Weekend Open Thread (2010-06-25)

Here is your open thread for the weekend beginning Friday June 25th, 2010. 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!


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.

38 comments:

  1. 1

    By Scotsman @ 31:

    RE: pfft @ 30 – News Flash!! Arizona is no longer on the boarder with Mexico- it has been moved to some northern location!
    Fat and stupid is no way to go through life…

    http://www.youtube.com/watch?v=B-VMMweYcd8

    Assuming that’s what I think it is, AZ is not the only place with stupid politicians. Judging by Leno’s monologue two nights ago, the city of L.A. just figured out where their traffic cameras come from. Seattle figured that out almost instantly, and they’re not that bright either.

  2. 2
    wreckingbull says:

    RE: Kary L. Krismer @ 1 – The part I don’t get about this debate is this: Either change the law or enforce the law. Pick one. If we want a nation of open borders, fine, debate and pass that legislation. Otherwise, enforce the laws on the books.

    Poor Peggy. Sucks to be stupid, but sucks even more to have that stupidity broadcast to the world.

  3. 3
    Magnolia44 says:

    Kary,

    What’s the longest a home can go pending? There is a home nearby that went pending rather quickly within 2 weeks, had inspections etc but has been sitting pending for 3 months easily with the sale and sold sign still sitting there. I see the people moving out slowly and have even seen new owners stop by.

    I am wondering why it is taking so long to see a closed sale and price. I am curious because I was suprised at the speed of the sale and it was funny to see the realtor go and update the zillow which icreased its zillow value by well over $100k. Basically adding basement sq footage as overall living space in their calculation.

  4. 4

    RE: Magnolia44 @ 3 – It could be that the seller asked for an extended closing date. Maybe they need to buy a new place, and needed time to find that new property and close. Maybe they are retiring and moving out of state, and just managed to have that offer come in quickly. I had that second situation happen before, and the closing date we requested was so far out that the offers didn’t fit with the standard escalation clause terms, so we had to get to the increased price through a counter-offer.

  5. 5
    Magnolia44 says:

    Sounds good the house to me is a reminder is a home is worth what someone will pay. Its not very big and I see plenty of flaws, yet even if it sold at a discount on list ( not sure that’s the case if it sold so fast) it still a good price.

    Again I was suprised, but I expect to see more pain ahead for housing. I mentioned selling the house to my wife last night (it would be at a slight loss) but she is not on board.

  6. 6
    Dirty_Renter says:

    25-Jun-10 06:29 am
    Congressman Watt asks – “is tier 1 capital something every Bank has” in response to a senate admendment (passed) that changed the 3% prop trading standard from 3% Tangible common Equity to 3% Tier 1 Capital.
    In 1992, Mel was elected to the U.S. House of Representatives from North Carolina’s 12th Congressional District.
    Mel is a member of the House Financial Services Committee, on which he is the Chairman of the Domestic Monetary Policy and Technology and serves on the Financial Institutions and Consumer Credit Subcommittee and the International Monetary Policy and Trade Subcommittee.

    Dirty Renter would humbly submit to Representative Watts that there are probably still 1000 banks who, indeed, have no Tier 1 capital. :)

  7. 7
    Scotsman says:

    My gawd- you can’t make this stuff up- more legislation where we won’t know what the effects are until it’s in place. Makes you wonder if these guys really know what they’re doing:

    “It’s a great moment. I’m proud to have been here,” said a teary-eyed Sen. Christopher J. Dodd (D-Conn.), who as chairman of the Senate Banking Committee led the effort in the Senate. “No one will know until this is actually in place how it works. But we believe we’ve done something that has been needed for a long time.”

    http://www.washingtonpost.com/wp-dyn/content/article/2010/06/25/AR2010062500675_pf.html

  8. 8
    Magnolia44 says:

    Yeah the whole bill is weak and truly a joke. Goodnight USA trouble is ahead.

  9. 9
    Nullpointer says:

    What is up with rental prices? There’s been a 600 / month jump for the same properties. The Villas in Woodinville were listed at 1800 / month a year ago and now they’re asking 2K – 3K for the same units.

    Also, the Broadway Building in capitol hill… who is soaking up all these leases? They’ve leased all but the 627 sq ft studios, which go for 1500 / month.

    I keep hearing about how prices are going to become more reasonable but I’m not seeing it in actual listings. Is there some sort of if you rent in summer premium?

  10. 10

    RE: Magnolia44 @ 3

    Could it have been a short sale?
    Sometimes those are marked as pending as soon as the seller agrees to the deal, but prior to the bank’s approval of it, which can takes months, or not happen at all.

  11. 11
    Chris says:

    RE: Nullpointer @ 9
    Interesting article in the Puget Sound Business Journal on apartment trends – rents are up slightly, vacancies down slightly, and concessions also down slightly.

    http://seattle.bizjournals.com/seattle/stories/2010/06/28/story7.html

    With local population increasing, but foreclosures high and home ownership decreasing, average household size has probably increased (kids moving back in with parents, etc.). Over time I expect we’ll see pretty much all metrics (interest rates, home ownership, foreclosure rates, housing affordability, unemployment, household size, etc.) regress back towards their historical means. Population increases and a reduction in household size will result in increased demand for housing – it makes sense that apartment demand will rise before home purchases in this environment. I assume the record drop in housing starts is similar for multi-family and single family projects – if that’s true it’s not hard to imagine that it’s going to be a landlord’s market for rentals in the Seattle area (in a couple years maybe?) if the population continues to rise and parents have reached their limit for having adult children back at home (and adult roommates feel like they want their own space).

  12. 12
    Pegasus says:

    RE: Nullpointer @ 9 – Maybe those units have hired the same fools to manage that were raising their prices on their condos for sale after the market was collapsing? You know, the ones who kept claiming they had demand and two years later they had sold almost nothing and went bankrupt? Real estate….always a market for bigger fools. Don’t be one.

  13. 13

    RE: Chris @ 11 – I don’t know that I would make those assumptions about housing starts. I’ve seen a lot of apartment complexes built in the last couple of years, many of which presumably were originally planned as condos. The biggest is that huge complex at the Landing in Renton. Some historical stats would be interesting.

  14. 14
    Chris says:

    RE: Kary L. Krismer @ 13

    Hmmm, good point – looking at the housing start link that Deejayoh posted a while ago it looks like multi-family construction is actually a smaller portion than it has been of the overall volume of housing starts – although it only gets as granular as “Western” region of the U.S. Renton doesn’t strike me as an area that needs more units to keep rent prices in check – the challenge will be in Seattle, Bellevue, Kirkland and other places that renters see as a “desirable” place to live (for lack of a better word, not trying to bash Renton).

    http://www.census.gov/const/startssa.pdf

  15. 15

    Note that car loans were exempted from the new consumer protections in the finance reform law. Whoever those guys have as lobbyists are worth every penny. With the latest bankruptcy act they became almost as favored as lessors, and now this.

    Newsflash members of Congress: People get car loans at auto dealerships! If any loans need consumer protection, it’s car loans.

    (BTW, as an aside, Washington State used to have a law that prevented deficiencies on car loans where the loan was purchase-money loan obtained at a dealership.)

  16. 16
    Scotsman says:

    The Keynesian Dead End
    Spending our way to prosperity is going out of style.

    http://online.wsj.com/article/SB10001424052748703615104575328981319857618.html?mod=rss_opinion_main

  17. 17
    David Losh says:

    OK, I did the calculations for Seattle and yes 44% down from the peak would be normal for our area. Let’s say we dropped 22% so far, so we have another 22% to go, just to put us at evens.

    Seattle Real Estate appreciated at the rate of approximately 9.3% per year between 1997 to 2007, on average. 4% is more normal, and honestly that may be high. That leaves us with a 5.3% false appreciation in pricing, or 53%.

    If I were to really think about it we added millions of housing units to our inventory in that time, prices should be dropping like a rock. I’ll research that next because they are still building, and I can’t imagine why.

    http://www.forecast-chart.com/estate-real-seattle.html

    I posted this some place this morning here on the Seattle Bubble, but I can’t remember where.

    If you look at the chart of rates of appreciation you can see in 1987, and 1988 we did have double digit appreciation due to real inflation. This is what skewed the financial models, in my opinion, to believing that double digit appreciation was possible.

    This could be where sniglet gets the 80% down from peak for future residential Real Estate pricing. If you take the actual rate of inflation, and compare it to the run up in residential Real Estate pricing you can see the asset bubble clearly.

  18. 18
    softwarengineer says:

    RE: Kary L. Krismer @ 1

    No Jobs

    It’s unproven either way, but the AZ Governor is alleging today that most of the insourced population growth into her State are drug smugglers….cartel mob controlled too….wouldn’t surprise me though, to come to America and find no jobs, you’d best bring your income source with you or starve.

  19. 19
    Scotsman says:

    Hey Pfft- what does Krugman say to refute this analysis?

    “At current debt levels, the government really needs several years of completely balanced budgets, not just deficits that are barely sustainable. But at no point in the next ten years, according to the Obama Budget, will the deficit even shrink to as little as 3 percent of GDP. According to the CBO, it will never even get as low as 4 percent.[2] And the dire deficit projections of reliable nonprofit groups like the Pew Trust and Peterson Foundation are even more alarming: the deficit won’t even shrink to 5.5 percent of GDP in their analysis. [3]

    ‘Mind-boggling’ is the term Martin Sullivan of Tax Analysts uses to describe the tax and spending changes that would have to occur just to get the deficit down to 3 percent of GDP.

    “Our gridlocked, dysfunctional Congress simply cannot bring itself to absorb these types of painful shocks,” says Sullivan. “Given these unprecedented pressures I believe that within the next decade there is more than a 50-50 chance there will be an upheaval either of the political system or the economy”

    http://www.ourfiscalfuture.org/can-income-tax-rate-hikes-close-the-deficit/

  20. 20
    pfft says:

    By Scotsman @ 7:

    My gawd- you can’t make this stuff up- more legislation where we won’t know what the effects are until it’s in place. Makes you wonder if these guys really know what they’re doing:

    think about what you just wrote. think about it for awhile. please.

  21. 21
    pfft says:

    By Scotsman @ 19:

    Hey Pfft- what does Krugman say to refute this analysis?

    “At current debt levels, the government really needs several years of completely balanced budgets, not just deficits that are barely sustainable. But at no point in the next ten years, according to the Obama Budget, will the deficit even shrink to as little as 3 percent of GDP. According to the CBO, it will never even get as low as 4 percent.[2] And the dire deficit projections of reliable nonprofit groups like the Pew Trust and Peterson Foundation are even more alarming: the deficit wonâ��t even shrink to 5.5 percent of GDP in their analysis. [3]

    �Mind-boggling� is the term Martin Sullivan of Tax Analysts uses to describe the tax and spending changes that would have to occur just to get the deficit down to 3 percent of GDP.

    â��Our gridlocked, dysfunctional Congress simply cannot bring itself to absorb these types of painful shocks,â�� says Sullivan. â��Given these unprecedented pressures I believe that within the next decade there is more than a 50-50 chance there will be an upheaval either of the political system or the economy”

    http://www.ourfiscalfuture.org/can-income-tax-rate-hikes-close-the-deficit/

    I’ve already posted his reply fifty times.

    Joke Europeans
    http://krugman.blogs.nytimes.com/2009/11/22/joke-europeans/

    we could always raise taxes.

    Tax bills in 2009 at lowest level since 1950
    http://www.usatoday.com/money/perfi/taxes/2010-05-10-taxes_N.htm

  22. 22
    Scotsman says:

    RE: pfft @ 21

    Ah, I see you never did my suggested exercise of running the numbers for 20 years out, or you would know that even with tripled taxes we couldn’t afford all the goodies the government has planned.

    Can you shoot a gun and plant a garden? Do you know some sort of skilled trade- welding, mechanics, etc. as a source of barter? Such skills will be useful in the new world.

  23. 23
    pfft says:

    By Scotsman @ 22:

    RE: pfft @ 21

    Ah, I see you never did my suggested exercise of running the numbers for 20 years out, or you would know that even with tripled taxes we couldn’t afford all the goodies the government has planned.

    Can you shoot a gun and plant a garden? Do you know some sort of skilled trade- welding, mechanics, etc. as a source of barter? Such skills will be useful in the new world.

    I see you’ve been over the the oil drum lately.

    did you run 20 year numbers?

    please back up your claim that taxes will triple.

    did you even take into account that the economy and wages will grow?

  24. 24
    Scotsman says:

    RE: pfft @ 23

    Yup, I ran the numbers. I’ve done it many times, with many different assumptions.

    Yup, I had the economy grow at realistic, historically accurate rates. That would include wages. I used CBO/Obama numbers for the deficits and entitlement growth for the ten years they are available.

    Yup, we’re still hosed. I can weld, fix equipment, shoot a gun, and plant a garden. I might try living on a boat. Sounds like fun! What about you?

  25. 25
    pfft says:

    By Scotsman @ 24:

    RE: pfft @ 23

    Yup, I ran the numbers. I’ve done it many times, with many different assumptions.

    Yup, I had the economy grow at realistic, historically accurate rates. That would include wages. I used CBO/Obama numbers for the deficits and entitlement growth for the ten years they are available.

    Yup, we’re still hosed. I can weld, fix equipment, shoot a gun, and plant a garden. I might try living on a boat. Sounds like fun! What about you?

    you can’t run numbers though, or else you would have shown them to me.

    you create a future scenario where your social status is elevated because you can hunt or whatever. are you really that insecure about your present situation that you need to create a mad max future? of course in the process of elevating yourself you predictably put down the rest of us who don’t have your “skills.”

  26. 26
  27. 27
    Scotsman says:

    RE: pfft @ 25

    Say what? I didn’t know if you had any skills or not, still don’t. No one here knows anything about you outside of your apparent desire to see a pending recovery. I can put up all the numbers in the world, but they won’t mean a thing to someone who doesn’t seek to understand. And your understanding will be increased if you work it out yourself. Then you can teach others, and together maybe we can turn this mess around while we still have some choices.

  28. 28
    Scotsman says:

    “Post Turtle”

    https://login.wwdb.org/mcall/6017827250314568/ATT1.jpg

    While suturing up a cut on the hand of a 75 year old rancher, whose hand had been caught in the gate while working his cattle, the doctor struck up a conversation with the old man. Eventually the topic got around to Obama, and his being our president.
    The old rancher said, “Well, ya know, Obama is just a Post Turtle.”
    Now not being familiar with the term, the doctor asked, What’s a “Post Turtle?” The old rancher said, “When you’re driving down a country road and you come across a fence post with a turtle balanced on top, that’s a post turtle.”
    The old rancher saw the puzzled look on the doctor’s face so he continued to explain. ‘You know he didn’t get up there by himself, he doesn’t belong up there, he doesn’t know what to do while he’s up there, he sure as heck ain’t going anywhere, and you just wonder what kind of dumb ass put him up there in the first place.

  29. 29
    Scotsman says:

    OK, something serious- Shadow Stats update on the money supply. Smells like deflation. This economy isn’t going anywhere, anytime soon. AKA- all that deficit spending hasn’t done a thing to turn the economy around. It hasn’t even really slowed the fall. This would be a good time to locate your life jacket, as the “to big to fail” Titanic U.S. economy is going to experience some pain soon.

    http://www.shadowstats.com/alternate_data/money-supply-charts

    P.S. Click the monetary base charts link in the above link to see how quickly all of the stimulus spending has disappeared in to ether. Link binge drinking the next day- all that’s left is the “debt” of pain.

  30. 30
    pfft says:

    By Scotsman @ 27:

    RE: pfft @ 25 I can put up all the numbers in the world, but they won’t mean a thing to someone who doesn’t seek to understand.

    so put up the numbers. I do seek to understand. that’s why I switched from my previous bearish stance on the economy and the stock market last year. that’s why I changed my feelings on the bond market.

  31. 31
    pfft says:

    By Scotsman @ 28:

    “Post Turtle”

    https://login.wwdb.org/mcall/6017827250314568/ATT1.jpg

    While suturing up a cut on the hand of a 75 year old rancher, whose hand had been caught in the gate while working his cattle, the doctor struck up a conversation with the old man. Eventually the topic got around to Obama, and his being our president.
    The old rancher said, “Well, ya know, Obama is just a Post Turtle.”
    Now not being familiar with the term, the doctor asked, What’s a “Post Turtle?” The old rancher said, “When you’re driving down a country road and you come across a fence post with a turtle balanced on top, that’s a post turtle.”
    The old rancher saw the puzzled look on the doctor’s face so he continued to explain. ‘You know he didn’t get up there by himself, he doesn’t belong up there, he doesn’t know what to do while he’s up there, he sure as heck ain’t going anywhere, and you just wonder what kind of dumb ass put him up there in the first place.

    dumbest story ever. the rancher probably voted for bush twice.

  32. 32
    pfft says:

    news from the healthcare front.

    US Ranks Last in Health Care vs AUS, CAN, GER, NETH, NZ, UK
    http://www.ritholtz.com/blog/2010/06/us-ranks-last-in-healthcare/

    telling quote.

    “The U.S. health system is the most expensive in the world, but comparative analyses consistently show the United States underperforms relative to other countries on most dimensions of performance.”

    that is why we had reform. reform will also help keep costs in check which is one of the biggest contributors to the national debt projections.

    here is that reform in action.

    High-Risk Insurance Pools to Begin Next Month
    http://www.nytimes.com/2010/06/26/health/policy/26patient.html?pagewanted=1&sq=high%20risk&st=Search&scp=1

  33. 33
    David Losh says:

    Well, we are in a recovery, I just don’t think it’s the kind pfft is thinking of.

    Kary keeps insisting we need credit and insurance to make the economy work, which was very true in the past. That was then this is now.

    The chart Scotsman put up is probably correct, the source may be suspect, but the fact remains we can dump trillions into the economy, print trillions, and it will not be enough.

    http://www.inflationdata.com/inflation/inflation_rate/historicalinflation.aspx

    http://www.forecast-chart.com/estate-real-seattle.html

    If you compare the rate of inflation to Seattle Housing Price appreciation you’ll get a small sampling of the problem in money supply. The cost of housing far exceeds inflation. Residential Real Estate is however tied to the Consumer Price Index. The basket of goods does not include housing because that is a wide variable, but still when you compare the rate of appreciation you see the problem.

    It is all credit driven. Insurance is a pool of money, like a pension fund. If you need to produce a return on investment from that pool of money you are lending the money. You are buying appreciating assets, or portions there of, like stocks, bonds.

    So, yes, I understand, leveraging, credit, and insuring against loss is what makes business what it is today. It’s in debt without reserves.

    Paying debt is an expense, paying the insurance premiums is a expense, and then after paying taxes, you’re better off getting a job if there was one to be had.

    The recovery I see is people clearing debt. You have to pay insurance, but it’s going to be a shrinking pool of money, insurance companies will be asking for more, and people will be getting less. People will pay less, the very least that they can, it will no longer be easy for an insurance company just to raise premiums because they feel like it. People will ask for higher deductibles, and less coverage. We can expect more bankruptcy, and no on will think twice about it.

    The barter thing may be closer to the truth than you might think. In my opinion, where I have invested my time, and money, is in skilled trades. I think the days of the banker are numbered, and people who can do things will thrive. People who can do things without running up a debt will create wealth.

  34. 34
    David Losh says:

    RE: pfft @ 32

    Our problem is Health Insurance, Private Insurance paying for Health Care. The reform act is a step to getting insurance companies out of the business of collecting premiums.

    The debate, the sole debate is about Private Health Insurance Companies. Do they work? No, they do not work. They are a massive hemorrhaging of cash out of our economy. The losses in Private Health Insurance are staggering, and all the can do, all they are allowed to do, is to raise premiums.

    Maybe if they had any power to actually fix anything, or control costs, the system might have a chance to work. There again the government would have to be involved, that bureaucracy would grow, and costs would continue to sky rocket.

    It’s best to expand coverage using government resources already in place, like Uniform Medical, the Veterans Administration, or open up extended coverage for Medicaid, or Medicare. That would also alleviate a portion of the entitlement problems.

  35. 35

    By David Losh @ 34:

    Maybe if they had any power to actually fix anything, or control costs, the system might have a chance to work. There again the government would have to be involved, that bureaucracy would grow, and costs would continue to sky rocket.

    When they try, politicians step in to stop them. People want insurance companies to pay for everything, as if that’s the solution. That’s the problem.

  36. 36
    David Losh says:

    RE: Kary L. Krismer @ 35

    You are a true believer, God bless you.

  37. 37

    RE: David Losh @ 36 – And you on the other hand have absolutely no concept at all of supply and demand, and what happens to a market when the demand side becomes totally skewed because no one cares what anything costs.

    But tell us David. How can politicians demand that insurance companies pay for more and more things (e.g. acupuncture, chiropractics, mental health, etc.), without that affecting the cost of insurance? On what planet do you live where you think that possibly could be true?

    Sometimes the analysis has to be a bit more complicated than: “Corporation bad.” Unfortunately, most Americans are so uneducated that’s the limit of their abilities.

  38. 38
    David Losh says:

    RE: Kary L. Krismer @ 37

    If they wanted to insure the business venture of a hospital they can. If they want to insure you, for your driving habits, they can. You can not insure against AIDS, or an AIDS out break. There are too many variables in “health.”

    Just to put the issue to rest, health will become a World Health Organization issue. Governments, globally, will have to get along. The administration of health will become a global invasion of our privacy. I’m sure that’s how it will be spun.

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