Posted by: The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

33 responses to “Buyers Getting More House for Their Money Even as Median Prices Rise”

  1. Mikal

    Never mind. I need to improve my math.

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  2. Mikal

    RE: The Tim @ 2 – I figured it after posting. Thank you for the clarification.

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  3. deejayoh

    ooh. is this a new calculator feature?

    square root of 643

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  4. Elizabeth

    I’d be interested in seeing what the 2009-size house would go for today.

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  5. patient

    Very nice post. Median price is up but home values continue to decline. This is what the local real estate agencies will channel as bottom, price recovery and hurry before you are priced out foooorever through MSM. It’s a legimate scam to use the median as a measure of home prices. It will lead to another year of misguided sellers that will cling to unrealistic prices and volumes will stay relatively low. The re-industry is doing a nice job of starving themselves.

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  6. David Losh

    My point is that the houses are also in better shape. There’s more attention to the condition. Nicer properties are selling for less.

    patient is right that the median is a sales tool.

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  7. alex

    The Case-Shiller metric is immune to this “house feature inflation” phenomenon, though…

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  8. ARDELL

    Interesting comments. I never posted median prices until one of the consumer readers of RCG asked me to do that. When they asked for median price per square foot, I accommodated that request.

    I never use either in my business, but I find it somewhat informative to calculate them. They don’t tell the full story for sure, but they are an interesting part of the equation none-the-less.

    I would never, ever have done full King County stats, if I were not asked to do that, as I do not work in all of King County. I’m more likely to be in that part of Snohomish that borders North King County than South Seattle. or South King County.

    I only do King County stats because our readers seem to want it to compare that data with information they find here on Seattle Bubble. At least that was the case before we screwed up the format on RCG. Totally contrary to David’s comment that it is a “sales tool”, I only did those stats on a County-wide basis because readers asked me to do that. In fact I have been criticized when I only talk about the areas I am expert in, and don’t include full King County stats.

    Very interesting comments here, from my perspective.

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  9. ARDELL

    Tim,

    This is an AWESOME post! I cannot interact with your conclusions or the post itself, but wanted to herald your basic post content!

    As agents and members of the mls, we are not allowed to post the listings of other agents in this specific manner. Nor are we permitted to enter into conversations about those listings. We are only allowed to talk about the properties we were personally involved in, which makes the idea self-serving and of no use to the public at large.

    I think it is incredibly awesome that you are doing this, and encourage specific delving into homes that have sold or are for sale by you, a consumer based blog…as no one who is a member of the mls is allowed to do what you can.

    Bravo! w00t!

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  10. David Losh

    Well….

    Kind of a great lead in.

    I agree that there should be a forum to talk about properties that are good properties that are over looked. It has happened consistently in the bubble market.

    A house would come on the market with an inexperienced agent, or discount brokerage, and sit there. Then the price reductions start, then the property goes off, and on the market until eventually it either gets a low offer, or goes off the market.

    People play a lot of games with real estate when it as simple as determining value. Some properties are great properties that get over looked.

    My online business model for Buying Seattle would like to be in that format. What I think is that it should be a positive format rather than bashing. That’s the only way I see a site getting broad support. An excellent value feature would be the theme.

    These would be properties that could be submitted, but I have the feeling every agent would submit, so the properties would have to be chosen then promoted gracefully.

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  11. ray pepper

    “David Losh brought up an interesting question”

    This alone is noteworthy!

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  12. Scotsman

    Wow- my best guess is there was a lot of beer/wine being consumed in the sun today.

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  13. Herman

    Tim, how do we know that you didn’t “select” your samples with a bias to prove your point?

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  14. Kary L. Krismer

    I think you’re just seeing a change in mix. I did a search for 3-4 bedroom homes, 1.75+ bath between 85th to the north, 45th to the south, 8th to the west and I-5 to the east for Greenlake, with dates between 12/10/09 to 3/16/10 and 12/10/08 to 3/16/09 and found both the mean, median and average square footage had all dropped. The square footage and mean were both roughly 10% less and the median down just slightly more than 10%. That’s significantly different than the numbers you came up with for Greenlake. Part of the difference could also be different area definitions, but I would suspect a lot of it is just going for any property within a given area, as opposed to a specific type of property.

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  15. anonymous

    I can think of two things. One is the collapse of the condo market – people finally realized that a tiny, poorly constructed, glorified apartment in a bad neighborhood isn’t automatically worth $350K, and association dues that don’t cover the full cost of maintaining the property won’t last.

    The other is related to the “equity ladder”. I personally know a lot of people who bought a tiny piece of junk they didn’t like because it was all they could afford and they figured they would only have to live there a couple years before they could sell for a profit and move up. Now I suspect a lot fewer people would by a place (owner occupied) where they didn’t want to live just to be in on the ownership game. An “entry level” house would have to be a place you could see yourself living in for 5-10 years to be even remotely acceptable now.

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  16. HappyRenter

    By anonymous @ 19:

    I can think of two things. One is the collapse of the condo market – people finally realized that a tiny, poorly constructed, glorified apartment in a bad neighborhood isn’t automatically worth $350K, and association dues that don’t cover the full cost of maintaining the property won’t last.

    On the other hand, a lot of people these days prefer living in a condo so that you don’t have to take care of a yard or general repairs which need to be done in a single family home. On the other hand, I have heard of a lot of condo owners who are fed up with the constant money requiring projects which need to be done around the condo complex.

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  17. softwarengineer

    RE: David Losh @ 8

    Good Point David

    And how much money was poured into the money pits to get them looking like new?

    Sounds like a huge loss for sellers at flat table prices, let alone -YOY%.

    But all sellers are building contractors, skilled carpenters and landscape artists rolled in one; it won’t cost ‘em a dime to upgrade to sell as high as possible…..Home Depot hands out the materials needed for pennies on the dollar….LOL

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  18. Scott is Rad

    By HappyRenter @ 20:

    By anonymous @ 19:
    I can think of two things. One is the collapse of the condo market – people finally realized that a tiny, poorly constructed, glorified apartment in a bad neighborhood isn’t automatically worth $350K, and association dues that don’t cover the full cost of maintaining the property won’t last.

    On the other hand, a lot of people these days prefer living in a condo so that you don’t have to take care of a yard or general repairs which need to be done in a single family home. On the other hand, I have heard of a lot of condo owners who are fed up with the constant money requiring projects which need to be done around the condo complex.

    The arguments here sound like great reasons for renting an apartment. But then again, personally, I’ve never understood the idea of buying a condo. They seem to get hardest anytime there’s a problem in the market.

    Where prices are trending, they’ll be giving them away two at a time when you sign up for a new savings account at your local bank.

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  19. Kary L. Krismer

    RE: The Tim @ 18 – I can see now why you called your exercise “anecdotal.”

    Interesting that in your Greenlake sample it was one bathrooms in the results. I don’t have the search area up that I used, but for the 1.75+ bath the sales volume was roughly the same, maybe off 3-5 units or something. I wonder if the 1.5- bath sales were way off? If I get time, I’ll check.

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  20. HappyRenter

    By Scott is Rad @ 22:

    The arguments here sound like great reasons for renting an apartment. But then again, personally, I’ve never understood the idea of buying a condo. They seem to get hardest anytime there’s a problem in the market.

    Buying a condo makes sense only if after 10 years your monthly payments (mortgage+HOD) are lower than what you would pay in rent for the same apartment. For example: some family friends bought a 2-bedroom condo in Switzerland 10 years ago for 500’000 SFr. Today, they are paying in total 1300 SFr a month for mortgage+HOD (interest rates in Switzerland are very very low: 3-3.5%). A similar apartment in the same area would rent today for 2000-2500 SFr. For them it made totally sense to buy. I’m not sure I can apply the same reasoning in Seattle where wages are much lower and interest rates much higher.

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  21. anonymous

    By HappyRenter @ 24:

    By Scott is Rad @ 22:
    The arguments here sound like great reasons for renting an apartment. But then again, personally, I’ve never understood the idea of buying a condo. They seem to get hardest anytime there’s a problem in the market.

    Buying a condo makes sense only if after 10 years your monthly payments (mortgage+HOD) are lower than what you would pay in rent for the same apartment. For example: some family friends bought a 2-bedroom condo in Switzerland 10 years ago for 500’000 SFr. Today, they are paying in total 1300 SFr a month for mortgage+HOD (interest rates in Switzerland are very very low: 3-3.5%). </

    It also only makes sense in that scenario if you are going to live in the condo for over 10 years. I would guess much fewer than 50% of the people who bought condos in Seattle in the last few years stay for 10 years or more, or at least they won't want to.

    But my point was that since sensible people now would only buy a home to live in that they would want stay in for the long term. You knock cruddy "starter" homes off the list (they would need to be fixed up, way cheaper, or rented) and the median house should be nicer.
    Also, I have no problem with people preferring condos (for many of the same reasons others rent), but I do believe the market has collapsed, putting them farther below the median.

    I'm not gonna run the math on 500K SFr at 3-3.5% plus HOA being under 1300/mo, but it sure seems low.

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  22. anonymous

    RE: @ – OK, I did run the math. They would have needed to put around 150K down on a 40 year loan at 3% with only 47/mo in HOA.

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  23. HappyRenter

    By anonymous @ 26:

    RE: @ – OK, I did run the math. They would have needed to put around 150K down on a 40 year loan at 3% with only 47/mo in HOA.

    They might have put down even 200K. You can’t lock interest rates in Switzerland (only for a maximum of 3-5 years), but it’s still considered safe because Swiss interest rates do not oscillate a lot. Right now interest rates are at around 2.5% (exceptionally low because the SNB keeps interests low like the Fed in the US). The Swiss never pay off their mortgage because property taxes are very high and deducting the interest rates balances out the property taxes. So, I don’t know how they calculate the monthly mortgage payments based on a specific loan. Right now, there are discussions in Switzerland about abolishing property taxes, but I have no idea how far that will go.

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  24. Townhomes Buyer

    The homeownership rate in the U.S. is nearly 69 percent — indicating that homeownership is within reach for more Americans than ever before. In fact, it can be as affordable as renting, and in some regions of the United States, it can be more affordable. The following are some of the advantages of owning a home rather than renting. You can build equity; this means your wealth will increase as you gain more home equity. You can gain tax advantages, because mortgage interest is tax deductable. A home provides a permanent place where your family can live and grow, and you can decorate or expand a house the way you like to create your dream home. [Blatant advertisement removed by The Tim per the comment policy.]

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  25. ARDELL

    One of the reasons you buy vs rent is so that you can do whatever you golly please, pretty much, without answering to a landlord. In many ways buying a condo is almost like answering to 100 landlords, your neighbors and the HOA, who all want to tell you what you can and cannot do in and around your “home”.

    The bundle of rights, the right of “quiet enjoyment” and others, should be weighed against the cost. Are you getting the full “bundle of rights” that comes with buying vs renting? Read the minutes carefully. Are there notable neighbors who come to the Board Meetings month after month to control what their neighbors are doing? Ask for a list of who was fined and for what in the last year. All too often, people stop at that new granite countertop.

    Then again, buying a condo can be perfect for someone who aspires to be “President” of something. Becoming the President of your HOA Board, is not all that difficult. I once saw a guy get all the votes in his condo complex, in exchange for free oil changes :)

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  26. Kary L. Krismer

    Becoming a even a member of a condo board can be difficult if you’re a nutcase. At my old condo there was one guy who tried repeatedly to become a member of the board, but only he and his five crazy friends ever voted for him. Much more than that was needed in a 100+ unit complex.

    And don’t assume that living in a condo will be less work. You might have to join the board just to protect your interests. I joined after discovering that the board almost perfectly forecast both expenses and revenues, but didn’t have the guts to raise dues (set low by the developer) until the point where a special assessment was needed.

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  27. David Losh

    When you buy into a condo property you need to be a part of the process of maintaining the building. Then you also need to consider the special assessment possibilities. You are buying a package, and set of reserve funds in the event something goes wrong. In new construction many things can go wrong.

    First you would need a condo expert who knows the market place, rather than the site sitter. The Real Estate market place is fueled by gossip, so you need inside information.

    Second will be the management of the building. If it is self managed you will want to meet the president and follow the “politics” of the building. If there is a management company you want to be sure they are involved.

    I’m going to plug http://www.primeseattle.com/ as the best condo management company that we’ve run across. Other companies are there to maximize the profits of managing a property. You need some one who can negotiate a balance with the home owners and what needs to be done.

    A condo is more than the unit. It’s a life style.

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  28. SummitSeeker

    RE: alex @ 9
    Hey Tim, any chance you can post a monthly graph of price per square foot sold in the prior month, for each of the three case shiller price tiers? Rich at piggington.com has been doing this for over a year. It’s proven to be a pretty accurate method for forecasting the case shiller index, which doesn’t come out until after a 3 month lag. Here’s an example of the latest:
    http://piggington.com/february_2010_resale_data_rodeo
    A lot of people think we are at a turning point in the market, with the possible beginning of a new leg down. I would think that anything that can provide some forecasting value would be of interest to your readers.

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