Here’s a brief roundup of a bunch of noteworthy items that have popped into my inbox and RSS feeds in the last day or two.
Aubrey Cohen: Current economic woes more like 1873 than 1929.
“When commentators invoke 1929, I am dubious,” writes Scott Reynolds Nelson, a professor of history at the College of William and Mary. “According to most historians and economists, that depression had more to do with overlarge factory inventories, a stock-market crash, and Germany’s inability to pay back war debts, which then led to continuing strain on British gold reserves. None of those factors is really an issue now.”
Nelson continues: “In fact, the current economic woes look a lot like what my 96-year-old grandmother still calls ‘the real Great Depression.’ She pinched pennies in the 1930s, but she says that times were not nearly so bad as the depression her grandparents went through. That crash came in 1873 and lasted more than four years.”
Noted.
Seattle Times: Microsoft hiring plans to face “adjustment” as tech spending slows
Microsoft confirmed Friday it’s re-evaluating its current hiring plans and “will make some adjustments as appropriate.”
Those adjustments are likely to be downward, given Chief Executive Steve Ballmer’s recent comments about Microsoft being affected by the economic slowdown.
Although the company still intends to keep growing, any reductions are unsettling for a region reeling from the fire sale of Washington Mutual, the sale of Safeco, a Boeing strike and a sputtering housing market.
Seattle Times real estate blogger Cindy Zetts shares some recent meandering excerpts from her blog, in which she appears to be trying to spin today’s market positively.
Aubrey Cohen also gives a good outline of what the local foreclosure auction scene looks like today.
That’s the foreclosure auction scene these days: lots of houses for sale, lots of cautious investors and an increasing number of civilians who think it might be a good place to get a home at a bargain price.
And lastly, Mr. Cohen again, who points out in his blog that local real estate broker Coldwell Banker Bain is thumbing their nose at the national Coldwell Banker office, declining to participate in the 10% off “10-Day Sales Event.”
“While I appreciate the effort to ‘make something happen’ relative to the more adversely affected markets in the U.S., we strongly feel the ‘retail’ mindset of this promotion is not appropriate,” Ron Sparks, managing vice president Coldwell Banker Bain, said via e-mail. “Homes are unique, and each brings a nuanced value proposition to the market. We do our very best to properly price our listings every day.”
In other words, “Seattle is special. Homes here are worth whatever we say they’re worth, and these stubborn buyers just need to deal with it.”
Jump to the bottom to add your comment. ↓
58 responses so far ↓
1
Jillayne
// Oct 4, 2008 at 2:11 pm
Thanks for the link to Aubrey’s article on foreclosures. I had been wondering what the auction scene looks like today compared to 2005 when it was a feeding frenzy of starry-eyed new flippers.
I wish there was a way we could track the increase in REOs as a percentage of inventory. Is this possible, Tim?
2
Matthew
// Oct 4, 2008 at 2:20 pm
The panic of 1873, or Long Depression, is an interesting period of time we could learn valuable lessons from. It used to be called the Great Depression, until the Great Depression came and ended up being more severe.
However this unfolds, it would appear that history does indeed repeat itself. I still think that our current situation is more akin to the Great Depression than it is to 1873, but we will see.
3
Crusader
// Oct 4, 2008 at 2:32 pm
I hear that all companies are instituting hiring freeze on high-salaried openings right now.
Matthew - any evidence to point that we’re in anything worse then the 1979-1982 recession?
4
Sniglet
// Oct 4, 2008 at 2:39 pm
Anyone who still thinks Seattle area real-estate is special should just ask themselves one simple question: what impact will there be on the local economy if Boeing, Microsoft, and Amazon all start laying off thousands of employees by the end of 2009?
As the recent news items illustrate our local firms are NOT immune to the global economic conditions, and are already responding to changing conditions (e.g. with various degrees of hiring freezes, etc). All this and we haven’t really entered a recession of any significance yet!
To be fair, I do believe that Seattle has some great companies, many of which will survive the coming depression better than most of their competitors. That said, it is terribly naive to think that they won’t embark on any cost-cutting and staff reduction exercises to cope with a contracting economy.
5
Crusader
// Oct 4, 2008 at 2:46 pm
Sniglet - where did you get the idea we are headed towards a depression? How about a recession first?
6
Sniglet
// Oct 4, 2008 at 3:02 pm
http://surkanstance.blogspot.com/2008/09/its-official-depression-just-ahead.html
7
Jonny
// Oct 4, 2008 at 3:03 pm
“I hear that all companies are instituting hiring freeze on high-salaried openings right now.”
all companies? source?
8
pfft
// Oct 4, 2008 at 3:05 pm
As someone who had read about the housing bubble for year and has heard the excuses for other areas like San Diego, phoenix and Florida it’s amazing that people don’t learn from the past. this isn’t even the past we’re talking about. we’re talking about 2005 and 2006.
do Seattle used home saleman only get Seattle news? maybe they’re too busy looking for that “gem” they keep telling us about?
9
Ira Sacharoff
// Oct 4, 2008 at 3:11 pm
“do Seattle used home saleman only get Seattle news? maybe they’re too busy looking for that “gem” they keep telling us about?”
Believe me, even in places like Las Vegas and Miami, real estate agents are lying through their teeth talking about how they’ve hit bottom, now’s a great time to buy, etc..
Seattle’s not special, and Seattle’s real estate agents aren’t any more or less ethical than their counterparts in other places.
10
david losh
// Oct 4, 2008 at 3:40 pm
Please!!!
I’ll say it again, the Real Estate market place never changes. People buy and sell every day for a wide variety of reasons. The stock market is the same today as it was in 1929. People buy, sell, and trade investments every day.
The Bottom??? What is that? Are you really waiting for the market to determine your investment strategy?
You play the odds.
If you’re trying to say the house always wins, that may be true.
In Real Estate you are the house. you make the play, the deal, that makes sense at the time. There are always strategies along the way.
Sales people?
Real Estate is not a commission sales position any more than Stocks are.
11
david losh
// Oct 4, 2008 at 3:58 pm
OK, I’m much calmer now, but this is ridiculous.
Aubrey’s a nice kid and all, but what does he have to say about anything?
Never get me started on Cindy Zetts.
This is the problem right here. You’re talking about propaganda. If a house is the largest investment you are going to make why isn’t that decision taken seriously?
Why not just have your mortgage rep and an attorney handle everything for you? Why trust the guy at the church? What is wrong with people?
I’ve bought and sold many houses in my career and I always ask advice from people in the business. I make a decision based on current and future economic conditions. It’s my research, but it’s with input. I’m not the sharpest tool in the shed, so I rely on a second opinion, one that I trust has had years of experience.
12
Matthew
// Oct 4, 2008 at 4:15 pm
Crusader,
The main difference between now and 20-30 years ago is the level of household debt. The debt burden on the middle class is larger than it has ever been. Now that J6P can’t tap into his home equity, he has been putting more and more of his debt onto credit cards. Credit card balances are higher than they have ever been right now.
There is also a huge amount of wealth being destroyed by the decrease in housing prices. Trillions of dollars in equity has already been erased, and we still have a long ways to go before the bubble is deflated.
Baby boomers are beginning to retire, which is going to continue to be a drain of government entitlement programs (medicare, medicaid, social security, etc.) Many boomers were counting on their new found housing wealth to help them into their golden years. This dream is quickly turning into a nightmare.
This country has become a nation of debtors, and not a nation of savers. This is also the case with the government. What you are seeing right now are the consequences of a decade of an orgy of spending by both Americans as well as the American government. It’s all starting to unwind, and it’s going to be a long, painful lesson for some. When all is said and done however, I believe this country will come out stronger, and people will learn the lesson of “a penny saved is a penny earned”.
I was young in 1979, and don’t remember the recession all too well, but from what I’ve read there weren’t major bank failures, a commercial paper freeze, or a nationwide decrease in housing prices. The American consumer also did not have nearly the amount of debt that he had in 1979.
13
Scotsman
// Oct 4, 2008 at 4:51 pm
Crusader- if you want to read, CHS has great summaries of current issues in an easy to read style. I’m sure your questions will be answered. You may not sleep well though.
http://www.oftwominds.com/blog.html
14
b
// Oct 4, 2008 at 4:55 pm
Matthew -
I think this recession will be worse than the 70’s just for the reason that most households are dual income these days and still barely above water. In the 70’s it was likely that in rough times, Mom could go out and get a job part-time or whatever to help things out. These days Mom and Dad are already both working and still not saving, so the jobloss risk to the household is doubled and the ability to make up any loss quickly is gone.
15
softwarengineer
// Oct 4, 2008 at 5:13 pm
GOOD TAKE MATTHEW: EXCEPT HOUSEHOLD INCOMES
Seattle has about 1.2 household incomes per household, on the average. About half of Seattlites are singles, like Softwarengineer. About half the married people only have one income per household. The average income is about $33,000/yr per Census Bureau, albeit this Joe Lunchbox average is decreasing with uncontrolled population growth and wage competitions.
A good witches brew for a Seattle housing price collapse to last for years [decades?].
16
Matthew
// Oct 4, 2008 at 5:59 pm
B/Software,
I agree with you both. There are also a myriad of other reasons why this is different than it was in the late 70’s-early 80’s, but those were a few on the top of my mind. There is also the outsourcing of almost all manufacturing jobs in urban core areas throughout the U.S., people living longer (straining entitlement programs), and peak oil (if you buy into it).
17
jonness
// Oct 4, 2008 at 6:39 pm
David Losh:
Have you given up on your pitch for all people to donate $10 to this site? It’s a good pitch bro. If you hadn’t made the case, I wouldn’t have donated. The bottom line is, if you use this site regularly, $10 is extraordinarily cheap rent.
Peace out :)
18
Ray Pepper
// Oct 4, 2008 at 6:43 pm
I started an exhaustive GEM search last night on the MLS. I couldn’t find squat in Pierce/King/Kitsap County. I still say the current BEST Gems are 800 miles south of here where the homes that hit nearly 300k are now sputtering around 130-150k. They all rent for a 1000. I’m waiting for 110k on those and always looking for mixed -use commercial.
19
Ray Pepper
// Oct 4, 2008 at 6:54 pm
I never heard the 10.00 pitch deal from David Losh. I have something far more valuable for Tim and everyone else. The brand new, form fitting 500 Realty T shirt. The delivery arrived Friday just in time for the 2 Home Shows Next week.
I don’t know if its the message or the material in the shirt but it seems to make me look even more handsome by focusing attention away from hair loss, pot bellies /beer guts, and most forms of psoriasis I have to get them in Wal Mart somehow……..
20
magnolia44
// Oct 4, 2008 at 7:00 pm
So this site went from wanting the seatle bubble to burst so homes could return to normalcy to now calls of depression and deep recessions and if you read closely, there is almost a joy that those things may happen. A joy that a depression or hard felt long lasting recession will hit.
This site is almost becoming a creepy place with the happiness people would feel, an almost “i was right i knew this would happen so im happy” is the feeling i get from reading some posts. Good luck with that..hoping homes come down 20%+ hey more power to you, but the rest of the sh%t people seem to be wanting is pretty sad.
21
wreckingbull
// Oct 4, 2008 at 7:37 pm
Maggie 44
I have been awaiting this recession for a long time. It is akin to a nice vomit after three days of drinking. The turds (read: parasitic, inefficient industries) finally get flushed. Are you ready? I am. I certainly am not looking forward to the next 3 years. The dry-heaves are going to hurt. When they subside, I look forward to the prospect of trying to rebuild the steaming pile of doo-doo that has become of our nation. Hey, maybe we can even get a positive savings rate. (baby steps first) When that happens then perhaps we can start work on that $10 trillion bar tab.
22
Timber
// Oct 4, 2008 at 7:39 pm
“So this site went from wanting the seatle bubble to burst so homes could return to normalcy to now calls of depression and deep recessions and if you read closely, there is almost a joy that those things may happen. A joy that a depression or hard felt long lasting recession will hit.
This site is almost becoming a creepy place with the happiness people would feel, an almost “i was right i knew this would happen so im happy” is the feeling i get from reading some posts. Good luck with that..hoping homes come down 20%+ hey more power to you, but the rest of the sh%t people seem to be wanting is pretty sad.”
No one wants a depression here. People just think that at this point it is growing more and more likely. Even people in the government and in finance have been using the term depression so its not that far out there. People on here have been keeping up with the economic developments for the most part and the future outlook for the economy is not good according to almost everyone except for the people with their heads in the sand. The economy and the possibility of a recession or depression will greatly effect peoples ability to buy homes and therefore is the main topic of discussion here lately because most want home prices to return to reality and for the average family to start saving and stop living off of credit.
23
david losh
// Oct 4, 2008 at 9:16 pm
For one thing the credit market came as a surprise to me and I pay pretty close attention. It was something in the back of my mind but never saw this coming. Some people here did.
Personally I think that everything is a bubble. I have stayed away from the stock market because it seems completely over priced. I believe people will wake up one morning and say, hey, wait a minute, the stock market is double or triple the price it should be, but it goes on and on.
The difference between today and any time in history is the internet. That’s the $10s. In the upper right hand corner of this web site is a button to contribute $10 to the Tim’s enterprises.
It’s just $10s for this amount of entertainment.
I come here to be educated about the economy and it seems to be working. When I talk with people about the economy they look at me more sideways than usual. It has to do with this site.
What I would like to do is show the power of the internet by making the Tim a million dollars. That’s what is different today. Huge corporations make billions of dollars putting ads, or buttons, or manipulating internet presence.
Why not the Tim? Better yet, why not you, or the guy down the street.
The internet is a powerful business platform. Corporations use it, manipulate it, build onto it, and it’s gobal. If we all kick the $10s to the Tim he’s rich. He then can do what he wants with his capital, but it’s an experiment.
24
Matthew
// Oct 4, 2008 at 9:38 pm
If anyone was wondering where the 700 billion was going to come from, looks like the Chinese are going to buy some more debt:
http://translate.google.com/translate?u=http://www.dwnews.com/gb/MainNews/SocDigest/Economy/2008_10_4_18_16_6_636.html&hl=en&ie=UTF-8&sl=zh-CN&tl=en
http://www.bloomberg.com/apps/news?pid=20601080&sid=akO3ktmnUkyQ&refer=asia
China basically told the U.S. “let us unload our toxic assets through your banks, and we will buy more treasuries. Don’t let us unload our cr@p sandwiches and we are done buying US Debt”.
Guess what happened???? The bailout bill passed.
25
Sniglet
// Oct 4, 2008 at 9:44 pm
It’s hard not to be a little smug these days, considering how much aprobrium I have been getting from friends, family, and colleagues over the last decade. Nearly everyone I know (including family) thought I was a nutter for selling my Bellevue home in 2003 (and have been renting ever since), due to my fears of what I saw happening with mortgage securities and credit default swaps.
Worse, it has only been this year that all my negative investment strategies have finally begun to pay off.
I never wanted us to have a depression, but it is certainly a big relief to now have my friends and acquaintances ask ME for advice (the guy they thought was off his rocker), and see the criticism of my decisions vanish. I may have a thick skin, but it still rankled to have my in-laws and neighbours tell my wife and kids that I was making a grave mistake for our family’s future by not getting back on the housing price escalator.
So, yes, I am feeling SO much better these days.
26
Matthew
// Oct 4, 2008 at 10:05 pm
Do I look forward to a depression? Absolutely not. Do I look forward to a United States of America in which I don’t see the following:
13 year old kids with cell phones, iPods, flat screen tvs in their bedroom and their own personal computers
Women who feel it a necessity to own 700 dollar shoes and handbags
Every family owns a 50k gas guzzling SUV
McMansions everywhere
CEOs with salaries 100 times higher than their workers
Shows like cribs, flip this house, Sell this house, etc
Celebrity worship
etc. etc. etc.
An adjustment of values and work ethic is coming to a neighborhood near you.
27
economist
// Oct 4, 2008 at 11:01 pm
“The Bottom??? What is that? Are you really waiting for the market to determine your investment strategy?”
Yes. If someone else is willing to pay more for a house than it’s really worth, I’m not buying. And that goes for any other investment too. It’s all about value.
Shocking fact: I don’t regard buying a house as an end in itself. Just a cost-effective way to have a place to live - when the price is right.
“What you are seeing right now are the consequences of a decade of an orgy of spending by both Americans as well as the American government”
A generation, not a decade. Take a look at the link below, in particular the debt versus GDP graph. Consumer debt has followed a similar pattern.
United States National Debt
28
Ray Pepper
// Oct 4, 2008 at 11:10 pm
Now this is truly depressing! I think we have all been to the Fitz!
http://oldreno.net/fitzgeralds.htm
29
Markor
// Oct 5, 2008 at 12:15 am
You want depressing? In the 1873 bust Seattle land values dropped 90%.
30
didn't just fall off the turnip truck
// Oct 5, 2008 at 1:11 am
Matthew@24
You Wrote: China basically told the U.S. “let us unload our toxic assets through your banks, and we will buy more treasuries. Don’t let us unload our cr@p sandwiches and we are done buying US Debt”.
Yes, you are dead on in my estimation. The US got a margin call from its largest lender.
31
LeftOverpricedSeattle
// Oct 5, 2008 at 4:48 am
Ray,
I am a little confused, it says November 30, 2008 as the date of the announcement about Fitz???
I completely agree with you on Reno and the Reno metro. My old home in Cold Springs is dropping VERY close to what I paid for it NEW in 1997.
Looks like some REAL bargains are to be had in Reno.
Double Diamond, which I always thought was a totally crappy subdivision (slab floor foundations on a former flood plain/meadow is NOT a good idea long term) seems to be teeming with foreclosures, etc.
My brother lives in DD and to see his home value drop from $480K to $317K with a 1998 purchase price of $201K and no bottom in sight is pretty wild.
Is Douglas County getting nailed as well? I never could understand the appeal of Minden personally.
The West side of CC seems pretty solid so far, what do you see?
32
anony
// Oct 5, 2008 at 7:15 am
RE # 10 “If you’re trying to say the house always wins, that may be true.
In Real Estate you are the house. you make the play, the deal, that makes sense at the time. There are always strategies along the way. ”
This analogy got me thinking. You are not the house, the real estate industry is. You can win or lose money, either way the house gets 6% of the pot.
More similarities:
No money is actually being created, it only changes hands.
The average profit of everyone at the table is negative 6% per hand. (excluding finance charges)
The only way the house can lose is if people stop playing the game..
Of course unlike poker, we are dealing in something of value here. Real estate is worth something and the industry does a legitimate service helping to buy and sell. Whether they perform the service well and ethically is up for debate.
I would say the house’s problem now is they kept pushing for bigger and bigger pots to increase that 6%, but now all they have is $500 limits when people can only afford to play the $100 table. Very few people are playing right now.
33
Ira Sacharoff
// Oct 5, 2008 at 9:24 am
So why would David Losh, a real estate agent, be suggesting that readers donate ten dollars so that this website can continue to thrive?
For the same reason that I am. I’ve advertised here, and donated.
It’s important that people get clear, accurate information that’s not commonly found in the mainstream media.
The fact that this information is not favorable to the real estate industry in general is immaterial…I think it speaks well of David Losh and myself that we follow and recommend Seattle Bubble.
I can’t speak for David Losh, but I’ve learned a lot following Seattle Bubble.
As a real estate agent, I feel that I can’t really have long term credibility if I’m just parroting real estate industry gospel.
34
rose-colored-coolaid
// Oct 5, 2008 at 9:58 am
#20 Magnolia44,
I think it’s a mischaracterization - and one I’ve started to hear regularly - that any of the “bears” are eager for a depression. Ask anyone these questions and you’ll understand.
Do they want volatility at their job, with the possibility of being laid off in a difficult job market?
Are they looking forward to their friends/family being unemployed/underemployed?
Do they hope families with children lose their homes?
Are they happy many peoples retirement or those already retired might lose significant portions of their nest eggs?
Nobody will tell you they look forward to any of those things. Or, if someone does love those prospects, I’d rather not deal with them.
What you’re seeing instead is people looking beyond the recession or coming depression and being optimistic that it will make America better. Many people live on Ramen and little sleep for a few years while they go to college. It’s a poor existence, but you put up with it because you know it’ll pay off for the next 50 years.
That’s how I see what’s coming. It’s going to sting. A lot of people will be hurting. People are going to have to help each other to make it through…but maybe, just maybe it’ll make America a better stronger nation. Maybe we’ll see all that we’ve traded over the last 20 years to get 42″ TVs and 4-ton SUVs, and maybe we’ll reprioritize. Maybe we’ll stop trying to be the world’s police, and go back to being the world’s role model. Maybe we’ll realize that the life of an American is not worth more than that of an African, even if we’d like it to be true. And maybe we’ll final admit that the “greatest nation in the world” is not a birthright, that it’s something we all have to work hard for.
Or, we can all just decide it hurts too bad, declare a mulligan, and then pass the bill off to our children.
35
david losh
// Oct 5, 2008 at 10:48 am
Many people focus on the 6% commission as the house.
Many people have account executives at brokerage houses buy and sell investments.
You may chose to ETrade, you may chose rodfun for a Real Estate transaction.
The 6% I have agrued for years is the cost of doing business. If you do a transaction in New York, back in the day, I don’t know about now, every body has an attorney. 6% from start to finish, to me, is a bargain if you get value. Many people just don’t.
Many people hire a neighbor, friend of a friend, the local shmoe sitting in the real estate office. Way back in the day the shmoe in the office was there because he was in the Real Estate business.
Today everybody thinks they know something about stock, or Real Estate. I hear and read ridiculous assertions about both.
Pay attention, because this is from years, many years of experience, you’re not getting a deal unless you have inside information. If you are not getting insider trading tips get another account executive.
Check the “we want a home to live in” at the door. Real Estate is business. If you are not hiring a baracuda, or a shark to represent you keep renting.
You just saw what happens when you hire the neighborhood cheer leader. Get some advice so you can make wise decisions.
If you are spending a half a million dollars I think you want some one better than an Edward Jones sales person.
36
Crusader
// Oct 5, 2008 at 11:16 am
There are people here who are salivating at the prospect of a Great Depression II. They think that they will be ok, while the rest of us are waiting in bread lines and queuing up to soup kitchens while they cackle in glee….
37
Ray Pepper
// Oct 5, 2008 at 12:48 pm
LeftoverpricedSeattle——-Yes, Minden is nailed. My parents used to live there until we moved them to Dayton 89403. The Dayton properties have come full-circle from when they hit the mkt at 160k–to 300k to now 150’s. I focus in on the Builder Lakemont and the golf Course Community Legado. They all rent for 1000+. The builder and golf course are now in Bankruptcy and I’m watching what they will do with their 20+ homes sitting. Can you say GEMS!! It could get real bloody!
I heard DD is in the process of bottoming out. I never bought there for it was just too expensive to pencil for me. I don’t track it. All I follow is 89403 and 89406 because of the military base. I have contacts there and its where I’m waiting to place my money. I want to pick up the homes for 110k-130k. I’m not sure I will get any but who knows. They are very nice homes. All 1300-1400 sq feet, tile roofs, fenced, etc. I’m not looking for residential though. My parents neighbor ( a deputy) just killed himself in his home because of his ex. The home has been sitting for months due to investigation but needless to say its on my list. Very tragic but hey………its right next to Mom. The entire community is mourning the event.
As for the Fitgerald. I also noticed that Nov 08 they are closing the club. When you call nobody answers. They lost alot of landmarks. I tend to go to Peppermill and Atlantis when in town. I also like The Nugget in Sparks.
Leftoverpriced-I have been here for 24 years. I’m 42. It is my intention to retire in Dayton in time. I love Tahoe and Reno-Sparks. I have a vacation home there and were just about to open 500 Realty in Reno. My kids are in school here and its always a push-pull of leaving or staying. I will always be a Nevada guy. I say I will get it open in July 2009. The licensing division in Carson reviewed our website for compliance and as they stated to me ” We welcome different types of real estate models based on Lead Generation.” I will keep you posted!
See you at the Home Show!
38
jonness
// Oct 5, 2008 at 1:06 pm
“This site is almost becoming a creepy place with the happiness people would feel, an almost “i was right i knew this would happen so im happy” is the feeling i get from reading some posts. Good luck with that..hoping homes come down 20%+ hey more power to you, but the rest of the sh%t people seem to be wanting is pretty sad.”
You really do miss your bubble don’t you? Isn’t it great when you first borrow a bunch of money? Wow, if only you never had to pay it back!!! Life would be perfect. :)
You accuse bubbleheads of being perverse? The perverse people are the unaware whom continue to borrow without the slightest clue of the economic repercussions that retarded fiscal policies create. The key to getting the country in order is to get the debt under control–not create more!
Always question authority: Who stands to profit?
39
mukoh
// Oct 5, 2008 at 3:36 pm
Don’t worry guys Sniglet gets his facts from blogs. It gotta be right.
As far as Microsoft, the situation with them slowing down on hiring is a neutral effect. In times when they slow down on employees they push work onto contractors which in our area we have a ton of agencies that have contracts with Microsoft. An agency in Kirkland had an increase in work orders from Microsoft this Friday and they are hiring more contractors.
40
mukoh
// Oct 5, 2008 at 3:41 pm
Ray,
BTW did you see the LV sales come up 80% MOM in Sept?
41
LUC
// Oct 5, 2008 at 4:01 pm
Mukoh,
To cut costs, you need to quit hiring employees and start hiring contractors. To counteract the fact that temporary contractors are less productive because of their lack of institutional memory, you need to hire even more contractors. Therefore, I don’t think hiring contractors is beneficial to Microsoft…you can only throw so many employees on a project before it becomes too unwieldy. Oversight becomes impossible and duplication of work becomes inevitable, with the “one hand not knowing what the other hand is doing” adage coming into play.
42
BrianL
// Oct 5, 2008 at 4:13 pm
If you believe Russian researchers, 4-7 million people died of famine during the Great Depression. I have no idea if this information is accurate, as I can’t many states to correlate this number. Lets assume it is true for the moment.
The people who are aghast at the ‘Oh yay, a depression to purge the system’ aren’t upset that credit would be sure under such as situation. They’re horrified by the idea that people cheer on a condition that - last time it occurred in the US - resulted in millions of people starving to death.
There are people here cheering a recession or depression as an equalizer - as a toxin that clears the system. Frankly, I don’t think they understand how much damage the toxin may cause to those who are innocent in all of this.
43
mukoh
// Oct 5, 2008 at 4:17 pm
LUC,
Microsoft hires contractors to do a specific set portion of software project. For example Live mobile search was 80% hired out to local contractors and one portion to indian contractors. Whether it is productive or not we will never know, as from a contractor this week I heard they unloaded a long project on them.
44
LUC
// Oct 5, 2008 at 5:31 pm
You missed my point. Microsoft loses their experience and expertise when those contractors are turned over. I would hedge my bets that it is not productive because you end up in a constant cycle of having to train and get personnel up to speed on current projects instead of channeling money and resources into developing new products in-house. I’ve seen this happen in the Biotech industry.
45
jonness
// Oct 5, 2008 at 6:13 pm
@41
Isn’t the goal is to hire contractors to implement the system after the architecture has been completed. In-house experts will manage the system building. Thus implementers are not required to know anything other than the public interface of the module they are assigned to work on. This limits the amount of business knowledge contractors must possess and allows them to work productively.
Okay, that’s my theoretical BS for the day. My question is, why does my proposed method not work in the real world?
46
jon
// Oct 5, 2008 at 6:51 pm
Last I heard, contractors could only work 9 months and then either have to get hired or take six months working somewhere else before they could contract with that company again. That may or may not mesh well with the development process. Considering it takes several months before a team starts working well together, that doesn’t make for very efficient development. In some places, it takes several months just to learn the use whole development environment effectively. For many tasks, you can have people develop in a little sandbox, but then you aren’t using very much of their potential value to the company. For example, those people aren’t able to contribute to making the overall project better. That’s fine for large waterfall type projects, but those doesn’t mesh well with a fast paced marketplace.
47
mukoh
// Oct 5, 2008 at 9:40 pm
jon,
Contractors work for years. They switch from contract to contract.
Again whether it is effective or not time will tell.
48
LUC
// Oct 5, 2008 at 10:43 pm
Mukoh,
I think you see the effects now… Apple and Google are immensely more innovative that Microsoft.
49
Joel
// Oct 5, 2008 at 11:21 pm
What kind of contractors? V dash or A dash?
50
Joel
// Oct 5, 2008 at 11:33 pm
Actually strike that, only A dash are contractors as V dash are vendors. And since A dash have to take 100 days off after a year of work it’s not nearly as seamless as a full-time hire and that’s assuming MS is stupid enough to put a contractor on a multi-year project instead of just hiring them full-time.
51
mukoh
// Oct 5, 2008 at 11:40 pm
Luc,
Effects of what? That MS still has 97% of the desktop OS market even with Vista blunder? There is no effect, Google and Apple surpass MS in search and the other in gadgets. We know where that took apple last time.
Not a big MS applauder, have had my ups and downs through the 19.00 to 35 dollar range.
Whether something is effective or not none of us can judge that.
What the fact of the matter is, the hiring freeze/HR re-evaluation brings more work to contractors, who on the other hand get paid way more then employees.
52
mukoh
// Oct 5, 2008 at 11:41 pm
Joel,
I was referring to vendors, not the typical temp contractor.
53
LUC
// Oct 6, 2008 at 12:07 am
Mukoh,
You have to take into account health insurance and taxes. That would bring a contractor’s earnings down to the same level as a salaried employee.
54
LUC
// Oct 6, 2008 at 12:13 am
Also too, the firm that the contractor is employed with would take a cut of the hourly wage that is being charged.
55
LeftOverpricedSeattle
// Oct 6, 2008 at 6:08 am
Ray,
Thanks for the info. on Reno/Tahoe.
I had a 1/3 acre in Dayton in one of the small subs. Was going to build a home on it back in 2002, decided against it.
I went to Fritsch Elementary on the West Side of CC for a time and spent my summers in C.C. (Most of my family still live in CC or Reno).
I’ll email you offline. Ever met Damian Janssen, Charlie Kitchen or Bill Custer in your dealings? All three are Reno/CC area realtors that are acquaintances of mine.
Thanks again (P.S. Still love the Nugget’s Awful Awful, especially the downtown counter version!).
56
Rodney
// Oct 9, 2008 at 1:21 am
Mukoh, you comments about Microsoft adding more contractors when full time hiring stops is basically true (I have been an “a-” by choice at MS since 1999), contractors are required to take a 100 day break after being with MS a maximum of 365 days. Lending institutions understand how this planned unemployment works, and take that into account before issuing a loan. I know because I just had this discussion with a mortgage broker a few days ago. She said, “oh, you’re a contractor - that will definitely affect the banks perception of your income.” The banks apparently are all too aware of how this works, and will restrict the loan amount accordingly.
One more interesting development - MS is starting to place full time new hires in their Vancouver BC campus. My tiny team of 10 just added two full time positions up there. Those positions were originally slated for Redmond, but as they are fresh out of visas, they headed north. These new hires will not be transferring here for years at the earliest. This trend will only grow in the near future. So while MS the company is adding new people, many of those new folks will be spending their paychecks on Vancouver real estate. Another hit to the local market…
57
David McManus
// Oct 9, 2008 at 7:19 am
Well, if I can interject after having done consulting / contracting for the better part of 15 years and now running a consultancy……
The non-MS contractors (Java devs, Oracle DBAs) make wayyyyy more than M$-exclusive contractors. Hands down. The quality of the finished product seems to be better too.
58
Rodney
// Oct 10, 2008 at 9:21 am
Hey, thanks for the insight David. I will definitely look into those non-MS better paying positions :-)
But back to how a Microsoft hiring freeze (for full time employees) will affect the local housing market. One word - adversely. As MS switches to contractors that means they will be hiring local talent only. You can’t bring in someone from India to work a contract very easily, if at all. The workers MS brings in from other places were a huge part of what fueled the housing boom in this area. Introducing a new consumer making 80k to the local economy puts upward pressure on housing. Contractors are already living here in their own houses. As the economy constricts, even a contractor’s position becomes more tenuous. That contractor may not be feeling the consumer confidence to risk an upgrade. To make matters worse, MS is placing new hires in their Vancouver BC facility. That new hire will likely reside at the BC campus for their entire Microsoft tenure (visa issues). My tiny team just added two FTE’s that way. With the current conditions, I don’t see any politician bold enough to try and raise the foreign worker visa limits in the middle of a recession. Heck, they couldn’t even raise the visa limits from the 9/11 levels during our recent boom. Now it seems like a visa increase is years away. Those foreign worker visas were the fuel to the Seattle housing fire. No contractor is going to supplant himself from say Chicago to here for a 6-12 month project. They certainly won’t buy if they do bother to temporarily uproot themselves. That person is a called a renter.
The MS hiring binge introduced a ton of well paid future home owners. This led to local MS partner companies bringing in their own high paid talent. That is all about to come to a grinding halt, and even a contraction with the MS partner-company payrolls. All of this will result in a shrinking number of potential home owners, ie, ever lower home prices.
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