By The Tim on November 18, 2009
Here is your open thread for the mid-week on November 18th, 2009. You may post random links and off-topic discussions here. Also, if you have an idea or a topic you’d like to see covered in an article, please make it known.
Be sure to also check out the forums, and get your word in the user-driven discussions there!
Posted in Open Thread | Tagged open_thread
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.
Herman, I think, said it best that Real Estate is a meat heads way of creating wealth.
When starting out you buy a property you can pay off, or get to amortize quickly, you rent that out and buy the next one. You live in it, fix it a little, either sell it or rent it, then buy another one. Real Estate is a building block investment.
On this site, which, I’m grateful for, there is a lot of economic theory that people try to shoe horn into the Real Estate formula, but Real Estate is a meat head’s investment tool.
Inflation is a big part of the meat head equation. That’s why the Consumer Price Index is the main indicator for Real Estate. Paying off past investments with future inflated dollars is a part of the formula. In my case I watched the Asian markets as an indication of future demand for Seattle homes.
Beyond those simple things the question is why home prices in Seattle got so expensive.
RE: David Losh @ 1 –
Can you explain How you watch the Asian markets for clues about demand in Seattle?
What are you looking at?
Specifically, Where do you go for that info and what kind of correlations have you found?
I’m not arguing, just curious.
RE: Haybaler @ 2 – Let me warn you:
You might be more confused after an answer is provided.
My simple answer: Tea Leaves!
Oh, Lawrence Yun, you big bag of hot air:
Yun: 2010 Sales to Rise 15 Percent
Home sales will increase 15 percent to about 5.7 million units and REALTOR® income will be up 20 percent in 2010, NAR Chief Economist Lawrence Yun told a packed room of REALTORS® today in a residential economic update at the 2009 NAR Conference & Expo.
http://www.realtor.org/RMODaily.nsf/pages/News2009111301?OpenDocument
RE: Jbeans @ 4 – I’d have to do some math, but given how bad sales were Jan-Mar that might not be all that optimistic. It might even be a decrease in sales from the rate of the last six months.
RE: Kary L. Krismer @ 5 –
Very True Kary
Some rant we’re not in a depression now because only 50,000,000 [1 out 7 households] go hungry today; why during the Great Depression it was worse, at 1 in 4.
LOL, if 1/7 is better than 1/4 with a Dust Bowl we don’t have today…..I have a bridge I can sell ya :-)
You have to put statistics on a flat table comparison when you rant about them.
RE: Jbeans @ 4 – What he probably forgot to mention was that sales increase are based on tax credit support, and that the number of sales only tells part of the picture. For most markets the prices continues to go down.
So Yun is predicting a 15% increase in sales when there are direct cash handouts in the form of tax credits coupled with continued lower prices? I guess that’s better than lower prices and lower sales, at least for market stability.
Okay, I did the math with King County SFR numbers, assuming sales of 1500 for November and December, which might be high. If you double the sales of Jan-Mar, and assume the other months remain the same, that would be a 14.4% increase in sales for the year. Note that doubling the sales for those months would be below sales for the same months in 2007.
RE: AMS @ 3 –
You have engaged is several “discussions” here on the site with a wide variety of theories and opinions. Aside from the cash for clunker purchase and the statement that if a property is below market value you buy it, there is very little that I can follow in your comments. I understand the theories you throw out for these “discussions,” but how do they relate to Real Estate?
RE: David Losh @ 9 – What’s all of this have to do with Asia?
(I feel the onset of my pain already)
nikkei 225 index, Pacific Trade groups such as: http://en.wikipedia.org/wiki/China%E2%80%93Peru_Free_Trade_Agreement
and locally http://www.usasiapacific.com I also watch the Pan Pacific Conferences. There is tons of information, way too much to list in one place.
My brother has exported goods to Thailand for over 25 years. There are a lot of people that i have met in that time who are interested in doing business with the United States. Vancouver B.C, had a huge influx of Hong Kong dollars when China was due to take the country over. My thoughts were that Seattle would get to be the toe hold into the United States for many people from China, to Canada, to here.
My second point of interest is Peru which I think will be China’s gateway to South America. Today my feeling is that San Fransisco will contue to be preferred for foriegn Real Estate investment in the United States. Peru, for sure has a brighter potential for Chinese investment.
RE: Haybaler @ 2 – AMS’s translation of Losh #11 to English: “Blah, Blah, Blah.”
(I note there is no specific correlation supported. I’d love to see his hands flail as he tries to prove some claim.)
As a side note, I have to say I find it amusing to read, “There is tons of information, way too much to list in one place.” Google is one place that probably has far more information. How much information did Tycho Brahe record only to be generalized by Newton/Leibnitz in a few simple formulas?
Information is pretty much useless. It’s data that gets the job done.
RE: AMS @ 12 –
Now there’s a translation. OK, try it again in english.
RE: David @ #1
I like your “meat-head” theory. There’s a lot more validity there than many would care to admit, the key being almost two generations or 40+ years of consistent inflation to bail out what might otherwise have been bad decisions.
What interests me is trying to figure out how long it will be before the population at large figures out the meat-head days are over. With two generations yapping on and on about how “homes always go up” it may take a while. Or who knows, maybe the “inflationistas” will be right as we come out of the lurking depression, but I’m not convinced.
RE: David Losh @ 13 – I only know English. I’ll leave the english to you. lol
Must watch TV. Three great episodes that do a fantastic job of explaining the current economic situation. Number one is the set-up and interesting but not vital. Two and Three are “must watch TV.”
http://market-ticker.org/archives/1640-MUST-WATCH-Glenn-Beck-And-The-Dollar-Carry.html
RE: AMS @ 15 –
OK, try it again in English.
RE: David Losh @ 17 – Your spelling has improved.
RE: David Losh @ 17 –
Awhile back I asked for a “Losh filter.” How we coming on that?
RE: Snigliastic @ 19 – Maybe the next poll:
Do you want a “Losh Filter?”
Yes
No
Maybe, I’m new here; let me read a couple more posts.
RE: David Losh @ 1 – Yep, RE is meat head money. Big, thick fingered handshakes made over piles of dirt.
By Jbeans @ 4:
I heard an interview with him a week or two ago where he predicted that 30-year mortgage rates will be 5.8% in mid 2010. Does anyone even believe a word from him any more?
Deflation, anyone?
http://www.telegraph.co.uk/finance/economics/6592425/Core-deflation-in-the-US-continues-to-gather-pace.html
“Unemployment has reached 10.2pc and the average working week has fallen to a record low of 33.0 hours, creating powerful deflation headwinds.
Gabriel Stein from Lombard Street Research said the US “output gap” is currently at 6.2pc of GDP. The last time it was near this level – in 1982 – producer price inflation fell by 300 basis points over the next year. A repeat today would cause it to spiral to dangerous levels below minus 3pc.
Richard Fisher of the Dallas Fed said the sheer scale of excess plant will curb prices and wages for a long time. Capacity use in manufacturing is near a post-war low of 67.6pc.
Mr Fisher said the “peak impact” of the Obama fiscal blitz has already come and gone. “Several recent sources of strength are likely to wane as we head into next year. Cash-for-clunkers and the first-time-homebuyer tax credit have both shifted demand forward, increasing sales today at the expense of sales tomorrow. Neither of these programmes can be repeated with any real hope of achieving anywhere near the same effect. The more demand you steal from the future, the less future demand there is for you to steal,” he said.
“Chastised by recent experience, businesses will continue to run tight ships. It may be some time before significant job growth occurs and even longer before we see meaningful declines in the unemployment rate.”
Bank credit has been shrinking at an accelerating pace since May, though bonds and commercial paper have partly stepped into the breach. “I haven’t been this bearish in a year,” said bank guru Meredith Whitney on CNBC.
The M3 money supply has been shrinking at a 7pc annualised rate since June. Paul Ashworth from Capital Economics said it is not yet clear whether this is the harbinger of a crunch next year, or a blip caused by portfolio shifts. “We think deflation is still a bigger risk than runaway inflation,” he said.”
RE: AMS @ 20 – RE: Snigliastic @ 19 – RE: AMS @ 18 –
OK, this is an open thread so I’ll ask, what are you guys talking about? I understand the weird statistical anaysist theories and the fact you can belabor any little point. I get it, but you should have a point.
I spent about three days one time engaging in an AMS “discussion” that went absolutely no where other than insults and some very obscure theories that had nothing to do with anything related to Real Estate.
Since then, while reading other “discussion” people have had with AMS, I’ve come to conclusion that you are here to close this site.
Why would any one engage you? I appreciate that you are adding content to the site and running up the comment count, but really what’s the point?
RE: David Losh @ 24 – I’ve been watching this party for a while. You have your own unique voice and style. Just do what you do. Let the personal stuff go…..
RE: Scotsman @ 23 –
http://www.cnbc.com/id/15840232/?video=1332936523&play=1
I hope this link works it’s the Meredith Whitney interview Ray sent me earlier this week.
RE: Haybaler @ 25 –
It’s nothing personal, it’s just business. This site has a message not well regarded in the Real Estate community. Any agent with a grudge could get on to this site without sharing a name or other information and run the comments into the ground.
I’m just saying.
RE: AMS @ 12 –
Don’t be a bore, senor.
I’ve learned nothin from ya and sense inexperience via snark.
Otherwise, very best regards and Happy Thanksgiving.
RE: truthtold @ 28 – Have a great Thanksgiving, and don’t forget to get some bargains on Black Friday.
RE: David Losh @ 27 – Let’s say some agent had a grudge wanted to come here and post. Wouldn’t this be the perfect place for such agent?
If you want to hear how great the real estate market is, no matter how bad it is, then try Real Estate Today with Gil Gross.
http://retradio.com/
The program can be found on 1380 AM Saturdays 10 AM – 12 PM.
That’s where I heard Yun’s prediction of 5.8%. Gil Gross is annoying.
RE: BillE @ 31 – Gil Gross definitely gives a different message than what one will find here, and by no means would I ever suggest that one single source information.
For a much different perspective, try Mish’s financial commentary on Coast to Coast AM:
http://www.coasttocoastam.com/guest/shedlock-michael/6800
Foreclosures hitting more people with good credit
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More U.S. Homeowners Are Falling Behind
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About one in seven American households with mortgages is behind on payments or in foreclosure, according to new data from the Mortgage Bankers Association. That is up from about one in 10 a year ago…..
Tim – If the topic hasn’t been discussed a bunch already, I’d be interested in a piece on families (with kids) and housing in the City. The article in the Seattle Times today about neighborhood-based public school placement made me think of it. I’d be curious to know if there are many renters in Bubbleland with post-toddler kids and if so how it’s working/pros/cons.
My husband and I pay 725/mo for a pretty nifty 1br duplex in Ballard. I realize that like my parents back in the day, we could raise a mini-us in a small rental up to a certain point and then…hmm. There seems to be an assumption out there that you need to buy yourself a home and put up that picket fence once you procreate otherwise – bad mommy and daddy! We could manage it I suppose, especially if the kid turns out as handy as his folks (read: fixer) but I wonder if it’s really necessary to buy. Any thoughts?
RE: Betsy @ 35 – I don’t think it’s so much that one “needs” to get the picket fence, etc., it’s just that true “family-friendly” housing within Seattle is just too darn scarce and expensive, either renting or buying. Kids need to get their ya-yas out, and putting them up in even a 3-br condo would be a bit unfair to them and the neighbors. I would love to live in Seattle, but with two kids, it’s far easier and cheaper to look for a place in Shoreline or Edmonds. It’s still a bit “city”, but far more affordable. The Seattle school district seemingly going bankrupt every 3-4 years doesn’t make it any more appealing either.
RE: Betsy @ 35 –
Sure, there’s been this stigma that if you’re a parent, you are not being responsible and middle class if you aren’t a home owner, but that has changed a lot over the last few years. Lots of middle and upper middle class parents are now renters, and certainly the monthly rent will be significantly lower than the mortgage payment for the same house.
On the other hand, some people don’t want to feel that they could be in danger of having the house ” sold from under them”, or want to make bizarre changes to the house that they know a landlord wouldn’t approve.
Renting is also a good way to get into a school district or school assignment area that you couldn’t otherwise afford.
RE: Betsy @ 35 –
Hi, Betsy. My 5-year-old just started Kindergarten, and I’m pretty sure he’s the only kid in his class that lives in a rental house. This could be because we’re at a private school, though, so our experience may not be typical. We had to choose between buying a house and sending our kid to private school. It was, really, a no-brainer for us. We were on the border of a reference area for one of the best schools in Seattle, so we knew we wouldn’t get in and would get shipped to the other side of nowhere. If we’d thought ahead, though, we would have found a rental across the street from John Stanford or one of the other really good schools.
The down side of renting with kids is that you do sometimes have to move when someone else decides. Our first rental house here in Seattle got sold out from underneath us, at a very inopportune time. But you roll with it, everyone survives and we remind our son that home is where we are all together. The upside, of course, is that we have more time to hang out with our kid rather than spending every weekend working on house projects.
My husband grew up in a tiny house with two siblings and no yard but a park just a couple of blocks away. I grew up on an acre out in farm country. We have very different views on whether or not a kid needs a yard. At this point in our child’s life, he still wants to be with us all the time, so renting a tiny house makes sense for us. We’re always all in the same room together anyway. I imagine that will change as he gets older, though! That is another upside to renting — when your family’s needs change, you can just find a new house. If you’ve bought something, you’re stuck renovating or going through the torture of selling your house if you need something different.
I think the bottom line is that you can be happy with your family anywhere you choose to. Every family is different and needs different things, and you should do what makes sense for your family and not follow conventions for the sake of following them.
Quadrant Sued for shoddy construction. . By some poor folks near Bonny Lake..
RE: Betsy @ 35 –
Lot of good comments here. My wife and I found ourselves renting when our eldest entered kindergarten. Much like today’s market, we were able to rent a very nice home for about 1/3 of what it would have cost us to buy. And since we knew the owners wouldn’t be returning for close to a decade from a corporate assignment, there was no threat of being moved out. We used the money we saved to eventually send both daughters here: http://www.seattlecountryday.org/default.asp .
We would have made some money had we bought. But the education our girls received was first rate, and worth much more in my mind. One is at Stanford, the younger wants to attend Yale and has an excellent chance of getting in. What is that worth? Given that there appears very little chance homes prices will even hold, let alone increase in value for a decade or so, why not rent, save, and put the money where it will have a greater effect on you and your child(ren)’s lives? Take your time, ask questions, find a situation that matches up with your values. But don’t let convention, more often than not wrong, make the decision for you.
I seriously had no idea, not being much of a TV guy. But THIS is what American watches? I don’t consider myself elitist, or a snob, or anything much more than a bit weird regular guy. But if this is how most spend their free time we are lost. If the government taxed those who watch “Judge Judy” every time the TV was on maybe people would sit up and take notice. Scroll down to the list…
http://tvbythenumbers.com/2009/11/18/syndicated-ratings-top-25-two-and-a-half-men-judge-judy-and-oprah/33892#more-33892
P.S. I do watch Myth Busters and Dirty Jobs once and a while if my kid has them on…
RE: Scotsman @ 41 –
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That is a really pathetic list. What does it say about American society?
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I have to admit I watch Judge Judy very occasionally. I like her attitude. -
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“They don’t keep me because I’m gougeous. They keep me because I’m smaaht! .
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News, Discovery Channel, History Channel, MythBusters, and Dirty Jobs (her choice surprisingly) at our house. Everything else is pretty much crap. ……. except maybe the The Office…… I caught a few episodes…….. really funny sometimes…… maybe some others, like maybe Sponge Bob Square-Pants and maybe Roid Rogers and the Whirling Butt Cherries whenever they are on American Bandstand.
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(She made me add the last par)