There is absolutely no way you can spin your way out of your blatant contradictions. Again:

October 2007: “What’s going to happen with home prices? … In a few words, I think they’re going to stay flat for the next few years.”

August 2008: “I had predicted that home prices would fall by average of 10-20% this year compared to their peak values.”

Do you not see the enormous difference between “flat for the next few years”, and “fall by an average of 10-20% this year”?

Give it up, Steve. You can’t BS your way out of this one.

When I open our Mortgage Company (which is coming) the website would be littered with all the contemporary companies that educate the consumer and place money in their pocket. Every company would be listed.

It doesn’t matter who your clients use. It only matters that YOU REPS EDUCATE that there is an option.

Do you write and tell the masses that with a little effort on their part they can earn nearly all the commission?

When you get leads from Realtors do you advise “their” clients that with a little effort they can reduce nearly all of the amount of money needed to close?

I suspect you DO NOT.

You are not a Professional in any profession when you do NOT disclose what you know. If you do not KNOW then you are also not a Professional due to not keeping up on what is truly happening in your Profession.

Your guessing of tops and bottoms is insanity. Every deal is it s own entity. With all the knowledge behind Tim he may still end up buying too high. You may get one at 10% off or 50%. True DD in your purchase will equate to the purchase of a GEM.

I ask you as I ask ALL Mtg Rep’s. Are you EDUCATING YOUR CLIENTS? I suspect not. Your loyalties are sorely misplaced.

http://www.nytimes.com/2008/08/09/business/09mortgage.html?_r=1&ref=patrick.net&oref=slogin

One thing we know in the next 10 years is half of the 78 Million baby boomers are going to be retiring and we will need to replace their jobs.

Thoughts of retirement are probably wishful thinking on the parts of many of those baby boomers, Harley. Forecasts I have seen suggest a good portion of them (half) are going to have to work well beyond the typical age of retirement in order to make it because they have very low savings.

From AARP via MarketWatch:

Consumers 45 years and older are raiding or compromising their 401(k) accounts, shirking monthly payments and skipping regular medications and doctor visits at an alarming rate, according to the American Association of Retired Persons.

As many as 25% of Americans from the ages of 45 to 64 said they are taking these steps to stay financially afloat, the AARP found in a recent study. That puts them at a decided disadvantage when retirement rolls around, particularly if they have subverted their health, and may lead to putting that retirement on hold.

Half of their wealth is in Home Equity, and we all know what’s happening to that…

I think those forecast models assume behavior of this generation will look like past generations. I don’t think that will come to pass. And that’s speaking as a boomer.

One thing we know in the next 10 years is half of the 78 Million baby boomers are going to be retiring and we will need to replace their jobs. We cannot fill the jobs through our own population growth and must have a more robust immigration policy to fill them. http://www.bls.gov/opub/mlr/2000/07/art2full.pdf

“All of my predictions have been published in the Everett Herald where I have been a paid real estate columnist since 1990″

It’s not a hope, it’s not a guess, it’s my analysis based on more than 20 years of studying the Seattle area real estate market.

Steve, you do understand that this weakens your credibility rather than strengthen it in most peoples eyes? Heck my 85-year old, no college, never worked but very nice neighbour lady spotted the bubble before the “paid real estate columnists” did. I’m pretty sure she can get closer in a depreciation guess as well…

The second “wild card” I meant to include is low mortgage rates, which bottomed out in 2004. Those low rates made more expensive homes more “affordable.”

Today, mortgage rates are about 1.5% above the lows, so that affects affordability.

But as I said, peoople are still buying homes. It will just take time for the excess inventory of houses for sale to work out of the market.

One of the long-running debates that I have been having with Tim (on and off this blog) is whether the last housing booms is truly “unprecendented.”

Personally, I think it is very similar to the last housing boom of 1989-90 when housing prices doubled in 2-3 years.

That boom was followed by a 10-20% pull back and several flat years of virutally no appreciation.

I think that we will see basically the same thing this time around. Hence my predictions.

Now, no two housing boom/busts cycles are EXACTLY alike … so it’s impossible to predict with 100% certainty what will happen.

There are two “wild cards” in this housing boom/bust and that is subprime mortgage boom. That is a new development that we did not have in previous housing booms.

The idea of giving “zero down payment” mortgages to people with BAD credit was so stupid that it was never even considered until a few years ago. And now,
20% of those loans are in default. Big surprise, huh?

I believe that most of those borrowers will go into foreclosure this year and next because they can’t keep making the mortgage payments forever. So the worst will be over by the end of next year in terms of foreclosures.

There will always be foreclosures .. they exisit in any market .. but the peak in the number of foreclosures shuld occur this year and/or next year… then they will start droppping back to normal levels.

As with home prices, I do NOT believe that the foreclosure rate in the Puget Sound region will come anywhere close to the rate we are currently seeing in California, Nevada, Arizona and Florida.

Why?

Historical trends.

Those areas always have bigger housing boom/bust cycles than us and they also have bigger foreclosure “booms” than we do.

So the crux of the argument is whether the current housing cycel is truly unprecedented .. or will it be similar to previous housing cycles.

Many of this blog believe we are in uncharted territory. I think this housing “bust” could be a litte more severe than the last one, but nowhere near as bad as areas like San Diego.

Why?

Because I have seen this all before.

Contrary to popular belief, the housing market is not totally dead. It is slow, but now dead.

I have mortgage clients who are literally buying houses every day. I had one client buy a house last Friday and another one is making an offer on a house today.

So there is a market out there. Sellers just have to adjust their asking prices to the new reality.

I was able to use it recently when I refinanced and guessed the value the assessor came up with to within a few hundred so that it didn’t slow down the process of getting the loan together.
You just have to be willing to face reality and look at all the comp sales in the area to determine if your zillow price is high or low, but at the very least it gives you a starting point.

It looks like Canada has overtaken the U.S. from a quality of life and overall wealth… interesting article, probably worth a discussion.

http://www.macleans.ca/canada/national/article.jsp?content=20080625_50113_50113&page=1&ref=patrick.net

I’m impressed with your predictions coming true so far, but the fact is we really don’t know what is going to happen in 10 years.

We could have 2 years of a falling market and then a flat market for another 7 years. We know the upside on this last cycle was unprecedented.

What we don’t know is: What is going to happen in the local and global economy over the next 2-10 years?

I don’t normally take the time to get into “tit for tat” on this blog .. but since you seem to have missed the point of my MANY predictions about this housing market over the past few years, let me recap:

In the Fall of 2005 I said the housing market was peaking.

In the Fall of 2006 I said the housing boom was over and there would be no appreciation in 2007.

In the Fall of 2007 I said home prices would fall an average of 10-20% from their peak value (depencing on the neighborhood) and would then remaiin “flat” for several years (i.e. very little appreciation or depreciation).

I have also said repeatedly that the Seattle area market will NOT experience widespread home price devlaution of 20%+ as we are seeing in San Diego, Las Vegs, Phoenix, etc.

All of my predictions have been published in the Everett Herald where I have been a paid real estate columnist since 1990.

I have repeated may of the same predictions on this blog and in personal email conversations with “The Tim.”

You can disagree with my predictions, but don’t accuse me of changing my tune. I was bearish on the local real estate market LONG before anybody else in the “mainstream media” (i.e. local newspapers, TV news, etc.).

My only argument with some of the posters on this blog is that many of you are TOO bearish. You keep predicting (hoping) that home values will “crash” in this area by 50% like we are seeing in other parts of the country.

I have consistently predicted that will not happen. And I still believe that today.

It’s not a hope, it’s not a guess, it’s my analysis based on more than 20 years of studying the Seattle area real estate market.

This housing market follows fairly consistent patterns. Tim and I disagree somewhat about this, but I think his charts add more support to my arguments
than disputes.

There is a predictable 7-10 year housing cycle. We are currently in the down part of that cycle, which will be followe by a few years of viturally no appreciatiion, which will be followed by another housing boom.

In other words, even though I predict declining home values this year and into next year and no appreciation for the next 3-5 years, I still think home prices will take off again.

Any house you buy today will be worth more money 10 years from now, even if you paid near peak market value for it. Because even though real estate values fall during the 7-10 year cycle, the overall trend is always up.

If buy real estate for the LONG TERM (10 year or more), you are almost guaranteed to make a profit when you sell.

Short-term “flipping” only works if you are lucky enough to get in and out of the market at the right time. Real estate professionals can do it, I’ve done it a few times myself, but the average person gets in too late and they get stuck with a property that costs them hundreds of dollars per month to hold while they wait for market appreciation to bail them out.

That is not “investing” it is “speculating” and just like oil speculators who bet that oil prices would keep going up past $140 per barell, often you lose when you get into the market too late.

Consumer Reports Sept. issue has an article about bargaining with Realtors for less commission. Re/Max and the independent brokers tend to go lower than others, but all Realtors are subject to coming down on their fee. CS found that those that failed to bargain with their agent often ended up regretting it.

The problem I see with this bargaining strategy is it’s still too much like walking into a car dealership. I think customers would be much more satisfied to pay for the actual services received as opposed to averaging the last guy’s good or poor deal in with their deal.

Let’s see, the last guy had the agent open 50 doors and then didn’t buy. Now I walk in and only need 3 doors open, and I buy. I end up paying for the other guy’s doors. I get upset and recommend to all my friends that they find an agent who will only charge for the 3 doors they need opened. Eventually, the agent who charged me for opening 53 doors loses out, because the only clients whom will come see him are the ones who need 50+ doors open. Thus, he actually starts making less money per hour than the cut rate agent down the street. It is important to note, this agent didn’t rip anyone off. He opened 53 doors, and he was paid to open 53 doors. But now he is opening 53 doors for every client and only 1/4 of them end up buying, so he is working harder for less money. Thus, adjusting RE company business models to fit the changing environment will ensure buyers and sellers receive high value on their transactions and also ensure the agents that handle these transactions are fairly compensated.

Of course the above paragraph is generalized to a specific scenario. Agents who have built good reputations and have repeat clientèle will be more immune to this than the 21-year-old just starting out with his new license and attempting to charge 6%. But it will still have an affect on everybody’s 6%.

The level of granularity present that you mention is very interesting. It would be fun to have an interactive map with different levels of drilldown detailing the price history of the categories you mention. I’m surprised companies like Zillow don’t make these maps available. They already have the data, so 95% of the work has already been done.

…you would enjoy reading Jim Cramer’s ‘The Winners of the New World’… Too bad thestreet.com removed said article.

That’s why we have the Internet Wayback Machine. Behold, the original “Winners of the New World” article in all its glory.

Great post. It seems like the best jobs in the world are economics expert/stock market analyst, and weather forecaster. You can be wrong 90% of the time, and people don’t remember that two days down the road.

I would edit the last word of this paragraph to be PRICE, not VALUE. I’m sure you other bubbleheads will understand my point.

The map is at http://www.newyorkfed.org/mortgagemaps/

“The states that have mortgages that have ARMS that had peaks in 2007 and later what were their precentages of subprime loans?”

I’m not sure of total percentages, but you can see on the map using “loans per 1000 housing units” that, for instance, Washington has about 60% as many subprime loans as the average of CA-AZ-NV-FL. What would be more interesting would be to see how many loans were out in 2004 to present. This would show if the states on my list have caught up to where CA-AZ-NV-FL were at when they started to implode. Unfortunately, the Fed removed to back data from its site.

“Also from that precent how many will be not be able to afford the adjustment of the loan?”

Perhaps “share 90 days + delinquent” provides some indication of this relative to CA-AZ-FL-NV. But other non-map data sources are also available that show how much credit people have taken out, median household incomes etc.

“Also the states that have been heavily hit such as CA, AZ, FL and NV, what other factors may played into the high foreclosure rates? For example were certain areas hit harder then other areas in the state? For example in California certain areas have been high in foreclosure while others not as much.”

I think that is relevant, but since the dynamic map data source is statewide as opposed to city-based, providing a more granular breakdown would not be initially warranted. Most likely, historical value and price history heavily factor into which areas hold their value and which areas plummet. IOW, location, location, location. Since all states have their share of good locations and bad locations, it will average fairly well when ignored. I think this is especially apparent from median price lines that closely match between states. There are so many factors to consider, yet there are only a few main price patterns that account for all 50 states.

“I think that it is hard to figure what precent of subprime loans within a given state will go into foreclosure? There are so many other factors that can play into this.”

But the point of a data mining study is to enter all of those factors into a database and run pattern detection algorithms against the data which will show which of these factors most closely correlate to foreclosures. For instance, a high “Median Combined Loan to Value” in conjunction with price declines represents much more risk that owners will walk away than a high number of loans taken out with 20% down payments. That being said, I agree with you that it would be impossible to create a perfect model that would accurately forecast future prices for every city in every state. However, I believe one could get a pretty good idea of the relative risks in each area.

“Also do think that any of these borrows with these subprime loans will be able to benefit from the house bill that passed?”

Yes, that’s a good point. Market conditions are constantly changing, so what happened last year to CA doesn’t necessarily equate to what happens this year to WA. However, legitimate fundamentals that drive price declines and appreciation will remain fairly constant over time. Thus, figuring out what moves markets and applying this to a particular market would give a good indication of risk of price decline. That doesn’t mean the price will decline. It simply means the risk is higher. For instance, inflation might increase instead of prices going down. This is similar to what you are getting at with your housing bill question.

I’m not saying I will do the study, as it would be extremely time consuming, plus the Fed site deleted the core data I would like to use. But I do think the outcome of such a study would be interesting. Fortunately, we do have the next best thing to this study–Global Insight’s housing valuation analysis. Hopefully the quarter 2, 2008 data set is released soon.

https://www.nationalcity.com/main/micro-site/economics/commentary-analysis/pages/housing-valuation-analysis.asp?WT.vanity=HouseValuation

My opinion is no way. Gather around shorts. GEM STOCK TIP………..** Im still long 88k on EGHT** PPS avg at 1.05. I still say to the MOON! No dent.. 15 mill in cash……Come on already…I smell 2.00!

Steve Tytler, October 2007:

“What’s going to happen with home prices? … In a few words, I think they’re going to stay flat for the next few years.”

Steve Tytler, May 2007:

“I do NOT expect to see 20%+ price drops as we have seen in other previously housing markets around the country.”

It’s COMPLETELY obvious that Steve Tytler is one of many industry “professionals” changing his tune as we go along. This sort of waffling reeks. While Steve has apparently had a come to Jesus moment regarding declining prices, none of his predictions can be taken seriously given his track record. Sorry Steve.

It’s a legal issue, not a disclosure issue.

The states that have mortgages that have ARMS that had peaks in 2007 and later what were their precentages of subprime loans?

Also from that precent how many will be not be able to afford the adjustment of the loan?

Also the states that have been heavily hit such as CA, AZ, FL and NV, what other factors may played into the high foreclosure rates? For example were certain areas hit harder then other areas in the state? For example in California certain areas have been high in foreclosure while others not as much.

I think that it is hard to figure what precent of subprime loans within a given state will go into foreclosure? There are so many other factors that can play into this.

Also do think that any of these borrows with these subprime loans will be able to benefit from the house bill that passed?

Furthermore predicting a 10-20% drop in the PNW is the most common prediction posted everywhere and on nearly every graph on CNBC, Bloomberg, and mentioned in WSJ. In fact that has been the predictions of many here. You know why? Because they do not know. From my travelling and seeing why home sales are picking up in Florida, Nevada, and Arizona–there is only 1 reason….The homes have dropped 30-50%. These areas will always be the first to recover because TRUE GEMS always get gobbled up.

The answer is right in front of you when prices will recover. The foreclosure numbers must decrease q over q. Buyers will continue to purchase distressed properties long before active sellers. 10-20% prediction is sending the wrong message. I suggest Buyers find the homes that are down significantly more then 20% and plan on an additional 15% to equate to about a 33%. I have already seen many homes listed at 499k now 399k.

Furthermore my message to Steve Tytler is during this time of distress in the housing industry are you advising ALL your Buyers on the only way to Buy Real Estate that is listed on the MLS?

When you are supposed to be acting in the BEST interests of your clients and placing them in the BEST loans do you mention companies like 500 Realty and Red Fin? What do you do when a real estate agent “friend” sends you a client for pre-approval. Do you tell the truth on how they should buy and seek an Agent who will give you the majority of the commission. How can you not? You are an adviser and a professional.

Mortgage Reps who do NOT promote Brokerages who give back to the consumer are worthless. We as professionals are supposed to represent our clients and EDUCATE those who DO NOT KNOW. The “hidden secret” is getting more exposed daily . So next time you sit down with your client forget where they came from and EDUCATE THEM. You owe it to your profession!

Washington
Oregon
Idaho
Montana
Wyoming
Utah
New Mexico
Wisconsin
Alaska
West Virginia
Maryland
Delaware
New Jersey
Vermont
Maine

Note that the states that have already been heavily bashed by the subprime mess are not present in the list. Perhaps this is because they have already worked their way through the increasing ARM reset aspect of the downward pricing cycle.

Unfortunately, the New York Fed recently took the historical data off its website for the “Dynamic Maps of Nonprime Mortgage Conditions in the United States.” Otherwise, I could do a legitimate data mining analysis and see how subprime exposure is related to price patterns of the cities that crashed and the cities that have held. It would be very interesting to see the future predictions such an analysis would provide.

This is a buyers market so make the seller pay the closing costs!!!

Pay your own d*** closing costs. Rolling them into the sale price keeps comps artificially inflated and increases your property taxes.

Here’s where Steve made that prediction on December 16 last year:

I expect home prices to drop about 10 percent to 20 percent over the next year or so, and then the housing market will flatten out with very little appreciation or depreciation for a few years.

He has repeated it a number of times since then as well. You can find the predictions of a number of local agents and “economists” in this post.

“I had predicted that home prices would fall by average of 10-20% this year compared to their peak values.”

Really, Steve? When did you “predict” this? If my memory serves me, you were drinking the Kool Aid not so long ago, right? I could have sworn that you were protesting such a thing as price declines. I’ll have to search the archives.

Hey, I expect anyone who is using this info to buy a house would do their own due diligence. You wouldn’t buy a house based solely on the info in the MLS, would you? Of course, Realtors always enter the property info into the system correctly every time. They never try and create false impressions through creative omissions or mischaracterizations. :)

With that being said, I took some additional steps to make sure my data is correct. Also, I completely welcome any comment or criticism on my blog, and if you find any other errors, please let me know. My goal is 100% accuracy. I know that’s impossible, but I will try.

Andy -
think about what happened in New Orleans. then reread my comment…

Good point..the floods, something Miami did not have to worry about

I was talking to a friend of mine tonight and he summed it up, “America is on a bender, the truth is lies and honesty is dishonesty…” In other words, we preach the diametric opposite of sound advice as good advice. He’s a personal trainer and I mentioned to him, its not just real estate, its everything; at the gym they tell you dairy products are bad for you, but whey powder [made from dairy products] is good for you. Its like we’ve made misinformation information and information misinformation.

A physician told me red wine will not help me, but agreed that red wine had cancer fighting properties.

Liberals will tell you to recycle then go back to their McMansion to live anyway.

Politicians will tell you they’re for change, then flip flop back to the old way any way.

Conservative politicians will preach fiscal government then spend money like drunken sailors.

I’m sure you bloggers can think of a zillion examples too. Has America lost its mind? LOL

If you want your site to have credibility, you need to figure out how to filter those out. I can’t see using your info if it’s not credible.

Yes, but it is interest free over a 15 year period.

This is a buyers market so make the seller pay the closing costs!!!

My point is that because it stated that “Homeowners were in Denial” it got a pass from the blog. If it had stated “Home owner confidence improving, Lowes and Home Depot revenues likely to increase, as homeowners seek to improve homes.”, it would have been shredded by everyone on here. It just amazes me how people that trash Zillow’s methodology constantly would think any better of it now. Yes Tim, you did say it was “entertaining”, but you did use it in your final conclusion to back up your point.

With regard to the Redfin methodology, I was not aware that they took it from the MLS. Thanks for pointing out the methodology.

It is a collections of houses “sold for a large discount from the last asking price” which definitely targets one end of the spectrum, but nonetheless I think can be used as a great tool for finding bargains in this market.

I was responding to jeff. The link he gave was for a house unrelated to the one he was referring to.

Believe me, I’m not put off by criticism. :) I’ve taken quite a bit these last few years since I started these blogs. Since I’m working with imperfect date, the results will never be 100% accurate.

I’m especially handicapped when it comes to Seattle, since I’m not from there.

I don’t understand your last post.

FWIW, I really like the idea of a Seattle Flippers similar to the one for Sacremento. I would do it if I knew how. Don’t be put off by a little constructive criticism.