Shortly after I started this blog, I came across this opinion piece published in the Everett Herald, written by local “Real Estate Communicator” Tom Kelly in October 2005 (emphasis mine):
Is there significant merit in waiting for the local housing market to cool before jumping in to buy a home? While that question may be on the minds of many consumers, the reality of a significant drop in home prices and a rise in inventory is rather remote.
At the time he wrote that (October 2005), active SFH inventory in King County was at 6,014 homes. Even though last year had backed significantly off the highs, October 2009 inventory was nearly 50% higher at 8,869.
The idea of “saving my money until home prices come down” has probably become a contradiction in terms – at least for the foreseeable future. Yes, housing is cyclical but it usually does not go backward for very long, if at all. The additional money you save now probably will not offset the appreciation (albeit slower than today’s torrid pace) you would have accrued had you found a way to purchase a local home sooner rather than later.
Mr. Kelly is also the author of the book The New Reverse Mortgage Formula: How to Convert Home Equity into Tax-Free Income, published in March 2005.
A year later in October 2006 (just nine months before prices around Seattle peaked), Mr. Kelly was singing basically the same song (emphasis mine):
While the past 24 months have been crazy, the long-term outlook for the Puget Sound housing market continues to be bright. Here’s why.
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. While homes might take longer to sell and sellers again are considering offers contingent on the sale of the buyer’s home, local prices are not headed backward or even close to a “soft landing.”
…the down period in the Puget Sound will mean slower, not negative, appreciation.
So in summary, buyers that took Mr. Kelly’s advice bought all the way up the bubble price ramp-up, extracted as much “tax-free income” from their homes as they could, and based their plans on a guarantee that prices would never drop. I bet that plan worked out really well for people.
Fortunately Mr. Kelly’s
syndicated real estate column and weekend talk radio program seem to have ended sometime in early 2008—right around the time that it would have become apparent how dangerous his advice was.
Update: Apparently I just wasn’t looking hard enough. As pointed out to me in the comments below, Mr. Kelly’s column marches on in the Tacoma News Tribune and the Everett Herald, among others.