CA is proposing levying extra taxes on houses > 5000 sq ft who’s to say it won’t happen here? There is already budget shortfalls in King county and with the recession going forward that budget shortfall has to be made up.

With Mass Transit just passed and the new 520 and Viaduct where is that money coming from?

With the right wing free-market philosophy out of the office in DC, the new gov’t will now emphasize fiscal stimulus to revive the economy and one of the ways is spending on infrastructure–where is that money going to come from?

Less borrowing from foreign gov’t means more need for domestic funding–i.e. taxes

Going forward the country has to become more thrifty so I can totally see taxes levied on energy consumption (that mean the bigger your house is the more tax you pay).

You want better schools? Tax the property owner…..

Anyone want to buy some beanie babies? Just kidding, I didn’t buy in to that bubble either. But dang, I sure wish I had bought some of those tulip bulbs….

the census provides the numbers, look at my link in the first post. we are now back to 1960 levels of population here. the population declined a lot in the 70s and 80s and is just now getting back to previous levels. I think the trick or treat difference is that most parents today are psychotically paranoid. myself and most people I know live in kid-dense areas and didn’t get many trick or treaters either, and it isnt due to a lack of children.

they were torn down in the 70’s and 80’s. when city populations declined in seattle and all over the country. tell me, do you think that cannot ever happen again? there is plenty of space outside of seattle and no reason the population can’t decline in-city again. there has been a resurgence of city living in the last 15-20 years, but there is nothing to guarantee that will always be there. when seattle starts getting to san francisco density levels, then we can talk about more permanently high prices.

And the office buildings used to be apartments and homes. The census doesn’t lie, its pretty "golly" accurate for such a survey in fact. You can choose not to believe it, but I am not sure why. In-city living declined for a while pretty much everywhere in the country during the 70s and 80s, the fact we are getting back to old levels shouldn’t really surprise you. Density is important, but Seattle’s density even now is not that great comparatively. A few thousand extra units in condos for a city of 600k and 60%+ homeownership is barely a ripple.

i’d be happy to purchase 1800 sqft for $700K …. if I knew it was going to appreciate at 15% a year (and my cost of borrowing was 5%)…. not realestate’s fault…

thats not true in the slightest. the population of Seattle is around what it was in 1960. the makeup of the city may have changed, but the amount of people who live in-city hasn’t changed much at all.

http://www.ci.seattle.wa.us/dpd/cms/groups/pan/@pan/documents/web_images/dpds_006607.jpg

“I look forward to the time when you decide to participate in the solution.”

I know you weren’t directly this to me, but I just wanted to say that I have been participating in the solution by not participating in the problem to begin with. I think this is how Thomas feels also.

People/families with incomes of about $70K/year, or even lower, have been buying $400-500K homes during the past few years. That’s the problem, in essence. That was/is the market.

Reduce the demand for that market and what’s going to happen? The price will begin to drop, and it will continue to drop until “revision to the mean” occurs.

Demand is already dropping for several reasons, not the least of which is the scarce availability credit. Moving forward, banks will require good credit, a solid income, low debt and a large down-payment to qualify for a mortage. This is how is should have always been. But, credit standards got loose, this is what allowed prices to shoot up disproptionately with incomes. Ergo, these prices are not reflective of the underlying fundementals, which are based on median analysis.

Also, recently home-ownership numbers have been about 70% in the US overall. I doubt that number is significantly different for the Puget Sound area in general.

Granted, median incomes and median home prices are not tied at the hip, but they are a good overall indicator of the state of a given asset market, which is why they are used instead of mean averages. It conveys more of a the distribution of the sample.

I’m not a wiz with statistics like The Tim, but I do have an ample “this just doesn’t seem right” sense about me. I recall in 1999 when I heard that an Internet startup made a billions dollars overnight on an IPO; I said this is not sustainable, we’re going to see a crash. I frankly didn’t know much about economics or the stock market at the time, but when something stinks you don’t need an MBA to smell it.

So, in closing, what I’m saying is that these $400-500K houses are not really worth that. Most of them should be priced such that median income buyers can afford them. That means somewhere around $250-300K.

If only people at the 75th percentile, which a way above medain incomes, can afford the median priced house, I see a large gap in demand to sustain the $400-500K price. What, are all the 75th percentilers going to buy up all the excess inventory so that they can rent it out at a loss to the median income earners?

The market is unsustainable at it’s current price, and we’re seeing demand drop way off and the prices declines are in the double-digits in some areas of the Puget Sound already.

I don’t hate anyone.

Amen to the new Viagra spokesperson John McCain.

The ‘funny’ thing about that, is you pretty much described both my parents and grandparents. They had ‘regular’ jobs, saved what they could, and owned in-city homes. It is all coming full circle and I am a little surprised you don’t see it.

Don’t hate us since we chose not to overpay. I look forward to the day I can make a cash offer on a small, modest, in-city home. Almost there, and yes, my job is pretty darn ‘regular’.

Doubtful. The homeownership rate among retirees is above the average. Old folks with low incomes make up a substantial subsection of the homeowner population.

LOL!

Now if the article was in a credible publication…such as People or The National Enquirer…then I might give it credence.

Your post at 27 is as much a stretch as 15. Your post accuses both Steve and me of being bubble deniers. Steve predicted some time ago in the Everett Herald that prices would decline 10-20% from their peak and then stay flat for a period (accounting for inflation this would be more than a 10-20% decline, and was the first of our local expects to predict any kind of decline at all). In post 1, I predict prices to fall another 1/3 from where they are today. Added to an existing decline from the peak, this totals a 40% drop, again not counting for inflation. It is a real stretch to say that either of us are bubble deniers. We merely differ on the size of the deflation necessary to remove the bubble.

As you say, America is angry and frustrated, and the tone of your posts suggests that you are more so than the average American. I believe that the housing bubble is only part of a greater debt bubble that must deflate, and further would suggest that within the next three years the physical limitations on oil supply will create greater economic chaos than the collapse of the housing bubble currently is. Whatever the causes and where we would like to lay the blame, the only way forward is for all of us to set emotion aside and make rational decisions that enhance the productive parts of our economy. Until then, nothing will get better, not housing prices, not the price inflation/deflation seesaw, unemployment, nothing. I look forward to the time when you decide to participate in the solution.

Oh the conundrum of predicting inflation and/or deflation [maybe both, depends on the commodity?] for 2009 and even on to 2030….

It depends on the value of the dollar and what it buys abroad and in America.

If we remain addicted to oil, then $1 Trillion a year goes to energy and into our great grandchildrens’ debt…..will driving cars less help? Some, but food consumption has been down played by our media types as unattached to energy, where in reality it is almost all of our energy consumtion [per capita folks]. So is getting potable water out of deeper and deeper wells, without sea water mixed in with it. Ohhhhh, the water is needed for food too.

So do we stop eating? For a lot of us, backing away from the table wouldn’t be a bad idea, but tell that to a single mom trying to feed three kids on a limited income, with vegetables and fruit costing as much as meat lately.

One thing’s for sure, borrowing on our great grandchildrens’ back is not the answer. Building a real domestic industrial base is going to take a decade or so, maybe longer. That will pull us out of the mess. How about assembling foreign stuff in America, will that help? Not really, the non-union foreign companies pay like $10/hr, try feeding yourself on that income. The engineering and college jobs would all be in, i.e., Japan and South Korea; little good it will do us with college degrees.

Nope, nothing will get us out of this mess except a return to a domestic industrial base. How about in-sourcing foreigners to replace us? Isn’t that far worse than outsourcing, but the government/media types will tell you the subsequent lower wages mean more jobs?

Sometimes I can’t imagine why we “just don’t get it” as a country…..perhaps that’s why I see a long horrifying downturn with no hope on our present course. The hope is get engfineers building real factories in America again, but that wouldn’t fatten China’s banks. But should we really care?

Seattle is one of the dominos towards the end of the line.

All the dominos in front have fallen so what is the “logical” conclusion?

Well since the Seattle domino has not fallen yet, it never will. Yea, that’s the ticket.

And MS will never layoff and no Boeing orders will be cancelled…..because the global economy is not connected to the local economy.

Unbelievable…..I guess any idiot with a keyboard can be quoted as a pundit.

I’m out of line? Really? Have you read Steve’s post? Let’s get real here. I don’t like getting lied to and I don’t like when people insult me, no matter if he is your friend or not. The truth is that you and Steve are bubble deniers. You simple refuse to admit the truth and you insult people that have called it right. I can’t see how someone can be “honesty” and ignore the reality of the market; ignore the numbers; ignore the hard facts; ignore the newspapers and experts. THERE WAS A BUBBLE AND PRICES MUST DECLINE TO RATIONAL LEVELS PERIOD. To imply that anyone on this board wants a “bust” is ignorant and intellectually dishonest. Period. There is no way you can spin his statements otherwise. I’m not out of line, you and Steve are for spinning statements and ignoring the truth. America is frustrated and they are angry at the out of control speculation and the subsequent implosion of the housing market. That is reality. Once you realize that, then maybe we can move on to a housing recovery.

I think the seattle real estate market is up for a rise in 2009.

Good time to buy now.

I find SeattleBubble useful because it helps me dig into the facts for that awareness.

Here is I have seen over the past year on SB:
1) Every single piece of positive spin I have ever heard about the real estate market here (e.g. jobs, demographics, population change, land use, incomes, “world class city”) has been refuted multiple times with quantitative evidence against it.
2) Negative views are routinely backed up with hard evidence (e.g. subprime lending, foreclosure rates, income vs prices, mortgages vs rents).

How is it a bad thing to be aware of the risks? Without that awareness, you might as well be juggling chainsaws.

Now for a bit of my own personal negative views on the overall economy:
1) The U.S. Government and consumer has been living a lifestyle financed by debt and waves of inflation pushed through the global economy.

2) The options used to get us to the current lifestyle are no longer viable and in fact will begin to collapse.

3) The direct result of this collapse will be a roll back of 20 years or so to the standard of living.

4) The government has been covering this up for the past 5-10 years (i.e. you make less now in real terms that 10 years ago, but it was hidden due to CPI manipulation and heavy borrowing) and will continue to do so for the next 10-20. On paper you may think you are getting ahead, but you will notice that you have to make changes to your consumption patterns across the board. This doesn’t take a conspiracy theory, just politicians who know they will be out a job if they tell us the bad news.

5) And finally, my personal opinion on the net effect: this isn’t a bad thing! Reducing our consumption and greed will let us focus on building quality lives and connections. We will all have to pull together as a nation to get through the next couple of decades and will come out stronger for it. Perhaps we are the next “Greatest Generation” in the making.

The best explanation I have heard for how we will get from point A to point B is through rapid asset deflation over the next year or two followed by a decade of inflation with incomes constantly falling behind inflation.

Thoughts on this theory? Evidence to the contrary?

I think the take away here is along the lines of “everywhere sucks right now, Seattle probably sucks a bit less than most places”.

With most new project on hold right now, and current projects scheduled to complete over the next, what, 18 months or so? That, to me, probably puts the “bottom” of the Seattle real estate market within the next 15 to 24 months, unless the economy continues to get a LOT worse. As a guess, I’d say it’s closer to the 24 month mark than the 15 month mark.

It isn’t the return to sane prices that is killing the economy. It is the insane valuations of the recent past. Among other things, banks lent money and spent money based on assets that weren’t worth what they thought, and they are suffering now, and dragging the rest of the economy down with them.

Good luck with that and be careful what you hope for millions will lose jobs but I guess bubbleheads are immune to that possibility and will be employed if they see 50% off.

I think your post at 15 is out of line. Steve is one of the few high profile industry types who will post on this blog, so we should give him credit for that. Further, he has been warning of price declines for some time (just not as much as what appears to be happening). I’ve never met him, but we know several people in common and he has a reputation for honesty and putting long-term relationships ahead of short-term profits.

Maybe some of them just want to be able to afford a decent place. A bust for sellers is a boon for buyers. Doesn’t it make sense potential buyers would root for lower prices. Do you pray for gas prices not to fall because it would hurt Exxon?

Falling prices hurts the economy short term due to people no longer being able to pull money from a home, but you have to remember that every penny of that money is paid for by someone buying the place later (or the bank writing off losses). In the long term, less money spent paying mortgages means more saved, spent, and invested in productive places.

Let me know how rates and credit availability is if we hit ultimate economic collapse which is what most here hope for. Not sure homes will be the most important thing then and you for sure won’t be buying.

Sometimes I get the feeling that people on this blog are actually ROOTING for a housing bust in the Seattle area.

I’m rooting for sane prices and not speculative prices. Your analysis is shallow and not based in logic. The bottom line is prices are too high when compared to the disposable income of people. The bottom line is that realtors lied and continue to lie about prices out of self-interest and greed.

The appropriate question is why are realtors and you so greedy? Shouldn’t realtors, especially buyer agents be pushing for fair prices. The only conclusion I can come to is that you hate buyers.

I see, we hop on the Prop 1 light rail that failed last election anyway?

We all ride bicycles to the Boeing Everett Plant?

We can learn to eliminate 2-4 hrs of our free time riding the Metro buses to the Redmond Microsoft plant?

Obviously, the Forbes writing staff doesn’t live anywhere near the Seattle area, but it must be nice for them to dream impossible pipe dreams in their elite ivory towers back east.

Please explain why you compare median income to median price, to me the two are not dependant on each other. If homeownership is at about 50% of population, then the people who own real estate are mostly above the median income level. So it would seem to me that a family at the 70k median income would be buying at the bottom end of the market, around 300k, not at the median. People buying at the median sales price would be around the 75th percentile of income, which I have no idea what that number is, maybe someone does, but I am guessing it is around 100k.

My thinking may be way off and I welcome any feedback.

I hope you are right. My sense is that the pent up demand may have to wait several years for the economy to right itself. I doubt any of us reading this blog were alive the last time there was this much asset deflation (real estate, equities, commodities) going on, not to mention deleveraging by banks. This is now driving down consumer price inflation and, I expect, will lead to price deflation as well. Throw in government intervention and the economy gets a whipsaw effect that makes it very difficult to pencil out major new investments. Despite the dogma of many economists, it is possible for the economy and demand for housing to contract for periods of years. During this time, I expect there to be some new construction as well as pockets of appreciation (especially near the light rail stations), but it will probably be on a much lower level than we have seen in a very long time.

I agree with your perception that some people are rooting for a local bust, but I think they are a bitter minority. This blog is like driving on the freeway. We scarcely notice the hundreds of other people who are following the rules while only remembering the idiot swerving between cars.

There are reasons why this area has attracted more than its share of growth over the years, but that does not exempt Puget Sound from seeing further price declines. The last time I bought property was in 2004, and even at that time, I considered it a risky choice due to the housing bubble. Greed and ignorance drove prices too high, and, frankly, I enjoy seeing some of the greedy get what they deserve. My feelings on those who chose to act in ignorance are more mixed.