NWMLS: Historic 2015 Seller’s Market Drags On

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September market stats were published by the NWMLS today. Before we get into our monthly stats, here’s a quick look at their press release.

Housing market slowdown expected
But prices in most areas are still rising

Scarce inventory, new rules for mortgage closings and affordability concerns will likely slow home sales around Western Washington during the remaining months of 2015 and into early 2016, according to spokespersons from Northwest Multiple Listing Service.

The latest statistics from the MLS show a double-digit drop in inventory, a double-digit jump in closed sales, and a near double-digit increase in prices from a year ago, prompting one industry leader to say the trends aren’t sustainable. “We simply can’t sustain double-digit increases in sales when inventory levels continue to drop every month,” remarked OB Jacobi, president of Windermere Real Estate. “We’re on the cusp of a housing market slowdown,” he predicts.

It’s very interesting to see home salespeople actually warning about a housing market slowdown. Apparently they learned at least something from the 2000s bubble and subsequent bust.

CAUTION

NWMLS monthly reports include an undisclosed and varying number of
sales from previous months in their pending and closed sales statistics.

Here’s your King County SFH summary, with the arrows to show whether the year-over-year direction of each indicator is favorable or unfavorable news for buyers and sellers (green = favorable, red = unfavorable):

September 2015 Number MOM YOY Buyers Sellers
Active Listings 3,403 -2.5% -31.4%
Closed Sales 2,364 -8.2% =11.9%
SAAS (?) 1.09 -13.3% -18.0%
Pending Sales 2,753 -7.3% +5.2%
Months of Supply 1.44 +6.2% -38.7%
Median Price* $490,250 -1.9% +6.6%

With record-low inventory and one of the strongest years for closed sales, it’s frankly shocking that prices are “only” up 6.6 percent from a year ago. I think we may be at some kind of saturation point with respect to home prices. Since we don’t have ridiculous financing (e.g. 80/20, NINJA, negative-amorization, interest-only, etc.), home prices this time around are limited by what people can actually afford to pay.

Here’s your closed sales yearly comparison chart:

King County SFH Closed Sales

Closed sales fell 8 percent from August to September. Last year they fell about 11 percent over the same period. The prior ten years (2004-2013) saw an average 12 percent decline in closed sales between August and September, so this year’s slowdown is slightly slower than typical. Meanwhile year-over-year closed sales increased slightly to the highest level in the last three months.

Here’s the graph of inventory with each year overlaid on the same chart.

King County SFH Inventory

Inventory fell again from August to September, while the year-over-year number fell further into the red.

Here’s the supply/demand YOY graph. “Demand” in this chart is represented by closed sales, which have had a consistent definition throughout the decade (unlike pending sales from NWMLS).

King County Supply vs Demand % Change YOY

Everything in this chart is still in sellers’ favor, and both lines moved even further into sellers’ market territory in September.

Here’s the median home price YOY change graph:

King County SFH YOY Price Change

Another big swing in this chart from +14.4 percent in August to +6.6 percent in September.

And lastly, here is the chart comparing King County SFH prices each month for every year back to 1994 (not adjusted for inflation).

King County SFH Prices

The median home price has been bouncing around in the $480,000 to $500,000 range since April.

September 2015: $490,250
July 2007: $481,000 (pre-2015 high)

Here’s this month’s article from the Seattle Times: Local home sales slow, median prices edge lower in September

Check back tomorrow for the full reporting roundup.


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.

98 comments:

  1. 1
    Boxkicker says:

    I picked a good time to get a job offer across the state. Put my house on the market last month, had an offer $16K over asking in one day and signed the acceptance within 6 days. Buyers inspected the house, found nothing that I needed to fix. Appraisal was at value. Supposed to be a 45 day close will now be a 30 day close. This was in South King County also!!!

  2. 2
    David B. says:

    Another thing that was crazy about the last bubble was the disconnect between the cost of renting and the cost of owning. I remember doing the numbers back then and buying looked absolutely ridiculous in dollars-and-cents terms. I didn’t even consider it.

    What’s crazy about this bubble is the low inventory. I would have probably bought something six months earlier if only there had been something that appealed to me on the market. I was looking for a longer-term (read: nicer than where I was) rental as well as at things for sale, just because both markets were so tight and I was open to the idea of renting for several more years until inventory improved.

  3. 3
    district says:

    The low inventory really is the outstanding factor this time around. Rather than ask again whether we’re in a bubble or not, it seems more interesting to ask how this anomaly plays out.

    Owners seem to be holding on to properties they don’t occupy either a) in expectation of future growth or b) because rental income is high or c)both. Given high rental prices, there is a fundamentals-driven reason to hold on to your property. On the other hand, the total refusal to sell is very abnormal behavior.

    SO…
    If we ARE in a bubble, what does it look like when this bursts (and everyone puts their property up for sale at the same time)? (Do prices collapse? Does it just take longer to sell?)

    If we are NOT in a bubble, what does a more gradual adjust towards normal look like?

  4. 4
    David B. says:

    RE: district @ 3 – I think things will start heading in a more normal direction once interest rates start rising. That will put a real damper on price increases, which will in turn prompt many fence-sitters who have been waiting for prices to peak to list their properties because they won’t be able to expect to get more if they wait, which will cause prices to start falling due to increasing inventory, which will motivate more fence-sitters to list, etc.

    The self-reinforcing nature of the process might make the inventory recovery surprisingly fast, once it begins.

  5. 5
    LW says:

    As a buyer, I’ve looked at way more homes than I care to say. Most properties are coming on the market as the result of retirement or relocation for a job. If you are looking outside of trendy areas, then there are nice homes to be had. The spike in prices is unsustainable on a working income. You are going to see people exit to more affordable states where they don’t need to financially struggle just for a dwelling.

    When interest rates go up (eventually), there will be a lot of people left holding the bag on overpriced homes in the most trendy neighborhoods. I’ve seen this game of musical chairs a few times before. You just have to make sure you are in a good position when the music stops.

  6. 6
    GoHawks says:

    So what if rates stay in the 3.75-4.50% range for another 1-2 years?

  7. 7
    boater says:

    There’s at least one more option. Prices stabilize. That alone would allow potential sellers the comfort of knowing they can sell their current home and fine something they can afford in the next 6-24 months after they sell. If that happens i expect an increase in inventory from the class of buyers who are currently stuck doing remodels instead of purchasing a solution to their home problems.

  8. 8
    wreckingbull says:

    RE: LW @ 5 – It’s what I did in 2008, although one only has to move a few counties away, not to another state. I did it looking for affordable housing (about 1/2 the price of Seattle), but ended up liking my new adopted town even more than I did Seattle – way more outdoor activities, no traffic, and much less angst.

    For many years, I had the Seattle or bust mentality, but I am seeing more and more young people moving up my way for the reasons you state. I think they are getting it.

  9. 9

    RE: Boxkicker @ 1
    Ah, but you had the wisdom to own in Maple Valley and not Auburn.

  10. 10
    whatsmyname says:

    “We simply can’t sustain double-digit increases in sales when inventory levels continue to drop every month,” remarked OB Jacobi, president of Windermere Real Estate. “We’re on the cusp of a housing market slowdown,” he predicts.

    A case of demand outstripping supply will not provide the kind of market slowdown you hope for. Real estate appears to be a seasonal business. Based on your historical activity charts, Jacobi has a pretty safe bet for the next five months regardless of macro movements. After that, who will even remember.

  11. 11
    Boxkicker says:

    By Ira Sacharoff @ 9:

    RE: Boxkicker @ 1
    Ah, but you had the wisdom to own in Maple Valley and not Auburn.

    Yes, sir!!!!!

    Decision was made for me with 2 kids who were still in school…..

  12. 12
    Deerhawke says:

    It seems Sanjay Bhatt at the Seattle Times decided to listen to the real estate brokers and ignore the math.

    If you read the story in today’s paper, you would have thought that the market was (Oh No!!!) cratering because of the massive debt load. But no. In fact, the numbers show a continuation of an existing trend. Strong demand. Really low inventory. Inadequate sources of new supply except very expensive downtown condos.

    The natural result of this combination is double digit price increases in all areas.

    But instead of writing a boring rehash of the last several month’s pieces, Sanjay chose to regurgitate a Zillow piece on the (marginal) effect of owners being underwater in outlying areas, speculating that this is what is causing all the problems. Somehow if only people in Enumclaw could get their heads above the deep waters of debt, prices might go down in Seattle and the world would be a better place for all of us.

    And then he goes on to quote OB Wan Jacobi bemoaning the lack of inventory and its effect in holding back double-digit sales increases.

    Good grief Sanjay. Are you getting tired of being paid as a journalist and want to go into the PR world writing press releases for the MLS?

    Here is what the numbers really say. Same pattern in real estate for the last 6 months. For real news try the Sports page.

  13. 13
    Erik says:

    It’s a standoff between buyers and sellers. Buyers will cave and prices will shoot up. Low inventory always wins. Cash in your retirements because prices never go down.

  14. 14
    district says:

    RE: David B. @ 4
    I’ve gotten three really interesting replies to my query. So first, thanks!

    Everyone seems to agree that it’s a standoff (to use Erik’s word) between buyers and sellers, but

    -David B thinks that prices will fall, possibly dramatically.
    -Erik thinks that buyers will eventually capitulate and prices will rise.
    -Boater largely agrees with David B, but suspects the process will be smoother.

    It seems to me that the wildcard here is rents. If rent prices are stable or continue to rise, the process of inventory growth that David B describes will be muted (Boater) or won’t happen at all (Erik), because sellers will be able to wait it out.

    The reason I think rents will play the big role is that the bubble-like phenomena here is inventory (rather than price etc.) People naturally move to and away from a city. So if inventory is so tight, it suggests to me that people who have left the area are deciding to become landlords. Right now, this works because most new arrivals are choosing to rent.

    It would be VERY INTERESTING in other words, to find out how many primary residences have been converted to rental units recently, and how that trend (if there is one) tracks the inventory numbers.

  15. 15
    LW says:

    There are a lot of other metro areas where a good job lands you a nice house and you are very comfortable with good schools for the kids. I lived in one area out of state where a 200k would buy you a near new home in the best school district for that metro area. The salaries were comparable to the Seattle area.

    In today’s real estate market, stay patient, watch the new houses coming up every day, be open to what neighborhoods you’d live in, then buy a solid property. You don’t want to get stuck with a home on a bad lot or with serious flaws when the housing price correction comes around. With today’s prices, I say rent. If you are staying in the home 10+ years, then buy.

  16. 16
    LW says:

    District is right on the landlord phenomenon. I know several people that just accumulate properties and then rent them out. It is their long term retirement plan. They barely break even on what they collect in rent, but the renter gets the equity going for them. Plus, people transferring for jobs keep their Seattle area home. They go and rent in their new locale, but plan on coming back to Seattle some day and moving back into their house. For this reason, I think rental homes in the outer neighborhoods will always be well below buying in the short term. There are a lot of landlords in Seattle that purchased 10-20 years ago and can always undercut what today’s actual monthly mortgage cost is.

  17. 17

    A 52 YO Business Owner Asked Me For Retirement Advice

    All he mainly owns is two mortgage loans on two rentals. I told him at his age, he should “get debt free”. I told him cashing in on the equity in his rentals and saving it as a retirement annuity instead would land him $750/mo on every $150K he saved and the annuity would last like 18-20 years at 0-2% saving interest. Sounds much easier and less risky than being a landlord in Seattle. Prices are high right now to cash in, a bird in the hand at his age.

    He agreed.

  18. 18
    David B. says:

    RE: district @ 14 – “David B thinks that prices will fall, possibly dramatically.”

    No, I think that inventory will increase, possibly dramatically, when interest rates increase.

  19. 19
    kenmorem says:

    RE: district @ 14
    erik says the same thing on every single thread. there’s no thought put into it regardless of what numbers, or reason, or other evidence would lead one to believe.

  20. 20
    GoHawks says:

    What percentage of folks on here thinks rates will be higher, the same, or lower this time in 2016? I vote the same.

  21. 21
    Cap''n says:

    Higher, but not by much. Even if the fed moves, it will take a while to trickle down. My speculation is that we will not see rates above 4.5 percent until late 2017. Investments outside mortgage backed securities will have higher risk and lack luster returns, so a bundle of high quality mortgage interests returning more than 4 percent (which is point and a half plus over treasuries) seems like a steal. Tough to justify charging debtors more than high three, low four percent interest if they have excellent credit, at least in the current market with low inflation

    RE: GoHawks @ 20

  22. 22
    Erik says:

    RE: GoHawks @ 20
    Probably the same

  23. 23
    bingo says:

    RE: Deerhawke @ 12

    ” Really low inventory. Inadequate sources of new supply except very expensive downtown condos.”

    Downtown Seattle has no new supply either. Insignia & Luma are the only new products on the market. Insignia seems to do be doing better than Luma. The rest of the new supply in Downtown Seattle is For Rent.

    Downtown Seattle is suffering from the same lack of inventory for sale.

  24. 24
    Erik says:

    RE: kenmorem @ 19
    So keeping the same conclusion makes me dumb? The big boom in prices may be over, but there in no reason for them to not continue going up. Are you a software engineer? Software engineers are notorious for not being able to predict what will happen. Let me help you dummy… low inventory and housing prices that stay slightly above inflation even when the stock market dumps.

  25. 25
    Boxkicker says:

    Not Acceptable:
    name-calling
    blatant antagonism

    Really?

  26. 26
    Scotsman says:

    Low inventory tells the story- nobody thinks it’s a good time to sell. Might as well rent it out- my guess is rents are more likely to go up than selling prices are to come down. People are continuously moving into the area for good paying jobs- they need to live somewhere. The demand is there but the supply is inadequate. Its strikes me as analogous to general employment trends. Unemployment on a national basis isn’t down because everyone has a job, but because many have stopped looking and dropped out. Much like we used o talk about shadow inventory my guess would be that shadow buyers are waiting to “buy the dip.” An uptick in rates (unlikely), a surge in inventory, any hint that a buying opportunity may present will bring more buyers out of the closet immediately stabilizing or increasing prices yet again. Until job growth craters (locally and/or nationally) housing prices and rents will continue to climb

  27. 27
    GoHawks says:

    RE: Scotsman @ 26 – That about sums it up……

  28. 28
    boater says:

    I’ve said it before, I don’t think prices are going to decline. I think we will hit a price range where advances will slow to stall. At that point inventory will increase but i believe it will be matched by an increase in demand. Right now you can sell a home and buy it back six montha later without prices going up 5%
    That just kills move up buying especially when coupled with such tight inventory. You see prices stall and you’ll see both more buyers and sellers.

    I think rents are still going up.

  29. 29
    boater says:

    RE: boater @ 28 -oh and I’ll add i believe home mortgage rates will go down not up.

  30. 30

    RE: Scotsman @ 26
    It Depends On Your Age Scotsman

    Yes, you hang on to retirement equities for the long-haul….same with real estate….but, when you hit your fifties, mid-fifties….you’re running out of time. Nobody keeps retirements primarily in stocks or real estate planning much past that age requiring “paying for your maintenance” or taking stock market risks because you’re too old for home fix up duties or you’re running out of time to risk losses. Contractors are very expensive, so are stock losses.

    Landlord duties are stressful and time consuming for any age….especially at retirement. Get your house in order before you get too old. Erik is too young to grasp retirement planning?

    “… A caller into C-SPAN’s “Washington Journal” on Tuesday morning identified herself as Rachael, a married, working millennial who pays $1,600 a month to rent her one-bedroom apartment in Northern Virginia, but, “would love to buy a condo.” She said she cannot afford the sky-high prices.

    “It gets really expensive for a first-time homebuyer,” she said….”

    http://www.cnbc.com/2015/10/06/housing-today-a-bubble-larger-than-2006.html

    Its worse in Sammamish….$2000/mo for a one bedroom….

  31. 31

    RE: boater @ 29

    I’m With You

    At 0-2% long-term treasuries we fund our $17Trillion debt at 15% of the tax revenue collected….imagine how government would get butcher axed if the rates doubled or God forbid quadrupled….its never gonna happen for decades now.

    On the other hand we’re at Zombie Interest Rates now, the next phase could be negative interest for savers to possibly lower mortgage interest rates? Even that possibility means the risk of a bank run remains very high today if implemented. We’re between a rock and a hard place.

  32. 32
    greg says:

    By Erik @ 24:

    RE: kenmorem @ 19
    So keeping the same conclusion makes me dumb? The big boom in prices may be over, but there in no reason for them to not continue going up. Are you a software engineer? Software engineers are notorious for not being able to predict what will happen. Let me help you dummy… low inventory and housing prices that stay slightly above inflation even when the stock market dumps.

    TIM, don’t ya think there should be an end to this type of talk….

  33. 33
    greg says:

    RE: softwarengineer @ 30

    ref age and asset allocation.

    50-60 is much too young to shift to safety. Stocks , bonds, RE all make good sense for those getting close to retirement or even retired.

    The days of moving your monies to safe havens are gone. People are living too long and need to stay in the markets for much of their retirement. Sure they should have plenty of liquid lower risk assets too, but the majority of monies needs to keeping working. Just as middle to lower income families need to spend more years working , our investments need to work more years.

  34. 34
    Blurtman says:

    By softwarengineer @ 30:

    RE: Scotsman @ 26

    Its worse in Sammamish….$2000/mo for a one bedroom….

    And you have to pass the screening test.

  35. 35
    Blurtman says:

    RE: greg @ 33 – Yup. And imagine if folks lived forever, what that might do to the time value of money.

  36. 36
    jojo says:

    based on nothing by my own opinion, If you want to see where home prices are going, look at San Fran. Maybe not to that extent, but similar pattern. I saw Seattle was building the largest skyscraper on the West Coast. San Fran, Seattle, Portland are places people and tech companies want to be. This is a tech bubble spilling over into real estate maybe?…or just some serious real growth.
    Another thing, watch a documentary called “Generation Earth” to see what is happening globally to our cities.

  37. 37
    GoHawks says:

    I am curious, why do folks refer to everything that goes up as a bubble? Seems like such a blanket statement.

  38. 38
    nathan118 says:

    RE: Erik @ 24 – Right, and people continue to magically pull money out of their arse even though wages don’t go up. It’s gonna go up forever guys!!!! Erik says the same dumb cramp every time, so it must be true! Just like 2008 everyone! Up up up!!!

  39. 39
    boater says:

    RE: GoHawks @ 37
    It’s a bubble if you want things to go down in price. It’s growth if you want things to go up. It’s market rate if you don’t care.

  40. 40
    Erik says:

    RE: nathan118 @ 38
    That same dumb crap has been consistently correct for a longtime. The big run is over. Now it will be a time of moderate gains. Mark my words. Next real estate crash won’t be until at least 2024. Every year buyers wait will cost them more and more money.

    Unless Corndogs or Ray Pepper say otherwise, that’s what I know. Ray said the real estate party is over and Corndogs said the smart money is beginning to show restraint now. The big boom is over and inventory is at record lows. Even a software engineer can figure that one out. Right?????

    I bought November 2011. I knew we were way high in 2008. I wasn’t saying “up up up” back then.

  41. 41
    Macro Investor says:

    By Scotsman @ 26:

    Low inventory tells the story- nobody thinks it’s a good time to sell… An uptick in rates (unlikely), a surge in inventory, any hint that a buying opportunity may present will bring more buyers out of the closet immediately stabilizing or increasing prices yet again. Until job growth craters (locally and/or nationally) housing prices and rents will continue to climb

    Hello Scotsman. Nice to see a few of the old timers drop by.

    Catch 22 — nobody thinks it’s a good time to sell –> low inventory –> we can’t sell because we’ll be stuck without a house. Another way of putting it is — you can sell at top dollar (maybe even bidding war)… but then you’ll just have to make a crazy bid to have a place to live. Therefore, unless you leave the area (or rent, which many people don’t like as an option) YOU ARE STUCK.

    What changes this? Nothing stays the same forever. That is called normalcy bias. Eventually rates will have to rise. As the economy slows (again, someday it must) tech companies will cut costs, and either lay off or move to cheaper digs. I don’t see any of this happening soon.

  42. 42
    Erik says:

    RE: Boxkicker @ 25
    I’m raw. If you can’t handle the heat then get off my site!

  43. 43

    RE: greg @ 33
    Age Statistics in America

    90% of us are dead by 80. If you live past 65, you have an average of 19 years left (84).

    No one is living forever, on the average. Nope, its all luck and genes…..pick your parents carefully.

  44. 44
    Scotsman says:

    Hey Macro…… My guess is that it’s a small percentage of sellers that are looking to move up verses looking to move to retirement, moving for a job, or seeking liquidity. Unless you’ve doubled the size of your family the old digs with a remodel will often do for a while longer. The other side of this is that move up buyers can always find their new dream home and lock it in, secure in the knowledge that in this market their current house will sell quickly, maybe even for more than they planned… Chicken or egg? Sell, then buy- or buy, then sell? Not the issue people make it out to be.

    Interest rates are a puzzle- low rates steal from retirement/savings accounts, retirees spendable income, and capital accumulation while making banks and speculators rich, not a healthy relationship. But increased rates will put pressure on so many marginal operations- including the government- that they really can’t be allowed to happen. A doubling of 10 year rates to “only” 4-5% would kill the economy and cause havoc with federal budgets. I believe those in the know are waiting for the inflation they’ve tried to create- and are close to panic that it hasn’t materialized. Boxed in, no where to run to.

  45. 45

    RE: greg @ 33
    Life Measurement Studies

    We’re you referencing the CDC studies which showed much longer life spans than the Census Bureau? Which study is the cooked book?

  46. 46
    boater says:

    By Scotsman @ 44:

    Hey Macro…… My guess is that it’s a small percentage of sellers that are looking to move up verses looking to move to retirement, moving for a job, or seeking liquidity. Unless you’ve doubled the size of your family the old digs with a remodel will often do for a while longer. The other side of this is that move up buyers can always find their new dream home and lock it in, secure in the knowledge that in this market their current house will sell quickly, maybe even for more than they planned… Chicken or egg? Sell, then buy- or buy, then sell? Not the issue people make it out to be.

    I disagree. Investory is low so finding a new home is unusually difficult. You have to either make a contingent offer (not attractive to sellers) or swing two mortgages/shift assets (not attractive to the buyer).
    I hang out with the you family crowd. They’re all looking to switch to a home they thought would be great for their impending family to a home they want now that they have said family. Sometimes its the floorplan they want to change maybe schools maybe a better yard. Whatever it is they all would prefer to buy their way out of the problem vs living through a remodel. But with inventory the way it is they have been remodeling. With remodeling price almost doubling in the last year even that is falling away. Living with small children through a remodel is no fun.

  47. 47
    greg says:

    RE: softwarengineer @ 43

    so then you agree with me.

  48. 48
    Azucar says:

    By Erik @ 40:

    RE: nathan118 @ 38
    That same dumb crap has been consistently correct for a longtime. The big run is over. Now it will be a time of moderate gains. Mark my words. Next real estate crash won’t be until at least 2024. Every year buyers wait will cost them more and more money.

    Unless Corndogs or Ray Pepper say otherwise, that’s what I know. Ray said the real estate party is over and Corndogs said the smart money is beginning to show restraint now. The big boom is over and inventory is at record lows. Even a software engineer can figure that one out. Right?????

    I bought November 2011. I knew we were way high in 2008. I wasn’t saying “up up up” back then.

    Anyone who thinks that they know what the real estate market will be doing for the next 9 years is either deluding themselves or trolling a real estate site for attention.

    What year did you buy the place up in Everett that you had to sell short and move in with your parents? What were you saying in that year?

  49. 49

    RE: Ira Sacharoff @ 9
    Avoid the Maple Valley River Shore Properties

    They flood.

  50. 50
    David B. says:

    RE: Azucar @ 48 – Hang on, he’s got to check his notes and make sure he gets his story right.

  51. 51

    RE: boater @ 46
    Yes, High Material Costs from $120/bbl Oil

    Its down below $50/bbl and food hasn’t budged down in price either….ditto for roofing composites. We’re getting screwed IOWs.

    My roof replacement was about $2-3K 20 years ago with cheaper materials….it was $7K today and I had to shop with the contractors to get a wholesale work crew to get it down that low. Thank God I know old retired contractors who know the ropes or I’d of been screwed worse.

  52. 52

    RE: Azucar @ 48
    Getting the Truth from the Millennials

    Never ask an X Gen or a Baby Boomer how their 20 something kids are doing financially. Ask the kids directly to get the harsh reality truth. The parents are mostly in denial with comments like “they’re on their own and doing wonderfully” [right before they move back in to the McMansion with mom and dad again]….its human nature to brag about your kids, even most of the degreed ones end up with mom and dad if they can. Money Magazine even encourages it to help them save with the high costs of real estate.

    I could see the hand writing on the wall with my 27 YO daughter, degreed or not, she’d be living with me until I was dead. Then the $26K 3 bdrm 1/2 acre popped up as a rental foreclosure in Kansas City and I saw my out. She’s much happier too.

  53. 53
    Erik says:

    RE: David B. @ 50
    Her her he he ya guys.

  54. 54
    Erik says:

    RE: Azucar @ 48
    I detailed my story step by step on this site from 2010 til 2013 of how I went from owing 220k to the world to being 128k ahead. I don’t need to explain how I turned $358k in 2 years. I did great. Thank you Tim and others for the great advice. I will not keep explaining. If you missed it, you missed it.

  55. 55
    MD says:

    I don’t think rate increases will affect the price of Seattle real estate significantly. History shows that interest rates and real estate prices are not strongly correlated – even Robert Shiller admits this.

    I think the big wildcard is the economy, specifically the tech bubble. There are dozens (hundreds?) of tech startups all over the world getting billions in funding, and producing little to no profits or even revenues. And 95% of these startups are spending their VC money on the biggest cloud provider out there:

    Amazon Web Services.

    What happens if the US economy generally takes a dump? Retail spending falls. Who’s the biggest e-commerce company out there today? Hint: It begins with an ‘A’ and is based in Seattle.

    Facebook, Microsoft, Expedia, Google would also have exposure to a tech bubble pop. Hiring would slow dramatically if the downturn is ugly. Then we have a glut of luxury condos and rentals.

    Interest rates won’t affect anything. But if the economy turns, Seattle housing could turn quickly, too.

  56. 56
    boater says:

    RE: softwarengineer @ 51
    The biggest challenge eight now is finding quality trade labor who will commit to a project. There appears to be a lot of demand for thise folks working on large multifamily projects in the various downtown areas. Small contractors got burned bad in the last ceash and do not appear to be expanding their labor. It feels like there is room for more jobs i construction if someone wants to fill it.

  57. 57
    LW says:

    We are in a bubble that will burst in 1-2 years.

    When the cost of a house is above the purchasing ability of the majority you know you are there.

    We are seeing low inventory, low interest rates and huge stock gains in the market. The combination of the three are pushing prices up. Most people don’t get $150k down payments by purely saving. For the most part, you would have had to play the stock market and won big over the past several years. These jumbo loan buyers put $20k in the stock market and that stock did a 5x giving them $100k.

    When the stock market corrects, and it will, then all of these sky high jumbo loan homes will really sell slowly.

  58. 58
    nathan118 says:

    RE: MD @ 55 – Agree….the next downturn will be caused by a recession, not interest rates. And right now, the way the FED is going, the economy is never going to be strong enough to raise rates. My prediction is that we hit a recession in the next year or two, and this time the FED’s hands will be tied from the start.

  59. 59
    Eastsider says:

    Just a related comment –

    We are not in a normal housing market. I bet the current SFH monthly closing numbers pale in comparison to those in the early 2000’s. It is like the massive trading volume in NYSE today, except that 80% (?) of the trades are HFTs. The market is narrow and fragile and prices can move in either directions in short notice. People who bought 5 years ago have gains that normally take 30 years to accomplish. So stop speculating where the prices will be tomorrow. Buy what you can afford and settle down.

  60. 60
    Erik says:

    RE: MD @ 55
    If this thing pops, I’m going to buy a remodel in sammamish next to blurtman.

  61. 61
    nathan118 says:

    RE: Eastsider @ 59 – But if prices shoot up, then down, now back up….why buy now when it’s up? Why not sit back and wait for that eventual dip? It will surely be sooner than 9 years as some people think, haha.

  62. 62
    boater says:

    The s&p500 has done a little more than double since it’s bottom in 2008. You could have done just as well if not better due to leverage buying property in seattle over the same time period. And you definitely could have bought plenty after the crash.

    The annual compounded rate of return for both has been around 10% over the last 7 years. Using a more normal real estate return of 5% it would have taken 14ish years to see the same doubling rate of return.

  63. 63
    Eastsider says:

    RE: nathan118 @ 61 – You must be making a ton of money in the stock market then. So is the stock market going up or down over the next 12 months? LOL.

  64. 64
    Eastsider says:

    RE: boater @ 62 – The S&P500 index dropped to 666 (an easy number to remember) and today it closed at 2015 (another beautiful number.) It has more than TRIPLE!!!

    Also, you could have bought a 2br condo for under $100k on the Eastside at the bottom and some of the same units are selling close to $300k today.

    I don’t think you can see this kind of gains, especially in housing, in such a short period of time. At the historical 4% annual gain, it takes 30 years to gain as much!

  65. 65
    Erik says:

    RE: Eastsider @ 64
    I boughtt for $92k in Kirkland in 2011 and sold for 233k in 2013. Ya, it as a good time.

  66. 66
    Blurtman says:

    RE: Erik @ 60 – That’d be great! C’mon over, and I’ll smoke you out.

  67. 67
    Macro Investor says:

    By nathan118 @ 58:

    RE: MD @ 55 – Agree….the next downturn will be caused by a recession, not interest rates. And right now, the way the FED is going, the economy is never going to be strong enough to raise rates. My prediction is that we hit a recession in the next year or two, and this time the FED’s hands will be tied from the start.

    I agree with this comment. I’d just like to add a few thoughts.

    The global economy has been extremely fragile since the banking crisis. Though it doesn’t make news very often due to short attention spans, Greece and much of Europe is in depression. Brazil (largest economy in S America) is also, and Venezuela is in full blown currency crash. Japan (#2 economy) has been in recession for 25 years. China is on the verge, but information is hard to come by (you can be shot for negativity).

    This is important to know because people world wide protect their savings as best they can, and that means buying US stocks, bond and RE. So it almost doesn’t matter what the fed does. So much money wants to be in US assets, interest rates will likely be bid to very low levels for some time to come.

    The fact that the global economy is so fragile after so many years of low interest rates should worry you. That means that outside of government spending of funny money, there really isn’t much room for growth. A recession will come (because they always do), and then who gets stuck will all the high priced stocks, bonds and real estate? I’m doing my best to protect my savings and make sure I’m not the bag holder.

  68. 68
    Deerhawke says:

    Every year at this time the real estate market slows down and people start speculating about whether the market has overextended itself and is going to take a dump. Is this it? Is this the big one?

    It seems like a perennial ritual. Right around the time summer vacation is over and the kids are going back to school, Congress questions whether it will pay its bills. Then the stock market goes through its fall correction. And inevitably as there are fewer buyers and fewer transactions in the real estate market, people ask whether this is the beginning of the end. Is there a bubble? Is the bubble popping? is it popping now?

    I always associate this behavior with football season.

    Last year people were asking these questions even while the market had a fall surge where prices and transactions both increased. Last autumn even stuff that was pretty overpriced was checking through. Builders who were trying to set new price points were rewarded with quick sales at high prices. Instead of being seen as greedy, they were seen as trendsetters.

    This fall seems a lot more normal. Even as people ask the inevitable questions about whether there will be a real estate downturn and whether this is the start of it, the overall market seems fairly strong. Things that are reasonably priced are selling with a couple of offers– but not a dozen offers. Prices are solid but not crazy. Builders who are trying to get an extra $25K or $50K for their new houses are watching their listings sit. The word is out among builders– no fall price increases this year. Price things where they were in June and they will sell. This is not a time to set new price points.

    That is the market I a seeing. Any other market participants want to weigh in? Are your flips selling? Are your listings selling quickly?

  69. 69
    GoHawks says:

    RE: boater @ 56 – Will that just bring supply and demand in balance? More buyers than sellers now, will a stock market correction uptick supply and down tick demand putting it in equilibrium?

    One thing that is often overlooked on this thread is the quality of the buyer pool these days. Not like it’s zero down, borrowing for closing costs. Quality of buyers has never been higher (20% down, credit scores, cash). If the market does correct 5-10%, not like a bunch of new folks will be underwater immediately or waiting for their ARM to reset.

  70. 70
    Azucar says:

    By Erik @ 54:

    RE: Azucar @ 48
    I detailed my story step by step on this site from 2010 til 2013 of how I went from owing 220k to the world to being 128k ahead. I don’t need to explain how I turned $358k in 2 years. I did great. Thank you Tim and others for the great advice. I will not keep explaining. If you missed it, you missed it.

    I didn’t really miss it… other than what I just kind of semi-ignored… I just get confused now when you talk about how successful you are at buying and selling properties but neglect to mention that less than 5 years ago you were selling a place short and moving back in to your parent’s house. So I checked to make sure that I hadn’t misremembered something… but you being 220k in the hole does fit the story as I remember it. Does that mean that you bought a place for like $350k and it ended up being worth only $130 when you sold it? And you are making predictions about what the market will be doing between now and 2024?

  71. 71
    nathan118 says:

    By GoHawks @ 69:

    RE: boater @ 56 – Will that just bring supply and demand in balance? More buyers than sellers now, will a stock market correction uptick supply and down tick demand putting it in equilibrium?

    One thing that is often overlooked on this thread is the quality of the buyer pool these days. Not like it’s zero down, borrowing for closing costs. Quality of buyers has never been higher (20% down, credit scores, cash). If the market does correct 5-10%, not like a bunch of new folks will be underwater immediately or waiting for their ARM to reset.

    Most of the people that went belly up last time were traditional 30 year mortgages. How many of these people are maxing out what the bank will allow just to get in, and the minute a recession and layoffs start, they’ll be screwed?

  72. 72
    Erik says:

    RE: Azucar @ 70
    I bought for 160 and refinanced to 220 in a neg am loan. I could barely afford the payments since I just got out of college. My real estate maneuver provided me lots of happiness since I’m not strapped for cash anymore. I share my experience so someone else can do the same thing.

  73. 73
    boater says:

    By nathan118 @ 71:

    By GoHawks @ 69:

    RE: boater @ 56 – Will that just bring supply and demand in balance? More buyers than sellers now, will a stock market correction uptick supply and down tick demand putting it in equilibrium?

    One thing that is often overlooked on this thread is the quality of the buyer pool these days. Not like it’s zero down, borrowing for closing costs. Quality of buyers has never been higher (20% down, credit scores, cash). If the market does correct 5-10%, not like a bunch of new folks will be underwater immediately or waiting for their ARM to reset.

    Most of the people that went belly up last time were traditional 30 year mortgages. How many of these people are maxing out what the bank will allow just to get in, and the minute a recession and layoffs start, they’ll be screwed?

    Do you have any data to back that up? I’m not sure you’re wrong given that I recall Seattle favored 30 year mortgages more than most Californian cities but I can’t recall seeing any statistics on what mortgages tended to fail in Seattle.

    But ignoring whether it was a 30 year fixed or an ARM of some sort I suspect both were obtainable with substantially lower down payments and credit scores than you currently see.

    Also you seem to think recessions hit everyone exactly the same. They don’t. The last great recession hit manufacturing substantially harder than it did tech. The tech recession in 2000 didn’t hit manufacturing that hard.

    If mom and pop stores close don’t you think Amazon will do better as it becomes the only provider to many smaller towns? Whether you like Amazon or not for the local economy it’s a huge plus. It competes on price nationally in the same way Walmart might but with substantially fewer costs centers in other states. Every time things get harder for retail Amazon gets stronger. That’s a heck of a nice economy driver for a city to have. You may not like how you have to deal with all the Amazon folks in town but it’s sure better than being Detroit.

    As to what I think will bring things into balance. I think we have to hit an upper wall in what prices the tech workforce can pay in Seattle. When they stop offering more than asking and prices start to slow I think we will see more inventory appear. Looking quickly at a mortgage affordability calculator and assuming 250K combined income I’m guessing we’re talking 1-1.3 million is where it’s going to equalize. Probably less since that was a quick calculation.

  74. 74
    Jay says:

    RE: boater @ 73 – Personally, I much prefer Amazon than Walmart. It saves me time and gas when ordering online. Amazon targets a different group of consumers than Walmart, so it is not surprising when retail goes downhill, Amazon can still do better than the rest.

  75. 75

    RE: nathan118 @ 71

    My Old 30 Year Mortgage That I Paid Off After 10 Years Was A Joke

    I won’t tell you my age, but let’s put it this way…..I doubt most Americans could have lived that long on the average to pay it off. Ya refinance and you start all over with a fresh new 30 year loan to be paid off when you’re 90-100?….LOL

    The banks are buffoons.

    I know a lady who retired 10 years ago and the first thing she did with her pension is sign up for a $250K home loan to obtain a giant new house to live in by herself. Talk about ludicrous.

  76. 76
    Blurtman says:

    By softwarengineer @ 75:

    RE: nathan118 @ 71

    My Old 30 Year Mortgage That I Paid Off After 10 Years Was A Joke

    – When companies buy other companies with debt, they own the company, even though they are saddled with debt. This type of thinking has become commonly applied to residential RE. Folks commonly say they own a home when they have 25 years left on a 30 year mortgage, for example. Is it bad to purchase an asset with debt? Lacking cash, it allows one to live in a much nicer home. It allows one to participate in potential upwards asset price appreciation. And you can live in the asset. You can’t take ti with you when you die. And maybe 70 year olds with 20 years left on the mortgage prefer to live a higher quality life.

  77. 77
    boater says:

    If the asset appreciates at a faster rate than the loan rate you’re off to a good start. If not you better really need it.

  78. 78
    m-s says:

    RE: boater @ 77
    That’s the thing; at todays cheap rates, its not hard to imagine the asset appreciating faster than that, at higher rates, its a little less obvious. Its also a self-fulfilling prophesy; cheap rates say homes should appreciate fast, therefore they do! More expensive rates may encourage the opposite thinking (and fulfillment thereof?).

  79. 79
    Weasel says:

    The simplest explanation is often the correct explanation. Seattle is so awesome no one wants to leave!

  80. 80
    greg says:

    A lot of posters on this site sound like the posters on a bunch of sites circa 2007.
    Lots of reason why housing will continue to go up. and lots of reasons to dismiss any other viewpoint.

    The simple truth is that tress don’t grow to the sky. The confluence of events that have conspired to drive up asset prices is in my opinion drawing to a close.
    How much longer it lasts is hard to tell, but it is not at all hard to tell that RE prices are very toppy, as the primary force capping housing has begun to come into play…. ability to pay.

  81. 81
    Erik says:

    RE: greg @ 80
    Fancy words. Make a prediction and stop being a politician. I think the bubble will burst 2024. You seem like you are trying too hard to sound smart and it makes you sound stupid. If you have a year, say it. If you are going to feed everyone touchy freely bs, stop wasting our time. If you don’t have the understand bubbles, just admit it.

    We don’t even have surplus inventory yet bonehead, so we cannot be in a real estate bubble.

  82. 82

    RE: GoHawks @ 69

    Correct Allegations?

    What research did you pull this personal guess from?

  83. 83

    RE: Erik @ 81

    Personal Predictions

    Weigh heavily on when you bought or if you’re a buyer vs a seller. I like good neutral based predictions based on the stagnant total labor base and 100,000,000 that need “full-time” jobs today. Most media and Dem/Reps aren’t mentioning it [but thinking it]….Trump is….he states our real unemployment rate is 40%. Forbes [a NWO rag] agrees with Trump too….why would Forbes side with Trump on this issue that goes against their NWO politics?

  84. 84
    Blurtman says:

    My report from Westchester County, NY. A friend who is a realtor said inventory is low as folks who own really don’t believe the economy is doing as good as the gubbermint claims and so folks are sticking with what they have, versus buying up or buying new. I don’t think this explantation has been discussed before – those who survived the last fraud caused meltdown with their homes intact are too gun shy to take on new risk. And this is just one of the many ramifications of unprosecuted financial fraud. Thanks, Obummer. Thanks, Place Holder.

  85. 85
    S-Crow says:

    Nathan 118 @71 “Most of the people that went belly up last time were traditional 30 year mortgages. How many of these people are maxing out what the bank will allow just to get in, and the minute a recession and layoffs start, they’ll be screwed?”

    That’s not our experience. If people recall way back several years ago, I was shocked when I tallied that a little over 70% of the entire lot of closed transaction PURCHASES through our escrow office were 100% financed (not 30 yr terms). Most short sales our office has closed have not been for 30 yr term loans. But that’s just “anecdotal”. What we have today is a lot of young people and couples that have heard about the bubble. Back then, today’s younger buyers were in high school or just entering college when the bubble that many said never was, burst. The real estate “churn” is alive and well. Today’s 100% loans: VA & FHA low down. One of the VP’s at Chase commented I think on CNBC recently that they are not necessarily ashamed that they do very little FHA business. They price those loans accordingly which basically makes them un-competitive in then lending market. This was due to the fact that “Chase is not in the subprime business”, equating FHA as a defacto subprime product with FICO requirements as low as 610 or lower (something like that.) It was quite the blatant slam on what “affordable” housing pundits within HUD & Washington DC claim as helping those who wouldn’t necessarily have “the American dream” of home ownership. Some should not buy a home and some should clearly not buy in this market but that is just my opinion.

    In other news…I’m not sure anyone has been noticing but me thinks that The Tim has many in the local real estate world a bit gun shy and staying ‘neutral’ in their public commentary these days.

  86. 86
    S-Crow says:

    Blurtman @84: Full stop. Dead on comment regarding the gun shy owners selling or hesitant in moving up due to selling costs, prices and economic uncertainty. Not to mention the crisis in the middle east, Ukraine/Crimea and North Korea.

  87. 87
    Mike says:

    It’s very interesting to see home salespeople actually warning about a housing market slowdown. Apparently they learned at least something from the 2000s bubble and subsequent bust.

    They want to scare people into listing their homes since inventory is non-existent.

  88. 88
    Mike says:

    Lack of affordable housing? lol.

    if you actually live in Seattle, you know it’s irrelevant. There’s absolutely NO shortage of affordable housing, despite what some people might think from looking at the sales statistics. The number of people living in RVs, tents etc… is growing every day. It’s legal, it’s affordable, and it’s housing. During the bubble, this was a vast untapped resource of potential PRIME real estate that hardly anyone was taking advantage of. People worried about being ‘priced out’ whereas now the lower bound on price is around $100 for a tent and sleeping bag. $5K can get you pretty nice digs with no taxes, and your only utility is an occasional gas or propane fill.

    This is a major change from the bubble days. Back then, Ballard/Fremont/Phinney Ridge/Blue Ridge were somewhat expensive even on the low end. Now the low end is so low, people can camp anywhere in District 6 for pennies a day. The only people experiencing an affordable housing crisis in Seattle are entitled whiners that think they deserve something they can’t afford – not the regular working (or stealing) man that is humble in their desires.

  89. 89
    boater says:

    By greg @ 80:

    How much longer it lasts is hard to tell, but it is not at all hard to tell that RE prices are very toppy, as the primary force capping housing has begun to come into play…. ability to pay.

    I certainly agree that the ability to pay will determine the cap in price. And unlike last time the ability to pay is based on actual income and assets.

  90. 90
    greg says:

    By Erik @ 81:

    RE: greg @ 80
    Fancy words. Make a prediction and stop being a politician. I think the bubble will burst 2024. You seem like you are trying too hard to sound smart and it makes you sound stupid. If you have a year, say it. If you are going to feed everyone touchy freely bs, stop wasting our time. If you don’t have the understand bubbles, just admit it.

    You don’t think the “bubble” will burst in 24, you say that to get attention. 2024 is meaningless , completely useless. but knock your socks off :)

    my predication is that ability to pay is maxed out.

    We don’t even have surplus inventory yet bonehead, so we cannot be in a real estate bubble.

  91. 91
    Erik says:

    RE: greg @ 90
    I think 2024 is a good guess. We know there are lots of issues with why real estate may go up or down. Any moron can parrot the issues. When those issues translate and how they will translate is what takes some thought.

  92. 92
    BellevueTheLivable says:

    I have a buddy named Newton, real brainiac, made a fortune in physics. The advice he gave me: for every action there is an equal and opposite reaction.

  93. 93
    wreckingbull says:

    RE: Mike @ 87 – This is spot-on. They are finally realizing that what they need is sales volume, not rising prices. Look for more of this in the near future. Hard to skim the cream when the cow is dry.

  94. 94
    Macro Investor says:

    By Mike @ 88:

    There’s absolutely NO shortage of affordable housing, despite what some people might think from looking at the sales statistics. The number of people living in RVs, tents etc… is growing every day… The only people experiencing an affordable housing crisis in Seattle are entitled whiners that think they deserve something they can’t afford – not the regular working (or stealing) man that is humble in their desires.

    D@mn those whiners who feel entitled to running water and walls. Thank you for another mensa quality comment from our friends in the real estate industry.

  95. 95
    redmondjp says:

    By wreckingbull @ 93:

    RE: Mike @ 87 – This is spot-on. They are finally realizing that what they need is sales volume, not rising prices. Look for more of this in the near future. Hard to skim the cream when the cow is dry.

    Oh, but what sweet cream it is, when you can get some! In my neighborhood, the average transaction price is in the high six-figures. So you don’t need to milk the cow as often.

  96. 96
    Erik says:

    RE: Macro Investor @ 94
    I hate your character on here because you sound extremely pompous and you don’t even say anything intelligent. You may be fine in real life, but on here yo talk like everyone is below you and you aren’t saying smart things. Corndogs did that but he said very smart things. He earned it. You just sound ridiculous.

  97. 97
    Shoeguy says:

    By Erik @ 81:

    RE: greg @ 80
    Fancy words. Make a prediction and stop being a politician. I think the bubble will burst 2024. You seem like you are trying too hard to sound smart and it makes you sound stupid. If you have a year, say it. If you are going to feed everyone touchy freely bs, stop wasting our time. If you don’t have the understand bubbles, just admit it.

    We don’t even have surplus inventory yet bonehead, so we cannot be in a real estate bubble.

    It’s been pointed out to you a couple times now that inventory was low at the peak of the last Housing Bubble. Inventory didn’t start to climb until AFTER the bubble popped.

  98. 98
    Mike says:

    By Macro Investor @ 94:

    By Mike @ 88:

    There’s absolutely NO shortage of affordable housing, despite what some people might think from looking at the sales statistics. The number of people living in RVs, tents etc… is growing every day… The only people experiencing an affordable housing crisis in Seattle are entitled whiners that think they deserve something they can’t afford – not the regular working (or stealing) man that is humble in their desires.

    D@mn those whiners who feel entitled to running water and walls. Thank you for another mensa quality comment from our friends in the real estate industry.

    Swing and a miss. The company I work at is not even tangentially related to the Real Estate industry – doesn’t even offer products aimed at that market. I do, however, own a house in District 6 so I see what is going on in my neighborhood.

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