Posted by: Timothy Ellis (The Tim)

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

41 responses to “NWMLS: Inventory Increases Again, Pending Sales Fall”

  1. Erik

    January – July 2013 has the largest increase in price I see. The second largest January – July increase is 2012. Everyone was raving about the 2006 and 2007 gains. 2012 and 2013 gains have been greater so far. Prices in King County have gone up almost $100k in 2013 so far alone. That’s insane! I hope this trend continues for another 6 months so I can cash in on the insanity.

    Rate this comment: Thumb up 6

  2. patient

    15% YoY for median – check. Wait for CS to follow later this fall and then PANIC!

    Rate this comment: Thumb up 3

  3. Erik

    “We experienced a mini power surge of sales activity that was touched off by a sudden raise of interest rates during the month of May,” J. Lennox Scott, chairman and CEO of John L. Scott Real Estate

    Based on this logic, do you think we will see another surge in sales when interest rates are raised to 5.25%?

    Rate this comment: Thumb up 4

  4. goblue72

    I wouldn’t make as much of percentage price increases currently in comparison to price increases at the tail end of the bubble in 2006. We experience the single largest collapse of the residential real estate market since the Great Depression – as a consequence of single largest financial/banking crisis in the U.S. since the Great Depression.

    Prices collapsed dramatically. Now they are recovering. And when prices swing so far down (often shooting way down as the market overcompensates in the other direction), the recovery is going to look equally dramatic YoY until the market stabilizes.

    With inventories growing (but still below what they’d be in a healthy market), price increases will start to stabilize – and it looks like that is starting to happen.

    This does not mean we are in a bubble. It means we are in a recovery from financial crises – which based on the history of post-WW2 financial crises in other developed countries, takes between 10-20 years to burn off. The U.S. – as a consequence of fiscal stimulus (Obama’s ARRA, and TARP) combined with monetary stimulus (Fed QE1/2) is pulling out of its financial crisis quicker than historical averages.

    Rate this comment: Thumb up 10

  5. patient

    This bubble as the last has little to do with equally raging economic growth. Instead it is again sparked and fueled first by cheap money and the extended by fear and greed. We are now entering the start of the fear and greed stage while still having cheap money as support.

    Rate this comment: Thumb up 18

  6. patient

    And of course it will cool off eventually since it’s unsustainable just as the last bubble was. How long it goes on and at what temperature will determine if it will be a stabilizing slow down or a pop. I think people have learnt nothing and they will throw in their kids in the deal to get a house and be part of the gravy train once Panic sets in. I hope I’m wrong but sofar it looks very familiar including the comments here.

    Rate this comment: Thumb up 15

  7. Erik

    RE: patient @ 6
    I hope you are correct for atleast another 6 months and then pops in our faces. I will be safely renting while I wait for my credit to recover from a previous short sale. Then I will swoop in like a hawk and latch on to another abused property, fix it up and sell it back to the public for a large gain. The larger the oscillations, the more potential gains. Go bubble go!

    Rate this comment: Thumb up 5

  8. patient

    RE: Erik @ 7
    Right on, stability is a trader/flippers worst enemy. Buy low sell high. Personally I’m looking for stability based on longterm fundamentals. I’m not looking for a risky bottom pick in a shaky economy. Enjoy it and good luck, I think we will have gyrations/ aftershocks for a while still but please don’t take my word on it. Only trust yourself, housing is the most rotten legal business there is with endless corruption, lies etc,etc.

    Rate this comment: Thumb up 7

  9. rojo

    By Erik @ 7:

    RE: patient @ 6
    I hope you are correct for atleast another 6 months and then pops in our faces. I will be safely renting while I wait for my credit to recover from a previous short sale. Then I will swoop in like a hawk and latch on to another abused property, fix it up and sell it back to the public for a large gain. The larger the oscillations, the more potential gains. Go bubble go!

    You must be the biggest idiot….oh no sorry, you are The missing link in our evolution. Should have seen the avatar!

    Rate this comment: Thumb up 5

  10. Matthew

    THE TOP IS NEAR! SELL NOW OR BE PRICED IN FOREVER!

    Rate this comment: Thumb up 8

  11. Erik

    RE: rojo @ 9
    Why do you think I’m the biggest idiot? In 2012 I was $116k underwater and now I’m atleast $100k above water. That is a $216k gain in a year. On paper I would say I have made some pretty good moves recently. I sleep better having that security. Please reply rojo and let me know why you think i’m dumb. I made $216k.

    Rate this comment: Thumb up 3

  12. Matthew

    When prices tank I wonder if lenders will let you short sale again and buy a third house.

    The third time’s a charm after-all…

    Rate this comment: Thumb up 8

  13. enatailurker

    RE: patient @ 6

    Patient, what evaluation method do you use to say that current prices are unsustainable? Or that money is “cheap”? Price/rent ratios seem reasonable, at least in my neighborhood. And I don’t understand the frequent BubbleBear complaint of “artificially cheap money.” Unemployment is high, inflation is low, so current interest rates, or at least the Fed rate, really shouldn’t be going up much right now.

    Rate this comment: Thumb up 1

  14. No Name Guy

    RE: enatailurker @ 13
    “Or that money is “cheap””

    See QE for how / why money is cheap. The Fed is printing something like 85 Billion a month. They soaked up billion upon billion is toxic MBS steaming piles from the banks. Fannie / Freddie are the only Mtg money in the country. Take away that Fed printing press driven gravy train and see where rates would really be. Take away the Fannie / Freddie driven subsidy. Take away the Fed from buying up toxic MBS piles and let real investors risking their own savings be exposed to the full spectrum of risks associated with lending. Once those things happen, either by choice of the powers that be or when they’re forced into it (because the house of cards they’re propping up with said policies collapses), it’ll become obvious how “cheap” money really is.

    Rate this comment: Thumb up 9

  15. 3rd Generation

    11. Erik
    “I made $216k. ”

    Congratulations on your closed sale troll-boy !

    If you haven’t closed and settled you haven’t ‘made’ anything, and are just, once again, showing in the words of the previous poster ‘the biggest idiot’.

    Sleep better with all that cash in the bank. Impressive. Congratulations.

    Rate this comment: Thumb up 10

  16. David B.

    RE: rojo @ 9 – “Should have seen the avatar!” Erik’s avatar looks like a troll to me.

    Rate this comment: Thumb up 3

  17. Erik

    RE: David B. @ 16
    Enough guys! I posted a picture of me took in 2011. Yes, I am a troll… get over it. I have to deal with this daily, but that doesn’t mean i’m not going to be the best troll i can be.

    3rd Generation- I clearly spelled out that I short sold and had tax payers like yourself give me a $116k debt forgiveness on my first house. Thank you. The $100k has not been realized yet. I plan to sell in 6 months and hopefully I can get $100k equity. Hopefully matthew is not correct and the market doesn’t crash before then.

    Matthew- The lenders won’t let me buy for 2 years from December 2012. I have been fighting the credit companies to remove it, but not much luck yet. I got them to remove the balance, so there has been some progress. Anyway, 2 years for a shortsale when financing with Fannie or Freddie, so I need this deal to go well. I fear you are right and this is the top. Hopefully i can still sell in Feb 2014. Worst case, I’ll just stay in the place I remodeled which isn’t so bad. Low payments and a nice place.

    rojo- Are you a member of wreckingbull’s goon squad? I see you are not able to comment logically with anything other than calling me names. That’s what the goon squad does.

    Patient- My idea is to play those oscillations and come out on top so I can take it easy later. Own my place outright and tell war stories.

    Rate this comment: Thumb up 4

  18. 3rd Generation

    17. Erik

    Troll-Boy, I was wrong. You did ‘make’ something. I stand corrected.

    You made yourself look even more ridiculous, uninformed and plain foolish than you usually do (yes, you’ve proven it possible) in my personal opinion.

    Why any serious person would ever take anything you write, allege or post seriously is waay beyond me, but America is filled with stupid, semi-retarded people.

    As for: “I clearly spelled out that I short sold and had tax payers like yourself give me a $116k debt forgiveness on my first house. Thank you.” You’re Welcome, my pleasure, believe me. As you were getting your financial head handed to you, and your credit wrecked, I was making money. Nice money, not big, but consistent money.

    About that short sale, keep good records. You, and many others may need them sooner-than you-think. I’m confident you did a bang-up-job with all your paperwork. Every piece.

    Punitive tax audits for people who behaved like yourself and now feel the need to shout about it are surely a very distinct possibility. They ARE watching. Whoop it up while you can. You won’t be laughing when that plain white windowed envelope arrives. . . You’re young and seem motivated, you can probably rebound and rebuild – it may take a few years. . . Maybe they will cut you a deal. . .

    Keep one eye on the mailbox and one hand on your b*lls. You might be delaying that second-hand Z purchase you so cleverly outlined last week, for a bus pass.

    Penalty & Interest, the dual whores of life. Wage garnishment – Think about it.

    Money never Sleeps. Neither does the IRS.

    Tick tick tick…

    Rate this comment: Thumb up 9

  19. wreckingbull

    I long for the day when we can get through one of Tim’s posts without a one-man circle-jerk about a Juanita condo. I can dream, right?

    Rate this comment: Thumb up 46

  20. Peter Witting

    RE: Erik @ 17

    “3rd Generation- I clearly spelled out that I short sold and had tax payers like yourself give me a $116k debt forgiveness on my first house. Thank you.”

    I curious if you had to pay income tax on the amount of the forgiven debt?

    Rate this comment: Thumb up 3

  21. Azucar

    RE: wreckingbull @ 19

    As it is we have to hope that he comments a lot early in each thread so he reaches his 5 comment limit and then can no longer continue to spread his “knowledge”.

    Rate this comment: Thumb up 8

  22. drshort

    This (price increases) is just about over. Not saying prices will decline significantly, but inventory is going to catch up soon and we should get closer to normal.

    Rate this comment: Thumb up 3

  23. whatsmyname

    Nothing says “market top” quite like a 1.5 month inventory level.
    Be sure not to buy until the price increases are over. That will feel normal and comfortable.

    Rate this comment: Thumb up 4

  24. Lo Ball Jones

    Reading an ad for a home builder on the Seattle Times home page. Seems like those guys are settling in at around $250,000 for a “Craftsman like” home in the suburbs. That brings in a monthly at $1125. Gee, that’s darn less than a tiny apartment in Seattle proper!

    (They also are offering free air conditioning. Bet you longtimers never thought you’d see that day in Washington State!)

    Rate this comment: Thumb up 1

  25. David Losh

    From Obama’s speech yesterday I’m thinking we will see interest rates rise on private mortgages which will become the long term investments they once were.

    As a matter of risk management I would think that lenders will want the price of property to be lower than it has been. It may be tougher to get properties to appraise.

    Those with lower interest rates will feel lucky to have them. People will once again pay more to have a mortgage, but the debt may be more manageable.

    Rate this comment: Thumb up 1

  26. David Losh

    RE: Lo Ball Jones @ 24

    I have to agree that new construction looks like a good deal. I really like the look, and feel of new construction, and even if the price were a little higher, which really it doesn’t seem to be. It’s a lot of good usable space for the money, not to mention the energy efficiency.

    Rate this comment: Thumb up 0

  27. Carl
  28. SMW

    Tiiiimmmmmbbbbeeeeer!!

    Here it comes….

    I) Inventory creeping up? Check
    2) Months of Supply increasing? Check
    3) Sales decreasing? Check
    4) Interest rates sky-rocketing? Check
    5) Economy still lousy (Jobs/ Income)? Check

    To quote Alan Greenspan: “the market does have a fair amount of ‘froth’ to it”

    ERIC’s TAX SITUATION:

    As for Eric’s tax situation….he probably didn’t have to pay taxes because he was likely ‘insolvent’ at the time of the sale, which would shield him from COD (1099-C) income tax liability. If he wasn’t and this wasn’t his primary residence….he’s going to get a nice tax bill.

    Rate this comment: Thumb up 6

  29. Kyle

    CRE: Carl @ 27

    Interesting. It does kind of feel like that is going on in Seattle.

    Rate this comment: Thumb up 2

  30. mike

    By SMW @ 28:

    ERIC’s TAX SITUATION:

    As for Eric’s tax situation….he probably didn’t have to pay taxes because he was likely ‘insolvent’ at the time of the sale, which would shield him from COD (1099-C) income tax liability. If he wasn’t and this wasn’t his primary residence….he’s going to get a nice tax bill.

    How do you guys not know about the Mortgage Debt Relief extension?

    http://www.forbes.com/sites/financialfinesse/2013/01/10/extension-of-mortgage-debt-relief-and-debt-cancellation-options-if-your-mortgage-is-still-underwater/

    There is a legitimate question about how he qualified for the debt relief on a primary residence after buying another property (presumably a primary residence?)

    Rate this comment: Thumb up 0

  31. corndogs

    RE: Carl @ 27 – “A talking head on Yahoo Finance says that the suburbs are not growing as fast as the cities now. And that there will be an oversupply of housing stock in the suburbs and an undersupply in the urban areas.”

    There isn’t an oversupply of houses in the city or the suburbs at this time and his prediction (as you’ve summarized) is wrong!

    As my economics professor explained many years ago….During recessions people tend to swarm back to the work centers. Recovery happens there first, as prices rise in the urban center, the outlying areas start looking better and people start competing for the close in suburbs and then it works it way outward…. Tacoma is that lower tier you see lagging in the Case Shiller. You should take a look at “months of inventory”. compare the outlying areas to Seattle. Seattle hit 3 “months of inventory” April 2012, Kent hit that mark 6 months later. Tacoma, a year later. Even if prices stagnate or drop in Seattle proper, there is still some room for price gains in the outlying areas. The key is affordability, it’s still there you just have to drive to it.

    Since Case Shiller isn’t a median price but rather a composite of the price change of individual houses in King/Pierce/Snohomish, you will NOT see a decimation of the composite within the next year as Matt the Troll indicates. Like I’ve said all along, it’s preceding like clockwork, this is a recovery, not a bubble, if you want cheap housing you’ll need to commute. Kent is at $135 per sq ft and Tacoma at $120 per sq ft. That is NOT bubble pricing, it is pricing which is marginally above build cost. In a “normal market” prices of the outlying area should attain a modest premium over build cost and then track with inflation. Take note that build cost is NOT dependent on the cost of your financing! The interest rate required to buy a home will make a hit on the affordability, but the cost to bring new units will place the floor on the lower tier pricing. If people can’t afford the payments, they move down a tier and new units become smaller and less units end up getting built. Rising Interest rates will not cause a crash in the lower tier, it will cause greater competition for the lower tier as the lower tier becomes the only affordable option. Unfortunately, Lots ARE limited AND costs ARE going up… welcome to normal folks! http://www.cnbc.com/id/100642022

    BTW, I bought my house in early 2012 for LESS than build cost, if you want to talk about something being unsustainable, prices remaining below build cost is clearly not sustainable unless there is no demand for additional units (this isn’t Hoquiam, yet!).

    Rate this comment: Thumb up 6

  32. SMW

    Mike,

    The Mortgage debt relief act only applies to primary residences (I was under the impression this was a rental – sorry, I don’t know the situation that well and assumed it was a rental based on other comments).

    Rate this comment: Thumb up 0

  33. corndogs

    RE: David Losh @ 25

    “As a matter of risk management I would think that lenders will want the price of property to be lower than it has been. It may be tougher to get properties to appraise.”

    Really? Is that how appraisals are done? The guy at the bank decides to knock 25% or so off the price of houses arbitrarily because he feels more comfortable at lower prices? We just had prices drop. Do you remember? How did that work out?

    “Those with lower interest rates will feel lucky to have them. People will once again pay more to have a mortgage, but the debt may be more manageable”

    Higher payments are somehow more manageable? What are you smoking today?….

    If you guys thought upside down buyers were sitting on their houses, just wait until they are sitting on a 3% loan and have to pay 6% to make a trade….

    Rate this comment: Thumb up 0

  34. David Losh

    RE: corndogs @ 31RE: corndogs @ 33

    Let’s take both of your comments, because they do make me laugh, you are a funny person.

    The suburbs are filled with housing units that were built mortgaged, and those loans sold into the secondary market. Those properties are going down in price which was the point of the Yahoo Finance article, and video. They are obsolete.

    Many properties are obsolete, and continue to be worth less than construction costs.

    Your old economics professor probably never saw a Real Estate market crash like the one we just had, so that input is dated.

    What’s current is that we have huge tracks of land in urban centers for development. If you are starting out you may want to rent in a high rise apartment closer to work so you can save up for your down payment.

    If you are thinking that lenders, who won’t be able to sell off bad debt, are going to continue to watch the price of property rise without mitigating that risk, you’re smoking something.

    This is today’s news; Obama on Zillow, and speaking in Phoenix talking about winding down Fannie Mae, and Freddie Mac.

    To me that means changes in the lending industry. You seem to think that will mean business as usual.

    Rate this comment: Thumb up 4

  35. Corndogs

    RE: David Losh @ 34 – Obama making some sound bites to pretend he isn’t a socialist doesn’t change a thing…

    Remember at the end of 2011 when you said prices were going to 1998 levels? Well, that was really dumb, but here’s your chance to redeem yourself. If you think that the median prices in the outlying suburbs of Seattle are going sink below build cost, let’s put some money down. I think I would be generous to give you $100 per sqft as build cost. We can use an average of Kent and Tacoma as posted on Redfin. If the average of those means drop below $100 per sq ft for two consecutive months you win, the bet ends next April with the next buying season. $1,000? you in?

    Rate this comment: Thumb up 0

  36. whatsmyname

    Did anyone notice that at 2,648, July had the highest number of KC closed sales for any month since 2006? Not worth remarking on I suppose, when August has an even money chance of not being the 18th consecutive month of lowest inventory for the month on record.

    Rate this comment: Thumb up 2

  37. David Losh

    RE: Corndogs @ 35

    Oh what the heck, this is what I was saying in 2011, http://buyingseattlerealestate.com/2011/11/03/solid-property-values/

    At the end of 2011 I was surprised at all of the government interference, and was calling the Real Estate market stable, according to my David Losh site.

    Now I see you have been reading my sites, and that is where you get your Real Estate knowledge. It does me good to see some one quote me in comments.

    As for the $100 construction cost that would put a 2000 sq ft house at $200K, when you throw in the dirt at $50K that there is $250K.

    How long does it take for that new construction to be obsolete? I say five years in one of my posts, so an average, given all the builder activity, and like I said new construction is a pretty sweet deal right now, that there two year window is pretty tight, and your conditions pretty lame.

    Unlike a 1980s vertical grain cedar siding house that from my experience needs $100K to make it marketable.

    Don’t worry, what Obama was saying today is to bolster what is coming from the Fed, and Central Banking in general. The gravy train for lenders is coming to an end. There is no other way for this to play out.

    Real Estate pricing is unsustainable as it is now, let alone in a few years of private lending.

    Seriously how do you see it playing out? If you were a lender who could only sell the loan to a secondary market that will actually look at the file, would you be making loans on a promise to pay, or the value of the asset?

    Rate this comment: Thumb up 1

  38. ChrisM

    RE: corndogs @ 31 – “During recessions people tend to swarm back to the work centers”

    unless they’re stuck in their underwater house. I’ve long thought mobility was under-appreciated in our current depression.

    Rate this comment: Thumb up 1

  39. ChrisM

    RE: David Losh @ 25 – “From Obama’s speech yesterday I’m thinking we will see interest rates rise on private mortgages which will become the long term investments they once were.”

    I wonder if America will eventually adopt European/British lending standards, where there is no 30 year mortgage, just a more rational 5/15 year mortgage (possibly ARM-only). Obviously it would be a major game-changer, but how does a bank justify a 30 year loan at 4%?

    Rate this comment: Thumb up 0

  40. Corndogs

    RE: ChrisM @ 39 – Prior to the housing bust a great deal of mortgages were from private lenders…. if interest rates rise, and the economy improves those guys will be willing to lend again, clearly, Fannie Mae is profitable now, even at these low interest rates. So it isn’t a surprise that this will begin to happen, it’s part of the recovery. The problem is the governments continued meddling trying to find an angle to get low income people into loans they can’t afford. Home ownership today is back down to where it was in 1994 before Clinton changed the Community Reinvestment act pushing quotas on lenders to give out risky loans. Obama wants to figure out a way to do the same thing all over again, that’s why he is prepping you all with his BS “I am not a socialist” soundbites. There isn’t a problem getting private lenders involved as long as the government regulations regarding who you have to lend to are dropped. In the end, what Obama wants is another Affordable Care Act type legislation, he want’s to charge everyone a “fee” so he can issue and insure sh!tty loans to low income guys like Losh. 30 year mortgages are not going away, but if he had his way you’d be paying mortgage insurance even with 20% down and at a sliding scale to soak ‘the Rich’ guy AKA whitey.. If he wasn’t President he’d be on the streets of Chicago with his Acorn bros putting pressure on banks trying to get some more bad loans coming their way…

    http://www.breitbart.com/Breitbart-TV/2012/09/26/Uncovered-Video-Obama-With-ACORN-In-2007-You-Know-That-Youve-Got-A-Friend-In-Me

    Rate this comment: Thumb up 1

  41. Jonness

    By Corndogs @ 35:

    RE: David Losh @ 34 – Remember at the end of 2011 when you said prices were going to 1998 levels?

    I own a piece of raw land in the countryside (Gig Harbor outskirts), which I recently comped it in anticipation of selling. I was surprised to learn, its fair market value has dropped below 1998 levels. I wish it weren’t true, but it is.

    If you think that the median prices in the outlying suburbs of Seattle are going sink below build cost, let’s put some money down. I think I would be generous to give you $100 per sqft as build cost.

    You probably need to quantify what kind of house, because custom homes typically cost a lot more than $100 sq/ft. (I’m not talking Hi-Line trailer houses built on site on concrete foundations. I’m talking the cost of hiring an architect and GC and building a modest home).

    Rate this comment: Thumb up 1

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