June Reporting Roundup: “A Long Way To Go”

It’s time once again for the monthly reporting roundup, where you can read my wry commentary about the news instead of subjecting yourself to boring rehashes of the NWMLS press release (or in addition to, if that’s what floats your boat).

To kick things off, here’s an excerpt from the NWMLS press release:

Market showing signs of adjusting

Home sales around Western Washington continued at a torrid pace during June, but a 10 percent year-over-year increase in new listings has some brokers with Northwest Multiple Listing Service suggesting a little relief may be emerging.

In the meantime, “We have a long way to go to catch up with the demand,” stated Mike Grady, president and COO of Coldwell Banker Bain.

Surprisingly, I completely agree with the release up to this point. As I said yesterday, there are some signs that the market might be at a turning point. We may be seeing some very early signs that the market is softening a bit, but since it has been so strongly tilted in favor of sellers for so long, it’s most likely going to take a long time to get back to anything resembling a balanced market.

Back to the press release:

J. Lennox Scott, chairman and CEO of John L. Scott, Inc., described the market as “frenzy hot” in June, but suggested there was a “short breath of fresh air for homebuyers.” He credits the combination of more inventory coming on the market and lower interest rates with bringing some “welcome relief to the backlog of buyers who have been waiting to purchase a home.”

Here’s where I disagree with the NWMLS release. The market is still currently terrible for buyers. There really wasn’t any “breath of fresh air.” The data from June show signs that there might be some fresh air on the horizon, but it’s still a long way off. Of course, Lennox is never going to suggest that it isn’t a Great Time to Buy™, so his spin is no surprise.

Read on for my take on this month’s local news reports.

Seattle Times

Mike Rosenberg: Seattle’s devilish new home price record: $666,000

As home prices and rents continue to soar faster in the Seattle area than just about anywhere else in the nation, the city and its neighbors have set new highs for housing costs.

Seattle’s median single-family home cost $666,500 in June, easily beating out the record set in February, according to figures released Wednesday by the Northwest Multiple Listing Service. Seattle home prices have risen 15.9 percent just in the past year and an astounding 74 percent in the last five years.

The typical Seattle home now costs about $300,000 more than it did when the market bottomed out in 2011.

“I don’t see any end in sight, yet,” said South Lake Union broker Eric Shull of John L. Scott Real Estate. “We’re still going to see price increases. With all the tech companies moving our way and more employees moving this way, it’s just nuts.”

Oh definitely. Home prices can only go up, up, up—forever! There’s no end in sight! Hmm, now where have we heard this before.

Everett Herald

Herald Staff: Housing market in Snohomish County continues torrid pace

Home prices continued to climb dramatically in Snohomish County last month.

And part of the reason for the increase is the continued lack of inventory on the market.

Unfortunately, the Herald article this month is basically just an excerpt from the NWMLS press release.

KING 5

Travis Pittman: Listings down, prices up in June Western Wash. housing market

The tight real estate inventory in Western Washington led to a drop in listings and fewer multiple offers in June, but home prices continued to climb. It may be a sign of more people priced out of the market.

We’ve also got an extremely short piece from KING 5. Nothing much to comment on here.

Tacoma News Tribune / The Olympian

Rolf Boone: South Sound home sales cool from May

The South Sound housing market cooled to warm from hot in June, according to Northwest Multiple Listing Service data released Wednesday.

That’s because more single-family residences came to the market last month in Pierce and Thurston counties, likely giving prospective buyers in a seller’s market a bit more time to find a house.

A fairly short, just the facts story in the Tribune and the Olympian. No real expansion on the numbers or local flavor in this online edition, anyway.

(Mike Rosenberg, Seattle Times, 2016-07-06)
(Herald Staff, Everett Herald, 2016-07-07)
(Travis Pittman, KING 5, 2016-07-06)
(Rolf Boone, Tacoma News Tribune, 2016-07-06)


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.

142 comments:

  1. 1

    Buy In at HIGH Prices if You’re Rich?

    LOL….even the billionaire Trump was criticized for suggesting fore closures “were a good time for investing”. Why is savvy investing for LOW prices criticized? I agree with Trump….waiting like a vulture beats gambling with your future…beats buying HIGH now for an investment.

    Now…..I’ve always recommended freedom of choice too, if ya gotta pay too much, ya really like it and admit it….buy it anyway. Just don’t claim its sound investment advice.

    This is Business 101 folks…

  2. 2
    Doug says:

    Tim, do you know what’s driving the difference between Seattle Times’ reported median home price of $666k versus yours of $574k?

  3. 3

    RE: Doug @ 2 – Without looking I’m going to guess the higher number is Seattle, the lower King County.

  4. 4
    Doug says:

    RE: Kary L. Krismer @ 3 – Oh, duh. Makes sense.

  5. 5

    Since there’s no longer an open thread, I’ll post this here. The WA Supreme Court just ruled that banks don’t have the right to routinely change locks prior to foreclosure.

    http://www.courts.wa.gov/opinions/pdf/920818.pdf

    A great win for homeowners and real estate agents!

  6. 6
    Action says:

    RE: softwarengineer @ 1

    Question for the people waiting for the bubble to pop to invest with money on the sidelines, where are you investing in the meantime?

    Stocks? If there is a recession or a tech bubble burst stocks would likely fair worse than real estate.
    Bonds? How much lower can yields go? And if they do go to negative, won’t that extend the housing bubble?
    Cash? How long are you willing to wait while inflation erodes away at your savings?
    Gold?
    Seems like the most logical place to put your money if you believe this is a bubble would be to short REITs.

    The rent vs buy equation only works out for renters if they invest the difference from the down payment or monthly payment savings to earn a real rate of return.

    I see the rise in real estate prices now driven much more by irrational fear than by irrational exuberance like the last time around.

  7. 7
    Blurtman says:

    RE: softwarengineer @ 1 – But it could be HIGHER later. And timing a RE correction – many said they knew and are/were wrong. But Yogi said it best.

  8. 8
    greg says:

    RE: Action @ 6

    Trillions of dollars will be heading for the doors at the first chance it gets. Right now it all looks sweet and happy, but it requires the treasure of many nations to keep this market going.

  9. 9
    David B. says:

    RE: Blurtman @ 7 – If SWE can really time the markets, he should quit writing code and start playing the futures markets. He’ll make a killing.

  10. 10
    pfft says:

    By Action @ 6:

    RE: softwarengineer @ 1

    Question for the people waiting for the bubble to pop to invest with money on the sidelines, where are you investing in the meantime?

    the real question is more like did you call the bottom of this bubble? that would apply to virtually nobody here. I don’t remember anyone except me calling a bottom and I was a summer early.

    let’s face it. the loudest and most numerous people here are permabears. this is a permabear site notwithstanding The Tim.

  11. 11
    DontRushIntoIt says:

    By pfft @ 10:

    let’s face it. the loudest and most numerous people here are permabears. this is a permabear site notwithstanding The Tim.

    Actually, I think you are playing into the “all or nothing” echo-chamber. There are plenty of people here that think the market is rising, the government actions are reasonably predictable, our economy is decent, and things are “at least ok”.

    This market isn’t going to appreciate 10% a year forever. But there also aren’t signs we are going to see the sub-prime crash again any time soon. Why can’t we have a middle ground? Yeah, it would have been nice to have bought a couple years ago, but buying today doesn’t doom you to being underwater in 5 years either…

  12. 12
    Justme says:

    RE: DontRushIntoIt @ 11

    >>But there also aren’t signs we are going to see the sub-prime crash again any time soon.

    No signs? Seriously? I see signs all over the place, and I have posted about a few of them. Nobody can force you to agree, but the casual reader should at least know that the above statement is NOT generally agreed upon.

  13. 13
    whatsmyname says:

    RE: Action @ 6

    Funny you would ask that here. But I’ll step up on behalf of the community. Go long on tin foil.

    https://www.thestreet.com/quote/RAI.html

  14. 14
    DontRushIntoIt says:

    By Justme @ 12:

    No signs? Seriously? I see signs all over the place, and I have posted about a few of them. Nobody can force you to agree, but the casual reader should at least know that the above statement is NOT generally agreed upon.

    Actually, you have never shown how we are going to see a 40% collapse in the housing market. You have shown that there are general indicators of high leverage, high price/wage valuations, and global market softening, but you have never shown anything that makes a reasonable reader believe a once-in-a-generation event like the last crash is happening twice-in-a-generation…

    Please leave your money on the sidelines… more for the rest of us…

  15. 15
    Justme says:

    RE: DontRushIntoIt @ 14

    The goalposts just got moved from “show signs” to “show how we are going to see a 40% collapse”. Nice.

  16. 16
    Eastsider says:

    By DontRushIntoIt @ 14:

    By Justme @ 12:

    No signs? Seriously? I see signs all over the place, and I have posted about a few of them. Nobody can force you to agree, but the casual reader should at least know that the above statement is NOT generally agreed upon.

    Actually, you have never shown how we are going to see a 40% collapse in the housing market. You have shown that there are general indicators of high leverage, high price/wage valuations, and global market softening, but you have never shown anything that makes a reasonable reader believe a once-in-a-generation event like the last crash is happening twice-in-a-generation…

    Please leave your money on the sidelines… more for the rest of us…

    RE: DontRushIntoIt @ 14

    Hmm… what if Trump gets elected? EU breaks up? Trade war breaks out?

    I suggest that you check out the current British commercial RE market which is likely heading for a severe fall. No one saw it coming (or they would have sold before the ‘freeze’.)

  17. 17
    DontRushIntoIt says:

    By Eastsider @ 16:

    Hmm… what if Trump gets elected? EU breaks up? Trade war breaks out?

    I suggest that you check out the current British commercial RE market which is likely heading for a severe fall. No one saw it coming (or they would have sold before the ‘freeze’.)

    Sigh, this has gone off the wheels so quick…

    What I was trying to assert is … does everyone REALLY think we are simply going to duplicate what happened in 2009 again – 7 to 10 years later? 40% decline, foreclosure numbers not seen since the great depression, once-in-a-generation chaos? You REALLY think it will be that bad in the residential real estate market in Seattle? I’m not saying it will grow continuously (or even do better than flat-line), but you REALLY think we are going to see a retraction of prices on that scale in the next 5 to 10 years?

    I honestly just don’t understand the “I’m going to wait for it to crash again” mentality. Real estate doesn’t grow every year, but it doesn’t retract like that every 10 years…

  18. 18
    Blake says:

    RE: Action @ 6
    Re: “Question for the people waiting for the bubble to pop to invest with money on the sidelines, where are you investing in the meantime?”
    VPU, IAU, SIVR, COST… and holding lots of cash as there will be buying opps the next year or so and inflation is dead.

  19. 19
    GoHawks says:

    I am still curious why people think this market is “turning” with 1.10 months worth of supply.

  20. 20
    ARDELL says:

    RE: pfft @ 10

    Actually…mine was front page news. When did you call it?

  21. 21
    ess says:

    Other cities – same debate – except Vancouver’s prices are 2-3 times Seattle’s across the board for all properties. If Seattle has a bubble to worry about, Vancouver has a blimp. Imagine worrying about being a buyer or seller up there!

    http://globalnews.ca/news/2804304/vancouvers-real-estate-is-fueled-by-a-money-laundering-bubble-market-analyst/

  22. 22
    MntGoat says:

    Because of the “recency bias” everyone automatically assumes it will be like last time with a real estate correction and there will be deep discounts. There might not be a major correction again for a long, long time. There may not be a time to buy like 2009-2012 in your lifetime. The next “correction” may be very minor. Don’t expect the MLS to be bursting at the seams with REO’s and short sales like 2009-2012 anytime soon, I think that was a once in a lifetime shot. The only thing in my opinion that could cause a major correction would be a major interest rate rise, and I do not see the Fed ever letting that happen unless with have major wage inflation.

  23. 23
    ess says:

    By MntGoat @ 22:

    Because of the “recency bias” everyone automatically assumes it will be like last time with a real estate correction and there will be deep discounts. There might not be a major correction again for a long, long time. There may not be a time to buy like 2009-2012 in your lifetime. The next “correction” may be very minor. Don’t expect the MLS to be bursting at the seams with REO’s and short sales like 2009-2012 anytime soon, I think that was a once in a lifetime shot. The only thing in my opinion that could cause a major correction would be a major interest rate rise, and I do not see the Fed ever letting that happen unless with have major wage inflation.

    As you indicate, a major housing price drop as was experienced in the recent past probably won’t happen in the next few years (although anything is possible – example number one – Trump as Republican nominee for president). It may be a function of wishful thinking by those who had hoped to purchase a residence in the Seattle area, but I bet many of those folks intuitively understand that their dreams of buying a residence at these prices are just that – dreams. But they keep on hoping for a major housing correction. And those dreams are further from reality when increased housing prices are coupled with sharp increases in rents, which prevent hopeful purchasers from accumulating a down payment to purchase a residence at these much higher prices. A realistic view of housing prices in most markets is that those prices tend to increase over time, with some declines that are usually temporary in nature. After all, one of the great residential market busts of all time, the precipitous decline in housing prices as a result of the great recession of the last decade was totally reversed by only four – five years of housing price increases. And as housing is a longer term proposition, that isn’t much time at all to experience a total recovery of prices (sans inflation).

  24. 24
    Eastsider says:

    By DontRushIntoIt @ 17:

    By Eastsider @ 16:

    Hmm… what if Trump gets elected? EU breaks up? Trade war breaks out?

    I suggest that you check out the current British commercial RE market which is likely heading for a severe fall. No one saw it coming (or they would have sold before the ‘freeze’.)

    Sigh, this has gone off the wheels so quick…

    What I was trying to assert is … does everyone REALLY think we are simply going to duplicate what happened in 2009 again – 7 to 10 years later? 40% decline, foreclosure numbers not seen since the great depression, once-in-a-generation chaos? You REALLY think it will be that bad in the residential real estate market in Seattle? I’m not saying it will grow continuously (or even do better than flat-line), but you REALLY think we are going to see a retraction of prices on that scale in the next 5 to 10 years?

    I honestly just don’t understand the “I’m going to wait for it to crash again” mentality. Real estate doesn’t grow every year, but it doesn’t retract like that every 10 years…

    I am not making any forecast here. But I don’t think you can assume a 40% decline would not happen. The rapid price appreciation (+80%?) in the last 7-10 years is abnormal and a correction may occur. Our (global) economy is very fragile and anything can trigger a reset to a new ‘normal’.

  25. 25
    uwp says:

    By ARDELL @ 20:

    RE: pfft @ 10

    Actually…mine was front page news. When did you call it?

    Yup, Ardell, you nailed!

    ARDELL says
    February 27, 2007 at 4:13 pm

    Mark,

    As I’ve said before, 2007 feels the same as 2006 and not like 2005. But there is a huge backlog of buyers who want what the market isn’t readily offering. I have my finger on a few pulse points. If inventory expands in the right places, we’ll see a 25% increase by August. If it doesn’t, we’ll see a 15% increase.

    http://raincityguide.com/2007/02/26/seattle-area-appreciation/

  26. 26
    uwp says:

    By uwp @ 25:

    By ARDELL @ 20:

    RE: pfft @ 10

    Actually…mine was front page news. When did you call it?

    Yup, Ardell, you nailed!

    Whoops, that was the wrong one!

    We’re at bottom…

    February 7, 2009 By ARDELL 192 Comments

    The market is shifting. More on this when I do Sunday Night Stats, as I have a busy weekend.

    But I’m calling it…we’re at bottom.

    http://raincityguide.com/2009/02/07/were-at-bottom/

    I always forget which “right” call of yours we’re talking about.

  27. 27
    Doug says:

    What an interesting day. Stocks love the jobs number beat yet 2s-10s is flatter by 3-4 bps. Perhaps in anticipation of another Fed hike this year that will trigger the next recession?

  28. 28
    MntGoat says:

    IMO the only thing that could create a big price drop would be a decent rise in rates without a concurrent rise in income. But I do not see that happening. The worse Europe and the rest of the world get, the lower U.S. mortgage rates go. Only way they go up is with decent wage inflation.

    I was living in SoCal prior to 2013 so I did well buying rentals from 2009-2012 post crash down there. But I moved up to Seattle in early 2013 and was burnt out on real estate, didn’t know where I wanted to live, wasn’t sure I would stay, etc… …. so I rented. I’m still renting here. It was a big mistake. I could afford to chase the market and buy but that is not in my blood. I’m a bargain chaser. But I fear that I may be priced out here eventually and may have to move since I’m a cheapskate and keep my overhead low. I was a bear in 2005 and I waited and got great deals post crash, but I do not see a repeat. The mortgage lending has been way too rock solid since 2008 (some of the most conservative lending in history). Marginal buyers can’t get loans. Also, developers have a hard time getting financing since banks are not doing a lot of construction financing, there is no way to add a decent amount of supply. And I am a bearish type of guy, but I have seen nothing to make me bearish on Seattle RE. And do not compare FHA today with 2003-2007 subprime…there is NO comparison AT ALL, two different universes. At one point in 2006 70% of all mortgages being originated had NO INCOME documentation! FHA has historically has a average fico score of around 580….today it is 680! Marginal buyers can not get loans to get in the market.

    I do think there could be a apartment bubble at some point. Probably mostly in Class A buildings since that is all they are building. Maybe flattening to falling rents could create less eager buyers and cause a SFR price slide? But I do not see how SFR’s take a significant hit. Just cannot add enough supply. If you look at charts of rents in Seattle going back 50 yrs they never fall much or are flat for long. They always bounce back quickly after a recession and continue their upward climb.

    Also, when you look at Vancouver BC, SF Bay, SoCal, NYC, DC, Boston….Seattle is still really not that expensive comparatively (yet it has all the same attributes or more). Unfortunately I think Seattle is going the way of the SF Bay in terms of prices, it has all the same ingredients of the SF Bay (top tier tech companies, mild climate, abundant natural beauty, geography with mountains and water that constrain growth, liberal population that will keep a rein on zoning, large Asian population, and connections to Asia, etc…).

  29. 29
    MntGoat says:

    To add to my comment, you have to have a lot of supply hit the market to have a big price drop. In 2008 the banks started foreclosing on a ton of people. Even if we were to have a lot of defaults this time, the banks wouldn’t foreclose, they would just extend and pretend and let people live in their house for free or give them crazy loan mods. They learned their lesson from 2008 when they all dumped inventory on the market and prices plummeted. They won’t do that again. Prices would have fell much worse in 2009, 2010, 2011, etc… if banks wouldn’t have stopped foreclosing on people in mid 2009 like they did.

    Also, all these federal and state laws were put into place post crash that makes it more difficult for banks to foreclose on owner occupants that are defaulting (laws I do not agree with by the way). So it takes twice as long now to foreclose on an owner occupant as it did pre-2008 and the banks are forced by law to offer loan mods and all this other baloney before they foreclose. So these laws will also stop large amounts of inventory hitting the market.

    But those are just my thoughts. Anything can happen I don’t have a crystal ball or claim that I can time markets. But the ingredients are all radically different then the last run up. And a lot of permabears suffer from “recency bias” (they still have the 2008 crash in their minds and think it will happen again just like that) and “confirmation bias” (they only read blogs, articles listen to people, etc… that support their bearish convictions). I know this because I tend towards permabearism – but I force myself to challenge my confirmation bias.

  30. 30
    greg says:

    RE: MntGoat @ 28

    Just cause the cool kids (san fran NY etc) have very high prices does not mean we can support those longer term. BC stands for basket case, their market is so distorted are to be stupid. Only a fool would believe the story they are selling up there. Seattle has seen a lot of growth, but we are very unlikely to see tech continue its run unabated. You really need to look at incomes , Seattle just does NOT have them. Investors are driving the market, not retail consumers. The deal is very simple, trillions of dollars looking for somewhere to make profit or at least not lose too much. That money will exit as soon as it has a better option, and the option may well not even be in any US market!

    I strongly suspect a lot of people are going to find themselves holding RE for a couple of decades and wondering why the hell they ever got themselves into this.
    For this bull to keep running requires lots and lots of legs, low interest is just ONE of them. If foreign investment / sentiment fails so will prices.

  31. 31
    GoHawks says:

    Stocks make new highs, rates make new lows. The Bubble poppers will have to wait a little while longer.

  32. 32
    Matt says:

    RE: greg @ 30

    What makes you think investors are driving the market? Do you think this holds true for SFHs?

    Also, I don’t agree with your statement that Seattle doesn’t have the incomes to support the market. At current tax rates, cost of living, etc. the adjusted median income in Seattle is at least equal to many markets with vastly higher home prices. Of course, our cost of living advantage erodes with increased home values, but incomes are also rising in Seattle. There is also the fact that has been pointed out on this blog before by people like Kary: the median income isn’t buying a home in Seattle. So we have to look at the upper tail of the distribution and what those incomes look like. All I see is a lot of techies coming in making $150K/yr a few years out of college and, even worse, people cashing out of the Bay Area with hundreds of thousands in savings for a down payment. This gravy train in my opinion is what is driving the market, at least in SFHs. I also opine, the ride will slow, but not abate in most likelihood.

  33. 33
    uwp says:

    By Matt @ 32:

    Seattle Incomes

    Also, I was under the impression that many new Amazon employees get a hiring bonus that is a pretty substantial “loan” which is forgiven over a period of time (4 years?). This is helps these folks come up with the down payment. High incomes + decent downpayments = solid buyers out there.

  34. 34
    Blake says:

    DontRushIntoIt @17 says: “Real estate doesn’t grow every year, but it doesn’t retract like that every 10 years…”

    This statement seems to be simply based on historical data… yes?
    Did it every occur to you that things may be a bit different today than it has been in the past? For one, the central banks around the world have pumped about $5 trillion of money into the system which has – surprise surprise – inflated asset prices.

    Fed balance sheet vs. S&P 500
    http://2.bp.blogspot.com/-u71VdzNPHkU/Vqhxxk73ulI/AAAAAAAAhOA/SuFzua0CWSM/s1600/QE%2Bvs%2BS%2526P%2B500.png

    We live in unprecedented times… I’m in my mid-50s and studied international political economy and banking for 30+ years and I never dreamed that we would witness the financial shenanigans that we’ve seen the last few years. Since financial liberalization took hold in the late 1990s we’ve had three financial crises with each being larger than the one before: 1997, 2001, and 2008. After ’08 the Fed and other central banks resorted to extraordinary means to try to get the economies to “take off” again… they’ve failed. Europe is mired in a depression that is worse than the 1930s and still being subjected to German-lead “sadomonetarism”, the US economy is barely growing with 60-70% of wage earners left out of the “recovery”, the oil exporting nations are in collapse, and the world is awash in overcapacity as China has inflated their economy with debt beyond any level the world has seen.

    Ask yourselves this: If the US tips into a recession what can the Fed and our leaders do to pull us out?
    Cut interest rates?
    – – Ha hah hah…
    Buy more bonds to drive rates down?
    – – Rates are already setting record lows despite QE being suspended.
    The only hope would be a huge fiscal stimulus which is really unlikely with the Republicans holding the purse strings here and Wolfgang Schauble terrorizing the European Parliaments.

    Many of you still write that as long as interest rates stay low the RE market will be fine. Really? You don’t think that wages, unemployment and jobs may have some effect? Seattle is not an island…

    We live in unprecedented times and historical trends are no guide to the future.

    btw: British RE basically just devalued 17% in a few weeks… more than $10 trillion in sovereign debt now trading at negative interest rates… Italian banks on on life support (Portugal, Spain soon?)… and – ironically – Deutsche Bank is the most systemically risky bank in the world holding huge derivatives and lots of bad loans.
    Read this article and then don’t say later that you were surprised:
    http://seekingalpha.com/article/3987017-coming-soon-europe-next-global-financial-crisis
    -snip- A collapse of Deutsche Bank would be the most serious of the three according to the IMF, which stated that the bank “poses the greatest systemic risk to the global financial system.” Deutsche Bank failed the U.S. Fed’s stress test this year and last. Credit Suisse poses the third greatest risk. Deutsche Bank is sitting on a mountain of derivatives, estimated to be as high as $75 trillion.

    https://www.neweurope.eu/article/deutsche-bank-dangerous-bank-world/
    -snip- Deutsche is a bank with €1,64 trillion liabilities and €1,58 trillion in assets. In sum, it is a few billion in the red and could be worth very little if its share value continues to fall. Its book net value now is little over €20bn. The bank costs twice what it paid in fines and lawyers last year. On Wednesday, the banks stock tumbled to levels unseen since 1989. It is conceivable that the bank could fail.
    … The cost of going down does not come merely from direct investor exposure, but also from the networking effect. The interconnection with other financial institutions and the state is rarely transparent or easy to risk assess. The problem with Deutsche Bank is that it is cornered in a position in which its fate is not absolutely in its hands. However, Deutsche Bank’s performance over the last several quarters is weak, because the global economy is weak. Brexit did not help; Chinese growth deceleration and the collapse of the commodities market did not either. DB cannot control economic climate.

  35. 35
    Justme says:

    RE: MntGoat @ 28

    >>The mortgage lending has been way too rock solid since 2008 (some of the most conservative lending in history).

    This was already covered one or two threads ago, with DATA. When the median down payment (nationwide) is 3.5%, as is now the case in 2015-2016, the lending is anything but rock solid, and certainly nowhere near the most conservative lending in history. With a projected 4-6% sales costs, the median buyer is underwater from day one.

    Seattle is not an Island onto itself, as Blake said above. Amazon, Boeing, Costco, Expedia, Microsoft, yes even Google are highly dependent on the nationwide and/or worldwide economy.

  36. 36
    pfft says:

    By Eastsider @ 24:

    By DontRushIntoIt @ 17:

    By Eastsider @ 16:

    Hmm… what if Trump gets elected? EU breaks up? Trade war breaks out?

    I suggest that you check out the current British commercial RE market which is likely heading for a severe fall. No one saw it coming (or they would have sold before the ‘freeze’.)

    Sigh, this has gone off the wheels so quick…

    What I was trying to assert is … does everyone REALLY think we are simply going to duplicate what happened in 2009 again – 7 to 10 years later? 40% decline, foreclosure numbers not seen since the great depression, once-in-a-generation chaos? You REALLY think it will be that bad in the residential real estate market in Seattle? I’m not saying it will grow continuously (or even do better than flat-line), but you REALLY think we are going to see a retraction of prices on that scale in the next 5 to 10 years?

    I honestly just don’t understand the “I’m going to wait for it to crash again” mentality. Real estate doesn’t grow every year, but it doesn’t retract like that every 10 years…

    I am not making any forecast here. But I don’t think you can assume a 40% decline would not happen. The rapid price appreciation (+80%?) in the last 7-10 years is abnormal and a correction may occur. Our (global) economy is very fragile and anything can trigger a reset to a new ‘normal’.

    but the 3-4 year crash in housing prices wasn’t was abnormal too!

  37. 37
    pfft says:

    By Doug @ 27:

    What an interesting day. Stocks love the jobs number beat yet 2s-10s is flatter by 3-4 bps. Perhaps in anticipation of another Fed hike this year that will trigger the next recession?

    if the yield curve were predicting recession it would be inverted or inverting. no real signs of that.

    https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/Historic-Yield-Data-Visualization.aspx

  38. 38
    Doug says:

    RE: pfft @ 37 – Agreed, no recession indications at the moment, but the 2s 10s spread has decreased pretty dramatically since the end of the 2013…

    https://fred.stlouisfed.org/series/T10Y2Y

  39. 39
    Blurtman says:

    By Blake @ 34:

    Ask yourselves this: If the US tips into a recession what can the Fed and our leaders do to pull us out?

    — Legalize all recreational drugs. :

    btw: British RE basically just devalued 17% in a few weeks…

    — All on the sidelines home owner wannabe’s must vote Trump.

  40. 40
    whatsmyname says:

    RE: Justme @ 35
    DATA in caps? For one number?

    “When the median down payment (nationwide) is 3.5%, as is now the case in 2015-2016”
    No, per your own source, it is the median only for First time homebuyers with mortgage debt.

    So let’s try and find a little data. First, let’s go to your source’s think tank website. There we may find an article by him. No, no, not the one about how 30 year mortgages are too dangerous; this one: http://www.housingrisk.org/mortgage-risk-index-release-of-march-2016-data/

    Here we can see that the first time buyer mortgages he tracks are running about 160,000 last August, dropping to about 90,000 in March. Half of those would be 80,000 and 45,000.

    Best I can find for sales is a chart download from this NAR page for existing home sales. http://www.realtor.org/topics/existing-home-sales

    It understates total sales by not counting new units, but still shows 504,000 declining to 421,000 over the same period. So even on this basis, we are looking at 12% to 16% of the market. That’s a long way from a market median. It’s not nothing, but is it really that different than the 1950’s when veterans were filling up the Levittowns with their new benefit? Or the ’60’s, or the 70’s when FHA was everywhere? I don’t know. We’re still kinda short of DATA. All we know is that it’s a different picture than what you are painting.

  41. 41
    Mike says:

    RE: uwp @ 26 – Anyone who made the right call bought a house then and made some money.

  42. 42
    Blake says:

    RE: pfft @ 37
    With ZIRP, yield curve will not invert any more… just go flat before recessions.
    http://www.bloomberg.com/news/articles/2016-02-01/has-the-most-reliable-u-s-recession-predictor-lost-its-value
    “Over the last two decades, the Japanese yield curve has flattened ahead of each of the last four recessions (1997 to 1999, 2000 to 2002, 2008 to 2009 and 2012). Yet in each case, it did not invert,” the economist explains. “Consequently, we believe there is a high probability that whenever the next U.S. recession occurs, the 10s-funds curve is likely to remain positive, and perhaps significantly so, at least compared to past business cycles.”

  43. 43
    Justme says:

    RE: whatsmyname @ 40

    I wrote: “When the median down payment (nationwide) is 3.5%, as is now the case in 2015-2016”, and you (whatsmyname) disagree based on not being able to deduce (or square) that number from the National Mortgage Risk Index report, of which the latest is found at http://www.housingrisk.org/mortgage-risk-index-release-of-may-2016-data/ .

    But that 3.5% quote is not from that report! It is from the link posted in a previously

    http://www.npr.org/2016/07/03/484562969/if-some-homeowner-trends-continue-signs-of-another-housing-bubble-ahead

    QUOTE: “The median down payment for a first-time buyer in the United States is 3 and a half percent.”

    Again, the quote is not from or based on the NMRI report. It may be work-in-progress based on more extensive data that the UCLA professors are working on, as they say in their Jan 2016 methodology document that “Later this year, the (NMRI) index will be expanded to include purchase loans without any form of government backing and second mortgages.” I do not know with any certainty where the number comes from. But as you (whatsmyname) indicated yourself in another post, prof. Oliner does (unlike you and I) need to maintain credibility, so I will take his statement at face value.

    I did make one mistake. I should not have said “as is now the case in 2015-2016”. Prof. Oliner did not say over what period the “The median down payment for a first-time buyer in the United States is 3 and a half percent.” It *may* have been even just for May 2016. The period is unknown, and that fact is hereby conceded.

    But from now on, can we please include page numbers if we are throwing numbers around, For example, I *think* your 160,000 and related numbers can be found in the May 2016 NMRI slides on page15. As far as matching the numbers up with NAR numbers, although NOT relevant to the “median downpayment is 3.5%” claim, Oliner is covering that topic on the very next page, page 16. There you can also surmise that government-guaranteed loans have a market share of about 63% in May, and marketshare has been rising pretty sharply lately.

    (Note to readers: To download pdf of the May 2016 NMRI, follow link above, scroll down to the embedded pdf presentation. Then use the menu marked >> in the top right corner of the embedded presentation to download the complete pdf.)

  44. 44

    By pfft @ 37:

    By Doug @ 27:

    What an interesting day. Stocks love the jobs number beat yet 2s-10s is flatter by 3-4 bps. Perhaps in anticipation of another Fed hike this year that will trigger the next recession?

    if the yield curve were predicting recession it would be inverted or inverting. no real signs of that.

    https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/Historic-Yield-Data-Visualization.aspx

    I really don’t think we need economic analysis from you. Have you quit your panic over the Brexit yet? From the “Record High Prices” thread:

    By pfft @ 128:

    The markets show brexit is a bad idea. imagine if Bernie or Hillary put forth economic programs and the dollar tanked 13% and the dow went down 9%?

    So now that the stock market is back up, does that mean you think the Brexit is a good idea?

  45. 45
    greg says:

    RE: Matt @ 32

    Really? you are really asking what makes me think investors are driving the market?

    you can check it out yourself :) , it requires some effort and some time , but of course every investor should be prepared to take care of their own DD.

    But thanks for the chuckle, the very idea that this market is being driven by a need for housing is cracking fun. I can see it now like a scene out of the Walking Dead, vast herds of people arriving daily. Just do the math , search the records and see who is buying, it will take some work, but investing IS work.

  46. 46
    whatsmyname says:

    By Justme @ 43:

    I wrote: “When the median down payment (nationwide) is 3.5%, as is now the case in 2015-2016”, and you (whatsmyname) disagree based on not being able to deduce (or square) that number from the National Mortgage Risk Index report

    Wrong. I took the 3.5% quote from your NPR source at face value. The issue here is that you are not alert enough to distinguish between “median down payment” and “median first-time buyer downpayment”. You got your facts wrong.

    The rest of my post is finding numbers to quantify how many transactions are the first time buyer portion of the market and how big is the whole market . You know, context, meaning.

    , the quote is not from or based on the NMRI report. It may be work-in-progress based on more extensive data that the UCLA professors are working on

    The NMRI work is done by the American Enterprise Institute, not UCLA. You are conflating again.

    as you (whatsmyname) indicated yourself in another post, prof. Oliner does (unlike you and I) need to maintain credibility, so I will take his statement at face value.

    So much for DATA, eh? Do you take his statement that we are not in a bubble at face value also?

    far as matching the numbers up with NAR numbers, although NOT relevant to the “median downpayment is 3.5%” claim, Oliner is covering that topic on the very next page, page 16. There you can also surmise that government-guaranteed loans have a market share of about 63% in May, and marketshare has been rising pretty sharply lately.

    Government guaranteed loans is not the same number as first-time buyer loans. It does not in anyway tell you how significant the first time buyer downpayment is to the market as a whole. You are thicker than I thought.

  47. 47
    bingo says:

    RE: Justme @ 43

    I’m having trouble believing Oliner. If I remember my math correctly, if the median down payment is 3.5% that means half of first time buyers are putting less than 3.5% down on their purchase. I googled low downpayments. The only programs I saw were for veterans. It’s hard to believe half of first time buyers are veterans. Pls post a link for the under 3.5% downpayment programs. I want one!

  48. 48

    RE: bingo @ 46 – Conventional with PMI goes down to 3%. I think it’s been that way for at least a year and a half now.

    Edit: Here’s your link, but you can find actual lenders advertising it too.

    https://www.fanniemae.com/singlefamily/97-ltv-options

  49. 49
    Matt says:

    RE: greg @ 44

    No need to be disparaging. I was asking an honest question, but if you don’t feel the need to support your ridiculous claim, that’s on you. The situation you derided as laughable is precisely what is happening. The shifting demographic as the first recent surge of young tech hires move towards buying a home only exacerbates the issue. You want to know where else the demand is coming from? It was already here renting and saving up a down payment! The open houses in Seattle are filled with normal people–whether or not you are right that speculators are the ones who win the eventual bid is only part of the equation. One has to wonder why these speculators are snatching up all these houses. To rent? Rarely. To tear down and build townhomes? That actually happens, but if what you say about the Walking Dead scenario is true, why would any speculator by land at a premium just to be unable to sell to anyone? Seems to me that real demand is robust and supply is weak–because again, real people own and want to live here.

  50. 50
    pfft says:

    By Justme @ 35:

    RE: MntGoat @ 28

    >>The mortgage lending has been way too rock solid since 2008 (some of the most conservative lending in history).

    This was already covered one or two threads ago, with DATA. When the median down payment (nationwide) is 3.5%, as is now the case in 2015-2016, the lending is anything but rock solid, and certainly nowhere near the most conservative lending in history. With a projected 4-6% sales costs, the median buyer is underwater from day one.

    Seattle is not an Island onto itself, as Blake said above. Amazon, Boeing, Costco, Expedia, Microsoft, yes even Google are highly dependent on the nationwide and/or worldwide economy.

    are there liar and ninja loan and balloon payment arms and option only loans? is the securitization market as reckless? who cares about down payments when all that shenanigans can go on?

    I would have to say I haven’t read about stuff like that.

    you know what could be driving the market? the 287,000 jobs added. people used to post the jobs numbers pretty regularly. why don’t they do that anymore? scotsmans used to reliably post the ADP numbers. why not anymore?

  51. 51
    pfft says:

    By Blake @ 42:

    RE: pfft @ 37
    With ZIRP, yield curve will not invert any more… just go flat before recessions.
    http://www.bloomberg.com/news/articles/2016-02-01/has-the-most-reliable-u-s-recession-predictor-lost-its-value
    “Over the last two decades, the Japanese yield curve has flattened ahead of each of the last four recessions (1997 to 1999, 2000 to 2002, 2008 to 2009 and 2012). Yet in each case, it did not invert,” the economist explains. “Consequently, we believe there is a high probability that whenever the next U.S. recession occurs, the 10s-funds curve is likely to remain positive, and perhaps significantly so, at least compared to past business cycles.”

    I expect longer term bonds could go negative next recession like in parts of Europe.

  52. 52
    Matt Damon says:

    Numbers, numbers, numbers….oof. There’s no way a glut of inventory and bad loans will trigger a housing crash this time around. The next housing crash will not come from these factors but the fact that 75% of all tech companies in this area aren’t sustainable and are in fact, terrible ideas. The tech crash Seattle faces will make the silicon valley crash look like a fender bender. Can’t wait for the economy to rid my city of the Audi-driving, soccer-watching douchebags that have no social skills and no business earning over 30k a year. Can’t wait.

  53. 53
    Matt says:

    RE: Matt Damon @ 52 – What companies in Seattle specifically do you see failing? I agree that the money thrown around in San Francisco for wannabe entrepreneurs is ridiculous and likely will meet a sour end, but Seattle isn’t anywhere near SF in those terms. Even if you’re right that 75% of tech companies in Seattle will fail, what does that matter when those 75% of the little companies only employee <5% of the engineers. Seattle is stocked with corporate sellouts to the big, established businesses. Might wages decrease, might business slow at those big corporations? Absolutely–actually most likely given all indicators. But keep dreaming if you expect some cataclysmic collapse of the Seattle tech scene.

  54. 54
    Blake says:

    RE: pfft @ 51
    I doubt ^TNX will go negative before a recession… but if it does I’ll be rich! ;-)
    Spread with 2yrs is getting smaller…
    https://anthonybsanders.wordpress.com/2016/07/08/yieldcurvepiercer-10y-2y-yield-curve-drops-below-80-basis-points/

  55. 55
    Blake says:

    By pfft @ 50:

    you know what could be driving the market? the 287,000 jobs added. people used to post the jobs numbers pretty regularly. why don’t they do that anymore? scotsmans used to reliably post the ADP numbers. why not anymore?

    The jobs report was actually not good…
    https://anthonybsanders.wordpress.com/2016/07/09/goldilocks-jobs-report-treasury-yields-spike-then-drop-after-strongest-labor-report-in-8-months-while-dow-rise-251-points/
    the majority of the jobs added (691k) were low-wage summer jobs for youths ages 16 to 19. Jobs added for ages 25 years and older declined by -696k.

  56. 56
    Anonymous Coward says:

    RE: Blake @ 55 – The same report did show that average hourly wages were up 2.6% YTD (annualized)…

  57. 57
    Blake says:

    Meanwhile in Japan…
    http://blogs.cfr.org/setser/2016/07/07/meanwhile-in-japan-household-consumption-continues-to-fall/
    Real household consumption has fallen ever since Japan started its fiscal consolidation in 2014. 2016 does not look to be any different: 2016 consumption is running about 6 percentage points lower than in 2013.

    the burden of Japan’s 2014 and 2015 fiscal consolidation has been borne by households, and heavily by lower-income households. It is at least possible that the expected impact on household demand from future consolidation is also having an impact on investment. Why invest today to deliver goods and services in the future when when household demand inside Japan is falling, and could fall more? Investment hasn’t responded to monetary stimulus in the way Japan had hoped. Hence wonderful anecdotes, such as this FT story about corporate Japan’s skill at rehabilitating 1990 era computers to keep costs down.

    We live in strange times…
    And I love this sarcastic footnote at the end:

    ** Real wages rose, but only because nominal wages fell more slowly than nominal prices. That isn’t exactly the reflationary equilibrium where higher expected inflation result in a shift in price-setting throughout the economy that Kuroda was aiming for … ( end quote)

    Deflation is nasty sh*t!

  58. 58
    sleepless says:

    By pfft @ 10:

    By Action @ 6:the real question is more like did you call the bottom of this bubble? that would apply to virtually nobody here. I don’t remember anyone except me calling a bottom and I was a summer early.

    let’s face it. the loudest and most numerous people here are permabears. this is a permabear site notwithstanding The Tim.

    We have never reached the bottom, thanks to the FED endless QE programs and ZIRP. No go and cast your vote for the criminal scumbag Klinton!

  59. 59
    sleepless says:

    By DontRushIntoIt @ 11:

    By pfft @ 10:

    But there also aren’t signs we are going to see the sub-prime crash again any time soon…

    It won’t be sub prime crash, it will be a dollar bubble crash. We are in the debt bubble the human history has never seen before. Wait for the debt bubble to crash! Got GOLD?!

  60. 60
    sleepless says:

    By DontRushIntoIt @ 17:

    By Eastsider @ 16:

    …but you REALLY think we are going to see a retraction of prices on that scale in the next 5 to 10 years?

    I honestly just don’t understand the “I’m going to wait for it to crash again” mentality. Real estate doesn’t grow every year, but it doesn’t retract like that every 10 years…

    One thing you fail to realize is the trigger of the last / the next crash. The trigger was not the subprime mortgages. I will tell you a secret. The prime mortgages defaulted at the same rate as sub-prime during the housing crash. It was not the subprime that caused the problem, it was the FED keeping low interest rates for too long and cause the housing bubble in the first place. The FED raised the rates and burst the bubble. The difference this time is the the bubble is much larger as it is not only mortgages that are in the bubble, but also stock market, bond market, derivative market. The debt levels have grown dramatically since the last crash and no problems were fixed. The only difference this time is the bubble is much bigger and consequences will be more severe.

  61. 61
    MntGoat says:

    By Blake @ 34:

    DontRushIntoIt @17 says: “Real estate doesn’t grow every year, but it doesn’t retract like that every 10 years…”

    This statement seems to be simply based on historical data… yes?
    Did it every occur to you that things may be a bit different today than it has been in the past? For one, the central banks around the world have pumped about $5 trillion of money into the system which has – surprise surprise – inflated asset prices.

    Fed balance sheet vs. S&P 500
    http://2.bp.blogspot.com/-u71VdzNPHkU/Vqhxxk73ulI/AAAAAAAAhOA/SuFzua0CWSM/s1600/QE%2Bvs%2BS%2526P%2B500.png

    We live in unprecedented times… I’m in my mid-50s and studied international political economy and banking for 30+ years and I never dreamed that we would witness the financial shenanigans that we’ve seen the last few years. Since financial liberalization took hold in the late 1990s we’ve had three financial crises with each being larger than the one before: 1997, 2001, and 2008. After ’08 the Fed and other central banks resorted to extraordinary means to try to get the economies to “take off” again… they’ve failed. Europe is mired in a depression that is worse than the 1930s and still being subjected to German-lead “sadomonetarism”, the US economy is barely growing with 60-70% of wage earners left out of the “recovery”, the oil exporting nations are in collapse, and the world is awash in overcapacity as China has inflated their economy with debt beyond any level the world has seen.

    Ask yourselves this: If the US tips into a recession what can the Fed and our leaders do to pull us out?
    Cut interest rates?
    – – Ha hah hah…
    Buy more bonds to drive rates down?
    – – Rates are already setting record lows despite QE being suspended.
    The only hope would be a huge fiscal stimulus which is really unlikely with the Republicans holding the purse strings here and Wolfgang Schauble terrorizing the European Parliaments.

    Many of you still write that as long as interest rates stay low the RE market will be fine. Really? You don’t think that wages, unemployment and jobs may have some effect? Seattle is not an island…

    We live in unprecedented times and historical trends are no guide to the future.

    btw: British RE basically just devalued 17% in a few weeks… more than $10 trillion in sovereign debt now trading at negative interest rates… Italian banks on on life support (Portugal, Spain soon?)… and – ironically – Deutsche Bank is the most systemically risky bank in the world holding huge derivatives and lots of bad loans.
    Read this article and then don’t say later that you were surprised:
    http://seekingalpha.com/article/3987017-coming-soon-europe-next-global-financial-crisis
    -snip- A collapse of Deutsche Bank would be the most serious of the three according to the IMF, which stated that the bank “poses the greatest systemic risk to the global financial system.” Deutsche Bank failed the U.S. Fed’s stress test this year and last. Credit Suisse poses the third greatest risk. Deutsche Bank is sitting on a mountain of derivatives, estimated to be as high as $75 trillion.

    https://www.neweurope.eu/article/deutsche-bank-dangerous-bank-world/
    -snip- Deutsche is a bank with €1,64 trillion liabilities and €1,58 trillion in assets. In sum, it is a few billion in the red and could be worth very little if its share value continues to fall. Its book net value now is little over €20bn. The bank costs twice what it paid in fines and lawyers last year. On Wednesday, the banks stock tumbled to levels unseen since 1989. It is conceivable that the bank could fail.
    … The cost of going down does not come merely from direct investor exposure, but also from the networking effect. The interconnection with other financial institutions and the state is rarely transparent or easy to risk assess. The problem with Deutsche Bank is that it is cornered in a position in which its fate is not absolutely in its hands. However, Deutsche Bank’s performance over the last several quarters is weak, because the global economy is weak. Brexit did not help; Chinese growth deceleration and the collapse of the commodities market did not either. DB cannot control economic climate.

    This is the pretty much the same permabear narrative that I have been hearing said over and over and over again ad nauseum since 2009. I have read all the books by the permabear authors, read all the permabear blogs. All you have to do is read Zero Hedge or whatever and you’ll read exactly the same stuff as Blake just said over and over again. But it’s 2nd half of 2016 and even Brexit could not put a dent in the stock market??? When is this big crash that all the broken clock permabears have said “will happen any day now” for the last 7 years going to happen? It reminds me of the boy who cried wolf story or chicken little.

  62. 62
    pfft says:

    By Blake @ 55:

    By pfft @ 50:

    you know what could be driving the market? the 287,000 jobs added. people used to post the jobs numbers pretty regularly. why don’t they do that anymore? scotsmans used to reliably post the ADP numbers. why not anymore?

    The jobs report was actually not good…
    https://anthonybsanders.wordpress.com/2016/07/09/goldilocks-jobs-report-treasury-yields-spike-then-drop-after-strongest-labor-report-in-8-months-while-dow-rise-251-points/
    the majority of the jobs added (691k) were low-wage summer jobs for youths ages 16 to 19. Jobs added for ages 25 years and older declined by -696k.

    287,000 jobs is not good? in what world? so if we lost 287,000 it would be ok if they were only low wage jobs?

    people have been talking for years how bad the job market is for teenagers and now we add jobs for teenagers(assuming your numbers are even being used correctly which I am not so sure of)) and it’s bad? the goal posts are constantly being moved at SB.

    During the Bush years all we heard about was Goldilocks, we never heard anything about food stamps or the participation rate.

  63. 63
    pfft says:

    By Anonymous Coward @ 56:

    RE: Blake @ 55 – The same report did show that average hourly wages were up 2.6% YTD (annualized)…

    we ignore good news and complain about some secondary metric being not perfect.

  64. 64
    pfft says:

    By sleepless @ 58:

    By pfft @ 10:

    By Action @ 6:the real question is more like did you call the bottom of this bubble? that would apply to virtually nobody here. I don’t remember anyone except me calling a bottom and I was a summer early.

    let’s face it. the loudest and most numerous people here are permabears. this is a permabear site notwithstanding The Tim.

    We have never reached the bottom, thanks to the FED endless QE programs and ZIRP. No go and cast your vote for the criminal scumbag Klinton!

    I will gladly vote for Hillary. It seems like all the alternatives keep getting worse. HW Bush was probably the last Republican president who didn’t seem like he was crazy. Bush was a terrible president and both Romney and now Trump seem like they would be terrible presidents.

    “We have never reached the bottom, thanks to the FED endless QE programs and ZIRP.”

    Blah blah blah there is always an excuse. When did hit bottom during the Deperssion? After all a few years in FDR came in with this depression fighting programs. I guess we have never had a recovery since the 20s? THere are always deniers. Just like there are people who can’t see a top there are people who can’t see the bottom.

  65. 65
    sleepless says:

    By pfft @ 64:

    By sleepless @ 58:I will gladly vote for Hillary. It seems like all the alternatives keep getting worse.

    Yes, having the criminal Klinton who is responsible for killing hundreds of thousands in Libya and Syria, the corrupt criminal who is running the corrupt Klinot foundation, the corrupt DOJ, the individual who endangered the national security with private email server just to keep her corrupt secrets… Thanks to the libtards like yourself we are in such a mess…

    HW Bush was probably the last Republican president who didn’t seem like he was crazy…

    Really? Bush did 9/11, started two illegal wars in Iraq and Afghanistan, killing millions of people and running unprecedented debt (wars were more than 1T each). The only difference between Bushes and Klintons is that Bush was not a sexual predator / pedophile like slicky Bill was and he didn’t kill tens of people like Klintons did to keep their dirty secrets.

    Bush was a terrible president and both Romney and now Trump seem like they would be terrible presidents.

    A single thing i agree with you 100%

    Blah blah blah there is always an excuse.

    It is called FACTs, you are just a CNN troll you doesn’t have his own thoughts… The FED “printed” $4 +T to reinflate the bubble, just like they did in 2000 – 2005 (low interest rates) to reinflate the markets after the dot com bust.

    THere are always deniers. Just like there are people who can’t see a top there are people who can’t see the bottom.

    We will see the bottom ONLY after the FED stops intervening with the markets. There are always deniers, I agree, just like there are people who can’t see a top bubble there are people who can’t see the bottom gubmint manipulation and central banks intervention. Here, fixed it for you!

  66. 66
    Doug says:

    RE: sleepless @ 65 – How is the Fed currently intervening in markets today?

  67. 67
    whatsmyname says:

    RE: sleepless @ 65
    I love you, man. Don’t ever stop writing.
    And always put the pill under your tongue, and pretend to swallow ;)

  68. 68
    jon says:

    The LA Times has a great series of articles about OxyContin and it’s role in the heroin epidemic. Here’s the chapter on Everett: http://www.latimes.com/projects/la-me-oxycontin-everett/

  69. 69
    Blurtman says:

    RE: sleepless @ 65 – “We will see the bottom ONLY after the FED stops intervening with the markets. ”

    Must the FED stop?

  70. 70
    GoHawks says:

    Wow the gloom and doomers are out in full force. The more vile they spill, the more this market goes up……

  71. 71
    Scotsman says:

    Whew….. lots of blather with some good ideas mixed in. I’m a double degreed economist with an independent streak. Bought my current home 2/2012, right at the bottom with generous credit given to informed luck. I’m still holding on, and in fact will probably go ahead with a significant remodel to get the net value up. Not a bubble, not in Seattle. We are facing significant distortions in everything from local to world economies thanks to .gov and central bank intervention. And while the effectiveness of those efforts will eventually end we aren’t there yet. Think of what is at stake, who loses and who benefits, then re-evaluate the effort that will go into propping up the current model. Check brexit for a recent example of continuing resiliency. Collapse will happen, but not for a few more years at a minimum. Next test- Deutsche Bank and perhaps BOJ. Seattle real estate prices are at the end of a long line of consequences.

  72. 72
    Scotsman says:

    From reading through most of the above comments I’m struck by the lack of focus. There’s a ton of data out there about economic events at all levels with much of the highlighted data being national. When talking about Seattle housing it’s important to remain focused on the relatively small sub group that can afford to buy along with the events that can/do affect their economic situation. It seems to me that subgroup is doing pretty well and is likely to do as well or better in the short term future. Government employees- teachers, administrators, police, etc make close to or over $100k and are highly unlikely to lose their jobs even if everything goes boom. Tech people are in similarly strong positions and are likely to be an ongoing, growing segment of the population. Recent news reports had Seattle as a relative bargain in terms of housing, etc. for tech folks so we should expect their numbers to increase. Supply will remain constricted for a wide variety of reasons.

    Or look at it this way. A depression is defined as a10% contraction in GDP. That’s not the end of the world, even assuming Seattle’s home buying sub group takes a similar hit. Home prices likely stabilize or drop a bit, but not the 40% we saw last time around. The only thing that shakes this tree hard has to be global in scale and we aren’t there …. yet.

  73. 73
    siddharta says:

    By GoHawks @ 70:

    Wow the gloom and doomers are out in full force………………..

    yeah…..that’s why the housing market will continue to go up.

  74. 74
    sleepless says:

    By Doug @ 66:

    RE: sleepless @ 65 – How is the Fed currently intervening in markets today?

    Keeps the rates artificially low, gives money at 0% interest to buy back their own shares…

  75. 75
    sleepless says:

    By Blurtman @ 69:

    RE: sleepless @ 65 – “We will see the bottom ONLY after the FED stops intervening with the markets. ”

    Must the FED stop?

    No, the FED must cease to exist…

  76. 76
    Doug says:

    RE: sleepless @ 75 – What does FED stand for?

  77. 77
    GoHawks says:

    RE: sleepless @ 74 – so many people trying to talk down this market, hard to see it topping out when so many are saying it’s going to pop at any second. Everyone trying to make the 2007 call that so few made. People on here have been calling for a top since 2005.

  78. 78
    Eastsider says:

    By Scotsman @ 72:

    Or look at it this way. A depression is defined as a10% contraction in GDP. That’s not the end of the world, even assuming Seattle’s home buying sub group takes a similar hit. Home prices likely stabilize or drop a bit, but not the 40% we saw last time around. The only thing that shakes this tree hard has to be global in scale and we aren’t there …. yet.

    Mind you, the last Great Recession was not even a Depression. And we saw a 40% drop in housing prices. And you think Seattle home prices will likely “stabilize or drop a bit” in a Depression???

  79. 79
    Blake says:

    RE: MntGoat @ 61
    So don’t address ANY of of the facts I posted to backup my points and dismiss me by namecalling: Permabear! (If I was a permanent I wouldn’t have bought a house here in 2011 and another last year!)

    I also posted several questions for you which no one has bothered to answer: If we enter a recession what can the Fed or Govt do to stimulate the economy????

    Kicking the can down the road with more debt and devaluation cannot go on forever
    http://www.nakedcapitalism.com/2016/07/china-destabilizes-global-economy-by-exporting-deflation-through-currency-devaluation.html
    -snip- As we have also warned, ZIRP and negative interest rates are destructive to banks, life insurers, and pension funds. Both the real economy and financial assets suffer in deflation. Despite lofty-looking valuations now, a financial asset is someone else’s financial liability. Many of these claims will be marked down as businesses and households struggle under sustained low growth-recessionary conditions.

    The economist Herbert Stein said, “If something cannot go on forever, it will stop.” However, China has made an art form of defying Stein’s saying. And every major economy that has moved from an export-driven model to a consumption-driven one has suffered a major crisis. There are thus good reasons to expect things to end badly, but when is anybody’s guess.
    (end quote)

  80. 80
    Scotsman says:

    RE: Eastsider @ 78 – The difference being current prices aren’t in a bubble despite what many want to believe. Last time around while driving up from CA I heard an ad on the radio- “borrow $1.0M for only $1,000/mo for the first 12 months!” That confirmed, at least to me, that the end was near. Show me the negative amortization loans, the non qualifying 100% loans, the striper/stylist buying 4 houses. This isn’t a bubble. It’s a hot market in the midst of a hot localized economy operating in a global sphere that has some very unhealthy foundational trends. And the people who can buy at the current prices also just happen to be essentially the same people who make our economic world go ’round. Very few of those jobs are at risk in a downturn. I doubt we’ll see another 40% drop in our lifetime. Maybe 10-15%. And even then prices may never be this low again. If you doubt me please lay out in detail the scenario that has a significant percentage of government employees, tech wizards, and medical personnel losing their jobs. Baristas. Bass Pro Shop, and Target employees will be hit hard. Those that support Seattle housing purchases not so much.

  81. 81
    Eastsider says:

    RE: Scotsman @ 80 – There are so many scenarios that could tank the housing markets. I am not saying that they will happen but they could – FED balance sheet unwind, global trade war, bursting of stock bubble, financial contagion etc. I was responding to your assertion that a Depression would not affect Seattle housing market. I simply find it incredulous. Find me a place in Greece/Venezuela where RE prices stay close to its peak. Also, in the last Internet bubble, Microsoft, Amazon and practically all internet stocks plunged. The prevalent cash offers in the current market could disappear overnight.

  82. 82
    js says:

    By Blake @ 79:

    I also posted several questions for you which no one has bothered to answer: If we enter a recession what can the Fed or Govt do to stimulate the economy????

    QE5? QE6? The Fed has proven there is no upper limit to the amount of money they will print/spend to protect the asset holders in this country. As you pointed out, this cannot go on forever, but no reason to think it will stop in the next year or two.

  83. 83
    js says:

    By Scotsman @ 80:

    If you doubt me please lay out in detail the scenario that has a significant percentage of government employees, tech wizards, and medical personnel losing their jobs. Baristas. Bass Pro Shop, and Target employees will be hit hard. Those that support Seattle housing purchases not so much.

    Tech wizard jobs don’t seem that secure to me. Software development is getting much easier, and AI technology is getting better by the day. Won’t be long until us code monkeys have automated own jobs:
    http://www.forbes.com/sites/julianmitchell/2016/07/11/robots-replacing-developers-this-startup-uses-artificial-intelligence-to-build-smart-software/

    The tech jobs won’t completely disappear, but I doubt there will be enough of them to support the hordes of knowledge workers that are and will be flooding the market. Yes, that’s right, a Geek Bubble. Prediction: Peak Geek will occur sometime in 2018. And Seattle will be hit hard. And Erik will revel in schadenfreude.

  84. 84
    Blake says:

    By js @ 82:

    By Blake @ 79:

    I also posted several questions for you which no one has bothered to answer: If we enter a recession what can the Fed or Govt do to stimulate the economy????

    QE5? QE6? The Fed has proven there is no upper limit to the amount of money they will print/spend to protect the asset holders in this country. As you pointed out, this cannot go on forever, but no reason to think it will stop in the next year or two.

    The purpose of QE was to drive down interest rates to help spur more borrowing. Rates have been plummeting this year w/o additional QE… With rates so low experts deride more QE as “pushing on a string” – – i.e. it has only a diminishing effect anymore… verging towards nil!

    People optimistic about local RE values in the short and medium term need to address:
    1. What if a recession hits in the next year or two?
    … Or do they even think another recession will not happen… the business cycle been defeated!?
    2. If and when the next recession hits, why do they think it will be only mild? Which of the usual tools that the central banks and government have used in the past can be used to stimulate the economy?
    3. Why do they think the Seattle RE market will not be affected by a moderate or severe recession/depression?

  85. 85
    Anonymous Coward says:

    RE: Blake @ 84 – We all know what happens at the end of a fiat backed currency: the banks (aka the federal reserve) simply print money to avoid deflation and you get hyper-inflation. What I don’t understand is the bear case of hyperinflation in which housing is the one hard asset whose values go down. Can somebody explain it to me?

  86. 86
    pfft says:

    By sleepless @ 74:

    By Doug @ 66:

    RE: sleepless @ 65 – How is the Fed currently intervening in markets today?

    Keeps the rates artificially low, gives money at 0% interest to buy back their own shares…

    rates are not artificially low. if they were inflation would be higher. inflation is almost at the Feds target.

  87. 87
    pfft says:

    By sleepless @ 65:

    By pfft @ 64:

    By sleepless @ 58:I will gladly vote for Hillary. It seems like all the alternatives keep getting worse.

    Yes, having the criminal Klinton who is responsible for killing hundreds of thousands in Libya and Syria, the corrupt criminal who is running the corrupt Klinot foundation, the corrupt DOJ, the individual who endangered the national security with private email server just to keep her corrupt secrets… Thanks to the libtards like yourself we are in such a mess…

    HW Bush was probably the last Republican president who didn’t seem like he was crazy…

    Really? Bush did 9/11, started two illegal wars in Iraq and Afghanistan, killing millions of people and running unprecedented debt (wars were more than 1T each). The only difference between Bushes and Klintons is that Bush was not a sexual predator / pedophile like slicky Bill was and he didn’t kill tens of people like Klintons did to keep their dirty secrets.

    Bush was a terrible president and both Romney and now Trump seem like they would be terrible presidents.

    A single thing i agree with you 100%

    Blah blah blah there is always an excuse.

    It is called FACTs, you are just a CNN troll you doesn’t have his own thoughts… The FED “printed” $4 +T to reinflate the bubble, just like they did in 2000 – 2005 (low interest rates) to reinflate the markets after the dot com bust.

    THere are always deniers. Just like there are people who can’t see a top there are people who can’t see the bottom.

    We will see the bottom ONLY after the FED stops intervening with the markets. There are always deniers, I agree, just like there are people who can’t see a top bubble there are people who can’t see the bottom gubmint manipulation and central banks intervention. Here, fixed it for you!

    sorry, as a general rule I don’t argue with people who use terms like libtards for obvious reasons…

    And HW Bush is W’s father. I am talking about 41 not 43.

  88. 88
    pfft says:

    By Anonymous Coward @ 85:

    RE: Blake @ 84 – We all know what happens at the end of a fiat backed currency: the banks (aka the federal reserve) simply print money to avoid deflation and you get hyper-inflation. What I don’t understand is the bear case of hyperinflation in which housing is the one hard asset whose values go down. Can somebody explain it to me?

    most currencies end because a nation has lost a war. I am not really familiar with the examples you talk about.

  89. 89
    Anonymous Coward says:

    RE: pfft @ 87 – Off the top of my head, how about Zimbabwe in the late 2000’s and Turkey in the early 2000s?

  90. 90
    Blake says:

    RE: Anonymous Coward @ 85
    We don’t get hyperinflation when they are “printing” money because the economy (demand) is grinding to a halt for many reasons… Take a look at M2 (monetary base) growth and tell me that you see hyperinflation on the horizon?
    http://www.acting-man.com/blog/media/2016/04/4-M2-velocity.png
    … trend is just *slightly* down… eh?

  91. 91
    Amie M says:

    So what is the word on the long-term (say 5 yr) housing market in Seattle? Can it continue that long or are we in for a burst sometime in there?

  92. 92
    Anonymous Coward says:

    RE: Blake @ 90 – I don’t. But I don’t think we’re going to see a 40% decrease in Seattle housing prices in the near/mid term. But there are other posters who, if I understand them correctly, believe we may see a massive economic collapse which will cause housing prices in Seattle to drop 40+%. I’m trying to understand their point of view, as I’m sure they’re probably pretty smart people who are seeing something I’m not. I’m having trouble imagining a scenario of economic collapse coupled with significant deflation in housing prices.

  93. 93
    ess says:

    By Amie M @ 91:

    So what is the word on the long-term (say 5 yr) housing market in Seattle? Can it continue that long or are we in for a burst sometime in there?

    Ah – wish my vision of the future was so clear that I could let you know. Other than housing prices rising over time ( and the definition of time varies in each case) with occasional decreases is about the best anyone could do, other than making intelligent guesses based upon the factors at hand. As to your question, the best anyone can answer as to a continuation or a burst over that period of time is that it depends.

  94. 94
    Panda says:

    I have seen some statistics of foreign investment in the United States. A dramatic increase of Chinese investment in major cities in United States tracks almost exactly with when the prices began to rise in the major cities in the United States. Those buyers and private equity were paying cash for homes and then renting them out. The 30 percent increase in demand from foreign investment and private equity seems to have driven down supply. This drove up prices at a super fast rate over the last 3 years. People who live in Seattle, or Denver, or you name the major city, could not sell their home without taking a major risk of losing equity in their home: 6% loss of closing cost of selling and another 2-3percent appreciation lost in the couple of months they are out of the market bidding against 10 others for a home for a total loss of equity in your home of about 10percent. Why would you sell your home to lose 10% equity? Unless you got a giant raise and are willing to bet you can find a better house than you already own, and outbid everyone else for such a great valued property, why would you sell. So the new 30 percent increase in chinese investment has a secondary effect substantially reducing inventory beyond just the decrease from the primary sale.
    So if supply and demand is what drives all markets then what happens if Chinese investment decreases? Would it cause the same additive effect in the reverse direction of supply or even worse? Let’s suppose Chinese investment decreases and thus supply increases. At some point supply is large enough that the people form Seattle can put their homes on the market without the fear of having to bid against ten other people. The creates the first wave of supply from Seattleites. This wave of supply with a decrease in Chinese investment leads to prices flattening out or even dipping. At this point, those Chinese investors who are treating our real estate as an investment vehicle will start selling. They paid cash and cashing out could occur quickly. They don’t need to find a new home-just give 30 days notice to someone renting their house. If the 30 percent of the market from China, who paid cash over the last 3 years, decide to sell their stocks/houses before the market falls and their investment declines you could have a massive flood of supply on the market. With very few people who can afford prices at this current level you don’t have demand to keep up. The market drops and prices fall by 15-20 percent within a year. If interest rates rise too we would be in a world of hurt. I don’t see the FED raising rates at this point, but they can’t lower them and the spiral begins. The real concern this time around is the opposite of the last housing bubble. It isn’t unqualified buyers with no money down, but instead all cash buyers who are using the United States real estate as an investment vehicle and can sell and liquidate at the drop of a hat-almost like a stock. The Chinese investors aren’t stupid, the return on investment has decreased substantially over the last 3 years. The Chinese have little reason to buy now and it is scared americans who are purchasing homes at prices that cannot be sustained by wages in local markets. Private equity and Chinese investment will be able to sell much faster than the average Joe who lives in the house they own. That is how i see the downward spiral happening. The Brits leaving the EU may have delayed when this happens a bit because international investment may be wiling to bet on the U.S. real estate market longer with fewer options in Europe. The interesting thing i hear from my friends from Denver, Portland, and every other major market is that their city is different because X,Y, or Z. It is curious that X,Y, and Z suddenly and magically made Seattle and every other major city the place to be and live and buy a home 3 years ago when before that people couldn’t do anything to sell their house. Is it more likely that Chinese investors are creating an artificial supply shortage and a housing bubble or that magically every major city in the U.S., which also happens to be the same cites China is investing in, became the best city in the world and everyone one has to live there and buy a house?

  95. 95
    Anonymous Coward says:

    RE: Panda @ 94 – I thought Chinese buyers were looking to international real estate as a store of wealth denominated in something other than the renminbi and outside of China, preferably a politically safe place that holds open the option for future immigration. How would a flat (or even 10% down) market change the calculation for a Chinese buyer in such a way that it would cause them to liquidate? (Hint: have Chinese buyers even started liquidating their Australian real estate holdings over the last 2 years?) Sure they might stop future purchases, but that doesn’t increase supply any. As for every city in the country being special, just like Seattle, is every city in the country experiencing the fastest population growth in 100 years? (Population growth data is a good proxy for “special” and “desirable”.)

  96. 96
    Matt says:

    RE: Panda @ 94

    Where’s the proof showing this? I just went and did a records search on 15 properties currently for rent in Seattle and all of them have been owned for >5 years. I don’t doubt that some of what you say is true–I had a friend renting this awesome $2mil+ home with 4 other guys from a “Chinese man” as they told me. But based on the numbers you’re stating, I would expect to see more instances of this via such a search. Of course, I am merely searching in Seattle and the general story is that Asian investment is much stronger on the East side/Mercer Island, which would in-turn cause an increase in Seattle as the delta in cost between city and suburb changes. So there are other things to consider here, but I still think the foreign investment angle is a bit overplayed–especially next to the fact we just added 85,000+ people in the area in a year on the back of the well-paid tech sector (http://www.geekwire.com/2016/seattle-regions-population-growing-historic-pace-making-biggest-annual-gain-century/).

    And this all ignores what types of buyers target the quaint 2-3 bedroom house in Seattle, which now costs $650,000+ (Hint: I doubt it’s the foreign investor).

  97. 97
    Blake says:

    RE: jon @ 68
    That was a very interesting piece about Everett and the opiod epidemic… thx Jon. This provides another interesting perspective on the evolution of the problem.
    http://www.nakedcapitalism.com/2016/07/credentialism-and-corruption-the-opioid-epidemic-and-the-looting-professional-class.html

  98. 98
    Panda says:

    http://www.wsj.com/articles/chinese-pull-back-from-u-s-property-investments-1448649226

    Look at this chart and then look at appreciation gains in those same cities in which “China” was investing heavily. The dates of the price gains and the increase in Chinese investment follows an early similar timeline.

  99. 99
    StupidLifeDecisions says:

    By Eastsider @ 78:

    By Scotsman @ 72:

    Or look at it this way. A depression is defined as a10% contraction in GDP. That’s not the end of the world, even assuming Seattle’s home buying sub group takes a similar hit. Home prices likely stabilize or drop a bit, but not the 40% we saw last time around. The only thing that shakes this tree hard has to be global in scale and we aren’t there …. yet.

    Mind you, the last Great Recession was not even a Depression. And we saw a 40% drop in housing prices. And you think Seattle home prices will likely “stabilize or drop a bit” in a Depression???

    If we go off some of the recent posters on this thread, they will only stabilize, since everyone else will be affected by a depression EXCEPT all the software engineers (and related) in Seattle. Seattle will be immune because the all the major employers and the sum of all the smaller IT/start up type Seattle companies will only be immune to any and all economic downturns! Anyone who is bearish on the Seattle economy/real estate market just reads zerohedge too much! jeff bezoz might photograph like a hairless cat, but amzn is totally justified in having 311 price to earnings ratio. Tomorrow that ratio goes up because it’s prime day!

    Don’t worry about paying 20% over ask in today’s real estate market, nowhere to go but up!

  100. 100
    MntGoat says:

    There is no “gold rush” mentality this time like there was from ’98-’00 in tech or ’04-’07 in real estate. I was in both of those bubbles and this feels nothing like those. No way we see a 40% drop in house prices, keep dreaming, not a chance, ain’t gonna happen. Only way that kind of price drop happens is with a significant rate rise (without subsequent income inflation). And I do not see that happening.

  101. 101
    MntGoat says:

    Also another detail that is very different this time vs. ’03-’07, is that 99% of all the loans are fully amortizing vs. probably 60%-70% of all loans in the last run up being interest only. When you have fully amortizing loans with rates in the 3’s, the borrowers are paying huge chunks of principle every month. So even with FHA borrowers who put 3.5% down, even if their property didn’t appreciate, they will be building a sizable amount of equity just from principle pay down from the loan amortizing. That is a factor that was completely absent from the last run up. This helps provide some protective equity.

  102. 102

    By Panda @ 98:

    http://www.wsj.com/articles/chinese-pull-back-from-u-s-property-investments-1448649226

    Look at this chart and then look at appreciation gains in those same cities in which “China” was investing heavily. The dates of the price gains and the increase in Chinese investment follows an early similar timeline.

    I don’t think the WSJ is a good source of information, thus I’m not a subscriber, and thus cannot read the article. I’m curious how they deal with the fact that the nationality of buyers of real property is not known? Where do they make up/get their statistics?

  103. 103
    greg says:

    RE: Panda @ 94

    Panda you are correct. The data is there to prove it too, most just want to dismiss this because they know it means that when circumstances change that money will flow out much faster than it flowed in.

    It is not just China, it is retail and institutional investment from across the globe. they are hedging against any on coming storm/ currency hedge / betting the US will be the last man standing / protecting theier monies from their own governments.

    The US even changed the rules this year to make it easier for foreign investment in US based REITs. This was pretty much the last trick we have, well I am sure they can come up with a few more…

    If I were an investor foreign based investor I would be considering exiting the US market while the dollar is strong and my profits are there for the taking.

  104. 104
    Blurtman says:

    RE: greg @ 103 – “If I were an investor foreign based investor I would be considering exiting the US market while the dollar is strong and my profits are there for the taking.”

    You gotta know when to hold ’em, know when to fold ’em, know when to buy off pols, know when to bribe.

    Whether Dems or Repubs, the door revolves the same, when the shears come out for harvest, it ain’t the sheep who control the game.

    Congress Exposes That DoJ Overruled Recommendation to Indict Money Launderer HSBC Over Too Big to Fail Worries
    http://www.nakedcapitalism.com/2016/07/congress-exposes-that-doj-overruled-recommendation-to-charge-money-launderer-hsbc-over-too-big-to-fail-worries.html

  105. 105
    Anonymous Coward says:

    Question for all y’all who think Chinese investors are going to sell to consolidate their US real estate profits, why haven’t they done so with their Australian properties over the last 2 years?

  106. 106
    Panda says:

    You pose a good question. I pose my thoughts as a possible scenario if market forces move in certain directions. I do not know what direction institutional investors, foreign or domestic, or individual investors from “China” or europe will turn if the market begins to weaken. I would guess different people have different reasons for investing and different risk tolerance. I would guess that institutional investors will withdrawal when they feel their investment is decreasing, but that is a guess also. Domestic institutional investors i’m certain will sell when the time is right. JMHO
    RE: Anonymous Coward @ 105

  107. 107
    Green-Horn says:

    RE: Kary L. Krismer @ 102

    To see WSJ or Barrons content for free, highlight and select some text from the article preview then google search it.

    In this case, search for:
    “Karen Xu, a Shanghai resident looking to invest in U.S. real estate, decided this spring to seek a Miami one-bedroom condominium in the $500,000-to-$750,000 price range.

    China’s economic slowdown has since changed her mind. “I don’t think I’ll be investing in the U.S. right now,” said Ms. Xu, who works at an investment”

    Google then gives a link to the full article.
    http://www.wsj.com/articles/chinese-pull-back-from-u-s-property-investments-1448649226

    Unfortunately the paywall to the Financial Times is more pirateproof than NewsCorp’s WSJ.

    I ought to just breakdown and subscribe…

  108. 108
    Panda says:

    RE: Kary L. Krismer @ 102

    The source they use for the graph in the article is the National Association of realtors. The real dollar amount of Chinese investment is likely much higher than this because they are using many different ways to get money into the U.S. So take those figures as a low ball estimate. I only used this article for the graph as one person asked me to show some data to back up what i was saying. There is much more data than that graph, but i just used it because graphs make a good way to illustrate something quickly. I hope the market continues to increase in Seattle as i was fortunate to purchase a home at the end of 2012(the bottom of the market if you take into account price and interest rates and what really matters is your monthly payment), but i don’t allow my emotional investment to cloud my deductive reasoning on what the market may or may not be. My home appreciated over 3 times my payment every month over a 40 month period if you average it out. That is not sustainable-not even in Allen Greenspan’s delusional dream economy right before the last crash.

  109. 109
    Erik says:

    RE: js @ 83
    You are right, that would bring me pleasure, but I predict the rapture to come in 2024 though. I will get out of the market well before the mass exodus, but we have a ways to go I think. The fact is that these code monkeys are way overpaid for their intelligence. I’m sure they can be replaced by a simple machine at some point.

    Thanks for the article and bringing a twinkle to my eye.

  110. 110
    Panda says:

    In my humble opinion the bigger scare isn’t a market correction-even it was as high as 30%. That correction would bring balance to the housing market and people could still buy and sell. The bigger scare is when interest rates go up and maybe double. People cannot sell and purchase laterally because their payment would be so much larger even if they purchased their home back from themselves. That could stagnate the real estate market and maybe even freeze it. If that happens the economy will really turn nationally and locally and a large recession or depression could set in. If China or institutional investors sell off that means someone is buying and the economy keeps running. Realtors make money, just like stock brokers, when the market goes up or down. It is sales that keeps them eating.

  111. 111
    Justme says:

    RE: MntGoat @ 100

    >>There is no “gold rush” mentality this time like there was from ’98-’00 in tech or ’04-’07 in real estate.

    There you have it. Buyers nowadays just have a much better mentality than in 2004-2007. Clearly, as long as the mentality is good, there can be no bubble. It is all those negative-thinking non-buyers that are causing bubbles to exists, and just as importantly, causing bubbles to burst. Everyone get with the program and adjust their mentality! Otherwise the current massive run-up might be a bubble and it might burst!

  112. 112
    GoHawks says:

    RE: Anonymous Coward @ 105 – and why have they not sold they Vancouver properties with 10-30 years of gains.

    People paint “investor” with a broad brush. How do you know they will not hold for a long time?

  113. 113
    Blake says:

    By Panda @ 110:

    The bigger scare is when interest rates go up and maybe double.

    You mean like in 2030 or 2040? In case you haven’t been paying attention (??), the world and the US is dealing with a severe deflation problem! There is ZERO likelihood that US interest rates are going to go up any time soon!
    oiii… I can’t believe that people are worried about interest rates spiking!?

  114. 114
    Blake says:

    By Anonymous Coward @ 85:

    RE: Blake @ 84 – We all know what happens at the end of a fiat backed currency: the banks (aka the federal reserve) simply print money to avoid deflation and you get hyper-inflation. What I don’t understand is the bear case of hyperinflation in which housing is the one hard asset whose values go down. Can somebody explain it to me?

    Because hyperinflation is not going to happen here… at least not in my lifetime (2050?)

  115. 115
    Blake says:

    By pfft @ 62:

    By Blake @ 55:

    The jobs report was actually not good…
    https://anthonybsanders.wordpress.com/2016/07/09/goldilocks-jobs-report-treasury-yields-spike-then-drop-after-strongest-labor-report-in-8-months-while-dow-rise-251-points/
    the majority of the jobs added (691k) were low-wage summer jobs for youths ages 16 to 19. Jobs added for ages 25 years and older declined by -696k.

    287,000 jobs is not good? in what world? so if we lost 287,000 it would be ok if they were only low wage jobs?

    people have been talking for years how bad the job market is for teenagers and now we add jobs for teenagers(assuming your numbers are even being used correctly which I am not so sure of)) and it’s bad? the goal posts are constantly being moved at SB.

    During the Bush years all we heard about was Goldilocks, we never heard anything about food stamps or the participation rate.

    Yeah pfft… the same report had the unemployment rate go up by 0.2% If it went down you would have been trumpeting that, but since it went up you don’t mention it!!? I didn’t mention it because the unemployment rate is almost useless…

    The rate of jobs added so far this year is 172,000 per month… not good…
    “On average, employers added 172,000 jobs a month in the first half of 2016 compared with an average growth of 220,000 jobs for the first six months of 2015 and 243,000 in the first six months of 2014.”

    Labor market conditions continue to deteriorate, as reported today:
    http://www.wsj.com/articles/feds-labor-market-conditions-index-drops-again-in-june-1468255955
    The Fed’s Labor Market Conditions Index declined 1.9 points in June after falling 3.6 points in May. The index has fallen for six consecutive months, the longest decline since the end of the recession in 2009.The Fed introduced the index in 2014 as a way to measure the labor market’s momentum using 19 economic indicators including the unemployment rate, average hourly earnings and results from consumer and business surveys. The index tends to be positive during expansions and to drop suddenly in the months preceding a recession.

  116. 116
    Blake says:

    By MntGoat @ 101:

    Also another detail that is very different this time vs. ’03-’07, is that 99% of all the loans are fully amortizing vs. probably 60%-70% of all loans in the last run up being interest only.

    99%!? Impressive numbers… can you provide any source or citation for these… or are you just guesstimating?

  117. 117

    By Panda @ 108:

    RE: Kary L. Krismer @ 102

    The source they use for the graph in the article is the National Association of realtors. The real dollar amount of Chinese investment is likely much higher than this because they are using many different ways to get money into the U.S. So take those figures as a low ball estimate.

    RE: Green-Horn @ 107

    It’s actually likely a completely made up number, so it could either be low or high. There is no way to get statistics on that type of thing, which is why I asked.

    Edit: It’s apparently based on a survey of Realtors, which again makes it suspect. As I’ve stated before, there’s no particular reason an agent would know the citizenship of their buyer clients, as opposed to their being resident aliens. http://www.realtor.org/reports/profile-of-international-home-buying-activity

    NAR’s stats have about as much credibility as Zerohedge, they just have different bias.

  118. 118
    Scotsman says:

    A couple of points.

    Interest rates will be going up under only two scenarios- the first is higher levels of inflation- which will also drive housing prices up. Back in the ’80s mortgage rates were at 10- 12% and people still bought houses because their prices were also inflating and it made financial sense. Those of you shopping in todays environment can try and wrap your head that. The second scenario that drives rates up is a hot economy filled with great investment opportunities leading to a relative scarcity of money. In a hot economy with rising wages, etc. housing prices won’t be left behind, they’ll rise too. But rates won’t be going up any time soon, not with more easing the only tool central banks have on the table.

    And Amazon, etc. I have friends who have been talking about/waiting to short Amazon for decades based on the lack of profitability, earnings multiples, pending legislation, etc. Yet somehow a share of the stock is now worth almost 100 times what it sold for 15 years ago. Amazon’s strategic position, political power, cash flow, etc. give it more security now than ever before. I’m not saying it can’t falter, but I’m unwilling to take that bet. The obsolescence of lower level programmers is another issue….

    Finally, when was the last time you saw a significant- no, make that ANY- reduction in government employment levels and wages? Remember government includes teachers, cops, firemen, administrators, planning departments, licensing, tax administration and on and on. Ten years experience in most of these positions gets you close to if not over $100K/yr. Two of those incomes buys a house in Seattle.

  119. 119
    Anonymous Coward says:

    RE: GoHawks @ 112 – Because they’re not looking for income/yield. Chinese investors aren’t looking for yield; they’re looking for safety. An overseas property is insurance. Which is also why they don’t necessarily rent them out. If you need to flee the country and leave tonight, it’s a little problematic if your tenant’s lease isn’t up for another 10mos.

  120. 120
    Blake says:

    By Scotsman @ 117:

    Finally, when was the last time you saw a significant- no, make that ANY- reduction in government employment levels and wages?

    Ummm… 2015… and the year before… and the year before that….and the year before THAT! There are more than 500,000 FEWER public sector employees today than there were when Obama came into office… I thought that was why you became a big Obama supporter Scotsman? ;-)
    http://www.pewresearch.org/fact-tank/2015/01/14/job-shifts-under-obama-fewer-government-workers-more-caregivers-servers-and-temps/
    http://www.nytimes.com/2015/05/25/business/public-sector-jobs-vanish-and-blacks-take-blow.html?_r=0
    … way to go Barack!

  121. 121
    Panda says:

    “You mean like in 2030 or 2040? In case you haven’t been paying attention (??), the world and the US is dealing with a severe deflation problem! There is ZERO likelihood that US interest rates are going to go up any time soon!
    oiii… I can’t believe that people are worried about interest rates spiking!?”

    What would the national debt look like if interest rates were artificially deflated until 2030 or 2040? We artificially deflated them over the last 8 years and the cost was doubling the national debt. Can we afford the to do that forever?

  122. 122
    Green-Horn says:

    RE: Kary L. Krismer @ 116

    I like science fiction.
    I like comedy.
    I sometimes also like to read Zerohedge.

    On the first most obvious level it’s completely ridiculous.
    On a deeper meta-level their “outsider” status allows them to let some uncomfortable truths to light that “more responsible” mainstream media would never touch.
    Only entertainment. Sometimes Straussian?

  123. 123
    Panda says:

    RE: Kary L. Krismer @ 116

    Are there numbers or data we can trust? Which numbers should i look at?

  124. 124
    Panda says:

    RE: Scotsman @ 117

    History repeats itself, but almost never in the same exact manner or circumstance as before. That is why computer models do a great job of predicting past behavior every time, but they are almost useless in predicting future crashes in markets. The assumptions they are based on do not, and cannot, factor in the next unique set of circumstance or emotional reactivity to it because it has never happened before. It is often the manipulation of market forces to prevent past bad events which lead to the next unforeseeable event. The Medicine ends up being what makes you even sicker in the long run.

  125. 125
    Anonymous Coward says:

    RE: Green-Horn @ 121 – Zerohedge is an awesome window into the world as the FSB sees it/ would like it to be.

  126. 126
    Blake says:

    By Panda @ 120:

    What would the national debt look like if interest rates were artificially deflated until 2030 or 2040? We artificially deflated them over the last 8 years and the cost was doubling the national debt. Can we afford the to do that forever?

    Well… luckily they do not need to intervene to artificially deflate interest rates anymore because their ZIRP policies the last 7+ years has the world awash in overcapacity and excess savings looking for investments. Yes, the central banks have some $6 trillion in bonds still on their books, but there is now over $10 trillion invested in negative interest bonds (by individuals, banks, insurance companies etc.)! The Fed is not increasing their asset purchases anymore… low rates have taken on a life of their own and – like zombies – it … is … not …. good!

  127. 127
    Green-Horn says:

    RE: Anonymous Coward @ 124

    FSB, you mean the Russian Federal Security Bureau?

  128. 128

    By Panda @ 122:

    RE: Kary L. Krismer @ 116

    Are there numbers or data we can trust? Which numbers should i look at?

    For this topic, as we discussed on a prior thread I don’t think there are any valid statistics. Federal law doesn’t allow discrimination on this basis, and therefore most reasonable people in the industry wouldn’t asked. Almost certainly escrow companies and title companies would not know, although escrows might know if funds are transferred from a foreign bank. Recorders would not know. And many/most agents would not know.

    That’s why I had a problem with your assertions in Post 94. There are no such valid statistics upon which such claims could be based. Only people hypothesizing in magazine and newspaper articles.

  129. 129
    S-Crow says:

    RE: MntGoat @ 101

    Mt Goat:
    Let’s not forget….when you have 20-30% (just to use numbers) evaporation of equity it hits all price levels. People walked away from homes at all levels, albeit it was easier when you had little down. The issue was that the sheer number of people walking away impacted housing prices in ways that was not expected. My office is still closing short sales from ‘walk aways’ reflecting payment in arrears from 5 freakin’ years ago…..collecting rents all that time. And, my signature on HAFA (Gov. program) generated proceed funded checks for $10K to the parties for “hardship and moving expenses.”

    If poeple want to know what the hell goes on in real estate in a granular way…..escrow is a great place. See my next comment below to Kary Krismer.

  130. 130
    S-Crow says:

    RE: Kary L. Krismer @ 127
    Kary Krismer:
    From your earlier thread comment regarding the merit of what escrow would have to offer in market commentary and it may be better to ask a mortgage broker…..

    FWIW: We DO read DOT’s, Notes & Terms (we prepare them in many cases and correct some that are prepared by other professionals ; cough- cough ), Deeds (we prepare them on every sale), we see income, we see IRS 1040’s (some abbreviated) , see debt loads, see employment, see pension and SS awards, and more ON EVERY SINGLE TRANSACTION. What people in real estate don’t see is all the refi activity and the front loading of debt onto homes–some equity of which is pulled to flip property which is happening today. What we don’t always see is additional net worth documents via investments (ie, Schwab, Janus, Fidelity, TD Ameritrade, etc…).

    So the idea that escrow is just worth our paygrade (not your words) on the fee we earn at $795 to close a $745,000 sale vs. commission at about $44,700 @ 6% is always amusing to me. Not that $44,700 is not money well spent. It is in many cases. However, if I’m spending that kind of money I sure as hell hope that my broker is a student of the market as part of their services offered and they better be able to give me a cogent opinion.

    I think I’ve told Jillayne Schlicke (clock hour trainer of many brokers and mortgage folks) in the past that brokers should be required to work in escrow pre-licensing for at least a month to see all the moving parts in a sale (see the finance, deal with lenders from coast to coast, actually be able to prepare and explain settlement statements and how you arrived at prorations, actually clear title problems,—> to avoid comments from brokers “how come I’m only finding out about this the day prior to closing! Who dropped the ball! ” when they have had the title report for six months when they took the listing . They should also review the Purchase and Sale agreements and see what works and how poorly others are drafted. They should actually disperse files, get UPS and Fed Ex payoffs out the door, get wires out by cutoff times, hop in their car in traffic to drive commission checks to the real estate offices as we have or pick up earnest money checks at their own homes or businesses as we do and also record documents IN PERSON at the county so they see the human effort behind the scenes and find out there is no magic green “open escrow” “close escrow” buttons we push. They should sign clients at all times of the day and night and field clients questions during the signing and crunch time (which really is a great way to cut your teeth and learn). Then once a year you cut a check for $10K-$15,000 for the glorious insurance and crime bonding required before we can even turn the lights on and close on one $450 refinance transaction. Trust me, it can only benefit brokers and lights will come on.

    Anyone needing resources in Snohomish County and beyond? Give Laura Burton a call…she’s the managing broker at Windermere in Everett by Costco and she’s knows the market and isn’t afraid to provide her opinion. Another resource is Natalie Thurston of Windermere and she is not afraid of providing her opinion on the market, warts and all. Teri Kielow is a no nonsense broker as well that we have worked with since day 1. Financing needs? Shoot me an email and we can refer you to resources for comparing loan costs and fees. Escrow knows who does good work and makes an effort to earn their fees.

    S-Crow

  131. 131
    Mike says:

    By Scotsman @ 117:

    Finally, when was the last time you saw a significant- no, make that ANY- reduction in government employment levels and wages? Remember government includes teachers, cops, firemen, administrators, planning departments, licensing, tax administration and on and on. Ten years experience in most of these positions gets you close to if not over $100K/yr. Two of those incomes buys a house in Seattle.

    Shortly after Obama was elected. Around 2010 the federal layoffs were staggering. During the early part of the recession many of my friends went to work for the federal government after losing their private sector jobs. By 2010 we were hiring them back after fed layoffs. Prior to that the top salesman at the company I worked for was the one doing government contracts or with government contractors. He quickly became the lowest producer in the company. Billions in federal spending evaporated in 2010 and the many projects were consolidated down to a small number of employees or disappeared entirely. It’s not a story many people heard but I was in a company/field with huge federal employment and contracts and it was absolute carnage. I knew a lot of people who had multi-decade careers in federal employment and they were not able to easily get re-hired as all of their connections were let go as well.

  132. 132
    Justme says:

    RE: S-Crow @ 128

    How practical is it for lenders/bondholders to garnish the rental income of a specuvestor that defaults on the mortgage but keeps renting out the place? Good stuff, eagerly awaiting more insights.

  133. 133

    RE: Justme @ 130 – There is a process, but it’s usually done on multi-family buildings. I’m not even sure off the top of my head that a typical SFR deed of trust contains an assignment of rents clause.

    Their faster remedy is just foreclosing in a timely manner, but they don’t, because banks and loan servicers are not typically run by people who are capable of making good decisions.

  134. 134
    greg says:

    RE: Kary L. Krismer @ 131

    Lets all neg the Banks, after all it is their fault for allowing us to ask them for money ….

  135. 135

    RE: S-Crow @ 130 – I knew you could read notes and deeds of trust, but why would you, other than checking names are entered consistently, etc.? If the title company and lender is happy with the docs, then why would you care? Do you have some sort of a duty to them, beyond just making sure docs are properly signed and then recorded/transferred that I’m not aware of.

    I was totally unaware that you see income documentation (other than the loan application which gets re-signed), and wonder why you would even need to see income tax returns?????? Seems like an incredible invasion of privacy, but it is an industry where they commonly copy earnest money checks without redacting account numbers.

    Maybe I missed it, but I’m not seeing anything that would give you access to nationality or citizenship information. And for the benefit of others, the escrow may never even meet the parties–instead having an approved notary have the documents signed–sometimes not even at the office of the notary.

    But as to the old point about who would be better to review current buyers, an escrow or a loan originator, and compare that between now and 2007, I still think a lender would have a much better idea of the programs available and the qualifications of the people who do get loans. That’s not intended to be a put-down, it’s just that loan originators are more in the trenches.

  136. 136

    By greg @ 134:

    RE: Kary L. Krismer @ 131

    Lets all neg the Banks, after all it is their fault for allowing us to ask them for money ….

    Believe me, I think people should repay their loans. But that doesn’t change the fact that many/most people working for banks are not exactly high up there in the IQ/ability charts. There are exceptions of course, but they are the exception rather than the rule.

    The biggest negative about moving from bankruptcy law to real estate is I still have to deal with banks and bank employees. It’s particularly aggravating on short sales, but at least those are becoming rather uncommon, or at least more avoidable. And it’s not as bad as my bankruptcy days dealing with Seafirst, where we had to retrain bank employees every time we wanted to open an account.

  137. 137
    pfft says:

    By Blake @ 126:

    By Panda @ 120:

    What would the national debt look like if interest rates were artificially deflated until 2030 or 2040? We artificially deflated them over the last 8 years and the cost was doubling the national debt. Can we afford the to do that forever?

    Well… luckily they do not need to intervene to artificially deflate interest rates anymore because their ZIRP policies the last 7+ years has the world awash in overcapacity and excess savings looking for investments. Yes, the central banks have some $6 trillion in bonds still on their books, but there is now over $10 trillion invested in negative interest bonds (by individuals, banks, insurance companies etc.)! The Fed is not increasing their asset purchases anymore… low rates have taken on a life of their own and – like zombies – it … is … not …. good!

    rates are not artificially low. they are exactly where they should be in a deflationary/banking crisis environment. inflation rates are low so there is no sign of artificially low rates. if rates were too low the economy would be overheating and inflation rates would be higher than currently.

  138. 138
    Blurtman says:

    By greg @ 134:

    RE: Kary L. Krismer @ 131

    Lets all neg the Banks, after all it is their fault for allowing us to ask them for money ….

    They actually do not have the money that they are lending you. Wouldn’t you like a piece of that action?

  139. 139
    greg says:

    RE: Blurtman @ 138

    it is definitely magic money and a hard concept to get one’s head around when you first encounter how banking works.

  140. 140
    Doug says:

    Justme, I’m sure you’ve already devoured this hit piece from ZH, but still worth posting:

    http://www.zerohedge.com/news/2016-07-14/three-red-flags-us-housing-starting-roll-over

    tl;dr — 1) Institutional investors are beginning to get out of the flipping game while unsophisticated flippers pile in (a similar trend seen in the last housing bubble). 2) Purchases of home goods are in decline. 3) Traffic levels are also in decline.

    Nonetheless, the article specifically mentions Seattle twice as being a pocket of strength. The housing market nation wide isn’t overheating. Rather, we’re just seeing a reallocation of capital to, dare I say, special cities — like Seattle…

  141. 141
    Justme says:

    RE: Doug @ 140

    >>Nonetheless, the article specifically mentions Seattle twice as being a pocket of strength.

    Translation: Seattle is being mention twice as a pocket of extreme bubbliness.

  142. 142
    greg says:

    RE: Doug @ 140

    institutional investment in residential started to fall off in late 2015.

    There is really no where left to go. REITs started in the prime and more robust markets, as prices impacted returns they moved down stream, they are now far out on that risk curve. But to hear many of the posters here on this site, one would think this was early in the cycle.

    I look forward to seeing how the Trillions of dollars find return over the coming months and years. With virtually no where left to go, exactly what will tempt new money to the table? There is not much left that pays a return that is attractive enough to offset the increasing risk incurred.

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