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.

52 responses to “November Reporting Roundup”

  1. pfft

    Don’t ask your barber if you need a haircut.

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  2. Ray Pepper

    Dick Beeson used to get quoted all the time in the News Tribune Blog. It disgusted me. The information he provided was ALWAYS pandering to the NAR.

    His quote on the NWMLS states” My personal Mission Statement is to achieve Excellence through service to others through my actions, words, and deeds.” I am passionate about growing people through their work and making a positive difference in peoples lives on a daily basis.”

    I’m sure Dick did INDEED make a difference in peoples lives here in Pierce County. .

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  3. Robert Wojciechowski

    I think that after the Nov job report the US govt will go on a rampage and will print, borrow or whatever and just do one bailout after another. The thing is whether all foreclosure type people will get a bailout. I am sure there are sweet deals in store for people who get into credit mess or just acr irresponsibly. This is going to pay off in the long run because instead of working hard you can just look to the Fed to give you a handout or bailout.

    It is in the interest of taxpayers to give every Joe Shmo a bailout. If that does not happen then the prices fall further and then banks loose more money and ultimately the economy goes down.

    I think the Dow rally shows that everybody is betting on this massive bailout plan. I think at some point even China will be fine if America just prints some $$ to inject some cash into the system.

    The responsible people who think whether they can afford sthg will be the big loosers…..In Germany for example some people used to be stupid and worked hard and others just relied on paychecks from the govt and were tanning on Canary Islands. Ofcourse its better to tan then slave your ass. It is better to get a freebie from the govt instead or worrying whether you can afford sthg.

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  4. Ray Pepper

    Tim where is my AVATAR?

    Don’t you want me blogging with my Avatar?

    Hope Findwell doesn’t have something to do with it!!

    Did they take my Avatar?

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  5. Ray Pepper

    Fixed it….I felt naked without it.

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  6. buystocks

    I heard the seattle bubble fired the avatars to decrease costs. I think I saw some of them in front of Home Depot looking for work. These are tough times indeed. Sorry Ray.

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  7. deejayoh

    and to think just 2 months ago, the headline in the PI was this:
    The Seattle area’s real estate market showed signs of stabilization in September, according to new statistics released Monday.

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  8. Ben

    Robert W:

    a) Loose is the opposite of tight. Lose is when something becomes lost. I know I am putting a finger in the dyke, but please spell lose properly.

    b) If the government prints any money (i.e. M0 money supply) it would immediately cause the borrowing cost of the government to skyrocket for a very long time (like decades, probably) and potentially even cause a war (because the US would screw the countries it owes money to, and the US owes a lot of money).

    Bernanke either does not realize that house prices cannot remain elevated (in which case it is unlikely his fiscal tools will work, since he does not understand the cause) or he does realize it and won’t admit it because he wants the confidence to continue leaking rather than popping.

    Either way, harsher times are on their way. Look for unemployment to shoot for the moon in the next few months.

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  9. Slumlord

    I wonder when the local papers will report that the real cause of housing declines is the biggest unleveraging of debt that the world has ever seen, and the consequence of extinguishing debt will be the Greater Depression. Is this too frightening for their readers to think about? Maybe, but consider the consequences of not thinking and being unprepared. With another 533,000 U.S. jobs lost in November alone, how can people like Nathan Gorton live with themselves while spewing babble about hoping home sales will pick up? It is ridiculous and shameful.

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  10. buystocks

    We keep going back to this printing of money talk, and how the government can’t print money. But, if the government starts buying back its own bonds, which has been discussed, aren’t they basically printing money.

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  11. Slumlord

    Tim,

    You always brighten my day. Thank you!

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  12. dogggis

    My wife was at a get together with her friends last night making ginger bread houses and they gasped when she mentioned the housing market here wasn’t even close to bottoming out. They didn’t believe her (mostly the one trying to sell her house, and the other who just bought a house). And they asked her why she thought that and she said “From the Seattle Times article I read this morning” My wife was telling them about the sweet deal we just got on a rental house (moving from our apt), instead of buying now. We will have the last laugh. What’s even more surprising is really how out of touch most people are. I guess they don’t read SB either, lol

    Hooray for Mother’s Cookies!! I bought like four bags of the Circus Cookies right when they announced they were closing.

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  13. Slumlord

    Ben,

    In normal times, I would agree with your assessment of where government borrowing leads. Things are obviously not normal and I don’t have an alternate scenario to offer because I think the economy is heading somewhere that nobody has ever seen. I liken borrowing rates and inflation to a crowded trampoline where the people represent countries. It is possible, but not necessarily easy, to predict the rise and fall of others when one person moves at a time. Right now, everyone is moving and some of the straps that hold the surface are snapping free. This will end with a smaller trampoline surface with fewer people (or countries) standing. Beyond that, I doubt anyone really knows.

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  14. what goes up must come down

    I for one will say when Ray doesn’t mention a gem being just around the corner the proverbial bad stuff is about to hit the fan.

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  15. Bits_of_Real_Panther

    The treasury can’t print money fast enough to keep up with the universal balance sheet destruction

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  16. softwarengineer

    WE’RE HUMMING THE SAME TUNE TODAY

    It must be Friday :-)

    I hope all my SB friends enjoy their weekend and don’t eat too many animal cookies!!!

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  17. Chris

    Tim @ 10: Is Franz owned by Kellog? I picked up a bag of animal cookies last weekend that were made by them. I haven’t cracked into them yet to see if they are real or imposters.

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  18. patient

    dogggis. the belief in housing among your wife’s friends is like kids believing in Santa Clause, it takes a long time to sink in that it’s not true cause they like it to be true. And anyone suggesting the opposite is being seen as a party pooper.

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  19. jon

    “making ginger bread houses ”

    http://picasaweb.google.com/louiscohen2006/Culinary#5276185495826453698

    (Take a look at frames 10-14 more some more traditional ones)

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  20. TheHulk

    Over the last 6 months or so, I have mentioned SB to a number of people (including people who have existing homes). Potential new home buyers have thanked me multiple times for pointing them to the Website. What genuinely surprised me was the thanks given by long time friends who have had a house they purchased in 2000. They were thinking of “moving up” the equity ladder based on the FUD being fed to them by their realtor.

    They just sold their house a couple of months ago thru redfin (granted, they lost 15-20% compared to the 07 highs) and *gasp* became renters. They will jump back with their increased equity after a couple of years which is safely parked away in cash, not stocks.

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  21. cheapseats

    umm, patient, please show some facts to support your “no Santa” position.

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  22. Slumlord

    All I ever get from Santa is a lump of coal. He is a cruel, mean-spirited old man.

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  23. EconE

    Hey now…Santa Rocks! At least his presents were “age adjusted” as I grew up. The clothes got larger each Christmas and the school supplies/books were always “grade appropriate”. I’m not sure he was a very good reader however as I never got a toy that was on my “list”. Perhaps I left the wrong kinds of cookies out?

    Now the tooth fairy…that’s a different story. That androgynous pixie never did learn how to adjust for inflation. A dime every time.

    Sheesh.

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  24. Buceri

    NO SANTA?!?! And I thought the 533K jobs gone were going to ruin my weekend!!!!

    Now seriously; we are really heading to uncharted territory as a country.

    And no, nobody that saw it coming WAS WISHING IT. Let’s make it clear.

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  25. anony

    Slumlord, Santa knew what he was doing. You can use all that coal to keep warm in the upcoming depression.

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  26. Ray Pepper

    #15………Yes, it has been distressing in Real Estate and I suspect it will remain this way despite 4.5% in the coming year. Short sales and foreclosures..Over and over…About as invigorating as me taking care of Vent patients on Friday nights………………….

    Gems Gems everywhere but as Howard Davidowitz states( a retail analyst on CNBC)–” They are all going down the crapper”–in reference to Guitar Center and a huge variety of other retailers post Xmas shopping season..

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  27. jonness

    Richard Moody, chief economist for Mission Residential Research:
    “As has been the case in recent months, conditions in the labor market are even weaker than suggested by the headline numbers. . . . Accounting for these [part-time] workers (who would be working full time were they able to find full-time employment) and those discouraged job seekers who have given up looking for work puts the broader U6 measure of unemployment-underemployment at 12.5 percent in November, compared to the headline unemployment rate of 6.7 percent.”

    It will get worse before it gets better.

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  28. braden

    Great blog. Very relevant.

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  29. Scotsman

    Thank God for Mother’s Cookies! I bought a Jones Soda the other day, just to help them out- keeping my fingers crossed!

    The FED is buying their own stuff, not because they really think it will save anything, but because they think it will soften the landing. Unfortunately,
    in the end it will just prolong the pain once it all does collapse. Politics
    is an odd business. It would be better if there were some adults in the room to supervise, but I guess that’s asking for too much in todays world. I’m a boomer, but I’m not proud of my generation. This collapse will be the last greedy gasp of a generation that hasn’t left much of a legacy.

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  30. David McManus

    I was flying back from Houston yesterday and Rob McKenna was on my flight. I overheard him prior to boarding talking about a meeting with the Washington Association of Realtors. Why does it sound like our state is in cahoots with these guys?

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  31. Jillayne

    Hi Jon,

    Thanks for the link to the gingerbread houses pictures (see comment 20). I wanted to look through your pics for ideas. i do a ginger bread house every other year. I think we’ve decided to go with a series of gingerbread birdhouses.

    The ginger bread strip club, complete with candy cane stripper poles was….a surprise :)

    Still searching for Mother’s Angel Choc Chip cookies.

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  32. Jillayne

    Hi Tim,

    Poll idea:

    How many SB readers are thinking about selling their house now, in anticipation of even lower home values in 2009, 2010, and renting for a few years.

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  33. Andy

    Lower home values are expected. I’m wondering what the discount spread on home purchased now is…

    I mean, if you have a house in Gig Harbor listed at $750K – what kind of discount are sellers willing to accept? I’d think that they would take 20% (PER CASE-SHILLER + S&P outlook) off. Therefore, you could get a $ 750K house for $600k.

    Still., considering that this same home went for $400k three years ago….

    No wonder there are no buyers.

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  34. Nobodyspecial

    #33
    I’m selling my home. It received an honest appraisal via Catlin Capital in 2004 for $375,000. If someone offered me $400,000 right now I’d take it.

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  35. Ira sacharoff

    Maybe I’m just a clueless dolt, but I can only see lower house prices as a good thing. It’s a good thing when people can afford to buy homes. Isn’t it?

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  36. jon

    “I can only see lower house prices as a good thing.”

    It’s not the low prices that are hurting the economy, it is the rapid fall. A slow descent of prices would give time for inflation-driven salary increases to allow people to refinance their mortgage to better terms. The sudden drop locks them in to bogus post-teaser rate terms and forces a lot of people out of their houses all at the same time.

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  37. what goes up must come down

    hey jon shouldn’t people have thought about what you said BEFORE they bought?

    I mean if the “teaser” rate forces someone out were they not stupid in the first place?

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  38. Interloper

    The Seattle Times Sunday “Real Estate” section needs to get a clue.

    I’m looking at page E-1 now, and I see the following:

    - headline about 4.5% mortgage rates, which has no mention of whether 4.5% rates are actually good for the economy in the long run (you can argue that low rates were the catalyst for the peaks in the real estate bubble)

    - “What Your money will buy” with six pictures of recent homes sold. None of them are desirable houses in desirable neighborhoods. Because that would cost $600,000+. Isn’t that a problem?

    - A syndicated column from Ken Harney saying that major real estate markets like Seattle still have 50% gains over the last five years, which offsets recent declines. Misses some obvious points: a.) that the sharp declines happened *because* of unsustainable increases and b.) the the sharp declines are very likely to continue, perhaps until any 5-year increase has been wiped out.

    - A farewell blog post from the departing Times Real-estate editor (she and real estate reporter Elizabeth Rhodes are among the voluntary layoffs at the Times). The blog post includes the subheadline “Mortgage broker: it’s a great time to buy”, a quote from a real estate Agent, “I agree with Dave that this is a great time to buy.” The blog lists some dissenting opinions before concluding that the investment outlook remains good. I thought journalists were supposed to be questioning, cynical people?!

    In the remaining 12 page Real Estate section that follows, every ad is from either someone in the real estate industry or the Seattle Times, with the exception of one quirky ad selling fishermen maps to Seattle’s lakes and streams.

    With the Time’s commercial interests involved, it’s no wonder we’ve been reading about Un-real Estate these last several years. The Times has printed the news that servers the interests of its advertisers, not its readers.

    From the new regime (assuming the Times can afford to pay one), let’s hope we see some actual journalism.

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  39. Ray Pepper

    Andy the 750k homes that are robust throughout the Harbor will be all returning to the 400′s. You know as well as I there is no better place to live in the State then the Harbor. The fact is with the huge surge in prices in the last 5 years along with the ever increasing bridge tolls Buyers will hold out. The Gig Harbor mkt is completely shut down (including Quadrant). We are still staying in Proctor until I find one that I just cant resist. Most likely will be a foreclosure or shortsale. With one kid on the way and one in 1st grade we just need to do it in the next 3 years. We are focusing on Sea Cliff again in the 98322. All the NEW homes behind Target from Bennett became rentals at 1700 a month. Check out Craigs List. Those boxes (at best) are worth 300-325k going forward. They were unable to sell even 1.

    GEM in foreclosure in about 60 days. 7207 93rd St Ct NW 98332 25149118 Unless “an old friend” takes everything from the home(incuding gutting the kitchen) scooping this GEM at 300k is your DEAL of the MONTH!

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  40. Robert Wojciechowski

    For those people who believe the govt will not print money to get rid of deflation and prop up housing and lower unemployment. Here is an excerpt from the Economist from 29th Nov “Unorthodox economic policies”

    “Many homeowners, though they do not know it, will be sending their monthly mortgage payments to the Fed. The Fed will finance these programmes with newly created reserves: that is, it will PRINT MONEY. Its balance sheet which has balooned from 900 billion to 2,2 trillion since August, could grow by another 800 billion ……”

    So the US govt will print money as needed to get rid of deflation. In fact they are much more easy with risking inflation because dfelation is much worse than inflation.

    The Fed is responsible to keep prices stable and will do just that.

    I would be interested in the extent that the Fed will succeed in getting prices of houses back on track. Obama is also talking about expanding govt expenditures substantially in order to fight unemployment. He will too probably use printed money. I think there is very little discussion on printing money here as if this was a big no go.

    Also nobody talks about the extent to which money supply has gone down as a result of commercial banks issuing less loans. As we all know commercail banks like Key bank participate in creating money almost out of thin air. And if they issue fewer loans then money supply goes down which would seem to me as equivalent of raising interest rates to combat inflation.

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  41. jon

    The bailout of the financial industry, and soon the auto industry, and later the take over of the health care industry, and now Obama’s public works projects, all indicate that like it or not we are suddenly moving into a post-capitalist era. The fact that all of a sudden people are only investing and Treasuries and no stocks or commercial paper is forcing this to move very quickly.

    It is a nice warm fuzzy feeling knowing that the government is solving our problems with a simple printing of money, but today’s article in the Seattle Times about how a few contributions was enough to result in inferior chemical protection for our troops is a warning of what is to come.

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  42. deejayoh

    For those people who believe the govt will not print money to get rid of deflation and prop up housing and lower unemployment. Here is an excerpt from the Economist from 29th Nov “Unorthodox economic policies”

    Robert, that’s a good article, but a bit of a cherry-picked quote. Yes, the Fed has dramatically expanded the Money supply in the last month or so (by about $600B) but read back a couple of paragraphs in the article:

    America’s financial system is undergoing a radical reassessment of what are acceptable levels of capital, leverage and interest rates. Some institutions have failed; those that have not are intent on reducing their leverage (ie, their volume of loans for each dollar of capital). The Fed has no hope of stopping this: it is merely trying to slow it down, by providing a home for the assets that the financial sector is shedding. The alternative would be plunging asset values, a complete withdrawal of credit and economic catastrophe.

    So in a market accustomed to Trillions of dollars in liquidity sloshing around, how much can the Fed really make up? I think they have their finger in the dike, that’s about it. They’re just trying to keep credit markets from disappearing. Supporting asset prices is a pipe dream.

    for those inclined, the full article is here

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  43. Andy

    I have to ask:

    Why do Real Estate Agents/NAR think they understand pricing/possible appreciation on homes? Why are they suggesting a recovery at all. They should keep their mouths shut and recommend (to sellers) that their properties will never sell!

    They have no clue. Usually, they think that a 10% yearly appreciation is on the low end. Where are even the rich supposed to get this kind of income appreciation???

    Most of these RE people are not Harvard MBA’s or PH’ds. They are Joe/Jessica six-packs looking to make their 5% on $500K. They are sales people. NOT ANALYSTS OR ECONOMISTS. And just so we are clear – anyone can get into this racket.

    And there is nothing wrong with making money – go get your fees. However, when a real estate agent details that a property WILL appreciate – they should be imprisoned.

    I mean, Wall Street brokers have to detail that the advice they give may never bear any fruit – and they are forced to disclose this. investors know that this is a major risk – whearas Real Estate Agents harp about pricing trends and where your property will be worth. Then they go out and get help from a shady appraiser to help motivate the buyers and sellers. If they never did provide false advice, and the NAR was forced never to give an opinion, we would have severely compressed American’s views on what their depreciating home would be worth.

    In the end, the real estate business was the new “BOILERROOM.”

    http://www.youtube.com/watch?v=TbIRedOqDwE&eurl=http://video.google.com/videosearch?hl=en&rlz=1T4GWYE_enUS292US293&resnum=0&q=boiler%20room&um=1&ie=

    As you can see, its the same mentality. Get them to sign on the line which is dotted…..!!!!!

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  44. EconE

    The Fed is responsible to keep prices stable and will do just that.

    A global bubble economy isn’t “stable”. They’re working on saving the whole “system”. They certainly aren’t going to be able to prop up bubble housing prices that were fueled by crazy lending standards that will NEVER return.

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  45. joness

    What good is printing money to support house prices if wages don’t follow inflation on the way up? Such a situation would represent a double-whammy with home prices too high and people’s savings rapidly decreasing in value simultaneously.

    My question is:

    If the fed were able to print enough money to cause inflation, what will it take to cause a wage-price spiral as opposed to just a price spiral? Is it possible or probable that we could see a price spiral as opposed to a more desirable wage-price spiral?

    Thanks :)

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  46. renter

    They aren’t printing money, they are making loans. The difference is that the money the fed hands out now is going to be repaid at some point in the future.

    When the credit market contracted, the fed stepped up to become a ‘new bank’ to loan to folks/companys as a result of the real banks not extending the same credit as they had in the past.

    Not the same as printing money.

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  47. jon

    The Fed is doing a lot of different things, some things are more like printing money than others. Spending on public works projects where it is paid for by borrowing money when we have no record of paying down debt for very long is essentially the same as printing money, because the bonds will keep getting rolled over. There has been talk of buying 15 year Treasury bonds. I have no idea how they will pay for bonds other than printing money, because it makes no sense to borrow to by bonds. Some of the bailouts involved getting warrants that have since lost 1/3 their value. So that means there are cash-equivalent bonds floating around for which there is no asset, and that would be inflationary in there wasn’t deflation going on.

    It is true that the fed is stepping in as a result of the contraction, and that is why there isn’t inflation yet. That contraction will stop eventually, but the politicians are quickly getting used to spending $10Bs every few days with no budget and little accountability. It will not be an easy habit for them to kick, if they even wanted to.

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  48. deejayoh

    They aren’t printing money, they are making loans. The difference is that the money the fed hands out now is going to be repaid at some point in the future.

    AFAIK. they are buying those loans with newly created money supply – so no, they aren’t printing money – but it seems they are adding to the money supply.

    take a look at this http://research.stlouisfed.org/fred2/series/BASE

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  49. Robert Wojciechowski

    And I wonder how much money will be created by commercial banking system as a result of Fed’s actions and how much supply of money got wiped out as a result of reluctance of banks to issue loans? How much money is needed to be created and/or printed to prevent deflation?

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  50. renter

    Yea, I think Robert is on the right track here.

    There is still a net loss of money in the system, even with the Fed increasing its loans.

    If we had a net gain in money supply, we would certainly have inflation. Instead we have been getting lots of deflation in all areas of the economy.

    This points to a lower money supply overall..

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  51. deejayoh

    This was covered in depth by John Mauldin over at Minyanville today. John is (imho) always worth reading and if you do not receive his newsletter, I suggest signing up.

    http://www.minyanville.com/articles/index.php?a=20257

    He points out that the banks not lending money has dramatically slowed the velocity of money, which in essence contracts the money supply. His conclusion:

    Within a few quarters we will be facing outright deflation. The Fed is going to monetize at least a portion of what will be a $1+ trillion dollar US deficit. They have announced they are going to purchase $800 billion in mortgage-backed and other types of consumer loan assets. That will be a direct infusion of dollars into the economy. That is serious monetization. But they may feel they have no choice if they want to keep the US economy from going Japanese.

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