“I don’t think that ‘crash’ is appropriate language in Seattle, but I do expect that it’s going to continue to soften and prices are going to come down some,” he said. “It’s kind of unrealistic for people to think it’s not going to happen.”

“I don’t think home prices are going to come down dramatically,” he said. “It’s hard to find that home that you really like. If you find a home that you really like, that’s the right place for you and your family, I would tell you it’s a great time to make an offer.”

I love the data-centric approach.

as “I love the drama-centric approach.

Michael, my blog’s about Mercer Island. The post’s title reflects that the post is a response to ZipRealty’s CEO’s comments on same.

Anyway, enough ’bout that. Seattle Bubble Blog’s one of my favorites- I love the data-centric approach. Keep it up.

It’s called Blog Spam and I notice in your second post that you cut that junk out. If you want page rank for Seattle Real Estate then pay Tim for your ad.

They of course are factored in when computing the return of your portfolio, but not the returns of the individual assets.

Everyone gets a different return on their IRA, but everyone gets the same return on MSFT. Likewise the return on a house has nothing to do with financing. The financing is a separate asset (a short position).

I’m surprised you think my blog is spam. I often cover real estate in my Mercer Island blog. Yesterday I spent about an hour writing a post, looking up related market information and making it relevant for my readers, Mercer Island residents. I try to offer a coherent opinion on our very local market. You’re free to disagree on the coherence of my thoughts on Mercer Island and its real estate market, but you’re wrong to assume it’s spam. If spammers spent as much time on each post as I and most neighborhood bloggers spend, they’d be very poor indeed. Speaking of money, I’ve never made a penny from my blog. So as a spammer, I’m a failure.

The title of the post reflected the post itself, which was a reaction to the comments of ZipRealty’s CEO on Seattle Real Estate. I guess I could have called it “Zimbabwe Real Estate: Spare Us Your Wild Speculation” but I feel that would have been confusing to my readers.

As a blogger I’ve seen plenty of comments that are spam. The viagra touts, link requests and “hi, great post- mysite.com” comments are pretty easy to identify. If a 500-word post with charts and data looks like spam to you, I wonder what you find to read.

You have a link or MLS# to one of those the discounted Buchan properties? Are they in Education Hills or Bothell?

O.K., got it.

“Property taxes (not income taxes), insurance, etc are asset costs and should be subtracted to get the net return.”

I get the bit about income taxes not being figured in for determining net return, but are you saying portfolio costs are not factored in when calculating net returns?

Property taxes (not income taxes), insurance, etc are asset costs and should be subtracted to get the net return.

The reality of life is that since GW took office in Jan. of 2001, the markets as measured by the major indexes are up in the case of the DOW and S&P by a miniscule %4+ and the NASDAQ is still in the red, and that was of last friday

That’s in USD of course. If you measure them in real money (i.e. anything other than the USD or currencies pegged to it) they are down substantially.

Does that 4 or 5% account for mortgage interest, taxes, insurance, maintenance, etc.?

RAL said “investment” which would exclude your primary residence by definition. I am curious to know more about the class of real estate that is an investment and is not taxed. Please let me know so I can buy some of it. ;)

I’m not an accountant, so am not going to put a tax rate on it, but perhaps take off 25%?”

The current long term capital gains rate is 15% if I am recalling correctly.

Th Bbblhds r ttmptng t “tm” th rl stt mrkt. Why dn’t thy s thr “fnncl gns” t tm th Stck mrkts? ftr ll th S∓P 500 DBLD frm 2002 t 2007.

Rsn: Thy cn’t pck bttm, nd thy stll cn’t ffrd Sttl hm prcs s th bst thy cn d s try t “Hckl ” th mrkt dwn.

vn Tm cn’t rs th $2500 msly bcks h’s lkng fr hr. Myb h shld lwr hs sk?

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My first house in NC was $60/sqft. My condo in TX was $100/sqft. Seattle is going to have a premium. I don’t think there is an easy way to determine what that premium might be in the future.

Sorry about the confusion. If you would have been following the thread a little closer you would have noticed that I was responding to RAL earlier post where he brought up the liberals are spreading doom and gloom, the stock market looks forward 6-9 months, and we are only down about 10% on the S&P from its all time high.

The reality of life is that since GW took office in Jan. of 2001, the markets as measured by the major indexes are up in the case of the DOW and S&P by a miniscule %4+ and the NASDAQ is still in the red, and that was of last friday. The markets are getting pounded again today. The “ONLY 10%” that the S&P is down in a year is a huge number compared to the paltry 4% return of the past 7 plus years. Thats the only point.

Sorry about the formatting. I hope you don’t lose any sleep over the fact that I didn’t put the losses in parenthesis.

Stocks are a good investment the last year? LOL

Negative losses are parenthises, I already gave you the URL above, but apparently your MSM (liberal?) Rosy Bush Economy brainwashing worked on you too well. Here’s the Government TSP conglomerate URL’s data (C= American Stocks, I & S= International Stocks, G= money markets and F= Bonds):

Returns & Share Prices Current Returns

G Fund F Fund C Fund S Fund I Fund
May 2008 0.32% (0.74%) 1.27% 4.88% 1.09%
Year-to-date 1.47% 1.34% (3.80%) (0.05%) (2.87%)
12 Month 4.36% 7.09% (6.68%) (5.27%) (2.28%)

The bond fund went up almost 8%, but rises when the feds cut interest rates [that's over I predict, because of hidden horrifying inflation by the way].

All Types of Stocks generally collapsed -2-7% the last 12 months and I predict the uncontrolled bleeding will go on for years too.

What’s this got to do with your alleged liberal media brainwashing us before the election?

I don’t like liberal or conservative labels anymore, they’re totally meaningless. We lost our environmental liberal definition a long tome ago when the Seattle area’s population went up 400% since 1990 and the alleged liberals think its liberal?

Off topic a bit, what do you guys think about Mayor Nickels’ 100 mpg Prius? The one that goes 30 miles [before the nicads get weak after a couple years of use], but requires 4 hrs charge, or it goes back to just a 1100CC motorcycle engine lugging a heavy car [approx 20 mpg with weak/dead batteries]. Mayor Nickels touted after 7 years the cars’ $10K options “pay for them selves”. Did that unscientific politician ever add in the cost of dead nicad battery replacement every two years (approx $3K) and the cost of electricity to charge the thing for 4 hours so you could drive it an hour? LOL

> My Redfin search updates showed me some interesting stuff last night.

> The first thing was a whole lot of Buchan homes properties dropping
> 50k – 100k overnight

By any chance are any of these Buchan properties located on the Eastside?

AS

If we want to compare returns, you might want to tax your stock market returns as most of the gain on housing is tax free, in the majority of cases… I’m not an accountant, so am not going to put a tax rate on it, but perhaps take off 25%? So your return might be 7.5% long term… Still better than real estate which I think is something like 4 or 5% over the long haul.

Also, there are a lot of smart people out there saying that the years of 10% returns are over for quite a while. I think Buffet is strongly in this camp. So if we’re looking at 8% pre-tax (6% post tax) then this really isn’t far off housing.

Of course, there’s always a benefit to buying low(er), so I’m not saying “buy a house now”…

Hogwash. That sounds like something a person who has difficulty counting might say. I’ve averaged 10% returns per year in a diversified mutual fund portfolio, after expenses (ignoring the first half of this year, of course). And that is basically from operating on auto-pilot; no granite counter tops installed, no sweat equity, and no interest payments.

I’ve been counting on builders to drive the market down, because they are the ones that don’t need to make money on every transaction, as they win on the volume… if builders become “patient” like that, then we may live in this molasses mode for a while.

Are you joking? Creating the biggest asset bubble in history is “getting the economy back on track”?

The US should have just taken its lumps in 2001 and gotten back to a real economy, not a make believe one. The adjustment coming up, and there’s no way around it, is going to be a lot more painful.

If the economy was truly in such bad shape it would be reflected in the stock market. We are less than 10% off our all time highs on the broad S&P 500. If the economy is really headed for recession/depression don’t you think the big time investors would be pulling out in droves? After all, the markets look ahead roughly 6-9 months. From what I see this slowdown will be (is) short and shallow.”

RAL

Have you gotten in touch with reality lately?
Since GW’s first day in office:
DOW is up 539.02 or 4.265%
S&P is up 57.84 or 4.13%
NASDAQ is down 247.72 or -9.82%

Those are total returns the market has delivered for 7+ years. The less than 10% we are down sure looks juicy compared to the abysmal returns that we’ve gotten so far.

ln // Jn 1, 2008 t 12:45 pm

Y hv shwn tht byng 400k hm s pssbl fr y vs rntng.

dn’t qt mk $100k nd $400k s th bttm f th mrkt. f cn jst brly ffrd th bttm f th brrl thn wht bt th 75% f r hshld tht cn’t ffrd tht?
…………………..

S Y LD BT YR NCM, HW FR R Y WY FRM 100K, 50% ? R Y JST WNNB HMWNR?

Th lngr trm (7+ yrs) grwth n qty rlzd thrgh lngr trm rl stt pprctn s wll s prncpl rdctn mr thn tks cr f th “pprtnty cst”.

Nt ccrdng t ths rtcl: < hrf="http://www.nytms.cm/2006/03/05/mgzn/305tlps_shrt.1.html?x=1299214800∓n=bb36dc2d13b1c24f∓=5088∓prtnr=rssnyt∓mc=rss" rl="nfllw">http://www.nytms.cm/2006/03/05/mgzn/305tlps_shrt.1.html?x=1299214800∓n=bb36dc2d13b1c24f∓=5088∓prtnr=rssnyt∓mc=rss

Y S N RTCL FRM MSTRDM T BCK P YR RGMNT?

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STTL RL STT HS BN RSNG T BT 8%+ PR YR FR 10 YRS NW, NFLTN RNNNG RND 2-3%, TRY GN.

lrdy gt $10500 s stndrd tx ddctn. f py $18000 yr n mrtgg ntrst thn m rlly nly gttng $8000 yr tx fr. My tx svngs r nly rnd $2400 yr. Tht mns $15600 s dwn th tlt jst s gd s rnt. ’m pyng $13800 n rnt rght nw fr 2 ml cmmt nd 1200 sqft. Thr s nthng n th mrkt tht cn cmpr t tht rght nw.

Y WLL B LVNG N HM DBL TH SZ F Y BY. CMPR PPLS T PPLS, WHTS TH RNT N 2200 SQ FT HM. Y BBBLHDS TRY T PPLY P/ RTS T HM PRCS, WLL S YR LGC PRPRLY. WHY R LVNG N SHBX?

vry dllr pt nt lw yld rl stt s dllr tht cnnt mv btwn mr lqd nvstmnts tht blv r hghr yld.
5% ncrs n 400k hm s 20k.
S s 5% lss. Tht s lt f svng nd scrfcng whn lck dsn’t gv y rd n th rl stt qty trn.

Y R LKNG VRY SHRT TRM, LK T TH 10 YR CHRT GN N STTL RL STT.

cn lvrg my slf p n th stck mrkt by pnng mrgn ccnt f rlly wnt tht srt f rsk.

Y HVN’T GT TH BLLS.

g bck t my prvsly pstd stts n Nt Wrth f hmwnrs vs rntrs shwng

Crg clt mntlty: < hrf="http://n.wkpd.rg/wk/Crg_clt" rl="nfllw">http://n.wkpd.rg/wk/Crg_clt

PST WTH YR LT N LF?, YR RL NT WRTH LSS THN RNTR? FTR LL, Y LD BT YR NCM, PRBBLY LD BT YR DWNPYMNT S WLL.

Byng hs wll nt mk m rch. Bng rch wll llw m t by hs. (whr “rch” s dfnd lsly s “wll ff”)

Y WN’T B BL T CTCH P.

BTW dn’t knw whr y cn gt 6% ftr txs n 100k rsk fr, pls dvs.

Th stck mrkt hs hstrcl gns f 10% vr th lng rn. Snc bsnss ctlly crts vl, 10% s rlstc vr smthng lk gld r rl stt (rl stt cn b prt f bsnss tht rtrns 10% ). Grntd y hv t b n t fr th lng trm. Prk yr mny n lw cst ndx fnd nd lt m knw hw y dd n tn yrs.

DN’T LCTR M BT TH STCK MRKT, MK TN F DGH SWNG TRDNG. F DN’T KNW WHT THT S :
< hrf="http://n.wkpd.rg/wk/Swng_trdng" rl="nfllw">http://n.wkpd.rg/wk/Swng_trdng

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Y WNN TLK GLD? BGHT GLD FND N 1995 T $6 BCKS/SHR, NW T $45. WHN DD BY?.

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If you have so much money quit using SPAM SEO tactics in your links. Give me a break you start the link with SEATTLE REAL ESTATE? Could it be that you are trying to SEO your site from the term Seattle Real Estate from Seattle Bubble’s high page rank? If you want to advertise then buy it! How about I fill out a Google PR complaint report for SPAM tactics. Then see how long it takes your blog to get rank.

YOU SHOULD BAN THIS IDIOT IMMEDATELY!

As values decrease, the pool of buyers may actually very well decrease as well, due to diminishing and finally evaporated equity that would normally be used by this group to ‘buy up’

“Buying up” becomes more difficult as prices go up. If prices are falling then people are more likely to be able to move to a more expensive place.

This is not true if someone has a property in a desirable location and is willing to move to a less desirable location. In that case, his property might have appreciated more than the less desirable location and he can move to a large place more easily.

My theory about bubbles says that speculator demand is positively correlated to a time weighted summation of price changes. The longer prices go up the more speculators come into the market. The longer prices go down, the more speculators leave the market. Speculator demand will go down in a falling market, but it is not clear how much of the current demand is due to speculators.

As values decrease, the pool of buyers may actually very well decrease as well, due to diminishing and finally evaporated equity that would normally be used by this group to ‘buy up’ — With this aspect factored in, along with tighter lending standards, inflation ramping up even further and other various factors outlined here before, it seems to me that as prices fall, all of the internal/external factors are assembling themselves to amplify the downward spiral.

As it becomes apparent what is happening, regardless of the # of ‘renters’ waiting to purchase with diligently nurtured savings accounts [cash] that may very well qualify for the standard 20% down payment – what % of these folks are going to be aggressive about a home purchase, regardless of the immediately preceding discounts (10% – 30%?) they may be seeing?

As one of these ‘renters’ waiting and planning, my disposition may be harder to convince at this point in the near future, despite prices being much more attractive. What will the economy and general sentiment indicate as this time (3-9 mos.?)?

…just speculating, and especially interested in the legitimacy (or not) of the 1st portion.

You have shown that buying a 400k home is possible for you vs renting.

I don’t quite make $100k and $400k is the bottom of the market. If I can just barely afford the bottom of the barrel then what about the 75% of area household that can’t afford that?

The longer term (7+ years) growth in equity realized through longer term real estate appreciation as well as principle reduction more than takes care of the “opportunity cost”.

Not according to this article: http://www.nytimes.com/2006/03/05/magazine/305tulips_shorto.1.html?ex=1299214800&en=bb36dc2d13b1c24f&ei=5088&partner=rssnyt&emc=rss

Over the long term, real estate basically tracks inflation. The huge run ups of the past few years have been due to “inflation” caused by loose and easy credit. Maybe that inflation will stick around. Maybe it will revert. If it sticks then everything else will catch up to housing prices — including eventually salaries.

I already get $10500 as a standard tax deduction. If I pay $18000 a year in mortgage interest then I am really only getting $8000 a year tax free. My tax savings are only around $2400 a year. That means $15600 is down the toilet just as good as rent. I’m paying $13800 in rent right now for a 2 mile commute and 1200 sqft. There is nothing in the market that can compare to that right now.

Every dollar I put into low yield real estate is a dollar that I cannot move between more liquid investments that I believe are higher yield.

A 5% increase on a 400k home is 20k.

So is a 5% loss. That is a lot of saving and sacrificing when luck doesn’t give you a ride on the real estate equity train.

I can leverage my self up in the stock market by opening a margin account if I really want that sort of risk.

I go back to my previously posted stats on Net Worth of homeowners vs renters showing

Cargo cult mentality: http://en.wikipedia.org/wiki/Cargo_cult

Buying a house will not make me rich. Being rich will allow me to buy a house. (where “rich” is defined loosely as “well off”)

BTW I don’t know where you can get 6% after taxes on 100k risk free, please advise.

The stock market has historical gains of 10% over the long run. Since business actually creates value, a 10% is realistic over something like gold or real estate (real estate can be part of a business that returns 10% ). Granted you have to be in it for the long term. Park your money in a low cost index fund and let me know how you did in ten years.

The article reminds me why the real estate industry is shooting themselves in the foot every time the say this is a great time to buy. It’s still a very risky time to buy (although not quite as bad as last year).

What real estate agents should be saying is it’s a very smart time to sell. You can still get a fair price near the peak. If you wait to sell, then you risk finding out that irrational market momentum goes both ways.

As it is a lot of sellers are chasing this market down rather than pricing right.
Sellers need to wake up and smell the coffee. Everything on the market should be priced 5 percent below where it is right now.

Look at it this way: sellers right now want a buyer to take over their risk of a downturn and we haven’t even felt the aftershock from a national recession that the FED can’t solve due to inflation. Can anyone honestly say we won’t see a big drop here of 20 percent plus, followed by a long period of a flat market?

That 20 percent downpayment of 100K buyers made last July could easily be wiped out by next July. Depending on how this plays out nationally with the economy, people who buy near the top could still be underwater a decade from now.

Sellers need to get out now before it’s too late.

Reminds me of this: http://www.theonion.com/content/node/38644

———–
Dang, I wish most of the people who earn up to 100k thought exactly like Alan does! That’s my line of thinking too! And if everyone restrained themselves to this, that restraint alone would keep the market sane!

But no, somehow, somewhere, due to some crazy sense of competition (envy?), it became okay to spend $3000 a month on living expenses – or to sign a contract that would lead to that kind of monthly payment in a few years.

I don’t know about you guys, but I’m personally resentful with people who allowed this to happen. People who mortgaged themselves beyond their limits drove the markets up, and reduced *my* opportunity to live in a nicer house at reasonable expenses.

Keep those foreclusures coming!

I stand by my prediction and as such, we have a long ways to go. We are about 1.5 years behind CA and their markets are in free-fall. In fact it could even be worse than my prediction as I did not anticipate the higher gas/food prices which reduce the amount of money available “upfront” to qualify for and pay a mortgage.

Still not sure if the gas/food run-up is purely demand or also fueled by speculators who are always hunting for, and hence causing, the next speculative bubble. I suspect more of the latter. If the recent jump is just “demand” than my predictions are actually conservative.

Y hv shwn tht byng 400k hm s pssbl fr y vs rntng.

hv nvr vn cnsdrd “pprtnty cst” f th dwnpymnt. gss tht’s whr my vws dffr cnsdrbly frm th mjrty hr. lwys cnsdrd th dwnpymnt s n nvstmnt n my lfstyl, n ssrnc tht wldn’t hv t mv n smn lss whm, n pprtnty t cstmz my lvng nvrnmnt t my prsnl nds, nd n ssrnc tht my csts r bsclly fxd t tdys nmbrs. Th lngr trm (7+ yrs) grwth n qty rlzd thrgh lngr trm rl stt pprctn s wll s prncpl rdctn mr thn tks cr f th “pprtnty cst”. 5% ncrs n 400k hm s 20k. t wld tk 2.5 yrs wth yr 6% tx fr rt t chv ths nd by thn yr rnt wld hv ncrsd by cpl hndrd mnth vs th mrtgg rmnng th sm. wld rcmmnd tht y lk t 10+ yr chrt n Sttl hm prcs t gn sm prspctv n pprctn. Th crrnt dwntrn n prcs s bt mnr pllbck n th chrt.

Tht sd, (s hmwnr) t’s mprtnt t b dvrsfd nd s yr ncm grws th xcss gts nvstd n thr vhcls lk stcks, cd’s tc. g bck t my prvsly pstd stts n Nt Wrth f hmwnrs vs rntrs shwng (f rmmbr crrctly hmwnr n th 80k+ ncm brckt hs n vrg nt wrth f 460k+ vs rntr rnd 87k.) Ds ths rng ny blls? t’s nt chvbl vrnght ,nd t pprs th crrnt gnrtn f hmbyrs wnt t ll, rght nw, srvd p n plttr.

BTW dn’t knw whr y cn gt 6% ftr txs n 100k rsk fr, pls dvs. wld lk t prk sm mny n tht.

f t sn’t rsk fr, wll y cld vry wll b fcd wth dcln n prncpl ffctvly ttlly ngtng th pprtnty cst rgmnt.< hrf="#" clss="rplyt" nclck="rplyt('49211','∓#91;trll∓#93;',''); rtrn fls;">Rply – < hrf="#" clss="qt" nclck="qt('49211','∓#91;trll∓#93;','ln,\r\n\r\nY hv shwn tht byng 400k hm s pssbl fr y vs rntng.\r\n\r\n hv nvr vn cnsdrd \&qt;pprtnty cst\&qt; f th dwnpymnt. gss tht\'s whr my vws dffr cnsdrbly frm th mjrty hr. lwys cnsdrd th dwnpymnt s n nvstmnt n my lfstyl, n ssrnc tht wldn\'t hv t mv n smn lss whm, n pprtnty t cstmz my lvng nvrnmnt t my prsnl nds, nd n ssrnc tht my csts r bsclly fxd t tdys nmbrs. Th lngr trm (7+ yrs) grwth n qty rlzd thrgh lngr trm rl stt pprctn s wll s prncpl rdctn mr thn tks cr f th \&qt;pprtnty cst\&qt;. 5% ncrs n 400k hm s 20k. t wld tk 2.5 yrs wth yr 6% tx fr rt t chv ths nd by thn yr rnt wld hv ncrsd by cpl hndrd mnth vs th mrtgg rmnng th sm. wld rcmmnd tht y lk t 10+ yr chrt n Sttl hm prcs t gn sm prspctv n pprctn. Th crrnt dwntrn n prcs s bt mnr pllbck n th chrt. \r\n\r\nTht sd, (s hmwnr) t\'s mprtnt t b dvrsfd nd s yr ncm grws th xcss gts nvstd n thr vhcls lk stcks, cd\'s tc. g bck t my prvsly pstd stts n Nt Wrth f hmwnrs vs rntrs shwng (f rmmbr crrctly hmwnr n th 80k+ ncm brckt hs n vrg nt wrth f 460k+ vs rntr rnd 87k.) Ds ths rng ny blls? t\'s nt chvbl vrnght ,nd t pprs th crrnt gnrtn f hmbyrs wnt t ll, rght nw, srvd p n plttr.\r\n\r\nBTW dn\'t knw whr y cn gt 6% ftr txs n 100k rsk fr, pls dvs. wld lk t prk sm mny n tht. \r\n\r\nf t sn\'t rsk fr, wll y cld vry wll b fcd wth dcln n prncpl ffctvly ttlly ngtng th pprtnty cst rgmnt.',''); rtrn fls;">Qt

I rented a 3/2 house for $1800/month for a year. Zillow estimates it at $600k down from a peak of $670k. Personally, I found $1800/month too expensive and moved to a smaller and cheaper place. I put $1800 as my upper limit on housing expenses — purchased or rented.

A quick look at craigslist found some 3/2 houses near Microsoft that rent for around $2k with a value of $400k, but there are also houses that rent for less. I also found a $1M house that rents for $2400 and a 3 bedroom that doesn’t list the address or bathrooms for $1400.

What is the monthly nut on a $400k house with a $100k down payment? Finance $300k at 6% comes to $1500 in interest a month. 1% annual taxes adds another $300. Generously add another $100/month for maintenance that is included in rent. You also lose the investment opportunity of the $100k down. Say you can earn 6% after taxes and that is another $500/month. But then most people don’t really consider the opportunity cost. Personally I see that opportunity cost quite accutely.

But why put $100k of capital into a falling market? Especially one that moves as slowing as real estate? Real estate isn’t immune to to laws of supply and demand. As long as inventory:sales is higher than it was in other depreciating markets then it will continue to depreciate in this market.

I plan to buy at some point. Now isn’t the time.