Last week the Puget Sound Business Journal ran a piece comparing King County to San Diego County. It was behind a subscriber-only wall, but now it’s fully available on their website: How King County dodged mortgage mess compared to San Diego. Unfortunately, the article doesn’t really have any new material that regular readers here haven’t seen before.
While the housing market’s downturn has certainly struck the Puget Sound region, it hasn’t wrought the widespread havoc that hit cities like Miami, Las Vegas and San Diego.
On the surface, there appear to be few reasons why the Puget Sound area has been able to escape the worst of the mess. Housing markets in both cities saw companies, jobs and people pour in during the first half of the decade. Both are desirable places to live. Home prices rose. And subprime mortgages were widely available.
But a detailed comparison of the two regions shows why King County’s economy is heralded as a bright spot across the country while San Diego County has come to represent everything that went wrong.
First off, I agree 100% with what appears to be the basic premise of this article: that the housing bust won’t be as bad here as it will be in San Diego, Phoenix, Florida, etc. I don’t think anybody has ever tried to argue that things will be as bad or worse here.
Unfortunately, while the article promises a “detailed comparison,” it doesn’t really deliver.
Builders in San Diego raced to build homes to keep up with demand, pushing farther into the previously undesirable areas of southeastern San Diego County, far away from the ocean.
In contrast, Seattle builders were restricted in part by the state’s growth management law and weren’t able to build at nearly the same pace.
In addition, mortgage companies and banks in San Diego — including Seattle-based Washington Mutual — wrote thousands of subprime loans. Their counterparts in Seattle wrote far fewer.
Ok, those are some interesting assertions, but where’s the data? What were the per capita rates of new construction and subprime lending in the two counties? The article doesn’t say. In fact, the only data I’ve been able to find that compares lending in San Diego to the Seattle area shows suprisingly similar amounts in both areas.
Later in the article, they do cite some raw data on homebuilding:
In San Diego, developers got 9,749 permits for single family homes in 2002, up about 6 percent from 2000, according to the Building Industry Association of San Diego County. That pace held steady through 2004 and then started to fall. By 2007, building permits for single family homes had plummeted 64 percent to 3,508 from the heyday of 2002.
By comparison, King County’s single family building permit activity remained flat between 2003 and 2005, with about 1,300 permits filed each year, according to the Washington Center for Real Estate Research. In 2007, permits dropped slightly to 1,239.
So, San Diego permits went up in 2002, leveled off for two years, then fell. In King County they leveled off for two years, then fell— the same pattern as San Diego, but offset by a year.
Of course comparing raw data like this is rather deceiving since the population of San Diego County is 2.8 million, versus King County’s 1.7 million. A better comparison would be King, Snohomish, and Pierce combined, with a population of 3.0 million. And as anyone that’s spent much time driving around outside King County knows, there was a heck of a lot more development in Snohomish and Pierce than there was in King. (And there are a lot more foreclosures out there, too.)
Another big reason: It took Seattle longer to recover from the economic aftershocks of 9/11 and the dot-com bust. As a result, the city entered the housing boom late and “although it got heated, it wasn’t as seriously overheated as some of the other parts of the country,” said Glenn Crellin, director of the Washington Center for Real Estate Research, Washington State University’s real estate research arm.
“Our economy has done very well compared with many other parts of the country,” said Crellin.
Does it occur to folks like Mr. Crellin that perhaps the only sectors of San Diego’s economy that are suffering are those related real-estate, and that perhaps the reason our economy looks so great is because the housing bust here is only just getting started?
I also don’t understand how someone can say “we entered the housing boom late” then when we likewise exit the boom late, say “look how unique and strong we are!” How does that make any sense?
What lies ahead? Chad Ruyle, an estate planning attorney and co-founder of You Walk Away, a foreclosure advice firm, thinks San Diego is not near the end of its housing market downturn.
…
“No one can predict when the market will bottom out and return to normal,” said Ruyle. “But I think we’re only a third of the way through it.”Seattle, on the other hand, has likely made it through the worst of its downturn and will slowly start recovering, said [University of San Diego professor Norm] Miller.
I’d be curious to know exactly what Mr. Miller is basing his theory on. Unfortunately, the article doesn’t say.
No offense to Ms. Grind, as I realize there’s only so much you can fit into an article of this nature. But I have to say that this article came across to me as light on details and high on wishful thinking.
(Kirsten Grind, Puget Sound Business Journal, 06.06.2008)
Marc » Jun 13, 2008 at 2:15 pm
“First off, I agree 100% with what appears to be the basic premise of this article: that the housing bust won’t be as bad here as it will be in San Diego, Phoenix, Florida, etc. I don’t think anybody has ever tried to argue that things will be as bad or worse here.”
Tim, you’ve got to be kidding. To say that none of the people posting on this blog have been exhorting a percentage decrease in Seattle prices that would rival SoCal is disingenuous at best.
The Tim » Jun 13, 2008 at 2:16 pm
Marc, have you asked those people how far they think SD will fall? Maybe the people calling for 50% off in Seattle think SD will fall 75%.
Marc » Jun 13, 2008 at 2:21 pm
Regarding permits issued in San Diego County and King County, I’d love to see a comparison of the total number of permits issued this decade in those two counties (plus Tim’s King/Snoho/Pierce combo). This article seems to suggest that the total number isued in San Diego would smoke our numbers up here. If that were true that would be a very significant factor in where overall prices are headed here vis a vis San Diego.
Brian » Jun 13, 2008 at 2:24 pm
I know I could do this myself, but I haven’t got around to it.
I’d really like to see actual house prices indexed to specific points in time. IE, take the Case-Shiller data, and just chart out a few cities (so it’s not too hard to read), indexing their values to several points in time over the last few years. It seems like that would be a good way to see what’s overpriced and what’s not. Almost every RE chart I ever see is % change based. I want to see actual prices over longer periods of time.
If we put SD and Seattle on the same chart, and index them to the same starting point a few years back, it’d be interesting to see the difference. Actually, with SD and Seattle, you wouldn’t even have to index. :)
Garth » Jun 13, 2008 at 2:32 pm
The census has all the data
http://www.census.gov/const/www/C40/table3.html#annual
I think a per 1000 housing units would be a more useful number, I have no interest in Pierce and Snohomish counties.
The Tim » Jun 13, 2008 at 2:33 pm
I agree Marc. If someone knows where to find that kind of information I’d love to do a post on it. Of course, I also think population growth over the same time period is an important factor to consider in a comparison like that. A cursory search shows that San Diego has grown just a bit faster than King/Pierce/Snohomish since 2000:
I bet when Pierce and Snohomish are thrown into the mix the building booms between the two would be similar as well.
biliruben » Jun 13, 2008 at 2:48 pm
I don’t know about SD, but WSRER has permit data, and even lets you download it to a spreadsheet. Kinda crappy interface, however.
http://www.wcrer.wsu.edu/WSHM/buildOwnReport.aspx
I messed around with it when the article first came out, and have no idea where they got their numbers.
softwarengineer » Jun 13, 2008 at 2:55 pm
WHAT GOES DOWN, MUST KEEP GOING DOWN
Its that simple. We trend the same as SD and we’re going down just like that city too.
The Tim » Jun 13, 2008 at 3:03 pm
Ok, the tables Garth linked to show “New Privately Owned Housing Units Authorized” by Metropolitan Statistical Area, which conveniently happens to be King/Pierce/Snohomish for Seattle, and San Diego County for San Diego.
If the Census data is truly showing the amount of building activity, then Seattle has actually been building more than San Diego.
Here’s a yearly comparison of “new housing units authorized” per new person. In other words, I took the Census data and divided it by the population growth over the previous year.
Am I reading something wrong here, because that shows the Seattle MSA as having quite a bit more overbuilding than San Diego.
Marc » Jun 13, 2008 at 3:03 pm
Tim,
Regarding your query at #2, thanks to Softwarengineer it looks like I won’t need to ask “those people how far they think SD will fall.” I’m sure you’ll agree that he’s reasonably representive of the chicken little fringe vote. No disrespect SE.
Marc » Jun 13, 2008 at 3:05 pm
Tim,
I think you should look at absolute numbers in terms of permits issued and population. I think existing housing stock is also a relevant factor to adequately compare betwen these geographic regions.
The Tim » Jun 13, 2008 at 3:05 pm
Marc, I don’t see a claim in SE’s comment that Seattle’s percentage decrease will “rival SoCal,” just that they’re both going down.
The Tim » Jun 13, 2008 at 3:10 pm
Ok Marc, here you go:
Where can I find information about “existing housing stock”?
Marc » Jun 13, 2008 at 3:12 pm
Alright Tim, if that’s how it is.
Softwarengineer, in your opinion, will the percentage decrease in Seattle prices rival that in Southern California or will Seattle be spared the massacre awaiting our fellow Americans just north of the border? How about San Diego county alone?
Marc » Jun 13, 2008 at 3:15 pm
Thanks for the stats Tim. How about just King County’s stats since the original article referred to KC alone? As for existing housing stock stats, your guess is probably bettern than mine.
The Tim » Jun 13, 2008 at 3:17 pm
Unfortunately the census data Garth linked to only provides new construction authorization stats broken down into MSAs.
Garth » Jun 13, 2008 at 3:55 pm
Tim,
The Census also has the number of housing units:
http://factfinder.census.gov/home/saff/main.html?_lang=en
Click the housing tab in the left menu and then you can get reports for states counties and zips.
The raw data can be had too, but you need a database to put it all in.
There are a lot of free datasets available here as well
http://infochimps.org/
Marc » Jun 13, 2008 at 4:01 pm
Here’s some info I found on the counties’ websites on existing housing stock and population:
King County total housing units in 2006 = 803,543
King County population = 1,826,732 (2.27 persons per household)
King County Square miles = 2,126
San Diego County total housing units on Jan. 1, 2007 = 1,131,749
San Diego County population = 3,098,269 (2.74 persons per household).
San Diego County Square Miles = 4,261
http://quickfacts.census.gov/qfd/states/53/53033.html
http://www.sandag.org/uploads/publicationid/publicationid_485_637.pdf
http://www.sandag.org/resources/demographics_and_other_data/demographics/fastfacts/regi.htm
The Tim » Jun 13, 2008 at 4:08 pm
That data falls fairly closely in line with the “average household size” data from the Census Bureau, too:
San Diego County: 2.72
King County: 2.38
Garth » Jun 13, 2008 at 4:19 pm
There is county permit data here too:
http://censtats.census.gov/bldg/bldgprmt.shtml
Marc » Jun 13, 2008 at 4:22 pm
As an aside, I just had one of those moments of sheer awe thinking about the power of the internet. I mean it took me about two minutes to find the population, total housing stock, and size of San Diego County and another thirty seconds to find out San Diego is 58.4 miles south of Temecula and I didn’t even get out of my chair.
Thank God for nerds.
Sniglet » Jun 13, 2008 at 4:23 pm
I, for one, am unwilling to say whether Seattle will face a deeper real-estate decline than San Diego. There are many factors that can come into play, and I just don’t know how much a severe recession (which I predict is coming) will impact each locality.
I do feel confident, however, in predicting a greater than 50% price decline (from peak) in both Seattle and San Diego. I would also tend to the notion that prices in both regions will revert to mid ’90s prices. So, whichever city had a greater price appreciation since ‘95 would be the one I would expect to see a greater depreciation.
That said, there certainly can be regional variations as to the impacts of a global recession, and we will just have to see how that plays out in the economy of both cities.
Yaoyao » Jun 13, 2008 at 4:44 pm
Does the data above about “King County total housing units” include apartments and condos?
Very interesting discussion
James » Jun 13, 2008 at 4:46 pm
Softwarengineer,
I simply must ask. Are you the guy that has been living in a hotel since August waiting for the deal of the century? If so, you are infamous in the real estate world.
Marc » Jun 13, 2008 at 5:20 pm
Yaoyao,
Apartments are included in King County’s definition and I’m fairly certain they’re also included in the San Diego numbers. Condos are less certain but I’d guess they’re included.
Sniglet,
That’s a pretty strong prediction and, while I have a different opinion, I believe you’re genuine and did not make it lightly. I would guess that a 50% decline in Seattle prices would result in a median price in the neighborhood of $220,000. You didn’t indicate the time frame for your prediction and I’m curious how long you think it will take to reach bottom.
If it were to happen by this time next year or sooner I would predict that it was part of a nationwide and/or global meltdown far beyond what we’ve seen so far. I would also predict that some of the concordant ramifications of such a decrease would be wide spread rioting and virtual anarchy. If it were to be strung out over 4 or 5 years I doubt all hell would break loose but many a politician will be voted out and God only knows what new social programs and governmental debt our grandkids will be saddled with.
What do suppose the state of affairs will be over the course of the decline you predict?
magnolia44 » Jun 13, 2008 at 5:52 pm
lol 50% decline…lmfao keep going with that.
wreckingbull » Jun 13, 2008 at 6:09 pm
To me, focusing on ‘decline from peak’ is interesting, but not that relevant. I don’t know if Sniglet is right, but I do know one thing…we are not even close to hitting a to the historical norm where our prices are supported by income and current lending practices.
Based on this, I don’t find Sniglet’s prediction to be that unreasonable. It certainly won’t happen in one year Marc, I think your four-year scenario is far more likely.
James » Jun 13, 2008 at 6:46 pm
Did anyone catch King 5 news tonight? King County property values are up 6%-13%….Hmmmm. Now those sellers are REALLY going to be patient.
Hard to imagine a decline of 50% with news like that. People that are selling are not desperate, but the deals are outside the city. Most of the current sellers I’ve encountered are planning a move closer to Seattle from the burbs.
Garth » Jun 13, 2008 at 7:18 pm
I think wreckingbull is right, the YOY numbers are where the focus of the general population is going to be.
There has clearly been a repricing of risk, and the prices on as-is properties reflect the fact that the buyer probably needs cash to purchase it. I would bet money that the house in Ballard billreuben posted yesterday is a wet mold factory. One thing I learned from looking at houses is that one picture of the exterior only in the listing = wet as hell inside.
jonness » Jun 13, 2008 at 7:36 pm
“I’d really like to see actual house prices indexed to specific points in time.”
Here are quarterly housing prices going back to 1985. Open the 1Q 2008 Dataset.
https://www.nationalcity.com/main/micro-site/economics/commentary-analysis/pages/housing-valuation-analysis.asp
jonness » Jun 13, 2008 at 7:50 pm
Hopefully I don’t break a length requirement rule for posts here or something.
San Diego, CA vs. Seattle house prices by quarter
SD Seattle
1985Q1 $97.9 $77.8
1985Q2 $99.6 $78.2
1985Q3 $101.7 $79.0
1985Q4 $101.7 $79.4
1986Q1 $104.1 $80.1
1986Q2 $105.5 $80.4
1986Q3 $108.0 $81.4
1986Q4 $109.7 $82.3
1987Q1 $112.4 $83.7
1987Q2 $114.7 $84.4
1987Q3 $117.6 $85.5
1987Q4 $120.2 $86.6
1988Q1 $123.7 $88.4
1988Q2 $127.5 $90.1
1988Q3 $132.9 $91.9
1988Q4 $141.3 $93.7
1989Q1 $148.4 $97.4
1989Q2 $156.0 $102.7
1989Q3 $163.6 $107.9
1989Q4 $168.2 $115.4
1990Q1 $170.2 $126.1
1990Q2 $170.6 $136.0
1990Q3 $172.6 $138.5
1990Q4 $171.0 $137.3
1991Q1 $171.1 $137.7
1991Q2 $170.4 $139.6
1991Q3 $169.9 $139.5
1991Q4 $169.9 $140.7
1992Q1 $169.4 $140.5
1992Q2 $167.9 $141.8
1992Q3 $167.3 $144.2
1992Q4 $164.6 $144.0
1993Q1 $161.2 $143.6
1993Q2 $160.0 $145.9
1993Q3 $157.5 $147.9
1993Q4 $156.1 $149.0
1994Q1 $153.6 $149.9
1994Q2 $153.9 $152.4
1994Q3 $154.3 $153.1
1994Q4 $152.7 $153.2
1995Q1 $151.8 $153.6
1995Q2 $151.2 $153.7
1995Q3 $151.1 $154.0
1995Q4 $149.4 $153.2
1996Q1 $149.4 $154.1
1996Q2 $149.1 $157.9
1996Q3 $149.9 $158.5
1996Q4 $150.0 $157.8
1997Q1 $148.6 $160.5
1997Q2 $152.4 $166.0
1997Q3 $154.2 $170.0
1997Q4 $155.2 $171.6
1998Q1 $159.1 $175.1
1998Q2 $166.2 $183.1
1998Q3 $170.8 $186.8
1998Q4 $174.1 $188.4
1999Q1 $178.9 $192.4
1999Q2 $185.4 $199.6
1999Q3 $191.6 $204.2
1999Q4 $196.7 $206.9
2000Q1 $204.0 $212.3
2000Q2 $212.0 $216.4
2000Q3 $219.0 $218.4
2000Q4 $225.8 $220.8
2001Q1 $232.1 $223.9
2001Q2 $239.9 $228.3
2001Q3 $247.4 $232.0
2001Q4 $253.9 $231.4
2002Q1 $264.7 $236.5
2002Q2 $281.0 $241.6
2002Q3 $296.4 $243.7
2002Q4 $306.7 $246.1
2003Q1 $320.0 $249.5
2003Q2 $335.1 $254.8
2003Q3 $351.0 $259.6
2003Q4 $369.0 $263.5
2004Q1 $389.3 $271.2
2004Q2 $416.7 $281.5
2004Q3 $450.6 $288.2
2004Q4 $463.7 $295.4
2005Q1 $480.8 $302.6
2005Q2 $495.0 $320.1
2005Q3 $505.9 $334.1
2005Q4 $500.5 $342.1
2006Q1 $496.5 $354.6
2006Q2 $496.4 $372.4
2006Q3 $482.5 $381.7
2006Q4 $469.3 $385.0
2007Q1 $462.6 $392.9
2007Q2 $457.6 $404.0
2007Q3 $438.4 $409.0
2007Q4 $409.5 $400.2
2008Q1 $376.6 $393.2
deepcgi » Jun 13, 2008 at 7:52 pm
I think it is interesting that the rising inventory numbers in the worst hit areas (including San Diego) have leveled off to a great extent, compared to last year – but have not stopped the prices from dropping. Apparently, people still believe the market will turn in their favor within the next year or so. The inflation pressure on consumers, however is equally painful everywhere. I think the disparity between Seattle and these other areas will soon diminish. It may be fair to say that the percentage drops in Seattle will not match the magnitude in San Diego, but I also believe the motion of this train wreck is even slower than the greatest pessimist had predicted. I don’t think we are even halfway to the bottom of this crash. I think San Diego is going to see median home sale prices at 55% below peak (if they are lucky). They are already at 28%. I wouldn’t be surprised to see median prices in Seattle at 40% below peak.
b » Jun 13, 2008 at 8:48 pm
This crash is going to be 4+ years in the making. Real estate cycles are very slow and it seems that the last hope of the RE bulls is that things are happening slow and therefore they won’t happen. This was created by a global credit bubble that blew up home prices from Seattle to San Diego to Spain to Ireland. It is a slow motion contraction in the making and might only have the bottom drop out if a precipitating event, like the near crash of Bear Sterns, plays out fully instead of being averted. San Diego and similar areas will drop to the bottom quickly and stay there, Seattle and similar areas will just drop drop drop until they hit the bottom. Mortgage rates are currently rising, shaving $10k+ off affordability of homes everywhere by the week. For those that believe 50%+ price declines will mean the end of civilization and blood thirty vampire zombies roaming the suburbs, please take a look at California in the 90’s, Texas in the 80’s and of course Japan in the 90’s and 00’s. It hurts like hell but life will go on fine.
jonness » Jun 13, 2008 at 9:18 pm
Notice in the above post that in 1985 SD was way higher than Seattle. In Q4 1994, Seattle overtook SD. In Q2 2000 SD reclaimed the lead. SD then began to explode until Q1 2006 when it began to come apart. Seattle peaked in Q3 2007 with almost $100K less appreciation than SD at its peak.
It is quite relevant that SD peaked much higher than Seattle. However, let’s take a look at SD’s drop vs. San Diego’s drop.
San Diego
Quarter………$……% Drop
2005Q3…..505.9
2005Q4…..500.5……..1.1
2006Q1…..496.5……..0.8
2006Q2…..496.4……..0.0
2006Q3…..482.5……..2.8
2006Q4…..469.3……..2.7
2007Q1…..462.6……..1.4
2007Q2…..457.6……..1.1
2007Q3…..438.4……..4.2
2007Q4…..409.5……..6.6
2008Q1…..376.6……..8.0
———————————-
Seattle
Quarter……….$…….% Drop
2007Q3…..$409.0
2007Q4…..$400.2……2.1
2008Q1…..$393.2……1.8
Wow, both markets started coming apart in Q3, but Seattle is dropping much faster than San Diego. I would expect this because market fundamentals are not the same during the 2 years that separate the cities.
What I take away from this is that we probably won’t see a huge drop in Seattle all at once. In fact, San Diego stabilized 4 quarters into its drop. I expect it will take a few years of drops before the people who are buying now in Seattle truly realize what a dismal investment they have made.
However, if the economy picks up and interest rates remain low, Seattle could hold. More than likely the opposite will be the case, so Seattle could drop much faster than San Diego. At any rate, I’m waiting before I buy.
Garth » Jun 13, 2008 at 9:19 pm
It is all about how many investors there are and how many ot them get foreclosed on. For several months in San Diego and Vegas 40% of sales were foreclosures, that number has dropped into the mid to high thirties in the last 60 days or so. I have not seen that number reported anywhere for seattle, so I have no comparison, but I imagine if it was anywhere close to 40% we would know.
The hotpads foreclosure heat maps show what is going on in both markets pretty well, if you look at san diego, you will see the only good area is owned by the military, while in king county parts of the eastside and seattle proper are still green, this is also after the San Diego map was bright red a few months ago.
mikal » Jun 13, 2008 at 9:31 pm
Since financing dried up for all at the same time, our market is stronger. We still aren’t at the bottom yet.
deejayoh » Jun 13, 2008 at 9:31 pm
You mean the article talking about property tax assessments?!?!? Are you going to sell your house for it’s property tax assessment? Does the County offer you a put back to them for the assessment? Actual property values and tax values are two completely different things, and offering that up in this conversation provides little insight or value. . It’s a made up number based on which they charge you taxes. Probably tracks actual sales values at <80% correlation.
If you’re going to make a claim, provide a link – and make it relevant.
b » Jun 13, 2008 at 9:41 pm
Garth -
Seattle and San Diego had similar levels of investment purchases during the height of the bubble, and also similar levels of high leveraged loans. See figures 6 and 7 in the flash segment at the bottom of the Fed’s datasheet. Other Fed analysis has shown that foreclosures are led by price declines and not vice versa. Since Seattle is just beginning its shift to price declines I think we can expect Seattle foreclosure activity to be really going rampant in a year or so from now, similar to other cities which started earlier than us and are getting slammed today.
b » Jun 13, 2008 at 9:47 pm
mikal -
San Diego had already burst before the credit contraction took force last August. Seattle’s burst was premature and caused by the credit contraction itself. The reason is not that Seattle is stronger per se, but that San Diego reached the point of “no more buyers” before Seattle as it started rapid appreciation earlier. In any market at some point, even with baloney loans, the prices cannot be sustained. SD reached this level and the declines started piling on. Seattle was probably another 6-12 months from reaching this level naturally, but the credit contraction caused the top of that curve to come down due to financing restrictions.
mikal » Jun 13, 2008 at 10:46 pm
We will see. Places like Spanaway, Covington, Lake Stevens will be the hardest hit. The people that can barely afford to buy can only afford there. That 25% energy inflation will certainly push them out of it since many are paycheck to paycheck. That said, inner city Seattle won’t drop much.
economist » Jun 13, 2008 at 11:03 pm
Did anyone catch King 5 news tonight? King County property values are up 6%-13%
Assessments are an estimate of market price as of Jan 1, 2008. So what you are saying is that the estimated market price as of Jan 1, 2008 was up 6-13% from Jan 1, 2007. Which is probably pretty accurate, since the Seattle market peaked in summer 2007.
Now just what does that have to do with the change in market price since that time?
jonness » Jun 13, 2008 at 11:15 pm
b, I agree.
It seems to me the housing bubble keeps spiraling up until the point where homes become unaffordable. San Diego reached max affordability at $500k in its market conditions in its time. Seattle reached max affordability at $400k in its market conditions in its time (based on National City data) .
Once house prices start to go down, a new mindset takes place. Buyers are hesitant to buy knowing that they could lose money, and sellers are hesitant to drop prices because it makes them feel like they are losing money. No one wants to lose money. Thus, a game of cat an mouse ensues where prices drop a little bit each quarter until the market finally realigns with the new fundamentals, which currently are rising interest rates, loan resets, tightening credit, supply outstripping demand, rising unemployment rate, etc.
Is there anybody out there that truly believes that Seattle house prices are going to hold the same value as when we had liar loans, zero down loans, rabid speculation fueled by greed, etc.? Peak prices were a reflection of those market conditions, which no longer exist. Thus, the price must adjust accordingly.
At a minimum I believe buyers should be hesitant to buy in a quarter where prices dropped the previous quarter or remained flat for less than 2 consecutive quarters. Look at how San Diego has dropped from it’s peak in 2005Q3. That’s what 2 and a half years can do to you. What’s more, it doesn’t appear the San Diego market has hit bottom yet. In fact, it set a new record price drop last quarter.
[troll] » Jun 14, 2008 at 7:24 am
Zllw Z-stmts fr SFH hv bn crpng bck p n th Sttl mrkt vr th pst mnth.
Whl mny Bbblhds hr wll crtcz th mthds zllw ss th fct rmns thy r jst s rlvnt r rrlvnt s th mthds Tm fnds nd psts n ths blg.
ls nt tht mny hr prdct mny yrs f dclnng prcs nd f y hnstly blv ths, why th hck d y wst yr tm pstng hr mltpl tms dy? s ths yr pln fr th nxt svrl yrs? D y hnstly blv tht yr trshng th R mrkt n Sttl wll nflnc th mrkt?
Rntrs hr hv thr nss pshd p n th hm wnrshp wndw, thy jst dn’t hv th cjns r th mny t gt n, prbbly nvr wll.
BTW ptfl rspns t th fndrsng drv, shm n y Bbblhds! Whr s yr pprctn f Tm’s Spn?< hrf="#" clss="rplyt" nclck="rplyt('50162','∓#91;trll∓#93;','43'); rtrn fls;">Rply – < hrf="#" clss="qt" nclck="qt('50162','∓#91;trll∓#93;','Zllw Z-stmts fr SFH hv bn crpng bck p n th Sttl mrkt vr th pst mnth.\r\n\r\nWhl mny Bbblhds hr wll crtcz th mthds zllw ss th fct rmns thy r jst s rlvnt r rrlvnt s th mthds Tm fnds nd psts n ths blg.\r\n\r\n ls nt tht mny hr prdct mny yrs f dclnng prcs nd f y hnstly blv ths, why th hck d y wst yr tm pstng hr mltpl tms dy? s ths yr pln fr th nxt svrl yrs? D y hnstly blv tht yr trshng th R mrkt n Sttl wll nflnc th mrkt? \r\n\r\nRntrs hr hv thr nss pshd p n th hm wnrshp wndw, thy jst dn\'t hv th cjns r th mny t gt n, prbbly nvr wll. \r\n\r\nBTW ptfl rspns t th fndrsng drv, shm n y Bbblhds! Whr s yr pprctn f Tm\'s Spn?','43'); rtrn fls;">Qt
SeattleMoose » Jun 14, 2008 at 9:10 am
About 18 months ago I predicted Seattle area prices would fall from 20 to 50 percent depending on the “bubbliciousness” of the run-up in any given area. I also stated the “average” drop would be about 33% for Seattle and vicinity.
18 months later I see no evidence that I may have been too bearish. In fact, if anything, I feel I may have understated the drop because I did not count on the unprecedented run-up in gas/food which further erodes the amount left out of the “budget” for a mortgage payment. And with “actual inflation” (not to be confused with “reported inflation”) running rampant the FED will start raising rates (along with other world central bankers) which will raise mortgage rates putting yet more downward pressure on RE prices.
These forces will work at a national level and it just means that ALL cities may fall further than predicted due to the “perfect storm” that appears to be gathering steam.
In the end the number one factor for housing prices is personal income. And consequently, how how much lenders will allow one to borrow based on actual/verified income….not “stated income” or any of the other nonsense that fueled the run-up.
Just a side-note (using Zillow data):
In 1992 I sold a condo in Huntington Beach for 172K. By 1998 it was down to 159K. At the peak (2006) it hit 569K. It is now at 400K. I am estimating that between 2011 and 2013 it will have finally intersected the “normal appreciation curve” and will bottom out about 250K. The person who bought in 92 still lives there and will be fine and will still have over 100K in equity.
We will return to sanity/reality from insanity…..dragged kicking and screaming all the way.
David McManus » Jun 14, 2008 at 9:26 am
RAL, I’ll post this on the PI Blog:
I also note that many here predict many years of increasing prices and if you honestly believe this, why the heck do you waste your time posting here multiple times a day? Is this your plan for the next several years? Do you honestly believe that your pumping the RE market in Seattle will influence the market?
[troll] » Jun 14, 2008 at 9:58 am
bt 18 mnths g prdctd Sttl r prcs wld fll frm 20 t 50 prcnt dpndng n th “bbblcsnss” f th rn-p n ny gvn r. ls sttd th “vrg” drp wld b bt 33% fr Sttl nd vcnty.
………………
FRM TH STTS PSTD BV:
18 mnths g 2007Q1 $392.9
Ltst Dt 2008Q1.$393.2
33% Drp prdctd 18 mnths g?
SLLYMS!< hrf="#" clss="rplyt" nclck="rplyt('50166','∓#91;trll∓#93;','46'); rtrn fls;">Rply – < hrf="#" clss="qt" nclck="qt('50166','∓#91;trll∓#93;','bt 18 mnths g prdctd Sttl r prcs wld fll frm 20 t 50 prcnt dpndng n th &crc;bbblcsnss&crc; f th rn-p n ny gvn r. ls sttd th &crc;vrg&crc; drp wld b bt 33% fr Sttl nd vcnty.\r\n..................\r\n\r\nFRM TH STTS PSTD BV:\r\n\r\n18 mnths g 2007Q1 $392.9\r\nLtst Dt 2008Q1.$393.2\r\n\r\n\r\n33% Drp prdctd 18 mnths g? \r\n\r\nSLLYMS!','46'); rtrn fls;">Qt
[troll] » Jun 14, 2008 at 10:05 am
LT M CRRCT THT, ND BCK T P QRTR
18 MNTHS G 2006Q4 $469.3 $385.0
TDYS DT 2008Q1.$393.2
CNGRTS N YR CLL!< hrf="#" clss="rplyt" nclck="rplyt('50167','∓#91;trll∓#93;','47'); rtrn fls;">Rply – < hrf="#" clss="qt" nclck="qt('50167','∓#91;trll∓#93;','LT M CRRCT THT, ND BCK T P QRTR\r\n\r\n18 MNTHS G 2006Q4 $469.3 $385.0\r\nTDYS DT 2008Q1.$393.2\r\n\r\nCNGRTS N YR CLL!','47'); rtrn fls;">Qt
[troll] » Jun 14, 2008 at 10:08 am
FRM $ 385 T $ 393 N TH PST 18 MNTHS
WHR’S D CRSH?< hrf="#" clss="rplyt" nclck="rplyt('50168','∓#91;trll∓#93;','48'); rtrn fls;">Rply – < hrf="#" clss="qt" nclck="qt('50168','∓#91;trll∓#93;','FRM $ 385 T $ 393 N TH PST 18 MNTHS\r\n\r\nWHR\'S D CRSH?','48'); rtrn fls;">Qt
shawn » Jun 14, 2008 at 10:31 am
RAL,
http://en.wikipedia.org/wiki/Troll_%28Internet%29
[troll] » Jun 14, 2008 at 10:35 am
Shwn,
m sng th dt pstd HR.< hrf="#" clss="rplyt" nclck="rplyt('50170','∓#91;trll∓#93;','50'); rtrn fls;">Rply – < hrf="#" clss="qt" nclck="qt('50170','∓#91;trll∓#93;','Shwn,\r\n\r\n m sng th dt pstd HR.\r\nf y Bbblhds dn\'t lk yr wn dt, tgh.','50'); rtrn fls;">Qt
f y Bbblhds dn’t lk yr wn dt, tgh.
shawn » Jun 14, 2008 at 10:35 am
http://en.wikipedia.org/wiki/Zillow
Zillow.com is a Seattle-based online real estate service company … the site has received repeated criticism from real estate agents who believe that the values given on some homes are overvalued or undervalued and not a true reflection of the value of the home.
shawn » Jun 14, 2008 at 10:45 am
I have been on the internet since ‘90. One constant: people want to argue who have neither studied “argument” nor “persuasion.” First I give them the benefit of the doubt. I try to educate them, to encourage them to learn about arguing, for them to study the art that they are engaging in.
But if they persist in pushing their mean spirited ways, then I just ignore them. That is what most people do, ignore them. Or just post links to sites that refute them, but no longer are they engaged as they will only continue to attempt to bait others into their fallacious ad hominem diatribe.
http://en.wikipedia.org/wiki/Argument
[troll] » Jun 14, 2008 at 10:56 am
Zllw.cm s Sttl-bsd nln rl stt srvc cmpny … th st hs rcvd rptd crtcsm frm rl stt gnts wh blv tht th vls gvn n sm hms r vrvld r ndrvld nd nt tr rflctn f th vl f th hm.
…………………………….
Y r crrct, nd th sm gs fr th Cs Shllr dt nd thr frms f dt. Thr r mny fctrs tht mst b cnsdrd whn rvwng th dt. Hwvr, y r wtchng trnds nd s m . Zllw cn shw trnd jst lk Cs Shllr.
dd stt whn mntnd Zllw. “Whl mny Bbblhds hr wll crtcz th mthds zllw ss th fct rmns thy r jst s rlvnt r rrlvnt s th mthds Tm fnds nd psts n ths blg”
Hwvr, Th mssv Sttl Rl stt crsh y ll hv bn prdctng s nt mtrlzng, nd f Sttl cntns t hld frly frm, whch t s, whn ths cnmy strts mvng gn n cpl f mnths d t pnt p dmnd n ll rs f cnsmr spndng, prdct rsng prcs n r lcl Sttl R mrkt.
Yp y hrd t hr frst! Sttl Rl stt prcs strt hdng p n Sptmbr 2008.
Srry t dsppnt y’ll.< hrf="#" clss="rplyt" nclck="rplyt('50173','∓#91;trll∓#93;','53'); rtrn fls;">Rply – < hrf="#" clss="qt" nclck="qt('50173','∓#91;trll∓#93;','Zllw.cm s Sttl-bsd nln rl stt srvc cmpny &crc;&brvbr; th st hs rcvd rptd crtcsm frm rl stt gnts wh blv tht th vls gvn n sm hms r vrvld r ndrvld nd nt tr rflctn f th vl f th hm.\r\n..................................\r\n\r\nY r crrct, nd th sm gs fr th Cs Shllr dt nd thr frms f dt. Thr r mny fctrs tht mst b cnsdrd whn rvwng th dt. Hwvr, y r wtchng trnds nd s m . Zllw cn shw trnd jst lk Cs Shllr. \r\n\r\n dd stt whn mntnd Zllw. \&qt;Whl mny Bbblhds hr wll crtcz th mthds zllw ss th fct rmns thy r jst s rlvnt r rrlvnt s th mthds Tm fnds nd psts n ths blg\&qt;\r\n\r\nHwvr, Th mssv Sttl Rl stt crsh y ll hv bn prdctng s nt mtrlzng, nd f Sttl cntns t hld frly frm, whch t s, whn ths cnmy strts mvng gn n cpl f mnths d t pnt p dmnd n ll rs f cnsmr spndng, prdct rsng prcs n r lcl Sttl R mrkt.\r\n\r\nYp y hrd t hr frst! Sttl Rl stt prcs strt hdng p n Sptmbr 2008. \r\n\r\nSrry t dsppnt y\'ll.','53'); rtrn fls;">Qt
jonness » Jun 14, 2008 at 11:32 am
IMO, the only thing that is supporting many micro markets in the Seattle area is cheap and easy to get FHA loans and other devices the government has put in place to artificially prop up house prices like unrealistically low short term lending rates that help to keep mortgage rates unrealistically low at the cost of rampant weakening of the dollar and price inflation. Once these gimmicks are no longer viable, Seattle is going to drop like a rock. The problem is that many people buy with their emotions instead of with their logic. RE agents, like used car salesmen, rely on this fact to make a living. Logic is an RE agent’s biggest enemy in a falling market. Thus, bubbleheads are the bane of RE agents’ existence.
IMO, buying a house in the Puget Sound area is currently financially dangerous, and I encourage people to not buy in a quarter that follows a quarter with a drop or follows less than 2 quarters of flat or increasing prices.
[troll] » Jun 14, 2008 at 11:42 am
Y ncrg ppl t nt by wht y prsnlly cn’t ffrd?
RFLM!!!!!!!< hrf="#" clss="rplyt" nclck="rplyt('50175','∓#91;trll∓#93;','55'); rtrn fls;">Rply – < hrf="#" clss="qt" nclck="qt('50175','∓#91;trll∓#93;','Y ncrg ppl t nt by wht y prsnlly cn\'t ffrd?\r\n\r\nRFLM!!!!!!!','55'); rtrn fls;">Qt
TJ_98370 » Jun 14, 2008 at 11:42 am
jonness said
…..Is there anybody out there that truly believes that Seattle house prices are going to hold the same value as when we had liar loans, zero down loans, rabid speculation fueled by greed, etc.?….
Apparently, yes. RAL and other controlled substance abusers come to mind.
For the record, SeattleMoose said that he predicted a 20% to 50% drop would occur dependent on run-up (which apparently ended 3rd quarter 2007). He did not say that he predicted prices would fall in the18 months subsequent to his prediction, but rather he made his prediction 18 months ago. A subtle distinction that is beyond your comprehension, RAL?
Garth » Jun 14, 2008 at 12:03 pm
b,
Having a home equity loan is not always a highly leveraged situation. Yes, foreclosures start when values are flat or dropping and those with highly leveraged short term loans are not able to refinance. Big price drops in every market so far have been related to the density of foreclosures. From what I have seen density of distress is vital if you want big declines.
Several bubbleheads have posted emperical data that filppers living nearby were selling and taking losses, and the credit crunch and declines happening here at the same time means that there are no options other than selling when the arm comes up, while other markets were experiencing declines while exotic financing was still available. I don’t have a ton of faith in the soundness of the decision making of the small real estate investor, but you would think all the news over the last 18 months or so would cause some percentage of those people to get out before they get foreclosed on.
Is there any way to see if homes are a person’s primary residence vs a second / investment property in any of the data? Where is the info coming from when you read the estimates that 20% of the activity in seattle has been investors.
[troll] » Jun 14, 2008 at 12:06 pm
pprntly, ys. RL nd thr cntrlld sbstnc bsrs cm t mnd.
…………………..
Th nly wy t dscrdt m s t TRGHT L?
F2 HL.< hrf="#" clss="rplyt" nclck="rplyt('50178','∓#91;trll∓#93;','58'); rtrn fls;">Rply – < hrf="#" clss="qt" nclck="qt('50178','∓#91;trll∓#93;','pprntly, ys. RL nd thr cntrlld sbstnc bsrs cm t mnd. \r\n.......................\r\n\r\nTh nly wy t dscrdt m s t TRGHT L?\r\n\r\nF2 HL.','58'); rtrn fls;">Qt
[troll] » Jun 14, 2008 at 12:08 pm
18 MNTHS G 2006Q4 $385.0
TDYS DT 2008Q1.$393.2
FRM $ 385 T $ 393 N TH PST 18 MNTHS
WHR’S D CRSH?
m sng th dt pstd HR.< hrf="#" clss="rplyt" nclck="rplyt('50179','∓#91;trll∓#93;','59'); rtrn fls;">Rply – < hrf="#" clss="qt" nclck="qt('50179','∓#91;trll∓#93;','18 MNTHS G 2006Q4 $385.0\r\nTDYS DT 2008Q1.$393.2\r\n\r\nFRM $ 385 T $ 393 N TH PST 18 MNTHS\r\n\r\nWHR&crc;S D CRSH?\r\n\r\n m sng th dt pstd HR.\r\nf y Bbblhds dn&crc;t lk yr wn dt, tgh.','59'); rtrn fls;">Qt
f y Bbblhds dn’t lk yr wn dt, tgh.
magnolia44 » Jun 14, 2008 at 12:47 pm
in other news a 600k house in the hood just went STI in 5 days, yes the sky is falling people its falling. Price it right it sells, for those with unrealistic prices they join the inventory levels.
Here is a rule i realized when i was looking
Rule #1 : There is always somebody with more money than you, willing to pay a higher price than you.
Good luck let me know when we have reached full on market collapse.
TJ_98370 » Jun 14, 2008 at 12:51 pm
Never argue with an idiot, onlookers may not be able to tell the difference – Mark Twain
what goes up comes down » Jun 14, 2008 at 12:53 pm
RAL,
what a fing joke you are. you critize people for multiple post and you have over five in this thread alone, you are one serious loser. you are so stupid to get on people about something and then do the same thing. you need some serious help go to the doctor.
NoMoreWork » Jun 14, 2008 at 12:53 pm
Please read what other people write RAL. At least give us “bubbleheads” that courtesy…
………………….
TJ_98370 wrote:
For the record, SeattleMoose said that he predicted a 20% to 50% drop would occur dependent on run-up (which apparently ended 3rd quarter 2007). He did not say that he predicted prices would fall in the18 months subsequent to his prediction, but rather he made his prediction 18 months ago. A subtle distinction that is beyond your comprehension, RAL?
……………………
So RAL, your data is referenced wrong, irrelevant to this discussion and serves no purpose in supporting any argument you are trying to make. He stated 18 months ago that the drop would happen. He did not give a time zone for the drop. You are trying to distort his point. Don’t post on here if you don’t understand what others are posting. READ, then THINK, then post.
what goes up comes down » Jun 14, 2008 at 12:55 pm
oh, btw RAL are prices now going down or up. oh I think you will take it deep and hard — ha, ha, ha, ha, ha, ha
RAL = FABO
b » Jun 14, 2008 at 12:56 pm
Garth -
Follow the link I posted. Figure 6 shows that “non-owner occupied” purchases during the height of the bubble (05/06) was similar in King County compared to San Diego, Bay Area and other bubbly metro areas. Surrounding counties to King were actually in the same category as the worst investor locations, like the outskirts of LA, Vegas, Arizona, etc.
The Fed has shown through several studies that the lack of equity when combined with price declines causes foreclosures to pile up. This creates a cycle, which is what you see going on in places like Stockton and Riverside in Cali, etc. If you read in the same link Bernanke’s speech he makes this very clear, price declines are not caused by foreclosures, foreclosures are caused by price declines and no equity. The King County area having similar amounts of low/no equity and investor purchases as places now experiencing rapid declines should be taken as a warning. I am not sure why people seem to think we are magically exempt from market forces, one look at those Fed graphs of the entire country should cure that.
faster » Jun 14, 2008 at 12:58 pm
Here’s all you need to know about Zillow:
http://www.redfin.com/WA/Bellevue/17172-SE-40th-Pl-98008/home/429125
For Sale: $648,000
Zestimate: $704,000
Days on Market: 73
http://www.redfin.com/WA/Seattle/4019-Ashworth-Ave-N-98103/home/118499
For Sale: $699,950
Zestimate: $532,000
Days on Market: 113
If the Zillow’s Zestimate was even remotely accurate these people would have buyers lining up to buy their houses. There are many, many examples just like this.
Or if you really think the Zestimate is accurate, than our local Real Estate market is in a world of hurt when people can discount their houses $50,000 plus and still can’t sell it.
And once again, it’s not just these two houses, there are scores of examples like them.
b » Jun 14, 2008 at 1:02 pm
magnolia44 -
And a similar house will sell 3 months from now in 5 days for $575k. Then three months later another will sell in 5 days for $550k. This is a slow moving process, claiming an anecdote about one sale is idiocy. Go look at the worst markets in the country experiencing serious declines, there are still a lot of sales. It means nothing if inventory is up, volume is way down and the vector of prices is headed into the toilet. I am sure there was still a lot of buying volume on Pets.com in 5/2000 as well, never underestimate the stupidity of your fellow man.
deepcgi » Jun 14, 2008 at 1:16 pm
I think there is a limited number of optimistic home buyers left in the world. One thing about sticky prices not dropping as fast as renters may hope is that once a speculator finally buys a place, he finds he is stuck. The only way this could be further protracted is if the dollar’s value versus one particular currency falls precipitously and creates artificial demand from some foreign investors. It’s highly unlikely to affect common residences. My only question for all of you is how long will stable inventory numbers continue in San Diego – or Seattle, for that matter?
harbored » Jun 14, 2008 at 2:11 pm
More supply + less demand = lower prices
Inasmuch as I think the great commentary here doesn’t effect the market negatively, most of what the vested bulls say doesn’t either. The smart money has walked, the dumb money has been left holding the bag.
Everyone wants to pimp, nobody wants to ho. Who the f do you think bought all those Escalades and Plasmas? Why is there a check cashing place and latte stand every other block?
Too many sellers in denial, not enough buyers who qualify. I’m certainly not saying activity will come to a grinding halt. You will always have the 5 D’s of the real estate market. Death, Divorce, Destitution, Deportation, and Desperation.
Tim: YATM. I love this site. I promise to make a modest donation if you would start tracking foreclosures of agents and mortgage brokers.
local Realitor » Jun 14, 2008 at 2:56 pm
RAL….give it up. You and Ray Pepper would make a great team.
Tired of reading your condescending crappola.
mikal » Jun 14, 2008 at 3:53 pm
RAL and Ray Pepper, I like the condescending crap. More sarcasm PLEASE! BLAH BLAG BLAH. The market is going to drop fifty percent. And Solyent Green is PEOPLE. PEOPLE.
TJ_98370 » Jun 14, 2008 at 6:49 pm
NoMoreWork said –
So RAL ..….He (SeattleMoose) stated 18 months ago that the drop would happen. He did not give a time zone for the drop. You are trying to distort his point…..
You said it alot better than I did. Good job.
jonness » Jun 14, 2008 at 7:50 pm
“You encourage people to not buy what you personally can’t afford?”
You might as well save your breath. All of the personal insults in the world are not going to magically make house prices go up. At first I thought you were an RE agent. But I couldn’t get past the fact that you were just too uninformed and unprofessional to work in that industry. Then it struck me–you bought at the peak! Thus you have a vested interest in seeing house prices remain artificially high.
In truth, I don’t think anything you or I say on this website is going to make even a slight bit of difference to the price of houses in the Seattle area. Economic fundamentals are trillions of times more influential than our minuscule contribution. Think about it, not even the Fed has the power to artificially inflate house prices forever. And that’s exactly why we are seeing prices fall at record levels that were not even approached during the great depression.
We are witnessing something amazing!
Ray Pepper » Jun 14, 2008 at 8:27 pm
RAL and Ray Pepper? Condecending crapola? What have I done? I just say the following:
1. Don’t buy from anyone that is influenced by a Commission.
2. Don’t buy anything unless its a GEM.
3. Eat Lil Caesar’s and save BIG $$.
4. Be nice, request a free 500 Realty T shirt, and IMPRESS YOUR FRIENDS!
5. Come to our 1 year anniversary on Aug 10 and get a Free Costco Hotdog.
6. Rent the French Love Story ” High Tension” and you will forget about all this Real Estate Mumbo Jumbo.
Ray Pepper
Broker
http://www.500Realty.net
[troll] » Jun 14, 2008 at 9:21 pm
S RL ..….H (SttlMs) sttd 18 mnths g tht th drp wld hppn. H dd nt gv tm zn fr th drp. Y r tryng t dstrt hs pnt…..
…………………
1) GV M LNK FR THT 18 MNTH LD PRDCTN R STF.
2) HW LNG D W HV T WT FR THT PRDCTN T CM TR?
S FR TH MRKT HS RSN N TH PST 18 MNTHS SNC SLLYMS MD HS PRDCTN S PRVN WTH YR WN DT.< hrf="#" clss="rplyt" nclck="rplyt('50198','∓#91;trll∓#93;','75'); rtrn fls;">Rply – < hrf="#" clss="qt" nclck="qt('50198','∓#91;trll∓#93;','S RL ..&crc;&brvbr;.H (SttlMs) sttd 18 mnths g tht th drp wld hppn. H dd nt gv tm zn fr th drp. Y r tryng t dstrt hs pnt&crc;&brvbr;..\r\n\r\n.....................\r\n\r\n1) GV M LNK FR THT 18 MNTH LD PRDCTN R STF.\r\n2) HW LNG D W HV T WT FR THT PRDCTN T CM TR?\r\n\r\nS FR TH MRKT HS RSN N TH PST 18 MNTHS SNC SLLYMS MD HS PRDCTN S PRVN WTH YR WN DT.','75'); rtrn fls;">Qt
Alan » Jun 14, 2008 at 9:47 pm
8.2 increase on 385 over 18 months comes out to a stunning 1.4% rate or return. Even leveraged 4:1 that only comes out to 5.6% and you can’t even realize that gain because transaction costs will put you into the hole. Anyone who bought 18 months ago and got average returns is the real loser.
Mark » Jun 14, 2008 at 9:54 pm
RAL, People come here for many different reasons – we’re not all frustrated renters that won’t ever be able to by. You claim to be in this camp yourself – a homeowner with less than a 6 figure mortgage. Good for you. Myself, I own my own home outright, and have two rental properties that are paid for also. I do enjoy reading others thoughts here on what the local RE market is going to do. Some I agree with and other I don’t.
The only thing I come away with after reading what you have to say is that you are nothing more than a horses ass. How many times have you been divorced?
[troll] » Jun 14, 2008 at 9:54 pm
ln,Lsr,
Scrll p t lk t th 10 yr rtrn, thn tll m hw mch y thrw t th wndw vry mnth fr th 3 bdrm rtrp y lv n.
Thnks n dvnc.< hrf="#" clss="rplyt" nclck="rplyt('50201','∓#91;trll∓#93;','78'); rtrn fls;">Rply – < hrf="#" clss="qt" nclck="qt('50201','∓#91;trll∓#93;','ln,Lsr,\r\n\r\nScrll p t lk t th 10 yr rtrn, thn tll m hw mch y thrw t th wndw vry mnth fr th 3 bdrm rtrp y lv n.\r\n\r\nThnks n dvnc.','78'); rtrn fls;">Qt
jonness » Jun 14, 2008 at 9:57 pm
“SO FAR THE MARKET HAS RISEN IN THE PAST 18 MONTHS SINCE SILLYMOOSE MADE HIS PREDICTION AS PROVEN WITH YOUR OWN DATA.”
What my data shows is that Seattle is dropping at roughly 2x the rate San Diego was dropping during the same point (2 quarters into) the drop zone. It also demonstrates how dangerous it is to buy a house during a quarter that precedes a quarter with falling prices (i.e. right now).
House prices take years to reach their peaks and valleys. The data I posted bears that out. Seattle has just starting to move downward. It will take years to hit bottom, but a slumping economy and rapidly rising interest rates will help accelerate the correction. Keep in mind that house price means a lot less than monthly payment. Interest rates go up, house prices go down. That’s the game.
In April, rates were at about 5.6%. Today, rates are at about 6.3% (30 year fixed). On a 500k mortgage, that’s $225 mo. extra that you have to pay today than if you had bought in April. IOW, borrowing 500k at 5.6% is the same payment as borrowing 465K at 6.3%. That means $35,000 will be lost on the day buyer’s sign on the dotted line. Add to that the depreciation we will see over the next 2 years, and buying a house in Seattle today does not appear to be a wise investment. You claim you are wealthy and can afford to lose hundreds of thousands of dollars in a few years time. That’s good for you, but unfortunately most of the rest of us must treat buying homes as an investment.
Source for 30-year fixed = http://www.bankrate.com/brm/graphs/graph_trend.asp
Seattle is just starting to get a taste of what it’s like to do battle with a collapsing market. When it gets to the point where people start going upside down on their mortgages, the real storm will begin.
b » Jun 14, 2008 at 10:18 pm
jonness -
You are close, RAL actually has a house on the market likely bought for too much. He claims to have lowered the price several times and is rejecting offers still, so obviously he is doing something wrong.
b » Jun 14, 2008 at 10:26 pm
I am curious how much you are throwing out the window by not lowering your price and actually selling your place. Have you actually run the numbers on what you are burning carrying costs and opportunity costs? Is it worth that much to you out of spite for the people you want to buy it? I can understand why you are angry, I would be angry too if I continually made poor decisions and my rage did not allow me to change them for the better. Pretty awful cycle you have right now, isn’t it?
TJ_98370 » Jun 14, 2008 at 10:40 pm
harbored -
You’re new, or I missed a previous post?
Okay, here are the rules. You are either a bubblehead or not. If you are an anti-bubblehead I have it by good authority that you must attend secret meetings, convened by Lawrence Yun or one of his minions at mid-night of the first full moon of the month at a location only disclosed a day before the actual meeting. There will be the standard rituals, such as dancing naked around burning symbolic effigies representing common sense and logic and you must chant “real estate always appreciates” many, many times or you will be suspect as one of the “non-believers”. You do not want to be identified as “one who does not believe” as it will have catastrophic consequences. I got this info from a guy stumbling around in the parking lot at the local seven-eleven who said he was a real estate agent (he thought he was in Memphis).
Fortunately, there is an alternative, you can be a celebrated member of the new order of Seattle Bubbleheads, or if you are not ready, you can be a closet bubblehead. It’s okay. There are many amongst us who understand how coming out on the side of logic and reality can be a traumatic experience (I hear RAL is secretly going thru a rehabilitation program. Withdrawls from fantasies of untold riches by ways of real estate appreciation can be severe.) Are you willing to undertake take the risk of reality encountered, brother “harbored”? :-)
economist » Jun 14, 2008 at 10:42 pm
1) GIVE ME A LINK FOR THAT 18 MONTH OLD PREDICTION OR STFU.
RAL, you are the one who has accused someone of making an inaccurate prediction, so the burden is on you to back up your accusation with evidence.
Roger » Jun 14, 2008 at 10:54 pm
(Tim, get that apartments.com ad out of the tab order for fields in this form. Bah.)
We’re getting ready to build right now, and all I can say is how much more eager everyone is to work with us now as opposed to two years ago, and at much more favorable margins. I guess that’s one benefit of a housing crash, assuming you’re in position to do so.
Ira Sacharoff » Jun 14, 2008 at 11:36 pm
There is a difference between RAL and Ray Pepper. RAL will call renters losers, and call them stupid and berate them for living in rat and bug infested filthy apartments, and when called on it will shrug his shoulders and say ” aw shucks, who, me? I Love everybody.”
Ray, on the other hand, hasn’t really expressed opinions that very many people here strongly disagree with. He believes that Seattle area home prices are too high for the most part, but that there are some deals out there. Some have been offended by his self promotion,and he has toned it down some, and unlike RAL I’ve never sensed any hostility coming from the guy.
Eleua » Jun 14, 2008 at 11:54 pm
I’ve been away too long. Apparently, we have a new “Meshugy” (RAL) and he has an attitude. Sweet!
My goodness! That’s cluelessness on parade.
What “pent up” consumer demand? Seriously. Your benevolant government has had to resort to sending out checks to all the sheep to keep what is left of consumer activity from folding into a singularity. The consumer is in full retreat.
What is left of any demand is being spent on carbohydrates, proteins and hydrocarbons. The consumer demand we had over the past 5 years was nothing more than HELOC money being sucked out of the biggest credit bubble in world history.
You missed that? Wow, simply….WOW!
The HELOC money is gone. The consumer has a garage full of stuff he doesn’t use, and enough personal debt to last two or three lifetimes.
The consumer is checkmated. Housing can’t outstrip peoples’ ability to pay for it.
Good luck selling your house.
Matthew » Jun 15, 2008 at 12:02 am
E-
At least Meshugy had his zestimates on his side, when zillow went south on him he was smart enough to abandon this blog. All RAL has are baseless ad hominem attacks.
TheHulk » Jun 15, 2008 at 2:22 am
RAL,
Seriously. If you have any guts/cojones/whatever you want to call it. Post your MLS# on this site. Oh wait, I guess your momma will throw you out of your basement if you do so.
I apologize. (Tongue very much in cheek)
Cougar » Jun 15, 2008 at 5:59 am
Many think they are anonymous using a computer or cell phone. They are not. Online etiquette is the same as one would be in person. We can’t be perfect all the time, yet when called on for bad behavior, those whose acknowledge and accept responsibility for their actions, will have a better chance of their opinion getting heard. Agree to disagree. Follow up your opinion with factual data. You are not anonymous.
[troll] » Jun 15, 2008 at 6:57 am
83 cnmst // Jn 14, 2008 t 10:42 pm
RL, y r th n wh hs ccsd smn f mkng n nccrt prdctn, s th brdn s n y t bck p yr ccstn wth vdnc.
…………
cnmst,
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[troll] » Jun 15, 2008 at 7:03 am
Cgr,
nyn tht hs n ppsng vw gts clld ll knds f nms hr lng wth mny fls ccstns. r y blvs t th “Bbblhds” trtmnt f n ppsng vw?< hrf="#" clss="rplyt" nclck="rplyt('50215','∓#91;trll∓#93;','91'); rtrn fls;">Rply – < hrf="#" clss="qt" nclck="qt('50215','∓#91;trll∓#93;','Cgr,\r\n\r\nnyn tht hs n ppsng vw gts clld ll knds f nms hr lng wth mny fls ccstns. r y blvs t th \&qt;Bbblhds\&qt; trtmnt f n ppsng vw?','91'); rtrn fls;">Qt
Cougar » Jun 15, 2008 at 7:23 am
RAL,
I find many here enjoy the debate of the housing market. It’s the discussion and reporting of facts I find most interesting. Personal attacks and mudslinging are uncalled for. Holding one accountable for their opinion to understand where they are coming from can educate everyone. I find these past 5 years of real estate and the economy amazing. We are all Bubbleheads who post here; some have better presentation then others. There are posts I don’t understand and wish they would cut to the chase, and then there are ones I could have written myself in total agreement.
[troll] » Jun 15, 2008 at 7:50 am
Cgr,
ndrstnd th frstrtn f mny Bbblhds tht wld lk t gt fthld hr n th Sttl R mrkt. n my pnn, Sttl s dffclt mrkt fr frst tm byr, gnrlly mr std t “mv p” byr. knw ths s dffclt fr yngr gnrtns t ndrstnd, thy wnt t ll nw.
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Wth th crrnt fl prcs nd trffc frm th brbs n -5, jst cn’t s Sttl rl stt dplctng th drps wtnssd n thr rs f th cntry. Mny hr tlk bt th mnthly xpns f fl nt bng ngh t wrrnt th hghr xpns f ddtnl mrtgg rqrd, hwvr, n n hs tlkd bt lmntng n vhcl frm th typcl 2 cr fmly. Whn y cnsdr cr cn cst p t 8-10k pr yr n ntrst, dprctn, mntnnc nsrnc nd fl, tht 10k cn by lt f mrtgg.
Cougar » Jun 15, 2008 at 8:18 am
RAL,
Agreed, elimination of “extras” toward purchasing a home is forefront. Bills I did not have purchasing my first home; cell phone, direct TV, cable, internet, video games (well Atari – I was hooked on Pong). All these siphon a decent down payment for a home, yet today there a must have. Gas at $4 and Apples at $2.50lb, those who want to purchase a first home will need to evaluate their wants vs. needs.
There are neighborhoods in King County that hold there property value and selling power no matter what the economic situation is. Then there is the rest that value change day to day.
Happy Fathers Day!
If it weren’t for Fathers we wouldn’t need homes! Caves, lots of caves! ;)
economist » Jun 15, 2008 at 9:45 am
RAL: I did
You didn’t even demonstrate what (if any) prediction was made in the first place, so how can you claim your evidence invalidates it?
[troll] » Jun 15, 2008 at 9:48 am
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Alan » Jun 15, 2008 at 10:00 am
I don’t deny that real estate in the Seattle area has appreciated drastically in the past decade. Still there have been better opportunities: buying GOOG at IPO; buying put options on Bear Stearns a week before their demise; heck, you could have even bought Yahoo ten years ago and still have your money doubled (although you lost out on hge profits if you didn’t sell 8 years ago). Huge profits in real estate, Google, Bear Sterns, and Yahoo all have a similar thing in common — it is hard to predict what they are going to do ahead of time.
As for my rent, I’m paying less monthly than my tax-adjusted interest payment + HOA fees would be if I purchased this place with 20% down.
I owned for nine years before moving here and saw marginal appreciation. As an owner I was a financial loser (but then so were the other owners around me). Honestly, I hate renting but the premium to own in this area is more than I am willing to pay.
[troll] » Jun 15, 2008 at 10:12 am
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…………………………
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a normal person » Jun 15, 2008 at 10:16 am
Lots of intense arguing going on this site every day. How do you find the time to bother with it, and why?
I just listed my rental home, which was in great condition, for under $400,000 just north of Greenlake. It got a full price offer in 8 days. The buyer is going FHA, and we’re paying her closing costs. We are happy, she is happy, and we are also giving her the lawn mower and our gardening tools too.
A home isn’t a stock investment. It’s where you live. Live long, enjoy life, and quit bickering over what you cannot control.
If you can’t afford to save up a down payment, give up some of those extras that you think you ‘need’. 5 lattes a week? Add ‘em up. 8 cocktails on Friday night? A bit extreme, don’t you think?
My husband and I worked 2 jobs each during the first couple years we were together, so we could save faster for our down payment and our first home.
I have to agree with another guy I read recently: shut off your computers, get outside and enjoy your life. What you are doing here is not life.
a normal person » Jun 15, 2008 at 10:19 am
Alan, it is a lifestyle choice to own. Hating renting is a sad way to live your life.
I encourage you to buy a home rather than a condo. Homes just feel better to me ….
david losh » Jun 15, 2008 at 10:33 am
The comparison I believe was between San Diego and Seattle. One point Tim made about encorporating the three county area as a comparison to San Diego hit a chord with me.
When did anyone get the idea that a house in White Center, Puyallup, or Tacoma would be a comparable price to a house in city Seattle? I went to see a house in Skyway that sold for $400K. WTF was anyone thinking when they bought it? The very same in San Diego. Once you’re away from the beach there’s nothing there. Even if it’s way cheaper, there’s nothing there.
In San Diego there is a lot of very crappy construction. Here in Seattle I’ve noticed builders slashing prices the quickest. I’d be interested to see what the difference is between exsisting homes and new construction in terms of price reductions.
Ray Pepper » Jun 15, 2008 at 10:42 am
LETS TALK…………..QUADRANT HOMES…………………………..GIG HARBOR…….
400 people on waiting list
50 show up at Grand Opening to get 5k Bonus
10 sell in 1st Release…(horrible)
2 buyers sign with me ( They both get about 7000.00 at close) since they saw our paid Staff of college Kids holding signs up stating “500 Realty ..Your Only True Friend In Real Estate” Never Call The Name on the Sign” At Nearby Intersections….
Gig Harbor/Tacoma is our Summer test Market for the ” In your face Gorilla Marketing”….Anyway my point is this…….
Quadrant paid far too much the land and these home prices MUST COME DOWN. Even though the Reps say Quadrant does NOT lower prices I see some big 10k Buyer Bonuses coming. I look at these 2400 sq foot boxes for about 330k on 4500 sq foot lots and although I know there are the LEAST expensive homes in the area by 20% they are still overpriced.
Quadrant is NOT offering GEMS at this time. Stay Tuned!
**BTW If you sell 4 of these boxes by the end of the year the Agent gets 10k bonus…It does NOT influence me or AT ALL!
Ray Pepper
Broker
http://www.500Realty.net
Cougar » Jun 15, 2008 at 10:52 am
And then there are those who use this forum for personal solicitation. Not only does it discredit their professionalism, it also is reverse advertising. A bad referral does not create business or clients.
david losh » Jun 15, 2008 at 11:38 am
I’d like to make a plug for this web site again. In the world of Real Estate blogs I just did a tour of other sites related to Real Estate to catch up after a couple of weeks. There’s news you can use here on this site and I’m sure that my questions will be answered.
On other real estate sites there seems to be a lot of commentary about how great everything is. A lot of time is spent, on other sites, about personal experiences; here it’s about data.
I have had and have no illusions about the people who congregate here. You’re not Real Estate people. I find most of you trying to dialog about an important issue.
In terms of a internet community this site is the most cohesive I’ve found.
Ray Pepper » Jun 15, 2008 at 11:44 am
If you are referring to me Coug the message is too important to not be heard. If you choose to BUY in this environment you need to get ALL the financial incentives you can. Every "golly" penny!.
Just be smart and educate everyone there is only one way to Buy in 2008 and beyond. Embrace change!! It will be Good For us ALL.
As Tim says the question of needing a Realtor at all is an important one. For now, however, every property that is listed on the NWMLS has money that is the Buyers. But, the vast majority just DO NOT realize its theirs. Be happy you do!
Its not the Realtors that should be scared of change. Its the MLS’s of this Nation. The big Gorilla is coming and when they combine forces with the Zillows, major banks, and The Zip Realty’s of the World, change will be HUGE!
But, for now, JUST BE SMART!
Ray Pepper
http://www.500Realty.net
magnolia44 » Jun 15, 2008 at 11:58 am
I was just in Dallas and Austin Texas, you better believe the West Coast has a premium.
BTW most bubbleheads on the sidelines will not have the access to credit to buy the homes. Times and the terms have changed. You say prices will drop? Ok so then do you have the 80k down payment for the $400k starter home? The starter home will be $350k? Ok where is the 70 k in hand as well as reserves to step up and buy? Will you still have a job if there is utter collapse?
Lots to think about slice and dice all you want, there is a premium here (Magnolia, Queen Anne, Green Lake, Ballard) . Yeah they are going to drop 10 – 15% worst case scenario, please exclude townhomes and condo conversions those have been overbuilt and are being slashed. I will let you know how I am sitting in 10 years. Will this site be around? Donors are you there…. donors are you there…. ?
WaitingForSanity » Jun 15, 2008 at 12:06 pm
Quadrant Homes gig harbor, how much did they pay for the land?
b » Jun 15, 2008 at 12:08 pm
magnolia44 -
Your point about downpayments is a good one. Do you realize that in your first paragraph you make the case for 50%+ price drops in those type of homes? Then go on to claim the worst case is 10% drops? Where are these magical buyers? People with “move up” equity generally want to actually move up.
magnolia44 » Jun 15, 2008 at 12:13 pm
b,
I stand by the premise there is always someone with more money than you or I, thats why the desirable areas will hold strong. Outlying areas where many first time buyers squeezed to get in only to find those around them foreclosing dropping prices or moving on to the development up the street, I see those places falling in the 20% + range. The areas I listed have no land or new developments, people want to live in those areas. The guy who come from money and has 500k to spend will spend it, the Dr & Lawyer who want to live a jump from downtown will spend it. Like I said before i feel real estate especially in this city is down to neighborhood and some cases street. Maybe I am just focused on a different area then the rest of this site. I have lived here 4 years, I dont know where Kenmore is, I maybe been to Lynwood once, Bothell twice. I dont know the outlying areas nor would i have bought in any of them especially with developments starting up all over the place. I can see those areas dropping by 20 – 30%.
mikal » Jun 15, 2008 at 12:32 pm
Magnolia44 You are right about the prices in neighborhoods. If Queen Anne house dropped even 20 percent off peak the demand would be so much more that it will only drop so much. People will pay a premium to live there. Do you people even read the bitterness in your posts? You will never be able to afford the neighborhood you want. Everything is relative.
b » Jun 15, 2008 at 12:33 pm
magnolia44,
Those people with lots of money do not want to buy "chocolate"boxes in the middle of Ballard, especially if they can rent something twice and nice for half as much. The real estate market is build completely on first time buyers. The entire reason prices moved so high is that first time buyers all of the sudden has an unprecedented amount of financing available to buy and the pool of those buyers was increased a huge amount by lax standards. This worked its way into the system so that the owners of those homes could sell for a lot more and then buy a lot more themselves, and on and on. Without first time buyers, there is no RE market as we have it today.
mikal » Jun 15, 2008 at 12:40 pm
Yes. B. maybe in Spanaway. People have always payed a premium to live, even Ballard. What is the overall population gain in the three county area for the last twenty years? I don’t see condo’s or townhomes gaining much value with the exception oof Queen Anne. Financing dried up for all at the same time nation wide. There isn’t a six month difference. You will never be able to get the house you want in the neighborhood you want. Better start looking at Spanaway.
david losh » Jun 15, 2008 at 12:48 pm
The price of Real Estate, as pointed out earlier, is a global phenomenon I talked with a seller last week who is relocating to Dublin Ireland. He’s selling a $429K house here in Seattle and he told me a comparable house in Dublin is $750K to $800K. Fifteen years ago Ireland was dirt cheap, literally.
I said before when we came back from Spain a couple of months ago that properties I looked at in 1996 were now ten times the price. $30K to $300K once converted from Euros.
The gentleman I did business with in Spain has sold ten of his units this past year, discounted for cash. He’s looking for a place to put his dollars and he asked me about Seattle.
Real Estate is a business. First time home buyers either stay in or sit there. The dollars are in speculation, large fund speculation.
b » Jun 15, 2008 at 12:56 pm
mikal -
I could afford to live anywhere in the city right now, unfortunately I am currently in Silicon Valley and won’t be back in the area until later this year. In case you cannot figure it out, I have one of those coveted tech jobs that pays me way too much money. But thanks for being a condescending douche who believes they are richer than everyone else because they made a poor financial decision to buy at the top of a bubble market.
You are right that QA is going to have higher prices than Spanaway. The point that you do not seem to realize is that the desirability of a place like QA, and the premium it can charge in relation to other areas is RELATIVE TO THE PRICES OF THOSE AREAS. It is not an absolute number, it is a relative valuation premium compared to the prices of other areas. Maybe you need to take some more math to understand this type of relationship, but if prices fall in outskirts areas, they will start to fall in the areas that border them, and the areas that border those areas and so on. I see it happening here in the valley right now, Seattle is no different than anywhere else in this respect. If you thought about it for more than 3 seconds you might understand this.
cheapseats » Jun 15, 2008 at 1:22 pm
I am still uncertain why there is an assumption that so called bubble heads don’t have money to buy?
ie
Mikal says- “If Queen Anne house dropped even 20 percent off peak the demand would be so much more that it will only drop so much.”
Then says-
“You will never be able to afford the neighborhood you want.”
To me I would likely fall into the first statement. If prices in QA dropped 20 percent I would buy a house there. I sold my house a couple years ago and have been waiting for a time that I believe is appropriate to buy. In my opinion this is more representative of “”bubble heads” than the notion that we are all poor whiners. If I was not in a position to buy, I would not be on this site, or any real estate site.
PlzBanRAL » Jun 15, 2008 at 1:39 pm
Rentersarelosers,
“When you sell” – Will you then leave this blog and never come back?
jon » Jun 15, 2008 at 2:56 pm
The premium at the high end is not determined relative to lower priced areas, it is more determined by the top working down. There is basically an auction for the best locations, and everyone fits in behind that. As you move down the scale, then the price becomes more influenced by the low end, which is the cost of building a house on cheap land.
The affect of that is that because so many people bought more than a couple of years ago, there is still plenty of money to keep prices steady over the best locations, which currently covers Seattle and the western parts of the Eastside.
The cost of farther out areas dropping, and that would have an effect on the best areas, but as it happens that the rising cost of gas just offsets that.
The problem with San Diego is they overbid by much more than Seattle, with what appear to be similar demographics. So now they have dropped down to close to prices here, and will likely overshoot going down also because of the foreclosures. Seattle’s 10% drop is pretty insignificant in comparison, unless you happen to be one of the people that bought at the peak.
mikal » Jun 15, 2008 at 3:00 pm
I didn’t buy at the peak. I bought in 96, 97 and 01. It is not douche. Use the term right or don’t use it at all. It is douche bag. The math will show that alot more people will be able to afford in Queen Anne if the price drops by as much as some of you seem to think it will which will keep it higher than you seem to think. Do you want the math in numerals?
[troll] » Jun 15, 2008 at 3:30 pm
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b » Jun 15, 2008 at 3:50 pm
jon -
The opposite is true. Prices are set at the bottom because RE is based on “moving up”. The vast majority of purchases require the equity of their sale to buy that bigger home. If prices drop out of the bottom of the market, it will eventually filter all the way up. The only price areas that may not be effected are those which are so high that the buyers typically pay cash or do not have to sell their previous home.
b » Jun 15, 2008 at 3:58 pm
mikal -
Those neighborhood dynamics were in play before the bubble in 2002 and will be after it. Nothing has changed fundamentally in any of those neighborhoods, or their relative stature between them, since 2002/2003. The only thing that changed was credit availability and bubble mania.
mikal » Jun 15, 2008 at 4:19 pm
B. The market is based in most markets from the bottom up. The top markets are different. Most markets have an average income level of $45,000. When you through in alot of people with an average income level of $100,000 the dynamics change. Add gas prices and the dynamics change even more. The people that bought close in typically didn’t need funny loans to do that.
b » Jun 15, 2008 at 4:43 pm
mikal -
$100k is not enough for the dynamics to change. More like $500k/yr, or more. As long as the market you are in is based mostly on people buying with financing or buying with financing and proceeds from their old home, it is a bottom up market. I currently live in Silicon Valley, which is even more wealthy than Seattle, its the same here. I don’t know anyone who makes less than 6 figures, and none of them are in the category of putting down full cash or not being dependent on what their old home sells for.
mikal » Jun 15, 2008 at 4:49 pm
We will agree to disagree.
jon » Jun 15, 2008 at 4:51 pm
Yes they need they equity, but there is also a big chunk added from stock options, etc. Otherwise they couldn’t move up. But the basic point is scarcity: a large amount of money chasing a limited number of prime locations.
softwarengineer » Jun 15, 2008 at 5:10 pm
GREAT BLOGS ALL
You folks impressed me, even the realitors….pragmatic stuff here.
Do I think SD will slow down in its price collapse and SEA be not as bad? Hey, I’m not a seer, but my tea leafs do see this in our future if we don’t stop the “growth monster” in Seattle prices will drop for years to come…..lower wages, bigger government [more taxes] and no light at the end of the tunnel; one hope for real estate though, we do a “phoenix from the ashes” [real change] and start retraining our own kids from the U of W and Seattle University , etc to be MSFT and Boeing brains, with $50-70K starting salaries going to $70-90K journey level averages [a year or two of college should be fine for most too]. Out sourcing [in sourcing too] just kills real estate with growth kool ade.
I’m looking out my hotel window [just kidding....lol] watching Seattle area’s lease signs go up all over the place, and wondering who they’ll all rent to and what business will work in this energy hampered economy.
I blogged this comment last Friday, enjoy:
“….
GROWTH GASOLINE
Our country is on fire with high gas/food prices, swollen deficits, resource shortages, infrastructures collapsing, etc, etc.
The lame brain method of “growing” out of the fire with more guest worker overpopulation is making it far worse, its putting gasoline on the fire….”
Posted by: Softwarengineer on June 13, 2008 04:22 PM
b » Jun 15, 2008 at 5:17 pm
jon -
There is hardly any scarcity in Seattle compared to other metropolitan areas. If there was, those prime locations would have been bulldozed and replaced by $3m+ mansions long ago. Ballard and Fremont, etc, are prime locations for middle class people and they are still middle class neighborhoods. The credit bubble won’t change that. Seattle’s density is nothing like SF for example, where there is true scarcity.
shawn » Jun 15, 2008 at 6:41 pm
As I said earlier, if you want a reality check, come to online sites like this. I am not saying Tim is correct and the mass media are not, or that blogs have no bias. What this thread shows is that here you get both sides of the issue. In college they teach that to present a valid argument one must fully express in honest terms the opposing side, that is what I get here, both sides.
RAL, a guy once said that if you cannot take the heat, get out of the kitchen.
economist » Jun 15, 2008 at 6:47 pm
He’s selling a $429K house here in Seattle and he told me a comparable house in Dublin is $750K to $800K…
I said before when we came back from Spain a couple of months ago that properties I looked at in 1996 were now ten times the price.
Nice of you to bring up Ireland and Spain David because both of them are now tanking big time. That’s exactly what happens when huge price increases bring on an avalanche of oversupply.
Helldorado: How expats dream life in the Spanish sunshine has turned into a property nightmare
jon » Jun 15, 2008 at 7:37 pm
b – The problem with a bottom up market theory is that there isn’t enough money at the bottom to drive the price fluctuations at the top. A 20% drop on a 300K house will only lose enough equity for a 5% drop at 1.2M. There is something else that drives the difference in price between waterfront and across the street from waterfront, lake vs. terrestrial view, etc.
TJ_98370 » Jun 15, 2008 at 8:09 pm
RAL said –
….Guess what? I’m leaving now…..
No big loss, RAL. My biggest problem with you is that you are not who you say you are. Your BS just cheapens the whole website.
Tim, I am not very internet savvy. Is it possible to inform us about the identity of RAL’s next incarnation?
b » Jun 15, 2008 at 8:30 pm
jon -
They go from 300k to 500k to 700k to 900k, etc. The guy buying the 1.2m house needs to sell his 900k house. If he can only get 800k for his previously 900k house, he can only buy a 1.1m house now. His income that allows him to jump 300k and afford the mortgage is still the same, but now his price limit has shifted down for the difference of his new sale price. This works similarly with first time buyers with their down payments and financing options. It is rare for a regular homeowner to buy a home with cash and/or not having to sell their previous home first. The market that does support those people is very high and not even worth discussing, it is the top 1% of the market probably.
Alan » Jun 15, 2008 at 8:36 pm
If you want to buy a house based on a lifestyle decision then I can’t fault you. That does not make it a good financial decision. As you as you don’t pretend that it does and go into it with your eyes wide open then I really can’t criticize you.
NoMoreWork » Jun 15, 2008 at 9:52 pm
$10 donation says RAL has checked this site >5 times since he “signed off”. Hi RAL. Goodbye RAL. You won’t be missed.
I’m really not sure how us “bubbleheads” have gotten the reputation of being poor, unintelligent whiners. Just because I converse about how bad of a decision it is right now to invest in a declining real estate market does not make me unable to do so.
For the record I will be a first time home buyer in the somewhat near future. I have a good, steady job. I rent with a roommate to keep costs down. I have stuck to a savings plan over the past two years and I’m now in a good position to buy (>20% down). I did not rush in to one of the most important financial decisions of my life. Each week I wait 2 things happen; I make/save more money and the market comes further down. There are plenty of people doing the same.
Ira Sacharoff » Jun 15, 2008 at 10:24 pm
Oh, there are a few whiners here, but not poor unintelligent whiners.
jonness » Jun 15, 2008 at 10:46 pm
IMO, to figure out if Seattle house prices will flatten or go up, it’s important to understand what it was that ran them up so high in the first place. Many people argue that it is because Seattle is “special.” I’m left wondering, if Seattle is such a great place to live, why were people paying a lot more for a house in San Diego just a few years ago? If Seattle is special, why did its prices not run up to Miami and Las Vegas levels? If Seattle is so special, why are its house prices currently dropping? The point is, a lot of places are special, and a lot of those special places are dropping like a rock. The reason Seattle held out longer than these other special places is not because Seattle is more special. It’s because Seattle is LESS special, thus, house prices did not run up as high here as they did in other places. However, market fundamentals are quickly changing, and Seattle house prices will change to reflect this–just as they changed to reflect a time of easy credit, speculative mania, etc.
A comment above speaks of selling a $400k rental recently very quickly and easily. I notice the type of loan used to buy the house was a zero down FHA loan. I previously mentioned that this type of loan will help artificially prop up Seattle house prices. However, I would like to expound upon that statement. I’m not arguing that there are not a lot of financially illiterate people in the marketplace who will use easy to get 0-down loans to pay whatever price is asked for a house. Recently history shows that there are a plethora of such individuals. My point is there are less people willing/able to do this than there were a year ago. And the supply/price data I and others have posted bears this assertion out.
Markets are driven largely by the principles of greed and fear. When you see everyone else is doing it and making money, you jump on the bandwagon without a second thought. When you see people doing it and losing money, you are much more hesitant to part with your hard earned money.
One of the problems with 0-down loans is that there is no actual hard-earned money associated with the transaction. The buyer pays $400K for the house and has not put any real investment of time and money into the home. If the price drops, they simply walk away. If the price stays the same or goes up, they happily stay. Everything works fine as long as prices stay flat or continue up. But when prices go down…Well, take a look at the news lately, and you see what happens. It is not a pretty picture and is the reason why housing throughout the nation is in so much trouble.
Some people might argue that recently instituted 0-down govt. loans with increased limits will save the Seattle housing market. IMO, such loans will only prolong the bleeding. It is loans like these that got us into all the trouble in the first place. These loans artificially inflate the value of houses because they increase the demand by allowing people to buy homes that don’t actually have any money. This increases the pool of buyers and makes for a more competitive marketplace, thus prices stay higher than they otherwise would be.
However, it only takes a 5% drop in house prices to force such buyers underwater to the point of desiring to walk away. A slight increase in mortgage rates can cause such a drop as can many other economic fundamentals such as rising unemployment rates etc. All of the sudden you have the same house back on the market at a firesale price. Then the guy down the street trying to sell his home for 5% less than he bought it last year has to sell for a firesale price, and you get a downward run in the market. In the near future rising inflation will force interest rates up. This will force home prices down. Yes, the nice lady who bought the $400K rental will be underwater by the end of the year. When she realizes she owes more than the house is worth and that she can rent a similar home for half the cost, she’ll eventually get her fill, keep the garden tools, and walk away.
There is a sucker born every minute, but when lot’s of suckers start to drown, even the biggest suckers become too scared to enter the water.
To increase house prices:
Lower cost of living
Lower interest rates
Lower supply
Increase demand
Ease credit
Create Jobs
etc.
To lower house prices:
Raise cost of living
Raise interest rates
Increase supply
lower demand
tighten credit
fire people
etc.
economist » Jun 15, 2008 at 10:50 pm
People who refuse to pay more for something than it is really worth are not “whiners”. Nobody has any obligation to buy anything from anyone else. It’s their money and they have every right to do what they want with it.
It’s the people who think they are entitled to sell something for more than it’s worth who are the whiners.