Posted by: 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.

116 responses to “May Reporting Roundup: You Have Missed the Bottom (or not)”

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  1. jon

    RE: deejayoh @ 99 – “The NAR says the average length of home ownership is 6 years. So how can MOST people keep their homes more than 10 years? ”

    I have owned and lived in my current house X years, but the total amount of time that I will keep my house is some unknown number that is longer than that. I won’t know until I move out. So when you ask people how long they have lived in their house, it will be a smaller number on average than the average number of years that people live in the same house.

    Also, it is kind of like marriage where flippers go around owning houses for a year or so. They bring the average length of occupancy down, while most people stay in their houses for a long time.

    I’m not speaking to the statements of the NAR, just the statistical problems.

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  2. Jonness

    Lately, I’ve been posting about why it makes sense to save money and buy with as much cash as possible instead of rushing out, and borrowing most of the money necessary to purchase the dreamhouse. As Steve T. points out, for most people, buying a house is an emotiional decision where financial common-sense isn’t a factor. Actually, that kind of buying works in an inflating market, but when house prices are going down, it’s the death nail.

    To me, buying a house on credit is similar to asking the govt. to borrow money for jobs and services it can’t afford to pay for. Eventually, you become a debt slave, and wind up paying a very large portion of your income to finance the debt. But remember, this kind of emotional credit-based borrowing actually works during times of inflation.

    I believe most people would rather inflate our way out in order to get around the burden of sacrificing most of our future wealth to pay for the party we already had. Many older people I’ve talked to want me to have a lot of babies (and embrace immigration) so someone will be around to pay for their retirements. I got to thinking about this the other day and realized it’s a complete ponzi scheme. Our entire country’s economic strategy is a gigantic ponzi scheme! What keeps it alive is politicians’ need to satisfy voters in the short-term. Nobody wants to pay the necessary price to correct this mess, so every decision that comes down the line is directed toward the best short-term outcome as opposed to looking at the big picture and embracing the long-term health of America. In short, we are like a bunch of spoiled little children who want, want, want, and the govt. is our parent and does it’s best to satisfy our desires one day at a time. In a way, it’s like driving with a blindfold on.

    I believe most of my future investments, other than a place to live, will be made in other countries that are up and coming as opposed to wealthy and entitled–especially when that wealth and entitlement is dependent upon borrowing money from countries who are up and coming. IOW, it’s not anit-American to dump U.S. stocks and buy into companies overseas. You either buy their stocks and make money, or you borrow money from them you don’t have. I suspect many other Americans will adopt a similar strategy.

    The green shoots we keep hearing about are laughable to me. We are experiencing the effects of borrowing money, but where are the jobs going to come from when we attempt to balance the budget in the last half of Obama’s term? The U.S. attempted to bring down the debt after the economy begin to heal during the Great Depression, and it sent the economy back to Hades. No wonder the Chinese laughed at Giethner when he pledged to bring down the debt and protect the dollar. Unlike the American’s, the Chinese have read up on American history; thus, they know exactly what’s going to happen when we try to bring down the debt. The reality of the real underlying economy is going to set in. What will the U.S. govt. do when faced with that reality? Borrow more money.

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  3. deejayoh

    RE: jon @ 101 – Please read my comment right above yours.

    You are right, the average does not supply sufficient information. but the Median = 8.2 years

    half own longer, half own less than this. definitionally

    so the statement that “most people keep their homes more than 10 years ” is definitely incorrect

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  4. jon

    RE: deejayoh @ 103
    From the study you cited in 37, “While renters maintain their residences for a median duration of 2.1 years, homeowners stay in one residence for a median of 8.2 years.”

    That is a statement about the period of time of each ownership. The statement “most people own their homes for more than 10 years” is a statement about people. I don’t have information to verify that, so I simply assume that sampled a group of people and measured the length of time they owned their previous home. That is going to be a differently weighted sample than if they measured based on a sample of sales. Flippers will be weighted more heavily in a sample of sales than they will be in a sample of all people. That’s how flippers will bring down the average length of ownership relative to the amount of time of all people on average.

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  5. Alan

    RE: Ross @ 71

    Thank you for sharing that, Ross.

    Did you use a real estate agent to help you through the process?

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  6. David Losh

    RE: Groundhogday @ 97RE: Jonness @ 102

    Yes you can invest in foriegn countries, and yes there is profit.

    When Americans talk about a global economy they assume we will be importing goods as we always have. Today is the first time any one has mentioned exporting American goods. A lot of talk about Japan centers on stagflation and deflation, but Japan needs to import. They are a rock surrounded by water.

    The United States is self contained. We can afford a weaker dollar. We can export.

    The way it gets inflationary is by having a dollar that is worthless.

    A dollar that’s worth less: Exports become cheaper, while imports become more expensive. All else being equal, gasoline prices go up. So do other commodities — meaning that we’d likely resume the upward pay-more-for-food and pay-more-at-the-pump trend that was evident about a year ago.

    A stock market and bond market crash: If investors start to view inflation and a devalued dollar as inevitable, it could result in a broad sell-off of stocks and bonds, and a flight of capital to other assets and currencies. (Swiss francs might become more attractive.) Inflation expectations are important.

    U.S. banks have an enormous amount of excess reserves, according to Federal Reserve data, that would rapidly expand the money supply once lent out. “The enormous increase in reserves is potentially inflationary,” Stanford economics professor John Taylor told the U.S. Congress in February. “With the economy in a weak state and commodity and many other prices falling, inflation is not now a problem, but at some time the Federal Reserve will have to remove these reserves or we will have a large increase in inflation.”

    Think of paying your debt with worthless dollars. It’s not that wages will increase it’s that the dollars you get will be worth less.

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  7. Groundhogday

    Per our discussion on foreclosures, here is a great piece by Matthew Padilla (hat tip Calculated Risk) reporting on a new academic study:

    http://mortgage.freedomblogging.com/2009/06/05/do-these-homeowners-deserve-help/11597/

    Guess what, the housing ATM might be more responsible for the massive wave of foreclosures than market dynamics! Yep, some really sympathetic victims out there.

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  8. deejayoh

    RE: jon @ 104 – Again, now I know you are just trying to yank my chain.

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  9. Kary L. Krismer

    On the amount of time people stay, what about neighborhoods that are less than 10 years old?

    I looked on my block and the mean and median were both over the reported stat, but we have two that have been here over 20 years.

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  10. waitingforseattletocool

    RE: deejayoh @ 13

    I don’t think Steve was trying to quote a statistic regarding length of home ownership. It was a prediction based on an assumption it will be a poor sellers market for a while.

    “the majority of people who bought their homes during the credit boom will probably keep their homes for 10 years or more — partly becuase they would have to take a loss if they sold.”

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  11. Ross

    RE: Alan @ 105

    Indeed, we’ve been working with a very patient real estate agent.

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  12. SeaBuyer

    Do people actually walk away from their homes because of the big price drops, even when they can financially afford the home?

    I can understand the logic, but what about everything that comes with a foreclosure? I’m not talking about ruined credit alone, but all the pressure, the shame, the notices being put on your door, the harrassing phone calls from the bank, mortgage negotiators, attorneys, and other people “who can help”?

    Can people handle all that?

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  13. Kary L. Krismer

    RE: SeaBuyer @ 112 – What we need is people that bought at the top to walk away. Since their timing was so bad before, that would likely be the sign of a bottom. ;-)

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  14. Bookwerm

    RE: Steve Tytler @ 10

    Um, if the house has lost 400K, I would walk away, and rent, until my credit cleared. Why sell it? Give it back to the bank. If it is upside down 10, 20, 30K, fine, I will eat it,.. but 400k? time to walk. The bank has a loan with an asset to back it. Give them back the asset they they AGREED was worth the loan. You don’t agree the house is worth the loan? Fine, the bank can have it back. Totally moral.. businesses would do the same thing.. If the banks were ambitious and didn’t require 20% down, have a cushion.. well, maybe the head of that bank should not have gotten a million dollar bonus.

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  15. Still Lower than Last Year, but Rates Beginning to Climb : Seattle Condo Blog | Active Condos for Sale | Downtown Market Trends

    [...] Again, much of these clues pointing to market bottom could just be an illusion.  Seattle Bubble recently pointed out that many of the market bottom predictions have been completely off. [...]

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  16. Reader Story: Buying a Bank-Owned Home | Seattle Bubble — News & discussion about real estate & the housing bubble in the Seattle area.

    [...] we’ll have the monthly foreclosure report for May, but today here’s a comment left by “Ross” in the reporting roundup last week that deserves to be highlighted. Ross recounts his experience [...]

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