True, that although the market will probably not bottom out until 2010 there may be some homes who are at the “corrected” price to use the economic term. However, there are still flippers, realtors and developers who have made a certain investment and want a high price. This is especially evident when there are two almost identical homes for sale next door to each other and the price difference is over $100K.

Eventually they will drop their prices after frustration from not being able to sell. You may be able to find a “bottomed out” price but the inventory will be much bigger next summer or even the summer after. Human beings just don’t get it. If we suck the marrow out of a particular industry without any regard for the future consequences, we are destined to repeat scenarios in other areas of our economy.

“On the other-other hand, I have their credit report and rental application and know that a 5% increase is a rounding error in what they can afford, but is a big deal for me.”

it wasn’t just the closing costs. maybe here in the Seattle area we didn’t see the kind of run ups they did in other parts of the country. Say Nevada, some places there the price did in fact double.

it’s a national, even global phenomenon. adding closing costs didn’t do it. i also don’t buy the consumer is an idiot theory.

here in Seattle i do blame the real estate agents. i also blame them in Nevada. there was no way doubling prices wasn’t noticed, commented on, or talked about amongst real estate professionals.

i had the conversation a lot over the past few years. i just told buyers there were better deals to be done.

there again some one pointed out to me Sunday i look at real estate from an investor perspective. still i am having a problem believing the banking industry is to blame. in my opinion they got caught up in the greed every one else did.

there again, a lot of money changed hands, and money doesn’t just get lost, so what was the real deal.

now that i reread my comments it kind of sounds like a conspiracy theory, but i do want to know.

– Population grew at 7.15%.
– Housing stock grew at 9.5%
– 9.5/7.15 – 1 = 32%

So housing stock grew 32% faster than population. Just like saying if you had one stock that returned 10% and another that returned 5%, the first one did twice as well.
Looking at the absolute number of homes added or houses added is pointless. you need to compare the relative rate of change.

david losh

the data shows a direct relationship of housing units keeping pace with households and the data is for only between 2000 to 2003.

Because of buyer and seller cooperation in adding on buyer closing costs to the sales price in 100% transactions, never mind if the buyer was invovled in multiple offers—which would compound the problem further. The artificial appreciation created by this program by lenders and the wake it is leaving in the markets around the country speaks for itself.

Because of unscrupulous and unethical loan officers who would do anything to jack up fees and/or tell their customers that “they can just refi again” before their ARM recasts or when their pre-payment penalty expires.

it shows households, then the number in the households as a seperate statistic.

the data shows a direct relationship of housing units keeping pace with households and the data is for only between 2000 to 2003.

i would also like to see a separate post about interest rates. it occurred to me a few weeks ago that lower interest rates show have never had anything to do with the price or value of real estate. so what the payments are less, or more, it doesn’t change the value of the item.
in this case and this case alone i’d like to make the analogy to buying a car. the cars worth $23K , no matter what the car’s worth what the car’s worth. there are all kinds of gimmicks to get you into the car, and negative financing to get you to pay more through the finance swindles, but the car is worth $23K.

How did the mortgages companies end up for taking the rap for the run up in real estate pricing?

The 2000 census numbers report 2.38 persons per household in King County. Using this number, housing outpaced population by 59%.

Even using the Seattle number of 2.08 persons per household, housing outpaced population by 39%. Both of these numbers outpace the 30% number given.

http://quickfacts.census.gov/qfd/states/53/5363000.html

OK housing vs population growth. you had me for a minute but check your own data against the article. that doesn’t look like a 30% increase in housing to population growth.

if i read it correctly that’s an average change of about 10000 housing units per year over seven years. population about 15000 per year..

So you make a choice. My choice is to accept volatility and risk in the portion I invest in stocks, but counter that by keeping the majority in cash (or low risk MM). You may see a better strategy. If so, share it. I’m just not going to give 1% to anyone to tell me I could nearly keep pace with inflation if I hadn’t been stupid enough to pay them that 1%.

I think that the financial planning concept is that you don’t want high volatility in money you want short term. If it’s August of 2000, and I plan to cash out in 14 months, I will get volatility; I will not get high returns.

Financial planners are generally just looking to avoid volatility and blame. I can take volatility in exchange for higher returns. As long as I’m not stupid of enough to pay a financial planner.

Watch out for MM; many of them have toxic instruments previously thought liquid. Stocks? Any financial planner will tell you they are not for money you want to get at in the next 5 years.

I’ll probably keep some in a MM and toss some into stocks.

Where are the rest of you parking your down payment cash? Are there better returns possible for reasonably large amounts – say $100-200K?

overall nothing special

This is where being special is not good. Being at the top of the list for growth really increases the chance you will lead the list down.

What ACS has to say about population was just FYI. As I said
“I don’t know” but I doubt it has changed much.

2006 562,106
2000 563,374

I would treat the household size equally suspect.

From http://www.city-data.com/city/Seattle-Washington.html

Population (year 2000): 563,374. Estimated population in July 2006: 582,454 (+3.4% change)

deejayoh –

Correct me if I am wrong. But the 30% housing growth over population is only if every person lives by itself. If you throw some families in the mix, the increase of new housing is over 30%.

I meant on a relative basis, which means assuming a constant household size. I don’t know if household creation has outpaced population growth. According to the most recent ACS, it hasn’t

carpe diem you people of little faith

Can you tell I work in patent law?

http://www.sun-sentinel.com/news/local/broward/sfl-flbrenterssbmay02,0,2357523,full.story

They are also warning renters not to rent from investors that may be financially invsolvent…

Correct me if I am wrong. But the 30% housing growth over population is only if every person lives by itself. If you throw some families in the mix, the increase of new housing is over 30%.

On the other hand, I did say I will do all I can to keep them, which may mean keeping the rent the same.

On the other-other hand, I have their credit report and rental application and know that a 5% increase is a rounding error in what they can afford, but is a big deal for me.

You’re planning on raising your rent 5% just as the impending recession is in full swing? Good luck with that one.

Average rent increases back to 1985 have been about 4.2%. There’s nothing really out of line about a 5% increase.

http://seattlebubble.com/blog/2008/01/03/rents-to-rise-or-homes-to-fall/

Regarding rent increases I can recommend getting yourself into a privately owned SFH rental. My experience is that the owners are much more concerned about having a stable, clean non destructive tenant than getting top dollar. We have not had one cent increase in the last 3 years and just renewed for the same amount.

Exactly the case for me. I have great tenants and will do all I can to keep them. I am planning on raising the rent (~5%) next year when they sign a new lease, but of course that is negotiable.

King County gained 124,254 people since 2000 — by far the most of any of Washington’s 39 counties. Its growth rate of 7.15 percent, however, was good for 21st place, well behind first-place Franklin County’s rate of 36.58 percent.

It’s in the article he provided a link to. BTW it’s a good article about growth here in Seattle.

What I’m more interested in is: The number of homes created during that period grew by about the same rate.

If that’s true then the supply and demand theory so many of you advocate would say housing prices should be stable or be going up.

Some facts:
1) 7.15% growth over 7 years is pretty lame. That’s 0.99% CAGR – probably slightly under the overall growth rate of the US.
2) Housing growth for King County was much higher – 9.5% over the same period according to the spreadsheet at OFM. That’s a CAGR of 1.3%.

In other words, Housing stock grew 30% faster than population from 2000 – 2007.
Why should prices be stable or going up?

Home prices should have been stable during the bubble, that is the entire point. Those numbers just show that there was no incredible decrease in supply, or increase in population, to justify the bubble prices. I think most people here believe that prices will return to their fundamental pricing of true supply/demand from the bubble pricing eventually, however it will likely undershoot it for a while as market corrections tend to do.

You are right, again my brain was apparently not functioning when I read the article. The _next_ highest was over a decade ago, but it was not higher. On average it looks like we had a good clip last year but overall nothing special compared to other large cities. Basically, population growth is not so explosive here that it is going to push up rents enormously or keep home prices artificially high.

Sorry, I totally misread the article to say that KC growth was 21st in the nation. It looks like it was actually 21st in the state. From the same article at the bottom it looks like Seattle growth is still nothing great so the point stands:

Seattle’s 3.4 percent growth from 2000 to 2006 was good for 127th place among U.S. cities with at least 100,000 people.

I generally disagree with this statement because of the decreased stability. I, for one, had to leave a rental because the stupid landlord got in over their head on the new “big house” so they decided to move back into their old place (the rental) when the lease was up.

Also, just had lunch on Wednesday with a friend that’s lived in a privately owned rental in Seattle for 5 years and is going to have to leave because they’re selling the place. They’ll soon realize they probably missed the boat and rent it out again… But that doesn’t help my friend.

Sure, they’ll be lots of rentals out there from desperate sellers that can’t sell and so will “wait the market out” and rent it. That just means they might foreclose, or sell soon if prices go back up (unlikely, I know). I don’t recommend renting from these people unless you’re fairly mobile and don’t have too much crap to drag around from place to place.

I know everyone’s personal experience can be different, but I would only recommend renting a SFH from a private owner if that person had bought the house >5 years ago and didn’t *seem* like they were interested in selling soon. It’s hard to judge, I know.

I think it’s one of those word problem things… the house goes up 12% by 2010 but from the example above

You save six month’s worth of payments before realizing that prices are already going up again.

The the assumption is that after waiting 6 months, and seeing the price skyrocket, you decide not to wait, and buy the place now. (hence the prince being _only_ $465K)

Dont’ca hate word problems?

Ray Pepper: Never wait to buy. Never Never. Always Look! The Gem you find today just may not be available when the bottom hits. 1 year or 5 years. Just keep looking…. Everytime I buy I know I nailed the bottom. Its not hard. It just takes time and EFFORT!

The fundamental difference between your mindset and the majority of the folks on here is that you treat each property as an investment versus a place to live. The large majority of the readers of this site are future buyers who simply want to make an effective purchase, once.

What The Tim, and others, have shown us is that the time to buy more than likely isn’t right now.

Remember the bubble thingy? It always lasts longer than you think it can possibly last.

Same thing going the other way….

It’s in the article he provided a link to. BTW it’s a good article about growth here in Seattle.

What I’m more interested in is: The number of homes created during that period grew by about the same rate.

If that’s true then the supply and demand theory so many of you advocate would say housing prices should be stable or be going up.

First time post and I’m just wondering where you got your numbers for the house prices in the future for scenario C —

i.e., the 12% increase in value in 2010 of a home you bought now doesn’t seem to be reflected in the purchase price of the future home if you never bought in the first place. How would that home price in 2010 only be $465K vs the $450k in today’s market if the home you bought today was worth 12% more in 2010?

If that’s a stupid question my apologies –

Gill

Geezus, the Yuppie menatlty never ceases to disgust me. ME ME ME.

It was the fastest growth for single year in the last 40 years, not ten.

I am not challenging the number; I just want to see who’s where.

Thank you

TIPS (Treasury Inflation Protected Security, or some such). they return a fixed rate + inflation. right now the fixed rate is 0% b/c the premium for safety is so high. inflation is about 4.8% according to the CPI.

viola, risk-free 5%

or find an FDIC CD with a 2yr term. they go for about 4% right now, if you really have $100k to put in.

the only good argument for buying a house now is if you think we’re heading into unusually high price inflation rates across the economy, like we saw a few decades ago. if that happens and you have an inflation-protected income, you may be better off locking in the low rates today, because they wouldn’t be available later.

you could even end up with a interest rate below inflation. how cool would that be? in real terms, you could end up paying back less than you borrowed.