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.

19 responses to “December Stats Preview: Better for Buyers Edition”

  1. Kary L. Krismer

    Where does the 3,820 for active listings come from in the first graph? The number in the second to last graph is much closer.

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  2. ARDELL

    Pretty obvious the shift happened when interest rates went from 3.5% give or take to 4.5% give or take. That’s pretty much the full story in a nutshell.

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  3. Craig Blackmon

    Good stuff Tim, and interesting observation, Ardell. It all got me thinking…

    The King Co. “Warranty Deeds” chart in particular nicely illustrates the seasonal, cyclical nature of the housing market. It also illustrates the fact that we have come off the bottom of the market following the crash (a “fact” consistent with lots of other data and observations). Interest rates are off their low and are likely headed higher, yet they remain very attractive by historical standards. Inventory has been out of whack but now seems to be returning to the norm, which as Tim notes is more good news for buyers.

    Of course, I recognize that nobody knows the future. And for good reason, many people distrust real estate brokers when they say, “Now is a GREAT time to buy!” That said…

    Can we all agree that, subject to the “future is unknown” disclaimer, right now really is a great time to buy?

    Happy New Year Seattle Bubble!
    -Craig

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  4. Macro Investor

    By Craig Blackmon @ 4:

    … right now really is a great time to buy?

    Well, I wholeheartedly agree with you. It is a FANTASTIC time to buy…

    Discounted sweaters at the year end sales, gold bullion coins, and houses in places like Spokane or Kentucky. Certainly not in places like Seattle or Eastside where it still costs $500k for a shabby wooden box floating on a tiny patch of mud.

    But – to each his own. Happy new year bubble heads and headesses :)

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  5. Erik

    RE: Craig Blackmon @ 4
    I am waiting for the market to tank again before I buy. I think 2015 seems like the best time to buy based on what I read on here and online. I will be looking more seriously in summer 2015. Ray Pepper posted a link here one time of a guy that is good at predicting this stuff. The guy predicted that the market would decrease 10-15% in 2014 and another 30% or so in 2015. If it happens, I will find my way to the money again.

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  6. mmmarvel

    By Craig Blackmon @ 4:

    Can we all agree that, subject to the “future is unknown” disclaimer, right now really is a great time to buy?
    -Craig

    Well, compared to when I bought (in 2011) and got a 30 year fixed at 3.75%, no, it’s not all that a spectacular time to buy. My house which I bought (here in Houston) for $118K is now valued at $164K, so a person buying at the higher price wouldn’t think it was such a great time to buy.

    Down here, what I’m seeing is that there are still a fair amount of foreclosures going on. Prices have been going higher, but I’ve seen a lot of homes that were up there a bit, shave something off the price. And inventory is fairly low – sort of a stalemate between those who think its a good time to sell, and are trying to make top dollar and buyers who are more than happy to sit and wait (for either more inventory and/or lower prices). But that is just one man’s observation for a place far away from Seattle.

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  7. Craig Blackmon

    RE: mmmarvel @ 7:

    Is it the best time EVER to buy, looking back at prior market opportunities? Of course not. But this is a PROSPECTIVE opinion, and it cannot be compared to other situations where we get the benefit of hindsight. If you want to compare the buying opportunity of 2011 to the opportunity of today, you’d have to concede that, in 2011, the future of the housing market was much murkier. Back then, it was not clear whether or not we had hit bottom following the crash. Today, the outlook is a whole lot clearer. And thus, from a purely prospective viewpoint, buying today is a “better opportunity” because there is a whole lot less downside risk. Admittedly the risk of renewed depreciation didn’t come to pass, but nobody knew that back in 2011. There is less risk today. And interest rates remain low. And inventory is building….

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  8. ARDELL

    RE: Craig Blackmon @ 8

    There will likely be a correction of pricing this year to compensate for the push in prices caused by the low rates in the first half of last year. I don’t think that correction happened by year end 2013. That could result in flat to less up than if the 3.5% rates had continued…but it could also create a downturn.

    Also I am seeing sellers in early listings “jumping the shark” LOL! They are taking the 13% up comp value and ADDING 13% to it. Builders are doing it too. I don’t think that’s going to fly. It’s still a better time to SELL than it is to buy…and buyers have to be careful that the seller’s price is not overly hopeful in this early opening of 2014.

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  9. Craig Blackmon

    RE: ARDELL @ 9 – So you think we’ll see a brand new bottom to the market???

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  10. ARDELL

    RE: Craig Blackmon @ 10

    I think it’s still a good time to sell…do you disagree? It can’t be a good time to sell and a good time to buy on the same day. Which would you pick?

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  11. Craig Blackmon

    Answering a simple question with another, huh? Well, you’ve always been pretty slippery… ;-)

    No, I strongly disagree that it must be EITHER a good time to sell, OR a good time to buy. Buying real property is a long-term investment with many, many factors to consider (e.g. tax implications, current values, presumed future values, inventory, interest rates, etc.). We’re not talking about day trading a particular stock. And I think now is a good example of an instance where the market is good from either perspective.

    The point of my comment was to illustrate that, notwithstanding the bad rap brokers get for encouraging people to buy, sometimes it really IS a good time to buy, now being an example. But apparently you disagree even with that premise.

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  12. Kary L. Krismer

    By Craig Blackmon @ 8:

    RE: mmmarvel @ 7:If you want to compare the buying opportunity of 2011 to the opportunity of today, you’d have to concede that, in 2011, the future of the housing market was much murkier. Back then, it was not clear whether or not we had hit bottom following the crash. Today, the outlook is a whole lot clearer. And thus, from a purely prospective viewpoint, buying today is a “better opportunity” because there is a whole lot less downside risk.

    I think you may be confusing the perception of risk with actual risk. Are we really better off, or are we just two years closer to collapse? I don’t think it’s all that clear that the economy is out of the woods, but on the other hand, if it isn’t, real estate might be a lot better place to be than some other assets.

    I don’t think you can ever know whether it’s a good time to buy or not. You can only determine that later down the road, with hindsight. Just because things might be perceived to be risky at the time doesn’t mean it won’t turn out well–it’s like Emerald Downs.

    Good time to buy, not so clear, especially when the December median is the third highest and the inventory the second lowest. Whether it’s a good time to buy is probably more dependent on personal circumstances, AND what you manage to find to buy.

    I will say though that it is a good time to sell, but not because I think prices will be coming down in the future. I think it’s a good time to sell because of low competition in many/most locations.

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  13. Kary L. Krismer

    RE: Kary L. Krismer @ 13 – I want to follow up on this a bit. I represent both buyers and sellers, but in recent years I’ve tried to represent more buyers than sellers because quite frankly, buyers were easier. That changed last year.

    In 2013 representing buyers became much more challenging. After 2008 it was often just trying to figure out how little a seller would accept. In 2013 more situations became about trying to figure out how much competition you would have from other buyers, and not only what price the seller would accept, but what other terms the seller would accept. The goal shifted from trying to find the lowest offer the seller would accept, to creating the lowest offer the seller would accept without being the highest offer. Stated differently being the best offer the buyer could make that the seller would accept.

    I like that environment representing buyers, because it is more of a challenge, but I have a hard time saying that it’s a better environment for buyers than when they could just make offers in leisure, and not worry much about having any competition. Running with the herd is not necessarily a good thing, and that’s especially true when the herd is buying things.

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  14. Craig Blackmon

    This being my last comment, I’ll try and tie up several loose ends. First, and again to clarify my point, I believe real estate brokers are capable of analyzing market data and other relevant external factors (e.g. interest rate, inventory, etc.) to provide their clients with informed, professional opinions about the future. No guarantees, of course, as the future cannot be known with certainty. But brokers can and should provide their clients with in-depth analysis that will assist the client in making a decision about a long-term, extremely expensive investment.

    Frankly, I’m a little surprised that Kary apparently disagrees with this point.

    I believe that, based on my current analysis, this year represents a “good time to buy.” Ardell believes otherwise, notwithstanding the many factors I mention in my original comment (continued low interest rates, rising inventory, a “bottomed” market, etc.). That said, she’s hardly a true “bear” as she believes the market will likely be “flat to less up” this year. Since buying real property is a medium to long term investment in most instances, that is not inconsistent with “good time to buy.” If she believed the market would hit a new low following the crash, then she would be on the right track. But she refuses to clarify that point…

    Macro believes prices are too high because, darn it, those are really big numbers for really crappy houses. Looking at numbers alone, without any context whatsoever and with only reference to a “common sense” notion of value, is an exceptionally simple way to analyze the issue.

    Erik believes in “some guy” who apparently knows the future. I’ll buy into Erik’s analysis just as soon as I see this working crystal ball myself.

    Thanks for the dialog, good stuff!

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  15. Kary L. Krismer

    RE: Craig Blackmon @ 15

    Frankly, I’m a little surprised that Kary apparently disagrees with this point.

    You shouldn’t be surprised that I disagree with that because my position has always been that agents are not trained or qualified to predict the future, and further that it should be an ethical and licensing violation to do so. You’d be better off investing your money at Emerald Downs using one of the papers you can buy out front with their favorite picks of the day. The people who publish those understand more about which horse will win the race than almost any agent knows about what real estate prices will be in the future. (Although those picks to probably affect the odds somewhat.)

    But in case you disagree with this, since you’re out of posts here, in the open thread you can give me your detailed analysis of the growth of the US economy going forward, inflation in the US going forward, the fiscal situation in Portugal, Italy, Greece and Spain, as well the status of the Euro overall, peace in the middle east and the China Sea, as well as how the new head of the Fed will unwind QE2. And when you’re done with that, please point me to the clock hour course that covers those topics. ;-)

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  16. ARDELL

    Craig,

    Picture yourself at a conference table with buyer clients telling them it’s a good time to buy. Now picture a 2nd set of clients, seller clients, sitting in the same room and your turning to them in the next breath and saying it’s a good time to sell.

    Sorry if you think I “refused” to answer you, but once you say “I strongly disagree that it must be EITHER a good time to sell, OR a good time to buy.” the conversation is over and we agree to disagree on that. I doubt either the buyer clients or the seller clients at that table would agree. Each would feel as if you are telling them what you need to say in order to get more business.

    It is still a seller’s market. It is still a better time to sell than it is to buy. As late as November there were still many multiple offer situations forcing a buyer to offer over “top dollar” and in addition forfeit many protections like an inspection contingency. There is no market where no one is selling or buying. It can’t be a good time to sell with no buyers. But as Kary noted and I agree, the wind is still shifting to seller advantage.

    Even if the market stays flat in 2014…it will still be a better time to sell than to buy. Sellers can still prepare their homes to garner at least 2 or 3 offers in good locations at high prices. Buyers still have to deal with competing offers and dropping protective contingencies. Until and unless we have double the amount of quality inventory, and at least 4 months to 6 months of inventory, it will still be a seller’s market and a better time to sell than to buy.

    My opinion, of course. Yours may vary and I would totally respect a reverse opinion. But the answer to “which one would you pick” is rarely “both” when you are talking about good time to buy or sell, unless the person answering benefits from the answer being “both”.

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  17. Ira Sacharoff

    RE: Craig Blackmon @ 15
    Sure, some real estate brokers are capable of analyzing market data and presenting professional opinions to their clients. But how many of them have their client’s best interests above their own?
    Based on the median income to median home price ratio, it’s not such a bad time to buy. But in the sought after areas, houses are still not staying on the market very long, and the seller still clearly has the upper hand. But if you ask real estate agents if it’s a good time to buy, almost all of them will say yes. If you ask real estate agents if it’s a good time to sell, almost all of them will say yes. I’m sure it’s just a coincidence that they way they make their living is from people buying and selling real estate. Until real estate brokers dispense advice that is against their own self interest, they are going to continue to be seen as lying slimeballs.
    Are most real estate brokers really capable of analyzing data and presenting professional opinions? I don’t know about most. Some, at least, are barely capable of walking, chewing, and drooling at the same time.

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  18. mike

    RE: Erik @ 6 – You realize the 40% correction you’re predicting over the next 18 months would be even more severe than what happened in the most remote, overbuilt areas of the country during the previous bust?

    Last time even with a proliferation of shaky loans, rampant overproduction of housing, a financial crisis, and extremely sluggish policy response from the government it took 3-4 years from peak for losses to reach that point.

    Call me skeptical, but it seems very unlikely that someone who didn’t even see the last bubble/bust coming would now be able to predict a significantly more swift and severe correction with any degree of precision.

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