Case-Shiller: Seattle Home Prices Hold Steady Through Summer

It’s everybody’s favorite time of the month again. That’s right, time for the latest data from the Case-Shiller Home Price Index. According to July data,

Down 0.1% June to July.
Down 0.3% June to July (seasonally adjusted)
Down 15.3% YOY.
Down 22.3% from the July 2007 peak

Last year prices fell 1.0% from June to July (not seasonally adjusted) and year-over-year prices were down 8.2%.

Since the national media outlets will no doubt be crowing once again about a month-to-month increase in the nationwide 20-city index, here’s a new chart to kick things off: every city’s percentage change from June to July (taken from the non-seasonally-adjusted data, since that’s all the national media usually reports on):

Case-Shiller HPI: Month to Month Change

So, there’s that.

Here’s our offset graph, with L.A. & San Diego time-shifted from Seattle & Portland by 17 months. Still the summer of improvement on this one, with Portland up to -13.9%, Los Angeles at -14.9%, and San Diego again coming in better than Seattle at -12.3%.

Case-Shiller HPI: West Coast

Note: This graph is not intended to be predictive. It is for entertainment purposes only.

Here’s the graph of all twenty Case-Shiller-tracked cities:

Case-Shiller HPI: All Cities

In July, twelve of the twenty Case-Shiller-tracked cities experienced smaller year-over-year drops than Seattle (vs. ten last month). Cleveland at -1.3%, Dallas at -1.6%, Denver at -2.9%, Boston at -5.0%, Charlotte at -9.0%, Washington, DC at -9.8%, New York at -10.0%, Atlanta at -12.1%, San Diego at -12.3%, Portland at -13.9%, Chicago at -14.2%, and Los Angeles at -14.9%. Vegas held the #1 spot for the largest year-over-year drop, with prices still falling over 30% in a single year down there.

Here’s an update to the peak-decline graph, inspired by a graph created by reader CrystalBall. This chart takes the twelve cities whose peak index was greater than 175, and tracks how far they have fallen so far from their peak. The horizontal axis shows the total number of months since each individual city peaked.

Case-Shiller HPI: Decline From Peak

In the two full years since the price peak in Seattle prices have declined 22.3%. We still haven’t quite moved over to the DC trend, but the summer of flatline prices did at least move Seattle off the Phoenix price drop trend.

The following chart takes the post-bubble years of 2007, 2008, and 2009 and indexes each January’s Case-Shiller HPI to 100 so we can get a picture of how this year’s declines compare to last year:

Post-Bubble Seattle Case-Shiller HPI by Year

Still slightly below where we were this far into last year, at just over 3% off January.

Here’s an update to the Case-Shiller vs. NWMLS median chart. The following chart shows Seattle-area 2009 home prices, indexed to January = 100, as reported by the NWMLS and by Case-Shiller.

Seattle Case-Shiller HPI and NWMLS SFH Median

While Case-Shiller has been mostly flat since March, the NWMLS median has been swinging all over the place.

Check back tomorrow for a post on the Case-Shiller data for Seattle’s price tiers.

(Home Price Indices, Standard & Poor’s, 09.29.2009)

  

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.

137 comments:

  1. 1
    S-crow says:

    Last week a friend of family’s home sold in hours after being listed in Edmonds. $330-350K Range. Priced well, positioned well, staged well. Sold. Now that home will be used as a comp as an additional building block for price stability.

    Rate this comment: Thumb up 0

  2. 2
    S-crow says:

    I should also state that the property gained about 100K since it’s last sale in 2000.

    Rate this comment: Thumb up 0

  3. 3
    Kary L. Krismer says:

    Tim, thanks for doing the NWMLS median to CS comparison–that’s new isn’t it?

    Part of the reason for the median being more volatile is CS reportedly uses some sort of 3 month average. If you take a three month moving average of the median, it’s been pretty flat over the past six or seven months too. Here are my calculations of that:

    393666.67 Jan
    387000
    373783.33
    372950
    372950
    383333.33
    384666.67
    384666.67 August

    In comparison, the raw numbers were as high as $395k in June and as low as $364k in March.

    Also, you reported above that CS is 22.3% off the peak. I’d add that the median is 20.2% off the peak and the mean 22.1% off the peak (July numbers, King County SFR).

    Rate this comment: Thumb up 0

  4. 4
    The Tim says:

    RE: S-crow @ 2 – That comes out to a yearly gain of approximately 4%, which incidentally happens to be pretty much spot on with the yearly gain in Seattle’s Case-Shiller index between 2000 and this latest data.

    RE: Kary L. Krismer @ 3 – Just for you:

    Rate this comment: Thumb up 0

  5. 5
    Ray Pepper says:

    22% ..Good Lord!

    S-Crow …Yes………..Priced aggressively (being the best deal on the block) your home has a good chance being SOLD being that its sub 350k. Let me remind you though that home hasn’t closed yet—if you catch my drift.

    That home being used as a comp for stability. I doubt that. The numbers are all over the place. Wait till the next 2 short sales arrive combined with a couple foreclosures.

    There is no stability. Its very very fragile out there. But, with the FED at our back these sellers are getting their chance to unload.

    Rate this comment: Thumb up 0

  6. 6
    David Losh says:

    It is fragile. Actually for me this selling season may have been very good for sellers who dumped properties. For buyers some made good purchases if they bought the right loacation and condition, but they paid high prices.

    My question of the day is how 2005 pricing got to be the bench mark for this years selling season. Buyers I’ve talked to or cocktail party conversation this year have been the people who paid about 2005 prices.

    My recollection is that 2005 was when I first really noticed pricing being unsustainable. I’m beginning to think next year we will be talking about 2003 pricing as being the bottom.

    Rate this comment: Thumb up 0

  7. 7
    Kary L. Krismer says:

    RE: The Tim @ 4 – Thanks!

    Rate this comment: Thumb up 0

  8. 8
    Back to Basic says:

    The right location, right house, bottom price and bottom interesting rate don’t happen at the same time. So be greedy when everyone is fearful. Housing price may or may not touch the bottom but fed will sure to raise the interest rate when economy improves and inflation is the issue. The people on the sideline (including many of us) will jump at the same time to grab the good property at the good location. So if you want to avoid the bidding war and don’t mind to pay 10~20k more (assuming there we are yet close to the bottom), do shop in the comming season. Now is the good time to test the water and find the house for you. But only if you have 20% down, stable job and perfect FICO.

    Rate this comment: Thumb up 0

  9. 9
    Dave0 says:

    Here’s my prediction based on this latest data:
    The Case-Shiller YOY % change for Seattle will trend back to zero, mirroring it’s path on the way down (like it has started doing since May).

    If this happens, Seattle will continue to flat line month to month through November with less than 2% changes month to month. Starting December we will see prices drop some more, bottoming out March 2010 at a CS index value of about 138 (I’m guessing that would put the King County Combined median at around $325k). March 2010 through Sept 2010 will continue to see YOY % drops, but month to month values will begin to increase, until we get to about a YOY% change of 0 in Sept 2010.

    Only time will tell if this turns out to be the case, but that’s the way it’s looking to me right now…

    Rate this comment: Thumb up 0

  10. 10

    RE: Dave0 @ 9
    Seems about right to me. I can also see Sep 2010- Sep 2011 YOY change being about zero as well.

    Rate this comment: Thumb up 0

  11. 11
    Jimbo says:

    Hey Tim,

    Great work and thanks for all the analysis. One thing that would be nice to see would be to have you incorporate a trendline that shows historical house price appreciation (something like CPI + 1% or something to that effect). That woudl provide a good visual to show where we are versus where we would expect house prices to be had the followed historical norms.

    Rate this comment: Thumb up 0

  12. 12
    AMS says:

    RE: David Losh @ 6 – What is a ‘high price?’

    A buyer is always better off paying a lower price for the product. Cheap is good, and free is better.

    Rate this comment: Thumb up 0

  13. 13
    patient says:

    Here’s my prediction, the remaining 5 C-S month for the year will show month to month price drops for Seattle as foreclosures and short sales continues to increase their share of the sales volume.

    There also seems to be increased realization among politicians of the political and economic risk with growing our national deficit any further. Some stimulus programs are slowly being phased out and I don’t think extension of the $8k tax credit is a given. Politicians who are against more spending on housing have the national C-S stabilization as an argument on their side. It will be an interresting fall and winter. Hopefully Sheila Bair will set a bit of a precedent on how to fund programs without using tax payer funds.

    Rate this comment: Thumb up 0

  14. 14
    Dave0 says:

    RE: Ira Sacharoff @ 10 – I hope that’s the case, rather than have the market pick up again, as I probably won’t be ready to buy until mid to late 2011 based on my life situation.

    Rate this comment: Thumb up 0

  15. 15
    Back to Basic says:

    I do know some friends start biding foreclosure property realizing the value. Not because of 8k credit. Do you really care about 8k rebate if you already have 20% down and looking for good property? 8k is for people short of down pay. High ends are not moving. But low ends and mediums are moving if the property price is right and condition and location are good. Housing trend will be 2~3% trend after this crisis is over. It will be GDP%+inflation% if housing as a good. Now both GDP and inflation are not there, so price will stay flat until the curve catch up. One this trend coming back, this bubble.com need to change its name. We all like to see a stable growth economy but not a boom burst.

    Rate this comment: Thumb up 0

  16. 16
    Indy says:

    Well, I for one am not very encouraged by the small upticks we see in the July data for most of the country when literally every stop was pulled to try and support housing prices at the very peak of the season. My guess is that declines will continue in high-priced markets for the next six months, especially as more distressed properties come on the market.

    Still, the only cities, along with Seattle, to have a seasonally adjusted decline in July were poor Detroit and Las Vegas. Some company!

    Say Tim, could you post a inflation-adjusted Cash-Shiller. It really makes the point at how far back in time this crash takes housing. Here’s my approximate list per city using CPI.

    Phoenix: 15 years
    LA: 7 years
    San Diego: 8 years
    San Francisco: 10 years
    Denver: 10 years
    DC: 6 years
    Miami: 8 years
    Tampa: 8 years
    Atlanta: 16 years
    Chicago: 10 years
    Boston: 8 years
    Detroit: Greater than 20 years (no data) – today is 25% less than Jan 1, 1991 (YIKES!)
    Minneapolis: 11 years
    Charlotte: 14 years
    Las Vegas: Greater than 20 years (no data) – today is 19% less than Jan 1, 1991 (YIKES!)
    New York: 6 years
    Cleveland: Greater than 20 years (no data) – today is 3% less than Jan 1, 1991
    Portland: 5 years
    Dallas: Greater than 10 years (no data) – today is 7% less than Jan 1, 2000
    Seattle: 5 years

    So, inflation adjusted, the Northwest has gone the least back in time for inflation parity.

    Poor, poor Detroit. What a total disaster. Vegas isn’t in much better shape either.

    Rate this comment: Thumb up 0

  17. 17
    Anon. says:

    DO it by tier! By Tier!
    :)

    Rate this comment: Thumb up 0

  18. 18
    Back to Basic says:

    When we talking about Detroit, we only talk about the city and Wayne county which are in distress shape since last oil crisis in 70s and roit in 60s force many middle class to move to suburb. So if we taking about Metro Detroit which include Oakland county and Washtenaw county, the situation is not that bad. People are still paying 1/3 of their income for decent 4brd house, unlike King county, we are still pay 40~50% for a medium prices house. But location, weather and job opportunity still attract people to stay. People will still pay premium for staying on both coasts.

    Rate this comment: Thumb up 0

  19. 19
    AMS says:

    RE: Back to Basic @ 18 – From the personal reports I am getting, no area in Michigan has been immune. It is true, however, that the Race Riots sent many out to the suburbs. It is really tough to price the cost of crime when looking at an individual home. Take a look at the article I posted in the Open Thread in regards to this. In 2005 a sale of home in Detroit was recorded at $250,000, and about three years later that same home, sold for $10,000.

    By AMS @ 15:

    “DETROIT — On a grassy lot on a quiet block on a graceful boulevard stands the answer to a perplexing question: Why does the typical house in Detroit sell for $7,100?”

    Go to:
    news.google.com

    Search:
    “1626 W. Boston Blvd.”

    The full article will show right up.

    The other SE Michigan counties are not doing stellar. I estimate the unemployment rate in the entire state of Michigan to be 25%, with some pockets better and others worse. I know the headline number is different, but look at some of the other measures.

    I could buy about 100 homes in Detroit for the cost of 1 or 2 in Seattle.

    In the larger context of society, where, for example, the same tax code and minimum wage applies to all, I don’t see how such a great disparity can continue to exist. Detroit priced too low? Seattle priced too high? Or Seattle is worth it? I guess the corruption could go on for years, but doesn’t Seattle have some corruption of its own?

    Rate this comment: Thumb up 0

  20. 20
    Greg Perry says:

    Median prices, whether up or down, always follow the sales ratios as measured in Months of Inventory.

    Rate this comment: Thumb up 0

  21. 21
    Back to Basic says:

    By AMS @ 19:

    RE: Back to Basic @ 18 – From the personal reports I am getting, no area in Michigan has been immune. It is true, however, that the Race Riots sent many out to the suburbs. It is really tough to price the cost of crime when looking at an individual home. Take a look at the article I posted in the Open Thread in regards to this. In 2005 a sale of home in Detroit was recorded at $250,000, and about three years later that same home, sold for $10,000.

    By AMS @ 15:

    �DETROIT � On a grassy lot on a quiet block on a graceful boulevard stands the answer to a perplexing question: Why does the typical house in Detroit sell for $7,100?�

    Go to:
    news.google.com

    Search:
    “1626 W. Boston Blvd.”

    The full article will show right up.

    The other SE Michigan counties are not doing stellar. I estimate the unemployment rate in the entire state of Michigan to be 25%, with some pockets better and others worse. I know the headline number is different, but look at some of the other measures.

    I could buy about 100 homes in Detroit for the cost of 1 or 2 in Seattle.

    In the larger context of society, where, for example, the same tax code and minimum wage applies to all, I don’t see how such a great disparity can continue to exist. Detroit priced too low? Seattle priced too high? Or Seattle is worth it? I guess the corruption could go on for years, but doesn’t Seattle have some corruption of its own?

    Sure you can buy 10 if not 100 properties in Detroit with one Seattle property. But remember house ownership is just a way that local goverment to lock your property tax into their treasure box. Seattle people are lucky for paying low property tax and zero income tax. That also contribute the housing bubble here. Look at the King county budget shortfall. Many of the King county properties are not even home owner occupied. The housing become a trading card for many people to make profit. I know people own several propertie by trade make more profit in short period of time than their life time earned income. The whole economy becomes a virtual trading economy with no real content: the loss of manufacturing industry, the dot.com boom, the housing boom, the NAFTA and global trade inbalance. Our economy are totally depend on tade but not on creation. All of these have only benefit the Wallstreet traders and real estate traders. Once the music stops and party is over, people realize this is just a mirage. History will repeat itself again.

    Rate this comment: Thumb up 0

  22. 22
    AMS says:

    RE: Back to Basic @ 21 – At some price point the relative value is much greater in Detroit. That said, one must be of the correct demographic to make it.

    I have a hard time believing that a $10,000 home in Detroit has greater negative value than a $350,000 home in Seattle. One thing is for sure, a person making minimum wage in Michigan would probably could handle the payments on a $10,000 home. The annual income is greater than the home cost, albeit there are other problems that must be consider with low-income earners.

    Let’s take the guy who was paying $500 per month in rent. That’s $6,000 per year, or over 50% of the cost of the home. Yes, I know that taxes, insurance, maintenance, and so on must be considered. The cost of crime is hard to value.

    His down payment of about $30,000 dollars clearly would cover the entire cost of the home, plus a good deal of renovation. He could pay cash instead of taking on about $270,000 in debt. The annual interest on the debt on a Seattle home would clearly pay for a Detroit home each and every year for the first few years.

    Rate this comment: Thumb up 0

  23. 23
    dailyt says:

    Tim,

    Any chance you’ve posted a blog lately on Seattle median home prices v. income? (IE, affordability index) This probably is similar in the previous requests for inflation adjusted prices, but it would be interesting to see where we are relative to wages. (Mainly a snapshot on wage pressures v. home prices)

    Rate this comment: Thumb up 0

  24. 24
    Steve Tytler says:

    These charts indicate what I have been saying for years: Seattle home prices would NOT fall anywhere near as far as the “bust” cities like Las Vegas and Phoenix and San Diego.

    Looks like most people here agree that our housing bottom will hit sometime next year, which is what I said earlier this year, although it’s still too early to tell for sure. You can only call a true “bottom” after it has happened.

    So we are rolling back to 2005 prices, which is about what I expected, and then we will have several years of no appreciation.

    But here’s where I depart from the “Bad News Bears” on this site … I still believe home prices in the Seattle area will exceed the 2007 peak values sometime in the next 10 years. We just have to wait for incomes to catch up to home prices and I expect inflation to increase dramatically in the next few years because of all the gov’t spending.

    The classic “stair step” pattern of home appreciation is alive and well. The 2006-2007 credit bubble caused a major distortion of the normal housing market pattern. By next year, most of that impact will be wiped out so I think in a few years, not sure exactly when, we will resume a more typical pattern of home appreciation in this area.

    Rate this comment: Thumb up 0

  25. 25
    AMS says:

    RE: Steve Tytler @ 24 – “I still believe home prices in the Seattle area will exceed the 2007 peak values sometime in the next 10 years.”

    That’s a long time for very little gain.

    Rate this comment: Thumb up 0

  26. 26
    TJ_98370 says:

    .
    This article references Case / Schiller but then says Seattle is indeed special !!!
    .

    Index shows home prices rose for 3rd month in July
    .
    ….Home prices are now at levels not seen since the third quarter of 2003. And prices in Las Vegas, Detroit and Seattle are still falling, on a seasonally adjusted basis.…..
    .
    ……Seattle, by contrast, was one of the last areas to enter the downturn so prices there have yet to hit bottom….

    .
    I posted a link to this article in the open thread also. It seemed more appropriate here. Sorry about the redundancy.
    .

    Rate this comment: Thumb up 0

  27. 27
    Steve Tytler says:

    BTW, I was in Lake Tahoe last weekend talking to a friend who bought a house in Phoenix near the top of the market. He paid something like $500K for it and it’s currently worth about $260K.

    Is he going to walk way? Do a short sale?

    No.

    He said he’s not happy about the situation, but he liked the home when he bought it, he can afford the mortgage payments and they bought the house for their lifestyle, not as an “investment.” He says he plans to live there “forever” so it doesn’t really matter that he is now underwater.

    This guy is a mortgage broker and real estate broker, so he knows the market.

    I submit that he is typical of most homeowners in this country. They are not going to walk away from their homes just because they turned out to be a bad investment. They bought their home for the lifestyle benefits and as long as that has not changed and they can afford the payments, they won’t walk away.

    Now I know many people on this site think that is crazy because you look at the housing market on charts as if it were the stock market, but that is NOT how most people look at the housing market.

    That’s why home prices won’t crash as far as some of you think. Because most people are happy with their homes and it doesn’t really matter to them how much it’s worth.

    Rate this comment: Thumb up 0

  28. 28
    AMS says:

    RE: Steve Tytler @ 27 – That’s fine, if the owner can make the payments. Many of the ‘failures’ happen when the owner cannot make the payments and cannot sell. What do you suggest in such a situation?

    Rate this comment: Thumb up 0

  29. 29
    The Tim says:

    By Steve Tytler @ 24:

    These charts indicate what I have been saying for years: Seattle home prices would NOT fall anywhere near as far as the “bust” cities like Las Vegas and Phoenix and San Diego.

    Just about nobody here has been saying we would fall as far as those cities. You’re arguing against a straw man with that one, Steve.

    By Steve Tytler @ 27:

    BTW, I was in Lake Tahoe last weekend talking to a friend who bought a house in Phoenix near the top of the market. He paid something like $500K for it and it’s currently worth about $260K.

    Is he going to walk way? Do a short sale?

    No.

    He said he’s not happy about the situation, but he liked the home when he bought it, he can afford the mortgage payments and they bought the house for their lifestyle, not as an “investment.” He says he plans to live there “forever” so it doesn’t really matter that he is now underwater.

    So does your friend not realize or simply not care that he can get the same “lifestyle” for far less money per year?

    Your friend sounds like a pretty responsible guy, so let’s assume he put 20% down on that $500k lifestyle choice in 2006. $400k mortgage at 6.5% (a good rate in 2006) is PI payments around $2,500 a month, or $30k annually.

    If your responsible friend has a PI no more than 30% of his income, we can estimate his annual income at around $100k.

    Let’s also assume that this responsible gentleman left $20k in some form of liquid savings after making his down payment in 2006. If he has also been saving 10% of his income in the time since, he’s now got about $50k in the bank.

    Take that $50k in the bank, put ~20% down on the $260k home, with a 5% interest rate you’re now looking at monthly PI payments of around $1,125 — a 55% savings.

    That’s a savings of $16,500 a year. Run that out through the duration of the mortgage (subtracting the three years of extra payments that would be made by resetting the mortgage to a new 30-year period), and your friend is paying an extra $400k for the same exact “lifestyle” he could have if he bought another house and walked away from his 2006 mistake.

    Not that I’m suggesting this as the most ethical course of action, but I’m just pointing out there is a tangible, non-negligible, hard-money aspect at play here that is leading many people to choose to walk away, despite the “lifestyle” argument.

    Rate this comment: Thumb up 0

  30. 30
    Markor says:

    By Steve Tytler @ 27:

    I submit that he is typical of most homeowners in this country. They are not going to walk away from their homes just because they turned out to be a bad investment. They bought their home for the lifestyle benefits and as long as that has not changed and they can afford the payments, they won’t walk away.

    The key is “and they can afford the payments”. That will become increasingly unlikely because, as house prices fall further due to foreclosures, more jobs will be lost. Wages will on average reset to reflect lower house prices. An employee would have to be exceptionally good to be kept at $75K salary when someone else is happy to do it for $50K because they can buy a house for $150K. Eventually equilibrium will be reached but I don’t think that’s at 2005 prices in Seattle. More like 2000 prices. I doubt gov’t borrowing will prevent that.

    Rate this comment: Thumb up 0

  31. 31
    Kary L. Krismer says:

    By The Tim @ 29:

    By Steve Tytler @ 24:
    These charts indicate what I have been saying for years: Seattle home prices would NOT fall anywhere near as far as the “bust” cities like Las Vegas and Phoenix and San Diego.

    Just about nobody here has been saying we would fall as far as those cities. You’re arguing against a straw man with that one, Steve.

    Huh? What about the argument that Seattle is XX months behind San Diego? Maybe that argument hasn’t been made much lately, but you even have the second chart above that has Seattle compared to SD 17 months ago, and had an entire thread on it this year:

    http://seattlebubble.com/blog/2009/02/20/bottom-calling-san-diego-lag-forecast/

    Or how about Sniglet’s 80% decline, based on deflation?

    Rate this comment: Thumb up 0

  32. 32
    The Tim says:

    RE: Kary L. Krismer @ 31 – And from the first bullet point in the list of assumptions in that very post:

    Seattle’s peak YOY drop will be ~45% lower than San Diego’s.

    It’s like you didn’t even read the post. At all.

    Rate this comment: Thumb up 0

  33. 33
    Kary L. Krismer says:

    RE: The Tim @ 32 – I’m not saying you in particular made that argument. If you look at those same assumptions, you only put that San Diego Lag theory as having a 10% chance, which might have been the lowest number you gave any of the methods covered that week.

    Rate this comment: Thumb up 0

  34. 34
    Scotsman says:

    Which best describes the current situation:

    “Precedent”- n. An act or instance that may be used as an example in dealing with subsequent similar instances.

    “Unprecedented” adj. Having no previous example: i.e. unprecedented economic growth (or decline).

    Too many are focused on the first, looking at past performance and assuming we still operate in the environment that produced past results. Whether from willful blindness/denial or ignorance, it negates the value of this data. A whole new set of rules is in play.

    So, after trillions of $ in TARP, bail-outs, government take-overs of banking, industry, and insurance, we see home price declines have flattened or bumped up slightly in a seasonal or emotional mini-rally. And now, ignoring the short term impact of these efforts, along with the fact that these same efforts have weakened the prospects for long term growth and recovery, those who make their living selling homes and financing are boldly claiming the bottom is indeed in sight.

    I can assure all of you that home prices have not bottomed, and won’t for a decade or more. The U.S., already insolvent on multiple levels and headed for additional trouble will end up somewhere between Japan and the great depression. Sure the FED is monetizing, but they aren’t doing it at a rate that even keeps up with the demand for cash/credit, let alone replacing the wealth that has been lost. There won’t be inflation, but there will soon enough be a shortage of cash to pay the ever increasing interest demanded by the economy as a whole. Rates will rise, the FED will print, but not fast enough to cause inflation, unemployment will continue to grow, and the value of the dollar will fall making our imports more expensive. Increased taxes, an attempt to keep the system going, will take ever more dollars from consumer’s pockets cutting demand, leading to more layoffs, and on and on and on. Don’t be fooled.

    Ask yourself this: which economic fundamentals have changed for the better over the last 6 months? Remember, home prices are the effect, the “band-aid” if you will, not the cause or injury. Incomes and employment up? Debt reduced? Discretionary income up? Job security up? No, no, no, no.

    It’s a great time to sell. Perhaps the last great time…

    Rate this comment: Thumb up 0

  35. 35
    patient says:

    It’s way to early to say where we will endup. We will continue to drop but until the government exceptional intervention is done with it’s hard to say how much. There is still very little transparancy into the true health of banks and how we are going to deal with the deficit. We are currently floating on a multi trillion dollar rescue raft so it’s very, very difficult to know where we really are. My guess is that we will know a lot more around christmas.

    Rate this comment: Thumb up 0

  36. 36
    AMS says:

    RE: Scotsman @ 34
    “Which best describes the current situation:

    ‘Precedent’- n. An act or instance that may be used as an example in dealing with subsequent similar instances.

    ‘Unprecedented’ adj. Having no previous example: i.e. unprecedented economic growth (or decline).”

    This is essentially the Trend analysis versus the Efficient Market Hypothesis discussion.

    See Elliott Wave for Fibonacci Trend Analysis.

    Rate this comment: Thumb up 0

  37. 37
    Scotsman says:

    RE: AMS @ 36

    Nice summation, for those that know. But one doesn’t need to read, let alone understand Elliot or other esoteric theorists, to make a choice in this situation. Some good old fashioned econ 101-103 or a couple of books will allow those who want to understand to do so. Some common sense and an open mind seeking truth as opposed to justification will do the trick.

    You can’t borrow your way out of debt.

    Debt is not the same as wealth.

    If you just increase the number of dollars without increasing the wealth/production that back them up, the dollars can only be worth less.

    “Everybody, sooner or later, sits down to a banquet of consequences.” (Stevenson)

    Rate this comment: Thumb up 0

  38. 38
    AMS says:

    RE: Scotsman @ 37 – There are those who will always claim that there is some pattern in history, be it based on “good old fashioned econ 101-103″ or some other less common theory that may be used to predict the future.

    Then there are those who suggest that the future is always new, and no matter how much past data you have, you cannot predict the future.

    How do we separate those who rely on some history to predict the future from those who say there is no way to predict the future because it’s a new world?

    Rate this comment: Thumb up 0

  39. 39
    waitingforseattletocool says:

    RE: The Tim @ 29

    Just so I understand the scenario correctly, does this person qualifiy to buy the $260K home before he walks away from his $400K mortgage?

    He has a total mortgage obligation of $600K on the two homes before he walks?

    Rate this comment: Thumb up 0

  40. 40
    Kary L. Krismer says:

    RE: AMS @ 38 – If you consider enough variables, everything is unprecedented. But if you just look at individual variables, nothing is unprecedented.

    Rate this comment: Thumb up 0

  41. 41
    AMS says:

    RE: Kary L. Krismer @ 40 – And the fewer variables one considers the less predictive?

    Rate this comment: Thumb up 0

  42. 42
    wreckingbull says:

    Since no one has pointed out the elephant in the room, I will.

    This price stabilization has occurred during a period of MASSIVE government intervention, most specifically FHA pseudo-subprime lending and the Fed buying down interest rates to ridiculous lows.

    What happens when this intervention ends? Can the house of cards stand on its own? I think this is an important question to ponder.

    Rate this comment: Thumb up 0

  43. 43
    Kary L. Krismer says:

    By AMS @ 41:

    RE: Kary L. Krismer @ 40 – And the fewer variables one considers the less predictive?

    That might depend. I don’t know what happened to property values near 3 Mile Island after their reactor accident. Assuming they dropped significantly, I suspect that if nearby reactor accidents was your variable, it would be rather predictive!

    Rate this comment: Thumb up 0

  44. 44
    Kary L. Krismer says:

    RE: wreckingbull @ 42 – It can if they repeal the Garn Act after interest rates start heading up. (A one variable analysis.)

    Rate this comment: Thumb up 0

  45. 45
    AMS says:

    RE: Kary L. Krismer @ 43 – I’d suggest that the Three Mile Island incident fully supports the Efficient Market Hypothesis. There had never been a failure in the past.

    This reminds me of people who buy used cars and think that because the transmission hasn’t failed in the first 200,000 miles that it’s a “proven product.”

    Rate this comment: Thumb up 0

  46. 46
    patient says:

    RE: Scotsman @ 37

    “Some common sense and an open mind seeking truth as opposed to justification will do the trick.”

    Excellent point. There is far to little of common sense and far to much tradition in the way to look at the economy in general and housing in specific. A recovery based on borrowed money is not a recovery it’s like painkillers, they don’t treat just reduce the symptoms. Once you stop taking them you will know the true status of the illness.

    Rate this comment: Thumb up 0

  47. 47
    Ray Pepper says:

    RE: Steve Tytler @ 27

    Wow….I will be nice and just state…Check back with your friend in two years. See if hes still holding his property. Has he attempted a Loan Mod? Why not?

    We obviously hang out with different friends. All my friends and investors who found themselves in that same situation (upside down greater the 150k)dropped the home nearly 2 years ago. Right or wrong I believe my friends made the right financial decision.

    I hope your real estate Broker friend is not giving financial advice to anyone.

    Good LORD!

    Rate this comment: Thumb up 0

  48. 48
    Ray Pepper says:

    RE: Markor @ 30

    As soon as his friend realizes the insanity of his decision (to continue to pay on an upside down 240k amount )that home will be gone quicker then my cash against Phil Helmuth at the WSOP.

    Be it loss of his Broker friends income, divorce, illness, job transfer, or any other life style factor—that home will be the 1st to go. Where is the Brokers common sense in not buying one for 240k now ? Oh he cannot qualify?????

    I get it…………Hmmmmmmm. Gather around.. Shhhhhhh…Tytlers buddies home is going back. Maybe not this year or next but its going back………Some people just take ALOT longer to realize their errors in judgement. Trust me friends. Its not about morals anymore. Its about plain commonsense.

    Bank on it!

    Rate this comment: Thumb up 0

  49. 49
    Kary L. Krismer says:

    By Ray Pepper @ 47:

    <We obviously hang out with different friends. All my friends and investors who found themselves in that same situation (upside down greater the 150k)dropped the home nearly 2 years ago. Right or wrong I believe my friends made the right financial decision. !

    So your “friends and investors” were upside down at the peak of the market?

    I’m not sure I’d be using them as shining examples of being able to make good financial decisions. ;-)

    Rate this comment: Thumb up 0

  50. 50
    Scotsman says:

    RE: Ray Pepper @ 48

    Pride. It affects folk’s vision. We’ll be seeing less of it in the future.

    If this guy just wants to make payments on a couple hundred grand and get nothing for it, I’m here to help. ;-) I’ll even give him a lower rate….

    Rate this comment: Thumb up 0

  51. 51
    Scotsman says:

    More deflation in Japan as falling dollar (strong yen) kills their exports. What’s not mentioned is the lack of demand outside changes driven by currency fluctuations. They devalue, we devalue, nothing changes, all contract:

    http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/6244429/Japan-tips-ever-deeper-into-deflation.html

    As a reminder, the problem with deflation is your debt stays the same- it doesn’t deflate along with your income- and indeed, it’s relative size/impact increases. Get out of debt.

    Rate this comment: Thumb up 0

  52. 52

    RE: Scotsman @ 51

    Lot’s of Surprises Today Scotsman

    After yesterday’s stock rally, it was slam dunk IMO that it would extend today and tomorrow to make Q3 look rosy at the end of the quarter…..it didn’t happen, even with the stock market mainly on federal life support and any other trade volume light since March’s collapse.

    This means, IMO, private investors, CEOs and retirement agencies must be selling; even at light volume.

    Very odd news indeed for the end of the quarter looking bad anyway.

    Rate this comment: Thumb up 0

  53. 53
    Scotsman says:

    News from the WSJ, Monday, Sept 29th 1930 (NOTE THE DATE): Love the last bit- unprecedented!

    “Week in review: stock and commodity markets very weak; bond market strong; general business shows some improvement; short term money extraordinarily easy; commercial loans and money in circulation down; foreign markets nervous.

    Stop-loss orders have been popular; the resulting automatic selling has been a factor in recent market breaks.

    Some banks in last few days rumored to be buying “stocks sponsored by them”, though not on large scale.

    Bears are targeting GE because it has a high price-earnings ratio, but it’s always sold too high on that basis and noone has ever made money shorting it long-term.

    Dr. B. Anderson of Chase Nat’l. Bank criticizes Fed. Reserve use of open market operations; allows they may have been necessary to arrange war financing at low rates, but use has increased greatly since, mainly to lower rates; doing this “can generate almost incredible abnormalities in the monetary picture.”

    Dr. J. Klein, Asst. Commerce Sec., predicts greatly improved business conditions by end of Oct., prices back to 1928 level by end of the year. Notes history of depressions in past 50 years; average length has been 13 months and drop in price 15% (current price drop is 11%, drop in 1921 was 25%). Says US financial position stronger than ever; savings up tremendously over past 10 years, as is purchasing power (wages up 2.1% annually while cost of living hasn’t increased).”

    Rate this comment: Thumb up 0

  54. 54
    Scotsman says:

    Here’s the link to the above resource- lots of fun!

    http://newsfrom1930.blogspot.com/2009_09_27_archive.html

    Rate this comment: Thumb up 0

  55. 55
    Scott Weitz says:

    RE: Steve Tytler @ 27

    I would suggest that he will capitulate once he realizes that prices are not going back up to pre-bust levels.

    He would be stupid not to…especially in Phoenix where deficiencies are generally not allowable.

    This ‘crisis’ is not over…not even close. High end real estate is a disaster, as is the commerical market.

    Rate this comment: Thumb up 0

  56. 56
    Ray Pepper says:

    RE: Kary L. Krismer @ 49

    Absolutely Kary…Its a numbers game. Investors who held alot of properties 3 years ago were unable to unload in time and became bagholders. Remember Nevada and Arizona got nailed a clear 18 months ahead of us here in the PNW. All had one thing in common. They let the upside downinvestments go. None I know were quite 240k negative like Steve’s friend but most were clearly above 80-100k. They all report to me it was the best decision they ever made. The same homes are now upside down another 20-50% from when they stopped paying.

    A house is ALWAYS an investment. Just like any investment if it becomes toxic it must be removed or it can infect an entire portfolio. Stocks, homes, I don’t care. I would never EVER recommend anyone continue to pay in Steve’s scenario above with his friend.

    Rate this comment: Thumb up 0

  57. 57

    “Then there are those who suggest that the future is always new, and no matter how much past data you have, you cannot predict the future.”

    Somebody famous once said ” Those who don’t remember the past are condemned to repeat it.”
    And while, of course there are seldom exact parallels, this lack of remembering is exploited for pure profiteering. Look back a couple of years ago, when real estate professionals were saying things like
    ” This is a new paradigm. We no longer have cycles in real estate. Real estate will only go up and you don’t want to get left behind now, do you?”
    While we are not slaves to the past, and are not doomed to have history repeat, it sure doesn’t hurt to know one’s history. Con men go back a long time in this country.

    Rate this comment: Thumb up 0

  58. 58
    Fran Tarkenton says:

    By Steve Tytler @ 24:

    Looks like most people here agree that our housing bottom will hit sometime next year, which is what I said earlier this year, although it’s still too early to tell for sure. You can only call a true “bottom” after it has happened.

    I count two people saying it in this thread (posts 9 and 10). There’s been a handful of similar statements in other threads. Where do you get “most” from?

    So we are rolling back to 2005 prices, which is about what I expected, and then we will have several years of no appreciation.

    You’ve predicted so many different things that I predict that you’ll claim to be correct no matter what ends up happening.

    Rate this comment: Thumb up 0

  59. 59
    AMS says:

    RE: Ira Sacharoff @ 57 – We also have statements like, “Past performance may not be indicative of future results.”

    Rate this comment: Thumb up 0

  60. 60
    waitingforseattletocool says:

    RE: Ray Pepper @ 56

    I think the key here is your statement “Investors who held alot of properties”, Steve’s friend is living in his home.

    I don’t think you can make an automatic “walk” recommendation to someone who is living in a home that happens to be underwater.

    Walk and rent may be fine for some people, it doesn’t work for everyones lifestyle. He made a bad investment and life goes on.

    Rate this comment: Thumb up 0

  61. 61
    Mikal says:

    RE: Kary L. Krismer @ 31 – AMEN BROTHER.

    Rate this comment: Thumb up 0

  62. 62
    David Losh says:

    RE: Steve Tytler @ 24

    Steve’s making predictions. I didn’t realize things were so bad. We must be in for another 10% reduction in pricing this year.

    It’s just a personal observation, but I think whenever Steve makes a comment bad news is just around the corner.

    Rate this comment: Thumb up 0

  63. 63
    David Losh says:

    RE: AMS @ 12

    In 2006 and 2007 we saw double digit appreciation in the price of housing, each year. The price decline is only 22% from the peak. 2003 to 2005 saw double digit appreciation in combined years. 1998 to 2003 we saw massive appreciation. I think it was like 7% per year.

    For some one like Steve the mortgage broker to hope we will bottom at 2005 pricing is unrealistic. In his next comment he talks about some one owing more on a mortgage than the property is worth.

    Now I know you’ll correct me if I’m wrong, but the problem in the financial markets is that asset values are far below securities that were traded. Mortgage backed securities are only a part of the under collateralized problems we are coming into.

    Shopping malls are going bankrupt. That’s an investor pool that’s wiped out. Commercial loans, leases, and agreements are going back to the bank and investors.

    Then we have the federal government that stepped in to run up a ton of debt to bail out the banks, and investors.

    Combined, the price of housing is a small thing to keep propped up forever. So, in conclusion, when the commercial markets start adjusting downward in 2011 and 2012 money will be needed elsewhere than home mortgages.

    Banks and investors will only want to lend on secure, salable assets. That could be higher down payments like we have now or the prices will have to come into line with values.

    I’m in the camp that as interest rates tick up prices will really start to come down.

    Rate this comment: Thumb up 0

  64. 64
    David Losh says:

    Let’s try this link to the http://www.bloodhoundblog.com

    http://www.bloodhoundrealty.com/BloodhoundBlog/?p=9901

    I wish my comments were as clear.

    Rate this comment: Thumb up 0

  65. 65
    David Losh says:

    That worked, it’s worth the read.

    Rate this comment: Thumb up 0

  66. 66
    AMS says:

    RE: David Losh @ 63 – “Now I know you’ll correct me if I’m wrong, but the problem in the financial markets is that asset values are far below securities that were traded. Mortgage backed securities are only a part of the under collateralized problems we are coming into.”

    I think this is probably the biggest problem driving the rise of foreclosures and massive losses with the mortgage back securities.

    I posted an article about a home in Detroit that had a first mortgage of $200,000 and a second mortgage of $50,000 taken on the day of purchase in 2005. A couple years later foreclosure. A year or so later, and the home sells for $10,000. Someone, or some group of people, took a $240,000 loss on a $250,000 investment. (More accurately, the $50,000 was cleared out, 100% loss, and the $200,000 probably took a hit of more than $200,000 once the legal fees and other costs are added in, and that does not even consider the lost time–essentially this is a 100% loss for the lender, probably more.)

    $250,000 to zero on what was considered a “safe” investment.

    It does not take too many homes like that, much less the entire Las Vegas market, to cause massive problems.

    How long will it take before a $10,000 home rises back in value to $200,000 given the economic backdrop? Essentially never, if we place some value on time.

    I have always suggested, “Give me a million years, and I will sell your home for $10,000,000.” Another way of looking at this is, I will give you $1,000,000, but I am only going to pay $1 per year. What the value of that? Depends on your discount rate, but the present value is about $10.

    In my opinion the only way to go back to the old prices is to inflate the currency, which I don’t see happening any time soon.

    On a different topic, I received an e-mail from a retired person who asked me what to do. The gist of the problem is that he has saved all his life, and he planned on earning interest on his savings. Now he suggested the FED has pushed rates so low that he gets about $2.50 on each $1,000 (=0.25%) per year. Forget the whole deflation concept for a moment, this poor guy is suggesting that his money is going to run out too soon because of the FED’s low interest rate policy. While I didn’t get an exact number out of him, he suggested that he did not plan for the event where savings would pay essentially zero. The bottom line is that his entire life savings earns nothing in this market.

    Rate this comment: Thumb up 0

  67. 67
    AMS says:

    RE: David Losh @ 65 – Ok, let’s have a pricing discussion in the mid-week open thread. It’s been some time since I have reviewed pricing, but it is one of my favorite topics. Let’s start with this article, and then move toward generalized pricing.

    Rate this comment: Thumb up 0

  68. 68
    Jonness says:

    By David Losh @ 6:

    For buyers some made good purchases if they bought the right loacation and condition, but they paid high prices.

    I’ve been looking at a lot of waterfront property, and I notice some of it is priced not so bad, but still sitting there. Most of it is priced 2 or 3 times 1999 prices. That seems crazy to me, because adjusted for inflation, wages were higher in 1999. So shouldn’t houses cost what they did in 1999 plus inflation? I’m keeping in mind, in August 1999 the U.S. unemployment rate was 4.2% compared to 9.7% in August 2009. Seriously, where are people going to get 2 to 3 times as much money as they could get back then to buy a house? The only way this will happen is if Burnbanke prints it out of thin air; thus devaluing the dollar by 2 to 3 times.

    My question of the day is how 2005 pricing got to be the bench mark for this years selling season. Buyers I’ve talked to or cocktail party conversation this year have been the people who paid about 2005 prices.

    Isn’t it funny? Most people think of this from the top down, but guys like you and I think about it from the bottom up. Do people have short-term memory loss?

    http://seattlebubble.com/blog/wp-content/uploads/2008/10/japanes-and-us-housing-bubbles-600×435.png

    Rate this comment: Thumb up 0

  69. 69
    TJ_98370 says:

    By TJ_98370 @ 26:

    .
    This article references Case / Schiller but then says Seattle is indeed special !!!
    .

    Index shows home prices rose for 3rd month in July
    .
    ….Home prices are now at levels not seen since the third quarter of 2003. And prices in Las Vegas, Detroit and Seattle are still falling, on a seasonally adjusted basis…
    .
    ….Seattle, by contrast, was one of the last areas to enter the downturn so prices there have yet to hit bottom….

    .
    I posted a link to this article in the open thread also. It seemed more appropriate here. Sorry about the redundancy.
    .

    An interesting internet phenomenon – the quote “…Seattle, by contrast, was one of the last areas to enter the downturn so prices there have yet to hit bottom….” is no longer in the linked article as of 8:45 P.M. PST. A detail maybe only of interest to the obsessive. Why would they drop that quote? Hmmmmm.

    Rate this comment: Thumb up 0

  70. 70
    TJ_98370 says:

    Correction – as of 8:45 P.M. PDT. Details, details……….
    .

    Rate this comment: Thumb up 0

  71. 71
    Jonness says:

    Is he going to walk way? Do a short sale?

    No.

    Just because about half the population has an IQ of 99 or less doesn’t make doing what they do a smart financial decision. So your friend loves the house so much he wants to pay 2x what its worth and spend the rest of his life working to pay it off? To each their own, but I don’t recommend that strategy as a pathway to financial security. Then again, the fact that your friend bought at the peak is evidence he’s an extremely poor money manager, so your story doesn’t surprise me in the least.

    I hope you are right that most people are going to do as your friend does, because if most people truly are that financially incompetent, getting rich will prove to be almost effortless for those willing to take some time out to use logic for an hour or so per day.

    I think most people have the ability to practice logic. It’s just that the path of least resistance is to think purely emotionally. Like a mindless baby.

    Rate this comment: Thumb up 0

  72. 72
    mr.finviz says:

    RE: Steve Tytler @ 24 – and did I tell you that I love to blow my horn.. really loud??

    Rate this comment: Thumb up 0

  73. 73
    Kary L. Krismer says:

    By Jonness @ 71:

    Is he going to walk way? Do a short sale?

    No.

    Just because about half the population has an IQ of 99 or less doesn’t make doing what they do a smart financial decision. So your friend loves the house so much he wants to pay 2x what its worth and spend the rest of his life working to pay it off? To each their own, but I don’t recommend that strategy as a pathway to financial security. Then again, the fact that your friend bought at the peak is evidence he’s an extremely poor money manager, so your story doesn’t surprise me in the least.

    I hope you are right that most people are going to do as your friend does, because if most people truly are that financially incompetent, getting rich will prove to be almost effortless for those willing to take some time out to use logic for an hour or so per day.

    I think most people have the ability to practice logic. It’s just that the path of least resistance is to think purely emotionally. Like a mindless baby.

    I know to each his own, but this is really just a bunch of nonsense. Lots of people with very good financial competence happen to buy things at the peak. The alternative is to put your life on permanent hold due to the possible risk that the present might be the peak. The real issue is risk, and even there there are some people who are financially competent who go a bit too far in the risk department. The issue is really risk adversity, not financial competence.

    But beyond that, your course of action is more likely than not the path to being financially locked out forever. People here talk all the time about how government is subsidizing home loans. Well guess what? That includes who loans are made to. Assuming you don’t want to make your money in real estate, you’re going to find it a bit difficult to make money when no one will loan you money for other purposes because you defaulted on a loan in at a low point in the market. Good luck making money without access to capital.

    That property that you think they’ll be paying off for the rest of their life could very well be something that will earn them a 400% return down the road (ignoring leverage). We were talking today of the past predicting the future, and that has happened in the past, and not so long ago. You see that repeatedly in the stock market where certain stocks drop suddenly, and forcing many people out at huge losses, only for the stock to recover fully and beyond. The mistake is thinking that the very recent past is also what the future will be like. The future is uncertain. It can be worse or it can be better.

    Rate this comment: Thumb up 0

  74. 74
    Kary L. Krismer says:

    By Jonness @ 68:

    I’ve been looking at a lot of waterfront property, and I notice some of it is priced not so bad, but still sitting there. Most of it is priced 2 or 3 times 1999 prices. That seems crazy to me, because adjusted for inflation, wages were higher in 1999. So shouldn’t houses cost what they did in 1999 plus inflation?

    You do realize that they are not making more waterfront property, right? Why would you possibly think it would only rise at the rate of inflation?

    When things are in short supply, they can rise in price exponentially. The rate of general inflation has nothing to do with it.

    Rate this comment: Thumb up 0

  75. 75
    AMS says:

    RE: Kary L. Krismer @ 74 – The Palm, maybe?

    Rate this comment: Thumb up 0

  76. 76
    Jonness says:

    RE: Scotsman @ 34

    When a person in debt first borrows a new load of money, everything seems chipper for a while. It’s like a drug addict feels when he get’s fronted another fix. But the picture is not nearly as rosy when it comes time to pay for the ride that one took in the past. The person is still scrambling for the next fix when the old loans come due. Of course, he can borrow some more to make everything great again. But a time comes where the interest on the loans is so crushing borrowing more can no longer help, because it means an ever increasing monthly payment.

    We are currently at the “just got fronted another fix” part of the game. What scares me is we’ve borrowed to the extent of our loan limits, thrown the kitchen sink at the problem, we’re still flush with the newly borrowed money, the Spring bounce has still proven anemic…

    And there are no jobs in sight to pay the loans back.

    You have to hand it to the U.S. government. They appear to have invented a perpetual money machine. The problem is, such things are the work of magicians and thieves and don’t exist in the real world.

    Rate this comment: Thumb up 0

  77. 77
    AMS says:

    RE: Jonness @ 76 – Where is the critical point of no return?

    Rate this comment: Thumb up 0

  78. 78
    Jonness says:

    By Kary L. Krismer @ 73:

    Lots of people with very good financial competence happen to buy things at the peak.

    Granted, but none of them decide to spend the next 30 years of their lives paying half their incomes to mitigate their misfortune. Otherwise, they can’t be considered financially competent. So the key here is, risk diversification where one poor decision is offset by many good decisions.

    The alternative is to put your life on permanent hold due to the possible risk that the present might be the peak.

    Or you could use a little financial common sense and look at historical rent/income and house price/income ratios and only buy during favorable times. In other times, it makes more sense to rent while saving money for a bigger downpayment when market fundamentals return to historic norms.

    The real issue is risk, and even there there are some people who are financially competent who go a bit too far in the risk department.

    The first thing amateur investors learn is risk diversification. From their they learn to make logical decisions free from greed and fear. Those that do not adhere to these basic rules are financially incompetent. A few lucky rolls of the dice along the way don’t change this.

    Good luck making money without access to capital.

    That’s an excellent point. Banks won’t loan to financially incompetent people. Thus, they are stuck underwater paying half their incomes for fear of losing access to capital. This is the ultimate dilemma for the financially incompetent. Either they are enslaved to debt, or they have a history of bankruptcy and have no access to VC.

    That property that you think they’ll be paying off for the rest of their life could very well be something that will earn them a 400% return down the road (ignoring leverage).

    And that would have been 800% or greater had they been financially competent–especially when you adjust those profits for inflation and the loss of 30 years of massive interest payments. Just because the government has chosen to bail out the financially incompetent masses, doesn’t change the fact that they don’t understand market fundamentals, risk diversification and how to live free from impulsive decision making.

    Rate this comment: Thumb up 0

  79. 79
    what goes up must come down says:

    Kary do you think things are looking up and the future is bright?

    Rate this comment: Thumb up 0

  80. 80
    Jonness says:

    By Kary L. Krismer @ 74:

    You do realize that they are not making more waterfront property, right? Why would you possibly think it would only rise at the rate of inflation?

    When things are in short supply, they can rise in price exponentially. The rate of general inflation has nothing to do with it.

    That not making anymore property spiel worked great during the bubble, but not too many people are foolish enough to buy into it at the moment. If you look at the percentage of waterfront listings that have sold over the last 2 years, you will realize there is currently no shortage of waterfront properties. If anything, the market is glutted with overpriced waterfront properties rotting after a great number of days on the market.

    Granted, when the market recovers, and waterfront becomes in short supply, it could be a great investment. But I don’t expect that to happen anytime soon. Prices on these properties are plummeting and will continue to do so for years to come. At the end of the day, prices can only go up if people can afford to pay for them. Wages are going down, supply is skyrocketing, and you think the price deserves to triple?

    Rate this comment: Thumb up 0

  81. 81
    b says:

    By Kary L. Krismer @ 73:

    The alternative is to put your life on permanent hold due to the possible risk that the present might be the peak.

    I don’t know, my life seems to be moving forward pretty well without owning a home. I know a lot of folks living in all over the world who can say the same thing. To Jonness’ point, “not buying a home = putting life on hold” is an emotional concept that drives many people to buy, they obviously value the concept of buying much more than the financial sense of it. Thats fine for them, personally I value financial stability more than other peoples impressions of my dwelling.

    Rate this comment: Thumb up 0

  82. 82
    Scotsman says:

    RE: Kary L. Krismer @ 74

    You do realize U.S. population growth is under 1% and slowing? With a long economic downturn it may even go negative like it has in japan. At any rate, while they may not be making any more land, they aren’t making very many more people, and we already have close to 20,000,000 vacant homes in this country.

    Change. Hope, and change, that’s what we’ve got alright!

    Rate this comment: Thumb up 0

  83. 83
    AMS says:

    RE: b @ 81 – I ‘feel’ better with big bank accounts (always maintained in such a way to preserve full FDIC insurance at all times on all funds in any bank) rather than a big home with big debt.

    I certainly don’t understand those who desire the big home with big debt.

    Rate this comment: Thumb up 0

  84. 84
    AMS says:

    RE: Scotsman @ 82 – “At any rate, while they may not be making any more land…”

    Again, what about The Palm?

    Rate this comment: Thumb up 0

  85. 85
    b says:

    By AMS @ 83:

    I certainly don’t understand those who desire the big home with big debt.

    Of course you don’t, thats why you are on bubble blog sites instead of trying to pick out furniture to put on your credit card to never pay off. One thing which is obvious in most statistics is that the majority of people do not feel the same way, they value the thrill of buying, or having a bunch of chocolate, or “owning” their home over being a “chocolatebag renter” more than financial stability. I think most of it leads back to ego and self esteem in general, buying chocolate to be flashy and pretend you are rich, then when everything goes wrong you can also be the center of attention drama queen about it. Debt to cover up emptyness.

    Rate this comment: Thumb up 0

  86. 86
    AMS says:

    RE: b @ 85 – “Of course you don’t, thats why you are on bubble blog sites instead of trying to pick out furniture to put on your credit card to never pay off.”

    :-)

    I still drive my ‘clunker’ even after my CFC purchase. Yes, I drive the new CFC vehicle too, but Obama didn’t stop me from driving an old ‘clunker.’

    I must admit, however, that Kary has me beat. I probably have more clunkers in number, but that ’89 Ranger is going to be tough to beat.

    Rate this comment: Thumb up 0

  87. 87
    Scotsman says:

    RE: AMS @ 84

    Temporary- first tsunami and it’s gone… ;-)

    Rate this comment: Thumb up 0

  88. 88
    buystocks says:

    By Jonness @ 78:

    Or you could use a little financial common sense and look at historical rent/income and house price/income ratios and only buy during favorable times. In other times, it makes more sense to rent while saving money for a bigger downpayment when market fundamentals return to historic norms.

    What your failing to note is that there is another force here stronger than any down housing market: wives.

    Rate this comment: Thumb up 0

  89. 89
    what goes up must come down says:

    RE: buystocks @ 88 – well Jonness did mention common sense in his statement, so I thought wives would be excluded :-)

    Rate this comment: Thumb up 0

  90. 90
    The Tim says:

    By Jonness @ 78:

    By Kary L. Krismer @ 73:
    The alternative is to put your life on permanent hold due to the possible risk that the present might be the peak.

    Or you could use a little financial common sense and look at historical rent/income and house price/income ratios and only buy during favorable times. In other times, it makes more sense to rent while saving money for a bigger downpayment when market fundamentals return to historic norms.

    Hang on Jonness, you’re not making any sense here. I’m pretty sure that the only two choices are:

    1. Buy indiscriminately whenever you happen to get the notion, paying whatever price is necessary, regardless of what the so-called “fundamentals” may look like.
    2. Put your life on permanent hold. Forever.

    And don’t forget all the various federal and state laws that prevent you from enjoying your life or ever becoming a productive member of society unless you buy a house.

    I think the choice is pretty clear.

    Rate this comment: Thumb up 0

  91. 91
    wreckingbull says:

    RE: The Tim @ 90 – I suggest renters cryogenically freeze themselves until the market fully corrects.

    Rate this comment: Thumb up 0

  92. 92
    AMS says:

    RE: The Tim @ 90 – “Put your life on permanent hold. Forever.”

    Forever is generally shorter for the very young and very elderly. Ask a small child to wait for 10 minutes–that’s seemingly forever. Ask a 95 year old to wait 2 or 3 years, and that may be too long.

    Rate this comment: Thumb up 0

  93. 93
    Kary L. Krismer says:

    By what goes up must come down @ 79:

    Kary do you think things are looking up and the future is bright?

    No. I think we’re in a very precarious position. I can’t get a good feel for it, but I don’t think the commercial credit markets have recovered all that much, and that is critical IMHO. Lots of bad things could happen going forward.

    It is good we’ve apparently made it a year without a new major financial crisis. They were getting to be annual events.

    Rate this comment: Thumb up 0

  94. 94
    Kary L. Krismer says:

    By Jonness @ 80:

    By Kary L. Krismer @ 74:
    . Wages are going down, supply is skyrocketing, and you think the price deserves to triple?

    Well first, the supply is not increasing at all, at least with SFR waterfront. Second, the people that buy Lake Washington waterfront don’t tend to be wage earners.

    The problem with the waterfront market is largely the same as that affecting other high end properties. Less availability of financing and more importantly, a great loss of wealth in other areas, most notably the stock market. It’s a lot easier to put 2-3M into a house when your net worth is 10M than when it’s dropped from 10M to 5M.

    Rate this comment: Thumb up 0

  95. 95
    Kary L. Krismer says:

    By b @ 81:

    By Kary L. Krismer @ 73:
    The alternative is to put your life on permanent hold due to the possible risk that the present might be the peak.

    I don’t know, my life seems to be moving forward pretty well without owning a home. I know a lot of folks living in all over the world who can say the same thing. To Jonness’ point, “not buying a home = putting life on hold” is an emotional concept that drives many people to buy, they obviously value the concept of buying much more than the financial sense of it. Thats fine for them, personally I value financial stability more than other peoples impressions of my dwelling.

    I wasn’t just speaking of homes. If you’re afraid of buying things because the price of those things might go down in the future, you’re not going to be doing anything.

    Back when oil was first $80 a barrel, there were probably people on websites claiming that the price was outside historical norms, etc. Others were buying and it went over $100. Eventually people holding remaining bullish lost out, but the point is following Jonness investment strategy you’d have been entirely out of a market that could have made you a lot of money. He was calling the people who made a lot of money financially ignorant and questioning their IQs. All nonsense.

    Rate this comment: Thumb up 0

  96. 96
    Kary L. Krismer says:

    RE: Scotsman @ 82 – But I’m talking about a desireable housing subset–waterfront property.

    With negative population growth the value of waterfront property would possibly decline faster than the rate of inflation/deflation. The point is there’s no reason such a limited resource would be tied in any way to the rate of inflation.

    Rate this comment: Thumb up 0

  97. 97
    Kary L. Krismer says:

    RE: The Tim @ 90 – Again, my permanent hold statement wasn’t addressing just housing. Perhaps you missed my use of the very tecnical term: “things.”

    If you’re always afraid the price of something is going to go down in the future, you can’t invest in anything. That would leave only working as a method of creating wealth–and that does work for a lot of people, but there are even more people that will never work for.

    Rate this comment: Thumb up 0

  98. 98
    The Tim says:

    By Kary L. Krismer @ 97:

    If you’re always afraid the price of something is going to go down in the future, you can’t invest in anything.

    Because anyone who looked at the fundamentals prior to the peak, decided that real estate was overpriced, and chose to put off their purchase until such a time that the fundamentals made more sense must obviously have made that decision based on fear of a future price drop. And logically that means that they’re “always” afraid of anything they may ever buy dropping in price.

    In case you hadn’t noticed, I’m in a snarky mood this morning.

    Rate this comment: Thumb up 0

  99. 99
    Kary L. Krismer says:

    RE: The Tim @ 98 – You can make the decision that it’s too high, and be right and be happy. You can also make the decision that it’s too high and be wrong and be left out. But if that is always your overriding consideration, you’ll never do anything, because things can always go down.

    Switching to stocks, in the boom years there were always people that claimed that the PE was too high, or some such thing. But the best time to buy a high PE stock was generally right after it passes a prior historic high.

    Switching back to houses, the difference is they are not as liquid, so perhaps more caution should be exercised. But that could also depend on your expected holding period.

    Rate this comment: Thumb up 0

  100. 100
    David Losh says:

    RE: Kary L. Krismer @ 99

    I’m liking this fundamentals idea, There are fundamentals rather than rules in Real Estate. One fundamental is the rental market and tying that to the Consumer Price Index. When mortgage payments, even with artificially low interest rates, are double what a similar property will rent for, there is a good indication the fundamentals have been ignored.

    Rate this comment: Thumb up 0

  101. 101
    David Losh says:

    Actually I couldn’t resist being the 100th comment.

    Rate this comment: Thumb up 0

  102. 102
    AMS says:

    RE: Kary L. Krismer @ 99 – That whole PE analysis…

    If you expect earnings to increase, then you’ll buy even if the PE is high, as you expect the PE to adjust downward in the future, or alternatively, the stock price to increase upward.

    Using historic PE to predict the future earnings is difficult.

    Rate this comment: Thumb up 0

  103. 103
    AMS says:

    RE: David Losh @ 101 – Maybe this post should be tagged “100 comments?”

    I’m looking forward to hearing more about your pricing model!

    Rate this comment: Thumb up 0

  104. 104
    truthtold says:

    #88 – buy sumthin tiresome
    How can one forget the foolish little wife? Presumed by ye moguls (or pigs of the chauvenist variety) to be of miniscule mind. Yes, the little dingbat does need shelter, financial support and a wiseman, no doubt about it: Barbie loves to shop for shiny things. I don’t know any of this variety of woman…yet, this thread of ignorance is alive and well…some myths live on in the comfort of cavalier disparagement and it is terrific not having to know ye or the mentally challenged little lady in reference..

    Rate this comment: Thumb up 0

  105. 105
    Urban Artist says:

    Hey Joness, I am the wife and I did not encourage us, my husband and I, to commit financial suicide. I pay my bills and don’t over spend. I don’t like debt anymore than you do. Oh and I also have two kids. Believe me I would love a house and not for status. I want a house so I can do with it what I want. If I want to paint crazy colored walls I can do it. If I want to ad solar panels I can do it. Landlords are a pain in the neck. On the flip side I also don’t like over paying for stuff so we will wait to buy. Okay I may be in the minority as far as wifes go but watch it with the stereo types.

    Rate this comment: Thumb up 0

  106. 106

    RE: Urban Artist @ 105
    Just for clarification’s sake, it was not Jonnesss who made the ” wives” remark, but buystocks in post 88.

    Rate this comment: Thumb up 0

  107. 107
    buystocks says:

    yep, it was me. poor humor. should of stated significant other, rather than wife.

    Rate this comment: Thumb up 0

  108. 108
    Doug says:

    With Seattle prices flattening out is now the time to jump in for a 1rst time home buyer?

    Rate this comment: Thumb up 0

  109. 109
    Doug says:

    What months are the best to buy? Could some of the summer flatline be seasonal from family moves before school starts? Is winter the best time to buy historically. Trying to time the market. Maybe we have hit bottom.

    Rate this comment: Thumb up 0

  110. 110
    S-Crow says:

    Doug,

    As I mentioned in the Forum to John, have patience, get your financial snapshot more crisp (actually getting pre-qualified) and be flexible in your search (you may find a very good property that may not be in your primary search area).

    Timing? I can’t foresee this market moving upward anytime soon unless interest rates drop further and world peace breaks out and employment improves and peoples balance sheets improve by debt levels dropping etc….

    You want to see the bottom? See if I’m hiring staff to close transactions. Watch the Title companies closely as I do. We had an increase in transactions (purchase and refinance) over the past several months and hiring has not occurred. In fact, office consolidation occurred as well as a few more layoffs (in title offices) even through this sales improvement during Spring to date. I’m aware of a seasoned vet being let go as recent as the last month or so; time will tell. If we have a stronger than average 4th quarter then there may be something to this Puget Sound market.

    All that to say, if you find a place to establish roots and can comfortably afford the home, buy. But snoop on your neighbors first if you can.

    Rate this comment: Thumb up 0

  111. 111
    Doug says:

    thanks for the help. what are some good resource for a first time buyer?

    Rate this comment: Thumb up 0

  112. 112
    Urban Artist says:

    Sorry Joness.

    Rate this comment: Thumb up 0

  113. 113
    truthtold says:

    insignificant better describes her.

    Rate this comment: Thumb up 0

  114. 114
    Jonness says:

    By Kary L. Krismer @ 95:

    but the point is following Jonness investment strategy you’d have been entirely out of a market that could have made you a lot of money. He was calling the people who made a lot of money financially ignorant and questioning their IQs. All nonsense.

    Uh…actually, I didn’t publicly proclaim it was time to sell until late 2007. Unfortunately, you convinced a lot of your clients to buy from 2005 to present who are now stuck underwater and are approaching bankruptcy. And you say I speak nonsense?

    In short, if you want to buy a house right now, go ahead. I’ll stick to my own strategies, as my track record is far better than the nonsense you’ve been preaching to your clients in order to pump your personal income stream.

    As far as low IQ’s go, I simply pointed out a fact that almost half the population have an IQ of 99 or below. I like facts Kary, which is why I chose to pursue data analysis for a living as opposed to convincing people to buy things.

    Rate this comment: Thumb up 0

  115. 115
    Jonness says:

    By Kary L. Krismer @ 96:

    RE: Scotsman @ 82 – But I’m talking about a desireable housing subset–waterfront property.

    You have a different idea of what desirable is compared to me. IMO, if it’s been on the market over 100 days, it’s not desirable. The bubble is over, and we are experiencing extended disinflation. It’s time to shed yesterday’s mindset and accept the new normal.

    Rate this comment: Thumb up 0

  116. 116
    Jonness says:

    By Kary L. Krismer @ 96:

    The point is there’s no reason such a limited resource would be tied in any way to the rate of inflation.

    Hmmm, so during the Great Depression waterfront property didn’t decline in value? Asset prices are not tied to inflation rates?

    We had a housing bubble where extremely lax lending standards were tied with a flood of foreign money chasing U.S. housing. Those days are over, and the market is correcting accordingly.

    I realize I am being harsh on you about your profession, but it seems to me you are spending a great deal of time and effort attempting to convince people overpriced houses went up in price because they were worth it. I believe that argument has hurt people in the past, and it will continue to hurt people until this economic mess gets straightened out. I’m much more comfortable with the approach of Ira, David, Ray, etc, who tell it straight that the market is a mess, but there are other reason you might want to buy other than price. I’d buy a house myself if I found the right one in this market. It’s just that my gem is a rare bird.

    Now is not a good time to buy a house–especially a waterfront house.

    If I’d have listened to all of the hoopla about not making land anymore, buy now or be priced out forever, waterfront is rare and will never go down, I’d be underwater and bankrupt like the rest of these fools.

    My motivations as a buyer are in direct conflict with your motivations as a seller. Thus, it would be very dangerous for me to take your non-data supported claims seriously.

    Rate this comment: Thumb up 0

  117. 117
    Jonness says:

    By Urban Artist @ 105:

    Okay I may be in the minority as far as wifes go but watch it with the stereo types.

    My GF is more thrifty than I am. She spent a lot of time traveling around with me impoverished as I played extremely bleeding edge original music (not much money in that route). She is comfortable going without. As for me, I’m thinking of buying one more house before I die a half century from now, so I want to get a good one. I’m not crazy enough to pay 3x what it cost when incomes were higher than now though. I’m not the brightest post on the fence, but I’m not completely gullible either.

    Rate this comment: Thumb up 0

  118. 118
    Kary L. Krismer says:

    By Jonness @ 114:

    By Kary L. Krismer @ 95:
    but the point is following Jonness investment strategy you’d have been entirely out of a market that could have made you a lot of money. He was calling the people who made a lot of money financially ignorant and questioning their IQs. All nonsense.

    Uh…actually, I didn’t publicly proclaim it was time to sell until late 2007. Unfortunately, you convinced a lot of your clients to buy from 2005 to present who are now stuck underwater and are approaching bankruptcy. And you say I speak nonsense?

    Well first, again I’m not talking just of houses. In fact I was using oil as an example. But if you want to use houses, there were 20 years where your advice would have been bad, and there were people who sold say 7 years ago thinking the prices were at historic highs. Your system has no proven track record and is more often wrong than right.

    Second, I’ve not convinced any clients to buy or sell at any time. People come to me either wanting to buy or sell. At best I might try to change their timing on a sell decision slightly, or alter their choice of purchase.

    Rate this comment: Thumb up 0

  119. 119
    Kary L. Krismer says:

    By Jonness @ 115:

    By Kary L. Krismer @ 96:
    RE: Scotsman @ 82 – But I’m talking about a desireable housing subset–waterfront property.

    You have a different idea of what desirable is compared to me. IMO, if it’s been on the market over 100 days, it’s not desirable. The bubble is over, and we are experiencing extended disinflation. It’s time to shed yesterday’s mindset and accept the new normal.

    Property in that price range doesn’t necessarily sell within 100 days even in good markets. But in any case, you’re confusing the price something is offered at relative to it’s value (whether it’s a good deal) with whether it’s desirable. Over-priced houses can be very desirable and bargain priced houses not desirable at all.

    Rate this comment: Thumb up 0

  120. 120
    Kary L. Krismer says:

    By Jonness @ 116:

    By Kary L. Krismer @ 96:
    Now is not a good time to buy a house–especially a waterfront house.

    Actually, since financing is tough at those prices, since many people in that market have been financially hit hard in other areas, and since there’s a ton of inventory relative to sales, it’s probably a better time to buy that type of property than just about any other type of real property.

    Whether it’s a good time to buy houses in general we’ll only know in the future. Anyone who claims to know otherwise is just pretending.

    Rate this comment: Thumb up 0

  121. 121
    Scotsman says:

    RE: truthtold @ 104

    “I don’t know any of this variety of woman…”

    I call B.S. We all know plenty of these kinds of women. They may be rarer than they were 20 years ago but the type is still well represented. Don’t let political correctness blind you to reality.

    Personally, I’m married to an engineer/mathematician, so logic goes a long way. But I would never dismiss the influence of the wife, and especially the nesting instinct of a wife/mother-to-be when it comes to pressures affecting the purchase decision.

    Rate this comment: Thumb up 0

  122. 122
    truthtold says:

    I call ridiculous, (small t) titans. Imagine in 2009: women make and contribute to households and decisions.
    yowza – many are sole providers. It is disparaging to suggest otherwise.
    It is typical that the likes of Scot finds an intelligent exception in their own home and considers this rare. Political correctness my a$$…

    Rate this comment: Thumb up 0

  123. 123
    Jonness says:

    By Kary L. Krismer @ 118:

    Your system has no proven track record and is more often wrong than right.

    I think you got that wrong Kary. Your system has not only been proven wrong; it’s led to the greatest financial meltdown since the Great Depression. Our grandkid’s grandkid’s will be paying for following your investment strategy. Your strategy is extraordinarily risky, and has led to a lot of broken minds, broken hearts, broken families, and suicides. This isn’t the first time it was proven wrong. The same investment strategy caused the Great Depression as well. I strongly encourage anyone reading this blog to not take your financial advice seriously.

    I’d warn your clients as well, but your conversations with them take place behind closed doors.

    Rate this comment: Thumb up 0

  124. 124
    AMS says:

    RE: Kary L. Krismer @ 119 – “Over-priced houses can be very desirable and bargain priced houses not desirable at all. ”

    No. This does not follow the basic assumption of economics, where everything has some value (in other words, every person wants the home for free). As we increase the price, it becomes less and less attractive, until the point where there is no buyer. If priced too high, the product won’t sell.

    In other words, over-priced houses are not desirable. Bargain priced houses are desirable, but only at true bargain prices. If a so-called bargain price home does not sell right away, then it’s not bargain priced.

    I love to hear sellers suggest what is a “bargain price.” Comical.

    Rate this comment: Thumb up 0

  125. 125
    Jonness says:

    By Kary L. Krismer @ 120:

    Whether it’s a good time to buy houses in general we’ll only know in the future. Anyone who claims to know otherwise is just pretending.

    By looking at the fundamentals, The Tim started this website and predicted houses in the Seattle area were about to take a major hit. He had plenty of doubters–especially in the beginning before bandwagoners jumped aboard. You call his insight blind luck, but professional investors call it logic.

    You should visit patrick.net and read the front page facts on housing affordability. Patrick is another guy who paid attention to fundamental indicators and put up a website predicting this before it happened.

    Rate this comment: Thumb up 0

  126. 126
    Jonness says:

    RE: AMS @ 124 – According to Kary, this house is priced right at market value. LOL! They dropped the price a million, and it’s still rotting. Now that the prime selling season is over, the owners get to head into winter for another round price of drops. Hey, a good agent will tell them to stick to their guns, because it’s normal for underpriced highly desirable houses to stay on the market this long. It’s because they are special. In fact, they should raise the price back up to where it was. It’s worth it!

    http://www.redfin.com/WA/Seattle/218-40th-Ave-E-98112/home/139587

    Rate this comment: Thumb up 0

  127. 127
    Jonness says:

    Hey, how about this highly desirable waterfront home in Gig Harbor. It sold for $1,750,000 in 2006. It’s down to $634,900, and it has only been rotting on the market for 480 days. Hey folks, break out your checkbooks. Waterfront never goes down!

    http://www.redfin.com/WA/Gig-Harbor/6717-Cascade-Ave-98335/home/2486878

    Or if you just love living in sleepy little Gig Harbor where jobs are scarcer than 20-somethings, you might want to pick up this house. The owner bought it in 2001 for $1,074,438. It’s been on the market for 924 days at the bargain price of $4,800,000. That’s only 4 1/2 times as much as the owner paid for it a few years ago when inflation adjusted wages were higher than now. Hey, 3 years on the market is normal for these kinds of houses. The beauty of it is, real estate always goes up, so it’s worth at least 2x as much now than when it was listed. Don’t worry, price is no object because people who buy these kind of houses are not lowly wage earners (ewe).

    http://www.redfin.com/WA/Gig-Harbor/7906-Goodman-Dr-NW-98332/home/2485553

    It’s a great time to buy a waterfront home, and that’s a great deal! Call my number right away so I can get 3% of the sales price. Hey, waterfront is a great deal right now! Way better than those underpriced REO’s.

    Rate this comment: Thumb up 0

  128. 128
    AMS says:

    RE: Jonness @ 126 – As I read your message, I was wondering why Kary didn’t buy the place himself. As I read on about the $1M price reduction, I though the price today was like $50 or something. In this case $1M is only less than 10% of the original asking price.

    I do have to admit, however, that I didn’t realize we were talking about a $10M home. The volume of sales in the $10M+ market is very narrow. I am going to guess that a home like this could take 2 years to sell, maybe more. It is very difficult to measure the value of very high end homes.

    I will say, however, it could be priced to sell within 6 months. Reduce the price enough and it will get sold sooner.

    Don’t get me wrong, it looks nice and all, but $10M takes a very special buyer. Probably beyond what Kary is able to buy (I have no inside information on Kary’s financial condition, but $10M is beyond most people; I am only guessing. Certainly this is not a rental unit.)

    It’s like offering a Rembrandt to someone for $10,000 who only has $50. It may be a screaming good deal, but if you only have $50, there is a problem…

    I will stick by my statement, however, it is very comical to see what sellers think is a “bargain price.”

    I also estimate that I could buy 2,000 homes in Detroit for $10M.

    Rate this comment: Thumb up 0

  129. 129
    Jonness says:

    He he, the guy with the last house probably paid that in 2001 for the land and then built the monstrous house on it. This elite “non-wage earning” person is most likely way underwater and near losing everything. It’s not that he won’t drop the price to something realistic. It’s that he can’t.

    But remember, waterfront is special. You should buy some immediately. It’s the best bet going. If you don’t believe me, just ask the owners of the houses I linked and their many neighbors.

    Rate this comment: Thumb up 0

  130. 130
    AMS says:

    RE: Jonness @ 129 – They are not making any more of it… Better get it while you can… Lakefront property only goes up in value… Where are you going to park your boat…

    Rate this comment: Thumb up 0

  131. 131
    Jonness says:

    RE: AMS @ 130 – I’m not sure if there’s room for the boat I’m going to buy. At the rate they are handing out loans on places like this, I can most likely get a 100′ yacht at 0-down. It’s true that I was laid off from my job as a strawberry picker. But I have another 3 months until my unemployment benefits run out. Since Burnbanke has my back, I’m going in with infinite leverage. It’s a sure path to becoming wealthy without actually having to work (ewe).

    In all seriousness. These people trying to sell these things must be absolutely horrified. What a horrific nightmare. I can’t imagine buying into all the NAR hype and leveraging up like this right at the peak of the bubble. I don’t feel sorry for the banks, but I do have empathy for many of the people caught in the crossfire. That’s all the more reason to pay attention to the fundamentals and ignore the NAR and its market-hyping groupies.

    Rate this comment: Thumb up 0

  132. 132

    RE: Scotsman @ 121
    I recently showed a married couple a home. I’d never showed them a home before, and they hadn’t been looking before. The home was in decent shape, kind of ugly and tackily remodeled but at a relatively low cost. At the end of the visit, the husband blurts out “We should make an offer on this one.” His wife stood there open mouthed and amazed at that statement.
    And me, despite smelling the dollar signs, said ” Look. You haven’t looked at any other houses. You have to look at other houses so it can become clearer what you want and don’t want. Your wife has the sense to not make an offer on the first house you look at. Take your time. Nobody’s pointing a gun at your head and ordering you to buy a home now.”
    Mr. Real Estate Agent at it again, talking yet another couple out of making an offer.
    So sure, there are women with nesting urges who want to settle down and buy a home. And there are idiot guys out there too who want to make offers on the first house they look at, even if it’s tackily remodeled and ugly.
    Maybe he considers the home buying process torture, and just wants to get it over with. Your choice, Bub. Waterboarding or looking at houses.

    Rate this comment: Thumb up 0

  133. 133
    VerdureVision says:

    Ira,

    While lurking on this blog for what seems to be an eternity, I have followed your comments with great pleasure. Not only do you have a delightful, quirky sense of humor that I find very appealing, you also appear to be an agent with a great deal of integrity and one who is fully aware of the realities of the current market.

    When my husband and I are ready to buy, I will be sure to seek you out. I wish I knew exactly when that will be, but like several (many?) others who follow this blog, we are also watching the market and the economy closely to try to determine the best time for us to buy our first home. We feel wary and not very optimistic…and certainly called BS on the “free money” (aka the $8K home buyers credit) being hyped to us by some of our Realtor(R) acquaintances. (I would hesitate to call them friends…)

    In the meantime, my Mister and I will keep renting, living within our means, not acquire any new debt, and squirrel away even more $$ to our down-payment fund.

    P.S. Waterboarding was a *close* second for me. ;-)

    Rate this comment: Thumb up 0

  134. 134
    Scotsman says:

    RE: Ira Sacharoff @ 132

    Ira, I don’t mean to pick on the ladies. And there are plenty of idiot guys out there- I’ve even played the roll myself. But It seems to me your buyer was either a real decision maker, or just tired of shopping. I’ve been there too. ;-)

    Rate this comment: Thumb up 0

  135. 135
    David Losh says:

    RE: Scotsman @ 134

    Women are the decision makers in a home purchase.

    Men have ego involved that has traditionally clouded the process.

    That’s why there are so many women who do well in this business.

    Rate this comment: Thumb up 0

  136. 136
    Scotsman says:

    RE: David Losh @ 135

    I can understand how that would be true. I think i remember reading that women control 2/3 of car purchase decisions too.

    If momma ain’t happy, ain’t no one happy. Funny… because it’s so true!

    Rate this comment: Thumb up 0

  137. 137
    David Losh says:

    RE: Scotsman @ 136

    When a man comes in to a Real Estate office and says he has $10K to put down on a house you know he has less than $5K and a truck payment he won’t tell you about. When a woman comes in and says she has $10K to put down you know she has more than $20K and no debt.

    The woman is usually prepared and the man is hoping for the best.

    Rate this comment: Thumb up 0

Leave a Reply

Use your email address to sign up with Gravatar for a custom avatar.
Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Please read the rules before posting a comment.