Here is your open thread for the weekend beginning Friday June 12th, 2009. You may post random links and off-topic discussions here. Also, if you have an idea or a topic you’d like to see covered in an article, please make it known.
Be sure to also check out the forums, and get your word in the user-driven discussions there!
Trigger » Jun 12, 2009 at 8:02 am
I was thinking about the housing market and I think if you are
- Looking at the lower priced market – then in order to calculate if the price is right you need to look at the rent/price ratio. In general by renting the apartment for 10-15 years – you should pay off the whole principal owed. So those are properties valued at less than 500K. There is no reason not to look at the price to rent ratio. If the price is too high you rent the same property.
- But if you look at the high end market – so properties selling for 1-2 mills – well there is no rental market over there. People in this segment like the type of finishings, the type of a view, type of rooms, the right staircase etc. And you cannot rent sthg for 10-20K per month. The rental pool revolves around from 500$ to 2.5K per month in general.
Because the bubble times are over – counting on artificial appreciation is dumm. Normally it would make sense to buy an overpriced property, be cash flow negative if you can sell the same property to an even dummer person. Like selling the rusted nail – it makes sense to buy a rusted nail for $100 even if it is worth 1 cent if you think sb will buy it for $120.
Kary L. Krismer » Jun 12, 2009 at 8:32 am
RE: Trigger @ 1 – Well clearly if someone thinks the value of something will be going up, they’ll pay more for it. Multifamily pricing in 2007 was that way. The only way the prices made sense were if you assumed the prices (and also rents) would increase in the future.
On the high end, I really think what’s hurting that more than anything is the losses people have taken in other areas. People buying those places buy and large do not get huge mortgages, so that means they need lots of cash going in. While the stock market averages are certainly down, there are probably a lot of people down much more due to having invested heavily in particularly hard hit stocks, like banks or autos. I’d assume the largest holdings locally are probably BA and MSFT, and they aren’t doing horribly (although BA is well off it’s absurd highs). But there probably was (emphasis on was) a lot invested in WAMU, that is now gone.
Edit: The price of BA over $100 is actually an example of people paying more thinking it will go up more.
patient » Jun 12, 2009 at 8:36 am
RE: Trigger @ 1 – Trigger, that’s a subject that has been discussed many times over the years here, some are in the camp that it does make sense, others like me never thought it made sense because the risk is to high if the under lying “real value” isn’t there. One way to calculate real value is the rent comparison but it has issues as well since rents and incomes can alsobe inflated and can fall in an environment like the current to an unknown level. I’m getting more and more convinced that the only good strategy is to never buy in a declining market but wait until true stabilization of the economy and prices occurs otherwise the unknown and thereby risk is just to high.
patient » Jun 12, 2009 at 8:39 am
RE: patient @ 3 – But yes, in a stable market with robust long term fundamentals the rent comparison is a good measure on value.
Kary L. Krismer » Jun 12, 2009 at 8:42 am
I just pulled some numbers (from NWMLS sources, not verified or guaranteed), and there are a few things that are interesting. All information is King County SFR.
Bank owned listings appear to be about 3% of the market, but well over 5% of the solds. Unfortunately they’re only getting about 66% of the price!
Short sales are about 10% of the market, but about 2% of the sales, but the prices are actually higher than the total sales. People are picking up a few nicer houses on short sale.
All sales are clipping along at a pretty good pace for this early in the month.The volume is heavily weighted toward the end of the month, but the sales so far are pretty high.
Again note that the percentage of market (active listings) is still questionable because if the agent hasn’t changed the status or price they might not have entered the information on whether it’s a short sale or bank owned.
patient » Jun 12, 2009 at 8:51 am
Kary, if you are pulling numbers why not give them instead of “pretty good”. It really doesn’t say much. The percentages are interresting though since it seems they continue to be way off the pendings mix where if you interpret the nwmls spokes people ~30% are estimated to be short sales. 2% and 30%, quite a difference.
Kary L. Krismer » Jun 12, 2009 at 8:56 am
It’s over 400, but the problem is that number is so heavily back weighted it doesn’t mean anything. I think there were probably close to that many closings the last 2-3 days of May.
I didn’t give any pending numbers. But FYI, the pending SS are just under 20% of the total, and pending bank owned well under 10% of the total. So lots of SS in pending, but only a handful (actually a couple of hands) selling. Again though, the older pendings might not be properly indicated as SS, so that percentage could actually be higher.
patient » Jun 12, 2009 at 9:05 am
RE: Kary L. Krismer @ 7 – Thanks Kary, 400 that’s a long way to go before we break 2000 but as you say closing volume is weigthed towards the end of the month. Is 400 really “pretty good” half way into the prime selling month of the year though? I can’t help feeling that it sounds like a bit of a stretch.
Interresting to see that the diff between pendings and closings mix and volume likely remains.
Kary L. Krismer » Jun 12, 2009 at 9:14 am
RE: patient @ 8 – I think that 400 is above last month’s pace, but I don’t record such things. And really we’re only about 1/3rd of the way through because agents don’t report sales right away. They have 3 days to report, and some of them take all three days (or longer) for some reason.
patient » Jun 12, 2009 at 9:18 am
RE: Kary L. Krismer @ 9 – I read that as nothing has really changed in June so far, closed sales remains historically depressed and the discrepancy between pendings and closing remains histroically large. So far that is.
Kary L. Krismer » Jun 12, 2009 at 9:36 am
RE: patient @ 10 – I’d agree that the sales are still bad, but they are probably improving. I still think 2000 is a stretch, unless maybe the banks release a flood of short sales in one month.
I’m not sure that the level of pendings is that bad in comparison to solds, if you back out the short sales. Unfortunately we don’t know exactly how many of the pendings are short sales. Only about half of the pending listings that went pending before 5/1/09 are indicated as short sales. I’d expect that to be closer to 70 or 80%. Only 12% of the pending inspections that went such prior to 5/1/09 are indicated short sales. I’d suspect that’s closer to 100%.
patient » Jun 12, 2009 at 9:54 am
RE: Kary L. Krismer @ 11 – That’s just the thing Kary, the short sales as far as we know are the difference and so far it seem that they overwhelmingly do not close.
WaileaKid » Jun 12, 2009 at 11:07 am
btw haven’t seen a post from Greg Perry in last few days. He used to do weekly numbers of pendings.
Things seem to have suddenly died down in the area that I am tracking. Is that what everybody else is seeing too?
Ira Sacharoff » Jun 12, 2009 at 11:49 am
For all King County Single family residences, the total number number of all pending sales for the seven days ending June 11 was 595 compared to 614 for the seven days ending June 4th.
Kary L. Krismer » Jun 12, 2009 at 11:51 am
RE: patient @ 12 – Well that gets to why I sort of think the rule change issue is getting overblown. Because of the increased number of short sales, the YOY pending data would be pretty useless even without the rule change. I really don’t think pending volume means a heck of a lot anyway the way the NWMLS reports it (pendings for the month as opposed to all properties still in pending status), but the volume of short sales makes it worth even less.
As to Greg Perry, I think he has another site where he posts the data. Maybe his profile over at the P-I has a link.
Scotsman » Jun 12, 2009 at 12:09 pm
Debt, debt, and more debt. Here ya go, fellow gear-heads, everything you want to know about current debt.
Dig in a few pages and you’ll see the real problem- while debt growth has slowed for all but the government, the asset base has shrunk even faster.
http://www.federalreserve.gov/releases/z1/Current/z1.pdf
Scotsman » Jun 12, 2009 at 1:45 pm
But I thought the savings were going to pay for it…..
$600 Billion in new taxes? That will boost the economy.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aqLNecbH0dcg
Greg Perry » Jun 12, 2009 at 2:12 pm
By Kary L. Krismer @ 15:
For the 7 day period ending on 6/10, KC weekly pendings were 621 (2nd best week of the year, previous week was 657.) For the seven day period, 240 closed. As Kary pointed out closings are weighted toward the end of the month.
Eastside (NWMLS 500-600) pendings for the period were 199, best to date this year.
Metro Seattle (140,380,385,390,700,705,710,715,720) pendings for the period were 209.
I posted a very interesting piece talking to sellers who are contemplating selling now, or waiting for prices to come back:
http://www.workingforyou.typepad.com//realestate/2009/06/should-i-sell-now-or-wait-until-the-market-improves.html
Month end info and plenty of other info here:
http://www.workingforyou.typepad.com//realestate/market_watch/index.html
Statistics compiled from NWMLS and are not published or verified by NWMLS.
Scotsman » Jun 12, 2009 at 2:58 pm
RE: Greg Perry @ 18 –
You should show your customers this- it’s a much better representation of the reality ahead:
http://www.ritholtz.com/blog/2008/12/classic-case-shiller-hosuing-price-chart-updated/
Seattle, although late to the game, will reach an equilibrium consistent with the rest of the country. And remember, the chart assumes a positive economic climate. I doubt we’ll be seeing that going forward.
Everett_Tom » Jun 12, 2009 at 2:58 pm
Chuck over on rain city guide just updated the “pending falling out” chart, similar to what the Tim did a awhile ago.
Looks like the pendings falling out are getting worse
http://www.raincityguide.com/2009/06/12/the-buyers-are-out-and-trying-to-buy-but/
(Chuck does 2 month rolling, instead of Tim’s 30 days).
Chuck’s chart has something like 40% of pending not closing… unlike the last few years, where it maxed out at 10% – 15%
Kary L. Krismer » Jun 12, 2009 at 3:33 pm
RE: Everett_Tom @ 20 – I’m not sure how he could track the percent of pendings that fall out, other than by tracking each one, which would be difficult.
No doubt a lot more are not closing than in the past, I’m just saying I’m not sure I would trust the exact percentages given in the chart.
Everett_Tom » Jun 12, 2009 at 3:50 pm
RE: Kary L. Krismer @ 21 – I think he’s doing the same thing the Tim did back awhile ago, just looking at the number of sales in a month, divided by the number of pendings two months before.. with some filtering.
I guess I was mainly interested to see similar data to what was in a post on SB back in early may, but updated. Chuck’s data appears to show that the “gap” between pending and sold is still getting larger (the SB May data had about 30% falling out, Chucks chart for Q1 seems to follow that for Q1, and show it getting worse in this quarter..). –
Though as you point out, the June data is probably pretty suspect since sales aren’t evenly distributed across a month..
cutienoua » Jun 12, 2009 at 6:20 pm
To be or not to be ?! sold!!
Please advise on this listing 29032871
Redfin shown as sold,realtor website illustrate it as active.
Thanks!
Kary L. Krismer » Jun 12, 2009 at 9:02 pm
RE: cutienoua @ 23 – It’s back active again. It never was sold–at least within recent history.
Kary L. Krismer » Jun 12, 2009 at 9:14 pm
A while ago here in commenting about the lousy job some agents do listing bank properties, I mentioned a place that only had a tiny sign just off the ground in tall grass. That was just over a month ago, and at the time I called the agent to let him know a problem with the keys.
I went back there today, and the sign is now gone, and the key problem still exists. The price has dropped 25% I guess if no one shows any interest in your property because there’s no sign and no way to get inside, you just keep dropping your price.
Now admittedly they might not ever have had a chance getting the original price, but paying a listing agent 3% to do the job properly seems pretty obvious compared to paying them less to do next to nothing and dropping your price 25%.
Romwo » Jun 13, 2009 at 4:07 am
I know this is off the topic a little bit. But there are some cities like Detroit offering kind of decent homes for 70K. Now is that a bubble or what – but the other way round. I know that GM is struggling. But in 10 years time companies will come in and fill the vacuum? The rent to price ratio is much better over there than over here – but you might have problems with tenants paying on time.
Also Detroit is not the best place to live compared to Seattle but still – 70K seems kind of cheap.
Kary L. Krismer » Jun 13, 2009 at 5:46 am
RE: Romwo @ 26 – There is no topic in the open topic thread! ;-)
That sounds cheap for a big city, but I’m not so sure it’s necessarily all that cheap for other areas, and without jobs there might not be a recovery of housing prices. I haven’t been to Detroit for years and years, so I’m not sure what the attraction would be for new employers.
On the topic of Detroit, I just watched Grand Torino last night. Excellent film.
Kary L. Krismer » Jun 13, 2009 at 6:46 am
I’ve been seeing a lot of brand new 2009 construction come on the market recently, so I thought I’d check. Roughly 10% of the active listings in King County are 2009 construction. Note there’s other new construction out there from 2008 and perhaps earlier, and not all new construction in a project gets listed. So the total inventory of new construction would be much higher than 10%.
I’ve never run that type of search before (current year construction), and obviously the results would depend on how early in the year you ran the search, but that percentage seems surprisingly high to me, in part because I haven’t noticed that much ongoing construction. Just a bit of it here and there.
David Losh » Jun 13, 2009 at 8:39 am
RE: Romwo @ 26 –
I never listen to NPR, but it was on in a house I was working on. The segment was about urban down sizing. It was mainly focused on Flint Michigan, but mentioned Detroit.
One of the things that was addressed is the idea jobs are coming back. There are already many market places where jobs never did come back.
I over heard a conversation between a developer and banker where both were sure that in ten years the demand for housing will be coming back. It won’t because of job loss in this area.
Construction was the perfect storm to build an economic collapse. Jobs, durable goods, financial instruments were all created by building housing units. Once the building is done the jobs leave. You would need a large job base to fill the void of thousands of construction workers going on to the next development, or not as we are seeing today.
In areas like Flint and Detroit construction was going on and is now stopped. Construction job loss coupled with the loss of manufacturing based jobs will take more than a decade to correct.
I’m also going to continue with the immigration issue. The loss of construction jobs means less foreign workers. Many opportunities are available over seas and south of the border. The United States is a lot less attractive with an economic melt down to foreign workers and investors. That takes out another large segment of demand.
Nick » Jun 13, 2009 at 8:46 am
My sister just bought a really nice first house in Indianapolis for $110k. All-brick, hardwoods, and remodeled not too long ago. It sits on about 1/4 acre of land. She has a 15-20 minute drive into downtown (Rolls-Royce Aerospace, Eli Lilly & Co., Conseco, Etc.), is close to a shopping mall, etc.
$70k in Detroit for the same type of setup is definitely reasonable.
You can’t buy into a mobile home park here for $100k…
Salaries are not THAT much higher here.
Nick
cutienoua » Jun 13, 2009 at 12:13 pm
RE: Nick @ 30 –
Here we pay for the Liberal Air! smile
Kary L. Krismer » Jun 14, 2009 at 9:02 am
Apparently there’s talk of expanding the tax credit to cover all buyers and even refinancing costs.
http://seattletimes.nwsource.com/html/realestate/2009331864_harney14.html
McFly » Jun 14, 2009 at 8:51 pm
Can you buy back a house you were associated with once it is bank owned and listed?
Consider the scenario of a woman whose husband purchased their home. The mortgage was in his name only but both were listed on the deed. They divorced. Since she would never be able to afford the house on her own and he didn’t want to move, he was awarded the house and its mortgage. Her name was taken off of the deed.
And then the market nosedived. The man made a financial calculation and decided to walk away from the house. He didn’t need the space and could rent for 1/4th the amount of the monthly mortgage payment.
The woman has diligently saved over the last year and protected her credit score. The house is now listed by the bank at an attainable price which is far below what she considers its market value. She loved the house and wants to buy it back.
Is there any reason why she wouldn’t be allowed to purchase the house because of her past association with it?