About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

27 comments:

  1. 1
    Christian Wathne says:

    Bubble? No

    I think we’re near the end of an ultra fast correction back to normal housing prices. Just like what happened recently with the stock market; it came roaring back then has since settled down.

    YOY gains will begin to slow down to the +2 to +4% range, and the medium term (5 years) outlook for the affordability graph is a steady slightly downward trend because a couple years from now rates will begin to be brought up by around a half percent every 6-12 months.

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  2. 2

    By Christian Wathne @ 1:

    Bubble? No

    I think we’re near the end of an ultra fast correction back to normal housing prices..

    I wish Tim would post more non-distress stats. As I posted last week, the non-distress median was at or above $420,000 three times in 2010, once in 2011 and multiple times thereafter. So it’s not like there was some “ultra fast” increase, although things have been increasing the last year or so at too fast of a clip, IMHO.

    What we really had was a period where there were a great number of properties which were distressed and available for lower prices, and those pulled the prices of other listings down, but not my nearly as much as what people have been lead to believe by the press and Case-Shiller.

    Numbers from NWMLS and other sources, but not guaranteed.

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  3. 3

    RE: Kary L. Krismer @ 2
    My SE King County Property Assessment Came in a Couple Days Ago Kary

    It was $84K in 2012, then bounced up [wildly in error?] to $105K in 2013, now its back down to $94K in 2014.

    More like $91K, if you add in the bogus 7/1/2014 unapproved by all the HOAs’ banks lein the HOA assumed was in the bag for 7/1/2014, that never happenned to date….I wonder why? [LOL]

    How about the infamous non-housing SWE monthly investment report? [sorry I’m late]….

    Jul 0.19% (0.19%) (1.37%) (4.38%) (1.95%)
    YTD 1.36% 4.17% 5.71% 1.56% 3.01%
    Last 12 mo 2.31% 4.67% 17.03% 13.57% 15.45%

    July was a bruiser month for general mixed pool investment stocks, YTD shows American stocks on top of the heap of the whole world, like the 2015 707 hp Dodge Charger sedan [its called the Hell Cat] for a paltry $55K [in comparison to its closest insanely priced “lower hp” sedan competitors in Europe]….

    The first number above is like a fixed 10 year CD, the 2nd number above is long term bonds, the 3rd number is American stocks, the last two are foreign stocks….

    My investment rules, don’t sell if its clobberred monthly….don’t buy if its on a roll monthly either….the YOY numbers or YTD monthly conglomerate trends are more trustworthy for buying or selling….

    My crystal ball projects a 5-10% YTD gain in general conglomerate American stocks for 2014 to date….we’ll see if I got pie in the face by year’s end…

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  4. 4
    evildoggie says:

    It feels like a bubble to me.
    Lots of very marginal properties on the market listed at prices well beyond the average family and too costly to make any reasonable return as rentals.

    investors 9 (in my view) have been paying far too much , so I am assuming either I am wrong and they can make a profit where I would be far too afraid to try, or they are simply gambling, hoping to sell to the greater fool……

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  5. 5
    redmondjp says:

    Almost $1.3M for an Eastside house facing a divided high-traffic street with only one-way access to the driveway???

    Maybe chasing some of those incoming foreign flight-to-safety dollars . . .

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  6. 6
    enatailurker says:

    I think it’s a bit too early to say. The rising house price/rent ratio concerns me. That’s a better bubble indicator than the price/income ratio or the affordability index. But as Kary said on another thread, it might be that rental price increase lag the home prices. I think we need at least another 6 months or so of price/rent data to make any useful calls.

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  7. 7

    RE: enatailurker @ 6 – Or the other possibility, that rentals were overbuilt, driving down rental prices. I don’t know that occurred, but it does seem like they’ve been building a lot of rentals for the past several years.

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  8. 8
    Erik says:

    RE: Christian Wathne @ 1
    I will assume that is what will happen. If you are wrong, assume will make an ass of u and me.

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  9. 9
    DrRick says:

    By Kary L. Krismer @ 7:

    RE: enatailurker @ 6 – Or the other possibility, that rentals were overbuilt, driving down rental prices. I don’t know that occurred, but it does seem like they’ve been building a lot of rentals for the past several years.

    I live on Cap Hill and the crane action the past 3 years has been very active. Lots of new rentals, all at higher prices than existing units, and existing unit prices going up steadily as well. Our building just sold and we all anticipate a marked increase, no one would be surprised at 25% increase under new ownership. Hey, they need to pay the note!

    Fel Temp Reparatio

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  10. 10

    By DrRick @ 9:

    Our building just sold and we all anticipate a marked increase, no one would be surprised at 25% increase under new ownership. Hey, they need to pay the note!

    That is so unfair. They should use the law firm model, where hourly rates go up because it’s a new year and they want more money! ;-)

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  11. 11
    Erik says:

    RE: DrRick @ 9
    You may have to sell part of your coin collection to make rent.

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  12. 12
    BacktoBasic says:

    By DrRick @ 9:

    By Kary L. Krismer @ 7:
    RE: enatailurker @ 6 – Or the other possibility, that rentals were overbuilt, driving down rental prices. I don’t know that occurred, but it does seem like they’ve been building a lot of rentals for the past several years.

    I live on Cap Hill and the crane action the past 3 years has been very active. Lots of new rentals, all at higher prices than existing units, and existing unit prices going up steadily as well. Our building just sold and we all anticipate a marked increase, no one would be surprised at 25% increase under new ownership. Hey, they need to pay the note!

    Fel Temp Reparatio

    Why such high increase? Might below market rent before. You can just move.

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  13. 13
    Kmac says:

    Cap Rates Fall to Historic Lows as Investors Chase Yield Far Afield

    “It’s been a common question as the apartment recovery matured: When will cap rates stop falling in the so-called “sexy six” markets of New York, Boston, Washington, Los Angeles, Northern California, and Seattle?

    Well, if you guessed the first half of 2014, you were wrong.

    In its “Apartment Mid-Year Review,” New York-based firm Real Capital Analytics (RCA) reported that cap rates fell to 4.4 percent in the second quarter, equaling the historic low established in the second half of 2006. For mid- and high-rise properties, yields came in at 3.9 percent after they blew past previous lows in 2013. So much for fears cap rates were getting too low in the gateway markets.

    “There is so much capital pouring into those big six markets that even if many investors are concerned about valuations, there are plenty of investors still competing fiercely for those properties that the investors with concerns have passed on,” says Ben Thypin, director of market analysis at RCA.

    While volume increased in secondary and tertiary markets, average and top quartile yields for garden properties in non-major metro areas have actually gone up in 2013. Overall, garden cap rates came in below 6.5 percent and mid- and high-rise cap rates were below 5 percent.

    Soultana Reigle, managing director for Prudential Real Estate Investors says concerns about exit strategies are part of the caution institutional investors have in these markets. But she is still investigating secondary markets like Pittsburgh.

    “If you reach out into the second tier, you can find better yields,” Reigle says.

    Prudential certainly isn’t alone in its institutional interest in secondary markets.

    “We made strategic decision to do a fund primarily doing multifamily and retail in secondary markets,” says Ron Miller, director of acquisitions for Invesco Real Estate. “But we’re still very active in core markets. We have core funds with a lot of core clients.”

    Overall, Philadelphia, Portland, and Baltimore climbed the highest in RCA’s list of top apartment markets (by volume) in the first half of the year. Markets that were in major metros, but not downtown, like the New York boroughs (as opposed to Manhattan) and Orange County, Calif., (as opposed to Los Angeles) also jumped in the rankings.

    “There’s definitely a shift to secondary markets, especially those within large metro areas,” Thypin says.

    But the biggest spikes in first-half volume were in places like Colorado Springs, Tallahassee, Pittsburgh, Tulsa and Birmingham. “Investors are now going out to compete in secondary markets,” Thypin says.

    While cap rates haven’t reflected this increased competition yet, Thypin thinks as interest heats up, cap rates will eventually fall.

    “I would be surprised in six months or a year if cap rates weren’t going down in these markets,” he says.”

    http://www.multifamilyexecutive.com/dispositions-and-transactions/cap-rates-fall-to-historic-lows-as-investors-chase-yield-far-afield_o.aspx?dfpzone=general

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  14. 14
    Randomized says:

    I really hope that it is a bubble, at least for my family’s sake, otherwise we’re stuck renting until the rent becomes unaffordable, or our landlord randomly decides to kick us out. (I’ve had a multiple friends who were given 30 days notice because the landlord wanted to sell or move back in.)

    I’m posting this after over a year of lurking, with any luck, it will at least be cathartic.

    We moved here in early 2013, and tried to buy a few houses – we weren’t in love with any of them, and were always outbid anyway – all the while watching the prices skyrocket. We were pushed further and further out, until we finally decided to step out of the insanity. I’d seen this kind of madness before, I was drawn in by it and almost bought at the peak. I finally regained my sanity back then in enough time to only lose my deposit, a couple orders of magnitude less than I would have lost had I purchased the house I couldn’t afford.

    Problem is, we were hoping things would calm down, and we could make a rational decision after a year or so of renting. Obviously that didn’t happen. So we’re stuck. I want a house as a way to create stability for my family and have a place we can call home. It drives me crazy that buying has become such a risk, something you have to wager on. The idea of owning for multiple years at a small rate of appreciation/inflation has always seemed just fine to me. Now I have to hope that prices tank again while somehow interest rates stagnate.

    My fear of buying, then, and even more so now, is that even if I can afford it, can I afford to lose the drop in value on the other side of the mountain? I can’t guarantee I’ll be here for the rest of my life, if we sell in 5 years, will we have to take out a loan because we’ve lost our life savings? I’ve owned before when the market was calm and I really, really miss it.

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  15. 15
    whatsmyname says:

    In another bubble? Does this mean the dead cat bounce is over?

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  16. 16
    Mike says:

    It surprises me that people see -25% to +15% appreciation over 7 years (depending on area) as a sign of a bubble.

    You can still buy a house in a lot of areas for a deep discount to what they were selling for in 2007.

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  17. 17
    Jonness says:

    The Fed has pumped the living daylights out of stocks and houses by issuing cheap money. GDP went up 1% while stocks shot up 30%. There’s a well-known mechanical cause for what we’re experiencing. As I have repeatedly stated since a few years back, listen to Ray Pepper when he says, “don’t fight the Fed.”

    The better question is, can the Fed exit smoothly without causing a collapse in all the bubbles it has created? Then again, there are those who are wondering can the Fed exit at all?

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  18. 18
    Corndogs says:

    RE: Randomized @ 14 – You’re priced out forever. Remember, in your next life, the price of houses always go up and housing is a GREAT investment. You missed a once in a lifetime opportunity. You could have risen above proletariat status but no! You are to remain at the lowest rung of the new caste system where the cognitive elite wear the crowns. Membership is worldwide. Now Chin Lou has your dream house and the life you always wanted and your new landlord smells like curry chicken.. Cest la freaking vie. Don’t feel bad even ‘The Tim’ called it wrong, he missed the bottom and bought a hamster cage, when he could have went big and made some serious equity. Hahaha…Where’s all that shadow inventory boys?

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  19. 19
    masaba says:

    Personally, I think we are just in a strong seller’s market, but not anything comparable to the mid 2000s bubble. Real estate has always been somewhat cyclic, from what I understand. If you are willing to wait it out, then eventually it will hit a buyer’s market again, but I seriously doubt that anything like the previous market crash will occur again. The most likely scenario is that prices will fall slightly for a few years and sellers will be the ones making concessions in the contract rather than the buyers.

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  20. 20
    BacktoBasic says:

    The historical low rate cause all asset inflation. The bubble is not a bubble because it is rate related.

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  21. 21
    Erik says:

    RE: Corndogs @ 18
    Ya!!!! Corndogs back!!!!

    Tim’s timing wasn’t that bad. His location and amount he spent was his mistake. I only spent $92k because that was all the money I could get. I got out of there just so I could buy a more expensive place in a better area. F=P(1+i)^n. Computer people don’t understand that equation. The more you put down, the more you can make.

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  22. 22
    Macro Investor says:

    Bubble… but it has a while to go. Two years at least.

    The party will end when interest rates bottom and reverse. The bankers decide that in a smoke filled room. They’ll do it when it makes the most sense FOR THEM, NOT US. We are getting clue #1 now — QE is winding down. Think of this as a few wispy clouds on the horizon.

    Interest rates don’t move rapidly like stocks do. It’s a slow process. However, if inflation picks up suddenly, or the dollar falls suddenly… these are storm clouds right over head. Put your house on the market immediately unless you plan to keep it a long time.

    PS – I know Tim says rising interest rates doesn’t hurt home prices. But he only looks back to 1990. We haven’t seen a bear market in bonds since 1982. Only small pullbacks in a bull market = decreasing rates.

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  23. 23
    Mike says:

    By Macro Investor @ 22:

    Bubble… but it has a while to go. Two years at least.

    The party will end when interest rates bottom and reverse. The bankers decide that in a smoke filled room. They’ll do it when it makes the most sense FOR THEM, NOT US. We are getting clue #1 now — QE is winding down. Think of this as a few wispy clouds on the horizon.

    Interest rates don’t move rapidly like stocks do. It’s a slow process. However, if inflation picks up suddenly, or the dollar falls suddenly… these are storm clouds right over head. Put your house on the market immediately unless you plan to keep it a long time.

    PS – I know Tim says rising interest rates doesn’t hurt home prices. But he only looks back to 1990. We haven’t seen a bear market in bonds since 1982. Only small pullbacks in a bull market = decreasing rates.

    You could also look back to the period after WW2 where mortgage interest rates fell into the 4% range. There wasn’t a significant correction in most markets for another 30+ years, and even the one precipitated by the Volcker fed in 1980 was fairly short lived.

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  24. 24
    Erik says:

    RE: Macro Investor @ 22
    Good job on finally listening to me macro idiot. We should have 2 more years of rising home prices in our area. Now that you say it, I start to question this.

    Here is my concern… there are only 3 times the CAPE ratio has been higher than it is today: 1929, 2000 and 2007. I know you have limited brain power, so let me draw the conclusion for you. After those 3 dates the market crashed. That means the stock market may very well crash soon and that could affect housing prices. This is a risk that could blow this thing out of the water.

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  25. 25
    ChrisM says:

    I think we can all agree that historically interest rates have been at 5% or higher.

    Given that, can someone give me an example where a listed 4+ unit rental property pencils out where I try to sell in a 5% interest world?

    In other words, what is my exit strategy in a 5% world if I buy a 4-unit place in today’s pricing?

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  26. 26

    RE: Corndogs @ 18

    I Also Remember in the 80s Recession When Japan Was Grabbing Up Real Estate Americans Couldn’t Afford and It Seemed Grim to Americans Then

    It wasn’t, the Japanese lost their shirts on WAY over priced purchases we conned them into. I hear China’s real estate prices are collapsing lately.

    http://www.mingtiandi.com/real-estate/finance-real-estate/nomura-says-chinas-real-estate-market-is-already-collapsing/

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  27. 27
    enatialurker says:

    RE: Kary L. Krismer @ 7 – Rental overbuilding should lower home prices though. Renting is a market substitute for owning, at least for lower-income and first-time buyers.

    I suspect that we will see rental increases show up soon in the statistics. Friends in the rental market say it’s brutal right now, and we have 3 friends who have all been evicted from their rental homes so the landlords could sell the home. I wonder how long until we start seeing apartment-to-condo conversions return on the Eastside.

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