Which is Larger: Pent-Up Demand or Pent-Up Supply?

Whenever local real estate professionals are quoted in the paper lately, it seems that one line we’ve been hearing repeated a lot is about the alleged loads of “pent-up demand” out there.

The thinking goes that there are hundreds thousands upon thousands of potential buyers out there that are “waiting on the sidelines” or “sitting on the fence,” and as soon as the housing market starts to pick back up again, they will all rush in at once and the market will be hot hot hot once again, and the opportunity for good deals will have passed.

Let’s explore that theory, shall we? In the chart below I have plotted total yearly closed sales for 2000 through 2008. The bars are centered on the 2000-2002 average (23,106), to give us an approximate visual of how each year compares to the pre-bubble housing market.

King County SFHs: Pent-Up Demand

The “pent-up demand” that the local real estate salespeople love to talk about so much is represented in that big dip in 2008, where sales fell over 30% below our 2000-2002 baseline.

However, the chart also tells a story that you never hear real estate salespeople talk about… From 2003-2006, demand was far above the baseline, with average excesses of 30% for four straight years. This is what I like to refer to as “borrowed demand.”

The total borrowed demand from 2003-2006 was 27,798 sales. The demand shortfall in 2008 was a mere 7,115 sales, enough to “pay back” 26% of the borrowed demand of the bubble years.

Is there some pent-up demand? Probably a little bit, but in reality, the amount of pent-up demand out there will likely still be dwarfed by the amount of borrowed demand that still must be paid back.

Of course, this all completely ignores the other side of the equation: “pent-up supply.” The chart below plots new listings in the same manner as the closed sales chart above.

King County SFHs: Pent-Up Supply

Wow, so during the bubble years, supply was actually slightly lower than the baseline (44,581), averaging 4.3% under the 2000-2002 average from 2003-2005. In 2006-2008, supply has been about 11% under average.

Looked at in the same way as the pent-up demand picture, we’re currently sitting on between 15,000-20,000 homes across the county that represent pent-up supply.

So, to sum up: The borrowed demand from the bubble years has still left us with a demand deficit in excess of 20,000 sales, while the lower than usual new inventory of the last few years has built up a pent-up supply of around 15,000 homes.

Admittedly, this is a rather coarse method of investigating the issue of pent-up demand and pent-up supply, but it’s probably the best we can do with the limited hard data that is available. I’m interested to hear what you think about the issue, especially if you’re an agent that has been using “pent-up demand” as a scare tactic to attempt to “get buyers off the fence.”

  

About 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.

142 comments:

  1. 1
    jordo says:

    Those closed sales also include flips.

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  2. 2
    pragmatist says:

    How is there going to be that much pent up supply when most of the market is currently underwater? Obviously, with so much of the “borrowed demand” from the peak years, that vast majority of homeowners from the peak years is going to be underwater. It will be interesting to see how this plays out in the coming years when demand does increase, but supply doesn’t because so many people will still be underwater.

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  3. 3
    Greg Perry says:

    Inventory is currently absorbing. 705 is a sellers market (<3 months inventory) and 715, 710 and 380 are right behind. Pendings are picking up, but the rate of new inventory coming on is slow. 1/2 of King and Snohomish county MLS areas are Balanced markets (between 3 and 6 months supply). The rest are buyers markets, but improving.

    The elephant under the rug could be pent up supply. People who want to sell, but feel forced to rent because the market won’t let them have what they need.

    The rate of new short sales and foreclosures should slow down with the aggressive loan mods coming up.

    An upcoming factor will be when new construction sells through, we’ll be working only on the resales. Replacements could take a couple years to find their way to market.

    Another thought is that the high end continues to be abysmal. Virtually all activity is under $600k. This is causing market compression.

    This will be an interesting market to watch.

    The tag says “Anonymous” (It’s Greg Perry)

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  4. 4

    There are a ton of brand new homes and condos out there aren’t selling, and a bunch more that haven’t yet been finished and are yet to hit the market. When they do hit the market, they will need to be priced low enough to sell them, and homes that are not brand new on the market will need to adjust their pricing to compete with the brand new homes.
    Yeah, there are exceptions. People looking for a 1920’s Craftsman on North Capitol Hill aren’t looking for and don’t care about the brand new homes and the market for those shouldn’t be as affected, but if builders are teeming up with bankers to offer especially low interest rates, this doesn’t apply to 10 year old homes, so what will the overall effect be?
    I can’t see anything other than downward price pressure on newer homes that aren’t brand new, at least in the short term.

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  5. 5
    pragmatist says:

    Yes in the short term new construction will put substantial downward pressure on pricing, however, I believe the point that many real estate professionals are trying to make is that without new construction (which is essentially zero right now), there won’t be much new supply that will come on the market. Many individual sellers won’t be able to sell at market prices, so there will be some reduction in available supply there. In addition, the new construction starts are very low right now, so there will be a further reduction in supply.

    In the 2-5 year time frame, where is supply going to come from? If the economy recovers in that time frame and Seattle’s population continues to increase, which should further increase demand for all housing (apartments included), which in turn may create a short term “hot” market of low supply and high demand (for the amount of supply on the market).

    I don’t work for any real estate organization and am simply trying to play devil’s advocate here. Is there some line of reasoning here that is faulty?

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  6. 6
    D. says:

    I think there is a lot of pent up demand. I notice it in the comments all the time. I’ve been looking since early 2007. Yes, I’m choosy. I want a nice house in a nice location at a nice price and I’m not settling for less. But there aren’t a lot of great houses out there so maybe there are sellers waiting on the sidelines too.

    Everyone says it’s a great time to buy but those of us who are looking can’t agree. It’s pretty dismal.

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  7. 7
    masaba says:

    RE: Ira sacharoff @ 4

    Speaking of new townhomes “not selling,” I have a different story that is confusing me a bit.

    I rent a townhome in the area between N 85th and N 90th by Aurora. About a year ago, a developer tore down the last SFH on the block and began putting up 8 new townhomes. These things literally spring up overnight. It took about 3 months to tear down the SFH and prep the site, then they spent about 3 months with people working about 10 hours a day and on weekends to erect the structures.

    So, about 6 months ago, after the doors and garage doors went up, I expected them to be on the market in less than 3 months time. However, it seems they have just quit the project for a while. I have no idea what happened, I haven’t seen anyone enter, leave, or even drive up in the past 6 months. I have peeked in the windows, and it seems like they haven’t done much of the interior yet. Maybe the developer went bankrupt, or maybe he is holding off for a bit to put them on the market, it literally makes no sense to me why they would work at a breakneck pace to get these things up then stop at the final hurdle.

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  8. 8
    patient says:

    I guess with supply and demand we are talking nwmls numbers here? Can someone explain how foreclosures in general are handled when it comes to the nwmls? Does a foreclosure home always pass through the nwmls as supply(inventory) and demand(closed sale ) in the process from foreclosure to new owner? If not and we endup like some areas in California where apparently the bulk of homes sold are forclosures supply and demand as measured from nwmls data becomes very unreliable.

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  9. 9
    Objectivity says:

    @2- Look for increased foreclosures. Its doubtful people will remain in their homes when the dream of a sharp rebound becomes fiction. Then again, who knows what type of plan the govt will come up to incentivize remaining in your home when the value is down 40%.

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  10. 10
    Scott Weitz says:

    Great post, Tim. This is the sleeeping giant that noone wants to talk about.

    I see a silent storm brewing as the majority still expects a ‘rebound’ soon. When that dream dies, it will be interesting to see how the populus reacts.

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  11. 11
    Groundhogday says:

    RE: pragmatist @ 5

    You forget that if people can’t sell because they are underwater, they also can’t buy because they are underwater. Household formation is going negative, new homes are coming on the market, the math is pretty simple.

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  12. 12
    Groundhogday says:

    By D. @ 6:

    I think there is a lot of pent up demand. I notice it in the comments all the time.

    This blog is not representative of the general population.

    Everyone says it’s a great time to buy but those of us who are looking can’t agree. It’s pretty dismal.

    Just about no one who understands the real estate market in the Pacific Northwest thinks it is a great time to buy. Home prices are still too high relative to rents and incomes, and we are just starting to hit our stride in home price reductions. It will be another year or two before it is a great time to buy in the PNW.

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  13. 13
    Mikal says:

    RE: Groundhogday @ 11 – The stuff that was planned before the crash is coming online. Other than that there is very little being built.

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  14. 14
    Tyler says:

    I am having a hard time with the comparison of supply vs. demand as the charts are laid out. In my mind, many people did buy years earlier than they would have given different a normal home appreciation curve. Also, some of these people would have *never* purchased a home, so this is even worse than borrowed demand; it is illusionary demand.

    New home builders are not putting much inventory on the market, but a lot of the ground work was laid for more construction. Land has been purchased, subdivision plans made, etc. I think that if demand does pick up, it will be easily met. It is far easier to create supply than demand.

    Tim, I think it would interesting to chart home ownership percentages historically along with the supply/demand inspired charts.

    When the tech bubble of the late 90’s ran up, your aveage Joe was creating an online trading account. Ameritrade, Etrade, GetRichQuickTrade, etc., opened up and made lots of money based on the volume of trades happening every day. These brokers got a small cut $5-$15 a trade, and were making some money. When the tech bubble burst, and volumes dropped to historical lows, I don’t recall anyone saying that people needed to increase their transactional volume to keep the discount brokers alive! The average tech bubble speculator left the stock market as an active trader, never to return. I think that a lot of buyers of the housing bubble who will eventually lose their home will be the same story. Back to renting, b/c for lots of people it is the most reasonable thing to do.

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  15. 15
    pragmatist says:

    RE: Groundhogday @ 11 – While I agree that there will be some reduction in demand due to homeowners being unable to trade up, there will still be demand due to new college graduates, people moving out of their parents’ basement, and people moving to Seattle from other areas of the country. Since new housing starts are basically zero, there won’t be much new inventory coming online once current inventory is exhausted.

    I believe Paul Krugman made a similar argument with respect to the auto industry. Manufacturers have cut back production and shuttered so many plants, that once the market for new automobiles comes back, there won’t be enough capacity to support the market. In fact, we will be at a net negative for automobiles, because we won’t be able to replace all of the vehicles that are destroyed due to collisions or are sent to the junkyard.

    The short term is going to be hell for sellers, but in the medium to long term there could very easily be a market squeeze where too many buyers are trying to compete for a limited supply of homes.

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  16. 16
    patient says:

    RE: pragmatist @ 15 – College grads and kids leaving home that can get a mortage and afford today’s prices are probably very limited compared to new supply from aging/dying population which makes that equation negative for demand vs supply. People move in but they also move out of Seattle.

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  17. 17
    drshort says:

    By pragmatist @ 15:

    RE: Groundhogday @ 11 – While I agree that there will be some reduction in demand due to homeowners being unable to trade up, there will still be demand due to new college graduates, people moving out of their parents’ basement, and people moving to Seattle from other areas of the country.

    A couple of points here…

    No down payment mortgages are basically gone. In this “declining market” FHA and PMI are going require a buyer come to the table with a sizable downpayment. This essentially cuts off a large percentage of “new grads” who may qualify based on their income, but have no down payment saved up. This is probably a significant long term change.

    The drop in CA real estate is going to impact this area. The pipeline of CA residents coming to Seattle with huge piles of equity is basically gone. The reasons for moving to Seattle (MSFT is hiring and much cheaper housing compared to CA) are lessened too.

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  18. 18
    deejayoh says:

    By Tyler @ 14:

    Tim, I think it would interesting to chart home ownership percentages historically along with the supply/demand inspired charts.

    When the tech bubble of the late 90’s ran up, your aveage Joe was creating an online trading account. Ameritrade, Etrade, GetRichQuickTrade, etc., opened up and made lots of money based on the volume of trades happening every day. These brokers got a small cut $5-$15 a trade, and were making some money. When the tech bubble burst, and volumes dropped to historical lows, I don’t recall anyone saying that people needed to increase their transactional volume to keep the discount brokers alive! The average tech bubble speculator left the stock market as an active trader, never to return. I think that a lot of buyers of the housing bubble who will eventually lose their home will be the same story. Back to renting, b/c for lots of people it is the most reasonable thing to do.

    I was thinking this would be a big driver but when you look at the numbers, % of home ownership for King County is actually pretty normal relative to historical standards (sources are linked in 1970 and 2007)

    Year | Percent
    1970 | 63%
    1980 | 62%
    1990 | 59%
    2000 | 60%
    2005 | 61%
    2007 | 62%

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  19. 19
    Greg Perry says:

    Is new construction selling?

    Here are the NEW CONSTRUCTION ONLY residential absorption rates (months of supply), based on Pending sales for the last 4 months:

    In all areas, Pendings sales are up, Active supply is down.
    King County:
    18.3; 14.5; 11.3; 8.0

    Metro:
    15,8; 12.4; 7.5; 5.0

    Eastside
    23.4; 18.8; 14.4; 12.4

    In normal markets there is always units to replace existing sold. For the last year or so, it has been very hard for the majority of builders to get loans for land acquisition , development and permits. I believe there will be at least an 18-30 month hole where replacement new construction homes will be ready to sell and occupy. People don’t realize how many quality small builders that build custom and spot projects in the county. Many of these small guys have disappeared.

    In addition the banks carrying the builders financing, along with the builders have created especially hot financing programs. I am seeing ARM loans start at 2 7/8 percent and 30 year fixed at 4 3/4 percent offered by builders which should accelerate sales. We’ll also see the down payment assistance programs come back.

    New construction IS selling and I believe there will be an 18-30 month hole in the segment as existing inventory is sold off.

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  20. 20
    Greg Perry says:

    Does anyone have thoughts on price compression?

    This market is extremely bottom heavy. High end sales are very slow. Lower price ranges are starting to pick up dramatically.

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  21. 21
    Robtr says:

    I’m sorry but your “base line” is a joke. Some of you may remember that 2000 to 2002 we were in a recession and had the September 11, 2001 terrorist attack on the United States.

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  22. 22
    EconE says:

    Hmmm…more pent up supply or demand?

    Well…how many renters don’t have roofs over their heads?

    How many houses out there don’t have occupants?

    The reasoning by the bulls gets more desparate by the day.

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  23. 23

    I refuse to do a mortgage longer than ten years on general principle, so prices have to drop massively before I am likely to plunk down my downpayment or outright cash sum (depending on just how low prices get by 2011, 2012, 2013).

    I remember when the shift started from 15 year mortgages to 20 and then 30 year ones. It was quite sadly not that long ago.

    Something to keep in mind– historically in America, homes have mostly been things you purchased on a 5-15 year installment plan– much more like cars over the last century than the 30 year situation of the last 15 years,

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  24. 24
    deejayoh says:

    RE: Robtr @ 21 – Actually, according to NBER the recession started in March 2001 and ended in November 2001. It lasted 8 months peak to trough. So no, I don’t remember the 2000-2002 recession the way you do.

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  25. 25
    Greg Perry says:

    RE: Robtr @ 21 – It’s a fine base line. From 2002, we steadily lost inventory while demand was at an all time high. This is the period that the exotic loan programs most affected housing demand/supply. I have no arguments with the baseline for this discussion.

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  26. 26
    drshort says:

    Apparently, there is housing “scarcity” going on right now….

    http://blog.seattlepi.com/realestate/archives/166020.asp

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  27. 27
    deejayoh says:

    By Secular Apostate @ 23:

    I remember when the shift started from 15 year mortgages to 20 and then 30 year ones. It was quite sadly not that long ago.

    Something to keep in mind– historically in America, homes have mostly been things you purchased on a 5-15 year installment plan– much more like cars over the last century than the 30 year situation of the last 15 years,

    Wow. you must be old. 30 year mortgages have been the norm since the new deal…

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  28. 28
    The Tim says:

    RE: Robtr @ 21 – There was very little difference in the stats between 2001 (75% of which was already on the books before 9/11) and 2002, so I highly doubt 9/11 had any real effect on these numbers. As far as the recession goes, that didn’t “technically” begin until March 2001, either.

    So if you want to realign the baseline, go ahead and just use the 2000 figures. The pent-up demand picture stays pretty much the same, and the pent-up supply drops to around 6,000.

    I’d love to use something like a 10-year average from 1990-1999 for the baseline, but unfortunately reliable data on listings and sales isn’t available past 2000.

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  29. 29
    pfft says:

    “they will all rush in at once and the market will be hot hot hot once again, and the opportunity for good deals will have passed.”

    doesn’t that describe the bubble years? if everyone does rush in, who is left to buy? nobody, so we’ll go back to real estate being a deal.

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  30. 30
    The Tim says:

    RE: pfft @ 29 – Yes well that is the dream of most real estate salespeople, isn’t it? That they’ll wake up one day and *poof* it’s the housing bubble all over again.

    Ain’t gonna happen.

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  31. 31
    patient says:

    Greg Perry, you seem to follow absorption rates and sales pretty closely on an area basis and in relation to your compression statement,. can you shed some light on where the bulk of the sub $350k sfh sales in King Co. are made? With these sales making up half of the closed sales in March with ~500 units it’s pretty interresting to know a bit more details, especially since the main population areas in King Co are close to clinically free from sub $350k sfhs.

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  32. 32
    The Tim says:

    RE: patient @ 31 – I’m not Greg, but I can tell you that according to Estately, there are (as of this comment posting) over 2,700 SFHs on the market in King County priced $350 and below.

    The bulk of them look to be located between south Seattle and Auburn.

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  33. 33
    patient says:

    RE: The Tim @ 32

    Thanks The Tim!
    So, it’s probably fair to assume that most sales in King Co. nowadays comes from this area as well?

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  34. 34
    Kary L. Krismer says:

    By pragmatist @ 2:

    How is there going to be that much pent up supply when most of the market is currently underwater? .

    I’m only to the second comment, but that was my thought also. You can’t really measure the pent up supply because a lot of owners simply are not in a position to sell. Not everyone can do a short sale.

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  35. 35
    patient says:

    The follow up question would be, why do you think that is? Prices are lower, yes but I would also guess that the median income level is lower than for Seattle proper and the eastside? I find the cause of this potential concentration of sales to a certain area an interresting subject. I.e if income/price is similar to areas that are not seeing increased sales the reasons are interresting.

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  36. 36
    Nick says:

    I hate to be a statistic, but in this case, I think I am. I have some potential down payment money, good credit, and I’m waiting for the market to come down further before I buy (again). I suppose I represent the “pent-up demand”, since I fully intend to buy a house when they become reasonably priced; but I’m not sure I’d worry too much about people like me spiking housing prices back up into the bubble range any time soon. For one thing, I’m looking at a multi-year time horizon before I think prices will be reasonable, and I don’t intend to buy just because of a perceived “uptick” in prices. For another thing, unless the government increases their lending risk and subsequent wasting money by an order of magnitude, there’s not going to be nearly the same size pool of buyers able to buy, even if there are as many willing. Also, by the time the market eventually becomes rationally valued again, most “sheep” buyers will probably be convinced that real estate is a horrible investment, as they were similarly convinced it was a “can’t lose” proposition during the bubble.

    In short, although I buy some pent-up demand, I don’t think any fence sitters need be overly concerned about a sudden and unexpected reflation of the housing bubble leaving them behind.

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  37. 37
    Kary L. Krismer says:

    By deejayoh @ 24:

    RE: Robtr @ 21 – Actually, according to NBER the recession started in March 2001 and ended in November 2001. It lasted 8 months peak to trough. So no, I don’t remember the 2000-2002 recession the way you do.

    Is NBER a political organization? I’d never heard of them until when they suddenly declared the recession to start about a year before the end of Bush’s term. Now you’re saying they said the prior one started after Bush took office, when clearly we were in trouble even before Bush took office. Seemingly they are not applying the same standards to their start dates. That’s why I like the classic definition which is based on GNP numbers.

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  38. 38
    Kary L. Krismer says:

    By patient @ 8:

    I guess with supply and demand we are talking nwmls numbers here? Can someone explain how foreclosures in general are handled when it comes to the nwmls? Does a foreclosure home always pass through the nwmls as supply(inventory) and demand(closed sale ) in the process from foreclosure to new owner?

    They are only accounted for if the bank buys, lists as a bank owned.

    I do track (but don’t record) the means medians prepared by First American, which should include foreclosures, and they are fairly close to the NWMLS numbers, but very untimely. About as untimely as Case-Shiller.

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  39. 39
    The Tim says:

    RE: Kary L. Krismer @ 37

    The answers to your question about their standards can be found here: http://www.nber.org/cycles/recessions.html and here: http://www.nber.org/cycles.html

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  40. 40
    patient says:

    RE: Kary L. Krismer @ 38

    “They are only accounted for if the bank buys, lists as a bank owned.”

    Which do not reflect the real demand or supply, so when foreclosures start to make up a large chunk of available properties and sales the nwmls supply and demand numbers are very unreliable as to true supply and demand.

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  41. 41
    patient says:

    By patient @ 40:

    RE: Kary L. Krismer @ 38

    “They are only accounted for if the bank buys, lists as a bank owned.”

    Which do not reflect the real demand or supply, so when foreclosures start to make up a large chunk of available properties and sales the nwmls supply and demand numbers are very unreliable as to true supply and demand.

    i might have gotten that wrong, is what you are saying is that if the bank buys the property will be listed and included in supply when they want to sell it and the sale will be recorded as closed in nwmls? In that case it’s not a problem if this is how the majority of foreclosures endup.

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  42. 42
    Kary L. Krismer says:

    By patient @ 41:

    By patient @ 40:
    RE: Kary L. Krismer @ 38

    “They are only accounted for if the bank buys, lists as a bank owned.”

    Which do not reflect the real demand or supply, so when foreclosures start to make up a large chunk of available properties and sales the nwmls supply and demand numbers are very unreliable as to true supply and demand.

    i might have gotten that wrong, is what you are saying is that if the bank buys the property will be listed and included in supply when they want to sell it and the sale will be recorded as closed in nwmls? In that case it’s not a problem if this is how the majority of foreclosures endup.

    Well, right now a large percentage of foreclosures end up bought by banks, but that’s probably not always the case.

    Another thing that throws off the numbers is FSBOs. Prior to 2008 there were a lot more FSBOs. I’m not sure about 2001-2002.

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  43. 43
    Kary L. Krismer says:

    RE: The Tim @ 39 – I’m more interested in what they do than what the say. The ABA would say that they’re non-political in grading judicial nominees. Color me very skeptical on that.

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  44. 44
    Greg Perry says:

    RE: patient @ 31
    I keep the charts in even number increments, so I can’t give you <350k but will give you <400k.

    To give you an example on the eastside for the 7 day period ending 4/1:

    Area 500
    Pendings: 25; 700k=1; only 1 home priced above $1mil

    Area 530:
    Pendings 12; 700k =2 ; 55 homes above $1mil

    Area 540:
    Pendings 23; 700k=3 ; 136 homes above $1mil

    Area 550:
    Pendings 16; ,700k = 4; 72 homes above $1mil

    Area 560
    Pendings 13; 700k = 3; 170 homes above $1mil

    Area 600
    Pendings 34; 700k=4; 81 homes above $1mil

    Selected In City:
    Area 380
    Pendings 20; 700k = 3; 22 homes above $1mil

    Area 705:
    Pendings 48; 700k=1; 29 homes above $1mil

    Area 710
    Pendings 31; 700k = 7; 59 homes above $1mil

    Area 720
    Pendings 14; 700k = 1; 19 homes above $1mil

    I don’t have the time to devote to the South End right now.

    As anyone can plainly see, there is very little high end (>700K) support in sales. Some of the areas have few homes priced under $400k, yet they still show the majority of sales.

    Sales ratios for homes priced above $1 million are abysmal.

    What I am seeing is healthy to steadily increasing absorption rates in core area homes priced under $700,000. The lower the price, the faster the rate of sale. There is very little support for high end sales. Remember, when we look at median prices for any area, it is the mid point price! What happens to medians with 0 to little support on the high end?

    I believe that price compression may become a real factor in the marketplace as the sellers in high end inventory will be reducing 20-30% or more to sell, while the more affordable houses start to stabilize and start to rise in price.

    I do, however, believe there IS pent up seller demand and we will see formerly frustrated sellers going back to market. I also believe that we will be faced with new construction shortage. Lots to look at and analyze. The one thing I know for sure is that taking a simplistic look at medians as the main market indicator is a huge error.
    Following and understanding absorption rates — by area, by price and even by house style (split, rambler, etc) will help the agent, buyer or seller understand the market they are in.

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  45. 45
    Alan says:

    If the top 60% of people should be able to afford a home then that implies that a person at the 70th percentile of income should be able to purchase a median prices home.

    What is 70th income percentile in KC?

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  46. 46
    Kary L. Krismer says:

    On the Kent/Renton border they started constructing some homes just recently again where the foundations were probably poured close to two years ago. Seeing new stuff going up looks strange.

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  47. 47
    deejayoh says:

    RE: Kary L. Krismer @ 37

    ok, everyone else – economists, the goverment, the press – will rely on the NBER. but you can use the “classic” definition if it suits you.

    For those of us not quite so certain of our encyclopedic knowledge of economics:

    In the United States the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER) is generally seen as the authority for dating US recessions. The NBER defines an economic recession as: “a significant decline in [the] economic activity spread across the country, lasting more than a few months, normally visible in real GDP growth, real personal income, employment (non-farm payrolls), industrial production, and wholesale-retail sales.”[7] Almost universally, academic economists, policy makers, and businesses defer to the determination by the NBER for the precise dating of a recession’s onset and end.

    by the way, if you haven’t heard of the NBER then you probably shouldn’t be opining on economics…

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  48. 48
    Greg Perry says:

    AARRRRGGGGGG
    I was using symbols for greater and less than and they blew out!

    I will do this again (and I don’t have time!!!!)

    You can see the homes priced above $1 mil in my previous post

    The first number is Pendings, the second number is pendings priced under $400k, the third number is pendings priced over $700k

    500: 25 ; 8 ; 2
    530: 12 ; 2 ; 3
    540: 23 ; 4 ; 3
    550: 16 ; 2 ; 4
    560: 13 ; 4 ; 3
    600: 34 ; 10 ; 4

    In City
    380: 20 ; 13 ; 3
    705: 48; 18; 1
    710: 31; 13; 7
    715: 14; 11; 1

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  49. 49
    Kary L. Krismer says:

    RE: deejayoh @ 47 – I hadn’t heard of them being the “official” definition of when a recession starts until last year. I suspect they declared themselves to be such an official source. ;-)

    But hey, if you think we were in a recession at the beginning of 2008 but not at the beginning of 2001, fine–they’re accurate and non-political. Maybe there’s some other explanation for the discrepancy that is based on some statistic they monitor, but it seems suspicious to me.

    Edit: One possible explanation would be their accounting for the price of oil in the national numbers. That created quite a fake increase.

    Out of curiosity, were they an official source prior to 1980? You have to remember that’s when I graduated college.

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  50. 50
    patient says:

    Thanks Greg, looks like the current numbers indicates a continued anemic market on the eastside and in-city in all price levels and that high end is dead.

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  51. 51
    deejayoh says:

    RE: Kary L. Krismer @ 49 – Well, I don’t know their exhaustive history – but according to their site NBER was founded in 1920. They have press releases opining on recessions on their site going back to 1979 and archives of their newsletters going back to 1920… Basically, they’re an economics think tank.

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  52. 52
    deejayoh says:

    RE: Greg Perry @ 48 – Looking at this, I expect the median to drop pretty dramatically even as sales pick up. Few if any sales at the high end combined with increasing volume at the low end is going to make the pricing numbers look even worse than they might.

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  53. 53
    Greg Perry says:

    RE: patient @ 50

    Well, not so fast. I would not call the numbers anemic. For the same week for above figures, the in city sales ratios were:

    NWMLS Area 380 jumped from 12 to 20 sales. (2.8 months inventory)
    NWMLS Area 390 jumped from 13 to 22 sales. (3.8 months inventory)
    NWMLS Area 705 had 48 sales. (2.3 months inventory)
    NWMLS Area 710 had 31 sales. (2.5 months inventory)
    NWMLS area 715 had 14 sales. (2.2 months inventory)

    For the 7 day period ending on 04/04, KC pendings jumped from 401 to 497 and 380, 705, 710 and 715 sales ratios were in Seller’s market territory. 705 finished the month of March in Seller’s market territory. And that is without any help from the top end. The lower priced homes are actually cooking along when compared to the active inventory. The lower prices in the eastside area all balanced or better,

    Each week pendings has been improving, but for the previous 7 days ending on 4/1, we saw a significant jump (almost 25%) in pending sales. I will get figures for last week (7 days ending on 4/08 tonight or in the morning to see if we’re keeping pace.

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  54. 54
    patient says:

    RE: Greg Perry @ 53 – Sorry but the numbers still look anemic to me.

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  55. 55
    Greg Perry says:

    RE: deejayoh @ 52

    I agree completely. Which is one of the problems with those who just look at the medians,

    The overall area will show a decline in median price. YET, the lower price points, for example the point between $400k and $500k many not be dropping at all. In fact this price range may be stable or rising in price. Yet the high end can be collapsing at the same time.

    When the lower price rages rise and the higher price ranges collapse, it creates a market compression.

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  56. 56
    Groundhogday says:

    Okay, Econ 101 time.

    There is a demand CURVE, not a demand point for housing. People have many housing options, they can rent, they can buy, then can shack up in shared housing, they can move away from an urban center to save money, move closer to save commuting time, etc.. As prices increase, fewer people will want to or be able to buy. As prices drop, more people will want to and be able to buy. This is not “pent up demand.” This is just the demand curve for housing. The increased demand will only exist as long as home prices stay low… particularly now that you can’t get loans without a down payment and a demonstrated ability to make the payments.

    The only way to get a rapid rise in housing prices is to shift the demand curve to the right, as happened with easy lending and bubble psychology for several years. Now it has shifted back to the left. Actually shifting the demand curve going forward will be almost impossible at this point given the fundamental changes in psychology and lending standards.

    Bottom line: As we have seen in market after market, the only way to get sales moving again is to lower prices. All the money NAR spends on commercials targeting buyers would be better spent targeting sellers, and encouraging them to drop prices to levels that will clear the market.

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  57. 57
    mukoh says:

    RE: Ira sacharoff @ 4 – Ira there is also a ton of condos/new homes that will not hit the market for a long long time as banks are shut down on any new starts PERIOD.

    Only hard money plays now in the commercial field.

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  58. 58
    Groundhogday says:

    By Greg Perry @ 55:

    RE: deejayoh @ 52

    The overall area will show a decline in median price. YET, the lower price points, for example the point between $400k and $500k many not be dropping at all. In fact this price range may be stable or rising in price. Yet the high end can be collapsing at the same time.

    Look at the Case Shiller tiers: the lower price points have dropped first and faster in almost every market. The higher tiers tend to be very sticky, and slower to fall. Eventually we will see price compression, but the initial deflation of the bubble will probably yield the opposite effect in the PNW.

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  59. 59
    Groundhogday says:

    By Kary L. Krismer @ 34:

    By pragmatist @ 2:
    How is there going to be that much pent up supply when most of the market is currently underwater? .

    I’m only to the second comment, but that was my thought also. You can’t really measure the pent up supply because a lot of owners simply are not in a position to sell. Not everyone can do a short sale.

    Easy: jingle mail. When people are substantially underwater, they walk away. All types of loans, all types of incomes, all types of FICO scores.

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  60. 60
    Greg Perry says:

    To put it into perspective, there are 4.3 weeks in a month. If we turn in the same performance for the rest of the month, we’ll see 2137 pendings, which puts the volume comparable to most months in 2004,2005, 2006.

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  61. 61
    Kary L. Krismer says:

    RE: deejayoh @ 52 – The high end has been dead for some time, and that affects the mean more than the median. The difference between the two was very low for March, only about $57,000 which is the lowest going back to at least December 2005.

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  62. 62
    Kary L. Krismer says:

    RE: Groundhogday @ 59 – I’ve had that discussion with Ray a lot here, and in my experience as a bankruptcy attorney just the opposite is true. People will do crazy ridiculous things to save their homes they have no equity in.

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  63. 63
    jon says:

    The premise of this posting seems flawed. The graph of sales is presented as if it is demand that has been borrowed from the future. But each sale represents both a buyer and a seller. So those could be called sales borrowed from the future just as easily. The fact that the graph of listings is not the same is probably a reflection of how different your strategy for pricing and relisting needs to be when the market is rising versus when it is falling.

    In the short term of a few years, demand for housing is going to be the number of households, and supply is the number of units. The details of where that demand will be focused in terms of rent vs. buy and where they fit on the price scale will be what matters, but that will be much harder to determine than just looking at the total number of sales over recent years.

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  64. 64
    Kary L. Krismer says:

    RE: Greg Perry @ 60 – But the pendings get double counted from month to month if they are that state for more than 30 days.

    But I do agree that the pendings are rising, and seem to be continuing to do so.

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  65. 65
    Kary L. Krismer says:

    By deejayoh @ 51:

    RE: Kary L. Krismer @ 49 – Well, I don’t know their exhaustive history – but according to their site NBER was founded in 1920. They have press releases opining on recessions on their site going back to 1979 and archives of their newsletters going back to 1920… Basically, they’re an economics think tank.

    I’d guess if their Internet site goes back to 1979, that’s probably how far back they did this. Either that, or they were a very early adapter of the Internet. ;-) Anyway, if they started in 1979 it’s likely none of my classes mentioned it, because one it would have been new and of little interest, and two it would have probably been taught in introductory classes I took earlier.

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  66. 66
    patient says:

    RE: Groundhogday @ 58 – I thought as deejayoh when I made predictions for 2008 which was beyond doubt a price deflation year, I predicted 25% off for median and 10% off for Case Shiller, however the outcome was ~7% down for median and ~13% (15% for low tier) down for Case Shiller showing that this logic is not so clear cut as one might think.

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  67. 67
    patient says:

    RE: Greg Perry @ 60 – For April in those months? sales are pretty seasonal.

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  68. 68
    Kary L. Krismer says:

    RE: Kary L. Krismer @ 61 – Just to follow up on the high end and mean/median, the March NWMLS King County SFR mean is about 70.7% of peak, while the median is 75.6% of peak.

    Only 29 properties over $1,000,000 sold in March, and only 82 since the beginning of the year.

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  69. 69
    Greg Perry says:

    Yes, Kary, you are correct. (comment 64)

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  70. 70
    EconE says:

    By Kary L. Krismer @ 68:

    RE: Kary L. Krismer @ 61
    Only 29 properties over $1,000,000 sold in March, and only 82 since the beginning of the year.

    It looks as if over the last 30 days, 320 properties over $1,000,000 came on the market in King County (not including condos).

    It also looks as if there are about 1,500 properties listed over $1,000,000 in KC (not including condos)

    Houston…we have a problem.

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  71. 71
    EconE says:

    Perhaps we can all take up a group project.

    We can all send postcards to the sellers of the $1,000,000+ properties that state…

    “We regret to inform you that your property is NOT worth what you think it is!…and it never was…period.”

    ;^)

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  72. 72
    Ray Pepper says:

    We just had an 8 month deal finally close today on a short sale………………………. WHAT A JOKE!……………….But, in the end our buyers were happy.

    The Listing Agent didn’t even get paid because of a last minute Lien. AMAZING! Amazes me Agents take these short sale listings..

    Anymore of these 8 month short sale transactions I will go back to my old desk job.

    http://www.youtube.com/watch?v=OPeiuNmxPkM&feature=PlayList&p=B954716A8D366460&playnext=1&playnext_from=PL&index=8

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  73. 73
    jon says:

    RE: Kary L. Krismer @ 65 – I had at least one professor in the late 70’s whose work was funded by NBER. There was economic data online at that time on ARPANET, the precursor to the internet, but you had to log in remotely to the computer that the data was stored on and run programs there, as the www would not be around for another 10 years. I recall one time I managed to spend $1000 of computer time in one hour doing that. grrrrrr.

    Back then, the definition for a recession would have pretty much had to have been quarterly, because it took a much longer time to collect the data than it does now.

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  74. 74
    Jonness says:

    RE: Ray Pepper @ 72

    Ray. Is lowballing REO’s worthwhile, or are the banks reluctant to take lower offers on homes already discounted?

    BTW, that video is completely hilarious!

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  75. 75
    Ray Pepper says:

    RE: Jonness @ 74

    Personally I call the listing agent whenever I have a buyer want to make any offer. A good listing agent will tell you if you are wasting your time or if a higher offer has already been presented and rejected. Some corn balls state: “Ray…….just submit your offer like everyone else.”…However, these last two weeks there has been a HUGE uptick in activity…Spring Buying..pent up demand…whatever…… and I have met multiple offers on short sales and REO’s all higher priced then my offers.
    “Are banks reluctant to take offers on homes already discounted?”…in my opinion it seems to matter how long it has been sitting there at the current price…………..or if it was just reduced….

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  76. 76
    mukoh says:

    Ray,
    Not necessarily a friend of mine just got a deal on a duplex conversion $100 a foot in south snoco. Previously the bank rejected an offer that in the numbers was more then $120 a foot. Now they are taking a $60k haircut two months later and accepting it.

    Best REO deals are to have an agent who specializes in working with banks and knows the right contacts who can get you in as a buyer directly with the bank, as well as the inside on how low you can go. There is only few of those around.

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  77. 77
    Hector says:

    I really wish we could somehow include the availability of financing into the equation. It naturally has a direct impact on any pent-up demand, but we have no way of measuring, we only know the party is over.

    Another dumb yet obvious thing is we have no way of including fraud in the equation, we just know the fraudsters have for the most part moved on, reducing demand (and supply?)

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  78. 78
    Herman says:

    I love Tim’s experimental charts. This one doesn’t work for me.

    I think that pent up supply and demand conclusions can’t be teased out of listing trends. I think that such a measurement would have to take into account the migration into/out of our area, new construction adds, birth/mortality, and the % of ownership vs historical average. I think those are stronger factors.

    I have heard for example that the % ownership is usually 59% but right now we’re at 64%. That indicates pent up supply to me. Meaning 5% are owners that over time will go back to renting as things even out.

    Our higher unemployment rate and lower CA property values I think will freeze mobility into our area. That will reduce demand. Generally the RE industry loves mobility and rapid turnover of inventory. They want people to move every 5 years instead of every 10 years. At the moment I think people are going to stay put longer. Since Seattle is a city driven by immigration, the mobility slowdown will reduce demand.

    Construction may be slowing, but I think it’s going to overshoot. In West Seattle the construction is still so hot. There are townhomes going up and a few major, major projects opening. Something like 2,000 new units will be added in 2009. Incredible.

    Don’t forget that Seattle became the bastion of real estate investors because we were among the last to crash. A lot of construction money moved up here in 2006-2007.

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  79. 79
    Ray Pepper says:

    RE: mukoh @ 76

    Give me the names of the few that you suggest and speak highly of. I will do my own research on them and give you my analysis. If everyone is working on the same playing field, and we are all playing fairly, then I suggest a GOOD COMPETENT AGENT will do a good job as well.

    Your analysis just happened on two of my transactions. My buyers made an offer. After 2-4 months of waiting buyers walked. The home went back on the mkt priced lower. Both Buyers resubmitted lower. One was accepted. They once offered 399k and ended up getting it for 350k 96 days later. great Agent…..well maybe….A sign of the times…………most definitely………..

    In life it does help in who you know. If you know people who are “Special” please share how these Agents know the right contacts and how they can get Buyers offers in directly to the bank. It sounds to me they will lose their license.

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  80. 80
    Herman says:

    I’d also like to see Tim start tracking the “vintages” of owners out there. I think the 2005-2009 vintages represent trapped owners. As the pre-2005 vintages sell off and decline in number, more people will be trapped and the market will be even slower, barring foreclosures of course.

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  81. 81
    Groundhogday says:

    By Kary L. Krismer @ 62:

    RE: Groundhogday @ 59 – I’ve had that discussion with Ray a lot here, and in my experience as a bankruptcy attorney just the opposite is true. People will do crazy ridiculous things to save their homes they have no equity in.

    Well, I guess your personal experience isn’t representative. People are walking away all over the country. All income levels, all FICOS, all types of loans.

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  82. 82
    Mikal says:

    RE: Herman @ 80 – DJO says historically it is normal. Who is right?

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  83. 83
    Kary L. Krismer says:

    By Groundhogday @ 81:

    By Kary L. Krismer @ 62:
    RE: Groundhogday @ 59 – I’ve had that discussion with Ray a lot here, and in my experience as a bankruptcy attorney just the opposite is true. People will do crazy ridiculous things to save their homes they have no equity in.

    Well, I guess your personal experience isn’t representative. People are walking away all over the country. All income levels, all FICOS, all types of loans.

    How many of those had the ability to do anything else? Also I’d question how many of them got any financial advice. Lots of people make really bad financial decisions.

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  84. 84
    Kary L. Krismer says:

    By Herman @ 80:

    I’d also like to see Tim start tracking the “vintages” of owners out there. I think the 2005-2009 vintages represent trapped owners. As the pre-2005 vintages sell off and decline in number, more people will be trapped and the market will be even slower, barring foreclosures of course.

    Surprisingly, most the local Chapter 7 bankruptcies where a home is owned are people who bought earlier, but not before 2000.

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  85. 85
    Ray Pepper says:

    RE: Groundhogday @ 81

    Times have changed on Kary. We are in a whole new world where Bankruptcy and foreclosure is becoming far more accepted. I assure everyone people will NOT hold onto their upside down assets. Houses, cars, credit cards, etc…they are all going back. Bankruptcy Attorney’s –have been in the last year– and will continue to be one of the busiest professions. Try and get an appointment now. I hear, many are a month out.

    People are NOT stupid. A family makes a home…….The house does not. The mantra of home ownership has changed for this decade. They WILL walk (unless of course Mtg Cramdown occurs on a large scale). If not this year, then at some point in the next 5 due to many reasons in this mobile society. If they don’t then it will most definitely be a short sale..

    Watch for loans that will be common for post-Bankruptcy people and foreclosure (victims) who can Buy homes with stable employment. Wait 2 years?………..My butt…………….Thats a laugh……Try 6 months in 2010….This is a given to get all these properties bought up…

    Watch and Learn…..The social stigma of BK and Foreclosure has evaporated. Don’t believe me? Just wait!

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  86. 86
    AZ says:

    RE: Groundhogday @ 81

    I think Kary was correct historically. However, this is the collapse of a bubble in RE and historical averages, events, accounts, norms simply don’t apply. Hence the new terminology introduced into our language ‘jingle-mail’.

    Personally I’m waiting for prices to fall more. I think it’s going to get a lot worse as macroeconomic deterioration continues. While I find the price compression idea interesting and believe it may occur to some small extent I feel it will lead to overall lower prices as the low end housing is going to have to decrease in price. If it didn’t, which idiot would buy the lesser house for the same price? (all other things being equalish)

    The TIm – Been following the site for long time and love it. Thank you for your efforts here. As an aside and this probably belongs in the article about rent and income comparisons, have you looked at how they have been coming up with these numbers at housingtracker.net I’ve also followed that site for quite a while and they’ve been calculating that type of thing all along (one of the reasons I’m renting in Seattle area currently).

    All – sorry for the extremely long winded first post :)

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  87. 87
    Kary L. Krismer says:

    By Ray Pepper @ 85:

    RE: Groundhogday @ 81

    Times have changed on Kary. We are in a whole new world where Bankruptcy and foreclosure is becoming far more accepted. I assure everyone people will NOT hold onto their upside down assets

    You’re only about 25 years late noticing the stigma of bankruptcy has faded. And no, it doesn’t take 30 days to get an appointment with a bankruptcy attorney. But don’t plan on a last minute appointment, but that’s due to the bankruptcy counseling required by the legislation that went into effect a while ago. Also, there is the fact that they are busy, so why bother with someone who procrastinated when there are plenty of others.

    As a practical matter you really should see a bankruptcy attorney 100 days before you need to file–minimum.

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  88. 88
    One Eyed Man says:

    RE: Herman @ 78
    Two points:

    First, excellent comment Herman! Trying to reach a conclusion about pent up supply and demand from charts on pendings and solds is like trying to make out the picture on a jig-saw puzzel with many of the most important pieces missing. If you don’t quantify the home owners who are first entering the pool and those who are leaving the pool, you are left with a situation in which there is no net gain or loss of inventory. Each seller is replacing their home and creating demand with a new purchase and each purchaser is placing inventory on the market and creating supply with a corresponding sale of their old home.

    There is in all probability some shift between market segments as existing home owners either move up to larger homes or down size, but the key elements to an over all increase in supply or demand are the numbers of people entering and leaving the system and those buying multiple homes or disposing of rental properties and vacation homes. I think most real estate economists stress the importance of local economy and job growth as a driving force in housing demand.

    Second, I think there is a theoretical mathmatical answer to the question of whether there is more pent up supply or pent up demand at a certain point in time (at least as to months in the past). I believe that it’s the slope function for the graph on price change at any particular point. I looked at the 2007 page on who you guys are before and I know a lot of you are geeks who should have an opinion on this. Scotsman, anyone who throws out commets like check out the second derivative knows what I’m talking about even if I’ve stated my explanation incorrectly. I haven’t done any calculus since 1970 but theoretically I believe that pent up supply and demand should be represented by the acceleration in the rate at which prices are increasing or decreasing. If prices are decreasing at an accelerating rate then there is theoretically more pent up supply. If prices are falling at a decreasing rate, then there theoretically is more pent up demand. But of course, this quantitative measurement would be only at an historic point in time and wouldn’t necessarily tell you where next month’s point will fall on the curve.

    I think The Tim’s question is really asking for technical analysis (as opposed to fundamental analysis) of the real estate market. I think that “The Tim’s” volume and price charts are relevant to future supply and demand to the extent that they affect market psychology and market momentum. In my understanding market momentum and psychology are what “technical analysis” (as opposed to fundamental analysis) is all about. That is to say, will declining volume and prices result in pessimistic market psychology that increases supply and lowers price further? Or will decreasing prices result in increasing demand and higher numbers of transactions (called “support” in technical analysis) that will tend to stabilize price and perhaps create a rally (which could be either a “bear market rally” or a new bull market depending on it’s duration).

    I’m not particularly fond of technical analysis because I think it’s why lemmings run off cliffs. That is to say, it’s why everyone still wants to buy just before the top even though fundamental analysis says prices are too high.

    But technical analyis can have it’s place, although I think it’s better used in more fluid, fast moving markets for more fungible items like the stock exchange. If you go back and look at the CS charts on mean monthly price, you will see what technical analysts call a head and shoulders top with a shoulder in the summer of 2006, the head in the summer of 2007 and a shoulder in the summer of 2008. Of course, as we all know, this pattern is likely attributable to the seasonality of the market to a large degree. I think that if voume decreased as prices leveled and inventory increased, a technical analyst would say that a particular shoulder or top represented “resistance” and signals a true top in the market at the point it was formed.

    I think that those who believe in technical analysis would argue that a turn around in our currently falling real estate market will be evidenced by an increase in the volume of transactions as a leading indicator while prices start to level off and eventually increase as the market turns positive. (I think this is in fact what Ardell is talking about in her bottom call although from what I read, I don’t think she exactly explains it in that manner). It’s my understanding that increased volume while prices stabilize, is termed “support.” The problem with viewing an increase in volume and an apparent stabilization of price as evidence of support indicating a bottom in the real estate market at the current time is that it may be just seasonal demand and not a true bottom.

    I don’t know that much about technical analysis, but if you want to do technical analysis, I think that you need more detailed charts showing the interrelationship of changes in transaction volume and changes in price perhaps on a monthly basis. The yearly charts The Tim has posted don’t provide enough detail.

    Last: Did anyone actually read my comment. If so, do you think I’m: (A) nuts?; (B) full of it; or (C) providing an indepth and inciteful comment that is helpful to understanding the issues and moving the discussion forward.
    I apologize for the length of this comment and I know it’s a pain.

    The Tim, and everyone else out there. Let me know if you would prefer I not post long crap like this. I try to post long stuff like this at the end so it doesn’t kill the thread.

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  89. 89
    Kary L. Krismer says:

    By AZ @ 86:

    RE: Groundhogday @ 81

    I think Kary was correct historically. However, this is the collapse of a bubble in RE and historical averages, events, accounts, norms simply don’t apply. Hence the new terminology introduced into our language ‘jingle-mail’.

    What we’re going through is very similar to the local condo market of the early 80s, and probably the national real estate market (not sure). The degree is a bit more severe, but it’s not like we haven’t gone through declining markets again.

    And the biggest thing to keep voluntary foreclosures from becoming popular? They are very public. People generally try to hide their financial troubles from their neighbors. I’ve even had a few clients concerned that their bankruptcy filing would be published in the Daily Journal of Commerce, as if people regularly read such things. But have your house foreclosed–the neighbors will know.

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  90. 90
    Kary L. Krismer says:

    By One Eyed Man @ 88:

    RE: Herman @ 78 – There is in all probability some shift between market segments as existing home owners either move up to larger homes or down size,

    If you include the people that want to move up or down, that’s probably a huge number. Real estate being really illiquid right now is keeping a lot of people from even trying.

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  91. 91
    The Tim says:

    RE: One Eyed Man @ 88 – Well I for one appreciate it when people take the time to post thoughtful and in-depth responses like this. Keep it up. Thanks!

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  92. 92
    AZ says:

    By Kary L. Krismer @ 89:

    What we’re going through is very similar to the local condo market of the early 80s, and probably the national real estate market (not sure). The degree is a bit more severe, but it’s not like we haven’t gone through declining markets again.

    I have to wholeheartedly disagree. I was referring (although maybe not pointedly enough) to the national level RE bubble of which Seattle is just a small latecomer to the party. We have not seen anything like this as it is a nationwide decline of housing prices in all markets simultaneously. On top of which you add in the macroeconomic failures of the banking system, massive unemployment, a retrenchment to lucid lending standards, massive amounts of debt (individually and nationally), and until very recently a declining savings rate that had turned NEGATIVE.

    Nothing like this has ever been seen in our history and I think you may be underestimating it’s long term effects and consequences. Unpleasant feelings of inadequacy fall to the wayside when compared to the financial future of families.

    Having said all that, housing prices may skyrocket in the next 3-10 years. If they do however, it will be because of massive inflation NOT any increase in housing relative to other goods.

    AZ (not anonymous)

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  93. 93
    mukoh says:

    RE: Ray Pepper @ 79 – Ray our group mostly uses one guy out of Lynnwood that literally knows every local bank, and sends us their inside lists weekly. Pre-Reo transactions only is what we are getting. Anything that has gone into REO already has been gone through and the cream has been taken off the top. Sifts through the deals for us then makes our LOIs on what we think is worth while. 90% of the time bank rejects first LOI then comes back a couple of weeks later with realistic number, and ends up taking what we want.

    A regular COMPETENT agent as you say does the same thing every other agent does. Pull up the MLS. The deals are not there, or if they are you have to compete against others or work around LAs that don’t know what they are doing.

    Not going to name the guy.

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  94. 94
    One Eyed Man says:

    RE: Kary L. Krismer @ 90

    Kary, I agree that there are probably a lot of people sitting on the sidelines who want to move up or down size. But I don’t think they represent a future net change in supply vs demand because they intend to both buy and sell. A buyer who is moving up or down sizing represents pent up demand for one house and pent up supply for one house, assuming they intend to sell their current house. The net change in total supply vs. demand represented by that particular person would be zero in the over all market. There would potentially be an increased demand in one market segment and a decrease in others if there were say more people who wanted to move up than people who wanted to down size.

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  95. 95
    BPL says:

    I’ve been patiently waiting on the sidelines ready to buy and following very closely smaller SFH and town homes in the 400-550 range in Ballard /or Fremont for the past 12-15 months. I don’t have data, just a general perception of these market:

    My goal has been to wait until the new or newer townhomes that started off asking 475-525sh, are being offered for 375-400 – we’re not there yet, but will soon be.

    As little as 6 months lots of stuff to choose from, but not priced right. Then about 2-3 months ago supply seemed to come down dramatically (folks simply pulling stuff off the market). Concurrently, a lot of the units I saw for sale are now on craigslist as rentals – so builders are simply giving up(?). Also a lot of new TH aren’t even on the MLS – at least I don’t see them. So I most definitely think there is a hidden supply. Big supply.

    I have a few friends who are high income (125-150K) who own condo’s who are not underwater, but not ahead either – they’re wanting to move up or move out, but are stuck. So I don’t see a lot of current homeowners feeding the market – it’s probably guys like me – sitting on a down payment, waiting it out. On the other hand, who has 40-80K in the entry space (10 -20% down) in this economy? Most people I know with savings are homeowners, not 30 somethings looking to buy for first time.

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  96. 96
    softwarengineer says:

    2009’S SALES DROP IS GOING TO MAKE 2008’S LOOK LIKE A JOKE

    Hey realitors, America is shedding about 650K jobs a month and insourcing [lower pay] 140K guest workers a month competing for the few jobs left. That means laid off Boeing workers and the rest like them across America will number about 10M a year.

    I predict a 20-25% low-ball [excludes giveups and underemployed] unemployment rate by 2010. Wait until the unemployment benefits and local government stimulus money dries up this year. Its going to get far worse. Teachers, police, nurses, etc….none of your jobs are safe either, with continued brainless debt growth.

    You realitors better band together with the “more overpopulation is good cult” and make our horrifying futures and home price decreases far worse….LOL

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  97. 97
    mukoh says:

    RE: softwarengineer @ 95 – SOFTIE, stop making this info public. Walmart is already out of ammo.

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  98. 98
    Kary L. Krismer says:

    By softwarengineer @ 96:

    Hey realitors, America is shedding about 650K jobs a month and insourcing [lower pay] 140K guest workers a month competing for the few jobs left.

    It’s okay. The people losing their jobs are all renters. ;-)

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  99. 99
    sead97 says:

    I’m not sure I buy the concept of pent-up supply. You’d have to believe that people opted not to sell because it became too expensive to upgrade. And given the vasts amount of new construction adding to supply, you’d have to believe this was a significant factor, which is hard to reconcile with what we heard about during the bubble.

    My concern is this – do the “listings” statistics adequately control for relistings. We know that during the bubble stuff sold so quickly there wasn’t as much need to relist as we are certainly seeing now, and probably saw before the bubble. To use a money supply analogy, there was a dramatic change in velocity, and if we are not factoring that in our supply calculations can be quite misleading.

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  100. 100
    Kary L. Krismer says:

    By sead97 @ 98:

    I’m not sure I buy the concept of pent-up supply. You’d have to believe that people opted not to sell because it became too expensive to upgrade.

    There could be a lot of different reasons for it. One of the biggies is new babies.

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  101. 101
    sead97 says:

    By Kary L. Krismer @ 99:

    By sead97 @ 98:
    One of the biggies is new babies.

    Not sure I follow. You’re saying people had babies and didn’t want to move? Most people I know think about moving when they have a baby. Do you believe there were more babies during the bubble than than in the years before and after (a mini-baby boom)? Maybe – I hadn’t heard anything about it though.

    Another way to look at Tim’s statistics is the % of listings that sold. It goes from about 50% in early 2000s to high 70%s during the bubble. I have a hard time believing that 50% is the baseline – that 1 out of 2 houses doesn’t sell and the owner just gives up and decides to rent or continue living there. Therefore, I would hypothesize that some of those “New listings” are not in fact new, but are people relisting to get a new MLS and clear their asking price history. You see a ton of that now. And unless these stats control for that, they’ll skewed the numbers.

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  102. 102
    mj4 says:

    Good stuff. I’m no economist, and I’m pretty sure I can’t buy the pent-up-supply / pent-up-demand argument wholesale, but the discussion is enlightening.

    My best guess is that we’ve just experienced the first lurch from heavy on the supply side to a bit heavy on the demand side. I’d also guess that it won’t stay that way. The low interest rates and tax bonus pulled some buyers off the fence and that clipped some supply from the market, but I doubt it will stay that way.

    Any market where it is taking so long to close deals is not close to finished with adjusting. I’m guessing that we’re not going to see a straight line down, but more lurching in different sectors (with single family low, middle, high and condos all in the mix) before we flatten out.

    I do see a flattening. I can’t see the people who managed to stay in their homes while the market took a tail spin have much of a stomach for getting into new homes until they see values become more stable. The thing I find funny is all the agents who keep suggesting the concept of a “market bottom” with a chart that reaches a sharp bottom point with prices climbing in a steep jag on the other side. They are trying scare tactics on buyers with a sharp market knife.

    They’ll probably pull more folks off the fence with fear mongering, but it’s to their own detriment. The more people they’ll pull in at this point, the stronger the next lurch down. They should be satisfied with the artificial heat the government is already applying to thaw the market. For now, I think the safe place is on the fence.

    I do have two questions to toss into the mix. Both have to do with numbers (as I can tell I’m clearly out of my league talking numbers here).

    1. In an attempt to understand the crazed market, I’ve been trying to anchor myself as best I can with a metric drawn before the swing, tax assessment values. I’ve seen places coming on the market 25% on either side of assessed value, and seen houses going off the market near the assessed value (with some slight adjustment up or down usually based on condition of the property). Is it safe to use assessed value as line of market measure? Can we effectively use the assessment line as a place to alert us as to volatility (meaning when we see that 50% spread shrink to 15% on the high or low side –depending on where the market goes– we’ve got a de facto indicator that we’re getting realism in pricing because enough forecloses and crazed agents have worked through the market? (The reason I ask is because I’ll be more willing to come off the fence and buy when I see the market calm)

    2. I agree with folks who are saying that we’ll likely see market compression. How do folks see that compression playing out over time.

    Thanks for the great conversation.

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  103. 103
    Kary L. Krismer says:

    RE: sead97 @ 101 – What I mean is that the couple gets pregnant, needs more room for the kid, and then wants to buy a bigger place (or a first place). Almost a nesting activity.

    It’s just an example of what I always say. Most people don’t want to buy or sell real property because they think it will go up or down in the next year. Most people do so for other reasons: Marriage, divorce, kids, jobs, retirement, etc.

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  104. 104
    Kary L. Krismer says:

    RE: mj4 @ 102 – Assessed value is practically meaningless in many parts of King County, and even worse in Snohomish County.

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  105. 105
    sead97 says:

    By mj4 @ 102:

    Is it safe to use assessed value as line of market measure?

    I don’t put much stock in assessed/taxable value. Many of the places I see have 10% increases 2008 to 2009, which makes no sense at all.

    The way I do it:

    1) I use Case-Shiller numbers to establish a trendline. I use 1990-2002 for Seattle. This probably sets the trendline a little steep, but I don’t think we’ll go back to the 1990-1997 trendline that I also look at, and I’m comfortable with a little downside risk.

    2) I take any property I’m interested in and all it’s sales since 1990. If it has nothing, I find comps and estimate what it would have sold for in some year since 1990 (for instance, if an identical house down the street sold for $400K in 2000, I assume the one I’m looking at would have sold for 400K in 2000)

    3) I use Case Shiller numbers to generate a current estimate. For example, suppose Case-Shiller was at 100 in 2000. The house sold for $400K. Per the 1990-2002 trendline, Case-Shiller should be at 130 today (in reality it’s at 155). Therefore, the house should be worth 30% more than 2000, or $520K.

    Finally, I factor in any improvements or wear-and-tear that I think have occured since the last sale. Let’s say they put in a new kitchen in 2004 and it’s looks like a $30K kitchen. Even though you often don’t get dollar for dollar out of remodels, I usually just tack it on to inform my estimate. So in this example, I’d say $550K is a price that gives me some comfort that my downside is limited.

    Of course, I then compare this number against current comps, what I think I could rent the place for, and taxable value just to make sure it makes sense. Most of the places I see these days are 10-30% above the trendline, and I find a few that are right near it (and they tend to go pretty quickly).

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  106. 106
    Kary L. Krismer says:

    By sead97 @ 105:

    I don’t put much stock in assessed/taxable value. Many of the places I see have 10% increases 2008 to 2009, which makes no sense at all.

    Actually it does make sense, because the 2009 values are based on 1/1/08 values, which were only a few months after the peak. We won’t see declines until 2010, but it really doesn’t matter because your tax is based on the percentage of your value to all the other values. So when your assessments do finally decrease, that doesn’t mean you’ll see a reduction in tax paid.

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  107. 107

    I also see assessed valuations as practically meaningless in King County. Not that many years ago you could assume that the actual value could be somewhere in the neighborhood of 20% ish higher than the assessed value, but not now. Now it’s all over the map.

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  108. 108
    The Kid says:

    Just throwing my 2 cents in here. There is both a pent up demand, and a pent up supply. Allow me to illustrate.

    Anyone who is convinced that there are a bunch a “Young Couples” and recent college grads interested in jumping right into the market, get their homes, start their familes is 100% correct. Every “young couple” (I put that in quotes because that definition can range from mid 20’s to mid 30’s these days) I know, including myself and my wife (I am in my late 20’s, married about five years now) would love a home. What is grossly overestimated is our ability to PAY for one at these prices. Most recent college grads are drowning in student loans, with college grad jobs that pay, generously, around $40k a year, probably less. On their own, working with $60k+ of student loans (which thankfully, I don’t have), recent college grads can afford a nice three bedroom Jack with attached two car shiat. Even people working with a dual income, no kids, no debt (such as myself) have to jump to grab the bottom of the market in Tukwilia. Generate a down payment of $60k cash? Not likely.

    So yeah, there is a demand for homes, a fairly sizable one.

    There is no demand for $350k “starter homes”.

    And there is also an enormous pent up supply. Of $350k “starter homes”. See where this is going? There are a fair amount of professional positions in this area, paying upwards of $80k a year. Look at the age of who is holding them. Know any first time homebuyers, wanting to start a family, pushing fifty?

    So, to sum up, in order to tap into this massive pent up demand, we’re going to have to see a median home price in King county of about $200k. I think we will, soon enough, which jibes with the bottom of 50% to 70% off peak numbers I hear thrown around alot, but until that happens, the market will just be baby boomers trading homes around. Sorry to burst your bubble :-)

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  109. 109
    sead97 says:

    By Kary L. Krismer @ 106:

    By sead97 @ 105:
    I don’t put much stock in assessed/taxable value. Many of the places I see have 10% increases 2008 to 2009, which makes no sense at all.

    Actually it does make sense, because the 2009 values are based on 1/1/08 values, which were only a few months after the peak. We won’t see declines until 2010, but it really doesn’t matter because your tax is based on the percentage of your value to all the other values. So when your assessments do finally decrease, that doesn’t mean you’ll see a reduction in tax paid.

    Maybe I should have been more clear – “makes no sense at all for computing the value of a home (e.g. the amount one might want to pay)” Death and taxes may be unavoidable, but overpaying for a house is not.

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  110. 110
    David Losh says:

    RE: The Kid @ 108

    This is truly a very fair assesment. What I would like to point out is the debt aspect. Today a person graduating with a professional degree of doctor, lawyer, architect, marketable computing/programming, financial, or business has huge tuition debt. On top of that to start there is the slave wage mentality of the industries they enter. It’s all big, very big business. Then to open a place of thier own is another big round of debt. Putting a mortgage on top of that nakes financial security an unrealistic dream.

    Owning a home should be a responsibilty rather than a burden.

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  111. 111
    Kary L. Krismer says:

    RE: sead97 @ 109 – Correct. Not only is the assessed value based on some time over 12 months prior than when you’d be considering buying, but they probably didn’t even get that value right. I’d guess it’s about as reliable as Zillow, but less up to date.

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  112. 112
    Snigliastic says:

    RE: The Kid @ 108
    There is a lot of pent up demand. I have several friends who make 80k+ with no debt, no kids and want to buy a house, but aren’t willing to spend 350k to get a “chocolately” house. Myself, I make six figures, no debt, and have the downpayment (29 years old), but decided to keep renting. I want a nice house with a nice yard, not some overpriced POS abutting another overpriced POS that will fall about in ten years. As it is, I just stockpile cash, waiting for the right time to buy the right house at the “right” price.

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  113. 113
    The Kid says:

    RE: Snigliastic @ 112

    Fair for you, certaintly. But do realize that a six figure income, minimum, puts you over the 92nd percentile for income in king county. Even $80k+ is well over the median king county single male income of $45,802 (according to wikpedia and the state census site). So what I’m saying is that while there IS demand for housing, there is no demand for the housing being offered at the prices that they’re being offered at. You assesment of your own situation, even considering the relative abnormality of it, seems to echo that sentiment.

    For the money you make, you deserve far better than it will currently buy you. Therefore, you are part of the same “pent up demand” as I am. Pent up demand for reasonably priced housing. From the top to the bottom, we’re all holding out for fair pricing, which the market hasn’t even touched.

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  114. 114
    Mikal says:

    RE: The Kid @ 113 – Good luck with that. You will get that in certain neighborhoods, but where is it you both are considering buying?

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  115. 115
    The Kid says:

    RE: Mikal @ 114
    Eastside, Bellevue, Kirkland, Issaquah. I know it may sound laughable, but hey, it’s where I was born and raised. I’m hoping to find something in the crossroads/lake hills area.
    I will admit a personal, emotional resentment for the bubble essentially pricing me out of my hometown. The modest three bedroom 2 and 3/4 bath rambler that I grew up in, purchased by my parents, construction worker (ran bulldozers) and preschool teacher respectively, for $30,000 in 1979 went on the market for over $600k a few years back, without any appreciable updating. It all kinda feels like a sick joke to me.

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  116. 116
    Snigliastic says:

    RE: Mikal @ 114 – Snohomish county. Lots of crap up here. Lots. Either you are getting a 20 year old, poorly maintained house our a new place built out of construction paper. Pretty depressing. I almost pulled the trigger on a house about 7 months ago, but fortunately did not. Yeesh.
    You would think 20+ miles north of Seattle people would be more realistic about pricing, but alas, no.

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  117. 117
    what goes up must come down says:

    The Kid see the problem is you are mixing reality with the fantasy land that some people here believe in. The reality is the historical trend line for housing versus the fantasy that was the bubble. Be patient we are going back to the historical trend line — i.e. that is why it is a long term fundamental trend line. The people who think the current prices can be maintained are IMHO smoking the wacky weed.

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  118. 118
    Mikal says:

    RE: what goes up must come down @ 117 – So that house that sold for $60,000 on Capitol Hill 45 years ago hasn’t appreciated? Some of those trend lines may be correct. But the area has increased in population has quadrupled since 1950 and we should expect 1 million more before 2020 according to a USA today article. Tell me that doesn’t mean certain close in areas are worth alot more now. The guy wanting to move somewher in Snohomish should be able to find a decent deal when this all bottoms out. Kirkland? Good luck with that. My brother in law is a day trader living in New Jersey. He makes in excess of $1 million a year. He has called bottom and is now looking for good deals there. We aren’t here yet, but it isn’t that far off.

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  119. 119
    The Kid says:

    RE: what goes up must come down @ 117
    Totally agreed. I think the overvaluation of, well, everything was a hell of alot higher than alot of people think. We WILL return to historical norms. That would make the house I grew up in worth about, hmmm… $180-200k. We still have a ways to go.

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  120. 120
    Kary L. Krismer says:

    One thing that is probably hurting the upper end a lot, and can’t be explained at all by looking at graphs of prior house prices, is the huge decline in the stock market. If you’ve lost $1,000,000+ in asset value, it’s harder to think about buying a $1,000,000+ house.

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  121. 121
    Mikal says:

    RE: The Kid @ 119 – Are we going to return to the old population levels as well?

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  122. 122
    EconE says:

    RE: Mikal @ 118

    USA Today? You’re kidding right?

    Next time you’re “dropping the kids off at the pool”…grab the People Magazine on the back of the toilet and let us all know what they have to say also!

    ;^)

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  123. 123
    S-Crow says:

    Snigliastic @ 116:

    I completely agree re: pricing in Snohomish Co.. Also, many vacant developments are reaping the benefits of more sunlight these days; ie, overgrown grass and weeds on vacant lots. Some framed out homes are sitting without siding; OSB sheathing exposed to the elements is not a pretty sight with 5 mos. of PNW moisture and mold growth. I really don’t understand how building depts. let this stuff get covered with cement board siding when they’ve been exposed for so long in our climate.

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  124. 124
    Mikal says:

    RE: EconE @ 122 – It was the first thing I could find. According to the Puget Sound Regional Council the Pierce, King, Kitsap, and Snohomish County region went from 1,196,172 from 1950 to just under 4,000,000 today . So while we are at the pool, there are still people moving here and guess what, they drive prices as well. If Boeing leaves we could become the new Detroit. It hasn’t happened yet. To think that growth doesn’t affect the long term patterns as to prices in certain neighborhoods like Kirkland or Queen Anne is a bit foolish. Historical trends can change unless you think everything is static. Putting a factory in a small town will make living there more expensive than it had in the past. Microsoft gearing up in the late 80’s changed the historical patterns of this area especially in the 90’s.

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  125. 125
    Snigliastic says:

    RE: S-Crow @ 123
    Do you live up here? I’d like to own up here, but really, too many overpriced POSs. But I get frustrated by how people price a lot of things I want to buy: boats, jet skis, etc. Prices have not fallen enough. One of my best friends is trying to sell his two year old motorcycle for 15% less than a brand new, updated model. He has not gotten, or lowered, his asking price for months, but absolutely has to sell.

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  126. 126
    S-Crow says:

    Snig: yes, our escrow office is just north of Mill Creek (technically Everett) and I’m very close to organizing another Seattle Bubble informal get-together for our Snohomish/Everett/Lake Stevens/Arlington/Monroe Sky-Valley readers; probably in the Everett area soon. I live a stones throw from downtown Snohomish. If time allows I’m also hoping to make it to the Seattle Bubble meet up on April 21.

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  127. 127
    EconE says:

    By Mikal @ 124:

    RE: EconE @ 122 – It was the first thing I could find. According to the Puget Sound Regional Council the Pierce, King, Kitsap, and Snohomish County region went from 1,196,172 from 1950 to just under 4,000,000 today . So while we are at the pool, there are still people moving here and guess what, they drive prices as well. If Boeing leaves we could become the new Detroit. It hasn’t happened yet. To think that growth doesn’t affect the long term patterns as to prices in certain neighborhoods like Kirkland or Queen Anne is a bit foolish. Historical trends can change unless you think everything is static. Putting a factory in a small town will make living there more expensive than it had in the past. Microsoft gearing up in the late 80’s changed the historical patterns of this area especially in the 90’s.

    First thing you could find? LOL.

    1,196,172 to 4,000,000 in 60 years? So what? What does that mean? Should I offer 4x 1950’s prices?

    People don’t drive prices, money does. Lots of people crowded into many cheap areas.

    You are correct however when you say that “Historical trends can change”.

    Guess which historical trend is changing? It’s called “appreciation”.

    Cheers!

    Oh…wait…I just read The Enquirer…sorry…first thing I could find. Between the articles on the Bat Child and Alien Abductions they said that RE would turn around soon. Good thing eh?

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  128. 128
    Mikal says:

    RE: EconE @ 127 – I’m not saying that at all d!ckhead. I wouldn’t buy right now. To look solely at historical appreciation is foolish for many places in the Puget Sound region.

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  129. 129
    The Kid says:

    By Mikal @ 121:

    RE: The Kid @ 119 – Are we going to return to the old population levels as well?

    Nope, don’t need to, just the same housing to population ratios. Which we already have. We didn’t double or triple the population, and just happen forget to add any homes. If anything, by all available statistics, we have MORE homes than the population needs, just not at the right price.

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  130. 130
    Mikal says:

    RE: The Kid @ 129 – That would still compress the value of some neighborhoods therefore keeping bthem higher than before. If any of you really believe that Capitol Hill and Queen Anne will have houses selling for $200,000 I have a bridge to sell you..

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  131. 131
    EconE says:

    RE: Mikal @ 130

    Which bridge? How much?

    Where did I ever say I wanted to live on QA or Cap Hill…they’re nice areas and all but not what I’d be looking for personally. To each his own. If I lived on top of those hills I’d have to factor in a whole lotta 3k clutch replacements…not to mention…my mechanic’s in Huntington Beach. :^)

    I never expected to see 200k there either (for SFR’s)…if the rare case ever came up, I can assure you that it would be something so precarious that nobody would want it at any cost. Kind of like that row of “modern” homes on the northwest side of Cap Hill over I-5 that “tilted” back in the mid 90’s due to the super soft hillside land that “slipped” due to those rains. I’m sure you remember those. The land is still for sale.

    They’ll still see some significant haircuts IMO. How much? We’ll see. I can find better buys in Bel-Air and Beverly Hills…aren’t those places pretty special also?

    Let’s see how the Jumbo ARMs and Option ARMs shake out over the next couple years. The “Prime” toxic loans if you know what I mean. The (over)Stated Income (liar loan holders) will come to light also. I’m wouldn’t doubt that there was some HELOC abuse too. We’ll see in due time.

    However…for the Record…I don’t believe that the 80% off peak predictions will come true for the high end places either.

    And I was only teasing you about your reading material…sorry to have urinated in your Bud Light. ;^)

    I love you man!

    http://www.youtube.com/watch?v=AYNNH8WX9Eo

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  132. 132
    The Kid says:

    RE: Mikal @ 130
    Actually, yes, I do believe Cap hill and Queen Ann will see houses in the bottom end of the market for ~$200k. Specifically, because those areas still have alot of much older, and much smaller homes. So yeah, I think, inside a couple years, you will be able to find a, call it 2 bedroom, one bath, freestanding home for around $200k. May not be BIG, but it will be there.

    Keep in mind, basically what the bulk of my argument boils down to is that you can only price anything at what people will pay, and people will only pay what they CAN pay. If the days of easy credit are behind us, which has reduced what people can pay, which will reduce what people will pay. Pretty simple. People cannot pay for $600k homes. At least not as many people as there are $600k homes on the market. Therefore, prices must keep coming down, until there are roughly as many people buying the homes as there are selling them.

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  133. 133
    Kary L. Krismer says:

    By The Kid @ 132:

    RE: Mikal @ 130
    Actually, yes, I do believe Cap hill and Queen Ann will see houses in the bottom end of the market for ~$200k. Specifically, because those areas still have alot of much older, and much smaller homes. So yeah, I think, inside a couple years, you will be able to find a, call it 2 bedroom, one bath, freestanding home for around $200k. May not be BIG, but it will be there.

    Well first, keep in mind that I think what is being said is something to the effect that you could have all of King County tracking inflation over the long term, but the close in areas are going to do better because of their location. Areas say in Kent or Auburn can be subdivided, which increases the value of the total land, but when you’re looking at median sales statistics, it lowers the value of each sale.

    Second, the older homes are not necessarily smaller, and they are often sought after because of their age. There seems to be a bit of thinking on this board that newer is better. To a lot of people, new sucks. When we were looking a year and a half ago, we excluded anything built this century.

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  134. 134
    peanutgallery says:

    RE: pragmatist @ 15

    You may be correct about much of this, but what made me snort was the comment about recent college grads being part of a developing group of buyers. Think about this. Graduate into $45,000 dollar job (if they can get one), student loans nearing the same amount, average $4,000 credit card debt. Now think about the price of an average King County home. Um. Let me say from experience, they may want too, but they will be pent up for about 10 years.

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  135. 135
    what goes up must come down says:

    The Kid,

    You are right on target, some people here think the bubble was created by location, location, location or this mass influx of people to Seattle well guess what that wasn’t it. If Seattle’s population doubled over night but only a small fraction of those people could get loans do you think the prices would have doubled over night — NO. How many times do we have to go down this road — it was a bubble because of easy credit.

    The bubble has popped hello McFly. Will all neighborhoods see the same amount of depreciation — NO of course not but they will see depreciation. Will that be the end of world — NO. Will some people feel the pain — Yes.

    Kary I think most on this board just want a good value. Paying 500k for a two bedroom 1 bath 1400 sq ft place in Ballard is not a good value. As Ray has said before the gravy train has come to an end.

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  136. 136
    Mikal says:

    RE: what goes up must come down @ 135 – Your not going to get that home in Ballard for $200,000 either. At some pricepoint people will come out of the woodwork thereby keeping prices high in certain areas . You will find alot of overbuilding in Spanaway, you should be able to get great value there.

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  137. 137
    The Kid says:

    RE: Mikal @ 136
    Well, lets have some fun with sociology. Lets talk about Cap Hill for a second. Full of high priced homes. Lets take $500,000 cuz that is a decent range and the math is easy. So, at $500k, you’re looking at being affordable to someone that makes, oh, approx. $150k a year. Great. That is somewhere in the 94th precentile for income in the area, but they exist, and Cap hill is a pretty small area.

    Lets bring a little demographics into this. Who makes $150k a year? Well, the obvious, Doctors, Lawyers, Engineers (some of them), very successful businessmen and women, I’m sure you can think of a few more. And all these upper class professionals will positively FLOCK to cap hill to buy cuz of….. The high crime rate? The crappy schools? The gay bars? Oh I KNOW it’s close access to all those “leather goods” stores. Sounds like a great place to put a family to me! Where do I sign up! Or maybe it will be grandma moving up in the world, taking all the equity from her hard earned home and moving into something twice as expensive, and half as nice.

    Who.Do.You.Imagine.Will.Buy.These.Things?

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  138. 138
    Mikal says:

    RE: The Kid @ 137 Not you because you don’t make enough money.

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  139. 139
    what goes up must come down says:

    Mikal, come on dude he has a point even if you don’t want to acknowledge it. There is a reason for historical trends. Please answer this question do you think the last five years were the norm yes or no. If the answer is no where do YOU think things will go? If the answer is YES than tell me why.

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  140. 140
    what goes up must come down says:

    Mikal and concerning the 200K place in Ballard maybe it won’t happen but then who the hell wants to live in Ballard.

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  141. 141
    Mikal says:

    RE: what goes up must come down @ 139 – No, but do the last twenty with all the money that Microsoft alone has brought to the area. Those kinds of value added industries drive property values up. Therefore it changes the historical trends. There is alot of new houses that were built in Puyallup and Spanaway that are included in the overbuilding. You want a cheap house there you go. There is a reason it is cheap. If you honestly think Kirkland will drop anywhere near below $200,000 for a SFH you are deluded in your hopes. I’m hoping the properties around Times Square will go down in value. It used to be farm land and the historical trends can’t be wrong. Things change, even historical trends. I also do not want to live in Ballard. I also don’t think we are at the bottom.

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  142. 142
    what goes up must come down says:

    Mikal fair enough thanks for the reply.

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