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.

39 responses to “One in Four Seattle Area Home Listings are Distressed”

  1. MacroInvestor

    And this is just the inventory we can see. We know banks are refusing to foreclose in many cases because they don’t want to take the hit to their balance sheets and look too distressed themselves. It also misses the pent up demand from sellers who cannot stomach taking the loss, and are playing the waiting game by either feeding the alligator or renting out.

    The bottom might be in a year or two, after the wave of option arms reset.

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  2. MacroInvestor

    RE: The Tim @ 3

    Thank you.

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  3. Sniglet

    What would be even more interesting would be to look at mortgage delinquency rates. I am sure there are plenty of “distressed” homes that are not even for sale (i.e. because the bank hasn’t foreclosed).

    Unfortunately, I don’t think such data is available, and certainly not on a county basis.

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  4. Magnolia44

    Seen quite a few bank owned and short sale listings in magnolia. Walked by a house that looked abandoned yesterday. I remember the guy had a flashy car and great big boat (really expensive), no sight of anyone there. I pulled the king county record, purchased early 2000, me thinks it was refinanced to the hilt!

    Oh well life goes on, just finished “the greates trade ever”, decent book this whole economy is false! Ha…

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  5. RoflCatDown

    With the way that the economy and housing market is trending, it’s difficult to not imagine that most of the homes on the market (even those not currently in distress) are there because the owner is distressed. Either due to job loss issues, or a rental gone bad, or a failed flip, or new child, or job relocation, or perhaps they’re just bitter that they are upside down in home value and stopped paying because how dare market prices go down.

    For the most part I imagine that anyone who doesn’t have to have their home on the market right now isn’t. Those that are on the market are going to be at varying levels of distress and desperation because they cannot reconcile their idea of what their home is worth vs what the market will actually bear.

    For the first time in a good while it’s a buyers market, and those who are out shopping are looking for the deals to gain them the most equity when prices start to pick back up. If they pick back up.

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  6. Conor MacEvilly

    Hi Tim

    Many thanks for your continued good work and informative stats.
    Do you have this data in a tabulated form? I’d be be interested to see the percentage of short sales and REOs in the individual Seattle neighborhoods (a little hard to see on the map).

    thanks
    Conor

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  7. Conor MacEvilly

    RE: The Tim @ 9

    Great! Thanks Tim

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  8. softwarengineer

    RE: MacroInvestor @ 2

    Precisely

    We now need a homeowner age circle chart/map, like Red for 65-75 YO, Orange for 55-65 and Blue, less than 55 YO. I’m sure Seattle centrist would rule the Red/Orange circles then.

    And IMO the red/orange older owners are itching to sell and down-size and/or get something newer and more reliable for their retirements…..but can afford to not sell unless they get high-balled offers. I imagine too, the King County massive disability and low income property tax relief keeps their houses off the low-ball price market longer too.

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  9. CalEngineer

    I can never find Belltown (98121) on these visualizations…Am I just missing it?

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  10. deejayoh

    By MacroInvestor @ 2:

    The bottom might be in a year or two, after the wave of option arms reset.

    Option-ARM resets are not really an issue with ZIRP

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  11. BillE

    Great info as always. I’ve seen all the short sales and REOs on the market in Snohomish County. It’s nice to see some numbers on it.

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  12. Kary L. Krismer

    Hidden in the data is there are some neighborhoods/developments where everything is a short sale.

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  13. BillE

    By Kary L. Krismer @ 17:

    Hidden in the data is there are some neighborhoods/developments where everything is a short sale.

    There are some neighborhoods dominated by bank owned houses too. In some developments he values have been absolutely destroyed. One in Marysville stands out in my mind. Some homes were sold by the builder, but what’s left is a bunch of bank owned houses in varying states of construction.
    http://www.redfin.com/WA/Marysville/6607-101st-Pl-NE-98270/home/21500998
    http://www.redfin.com/WA/Marysville/6529-101st-Pl-NE-98270/home/21501000
    http://www.redfin.com/WA/Marysville/6604-101st-Pl-NE-98270/home/12196542
    http://www.redfin.com/WA/Marysville/10017-65th-Dr-NE-98270/home/28580308
    http://www.redfin.com/WA/Marysville/10009-65th-Dr-NE-98270/home/28580264
    I’d hate to be one of the people who paid $300+ in 2008.

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  14. BillE

    I just learned from an industry professional that there is actually a shortage of houses on the market in our area. The short sales and REOs never sell and shouldn’t really be considered inventory. Hmmm, ok.

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  15. Ira Sacharoff

    By BillE @ 19:

    I just learned from an industry professional that there is actually a shortage of houses on the market in our area. The short sales and REOs never sell and shouldn’t really be considered inventory. Hmmm, ok.

    Well, there is is a shortage of reasonably priced houses on the market in our area.

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  16. Kary L. Krismer

    RE: BillE @ 19 – I think you could make a valid argument for excluding short sales from inventory, or maybe taking 80% of them out of the figure. I’m not sure why you’d remove REOs. They do sell.

    BTW, just a reminder, some of those short sales are actually pendings but the agent is playing foolish games with when mutual acceptance occurs by having the bank approve the offer before the client does.

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  17. MacroInvestor

    RE: RoflCatDown @ 7

    “For the most part I imagine that anyone who doesn’t have to have their home on the market right now isn’t. Those that are on the market are going to be at varying levels of distress and desperation because they cannot reconcile their idea of what their home is worth vs what the market will actually bear.”

    I think this is a very insightful comment. Quite a few of my friends have reported that sellers are seriously in denial about what their houses are worth. The average gap seems to be about 15%. The ones that discount that much likely have no choice.

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  18. MacroInvestor

    RE: softwarengineer @ 11

    No doubt many people retiring soon were counting on downsizing and living off the equity draw. As Rolfcat said, these would be distressed sales that don’t show up as obvious REO’s or shorts.

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  19. Kary L. Krismer

    RE: MacroInvestor @ 22 – Actually today isn’t much different than any other time. Most people who have their house on the market do so because of the fact that something in their lives means it’s better that they move. It might be job related, family related, etc. Not that many people sell because of the market.

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  20. David Losh

    As Ray says, they are all coming back to the bank.

    My company has been preparing properties for sale since 1976, and I worked for another guy since High School.

    There has never been as high of a demand for our services as there is this year. We’re in July, and there are people getting ready to sell. Once the tax credit died the market died with it.

    A lot of people who bought paid excessive amounts of money for nothing. Those will be going back to the bank.

    In five years all properties will be distressed by today’s definition. The people who have sold, and unloaded properties, this year are extremely lucky. If you can get rid of your property do it, or pay it off. Those are your options.

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  21. pmseatac

    RE: The Tim @ 1 – “Good luck to the “non-distressed” sellers trying to unload a townhome in Tacoma’s 98405 zip code. 14 bank-owned townhomes and 2 short sales vs. just 4 regular listings. Ouch!”

    I notice when looking through Tacoma listings that there are a lot of small (1-bedroom) condos and apartment conversions listed at significantly higher prices than much larger SFH properties in the same area. Is there something special about living in a condo in Tacoma that I don’t know about ? Also I see multiple condo listings in the same building that appear to have the same floor plan, with some listed at almost twice the price as others. Does the location within a building really add that much value to an individual unit ?

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  22. RoflCatDown

    RE: Kary L. Krismer @ 24 – But there is a disconnect between have to move because you lost your job after buying an overpriced house you couldn’t afford when unemployment spiked to 10% and included you with it…or you live in a studio apartment with your wife/babymama and are expecting a kid…aka I NEED to sell, and “I’d like something a little bigger because I own too much scrap booking stuff so I’ll sell the smaller house to have more room to clutter up.”

    It looks like there’s a lot more of “I NEED to sell” going on than “I WANT to move.” Which are two completely different market motivators.

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  23. CCG

    By The Tim @ 3:

    By MacroInvestor @ 2:
    It also misses the pent up demand from sellers who cannot stomach taking the loss, and are playing the waiting game by either feeding the alligator or renting out.

    Don’t you mean pent-up supply?

    Well, as Say’s Law teaches us, supply is just a demand for something else. In this case, it’s the demand to “get me the @#$ out!”

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  24. CCG

    By deejayoh @ 14:

    By MacroInvestor @ 2:
    The bottom might be in a year or two, after the wave of option arms reset.

    Option-ARM resets are not really an issue with ZIRP

    That and the fact that only chumps pay anyway. It’s the new socialist economy: taxpayers pay the banks and banks pay the taxpayers by not foreclosing. Everyone gets free housing and more money to consume half the world’s output, as is their birthright. Works until the people who actually produce anything get tired of being robbed.

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  25. Sniglet

    RE: MacroInvestor @ 2

    We know banks are refusing to foreclose in many cases because they don’t want to take the hit to their balance sheets and look too distressed themselves.

    I commented on this in the Open Thread.

    According to the Wall Street Journal, many banks are delaying foreclosures on commercial properties precisely to avoid having to take write-downs.

    A big push by banks in recent months to modify such loans—by stretching out maturities or allowing below-market interest rates—has slowed a spike in defaults. It also has helped preserve banks’ capital, by keeping some dicey loans classified as “performing” and thus minimizing the amount of cash banks must set aside in reserves for future losses.

    http://online.wsj.com/article/SB10001424052748704764404575286882690834088.html?mod=WSJ_hpp_LEFTWhatsNewsCollection

    Apparently it is possible for a bank to just change the terms on a non-performing loan so that they don’t even have to classify them as being delinquent. No payments being made? No problem. Just ammend the terms to state that nothing is due for another year. Voila, the non-performing loan has vanished.

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  26. CCG

    “Apparently it is possible for a bank to just change the terms on a non-performing loan so that they donâ��t even have to classify them as being delinquent. No payments being made? No problem. Just ammend the terms to state that nothing is due for another year. Voila, the non-performing loan has vanished.”

    I love it when permabulls screech that “we’re not Japan” because our financial system is so much more transparent and quick to mark things to market and take the losses.

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  27. JChristoph

    RE: pmseatac @ 26

    It’s closer to the guy on the corner that sells the best crack?

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  28. Blurtman

    So again I ask – would you pay off your house in a market like this?

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  29. David Losh

    RE: Blurtman @ 33

    Thanks to the Seattle Bubble there are things that I see now that never made an impression on me in the past. Globalization is a great, and beautiful thing in terms of goods, exchange of ideas, and technology, but when it comes to finance we have a disaster.

    Case Schiller is an excellent example. Technology can bring all kinds of statistics to a rationalization that have nothing to do with reality. People are waiting for the Case Schiller report that is nothing more than sales data. Sales data will only prop up pricing if the sales people have anything to do with it.

    Rationalizations are made all over the globe based on statistics that are readily available through Financial Engineering. I’d really like to revive that debate these years later. It seems that there is data to support any thing, and every thing.

    So the conclusion that I came to a year or so ago is to concentrate on the things that are directly controlled by me, such as paying down my debt, which includes my house. There are gambles that I’ll take that have a return I can verify.

    In other words I wouldn’t know where to invest other than in cash. With my cash I may buy something that I can resell for cash, with a profit.

    It’s just my opinion.

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  30. Blurtman

    RE: David Losh @ 34

    David,
    To quote that great sage Stymie of the Little Rascals: “I don’t know where we are going, brother, but we are on our way.”

    From what I can gather, cash is supposed to be king today, I guess from a relative comparison to falling asset values. But not compared to gold. And yet many believe US dollar cash will be worthless in the near future.

    I like the house I live in, and it is more than an investment to me. But I do keep an eye on its market value, too.

    There is more to life than money, and this is a great place to live.

    But I’d rather be rich and miserable, than poor and miserable, if misery were the only choice (and it ain’t.)

    I don’t know, but I been told, big legged women ain’t got no soul.

    Just along for the ride.

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  31. John

    I’m curious why you build the map this way? As someone who’s interested in data visualization, displaying pie charts on a map seems like an interesting choice. I know a heat map wouldn’t show the same amount of information, but might be a little easier to read? Is the idea to get a general idea of the state of distressed sales in the area, or to find your home zipcode and get only that info?

    Just curious how you came to this.

    Love the site!
    John

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  32. To the Students from the Jan 20, 2011 REO Classes : ceforward.com

    [...] the Seattle Bubble article showing distressed inventory in the greater Puget Sound area.  Tim Ellis promised to update this information and it will appear in a future blog post. If [...]

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  33. To the Students from the Jan 21, 2011 Foreclosure Field Trip : ceforward.com

    [...] the Seattle Bubble article from July 2009 showing distressed inventory in the greater Puget Sound area.  Tim Ellis promised to update this information and it will appear in a few days. If you’re on my [...]

    Rate this comment: Thumb up 0

  34. Lo Ball Jones

    How many properties…including rental homes (and apartments) are physically vacant (and for how long)?

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