Posted by: Timothy Ellis (The Tim)

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

24 responses to “January Reporting Roundup: Clearance Sale Edition”

  1. bob

    argg … it really depends on the buyers’ mindset. Are they 1) looking for a good deal, and intend on steady paying off on the mortgage, 2) or are influenced by any type of hype.

    I live in on of the condo buildings in Seattle that is getting ready to auction of some units. So potential buyers were traipsing through this weekend (and you could over hear conversations, especially in the elevator). There is still some mindset of get a good price and selling once things ‘recover’. Have these guys really done the math and some worst case scenarios? Perhaps.

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  2. softwarengineer

    Buyer Demand Would Be far More Dismal

    If all the MSM could reference is unemployed workers….but, QEC2 debt gives ‘em phony shorterm lower interest rates, simulatneously fueling a growing stock market to gloat at and then allege we’ve “bottomed” out, bring on more uncontrolled growth….until the $600B QEC2 runs out ths June.

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  3. Mike

    I generally agree with the conclusion that prices will slide more this year (and then bottom) with more sales occuring as prices, particularly outside the urban core, get down to a more reasonable level in terms of rents and income. It seems though that interest rates and how long the Fed can keep them at historical lows are the big second shoe (after foreclosures) waiting to drop. Though what do I know, maybe rates going to 6-7% wouldn’t have as big an impact as it seems they would?

    Tould love to see if you have the ability to crunch out a comparison of what the current market prices look like in terms of assumed monthly payments (say 10% down at the December-January average 30 year rate) and then go from there and back into what comparable prices would be today if you assume buyers have a relatively constant “monthly payment buying power” but interest rates go up 2 or 3 percent. Basically is there a way to see what the price fall would look like if we backed out the Fed interest rate intervention? Low rates now may be great if you manage to stay in your house and pay that rate for 10+ years but it seems any buyer who has any sense that they might possibly need to move in less than 10 years (i.e. not planning to move like the fools who buy starter houses but someone how can’t rule out wanting to move with a near certainty) should also be factoring in that risk, which my gut says is substantial.

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  4. Drone

    RE: Mike @ 3 – Let’s assume that the our hypothetical buyer can support a monthly payment of $2,000. This does not include insurance, maintenance, taxes, etc. Let’s further assume that the buyer has a 10% down payment for any purchase price. Here’s the price that monthly payment supports:

    4.5% – $438,580
    6.0% – $370,648
    8.0% – $302,852

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  5. Scotsman

    Pfft! The bottom is in- and we missed it! Even 18 year old students can make hundreds of thousands of dollars in this market. Time to leave the computer and get out there and start flipping!

    http://seattletimes.nwsource.com/html/realestate/2014125179_realyoungrealtor06.html

    “He bought the 3,340-square-foot-house with four bedrooms and 3.25 baths for $287,000 at auction. He sold it after two days on the market for $415,000, a 45 percent profit.

    The most surprising number is 18, the number of years Scrivanich has been on this planet.”

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  6. David S

    RE: Scotsman @ 5 – That’s pretty awesome that this young man had $287,000 of cash when he was 18. I suppose it it easier to save hundreds of thousands of dollars when you live rent free with your parents and your mom buys all your clothes at Abercrombie & Fitch for you. Or maybe he was just able to secure one of those amazing loan products designed for these trustee cash sales environments.

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  7. Scotsman

    RE: David S @ 6

    If I recall he was a saver/investor since an early age, and had a previous business giving tours. His dad chipped in $5K. But all that aside, what counts is that he found a market discontinuity to take advantage of. Give him credit.

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  8. David S

    RE: Scotsman @ 7 – That market discontinuity discovery came at a price. He must be well connected.

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  9. ;

    By Scotsman @ 5:

    Pfft! The bottom is in- and we missed it! Even 18 year old students can make hundreds of thousands of dollars in this market. Time to leave the computer and get out there and start flipping!

    http://seattletimes.nwsource.com/html/realestate/2014125179_realyoungrealtor06.html

    when i read these stories, it makes me think the busting of the bubble is far from over.

    when everyone hates housing, and no one wants to buy is when we’ve hit bottom.
    we need another story like “The Death of Equities” story in BusinessWeek in 1979:
    http://www.fiendbear.com/deatheq.htm

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  10. What's my name

    RE: Scotsman @ 5
    Priceless.

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  11. One Eyed Man

    RE: Scotsman @ 7

    “Give him credit.”

    I’ll give him kudos for capitalistic hutzpah but he got his credit courtesy of the co-signature from his father who owns the Mission Ridge ski area and a Woodinville stone yard. And I’d imagine he’s seen a proforma financial or two on family real estate deals. Per the article,
    “His father helped him through the process, showing him the ropes and how it was done . . . “

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  12. ray pepper

    “To me it’s not even work,” he says. “It’s just really interesting.”

    Agreed…Its fascinating young man. Lets talk again when you slip up and cannot unload. One bad deal can kill 5-8 good deals. Then lets see if you think its work.

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  13. TheHulk

    RE: Scotsman @ 5
    Nice article scotsman! More than anything else this seems to be the rich old dad trying to get his son to look good for whatever reason.

    Let me put it this way. For outsize returns, you need to take outsize risk. Knowing you have a few million stocked away (maybe even tens of millions?), throwing 300K at something seems like chump change. I do it with the nickel slots at Vegas, but I am sure even those nickels are mighty precious for someone else.

    I just wonder who was the buyer @ 415K. Seems like that person could have bargained a lot more and didn’t do his homework. I mean seriously, 45% on 287K in 2 days? If it had been on the market for 6 more months (and presumably some time to fix up the place) I might have believed it. Something is fishy here and it ain’t pike place.

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  14. Real World Express

    Anyone with half a brain should realize that they should sell out now and move to another city before Conlin takes any gains away as tax.

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  15. Scotsman

    I smell jealousy. Is it the money, or this:

    ” Tall, with dark-blue eyes and shaggy blond hair,. . .”

    Seriously, he has three properties purchased, two sold at a profit, with the third ready to go. The Tim should follow up on this- maybe some of the “experts” around here could learn a thing or two. ;-)

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  16. David S

    RE: Scotsman @ 15 – Nephew of yours? Nepotism? :)

    Scotsman, I’m not jealous at all, just joshing you. If this is the career path he has chosen it sounds like it’s working out well for him.

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  17. One Eyed Man

    RE: Scotsman @ 15

    I confess. I’m jealous. But not of the kid. I’m jealous of the father, he owns his own frick’n ski area.

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  18. Kary L. Krismer

    By Scotsman @ 15:

    Seriously, he has three properties purchased, two sold at a profit, with the third ready to go. The Tim should follow up on this- maybe some of the “experts” around here could learn a thing or two. ;-)

    I’m not sure who you’re including in that category. Even through some of the darkest times there have been successful flippers. It’s like most everything else–few things are black and white or as extreme as some people try to make them.

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  19. softwarengineer

    Interesting Investment Story In Today’s RE Stagnation

    Bill Gates had a dad that got him mainframe access in his garage; given that boost up we all could of been possible billionaires too…..but alas, most of us don’t have family pulls.

    Buying distressed properties before they hit the courthouse is another way to make money at any time in RE, but you need insider information or a sweetheart deal from a family member [I bought my first house that way]. A warning, if you’re an in-law and you buy a sweetheart deal, beware, there may be hidden hooks in the deal [mine led to a divorce]; especially if other family members feel they got cheated out of inheretance.

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  20. Drone

    By TheHulk @ 13:

    Let me put it this way. For outsize returns, you need to take outsize risk.

    I disagree. You either need to take outsize risk OR have superior information. It seems to me that this kid, through his forclosure group, had access to information unavailable on the broader market. Risky yes, but still a solid play.

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  21. Kary L. Krismer

    RE: Drone @ 20 – Or be lucky.

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  22. Devmud

    It was good discussion on KUOW, missed an important point though. Whole media is screaming on seattle is not a buy area, but renting (Price to rent ratio). I don,t remember if this point came across discussion table. Can anybody through light on this?

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  23. Urban Artist

    I would just like to be able to buy a house to live in for a long time. A house I can afford without having to win Lotto. I think I’m like most people we have a job that pays fairly well but not a high six figure one. It seems like in Seattle (North Seattle) if you’re not making a really good six figure income you’re out of luck. Unless you have family to bank role you. I really hate hearing about people still flipping houses. It makes it hard for people who just want a home not something to add to an investment portfolio.

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  24. On the Radio: Walk Aways and Puyallup Condos • Seattle Bubble

    [...] of today’s post, here’s a brief service announcement. I’ll be on KUOW 94.9 FM again today to discuss the topic of “walking away.” Here’s their promo copy:Is It [...]

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