Well deserved.

I still don’t understand why they put all their energy into pumping up buyers. Since they get paid on sales, they should be beating on sellers to reset expectations and lower their prices. It’s the only way to get volumes up right now.

It’s not quite that bad. If they paid off the bad debt, then lending would resume, the real estate values would go back up, and that would push back up the NYSE and NASDAQ. In other words, they would only have to print enough to where the multiplier effect supplies the rest.

or, you could be Japan

I always thought it was a companies earnings/potential earnings. I also assume that “bad debt” (people borrowing more than they could afford) contributed to some of those earnings (and anticipated future earnings).

Are the banks going to write more bad debt?

- Losses to NYSE Market cap = $8.3 trillion
- Losses to NASDAQ market cap = ?? trillion (off 50%)
- Change in value in residential real estate value = $6.0 trillion
Losses in debt markets = ?? Trillion

It’s not quite that bad. If they paid off the bad debt, then lending would resume, the real estate values would go back up, and that would push back up the NYSE and NASDAQ. In other words, they would only have to print enough to where the multiplier effect supplies the rest.

Yeah, I found the current front page, but I know in years past I could pull up front pages by date in the archives. They probably want one to have an account to do that now, especially since their RE advertising $’s are likely drying up, etc.

Being a dirty renter has never been quite so satisfying.

The P-I, however, does provide such an archive here: http://seattlepi.nwsource.com/frontpage/

I can’t find all the supporting data, but I expect that the total losses to date in what people perceived as their “assets” easily exceed $30 trillion.

Even if you believe the most aggressive estimates of what the government has pumped into the market it doesn’t but a dent in that loss. The biggest number I have seen is $7 trillion – and I don’t believe that number given that over the history of the US we have only run up a $10 trillion tab for public debt.

Very true. People need to cut their listings. 2004-2006 is over with, and not likely to be repeated in our lifetimes.

what if the government injects money into infrastructure and job creation instead of handing it out through the fed?

Spending money on infrastructure rather than bail-outs might result in less of an absolute loss for the tax-payer (i.e. there is actually an asset when all is said and done). However, it won’t help one bit in arresting the collapse in asset prices we are going to see over the next 5 to 10 years. I know I am sounding like a broken record, but Japan is again an excellent case in point. Most of their stimulus spending over the last 20 years was spent on infrastructure, but it did NOT stop deflation (they are just now experiencing even DEEPER deflation, after 20 years!!!!).

There is NOTHING the policy makers can do to stop this, now that it has occurred. The only thing they will achieve by throwing money around is to 1) prolong the pain and 2) put the nation in a worse fiscal situation for future generations.

LOL. Who do we bail out first? Loan Foreclosures/bankruptcies [homes, college, credit cards, etc]? New purchases [homes, credit, etc]? Detroit? Japan? Retirements? Homelessness? Medical shortfalls?, etc, etc…..

I suppose we can keep picking and choosing which elite to give a bailout too, adding this debt to our children’s children; but this route is a road to ruin, i.e., what we’ve already tried and failed at miserably too. Ask Paulson.

So bloggers, don’t expect a 4.5% interest bailout in your Christmas Stocking, with a simultaneous approximate 20% “real unemployment rate” in America per today’s NYT’s article:

http://finance.yahoo.com/career-work/article/106262/Workers-Give-Up

Hades, the approximate “real 20% unemployed [or uneremployed, same thing]” need decent jobs, not a bankrupt federal government pouring out the last of its tax money to home rich developers at 4.5%. A grade school kid could figure that one out.

Here’s an excerpt from a good website I stumbled on and its my opinion in a nut shell:

“….After all, every dollar they waste, oops, I mean invest, in U.S. bonds and mortgages (debt) is a dollar not invested in their own nations’ well-being. Eventually their own people will demand that the surplus be invested in their own nation rather than propping up The Empire of Debt, a.k.a. the U.S.

At the local and state level, bankruptcy will become inevitable as soon as revenues are dwarfed by expenditures and pension/benefit promises. The city of Vallejo has offered us the template which will be followed hundreds of times in the coming decade: recalcitrant public unions demand more taxes to cover the structural budget shortfalls and complain “the money’s gotta be here somewhere,” and after cutting services to the bone the city finally declares bankruptcy….”

The rest of the URL:

http://www.oftwominds.com/blogjuly08/bankruptcy7-08.html

There is a lot of talk of deflation on this site and you are probably its most extreme forecaster. I understand the basis of your argument, essentially that all debts have to be paid eventually and debt will cause a deflationary stranglehold.

Its definitely a possibility.

What I want to ask you and other bubbler’s is what if the government injects money into infrastructure and job creation instead of handing it out through the fed? If money is spent on infrastructure and building a green collar economy there will be a return on investment when the bill comes due, potentially staving off or limiting deflation.

So tell me why thats wrong?

Might be a good one to link off the home page

Buceri, did you read the Bloomberg article on the job loss #’s? Here’s one clip from the article that makes me cringe:
“We don’t get the job losses stopping until 2010,” Kurt Karl, chief U.S. economist at Swiss Re in New York, said in a Bloomberg Television interview.

If Seattle is behind the curve relative to other parts of the nation, then does it follow that job losses & economic woes will continue to batter the state well into 2011 and 2012?

Relocate to cemetaries; that’s just rich.

Just wondering what you think of Nouriel Roubini’s predictions?

you are the new RAY 500

With one wee exception: I am not trying to hawk some commercial enterprise (not that that would be a bad thing, I just don’t happen to have one to push).

Also, I think I tend to be much more long-winded than Ray in many of my posts….

Some very important differences with Japan that can make our situation worse are:

1) Japanese are savers.

2) Japanese stay in their Tokyo hole in the wall for the rest of their lives. No pressure to move. In the rare case of job loss; they’ll find something else in Tokyo.

Our citizens are in debt and in the case of job loss, we generally relocate.

With regards to interest rates – jobs, jobs, jobs. An $1800 mortgage payment, even at 1% interest, is huge when you don’t have income.

And newsflash: People have been out of work for much more than the 6 months unemployment covers. And now they are reporting people out for over a year.

November job loss numbers out today.

My friend? Not so much. He’s in total control as long as he never wants to leave his condo. Plus I pay almost half as much as him for a much bigger place. He may get to control his small condo, but I get to control an extra $1,600/ month.

Main upshot of it seemed to be that tenants really do get the fuzzy end of the lollipop, in lots of ways. It was really pretty informative, and I’ll bet it’s online; y’all might want to check it out.

alot of people will just stay where they are and ride it out

I know this is sounding repetitive, but I can’t resist: this is exactly what happened in Japan. Most people have just toughed it out and sat on their property even though they might be deeply under-water. But that hasn’t prevented prices from falling for some 20 years. I am sure we will see lots of people in the US hang on as prices crash.

I do like my control over renters being a landlord, and pushing other peoples rents up though.

A lot of people look at it the same way.

This stats drop is great though. I am glad to be on the sidelines with more money to buy more rentals when I see fit down the road.

I do agree with some of what you said, alot of people will just stay where they are and ride it out. The only thing that I think is the wild card is — JOBS. If unemployment really gets going than all bets are off and things get nasty very fast.

people will refi for sure

Let’s not get too carried away here with predications of mass waves of refis. Let’s not forget that vast numbers of home-owners will be unable to qualify for any refi at all (i.e. they are under water, have poor credit, etc). In fact, the people who are in the most stress and could really use payment relief are going to be the least able to take advantage of the low rates.

The foreclosure machine just rolls on…

telling people to sell now is like telling them to get out of the stock market next week

And just what would be so terrible about that advice? If stocks are going to drop another 50% or so (I am the guy calling for sub-2000 in the Dow, remember), then selling now is the smart thing to do. I am sure there are lots of Japanese who wish they’d sold stocks when the Nikkei was down only 50% from it’s peak (20 years ago)…

Best suggestion i have heard so far is: “run for the exits if you are a homeowner”… nice in theory.

that was so two years ago. telling people to sell now is like telling them to get out of the stock market next week.

Best suggestion i have heard so far is: “run for the exits if you are a homeowner”… nice in theory.

I agree we overshot on the upside and we will also overshoot on the downside, but there will be a certain point where folks who *thought* they were worth $1MM will go back to being regular people… just like the dotcom boom. (everyone thought our financial system was kaputz that time too).

There*are* people out there who are willing to be “underwater” for some period of time…these same people actually care about their credit score, they don’t want to hand in the keys… if they are on the edge right now and a rate drop from 6.5% to 4.5% will save them $300/month… you can bet they will take it. This represents more than just a handful of homeowners and will affect the supply side to some extent.

There was an article in The Seattle Times on 12-03-08 entitled “Real-estate rebound? We haven’t hit bottom” by James R. Hagerty / The Wall Street Journal. Maybe you’d have better luck searching the WSJ website.

I agree that low rates are good for people who already have mortgages since it can lower their costs, but they are very bad for real-estate, in general. It’s so worrisome that those who are actually able to refinance (i.e. because they do have equity) might want to consider just cashing out to avoid the devastating price declines that are coming. When prices fall another 60% I am sure there will be many home-owners who wished they had sold.

As far as the future of rates go, I wouldn’t be surprised if they go even lower than 4.5%. Heck, 3% rates sound much more likely to me than 6% ones in the next 3 years. 2% for a 30-year fixed loan isn’t even beyond the realm of possibility.

I understand your point and your recent emphasis on price drops, but it will probably be meaningless to those with existing mortgages that are 1.5+ pts higher than rates at 5% or lower. Don’t forget, FHA is a prime vehicle for people to refinance into at around 96-97% LTV. People are consolidating debt as well. Homeowners will refinance and they are. I have about 80 files idle and several have just been revived.

The news regarding rates dropping into the mid 4’s being solely for purchases is not going to be the case in my view. I don’t know how specific rates could only be reserved for purchases, unless is was some sort of legislative action. But the political firestorm would probably squash that idea. If rates drop that low we will have a refinancing push. While quite a few borrowers may be upside-down, a lot have enough equity to refinance going conventional. If low LTV then they’ll be a candidate for FHA, which is what is occurring right now.

Any thoughts on whether the promise of lower interest rates in the future not only effects demand, but supply as well?

There may be a short-term blip in both sales and supply due to low interest rates, but these very low rates are actually a screaming signal that house prices are going to crash. What good are low rates when real-estate prices are declining 5% or 10% every year, for many years?

I have a podcast explaining why low rates are something to fear at http://msurkan.podbean.com.

This market won’t pick up in terms of closed sales until the sellers decide that bailing out now will be less painful than doing so in the future, or just throw in the towel and walk away. A huge percentage, indeed a majority, of the sales in CA, AZ, etc. are foreclosures and short sales. Our market hasn’t gotten to that point yet, but when it does the closed sales number will head back up.

If people are already heavily burdened with debt, that can no no longer be serviced with more debt, and US household incomes have been stagnant for the last few decades, I just don’t see there being enough people with the cash or credit to “reinvigorate” the Puget Sound areas RE markets. Even with 4% rates. That may bring out a brief surge, but I really can’t see how housing prices can avoid continue to decline, for some time to come?

A couple months

I believe that the psychological impact of rates below 5% will move a lot of people toward buying. Refinancing is already underway.

Low rates might encourage SOME people to buy, but this is overwhelmingly negative. Rates are low because everyone is rushing to de-lever and put their wealth into US government backed securities. This is VERY bad, and is a sure sign of impending deflation.

Again, I point to Japan which has had very low rates for almost 20 years, yet that hasn’t done a thing to bring it’s real-estate market out of the dolldrums.

Take a look at my blog, where I have some articles on why all the stimulus in the world can’t stop deflation. http://www.surkan.com

The downtown core has grown I suppose. I guess I would include First Hill, Vulcans projects, etc. The downtown core 10 years ago meant the business core. Which is more of what you were thinking. From all of the out of state developers we have had flood into our market since then, they seem to look at our core area being much broader and I guess I now feel the same way. It would encompass parts of Cap Hill, First Hill, Pioneer Square north to Denny Way?

Im not saying you should worry or run away from your deposit, but that is what I am watching as well. I have heard only rumors on 1521 and am curious as well on Olive and the Four Seasons. It will all depend I believe on how motivated the seller is to keep sales in place. If there appears to be some fall out and or clients that are not able to perform or obtain a loan, the seller and sales team should be making contact with all buyers now and work with them ahead of time to make sure they are still able to close. You have to be pro-active as a seller in this market. So I dont know if it is a price concession, buying the rates down, or paying for closing costs, but I would do what ever it took to ensure the buyers I had were still able and motivated to close.

The Moda (obviously a different product type) was at a point where if they engaged the right people could have closed the buyers they had by working with them. With the unit sizes and price points there, they could have offered FHA terms due to their condo doc’s had seasoned for a one year period. There were other ways to get around rising pre-sales requirements by FNMA by phasing the project, and they didnt take them? It just baffles me.

So in closing, I didnt mean to make it sound as bad as I did, but I do feel we have a long way to go to get thru this. I guess my advice would be if you sense a large fall out at Olive, and the seller will not work with you, I guess I would walk away. My gut feel is that 1521, Olive, etc will take a hit of at least 25% of the pre-sale buyers leaving at ocupancy?

Risk is getting priced back into real estate in Seattle and $200/month off your interest payment is not going to solve that anytime soon. Even if homes magically stopped depreciating, unless you are in a business that thrives during recession you’d be nuts to lever up into anything right now.