More Homes Sold In Cheaper South King Neighborhoods

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It’s been quite a while since we took a look at the in-county breakdown data from the NWMLS to see how the sales mix shifted around the county.

In order to explore this concept, we break King County down into three regions, based on the NWMLS-defined “areas”:

  • low end: South County (areas 100-130 & 300-360)
  • mid range: Seattle / North County (areas 140, 380-390, & 700-800)
  • high end: Eastside (areas 500-600)

Here’s where each region’s median prices came in as of January data:

  • low end: $310,000-$429,500
  • mid range: $469,250-$800,000
  • high end: $649,995-$1,508,750

First up, let’s have a look at each region’s (approximate) median price (actually the median of the medians for each area within the region).

Median Price of Single Family Homes Sold

Only the low tier saw a month-over-month gain in its respective median-median price, while the middle and high tiers both fell slightly. All three tiers are currently at a level lower than their respective all-time highs. Month-over-month, the median price in the low tier rose 0.3 percent, the middle tier decreased 3.3 percent, and the high tier lost 1.2 percent.

Twenty-five of the twenty-nine NWMLS regions in King County with single-family home sales in January had a higher median price than a year ago, while Fifteen had a month-over-month increase in the median price.

Here’s how the median prices changed year-over-year. Low tier: up 19.2 percent, middle tier: up less than 0.1 percent, high tier: up 13.8 percent.

Next up, the percentage of each month’s closed sales that took place in each of the three regions.

% of Total King Co. SFH Sales by NWMLS Area

Sales in all three tiers fell between December and January, with the middle and high tiers seeing the biggest dips. Month-over-month sales were down 21.8 percent in the low tier, down 30.1 percent in the middle tier, and down 29.0 percent in the high tier.

Meanwhile, year-over-year sales were up considerably in all three tiers. Compared to a year ago, sales increased 25.1 percent in the low tier, rose 25.8 percent in the middle tier, and gained 8.7 percent in the high tier.

The interesting thing is the strong shift in the sales mix in recent mix away from the high tier and into the low tier.

As of January 2017, 41.3 percent of sales were in the low end regions (up from 39.7 percent a year ago), 31.8 percent in the mid range (up from 30.4 percent a year ago), and 26.9 percent in the high end (down from 29.8 percent a year ago).

Here’s that information in a visual format:

Bank-Owned: Share of Total Sales - King County Single-Family

Finally, here’s an updated look at the percentage of sales data all the way back through 2000:

% of Total King Co. SFH Sales by NWMLS Area since 2000

With sales shifting strongly into the lower-priced regions, it’s no surprise that the county-wide median price fell slightly. The last time this large a share of sales were in the low-tier parts of the county was in November 2007, just a few months after home prices peaked.


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.

393 comments:

  1. 1
    uwp says:

    South King and Eastside seem to diverge every January. I wonder why.

    The Tim points to late 2007, but also check out Jan 2004 as a possible parallel.

  2. 2
    Brian says:

    On the last chart, it’s interesting that the divergence between the three tiers looks similar now as it did in 2007.

  3. 3
    Deerhawke says:

    This is the kind of pattern you expect late in an expansion. Core neighborhoods are fully priced given certain levels of incomes so people move out toward the periphery where there not only are lower prices but more inventory.

    So do these trend lines mean that we are at 2007 again?

    It is a question worth asking, but I would want to see some other indicators that were similar. Starting in 2005, inventory stopped dropping and rose pretty quickly along with sales. Nobody paid much attention because sales were so robust. In 2006 and the first quarter of 2007, sales and inventory were both rising rapidly. It was a heck of a party until the music stopped.

    Right now, with a much greater population, we are at a level of inventory that is less than half of the 2005 level. If I start seeing it rise rapidly like in 2005, that will really get my attention.

    In the meantime, I am convinced that if we have a recession in this real estate market, it will be caused by the end of the business cycle (soft landing) or political incompetence at a national level (hard landing). Either way we will see that played out in the equities markets first.

  4. 4
    Sid says:

    By Deerhawke @ 3:

    ……..
    So do these trend lines mean that we are at 2007 again?
    ……

    We will not be at “2007” kind of conditions for another few decades. 2007/8 crash was once in a generation event. Anyone expecting another crash will be very disappointed.

  5. 5

    RE: Sid @ 4 – 18 year cycles, once in a generation, etc., reminds me of picking stocks by chart patterns. The past only tells you what happened, it does not tell you what will happen.

  6. 6
    N says:

    That may be. But one could also say the 75% increase in the last 5 years is also a once a generation event.

    By Sid @ 4:

    By Deerhawke @ 3:

    ……..
    So do these trend lines mean that we are at 2007 again?
    ……

    We will not be at “2007” kind of conditions for another few decades. 2007/8 crash was once in a generation event. Anyone expecting another crash will be very disappointed.

  7. 7
    Panda says:

    RE: Kary L. Krismer @ 5

    Yes, economics and climate science are flawed because they use models with assumptions based on the past and it is always the assumptions which make the predictions of the future flawed.

  8. 8

    By N @ 6:

    That may be. But one could also say the 75% increase in the last 5 years is also a once a generation event. .

    Well you could say that, but since it hasn’t happened it might be called a not in a generation event.

    Yes you can find REOs and short sales that went for incredible prices in the not so distant past, but that just means they were relative bargains.

  9. 9

    By Panda @ 7:

    RE: Kary L. Krismer @ 5

    Yes, economics and climate science are flawed because they use models with assumptions based on the past and it is always the assumptions which make the predictions of the future flawed.

    I would say it’s simply not being able to account for all the possible variables, rather than assumptions (unless you maybe assume all the other variables will be the same).

  10. 10
    Deerhawke says:

    I am always fascinated by people who predict the end of the world. Somehow the date and time has been revealed to the elect and they announce it to the rest of us so we can repent.

    And then that date and time comes, the sun comes up, the birds start singing and everybody just goes off to school or work. The prophet gets a big eraser and goes back to his calculations to find out why his revelation’s timing was off target. Believe it or not, a guy by the name of Harold Camping did this a couple of times. He got people to believe him so he must have been a heck of a salesman.

    I am similarly skeptical of 18 year cycles and other cyclical theories about real estate or the stock market.

    The people who will call the next big downturn are likely not to be people who see repeating multi-year cycles, but repeating patterns of human folly.

    If you haven’t read them, pick up these two books.

    Manias, Panics, and Crashes: A History of Financial Crises, Seventh Edition Oct 13, 2015
    by Charles P. Kindleberger et al.

    Irrational Exuberance 3rd edition Revised and Expanded Third Edition
    by Robert J. Shiller

  11. 11
    Panda says:

    Is that what a computer model does? Assumes all variables will be the same except the ones you determine to be an active part of the algorithm of your model. So the assumptions are equally those which you do and don’t account for in the future of your model?

  12. 12
    N says:

    Interesting, the 75% number has been widely reported and looking at latest charts from Tim it looks like we were around $300k 5 years ago which would put today’s medium price in the range of 75%+ higher. By hand picking select properties you find things more in the range of 100% but the medium home price is a better measure.

    By Kary L. Krismer @ 8:

    By N @ 6:

    That may be. But one could also say the 75% increase in the last 5 years is also a once a generation event. .

    Well you could say that, but since it hasn’t happened it might be called a not in a generation event.

    Yes you can find REOs and short sales that went for incredible prices in the not so distant past, but that just means they were relative bargains.

  13. 13
    Deerhawke says:

    RE: N @ 12

    N, the 75% figure you are quoting for the past five years may or may not be entirely accurate, but to anyone who has been dealing with real estate in Seattle, it might seem rather arbitrary.

    If you choose the bottom of the recession until the present, that choice seems artificial and contrived to show the maximum percentage gain. This is the kind of thing that our city council people do for political effect. (“This is a crisis of affordability. Something must be done to address this crisis!”)

    Why not choose a longer time horizon? Why not choose 2004? Or 2000? Perhaps you would come to see that the once in a lifetime event was actually the tremendous loss of equity between late 2007 and late 2011 rather than the tremendous gains in the period since 2012.

    Just for reference, my family and I arrived in Seattle in late 1990. Everyone told us that we had missed the opportunity to buy a really nice home in Seattle since everything had doubled (doubled!!) during the 80’s. I am not sure if it is actually true, but it was the received wisdom of the time. That doubling of prices, they said, was a once in a lifetime event.

  14. 14

    By N @ 12:

    Interesting, the 75% number has been widely reported and looking at latest charts from Tim it looks like we were around $300k 5 years ago which would put today’s medium price in the range of 75%+ higher. By hand picking select properties you find things more in the range of 100% but the medium home price is a better measure.

    I’m not sure where you get the $300,000 figure, but looking at Tim’s charts the last time that occurred was sometime before 2006. It did dip briefly to $308,000 in February 2012, but was back up to $360,000 two months later and $380,000 two months after that because of the next topic.

    The issue with the median (as well as Case-Shiller) is it is affected by the short sales and REOs, just as Tim points out that the current median is affected by more sales occurring in the south end. The median for non-distressed sales was hanging out between $380,000 and $420,000 for a long time. But in February 2012 the volume was relatively low, while short sales and REO sales plugged along at a fairly steady level, thus dragging the median down. The sales four months later were about 900 more units, thus being largely responsible for the $72,000 gain. If you just look at non-distressed sales the King County median in February 2012 was $382,000 and the non-distressed median in June 2012 was $430,000.

    Some numbers sort of though NWMLS sources directly or indirectly, but not guaranteed by the NWMLS.

  15. 15

    RE: Kary L. Krismer @ 14 – Just to carry those numbers forward a bit, the non-distressed median in December 2016 was $565,000, so just barely above the total median, but in January 2017 is was $542,000, which was a bit more above the total median. So the because the distressed sales are making up a smaller portion of the market they are having less of an affect today, but they still have more of a seasonal effect.

    Same disclaimer as in prior post.

  16. 16
    Erik says:

    RE: Deerhawke @ 10
    Thanks for the references. I read irrational exuberance, but it got a little boring for me towards the end because I don’t understand stocks and all of that. I just like the real estate. I’ll try Mr. Kindleberger’s book and let you know what I think.

    We can tell what part of the cycle that we are in, right? Housing prices can’t be going down when we are in the expansion phase, right?

    https://www.extension.harvard.edu/inside-extension/how-use-real-estate-trends-predict-next-housing-bubble

  17. 17
    Deerhawke says:

    Erik, I read the article you referenced. It is interesting, but I would forget about the 18-year cycles.

    Anyone who was around for the 1973-74 downturn would have thought that they were good until 1991. But they would have been wiped out by the 1979-81 downturn.

    In point of fact, in Seattle we have had a lot more than the number of downturns predicted by this model. There was a double-downturn in ’69-70 caused by the Boeing bust followed rapidly by a 73-74 downturn caused by the first oil shock. There was the 80-81 real estate meltdown caused by the second oil shock. In 1991 there was a downturn caused by (your theory here) but triggered by the Gulf War/Desert Storm. We often forget the 2001 mini-downturn caused by the tech meltdown– it mainly only really affected the East Side. And then there was the big one in 2008 that still has us scratching our heads.

    Just so you know, for a very long time people in Seattle real estate talked about the 9-10 year cycle. This is not just because they were cutting your longer cycle in half. In fact, Seattle real estate was heavily dependent on Boeing and the aircraft industry did have a 9-10 year cycle expansion/contraction cycle.

    Anyway instead of focusing on the years predicted by the cycle (which I think is bogus) I would focus on the 4 phases noted in the article, which fit into the economic literature– recovery, expansion, hypersupply and recession.

    This is all easy in theory, but even taking recent events into account, how do you chart it?

    From Q3 2007 we were clearly in a real-estate recession, since a lot of major lenders (Countrywide, etc) had stopped making loans. Then 2008 through 2010 were just a nightmare. I think you could make the argument that 2011 marked the beginning of recovery although it wasn’t that apparent to market participants until late Q4. People actually started to talk about a recovery in 2012 and really felt like they could be sure it was taking hold in 2013. By 2014, home prices and land values started shooting up so it felt like we were out of recovery and full-on into the expansion stage. Vacancy rates were dropping. There were construction cranes all over the place. Everywhere you looked, you saw notices of impending land use all over the city.

    So… by 2016 the talk about whether we are in a bubble was pretty common. It sure felt like a bubble. Multiple offer situations were the rule rather than the exception. And all of that apartment inventory was starting to come on line.

    So the real question here in the first quarter of 2017 is– where do we stand? Continued Expansion or HyperSupply? Are we still growing stably? Or are we overstepping common sense and getting ready for the next downturn?

    Economists and historians have the advantage of hindsight. Recessions do not even get declared until they are mostly or fully over. I am a spec builder so these are real questions for me and I have to take a stand in real time in advance.

    For me, there is no clear answer to the question. If you look at the rental market, it seems we have some real elements of hypersupply. I think rental rates will drop a bit or at least stop rising. Most of the people I know in that world feel confident that they can get rented up if they give away some freebies like parking or a free month of rent. Most do not feel it is a good time to be building now.

    On the other hand, the for-sale market (which this website focuses on) still shows a pretty vibrant expansion. There is a truly weird lack of inventory that throws off all calculations. There is not a lot of vacancy and new construction is barely keeping up. Perhaps this lack of inventory is what will keep us in a stable expansion mode and help us avoid the kind of hypersupply that is always the prelude to a correction.

    For 2017, I have decided that we are still in an expansion and that we will see strong demand meeting limited supply. I believe prices will go up by around 8 percent, but that is 8 percent on top of a pretty substantial base.

    As I have said, I am going to be keeping a close eye on inventory levels. If I see a sudden change, I will be looking for an exit.

  18. 18

    Both Samamish and SE King County Have Something Seattle and Bellevue Lacks

    A much newer infrastructure of roads and water lines….while both Seattle and Bellevue both need to be tore apart and rebuilt due to aging corrosion.

    Why do you think I moved from Bellevue to Kent?

  19. 19
    Blurtman says:

    First, the sportsmen came to Sammamish, and then the settlers came. Folks who were self sufficient, or able to be employed by local industries. Then came gentrification and loss of trees and open space. Then came the immigrant workers.

  20. 20

    On the Zillow front, they’re apparently going to stop individual agents from posting listings, only accepting listings from an MLS or firms. That will reduce the number of listings they have, but it should probably really help with their stale listing problem. Sorry I don’t have a link to the complete article.

    https://www.inman.com/2017/02/15/zillow-group-nixes-manual-listing-entry-real-estate-agents-doubles-direct-listing-feeds/?utm_campaign=AddThis&utm_source=facebook&utm_medium=social#.WKSPRX6u_qE.facebook

  21. 21

    RE: Deerhawke @ 17 – I would add not all areas follow the same schedule, even if you accept that their is a schedule. I don’t have something to pin down any of this timewise, but back when I was practicing bankruptcy law I did have some clients who came from other parts of the country where their real estate markets had collapsed while ours was chugging along without a concern. I remember one client who had several rental houses he bought while things there were going well, and by the time he came here it was difficult to even rent them.

  22. 22
    Deerhawke says:

    Erik there is a good list of US recessions (and explanations) at
    https://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States.

    Again, if you ask someone in real estate in Seattle when the recessions started and stopped, they might remember quite accurately but their perception of when the recession occurred is different from what NBER says. The main reason is that there is a lag. Here in Seattle, we are behind the rest of the country going into a recession and late coming out as well.

  23. 23
    Deerhawke says:

    RE: Kary L. Krismer @ 21

    I referenced this in my previous post. I agree there is a differential effect by region. We always seem to experience a lag. I am sure that different parts of the country experience a recession more strongly while other parts hardly experience it at all.

    What I can say for sure is that when the recession starts to effect the rest of the country, people quoted in the Seattle Times will say that this time is different and it will have little if any effect on Seattle at all. This always happens and it is always a delusion.

    Wow. Bankruptcy law to real estate agency. What a segue!

  24. 24
    Scotsman says:

    Cycles, charts, crystal balls and dark magic! Forget all of it. What matters is demand- and the quality of that demand: Can buyers actually afford what they buy with traditional terms, ratios, etc. Is the employment base financially solid, diverse, and expected to grow or at least maintain? Is the effective supply likely to change for any reason- geographical expansion thanks to changes in transportation choices, zoning changes, government incentives/disincentives, etc? At this point people can afford the homes they buy without having to resort to tricky financing gimmicks, supply remains constrained, the economy continues to grow. Seattle looks good for the coming years.

  25. 25

    By Deerhawke @ 23:

    Wow. Bankruptcy law to real estate agency. What a segue!

    In most personal Chapter 7 bankruptcies the only asset worth selling is the personal residence, at least in Washington state, so a lot was very familiar. And in other bankruptcies liquidating real property was also important, and a not insignificant part of the practice involved verifying that deeds of trust were proper. If not the bankruptcy trustee could sell the property. Finally, some Chapter 13s were done just to allow additional time to sell, or otherwise save the house from foreclosure.

    I do wish though that I had some of the tools then that I have now as a real estate agent. They would have made it much easier to deal with clients and check out what they were telling me.

  26. 26
    Brian says:

    RE: Kary L. Krismer @ 20

    That would definitely help them. If they could get rid of or filter the auction.com listings that would benefit them as well. As a person looking for homes, I hate using Zillow because of all their useless listings and inability to filter them.

  27. 27
    Deerhawke says:

    RE: Scotsman @ 24

    “What matters is demand- and the quality of that demand.”

    Well demand does matter, but of course it is only part of the equation. Others might say… What matters is supply- and the quality of that supply.

    Really it is demand relative to supply and supply relative to demand.

    My way of tracking this is to look at the monthly numbers of active listings, solds and pendings.

    When I see a pattern where there are more pendings than solds and more solds than actives, this is a classic indicator– the market is heading up and prices will rise.

    When I see a pattern where there are more actives than solds and more solds than pendings, that is also a classic indicator– the market is heading down and prices are going to drop.

    Track it for a while. This gives a pretty balanced perspective on demand (and future demand) relative to supply.

  28. 28
    jon says:

    This article breaks down the salary increases since 10 years age by different areas in Seattle. The fact house prices are slightly more than they were at the previous peak seems much less significant when compared to the increased average income that has resulted from the influx of tech jobs.

    http://www.seattletimes.com/seattle-news/data/seattle-neighborhoods-wage-growth-hot-spots-getting-richer/

  29. 29
    Andrew says:

    RE: Erik @ 16 – Thanks for sharing the link. I often hear about that cycle and you seem to have deeper understanding in the cycle.
    To me personally, though it’s clear that there have been ups and downs (most likely there will always be), I’m having difficulties determining actual interval (i.e. how many years) until the next phase comes when we’re not at a turning point, and what is the magnitude of the upcoming phase.
    With my limited knowledge of future projections for all contributing factors to the cycle, looking at historical data alone I’d feel like using roulette winning numbers board to decide what my next bet should be.
    How did you calculate those figures? Your input would be greatly appreciated.

  30. 30
    Erik says:

    RE: Andrew @ 29
    I’d love to take credit for having a deep understanding, but that is not the case. I just read on this site that the number of houses for sale is super low, which represents supply. I then read the number of houses sold per month and I can see it is slightly above average, which represents demand. I’m sure it is much more complicated than that, but it’s good enough for me. If supply is low and demand is high, prices will likely go up. If you want to reference the 18-year cycle, you could say we are somewhere in the expansion phase. I read somewhere that the expansion phase is usually the longest of the phases. As long as we are expanding, prices of houses should be going up.

    When supply goes up and demand goes down, we are heading toward Hypersupply. You want to be very scared in Hypersupply, because the bubble could pop as any moment. Therefore, you can deduct that when supply is low and demand is high, we are in the recovery phase or the expansion phase. Right now it’s time to party because we are likely in the expansion phase. It would have been nice to buy in previous years, but it’s still going up and could keep going a while.

    Average inventory for SFR for king county is about 7500. We are somewhere around 1380 last time I looked which is way below the Hypersupply phase. I would say keep partying until we get to atleast 5000 SFR for sale in king county. At that point, you may want to think about selling something. When credit loosens and supply is up, you know this thing is gonna blow at some point. It’s a game of chicken because bubbles accelerate at the end when the mania really sets in. You may just want to take your profits and run at this point. I’d sell a couple houses and keep pushing to the top of the market.

  31. 31
    justme says:

    >>I just read on this site that the number of houses for sale is super low, which represents supply. I then read the number of houses sold per month and I can see it is slightly above average, which represents demand.

    That can only mean that more houses sold than there were houses for sale?? That’s quite a feat, even for attempted reformed bad-boy Erik!

  32. 32
    Erik says:

    RE: justme @ 31
    ……………………

  33. 33
    Brian says:

    RE: Erik @ 30

    Inventory can go up very quickly, as 2007 pointed out. 5000 could be achieved in a few months if enough people suddenly have reason to sell.

  34. 34
    Erik says:

    RE: Brian @ 33
    Yeah, that’s the scary part. It’s certainly not a full proof plan. If everyone suddenly had a reason to leave, you wouldn’t have a chance to sell. Low inventory makes me feel safer though.

  35. 35
    Sid says:

    Looking at AMZN & MSFT stock, foreign investment interest and good outlook for local tech jobs, another 10+% year for Seattle real estate is very likely.

  36. 36
    Blurtman says:

    And don’t forget legal weed. Why, you’d have to be high to buy at that price. Tee hee.

  37. 37

    RE: Erik @ 16
    Read This Book Today

    Its available used and shipped [hard bound copy] to your home for about $4 from Amazon:

    Dark Rivers of the Heart by Dean Koontz [1997]

    It totally explains much of today’s NWO by a world renown Fiction Writer with references to REAL SURVEILLANCE the NWO is using against citizens….his Odd Thomas series is good too, emphasizing California’s Milenial economy: youth sponging off Baby Boomers with incomes collapsing. A refreshing best seller author and a good read too!!!

    Real answers for flipping planning and future real estate investment strategies in 2017!

  38. 38

    RE: Blurtman @ 19
    Yes Blurtman

    Cheap foreign replacement labor is nothing but “federal tax evasion” by Sanctuary Cities protected by the Fake News cloak of real democracy? LOL….try another description, Sanctuary Cities are selfish greedy tax evaders, its that simple…

    God forbid we prosecute the massive FELONY identity theft [duplicate use of your Social Security Numbers] abuse of legal citizens opposed by the Chamber of Commerce, ACLU, establishment Rinos/Progressives, Mexican Drug Cartels, SSA, our 3 Credit Bureaus and the banks….get Life Lock and more xray radiation surveillance at airports???

    Lock ’em all up???? LOL, or are they too big to fall???

  39. 39
    ess says:

    By Sid @ 35:

    Looking at AMZN & MSFT stock, foreign investment interest and good outlook for local tech jobs, another 10+% year for Seattle real estate is very likely.

    From your writing to my retirement plans.

    Will there be an eventual reduction of housing prices in Puget Sound in the future? Probably. The history of housing prices in most areas is that of two steps higher, one step back. But what is of interest to me will be the scope of any future decrease in prices. Will it be another 2007-2011 where many homeowners walked away from housing where they had little or equity? Or will the next turndown be less severe because more home purchases were for full price or a significant down payment? I guess we will see. But hopefully it won’t be for a number of years.

  40. 40
    justme says:

    RE: Sid @ 35

    >>Looking at AMZN & MSFT stock, foreign investment interest and good outlook for local tech jobs,

    Amazon had a terrible Q4 in 2016, with a massive increase in general and administrative (G&A) costs
    There’s growing suspicion that AMZN is increasingly hiding their capital/depreciation expenditures in their G&A costs, in order to make AWS look good and perhaps present seemingly good numbers for Free Cash Flow in the AWS segment, which traditionally is the metric that AMZN chooses to brag about.

    Cloud computing is becoming a commodity, and indeed AMZN and MSFT are locking horns over the cloud market, along with Google and a slew of smaller vendors, like Digital Ocean.

    http://seekingalpha.com/article/4042924-amazons-margin-situation-5-charts

    QUOTE from 2016 10-K annual report:

    General and administrative expenses primarily consist of payroll and related expenses; FACILITIES AND EQUIPMENT, SUCH AS DEPRECIATION EXPENSE AND RENT; professional fees and litigation costs; and other general corporate costs for corporate functions, including accounting, finance, tax, legal, and human resources, among others.

    Summary: I don’t think the above bodes well either for stock gains or tech employment in the Seattle area.

  41. 41

    RE: ess @ 39 – A couple of points.

    Prior to 2007 the Seattle area went something like 20 years without a YOY decline (based on Jan 1 numbers, I believe). So you can have extended periods one direction.

    Beyond just the market level, I don’t think you can overlook those buying houses today at well over market prices. It’s a very small part of the market, but the combination of bidding wars and desperate buyers can create some situations where houses go for some pretty crazy prices. I should start checking to see how many of those are cash buyers–the one I checked most recently was, but I don’t check that with any regularity. Hopefully if they ever do take out a loan the appraiser will realize that what they paid in cash wasn’t representative of what could necessarily be expected.

  42. 42
    justme says:

    FedEx is getting into the fulfillment business, as a direct competitor to Amazon. And Amazon has been getting into the package delivery business. Amazon is desperately expanding into unprofitable businesses just to increase revenues, making steps such as entering into a 50-year lease on an airports in Kentucky.

    Does that sound like a recipe for big Amazon (or FedEx) profits? I very much doubt it will be.

    http://seekingalpha.com/article/4044962-amazon-finally-getting-competition

  43. 43

    I actually wish Amazon would let you select which carriers your stuff would be delivered by. I’d deselect FedEx and OnTrac. They make the USPS look good!

  44. 44
    jon says:

    Amazon will start making money when they replace their 100,000s of warehouse workers with robots. I see they are growing a robotics group in their Boston office.

    The drones are already a start, by going after the delivery people. Drones seem pretty limited now, but when you couple them with self-driving trucks that serve as a base for the drones, that will help with the range problem.

    They are going after market share now to keep the competition out.

  45. 45

    RE: jon @ 44 – I have a hard time seeing how drones will be a significant portion of their delivery business. Including the obvious inventory issues (not everything sent to me is sent from their Kent Fulfillment Center), I’d question the energy use. Not only do you need to maintain the object in the air, but the entire route and back presumably just serves one customer. That might compare well to the situations where they have a driver in a private beat up car deliver your package, but I don’t think it would compare well to UPS, etc.

    Warehouse automation though . . ..

  46. 46
    justme says:

    RE: Kary L. Krismer @ 45

    >>I’d question the energy use. (of drones)

    That is spot on. Drones are helicopters, and helicopters are massively ineffective flying machines. Google “helicopter MPG” and be prepared for a shock. And no, being electric does not help much. A hybrid UPS truck will do much better than a swarm of drone helicopters with the same delivery capacity and throughput.

  47. 47
    ess says:

    By Kary L. Krismer @ 41:

    RE: ess @ 39 – A couple of points.

    Prior to 2007 the Seattle area went something like 20 years without a YOY decline (based on Jan 1 numbers, I believe). So you can have extended periods one direction.

    Beyond just the market level, I don’t think you can overlook those buying houses today at well over market prices. It’s a very small part of the market, but the combination of bidding wars and desperate buyers can create some situations where houses go for some pretty crazy prices. I should start checking to see how many of those are cash buyers–the one I checked most recently was, but I don’t check that with any regularity. Hopefully if they ever do take out a loan the appraiser will realize that what they paid in cash wasn’t representative of what could necessarily be expected.

    If we can have a 20 year period of real estate price increases – that would be wonderful for a majority of homeowners , not to mention my retirement plans!

    Perhaps the prices that some of these buyers paid were not over market prices -but as a result of changing market conditions. Too many buyers chasing too few houses will necessarily fuel bidding wars. But if the market does fall – an all cash buyer is not going to walk away from his or her investment unlike a buyer who has purchased with nothing down and is facing a life altering situation preventing the ability to make the monthly payment.

    And time heals overpriced purchases. There was one house sold in my neighborhood a few years ago at a price that I thought was overpriced. These days – not only has the market caught up with that purchase, but it is starting to look like a pretty good deal compared to similar properties in the area.

    And if one wishes to view properties that really appear to overpriced, view some of the housing for sale in the SF area or back east. Those lofty prices make this area appear reasonable.

  48. 48
    Brian says:

    RE: justme @ 46

    If you couple a drone with a self-driving delivery truck, using the drone to take the package from the truck to the delivery spot, then we’re talking profit. But we’re also talking no time soon.

  49. 49

    By ess @ 47:

    Perhaps the prices that some of these buyers paid were not over market prices -but as a result of changing market conditions. Too many buyers chasing too few houses will necessarily fuel bidding wars.

    Those are the conditions that set up what I’m talking about, but I’m focusing on a very small part of the market–one where the sales price is not in line with the rest of the market.

    Sometimes that occurs because the location or the house is relatively unique–I’m not addressing that. Unfortunately I don’t think it would be proper for me to give specific examples of what I’m thinking of.

  50. 50

    By Brian @ 48:

    RE: justme @ 46

    If you couple a drone with a self-driving delivery truck, using the drone to take the package from the truck to the delivery spot, then we’re talking profit. But we’re also talking no time soon.

    I could see that. It wouldn’t even need to be a self-driving truck. You could have the drone as a helper for the driver, sort of like what happens during the holiday season.

  51. 51
    Blurtman says:

    RE: softwarengineer @ 38 – I know illegals need a SS # to work. But can they also take out a loan using that number? That can really screw up the real holder’s credit rating. ID theft is a felony, isn’t it?

  52. 52
    Brendan says:

    Another way to look at the likelihood of price increases is as a matter of policy.

    Baby boomers have their retirements locked up in housing, so they want to protect that investment. Millenials own real estate at much lower rates, so they have no incentive to pump up housing prices.

    I’d like to buy property to be insulated from changes in the market and have predictable monthly payments, but I don’t view owning a home as an investment. I view it as an expense.

    Clearly mutual funds are a superior investment. They provide a better rate of return when you consider the cost of maintenance on a house, and they offer liquidity.

    From my position, policies that increase housing production, increase property tax, and lower housing prices are good for my bottom line. Even if I purchase a home, I’d like it to be as small a fraction of my asset mix as possible.

    Since millenials are the majority in Seattle, and their numbers are skyrocketting nationally, I’d say those policies will start to win over time. So I would expect the rate of return on SFH ownership to go down.

  53. 53
    Ione says:

    I enjoy reading your articles being that they are mostly on the positive side of real estate; but what about the massive amount of shadow inventory that the banks and real state company’s keep off the books. When will that market bear it’s ugly head and totally collapse the US housing market. There are plenty of empty condos and condo tower and empty homes that are not on anybody’s real estate list.

    Thoughts

  54. 54
    Deerhawke says:

    By Ione @ 53:

    But what about the massive amount of shadow inventory that the banks and real state company’s keep off the books?

    You must have been reading really really old Seattle Bubble posts (or going through stacks of old magazines and newspapers).

    Wow, talk about a zombie theory rising up from the grave!

  55. 55
    StupidLifeDecisions says:

    By justme @ 42:

    FedEx is getting into the fulfillment business, as a direct competitor to Amazon. And Amazon has been getting into the package delivery business. Amazon is desperately expanding into unprofitable businesses just to increase revenues, making steps such as entering into a 50-year lease on an airports in Kentucky.

    Does that sound like a recipe for big Amazon (or FedEx) profits? I very much doubt it will be.

    http://seekingalpha.com/article/4044962-amazon-finally-getting-competition

    Amazon is the most disgusting company around right now. People should really open there eyes to how dangerous a company like this is if it’s not brought down many notches. Facebook and Google are very close seconds and thirds.

  56. 56
    sfrz says:

    RE: Deerhawke @ 54 – Just a couple of hours South:

    I don’t think they would want us to flood the market again with less desirable homes at cheaper prices, which then turn around and make other homes worth less,’ she said.
    http://www.nrtoday.com/news/local/homelessness/zombie-homes-drag-down-values-increase-crime-in-roseburg-district/article_06f55a3a-9fb2-5548-bd44-55e215e2e871.html

  57. 57
    GoHawks says:

    RE: Ione @ 53 – If the banks had extra inventory to part with, they would be selling them now. The mythical second wave of foreclosures never washed ashore.

  58. 58

    By Ione @ 53:

    I enjoy reading your articles being that they are mostly on the positive side of real estate; but what about the massive amount of shadow inventory that the banks and real state company’s keep off the books. When will that market bear it’s ugly head and totally collapse the US housing market. There are plenty of empty condos and condo tower and empty homes that are not on anybody’s real estate list.

    Out of curiosity, what do you think they’re waiting for?

  59. 59
    Deerhawke says:

    If banks have any shadow inventory, it is bound to be in places like Douglas County. Somehow I don’t think that will have any effect on the market here in King County.

  60. 60
    Deerhawke says:

    RE: sfrz @ 56

    Just a couple of hours EAST of here, you mean.

    If banks have any shadow inventory, it is bound to be in places like Douglas County. Somehow I don’t think that will have any effect on the market here in King County.

  61. 61

    Here’s an interesting piece basically reviewing a study on student loan debt. https://www.currentaffairs.org/2017/02/does-student-debt-matter

  62. 62

    RE: Blurtman @ 51
    Yes Blurtman

    Even the Washington DC Swamp Alligators [Congressmen and Senators] have all been sitting on their hands when it comes to protecting this country from identity theft….like they have been with failing Obamacare….until the establishment politician school punishment included the spanking board at press conferences….Trump….LOL

  63. 63
    justme says:

    RE: Deerhawke @ 3
    RE: Sid @ 4
    RE: Kary L. Krismer @ 5
    RE: Erik @ 16

    I counted the word “cycle” occurring 17 times in this thread so far. Some people are cycle astrologists and chart astrologists (Sid and Erik seem to be in that category. Some people are plain bubble boosters that will not quite write off cycle theories (Deerhawke has moderated his boosterism recently, but the damage he has done is already, well, done). Kary is a chart astrology skeptic, and so am I. This blog is otherwise full of petit rentier and grand rentier bubble boosters that will invoke charts and cycles as useful propaganda tools.

    Now, and here comes the important stuff, some people think cycles occur spontaneously, that they are intrinsic to human nature and all that. These people tend to overlap quite a bit with the chart and cycle astrologists, who read charts, study old cycles, and predict cycle periods based on previous cycles. While bubbles and manias (Kindleberger) are intrinsic to human nature, rapidly REPEATING or ROLLING bubbles are absolutely man-made and intentional, and not just a matter of pure social physics, to use a fairly modern term.

    Rapid reflation of already burst bubbles are caused (*) by one force and one force only, namely NADIR, Nearly Always Declining Interest Rates (just coined the acronym) and QE (Quantitative Easing), that is, forms of monetary manipulation. (*) By “caused” I mean, “could not and would not occur without”.

    All the bubbles since interest rates peaked in 1981 have been reflated by still lower interest rates. For reference, everyone can look at the following chart of historical 30-year mortgage interest rates since 1971. The NADIR concept , Nearly Always Declining Interest Rate, should be obvious. QE is not directly visible, of course. And everyone can look up historical 10-year bond interest rate themselves.

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

    (I wish I could post that chart as an image, but that is not allowed here, AFAIK.)

    While there are other factors at work, without NADIR+QE, there would be no bubble reflation. Once the bubble starts reflating, NADIR combined with social physics creates the positive feedback loop where prices rises without any connection to fundamentals such as income. Currently, prices in Seattle are completely disconnected from income reality. Rising interest rates will end 35+ years worth of bubbles with a big bang (the chart ends at Sep 2016 at the time I wrote this, so the starting rise is not so visible yet).

    A large number of people on this blog think there is something unique and special about Seattle and what goes on here that warrants endless and outsized housing price increases. I beg to differ. Without NADIR+QE, the bubble would not have reflated. And when NADIR ends, the current bubble will end with a bang.

  64. 64
    justme says:

    Better/newer version of the chart, that continues past Sep 2016:

    https://fred.stlouisfed.org/series/MORTGAGE30US

  65. 65
    jon says:

    An interesting list from Penske that lists the top ten cities that people are moving to. Seattle is number 7. What is interesting is that Seattle house prices are much higher, even in terms of ratio of avg house price to avg rent and avg income.

    http://www.businessinsider.com/top-us-cities-people-moving-to-penske-2017-2?utm_content=buffer282ff&utm_medium=social&utm_source=facebook.com&utm_campaign=buffer/#-3

    Seattle has a lower percentage of home ownership, so owners are presumably drawn from the higher end of the income scale, but this seems even bigger than that.

  66. 66
    Sid says:

    http://www.reuters.com/article/us-sprint-corp-m-a-t-mobile-us-exclusive-idUSKBN15W26E

    This could have some impact on Eastside down the road if Sprint is the one acquiring and the usual (cost synergies) layoffs due to the merger happen in Bellevue. If T-Mobile is the one acquiring and the layoffs happen in Kansas City, then this will impact that city quite a bit as Sprint is one of their biggest employers.

  67. 67
    Brian says:

    RE: jon @ 64

    Yeesh, if that doesn’t make Seattle look overpriced, I don’t know what does.

  68. 68
    Travis says:

    Hi everyone, longtime lurker and am a first-time home buyer in this ridiculous market. Been bought out with all cash offers even when offering up to 12% over list. It’s been really frustrating…hoping for any signs of relief. Anyway, I read an interesting article recently and wanted to get people’s thoughts:

    https://www.mhanson.com/2-10-hanson-mismatched-housing-market-buyers-market/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+MarkHansonAdvisers+%28Mark+Hanson+Advisors%29

  69. 69
    Ross Jordan says:

    By Sid @ 65:

    http://www.reuters.com/article/us-sprint-corp-m-a-t-mobile-us-exclusive-idUSKBN15W26E

    This could have some impact on Eastside down the road if Sprint is the one acquiring and the usual (cost synergies) layoffs due to the merger happen in Bellevue. If T-Mobile is the one acquiring and the layoffs happen in Kansas City, then this will impact that city quite a bit as Sprint is one of their biggest employers.

    Except that presumably Sprint is buying T-Mobile for its management and team. T-mobile’s market share and profits are up, Sprint is mostly down. I think it’s more likely the merged company would want to keep T-Mobile side over Sprint side, though I guess at the lower levels it matters less.

  70. 70
    Green-Horn says:

    RE: Deerhawke @ 27

    This is a great way to view it.

    Maybe a little bit of calculus and we can sum the health and trajectory of the market in a single key number quotient?

  71. 71
    justme says:

    RE: justme @ 63

    Comment 63 just came out of moderation. Thanks, Tim.

  72. 72
    justme says:

    By Brian @ 67:

    RE: jon @ 64

    Yeesh, if that doesn’t make Seattle look overpriced, I don’t know what does.

    Indeed. There is no connection with the income reality at all. Median price 2016 was 612k, median income 2016 was 75k, according to the article. That is more than 8X gross/pretax income. It would not happen without extreme monetary policy, NADIR+QE, as described in comment 63.

  73. 73

    RE: justme @ 63 – Must have sucked having all that in moderation! ;-)

    Here’s a thought. Are all the bubble asset classes you see productive assets? For example, buildings produce living and working space. Perhaps as interest rates drop the productive assets become more valuable, just as an interest bearing bond would become more valuable.

    Or another thought. NADIR is largely the result of extreme inflation prior to 1981. It’s easy to think of how assets will become nominally more expensive during periods of inflation, but your theory is basically that at least certain assets can continue to become more expensive in real terms for an extended period even as the inflation subsides.

    As to your post #72 I would again just point out that median income isn’t the only factor at play, and probably not even that important of a factor (mean income would be more relevant).

  74. 74

    By Ross Jordan @ 69:

    Except that presumably Sprint is buying T-Mobile for its management and team. T-mobile’s market share and profits are up, Sprint is mostly down. I think it’s more likely the merged company would want to keep T-Mobile side over Sprint side, though I guess at the lower levels it matters less.

    More likely they would buy them for their infrastructure (equipment) and customer base. They probably think they are the superior management–regardless of the truth.

    One likely result of such a merger would be that in two years we’d only have a choice between Verizon and AT&T (that the two merged companies would go out of business).

  75. 75
    jon says:

    RE: Kary L. Krismer @ 74 – The way I read it, Son seems pretty frustrated, where Deutsche seems quite satisfied.

    There is obviously going to be a lot of consolidation in sales offices, but for the headquarters, it seems like you would pick one team or the other. Given T-Mobile’s recent performance, they seem like the much better bet.

    As for the anti-trust problem, unlike the previous attempted mergers this one has arguably a sound basis in avoiding billions of dollars in redundant investment in 5th gen upgrades. Perhaps that is what is behind Son’s talk with Trump, a promise that he would plow that savings back into US jobs.

  76. 76
    GoHawks says:

    RE: Travis @ 68 – Good luck out there Travis.

    Interesting article, but I am not sure it meshes with 1 months worth of supply. Where is there inventory that is sitting extra long right now? Why would sellers reach down for buyers when homes are getting bid up?

  77. 77
    ess says:

    By Travis @ 68:

    Hi everyone, longtime lurker and am a first-time home buyer in this ridiculous market. Been bought out with all cash offers even when offering up to 12% over list. It’s been really frustrating…hoping for any signs of relief.
    ————————————————————————————–

    Sign that the market is still strong and will be so this spring.

  78. 78
    screenname12345 says:

    @GoHawks. The banks are hording inventory in the Seattle area and will release it when everyone least expects it of course. I just saw a $2.6 mm house get listed and close in 1 week. The end is definitely near. I am off to read some zerohedge and continue to short this stock market rally. I know I can time markets and without a doubt smarter than all the bagholders out there. Back to the basement I go.

  79. 79
    whatsmyname says:

    RE: justme @ 63
    NADIR? Is that the fancy new pun for the boys who cried ZIRP?
    Speaking of “cycles”, did you know the US had over two dozen recessions even before the FED was introduced in 1913? I’d be interested if you could point to a period of history with no cycles. Even the Torah writers alluded to groups of fat years and lean years

  80. 80
    sfrz says:

    RE: Deerhawke @ 60 – How many communities are holding properties like this?

  81. 81
    justme says:

    RE: whatsmyname @ 79

    I did not say we did not have cycles. I said

    >>rapidly REPEATING or ROLLING bubbles are absolutely man-made and intentional,

    Some sort of cycles always existed. And they were generally always CREDIT cycles, even before the FRB and central banking became law in 1913.

    However, cycles were not always MANAGED cycles like they are now. That is the difference. Cycle astronomers are making a huge mistake by thinking of cycles as being naturally occurring phenomena that exist in some sort of vacuum of human folly. They do not. True, there is plenty of human folly to go around. But, cycles have, since 1982 or so, been actively managed by FRB using NADIR+QE. And need I mention that “managing” the cycles has come at a great cost to the average worker, taxpayers, savers, and many of those speculators that do not have a reserve account at the FRB and/or access to the discount window for loans, and (later) QE. It really is that simple. The last 35 years (at least!) have been nothing but monetary fraud and wage deflation, camouflaged as rising asset values.

  82. 82

    RE: justme @ 81 – I think the managing goes back further, and what happened in the late 70s early 80s was largely a result of mismanagement. But you’re right, whatever cycles there would be naturally are now being managed, and thus will not be the same rise/fall or the same duration as what they would have been otherwise.

    But in defense of those asserting a cycle theory, their views are probably based on fairly recent history when the cycles were being managed. So I’m not sure you’re saying the cycles are managed is something counter to their claims (which I don’t agree with).

    I’m not certain however that QE has ever been tried before at all, or on the scale done, so that would refute their theories.

  83. 83
    Go Hawks! says:

    RE: justme @ 72 – Zerohedge called for the real estate market to crash again in 2012 and the stock market in 2011. How has that turned out.

  84. 84

    RE: Go Hawks! @ 83 – It amazes me that anyone gives Zerohedge any credibility. I don’t think I’ve read a single rational thought on that site (but I don’t frequent it).

  85. 85

    On the topic of ST3, which was so popular here, the new license tabs are coming out and some people are freaking out. I saw this one person on Facebook before the articles started coming out. The license tab increase is .8% of value.

    http://www.seattletimes.com/seattle-news/transportation/sticker-shock-much-higher-car-tab-bills-landing-in-mailboxes/

  86. 86
    Deerhawke says:

    By sfrz @ 80:

    RE: Deerhawke @ 60 – How many communities are holding properties like this?

    I am not really sure. At one point, I tracked bank inventory and foreclosures in the Puget Sound area. It has stopped being a source of deal flow or a moving factor in the market here.

    I recently bought a property that was poised for foreclosure in the Seattle area. The homeowner had not made payments for 4 or 5 months. As soon as it went on the MLS, there were two dozen offers, a dozen all cash with no contingencies.

    So that is why when you talk about shadow inventory here, people laugh. There is no shadow and no inventory.

    Just as we live in two Americas, we live in two quite different Washington States. What is happening in the Seattle area is quite different from what is happening in Douglas County or Grays Harbor County.

    I am in touch with the agent for the seller of the near-foreclosure here in Seattle. He is looking to buy a house with the remaining equity out on the Kitsap Peninsula or out in the country up past Arlington. It looks like he will be able to buy a newer bigger better house for a third of what his house in Seattle sold for. And he will be the all cash buyer.

  87. 87

    RE: Deerhawke @ 86 – There are some (rare?) situations where a bank seems to take forever to foreclose or take forever to list after they foreclose. A federal tax lien might be a legitimate reason for them to do the latter, but I think mainly it’s incompetence. Banks are not well run entities.

    I remember a situation back in my bankruptcy attorney days where I couldn’t get a hold of one of my two clients to agree to an order allowing the bank to repossess a car. The bank’s attorney wouldn’t agree to delay the hearing, so I had to file a motion to delay it. After getting the court ordered continuance my second client agreed and an agreed order was entered allowing the repossession. Three or four months later I learned the bank had not come to get the car. It just dropped through the cracks.

  88. 88
    Blurtman says:

    RE: Kary L. Krismer @ 84 – It is wise to do your own homework and make up your own mind. One value of Zero Hedge is the links they provide to their stories. I may not agree with ZH’s interpretation, but frequently the links are from credible sources. Nowadays, and possibly it has always been that way, opinion has taken the place of facts in the MSM. But the MSM has lost their monopoly on reporting due to the internet, Twitter, etc. The local media is the worst. Read diverse sources and make up your own mind.

  89. 89
    justme says:

    RE: Go Hawks! @ 83

    I see what you’re doing here. Instead of discussing the substance of what I said about FRB+NADIR+QE, and the role they have in man-made bubbles (whether the reflated, recurring or rolling kind), you attempt instead to bait me into a discussion of ZeroHedge.

    If you have nothing intelligent to say, trying to conflate what I say with some unrelated perceived faults of ZeroHedge might seem like a tempting strategy. But, a good strategy it is not. Thanks for playing, as they say. Are you going to discuss anything substantial?

    May I also suggest you read what @Blurtman said in comment 88.

  90. 90
    Wb says:

    RE: Ione @ 53

    I would love to see that list. I was just outbid on a studio condo where the agent told mine that the seller accepted an all cash offer over asking with all contingencies waived. There is no way that I or other workers can continue to compete with that. I will just continue to rent; then get the hell out.

  91. 91
    justme says:

    RE: Kary L. Krismer @ 82

    >>I think the managing goes back further, and what happened in the late 70s early 80s was largely a result of mismanagement.

    Not disagreeing. And the mismanagement generally consisted of actions taken to enrich the bankster and capitalist class at the expense of everyone else. However, I was discussing the NADIR+QE era and NADIR+QE approach from 1982-2016(+?) specifically.

    FRB chairman Bernanke once gave a famous speech where he apologized for his predecessors in FRB “causing” the Great Depression in the 1930s by not enacting sufficiently forceful monetary policy in the 1930s (ZIRP, NADIR and QE would qualify as forceful and radical IMO). Bernanke had nary a word about what monetary mismanagement and mis-regulation that preceded, and was the ACTUAL cause, of the stock market and credit bubbles, (which eventually burst in 1929). The Great Depression happened because of the preceding bubbles, not because of a lack of bubble reflation. Bernanke is the kind of guy that does not hesitate interchanging cause and effect in his analysis of reality. There was a short time between, 1913 (FRB) and 1929, which is so far the biggest bubble implosion in history.

  92. 92
    whatsmyname says:

    By justme @ 90:

    RE: Kary L. Krismer @ 82

    Not disagreeing. And the mismanagement generally consisted of actions taken to enrich the bankster and capitalist class at the expense of everyone else.

    Please elaborate. Don’t be afraid to use examples.

    was discussing the NADIR+QE era and NADIR+QE approach from 1982-2016(+?) specifically.

    The low FED rate for 1982 was 8.5%.

    chairman Bernanke once gave a famous speech where he apologized for his predecessors in FRB “causing” the Great Depression in the 1930s by not enacting sufficiently forceful monetary policy in the 1930s (ZIRP, NADIR and QE would qualify as forceful and radical IMO). Bernanke had nary a word about what monetary mismanagement and mis-regulation that preceded, and was the ACTUAL cause, of the stock market and credit bubbles, (which eventually burst in 1929). The Great Depression happened because of the preceding bubbles, not because of a lack of bubble reflation. Bernanke is the kind of guy that does not hesitate interchanging cause and effect in his analysis of reality. There was a short time between, 1913 (FRB) and 1929, which is so far the biggest bubble implosion in history.

    To be clear, the MANAGING of the cycle by monetary policy is limited to some braking ability in an overheated economy, and funding some marginal limited demand in a weak one. That is the basic theory of the FED. Republican appointees are naturally and ideologically cautious about “interfering” in the free markets. So let’s not try to parse Bernanke into a different meaning. No informed person thinks that the western world was engaged in a huge depression due to the monetary policy of the USA.

  93. 93
    Deerhawke says:

    RE: Kary L. Krismer @ 87

    Kary for a while in 2011 I worked with some investors who wanted to buy foreclosures. They were not big enough to compete with the folks from Goldman Sachs or the hedge funds (who got the big tranches of deals in Washington). They were not nimble enough to compete with the folks who showed up on the courtroom steps and really knew what they hoped to buy. It was basically a waste of time but it led to some good connections that were productive.

    In the course of that exercise, I ran into the fools who were managing pools of foreclosed properties. They really had no idea what they were doing or how to do it. It was complete amateur hour.

    I remember talking to a young guy managing an $80 million portfolio of distressed assets. When I used the term “cost of capital” he asked me what that meant. When I said their appraisal was an old one that assumed the project was complete, he asked me what about it was not complete. (It was framed up and had a roof and windows, but that was it.) I tried to explain the difference between an “as is” and “as complete” appraisal, but he was convinced this was nonsense meant to confuse him. He made it a practice to immediately shred any offer that was not at least 100% of the appraised (complete) value.

    Eventually I heard through others at the bank that he was 23 years old and that other than some background in the fast food industry, an associate’s degree and a teller’s training program– no background in finance at all. All the adults had been fired to save money and he was taken straight from the teller’s booth to manage the portfolio.

    I have the feeling that even in normal times, the distressed asset section is where banking careers go to die.

  94. 94

    By Deerhawke @ 92:

    I have the feeling that even in normal times, the distressed asset section is where banking careers go to die.

    Based on what I saw back in my attorney days that very well could be.

  95. 95
    GoHawks says:

    RE: justme @ 89 – my response was not in regards to your post, but screenname12345’s. They said they are confident they can time the markets and while I disagree with their conclusions, I appreciate their gusto and being will to say what actions they are taking (shorting the stock market).

  96. 96
    Erik says:

    RE: justme @ 63
    I read Robert shiller’s irrational exuberance. I read a synopsis of the Kindleberger’s book cause deerhawk kept pushing it. Shiller is a student of Kindleberger, so no point reading both. The books both use many words to describe how credit becomes more and more available until the market collapses and prices go down. You should read one just to make sure you understand it, but it’s a lot of words to describe that simple concept.

    I don’t think it’s one or the other. I think people on here just want to find something to argue about. I believe they look at different aspects of the same thing. I like the 18 year cycle because it’s more quantifiable since you can look at inventory numbers and houses sold.

    I wouldn’t be surprised if there is some very wealthy person pulling the strings in the background somewhere by loosening up credit and watching it tumble. Next time credit is loosened and inventory is high, you may want to sell. Right now the real estate market seems pretty healthyou to me.

  97. 97
    N says:

    Credit has been loosened quite a bit. A 500 credit score can buy FHA, 5% down will get you a traditional (non FHA) mortgage although granted you will have PMI. Back in the great recession neither a 500 credit score or 5% or even 10% down would get you any where close to a deal. I keep reading how lending standards are so tough now and maybe UW is stringent but it doesn’t take much to qualify up to 40% of your GROSS income.

  98. 98

    RE: ess @ 39
    Yes ESS

    Retirement planning is now full of fees and dreadful advice planners predicting a stock market collapse after Trump’s election; and we pay these idiots fees??? LOL

    My advice is simple:

    1. Become debt free ASAP
    2. Cash in your like 0-2% IRAs ASAP….get this money out into cash accounts with back taxes paid, the IRAs tie it up with puny interest and penalties if you need the cash for emergencies…
    3. And if you really thought out of the box, [I had got out after retirement, most do]…you should have reaped the 20% gain the last month in 100% investment in stocks….thank Donald Trump BTW….what financial advisor recommended that? Zero, nada. A bunch of stupid Progressive thinkers.

    Real estate’s future in Seattle with the federal funds slashed from Sanctuary Cities? Hey….when the illegal slave labor jobs go to legal citizens [H-1Bs too] with real commercial pay and benefits your home is your IRA for the future….the legal citizen Milenials can pick and choose which high job offer to take, like the good ole days…that’s good for housing and the cash rich elite babies that don’t work can spend more money on the federal tax base as a result [higher incomes actually pay federal taxes, BTW] for their house cleaners, care givers and gardeners.

    Property taxes pay way too much for schools [like twice what they should be paying]….end the ESL waste and watch housing costs plummet on teh tax level.

    Besides, with all the IAs working “slave labor” house construction for a like the Issaquah Contractor….have Issaquah passed the savings on to the consumer? LOL….Hades NO! They gouged us worse on new home construction anyway.

    Greedy rich elite tax evaders with no morals.

    There’s lots of hope for real estate, but saying there is no hope is failure….and we’ve [the population majority deplorables] been living in this self made Hades for decades now…so let’s support Trump and HOPE!

  99. 99
    justme says:

    RE: GoHawks @ 94 – ”

    >>my response was not in regards to your post, but screenname12345’s.

    Nice try. Screenaname12345 wrote a bad parody of a ZeroHedge reader, then YOU conflated that parody with me, and made a direct reply to me where you invoked ZeroHedge, and implied that my analysis of NADIR+QE, was wrong (not for any stated reason, but rather because ZH was (supposedly, I have not checked) wrong about something in 2012, and therefore I must be wrong, too, by association !!).

    Come to think of it, is post 94 just another one of your attempts to derail the discussion of NADIR+QE?

  100. 100
    justme says:

    RE: Erik @ 95

    I’m way ahead of you, Erik. I read the Shiller(+), Chancellor(++), Kindleberger(++) and Roubini(meh) books years ago, around 2011, I think. In fact I have 3 of the books in my bookshelf. But I agree, many people would benefit from reading those books. But to keep things simple, start with the FRED chart I posted of NADIR 1982-2016(+).

  101. 101
    justme says:

    A good article about how the FRB (Fed) saves the banks and the top 0.1% and screws everyone else.

    https://www.linkedin.com/pulse/how-fed-went-from-lender-last-resort-destroyer-american-booth

  102. 102
    Go Hawks! says:

    RE: justme @ 98 – I have never replied to one of your responses.

    I will now though. Yes, QE etc have inflated the market, as have numerous other factors over the past 30 years. It’s a fact of life though. Go ahead and short the stock market and call a top on the housing market, I respectfully disagree.

  103. 103
    justme says:

    RE: GoHawks @ 94

    This guy definitely responded to me

    RE: Go Hawks! @ 101

    >>I have never replied to one of your responses.

    I didn’t say you did, I was talking to the “other” GoHawks. Can you you guys sort out who is who, and whether you are the same person or not?

  104. 104
    justme says:

    RE: Go Hawks! @ 101

    >>Yes, QE etc have inflated the market, as have numerous other factors over the past 30 years. It’s a fact of life though. Go ahead and short the stock market and call a top on the housing market, I respectfully disagree.

    In other words, you are trying to pooh-pooh the effect of NADIR+QE, and invoke “numerous other factors”. But the truth is that without NADIR+QE, prices would be nowhere as high as they are.

  105. 105
    jon says:

    The latest Case-Schiller for Seattle is at 204.8 relative to a 100 in year 2000. That works out to an average 4.5% per year during that time, compounded annually. When we discussed the Octopus ad, as I recall I calculated an increase of 5% over the last 100 years or so for the price of a Seattle lot. So the effect of QE does not jump out in the numbers. I think the QE basically cancelled out the deflationary effect of globalization. Some other factors to consider why Seattle and other west coast cities are so expensive are urbanization, land use regulation, and restricted geography.

  106. 106
    Erik says:

    RE: justme @ 99
    The interest rate is part of available credit, but there is much more to it. The NINJA loans are an example of that. The banks would loan to anyone making credit very available. So when credit becomes very easy to get and people can get lots of it, that is a big sign of another bubble. If there is lots of available credit and high inventory, we are likely in a bubble that could pop at anytime.

  107. 107
    whatsmyname says:

    By justme @ 100:

    A good article about how the FRB (Fed) saves the banks and the top 0.1% and screws everyone else.

    https://www.linkedin.com/pulse/how-fed-went-from-lender-last-resort-destroyer-american-booth

    The FDIC closed 465 banks 2008-2012. The author of this advertisement for her book (and her boss) were investment bankers, not commercial bankers, and well demonstrate why we still need Glass-Steagal around the commercial banks.

    It is an extraordinary dishonesty to fuss that easy credit and expansion help the rich more than anyone else, while neglecting to admit that tight money and recession hurt the rich less than anyone else. This seems particularly egregious for a FED president who made his fortune purchasing distressed assets.

    In the end, only you can decide if you are satisfied with hurting the workers more to keep those nasty rich from gaining more. If you feel bad that your deposits don’t earn much, be glad that they did not disappear in a systemic collapse. It’s not like this stuff happens in a vacuum.

  108. 108
    Deerhawke says:

    Justme, this is a blog dealing with Seattle real estate.

    We get the fact that you clearly have an animus against the Fed and the way it has been managed over the past many years. Perhaps you do not believe it should exist. There are blogs dedicated to this kind of anti-Fed bashing, the beauty of the now bygone era of the gold standard, etc. This is not that kind of blog so let’s put all that aside.

    How does our belief in Zirp, Nadir, QE, or whatever apply to the Seattle real estate market? And more to the point, how are you taking a position to back your bet?

    You seem to say over and over again that the bubble has been inflated by QE etc. Does that mean with the coming of higher interest rates that you will be selling real estate to buy it back later at a lower price? Are you shorting publicly traded REITs with holdings in the Seattle area?

    You have said your piece. Now tell us how you are making your bet. What is your play?

  109. 109

    By justme @ 103:

    In other words, you are trying to pooh-pooh the effect of NADIR+QE, and invoke “numerous other factors”. But the truth is that without NADIR+QE, prices would be nowhere as high as they are.

    I would agree, but also, we wouldn’t be as high without those “numerous other factors.” That’s been my point for years–that there are so many variables that affect the result that results are impossible to predict. It’s a combination of many many things.

    Just as an example, for many years people have pointed to the median income and I’ve pointed out that income isn’t the only thing that allows people to buy houses and not all people are in a position to buy houses. More recently though, what has helped drive up prices is the tech boom, with a lot of high income people coming into the area. Between them buying and their pushing rents higher making others more likely to buy, that’s pushed prices higher, while people continued to point to that one stat as proof prices are too high. You can’t just focus on one or two factors–they will often lead you the wrong way. (e.g. higher prices hasn’t lead to higher supply).

  110. 110
    ARDELL says:

    RE: Deerhawke @ 92

    More like where they send you to cut your teeth. Collections is where they send you to die. They throw the young ones into low profit sections and the old ones into collections. I left mid-stream. :)

  111. 111
    Sid says:

    By Deerhawke @ 108:

    Justme, this is a blog dealing with Seattle real estate.
    …………..

    You seem to say over and over again that the bubble has been inflated by QE etc. Does that mean with the coming of higher interest rates that you will be selling real estate to buy it back later at a lower price?
    …….

    Justme is a permabear. Assets and stocks are always in a bubble according to permabears and are never worth buying.
    Justme, AMZN will close at all time high today :)

  112. 112
    Doug says:

    RE: Deerhawke @ 108 – Haven’t been here in a while, but nice to see Justme still howling at the moon. He has no open positions to potentially profit from the current environment, but instead finds it easier to complain about the injustices of rising asset prices.

    A few months ago, I posted that I like real assets (namely real estate) and you could hedge that by going long the financials. Both bets have done far better than I thought they would and I’ve made a little lunch money along the way.

    Justme, if the Fed didn’t step in we’d all be sleeping in cardboard boxes under a bridge.

  113. 113

    By Doug @ 112:

    Justme, if the Fed didn’t step in we’d all be sleeping in cardboard boxes under a bridge.

    Back in 2009 I made the comment that I wasn’t afraid that the economic turmoil would result in my living on the street, but that it would get so bad there wouldn’t be any streets.

    I wasn’t a fan of exactly how “the stimulous” was done, but I do believe that without it and the action by the Fed that things would have gotten very much worse. But if you listen to some conservatives they’ll claim that the stimulus didn’t work at all, and if they say that three times a lot of people will believe them. It’s sort of like global warming, where rather than thinking about an issue some people find it easier to just pick a position based on their political leanings (and to be clear, that applies both to liberals and conservatives).

  114. 114
    Doug says:

    RE: Kary L. Krismer @ 113 – I know the Estately inventory numbers have previously been questioned, but are these real?

    Down 28% year-over-year?!?! That can’t be right, can it?

  115. 115

    RE: Doug @ 114 – I don’t know what they were on 2/21/16, but we are down about 100 from the end of the month, and Tim had the YOY for then being down 18.9. But Estately shows the drop being about 2x as large as what it is, but who knows what figure they’re working off of for the prior year.

    I really wish someone could figure out what is wrong with the Estately numbers. Usually I can figure out numbers. The only think I can think is that they have some way of backing out duplicate listings, but I doubt there are that many duplicates. (Those are sometimes done when a house is close to the border of a NWMLS area so that the house will show up in searches for either area.)

    Numbers from NWMLS sources, but not guaranteed.

  116. 116
    Eastsider says:

    FED policies directly affect asset prices. That includes Seattle home prices.

    A few other thoughts –

    1. Affordability – In the US, housing affordability generally correlates with income. However, in many Asian cities, there appears to be a disconnect between prices and income. Is Seattle heading that way in an open border world?

    2. Inventory and prices – We have had very low inventory in Seattle in the past few years. Yet prices have increased dramatically (50%?) in the same low inventory environment. So maybe prices can also drop 30% in the same (low) inventory situation, no? Think about it. (Hint: The Dow can drop 5000 points overnight and prices are still valid.)

    3. China – We have seen home prices inflated by Chinese money worldwide. Vancouver BC and other Australian and Asian cities have clamped down on Chinese money and the effect has been stalled and reduced prices. It shows that a small amount of hot Chinese money can distort local market. So Seattle bubble speculators might want to pay attention to the flow of Chinese money.

    Most experts are no better than others in predicting future prices. My advise to anyone buying a home is to base your decision on your own circumstances instead of reading comments in this blog. If you intend to live in a house for 30 years, IMO prices doesn’t matter.

  117. 117
    Blurtman says:

    RE: Kary L. Krismer @ 113 – “Back in 2009 I made the comment that I wasn’t afraid that the economic turmoil would result in my living on the street,…”

    No worries. With hard work you could probably be the top realtor representing GEMS in The Jungle,

  118. 118

    RE: Blurtman @ 117 – No, Ray would kick my butt in that field. I wonder if he’d let me join his firm? ;-)

  119. 119
    justme says:

    RE: Deerhawke @ 108

    >>Justme, this is a blog dealing with Seattle real estate.

    Dat funny. NADIR+QE deeply affects Seattle, probably even more than most other locations. Hot money comes to places where there are other bubbles, like Amazon. So I think it is VERY appropriate to discuss monetary shenanigans here.

    >>You have said your piece. Now tell us how you are making your bet. What is your play?

    Bahaha. What’s going to happen when I don’t want to divulge my investment strategies? You are going to say that I’m not a big boy? Oooh, that’s really going to sting. NOT! I might retort that only little boys use such lame rhetorical gimmicks. Go right head :).

  120. 120
    justme says:

    RE: Sid @ 111

    >>Justme, AMZN will close at all time high today :)

    Like I said, AMZN is a bubble. Here is a more detailed analysis of how Amazon manipulates their ever-so-holy Free Cash Flow numbers. Enjoy, and be frightened, very frightened.

    http://seekingalpha.com/article/4047234-calculating-amazons-free-cash-flow-different-way

  121. 121
    justme says:

    RE: Doug @ 112

    >>Justme, if the Fed didn’t step in we’d all be sleeping in cardboard boxes under a bridge.

    Ah, yes, the rhetorical device called “the false dichotomy”. Either we have to reflate a massive asset bubble, OR people will be living in cardboard boxes. You say that here are no other options! Of course there are.

  122. 122
    Sid says:

    By justme @ 120:

    RE: Sid @ 111

    >>Justme, AMZN will close at all time high today :)

    Like I said, AMZN is a bubble. Here is a more detailed analysis of how Amazon manipulates their ever-so-holy Free Cash Flow numbers. Enjoy, and be frightened, very frightened.

    http://seekingalpha.com/article/4047234-calculating-amazons-free-cash-flow-different-way

    From the article:
    “”Amazon investors should know that the company is in the low-margin business, one which requires continuous capital spending in order to maintain the company’s CFO.

    At 3x the P/FCF ratio of Alibaba, Amazon investors are putting very high expectations on the stock.
    “”

    LOL. The author of the article probably hasn’t heard of AWS and still considers Amazon just an online retailer. No mention of AWS in the whole article which is the primary driver of stock over last few years.

    Anyhow, stop linking to external articles. There are many bullish articles that one can point to also – http://www.cnbc.com/2017/01/11/amazon-and-alphabet-are-best-bets-chamath-palihapitiya.html

  123. 123
    justme says:

    RE: Sid @ 122

    >>LOL. The author of the article probably hasn’t heard of AWS and still considers Amazon just an online retailer.

    Goes to show you really should read the whole article. It specifically calls out the importance of AWS capital spending being hidden as capital leases and thereby excluded from the much vaunted Free Cash Flow measure. Also, more about AWS and FCF in the other seekingalpha article I posted earlier. Another good one.

    >>Anyhow, stop linking to external articles.

    Yes, indeed, I should post these links and people ought to read them. But many will not, and that will come back to haunt them.

  124. 124
    GoHawks says:

    RE: justme @ 123 – Would you short Seattle real estate at today’s valuations?

  125. 125
    Deerhawke says:

    Justme. Thanks for playing.

    You ought to head out to the trailerpark in Kent where softwarengineer hangs out. You two could have a great conversation.

  126. 126
    Deerhawke says:

    RE: Kary L. Krismer @ 115

    Kary, thanks for your comments on the Estately inventory figures. It seems those numbers are always off and we can’t be sure why. What do you use to track inventory? Does the MLS post a daily number? Or is it only once a month?

    Do you have an educated WAG (wild donkeyed guess) as to what is going on with inventory right now and what the trendline looks like?

  127. 127
    Galen Ward says:

    Hi Kary and Deerhawke,

    I’m Galen Ward, the CEO of Estately. I’m going to take a look at our inventory numbers and get a complete answer for you.

    In the interim I can tell you the following: we do indeed stop a property listed multiple times from being multiple counted and we use actual city boundaries to determine what is “in” or “out” of a city – so agents listing a home at 150th and calling it in Seattle won’t make it in Seattle.

    Send me an email with further questions about our data anytime – I’m galen at estately.com.

  128. 128
    sfrz says:

    RE: justme @ 123 – Preach! The cheerleaders need some other views on this site. I enjoy the discussions. Otherwise, just boring back slapping. Yawn…

  129. 129

    By Deerhawke @ 126:

    RE: Kary L. Krismer @ 115

    Kary, thanks for your comments on the Estately inventory figures. It seems those numbers are always off and we can’t be sure why. What do you use to track inventory? Does the MLS post a daily number? Or is it only once a month?

    I just use the NWMLS “Matrix” system, which is sort of like the consumer sites but with more detail and options (although the consumer sites have been getting better over the years). I just track the inventory periodically by using that site. Takes only a few seconds.

    The NWMLS only releases the data monthly, but except for the sales I don’t know that it really matters. The spot checks I do on inventory should be accurate, but sales they have to deal with late reported sales and that throws my numbers off from theirs.

    As I noted above the trend from the end of the month is down, but it can bump around a bit. Like I said, I don’t keep track of intra-month trends, so I wouldn’t read anything into that at this point in time.

  130. 130
    GoHawks says:

    RE: justme @ 120 – Are you shorting more Amazon at these record prices?

  131. 131
    Deerhawke says:

    RE: Kary L. Krismer @ 129

    Thanks for that info Kary. I guess I have been exploring the idea of where the bottom is in terms of inventory.

    Here is the analogy. In a full employment economy, there is still what is called frictional unemployment resulting from temporary transitions in hiring and employment. Some businesses will go under and their employees will lose their jobs temporarily. Some people get fired, but then get rehired relatively quickly. Other people decide to go into a different line of work, or go back to school, or have a baby, but could find a job quickly if they wanted to. This all amounts to frictional unemployment.

    When I look around Seattle right now, pretty much all I see is frictional inventory.

    Somebody dies and there is an estate sale. Somebody moves to Boston and decides that they will need even more money there for a place to live, so they sell their place here. Somebody has personal problems and loses his job and sells the house right before being foreclosed. Somebody decides to retire and moves out to the peninsula or up north where housing costs are half of what it costs here. These are all deals I have been involved with recently– real examples of the causes of frictional inventory.

    What I have not seen recently is people selling their houses to move up– unless they decided to keep the old place as a rental.

    What I have not seen since early 2011 is people selling because they think their house will be worth less next quarter than it is today. There is no panic selling.

    And of course I have not met anyone selling their home in the belief that we are in a bubble that is about to pop. People talk about shorting the Seattle housing market so they could buy back in later at a substantially lower price. But I have never met one and I doubt I will in this environment.

    Economists debate all the time about what the frictional unemployment rate is. They do this because it is one way of defining full employment.

    So my question for you is what constitutes pure frictional inventory in Seattle. Are we almost there? Or could it drop substantially from these levels?

  132. 132
    Go Hawks! says:

    RE: Deerhawke @ 131 – Fantastic analogy. You hit the nail right on the head.

    Does anyone know anyone selling because they are trading up or because they are looking to time the market?

    Without any fear in the market, inventory could stay historically low until some owners need to sell now or be faced with the prospect of selling at a lower price. That mindset is nowhere to be seen today.

  133. 133
    The renter shmuck says:

    Odd thing starting to happen – I’m looking for a rental SFH in Seattle and it’s pretty much dead opposite of Seattle’s SFH buy/sell market. We are looking at houses in prime neighborhoods that have been sitting un-rented for weeks. The owners are actually calling us to follow up to see if we’re still interested (vs. fighting to get sellers’ attention in the buy/sell market). One owner even agreed to a 20% rent reduction without any push back.

    I have no idea if this is the season, an anomaly, or if it’s finally the increase in rental inventory having an effect on rental demand. Anyone else seeing anything strange?

    When I arrived in Seattle 3 years ago there was hardly anything in the way of rental or sales for SFHs. Now the rental side of the equation is markedly different. Blip or sign of things to come?

    One theory is that Seattle has a ton of rental inventory coming online in the form of apts/condos around where Amazon is importing all these transplants. Look at all the cranes. It’s insane. 30 something people with young families who move to Seattle for Amazon are probably reluctant to buy because they aren’t stupid – they’ve heard the stats that the average Amazonian lasts something like less than 2 years. On top of that, they’re probably nervous about the prospect of vitamin D deficiency and being marooned from all family connections. So all this rental inventory coming online right next to Amazon offices is probably having an unusually powerful appeal among people who might otherwise be tempted to buy for lack of other options.

  134. 134
    justme says:

    RE: sfrz @ 128

    Thanks, sfrz. I’m just doing what I can. Appreciate your efforts, too!

  135. 135
    justme says:

    RE: GoHawks @ 130

    >>Are you shorting more Amazon at these record prices?

    You’re so cute with your leading questions. Similar to Deerhawke trying to get me to reveal my investment strategies. And then there is “Go Hawks!”. Are you all three the same guy, or what?

    PS: Never said I was shorting Amazon, so your question is obviously a trick to begin with. Not clever enough, though.

  136. 136
    Anonymous Coward says:

    Go Hawks! and Deerhawk, I don’t think Justme is going to let us in on his investment strategies, and for a perfectly valid reason: he doesn’t want anyone to know it exists. If one really does take all the ZIPR, NIRP, end of fiat currency stuff to be both real and likely, the rational choice is not to short the stock market, play currency trader, etc because that’s only going to give you a big number on a website run by some big investment firm that’s going to be wiped out when their proprietary trading desk’s trades all go bad due to the unforeseen meltdown. If one thinks through, and believes such theories, the rational “investment” strategy is in gold, guns, ammo, and farmland with natural access to a consistent water supply. Since Justme is posting here, I’m going to guess he doesn’t believe in the coming meltdown strongly enough to sell any Seattle property he might have and move to Eastern Washington. So that leaves him with stockpiling gold, guns and ammo. But he’ll never publicly say that he’s doing so because, if you believe the things that lead you to that strategy, you’ll also believe the Feds will inevitably come for your stash (like they did in the 30’s).

  137. 137

    RE: Deerhawke @ 131 – That’s really hard to say, because unless it’s an estate sale or a bankruptcy it’s not always clear why a seller is selling. And it was early 2012 when I noted that it was finally safe to buy a new house first and then sell. We’re no to the point where that’s practically a necessity. So although I can easily determine what percentage of listings are vacant (about 47%), I’m not sure that would tell me all that much.

    Also, keep in mind I’m not so sure the lack of inventory is due to the lack of sellers as much as the number of potential buyers.

    Maybe it’s more the number of new listings you need to keep track of. That can be deceiving because some agents will cancel a listing and then relist, but that will give you an idea of how much inventory is coming on the market each month. Not sure if the NWMLS publishes that number–I’ll check.

    Number from NWMLS sources but not guaranteed.

  138. 138

    By Go Hawks! @ 132:

    Without any fear in the market, inventory could stay historically low until some owners need to sell now or be faced with the prospect of selling at a lower price. That mindset is nowhere to be seen today.

    You see that in stocks too, when individual stocks are at a record high. There everyone is holding at a profit of some sort, things have been going well for them with that investment, it can drop some without causing them to take a loss, and all that means together is that they don’t tend to want to sell. Others will see the stock has been doing well and want to jump on, causing the stock price to rise even further.

  139. 139
    Brian says:

    RE: Galen Ward @ 127

    Thanks. Looking forward to more details.

    Personally it doesn’t matter to me what the exact inventory number (boundary) is. I’m looking at the trend.

  140. 140

    RE: Deerhawke @ 131

    Deerhawke said: “What I have not seen since early 2011 is people selling because they think their house will be worth less next quarter than it is today. There is no panic selling. And of course I have not met anyone selling their home in the belief that we are in a bubble that is about to pop.”

    Actually I just went through a bunch of sales and there are many of those, but they are not as simple as leaving to rent. In most cases the person already left within the last 5 years but held on to the property until now. Not “panic” sales but feeling like now is as good a time as any.

    Looking at “vacant” listings doesn’t tell you much because most agents move their sellers out prior to listing these days whenever possible.

    Some examples of mine:

    -Inherited a nearby property a few years ago due to parent’s death, moved to it then and rented their property, sold that property now.
    -Move up seller was lucky to get a contingency accepted but they were moving from a primary location to a secondary location and willing to overpay for the house they were buying to get the contingency.
    – Estate sale not vacant (2 of 3 children inherited wanted to keep it but they couldn’t buy the 3rd out)
    -Estate sale not vacant (1 of 3 children wanted to keep it but couldn’t buy out the other 2)
    – Personal – illness
    -Moved some time ago and rented it to a family member but sold now because family member was buying a home
    -Married and moved out several years ago but kept as rental. Selling now.
    -Move up buyer held on to former home until now.

    There are many people who are choosing to sell now for market reasons, feeling like it’s time to take their gains. They are not “panic” sales as they have had the property as a rental for sometime even though many if not most were not investors. They were “temporary landlords” holding until t felt like a better time to sell. For many that time is now.

  141. 141

    By Ardell DellaLoggia @ 139:

    Looking at “vacant” listings doesn’t tell you much because most agents move their sellers out prior to listing these days whenever possible.

    I agree on vacant doesn’t tell you much, but that seems rather extreme to actually move out. I’ve suggested clients might be well advised to take a three day vacation somewhere, so that buyers can come through without calling the first three days of the listing (and so the client will not be constantly bothered). And I suspect a number of other agents do something similar.

    That also fits well with my request to have 2 or 3 days to review offers, in lieu of the offer review date system.

    The goal is to get as many people through the house the first few days as you can.

  142. 142

    RE: ARDELL @ 110
    Ardell Should Thank Trump

    Home sales and optimism have surged since the election, so has the stock market…..its called HOPE.

    http://hosted.ap.org/dynamic/stories/U/US_HOME_SALES?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2017-02-22-10-01-25

  143. 143
    Travis says:

    Interesting article on the recent changes in immigration/deportation. I know there are many immigrants in the Seattle area due to tech…though, many of which are likely permanent citizens by now with higher paying jobs.

    https://www.bloomberg.com/news/articles/2017-02-22/why-trump-s-immigration-crackdown-could-sink-u-s-home-prices

  144. 144

    RE: Kary L. Krismer @ 141

    I do it every time the seller doesn’t need to sell to go where they are planning to go. I guess I’m extreme, but I doubt I’m the only one. I often run into vacant homes that don’t say they are vacant just because the owner or the listing agent don’t want people to know it is a vacant house.

    Main point of my previous comment to Deerhawke is with inventory so very low, the fact that many of the for sale homes are “temporary landlords” with the owners having left during the market slump, what would inventory be like without those? Those are “shadow inventory” properties where the owner left to move up or because they were relocated after the market crash, but held on until the market was better.

    Part of the reason inventory keeps getting lower and lower is we are working through the majority of “accidental and temporary landlord” properties. They look as if they are investors selling off their rental properties because they were in fact rentals. But in many cases they were just delayed sales.

  145. 145
    ess says:

    And the beat goes on – home sales are accelerating throughout the US – Seattle gets honorable mention

    http://hosted.ap.org/dynamic/stories/U/US_HOME_SALES?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2017-02-22-10-01-25

  146. 146

    By Ardell DellaLoggia @ 144:

    Part of the reason inventory keeps getting lower and lower is we are working through the majority of “accidental and temporary landlord” properties. They look as if they are investors selling off their rental properties because they were in fact rentals. But in many cases they were just delayed sales.

    I would say that helps inventory, not hurts.

    On that topic though, it seems as if many of those accidental landlords have decided that being a landlord isn’t all that bad. Hopefully though they’re looking at the deadline to sell a former residence tax free and looking at the tax consequences of selling after the deadline. A tax free sale should not be given up without at least thinking about the numbers.

  147. 147
    justme says:

    RE: whatsmyname @ 107

    Wow, there is a lot of wrong (but at least one right) in what you wrote. Let’s have look

    >>The FDIC closed 465 banks 2008-2012.

    I guess you are stating this to “prove” that FRB does not favor banks over people. Well, WRONG. The banks did not “close”. FDIC took control over these mostly *small* banks, and sold them to *bigger* banks that are beneficiaries of NADIR+QE from FRB.

    >>The author of this advertisement for her book (and her boss) were investment bankers, not commercial bankers,

    WRONG again: The author’s and her boss’s claim to fame is that they worked for the Dallas Fed (FRB). They were FRB insiders, and know what the FRB really does. Hence the book. At other times they worked in investments, but that is not the point.

    >>we still need Glass-Steagal around the commercial banks.

    CORRECT: Finally something we can agree on

    >>It is an extraordinary dishonesty to fuss that easy credit and expansion help the rich more than anyone else,

    WRONG: FRB policy has been to give loans to those who do not need it (Wall St/banks) so that Wall St can buy up foreclosed assets , rather than to who do need loans (renters that would like to buy at pre/post-bubble prices). A full 7% of the US housing stock was purchased by investors in the aftermath of 2008. FRB monetary policy is is the ultimate trickle-down economics scam: Pretending that helping rich people will cause economic benefits to “trickle down” to poor people, or at least the middle class. Hah. Never gonna happen. NADIR+QE increased wealth inequality. Your argument is essentially that we cannot help the bottom 99% without enriching the top 1% disproportionally. THAT argument is an extraordinary dishonesty, to re-use your phrase.

    >>while neglecting to admit that tight money and recession hurt the rich less than anyone else.

    WRONG: Mostly rich people lost money when the stock market dropped by nearly 50% and housing by almost the same in some places. If the FRB had given middle class renters a chance to buy homes at those more affordable prices, the middle class would have gained. But did the FRB give or facilitate preferential loan treatment to renters that did not participate in the bubble? Hell no. FRB gave preferential treatment to Wall St hedge funds, that bought up large swaths of foreclosed US housing stock. And the upper-middle class petit rentiers bought the rest.

    >>This seems particularly egregious for a FED president who made his fortune purchasing distressed assets.

    WRONG: I think you are talking about Stephen “the munchkin” Menuchin, the new US Treasury Secretary under Trump, and ex-Goldman Sachs and ex-IndyMac Bank vulture capitalist. Can you please try to keep straight the difference between FRB, FDIC, and UST? I can agree that it is confusing, because all these institutions (+Goldman Sachs and other big banks) are run by a revolving cast of the same people, for the benefit of the top 0.1%. So I should maybe give you a pass on that one, if you would at least show a little contrition.

  148. 148
    Kit says:

    RE: Deerhawke @ 131

    >What I have not seen recently is people selling their houses to move up– unless they decided to keep the old place as a rental.

    Anecdotally, that is pretty much what I’ve seen in my coworkers at my old and current job. People who want to move up are terrified of the low inventory market. People who can afford it (gen X or boomers in tech) are buying multiple houses to either rent or in one case, as a fixer-upper to sell quickly. It has slowed down recently, but it is that time of the year.

    I’m starting to watch rental rates cause I’m interested in where this is going if so many people want to rent in a growing area. I wonder if rental prices will keep stable, drop, rise, and/or if people will have enough bad tenets to start to sell over the course of 2017.

    RE: The renter shmuck @ 133

    We’re with you renter shmuk – later this year, we may rent a SFH instead of our current apartment. I’ve seen some good options so far this year – better than I expected for price/location/building.

  149. 149
    justme says:

    RE: The renter shmuck @ 133

    Thanks for your observations. Perhaps some desperation in the air?

    >>We are looking at houses in prime neighborhoods that have been sitting un-rented for weeks. The owners are actually calling us to follow up to see if we’re still interested (vs. fighting to get sellers’ attention in the buy/sell market). One owner even agreed to a 20% rent reduction without any push back.

  150. 150
    Brian says:

    RE: The renter shmuck @ 133

    It seems to me like there’s been a rental inventory build and with better incentives over the past several months. But I don’t know if that’s just a seasonal thing because I haven’t been following the rental market for long. Maybe there’s just too many people buying properties to rent them out now while apartments are being built with a furious pace.

  151. 151
    ARDELL says:

    RE: Kary L. Krismer @ 146

    It did…for a time…but they are running out. An extraordinary number of people who sold 2008 to present held them, who wouldn’t have if they weren’t underwater. So how much of 2014 to present low inventory was just delayed sales? Fewer as time goes on.

  152. 152
    jon says:

    Rents close to Amazon can stay low if owners are holding on to the properties in anticipation of future price increases. They are betting that Amazon will eventually gradually slow their hiring and they can get out without having to catch a knife.

    In the meantime, there is still a lot of automation still to be done. UPS at least is already working on drone delivery:

    http://money.cnn.com/2017/02/21/technology/ups-drone-delivery/

  153. 153
    Blurtman says:

    RE: Kary L. Krismer @ 138 – “You see that in stocks too, when individual stocks are at a record high.” Yes, and the longer the investor is holding during the appreciation phase, the more likely he/she is able to weather a downturn in the price of the asset. Whereas a new investor who has little equity will tend to get a lot more worried and prone to bail.

  154. 154

    By jon @ 152:

    In the meantime, there is still a lot of automation still to be done. UPS at least is already working on drone delivery:

    http://money.cnn.com/2017/02/21/technology/ups-drone-delivery/

    Brian in post 48 above mentioned the use of deliver drones attached to trucks after I mentioned how inefficient drones would be going from distribution centers. This is exactly what Brian was talking about, and is the first article covering the situation that also mentions my thought that it’s like the driver having a helper with them (as occurs during the holiday season).

  155. 155
    dlee says:

    RE: Go Hawks! @ 132:

    Does anyone know anyone selling because they are trading up or because they are looking to time the market?

    Longtime lurker — a little bit of both and then some. Bought in March 2012, it is now ~50k above 2007s peak price (later foreclosed). The 405 expansion project directly affects my property and will continue to do so indefinitely. If the market tapers off, I am not sure how much this will affect the pricing/desirability — I have some examples to show it probably has. I am hoping the low inventory gets me close to the estimated price.

  156. 156

    RE: dlee @ 155 – I would just say that a strong seller’s market is the best time to sell houses with less than desirable conditions, and perhaps your proximity to 405 is such a condition. No guess on when the market will change.

    BTW, the flip side of that is such houses will more likely be foreclosed in a bad market. A disproportionate number of REOs seemed to be in close proximity to a freeway or major road.

  157. 157

    On the real estate tax/ST3 topic, my assessment went up just over 6% but may taxes went up only 1.4%. Less than $100 for the year.

    It just shows how you cannot determine your tax amount from the assessment notice–you have to wait until they determine the rate, and that only happened recently.

  158. 158
    GoHawks says:

    RE: dlee @ 155 – If there is a perceived flaw, better to sell a year early than 5 minutes too late.

  159. 159

    RE: dlee @ 155

    You just missed your best window of opportunity. The best time for a “dump shot” is 1/15 to 2/15 when there is the highest pent up demand and still a serious low in inventory. Inventory is already starting to accelerate and will increasingly do so each week forward from here. It will dwindle again come August or so, but with little to no pent up demand.

    If you are not ready to do this tomorrow, then hold your breath that this early, extreme 2017 market continues upward without break and plan for 1/17/2018. But yes, by all means, dump it.

  160. 160
    dlee says:

    RE: Kary L. Krismer @ 156RE: GoHawks @ 158RE: Ardell DellaLoggia @ 159

    Loud and clear! I’ll let you know how it goes. Thanks all :)

  161. 161
    Kit says:

    RE: Ardell DellaLoggia @ 159

    Given the overall low inventory of the times, is it really too late? While not every single one sold, I saw the majority of houses near the highway sell – just took 2-3 weeks instead of the typical 1 in June-Sept. I wasn’t looking in April/May 2016 though. If prices keep increasing, shouldn’t come out as a wash for dlee versus risking a whole year?

    I don’t know much anything and this is all confirmation bias, but I am curious what I am missing.

  162. 162

    RE: Kit @ 161

    I said “best” not “only”. Everything sells. There is no house that never sells. We’re talking about highest and best price. If someone is just thinking about it now you are looking at at least several weeks or more to actually be ready to go on market, so yes.

    Will waiting = less than not having been optimal in 2017? Maybe. Not likely.

    It’s common for agents to always say NOW is a good time to sell because they want to list your house now. But we all know it isn’t true. The one I just listed and sold we set for a Feb 1, 2017 list date back in early 2016 when the earliest they could list was mid August that was likely to stretch to September.

    This is especially important for homes with a significant weakness. For primo property in a primo location with no traffic noise considerations or power line towers or…name your weakness, then not so important. But that doesn’t change the fact that pent up demand is strongest early in the 1st quarter but not so early as to infringe on the holiday period and not during football season until the Seahawks are out of the playoffs-Super Bowl. :)

  163. 163

    RE: Ardell DellaLoggia @ 162 – Selling it right has more of an effect than when. As I mentioned a while ago I noticed two similar houses very close to one another. One seller did just about everything wrong, including pricing too high. The other did everything right (that I noticed). The difference in sales price was almost 10% of the amount of the lower price.

  164. 164
    Galen Ward says:

    RE: Deerhawke @ 126RE: Kary L. Krismer @ 115RE: Doug @ 114

    The team here is busy, so I don’t have definitive answers just yet, but…

    We had forgotten that API still exists, so I can’t tell you just yet what it’s counting, but I can tell you it’s highly consistent and quite likely a simple count. I can also tell you this: we use NWMLS data, our data is *very* up-to-date, you won’t find an actively listed house missing on Estately in King County, and I have no reason to doubt this count.

    I have to admit, I didn’t read all 163 comments, so I’m probably retreading many comments, but inventory can be misleading. There are (and have been) so many buyers that homes are auctions, which means sellers slightly underprice, buyers bid prices up and homes sell fast. As Tim pointed out, there were 25% more homes sold in January YoY. More homes sold YoY has been the pattern since August (with a small 2% dip in November), so low inventory isn’t that crazy to me – it reflects a cultural change towards auction-like listings.

    That said, 36% of the homes that sold in January sold over asking price, which is about the same as last January.

    Ardell, I’d be curious why you think now is the time to sell. Last year May and June had the highest percentage of homes selling over list price – 59% and 55% respectively.

    Hope that helps some.

    Now for your moment of underpriced zen.

  165. 165
    whatsmyname says:

    By justme @ 147:

    I guess you are stating this to “prove” that FRB does not favor banks over people. Well, WRONG. The banks did not “close”. FDIC took control over these mostly *small* banks, and sold them to *bigger* banks that are beneficiaries of NADIR+QE from FRB.

    The key phrase, and it was your phrase, “A good article about how the FRB (Fed) saves the banks”

    These 465 banks weren’t “saved”. If the Bernanke were to give (or sell) your assets to me, would that mean he was favoring people? I am a person after all.

    But again, your phrase was “and screws everyone else”. The favoring talk is just goal post moving. Did you feel screwed that the FDIC didn’t offer you any branch locations? They are not some kind of amalgam bank regulator/welfare office. They are not authorized for that.

  166. 166
    whatsmyname says:

    By justme @ 147:

    The author of this advertisement for her book (and her boss) were investment bankers, not commercial bankers,

    WRONG again: The author’s and her boss’s claim to fame is that they worked for the Dallas Fed (FRB). They were FRB insiders, and know what the FRB really does. Hence the book. At other times they worked in investments, but that is not the point.

    Of course they worked for the FED. The point is that they were not experienced in commercial banking – the purview of the FED. They had their history in investment banking, the very threat to the system that Glass-Steagall was aimed at. You had the fox in the henhouse, Now you want to pimp the fox’s ideas on henhouse security. Good call, Einstien.

  167. 167
    whatsmyname says:

    By justme @ 147:

    It is an extraordinary dishonesty to fuss that easy credit and expansion help the rich more than anyone else,

    WRONG: FRB policy has been to give loans to those who do not need it (Wall St/banks) so that Wall St can buy up foreclosed assets , rather than to who do need loans (renters that would like to buy at pre/post-bubble prices). A full 7% of the US housing stock was purchased by investors in the aftermath of 2008. FRB monetary policy is is the ultimate trickle-down economics scam: Pretending that helping rich people will cause economic benefits to “trickle down” to poor people, or at least the middle class. Hah. Never gonna happen. NADIR+QE increased wealth inequality. Your argument is essentially that we cannot help the bottom 99% without enriching the top 1% disproportionally. THAT argument is an extraordinary dishonesty, to re-use your phrase.

    FED policy influences how much money the banks can lend, not who they lend it to. They will tend to lend it as safely and profitably as they can. It is a business, not a needs driven charity. No one is pretending in trickle down or anything, except for you. The rich are better placed, and do better in an expansion – That is your complaint, dummy. Now you contradict it?

    The dishonesty I was referring to was to ignore the linkage that the rich not only do better in good times , but that is also true in bad times. – Ha ha – And the first thing you do is to split that sentence. But don’t worry; it’s dishonesty coming from a Fed President. It’s ignorance coming from you.

  168. 168
    whatsmyname says:

    By justme @ 147:

    ;while neglecting to admit that tight money and recession hurt the rich less than anyone else.

    WRONG: Mostly rich people lost money when the stock market dropped by nearly 50% and housing by almost the same in some places. If the FRB had given middle class renters a chance to buy homes at those more affordable prices, the middle class would have gained. But did the FRB give or facilitate preferential loan treatment to renters that did not participate in the bubble? Hell no. FRB gave preferential treatment to Wall St hedge funds, that bought up large swaths of foreclosed US housing stock. And the upper-middle class petit rentiers bought the rest.

    Losing some portfolio is nothing next to losing your job, your savings, your home. The less you have, the bigger the impact. Also, the FED lends to banks, not to consumers. Do you still live with your mom?

  169. 169
    whatsmyname says:

    By justme @ 147:

    This seems particularly egregious for a FED president who made his fortune purchasing distressed assets.

    WRONG: I think you are talking about Stephen “the munchkin” Menuchin, the new US Treasury Secretary under Trump, and ex-Goldman Sachs and ex-IndyMac Bank vulture capitalist. Can you please try to keep straight the difference between FRB, FDIC, and UST? I can agree that it is confusing, because all these institutions (+Goldman Sachs and other big banks) are run by a revolving cast of the same people, for the benefit of the top 0.1%. So I should maybe give you a pass on that one, if you would at least show a little contrition.

    I am talking about Richard Fisher, the retired Dallas Fed President, mentor and former boss of your author -your much touted FRB insider. I enjoy a clown show; but really, you are too much of a good thing.

  170. 170

    RE: Kary L. Krismer @ 163

    Not when you back up to the freeway. :) Generally, I would agree.

  171. 171
    justme says:

    RE: whatsmyname @ 164

    The FRB lends money to the big banks so that they can take over the weak banks that the FDIC took control over. The FRB always saves banks first, not main St. Please tell me, exactly which Main St citizens did the FRB save, and how?

    RE: whatsmyname @ 165

    Aha, so now you say the author must be wrong about her analysis of the FRB because of the job she used to have. Is your analysis therefore also wrong because you are petit rentier fox watching the Seattle real-estate henhouse?

    RE: whatsmyname @ 166

    One of the big faults of the FRB is indeed that it does not specify who banks must lend to when FRB gives banks emergency credit. That is by design. So, in 2009-2012, very few renters got loans to buy distressed homes, but hedge funds got plenty of loans to do the same. I think we may just have reached agreement that FRB favors Wall St?

    RE: whatsmyname @ 167

    >>Losing some portfolio is nothing next to losing your job, your savings, your home. The less you have, the bigger the impact

    This is another variation on the “we must help the rich people first so that they can give jobs to poor people” argument. It’s the old “Job Creator” argument. I’m not accepting it, and neither should anyone. Scant jobs were created from the massive QE in 2009-2012. Direct stimulus created most of the jobs. QE was just used to buy up the assets of the working class at prices lower than what they had paid for it.

    RE: whatsmyname @ 168

    >> This seems particularly egregious for a FED president who made his fortune purchasing distressed assets.

    https://en.wikipedia.org/wiki/Richard_W._Fisher#Career

    Feel free to educate us as to when Fisher was in the business of buying distressed assets. If he ever was he certainly has seen the light and changed his tune before the bubble burst. He sounded the alarm on the housing bubble, and spoke out against QE and ZIRP/NADIR.

    QUOTE: Transcripts of the Federal Open Market Committee May 2007 showed Fisher sounded the alarm on the housing crisis even as many of his peers on the Committee expressed doubts: “On the housing front, I have been bearish—more bearish than anybody at this table. I am more concerned than I was before. We can go through the numbers, but I think it is best expressed by the CEO of one of the five big builders, who said that in March he was arguing internally with his board that the headlines were worse than reality and now reality is worse than the headlines.” [4]

    QUOTE: At the Dallas Fed, Fisher was outspoken in 2013 in opposition to the way quantitative easing was being pursued by Fed chair Ben Bernanke and board.[5]

  172. 172
    justme says:

    Listen, whatsmyname, I get it.

    You favor any monetary policy action that reflated the value of your real-estate holdings. Can’t you just admit it, and stop trying to rationalize that this was a “must be done or else” policy? There is nothing moral about your position. It is pure self-interest with post-facto rationalization. You feel entitled to the fake gains of the bubble, and I think you are NOT entitled. I think renters are entitled to buy houses at non-manipulated and non-inflated valuations. That is the moral position to take.

  173. 173
    justme says:

    Recommended viewing for all: Former Dallas FRB President Richard Fisher speaking about how FRB provided the banks and wall st with the loans so that they could buy into the stock market at the bottom in March 2009. The term he uses is “front-loaded the rally”, meaning providing the funds for Wall St to front-run the general public in the markets.

    https://www.youtube.com/watch?v=grZ19zQRlAI

    This is the essence of the FRB: Help rich people buy low, and then later “help” (very much in quotation marks) the bottom 99% to buy high while the top 0.1% sells high. It’s what the FRB *does*.

  174. 174
    whatsmyname says:

    RE: justme @ 170
    I get it too. If you can’t argue the facts, argue that recognizing the basic operations and restrictions on the 100+ year old FED is unfair moralizing. Tell us that a depression (bad for most people) is morally superior because you personally hope to get a good price on a house.

    We just had a massive recession with that huge sale on house prices you want- why didn’t you buy? Is it because you weren’t doing that well in the recession? Or did your deserving self simply lack the stones? No monetary policy can fix that.

    People here asked about your investment strategy We know what it is, don’t we? Put your money in savings, and express your anger at not getting a government guaranteed 5% – until you can get a government subsidized mortgage you’re not qualified for on a house you can’t afford.
    Pathetic.

  175. 175
    whatsmyname says:

    RE: justme @ 171
    Tell us about your experience in getting a loan from the FED to buy some high priced stocks.

    The less you know, the simpler it is.

  176. 176
    Blurtman says:

    RE: justme @ 171 – Recall when the bank bailouts began (“I’ve abandoned free market principles to save the free market system.”), a misguided fellow crashed his plane into the IRS building in Austin, TX. One of his complaints in his suicide note was the Wall Street bailouts juxtaposed against the IRS bankrupting his business for non-payment of taxes. While an extreme form of protest, it does illustrate anger over the unfairness that there are some institutions that play buy a different set of rules, the so-called to big to fail.

    Not only do the institutions play by a different set of rules, so do the bank executives. Robert Rubin was referred for criminal prosecution by the Financial Crisis Inquiry Commission for knowing about Citibank crimes, i.e., selling bogus mortgage backed securities. Whistleblowers who informed Rubin of the fraud were fired. The DOJ under Obama never bothered to even contact Rubin. HSBC laundered money for drug cartels and terrorists. Obama’s AG Eric “Place” Holder said that prosecuting individual bank executive criminals would endanger the jobs of all HSBC employees, somehow magically. And yet we jail people for relatively trivial crimes, while the criminals whose crimes have destroyed the lives of millions walk free.

    We watch the announcement of mega-mergers, with billions of dollars that do not exist. Not only the Fed, but community banks lend money that does not exist, conjured out of thin air. This privilege to create money should also carry with it a responsibility to act with utmost probity, but banks make a total joke of this.

    And so even the average schmoe gets what is going on. They see the hypocrisy that is emblematic of our government, irrespective of which party is in power. Hank Paulson, The Republican president’s Treasury Secretary, presided over fraud of such magnitude that his firm Goldman Sachs had to ostensibly pay a $5 billion fraud settlement. And Bill Clinton’s Treasury Secretary and family friend was/is Robert Rubin.

    The Democrats run a bankster stooge millionaire candidate and they lose. The disgust of average Americans with the status quo explains Trump. He is not the answer, and I did not vote for him (Jill Stein) but the corruption of our government, political parties, and in your face two-tiered justice system is one large contributor to Trump’s election.

  177. 177

    RE: Travis @ 143
    Yes Travis

    Bill Gates is Only High School Educated Too

    We had much better O/S performance when our NW High School kids helped develop Windows 98…no virus S/W necessary and no weekly “poor quality” patches either.

    We don’t need foreign H-1Bs so Gates and his mob can evade federal taxes with lower pay to H-1Bs…hire our own NW High School kids again for livable pay too.

    Ya don’t need a degree to do arithmetic on a computer…..LOL….its a job anyone can be trained to do, ask Gates.

  178. 178
    Kit says:

    RE: Ardell DellaLoggia @ 162

    Ah. So your saying that that dlee’s house selling in Feb would net something like $800k (numbers made up), but even if prices increase for the area in March-April, that dlee would still have to lower the number to like $750k to be competitive since there will more competition from more attractive houses?

  179. 179
    js says:

    Interesting theories here regarding the low inventory. The linked article from 2015 points to a huge surge in rentals in the last 10 years. As has been suggested here before, perhaps the inventory issue here has a lot more to do with speculators (both institutional and individual) than an actual supply/demand problem.

    Two of the key reasons inventory is low: 1) A large number of single family home and condos were converted to rental units. In 2015, housing economist Tom Lawler estimated there were 17.5 million renter occupied single family homes in the U.S., up from 10.7 million in 2000. Many of these houses were purchased by investors, and rents have increased substantially, and the investors are not selling (even though prices have increased too). Most of these rental conversions were at the lower end, and that is limiting the supply for first time buyers. 2) Baby boomers are aging in place (people tend to downsize when they are 75 or 80, in another 10 to 20 years for the boomers). Instead we are seeing a surge in home improvement spending, and this is also limiting supply.

    http://www.calculatedriskblog.com/2017/02/a-few-comments-on-january-existing-home.html#pZZttiYOuOGAIbeJ.99

  180. 180
    Brian says:

    RE: js @ 179

    I definitely believe real estate has become more of an investment vehicle for institutions and individuals that can’t seem to find such safe-ish returns elsewhere. The rent is like a significant dividend. The cherry on top of the massive price gains.

    Maybe if Trump Makes Interest Rates Great Again then the housing market will start to return to more historically normal behavior.

  181. 181
    ARDE says:

    RE: Kit @ 178

    Correct. Supply and demand. Homes with weakness sell better and for more money early in the year when you have the largest pent up demand and the smallest inventory.

  182. 182

    Conversely, if you are a weak buyer, VA, FHA, 10% down (vs a seller with a weak house) and have trouble competing in multiple offer scenarios, best time is August-September when inventory is still a bit healthier but most of the pent up demand buyers have secured their housing. More houses and fewer buyers in August and September. Fewer houses and more buyers Jan and Feb.

  183. 183
    Kit says:

    RE: ARDE @ 181

    Thanks for clarifying for me :)

  184. 184
    N says:

    http://wolfstreet.com/2017/02/23/whos-driving-this-new-normal-housing-market/

    If true, 37% of sales being to investors is quite interesting.

  185. 185
    justme says:

    RE: N @ 184

    The linked article, and the underlying “Landlord Land,” paper, chronicles nicely how the big investors (wall st hedge funds) get FRB support to buy low, and then the government is goaded into creating “programs” and boosting FHA loans to so that renters can buy high again. Just like I said earlier in this thread. And investors (=landlords) increased their ownership of US housing stock from about 31% to about 38% since 2008 (home ownership rate dropped from about 69% to 62%). Awesome for the rentiers, large and small alike.

    QUOTE:

    In Q3, 2010, institutional investors bought 7% of all homes. In Q1 2013, their share reached 9.5%. As home prices soared, fewer foreclosures were taking place. By 2014, when home prices reached levels where the large-scale buy-to-rent scheme with its heavy expense structure wasn’t working so well anymore, these large buyers began to pull back. In 2016, the share of institutional investors dropped to just 2% of all home sales.

    First-time buyers are the crux to a healthy housing market, but they aren’t buying with enough enthusiasm. In 2012, buyers with FHA-insured mortgages – “who are typically first-time homebuyers with a low down payment,” according to the report – accounted for 25% of all home purchases. In 2013, their share dropped to about 20%, in 2014 to 18%. Then hope began rising, briefly:

    However, in January 2015, FHA lowered its insurance premium 50 basis points, and there was a modest resurgence in FHA buyers – a trend perhaps indicative of loosening credit requirements or of a desire to re-enter the housing market for those displaced during the crash.

    Their share of home purchases ticked up to 22.3%. Alas, “the FHA resurgence was short lived” and in 2016 eased down to 21.7%.

    ENDQUOTE

  186. 186
    justme says:

    RE: Blurtman @ 176
    >>(“I’ve abandoned free market principles to save the free market system.”),

    Right on, Blurtman. Thanks for providing historical context and color. It’s Not a Crime When Banks Do It (TM).

  187. 187
    justme says:

    RE: whatsmyname @ 174

    >>Tell us that a depression (bad for most people) is morally superior because you personally hope to get a good price on a house.

    There you go again with your false choices. The choice is not between making the rich even wealthier OR have a great depression that hurts the 99%. Any fool, if honest, can see that this is not true.

    RE: whatsmyname @ 175

    >>The less you know, the simpler it is.

    While it is tempting to agree with that, I would say also, the less honest you are, the simpler it is.

    Our readers can now read what you have said and what I have said, and decide who they believe.

  188. 188
    greg says:

    By Deerhawke @ 13:

    Just for reference, my family and I arrived in Seattle in late 1990. Everyone told us that we had missed the opportunity to buy a really nice home in Seattle since everything had doubled (doubled!!) during the 80’s. I am not sure if it is actually true, but it was the received wisdom of the time. That doubling of prices, they said, was a once in a lifetime event.

    we arrived end of 98….. Agent warned us and numerous people warned us prices were too high and we would likely be risking our money….

  189. 189
    justme says:

    RE: greg @ 188

    >>we arrived end of 98…Agent warned us and numerous people warned us prices were too high and we would likely be risking our money….

    They might be forgiven for not yet having quite recognized, in 1998, the extent of the depravity of the FRB, with NADIR and QE?

  190. 190
    justme says:

    Uh-oh. Famous bubble blogger Calculated Risk is noting a selling trend and high DOM among Chinese mega-mansion owners (recent buyers?) turning sellers in LA. CR is not a guy that is prone to hype –he is known for his restraint. But when CR is giving updates on the state of Chinese buyers, I believe it is time to take notice.

    http://www.calculatedriskblog.com/2017/02/update-on-lack-of-chinese-residential.html

  191. 191
    Eastsider says:

    RE: justme @ 190

    The CR article mentioned three cities – Vancouver, Sydney, and Seattle. Check out my comment #116 above. LOL.

  192. 192
    whatsmyname says:

    By justme @ 187:

    RE: whatsmyname @ 174
    There you go again with your false choices. The choice is not between making the rich even wealthier OR have a great depression that hurts the 99%. Any fool, if honest, can see that this is not true.

    “Any fool” describes you well.

    I did not offer the choice between making the rich richer or a depression. I observed the fact that whether it is expansion or depression, the rich do better than the rest either way. It is you that offered the false choice that you could somehow beat the rich in a recession or depression. – “Mostly rich people lost money” – YOUR WORDS.

    Btw, I just saw your post 171. You are likely the least intelligent person I have ever run into.

  193. 193
    whatsmyname says:

    By justme @ 171:

    “The FRB lends money to the big banks so that they can take over the weak banks that the FDIC took control over. The FRB always saves banks first, not main St. Please tell me, exactly which Main St citizens did the FRB save, and how?”

    Again, I can see 465 banks that they didn’t save first, last or in between. But OK, you’re partly right on this one; and its spreading. The guy at the food wholesaler won’t fix me a burger, the metro bus barn won’t fix my car, and the rat b*st*rds at the dry cleaners won’t clean my carpet.

    “Aha, so now you say the author must be wrong about her analysis of the FRB because of the job she used to have. Is your analysis therefore also wrong because you are petit rentier fox watching the Seattle real-estate henhouse?”

    Do you want me in charge of regulating rental houses? And renters? Oh wait, I have experience in rental houses. So I bring not only conflict of interest, but also some knowledge. I know I have your support.

    “One of the big faults of the FRB is indeed that it does not specify who banks must lend to when FRB gives banks emergency credit. That is by design. So, in 2009-2012, very few renters got loans to buy distressed homes, but hedge funds got plenty of loans to do the same. I think we may just have reached agreement that FRB favors Wall St?”

    Weren’t the renters too busy warning us about catching a falling knife to apply for a mortgage? Weren’t a lot of the renters suffering from the recession, and not real credit worthy?

    “Losing some portfolio is nothing next to losing your job, your savings, your home. The less you have, the bigger the impact
    This is another variation on the “we must help the rich people first so that they can give jobs to poor people” argument. It’s the old “Job Creator” argument. I’m not accepting it, and neither should anyone. Scant jobs were created from the massive QE in 2009-2012. Direct stimulus created most of the jobs. QE was just used to buy up the assets of the working class at prices lower than what they had paid for it.”

    Saying the rich don’t have it too bad is not a variation of “we must help the rich” or that they are job creators. Please put down the bong.

    “Feel free to educate us as to when Fisher was in the business of buying distressed assets. If he ever was he certainly has seen the light and changed his tune before the bubble burst. He sounded the alarm on the housing bubble, and spoke out against QE and ZIRP/NADIR.”

    Here you go: https://www.nytimes.com/2015/03/21/business/economy/richard-fisher-leave-the-fed.html

    QUOTE: “He made a fortune investing in distressed assets during the rocky years of the Texas economy in the late 1980s and early 1990s. ”
    But that’s not really the most interesting part. Your fellow SJW’s had a lot of problems with him.

  194. 194
    Andrew says:

    RE: Ardell DellaLoggia @ 182 – I heard from some real estate professionals that buyer competition for single family housing tends to peak during mid-year which to me means higher selling price — almost the reverse of what you were stating. I thought that would make sense due to Summer break for families with younger children. Comparing that rationale to your comment about pent-up demands, now I’m not sure about the validity of the Summer argument.
    Could it be that both views have merits but your approach related to pent-up demands is more universally applicable (Vs narrow focus on specific buyers’ profile)?

  195. 195

    RE: Andrew @ 194

    It is true that Summer often has the highest selling price, but that is more because each next house tends to sell for more than the last one in an upwardly mobile market. Also some of the best houses in the best locations wait until they are within 45 to 60 days of the end of the school year so they don’t have to move out before school is over. So usually inventory peaks in April-May and not Summer, though the closings are summer because they happen after the end of the school year and before the beginning of the next school year. But that is not the time when the offers are made and the properties go pending…Summer is when the Spring contracts close at high prices.

    I just did the numbers for all of 2015 and 2016, single family home, Kirkland+Bellevue+Redmond. Just checking that nothing significant has changed.

    1) All the hype about “inventory” is pretty much BS. The cylce has been pretty much the same since I have been doing this, since 1990. In 2015 and 2016 pretty much anything good sells and in 2015 for that market it was 3,816 sales and in 2016 it was 3,751 sales. Not such a huge difference that people would notice a significant change.

    2) As usual about 5% of all sales for the year happen in January and 4% in February or the reverse. So 9% of a year’s sales sell in Jan and Feb and these are almost always the two lowest months of homes for sale. Hence the “dump shot” period per my comment to Kit and dlee.

    3) 30% to 33% of a year’s sales close in May+June+July so March, April, May listings for the most part. Maybe April, May, June listings. But usually a full third of all sales for the year close in May, June and July and some of the May closings the seller gets a rent back until school is out.

    I don’t really understand why you think this: ” I heard from some real estate professionals that buyer competition for single family housing tends to peak during mid-year which to me means higher selling price — almost the reverse of what you were stating.” I think maybe you missed the point that this started with dlee talking about a home near a freeway and we were talking about homes with significant weakness selling better and higher in Jan and Feb when there are few homes to buy and consequently fewer homes sold. When inventory expands to a full third of homes for sale and sold in the mid year, people are less likely to pay the highest price for a home with a significant weakness because they have better options on market at that time.

    Hope that answers your question.

    (Required Disclosure – Stats used for this comment were not compiled, verified or published by The Northwest Multiple Listing Service. I hand calculated all SFH sales in Kirkland, Bellevue, Redmond for each month in 2015 and 2016 and did not use NWMLS “published” data.)

  196. 196

    RE: Andrew @ 194 – I don’t believe you can generalize it to either period. If multiple other similar properties come on the market at the same time your chance of multiple offers will be reduced or the number of offers you receive will be less. Perhaps other similar properties popping up would be more likely in June than December, but when you’re dealing with specific properties general trends do not always hold true. But sometimes one other listing might actually cause you to raise the price that the property would be listed at and/or might help draw more attention to your listing.

    I’ve never been a big fan of the period after Thanksgiving, but other than that I would pay more attention to other factors more directly related to the seller’s situation and needs rather than the time of year.

  197. 197
    Andrew says:

    RE: Kary L. Krismer @ 196RE: Ardell DellaLoggia @ 195 – Thanks to both of you for the clarification, I appreciate the time you guys take to educate others. Truthfully, I’ve been learning so much more from experts’ commentaries on this web site (incl. Tim’s) than anywhere else and I’m very grateful for that.

  198. 198

    RE: Andrew @ 197 – You’re welcome. One thing to keep in mind is most the stuff you’ll read elsewhere (Seattle Times, Zillow, etc.) is written by people who don’t work in the industry and don’t really know what they’re talking about. There’s a lot of bad advice out there. Ardell and I may disagree from time to time (to put it mildly), but at least both of us have something more to base our opinions on than having read something by someone else.

  199. 199

    RE: Kary L. Krismer @ 157
    My SE King County Property Tax Went up 36%

    We’re taking a pounding here Kary….even retired disabled rates with lower incomes have big increases too. I thought they were limited to 10% gains per year….apparently all those special elections and Propositions for subpar transportation systems upgrades and terrible public schools HAS NO LIMITS.

  200. 200

    RE: softwarengineer @ 199 – Your tax or your valuation?

    Also, was there maybe a school levy change? Those can make a huge difference from year to year.

  201. 201
    jon says:

    Maybe prices are lower in Jan and Feb because that’s when houses with a close-up view of a freeway are being dumped.

  202. 202

    RE: jon @ 201

    This year I saw a few down where the 405 meets I-90. I just need to wear a tee shirt with a “Yield” sign as we pass through the season of frustration into the season of hope. :)

  203. 203
    redmondjp says:

    By Kary L. Krismer @ 200:

    RE: softwarengineer @ 199 – Your tax or your valuation?

    Also, was there maybe a school levy change? Those can make a huge difference from year to year.

    And fire district levies as well – a number of my coworkers who live in Renton got hit hard by the new fire district – $400-700 per house increases for that alone.

  204. 204
    jon says:

    By Ardell DellaLoggia @ 202:

    RE: jon @ 201

    This year I saw a few down where the 405 meets I-90. I just need to wear a tee shirt with a “Yield” sign as we pass through the season of frustration into the season of hope. :)

    Redin says that is the #2 hottest neighborhood in the country for 2017 and Factoria was also in the top 10 for 2016. The nightly massive backups on 405 must be holding down prices south of I-90. With the new expansion work on I-405 down to Renton as well as ST3 out to Issaquah, that is going to raise prices in a big way over there.

  205. 205

    RE: jon @ 204

    Don’t disagree…again, talking about homes where the County marks them as “Road Noise Nuisance: EXTREME” and beyond HIGH or MODERATE.

  206. 206

    On a side note to Kary based on an fb discussion we’ve been having, Steve Miller trying to keep his $670,000 EM deposit even though there was no appraisal contingency. He’s using your theory that he can get out on the finance contingency without a must appraise clause. :)

    http://pagesix.com/2017/01/26/rocker-steve-miller-sued-for-ditching-6-7m-mansion/

  207. 207

    RE: Ardell DellaLoggia @ 206 – Hard to say if he’s right or wrong about what would happen under contract terms I haven’t seen, but you now have three attorneys (Annie, Minh and myself) telling you that just striking the appraisal language isn’t sufficient with the language of our financing contingency. Minh , in case you don’t know, is a practicing real estate attorney.

    That’s a crazy amount of earnest money. There’d probably be a fight over that no matter what the contract said! ;-)

  208. 208
    ARDE says:

    RE: Kary L. Krismer @ 207

    You know I don’t agree. You can line up a string of attorneys. Obviously not a slam dunk or that case wouldn’t exist. :)

    You idolize attorneys too much. As if…discussion over. A judge maybe…but could be an outlier, one off decision as well.

    You have to weigh the negatives of the alternative…no?

  209. 209

    RE: ARDE @ 208 – We discussed this elsewhere, but all you’re doing is removing the provisions that say what happens if an event occurs–a low appraisal. As I said elsewhere, you could try that case in front of 10 judges in King County Superior Court and get at least two different results–but at what cost? Litigation is expensive and by making the contract at best ambiguous all you’re doing is benefiting the attorneys who will litigate it (and also possibly unlawfully practicing law, because striking language isn’t the same as filling in a form).

    If you really don’t want the result to be dependent on an appraisal, don’t use the financing contingency and instead use Form 22EF (evidence of funds) disclosing that you will be getting a loan.

    For the benefit of others, here’s Annie Fitsimmon’s video on the topic. She is probably the foremost expert on our forms.

    https://www.youtube.com/watch?v=ME6g-BnmnVo

  210. 210

    RE: Kary L. Krismer @ 209 – BTW, at about the 2:40 mark Annie starts talking about some local brokerage low appraisal forms and says there are no statewide forms for low appraisal. The latter comment is no longer true as of yesterday. There is a new Form 22AD (Additional Deposit). I would not advise the use of that form, or the broker forms, without understanding the math. Most of them, including 22AD, do not do what the seller would expect if the appraisal comes in so low that the additional funds are not sufficient.

  211. 211

    RE: Brian @ 180
    LOL You Ever Been a Landlord?

    Sounds like the answer is no.

    Safe rent returns when they tear the house apart or pack it with multiple family gypsies? When its empty getting remodeled? The renters need to get evicted for paying no rent and it takes 3 months and much legal cost. They brew crack in your house and destroy it with toxic chemicals. Did anyone mention sheet rock mildew from not heating your property? Etc., etc….

    The good renters with incomes own a home mostly already….most of these folks are out of the rent equation. My ex-landlord friend will fill your ear with stories after he shut his apartment down for losses…he so much happier now…

  212. 212

    RE: redmondjp @ 203
    Yeah It All Adds Up In Sanctuary City Economies

    When the sales tax per capita income plummets with low GLOBAL P/T type and burger flipper incomes with no health care. Let alone the global pay cuts also cut federal tax revenues [these poor also collect Food Stamps]…they mail money out of Washington State to foreign countries in DROVES too…further destroying Seattle’s local tax base requiring property tax gouging for over-paid schools.

    Hey….Boeing/MSFT is laying off legal Americans but we have Amazon warehouse slave labor to replace it….now, how do we afford to get to work? LOL Why shouldn’t the Police and Fire Departments see layoffs too??? Its only fair.

  213. 213

    RE: softwarengineer @ 211 – Those are all concerns, and they are more of a concern for the small landlord. If you have one tenant doing something like that and you have 10 or more units, it’s a PITA. If you have one tenant doing something like that and you have only one unit it be result in severe financial hardship if not financial ruin.

    I would also note that things like that are probably more likely to happen to the small landlord due to inadequate procedures.

  214. 214

    RE: Kary L. Krismer @ 209

    The problem is you throw out the baby with the bathwater.

    1) The marketplace creates a “will look at offers on Monday” to give the seller 4 days of on market time and the buyers 2 weekdays and 2 weekend days to consider the house. It works well for going on 5 years and you don’t like it. The MLS effectively thumbs their nose at the marketplace by basically vetoing the marketing strategy and posting “seller may accept sooner” without the seller’s consent. Legally correct? Yes. Always legally correct for the 4 or 5 years prior? Yes. But telling buyers and agents they can IGNORE the seller’s request right on top of and immediately following the request?

    2) Buyers are frustrated due to being beat out time and again by all cash offers. The marketplace creates a means for a buyer (If ready, willing and able) to compete with cash by removing the “must appraise” clause. This has assisted many financed buyers in acquiring homes, beating out cash offers in the process. Now you take out your legal stick and poke so many holes in it that “cash is king” once again.

    The problem isn’t that you are wrong. The problem is that you forget why the marketplace created the method in the first place. You worry about the seller…well, here’s a clue. Seller’s don’t need you to worry so much about them in this current market. It is the buyer that needed a leg up on cash offers. What does your changing everything do to help them compete with cash offers? It throws it back to “cash is king”. So right or wrong…you are wrong.

  215. 215

    RE: Ardell DellaLoggia @ 214 – Well first, the reason I don’t like the “offers reviewed date” system is because it suffers the same flaw as many other agent mistakes. Agents do things just because they hear about them. Too few agents ever think about whether something they hear about is a good idea or if there’s a better way to do something.

    My system of asking for 2 or 3 business days to review offers is much better, and gives you the same amount of time if you list on a Thursday or Friday. 1. It doesn’t create that NWMLS language about “may accept sooner” that you don’t like. 2. It doesn’t create a situation where most the offers will come in at the last moment giving the listing agent less time to conduct their due diligence of the offers. 3. It doesn’t make the seller look foolish if the review date passes without an offer coming in. 4. It continues to apply for the life of the listing.

    As to your second paragraph, my system of not using a financing contingency and instead using 22EF would be much better at beating out a cash offer. Using 22EF instead the buyer would lose their earnest money no matter what the reason the buyer couldn’t get financing. That’s much better from the seller’s point of view. (BTW, obviously the buyer should be advised as to the increased risk of doing that.) You’re just suffering from the same thing I just mentioned. You heard/saw a way of doing something (striking the appraisal language form Form 22A), but never stopped to think about whether it was a good idea (it’s clearly not) or whether there’s a better way to do something (there is).

    And here the problem is you are wrong! Striking the language doesn’t necessarily do what you think it does. If there becomes a dispute over what your ambiguous contract means your client will possibly be on the hook for attorney fees and their attorney will almost certainly sue both you and your firm. That’s hardly good for anyone (except the attorneys).

  216. 216
    Eastsider says:

    RE: Kary L. Krismer @ 215“Using 22EF instead the buyer would lose their earnest money no matter what the reason the buyer couldn’t get financing. That’s much better from the seller’s point of view.”

    This seems risky to me. If the buyer fails to get mortgage financing in place before closing, which is very common, he is at the mercy of the seller to extend the closing date or lose his earnest money. In that case, you as an agent giving such (bad) advice might be held accountable. No?

  217. 217
    Eastsider says:

    RE: Kary L. Krismer @ 213 – I disagree with your assessment. With the recent anti-landlord/business policies, I doubt any serious developer will be contemplating new apartment buildings in Seattle. The recent city council actions basically kill the SFH rental market in Seattle.

  218. 218

    RE: Eastsider @ 216 – Yes, that is one of the risks I was thinking of in the parenthetical sentence. The other would be that there’s some issue with the house that would keep it from getting financing. Or even a major earthquake on the afternoon of the day of recording. The buyer does need to be advised of those risks. (As an aside I really wish the P&S contract had at least optional language providing for a later closing date if the transaction doesn’t close due to no fault of either party–that would cover many of those things. Back when the market was weaker I would add such language to my buyers’ contracts. Now I don’t risk that turning off a seller.)

    If the buyer doesn’t want that great of risk, another option to striking the low appraisal language would be to calculate the appraisal value at which the buyer could not perform, and then add language indicating that the low appraisal provisions would not apply unless the appraisal came in below that amount. That would make the contract unambiguous, and now that 22A has an option for the seller to specify a new price, it would be more likely something would be worked out. And if that threshold value were below the list price, that should not make the seller all that nervous.

    That is generally what I have done when I represent a buyer, or what I suggest when I represent a seller. I mainly mentioned the going without a financing contingency because that is what Annie Fitzsimmons suggests in her video. And since Ardell was addressing competing with a cash offer.

    The point is there are better options.

  219. 219

    By Eastsider @ 217:

    RE: Kary L. Krismer @ 213 – I disagree with your assessment. With the recent anti-landlord/business policies, I doubt any serious developer will be contemplating new apartment buildings in Seattle. The recent city council actions basically kill the SFH rental market in Seattle.

    I’m not following. I was suggesting that having a nightmare tenant is more of a problem for the small landlord than the landlord which owns many properties.

    I wasn’t dealing with the anti-landlord policies of Seattle. But on that topic, I did find this story almost laughable. Apparently the Seattle Times thinks that tenants are “a group that’s long been a minority voice in city politics . . ..”

    http://www.seattletimes.com/business/real-estate/in-a-first-seattle-renters-could-get-own-voice-in-city-hall/

  220. 220
    Eastsider says:

    RE: Kary L. Krismer @ 219 – I was simply suggesting that getting a nightmare tenant nowadays was significantly higher for both small and big landlords. Landlords are now forced to accept tenants with (criminal) records and questionable finances. Even big landlords may have trouble managing such risks. (If the city council imposes similar anti-economic rules to auto financing. car dealers will flee the city in a heartbeat.)

  221. 221

    RE: Eastsider @ 220 – Oh, okay, I get it.

    BTW, I don’t know what Seattle has on criminal records, but the state is very unclear. Apparently the Attorney General just started going after property management companies if they didn’t accept felons without any review for nature of the crime or time period. Apparently no warning, and even after they started doing it, no guidance was to what was or was not allowed (other than a blanket prohibition).

    https://www.youtube.com/watch?v=lzr_pc17JvQ

    There are also some news articles on this, but I don’t have time to find them.

  222. 222

    RE: Eastsider @ 216

    Agree. No need to throw that baby out with the bathwater. :)

  223. 223

    RE: Ardell DellaLoggia @ 222 – Better than thinking you’ve removed the baby from the bath when you’ve not really done so. Especially after three experts have looked into the bathtub and told you the baby is still there! :-D

  224. 224

    RE: Kary L. Krismer @ 223

    I already told you I paid for my own legal opinion on the matter AND your referenced expert also indicated she refused to give an alternative and agreed with my expert’s legal opinion while being goaded into giving a different one for 18 months and now that someone else came up with a different one, by your own admission it came up short and is NOT a better alternative.

    Removing the Finance Contingency in its entirety is NOT a better option in many if not most cases.

    You may not like my method, but you and others have failed to come up with a better way…by your own admission and theirs.

    Know that a “must appraise clause” is not a part of all Finance Contingencies in all parts of the Country nor has it ever been. So removing it is not as uncommon as you may think.

    From the buyer side, if the seller side adds additional language as part of the acceptance, that works. From the seller side choosing someone with overly sufficient down payment works very well.

    This wheel does not need reinventing.

  225. 225

    RE: ARDELL DellaLoggia @ 224 – Whatever Ardell. I don’t even know what you’re trying to say in your first paragraph. But I’ve given two alternatives and both are better because neither one will put you in front of a judge possibly being responsible for the other side’s attorney fees. I can you guess you don’t have a clue how bad of a situation that is. It should be avoided at any cost.

    Whether to go without a financing contingency at all (the most attractive to a seller) or to just set a threshold for when the low appraisal provisions kick in is something for a buyer to consider after appropriate disclosures and consultation. What is not something for them to consider is striking the low appraisal language after being incorrectly advised that is a safe thing to do.

    And your “by our own admission and theirs” comment is just complete fantasy. I don’t have a clue what you’re basing that comment on. Everything you’ve said is wrong. I haven’t admitted a single thing you’ve said is right.

    As to contracts in other parts of the country, completely irrelevant. As I said when you linked to the article above, without knowing how their contract reads it would be impossible to know the result would be. If our Form 22A was drafted without the appraisal language you strike there would be zero argument that a low appraisal would not let the buyer out because the buyer would not be able to get financing with the low appraisal. The only argument differently is that the parties intended something by striking that language. But the counter to that argument is you just removed the process that occurs when a low appraisal occurs. I believe the latter is a better argument, but a minority of judges would possibly disagree.

    And finally, I’ve never said anything against picking someone with an overly sufficient down payment. Again I don’t have a clue what you’re talking about because that’s the entire point of a low appraisal addendum or having a contract without a financing contingency. If they didn’t have an overly sufficient down payment they would be in breach of contract because the contract has the buyer represent that they have sufficient funds to close. And the breach of that representation is one of the reasons why your expert’s opinion is incorrect. If you breach the contract you lose your earnest money! (Or worse–the misrepresentation might rise to the level of fraud.)

  226. 226

    RE: Kary L. Krismer @ 225

    It’s getting too easy to pull your chain.

    Kary…it works just fine…for 27 years for me. The paper and what’s on it can never replace a seller and a buyer with equal and good intent and competent professionals to assist them .

    Step away from the paper.

  227. 227

    By ARDELL DellaLoggia @ 226:

    RE: Kary L. Krismer @ 225 – Kary…it works just fine…for 27 years for me. The paper and what’s on it can never replace a seller and a buyer with equal and good intent and competent professionals to assist them .

    That’s the other problem with agents. They think just because something has worked that it’s the right thing to do. They forget that 99% of the time both the buyer and seller want the same result–a closing. That hardly makes their practice an acid test of proper procedures.

    And in any case, the Form 22A has not been around for 27 years.

    But if you’re such an expert in the Form 22A, let’s assume you’ve crossed out all of section 7–the low appraisal provisions. Exactly what language in the contract are you referring to that says the seller gets to keep the earnest money if the buyer cannot perform due to the low appraisal? If you think the seller gets the money you should be able to point to what that language is. Point to it and maybe I’ll agree. But I bet you can’t point to it, because it doesn’t exist.

  228. 228
    justme says:

    RE: Eastsider @ 217

    You mean the proposed renter’s commission? Or the two measures?

    http://www.seattletimes.com/business/real-estate/in-a-first-seattle-renters-could-get-own-voice-in-city-hall/

    “That includes two significant new measures: one that caps move-in fees for tenants, and another that requires landlords to give open apartments to the first qualified renter who submits an application, starting in July.”

    UPSHOT: Can you say “pent-up supply”? I love the smell of INVENTORY! in the morning.

  229. 229

    RE: Kary L. Krismer @ 227

    Why would I want the seller to keep my buyer client’s Earnest Money? You are definitely missing the point. If you don’t think everyone happy and it closes is important…discussion over.

  230. 230
    Erik says:

    RE: ARDELL DellaLoggia @ 229
    Kary only sees what he wants to see. Get’em Ardell!

  231. 231
    Erik says:

    RE: dlee @ 155
    Keep it. You did good buying March 2012. This bubble is far from popping. You should be safe until 2022 for sure. I know the bubble won’t pop because in order for the bubble to pop, supply must exceed demand. We are far from that. New housing projects won’t be approved fast enough for supply to meet demand. If you sell, you’ll regret it later unless you are only selling to buy more real estate.

  232. 232

    By ARDELL DellaLoggia @ 229:

    RE: Kary L. Krismer @ 227

    Why would I want the seller to keep my buyer client’s Earnest Money? You are definitely missing the point. If you don’t think everyone happy and it closes is important…discussion over.

    Huh? What exactly do you think removing the low appraisal language does if it doesn’t allow the seller to keep the buyer’s earnest money if the property appraises too low for the buyer to buy? If you leave that language in the money clearly goes back to the buyer if the appraisal is too low. So just what do you think removing the language does?

    Or stated differently, what do you think you’re offering the seller over other offers by removing the low appraisal language?

    You’re not making any sense at all.

    As to your “everyone happy” being important, you could write a purchase sale contract on a napkin with crayon, and if it closed it wouldn’t matter. Everyone would be happy, but that doesn’t mean that’s the standard you would go by for writing a good contract.

    Again, you’re not making any sense.

    I’m beginning to wonder if you understand a single thing about the financing addendum.

  233. 233
    Eastsider says:

    RE: justme @ 228 – I meant the two and more measures (e.g. section 8) passed in recent years. Coming up next is rent control (it’s a matter of time IMO) and more socialist measures. Landlord business is dead in Seattle. Perhaps that will free up some inventory. Haha.

    Btw, if anyone is reading this, please don’t listen to investment advise given in the comments, especially from people who have defaulted on their previous mortgage. LOL.

  234. 234

    By ARDELL DellaLoggia @ 229:

    RE: Kary L. Krismer @ 227

    Why would I want the seller to keep my buyer client’s Earnest Money? You are definitely missing the point.

    If you think the buyer still gets to keep the earnest money even if you remove the low appraisal language, you’ve been missing my point. That’s what I’ve been saying all along–that the buyer can still rely on the financing contingency even if you remove that language.

  235. 235
    Eastsider says:

    RE: Kary L. Krismer @ 232 – In practice, buyers and sellers just want to close deals. In the event when a deal fails to close, normal people tend to terminate the transaction in good faith. In the unfortunate event that one party is litigious/malicious, the contract will not protect the other party from expensive and protracted legal costs. For example, a seller in bad faith can ask escrow not to return the earnest money and there is little a buyer can do to reclaim his fund immediately. Fortunately such incident happens rarely.

  236. 236
    Hugh Dominic says:

    By Eastsider @ 217:

    RE: Kary L. Krismer @ 213 – I disagree with your assessment. With the recent anti-landlord/business policies, I doubt any serious developer will be contemplating new apartment buildings in Seattle. The recent city council actions basically kill the SFH rental market in Seattle.

    I can vouch for that. I have a SFH that is not worth risking as a rental due to those policies.

  237. 237
    Andrew says:

    RE: Hugh Dominic @ 236 – could you expand a bit as to why City of Seattle made it so, intentionally or otherwise?

  238. 238

    RE: Kary L. Krismer @ 234

    Removing the must appraise clause and removing the Finance Contingency in its entirety are not the same thing. If a buyer offers $100,000 over the asking price then the buyer should have the means to pay for the offer they are making. If the buyer removed the must appraise clause without having the means to pay for the bid up, then someone didn’t explain to them what removing the must appraise clause means.

    The listing agent doesn’t have different information as to comps than the agent for the buyer. The appraiser doesn’t have access to different information than the two agents.

    It has long been known that if a property defect is noted in the contract, the lender will likely want that corrected prior to closing. That is why contracts rarely have language referring to a contract price change due to the fact that the home needs a new roof. Once someone specifically says it needs a new roof and everyone agrees, the lender wants the roof on prior to closing.

    Same logic with your “remedy” for low appraisal. If the buyer and seller agree in the contract that the home only needs to appraise for $100,000 less than the purchase price and the buyer will pay that additional $100,000, what makes you think that won’t cause the appraiser to “quit” at Purchase Price minus $100,000?

    It is not the purpose of the contract to cause undue “harm” to the parties. You seem to think about things from the standpoint of protecting a seller as in if buyer has to spend an additional $100,000 out of pocket unnecessarily, great! Seller is better protected. But how do you justify causing your buyer client undue “harm” because that is what is best for the seller?

    This is why I posted the Steve Miller case. Do you think he can’t close? Do you think he doesn’t have the means to close? Or do you think he just doesn’t want to overpay for the property? Do you think he should get his $670,000 back if he can in fact proceed and has the means to do so?

    If a buyer removes the must appraise clause and does have the means to proceed (which is how and why he removed the must appraise clause in the first place) but changes his mind about buying the house because they are surprised by the low appraisal, then they are trading forfeiture of Earnest Money for overpaying for the house. In Mr. Miller’s case he can lose $670,000 or pay $2.4 Million over appraised value. I don’t think it’s a case of his not being ABLE to purchase the house at the price he agreed to pay.

    I wonder, given he has a house for sale here, if he just assumed that the customary contract provisions here would also apply in NY where he was buying. If it is not customary in Duchess County NY for a contract to have a must appraise clause, ever, is it negligence for his lawyer and agent to not have included a must appraise clause? If he loses his $670,000 to the seller, can he turn around and sue his agent and lawyer for not adequately protecting him in the offer in the manner he was used to when buying his home here, and that will be used when selling his home here?

    That is why actively striking the must appraise clause, vs not having had one in the first place, is better. If Steve Miller had to make a bid red X through the must appraise clause and initial that, he likely would not be as surprised as he is that he might have to buy the house without regard to appraised value…or lose his Earnest Money if he doesn’t. The act of striking it out is important, and more important than merely omitting it in the first place.

  239. 239

    By Eastsider @ 235:

    RE: Kary L. Krismer @ 232 – In practice, buyers and sellers just want to close deals. In the event when a deal fails to close, normal people tend to terminate the transaction in good faith. In the unfortunate event that one party is litigious/malicious, the contract will not protect the other party from expensive and protracted legal costs. For example, a seller in bad faith can ask escrow not to return the earnest money and there is little a buyer can do to reclaim his fund immediately. Fortunately such incident happens rarely.

    Exactly, but that’s why you want a well drafted contract. It’s for those litigious and/or unreasonable people. You don’t want to have a situation that isn’t clearly addressed in the contract.

    BTW, not sure if you’re aware, but there is now legislation in place that makes getting the EM back a bit easier–although the unreasonable party can still defeat that by action, but not just through inaction as was the case before.

    Which reminds me. Yet another legal issue that Ardell was wrong on in the past. She thought that an escrow agent had to return the money just on the buyer’s request. That the escrow could not require the seller’s signature too. Sure the escrow could return the money on whatever terms they want, but most escrows don’t want to get sued on a transaction they didn’t make any money on, so they require both sides’ signatures.

  240. 240

    By Ardell DellaLoggia @ 238:

    RE: Kary L. Krismer @ 234

    Removing the must appraise clause and removing the Finance Contingency in its entirety are not the same thing. If a buyer offers $100,000 over the asking price then the buyer should have the means to pay for the offer they are making. If the buyer removed the must appraise clause without having the means to pay for the bid up, then someone didn’t explain to them what removing the must appraise clause means.

    . . .

    Same logic with your “remedy” for low appraisal. If the buyer and seller agree in the contract that the home only needs to appraise for $100,000 less than the purchase price and the buyer will pay that additional $100,000, what makes you think that won’t cause the appraiser to “quit” at Purchase Price minus $100,000?

    You’re really changing the topic and effectively advocating for the use of a low appraisal addendum, although you may not realize that. The issue we were discussing, and which was addressed in the Annie Fitzsimmons’ video is whether removing the appraisal language gets the buyer their money back if they cannot get financing due to a low appraisal. I was arguing it would get them their money back and you were arguing it would not (until a couple of posts ago).

    Beyond that though, you really don’t understand the issues. Just because a buyer offers $100,000 additional down payment, that doesn’t mean that the buyer will be able to perform no matter what the appraisal amount comes in at. There will be an appraisal value where their down payment and additional down payment together with their ability to finance at the appraised value is not sufficient. If that happens and there’s a 22A financing contingency, the buyer will likely get their money back. Just striking the low appraisal language will not likely change that result. If they use 22AD, or if they use my threshold value language, they would clearly get their money back.

    What you are apparently trying to do is deal with the situation where the appraisal comes in low, but not so low that the buyer can’t still perform. For example, the buyer offers $1,000,000 with 40% down. There the buyer could probably perform with any appraised value in excess of $750,000, because a $750,000 valuation would allow a bank to loan $600,000 at an 80% LTV. Using the unaltered 22A, the buyer could back out if the appraisal came in at even $999,999.99. But that doesn’t mean the solution is removing 22A’s low appraisal provisions entirely, although admittedly the risk of doing that is less the more down the buyer is offering. But that’s what the 22AD or my threshold language deal with.

    If the buyer is offering less additional down the risk to the buyer in striking the 22A appraisal low language becomes greater. Let’s use the same $1,000,000 contract price, but the buyer is only agreeing to put 20% down, plus $50,000 in additional down if necessary. You write that up using 22A with the low appraisal provisions stricken. Let’s assume the property appraises at only $900,000–its original list price. In that situation the buyer will only be able to borrow $720,000, which together with their $200,000 down and $50,000 additional down only equals $970,000. They won’t be able to close and they will likely lose their earnest money, IMHO, because they still have their financing contingency in place and could not get financing to buy. And with the appraisal language stricken, they will have no clear procedure to back out.

    The difficulty comes in though because the listing agent and seller may say that by removing the low appraisal provisions the buyer was agreeing to forfeit their earnest money if they couldn’t perform. That seemed to be what you were arguing until a couple of posts ago, and clearly it’s something a seller could think based on the questions Annie is getting from agents. And that’s what would lead to the possible litigation.

    That’s where either 22AD or my threshold language would come in. With 22AD there would be a procedure for the buyer to give notice and ask for a lower price ($950,000 in my example). Incidentally, if the 22A was used unaltered, what would happen is the buyer could ask for a lower price of $900,000 (the appraisal amount) and the seller with the new forms could come back and ask instead for $970,000 (the maximum amount the buyer could do at that appraisal amount). Using my threshold language, I would provide that the low appraisal provisions of 22A wouldn’t kick in unless the appraised value came in below $937,500–the amount needed to borrow $750,000. At $900,000 the same result as an unaltered 22A would occur (the buyer could ask for $900,000 and the seller could come back at $970,000.) But whichever is used, there is language covering the situation–and less chance for costly litigation.

    What you’re advocating is just striking the language and then hoping bad facts don’t occur. That is very bad practice, but again the risk there is less the more the buyer is putting down over 20%.

  241. 241

    By Ardell DellaLoggia @ 238:

    It is not the purpose of the contract to cause undue “harm” to the parties. You seem to think about things from the standpoint of protecting a seller as in if buyer has to spend an additional $100,000 out of pocket unnecessarily, great! Seller is better protected. But how do you justify causing your buyer client undue “harm” because that is what is best for the seller?

    You’re completely missing the point! The point of offering additional down is to make your client’s offer more attractive to the seller so that they pick your offer over another offer. The buyer wants their offer to be selected, and offering additional down is a way to offer the seller greater assurance.

    If a buyer wants to make the strongest offer possible–the one most attractive to a seller–they will go without any financing contingency and just disclose their available cash and the loan amount they intend to get. That obviously has risks, but taking those risks will make their offer more likely to be accepted over other offers, including other higher offers or even possibly cash offers. But not all buyers are so risk tolerant (particularly when it may not be their credit that keeps them from getting financing), so it’s not a course for everyone, nor would I recommend it to everyone.

    So that leaves the next step of not having the appraisal provisions kick in if the buyer can still get financing at the appraised amount. Many listing agents and sellers probably don’t realize that a buyer could back out of a $1,000,000 40% down deal with a $999,999.99 appraisal, and the reason they don’t realize that is what I mentioned before–most the time the buyer and seller want the same result–to close a sale.

    But that leaves drafting alternative language to avoid the buyer being able to back out if they can still perform at the appraised value. 22AD does that and my threshold appraisal amount does that, but they act in different ways. The problem with your striking the low appraisal language is it doesn’t say what happens if the buyer cannot perform, and that can lead to disputes and litigation. A seller and their listing agent may very well think that by removing the low appraisal language the buyer doesn’t have an out if there is a very low appraisal. I believe they likely would still have an out, but as noted, different judges would decide that differently. And creating that issue is not good for either the buyer or seller–only attorneys.

  242. 242

    By Kary L. Krismer @ 240:

    In that situation the buyer will only be able to borrow $720,000, which together with their $200,000 down and $50,000 additional down only equals $970,000. They won’t be able to close and they will likely lose their earnest money, IMHO, because they still have their financing contingency in place and could not get financing to buy.

    That should have read “will not likely lose their earnest money, . . .”

  243. 243
    GoHawks says:

    Kary and Ardell. We really appreciate the professional insight and knowledge that you bring to this blog. That being said, enough with your back and forth. E-mail one another offline about your differences. The back and forth is beneath you (I hope).

  244. 244
    screenname12345 says:

    RE: erik @ 231 –

    I agree there is no sign of a bubble. The thing is as you go higher in price I am noticing lower % of appreciation. People in the cheaper homes under $1 million will continue to do fine. The luxury level is not appreciating all that much, at least not in Seattle. Maybe on the eastside with the Asian money flow this is not the case. Another issue some of us are running in to is once you surpass the $500k in profit tax break for a married couple you are getting taxed at an ordinary income rate.

    Good problem to have but something many folks aren’t even aware of that needs to be considered in their financial planning.

  245. 245

    By GoHawks @ 243:

    Kary and Ardell. We really appreciate the professional insight and knowledge that you bring to this blog. That being said, enough with your back and forth. E-mail one another offline about your differences. The back and forth is beneath you (I hope).

    I would hope that it would be interesting to buyers and sellers (as well as other agents).

    If you’re a buyer, don’t you want to know ways to make your offer more attractive? Don’t you want to maybe know a possible reason why you lost out so many times?

    If you’re a seller don’t you want to know how the financing contingency works, or how the low appraisal addendum works?

    Elsewhere I’ve been very critical of the new Form 22AD because using my hypothetical numbers above it only allows the seller to lock in the buyer at $950,000, where they would only be using $30,000 of the additional $50,000 they seemingly offered, rather than locking them in at $970,000 and using the full $50,000 offered. Don’t you think sellers would want to know that sort of thing?

  246. 246

    RE: GoHawks @ 243 – Just to follow up on this thought, most buyers aren’t aware that their offer being selected isn’t just about the price or how much money they put down, particularly in multiple offer situations. The “best offer” all other things being equal is the one that offers the most money with the fewest contingencies, but also one that can be signed off on without any changes, because if you need to make a change you will not be locking in the buyer and the other next best offers may disappear.

    So for example, if a buyer is out there offering $1,000,000 on $800,000 listings with 40% down and a 22A financing contingency and repeatedly losing out, the buyer may have no idea that they lost out due to their agent’s drafting of the form.

    I had a situation last year on one of my listings. Multiple offers but the one that won out not only dealt with the additional funds issue, but also allowed my client to choose between two Form 35s–one with an inspection contingency and one without, because the buyer’s agent knew some agents and sellers understand the importance of allowing the buyer an inspection. That agent really earned her commission because it got the buyer the house.

    I would also note that some here (e.g. Craig) have asked about the value of my services. What do you think the value of an agent is to a buyer who understands how to make a buyer’s offer more attractive to a seller and can not only offer advice on that topic, but also convey the advantages of that buyer’s offer to the listing agent? Or conversely, what do you think the value of a listing agent is who knows that the sum a seller can lock a buyer into under Form 22AD is 2% less than what it should be?

    If a consumer understands how the business works they will understand it’s about a lot more than price and financing. It may be tedious to read, but I believe it’s useful information.

  247. 247
    justme says:

    RE: Eastsider @ 233

    >>please don’t listen to investment advise given in the comments, especially from people who have defaulted on their previous mortgage. LOL.

    Hehe, (cue the SNL church lady impersonation) “Could it be, …. Erik?”

  248. 248
    Erik says:

    RE: justme @ 247
    Ouch. You got me! That one stings. Are you satisfied now?

  249. 249
    justme says:

    RE: Erik @ 248

    Yes! I think that will do for today. Almost certainly. I work off an 18 hour snark cycle, but some people think also that this cycle is completely bogus, and that in reality the snark is controlled by the actions of the FRB. The jury is still out on that one.

  250. 250
    Blurtman says:

    By justme @ 247:

    RE: Eastsider @ 233

    >>please don’t listen to investment advise given in the comments, especially from people who have defaulted on their previous mortgage. LOL.

    Hehe, (cue the SNL church lady impersonation) “Could it be, …. Erik?”

    To be fair, many large institutions either defaulted on underwater RE, or were rescued when they were holding underwater RE backed securities.

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