Eric Fischer: San Francisco Housing Model

No, Seattle Affordability Is Not “Pretty Much Game Over”

A few weeks ago Stranger writer Charles Mudede published a post in which he argued that “Seattle Is Pretty Much Game Over” in terms of housing affordability.

There was a time when something could have been done to avoid its entry into the locked cycle of asset value inflation, but that was a few years ago. We now have to face the fact that this city will become another Vancouver, B.C. or San Francisco (or Miami, for that matter). The soft city is gone for good; the hard city is here to stay.

The opinion piece is very thin on details explaining exactly why he believes this to be the case. In fact, I’ve quoted twenty percent of the entire article above. Mudede just makes a series of emotionally-framed declarations and apparently doesn’t feel any particular obligation to explain to the reader how he came to these dramatic conclusions.

Here’s the main part of the article that I’d like to focus on:

And the idea of building our way out of this bad situation, as the urbanists propose, will not produce the desired results in reality because the market is not structured in that way. It does not answer to the basic laws of supply and demand.

To put it plainly, that is complete and utter nonsense. The real estate and housing markets absolutely do answer to the laws of supply and demand. Can they occasionally be warped by other external factors? Sure, definitely. We saw an extreme example of that ten years ago during the last housing bubble, which is what motivated me to start this site. In fact, if you looked only at housing prices as Mudede does in his piece you would have come to a similar conclusion that we were stuck in a “locked cycle of asset value inflation” in 2007 as well.

But prices alone do not paint a complete portrait of the real estate market. Despite Mudede’s unfounded assertion to the contrary, the housing market does respond to supply and demand. And it’s funny that he should mention San Francisco, because just a few days ago a gentleman named Eric Fischer published a great piece exploring an investigation of nearly 70 years of San Francisco rental price data.

Housing, it appears, gets expensive either when people get paid more or there are more people getting paid, and more steeply than simple linear increase. … If you add [housing inventory] to the model, it does a better job of explaining the swings in rent over the past 20 years through the additional prediction that housing gets cheaper than employment alone would predict when you build more of it, and doesn’t when you don’t.

Using housing inventory (supply) plus wages and total employment (demand) he was able to build a very good model that predicts housing prices for San Francisco:

Eric Fischer: San Francisco Housing Model

In other words, housing does “answer to the basic laws of supply and demand.” Even in San Francisco, where a 390-square-foot apartment currently rents for $3,200 (link). The source of the problem of high housing prices is simple: Demand (employment and wages) is increasing faster than supply (new housing inventory).

Even San Francisco is not in a “locked cycle of asset value inflation.” If they built more housing at a fast enough rate, the city would become more affordable. The problem in San Francisco is that most of the city’s wealthy, entrenched interests don’t want to build more housing.

San Francisco does not have enough places to live. Sonja Trauss, a local activist, thinks the city should tackle this problem by building more housing.

This may not sound like a controversial idea. But this is San Francisco.

Across the country, a reversal in urban flight has ignited debates over gentrification, wealth, generational change and the definition of the modern city. It’s a familiar battle in suburbs, where not-in-my-backyard homeowners are an American archetype.

In San Francisco, though, things get weird. Here the tech boom is clashing with tough development laws and resentment from established residents who want to choke off growth to prevent further change.

Those groups oppose almost every new development except those reserved for subsidized affordable housing.

Here’s Eric Fisher’s conclusion about San Francisco:

San Francisco is an expensive city because it is an affluent city with a growing population and no easily available land for development. Sonja Trauss is right that building more housing would reduce rents of both high- and low-end apartments. Tim Redmond is right that building enough housing to make much of a dent in prices would change the visual character of most streets, although the result could be more like Barcelona than like the Hong Kong that he fears. The unsettled question is which of these is the higher priority.

Building enough housing to roll back prices to the “good old days” is probably not realistic, because the necessary construction rates were never achieved even when planning and zoning were considerably less restrictive than they are now. Building enough to compensate for the growing economy is a somewhat more realistic goal and would keep things from getting worse.

…if price stability is the goal, the city and its citizens should try to increase the housing supply by an average of 1.5% per year (which is about 3.75 times the general rate since 1975, and with the current inventory would mean 5700 units per year).

Similarly here in Seattle, building more housing would help prevent it from becoming even more expensive. That said, even if we dramatically relaxed regulations and ramped up incentives for development, we’re not likely to see builders add new housing at a rate that would be required to begin driving prices down. Builders want to make a profit, after all. However, with enough new housing we could absolutely level off price increases and allow employment and wages to catch back up. There is zero reason to believe that’s not possible.

Of course, this all assumes that the economy—and specifically the tech economy—is not currently in another big bubble. If it is, and if said bubble pops, expect housing prices to drop again, regardless of how special Seattle may seem right now.


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.

147 comments:

  1. 1
    John says:

    another bubble popper would be an earthquake or other big adverce event

  2. 2

    Another Bubble Popper: Lower Wages to MSFT With India Replacements?

    https://www.numbersusa.com/news/intel-will-layoff-12000-american-workers-after-requesting-14523-foreign-workers#comment-154361

    Blog comment:

    “…Aaron 8129 of ID’s picture

    So does Microsoft! I know because one of my older siblings was working there and had to train replacements from India! Then they let him go.
    Mon, 05/09/16 1:04 am EDT…”

    No one is immune from the evils of globalism, just wishful thinking and assuming….

  3. 3
    northwestdr says:

    I agree that a significant economic downturn (or a decline in success of one or some of the big local corporations, or just corporate moving out of town) could cause a correction in home prices in Seattle. The same is true for a large increase in mortgage rates. However…

    One thing I NEVER hear about in the discussion is, admittedly, a black swan. A large, destructive earthquake (or, God forbid, a nuclear attack) could and probably would cause prices to plunge. Many have no insurance against such a catastrophe, nor can they obtain it. Of course, home prices would be of secondary importance, but… this scenario easily could occur and should not be forgotten.

  4. 4
    northwestdr says:

    RE: John @ 1 – Wow, I was just composing my message and sent it, and then found you were thinking likewise… so I’m NOT the only one

  5. 5
    Anonymous Coward says:

    Wait! I did go to public school, but how does an earthquake increase the supply of housing? Or do you have data to show the relationship between job and income losses vs housing unit losses and their historical impact on housing prices? If you do, please share, because while I’m pretty impressed with the gentleman from San Francisco’s data and analysis, I’d be *really* impressed with that data and analysis.

    I’m not sure what to make of it when the bears around here are reduced to “it’s a bubble because: earthquake!”

  6. 6
    David B. says:

    “Of course, this all assumes that the economy—and specifically the tech economy—is not currently in another big bubble.”

    The business cycle is a fundamental aspect of capitalism. And that is why I expect that building more housing will indeed eventually result in falling prices.

    And I have never understood why some folks assert that housing does not follow the laws of supply and demand, when it’s pretty obvious that in fact it does.

  7. 7
    Weasel says:

    There is always land, the problem isn’t land or a lack of it, the issue is getting from A to B and back to A again each day.

    No one wants to build high speed transit. The transit solution stops at slow buses, and slow Link that’ll take a 100 years to complete. The only thing that resembles something “fast” and pretty reliable is Sounder south line.

    Random example: If ST ran express Sounder trains from Tacoma to Seattle with out stopping in-between, the trip would take about 30 to 35 minutes. If that was in place, how many people would soon start living in Tacoma for the cheap houses and work in Seattle?

    The flip side is it would also open up a new pool of potential employees to Seattle companies.

    Anyways, keep on building those high density condoboxes most people dont want to live in given a choice.

    Heres a little gem at 220k, if its not sold already – https://www.redfin.com/WA/Puyallup/3111-10th-Street-Pl-SW-98373/home/2661987 Couple mins walk from South Hill park and ride where ST 580 from Lakewood stops on its way to Puyallup. ST 580 also waits for the train during the PM. Seattle would be around a 1hr commute from this location, no car required, and no traffic headaches.

  8. 8
    David B. says:

    By Weasel @ 7:

    No one wants to build high speed transit. The transit solution stops at slow buses, and slow Link that’ll take a 100 years to complete. The only thing that resembles something “fast” and pretty reliable is Sounder south line.

    That’s strange, a majority voted in favor of the last two ST measures. That’s hardly “nobody”.

    The proposed ST3 will take more like 40 years to complete (still a long time, but hardly a century). But hey, why nitpick about being off by a mere factor of 2.5?

    Link between Downtown and the UW is fast by pretty much any comparative means; thanks to how bad traffic congestion tends to be, it even typically beats driving.

    Random example: If ST ran express Sounder trains from Tacoma to Seattle with out stopping in-between, the trip would take about 30 to 35 minutes. If that was in place, how many people would soon start living in Tacoma for the cheap houses and work in Seattle?

    That would require (a) purchasing the needed slots to run the trains from BNSF (not either cheap or easy) and quite possibly (b) adding a third track to handle the need for extra capacity (particularly given that it’s unacceptable for the express trains to have to stop or slow for other trains). Again, neither cheap nor easy.

    Anyways, keep on building those high density condoboxes most people dont want to live in given a choice.

    Except of course that people do want to live in them, else builders would have no market for them and wouldn’t be building them. And most of what’s being built are apartments, not condos, due to the liability exposure that condo developers have under Washington law.

  9. 9
    Action says:

    By Anonymous Coward @ 5:

    Wait! I did go to public school, but how does an earthquake increase the supply of housing? Or do you have data to show the relationship between job and income losses vs housing unit losses and their historical impact on housing prices? If you do, please share, because while I’m pretty impressed with the gentleman from San Francisco’s data and analysis, I’d be *really* impressed with that data and analysis.

    I’m not sure what to make of it when the bears around here are reduced to “it’s a bubble because: earthquake!”

    If the data on San Francisco above shows anything, it’s that even an Earthquake won’t stop the increase in home prices if you don’t build enough new supply to keep up with demand. Look at the graphs… not even a blip from the 1989 Loma Prieta earthquake.

  10. 10
    Action says:

    In fact, if anything a major earthquake would increase the shortage of houses as construction projects would be disrupted and contractors and equipment were needed for repairing damaged structures and infrastructure.

    With a release of energy in the Cascadia Subduction Zone, this area could become a much more desirable place to live as the largest threat to health and safety would no longer be a concern.

    Nuclear war on the other hand… now that’s something to keep you up at night worrying about the bubble bursting.

  11. 11

    By northwestdr @ 3:

    A large, destructive earthquake (or, God forbid, a nuclear attack) could and probably would cause prices to plunge.

    I also don’t see how an earthquake would reduce prices. Assuming damage to buildings, the supply of houses would decrease, causing a short term increase in prices. The destroyed houses would presumably be replaced with more valuable newer houses, again causing an increase in prices.

    Now a nuclear event in another city, that could reduce demand for housing near every large city. That would be a real game changer.

    Personally I’ve always thought the most likely cause for significant declines in value would be some sort of deadly pandemic that killed off a significant percentage of the population. Not only would that decrease the demand for housing, but it could also affect other industries if extremely severe.

  12. 12
    The Tim says:

    By David B. @ 8:

    By Weasel @ 7:

    No one wants to build high speed transit. The transit solution stops at slow buses, and slow Link that’ll take a 100 years to complete. The only thing that resembles something “fast” and pretty reliable is Sounder south line.

    That’s strange, a majority voted in favor of the last two ST measures. That’s hardly “nobody”.

    I think the point was that everything Sound Transit has built so far and the projects they’re currently proposing as part of ST3 are not “high speed” transit. It’s transit, but it’s not high speed by pretty much anybody’s definition.

    e.g. – The proposed Lynnwood to Everett light rail route will be a 31-minute ride. 31 minutes on a train vs. 11 minutes typical by car most of the day. Add that to the 28 minutes Lynnwood to downtown Seattle and it’s about an hour on the train from Everett to Seattle. My bus ride from Everett to Seattle this morning was just 42 minutes, and I don’t get off until the fifth stop downtown.

  13. 13
    district says:

    A question to the bears: are we overbuilding? If we are on the cusp of a tech bubble-burst with the result of wildly decreased demand, are we making the eventual crash worse by adding too much supply?

    For the tech bubble to translate into a real estate bubble, it isn’t enough for the real estate market be merely *meeting* the increased housing needs of the tech-fueled migration. For there to be a real estate bubble, building has to be wrongly *anticipating* growth at the same or a higher rate.

    My bullish thought: It sounds like increased demand is not even being met. If that’s the case, even a dramatic burst of tech might not have a dramatic ripple effect into housing.

    Since this is a bear driven blog, I’m curious what people think is wrong with my view. I have some skin in the game, so I have an interest in hearing serious criticisms of my view.

  14. 14
    Bingo says:

    RE: district @ 13

    Here’s a link that shows the number of building permits issued and the population of the Seattle MSA. From the chart, it doesn’t look like the number of permits for single family homes is keeping up with the population growth.
    https://research.stlouisfed.org/fred2/graph/?g=4agx

  15. 15
    northwestdr says:

    RE: Kary L. Krismer @ 11
    I don’t mean a puny tremblor like the Nisqually quake in 2001, I mean a large one like we are told could happen at any time. The kind that would destroy many of the old, brittle buildings in the downtown and collapse bridges. The quality of life would go way down in the area, and it would be less desirable to live here for quite some time. Furthermore, if transportation is disrupted, businesses would probably leave. So, I’m not talking about an increase in supply, I’m referring to a decrease in demand.

    As for a nuclear incident, how are real estate values doing in Chernobyl or Fukushima? Very few buildings were even destroyed there. I wouldn’t want to live in a city where a lot of radiation was released and is on buildings and vegetation, and in the soil. A grim scenario, I know, but is there any city in the USA which is more likely to be the target of an attack, with the port, the airline industry, and so much technology here?

  16. 16

    RE: northwestdr @ 15 – The effect on transportation would be significant, but I’m not sure people would move from the just for the months it would take to get most of it hobbled back together. The rest though would be a decrease in supply.

    As to nuclear, yes, I was considering examples where it was just contamination. If a terrorist type attack that could really impact demand because you wouldn’t know the life of a property.

  17. 17
    redmondjp says:

    RE: northwestdr @ 15 – No, it would be impossible for a great number of people to live here at all. Imagine the condition of the 80 to 100-year-old water and sewer lines in just Seattle proper after the big one. That is going to take several years if not decades to fully repair/replace. How do you live in a house for several years without water and sewer?

    Think of the New Orleans flood, but ten times worse. In the flood, the infrastructure remained largely intact. Our infrastructure will be decimated. On the upside, the local flora and fauna will remain unaffected (meaning that the crows, rats and blackberries will continue to thrive).

    Got earthquake insurance?

  18. 18
    Green Horn Investor says:

    RE: John @ 1

    actually a sudden catastrophe like an earthquake would likely make the remaining undamaged housing much more expensive because planning and rebuilding would take its sweet time.

    seattle needs a new slogan and mascot. “business moving at the speed of bertha” and a fat unsmiling surly snail that thrives in the rainy seattle process.

  19. 19
    Green Horn Investor says:

    RE: Bingo @ 14

    looking at that chart makes obvious the reasons for the scarce inventory.

    multifamily is substitutable for single family. in many other cities across the country and world it’s quite normal for families to live in apartments. it’s time for us to get acquainted with the density we’ve been discussing so long.

  20. 20
    northwestdr says:

    RE: Green Horn Investor @ 18
    How would the prices of the damaged or demolished homes fare? Due to age, many cannot be insured for earthquakes… and “acts of war” may not be covered. Of course, for many owners, home price would be of little significance in one of those sad scenarios.

  21. 21

    From the article: Advice on how to beat out in a multiple offer scenario
    “Offer to pay the SELLER’s closing costs.”

    Tell me this isn’t happening.

    http://www.housingwire.com/articles/37025-how-to-beat-out-other-homebuyers-when-there-is-no-inventory

  22. 22
    AJT says:

    I would also add that in addition to tech having some downward pressure there is another element of demand that has had a large influence on our RE prices. Foreign investment, more specifically the yuan.
    https://www.theguardian.com/business/2016/may/16/chinese-pour-110bn-into-us-real-estate-says-study
    In the last couple of years this has caused our prices to skyrocket coupled with a super strong job market(tech mainly).
    Now if the demand is even moderately curtailed by an alteration of the two aforementioned factors that will put downward pressure on RE prices.

  23. 23
    Kyle says:

    By district @ 13:

    A question to the bears: are we overbuilding? If we are on the cusp of a tech bubble-burst with the result of wildly decreased demand, are we making the eventual crash worse by adding too much supply?

    For the tech bubble to translate into a real estate bubble, it isn’t enough for the real estate market be merely *meeting* the increased housing needs of the tech-fueled migration. For there to be a real estate bubble, building has to be wrongly *anticipating* growth at the same or a higher rate.

    My bullish thought: It sounds like increased demand is not even being met. If that’s the case, even a dramatic burst of tech might not have a dramatic ripple effect into housing.

    Since this is a bear driven blog, I’m curious what people think is wrong with my view. I have some skin in the game, so I have an interest in hearing serious criticisms of my view.

    I just bought a house in this crazy market. Took me a full year. Depressing process and I’m glad it’s over.

    I won’t be worried until everyone starts agreeing with you.

  24. 24
    Erik says:

    RE: The Tim @ 12
    We have a big enough homeless problem here in Seattle. Creating a high speed transit from Everett to Seattle would only worsen that problem.

  25. 25
    Dave says:

    An account friend of mine added this to the discussion when I brought up this thread.

    http://www.bloomberg.com/news/articles/2015-12-18/u-s-poised-to-lift-35-year-old-real-estate-tax-on-foreigners

    From the article;
    “a provision that treats foreign pension funds the same as their U.S. counterparts for real estate investments. The provision waives the tax imposed on such investors under the 1980 Foreign Investment in Real Property Tax Act, known as FIRPTA.”

    Nothing but yuan upside here for real estate purchases by foreign pension funds. I asked him if he had purchase data for our area and he joked that he was an accountant and not a real estate agent. Still interesting though.

  26. 26
    AJT says:

    RE: Dave @ 25
    I suspect that would be more weighted on the commercial side. I could be wrong but not sure how many pension funds would buy a 3 bdrm rambler on 1/4 an acre on the Eastside, but you never know :)

  27. 27
    Erik says:

    RE: Action @ 10
    I agree. I would love to see an earthquake delay builders a few years and extend mueller’s 18 year real estate cycle curve. Northwestdr doesn’t seem very smart. Either that or doesn’t understand the housing market.

  28. 28
    Doug says:

    RE: Erik @ 27 – To be clear, you’re hoping for an event that would bring catastrophic damage, chaos, and loss of life to Seattle so our real estate cycle better fits your model?

  29. 29
    northwestdr says:

    RE: Erik @ 27
    So, you’re smart because… you heard or read about some bogus 18-year cycle? Sure, whatevs. I might not be as smart as the likes of you, but I’m not heartless. I don’t wish for an earthquake or any other disaster, I just recognize that some unexpected circumstance could arise which could bring real estate down outside of the usual economic factors. In fact, I’m so dumb, I believe it might not happen on an 18-year schedule.

  30. 30
    boater says:

    Are people seriously contending that what will stop this market is either a nuclear attack/meltdown or an earthquake that may happen anytime in the next +/- 400 years?

    Listen to that statement and realize just how desperate / crazy that sounds.

    If this is a bubble, it’s one people made and people are likely to end it not random acts of nature.

  31. 31
    Cap''n says:

    RE: boater @ 30

    My favorite post on this thread so far. We are obviously reaching, looking for anything, plague, thermonuclear warfare, etc to say the end of the bubble is near or possible. Don’t forget the lahar flow from Rainier. Could happen.

  32. 32
    Green Horn Investor says:

    RE: Cap”n @ 31

    yes a nutty gang here. the only thing that could dampen the Seattle real estate bubble would have to be greater than a natural disaster or an act of god. if nuclear Armageddon or divine apocalypse come to Seattle, then your home equity values will be the least of your concerns.

    hell may be hot, but the housing market there is probably pretty cool there… plenty of space (and inventory) for all us sinners.

    heck with all our good intentions the roads down there are probably very well endowed and paved too.

    actually with the warm dry weather, the good spacious roads and plentiful housing inventory this hell is starting to sound like heaven compared to Seattle. i wonder if they have to worry abut the Seattle freeze there?

  33. 33
    Ross Jordan says:

    By Action @ 10:

    In fact, if anything a major earthquake would increase the shortage of houses as construction projects would be disrupted and contractors and equipment were needed for repairing damaged structures and infrastructure.

    With a release of energy in the Cascadia Subduction Zone, this area could become a much more desirable place to live as the largest threat to health and safety would no longer be a concern.
    .

    The logic is right on the housing supply side, but I think a big enough earthquake would result in deaths and various people leaving Seattle temporarily & permanently (for a variety of reasons). So housing demand would also be reduced, at least for a while.

    The net difference in supply/demand and impact on housing prices … it’s anyone’s guess.

  34. 34
    Bryan Copley says:

    Thanks for the data-driven piece, Tim. Numbers – not rhetoric – are the best way to inform and rally folks on both sides of the aisle behind viable solutions.

  35. 35
    Anonymous Coward says:

    RE: AJT @ 22 – That’s one of the really interesting things in the San Francisco data. You know, I was thinking the same thing, too. Foreign purchasers looking for dollar denominated hard assets must have *some* demonstrable effect on real estate markets. Yeah, I know, plural of anecdote is not data and all, but we are talking about raising prices at the margins, so in theory it shouldn’t take too many additional buyers at the margins to have an effect. Ok, maybe it’s small in Seattle (for now) and bigger in better known places like Vancouver, Sydney and San Francisco. It’s just not there in the San Francisco data…

  36. 36

    By boater @ 30:

    Are people seriously contending that what will stop this market is either a nuclear attack/meltdown or an earthquake that may happen anytime in the next +/- 400 years?

    I don’t think anyone is saying that, but instead just bringing up things that have nothing to do with price data that could significantly affect the future price data.

    But why no love for my pandemic theory? ;-)

  37. 37
    northwestdr says:

    RE: boater @ 30
    On the contrary, what I’m gathering from many comments is pro-bubble apologists are desperately defending that housing MUST only go up from here, in perpetuity. They won’t even acknowledge the *possibility* of a black swan event which could derail their well-laid plans. Also, one crackpot is trying to sell real estate in Hell.

  38. 38
    Mojo says:

    From a macro perspective (i.e. over the course of someone’s lifetime) your argument of supply and demand makes sense. But in this moment and for the last several years, it would seem that median rent prices in Seattle are increasing in large part because they are building new supply that is more expensive. This new supply is not only raising the median rent, but in some cases also is replacing the older and less expensive supply.

    How would building more houses/apartments lower prices in the next 10 years when the new inventory being brought into market is more expensive than the existing inventory? Within a shorter timeframe perhaps Mudede is right?

  39. 39
  40. 40
    Erik says:

    RE: Erik @ 27
    I don’t wish bad on anyone. I’m just making the point that a nice little medium size earthquake may make housing prices go up longer. Maybe 20 years of growth.

  41. 41
    boater says:

    L.A. experienced the effects of a significant earthquake and real estate prices in the early 90s. For a short period people leave. Buy then because as long as you’re a coastal city they will be back in droves.

    In fact I could see increased buying because the faults here move so rarely. Some idiot will decide because we got our once in a thousand years earthquake it’s safe from them for their lifetime. Followed by someone completely bought in to gloom and doom saying it didn’t count because it was only a 8.7 and to count it has to be 8.9 or greater.

    Then SE will post some random crap totally unrelated and we’ll all move on.

  42. 42
    boater says:

    By northwestdr @ 36:

    RE: boater @ 30
    On the contrary, what I’m gathering from many comments is pro-bubble apologists are desperately defending that housing MUST only go up from here, in perpetuity. They won’t even acknowledge the *possibility* of a black swan event which could derail their well-laid plans. Also, one crackpot is trying to sell real estate in Hell.

    When my parents bought in 72 they paid 20k for their house. From their perspective housing has only gone up here.

  43. 43
    Magnolia44 says:

    nt

  44. 44
    Blake says:

    By boater @ 30:

    Are people seriously contending that what will stop this market is either a nuclear attack/meltdown or an earthquake that may happen anytime in the next +/- 400 years?

    Hate to tell you, but we are not due for an earthquake in the next 400+ years… we are OVERDUE NOW. Great earthquakes have struck this region every 243 years on average and the last big one was in 1700…

    http://www.newyorker.com/magazine/2015/07/20/the-really-big-one
    “Thanks to that work, we now know that the Pacific Northwest has experienced forty-one subduction-zone earthquakes in the past ten thousand years. If you divide ten thousand by forty-one, you get two hundred and forty-three, which is Cascadia’s recurrence interval: the average amount of time that elapses between earthquakes. That timespan is dangerous both because it is too long—long enough for us to unwittingly build an entire civilization on top of our continent’s worst fault line—and because it is not long enough. Counting from the earthquake of 1700, we are now three hundred and fifteen years into a two-hundred-and-forty-three-year cycle.”

    … and these subduction-zone earthquakes are not little 6.8 Nisqually earthquakes, but 9.0… 9.0 is 100 times stronger than a 7.0 earthquake!

    8-8.9 = Major damage to buildings, structures likely to be destroyed. Will cause moderate to heavy damage to sturdy or earthquake-resistant buildings. Damaging in large areas. Felt in extremely large regions.

    9+ = At or near total destruction – severe damage or collapse to all buildings. Heavy damage and shaking extends to distant locations. Permanent changes in ground topography.

    Have a nice day :-)

  45. 45
    Carl says:

    RE: The Tim @ 12 – A good argument for “bus rapid transit”. Probably would be cheaper to build dedicated bus lanes.

  46. 46
    northwestdr says:

    If The Tim can, um, unearth some data about how housing markets have fared after Large earthquakes, that might make for an interesting post and of course discussion.

    BTW, not to pile on too much, but it actually does freak me out a bit that there is an angry, krazy man in North Korea who has nukes, repeatedly threatens the USA, might have secret technology from China and/or Russia, and has missiles which keep getting “better…” plus Seattle is the closest large city with some military and technological importance.

  47. 47

    The impact of over building usually impacts the upper tier and luxury markets first. NYC, after 50% to 75% gains since 2013 is experiencing a slow down and possibly some price reversal in the very large, luxury condo-apartment sector.

    http://www.thelowdownblog.com/2016/05/buy-apartment-and-ill-throw-in.html

  48. 48
    Carl says:

    I read the main Vancouver newspaper – http://www.vancouversun.com

    There is a lot of angst over real estate prices there. Much more so than on the Seattle Times. Seems like the Vancouver paper has a real estate headline every other day about a bubble. And yet the bubble has been inflating for years, even decades.

    So perhaps there is a lot more room to run here . . .

  49. 49
    Anonymous Coward says:

    RE: northwestdr @ 45 – The closest data you could probably come up with would be post-hurricane data*. Surprisingly, there’s not much impact, even for those without insurance. For high-impact region wide natural disasters, insurance isn’t particularly helpful as the losses are so great the insurers go bankrupt. So the federal gov’t usually steps in with disaster recovery funds either for property owners and/or the insurers themselves.

    *You could try looking at post-earthquake housing data from other countries, but I suspect differences in gov’t responses and property markets would be too great to draw a meaningful conclusion.

  50. 50
    David B. says:

    By northwestdr @ 15:

    As for a nuclear incident, how are real estate values doing in Chernobyl or Fukushima? Very few buildings were even destroyed there. I wouldn’t want to live in a city where a lot of radiation was released and is on buildings and vegetation, and in the soil. A grim scenario, I know, but is there any city in the USA which is more likely to be the target of an attack, with the port, the airline industry, and so much technology here?

    Hmmm. San Francisco? LA? Chicago? NYC (already been the victim of several terrorist attacks)?

    In other words, the ones that actually are world cities, not regional cities with inferiority complexes who keep insisting to themselves that they in fact are world cities.

  51. 51
    David B. says:

    By northwestdr @ 20:

    RE: Green Horn Investor @ 18
    How would the prices of the damaged or demolished homes fare? Due to age, many cannot be insured for earthquakes… and “acts of war” may not be covered. Of course, for many owners, home price would be of little significance in one of those sad scenarios.

    So far as I know, acts of war are almost never covered by insurance policies.

  52. 52
    Eile says:

    Microsoft and Amazon move out of WA will guarantee huge house price drop. I guess we don’t want that to happen :)

  53. 53
    Blake says:

    The odds of a great earthquake are supposed to be something like 1% per year for the next ten years… But the odds of an economic tsunami from China are much higher!

    Hard Landing Coming Soon? Chinese Officials Set Off Red Alert on Debt, Urge Serious Measure to Contain It
    http://www.nakedcapitalism.com/2016/05/hard-landing-coming-soon-chinese-officials-set-off-red-alert-on-debt-urge-serious-measure-to-contain-it.html

    China’s Communist Party goes way of Qing Dynasty as debt hits limit
    http://www.telegraph.co.uk/business/2016/05/18/chinas-communist-party-goes-way-of-qing-dynasty-as-debt-hits-lim/

    Bankruptcy experts eye Asia boom as debt fears grow
    http://www.ft.com/intl/cms/s/0/a12c133e-1cb9-11e6-b286-cddde55ca122.html#axzz498rFPtib

    Premier Xi spoke bluntly this week: “Our economy is seeing unexpected new problems. It cannot be described with simple concepts like kai men hong… Our economic trend is not U-shaped and absolutely not V-shaped. It is L-shaped. It is not going away in a year or two.”
    http://www.scmp.com/business/article/1944690/xi-jinping-full-control-what-anonymous-interview-tells-you-about-power

    A week before the interview, the People’s Daily published the transcript of one of his speeches laced with cultural-revolution idiom, sending chills down the spines of party cadres: “There are careerists and conspirators in our Party undermining the Party’s governance…We must respond resolutely to eliminate the problem.”

    During one of the darkest periods of Chinese history, words like careerists and conspirators used to be reserved for leaders such as Lin Bao, successor-designate of Mao Zhedong who allegedly tried to kill Mao. Xi gave the speech to graft fighters in January. Whatever the rationale of publishing the speech four months later, the message is clear – fall in line, or else.

  54. 54
    Mike says:

    Quite possibly the best thread on here ever. We used to talk about Pink Ponies and rainbows, ah the innocence of our youth on Seattle Bubble….

    More of a real concern then a nuclear terrorist attack would be some sort of misguided rent control policy and combined with a hard push back on development by the NIMBYs in places like the UW that are set to be the next large up-zones. Seattle is on a building tear that puts San Fran to shame. Every time I’m down in SF I walk around going, my god they have a housing cost crisis here and there are basically ZERO cranes to be found anywhere. It’s like the guy who hits himself in the head and complains of the headaches.

    I agree with the end of Tim’s post that the current frantic pace of building isn’t likely to lower prices, but it sets the ground work for prices to actually soften during the next economic correction (even if its not Tech Armageddon). Even more important, today’s frantic building creates the potential for slack for when the next recovery takes off since large scale housing development is always a year or two behind the larger economic cycle. It’s the story of Seattle: builders react to prices and build too much, economy tanks and many projects are finished into a lousy market leading to rental incentives, economy improves, developers wait too long to see that all of the slack has been taken up, slack is taken up and there are 2-3 years of tightness as developers flood back into the market, rinse lather repeat….

    For now I’ll keep fearing the enemy within our political system that wants to be “world class” like SF with rent control and stiff development limits way more than an act of god or terrorism I can’t control.

  55. 55
    boater says:

    By Blake @ 44:

    By boater @ 30:

    Are people seriously contending that what will stop this market is either a nuclear attack/meltdown or an earthquake that may happen anytime in the next +/- 400 years?

    Hate to tell you, but we are not due for an earthquake in the next 400+ years… we are OVERDUE NOW. Great earthquakes have struck this region every 243 years on average and the last big one was in 1700…

    http://www.newyorker.com/magazine/2015/07/20/the-really-big-one
    “Thanks to that work, we now know that the Pacific Northwest has experienced forty-one subduction-zone earthquakes in the past ten thousand years. If you divide ten thousand by forty-one, you get two hundred and forty-three, which is Cascadia’s recurrence interval: the average amount of time that elapses between earthquakes. That timespan is dangerous both because it is too long—long enough for us to unwittingly build an entire civilization on top of our continent’s worst fault line—and because it is not long enough. Counting from the earthquake of 1700, we are now three hundred and fifteen years into a two-hundred-and-forty-three-year cycle.”

    … and these subduction-zone earthquakes are not little 6.8 Nisqually earthquakes, but 9.0… 9.0 is 100 times stronger than a 7.0 earthquake!

    8-8.9 = Major damage to buildings, structures likely to be destroyed. Will cause moderate to heavy damage to sturdy or earthquake-resistant buildings. Damaging in large areas. Felt in extremely large regions.

    9+ = At or near total destruction – severe damage or collapse to all buildings. Heavy damage and shaking extends to distant locations. Permanent changes in ground topography.

    Have a nice day :-)

    Read more. As it happens they do not happen evenly distributed across that period. They cluster. We are neither overdue nor too soon.

  56. 56
    Green Horn Investor says:

    RE: northwestdr @ 46

    case study in christ church nz might be instructive.

    of course the situation is quite different, but i’m sure some lessons could be drawn.

    http://www.stuff.co.nz/the-press/business/the-rebuild/69329787/As-is-where-is-houses-are-Christchurchs-new-gold-mine

  57. 57
    Justme says:

    RE: Mike @ 54

    >>Every time I’m down in SF I walk around going, my god they have a housing cost crisis here and there are basically ZERO cranes to be found anywhere.

    Wait a minute. What you are implying about construction activity just isn’t true. SF has had LOTS of construction in 2012-2016, and before that another peak around . A simple google search will show you that. See for example

    http://sf-planning.org/pipeline-report

    Not sure whether crane counts is a reliable indicator, but do you have any data on cranes to back up your claim?

  58. 58
    Hamlet says:

    How would a big earthquake affect the tax base? Serious property damage means many houses will be worth far less. Will they be reassessed to a much lower property tax?

    And if jobs and houses are lost, many people might leave, which means lower sales tax revenue.

    Overall, an earthquake might mean less revenue for Seattle, at a time when it’ll need more revenue to rebuild the infrastructure. Broken infrastructure, and less revenue to rebuild, should make Seattle a less desirable place to live.

    I guess a lot depends on how much federal aid the city will receive.

  59. 59

    By Hamlet @ 58:

    How would a big earthquake affect the tax base? Serious property damage means many houses will be worth far less. Will they be reassessed to a much lower property tax?

    That would affect things like levies for schools, fire stations, etc., but not the main tax. The main tax rate is determined by dividing the total value of all properties in a given area by the amount of revenue to be received (or visa versa–it’s too early/too little coffee to think about that). So if the total value of all the property in King County was cut in half the tax rate would roughly double. So it would hurt some things, but not others.

    I would guess you’d see a lot of foreclosures and then sales by national banks, neither of which generates REET revenue. But the sale to a developer would, as would the subsequent sale to a consumer, so REET revenue would likely fall initially and then rise.

  60. 60
    redmondjp says:

    RE: Justme @ 57 – Google ‘Skyscraper index’.

  61. 61
    Justme says:

    RE: redmondjp @ 60

    Yeah. Another variation on the “skyscraper index” is what I call the “palatial wholly-owned new headquarters index”. It is uncanny how big corporations choose to build (and OWN) huge expensive HQ buildings just when they are peaking.

    For example, the new Apple HQ in Cupertino is rising in Cupertino right now, just as Apple’s revenues are falling 13% YoY. Another example may be Amazon’s new digs at Lake Union, Seattle. We shall see.

  62. 62

    RE: Kary L. Krismer @ 11
    How Many Home Owners Have “Real Earthquake Insurance”

    Without the $100K deductible [cash]. No one, the earthquake insurance will bankrupt us on deductibles alone….that’s why its a Bubble Popper…

  63. 63
    redmondjp says:

    RE: Justme @ 61 – I’ve been reading Geekwire lately and they have had a rash of “new Seattle HQ tour” articles recently. Man oh man it so reminds me of the heady days of the late 1990s during Dotcom 1.0. Got sock puppet?

  64. 64
    PrivateBuyer says:

    Change of subject, advice needed. We are going to view a home privately and could very well decide to make an offer. Neither party wants to involve RE agents.
    1).what advice would you give regarding negotiation?
    2) what would a Real Estate Lawyer need to do to make this sale legal and binding? Would the offer be presented by the lawyer?

  65. 65
    greg says:

    RE: redmondjp @ 63

    I am starting to think that if god himself came down and said “house prices are going down” we would have posters here saying JC just doesn’t understand Real Estate.

  66. 66
    Jasper says:

    By softwarengineer @ 62:

    RE: Kary L. Krismer @ 11
    How Many Home Owners Have “Real Earthquake Insurance”

    Without the $100K deductible [cash]. No one, the earthquake insurance will bankrupt us on deductibles alone….that’s why its a Bubble Popper…

    Amica offers 5% deductibles (and replacement cost coverage up to 130% of insured value) with reasonable prices on houses built to almost-adequate earthquake codes. (Hardie siding is covered, but masonry veneers are not.) For a typical house built in Seattle in the 21st Century, that works out to a $ 20,000 – $ 30,000 deductible, with an incremental cost (compared to homeowners’ insurance that does not include any earthquake coverage) of about $ 30 per month.

    If you custom build, you can have the house built to an adequate earthquake code (by not using masonry veneers, and by substituting in San Jose, California’s shaking values instead of Seattle’s underestimated shaking values, and/or by overestimating the house’s dead loads).

    I have both forms of earthquake insurance. And yes, I own stock in a company that sells earthquake tie-downs and shear panels.

  67. 67
    AJT says:

    RE: greg @ 65

    I think some of the bulls on this blog may not realize headlines any further than Tacoma. There are some macro headwinds out there that seem to be becoming more prevalent vs just rumblings.
    http://www.bloomberg.com/news/videos/2016-05-18/this-could-be-the-end-of-the-tech-boom

    Also there are two macros that are UNPRECEDENTED. First there has never been so much debt accumulated at such a rapid pace as there has been in China since 08. Ever. At this point the pundits who think China can grow out of this is shrinking exponentially, like two. It is getting serious with world wide ramifications that will affect our little slice of heaven. Anybody care to guess who Seattle’s largest trading partner is?
    http://www.telegraph.co.uk/business/2016/05/18/chinas-communist-party-goes-way-of-qing-dynasty-as-debt-hits-lim/
    Another thing that NO ONE in the financial world will argue is that negative interest rates or near negative interest rates is again unprecedented. There are some very smart people out there that state this is experimental and no one has any idea the impact of these policies in the medium to long term. We all know short term that zero rates have massively inflated asset prices, i.e., stocks and RE.
    I’m no prepper but I haven’t seen this many storm clouds on the horizon for some time.
    One last thing. Employment is a lagging indicator.

  68. 68
    Justme says:

    It is unusual for the financial press to quote anyone that states that the real purpose of FRB policy (ZIRP and QE) is/was to create asset inflation, and/or that same policies are largely ineffective for creating job inflation and wage inflation. Besides, the Fed does not want wage inflation, anyway. The quote below is pretty factual, apart from the statement that claims asset inflation is an “explicit goal”. The Fed NEVER says explicitly that they are targeting the stock market. Fed officials may make some noises about the housing market or the mortgage market, but they never say that are trying to goose the stock market, for example. Savers, renters and retirees will not accept that the Fed steers inflation to benefit bankers and the 1% rather than renters and the 99%, if only they knew and understood that this is what the Fed actually does.

    http://finance.yahoo.com/news/citi-well-only-slightly-less-103913876.html

    QUOTE:

    “Central banks may be partially to blame for the misperception that economic conditions will be materially better than they are now when inflation is higher, contends Citigroup Inc. Global Head of G10 FX Strategy Steven Englander. To the extent that this true, it probably has much to do with the increased emphasis the Fed has placed on the wealth effect as part of the transition mechanism by which unconventional accommodation boosted activity when policy rates approached zero.”

    “Asset price inflation, improving Americans’ aggregate net wealth in the process, has been an explicit goal of Fed policy.”

    ENDQUOTE

    What Americans’ net wealth exactly? Well, first and foremost the wealth of banks and the top 1%. Basically the US top 1% is in a contest with the rest of the world about who can have the most overpriced houses and the most overpriced stock market, because that makes the top 1% richer. Never mind the rest of the population. Never mind actual jobs and production. The goal is to dominate everyone else, inside and outside of the country, and our main product is overpriced assets, because that is the only arena in which we can “compete”. Some of the middle class may be along for the asset inflation ride, but the middle class is shrinking and they are just a prop for the top 1%.

  69. 69
    Bob says:

    Beware

    Seattle housing prices have been rising in an environment where:
    -Local wages are stagnant
    -Corporate profits are stagnant or even declining in some cases
    -Formal interest rate policy is increasing (albeit gradually)
    -China is starting to clamp down on foreign investment
    -Stock market has lost all upward momentum and risks large downside drops

    The above factors will likely lead to several of the following events within a year:
    -Stock market declines
    -Interest rate increases
    -Layoffs and declines of immigration to Seattle
    -Increases in home listings
    -Declines in Chinese investment

  70. 70
    Bryan Copley says:

    Mitigation via Innovation: Amazon is killing it, and blue chip tech companies are hiring thousands locally who will continue to support local small businesses.

    Meanwhile, a small but steady portion of tech workers at these blue chips will leave BigCorp to innovate, starting new companies, creating more jobs. Virtuous cycle.

    Most important thing for Seattle to get right now is creation of more housing (affordable + sustainable + dense), better transportation/transit, universal access to online STEAM education, and societal safety nets via public/private partnerships which result in improved quality of life for all constituents and equal access to opportunity.

    Rising tide lifts all ships.

  71. 71
    northwestdr says:

    RE: Bryan Copley @ 70
    Hahaha, Bryan! I like the line about “improved quality of life for all constituents.” Press release from the Seattle city gov (or, uh, STEAM education)?

  72. 72
    LetsgoSounders says:

    I made alot of money investing in Florida during the major bubble there 10 years ago. In 2004 I thought it was over for me when Port Charlotte was devestated by a hurricane. Well quite the opposite happened. People whose houses were destroyed started competing with investors for real estate and that is when prices really got out of control. So be careful for what you wish for. From my experience in Florida if we are in a bubble this is the top of the 1st inning. There is zero reason to think prices are going to fall for the next 3-5 years considering the influx of new people, high paying jobs, record low inventory, Asian investors bailing on China, and a few other very valid reasons like no shortage of buyers using “mommy and daddy” money to buy houses here. Anyone else notice the influx of 18 year olds driving $150k cars lately?

    I will also add at the bottom of the market a few years ago hedge funds went into areas where real estate crated and bought 1000s of houses around the country. I would not rule that out here at some point if the numbers work. They can just bank houses or rent them out and probably out perform the stock market for a few years. Blackstone set up a fund to do this and they already have a presence in Seattle so…. That would actually get me thinking we are in full on bubble mode but we aren’t there yet.

    Large tech companies from the Bay Area are just starting to lay groundwork here, this just just the beginning. Buy Seattle short Silicon Valley.

  73. 73
    AverageJoe says:

    Any take on the NAR report on affordability: http://www.realtor.org/topics/housing-affordability-index

  74. 74
    Som says:

    RE: softwarengineer @ 2 – More than 50% of Microsoft revenue comes from outside US. More than 50% of GE revenue comes from outside US. More than 50% of IBM revenue comes from outside US. More than…more than…more than. I could go on. Apple did close to $60B revenue in China alone last year.

    It is the fiduciary duty of the CEO to increase shareholder value. If one would not expand internationally, growth would be stagnant. Equity market returns would drop, ROI on equity capital, and thereby interest in equity investing would drop. Businesses would then have to take debt to grow which does not scale.

    A tiny fraction of goods sold by US to international customers are necessity based. Maybe Monsanto and some drugs. ANYTHING not a necessity is luxury. To sell luxury goods to other countries, you make deals. You say “ok I’ll build a factory here to reassemble some parts…ok? Maybe I’ll get you some customer service jobs…ok? Ok, maybe I’ll give you some fancy jobs too. But then allow all my products to be sold without any tariff…ok? Give me first citizen business access. Change your laws to protect all my patents so no indigenous company can ever succeed, enforce MY licensing rules, etc. ok?”

    You think China cares about iPhone when half of the services don’t work. They could have lived without giving $60B to an American company. Why is Tim Cook raving about India, touring India, and trying to now open factories, etc. in India – coincidentally he has also applied for hundreds of permits to open retail stores in India, wants to dump refurbished iPhones at a premium, and wants preferential treatment from government.

    Global trade is not a one way street. You give some you take some. And so far America has been winning. If there was no global trade, American economy would be regressing. Domestic growth happened prior to 20th century and saturated by mid 20th century.

    But oh my…you are as simplistic as they come. You need to feel better to sleep well at night. So you blame your incompetence on globalism. By the way, how come I never hear complains about Ireland taking up all the jobs? Software outsourcing industry in Ireland contributes 40% in industrial GDP to Ireland, over 80B euros. Large amount of US jobs have moved to Ireland over the last 15 years. Umm, do you want to come out and say it – “oh the Irish them are all good fellas, have red hair and fair skin, they are like us, they are our race. So it’s ok.” I have no problems with this logic. I can understand it. But please have some balls. Do not hide your apparent you-know-what under the cloak of anti-globalism.

  75. 75

    RE: Som @ 74 – I don’t think anyone disputes the fact that free trade benefits large business interests. It’s the adverse impact on many workers that causes many to not like free trade. The lack of any significant real wage growth for a many many years is probably most likely to free trade deals. Employees can’t demand more money when the supply of workers has greatly increased.

  76. 76
    Mike says:

    The Stranger is almost entirely hiring people from outside Seattle at this point. I know Charles has been there a while but with the entire new staff being recent migrants the views expressed there, and what makes it into print is turning into more of a look at how Seattle is viewed as an outsider.

    This is another reason why the view has shifted to be VERY pro-developer. The entire office is, when it comes down to it, ok with wiping the rest of old Seattle off the map and replacing it with a new version built for consumption from elsewhere.

    So if The Stranger seems to be even more incoherent than usual lately, that’s why.

  77. 77
    Som says:

    RE: Kary L. Krismer @ 75 – “Probably most likely” and other conjectures I hear are dangerous. My point is simply this – the issue is much more intricate than what some politicians and public broadcasters make out to be. So, policy built on populist conjecture without understanding implications would take us I don’t know where.

    Trade should absolutely be fair and corrected where necessary. But there must be trade. Putting us in a silo would destroy entrepreneurial fabric. When I read simple comments like “Umm…my job was replaced by a robot…robot bad.”, it just bothers me. If only such people would educate themselves and be more nuanced instead of painting with a broad brush.

    For the uninitiated, the reference to Monsanto was saracastic.

  78. 78
    Blurtman says:

    Cold calling Realtors®? Indeed. “A home in your neighborhood has recently sold, and buyers who have been outbid are looking for homes. If you are aware of any homes in your neighborhood that will be up for sale, please call….”

  79. 79
    Irrational Exhuberance says:

    Hypothetically speaking

    – When (not if) Washington State and/or other states without income tax decides to enact a progressive income tax — what effect do you think that will have on home values in those states?
    – When (not if) California negates Proposition 13 — what effect do you think that will have on home values in San Francisco?
    – When (not if) other states enact law that throw out non-compete agreements — what effect do you think that will have on home values in tech states?
    – When (not if) tech executives see lesser returns on real estate surrounding office acquisitions they themselves decide/approve — what effect do you think that will have on home values?

    These are the four things making tech companies favor Nevada, Delaware, California and Washington State. If you aren’t aware of these — you better get aware because these are the conditions keeping home values high. If you don’t work in tech — you probably aren’t aware that executives and their friends seem to buy property around a new office BEFORE announcing a new office.

    Large firms WILL exit these states in advance to protect themselves from a different climate regarding taxation. Income tax is coming — right now we are, no hidden agenda, taking advantage of arbitage in wealth creation by living in a state w/o income tax and a state where we hinder workers with non-competes in an effort to guard our business. We might live in a state that artificially taxes your property at below market rates (Prop 13 in California); Apple and other tech companies largely get the largest benefit of peanuts for large swaths of property. Apple and other tech companies keep large piles of cash just in case the tax climate changes.

    Be prepared before you buy into the “it’s not a bubble territory”… it is a bubble and it is supported by laws inducing arbitrage. It’s not a bubble as long as the laws stay put, as soon as law change or other states adopt laws favoring tech — it pops. Stay ahead or be burned.

  80. 80

    By Irrational Exhuberance @ 79:

    Hypothetically speaking

    – When (not if) Washington State and/or other states without income tax decides to enact a progressive income tax — what effect do you think that will have on home values in those states?
    – When (not if) California negates Proposition 13 — what effect do you think that will have on home values in San Francisco?

    I’m not seeing income tax mattering much. If it did, Boeing would not have moved their headquarters to Illinois (assuming Boeing management at the time was competent, which is a huge assumption). I also wouldn’t be so certain that income taxes will come to Washington, The voters are not that stupid, and in all likelihood it would require a constitutional amendment (notwithstanding the arguments of the proponents of an income tax).

    As to Prop 13, if I understand it correctly, getting rid of that would probably help home prices for a while, because new purchasers wouldn’t be hit with as large of tax (assuming they kept overall RE tax collections the same as part of eliminating it).

  81. 81
    greg says:

    RE: Som @ 77

    I think most people fully understand we need trade, but many are questioning the price of that trade and who the trade benefits.

    For the majority of American workers it is every hard to believe these trade agreements will ever benefit them in any way. The past 30 years have shown them a decline in job security, flat to declining wages and very few ever find as good a job as the one they lose.

    I am not a fan of Trump politics , I very much dislike the lies and twisted truths. However I fully understand why someone who did everything they were told would be angry and looking to place blame. Many of them played by the rules and then got beaten over the head by the very rules that they were promised would protect them.

    Try telling almost anyone outside of tech that things are better now or that Trade agreements make things better for Americans and they will tell you story after story of people who lost their jobs, their homes, their futures to NAFTA or some other agreement that opened our market to competitors in their field to benefit Steve Jobs orsome other “winners”.

    Clearly trade is vital, but the cost has been very high .

  82. 82
    Anonymous Coward says:

    By greg @ 81:

    RE:

    Try telling almost anyone outside of tech that things are better now or that Trade agreements make things better for Americans and they will tell you story after story of people who lost their jobs, their homes, their futures to NAFTA or some other agreement that opened our market to competitors in their field to benefit Steve Jobs orsome other “winners”.

    Hmm… And yet I just saw something in the news this morning announcing a $100B sale of locally manufactured goods to an overseas buyer. Now, outside of commercial airplane makers, I suppose free(er) trade might not have done a lot for American workers, but this is Seattle Bubble, not Youngstown Bubble.

  83. 83

    RE: Anonymous Coward @ 82 – Given how much of the 787 is produced out of the country, I don’t know that all Boeing workers would agree with you. But other than that, yes, this area has been hurt less than others.

  84. 84
    Cap''n says:

    RE: greg @ 81

    It’s interesting that most “research” shows trade deals are generally an economic plus, but the benefits are very diffuse. Cost of some goods may slightly decrease, GDP may slightly rise, but the benefits for individuals are nearly imperceptible. The costs, however, are high and concentrated for the affected workers. So I can sympathize with those who think it’s a raw deal.

  85. 85
    biliruben says:

    By Jillayne Schlicke @ 21:

    From the article: Advice on how to beat out in a multiple offer scenario
    “Offer to pay the SELLER’s closing costs.”

    Tell me this isn’t happening.

    http://www.housingwire.com/articles/37025-how-to-beat-out-other-homebuyers-when-there-is-no-inventory

    It didn’t happen in our multiple offer situation last week. Though I did at least get the buyer to pay most of the buyer’s agent’s commission. Which should be happening as a matter of course. How can you be confident they really are representing you to the maximum of their ability if your adversary is paying their salary.

  86. 86
    Irrational Exhuberance says:

    Kary — agreed, however I think you and I both know that solutions to the wealth gap is something rapidly rising in politics and that there are studies (ie. Matthew Rognlie’s Deciphering the fall and rise in the
    net capital share
    ) making rounds in DC around wealth generation being tied to real estate. We’ve been warned and the Fed is already flashing the warnings too, “we told you there was too much risk”. I find the Fed signals impending policy change because it prepares the system well in advance (TL/DR: the Fed telegraphs policy changes, learn to read it).

    We shouldn’t feel excluded from activities in Federal government or neighboring states — we stand (with SF and other metro areas) to lose if a larger change in laws changes to support social mobility. We’ll probably reach a soft ceiling in prices as the downward pressure of higher taxes bites folks booking higher valuations on their homes here in the Seattle area, whereas in SF, the large tax increases are deferred to new buyers by Prop 13 (we don’t have that law). I think we are on the verge of policy changes that will impact housing prices negatively once real estate risk is has been “safely” reduced on a majority of retirement accounts, which is something policy makers, banks and the Fed are slowly putting in place. If you are wealthy and haven’t read Fed minutes nor kept up with the Fed’s flashing of warning signs, too bad for you.

    As for Prop 13 — straight from the horse’s mouth — bullet point 4 from http://www.californiataxdata.com/pdf/Prop13.pdf:

    Reassessment Upon Change of Ownership

    Proposition 13 replaced the practice of annually reassessing property at market value with a system based on cost at acquisition. Prior to Proposition 13, if homes in a neighborhood sold for higher prices, neighboring properties might have been reassessed based on the newly increased area values. Under Prop. 13, the property is assessed for tax purposes only when it changes ownership. As long as the property is not sold, future increases in assessed value are limited to an annual inflation factor of no more than 2%.

    Here’s Matt’s paper which is circling and re-circling DC’s elite:
    http://www.brookings.edu/~/media/projects/bpea/spring-2015/2015a_rognlie.pdf

    And here is a gentle CRE reminder from the Fed:
    https://www.federalreserve.gov/newsevents/press/bcreg/bcreg20151218a1.pdf

  87. 87

    RE: biliruben @ 85 – Long time no see!

  88. 88
    biliruben says:

    By Kary L. Krismer @ 87:

    RE: biliruben @ 85 – Long time no see!

    Hey Kary – Yeah, thought it wise to go back to listening in on you bubble-heads (of which I was a fervent member) while preparing our house for market, and trying to figure out what to price it at. Got about what I thought I would just following the sales on Redfin for a few months. Maybe a bit more, because I went with a discount broker and had multiple offers I can play against each other. And their agents.

    Hope things are bubbly again so it won’t be impossible to buy back in, but it doesn’t really feel like it to me. We shall see! I too was also hoping for a little help (not too much!!) from the Seattle fault.

    Down in Albuquerque now for somewhat of an extended adventure, though hopefully back in Seattle sooner rather than later.

  89. 89
    Blake says:

    RE: Irrational Exhuberance @ 86 -IE wrote: “Kary — agreed, however I think you and I both know that solutions to the wealth gap is something rapidly rising in politics…”

    Say what? You think President Trump/Clinton and a Republican Congress are going after the wealth gap? “Solutions”!? Ha ha hah!!!
    … I want some of what u r smoking…

  90. 90
  91. 91

    RE: Blake @ 89 – I wouldn’t assume that if it’s a President Clinton that it would still be a Republican Congress.

  92. 92
    Blake says:

    RE: Kary L. Krismer @ 90
    If it’s a landslide, the Dems may get the Senate… but the Reps have the House locked up until 2020 redistricting/census at least. But it looks like it’ll be close… Trump is running a populist campaign and Hillary is the consummate insider/establishment… and a terrible, terrible campaigner!
    http://billmoyers.com/story/trump-might-win/
    -snip- But in my travels around the country I’ve found many who support him precisely because of the qualities he’s being criticized for having.

    A Latina-American from Laredo, Texas, tells me she and most of her friends are for Trump because he wants to keep Mexicans out. She thinks too many Mexicans have come here illegally, making it harder for those here legally.

    A union member from Pittsburgh says he’s for Trump because he’ll be tough on American companies shipping jobs abroad, tough with the Chinese, tough with Muslims.

    A small businessman in Cincinnati tells me he’s for Trump because “Trump’s not a politician. He’ll give them hell in Washington.”
    (end quote)
    … A lot of independents turned out to vote for Bernie because they really want change… and they don’t like Hillary. They are not Bernie “followers”… Trump will do well in Ohio, Penn… rust belt. Plus he is very clever and much more ruthless than Bernie. It’ll be ugly…

  93. 93

    RE: Jasper @ 66
    You Sell Earthquake Insurance and Forgot MASSIVE Florida’s Hurricanes?

    Ya know, when all the insurance companies just didn’t honor their policies with MASS STATE-WIDE DAMAGE. Trust no-one during a massive apocalypse…

  94. 94

    RE: Blake @ 91
    Yes Blake

    My Latina Friend [Legal US Citizen Since age 19] From Dallas Called Me Recently

    She did Caucus work for Hillary in 2008…..she’s for Trump too….she wants her kids to have jobs.

  95. 95

    RE: Blake @ 91 – I don’t know that the usual rules will apply because I think most the voters will be voting against someone rather than voting for someone at the Presidential level. That could affect turnout.

  96. 96
    Erik says:

    They should have said “Seattle affordability is pretty much game over for the next 8 years.”

  97. 97
    Blurtman says:

    By Blake @ 92:

    RE: Kary L. Krismer @ 90

    -snip- But in my travels around the country I’ve found many who support him precisely because of the qualities he’s being criticized for having.

    A Latina-American from Laredo, Texas, tells me she and most of her friends are for Trump because he wants to keep Mexicans out. She thinks too many Mexicans have come here illegally, making it harder for those here legally.

    I am constantly befuddled as to why people think Latin Americans will vote as a bloc, but not European Americans. I attribute it to ignorance stoked by the MSM.

    Recall the controversy surrounding Elizabeth Warren self identifying as a Native American. She was universally mocked even though many mixed race Americans do have Native American ancestry. And yet many politicians claim to be Native Americans by self declaring that they are Hispanic or even more inaccurately, Latino.

    In the USA, endogenous Native Americans must prove that they are registered on a tribal registry to be considered legitimate by the USG. Native Americans with roots south of the border are held to no such standard. Anyone can say they are. Has Bob Menendez been asked to show proof of Native American ancestry?

    Several Latin American countries are composed almost totally of European Americans, much moreso than the USA. And yet the media will have you believe that Europeans, Asians, Southeast Asians, etc. were magically transformed into Hispanic minorities by moving to Latin America.

    And so Latin Americans’s voting will represent the diversity of this group which merely refers to a geographical area of origin. It isn’t a race or even an ethnicity. Everyone, please turn of the television and stop watching CNN.

  98. 98
    greg says:

    RE: Anonymous Coward @ 82

    Trade agreements create winners and losers. Right now Boeing is a winner, and some other group is a loser. Boeing is doing fine, but of course we have already seen growth has moved away from this region through political dealings .

    so yep pretty much exactly what I was saying.

  99. 99
    Michael says:

    To call Fischer’s model a “supple/demand” model gives too much credit to the supply variable. It’s really a demand model. With the demand variables only, the r squared is .924; with the supply variable added it is .940.

  100. 100
    pfft says:

    By Irrational Exhuberance @ 79:

    Hypothetically speaking

    – When (not if) Washington State and/or other states without income tax decides to enact a progressive income tax — what effect do you think that will have on home values in those states?
    – When (not if) California negates Proposition 13 — what effect do you think that will have on home values in San Francisco?
    – When (not if) other states enact law that throw out non-compete agreements — what effect do you think that will have on home values in tech states?
    – When (not if) tech executives see lesser returns on real estate surrounding office acquisitions they themselves decide/approve — what effect do you think that will have on home values?

    These are the four things making tech companies favor Nevada, Delaware, California and Washington State. If you aren’t aware of these — you better get aware because these are the conditions keeping home values high. If you don’t work in tech — you probably aren’t aware that executives and their friends seem to buy property around a new office BEFORE announcing a new office.

    Large firms WILL exit these states in advance to protect themselves from a different climate regarding taxation. Income tax is coming — right now we are, no hidden agenda, taking advantage of arbitage in wealth creation by living in a state w/o income tax and a state where we hinder workers with non-competes in an effort to guard our business. We might live in a state that artificially taxes your property at below market rates (Prop 13 in California); Apple and other tech companies largely get the largest benefit of peanuts for large swaths of property. Apple and other tech companies keep large piles of cash just in case the tax climate changes.

    Be prepared before you buy into the “it’s not a bubble territory”… it is a bubble and it is supported by laws inducing arbitrage. It’s not a bubble as long as the laws stay put, as soon as law change or other states adopt laws favoring tech — it pops. Stay ahead or be burned.

    I’ve never met anyone who left somewhere because of taxes. most of the time it’s because of the weather. people may move within a state because of taxes but often what they save on property taxes they have taken back with high home prices.

    I read that the whole sun belt is only the sun belt because of air conditioning. It’s a shame that people are leaving the rust belt and the great lakes area with it’s awesome amount of fresh water for the sun belt. people are moving somewhere with little water! think of all the essential blue collar skills and ingenuity in the rust belt.

    on some level I can understand it though, some rust belt cities are cold! the thing is every doomed rust belt city has thriving suburbs.

  101. 101
    pfft says:

    By Kary L. Krismer @ 91:

    RE: Blake @ 89 – I wouldn’t assume that if it’s a President Clinton that it would still be a Republican Congress.

    the Senate will probably go dem but not the House.

  102. 102
    pfft says:

    By softwarengineer @ 94:

    RE: Blake @ 91
    Yes Blake

    My Latina Friend [Legal US Citizen Since age 19] From Dallas Called Me Recently

    She did Caucus work for Hillary in 2008…..she’s for Trump too….she wants her kids to have jobs.

    So why is she voting Republican? W was a D for disaster. Republicans say Obama has been a disaster as though we forgot 2007 and 2008. W left a absolute mess and they think we’ve forgotten that. Every time a democrat advances a policy that benefits the regular guy Republicans say it will destroy the economy and cause a recession. I started following politics in the 90s. Clintons tax rasise was supposed to be a disaster but it wasn’t. the tech bubble was a symptom not a cause of the 90s prosperity. Everything Obama does was supposed to destroy the economy. His Las Vegas comments(remember when kary was going crazy about them? How’d the go kary?). The stimulus was going to destroy the economy. The deficit was supposed to destroy the economy. Same for Obamacare. Now it’s the minimum wage and the new overtimes rules. Apparently the ordinary person has enough money and if they have just a little more the economy will go into a recession. Then they turn right back around and say people haven’t seen their earnings increase enough.

    Ryan: Overtime rule is ‘absolute disaster’
    http://thehill.com/regulation/labor/280357-ryan-overtime-rule-is-absolute-disaster

  103. 103
    pfft says:

    By Blurtman @ 97:

    By Blake @ 92:

    RE: Kary L. Krismer @ 90

    -snip- But in my travels around the country I’ve found many who support him precisely because of the qualities he’s being criticized for having.

    A Latina-American from Laredo, Texas, tells me she and most of her friends are for Trump because he wants to keep Mexicans out. She thinks too many Mexicans have come here illegally, making it harder for those here legally.

    I am constantly befuddled as to why people think Latin Americans will vote as a bloc, but not European Americans. I attribute it to ignorance stoked by the MSM.

    Recall the controversy surrounding Elizabeth Warren self identifying as a Native American. She was universally mocked even though many mixed race Americans do have Native American ancestry. And yet many politicians claim to be Native Americans by self declaring that they are Hispanic or even more inaccurately, Latino.

    In the USA, endogenous Native Americans must prove that they are registered on a tribal registry to be considered legitimate by the USG. Native Americans with roots south of the border are held to no such standard. Anyone can say they are. Has Bob Menendez been asked to show proof of Native American ancestry?

    Several Latin American countries are composed almost totally of European Americans, much moreso than the USA. And yet the media will have you believe that Europeans, Asians, Southeast Asians, etc. were magically transformed into Hispanic minorities by moving to Latin America.

    And so Latin Americans’s voting will represent the diversity of this group which merely refers to a geographical area of origin. It isn’t a race or even an ethnicity. Everyone, please turn of the television and stop watching CNN.

    I remember that someone here had a weird fixation with hispanics and latinos in terms of them and what race they were and if latino or hispanic were even a race. weird. is that you?
    “And yet the media will have you believe that Europeans, Asians, Southeast Asians, etc. were magically transformed into Hispanic minorities by moving to Latin America.”

    NO. never. maybe you are thinking that when they are here they are minorities. I think most people and media members know that the minorities in latin america are the indigenous people.

    “It isn’t a race or even an ethnicity. ”

    LOL. I guess you have never read the comments section of many website or listen to trump and his supporters.

    Many groups do vote as blocs lately. Men are heavily republican. Woman not so much. Black and hispanic voters go heavily for democrats. As a bloc European-Americans(the white vote) I think are split 60-40 for republicans. The republican party is basically heavily supported by white males and that’s it.

  104. 104
    Som says:

    RE: pfft @ 102 – President Comancho has nothing on Trump: https://www.youtube.com/watch?v=oDGGZpAmZr4

  105. 105
    David B. says:

    By Kary L. Krismer @ 80:

    I’m not seeing income tax mattering much. If it did, Boeing would not have moved their headquarters to Illinois (assuming Boeing management at the time was competent, which is a huge assumption). I also wouldn’t be so certain that income taxes will come to Washington, The voters are not that stupid, and in all likelihood it would require a constitutional amendment (notwithstanding the arguments of the proponents of an income tax)..

    What’s so “stupid” about wanting to fix one of the most regressive tax policies in the USA? I agree that it would almost certainly take a constitutional amendment (given case history), but amending a state constitution is much easier than amending the Federal one. I agree with IE that it will eventually happen. The rub is that “eventually” can sometimes take a long time.

  106. 106

    RE: David B. @ 105 – I’m not so sure Washington’s tax system is all that regressive since low income people don’t pay sales tax on rent or food. Also, our real estate taxes, to the extent they contribute to rental rates (debatable) are rather low. About the only regressive tax we have is the car tab tax, thanks to Tim Eyeman.

    But the reason it would be stupid for voters to approve an income tax is that it would just lead to higher taxes overall, unless maybe the same constitutional amendment that made income taxes legal made sales taxes illegal.

  107. 107
    m-s says:

    RE: Kary L. Krismer @ 106

    Make sure you are sure. According to the Institute on Taxation and Economic Policy, Washington has the most regressive tax policy of all 50 states.

    http://www.itep.org/whopays/full_report.php

    And when income inequality is present, states like WA that are regressive get further behind, because they collect less in taxes from the high-income portion of their population.

  108. 108
    redmondjp says:

    RE: Kary L. Krismer @ 106 – Nice try Kary, blaming Eyman for actually LOWERING car tab fees.

    Why don’t you place the blame where it belongs?

    If Sound Transit 3 passes this fall, annual vehicle registration costs will once-again go up to several hundred dollars per vehicle, per year, with the charge based upon the non-depreciated MSRP of the vehicle. Will that be Tim Eyman’s fault too?

  109. 109

    RE: redmondjp @ 108 – Being regressive has to do with values. When you pay largely the same tax on a $50,000 car as a $500.00 car that makes it regressive because less wealthy people tend to own less expensive cars.

    The Sound Transit change you mention would make it less regressive.

  110. 110

    RE: m-s @ 107 – I’m not sure if that’s the same study I saw a few months ago, but if it is it makes a lot of questionable assumptions.

  111. 111
    David B. says:

    By Kary L. Krismer @ 106:

    But the reason it would be stupid for voters to approve an income tax is that it would just lead to higher taxes overall, unless maybe the same constitutional amendment that made income taxes legal made sales taxes illegal.

    There is no reason why that must happen. Overall tax revenues and the mix of taxes used to collect those revenues are two different things.

    Nearly every other state uses some mixture of sales and income tax that is less regressive, even states that are politically much more conservative than Washington. Washington’s tax system is an anomaly, and it won’t persist indefinitely.

  112. 112

    By David B. @ 111:

    By Kary L. Krismer @ 106:

    But the reason it would be stupid for voters to approve an income tax is that it would just lead to higher taxes overall, unless maybe the same constitutional amendment that made income taxes legal made sales taxes illegal.

    There is no reason why that must happen. Overall tax revenues and the mix of taxes used to collect those revenues are two different things.

    Nearly every other state uses some mixture of sales and income tax that is less regressive, even states that are politically much more conservative than Washington. Washington’s tax system is an anomaly, and it won’t persist indefinitely.

    There’s no reason overall higher taxes “must” happen, but given the nature of politicians . . .. In the other recent thread I didn’t realize that most of Europe had fairly significant income taxes, because I assumed that their high VAT taxes would have replaced those. They didn’t.

    And again, I don’t think the regressive analysis is all that certain, but I haven’t had time to look at the site linked. The nature of sites like the one linked is that many have a political agenda and twist their data to fit the result they want. Given that an income tax has been under consideration recently in Washington it isn’t surprising that there are some studies showing Washington is really regressive. I’m not saying that site is such a site, but I have seen at least one such site in the recent past.

  113. 113
    David B. says:

    By Kary L. Krismer @ 112:

    There’s no reason it must happen, but given the nature of politicians . . .. In the other recent thread I didn’t realize that most of Europe had fairly significant income taxes, because I assumed that their high VAT taxes would have replaced those. They didn’t.

    And many examples can be found of states that have both income taxes and sales taxes yet have a lower overall tax burden than Washington. As I have already mentioned, overall revenue collection and how that revenue is collected are two different, disjoint, things.

  114. 114

    RE: David B. @ 113 – Are there any states with both taxes and a lower tax burden that are not economic backwaters?

    I’ve been following the Washington legislature for about 7 years or so. There’s a not insignificant group down there that really really really wants to increase the tax burden in this state. Higher REET, higher sales tax, higher B&O, applying the sales tax to more things, etc.

    And don’t get me wrong. I wouldn’t be opposed to replacing the sales tax with an income tax. And there’s never been a Tim Eyeman initiative I’ve supported, because he only focuses on the revenue. I’m just against giving Olympia the power to raise taxes via more methods because I know it will be even harder to hold them back.

  115. 115
    David B. says:

    By Kary L. Krismer @ 114:

    RE: David B. @ 113 – Are there any states with both taxes and a lower tax burden that are not economic backwaters?

    Now we’re really getting into topic drift and moved goalposts. From insisting it’s not possible to insisting it’s not possible if one is not a “backwater”, whatever that means. Anyhow: Virginia. I suspect that will either be rationalized as a somehow a “backwater” (despite all the affluence around DC) or the goalposts will be moved yet again….

    I’ve been following the Washington legislature for about 7 years or so. There’s a not insignificant group down there that really really really wants to increase the tax burden in this state. Higher REET, higher sales tax, higher B&O, applying the sales tax to more things, etc.

    None of which are income taxes, let me point out.

    And anyhow, I care far more about how and for what the money is spent than the overall rate of spending. Education rather than incarceration, etc. Not all government activity is equally oppressive.

  116. 116
    Markettimer says:

    RE: pfft @ 100

    myself and many others moved from income tax states to Washington either primarily (me) or as a supporting reason due to lack of state income tax.

    I just HATE them. sales taxes you can control (just decide how much to spend), but income tax comes right off the top to the gov.

  117. 117
    redmondjp says:

    RE: Kary L. Krismer @ 109 – Are you being purposefully dense, Kary?

    Let’s see . . . $30 per year (plus taxes, RTA fees, and so on)

    OR, $80 per $10K of original MSRP of value (if ST3 passes)

    So which one is going to cost the poor more? Who cares about regressive? The rich can afford it no matter what.

  118. 118
    Warren Hutch says:

    RE: Irrational Exhuberance @ 79

    Thank you; this has been one of the more cogent posts on this blog for a while. For me, adding a global perspective on this has helped me understand this current bubble more clearly. It almost seems like real estate here in the US is serving as a global tax haven.

    As for Kary’s comment about voter stupidity regarding a state income tax, it’s not about stupidity; it’s about making sure that our infrastructure and community resources continue to provide us with the appropriate level of safety and security.

  119. 119
    Matt says:

    RE: Warren Hutch @ 117

    For me, the much more cogent post was @72 by LetsgoSounders. Such a strong post, and so very on-topic, too! Yet not a single mention of it yet by any commenters. I was struck by the “first inning” remark — since recently a commercial real estate broker who was encouraging selling said to me that he thought we were in the “8th inning.” In this particular case, he was clearly wrong with the 8th inning thing, since the property is a tear-down multi-family building (currently zoned LR2) in a Seattle “urban village”, slated to get “upzoned” through HALA …. but not until summer of NEXT year.

  120. 120
    boater says:

    So I vote no for income tax in Washington because I’ve lived in Los Angeles. While there I had a 9% income tax rate, .79% property tax rate, 9% sales tax rate and crap all for city services to ahow for it.

    Here I have a 1% property tax rate, 9.5% sales tax rate and crap all for city services to show for it. Although I tend to think I have slightly better service here.

    I firmly believe any drop in sales tax due to adding and income tax will be short lived and I see little reason to believe useful things will be done with added money.

  121. 121
    David B. says:

    RE: boater @ 119 – I’ve lived in CA, too, and the government services here are hardly the same “crap” they are there. They are in my experience significantly better run. Most of the time I have to deal with state or local government bureaucracy I come away being reminded that not all government agencies are stereotypically slow and inefficient.

    To pick one small example, getting/renewing a driver’s license is significantly less unpleasant in Washington than it is in California.

  122. 122

    By redmondjp @ 116:

    So which one is going to cost the poor more? Who cares about regressive? The rich can afford it no matter what.

    The topic was regressive taxes! I originally wrote: “About the only regressive tax we have is the car tab tax, thanks to Tim Eyeman.” Not sure how much clearer that can be. You responded to that by saying: ” Nice try Kary, blaming Eyman for actually LOWERING car tab fees.”

    Reminds me of Losh not understanding what leverage was.

  123. 123

    By David B. @ 115:

    By Kary L. Krismer @ 114:

    RE: David B. @ 113 – Are there any states with both taxes and a lower tax burden that are not economic backwaters?

    Now we’re really getting into topic drift and moved goalposts. From insisting it’s not possible to insisting it’s not possible if one is not a “backwater”, whatever that means. Anyhow: Virginia. I suspect that will either be rationalized as a somehow a “backwater” (despite all the affluence around DC) or the goalposts will be moved yet again….

    Hardly moving the goal posts. The point is I don’t really want Washington’s economy to be modeled after some economically backward states’ that can barely keep their citizens employed processing consumer rebate requests and other menial tasks. Also, to the extent Virginia has a decent economy, it is probably only due to its proximity to DC and federal spending. So unless you have a way of moving the capital of the US to somewhere near Washington state, no, not a good example.

  124. 124

    By David B. @ 115:

    By Kary L. Krismer @ 114:

    I’ve been following the Washington legislature for about 7 years or so. There’s a not insignificant group down there that really really really wants to increase the tax burden in this state. Higher REET, higher sales tax, higher B&O, applying the sales tax to more things, etc.

    None of which are income taxes, let me point out.

    And anyhow, I care far more about how and for what the money is spent than the overall rate of spending. Education rather than incarceration, etc. Not all government activity is equally oppressive.

    Seriously? None of which are income taxes? Talk about dense matter! The topic is multiple taxes making it easier for politicians to raise taxes, and the propensity of some politicians in Olympia to want to raise taxes. To say that those other taxes which they have repeatedly tried to raise are not income taxes is just completely non-responsive.

    Note I don’t think Olympia is all that bad compared to some other states or compared to say Seattle.

    And I agree that how they spend the money is important, and even that a lot of government spending is very important. I just don’t want to see the level of taxation get to the point where it starts adversely impacting the economy, but I don’t want to do that by having some supermajority of the legislature or voter approval required for additional taxes. I just want to do that by limiting the types of taxes we have so that there will be more pushback whenever there is a proposal to raise taxes. I think we have a relatively good balance now, and I don’t want to upset that by adding a new tax without eliminating an existing tax.

  125. 125
    David B. says:

    RE: Kary L. Krismer @ 122 – Actually, yes it is. The original claim was one of how allowing an income tax must inevitably increase government spending. (Also in the same vein: both the USA and Denmark have income taxes. Do they both have the same per capita level of government spending?)

    The Federal government functions for Virginia much like Boeing does for Washington: as an organization that employs a lot of local people and brings money into the local economy from elsewhere. Neither organization itself furnishes local government services and relieves local governments of such obligations. Those remain furnished by local governments and largely funded by local taxes in both cases.

  126. 126

    By David B. @ 124:

    RE: Kary L. Krismer @ 122 – Actually, yes it is. The original claim was one of how allowing an income tax must inevitably increase government spending.

    Nope, we already covered that when I responded to you: “There’s no reason overall higher taxes “must” happen, but given the nature of politicians . . ..”

    I’m saying it makes it more likely, and that’s a risk I don’t want to take. I see it as being likely to eventually lead to the type of situation that Boater described above. I’m not saying it will happen for certain, only that I don’t want to take that risk.

  127. 127

    By David B. @ 124:

    The Federal government functions for Virginia much like Boeing does for Washington: as an organization that employs a lot of local people and brings money into the local economy from elsewhere.

    The difference being government spending versus business spending. Also the policies of Virginia, including their taxation policies, have not caused the federal capital to be in or remain in DC. Having a large spending entity next door is a completely fortuitous situation for them.

    In contrast, Washington state needs to attract and retain businesses for its economy to do well.

  128. 128
    Blake says:

    By Matt @ 119:

    RE: Warren Hutch @ 117

    For me, the much more cogent post was @72 by LetsgoSounders. Such a strong post, and so very on-topic, too! Yet not a single mention of it yet by any commenters.

    LetsgoSounders @72 wrote: “There is zero reason to think prices are going to fall for the next 3-5 years.”

    Zero reasons… really? Zero?? I guess many of us just assumed that LetsgoSounders was Erik posting under a different name, so that’s why this post was ignored…

    Among the non-zero reasons that prices might fall in the near future: Interest rates rise, major recession, worldwide deflationary spiral, tech bubble bursting, baby boomers retiring and moving on, 25-40 year olds with stagnant wages and onerous student debt, tech companies replacing engineers with H1B slaves, Blackstone and other private equity groups liquidating their RE investments, China collapse/crack down on capital flight… did I miss anything?

  129. 129
    Blake says:

    By Kary L. Krismer @ 122:

    By redmondjp @ 116:

    So which one is going to cost the poor more? Who cares about regressive? The rich can afford it no matter what.

    The topic was regressive taxes! I originally wrote: “About the only regressive tax we have is the car tab tax, thanks to Tim Eyeman.”

    Oh brother!??? WTF?
    http://www.itep.org/pdf/whopaysreport.pdf
    Who Pays? A Distributional Analysis of the Tax Systems in All 50 States
    January 2015
    … Sales and excise taxes are very regressive. Poor families pay almost eight times more of their incomes in these taxes than the best-off families, and middle-income families pay more than five times the rate of the wealthy.
    … In the 10 states with the most regressive tax structures (the Terrible 10) the bottom 20 percent pay up to seven times as much of their income in taxes as their wealthy counterparts. Washington State is the most regressive, followed by Florida, Texas, South Dakota, Illinois, Pennsylvania, Tennessee, Arizona, Kansas, and Indiana.
    … State consumption tax structures are highly regressive with an average 7 percent rate on sales and excise taxes for the poor, a 4.7 percent rate for middle-income people, and a 0.8 percent rate for the wealthiest taxpayers.
    … Taxes as shares of income by income for non-elderly residents:
    Washington: Poorest 20% – 16.8%; Middle 60% – 10.1%, Top 1% – 2.4%!!!!
    Simply shameful….

  130. 130
    Matt says:

    RE: Blake @ 128

    Haha! Yeah, that’s fair enough! Good points.

    I guess the only thing you might have missed was the earlier stuff about a major earthquake, etc…

  131. 131

    RE: Blake @ 129 – I guess I have to be more specific. The topic was the regressive nature of the tax on car license tabs.

    This is getting ridiculous.

    As to the broader tax base, and whether or not it’s regressive, I commented on that separately above. That had nothing to do with the sub-thread you quoted.

  132. 132
    redmondjp says:

    By Kary L. Krismer @ 122:

    By redmondjp @ 116:

    So which one is going to cost the poor more? Who cares about regressive? The rich can afford it no matter what.

    The topic was regressive taxes! I originally wrote: “About the only regressive tax we have is the car tab tax, thanks to Tim Eyeman.” Not sure how much clearer that can be. You responded to that by saying: ” Nice try Kary, blaming Eyman for actually LOWERING car tab fees.”

    Reminds me of Losh not understanding what leverage was.

    Congratulations, Kary. You are a true progressive. You decry ‘regressive’ taxes, but then give us an alternative example that actually costs the poor more money, as was my point that you are avoiding.

    Reminds me of Meshugy not understanding what a bubble is.

  133. 133

    By redmondjp @ 132:

    Congratulations, Kary. . . . . Rallying against ‘regressive’ taxes that end up actually costing the poor more money, as was my point that you avoiding. .

    Congratulations redmondjp. You’ve managed to put together a sentence of complete gibberish, while simultaneously failing to understand a single point.

    You usually are not this dense.

  134. 134
    pfft says:

    By Markettimer @ 116:

    RE: pfft @ 100

    myself and many others

    doubt it. got some research?

  135. 135
    David B. says:

    By Markettimer @ 116:

    I just HATE them. sales taxes you can control (just decide how much to spend), but income tax comes right off the top to the gov.

    Incorrect. It is also possible to choose to earn less.

  136. 136
    David B. says:

    By Kary L. Krismer @ 131:

    RE: Blake @ 129 – I guess I have to be more specific. The topic was the regressive nature of the tax on car license tabs.

    This is getting ridiculous.

    Indeed.

    As to the broader tax base, and whether or not it’s regressive, I commented on that separately above. That had nothing to do with the sub-thread you quoted.

    In part by posting the whopper “About the only regressive tax we have is the car tab tax, thanks to Tim Eyeman,” which is what Blake called you on.

  137. 137
    David B. says:

    By Kary L. Krismer @ 127:

    By David B. @ 124:

    The Federal government functions for Virginia much like Boeing does for Washington: as an organization that employs a lot of local people and brings money into the local economy from elsewhere.

    The difference being government spending versus business spending.

    I fail to see how that is pertinent in this discussion. Both inject money into the local economy.

    Also the policies of Virginia, including their taxation policies, have not caused the federal capital to be in or remain in DC. Having a large spending entity next door is a completely fortuitous situation for them.

    In contrast, Washington state needs to attract and retain businesses for its economy to do well.

    Yes, the states which have income taxes are all to a last one struggling so badly they might as well be Venezuela. It’s an economic calamity!

  138. 138
    Ross says:

    By David B. @ 121:

    RE: boater @ 119 – I’ve lived in CA, too, and the government services here are hardly the same “crap” they are there. They are in my experience significantly better run. Most of the time I have to deal with state or local government bureaucracy I come away being reminded that not all government agencies are stereotypically slow and inefficient.

    To pick one small example, getting/renewing a driver’s license is significantly less unpleasant in Washington than it is in California.

    My favorite story of the brokenness of California DMV…. A friend arrived at a bay area DMV at 8AM, 1 hour before it opened. There were already ~100 people in line. He waited patiently most of the day, until they closed at 4:00PM (only a few people were ahead of him at that point), at which point they told him to come back tomorrow and try again.

    So, it could be worse =)

  139. 139

    By David B. @ 137:

    By Kary L. Krismer @ 127:

    The difference being government spending versus business spending.

    I fail to see how that is pertinent in this discussion. Both inject money into the local economy.

    Virginia could have the most anti-business taxation system and Washington DC would still be there pumping money into its economy. Washington DC’s presence is not dependent upon the policies of Virginia.

  140. 140

    By David B. @ 137:

    Yes, the states which have income taxes are all to a last one struggling so badly they might as well be Venezuela. It’s an economic calamity!

    You’re removing an element. I asked which have both sales and income taxes AND a lower tax burden.

    This discussion started when you said “And many examples can be found of states that have both income taxes and sales taxes yet have a lower overall tax burden than Washington.” I had no doubt that there were states that had both sales and income taxes and a higher tax burden. ;-)

  141. 141

    By David B. @ 136:

    In part by posting the whopper “About the only regressive tax we have is the car tab tax, thanks to Tim Eyeman,” which is what Blake called you on.

    In context, just prior to that I mentioned how our sales tax does not tax food or rent.

    I’m sure you can come up with all sorts of ways to determine if Washington’s taxes are regressive overall. I suspect that it isn’t for people making only $13,000 a year, but very well might be for people making $30,000 a year–particularly if you compare them to Bill Gates and Bezos. They really benefit from no income tax.

    But as to the studies I’ve seen, some seem to go out of their way to find a state’s tax system regressive by doing things like attributing taxes paid by a landlord to the tenant.

  142. 142
    David B. says:

    RE: Kary L. Krismer @ 139 – You miss the context, which was whether or not Virginia is an economic backwater.

  143. 143
    David B. says:

    By Kary L. Krismer @ 141:

    In context, just prior to that I mentioned how our sales tax does not tax food or rent.

    Yet you still managed to inject a whopper about only one tax/fee really being regressive in Washington. If you had stuck to your claim about the food and rent exemptions, you would have been OK. Instead, you stepped in it.

    And despite the exemptions, every study I’ve seen shows our sales tax to still be regressive. It would simply be even more regressive if it didn’t have them.

  144. 144

    By David B. @ 143:

    And despite the exemptions, every study I’ve seen shows our sales tax to still be regressive. It would simply be even more regressive if it didn’t have them.

    Almost any sales tax will be regressive. I was just addressing the studies that show Washington to have one of the most, if not the most, regressive tax systems.

    And obviously our sales tax would be even more regressive without the exemptions.

    Finally, again, I’d be perfectly okay with a constitutional amendment that legalized an income tax if it made the sales tax illegal. I’m not a huge supporter of the sales tax system.

  145. 145
    northwestdr says:

    RE: Kary L. Krismer @ 144
    The comments section regressed (and became painfully boring) once this topic of types of taxes hijacked it

  146. 146

    RE: northwestdr @ 145 – I agree–I reached that conclusion at post 131.

  147. 147

    RE: Erik @ 96
    Hi Eric

    I beg to differ….this $15/hr minimum wage sounds great for jobs soon to replaced by robots, McDonalds IOWs…..but its a JOKE.

    Get our Boeing parts manufacturing back from Japan, you know the nation that launched a major trade war against us decades ago…now we’re talking $30-40/hr jobs in Seattle [?] with health benefits….the rich ones with no job call this racist [most of Seattle’s real estate owners?]….Americans with mortgages and job skin in the game keep prices up when wages GO UP!

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