If it was that simple wouldn’t there be a consensus? Even on a blog titled Seattle Bubble there’s a pretty good mix of opinions from a bunch of people who are more well-informed than the average joe. My opinion is that it’s a bad idea to wait for a price in your comfort zone in your favorite neighborhood because it might not ever get there. In this case the person waiting for a 400k house in Kirkland might have to settle for Bothell, that’s life, unless they can handle a fixer. On the other hand I think it is a good idea to wait for the dust to settle in the financial markets if you can wait, and if the economy gets "chocolatey" enough and you are well-positioned for that then maybe you will get what you want

“I can’t stand that place either – I like the city and the country, everything in between could disappear tomorrow and I wouldn’t care – but objectively thinking it should hold up comparitively well IMO, the same people who have flocked there over the last three years will still want to live there. If you wanted to buy a place there but decided to wait until 2005 prices you will wait forever unless the recession is a big one, and if it is a big one unless you’ve got a pile of cash to take advantage of the situation it won’t matter.”

You seem to be overlooking the most crucial fact. People CANNOT afford current prices. That simple. So, they will be going down, WAY down. There is quite simply no way around it.

Quite clearly if you think the per capita income number is the right choice for doing that kind of analysis. Property managers and apartment and housing research firms generally use the family income number for this type of analysis.

True. But that suggests that family income moves differently than per capita income. That would mean either a) a change in family size or b) a change in the number of wage earners in a family. I don’t think these are changing all that fast. And even then, would the correlation would be better than the 99% correlation between per capita and house prices that held from 1985 – 2001?

Per capita isn’t a useful number.

But family income in KC is still really low. $75K.

Try raising a family on that with home prices at $400K.

Family incomes don’t support the home prices. I actually had a RE agent try and tell me that median family income was irrelevant because a 2 income household was making double that!

You can see the disconnect between home prices and incomes that starts in 2001 quite clearly on this chart

Quite clearly if you think the per capita income number is the right choice for doing that kind of analysis. Property managers and apartment and housing research firms generally use the family income number for this type of analysis. Tim has said that the per capita number includes “the most people”, but with the majority of home buyers being married, and most other analysis using the family number I don’t think the per capita number is the right one to use. To me the point is to evaluate if the pool of potential homeowners can afford the available housing, not if everyone can afford to buy a house.

For example a lot of apartment research firms use the Median Family income, Class A rents and the Median Home price to generate a monthly spread between renting and owning which is a lot more concrete than the “small premium” often discussed here.

I’m really stuck on the idea that we saw a huge spike in pricing between 2001 to 2007.

Wow. Perhaps someone should start a blog and call it “Seattle Bubble”! 8^P

My neighborhood in Bellevue has had demand fall through the floor. There are a large number (historically) of houses for sale in a several block radius, at asking prices 10%-15% below last year’s comps, that are not selling. I haven’t seen a “sold” sign in ages, but more and more houses come on the market. The whole place seems to have stagnated.

Whatever it is, it’s worse than the dot com bust, 9/11 and the airline bust combined.

My guess? Prices are too high.

http://articles.moneycentral.msn.com/Investing/JubaksJournal/TheHugeThreatToTheUSEconomy.aspx?page=all

The U.S. Treasury and the Federal Reserve recognize that taxpayers will have to pay whatever it takes to keep these two players in the mortgage game. With $5 trillion in financial paper in the markets tied to these two companies, a failure at one or the other would panic the U.S. and every other financial market in the world.

The U.S. government is caught in a terrible bind. On the one hand, if the government doesn’t stand behind Fannie Mae and Freddie Mac, many overseas investors will see it as equivalent to the U.S. government defaulting on its debt. If the U.S. government walks away from Fannie and Freddie, these overseas investors will worry that the U.S. government will walk away from the other U.S. debt they own and from the dollar itself. There’s already a suspicion among overseas investors that the U.S. government will try to solve its dual problems of a massive government debt and a massive trade deficit by letting the dollar tank. On the other hand, if the U.S. government does back Fannie Mae and Freddie Mac, it runs the danger that overseas investors will simply add Fannie and Freddie’s $5 trillion in mortgages and guarantees to the $9.5 trillion the U.S. government already owes. By that calculation, a bailout would increase the debt level of the U.S. by 53% overnight.

Do you know when prices will bottom out??

When you and your fellow Californians move back!!!

Just kidding (about the moving back – not about you guys being the reason behind the crazy pricing)

faster, yes, I know 520 is a parking lot during rush hour. “Evenings” to me means 8 pm or later. AFAIK 520 westbound starts clearing up a bit around 7:30 pm. (True? Or am I fooling myself?)

Office rentals dropping sounds more like a stagnant economy to me. What’s going to happen to rents when WAMU clears out? That’s a lot of open office space.

“Market at bottom? Don’t believe it”

“The recent updraft is probably an illusion. There’s no indication the bear market has ended and plenty of evidence it has a long way to fall yet.
By Jon Markman

Investors praying that the most inept federal government since the Hoover administration has engineered an end to the credit crisis with a plan to rescue Fannie Mae (FNM, news, msgs) and Freddie Mac (FRE, news, msgs) may be on track to see their delusions shattered.

At the root of investors’ hopes in recent days has been a sharp jump in the shares of banks and brokerages even after the companies reported terrible second-quarter earnings and acknowledged that profits will likely be impaired for at least a year to come.”

hmmm…

i wasn’t saying the two things are related, just saying they are both in the news and represent positives for business growth for the corporate and local economies in seattle. i know quite a few local business owners in seattle foaming at the mouth for lower rents in downtown/belltown.

its you that’s thick dude — reread the post.

The existing home sales rate – including single-family, townhomes, condominiums and co-ops – was 15.5% below the 5.75 million units sold in June 2007….

The median price of a home sold during the month fell to $215,100, down 6.1% from $229,000 a year earlier. Prices are being pushed down by the growing number of existing homes on the market.

Homes available for sale at the end of June rose 0.2% to 4.49 million, which represented an 11.1-month supply at the current sales pace, up from a 10.8-month supply in May.”

And per a companion article: “The percentage of vacant homes available for sale remained relatively flat in the second quarter, but still hovered in record territory.

Some 2.8% of homes, excluding rental properties, were empty and on the market from April through June, according to Census Bureau figures released Thursday. The vacancy rate hit a record high of 2.9% in the first quarter of 2008. It was 2.6% a year ago.

“They are still not showing a downward trend,” said Christian Menegatti, U.S. lead analyst at RGEMonitor.com, an economic research and consulting group. “That’s the bad news. The numbers are telling us that prices have to fall more.’”

Don’t get me wrong, the 2008 Q1 GDP of 0.6% was low enough to be called recessionary; but like any statistics is totally error prone. Its simply pumped up with inventory hoarding because of higher energy panic (i.e., people hoarding bags of rice from COSTCO)….so what is the Real GDP for 2008 Q1?

Its definitely recessionary at approximately -0.6% when calculated sensibly.

See the proof [just scroll down to the "Real GDP" chart from our government]:

http://www.econedlink.org/lessons/index.cfm?lesson=EM775

As far as the new housing bill passed by our government fixing bad loans from the last 5 years, forget it….it may help future loans by reorganizing Fannie/Freddie, but again, I’m skeptical…..is this bill just rearranging the chairs on the Titanic? Without good paying jobs and an industrial base in America again i don’t want to say its hopeless, but our credit ratings in America aren’t what they used to be. I hear both GM and Ford have a 50/50 chance of going bankrupt soon.

I stilll believe by 2010 or 2011 we’ll know when we’re gonna hit bottom in this crisis. Til then, just hang tight and baton up the hatches.

Gotta love these two:

“Shares closed down $1.17 at $4.65, gaining 19 cents in after-hours trading. The stock has fallen 66 percent this year.

Piper Jaffray Cos. analyst Robert Napoli cut his rating to “sell” in a report because the lender’s balance sheet is “burdened with high-risk mortgage loans.” Napoli and analysts at Merrill Lynch & Co. and Friedman Billings Ramsey Group Inc. said Washington Mutual may need more capital.

Merrill Lynch analyst Kenneth Bruce in San Francisco cut his rating to “underperform” today, citing the likelihood of $27 billion in cumulative losses through 2010 and a tangible equity ratio in 2011 that’s below a “self-imposed floor.”"

___________________________________________

Really Robert Napoli?? After a 66% collapse in 7 months, you really had enough and it’s time to sell??

And you, Mr Bruce: you finally go from “market performer” to “underperform”?

I would love to hear the phone conversations between these guys and their customers: “yeah, remember the $100K we put on WAMU last December because the worst was behind them? OK, let’s just say I want you to sell and now we have $34K to work with.”

How could these guys allow their names to be public??

Would you imagine a sport commentator waiting for week 15 in the past NFL season to say: “Yeah, I predict the 1-14 Miami Dolphins will not make the playoffs”

Everyone looks on a map and thinks they’re close to Seattle, but the reality is that with 520, being close isn’t enough. Go ahead and take that easy 10 mile drive from Kirkland into the city one evening around 6:00. To be safe, make sure your dinner reservations are for 7:00

“Note that the second quarter of 2008 was the fourth-lowest quarter on record, beaten only by 2000:Q1, 2007:Q4, and 2008:Q1.”

I guess I don’t know what “beaten” means in this context. I look at the graph and all of the bars are bigger than 2008Q2. If the referenced three quarters had smaller bars I would presume that “beaten” means “performed more poorly” but I can’t presume that because I can’t see the referenced pattern at all.

Do I believe the graph or the text or neither?

Did she ever list it or did she decide to sit tight for a while?

I think there are some neat homes in Kirkland, but most of the stuff just isn’t worth considering unless it was dirt cheap, at least for me.

My old violin teacher lived out off of Waverly Way. If I could get a home there for a reasonable amount I would do it.

I think her home is part of the reason I love pre-war homes.

Gates foundation opening soon in Seattle as well…

The new bailout bill has $3.9 billion for local communities to buy and refurbish foreclosed properties. Interesting that municipalities will be getting in the flipping business, paid for by you and I.

I think the CDBG’s that are the 3.9 billion part of the bill are usually for HUD related activity and are generally more involved than flipping individual houses. These grants were cut pretty heavily if not completely in the last couple of years.

Was the first quarter of 2008 the bottom of the local housing downturn?

ARE YOU BLIND GUYS? This is just a beginning.

That’s what they thought in many parts of the country. We are only finishing up the 1st inning.