Have some faith Silver9. Remember this isn’t the first time something has happened like this. The Great Depression played out very similiarly in certain areas of the economy, example being the cheap credit that was avaliable at the very onset of the depression. My generation will learn to adapt to the new economic realities; hard work will still get your somewhere recession/depression or no. If anything I think this will make economimists take a good hard look at their smoothing out of the economic cycle curve theory, where, because of goverment intervention and policies, our boom and bust periods have become less drastic. I don’t think there is anyway that this recession will be any milder than our last one; I would go so far as to argue that the FED and goverment administration policies for the last 15 or so years exacerbated the problem.

Who in the world brags about owning a vacation home in Seattle?

robbie knievel

All I am saying is that Seattle needs to be compared with other towns where growth and wealth is related 100% to jobs. Seattle can not be compared with exotic locations; simply because it does not have the outside pressure on its RE that exotic locations have. Who in the world brags about owning a vacation home in Seattle?

Miami is a bad example for a ton of reasons. But mainly, because it’s full of rich Venezuelans that ran away from Chavez, rich Colombians, rich Central Americans, Spaniards, Brits, Canadians, and Germans that want a flat under the sunshine. As well as wealthy New Yorkers and North Easterners. Miami money is not made in Miami. The weather in Seattle is as bad as in Northern European countries and at the cocktail party you want to say you own a place in paradise; not in Seattle. Everyone knows Miami.

True; it was full of speculators and scam artists; and they overbuilt grossly. It was going to collapse. But, unlike in Seattle, household income is not as relevant.

http://www.redfin.com/WA/Seattle/7344-19-Ave-NW-98117/home/165675

Why? What is so special about a year ago?

The only special times in market cycles are peaks and bottoms.

I think it would be much better if you had a graph of the Case Shiller HPI (rather than a graph of the YOY change of the Case Shiller HPI).

That’s what the second two graphs are (final graph starts at peak).

The macro picture is that our entire country (the federal government and households) is going to have to readjust our income/expenses to a more sustainable rate. That is going to be painful because a) we like to spend like crazy b) we are used to spending with debt.

Homes are the largest expense for most people. Home prices went up because of the supply of loans and now prices will fall as the supply of loans collapses. Add to that all the other big expenses: war in Iraq, health care, food + transportation, and most of all retirement.

I think this is new territory for a generation that has been used to the easy life. History is not a good guide for the next 25 years.

can we keep some perspective here?

+0.7, -0.5, -0.2% are all big declines in prices that represent very ugly market conditions.

house prices normally follow consumer price inflation. according to the official CPI, this means that any house price appreciation rate below ~3% is negative.

The 0.7, 0.5, etc is month to month, the normal 3% is over the entire year.

+0.7, -0.5, -0.2% are all big declines in prices that represent very ugly market conditions.

house prices normally follow consumer price inflation. according to the official CPI, this means that any house price appreciation rate below ~3% is negative.

So Seattle price collapses lags SD/LA by six months.

I remember the optimistic RE pink pony bloggers saying about 6 months ago, that although Seattle prices may be mirroring SD/LA horrifying downward data trending, they were just starting to fall. These RE cheer leaders alleged then that SD/LA would level off [had hit bottom] and then Seattle’s would be on the “pink pony” rise again.

Where’s these RE cheer leader bloggers comments now? Haven’t heard from RAL in a while, LOL. Maybe he sold everything off?

Now the argument is “this is just a blip, it won’t continue, prices are about to go up, or maybe flatten now for a while.” Even now the press won’t/can’t just say “dear God folks sell today before it is too late!” They sure had no problem telling us that “if you don’t buy now it will be too late to buy later.”

http://money.cnn.com/2008/08/25/real_estate/soaring_mortgage_fraud/index.htm?postversion=2008082606

Seattle houses are taking an absolute beating. As we journey from summer to fall, I’m starting to see more aggressive pricing as the desperation ramps up. The cold weather is a sign of the dreary nuclear winter coming upon the Seattle RE market. Interestingly, many of the very aggressively priced homes are still sitting there languishing.

The most hopeless tactic I see out there is to lower the price a little at a time. These sellers simply follow the market downward and never sell their homes. Prices on the homes that sell are cut in one large chunk, and if it doesn’t sell in a few months, they bite off another large chunk. This chunking excites the buyers and helps to feed their impulses. Inevitably it brings out fence sitters who think, I better get that before someone else does.

And of course, this helps the market downward toward the reality of supply and demand. Cheap easy loans = price spikes; expensive loans that are tough to acquire = price depreciation. The market is going to look a whole lot better in Spring 2009 after the nuclear winter shakes the desire to see Santa Clause out of the sellers’ minds. Prices will be lower, but more certainty will exist.

I’ve come to believe that the current administration- executive, treasury, fed, are working hard to keep things together until after the election. Not because they think their actions will swing votes one way or another, but out of pride. Nobody wants to have the ship sink on their watch. They know it’s going to go down, but hope to keep patching the hull until the next shift comes on.

Finally, one of the homes on my street that has been for sale for some time and was delisted has come back on the market- with a very high powered agent and a 20% price reduction. When/if it sells, it will push the comps for the entire neighborhood down significantly. This home is indicative of the future. After playing around for a year, the sellers are serious, understand the reality of the new market, and are getting ready to take a hit.

That is the perfect way to describe it. The new buyers were just cashing out the early buyers. The losers are left holding the bag (a.k.a. overpriced $500,000+ condo/sfh).

especially on eastside – most of existing home owners are able to keep up with their loans and they are not worrying to sell their houses with reduction as FL or CA prices.

This is yet another variation on the “Seattle\Eastside is so special” stuff that RE agents around here keep spouting. Most eastsiders would be truly shocked to find out what their homes are selling for in *todays* market.
I wonder why so many of the loans that were taken out in King County were ARM or interest only loans in 2006/2007. Its because people could not afford to buy those 500K houses at the Fixed rate mortgages at that time. Additionally many people I know bought in to yet another Realtor saying “Get a 7 year ARM, These days everyone sells their houses after 7 years, why do you want to pay more towards principal when you could use that money to get new granite countertops? You will just lose money” when what they really meant was “Oh yeah buy this 600K house instead of the 350K townhouse you can really afford with your ginormous 100K salary at MSFT/AMZN/GOOG. My commission is bigger and heck if things really go like this for 7 years, you will be asking *me* to once again sell this place for a million bucks. Sweet!”.
Note that this is not merely anecdotal. I know 5 different families who purchased a house during those years (various areas and various financial levels) and they ALL took out ARMs using the logic above.
The whole thing was a ponzi scheme fueled by cheap credit. The fed is gonna raise interest rates in the next meeting. The leaves are already turning and this housing market is gonna fall with the leaves!

Friend of mine was approved for a $350k loan ~4 months ago, went back again to renew it and keep shopping and the bank has lowered it to $280k now. No change in income, no change in credit rating, and his down payment grew due to savings!!

How can this not push prices down? WaMu is struggling, Boeing Machinists are threatening a strike… I guess everything is not green in the Emerald City.

The credit markets, specifically the lack of easy credit, is not a regional issue. That has changed nationally and it changed the same everywhere. As that trickles through, all markets are running into the same difficulty in refinancing and higher down payments.

That would argue for some steeper declines in Seattle / Portland as the 17 month time delay shrinks.

IMO, California was starting to a decline in prices and large amounts of inventory in summer of 2006. Then it really went downhill last summer in 2007 when the credit problems really started to hit.

According to the charts it looks like Seattle was still increasing in sales price but the number of houses sold was being to slow down sometime in 2007. However it looks like the big drop off happened into the Fall of 2007 when the credit problems hit.

Then many other major areas in the US were also seeing a downturn at the same time, in regards to the credit issues.

IMO, Seattle is a slight image of Calfornia. However I think that it is hard to call if Seattle will see the big down turn prices ,25%-35% in one year, as parts of California.

The RE in California seems to vary greatly by geographic regions. Just as Seattle or Washington seems to vary by geographic region.

They have been building highrises in Orange County for the last few years. This area has gotten away from the planned developments and older areas and being torn down with highrises going up.

“I agree that July’s index will probably be down 9%-10%, wasn’t June’s number around 9%?”

Nope, June’s number is what was reported today. It’s down 7.1% YoY.

There will be money to be made by investing in real estate, but we are years away from the bottom.

The relevant data is the cashflow analysis and the comparable rents analysis. We covered that in a very long and detailed post last week.

I guess this chart would be helpful for a quick flipper trying to find a bottom but for any long-term investment these charts are not as important and looking at the capital you need to invest and the rate of return on that investment.

Unfortunately those numbers are WAY out of wack for any kind of sustainable investing.

I’m a little confused. I agree with you that the glut of new condos downtown may drive prices down farther. But then you claim that the “the market has corrected” (past tense?). Where in the world did you get the idea that we’ve already seen the bottom?

http://www.thestreet.com/s/cramer-map-to-a-housing-bottom/newsanalysis/investing/10434379.html?puc=_cnnmoney&cm_ven=CNNMONEY&cm_cat=Free&cm_pla=Feed&cm_ite=Feed&puc=cnnmoney&

Just a minor correction, but almost nobody in CA lives in highrises, nor do developers build them. All of the housing boom and bust in CA involves SFHs.

I agree that July’s index will probably be down 9%-10%, wasn’t June’s number around 9%?

Anyhow to see the double digit declines for the rest of the year I am not sure if we will see that.

When you look at Tim’s charts the big drop appeared September of 2007 and the prices seem to fall down hill rather quickly. When the numbers are compared from 2008 to 2007 I am not sure if that type of price decline will continue.

It only makes sense that Miami is getting beat up. The Median Household Income is $37,000. That’s household not per capita income! No one that lives in the Miami area can afford anything but a trailer home on swampland. The speculators were out in force and now Miami is paying for it. I would expect Miami to get beat up for the next few years until median income increases or housing prices come back down to realistic levels. You can’t pay for mortgages when your job can’t support the payments.

Even the national index has slowed its rate of decline. It seems Niuska may be right and we will see a longer correction, locally and nationally.

I find it interesting that Portland resumed its decline, like Seattle declining roughly 1/2 of an index point in June. I say this because Portand and Seattle’s indexes are so predictive of one another. Both markets have flattened somewhat but show a slight downward trend.

These seasonal effects are easy to see in the “decline from peak” graph since markets peaked at different times of year the waves are offset accordingly.

Bottom line: prices have declined slightly when in a normal year they would have increased. When we start getting data from Aug, Sept, Oct, Nov, etc… the price declines will accelerate.