Hungry for More Data? Try Sound Housing Quarterly

The latest issue of Sound Housing Quarterly has been published (Q1 2011). Sound Housing Quarterly is a subscription-based sister project to Seattle Bubble that I created to provide a single consolidated and consistent source of high-level local housing market stats and analysis.

This month’s report sports 49 pages packed with unique housing market insights you won’t find anywhere else. Far from being a rehash of the material posted here on the blog, Sound Housing Quarterly is a unique collection of charts, tables, data, analysis, and predictions that I compile every quarter specifically for this project. Here are a couple of highlights from the first quarter issue.

The Real Estate Heat Index (a proprietary index I created that uses supply, demand, and home prices to calculate the general “heat” of the housing market) dipped a bit in Q1 in all eight of the Puget Sound Counties I track. Here’s a look at King, Snohomish, Pierce, and Kitsap:

Real Estate Heat Index: King, Snohomish, Pierce, Kitsap

Meanwhile, affordability rose everywhere but Kitsap and Island, thanks to the continued decline in median home prices, as well as still-ridiculously-low mortgage interest rates:

Affordability Index: King, Snohomish, Pierce, Kitsap

The full version of Sound Housing Quarterly includes detailed data and analysis for King, Snohomish, Pierce, Kitsap, Thurston, Island, Skagit, and Whatcom counties.

Head over to HousingQuarterly.com to subscribe to Sound Housing Quarterly. You can also download a free single-page summary of this quarter’s report, or drop by the free archive to check out the 2008 Q3 through 2010 Q1 reports in full at no charge.

  

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.

29 comments:

  1. 1

    What’s Missing from the Housing Affordability Improvement [????] Graph

    Is what household income, at what age bracket, is needed for a pre-approved loan, let alone a much more affordable loan payment IMO, which doesn’t max out the pre-approved bank lending limit for that FICA score?

    Let me clear this up IMO:

    1. age 50-60 loan payment: 0%, they shoukld be debt free by now
    2. age 40-50 loan payment: NGT 20% of net pay
    3. age 30-40 loan payment: NGT 30% of net pay

    Net pay is after taxes, deductions, car payment(s), college loan payment(s), etc….

    If you think BIGGER loan payments than this per Seattle household are needed and are affordable, please explain why?

    Rate this comment: Thumb up 0

  2. 2
    Matthew says:

    Tim,

    Do you have a heat index reading for just the month of April? It would be interesting to see if this reflects the supposed “heating up” of the market being reflected by the supposed bidding wars taking place.

    Rate this comment: Thumb up 0

  3. 3

    Now They’re Admitting More Truth on the Japanese Parts Shortage Impact on Seattle’s Economy and Hence, Home Prices

    Article in part:

    “…Nearly every major auto company has had to idle factories due to shortages. Honda, Toyota Motor Corp. and Nissan Motor Co. have been hit particularly hard. Supply companies are scrambling to build their parts elsewhere, but setting up alternate factories takes months.

    Honda, which makes 80 percent of the vehicles sold in North American at plants in the region, also said it will be able to import only a limited number of Japan-built cars in the U.S. That means dealers won’t be able to order the Fit subcompact, and the CR-Z, Insight and Civic gas-electric hybrids until later in the year.

    “Our goal remains to normalize overall production sometime around the end of the year,” …”

    http://finance.yahoo.com/news/Honda-to-cut-production-of-apf-91811924.html?x=0&sec=topStories&pos=6&asset=&ccode=

    Geeeee…a few weeks ago they were predicting get-well in a month or two….now its the end of the year….LOL

    By the end of 2011, it will be fixed by mid-2012, etc, etc……LOL

    My blog to the AP MSM Parts Shortage Story:

    “….GDP Decreasing Impact

    MSM always leaves this critical issue out on Japanese parts shortages shutting down assembly plants and dealerships too….what impact will that have on America’s 2011’s economy. No impact? LOL

    IMO, you may be likely be making a BIG mistake running to your Toyota dealer to buy the last of the inventory, wait until the economy get’s FAR worse and the prices of all cars collapse? LOL

    What’s my prediction, will autos go up, stay the same or down in price by summer? Lord only knows….”

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  4. 4
    NESeattleSeller says:

    SoftwareEngineer’s pessimism aside, affordability for homes is rising and availability of rentals is falling. There are bidding wars in good neighborhoods and close-in areas have very low vacancy in rentals. The PI story today on decreasing affordability of rentals demonstrates that the market is strong for housing: http://www.seattlepi.com/realestate/article/Typical-renter-can-t-afford-one-bedroom-apartment-1361958.php. This strong market just hasn’t yet translated into confidence among buyers of single family homes or condos. And sellers are in wait mode so the inventory is limited. Unless we see some dramatic negative trends in employment or wages in Seattle in the next quarter my bet is on a stabilization in prices for single family homes in Seattle. If gas prices stay high or go higher there will be negative pressure on home prices in outlying areas not served by public transportation.

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  5. 5
    Real World Express says:

    Seattle PI is reporting that renting a one bedroom now costs more than average salary.

    So, who is zooming whom?

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  6. 6
    Scotsman says:

    RE: NESeattleSeller @ 4

    Cute. How far underwater are you?

    ” next quarter my bet is on a stabilization in prices for single family homes in Seattle”

    Mine too- we see it every spring. It’s what comes next that’s a b*tch. Good luck with your sale. Price very aggressively- ahead of the market.

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  7. 7
    Scotsman says:

    What happens when people can’t afford something due to insufficient wages, job loss, etc? Do prices just continue to climb? Rents go to the moon? This economics is so confusing!

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  8. 8

    RE: Scotsman @ 6

    SWE’s Not Pessimistic at All

    Pessimism and pragmatism are not the same thing, albeit “being in denial” sure isn’t pragmatic or optimistic either….LOL

    You’re right Scotsman, you can read Tim’s charts, see an uptick in affordability and allege improperly that now its affordable. I love your term, “intangibles” not on the charts….LOL

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  9. 9
    Scotsman says:

    RE: softwarengineer @ 3

    Plant closures will hurt local economies more than it hurts parent corporations. We’re only part of their market, while they pretty much carry some local economies.

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  10. 10

    RE: Scotsman @ 8

    Dealerships in Seattle sell almost 60% Japanese cars, and even S Korean have much more Japanese components in them than the Big Three. Toyota is 90% Japanese components. American cars and Boeing aerospace are hit by Japanese parts suppliers to suppliers too. We’re all on the Japanese parts shortage Titanic together. LOL

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  11. 11
    NESeattleSeller says:

    By Scotsman @ 6:

    RE: NESeattleSeller @ 4

    Cute. How far underwater are you?

    ” next quarter my bet is on a stabilization in prices for single family homes in Seattle”

    Mine too- we see it every spring. It’s what comes next that’s a b*tch. Good luck with your sale. Price very aggressively- ahead of the market.

    Not selling at present. Not underwater in any of my properties. Just looking at the small numbers of REO and foreclosures inside the city limits of Seattle and the number of well qualified buyers who keep complaining that they get into bidding wars. Meanwhile rents keep rising. My tenants pay more than they would if they put 10% down and bought the place and rents will rise at the next lease renewal. Same thing all over NE Seattle. It is possible now to purchase a single family home and rent it for positive cash flow in many neighborhoods. Hiring in IT is accelerating. I doubt we will see an increase in prices in the next 9 months, but I don’t see them dropping much either. Rents are too high- they support positive cash flow from new purchases with as little as 10% down now and look to keep going up.

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  12. 12
    NESeattleSeller says:

    By softwarengineer @ 9:

    RE: Scotsman @ 8

    Dealerships in Seattle sell almost 60% Japanese cars, and even S Korean have much more Japanese components in them than the Big Three. Toyota is 90% Japanese components. American cars and Boeing aerospace are hit by Japanese parts suppliers to suppliers too. We’re all on the Japanese parts shortage Titanic together. LOL

    It may take some automobile plants a while to get back, but most of the manufacturing affected by the quake is already back and the rest is coming soon:
    “A survey of 70 damaged factories released last week by Japan’s Ministry of Economy, Trade and Industry found that nearly two-thirds of them had recovered while most of the rest in the survey group expected to do so by summer. ” http://www.nytimes.com/2011/05/02/business/global/02ricoh.html?src=busln

    Some limited availability of some car lines is hardly going to reverse the growth in the Seattle economy.

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  13. 13
    Scotsman says:

    RE: NESeattleSeller @ 10

    “My tenants pay more than they would if they put 10% down and bought the place.”

    Really?! Are all your tenants blond Norwegians? I find that very hard to believe.

    Out here in the middle of nowhere (Preston/Fall City) I’m not aware of a single property that can be bought for less (PITI) than it rents for. And we have a lot of crappy properties, not to mention the $10 dollars in gas it takes to drive the suburban to Pike Place Market and back.

    Either Seattle is more special than we know, or my bs meter is pegging.

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  14. 14
    D. in Ballard says:

    RE: Scotsman @ 12 – I agree. Even in Ballard I don’t see that you can buy cheaper than the cost of renting. I’m putting in a considerable down payment on my purchase and only then will my mortgage be equal to what I could rent the place for.

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  15. 15
    kristian says:

    RE: NESeattleSeller @ 10 – I’m really curious about your comments here. Can you point to an example of a house on the market which you think is in the vicinity of ‘you can buy it and rent it for positive cash flow’?
    I have a friend doing this with great success on 4 houses in Minnesota, but the math I’ve done on houses around here comes up way short.

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  16. 16
    Jonness says:

    By kristian @ 14:

    Can you point to an example of a house on the market which you think is in the vicinity of ‘you can buy it and rent it for positive cash flow’?

    Other than foreclosures and short sales, it’s easier said than done.

    Bulls typically cite affordability of distressed homes, but they typically fail to mention such purchases don’t provide the previous owners with big paychecks they can use to run out and buy better houses. This is having a huge impact on the market. You need a healthy exchange between first timers and move up buyers, and it just doesn’t exist right now.

    However, we are indeed getting some Spring support (as I previously predicted would occur). But If I decide to buy a house in the current market, I do so under the understanding that I could easily lose my 20% down payment. If people are not factoring this possibility into their purchase decisions, they are skiing with their eyes closed.

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  17. 17
    NESeattleSeller says:

    RE: kristian @ 14 – Take a look at neighborhoods north of the U-District and east of I-5. Out in rural areas you have a 30-45 minute commute, no walkable services, and no decent jobs close by. In Ballard you have a very trendy, hip location that was over hyped and has prices that may still fall a bit. But in many areas of NE Seattle there are 800-1100 sqft homes selling for well under $300K. One can ride the bus downtown in 20 minutes. It is often easy to walk to the grocery store, parks, etc. The houses are not castles, but are often quite decent and work for a young couple with no kids or very young children. Rents run in the 1200 range and up. Here is one example: http://www.redfin.com/WA/Seattle/11343-31st-Ave-NE-98125/home/111379 – listed for $225K, Mortgage with 10% down would be around $1050. This place would easily rent for $1200 or maybe as high as $1350. I have a similar 2 bedroom place rented for $1150. When I listed it 9 months ago on craigslist I had inquiries in less than 10 minutes and non-stop until I did the group showing. 3 couples were ready to sign the lease when I arrived to show it – all very well qualified with verifiable w-2 income more than 3 times the rent. That was 9 months ago and things have only tightened since then. I am just stupid enough to point this out so that maybe some of you will become my competitors for these fairly easy cash-flow rentals. Please don’t believe me. Keep renting. Don’t buy a house. Keep the prices falling and the rents rising.

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  18. 18
    David Losh says:

    RE: Scotsman @ 12

    OK, I went to Fall City while the kids were snow boarding. My gawd the price of property was ridiculous. I talked to an agent there who was from the upper valley? North Bend or some place like that. She was very sure that prices were in line with the market at $400K.

    It seems to me that prices there were dirt cheap ten years ago. I mean they were worth the price of the dirt.

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  19. 19
    David Losh says:

    RE: NESeattleSeller @ 16

    The rent isn’t the problem. The price of the dirt is. That’s a blocker in a great location. The Lindal Home up closer to Lake City that I like is $500K or something. In order for that dirt to be worth something it would need to be torn down to build a $600K home, or more.

    Does the area warrant that type of development? Maybe.

    For me it would make more sense to find a better use for my $20K down payment, or $40K.

    My reasoning is that in the near term that blocker will sell for $199K. It might sell for as low as $150K which Greg McGar pays as a spot lot builder in that area.

    So you end up with a paper loss, and your positive cash flow of $500 per month is $6000 per year, and it takes three years for you to get back what is sure to be the price declines in the same period.

    You’re at a wash for at least five years.

    In that time I expect every town home built in the past ten years to go back to the bank and come back as a very low income housing unit. As new construction, and condo conversions fall apart with the need for greater maintenance we’ll see a glut of rental units.

    By close proximity you also have developments like Glover Homes which are rental properties. They didn’t pencil as well as sales units did, but are quickly becoming more profitable.

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  20. 20

    RE: NESeattleSeller @ 16
    A 225,000 dollar house, at 5% interest, with 10% down, including property taxes, PMI, and homeowner’s insurance, is going to run closer to 1375 per month, not 1050.
    I’m not disputing that in the lower end of the market, away from the hippest and trendiest areas, there are places you can buy, rent out, and have the rent cover the mortgage. But the example you gave doesn’t seem to be it.

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  21. 21
    Scotsman says:

    RE: David Losh @ 17

    Yup, it’s a weird mix. You’ll drive past a couple of mobiles on half acre lots then come up on a multi-million dollar estate. Lots of microsofties out in the hills, several what were $2.0M homes now selling for half. Still room for prices to fall.

    Funny thing is, lots of people think it’s soooo far out, but I can be in Downtown Seattle in less than half an hour- less time than it would take from the northend, etc. And when I come home at night no neighbors in sight- except for the bears.

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  22. 22
    David Losh says:

    RE: Scotsman @ 20

    The only reason to go out there was the gun shop which closed for some circle yurkin out in the middle of nowhere. Glad it reopened, but it will never be the same. I hope the cafe is still serving meat loaf, but Fall City is almost as far as Issaquah.

    I just shows you how much dirt is available to develop once you get out of Seattle.

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  23. 23
    Scotsman says:

    RE: David Losh @ 21

    Yup, we ain’t making any new dirt out here, buts we got plenty of the old stuff.

    Rate this comment: Thumb up 0

  24. 24
    Localyokel says:

    In sunny, dry Lost Wages today
    Lots of homes for sale here
    And tons of holes off the strip.
    Makes me appreciate Seattle more
    And more. Miss the rain…and
    The passive aggressive people.

    Rate this comment: Thumb up 0

  25. 25

    RE: NESeattleSeller @ 11

    Its the ICs and Small Stuff That’s Stopping Japanese Car Production

    The stuff inside the nuclear evacuation zone. It may be we can’t even get the tools and test equipment out of there .

    Rate this comment: Thumb up 0

  26. 26

    RE: Ira Sacharoff @ 19

    Good Point Ira

    I’d add too the lesser priced units likely have issues too, requiring lots of cash to fix. IMO, once you kiss approx $2000/mo on rent they run like rats or don’t stay long, why rent when you can buy even a fixer upper.

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  27. 27
    johnnybigspenda says:

    Article on Yahoo finance talking about Renting vs. Buying…. they state that 80% of cities are now cheaper to buy than rent…. Seattle is in the 20%

    http://finance.yahoo.com/news/Buying-Beats-Renting-in-80-usnews-1089844766.html?x=0&sec=topStories&pos=6&asset=&ccode=

    Rate this comment: Thumb up 0

  28. 28
    ESS says:

    By NESeattleSeller @ 16:

    RE: kristian @ 14 – Take a look at neighborhoods north of the U-District and east of I-5. Out in rural areas you have a 30-45 minute commute, no walkable services, and no decent jobs close by. In Ballard you have a very trendy, hip location that was over hyped and has prices that may still fall a bit. But in many areas of NE Seattle there are 800-1100 sqft homes selling for well under $300K. One can ride the bus downtown in 20 minutes. It is often easy to walk to the grocery store, parks, etc. The houses are not castles, but are often quite decent and work for a young couple with no kids or very young children. Rents run in the 1200 range and up. Here is one example: http://www.redfin.com/WA/Seattle/11343-31st-Ave-NE-98125/home/111379 – listed for $225K, Mortgage with 10% down would be around $1050. This place would easily rent for $1200 or maybe as high as $1350. I have a similar 2 bedroom place rented for $1150. When I listed it 9 months ago on craigslist I had inquiries in less than 10 minutes and non-stop until I did the group showing. 3 couples were ready to sign the lease when I arrived to show it – all very well qualified with verifiable w-2 income more than 3 times the rent. That was 9 months ago and things have only tightened since then. I am just stupid enough to point this out so that maybe some of you will become my competitors for these fairly easy cash-flow rentals. Please don’t believe me. Keep renting. Don’t buy a house. Keep the prices falling and the rents rising.

    Well stated NE Seattle Seller. I had a similar response when one of my houses was available for rent last year. Yes – housing prices have dropped – but rents have remained stable and/or are going up. I rented it immediately with a slight increase of rent. If one has bought single family rental housing a number of years ago, one is doing very well in this market. Prospective tenants are more qualified both as a result of the fear of entering the real estate market and stricter lending policies. Furthermore, the types of housing that you cite as examples of available real estate are perfect rental houses. Not only are they located in or near the Seattle metropolitan area, but a 900 – 1300 sq. foot two or three bedroom house is advantageous for a variety of reasons. Not only are they less expensive to purchase — but they generally tend to be the size that many renters want to rent. Many are saving for their first down payment – they don’t want to pay top dollar for a huge house. Others just want to escape the confines of an apartment or townhouse, and a few dollars more to rent a single family house is well worth the money to those individuals. As a result – there are more prospective tenants for a smaller but well maintained and priced house in a decent area.
    Personally I would not mention the following in order to maintain a permanent class of renters:
    That real estate generally increases in value over time – this correction is more of an anomaly than a permanent decline. Any review of housing in any growing market such as Seattle confirms that prices go up over time. That upkeep is cheaper and easier on smaller houses, and one is able to much of the upkeep by oneself that they may not be able to do on a much bigger house. That other replacement items – such as roofs, furnaces, flooring are less money to replace. Not a word about the financial benefits of purchasing and owning real estate, including the tax deductions, the fact that real estate generally tends to increase in value over time with an investment that has been leveraged to maximize profits. That there are amazingly low interest rates that can only return to historical rates. The fact that modest size single family houses with a front and back yard are not being built any more in the Seattle area and are only going to decline as a percentage of the available housing stock. That the Urban Growth Management Act and all the regulatory requirements have increased the cost of housing over the years. That inflation will result in greater expenses to build new housing in the future. That a modest size single family houses in the right area and at the right price can make a wonderful home for the buyer if he or she is willing to put in some work. And is there some risk in buying a house to live in or rent to others? Of course – but there is risk in doing everything – including getting out of bed. There are very few certainties in life – but I can mention one. If you rent a two bedroom apartment for 20 years at 1000 dollars a month and then move – you will have spent 240,000 dollars (assuming your rent didn’t increase over the years), and all you will have to show for it are your memories.

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  29. 29
    m-s says:

    RE: ESS @ 27
    AND, given 1%/yr maintenance (lowball)
    AND, given the number $1375 from #19 above ($375 more than the rent quoted)
    you will have the memories PLUS $135000 more dollars when you move (if you actually save them, more if it compounds) than if you bought.
    YMMV; in other words, you can generate all kinds of scenarios.

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