This is a little redundant, but that’s why I’m posting it on a Saturday. It’s just a slightly different take on the economic fundamentals that allegedly drive the local housing market. Much of this data comes from the recently-released 2007 King County Annual Growth Report. You can get all these charts and the data behind them in this spreadsheet.
Here’s a chart of local economic fundamentals from 2000 through 2006:
And here—on the same scale—are some measures of the local housing market for the same time period:
Here are the fundamentals and the housing market measures all on the same chart.
I realize that posts like this are seen by some as beating a dead horse. The sad thing is that there are still people that believe that home prices are somehow supported by these fundamentals. I wonder if someone that believes this could be bothered to bring out the data that supports such a position.
(King County, 2007 Annual Growth Report, 2007)
How many working-age couples do you know where only one spouse works? Aside from those with pre-school children, I’ve never met any.
Most of my married coworkers have non-working spouses.
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Re: Angie – Yep, she’s done her homework and knows what “should” be happening. However, the fact is that she’s still being outbid. It’s a real estate market and someone, or many someones, are still willing to meet or beat the advertised prices.
Angie, Are you all that surprised that even in a faltering market there will be properties that have bidding wars? Do you really believe that since there are sporadic bidding wars on appropriately priced (for the moment) houses, the market must still be strong? Jess’ difficulties in finding a suitably priced property and the fact that the few she is able to find result in bidding wars simply confirm that affordability is still too low and that prices will need to drop even further. As per comments above, I have no issue with those who simply acknowledge (granted, for reasons that I don’t understand) that they want to blow lots of cash on a property and not worry about the loss. People do it all the time, albeit on a smaller scale, with fancy cars, vacations, big screen TV’s, jewelery, etc) and don’t expect to get any return on their purchases. If you can afford to drop much dinaro on a depreciating asset and it fulfills your life’s dreams, then who am I or anyone else to question? It is the fallacy that now is such a great time to buy from a financial standpoint that is absurd, not simply the idea of buying a house now.
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I can show you that there are (select) people making TONS of money flipping homes in Los Angeles currently. 6 figures a month. Does that mean that the L.A. RE market is healthy?
Angie’s just all bent out of shape again because *surprise*…there are actually people that DONT WANT TO LIVE IN COLUMBIA CITY OR ANYWHERE ELSE IN THAT GHETTO OF A NEIGHBORHOOD.
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Jess -
I did not mean for it to come across as a put down or insult. What I meant is that you seem to really want to buy a home, so why are you letting a slight price difference make you lose bidding wars? You already have decided to buy right now anyway, so a 3-5% premium should not make a difference unless you are at the very end of your affordability range (which I hope you are not). It certainly sucks, but the price difference is probably worth your mental health.
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RE: Magnolia44: “we closed today, its all a done deal. I have now turned cheerleader and want the home behind me thats for sale to sell for at least 90% of what its listed for.”
Why? Are you planning to sell your house soon? Otherwise, it seems that you are just cheering for higher property taxes.
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Jess’ difficulties in finding a suitably priced property and the fact that the few she is able to find result in bidding wars simply confirm that affordability is still too low and that prices will need to drop even further.
Um…yeah…OK. (Did George Orwell write economic theory, too, and I just missed it somewhere?)
EconE, you’re so cute when you get all racist ‘n chocolate. In fact, I actually meant to include north end ‘hoods in that comment, too, know what I’m talkin’ about, homie? Bothell, Lynnwood, chocolate, even Northgate (how about that gang shooting in the parking lot last week? Dag.) Obviously not good enough for West Side Billy–or you, you precious litle thing.
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Obviously not every property is going to be perfect, and calling them chocolate is probably overkill if favelas are your reference point. But KC has a LOT of properties on the market, and people keep citing that as a reason why housing should crash NOW, but the reality is that many of those properties are not good properties to potential buyers – especially at their listing price, and even more so if they’re out in BFE and you want to live in Queen Anne or Magnolia. There are a lot of great houses in the Seattle area, and when they show up on the MLS at a reasonable price, people bid on them and close fast. That’s what Jess is experiencing. If my memory serves for her criteria, there are about 40 properties that would “qualify” and most of them have glaring issues. Not favelas, but not worth $650k either.
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I told myself last night that I was not going to come back anymore, but golly, SeattleBubble is like a drug and I’m hooked. I was really, really p-ed last night, but I was also stinging hard from losing the house. I’ve slept on it, and I’ve read all of your comments, and here’s the bottom line: as mad as I was about some of the stuff being written yesterday, and as mad as I am with myself that I insisted we wait until the market “drops” for the last 18 months and it hasn’t (and now prices are higher than they were then), this site SAVED ME. If I had not been a faithful SB reader, a “reluctant convert to Bubbleheadness,” we would have offered even more on the house yesterday and gone all the way to our max. I do have a much better perspective on what a good price is and what is too much. Dirty little secret? We have a pre-approval to go all the way up to $675K, however, we don’t feel comfortable with more than $600k, maybe $625K for a spectacular SFH, and prefer to pay less than that. Had I not been a “reluctant convert to Bubbleheadness,” we would be looking at houses priced higher than what we are. So thank you, Tim; thank you, Deejayoh; thank you, S-Crow.
Why do we feel we need to buy? I’ll try to keep this short since I’ve said it a number of times before (and I really don’t want to rehash the same arguments again). Renting sucks. We had to move constantly before we last bought because of the whims of landlords. We have a kid and want to give him some stability again. Our rental house is awful (basement leaks like a sieve, no insulation, roof keeps leaking, etc), but I have been watching Craigslist for a new rental house big enough with a yard that will allow pets and is not on a busy street or other terrible spot in the areas we want to be, and those seem to be less common than the SFHs that fit the bill (yes, I have been looking, I promise). We took a hit on taxes this year. We are looking for a place to call our own again and to grow old in — we are not looking for short-term investments (will own for 10+ years). We’ve gone through a lot of changes in the last two years — deaths, learning disabilities, career changes, other incredible family stresses — and we really want to get settled on one thing we can control: where will we live and call home while our son is still in school and as we transition to empty-nesters? Can’t control anything else in life, but it will be nice to feel settled and secure on something. Is this emotional rather than analytical? You bet! But there you go.
And Angie, you will be happy to know that I have been watching around your area. The problem is most of what’s come on in your neck of the woods has teeny tiny lots and the commute to the kid’s school in Wallingford will be more difficult in the morning — but I am watching!
Cheers, the reluctant convert
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Watch out for the PC police. Ghetto is the new n-word.
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Jess,
There’s nothing wrong with wanting to buy. And if you can afford it and believe the downside risk is not too high or something you could stomach, more power to you.
I think most of us on here that don’t already would like to own a home someday. I wish you the best of luck in your search, I really do. I’m glad to hear that this site has helped you learn more about the market and how to find things out for yourself.
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Having been to/through some of the worst ghettos in this country (South Chicago, Gary, 8 Mile area in Detroit, etc), I think your definition of ghetto might be skewed a bit. :)
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Oh, just one more question: what Seattle neighborhood are you in, BitterOwner?
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Jesse, it may not be easy to find the perfect rental but I just don’t believe it is that difficult to find a good one. I must have checked craigslist 15-20 times a day for a month when I moved last time. You just need to be fast and have an excellent credit score. A leaky roof can happen to a $600k home too. Home ownership can mean a whole new set of stress if you don’t do your homework carefully or you are just unlucky.
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Jess–as a real estate professional I don’t believe that everything presented/said here on Seattle Bubble is gospel but I do think one thing that Seattle Bubble does that is really important is to get people to look at buying a home more critically and hold out for the home that really makes sense for them. For some people it does make sense to buy now, but for others it might mean waiting until either their personal situation changes or until the market does.
The bottom line is that people should buy a home they can afford and feel comfortable with and not feel pressured to buy something that maybe they can qualify for, but will leave them house poor. So, if nothing else, if Tim helps people like you hold out for a home that really makes sense for them, rather than get caught up in the bidding wars, then what he does here is a public service even if we don’t agree with everything he says.
Somewhere between the extremes is where the truth lies for most of us. Here’s hoping you find the home that makes sense for you in your particular situation. You’re the one who will have to live with it, after all, so it really doesn’t matter what anyone else thinks about it.
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Ghetto the new N-word?
LMAO! and I could give a shi# about the PC police. Nobody wants to seem to admit that there are “sketchy” areas in Seattle because every nook and cranny has “gentrified”.
Sure…Seattle “ghettos” might not be on the same level as an area where you have to live your life sitting on the floor because of stray gunfire…but they still leave a whole hell of a lot to be desired. It’s all relative.
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Housing is a bad investment, period. In the long run it barely keeps up with inflation and it is subject to a lot of volatility depending on the local economy and even the neighbors you have.
That said, you have to have someplace to live.One of the problems right now is that housing is overpriced compared to renting. But it is likely that difference will narrow and some of that narrowing will come from increasing rents. Unlike renting, once you buy a house with a fixed rate mortgage your housing costs aren’t going to go up dramatically.
Moreover the real value of your house to you doesn’t change except relative to other housing prices. If every house goes up 20% in value then you will have to pay 20% more for a replacement. If it goes down in value, you are going to have to pay less for the replacement. In fact, the lower the cost of the house you sell the less real estate fees you will have to pay for changing houses.
So if you already own a house, when to buy is largely irrelevant. If you have money in the bank and and want the best deal then you will have to wait a very long time. And you may find you are paying a lot more in rent than you are now before housing bottoms out.
The actual value of a house if you assume traditional relationships to income and rental costs may be as low as 50% of the peak sales price during the bubble. It may take a decade before that unravels. A lot of people are simply going to wait until inflation pushes prices back up to what they purchased their home at, regardless of how long that takes.
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[...] there is one metric to judge the size of bubbles, what would it be? There are many economic fundamentals that you can compare with housing prices, but I think the best metric is probably rents. Seattle Bubble contributor Deejayoh did a great [...]
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