Kirkland is full of speculators. Especially in the 800k+ New construction segment. Just go through the photos in the listings and you’ll be able to see how many “empties” there are. It’s an astoundingly high percentage. Some are staged (obviously), but have been on the market since they were completed in early 2007.

Way too much built on the high end IMHO.

Plus…I’d bet there were plenty of ARM’s (of many flavors) in 98033 over the last few years that contributed to some of the “fake” appreciation.

In the runup of the last several years, though, there’s some subset of people who have significant capital gains on paper who do fall into the two-of-the-last-five-years group, and this could push them to sell if they’re on the fence.

Funny you should invoke ten years as an example–my husband and I bought our first house almost exactly 10 years ago, and it’s been a rental for a bit over two. So, we’re right on the verge of losing that qualification. If we sold the house today for what Zillow says its worth (however likely that is), we’d pay nothing whatever for the CG tax. If we sold it a year from now at that same price, we’d owe at least a few thousand bucks in taxes and as time goes on the bite will be bigger.

Another thing to keep in mind is when the BB’s start to downsize the will be looking for single floor residences as the stairs are too uncomfortable to traverse with old knees and hips. I’m predicting stronger value retention in rambler/rancher homes with flat lots and open floor plans for BB’s who may be abandoning multi-storied homes.

I will be moving from another state to Bellevue in December and have been watching the market for some time. I grew up in Bellevue and moved away for schooling ten years ago. I am amazed at the high cost of housing in the West Bellevue/West Kirkland and Medina regions. It seems to me that much of the increased cost of housing in these regions are based on speculators who purchased homes in the last several years with the expectation of a short term, less than 5 year, occupancy. I am not talking about flippers since I doubt anyone would try to do that in this environment. I believe this because many of the homes for sale now were purchased less than 5 years ago. These are not the typical home owners of the past who purchased a home for enjoyment.

An interesting statistic would be to determine what percentage of for sale homes in a particular region were purchased less than 5 years ago. This would identify a particular market strength or weakness since speculators will soon become more desperate as they watch their neighbors loose equity. Is such a statistical analysis available? It would be interesting to compare Seattle to other cities. It seems that the more speculators in a market, the harder the crash will be.

Many of the homes I have looked at are exceptionally over priced. Some home owners seem to be in fantasy land when they came up with a selling price. Some people actually think a purchaser would pay 20 or 30% more than they paid only 2 years ago. Thats ridiculous. I could afford an expensive home in a nice neighborhood, but I am not crazy. I plan to wait until prices come down.

For subprime loans, the typical ARM was 2 years when those loans were still around. The last of the subprime companies stopped offering those 2 years ago this January.

However, for a more traditional conventional loan historically, a 5 or 7 year ARM is much more standard. VA ARM’s can only be 3 years, but mostly 5 year is what you see.

On the other hand, I am not sure about the PS area demographics; but I suspect the region’s median age is quite younger than the country’s general population. Most arrived in the late 1980s and 1990s while the were in their late 20s/early30s.

I agree and think this will be a long term (next 5-15 years) trend in both real estate and equities. The boomers are going to be cashing out of both over that timeframe and there isn’t enough population or wage growth in non-boomers to make up for the balance.

I suspect that as baby boomers see the values of their stocks diminish, inflation rise, interest rates go up, they will become increasingly interested in selling their larger homes and becoming more conservative. This seems an expected trend, but I almost never hear anyone in the national media discuss this possibility. Does anyone else suspect a similar trend?

That’s the problem with this site. When someone like you comes along with some extremely ridiculous statement pulled out of their asses; some moron like deejayoh comes back with actual statistics and facts. And facts suck!!!

I have to admit that I had to e-mail you statement that the job market drives the sales of 2.5mil homes to a few friends. It was priceless.

Then again; car salesmen are probably telling people SUVs are making a comeback.

Yes, the law becomes effective on Jan. 1, 2009. But the clock doesn’t reset to 2009. The ownership period to take into account as the “numerator” for nonqualified use starts on Jan. 1, 2009. In other words, if you rent your house out for 2009 and lived in the house for the 4 years prior, you pay taxes on 20% of the capital gains. This law is really geared towards rental or vacation home owners who try to move into their second properties for two years to avoid paying. You’re not going to get charged capital gains on a home you’ve owned for ten years, just because you began renting it out January 1, 2009.

Here’s a link to more info from Marketwatch:

http://finance.yahoo.com/loans/article/105473/The-Hidden-Tax-Traps-in-the-Housing-Rescue-Bill

Great posts, everyone!

Can you tell me exactly how many 400k+ 1BR’s sold in the last 6 months?

Can you tell me exactly how many are for sale?

Can you tell me how many are for sale but not listed (Olive8, Enso, Rollins, Veer, Escala, etc etc etc)?

Sorry…Seattle’s condo market is a bust. If it weren’t, I wouldn’t see a Windermere Broker trying to off a condo that she paid more than 600k for in 2006 for less than 500k.

But I guess that 100k+ loss is a good thing eh? Tax write off?

Just kidding; I am CERTAIN you are not.

My husband and I fit those requirements. We don’t have any plans to sell the rental house–it pays for itself just fine, it’s the backup plan for paying for kids’ college as it’ll be paid off just before kid #1 hits college age. But it does change the parameters of the endgame, if and when we do ever decide to sell.

This may well spur investors who can meet the “two in the last five” requirement to try to unload properties between now and the end of the year, to avoid a big tax bill. We’ll see!

Wow. That could be a huge driving force for lower prices this year.

Say someone bought a house for $300k that is worth $500k today. They can sell it by December this year tax free or in January next year and pay taxes above $300k (assuming they didn’t depreciate it). Say their tax rate is 30%. The should be willing to discount the $500k market price up to around $440k. Everyone competing will have to follow suit.

We may see an additional 10% drop by the end of the year with an uptick in price in January.

I may have to buy a house this December.

For the past several years, if owners occupied a house as a primary residence for two of the past 5 years, they would be exempted from capital gains taxes upon sale of the house, for up to $250K if single or $500K if married. Lots of folks used this tax dodge during the runup.

After January 2009, the clock gets reset, so to speak, and the degree to which capital gains are paid depends on what fraction of time the owners actually reside in the house from that point on. A house that’s always a rental after Jan 2009 will see no capital gains tax exemption.

This may well spur investors who can meet the “two in the last five” requirement to try to unload properties between now and the end of the year, to avoid a big tax bill. We’ll see!

Mag + QA >$1mm value properties sold:
Last 12 months: 128
12-24 months: 159
off 20%

REAL downtown properties (since when are QA and Magnolia DT?) over $2.5mm
Last 12 months: 16
12-24 months: 48
off 67%!!!

Yep. those jobs are doing the trick

Charles Grimes // Aug 4, 2008 at 5:21 pm

The recent news is that zip codes in downtown Seattle are still rising. More homes valued over 2.5 million on Queen Anne and Magnolia sold this year than last. Because of the increase in the job market here, the downtown area continues to hold its value- condos and homes alike.

Wait, you think that the increase in the job market is causing the number of $2.5mm+ homes in QA and Magnolia (went from 12 to 24 sales) to go up? Which jobs? I want one of those?

Only 27 more listings to go…

Exactly – for 2 years now they’ve been concentrating on sub-prime; but a ton of people with good credit were warned about being left out and jumped with both feet into bad loans. They all know these families; they got in at the wrong time.

To me, this will be a much larger issue than sub-prime. Much larger.

I can’t add much to it, you covered most of the salient points. Its almost like the realitors preaching “pink ponies” in Seattle are calling part of the media and most of the American voters “whiners” for being intelligent and pragmatic about our current recession [yes, be in denial all you want, we're in a recession in my opinion and its apparently getting much worse too].