Affordability Index Falls To Early 2005 Levels

You can get access to the spreadsheets used to make the charts in this and other posts by becoming a member of Seattle Bubble.

With all of the first quarter behind us, and the question of whether or not we’re in another real estate bubble here in Seattle on everyone’s minds, let’s take an updated look at our affordability index charts for the counties around Puget Sound.

As of March, affordability has now fallen to its lowest level since November 2008, and as has been the case for quite a while, it would be considerably worse if not for the current absurdly low interest rates.

Median home prices have already begun their annual spring bump, while interest rates have ticked up slightly. The affordability index for King County currently sits at 90.7. An index level above 100 indicates that the monthly payment on a median-priced home costs less than 30% of the median household income.

King County Affordability Index

I’ve marked where affordability would be if interest rates were at a slightly more sane level of 6 percent—74.0, which is worse than any point outside of early 2006 through late 2007.

If rates went up to a more historically “normal” level of 8 percent (the average rate through the ’90s), the affordability index would be at 60.4—five points lower than the record low level in July 2007.

What if rates were at 6.7 percent, the same level they were at in July 2007 when the affordability index bottomed out at 65.2? At that rate with today’s home prices and incomes, the affordability index would currently be 68.7.

In other words, ridiculously low interest rates are still the only thing propping up affordability in the Seattle area.

Here’s a look at the index for Snohomish County and Pierce County since 2000:

Snohomish / Pierce County Affordability Index

The affordability index in Snohomish currently sits at 118.1, while Pierce County is at 132.1. Both down considerably over the last few years.

In other affordability-related news, Zillow subsidiary Trulia recently released their own version of an affordability calculator. It is broken and gives terrible advice. Do not use it. If you adjust the interest rate, the calculator breaks. If you adjust the property tax rate, the calculator ignores the new value. They also claim that spending up to 36 percent of your income is “affordable,” despite years of precedent that “affordability” means not spending more than 30 percent of your income. I’m shocked that such a broken and misleading tool was published.

My own simple affordability calculator doesn’t have a lot of fancy features or the prettiest interface, but at least it works.

Tomorrow I will post updated versions of my charts of the “affordable” home price and income required to afford the median-priced home. Hit the jump for the affordability index methodology, as well as a bonus chart of the affordability index in the outlying Puget Sound counties.

Outer Puget Sound Counties Affordability Index

As a reminder, the affordability index is based on three factors: median single-family home price as reported by the NWMLS, 30-year monthly mortgage rates as reported by the Federal Reserve, and estimated median household income as reported by the Washington State Office of Financial Management.

The historic standard for “affordable” housing is that monthly costs do not exceed 30% of one’s income. Therefore, the formula for the affordability index is as follows:

Affordability Formula

For a more detailed examination of what the affordability index is and what it isn’t, I invite you to read this 2009 post. Or, to calculate your the affordability of your own specific income and home price scenario, check out my Affordability Calculator.


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.

250 comments:

  1. 1
    ess says:

    Of course affordability comes in many flavors these days, and some of these guidelines may not be useful as we may believe.

    Seattle may be transposing into a city for the very wealthy, and for many of those buyers willing to bid housing prices up, the desired house and neighborhood is of greater concern than the price or taxes. For those people, affordability indexes are irrelevant.

    But for others, affordability is all relevant to the financial issues at hand.

    Presented is an example of two individuals obtaining housing and how these hard and fast rules can be somewhat misleading:

    Individual A has 3000 dollars a month disposable income after all taxes are deducted, which would indicate the ability to pay 900 dollars a month for housing in order not to be considered “housing stressed”. That would leave that individual with 2100 dollars a month for all other required and discretionary purchases. Assuming Individual A can find a nice studio apartment in a less trendier part of Puget Sound for 900 dollars or less, Individual A is considered not to be “housing stress” because Individual A is only spending 30% of his or her available income for housing.

    Individual B has 10,000 dollars a month disposable income after all taxes are deducted, which would indicate the ability to pay 3000 dollars a month or less for housing as to not be considered “housing stressed”. But individual B likes to live it up, desires to reside in trendy housing in a hip and happening area for 4000 dollars a month. Individual B would be considered “housing stressed” because individual B is applying 40% of his or her income to housing, which is 10% over the guidelines. But individual B has 6000 dollars a month for his or her other expenditures, which is certainly superior to Individual A’s situation.

    Thus when these ” housing affordability tests” are applied, it should not only be the amount being applied to obtain the housing, but the amount that is remaining.

  2. 2
    Macro Investor says:

    I’ll say again, if you want to be a good investor you buy when affordability is on the way up — not down. As it’s going down, eventually enough potential buyers are left out… that’s when the bubble pops.

    When interest rates are historically low, that is a trap. When they are high, you can pick up bargains.

    I feel sorry for all the folks who have chased higher and higher prices. They will not only be sorry, but possibly financially ruined for life. They are thinking short term. Look at that shiny new object. They aren’t thinking about retiring with a comfortable nest egg down the road. Local markets with strong job markets and popularity can resist this for a while. But that can change quickly too. Especially when hedge fund money is involved. That runs hot and cold.

  3. 3
    Eastsider says:

    A few notes –

    – The yield on 10-yr Treasury notes has declined from 2.626% on 3/13 to 2.176% today. That is almost half a percent drop in a month. As a result, the 30-yr mortgage loan rate should decline by about half a percent from a month ago. This improves affordability.

    – That said, income for most income groups, except perhaps the top 10%, have not kept pace with home price increases in the last decade. This reduces affordability for most families.

    – Finally, does affordability even matter when our neighbor up north, Vancouver, has been unaffordable for years? Seattle could be the next NYC, DC, SF, or Vancouver.

  4. 4
    Macro Investor says:

    By ess @ 1:

    Of course affordability comes in many flavors these days, and some of these guidelines may not be useful as we may believe.

    There’s no need to “geek out” about definitions. What matters is the trend — what direction it’s moving and how far extreme it is.

    It is stating the obvious to say not all credit decisions follow hard/fast rules.

  5. 5
    Macro Investor says:

    By Eastsider @ 3:

    – The yield on 10-yr Treasury notes has declined from 2.626% on 3/13 to 2.176% today.

    ==> Did that in reverse last summer. What’s your point?

    – Seattle could be the next NYC, DC, SF, or Vancouver.

    ==> They used to say that about Detroit.

  6. 6

    By Macro Investor @ 2:

    I’ll say again, if you want to be a good investor you buy when affordability is on the way up — not down. As it’s going down, eventually enough potential buyers are left out… that’s when the bubble pops..

    So basically your advice is buy low, sell high. Thank you for that insight. /sarc

    If you want to be a good investor you don’t just look at one factor. Using your analysis it would have been a bad time to buy in July of 2004 when the median was only $330,000. Even ignoring the fact that you could have sold much higher than that in 2008 if you’d been so inclined (if investment had been your goal), the non-distressed median has not been that low again.

    I don’t have a problem of saying the affordability factor is a forward looking index, but it seemingly looks years forward at times. I think the average person could probably do a better job of understanding how interest rates affect things by using a mortgage calculator. Take the monthly P&I on your current or contemplated loan and then determine how much you could borrow at higher rates. If rates do go up the market would need to make up for that amount in some other manner for you to break even.

    Almost forgot: $330,000 from NWMLS sources, but not guaranteed.

  7. 7
    Eastsider says:

    By Macro Investor @ 5:

    By Eastsider @ 3:

    – The yield on 10-yr Treasury notes has declined from 2.626% on 3/13 to 2.176% today.

    ==> Did that in reverse last summer. What’s your point?

    Half a percent is a big deal to borrowers. If the rate goes from 4.25% to 3.75%, that is a 12% savings in monthly interest payment.

    – Seattle could be the next NYC, DC, SF, or Vancouver.

    ==> They used to say that about Detroit.

    Seattle may be the next Detroit… perhaps in 50 years. LOL.

  8. 8
    ess says:

    By Macro Investor @ 4:

    By ess @ 1:

    Of course affordability comes in many flavors these days, and some of these guidelines may not be useful as we may believe.

    There’s no need to “geek out” about definitions. What matters is the trend — what direction it’s moving and how far extreme it is.

    It is stating the obvious to say not all credit decisions follow hard/fast rules.

    There are literally hundreds of articles that quote the 30% rule without any further analysis. Those figures are often cited by those advocating extreme housing measures such as rent control or other housing schemes that are placed on the back of the taxpayer, but yet benefit only a select few.

    Furthermore, while some may have difficulty with affordability for housing and relocate to other parts of Puget Sound, there is no affordability issue for most buyers or renters as multiple offers for Seattle property and low vacancy rates attest. If people couldn’t really afford housing in Seattle – houses for sale wouldn’t sell like hot cakes, and rentals would remain empty. That does not appear to be the case.

    So there is no affordable issue. Perhaps it should be labeled an ill advised allocation of scarce resources issue.

  9. 9
    Macro Investor says:

    By Eastsider @ 7:

    ==> Seattle may be the next Detroit… perhaps in 50 years. LOL.

    Stop lying. Nobody said that.

    But let’s suppose Seattle real estate goes down 1% a year. Tiny right? Recent buyers have to pay someone to take their house. With leverage, just a few percent down makes it impossible for many people to sell. This is what happened in ’08. As soon as people get even a whiff of a down market, they rush to list. Then it snowballs as people compete to dump their losing investment.

    Were you in a coma from 2007-2011? Remember multiple “for sale” signs on each bloc?

    Global markets shift. Many of the tech companies require cash infusions to stay alive. Any break in the markets causes that money to dry up. It can happen in days. Amazon is a company that doesn’t earn enough to finance itself. A bond or stock market freezup (2000 and 2009) could put them out of business in months.

  10. 10
    Doug says:

    This is just about rates and the 10y isn’t going anywhere, but up in price –> down in yield. I’m pretty sure I was here months ago saying the 10y is a buy at 2.50%….

    I have no doubt that the 10y will reach all-time lows in the next couple of years.

  11. 11
    Action says:

    By Macro Investor @ 9:

    Were you in a coma from 2007-2011? Remember multiple “for sale” signs on each bloc?

    The argument that we are in a bubble is often made on this site that if interest rates weren’t so low, real estate prices would not be nearly as high and if interest rates went to 6%, the bubble would surely pop.

    On the flipside, one thought I’ve had is how much is recency bias from the last real estate bubble suppressing price increases? Everyone is scarred from the last recession, especially millennials, who demographically should be in their peak home buying years when compared to the previous two generations. You read it in the news and bubble is on the tip of everyone’s tongue when talking about real estate. Yet demand for housing is still high given the inventory that is available. Many people thought they were cashing out at the top in 2014 and we’re up another 30% since then. And we’re still no where close to building enough new housing to keep up with demand.

    My thought is that if everyone thinks it’s a bubble, it’s probably not a bubble.

  12. 12
    GoHawks says:

    RE: Macro Investor @ 9 – It’s a big * that people always use when talking about affordability these days, but rates have been low now for coming up on 10 years. This is not a couple of year phenomenon, there has been a structural change in interest rates in the U.S. and around the world.

  13. 13
    GoHawks says:

    RE: Action @ 11 – Yeah, many more people calling this a bubble this go around. Many are still fighting the last battle, or they watched the Big Short and want to call the top of the market. People on this site ranted about institutional buyers topping out in 2013-2014 and that the end of our market was at hand because there were not enough local buyers to pick up the slack. Then China was supposed to crash…….then rates were supposed to rise……then Brexit was the end…….then Trump was the end……..

    This market has really climbed a wall of worry.

  14. 14
    Joe says:

    Forget about prices for a minute. Why would you want to buy anything offered in Seattle at this point in time. Inventory is at a historical low, and people are forced to buy crap to satisfy their perceived need for a home. Why live in crap? If the housing market drops, you won’t be able to sell that crap of half of what you paid for it, and you’ll be stuck in that sad hell hole for many years to come. Even if prices rise, you’ll still have not out of that hell hole. Best to stay out of that trap and rent a nice clean problem-free unit for while until things become more clear.

  15. 15
    Ess says:

    RE: Joe @ 14

    You answered your own question – “perceived need”. A powerful force in trendy Seattle neighborhoods these days.

  16. 16
    Macro Investor says:

    By Action @ 11:

    By Macro Investor @ 9:

    Were you in a coma from 2007-2011? Remember multiple “for sale” signs on each bloc?

    My thought is that if everyone thinks it’s a bubble, it’s probably not a bubble.

    Almost nobody is saying bubble. It’s probably 90% plus, woo hoo we’ll soon be rich. Let’s pay anything because the market will rise and make it worth while.

    I understand the sentiment argument. Sentiment isn’t magic and it changes on a dime.

  17. 17
    Macro Investor says:

    By GoHawks @ 12:

    RE: Macro Investor @ 9 – It’s a big * that people always use when talking about affordability these days, but rates have been low now for coming up on 10 years. This is not a couple of year phenomenon, there has been a structural change in interest rates in the U.S. and around the world.

    Hawk, the structural change is economies cannot grow. Even with massive cash injection. Low rates are the SYMPTOM.

    I tend to agree with the structural change argument, but fact is the fed is raising. They’ve realized super low rates hasn’t worked. Maybe higher rates will. There are reasons for that I won’t get into here.

  18. 18
    boater says:

    I’d be more concerned if so many homes were not bought with all cash. I sold a $1M+ home recently and had multiple all cash offers. These people can sell. They’ll take a loss but they can sell. They don’t need to get a banks approval before selling at whatever the market rate is. They can also afford to wait until a recovery happens.

  19. 19
    Brian says:

    By Action @ 11:

    My thought is that if everyone thinks it’s a bubble, it’s probably not a bubble.

    Yeah, but does “everyone” really think it’s a bubble or do you just think everyone does? If everyone thought it was a bubble, they wouldn’t still be buying in droves.

  20. 20
    Cap''n says:

    Just wondering what definition of bubble we are all using? I know there are books, research, etc., on the topic (and likely multiple posts on this website) but curious if everyone is starting from a similar baseline understanding. Real estate values that rank low on affordability or are on any objective basis dramatically overpriced doesn’t really seem to capture the bubble concerns unless there is a real/inevitable risk of collapse. It seems possible to me that Seattle SFH prices reach unattainable for median income households, but can neverthess be sustained by those willing to pay. So if tulips are $100 each, but the line of willing buyers is nowhere near short, can it really be a bubble at this point?

  21. 21
    Erik says:

    RE: GoHawks @ 13
    When the Feds expand credit, we will have ourselves a bubble. The Dodd-frank act controls lending. When that gets changed or goes away, prices will really skyrocket and there will be a collapse. If you are interested, read “The housing boom and bust” by Thomas Sowell. Credit expansion means a bubble. Credit expansion can mean lenders will loan to anyone, or they will loan a lot of money to people, or they will make their payments cheap, or some other way I’m unfamiliar with. The Dodd-frank needs to go away or change for this to happen. I already see Trump wants to do away with the Dodd-frank act. When he “fixes” it and credit expands, we will be in another bubble.

  22. 22
    Action says:

    By Macro Investor @ 16:

    By Action @ 11:

    By Macro Investor @ 9:

    Were you in a coma from 2007-2011? Remember multiple “for sale” signs on each bloc?

    My thought is that if everyone thinks it’s a bubble, it’s probably not a bubble.

    Almost nobody is saying bubble. It’s probably 90% plus, woo hoo we’ll soon be rich. Let’s pay anything because the market will rise and make it worth while.

    I understand the sentiment argument. Sentiment isn’t magic and it changes on a dime.

    You think so? With inventory so low it only takes a small amount of buyers to bid up home prices. I wouldn’t say that demand is in bubble territory like it was in 06/07.

    In 06/07 you had sellers believing their home was worth more than it was and believing it would continue to go up in value. Today sellers are often surprised to have the home bid up 10-20% over their asking price.

    I would argue that demand would be a lot higher if we were in a bubble. Demand is being tempered by higher prices and low supply. We compare it to the peak in 2007, but keep in mind that the population n King County has grown by 15% in the decade since then. There are a lot of people waiting on the sidelines right now.

    I think that rents will need to get more out of whack with home prices before we see a correction. Low affordability alone won’t cause a correction if the alternative of renting is just as expensive.

    Maybe it’s time for Tim to do another price to rent ratio post?
    http://seattlebubble.com/blog/2015/08/13/home-price-to-rent-ratio-still-below-bubble-territory/

  23. 23
    Brian says:

    By Erik @ 20:

    RE: GoHawks @ 13
    When the Feds expand credit, we will have ourselves a bubble.

    An asset (yes, even real estate) can be in a bubble even without easy credit. That especially could be the case this time since there are so many all-cash buyers (read: investors) that may get out as fast as they can if the market turns, so that they can take their profit and move on to their next big investment.

  24. 24

    By Macro Investor @ 2:

    I’ll say again, if you want to be a good investor you buy when affordability is on the way up — not down. As it’s going down, eventually enough potential buyers are left out… that’s when the bubble pops.

    I thought I’d go back and see what Macro Investor was saying at this magical time when affordability was on the way up. Guess what? Still a bear then. In post 17 he mocks Scottsman becoming bullish and Scottsman’s idea of pent up demand and instead suggests that we’ll see a lot of sellers in the future.

    http://seattlebubble.com/blog/2012/02/10/2012-the-year-of-crappy-housing-selection/

    I particularly like the ending: “Also, you forget pent up supply. Below average inventory suggests lots of debt slaves waiting to sell. If bubble credit ever came back, sellers would come out in droves.” When he wrote that, inventory was over 3x as high as today.

  25. 25

    And yet another great post 17 from back in that era, perhaps my favorite post here of all times.

    http://seattlebubble.com/blog/2012/03/13/dude-wheres-my-inventory/

    Someone named “Mike” saying: “The ‘bottom’ isn’t looking nearly as fun as it sounded like…”

    Oh little did we know back then how much worse it could get for buyers.

  26. 26

    By Brian @ 21:

    An asset (yes, even real estate) can be in a bubble even without easy credit.

    I’m not really sure what started this discussion. There doesn’t seem to be any shortage of credit right now.

    But to your point, I suspect (but don’t know) the Dutch weren’t buying their tulip bulbs with credit, and buying stock on margin is limited, so clearly credit is not a requirement for a bubble to form.

  27. 27
  28. 28
  29. 29
  30. 30
  31. 31
    Panda says:

    Pick any city write it followed by housing market in your google browser. What does it say? I”m not sure what it says and i don’t think anyone else does either. Are housing prices finally normalizing after a strong correction? Are millennial finally having families and must purchase homes? Are interest rates floating the market? Is institutional investors also increasing it? Are speculative “average Joe’s” also getting in the real estate market and renting? The million dollar question isn’t if our real estate market is super hot right now, the question is what unforeseen market condition will cause it to continue up or go down.

  32. 32

    I’m a bit behind in reviewing new court decisions, but this one from a couple of weeks ago is one of the few I’ve seen where the homeowner has won a foreclosure case–based on some pretty incredible facts. Most of the case is about the award of attorney fees, so the part most people will find interesting is probably limited to the facts portion of the decision.

    http://www.courts.wa.gov/opinions/pdf/747738.pdf

  33. 33
    WS says:


    When the Feds expand credit, we will have ourselves a bubble. The Dodd-frank act controls lending. When that gets changed or goes away, prices will really skyrocket and there will be a collapse. If you are interested, read “The housing boom and bust” by Thomas Sowell. Credit expansion means a bubble. Credit expansion can mean lenders will loan to anyone, or they will loan a lot of money to people, or they will make their payments cheap, or some other way I’m unfamiliar with. The Dodd-frank needs to go away or change for this to happen. I already see Trump wants to do away with the Dodd-frank act. When he “fixes” it and credit expands, we will be in another bubble.

    By Action @ 11:

    You read it in the news and bubble is on the tip of everyone’s tongue when talking about real estate. Yet demand for housing is still high given the inventory that is available. Many people thought they were cashing out at the top in 2014 and we’re up another 30% since then. And we’re still no where close to building enough new housing to keep up with demand.

    My thought is that if everyone thinks it’s a bubble, it’s probably not a bubble.

    I rarely find someone in real estate or out of it that talks of a bubble…most have the attitude that they gotta buy right away and seem to have forgotton about 10 years ago. The stock market on the other hand people seem to feel is more bubbly.

    Expanding Credit? Not sure how there could be more easy credit than what we have had the past 10 years, and while it was hard to borrow 7 years ago today its easy. 600 credit score and only 3.5% down, no problem? Read that again, a 600 credit score will get you a house with nearly no skin in the game. 5 years ago we would be throwing a fit if we heard that was happening and saying didn’t we learn anything? Sure there are cash buyers but there are also lots of buyers struggling with higher and higher rents who go buy a house in Kent or Lynnwood just because they are tired of rent increases and barely squeeze into the payment. I am not a bear by nature but 100% increase in 5 years is starting to sound extreme, even if we were under-priced at the bottom. Wages have to keep up or you start getting problems.

  34. 34

    By WS @ 31:

    I am not a bear by nature but 100% increase in 5 years is starting to sound extreme, even if we were under-priced at the bottom.

    I would agree with most of what you wrote, but it’s not quite that large of an increase if you look at the non-distressed median. That seldom dropped below about $380,000.

    And yes you should look at the non-distressed median. Banks which are really bad at selling property, such as banks like Ocwen, are selling houses cheap even today. But they are not selling at low porices because the market is bad, but because those banks are so bad at selling property. Ocwen may be an extreme example of bank stupidity, but very few if any banks placed their listings on an equal footing with a non-REO listing.

  35. 35
    Erik says:

    RE: Kary L. Krismer @ 26
    Agree to disagree with both you on this one. Read the book, then tell me I’m wrong.

  36. 36
    Erik says:

    RE: WS @ 33
    We need to bring the NINJA loans back combined with negative amortization and a balloon payment. That’s the kind of credit expansion we need for another bubble. 3.5% is still 3.5%. We need 0%. It’s coming. When it does, keep your finger on the trigger.

  37. 37

    RE: ess @ 1
    I’ll Sum Up the Horrifying Economic Situation Without Old Money Riches in Seattle

    Approximate $50,000 average household incomes trying to cope with a low paying job market and $1800/mo avg priced “real” health care for family of four. Obamacare is horrifying to American workers and about to implode soon at a theater near you.

    Progressives lie.

  38. 38
    David B. says:

    By Kary L. Krismer @ 25:

    Oh little did we know back then how much worse it could get for buyers.

    Really. Back in ’12 or ’13 I was expecting the market to get back to normal in a year or two. How wrong I was.

  39. 39

    RE: David B. @ 38 – I’ve got that beat. Back in 2010 I did an analysis of what an assumable loan would be worth if interest rates went up.

  40. 40
    SeaTownDweller says:

    I’m not sure of your qualification as a trustworthy source of investment ideas. Let’s address what you claimed in these threads starting from your first sentence, which is ridiculous. To follow what you said would be to buy at any point between 2007 and 2012, there is no correlation to profitability to the increasing affordability thus your first statement is false. The affordability was at its highest at 2012, and then it started to drop, but if you were to have bought at 2012, 2013, 2014, even 2015 (while the affordability continued to drop), you actually made very decent annualized return (cash or leveraged).

    Then your next point, you went on to talk about how low interest rate is a trap, and that bargains can be had at high interest rates (mortgage interest rate I assume). Why don’t you just Google mortgage interest rate history chart and see if there is any truth to what you claim, because I certainly can’t. Rate achieved local max at the height of CDS era, leading to collapse of credits and recession, then the ZIRP came in and the long term yield curve flattened, causing the historically low mortgage rate. Saying that you can find bargain when rate is high is the opposite of what you should do as an investor.

    Then you said something about people thinking short term. But are you thinking at all..? Or just trolling and dolling out nonsense loudly, thinking that people would start to believe you. I’ll give you a pass if you indeed were just waking up from a coma yourself.

    About your comments on Detroit, also questionable. If your plan is to look super long term, as in in terms of periods of industrial revolutions, then forget about it, you will not make money. What Eastsider was saying about how Seattle may be Detroit in 50 years jokingly is to poke at your lack of awareness in changing of industries through time. Investors can make a boat load of money while riding on industrial boom (decades at a time), which they did when Detroit was once a industrial hub, so what is your point, don’t ride the wave.., bring fear upon people because you were too scared? Global markets do shift, but given Seattle’s relative advantages (even today), it’s not a doomsday scenario that you want to portray.

    You want to compare the current days to 08′ based on what? Mortgage rate is based on rate of 10-yr yield. The Feds can raise the overnight rates several times without affecting the longer term yield much. So it is presumptive to talk about 6% mortgage rate based on the Fed’s plan, also presumptive to do “let’s suppose Seattle real estate goes down 1%”

    The Feds are treading dovishly regardless of employment numbers and manufacturing index because the era of slower growth and lower production is upon us. They also know the importance of real estate as its a single largest source of equity that the citizens own, that is why ZIRP is a monster, arguably as bad as CDS, and the Fed won’t be in a hurry to bring US into a recession. So expect that 10 yr curve to remain flat, and 30 frm rate to stay below 6% for longer than you would like (apparently).

  41. 41
    SeaTownDweller says:

    RE: SeaTownDweller @ 40 – Sorry, I meant to reply Macro Investor

  42. 42
    wreckingbull says:

    Many opinions here about how to evaluate RE prices.

    For me, it has always been about the P/E and will be always be about the P/E. How does pricing compare to the *net* income the property would produce? (Note: this still applies if you plan to live in the property, as it is saving you rent)

    In the mid ’00s bubble, the P/E screamed that we were in a bubble. In 2008, I rented a sweet water-view house at 30% of what it would have cost to own. Buying then would have been stupid.

    Run those numbers today, and due to high rents, things are not quite as bad, although it appears the pendulum is swinging again. The advice from a few posts ago was great. Have a logical plan for when things go pear-shaped and execute on it, even in the midst of fear.

  43. 43
    ess says:

    By Erik @ 35:

    RE: Kary L. Krismer @ 26
    Agree to disagree with both you on this one. Read the book, then tell me I’m wrong.

    Erik
    Thanks for the heads up regarding Thomas Sowell – a great economist, writer and thinker. His three chapter discussion of rent control and how it destroys a housing market in one of his basic economics texts is priceless

  44. 44

    RE: wreckingbull @ 42

    That usually leads you to the “worst” of areas where the land is cheap. Not always, but often. I don’t like to value based on income, as often the best profit as in greatest appreciation is where land is expensive. That land value doesn’t always equate to highest rent. Still if you are paying close to land value, the upward potential is greater than just doing ROI based on rental income.

    Most of the highest gains I have seen have been crap houses in awesome locations. I like to use the “what is it worth if it burned down” rule of thumb when looking at homes priced primarily based on rental income. Saves you from a lot of potential pitfalls like current zoning would not allow a rebuild of what is currently there.

  45. 45
    wreckingbull says:

    RE: Ardell DellaLoggia @ 44 – I’m not really sure what you are getting at. Buying based on perceived future appreciation is called speculation. Most people here don’t want to be real estate speculators. They want to be assured they are not throwing their financial future away.

    I seem to recall that you preferred appreciation over cash flow during our last bubble and it did not end too well for you.

  46. 46

    RE: wreckingbull @ 45 – I think it may depend on what your use is (although I agree with your comments about speculation and Ardell’s past results). If you’re planning on renting out the place then your method of checking valuation would have a lot of appeal. If you’re planning on living there then other factors could come into play.

    One thing about speculation is that the rate of movement is also called volatility, and that can work in both directions. It isn’t necessarily just a positive.

  47. 47
    wreckingbull says:

    RE: Kary L. Krismer @ 46 – But Kary, you are missing the exact point I am making. If you plan on living there, you don’t pay rent. This cost savings is the “E” in the “P/E” calculation. *THIS* is what people should be basing price on, (along with a moderate premium on what someone values the non-tangible value of owning real estate, such as freedom and some added security.)

    For example, I’d be very happy buying a home which costs me 1.3 times what it would cost to rent the same home. In some areas, this ownership premium can be found, which is why I am not stating it is 2008 all over again.

  48. 48

    RE: wreckingbull @ 47 – I think I get that. I’ve even posted a few times about how much owning has saved me in rent over the years, and even taken that a step further to calculate how much more in income I would have had to earned to pay that rent (but backing out RE taxes paid, and now even maintenance).

    But I guess what I’m getting at is this. Just today I almost missed a turn to a house we were previewing because I was distracted by a one story with daylight basement house that sat overlooking a very large lot, facing away from the other houses in the neighborhood. Now I’m sure that house would also be easy to rent, but I’m not sure that it would generate the extra rental income to equal the value I would place on that setting.

  49. 49
    wreckingbull says:

    RE: Kary L. Krismer @ 48 – Fair enough. All I am proposing is that people start with a logically-calculated P/E, and from there, decide the ownership premium they are willing to pay. As long as this ownership premium is reasonable, I feel they can be assured they are making a prudent investment.

    During our last bubble, this sort of logical approach to RE pricing was completely thrown out the window, as all people could think about was appreciation.

  50. 50
    Eastsider says:

    By Erik @ 36:

    RE: WS @ 33
    We need to bring the NINJA loans back combined with negative amortization and a balloon payment. That’s the kind of credit expansion we need for another bubble. 3.5% is still 3.5%. We need 0%. It’s coming. When it does, keep your finger on the trigger.

    While we don’t have NINJA loans, we have far worst EXCESS LIQUIDITY in the system. The FED has basically pumped $4T or so into the economy in the past decade to support asset prices. The FED is supposedly contemplating withdrawal of liquidity later this year. I have doubts that they will do it. Otherwise, watch out below.

    P.s. the recent increase in property and various taxes is going to put pressure on many marginal homeowners in the area.

  51. 51
    Erik says:

    RE: ess @ 43
    I’ve read as many books as I could get my hands on regarding housing bubbles. This one is by far the best. The author gives you a broad overview of concepts, then gets specific regarding what caused the last bubble. He then talks in general what will create the next bubble. Two words that cause a bubble, “credit expansion.”
    I didn’t know the author was actually famous. I don’t give a lot of respect to names and titles. What I respect is someone that makes sense, and this guy nailed it.

  52. 52
    GoHawks says:

    RE: Eastsider @ 50 – how much of that liquidity is in the economy, how much is just sitting on the bank’s balance sheets?

  53. 53
    SeaTownDweller says:

    RE: Erik @ 51 – IMHO, Credit expansion is not a bad thing if underwriting is well justified. Credit expansion prior to the onset of the previous recession caused the highly speculative pricing, which was unsustainable because the tide had to change at some point with supply and demand and then followed by chain reaction of subprime mortgage deleveraging. But that particular credit expansion was caused largely by CDS, allowing junk to achieve good enough ratings. Without the CDS (or as much of), credit wouldn’t have been doled out easily. I particularly think that bubble caused by speculation with all (or more) cash vs with subprime loans will differ significantly by the level of crashing, although it would be mostly philosophically speaking.

  54. 54
    Erik says:

    RE: SeaTownDweller @ 53
    How much to expand credit is something that is very subjective. Some of the people that influence how much credit is allowed want a lot of credit expansion while others hardly want any. The last bubble began by expanding credit to reach minorities. Credit expansion ballooned the US into a massive bubble it was that helped take down the US economy. The new cycle is in full tilt. We are right on track with the 18 year cycle in my opinion. Housing data looks as I would expect it to look at this stage with respect to the 18 year cycle.

  55. 55
    Macro Investor says:

    By Erik @ 51:

    RE: ess @ 43
    Two words that cause a bubble, “credit expansion.”.

    Eric — yes, that nails it. That’s why it’s a risky time to buy. Historically low rates = max credit expansion. The fed has not only promised to unwind that, but they have raised rates 3 times. In math terms, the second derivative has turned. If they make good on their promise to sell off their balance sheet, that is the first deriv.

    I like the way you are investing. It makes sense to buy an asset if you can rent it at a profit. I also respect Wrecking Bull and Software Engineer’s approaches to deep discounting. These are business like approaches. That is the complete opposite of what I am criticizing here. Consumers who are paying full retail, and even getting emotional and bidding higher.

  56. 56
    Macro Investor says:

    Forgot about Ray. A few jealous agents like to attack him. At least he has the guts to build a business and improve his life. It sounded like it worked well. Criticizing him is like bashing Trump for declaring bankruptcy. Stupid Trump only made a few billion.
    /sarc

  57. 57
    SeaTownDweller says:

    RE: Erik @ 54 – can you elaborate on the claim that we are “right on track with 18 year cycle”? Also While I agree that credit expansion, or at least bad credit expansion, caused the bubble last time, I don’t fully agree that credit expansion means bubble will be formed. The deregulation also allows business borrowing that leads to increase GDP, and yet the positive effects are not mentioned anywhere in this thread, as if the credit expansion is used to only create a bubble..

  58. 58

    By Macro Investor @ 56:

    Forgot about Ray. A few jealous agents like to attack him. At least he has the guts to build a business and improve his life. It sounded like it worked well. Criticizing him is like bashing Trump for declaring bankruptcy. Stupid Trump only made a few billion.
    /sarc

    The only difference is Trump never declared bankruptcy personally. To put a business entity into bankruptcy is an entirely different matter, and can even be a great move personally.

    I really am beginning to wonder what your expertise is, or if you even have one. Again, very ironic that moniker you gave yourself. I think even the average person who doesn’t get their news from The View knows about Trump and his supposed bankruptcies.

    Finally, you are pretty funny. Maybe your expertise is Court Jester. That comment last thread about this being a bad market for agents was hilarious. I didn’t think you could follow that up, but that other agents being “jealous” of Ray, now that too is funny! As is the comment that is sounds like his plans “worked well.” If you weren’t so golly funny I’d only assume you too don’t have a clue what an offer in compromise is.

  59. 59

    Returning to the topic of real estate, in prior years cash buyers expected to be able to get a discount well in excess of the roughly 30 days of interest that their ability to bring cash was worth. In this market cash buyers expect to be able to buy a property for a surcharge bringing the price paid well in excess of what the property is worth. Quite the change in attitude.

  60. 60
    SeaTownDweller says:

    RE: Macro Investor @ 56 – I have not been reading this blog since day one so I don’t know who Ray is in your comment. And as far as your comment on Trump, just because he made money doesn’t make him a saint who shouldn’t be criticized. Stay objective. Conjecture based on history and theory is what we are trying to discuss here.

  61. 61

    RE: SeaTownDweller @ 60 – Ray is a real estate agent who would bought a property to flip in Tacoma prior to the peak, failed to flip it then rented it out. He failed to pay the mortgage and then drug out the foreclosure as long as possible. He also reportedly bought foreclosures properties both here and in other states, and some of them also possibly went back to foreclosure, but I can’t verify those claims. In the process he somehow ran up a lot of tax debt and did an offer in compromise to deal with that debt. As part of that process though he would come here and try to convince others of what a great thing he was doing, presumably to suck other people into the same scheme.

    He also posted here a lot after the peak about how the entire real estate market was going to collapse, using the catch phrase “They’re all coming back.” By that he meant that we were going to have a huge run of foreclosures.

    You can actually get some good examples of what I’m talking about in the “Crappy Inventory” link I posted in post 24 above, but for your convenience.

    http://seattlebubble.com/blog/2012/02/10/2012-the-year-of-crappy-housing-selection/

    Anyway, suffice it to say that anyone who thinks Ray was a success or rich is gullible at best. Not surprising that Macro Investor falls into that category given the other stuff he posts.

  62. 62
    Eastsider says:

    By GoHawks @ 52:

    RE: Eastsider @ 50 – how much of that liquidity is in the economy, how much is just sitting on the bank’s balance sheets?

    A lot of liquidity is currently parked at the FED as excess reserves (>$2T). The rest was used to ‘save’ the economy and improve bank balance sheets.

  63. 63
    SeaTownDweller says:

    RE: Kary L. Krismer @ 59 – at least from personal experiences, We were able to get discounts in late 2012 and early 2013 with cash purchases, but in summer of 2015, we had to go about 5% over even with all cash. With that said, from recent searches these types of things such as going over ask and inventory squeeze, also happened before the last recession hit, so as we approach the 9 yr mark post Lehman collapse, I’m becoming more sensitive to news and possible indicators. I tend to agree that credit expansion will form bubble more likely than not, which to me is still yet another indicator, although again not the only or dominant one as of now. But i for one know that I wouldn’t buy another place because I don’t have that level of confidence that I would come out well ahead after transaction costs and carrying expenses.

  64. 64

    RE: SeaTownDweller @ 63 – Financed buyers actually have an advantage because of the appraisal, if they can get their offer accepted. Recently there were two virtually identical condos in the same complex, which were both overpriced by a significant amount. We made an offer on both for our buyer that was well below list because we understood that the property would not appraise anywhere near list. Finally after a significant passage of time we got into contract on the second one at a slightly increased offer pirce with the agreement that my client would bring additional funds if the property appraised above our initial offer. Turns out the appraisal came in $1,000 less than our initial offer, so we agreed to pay slightly less than our initial contract price. (We were not locked in by the terms of 22AD.)

    The other condo sat on the market for about two months but sold about the same time as ours to a cash buyer. For some reason they paid over list and well more than 10% over the appraised value of the virtually identical unit.

    This is really the issue that Annie Fitzsimmons addressed in her first risky practices video, particularly starting at about the 2:50 mark, except that we’re not talking overpaying by $100,000.

    https://www.youtube.com/watch?v=HK7-ii25Mt4

  65. 65
    redmondjp says:

    Reading through this thread, I feel like the calendar has been flipped back to the year 2005!

    Is it really different this time?

    I guess we’ll all find out. Read what Jeff Bezos said about Day 2 recently:

    http://www.geekwire.com/2017/irrelevance-excruciating-decline-death-amazon-ceo-jeff-bezos-paints-bleak-picture-day-2/

    History teaches that Day 2 always comes, be it personally, corporately, or nationally. When will Day 2 come to Seattle’s real estate market? That is the operative question.

  66. 66
    GoHawks says:

    RE: Eastsider @ 62 – Thanks Eastsider. But if that money is parked, it means it’s not floating around in excess in the system. It was created then stashed away. Not put into consumers/spenders pockets. Money velocity has not picked up much. There is not reckless lending these days.

  67. 67
    wreckingbull says:

    By GoHawks @ 66:

    RE: Eastsider @ 62 There is not reckless lending these days.***

    ***Except for the $1.5 trillion in student loans. Today’s student loans are subprime by their very nature – no need to prove ability to repay. To make matters worse, it is the most toxic type of debt one can take. I don’t know how or when this will bite, but it will bite.

    And let’s not forget auto loans.

    https://www.bloomberg.com/news/articles/2017-03-28/-deep-subprime-becomes-norm-in-car-loan-market-analysts-say

  68. 68
    Macro Investor says:

    Someone else mentioned 3.5% down for 600 credit score. Reckless. It costs 10% to sell.

    That means mister 3.5 is 6.5% under water day 1 if he has to move.

    The market MUST GO UP steadily or most new buyers cannot sell. Think about it. You pay 900k for your lovely rambler around the corner from a homeless camp. If you try to sell in the next year or 2, you will pay the buyer to take it off your hands. Lose 90k if you have to sell before the market goes up.

    Why can banks do this? They don’t care. They pawn the loans off to fannie/freddie/fha/private funds. Other thank the liar loans it is 2005 all over again.

  69. 69
    Eastsider says:

    By GoHawks @ 66:

    RE: Eastsider @ 62 – Thanks Eastsider. But if that money is parked, it means it’s not floating around in excess in the system. It was created then stashed away. Not put into consumers/spenders pockets. Money velocity has not picked up much. There is not reckless lending these days.

    I wish it is that simple. The FED has $1.75T of MBS on its balance sheet. In the two year prior to end of 2014, it increased its holding of MBS by a $1T. (That $1T injection might have something to do with the housing recovery, don’t you think?)

  70. 70
    Joe says:

    First Vancouver, and now Toronto has imposed the 15% foreign buyers tax. How long before Seattle or San Francisco do this? It seems to be catching on.

  71. 71
    Joe says:

    RE: Joe @ 70

    Note, companies like Amazon and Boeing and other businesses would likely support a tax, as it reduces costs for their employees, and ultimately helps their bottom line. This assumes there is an exemption for foreign buyers that actually live in the houses. RE Black swan?

  72. 72

    By Joe @ 70:

    First Vancouver, and now Toronto has imposed the 15% foreign buyers tax. How long before Seattle or San Francisco do this? It seems to be catching on.

    Almost certainly illegal under the Fair Housing Act.

  73. 73

    RE: Erik @ 51
    Eric

    Read the ‘Dark Rivers of the Heart” by Dean Koontz [I’m doing F Paul Wilson books now]….it totally explains how the NWO manipulates and lies for greed. Do you know what an infinity generator is? Koontz will teach you.

    Koontz recent Odd Thomas series documents how Baby Boomers are subsidizing Milenials’ living expenses in California….ya won’t get that news from open border establishment MSM…Milenial pay checks are way too low.

    It helps you sweep away fake news because you understand their motives for printing it. Street smarts is what I call it.

  74. 74

    RE: Kary L. Krismer @ 72
    Yes Kary

    But Sanctuary Cities are also illegal….but open border Progressives allege the Constitution Laws on the books have no real teeth? Anarchists?

    Ya can’t have both worlds at the same time. Its that simple or we split up into another Civil War?

  75. 75
    Blurtman says:

    Americans are cry babies. If you are falling farther and farther behind, being priced out to the hinterlands while furreigners bid up RE prices with suitcases of cash, think on the bright side. Many of these million dollar home owners will need servants, gardeners, au pairs, wombs for rent, etc. it is your time to serve, honkey!

  76. 76
    Erik says:

    RE: SeaTownDweller @ 57
    I guess you could say credit expansion beyond a certain point causes a bubble, but I don’t think we really know what that point is.

    Read this a couple times and try to understand it: https://www.extension.harvard.edu/inside-extension/how-use-real-estate-trends-predict-next-housing-bubble

    Phase II is declining vacancy, new construction. Phase III is increasing vacancy, new construction. We certainly aren’t increasing vacancy and we do have new construction. Based on our super low inventory, one could say our inventory is declining, so I would say that we are in Phase II, the expansion phase. This phase lasts the longest.

    Is the bubble about to burst? How can a bubble burst if inventory is at an all time low? It most likely won’t. We would need to be adding homes for sale in king county in order to be in phase III, which still isn’t going to make housing prices go down. Phase III is the bubble when inventory is increasing, but prices are still rising for no apparent reason of than people scared of being priced out if they don’t buy now. Phase IV is when the music stops and the game is over. I hope to sell at the peak of phase III, but I’m sure i’ll add a safety factor of a year just to be safe. You want to have as much cash in hand when this thing blows and we are at the bottom again. If you can have $500,000 in hand at the bottom and you go out and buy 20 rentals, the game will be over and you will have won like the great and powerful Ray Pepper did during the last bubble.

  77. 77

    RE: Blurtman @ 75
    LOL Blurtman

    And if we pay these open border “legal American worker replacements” slaves peanut wages, this isn’t tax evasion? I have bridge I can sell ya too…

  78. 78

    RE: Erik @ 76
    Tabs, Property Tax Increases, Dinky Wages and Healthcare Implosion

    Will suck the money dry in Seattle and cause a Bubble eventually….2007 proves it. Meanwhile we wait and hope the foreigners are lemmings to snooker…

  79. 79

    RE: Macro Investor @ 68 – Yes closing costs need to be covered, but they’re not 10% and also you’re assuming everyone buys and sells the same way. There are people who pay over 10% more than FMV in this market, and they’re going to have a tough time selling if that day comes anywhere near soon. That was the point of Annie Fitzsimmon’s first greedy seller/desperate buyer video.

    But there are also buyers who are patient, have good self-control and willing to look for situations where they can buy at a fair price or even a great price (e.g. Ocwen listings). And in this market buying the hypothetical median house for a fair price is probably a great price given what some other buyers are doing.

    And then when it comes time to sell they can either have poor or great selling/listing/showing terms, which again can result in more than a 10% swing in amount recovered.

    The point is, the result is not determined just by the one factor of how much they put down. I don’t know why you continue to focus on just one factor at a time, particularly given your moniker.

    But is it risky to buy? Of course there are risks. It can also be risky to do nothing.

  80. 80

    By softwarengineer @ 78:

    RE: Erik @ 76
    Tabs, Property Tax Increases, Dinky Wages and Healthcare Implosion

    Will suck the money dry in Seattle and cause a Bubble eventually….2007 proves it. Meanwhile we wait and hope the foreigners are lemmings to snooker…

    None of those things caused Seattle to decline last time, so 2007 is not proof of that.

    What I would say though is that if history did repeat itself, and there’s another crisis that is brought on by housing prices, Seattle will be in much worse shape this time because we seem to be leading the charge this time. That will mean we will have likely overshot by more and the recovery will take longer. Look at the Case-Shiller data for Phoenix, which shot up to almost 230 and is still at only under 170. If market conditions in Seattle had been different in 2004-2007 that could have been us.

  81. 81
    ess says:

    By Kary L. Krismer @ 79:

    RE: Macro Investor @ 68
    .
    But is it risky to buy? Of course there are risks. It can also be risky to do nothing.

    At least there are no risks to renting. A renter understands, or at least should that:

    -they will accumulate no equity in the property that they rent
    -they (for the immediate future) will have no tax advantages afforded homeowners and rental property owners.
    -they will probably have continuous rent increases in the future
    -those rents may accelerate to the point that they may have to vacate the area they desire to reside in
    -they may have to vacate the property if the property is sold, torn down, or used for other purposes and relocate to an area they may not desire

    Should all individuals purchase their abodes at all times? Absolutely not. There are all sorts of individuals that find themselves in particular situations where renting makes perfect sense. But blanket statements about the future of the cost of housing more often than not tend to be incorrect, other than over time, housing prices as well as rents tend to trend higher unless there is some unseen catastrophic event (think Detroit). Intelligent estimations and evaluations can and should be applied about each particular housing situation, but blanket rigid ideologies applied to purchasing real estate often lead that individual to the proverbial poorhouse.

    For better or worse, most Americans derive most of their net worth from the ownership of their own homes. Studies dramatically indicate that renters have a much lower net worth than homeowners. Owning a home forces an individual to accumulate wealth, unless they view their homes as an oversized ATM machine. The renter who applies savings to other investments rather than applying assets to maintain their property is more myth than reality,

    Recall, that even in the most severest of economic and housing downturns, most homeowners, as well as real estate investors were able to weather the financial storms and end up ahead. The overwhelming number of properties that are not foreclosed upon is neither newsworthy, or grist for ideological axes by advocates of various causes. Most residential owners, as well as property investors have done rather well over the past twenty five years in this area.

  82. 82

    By ess @ 81:

    At least there are no risks to renting. A renter understands, or at least should that:
    . . .
    -they will probably have continuous rent increases in the future
    -those rents may accelerate to the point that they may have to vacate the area they desire to reside in
    -they may have to vacate the property if the property is sold, torn down, or used for other purposes and relocate to an area they may not desire

    I would call all those things risks, although understanding them is better than not.

    Should all individuals purchase their abodes at all times? Absolutely not.

    Agree 100%. I would go so far as to say that government programs that promoted increased percentages of home ownership contributed to the problem in 2006-2010.

  83. 83
    justme says:

    RE: ess @ 1

    I’m going to rewrite Ess’s prose into plain English:

    Look, consider a rich guy and a poor guy. The poor guy cannot afford to buy a crappy little wildly overpriced place in Seattle Prime. The rich guy can. Therefore crappy little wildly overpriced places in Seattle Prime are not unaffordable, and you should buy one, too! Never mind that you cannot really afford it, other fools will buy unless you do! You want to be Prime, don’t you? Poor guys will move out of Seattle Prime. If you move you are no longer a Prime member of Seattle, and that is baaad. Loser!

    PS: Phinney Ridge is PRIME! It is a ridge, and therefore it is narrow, which makes it even more PRIME! Get your spot on the knife’s edge before it is too late!

  84. 84
    WS says:

    By Erik @ 76:

    RE: SeaTownDweller @ 57
    I guess you could say credit expansion beyond a certain point causes a bubble, but I don’t think we really know what that point is.

    Read this a couple times and try to understand it: https://www.extension.harvard.edu/inside-extension/how-use-real-estate-trends-predict-next-housing-bubble

    Phase II is declining vacancy, new construction. Phase III is increasing vacancy, new construction. We certainly aren’t increasing vacancy and we do have new construction. Based on our super low inventory, one could say our inventory is declining, so I would say that we are in Phase II, the expansion phase. This phase lasts the longest.

    Is the bubble about to burst? How can a bubble burst if inventory is at an all time low? It most likely won’t. We would need to be adding homes for sale in king county in order to be in phase III, which still isn’t going to make housing prices go down. Phase III is the bubble when inventory is increasing, but prices are still rising for no apparent reason of than people scared of being priced out if they don’t buy now. Phase IV is when the music stops and the game is over. I hope to sell at the peak of phase III, but I’m sure i’ll add a safety factor of a year just to be safe. You want to have as much cash in hand when this thing blows and we are at the bottom again. If you can have $500,000 in hand at the bottom and you go out and buy 20 rentals, the game will be over and you will have won like the great and powerful Ray Pepper did during the last bubble.

    I wouldn’t bet on each up and down cycle playing out the same. Did the early 2000 cycle play out the same? Sure if you can time things near perfectly you’ll make out like crazy, but there is a lot of risk, very few are able to time markets right. Its just a guess but what if something else causes demand/supply to change rather than just the inventory side, a doubling of interest rates, job losses, investors losing interest due to rents leveling or declining. None of this may happen but the more prices run up the more there is risk out there.

  85. 85
    Macro Investor says:

    RE: ess @ 81

    Blah, blah, blah – I need another commission for doing clerical work, blah. Repeated a million times, blah.

    Everything you said applies to homeowners too. Taxes/every expense go up. Traffic patterns/jobs change. Ho hum. Now go back to chauffeuring people around and doing their clerical work. Worth $15/hour at best.

  86. 86
    Brian says:

    By Erik @ 76:

    Is the bubble about to burst? How can a bubble burst if inventory is at an all time low?

    You seem to be unaware of how quickly inventory levels can increase. See 2007. Went from 6K to 11K (+5000 units!) in only seven months. Better detect that trend early or you’ll be hanging out with a lot of other sellers.

  87. 87
    Action says:

    RE: Erik @ 76

    Great link Erik. I definitely agree with you that we are currently in Phase 2 Expansion . The only thing I disagree with you on is that this is on a set 18 year cycle. There are so many factors that can affect how long each phase lasts. But it is a good rule of thumb for how long the cycle takes to play out.

    My opinion is that we are going to remain in the Phase 2 Expansion for longer this time due to increased restrictions in new construction in this area compared to in the early 2000s. In the early 2000s we had mega plats and planned developments going in outlying areas of Seattle (Issaquah Highlands, Snoqualmie Ridge, Redmond Ridge, Maple Valley/Covington, Bothell/Mill Creek area just to name a few). These areas are now mostly built out and now new construction is mostly infill with smaller plats and short plats of existing residential areas. The easy developments have all been done and increasingly developments are requiring more expensive infrastructure and mitigation for critical areas. Combine this with increasingly stringent environmental regulations in King County, increasing construction labor costs and increasing nimbyism, it is going to be much harder for new construction to overshoot demand and for the cycle to enter the Phase 3 Hypersupply.

    That said, if the tech economy in Seattle tanks and companies stop adding 1000s of new jobs, there could be a great reduction in demand, but it is still going to be hard to get to the Hypersupply phase in the SFR market. Possibly in the apartment or high-end luxury segment of SFR. But in the long run, the Seattle area’s population is only going to continue to grow and SFRs supply will continue to be limited.

  88. 88
    Macro Investor says:

    There are actually good agents out there. Ardell seems very good at staging and has lots of pro tips for getting sellers the best price. I’d list with her. She also seems like she knows which properties are a good value for buyers.

    Most of the others come here and show their maturity and professionalism with each comment they make. Nothing but cut/paste talking points. Using scare tactics to get their smarmy commissions. Would you really want to do business with them?

  89. 89

    RE: Macro Investor @ 88 – Pointing out that your comments are nonsensical and overly simplistic at best is not a scare tactic. I’m not even sure what you think I’ve ever said is a scare tactic. I’m certainly not telling people they have to buy, only how to buy well (e.g. the opposite of Ardell waiving inspections, appraisals and offering amounts way over list). And sellers how to sell in order to get the best price possible.

    But hey, think what you will about me. The fact that you don’t like me is a good thing, because you have yet to demonstrate the ability to even understand the simplest of things, or even contribute to this site in any useful manner, as has been demonstrated by me and others shooting down everything you’ve said here. Get a clue! You don’t understand or know squat!

  90. 90
    Erik says:

    RE: Macro Investor @ 88
    Ardell is the best agent I’ve ever dealt with. She’s obsessed with real estate. Someone you want to work with. She loves her job and is therefore excellent at it.

  91. 91
    Macro Investor says:

    By Brian @ 86:

    By Erik @ 76:

    You seem to be unaware of how quickly inventory levels can increase. See 2007.

    All it takes is a few months of flat pricing. The bidding wars stop immediately because buyers no longer believe the market will bail out a bad decision. Phase 2 stops.

    Watch out if the media starts reporting a down month or two. “For sale” signs might pop up everywhere, as in 2007. Once people think the market might go down MANY rush to sell. Construction doesn’t matter. Every homeowner can call for a listing at any time.

    Nobody knows when or how this happens. It could be a market break in China (something I watch closely). It’s worth repeating — construction may have nothing to do with inventory for sale.

  92. 92

    By Brian @ 86:

    By Erik @ 76:

    Is the bubble about to burst? How can a bubble burst if inventory is at an all time low?

    You seem to be unaware of how quickly inventory levels can increase. See 2007. Went from 6K to 11K (+5000 units!) in only seven months. Better detect that trend early or you’ll be hanging out with a lot of other sellers.

    We don’t even need to get a 5000 unit increase for the market to be significantly better. Even a total of 5,000 would still be a good market for sellers, but it wouldn’t be so crazy for buyers. As I mentioned before, working with a buyer last year in Olympia when there was around 2 months of supply was very nice compared to what we’ve been going through up here.

    But yes, things can change quickly.

  93. 93

    By Macro Investor @ 91:

    By Brian @ 86:

    By Erik @ 76:

    You seem to be unaware of how quickly inventory levels can increase. See 2007.

    All it takes is a few months of flat pricing.

    You mean like June 2016 to December 2016?

    You really should start looking at what the stats show before you start making comments. This is at least twice you’ve said things that don’t make any sense based on existing stats published by Tim. (The other being best time to buy is during declining affordability.)

  94. 94
    Erik says:

    RE: Brian @ 86
    I fully agree that once the symptom of low inventory is there, it’s too late. This cycle can get you in the ballpark. It’s gonna take a deeper dive into looking at credit expansion and other key factors I’m still unaware of to make the right call to sell. I’m going to look at credit expansion and use my gut. May not be the best plan, but it’s my plan. In phase II, we can relax and buy more real estate.

    If you know any other key leading factors to identify i bubble is about to burst, please share.

  95. 95
    Action says:

    By Brian @ 86:

    By Erik @ 76:

    Is the bubble about to burst? How can a bubble burst if inventory is at an all time low?

    You seem to be unaware of how quickly inventory levels can increase. See 2007. Went from 6K to 11K (+5000 units!) in only seven months. Better detect that trend early or you’ll be hanging out with a lot of other sellers.

    http://www.ofm.wa.gov/pop/april1/hseries/default.asp

    See my post @87. There are numerous factors that will prevent the number of new SF housing units from being constructed at the rate of the early 2000s. In the 5 years from 2003 to 2008, there was a net increase of 25,168 SFR (1 unit housing units) in King County. In the last 5 years from 2011 to 2016 the net increase was 12,083…

    In 2016, the population in King County increased by 52,300. http://www.ofm.wa.gov/pop/april1/poptrends.pdf

    Where is this 5000 unit increase in inventory going to come from? It would either need to come from increased new construction or people leaving the area. Neither of which appear likely to happen soon.

  96. 96
    Erik says:

    RE: Kary L. Krismer @ 92
    Please define a “better market.” Better to me is lower inventory and faster rising housing prices. I think better for you is more inventory and sales and hence more real estate commissions, right?

  97. 97
    SeaTownDweller says:

    RE: Erik @ 76 – Greed is greed, same level of frenzy, same inventory squeeze and bidding war, so I expect the same outcome eventually. Nothing wrong with riding the wave, just need to determine timing for cashing out. I’m a millennial (meaning I didn’t know anything about anything), so I got lucky (with a tremendous help from family) with timing after the last recession, but I’m determined to keep as much of that gain as possible, and be in best position to get back in, hence here I am, reading about more savvy people who have seen it all and then some. Thanks for your sharing of information and knowledge. I agree that Ardell’s analysis has been on point. I too am obsessed with real estate, but she puts the numbers to work for her.

    By Kary L. Krismer @ 93:

    The flattened price in Seattle between June and Dec of 2016 was likely due to seasonality and uncertainty in political election. As Trump narrowed the gap, the risk of federal funding being cut off due to ‘Sanctuary’ status and the threatened tax audit on Amazon and the crack down on H1B visas affecting many companies here contributed to that. Then once everyone realized that it was mostly smoke, the party continued.

  98. 98
    Brian says:

    By Action @ 95:

    Where is this 5000 unit increase in inventory going to come from? It would either need to come from increased new construction or people leaving the area. Neither of which appear likely to happen soon.

    Good links, but a 5000 unit increase can come from spooked sellers and/or buyers. There is a lot of inventory coming on the market, but it is scooped up so fast that inventory goes down, stays the same, or barely goes up. This is because buyers are so eager and seemingly capable to buy right now. If buyers get spooked and less people buy, and/or if sellers get spooked and list their investment properties they’re hoarding, inventory could definitely go up quickly.

    This is pretty much what happened in 2007. Per your data, 2007 King County saw a 4,000 unit increase in SFH. 2016 saw 2,300. That is not that huge of a difference when we’re talking about 508,000 total SFH units. What is more likely, that a “flood” of 1700 more units causes a bubble burst or a flood of some portion of those 508,000 people getting spooked and selling? No way does the inventory increase have to come from new construction. Most likely it comes from buyers holding back and sellers trying to cash in.

    Don’t forget that there’s plenty of new apartments being built (record numbers, actually) that people can live in.

  99. 99
    SeaTownDweller says:

    RE: Brian @ 98 – Also upzoning of multiple areas will also add to inventory. But as more and more apartments get added, the rental market will dip and hurt the bottom line of investors who hold non-primary residences, leading to inventory increase. Supply and demand kinda thing.

  100. 100
    WS says:

    By Brian @ 98:

    By Action @ 95:

    Don’t forget that there’s plenty of new apartments being built (record numbers, actually) that people can live in.

    Yes, huge numbers of units like this city has never seen before. 10,000 units this year, 13,000 next. If you look around other cities this has caused rents to drop and even in Seattle the latest Zumper data shows a 6% drop in rents for 2 bedrooms YOY. Less rent increases means less renters are likely to join the buyer frenzy. That alone could be a factor in getting to a more balanced market. Add to it some investors looking to cash out like many are talking about on here and you have a very different supply/demand situation.

  101. 101
    ess says:

    By Macro Investor @ 85:

    RE: ess @ 81

    Blah, blah, blah – I need another commission for doing clerical work, blah. Repeated a million times, blah.

    Everything you said applies to homeowners too. Taxes/every expense go up. Traffic patterns/jobs change. Ho hum. Now go back to chauffeuring people around and doing their clerical work. Worth $15/hour at best.

    Homeowners have come out much further ahead in the greater Seattle area by any measure no matter how much one piles on the taxes and expenses. Compare two Seattle area residents – one that bought and maintained a single family home 25 years ago, and one a tenant that started renting 25 years ago, and nine times out of ten the homeowner is going to be much better off financially as a result of their residential choices.

    As for those expenses that landlord must pay to maintain their property, apparently it is not a problem as the media repeatedly regales us all with horror stories of how tenants are being gouged by greedy landlords, and how we need to impose “affordable housing”, rent control and other income redistribution schemes that will only intensify housing problems

  102. 102
    SeaTownDweller says:

    RE: ess @ 101 – That logic exists because of forced saving and leverage. Should the renter be savvy with saving and borrowing, index funds would fare better with renting. Not to mention the deduction of rent as business expenses. Both sides of the camp would work, yes it is worse when you rent and just blow money away without savings/investments, but you could also over leverage either way at a bad time and have to declare chap 11.

  103. 103
    Macro Investor says:

    RE: ess @ 101

    Blah, blah commission please.

    Stocks have quadrupled in just 8 years. But thanks for all those repeated/repeated/repeated talking points. Only heard a billion times now.

  104. 104
    ess says:

    http://www.seattletimes.com/business/ontario-canada-brings-in-foreign-housing-tax-to-cool-market/

    Above is an article describing Toronto’s latest tax on foreign real estate investors. Notice that they are also extending rent control – which should negatively impact the rental market if all other attempts at rent control in other cities around the world are any indication.

    Will such a tax be imposed in the US on real estate purchased by foreigners ? Would a tax be legal? Beats me – been a long time as of the time I took Constitutional Law 101 (a course that was paid for in part by real estate investments) in the days of my misguided youth.

    But more importantly, will it encourage a segment of the foreign investment market to look towards the US, and specifically the Seattle area to park monies? Have we in the Seattle real estate market (to paraphrase Al Jolson) not “seen nothin yet”? To paraphrase another movie, ” is this the start of a beautiful friendship”?

    Stay tuned!!

  105. 105
    wreckingbull says:

    RE: ess @ 101 – 90% would have done better owning than renting? Are you sure about that? Can you cite a source for that statistic, or did you just make that up?

  106. 106
    SeaTownDweller says:

    RE: Macro Investor @ 103 – The ‘quadrupled’ claim depends on how you look at it (what stock, what index). If i look at SPX, 10 years to today it increased by 70%, if I go from 2012 when I bought the property, SPX also went up about 70%, my property did about that too (plus I had a place to live). That’s a bit further away from quadrupling. Hindsight is 20/20 about the comparison between stock and housing (as an investment), it seems that for most people leveraging with housing is no-brainer, and you do need to live somewhere regardless, might as well build equity. I don’t fault anyone for wanting to own where he or she lives. Further, Chinese culture is about owning housing, so the herd mentality works out when everyone buys in. Just need to know when to collect profit at times when your property is more liquid.

  107. 107
    SeaTownDweller says:

    RE: ess @ 104 – I did read somewhere that such a foreign tax is very difficult to impose in the US but can’t recall where, the same reason Bay Area currently doesn’t have such tax. But more importantly, what is the efficacy of such tax? Is it working for Vancouver? News are not indicating so.

  108. 108
    ess says:

    By SeaTownDweller @ 102:

    RE: ess @ 101 – That logic exists because of forced saving and leverage. Should the renter be savvy with saving and borrowing, index funds would fare better with renting. Not to mention the deduction of rent as business expenses. Both sides of the camp would work, yes it is worse when you rent and just blow money away without savings/investments, but you could also over leverage either way at a bad time and have to declare chap 11.

    In theory that would work, but in our hyper material world – renters never put money into investments to even get close to the value of real estate over a period of time. There are just too many goodies to buy out there, while saving and investing just isn’t much fun. It is always something they will do tomorrow. By buying a residence, a majority of buyers usually come out much further ahead, as the article below discusses:

    https://www.forbes.com/sites/lawrenceyun/2015/10/14/how-do-homeowners-accumulate-wealth/#2492f1261e4b

  109. 109
    Brian says:

    I think you guys were right about the lack of new listings last week/weekend being due to Easter.
    Inventory is heating up much faster this week.

  110. 110
    ess says:

    By wreckingbull @ 105:

    RE: ess @ 101 – 90% would have done better owning than renting? Are you sure about that? Can you cite a source for that statistic, or did you just make that up?

    See the article posted above.

    Furthermore, just review housing prices 25 years ago and what they are in the Seattle area. If a homeowner had stayed in that house, or leveraged into another house in the area, they would have had a significant increase in the value of their residence in the Seattle area.

    After 25 years, the tenant has nothing to show except for the well wishes of the landlord. They would have expended twenty five years of rent, which is substantial.

    As to the argument that tenants don’t have to pay for taxes, insurance and upkeep? Unless the rental property makes no sense financially, all expenses in operating that property are financed by the rents. And in 40 years of owning real estate investments, I never bought anything that didn’t make financial sense. And any investments initially made upon buying a property were eventually offset by rising rents.

    In no way am I encouraging anyone to buy or rent. That is a personal decision that each individual must make for themselves. But the figures and outcomes don’t lie – people who buy in the vast majority do better than people who rent over the long term.

  111. 111
    wreckingbull says:

    Larry Yun articles starting to show up in the comment section again. Perhaps the peak is indeed near! Other contrarian indicators to look for:

    – “Forced Savings Plan”
    – “Real Estate Always Goes Up”
    – “Don’t miss the last spaceship off earth”
    – “Renting is Throwing Away Money”

    RedmondJP is right. Smells a lot like the mid-aughts around here.

  112. 112

    By Erik @ 96:

    RE: Kary L. Krismer @ 92
    Please define a “better market.” Better to me is lower inventory and faster rising housing prices. I think better for you is more inventory and sales and hence more real estate commissions, right?

    I don’t think I used the term “better market.”

    But you’re making the same mistake as Macro Investor. You don’t look at inventory to determine how agents are doing, you look at the number of transactions, and those are moving along just fine. And one advantage of lower inventory for buyer’s agents is fewer houses to preview/show means less in mileage expenses. So that’s good too.

    In any case, what I spoke of in that post was the impact of rising inventory to a more moderate level, but one which was being complained of only a couple of years ago in the links I posted above. That would still be good for sellers, but a bit more relaxed for buyers.

  113. 113

    By SeaTownDweller @ 107:

    RE: ess @ 104 – I did read somewhere that such a foreign tax is very difficult to impose in the US but can’t recall where, the same reason Bay Area currently doesn’t have such tax. But more importantly, what is the efficacy of such tax? Is it working for Vancouver? News are not indicating so.

    Again it’s the Fair Housing Act. That prevents discrimination based on national origin, and I’m fairly sure that it applies to local government entities.

  114. 114
    ess says:

    By SeaTownDweller @ 107:

    RE: ess @ 104 – I did read somewhere that such a foreign tax is very difficult to impose in the US but can’t recall where, the same reason Bay Area currently doesn’t have such tax. But more importantly, what is the efficacy of such tax? Is it working for Vancouver? News are not indicating so.

    Sea

    According to my in laws who reside in the area, the market and price for lesser expensive properties and condos has not decreased, as there is still an insatiable demand for that type of housing. But that was a few months ago, and this is now. As luck has it, some of the in laws who just bought a residence in the greater Vancouver area are coming down for a visit later this month. I will be sure to ask them to gain their perspective.

    Oh boy – I remember the bad old days up there where houses in the Vancouver area where going begging at 40 -50K Canadian because interest rates had shot up, and one had to keep refinancing their mortgages every few years. For those who don’t know – there was no such thing as a 30 year mortgage in Canada back in the late 70s. One had to do a simple refi every couple of years, and when interest rates were in the high teens – many homeowners were out of luck as they could no longer afford to pay for their houses.

    You might be right about the Bay area. Their politics are probably even more left wing than Seattle’s (if that is possible). If there was any kind of tax they could have imposed to ensure “equality of outcome” via “affordable housing” for one of those many myriad human rights that society should pay for, then all sorts of taxes would have been imposed years ago on property in a (foolish) attempt to keep prices lower. The fact that they have not probably indicates that a tax such as that is illegal.

  115. 115

    By ess @ 108:

    By SeaTownDweller @ 102:

    RE: ess @ 101 – That logic exists because of forced saving and leverage. Should the renter be savvy with saving and borrowing, index funds would fare better with renting. Not to mention the deduction of rent as business expenses. Both sides of the camp would work, yes it is worse when you rent and just blow money away without savings/investments, but you could also over leverage either way at a bad time and have to declare chap 11.

    In theory that would work, but in our hyper material world – renters never put money into investments to even get close to the value of real estate over a period of time. There are just too many goodies to buy out there, while saving and investing just isn’t much fun. It is always something they will do tomorrow.

    Unless they use their house as an ATM and incur more and more debt against it to buy all those goodies.

  116. 116
    Erik says:

    RE: Kary L. Krismer @ 112
    More inventory would mean more sales right now. Less people are buying than would right now because they can’t find the house they want. More sales means more money in your pocket. Mo’ money mo’ better.

    You said “good market.” You know what I meant.

  117. 117

    RE: Erik @ 116 – For all agents sales would increase, yes, but low inventory is only a problem for incompetent buyer’s agents who cannot get their clients into contract.

    The goal of a listing agent is to receive an offer that they can accept without making any changes that would constitute a counteroffer. If they have to counter an offer that means the buyer can back out, and the other good buyers might also disappear. Some agents are simply not able to draft such an offer due to incompetence. Those are the agents who have a problem with low inventory and even in weak markets. So it’s not that I wouldn’t appreciate more inventory, but it’s not going to contribute to significantly more transactions. Unless I’m forgetting someone, I think in all of 2016 we only had one buyer client we couldn’t get into a property.

  118. 118
    Erik says:

    RE: Kary L. Krismer @ 117
    That’s cause you are representing clients in Olympia. Seattle would be a completely different story for you.

  119. 119
    WS says:

    I view a good market from an economic perspective where neither 2008 or 2017 is a good market. Sure, its good for certain individual participants but a healthy market is much better for long term health and would require a more balanced market.

  120. 120
    SeaTownDweller says:

    RE: WS @ 119 – To my minimal understanding of the topic, real estate market by its less liquid natural isn’t as efficient in pricing as say stock price adjustment, there is a latent effect in news that eventual lead to price change and is more macro. Because of that its relative health is a moving target that can be bubble proned, meaning that people piled in to overpay for little inventory, then once inventory (slowly but surely) start to catch up en mass while prices are squeezed too much, correction ensues harshly. For the real estate market to be healthier, inventory supply should catch demand rather than being held back by inefficient permitting/regulation, but understandably those procedures exist for good reasons. So since inventory creation is slow, we will continue to see this cycle of boom and bust.

  121. 121
    Erik says:

    RE: SeaTownDweller @ 120
    Correct! The permitting and building takes years and drives inventory down and lifts prices up. Overpaying at this point is okay if you are gonna keep it a few years and sell at the top. When inventory increases and prices keep going up fast, it’s time to consider selling. That’s phase III, the hypersupply phase. We all know what comes next, phase IV, recession. Don’t get left holding the bag. Sell in phase III.

  122. 122
    SeaTownDweller says:

    RE: Erik @ 121 – The article you are referencing (a good read) indicates the pricing peak at 2024, do you plan to cash out a year or two before that as buffer or just rely more on the inventory/occupancy rate changes?

  123. 123

    RE: Kary L. Krismer @ 117

    When there are 15 or more offers on a property as there was on my listing and others nearby early this year, all that didn’t “win” were not represented by incompetent agents. Do you really think all the other 89 agents who showed my listing or even just the ones who managed to present an offer in short order were incompetent? You need more experience in hotter markets or at least you need to stop denigrating every agent who isn’t also an attorney. If you can’t respect the field you “work” in, go back to the field where you may have had some respect for your peers.

  124. 124
    Erik says:

    RE: ARDELL DellaLoggia @ 123
    Kary doesn’t work in the Seattle market and has no idea what he’s talking about again. The reason I’m guessing Kary is a frustrated agent is because he lacks people skills.

  125. 125

    By Erik @ 118:

    RE: Kary L. Krismer @ 117
    That’s cause you are representing clients in Olympia. Seattle would be a completely different story for you.

    What? That comment has nothing at all to do with the one transaction I did in Olympia last year. But in any case, that comment is true anywhere you have multiple offer situations, and that one in Olympia did get multiple offers.

    Also, that transaction was one client in Olympia. We’ve helped them buy several properties down there, but that is not the typical place I do business. I generally do most my business in King and South Snohomish.

    The point of bringing up Olympia is they have a better inventory situation than we have here today, and it’s much better for buyers but still fairly good for sellers (but obviously not as good). But it has nothing at all to do with what a listing agent looks for in an offer. Even in the worst of markets that’s what they look for. The difference is in the worst of markets listing agents are willing to put up with more questionable buyer’s agents. I once even redrafted the buyer’s offer where my seller was very desperate to bet a buyer and the market was very week. It wasn’t a counteroffer, it was an entirely new offer signed by the seller that the buyer could accept. And yes the transaction did get into issues later, as is to be expected when you’re dealing with an incompetent agent, but it did close.

  126. 126

    By WS @ 119:

    I view a good market from an economic perspective where neither 2008 or 2017 is a good market. Sure, its good for certain individual participants but a healthy market is much better for long term health and would require a more balanced market.

    I don’t think Seattle has had a healthy market since at least 2006, or if it did that market only lasted for a short time while it transitioned unhealthy in another way. Markets with buyer frenzies are not healthy. Markets with lots of distressed properties are not healthy. Markets with low inventories are not healthy. That’s pretty much all we’ve had since 2006.

  127. 127

    By ARDELL DellaLoggia @ 123:

    RE: Kary L. Krismer @ 117

    When there are 15 or more offers on a property as there was on my listing and others nearby early this year, all that didn’t “win” were not represented by incompetent agents. Do you really think all the other 89 agents who showed my listing or even just the ones who managed to present an offer in short order were incompetent? You need more experience in hotter markets or at least you need to stop denigrating every agent who isn’t also an attorney. If you can’t respect the field you “work” in, go back to the field where you may have had some respect for your peers.

    What? Reading comprehension is apparently not your strong suit, or you’re purposefully misrepresenting what I’m saying. But the former would probably explain your inability to understand simple contract language.

    And I need more experience working in the hotter markets? LOL. I’ve been dealing with multiple offer situations on the buyer’s side continuously since at least 2012. This isn’t something new for me. I had a period that year where I won 5 out of 7 multiple offer situations, and not necessarily by being the highest price. The difference between you and me is I know how to win by making the best offer, not the highest offer. And I win by still giving my clients inspection and appraisal rights.

    As to your situation, I didn’t say all the agents that showed your listing were incompetent, or even that all the ones that didn’t win were incompetent. What I said was that some offers written by incompetent agents. Learn to read simple English.

    As to the quality of agents in general, I wouldn’t expect you to be able to judge their competency.

  128. 128

    By Erik @ 124:

    RE: ARDELL DellaLoggia @ 123
    Kary doesn’t work in the Seattle market and has no idea what he’s talking about again. The reason I’m guessing Kary is a frustrated agent is because he lacks people skills.

    Eric, you too need to improve your reading comprehension and also logic. When I said I was working with one buyer in Olympia last year that doesn’t mean I don’t work in King County.

    And the reason I get frustrated, if you want to call it that, is because you and Ardell misstate what I said.

  129. 129

    RE: Kary L. Krismer @ 80
    My Gosh Kary We had to Feed Big Banks Trillions of Welfare Then

    To keep the banks open….this wasn’t just a normal economic reset….it was the verge of national bankruptcy and bank insolvancy. And this condition has not gotten better today IMO, its held together with duct tape debt…

  130. 130

    Here’s an example of what I mean by incompetent agents. Keep in mind that these agents represent buyers and they want their buyer’s offer accepted by the seller.

    The situation was an estate sale of a property that clearly needed to be flipped, and although it had been lived in just a few months earlier, it probably shouldn’t have been lived in at that point in time. It was an obvious multiple offer situation and it in fact generated 12 offers. None of the 12 offers didn’t have some defect in the offer, although some were minor defects (e.g. writing “American Title” rather than “First American Title.”)

    Only one offer was not for cash, and it was for 3% down conventional which would obviously be difficult/impossible with that property. The agent was just wasting their and their client’s time making an offer.

    Four offers had an item checked with was specifically requested not to be checked in the agent only remarks. I don’t want to disclose what that was, but it wasn’t something that would impact a buyer.

    One offer had the right to inspect the property for lead based paint. I’m not sure I’ve ever seen another offer where the buyer asked to have that right, but clearly that’s not going to help you win a multiple offer situation. One other offer didn’t check the box on whether they waived or maintained the inspection right for lead based paint.

    Eight of the offers indicated that the seller would pay any charges and assessments due after closing. In fairness, being an estate sale there was no Form 17 addressing what charges and assessments were due, but it wasn’t a property likely to have such charges, and you’re not going to win a multiple offer situation making that choice. So this is the first one I wouldn’t describe as pure incompetence, but clearly making that choice had consequences. Hopefully they explained that to their clients. If they had not, then they were incompetent.

    There were other issues, but none of them were the ideal offer that was an offer that could just be accepted. We ended up countering the offer with only one issue that also happened to be the highest offer and for cash.

    Now perhaps the agents representing buyers on this type of property aren’t going to be the highest level of agent, but those are the types of things in a contract that show competence of the agent if you define competence as understanding what will get your clients’ offers accepted. And I didn’t even mention the failure to use the documents attached to the listing, which is another very common problem. And this was an extreme example. I have had multiple offer situations where all the offers were well drafted–the situation above was extreme.

    But to be clear, the point is that there are choices in a purchase and sale contract that will make a buyer’s offer less likely to be accepted in a multiple offer situation. The offers I wrote for clients in 2010 had a lot different choices selected than they do today. And agent who doesn’t understand the ramifications of the contract choices on their clients’ chances of success is in my opinion incompetent.

    Now Ardell can be critical of my calling agents incompetent, or even fail to recognize incompetence due to her own shortcomings. But if you are a buyer you’re not likely to understand these issues or why you’re losing out on multiple offer situations. So this type of incompetence is a serious issue for buyers.

  131. 131
    ess says:

    By Kary L. Krismer @ 126:

    By WS @ 119:

    I view a good market from an economic perspective where neither 2008 or 2017 is a good market. Sure, its good for certain individual participants but a healthy market is much better for long term health and would require a more balanced market.

    I don’t think Seattle has had a healthy market since at least 2006, or if it did that market only lasted for a short time while it transitioned unhealthy in another way. Markets with buyer frenzies are not healthy. Markets with lots of distressed properties are not healthy. Markets with low inventories are not healthy. That’s pretty much all we’ve had since 2006.

    I would also suggest that the Seattle and area market is unhealthy as a result of both market forces and legal issues as follows:

    -Legal issues – apparently there is a new condominium products liability law that has had the effect of limiting the construction of new condominiums for sale. Those new projects that are for sale are prohibitively expensive, in part to weather any litigation, and middle class condominium projects appear to be at a standstill at this time.

    -Legal issues that morph into market issues – the Urban Growth Management Act, as well as a variety of other legal developmental requirements has dramatically increased the cost of obtaining and developing land for buildable lots. As a result, builders must construct expensive houses on those lots in order to recoup their investment. In most cases, expensive is translated into larger size houses with more fancy amenities for sale. Over the years, the percentage of “starter homes” ( defined as any house smaller than 1500 sq feet for this discussion) has declined precipitously as a percentage of the available universe of houses for sale. Exacerbating the situation that it is often less expensive (ie smaller) houses that are replaced by these expensive, oversized projects.

    Result – many first time middle class buyers of modest means are faced with the prospect of either attempting to purchase a lower priced older condominiums, or competing for single family houses in a declining available pool of smaller houses which are increasing in price due to the cost of the land they are situated on, or move further away from the central Puget Sound area. Many are frustrated by the process, and continue to rent.

    That is the problem with the legal process. Sometimes you get what you legislate for.

  132. 132

    RE: ess @ 131 – I would agree with a lot of that, but I’m not sure about that Condo issue. That may just be a builder’s association propaganda type issue. Not sure.

    Another one I would add would be the Distressed Property Law passed in 2007 or 2008 and then amended the next year. The amendments added to that just prior to initial passage were very poorly drafted and in many ways were “Nanny State” sorts of things. They prevented people from selling their houses at bargain prices where the only other likely option was eventual foreclosure or bankruptcy. It contributed to increased foreclosures here at the worst possible time.

    I’ve been critical of the legislative process here in the past. The quality of legislation is very low now compared to decades past. One just this month somehow affects real estate brokers. Apparently there’s some issue as to when firms have to pay unemployment taxes which is dependent on whether or not the broker is an independent contractor. I’m not really sure why that’s a particular problem relative to other industries, but to “fix” the problem they amended the definitions statute of the broker’s chapter of the RCW. Seemingly no substantive change in the law and it doesn’t even reference the definition applying also to the unemployment statutes. Even worse, they seemingly allow firms to make what would be clearly an employee and independent contractor just by calling the person an independent contractor. A very poorly thought out bill.

    http://lawfilesext.leg.wa.gov/biennium/2017-18/Pdf/Bills/Senate%20Passed%20Legislature/5125.PL.pdf

  133. 133
    ess says:

    RE: Kary L. Krismer @ 132

    Yep, when I was in the legal bizz, I was always amazed at the quality of the statutes that the legislature pumped out. A first year law student could draft more coherent legislation than some of the stuff I had to deal with.

  134. 134
    Blurtman says:

    RE: softwarengineer @ 129 – This country would be a lot better off if the free market economy was able to deal with the banks. It is an utter perversion to have bailed them out. Other institutions would have arisen to take their place. Jailed bank executive criminals would have been replaced by legions of other execs. And we wonder why Americans are so pissed off these days.

  135. 135

    By Brian @ 109:

    I think you guys were right about the lack of new listings last week/weekend being due to Easter.
    Inventory is heating up much faster this week.

    I wasn’t too impressed yesterday, but it’s really shot up in the past 24 hours (or so).

  136. 136
    Brian says:

    By Kary L. Krismer @ 135:

    By Brian @ 109:

    I think you guys were right about the lack of new listings last week/weekend being due to Easter.
    Inventory is heating up much faster this week.

    I wasn’t too impressed yesterday, but it’s really shot up in the past 24 hours (or so).

    A solid 20% increase in inventory since Wednesday. Normally it’s been like 10% at best.

  137. 137
    Macro Investor says:

    By ess @ 133:

    RE: Kary L. Krismer @ 132

    Yep, when I was in the legal bizz, I was always amazed at the quality of the statutes that the legislature pumped out. A first year law student could draft more coherent legislation than some of the stuff I had to deal with.

    Legal “bizz”??? Pretty funny bagging on others when you are this ambiguous/deceptive. We are supposed to be impressed — but was he a supreme court justice, or did he just have a run in with the police?

    You must have been good in skewl.

  138. 138
    Minnie says:

    You’ll see Seattle inventory increase if that City income tax on “high end” households passes (households earning 250k per year or more, incl passive income and divedends)
    I’m trying to convince other folks on NextDoor that $250K is not “rich” but seems like they all thing it is…..wow……

  139. 139
    Macro Investor says:

    By Minnie @ 138:

    You’ll see Seattle inventory increase if that City income tax on “high end” households passes (households earning 250k per year or more, incl passive income and divedends)
    I’m trying to convince other folks on NextDoor that $250K is not “rich” but seems like they all thing it is…..wow……

    Really outs the lie that everyone is equal. If everyone was equal, we’d all pay the same tax for gov services.

    Next up, grocery stores will charge based on income. You’re rich, you can afford $500 for a loaf of bread.

  140. 140

    RE: Macro Investor @ 137 -You’re not really the poster here who is in a position to be making that type of comment. Hypocrite much?

    At least ess says some things that are intelligent and useful.

  141. 141
    SeaTownDweller says:

    RE: Macro Investor @ 139 – Rich people would just get their servants to go to grocery stores anyway. I suppose the 250k mark is to target people who actually make significantly more than that and couldn’t deduct anymore even if they try, or the capital gain folks~ Given the regressive nature of the WA tax, it isn’t far fetched to get more tax from that income bracket, after all, even if right at 250k isn’t considered ‘rich’, it’s the new middle class, and middle class foot the tax bill.

  142. 142
    ess says:

    By Macro Investor @ 137:

    By ess @ 133:

    RE: Kary L. Krismer @ 132

    Yep, when I was in the legal bizz, I was always amazed at the quality of the statutes that the legislature pumped out. A first year law student could draft more coherent legislation than some of the stuff I had to deal with.

    Legal “bizz”??? Pretty funny bagging on others when you are this ambiguous/deceptive. We are supposed to be impressed — but was he a supreme court justice, or did he just have a run in with the police?

    You must have been good in skewl.

    Nope, just an attorney who previously obtained a Masters Degree of Social Work who had enough of not having an outside life after ten years of practicing family and guardianship law and also actin as an expert witness in a number of cases who eventually went inactive with the bar while establishing our own part time family business with my lovely wife so we could travel to many interesting places both in the US and around the world made possible in part because of successful real estate investments.

  143. 143
    Scotsman says:

    Interest rates won’t be going back up- the ten year just fell back to previous levels. People forget the FED doesn’t really control rates- the market does. The government can’t afford higher rates. Rates continue their 40 year down trend until either a massive print or general economic/political collapse, both of which will radically change the fundamentals in all aspects of the housing market. But Seattle is still good for a bit more exuberance.

  144. 144

    RE: Minnie @ 138 – It might actually be a good thing if Seattle passes an income tax, because the state Supreme Court might be more likely to find a Seattle income tax unconstitutional than a state income tax, particularly if the state income tax were used to fund education. There are at least two cases indicating that income taxes are unconstitutional in Washington, but they are very old cases.

  145. 145
    Jeff says:

    We haven’t had 1800 SFH king county homes since – 12.20.2016 – 1802
    Interest rates at yearly lows, should be an interesting weekend

  146. 146
    SeaTownDweller says:

    RE: Scotsman @ 143 – Yep, often people don’t grasp that overnight rate is not the same as long term yield like a 10 yr that the mortgage rate depends on, so when CNBC talks about rate hike, people just freak about real estate. And Fed can only raise rate based on economic indicators, unlike what Trump alluded to during his campaign about Yellen.

  147. 147
    Brian says:

    By Scotsman @ 143:

    Interest rates won’t be going back up- the ten year just fell back to previous levels.

    Not sure what you are talking about. 10 year is at 2.25%, which is still a good bit above the 1.6% rate of last summer/fall.

  148. 148
    justme says:

    RE: Scotsman @ 143

    >>People forget the FED doesn’t really control rates- the market does.

    Utterly wrong. Trillions of QE including some 1.7T of accepting mortgage backed securities as money had a massive effect on long term interest rates. Only the most disingenous of the dishonest can disagree with that. Pure propaganda.

  149. 149
    wreckingbull says:

    RE: justme @ 148 – Thank you. I has hoping someone would correct that erroneous statement.

  150. 150
    ess says:

    By Minnie @ 138:

    You’ll see Seattle inventory increase if that City income tax on “high end” households passes (households earning 250k per year or more, incl passive income and divedends)
    I’m trying to convince other folks on NextDoor that $250K is not “rich” but seems like they all thing it is…..wow……

    Minnie

    Many states back east have a state income tax, sales tax and property tax, and these states have some of the highest overall tax burdens. These are states that retirees and others are fleeing for tax relief. People are truly voting with their feet.

    These tax propositions are always packaged in a class envy format to “tax the rich” and give a break to the middle class and the poor. Eventually the taxes are expanded to include more and more individuals as more and more important “needs” are discovered , and suddenly the middle class has another tax on its hands.

    Sales and property taxes have never been higher, but yet many of the institutions in Seattle, not to mention the amenities are an absolute mess.

    In a country where the average family income is about 50-60K, 250K is really up there on the top of the income ladder – somewhere in the top five percent. I believe a more useful approach is to appeal to their own economic interests – today the rich are taxed – tomorrow everyone else will also pay. With that argument, you usually have history on your side.

    http://www.investopedia.com/financial-edge/0912/which-income-class-are-you.aspx

  151. 151
    Macro Investor says:

    Poor people pay little/no taxes and live free on the benefits. Rich pay the vast majority yet don’t collect benefits. Liberals call this equal and progressive… nice words for “theft”.

    Back in history only land owners voted. Those people understood poor people will vote themselves everyone else’s money.

    We should each be billed for the total cost of gov divided by the number of people. Kids can be half. If you don’t pay your share, no vote.

    3-2-1 seconds before someone cries “not fair”. My answer to that is you always have the option of giving to charity. Just don’t impose your charity on others.

    BTW — on your tax return you have the option of paying extra (i.e. charity). If you cry not fair and don’t do that, then SHUT UP.

  152. 152
    whatsmyname says:

    By Macro Investor @ 2:

    I’ll say again, if you want to be a good investor you buy when affordability is on the way up — not down.

    When did you buy?

  153. 153
    Scotsman says:

    RE: justme @ 148
    You’re assumptions are too simple and incomplete. Yes, QE drove a bit of expansion and contained rates (short term shocks) but only as a one shot deal in the face of huge loan losses (capital destruction) and an economy fighting deflation. The rapid expansion of debt over the past 3 decades has reinforced a cycle where so much future production/income has been pulled forward that ever falling rates are the only mathematically feasible solution to keep growth alive. As soon as debt saturation stabilizes for a given rate the only way forward is to refinance and add the new debt at an ever lower rate. If you think the FED has any real control over this you will be badly hurt at some point in the future. Doubt me? Look up charts for total debt, returns to capital for each addition new dollar invested, and interest rates for the last 40 years. Then explain how we escape those trends. But we haven’t hit the end point yet. We have driven growth rates down to historic lows though. Math is a dog. Rates will not be going up until the system breaks. And yes, thanks to Seattle Bubble I bought at the bottom and will sell at the peak. ;-)

  154. 154
    justme says:

    RE: Scotsman @ 153

    Blah blah blah. More verbiage with no substance.

    The only thing keeping long term rates low is that the FRB keeps rolling over their QE-purchased bond holdings when they mature. And BoJ and ECB are even expanding their bond holdings.

    >>ever falling rates are the only mathematically feasible solution to keep growth alive.

    I think you just admitted that I am right. Yes, indeed. The FRB/BoJ/ECB maintain and even expand QE because the markets WOULD NOT reduce interest rates by themselves under the conditions caused by the previous bubble.

  155. 155
    Eastsider says:

    In a normal market, the FED generally does not control long term interest rate.

    In the past decade, however, both negative interest rate policy and Operation Twist had influenced long term interest rates.

    What is an ‘Operation Twist’
    An operation twist is the name given to a Federal Reserve monetary policy operation that involves the purchase and sale of bonds. “Operation Twist” describes a monetary process where the Fed buys and sells short-term and long-term bonds depending on their objective. For example, in September 2011, the Fed performed Operation Twist in an attempt to lower long-term interest rates. In this operation, the Fed sold short-term Treasury bonds and bought long-term Treasury bonds, which pressured the long-term bond yields downward.

    Read more: Operation Twist http://www.investopedia.com/terms/o/operation-twist.asp

  156. 156
    Erik says:

    RE: Kary L. Krismer @ 128
    My logic skills are just fine Kary. My job is to to math all day everyday.

    I know that Ardell has taught you a lot about real estate. I’ve read your learning sessions when Ardell dominates you. It’s great to see junior agents like yourself learning from experienced agents like Ardell. Some day when you learn more about real estate, you’ll be able to teach junior agents like Ardell is teaching you now.

  157. 157
    Scotsman says:

    RE: justme @ 154 – Really? When was the last time there was a big QE? Do you ever think about how deflationary expectations in a competitive environment might affect interest rates on both the supply and the demand side? The FED has far less influence than you think. What is the size of their balance sheet verses the extended U.S. economy? I don’t know what you do, but economics and investing are what I do every day. You’re giving econ 102 textbook answers without really thinking the current situation/reality through.

  158. 158
    GoHawks says:

    Thoughts on the top two Mayoral candidates saying they will impose an income tax on high-end households in Seattle?

  159. 159

    By justme @ 154:

    RE: Scotsman @ 153

    Blah blah blah. More verbiage with no substance.

    The only thing keeping long term rates low is that the FRB keeps rolling over their QE-purchased bond holdings when they mature. And BoJ and ECB are even expanding their bond holdings..

    Well there’s also the fact that the economy isn’t all that strong–that’s keeping rates low. And also keeping wage increases in check.

  160. 160

    RE: Erik @ 156 – Erik, you’re delusional if you think I’ve learned anything from Ardell, or that she has anything to teach anyone, particularly other agents. That statement is just as absurd as your claim that I don’t work in King County.

  161. 161
    Marc says:

    RE: GoHawks @ 158 – I have two thoughts on this. First, it’s classic populism/pandering to get the vote. It worked for Trump and the liberal Seattle electorate is still in a tizzy so why wouldn’t you use it?

    Second, it’s a great way to solve Seattle’s low inventory problem. All the “rich” people will sell their Seattle rentals and residences so they can move to Mercer Island or the Eastside. Quite a few will hightail it to Snohomish County because the morons on the King County Council are itching to raise taxes and will be watching closely. You can count me among the latter if this goes into effect.

  162. 162

    By GoHawks @ 158:

    Thoughts on the top two Mayoral candidates saying they will impose an income tax on high-end households in Seattle?

    I already responded in post 144 above.

  163. 163

    By GoHawks @ 158:

    Thoughts on the top two Mayoral candidates saying they will impose an income tax on high-end households in Seattle?

    BTW, I’d also be paying attention to the proposed changes in the federal income tax–they could affect the market, particularly if either the mortgage interest deduction or the local tax deduction disappear. And the thing about both those deductions is most people think they affect them more than they do. They think that if they pay $25,000 in interest and are in a 30% tax bracket that they save $7,500 in tax. For most people that is not true at all, so overestimating the effect could impact decisions more than it should.

  164. 164
    ess says:

    By GoHawks @ 158:

    Thoughts on the top two Mayoral candidates saying they will impose an income tax on high-end households in Seattle?

    These types of clarion calls for “economic justice” always have a certain amount of appeal to a variety of folks. Better to tax those undeserving rich folks than those in the middle class.
    Oh, and what is most people’s definition of “rich” or “high end” households?
    Anyone making more than me, or anyone with more stuff than I have.

  165. 165
    piggyshooz says:

    RE: GoHawks @ 158
    the “wealthy” folks making 250k+ will move to Bellevue and commute into seattle making traffic even worse…..all a ploy to raise more funding for light rail and increase your car tabs to 2k per year. actually Bellevue would probably follow suit and pass a tax since they are almost as stupid and crazy as the idiots running seattle. guess we are just turning into California without the sunshine.

  166. 166

    By ess @ 163:

    By GoHawks @ 158:

    Thoughts on the top two Mayoral candidates saying they will impose an income tax on high-end households in Seattle?

    These types of clarion calls for “economic justice” always have a certain amount of appeal to a variety of folks. Better to tax those undeserving rich folks than those in the middle class.
    Oh, and what is most people’s definition of “rich” or “high end” households?
    Anyone making more than me, or anyone with more stuff than I have.

    I think it’s more a ploy to get votes. If you proposed to tax everyone it would be harder to pass–even in Seattle.

    I’m not sure how strong that appeal you mention is. The voters approved ST3, which included probably one of the least regressive taxes in the state, but as soon as it’s passed the legislature goes to a lot of work to undo it because it affects the higher income/wealthy people too much.

    And I’m not sure you can place all of that on people complaining. 46% of voters voted against ST3. It should come as no surprise to politicians that a lot of people don’t like the taxes that it imposed. (But yes I realize there are representatives from areas taxes whose district did vote against it–they’re in a different class.)

  167. 167
    jon says:

    By GoHawks @ 158:

    Thoughts on the top two Mayoral candidates saying they will impose an income tax on high-end households in Seattle?

    Amazon will be moving up to 2000 people into their first building in Bellevue this summer.

  168. 168
  169. 169

    Not that Seattle has ever cared about following the law, but I’d like to see how Seattle and Olympia think they can get around this statute. Seems pretty clear, and as far as I know, within the state’s powers.

    http://app.leg.wa.gov/RCW/default.aspx?cite=36.65.030

    RCW 36.65.030
    Tax on net income prohibited.
    A county, city, or city-county shall not levy a tax on net income.

  170. 170
    Macro Investor says:

    By justme @ 154:

    RE: Scotsman @ 153
    I think you just admitted that I am right. Yes, indeed. The FRB/BoJ/ECB maintain and even expand QE because the markets WOULD NOT reduce interest rates by themselves under the conditions caused by the previous bubble.

    Correct. He contradicted himself in another way too. He admits lower rates and credit expansion has stopped pumping up growth. The fed realizes this too. That is why they are raising (and talking about selling off their inventory) despite the weak economy. IT’S NOT WORKING ANY MORE.

    It is simplistic to say only markets set rates. Markets place great emphasis on central bank policy. People get fooled because there can be a delayed reaction.

    BTW, for those of you who would argue that GDP is just fine… Gov spending is an addition to GDP. So a trick politicians use to look good is to increase borrowing/spending. They have no incentive to balance a budget and be blamed for the subtraction to GDP. GDP isn’t in the toilet, but it’s weaker than advertised.

    I think we all know 5% unemployment (woo hoo, righ?) is only because 100 million people gave up looking for work (or decided they’d rather not bother).

  171. 171
    Macro Investor says:

    By whatsmyname @ 152:

    By Macro Investor @ 2:

    I’ll say again, if you want to be a good investor you buy when affordability is on the way up — not down.

    When did you buy?

    It was actually very easy to buy near the bottom. Tim publishes case-shiller every month. It’s a blunt instrument, but you don’t need to be exact in real estate. If you miss it by 6-12 months, no big deal.

    Here is a quick risk analysis that anyone can do. Let’s say I buy that $1.2 million fixer in trendy ballard. Let’s also assume it costs 10% for me to sell. Finally, we assume prices go up 5% a year.

    I break even in 2 years, and I’m up 10% in 4 years. But if there is a 10% market correction within 4 years, I’m stuck in my house. If it’s a 20% correction I’m stuck if the correction happens within 6 years.

    For my risk appetite, too many things can happen in 4-6 years. The fed is raising. The market reaction to that is often delayed, but a recession in 1-2 years is likely. Even Eric’s rosy 18-year cycle comes into play.

    I hate being stuck because traffic sucks and I change jobs every few years. The next one might be 40 miles away or in another state. I don’t have much control over that. Remember, you are the guy who writes about home ownership correlating with unemployment.

  172. 172
    whatsmyname says:

    RE: Macro Investor @ 171
    It was easy to buy near the bottom. But I think the answer to my question is that you’ve never bought a house. It’s nice that you are self-aware enough to know that buying is not for you. What, then, is your interest in a housing blog?

  173. 173
    Macro Investor says:

    By whatsmyname @ 172:

    RE: Macro Investor @ 171
    It was easy to buy near the bottom. But I think the answer to my question is that you’ve never bought a house. It’s nice that you are self-aware enough to know that buying is not for you. What, then, is your interest in a housing blog?

    I’m interested in bears, big cats and race cars. Doesn’t mean I have to own them, or buy everything I like at anyone’s insanely inflated price. Take a course in logic, or at least get your GED.

  174. 174

    By Macro Investor @ 173:

    I’m interested in bears, big cats and race cars. Doesn’t mean I have to own them, or buy everything I like at anyone’s insanely inflated price. Take a course in logic, or at least get your GED.

    Judging by post 171 you need to take a course in math and reading comprehension. You can say all you want it costs 10% to sell, but saying it repeatedly doesn’t make it true. And if you have 5% gain for 4 years you’ll be up more than 20%. All this is pretty basic stuff for someone who knows anything about real estate or investing.

    You’re just a perma-bear and somehow posting here makes you feel self-important. But all you’re doing is wasting everyone’s time by sharing your ignorant opinions. How about you go pick a stock you don’t own, find some forum that discusses that stock, and then start posting a bunch of nonsense there?

  175. 175
    Brian says:

    By Kary L. Krismer @ 163:

    And the thing about both those deductions is most people think they affect them more than they do. They think that if they pay $25,000 in interest and are in a 30% tax bracket that they save $7,500 in tax. For most people that is not true at all, so overestimating the effect could impact decisions more than it should.

    Doesn’t help when all the calculators on mortgage deduction savings tell people they’ll save $7500 not $1200 (or less if married). Most don’t​ factor in the standard deduction or other deductions at all.

  176. 176
    whatsmyname says:

    RE: Macro Investor @ 173
    I think you are interested in pretending as well. I have sufficient logical ability to determine that a “tru-nuff” platitude which is not an answer to a direct question, but might be inferred as the answer, is likely a deception – Something you just confirmed with your last post. Are you even a micro investor?

    Do you think a GED will make my masters degree look better?

  177. 177

    Per an announcement in the NWMLS, Zillow will stop allowing individual agents to manually input their listings starting on May 1st. Firms can still automate the uploading of their listing information. This change might reduce slightly the number of listing they show, but I suspect it will greatly reduce the number of stale and out of date listings that appear on their site. Probably a good move.

  178. 178
    Macro Investor says:

    RE: Macro Investor @ 173

    If an agent’s mouth is moving, just tune out. Translation = gimme commisions.

  179. 179

    RE: Macro Investor @ 178 – Quit wasting our time! You don’t have a clue what you’re talking about. Over and over many people besides myself have pointed that out. That one about not buying when affordability is getting worse was one of the stupidest things said on this site in the history of the site. But just about everything you post shows considerable ignorance.

  180. 180
    Macro Investor says:

    By Macro Investor @ 178:

    RE: Macro Investor @ 173

    If an agent’s mouth is moving, just tune out. Translation = gimme commisions.

    I certainly didn’t mean Ardell or the few good ones. Only the obvious commission whores who chimp out at any disagreement.

  181. 181
    Erik says:

    RE: Kary L. Krismer @ 174
    How come you preclude all of the comments you reply to by telling the person you are replying to that they are not smart? Doesn’t seem like a good approach unless you are just projecting how you feel about yourself onto others. I told you that you need to read “How to make friends and influence people” by dale carnegie. If you start by telling someone they are wrong and they are stupid, they surely will not agree with you. Then is just turns into a big pissing match.

  182. 182
    whatsmyname says:

    RE: Macro Investor @ 180
    What does an agent’s mouth have to do with post 173? That was directed to me. I am not an agent.

    Can you direct me to a good race car driver site? I want to get some tips and expert opinion from someone who is interested in, but has never driven a race car. Will you be there? Will your name be Indy Champ?

  183. 183
    redmondjp says:

    RE: Erik @ 181 – It’s a sign of insecurity, Erik.

  184. 184
    Green-Horn says:

    RE: Kary L. Krismer @ 174

    I was never very good at math, but I’m numerate enough to grasp that it’s crazy to try to time the market.

    Let’s assume that the next down spell is a more normal moderate drop than the unusually apocalyptic one that plagues recent memory. So in that case, Seattle probably would experience something considerably less than that decline of 30% from the peak before the trend reverses again…
    http://seattlebubble.com/blog/wp-content/uploads/2017/03/Case-ShillerHPI_Seattle-Reverting_2017-01.png

    Good luck timing things and selling at the peak and reentering at the nadir to capture the full effect.
    Round trip transaction costs and the expenses of moving, renting and sitting on the sidelines during the dip would also consume much of any “savings” of being able to buy a fire sale priced home during the next down period.

    The chances of riding higher another 20 – 30% appreciation for the next years before any downturn also aren’t bad. At least one would have enjoyed the period of living in an owner occupied home for the time. As an owner occupant, it’s probably still not a terrible move to buy if one can afford. The real challenge is the product that is available… Few options and they’re really scraping the bottom of the barrell. I wonder if the quality of the very few homes that do make it onto the market is distorting the statistics in ways that are difficult to appreciate. Plenty of cases of people buying homes, no questions asked, with defects that would make them a difficult sell in normal times…

    The real question in trying to time the market is what to do with savings or investments… At the same time lots of pundits are ringing alarms about US equities being overvalued as the stock market has pushed higher and higher via multiple expansion without enough underlying increases to revenue & profit and substantial underlying economic growth to justify the bulls.

    Alas where to park our savings…

    Erik and I maybe Green-Horn simpletons, but we both seem bullish on the local economy and its real-estate. Where’s everybody else allocating their savings?

    Obviously another crisis will come, but unlikely that it’ll be like the last. With so many who have been scarred by the historic great recession and its contractionary effect, it’s no wonder they’re sitting on cash hoping that the same thing repeats itself and they’ll be able to buy assets cheaply from panicked sellers when blood again flows in the streets. However all that liquidity that has flooded into the economy, whether in the form of unconventional monetary policy aka quantitative easing or as the savings glut in general may eventually be enough tinder to fuel a period of inflation that few have in living memory that renders all that savings idly parked in cash worth less, much less…

    In periods of inflation, those who hold debt and owe money while owning real assets like real estate or factories will do quite well. All the rumblings about rising interest rates might not reflect the full picture. Sure interest rates might be climbing, but inflation might actually be relief for mortgage debtors.

  185. 185
    Blurtman says:

    RE: Green-Horn @ 184 – Equities, bonds and RE should diversify one’s portfolio. Also growing one’s income stream and keeping enough liquid in case of emergencies. Taking care of one’s health is the best investment.

  186. 186

    By Macro Investor @ 180:

    By Macro Investor @ 178:

    RE: Macro Investor @ 173

    If an agent’s mouth is moving, just tune out. Translation = gimme commisions.

    I certainly didn’t mean Ardell or the few good ones. Only the obvious commission whores who chimp out at any disagreement.

    MI, you really are incredibly naive. Ardell is the one hear trolling for clients, not me. She was practially crawling all over that one seller a few weeks ago who was having issues selling. I’ve referred most the people elsewhere who have contacted me from this site. If I was interested in getting clients from the Internet that would make me rather hypocritical, but also my personality here would be a lot different. I’d be blowing smoke up peoples’ butts like Ardell.

    And if you think Ardell is a good agent, again it just proves you don’t know anything about real estate (or seemingly anything else), and again have poor reading comprehension. But hey, if you think the agent who gets into contract without their buyer having appraisal or inspection contingencies is better than the one who gets into contract with those contingencies . . ..

  187. 187

    By Erik @ 181:

    RE: Kary L. Krismer @ 174
    How come you preclude all of the comments you reply to by telling the person you are replying to that they are not smart? Doesn’t seem like a good approach unless you are just projecting how you feel about yourself onto others. I told you that you need to read “How to make friends and influence people” by dale carnegie. If you start by telling someone they are wrong and they are stupid, they surely will not agree with you. Then is just turns into a big pissing match.

    Because I want them to understand the obvious limits of their abilities. Not only will I point out that they are either not smart or ignorant (and I’ll usually distinguish if it’s not both), but I’ll explain why. That will leave them with a clear understanding of their shortcomings. It usually works with most people, but some people are just too dense.

  188. 188

    By Green-Horn @ 184:

    RE: Kary L. Krismer @ 174 – I was never very good at math, but I’m numerate enough to grasp that it’s crazy to try to time the market.

    I would agree on not trying to time the market, and have always said you should base your purchase/sell decisions on your own needs and abilities, not on some prediction of the future. I’ve also said though the obvious–the longer and more prices have gone up the more likely they are to go down, and visa versa. But Seattle had something like 20 years in a row without a down year, and I suspect there were a lot of people those last 15 years betting against the market the entire time. So there is no one factor you can look at. And finally, I would caution that looking at price and mortgage payment is not the complete analysis by any means. There can be many factors that affect whether or not you might want to buy or sell.

    As to the math, I assume you’re commenting on my response to Macro Investor. That he would claim that a 5% gain for 4 years is a 20% gain just shows he doesn’t have much investment experience. It’s a small difference, but no one who deals in such matters would say such a thing. And the 10% costs of sale showed he doesn’t have any real estate experience, which he has since admitted. And finally, if you had a 20% gain and then a 10% drop and 10% costs of sale, you would’t break even. In his $1.2M example you’d be down $33,600, not an insignificant number. Again, something someone with investment experience would know without even thinking about it, and thus not say such a thing.

    And let’s not forget that he thought agents were having trouble in this market, even though sales are moving along fairly briskly.

    The bottom line is Macro Investor is just some anonymous person on the Internet trying to sound informed and experienced, largely by the name they picked for themselves, but failing miserably virtually every time they post.

  189. 189
    GoHawks says:

    I do appreciate/value the Bull vs. Bear dialogue on here. I still think this market has another 12 months (through next summer) at least to go.

    -Inventory/supply & demand is so far out of whack. Listings could rise by 50% and we would still be in a seller’s market.
    -Rates will stay low, longer than anyone realizes. Wall Street predicted they would rise meaningfully……starting in 2010-11.
    -Tech, tech, tech. The 5 biggest companies in the world now all have a footprint here.
    -Rental rates. Last cycle, you could still rent a quality home at a reasonable monthly rate. Not so much now. Yes there will be an apartment glut, but many tenants don’t want to be in a tower apartment.
    -The national housing market seems solid to good. It won’t drag us down.
    -China holds up, everyone has been predicting the end of China’s economy or financial controls for years, they continue to be wrong.

    Why I could be wrong:
    -Geopolitical risk, N. Korea etc.
    -The stock market feels overdue for a meaningful correction that lasts longer than a few weeks.
    -At some point, buyers will be priced out and/or refuse to compete. Buyer’s habits will adjust first, sellers more slowly as they cling to a comp from a few months ago even as buyers have pulled back in real-time.

  190. 190
    Brian says:

    The past several months, with mortgage rates jumping from 3.5% to 4.5%, caused buyers to flock and buy before rates went up further, and homeowners to hold back from selling to keep their low mortgage rates. Mortgage rates have now gone back down to 4.0%. Wondering if buyers will be less antsy and homeowners might be more willing to sell & upgrade/downgrade now.

  191. 191
    David B. says:

    RE: Macro Investor @ 151 – I think you should be disqualified from voting.

    Hang on, I’ll come up with some categorization that does the trick than promote it on that basis. And you’re just dangerously and foolishly preaching populism if you disagree.

  192. 192
    wreckingbull says:

    By Green-Horn @ 184:

    RE: Kary L. Krismer @ 174

    Alas where to park our savings…

    With today’s range of low-cost mutual funds and ETFs, you choices are vast. You have no excuse to be poorly diversified. It takes some work, but it is not that hard. I’d start with Blurtman’s advice and go from there. Real easy to put your money where your mouth is:

    https://investor.vanguard.com/mutual-funds/list#/mutual-funds/asset-class/month-end-returns

  193. 193
    greg says:

    By Kary L. Krismer @ 186:

    MI, you really are incredibly naive. Ardell is the one hear trolling for clients, not me. She was practially crawling all over that one seller a few weeks ago who was having issues selling. I’ve referred most the people elsewhere who have contacted me from this site. If I was interested in getting clients from the Internet that would make me rather hypocritical, but also my personality here would be a lot different. I’d be blowing smoke up peoples’ butts like Ardell.

    And if you think Ardell is a good agent, again it just proves you don’t know anything about real estate (or seemingly anything else), and again have poor reading comprehension. But hey, if you think the agent who gets into contract without their buyer having appraisal or inspection contingencies is better than the one who gets into contract with those contingencies . . ..

    Come on kary , you were / are a real estate agent who always has to be “right” even when that requires you change your point, rebut with pedantic responses and a whole host of fallacious bs.

    The times when you stay on topic, stick to what you know you contributions can be useful, but mostly you resort to nasty ad hominem attacks when you can’t find a narrative that allows you to pretend to yourself that you “won”. For a grown man to argue with dozens, if not hundreds of posters year after year and change your position almost weekly is just “sad”.

    Macro seems to have a better grasp of the big picture than you on a regular basis , but i am sure in your own head you are crushing it on the internet…

  194. 194
    wreckingbull says:

    RE: greg @ 193 – I’m going to second this. Kary, I think you are well-respected here, and I value your advice more than other agents, but you need to know when to stop. It’s OK to let a differing opinion stand without reply, especially when that opinion is is poorly supported by facts.

  195. 195

    RE: wreckingbull @ 194 – I appreciate that, but do note I haven’t attacked Macro Investor for anything he’s said about the Fed, and we’ve even said something similar about the strength of the overall economy, but the latter is pretty basic stuff. I consider all the Fed discussion here to be rather off topic and annoying because I don’t think it’s clear anyone has basis to be making such comments, particularly given the uncharted waters we are in.

    What I have attacked him on have been very specific things about real estate. Particularly: (1) His idea that agents are somehow doing bad in this market, which he apparently thought up based at only looking at the inventory graph and none of the other graphs; and (2) The idea that it is not a good time to buy when affordability is declining. People who bought during the most recent period of declining inventory have done rather well, and rather quickly. Macro Investor cannot even understand the simple graphs that Tim posts, and clearly does not contribute to this site.

    In my opinion Macro Investor is just one of those people who troll Internet sites trying to sound important and educated when they are far from that. If he had just been doing that I probably would have left him alone, as I have others here. But since he didn’t, and made me a target, I hit back and pointed out what an ignorant, uneducated person he really is.

    Or stated differently, I don’t think this is a situation for “Don’t feed the trolls” because others need to realize that Macro Investor is full of . . ..

  196. 196
    Azucar says:

    By Macro Investor @ 151:

    Poor people pay little/no taxes and live free on the benefits. Rich pay the vast majority yet don’t collect benefits. Liberals call this equal and progressive… nice words for “theft”.

    Back in history only land owners voted. Those people understood poor people will vote themselves everyone else’s money.

    We should each be billed for the total cost of gov divided by the number of people. Kids can be half. If you don’t pay your share, no vote.

    3-2-1 seconds before someone cries “not fair”. My answer to that is you always have the option of giving to charity. Just don’t impose your charity on others.

    BTW — on your tax return you have the option of paying extra (i.e. charity). If you cry not fair and don’t do that, then SHUT UP.

    What you are overlooking is that the stability that the government provides is protecting more for rich people than it does for poor people. Someone living in a 1 million dollar house and driving a $80,000 BMW is getting the protection of law an order for that 1 million dollar piece of property and the stuff inside of it. The guy who rents a condo for $1500 a month and drives a $5000 Toyota has a lot less to lose if there is no protection (law and order) provided by the government. Also, the guy with the expensive stuff has more people that want to take it from him.

    Same with the roads and infrastructure. If the total cost of road building and maintenance, divided by the number of taxpayers, comes out to $10,000 per head, why would it be fair if a guy who makes $50,000 per year is paying half of his salary use those roads while a guy who makes $250,000 by using those same roads would only be paying 10 percent of his? The guy who makes $250,000 is deriving a lot more dollar value out of the infrastructure than the guy who makes $50,000.

  197. 197

    By Azucar @ 196:

    What you are overlooking is that the stability that the government provides is protecting more for rich people than it does for poor people. Someone living in a 1 million dollar house and driving a $80,000 BMW is getting the protection of law an order for that 1 million dollar piece of property and the stuff inside of it.

    Protecting it? Government likely created the system that allowed them to earn money and buy such things in the first place! The last people who should be unhappy about our economic system and its taxation are the well to do. They’re winning at the game.

    In any case, a system that tried to tax everyone equally would be extremely regressive, and if you tied paying taxes to voting you’d create a huge disincentive to vote.

  198. 198
    justme says:

    RE: justme @ 154

    Here is a little picture of what QE historically amounted to, and the ongoing QE of the world’s six biggest central banks. Sometimes I really wish TheTim would let us post images directly in the comment section. This image is one for the history books.

    https://3r8md7174doo44lgpk3kou79-wpengine.netdna-ssl.com/wp-content/uploads/2017/04/CentralBanksMoreAndMore350.jpg

    Reference in case image somehow disappears from the cache location:
    https://www.theautomaticearth.com/2017/04/you-are-not-an-investor/

  199. 199
    Eastsider says:

    The debate on taxes – poor vs rich / progressive vs regressive – has become lopsided lately. Many here complain that the poor are paying disproportionately more of their income on taxes (e.g. sales, gas etc). However, no one wants to bring up that most ‘poor’ do not pay any federal taxes, and many in fact receive transfer payments from the government. IMHO, it is best if EVERYONE pays taxes. The question is what is a ‘fair’ amount. But telling only one side of the story is divisive. I hope the Seattle Times and the city council will stop this constant bashing against the ‘wealthy’. They are going to kill the goose that lays the golden eggs over time. The ‘rich’ will simply stop coming here if we become hostile to them.

  200. 200
    redmondjp says:

    By Eastsider @ 199:

    They are going to kill the goose that lays the golden eggs over time. The ‘rich’ will stop coming here if we become hostile against them.

    Exactly correct. Look at what is happening in Chicago and the entire state of Illinois, New York (both city and state), and places like Detroit (some of the highest city taxes in the country). There is a threshold, and once you cross it, the rich start moving elsewhere.

    I’m waiting for the City of Seattle income tax, which is clearly against state law, but with Sideshow Bob in charge, and given our state supreme court, they’ll figure a way out to weasel-word it into legality.

  201. 201
    Macro Investor says:

    RE: Azucar @ 196

    Appreciate the input, Az, but not really.

    As you know, the rich have to hire their own security (monitoring, fencing, guards, etc) because the police are often busy elsewhere. The state provides a bare minimum, and you may bleed quite a bit before they show up. The police barely investigate crimes unless it is major.

    We all use the roads equally. Your bentley and my pinto take up the same space and cause the same wear.

    We are all equals. You shouldn’t have to pay more for your movie ticket, loaf of bread or road. If you WISH TO, then you may contribute to charity. That is your own choice as a free person.

  202. 202
    wreckingbull says:

    RE: redmondjp @ 200 – Speaking of our state supreme court, I am surprised I have not heard much here about the recent Hirst Decision.

    Most counties in our state have stopped issuing building permits if the piece of property uses a well (i.e. almost all rural property) Rural building has come to a halt. City dwellers may laugh at this, as they think it only affects rural residents, but there will be a massive tax shift from rural property owners to urban property owners if a solution is not found. A property without water is not worth much, which means it is not assessed much, which means others will make up the difference.

  203. 203
    Macro Investor says:

    RE: Eastsider @ 199

    Here is how politicians “do the math”. There are only a few rich people. There are many poor people. If I tax the rich and give more benefits to the poor, I will lose 1 rich person vote and gain 10 poor people votes. I win!!!

    When a politician is talking, translation is always “vote for me”.

  204. 204

    RE: wreckingbull @ 202 – Hirst isn’t really something I’ve focused on or even read, but I wouldn’t assume it’s the Supreme Court’s fault. As mentioned above in other contexts, the legislation passed is often very poorly drafted.

    My favorite example of that is in bankruptcy law, where Congress decided to not make certain taxes nondischargeable in Chapter 7 if a debtor filed a fraudulent return or willfully attempted to evade or defeat the tax. They incorporated that same language by reference into the priority payment provisions, so that meant the tax would be non-dischargeable, but not paid ahead of other claims. Almost certainly what they intended because it left the debtor on the hook for the taxes. But the same non-priority provisions applied in Chapter 13, but not the same discharge provisions, so in some cases if you’re going Chapter 13 it’s better to have a tax claim based on a fraudulent return or an attempt to evade or defeat the tax. Probably not what they intended, but I don’t think Congress has acted to change it yet (that I remember). The thing is though, word for word that’s what the statutes say, so that’s how the courts interpret them (or did back when I was practicing).

    The point is, Hirst could be a hard result, but also the correct result based on the statute(s). I’ll try to read it when I get a chance.

  205. 205
    David B. says:

    By Eastsider @ 199:

    …most ‘poor’ do not pay any federal taxes….

    Link, please.

  206. 206
    ess says:

    By David B. @ 205:

    By Eastsider @ 199:

    …most ‘poor’ do not pay any federal taxes….

    Link, please.

    Actually , not only is it the poor that don’t pay federal income tax, but a good chunk of the lower middle class also doesn’t pay any federal income tax either.

    http://www.marketwatch.com/story/45-of-americans-pay-no-federal-income-tax-2016-02-24

  207. 207
    Eastsider says:

    By David B. @ 205:

    By Eastsider @ 199:

    …most ‘poor’ do not pay any federal taxes….

    Link, please.

    Is this an ‘innocent’ question? /sarc

    From Wikipedia –

    Tax burden by income bracket –

    The Congressional Budget Office breaks down the 2007 share of the tax burden according to each segment of the population as follows:

    The highest quintile in total earned 55.9% of all income. It paid 86.0% of federal income taxes and 68.9% of all federal taxes

    The top 1% earned 19.4% of all income. It paid 39.5% of income taxes and 28.1% of all federal taxes

    The next 4% earned 12.9% of income. It paid 21.5%. of income taxes and 16.2% of all federal taxes

    The next 5% earned 9.7% of income. It paid 11.7% of income taxes and 10.7% of all federal taxes

    The next 10% earned 13.9% of income. It paid 13.3% of income taxes and 13.9% of all federal taxes.

    The fourth quintile earned 19.3% of income. It paid 12.7% of income taxes and 16.5 of all federal taxes.

    The third quintile earned 13.1% of income. It paid 4.6% of income taxes and 9.2% of all federal taxes.

    The second quintile earned 8.4%. It paid a net -0.3% of income taxes, meaning in aggregate this quintile received slightly more back in income tax credits than it paid in income taxes. It paid 4.4% of all federal taxes.

    The lowest quintile earned 4.0% of all income and received a net -3.0% income tax credits. It paid 1.0% of all federal taxes.

  208. 208

    RE: greg @ 193

    Ardell: “I always suspected your arguments have been misogynistic or merely not wanting agents to be agents…unless they are also an attorney.”

    Kary: “Yes.”

    ‘enuff said :) I have never met Kary and never had a real estate transaction with him. I have 27 years of happy clients and 1 mad Kary casting aspersions. I can live with that.

  209. 209
    kenmorem says:

    RE: Ardell DellaLoggia @ 208

    kary needs to be voted off the bubble island. seriously, he posts about 25% of the responses in almost every given thread, bickering endlessly about everything. this site needs approval ratings. kary would be in last.

  210. 210
    Voight-kampff says:

    I have always appreciated Kary (and all of the other agents), but it appears his desire to win the Internet and be proven right in every facet of existence outweighs his desire to inform. I always used to read his comments, but lately I almost always skip them. Please Kary, Less bloviating more pithy, more informative comments… you may yet win the Internet.

  211. 211
    Ron says:

    Kary comments on everything. I see him on Geekwire all the time too. Not sure when he practices law / real estate.

  212. 212

    By Ardell DellaLoggia @ 208:

    RE: greg @ 193

    Ardell: “I always suspected your arguments have been misogynistic or merely not wanting agents to be agents…unless they are also an attorney.”

    Kary: “Yes.”

    ‘enuff said :) I have never met Kary and never had a real estate transaction with him. I have 27 years of happy clients and 1 mad Kary casting aspersions. I can live with that.

    Mislead people much? Seriously, that is just downright deceptive. What I answered was:

    Yes, part of it is due to Mark being an attorney. You are violating your licensing restrictions when you strike entire paragraphs or even words. I explained that above.

    The other reason it’s fine when Mark does it is because he understands what happens and can explain that to his client (and also can convey the correct information to the agent on the other side). Basically he knows and understands what he is doing and you do not. It’s as simple as that.

    Ardell, you have demonstrated over the years that you are dangerous because you don’t understand legal matters or risk. And it’s only the fact that well less than 1% of real estate transactions end up in litigation that has saved you, because you simply have been lucky.

    But in any case, contrary to your false and misleading post, I did not admit your accusation. No wonder agents have a bad name with agents like you so willing to mislead people on a public webpage.

  213. 213

    RE: kenmorem @ 209 – As opposed to you, who has yet to contribute anything to this site.

  214. 214

    RE: Ardell DellaLoggia @ 208 – Ardell, just out of curiosity, does your firm have malpractice insurance? Or do you just make your clients rely on your own questionable solvency to solve any issues that you might create?

    It’s too bad the Department of Licensing doesn’t require disclosure of those type of things, like is required in other areas of practice. Agents make decisions which can have serious adverse consequences for their clients, and if firm they work for doesn’t have either the insurance or the wherewithal to cover the losses it’s the client who loses out.

    Of course it’s better to have the client never be in that situation, because even being fully compensated financially won’t be full compensation. But if a mistake is made, an agent and/or their firm should be able to fully compensate their client if the mistake was theirs.

  215. 215
    GoHawks says:

    RE: Kary L. Krismer @ 212 – Kary, a number of people have commented on here in the past few weeks, asking you to stop posting so much and to stop being so petty.

    You make Trump’s skin look thick. You have some really valuable insights, but they get lost in your kindergarten “I know you are but what am I” routine.

    I know that you really value and respect this site, so do it a favor and give the posters what they want. Cut your replies by 50-75% please. Cue up Kary getting ready to let me have it in 3……2……1…….

  216. 216
    Voight-kampff says:

    RE: GoHawks @ 214

    I have always appreciated Kary (and all of the other agents), but it appears his desire to win the Internet and be proven right in every facet of existence outweighs his desire to inform. I always used to read his comments, but lately I almost always skip them. Please Kary, Less bloviating, more pithy, more informative comments… you may yet win the Internet.

  217. 217
    Green-Horn says:

    RE: wreckingbull @ 192

    Until last year I had a bunch of ETFs, but my temptation to play with ’em because of the convenience and ease of online brokerage platforms got me into some trouble. Nothing horrible, but I wiped out a couple years of gains (and salary equivalents) by trying to be cleverer than the market. A couple early easy big wins were like heroin for my psyche as I thought that it was easy and I could do no wrong and. It’s as if you hit the big jackpot with your first quarter you put into the big payout slot machine when you first arrive in Vegas. Like I said, no major setback, but enough of a scorch to make the burn quite educational.

    No doubt I will sure to learn some hard lessons with real estate investing, but the lack of liquidity might be a big feature for somebody tempted to play with things too much. The expense of 10% round trip transaction costs plus the hassle of prepping, renovating and staging the place make it much less tempting to change your mind and exit and reenter the market impulsively. Of course putting my chips disproportionately on the Seattle market does expose me to unusual risks that a more diversified holdings wouldn’t be subject to, but I feel like I’m betting on a horse that’s already shown itself to be quicker than the competition and is already in the lead. Naturally this horse may fatigue and some of the others who’ve been lagging might start to find their legs and catch up. Perhaps for my next investment I should consider another market that had been lagging but offers good catch up potential? Texas? The Rust Belt? Overseas? Anybody want to guess?

  218. 218

    RE: Voight-kampff @ 215RE: GoHawks @ 214 – So you two expected me to just ignore Ardell’s blatant misstatement of what I previously said?

    I’ll admit I should have a thicker skin, but when people call me out like Ardell and Macro Investor, I will react. And in the case of Ardell my reaction has been very restrained. Some of the long term posters here know her spotted history, only some of which has been alluded to recently. And some things have not been posted here. I try to stick to the topics she discusses, but if she wants to start deceiving people about what I’ve said or what my positions are maybe I’ll pull back the curtain.

  219. 219
    Voight-kampff says:

    RE: Kary L. Krismer @ 218 – A simple “I think you are wrong”
    or “I disagree” will often suffice.
    It’s your long exposé-parsing-of-posts that becomes tedious for the reader.
    Who knows, maybe some people like these long drawn out arguments. I don’t. Just my opinion.

  220. 220

    By Eastsider @ 207:

    The lowest quintile earned 4.0% of all income and received a net -3.0% income tax credits. It paid 1.0% of all federal taxes.

    The tax law has changed a lot since I last studied it. From memory, I don’t think it was possible to get a tax credit or refund in 1984 that was in excess of what you paid in previously (including prior years).

    But the point I wanted to make is that Social Security taxes kick in from the first dollar, and are over 10% of earnings if you include the employer half. So they do impact low income people considerably.

    On the other end of the scale, not only is there a limit at which they no longer collect SS taxes, but certain types of income are completely exempt.

    It appears the article linked above does try to look at the broader picture, and not just the federal income tax by itself.

  221. 221
    David B. says:

    RE: Eastsider @ 207 – None of which does anything to substantiate your claim that “most poor do not pay any federal taxes.” In fact, it openly admits that the lowest quintile paid 1.0% of federal taxes in total, which would seem to directly contradict your earlier claim.

  222. 222
    David B. says:

    RE: ess @ 206 – You’re attempting to move the goalposts. The claim was not about income taxes but Federal taxes.

  223. 223
    Jasper says:

    RE: Kary L. Krismer @ 220 – Your point is correct for middle-income taxpayers. I wish everyone commenting on the alleged progressiveness of federal income tax rates would include both the employer’s and employee’s share of Social Security and Medicare taxes in “federal income taxes”, because all of those taxes are on personal income.

    But for low income taxpayers, the Earned Income Tax Credit is designed to refund Social Security and Medicare taxes. Quoting the IRS:

    The Earned Income Tax Credit, EITC or EIC, is a benefit for working people with low to moderate income. To qualify, you must meet certain requirements and file a tax return, even if you do not owe any tax or are not required to file. EITC reduces the amount of tax you owe and may give you a refund.

  224. 224

    RE: Jasper @ 223 – The EIC is something I don’t know was around prior to 1984, but if it was it wasn’t heavily covered either in law school or business school. Apparently not the type of clients the schools thought their students would be drooling to represent! ;-)

    And law school probably didn’t have the time. They spend two days covering the netting of capital gains and losses, something that could be easily taught in 10 minutes if you didn’t focus on the text of the IRC. My Criminal Law class never got beyond some form homicide, which gave rise to the joke that UW grads representing criminals would have to plea bargain up to pre-meditated murder. Fortunately the only Criminal law question on the bar exam when I took it was a fact pattern where every crime but pre-mediated murder was barred by the statute of limitations.

  225. 225
    ess says:

    By David B. @ 222:

    RE: ess @ 206 – You’re attempting to move the goalposts. The claim was not about income taxes but Federal taxes.

    The poor do pay less in federal taxes, but often pay either more, or a disproportionate amount of their income to social security, which I assume you lump in as a “federal tax”

    But social security is technically not a tax. As a matter of fact, its actual name is Old Age, Survivors and Disability Insurance.

    And as a government coerced insurance program, it provides more benefits than just what is commonly known as social security. As the name suggests, it also pays widows and widower survivor benefits, as well as insurance for the disabled.

    Furthermore, most actual taxes disappear into various general funds, and are arguably applied for the public good unless the individual qualifies for some special means tested program such as food stamps. The typical middle class individual that pays his or her taxes will often never obtain a cash payment from the government during his or her working lifetime, although Obamacare did change that for a few.

    Old Age, Survivors and Disability Insurance provides almost everyone with some sort of direct cash payment, providing they have qualified for the program and live long enough to collect. Most importantly, it is one of the few cash programs that is not means tested. The pauper and the millionaire collect their benefits they are due regardless of their incomes. As a matter of fact, the benefits are too rich based upon the Ponzi like manner in which the way the program was designed, and such has and will continue to require both adjustments and more premiums paid into the program in the future to keep it “solvent”. Or in other words – if you live long enough, y0u will get more money back than you paid in, as life expectancy increases, so have the financial woes of the program. (Another reason to eat your vegetables). Of course there is no “lock box” for this program, solvent for the purposes of this discussion that of taking in more premiums than paying benefits as an accounting proceedure.

    But those in the lower income brackets that have contributed and qualify for Old Age, Survivors and Disability Insurance can take heart. While the “tax” (i.e. premiums) appears to be regressive insofar as the rates are the same regardless of what the salary of the beneficiary is, (until the cap is maxed), the benefits that are provided are in much higher proportion to the lower wage earners than higher ones. For benefits, what we call “social security” is not such a good deal for those who pay more into that particular system as it is for lower wage workers, which it is for a long lived one.

    So yes – it appears what is deducted from one’s paycheck for OASDI appears to be a “federal tax” technically is not a tax.

  226. 226

    By ess @ 225:

    But social security is technically not a tax. As a matter of fact, its actual name is Old Age, Survivors and Disability Insurance.

    And as a government coerced insurance program, it provides more benefits than just what is commonly known as social security. As the name suggests, it also pays widows and widower survivor benefits, as well as insurance for the disabled.

    Names don’t really determine the nature of a government program. As to social security, it was known the very early retiree recipients would pay in very little and get back a lot more than what they paid in. Clearly it was not insurance. Technically it’s really a form of welfare but paid to a broader group of beneficiaries to make the taxation more palatable. Also, calling it welfare wouldn’t have gone over as well politically.

  227. 227
    Macro Investor says:

    By Green-Horn @ 217:

    RE: wreckingbull @ 192
    It’s as if you hit the big jackpot with your first quarter you put into the big payout slot machine when you first arrive in Vegas….

    ==> Imagine trying to beat Serena Williams in tennis when you only play occasionally. Anybody with decent math skills can do well in the markets, but it has to be a serious hobby almost like a second career. Make sure you are at least an expert on money management before playing again. Most books only have a chapter or 2 on this, but it is vitally important.

    No doubt I will sure to learn some hard lessons with real estate investing, but the lack of liquidity might be a big feature for somebody tempted to play with things too much. The expense of 10% round trip transaction costs plus the hassle of prepping, renovating and staging the place make it much less tempting to change your mind and exit and reenter the market impulsively…

    ==> Bingo, a winner. As I pointed out earlier, it takes many years of average gains to make up for a moderate correction. And because you cannot just click “stop loss” it can be very hard to get out when you want to.

    Perhaps for my next investment I should consider another market that had been lagging but offers good catch up potential? Texas? The Rust Belt? Overseas? Anybody want to guess?

    ==> If you have a very long time horizon and it would only be a fraction of your cash (again, money management). But, don’t you think it’s very late in the bull market? There may be a few years to go, but aren’t most of the easy gains in the past?

    I’ve wondered if global trade might revert to more local once oil starts running out and prices are permanently high. Maybe it won’t make sense to make everything in asia and ship here. But this may be in the time frame of our children or grandchildren. How would you pick amongst the thousands of rust belt locations that would benefit?

  228. 228
    Eastsider says:

    RE: David B. @ 221

    Half the population is NOT paying federal taxes on their income. Mind you, this is decade old data. The Obama era tax increases have further shifted federal tax burden to the other half.

    If you consider social security as taxes, then yes, everyone pays ‘taxes’. But then, as others have pointed out, most people are getting far more in return. I assume you would also consider 401k contributions as taxes just to push your narrative.

    Seriously, why do I even bother to reply? People like you are going to make Seattle the next Detroit, Chicago, Baltimore. They were once great cities until people like you showed up.

  229. 229

    By Voight-kampff @ 216:

    RE: GoHawks @ 214

    I have always appreciated Kary (and all of the other agents), but it appears his desire to win the Internet and be proven right in every facet of existence outweighs his desire to inform. I always used to read his comments, but lately I almost always skip them. Please Kary, Less bloviating, more pithy, more informative comments… you may yet win the Internet.

    I decided to respond to this. There have been a lot of comments about my desire to be right, but not a single comment showing where I was wrong. How about some examples? The fact is most of the stuff I say is correct, but when I make an error I’ll admit it. So it’s not really a desire to be right, it’s a desire to educate some of you.

    For example, my post 130 had some very useful information, posted after Ardell completely misstated in post 123 what I had clearly said earlier in post 117. The topic was why some offers don’t get accepted. Quite often we here people come in here and say that they or someone they new lost out on multiple offers that were well over list and didn’t have an inspection contingency, as if those are the only two things sellers and listing agents look at. Post 130 shows some ways that buyers can lose out because of their agents’ incompetence in drafting offers. That should be fairly useful information to people, or at least cause people to think. But it got zero response.

    The problem with Seattle real estate in 2017 is that for too many agents it’s “monkey see, monkey do.” Agents see something and then start copying it without giving any thought to whether something is a good idea. Sellers allowing pre-inspections or not allowing any buyer inspections for example. Or striking paragraphs W and/or X of the purchase and sale agreement (information verification and property condition disclaimer). Trying to make earnest money non-refundable. Some of that you can debate, but some of it is just pure crazy. As more and more agents try to figure out what they’re doing wrong they start doing more and more questionable things. It says something that it got so bad that Washington Realtors felt the need to run a 6 part (and counting?) video series on the topic. Oh and by the way, none of those videos has generated much discussion either, because instead we apparently want to debated the consequences of fiscal and monetary policy.

  230. 230
    Macro Investor says:

    By Eastsider @ 228:

    RE: David B. @ 221
    People like you are going to make Seattle the next Detroit, Chicago, Baltimore. They were once great cities until people like you showed up.

    Unfortunately it’s too late. The tech boom ruined Seattle by the mid 90s, or earlier. Over crowding, strained infrastructure, crime, homelessness, pollution… Business groups want more consumers. Always more. Politicians want more voters, and attract them by giving away your hard earned money.

    If you want growth and more jobs, you are voting for the slow death for quality of life. The only real solution is population control. I had this debate with a respected friend in the early 90s. He moved away long ago.

    Look at the people saying border security is barbaric.

  231. 231
    Douglas Dougan says:

    So things seem to be relatively affordable still. Good to know.

    SCOTSMAN: When do you plan on selling some of your holdings?

  232. 232
    ess says:

    An interesting article about California, their housing shortages and high rents, and their attempts to provide solutions. Seattle is not the Lone Ranger in facing these issues:

    http://www.businessinsider.com/granny-flat-law-solution-california-affordable-housing-shortage-2017-3

    And note – Seattle is not even listed in the top ten most expensive areas in the US

  233. 233
    kenmorem says:

    CTL + F for “kary” and you get 118 hits. that’s not right.

    let’s see, something he is wrong about… how about that agents add so much value that their combined 6% fee is totally justified…

  234. 234
    Erik says:

    RE: Kary L. Krismer @ 187
    I highly doubt you telling people they are dumb and describing why “works with most people.”

  235. 235
    HeidiJL says:

    By kenmorem @ 233:

    CTL + F for “kary” and you get 118 hits. that’s not right.

    let’s see, something he is wrong about… how about that agents add so much value that their combined 6% fee is totally justified…

    Let’s try some Kary logic. All agents are incompetent. I guess including his own wife? As a woman I find this offensive, but I guess that is her business.

    To win a bidding war you need certain technical wording, instead of bidding the most money? The seller agent, who is incompetent according to Kary, will not understand his superior offer, so it is a waste of time anyway.

    Wrong twice and a d-bag.

  236. 236
    Erik says:

    RE: HeidiJL @ 235
    On behalf of the regular Seattle bubble commentators, I’d like to apologize for Kary’s actions. There are a lot of nice people on here. Don’t let one bad apple ruin your entire experience.

    Kary left his job as an attorney for an undisclosed reason to wreak havoc on the real estate industry. Now he sellls houses outside of the puget sound area. He’s bitter at top agents like Ardell that sell in prime locations like Seattle and the east side. Hope this helps…

  237. 237

    By Erik @ 234:

    RE: Kary L. Krismer @ 187
    I highly doubt you telling people they are dumb and describing why “works with most people.”

    Actually, I seldom if ever use the term dumb. I tend to use unintelligent or uneducated/ignorant, and distingish between the two. In this thread I did refer to banks as being stupid, and Macro Investor’s affordability comment, post 2, as being one of the stupidest posts of all times on this forum. I stand by that comment.

    But that wasn’t my question. My question was where was I wrong.

  238. 238

    By HeidiJL @ 235:

    By kenmorem @ 233:

    CTL + F for “kary” and you get 118 hits. that’s not right.

    let’s see, something he is wrong about… how about that agents add so much value that their combined 6% fee is totally justified…

    Let’s try some Kary logic. All agents are incompetent. I guess including his own wife? As a woman I find this offensive, but I guess that is her business.

    To win a bidding war you need certain technical wording, instead of bidding the most money? The seller agent, who is incompetent according to Kary, will not understand his superior offer, so it is a waste of time anyway.

    Wrong twice and a d-bag.

    Well first, I did not say all agents are incompetent. Ardell made that same argument in post 123 and I refuted it in 127. So don’t get offended because I didn’t say that. In any case though, I’ll put my wife up against Ardell’s skills any day of the week. She is a much better agent than Ardell.

    As to your last point, that shows you don’t understand the industry, but unfortunately it is also true. You can lose out where the listing agent doesn’t understand your offer is superior. I’ve mentioned in the past losing out in a multiple offer situation where an experienced agent accepted the other offer where they waived their inspection contingency as the negotiations went on. The listing agent was very experienced, and in my opinion a very good agent, and it never occurred to me that I needed to explain to him the reason inspection contingencies are important. Now perhaps that listing agent explained to his client the risks of accepting an offer without an inspection contingency. If that was explained and the seller chose to take that risk, that’s not the agent’s fault.

    As to that topic, I recently came across a recent unpublished case where yet another seller prevailed on a lawsuit where the house had serious defects because the purchase sale agreement had an inspection contingency and the buyer’s inspection found some evidence of a problem that was not followed up on. That lawsuit was filed well after the Douglas v. Visser case, which was relied upon by the seller to prevail. The buyer ended up paying the seller’s attorney fees, and amount that was about 4% of the purchase price. The worse inspection response I recall that wasn’t just an outright walk away was just in excess of 1%. But again, those numbers don’t reflect the stress of just being involved in a lawsuit. That is something that IMHO you should take every effort to avoid, although it is impossible to totally eliminate that risk. The point is though, this risk is not just hypothetical. Sellers do get sued and the buyer having conducted an inspection can often allow the seller a defense in incredible situations.

  239. 239

    RE: HeidiJL @ 235

    It’s not so much that they are “incompetent” but rather “not allowed” to be smart enough to write language in a contract or strike language in a contract or advise clients or explain contracts. According to the “Attorney Rules”, only attorneys are allowed to do those things. So that real estate agents have been doing these things for as long as there have been real estate agents creates a never ending war of “no you can’t; yes I can and do” that will never die.

    That is why I goaded Kary into agreeing that when Marc (an attorney-agent) said he operated much the way I do, it was perfectly fine. So it wasn’t the what…it was the who. Attorneys can in his mind do the same as I do…and be “right”. I am surprised he didn’t deny being misogynistic when I brought it up. But I’ve never met a misogynist who didn’t blame their misogynistic behavior on something else entirely, so it’s a moot point. Still you would think a “no” vs “yes” would have followed that. :)

    The only people who can be “right” about striking language in a contract are other attorneys the same as writing language and explaining contracts or advising clients. So I am by definition, according to Kary, wrong. This argument has been going on for 10 years between Kary and I and he takes every opportunity to poke me in the eye in public. It’s getting a bit old…but then so are we. One of us will die eventually and it will end.

    It’s like that joke about the special room in Heaven where the occupants (attorneys in this case) think they are the only ones up there and everyone else lets them think so as long as they stay in their own room.

  240. 240

    By Erik @ 236:

    Kary left his job as an attorney for an undisclosed reason to wreak havoc on the real estate industry. Now he sellls houses outside of the puget sound area. He’s bitter at top agents like Ardell that sell in prime locations like Seattle and the east side. Hope this helps…

    Not undisclosed reasons. I left because of the changes that were occurring to the bankruptcy act at the time, and also because I was sick of practicing bankruptcy law after having done it for 20 years. Also my wife had started in the field and the crazy hours of a real estate agent were driving me nuts. People comment on my regularly posting on websites during the day, but they don’t realize that I often go late into the night dealing with clients. Monday night I didn’t get home until almost 8:00, and last night I was dealing with issues after 8:00.

    Also, you need to understand that you are a really poor judge of the quality of agent. Of the ones you like Ray is probably the best as to his skills–my main issues with him are not how he conducts himself as an agent. I’ve even referred clients to him in the past.

  241. 241

    By Ardell DellaLoggia @ 239:

    That is why I goaded Kary into agreeing that when Marc (an attorney-agent) said he operated much the way I do, it was perfectly fine. So it wasn’t the what…it was the who. Attorneys can in his mind do the same as I do…and be “right”. I am surprised he didn’t deny being misogynistic when I brought it up. But I’ve never met a misogynist who didn’t blame their misogynistic behavior on something else entirely, so it’s a moot point. Still you would think a “no” vs “yes” would have followed that. :)

    Ardell, it has nothing to do with your being a woman, but I suspect your arguments with me are related to my being a man, or maybe my being an attorney. You do have a history of arguing with attorneys about what the law is. Seriously, you even once did a blog piece on me over at RCG. The problem is you, not me.

    As to the rest, I’ve explained what you’re trying to allude to above, and it’s clear you don’t understand it. I really don’t care to explain it again so that you can not understand it again. I’ll just refer you to the March Stats Preview thread and Marc’s and my comments 127, 128, 163, 165 and 169. Try to read those before again misstate what I’ve said.

  242. 242
    Blurtman says:

    RE: Erik @ 236 – Please consider that Kary Krismer is an anagram of Risky Remark. His photo is actually lifted from a ’50’s milkman ad: http://i.huffpost.com/gen/1330354/images/o-MILKMAN-facebook.jpg

  243. 243

    By kenmorem @ 233:

    CTL + F for “kary” and you get 118 hits. that’s not right.

    let’s see, something he is wrong about… how about that agents add so much value that their combined 6% fee is totally justified…

    Thank you for trying to answer my question!

    My response would be that the agent in the case I mentioned in post 238 saved his client from liability on a lawsuit and allowed his client to recover attorney fees equal to about 4% of the contract price. If that agent had not included in inspection contingency the suit very well could have come out the other way, and probably would not have been decided on summary judgment, thus been more expensive. Even if not more expensive, if the seller had lost then they likely would have had to pay both the buyer’s and their own own attorney fees which would have probably been 8% of the contract price, and that ignores any damages for the condition of the property. Is that worth 6% (or more likely 3%–I don’t know what the listing office commission was.)

    I’ll agree not all agents are worth what they collect in fees. That’s true in every industry. For example, the attorney who brought that lawsuit probably isn’t worth her hourly rate. Not only did they bring a suit that was almost certain to fail due to Douglas v. Visser, but they also made other rookie mistakes in bringing the case. And they ended up causing their client to have to pay the seller’s attorney fees.

  244. 244

    By kenmorem @ 233:

    CTL + F for “kary” and you get 118 hits. that’s not right.

    Here’s a tip, if you search for “Krismer says” you will find out how many times I’ve posted. 63 counting this one.

    The vast majority of those are ones in response to other posts, so I’m engaging people who post here. That’s sort of the purpose of the site.

    The ones that aren’t in response are things that people might find of interest if they’re interested in real estate. For example, the foreclosure decision where the homeowner actually prevailed for a change, or Zillow’s change in listing policy.

  245. 245

    By kenmorem @ 233:

    CTL + F for “kary” and you get 118 hits. that’s not right.

    let’s see, something he is wrong about… how about that agents add so much value that their combined 6% fee is totally justified…

    Or how about this if you want to go by price rather than legal risk. A property I listed sold for more than 20% over a similar but significantly larger house in the same neighborhood due to my pricing strategy and multiple offer bidding strategy. And I can say that because the buyer of my listing got locked out of bidding more on it by the bidding terms of that other listing.

    So what do you think getting over 20% more is worth to a seller?

  246. 246

    RE: Kary L. Krismer @ 245

    Link? Since it is your own listing you are not prohibited from sharing a link.

  247. 247

    RE: Ardell DellaLoggia @ 246 – Except I referenced another listing.

  248. 248

    RE: Kary L. Krismer @ 247

    True but selling agent has equal rights once sold. No?

  249. 249
    Erik says:

    RE: Kary L. Krismer @ 240
    I like Ray because he figured out how to get rich while everyone else was losing money. I don’t care if he followed all the rules or not. He won.

  250. 250

    [Topic Ray Pepper]

    RE: Erik @ 249 – I don’t know why you keep sticking with that claim that he got rich. Did you ever research what an offer in compromise entails? Ray is the one who admitted doing that–I would have had no way of knowing that, although the IRS lien was of record. The IRS does not do offers in compromise with rich people.

    But again, as an agent I didn’t have a lot of issues with him. The main one I remember was years ago, before the market got hot, his inclination was to withdraw an offer if another offer came in that his buyer would have to compete with. That never made any sense to me.

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