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.

23 responses to “May Reporting Roundup: Imaginary Increases Edition”

  1. Tim Deerhawke

    You may want to quibble about whether the kind of action that Gain and Jacobi describe is increasing, stabilizing or decreasing a bit, but in the more attractive close-in neighborhoods, it does seem to have become the new normal.

    In my immediate neighborhood of Tangletown, 9 of the 14 homes sold during the period went for well over what was already a gutsy asking price– $60K to $110K over asking price. You saw the whole gammut of real estate warfare on display including dropping all contingencies, all cash offers, quick closes, escalators, etc. A new neighbor who paid $65K over asking price summed up the experience by saying, “We just kept dropping conditions and throwing in more money until everybody else dropped out.”

    This may sound lame, but I think the weather actually had a lot to do with it. There was no overhang of inventory from last year and then we had a record wet, miserable spring. The fact that sellers couldn’t get their painting done and yards toned up really kept a fair amount of inventory off the market this spring. When buyers saw how very little was on the market, it really added to the feeding frenzy.

    Now that we are having a beautiful spring, painters and landscapers are getting their work done and we are finally getting more inventory. I think the frenzy should moderate a bit during the traditionally slow summer months. Aggregate prices may drop a bit.

    But there might be another frenzy coming behind it. Every open house I attend I hear potential buyers talking about how they lost out by not buying in (choose one — 2009, 2010, 2011, 2012, 2013). This seems to be the new received wisdom. Interest rates are still low and price increases like this past month will help a lot of people decide they are finally going to get off the fence.

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  2. softwarengineer

    I Skim Read Your News Articles

    1st one:

    “Location, location, location”….sounds like the lemming theory, where rich elite lemmings line up and brainlessly follows the first lemming over the high priced location cliff…

    2nd One:

    Likely high tier skewing of price increase data with decreased sales…

    3rd One:

    Don’t worry about home inspection defects during the sale, just sign the full price escrow papers with your fingers crossed…

    4th One:

    Snohomish County is different, more real middle class there [avg wage middle class now $90K per household per Kiplinger Reports this month, but dwindling with time] and actually work at a job, real money [not old riches in a safe] is used there, unlike rich elite Seattle prices….the learning curve on new home construction is driving contractor unit costs way down….look for more “over-building there…..

    5th One:

    Sounds like the sellers in Tacoma are finally giving up waiting for higher prices and trying to sell to down-size for retirements…

    6th One:

    Olympia area hard hit by State Deficit, laying off or not replacing retiree jobs in State Government, the only industry in town….look for price collapse soon….

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  3. Kary L. Krismer

    Tim wrote: “There are definitely a lot listings that receive multiple offers, but the trend is actually cooling off compared to a year ago, with 62 percent of Seattle-area offers facing competition in March 2014 vs. 72 percent a year earlier”

    Okay, so one broker says one thing and another says something else. Both are anecdotal evidence. Redfin might know the percentage of cash sales, assuming they go searching through the King County Recorder’s office data (which I’m not sure that they can), but they clearly do not have any direct insight into how many multiple offer properties there are.

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  4. softwarengineer

    RE: Kary L. Krismer @ 3

    Good Point Kary

    I’d add too that “unqualified offers”, i.e., HUD homes get artificially raised during bid wars because of this anomaly, are probably counted too, since the term “pre-qualified” is not used….

    Everyone dreams of buying in the Seattle area, but few [the ones that still rent] can…

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  5. bingo

    The Tim says “which doesn’t leave me much to comment on without commenting on my own comments. And that would just be weird”

    I dunno know. SWE seems to do it.

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  6. ray pepper

    Housing CRAPPY INVESTMENT!

    http://www.cnbc.com/id/101732365

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  7. Erik

    RE: ray pepper @ 6
    If you had $128k in the bank, you could buy 5 rentals over time for a total principal investment of a million dollars. 6% of a million is 60,000. To get that kind of return in stocks, you would need about 50% return. I think housing is still a good investment in my opinion.

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  8. boater

    RE: ray pepper @ 6 – yeah that’s nice unfortunately there is really no correlation between interest rates and home price. Go look at the data and you see at best a very very weak positive correlation. Basically interest rates go up (at least in general) because the economy is improving and you want to cool inflation. There are exceptions to that but for the most part if interest rates go up you house will increase in value very slightly.

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  9. ray pepper

    Well, personally I like both and really hold neither. In between tenants I typically throw my rentals on the mkt and if they go GREAT…if they don’t…back to cash flow. They remain just tools…

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  10. redmondjp

    By Erik @ 7:

    RE: ray pepper @ 6
    If you had $128k in the bank, you could buy 5 rentals over time for a total principal investment of a million dollars. 6% of a million is 60,000. To get that kind of return in stocks, you would need about 50% return. I think housing is still a good investment in my opinion.

    Have you ever been a landlord? And had to go to court to kick out your druggie tenants, after the electricity has been disconnected and they have completely trashed your unit, and it takes you over a year to get the place back in shape again?

    This happened to my parents in the rental duplex we owned when I was a child.

    If you don’t want to act as your own property manager, subtract 30% off your income . . .

    There are two sides to every coin, Erik. There is an intangible cost of being a landlord – what that amounts to is up to each individual to decide. My parents were fortunate in that they were able to purchase several duplexes within short walking distance of our primary residence, meaning that most of the typical issues (leaky toilets, plugged drains, broken swamp coolers, etc) could be dealt with by picking up a few tools and walking over there after our evening meal. I got pretty good at using a plumbing snake, let me tell you (you’ve got to charm it too, just like in the old movies, to get it to go DOWN the drain line instead of up the vent stack).

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  11. Kary L. Krismer

    RE: redmondjp @ 10 – I agree with most of that, except the professional management situation. I know someone who for years and years refused to go with professional management because “they’d just spend money like crazy fixing things” etc.

    After they switched, they made more money than they had ever in the past.

    Also, the risk of a bad tenant is greater the fewer units you have, which sounds backwards. But one bad tenant is a huge deal if you only have one unit, but not such a big deal if you have 100 units.

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  12. wreckingbull

    RE: redmondjp @ 10 – Indeed. Many landlords go even further and use the 50% rule as a general guideline. Classic rookie mistake is underestimating long term expenses and overestimating long term occupancy rates.

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  13. Erik

    RE: redmondjp @ 10
    I have been a landlord. On one occasion I had really bad tenants. Another time I had really bad tenants. That is why I took the money and ran on that kirkland condo. With fat stacks of cashola in my bank account from my remodel, I am more inclined to be a landlord again. Not as stressful when you have money to pay for issues as they occur. Otherwise, I would have rented that condo out. More green equals less stress. I got laid off the same day I cashed my $128k check from my remodel. I still feel zero stress. In fact, if I get laid off again, I could give 2 sh!ts. I would collect unemployment again and catch up on some reality tv.

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  14. Erik

    RE: redmondjp @ 10
    Let me ask you this… Have you ever been poor white trash and then cashed a check for $128k? Well I have and it is a game changer. Struggling to pay rent is stressful and as long as I can hold onto that money, the stress is not there. Rentals are just extra. I feel little stress from those things. You can always just stop paying and just collect rent if worse comes to worse. I have struggled and I can tell you we have 2 different ideas of stress. If I get shelter and food, I am good to go.

    If my tenants need me to repair something, I would feel no stress. I would just repair it. That place in north everett I remodeled was Barely livable. I made $15/hr. Sometimes I had no bathroom, no electricity , no water. Having bothersome tenants is a good thing.

    I tried to buy another condo at the auction today, but I didn’t get it. I think the rental place was zap pad or something like that. They wanted $100 per month. I think a lot of investors use them.

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  15. Erik

    RE: ray pepper @ 9
    You are a smart guy. Thank you for sharing your approach.

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  16. ray pepper

    RE: Erik @ 15 – Smart? Well, who am I to argue? I have 10 rentals currently. Some years 8…Some 12 but always around 10. I have NEVER used property management because they STINK! They do SQUAT and charge you 8-12% for doing squat. They have no interest in your home only their 10%. Have problems with leases, tenants, a bit of an idiot, then Landlord Solutions is your answer. Rentals can be a pain in the ass but what isn’t. Work with your tenants and don’t be an ass. When times get tough pay/assist your tenants to move. Have problems with the home? Pay your tenants to fix it. The money just goes right back in your pocket anyway!! Are rentals worth it? ABSOLUTELY ! Just never fall in love with a home and remember they are ALL tools and ALL investments. Including the home you live in!

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  17. Erik

    RE: ray pepper @ 16
    Right. I don’t think Michele sees it that way and that is why she is upset and suffering. I see them as monopoly properties now. I will trade you Marvin gardens for pacific ave. I do have notes of what you say sometimes and landlord solutions is on there. I put a bid in for 175 today through vestus, which was the highest number vestus suggested going. It sold for over 180. In my head I called them bag holders as I have seen you call people that overbid. I will bid next week. I will move into, fix it up, and try to sell it as you described. If that doesn’t work, I will rent it. I was thinking that would be a good plan, but it is nice to have someone with experience confirm that.

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  18. Blurtman

    RE: redmondjp @ 10RE: redmondjp @ 10 “Have you ever been a landlord? And had to go to court to kick out your druggie tenants, after the electricity has been disconnected and they have completely trashed your unit, and it takes you over a year to get the place back in shape again?”

    Hey, sorry about that man. In retrospect, the grow room in that dinky closet was a bad move. And for the record, the carpet was NOT flame retardant. And we didn’t play Kiss 24 hours a day, as claimed in court. We rotated in Poison, the Crue and Motorhead. Anyway, your sister is knocked up again. Do you think your parents can again, you know, contribute to the cause?

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  19. John Bailo

    Is it time for Funny Fotos?

    Here’s a listing that is like a leftover set from the X-Files:

    Description
    Unique opportunity to own a Cement Build Earth home in rural Yelm on 4.4 acres. Designed for off-the-grid living; come bring your finishing touches to this unique home! This is a Fannie Mae HomePath property.

    http://www.newberryrealty.com/Web/AR469319/ListingSearch/details/?mls_id=WA-NWMLS&mls_no=576913&from=ht

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  20. Mike

    RE: John Bailo @ 19 – Amazing they were even able to get a conforming loan on that place before it was foreclosed.

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  21. Blurtman

    RE: John Bailo @ 19 – Eva, it’s time to go.

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  22. ChrisM

    RE: John Bailo @ 19 – What a find!!!

    http://www.redfin.com/WA/Yelm/21636-Elbow-Lake-Rd-SE-98597/home/15732669

    clearly a steal, at any price!

    Sriously, I wish haybaler was still around. A couple of weeks ago I bought some sheep from someone who had their place for sale — they had all the perqs for the survivalist crowds, including greenhouses, water, and safe room.

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  23. Haybaler

    RE: ChrisM @ 22
    Still checking in from time to time. Its hay season…really long days.

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