Posted by: The Tim

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

45 responses to “Case-Shiller: Seattle Home Prices Shot Up in March”

  1. Chris

    Wow, that is a HUGE bump. So the data is Jan-Feb-Mar re-sales right? So December must’ve just been a grim month for sales?

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  2. softwarengineer

    RE: Chris @ 1RE: Chris @ 1

    The 24.5% YOY 2007 Drop in Prices

    Means a 11% YOY increase in a small 2013 base [from the 24.5% drop from 2007] is actually about 8%. I hope ya all put 20% down to keep above water if ya bought in 2007.

    Also, like others have said the 24.5% drop is a few prime “in city” areas…..not the lion’s share of the Seattle suburbs which plummetted from 2007 at approximately twice those levels, like SE King County.

    Location, location, location….

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  3. Erik

    Real Estate is up and stocks are up. This makes me feel like it has gotten too good too fast and it’s about time to sell.

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  4. Erik

    Index_Ct=[sum_i(Index_it/Index_i0)*V_io]/Divisor

    Where:
    -Index_Ct is the actual Shiller-Price index composite
    -Index_it is the level of home price index for that area(i) in a period(t)
    -Index_i0 is the level of home price index for that area(i) but I don’t understand what “0” is? It says base period, but I don’t understand how that happens.
    -V_io is aggregate value of housing stock in a metro area in base period 0 as defined in tables.
    -Divisor is a constant to convert housing values to an index number

    Feel free to comment and specifically help me understand what it means when t=0 and how indexes are calculated when t=0.

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  5. mike

    RE: softwarengineer @ 2 – I think we have a different definition of “Prime”. Try and buy a house in Greenlake or Ballard for 25% off of 2007 prices. The only way that’s happening is if the place has been completely destroyed since then. I’m not even sure those count as “Prime” neighborhoods since they’re nowhere near as expensive as some of the high end neighborhoods along Lake Washington. But you won’t be finding any 25% off deals there on habitable houses either.

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  6. One Eyed Man

    RE: Chris @ 1
    I’m not entirely sure but my recollection is that its Feb/Mar/Apr not Jan/Feb/Mar. But I’m not interested enough to peruse the CSI Methodology to check it.

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  7. Blurtman

    RE: Erik @ 3 – You’ve been down so long, it looks like up to you.

    You may not recall how the US equities market performed during the Clinton presidency. Anyone could have made 20% a year on an index fund.

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  8. doug

    MEGA Bubbles are forming everywhere especially in the stock market
    precious metals, oil and real estate. The one place where there are no bubbles is JOBS.
    The corporations and politicians are no longer concerned about the jobs crisis and are more interested in muddling are thought processes with stuff like guns and immigration.

    this phony market being run by pigs will end in the slaughter house

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  9. ray pepper

    RE: Erik @ 3 – …flippers r making a killing! everyone flush with cash, buyers on every corner, FIND THOSE GEMS!

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  10. wreckingbull

    Phoenix up 22%. This will end well.

    These gyrations will not end until the government stops picking winners and losers in the game. Fun times ahead.

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  11. mike

    RE: wreckingbull @ 10 – I too see those kinds of increases as troubling if they continue. However, the extremely overbuilt low end areas *probably* over-corrected, causing a lot of owners that might have stuck it out to sell in despair. 6 figures of unsecured debt with no other exit plan can be a very desperate situation.

    I know a few friends in (still) depressed areas of South King and Pierce that see little point in keeping their homes even now, so I can imagine the pressure to bail was even greater in markets that fell further.

    The main thing I take away from this ‘bottom bounce’ is it seems to be strongest in areas that saw the greatest price fluctuations during the bubble and bust. I doubt it’s sustainable, but it does appear to be part of a normal correction. At least for now with prices still 25-30% off peak with subdued demand and low rates.

    There are still A LOT of buyers stuck on the sidelines with ruined credit and depleted savings. It’s going to take a few years for this group to re-enter the market and contribute significantly to demand.

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  12. Ron

    Up, Up, and away we go….

    i’m gonna sell my house when the market tests the high from the last bubble about two years from now when I turn 50 and move onto a boat…..monthly expenses = $250.00 with water front views. I’ve had enough mortgage-stress for one life.

    I just hope those idiot’s in DC don’t get US debt downgraded again because that could be a fatal blow.

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  13. Scotsman

    “Up, up, and away, in my beautiful, my beautiful balloon!”
    http://www.youtube.com/watch?v=5akEgsZSfhg

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  14. wreckingbull

    RE: mike @ 11 – I see nothing normal about the correction going on, mike. It is almost exclusively the result of money printing and hot potato investing.

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  15. toad37

    I stopped trying to figure the markets out. It’s a fools game.

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  16. rojo

    Check this home out.

    It is listed at the same price it sold for in 2006. Had we not rolled back on 2004/early 2005 prices?

    http://www.redfin.com/WA/Kirkland/9100-NE-128th-Ln-98034/home/2060079?utm_campaign=instant_listings_update&utm_content=address&utm_medium=email&utm_source=myredfin

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  17. Me2

    When does constant blathering about the end of our financial world start being background noise. For once I’d like someone to make a statement and actually gives a time period for that prediction to occur. Half the people here mumble on and on about the sky falling and the Earth being scorched forever- If you make the same constant prediction over and over and over for years and it only happens numerous years later – that doesn’t make you Nostradamous! It’s like everyone just wants to be the next Tim- I didn’t hear any of you Charlatons predicting the current rise in house prices 18 months ago. Guess what I’m predicting – the stock market will fluctuate for unspecified amount of time for the next 100 years! I think a house price poll is in order with specific timeframes that will once and for all end all this quackery.

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  18. Erik

    RE: Ron @ 12
    What makes you think housing prices will go to the last bubble high in 2 years? I was thinking we have one more year of housing price gains, but I am just guessing based on when Robert Shiller said that these housing bubbles gain momentum and last atleast a year. Also the feds say when we are under 6.5% unemployment and over 2% gdp they will raise interest rates, which will stall or decrease housing prices before 2 years.

    I guess I would question your prediction because I think interest rates will increase before 2 years. Again, I have no data that indicates unemployment will be under 6.5% and gdp will be over 2%.

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  19. Ron

    RE: Erik @ 16

    Eric – I wouldn’t begin to know but I’ll take you for a sail on my boat in two years if tops out again!

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  20. Jonness

    Well, at the supposed “bottom,” I went all in. Despite the ongoing phony correction and rosy hyped up appreciation, I’m not comfortable holding this much RE.

    This freaking thing has been crazy from the beginning, and it just keeps getting crazier. Bernanke has the gas pedal to the floor with no end in sight. Meanwhile, Europe is looking more and more like an impending plague that will explode, spread over here, and infect us.

    OK, so here come interest rates to help put a damper on this U.S. housing thing. They’ve gone up 3/4 of a point since I locked my loan last November. But with supply remaining low, there are still plenty of ongoing multiple offers. And the media meme is that we’ve bottomed, so you better get em while they’re hot.

    If Krismer were here, he would probably say the 10% YOY appreciation is not legitimate because of the change in the mix. So how about a refresher course in why the CS numbers are not exactly what they appear to be at face value?

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  21. ray pepper

    investor friends MUCH WISER then me having been dumping their multi-family props at very high returns on their original investments..they enjoy sitting on cash and very short term investments..I always ask why now………….they keep telling me the same thing…………….”because we can.”……….

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  22. Erik

    RE: Jonness @ 18
    I am here to take advantage of the craziness. I hope for a sinusoidal wave to continue so I can take advantage of the highs and lows by watching the market.
    Congratulations on locking in what is probably the lowest rate we’ll see.
    Lets not discuss Krismer or refer to his comments on here. Tim pushed him out for a reason and this blog is a better place because of it.

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  23. mike

    RE: Erik @ 16 – I tend to agree on this. The housing market seems to be ‘managed’ to a large degree for now. I do not see interest rates spiking, or increasing substantially until other fed goals are met. My suspicion is rates will begin a steady rise once the buyer pool is absorbing larger numbers of displaced homeowners. What we’re seeing now is a bottom scramble before the foreclosure victims rush in to buy again.

    My view is that once most of the recent defaulters are credit eligible, rates will march up to the 5-6% range. Price gains will moderate or flatten depending on the area, and we’ll see a shift back to something that resembles a buyers market – where payments are still at least 10% below bubble highs (based on a 30 year fixed rate amortization).

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  24. Jonness

    RE: Erik @ 20 – IMO, market timing is not about picking absolute tops and bottoms. It’s about sensing changes in direction and momentum. Most often, these changes are short to mid term. In addition, one can’t expect to be correct 100% of the time. The goal is to be correct more often than not such that one’s wins outweigh his losses.

    If you are smart and you study hard enough, you’ll win the game. If you’re just an egotistical bag of hot air, you’ll eventually lose your shorts. So far, I’m winning the game. But that doesn’t mean a few more years in the game won’t reveal me to be just another egotistical bag of hot air. Consistency and duration matter.

    As for Krismer, between feuds, I learned a lot from him. Thus, I have no bitterness toward him, and I appreciate all the good ideas he had along the way. Anybody can focus on the negative aspects of other people, but those who learn to put that aside and focus on the positive aspects gain the most. This, in turn, teaches them to be better investors.

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  25. Blurtman

    Don’t fight the Fed.

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  26. softwarengineer

    RE: softwarengineer @ 2
    When I Get the Most Down Thumbs

    I’m usually right on….today’s news:

    “…“Refinance applications fell for the third straight week bringing the refinance index to its lowest level since December 2012 as mortgage rates increased to their highest level in a year,” said Mike Fratantoni, MBA’s Vice President of Research and Economics. “Rates rose in response to stronger economic data and an increasing chance that the Fed may soon begin to taper their asset purchases.”…”

    http://wallstcheatsheet.com/stocks/is-the-federal-reserve-damaging-the-mortgage-market.html/?ref=YF

    Hey, when the QE stops soon and interest rates sky rocket [go back to free market]…..prices plummet….I warned you. BTW, I’m for free market higher interest rates anyway…if you bet on continued unsustainable debt to make your investments, you can’t keep this wager long without loss. You can’t retire on a stable 0% interest either.

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  27. softwarengineer

    RE: softwarengineer @ 24

    The Stock Market is Crashing Today too

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  28. Blurtman

    RE: softwarengineer @ 25 – I would not call 1% down crashing. I am keeping an eye on Treasuries yields, for the oft storied cycling out of stocks and into bonds. I am also checking the tea leaves and Crazy Eight ball. “Reply hazy. Try again.”

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  29. doug

    RE: Me2 @ 17

    I will guarantee a massive drop of The Stock market, Realestate, Oil and,Precious metals(gold) by November 2013 at the latest. Sometime in 2014 we will hit the double bottom on the SP 500 of 666 and we will touch the low on the Dow of 2008 as the Euro collapses.

    Big banks that were to big to fail will fail
    and the phony .coms that are left such as AMZN will go bankrupt.

    Obama care is no lie and we will all question how this guy ever got elected for a second term!

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  30. Blurtman

    RE: doug @ 29 – Keep taking those meds, and come out of the bunker for air.

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  31. Erik

    RE: Jonness @ 24
    Yeah, its about getting as close to the absolute top or bottom as you can. If you hit it as I did when i bought my condo, you are considered a little lucky. If you get close, you still win. It’s hard to hit tops and bottoms, but when you do, it’s a good thing. Saying you can’t is something people say to themselves to sleep better at night when they don’t hit the top or the bottom.
    I just bash on Krismer cause he left and i get the feeling he’s watching from afar and reads this.
    Mike-
    Your scenario sounds probable and I wouldn’t be surprised if that is what happens. Your reasoning of why it happens is flawed I think. Mortgage interest rates are driven by US unemployment numbers. Interest = Constant(1/unemployment). I made that equation up because like them and it helps define things, but you can see as unemployment rises, interest rates go down. Also, the opposite is true. When unemployment decreases, interest rates rise.

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  32. Blurtman

    RE: Erik @ 31 – Nonsense. You should challenge your Econ professors when they try to sell you that garbage about interest rates and unemployment. Other bunkum – you cannot have full employment without increasing inflation. Disproven.

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  33. Dave

    Just curious…are all the naysayers on here renting their homes and investing in gold? How’s that working for you?

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  34. softwarengineer

    Not to Worry

    Washington State has a $82B State red ink deficit to date, about $12K/person indebtedness….we’re FLUSH with money and jobs/hiring is the current prediction….

    Time to get the pot industries paying in taxes….Colorado is way ahead of us…

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  35. mike

    RE: Dave @ 33 – Yeah, it’s a wonder they haven’t shut off their internet connection yet to save more money for ammo.

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  36. softwarengineer

    I’ll We Got to Do to Fix the State’s Crisis is What California Did

    Butcher ax everything and tax us to death.

    http://money.cnn.com/2013/02/07/news/economy/california-budget/index.html

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  37. Plymster

    With the Fed’s intervention, Erik is right. QE will be used to press interest rates until either Unemployment is at their chosen level (6.5%), or QE has broken market investing because it’s pushed investors (ie: Insurance companies, pension funds, and corporate investors) too far up the risk curve and something systemic collapses.

    The global central banks are playing a dangerous game by trying to set interest rates. It’s an artificial bending of the rules that can only last for so long.

    I think they are trying to buy time to flush out some of the systemic issues from the last couple of decades. These sorts of crime-purging periods crop up, but this time the purge is bigger than they expected. It started with high Loan-to-value ratios (like 3% down payments), then spiraled out of control to faulty loan origination (NINJAs), then higher LTV issues (125% was common, as were HELOCs), then minor, short-term rehypothecation issues (Lehman’s REPO 101), then broad-based rehypothecation of US RE (basically enabled by MERS), then localized commodity rehypothication (a la MF Global), followed by broad-based flushing of European commodity rehypothecation (currently being reported on by ZeroHedge).

    It’s like The Powers That Be are unraveling a large cable-knit sweater of fraud that banking “innovators” keep knitting… and knitting… and knitting. Meanwhile, TPTB keep trying to maintain faith in the system by having the central banks paper over the mispriced assets while the “regulators” are supposed to be fixing the policy issues. But each fix blows apart some more asset prices, requiring first TARP, then QE 1, then further QEs as each issue is unraveled.

    This is why doubling the monetary base has resulted in so little inflation (as with the price of gas, which is . They’re only papering over the phantom prices that have already been built up.

    In the meantime, asset prices (like houses, stocks, commodities, bonds) will continue to vascillate wildly as different layers of fraud are unraveled. Eventually, once most of the fraud is sucked out of the system, some level of stability should return, and the central banks can stop propping up the system.

    I might be giving TPTB too much credit, but that’s what this looks like to me.

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  38. Peter Witting

    RE: mike @ 35 – certainly would give them more time to sew their own clothing.

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  39. No Name Guy

    RE: Dave @ 33

    Actually I own my home. Outright. I bought in the mid 90’s and never moved up the equity ladder. Even back then I could see it was a fools errand to always be taking on more and more debt for a bigger, more lavish, more expensive to buy AND maintain house. Nope….I was all about paying it off. And I did in 2010. I practice what I preach (e.g. don’t buy unless you have at least a 10 year horizon, pay it off as quick as you can, live frugal and debt free, be responsible for yourself, etc)

    Since 2010, I’ve been looking for rental places to put my money – places that will earn me an income. However, I missed the bottom (e.g. the metaphoric blood in the streets) since I was paying off my primary residence and building up my down payment. Leverage is a dangerous game, therefore I use it only sparingly. I wasn’t about to lever up in 2010 when i paid off the house – I needed more cash. I’m about OWNERSHIP, not renting from the bank.

    Since 2010 I have put together a solid stash of cash in the bank (or more correctly, liquid relatively low volatility securities) that I could use for a 30-50% down on a rental. However, now that I’m able to go there without excessive leverage, I don’t like the fundamentals any more. Add to that I don’t like the shadow inventory either (I can see it with my own eyes in my ‘hood of south Sno Co). With the big boys selling (see the link I posted in the open thread) I’m hesitant to take the other side of that trade at today’s prices and frothiness – smacks too much of Goldman et al selling stink fest RMBS’s in ’06 to everyone with a fist full of cash while they shorted the heck out of those same instruments. Burn me once (Goldman, TPTB, TBTF, Fed, etc), shame on you. Burn be twice, shame on me. Sorry but, Homey (or is it No Name-y) Don’t Play That Game no more.

    So, yes, I DO put my money where my mouth is. And actually it IS working out quite well for me – I owe nothing to no one, everything I have I own outright. I could lose my job and it would be meh……no big deal, I have years and years of expenses saved. Deflation? Meh, I have cash. Inflation? Meh, I also have hard assets. Stock market crashes? Meh, I have solid amounts in protected investments (GIC’s / stable value funds). Stock market booms? I also have some there as well. Bases are covered.

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  40. Jonness

    By softwarengineer @ 26:

    RE:
    Hey, when the QE stops soon and interest rates sky rocket [go back to free market]…..prices plummet….I warned you. BTW, I’m for free market higher interest rates anyway…if you bet on continued unsustainable debt to make your investments, you can’t keep this wager long without loss. You can’t retire on a stable 0% interest either.

    It’s interesting to me that you are betting on the Fed pulling out soon. I’m betting on the complete opposite scenario. IMO, the Fed will keep its foot on the gas right up until doomsday. What choice does it have? Take the foot off the gas, and bring on the Great Depression II, or keep printing (blowing bubbles) and pretending that nothing is wrong in Wonderland. History tells me the latter outcome is far more likely than the former.

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  41. Jonness

    By Me2 @ 17:

    I didn’t hear any of you Charlatons predicting the current rise in house prices 18 months ago.

    OK Mr. Smarty Pants, how about being truthful and telling us where you have allocated your investments over the last 7 years?

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  42. Me2

    RE: Jonness @ 41
    Did I ever make any predictions about where this economy was going? The only thing that makes me “smarty” is not to blather on and on about end of the world and then every time there is 0.000001% drop in house prices, or sales numbers or the stock market or any other financial metric make some statement that says that proves my wild claims to be true, while completely ignoring any increase or improvement in these very same metrics. I don’t know where or precisely when this market is going, but I’ll bet that the level we’re at now we will be at again and where we have been in the past we’ll at in the future- ie. that’s why I don’t make wild claims or do wild “snap-neck” things with my money.

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  43. Dave

    By Dave @ 33:

    Just curious…are all the naysayers on here renting their homes and investing in gold? How’s that working for you?

    Thanks for the response No Name Guy. It sounds like you are doing great through diversification of assets. I’m quoting my own question, for a follow-through. I asked because I’ve done well the last few years following the opposite of what a lot of the advice and opinion in the comments section of this site seems to be, so I think that recent history deserves some acknowledgement.

    I was very wary of the housing bubble from 2003-2010 so didn’t buy, and instead lived in apartments and saved my money away. Very glad I did this, of course. But by 2011, it looked close to a bottom in the market, so my wife and I bought a great house which we are very stoked about, not caring for any price appreciation, which I’m pretty sure is happening and is icing on the cake. Also, throughout the ‘great recession’ I’ve steadily bought into equities (with some diversification). Anyway, I’m now sitting on a healthy amount of savings for a guy of my modest salary and feel fortunate for it.

    Yes, stocks will drop, and yes, housing prices don’t go up at 5-10% per year forever, but my point is that if from 2008 until now, had I instead followed the advice I see given a lot on here, I would still be living in a rental and probably facing hefty increases in rent, and my money would be in gold or some other recently losing asset. I just think folks should maybe recognize that, the things they’ve been saying (at least recently, in 2010, 2011, 2012, and continuing now) has been pretty poor advice given what has actually happened.

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  44. No Name Guy

    By Me2 @ 17:

    When does constant blathering about the end of our financial world start being background noise. For once I’d like someone to make a statement and actually gives a time period for that prediction to occur. Half the people here mumble on and on about the sky falling and the Earth being scorched forever- If you make the same constant prediction over and over and over for years and it only happens numerous years later – that doesn’t make you Nostradamous! It’s like everyone just wants to be the next Tim- I didn’t hear any of you Charlatons predicting the current rise in house prices 18 months ago. Guess what I’m predicting – the stock market will fluctuate for unspecified amount of time for the next 100 years! I think a house price poll is in order with specific timeframes that will once and for all end all this quackery.

    You know “Me2″, one doesn’t need to give a time frame to KNOW with absolute certainty that Orting will be absolutely wiped out when, not if, but when Mt. Rainier erupts and sends a lahar 50 feet deep over the town. One also doesn’t need to give a time frame to know with absolute certainty that New Orleans will be absolutely wiped out when, not if, but when it takes a direct hit from a Cat 4 or Cat 5 hurricane. One doesn’t need to give a time frame to know with absolute certainty that a shake shingled home built up a brush choked slot canyon in California fire country will burn to the ground – its only a matter of time.

    The point being that only a fool thinks that Orting or New Orleans being wiped out is a “natural” disaster. No, the disaster was in the hubris of building those urban areas in those locations – of getting in the way of the inevitable and irresistible with valuable infrastructure and irreplaceable lives.

    As it relates to housing and predictions of yet another “pop” – only a fool doesn’t think the housing (and stock and bond) market is being heavily manipulated higher. Hello, QE to eternity. ZIRP. Helicopter Ben. Fannie / Freddie / FHA originating 90+% of mortgages. Foreclosures being delayed and then sat upon once done. Big insiders / hedge funds getting to buy up bulk quantities of properties from the banks using zero interest rate money from the Fed. Etc, etc, etc ad naueuseum. I mean, heck, Mr. Bernake has stated outright his intent to create a “wealth effect” to “stimulate” the consumer. What is the wealth effect? Bubble in ‘net stocks in 99, bubble in RE in ’04-06, which was blown to “fix” the bubble from 99. And now they’re blowing the next bubble. How’d it work out the last two times?

    These things that the Fed et al are doing can not be sustained indefinitely as the side effects eventually become too great to bear. And that which can not be sustained indefinitely, will not (as Charles Hugh Smith from “Of Two Minds” is fond of saying), therefore these props to the housing market WILL end at some point.

    When will this happen? Tell me when Rainier will pop it’s top and wipe out Orting? Will the Cat 4/5 that wipes out New Orleans hit this season….or in 50 years? Heck if I know. I just know these things will happen, eventually, (and only a fool would live in either location) and that the current props to the housing market will end, at some point.

    The rush for the exits for the panicked masses will be a grand affair once the spaghetti hits the fan, the trouble being that only the first couple will make it out before some one trips and everyone behind them will end up in a heap of bodies clogging the door – hmmm…sounds a lot like ’06 to ’07 when the early sellers got out in OK shape and the muppets got slaughtered.

    If you’re someone who would need to head for the exits in a crash, you’d better walk out now before the rush, or better yet, just stay out. Or, if you have to get in or stay in due to your circumstances, set yourself up (much as I’ve done for myself, in a way that works for me, in my particular circumstances – YMMV) such that it won’t really matter what housing (or stocks, bonds, or gold, or oil) prices are (e.g. own housing outright, with a long term view of wanting shelter, NOT an investment, being debt free, having a broad based skill set, living a low cost lifestyle, etc.). If you can’t ride out another 30 – 50% drop in all assets across the board, you shouldn’t be buying a home at this point in time.

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  45. No Name Guy

    Dave:

    If everybody is buying, it’s the time to sell.

    If everybody is selling, it’s time to buy.

    Buy when there is metaphoric blood in the streets. You had the courage of convictions to do so. You also were in the right place, at the right time to do so, it sounds like, after having the discipline to avoid the bubble. A hearty congrats to you for waiting for the obvious bubble to burst and pick up a place that suits your needs at a far better price.

    I wish I could have bought a rental in ’10 – I just wasn’t in the place to do it. Now that I am…well, I happen to think the current pop in prices is a temporary affair. I’ll be waiting, ready. If I’m right, I’ll have my opportunity to buy at distressed prices some time in the next few years (I just don’t know when, exactly, that will be however). If I’m wrong and prices go up indefinitely….meh, I can capture the gain in the sale of my residence.

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