Posted by: Timothy Ellis (The Tim)

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

54 responses to “Forbes: Seattle is #1”

  1. Timber

    Come on RE agents lets hear how you can spin this.

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  2. Jillayne

    I’m interested in how the real estate agent community will embrace this story.

    In the past, Realtors have blamed the media for scaring buyers away. Then they said the media’s rosy reports on the Seattle market was making it harder to convince sellers to drop their prices.

    So….here we go. Will Realtors add their spin and blame the media, will they use the Forbes story to get some radical price reductions or both?

    I’m guessing both; using the media when it suits their needs, blaming the media when it doesn’t.

    Well at least Hayes Barnard is still pumping everyone up with those radio ads. Maybe that’s the solution: create the reality you need in order to sell your product.

    Sigh.

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  3. Captain Kirkland

    Breaking news. Sellers in Seattle are naive and ignorant!!

    Don’t worry sellers. Rent your house instead. Prices will be back up in a couple of years…(not really). My advice to you. Lower your price. Take what you can get…and run away. Prices will not be inflated this high for a VERY long time….not until incomes double, or ‘exotic’ financing is back in the mainstream…neither of which seem likely right now.

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  4. Buceri

    Pretty amazing to Seattle at 1 and Miami at 11; when nothing, I mean nothing, is moving in Miami.

    Wow; it’s going to be a long winter for this industry…….

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  5. deejayoh

    I guess this was the anniversary story to follow up last year’s piece of responsible journalism. I’m surprised you didn’t link this one Tim!

    Housing Trends
    America’s Most Stable Housing Markets
    Matt Woolsey, 10.01.07, 4:00 PM ET

    Nationwide, home prices are falling, sales are sluggish and the number of foreclosures is mounting. Ask any economist and you’ll hear that things are bad, and likely to get worse.

    Unless you live in Seattle, where the market is slowing but fundamentals remain strong.

    The Emerald City has experienced strong price appreciation over the last six quarters, and that’s expected to continue in the new year, though at a slower pace. In addition to a very low housing inventory and a strong sales rate, there are few non-conforming and high-risk loans on the books than in other cities, which means the area will likely see fewer defaults in the coming months than the rest of the country’s markets.

    Forbes is such a worthless rag, people should just ignore it.

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  6. J.R.

    Whoa. Less than a year ago, Forbes said we were the #8 best real-estate market in America!

    http://seattlebubble.com/blog/2007/11/29/forbes-seattle-continues-its-ascent/

    Now we’re the #1 worst place to be selling a house. We’ve come a long way!

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  7. Ira Sacharoff

    Agents all have different styles when it comes to selling houses, but too many of them can’t face reality and aren’t encouraging clients to list their properties at lower prices in order to sell…The media is a convenient scapegoat, but real estate agents were part of the reason the bubble happened in the first place, as well as loose lending standards, huckster lenders, and yes, the media!
    The media was busy spreading the BS about how Seattle was different, how real estate never goes down, how we’re in anew paradigm, etc, but you didn’t hear the RE agents give the media credit for spreading their BS, only the blame now for speaking a little truth.

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  8. Tim

    I think this clearly shows that sellers are trying to hold onto bubble gains here that are unrealistic. I think sudden steep drops in pricing are around the corner.

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  9. MarkM

    Seattle is *so special* that no one really wants to leave or sell their home. They only put up *for sale* signs so we can kind of look like the rest of the country but deep down we all know its an eternal paradise…. :-)

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  10. BellevueRentMan

    I dont believe any of it. Call me when prices hit YEAR 2000 levels in our area!!

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  11. Tyler

    Now that the house has passed the bailout too, it may give home owners some hope of a faster recovery and delude them into not lowering their prices.

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  12. Peckhammer

    Call me when prices hit YEAR 2000 levels in our area!!

    Never happen… not now that the Rescue plan has been signed by the house and senate.

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  13. Thomas B.

    Guh… I appreciate what Forbes is doing, but it has become a little tabloid in the past few years with all its rankings.

    I believe Seattle should be on that list, but I feel Miami should top it. Too many condos and not enough people with money to buy.

    I agree Jacksonville, FL should be high on the list. The place is overbuilt on speculation with no associated increase in well paying jobs. I think the only major company with a headquarters there is CSX. Not a very diverse job market.

    St. Louis, Detroit, Cleveland? I thought they weren’t boom markets. Interesting.

    Manhattan!!! It’s going to get a lot worse for them since the investment bank business is crashing and there is consolidation. UBS already laid off 2,000 IB types. Boston is also going to have a rough time.

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  14. David McManus

    Call me when prices hit YEAR 2000 levels in our area!!

    Never happen… not now that the Rescue plan has been signed by the house and senate.

    Um, it actually IS HAPPENING.

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  15. patient

    “even sellers who have substantially lowered their prices aren’t finding it easy to move their houses.”

    Uhm…yeah well if you start with an obscenely inflated price and then reduce it substantially to reach just extremely inflated, guess what, your home isn’t going to sell in this market.

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  16. mukoh

    Even if a seller drops their price, there is in all likelihood lack of buyers. So sellers are more in trends pulling their house.

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  17. economist

    “Even if a seller drops their price, there is in all likelihood lack of buyers”

    Didja notice that the demand curve slopes down? Now what does that mean?

    Except for places like Detroit and Cleveland, that list is crap. The reason houses aren’t selling isn’t because they are hard to sell, it’s because sellers aren’t willing to accept market price.

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  18. Timber

    Something else I just noticed San Diego isn’t on that list and I know how mad Realtors get when you compare Seattle to California. So Seattle isn’t like California at all in fact your more likely to sell your home down there then up here.

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  19. mukoh

    economist
    You could tell a buyer that his payment right now will be $2000 a month for a $600k house, and that the house is below market, 80% of the buyers are scared. Thats the fact of the matter.

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  20. David McManus

    You could tell a buyer that his payment right now will be $2000 a month for a $600k house, and that the house is below market, 80% of the buyers are scared. Thats the fact of the matter.

    P&I on a 6% 30 year fixed for a 480K loan (80% of 600K) is still almost 2900 a month. Taxes and insurance easily put that up to 3500. The reason buyers are staying on the sidelines is that they don’t believe the BS that their RE professionals are selling them. And they don’t have the cash…..

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  21. rent for now

    Now that my job seems to be in jeopardy with this mess, I am glad that I don’t have a house, or any debt for that matter. As I watch the market, I see many folks pulling listings — some denial still I guess. I think a lot of folks are going to be stuck for quite some time. In fact, I think it might be 15 years before the market makes new highs again. Is this too soon? I wonder what a poll on this would show.

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  22. David McManus

    #21, just curious, but what industry are you employed in?

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  23. mukoh

    David,
    Buyers are scared to buy period. A major portion of them. And qualifying is not easy.

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  24. David McManus

    Yeah, mukoh….you have to like have……cash! And……good credit!

    But everyone in the Seattle area is independently wealthy so that shouldn’t be a problem. We’re special. That explains the constant appreciation.

    Rightly so, they should be scared. Who wants to buy into a depreciating asset? They are focusing on short-term, not long term, though. Prices still have a long way to fall, though.

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  25. mukoh

    David, Can you bring up examples of what you are talking about? Seems to be just emotions not actual experience.

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  26. David McManus

    Mukoh, numerous threads on this blog and in the forums have addressed this.

    http://seattlebubble.com/forum/viewtopic.php?f=1&t=1434

    In my neighborhood, people aren’t even getting offers at 2003 list prices.

    It seems like most of the emotion is coming from the sellers…..not the buyers.

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  27. Captain Kirkland

    Seattle is #1!!! ….given the state of the Mariners, Huskies, Cougars, and Sonics, it feel good to dominate something!!

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  28. rent for now

    I work in financial services.

    @The Tim – perhaps strong in comparison, but still got some tough sledding. For me, some consolidation in my dept. But I suspect it will get worse overall, no one is immune.

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  29. Joel

    I don’t think YOY drop in sales is a good metric for “Hardest area to sell in” because places like SD that have had enormous price drops are seeing decelerating sales declines due to sales of foreclosed homes. Neither area is close to the bottom but SD is closer than we are.

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  30. mukoh

    David, IMHO flops thread is not really valid real experiences of buyers.

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  31. david doosh

    Some well known acronyms:

    RTFM = Read The F*** Manual

    DYOFW = Do You Own F*** Work

    Here’s a new one:

    DLYFPIYWTSM = Dramatically Lower Your F*** Price If You Want To Sell, Moroon

    A word of advice for the sellers, if you’re lucky to hold on to your job then you may have a slim chance to wait till the storm passes (even with the 700b bail out it may at best be the end of beginning; Warren Buffett calls the economy lying flat from a cardiac arrest).

    With 2000+ sq ft that heating bill’s gonna hurt (PSE just announced a 10% increase), with yard maintenance cost going up, property tax going up for sure, that SUV tab tax is going up, junior and wifey are not going to sacrefice their life styles……etc….good luck to ya…….

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  32. David McManus

    David, IMHO flops thread is not really valid real experiences of buyers.

    No, but what you can see that even at list prices from 4 to 5 years ago the houses are not moving. If I’m a buyer right now, I know what reality is and have more wiggle room than a seller who still wants to sell their house at 2006 prices. Like I said, the emotion on this board is coming from sellers or people who work in the “industry”. All that media hype must be getting them down.

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  33. mukoh

    David, still no basis, but showing that you are emotionally involved as a future buyer for whatever it is you can afford.
    In opinions of some of the people I know who are big holders, prices were going to move to 2004 levels.

    Taking that into account new bailout will reduce someones mortgage to 2004 levels as well. And then they will just sit. :)

    Thinking maybe I should go and default on my mortgage to have it reduced by the bailout and sit back with a lower payment. Not that it is killing me.

    THe Flop thread is not a validation of anything, most of the house there are past the JUMBO limits and are at 7.5% financing, which is the upper echelon of buyers, which are sitting on the sidelines and taking a break.

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  34. David McManus

    Thinking maybe I should go and default on my mortgage to have it reduced by the bailout and sit back with a lower payment.

    Wow, can you not afford your payment? Or do you just not feel that you should have to pay? Do you feel like you go pressured into buying?

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  35. mukoh

    And as disclosure purposes, my affiliation with the industry is only through commercial loans on investment properties. My day job is a whole other avenue then RE.
    All properties are rented and have risen in rents 15% YOY.

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  36. mukoh

    David, I bought my house which is my 4th one for personal, long time ago before the bubble. It sits on this little hill overlooking the water. My loan is locked for 7 years at 4.5% non negam, regular normal mortgage. Just not a 30 year. And whether it resets makes no difference as I am at this point at 20% Loan to income ratio. House affords just fine for a long time to come.
    Just think it would be a prudent decision to drop a loan from $2500 a month to say $1500 a month. Especially since the law allows it.

    I did not get pressured I found the house myself and walked up to the builder and made a direct transaction getting it about 10% below that market.

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  37. David McManus

    Would that blow a hole in your credit?

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  38. mukoh

    That is what I will try to find out. My credit is perfect. If it does it makes no sense as it puts corporate credit lines at risk.

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  39. sunsplint

    RE agents are begining to tell their sellers to drop their prices. Sellers have not caught on to what is happening as a group. When they do, the home prices will drop as if on a greased slide fueled by competing sellers. I hope to position myself appropriately.

    One other note: explaining the reason why prices will drop to RE Agents seems to be a very difficult task. But, please spread the word. The sooner the industry knows what the expectations of the buyers are, the sooner the prices will align themselves to expectations.

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  40. WestSideBilly

    Buceri @ 4, Thomas @ 13, Timber @ 18:

    These are examples of what happens when you use a misleading statistic and make a list from it. They’re comparing July ’07 to July ’08, and most of the other cities mentioned had already tanked to very low sales by July ’07; July ’07 was still a so-so month in Seattle. So yes, our YOY drop is the biggest, but if you did July ’08 to July ’05 it would probably be a different picture.

    Whoever said Forbes is trash is correct. They love making lists, and usually compile them with next to no effort or thought put into the list.

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  41. vanderleun

    I’m looking forward to a first growth forest density of realtors’ signs at every intersection in Seattle on every weekend.

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  42. David McManus
  43. mukoh

    So is there a hiring freeze or not? Story is unclear. Thing like “things we have heard”, “things employees say” are made up without a confirmed source aren’t they?

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  44. David McManus

    I guess we will find out soon enough then, won’t we?

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  45. matthew

    at the top of my lungs with my fingers in my ears:

    “SEATTLE IS DIFFERENT, SEATTLE IS DIFFERENT, I CAN’T HEAR YOU, LALALALALALALALALALALALALALALALA!!!!!”

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  46. Kevin

    Microsoft will likely freeze hiring, that would be another factor driving down housing demand. http://www.reuters.com/article/ousiv/idUSTRE4928WP20081003

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  47. george

    Don’t take Forbes seriously but any way you slice it, this ain’t good news.

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  48. mydquinn

    Tim, the Forbes lists are kind of a joke. If you are going to post them, then please do explain why they are silly. For example, this is not a list of the hardest and easiest places to sell homes. It is a list of the YOY change in annual home sales. There is a big difference.

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  49. da bum

    This is that lag that I think Tim was talking about for the last year. The sagging sales prices were marked in late 2007 early 2008 in other cities, while Seattle prices “held on”. Well, no longer.

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  50. mydquinn

    Interestingly that “lag” keeps getting longer and longer. It started out being 4-5 months. Then it was 6. Then it was 8. Then it was 12. Now it is 17. Tim still has not provided any theoretical justification for its length. He just arbitrarily superimposed Seattle’s market trends onto San Diego’s & LA’s with no explanation for why those markets are more comparable to Seattle than other markets with different patterns.

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  51. Potential Buyer

    I just took a job in Seattle. I currently owe about 125K on my home on the east coat. It is a good and comfortable home. I looked at the price charts for Seattle (specifically the Kent area), and saw that around 2000, they were around 160K avg. In 2007 they were around 325K avg. I don’t know about you but my salary hasn’t gone up by more than about 25 percent. I am in information tech. I attribute that salary increase not to inflation but to career growth.

    I remember that around the year 2000 the DOW had just got done hitting 11,000. Right now it is below 10,000. I saw a chart that showed volume in sales beneath median sales price from 2004 to now. The thing that most stood out to me is the incredible dip in volume. Not an expert in real estate, but in stocks and futures, that is a pretty clear indication that a major change in trend is beginning. The prices are starting to trend down now.

    I am moving to the area but I sure as hell don’t plan on letting go of my home on the east coast or investing in a property in Seattle, until I see prices (for my home at least) down around the 2000 levels. On the plus side I just saw a great 4BR 2Bath home in Covington for around 160K which is what I paid for my 3BR 1 Bath back in 2004, so there are a few bargains out there starting to show up. I am still going to wait on buying for at least 6 months to try to find more and better bargains because I sincerely believe that they are coming whether people want to sell or not. I don’t think that many of them will have a choice.

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  52. Potential Buyer

    One additional thought. Earlier i saw someone post that people didn’t view the housing market the way that they do the stock market. I think that may be a misleading statement. 10 years ago, the average home buyer had no concept as to how the stock market worked or how to value a stock. Now with online trading and people using stocks as a retirement vehicle, I think that more and more home buyers are going to be inclined to look at the housing market the way they now (for the first time) are looking at stocks.

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