Local Factors Push Foreclosures to Unnatural Lows

It’s time once again to expand on our preview of foreclosure activity with a more detailed look at September’s stats in King, Snohomish, and Pierce counties. First up, the Notice of Trustee Sale summary:

October 2011
King: 376 NTS, down 71% YOY
Snohomish: 159 NTS, down 78% YOY
Pierce: 239 NTS, down 70% YOY

Another massive drop for Seattle-area foreclosures. As I’ve said before, I think we might be past the peak on foreclosures, but these are falling too fast for me to believe that it isn’t related to some sort of unusual external influence like the state legislation passed earlier this year.

This theory is boosted by headlines like what the Times and P-I are running today: Seattle-area foreclosure activity in October bucks national trend and Foreclosures fall in Seattle area, rise nationwide. Just like last time there was a big discrepancy between the local and national data, there’s probably a specific local reason behind it.

Here’s your interactive Tableau dashboard updated with the latest foreclosure data:

The percentage of households in the chart above is determined using OFM population estimates and household sizes from the 2000 Census. King County came in at 1 NTS per 2,201 households, Snohomish County had 1 NTS per 1,719 households, and Pierce had 1 NTS for every 1,343 households (higher is better).

According to foreclosure tracking company RealtyTrac, Washington’s statewide foreclosure rate for October of one foreclosure for every 1,049 housing units was 28th hightest among the 50 states and the District of Columbia. Note that RealtyTrac’s definition of “in foreclosure” is much broader than what we are using, and includes Notice of Default, Lis Pendens, Notice of Trustee Sale, and Real Estate Owned.

Here’s a heat map of Washington counties from RealtyTrac:

Hit the jump for a larger version of the chart that shows the percentage of households in each county receiving a foreclosure notice each month:

Note: The graphs above are derived from monthly Notice of Trustee Sale counts gathered at King, Snohomish, and Pierce County records. For a longer-term picture of King County foreclosures back to 1979, hit this chart and drag the date slider to its full range. For the full legal definition of what a Notice of Trustee Sale is and how it fits into the foreclosure process, check out RCW 61.24.040. The short version is that it is the notice sent to delinquent borrowers that their home will be repossessed in 90 days.

  

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.

50 comments:

  1. 1
    ChrisM says:

    Ah, that stinking Garfield county! Bunch of low-ilfe bubble speculators! :-)

    Aren’t outliers fun?

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  2. 2
    Scotsman says:

    Obvious answer- Seattle IS special, along with everything north of I-90!

    Not sure what the answer is here. It could be related to legislation or bank’s expectations for the future. Could be the banks internal processers are overwhelmed and trying to catch up before refilling the pipeline. It’s also quite possible that a new equilibrium has been reached given the current employment situation. We are, after all, looking at new foreclosures, not total numbers for those in process. If/when unemployment bumps back up we should expect a new wave of foreclosures as the financially weakest are again thinned from the herd. Which brings me to this chart:

    http://market-ticker.org/cgi-ticker/akcs-www?get_gallerynr=2407

    I’m not much of a chartist when it comes to making future predictions but the consistent seasonality of the one above is nothing short of striking. And it strongly suggests we are about to take another leg down with a surge in unemployment. It could be a chilly spring for home sales

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  3. 3
    Scotsman says:

    RE: ChrisM @ 1

    If I taught statistics this chart would certainly come up for discussion. Garfield County sure looks like a candidate for federal relief with a foreclosure rate similar to King County at 1 out of every 1,311 homes. So what does that look like “on the ground” as they say? Garfield county (2000 census) only has 1,288 housing units. So ONE GUY screws up or loses his job and the whole county gets highlighted. Fun with statistics.

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  4. 4
    robotslave says:

    Tim, if the drop in Notices of Trustee Sale (NTSs) is due to borrowers entering mediation under HB1362, then in theory, Notices of Default (NDs) should be closer to the national average than NTSs.

    Mediation would presumably add some delay between ND and NTS, thus introduction of mediation (on July 22) would appear initially as a drop in NTS, even if no NTSs at all are ultimately prevented via mediation.

    I assume you have the figures handy for NDs; how do they compare?

    Edit: After sniffing around a bit, I’ve realized there’s an additional step that’s been added to the foreclosure chain: the lender must send an “initial letter” 30 days prior to an ND; this delay alone might account for the October drop in NTS, though I’d expect the average time between ND and NTS to be more than just a couple of months. ND stats would still help to figure out what’s going on here.

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  5. 5
    JGBellHimself says:

    Tim, the numbers for Oregon are almost the total reverse from Washington this month, with no explanation for them, either. Well, there is NO “explanation” for anybody living in Oregon, is there. Tis much like Spokane.

    The new law in Nevada has thrown their numbers out of whack, also. So, the only “normal” numbers this month appear to be in Cal and Az – that is, of course, if you believe there is anything “normal” in either of those places.

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  6. 6

    By robotslave @ 4:

    Edit: After sniffing around a bit, I’ve realized there’s an additional step that’s been added to the foreclosure chain: the lender must send an “initial letter” 30 days prior to an ND; this delay alone might account for the October drop in NTS, though I’d expect the average time between ND and NTS to be more than just a couple of months. ND stats would still help to figure out what’s going on here.

    That letter, if it’s the same one I’m thinking of, was added a year or two prior to the most recent changes. When that was added there was an obvious surge in the numbers prior to it going into effect, and an obvious lull afterward.

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  7. 7
    ChrisM says:

    RE: JGBellHimself @ 5 – Not sure if you’re being sarcastic about Spokane (lower cost of living than Seattle, but decent employment) and Oregon or not, but one potential reason for declines in OR foreclosures is passage of SB 491 on June 23, effective Sep 21:

    http://gov.oregonlive.com/bill/2011/SB491/
    http://www.oregon.gov/DCBS/foreclosurehelp/laws.shtml

    “This bill changes the time required for a tenant to receive notice of foreclosure from 30 days to 90 days, consistent with federal law. The extended notice provisions sunset in 2014 to conform to federal law. The bill changes the definition of “covered tenant.” The bill adds enforcement and remedy provisions not existent in the original law, including a requirement that proper notice is given to the tenant and legal defenses if notice was deficient.”

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  8. 8

    I wouldn’t assume the factors are local, as opposed to distant. To the extent Washington foreclosures are being processed by national entities, it’s entirely possible that events in other states are taking processing time from Washington foreclosures. Maybe, for example, they’re trying to beat the effective date of some legislation in some large state (CA, AZ), or catch up in the states that had moratoriums.

    At this point the dip has been far too long and too extreme for me to think it has anything to do with the recent legislation. It’s possible, but more and more unlikely.

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  9. 9

    RE: ChrisM @ 7 – That might be notice after the foreclosure sale, and so something that wouldn’t affect the numbers reported here.

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  10. 11

    By Julie Lyda, RE/MAX Northwest Realtors @ 10:

    The drop is due to HE1362 going into affect as of October 1, 2011

    It was effective 7/22/11.

    http://apps.leg.wa.gov/billinfo/summary.aspx?bill=1362&year=2011 (near bottom).

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  11. 12

    Here’s a piece I did on the various time limits of the Foreclosure Fairness Act when it was still fresh in my mind.

    http://www.trulia.com/blog/kary_l_krismer/2011/04/washington_s_new_foreclosure_fairness_act

    Someone here (OEM???) said that there’s a provision in the act that allowed those in the process of foreclosure to take advantage of it. But from what I’ve read that would be maybe 500 people tops that actually did take advantage of it.

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  12. 13

    RE: Kary L. Krismer @ 11
    Thanks for that correction Kary.

    What went into affect on October 1st is this:

    (1) Except as provided in subsection (4) of this section, beginning October 1, 2011, and every quarter thereafter, every beneficiary issuing notices of default, or directing that a trustee or authorized agent issue the notice of default, on owner-occupied residential real
    property under this chapter must:
    (a) Report to the department the number of owner-occupied residential real properties for which the beneficiary has issued a notice of default during the previous quarter; and
    (b) Remit the amount required under subsection (2) of this section. (2) For each owner-occupied residential real property for which a notice of default has been issued, the beneficiary issuing the notice of default, or directing that a trustee or authorized agent issue the notice of default, shall remit two hundred fifty dollars to the department to be deposited, as provided under section 11 of this act, into the foreclosure fairness account. The two hundred fifty dollar payment is required per property and not per notice of default. The beneficiary shall remit the total amount required in a lump sum each quarter.

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  13. 14

    RE: Julie Lyda, RE/MAX Northwest Realtors @ 13 -The reporting and “tax” provisions. I’d like to see some stats on this thing some day.

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  14. 15
    Ray Pepper says:

    RE: Julie Lyda, RE/MAX Northwest Realtors @ 10

    You are 100% correct!

    From the front lines at Trustee Sales we have virtually ground to a halt with very few “scraps” available.

    “Face-to-face” meetings have been met with numerous delays logistically for the banks and with the clients/investors I follow they advise me that their meetings have been postponed on each of the scheduled times by the Lender for a variety of reasons. This is long before any form of mediation with a housing counselor or attorney.

    Furthermore Wells Fargo informs the homeowner that any scheduled meeting must be a minimum of 21 days out before a scheduling can be taken at hopes of a work-out plan and assessing ability to pay.

    With all the delays it sure appears 2013 forward will be HUGE at The Trustee Sales and 2012 will be a time for defaulting homeowners to SAVE SAVE SAVE like they never have before- for the inevitable!

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  15. 16

    RE: Kary L. Krismer @ 14

    Yes, it would be interesting.

    Now that they have to pay $250.00 to the State for every Notice of Trustee Sale filed, I’m sure they are no longer just filing them in mass to see which ones stick.

    In King Co there were 1,651 Notices filed in Aug, Sep & Oct multiplied by $250.00 equals $412,750.

    (Note: this fee only applies to banks that file more than 250 notices per year).

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  16. 17
    MichaelB says:

    Seattle Times: “It’s a great time to buy if you want to keep your monthly payments low,” Ellis said.

    Has Tim sold out? Yes, he has. Does he sound like a real estate spruiker? Yes he does! Does he really understand anything about the real estate market and valuation of property? Evidently not!

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  17. 18
    MichaelB says:

    Tim,

    Why is the whole comments section of the Seattle Times smarter than you? Oh, that’s right, you work for Redfin.

    “Think about it folks… why else would the banks offer you 3.8% rates? They are predicting even more collateral damage. Don’t be foolish and buy right now. Put your 20% in a safe place and wait 3 or 4 years.” “Renting is the way to go. Show the banks that they can take their low interest rates and shove it. Home prices will continue to drop for the foreseeable future. The world economy is crashing and oil has peaked… meaning as soon as production goes up to satisfy a recovering economy… the cost of fuel will bounce back up and quell the fire. A prolonged, continuous decline in middle-class jobs means an eroding base of people who qualify to buy homes… and thus further reduction in prices is inevitable. Fire Obama and save the country. Ron Paul is the new Oracle – Warren Buffet’s run is up.” “Watch-out! There is a big trap here. Low interest rates are what makes homes more affordable and may qualify the median home buyer into taking a big risk. With real estate highly leveraged, interest rates are a double edged sword.” “When interest rates go up, house prices come down to remain affordable to the median buyer. The current 10% down, 4% fixed 30 year mortgage buyer will be greatly underwater if interest goes up to 6%. Trapped making payments on a house one does not own and cannot sell is depression.
    example:
    @ 4% $1500/mo P&I + PMI buys a $320K house with $32k down (10%) financing a $288K mortgage.
    @ 6% to have the next buyer with same $32K down (12%) with same qualified $1500/mo payment,
    the house price needs to be $265K with $32 down and $233K financed.
    The first buyer will take a ($320K – $265K =) a $55K haircut. Lost is entire $32K down payment and then needs to bring $23K to the closing just to buy one’s way out of the home. Add to this 10% transaction costs and at least $87,000 is lost, that loss alone would have paid 5 years of rent.
    Interest rate increases to 8% or 10 % would be a disaster.”

    And so on, and so on, and so on…. What a joke!

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  18. 19
    ella says:

    Tim, what legislation are you referring to? Can you post it?

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  19. 20
    David Losh says:

    RE: MichaelB @ 18

    Renting is never an answer. Buying well is the only thing that matters.

    Your point is well taken. No one should be looking at interest rates when making a valuation of property. It’s called, or I call it, the rule of ten, 10% down, and 10% interest, would you buy the property at those ratios?

    You are correct, people should always look at the market place as interest rates being constant. You can go down to 8%, even as low as 6%, but the question is will you buy at that payment.

    The other thing is, if you put 20% down, and 8%, or 6% interest, will the property rent for that payment, or within $100?

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  20. 21
    Ray Pepper says:

    RE: MichaelB @ 18

    Marginally good post with some good points.

    NEVER, EVER Buy real estate because the rates r low. Rates can be bought down as we have witnessed now from builders the last few years paying in excess of 20k to get the Buyer their 3.8 % rates to entice.

    Nothing EVER matters more then the price when you choose to BUY however, there is ALWAYS GEMS in any market. Never engage in ANY multiple offer scenario and remember when you choose to BUY and NOT rent its ALWAYS an investment.

    You will find this out very quickly if you need to SELL your investment in the next decade. Also, NEVER forget the 10% it costs to UNLOAD in Washington State.

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  21. 22

    By Ray Pepper @ 21:

    Rates can be bought down as we have witnessed now from builders the last few years paying in excess of 20k to get the Buyer their 3.8 % rates to entice.

    The money to buy down the rate will be largely lost if the house is sold or refinanced within a few years. You’d have to know the amount paid and the discount to determine the break even point, but from memory I think it’s usually over 5 years out.

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  22. 23

    By ella @ 19:

    Tim, what legislation are you referring to? Can you post it?

    HB 1362 Washington State “Foreclosure Fairness Act”.

    http://apps.leg.wa.gov/billinfo/summary.aspx?bill=1362&year=2011

    Here is a summary PDF file:
    http://apps.leg.wa.gov/documents/billdocs/2011-12/Pdf/Bill%20Reports/House%20Final/1362-S2%20HBR%20FBR%2011.pdf

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  23. 24
    Jonness says:

    By MichaelB @ 17:

    Seattle Times: “It’s a great time to buy if you want to keep your monthly payments low,” Ellis said.

    Has Tim sold out? Yes, he has. Does he sound like a real estate spruiker? Yes he does! Does he really understand anything about the real estate market and valuation of property? Evidently not!

    Perhaps seattlebubble should feature an article titled, “Guess the value of Tim’s new house when we finally hit the bottom.” It would all be in good fun with no intended animosity.

    I’m really shocked about Tim’s statement. What happens if Italy defaults on its debt? Would it still have turned out to be a great time to buy? Tim knows as well as anybody who has taken statistics 101 that making a blanket statement like, “a great time to buy” is nothing more than pumping the market. A more honest statement would be, “it’s a risky time to buy, but there are probably some good deals out there once you weed through all the overpriced crap.”

    The one thing we know for certain about this market is there is a lot of risk present, and the danger of losing a whole lot of money is very real.

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  24. 25
    Scotsman says:

    RE: Jonness @ 24RE: MichaelB @ 18

    You guys are forgetting one thing in your analysis- well, actually more than that but let’s keep it simple.

    The decision to buy isn’t made strictly from an investment perspective. People need a place to live- it’s really rent verses buy and the projected cost differences over some expected time line. I could buy the house I’m in on a 3% down FHA and have the total payment be slightly less than what I’m paying in rent. So from a strictly cash flow perspective it makes sense. I’m sure that’s more in line with what Tim meant.

    A couple of other points. Some folks have special requirements for housing so owning is a better option, even at a higher total cost. I’ve made the point several times that owning in this market can be seen as a luxury (considering future depreciation) but some folks can handle that. Not everyone buys $20K Fords. Lots of people buy $80-120K Audis, Mercedes, and other exotics knowing full well they will lose half their value in 4 years. Are they “selling out” or just playing where others choose not to?

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  25. 26
    The Tim says:

    RE: MichaelB @ 17 – The data doesn’t lie. The simple fact is that monthly payments on homes purchased today are lower relative to incomes in King County than they have been since at least 1993.

    If a buyer is just concerned with low monthly payments, it’s a good time to buy. That’s a simple fact.

    It doesn’t mean it’s a great time to buy for everyone though, or that every home is fairly priced, or that you should buy if you don’t intend to stay a long time. As I pointed out just a little later in the article, the moment you sign the closing documents, you’ve lost 10% of the home’s value (the approximate cost of selling). That’s nothing to sneeze at.

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  26. 27
    3rd Generation says:

    How are the donations coming in to the blog?

    How about a tote board.

    “If a buyer is just concerned with low monthly payments, it’s a good time to buy. That’s a simple fact.”

    Is it also a ‘Good Time’ to donate?

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  27. 28
    ARDELL says:

    RE: The Tim @ 26

    ” As I pointed out just a little later in the article, the moment you sign the closing documents, you’ve lost 10% of the home’s value (the approximate cost of selling).”

    I was speaking with someone last night who has the opportunity to buy a house, off market, for $240,000 where the other homes are selling in the same neighborhood for $310,000 and up. Do you still perceive that to be “losing 10%” at time of sale? Does everyone “lose” 10% at time of sale as a given…even if their gain is $70,000, because that $70,000 includes a 10% transactional cost, and turns that $70,000 gain into a $40,0000 gain…with “10% lost”?

    Most people would say yes…because they want the whole $70,000 without the 10% of purchase price haircut. But is a gain ever really a loss? Isn’t that the same as someone who paid $200,000 selling at $300,000 thinking they “lost” $100,000 because they “could have” sold it for $400,000 in July of 2007?

    Every day we run into sellers who are selling at substantial gain, who think they are selling “at a loss”, because it is less than peak pricing. I guess that’s the old glass half full or half empty…depends on the perspective of the person who is either woohooing or whining.

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  28. 29
    turf says:

    Currently in S. Snohomish Co. rent on a 3 bed sfh is approx. 1500 per month. West of the 5 near amtrak. If you can buy in the low 200’s where is the sense in renting. (particularily cash) Chicken Littles (the sky is falling) abound in a down market. Just as James Glassman forecast in 1999 (in a rising market ) the DOW to go to 35000 by 2005. We know what happened. Glassman wasn’t anonymous and has been a figure of fun ever since. Forecasting the future is easy. Being right is considerably more problematic.

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  29. 30
    MichaelB says:

    RE: The Tim @ 26

    The road to financial ruin is paved with simple facts. Stating a simple fact without providing context is pumping the market.

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  30. 31
    The Tim says:

    RE: MichaelB @ 30 – Lucky for you, I wrote an entire post today all about the context.

    The ridiculously low affordability index was one of the things I frequently mentioned on here as evidence that the housing market was severely screwed up and poised for a big drop back in 2005-2007. At that time, real estate agents repeatedly claimed that I was missing “context” about why Seattle Is Special and fundamentals don’t apply.

    Now I’m still talking about the affordability index and a whole new group of people are claiming that I’m missing the “context” that somehow invalidates this basic measure of local fundamentals. Quite amusing.

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  31. 32
    MichaelB says:

    RE: David Losh @ 20

    David, unless you are paying cash, you are either renting from a landlord or renting from the bank. From a financial point of view, renting is often and even long term can be the best answer. Renting provides cost effective, flexible shelter with no long term liability.

    Putting all or most of your assets into a non-liquid single asset class like housing, as many have done, increases risk without increasing return. Borrowing money to “invest” in a poor performing asset like housing is often a very poor decision.

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  32. 33
    MichaelB says:

    RE: The Tim @ 31

    Spruiking in the Times and CYA here.

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  33. 34

    By The Tim @ 31:

    Now I’m still talking about the affordability index and a whole new group of people are claiming that I’m missing the “context” that somehow invalidates this basic measure of local fundamentals. Quite amusing.

    You seem to have better search tools for this blog than the rest of us. I don’t think MichaelB has been around long enough, but perhaps you could find someone who is not saying that statistic means nothing, when before it was THE reason prices would continue to decline.

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  34. 35
    David Losh says:

    RE: The Tim @ 26

    I’m not getting the 1993 part, except if you figure in the number of $100K a year jobs in the tech industry that Seattle has now versus then.

    I did check Census data at one time and was surprised how high the wages were for Seattle. Is that what you mean, or is this for everybody?

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  35. 36

    By MichaelB @ 32:

    <Putting all or most of your assets into a non-liquid single asset class like housing, as many have done, increases risk without increasing return..

    Putting all your assets into one thing is typically not a good idea, unless you’re really lucky.

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  36. 37
    MichaelB says:

    RE: Scotsman @ 25

    You can say that the decision to buy isn’t made strictly from an investment perspective. Those not considering the financial impact need not do any analysis or read a blog or newspaper article about whether “it’s a good time to buy” It’s true that human beings are not rational. However, it is the biggest investment decision that most people make in their life. Taking on a significant amount of debt in the current economy is financially risky no matter what the interest rate. Housing cash flow in inflexible compared to rent. If rents become too high, you can always rent a cheaper place.

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  37. 38
    MichaelB says:

    RE: Kary L. Krismer @ 34

    Affordability is not about the payment, it is about the amount of debt you are taking on. Is a $400k home affordable for someone earning $65,000? No.

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  38. 39

    RE: MichaelB @ 38 – That’s not what the affordability index is about. It’s the median of each.

    Rate this comment: Thumb up 0

  39. 40
    David Losh says:

    RE: MichaelB @ 32

    paying cash is no gaurantee of anything. people at the auctions can tell you that.

    You’re looking for a deal, and a deal you can live with.

    I agree with you about the debt, but debt is pretty meaningless today. I’ll get to teacher greg in a minute.

    You can make money if you buy well, and use the property to it’s best use. The second thing is that you are securing a property with a mortgage.

    Blah, blah, blah, but you can gift a land lord money, or take advantage of these historically low rates to secure a property so it can get to cash.

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  40. 41
    MichaelB says:

    RE: Kary L. Krismer @ 39

    Then the affordability index does not really measure affordability does it? It is just a tool for real estate agents like you and real estate spruikers like Tim to convince people they can afford something they really can’t,based on low monthly payments. This is the kind of thinking that causes housing bubbles and encourages people to go into debt to purchase things they really can’t afford. Shameless!

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  41. 42
    MichaelB says:

    RE: Kary L. Krismer @ 36

    How about putting all of your debt into one thing?

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  42. 43
    MichaelB says:

    RE: Kary L. Krismer @ 34

    Kary,

    This measure has different implications for a falling market than a rising market. So don’t waste your time trying to find an example as your logic in this case is faulty.

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  43. 44

    By MichaelB @ 41:

    RE: Kary L. Krismer @ 39

    Then the affordability index does not really measure affordability does it? It is just a tool for real estate agents like you and real estate spruikers like Tim to convince people they can afford something they really can’t,based on low monthly payments. This is the kind of thinking that causes housing bubbles and encourages people to go into debt to purchase things they really can’t afford. Shameless!

    I’ve not really ever followed or mentioned the affordability index, which means I’ve never misrepresented what it is either.

    You may not have been around long enough, but I don’t think much of comparisons between median income and median house prices, because everyone is included in the former but not the latter. It’s an irrelevant number, no matter what result it shows.

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  44. 45

    By MichaelB @ 43:

    This measure has different implications for a falling market than a rising market. So don’t waste your time trying to find an example as your logic in this case is faulty.

    Wow, do you just make things up, or is this another example of people here not liking statistics that don’t fit their view of the world?

    Trick question–it’s both.

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  45. 46

    By MichaelB @ 42:

    RE: Kary L. Krismer @ 36

    How about putting all of your debt into one thing?

    Debt should be generally something that provides a real benefit, as opposed to mere enjoyment. I mentioned a week or two ago that both cars and houses can fill both roles, but that the larger the expenditure the more it balances toward the latter, which is not a good thing. In contrast, successful businesses tend to take on debt only for the former.

    But if you have only one thing that provides a real benefit, there’s nothing wrong with having only one debt. In fact, that’s the most you should have of any significance.

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  46. 47
    The Tim says:

    By MichaelB @ 17:

    Has Tim sold out? Yes, he has. Does he sound like a real estate spruiker? Yes he does!

    By MichaelB @ 33:

    Spruiking in the Times and CYA here.

    By MichaelB @ 41:

    …real estate agents like you and real estate spruikers like Tim to convince people…

    At least you’re getting some good mileage out of your Word of the Day app.

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  47. 48
    MichaelB says:

    RE: The Tim @ 47

    I’m looking forward to the day when you are quoted in the Seattle Times as saying “Although affordability levels are better than ever, now may not be a good time to buy real estate” In 2006 you probably would have, given your link to that car salesman analogy…. But times change, don’t they? Spruik! Spruiker! Spruikalicious! Spruikadelic! Spruiktastic! Learned a bit from that car salesman in 2006, didn’t you? Buy a home today with only 3,600 low, low, low monthly payments!

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  48. 49
    Jonness says:

    By Scotsman @ 25:

    You guys are forgetting one thing in your analysis- well, actually more than that but let’s keep it simple

    Point taken. A VERY small percentage of people are so rich, it doesn’t matter how much they pay for a house, and it doesn’t matter how much money they lose from failing to look at their purchase of a home as an investment decision.

    For the other 95% of people, money matters. Let’s forget about your rent vs. buy argument, since it is absolutely meaningless in this environment. The average family moves in about 7 years. You and I both know there is a strong chance they won’t be cash positive 7 years from now when factoring in the 10% it takes to sell. So let’s talk about wise investing rule #1: Never leverage into a collapsing asset class that is obviously nowhere near moving to the upside. The reasons why are so basic and obvious, they need not be stated, since we would ultimately just agree to this basic truth.

    Now let’s talk about affordable housing while the bubble continues to correct.

    1. Split rent with others, and put the savings toward a down payment.
    2. Rent a cheap place, and put the savings toward a down payment.
    3. Live in your parents basement, and put the savings toward a down payment.
    4. Rent a moderate place, and put the savings toward a down payment.
    5. etc.

    Life is fun right up until the money runs out. Keep your eyes on Europe, and keep your hands tightly gripped around your wallet until this thing finishes shaking out. And whatever you do, do not take advice from those who work in an industry that makes its money from the buying and selling of houses. Even if these people were realistic and sensible prior to conforming for reward, their strong financial ties to the industry biases their judgement.

    The economy is extremely volatile right now, as is the housing market. This volatility equates to extreme risk. Anybody who discounts this risk is either trying to sell you something, very forgetful, or just plain stupid. In my opinion, anybody who leaves the risk equation out of house buying in this environment is, at a minimum, acting irresponsibly.

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  49. 50
    devatt says:

    Jonness – Seems a bit harsh don’t you think? If everyone “waited” until all of the conditions were just right to do anything, quite frankly, nothing would get done. Your post is full of fear, anxiety and false hopes. Sure hope your are not a motivational speaker!

    As to buying a home – it’s actually quite personal. Most global statements simply don’t work. A family may feel as though they are ready to buy. For example, either or both spouses may have a great job and the family is expanding. They may have saved enough for a down-payment and have calculated that for them, buying is cheaper than renting. Should they care if the LIBOR rate in London is going up? Or that the GDP in Germany is slipping? Is there ever a time where there is not some type of negative economic news? Of course not.

    With the Internet and world communication, we know instantly when the North Koreans sneeze or a whale is beached in Japan. In the olden days, people bought and sold real estate during all kinds of world crisis moments – they just didn’t know about it. Not that these things may not have been important, it was just that the families needs and desires trumped a North Korean sneeze or a beached whale (or other event out of the control of the real estate buyer.)

    So my advice is that if you can afford it, and you want it – go and get it! Life is too short to sit and wait for that “perfect” moment. For the only certainty we have is today.

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