Posted by: 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.

62 responses to “Predictions: Will 2011 Finally be the Bottom?”

  1. Jacob Beaty

    With Servicers / Banks still managing an increasing REO portfolio with hundreds of properties needing to be foreclosed on it will drag prices down another 5 – 8%. Until we actually see >25% of sales from distressed properties we won’t bottom out.

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  2. Chow King

    Here’s my two cents for you bubbleheads. Zillow, a Seattle base real estate web site had reached a 15.7 million unique monthly visitors in January. That’s 75 percent year over year and a new record. Their loan request are up 56% from December to January! That’s a signal that people are definitely diving into the market. Herd mentality is coming right to yah. Another good indicator is that Wells fargo bank is loosening their loan qualifications. You just need a 580 FICO score w/ 3.5 percent downpayment in order to qualify. BAM! BABY! The economy is growing, employment is gaining momentum according to ADP. Doom and gloom prophecy is a thing of the past. What is this all tells you? A 10 to 15 percent increase in value.

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  3. LA Relo

    Great feedback, thanks for sharing.

    Personally, I think 2011 will be worse. I’ve been watching foreclosure activity and there are more Auctions (supposedly) taking place than I can fathom. My guess is most of these are not being bought on the spot in the parking lot in Bellevue square but are instead spending the following 6 months or more becoming an REO.

    Remember, we went down about 5% in 2010 with the Gov’t throwing every housing prop up scheme in the book. That’s all gone.

    If rates go up, prices will eventually fall. Only a substantial rise in incomes will stabilize them and that’s not happening.

    I agree with Tim that tax credit bribes pulled late 2010 sales into early 2010, but I also think there is a lot of shadow inventory waiting, and I don’t think there are enough sideline sitters to out number that inventory, pending REOs, normal sales, and pending new completions.

    I do think the summer months will be better year over year, but overall I don’t think total closed sales in 2011 will trump 2010, at least by much.

    Sales flat
    Inventory up – 10%
    Prices down – 10%

    We’ll see.

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  4. K

    Chow King, I suspect you’re trolling since you started with an insult. But hey, let’s go with it: what you seem to be arguing for a reinflation of the bubble, prices trending back away from historical averages. That seems to be based on kicking the can down the road, since interest rates have literally nowhere to go but flat or up. Unless we see a massive shift in employment you won’t get your bubble back, and when interest rates go up it will have to force prices down unless we have big-time inflation going on.

    In short the only way I see your scenario playing out is if we are inflating at the same time.

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  5. Scotsman

    Let’s back up a bit and start with the macro environment. Consensus for 2011 is 2.5% GDP growth with 1.2% inflation leaving 1.3% real growth for the year. But if we properly subtract out the $1.5T in deficit spending/QE2-3 etc., (roughly 10% of GDP) we are left with a real growth rate of almost negative 9%. Negative growth of 10% is the technical definition of depression. Like it or not, this is the reality of our national economy. Sure, it doesn’t appear to be that bad, but like the freshly painted house with the newly sodded lawn that looks great in the photos, further inspection shows the foundation is collapsing and the real value just isn’t there.

    Unemployment is expected to drop into the mid-to-lower 9% range by the end of the year but as many of you know this number is a statistical fiction. The number that counts, the percentage of the population that is employed, will probably continue to fall. This, coupled with the fact that one out of nine housing units in the country is currently empty will continue to depress prices. Remember that if Seattle appears to be “special” now over time regional differences tend to equalize in both employment and housing.

    We are living in a mirage of normalcy fueled by ignorance, apathy, and habit. Sure, some people will continue to buy homes, some will still think they are great investments, but in the end it comes down to cash flow. Do you have a job, what does it pay, what are interest rates, can you really afford it? For more and more people the answer will be no.

    For 2011 prices down 10%, sales may climb a bit, government intervention can change the game at any time, but only for a short period. Fundamentals will continue to deteriorate. We will most likely overshoot the trend line on the way down. Bottom in 2013/2014.

    http://web.rollins.edu/~wseyfried/forecast.htm

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  6. mojo

    RE: Chow King @ 2

    Most of my freinds look at Zillow not because they are scoping out new homes to purchase, but because they want to use that z-estimate feature to gauge if they have lost money on the home they have already purchased. Web traffic on Zillow probably isn’t the most reliable indicator.

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  7. Cheap South

    RE: mojo @ 6

    Correct. I have been at zillow about a million times myself; and I have no plans (other than to get depressed looking at the values in my ‘hood).

    I think this rate will continue. We’ll finish 2011, 8-12% lower. Looking forward to seeing the numbers from Dec-March.

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  8. ray pepper

    Prices going up in 2011-2015 just as sure as my middle name is Hector……………..

    Pray for a flat line in housing and the market continue to run!

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  9. Ben

    RE: Scotsman @ 5 – I agree with Scotsman on the macro view.

    Government intervention aside, if the market is allowed to work its magic and finally let supply, demand, and price work towards a natural balance, I believe we should go down 10% or more in 2011. I believe we are overdue for interest rate increases as well.

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  10. deejayoh

    Nice post Tim. Great to get the guest predictions straight from the horse’s mouth. and this reader thanks all that participated!

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  11. Ross

    By Scotsman @ 5:

    Let’s back up a bit and start with the macro environment. Consensus for 2011 is 2.5% GDP growth with 1.2% inflation leaving 1.3% real growth for the year. But if we properly subtract out the $1.5T in deficit spending/QE2-3 etc., (roughly 10% of GDP) we are left with a real growth rate of almost negative 9%.

    That’s the kind of sketchy math that politicians try to pull:

    * QE/QE2 are not debt (printing)
    * You can’t subtract debt spending from growth. It makes no sense. If a company grows revenue by 50% while taking on debt of 50% of its former market cap, does that mean the company didn’t grow? No, debt and growth are different concepts.
    * This spending happened in prior years. So even if it were valid to subtract debt from growth, it shouldn’t be carried forward. The debt was incurred in 2010; growth is for 2011.

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  12. Ross

    When all the “experts” agree, they are almost certainly wrong (there’s actually studies that back this up). So, I’d take a contrarian point of view that we could see flat to small growth for 2011 (on the order of 0-2%).

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  13. Blake

    My “guess”… prices down around 10%, with the last part of the year being particularly gloomy.

    Folks had a nice little Christmas season buying more stuff they wanted… and Congress gave them all more tax breaks to perk them up for the New Year… and the booming stock market creates more “wealth affect”… But, like in time series modeling, there is a “decay” effect. The chickens will need to roost…. eventually!

    The wild card in here are possible actions by the Fed and Treasury… as Ray keeps alluding to. You know that they are game-planning various scenerios – – drastic actions. Helicopter Ben will do most anything. As China and the emerging markets take action to stem inflation we could see major corrections in the BRIC economies, leading to a crash in the commodity bubbles and deflation. There is an awful lot of risk (not to mention the momentous changes afoot in the Mideast!)

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  14. Ben

    RE: Ross @ 11 – Ross, it’s your math that is sketchy. A better analogy for you to understand would be this: If you borrow 12% of your spending on credit cards, are you 12% richer? How many years can you do that before maxing out your credit? How rich will you feel when you have to actually pay it back or when your credit is damaged enough that your rates get jacked up?

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  15. karl

    It has been mentioned here many times before. Growth measured in GDP is flawed….I wish they would find a new bel-wether. GDP includes government spending ect… that really doesn’t reflect the true health of an economy.

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  16. Devmud

    Great Post Sir:- Thank you

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  17. Crashcadia

    More than 10,000 baby boomers a day will turn 65, a pattern that will continue for the next 19 years.

    http://gazettextra.com/news/2010/dec/28/baby-boomers-near-65-retirements-jeopardy/

    Homeownership rate for that age group is about 80%

    Put that in your shadow inventory cup and drink it.

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  18. EconE

    It depends on what part of the market we’re talking about. Some people got better deals than others in 2010. I think that there is more room to fall in the condo market than in SFH’s and as Tim says, the outlying areas will get hit moreso than the close-in areas. The people trying to sell the high end (1,000,000+) properties will find out that there are far fewer potential buyers (or renters) in that strata so I expect to see the high end fall more than the low end.

    Put me down for a 10%-20% drop depending on the product/area with no quick rebound until the next bubble whatever it may be.

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  19. Mason Boswell

    I agree with Ross that the agreement of the four panelists disturbs me most, and I even see some potential rosiness in Tim’s prediction. What about the other side? There is the very real possiblity that prices collapse. The Fed is doing all it can to prop up the economy with false hope, which could very well lead to a significant crisis. Unrest in the rest of the world, exported inflation, rising food prices, more defaults in Europe, and a number of other events could conspire to lead the average American to spend more on necessities like food and have less money to upgrade a home or buy a first home or banks to stop extending loans (how big do you think a cash market or even a 20% down market would be among today’s anti-saving culture?). Foreclosures could also flood into the market from the inventory that we know is sitting on the sidelines. Given these factors, a prediction that prices could fall another 20% or more is not ridiculous, and though it may feel like a less “safe” prediction, it could well turn out to be right.

    I want to sell my downtown Seattle condo, so this isn’t what I want, but I’m a realist enough to see that it is a statistically reasonable possibility.

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  20. Scotsman

    RE: Ross @ 11

    “That’s the kind of sketchy math that politicians try to pull”

    Nothing sketchy about it- the only reason this economy is afloat is because an essentially insolvent federal government has kept itself and the national economy alive by using a combination of borrowing and money creation. Had the feds continued to run $300-500B deficits which were the norm you might have a point. But they have gone well beyond that, and in fact are pretty much committed to a decade or more of similar levels of borrowing. But they aren’t really borrowing at market rates from the pool of available funds because that would ramp interest rates and kill the “recovery.” Through a series of manipulations they are essentially borrowing from themselves with the help of a Fed/Treasury collusion that will prove extremely difficult to unwind, and will prove horrendously inflationary when it finally collapses.

    Will housing “crash?” No, it moves too slowly and is too sticky on the upside, and with the Fed pumping $trillions of dollars a year into the sick patient we’ll get a slow but certain death, not a dramatic collapse. Anyone who thinks the foundation is solid and that we will not only continue to move forward but eventually recover and return to a sustainable position anything close to what this country has occupied for the last 40 years is either grossly uniformed or seriously delusional.

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  21. Dave0

    “I think it’s fair to call this one a tie on price.”

    um… what? So let me get this straight… Steve Tytler’s prediction was about equal to the Case Shiller index, which is worshiped on this blog as the most accurate measure of change in home prices out there (by myself as well). Meanwhile, Tim’s prediction was about equal to some index Zillow put out that I’ve never heard of, and it’s Zillow, which we all know if not very accurate at valuing homes. And you want to call that a tie? Admit it Tim, Steve Tytler had a more accurate prediction for 2010 that you did. You can’t win them all.

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  22. corncob

    By Dave0 @ 21:

    And you want to call that a tie? Admit it Tim, Steve Tytler had a more accurate prediction for 2010 that you did. You can’t win them all.

    I agree, Steve totally won this one comparatively.

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  23. Blake

    RE: karl @ 15
    “Growth measured in GDP is flawed….I wish they would find a new bel-wether.”

    Yup… Over the last 40 years we’ve seen a huge increase in two income families where the kids are in daycare ($$) and instead of an inexpensive home cooked meal they either eat out or eat prefab frozen dinners.

    In terms of GDP the daycare and extra expenses on eating out or frozen meals are an “increase in per capita income”… = “quality of life”??

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  24. Ross

    By Scotsman @ 20:

    RE: Ross @ 11

    “Thatâ��s the kind of sketchy math that politicians try to pull”

    Nothing sketchy about it- the only reason this economy is afloat is because an essentially insolvent federal government has kept itself and the national economy alive by using a combination of borrowing and money creation [...]

    I don’t disagree at all that the fed, Bernanke and the government are running various shenanigans to prop up the economy. There’s definitely market manipulation going on (though when hasn’t their been). And the outstanding debt is a huge problem that doesn’t have seem to have any viable solutions proposed by the politicians. And I agree with various other commentators that GDP, as a measure of growth, has many flaws.

    BUT, none of that means you can subtract last year’s debt from this year’s GDP growth numbers and derive anything that is meaningful. It isn’t.

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  25. Jillayne

    I wonder what this economist will say?

    http://www.seattlemba.org/blast/20110215_DinnerBio.html

    I’ll be attending this dinner event. What questions should I ask him on behalf of Seattle Bubble readers?

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  26. Jonness

    Stimulus driven or not, I believe the consensus is for around 3% GDP growth during 2011, a greater than inflation increase in the stock market, and about a 5% drop in home prices nationwide. In addition, most analyst expect some job growth, but not enough to bring unemployment down much.

    We have economic headwinds of underwater homeowners, the notion of homes being crazy wealth generators long gone, a massively looming foreclosure mess, high unemployment, rising interest rates, wages stagnating, Seattle home prices historically high compared to rents and incomes, and no more $million mortgages to unemployed strawberry pickers.

    So you have a kind of blah growth picture coupled with house prices needing to decline considerably. Since, house prices are notoriously sticky on the downside, I expect them to fall less than 10% this year. However, I don’t expect them to fully bottom until we at least get to general 2003 prices in the region. I do expect some Spring price and sales support, but I do not believe the bounce will represent the upside after the bottom. IOW, this mess will take years to fully work its way through the system. To be certain, house price appreciation will lag a recovery in jobs.

    My oil stocks are up about 14% in the month of January alone. I’m diversified, so I’m by no means up that amount in total on the month. But it demonstrates money is always flowing somewhere. People got used to money flowing into Puget Sound houses, but that’s betting on a dead horse these days. Looking at the above consensus, what’s the better risk, stocks, cash, other, or local real estate? Of the three, leveraging 100% of your wealth into depreciating Puget Sound real estate that costs 10% to sell is the worst strategy.

    There are a million and one reasons to buy a particular stock, commodity, or asset. Buying is easy because we all love to spend money. But the biggest trick in investing, is selling. People don’t want to admit they lost, or they don’t want to pull profit because they might miss future gains, or they want to get their money back when their bet starts losing value, so they stay in too long. Enter today’s on-the-fence home sellers. This group mostly consists of clueless amateur investors who are heavily leveraged, overly attached to the idea of getting rich simply because they placed a bet, and incapable of making good investment decisions. For these and other reasons, house prices will remain sticky on the downside. But down they will continue until homes once again represent a less risky investment.

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  27. Jonness

    By Jillayne @ 25:

    I’ll be attending this dinner event. What questions should I ask him on behalf of Seattle Bubble readers?

    Hi Jillayne:

    What micro and macro economic signs and symptoms should we expect to see when house prices finally reach bottom in Seattle? How will these signs and symptoms differ from the bottom of the Phoenix housing market?

    Thanks :)

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  28. Scotsman

    RE: Ross @ 24

    “none of that means you can subtract last year’s debt from this year’s GDP growth numbers and derive anything that is meaningful”

    Sure it does. I don’t want to start a pissing match, but think this through- I know you’ll see it differently. It’s the difference between real or organic growth and and a one time shot of cash. It’s like the difference between your getting a raise to increase your income from $85k to $100k, and your putting $15k on your mastercard. Both get you to $100k in year one, What happens in year two? The raise is still there- an increase in real productive capacity. The Mastercard advance isn’t happening again, but the interest expense, a negative, will be there year after year for a long time, so in a very real sense you’re now worse off in year two than you would have been without taking the advance. Your income has not only dropped back to $85, but now it’s hit with a new $3k expense. The national economy or GDP number works exactly the same way. The increases aren’t real or lasting, and the interest will kill us in the end. Rising stocks, commodity prices, none of it is real, just like your first $15k borrowed “income” increase wasn’t real in my example above. When rates rise, when the easy flow of new debt or “printing” stops, it will all collapse.

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  29. Scotsman

    RE: Jillayne @ 25

    Ask him if he thinks the U.S. still has a competitive advantage in terms of cost and education over countries like China and India, and whether that advantage will be sufficient to support an increase in our standard of living, simply allow us to hold even, or leave us increasingly vulnerable to the new global market place. The answer to that question will go a long way toward determining what incomes, and hence housing prices, will do over the next decade.

    Be sure to remember while you’re listening to him that he is a paid speaker, hired by a group that has a clear interest in home prices not only stabilizing but increasing, and he is loath to insult or discourage his hosts. After all, there are many other mortgage groups out there and a good review here will help him land other similar gigs.

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  30. Cheap South

    We have to stop equating growth with well being. Basic math tells you there is a point when it can’t continue. And economics is not exempt from basic math.

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  31. One Eyed Man

    I’ve always believed that my personal quality of life isn’t measured in GDP, per capita income, GPA or win/loss record. But what’s true for me as an individual isn’t necessarily true for a society. I’m a “would be” hippie lost in time. I’d rather fish from a sea kayak and farm for produce and grains than draft commercial lending documents or design software.

    But if you want to change the macro measurement of quality of life from one that involves macro economic productivity, you’ll probably have to change human nature if not the laws of nature. Even in a quasi post scarcity society where food and shelter are abundant, people will trade their time for more economic security and more consumer crap. But the reasons aren’t as simple as just plain old greed. They go back to the laws of Darwin. The first things that a band of indians wanted when they encountered europeans were fire arms, powder and lead.

    The natural law of survival of the fittest requires that human populations adapt and survive. In the modern age survival requires technology to compete with other societies (both peacefully and for defense). And technology generally dictates and demands a social path of resource exploitation and increased efficiencies that are generally measurable in GDP growth.

    The hippie dream died at the hand of Darwinian theory as much as anything else. Some say that native american cultures were more respectful of the environment and lived in harmony with the environment. Others say that’s only true because they lacked the technology to rape mother earth the way modern society has. In any event, their cultures lacked the ability to compete with the mechanized leviathan of the industrial revolution.

    I doubt that anyone uttering their last dying words said “I just wish I’d spent more time at the office.” No one aspires to be a workaholic. I’ve probably spent over a thousand hours in a sea kayak. I measure my quality of life by my personal relationships and the ability to choose my own destiny and allocate my time to something other than the pursuit of another digit on an account statement. But being a pacifist who values protection of the natural environment isn’t necessarily the formula for survival in a hostile and competitive world.

    Measuring success based upon GDP isn’t a life style choice. Its more likely than not a biological imperative according to the laws of Darwin. Nevertheless, its extremely ironic that our need to adapt to remain the strongest may eventually result in the destruction of our species if not the destruction of our planet’s ability to support any complex life form.

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  32. Cheap South

    RE: One Eyed Man @ 31

    I doubt that anyone uttering their last dying words said “I just wish I’d spent more time at the office.”

    I have to use that one.

    “Nevertheless, its extremely ironic that our need to adapt to remain the strongest may eventually result in the destruction of our species if not the destruction of our planet’s ability to support any complex life form.”

    I agree; but let me point out that the planet has been around for about 3 billion years and will be around for another 7 billion; with or without our species. When the day comes that the planet can not support us any longer, we will be the ones in trouble. The planet will do just fine without us.

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  33. Kary L. Krismer

    By One Eyed Man @ 31:

    I’ve always believed that my personal quality of life isn’t measured in GDP, per capita income,. . ..

    Rather obviously you have no idea how much happiness you can obtain with a $600 smart-phone that has a $100 a month service plan. ;-)

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  34. One Eyed Man

    RE: Kary L. Krismer @ 33
    But unless they have a new app I haven’t heard about I’ll still probably need the number for the Mustang Ranch on my contact list? ;-)

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  35. NumberMonkey

    I agree with an above poster that the aging baby boom is going to have a significant effect, but I’d like to hear some opinions on what it will be. Conventional wisdom says the elderly sell their homes and retire, but I’m skeptical about that. Could, in an environment of low home equity growth, the over 65 crowd simply sit on their current homes, removing them from aggregate supply? Certainly when they die (sorry fellas, but you will!) a huge chunk of supply will come down the pipe, but we are years away from that.

    What are the debt/equity ratios in the baby boom? We have a few years of baby boom retirement to look back on, what are the patterns in their behavior? If anyone has a suggestion for a place this data might be borne out I would be happy to run some analysis, but I’m far too busy to go hunting for the data myself.

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  36. Kary L. Krismer

    RE: NumberMonkey @ 35 – I don’t know that you’re going to find meaningful answers. I’ve seen people retire with their home owned free and clear, and I’ve seen others that have owned their home a long time that owe more than they paid. Like everything else, different people act differently.

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  37. Still Anonymous

    Miniscule increase in 2011. Possibly even <1%. But it's an increase, so the media will break out the streamers and fanfare. "Mission Accomplished" banners behind the news anchors, etc..

    And 2012-2013 will be utter disaster.

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  38. Dan

    RE: Scotsman @ 5

    Scotsman, your math is quite wrong.

    You are comparing the GDP in two years, saying that there is a 9% contraction. However, in one year you remove deficit spending from the GDP. In another year, you do not.

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  39. NumberMonkey

    RE: Kary L. Krismer @ 36 – In aggregate there are bound to be patterns; even the old norm of “sell house, move to country, retire” was only true in aggregate yet it was a significant driver of the market.

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  40. Ben

    RE: Dan @ 38 – In Scotsman’s defense, he only mentioned one year (2011).

    I think your glasses need to be checked.

    “Consensus for 2011 is 2.5% GDP growth with 1.2% inflation leaving 1.3% real growth for the year. But if we properly subtract out the $1.5T in deficit spending/QE2-3 etc., (roughly 10% of GDP) we are left with a real growth rate of almost negative 9%.”

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  41. Marc

    My prediction is for prices countywide (and around the larger metro-area) to continue the gradual decline through the better part of this year before flattening. Increasing REOs and short sales being the primary driver of the declines. For the year, a 5% decline in median seems like a good guess. Price declines like this will draw buyers into the market but keep a good number of non-distressed sellers out of the market.

    I think the neighborhoods like Greenlake, Wallingford, and Phinney Ridge may be the exception and may actually see slight appreciation (i.e., flat to 2-3%). These areas are well stocked with homes in the $400 to $600k price range and the ones that come to market will be highly coveted. We started seeing multiple offer scenarios on this type of inventory last year and that will only gain steam in the spring.

    Falling prices generally result in increased demand so I’m inclined to think sales volume will be up a modest, but significant amount. I’d bet that the 16,000 (or so) average sales of SFR in King County of the past few years will increase this year to more like 17,000.

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  42. NumberMonkey

    RE: Ben @ 40 – Growth rates and inflation compare the current year to the previous: (2011 GDP/2010 GPD)= 1.025, or a 2.5% gain.

    If you wanted to look at GDP grown without deficit spending it ought to be subtracted from both 2011 and 2010 in the ratio above.

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  43. Ben

    RE: NumberMonkey @ 42 – That is a good point. Apples to apples for both years. I also understand the larger context of Scotsman’s point: namely that current GDP is being propped up by unsustainable deficit spending.

    In other words, we are borrowing 10-12% of GDP for 2% growth. I don’t even think Krugman would say that is sustainable.

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  44. WestSideBilly

    By Jonness @ 26:

    My oil stocks are up about 14% in the month of January alone. I’m diversified, so I’m by no means up that amount in total on the month. But it demonstrates money is always flowing somewhere. People got used to money flowing into Puget Sound houses, but that’s betting on a dead horse these days. Looking at the above consensus, what’s the better risk, stocks, cash, other, or local real estate? Of the three, leveraging 100% of your wealth into depreciating Puget Sound real estate that costs 10% to sell is the worst strategy.

    Worst? Not really. You’re paying for the roof over your head (which you would otherwise need to deduct from your profits from other investments), gaining a marginal tax deduction, and if by some chance you profit on the sale of the investment it is tax free. Even if a house loses 10% annually (borderline worst case scenario), that’s better than investments that can lose 100% of their value in a short time frame (hours/days). Selling most investments also has a fairly high transaction cost (20-40% tax on the profit + fees).

    Now, if you have no wealth whatsoever, and are leveraging 100% to buy a house, then that is a pretty risky proposition. Of course if you have no assets, you have nothing to lose except your credit score.

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  45. NumberMonkey

    RE: Ben @ 43 – I agree “how long can this continue” is a pretty good question, but I don’t think is has much to do with growth rates; deficit spending has been a fact of American political life for a very long time and to look at trends in GDP without it is silly.

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  46. Scotsman

    RE: Dan @ 38

    Dan, you don’t know what you’re talking about. In case you missed it we ran a roughly $1.5T deficit last year. . . and we’re going to do the same thing this year, and probably next year too. In fact, the CBO puts the average federal deficit for the next decade right at $1.0T/year, or another $10+T in federal debt. And I assure you that’s optimistic. Tell me the last time the federal government met a budget that was projected 5 years prior. My point is that without the deficit spending we would experience a 9% contraction in GDP and be in a near depression situation. That’s a fact. The question is how long can this continue?

    Heads up- at this very moment the federal government has to borrow 40 cents of each dollar it spends. And where in my post did I say anything about last year? All the numbers are projections for 2012.

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  47. Scotsman

    RE: Ben @ 43

    Bingo- we have winner! In fact, the numbers suggest that the borrowing is dragging the economy down, not jump starting it as was the expectation. Lots of studies showing the net return on new debt has been negative for a couple of years now.

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  48. Nancy Hill

    Well written post! Thanks for the information and predictions coming from a variety of sources. It is better to be armed with realistic predictions than rose colored opinions. I have my armor on and ready for 2011.

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  49. softwarengineer

    2011 Will Be the Year Home Prices Bottom Out

    Haven’t you seen the movie 2012? After 2011 we’re cooked gooses anyway…LOL

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  50. Blake

    RE: Blake @ 13
    “My “guess”… prices down around 10%, with the last part of the year being particularly gloomy.”

    I should have noted – tho it is implicit in what I wrote – that 2011 will NOT be the bottom for housing prices… in nominal or real dollars. The financialization whizzos are cookin’ up another mess for us to clean up later in this decade! They have the gov’t in their pocket and are not chastened in the least by what transpired over the last 3 years. And remember… they’re really, really intelligent!

    “Nothing doth hurt more in a nation than that cunning men are mistaken for wise.”
    – Francis Bacon

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  51. Jillayne

    Regarding if 2011 will be the year we hit bottom……Can we guess a year? I’ve been saying 2014 since 2007 but everyone told me I was insane back in 2007. I am still sticking w/2014.

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  52. Dawn Glover

    On RainCityGuide I have been commenting on a piece about voting if a homeowner is a miserable deadbeat or nice person for walking away from mortgage. I found the article to be baited considering the author is a Lawyer who is counselling such situations. It would really be interesting if more people joined the discussion

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  53. Jillayne

    Okay, Dawn I will check it out.
    J.

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  54. Crashcadia

    We know the homeownership rate for those age 65 and up is about 80%.
    http://www.danter.com/STATISTICS/homeown.htm

    So about 8,000 homeowners per day will turn 65 years old, starting last January and continuing for 19 years.
    They do typically stay in their homes…..typically. These are not typical times as this population accounted for a large percentage of the home second home purchases during the boom. They account for 57% of the vacation/recreational home market.
    http://www.lendingtree.com/smartborrower/mortgage-news/baby-boomers-second-home-market/

    With difficult economic times and retirement at hand, how many of these will hit the market and when? That is the question.

    They will have two impacts. They will not be purchasing homes and will eventually sell or give the homes to their children. In either case we will see less demand going forward and more supply.

    I am still trying to figure out how much and when.

    From what I can see, the impact would typically be 10 years out, but I feel this has been pulled forward due to bad investments in RE (being underwater on their investiment properties, purchasing second homes at the peak, Heloc) and bad economic times (needing to sell to fund retirement or cut their losses).

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  55. Dawn Glover

    RE: The Tim @ 54 – interesting posts and comments…I wonder how attitudes will change on this topic over time. One thing is certain, the discussions on Seattle Bubble have much more substance.

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  56. Jonness

    By WestSideBilly @ 44:

    Worst? Not really. You’re paying for the roof over your head (which you would otherwise need to deduct from your profits from other investments), gaining a marginal tax deduction, and if by some chance you profit on the sale of the investment it is tax free. Even if a house loses 10% annually (borderline worst case scenario), that’s better than investments that can lose 100% of their value in a short time frame (hours/days). Selling most investments also has a fairly high transaction cost (20-40% tax on the profit + fees).

    Now, if you have no wealth whatsoever, and are leveraging 100% to buy a house, then that is a pretty risky proposition. Of course if you have no assets, you have nothing to lose except your credit score.

    I own my home outright, so I have no tax benefit (as if paying all that interest on debt can be thought of as a benefit). Capital gains on stocks and dividends is 15% if held for a year or more. It costs $14 to turn a stock round trip if you use Scottrade and $2 if you use InteractiveBrokers.

    It’s becoming clear to me why I am profiting from the economic downturn and so many others are going bankrupt. The cheerleading for the housing sector has no end; yet, foreclosures are expected to break a new record over the course of the coming year. If homes are such a good investment, why are the people who mindlessly listened to the cheerleaders going bankrupt in record numbers? And how is the borderline worst-case scenario for losses on a home only 10% when recent history has proven homes can lose over 50% of their value in a short period of time? All this flies in the face of most professional financial advisors who recommend keeping a well diversified portfolio as opposed to leveraging 100% of one’s wealth into a rapidly depreciating asset that’s not expected to increase in value for many years to come.

    Good investing involves maket timing. People need to start cheerleading real estate when asset inflation takes hold. Cheerleading leveraged asset purchases in the midst of asset deflation is like whipping a dead horse hoping it will bring it back to life. IMO, anybody who buys in to the notion a RE agent can raise the dead simply by talking is taking a major risk of ending up in the poor house like the many millions of other victims who recently bought into the housing sector hype.

    http://taxdollars.ocregister.com/files/2011/01/hinn-and-crowd.jpg

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  57. David Losh

    RE: Jonness @ 56

    You own your home free and clear. You should have stopped there.

    Once again, the value of Real Estate never changes. There is no top, or bottom to the market. There are cycles to the market for purchase, or sell, mostly due to the buyer pool, and economic advantages.

    You buy it, pay it off, rent it, live in it, or use it for commercial purposes. That’s it.

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  58. Kary L. Krismer

    RE: Jonness @ 56 – By owning the house free and clear you get a return out of it every month–the rental value of the house (less RE tax and maintenance costs).

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  59. xz

    I think it is only the CS Index that matters. So I would say Tytler wins this round with his guess of 5%

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  60. Sottocapo

    I will say prices will drop more than 10% in 2011 in the Seattle area (inc. places like Bellevue, Clyde Hill etc.) and 2011 will not be the bottom. I would say at least 2014 for bottom and then staying there for some time.

    This is without any government intervention.

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  61. January Reporting Roundup: Clearance Sale Edition • Seattle Bubble

    […] continued price declines are the main reason I’m breaking from many other commentators with my prediction of a slight increase in home sales in […]

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