Posted by: Timothy Ellis (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.

34 responses to “Friday Flashback: Housing does not go backward”

  1. softwarengineer

    LOL: He’s Pushing Reverse Mortgages Too In His Book

    From some retired contacts I know that went the reverse mortgage route [and regretted it], there’s fine print that allows periodic inspections and mandatory repairs/upgrades by the old owner who reversed mortgaged or the bank can take the property away through eviction process. Costly repairs/upgrades too. Also a big chunk of the equity [it was like 10s of thousands] is immediately sucked dry after reverse mortgage signing.

    Even MSM is now admitting it takes millions to afford to retire now on puny interest rates; and don’t think absorbing your retirement balance over time is the answer either; you don’t know how long you’ll live and besides, you’ll need the millions if you live long enough for adequate nursing care….unless you want to be thrown into one of the subpar Social Security institutions [enjoy the smell]….LOL

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  2. bob

    More the the unemployment rate, i am more struck at least in downtown Seattle, at the underemployment and lack of hitting sales quotas across industries. People started to count on making bonuses and commisions from hiting sales targets. There is some suffering and spending cutbacks

    “Availability of jobs props up the housing market, and the job outlook for Western Washington continues to be extremely healthy, according to data compiled by Stewart Title Company. In fact, the Seattle-Tacoma-Everett area is expected to add jobs at a rate of double the national average for at least the next three years.”

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  3. SammamishRenter

    Re: “Waiting to buy may not be wise” I am surprised how fast any decent home on the market is going these days in Sammamish these days. A couple of homes listed last week went into pending in a matter of 3-4 days. Last-minute rush to get the tax credit? I can’t wait for the credit to expire.

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  4. Scotsman

    RE: SammamishRenter @ 3

    I too wonder why anybody would buy now, and have come up with three primary reasons:

    Some people are too busy to have really kept up with national economic developments, and truly don’t understand that this may not be a good time to buy.

    Never underestimate the power of the wife and her nesting instinct. It seems much more important to many women to experience the supposed increased security and sense of permanence that home ownership offers, or at least has offered in the past. When that first or even second child is on the horizon logic seems to fly out the window. I’m not picking on the ladies, it’s just that I’ve observed how much of a factor this really is.

    Hate to say it, but there’s a fool born every minute.

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  5. Kick the Box

    RE: Scotsman @ 4

    Yes, my wife has become a sleepwalking financial zombie due to her security instincts. Should would rather lose our entire retirement savings and own a house, rather than rent. We already lost about $100K in home equity since she fought me tooth and nail to not sell our home at the top of the market.

    Financial zombies watching too much TV is seriously bad for your wallet, IMO. I need to kick the crap out of the inside of our TV (the box of fascist lies) which only cost $800.

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  6. softwarengineer

    RE: bob @ 2

    LOL

    Agreed, the Title Company Wolves guarding the real estate chicken house psychology will always tell you there’s no chickens missing [unemployment].

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  7. HappyRenter

    By Kick the Box @ 5:

    RE: Scotsman @ 4

    Financial zombies watching too much TV is seriously bad for your wallet, IMO. I need to kick the crap out of the inside of our TV (the box of fascist lies) which only cost $800.

    Not buying a TV was a good move then! We both decided to keep renting for at least another year.

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  8. Jillayne

    Hey Guys,

    Brief reality check. Have any of you actually carried a baby in your body? It’s not all that comfortable during the final few months and if you’re one of the lucky ones to experience morning sickness, imagine throwing up every morning or even all throughout the day….for nine months.

    Who’s going to be the one doing the majority of the infant care? If the majority is going to be on her shoulders, then maybe she doesn’t want to add the additional stress of a possible move when there are young babies crawling/toddling around.

    I ask you to kindly entertain the notion that perhaps there actually is some logic involved in a decision to get settled before the baby comes and your life, as you once knew it will never, ever, ever the the same again. She already, instinctively knows this. If this is a guy’s first child, he doesn’t yet understand this.

    Sometimes the drive to purchase a home and get settled is attached to emotion or memory. For example, maybe she wants to give your kids the kind of home she had….or never had but wishes she had. Listen very carefully to what kind of ideas are attached to the preconceived belief that you MUST be homeowners. Listen to her, then perhaps she’ll listen to you and your ideas about renting v. owning.

    Then again, the nesting instinct is very powerful and sometimes y’all have to just pick your battles. That fiery passion is yet another reason why you love us so much.

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  9. Kary L. Krismer

    RE: Jillayne @ 8 – It is somewhat amazing how many people start looking for housing when one of them is pregnant. The government could have probably done more to help the housing market if rather than passing an $8,000 tax credit they’d just made birth control pills illegal. ;-)

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  10. Scotsman

    And there you have it, gentlemen. . . This is why women more often than not win the argument to buy, even though it makes very little if any sense to do so. After all, what is worth more, the perceived stability of home ownership, or the reality of an extra couple hundred grand in the bank? Which offers real security, flexibility, and freedom? It’s perception verses reality.

    Full disclosure- I have two kids and am married to a very smart woman with degrees in mathematics and engineering from Stanford, yet we still had to have this discussion. Genetic programming is a very deft enemy when competing against logic in the modern world.

    I’m leaving the room now. . . ;-)

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  11. shannon

    http://www.tomkelly.com/bookstore.html

    More books by tom kelly of bainbridge island by the way….this guy is….was busy!

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  12. HappyRenter

    Jillayne,

    I disagree that it is just genetics. My wife and me both agreed to rent even if we should get a child – and it was a decision we took together, as it should ALWAYS be in a functioning relationship. I don’t see why you MUST be a homeowner to gain stability. You can have stability also when you are renting. Right now, there are beautiful and new townhomes that you can rent for a fraction of what you would pay in a mortgage.

    And, it is also not true that you cannot move if you have a toddler. Our neighbors who were renting a two-bedroom apartment next to ours had a 2 years old and a newborn, they managed to move to Texas and they looked happy when we said goodbye. My parents moved from a country to another when I was 3 years old and my sister 7. My sister also moved between two countries with two kids, 1 and 5 years old.

    I think it is rather cultural than genetics. Americans are used to live in these big houses with backyards, everything has to be big and comfortable – and then, in some cases, you work 2 jobs until you are 70 to maintain it.

    I think you should sit down with your wife/husband and figure out what is most important to both of you and then see if you can afford it. That having children requires owning a home with a lot of space and a backyard is simply not true. And remember, any decision you take you take it together with your partner. Blaming your partner afterwards for a wrong decision is not fair and does not make for a happy family (no matter how big the house is that you might be owning).

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  13. HappyRenter

    I remember that where I grew up my parents bought a house in the countryside and we would spend the whole summer and most Sundays there. It was still close enough to town that my father could drive to work and my mother was working at home anyway. It was great as kids.

    I wanted to ask. How many people do this here? Like buying a cabin somewhere nice like North Bend or near Snowqualmie Pass or Monroe and live there only in the summer (or weekends). It’s still close enough that you could drive to Seattle during the day for work.

    What would a nice place be to buy such a vacation cabin around Seattle? In particular, a place where there are other similar cabins so that the kids could socialize with the kids of other families.

    Thanks

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  14. David Losh

    Tom Kelley is a good guy. He was the Real Estate columnist for years. The last time i saw him was here in Seattle with Bob Bruneau promoting Real Estate investment in Puerto Vallarta. My wife and i went down there, but prices seemed pretty steep to me.

    The thing about the reverse mortgage that has always bothered me is that it loses the asset over time. Right now though if you did take out a big old fat reverse mortgage wouldn’t you come out money ahead?

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  15. Jillayne

    Hi Happy Renter,

    I totally agree with you. In a perfect scenario the conversation about renting v. buying would take place before a marriage proposal. I can’t think of one person I know who would choose to move locally or cross country while pregnant. Out of necessity, sure.

    I have known some families who have that second home. In the winter it’s used as a ski cabin and they’re there many weekends. Others might own a second home or vaca property that they visit over the summer.

    But not “all winter” or “all summer” with dad commuting to work and mom at home. That sound like the 1960s. Or a much higher socioeconomic class.

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  16. Jillayne

    Scotsman you crack me up.
    “It’s perception verses reality.”

    Maybe it’s two different perceptions of reality.

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  17. Jillayne

    You know, Kary you could probably propose this and there are some folks out there who would go for it. “The government could have probably done more to help the housing market if rather than passing an $8,000 tax credit they’d just made birth control pills illegal. ;-)”

    http://www.pbs.org/wgbh/amex/pill/timeline/index.html

    One of the reasons why people became more accepting of legalizing birth control was because during the Great Depression, parents were not able to feed their children. It became an economic neccesity to limit family size.

    To some degree, economics influences morality.

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  18. One Eyed Man

    RE: Jillayne @ 8

    Thank God you don’t work for NAR. I’ll bet they could build an incredibly effective soft sell ad campaign around the concepts in that comment. Have you ever talked with anyone in their PR department? I’d be willing to pitch the concept for you, for a very modest fee of course.;-)

    “There’s never been a better time to buy” is just a cold saying that opens the door to unfavorable economic issues.

    They need something to change the focus to something warm and fuzzy like “Your own home, it’s about family.”

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  19. HappyRenter

    By Jillayne @ 15:

    Hi Happy Renter,

    I totally agree with you. In a perfect scenario the conversation about renting v. buying would take place before a marriage proposal.

    At a certain point you have to compromise. If you love each other (which is the most important prerequisite for marriage) you have to compromise where you disagree. I wouldn’t give up marriage just because one wants to rent and the other to buy, but I guess this is not what you were implying.

    But not “all winter” or “all summer” with dad commuting to work and mom at home. That sound like the 1960s. Or a much higher socioeconomic class.

    It wasn’t the 1960s but the 1970s :) You are right, it would not work for us. Unless we would have jobs which allow us to work at home part of the time and then alternate who stays at home. Go camping every weekend is the alternative and probably cheaper.

    But I do know a couple who lives out in the country side and he is a home dad. I guess that falls into “a much higher socioeconomic class”.

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  20. Pierce Anon

    The Tim, just a short correction. Mr. Tom Kelly’s weekly column, “Gimme Shelter” continues to appear each Sunday in The News Tribune (Tacoma) real estate section, and presumably other noteworthy outlets.

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  21. BillE

    By HappyRenter @ 13:

    How many people do this here? Like buying a cabin somewhere nice like North Bend or near Snowqualmie Pass or Monroe and live there only in the summer (or weekends).

    Have you been to Monroe? It’s not exactly a vacation kind of place, it’s a crowded traffic nightmare.

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  22. BillE

    By SammamishRenter @ 3:

    Re: “Waiting to buy may not be wise” I am surprised how fast any decent home on the market is going these days in Sammamish these days. A couple of homes listed last week went into pending in a matter of 3-4 days. Last-minute rush to get the tax credit? I can’t wait for the credit to expire.

    From what I’m seeing in Snohomish County, 3-4 days is about right IF the house is priced right. I can pretty much tell the ones that will sell like that when they come on the market. I’m also seeing some new construction that’s priced aggressively and selling fast. Some of the new construction is actually quite tempting. The people holding their prices high are having their lunch eaten by those new developments.

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  23. wreckingbull

    RE: One Eyed Man @ 18 – Another opportunity to bring out an old classic.

    http://www.youtube.com/watch?v=Ubsd-tWYmZw

    I always wondered if she was also on the speakerphone when they were participating in other ‘activities’ around the house.

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  24. Kary L. Krismer

    By BillE @ 22:

    By SammamishRenter @ 3:
    Re: “Waiting to buy may not be wise” I am surprised how fast any decent home on the market is going these days in Sammamish these days. A couple of homes listed last week went into pending in a matter of 3-4 days. Last-minute rush to get the tax credit? I can’t wait for the credit to expire.

    From what I’m seeing in Snohomish County, 3-4 days is about right IF the house is priced right. I can pretty much tell the ones that will sell like that when they come on the market. I’m also seeing some new construction that’s priced aggressively and selling fast. Some of the new construction is actually quite tempting. The people holding their prices high are having their lunch eaten by those new developments.

    3-4 days is probably a bit fast, but condition and pricing are important. As you note the new construction is sometimes being attractively priced, to the point where even I appreciate it.

    On the pricing point, we had some buyer clients make an offer on a rather nice house that had it’s price reduced somewhere between 5-10%, and they had three offers within a week, and although I haven’t seen the final sales price yet, I think the gross price might even be above what they were asking (because one of the buyers used an escalation clause).

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  25. Kary L. Krismer

    By BillE @ 21:

    By HappyRenter @ 13:
    How many people do this here? Like buying a cabin somewhere nice like North Bend or near Snowqualmie Pass or Monroe and live there only in the summer (or weekends).

    Have you been to Monroe? It’s not exactly a vacation kind of place, it’s a crowded traffic nightmare.

    There’s Lake Roesinger (sp?), which apparently just had a major development there die, and a few other lakes. I wouldn’t necessarily want to commute from Monroe to Seattle, but it would be fine for a recreation property.

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  26. HappyRenter

    RE: Kary L. Krismer @ 25

    I was just bringing an example. Monroe is probably not ideal but there might be other vacation type places along US-2? I know people who have vacation homes in Blaine, but I’m more the mountain type of person than sea.

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  27. HappyRenter

    RE: Kary L. Krismer @ 25

    For example this one?

    http://www.redfin.com/WA/Snohomish/418-Frank-Monsen-Dr-98290/home/2690369

    $3,527 annual tax is expensive though for a vacation home. And probably you would have to heat it also through the winter when you are not living there.

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  28. Kary L. Krismer

    RE: HappyRenter @ 27 – I can’t really comment on active listings, but I was thinking more of something with waterfront. I recently saw a place in south King County that was under $300,000 in decent condition. It was more of a place you’d live in though, rather than vacation property.

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  29. BillE

    RE: HappyRenter @ 27 – I’m with Kary on that. That house isn’t waterfront and isn’t near any kind of outdoor activities like hiking or hunting. There’s some listings for small houses/cabins near Lake Goodwin too, but like that one, they’re not close to much of anything except for the county park on the lake (which you’d still have to drive to) and a few public lakes with subpar fishing. But hey, different strokes…

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  30. BillE

    The Everett Herald has a Tom Kelly column in the Real Estate section every Sunday.
    http://heraldnet.com/article/20100328/BIZ/703289935/1012/BIZ03#New.law.targets.scammers.who.prey.on.homeowners.in.trouble

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  31. Jonness

    By SammamishRenter @ 3:

    Re: “Waiting to buy may not be wise” I am surprised how fast any decent home on the market is going these days in Sammamish these days. A couple of homes listed last week went into pending in a matter of 3-4 days. Last-minute rush to get the tax credit? I can’t wait for the credit to expire.

    I think it has to do with all the overpriced junk on the market. People with nice homes who don’t need to sell generally won’t list their homes in this market. As far as the tax credit goes, several of the commenters on this site who predicted it was stealing future demand appear to have been right.

    Low Rates, Tax Credits Failing to Ignite Housing Market

    “The 2009 first-time homebuyer tax credit may have dried up the pool of qualified first-time homebuyers,” Fannie Mae said. “In addition, while the tax credit was extended to cover repeat buyers, the amount of the credit was smaller than that for first-time homebuyers.”

    http://ecreditdaily.com/2010/03/rates-tax-credits-failing-ignite-housing-market/

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  32. Jonness

    RE: Scotsman @ 4 – I’d add a fourth reason–inability to control impulsive behavior.

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  33. Jonness

    RE: Kick the Box @ 5 – LOL! I got talked out of selling at the top as well, but it was because my GF was finishing up her degree and couldn’t handle the stress of moving in the midst of it all. I agreed not to sweat it and hold the home a few more decades. By then, it will be water under the bridge. I’m living in it cheap and continuing to save money so it all comes out in the wash. It’s a helluva commute to work and back though.

    I’ve been fixated on buying another home, but the weird thing is, the more time that goes on, the more renting a place near my work makes sense as opposed to buying. I’m not sure I want to commit to working there another 10 years.

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  34. Olive 8’s Unconvincing “Reset” Marketing Strategy • Seattle Bubble

    [...] what’s Tom Kelly’s record? Surprise! He’s been saying “buy, buy, buy” consistently since 2005.October 2005: “…the reality of a significant drop in home prices and a rise in [...]

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