“Entry Level” Home Sales Fell Furthest in July

In order to get a little bit better of a feel for how the tax credit expiration is affecting the sales mix, let’s take another look at a histogram of single-family home sales in King County.

To generate the chart below, I downloaded all the sales data for homes sold in King County from the beginning of the year through the end of July. Since my data download puts late-reported sales into the month that the sale actually took place rather than in the month they were reported, there is a slight difference in the number of sales I’m counting vs. what the NWMLS reports each month.

The NWMLS reports showed 1,879 sales in June and 1,474 in July (a 22% MOM drop), while my data includes 2,008 sales in June and 1,425 in July (a 29% MOM drop).

If you flip between June and July, you will see that while home sales dropped steeply in all price tiers between June and July, sales of homes priced $250k to $300k fell the furthest, falling from 292 in June to just 150 in July (a nearly 50% drop).

Considering that the tax credit was primarily available to first-time homebuyers, it makes sense to see the $250k-$300k range take the biggest dive. That’s about at the top of where I would expect most first-time homebuyers to be shopping, and it’s not surprising that the kind of buyers that are persuaded by an $8k check from the government would be buying the most expensive houses they can.

Of course, when you remove a huge chunk of sales from a below-median price bracket, what happens to the median price? It goes up, of course. The median price of the 2,008 June sales I analyzed was $380,000, while the median of the 1,425 sales in July was $389,000. That’s a 2.4% increase in a month (an over 30% yearly rate of increase), but it means absolutely nil about the value of any individual homes.


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.

70 comments:

  1. 1

    On the rising median issue, this is what I recently wrote over at Trulia: “Assume you have 11 sales, with the lowest being $200,000 and the highest being $700,000, each priced $50,000 apart. The median in such a group would be $450,000. Assume further that those sales included two first time buyers, and that both were below median buyers (safe assumption). If you take the median of the sales excluding first time buyers, it would be $500,000. Thus the removal of the first time buyers would tend to raise the median, and that is what was seen in many parts of the country in July.”

  2. 2
    buystocks says:

    Will the case-schiller correct for this?

  3. 3

    RE: buystocks @ 2 – Eventually, but you won’t have Case-Shiller data that doesn’t include tax credit sales until the end of November. And although it doesn’t have the median shift effect, their will be an effect on their tiers.

  4. 4
    Scotsman says:

    I’m sure this clever new ploy will help all home prices rise:

    “NEW YORK (CNNMoney.com) — Would you be willing to pay the original builder a fee when you resell your home? That’s an obligation some developers are trying to slap on homeowners in their communities”

    http://money.cnn.com/2010/08/23/real_estate/home_resale_fee/index.htm?hpt=T2

    Thank goodness the recession is over and prices have bottomed:

    http://www.cnbc.com/id/38830968

  5. 5

    RE: Scotsman @ 4 – Ken Harney wrote an article last Sunday about how either Freddie or Fannie won’t loan on such properties, and several states have or will be outlawing such practices (Washington will most likely this year).

  6. 6
    softwarengineer says:

    Sales of Existing Homes Plummets for July

    “…Sales of previously owned U.S. homes took a record drop in July to their lowest pace in 15 years, suggesting further loss of momentum in the economic recovery….”

    http://news.yahoo.com/s/nm/us_usa_economy

    Suggesting further loss of momentum in the economic recovery?

    How about what “momentum”, without ineffective longterm and moot point stimulus debt in America’s economy?

  7. 7
    Jerdobi says:

    First, I enjoy reading this blog. You’re doing a great service and hope others in Seattle find this site.

    As to housing in Seattle; falling, bottomed out or rising – this is my comment.

    Clearly (at least to me) both net and gross income is falling as people retire to lower incomes (i.e. not buying but going to sell their homes) and new people coming into the work force are entering at lower salaries (i.e. baristas and bartenders; service jobs at lower salaries). Combine this with 25-30% of the work force working for governement (local, state, federal) and another 25-30% living off the government. The remaining few left not working for or living off governement paying taxes can’t sustain a decent lifestyle (i.e. buy a home) and support the tax base. Government is starting to cannibalize on itself now by not funding government pensions and states going into deficit spending (I could go on and on with examples).

    Back to housing, we have a unsustainable situation that cannot support > $500,000 homes if not > $125,000 homes with income levels falling and tax spending going up. Add to this that the baby boomers are going to be retiring & dying and their homes going on the market in the next few years as they downsize to fund their retirements. Ultimately, housing will fall back to the 100 year average (if not lower) and be inline with income levels.

    Let’s just hope it’s a nice and calm easy slide in pricing so we don’t have panic selling.

  8. 8
    pfft says:

    By Scotsman @ 4:

    I’m sure this clever new ploy will help all home prices rise:

    “NEW YORK (CNNMoney.com) — Would you be willing to pay the original builder a fee when you resell your home? That’s an obligation some developers are trying to slap on homeowners in their communities”

    http://money.cnn.com/2010/08/23/real_estate/home_resale_fee/index.htm?hpt=T2

    Thank goodness the recession is over and prices have bottomed:

    http://www.cnbc.com/id/38830968

    the recession(contraction of GDP) ended over a year ago and home prices already bottomed.

  9. 9
    pfft says:

    By softwarengineer @ 6:

    Sales of Existing Homes Plummets for July

    “…Sales of previously owned U.S. homes took a record drop in July to their lowest pace in 15 years, suggesting further loss of momentum in the economic recovery….”

    http://news.yahoo.com/s/nm/us_usa_economy

    Suggesting further loss of momentum in the economic recovery?

    How about what “momentum”, without ineffective longterm and moot point stimulus debt in America’s economy?

    how many times do I have to post studies that show the stimulus helped the jobs picture and stimulus didn’t add much to the debt? doing nothing would have added more to the debt than stimulus, tarp and etc.

  10. 10
    TheHulk says:

    Looks like the MSM may be finally waking up to reality (they even mention magical ponies!!)-
    http://seattletimes.nwsource.com/html/soundeconomywithjontalton/2012708768_i_want_a_pony_magical_thinking.html

  11. 11
    Scotsman says:

    RE: pfft @ 8

    “how many times do I have to post studies that show the stimulus helped”

    You mean like your “Norway” study?

    Hahahahahahahahahahahahahaha! Tell me another!!!!

  12. 12
    pfft says:

    By Scotsman @ 11:

    RE: pfft @ 8

    “how many times do I have to post studies that show the stimulus helped”

    You mean like your “Norway” study?

    Hahahahahahahahahahahahahaha! Tell me another!!!!

    no I am talking about this.

    How do stimulus size and economic growth compare internationally?
    http://voices.washingtonpost.com/ezra-klein/2010/06/research_desk_responds_how_do.html

    or this.

    Keynes In Asia
    http://krugman.blogs.nytimes.com/2010/07/24/keynes-in-asia/

    and now this from today

    Stimulus boosted US GDP by up to 4.5 percent in 2Q 2010

    WASHINGTON (Reuters) – The massive stimulus package boosted real GDP by up to 4.5 percent in the second quarter of 2010 and put up to 3.3 million people to work, the nonpartisan Congressional Budget Office said on Tuesday.

    http://news.yahoo.com/s/nm/20100824/bs_nm/us_usa_economy_stimulus;_ylt=AsmOOt.Du6HTwGt3ddJBaTWyBhIF;_ylu=X3oDMTJzYTBmOGc2BGFzc2V0A25tLzIwMTAwODI0L3VzX3VzYV9lY29ub215X3N0aW11bHVzBHBvcwMxBHNlYwN5bl9hcnRpY2xlX3N1bW1hcnlfbGlzdARzbGsDc3RpbXVsdXNib29z

    I realize these facts won’t reach the bears, but those are the facts.

  13. 13
    pfft says:

    here is the norway article.

    Norway: Fjords, Oil, And Plenty of Jobs
    A flood of stimulus cash has kept unemployment low—at worst, it may hit 4 percent—but some economists now fear overheating
    http://www.businessweek.com/managing/content/aug2010/ca2010084_319342.htm

    but yeah the stimulus didn’t work accept in norway, asia, most of europe ex-spain and the US.

  14. 14
    HappyRenter says:

    If you are about to retire (so called baby boomer) and you are trying to downsize from your 4 bedroom house to a smaller 2 bedroom house or condo and enjoy retirement, what recommendation would you give? Sell the big house now at a lower price than you would have wished and take advantage of lower home prices for your new smaller home, or wait a couple of years hoping that home prices might rise again and your big house might be valued much higher?

    Thanks.

  15. 15
    chico says:

    RE: pfft @ 9

    Calculated Risk seems to agree with you pfft!

    A snip from his most recent post.

    “Less stimulus spending in Q3 was one of the reason I expected a slowdown in growth in the 2nd half of 2010.”

  16. 16

    RE: HappyRenter @ 14
    I wouldn’t wait a couple of years to try to sell. I think the odds that we’ll see significantly higher home prices a couple of years from now are slim. And the odds that prices will be lower a couple of years from now are pretty good.
    The third option might be to sell now, rent for a couple of years, and then buy.
    But any way you look at it, waiting a couple of years holding out for higher prices is something I can’t recommend.

  17. 17
    Lake Hills Renter says:

    The idea that $300k is an “entry level” home shows just how far things got out of whack.

  18. 18
    HappyRenter says:

    RE: Ira Sacharoff @ 16
    I like your third option (it involves moving twice though). Thanks.

  19. 19
    GH says:

    RE: Ira Sacharoff @ 16

    I’m a contrarian on this one: we are at the market bottom right now.

    The vast majority of opinions in the media (including this website) are negative toward home prices. However, the Puget Sound data suggests the opposite: prices have flat-lined, homes are generally affordable, unemployment and foreclosures are not expected to dramatically increase from current levels.

    This is the defintion of a market bottom.

    Prices will remain flat for the next couple years, but then they will probably go up.

    (The one caveat on this is interest rates. If we see spiking mortgage rates, then homes could fall another 10-20%. But that would not affect affordability, since the house payment would be unaffected.)

  20. 20

    RE: Ira Sacharoff @ 16 – I would add that if there is a rise in prices, the lower priced properties might rise more than the higher priced properties, or the property in the existing house area might go up less than the property in the new property target area. Lots of reasons not to try to time the market.

  21. 21
    HappyRenter says:

    By GH @ 19:

    RE: Ira Sacharoff @ 16
    Prices will remain flat for the next couple years, but then they will probably go up.

    They might go up, but not more than inflation. Ira’s point is that there is no reason to wait from a financial point of view.

  22. 22
    Dave0 says:

    By Jerdobi @ 7:

    25-30% of the work force working for governement (local, state, federal)

    Really? A quick google search for “number of people employed by the government” came up with this: http://wiki.answers.com/Q/What_percentage_of_americans_are_government_employed

    “According to the U.S. Bureau of Labor Statistics, government accounts for about 8% of jobs in the United States. Here’s the breakdown using numbers easily accessible on the BLS website (all numbers from 2006 or 2007):

    1,774,000 Federal government civilian employees, excluding Post Office
    615,000 Post Office
    1,172,913 Military enlisted
    230,577 Military Officers
    2,424,000 State government (excluding education and hospitals)
    5,594,000 Local government (excluding education and hospitals)
    That’s a total of 11,810,490 government jobs.
    The total number of jobs in the U.S. in 2006 was 150,600,000, so government employment makes up 7.84% of all jobs.
    In 2007, the U.S. population (according to the Census Bureau) was 301,621,157, so about 4% of Americans are employed by the government.”

    I don’t know how you could have come up with 25-30%, it looks to me like 8% of the workforce is employed by the government.

  23. 23
    GH says:

    RE: HappyRenter @ 21

    I agree with both statements: (1) Prices increases will probably be not much more than inflation, and (2) there is no reason to wait.

    My point is that while Mr. Sacharoff feels “the odds that prices will be lower a couple of years from now are pretty good”, I feel the opposite.

  24. 24
    Scotsman says:

    RE: pfft @ 12RE: chico @ 15

    Duh, the stimulus “worked.” You guys are a few tools short of a full shed.

    Look at it this way- let’s say I make $75,000 a year (year 1) as a janitor at city hall and I spend every penny of it. Then the budget crunch (recession) comes along and my hours get cut to 35 hour a week ($65,000/yr) from 40. It’s my own personal recession! But lucky for me stupid banker china-guy comes along and lends me $25,000 dollars! So in year 2 my “spendable income” as a practical matter is $90,000!!! And what do I do? I spend it! Like Obama, I give all my friends treats like dinner out (bail-outs), free golf, and we all stay in the cabin I rent at the lake for two weeks. Spending is up! GDP is up! Many jobs at the restaurants and golf course have been added or saved because of my good “stimulus” fortune and stupid banker’s lack of math skills. Yup, this stimulus is a success!

    Now what happens in year 3? China-guy won’t lend me another $25 large because I really only make $65,000 a year as a janitor in city hall. Since I won’t be going back to the golf course, cabin, or fancy restaurants those jobs that were added or saved are now gone again, perhaps for good. Because you see, now I have to make at least the interest payments on the $25,000 I borrowed, so my real spendable income has actually gone down. What???!! Yup, interest doesn’t get me anything in terms of lifestyle, but it does make chinese-guy happy- until I stop paying. . . But that’s another story.

    Is the light starting to go on for any of you stimulus nuts, or is this a lost cause?

  25. 25
    pfft says:

    By Scotsman @ 24:

    RE: pfft @ 12RE: chico @ 15

    Duh, the stimulus “worked.” You guys are a few tools short of a full shed.

    Look at it this way- let’s say I make $75,000 a year (year 1) as a janitor at city hall and I spend every penny of it. Then the budget crunch (recession) comes along and my hours get cut to 35 hour a week ($65,000/yr) from 40. It’s my own personal recession! But lucky for me stupid banker china-guy comes along and lends me $25,000 dollars! So in year 2 my “spendable income” as a practical matter is $90,000!!! And what do I do? I spend it! Like Obama, I give all my friends treats like dinner out (bail-outs), free golf, and we all stay in the cabin I rent at the lake for two weeks. Spending is up! GDP is up! Many jobs at the restaurants and golf course have been added or saved because of my good “stimulus” fortune and stupid banker’s lack of math skills. Yup, this stimulus is a success!

    Now what happens in year 3? China-guy won’t lend me another $25 large because I really only make $65,000 a year as a janitor in city hall. Since I won’t be going back to the golf course, cabin, or fancy restaurants those jobs that were added or saved are now gone again, perhaps for good. Because you see, now I have to make at least the interest payments on the $25,000 I borrowed, so my real spendable income has actually gone down. What???!! Yup, interest doesn’t get me anything in terms of lifestyle, but it does make chinese-guy happy- until I stop paying. . . But that’s another story.

    Is the light starting to go on for any of you stimulus nuts, or is this a lost cause?

    you really don’t know how stimulus works. the stimulus worked. deal with it. the CBO study shows it. so does the moody’s study put out by former mccain economic advisor mark zandi.

    “Now what happens in year 3? China-guy won’t lend me another $25 large because I really only make $65,000 a year as a janitor in city hall.”

    beacause you spent the earlier money you don’t need to borrow another 25k because you jump-started the economy. but your analogy doesn’t really work because a person doesn’t get the benefit of higher revenues like a government does.

    stimulus=higher revenue=lower debt.

  26. 26
    Scotsman says:

    RE: pfft @ 25

    “stimulus=higher revenue=lower debt.”

    Then why does the national debt always go up?

    Borrowed money is neither an asset or a sustainable net increase in productive capacity, i.e. wealth. As soon as the stimulus disappears, the effect is gone. In our current economy there is no multiplier effect because the net productivity of new debt is negative. Until you understand that you will continue to be nothing more than a useful idiot of TPTB.

    Despite your glorious proclamations we are more broke now than we were a year ago. This is one reason why home sales, especially at the lower end where they are dependent on net spendable income, not wealth, have fallen to 15 year lows. It is also why sales and prices will continue to fall for years to come. Let me repeat- new debt costs more than it can produce and as such is nothing but a drain on the economy. We are long past the point where we can stimulate with outside debt. Our “savings” or wealth is rapidly declining along with the home values that store much of it. When the equities market finally gives it up that will be another nail in the coffin. Get ready for it.

  27. 27
    The Kid says:

    By Scotsman @ 24:

    RE: pfft @ 12RE: chico @ 15

    Look at it this way- let’s say I make $75,000 a year (year 1) as a janitor at city hall and I spend every penny of it. T

    The real question here is “are you actually foolish enough to think that a janitor anywhere, city hall or otherwise, makes anywhere near $75k a year?”.

  28. 28
    David Losh says:

    RE: Scotsman @ 11RE: pfft @ 12

    So, Scotsman, where were you this week end when pfft first put up the stimulus is working internationally links?

    pfft, look at all the numbers, then get in line with the fact that stimulus only works, as long as stimulus money is available. Once it’s over, it’s over.

    Germany austerity is what’s working right now.

  29. 29
    David S says:

    After flipping back and forth it looks like the reductions are closely proportional across the board, maybe I’m looking at with a logarithmic eye. Who knows? It’s way down there.

  30. 30
    pfft says:

    By David Losh @ 28:

    RE: Scotsman @ 11RE: pfft @ 12

    So, Scotsman, where were you this week end when pfft first put up the stimulus is working internationally links?

    pfft, look at all the numbers, then get in line with the fact that stimulus only works, as long as stimulus money is available. Once it’s over, it’s over.

    Germany austerity is what’s working right now.

    germany didn’t go through austerity, they stimuluated the economy.

    How do stimulus size and economic growth compare internationally?
    http://voices.washingtonpost.com/ezra-klein/2010/06/research_desk_responds_how_do.html

    germany’s stimulus was 3.4% of GDP.

    What About Germany?
    http://krugman.blogs.nytimes.com/

  31. 31
    The Tim says:

    RE: David S @ 29 – Here’s a plot of the # change and the % change MOM June to July for each bucket.

    $250k to $300k took by far the largest # hit, and still took the largest % hit by a decent margin.

  32. 32
    karl says:

    IMO in November there will be a shift in congress and there will be an end to stimulis. Government needs to get out of the mortgage business and return it to private hands. A return to traditional lending is needed and after some hard knocks real estate will stabilize. I understand they are shooting for a soft landing, but the long drawn out downward spiral will be more damaging in the long run…..IMO.

  33. 33
    chico says:

    RE: Scotsman @ 24

    You’re great at pointing out the obvious and I see it also makes you a legend in your own mind.

    You said the stimulus didn’t work, well it did and everyone knows it.

    The stimulus was temporary though, no big secret about that, and there was also no big secret that it added to the national debt, but we weren’t talking about that, we were talking if the stimulus worked or not.

  34. 34
    chico says:

    RE: David Losh @ 28

    “Germany austerity is what’s working right now.”

    You might want to ask Ireland and Greece how austerity is working for them. Calculated Risk had a thread about that today also, rates are rising in both countries, trouble dead ahead.

  35. 35

    By David Losh @ 28:

    Germany austerity is what’s working right now.

    I don’t really think you can compare Germany to other countries, except perhaps the U.S. in about 1869. Absorbing a non-functioning communist entity is probably affecting them still.

  36. 36

    By chico @ 33:

    <The stimulus was temporary though, no big secret about that, and there was also no big secret that it added to the national debt, but we weren't talking about that, we were talking if the stimulus worked or not.

    And to know whether it worked or not you would have to go back in time and change a few votes in Congress (including a lot of R votes). There is no way we will ever know if the stimulus failed, unless it fails so badly that we head into another major depression.

  37. 37
    pfft says:

    By Kary L. Krismer @ 36:

    By chico @ 33:

    <The stimulus was temporary though, no big secret about that, and there was also no big secret that it added to the national debt, but we weren't talking about that, we were talking if the stimulus worked or not.

    And to know whether it worked or not you would have to go back in time and change a few votes in Congress (including a lot of R votes). There is no way we will ever know if the stimulus failed, unless it fails so badly that we head into another major depression.

    mark zandi did go back.

    Federal efforts avoided a depression, economists conclude
    http://www.kansascity.com/2010/07/28/2114624/federal-efforts-avoided-a-depression.html

    if you want to look at what might have been just look to the countries during the crisis that had bigger falls in GDP than we did. it’s not been fun. there are tons of examples. greece, estonia, ireland and etc. they are not all apples to apples comparisons but they are close.

    estonia had austerity. they cut back to get into the euro(and get a seat at the adult’s table- is this thanksgiving?) and they have 20% unemployment! so much for no debt and a seat at the table. a lot families have a lot less food on their table but hey the government has no debt!

    What Crisis? The Euro Zone Adds Estonia
    http://www.nytimes.com/2010/06/18/business/global/18euro.html?_r=1&sq=estonia&st=cse&adxnnl=1&scp=2&adxnnlx=1277094058-A0e0G0fzAtRa8T882GzIgg

    estonia probably could have had stimulus add still had a small debt/gdp ratio which they could use to reduce their 20% unemployment rate. instead they joined the euro. whoopie.

  38. 38

    By pfft @ 37:

    By Kary L. Krismer @ 36:

    By chico @ 33:

    <The stimulus was temporary though, no big secret about that, and there was also no big secret that it added to the national debt, but we weren't talking about that, we were talking if the stimulus worked or not.

    And to know whether it worked or not you would have to go back in time and change a few votes in Congress (including a lot of R votes). There is no way we will ever know if the stimulus failed, unless it fails so badly that we head into another major depression.

    mark zandi did go back..

    Not a big fan, so I’ll stick with my original position.

  39. 39
    pfft says:

    By Kary L. Krismer @ 38:

    By pfft @ 37:

    By Kary L. Krismer @ 36:

    By chico @ 33:

    <The stimulus was temporary though, no big secret about that, and there was also no big secret that it added to the national debt, but we weren't talking about that, we were talking if the stimulus worked or not.

    And to know whether it worked or not you would have to go back in time and change a few votes in Congress (including a lot of R votes). There is no way we will ever know if the stimulus failed, unless it fails so badly that we head into another major depression.

    mark zandi did go back..

    Not a big fan, so I’ll stick with my original position.

    why not? things would most certainly be worse w/o tarp, fannie/freddie and the stimulus.

  40. 40
    Jonness says:

    By pfft @ 12:

    WASHINGTON (Reuters) � The massive stimulus package boosted real GDP by up to 4.5 percent in the second quarter of 2010 and put up to 3.3 million people to work, the nonpartisan Congressional Budget Office said on Tuesday.

    That’s amazing! Since the revised growth for Q2 is 2.4, we see, without the borrowed money, we were really in the midst of a depression. The bad news is, now we have to pay back the money. Otherwise we might get another quarter or two out of this pony show prior to standing in the soup line.

    But don’t despair. Now that China has cut us off, U.S. retirees are fleeing stocks and buying the safety of treasuries. Maybe we’ll get an additional quarter out the pony show after all. :)

  41. 41
    Jerdobi says:

    By Dave0 @ 22:

    By Jerdobi @ 7:

    25-30% of the work force working for governement (local, state, federal)

    I don’t know how you could have come up with 25-30%, it looks to me like 8% of the workforce is employed by the government.

    My observations are mostly based on gut feel. But, it’s amazing how 8% of the workforce off the 520 bridge on a government holiday seems to take 50% of the cars off the roadway. I did a few searches myself (of course looking for the highest number and not the lowest) showing in a study by Economist Gary Shilling stating…

    “… calculated that 58 percent of the population is dependent on the government for “major parts of their income,” including teachers, soldiers, bureaucrats, and other government employees; welfare and Social Security recipients; government pensioners; public housing beneficiaries; and people who work for government contractors. By 2018, Shilling estimates, an astounding 67 percent of Americans could be dependent on the government for their livelihood…”.

    No matter the numbers, people working or depending on goverment is growing and income levels are deflating. Yes, home prices could go up in the long run; but it would be due to hyper-inflation and a loaf of bread would be $10 too.

    I know predicting home prices going down on a housing blog is not going with the flow. But, parabolic increases in prices whether in gold, stock or housing is usually followed by a parabolic move downward. Just as stock prices cross the 50 and 200 day averages, home prices are due to move down. My guess is prices will move across the 100 year price trend and home prices are “truely” tied to income levels and not a couple month price bottom or a statement that prices are higher in San Francisco or New York; so Seattle prices will go up to these same levels.

    My simple logic is as long as incomes levels are going down, the 520 bridge is empty on government holidays, baby boomers are kicking the bucket, my friends have unemployed house guests and I see lots of street camping in cars, vans and broken down Winnebagos; prices are going to continue going down.

  42. 42
    Jonness says:

    By chico @ 33:

    we were talking if the stimulus worked or not.

    Let’s say I lose my job, I’m deeply in debt, and my uncle loans me $20,000.00 in order to make it through tough times. I go out and buy a house and a car and make payments for three months. On the fourth month, my uncle sees the light and refuses to give me another loan, so I default on the original loan. Did the first loan work?

    In truth my uncle only enabled my addiction to debt and prevented me from seeking a cure. Thus, the pains of my life were extended. By the time I finally ran out of money and faced the music, I had used up all friends and relatives who cared about me.

    It worked all right.

  43. 43
    Jonness says:

    By GH @ 19:

    The one caveat on this is interest rates. If we see spiking mortgage rates, then homes could fall another 10-20%. But that would not affect affordability, since the house payment would be unaffected.)

    If you needed to relocate for work or any other reason, you would be trapped underwater and married to the house. If you can point out a single person in the world today who feels good about being trapped underwater on his house, I’ll show you a buffoon.

    Also, I disagree with the notion that house prices have bottomed in Puget Sound. They are still roughly 25% higher than historical relationships to incomes. Normally that might not seem so bad. But when you consider GDP massively fell from Q1 to Q2 and is expected to fall again in Q3, house sales are the lowest in 15 years, there’s massive shadow inventory out there, and we are in the midst of the worst economy since the Great Depression, I would expect to get a bit of a bargain rather than pay 25% more for the house than people paid in times of economic prosperity.

    I think a lot of people fail to contrast the debt money in the economy freely available during the bubble compared to what’s currently out there.

  44. 44
    patient says:

    Jonness @42&@43, Well said, you got it right.

  45. 45
    AerisWind says:

    RE: GH @ 19 – Interestingly, even with all the negative news in the media, most of my friends think the house price has already bottomed and will go back up soon. Some of them even buy their second or third houses in the last few months since they think the price is cheap now ….. so far, i do not see any panic in them that they want to sell their houses now, even if they are underwater ….. as for this blog, I don’t think it is a good indicator since most of us here do still think house price is expensive, which contrary to most of the public think right now…..

  46. 46
    Scotsman says:

    RE: chico @ 33

    “You said the stimulus didn’t work. . .The stimulus was temporary though”

    WTF? You can’t have it both ways, it either “worked”- and had an ongoing positive impact- or it didn’t. In your own words you admit it didn’t work, because there was no impact beyond the initial spending. Give us a break.

  47. 47
    BillE says:

    By Dave0 @ 22:

    By Jerdobi @ 7:

    25-30% of the work force working for governement (local, state, federal)

    I don’t know how you could have come up with 25-30%, it looks to me like 8% of the workforce is employed by the government.

    DaveO, Trashing government employees is all the rage now. It seems there’s too many of us and we all make six figures. Now if I could only figure out which department is paying that with the fat retirement. The department I work for sure ain’t it.
    Many times I’ve had people find out where I work and when money comes up they guess I make $XX a year, when I really make much less. And the gravy retirement? I think we have two people (out of hundreds) where I work who’ve been there long enough to be enrolled in that. The rest of us started too late to get that option.

  48. 48
    Cheap South says:

    By Lake Hills Renter @ 17:

    The idea that $300k is an “entry level” home shows just how far things got out of whack.

    Thank you!!! For a moment I thought I was the only one….

  49. 49
    Willy Nilly says:

    RE: Jonness @ 43

    Thank you for having a clear consolidated perspective on the situation, as opposed to an endless list of links that many people post as they attempt to compensate for their own lack of ability to think, synthesis information and have a perspective.

    As a home buyer I too expect to get a bit of a bargain considering all the existing conditions in the market.

  50. 50
    wreckingbull says:

    RE: BillE @ 46 – Do you really talk about personal salaries with friends and associates? I must be an old fart, but that has always been one of those things one keeps to themselves. I don’t think anyone has ever asked me about what I make. I suppose you have no choice if your salary is available via a Freedom of Information request, but I guess I don’t understand what you mean about “when money comes up”. I guess I need to also throw in an obligatory “get of my lawn” too.

  51. 51
    One Eyed Man says:

    RE: Jonness @ 43

    Just a “technical correction” Jonness:

    ” But when you consider GDP massively fell from Q1 to Q2 and is expected to fall again in Q3″

    That should read “. . . the growth rate in GDP massively fell . . ..” As we all know, so far GDP has not fallen since Q2 2009.

  52. 52
    Astro Kermit says:

    By Scotsman @ 24:

    RE: pfft @ 12RE: chico @ 15

    Look at it this way- let’s say I make $75,000 a year (year 1) as a janitor at city hall and I spend every penny of it.

    Janitors make $70k??????? I’m in the wrong career!

  53. 53

    By pfft @ 39:

    By Kary L. Krismer @ 38:

    By pfft @ 37:

    By Kary L. Krismer @ 36:

    By chico @ 33:

    <The stimulus was temporary though, no big secret about that, and there was also no big secret that it added to the national debt, but we weren't talking about that, we were talking if the stimulus worked or not.

    And to know whether it worked or not you would have to go back in time and change a few votes in Congress (including a lot of R votes). There is no way we will ever know if the stimulus failed, unless it fails so badly that we head into another major depression.

    mark zandi did go back..

    Not a big fan, so I’ll stick with my original position.

    why not? things would most certainly be worse w/o tarp, fannie/freddie and the stimulus.

    I would agree things would be much worse right now without the stimulus. That’s different though than the issue of whether the stimulus ultimately will prove a failure. If it wasn’t enough fast enough, that might end up being worse than having done nothing at all.

  54. 54

    By Jonness @ 40:

    But don’t despair. Now that China has cut us off, U.S. retirees are fleeing stocks and buying the safety of treasuries. Maybe we’ll get an additional quarter out the pony show after all. :)

    I wonder if they’re buying them as a deflation hedge? I’d also wonder whether how much of the sale of stocks is due to needing funds to live.

  55. 55

    By Jonness @ 42:

    By chico @ 33:

    we were talking if the stimulus worked or not.

    Let’s say I lose my job, I’m deeply in debt, and my uncle loans me $20,000.00 in order to make it through tough times. I go out and buy a house and a car and make payments for three months. On the fourth month, my uncle sees the light and refuses to give me another loan, so I default on the original loan. Did the first loan work?.

    Not a proper analogy at all when you’re taking about the economy, because the purpose of the loans for the stimulus is to start future activity. For that type of situation you’d need an analogy where the loans were to pay for the uncle’s son’s college, and you’d have to wait to see what the son did after graduating.

    Using your analogy, Redfin is a clear failure, because all they do is repeated borrow more money and end up deeper in debt. Is that what you were trying to indicate? ;-)

  56. 56

    By Scotsman @ 46:

    WTF? You can’t have it both ways, it either “worked”- and had an ongoing positive impact- or it didn’t. In your own words you admit it didn’t work, because there was no impact beyond the initial spending. Give us a break.

    I think it would be just as hard to argue that it had “no impact” beyond the initial spending as to argue that it created “no jobs,” which is what several Rs have tried to do. The question is whether it had enough impact.

  57. 57
    principals says:

    If pfft and others really do support the ponzi in which bernanke, geithner, wall street, and congress are enacting, then Thomas Paine is rolling in his grave for you that don’t have any of what he has prescribed!

    Man, actual GDP has been negative since ’09 with no chance of recovery due to the interference these crooks are getting away with. Has the bailouts helped, hell yeah they have helped the friends and families of these crooks, not everyday american citizens. The definition of what it is to be a productive Citizen in this country has definitely changed in the last 30 – 40 years.

    Pfft, here’s one of many posts by this blogger that contains the chart that explains it all:
    http://market-ticker.denninger.net/akcs-www?singlepost=2140372

    And love the durables report, pfft go to hell with your pump BS, friggen CNBS host wanna be!

  58. 58
    BillE says:

    By wreckingbull @ 50:

    RE: BillE @ 46 – Do you really talk about personal salaries with friends and associates? I must be an old fart, but that has always been one of those things one keeps to themselves. I don’t think anyone has ever asked me about what I make. I suppose you have no choice if your salary is available via a Freedom of Information request, but I guess I don’t understand what you mean about “when money comes up”. I guess I need to also throw in an obligatory “get of my lawn” too.

    I’m with you. But there’s been times when people I don’t even know that well have found out where I work and make a guess at what I make. Something like, “So, you must do pretty well there. You make about $xx a year?” I don’t give specifics and just say it’s less than their assumption.

  59. 59

    RE: BillE @ 58 – I used to tell people my hourly wage back when I worked at UPS, if they were looking for a job. $12 an hour with benefits was pretty good back in the late 70s for college students. Other than that, no.

  60. 60
    Scotsman says:

    RE: Kary L. Krismer @ 56

    “The question is whether it had enough impact.”

    Given where we (still) seem to be headed the answer to that becomes clearer every day. To eliminate any confusion the answer is “NO.”

    As for the jobs issue, I’ll just say that spending a couple of hours looking into the methodology used to calculate the numbers they come up with will reveal what a farce the whole thing is. There are so many assumptions and reporting errors that the validity of the final result is close to zero. None of the number would stand up to real scrutiny, and you may have noticed how they keep changing every time you open the paper or turn on your computer.

  61. 61
    GH says:

    RE: Jonness @ 43

    You said homes are “still roughly 25% higher than historical relationships to incomes.” I’m curious where you get that from. Do you have a source?

    By my calculation, many homes will be undervalued once the economy recovers.

    For example, suppose an Everett family making $60,000 wants to buy a first-time home, with 10% down. Assume mortgage rates have risen to 6% for the 30 yr fixed. Assuming 30% of thier gross income went to the house payment, they could ‘afford’ a home up to $250,000.

    A quick check of Everett home prices will find many first-time homes to be priced well below this amount.

  62. 62
    GH says:

    RE: GH @ 61

    Sorry, there was an error in my math. I used 33% of income instead of 30%.

    With 30%, the result is ~$230,000. Still below the current asking price of many Everett homes.

  63. 63

    RE: Scotsman @ 60 – I would agree that determining the number of jobs created/saved would be like shooting at a dartboard. It’s pretty clear the answer is something greater than zero, as some Rs tried to claim. But beyond that it’s anyone’s guess.

  64. 64
    BillE says:

    By AerisWind @ 45:

    RE: GH @ 19 – Interestingly, even with all the negative news in the media, most of my friends think the house price has already bottomed and will go back up soon. Some of them even buy their second or third houses in the last few months since they think the price is cheap now .

    Seems to be a lot of people talking about what a house was worth at one time, and thinking it will reach that level again in the near future. I haven’t seen any of them going all-in on the NASDAQ expecting it to move toward 5000 though.

  65. 65

    Living in the SW corner of Washington State we can report similar results with respect to which segment of the market saw the largest fall-off in sales. However, Vancouver’s “entry level” homes for sale typically top out at about $175,000!

    One demographic segment driving the sales of higher priced homes are the retirees leaving the high income tax states of California and Oregon. I sure hope the folks we have in Olympia don’t find a way to stymie that in-migration of capital.

  66. 66

    By John@ Vancouver Washington @ 65:

    I sure hope the folks we have in Olympia don’t find a way to stymie that in-migration of capital.

    You mean the voters–it’s an initiative that might change that. IMHO people who vote for that thinking it won’t lead to an income tax on everyone are very naive.

  67. 67
    The Kid says:

    RE: BillE @ 58

    Coming from the other side of it, It’s always absolutely baffled me why people consider their income to be something so deeply personal that it’s unforgivably rude to ask about it. I’ve seen people who are willing to divulge intimate details about their sexual fetishes or health problems who blanch at the thought of putting their income range on an anonymous survey. What’s the deal? Can anyone explain this to me? Please, I am genuinely puzzled. Maybe it’s just a generational divide.

    By the by, as people seem to be having difficulty with this whole incomes thing, lemmie help you out a bit. The median household income in King County is $53k year at last I checked.The per capita is $29k.

    According to wikipedia, for the city of Everett, the median household income is about $40k and the per capita is about $20k.

    From my admittedly rough calculations that means the 50th percentile of incomes in Everett can afford approximately a maximum of about $200k on a mortgage at todays interest rates. Once again, rough calculations. So you may want to readjust your thinking on what is “affordable”.

    You could assert that the 50th percentile has no business owning a home and should rent, as I have seen it not stated but implied on these forums before. In that case, we could bump it up to the 60th or 70th percentile and say that the prices are bang on, but that creates a simple supply and demand problem. If you are arbitrarily reducing the percentage of the population that “should” be able to afford a home, to say 30% to pick a random percentage, you had better make sure that there are only homes available for 30% of the population and a hell of alot of rental space. Otherwise supply exceeds demand and prices will have to come down.

    I think it’s important that people get over their (baffling, to me) squeamishness about incomes and start really looking at what kind of money people make around here. Presuming “everyone is about like me” is foolish.

  68. 68
    GH says:

    RE: The Kid @ 67

    If you live in an area long enough, you get a general idea of what “affordable” means.

    An Everett family making $60,000 should be able to afford a home. There is something wrong if that family needs to spend more then 30% of their income.

    In 2007, that $60,000 family would have spend 40-50%. Clearly overpriced.

  69. 69
    The Kid says:

    RE: GH @ 68

    Oh, I agree entirely, if a household pulling in $60k/year can’t afford a home on less than 30% of their income something has gone terribly wrong. I was just pointing out that $60k/year is 150% of the median household income for Everett. Not only should $60k/year be able to afford a home in Everett, they should be able to afford a pretty nice one.

    But we’re talking entry level homes here, and entry level wages aren’t $60k a year. There has to be movement at the bottom before there can be movement at the middle and top. Start looking at the household income statistics for people in the “first time home buyer” age ranges (30-35 these days) and things start looking pretty grim.

    I’m saying that not only are they overpriced, they are still pretty badly overpriced. Simple law of the marketplace, you have to sell your goods at a price that the target demographic can afford. Right now the target demographic for starter homes is woefully broke, and that’s unlikely to change anytime in the near future.

  70. 70
    Roger the Shrubber says:

    Let’s not forget that our Greater Seattle Area homes may have been overpriced for quite some time. Recall the 2008 Seattle Times article based on finding from UW’s Economic Policy Research Center:

    UW study: Rules add $200,000 to Seattle house price
    “The skyrocketing of home prices from 1989 to 2006 was largely because of laws intended to preserve the area’s character, analysis finds.”
    http://seattletimes.nwsource.com/html/businesstechnology/2004181704_eicher14.html

    From the article….

    Compared with 250 major U.S. cities, he[Theo Eicher] says, Seattle:
    • Is first in terms of the impact of state political involvement in land issues.
    • Is in the top 3 percent for approval delays for new construction.
    • Is in the top 10 percent in local political pressure influencing land use.

    …but it appears to be that way because we tolerate it.

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