NWMLS: Home Prices Hit New Highs, Listings Still Scarce

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April market stats have been published by the NWMLS yesterday. Here’s their press release.

Shrinking inventory putting “stranglehold” on sales

“Frustrating” is how brokers are summarizing the mood of buyers, brokers – and industry professionals – during the current housing market frenzy. New statistics from Northwest Multiple Listing Service show declines in inventory and sales, while prices continue their upward trajectory, but those numbers only tell part of the story.

“The real estate market is going absolutely gangbusters,” remarked OB Jacobi, president of Windermere Real Estate. “The remarkably low number of homes for sale can be blamed for the drop in sales,” he emphasized, adding, “The uptick in interest rates at the end of last year has clearly done nothing to slow things down.”

“Without a doubt this is the most frustrating market for both buyers and sellers that we’ve experienced in 24 years of business,” stated George Moorhead, designated broker at Bentley Properties. He said the frustration of low inventory is prompting sellers who haven’t been able to find their next home to look into undertaking major remodels instead of moving, thereby putting even more pressure on buyers who are struggling to find a home. Although buyers are being aggressive, Moorhead believes offer prices are starting to plateau. “Educated buyers cannot justify many of the home prices,” he reported.

The pressure is across county borders and across the price spectrum. “Market mayhem is wreaking havoc for homebuyers,” suggested J. Lennox Scott, chairman and CEO of John L. Scott. The inventory shortage is fueling the market and prompting shifts in seller behavior, according to Scott, who described the market as “intense as ever with 80 percent of homes in King County selling within 30 days of being listed.”

You can practically hear OB Jacobi and J. Lennox Scott drooling over all those sweet, sweet high commissions. At least George Moorhead seems relatively level-headed, pointing out that prices might be getting a bit out of control.

CAUTION

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

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

April 2017 Number MOM YOY Buyers Sellers
Active Listings 1,888 +10.9% -27.4%
Closed Sales 2,032 -2.3% -5.6%
SAAS (?) 1.32 +4.1% -8.7%
Pending Sales 2,795 +2.6% -7.8%
Months of Supply 0.93 +13.4% -23.1%
Median Price* $625,000 +4.2% +15.7%

Pending sales have been down year-over-year for three months in a row, and now closed sales have finally declined year-over-year as well. That said, even with the drop, closed sales in April came out higher than the April level in thirteen of the last twenty-four years. Given the continued extreme shortage of inventory, it’s no surprise then that strong demand + very low supply = surging prices.

Here’s your closed sales yearly comparison chart:

King County SFH Closed Sales

Closed sales fell two percent from March to April. Last year over the same period closed sales rose 13 percent. Year-over-year closed sales fell from up nine percent in March to down two percent in April.

King County SFH Pending Sales

Pending sales rose just three percent from March to April, and were down eight percent year-over-year.

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

King County SFH Inventory

Listings rose 11 percent from March to April, which is about half the size of the 21 percent gain we saw last year. Year-over-year listings were down 27 percent.

Here’s the chart of new listings:

King County SFH New Listings

New listings were basically flat month-over-month, and down 14 percent from last year. Pending sales and new listings were almost at the same level as each other. In other words, effectively every home that hit the market in April went pending within the month.

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

King County Supply vs Demand % Change YOY

Still a strong seller’s market, but it will be interesting to see if the trend in the closed sales line keeps heading down into buyer’s market territory.

Here’s the median home price YOY change graph:

King County SFH YOY Price Change

Still in strong double digits.

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

King County SFH Prices

Looks like we’re going to hit some pretty wild new highs this year. Sorry, homebuyers.

April 2017: $625,000
July 2007: $481,000 (previous cycle high)

Here’s the article from the Seattle Times: More records fall: Median home price hits $722,000 in Seattle and $880,000 on Eastside


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.

107 comments:

  1. 1
    Brian says:

    At least inventory is back above 2000 right now for the first time since December.

  2. 2
    Erik says:

    Great post Tim! I did my part to push people to buy when they thought inventory was too low at 3500 homes for sale. I fought with them. Eventually they proved me wrong with words. Well, looks like I was right after all.

    This is a great time for people to buy, hold a few years, and sell. You’ll likely make $100K on an owner occupied home in Seattle.

  3. 3
    Erik says:

    RE: Brian @ 1
    Bad news for people that own real estate in the Seattle area. Hopefully there will be little to no inventory come October.

  4. 4
    GoHawks says:

    The bears keep wishing this market down, the data keeps getting worse for them. When do they cry uncle?

  5. 5

    I’ll repeat what I said in the other thread so that it’s in the statistics thread.

    This increase is largely just a statistical fluke, not necessarily caused by rising values as much as certain high priced areas having increased sales (a change in the mix). From January to April we have a $100,000 gain in the median, but that’s largely because six of the 28 NWMLS areas accounted for over half the increase in sales from January. The lowest median in the six areas was $580,000 and the next lowest was $750,000, so those six areas all helped push the median up from $525,000 in January.

    Numbers from NWMLS sources, but not compiled by or guaranteed by the NWMLS.

  6. 6
    Deerhawke says:

    Tim, at first I thought you left out the chart for King County SFH New Listings. If you look hard, though, you can see that the chart is simply not displaying. Possible to fix this?

  7. 7
    steven says:

    i asked this in the other post but i guess 20+ real estate agents can’t explain this… seriously before you get your d*** out and start competing can you just explain one phenomenon? i don’t understand why downtown/central seattle/capitol hill area is the only region that is decreasing in value. is this just sampling error? this happened two months in a row

  8. 8
    Cap''n says:

    RE: steven @ 7

    My guess is supply and demand. You can only build so many high rise luxury condos until the prices start adjusting. Maybe I am wrong.

  9. 9
    Minnie says:

    RE: steven @ 7

    Note: this is just an educated guess (for lack of a better term)
    I believe many of the recent sales in those areas have been “tear downs”, so the stats are skewed by that. I have seen some properties in central district that are really bad, slum lord type stuff….and they are being sold I’m sure to be torn down (at least, I hope so)

  10. 10
    Erik says:

    RE: steven @ 7
    Have you ever used Microsoft excel? In excel, you can plot a bunch of data on a graph. After you plot all the data, you notice a correlation. You plot a line based on your data called a “best fit” curve. You make a solid line by averaging your data points.
    Think of the houses selling as a data point on the vertical axis. Time is on the horizontal axis. The data is scattered, but you make a best fit line and call it a trend. Capitol hill may scatter down 2 months in a row, but the general trend is up 15% year/year.
    I’m trying to describe the basics of making a graph and interpreting data. If you’ve never done it, you probably won’t get it and this site may not be the best one for you. You can always just read what real estate agents predict. They wouldn’t lie to you yo make more money.

  11. 11
    Steven says:

    Erik.

    Thank you for your degrading remarks. Yes it takes a few statistics courses in the 20 years of school to acquire a medical degree so yes i do have some statistics background. I said the downtrend was observed for at least the last two months but the graph/map showing decreasing value is based on one year price changes. So enlighten me on how you came up general trend is up 15%/year.

    By the way,

    Thank you minnie. I appreciate your reply and input.

  12. 12

    [Topic: Downtown Seattle/Capitol Hill stats]
    RE: steven @ 7

    I don’t remember you asking the question before, but to get an answer you’d need to point us to specifically what it is you’re looking at. Is it the stats for area 390? Something different? Something more (e.g. 390 and 701)? And are you looking at just SFR or both SFR and condo–if the latter a change in mix more heavily favoring condo is a likely explanation, but I haven’t looked to see if that’s it.

    Looking just at SFR I’m only seeing two areas which decreased in value from January to April, one of which is a low volume area so susceptible to changes. Area 390 went up 13%.

    But to answer your question in a general way, whenever you see something that doesn’t make sense you need to look deeper. That is why for example I knew before the April numbers came out that I’d have to dig a little, because I knew we didn’t have a 19% increase in three months. Back a few years ago it was to see how distressed properties were dragging down the median. For individual areas sometimes it’s as simple as a change in square footage. But without knowing what you’re looking at specifically it would be impossible to answer your question.

    Numbers from NWMLS sources, but not compiled by or guaranteed by the NWMLS.

  13. 13

    RE: steven @ 7RE: steven @ 7 – ” i don’t understand why downtown/central seattle/capitol hill area is the only region that is decreasing in value. is this just sampling error? this happened two months in a row”.

    It is “the mix” and more about townhomes than tear downs. There were a only a few tear downs in that period and at least one of those sold for a much higher price than many of the homes. So tear downs as a whole did not drag the stats down.

    It has more to do with Seattle calling townhomes SFH than anything and some of the ones recently sold are new construction while others in the CD were built in the period from 2003 to 2007. So even if you isolate townhomes as a separate study, you get a wide variance between a new townhome sold in Capitol Hill and a 2004 townhome sold in The CD.

    If you are looking at one floor condos, most all of those bid up over asking, so I’m not seeing a downward trend in pricing there either.

    If you are lumping The CD, Downtown and Capitol Hill together, it could simply be the weighting shifting since the real estate in those areas are not comparable to one another.

    But to answer your question, no. The prices are not down there in the last two months.

    Also there are NOT 20+ “agents” talking here. Usually only 2, and 4 at most. Seems you are thinking that some of the people talking here are agents, who are not. Note that most always it is a legal requirement or a licensing requirement that an agent use their full and real name when speaking with the public about real estate. So if you are thinking that someone not using their real name is an agent…not likely the case.

  14. 14

    [Topic: Townhouses Condo or SFR]

    By Ardell DellaLoggia @ 12:

    It has more to do with Seattle calling townhomes SFH than anything . . ..

    It’s not a Seattle issue, but more Seattle townhouses are SFR most likely due to either zoning or the size of the property. If the developer creates the unit under a condominium declaration it will be a condo. If not it will be “fee ownership” and thus listed in the NWMLS as SFR (or perhaps double listed as both condo and SRF).

    It’s not always about the size of the complex, the city it’s located in or the date it was built. There is at least one medium sized SFR townhouse complex built in Kent in the 1980s. There is another medium sized PUD complex in Renton built in the 1990s where part is condo and part has SFR townhouses. It’s up to the developer and how they want to set up the project.

    One thing I would note is that very small projects are not really well suited for condominiums. It’s hard to have a governing body when you only have four owners. Also, generating resale certificates would be an issue. And those are likely the reasons why you see a lot of SFR townhouses in Seattle–some projects are only a few units. On the other hand, maintenance of the exterior is a concern when you have attached units with a fee ownership structure.

    All that said, excluding SFR townhouses from your search for any given area would likely affect the results.

  15. 15

    Perhaps Group Think Can Get Anxious Buyers Buying

    Unless this same group think is not based on a 2007 bank collapse again.

    Lord only knows what’s gonna happen soon, at a theater near you.

    All the wars, economic woes and resource shortages destroying the current IMF stability have only one root cause and its getting worse and worse…..overpopulation. But Seattle’s somehow immune from this turmoil? Yeah right…

  16. 16
    Erik says:

    RE: Steven @ 10
    Didn’t mean to be disrespectful Steven. I don’t know your background.

    I wouldn’t get caught up in the “mix” as Ardell puts it. If you just want to invest and make money, it’s not important in my opinion. Some builder could have built cheap housing. Maybe more run down properties were sold the past couple months? Ignore the outliers and look at the trend.

  17. 17
    Brian says:

    By Erik @ 3:

    RE: Brian @ 1
    Bad news for people that own real estate in the Seattle area. Hopefully there will be little to no inventory come October.

    It’s usually the opposite though. September is often the peak.

  18. 18

    RE: Kary L. Krismer @ 13

    It’s because they more often subdivide the lots of attached housing. In the area in question that is almost always the case and a large % of the SFH sold in that period. Most notably and I think the only exception are the new “townhomes” in The CD that are built like row homes on top of “mixed use” retail. But without retail on the main, the townhomes in those specific areas are and have been SFH and not condo to date.

    The difference between condo vs fee simple is supposed to be a subdivided lot where the buyer is purchasing the land separately vs jointly. The only time I have seen a jurisdiction change that definition is in Snohomish County and that leads to a great deal of confusion. If you own the land under your “house” and not jointly with others, whether attached or not, it is “fee simple” and not “condo” ownership and a “rowhome” if attached.

  19. 19
    Erik says:

    RE: Brian @ 16
    You are right. I just want to see inventory reduce so prices keep going up.

  20. 20

    [Topic: Condo v. Fee Ownership]

    By Ardell DellaLoggia @ 17:

    If you own the land under your “house” and not jointly with others, whether attached or not, it is “fee simple” and not “condo” ownership and a “rowhome” if attached.

    That’s basically correct, but again it comes down to the condominium declaration. If you don’t have a condominium declaration it’s fee ownership (absent some rare situations like life estates, etc.). And if you have units on top of other units (or retail) it’s almost certainly condo. The first condo statute was called the “Horizontal Property Regimes Act.” Not sure why it wasn’t called the Vertical Property Regimes Act.”

    BTW, you sort of brought up a third situation to add to my descriptions. There’s the Lakeland Hills area just NW of Lake Tapps in Auburn where there are detached houses, some of which are condo and some of which are fee. The only way to be sure is to look at the legal description. If it references a condo declaration . . .. I haven’t looked recently, but the condos used to sell for about 20-25% less than the fee properties.

  21. 21

    [Topic: Inventory/Prices

    By Erik @ 18:

    RE: Brian @ 16
    You are right. I just want to see inventory reduce so prices keep going up.

    You don’t need low inventory for prices to go up. Prior to 2007 we had 20 years of increasing prices, but the inventory during that period was probably higher that entire time than what we have now (even without adjusting for the smaller housing base–Tim’s graphs don’t go back that far). That’s part of the reason I don’t like using the term “supply” for the active listings.

    But that raises an interesting question. Would it be possible to have prices significantly decline with inventory levels as low as they’ve been the past 2+ years? Probably unlikely, but not impossible.

  22. 22
    DerekB says:

    RE: GoHawks @ 4

    What’s interesting to think about is that there must be a certain amount of hold outs or bears who are sitting on the sidelines waiting for this mania to stop or at the very least prices to stabilize and the bidding wars to end so they can shop for a home. At what point do they give up and jump in only further fueling demand for a persistently low supply.

    Within my circle of friends who are mostly 24-30 in the 90-120k income bracket the line of thinking seems to be we will keep saving and wait out this “bubble”. What if the bubble never pops…. eventually they jump in…. or leave the PNW? I think prices have quite a bit further to go.

    Recency bias from the GFC seems to be keeping some of the sidelines… but for how long?

  23. 23
    Erik says:

    RE: Kary L. Krismer @ 20
    I believe that housing prices in the US have been going up approximately 14 years. Where do you get 20 years from?

    The longer we can stay in the expansion phase, the better for housing prices I would think. Hypersupply with raising housing prices is “the bubble.” I think we need credit expansion to keep housing prices going upward after supply exceeds demand. I think we will have excess inventory and prices will keep going up at some point, but I’d like to stay in the expansion phase as long as possible so homeowners and landlords can rest and our assets can appreciate.

    Below explains the terms I am referring to that I’ve posted here many times in case you missed it:
    http://www.extension.harvard.edu/inside-extension/how-use-real-estate-trends-predict-next-housing-bubble

    I’m open to being told i’m wrong if you can give me a good reason.

  24. 24

    [Topic: Historical Prices]

    By Erik @ 21:

    RE: Kary L. Krismer @ 20 – I believe that housing prices in the US have been going up approximately 14 years. Where do you get 20 years from?

    I was talking about the local real estate market (probably just King County) from 1988-2007. As I recall it’s based on year end median price, SFR. Here’s a chart that goes back to 1990.

    http://www.jparsons.net/housingbubble/seattle.html

    Not sure where you get the 14 year thing–the entire country started going down in 2006-2008.

  25. 25
    Clayton says:

    Does anyone think the surrounding suburbs like Shoreline and Lynnwood will continue to see rising prices? How tied are they to Seattle’s market?

  26. 26
    Erik says:

    RE: Kary L. Krismer @ 23
    When I look at the graph, I see 10 years of inflation adjusted price growth. If prices keep going up the way they have been, that puts us at 2022 for the next peak if you use the logic from the previous example that we can appreciate 10 years. My prediction for the next crash has been 2024. Not too far from one another. In 2022 it will be interesting to see when housing prices take a dump.

    If I can get 5 more years of this craziness and sell, I’ll be able to retire. From everything I’ve looked at, it appears it would be sell all real estate in 2022. A good time to take the money and run and perhaps wait for the bottom.

  27. 27
    wreckingbull says:

    By DerekB @ 21:

    RE: GoHawks @ 4

    Recency bias from the GFC seems to be keeping some of the sidelines… but for how long?

    Recency bias? Perhaps it is financial prudence. Some people may wish to save for retirement, contribute to an emergency fund, build a diversified nest egg, work toward financial independence, save for their kids’ education, and be able to buy a home without skipping an inspection. Buying a $750K poo-box does not align well with these goals.

  28. 28
    GoHawks says:

    RE: wreckingbull @ 25 – Please tell that to the people that bought “poo boxes” for $750,000 recently that are now worth $1,000,000-$1,350,000.

    Many have sat out the last 2-3 years of this market run. A number of folks on here said the market was inflated back in 2014.

  29. 29
    DerekB says:

    RE: wreckingbull @ 25

    I agree with everything you said. However I am referring to young smart high earning individuals who have the ability to buy a home as well as check the boxes on the other items you mentioned but simply have not pulled the trigger on housing because of the idea that maybe this “bubble” will pop or prices will at the very least stabilize.

    Many people may in fact use your logic… why over pay for a home while taking a risk by waiving inspection and be forced to compromise on several other factors. Maybe they think that when prices stabilize they will be able to buy a home in a more traditional way? Well what if prices do indeed stabilize…. but only once they have risen another 50%? Oh and now interest rates are in the mid 5’s? Then maybe taking that risk with no inspection was actually a +EV decision… Just thinking out loud.

    For a gross oversimplification although not far from the logic that I think eventually pushes most people to jump in:

    Let’s assume prices are going up at 2-3% a month maybe more in hottest areas. Then someone shopping in the 750k price range is in theory watching the price on their prospective new home increase at 15-25k a month… a few months from now they are now shopping for an entirely lower tier of home possibly not even able to buy in their desired location.

    How many people are still left with the ability to buy “expensive” homes but have not yet but eventually will use the rationale mentioned above. As I said before I think we have a long long way to go.

  30. 30
    Neil says:

    By DerekB @ 21:

    RE: GoHawks @ 4

    What’s interesting to think about is that there must be a certain amount of hold outs or bears who are sitting on the sidelines waiting for this mania to stop or at the very least prices to stabilize and the bidding wars to end so they can shop for a home. At what point do they give up and jump in only further fueling demand for a persistently low supply…. What if the bubble never pops…. eventually jump in… or leave the PNW?

    These are the questions my family and I are asking ourselves. We were lazy about getting into the housing market because we were busy with work and kid, and because we got burned in the last bubble (bought in DC in 2009 for 310k; short sale for 160k in 2013 to move here (hometown); Zillow estimate is now 236k in 2017).

    We are perplexed. I am a Seattle native and my family is here; I have no intention of leaving PNW. We keep saving, but can’t save fast enough to keep up with these prices. We are relatively well situated financially (for a family that lost all their savings in 2013), but can’t compete in these bidding wars. Even if we take out a 401k loan (!) we can’t come up with DP AND commitment to “over-appraisal” cash.

    On the other hand, population is growing, and a lot of the new people are in the tech sector with relatively high incomes. That doesn’t seem to be changing anytime soon. Then there’s the foreign investor phenomenon. Doesn’t seem like the Trump administration is going to make any policy that would disadvantage big $ real estate investors anytime soon.

    We don’t want to get burned again, but we don’t want to get priced out of this market either. Do we hurry in or wait? Hard to know. It’s agonizing.

    (There seems to be a lot of sarcasm on this comment board. I’m not sufficiently versed in this topic to be able to follow that, so I’d appreciate if any replies to this comment would keep that in mind.)

  31. 31
    whatsmyname says:

    By wreckingbull @ 25:

    Recency bias? Perhaps it is financial prudence. Some people may wish to save for retirement, contribute to an emergency fund, build a diversified nest egg, work toward financial independence, save for their kids’ education, and be able to buy a home without skipping an inspection. Buying a $750K poo-box does not align well with these goals.

    Wasn’t this pretty much your rationale for not buying a $450K poo-box, a $550K poo-box, and a $650K poo-box? I’m not sure the choice is between savings activities and buying a house. Perhaps the issue here is between savings activities and buying a house well over median price.

    Thought experiment: Are you renting a $750K poo-box (implication, previously $500K poo-box)? Are you goal post moving on a purchase, despite being willing to live in something less as a renter over a very long term? Or do you advocate a residential lifestyle where one couldn’t afford to responsibly own? And if so, is that not valuing short term consumption over long term financial control?

  32. 32
    redmondjp says:

    By GoHawks @ 26:

    RE: wreckingbull @ 25 – Please tell that to the people that bought “poo boxes” for $750,000 recently that are now worth $1,000,000-$1,350,000.

    Many have sat out the last 2-3 years of this market run. A number of folks on here said the market was inflated back in 2014.

    Paper profits are meaningless until the gain is realized. In the mean time, they get to feel smug and rich, while paying very high property taxes. Of course, they can ATM the place to the max and run away with the cash, like several people did (3 out of four homes in the same cul-de-sac) down the street from me in the last bubble.

  33. 33
    GoHawks says:

    RE: redmondjp @ 29 – If paper gains are meaningless, so are paper losses.

    If someone would rather buy than rent, then so be it. Given how tough underwriting standards are these days, they can obviously afford it if their loan gets approved.

    Telling someone not to buy and watching prices run up 20-30% is just as dangerous as telling someone to buy and watching them fall 20-30%.

  34. 34

    [Topic: Predictions/Market Direction]

    By GoHawks @ 30:

    Telling someone not to buy and watching prices run up 20-30% is just as dangerous as telling someone to buy and watching them fall 20-30%.

    Neither of those is dangerous at all. It’s the listening side which is dangerous.

  35. 35
    Minnie says:

    RE: DerekB @ 27

    My 2 cents….
    I bought in 2012 and I kid you not, there were some folks at that time that were already talking about the market tanking/ “a bubble” . In fact, I remember being terrified of purchasing in case “the market tanked”.

    But, we had saved a good downpayment and the monthly payment was the same or cheaper than rent. So, let’s just say the market tanked after we purchased….it wouldn’t have mattered to us because we could afford the monthly payment and planned to be in the home for about 7-10 years.

    Bottom line, if you want to buy a home and can afford the payments and plan to live in it for a certain amount of time (this depends on certain factors but can be calculated by the individual) then there shouldn’t be a problem. It’s about being able to afford the monthly payments, maintenance etc.

    if someone prefers to rent then that’s fine too.
    I understand not wanting to purchase in case the market tanks….and no one wants to “overpay” for something but if your friends find a house that they love and can afford then there isn’t anything wrong with purchasing, especially since interest rates are low.
    It appears that everyone nowadays wants to be real estate tycoons.

    In 2009 a friend of mine walked away from his condo in Seattle because he said it’s value was diminishing….the payments were well within what he could afford and he didn’t experience any loss of employment during the downturn….he just decided that he didn’t like that his condo wasn’t worth what he paid and he walked away. If he had waited it out he would have been fine, but he was restless. He ended up renting an apartment in Auburn comprobable to what his mortgage payments were.

    This is what scares me if the market starts to turn but I hope people have more sense than this individual.

  36. 36
    GoHawks says:

    RE: Minnie @ 32 – The big difference between this cycle and last cycle is the down payment %’s and cash purchases today. While they may change their mind and turn into seller’s someday, it won’t be like last time where people are just walking away and sending their keys to the bank. Prices went down extra because people were negotiating with the bank’s money, not theirs (short sales) or they just walked away (foreclosures).

  37. 37
    Erik says:

    RE: GoHawks @ 26
    I agree, his comments do not add value. At first I encouraged him to give reasoning to try and get him to understand real estate so he could be a valuable contributor. I finally gave up and I no longer read his comments.

  38. 38

    [Topic: Comparison now to prior peak/lending down payments]

    By GoHawks @ 36:

    RE: Minnie @ 32 – The big difference between this cycle and last cycle is the down payment %’s and cash purchases today. While they may change their mind and turn into seller’s someday, it won’t be like last time where people are just walking away and sending their keys to the bank. Prices went down extra because people were negotiating with the bank’s money, not theirs (short sales) or they just walked away (foreclosures).

    I wouldn’t necessarily agree with that. The required down payment is not really any greater today than before, with one exception. Before they did have more 100% financing options (and even negative amoritzation), but a lot of the 100% financing was in the form of an 80/20 loan package. Those are harder to walk away from than just about any other loan except maybe USDA, because the debt will still be owed on the second if the first forecloses. That gave a lot of people more motivation to stay in their property or at least do a short sale which would take care of both loans (if they were lucky).

  39. 39
    jon says:

    While a bubble is possible, I think the greater risk is if Amazon starts unhiring as fast as they are hiring now.

  40. 40
    Sea says:

    By Kary L. Krismer @ 38:

    [Topic: Comparison now to prior peak/lending down payments]

    By GoHawks @ 36:

    RE: Minnie @ 32 – The big difference between this cycle and last cycle is the down payment %’s and cash purchases today. While they may change their mind and turn into seller’s someday, it won’t be like last time where people are just walking away and sending their keys to the bank. Prices went down extra because people were negotiating with the bank’s money, not theirs (short sales) or they just walked away (foreclosures).

    I wouldn’t necessarily agree with that. The required down payment is not really any greater today than before, with one exception. Before they did have more 100% financing options (and even negative amoritzation), but a lot of the 100% financing was in the form of an 80/20 loan package. Those are harder to walk away from than just about any other loan except maybe USDA, because the debt will still be owed on the second if the first forecloses. That gave a lot of people more motivation to stay in their property or at least do a short sale which would take care of both loans (if they were lucky).

    And not only that but unlike 2012 you no longer need good credit. 600 credit score (which is terrible) and 3.5% down? No problem.

  41. 41
    Sid says:

    By jon @ 39:

    While a bubble is possible, I think the greater risk is if Amazon starts unhiring as fast as they are hiring now.

    That is not happening anytime soon.

  42. 42
    S-Crow says:

    RE: Minnie @ 35 – “This is what scares me if the market starts to turn but I hope people have more sense than this individual.”

    They won’t. It’s cute to walk away and socialize the losses.

    S-Crow

  43. 43
    Erik says:

    Why do so many registered child predators live in Everett Wa?
    http://www.homefacts.com/zip-code/Washington/Snohomish-County/Everett/98201.html

    193 registered child predators in Everett(98201) and 3 registered child predators in Alki(98116). What is the reason that the child predators in Washington state move to Everett Wa?

  44. 44

    [Topic: Walking Away/Foreclosure]

    By S-Crow @ 42:

    They won’t. It’s cute to walk away and socialize the losses.

    S-Crow

    It’s beyond cute, it’s almost encouraged. The waiting period to be able to get a new home loan under most programs is fairly short. I don’t know if it’s still the case, but Bank of American used to have some credit cards that you couldn’t get if you’d filed bankruptcy within 10 years of applying! But a six figure house loan a few years after foreclosure . . ..

    I know Freddie and Fannie want to promote home ownership, but that isn’t really as necessary right now given market conditions in just about all of the country given the C-S data. They could easily tighten their standards without causing a problem in the market (actually here it would help some problems).

    Back when people were considering short sales I would try to warn that the then current standards wouldn’t necessarily be the future standards. What I meant was you couldn’t count on a three year waiting period to be the waiting period four years from now. But so far I don’t think any entity has tried to tighten up credit based on a past foreclosure or short sale.

  45. 45
    David B. says:

    RE: Erik @ 43 – Wow, you sure prefer to invest in sleazy neighborhoods. 3 sex offenders? Homefacts reports my zip code has zero:
    http://www.homefacts.com/zip-code/Washington/Kitsap-County/Bainbridge-Island/98110.html

    And the outside temperature is 48.92 degrees F (exactly, down to the 100th of a degree) and Bainbridge is a great place to get in on the ground floor because the median price is now $0 as reported by Homefacts (which as we all know is never wrong!).

  46. 46
    Erik says:

    RE: Kary L. Krismer @ 44
    The world is not made up of rules to make things fair. If you want to predict what will happen, follow the money. There is no money to be made by lending less.

    If I was a banking executive, I would repeat the last cycle when rules got loosened and bankers got rich. When things go bad, get another tarp. The us government set a precedent. Nothing was learned, so the same cycle will repeat.

  47. 47
    Erik says:

    RE: David B. @ 45
    Bainbridge island is a nice place to reside. The predators are sent to Hadlock is my guess, but I haven’t looked up the facts. But who decides where the filth reside?

    In the north puget sound, someone designated Everett to send the ex convicts. Who makes that decision? How is the decision made? If I could figure this stuff out, it would be easier to project price increases.

    My friend from north Everett came to a remodel of mine in Shoreline. His first comment was that he was surprised I bought in a poorer area as I try to stay in nice areas. Later he commented that although it’s a poorer area, the people are nice and it’s comfortable. We shared how north Everett is poor and has a much different feel. I think it’s because north Everett is full of ex convicts and hence drug addicts and child predators. If your city starts relocating people out of prison to your city, it’s time to sell. This is an appreciation killer and not a nice place to live.

  48. 48

    [Topic: Lending Standards]

    By Erik @ 46:

    RE:
    The world is not made up of rules to make things fair. If you want to predict what will happen, follow the money. There is no money to be made by lending less.

    That’s probably one of the best things you’ve ever said here.

    But . . . if these decisions were left to the individual banks rather than Fannie/Freddie/FHA, the decisions would be different, and there would be fewer places for those with marginal credit to get a loan and/or they would pay much more. That Bank of America had that credit card policy demonstrates that–theirs was the most strict I’ve ever come across sort of credit unions. If you ever stiff a credit union, good luck ever doing business with them again.

  49. 49

    RE: Minnie @ 35
    $600/MO HOA Fees at Renton Condos

    Add in mortgage, maintenance, insurance, taxes….you get the gist….Seattle is a great if you don’t drive to work and you can drive 10A-1PM weekdays….otherwise its Hades.

    Thank God for the mountains and trees withing driving distance from the treeless asphalted neighborhoods , if ya got time, money and energy to visit them after stressing out commuting to work and paying your HUGE cost of living here.

  50. 50
    Jeff says:

    This is just turning into the next San Fran, Vancouver, Toronto hot money laundering spot..too much global credit with no where to go – great map of the hot spots..
    http://www.cnbc.com/2017/05/03/home-prices-will-not-fully-recover-until-2025.html

  51. 51
    justme says:

    RE: Jeff @ 50

    In your linked article, I see no data that supports your assertion. The data is not about money laundering.

  52. 52
    SeaTownDweller says:

    RE: softwarengineer @ 49 – So is moving to Kansas (or wherever you are) better..? Is there even a robust job market? People who live in the Bay Area also face high cost of living and terrible commute, but they are there because of the jobs. Now Seattle is the next frontier for tech boom because real estate is still much relatively cheaper than the Bay Area, and the more good engineers and high earners Seattle attracts, the higher the median will be. So if those who pay 600 in HOA and blah blah in mortgage/tax/insurance still come out way ahead of you in dollar sign, do you feel differently about your criticism?

  53. 53
    Blurtman says:

    Californication
    **********
    Why Silicon Valley tech workers are packing their bags for Seattle

    Technology workers are increasingly leaving the Bay Area for Seattle. A new study from Zillow and LinkedIn makes it easy to see why: Seattle tech workers have the most money left over after paying for housing.

    A tech workers on average in Seattle keep nearly 55 percent of his or her paycheck, or $5,500, after paying rent. Bay Area tech workers generally make more but have only 35 percent, or nearly $4,000, left over after paying rent.

    Zillow and LinkedIn analyzed job listings, salary data, tax rates and median rents to find the markets where technology workers have the most income left over after paying rent or making a mortgage payment.

    The Bay Area’s rising housing prices are an opportunity for Seattle, provided the Puget Sound region can keep costs down. A recent study from job search giant Indeed.com found Seattle is the third most-searched destination for Silicon Valley tech workers. The influx can help to supply Puget Sound-area technology companies with the talent they need to grow.

    Seattle technology workers who own homes have an average of 59 percent, or nearly $6,000, of their paycheck left over each month after making a mortgage payment. By contrast, Bay Area tech workers have an average of 37 percent, or about $4,200, left over.

    The Washington tech industry is growing by about 10 percent a year and there are now more than 250,000 people working in tech-related jobs in the Evergreen State, CNBC reported, citing a study from the Washington Technology Industry Association.

    The vast majority — almost 90 percent — of those jobs are in King County, home to the headquarters of Amazon and Microsoft. But Seattle is also seeing an influx of tech jobs from Silicon Valley tech giants like Google parent Alphabet and Facebook that have satellite offices there, CNBC noted. Facebook now employs about 1,000 people in the city.

    Seattle startups last year raised $583 million from investors, CNBC said, citing data from CB Insights.

    “We are the number one tech-importer of talent in the country,” Michael Schutzler, the CEO of the WTIA, told CNBC.

    http://www.bizjournals.com/sanjose/news/2017/03/21/silicon-valley-tech-workers-seattle-housing-costs.html

  54. 54
    Umka says:

    RE: SeaTownDweller @ 52

    You sound like everyone in the Puget Sound region works for the IT industry. Which is simply not true.
    Not even close!
    Wages are relative. If you own a house in Kansas and do not have to pay $3000/month for rent or mortgage, then you can be easily making $3000/month less than in Seattle, but have the same amount of $$$ left over.

    Its kinda funny how everybody screams about sudden “Tech boom in Seattle” forgetting the fact that not long ago Microsoft was the one who shipped those IT jobs overseas (India primarily) in the first place.

    I’m also open to hearing your suggestions about how REGULAR people (not IT folks) can survive here with their modest salaries? Teachers, bank tellers, firefighters, etc.

  55. 55
    SeaTownDweller says:

    RE: Umka @ 54 – I was addressing the criticism of another post, offering the other angle that many others currently share. I don’t have an answer for affordable housing here, and mostly just seeing what the government would do to even the playing field in a highly regressive tax state. But if you are responding to me, then perhaps your point is to say that the price wouldn’t increase and that people who are in this wouldn’t be better off after a certain time frame. Did that logic work out well for Silicon valley lower middle class or Manhattanites? Some people are forced to move further away from the city while the price continue to increase, catering to the money parkers, it isn’t something that you fight, but ride along if you can. If you can’t then, hopefully the government can help you, afterall, they collect more tax the higher the assessments.

  56. 56

    RE: SeaTownDweller @ 55 – Or if you’re lucky, you can retire during such a run up and get the H out of town. It would be sort of the opposite of those who reached retirement age here in 2009-2010.

  57. 57
    S-Crow says:

    I think there is a tendency for people to think that there is only real estate in Redmond, Bellevue, Seattle and Kirkland & Issaquah. As the above comment suggested, not everyone in the tri county area makes $200K or more per year working at AMZN, GOOG, MSFT, F5, , etc. However, the problem is that many communities outside of these areas are treating their property as if it is. IMHO, I see a tremendous disconnect in this regard.

    In addition, people are underestimating the amount of leverage sloshing around including debt loads. Sales are 1/2 the pie. The other “silent” half are the refinances taking place that could be your neighbor. With some new found equity, when you go from 60%CLTV up to 80% (even higher in many cases) and SHIFT DEBT (cars/trucks/toys, credit cards, IRS debt, student loans, etc) onto your home then you are going in the wrong direction. Unless you are a loan officer/processor or in escrow you don’t see this. This is classic bubble behavior from ’05-07.

    I would be very concerned if a high percentage of my neighborhood homeowners were all at 80% to 100% CTLV (cumulative loan to value).

    Go M’s. Sorry to see Paxton on the DL.

  58. 58

    [Topic Sales vs. Refinances.]
    By S-Crow @ 57:

    In addition, people are underestimating the amount of leverage sloshing around including debt loads. Sales are 1/2 the pie. The other “silent” half are the refinances taking place that could be your neighbor.

    I just checked King County for Star Wars Day, and there were almost exactly twice as many deeds of trust recorded as warranty deeds. There are a few sales transactions that would have more than one deed of trust, but S-Crow is pretty close saying refinances are half.

    And he’s also right about the concerns of refinancing, particularly if the owner runs up other debt again, but he didn’t mention that they’re likely restarting the 30 year clock too.

  59. 59
    Go Hawks! says:

    Where to go? So if you were to cash out of our market, what would be your top 3 destinations of choice to move/buy?

  60. 60
    justme says:

    RE: S-Crow @ 57

    Good information on high levels of indebtedness that you have observed, perhaps even for longtime homeowners. That’s the kind of condition that will make inventory rise like a hockey stick when all the debt serfs rush for the exit at the same time.

  61. 61

    By Go Hawks! @ 59:

    Where to go? So if you were to cash out of our market, what would be your top 3 destinations of choice to move/buy?

    1. Tahiti (unlikely)
    2. Canada (less unlikely) (Not near Victoria or Vancouver.)
    3. Somewhere in Arizona that’s not near Phoenix.

  62. 62
  63. 63
    Macro Investor says:

    By Erik @ 2:

    Great post Tim! I did my part to push people to buy when they thought inventory was too low at 3500 homes for sale. I fought with them. Eventually they proved me wrong with words. Well, looks like I was right after all.

    This is a great time for people to buy, hold a few years, and sell. You’ll likely make $100K on an owner occupied home in Seattle.

    I hope you make more. MUCH MORE. $100k is nothing. Let’s say that 100k is on a 600k house, now worth 700k. Your selling cost is 70k all in. If it’s not your primary residence (hello erik) you are in the 35% tax bracket. Oh, and I’m sure you included remodeling expenses. But did you include all the hours of hard work?

    After taxes and expenses your 100k becomes 20k. Divide that by the hours of work. Not really that impressive.

    Notice how the agents make 70k, while you only make 20k. You did all the work and took the risk. This is why the agents love love LOVE the move up buyer. These lost souls take their equity out, give a huge cut to the agents, then finance something even better for the agents. And this is why all the sleaze bags are about to attack the messenger — because if people understood it would kill their gravy train.

  64. 64
    Brian says:

    RE: S-Crow @ 57

    Thanks, I enjoy your insight coming from an escrow perspective.

  65. 65

    [Topic: Recent Gains/Gross/Net.]

    RE: Macro Investor @ 63 – Math isn’t your strong suit is it? Agents get 10% now?

    BTW, not sure why you assume Erik wasn’t talking net. He didn’t specify. People who bought a house a few years ago probably costing far less than $600,000 could easily net that in many situations.

    It really is crazy how well some people have done in a very short period of time. Check out MLS 1077220. I had nothing to do with that transaction or the one a few years ago, but those sellers grossed $99,000 more than the $80,000 they paid in 2013. Net they likely more than doubled their money, ignoring the likely leverage. Now you’re probably not going to do as well percentage wise on a $600,000 house, but netting $100,000 wouldn’t be that unusual of a result. And assuming those people lived there, almost certainly no income tax.

    Of course that happening if you buy today is less likely, but Erik’s example was clearly of buying a few years ago.

  66. 66
    Lily says:

    There is definitely a rental glut (concentrated on the pricier end of the market). As land lords – we have felt no incentive to increase our price. But I still think it is a decent time to invest in single family homes (if you can fetch one even) if you have the finances and a long term plan to stay put.

  67. 67
    learnaboutRE says:

    @Kary,

    If I want to buy an investment property(between 300k-800k), between Queen Anne/Capitol hill/Green Lake/UW area, which one would you recommend?

  68. 68
    Deerhawke says:

    Flipping houses is actually hard to make work. Most of the teams that do it have one partner that is a real estate agent to cut transaction costs.

    Really, though, most of the time real estate is not a get rich quick scheme. It is a get rich slowly plan where using the leverage of the bank’s money pumps up your returns.

    In 1997 we bought a 4 bedroom house right on 85th Street in Greenlake for $135,000. The 20% down-payment was a stretch for us. But, it was one of those rare times when you could get a decent cash-on-cash return from day one, even with a 8.75% interest rate on a 15 year loan. We have had good and bad tenants and had to replace the water line and most of the plumbing. But it rents now for $3200 per month to young professionals who take adequate care of the place. We get offers in the mail for $600k which we promptly recycle.

    My only real regret is that we don’t have more like it.

  69. 69
    wreckingbull says:

    RE: whatsmyname @ 31 – I sold in 2006 and I bought in 2011. In fact, I own multiple pieces of property. You should pay more attention. Where did I say I was a renter?

    Just because my own home has wildy appreciated does not mean I must feel compelled to pump RE. If the market crashed tomorrow – great. I am diversified and this would just mean more buying opportunities. There is no way I would buy today. Just because someone can afford something does not mean they should buy it. That axiom has served me well, in fact it is why I am typing this from home on a sunny day and not from a corporate cube-farm.

  70. 70
    Erik says:

    RE: Macro Investor @ 63
    I’m kinda new to buying rentals, and I don’t really know how to avoid the tax hit yet. One thought I had was to do a 1031 exchange and sell a few rentals in exchange for one that is paid off. That way you’d have a nice cash flow for life. I’d be interested in hearing more ideas.

  71. 71
    Brian says:

    Looks like treasury yields (and thus mortgage rates) are trekking back up. 10 year back to 2.4% from 2.2% last month.

  72. 72
    Marc says:

    How’s this for a lead sentence on a mainstream media site:

    It’s going to be a tough house hunting season for buyers, but it’s particularly brutal for those in Seattle.

    http://money.cnn.com/2017/05/09/real_estate/seattle-housing-market-buyers/index.html?iid=hp-stack-dom

  73. 73
    Sea says:

    @ Kary 65. No, agents don’t get 10% commission but usually with Commission plus transfer taxes etc it costs 9% or so to sell a house. I’ve sold several in Wa and never done better than 9%.

  74. 74
    Blurtman says:

    RE: Kary L. Krismer @ 61 – Why not Hawaii? It is civilized, and part of ‘Merica.

    1. Maui
    2. Molokai – check out this beauty. Probably have to do some guerrilla farming to stay busy. Or paint or start a right wing website. https://www.zillow.com/homes/48-N-Waieli-St-.num.-48,-Maunaloa,-HI-96770_rb/
    3. A nice forest retreat somewhere in Humboldt county.

  75. 75
    jon says:

    I’ve heard that people get tired of the wind in Hawaii and there is also island fever, because residents don’t island hop like people do on vacation.

  76. 76

    By Sea @ 73:

    @ Kary 65. No, agents don’t get 10% commission but usually with Commission plus transfer taxes etc it costs 9% or so to sell a house. I’ve sold several in Wa and never done better than 9%.

    Yes, I’m aware of those numbers. 9% is typically slightly high with a stereotypical 6% commission, but 8.5% would be too low. It’s just that Macro Investor repeatedly claimed earlier that the costs of sale were 10%, and rather than adjusting down he made the real estate commission by itself 10%.

    Macro Investor is just a perma-bear who will make any argument he can to dissuade people from buying. He was doing that back in 2013 about when that condo was bought. His comment 26 sounds remarkably like his recent decreasing affordability comment, except in 2013 he used interest rates instead.

    http://seattlebubble.com/blog/2013/06/05/nwmls-inventory-sales-prices-all-gain-in-may/#comments

    Actually that entire thread is an interesting/funny/sad read, but a good example of why I’m not really into peoples’ predictions of where the market is headed.

  77. 77

    By Blurtman @ 74:

    RE: Kary L. Krismer @ 61 – Why not Hawaii? It is civilized, and part of ‘Merica.

    Hawaii is not nearly as tropical as Tahiti. Most of Tahiti is beautiful, most of Hawaii is ugly. I call Hawaii “Eastern Washington with a bad exchange rate.”

  78. 78
    Erik says:

    RE: Kary L. Krismer @ 77
    Tahiti would be my choice too. Love that area. No comparison to Hawaii.

  79. 79
    Blurtman says:

    New Zealand? I feel comforted by an area operating under US law. Maybe St. Thomas.

  80. 80
    Shoeguy says:

    By Erik @ 26:

    RE: Kary L. Krismer @ 23
    When I look at the graph, I see 10 years of inflation adjusted price growth. If prices keep going up the way they have been, that puts us at 2022 for the next peak if you use the logic from the previous example that we can appreciate 10 years. My prediction for the next crash has been 2024. Not too far from one another. In 2022 it will be interesting to see when housing prices take a dump.

    If I can get 5 more years of this craziness and sell, I’ll be able to retire. From everything I’ve looked at, it appears it would be sell all real estate in 2022. A good time to take the money and run and perhaps wait for the bottom.

    Do you factor in raising interest rates from now until then?

  81. 81
    Erik says:

    RE: Shoeguy @ 80
    That’s not part of the calculation. Interest rate increases have a loose correlation at best with housing prices.

  82. 82
    whatsmyname says:

    RE: wreckingbull @ 69
    Ah, but I do pay attention. Your words: “Some people may wish to save for retirement, contribute to an emergency fund, build a diversified nest egg, work toward financial independence, save for their kids’ education, and be able to buy a home without skipping an inspection. Buying a $750K poo-box does not align well with these goals.”

    Seems like someone who has made the affordable purchase trip a couple of times wouldn’t automatically assume that a purchase must be unaffordable.

  83. 83
    Ross says:

    By Kary L. Krismer @ 77:

    By Blurtman @ 74:

    RE: Kary L. Krismer @ 61 – Why not Hawaii? It is civilized, and part of ‘Merica.

    Hawaii is not nearly as tropical as Tahiti. Most of Tahiti is beautiful, most of Hawaii is ugly. I call Hawaii “Eastern Washington with a bad exchange rate.”

    Except that it’s exceedingly difficult to move to Tahiti. For Americans, basically the only way to move to French Polynesia is to marry a local. Even for French citizens, it’s a pretty difficult process. But I guess one could buy a vacation property and visit there according to the visitor visas you can obtain (I think they are 30 or 60 days at a time)

  84. 84

    By Erik @ 81:

    RE: Shoeguy @ 80
    That’s not part of the calculation. Interest rate increases have a loose correlation at best with housing prices.

    That has certainly been true in the past but now I’m not so sure. It seems possible the current crop of buyers is income ratio constrained and a persistent push higher in rates could expose that weakness. Of course, prices are sticky to the downside and the local fundamentals indicate a continued boom, so you could well be correct.

  85. 85
    Brian says:

    RE: LessonIsNeverTry @ 84
    One thing I can say about interest rates is that if bond yields went up considerably (i.e. 10 year @ 5-6%) a lot of investors would probably take their money out of real estate and put it back into bonds, which are safer. Money is probably being funneled into real estate due to lack of safe alternative investments. Give them a safe alternative and they’ll flock like a bat out of hell.

    The reverse happened the last bubble. 10-year yields dropped below 5% and people went to real estate for returns. After the bubble popped, they went back in.

  86. 86

    By Ross @ 83:

    By Kary L. Krismer @ 77:

    By Blurtman @ 74:

    RE: Kary L. Krismer @ 61 – Why not Hawaii? It is civilized, and part of ‘Merica.

    Hawaii is not nearly as tropical as Tahiti. Most of Tahiti is beautiful, most of Hawaii is ugly. I call Hawaii “Eastern Washington with a bad exchange rate.”

    Except that it’s exceedingly difficult to move to Tahiti. For Americans, basically the only way to move to French Polynesia is to marry a local. Even for French citizens, it’s a pretty difficult process. But I guess one could buy a vacation property and visit there according to the visitor visas you can obtain (I think they are 30 or 60 days at a time)

    Well I said it was very unlikely. I don’t think my wife would go along with my marrying a Tahitian woman. I do remember one of our tour guides was from France and married to a Tahitian woman. That must explain that.

    Fortunately I have a leg up on the rest of you for my second choice–Canada. My dad is dual citizen, and apparently that helps (per one of those articles circulating around the time of the election).

  87. 87

    {Topic: Interest Rates]

    By Brian @ 85:

    RE: LessonIsNeverTry @ 84
    One thing I can say about interest rates is that if bond yields went up considerably (i.e. 10 year @ 5-6%) a lot of investors would probably take their money out of real estate and put it back into bonds, which are safer. Money is probably being funneled into real estate due to lack of safe alternative investments. Give them a safe alternative and they’ll flock like a bat out of hell.

    Unless their fear was the higher rates reflected inflation getting out of control. Probably unlikely unless something like “stagflation” in the 70s.

  88. 88
    redmondjp says:

    By Kary L. Krismer @ 77:

    By Blurtman @ 74:

    RE: Kary L. Krismer @ 61 – Why not Hawaii? It is civilized, and part of ‘Merica.

    I call Hawaii “Eastern Washington with a bad exchange rate.”

    What in blue blazes are you talking about? I have been to the Big Island twice in the past 6 months for work, and you can live there far cheaper than you can in Seattle. Gas at the Kona Costco (alcohol free as well) was under $3/gallon, and you can rent a 3BR house in Hilo for under $2K/month, with 1BR units well under $1000/month. Plus, you can grow tropical fruits right in your back yard.

  89. 89

    [Topic: Hawaii]

    RE: redmondjp @ 88 – I’ll admit I haven’t been there for probably 10 years or so. And when I was there I didn’t check out housing costs, but Hawaii was otherwise expensive at the time. I haven’t been back though not due to the expense, but more because I really don’t care for it because too much of it does look like Eastern Washington.

    But that said, everything I can find on the Internet indicates that Hawaii has a very high cost of living and a very high cost of gasoline. Do you have something to indicate that is old out of date information?

  90. 90
    Blurtman says:

    RE: redmondjp @ 88 – I dig Hilo and really like Pahoa. Haoles like Kary should stay away.

  91. 91
    Blurtman says:

    RE: Kary L. Krismer @ 89 – Here you go: https://www.zillow.com/homes/4-Mirador-Del-Cielo-Cliff-Street,-Isabela,-PR-00662_rb/

    Taxes are likely headed up, and services down, however. Armed guards may be recommended.

  92. 92
    QuahMan says:

    It would seem like holding is wise, rather than selling, given the incredibly stubborn inventory trend. At least until there is some semblance of reversal?

    We have a townhouse which I’m torn between selling and investing the funds elsewhere or holding & renting. Interestingly enough the rental income on the eastside isn’t all that great so it would be not much better than break even at current rents. Thoughts? Besides #sellersproblems…

  93. 93

    RE: QuahMan @ 92

    Not sure what you mean by “Besides #sellersproblems…” given buyers have a lot more problems than sellers these days, and for some time now.

    If it’s a two bedroom I wouldn’t wait until a reversal in inventory trend as the market can turn quickly on two bedroom townhomes from scarcity to glut.

    If it’s a sizable (about 1,500 sf) 3 bedroom, they are still a limited commodity and alternative to single family home, especially the ones with 2 car garages. A few 3 bedroom communities are not popular, but if you have a 3 bedroom in a popular neighborhood that would rent for more than a 2 bedroom and still be a limited commodity when and if inventory starts to turn, then a toss of the coin. But a 2 bedroom townhome I would not hold.

    My $.02. Other opinions may vary.

  94. 94
    Erik says:

    RE: QuahMan @ 92
    Rent it out and buy another one. Then sell the rental in a couple years. This way you don’t have to pay capital gains tax since you lived there 2 of the last 5 years. Plus, I bet you wind up with an extra $100k in your pocket. The market will not turn around in the next few years. Worst case scenario you keep the rental longer and make even more money later.

  95. 95
    jon says:

    RE: Ardell DellaLoggia @ 93 – I take it that #sellersproblems is a riff on #firstworldproblems. But I agree, the impending glut of high end apartments in Seattle because of all the construction is going to keep prices down on smaller homes.

    Tim has an article today on geekwire that illustrates the difference in returns between investing in the stock market vs real estate. It’s a tongue in cheek article, but the basic idea is sound.

  96. 96
    Doug says:

    RE: jon @ 95 – Yes, great and hilarious article. Here’s the link: https://www.geekwire.com/2017/amazon-stock-vs-seattle-real-estate-better-investment/

    Erik, I suggest you learn how the stock market works if you really want to get rich.

  97. 97

    RE: jon @ 95

    Had to go back and check that QuahMan was talking townhome on The Eastside. In Seattle I like 2 bedroom vs 1 bedroom “apartments” near SLU. On The Eastside I like 3 bedroom vs 2 bedroom townhomes with garages. “Liking” 3 bedroom “apartments” vs 2 in Seattle is TOO limited a commodity. :)

  98. 98
    QuahMan says:

    RE: Ardell DellaLoggia @ 97

    Yes my seller problems was tongue in cheek, related to first world problems. The townhouse is in Issaquah and it’s quite nice, 1500 sq ft, 3 bd/3 ba but only single car garage. Seeing all the rentals being built up has me worried that my rents will take a hit and I won’t have the ability to fully cover the mortgage/HOAs/etc with only the rents. Pretty surprising really, when you consider that to get that low of a mortgage you’d have to put $200K down. Surprising that rents don’t correlate more with mortgage payments on some places out here. @doug, yes I intend to invest but just wondering if waiting a year or so would get a better start. @Erik yes aware of the cap gains exemption, thinking of starting with holding for that period….at least.

    I guess I’m looking for validation of my rationale of low inventory = stable to increasing prices. I would think that’s sound just based on simple economics.

  99. 99
    Eastsider says:

    RE: QuahMan @ 98

    My 2 cents. If you are to buy a rental property for investment today, do the numbers work out? If not, I suggest you sell. As far as I can tell, the numbers (e.g. cap rate) have been dismal since 2015 or so. You should look at the big guys. None are buying into rentals this past couple years.

  100. 100
    jon says:

    RE: Eastsider @ 99 – The transaction costs on selling a townhouse are going to be hard to recover by switching to another investment. That money will have to be spent eventually, but if the owner does not sell, they can at least get a return on it in the meantime. The rents and sales price that are low now from apartment overbuilding will catch up eventually, say in a decade or so. It just depends on if the owner wants to wait that long.

  101. 101
    Eastsider says:

    RE: jon @ 100 – I agree that rents are low but prices are high! That’s the reason cap rate does not pencil nowadays. Keeping the ‘investment’ is a losing proposition unless the asset appreciates. Assuming that he bought the townhouse for $200k and it is now worth $400k. He should base his investment decision on current value of $400k, not $200k. If he keeps the $400k in the townhouse, he is likely losing money vs earning say 5% in a different investment. Dealing with rental properties also takes a lot of time and effort. My recommendation applies to rental property investors, but not homeowners who actually live in the house.

  102. 102
    Erik says:

    RE: Doug @ 96
    I don’t know how to predict the stock market. I think I have an idea how the real estate works after many years. Not willing to go through another learning curve. Besides, I don’t have lots of money to invest. With real estate, I can borrow the money to invest.

  103. 103

    [Topic: Stocks vs. Real Estate]

    By Erik @ 102:

    I don’t know how to predict the stock market..

    And that’s the problem. It you really wanted to compare RE to stocks you’d use one of the index funds. Applying 20/20 hindsight to one particularly company that has done well would be like comparing RE to the investment in a winning lottery ticket–not likely to happen again in a planned way, but almost certain to happen again in some way.

  104. 104
    Doug says:

    RE: Erik @ 102 – You can also borrow money to invest in stocks, bonds, FX, etc. It’s just referred to as ‘margin’ instead of a ‘mortgage’.

  105. 105
    QuahMan says:

    RE: Eastsider @ 101 – you capture the conundrum I find myself in. I could rent the townhouse for a price that is equivalent to that which a $200K downpayment buyer would make, which makes no sense to me. Why should anyone buy using that calculation (at least in this scenario)? Cap rate is dismal. Apartments keep going up (new batch off exit 15 near transit that are not yet completed) so it would seem the only long game would be appreciating prices. Which, based on inventory, seems very likely but who knows.

  106. 106
    Eastsider says:

    RE: QuahMan @ 105 – Yes, the current cap rate does not justify rental property investment. For homeowners, however, there is a benefit of having your own roof. The purchase is potentially decades long which makes current prices less relevant, if you can afford it.

  107. 107
    Erik says:

    RE: QuahMan @ 105
    Yeah, buy for low down and rent the property out. Let the price appreciate and either refinance it or sell it. That way you can feed your other rentals. That’s how it’s done in Seattle. Cap rate is for buying apartment complexes or beat down areas.

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