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.

89 responses to “Weekly Open Thread (2013-12-16)”

  1. softwarengineer

    Gold, Oil and Stocks

    Are sky-rocketing until the QEs taper.

    Some analysts say it has little or no effect on Seattle Real Estate prices. I agree.

    http://finance.yahoo.com/news/u-stock-futures-flat-investors-124017117.html

    Rate this comment: Thumb up 1

  2. Kary L. Krismer

    Latest from Ken Harney on possible tax code changes in Congress: This part I don’t understand at all:

    “California owners are not affected by the debt forgiveness expiration because state law exempts them from taxation when lenders cancel mortgage principal debt as part of short sales. The IRS has announced that it will not levy taxes on such transactions in California even if the federal exemption for owners elsewhere expires.

    http://www.latimes.com/business/realestate/la-fi-harney-20131215,0,7521773.story#ixzz2nejWwiAW

    Does the Supremacy Clause somehow not apply to California?

    Here’s further explanation:

    http://www.inman.com/2013/11/25/good-news-for-california-homeowners-facing-short-sales/

    Rate this comment: Thumb up 0

  3. Blurtman

    RE: Kary L. Krismer @ 2 – “Camp’s big bill, which would attempt to lower individual and corporate income tax rates to a maximum of 25%, is expected to call for significant cutbacks in or elimination of prized real estate deductions for home mortgage interest, local property taxes and other write-offs to pay for lower marginal rates.”

    Isn’t this a further screwing of the middle class, and a further gift to the wealthy?

    Rate this comment: Thumb up 0

  4. Ira Sacharoff
  5. Kary L. Krismer

    By Blurtman @ 3:

    RE: Kary L. Krismer @ 2 – Isn’t this a further screwing of the middle class, and a further gift to the wealthy?

    Some people will win and some will lose with any changes to the tax code. But getting rid of the mortgage interest deduction is one of some peoples’ (e.g. Tim) big goals because of the way it distorts the economy. Similarly, I’d like to get rid of employer provided healthcare being tax free–that’s created the mess we’re in, IMHO.

    As to your point though, it would help the wealthy less if they simultaneously got rid of the capital gains rates. With low rates there’s really much less justification for a capital gain rate.

    Rate this comment: Thumb up 0

  6. Kary L. Krismer

    By Ira Sacharoff @ 4:

    Making fun of Realtors can only be good:
    http://www.buzzfeed.com/ryanhatesthis/this-guy-spent-the-last-month-dressing-up-like-local-realtor

    I was just commenting at one Xmas party how it was obvious at another Xmas party which people were agents. Out in the real world you can often tell it’s an agent just from the car.

    Rate this comment: Thumb up 2

  7. softwarengineer

    RE: Kary L. Krismer @ 2

    Check Out Federal Laws Kary

    Especially on 2010 background checks changes for federal and private enterprise employees….short sales require explaining why you defaulted on the principle.

    I’m not saying they will definitely fire a “back ground checked” federal employee or private enterprise for a short sale, I’m saying they likely will.

    http://www.trulia.com/blog/wendy_rulnick/2012/02/check_your_security_clearance_before_you_short_sale

    Rate this comment: Thumb up 0

  8. Kary L. Krismer

    RE: softwarengineer @ 7 – I ran into that years ago in my bankruptcy practice. I don’t know how a short sale would affect a security clearance, but back then a bankruptcy filing wasn’t as bad as some other things that could occur.

    Rate this comment: Thumb up 0

  9. softwarengineer

    Its Simply Horrifying

    Some RE pundits like to omit the foreclosure data and spout 40% decrease in underwater mortgages nationally, albeit high priced RE areas like Seattle bring even this figure lower than it would have been.

    But that’s nonsense [omitting foreclosure delayed units], here’s the real data…30% of homes nationally are underwater. You’re right Kary, they cook these books.

    http://www.inlandnewstoday.com/story.php?s=21533

    Rate this comment: Thumb up 0

  10. softwarengineer

    RE: softwarengineer @ 9

    I Apologize for the 2 Year Old Count from 2011

    But right or wrong…the data is being manipulated.

    Rate this comment: Thumb up 0

  11. Kary L. Krismer

    By softwarengineer @ 10:

    But right or wrong…the data is being manipulated.

    You can’t manipulate that which is fictional. ;-)

    http://www.trulia.com/blog/kary_l_krismer/2013/09/the_gullible_seattle_city_council

    (And they now have new data since that was written which shows something completely different!)

    Rate this comment: Thumb up 1

  12. ARDELL

    The stock market (DOW) hit an all time high today…144% increase since March 2009 during Obama’s First 100 days.

    One Hundred and Forty Four Percent Increase…#justsayin

    Rate this comment: Thumb up 0

  13. softwarengineer

    RE: ARDELL @ 12

    Yes Ardell

    I could lose my shirt tomorrow if $85B/MO QE goes away, but today I’m still smiling!

    Rate this comment: Thumb up 0

  14. ARDELL

    RE: softwarengineer @ 13

    Expect some profit taking soon…real soon. We’re due for a serious correction.

    Rate this comment: Thumb up 0

  15. redmondjp

    By ARDELL @ 14:

    RE: softwarengineer @ 13

    Expect some profit taking soon…real soon. We’re due for a serious correction.

    But why? One could argue that current high prices (for stocks, houses, etc) are a direct result of the influx of money into our system – it has to go somewhere.

    Rate this comment: Thumb up 0

  16. ARDELL

    RE: redmondjp @ 15

    Rebalancing. It’s not about all in or all out.

    Rate this comment: Thumb up 0

  17. Blurtman

    The 10 year is heading to 3. Mortgage rates say……?

    Rate this comment: Thumb up 0

  18. Kary L. Krismer

    By ARDELL @ 16:

    RE: redmondjp @ 15

    Rebalancing. It’s not about all in or all out.

    Where are they going to rebalance to? Not likely bonds. Passbook savings? Another country?

    Rate this comment: Thumb up 0

  19. Kary L. Krismer

    I’ve been very critical of Boeing management for several years now, and thought that their offer to the Machinists was just a PR stunt that they probably didn’t think had a snowball’s chance. But with the vote controversy it might just end up being a genius move, or at least appear that way. It will be interesting to see how this plays out.

    Rate this comment: Thumb up 0

  20. softwarengineer

    RE: Kary L. Krismer @ 19

    One Major Thing in Seattle’s Favor on the 777

    Its a big ALUMINUM [not a 787 composite] plane….with huge aluminum panel riveting assembly jigs pile driven into Everett soil. Keeping assembly here saves huge bucks….

    Rate this comment: Thumb up 0

  21. Kary L. Krismer

    RE: softwarengineer @ 20 – But by thinking that matters you’re assuming that Boeing management is competent and rational. I wouldn’t make that assumption.

    Rate this comment: Thumb up 1

  22. Howard

    By ARDELL @ 14:

    RE: softwarengineer @ 13

    Expect some profit taking soon…real soon. We’re due for a serious correction.

    I agree. Will this “trickle down” to real estate?

    Rate this comment: Thumb up 0

  23. Kary L. Krismer

    By Howard @ 22:

    By ARDELL @ 14:
    RE: softwarengineer @ 13

    Expect some profit taking soon…real soon. We’re due for a serious correction.

    I agree. Will this “trickle down” to real estate?

    That could very well be the destination for the re-balancing that Ardell brought up, but most likely not so much in the single family residential market.

    Rate this comment: Thumb up 0

  24. ARDELL

    RE: Kary L. Krismer @ 18

    It’s been awhile since I’ve done this for a living, but the two choices are usually longish term bonds or cash. It depends where you expect the markets to be in the near term and the % of your holdings. I’d stay away from longish bonds for at least 60 days…move to cash temporarily, and then back into stock as the market corrects. If the gain taking is sizeable, then you dollar average back in on the way down. Likely the market will receded back to close to 14,000 and then head up again from there. It should at least recede back to 15,000 in pretty short order. If it doesn’t do that by end of January, then we will see another big year in real estate vs flat.

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  25. ARDELL

    RE: Howard @ 22

    The normal fluctuations of the stock market do not trickle down to real estate. The trend overall has to reset before it would impact real estate. The signal of a new high this close to year end would suggest home prices will go up again next year.

    Profit taking in real estate is not the same as the stock market due to liquidity issues. I am surprised to continue to see people renting vs selling presumably because they think they will get a better price later. Other than seasonal issues of Spring vs now, I don’t see much rationale for that.

    Rate this comment: Thumb up 2

  26. Macro Investor

    By redmondjp @ 15:

    By ARDELL @ 14:
    RE: softwarengineer @ 13

    Expect some profit taking soon…real soon. We’re due for a serious correction.

    But why? One could argue that current high prices (for stocks, houses, etc) are a direct result of the influx of money into our system – it has to go somewhere.

    The “money on the sidelines has to go somewhere” logic is too simplistic. Most of the money invested has some sort of margin/credit backing. It doesn’t necessarily go somewhere other than to pay off it’s lender. Ignore what you think small investors like ourselves would do. The large investors are playing games with foreign currency interest rate differentials. Also, with derivatives none of us have ever heard of.

    An example would be borrowing Japanese yen at close to 0% interest, and buying stocks in the US. Sometimes it just takes currencies to change values a few percent, and all that investment becomes unprofitable and has to be unwound. That’s why we never understand why a correction started.

    Bottom line — don’t be over confident. Be ready to get out even when it doesn’t seem like it should be happening.

    Rate this comment: Thumb up 1

  27. Ira Sacharoff

    As someone who has been investing in stocks for 20 years, let’s be clear that in a correction, not all stocks go down. And that at any given time, there are stocks that are undervalued. When the market is frothy like it is now and due for a correction, there are less of these bargains available, and far more that are overvalued. But they do exist.

    Rate this comment: Thumb up 0

  28. Macro Investor

    By ARDELL @ 25:

    RE: Howard @ 22
    I am surprised to continue to see people renting vs selling presumably because they think they will get a better price later. Other than seasonal issues of Spring vs now, I don’t see much rationale for that.

    Well, you wouldn’t because you are an agent who likes her commissions. But from the standpoint of an owner, why would they sell? They see prices going up after a long dry spell. Every media report is a super optimistic “expert” predicting everyone will be rich soon. Which is a big reason why inventory is so sparse now.

    Your own industry’s propaganda is working against you now. To get sellers off the fence you need to convince them to sell now or forever regret it :)

    Rate this comment: Thumb up 2

  29. ARDELL

    RE: Macro Investor @ 28

    Your bias to claim I would always say it is a good time to sell is stronger than my bias to say it. I just sold Erik’s condo at $233,000 that he paid $92,700 for just two years ago. When you have that kind of gain, why wait for more? Conversely I declined a listing in Renton recently with a similar but longer term gain and the owner ended up renting it out even though they were older and relocating to CA for their job (both owners worked in the same place). They never planned to return to the area or to the home they were leaving…so why rent vs sell?

    It is still a better time to sell than it is to buy. The same old, same old…I must say something because I am an agent doesn’t play. Your propensity to think so defies reality.

    Rate this comment: Thumb up 1

  30. Kary L. Krismer

    By ARDELL @ 29:

    Conversely I declined a listing in Renton recently with a similar but longer term gain and the owner ended up renting it out even though they were older and relocating to CA for their job (both owners worked in the same place). They never planned to return to the area or to the home they were leaving…so why rent vs sell?.

    There the reason to sell should be somewhat obvious: To take advantage of the exclusion on gain for sale of a residence. The government doesn’t offer many opportunities like that (more on that later). But assuming they really, really want to own a rental, it would be better to sell up here, take the gain tax free, invest down in California by buying a rental closer to their new home, and be able to take depreciation at a higher level.

    As to the more on that later comment, they will get a step up in tax basis when the first dies, so that could also be a good time to sell. Depending on their age/health waiting might not be the tax disaster that it otherwise would be.

    But to hold onto an asset that you can sell at a gain tax free, but only for a limited time, never made any sense to me. And long distance rentals are best left to the accidental landlords who can’t sell because of negative equity.

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  31. Kary L. Krismer

    By Macro Investor @ 28:

    Every media report is a super optimistic “expert” predicting everyone will be rich soon. Which is a big reason why inventory is so sparse now.

    I suspect it’s more the opposite. Don’t assume the people on this site who follow the market are normal. Not that many people are aware of the market. I would suspect that there are just as many people, if not more, who don’t realize that the market is doing than people who are holding off waiting for further gain (unless they really are still underwater and know it).

    Rate this comment: Thumb up 0

  32. softwarengineer

    RE: ARDELL @ 24

    Good Buy Short Plan

    My cautious advice with the stock market is don’t make predictions; they’re wrong as much as they’re right….Fortune, Money and Inc magazines [which I read a lot] predict a 10% increase in mutual stock funds for 2014, a correction in the growth, not a stoppage of the growth. Do I believe it? I haven’t a clue.

    Longterm investing erases the ups and downs; and that’s what I do…..is it the smartest way to invest? Who knows.

    Rate this comment: Thumb up 1

  33. Erik

    RE: Macro Investor @ 28
    I felt like it was time to cash in and take my earnings. The people on here that are good at predicting the future seem to think the market will be mostly flat for a while or prices will possibly decrease. Robert Shiller thinks prices will be flat or keep up with inflation the next 10 years. Corndogs thinks that we bounced off the bottom and are now going to keep up with inflation. The Tim forsees the market turning into a buyers market relatively soon.

    Based on what those people think, I felt it was a great time to sell. Making over $128k in 2 years for not that much work seemed like a pretty good idea to me. I can buy my next place cash for that much and not pay the bank interest. In the past, I haven’t noticed that you have a good view of what is going to happen, so I think you are possibly wrong. Things could increase, but I doubt it will increase too rapidly. Inventory will not stay this low forever. I got 5 offers of full price or better in 5 days… partially because Ardell is a great agent, but also because the market has no inventory.

    Rate this comment: Thumb up 3

  34. Erik

    RE: softwarengineer @ 32
    I think markets are “bubbly” these days. I don’t know a lot about investing because I have never had much money to invest, but I think shorting things is a good way to invest these days.

    Rate this comment: Thumb up 0

  35. pfft

    By Kary L. Krismer @ 5:

    By Blurtman @ 3:
    RE: Kary L. Krismer @ 2 – Isn’t this a further screwing of the middle class, and a further gift to the wealthy?

    Similarly, I’d like to get rid of employer provided healthcare being tax free–that’s created the mess we’re in, IMHO.

    the mess we’re in is people were losing their healthcare not gaining it. there is no data to back your “theory” on why we are in the mess we are in.

    http://fdlaction.firedoglake.com/2011/09/27/skin-in-the-game-is-failure-as-a-health-care-cost-control-idea/

    Rate this comment: Thumb up 0

  36. pfft

    By ARDELL @ 12:

    The stock market (DOW) hit an all time high today…144% increase since March 2009 during Obama’s First 100 days.

    One Hundred and Forty Four Percent Increase…#justsayin

    he’s the worst socialist ever!

    Rate this comment: Thumb up 0

  37. Kary L. Krismer

    By pfft @ 35:

    By Kary L. Krismer @ 5:
    By Blurtman @ 3:
    RE: Kary L. Krismer @ 2 – Isn’t this a further screwing of the middle class, and a further gift to the wealthy?

    Similarly, I’d like to get rid of employer provided healthcare being tax free–that’s created the mess we’re in, IMHO.

    the mess we’re in is people were losing their healthcare not gaining it. there is no data to back your “theory” on why we are in the mess we are in.

    http://fdlaction.firedoglake.com/2011/09/27/skin-in-the-game-is-failure-as-a-health-care-cost-control-idea/

    I know you can’t understand basic economic theory, but you’re looking at the wrong thing and don’t even realize it. LOL. For the theory to be disproven, you’d need a significant decrease in the number of plans that are what we consider traditional insurance plans.

    Let’s take me as an example. With the exception of the annual physical, my insurance never pays anything. So why would my spending habits be any different having a high deductible plan than if I were uninsured? Having that plan is not going to lessen demand.

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  38. ARDELL

    RE: Kary L. Krismer @ 30

    He moved for job purposes…so not old enough to worry about a stepped up basis. About “our” age. :)

    Rate this comment: Thumb up 0

  39. ARDELL

    RE: softwarengineer @ 32

    I’m still stuck on, in another thread, why you asked someone “mike maybe” “Does your spouse cook for you?” I can’t seem to get that out of my head. :)

    Rate this comment: Thumb up 1

  40. Kary L. Krismer

    By ARDELL @ 38:

    RE: Kary L. Krismer @ 30

    He moved for job purposes…so not old enough to worry about a stepped up basis. About “our” age. :)

    I’m thinking about depreciation on the rental. When it comes to depreciation there’s no reason to not wanting a higher basis because that means a higher depreciation expense each year (something the 1031 Exchange people don’t typically tell you).

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  41. Macro Investor

    “…the pace of the collapse in mortgages is absolutely astounding – refi applications are now 70% below year-ago levels. Even applications for purchases have now fallen significantly, down 6% in the latest week and down 16% against the same week in 2012.”

    http://www.alhambrapartners.com/2013/12/18/we-waited-two-months-for-this/

    Macro comment — this data is for the US, not at the local level. However, it’s quite amazing how much a small increase in rates has crushed purchase applications. How long the local economy can remained sheltered is anybody’s guess.

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  42. Erik

    RE: Macro Investor @ 41
    Based on your comments on this site, I think you are someone that writes mortgages for people. Here is my question…

    If joe had $128k in his bank account and was assured he would collect unemployment for 2-1/2 years, which is around $560/week after taxes, could joe buy a condo for $125k and only put 20% down? Joe has no job, but he has the cash to pay for the place if he wanted to. Joe is a greedy pig and he wants to hold onto as much cash as possible. Can he get a conventional loan with 20% down, remodel the condo and sell it in a year or 2?

    Can joe qualify for the homepath program without a job? Joe would occupy the residence.

    Rate this comment: Thumb up 0

  43. Blurtman

    RE: Erik @ 33 – You’ve sold for a good gain. Splendid! It sounds like you are on your own, young, adaptable, little baggage. Have fun! And don’t lose your sense of humor, or sense of adventure.

    Rate this comment: Thumb up 3

  44. Blurtman

    RE: Erik @ 42 – What I have never understood is why, if you have enough cash to buy a house three times over, but are unemployed, you are a risky loan candidate. But if you are employed, and barely have enough for a down, you are a less risky loan candidate. Does not compute.

    Rate this comment: Thumb up 2

  45. Kary L. Krismer

    An inch of snow took down my Comcast Internet this morning. Fortunately my Verizon wireless 4G tethering is pretty much as fast.

    How are others being affected by the snow?

    Rate this comment: Thumb up 0

  46. ARDELL

    RE: Blurtman @ 43

    That gain amount Erik noted is net…after his cost of sale. He did much better than even I thought possible.

    http://www.redfin.com/WA/Kirkland/12003-100th-Ave-NE-98034/unit-203/home/15329

    The Christmas Miracle is that he had no idea he would be laid off when we started getting it ready to list, and it closed the day after his last day of work. That makes the timing impeccable.

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  47. ARDELL

    RE: Macro Investor @ 41

    What’s missing are all the people pushing their purchase up in time to capture the rates before they went over 4%. It’s just another instance of last year’s volume borrowing from this year’s. People who would have waited until this year were motivated by the fear that rates would increase. While it is true that they could still increase from here, there is no rush to capture 4.5% the way there was to capture 3.5%.

    Rate this comment: Thumb up 1

  48. UrbanDweller

    RE: ARDELL @ 46 – Good job, Erik. Glad it worked out for you this time.

    Rate this comment: Thumb up 2

  49. Macro Investor

    By Erik @ 42:

    RE: Macro Investor @ 41
    Based on your comments on this site, I think you are someone that writes mortgages for people. Here is my question…

    Funny. Before I was a trust “baby” who never had to work.

    I doubt an unemployed person can get a conventional or FHA loan. Agents should be able to tell you — they generally know what’s available, since that’s what lubricates their business.

    Mortgage applications is key to understanding housing turnover, obviously. It’s just one of the many metrics I follow in order to understand the macro investment and business trends.

    Assuming you can get your expenses in line and live entirely on unemployment, you’ll need to buy and renovate entirely with your cash. I normally wouldn’t advise that. But for a young person it makes sense to take larger risks and hopefully make more money faster.

    As I mentioned on another thread, it gets hard to find a job if you don’t work for over a year (or even 6 months). Employers suspect something is wrong and your skills are too rusty. They have lots of other candidates to choose from, unless your experience really impresses. I would recommend you find a new job as quickly as you can and continue to flip condos in your spare time.

    Unless you think you’ll never need to work as an engineer again. Maybe this is a business you’d rather be doing full time. One of the most impressive people I’ve met was an EE who was working as an electrician and doing flips.

    Rate this comment: Thumb up 1

  50. Kary L. Krismer

    Outside of real estate circles, the fax machine gets no respect! I’ve seen Colbert make jokes about it, and now there is this:

    http://www.deathandtaxesmag.com/211695/north-korea-faxes-notice-that-it-will-strike-without-notice/

    Yes, countries should threaten military action using a technology that doesn’t readily confirm receipt of the message–email. That makes a lot of sense. /sarcasm

    Rate this comment: Thumb up 0

  51. pfft

    By Kary L. Krismer @ 37:

    By pfft @ 35:
    By Kary L. Krismer @ 5:
    By Blurtman @ 3:
    RE: Kary L. Krismer @ 2 – Isn’t this a further screwing of the middle class, and a further gift to the wealthy?

    Similarly, I’d like to get rid of employer provided healthcare being tax free–that’s created the mess we’re in, IMHO.

    the mess we’re in is people were losing their healthcare not gaining it. there is no data to back your “theory” on why we are in the mess we are in.

    http://fdlaction.firedoglake.com/2011/09/27/skin-in-the-game-is-failure-as-a-health-care-cost-control-idea/

    I know you can’t understand basic economic theory

    keep telling yourself that.

    Obamacare has been slowly implemented and costs haven’t sky-rocketed like you said. Increases in drug prices seems to be more about patents and shady businesses practices than people not caring about what their drugs cost.

    you do realize the ridiculousness of your position don’t you? If someone is in the ICU in a coma how are they supposed to shop around for less expensive drugs? what about someone with emergency surgery? how are they supposed to shop around for less expensive drugs?

    the problem doesn’t seem to be patients not caring:

    This $2,000 drug says everything about our messed up health-care system
    http://www.washingtonpost.com/blogs/wonkblog/wp/2013/12/09/this-2000-drug-says-everything-about-our-messed-up-health-care-system/

    every incentive in our health-care system preferences Lucentis, the $1,000 drug, over Avastin. Because it’s a more expensive drug, doctors get a higher administrative fee when they give it to patients.

    Seems like the problem is doctors and regulatory capture by the FDA. Plus our patent system.

    Rate this comment: Thumb up 1

  52. Blurtman

    RE: ARDELL @ 46 – So what’s your post-mortem? He bought in the right place at the right time? Eric always put down the part of Kirkland where he lived, but Kirkland is a desirable area, I thought.

    Rate this comment: Thumb up 0

  53. Erik

    RE: UrbanDweller @ 48
    Thank you, I’m glad it did too. :) Last time I got nothing, this time was largely successful. Moving forward, I would like to make more successes.

    Rate this comment: Thumb up 0

  54. Erik

    RE: Blurtman @ 52
    I don’t think there are any regrets on this remodel. The area I bought was Juanita in Kirkland. It is a nice area, but not as nice as downtown kirkland, I want to buy another one in the same area soon, but I think I need a job first.

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  55. Erik

    RE: Macro Investor @ 49
    I want to make piles of cash and it doesn’t seem possible in Engineering. I enjoy remodeling and I just made a pile of cash at it. I like the whole process from buying to remodeling to selling. Unfortunately, I need to have a job to buy at this point to do that. I need to do both.

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  56. Blurtman

    RE: Erik @ 54 – How much of the profit do you think was from the remodel, and how much from the recovery in the market?

    Rate this comment: Thumb up 0

  57. Erik

    RE: Blurtman @ 56
    Good question. That is difficult to quantify. I spent about $26k on the remodel. I bought the condo for $92.7k when it was worth probably about $130k.

    There were some obvious problems with the condo that needed to be fixed, so I fixed those major problems. The cupboards were lifted up too high, the floor was elevated in a section, it was painted brown inside, it needed new windows, the outside needed painting, baseboard heaters didn’t work. I also cleared out a nice view of lake washington that was being blocked by trees, which probably helped the sale price. The main issues were cosmetic, which really makes a remodel more profitable.

    Sale price was $233k, so the price increased $140.3k. I estimate that I bought the place for $35k under its value. The fixes I made were worth approximately $55k. That makes the market increase $50.3k. These are guesses of course, but that is my estimate.

    Rate this comment: Thumb up 1

  58. Erik

    RE: Macro Investor @ 49
    Based on your comments, I do think you got handed a load of cash. You write loans for people too. I think these this coexist. Or else you won powerball. Where did you get all this money to be a macro investor? Your family most likely handed you a fat check.

    Rate this comment: Thumb up 0

  59. Kary L. Krismer

    RE: pfft @ 51 – I’ll agree with you that part of the problem with healthcare costs is the drug system. For one thing it’s totally nuts that drug companies can advertise on TV to get people to pester their doctors to write them a prescription, the cost of which will likely be paid by others through their insurance.

    But seriously, you’re trying to claim Obamacare has been implemented and not caused increases yet? Apparently you don’t read the newspapers. Yes some parts have been implemented, like the no limits and some restrictions on pre-existing conditions. But the full rollout is just occurring now. Where do you think that the money for the extra 50-100% in premiums that businesses and consumers will be paying is going to go?

    Although I will say that the increases are not as likely as I thought a year ago. When I was originally warning about increased costs I had no idea the insurance would be so expensive. If they don’t get the sign up rates at those high premium prices there won’t be as large of an effect as I thought because the percent of people covered won’t increase that much. Also, most the Obamacare policies are high deductible and not the traditional type plans which are the cause of much of the problem. I now suspect we’ll more likely see increases in certain areas, like maybe mental health care.

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  60. Kary L. Krismer

    By Blurtman @ 56:

    RE: Erik @ 54 – How much of the profit do you think was from the remodel, and how much from the recovery in the market?

    A significant portion was the market, but I wouldn’t try to put a percentage on it because I don’t know what was done in the remodel.. Eric though bought an REO, and back when he bought REOs sold at a significant discount. That is no longer the case, and some REO listings come out with ridiculously high list prices.

    Back in the last 5 months of 2011 there were 5 2 bed, 1.75+ bath condos that sold within 1/4 mile of Eric’s unit (including his unit). Two Fannie Mae units went for under $100,000, and with the next cheapest being $160,000 and none above $100,000 was REO. This year six such units sold, and the cheapest two were both 180,000, and one of those was a Fannie Mae, as was the most expensive one!

    Note I’m not accounting at all for the difference between projects (or even size of unit) in doing that analysis, but it does show rather well what’s happened to REO pricing this last year. The shortage of inventory caused the banks to start getting FMV (or better) for their units.

    BTW, short sales have had a similar change, but they are more spotty. It’s still possible to get a good deal on a short sale, but also more likely you’ll be greatly disappointed.

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  61. Blurtman

    RE: Erik @ 57 – Sure, just estimates. But without the fixes, you’d probably have sold for less. So as you are tempted to do this again, perhaps when you were to put Project #2 on the market sometime in the future, you might not get the same bump in price appreciation due to a recovered market.

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  62. Blurtman

    RE: Kary L. Krismer @ 60 – Right. Buy low, sell high. But repeating the endeavor at this time might not yield the same results. But I am sure that is part of the fun, finding those “gems.”

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  63. Kary L. Krismer

    RE: Blurtman @ 62 – I would never say you couldn’t repeat the same thing, but this time it might not be an REO.

    That’s part of the problem with the focus on median around here. Bargains exist in every market, but in some markets they are easy to find and even languish on the market, and in other markets they are few and far between and usually require acting very fast. And yes in the latter case finding them can be a lot of the fun!

    So when you bought isn’t as important as how and what you bought. And on the topic of “what” I’d add that Eric having bought a 1.75 bath also helped with his gain. If he’d opted to spend slightly less on a 1.5- bath he probably wouldn’t have done as well.

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  64. Erik

    RE: Kary L. Krismer @ 60
    I agree. Lately I have been seeing good deals on short sales and not so much on reos. When I bought reos were much cheaper. In my special case, the person in the reo would not let anyone in to see it, so it sold cheaper.

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  65. Blurtman

    RE: Kary L. Krismer @ 63 – Probably like any investment. There is market risk, and then risk unique to your investment. If the RE market isn’t taking a grand slide at the time of sale, perhaps there is money to be made in buying low and selling high. I’ve often thought buying a multi-unit rental near a college might be one way to generate revenue. Of course screening your renters would be important, I suppose. And then when you are ready to retire, rent out the 4 unit home to 100 students, and slink away to Guatemala. ;>}

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  66. Kary L. Krismer

    RE: Erik @ 64 – HUD might be the one exception where you can still find a good deal. Until recently buying a HUD property required that you use the worst escrow that I have ever run into, and I ran into one once that was so bad I was emailing the partner of the firm while he was on a plane. The HUD escrow was worse than that!

    Anyway, I haven’t really noticed many HUD listings lately, but I’m not so sure how many agents know that escrow is no longer an issue. It still could be adversely affecting the value HUD is getting. And even without that escrow, HUD hardly has practices which maximizes their recovery. Fannie and Freddie were for a long time only quasi-government, but HUD is the real pure unadulterated government experience.

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  67. ARDELL

    RE: Blurtman @ 52

    The background on this has more to do with the condo conversion project of The Esplanade nearby Erik’s condo. In 2006 Spinnaker picked up the rental complex, converted them to condos and sold them for $260,000 to $300,000. Mostly in the $270,000 give or take range. When the market turned all of those went underwater, and for the most part still are. Add to that Esplanade going “cash only” due to changes in FHA financing criteria as to reserves and a condo conversion not having built up sufficient reserves during its rental history, and maybe a lawsuit or two against the conversion effort. Esplanade dropped to $80,000 to $100,000 or so for a two bedroom when only cash buyers could buy them. It being a fairly large complex, it dragged the values down across the board for the entire area. Once Esplanade came out of their “cash only” status, the entire area bounced back up with it. So much of the story of this section of Juanita was controlled by outside forces.

    Couple that with the many extras of Erik’s unit that have nothing or little to do with the remodel. A small complex of only 10 units gave Erik a lot more say in improvements made to all units by the HOA with shared cost among 9 other owners. His top floor unit had super high ceilings in the living areas…at least 16 feet high on the vaulted side with clerestory windows. Usually you have to climb 2 flights of steps to get to these units on a 3rd floor, but Erik’s building was only 4 units with the 2nd floor having the high ceilings. Again, because it was a small complex of only 10 units, Erik was able to go out with a ladder all by himself and improve his lake view. In a larger complex he would not have been able to do that and view of Lake Washington is a significant value component as are high ceilings in older condos.

    Mostly Erik was completely driven by his desire to make money. In that regard he did everything right and anything more he needed to do to achieve his desired price point, we did while getting it ready for market. He did everything I asked of him and more and in turn I followed his lead and did a lot more than I usually would do with regard to online presentation and marketing. We were a great team, both of us being somewhat OCD. :)

    While you could say low inventory had a lot to do with it…there is at least one similar condo with a view asking less nearby that is not selling. So inventory alone is not the answer. The presentation was impeccable, and much was done in that regard after we met and while we were getting it ready to list.

    This is one case where I have to say the staging effort had a lot to do with the end sold price. Presentation and marketing accounted for at lest 10% less on the buy side and 10% more on the sell side…so that alone accounts for about 20% of the increase, at little cost to achieve. Usually presentation can only account for about 5% difference in sold price, but when you have high ceilings, clerestory windows and a view to work with you can push that to 10%, and we did.

    I couldn’t have asked for a better “ready, willing and able” seller. He not only gave me carte blanche to do what needed to be done, he also assisted in the final effort…well, I held the ladder for him. :) He was truly devoted to accomplishing his objective. Not every seller is willing to do what it takes. They want a great result, but are not willing to do what it takes to get there. Erik was very driven and fully open to any and all wise counsel.

    Clearly the input from Seattle Bubble and its commenters had a LOT to do with his success. While many were tired of his endless questions that were purely self motivated, those who took the time to respond truly helped in his efforts. Everyone can take a bow on this one.

    When you calculate the ROI on his intitial investment, which was not $92,700 but only the downpayment of maybe $3,000, add the $26,000 he paid for improvements, subtract the $600 or more a month he paid less as an owner than a renter for those two years even before tax writeoff and you’re looking at a $128,000 return on an investment of about $15,000. Not bad. Not bad at all. Kudos to Erik.

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  68. Kary L. Krismer

    By Erik @ 54:


    I don’t think there are any regrets on this remodel. The area I bought was Juanita in Kirkland. It is a nice area, but not as nice as downtown kirkland, I want to buy another one in the same area soon, but I think I need a job first.

    You should probably research if and when the IRS will consider that to be a business, with less favorable tax treatment. As I recall at some point you won’t even qualify for capital gains if you hold longer than a year, but I don’t recall what that point is.

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  69. Blurtman

    “In 2006 Spinnaker picked up the rental complex, converted them to condos and sold them for $260,000 to $300,000. Mostly in the $270,000 give or take range.”. Ouch! Guess those buyers weren’t reading the Seattle Bubble at the time. Next time there is a crash – and you have the cash…..

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  70. ARDELL

    RE: Blurtman @ 69

    Next time is still here near any “cash only” complex. In Downtown Kirkland the cash only building is a newer one. The Boulevard. Same basic scenario except a new building vs a condo conversion project. Price point is higher because it is Downtown vs Juanita and it didn’t drag everything with it as deeply as Esplanade did in Juanita.

    To answer your original question, “Kirkland” is a big place and those who don’t consider the value variances of neighborhoods usually get caught with their pants down.

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  71. Erik

    RE: ARDELL @ 67
    Kudos to you Ardell. I didn’t know a good agent could make such a difference. You made the place picture perfect. I wanted you to sell it because of your staging ability. You are obsessed with real estate and that is why you are the best. Thank you very much for your hard work. I think you made a huge difference in my sale price and time on market. 5 offers of full price or more in 5 days speaks for itself. We will need to do this again if you are willing.

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  72. Blurtman

    RE: ARDELL @ 70 – What’s a 1 BR/ 1 Bath, 792 sq. ft. condo there rent for?

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  73. Erik

    RE: Blurtman @ 72
    You should buy it blurtman. I would if I could get a loan do it.

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  74. ARDELL

    RE: Blurtman @ 72

    Not sure what you mean by “there” but rents anywhere are $1.00 per square foot give or take. 792 is on the large side for a 1 bedroom in Kirkland. Better to go for a 2 bedroom that is 870 for a broader audience as a rental. You get more per sf that way. A 2 bedroom would go for $1,200 to $1,500 or more depending on location. A one bedroom would be more in the $950 range.

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  75. Erik

    RE: Blurtman @ 72
    This is all I see is this at “The Boulevard”…
    http://www.redfin.com/WA/Kirkland/375-Kirkland-Ave-98033/unit-217/home/22692621

    $294,900 for 1bd 1ba condo with $289/mo dues. I don’t see it being a good investment. Buy a place in Juanita for cheaper and rent it out.

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  76. ARDELL

    RE: Erik @ 75

    My point in the previous comment was that one cash only complex will be a drag on other properties in the area, not that the cash only building is a good buy. Same as you did not buy in Esplanade but benefited from its cash only stats back in 2011. Not commenting on the linked property as I can’t. Agents can’t make public comments about listed property. That Esplanade was cash only helped the price of your place be low back in 2011…but that does not mean you should have bought there. The one you bought was obviously a better buy and held more potential future value at the time.

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  77. Erik

    RE: ARDELL @ 76
    Got it. Thanks. Buy similar condos around a cash only complex.

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  78. Blurtman

    RE: Erik @ 75 – That might be a terrible investment at that price. If you rent it out for $1,000/month, you can do better parking the money elsewhere.

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  79. ARDELL

    RE: Blurtman @ 78

    Sorry…was a bit distracted yesterday writing an offer. $950 for Juanita and $1,350 or so for Downtown. There is that much of a variance. Also of note a cash only building will bounce up when the cash only restriction is lifted automatically whether you improve the place or not, however there is more control in buying old and ugly and making it look newer and pretty. If that old and ugly is also impacted by a nearby cash only…all the better.

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  80. Blurtman

    RE: ARDELL @ 79 – Sure, so $200,000 for a 1/1 that can rent for $1,000/month does not seem like a good investment after HOA, taxes, and even assuming constant occupancy.

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  81. ARDELL

    RE: Blurtman @ 80

    You’re talking about cash flow. We’re talking about a new home for Erik that he can sell in a couple of years at a tax free profit. Big difference. The best areas never cash flow. For cash flow you have to be a slum lord. :)

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  82. Blurtman

    RE: ARDELL @ 81 – So I guess you are sticking to the formula – find an undervalued place that renovation plus sweat equity and zippy staging can come together to result in a capital gain in a few years. But do you think it is a bit harder to find those undervalued gems these days?

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  83. Erik

    RE: ARDELL @ 81
    My neighbor in the slums of Juanita rents for $1600/mo and bought for $143k. His hoa dues are $425. I think my condo would have been a great rental except I didn’t have any extra money if something went wrong. That’s why I sold. I think my place could be worth $400k in ten years. I need the money now though. Blurtman could buy a place in Juanita and do just fine if he has some money to invest.

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  84. ARDELL

    RE: Blurtman @ 82

    You don’t go from a success of spending $15,000 net and turning that into $128,000 into spending $128,000 to gain an extra $400 a month…and you still a have to figure out how to pay for a place to live. Just makes no sense.

    As my Mom would say…”Don’t let that money burn a hole in your pocket.” The worst thing that can happen is that the $128,000 net gain turns into zero…”haste makes waste”. You don’t expect a great opportunity to be lying about the minute you get a big wad of cash in your hand. Take your time…get a job. If that job is out of State that changes the whole game plan.

    Back to Kary’s comment that kind of slid by…if buying and selling becomes your “job” because you have no other job, you do not enjoy the same tax benefits that you did this time around. That’s a big consideration.

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  85. Kary L. Krismer

    By ARDELL @ 84:

    Back to Kary’s comment that kind of slid by…if buying and selling becomes your “job” because you have no other job, you do not enjoy the same tax benefits that you did this time around. That’s a big consideration.

    As I said, I don’t remember the rules, but I suspect it turns on how many of these you’ve done within a certain period. If so, having another job wouldn’t save you, but whatever the rules are, Erik should learn them.

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  86. Blurtman

    RE: ARDELL @ 84 – Hey, I agree. Study why what worked, worked, don’t generalize a specific experience to the present (unless all variables are maintained), and yes, save it.

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  87. Blurtman

    RE: Erik @ 83 – Can you buy a similar place now for $143k and rent it out for $1,600? I kinda doubt it. Things tend to eqilibrate so that money is not left on the table.

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  88. redmondjp

    By Erik @ 83:

    RE: ARDELL @ 81
    My neighbor in the slums of Juanita rents for $1600/mo and bought for $143k. His hoa dues are $425. I think my condo would have been a great rental except I didn’t have any extra money if something went wrong. That’s why I sold. I think my place could be worth $400k in ten years. I need the money now though. Blurtman could buy a place in Juanita and do just fine if he has some money to invest.

    $425 – is that per month or per year?

    If per month, YIKES!!!! That’s more that I’ll be paying to ‘rent’ (pay property taxes) on my Redmond rambler after I have it paid off in a few years. Granted that I do have to mow my own lawn ;)

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  89. ARDELL

    RE: redmondjp @ 88

    That’s another miracle of this sale. When he bought it for $92,700 the dues were $250 a month. When he sold it for $233,000 the dues were $400 a month. I was not as optimistic as he was…but I did go all out on the staging to give him a fighting chance. :)

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