How Deep is the Current Listings Drought?

I thought it would be interesting to take a deeper look at the depth of the current listings drought by comparing monthly new listings over the last few years to the same period during the previous bubble (before listings began to increase in 2007).

Here’s a view of the number of new single-family homes that were listed each month from 2013 through the present compared with the same month in the 2004-2006 timeframe:

new-bubble_2015-03-new-listings

Over the past 27 months, 25 percent fewer single-family homes have been listed than during the same months in the 2004 to 2006 period. Considering how tight the market was during the previous housing bubble, imagining it today with 25 percent fewer homes hitting the market each month is just nuts.

However, that’s only half of the picture. Let’s look at the other side of the supply and demand equation: closed sales.

new-bubble_2015-03-closed-sales

Over the same period there have been an average of 22 percent fewer closed sales of single-family homes. This could be because there is still a lot less enthusiasm about homebuying today than there was at the height of the last housing bubble between 2004 and 2006, or it could be a direct consequence of the lower listing volume.

Either way, it’s clear that if we want to get anywhere close to a reasonable, non-bubbly market, we’re going to need a lot more listings.


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.

78 comments:

  1. 1
    Erik says:

    If we are ever going to have more listings, buyers are going to need to pay more to get us to sell. Maybe that means picking up a second job? Maybe that means selling some family heirlooms? That may even mean not paying for the kids to go to college?

    The educational loan bubble will be the next one to bust I suspect. Loading up on student debt may be a good idea because I’m guessing at some point it will be forgiven. It’s a big gamble, but it could really pay off.

  2. 2

    It’s impossible to say how many more listing we will need, because there’s no way to get data on how many buyers are out there waiting in the wings.

    So a simplistic answer might be we need 2,000 more listings than what we have been getting, so that the listing levels rise by 2,000. But those 2,000 extra listings could all be snapped up right away.

    I’ll come back to the automobile example, where slow sales are always considered temporary because cars eventually wear out. Houses don’t wear out, but we did have about six years of people not wanting to buy, and as they come back in that can eat up a ton of supply.

  3. 3

    It seems like a vicious cycle. People aren’t putting their houses on the market because they’d need to buy another house, and they keep hearing about multiple bids over asking price for hovels.
    So…more people will put their houses on the market when there are more houses on the market.
    How and when that’ll happen, I can’t tell you. Although it will happen. It seems like every time something goes on, people see it as permanent. When things were going gangbusters in 2006, we were hearing that this is the new paradigm, that house prices won’t fall ever again. Then in 2010, we were hearing that home prices will never get back to 2007 levels. In many parts of the Seattle area, they’re now there or close to it. Now I’m hearing that we’d better get used to low inventory, because from now on inventory will stay low. We tend to hold onto beliefs that suit our purposes. Erik believes that prices will continue to skyrocket until the very second that he sells his condo on Alki. He might be right, but, as Yogi Berra once said, and I’ve repeated way too often ” Predictions are hard to make, especially about the future.”

  4. 4
    Erik says:

    RE: Ira Sacharoff @
    I’m more of a Wayne Gretzky fan myself who said “You miss 100% of the shots you don’t take.” If you believe Seattle will grow faster than average it seems like west Seattle has the greatest potential for price increases. We are already beginning to see accelerated growth there. I think it will grow even more rapidly until we reach Ballard prices.

  5. 5
    Mike says:

    RE: Kary L. Krismer @ – Actually houses do wear out. I can show you a stack or receipts for replacing infrastructure items if you don’t believe me. Technically you can get by without plumbing, sewer and electrical, or a roof – but that’s not much better than being homeless.

  6. 6

    RE: Mike @ – I would compare that to proper maintenance of a car. But houses do wear out if people don’t maintain them, or they become functionally obsolete.

  7. 7
    JustJoan says:

    After 8 months of participating in this housing market, it seems like the ultimate culprit behind this painfully low inventory is cash. Every single offer we’ve made has been beat out with cash. Cash from the equity-rich from out of state, cash from downsizing baby boomers, cash from foreign investors. All of it causing a domino effect as people continually get priced out and crowded into lower housing brackets–where they bring more cash.

    All-cash offers come with waived financing, appraisals, etc and the bidding wars rage on while sellers come to expect cash at the table. In my dreamworld, there would be a way to create incentives for people to accept good old-fashioned offers with conventional bank loans (just say no to cash!). I bet inventory would open up and this nightmare would finally be over.

    JustJoan

  8. 8
    Mike says:

    RE: Kary L. Krismer @ – Electrical upgrades, windows and insulation would fall under functional obsolescence. Galvanized plumbing that has disintegrated? There’s no way to “maintain” that. Along with other things like furnaces, roofs, water heaters, oil tanks, they wear out.

    Then there’s the other issue with “used” houses – you have no way of going back in time and forcing the previous owner(s) to maintain things like woodwork. Once it’s rotted, it’s done. Whether they could have maintained it better is irrelevant. That’s the state many of the older houses in Seattle fall into by the time they hit the market. Most houses are worn out after 50+ years, and the new owners can either repair them or start over with a new structure. Both options significantly increase ownership costs far beyond purchase price. I’ve seen quite a few $700K-ish houses that don’t even meet the requirements for Section 8 rentals. They’re that worn out.

    In the current market rehab companies like Green Canopy are turning these dumps into functional, inhabitable residences. That doesn’t mean a significant amount of Seattle’s housing stock isn’t deteriorated to the point where it barely qualifies as a housing unit. Nationwide, approximately 300K existing units per year fall out of the housing supply due to either demolition or deterioration.

  9. 9

    RE: Mike @ – Functional obsolescence is something no longer desirable for use due to its outdated design. Examples would be 2 bedroom, one bath houses just about anywhere, or houses under 10,000 square feet on Lake Washington. They tend to get torn down rather than rebuilt.

    Edit: This site actually uses one of my two examples. http://www.investopedia.com/terms/f/functional-obsolescence.asp

    I don’t really see the galvanized pipe which lasted 50 years as being all that different than a 50 year roof. Both are maintenance items, but with copper you hopefully can go well beyond 50 years.

  10. 10
    Mike says:

    RE: Kary L. Krismer @ – Functional obsolescence also refers to 100 amp breaker panels as well as low-R insulation and windows. They still more or less work the way they were intended to a bazillion years ago, but they no longer meet current needs (or code for that matter)

    But you’ve made my point. Large parts of the house do wear out, and if they wear past a certain point the entire structure is compromised. Plenty of Seattle homes fall into this category of ‘too worn’ whether something *could* have been done to prevent it is irrelevant.

  11. 11
    Mike says:

    RE: Erik @ – But by then Ballard will be at Queen Anne prices, and Queen Anne will be even higher. There isn’t any inherent price ceiling at which one neighborhood will stop appreciating while the laggards catch up. It could happen, but there’s no reason to expect it will.

  12. 12
    Blurtman says:

    RE: Mike @ – We are the next San Francisco. Buy now, or be closed out forever!

  13. 13
    redmondjp says:

    By Blurtman @ :

    RE: Mike @ – We are the next San Francisco. Buy now, or be closed out forever!

    Yes, but how do us locals compete with those from SFO who can sell their tiny shack for $2M+ that you could pick up in Ballard for $725K?

    http://sanfrancisco.cbslocal.com/2015/04/10/hoarders-home-that-contained-mummified-corpse-easy-to-sell-in-sf-housing-crunch/

  14. 14
    Brady says:

    How many more listings do we need? Double. At least in Snohomish County where this month showed a 1.7 months of supply. The months of supply needs to double or triple to be in balance.

  15. 15
    Erik says:

    RE: Brady @
    Double or triple sounds about right. I think of equilibrium where we are neither a buyers nor sellers market at 8000 homes for sale in king country. I was told that on this site years ago. Someone please correct me if I’m wrong.

  16. 16
    Eastsider says:

    What we need now is a rate hike or a recession! Otherwise, house prices have one way to go – UP!

  17. 17
    ESS says:

    There are a variety of other interesting variables to consider between the two time periods including but not limited to

    The increase in the number of residents residing in King County

    Changes to income in King County and the increase or decrease of the number of individuals or family units able to purchase low, medium and high priced residential housing in King County

    The increase of foreign buyers purchasing residences as financial or geographic safe havens.

    The increase of professional investors purchasing property as only rental property.

    Furthermore, real estate in the more desirable areas of most West Coast cities are more expensive than Seattle and area such as Los Angeles, San Diego, San Francisco and Vancouver BC. Thus Seattle and King County are not some sort of expensive exception on the Pacific West Coast, but this area could be more like a San Francisco and area in the making. It is a beautiful area to reside, with moderate temperatures and a growing economy which is attracting tens of thousands of out of state people every year to relocate in this area.

  18. 18
    Rudolfo says:

    I think you have it right ESS.

  19. 19

    By Brady @ :

    How many more listings do we need? Double. At least in Snohomish County where this month showed a 1.7 months of supply. The months of supply needs to double or triple to be in balance.

    Yes, the months of supply does need to double or triple, but my point in post 2 is you don’t know how many more listing it will take to get there, because many of the new ones will get gobbled up and not add to the active inventory at the end of a month. This is a question that cannot be answered looking at graphs and statistics.

  20. 20

    RE: Erik @

    You Can’t Change City Hall

    So you might as well join ’em Erik. I’m retiring and sold my “soul to the devil” stocks. You’re younger and still in the game. Good luck, remember its slime inventing the rules along the way….the “slime’s” money is mostly cash in “scrooge Jack Benny type vaults” BTW.

    Total Labor market jobs are expanding in a lot of non-farm areas in the Seattle/Bellevue/Everett area [up about 50,000 jobs the last year], that’s shown an improvement the last year. What’s missing is the per capita income data into 2015. That’s when it get’s really gloomy. Historical Inflation Adjusted Median Household Income for Seattle has decreased about $4.5K since the latest figures were released and compared to it’s high peak in 2008. I’d add too, that the figures documented from the Department of Numbers is skewed too….eliminate the top 1-10% and the household income figures really collapse [like 40-50% from the 2008 high of peak of $72K]. Hey you red necked Conservative Tea Baggers for butcher axing Social Security….do you have a brain? That would totally destroy Seattle area’s economy; the SS fund keeps the American and Seattle economy alive; whether you like it or not, or whether you’re on SS or not.

    http://www.deptofnumbers.com/income/washington/seattle/

  21. 21

    RE: JustJoan @
    Cash Bag Home Buyers in Seattle Aren’t Good Investors Either

    When you get money you didn’t earn, but were handed with a silver spoon, you likely spend it easily. That’s propping up the mentality in Seattle’s bidding war IMO, brainlessness. Low inventory is a red risk light almost all savvy investors avoid.

    That’s the Alfred E Neumans buying real estate that you’re bidding against in Seattle.

  22. 22

    RE: Mike @

    They Use Plastic Goop and Paint to Cover Up Serious Structural Problems and Easily Pass Building Inspections

    Then sell to the Alfred E. Neumans with cash bags. I’d much rather buy a fixer upper than a plastic gooped and painted money pit. Have you seen the movie Money Pit…..the house looked well staged and perfect….until you ripped out all the sheet rock for a looksee.

  23. 23

    RE: ESS @

    Sounds Good ESS

    The opposite is true. Its clear from recent national migration data; people are migrating out of high priced New York and California….Seattle/Bellevue/Everett too. Tacoma is growing a bit though. I blame the migration out on low wages and high rents. Our clogged freeways may be driving them out too. Our taxes are too high too.

  24. 24
    Blurtman says:

    Communists clamor against your right to extract market rents. It is time to call in the National Guard. Bayonets ready!

    Seattle town hall will spark debate about rent control

    SEATTLE – A town hall meeting Thursday at City Hall will likely be a catalyst for debate over whether or not rent control would work in Seattle.

    “We are going to be presenting a resolution that demands Olympia repeal the ban on rent control,” Councilwoman Kshama Sawant said Tuesday. “It’s necessary for people to build a mass movement, just like we did for $15 an hour, to make sure that the elected officials respond.”

    The state statute which bans rent control has been in place since the 1980s.

    The town hall that council members Sawant and Nick Licata are hosting is geared to those like Barbara Brownstein. The 67-year-old social worker has lived in her Ballard apartment for about five years now but will leave this summer because of another rent hike. “I’m looking further away and I shouldn’t have to leave the city,” she said. “Being of, technically retirement age, I was thinking, ‘OK. I’m going to have to apply for social security and still work full-time in order to pay for this hike.’ That’s crazy. I’m sorry. That’s crazy.”

    http://www.king5.com/story/news/local/seattle/2015/04/22/seattle-town-hall-will-spark-debate-about-rent-control/26166065/

    Social work? Sorry, Barbara, but you should have sold bogus securities or flipped shacks.

  25. 25
    SaffyThePook says:

    By Eastsider @ :

    What we need now is a rate hike or a recession! Otherwise, house prices have one way to go – UP!

    I think we’ll get a rate hike this year and Econ 101 tells us that the builders will gear up and increase supply. New home supply will take longer than a rate hike in part because the builders were hammered so hard the last few years, but it will happen if supply continues to lag demand.

  26. 26
    LarryB says:

    By JustJoan @ :

    All-cash offers come with waived financing, appraisals, etc and the bidding wars rage on while sellers come to expect cash at the table.

    My wife and I were in the market for four months, and every single house we made an offer on was listed on Wednesday or Thursday and in contract by the following Tuesday. The only houses that linger are overpriced deep fixers or tear-downs.

    Only one of the houses we bid on had a winning cash offer. All but one of the others had conventional financing, mostly at 10% down, not 20. (It’s amazing what realtors tell each other.)

    The last one, which was the one that helped us decide that if anywhere had a bubble it was Ballard, we had the high offer, but lost out to someone who put down $30k in earnest money (~ 5% of the price) and waived the financing contingency. That’s something we NEVER would do.

    In the end, we wound up in West Seattle, and bought a great house for a LOT less than we were willing to spend originally. For us, it’s not about appreciation. We intend to stay in this house a long, long time so we wanted to more or less fix our housing costs.

    In fact, the only reason we want appreciation is so that we can build a DADU (backyard cottage) sooner. So we say bubble, schmubble. Let’s see how it plays out in 20 years, not 5 or 10.

  27. 27
    Erik says:

    RE: LarryB @
    Good job on discovering west Seattle. Welcome aboard!

  28. 28

    RE: LarryB @
    I Agree LarryB

    You’re going into the Seattle area mess open eyed and honest and buying what your heart desires, great blog!

    I’m spending about $2500 on my Kansas house landscaping the steel fenced 1/2 acre backyard oak tree park….doing it the right way too, getting the weed trees [like Alderwood] controlled too….some of the weed trees are already mostly dead too. Its good money after good money too…..I won’t lose a dime. Thank God Kansas doesn’t have those horrifying giant black berry sticker bushes that aren’t indigenous to the PNW….they’re like non-indigenous ivy [impossible to eliminate unless you dig up 4 feet deep of roots in the ground and dispose of the root contaminated soil]. The Kansas oak trees are protected, its sacrilege to cut ’em down there.

    The trans-planted Californians think different when they get to Seattle….mow all the evergreens down! They even get on the King County Council jobs to do even more environmental destruction to Seattle…..they want to turn it into a California desert and the rest asphalted..

    The lots are so bare of trees and dinky in Seattle, you likely don’t have my “beautiful bushy park trees that shade and cool” Kansas problem. I’m visiting my quasi-vacation home in Kansas this summer BTW. Now my park-like backyard will be landscaped :-)

  29. 29

    RE: Blurtman @

    And to Think Many of Those Against Seattle Rent Controls

    Call themselves liberals….LOL….

  30. 30

    By softwarengineer @ :

    RE: Blurtman @

    And to Think Many of Those Against Seattle Rent Controls

    Call themselves liberals….LOL….

    They’re neither liberal or conservative, just educated.

  31. 31
    David B. says:

    RE: ESS @ – “…but this area could be more like a San Francisco and area in the making.”

    As I’ve said in a comment in a previous post, the “Seattle is the next SF” talk is another sign that we’re in a bubble. This has been claimed during every Seattle bubble I’ve experienced since about 1990, and it’s never happened. Barring a major disaster, Seattle will never catch up to SF’s prices; too many people prefer the warmer, drier climate in the Bay Area, plus the job opportunities there are more lucrative.

  32. 32
    David B. says:

    RE: Blurtman @ – While it does provide a helpful measure of stability for long-term renters on limited income, the available evidence indicates that rent control does an absolutely horrible job of ensuring an affordable housing market overall. (Are SF and NYC known for their affordable housing?)

  33. 33

    RE: David B. @ – The only worse idea is a “gas tax holiday” when gas prices are high. You might as well continue to collect the taxes and pay all the money to the oil companies.

  34. 34
    David B. says:

    RE: Kary L. Krismer @ – Maybe as part of a coordinated program of varying taxes I could support such a thing. I.e. in times like now, when the market price is low, increase taxes temporarily in order to continue incentivizing conservation. Refund at least some of the extra money collected on a per-capita basis. The poor, who tend to consume less fuel in absolute numbers, would benefit the most in comparison to their consumption from the rebates, thus addressing the concern about the gas tax being regressive.

    On the subject of gas taxes, it always strikes me as odd how many people get upset over the prospect of a few cents per gallon increase in the gas tax, yet hardly raise a peep when market prices fluctuate by an order of magnitude more.

  35. 35

    RE: David B. @ – I was only focusing on times when prices are very high, which is when “tax holidays” are usually brought up. That’s usually because supply of gasoline (specifically) is low, and lowering the tax will not result in a lower price at the pump, except for a period measured in hours.

  36. 36

    RE: David B. @

    Yes DavidB

    I honestly don’t think they want us to have cheap gas, period.

    God forbid we throw a wrench in the 2016 Café standards [is that like $5.00/cup coffee replacing 50 cent a cup?] and make hybrids, electric cars and $30-40K Corollas [er, uh Lexus] a laughing stock joke. They want us to buy $30K+ pea sized cars [that are worth half the price] and make it even worse by putting turbo charged engine destroyers [seeeeeee…. my 2015 Mustang with a turbo-burn 4 cylinder is faster than your normal 300+ hp 6 cylinder] that cause excessive oil burning right away. Luggage goes on the lap of the guy riding the back windowless Prius Taxi [the trunk is full of batteries].

    Less is more. Oil consumption sooner is higher mpg quality….sounds like Orwellian Newspeak…

  37. 37

    By David B. @ :

    RE: Blurtman @ – While it does provide a helpful measure of stability for long-term renters on limited income, the available evidence indicates that rent control does an absolutely horrible job of ensuring an affordable housing market overall. (Are SF and NYC known for their affordable housing?)

    And in today’s news feed: http://blog.sfgate.com/ontheblock/2015/04/21/sf-oakland-and-san-jose-named-3-worst-cities-in-the-usa-for-renters/

  38. 38

    RE: Kary L. Krismer @

    Except for the solder joints on copper….they can fail right away with pipe vibration. They can also emit heavy elements into your drinking water.

  39. 39
    David B. says:

    RE: softwarengineer @ – “I honestly don’t think they want us to have cheap gas, period.”

    Nor do I. It promotes pathological behaviors which compromise livability today and doom future generations to dealing with an ecological catastrophe.

    The sooner the cult of automobility dies, the better.

  40. 40

    By softwarengineer @ :

    RE: Kary L. Krismer @

    Except for the solder joints on copper….they can fail right away with pipe vibration.

    Yep, we had that happen during a remodel of our old house. Failed within about a day, so it was just a bad solder job. Fortunately all the water went into the crawlspace and the soil was very sandy, so it just absorbed up within a couple of hours.

  41. 41
    Drone says:

    By JustJoan @ :

    All-cash offers come with waived financing, appraisals, etc and the bidding wars rage on while sellers come to expect cash at the table. In my dreamworld, there would be a way to create incentives for people to accept good old-fashioned offers with conventional bank loans (just say no to cash!). I bet inventory would open up and this nightmare would finally be over.

    There IS a way to create incentives. Because cash is more desirable to a seller (certainty of closure, quick closure) that means that in a normal market a good cash bid is less than the financed bid but is still considered to be of equivalent strength/desirability. Take the certain cash now, or maybe get a little more in 30-60 days with financing and take the risk that the deal will fall apart. So your dreamworld incentive program exists! Financed buyers pay more, and generally that works well.

    It’s only because the current market is so unbalanced that a cash buyer is able (and willing!) to outbid even the financed buyers. That won’t last forever, but for now they’re in a stronger position and there’s not much to be done about it. Same as it ever was.

  42. 42
    redmondjp says:

    By David B. @ :

    RE: ESS @ – “…but this area could be more like a San Francisco and area in the making.”

    As I’ve said in a comment in a previous post, the “Seattle is the next SF” talk is another sign that we’re in a bubble. This has been claimed during every Seattle bubble I’ve experienced since about 1990, and it’s never happened. Barring a major disaster, Seattle will never catch up to SF’s prices; too many people prefer the warmer, drier climate in the Bay Area, plus the job opportunities there are more lucrative.

    I tend to agree with you, but the Seattle tech job market is really exploding with more companies moving here all the time. When you can sell you 115-year-old hoarder-corpse crapshack in SFO for $2M+ (see my post above for the link), you can move to Seattle and buy waterfront property!

    And for techie couples in SFO that want to have children and want to buy a SFH with an actual yard in a nice neighborhood with a good school district, I can see moving to Seattle as a no-brainer just for the significant difference in housing prices. So yeah, there are more gray days and it’s a bit colder – still FAR better weather than most major cities in the US have IMO.

    And we have the Chinese Asset Locusts buying in far higher numbers now than they ever did in previous RE boom cycles, and Seattle is still relatively cheaper than any other major west-coast city on the continent. The effects of this should not be underestimated.

    So some things are different this time which points toward higher prices in our area. And I seriously can’t believe that I even typed that last sentence (having been on this site since day 1, initially as a permabear).

  43. 43
    David B. says:

    RE: redmondjp @ – You post some valid observations. However, saying that Seattle will never catch up to SF is not the same thing as saying that prices here will never increase. It’s just that SF’s will increase as well, so we will still end up having costs less than SF (and most of coastal California as well).

    I’d have to say it’s far more likely that Seattle’s prices will approach Vancouver’s as a result of their prices going down due to a bursting speculative bubble than it is via ours going up by the same process as Vancouver’s has and that proving not to be a bubble.

  44. 44

    By David B. @ :

    RE: redmondjp @ – You post some valid observations. However, saying that Seattle will never catch up to SF is not the same thing as saying that prices here will never increase.

    San Francisco hit a $1,000,000 median last year!

  45. 45

    RE: David B. @
    Do You Read Mother Earth David?

    I do. They state one dog is the carbon footprint of 4 Hummers….you’ll have to get rid of your pets too, they’re worse than cars. Imagine the carbon footprint of one human being? 20 Hummers? Perhaps depopulation isn’t the “Hogwash Agenda 21 Conspiracy Theory” or environmental terrorism the liberals against real Earth Day allege after all?

    Ohhhh…recycling is another joke….one trip on a Boeing jet= one year of recycling. Are you going to stop riding planes too?

    And that Seattle home isn’t very environmental either; time to sell it and live homeless style.

  46. 46

    RE: Kary L. Krismer @
    Perhaps They Took Too Much LSD in the Seventies During the SF Hippie days?

    Their brains were fried on drugs?

  47. 47
    David B. says:

    RE: softwarengineer @ – “one dog is the carbon footprint of 4 Hummers”

    That’s highly doubtful. Even a large dog doesn’t respire nearly so much CO2 as comes out the tailpipe of an SUV.

    Perhaps you mean the impact of the (largely meat-derived) food the dog is fed? Yes, our food system needs to go on a carbon diet, too. And reining in sprawl will help there, too, by keeping agricultural land closer to where people (and their pets) live.

  48. 48
    JustJoan says:

    I still don’t understand why cash is such a big deal to sellers…unless the property is truly dilapidated. So they close 2-3 weeks faster–what’s the rush? And what are sellers hiding behind waived inspections? Would a seller lose anything but time if a conventional buyer backed out in this market?

    Maybe it’s ultimately about appraisals. Cash wins there as the difference is paid out of pocket.

    We fell into the trap of attaching heartfelt personal letters, photos, etc (our lender even made phone calls to instill confidence in sellers), but we’ve realized that nobody gives a rat’s you-know-what. The only way to “win” is with cash.

    JustJoan

  49. 49
    GoHawks says:

    RE: JustJoan @ – JJ, completely understand where you are coming from. It’s more than just the appraisal. No underwriting, no waiting. Hard to fault a seller for wanting the “most” certainty they can get with what is most likely their largest financial asset.

    Regarding the SF talk and that being certain signs of a new bubble. Nobody is saying Seattle is going to catch or exceed SF, but that there are a number of similarities. No other city in the country more closely resembles Seattle than SF.

    It’s a simple deal. More people are moving in than are moving out. Until that balances out or reverses, prices will rise so long as many new residents are buying.

    People make fun of buyers for paying these “new bubble” prices, but is renting at record high prices that great of an alternative?

  50. 50
    GoHawks says:

    Amazon’s stock is up almost 7% and MSFT’s 3% on quarterly numbers……that should slow this market down.

  51. 51
    Macro Investor says:

    By Eastsider @ :

    What we need now is a rate hike or a recession! Otherwise, house prices have one way to go – UP!

    Once the hive mind thinks rates are trending up, that is when the bubble will pop. Here is how it will happen. For sale signs will pop up everywhere and inventory will get much higher. This is because sellers will be trying to beat everyone else to get the highest prices before they level off and drop. That causes a snowball effect. Bidding wars turn into concession wars. Just what we saw after the 07 peak.

    I don’t think we will get another sharp correction in housing. Long and gradual, like chinese water torture.

    Once again I’ll post the long term rate chart for anyone who missed it. This is what eventually has to be unwound.

    http://www.businessinsider.com/10-year-us-treasury-note-yield-since-1790-2012-6

  52. 52
    Rudolfo says:

    You fail to explain what the hive-minded sellers plan to do after they desperately try to sell their houses.
    The great majority will not simply sell without a plan for afterwards. And most do not want to leave Seattle.

  53. 53
    Macro Investor says:

    By Rudolfo @ :

    You fail to explain what the hive-minded sellers plan to do after they desperately try to sell their houses.
    The great majority will not simply sell without a plan for afterwards. And most do not want to leave Seattle.

    Were you here in 2008 to see the for sale signs on every block?

    Bubbles and bubble unwinds are EMOTIONAL. Humans are emotional beings. When they sense prices are in danger of falling, they will react to compete with each other. Every market is like this. Christmas sales of towels at walmart, where people stampede each other.

  54. 54
    David B. says:

    RE: JustJoan @ – “I still don’t understand why cash is such a big deal to sellers”

    It’s a much faster and more certain process — for the seller, at least. No appraisals, appealed appraisals, loan paperwork to grind through for a month, no risk of the deal all going flooey if something goes wrong and the loan doesn’t come through.

    Buyer writes a big check, deposits it into escrow, escrow company verifies the funds are all there, escrow company hands over the deed, done.

    It can be far more risky to the buyer, because many of those steps the lender insists on to protect their interests also protect the buyer.

  55. 55
    Rebecca says:

    RE: Ira Sacharoff @ – I completely agree with this sentiment because in our case its absolutely true. We would love to put our home up for sale, it was a first home purchase for us, but we’d like to move closer to where my husbands job is on the east side. However, we are barely able to afford the most well priced single family houses there – and I’m including the entire swath from Renton in the south to Bothell up north. We certainly cant afford to get into a bidding war and don’t feel its prudent to give away inspections etc as an enticement to sellers. Moving elswewhere in the city doesn’t make sense for all the above reasons and we refuse to make our commutes any longer by going farther affield. So we’re stuck. We figure that in 5 years we will leave the state after having lived in the Seattle area for 20 years and take the proceeds where they’ll go farther. I hope there will still be plenty of eager buyers then.

  56. 56
    Blurtman says:

    RE: Rebecca @ – Is renting on the eastisde an option? And renting your current home?

    Where will you go to? Not Kansas I trust.

  57. 57
    boater says:

    By Macro Investor @ :

    By Rudolfo @ :

    You fail to explain what the hive-minded sellers plan to do after they desperately try to sell their houses.
    The great majority will not simply sell without a plan for afterwards. And most do not want to leave Seattle.

    Were you here in 2008 to see the for sale signs on every block?

    Bubbles and bubble unwinds are EMOTIONAL. Humans are emotional beings. When they sense prices are in danger of falling, they will react to compete with each other. Every market is like this. Christmas sales of towels at walmart, where people stampede each other.

    I doubt most of those were emotional decisions. I’d bet most were cases of being underwater, bought too much for their income counting on appreciation and no ability to refi combined witb job loss or hours reductions.

    If you had equity and a stable job i seriously doubt you suddenly sold your house because it was worth less on paper. i know i didn’t and no one i know did either. People dont just uproot a family because their home might drop 10-20%.

  58. 58
    redmondjp says:

    RE: Macro Investor @ – You’re correct on the human reaction, but houses are illiquid, and Rudolfo’s point about needing somewhere to live is valid. I’d sell in a heartbeat right now, BUT my wife and I still have jobs in this area, and renting would cost us 2X what my current mortgage does. So we stay (no complaints, but darn it would be nice to cash out near a peak).

    As long as we don’t have a major job loss in the area – that could definitely tip the scales towards a buyers’ market, as it has in the past. But I really don’t see that either. Microsoft is the most likely to downsize, but I think they will do so more slowly. Boeing has been downsizing for decades now, and their local workforce shrinks by a few thousand per year. I paid almost $200 for a PNW company databook (to help in my job search) back in the 1980s, and it showed that Boeing had (including military division) something like 120K employees in WA back then.

  59. 59
    Rudolfo says:

    RE: Macro Investor @
    I have been here for quite some time, many decades actually.

    I still maintain you are erroneous in your assumptions, although there is an element of emotions in hive-like behavior. You don’t give human beings enough credit for their reasoning, however.

  60. 60

    By JustJoan @ :

    I still don’t understand why cash is such a big deal to sellers…unless the property is truly dilapidated. So they close 2-3 weeks faster–what’s the rush? And what are sellers hiding behind waived inspections?

    Banks can create all sorts of obstacles, many of which are complete nonsense. The chance of that may be small, but if it can be avoided it’s worth something (even ignoring the interest which will accrue on the existing loan waiting for the buyer’s loan to process).

    As to the inspection, hopefully they’re at least getting a pre-inspection. IMHO a waived inspection is bad for the seller because it may shift the liability toward the seller in the event of a non-disclosure of a defect, intentional or unintentional.

  61. 61
    Erik says:

    RE: Rudolfo @
    I have been reading and commenting on here a long time now. I would bet anything you are much smarter than macro investor. His screen name is actually my exact opposite opinion of him. A better name would be micro investor or macro idiot. Don’t waste your time with him. He has wasted my time and in the end I realized he’s a macro idiot. He doesn’t have a clear view of the real estate market. Too complex for him to understand.

    I read a lot of the comments on here and skip over macro idiots comments. Not worth your time.

  62. 62
  63. 63

    RE: Seattleboomerang @
    The Top 1-10% of Household Incomes are the Only Ones That Can Afford and Qualify for Seattle Mortgages Now

    Let’s be honest. The horrifying facts for even this lucky fringe group; without the other 90-99% of the households buying stuff in the Seattle area; consumer spending and the economic health of Seattle goes down the toilet. The approximate half that own a house in Seattle and actually work will have no regular customers to buy from them; let alone pay their high rent on any flippers.

  64. 64
    GoHawks says:

    The market cap of Amazon and Microsoft are up a combined $53 billion this morning. Not going to hurt buyer confidence.

  65. 65
    Rebecca says:

    RE: Blurtman @ – Not an option. We bought “low” after the crash. Rents now can never compare favorably to our mortgage and we are not interested in (have the stomach for) being landlords to cover the difference. But thats about the only idea I’ve heard that makes any kind of sense – so thanks for that! Also, in that scenario , our home still wouldn’t be entering the supply stream and easing the drought for buyers.And no, not Kansas ,another state from whence I once came as a younger single person and where family still lives. Home beckons, its just a matter of when. But in the time we have left here in Seattle we wont continue to climb the property ladder in this market!

  66. 66
    Mike says:

    By Macro Investor @ :

    By Rudolfo @ :

    You fail to explain what the hive-minded sellers plan to do after they desperately try to sell their houses.
    The great majority will not simply sell without a plan for afterwards. And most do not want to leave Seattle.

    Were you here in 2008 to see the for sale signs on every block?

    Bubbles and bubble unwinds are EMOTIONAL. Humans are emotional beings. When they sense prices are in danger of falling, they will react to compete with each other. Every market is like this. Christmas sales of towels at walmart, where people stampede each other.

    The emotional component was more the people desperately trying to hold on to homes they could not afford after the writing was on the wall. Selling? That was usually a financial decision, either voluntary or forced.

  67. 67
    redmondjp says:

    By Rebecca @ :

    RE: Blurtman @ – Not an option. We bought “low” after the crash. Rents now can never compare favorably to our mortgage and we are not interested in (have the stomach for) being landlords to cover the difference. But thats about the only idea I’ve heard that makes any kind of sense – so thanks for that! Also, in that scenario , our home still wouldn’t be entering the supply stream and easing the drought for buyers.And no, not Kansas ,another state from whence I once came as a younger single person and where family still lives. Home beckons, its just a matter of when. But in the time we have left here in Seattle we wont continue to climb the property ladder in this market!

    I’m in the same boat – I bought low before the runup in a very good location in Redmond. If I were to sell now and rent the same size of house (and we would want a bigger one), my monthly payment would almost double. And almost triple if I went up to a 4-5 bedroom which would be ideal.

    I could keep my existing house and rent it out (it would cash-flow slightly positive), but I really don’t want the payment (and hassle of being a landlord – BTDT with my dad as a kid – I’m an expert drain-cleaner and toilet-fixer now) that I would have to do that (need to start saving for kids’ college funds). Even selling my existing home, I would have to borrow at least another $150K (or more, depending upon final result of bidding war).

    So I know exactly what you are going through. Tomorrow I’m going to look at a house that is 700 sq. ft. larger than mine and has 5 bedrooms that is a few blocks away. From the listing, it appears to need about $100K in updates (aluminum windows, pressboard kitchen cabinets, etc etc). It is still over a half million and I suspect that there will be a bidding war because of its proximity to Microsoft. So my chances of getting it are not good. It’s still fun (and then depressing, sigh) to dream!

  68. 68
    Danny boy says:

    RE: Ira Sacharoff @
    Reasons for selling include downsizing, and cashing out on a home in an expensive area and moving to a much less expensive area. Thousands of Californians did that when they moved to Seattle area. No reason why Seattleites couldn’t do the same.

  69. 69
    Ryan says:

    RE: JustJoan @ – If you include your story with your offer, sometimes you will get lucky and the seller will choose the financed offer over the all-or-mostly-cash offer.

    A friend in San Jose got his house that way. His family of 3 had grown to 4 and they needed a 3-bedroom house and in a better neighborhood. They were constantly outspent and frequently by all-cash buyers. (My friend said guys in suits with briefcases would show up to the open houses, clearly a broker for someone else. It was weird.) So out of desperation, he wrote a letter and included a photo of his family in the offer. It worked! There were offers even higher than his, but the seller decided to go with his.

    I’m sure that’s rare these days, but there are still people in this world with a heart. :)

  70. 70
    redmondjp says:

    RE: Ryan @ – Ahhh yes, the housing love letter! Crazy, but OTOH, what the heck, you never know, it might just work and if not, you’re only out the time to write it.

  71. 71
    redmondjp says:

    Well, I walked over to the (not-so-busy) open house on Sunday near me in Redmond and looked at a 1976-built 2100sf house, for sale by original owners, for $549K. The house was pretty much all original, with maybe some vinyl flooring and a bathroom vanity and some toilets having been replaced. Even the furnace appeared to be original (no joke – and it is tiny and tucked into a downstairs utility closet that I don’t even think is wide enough for today’s wider standard-size furnaces like I have in my existing house). Original aluminum-frame windows. Original brown pressboard kitchen cabinets. Popcorn ceilings. Musty smell downstairs (anybody’s guess if a proper foundation drainage system was installed – my guess is no, based upon the houses built in my neighborhood during the same time period). No master bathroom. Downstairs bathroom combined with laundry room (wife doesn’t like). Wood deck past its halflife.

    For over a half million dollars. Nice location and neighborhood though. Most of the houses on the same street are larger/nicer and have a better layout than this one. We’ll have to see how quickly it sells and if it goes for over asking or not. I can see $100K worth of upgrades in this house’s future. It is interesting to see what is out there but I don’t think this one is the “make me move” special.

  72. 72
    Rebecca says:

    RE: redmondjp @ – Crazy! We do the same, checking out the “could be’s” from time to time. Yet to be impressed and motivated.

  73. 73
    william pokletar says:

    RE: Ryan @

    That exact thing worked for our neighbors who bought about a year ago – a letter & photo of the kids. Funny thing was the photo of the kids did not match the genders or hair colors of the children when they finally moved in! The sellers were older, and fell for this ploy. Many first day offers over the asking price – and we live in the sticks.

  74. 74

    RE: william pokletar @

    You say they fell for the “ploy” but it would have been illegal for them to consider these personal issues that appear in photos. There has been a recent warning to agents submitting these letters that highlight race, gender and familial status issues. It is not legal to pick the cute white kids, as example, when selling a home. It is not legal for the agent to help their clients submit letters that highlight race and familial status either.

    http://raincityguide.com/2012/08/18/discrimination-love-letters-to-sellers/

  75. 75

    RE: redmondjp @

    It went straight to pending today with no home inspection contingency, so likely multiple offers.

  76. 76
    redmondjp says:

    RE: Ardell DellaLoggia @ – Well, I’ll check the county records in a month or so to see how much it went for. Very desirable area so I’m not too surprised. Smelled a little too musty downstairs for me anyways . . .

    Now, to get busy drawing up plans for how to add space to my own house! I guess I should be thankful that I am in the neighborhood. The only bidding war I have to worry about then is between contractors . . .

  77. 77
    Tracy Brown says:

    The crux of this problem is in the title of this piece. There is a lack of inventory. Many people say they can’t sell because they are afraid they won’t find anything to buy. Buyers are desperate, so it appears from the number of multiple offers and the crazy high selling prices. Sellers have all the control. WE’ve seen houses start to regularly go for thousands of dollars OVER the listing price. A mid-century modern house in Montlake was listed at $850K, sold for $1.6- more than 10 offers. A classic craftsman in Greenlake just sold for $826K with over 10 offers. It was listed for $625K.

    Since sellers have all the control in this market, why not give them more control in a way that will increase inventory. As a buyer in this market, I might agree to that if the house is really what I wanted and I basically had no other choice but to bail and keep looking or sit tight and wait it out with the possibility of getting the home I want, I’d take the latter option. For buyers who’ve offered and lost on multiple homes, this is somewhat more positive than that.

    It seems like allowing this type of contingency would entice more people to try to sell which would increase inventory, which would in itself, solve much of this craziness.

    This type of contingency is allowed in California, using Form SPRP – Sellers Purchase of Replacement Property – (Here’s a link to this form http://www.insidecb.net/cbnow/misc/CAR%20SPRP.pdf)

    The NWMLS refuses to let this contingency be used in our region.

    Here’s copy from an article I found by a CA Real Estate Broker Kathy Yamamoto on The Californian.com showing how this could work. It seems like allowing this type of contingency would entice more people to try to sell which would increase inventory, which would in itself, solve much of this craziness.

    From Kathy Yamamotos article, “Buyers Have Options in Dealing with Seller Contingencies, The California Association of Realtors “new” form SPRP — “Seller’s Purchase of Replacement Property” is due to be released toward the end of November 2014. This addendum provides a seller with a contingency to enter into a contract for a sale of their property contingent upon the seller finding/closing escrow on a replacement property. In paragraph 1A of the SPRP — the addendum defaults to the provision which gives a seller 17 days after acceptance (unless otherwise agreed) to remove this contingency or cancel the agreement. If the seller does not remove the contingency, in writing, within the time specified — the buyer can give the seller a “Notice to Seller to perform” to remove the stated contingency. If the seller does not remove the contingency, the buyer can cancel the agreement. If the box is marked in paragraph 1B of the SPRP for a “concurrent close,” then the seller’s contingency remains in place until the seller has actually closed escrow on the replacement property. As a buyer, paragraph 1B creates a situation which puts the buyer of the property being sold at risk (the seller can cancel the sale of the property by using this contingency) throughout the escrow period. If the seller is unable to close escrow on the replacement property, then the seller would be able to cancel the sale of their property at anytime during the length of the escrow period — leaving the buyer without a home and with all the expenses/costs associated with the purchase of the home — inspections, appraisals, and other fees. One option for a buyer is to try to negotiate with the seller to have these expenses reimbursed if the seller cannot find a replacement property and subsequently cancels the transaction.

    Another option for a buyer to avoid incurring expenses is to negotiate when the time periods in the purchase agreement would begin for inspections, contingencies and other obligations. The SPRP form paragraph 2A gives the buyer and seller options for the time periods to begin in the purchase agreement. The first box in paragraph 2A (if marked) specifies that the time periods would begin “as specified in the agreement” — when the contract is accepted. The second box (if marked) specifies that the time periods in the purchase agreement will begin “the day after the seller removes the contingency of the purchase of a replacement property.”

    In addition, a separate paragraph provides that the seller may extend the close of escrow date for the sale of seller’s property for an agreed upon time by providing buyer with a written notice at the time the seller removes the contingency pursuant to paragraph 1A.

    These important terms of the SPRP need to be negotiated to satisfy both buyers and sellers. “

  78. 78
    Blurtman says:

    A small fisherman’s hut in Woodway recently sold for$750k. 20 offers, including from many folks who don’t fish! The market is on fire!!!!!!!!!!!!!!!I

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