“So much for Steve Tytler’s” and “espousing” in the heading of this post seems as “trollish” as I have been titled.

The point … cut Steve some slack, IMHO.

I have never claimed that I got it all right, every time. I do however enjoy pointing out when my yearly guesses are closer than a bunch of industry insiders.

The reason I enjoy giving Steve Tytler a good-natured hard time is that he was constantly coming in here and claiming that every one of his predictions have been accurate year after year, when that is clearly not the case. I have never made such claims regarding my own predictions, and in fact pointed you toward a 2006 guess I made that was even more off-base than the 2007 example you dug up.

So I guess what I’m saying is that I don’t get what point you’re trying to make.

fine, end of my argument on this.

keep the predictions going, both The Tim and Steve. They both have insight that is worthy of consideration, not always right, not always wrong.

It seems to me that you are being argumentative for the sake of being argumentative.

so now that I know the meaning of “trollish” thanks to Wiki…

How is getting The Tim to own up to his predictions compared to Steve Tytler “inflammatory” or “off-topic”?

I don’t think it’s a Steve Tyler which hunt. Steve has had some good insights, and pointed the Tim to data that he otherwise might not have known existed. (I believe the stair step data used above came from a source that Steve pointed out to the Tim)

However, when Steve shows up, and claims he made accurate predictions, when he didn’t. He got called on it. That’s all.

The difference is not as to how close the predictions are, the issue folks have is how the predictor owned up to their predictions at a later date… It’s no fair changing your predictions after the outcome, and then claiming your were right all along.

So I’ll summarize myself,

Tytler Ellis King Co. SFH
Listings 0% >15% +51%
Sales: <0% <-5 to -10% -14.5%
Prices: + <=0% -5% to +3% -1.14%

Both Ellis and Tytler way off on listings

Both off, The Tim less than Tytler on sales.

Both about right on prices.

Point is, why are we on a Steve Tytler witch hunt?

Sorry to be so naive, but what is trollish?

RE: The Tim @ 69 –

The Tim,

Please summarize here how your predictions for 2007 and 2008 compared to Steve Tytler.

Did you even read the posts that you linked? You are displaying some trollish behavior

( Link to 2007 summary, 2008 predictions) This is one of the links the Tim has on his post up at 69 as well…

The Tim,

Please summarize here how your predictions for 2007 and 2008 compared to Steve Tytler.

“Best Case
Prices flat to +3% for ten or more years”

10% chance

“Worst Case
Prices drop to 1997-1998 values over the span of approximately 5 years”

20% chance

Seems like you periodically compare how right you are to local prognosticators

http://seattlebubble.com/blog/category/opinion/page/4/

Heck, if you wanted an even better example of me getting it wrong, why not go back to April 2006?

I have made predictions, but I am always up front about the fact that I really have no way of knowing what will happen (just like everyone else), and that they really amount to nothing more than a guess. Also, I don’t constantly harp on how right I was with my specific predictions, with the one exception of my one-year forecasts, which have been relatively accurate the last two years.

Here is a quote from The Tim, recorded right here on this blog in 2007.

“Most Likely Case
The way things are headed as of right now, I expect we’ll see a Japan-style housing downturn. Prices declining 2-5% per year for 7-15 years”

This was given 50% chance to occur.

It is fair to say you have changed your outlook as the correction has played out, correct?

Wages. It all comes down to wages. With U3 unemployment above 9% and U6 heading to the sky (currently 16%, 17%, higher?), how will people pay for any of this?

The reality is short term massive deflation, including fuel. Demand will go down as unemployment soars, leading to more unemployment, and so on. In the 5-10 year period, we might see inflation on fuel, food, and some other core products due to lack of supply, but that will only result in a further lowering of our standard of living. It will not drive wages, and thus not drive inflation.

I’m still waiting for a single credible counter-argument to deflation to be posted on this site (or heck, anywhere on the Interwebs). We are living through the largest destruction of credit in history and that will destroy asset valuations and standards of living. It was never a housing bubble, just another face to a 30 year credit bubble.

The only possible case for inflation is…print money and hand it out through programs. I’ll leave it to you to figure out why that can’t work (hint – how do we finance government spending and what happens to that if you print money?). Look at the success of the recent QA efforts by Ben Co. if you have doubts.

Is it really?

Not the market being flooded with forclosures as a by-product of bad loans?

Not the fact that the banks would give few people financing?

Not the house factories stamping out houses by the 10’s of thousands?

Construction costs go up tremendously with fuel costs. If the price of new construction goes up, and their market prices have to go up to compensate, woudlnt this drive all real estate up?

Building material prices jumped 20% in 2005.

I think the price of fuel lowering the price of housing was co-incidence.

If by ‘all goods and services’ you mean ‘all goods and services, not including real estate’ then I agree. $5/gas is what turned a hiss into a pop for our housing bubble, remember?

RE: Racket @ 45 – You are proving my point about baseless inflation claims. If you are spending $600/month on fuel instead of $200/month on fuel, that leaves $400/month less you have for other expenses (read: mortgage).

How does this put inflationary pressure on home prices?

When fuel prices went up the price of all goods and services went up along with it. When the price of all goods and services go up things can happen.

1. Lower consumption.
2. Inflation.

Housing near job centers will go up in price because you can justify spending more on your mortgage and less on your commute. Just like the hybrid car surcharges, now they are giving away rebates on them.

I wont argue with you about a market that is saturated in excess inventory. It’s really not fair for you to tag this on your rebuttal when I was simply responding. To the increase caused by fuel prices.

I think the whole concept of “decoupling” is somewhat of a myth. The interactions and structural relationships still exist. Most of the “disconnects” are pretty short lived or the result of some atypical manipulation, but the math rules in the end.

This whole situation reminds me of the .com bust in the 80’s. You look at these failing companies burning through their initial capitalization while the stock continues to soar on hope and a prayer, and wonder when reality is coming. You figure it must be soon, but it refuses to show up. About the time you figure everything you know is wrong, boom- there goes the market and some semblance of sanity returns.

Everything I read is negative. Today, OMB said, for example, unemployment will continue to climb through the end of 2010 and (gasp!) may reach 9.5% by the end of the year. Ummm- it will hit that by July at the rate we’re going. British bonds were downgraded to something slightly better than junk. But rally on! I really think we’ll start to see some consequences in a week or so- too much debt is hitting the market. But if not now, certainly at some point in the future. Mortgage rates and all borrowing costs will jump, triggering a slew of consequences.

How does this put inflationary pressure on home prices?

Before you say ‘it will cost more to build a home’, remember we have close to 20 million vacant homes in the country now. The inventory overhang is massive. We could stop building for a half decade and still be fine.

The average 30 yr rate for last week dropped again. So far they’ve been able to de-couple the 30 yr mtg rate from the 10 yr rate over the last couple of months. I know you probably don’t think they can do it for long, but in the short term it looks like they can control the mtg rate by keeping the discount rate at near zero, perhaps manipulating the price at which the GSE’s will buy (and making sure they have the cash to do it) and buying some treasuries now and then. And don’t forget, average 30 yr rates over the last 40 yrs are probably north of 8%. If you’re talking about real estate prices reverting to the long term trend line, I think it’s reasonable to factor in a mortgage rate closer to the average historic 30 yr rate. Even if the 30 year mortgage rate goes back in step with the 10 yr, the 10 year rate can probably go to around 6% before the 30 yr mtg rate hits 8%. I still think that we won’t go below 2003 median real estate prices in King County. That’s when I thought the local real estate market would top in Tytler’s next stair step. But stopping price declines at near 300K median in King Co assumes a lot, probably including that they can save GM and most of the jobs related to it, to say nothing about the local economy.

100′k priced homes, come on now… Reallly?

I admit this isn’t a great house, but it is SFH, 2br, 2ba, 20 mins from downtown Seattle or Bellevue, current asking price $118k. Sold for $250k at peak. Ad says “fixer” but I happened to talk to the owner before the house was foreclosed on and it is livable now. I will not be surprised if it goes for less than 100k.

http://www.redfin.com/search#lat=47.4851929512123&long=-122.2049617767334&market=seattle&status=1&uipt=1&v=4&zoomLevel=14

I am not saying that there will be lots of livable houses near Seattle for almost as low as $100k, but your disbelief that it is possible perhaps bears more careful thought. Plenty of houses in Detroit are that cheap and it is surprisingly easy to move software development offshore. Our company now has more of our software development done out of Russia than here at HQ in Bellevue.

My take is that $100k houses in King County are not likely, but not as remote a possibility as your comment seems to suggest!

Please do! Housing is always about affordability (eventually) so I find the income/price data the most relevant to look at.

Can I borrow your rose-colored glasses for the weekend? I need a break from reality.

Doom and gloom isn’t a religion- it’s a probable outcome. That government intervention you rely on is coming next week, in the form of over $100B in bond sales, all at once. The problem is we’ve been buying $5-10B a week and interest rates have still crept up to 3.35% on the 10 year bond. The government’s target was 2.5% in an effort to keep mortgage rates low. That hasn’t been working out, and is about to get blown out of the water by dumping a huge amount of debt on the market. You can bet much of the money will come from a stock market that many feel has run it’s course for this rally.

So, in the next couple of weeks we can look for lower stock indicies and higher interest rates. Both will hurt home sales and the vaunted “spring bounce.” Your home’s value will probably drop some more. That’s not “doom and gloom,” it’s open ended analysis with probabilities assigned to a range of outcomes. I’ve never had much luck fighting reality, but YMMV. Good luck!

Agreed- I think we’re heading for a $175-200K mean. I only said Snig’s $100K was a real possibility. But you’re right, it would take serious wage deflation or massive unemployment to get there.

After making the original post I went and pulled up Shiller’s graph again- it also shows three steps up. The difference is that the first two fully return to the trend, and only the last bubble step has yet to resolve. So it looks like the middle step had more to do with a national tech boom, not just MS. I’m not sure all of that money is still around. I’m not up to speed on current tech wages, but haven’t they been flat or falling with outsourcing, etc?

http://www.econ.yale.edu/~shiller/data/Fig2-1.xls

I NEVER ONCE SAID SEATTLE HOMES WILL GO TO $100K

But…..its clear to me that if we keep adding 600K a week to unemployment [excluding the millions of college kids or those working on contract we don't count as unemployed; let alone the underemployed or giveups] chronically and continuously…the sky is the limit on home price decreases.

You and I may not want it that way, but wage deterioration will clearly call it anyway.

I hear families are moving in together more; and one lame-brained solution to fill vacant housing/rental units is bring in more uncontrolled growth population….LOL….where will the excess population work?

Magnolia44, do you have a solution to this economic mess we’re in besides overpopulation control? Do you suggest going back to the status quo of borrowing and borrowing that’s just making it worse? I know you come up nada.

Anyway this place has probablly less than 100 regular visitors, there is always room for a few guys to be “way out there”.

http://www.quantcast.com/seattlebubble.com

500 addicts
6,600 regular visitors
10,000 passers-by

Anyway this place has probablly less than 100 regular visitors, there is always room for a few guys to be “way out there”. Gubment aint gonna let it hapen, Fed aint gonna let it happen, global economy aint gonna let it happen

But because softwareengineer and sniglet spout some rhetoric, its gonna happen. Who’s side would you be on?

I called government intervention a long time ago and there has been program after program, is it right? No but there are more things down the hatch.

Spot on! Steve Tytler is like my group of 60 investor buddies who consistently “adjust” their views based on market performance of their holdings. BTW Steve, markets in Nevada have greatly exceeded your 50% prediction and reached 72% in regions of Vegas and Reno.

Steve I offer this same opinion to you as I have stated on the Bubble many times:

*We are no where near a bottom.
*The “mantra” of home ownership has greatly changed and is now a “lead weight” around the neck of millions of homeowners. This is caustic to home appreciation.
*All these upsidedown homes are coming back. Maybe not this year but I assure you in this mobile society over this next decade you will see short sale after short sale and foreclosure after foreclosure. People are not stupid and will make decisions that in the past were unheard of.
*Personal bankruptcy’s will soar to historic levels greatly beyond predictions set forth and consumer credit will continue to deteriorate in epic parameters.

There will be GEMS that will be scooped up over the next decade. I have witnessed a few last week in Puyallup bought at auction for 130k for a quick flip at 179k-199k. As many investors state to me now..”Ray, I won’t buy anything that I cannot sell tomorrow for a profit….There is no holding anymore.”

We are all in this together and we must educate the masses about the truth of real estate. I have become very bearish on real estate going forward even after these 20% declines. Buyers need to make their offers and resist any bidding wars in this temporary blip up. Place your offers on these short sales, stick to them, and keep looking for other GEMS while you wait for bank responses. There will be thousands of them.

I continue to refer people to the bubble for a “glimpse” of another perspective. So many rushing out to buy because of the low interest rates and sellers thinking next year or the year after will be better. Agents stating NOW is the time to buy everywhere I travel. Its a shame.

As my favorite analyst states…”keep your powder dry for the next decade and acquire CASH..you have seen nothing yet”

But at the end of the day, you are still left with a HHI of something like $60k per year in King County. There is no way that home prices drop to $100k based on that level of income.

If you are predicting $100k home prices, then you have to bring in assumptions around massive wage deflation and economic collapse – not saying that can’t happen, but I don’t draw that conclusion from looking at that chart.

It is the beginning of the fiat money debate.

Now he’s saying he always predicted prices 20% down.

No, Tim. Read his latest post. He always predicted prices would decrease 30%.

When the prices of oil goes up I’d imagine housing will follow it up, not down like you suggest. Especially close to job centers.

Also, I expect inflation to come roaring back over the next few years because of the enormous amount of government spending flooding the economy with dollars. If nothing else, inflation alone may cause home prices to regain their 2007 values and beyond.

Can you elaborate on the mechanics of this? How is this money making it into my paycheck? My company froze all wages last month. A flood only happens if the spigot is bigger than the drain. I’ll tell you one thing, if the market wage for my job doubled, my company would offshore it so fast it would make my head spin. I have yet to see anyone describe this, only make the claim.

Everywhere I look I see wage deflation. (4-day work weeks, shrinking benefits, layoffs, hiring freezes). All the reckless government spending WILL succeed in destroying our paper currency. I won’t argue with that. That will cause some price inflation in things like oil. How do home prices inflate when it costs $200 each time you fill your gas tank? To add insult to injury, you are now doing this three times per week, since you are driving 100 miles/day to your lower-paying ‘backup’ job. As software engineer pointed out, this is a very different situation than the 70’s.

Here’s the kicker- none of these events are likely to occur again. As housing prices slowly drift back to the inflation adjusted norm or trend line a median price of something under $200,000 doesn’t look that far outside the realm of possibility. This assumes a somewhat normal economy, not what we have on the horizon.

Everything considered, I have to agree Sniglet’s $100K median (inflation adjusted) home may be a possibility.

Can you explain “adusted for inflation”? If the “real” price was $500,000, what would “adjusted for inflation” change the price to? I’m not good at “not real” stuff.

On a separate note, how can anyone look at the first chart and think housing increases in value over time? From 1945 to 1975 (30 years!) the median price was flat or declining. How does that make a case for housing increasing in value? After 1980 we entered an era of personal and government deficit spending, which I suspect lead to the artificial increases in median price. What will happen to the median price when (not if) the deficit spending comes undone? All of a sudden, Sniglet’s call for $100k median prices in 2009 dollars seems downright intuitive.

Counter arguments?

Steve Tytler acknowledged the last step was out of step as late as July 2008.

What particular aspect of Mr. Tytler’s position is The Tim taking issue with?

This part, which Mr. Tytler said in the July 2008 quote I linked to:

This is the best graphic illustration of my “theory” that I have seen to date.
…
I have predicted home prices would fall about 10-20% from the peak value (depending on neighborhood) and then flatten out.

So far, my predictions seem to be right on track.

We will then have a flat period while all this excess inventory works its way out of the system.
…
Home prices will remain flat for a few years as income levels increase and housing supply levels decrease.

First off, I never did understand how he reconciled the claim that “home prices will remain flat for a few years” while simultaneously saying “home prices will fall 10-20%,” but putting that aside, home prices are down 20-25% from the peak already, and the drop is not likely over.

As Deejayoh pointed out in comment 30 above, Tytler claimed in May 2007 that prices would follow a “stair step” pattern: steep rise, then flat, steep rise, then flat, etc.. In July 2008 he was saying “flat” and “10-20% down.” Now he’s saying he always predicted prices 20% down.

In any case, the pattern in the chart above does not look like any kind of “stair step,” so Mr. Tytler obviously missed the mark, and will have to come up with a new analogy. Sorry, Steve.

Good sleuthing DJO. I just think Tytler is trying to cover all his bases at the same moment while trying to hit a home run. Not gonna happen.