating bubble is about to begin…

I call a 30% drop in popularity over the next 2 years while other blogs popularity will be increasing… definitely not a good time to own a bubble blog … rent maybe, definitely not own.

Must be “the new math” much of my generation was forced to learn.

Sure…they may cash flow…but how does it feel to be a slumlord?

Why on earth would a property be listed for 20% below market value? No realtor would ever do this – they know full well what comparable houses are selling for, and FSBO’s are almost always listed well above market.

Why wouldn’t realtors always want to do that? The lower commissions would be made up in spades by higher volume.

As for not finding about this blog earlier. Well, to be honest I have never been a blogger and it probably shows. I heard about this on KIRO. If I came along to late I’m sorry but I was hanging up my hat as a traditional broker for many years and started what everyone asked me to. I was a bit too busy.

As for having time to blog. With my extended family, 3 kids yelling downstairs with their xmas gifts, wife cooking, i need some sort of amusement while watching the Lakers!

Synthetik will it make you feel I have even more time on my hands when I say I’m taking the older kids to Alien v. Predator tonight while my wife sits through the Chipmunk movie. Just call me a multi tasker! My offer still stands! Your Free t shirt is waiting.

Ray Pepper
Broker
http://www.500Realty.net

I have zero interest in competing with people who do real estate full tme to find these great “deals” in the market. And I don’t trust anyone else enough to help me find one of these gems. There is too much incentive for someone who is helping me to take advantage of a gem deal themself instead of selling it to me for only 3% of the purchase price. I’ll take an ordinary, run-of-the-mill deal in a sanely priced market thank you very much.

It doesn’t make much sense for me to seriously look right now since I can’t afford anything I would be willing to live in. My price limit is $300k and I would rather move to another part of the country than settle for what I can buy here for that. I think prices wll drop, but if I am wrong in 3 more years then I’ll be moving somewhere else.

First, there is no such word as ALOT. I learned this in elementrary school. I suppose that has something to do with the fact that my careers have been in science and technology, and not selling $h1t to people who don’t need it. Furthermore, yes, there may be deals to be had now, next year, etc, but probably only for those whom have ample reserves, can weather a bad economy, and likely have significant experience in real estate and/or property development. There will be very few instances where the average joe can make out well buying a $600K house that’s reduced to $540K. Joe might just loose a hundred K or more. It’s not an investment now, and it’s even beyond a gamble. It’s a loosing prop in over 90% of the scenarios.

I work for a non-profit that consults on low-income and other affordable housing projects. A BIG SWELL OF MONEY is coming their way now. I wonder why?

There is ALOT of money to be made in the coming years not just in this market but many. But, waiting is very poor judgement. If you are making a point to actively look you may find something. I will tell you this, however. In this market there will be others right behind you. The PNW economy is strong and the rental market will remain robust.
But, friends there is always a GEM of a deal. ALWAYS !

Ray Pepper
Broker
http://www.500Realty.net

That said, I thought some might enjoy this article from Kiplinger’s. It states that Seattle was late to the boom and may probably be late to the bust. Also, the statistical model for affordability is based on income and demographic trends. Speaking of which I’ve noticed quite a few “For Lease” signs in downtown Seattle offices.

http://www.kiplinger.com/magazine/archives/2007/12/home-prices-2008full.html
For the past year, only five cities show appreciation of more than 6%: Albuquerque, Seattle, Nashville, Lancaster, Pa., and Knoxville, Tenn. Fiserv’s chief economist, David Stiff, observes that they were late to the party and will be late to correct. The vast majority of the cities show price declines.

If a seller wants to sell in today’s market, loping off a third of bubble peak price would realistically be a good starting point for making a sale.

And the harsh reality of life is that there are many reasons that force one to sell a home but few if any reasons that force one to buy.

How about the fact that I’ve been out of dollars and in stocks and commodities since Fed policy has dictated dollar devaluation.

The funny thing is that people think there will be a bailout.

There is, the Fed has been bailing out banks and bond insurers. THe little guy is not getting a “bail out”. THAT IS THE BAIL OUT.

I’ve been saying this for a long time.

Does that make me right only 2x a year too?

Well if they knew we would eventually be right, then why did they say 2+2=5 in the first place?

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/12/23/cccrisis123.xml

A not very commonly known fact is that the Titanic had a sister ship which ALSO sank for the very same reason that the Titanic did. When you get right down to it, people are just not as smart as they think they are.

Why on earth would a property be listed for 20% below market value? No realtor would ever do this – they know full well what comparable houses are selling for, and FSBO’s are almost always listed well above market.

Of course in a declining market, like now, virtually all properties are listed above market value and the price negotiated down.

The price a house will sell for in a reasonable amount of time is the market value.

I also don’t agree with the other statement “US is too big to fail”. Take a history lesson. British used to say “Sun never sets in English Empire”, Romans used to think they are unvenerable.

The best thing about America is they learn from history and always try to correct themselves when things go wrong.

Amarjit Sandhu
http://www.500realty.net

Well yes it does. There isn’t enough differentiation between houses in a given market that one could be a good buy, and another a bad buy, at the same time. Any more than one share of Microsoft could be a good buy, and another a bad buy, at the same time.

One house could be a slightly better buy than another, yes, but that’s about it.

That’s in today’s AP MSM News, albeit the article lacked logical and clear national percentages and past history comparison. But who says MSM has to be clear or even true. Here’s the article for what its worth:

http://biz.yahoo.com/ap/071224/real_estate_foreign_buyers.html

Before Nostradarnus and his wild eyed cohorts start beating their chests over this MSM allegation, on real estate price escalations, remember this, a country’s GDP per capita is the real estate income measurement and since America makes UK and South America GDP per capita look dinky, a small difference in currency [devaluing dollar] isn’t going to make any big difference in my book.

Couple that with current severe world bank credit tightenning, you get the picture.

From the U.K. Telegraph:

Crisis may make 1929 look a ‘walk in the park’

As central banks continue to splash their cash over the system, so far to little effect, Ambrose Evans-Pritchard argues things are rapidly spiralling out of their control

Twenty billion dollars here, $20bn there, and a lush half-trillion from the European Central Bank at give-away rates for Christmas. Buckets of liquidity are being splashed over the North Atlantic banking system, so far with meagre or fleeting effects.

As the credit paralysis stretches through its fifth month, a chorus of economists has begun to warn that the world’s central banks are fighting the wrong war, and perhaps risk a policy error of epochal proportions.

“Liquidity doesn’t do anything in this situation,” says Anna Schwartz, the doyenne of US monetarism and life-time student (with Milton Friedman) of the Great Depression.

“It cannot deal with the underlying fear that lots of firms are going bankrupt. The banks and the hedge funds have not fully acknowledged who is in trouble. That is the critical issue,” she adds.

Lenders are hoarding the cash, shunning peers as if all were sub-prime lepers. Spreads on three-month Euribor and Libor – the interbank rates used to price contracts and Club Med mortgages – are stuck at 80 basis points even after the latest blitz. The monetary screw has tightened by default.

York professor Peter Spencer, chief economist for the ITEM Club, says the global authorities have just weeks to get this right, or trigger disaster.

“The central banks are rapidly losing control. By not cutting interest rates nearly far enough or fast enough, they are allowing the money markets to dictate policy. We are long past worrying about moral hazard,” he says.

“They still have another couple of months before this starts imploding. Things are very unstable and can move incredibly fast. I don’t think the central banks are going to make a major policy error, but if they do, this could make 1929 look like a walk in the park,” he adds.

The Bank of England knows the risk. Markets director Paul Tucker says the crisis has moved beyond the collapse of mortgage securities, and is now eating into the bedrock of banking capital. “We must try to avoid the vicious circle in which tighter liquidity conditions, lower asset values, impaired capital resources, reduced credit supply, and slower aggregate demand feed back on each other,” he says.

New York’s Federal Reserve chief Tim Geithner echoed the words, warning of an “adverse self-reinforcing dynamic”, banker-speak for a downward spiral. The Fed has broken decades of practice by inviting all US depositary banks to its lending window, bringing dodgy mortgage securities as collateral.

Quietly, insiders are perusing an obscure paper by Fed staffers David Small and Jim Clouse. It explores what can be done under the Federal Reserve Act when all else fails.

Section 13 (3) allows the Fed to take emergency action when banks become “unwilling or very reluctant to provide credit”. A vote by five governors can – in “exigent circumstances” – authorise the bank to lend money to anybody, and take upon itself the credit risk. This clause has not been evoked since the Slump.

Yet still the central banks shrink from seriously grasping the rate-cut nettle. Understandably so. They are caught between the Scylla of the debt crunch and the Charybdis of inflation. It is not yet certain which is the more powerful force.

America’s headline CPI screamed to 4.3 per cent in November. This may be a rogue figure, the tail effects of an oil, commodity, and food price spike. If so, the Fed missed its chance months ago to prepare the markets for such a case. It is now stymied.

This has eerie echoes of Japan in late-1990, when inflation rose to 4 per cent on a mini price-surge across Asia. As the Bank of Japan fretted about an inflation scare, the country’s financial system tipped into the abyss.

Thanks for the blog, and all you’ve done to help people see alternatives to the current group-think.

Merry Christmas!

Either way, buying stocks because they’ve been beaten up has never been a good investment strategy.

Why not buy some CFC, WM, FMT or NCC now?

Jillayne: I know…that’s why we love you! :)

Merry Christmas!