Friday Flashback: Seattle’s Housing Bubble All-Star Team

Rather than focus on just one article for today’s Friday Flashback, I thought it would be fun to highlight a montage of brief quotes from a handful of local real estate professionals.


Marlow Harris on 360Digest, April 29, 2006: Housing Bubble Babble

Though I concede that we could be in for a market correction or a slowdown in housing sales and prices, I disagree that it will be of the mammoth proportions that many Bubble devotees believe it will be.

Everyone needs a home, and no matter what the value is, no one will lose money if they don’t sell it.

Here’s what Marlow had to say in the comments when I said that “I wouldn’t be surprised to see a 25% drop from today’s prices”:

Tim, you’re obviously frustrated and frightened by the current real estate situation and you’re getting sick of living in a garage.

Have faith in your talents to stay employed, bite the bullet, get a “0”-down 5-year ARM and get in the game.

You won’t regret it. It may cost you more in the long run to stay out.

Wow, I had completely forgotten that gem. When pressed, she also gave me her definition of the “mammoth” correction that we wouldn’t be seeing:

Ok, let me think. “Mammoth Proportions”? 10%? That would be a lot. I’d be bummed out if prices went down 10% or more…


Susan Ryan at Seattle Real Estate Professionals, October 2, 2006: Just Say No to Bubble Talk (original deleted, link goes to the HousingPanic post)

As I’ve said repeatedly, stock market terms do not apply to real estate. There is no real estate bubble and never will be. A decrease in acceleration is not an implosion (or even a pop).


Ardell DellaLoggia at ARDELL’s Seattle Area Real Estate Blog, November 25, 2006: Seattle Housing – Appreciation Graph

When I went to the underlying article What will your House Be Worth in 2016, I had to say to myself, why would we be second guessing Forbes and Moody’s? Surely they have the data to deliver the most reliable results.

…generally speaking…I like the fact that we do seem to be the ONLY City with these types of numbers.

"Why would we be second guessing Forbes and Moody's?"

If you’re curious, here’s my 2006 post on these charts: Economy.com: Seattle Definitely Special


Jon Ribary at Rain City Guide, February 16, 2007: Housing sales fall in 40 states; but not in Northwest

Do people behind the Rain City Curtin have their blinders on? Time will only tell, but if history is any guide (and I am NOT a historian) I would guess in time, with a smaller supply of products, demand will eventually grown (sic) so even though sales may be sluggish, over a 3 year window sales will continue to grow.


Larry Cragun at RealEstateUndressed, October 16, 2007: The Trouble With The Bubble Talk

Ok, I admit it, I went and read a bubble blog. … I fore-soothed I would see the babbling and whining of children. See the little boy pout. His name is Tim. He posts on the bubble blogs. … Sorry Timmy, sorry Robbie, watch out Alessey, people have to grow up someday.

Perhaps a better solution kids, is to just grow up and be good kids. Get some education. Learn some disclipine. Save some money. Be a hard worker. And stop whining and crying and pouting, especially on line.


Leanne Finlay at Seattle Real Estate Professionals, March 29, 2008: Smart or Stupid

There are people who are hell-bent on saying it’s stupid to buy now; their advice shouldn’t be taken as ‘advice’ but perhaps more as drama. It’s dramatic to suggest real estate prices will skyrocket down, but unless we see major unemployment, I don’t see that happening in our market. Buy smart, there are some very nice properties out there just waiting for you to come in the front door.


Mack McCoy at Seattle Real Estate Professionals, July 7, 2008: When Will The Seattle Housing Bubble Burst?

Certainly, Seattle has felt the effects of recent economic events. But it seems to me that the predicted “bubble popping” has yet to occur, and that perhaps predictions of doom were, gee, what’s the word I’m looking for . . . wrong?


Well, somebody was wrong, anyway.

The purpose of our Friday Flashback series is to remind people why it’s never a good idea to base your home purchase decisions on the word of someone with a vested financial interest in selling as many homes as possible for as much as possible, no matter what. If you’ve got a good example of local home salespeople or other industry shills on record making fools of themselves in the years before the bubble burst, shoot me an email.
  

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.

114 comments:

  1. 1
    Patrick says:

    Wow, that first quote is great.

    “Everyone needs a home, and no matter what the value is, no one will lose money if they don’t sell it.”

    That’s like two logical fallacies (strawmen?) in one sentence!
    “Everyone needs a home” – true, but not everyone needs to buy one… there are these things called apartments where they let you rent a home.

    “no matter what the value is, no one will lose money if they don’t sell it.” – well that’s true of stocks too. A stock analyst who says “well you don’t lose money unless you sell it” would likely get laughed out of town.

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  2. 2
    deejayoh says:

    Mack and Leanne are still at it over at SREP. Talk about living in a bubble…

    A Certain Calm

    Mack:

    I think back to a year ago. The World Was Coming To An End, and it was widely believed that real estate values would drop ten, fifteen, twenty-five percent by the end of 2009.

    You just never know, you know?

    Leanne’s response:

    I certainly feel calm. The real estate market has come alive, and everyone I know is busy.

    I guess everyone she knows does not include all the former real estate agents who have left the business in droves over the past 3 years.

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  3. 3
    David S says:

    RE: Patrick @ 1 – Banks know this of course and they are not loosing right now. They won’t loose money until they sell them, true statement.

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  4. 4
    Patrick says:

    Oh, and in the comments on Marlow Harris’s blog, you pretty much exactly called the percentage drop Tim:
    “… I wouldn’t be surprised to see a 25% drop from today’s prices.”
    May 1st, 2006 at 11:53 am

    Nice job. Normally I feel people shouldn’t toot their own horn, but in this case you are totally justified in doing that for as long as you want. You were making a reasoned argument using data and logic to back it up, and people like Marlow Harris and Larry Cragun were responding with ad hominen personal attacks with no facts or data.

    Not only were you right, but you had to put up with attacks from immature people who told you that you’re “thinking too much.” So yeah, you deserve all the credit and recognition possible.

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  5. 5
    The Tim says:

    RE: Patrick @ 4 – I totally botched the interest rate call though. Technically there’s still six months to go, but at this time I highly doubt we’ll see rates hit 9% next year.

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  6. 6
    Buy My House, Idiot Renters! says:

    I get misty-eyed reading these old quotes…

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  7. 7
    Dirty_Renter says:

    Cragun’s rant was particularly hateful.
    Perhaps Larry needs to follow his own advice and… ‘get some education’?

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  8. 8
    Dave0 says:

    Oh my god, I re-read that 2006 post at 360digest and Marrlow’s first comment is priceless:

    “Have faith in your talents to stay employed, bite the bullet, get a “0″-down 5-year ARM and get in the game.

    You won’t regret it. It may cost you more in the long run to stay out. You and your wife are both college graduates and I’m assuming, employed. You’re over-analyzing, worrying and thinking too much about it. Anyway, with a “0″ down, interest-only loan, what do you care if prices drop? If you lose your job and you lose the house, you’ll have no equity, right? So, by your estimation, nothing to lose.

    Tim, you’re over-analyzing and worrying too much about the purchase of what is likely the only product in your life that you will spend over $100,000 on. Don’t think too much about it, just take out a very risky loan, commit a large percentage of your future income and go into massive amounts of debt. It will be fine.

    Oh and you wouldn’t have put any money down, so you’d have nothing to lose. It’s not like you would have had to actually pay back any of the money loaned out to you if the value of your home went down and you owed more than the home is worth.

    I can’t believe there were (and still are) real estate agents out there that have such a mis-understanding of real estate. I wish there were stricter requirements to become a real estate agent, like say a 2-year college degree (at the very least). At least they upped it this year from one 60 hour course, to two courses totaling 90 hours; it’s a start.

    Thank you Tim for being the one sane person in the real estate world from 2005 through 2008 and allowing me to see the light before it was too late.

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  9. 9
    Sleepwalker says:

    By The Tim @ 5:

    RE: Patrick @ 4 – I totally botched the interest rate call though. Technically there’s still six months to go, but at this time I highly doubt we’ll see rates hit 9% next year.

    If rates hit 9% in the next 2 years, we’ll see another 25-50% reduction.

    Normally I think this horn-tooting is crass, but Marlow’s “get in the game” quote is so outrageously condescending and irresponsible… It’s mind-bogglingly unprofessional.

    Your “little” blog obviously got under their skin in a big way.

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  10. 10
    S. Marty Pantz says:

    That was one smug post by Mr. Cragun. How does getting a mortgage amount to “growing up” anyway? What’s he saying these days, I wonder.

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  11. 11
    Jillayne says:

    The condescending tone in almost all of the real estate broker comments is horrifying.

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  12. 12
    S. Marty Pantz says:

    RE: S. Marty Pantz @ 10 – (I supposed if I had clicked on the link attached before I posted, I would have learned what he’s saying these days.)

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  13. 13

    RE: Jillayne @ 11 – I saw one of Mack’s comments even got pulled by the P-I as violating TOS!

    As to the rest of you, I wouldn’t pat yourself on the back too hard. Many of you still are underwater from when you started being negative. Others had absurdly simple theories, such as Seattle being X months behind San Diego.

    As I’ve said before, of all the bubble bloggers, the only one that I recall who came close to the reason for the decline was Eleua (sp?). When you have a 50% chance of being right with a call (up or down), being right doesn’t really mean much unless you had a theory as to what would happen that actually happened.

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  14. 14
    Daniel says:

    By Kary L. Krismer @ 13:

    As I’ve said before, of all the bubble bloggers, the only one that I recall who came close to the reason for the decline was Eleua (sp?). When you have a 50% chance of being right with a call (up or down), being right doesn’t really mean much unless you had a theory as to what would happen that actually happened.

    There are two distinct issues:

    1) realizing something is wrong
    2) coming up with a correct description of what is going on.

    I am refusing to use the word theory as for me a theory is something rather special: http://en.wikipedia.org/wiki/Scientific_theory

    The second is always a lot more difficult to do. I would however argue that any moron should have seen what was wrong and many bubble bloggers did. The fact that all those “professionals” did not see the issues or where to scammy/greedy to acknowledge them shows you what to think of them.

    However to even attempt to make a prediction you would need to cover 2) which is much harder. Don’t blame the bubble bloggers for failing at 2). Blame those who failed at the much easier task 1).

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  15. 15

    RE: Kary L. Krismer @ 13

    Yes, In Seattle Its Worse With Higher Priced Real Estate I Imagine

    The average under-water home loan in America requires like $75K to sell it, out of the sellers’ pockets. In most cases, the sellers don’t have that kind of cash, so there they sit, forever.

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  16. 16
    LA Relo says:

    So many of those comments remind of a child with their fingers in their ears saying “na, na-na, na-na, na…I can’t hear you.”

    I’d love to see what they have to say now.

    Probably blame Bush.
    Or Obama.

    Or both.

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  17. 17
    Hugh Dominic says:

    RE: LA Relo @ 16 – My favorite economist at econtalk.org just did a great podcast. He outlined how a history of Fed bailouts of insolvent parties, since 1970, has trained bankers that there is no downside risk to making risky loans versus the major windfalls and bonuses they collect for doing so.

    And it continues. Nothing learned.

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  18. 18
    wreckingbull says:

    Cragun, Mackie, and Marlow all in one post. Christmas came early this year. Thanks Santa Tim! The only thing I learned from these ‘professionals’ over the years is what unprofessional behavior looks like.

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  19. 19
    JW says:

    I bought in 05′ and sold a couple months ago for 10% less. Lesson learned.

    Here’s the kicker my ‘next door neighbor’ had the exact same house, rented out the same/entire time for half what i was paying in my mortgage. Had I rented his house instead of bought mine and pocketed the difference I’d have over 100k in my wallet, instead I shelled out 40k at closing to pay off the mortgage i spent five years paying $2500 bucks a month for.

    The Real Estate game is over. The agents will be tomorrow what travel agents were yesterday…gone. Sorry for anyone to lose a job, much less see an entire profession disappear but the paradigm has shifted, thanks in part to the internet and in part to the bubble bust. When someone’s trying to scrape any bit of equity out of the sale of their home as they will be for some time (interest rates are rising,…so homes values are, my opinion, just starting to drop-we’ve just witnessed the beginning) the idea of paying someone 6% to do what can essentially be done for free plus a few hours of paper work…well you do the math.

    The cover is blown with all due respect, that real estate agent is a salesman like any other…and the last person you should ever listen to when you’re purchasing anything from a car to a vacuum is the person selling it. Do your own homework, scutinize the research and be informed. A lot of good people got caught up with good intentions selling real estate and making money hand over fist, not all of the are shills…however the folks in today’s posts are most definately shills, just tryin’ to make a buck…

    If a real estate agent wants to stay in the game build a business model that simply charges customers a low-flat fee to coordinate the paper work between a buyer and seller who found eachother on redfin…you’d be the busiest agent in town!

    People are still buying houses (albeit a few) but soon enough they too will be ‘underwater’ and learning the same lesson the person who sold them the home learned.

    Buying an owning a home is fantastic, however financing and mortgaging a home is entirely different. Thanks to this website and others like it for allowing citizens to make the most informed choices possible with possibly the biggest decision of their life…puchasing a home, which we now know carries more risk than a marriage and is probably harder to get out of!

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  20. 20

    By Daniel @ 14:

    The second is always a lot more difficult to do. I would however argue that any moron should have seen what was wrong and many bubble bloggers did. The fact that all those “professionals” did not see the issues or where to scammy/greedy to acknowledge them shows you what to think of them.

    What was wrong? It wasn’t necessarily prices, especially locally, although that was the case in CA, AZ and FL (although the uptick in the first half of 2007 was at an alarming rate). The main thing wrong was banks and other financial entities taking extremely risky, poorly thought out positions, which severely damaged the economy. So absent that having been your reason for a drop here, any guess as to future prices was just lucky (and not even that lucky because you had a greater than 50/50 chance given the prior years were up.)

    Let’s say rather than the financial crisis, prices had dropped because the bird flu wiped out 10% of the wage earners in the country. Would the bubble bloggers have then been right because they were saying prices would drop? What if an astroid or radiation leak destroyed most of the housing and industry in Seattle? Would the bubble bloggers have been right then? The reason you think something matters.

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  21. 21
    wreckingbull says:

    RE: Kary L. Krismer @ 20 – You might want to check the archives. Long before you started posting here, many of us were indeed pointing to a credit bubble as the cause of ridiculous Seattle home prices. I don’t think I ever saw bird flu or an astroid being mentioned. Calling it luck? That does not fly in my book.

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  22. 22

    RE: wreckingbull @ 21 – That could be. I’ve only been here a couple of years. My history goes further back at RCG, and that and the P-I’s REP site is where I ran into Eleua.

    BTW, since being here I’ve noticed Eleua is often attacked when he posts here. Not knowing the history here, I find that strange.

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  23. 23
    Daniel says:

    By Kary L. Krismer @ 20:

    So absent that having been your reason for a drop here, any guess as to future prices was just lucky (and not even that lucky because you had a greater than 50/50 chance given the prior years were up.)

    I should invest in companies promoting perpetuum mobiles. After all enthropy was rising all the time so far so a reduction must be imminent. *claps head*

    I should stop arguing with kitchen tables.

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  24. 24
    wreckingbull says:

    RE: Kary L. Krismer @ 22 – It won’t be me. I view him as the SB Patron Saint.

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  25. 25

    RE: wreckingbull @ 21

    Prediction Accuracy Was Never the Main Issue Either

    Almost all the past bubblebrains admitted it was their best guess or most likely outcome. I don’t believe I read too many historical blogs stating a 100% accuracy claim.

    I have seen a lot of recent posters at SB [and most of MSM too] that were apparently bullish with a quick bottoming of prices in early 2010, in their 2009 forecasts. They were wrong again. Was it luck or bad luck? IMO, many status quo thinkers are that way because it justified their mistakes and possibly protected their investments….in the end the actuals tell the story and it isn’t good for 2010 real estate investments in Seattle.

    I was talking to an engineering professional in New Castle that upgraded to a $500K split level 4 years ago. Single income, not that high either. She told me how smart I was keeping my real estate debt to half what I qualified for in 1999….a lot of people in my housing development call me Mr. Softwarengineer now-a-days, when years ago they wondered why I didn’t upgrade too…LOL.

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  26. 26

    RE: softwarengineer @ 25

    $43.00.

    That’s my prediction of some unnamed stock on some unspecified date in the future.

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  27. 27
    Scotsman says:

    Sorry, but luck has very little to do with it. Looking at facts and not just what people say, being willing to think for yourself, following a process through to a logical conclusion, that’s what it’s about. Just because Kary can’t or won’t make deductions about what’s going to happen in the future doesn’t mean plenty of other folks can’t do so very successfully. I’ve been watching this for years and have been consistently right on the events, but early on the timing. Let me take that back- I missed one crucial event- the government’s willingness to ignore the law and extend and pretend. I have no doubt how this all ends- collapse. The only question is when- next month or 6 years from now.

    We’ve gone from freaking out about $400B deficits to accepting years of $1.5T deficits in the blink of an eye. But like housing prices at 6 times average earnings, 30+% deficits can’t be sustained either. The system is going to crash. Soon enough what your house is “worth” will be a moot point. It will be worth shelter and perhaps some protection, but that’s it. Check back in 5 years and see who’s right again.

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  28. 28
    Markor says:

    Yes a credit bubble was noted here well prior to its popping in August 2007, which hit headline news in the major media.

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  29. 29

    RE: Scotsman @ 27 – Okay, relative probability rather than luck. If prices have been going up for 10 years, they’re more likely to go down than a city in the same state where prices have been flat during the same period. If they’ve been going up a lot for 3 years, they’re more likely to go down than if they’d just gone up a moderate amount.

    Stated differently, based on at the time recent price trends, you weren’t going too far out on a limb in 2005-06 to predict Las Vegas would drop significantly.

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  30. 30
    The Tim says:

    By Kary L. Krismer @ 20:

    Let’s say rather than the financial crisis, prices had dropped because the bird flu wiped out 10% of the wage earners in the country. Would the bubble bloggers have then been right because they were saying prices would drop? What if an astroid or radiation leak destroyed most of the housing and industry in Seattle? Would the bubble bloggers have been right then? The reason you think something matters.

    That argument makes no sense. The financial crisis and the out of control rise in home prices are directly related matters. Bird flu / asteroids / radiation leaks would have been completely unrelated occurrences.

    Home prices didn’t fall because of some random unpredictable event. The financial system spent years building up an unsustainable house of cards, largely based on rising home prices. The financial crisis occurred because home prices began to fall, which caused home prices to fall further.

    Home prices & the financial system were part of a giant economic positive feedback loop, working to raise prices on the way up, and push them down when things fell apart.

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  31. 31
    Scotsman says:

    RE: Kary L. Krismer @ 29

    ” Okay, relative probability rather than luck.”

    You’re on the wrong page. Prices are an output, not an input, at least until some sort of feedback loop is established. Watching prices is a terrible predictor, that’s why so many get it wrong. If you watched inputs like wages and interest rates this game was/is pretty easy to figure out. Once interest rates bottomed the game was really over.

    Now the national economy is just like your family economy and the housing economy. How long can you spend like you’re making $100K when your income is only $60K? This too must end, and it will, with much the same impact as it had in the housing industry.

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  32. 32

    RE: The Tim @ 30 – I’ll give you most of that, but that has little to do with the types of arguments I’m addressing–e.g. Seattle is XX months behind San Diego. So again, the reason you think something matters.

    Also, IMHO, what made the situation you describe much worse was the percentage of houses that were in the bubble states (e.g. CA, AZ, FL). As part of the real estate licensing courses in Washington, one of the things they teach is that one of the purposes of Fannie and Freddie was to make capital available to more areas of the country. What never occurred to me was the reverse could happen–that conditions in a relatively small number of states could wipe out a significant percentage of the capital of the entire country, making it less available everywhere. That it did I think relates back to my earlier point about banks and other entities not having very good risk control.

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  33. 33
    wreckingbull says:

    Seriously, if someone spent some time in the archives, I think you could bring up some very compelling evidence that most here knew exactly what was going on, even before the likes of Susan Ryan told us to just say no to bubble talk. That would make for an interesting post too, Tim.

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  34. 34
    Dave0 says:

    By Kary L. Krismer @ 20:

    What was wrong? It wasn’t necessarily prices, especially locally, although that was the case in CA, AZ and FL (although the uptick in the first half of 2007 was at an alarming rate). The main thing wrong was banks and other financial entities taking extremely risky, poorly thought out positions, which severely damaged the economy. So absent that having been your reason for a drop here, any guess as to future prices was just lucky (and not even that lucky because you had a greater than 50/50 chance given the prior years were up.)

    Kary,
    What I saw was wrong with the picture in 2005 was that the cost of owning (mortgage payments + maintenance + taxes + insurance) was more expensive than renting the same property. At that point I realized something was fundamentally wrong and the home prices at that time were not sustainable. The only logical reason to buy a home was if you thought price appreciation would make up for the extra cost of owning a home over renting, but there was not enough data to validate that price appreciation would continue. My thought was, if it doesn’t make sense for me to buy now, then it must not for many others. Thus, demand will fall, and prices should go down.

    I did not know what Mortgage Backed Securities or Collateralized Debt Obligations were, I didn’t even know any of that crap was going on, so there was no way for me to predict how to decline would happen. All I knew was that something was fundamentally wrong and the situation at that time was not sustainable.

    What Daniel is saying, and I agree with him, is any moron (especially professionals within the real estate industry) should have seen, like we did, that something was fundamentally wrong. My stance is any real estate professional that denied the existence of the bubble is either stupid or evil, and in either case I would not want to do business with them.

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  35. 35
    Daniel says:

    By Kary L. Krismer @ 29:

    RE: Scotsman @ 27 – Okay, relative probability rather than luck. If prices have been going up for 10 years, they’re more likely to go down than a city in the same state where prices have been flat during the same period. If they’ve been going up a lot for 3 years, they’re more likely to go down than if they’d just gone up a moderate amount.

    The reason for prices likely going down is then however not that they went up for years but that they were out of whack with all those places where the same did not happen. In the same way housing prices were out of whack with economic fundamentals, just like The Tim illustrated in countless plots.

    Just to make sure something very fundamental:

    Rolling a 1 on a die is not more likely just cause you rolled large numbers for a long time. Yes, over an infinite amount of rolls each nuber will have been rolled the same percentage of times but for each roll of the die the chance is the same.

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  36. 36
    Daniel says:

    By Dave0 @ 34:

    My stance is any real estate professional that denied the existence of the bubble is either stupid or evil, and in either case I would not want to do business with them.

    Exactly. Thank you for putting it like that =)

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  37. 37
    ARDELL says:

    In the middle of other things…so haven’t read through the entire post links and comments, but wanted to note that the graphs from my post, shown in this post, are Moody’s graphs and not mine. Most of the graphs in my blog posts over the years are mine. But these are directly from the linked to Moody’s article.

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  38. 38
    deejayoh says:

    By JW @ 19:

    The Real Estate game is over.

    or maybe you are just really bad at playing it? I mean, your one experience doesn’t exactly refute an entire marketplace any more than a bad stock purchase means Wall St. is corrupt. What you describe as your timing is certainly not great.

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  39. 39

    By wreckingbull @ 33:

    Seriously, if someone spent some time in the archives, I think you could bring up some very compelling evidence that most here knew exactly what was going on, even before the likes of Susan Ryan told us to just say no to bubble talk. That would make for an interesting post too, Tim.

    I didn’t mean to imply that Eleua was the only one who saw something close to what actually occurred, but I would bet if you pulled up the archives there would be a lot of nonsense posted in the same threads. I agree though, that would be interesting. I found going through some of those old P-I thread interesting.

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  40. 40
    deejayoh says:

    By Kary L. Krismer @ 22:

    RE: wreckingbull @ 21 – That could be. I’ve only been here a couple of years. My history goes further back at RCG, and that and the P-I’s REP site is where I ran into Eleua.

    BTW, since being here I’ve noticed Eleua is often attacked when he posts here. Not knowing the history here, I find that strange.

    I’m not gonna “patron saint” Eleua. He’s kinda bitter and a little bit out there. Reference his first post on his web site before you hold him out as the only rationale poster here….

    Do the Math: Why Real Estate Will Get Cut By At Least 50%, and more likely 75%

    I find his predictions on the downside as ridiculously negative as the posters Tim is poking fun at are to the positive.

    For those who are keeping score, Bainbridge Island prices (the subject of his blog) are off about 15% since the date of that post…

    http://www.zillow.com/local-info/WA-Bainbridge-Island-home-value/r_23574/#metric=mt%3D34%26dt%3D1%26tp%3D5%26rt%3D8%26r%3D23574%26el%3D0

    And I also disagree that other opinions expressed here about the future are somehow not valid. If I tell you a stock is 90% likely to fall in price in the next year, that’s pretty good information. And that’s what most people here were saying The trend is unsustainable, prices are more likely to go down than up Wait to buy. Seems to me that it saved a lot of people a lot of money. Except JW.

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  41. 41

    RE: deejayoh @ 40 – I have said in the past that he did overstate the results–so far. ;-)

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  42. 42
    Sparky says:

    Kary,

    Even if people didn’t know how everything would play out, I agree with the posters who say that something seemed wrong, and that’s what brought them here.

    I moved to the PNW at the beginning of 2008, and everyone was pushing me to buy as soon as I could. I needed to get a condo so that I could build up equity and sell it to some sucker in a few years. That way, I’d have enough money for a SFH.

    That doesn’t (and didn’t) make sense! It was much cheaper to rent here than to buy, housing prices had grown way faster than inflation, median incomes weren’t anywhere near what seemed to make the prices here affordable for the average family. If I could sell my (hypothetical) condo in a few years and trade up, who was the new guy coming in to buy my condo? I felt like I was sitting at the very bottom of a big pyramid of ever increasing debt loads. My parents bought their first house with a 15 year mortgage. I expected that I might need to take a 30 year mortgage, especially since the coasts cost more than the middle of the country. But when I started seeing things like negative amortization loans, it was clear that money was just being created from nowhere, and actual earnings weren’t supporting prices.

    So did I know how it would play out? No, absolutely not. I didn’t know about most of the crazy financial games that were being played, and couldn’t have forseen the massive gov’t bailouts. I don’t even know much about economics; I’m an engineer who took a single econ course in college.

    But what I could see was that phrases like “instant equity,” “prices only go up,” “buy now or be priced out forever” didn’t make any sense. I mean, how can I be priced out forever? Where are the new, richer people going to come from? They didn’t exist, it was just going to be someone taking out an even crazier loan than I had.

    At some point, something had to give. I wouldn’t agree that this meant I had a 50/50 shot of being right (that prices would go up or down). Looking at the market from the outside, the situation really was rediculous, and it didn’t take much of a stretch of the imagination to forsee that the market would have to correct.

    You’ve been focusing a lot lately on the offset from San Diego graph, like that’s the only thing people were looking at. That graph has been labeled as being for entertainment purposes for as long as I’ve been looking at it. It seems disingenuous at best to claim that that’s the data that made bubble bloggers decide something was going to happen. On the other hand, if San Diego had still been going up, I wouldn’t have been at all surprised to see the same graph (without the entertainment only claim) popping up from the NAR as absolute proof that I’d have more equity in 18 months.

    Also, a big thanks to The Tim. I’ve been reading this blog since I moved out here, and it helped me keep my sanity while everyone shouted at me to jump on the homebuying bandwagon. My wife and I have been renting since moving here, and I’m really glad that there was a voice of reason out there to oppose the roar of the housing bubble believers like those mentioned in this post. I’d really like to own a home, but can’t imagine the situation I’d be in if I’d actually purchased at the beginning of 2008.

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  43. 43

    By Sparky @ 42:

    You’ve been focusing a lot lately on the offset from San Diego graph, like that’s the only thing people were looking at. That graph has been labeled as being for entertainment purposes for as long as I’ve been looking at it. It seems disingenuous at best to claim that that’s the data that made bubble bloggers decide something was going to happen.

    But they were saying that. If I had to guess, Tim has that graph only because so many people were saying it. I doubt he ever considered that something viable.

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  44. 44
    Cheap South says:

    Tim – Has anyone contacted you to follow up?….discuss further?…apologize? are they still around?

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  45. 45
    wreckingbull says:

    RE: deejayoh @ 40 – I always liked his bitterness – perhaps that says something about my disposition. He did later clarify/adjust that 50-75% off prediction to be worst-case scenarios. We are definately there now in that light. I still give him plenty of respect for predicting the downfall of Washington Mutual, especially in relation to their capitalized interest accounting methods. He did this before anyone, even on this blog, smelled a whiff of trouble.

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  46. 46
    The Tim says:

    By Cheap South @ 44:

    Tim – Has anyone contacted you to follow up?….discuss further?…apologize?

    Hah, that is funny.

    … are they still around?

    Yes, I believe all of the agents quoted in this post are still practicing real estate in the Seattle area.

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  47. 47
    Dave0 says:

    Kary,
    The origination of the graph that offset NW cities to So.Cal. cities was before you started posting here I believe. I believe the reference originated with this post: http://seattlebubble.com/blog/2006/10/18/local-prices-are-not-headed-backward/

    At that time, most of the country had peaked and Seattle had not yet, and local “experts” were saying that while everyone else’s market was going down, Seattle won’t because Seattle is special. But Tim looked at articles from other markets, like California, and they all had the “we’re special” argument before their prices started going down. So Tim started theorizing that Seattle lagged behind California, and the country as a whole. Which could make sense if you think about people from California moving to the northwest because homes are cheaper here, which has been a popular theory around here for a long time.

    The offset idea didn’t just come from some crazy idea to line up two lines on a graph.

    Other references:
    http://seattlebubble.com/blog/2006/10/19/a-california-comparison/
    http://seattlebubble.com/blog/2006/10/20/a-california-comparison-part-2/

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  48. 48
    Dave0 says:

    here’s another “behind the cycle” archived post where Aubrey Cohen says “Seattle also may be behind the cycle because the previous tech bust in 2001 delayed its entry into the latest housing boom.”

    http://seattlebubble.com/blog/2007/06/27/seattle-just-maybe-behind-the-cycle/

    and here’s another:

    http://seattlebubble.com/blog/2007/02/21/seattle-running-6-12-months-behind/

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  49. 49
    EconE says:

    30 year mortgages

    Time to buy.

    Adjustable rate mortgages recommended by Alan Greedscam 2001-2002

    wtf?

    Interest Only Arms 2003-2004

    WTF!

    Neg-AM 2004-2005

    HOLY $HIT!

    Neg-AM liars loans 2006-2007 (no SSN required!)

    We’re in trouble.

    Resets on the majority of the loans…2-3 years.

    Worst loans written starting in 2006.

    2006+(2 or 3) years = MBS/CDO meltdown 2008-2009

    Easy.

    and as Dave0 says, the Realtors (and Mortgage brokers) were either stupid or evil.

    They belong in jail just as much as the Wall Street pigs.

    It wasn’t about predictions. It was ****ing MATH.

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  50. 50
    EconE says:

    OK…now for one of my favorite flashbacks.

    http://raincityguide.com/2007/02/11/confessions-of-a-zero-down-lender/

    Here’s some of the money quotes from Rhonda…

    “Bill, Zero down financing to get people into homes definately work in the right situations. Look at the wealth your friends have that they would not if they had continued renting. Thanks for your comment.”

    But…Rhonda did say…

    “There should be a class where buyers with credit scores under x and with less than y in savings, need to attend. Not just a 1-2 hour class, either….I’m thinking the class should be 1-2 hours a weekend for 1-3 months covering such topics as: (1) creating (and sticking to) a budget; (2) understanding credit; (3) how to avoid bankruptcy; and (4) why you don’t need a new flat panel tv. This should actually be taught in high school. Just my thoughts.”

    Ahhh! I like it. THEY SHOULD BE TAUGHT IN HIGH SCHOOL.

    What did the RE Educator Jillayne have to say about this?

    “Why would we want to spend our tax dollars for use in the classroom teaching children how to be financially sound citizens?”
    snip
    “Why would a consumer need a class before embarking on homeownership? Isn’t this what real estate agents and lenders are for: to help educate the consumer?”

    LMAO!

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  51. 51
    David Losh says:

    RE: EconE @ 50

    Wow.

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  52. 52
    Scotsman says:

    RE: EconE @ 50

    What is this, the third time you’ve completely blown these people out of the water with their own words? My favorite is still Ardell telling Tim he wasn’t qualified to do real estate analysis, and should leave it to experienced professionals- such as herself. In the good old days of 15% annual appreciation, multiple offers and bidding wars, the real estate agent was god. A “good” agent was the life of the party, the gatekeeper to a life of ease, riches, and early retirement, not only for themselves but for the “investors” they worked with through “teams” of specialists. Now that their fifteen minutes of fame is gone and the sun has moved on to shine on some other dog’s butt, a hard period of adjustment is being endured. Most surprising, the condescension still remains and no admissions of error or regret are ever uttered. Is that general human nature, or just the underlying nature of those attracted to the industry in the first place?

    “But Suzanne said…”

    http://www.miamicondoforum.com/?p=1197

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  53. 53
    Dave0 says:

    RE: EconE @ 50 – Wow… Bill Water’s first comment on that link is crazy:

    “A friend of mine was barely able to hang onto his 100% financed house in 2004 when they discovered expensive undisclosed problems. Due to a high DTI ratio, they were financed at a subprime (from the looks of it) rate ~7.7%, but thanks to 20%appreciation were able to pull out enough $$$$$ to fix both major problems and pay off one of their car loans. Had the house only appreciated 10% or so – they’d have been forced to sell.

    The were able to refinance a second time now that the home has appreciated around 65% and get out of the subprime loan – so they’re both driving brand new Lexuses.

    No wonder we are in the mess we’re in, subprime borrowers were refinancing their house to buy luxury cars?

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  54. 54
    Scotsman says:

    RE: Dave0 @ 53

    What, you don’t buy rapidly depreciating luxury cars with 30 years loans? Are you part of the solution, or part of the problem? The world is not as simple as it seems. ;-)

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  55. 55
    Aaron says:

    RE: Scotsman @ 54

    For what it’s worth, I don’t think financing a car through a house loan is necessarily a bad idea. Interest rates on used cars (which are usually a great value as compared to new cars) are often financed at relatively high rates, compared to a mortgage. Financing an automobile this way can make sense to save money.

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  56. 56
    David Losh says:

    RE: The Tim @ 30

    “The financial crisis occurred because home prices began to fall, which caused home prices to fall further.”

    Home prices declined on the collapse of the financial markets.

    Actually if you read through your thread, comments, and links you can see that in 2006 home prices were already receding even though we were having double digit appreciation.

    The financial markets collapsed on over secularization. It made little difference what the price of the assets did, you could probably blame the resets which lead to foreclosure, but even that doesn’t make a lot of sense.

    Really none of the post or comments are to the point of home prices. It’s all about bubble buyers.

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  57. 57
    EconE says:

    By David Losh @ 56:

    RE: The Tim @ 30

    The financial markets collapsed on over secularization.

    I guess they should have stayed with Jesus?

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  58. 58
    JW says:

    RE: JW @ 19
    not sure my timing was so off as my fundementals…

    I’m sure there are some out there that currently ‘know how to play the game’, but they’re certainly not realtors or real estate investors….they work high up in banking and live on the other coast.

    As a percentage of the licensed profession, i’d be curious how many are making a ‘living wage’ today selling real estate…if you say more than ‘a small’ you’ll hear laughter fr. the computer speaker.

    Real estate is a high risk game today, people are betting big on both sides with enormous uncertaintly as to the outcome (thus making it…high risk).

    Prudent to me is to wait for a steady upswing in values, better to lose 10% by buying on the rise than try to pick a bottom. I can respect anyone’s position on this market and hey, take all the risks you want, but the numbers speak for themselves very clearly and the probabilities for the future are awfully convincing…we have a ways to go before this whole real estate market truly hits the ‘reset’ button.

    God bless us if the apocolypse doomsday’er are right,… my mind can’t go there but my mind can certainly wrap around a coming economic ‘depression’ on the heels of this ‘great recession’.

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  59. 59
    EconE says:

    RE: Dave0 @ 53RE: Scotsman @ 52

    Why should there be any mea culpas?

    Everybody took the money and ran…

    Steve Miller Band…’Take The Money and Run’

    http://www.youtube.com/watch?v=jZwLsvO6YTw

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  60. 60

    By The Tim @ 46:

    By Cheap South @ 44:
    Tim – Has anyone contacted you to follow up?….discuss further?…apologize?

    Hah, that is funny.

    … are they still around?

    Yes, I believe all of the agents quoted in this post are still practicing real estate in the Seattle area.

    If you keep practicing real estate, maybe eventually you’ll get it right?

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  61. 61

    RE: EconE @ 50
    Hey, Thank you. I’d just mentioned in the last day or so on Seattle Bubble that you’d left Rhonda and Jillayne alone. I’m glad I have such a strong influence on you.

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  62. 62
    EconE says:

    RE: Ira Sacharoff @ 61

    That one was for you.

    Group Hug!

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  63. 63
    Scotsman says:

    RE: Aaron @ 55

    OK, but I doubt you know what you’re doing. Let’s assume you want to buy a $20,000 used car and finance it 100%. You can get a 6 year car loan at 10% and make 72 payments of $367.45/mo. for a total of $26,456. Or you can wrap it into your home loan and effectively make 360 payments of $106.91 (hey, that sounds like a deal!) for a total of $38,490. That’s $12,000 more out of your lifetime income stream to buy. . . interest. What a deal.

    Now, you can argue that you’ll get a tax write off with the mortgage wrap, and that’s true. But if you’re so broke you can’t get from $100 to $367 on a car payment I’m going to assume you’re in the lowest tax bracket, so you’ll save about $2,000 on your taxes. You’re still out $10,000 though. But here’s the killer- that car isn’t going to last 30 years- let’s give it 10. So in years 10 through 20 you’ll be paying on car number two while you’re still paying on car number one. And in years 20 through 30 you’ll be paying on cars one, two, and three in effect, since the first two still haven’t been paid off, they’ve just been carried forward. In fact, if you’re a serial refinancer you could effectively be paying on these things for more than 30 years as the balances keep being carried forward and wrapped into the newest loan.

    Maybe you should looking into one of those high school classes on finance and life management.

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  64. 64
    Scotsman says:

    RE: @

    The thinking above is a great example of why we’re in the mess we’re in. The root cause is people thinking they deserve or need something they just can’t afford. Sure, you can buy a Mercedes on a 30 year loan, but you still can’t afford it. I try to convince folks I know to save and pay cash for everything. Some get it, some just give me weird looks. I’ve had one car loan in my life- while I was in college. Every other car I’ve ever owned has been paid for with cash. And while it’s true I don’t buy the most expensive cars new, it’s not like we suffer. I drive an Audi A8- the same car J. Lennox Scott drives. Same year, same color. I bet his is paid for too. Paying interest is never a good deal- unless the item financed is generating cash flow. Rant off.

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  65. 65
    Curtis says:

    RE: Kary L. Krismer @ 20

    I beg to differ. By 2006 prices were clearly inflated in Seattle. In 2006 I refinanced my mortgage and they claimed my house in a very average part of seattle was now worth a good 25% more than it had been in 2002. That’s when I said “No way – something is wrong here” and that is when I first came across Seattle Bubble and Tim made a very clear case. His arguments were backed up facts and data. Others (such as Calculated Risk) made similar arguments with different expertise and datasets to back them up.

    None of them, including Tim, claimed to know exactly how things would blow up (they did speculate and there is nothing wrong with that) – but the general outlines? Yes, Tim (and some others) nailed it. It was not Bird Flu or some unpredictable event that caused the economy to fail and house prices to drop, it was caused by the the factors that Tim (among others) pointed out again and again with good facts to back up their arguments. Credit where credit is due. And the people who disgreed with what Tim was saying? They generaly did not have any facts, just opinions.

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  66. 66
    ARDELL says:

    RE: Scotsman @ 52

    My personal favorite was when the woman asked me “Are you saying my husband isn’t man enough to buy me a house?” And I said something like” You’re gollyed straight I am!” LOL. Oh the good old days.

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  67. 67
    Herding Cats says:

    People no longer care if they are wrong about their investments. It is more important for them to be seen as politically correct. They will destroy their retirement savings in order to better fit into the consensus opinion/majority view. That’s all that matters to most people. They live simply to fit in.

    Besides, if their peers become poor, they feel they should be poor, too. Otherwise they will stand out and be seen as different — a potential threat to the herd.

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  68. 68

    By wreckingbull @ 45:

    RE: deejayoh @ 40 – I always liked his bitterness – perhaps that says something about my disposition. He did later clarify/adjust that 50-75% off prediction to be worst-case scenarios.

    On that topic, his predictions could have come true if the system had collapsed at the end of 2008, early 2009. And they still could come true–the end point for such predictions is when every one of us is dead. ;-)

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  69. 69

    RE: Dave0 @ 47 – I don’t know why you’re trying to blame Tim for the 18 month thing! ;-) :-D

    That first link seems to be focused mainly on employment. If I had been posting back then, my comment would have been something to the effect that California state government is really screwed up, and that their employment situation was more likely to worsen than ours.

    Another point I might not have made at the time (but would have in early 2007), is that you need to fear an overheated market. What I’m getting at there is that many of the CA markets did show signs of overheating, and if and when Seattle started to show such signs that would be a concern that the “Seattle is special” arguments wouldn’t counter.

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  70. 70

    By Aaron @ 55:

    RE: Scotsman @ 54

    For what it’s worth, I don’t think financing a car through a house loan is necessarily a bad idea. Interest rates on used cars (which are usually a great value as compared to new cars) are often financed at relatively high rates, compared to a mortgage. Financing an automobile this way can make sense to save money.

    The interest paid on a car loan is typically fairly insignificant over the life of the loan. About $3,000 on a $20,000 four year loan, which you might be able to save half of by using your house. It’s not worth putting your house at risk for that savings is not worth it, IMHO.

    I’d also note that unless you do it through a HELOC or second you can pay off, borrowing against your house can affect you longer than what it takes to pay off the amount borrowed.

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  71. 71

    By Ira Sacharoff @ 61:

    RE: EconE @ 50
    Hey, Thank you. I’d just mentioned in the last day or so on Seattle Bubble that you’d left Rhonda and Jillayne alone. I’m glad I have such a strong influence on you.

    That was a very strange position for Jillayne, an educator, to take.

    Personally I’d like to see, in addition to personal finance, having basic economics taught at the high school level.

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  72. 72

    By Scotsman @ 64:

    RE: @

    The thinking above is a great example of why we’re in the mess we’re in. The root cause is people thinking they deserve or need something they just can’t afford. Sure, you can buy a Mercedes on a 30 year loan, but you still can’t afford it. I try to convince folks I know to save and pay cash for everything. Some get it, some just give me weird looks. I’ve had one car loan in my life- while I was in college. Every other car I’ve ever owned has been paid for with cash. And while it’s true I don’t buy the most expensive cars new, it’s not like we suffer. I drive an Audi A8- the same car J. Lennox Scott drives. Same year, same color. I bet his is paid for too. Paying interest is never a good deal- unless the item financed is generating cash flow. Rant off.

    A Scotsman post I can agree with every word of!

    I remember in the mid-80s, Porsche offered a very low payment lease, because it was also secured by your house and I think ran for 10 years. I’m not sure how you would get out of such a beast early.

    In the example I gave of a car loan, I used a $20,000 loan as an example. If you’re borrowing more than that, you’re buying too much car. I could even argue if you’re borrowing that much, you’re buying too much car.

    The point is, people spend way too much money on cars that they can’t afford.

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  73. 73
    chico says:

    RE: Scotsman @ 64

    “I try to convince folks I know to save and pay cash for everything. Some get it, some just give me weird looks.”

    And by time your able to save enough money to pay for college for your children they will be well into their 40’s.

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  74. 74
    chico says:

    RE: ARDELL @ 66

    My personal favorite was when the woman asked me “Are you saying my husband isn’t man enough to buy me a house?” And I said something like” You’re “golly”ed straight I am!” LOL. Oh the good old days.

    Or as Sarah Palin would say, they’re husbands are either impotent or limp!

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  75. 75
    S. Marty Pantz says:

    RE: Dave0 @ 53 – Right, Dave. Of those buying and refinancing during the boom, 30% were trying to get rich by flipping, and another 30% were using their homes as an ATM to take trips and buy cars–according to some sources–and I am now supposed to believe these were all people “saving for years for a down payment and taking money out only to pay for their kids’ college”? (This is not what YOU said, Dave, but someone else. I am just using your post as a jumping off point to make my own point here.) Now that they are “underwater” I am supposed to feel bad? Or support some massive principle reduction program? Give me a break.

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  76. 76

    RE: S. Marty Pantz @ 75 – Following up on the ATM comment, does anyone else find it odd that the GDP is higher now than in 2006 and 2007, when we no longer have so many people spending money based on their house appreciation, and we have roughly 2x the unemployment?

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  77. 77
    ARDELL says:

    RE: chico @ 74

    As I recall the woman was pregnant and her husband was an attorney. He was complaining that his friends had trust funds or parents who were giving them money to buy, and he had to do it all on his own. …and he deserved a very large and brand new house given all his years of education.

    The reality of these discussions on SB and RCG is we should learn from one another. Eleua did more to pop some Kool-Aid out of my brain than any other individual over the last 20 years I have been in this industry. I am forever grateful to him for that. We generally don’t have the opportunity for varying perspectives from our peers.

    It’s nice to be mentioned in Tim’s post, but given those are Moody’s predictions via Forbes, I fail to see how it “fits” the theme of this SB post. Granted there are probably others that contain my graphs and predictions that do…but that one isn’t “it”.

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  78. 78
    David Losh says:

    RE: EconE @ 50RE: EconE @ 57

    I forgot about the flying monkeys. Seattle Bubble was the home of the flying monkeys, like from the Wizard of Oz.

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  79. 79
    Scotsman says:

    RE: Kary L. Krismer @ 76

    “does anyone else find it odd that the GDP is higher now than in 2006 and 2007?”

    It isn’t really higher- the true measure of GDP is actually lower. What you’re seeing is the base with an extra $trillion or $trillion and a half of deficit financed QE and stimulus. Take the current GDP and subtract off the 12+% that is deficit financing and you’ll see that we’re still in recession, headed for depression. Just like your family, when you make $100K a year but add $14K in credit card charges your income isn’t really $114K, is it? That’s all that’s happening on a national level.

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  80. 80
    David Losh says:

    RE: Dave0 @ 53RE: Scotsman @ 52RE: EconE @ 50

    I have absolutely no problem pointing out that banks were, and are, giving away money. Banks are giving away money all over the world.

    Ten years ago one guy in Peru, in Lima, lent money on home appliances, one guy. If you didn’t pay he would send a truck to pick up the appliances, and bill you for what ever the difference was. Today, everybody has a credit card, Master card, and Visa.

    In Spain, fifteen years ago you bought property for cash or a large down payment. With new mortgage lending standards the price of Real Estate has quadrupled in fifteen years, in some market places.

    From what I understand this is kind of the same as the entire global financial market place. The value(?) of the derivatives market has double in, I think, six years.

    Now everybody is in a panic about debt. Debt is money. You can buy debt for pennies on the dollar. You can buy Real Estate for a 70% discount, in some market places. The car auctions? Housing auctions?

    I’m seeing nothing but opportunity.

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  81. 81
    David Losh says:

    RE: Scotsman @ 79

    Well, you beat me to that. I agree about the government debt. Infusing dollars by creating debt is a problem for the economy.

    I think Obama should have let the tax cuts, and unemployment expire. There, I said it, he was wrong. He was also wrong to go to Afghanistan, and probably his trade agreement with South Korea set off a bunch of bad blood with North Korea.

    I liked the Obama speech. The thing about holding the middle class hostage for giving the wealthy a tax break was a nice touch. He will though have to be the bad guy some time.

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  82. 82
    JimN says:

    RE: Kary L. Krismer @ 76

    Kary,

    Also take look at Denninger’s favorite graph:

    http://market-ticker.org/akcs-www?get_gallerynr=756

    If it works out as planned, this will allow the economy to “catch fire” and allow for a self sustaining recovery. Fighting the debt crisis with more debt is the paradoxical solution. Now if this proposition doesn’t work . . .

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  83. 83
    zipzippygc says:

    I think history is best seen after years, perhaps many, not just months, go by, so The Tim is right to keep congealing the historical postions and postings, such as the RE industry views vs. a few visionaries, like himself. Only a few in Seattle forsaw and foretold, instead of sold. The genius of The Tim forming this blog and being spot on — early enough to be actionable — is mind blowing. I emailed this site address to scores of people I cared about in 06-07-08 because everything was at stake. Not many were interested, it was too left field, but I became entranched.

    I was more interested in stock prognostications at the time, but luckily this site came up in the search engine and broadened my perspective of a potential disaster as a prospective buyer. This site put me in a cautionary saving state and while it put me at odds in my marriage at the time, I put the brakes on an Edmonds ‘charmer’ that had a mad house of about 25 people at a March 07 showing, complete with an unfinished bathroom and an oh-so-smug RE showing agent. Something stank from that moment on for me. After the obligatory argument with my wife on why I was not going to make her dreams come true on that Wysteria Lane, I became an avid late night reader of The Tim.

    Tim deserves a local medal of some sort and continued Internet notoriety. He has offered thousands a chance to save their treasure and deepen their personal strategy in an unsafe world.

    Now, not a day goes by where I don’t think where in the world might a bubble be building, exist, or imploding. It almost defines economic theory. There is no stasis.

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  84. 84
    Blurtman says:

    RE: zipzippygc @ 83 – Did one realy need this site in 06-07-08 to see where things were heading? All one had to do was to compare trends in home price appreciation with trends in income appreciation to see what was coming. I utilized this type of analysis with a few folks in 2005 who would not acknowledge what it meant. They wanted to keep the Ponzi going because they wanted to profit from it.

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  85. 85

    By David Losh @ 81:

    I liked the Obama speech. The thing about holding the middle class hostage for giving the wealthy a tax break was a nice touch. He will though have to be the bad guy some time.

    You liked an incredibly stupid extension of a poor analogy? I’ll give President Obama that he wasn’t the first to start that analogy, but what he said was absurd. Even Jon Stewart called him on it. Harming the hostages is the only card a hostage taker can play. President Obama just announced that he would negotiate with hostage takers.

    I’m sure he didn’t really mean that, but that doesn’t excuse his saying that because someone might believe him and take some hostages.

    Too many extreme left Ds are in complete denial about the election, and think that they can still get by without compromising, as they could in their “We won the election” world after 2008. If they think compromise is bad in the lame duck session, just wait. They’ll have to compromise a lot more in 2011. Even fmr. Rep. Ford, who is Chairman of the D’s election committee (or some such thing) is critical of the most left wing Ds for being in denial.

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  86. 86
    David Losh says:

    RE: Kary L. Krismer @ 85

    Those are all hostage situations, Afghanistan, South Korea, and the Republicans.

    We no longer have any business in Afghanistan. If we don’t kill Osama bin Laden, if he is a forgotten ghost, then we need to get out. You can’t negotiate with a narco state.

    South Korea was allowed to dump the Hyundai product, or any Daewoo they choose into the United States. Selling back some cars isn’t going to hold water. It was an economic action that caused or responded to an attack from North Korea. Obama needed a strongly worded response. He instead hid behind his Secretary of State.

    Yes, I would put the Republicans in the same camp. The anti American activity of the Republican Party is a mockery of everything the United States stands for.

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  87. 87

    RE: David Losh @ 86 – I would expect you to put the Rs in the hostage-taker camp, and totally ignore what the soon to be impotent House Ds are doing holding up the agreement the White House cut.

    The House Ds need to come to the realization that their activities the past two years lead to a rather large defeat, and as a result of that next Congress they will have no power and in fact can probably expect payback for the “we won the election” attitude expressed during the past two years. They can try to hold up this agreement the White House cut, but to what end? No consideration of Start and other important issues the remainder of the year? Are they really that stupid that they don’t realize this compromise can be easily passed next year, assuming the Rs will give President Obama the same deal? Are they really that stupid that they don’t realize that Ds will be blamed if the compromise is not passed?

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  88. 88
    David Losh says:

    RE: Kary L. Krismer @ 87

    Obama had no right making a deal on the tax cuts. They need to expire. Unemployment needs to expire.

    Obama should be getting us out of Iraq, and Afghanistan. That should be his present talking point.

    He should be reigning in Geitner, at this point, and addressing the deficit, that he inherited, rather than add to it. Any money given the economy will be squirreled away and hoarded. We know that now. It was a mistake to use Quantitative Easing as a tool to get trade concessions from South Korea.

    Great! If the Republicans want to hold up the START Treaty that’s something they will have to answer for later.

    I do think the Democrats, and Obama should keep to the agenda they advanced in 2000, and forget about the Republicans.

    We need to get out of the wars we have, and transfer focus to building a stronger military, which we can do at a reduced cost by ending the wars for oil. Then we need to secure the funding for Medicaid, Medicare, and Social Security, which can be done by having open and public debate about government spending.

    All the pieces are there. The Republicans are insignificant. They will continue down the path of supporting a small minority of wealthy individuals by attempting to crush the middle class.

    It’s very transparent. The Democrats just need to focus on the tasks at hand.

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  89. 89

    By David Losh @ 88:

    RE: Kary L. Krismer @ 87 – Obama had no right making a deal on the tax cuts. They need to expire. Unemployment needs to expire.

    That’s consistent with the belief here that government shouldn’t support the housing market, and just let it collapse. Imagine what wages and the overall economy (and crime rates) would do if people had to get work to get any money coming in!

    BTW, the Ds can’t ignore the Rs. The Rs will soon control one half of the Congress. And again, I don’t know why they would, since ignoring the Rs is part of what got them voted out in large numbers.

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  90. 90
    Matthew says:

    My favorite thread of all time:

    Is Seattle Bubble Proof? (From 2006) the comments here are priceless!

    http://raincityguide.com/2006/11/02/is-seattle-bubble-proof/

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  91. 91

    RE: Matthew @ 90 – I didn’t realize I was commenting at RCG back in 2006. Time flies.

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  92. 92

    I have to chime in here regarding mortgage brokers must have been evil or stupid…. some, sure… but not all. You have to remember that it’s the banks and wholesale lenders who created the products, sold them to mortgage brokers and then underwrote and funded those loans.

    I would have a pile of “reject” files on my desk with reps from all the big banks and major wholesale lenders (some gone now) asking to review, offering to write up and then tell me that I wasn’t making enough on files. It was really disgusting. And I lost a ton of business (realtor and buyers who knew someone else just got a stupid mortgage, so they should too) since I wouldn’t go there…which still is fine with me.

    The last “subprime” lender to call on us was Countrywide… it was shocking…wish I had the notes I wrote…it might have been early 2007…everyone else had stopped or at least had started raising the bar…. not CW.

    I guess my point is that without the banks/lenders offering and pushing their products to mortgage brokers, their mortgage bankers and correspondent lenders–they would not have existed.

    If I had a nickel for overtime a wholesale/banker rep said to me “you need to start selling our option ARMs… do you know how much money you’re losing”… it really was bad.

    RE: EconE @ 49 -

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  93. 93

    RE: EconE @ 50

    I’m reading backward and probably shouldn’t be commenting after attending my Dad’s services today…but I welcome this as “getting back to normal”.

    I do cringe at some of the stuff I’ve said or thought in the past…I’ve never claimed to be perfect and I’ve always felt that people need to be very responsible and accountable. They should seek out as much information as possible and make educated choices. I still think credit and debt management (including mortgages) should be taught in high school. It will be interesting to see what spin our politicians take with home ownership and what impact it may have on those who believe our elected officials.

    One thing I’ll say about those who did 100% financing is that those people lost nothing–or at least, the did not lose their down payment. Those who have lost the most are those who actually made a down payment.

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  94. 94
    David Losh says:

    RE: Kary L. Krismer @ 91

    You commented in 2008. The thread started in 2006. RCG has a long list of long standing threads.

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  95. 95
    David Losh says:

    RE: Kary L. Krismer @ 89

    You don’t like what I have to say about Real Estate, and neither do my long time investor clients.

    If you were going to sell, two years ago would have been good. Today you are trading dollars, and those dollars aren’t that great. If you sell a rental property, and wait a year to buy two properties, it is my opinion, your net return on that investment will be a wash.

    You have to pay to get out, and pay to get in, and in the mean time you would lose the rental income.

    In the future, which is the part you don’t see, rents will moderate. We have thousands of in city housing units that are falling apart along with thousands of housing units on the fringe that are falling apart. There are thousands, if not millions of square feet of commercial space that is currently vacant, so prices there will need to be renegotiated.

    Real Estate has a core value. That core value is eroding. I don’t see why any one would pay a land lord the amount of rent currently being charged.

    As rents decrease, and more properties come onto the market by foreclosure, or people tired of losing equity, all prices, and rents, while go down until people start buying again.

    You can call that a collapse if you want, but there is nothing that can be done. Real Estate is way over built.

    So Obama making a big show, or Republicans talking tough won’t change that. The only thing any one wants to hear about is reducing the deficit, and funding the programs that are in place, and promised.

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  96. 96
    doug says:

    RE: David Losh @ 95

    Actually, by polls, the only thing anyone wants to hear about is unemployment.

    I’m all for compromising, but 2 years of tax cuts for the richest Americans is too steep a price for one more year of unemployment. Unemployment actually stimulates the economy, as it is spent right back in. The rick can afford to hold on to their money, and more often than not, do. Obama caved.

    I would say the Republicans campaigning on the deficit, then signing the biggest budget-busting bill ever is stunning, but it’s exactly what I expected from them.

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  97. 97

    By doug @ 96:

    RE: David Losh @ 95

    Actually, by polls, the only thing anyone wants to hear about is unemployment.

    I’m all for compromising, but 2 years of tax cuts for the richest Americans is too steep a price for one more year of unemployment. Unemployment actually stimulates the economy, as it is spent right back in. The rick can afford to hold on to their money, and more often than not, do. Obama caved.

    He got more than the unemployment–there were other tax credits, including one that makes SS even less stable.

    As I’ve said before I would have preferred an upper end tax break that was related solely to those in business, and possibly even only those that actually employed others. Something along the lines of the capital gains, where Schedule C income would have a lower maximum rate. That would encourage business.

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  98. 98
    Agents Ranking Real Estate Agents says:

    I think most real estate agents saw then end of the boom coming well before the general public. It’s not like the floor fell out of the market overnight. It was a gradual slowdown over the course of 18-24 months before the collapse of the mortgage giants. Let’s be honest people, did you really not see it coming?

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  99. 99

    RE: Kary L. Krismer @ 97
    That sounds reasonable. Holding up extending unemployment benefits in order to continue tax breaks for the wealthy made the Republicans come across as heartless and not representing the majority of Americans.
    But the part of the “compromise” that bothers me the most is the reduction in the social security payroll tax. This was money exclusively dedicated to paying social security benefits. Now there will be far less revenue coming in exclusively dedicated to paying Social security benefits, and it will be shifted so that more money will come from the general fund to pay for social security. It makes social security more subject to the vagaries of politics, and strikes me as being a nail in the coffin for social security. Social security can be tweaked to make it a lot stronger and solvent, but that would take political courage, something the vast majority of politicians lack. Instead, they’re passing on the problem to future generations, saddling them with crippling debt.

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  100. 100
    doug says:

    RE: Ira Sacharoff @ 99

    The SS payroll was a very odd piece of the tax package (which will now assuredly pass). I’d like to hear the negotiating that led to THAT one.

    Well, for better or worse we have our big, fat tax breaks. Corporations once and for all know they can’t and won’t be penalized by this administration for crashing the economy. Will companies start hiring? I’m sure if they don’t, we’ll just be told by supply-siders that the rich just need even more tax cuts. Time to put up or shut up, corporate America.

    Americans at large

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  101. 101

    RE: doug @ 100 – The SS tax cut is kicking the can down the road in the extreme, but only if you incorrectly assume that the SS system is a retirement account.

    Stated differently, I think they’re thinking this is money they won’t have to repay for most people for a long time. That’s the wrong way of thinking about it.

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  102. 102

    By doug @ 100:

    Will companies start hiring? I’m sure if they don’t, we’ll just be told by supply-siders that the rich just need even more tax cuts. Time to put up or shut up, corporate America.

    As I’ve said in the past, I think that will depend on President Obama toning down his anti-business rhetoric. I think he will now that the Ds got their butts kicked in the election, but what I don’t know is if business will believe him. I’d add that having the Rs control the House may give business a bit more courage, irregardless of what they think of President Obama.

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  103. 103
    doug says:

    RE: Kary L. Krismer @ 102

    Snow-shovelling money at companies doesn’t count as playing nice? Companies were so hurt and frightened by things said months ago, before the elections, that they’re just paralyzed?

    I agree on you with lots of things, Kary, but there’s absolutely NO evidence of that, in fact there’s evidence against it. You’ve focused on the Obama @ss-kicking comment before, and the DJIA rose 33 pts on that day, 11 the next. Wall St doesn’t care about rhetoric, and Wall St. certainly isn’t scared of Obama.

    Not to mention Obama has only talked tough about the banking industry and BP. The banking industry is doing quite well, all things considered. Banking is one of the only sectors that’s hiring now. Why are the other corporations, that sell products and services to the masses, not hiring? Could it be that there’s no DEMAND for goods and services amongst the masses? Occam’s razor for goodness’ sake.

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  104. 104
    WestSideBilly says:

    Kary, I’ve asked other people, and other than some mumbling about the health care law, what exactly has Obama said or done that is anti business? ARRA had numerous breaks for businesses big and small, the domestic car industry was bailed out, health care / drug companies were given a big piece of pie with the health care law. Is it just that the previous 8 years were so blindly pro-business (W’s “do whatever you want, we don’t care”) that our concept of neutrality has been skewered?

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  105. 105

    RE: doug @ 103 – Actually, GM was just saying this last week that it’s hard for them to hire due to government intervention. And the banks paid off their loans ASAP to get out from underneath it.

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  106. 106

    RE: WestSideBilly @ 104 – I think his first thing was being critical of companies taking retreats in Las Vegas. That really helped their local economy! Then there were threats of extra taxes on bonuses and changes to government bailout programs after the loans were made. And he wasn’t exactly nice to the leaders of BP over the oil spill, even though there was little or no evidence in at the time and many entities possibly at fault (with the most recent reports being Haliburton might have been the most negligent actor).

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  107. 107
    doug says:

    RE: Kary L. Krismer @ 105

    http://www.thenewstribune.com/2010/12/10/1459645/gm-was-humbled-by-near-death-experience.html

    That’s GM only, a company that had to be saved from bankrupcy, because of their own incompetence. Moreover, they were talking about hiring business executives, not middle-class workers. That doesn’t backup your argument AT ALL.

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  108. 108

    RE: doug @ 107 – I know they were talking about hiring executives. I suspect the talent pool for assembly line workers is pretty vast.

    You describe their prior management as having been incompetent. How are they supposed to change that if they can’t attract talent? We own a lot of GM. It’s in our interest for them to have talent. President Obama doesn’t understand that it costs money to get people who can make money. Thus his attack on salaries, bonuses and other benefits.

    President Obama also made a lot of negative comments about AIG after the point we had taken them over and owned AIG. It’s incredible stupidity to try to drive talent away from companies you own by making working their so adverse that you lose people not as a result of your own choice, but a result of theirs. You tend to lose your best that way. He was pandering to the voters, but didn’t get any votes. Lose, lose.

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  109. 109

    RE: doug @ 107 – BTW, what other administration in history has been critical of the Chamber of Congress? Interesting though that when they are they don’t name the entity.

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  110. 110
    The Tim says:

    Guys, this conversation is way off topic. Please move it to the Global Economic December Thread.

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  111. 111
    David Losh says:

    RE: Agents Ranking Real Estate Agents @ 98

    Many people saw the bubble bursting, many agents who are now retired saw the end coming.

    The difference is how it happened. I thought, and believed we would have hyper inflation. I still think that if either Clinton or McCain were elected we would have had inflated out way out of this mess.

    Inflation is what many people were thinking, and talking about. Real Estate people talked about this being the 1980s, or similar to the Savings and Loan scandal, or us having a massive run up in oil prices.

    I don’t know any one other than here on this blog, or Calculated Risk that saw a deflationary spiral.

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  112. 112
    David Losh says:

    RE: Kary L. Krismer @ 102RE: Kary L. Krismer @ 101

    Well you did put a whole bunch of stuff out there. Obama has been extremely kind to business, and the Republicans. He needs to get tough, and get the country headed in the right direction.

    If your point is that we, the tax payers, should pay the executives who crashed our economy, while taking junkets to Las Vegas, more to attract more of the same kind of talent, then yes we have a lot to discuss in the Global Economic Thread.

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  113. 113
    x says:

    @ardell

    Ardell’s comments from John Ribary’s blog –

    1. Tim, Some day we’ll have to meet for coffee, so I can teach you how to read the stats.
    2. You really should take the time to understand the stats better. You have a lot of readers.
    3. I just saw someone asking your real, real estate questions on your blog Tim. You really should have a huge disclaimer that you are not licensed to give such advices.
    4. I meet with professionals all of the time to put our heads together and review market trends. Since you are not in the industry, have never owned real estate as far as I know, and are giving real estate advices to a large number of consumers on a daily basis, I think it odd that you have no passion to expand your knowledge on the subject.
    5. Talking about stats is one thing. Giving real estate advice borders on practicing without a license.

    Disgustingly condescending, with an empty intimidation and insinuation about the legality of Tim’s blog. Apparently free speech is dead in this country if it discusses real estate.

    Jillayne also joins in the fun, real estate “experts” dishing out the “expert” advice.

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  114. 114

    […] will recall, Larry Cragun is a former Issaquah real estate agent who received a brief mention in a previous Friday Flashback for his characterization of bubble blogs as “the babbling and whining of children.” But […]

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