The Mega Spring Bounce of 2012

In order to quantify just how absurd this year’s spring bounce has been, here are a few charts I generated from the single-family home data on Redfin’s region page for King County:

King County Single-Family Home Listings

Listings continue to drop through the floor. The selection this year really is abysmal.

King County Single-Family Home Price

Meanwhile, listing prices are soaring through the roof. They tend to spike every spring, but the spring bounce in 2012 has shot the median list price per square foot to its highest point since November 2010, easily surpassing all of 2011 in just a couple months. Sale prices haven’t seen quite as much of a boost, but the upward trend there is clear as well, just on a slight delay.

Where things will really get interesting is a little later this year. Throughout the bust, prices have tended to peak sometime between June and August, then just headed south again for the winter, plunging to a new low before the year is out. Will the same pattern emerge in 2012? Time will tell…

King County Single-Family Home Sale to List

This one is interesting when coupled with the soaring list prices in the previous chart. Even though prices are shooting up, the sale to list ratio is rapidly approaching 100%.

All of these trends are mirrored in Snohomish County, Pierce County, and Seattle proper. The average sale to list ratio in Snohomish County is actually over 99%, and Seattle is at 99.7%.

Whether this is the “bottom” or not, it’s certainly the biggest “spring bounce” we’ve seen in years, by far. Not an especially fun time to be a home buyer.

Full disclosure: The Tim is employed by Redfin.

  

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.

70 comments:

  1. 1

    Listing Sales Are Way Down In My Neighborhood Too

    Sales are too, they all just sit unsold… most likely the above water price tags too high.

    Bad time for buyers and underwater sellers trying to ask too much to afford the sell.

    Is there an end? The down thumb bloggers all reach for the down thumb against my blog whenever I mention undocumented shadow inventory [bank owned foreclosed homes kept off the listings] in Seattle….this is not a good decade to be a scientific/pragmatic type asking for hard Seattle area “shadow inventory” evidence when the post 2006 buyers would rather see this data exclude it. Until we solve this conundrum its as Kary put it, “taking numbers out of our butts”….

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  2. 2
    Peter says:

    Zillow is claiming 10.2% of Seattle homes are deliquent and underwater and a further 29.4% are just underwater for a total of 39.6% of Seattle homes underwater.

    http://economywatch.msnbc.msn.com/_news/2012/05/23/11835006-one-in-three-mortgage-holders-still-underwater

    And this is definitely a bad time to be a homebuyer. I am going to give it a go for a few more weeks, but if this ridiculousness continues, I will sit it out again.

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  3. 3
  4. 4

    RE: Peter @ 2 – Zillow’s own accuracy figures for Seattle:

    http://www.zillow.com/howto/DataCoverageZestimateAccuracy.htm

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  5. 5
    Scotsman says:

    Zillow emailed me last night to say my home went up $27,000 in the past 30 days. Went up the month before too. This is just like the “good ‘ole days” of 2006. /;-0

    They guy down the street (who has been chasing the market down for the last three years) put his home back on the market less than 2 weeks ago. It’s pending, for the first time. The current asking price is 28% down from the original listing price 3 years ago. Still seems like a lot to me. But the current market enthusiasm is real. How long can/will it last is the $64K question.

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  6. 6
    David Losh says:

    That is a big bounce, and I’d like to tie it back to interest rates.

    This is the lower prices from peak, coupled with historically low interest rates.

    It’s payment versus the value of the property. Is it sustainable? I don’t think so. I think people will be paying for this market place for a very long time, because it is all about appreciated value catching up to the total amount of payments a person makes.

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  7. 7
    deejayoh says:

    RE: softwarengineer @ 1 – Shadow inventory

    In the words of Inigo Montoya: You keep using that word. I do not think it means what you think it means.

    There are fewer active listings on the market than there have been for 5 years, and yet you somehow keep insisting – even when presented with facts and charts that show exactly the opposite is true – that banks are sitting on some huge backlog of REOs.

    It’s almost comical

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  8. 8

    RE: deejayoh @ 7 – Not to mention the facts here:

    http://seattlebubble.com/blog/2012/05/18/foreclosures-dip-in-april-continue-yearly-drop/

    If there is shadow REO inventory, it’s a long way away given how long foreclosures take to complete.

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  9. 9
    ; says:

    my current (unsubstantiated) theory is the huge run-up in the stock market (20%+ increase from october 2011 to march-2012) is contributing to increased housing prices.
    people are able to take money out of equities to make a larger down payment.

    since stock prices are correcting nicely; it’ll be interesting to see if house prices soften noticeably in the next few months.

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  10. 10
    Scotsman says:

    RE: ; @ 9

    “since stock prices are correcting nicely; it’ll be interesting to see if house prices soften noticeably in the next few months.”

    Stock prices correcting? You assume they are high. I thought the recovery was just starting to take off. Obama said so, on the internet.

    House prices will probably soften some in the coming months. It’s been a seasonal pattern for years, whether the longer general trend has been up or down. But to assume it’s because of stock prices leaves out about a dozen other variables that might have some impact.

    Looking at the longer trend- almost certain economic collapse/reorganization- the question might be will a falling stock market and inflationary fears cause people to move money into real property and other productive hard assets? I think yes. Retail investors continue to leave the stock markets. Where is that money going? Will some of it go into housing and continue to push prices up despite a lagging economy and flat wages? I’m betting yes.

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  11. 11
    David Losh says:

    RE: Scotsman @ 10

    I’m betting that the money has already been wrung out of housing, and will never return. Fool me once shame on you, we had a banking scandal, fool me twice, shame on me.

    Sure there is market exhuberance, and why not? People have been waiting for five years for a market place that had reasonable prices, low interest, and a stable, no matter how shakey, economy.

    It’s a perfect storm, and people are buying. Some people are making excellent deals.

    However, there is plenty of housing, and more on the way. Interest rates will stay stable, why would they go up? We have a deflationary enviorment, so the prices will be stable also.

    There is no upside, that I can see, to owning, or holding property for a long, long time.

    Money, and investment money, will go into technology. I would rather own Zillow stock, than property. I don’t really know anything about stocks, but I thought I’d throw that out there.

    There’s lots to invest in today, I can’t keep up with every new thing. Apple is the most valuable company, and FaceBook is worth billions. It’s a nutsy crazy world out there, but I for sure would rather have cash on hand than sit on equity in property that I know I can lose quickly, because we just saw it happen.

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  12. 12
    yosef says:

    Property as an investment right now I would agree total roll of the dice. We are likely going to rent our current home rather than sell it and it feels like gambling, no surety of appreciation at all. But I think we will go ahead and roll the dice. Accidental landlords.

    Property as a home for you to enjoy living in – now is a great time to buy such a home if you are presented one that you can afford. We are now buying a bigger house for our family and we are thrilled. I’ll tell me wife “I don’t know if it’s a great investment” and her response is “who cares, it’s our lives”. And I have to agree – life is gonna be a blast in that house, who cares if the home even drops 10% over the next year – we probably don’t move again for at least another 10.

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  13. 13
    Jonness says:

    Right now, people are still feeling the wealth effect of unprecedented govt. stimulus and Fed printing. Once that runs out, we can start talking seriously about a bottom.

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  14. 14
    Jonness says:

    By Kary L. Krismer @ 3:

    RE: Peter @ 2http://blog.seattlepi.com/realestate/2009/08/06/have-we-become-a-nation-of-the-extremely-gullible-its-on-the-internet-it-must-be-true/

    Core Logic has the necessary real estate transaction data, HELOC data, and mortgage servicing data to figure out a reasonable approximation of how much the majority of people in this country owe on their homes. In addition, they can use their RE transaction data to reasonably estimate homes values at the neighborhood level.

    It’s not a perfect methodology, but it sure beats a back of the napkin Realtor estimate.

    http://www.corelogic.com/about-us/data.aspx

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  15. 15
    Jonness says:

    Here is the latest Core Logic release:

    CORELOGIC® REPORTS NEGATIVE EQUITY INCREASE IN Q4 2011
    ––Negative Equity Back to Q3 2009 Housing Market Trough Level––
    SANTA ANA, Calif., March 1, 2012––

    http://www.corelogic.com/about-us/news/asset_upload_file909_14436.pdf

    Yeah, I know people want to believe the current low supply environment is the result of a healthy housing market. Unfortunately, it’s a result of the massive number of underwater homeowners who can’t afford to sell their homes. This is a classic symptom of the bursting of a massive bubble, as are the record low mortgage rates. As people deleverage out of necessity, rates are kept low to try to slow down the sucking sound of money evaporating from the economy.

    The problem is, borrowing money will not fix a fantastic mess caused by borrowing too much money. The only real pathway out of this mess is legitimate economic growth as opposed to simply dumping trillions of dollars of borrowed or printed money into the economy and reveling at how GDP increased by a whole lot less than what we dumped in.

    Before people start calling the bottom, they should wait for legitimate economic growth to materialize or hyperinflation to set in.

    A lot of people are fighting over bones and scraps in the current Seattle housing market. Many have been on the fence for a very long time, others are lured in by the 3.5% mortgage rates. But just as we had round after round of housing stimulus programs, only to see the affect eventually wear off, we will see the same thing here.

    Either the banks have got to lend more, or people have to earn more. And unfortunately, people are not earning more, and it was recently revealed that bank lending tightened considerably last quarter.

    I’m sorry to report, Santa Clause will not be coming down your chimneys any time soon.

    Banks pulled back on lending during the first quarter as loan balances dropped for the first time in four quarters.

    FDIC Acting Chairman Martin Gruenberg cautioned that it is too soon to draw conclusions about the lending drop after only one quarter but said “the overall decline in loan balances is disappointing after we saw three quarters of growth last year.”

    http://wtaq.com/news/articles/2012/may/24/bank-earnings-rebound-but-lending-slackens/

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  16. 16
    MichaelB says:

    By deejayoh @ 7:

    RE: softwarengineer @ 1 – Shadow inventory

    In the words of Inigo Montoya: You keep using that word. I do not think it means what you think it means.

    There are fewer active listings on the market than there have been for 5 years, and yet you somehow keep insisting – even when presented with facts and charts that show exactly the opposite is true – that banks are sitting on some huge backlog of REOs.

    It’s almost comical

    There is no shadow inventory and there is no mafia.

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  17. 17
    MichaelB says:

    When an average home in Everett costs $300K, we are a long way away from a bottom.

    How many new homes are being built?

    When Tim’s home is worth $150K = 3 X the average Everett Household Income – we’ll have hit bottom, and by then this blog and Redfin will both be cooked.

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  18. 18
    MichaelB says:

    By Jonness @ 13:

    Right now, people are still feeling the wealth effect of unprecedented govt. stimulus and Fed printing. Once that runs out, we can start talking seriously about a bottom.

    Exactly! Jonness Jenius!

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  19. 19

    RE: deejayoh @ 7

    You’re Comical

    When is undocumented shadow inventory mean it doesn’t exist and where did I allege it did?

    You post 2006 buyers and profiteers love to lie about what my blog said. I’ll repeat myself, its “undocumented”.

    Its like counting undocumented immigrants, how do you do that? With a Ouji Board?

    Until we all grow up and be scientist types “shooting from the hip” on wildly alleging either way on something this important to Seattle home price degradation that is “undocumented” is totally meaningless.

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  20. 20

    By Jonness @ 14:

    By Kary L. Krismer @ 3:
    RE: Peter @ 2http://blog.seattlepi.com/realestate/2009/08/06/have-we-become-a-nation-of-the-extremely-gullible-its-on-the-internet-it-must-be-true/

    Core Logic has the necessary real estate transaction data, HELOC data, and mortgage servicing data to figure out a reasonable approximation of how much the majority of people in this country owe on their homes. In addition, they can use their RE transaction data to reasonably estimate homes values at the neighborhood level.

    It’s not a perfect methodology,

    Ignoring entirely the debt side, when they’re often off by more than 10 or 20 percent on the value side, that would affect the resulting percentage of homes underwater by a significant amount. It makes the resulting number a total work of fiction.

    But hey, people want to pretend that they know things. And statisticians and economists need jobs. It’s a win-win situation.

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  21. 21

    By MichaelB @ 16:

    By deejayoh @ 7:
    RE: softwarengineer @ 1 – Shadow inventory

    In the words of Inigo Montoya: You keep using that word. I do not think it means what you think it means.

    There are fewer active listings on the market than there have been for 5 years, and yet you somehow keep insisting – even when presented with facts and charts that show exactly the opposite is true – that banks are sitting on some huge backlog of REOs.

    It’s almost comical

    There is no shadow inventory and there is no mafia.

    No one is saying there is no shadow inventory, but thanks for playing.

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  22. 22
    David Losh says:

    This is getting to be the Meshugy site on steroids.

    Some how, by magic, we went from making fun of that house in Ballard at the first of the year http://seattlebubble.com/blog/2012/02/23/guess-the-price-round-3-we-have-a-winner/ to now talking about the bottom of the Real Estate market based on low inventory, and low interest rates that are now at 3.5%.

    It’s a bizarre turn of events that now, after six years of waiting this must be the time to buy, and talking about how we timed the bottom.

    I remembered these posts http://seattlebubble.com/blog/2006/09/22/global-insight-seattle-overvalued-by-338/ because it seems like the same thing is going on now.

    I think now if you buy Real Estate you should be seeing it as a place to live, but the investment aspects really seem suspicious to me.

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  23. 23

    By David Losh @ 22:

    It’s a bizarre turn of events that now, after six years of waiting this must be the time to buy, and talking about how we timed the bottom.

    I remembered these posts http://seattlebubble.com/blog/2006/09/22/global-insight-seattle-overvalued-by-338/ because it seems like the same thing is going on now.

    Good points David.

    The King County SFR median back then was about the same as the non-distressed median is now. So those that waited from back then, depending on the type of property they would have been interested in, have not really gained much, but instead only lost about 10% of their adult lifetime waiting. Of course there were properties back then which did worse than others, such as 1.5- bathroom houses. And there are probably very few houses which actually increased in value because the mix of houses comprising the median is now different.

    What’s really going on is similar to thinking gas is a bargain at $3.00 a gallon after it was recently over $4.00. The price doesn’t seem so bad in comparison, but when it was first $3.00 a gallon that was horrible! With houses we’re basing that type of thinking not so much on actual prices or values, but by things like C-S and the NWMLS median, which mean very little when it comes to the individual property. So that makes things seem even better than they are!

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  24. 24
    yosef says:

    RE: David Losh @ 22
    “I think now if you buy Real Estate you should be seeing it as a place to live, but the investment aspects really seem suspicious to me.”

    Agreed, and I also think not enough is mentioned on this board about the huge differences in price behavior between neighborhoods and cities. The house we’re buying is in Bellevue and has only dropped about 6% since 2005. Nice home, nice neighborhood, good schools (elementary scores a 10 on greatschools.org). The house we own in Renton has dropped closer to 20% (elementary scores a 7 on greatschools.org). People moving to the area with high paying jobs target the areas with highly ranked schools, keep prices up in those locations. I never paid that much attention to schools when looking for where to live, now I see the wisdom in doing that from an investment perspective, even if you don’t have children.

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  25. 25

    By yosef @ 24:

    Agreed, and I also think not enough is mentioned on this board about the huge differences in price behavior between neighborhoods and cities.

    Hey, what about the post right above yours? ;-)

    The house we’re buying is in Bellevue and has only dropped about 6% since 2005. Nice home, nice neighborhood, good schools (elementary scores a 10 on greatschools.org). The house we own in Renton has dropped closer to 20% (elementary scores a 7 on greatschools.org).

    That’s what I’m talking about, but you could have even more extreme examples, like say a 1 bathroom house in Skyway. Those are probably down close to 40%.

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  26. 26
    David Losh says:

    The posts from 2006 are interesting because the interest rate was closer to 7% while discussions were going on.

    So is this an interest rate driven market place, where prices seem OK because the payments are lower?

    There’s more to that in terms of rents versus mortgage payments. Rents may seem high compared to these historically low mortgage payments, but will that also adjust when a market goes back to “normal.”

    Another interesting thing in the discussion about Tim refinancing is how many people will have these historically low rates? How many people will qualify?

    Then you take those people who have these hitorically low rates, compared to the people who can’t refi, then compare them to the people who own free, and clear.

    The people who can’t refi, and the ones who own free and clear should sell. My reasoning is that if, or when interest rates do go up the price of property will go down proportionally, at least. That is the real shadow inventory.

    From a purely investment stand point, now would be the time to sell.

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  27. 27

    By David Losh @ 26:

    The people who can’t refi, and the ones who own free and clear should sell..

    Sounds like a real estate industry sales pitch! ;-)

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  28. 28
    Peter says:

    As a buyer in the market right now with a substantial downpayment, all I can say is that I will not be rushed to making a decision. If I’m told that I have to make a full price offer immediately or risk missing out on the purchase, I will just move on. I’m not saying I’m adverse to making a full price offer, what I am saying is that I’m adverse to having absolutely no time or opportunity to negotiate. If there are others that will, have at it. It’s not hurting me to continue renting and grow my down payment.

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  29. 29

    RE: Peter @ 28 – There are some appealing houses which are somewhat unique which might make you change your mind on that. I’m referring to what might be described as the buyer’s perfect house.

    But really, if that’s your position it might be best to sit out a while, because that seems like a strategy that is doomed to getting an inferior house. It’s sort of like the strategy of always withdrawing an offer if another offer comes in. You’d only be bidding on the less appealing houses. (An exception might exist if you’re looking for fixers or semi-fixers).

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  30. 30

    RE: Peter @ 28 – Another situation you would want to act quickly is where the property is priced 20% under value, but there you’d probably want to offer 105% of list. ;-)

    There are no absolute rules.

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  31. 31
    Peter says:

    Kary, my position is intended to prevent me from getting stuck in an inferior home due to time pressure reducing my abililty to adequately assess a home before making an offer. The only other marketplace where a buyer is expected to climb to the top of the heap of a pile of other buyers in a mad scramble is the market for cabbage patch dolls, beanie babies, and Apple products, and I haven’t bought any of those either.

    There is one absolute rule – a fool and his money are soon parted.

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  32. 32
    Jonness says:

    By Kary L. Krismer @ 20:

    But hey, people want to pretend that they know things. And statisticians and economists need jobs. It’s a win-win situation.

    I’m not sure if you are claiming that nobody knows how far underwater homeowners are, except for you, or if you are claiming that it’s just as likely that 95% of Seattle homeowners are underwater as it is 10%?

    At any rate, you are not an expert at statistics and data analysis, so it would be foolish if I took your claims at face value as opposed to putting more weight on world-class experts’ opinions, such as Dr. Robert Shiller, whose methodology is completely documented and assessable to all.

    The fact is, the current low supply environment is a direct reflection of there being an enormous number of people who are underwater on their homes who can’t afford to sell them. IMO, the Core Logic estimate of Washington as a whole is reasonable.

    You can’t expect people to believe what you say just because you posted it on the Internet. Especially when the topic of your claim is that you can’t believe it just because it’s on the Internet. Your claims would carry more weight, if you followed Dr. Shiller’s lead and posted the math behind your hypothesis.

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  33. 33
    Jonness says:

    By David Losh @ 22:

    I think now if you buy Real Estate you should be seeing it as a place to live, but the investment aspects really seem suspicious to me.

    Well put!

    It’s not necessarily a bad time to buy, but is is a very volatile time to buy, which implies risk. Flip a coin. It could be heads, or it could be tails. It doesn’t mean you will get burned. It just means there is a substantial risk that you could get burned. There is also a good chance that things will work out OK.

    IMO, what’s going on here, is few people understood the article from 2005 that laid out the future of RE. It spoke of a time when supply would be artificially low, because few people could afford to sell their homes.

    Interestingly, once we actually got here, since very few people thought through the logic of a deleveraging bubble cycle, they mistake low supply with a healthy market. But in truth, if the market was healthy, people could afford to sell their homes, and we wouldn’t have a low supply.

    Now let’s get into the topic of a liquity trap. This is where the Fed lowers rates to the zero bound or below. That’s where we are at now. This is not a sign of economic health. It’s a sure sign of economic weakness as the Fed attempts to pump more credit money into the economy to compete for bubble assets. The fact that we are seeing new record low rates is a direct reflection of the current risk of borrowing the money. Rates are low because people are afraid the world is on the verge of economic collapse. Thus, they, along with the Fed, are piling money into bonds, which pay little or even negative interest.

    So home prices have come down greatly, and interest rates are at record lows. Couple this with false low supply, and yes, you have temporary price support.

    Could this be the bottom. Yes, it could. Greece, Spain, and Italy could magically heal their head wounds, and the U.S. could see some real growth that’s not just borrowed money pumped into the economy to bring about a temporary sugar high. I’m personally not banking on that outcome, but even the above improbable scenario has a low chance of occurring. IMO, a more probable outcome that could bring a bottom is the Fed over prints and devalues the dollar. Thus, $100 buys about what $20 currently could buy (initially, this would cause a price decline as rates initially moved higher, after which, prices would advance).

    However, I’m of the minority opinion and still believe what I’ve been saying for quite some time. We will will see periods of economic stability and periods of economic weakness for several more years, at a minimum. This will keep a lid on the housing market and allow people to continue saving a reasonable down payment of at least 20%. It will also mitigate the risk of further price drops over the next couple of years. Worst case, is, they miss the bottom, which means they buy into an environment where house prices are steadily increasing again, which allows them to afford to sell, profit, and move pretty much whenever they want.

    As an investor, I tend to stick to probability of outcomes. Nobody wins them all. But with hard work, proper risk/reward analysis, and patience, people can put the odds in their favor enough to win more bets than they lose. This is the profit that warrants the amount of work required to win.

    People should step outside the fish bowl, look in, and observe. They will never figure it out by swimming with the goldfish and adopting their perspective on the world in which they live.

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  34. 34

    By Peter @ 31:

    Kary, my position is intended to prevent me from getting stuck in an inferior home due to time pressure reducing my abililty to adequately assess a home before making an offer..

    And generally I would agree. I’m just saying there should be some exceptions to that. In the houses you look at it very well may be that exception won’t pop up, but if it does, you’ll know it when you see it. And the more houses you’ve looked at before you see that one, the more certain you will be.

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  35. 35

    By Jonness @ 32:

    By Kary L. Krismer @ 20:
    But hey, people want to pretend that they know things. And statisticians and economists need jobs. It’s a win-win situation.

    I’m not sure if you are claiming that nobody knows how far underwater homeowners are, except for you, or if you are claiming that it’s just as likely that 95% of Seattle homeowners are underwater as it is 10%?

    I’m not claiming I know. I’m claiming no one knows, because no one knows the value of individual properties without either selling that property or doing an appraisal. Even with an appraisal the valuation is probably only accurate within plus or minus five percent, which also would lead to the resulting number (percent underwater) fluctuating widely.

    It’s simple math. If you can’t determine with any reasonable accuracy what the value of a property is, you can’t determine whether it is underwater in marginal cases. There are likely a significant number of marginal cases (cases where the debt is within plus or minus 10% of the value).

    At any rate, you are not an expert at statistics and data analysis, so it would be foolish if I took your claims at face value as opposed to putting more weight on world-class experts’ opinions, such as Dr. Robert Shiller, whose methodology is completely documented and assessable to all.

    I’m not sure why you bring up Case-Shiller, because we’re talking about Zillow’s analysis here. But C-S is largely a black box. If you disagree, post me a link to which properties made up the paired listing for the April, 2012 Case-Shiller Seattle numbers, and which sales did not make the cut.

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  36. 36
    ESS says:

    “Not an especially fun time to be a home buyer.”

    If you want to see a place that it isn’t a good time to be a home buyer – check out our friends to the north. Vancouver BC, and close suburbs are witnessing amazing price increases. Foreign investors are snapping up properties left and right. Nothing like a group of people with deep pockets to get the real estate moving! Hopefully they will start to invest in the Seattle area – we have the same cheerful winters as they do

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  37. 37
    Drone says:

    RE: Kary L. Krismer @ 34
    I know that property. I didn’t think it existed, and then I found it. Holy *** was it ever perfect.
    But I couldn’t afford it. And somebody else could, and did. I’m not a particularly emotional person, and I’m still sad about that one.

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  38. 38
    David Losh says:

    I was talking with an agent today who wrote up an offer for $80K over asking and a five day close. The house sold for $190K over asking, all cash, 14 offers.

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  39. 39
    David Losh says:

    RE: ESS @ 36

    While talking with the same agent as the comment before, we were in one of his listing at the time, and a couple from China came in to look. They were very interested.

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  40. 40
    yosef says:

    RE: David Losh @ 38

    Where is this happening? Doesn’t sound like the eastside market that I’ve been travelling through. Never heard of such an overbid unless this thing is 3mil+ then it seems more believable. Indulge is with details.

    I was thinking rent our old home, now I’m thinking sell it, take the hit and be free. Ask me tomorrow and you’ll get a different answer :). Hard to let go of what’s been my baby.

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  41. 41

    RE: yosef @ 40 – Unless you have some desire to be a landlord, that’s probably not a good way to go. But then again, it’s not entirely impossible that you might like it.

    If there’s some reason your house would be in any way hard to sell, this would be the market to sell it. As an example, there was a place recently where the neighbor across the street had a very messy yard (trash, non-operable vehicles, etc.) and two inches of moss on his roof. The house being sold was very dated and had a questionable roof. It went pending inspection in a couple of days. In a more normal market that would sit.

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  42. 42
    David S says:

    RE: Peter @ 28 – Can I hear a big Amen on that? AMEN!

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  43. 43
    David Losh says:

    RE: yosef @ 40

    Madison Valley, in Seattle. The listing we were in the woman decided to sell, right now, rather than rent it out again. That is in View Ridge with plenty of activity.

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  44. 44
    yosef says:

    RE: Kary L. Krismer @ 41

    Thanks for the tip. Will be difficult to sell this house because it’s 1020 sq ft, 1 bath, laundry in garage. Will be easy to sell this house because you’re only a few homes up from lake washington with a view from the back patio, very nice garden, and the house is nice inside. Will be difficult to sell because one neighbor has a strangely landscaped yard. Will be easy because the house across the street is going through a super nice remodel, and there’s a very nice home going in down the street.

    Net result: I have no idea what would happen with this listing but someone probably goes “ah ha! that’s what I want” and then offers way less than I paid for it in 05 before I fixed it up.

    Hypothetically – let’s say I list this pupster for 330k and I get 2 or 3 people to go “ah ha!” – how much can we play the bidding war game? I thought that was a bit of a faux pas among the industry, or did I just make that up. In Sweden I believe that’s how it works – you list low and it basically auctions up to a final bid. Sounds good to me as a seller.

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  45. 45
    MichaelB says:

    By Kary L. Krismer @ 3:

    RE: Peter @ 2http://blog.seattlepi.com/realestate/2009/08/06/have-we-become-a-nation-of-the-extremely-gullible-its-on-the-internet-it-must-be-true/

    Don’t believe what you read on the internets…especially from the Kary Krismer blog bot.

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  46. 46

    RE: yosef @ 44 – I’ve never been a fan of listing below what you would actually sell for. In this market if you accidentally list below what it’s worth, the market will somewhat correct for that. But I don’t think it fully corrects, so intentionally doing that doesn’t make much sense to me.

    Others will disagree.

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  47. 47

    By MichaelB @ 45:

    By Kary L. Krismer @ 3:
    RE: Peter @ 2http://blog.seattlepi.com/realestate/2009/08/06/have-we-become-a-nation-of-the-extremely-gullible-its-on-the-internet-it-must-be-true/

    Don’t believe what you read on the internets…especially from the Kary Krismer blog bot.

    You’d have a problem with what I write, only because it requires over an 8th grade reading comprehension. What I wrote in that post is really rather simple math, probably 8th grade level too.

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  48. 48
    Macro Investor says:

    RE: Scotsman @ 10

    “Retail investors continue to leave the stock markets. Where is that money going?”

    Looked at bond yields lately?

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  49. 49
    Macro Investor says:

    By Peter @ 28:

    As a buyer in the market right now with a substantial downpayment, all I can say is that I will not be rushed to making a decision. If I’m told that I have to make a full price offer immediately or risk missing out on the purchase, I will just move on. I’m not saying I’m adverse to making a full price offer, what I am saying is that I’m adverse to having absolutely no time or opportunity to negotiate. If there are others that will, have at it. It’s not hurting me to continue renting and grow my down payment.

    Not to make this comment personal to you… but when you say you have a “significant” down payment, do you also have a significant retirement fund? Most people think if they have money saved it must be spent. And if they have a lot of money saved it must be spent on something big — like a house.

    Unless you love your job and want to do it until you’re 90, you need a large down payment for that… well over $500k if you plan on living in an expensive market like Seattle. Will you be capable of working when you’re very old? If you don’t have $200k saved up by age 35-40, you are behind schedule.

    Americans need to stop obsessing about shopping in all the forms it takes. Plan a little further out, or hope and pray social security is still around and not devalued by all the fed printing we’re going to have.

    For me personally, a house has to be a value before I pull from that retirement fund. A $500k crap box is not a value, just because a bunch of dumb 2-income techies can stretch to support the loan. Value is what we see in markets like Spokane, where regular people can afford a much nice home on 1 income.

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  50. 50
    David Losh says:

    RE: Kary L. Krismer @ 47

    but is it true?

    Value, and price of property are two different things. The price of property can be propped up by historically low interest rates, but that also adds to the number of people who are under water.

    People are jumping into a market today with 20% down payments, and perfect credit. What happens to these good people if the Real Estate market declines by 10%. Should they ride it out, or sell? You can sell with only a 10% equity, but you need 20% to 30% to refinance.

    What would you recommend, hold for the long term? take the chance that the market will rebound, or cut losses, and preserve that good credit? What would you do?

    In the Schiller comments that Deejayoh posted Schiller refers to the housing market in Spain. He did that because the Real Estate market place is also global. The investment dollars, from some place like Deutsche Bank, can go anywhere, and right now they are here. Deutsche Bank is here because we still have a boat load of people who are paying mortgages, unlike Spain where people don’t have the ability.

    I think the Deutsche Bank study is correct, and that they do know what they are talking about.

    Value, and price are two totally different things, and the value of the property in the United States is in the ability of the people to pay mortgages. If people lose the ability, or better yet, stop paying the bank, the value plummets.

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  51. 51

    By David Losh @ 49:

    RE: Kary L. Krismer @ 47

    but is it true?

    Value, and price of property are two different things. .

    It’s not when they’re talking about the percent of houses that are underwater.

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  52. 52

    By David Losh @ 49:

    People are jumping into a market today with 20% down payments, and perfect credit. What happens to these good people if the Real Estate market declines by 10%. Should they ride it out, or sell? You can sell with only a 10% equity, but you need 20% to 30% to refinance.

    What would you recommend, hold for the long term? take the chance that the market will rebound, or cut losses, and preserve that good credit? What would you do?

    I wouldn’t buy if you’re going to want to sell just because priced drop after you buy.

    Also, with interest at 3.75% or less, not being able to refinance wouldn’t really keep me awake at night.

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  53. 53
    David Losh says:

    RE: Kary L. Krismer @ 51

    Interest rates today are 3.75%. When rates go up, and it may be a long time before rates go up, but when they do, the price of property will also go down.

    That is simple math. The Real Estate market place is being propped up, again, by low interest rates. The myth that Real Estate always goes up in value has proved wrong.

    Deutsche Bank is very correct. They may even be a little optimistic, because they want Americans to keep paying.

    There will be a point when people realize that the value of the property they are paying for is less, much less, than the price they paid.

    Here’s another interesting simple math assertion. People compare the price of property today to what the replacement price would be, today. No one calculates that today’s building practices have an obsolesence. They never deduct for that. People continue to calculate last years model, or properties built five, or ten years ago by today’s construction cost.

    What we build today won’t last forever. It also has a diminshing value.

    I could go on, but you should be able to get the point, just because people are paying these really high prices today, doesn’t make that the value.

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  54. 54
    David Losh says:

    I’ll add a seperate line, because if you have been thinking of selling, now would be the time.

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  55. 55

    By David Losh @ 53:

    RE: Kary L. Krismer @ 51

    Interest rates today are 3.75%. When rates go up, and it may be a long time before rates go up, but when they do, the price of property will also go down.

    That is simple math.

    Incorrect. Higher interest rates would put downward pressure on real property prices, but interest rates are only one of many factors that affect real estate prices.
    .

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  56. 56

    By David Losh @ 53:

    Deutsche Bank is very correct. They may even be a little optimistic, because they want Americans to keep paying.

    What are you talking about? In 2009 Deutsche Bank said 50% of all houses would be underwater in 2011. That’s per the link I gave. Today Zillow is claiming 33% of all houses are underwater. That’s per Peter’s link.

    Did Deutsche bank publish yet another make-believe number?

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  57. 57
    MichaelB says:

    RE: Kary L. Krismer @ 47

    KaryBot comment

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  58. 58
    David Losh says:

    RE: Kary L. Krismer @ 56RE: Kary L. Krismer @ 55

    How quickly we forget 2011, and 2009. Then we had the tax credit, and these historically low interest rates. Without splitting hairs 33% and 50% are pretty close, but the fact is that selling today, if you have a mortgage, is very much a crap shoot. Anything can happen, at any time.

    I’ll say again that if you are going to sell, have thought about selling, now is the time.

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  59. 59

    RE: MichaelB @ 57 – What are you? Eight years old?

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  60. 60

    By David Losh @ 58:

    RE: Kary L. Krismer @ 56RE: Kary L. Krismer @ 55

    How quickly we forget 2011, and 2009. Then we had the tax credit, and these historically low interest rates. Without splitting hairs 33% and 50% are pretty close, but the fact is that selling today, if you have a mortgage, is very much a crap shoot. Anything can happen, at any time.

    I’ll say again that if you are going to sell, have thought about selling, now is the time.

    33% and 50% are pretty close? Yes, I guess you could see one number pulled out of Deutsche Bank’s corporate butt as being pretty close to another number pulled out of Zillow’s corporate butt. /sarc

    I would agree this is a good time to sell, but I don’t see what that has to to with bogus studies that the press and some people eat up.

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  61. 61
    David Losh says:

    The study is about properties under water, where the mortgage amount exceeds the price the property could sell for. We have had 25% of the market place as REOs, or short sales, and 33% to 50% of properties under water.

    I personally think the figures are staggering.

    You linked to an article that you wrote saying this can’t be true. You throw out a lot of statements like they can’t possibly know the future which is kind of your standard line, but we are now talking about 2011, and prices did decline.

    Prices of property continue to decline, but for a lot of reasons people on this blog want to dispute that.

    Now we have hind site, and I would like to see where Deutsche Bank was wrong.

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  62. 62

    By David Losh @ 61:

    The study is about properties under water, where the mortgage amount exceeds the price the property could sell for. We have had 25% of the market place as REOs, or short sales, and 33% to 50% of properties under water.

    I personally think the figures are staggering.

    You linked to an article that you wrote saying this can’t be true.You throw out a lot of statements like they can’t possibly know the future which is kind of your standard line, but we are now talking about 2011, and prices did decline.

    You’re missing the point. I’m also saying they don’t know the present! That priced did decline doesn’t mean we hit 50% as claimed by Deutsche Bank.

    For each individual house V-D=E, where V equals the value, D equals the debt and E equals the equity. You then collect that data, and for a certain percentage of houses E is positive and for a certain percentage E is negative.

    The problem is, they clearly don’t know V, and they probably don’t know D, so their E values are completely made up numbers. That means the percentages are also completely made up numbers, because they are a calculation done off the E values.

    If you want to go into the future, then they are even less likely to know the future value of properties and the future debt loads against those properties. Thus the numbers from the Deutsche Bank study are even more made up than the numbers from the Zillow study.

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  63. 63
    tim2 says:

    People, your discussion about interest rates, shadow inventory and the like misses the point. The biggest driver in housing is supply and demand. Demand in housing is driven by jobs and demographics. Seattle in creating jobs, therefor people with income are moving here. Presto! Housing demand. Demand up, prices up. Soon there will be fewer people underwater due to increased value, therefor fewer walk aways. Its not static. The game has changed, the bottom was in months ago. Bubble popped. Slow climb up.

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  64. 64
    David Losh says:

    RE: Kary L. Krismer @ 62

    You are talking about the past of 2011. The banks know value better than anyone, because they control the market place.

    You’re trying to project a false sense of value based on sales price data.

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  65. 65
    David Losh says:

    RE: tim2 @ 63

    If home prices were based on supply, and demand the price of residential Real Estate would plummet. We have an over supply of housing units with many more on the way.

    A Real Estate sales trick trotted out since 2007 has said that because builders stopped building in 2007, 2008, and 2009, we will have scarcity. The difference is we built all of those crappy housing units all over the Seattle countryside, and in city for ten years before that.

    Those people who are moving here for the Amazon jobs have already arrived, and have choices, lots of choices, millions of choices.

    Let me put this into perspective because right now there should be thousands of rental units ready to come on line. That’s what builders have been working on. One apartmant building can add 50 housing units in one construction project. That adds to supply.

    Next we have the long established trend of condo projects set for inner city that are permitted to be built. That will suck more people out of some of the trendy places people have been forced to live in.

    Last we have miles of acres of barely touched land to be developed between down town, and the airport.

    If, as you say, people are moving here for jobs, which they are, they are horrified by our housing prices. Some others are horrified by our lack of amenities, our lack of sophistication.

    A smart set of developers can make a fortune by providing housing units that fit today’s life style. It’s already happening, the cruise ship is turning on course, and the price for our over priced housing unit crap will continue to decline.

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  66. 66

    By David Losh @ 64:

    RE: Kary L. Krismer @ 62

    You are talking about the past of 2011. The banks know value better than anyone, because they control the market place.

    You’re trying to project a false sense of value based on sales price data.

    Again, when you’re talking about whether a property is underwater, it’s is the sales price that would determine that. Underwater equals less net money than what there is in debt, and the net money is directly calculated from the price.

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  67. 67
    tim2 says:

    David @ 65:

    But it is not. Prices are no longer declining. You need to look at the fundamentals. Fundamentals my man. People that were looking at the fundamentals knew in the mid 2000’s that something was up. And now in the spring 2012 the fundamentals (supply and demand) are telling us the bottom is in. It is irrelevant if the job is at Amazon, or if the job is long lasting, or if they pay good health benefits. It is a job, and it puts coin in peoples pocket, they are moving here, and therefore demand has increased. Ta da – bottom.
    Jump on board or be forever priced out of the market (kidding).

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  68. 68
    hinten says:

    RE: David Losh @ 53
    Would be good to talk about replacement value a little more. At the beginning of the downturn I was fascinated by the fact that used home prices were below replacement value (new construction). I chalked it off as a temporary effect of too much inventory.
    Now, the situation has changed. We still have too much inventory but replacement value has dropped.
    How can replacement value drop? Two reasons: 1) drop in prices in raw material and labor 2) even chocolatetier build quality

    I think point number 2 will really come to hurt us. I know it’s always been popular to bash McMansions but this goes deeper and broader. If you have ever spend days abroad you will notice different approaches to residential construction. I believe that we have a cast system of construction here in the US that the average person owns something that is made out of wood and parts you can get at any Home Depot. Then there is another cast that can actually afford materials that are designed to last longer than 15 to 20 years.

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  69. 69

    RE: hinten @ 68 – You think construction quality has gone down since 2007? How so?

    I would attribute the replacement cost decline to the cost of the lot, as I was mentioning last week. You you can pick up a lot for less than the cost of the infrastructure on the lot, that allows prices to decline for new construction.

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  70. 70

    […] Seattle Real Estate, a Big Spring Bounce for a Happy Few by Michael van Baker on June 6, 2012 Seattle Bubble, not easily impressed, is impressed: “the spring bounce in 2012 has shot the median list […]

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