06.01.2008 04:00 12749 13619 14593
06.01.2008 05:00 12602 13619 14593
06.01.2008 06:00 12542 13619 14594

Odd time though. It usually happens early in the morning.

1. Whether we are headed into an economic depression that socks the job market even in blessed Seattle. This includes apparent economic armageddon brewing in California.

2. The banks look assured of weathering this storm

3. The peak of the rotten mortgages arrives through 2009, and into 2010 as I’ve heard,

4. the efffect of all the baby boomers panicking and selling their biggest asset, their house, because they have nothing put aside for retirement. This is exaggerated by the previous three.

I remember the dotcom debacle and the predictions of a disaster and how long predictions were scoffed at and how long it took to become truly clear.

When the verdict is in on these four major issues, then I will feel confident buying a house or investing in general. You might miss the bottom, but we’ll stay at the bottom for a while before people jump in, so it should be an easy call. The hard call currently seems to be not catching the falling knife, especially in Seattle, because our fall has not gathered much steam, and this area does have jobs.

Urban areas will also fare better than suburbs as people are losing interest in a driving-intensive lifestyle, so this could offset a general decline. There are many possible other wildcards which make things worse, not better.

Feed 1 is more stable, but it does tend to correct by a few hundred on the first of the month as well. Example from May 1:

05.01.2008 05:00 11835
05.01.2008 06:00 11620

The official King SFH inventory count from the NWMLS for the end of April was 11,424, which was itself another 200 below the “corrected” Feed 1 value.

If this trend holds, my guess is that we will see the official NWMLS KingCo SFH inventory for May at about 12,250, which would be a 7% increase over April, and a 40% increase YOY. So Jon’s “spigot has been turned off” comment is clearly not supported by the available data.

5/30 11am
Feed 1: 12597
Feed 3: 14331

I expect Feed 3 to see a 2000 unit correction in a few days.

I agree that the inventory trend isn’t going to come to a dead stop after just 1 week of data, but remember that were are just two days away now from a likely 200 monthly downward adjustment in MLS data.

I’ll give you 10 to 1 odds on any amount of money that you want to wager that inventory will be higher at this point next month.

Jon, you are living in an alternate reality. Last month inventory was higher than it had ever been. Today it is 15% higher than that. Growth slowed last week because it was Memorial Day weekend. We’ll probably top out this summer, but every other market has shown that inventory tops are accompanied with massive price declines. Don’t see any reason why Seattle will be different.

oops. That was me in #110. Stupid wordpress

I’m not sure that I’d agree that the housing supply “spigot has been turned off”

John L. Burns shows that 12-month total for housing units permitted in Washington was 32,000 units. 19,000 were in Seattle. That’s 67% of peak permits (which we know outstripped population growth). Most of the correcting markets are now at 20-30% of peak. That’s what it looks like when the spigot gets turned off. And most of this housing is likely still WIP, so it will be added to inventory.

Try this little test: go to your favorite listings site and just look at “new construction” vs. the total. I make it out to be ~20% of total listings. – 2500 units in King County. So you have lots of new construction that is coming on a bit at a time. It isn’t going away as a factor in inventory any time soon, and any case it’s not the dominant portion of listings anyway

Over on the right hand side of this page. Where it says “Inventory”.

Inventory spigot has turned off? According to what data? Do you read the inventory tracker to the right of this blog? We started May at 11,832 SFH and are currently sitting at 12,591 SFH.

Doesn’t look like an inventory slowdown to me…. BTW sales are way down YOY, so by any measure it is doubtful that the excess inventory is going to subside any time soon.

If you think supply has stopped, then I recommend you get out of the house and drive around a little bit more. There are still a million cranes all over Seattle/Bellevue, and they are still building thousands of new townhouses and regular homes all over the suburbs in KC.

Even in other parts of the country where the bubble burst a year ago are still seeing supply growth. The lag time is more like 2-3 years for these kind of projects, they don’t just stop working on them one day. They will be overbuilding well into the future because they have to.

This, of course, takes no account into the overhang of “investor” purchases, which the Fed links I provided earlier in the thread show that Seattle had investor-owned purchases of a similar magnitude to the worst areas of California. When price declines really start to occur later after the summer, especially from new home builders on the brink, you can bet that 2009 is going to be a bloodbath.

I thought it was just a tiny little town!

Agreed the housing supply outran the demand over the past decade. However, that spigot has been turned off for now, and it is just a matter of a few more months before the supply drops to the normal level.

The inflow has slowed, but the April data shows it is still enough to absorb the inventory. I’m not saying we are going back to 2005 in price increases. I’m just saying there won’t be much more of a drop, based on using real data rather than just doing the “technical analysis” of that US News article.

RAL’s data explains the price drops in other areas. There are vacant houses there that won’t be filled any time soon, so those areas don’t have a floor on their prices.

Seattle
Estimated median household income in 2005: $49,297
Estimated median house/condo value in 2005: $384,900
Median gross rent in 2005: $804.
Housing density: 3226 houses/condos per square mile

The density explains a lot of the increased premium on the value of land. Charlotte seems more comparable to the farther out areas outside of Seattle in that regard. People are willing to pay for the enjoyment of a urban environment. I seriously considered moving to Charlotte last year. I decided to stay here for a variety of reasons, but I can certainly understand the draw to Charlotte.

I have two thoughts about your argument
1) the rate of housing starts has exceeded population growth for the last ten years. Even factoring in changes in household size, the housing stock has grown faster than the population. that has been discussed at length here previously. You can’t just look at current inventory
2) the rate of immigration to the state has slowed dramatically. Check the charts at OFM. The inflow from California has pretty much ended.

His example of strength in employment, look at Houston and Charlotte. Both have very strong employment, both markets is at about half of Seattle’s median price.

I just did a little search of what I call “sellers who finally gave up hope”: homes with 2000+ sqft, on the Eastside, less than 15 years old, 3+bed, 2+bath.

That’s the bottom of the “desirable range” for me, at least. I have seen this kind of house “sticking” to an asking price right around 500k, and that limit has been really hard to break.

Now, I joyfully see a few listings like this one: http://www.johnlscott.com/propertydetail.aspx?IS=1&ListingID=31920260&SPID=17240096

I hope more sellers “see the light” like this guy did.

The Fed, the speech I linked before, does not believe that unemployment is a factor in the housing bust, they also found little correlation. However, unemployment is certainly being caused by the housing bust, which probably does not help things.

http://www.usnews.com/blogs/the-home-front/2008/05/29/next-housing-market-to-crash-seattle.html

Vboring: I agree that sentiment is a factor, suspect that we’re seeing the low tier take a dive partly because these are the people living closest to the margins; those in the upper tiers have hedges that insulate them, at least temporarily and maybe longer, from looks-bad-and-getting-worse. But how long do you think the lag is between sentiment picking up and houses again tending to sell for asking price? I don’t think it happens in a flash and don’t know (do you?) how responsive the market would be to a very slight uptick in sentiment. And sentiment doesn’t turn on a dime.

I wish we could get away from this “timing the market” meme. I don’t think any of us are trying to time the market, get a gold star and bragging rights for buying in at absolute bottom. I won’t kick myself at all if I miss the bottom and end up buying a few months into a re-appreciation trend. So I’m not timing the market, I’m monitoring the market, and aside from the size of the purchase-to-be this behavior isn’t any different from what consumers of discretionary goods do every day. In that sense, not even a big deal.

if everything looks bad and getting worse, you may be able to negotiate an extra X% off asking price because the seller will expect to have to sell it for less to someone else later if they don’t sell it now.

as soon as people see sentiment moving up, though, you’ll have to pay asking or above.

this part of the market cannot be timed. not very easily, anyway

http://www.housingtracker.net/askingprices/Washington/Seattle-Tacoma-Bellevue/

the median asking price in STB area has gone up by 2% compared to 3 months ago. Does it mean
1) sellers are still in the wishful thinking mode
2) they are going to get a worse closing price/asking price ratio given that the sale prices are on the way down?

Take the same approach for Seattle market as a time series across 1990-2006, and the result is a little better (43% correlation) but that is a small data set.

Housing starts follow jobs. Housing prices don’t.

http://www.bls.gov/ro2/eu9490.pdf

Nt tht th lrgst jb lsrs r ls th hrdst ht n hm prcs.

Th Sttl-Tcm-Bllv r rcrdd 33,800 nw jbs n th pst yr, whch ws th frth-hghst mnt f jb grwth n th .S., ccrdng t .S. Dprtmnt f Lbr prl sttstcs rlsd Wdnsdy.

Ldng th ntn wth vr-th-yr mplymnt ncrs ws th Hstn r (p 71,000 jbs), fllwd by th Dlls-Frt Wrth r (p 66,800 jbs) nd th Nw Yrk-Nrthrn Nw Jrsy r (p 57,600 jbs).

n rs tht mply mr thn 750,000 ppl, th Sttl-Tcm r shwd th ntn’s ffth-grtst vr-th-yr prcntg ncrs n mplymnt t 2 prcnt. Ldng th ntn n prcntg grwth f mplymnt wr fr Txs rs: th Hstn r (p 2.8 prcnt), fllwd by th stn r (2.7 prcnt), nd th Dlls-Frt Wrth r nd Sn ntn, td t 2.3 prcnt ncrs.

Th stts f Mchgn, Clfrn nd Flrd ld th ntn n mplymnt dcrss.

Th lrgst vr-th-yr dcrs n mplymnt ccrrd n Dtrt r (lss f 50,900 jbs), fllwd by Rvrsd-Sn Brnrdn-ntr, Clf. r (lss f 17,900 jbs), Ls ngls r (lss f 17,500 jbs), Mm r (lss f 15,200 jbs), Tmp-St. Ptrsbrg, Fl., r (lss f 13,800 jbs), nd th Cp Crl-Frt Myrs, Fl., r (lss f 12,600 jbs). Th lrgst vr-th-yr prcntg dcrs n mplymnt ws rcrdd n Flnt, Mch. (dwn 6.4 prcnt), fllwd by Cp Crl-Frt Myrs, Fl. (dwn 5.3 prcnt), Npls-Mrc slnd, Fl. (dwn 4.6 prcnt), nd Sgnw-Sgnw Twnshp Nrth, Mch. (dwn 3.8 prcnt).

< hrf="http://www.bzjrnls.cm/sttl/strs/2008/05/26/dly11.html" rl="nfllw">http://www.bzjrnls.cm/sttl/strs/2008/05/26/dly11.html< hrf="#" clss="rplyt" nclck="rplyt('49075','∓#91;trll∓#93;',''); rtrn fls;">Rply – < hrf="#" clss="qt" nclck="qt('49075','∓#91;trll∓#93;','Strngth n Jbs = Strngth n Hsng prcs\r\n\r\nNt tht th lrgst jb lsrs r ls th hrdst ht n hm prcs.\r\n\r\nTh Sttl-Tcm-Bllv r rcrdd 33,800 nw jbs n th pst yr, whch ws th frth-hghst mnt f jb grwth n th .S., ccrdng t .S. Dprtmnt f Lbr prl sttstcs rlsd Wdnsdy. \r\n\r\nLdng th ntn wth vr-th-yr mplymnt ncrs ws th Hstn r (p 71,000 jbs), fllwd by th Dlls-Frt Wrth r (p 66,800 jbs) nd th Nw Yrk-Nrthrn Nw Jrsy r (p 57,600 jbs). \r\n\r\nn rs tht mply mr thn 750,000 ppl, th Sttl-Tcm r shwd th ntn\'s ffth-grtst vr-th-yr prcntg ncrs n mplymnt t 2 prcnt. Ldng th ntn n prcntg grwth f mplymnt wr fr Txs rs: th Hstn r (p 2.8 prcnt), fllwd by th stn r (2.7 prcnt), nd th Dlls-Frt Wrth r nd Sn ntn, td t 2.3 prcnt ncrs. \r\n\r\nTh stts f Mchgn, Clfrn nd Flrd ld th ntn n mplymnt dcrss. \r\n\r\nTh lrgst vr-th-yr dcrs n mplymnt ccrrd n Dtrt r (lss f 50,900 jbs), fllwd by Rvrsd-Sn Brnrdn-ntr, Clf. r (lss f 17,900 jbs), Ls ngls r (lss f 17,500 jbs), Mm r (lss f 15,200 jbs), Tmp-St. Ptrsbrg, Fl., r (lss f 13,800 jbs), nd th Cp Crl-Frt Myrs, Fl., r (lss f 12,600 jbs). Th lrgst vr-th-yr prcntg dcrs n mplymnt ws rcrdd n Flnt, Mch. (dwn 6.4 prcnt), fllwd by Cp Crl-Frt Myrs, Fl. (dwn 5.3 prcnt), Npls-Mrc slnd, Fl. (dwn 4.6 prcnt), nd Sgnw-Sgnw Twnshp Nrth, Mch. (dwn 3.8 prcnt). \r\n\r\nhttp:\/\/www.bzjrnls.cm\/sttl\/strs\/2008\/05\/26\/dly11.html',''); rtrn fls;">Qt

But Nostra"golly"Us may just be one of the many thousands of panicked RE Agents looking for an outlet to vent – I guess only Nostra"golly"Us knows for sure.

There was a net gain of 67,000 new drivers from out of state in the past year. Checking around, there are 4,000,000 over the age of 18 in the state, with 2.5 million housing units, or 1.6 adults per unit. So those drivers represent growth of about 40,000 new housing units per year. There are currently 50,000 listings on NWMLS now. That’s 10 months of sales at the currently depressed sales rate, and only 15 months of new growth. Since typically most sales are trades, the sales is bound to increase significantly once prices stop dropping, which will bring down the MOS.

No one is going to dump their house in a panic when in about a year there would be a severe shortage unless the price of housing is high enough to sustain new construction. Rent ‘em while you can.

I REALLY doubt that Nostra is Mack. Especially since one of Mack’s big point is that he isn’t afraid to be know by his name, and all the anonymous posters should be identifiable. (see PI post)

No matter how I turn it, I can’t figure any reason why Mack would bother to create an alter ego..

sorry if someone posted this already. No time to read the whole thread

“What I don’t quite understand is what sort of person, who can apparently afford it, wants to put off owning the home of their dreams for several years solely because the delay may save them a few thousand dollars? ”

According to Seattlecondoreview, the price of the median Belltown/Downtown condo (Mack’s hood) has fallen by $30K in the last year. Pay that no mind – remember (as a different PI poster noted), that even if you overpay, you can finance it over thirty years, so its only a few extra dollars a month!

Mack has a much more flamboyant way of insulting us…you know…scrubs banging on the side of our hoopties etc. etc.

Nostra said he lives in a house. Mack lives in a condo in Belltown.

It seems Nostra has suddenly seen a steep drop in his paper prices since he re-listed his house, hence the increase in frequency.
RAL on the other hand suddenly woke up one day to find his house wasnt worth the money he was banking on. Probably did not listen to a couple of good loser-renters who told him exactly what they thought it was worth. And now he has to move! quickly! and sell his house! Except that those HELOCs he probably took out are now hanging above his head like the sword of damocles.

Not a penny more or less.

I heard on Channel 13 news today that our local Seattle area has prospects of endless job growth, above the rest of America.

What they omitted was the average wage of this growth….like $10-15/hr [reference: an old recent data point from The Tim]. They most likely also omitted the horrifying demise of housing related contract jobs not tracked, like the unemployment rate totally omits too.

What is the local MSM smoking? They need Seattle Bubble treatment for their denial problem.

There’s no RE bubble in Germany. Main reasons are the fiscal effects of the reunification, and lack of cultural bias towards buying – i.e. Germans are happy renters. Germany also has very strict lending standards for RE and taxes RE gains.

You also left out what is now North America’s biggest bubble area, just a couple hours up the I-5, where everybody is absolutely, positively, sure that it’s different there.

TheHulk // May 28, 2008 at 7:44 pm

Tim,

Please do not ban RAL. I want to know if he ever has the guts to actually post his MLS# on this site. Of course there is no way to verify that it is *his* listing :)

look for the sign in the yard that reads something like

” Only full priced or above offers accepted , dirty stinking stupid renters need not make ANY offer, it will be rejected”

Nope, this is a knock-out punch for real estate – in all 50 states, England, Spain, Australia, New Zealand, Germany and your neighborhood. It’s going to take years for the tide to turn. By 2010 we will be back to 1998 prices and 1970’s inflation. Just add Socialism, government-controlled housing and just a dash of carbon-taxation and you get 30 years of real estate pain.