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.

28 responses to “Link Roundup: Housing Market Strength Evaporating”

  1. Blurtman

    We need another housing market crash to create new buying opportunities. When the tide goes out, you’ll see who is wearing bathing suits. It be all about the churn in a sh*tty economy. Zieg Heil to the New Normal!

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  2. Erik

    I really have no idea why prices are down with low inventory and fairly low interest rates. Maybe it is because prices shot up so fast and buyers need time to justify the higher price to themselves in their heads? I thought it would happen, just not sure why. I think prices may even go down a bit still.

    This is refreshing though to see that I bought at about the bottom and sold about at the top. Seems like a good time to take those profits and invest in european banks. I think those will be more profitable than buying real estate for a while. Just gotta choose the right ones.

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  3. Erik

    RE: Blurtman @ 1
    I am definitely cheering for more chaos to create another buying opportunity. Then I can talk about the Fremont condo I would potentially buy for the next 2 years.

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  4. Blurtman

    RE: Erik @ 3 – Pray they cannot help but relax lending standards. I think this time, Wall Street can hire the right physicists who can turn lead into gold. Yes, that’s the ticket. This time WILL be different. Just wait till Obummer’s last year, when his Republican replacement will be handed the next shyte sandwich. Then the house of cards begins to collapse. And pudgy munchkin Yellen escapes to Paraguay, to seek shelter in the George W. Bush compound there.

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  5. Kary L. Krismer

    National or even west coast data is fairly non-relevant, unless we have another national financing or economic event. You need to focus on local data, and the next release date for that is next week. Nationally there are still markets which are fairly weak.

    I would agree things don’t seem quite as frenzied as last year, but it’s difficult/impossible to really get data on that. About the only thing I think might show that is keybox openings, and unfortunately I cannot get that data just for King County. For the entire NWMLS system, there were more keybox openings in January 2014 than in either 1/2012 or 1/2011. But surprisingly, there were a lot fewer keybox openings in February 2013 than 2/2012 (2014 not available yet).

    Vague references to number of keybox openings not guaranteed by the NWMLS.

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  6. sam

    Hey Kary,

    King County SFH inventory data actually mirrors last year. I am looking for a home on the eastside and lost two homes to multiple offers. The good thing is I don’t have buyers remorse as both homes were seriously overbid, like 6-7%. God save these crazy people. Tim may be right about overall strength in the housing market, but east side, or other nice seattle neighborhoods will be the last ones to feel that effect or may be never as there is no good inventory there and there is still lot of demand. There needs to be a triggering event from MSFT or AMZN for eastside or seattle for people to get into a holding pattern and inventory to rise. I dont see that happening any time as both companies are doing very well

    .

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  7. ARDELL

    RE: Kary L. Krismer @ 5

    One of the houses I had an offer on with clients last weekend we saw at an Open House. More and more in the hottest neighborhoods houses are being listed with Open House Saturday and Sunday and “will look at offers on” Monday. That could account for at least some of the fewer keybox openings.

    I did show 4 today with keybox openings, but two of them were just courtesy log ins, as one was having a preinspection so everything was already open and one of the others had more than one agent showing at once. Yes, we are supposed to “key in” even if the door is open with another agent inside, but not everyone does.

    I wouldn’t put much stock in fewer key box openings.

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  8. Kary L. Krismer

    By sam @ 6:

    Hey Kary,

    King County SFH inventory data actually mirrors last year.

    Yes, I’m aware of that, but that is only half the story. The other half is the buyer side, and there’s little or no data for that. That’s why I turned to the keybox data.

    By ARDELL @ 7:

    RE: Kary L. Krismer @ 5 – One of the houses I had an offer on with clients last weekend we saw at an Open House. More and more in the hottest neighborhoods houses are being listed with Open House Saturday and Sunday and “will look at offers on” Monday. That could account for at least some of the fewer keybox openings. . . .

    I wouldn’t put much stock in fewer key box openings.

    That type of anecdotal evidence is the other evidence that is available, but that is very unreliable. My favorite example of that is that my wife and I were very busy the month before the slowest sales month after the peak. If you’d just asked me how the market was, (assuming I hadn’t been following the data back then), my answer would have been way off. That’s part of the problem I have with newspapers quoting brokers–even at the largest firms they aren’t going to have enough exposure to the market. It’s still anecdotal.

    I agree though that keybox openings is not great, in part because it’s not broken out by area, and in part because it would include openings by listing agents.

    But I think you might have misunderstood what I said about fewer keybox openings. There were fewer in 2/2013 than 2/2012, even though there was a lot of buyer pressure in 2013. So that shows it’s not a great indicator.

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  9. drshort

    By Blurtman @ 4:

    RE: Erik @ 3 – I think this time, Wall Street can hire the right physicists who can turn lead into gold. Yes, that’s the ticket.

    Since the crash there’s been barely a trickle of interest from Wall Street in buying new private mortgage securities. And that little interest is all in jumbos for very qualified buyers. For new mortgages, it’s all about the GSEs. If theres a “sub prime” it’s FHA. It will be interesting to see what happens if Obama gets his way and Fannie/Freddie are wound down. There’s not really a private market ready to step in.

    The only thing the mortgage physicists on Wall Street are buying is the distressed poop from 2004 – 2007. They are looking for the least smelly poop at rock bottom prices. And, yes, they’ve made a killing on that.

    Its gonna be a very long time (if ever) before we see lending stardards like the mid 2000s. Theres been too many regulatory changes (QM/ATR) and lawsuits to be able to replicate the “glory days” of mortgage lending.

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  10. Erik

    RE: drshort @ 9
    Yeah, I was trying to find a no-doc loan, but couldn’t. I called lending tree, but they didn’t have one. Theoretically they exist. This time I want to be one of the first people to get a negative amortization loan with no proof of employment.

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  11. Blurtman

    RE: drshort @ 9 – OK, so the mortgage security flim flam is currently out of fashion. What is the new con, then, and are the rating agencies in on it? And will the next Treasury Secretary have made a killing in the new con?

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  12. drshort

    RE: Erik @ 10

    Ain’t gonna happen — no docs are now illegal: http://www.consumerfinance.gov/newsroom/consumer-financial-protection-bureau-issues-rule-to-protect-consumers-from-irresponsible-mortgage-lending/

    “Financial information has to be supplied and verified: Lenders must look at a consumer’s financial information. A lender generally must document: a borrower’s employment status; income and assets; current debt obligations; credit history; monthly payments on the mortgage; monthly payments on any other mortgages on the same property; and monthly payments for mortgage-related obligations. This means that lenders can no longer offer no-doc, low-doc loans, where lenders made quick sales by not requiring documentation, then offloaded these risky mortgages by selling them to investors.”

    A lender can theoretically still do a negative-am loan, but it’s very risky. If the borrower runs into trouble, they could sue arguing the lender should have known they would have problems repaying the loan – even years later. If the borrower wins, they get all their money back, plus damages, plus maybe no foreclosure. An investor buying the loan picks us that risk — gonna be a very limited appetite for that sort of thing.

    Mortgage lending is now, and will be, rather boring (as it should be).

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  13. Kary L. Krismer

    By Blurtman @ 11:

    RE: drshort @ 9 – OK, so the mortgage security flim flam is currently out of fashion. What is the new con, then

    Bitcoin, followed by Cofcoin.

    http://www.trulia.com/blog/kary_l_krismer/2014/03/burned_by_bitcoin_get_in_at_the_ground_level_on_the_next_big_thing

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  14. John Sitar

    I am frustrated buyer who has just started following this blog. We have been living in a 2-bedroom apartment for last 1.5 years waiting for the housing market to improve for buyers. I was encouraged by some of the statistics on this blog but more and more I realize that the numbers are not showing the right picture.

    We have been looking for a 3+ bedroom house on Eastside and even though things did improve after July last year, we did not pull the gun thinking that it will imporve further for us. However since December things have gone downhill.

    We are looking at the Issaquah/Bellevue area with a budget of max 750K and all houses we find are either made in the 70′s (we prefer 90+) or 3-floor block houses where your neighbor is closer to you than the person sitting next to me on the metro bus.

    Look at Issaquah for houses in my range. There are 3 houses, thats it.
    In Bellevue there are 2 houses that are not made in the 70′s, both still in construction.
    The one house we bid for has 3 other higher bids, we were not willing to go higher.

    Are things really improving for buyers?

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  15. Erik

    RE: Kary L. Krismer @ 13
    For the loan thing we didn’t have to even put any money down. This sounds too risky to put my own money down.

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  16. wreckingbull

    RE: Erik @ 10 – Did you check into that before you sold that Juanita Condo? Seemed like a nice little cash cow to me. Low cost of ownership, OK neighborhood. You could have cash-flowed that baby for decades. Even your idol corndogs was trying to tell you this, but alas, you are the expert.

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  17. Eastsider

    Is it illegal for a builder to fake multiple (pending) sales to drum up interests in a development that has no sales? The pending sales are for houses that are not even started. I may be wrong about the fake sales but there have been no buyers for the finished and under construction homes. Their asking prices are also in the stratosphere.

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  18. Kary L. Krismer

    RE: Eastsider @ 16 – I don’t know if illegal is the right word, but it would likely be a violation of NMWLS rules to do that. Good luck proving it without any ability to access documents.

    People do buy properties before construction begins. My brother did that years ago over in Eastern Washington.

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  19. Macro Investor

    By Kary L. Krismer @ 13:

    By Blurtman @ 11:
    RE: drshort @ 9 – OK, so the mortgage security flim flam is currently out of fashion. What is the new con, then

    Bitcoin, followed by Cofcoin.

    http://www.trulia.com/blog/kary_l_krismer/2014/03/burned_by_bitcoin_get_in_at_the_ground_level_on_the_next_big_thing

    Gotta admire bitcoin for being an ingenious con, even while feeling sorry for the poor victims. By design, coins are harder and harder to “mine” — which ensures they will go up in value. The developers kept the easy first ones for themselves. Then just sat back and watched while they appreciated.

    As with any ponzi, you have to get in AND OUT early. Sadly it’s human nature to gravitate toward things that LOOK LIKE a free lunch. They never stand up to scrutiny. The lottery also comes to mind, but then that’s a government monopolized scam.

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  20. Eastsider

    RE: Kary L. Krismer @ 17

    Thank you for your reply. I am very familiar with pre-construction sales. But in this case, it sure seems like a last ditch “marketing” effort.

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  21. ARDELL

    RE: Eastsider @ 20

    While Kary is a lawyer and I am not, I do think misrepresentation of facts leading a buyer to a purchase decision is in fact illegal and not merely breaking an mls rule.

    That said, it is hard to believe that can happen given the builder is not usually the mls member who would have falsified that information. It would have taken someone else, and possibly someone associated with a major brokerage, to enter that erroneous information. For that reason I doubt you are correct and it is more likely that people selected better lots than the first ones the builder started, and agreed to wait longer for completion. A builder does not always build in the order of contracts, so if someone wants a lot that has a later start date then those would appear as pending with no activity on the lot.

    If you privately email me the name of the development I will look into it, as that is a pretty serious accusation.

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  22. Kary L. Krismer

    RE: ARDELL @ 21 – I just didn’t like the term “illegal” because it’s vague. I don’t think you’re likely to find a statute that it clearly violates, which is what I usually think of when I think of illegal activity. The type of activity implied very well could though be actionable in a lawsuit, but for that to be worthwhile you’d probably need to have had a cash buyer or other no appraisal situation, because otherwise your potential damages would be very limited, unless the appraiser was similarly deceived (unlikely). So is having a theoretical lawsuit with limited damages something the result “illegal” activity? Again, I just wouldn’t use the term.

    To put this in another context, the Hellicksons were found to have violated licensing laws by systematically and repeatedly pricing short sales too low. Before that decision I complained about that type of activity repeatedly, but I don’t think I ever used the word “illegal” to describe it. So that would be a case where you did have a statutory violation, but not a clear statutory violation, meaning even in that instance I would not have used the term illegal (before DOL made it’s position clear).

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  23. ARDELL

    RE: John Sitar @ 14

    No things are not better.

    Generally speaking, and this is not necessarily a change over the last 1.5 years, in Issaquah for a decent sized house and lot in that price range you likely should be looking at homes built in the latter part of the 80s and not cutting at the 90s. It was a stronger building period there and so there are more houses of good quality built around 1987 than 90′s plus. Bellevue…not likely doable in Bellevue School District. Possibly that portion of Bellevue address that is Issaquah School District. But less likely.

    Part of your low inventory problem is you are looking for something that does not as readily exist in abundance, even it there were 3X more sellers generally in the area. If it was never built…it won’t be coming up for sale.

    Take your geographic area of preference and calculate what exists. As example, 70% built prior to 1985, 15% built 1985 to 1990, 3% built in 90′s and 17% in 2000+. Then look at average lot size for the last 17% built 2000+ vs built in the 1985 to 1990 period. If you find that what you want only represents 2% of what was built in that area, then waiting for more of “that” to come on market doesn’t make a lot of sense. You may have to change what you want to get more options.

    You will find that building did not happen consistently and more houses were built in stronger markets and fewer in weaker markets. You will also find that lot sizes changed dramatically when you compare late 80′s in that price range to 2000+. The early 90s had cheaper construction materials and in many cases a class action suit siding product. Again…a generalization. But bust and booms in the market, even to a small degree, impacted the number of homes that exist in your area of preference that match your “want” list.

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  24. Erik

    RE: wreckingbull @ 16
    Yes, renting out that condo would have been a cash cow for years to come. I remodeled it to sell though. That was the plan. When I sold I had $7k in credit card debt and no money in the bank. I didn’t want to have to continue being strapped for cash and the stress that comes with that. Plus I want to enjoy life before I am too old. That money will hopefully afford me a little better life and for me, that is the entire reason I have been chasing down that money. $128k is a huge success for me. I put some in a Roth IRA and the rest in some pretty good stocks that have performed quite well so far.
    I am sure corndogs is correct, and yes, I do value his comments. Renting it was the best decision, but my situation did not allow for that to happen.

    Did you want a house on the lake in couredalene still? My parents are looking to sell a nice one for 459k. Let me know if you are interested. My grandpa died and left it to my parents. Needs some updating.

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  25. Eastsider

    RE: ARDELL @ 21 – Even if you come to the conclusion that these pending sales are highly questionable, there is little you can do to stop the practice, especially when you have no access to the documents.

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  26. ARDELL

    RE: Eastsider @ 25

    If you are correct…I can clearly get it fixed. I can find out whether or not it is true, and if it is true I can get it fixed. You have publicly claimed there is serious fraudulent activity going on. To now say you don’t want to help with the solution? Makes no sense to me.

    You are saying the public is being duped…that is terrible IF it is true. Yes, Kary said it’s hard to prove and maybe it is hard for him. It is not hard for me. Either admit it is not true or let me fix it.

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  27. John Sitar

    RE: ARDELL @ 23

    Thanks Ardell. I may be misunderstanding your comment. There many houses built in the Issaquah area during the 90′s with larger lots (The whole Montreux area). Are you saying that these houses are not in my 750K budget and I will have to probably increase my budget?

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  28. ARDELL

    RE: John Sitar @ 27

    My point to all readers is before you start looking at homes for sale and watching for new listings, it is important to first find out if what you want is like “looking for a needle in a haystack”. The first step in the home buying process is to test your parameters against availability of what exists, before watching new listings for a year only to find that there are none to a few that could be for sale in a year’s time.

    Back to John and comment 14 “We are looking at the Issaquah/Bellevue area with a budget of max 750K and all houses we find are either made in the 70′s (we prefer 90+) or 3-floor block houses where your neighbor is closer to you than the person sitting next to me on the metro bus.”

    Sold or Pending within 365 days on a rolling basis, Issaquah School District 475 properties between $600k and $750k of which 221 were in Issaquah or Bellevue. Only 22 of those were in Bellevue as to address. Only 19 of those were built prior to 1985, so my guess is if you were running into homes built in the 70s, you were trying to fit that price into Bellevue vs Issaquah School district. Not likely doable.

    Let’s stay with 221 homes sold in Issaquah School District to hit on your comment about lot size and wanting a house newer than 1990. My response based on perception was don’t cut out the homes built between 1985 and 1990. This data backs up my perception from the previous comment.

    50 built between 1985 and 1990 with a median lot size of 9,850 sf.
    18 built between 1991 and 1995 with a median lot size of 10,000 sf
    6 built between 1996 and 1999 with a median lot size of 11,000 sf

    By eliminating the homes built 1985 to 1990 you cut out 68% of the homes with larger lots.

    34 built between 2000 and 2005 with a median lot size of 5,100
    27 built between 2006 and 2010 with a median lot size of 5,400
    67 built in or after 2011 of which only 33 show a lot size (as new construction often doesn’t say) with a median lot size of 4,340 sf on those 33 that bothered to show the lot size. Guess is those that didn’t want to show the lot size were equally as small.

    So if you want a home on a larger lot in Issaquah, don’t rule out the 1985 to 1990 homes by starting at 1990.

    As to Montreux, that is on the South of I-90 toward Cougar Mountain end of Issaquah. Not my forte. But I’m seeing only 8 houses sold of which only two were under $750,000 and one was bank owned and both possibly too close to I-90. A view of I-90 from the bedroom, not a great selling feature. Those without serious issues all sold for over $750,000 and a couple of them in the $900,000 plus range.

    Generally Montreux is selling at 1.3 times Assessed Value depending on upgrades. 1.3 is the median of recent sales. Needs work as low as 1.2 times AV and remodeled as high as 1.45 times AV. So you are looking not only for a house…but likely one assessed at $575,000 or less in that area. $575,000 times 1.3 is $750,000. Hard to do stats on Montreux without excluding the houses that are right up on I-90 as the Divisions don’t break down that way. But of the 237 or so homes built there at least 191 of them have assessed values greater than $575,000 and many if not most are much greater. So you have 38 possible homes out of 237 built and of those 38 in the lower price point, some are right up on I-90 as to sound and view.

    No matter what you want to buy or where you want to live, calculate the odds of finding it before complaining that there have been very few for sale in a year’s time. Maybe there were very few built with those parameters in that price point. If it doesn’t exist…it can’t come up for sale.

    To John specifically, some very nice neighborhoods built by some excellent builders at $750,000 or below in the 1987 give or take age range. If you drop your 1990+ to 1985 or even 1987, you should be able to find a very good home without maxing out your price point in the next 90 to 120 days.

    (required disclosure: stats in this comment are not compiled, verified or published by The Northwest Multiple Listing Service.)

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