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.

27 responses to “August Stats Preview: More Inventory Gains Edition”

  1. Nick

    Here’s an idea to help sales return to normal levels: slash the transaction costs. Torching 10% of the home value with every transaction is absurd. How about flat fees for realtors? Quit taxing transactions? Regulate the title insurance racket so that they can’t charge thousands for spending 10 minutes on a record search?

    People feel trapped by the transaction costs in the Seattle area. They don’t need to be this high.

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  2. David Losh

    RE: Nick @ 1

    That’s a start. The other thing would be to give the hype from builders, and Real Estate Industry a rest.

    Here’s a stupid example of a phrase by John Burns: “In 27 leading markets, the average price of a finished lot ready for building was up 40 percent in the second quarter from a year ago, according to John Burns Real Estate Consulting.”

    A year ago lots were cheap because since so many builders went belly up in 2008 large builders came in to buy up all surplus. It was a win.

    Now the price of lots is going up, so the price of new homes is going up.

    Well, builders only sold half of what they built last year, so yeah, raising prices ought to get that market moving again?

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  3. softwarengineer

    Adddressing Ardell’s Question On What I Think My SE King County Home is Really Worth

    1999: 117K
    2007: 170K
    2013: 100K
    2014: 105K

    2007 Property Tax Assessment: 160K
    2013 ” ” ” : 84K
    2014 ” ” ” : 105K

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  4. Erik

    RE: softwarengineer @ 3
    You are rich, your house is not worth that much and you are highly paid i assume being a software engineer.

    You should go out and spend some money. Buy a new sweatshirt and get rid of that old black one. Also, you should get a leather couch and take that old blue one to the dump.

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  5. softwarengineer

    RE: Erik @ 4

    Yes Eric

    I’ve learned my philosophy from Buffet, live in your old house and drive “relatively” inexpensive but nice cars. How do you think he made his billions?

    Buffet still lives in his old home [I bet he remodeled it though] and drives an 06 Cadillac, which he loves. I still live in my old house and own an 11 Charger, which I love too…..I ‘m remodeling my house this month and throwing away most of my furniture too….my millenials moved out this month and last, its time to turn the place into a “God palace”….they won’t wear it out now. I’m turning my son’s old room into a game room and small sports bar….its time to celebrate :-)

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  6. softwarengineer

    RE: Erik @ 4

    My Daughter’s $600/mo Rent in Kansas

    Is actually a lease to own agreement…..yes, ya can buy a nice house in Kansas for about $500/mo. She is and she’s like her old man too, she’s got a big savings reserve she earned too….which she plans on “not” spending….she’s probably gonna have more money than me when she’s my age…LOL

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  7. softwarengineer

    RE: softwarengineer @ 6

    Will SWE ever Re-marry Again?

    Lot’s of spouses are money pits, some aren’t….if I marry I want to find one with similar wealth [and philosophy] as me.

    One good reason to stay single: decent nursing homes are about $100K/year. If ya gotta spouse its $200K/yr, if both go there about the same time. I’d recommend marrying one to salvage the estate by caregiving the sick spouse; but that’s changed drastically recently with the state’s tight budget….they blame caregivers a lot more for the sick ones’ ailments; even 90% of the licensed nursing homes are getting sued by money hungry attorneys lately for patient neglect. Whether its true or not, I’d add.

    Personally, I wouldn’t go there now. Single may be the best choice, but if I meet miss perfect? LOL

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  8. softwarengineer

    SWE Turns Into the XX Dos Equis Beer Man???

    Yes, I can see it my future…..LOL

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  9. Erik

    RE: softwarengineer @ 5
    Great, good job on creating wealth for yourself. That is the potential you have to do the things you want. Here is what I would do if I were you. This is what I think from what I have heard you say.

    1. Remodel your house in SE king county.
    2. Buy nice clothes. I like to buy trendy clothes, but it doesn’t matter, find something you feel good in.
    3. Quit drinking and start working out. You will feel more powerful and have the energy to go out and do more.
    4. Sell your house in SE king county and buy something in a nicer area such as a nice part of Seattle or the Eastside. You will have a much better chance of finding a nice companion in a nicer area in my opinion.
    5. Find a woman to date. Find her at the gym or school. I think finding someone at the bars lowers the probability of finding a good partner.
    6. Continue the relationship without expectations.

    You got enough money. You have achieved some success in life. You should focus on creating happiness. I think these things will help.

    This is what I would do if I were you. I don’t know you and I could be totally off base, but this is what I would do if I were you.

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  10. nwbackpacker

    It’s nice to see this trend in inventory..also, aren’t ~30% of owners underwater? After being outbid on 3 houses, we just decided to take a little break. It’s not so much the competition as the semi shady behavior with agents. It really sucks to be a buyer right now. Oh well, maybe we’ll get lucky and Fed rates will result in a semi significant drop in home prices (of course interest rate will be higher).

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  11. ARDELL

    RE: nwbackpacker @ 10

    It depends where you are buying. In a neighborhood built in 2007 more than 30% will be underwater. In some older neighborhoods, no, not unless a lot of people did cash out refinances. I ran 10 years of stats on the Eastside earlier today and we are at late 2006 to early 2007 pricing. So not so many underwater there. Though prices are starting to dip a bit from the June peak.

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  12. Ira Sacharoff

    RE: nwbackpacker @ 10
    I agree with Ardell. I think that 30% underwater figure might be nationally. In the Seattle area, more folks are underwater in South King and Pierce Counties, as those places declined more.
    To be underwater, you either need to have purchased when prices were higher, or taken out home equity loans, etc before the big decline. In the popular, sought after neighborhoods within Seattle, I’m seeing selling prices about 10% below the 2007 peak.

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  13. One Eyed Man

    RE: Ira Sacharoff @ 12RE: ARDELL @ 11

    When doug thru out the bogus 60% underwater number on another thread, I did a quick search and I think Trulia gave a figure of 40% underwater in greater Seattle or King Co at some point in 2012. As I recall, the article didn’t give a source or a method of calculation for that figure. If 40% was accurate then, given the price increases over the last 18 months, IMO about 25% to 30% being underwater would seem to be within reason as a current approximation for the King Co/greater Seattle area.

    The food stamp number from doug was also bogus, but probably not as far off in percentage terms as the estimate of underwater mortgages.

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  14. Erik

    RE: One Eyed Man @ 13
    Thank you for verifying doug’s claims for us. I think in the future, the things doug says need to be taken with a grain of salt.

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  15. ARDELL

    RE: Ira Sacharoff @ 12

    Also there are whole neighborhoods in Snohomish built in 2007 that were low priced and on very small lots where the majority of buyers bought zero down. Not sure if the source makes any distinction between underwater as in home is worth more than paid or underwater meaning they actually owe more than they can sell it for. I call underwater the latter, so that anyone who put 20% down might not be “underwater” even if it would sell for less than they paid, but more than they owe.

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  16. David Losh

    http://www.doctorhousingbubble.com/wp-content/uploads/2013/02/HouseholdPercentEquityQ32012.jpg

    Let’s see if this chart shows up in my comment.

    I think you are approaching this backwards. We should start with the number of people who have equity in a home, which is dismally low.

    Next, according to this article is that the number of people who own a home free, and clear is at the lowest point at 29%.

    I’ll put the link to the article here. It’s from Doctor Housing Bubble, so consider the source, but I think that is where we find the low inventory numbers. People are awash in mortgage debt, and if they sell they may deleverage, but if they want to buy, or rent they are faced with the same amount of debt, and payment, so why sell?

    http://www.doctorhousingbubble.com/americans-that-own-home-with-no-mortgage-free-and-clear/

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  17. nwbackpacker

    RE: ARDELL @ 15 – Agreed, I see underwater as owing more than house is worth thus it would be a rare for someone to pay 50% down and be underwater. 0-3% down on the other hand, in this economy…

    Back to the topic of the post, here’s to hoping quality inventory is higher this winter, I know last year the new/good listings were few & far between.

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  18. Macro Investor

    By Nick @ 1:

    Here’s an idea to help sales return to normal levels: slash the transaction costs. Torching 10% of the home value with every transaction is absurd. How about flat fees for realtors? Quit taxing transactions? Regulate the title insurance racket so that they can’t charge thousands for spending 10 minutes on a record search?

    People feel trapped by the transaction costs in the Seattle area. They don’t need to be this high.

    It’s even worse than that when you have to pay sticker price or more for your new house. You lose 10% on the sale PLUS 5-10% more on the purchase. What a deal!

    I love how the agents say few people are under water in “desirable” areas. Looking at a map of the US, a few tiny pin points like Ballard are considered trendy — and therefore sought after by image obsessed yuppies. The rest of the country is a nicer place to live — low stress, cleaner, quieter, less crime. And it’s on sale all the time.

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  19. ARDELL

    RE: nwbackpacker @ 17

    I still don’t quite understand why people think inventory is/was “low” this year. When I did my 10 year stats yesterday for Kirkland, Bellevue (excluding 98006) and Redmond 98052 (excluding 98053) i.e. “close in Eastside” stats, the number of homes sold in July of 2013 was 302. That is more than twice as many than were sold in 2010 and more than any July in all of the past 10 years.

    How can inventory be “too low” when more homes were sold than any YOY over the last 10 years? There must be more homes to be bought…if people are buying them.

    Counting “inventory” as only the homes left on market after people buy the ones worth buying, does not make sense to me.

    July homes sold:

    2004 – 273
    2005 – 253
    2006 – 190
    2007 – 236
    2008 – 162
    2009 – 162
    2010 – 140
    2011 – 171
    2012 – 215
    2013 – 302

    In 2012 and 2013 there has been a lot of talk of “low inventory”. I think the complaint is actually that good homes that are priced well just sell too quickly, because clearly there have been more homes sold. That is likely due to technological advances, and I don’t see that changing.

    Instant alerts have changed the way real estate sells, and how long it takes a house to sell. Fewer “for sale” on the last day of any given month is not a true reading of “inventory” without adding back all of the homes during the month that came on market and went pending in less than 30 days.

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  20. One Eyed Man

    RE: Erik @ 14

    The study was by Zillow, not Trulia. In the first quarter of 2012 they estimated 40% underwater in the Puget Sound area and less than 33% underwater in King Co.

    http://www.king5.com/news/local/Nearly-40-percent-of-Puget-Sound-homeowners-underwater-153644515.html

    The Zillow estimate for “Seattle” had dropped to 28% by the 2nd quarter of 2013.

    http://www.bizjournals.com/seattle/news/2013/08/28/about-28-of-seattle-homeowners-remain.html

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  21. ARDELL

    RE: ARDELL @ 19

    I would appreciate it if the thumbs down people could help explain to me how many more sold can be a result of “low” inventory? I truly don’t “get” that.

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  22. Erik

    RE: ARDELL @ 19
    I didn’t give you a thumbs down. I think your post was very interesting.

    You have to have some way to calculate inventory. In order to do that, you have to choose a date such as the 1st of the month. On that day; Inventory = (existing homes for sale + new homes for sale) – homes sold. I don’t see a more fare way to calculate inventory. Do you have an alternate calculation?

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  23. Macro Investor

    By Erik @ 22:

    RE: ARDELL @ 19
    I don’t see a more fare way…

    Fares are just taxes. Shirley we don’t need more of that.

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  24. Erik

    RE: Macro Investor @ 23
    A lot of picky people beating me up over grammar and making me cite my data. Sheesh!

    I don’t see a more fair way…

    There, you got my on grammar. You won.

    You should change your name to “Micro Investor” because you are examining the details and ignoring the larger picture as a “Macro Investor” would. Are you still mad at me? It seems like it.

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  25. Ira Sacharoff

    RE: ARDELL @ 19
    I’m trying to understand this. You’re not suggesting that the reason more houses are selling is due to technological advances, right? Or that they’re selling quickly is because of technological advances? Wouldn’t demand have something to do with the number of houses sold and how quickly they’re selling?
    Maybe I just don’t get it, but if there’s a lot of demand, and more houses get sold as a result of that demand, does it make a difference if inventory is high or low if the effect is the same?
    In a place like the “close in” eastside, that’s pretty highly sought after, so if there are a lot more buyers than there are homes for sale, whether it’s high inventory or low inventory makes little difference to someone who’s getting outbid on homes, or not acting quickly enough.

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  26. ARDELL

    RE: Ira Sacharoff @ 25

    I see two things repeatedly.

    1) People call houses on market for 15 days “stale” and possibly undesirable or over priced.

    2) People complain that there is “low inventory” by checking the number of “not sold yet” homes once a month and saying that number is too low

    If they expect houses to sell in less than 15 days, how can they also expect there to be a lot of homes available for 30 days or more?

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  27. David Losh

    RE: ARDELL @ 26

    I have always thought the technology changed the face of what buying, and selling of Real Estate is all about. I agree, that properties come, and go off the market quickly because the home buyer is plugged into the Multiple through many channels. Buyers are much more sophisticated, know what they want, and when it comes up, they buy.

    There are many people on this site, like Erik, who want to make a case about supply, and demand, and OMG!!!!! prices are really going up. They want to hear low inventory to go along with the supply, and demand theories.

    No one wants to hear that prices are based on $85 Billion dollars of low interest driving Fed policy, which pushes that Affordability, and builds Consumer Confidence.

    The real question that I have is how many Real Estate agents would talk a buyer out of a house they have picked, and want to write an offer for? Is there any real Brokerage any more, or is the industry run by a bunch of order takers collecting 3% for filling out boiler plate forms?

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