NWMLS: Listings and Sales Slip, Prices Edge Up in July

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July market stats have been published by the NWMLS. Here’s a quick excerpt from their press release

“We should be entering the summer doldrums, but I don’t see that happening,” reported Diedre Haines, principal managing broker-South Snohomish County at Coldwell Banker Bain in Lynnwood. “Inventory remains low, but prices and demand continue to increase, prompting murmurs of a looming bubble,” she commented, adding, “Some say yes, and just as many are saying no” when asked about the likelihood of a bubble.

The leap in prices may have some people crying “housing bubble,” said OB Jacobi, president of Windermere Real Estate. “I still feel confident we’re not headed in that direction. Bubbles result from irresponsible lending practices, but buyers in King County have high credit scores and higher than average down payments. This area also has a high percentage of homeowners who are ‘equity rich’ which means their home is worth more than twice what they owe. For a housing bubble to occur we would expect to see far lower equity, down payments and credit quality.”

Home salespeople have a historically good record when it comes to predicting housing bubbles, so you know you can believe what OB Jacobi says. (That was meant to be read with an extremely sarcastic tone.)

Now let’s dive into the numbers for July.

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):

July 2017 Number MOM YOY Buyers Sellers
Active Listings 2,898 +11.4% -18.5%
Closed Sales 2,727 -5.7% -2.7%
SAAS (?) 1.28 -6.4% -4.0%
Pending Sales 2,950 -13.0% -7.8%
Months of Supply 1.06 +18.1% -16.2%
Median Price* $658,000 +0.8% +18.6%

Prices keep climbing as listings are still scarce. What more is there to say? So far this year we haven’t seen any movement in the trends that point to some kind of change coming soon in the market.

Here’s your closed sales yearly comparison chart:

King County SFH Closed Sales

Closed sales fell six percent between June and July. Last year over the same period closed sales decreased three percent. Year-over-year closed sales were down three percent.

King County SFH Pending Sales

Pending sales fell thirteen percent from June to July, 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

Inventory rose 11 percent from June to July. Unfortunately for buyers, year-over-year inventory was still down 18 percent.

Here’s the chart of new listings:

King County SFH New Listings

New listings were down fifteen percent month-over-month, and down seven percent from last year.

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

No real change here. Supply and demand is still very much trending in sellers’ favor.

Here’s the median home price YOY change graph:

King County SFH YOY Price Change

July saw the highest year-over-year price increase since March 2016.

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

Yet another new all-time record high.

July 2017: $658,000
July 2007: $481,000 (previous cycle high)

Here’s the article from the Seattle Times: King County home prices grow $100,000 in a year for first time; West Bellevue jumps 41 percent


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.

367 comments:

  1. 1
    N says:

    I love the notion that only a lender driven problem can cause a bubble. How would you explain stock market bubbles? In a sellers market with buyers that have cash you would think that prices could easily push prices into bubble territory as cash buyers pay more than properties would appraise for, then causing the next sales to appraise at a much higher value than they would have otherwise. This outlook is all fine and good when the economy is strong, stock market is breaking records weekly etc but what happens when that is not the case. How many potential buyers would need to drop out of the market for things to change, probably not as many as many would think.

  2. 2

    RE: N @ 1 – Well in stocks there is buying on margin, which is a form of credit, but I do get your point. I think a lot of people don’t realize that without credit our economy would make the 1930s recession look like a utopia.

    In the past my suggestion for helping in the lending area was setting restrictions on lending not only based on current prices, but historical prices. So the lender on a 20% down loan perhaps wouldn’t lend over 80% of today’s value, but a smaller percentage of two prior years’ values. The numbers could be based on some percentage increase, perhaps not allowing more than a 12% increase in one year or a 20% increase over two years–numbers I just pulled out of the air without thinking about it much. That would act as a circuit breaker on financed transactions, reducing demand and thus the rate of increase. It would though significantly increase the cost of appraisals.

  3. 3
    N says:

    Of course no matter what the perception is on the street the ability to get a loan is so much greater than it was 5 years ago. Great for increasing the buyers pool and prices during a bull run but how will it fare in a downturn, especially with those 600 credit score 3.5% down buyers. Realtors can talk all day about how responsible lenders are now but two things that really stand out are how little down you need now versus a few years ago and how loose the appraisers appear to be with properties that would never have appraised like this even 3 years ago (for example within a 6 month window going up hundreds of thousands of $$).

    http://www.latimes.com/business/la-fi-mortgage-down-payment-20170629-htmlstory.html

  4. 4

    RE: N @ 3 – The appraisals work both ways–with condos being particularly problematic.

    I may have told this story before, but there were two nearly idential condos listed at something like 215k and 220k. Both were sitting and we went after the first one for a couple of weeks, but they wouldn’t agree to our price, and then the second one. We didn’t see any way either one would appraise for anywhere near even $200k. We came to terms on the second one at a price under 200k, with low appraisal protection for the seller down to an even lower number. The appraisal came in $1,000 lower than the low appraisal number, in part because the appraiser used a 10 month old sale in the same complex without making any adjustment at all for the market changes over 10 months! I can see why appraisers don’t adjust much for same complex sales, but ignoring the market changes seems absurd.

    Anyway, to complete the story, a cash buyer saw our client’s transaction go pending and jumped on the other one at something close to $215k, not knowing how much lower our contract was for. But now in that complex that sale will be a comp that the appraisers will use, and it will be easier to get a price over $200k financed.

  5. 5
    Bubble Trouble says:

    ” Bubbles result from irresponsible lending practices, but buyers in King County have high credit scores and higher than average down payments. This area also has a high percentage of homeowners who are ‘equity rich’ which means their home is worth more than twice what they owe. For a housing bubble to occur we would expect to see far lower equity, down payments and credit quality.”

    Median income in King Co: $75K
    Median home price in King Co: $680K

    I don’t care if everyone in King Co. has an 800 FICO score. A 9:1 ratio of home price to income is not sustainable. Not in King Co, not anywhere.

    And say everyone magically found 20% or $136,000 to put down on a median priced home. That leaves you with a mortgage of $544,000. At 4%, 30 year fixed, that’s $2597. Just mortgage, before taxes, before insurance, before maintenance and repairs.

    So just mortgage alone, the median household would need to spend 42% of their gross income on a mortgage. LOL. Yah man, totally sustainable. Add in property tax and insurance and reapirs/maintenance and it’s around 55% of **GROSS** income, or 75% or so of net income.

    And this is a best case scenario where the household has 20% to put down. More likely we’re talking a 5-10% down scenario, which adds in PMI and a higher PITI. How anyone can look at this scenario and say no bubble exists is laughable.

  6. 6
    Bubble Trouble says:

    Another sign of the impending burst is the proliferation of re-fi cash out commercials I see on TV/radio. For a while between 2008ish and 2013ish, these were for the most part non-existent. And 2014/2015 you’d see the one one here and there but it was rare. However starting last year and into this year, it’s like we’re back to 2006 where using your house as an ATM to buy that BMW, or Fiji vacation or boob job is back in style.

    “This years is shaping up to outpace expectations thanks to a resilience in refinance demand, especially when it comes to cash-out transactions. According to Freddie Mac’s May Economic and Housing Research Outlook report, 2017 is performing so well that its increased its 2017 forecast for mortgage originations by just over $200 billion and added $100 billion to our 2018 forecast. The year started out with a surprise uptick in refinance borrowers took cash out, increasing to 49% in the first quarter of 2017, which is up from 44% in the fourth quarter of 2016.

    Freddie noted that this is the highest share since the fourth quarter of 2008. However, it cautioned that the data is still below the peak of 89% in the third quarter of 2006.”

    I predict 89% will be hit by Q4 this year.

    https://www.housingwire.com/articles/40200-freddie-mac-cash-out-refinance-activity-highest-since-the-bust

  7. 7

    RE: Bubble Trouble @ 5 – As has been expressed here repeatedly by myself and others, the median income is irrelevant because that includes the entire population of people. What you would need would be the median income of current homebuyers if you wanted to make that comparison, and even then it would be irreverent because sometime buyers buy based on their assets rather than their income.

  8. 8
    greg says:

    By Bubble Trouble @ 6:

    Another sign of the impending burst is the proliferation of re-fi cash out commercials I see on TV/radio. For a while between 2008ish and 2013ish, these were for the most part non-existent. And 2014/2015 you’d see the one one here and there but it was rare. However starting last year and into this year, it’s like we’re back to 2006 where using your house as an ATM to buy that BMW, or Fiji vacation or boob job is back in style.

    I agree with this part completely. I was just talking with someone about this the other day, we were laughing that it feels like bubble time 2007… what with all the reverse mortgage ads the refi refi refi drum beat has really taken over again. I guess they see the prices back up and everybody wants today what the might be able to afford tomorrow.

    The hype is back and people are doing too much talk about RE when they are not in the market and not going to be.

    we look around the various nicer places to live in the USA and see grossly inflated housing due to policies in place for at least 7 or more years now. it really is a shame they did not manage to get interest rates up before housing went so vertical. Now increasing rates might be like a pin to a balloon.

  9. 9
    Deerhawke says:

    RE: N @ 3 – I have seen a lot of transactions since 2008, but not one done with less than 20% down. Many of the transactions were 40% and 50% down. Several were all cash. Maybe Kary or Ardell have seen these 3.5% down FICO 600 buyers, but I have not.

    Does that mean we are not in a bubble? Heck no. I have no idea if we are in a bubble or not.

    I lived in New York City in the 1980’s and watched the price of a 2 bedroom postwar condo on the upper west side go from $30K in 1981 to $400K in 1988 and $600K in 1995. I hate to even speculate on what it is worth now, but a friend told me it would be well over a million bucks. People kept saying it was a bubble and then when the market took a breather, they felt vindicated. Until the market took off 6 months later.

    I am a builder and am again seeing some of the same warning signs I saw in 2006-7. Young builders with access to FFR money (friend, family relative) or foreign money (Chinese, Vietnamese and Russian mainly) are paying truly absurd prices for land. They can only make money if the market goes up as much as it has the past two years. Eventually there will be a hiccup or a flat spot in the market and these guys will get bumped off the merry-go-round. Like last time, they will blame it on bad luck or the real estate agent who sold them the dirt. But really they have nobody but themselves and their greed to blame.

    My own feeling is that Seattle is a lot like New York. Maybe not like New York in 1980, but more like New York in 1990 or 1995. We are in a period of rapid price appreciation. But as cautious economists like to say, they have never repealed the business cycle. Eventually there will be a hiccup or pause or a breather– whatever you would like to call it. The permabulls will get thumped. And right around the time the bears are truly celebrating and saying “I told you so,” the market will take off again.

  10. 10
    Erik says:

    RE: Bubble Trouble @ 6
    I think we all expect this real estate bubble to burst, but in my opinion we still have a ways to go. I will keep buying about another year and then I will stop. When the value of the real estate doubles, I sell. Selling one next year for sure. Then I’ll wait with the cash I pull from that sale and start slowly pulling more profits off the tables as values double. 2024 is my hard limit where I will be sitting on cash or silver or gold.

    Selling just one next year will recapture all of my expenses from buying all my property and still leave me with a little profit. After that, I hope to really start profiting as this bubble develops. At that point I will hopefully not be poor and I can drop the Tim a fat tip.

  11. 11
    uwp says:

    We’ve talked about median income vs median home price plenty of times.

    How does New York support their home prices when median household income is lower there than here?

    http://www.kingcounty.gov/independent/forecasting/benchmarks/Household%20Income/MHI%20-%20KC%20and%20Peers.aspx

  12. 12
    Erik says:

    RE: Deerhawke @ 9
    Perhaps it will play out that way. I’m still pulling my money and running when I think we are at a top. Not making more sucks, but losing is even worse. A bird in the bag is worth 2 in the brush.

  13. 13
    Marc says:

    RE: Deerhawke @ 9 – I can confirm that sub 20% down payments are no longer unusual and are becoming more and more common. 10% down jumbo physician loans being an example of a loan product that returned to the market several years ago (if it ever left). And this is true even at higher price points in close-in Seattle and Bellevue neighborhoods that have seen the most rapid price appreciation. I would bet that in Pierce County and other lower price point areas, zero down VA loans and 3.5% FHA loans are quite common.

    Seattle prices have climbed so high that the loan limits of those programs mean most people using them have very few housing choices in much of Seattle-Bellevue. With 3.5% down and an FHA high balance loan, I think your max purchase price is about $536,000.

    At the higher end, I have personally handled deals well over $1 million for both buyers and sellers where the winning buyer in multiple offer situations had less than 20% down and beat out all cash and big down payment buyers. One was 10% or 15% down and also beat on max price by a healthy margin.

    I have not seen 80-20 piggy back loans yet but they might already be out there for all I know.

  14. 14
    steven says:

    there are people who constantly keep on repeating that bubble will burst and that has always been the case; i don’t understand where their information is coming from. All metropolis, LA SF NY have seen corrections in the past without the “bubble burst”. Most hit of the three, LA is above the previous peak of 2007. Despite your confidence on history, SF that has seen 25% correction from the great recession and is now sitting at 1.2m median price. although i agree that seattle will not go quite that high, what makes you think the “bubble” in seattle will burst at less than 1/2 of the price in SF?

    also i may be wrong in this matter but i believe you are thinking wrong in terms of affordability index. Like Kary said, it’s not all about income, and all major metropolises have excruciatingly high p/i ratio. At the same time, you need to consider that in most of the metropolises, many homeowners cannot afford the homeowner if they were to move into the city currently. What i mean is, the current price of the housing is based on income and assets of the incoming residents and not the whole population as majority of the population is not moving. This can skew the market especially when there are a bunch of foreign investors willing to come and buy houses; however, housing market can still remain elevated long term. Vancouver saw some correction over the last twenty years but despite residents’ yell for bubble burst, their median housing price sits strong well above seattle’s median (more like more than 1.5x seattle median)

  15. 15
    steven says:

    oh and i also wanted to say something else . i’m not saying that there will or won’t be a bubble burst , but i think the way things are at this point with seattle real estate appreciating much faster than any other metropolis, experts are bit more comfortable saying that this will be a new norm for seattle than not. SF real estate did not start at the norm of 1m. despite what people say about real estate bubble burst, it is not as severe and usually the price appreciations are there to stay.

  16. 16
    Cap''n says:

    Looks like we will know soon enough if Seattle is indeed following the trend of major metropolitan areas like NYC, SF, etc. 60 days with no measurable rain…must be a stellar place to live. I do think the ingredients for sustained high housing costs are in place. Bouncing around 700k median is where I think we will be for the next 5 years. Major YOY price increases will slow, but that doesn’t necessarily mean it’s a bad time to buy.

  17. 17
    Deerhawke says:

    Maybe we need to define terms. I think we should make a very heavy-handed distinction between a bursting bubble and an ordinary course correction. Markets rarely go up in a straight line. There are always pauses, corrections , flat spots, periodic reverses, etc.

    I know some academic has gone back and charted the monthly median price of a Seattle house back to WWII. At one point, I actually saw this chart through the mid 90’s. Any builder who saw that chart would remark that it understated the actual damage that corrections caused to their business. The recessions of 1981-82 and 1991-92 were particularly brutal, but they hardly show up in the charts of Seattle median prices. So if you could have held onto your real estate and kept it rented, you looked like a genius afterwards.

    What happened in 2008-2011 was a really different beast. Now that was the popping of a bubble.

    So when people talk glibly about this being another bubble, I don’t agree. I don’t think we are getting primed for another 2008-2011 experience.

    If people say that the market is a bit frothy and we are getting primed for a flat spot or a correction, I totally agree. But I doubt if they know when it will happen any more than I do.

  18. 18

    By Deerhawke @ 17:

    What happened in 2008-2011 was a really different beast. Now that was the popping of a bubble.

    Agreed, at least as to the first sentence. But while those prior incidents hardly showed up in the median, in this case the change in median showed a greater effect than what was the actual effect (due to the impact of distressed properties not applicable to other houses in most areas).

  19. 19
    Doug says:

    RE: Deerhawke @ 17 – Exactly. People just suffer from recency bias and expect 40-50% corrections to be the norm.

    That once in a lifetime correction is only going to happen…once in a lifetime.

  20. 20
    N says:

    By Doug @ 19:

    RE: Deerhawke @ 17 – Exactly. People just suffer from recency bias and expect 40-50% corrections to be the norm.

    That once in a lifetime correction is only going to happen…once in a lifetime.

    and you could also say after the 2003-2007 and 2012-2017 periods that people expect big run ups to happen and speculate more because of this. Or perhaps with easier credit we are now in a period of more dramatic ups and downs (Same goes for the stock market).

  21. 21
    ESS says:

    Real estate and stock mutual funds experience similar longer term upward trends. The longer one holds on to either investment, the greater the chance the asset will increase in value over time. Both types of assets will experience short and intermediate decreased values – that is the way of the investment world for both real estate and the investment markets.

    If one had bought a house only two years ago in one of the hot areas of Seattle, and by some chance there was a 20% correction, that buyer would still be ahead. Not only will the house still be worth more than what they bought it for, but they have paid two years of mortgage (which includes principle payments). If that person had rented, that rent money is but history without possibly of applying very generous tax deductions to one’s returns. But the purchaser would have missed the best part of owning a house in Seattle – complaining about the ever rising insane property taxes, and chiming in on how that money is wasted.

  22. 22

    By ESS @ 21:

    But the purchaser would have missed the best part of owning a house in Seattle – complaining about the ever rising insane property taxes, and chiming in on how that money is wasted.

    Our about how the City Council is going to allow homeless people to park illegally in front of your house!

    http://www.seattletimes.com/seattle-news/seattle-council-may-revive-debate-on-homeless-living-in-vehicles/

  23. 23

    By ESS @ 21:

    But the purchaser would have missed the best part of owning a house in Seattle – complaining about the ever rising insane property taxes, and chiming in on how that money is wasted.

    Or how the City Council will force you to rent to someone who has a felony conviction for murdering their prior landlord and burning down their house because the landlord didn’t like the meth lab they were running.

    http://www.seattletimes.com/seattle-news/politics/seattle-set-to-prevent-landlords-from-considering-applicants-criminal-records/

    Although at least Seattle, unlike the state, lets you know what you can and can’t consider, AND gives you advance notice of their intentions to look at the issue.

  24. 24
    ESS says:

    Kary 22 and 23

    The two proposed Seattle ordinances you cited is but the icing on a very large and stupid cake the Seattle City Council has been baking over the past few years.

  25. 25

    RE: ESS @ 24 – Agreed. I was going to have a third one that they allowed a 50 unit apartment building be built a block away from you without any parking spaces. That though would have required looking back further than one week.

  26. 26
    ARDELL DellaLoggia says:

    RE: Doug @ 19

    I’ve seen it twice in my adult years. It’s only “once in a lifetime” if you die young. It will happen again in my lifetime. I have seen two bubbles burst and several more corrections. No doubt I’ll see at least one more burst and a handful of corrections before I’m gone. Unless I go earlier than expected.

    Don’t be in denial by pretending it only happened once. Not true. It wasn’t a “one off”.

  27. 27
    Deerhawke says:

    RE: Ardell@26-

    Which two bubbles? In what markets?

  28. 28
    Erik says:

    RE: Doug @ 19
    Ardell owned you on the last comment.

    Usually 2 downturns happen before a bubble bursts. We haven’t had a downturn yet, so we are due up.

    If the Tim posted % increase in housing prices since February 2012, I think people on here would change their opinions. Seattle is a raging bull. The rest of the country is slowly climbing out of the hole.

  29. 29
    Doug says:

    RE: ARDELL DellaLoggia @ 26 – I’m using ‘once in a lifetime’ to really only capture the type of correction we saw recently. I wasn’t aware of a similar correction since the depression. Which two bubble are you referring to based on the nominal growth chart here?

    http://visualizingeconomics.com/blog/2011/03/23/real-vs-nominal-housing-prices-united-states1890-2010

  30. 30

    By Deerhawke @ 27:

    RE: Ardell@26-

    Which two bubbles? In what markets?

    ‘There were other parts of the country that had their RE market crash. When I was a bankruptcy attorney I dealt with a few clients who moved from such areas. One I remember had several rental houses but couldn’t rent them out for enough to cover the mortgages.

    Although last month I did point out to Ardell that a statute she was referring to as new was from the 19th century. I don’t think Ardell has ever disclosed her age here, so maybe the first time was in the 1920s. ;-)

  31. 31
    ARDELL DellaLoggia says:

    RE: Deerhawke @ 27

    The market I started in was identical to what “just” happened. Identical. My vantage point was around Philly and NYC and included parts of NJ and New England. The run up was the same. The drop was the same. The recovery was the same. Basically it started up after double digit interest rates receded down to 7.5%. The recovery went into full swing in 1998. 1995 was 2012, as example. In 1991 everyone who bought at peak was underwater. By 1998 most everyone was ahead of break even.

    I’m on vacation this week so hope that suffices as an answer to your question for now.

    The reason the discussion gets fragmented is that most people don’t know the difference between appreciation and market fluctuation and a bubble forming and bursting. The definition of bubble vs appreciation is about “air”. Where’s the air portion of appreciation and what is the cause of the air bubble when you separate it from the cause of appreciation?

    The air in the last bubble was the zero down loan portion and subprime portion. The air in this bubble is the bid up caused by low inventory.

    For every 30% increase in price, half may be from the appreciation caused by high income expanded hiring and higher salaried buyers and half may be an air bubble caused by low inventory bid outs due to supply and demand factors.

    No question there is an air bubble in Bellevue but not likely in Wenatchee. But most can’t understand the market at that level and so call all appreciation the bubble.

    Not all bubble; not no bubble and not “once in lifetime” one-off.

    Heady stuff for one finger vacation typing. :)

  32. 32
    Doug says:

    RE: Erik @ 28 – haha, ok…

    I don’t think I said recessions or downturns don’t happen more than once a lifetime. I’m also not saying there aren’t periodic ‘hard times’ for real estate agents.

    I believe I said the type of nation-wide housing correction seen in 2007 was a once in a lifetime event. Was there a similar housing correction since the depression that I’m not aware of?

    I suppose there are people who were adults during the depression that also experience 2007’s bubble, but that would generally put them at or over 100.

  33. 33
    Doug says:

    RE: ARDELL DellaLoggia @ 31 – Ha! Not a bad response from a vacation destination and certainly more thoughtful than what I would have written while on vaca.

    So it looks like the east coast correction was about 14% from ’88 to ’91. Definitely a material downturn, but just not what I would consider even close to 2007.

    You were there and I’m sure felt the gravity of the situation. I don’t mean to discredit that or other corrections. I should have just probably put more qualifications around what should be included with a statement like once in a lifetime and as far as I’m concerned the bubble of 2007 has happened once in a life time (so far, but stay tuned).

  34. 34
    Kmac says:

    For all the talk one hears about all the newcomers moving into our area, I never hear about how many people are moving away.

    I had a conversation today with a Snohomish County rental agent for a nation truck rental chain (starts with a “P” ).
    She mentioned to me that the last few months, if someone needs to rent one of their trucks, they have had to bring them in from other states because a large portion of their vehicles are ending up outside of Washington.
    According to her, natives and long time residents are leaving the state in a larger numbers than her recent memory recollects.

    In a nutshell, she described to me that the most common conversation as to why these folks are leaving has to do with long time Washingtonians not liking what is happening with all of these newcomers into the area. Home prices, taxes, ever increasing traffic problems, bad attitudes……

    Just one person’s view, but I find it very believable.

    Makes me wonder what will happen when the hiring stops and these transplants from fair weather states need to endure several years worth of wet and dark NW winters.

  35. 35
    ARDELL DellaLoggia says:

    RE: Doug @ 33

    Just like here, Doug, the stats you can access are watered down to average numbers. They were in fact identical. My there was the same as my here. Princeton NJ, Cherry Hill NJ, Newtown PA and Yardley PA stats were the same as Kirkland, Bellevue, Redmond. Seattle is different because Seattle IS in fact different.

  36. 36

    RE: Kmac @ 34 – I think a lot of those people leaving may be retiring. And their using a rental truck would fit with that. Relocation people moving either direction tend to use moving companies. I suspect there are probably stats on relocation in/out somewhere.

  37. 37
    Kmac says:

    Retiring or not, the reason why seems to be more interesting.

    Yes, I agree that the incoming most likely are using a moving service.

    With what some people are willing to pay for houses here, I think many sellers can easily become “retirees” and of course, go somewhere else.

    I don’t understand why buyers don’t go on a buyers strike for a few years.
    They have the power to start the price deflation if they would only do it.

    Ardell @ 26 –

    Great comment

  38. 38
    Erik says:

    RE: Doug @ 33
    Winning a argument on Seattle Bubble while sipping a mai tai on a hot beach somewhere is the perfect vacation for Ardell.

  39. 39

    RE: Kmac @ 37 – There are some outgoing relocation too. Probably mainly non-tech???

  40. 40
    ARDELL DellaLoggia says:

    RE: Kary L. Krismer @ 30

    1) I’m 63.

    2) There was a change making Adverse Possession less automatic and more difficult here. Between 2003 and 2005 as I recall. It might lave been Seattle vs Statewide. The property affected that I was working on at the time was in Seattle. It may not be an RCW at all and why I couldn’t find you a Statewide link back when we were talking.

    I’m stressing out as I’m meeting my youngest daughter’s boyfriend’s family at a dinner here in L.A. shortly. Our first meeting. I’m going to try to be less of a caricature. :)

  41. 41
    N says:

    Adding criteria like a nationwide collapse etc of course get you much closer to a so called once in a lifetime event. But the reality is when real estate is so local what perhaps do these conditions serve, other than to help one support a conclusion they already made, namely that there is no bubble and will be no bubble.

    Even during this past bubble and collapse it was not an even drop nationally, many markets took much bigger hits while other barely were affected.

    There are lots of examples of regional bubbles. In the 80’s Texas real estate dropped 40% and took 15 years to recover.

    The stock market was up 44% in one year prior to Black Monday in 1987 when it dropped 22% in ONE DAY!

    I like Ardell’s breakdown that part is a bubble and part is not, perfect

  42. 42

    By ARDELL DellaLoggia @ 40:

    2) There was a change making Adverse Possession less automatic and more difficult here. Between 2003 and 2005 as I recall. It might lave been Seattle vs Statewide. The property affected that I was working on at the time was in Seattle. It may not be an RCW at all and why I couldn’t find you a Statewide link back when we were talking.

    What I was referring to was this post in July’s Case-Shiller thread. This is your post and my response:

    By Kary L. Krismer @ 59:

    By Ardell DellaLoggia @ 58:

    RE: Kary L. Krismer @ 57

    I’m pretty sure they changed the law to make Adverse Possession much more difficult. “… and shall also during said time pay all taxes legally assessed on such lands…” Added https://app.leg.wa.gov/rcw/default.aspx?cite=7.28.070

    If you look at the end of your link it says: “[ 1893 c 11 § 3; RRS § 788.]” That means the statute was enacted back in 1893 and has not been changed once since! Now maybe you’re going to say you’ve been a real estate agent for 140 years, and it used to be much harder when you started . . . ;-)

    But that’s just another way of gaining adverse possession, but in only seven years rather than ten, and it requires “color of title,” which is typically a deed which for some reason didn’t actually convey title, and paying taxes during those years. There may be other elements of ordinary adverse possession not required too such as hostility. If you read my blog piece it was actually addressed in the first sentence of the third paragraph: “While there are also more lenient provisions where the adverse possession claimant has ‘color of title,’ . . .” The statute you cited is one of the things I was referring to. But ordinary adverse possession is 10 years and requires the elements mentioned in my blog piece.

    So I was just going by what you said, and since you cited to a very old statute I made a joke about your age! Now it’s possible there was a more recent case that changed adverse possession in some way–that happens quite frequently. But not in the way you suggest–requiring paying taxes if just straight adverse possession. That I would find surprising. Often adverse possession just changes the lot lines, so payment of the taxes would be practically impossible.

  43. 43
    Kmac says:

    By Kary L. Krismer @ 39:

    RE: – There are some outgoing relocation too. Probably mainly non-tech???

    I dunno………. but you have discounted rental truck users to being retirees…..

    By Kary L. Krismer @ 36:Relocation people moving either direction tend to use moving companies.

  44. 44
    ARDELL DellaLoggia says:

    RE: N @ 41

    I was in that business then. I sold off a bunch of stock in my 350 portfolios the Wednesday before Black Monday. Just thought with all that growth, it was time to rebalance back to 40% stock from the 80% it had grown to. I was the only one in my department getting thank you calls on Black Monday.

  45. 45
    ESS says:

    RE: Kmac @ 37

    I don’t understand why buyers don’t go on a buyers strike for a few years.
    They have the power to start the price deflation if they would only do it.

    ————————————————————————————————-

    Because folks not buying have to to pay rent, and that adds up after a while.
    But there is hope – if Seattle City Council passes the ordinance they are kicking around about allowing people living in RVs to park for free on the Seattle streets – then you may have something there!
    Just think – in the old OLD days – Seattle was known as “Jet City”
    Now it is called the “Emerald City”
    Perhaps it is time to change the name again to —-“RV City”.

  46. 46
    Bubble Trouble says:

    By Kary L. Krismer @ 7:

    RE: Bubble Trouble @ 5 – As has been expressed here repeatedly by myself and others, the median income is irrelevant because that includes the entire population of people. What you would need would be the median income of current homebuyers if you wanted to make that comparison, and even then it would be irreverent because sometime buyers buy based on their assets rather than their income.

    LOL. This is exactly the same stuff people were saying circa 2006. It’s amazing how in just a decade every lesson learned is forgotten.

  47. 47
    Bubble Trouble says:

    I was around in Las Vegas in the mid 00s. And it’s eerie how everything that was said about Las Vegas is said about Seattle on this blog. And you could take Phoenix, San Diego, Miami, Tampa and every other big city and they had the same local version.

    Tell me if any of this sounds familiar, if you just replace Las Veags with Seattle….

    – Las Vegas is different. We’re unlike any other city in America and so the “normal” rules don’t apply here.

    – 5000 people are moving to Las Vegas every month. Everyone wants to live here. Housing will only continue to appreciate.

    – Sure median income is $40K and median house price is $300K. But who cares? That whole median price to income ratio is out of date. And besides with 3% mortgages, we can easily sustain a 8:1 ratio.

    – Mainland Chinese love to gamble and they are buying up condos like crazy. The sky high prices are totally justified. All those new condo projects underway will be sold out in no time.

    – Sure things may be getting expensive but we’re still way cheaper than San Francisco!!

    And all that seemed rational until it didn’t. Those 5000 people moving to Las Vegas every month stopped moving there. The Chinese stopped buying condos. Eventually even with 3% mortgages 8:1 price to income ratios couldn’t be sustained. And while Las Vegas was and always will be cheaper than San Francisco, it was irrelevant.

    But I know, I know….this time it’s different!! And Seattle is different and special and none of the rules apply here.

    Bubbles always seem rational…until they don’t.

  48. 48
    Bubble Trouble says:

    By steven @ 15:

    oh and i also wanted to say something else . i’m not saying that there will or won’t be a bubble burst , but i think the way things are at this point with seattle real estate appreciating much faster than any other metropolis, experts are bit more comfortable saying that this will be a new norm for seattle than not. SF real estate did not start at the norm of 1m. despite what people say about real estate bubble burst, it is not as severe and usually the price appreciations are there to stay.

    Other west coast cities were convinced irrational prices were the new norm as well. Until they weren’t. But I guess Seattle is different. Cuz why not? And I’m not sure what your definition of sever is. But 25-40% collapse in pricing is pretty severe by my calculation.And keep in mind this is just nominal declines. Adjust for inflation and it’s 50%+ in San Diego and close to it in Los Angeles. And in San Francisco the nominal decline was 23%, yet people talk as if SF’s crash was a blip. It is mind boggling how what happened 10 years ago has gone down the memory hole never to be seen again.

    San Diego (all)
    Peak 2005 Median: $515K
    Trough 2009 Median: $285K

    Los Angeles (all)
    Peak 2007 Median: $550K
    Trough 2012 Median: $320K

    San Francisco (houses only)
    Peak 2007: $895K
    Trough 2011 : $690K

  49. 49
    Kmac says:

    By ESS @ 43:

    RE: Kmac @ 37
    Because folks not buying have to to pay rent, and that adds up after a while.

    Not sure why my comments are going to moderation now?? No profanity, no links and same email address???

    But anyway-
    Even if you buy, most people pay “rent”.
    It is called interest.

    You can “rent” the property
    or
    you can “rent” the money. (and from the government in the form of taxes)

    and if you pay cash, you still pay in the form of lost opportunity for that cash.

    All this talk about recent buyers running up the prices are “strong hands” is debatable and yet to be proven.
    Let’s not confuse them with “smart money”, which if you look at the stock market, the “smart money” is angling towards exit strategies lately. They are going to be leaving the “dumb money” (those that have bought into the this “time is different” bull thesis) possibly holding the bag.

    The next few years will continue to be interesting if nothing else.
    Maybe my magic number will be hit and I will be a newly minted retiree looking for a rental truck too.

  50. 50
    Eastsider says:

    I’m surprised no one mentioned the FED as a contributing factor to the nationwide asset bubble phenomenon.

    WaMu. Fannie Mae and Freddie Mac ran their business on the belief that house prices could only go up… Then there is Japan.

  51. 51
    ESS says:

    RE: Kmac @ 47

    Or in other words – a person that wishes to obtain a residence has to decide what is best for them. And that decision whether to purchase or rent is predicated upon many factors – some which are always going to be unknown and unknowable. A decision that is personable to every person’s unique situation. But historically, if a person is going to remain in one location for a certain number of years, the benefits of owning generally outweigh the benefits of renting if one of the factors to be considered is accumulating value through real estate.
    Or in other words – you pay your money either through rent or owning, and you take your chances!

  52. 52

    By Bubble Trouble @ 44:

    By Kary L. Krismer @ 7:

    RE: Bubble Trouble @ 5 – As has been expressed here repeatedly by myself and others, the median income is irrelevant because that includes the entire population of people. What you would need would be the median income of current homebuyers if you wanted to make that comparison, and even then it would be irreverent because sometime buyers buy based on their assets rather than their income.

    LOL. This is exactly the same stuff people were saying circa 2006. It’s amazing how in just a decade every lesson learned is forgotten.

    It was true then, it was true now. The Pittsburgh Steelers won the Super Bowl in 2006, beating our Seahawks. That doesn’t mean that caused the crash any more than your statistic.

    If you want to make an argument based on statistics, post some relevant statistics.

  53. 53

    RE: Bubble Trouble @ 45 -What was going on in Vegas then included a lot of people buying condos before they were built, never intending to live there, believing they could sell at a profit. I assume a lot of those people were non-residents of the state with no intention of living there.

    Do you see anything like that happening?

    You really though need to understand how to predict market changes. You can’t just post facts that preceded a prior market correction and then claim that those same facts exist today, so we’ll have a crash. They need to be facts that caused the crash.

  54. 54

    Gee, I sure wish we lived in that real estate utopia called Great Briton where real estate agents are not such a powerful force. That leads to all sorts of great things, like old people not being able to downsize because they can’t afford the real estate excise tax (called “Stamp duty” in this piece).

    http://www.telegraph.co.uk/personal-banking/mortgages/stamp-duty-drives-surge-old-age-borrowing-retirees-cant-downsize/

    Check out the revenues–some of that could be due to the slump, but in 2008-2009 they collected 2.9B of funds (in pounds) and in 2016-2017 (presumably a fiscal year) they collected 8.6B. As I mentioned before, the REET is probably the number one issue for Washington Realtors. They even get upset if where the money will be used is changed.

  55. 55

    By ESS @ 43:

    RE: Kmac @ 37

    I don’t understand why buyers don’t go on a buyers strike for a few years.
    They have the power to start the price deflation if they would only do it.

    ————————————————————————————————-

    Because folks not buying have to to pay rent, and that adds up after a while.

    Yep, to some extent it’s like gasoline. Consumers can’t affect the price because they need to drive to work, etc. And there’s nothing in it for them to change their habits because their change alone won’t affect prices.

    On the other hand, every potential buyer who decides to not enter the market does help moderate prices. But that’s always the case, regardless of current price trends.

  56. 56

    Yet another article on GB’s stamp tax and the unintended consequences of trying to prevent people from buying rentals.

    http://www.telegraph.co.uk/personal-banking/mortgages/sell-business-pay-extra-stamp-duty-choice-facing-entrepreneurs/

  57. 57
    ARDELL DellaLoggia says:

    RE: ESS @ 49

    Some day take a look at the companies who are hiring here and whether they own or rent the space their employees are in.

    Not every imported employee/homebuyer plans to stay here forever. Many from other
    Countries plan to go back at the time that they come here. Maybe they will; maybe they won’t. Same is true for some companies who are doing the imported hirings. If they are headquartered elsewhere, their setting up shop and hiring here is to some extent opportunistic and possibly not permanent.

    A company that rents space and makes no long term investment in buying the land and buildings can decide at most any time to just up and leave. Companies who rent are the same as any renter or imported employee/homebuyer. They don’t need an economic crisis to simply decide one day to move away from here.

    When a company decides to tighten its belt, they often shift their employees from rented space to company owned space. The company doesn’t have to be in trouble to shift to this thinking at any time.

    In the heat of a boom period we tend to focus on the impact of the decisions made by buyers enmasse. But a bubble bursting can be caused in a heartbeat by a boardroom decision to move out of rented space and into company owned space. When their company owned space isn’t here, they won’t give a tinker’s dam about the impact of their decision on our local housing market.

    Sort the new hirings causing home price expansion and isolate that significant portion being hired into rented space. It’s an eye opener.

  58. 58
    Doug says:

    RE: Kary L. Krismer @ 53 – come on, admit it. Everything about Seattle right now is in fact basically the same as Vegas’ run up. If you can’t see it, you’re not looking. There’s not enough room for me to list all the similarities.

  59. 59

    RE: Kary L. Krismer @ 2
    Yes Kary

    So much of we’re told is Fake News….to mislead our economic plans.

    Location, Timing and Luck make a good retirement plan with real estate investing…..not blindly assuming its all good….much of the future for Seattle does look grim. Asian stability and Seattle stability are now deteriorating with OVERPOPULATION, tied together at the neck with North Korean nuclear nooses…

  60. 60
    steven says:

    RE: Doug @ 58

    actually, there are no similarities. I don’t understand why you are comparing western coastal cities to an inland desert, tourist heavy city. About the net migration being similar, it’s dissimilar in that people are simply going where they can find decent enough jobs. I’m not so sure if Las Vegas was ever considered first or 2nd best city to open a tech business . Also about the Chinese, people are not going to Seattle for gambling or simple leisure; they’re going to Seattle for different reasons. They not only want to make money from the housing market, but want to have good education system, decent place to live with good weather, and close proximity to homeland. Irvine and Vancouver were big places for the above, and look at their prices now. Yes the prices are going up and similar groups of buyers were present, but unfortunately for different reason. Chinese actually intended and are intending on living in California, Washington and Vancouver. As much as people are complaining about the empty houses in Vancouver, there are just that many Chinese living there. Las Vegas Nevada? not so much… As much as I would like it to be a repeat of 2007 for multiple reasons, the signs are different and house appreciation is very localized to specific metropolitan cities. Seattle is not special and it’s not unique. But it is very comparable to other west coast cities and all the west coast cities have seen a hefty incline in prices while other cities have struggled. Yes, Seattle has gained more than any other cities in the west coast but I believe that would be an effect of the tech boom happening more in Seattle and Seattle being cheaper than other cities while San Francisco being priced out even for 6 figure earners.

    As much as you guys complain/discuss about foreign (specifically Chinese) buyers, I don’t think you guys are discussing why they’re buying where they’re buying.

  61. 61
    steven says:

    RE: softwarengineer @ 59

    I’m not sure this is sarcasm or that you truly believe Seattle is the North Korea’s top choice as site of attack amongst all of western US cities. In terms of Asian instability and seattle instability from overpopulation, I don’t really see the connection. Are you saying that Chinese/Indian overpopulation is somehow going to negatively affect the US housing market or seattle housing market? Might as well mention Seattle’s outlook is atrocious due to possibility of Mt Rainier being active again

  62. 62
    ESS says:

    RE: Kary L. Krismer @ 55

    On the other hand, every potential buyer who decides to not enter the market does help moderate prices. But that’s always the case, regardless of current price trends.

    ——————————————————————————————————————————

    Right, but if enough potential buyers decide not to enter the market that will increase the demand for rentals which should maintain or increase the price of SF housing if it is true that the two markets are somewhat correlated. The potential buyer who has a substantial down payment saved who decides not to buy because of uncertainty of the market is probably a better tenant than many who are living paycheck to paycheck.

    The problem in the Puget Sound area is that at present, there is not enough supply in the really trendy areas close to the employment centers of Seattle. With our dismal transportation system, being close in has become really important to people, and as a result SF housing is being sold at unprecedented amounts.

  63. 63
    ESS says:

    RE: ARDELL DellaLoggia @ 57

    What you say may be true – but employees have to reside somewhere, even as tenants. So long as employment remains strong, so too will the housing, unless Puget Sound becomes a massive retirement center where the residents have independent income such as social security, 401Ks, etc.

    As to companies not worrying about their workers and the city – this is nothing new. I was in partnership for my first real estate property right in the middle of the 1970s Boeing meltdown. As it was a one horse town at that time, and the horse was mighty ill, it made for interesting times. Hopefully the Puget Sound area has diversified enough to weather those reductions in labor force. Boeing is aggressively reducing it labor force, and it has made no dent on the residential market. So that is a good thing.

    Hope the big dinner and introductions went well. I take it you are or were in LA? If so – hope you got to see the new Getty museum. Very impressive – both the collection and the location.

  64. 64
    N says:

    By steven @ 60:

    RE: Doug @ 58
    all the west coast cities have seen a hefty incline in prices while other cities have struggled.

    What major cities are struggling? I read the same story lines out of other cities such as Boston, Miami etc. inventory is way down and prices are way up. Or are you referring to specifically price appreciation for just 2017? Despite the huge rent increases there are still 7 cities with higher rents then Seattle including Boston, DC etc,

  65. 65
    steven says:

    I never mentioned major cities are struggling, I believe you are putting words into my mouth. Boston, Miami are all major metropolitan cities. Metropolitan cities make up less than 10% of US cities. From my understanding that in 2007 all housing markets had peaked while majority of the housing markets unless they are major metropolitan cities are struggling to gain back 2007 peak right now. For example Las Vegas is still way below 2007 peak. If anything, this goes with the previous observation that new generation are more inclined to live in the city than rural area. (suburb maybe still city nonetheless)

  66. 66
    steven says:

    RE: ESS @ 62RE: ESS @ 62

    I may be wrong but even with good public transportation, i don’t believe seattle housing prices will improve much more. Many metropolises have much better public transportation yet still fail to reduce the housing price differences between nearby cities. The reason is that the price difference alone cannot account for the value of time lost especially when you take into account differences in price inflation between the cities. This can be seen in most of the major cities in Asia and Europe. Beijing, Seoul, Sinjuku (Tokyo), London, Austrailia, Paris etc etc.
    Also, millennia tend to value their time much more than money when they’re financially stable as the standard of living amongst different classes have narrowed quite significantly.

  67. 67
    N says:

    Many second tier cities are performing as good or better than the big cities at this point in the recovery. On the rent side Spokane has out performed Seattle in rent increase % by a good margin in the last year and the trend has been those second tier cities are catching up (in % terms). Seattle has led the pack of course but across the country there are plenty of cities that are near or past the prior peak (including Spokane).

  68. 68
    Doug says:

    RE: steven @ 60 – I was agreeing with Kary and just trolling the absurdity of comparing Vegas to Seattle. But thank you for writing a nice paragraph summarizing that absurdity for me. :)

  69. 69
    Deerhawke says:

    Re: Ardell at 57 and Doug @58

    Just for perspective, lets all remember that the whole “is it a bubble or is it not?” discussion has been taking place on this site in a big way since 2012.

    In fact, even during late 2010 and 2011, there were people who were making the case that we were on a shelf and that the market was just getting ready for another massive drop. (“Don’t buy now. Wait for the really big drop.”) I am fairly sure that the glass half-full people and the glass half-empty people are still in the same camps. I think optimism and pessimism are hard-wired into our biological make-up.

    I have lived in a city (New York) that had every single possible conceivable sign of a bubble in real estate and yet it was not. So yes, I should absolutely have bought those two apartments for $30K each in the Columbia neighborhood when I was a grad student there. And yes I should absolutely have bought that brownstone surrounded by crack dens in Manhattan Valley for $90k right after that.

    Sometimes, it looks like a bubble, but it is not a bubble. You are looking instead at a fundamental change in the nature of the city. My own feeling is that if there is one city where that argument can best be made right now, it is Seattle.

    Jeff Bezos, Paul Allen and a lot of other really big investors are either incredibly stupid or they are making the best case you can make that this is a fundamental change in the nature of this city.

    You pay your money and you take your chances. I only buy assets and projects where I will still make money if the market drops 10% so I hedge my short-term risk. But medium and long term, I think this is a city where I want to develop and own real estate.

    My bet is that in ten years we will have survived a flat spot or recession in the real estate market (or two) and prices will make current prices look absurdly cheap. Kind of like the difference between Silicon Valley or San Francisco prices in 1985 vs 1995.

    Think about it. The tunnel will be finished and the waterfront will be drawing people from all over the planet. Amazon, Google, Microsoft and every other tech company on the West Coast will still be hiring and building new facilities here, plus a whole range of other tech companies you have never heard of (because they don’t exist yet). We will finally have the kind of financial and consulting infrastructure that other world class cities have. Global warming will continue to make this a better place to live at the expense of places like Austin. Talented creative people will continue to want to flee the absurdity of the Trump-types and evangelicals in the red states. Seattle will be a prime destination for a whole range of reasons — lifestyle, employment, politics, you name it.

    Doug, if you think this is like the Vegas runup, there has never been a better time to sell. Go for it.

  70. 70
    steven says:

    RE: N @ 67

    I have no good explanation for Spokane besides the fact that their median price is 175k despite your rightful claim that it’s past 2007 peak. Sometimes, cheap price is enough of an attraction to drive its price higher.

    As for the price comparison of how it is now back to how it was in 2007, there is no question that the housing market in 2007 was a bubble. Most people also agree that housing prices over corrected in 2012 as all recessions do. Considering nominal average 1.5% growth in GDP for US in the course of 10 years is about 18%. With inflation and GDP growth over the 10 years, if the prices are now same (assuming that your claim that most market have climbed back to their previous peak is correct) as it was 2007, I personally think it’s hard to think that the prices are a “bubble”. Perhaps a little bit more inflated than ideal, but hard to say it’s back to bubble state of 2007. I may be wrong on this matter. I would love to learn from a professional economist.

  71. 71
    ARDELL DellaLoggia says:

    RE: N @ 67

    When it hits 4th tier it is the signal it’s going to swiftly correct. Some upswings never make it that far though and settle down vs correct after 2nd tier gets a boost up.

    That is why 1st tier (I actually call that the Primary markets) like Bellevue can have 3 intermittent boosts before third tier sees any meaningful and still lesser bump up and only one vs Bellevue’s 3.

    The cumulative impact on the primary markets is how stats get watered down on the County -wide YOY. All the Bellevue tier types get to 40% and the Kenmore tier types only make it to 8%. Then King County stats say up 17% YOY and Kenmore sellers start erroneously overpricing at 17% over last year’s comps.

    The bubble starts in first tier but the burst starts in the 4th tier.

  72. 72
    N says:

    By steven @ 70:

    RE: N @ 67

    I have no good explanation for Spokane besides the fact that their median price is 175k despite your rightful claim that it’s past 2007 peak. Sometimes, cheap price is enough of an attraction to drive its price higher.

    Spokane I don’t believe is by any means the only city that has zoomed past their pre crash high. Portland, Boston, Minneapolis, Dallas, Denver are some of the large cities and most of them past their prior peak years ago. But for clarity the current year to date medium price for Spokane is $205k as of June numbers. The June medium price is actually higher at $217k (not YTD).

    http://www.gospokanerealestate.com/

  73. 73
    steven says:

    RE: ARDELL DellaLoggia @ 71

    I strongly agree with this statement. Can you tell me what our 3rd tier markets and 4th markets are?

  74. 74
    ARDELL DellaLoggia says:

    RE: Deerhawke @ 69

    I have a double focus as I don’t plan to retire here. I think the local market is going to be entirely tech driven. I think there will be some disruption within 18 mos. As to my retirement markets, I expect a full burst caused by broader and likely political factors within 36 mos.

  75. 75
    steven says:

    RE: N @ 72

    I went by Zillow medians which may be off. Regardless, I can’t believe you are talking about Boston and Spokane in the same sentence.

  76. 76
    ARDELL DellaLoggia says:

    RE: steven @ 73

    I’d love to but

    1) I’m sitting in the back of a car with my grandchildren headed down to San Diego beaches from LA

    2) One commenter here hated me for years when I answered that question and he got butt-hurt that his house was in 3rd tier. People like to lie to themselves.

    I’ll do Kirkland a bit because it’s easiest to define and hopefully you can draw some correlations.

    First breakdown is by zip code.

    98033 is Primary Market (all tiers exist here)
    98034 is Secondary Market (there is no 1st tier in the Secondary Market)

    Second breakdown is by proximity to Downtown and Lake Washington.

    98033 by the Lake trumps 98034 by the Lake.

    Third breakdown is school rank.

    In the beginning of the recovery, before we had extremely limited Inventory, 8-9-10 ranked schools of 98033 were first tier. Starting last year at the beginning of fifth year into the upswept, only 9-10 ranked schools were first tier. This o late for bro the upswing to gamble on the 8, especially if the 8 didn’t used to be s 9 or 10 but used to be a 6 or 7.

    Pee break. Be back

  77. 77
    Doug says:

    RE: Deerhawke @ 69 – Sorry, I thought it was obvious I was mocking the idea of comparing Vegas to Seattle. Let the record show, comment #58 was a sarcastic comment, agreeing with Kary, and ultimately trolling comment #47 (comparing Vegas to Seattle).

    With that being clarified, thank you, Deerhawke — I could not have summarized the long term outlook for Seattle any better myself. And for further clarification, I am bullish, I have been bullish, and will remain bullish for the foreseeable future. I promise to be the loudest bear here when I do turn bearish.

  78. 78
    steven says:

    RE: ARDELL DellaLoggia @ 76

    I like the analysis. Can I have your input on insignia? It doesn’t have to be today. It’s in zip code 98121 which is rather large.

    Also if you don’t mind, can I ask what youre looking at in terms of retirement market?

  79. 79
    Jamie says:

    RE: Kmac @ 34

    Just an anecdotal take here, but I am one of the few leaving Seattle soon. Even the PODS guy was shocked because he only talks to people moving *to* Seattle. I’m headed to New York City (likely Brooklyn). I’ve been here for 15 years, and while I definitely can’t point my finger at one annoying New Seattle thing, issues like the increase in traffic, higher cost of living, and shift in culture have made me ask myself if I’m getting the benefits of a large city with the hassle of a large city. The answer is obviously “no.”

    I’m a professional musician and while Seattle loves to brand itself as a music city, there’s no real music industry here. I’m primarily hired by people in LA/NY/Nashville. I used to at least enjoy the small community of artists on Capitol Hill and now I avoid that area at all costs. I’m not mad about people wanting to move here for jobs, the culture up there is just not my thing.

    I also work in a tech-oriented job and have the option to work remotely full time. Another reason to ditch the shackles of Seattle. I can make that Seattle tech money with a more exciting home base and with the option to travel whenever I want.

    Finally, I bought my home in late-2007 (first home, had always been told homes are a great investment, didn’t know better, etc) and have been sitting on this thing waiting to jump off at a point where I feel like I’ll get my money’s worth. Right now might not be close to the bubble peak, but I don’t want to be caught on the downside again.

  80. 80
    ARDELL DellaLoggia says:

    RE: Doug @ 77

    Haha! I thought you were losing it. Thanks for the clarification.

  81. 81
    ARDELL DellaLoggia says:

    RE: steven @ 78

    As to insignia, can’t do a condo without seeing the Resale Certificate (unless I saw it recently) so sorry, no can do.

    Retirement is most likely in CA. Several options. I’m thinking a house in L.A. County and a condo in little Italy San Diego combo.

  82. 82
    ESS says:

    Deerhawk @69

    I have lived in a city (New York) that had every single possible conceivable sign of a bubble in real estate and yet it was not. So yes, I should absolutely have bought those two apartments for $30K each in the Columbia neighborhood when I was a grad student there. And yes I should absolutely have bought that brownstone surrounded by crack dens in Manhattan Valley for $90k right after that.

    _________________________________________________________________________________________________________________

    When I was a kid living in Brooklyn, I had some relatives that resided in some of the worst housing on the Lower East Side in Manhattan. Those tenements were old, depressing and falling apart, and I was always scared to be in that area as a 10 year old, let alone the apartment on Rivington Street. As a matter of fact, many of the tenements near Delancy Street were operated only on the ground floor by the store owners – they didn’t even bother to rent out the rest of the building, as no one was interested in living there.

    Fast forward to the present. The Lower East Side is a hip and happening place, years ago refurbished apartments were going for half a million. I walked around the area with my wife- I couldn’t believe it. Still find it an unpleasant place to live in. Imagine having one or two of those tenements near Delancy Street? And if you recall the Seward Park Co-ops on East Broadway and Grand Street on the Lower East Side, those co-ops went private some years ago. What had once been lower middle class housing for workers now sell upwards to a million dollars for a two or three bedroom apartment.

    Bob Dylan wrong. The times were not a changin, they have radically changed, at least in NYC

  83. 83
    Erik says:

    RE: steven @ 78
    Ardell won’t retire, I don’t see it. When she passes away, she’ll be 105 and in a wheelchair with an oxygen tank strapped to her back staging a house. Enjoys the process too much to stop.

  84. 84
    ESS says:

    RE: Jamie @ 79

    What part of Brooklyn are you thinking about moving to?

    I have maintained for years that if I had to return to NYC to live, my first choice would be Brooklyn. I love the neighborhoods, and they are on a more human scale than the Manhattan residential neighborhoods. And Prospect Park, The Brooklyn Museum and Brooklyn Botanical Gardens – great places.

    When my wife and I go back now and then for visits, we usually head to Brooklyn to explore various neighborhoods, both where I lived as a kid, as well as other interesting venues.

    Of course the problem with Brooklyn these days – gentrification. Even in some of the areas that we lived in when I was a kid (ex Crown Heights) is now getting pricey. And Williamsburg? Better bring bags of money to live there – very expensive.

    PS – I have lived in Puget Sound area on and off as of 1969, and I agree with you. The changes to this area have led me to a conclusion that would have been almost unthinkable fifteen years ago for me – it is time to leave. For many of the same themes that you have discussed. The parks have become so crowded with people because of the increase in density without any real addition of park land that places such as Greenlake are wall to wall people. And as per attitude – definite change over the years. Add on the taxes and we have been looking elsewhere to relocate.

  85. 85
    Steven says:

    RE: ARDELL DellaLoggia @ 81

    Oh i was just asking your thoughts in general about it or downtown condo

  86. 86

    By Doug @ 58:

    RE: Kary L. Krismer @ 53 – come on, admit it. Everything about Seattle right now is in fact basically the same as Vegas’ run up. If you can’t see it, you’re not looking. There’s not enough room for me to list all the similarities.

    You mean everything except the very thing I mentioned! People buying stuff under construction intending to sell when completed. [Edit–I hadn’t read subsequent posts yet, but the next point is still valid.]

    As to our market, what concerns me is the very high rate of YOY increase. I do find that concerning. Median income and what a bunch of people are reportedly saying–doesn’t bother me at all.

  87. 87

    By Steven @ 85:

    RE: ARDELL DellaLoggia @ 81

    Oh i was just asking your thoughts in general about it or downtown condo

    I think what Ardell might be saying is that to assess a condo you really need to see the resale certificate. It’s really a huge flaw in our system, where offers are typically made before the buyer has a chance to see the resale certificate. On condo listings I order them in advance so that I have that information for my pricing and so that if I choose buyers can see the information before they make an offer and are thereby less likely to back out.

    That may be part of the reason that appraisers are so unwilling to adjust for sales in the same complex. With such sales there’s no difference in the resale certificate information unless a change in timing of a few months generated a change. Where between complexes you might have a very strong condo association versus a very weak condo association. The former should be worth a lot more than the latter, all other things being equal, but buyers don’t typically know that information when they make an offer. So the price paid might not actually reflect the realities of the condo’s finances. And by the time a buyer typically gets the information they will be into the transaction by an inspection fee and appraisal fee, so they may just go ahead with the deal despite some slightly adverse information.

    And in case you’re wondering if this is inconsistent with my position on sellers doing pre-inspections, the difference here is the resale certificate will likely be prepared by the same entity no matter when it is done, unless by off chance the condo is changes management companies between listing and mutual acceptance. So the information will be the same. Yes it might be likely to reduce the price offered if the information is bad, but unlike an inspection report, you don’t have to necessarily report all the information in the resale certificate or even make it available. Off the top of my head I think the only information you’d need to report is pending special assessments, which presumably the seller would know of anyway. And there will be no issues of whether or not a seller should take some action, like a repair. So the seller has a lot more flexibility on what to do, and fewer decisions to make.

  88. 88
    N says:

    http://www.seattletimes.com/business/real-estate/housing-bubble-fears-stronger-in-washington-than-in-any-other-state/

    70% of Washingonians think we are in a bubble, but hardly any sales people (or Realtors) think we are!!!

  89. 89
    ARDELL DellaLoggia says:

    RE: N @ 88

    They are too caught up in self-fulfilling prophesy. Even if they think it, they blame whomever said it publicly for it bursting. In that regard, this bubble is no different from the last one.

    Consumer Confidence level is a huge factor in the housing market.

    If an agent says it and it bursts they see that as cause and effect and blame the person who said it. As if anyone has that much power. Really? But still…if enough said it, they could be right in their thinking. A drop in consumer confidence could cause it.

  90. 90

    A small correction might be a good thing in that it might get inventory to be more balanced.

    And you might not even need a downturn in the market to get that correction. Just a change in mix from expensive areas to cheaper areas might cause the median to drop and have the same impact on inventory.

    That all though is dependent on how strong buyer demand really is, and how deterred most buyers would be if prices stopped rising.

  91. 91
    Ross says:

    By N @ 88:

    http://www.seattletimes.com/business/real-estate/housing-bubble-fears-stronger-in-washington-than-in-any-other-state/

    70% of Washingonians think we are in a bubble, but hardly any sales people (or Realtors) think we are!!!

    If 70% of folks think we are in a bubble, then we are almost certainly not in a bubble. You’re in a bubble when 70% of folks think that price appreciation will continue indefinitely.

  92. 92
    greg says:

    By Kary L. Krismer @ 54:

    Gee, I sure wish we lived in that real estate utopia called Great Briton where real estate agents are not such a powerful force. That leads to all sorts of great things, like old people not being able to downsize because they can’t afford the real estate excise tax (called “Stamp duty” in this piece).

    http://www.telegraph.co.uk/personal-banking/mortgages/stamp-duty-drives-surge-old-age-borrowing-retirees-cant-downsize/

    Check out the revenues–some of that could be due to the slump, but in 2008-2009 they collected 2.9B of funds (in pounds) and in 2016-2017 (presumably a fiscal year) they collected 8.6B. As I mentioned before, the REET is probably the number one issue for Washington Realtors. They even get upset if where the money will be used is changed.

    What BS kary. complete balls.

    again you are getting into something where you don’t have a damn clue what you are talking about. Just stop talking about anything outside your core competence.

    REET in WA is about 1.25% off the top of my head.

    stamp duty in the UK is designed to be 1% for the national average home price. and then increasing gently to 3% for homes over twice the national average and eventually getting nice and high at 10% for 4 times national and caps at 12% . but of cost most folk pay 1-2% stamp duty on the sale of thier home. not 5% not 10%.

    what is more you ignore that in the UK home owners pay damn all in annual property taxes compared to the USA, instead they average about 800-1,500 depending where you live…
    the UK has a more more progressive taxation system than the USA, they vote for a system that increases taxation on RE sales as the asset value moves away from the average… that is a choice the public makes no amount of NAR lobbying is going to get a nation to shift to our regressive and heartless system.

    It really is worth explaining to you Kary, that a person selling an average priced home in the UK does it vastly CHEAPER than someone selling an avearage priced home in the US. even at twice the national average it is still much much cheaper than the US and again that still includes the taxes.

    Furthermore it needs to be heavily stressed that the UK and USA have completely different tax structures the UK it is designed to intentionally tax both wealth and income progressively. It is a choice. In the USA real estate is taxed each and every year at levels that drive the elderly out of their homes and away from the place they raised their families, made friends etc… It is a very sad situation indeed. So while you may wish to pretend the Real Estate machine in the USA that taxes americans 5-7% per transaction is everyone’s buddy and ally , in reality you are talking bollocks.

    1 UK charges 1% tax on the average home sale. while king county charges 1.25…

    2 UK Real estate agencies charge 1-2% vs WA 5-6%

    3 NAR and 800 odd MLS are the only reason americans pay fees that are multiples of those paid in the rest of the developed and even developing worlds. And remember kary people have been successfully buying and selling RE in a fair and above board manner for many hundreds of years before the Mayflower was even built.

    the sad reality it that the retail residential RE market in the USA has stupidly high fees because the agencies pump monies into lobby groups that spend tens of millions a year maintaining the status quo.
    MLSs have a lock on the industry and lobby to block any new models that might result in a state or region with other lower fees. If even a single state breaks the stranglehold others will follow. you guys fought off banks exactly because they would have reduced the fee charged and would force MLSs to reduce their fees too.

    ( i should add of course add that it is the BUYER who pays stamp duty not the seller, it occurs to me this might not be obvious)

  93. 93
    Erik says:

    RE: greg @ 91
    Put your coffee down and back away from your computer! No need to get worked up.

  94. 94
    Erik says:

    What this city needs is more land restrictions. We need to preserve Seattle with government intervention.

    Expand credit and make government enforced restrictions on housing. That is what will push prices up in Seattle.

  95. 95

    RE: greg @ 91 – First, the local REET is 1.78%, in most counties, particularly local counties. But if it were lower that would make my point even better. Think much?

    Second, have you even been reading the links I’ve been posting on the topic? From post 74 of the prior thread:

    As to the powerful RE lobby, be thankful for them. If we had the same nominal rates here you’d pay $15,000 for REET on a $500,000 transaction (3%), and $43,750 on a $1,000,000 transaction(4.375%). I mentioned above that Washington Realtors does some good things, and one of those things is going nuclear any time the legislature considers raising the maximum REET from the 1.78% number.

    https://www.gov.uk/stamp-duty-land-tax/residential-property-rates

    As to the real estate commission in England, we’ve already covered that too. That’s only the listing side!

    As to the buyer paying the stamp tax, you really don’t understand do you? That hardly makes it better for the seller. I’d explain, but it would probably be over your head since there are two parts to that.

    I’d suggest that you only post things you know about.

  96. 96
    Jamie says:

    RE: ESS @ 84

    We’re looking at Bushwick, or if we can make it work, Williamsburg. We’ve heard good things about Sunset Park being an affordable up-and-coming neighborhood, but we’re hoping not to recreate our “commute” now – 30-45 minutes from home (Greenwood) to the stuff we want to do (Downtown). Convenience will definitely come at a cost, and we are conscious about not contributing to gentrification.

    I wonder if there isn’t a small exodus of long-time Seattleites cashing in on their home appreciation and moving to locations without the growing pains happening here.

  97. 97

    By greg

    In the USA real estate is taxed each and every year at levels that drive the elderly out of their homes and away from the place they raised their families, made friends etc…

    BTW, note only are your numbers wrong on costs of sale here versus there, but this sentence is complete nonsense.

    First, real estate taxes in the United States are not just under one program. I don’t know why you would make such an ignorant claim.

    Second, in Washington State elderly LOW INCOME people get a break on their real estate taxes. And even without the break the taxes tend to run only about 1% of value. Again, very ignorant of you to make such claims.

    And in any case the post you quoted was talking about an entirely different topic which you chose not to refute at all–elderly getting locked into their homes in England due to the extra 3% stamp tax on the purchase of second homes.

    So anyway, nice that you go off on tangents. Note that I refuted nonsense that you actually wrote, rather than setting up strawman arguments.

  98. 98
    ess says:

    By Jamie @ 95:

    RE: ESS @ 84

    We’re looking at Bushwick, or if we can make it work, Williamsburg. We’ve heard good things about Sunset Park being an affordable up-and-coming neighborhood, but we’re hoping not to recreate our “commute” now – 30-45 minutes from home (Greenwood) to the stuff we want to do (Downtown). Convenience will definitely come at a cost, and we are conscious about not contributing to gentrification.

    I wonder if there isn’t a small exodus of long-time Seattleites cashing in on their home appreciation and moving to locations without the growing pains happening here.

    I understand the need to be near work. Commuting by NYC subway, especially from the outer boroughs is uncomfortable and time consuming, especially during rush hour. While the NYC subway system operates better than when I lived there as a kid, it is still sardine city during rush hour. And apparently there are still issues with its smooth and efficient operation.

    I am very partial to southern Brooklyn. There are nice neighborhoods in that area that are still on a human scale. In particular, one area I lived in for two years – near Ocean Parkway and Kings Highway was still relatively pleasant when we explored that area a few years ago.

    When I was showing my wife some of the neighborhoods that I lived in as a kid, we stopped in one area that is up and coming. My wife was concerned about the drug dealer doing deals on the corner, and that some of the front yards were filled with weeds and garbage. I on the other hand was impressed that not all the front yards of the apartment buildings were trashed, and some of the buildings appeared as someone finally cared about them. Thus different perspectives on that visit from the two of us.

    I know there are some longer time Seattleites (or those in the general area) considering moving. I never could imagine leaving this area – my wife and I made an exploratory trip to Arizona last year and a move is still on the table.

    I was doing business at the rental house last week, and my long term neighbor informed me he is out of here within the next year. Can get housing elsewhere much cheaper, not to mention the real estate tax situation. On the other hand – I know other folks with huge increases in equity that are never going to leave. I am just glad I have some options, obviously it is easier to move from an expensive area to a less expensive one than vice versa.

    Good luck in NYC. An amazing place, and really much improved from decades past. For example – the new Highline that we toured a few months ago was a great addition.

  99. 99
    jon says:

    There are 530,000 single family homes in King County. If we call the rate of SFH sales 2000/month, then it would take 22 years at that rate for all the houses in King County to change owners, where for simplicity we can assume that no house house sells twice. That does not sound like people are jumping ship by any means. It is unfortunate that some people were not able to prepare their retirement for the rising tax rate, but at least they are leaving with a large accumulation of house equity.

  100. 100

    RE: jon @ 98 – Some leave and become long distance landlords, but I agree with your overall conclusion.

  101. 101
    Eastsider says:

    By Kary L. Krismer @ 94:

    As to the real estate commission in England, we’ve already covered that too. That’s only the listing side!

    I have already pointed out that this statement is false. In the UK, buyers generally don’t pay commissions just like here.

    I’d suggest that you only post things you know about.

  102. 102
    Eastsider says:

    By Kary L. Krismer @ 96:

    Second, in Washington State elderly LOW INCOME people get a break on their real estate taxes. And even without the break the taxes tend to run only about 1% of value. Again, very ignorant of you to make such claims.

    I believe any ‘break’ in RE taxes has to be paid back by the estate when the owner dies, or when the property is sold. I could be wrong so feel free to correct.

  103. 103

    By Eastsider @ 100:

    By Kary L. Krismer @ 94:

    As to the real estate commission in England, we’ve already covered that too. That’s only the listing side!

    I have already pointed out that this statement is false. In the UK, buyers generally don’t pay commissions just like here.

    I’d suggest that you only post things you know about.

    Well that is technically correct, but still wrong. As the link I previously posted pointed out, most buyers go without an agent, so they don’t pay for what they don’t get. If you have something that says differently, post a link that shows that besides the one you posted in 96 of the prior thread. That just gave the general rule and didn’t refute the two specific links I posted in 93 and 94 of the prior thread.

    If you think a system is good where buyers are subjected to seller’s agents without their own representation, I guess we just disagree. I avoid that type of situation here, and think it is a horrible situation to put buyers in.

  104. 104

    By Eastsider @ 101:

    By Kary L. Krismer @ 96:

    Second, in Washington State elderly LOW INCOME people get a break on their real estate taxes. And even without the break the taxes tend to run only about 1% of value. Again, very ignorant of you to make such claims.

    I believe any ‘break’ in RE taxes has to be paid back by the estate when the owner dies, or when the property is sold. I could be wrong so feel free to correct.

    There are some tax breaks that need to be paid back when the property is sold–the one I’m aware of is the special break for keeping a property forested. But even that one doesn’t need to be paid back if the new buyer agrees to the terms for X years (5 years???). The last time I looked at that was over 10 years ago though, so it may have changed.

    I’ve represented a few buyers where the seller had been getting the senior credit and I don’t remember any charges on the seller side for repaying prior reduced amounts.

    I’ll see if I can find something, but that would seemingly make financing difficult since RE taxes get priority and people can live a long time past age 65. I think the forest one I referred to was capped at a certain number of years, so the lender would know their maximum exposure.

  105. 105

    By Eastsider @ 100:

    I’d suggest that you only post things you know about.

    By Eastsider @ 101:

    I could be wrong so feel free to correct.

    I think you’ve been hacked! ;-)

    BTW, I think it was you who dismissed my warning about putting a fence within an inch of a survey line because surveys are not necessarily that accurate.

    On a private RE attorney BB one asked for an expert witness to deal with a situation of conflicting surveys. They were quickly given four responses, which is unusual, so apparently it’s a rather common situation.

  106. 106

    RE: Eastsider @ 101 – I decided to just cheat and look at the assessor’s information. Seemingly if you’re above 61 and make less than $40,000 a year you get an exemption that doesn’t need to be paid back. If you’re above 60 and make less than $45,000 and are disabled, you get a deferral, which does have to be paid back. There are a few other situations there.

    http://www.kingcounty.gov/depts/assessor/TaxpayerAssistance/TaxRelief.aspx

    I would caution that the deferral programs might trigger a mortgage default. Consult your deed of trust terms and an attorney.

  107. 107
    Kmac says:

    By jon @ 98:

    It is unfortunate that some people were not able to prepare their retirement for the rising tax rate, but at least they are leaving with a large accumulation of house equity.

    View points from all sides of the housing issue are very interesting.

    The Seattle area is more than King County.

    I have no doubt that retirement is playing a role in some of the people leaving, but the only one suggesting that was Kary and I don’t think anyone made the claim that the retirees were moving because they couldn’t afford the taxes.

    Refusing to accept is different than affording.

  108. 108
    Kmac says:

    By N @ 88:

    http://www.seattletimes.com/business/real-estate/housing-bubble-fears-stronger-in-washington-than-in-any-other-state/

    70% of Washingonians think we are in a bubble, but hardly any sales people (or Realtors) think we are!!!

    Because so many people think so, with some uncertainty I will lean to the other side and say that I think there is a lot more upside to this before reality sets in.

    I think Deerhawk has his wits about him when he assesses his exit strategy factoring a 10% drop in market as he explained above.
    Need to get out in front of everyone on the way down, because people resist lowering prices.

    Look out below……

  109. 109
    ARDELL DellaLoggia says:

    RE: Kmac @ 107

    When there’s a drop it will not stop at 10%. That’s dangerous, wishful thinking.

  110. 110
    ARDELL DellaLoggia says:

    RE: Kary L. Krismer @ 102

    Only if the buyer’s agents are doing at least an adequate job of representing the buyers vs merely trying to sell them something. I’m going to pull rank on you again because only one of us worked in this field before buyer agency. Nothing changed in the way brokerages train agents. Don’t believe everything you hear. It’s mostly an argument to hold the status quo. I truly wish buyer agency were taught adequately. But it’s all how to get a client not how to do a great job for the client. Sad.

  111. 111

    RE: ARDELL DellaLoggia @ 109 – More strawman arguments. I’m not arguing in favor of the system we had before our current system. In fact I’ve repeatedly been critical of it, even within the past 30 days.

    Also, I can hardly be accused of claiming most agents do a great job! True most of my criticism has been of listing agents, but it also includes buyer’s agents, such as those who strike the “information verification period” language of the purchase and sale agreement, or those who have their clients waive inspection contingencies without adequate disclosure, just so that they can get a commission.

    I will agree with you on training, although I’m not sure it’s actually training. I think most attorneys understand the concept of representing a client’s position better than others not in the legal field, or at least better than most agents or people posting on RE websites. But that’s not really a topic taught in law school to any great extent, other than perhaps in Criminal Law. But the legal system is set up where the attorney represents their client’s position and it’s understood that they may take the opposite legal position in a future case. And they might win or lose both due to the slightest difference in facts (or judges)! But perhaps the difference is more RE agents are often really in need of that next commission check relative to attorneys (despite our “outrageous” commission levels that some want to reduce). Also, legally only attorneys are fiduciaries, RE agents are not.

  112. 112
    ARDELL DellaLoggia says:

    RE: Kary L. Krismer @ 110

    That’s my point. Yours is the strawman argument when you keep saying UK being cheaper is because it’s only for seller representation. Why do you keep saying that on every thread and now agree that the BA part is often worth about minimum wage???

    Buyer Agency is a failed experiment. Give them back the money or at least stop acting like our double commission compared to UK has good reason. You of all people don’t really believe that. So stop rationalizing in the UK argument.

    As to your lawyer argument…no. You have to be the expert of houses and the housing market …not the expert of paper and words…to represent buyers and sellers well. Get your nose off the paper. The answer is not a new or improved form.

    But I’ll save you the trouble. Give back all the money. Greg and the bubble guy are right. Buyer Agency is never going to be worth 3% so the 6% is over.

    It’s not even leaning in the right direction.. The industry isn’t even trying to be worth it. Time for lower fees instead. Failed experiment. Give the money back.

  113. 113

    By ARDELL DellaLoggia @ 111:

    RE: Kary L. Krismer @ 110 – That’s my point. Yours is the strawman argument when you keep saying UK being cheaper is because it’s only for seller representation. Why do you keep saying that on every thread and now agree that the BA part is often worth about minimum wage???

    Two responses.

    First, mediocre or even bad representation could be better than none. It’s sort of like the unrepresented buyer situation here–a situation I try to avoid if possible.

    Second, the buyer can get great representation if they pick the right agent, and that’s the real problem. No matter what the system, who the agent is representing or who is paying for the agent, if the agent the consumer picks isn’t good there will be a problem. And unfortunately it’s very difficult for consumers to pick a good agent, so instead they do things like find one on Zillow or off a sign, etc.

  114. 114
  115. 115
    ARDELL DellaLoggia says:

    RE: Kary L. Krismer @ 112

    No. The problem is IN the industry. Consumers making bad choices is not the problem. The odds are stacked against them. It’s been 20 to 25 years of not even trying to do it well. Failed Experiment

  116. 116
    ARDELL DellaLoggia says:

    RE: Kary L. Krismer @ 112

    No. The problem is IN the industry. Consumers making bad choices is not the problem. The odds are stacked against them. It’s been 20 to 25 years of not even trying to do it well. Failed Experiment

  117. 117

    RE: ARDELL DellaLoggia @ 115 – I don’t see how you can attribute the quality of agents to our agency system. It’s more related to our licensing system. But this discussion is really a bit of a repeat. This is from the prior thread.

    By Kary L. Krismer @ 115:

    By Ardell DellaLoggia @ 112:

    The sad part is the scads of people who complain that they have a bad agent. Why did they hire them? Why didn’t they fire them? Can we really have compassion for buyers and sellers who hire the wrong agent and pay them too much? If they can only find bad agents, then is fear of the disadvantages of a lower cost alternative really valid?

    It would be nice if quality of service was the focus of our discussion. The problem isn’t that some agents make 3% on some transactions. The problem is that some agents do that who aren’t worth even $1,000 or who shouldn’t be allowed to do brokerage services even for free!

    I’d love to improve the quality of the profession, but I don’t really have any great ideas, other than perhaps make every agent who hasn’t passed one of DOL’s situational tests do so, even if they have practiced for over 10 years. That would probably weed out a lot of the unqualified agents because some would never be able to pass such a test.

    But the other problem is the consumer typically has no idea whether or not their agents was good and did a good job for them. They only know that they like their agent and what their agent told them.

  118. 118
    ARDELL DellaLoggia says:

    RE: Kary L. Krismer @ 116

    Kary,

    If you don’t understand the issue…just stop.

    How the industry causes it and how a consumer has to maneuver through the mess are two different topics.

    The sadder part is several new real estate biz models formed because the industry was broken and they truly did have a mission to fix it. But like you, they just didn’t understand the industry well enough to fix it.

    The Founder of Trulia and I just had this conversation. He “gets” it and we agree on the fix, so maybe he and I will fix it together.

  119. 119

    RE: ARDELL DellaLoggia @ 117 – No Ardell, you stop. You don’t understand. Again, just like the last thread.

    By Kary L. Krismer @ 125:

    RE: ARDELL DellaLoggia @ 124 – And by “share commissions” Ardell probably means: “So that a seller can indirectly make an offer of a commission to an agent who knows a buyer, such offer being made through their agent who lists the property.” That’s basically how MLS services work–that and including listings from multiple brokerages so you don’t have to look multiple places.

    By ARDELL DellaLoggia @ 126:

    RE: Kary L. Krismer @ 125

    OMG No! Don’t you know what the mls is? Ever read a Listing Contract?

    That’s insane. You’re pulling my leg.

    By Kary L. Krismer @ 127:

    RE: ARDELL DellaLoggia @ 126 – Oh great, Ardell wants to pick another fight with a lawyer on a topic she doesn’t know squat about.

    From paragraph 4, commission:

    Seller will pay [listing] Firm a commission of ___% of the sales price, or $_______ (“Total Commission”). From the Total Commission, Firm will offer a cooperating member of MLS representing buyer (“Selling Firm”) a commission of ____% of the sales price, or $___________.

    So basically the seller is paying the commission through the listing firm. And if you don’t believe that, how do you explain what happens if the seller breaches? The buyer’s agent will start an arbitration against the listing firm and likely be found to owe the money to the other agent and then the firm will have to sue the seller if they won’t pay.

  120. 120

    By ARDELL DellaLoggia @ 117:

    How the industry causes it and how a consumer has to maneuver through the mess are two different topics.

    And yet another strawman. I never said anything differently.

    Of course those are two different topics, but regardless of the system, consumers should have access to better agents, even if they pick agents at random. Why are you against that? [Obvious strawman argument]

  121. 121
    toad37 says:

    @ Ardell,

    I just sent you a message through ActiveRain… had a quick question.

  122. 122
    ARDELL DellaLoggia says:

    RE: toad37 @ 119

    I answered you but on second thought it might be better if you popped by the house I’m working on. That way I can work while I give you some answers to your questions. I get back from vacation tonight.

  123. 123
    ARDELL DellaLoggia says:

    RE: Kary L. Krismer @ 112

    A good agent is one who has their clients’ best interests in mind at all times and who has the skills and knowledge to back that up.

    Brokerages don’t train agents to give good advice to buyers as in don’t buy that house or not a good idea given your current circumstances to buy at this time.

    Brokerages don’t train agents in great detail about how to be an expert on houses and value and market conditions.

    Some agents take it upon themselves to be better advocates, but until the brokerages support being expert at all things property, good agents are by happenstance and not design.

    That’s what I mean by the industry not even trying to move in the right direction.

    It’s “Be expert or be Gone” time.

  124. 124

    RE: ARDELL DellaLoggia @ 123 – I would agree with a lot of that, but I suspect that’s probably true in England, and was also true under Washington’s prior system. No matter the system, many of the same people would still be in the industry with largely the same skill sets. It’s not the agency system which is at fault.

    But hey, you can get continuing education course credit for a class that teaches you Feng Shui! So it’s not all bad. /sarc

    But again, as to fixing that I think it would come down to the Department of Licensing doing something. Firms could do more, but unless it was mandatory, like the relatively new enhanced supervision of new agents thing, I don’t see it happening and I don’t see it being consistent.

  125. 125
    ARDELL DellaLoggia says:

    RE: Kary L. Krismer @ 124

    We have one of the best if not THE best “agency” laws in the Country. It’s the brokerages that haven’t changed since sub-agency was the only option.

    Where’s the class on helping a buyer client determine which homes and when a buyer should not buy? Until then “buyer agency” is just the right thing to call yourself to get hired with no training for it to be of value and worth the big bucks.

    Brokerages spend a disproportionate amount of time on how to get hired and not enough time on what to do once you are hired. …except minimize liability for the brokerage. In that regard WA is the worst offender.

  126. 126
    ARDELL DellaLoggia says:

    RE: Kary L. Krismer @ 124

    What the UK peeps are trying to tell you is some, and likely 80%, would prefer lower costs to top level advocacy/representations. Since you agree that they likely can only get top agents 20% or less of the time, you should support their argument for lower costs.

    Why should they be paying top dollar for all the crappy agents you constantly denounce? What’s your rationale for that?

  127. 127
    greg says:

    By Kary L. Krismer @ 95:

    RE: greg @ 91 – First, the local REET is 1.78%, in most counties, particularly local counties. But if it were lower that would make my point even better. Think much?

    Second, have you even been reading the links I’ve been posting on the topic? From post 74 of the prior thread:

    As to the powerful RE lobby, be thankful for them. If we had the same nominal rates here you’d pay $15,000 for REET on a $500,000 transaction (3%), and $43,750 on a $1,000,000 transaction(4.375%). I mentioned above that Washington Realtors does some good things, and one of those things is going nuclear any time the legislature considers raising the maximum REET from the 1.78% number.
    https://www.gov.uk/stamp-duty-land-tax/residential-property-rates

    As to the real estate commission in England, we’ve already covered that too. That’s only the listing side!
    As to the buyer paying the stamp tax, you really don’t understand do you? That hardly makes it better for the seller. I’d explain, but it would probably be over your head since there are two parts to that.
    I’d suggest that you only post things you know about.

    Cool story bro.

    YOU are trying to give your lobby group credit for tax rates but ignore WA is a regressive tax state and the UK is a progressive tax state.

    The USA and WA in particular have very regressive tax systems.. The UK on the other hand taxes progressively . Thus there has NEVER been a chance in hades that WA would impose a 10% tax of property sales over 950K…. NEVER.

    (lets not forget until the last year KARY thought VAT was an income tax in the UK )

    Your lobby group was never fighting a shift to a progressive tax system, and as such you don’t get credit for preventing something that was NEVER on the cards. You might as well take credit for the sun rising.
    In the UK the taxes are planned so that a median priced home sale is taxed at 1%….. if prices double and triple the tiered system gets moved up to keep roughly inline with 1% . it is part of a plan to tax zero on a low cost starter home or flat , 1% for the average and then quickly ramping up to hit the buyer harder and harder exactly because the majority of the 60 million folk living there want that type of structure. It is what they vote for, just like they vote to have a national healthcare system too..

    their system INTENTIONAL targets higher value homes, because as a nation they believed in progressive taxation, unlike WA which is an extremely regressive tax state. In the UK car tax, sales tax etc are all the same they are all structured in one way or another to be progressive whereas our taxes are mostly not. In fact the last really progressive tax we had was on cars, and that was flattened out massively over 15 years ago.

    So again NO! you NAR nor any other RE group can rightfully claim to be keeping our taxes low when comparing them to any progressive tax system.

    and remember the average home sale in the UK pays a lower % in transfer/sale taxes than the average sale in King country or anywhere else. You , your NAR and the tens of millions spent are all spent to maintain the status quo and avoid any changes in taxes because any increase puts pressure on agency fees.

    Now on agency fees, the UK charges 0.75%-3.5% and up but most folk pay 1% There is NO buyer’s agent thus no 2nd fee. Instead both the seller and the buyer hire RE solicitors or conveyors who do the contracts, titles, escrow and haggle out the final price based on survey or other findings all those services for about 1-2k depending on what you need and if you are both buying and selling.

    The system is a little different than the US but the big take away is always the same. In the USA it will cost you about 5% for you agents plus a thousands in closing fees and in the UK it costs mostly less than 2% including closing. and including the costs of both parties. both spend about 1k-2k on an attorney and one person spends about 1% an agent. both system work well but one charges a lot more than the other. I think 1 or 2% beats 5% easy. attorney fees can go up but rarely and not a huge amount.
    1.5% +1.5%+1.5%+1.5% in the USA, is the real problem you MSL guys chop it up to wet so many beaks that you can individually put on the poor mouth while every home sale pays out 4 times as much into your MLS partners/members.

    and again kary your lobby buddies get no credit for keeping the current taxes where they are, the public do, they vote down almost every attempt to change our tax system to a more progressive one. You are misleading people by pretending WA would magically shift to progressive taxation without your lobbying.

  128. 128
    Bubble Trouble says:

    By steven @ 70:

    RE: N @ 67

    I have no good explanation for Spokane besides the fact that their median price is 175k despite your rightful claim that it’s past 2007 peak. Sometimes, cheap price is enough of an attraction to drive its price higher.

    There is no good explanation, other than cheap credit.

    Pick any city and it’s the same story. The entire country is in a bubble, and every city’s local real estate salespeople have a difference explanation as to why (fill in city name) is different and why the bubble prices are legit.

  129. 129
    Bubble Trouble says:

    By steven @ 60:

    RE: Doug @ 58

    actually, there are no similarities. I don’t understand why you are comparing western coastal cities to an inland desert, tourist heavy city.

    Oh right. Math is different in the desert than on the coasts. I forgot.

  130. 130
    ARDELL DellaLoggia says:

    RE: greg @ 127

    But why are you comparing the U.S. to the UK or any other place? I honesty get lost when people do this. It’s like the parent at a School Board Meeting who stands up and starts explaining how they did “it” in CA. Everyone looks at them like they have two heads and says or thinks and says later, if they like it better there, why don’t they just go back there.

    We all agree UK is different than here. I’m sure they are different as to many things. We care why? Not.

  131. 131
    N says:

    Apparently Realtors feel a need right now to really try to sell people on this market:

    http://www.thenewstribune.com/news/business/article166842887.html

    “This survey is a good example of how a small sampling of people, whose opinions are based on personal beliefs, extrapolates into a fearful and fretful story of eminent doom in the housing market.”

    “There will be a slowdown in price increases; nothing lasts forever. I think price increases will continue to rise through 2018 throughout Pierce County. The pace will be half of the 12 percent we’ve experienced in the last 3 years. After that, we’ll probably see a reduction in the rate of price increases.”

  132. 132

    By ARDELL DellaLoggia @ 126:

    RE: Kary L. Krismer @ 124

    What the UK peeps are trying to tell you is some, and likely 80%, would prefer lower costs to top level advocacy/representations. Since you agree that they likely can only get top agents 20% or less of the time, you should support their argument for lower costs.

    And what I’m saying is that’s bass ackwards. Quality is more important than cost, and cost should somehow correlate to quality. A low quality agent can be very costly on either side of the transaction–far more than the hypothetical 3%.

    And no it doesn’t support their argument. Lower fees are not going to somehow translate into better service.

  133. 133

    By greg @ 127:

    YOU are trying to give your lobby group credit for tax rates but ignore WA is a regressive tax state and the UK is a progressive tax state.

    Yet another strawman. Where did I ever mention regressive/progressive as being a part of the issue in total costs of sale?

    What I will say on that issue is much of the “research” done on regressive/progressive is designed to get a result. In Washington the studies pass through taxes from landlords to tenants, even though if the tax was totally eliminated the tenant’s rents would not drop a dime. But that’s another issue which has nothing to do with the relative excise taxes.

    But if you want to go there, one change Washington Realtors might possibly support would be doubling the REET but having it not apply to sales below each county’s median price. That would be relatively revenue neutral, but make that tax much less regressive.

  134. 134

    By greg @ 127:

    (lets not forget until the last year KARY thought VAT was an income tax in the UK )

    You know, if you’re going to get a hard-on every time I get something wrong (which I can understand since you find maybe once or twice a year out of the hundreds of things I post), you might as well remember it correctly.

    I didn’t realize that some European countries have both a very high VAT and very high income tax. I know the difference between a VAT and an income tax. What I am not is an expert in the taxation system of every country in the world. But that doesn’t stop you from getting excited.

  135. 135

    By Bubble Trouble @ 129:

    By steven @ 60:

    RE: Doug @ 58

    actually, there are no similarities. I don’t understand why you are comparing western coastal cities to an inland desert, tourist heavy city.

    Oh right. Math is different in the desert than on the coasts. I forgot.

    The demand is different. The demand suddenly rose in LV for no apparent reason, other than speculation.

    Prices are currently rising in the Seattle area largely based on people moving here. That wasn’t the case for what was going on in LV in 2005-2007.

  136. 136

    By N @ 131:

    Apparently Realtors feel a need right now to really try to sell people on this market:

    http://www.thenewstribune.com/news/business/article166842887.html

    “This survey is a good example of how a small sampling of people, whose opinions are based on personal beliefs, extrapolates into a fearful and fretful story of eminent doom in the housing market.”

    “There will be a slowdown in price increases; nothing lasts forever. I think price increases will continue to rise through 2018 throughout Pierce County. The pace will be half of the 12 percent we’ve experienced in the last 3 years. After that, we’ll probably see a reduction in the rate of price increases.”

    My response to the survey would be different. The article states: “A recent national survey by ValueInsured, which sells policies to guard against falling home values, . . ..” You can design surveys to get certain results, and this is the result that ValueInsured would want. It’s possibly part of a sales campaign, not useful data.

  137. 137

    RE: steven @ 61
    OVERPOPULATION is the Root Cause of All Present/Future Economic Problems

    It used to be in our public school world history textbooks….the Open Border liars removed this scientific and demographic reality from our public schools and colleges. Wake up and smell the coffee.

  138. 138
    Bubble Trouble says:

    By Kary L. Krismer @ 135:

    By Bubble Trouble @ 129:

    By steven @ 60:

    RE: Doug @ 58

    actually, there are no similarities. I don’t understand why you are comparing western coastal cities to an inland desert, tourist heavy city.

    Oh right. Math is different in the desert than on the coasts. I forgot.

    The demand is different. The demand suddenly rose in LV for no apparent reason, other than speculation.

    Prices are currently rising in the Seattle area largely based on people moving here. That wasn’t the case for what was going on in LV in 2005-2007.

    You could not be more wrong. That is literally the exact reason prices in LV were skyrocketing….5K people were moving there every month. And it wasn’t 2005-2007 it started in 2002.

    You couldn’t go 10 minutes without someone – either in the media or a real estate salesman – reminding you how the entire world wanted to live in Las Vegas because of reasons X, Y and Z! Every city has its own version of X Y and Z…the weather, tech jobs, skiing, the beach, low taxes, hiking trails, you name it. There is always a reason why (fill in the city name) is the hottest thing on the planet and everyone will want to move there.

    And for a while it worked. People were moving there faster than the number of houses that could be built. And that led to higher prices, due to ***LOW INVENTORY***. Sound familiar? You’d have people people lining up overnight when a builder announced plans for a new phase in a subdivision, to be first in line to buy. You’d have bidding wars and people writing letters to sellers begging them to pick us!! Houses would be listed on a Friday and on Saturday there would be 20 offers. Sound familiar? And it was all justified as normal, because everyone wants to move to LV and there is no inventory. Again, sound familiar? And then the foreign investors got into the game, buying up houses/condos sight unseen, sometimes 3 or 4 or 5 at a time. Why not? Buy today at $400K, sell in 6 months for $500K….easy money baby!! Hmmm, foreign investors buying up properties sight unseen? Where have I heard that happening recently? Surely not Seattle, right? Cuz Seattle is different and stuff,.

  139. 139
    Doug says:

    RE: Bubble Trouble @ 138 – I was too young to remember that far back, but people were actually moving there? Or they were just buying vacation properties there?

    I don’t know much about Vegas’ broader industries, but it doesn’t feel like strippers and card tables could support 5k new people per month.

  140. 140
    Nick says:

    Just from my time out there, I can say LV had/has quite literally countless acres of developable land. Some family retired to a LV subdivision in Henderson, and as far as the eye could see were new buildings, roads, & empty lots being graded for development (06-07).
    Contrast that to the incredibly rare event of an empty lot in Seattle proper. More likely some old SFHs are being demo’d for a condo unit.
    Not saying it can’t end in a crash. Anything can, only that SEA is quite different from LV therefore hard to compare apples to kumquats.

  141. 141
    uwp says:

    People were actually moving to Las Vegas.
    http://www.lvcva.com/includes/content/images/media/docs/Population-052517.pdf

    Looks like a about a 15% increase from 2002-2007. Then it was stuck there for 5-6 years until it started growing again. I’m not sure why people were moving there. Maybe someone else can remember.

  142. 142
    uwp says:

    One other comment on Vegas vs Seattle:

    Seattle has 50% more 100k income households than Vegas in relative terms (30%+ of Seattle households vs 20% for Las Vegas).

    Those are the kind of numbers that can support higher prices, not just median incomes. (100k income could handle a 3k house payment at 36% DTI)

  143. 143
    justme says:

    RE: Bubble Trouble @ 138

    I agree the Seattle inventory-number wanking is just like the Las Vegas. The inventory is low because so many speculators want to buy houses because … the inventory is low, Yeah, not circular thinking at all. /sarc.

  144. 144
    ess says:

    By Nick @ 140:

    Just from my time out there, I can say LV had/has quite literally countless acres of developable land. Some family retired to a LV subdivision in Henderson, and as far as the eye could see were new buildings, roads, & empty lots being graded for development (06-07).
    Contrast that to the incredibly rare event of an empty lot in Seattle proper. More likely some old SFHs are being demo’d for a condo unit.
    Not saying it can’t end in a crash. Anything can, only that SEA is quite different from LV therefore hard to compare apples to kumquats.

    The comparison can not be more stark. When in Las Vegas, I recall driving to the state parks that are east and west of Las Vegas. Mile after mile of development on formally what was desert as far as the eye could see. Massive developments all being constructed at the same time. And still much more land to build on in the immediate vicinity. Very different from Seattle and area with the physical and legal constraints that prevent the construction of large size housing developments.

    One thing that struck me was the lack of solar panels on the roofs of the new houses. One would think that an area such as Las Vegas would have them on almost every roof. Perhaps it has changed now.

  145. 145
    toad37 says:

    RE: ARDELL DellaLoggia @ 122 – Thank you SOOO much for meeting today, Ardell. It was incredibly helpful… you rock! :-)

  146. 146

    By Bubble Trouble @ 138:

    And for a while it worked. People were moving there faster than the number of houses that could be built. And that led to higher prices, due to ***LOW INVENTORY***. Sound familiar? You’d have people people lining up overnight when a builder announced plans for a new phase in a subdivision, to be first in line to buy. You’d have bidding wars and people writing letters to sellers begging them to pick us!! Houses would be listed on a Friday and on Saturday there would be 20 offers. Sound familiar? And it was all justified as normal, because everyone wants to move to LV and there is no inventory. Again, sound familiar? And then the foreign investors got into the game, buying up houses/condos sight unseen, sometimes 3 or 4 or 5 at a time. Why not? Buy today at $400K, sell in 6 months for $500K….easy money baby!! Hmmm, foreign investors buying up properties sight unseen? Where have I heard that happening recently? Surely not Seattle, right? Cuz Seattle is different and stuff,.

    Thank you for that perspective, but I’d note a lot of that happens whenever you have rapidly rising prices. Seattle was sort of different back in 2007 when prices were going up despite a fairly reasonable amount of inventory.

    I see conflicting stats on how many people were moving to the LV area, but what were they moving there to do? Many/most of the people moving to Seattle currently largely have fairly high paying jobs. Were there any high paying new positions in LV at the time, other than perhaps construction? Or is there enough tipping in the entertainment/gambling industries that a high percentage of their employees could actually afford to buy?

  147. 147
    N says:

    Its interesting to note that the NFL and NHL apparently both think the Vegas area has enough with cash to spend on pro sports. But I agree its not a good comparison. I had no idea MGM has 54,000 employees, wow!

    Here is a interesting blog on why Phoenix is a market to follow in looking at bubble trends.
    http://www.calculatedriskblog.com/2017/08/phoenix-real-estate-in-july-sales-up-3.html

  148. 148

    RE: N @ 147 – Not sure why that’s “interesting” but Phoenix is a market I’m a bit more familiar with due to having gone there several times over the years.

    They were practically bubble central in 2006-2007 and just eyeballing the C-S data shot up to about 228 and are now still only at about 170. Given how fast their rise was, there might not be that many people though who bought at higher prices than today’s prices, but there are undoubtedly some.

    The thing about that market is they quickly turned vast amounts of desert into freeway and housing, so I’m guessing they probably really overbuilt. I don’t remember seeing any new construction when I was down there last year, but I only drove in very limited areas. Also, that was an area that Washington Mutual moved into, which probably contributed.

  149. 149

    I just saw my first Tesla Model X in person. Two words describe it perfectly: Butt Ugly! It may be photogenic, but in person it is ugly. Even the paint seemed to suck.

    Tim made the right choice going with the Bolt.

  150. 150
    Josh Chinzy says:

    RE: ARDELL DellaLoggia @ 110

    I have always wondered why is Redfin the only brokerage to have their agents pay tied partly to how the customer is satisfied at the end of the transaction? Doesnt that system helps hold the agent accountable? When a bad survey and review leads to a lower bonus, it hurts the agent monetarily, so there is an incentive to try your best to deliver good service. Kinda explains why most agents spend 80 percent of their time on prospecting and finding new business , so there is a lot more focus on that end as oppossed to delivering better customer service.

  151. 151

    By Josh Chinzy @ 150:

    RE: ARDELL DellaLoggia @ 110

    I have always wondered why is Redfin the only brokerage to have their agents pay tied partly to how the customer is satisfied at the end of the transaction?

    That’s just a sales pitch. Agents who work through referrals, as opposed to advertising, are entirely dependent on customer satisfaction. That’s even better than being “tied partially” to customer satisfaction.

  152. 152

    RE: Josh Chinzy @ 150

    They are the only Brokerage who pays agents period. Brokerages don’t pay agents. Agents pay Brokerages. If you are salaried, then you get a bonus, same as most any other company with salaried employees.

    Agents are their own business. Some spend money on having a brokerage name, some don’t. The Brokerage is a business expense of the agent. The agent can choose a low cost broker or a high cost broker or a no cost broker.

    So it’s not that other Brokerages don’t pay for good service and happy clients…they don’t pay AT ALL.

    A Redfin agent gets paid whether they sell a house this month or not. Agents at other brokerages get paid when they sell a house by the seller and then they pay the Brokerage from that.

    I personally don’t like the getting paid extra for happy clients because I often annoy the crap out of my clients and challenge them when they are doing stupid things. People don’t hire me to be nice to them. They hire me to be really mean when they are going off course in a direction that will later come back to bite them in the ass.

    Often sellers are very unhappy people, even when they make a ridiculous amount of money. They are often unhappy and sad to leave their home or to have to sell their home because of a divorce or a death. It’s not really always a happy business. :)

  153. 153

    RE: Ardell DellaLoggia @ 152

    Sorry, I didn’t have the edit feature to add this above. Some of my best reviews have come from people who were extremely unhappy.

    https://www.zillow.com/profile/ARDELL-DellaLoggia/

    My favorite line from a client was “Ardell…I’m starting to feel really badly because you are always bending over backwards to try to make me happy. I think it’s time to tell you…I don’t get happy. It’s not in my nature.” :)

  154. 154

    By Ardell DellaLoggia @ 152:

    They are the only Brokerage who pays agents period. Brokerages don’t pay agents. Agents pay Brokerages.

    Once again your statements call me to recall your insulting comments from the prior thread, where for some yet to be explained reason you said:

    By ARDELL DellaLoggia @ 126:

    RE: Kary L. Krismer @ 125

    OMG No! Don’t you know what the mls is? Ever read a Listing Contract?

    That’s insane. You’re pulling my leg.

    That was based on some misunderstanding of yours you’ve yet to explain, and now yet another error in understanding our forms!

    The correct information is that the listing is in the firm’s name. The firm is entitled to all the money under the listing contract. The language of the contract is: “Seller will pay Firm a commission. . ..” The agent’s share of the commission is determined by his/her contract with the listing firm. And without the firm, the listing agent has no right to perform brokerage services or to get any fees.

  155. 155

    RE: Ardell DellaLoggia @ 152 – For some reason my comment on this is hung up in moderation. But Ardell has it wrong again.

    The listing is the firm’s property under any listing in the NWMLS, if not any listing in Washington state. The firm is entitled to the entire commission, but subject to any agreement they have with the agent. The listing office portion of the commission flows from the firm to the listing agent, not the other direction as Ardell claims. And as to the buyer’s agent’s firm, the commission flows from the listing firm to the buyer’s agent’s firm to the buyer’s agent.

    So Redfin is no different in that regard at all. It’s just that their agents are employees (or at least were prior to recent poorly drafted Washington legislation that might possibly have changed that) rather than independent contractors. They get paid either hourly or a salary, plus apparently some sort of performance bonus. I believe Zip Realty functions the same way. Most other firms have agreements with their agents as to the flow of commission dollars.

  156. 156

    The $100,000+ increase in the King County median YOY had me suspicious. I thought it might have been like a few months ago where there was a significant MOM jump in the median which was partially if not largely caused by the mix changing to more expensive neighborhoods. I suspected the same thing again on the YOY jump, but now that I’ve had a chance to look I’m not seeing that having a significant impact. The increases seem to be widespread throughout King County and there’s even one area that was below median that had a $100,000+ jump YOY. Only one area had a YOY decline, but it’s a low volume area likely to be highly volatile as such.

    Numbers and vague references to numbers from NWMLS sources, but not compiled by or guaranteed by the NWMLS.

  157. 157
    ARDELL DellaLoggia says:

    RE: Kary L. Krismer @ 155

    When the market was on the downside you skewed the data by removing pre and post foreclosures. That felt more “real” to you. Try the same on the high side by removing new construction. Same logic. Not saying it’s valid logic, but it would at least be somewhat consistent. :)

  158. 158
    Josh Chinzy says:

    RE: Kary L. Krismer @ 151

    But the issue is that a non redfin agent X CAN get paid the full commission offered without a penalty for THAT transaction even if the customer is not satisfied. Isnt that true? Not getting refferals five years from now is another topic.

  159. 159

    By ARDELL DellaLoggia @ 156:

    RE: Kary L. Krismer @ 155

    When the market was on the downside you skewed the data by removing pre and post foreclosures. That felt more “real” to you. Try the same on the high side by removing new construction. Same logic. Not saying it’s valid logic, but it would at least be somewhat consistent. :)

    Huh? I didn’t skew the data, I analysed it. The issue is understanding what’s going on besides just the raw numbers. For example, the low medians at the peak down-spot in the market didn’t really reflect the impact on sellers who were not distressed sellers, unless maybe their neighborhood was heavily impacted by distressed sales. For most distressed sellers the decline in the median probably understated their drop in value.

    But do you have some reason to think that new construction impacted the change? I’d be a bit surprised given how widespread the increases were across areas. Also, while the new construction median is also up $100,000+, the total sales are down about 10%, which is a much higher percentage than the drop in all sales.

    Same disclaimer about NWMLS data.

  160. 160

    By Josh Chinzy @ 157:

    RE: Kary L. Krismer @ 151

    But the issue is that a non redfin agent X CAN get paid the full commission offered without a penalty for THAT transaction even if the customer is not satisfied. Isnt that true? Not getting refferals five years from now is another topic.

    I don’t see why future referrals is another topic. The issue is the incentive to please the customer. For Redfin agents it’s a presumably tiny bonus, for agents who work off referrals it’s future commissions.

    I’m not sure why you think referrals come five years later. They could come before the referring customer’s transaction even closes. And getting perhaps 75-100% of the commission from that new client is likely much greater incentive than whatever bonus Redfin offers their agents.

  161. 161
    Josh Chinzy says:

    RE: Kary L. Krismer @ 159

    It’s not a tiny bonus if a string a bad reviews can get you fired. My friend who is a redfin agent in Portland has mentioned that he has seen people get fired for a string of bad reviews. So, there are consequences for bad customer service. And, secondly, you still didnt touch upon my point, isnt it true that agent X does get compensated the same for that transaction at closing REGARDLESS whether the customer is happy or not?

    Bottomline, this goes back to a fundamental issue at hand with real estate agents that you and Ardell were arguing earlier. I see a few problems in this industry that will sooner or later lead to changes/disruption.

    1. Accountability. Like you mentioned, a good agent delivers good service as referrals are the key for staying in the business for them. But we all know only 10-20 percent of percents perform 80-90 percent of the business. MOST agents are doing less than 3 deals a year and if you pick an agent from a room, basic probability says that you will pick an agent who is not producing or delivering bad customer service. And that agent gets compensated the SAME as any other superstar agent, gets to stay in the same company- as the broker couldn’t care less as it does not cost the broker any money to keep the agent on board. There is very little accountability. Do you think a doctor, lawyer or tax professionals (think big 4 accountants or big law firm employees, not mom and pop folks) can get to stay within their same company if they consistently deliver bad service? Most of them are employees, the employer has to let them go as another employee can take their place and could possibly perform better. Realtors being independant contractors means the broker has little control on the customer service delivered, the broker can do little to ensure there is accountability. If the customer is unhappy at closing, rarely can the agent or the broker take steps to correct that. The employee/independant contractor model in my opinion puts realtors in the same category as car salesman than a doctor, lawyer or tax professional.

    2. As you can already tell, commissions are under attack. In 2010 and 2012, the average rate was 5.4 percent and in 2013-5.36 percent, in the 80’s and 90’s, it was often 7 percent. Now, the national average is 5.26 percent and it is only going to go down even further. The fact that consumers now are more educated than ever before that commissions are not set by law, rebates and commission reductions can totally be negotiated, is a big win for the consumer. You can thank redfin for that. Discount brokerages have existed for ever, as I believe whatever you do, anybody else can do it cheaper, but redfin has shown that you can build a sustainable business. Before you say that they are losing money!!, c’mon read their S1-filing, and see how much they spent on national expansions last year. If you want to see “profit on paper” they could show you that, but I think they want to have a larger national foot print. Plus, they are profitable in their oldest markets- Seattle, DC, Chicago, LA, OC, SD, etc. And, the question is being asked by millenials is do you more work to sell a 550k home vs a 500K home? Dont compare a 500K home vs 3M home, its different markets, different marketing strategy, advertising, etc. So, you could earn more for that 3M home, but for 550K vs 500K, its almost always the same buyers, same marketing, etc, why do you earn more? So, there will be disruption in the commission structure.

    So, in the future I see commissions going down even further. I see value in realtors, the question is how much am I willing to pay? I still see Redfin as broadcast.com and there is going to be another netflix or hulu that were 2.0 versions of broadcast.com that we have not even heard of yet that will a better redfin which can deliver good service at low costs.

    Lastly, this might never happen in my lifetime, as NAR will fight tooth and nail against this just as they fight every year to keep dual agency legal just because realtors can keep more money in their pocket- truly shameful. I would like to see regulatory change to have realtors as employees. OH BOY! overnight, the industry will change, this is change that will affect more than a million people in the US as there are more than million licensed realtors. What will then happen is there will be mass consolidation. Your indie broker with 5 agents can no longer be in business as the broker cannot pay salaries, health insurance, etc. Mid size brokers will join forces with larger brand brokers and they will retain the best producers and let go of the rest. They might survive as they can still pay salaries and come out ahead as long as the best producers are producing. And of course, the new age brokers like Redfin will survive as they have always had an employee model.

    So, you will see an accounting or law type model where there will be the big 4 or the big 5 players dominating the industry. Of course, its a pipe dream, but oh boy will that be good.

  162. 162

    RE: Josh Chinzy @ 160 – I have to run out, so I’ll look at that more later, but you’re probably right that being fired by Redfin is probably more likely than a firm dropping an agent. That’s probably why there are so many bad agents, but on the other hand the quality of Redfin’s agents has become much more spotty than what it once was.

    What I want to add to the discussion though is that employee incentives can backfire. Wells Fargo is perhaps the best most-recent example of that. Employees will game the system somehow if it puts more money in their pockets. Ardell mentioned above how things sometimes get tense between her and her clients. I don’t tend to have so many issues with that, but I think it is important that an agent not feel like they have to cower to the client so that the client gets proper advice. If all an agent is doing is kissing their clients’ collective asses just to get good reviews, they probably aren’t giving great service, and that leads into a related point I’ve made before:

    Consumers don’t tend to know whether their agent (or attorney) did a good job or not. They only know whether or not they liked their agent and the things their agent (or attorney) said. So I’m not really sure how important client satisfaction is in the scheme of things for the consumer. Redfin wants it so that they can get future referrals, but that doesn’t mean the customers are necessarily being better served.

  163. 163
    N says:

    By Kary L. Krismer @ 155:

    The increases seem to be widespread throughout King County and there’s even one area that was below median that had a $100,000+ jump YOY. Only one area had a YOY decline, but it’s a low volume area likely to be highly volatile as such.

    I follow West Seattle and agree with this. Majority of places are going for significantly over list price right now, unlike what happened last summer when things slowed down and were more around list. One place that couldn’t sell had lowered from $499k to $425k and then sold for $475k, go figure. The impact of this should be not understated as a list at $600k that goes for $750k means $750 is the new comp and the next batch of houses will easily go for that much more. I could see how it could increase so fast.

  164. 164
    Dustin says:

    RE: Josh Chinzy @ 160

    What you don’t seem to address in your analysis of a salary model is the change it would bring to the incentive for individual agents to close sales. With a commission model in which the agent’s salary is correlated with the number of sales they close, individual agents are incentivized to help their clients close sales. You might argue there is too much incentive in the commission model, as poor agents could become eager or desperate to close a sale that isn’t appropriate for their client or burdens their client with excessive risk. But a different problem would come to the fore with a salary model. If an individual agent’s only incentive to work longer hours to close more sales for more clients is a modest “bonus”, consumers might find that the most talented and effective agents are less available to take on new clients, forcing them to accept less effective (average quality) agents (or worse!) just to get access to the market. For the agent, selling houses can be just a job, but for the consumer, buying a house is one of their most important investments. How many salaried agents will brokerages need to hire to provide the same level of service for clients as a handful of the highest performing agents in a commission model? A guaranteed salary might be attractive for agents wanting job security and stability, but will it be attractive for the consumer if it means they have less access to the highest level of agency? I’m not arguing against the salary model necessarily – it works in many industries and Redfin seems to be doing well. That said, commission models are used widely in sales industries and, in addition to providing an incentive for agents to close sales, they can help keep agents on the side of their clients in situations where what’s best for the employer isn’t what the client wants.

  165. 165

    RE: Dustin @ 163 – I think it could be an attractive model if they maintained consistency. The analogy I’ve used is Starbucks or McDonalds–not the best but at least you know what you’re getting. But when consistency goes down (which it has), that goes way. I used to refer unrepresented buyers interested in my listings to Redfin, but now I’ve been going elsewhere (and no, I don’t ask for a referral fee).

  166. 166
    Josh Chinzy says:

    RE: Dustin @ 163

    Great comment Dustin, this will be my counter argument

    1. One could assume that a salaried agent or a Redfin agent will work 9-5, do the bare minimum because there is a paycheck at the end of the day, dont work on the weekends, be complacent as hey there is a salary regardless you close or not!, but if you dig deep into the redfin model, you will see that their is a incentive to close! Redfin is not a charity to keep paying agent’s salaries, bonuses, benefits like health insurance, paid vacation, stock options, etc even if they are not producing. My friend who is a redfin agent in Portland tells me that their expectation is atleast 2-3 deals a month for every agent, and if your not producing atleast that much, your in trouble, as management will prefer to have somebody in your place who will produce.

    2. Again, going back to a structure you will find in many industries (law, banking, etc)- junior analyst, analyst, associate, senior associate, etc. There can be a hierarchy. To solve your problem of consumers not getting top quality agents, I would say, the junior analyst will primarily just open doors, but the contract and hand holding through escrow will be performed by the associate or the senior associate. That’s all they would do. So, the main points of the transaction are touched upon by the senior, more qualified agent. The junior level agents in this model will also be getting lower salaries. In this model, there will also be more emphasis on the broker bringing in clients and so the senior level folks wont spend as much time on prospecting, marketing, advertising, etc. Now, they spend 80 percent on average of their time on marketing and prospecting!

    Secondly, talking about customers getting average quality agents, isn’t that exactly what is happenigng right now anyway?! There are independant surveys conducted about customer satisfaction, it’s pretty bad accross the board. Reason- there are 10-20 percent of agents in every market who perform 80-90 percent of the business. These are the professionals, who are rockstar producers, knowledgeable about the market, the contract, as the volume they do just forces them to be more in tune with the market and the whole process and for the most part they deliver good customer service (there are still some sleazy old school folks who just produce because they are smart marketers). These folks will be senior level folks in my salaried model. The rest are pretty shitty. There is always Uncle Bob who is licensed and does 1 deal a year for family, so never really keeps up with the current market trends, changes in the purchase agreements, etc can never work in my salaried model. But, a LOT of these folks are licensed as realtors and they get paid the SAME for a transaction at closing as a good professional regardless of how the customer service was. You can blame it on a lot of things, but imo, one of things that deserves blame is the independant contractor model, the broker does not care!, he does not care if Uncle Bob never does a deal again as it does not cost him any money if Bob hangs his license with his firm. Do you see the flaw in this model? In a salaried model, the broker does care because if Bob does not close a deal again because of shit customer service, as the broker is not going to want to pay salaries and benefits to Bob.

    At the end of the day, a very good model is probably a combination of salary plus commission or bonus whatever you want to call it. The bonus will especially be needed to retain high quality senior level folks.

  167. 167

    RE: Josh Chinzy @ 160 – Okay, I’ve looked it over and here are my thoughts.

    1. You’re right there’s too little accountability. One issue not even touched on is firms typically don’t even review offers written by their agents where the offer is not accepted (new agents are now an exception to that I believe). That means that an agent can be writing up really bad contracts for their clients which will hardly ever be accepted, with the client never the wiser that they are wasting their time.

    2. All that money Redfin put into expansion was venture capital, so there is no proof that they are sustainable without repeated equity funding or borrowing. When they did their IPO I was actually surprised how many markets they’ve expanded into. I think that was a mistake because they should only be in high priced markets. They have very little appeal elsewhere because they do have to charge a minimum amount (or at least did used to do so and refer smaller matters out).

    3. As to NAR/Dual Agency, I’m not really sure what you’re referring to by dual agency because it doesn’t seem to fit with the discussion. But the poorly drafted legislation I mentioned above was WR promoted legislation that tried to make it clear agents are independent contractors. I think that’s driven by the issues that have been facing Uber and such. Quite frankly I think it was unnecessary and again poorly drafted if all they want is not to be subject to whatever statutes under state law. Agents are already covered by L&I “workers’ compensation,” and the state law won’t affect IRS withholding, labor law tends to be federal also, so I’m not really sure what they thought they were accomplishing.

  168. 168

    RE: Josh Chinzy @ 165 – I think you may be attributing too much value to number of transactions. First, as some point more transactions means handing off tasks to team members. Second, Micheal Hellickson was a very high volume agent, but having read some of the practices he did in the decisions involving him, he was hardly an agent that a consumer should have hooked up with.

    http://www.seattletimes.com/business/decision-to-yank-hellicksons-real-estate-license-upheld/

    I’ve yet to see any one factor that would assure consumers of quality. I can tell you it’s not firm association, neighborhood specialty, number of transactions, or years of being an agent.

  169. 169
    Josh Chinzy says:

    RE: Kary L. Krismer @ 167

    Kary, in my imaginary model, it will be a combination of a number of factors

    the number of transactions, years in the business, customer satisfaction (a customer will get a chance to review at the end of every transaction, etc.

    If you think about it, a lot of those factors meet each other at some point. If your not a local specialist, not able to provide service that the customer wants, your customer review is not going to be pretty. So, if Mike Hellickson was a senior agent in my salaried model, and had a string of bad reviews, he could be fired.

    An agent who does say 3 deals a year and writes 5 offers a year gets a chance to interact with 5 agents, build a relationship with 5 agents, gets to know the in and outs of the purchase contract 5 times. Wont you say an agent (for the most part, there are exceptions of course) who drafts the purchase contract 50-75 times a year, knows the nuances of it a lot better? As its the same contract-over and over and over, and things come up, that you learn along the way. This agent has also seen a lot more curveballs and hiccups in the escrow process that has made the agent an expert in putting fires out and maybe even anticipating issues before they even occur. This agent has also more experience negotiating, has also built a relationship with more agents and that can be handy when it comes to getting deals done. Do you see my point? Its’ not JUST the number of transactions, its a combination of thing that can help deliver better consumer experience, and the number of transactions rarely hurts, only helps.

    Lastly, “hands them off to team members”- well in my imaginary model as you can see, that is exactly what I would do, there is a hierarchy, so I am in favor of that, so I wont argue against that.

  170. 170
    Erik says:

    I predict inventory will be at an all time low in Seattle next year and prices will be at an all time high. No promises, but I really hope inventory dips below 1000 in king county next year. Anyone reading this, please don’t sell! Prices will only be higher next year.

  171. 171
    Matt says:

    RE: Bubble Trouble @ 5

    I’d be interested in seeing what the distribution of current homeowners’ income looks like. Just a quick look at other very expensive housing markets, one can see the median income doesn’t correlate very strongly. One can say San Francisco and New York City are in bubbles of their own, but just for reference, SF lists a median income of $78K and NYC claims $51K–both greater disparities than Seattle. At the very least, it shows that there are other market forces that can create a prolonged state of disparity between income levels and housing prices.

  172. 172
    N says:

    By Erik @ 169:

    I predict inventory will be at an all time low in Seattle next year and prices will be at an all time high. No promises, but I really hope inventory dips below 1000 in king county next year. Anyone reading this, please don’t sell! Prices will only be higher next year.

    By Erik @ 169:

    I predict inventory will be at an all time low in Seattle next year and prices will be at an all time high. No promises, but I really hope inventory dips below 1000 in king county next year. Anyone reading this, please don’t sell! Prices will only be higher next year.

    So another words a 75% to 200% drop in inventory levels for King County???

  173. 173

    RE: Josh Chinzy @ 168 – Good points, but there are too many agents for relationships to be important. There have been very few agents I’ve done more than one transaction with. Don’t get me wrong–that can help get a contract accepted a second time. But it’s somewhat rate that you run into that situation. I wouldn’t rate that as an important factor.

    Also, I’m not sure if number of contracts is as important as working both the seller and buyer side. If you only work one side you’ll not understand what the other side looks for. And if you only work the buyer side you’ll only see your contracts and not have any idea what other agents might be doing (which changes over time based on the market).

  174. 174
    Doug says:

    RE: Erik @ 169 – What do you think is driving ever lower levels of inventory?

  175. 175
    uwp says:

    RE: Doug @ 173

    The Tim posted the stats in July: houses have been listed at a decent rate this year, it’s just people are buying what’s getting listed before it has time to sit and back up into 6,000 houses in inventory. http://seattlebubble.com/blog/2017/07/12/new-listing-absorption-dropping-rapidly-december-high/

    Other thoughts:

    This market sucks to be a buyer, so I think that might hamper some borderline move-up buyers (a long with high prices making it difficult as well).

    Rent increases the last few years make it tempting for those who can move up to keep the house and rent it out.

    More people coming into Seattle than leaving it.

    SFH in Seattle just becoming more rare as time/development goes on.

    Homeowners who know they will make 100k more if they sell next year instead (I’m kidding).

  176. 176
    StupidLifeDecisions says:

    RE: Ardell DellaLoggia @ 153

    i always think women in their fifties + who have raised children are the best way to go if you want a short cut to competency. i laugh at people who dumb enough to practice age discrimination in the work place.

  177. 177
    ess says:

    By uwp @ 174:

    RE: Doug @ 173

    SFH in Seattle just becoming more rare as time/development goes on.

    —————————————————————————————————————————

    Not only is the single family house in Seattle becoming a smaller percentage of the available housing stock, but the newly constructed starter single family house is almost extinct, both in Seattle and the immediate areas.
    Newly constructed single family houses are very expensive, in part to justify both the land costs and all the other costs associated with construction. One has to journey quite a distance from the Space Needle to locate new “reasonably” priced single family housing. And making the situation worse is that when a house is knocked down to be replaced by a much larger one, often the house that was replaced was considered to be a “starter” home.
    The new housing that everyone is hoping will alleviate the dire rental situation in Seattle and the immediate areas are apartment units, two bedrooms and smaller. One wonders how long renters will be satisfied with apartments 1000 sq feet and smaller, especially when they start to have families. Then they will be hunting for that perfect inexpensive “starter” single family home to buy or rent, which will be even a smaller percentage of the available housing stock, and even more difficult to locate.

  178. 178

    By uwp @ 174:

    This market sucks to be a buyer, so I think that might hamper some borderline move-up buyers (a long with high prices making it difficult as well).

    This is definitely a problem, although I think it’s more the inventory part than the price part. The rising prices work for them too, although probably not quite to the same extent unless they’re downsizing or moving out further (which some people do).

  179. 179
    Erik says:

    I just finished speaking to a Chinese born man that made the mistake of buying in North Everett. He has all the same complaints I had. A lot of mentally ill people live in Everett. This man bought some commercial and residential real estate down by the waterfront in Everett. He bought some commercial real estate in the nautica building.
    He came up to me unsolicited and started telling me how horrible Everett of is. He says that it’s a terrible place because one person owned a lot of real estate there and wants section 8 government money and does not care about the area. He also told me that the mayor of Everett owns real estate there and is looking out for his best interests, which is to keep Everett a land of child rapists and drug addicts.
    He said, oh but it’s changing and they will move Everett scum to Arlington. I laughed and told him I wasted 6 years of my life believing Everett lies. Checks in the mail, but it never shows up. I told him to use RPA to lease his rentals, but they won’t even service north Everett.
    Anybody reading this, don’t make the same mistakes me and my friend made. Everett is a trash heap and always will be. If you currently live there, get out! If you are thinking about moving there, don’t do it!
    Nautica building is next to the sound view Tavern and a train. Sound view is where the banditos hangout, nasty nasty place.
    On a side note, I got the idea to use RPA from this site. Great leasing company so far except they demand 5% commission if you sell to the tenant. They will get 0% from me as I refuse to pay a nickel to them when I decide to sell. I’d rather get ripped off by the mls cartel than a leasing company.

  180. 180

    RE: Matt @ 170

    It wouldn’t be too difficult to back into what current buyers’ income is, but you say “current homeowners”. Can you define that better? I’m assuming you don’t really care how much a homeowner makes if they bought their home 40 years ago and paid it off 10 years ago. But not sure.

    It’s tedious, but can be done on this basis (one I’m looking at right now).

    Listed at $730,000 sold for $825,000 (no inspection contingency). Seller paid $325,000 for it in 2000 and the original owner paid $235,000 for it in 1995. The recent purchase at $825,000 had financing of $600,000, so one can possibly, reasonably assume that buyer made about $150,000 a year which would put the monthly payment at 30% of gross income.

    Since we can’t see people’s income, would calculating the likely amount they had to be making in order to obtain the financing be of any use?

    What we can observe from this one property is that in 1995 the owner qualified for $150,000 mortgage. In 2000 the owner qualified for a $140,000 mortgage (they paid more for the house but put more down) and today (recently) the owner qualified for a mortgage of $600,000.

    This not only tells us how much a person needs to make and likely does make, but also the increasing willingness to take on debt that is disproportionate to the home’s historic LTV. The original buyer financed 60% of the purchase, the 2nd buyer financed 40% of the purchase and the recent buyer financed 75% of the purchase. This shows us a trend if we take a large enough area to gather data but also small enough to be able to compile the data.

    People did use to save a lot more before buying a home, but they got a lot more interest on that savings. Once interest rates decreased to the point of making it not worthwhile to save, the % financed grew. So there are many factors. While people often talk about the impact of increasing mortgage rates, the reality is that when interest rates are high, people save more and put more down.

  181. 181
    Erik says:

    RE: Doug @ 173
    Seattle is turning into a world class city and that is bringing in foreign investment, hence lower inventory. Tim showed us that 517 people are moving to Seattle every week. That will drive down inventory as well. Seattle has a lot of software and aerospace jobs bringing in more people and lowering the inventory.

  182. 182
    Erik says:

    RE: N @ 171
    I hope so. Tim and people in the real estate industry on this site want more and more inventory. People in the industry want more inventory so they can make more transactions off the sweaty backs of home buyers.
    In reality, lower inventory translates to higher home prices. Higher prices help keep areas nicer and leave home owners with more equity. Don’t get played by these people. Don’t sell unless you have to or you are convinced housing prices are about to tumble. The real estate industry is very corrupt and they want you to buy and sell so they make more money.

  183. 183

    RE: Erik @ 181 – Erik, you do realize that your posting here isn’t going to have any significant impact on the market, right?

  184. 184
    Doug says:

    RE: Kary L. Krismer @ 182 – He has surely convinced me not to sell. Restricting potential supply by 1 household at a time.

    Fondly reminiscing, I’ll be able to tell my grandchildren, “I once knew the man, nay, the crystal gazer, who himself drove the 2017 bubble to dizzying heights.”

  185. 185
    Erik says:

    RE: Kary L. Krismer @ 182
    Right, but if I can reach a few readers and help them out, I’ll take it. I’m on here to learn and help fellow real estate enthusiasts to stay informed. We need to stick together. There is no motive to sway the industry in a direction. Not everyone is trying to screw the consumer on this site.
    Even though you don’t like mr peppers, he tried to help the consumer. Ardell tries to help the consumer. If Ardell associates with you, I would like to assume that you try and help the consumer.

  186. 186
    Erik says:

    RE: Doug @ 183
    Haha, I wish.

    If you are dumb enough to sell with inventory as low as it is, you deserve to be poor. That’s natural selection or the Darwin effect. Those dumb genes need to be flushed out of the human race so we can progress as a society. People that sold at this low of inventory hopefully haven’t reproduced yet as they will have less money and get less breeding opportunities moving forward.

  187. 187
    wreckingbull says:

    RE: Kary L. Krismer @ 182

    Allow me to provide the Cliff’s Notes to save SB readers some time.

    – Everett sucks (because I made a bad investment there)
    – The market will continue to go up (because all my chips are in real estate now)
    – Software engineers are dumb-dumbs.
    – Ray Pepper(s) [sic] is the man.

  188. 188

    By Erik @ 184:

    Even though you don’t like mr peppers, he tried to help the consumer.

    I like Ray (we’re even friends on Facebook, but I haven’t seen him there for a while), and think he is actually a good agent. My problem with Ray is related to his activities not directly related to his being an agent. His trying to suck others into something I consider a scam at best.

  189. 189
    N says:

    By Erik @ 181:

    RE: N @ 171
    I hope so. Tim and people in the real estate industry on this site want more and more inventory. People in the industry want more inventory so they can make more transactions off the sweaty backs of home buyers.
    In reality, lower inventory translates to higher home prices. Higher prices help keep areas nicer and leave home owners with more equity. Don’t get played by these people. Don’t sell unless you have to or you are convinced housing prices are about to tumble. The real estate industry is very corrupt and they want you to buy and sell so they make more money.

    Yes, there are definitely high transaction costs in real estate but based on your posts your more of a time the market, sell and buy kinda guy rather than a long term holder so you’ll feed right into that. I actually can’t think of a better time to be a realtor, talk to any who have been through some of the many down markets and they will tell you.

    Higher prices are good? Not for the overall market, not for the long term holder who sees their property taxes skyrocket and not for market stability? When prices far outpace wages guess what eventually happens? I know the jobs the jobs and Seattle is different but we don’t know what will happen when the stock market and Amazon stock drops 40% and we have a recession. When people spend more of their income on housing that means there is less for going out to restaurants, buying stuff etc. Buying in now reminds me of all the millenials who all of a sudden think its now a good time to get in the stock market after avoiding it during the ride from Dow 6k to Dow 22k because they thought it was too risky, a scam etc…but now its the thing to do again. Buy at the top and sell at the bottom.

    When your just looking at it from your little greedy perspective and it seems the good times will never end then yeah, it looks good. Been there, done that in 2006-2007, its not a great feeling being underwater for years, cash flow negative or watching fellow landlords loose multiple properties.

  190. 190

    RE: wreckingbull @ 186 – Not sure why I’m referenced in your summary of Erik’s posts, but that seems to be a good summary!

  191. 191
    wreckingbull says:

    RE: Kary L. Krismer @ 189 – The two of you were discussing bullet #2.

    Note that I was typing the post before his follow-ups, and he managed to hit on almost all his talking points before I even posted the Cliff’s Notes, including Ray Peppers [sic] worship, calling people dumb, and single-handed bubble pumping,

  192. 192
    N says:

    By wreckingbull @ 186:

    RE: Kary L. Krismer @ 182

    Allow me to provide the Cliff’s Notes to save SB readers some time.

    – Everett sucks (because I made a bad investment there)
    – The market will continue to go up (because all my chips are in real estate now)
    – Software engineers are dumb-dumbs.
    – Ray Pepper(s) [sic] is the man.

    And:

    Buy, buy, buy. (What risk, markets only go up)
    Condo, Condo, Condo (even though they fall more during a downturn).
    Don’t sell but I plan on selling a couple properties in 2018.
    Credit expansion, Credit expansion.

  193. 193
    OA says:

    RE: N @ 191

    Got my dose of comic relief for today haha.

    I recommend reading Erik’s posts with the intention of being entertained. And when you do, they’re quite funny.

  194. 194

    RE: N @ 191 – Thank you, and LOL. But I was a more than a bit surprised how well condos held up in the last downturn–assuming that the condo wasn’t in financial difficulty. Maybe the financial condition was what helped set them apart.

  195. 195
    Erik says:

    RE: Kary L. Krismer @ 187
    Ray pepper advised me to let my house go into foreclosure and get on the hamster wheel. I was too dense to do that, but I did short sell. Although I didn’t completely follow his advise like I should have, I was able to go from poor to having enough money to invest in property. Now I just go buy rentals at the auction as ray advised. Very smart and generous from my point of view. Shout out to Mr. Peppers!

  196. 196
    Erik says:

    RE: Kary L. Krismer @ 193
    I bought my condo on November 2011 in Kirkland for $92,700 and sold it in December 2013 for $233,00. It had previously sold in 2007 for $305,000. I’d say king county condos took a major hit during the recession and some of us made out like bandits.

  197. 197
    Erik says:

    RE: N @ 188
    Longtime holders are lazy and deserve to lose equity. It’s part of their grand plan, right? People that buy at the bottom and sell at the top also deserve it for not spending enough time thinking it through or not being smart enough to figure it out. Survival of the fittest is a hard pill to swollow, but that’s how the world works.
    It sounds like you are in the latter group, so let me help you. Now is a worse time to buy than 5 years ago, but supply is low and demand is high. We are not in a real estate bubble in the United States. We have a ways to go until our next major crash. Did you read the article I posted here many times from Harvard? Read it and try to understand it. Then read the housing bubble book by Thomas Sowell. You can plan for the next crash and stop listening to the people trying to sell you houses.

  198. 198
    Erik says:

    RE: N @ 191
    And I’m spot on with those assertions because I put the time in to understand the market. You are hanging out with people that want you to make transactions and software programmers that just know how to repeat what the mainstream tells them. I believe I know more than them because they just sell or repeat what the news and salespeople tell them. Don’t read these academic books that the boneheads like wreckingbull push on here like Robert Shiller. The books are too theoretical and wordy like a professor is lecturing. Read Thomas Sowell. Study how to identify quantifiable metrics of a housing bubble. I’m going to get rich and I hope you do to. This is important stuff if you want to be a wealthy investor.

  199. 199

    By Erik @ 194:

    RE: Kary L. Krismer @ 187
    Ray pepper advised me to let my house go into foreclosure and get on the hamster wheel. I was too dense to do that, but I did short sell. Although I didn’t completely follow his advise like I should have, I was able to go from poor to having enough money to invest in property. Now I just go buy rentals at the auction as ray advised. Very smart and generous from my point of view. Shout out to Mr. Peppers!

    Actually Ray should not have given you that advice. To advise someone to quit making payments is the practice of law. I think that may have been one of the 10 or so things Department of Licensing hammered Michael Hellickson for, but I’d have to look that up to be sure.

    You would need to talk to a loan originator to be sure, but I suspect you’re probably better off now with the short sale than with a foreclosure–particularly since you don’t know when the foreclosure would have actually occurred.

  200. 200

    RE: Kary L. Krismer @ 198

    “Actually Ray should not have given you that advice. To advise someone to quit making payments is the practice of law.”

    Lawyers didn’t get heavily involved in real estate transactions until they started telling Brokerages to dumb down their agents. Don’t speak at home inspections. Sit outside and read a book or work on something else during a home inspection was the beginning of lawyers counseling Brokerages to have a bunch of do nothing agents.

    That is why it is time to reduce the commissions to the do nothing amount.

    If agents aren’t allowed to be competent, then stop paying them so much is the order of the day.

    You say I am dangerous, and by the above thinking I am. I just told the sellers to move and give me the keys. What I am doing both personally, physically and what I am hiring people to do would never pass the smell test of what a lawyer thinks an agent should be allowed to do.

    There was a time all agents did what I do and more…but now it’s “dangerous” to do your job according to lawyers. I still do it and you hate me for that as I’m supposed to listen to any and every lawyer. But think about it. How does it make sense to strip away 60% of what people need us to do and then keep the amount paid the same?

    That is why I say we are not training the next (or last) generation of competent agents. The scope of work has been dumbed down to “a service industry”. We are supposed to be experts at many things for the high pay we got…not door openers and “sign here” service providers.

    Bring on the robots…

  201. 201

    RE: Ardell DellaLoggia @ 199 – Not paying your mortgage isn’t assisting with a real estate transaction, and giving the advice to stop paying isn’t “real estate brokerage services.” It’s just someone not trained giving an opinion on a topic that they shouldn’t be addressing. Do you think real estate agents should have also considered whether advise the person to file bankruptcy? Maybe they should also suggest a prescription medication for heartburn and anxiety in case the debt load is causing issues. None of that is within the realm of your typical real estate agent.

    Dealing with debt is purely a legal matter. DFI and DOL were actually quite liberal allowing licensed loan originators to handle short sales. I’d hate to know all the harm they caused–primarily in not getting proper releases of liability. Given that the statute of limitations was six years (before there was some corrective legislation), we might not have even seen all the harmful situations pop up just yet.

    As to sitting outside at inspections, that’s very old advice under our old system where the agent was representing the seller. It would be like a seller being present during an inspection–something to be avoided.

  202. 202
    ARDELL DellaLoggia says:

    RE: Kary L. Krismer @ 200

    Incorrect. Pulling my age before beauty on you again. :) Don’t talk at inspections started with buyer agency, not before.

  203. 203
    ARDELL DellaLoggia says:

    RE: ARDELL DellaLoggia @ 201

    Theory was buyers would be more litigious than sellers, so do less to reduce liability. Turned my stomach. As to agents not being able to give advice on heartburn remedies, I’m Italian, I know agida.

  204. 204
    Brock says:

    Me and my family left the bay area two years ago. With a combined income of $180,000 we could barely afford a blue collar neighborhood. The intent in moving up was to put some steam behind my new business(work from home), check the pulse of real estate, and at the same time give my lady some quality time with our 3yo daughter. We’ve been renting my grandfathers house in Burien at a reduced rate and are in a good position to keep saving the next two years (or possibly buy next year). After which my father is going to move into the house. I’d really hate to have to pay market rate rent so I’m trying to set goals and project (as much as possible). I’ve followed this site the last year on/off and it seems the overall theme is to either buy now if you plan on settling down for 8-10 years and ride things out or keep saving and buy when there’s a dip? Our budget is around $300-400k with $60-80k down.

    As for location we’ve been driving around and would ideally like to stay within 30-45 min of Seattle due to family. We’re thinking of home schooling because the areas we can afford don’t have the best school systems. Burien seems to be up and coming and headed in the right direction, but the schools are not nearly as strong as those in the Renton Highlands (little further out) or further south in Maple Valley (little too isolated), and Bryn Mawr (south lake Wa). Issaquah has a few older homes pop up sometimes, love that area but we’d probably get outbid by the looks of things.

    Any advice on buying our first home would be greatly appreciated. With the political mess that’s going on and the talk of a global fallout in the next 5-7 years it’s hard to imagine buying a house at the peak. Especially after seeing what the bay area went through in the last 15 years.

  205. 205

    By ARDELL DellaLoggia @ 201:

    RE: Kary L. Krismer @ 200

    Incorrect. Pulling my age before beauty on you again. :) Don’t talk at inspections started with buyer agency, not before.

    When you think something started isn’t really good evidence of when something started. You thought adverse possession with color of title was recent when it really is over 100 years old!

    There’s zero reason that an attorney would tell a buyer’s agent to stay out of a house during the inspection with our current system.

  206. 206

    By ARDELL DellaLoggia @ 202:

    RE: ARDELL DellaLoggia @ 201 – Theory was buyers would be more litigious than sellers, so do less to reduce liability.

    Well of course buyers would be more likely to sue after a sale for something related to the condition of the house. That’s sort of obvious. The house could fall down after closing and the seller wouldn’t care at that point.

    Maybe what you’re trying to get at is a suggestion to not give advice about what a buyer’s inspection response and inspection negotiations should be. If so, I would agree with the hypothetical attorney that is risky, and agree with you that is a BS concern. That is part of an agent’s job and just part of the risk that goes with the job.

    That’s somewhat related to the advice I’ve seen that agents shouldn’t get involved in a client filling out a Form 17. At a minimum agents should check to make sure all the answers are completed and that there are no obvious wrong answers. But if the concern is “My house had this condition two years ago, what do I need to disclose now?” then that maybe a situation where the client should be advised to seek legal advice.

  207. 207
    Brock says:

    Me and my family left the bay area two years ago. With a combined income of $180,000 we could barely afford a blue collar neighborhood. The intent in moving up was to put some steam behind my new business(work from home), check the pulse of real estate, and at the same time give my lady some quality time with our 3yo daughter. We’ve been renting my grandfathers house in Burien at a reduced rate and are in a good position to keep saving the next two years (or possibly buy next year). After which my father is going to move into the house. I’d really hate to have to pay market rate rent so I’m trying to set goals and project (as much as possible). I’ve followed this site the last year on/off and it seems the overall theme is to either buy now if you plan on settling down for 8-10 years and ride things out or keep saving and buy when there’s a dip? Our budget is around $300-400k with $60-80k down.

    As for location we’ve been driving around and would ideally like to stay within 30-45 min of Seattle due to family. We’re thinking of home schooling because the areas we can afford don’t have the best school systems. Burien seems to be up and coming and headed in the right direction, but the schools are not nearly as strong as those in the Renton Highlands (little further out) or further south in Maple Valley (little too isolated), and Bryn Mawr (south lake Wa). Issaquah has a few older homes pop up sometimes, love that area but we’d probably get outbid by the looks of things.

    Any advice on buying our first home would be greatly appreciated. With the political mess that’s going on and the talk of a global fallout in the next 5-7 years it’s hard to imagine buying a house at the peak. Especially after seeing what the bay area went through in the last 15 years.

  208. 208

    RE: ARDELL DellaLoggia @ 201 – BTW, an agent sitting outside the house during an inspection would also violate NWMLS rule 50(a)(iii) regarding leaving people unsupervised inside the house without seller permission. That said, attorneys are not likely to know NWMLS rules.

  209. 209

    RE: Erik @ 197
    The American Highschool Kids from the Seattle Area Were Better Performers at MSFT

    Than this Microsoft Globalism “lemming” bunch with no investment savvy. No common sense.

  210. 210
    Erik says:

    RE: softwarengineer @ 206
    Agreed. There is more to investing than just analyzing numbers.

    That said, I think you live in Kent, right? That area is doing surprisingly well. I think that may be a good place to invest, but I don’t really know. I’ll stick with my negative cash flow rentals in Seattle because it seems like a safe bet.

  211. 211
    ARDELL DellaLoggia says:

    RE: Kary L. Krismer @ 205

    I’ve seen them on the front step. I’ve seen them sit at the table working. I don’t see them paying attention to what the inspector is saying. I
    also remember a legal directive to brokerages (not mls) instructing them to behave that way.

  212. 212
    kenmorem says:

    61? posts by kary and kounting…

    website should be renamed: kary’s krazy opinions

  213. 213
    S-Crow says:

    RE: Erik @ 197

    You said: “This is important stuff if you want to be a wealthy investor.”
    You said in 196: “Longtime holders are lazy and deserve to lose equity.

    This is fools thinking. Negative cash flow on your properties ? Who are you getting your advice from again?

    May I offer a suggestion? Don’t take advise from people that have been in foreclosure or short sales that talk it up like it is some kind of badge of honor. Stop listening to the posers who own nothing but drive around in leased BMW’s because they can’t afford to buy them outright.

    The investors I know both in income producing properties and commercial do not have negative cash flow. In fact, of the true investors I know of most have very low CLTV’s or zero debt. Oh, and your thesis about holding on to the property…… they do hold them because they are reaping dividends and not feeding an Alligator.

    S-Crow

  214. 214

    By kenmoran @ 209:

    61? posts by kary and kounting…

    website should be renamed: kary’s krazy opinions

    Do you have a problem with any of them? Is thinking too hard for you?

  215. 215

    By ARDELL DellaLoggia @ 208:

    RE: Kary L. Krismer @ 205

    I’ve seen them on the front step. I’ve seen them sit at the table working. I don’t see them paying attention to what the inspector is saying. I
    also remember a legal directive to brokerages (not mls) instructing them to behave that way.

    A couple of thoughts on this. First, a brokerage firm is allowed to set whatever rules it wants on its agents. If they want to cut the level of service to reduce their liability, they’re free to do that, but ultimately the best way to eliminate liability is probably to quit offering real estate brokerage services–to shut up shop. So where do they stop in cutting services (assuming that helps).

    Second, I think that they are a bit misguided if they think doing nothing actually reduces their liability. If a problem develops for their buyer and the buyer’s attorney finds out that the agent did absolutely nothing to assist the buyer in the inspection process, I suspect the attorney will find that actionable, absent perhaps an agency agreement that clearly spells out that the agent won’t be helping with the inspection process.

  216. 216

    By S-Crow @ 210:

    In fact, of the true investors I know of most have very low CLTV’s or zero debt.

    A lot of that post was good, but I’ll take exception with this. While I think there are far too many people in our market relying on hard money loans, zero debt is not necessarily the goal either. Those are just the opposite ends of two extremes. If you have such wealth that you don’t really want to increase it further, than zero debt does reduce risk. But if you want to accumulate more wealth at a faster rate, borrowing is probably necessary.

    People like to complain about banks, and clearly banks have some bad practices, and some banks have some really bad practices. But banks also drive our economy by making money more productive (and making more of it). That requires people to deposit money and people to borrow money. The people who borrow money wisely do so in order that they can accomplish more than what they could with their own resources alone.

    Take Erik’s condo purchase in Juanita. I’m pretty sure he had to borrow money to buy that. By borrowing money he made money. That worked for him (as he’s repeatedly pointed out). That was a good use of borrowing money.

  217. 217
    LessonIsNeverTry says:

    If you have such wealth that you don’t really want to increase it further, than zero debt does reduce risk. But if you want to accumulate more wealth at a faster rate, borrowing is probably necessary.

    Ah yes… another term for this, of course, is leveraged investing. It is quite true that leverage increases returns on the way up. There is also something concerning about leveraged investments on the way down but I can’t remember what it is…. exactly. Probably something I should google.

  218. 218

    By LessonIsNeverTry @ 214:

    If you have such wealth that you don’t really want to increase it further, than zero debt does reduce risk. But if you want to accumulate more wealth at a faster rate, borrowing is probably necessary.

    Ah yes… another term for this, of course, is leveraged investing. It is quite true that leverage increases returns on the way up. There is also something concerning about leveraged investments on the way down but I can’t remember what it is…. exactly. Probably something I should google.

    I think you’ll find what you’re searching for in my prior sentence to the one you quoted.

    . If you have such wealth that you don’t really want to increase it further, than [sic] zero debt does reduce risk.

  219. 219
    ess says:

    RE: Kary L. Krismer @ 213

    Most individuals do not have the financial wherewithal to obtain the items they need and desire without obtaining a loan, whether it be an automobile or a residence. To excoriate lending institutions for making loans does not consider the lives of most middle class individuals would be able to live without access to credit.
    Indeed, other societies (example medieval Europe) that prohibited their own people from making loans either relied on outsiders to do so, or created legal fictions to overcome the obvious problems that the lack of credit created.

    BTW – thirty year mortgage rates have once again dipped below 4%. Again the pundits that projected higher mortgage rates were once again proven incorrect. Who knows – in 20 -30 years if interest rates if there is rampant inflation and interest rates rise dramatically, this period of mortgage rates will be known as the golden age of inexpensive money.

  220. 220

    By ess @ 216:

    Indeed, other societies (example medieval Europe) that prohibited their own people from making loans either relied on outsiders to do so, or created legal fictions to overcome the obvious problems that the lack of credit created.

    And even with those work-arounds they undoubtedly had smaller economies than they would have otherwise, meaning the average standard of living was low (based on material goods and food).

  221. 221
    wreckingbull says:

    By ess @ 216:

    RE: Kary L. Krismer @ 213

    Most individuals do not have the financial wherewithal to obtain the items they need and desire without obtaining a loan, whether it be an automobile or a residence.

    I’ll agree with the comment about needing a loan for a residence. But in most circumstances, people needing loans for automobiles is laughable. There are so many good used cars out there these days, in all price ranges, which are both reliable and safe. They may not look great or pump one’s ego, but they get the job done. The problem is that people have been brainwashed to think a new car every 3 years is primary requirement to live a “normal” life.

    Driving older (and sometimes crappy-looking) used cars my entire life is one of the reasons I am financially independent now. I cringe when I hear about people taking out loans for automobiles.

  222. 222
    steven says:

    RE: wreckingbull @ 218

    i dont’ think so. if you spend 20k on a 3 year lease for 9 years, that’s 60k. If you buy an e class that’s 2 years old that’s roughly 40k after taxes. and if you were to spend on 7 years of worth of maintenance and repairs for 7 years.. you would probably at additional 20k . Of course, you get the equity of an 11 year old eclass which should be about 6000 dollars. so in the end, you saved 6k and drove an older car for 7 years. each man to his own in terms of how much that 6k is worth. of course, if you go for a toyota or honda, i don’t understand why ur leasing in the first place

  223. 223
    Kmac says:

    RE: steven @ 219
    comparing apples to oranges…..
    replace the e class with a 3 or 4 year old domestic vehicle (which is comparable w/ a $20k – 3 year lease) and you will realize the savings.

    Automobiles are one of the dumbest things to borrow excessive amounts of money on.

  224. 224
    FirstPoster says:

    RE: kenmorem @ 209

    Let’s say it takes him 5 min per post on average to think and write. That means, total 5 hours of his time.
    May be it was all worth it for him to spread his knowledge on everyone. Or maybe, it was a waste of energy (electricity, computing power etc.), which all contributes to global warming. We may never know.

    What we know is that he loves to write on whatever electronic device he is using. Perhaps compensating for lack of something meaningful to do or something else. One can only guess.

    –end of sarcasm–

  225. 225
    Brock says:

    Is the comment section here more about helping people or yourselves?

    It’s good to read about different perspectives but how about a little help please.

  226. 226

    RE: steven @ 219

    I remember back when leases started agents were told by accountants that the write off was almost 100% if you leased vs purchased. The lease payment write off was a lot better than the depreciation and mileage write off. Not sure if that was correct or not. But it is why most agents leased cars given their Schedule C business status as to business write offs.

  227. 227

    RE: Ardell DellaLoggia @ 221 – I’m not terribly familiar with expensing lease payments (as opposed to mileage), but I’m fairly certain it would still depend on their use of the car. So to deduct 100% of the lease payment you’d have to use the car 100% of the time for business. Not likely, unless you have two cars.

    I suspect it really doesn’t make much difference assuming the purchased car is sold at the end of three years, the same as a leased car would be returned. The interest & depreciation expense might be slightly less than the lease payments, but nothing earth-shattering. And if you use mileage instead I believe they’ll be identical, subject to the next thought. I suspect the biggest difference is not needing to calculate a gain/loss on the leased car at the end of three years.

    Again not an area I’m terribly familiar with given the fact that I’ve only leased one vehicle and I tend to keep vehicles a very long time. I still use that 89 Ranger at least once a week.

  228. 228
    Erik says:

    RE: S-Crow @ 210
    Thank you for sharing your perspective with me. Not kidding, I like to hear people’s opinions.

    What you don’t know is that I buy at the auction and sometimes get really good deals, which subsidizes my poor financial decisions.

  229. 229

    RE: Kmac @ 220RE: steven @ 219RE: wreckingbull @ 218 – I agree with a bit of what you’re all saying, and the need to try to minimize the expense of vehicles. But one thing you’re all overlooking is the cost of maintenance, as well as the option of buying new and keeping it for a long time.

    Maintenance costs tend to go up as a car gets older, and might be even higher on a used car of a certain mileage if the first owner didn’t property maintain the car. On modern vehicles though the maintenance is mainly oil changes the first 50,000 miles. When I sold my dad’s car there was a record of all the oil changes because he went to the same dealer each time. But not all used cars have that kind of service record.

    The thing about keeping a car a long time is it does take a while to start paying off. We have a Toyota bought new with cash that is now 12 years old with over 170,000 miles. Fortunately the maintenance on that car has been relatively minimal (only two water pumps being unusual and that somewhat offset by long lasting brakes) , so at this point the cost probably somewhere between $2,000-2,500 per year and the car is still in good shape. That though is longer than most people want to keep a car, but it is another option.

    Oh, and the cost of tabs and insurance also gets lower going the long ownership route.

  230. 230

    RE: Kary L. Krismer @ 222

    Wouldn’t you lose on value to sell a new car every three years? My Uncle bought a new one every 2 years his entire life but didn’t care about the loss.

  231. 231

    By Erik @ 223:

    What you don’t know is that I buy at the auction and sometimes get really good deals, which subsidizes my poor financial decisions.

    Erik, that made me smile, but here’s a thought! How about getting really good deals and not making any more poor financial decisions! ;-)

  232. 232

    By Ardell DellaLoggia @ 225:

    RE: Kary L. Krismer @ 222

    Wouldn’t you lose on value to sell a new car every three years? My Uncle bought a new one every 2 years his entire life but didn’t care about the loss.

    Yes, I was just trying to make the buy and lease the same length to compare tax consequences with a typical lease term. I wasn’t advocating buying every three years.

  233. 233
    steven says:

    RE: Kmac @ 220
    yes.. apples to oranges.. like i said, the math changes for toyota or any value vehicles. i’m talking luxury brands, most precisely bmws and mercedes benz that offer good lease terms but high upkeeps. what’s the point of driving a corolla when you live in a 2million dollar home for example ? it’s a poor investment if you can not afford it, but sound investment for your welfare and well being if you can . in regards to the lease vs purchase… if you are changing cars every 3 years you come out at least 5k ahead every 3 years. in my example of55k to 36.5k before taxes, the depreciation is for 2 years. 55k+tax at purchase and 30k at sell, and you are out 30k every 3 years. in terms of deduction, it makes sense for those who meets sufficiently high tax brackets. if you are in the 10%ile, you wouldn’t be saving a whole lot from the deduction.

  234. 234

    By steven @ 228:

    i’m talking luxury brands, most precisely bmws and mercedes benz that offer good lease terms but high upkeeps. what’s the point of driving a corolla when you live in a 2million dollar home for example ?

    I realize we live in a consumer society, and that many wealthy people are likely to flaunt their wealth in multiple ways, but I don’t see that cars and houses are necessarily connected. Someone might be into houses but not cars or visa-versa. For example, one of the many here who feel that houses are grossly overpriced might live in a very modest house but have a high-end car. Or conversely, I once knew a millionaire who wore overalls and drove around in an old beat up pickup truck.

  235. 235

    RE: Kary L. Krismer @ 229
    Buffet Loves His 2006 Cadillac

    The 2017 looks like a 4 cylinder….its too small and noisy [wheel bearing and tires roar] as a result.

    He lives in a smaller old house too.

    The BMWs and Mercedes will get you into new hearing aids sooner too; they’re getting so small too…as a result they knock your hearing out [lack of steel and insulations]. Ask a ear doctor if ya don’t believe me.

  236. 236

    Seattle’s Laptop and Warehouse Techies

    Like MSFT and Amazon are hated by the “Populists”….bad news. They supported Obama 3rd world market but hate real Americans getting good jobs with healthcare…why?

    Maybe their lack of science and college applications drives American substitutes who fail at inventiveness, but are cheap? Gates has college degree envy? Computer S/W is about as scientific as a a crystal ball…

    ‘….that Trump ended up disbanding them.

    Amid the turmoil, Trump unloaded on Amazon, tweeting that the company is hurting other retailers, and causing shares in the online retailer to fall. “Towns, cities and states throughout the U.S. are being hurt – many jobs being lost!” Trump said in the tweet….”

  237. 237
    Deerhawke says:

    Re: Steven @ 228

    Steven I live in at $2 million dollar house and part of the reason that is possible is precisely BECAUSE I drive a 98 Camry and a 2004 F-150.

    People who put their money into rapidly depreciating assets like automobiles are fools. People who put their money into well-researched appreciating assets (like solid stocks and real estate investments) may look a little shabby because they don’t have a fancy ride, but they get the last laugh.

    If you haven’t read the book, check out “The Millionaire Next Door” by Thomas J Stanley & William D Danko.

    One of the most interesting facts in the book is that the vehicle most commonly driven by a millionaire in this country is not a Land Rover, BMW or Mercedes but the humble and useful F-150.

  238. 238

    By Deerhawke @ 232:

    One of the most interesting facts in the book is that the vehicle most commonly driven by a millionaire in this country is not a Land Rover, BMW or Mercedes but the humble and useful F-150.

    I think the F-series may be the highest volume vehicle, with over 800,000 sold in 2016, and they are rather expensive. So not that surprising they would be the most common, but you’d think more would opt for the F-250.

  239. 239
    Kmac says:

    By Kary L. Krismer @ 229:

    Or conversely, I once knew a millionaire who wore overalls and drove around in an old beat up pickup truck.

    I know many people like this.
    In fact, this type of frugal behavior was a contributing factor to the wealth they had accumulated.

    And maintaining an older vehicle isn’t necessarily that expensive of a job if you buy correctly and if an enthusiast of the vehicle, self repairs are lower cost and satisfying, albeit not everyone’s cup of tea.
    I’ve noticed that most well maintained modern vehicles have a “sweet spot” between being paid off at 3 years and the 8 year mark where it takes very little to keep them in tip top shape.
    Heck, I drive a 24 y/o truck that hardly costs anything but the gas because I take good care of it. Has nothing to do with what I can afford.

  240. 240
    Erik says:

    RE: Deerhawke @ 232
    I read that book twice. In the book the author interviewed this millionaire and he asked him what his favorite kind of beer was. He replied “Budweiser and free.” I still use that line when I can.

    The worst thing you can do is spend money. I live in a condo in Seattle that I paid $360k for last month. I split the rent with my girlfriend, because I would never live somewhere that expensive by myself. The only reason I live somewhere that expensive is because I got a really good deal on it and I can avoid paying capital gains when I sell it in 2 years. I use to pay $1200/mo for a 1br 1ba apartment. I drive around a Nissan Frontier with dents in it. It has over 375k miles on it. I own a small amount of real estate. The way I afford my negative cash flow rentals is by living on the cheap. My big splurge was when I bought an iPhone 5s after I sold that condo in Kirkland. Still got the cell phone and I intend to keep it another 5 years.

    When people ask me what I do for a living, I tell them I organize drill bits in a machine shop. By being humble it’s easier to negotiate good deals.

    Sounds like you have a lot more cash than me. Even if I had a lot of cash, I’d still love cheap. I moved to a nicer more expensive place for a while and didn’t really like it. I’m use to the struggle and it’s where I’m most comfortable. Live cheap in nice areas. I will not live in everett, tacoma, Lakewood, etc. Those areas contain a lot of mentally I’ll people and life is too short to live in those places.

  241. 241
    S-Crow says:

    RE: Deerhawke @ 232 – My 2004 Toyota Sienna just passed 315K miles on it. I just bought an ugly 96 Ford Taurus with 49K miles on it. That’s 2300 miles per year on it. Inside is very good condition. Runs well and have already put 3K miles on it. Colder A/C than my newer car and truck. It was parked under Cedar trees in Edmonds by a neighbor of my in-laws. I paid $1,750, plus some new tires. I’ve nick named it the “purple Jellybean.” Now, my kids and Mrs. S-Crow think I have issues and I take thriftiness to a new level. However, my son, who I just put on an flight to Phoenix for College last week just scored about $150 worth of very good (Hollister/American Eagle brands) clothes for about $21 at Goodwill. It’s rubbing off on them. Good.

    True Story: my name is on a check I wrote to the IRS for about $100K for a client who refinanced and that owed back taxes. Profession: Investment “Advisor.” He made sure I met him with his loan docs at his “Country Club.” I don’t know what the monthly dues are but can imagine it is some good coin. Some people like to look the look.

  242. 242
    N says:

    By Erik @ 196:

    RE: N @ 188
    Longtime holders are lazy and deserve to lose equity. It’s part of their grand plan, right? People that buy at the bottom and sell at the top also deserve it for not spending enough time thinking it through or not being smart enough to figure it out. Survival of the fittest is a hard pill to swollow, but that’s how the world works.
    It sounds like you are in the latter group, so let me help you. Now is a worse time to buy than 5 years ago, but supply is low and demand is high. We are not in a real estate bubble in the United States. We have a ways to go until our next major crash. Did you read the article I posted here many times from Harvard? Read it and try to understand it. Then read the housing bubble book by Thomas Sowell. You can plan for the next crash and stop listening to the people trying to sell you houses.

    Ha. So much could be said about this…but your view of long time landlords pretty much sums it up and makes you sound like all the dog and pony shows in hotel ballrooms you hear advertised telling you how you can make millions using other people’s money flipping houses, its just so easy.

    I do love your confidence in timing the market based upon one source/book though. In my experience though your types are the ones that get burned the most when the market flips. Whats wrong with good old fashioned positive cash flow rentals that pay you an income + pay off the mortgage. Oh yeah, those guys are lazy because they could make so much more with negative cash flow houses and timing the market. I wonder how much you factor in risk to the equation. Your doing well now but so is just about everyone else in the game.

  243. 243
    steven says:

    RE: Deerhawke @ 232

    and are you still paying mortgage for that 2million dollar home? let’s not bring this into a who has a bigger cock battle. you are free to think that a person who buys an expensive car is an idiot but anyone is also aka me is free to think youre an idiot to live in a 2 million dollar home and drive a 98 corolla. i like balance. why settle for less if you can afford it? so that you can carry it in to your graves? in terms of f150, i think platinum lariat with the right options cost more than an e class.

  244. 244
    Erik says:

    RE: N @ 237
    I appreciate the feedback N.
    My plan is to sell the condo that is the riskiest with the most equity next year. The following year I will sell the condo I’m living in. That will leave me with lots of capital to feed my negative cash flow. Well, hopefully it’s not negative by that time. Also, I’ll have no money invested because my investment will have been returned when I sell. So basically I’ll have rentals with no skin in the game and plenty of reserves in the bank. If the market crashes before next year I’m screwed, but I should be okay.
    The thing I think people on here don’t understand is how to go from poor to wealthy. It’s not a straight path as I don’t have large sums of money at my disposal yet. I make a decent wage, but nothing that great. I don’t know how to go from poor to wealthy with cash flow property without taking on risk and timing the market. If I were a fat lazy trust fund baby it would be different, but unfortunately that is not the case for me.

  245. 245
    Erik says:

    RE: S-Crow @ 236
    Businesses have people tricked into defining themselves and their self worth with material things. Good job not falling for that and teaching your kids not to fall for the lies.

  246. 246
  247. 247

    RE: QA Resident @ 241 – That is more commercial, but this article at does address residential and at the Seattle level. One transaction mentioned was for €12B!

    http://www.seattletimes.com/seattle-news/politics/proposed-seattle-taxes-targeting-foreign-buyers-investment-properties-take-fire/

    One mayor candidate is proposing a Vancouver style tax, and the King County Assessor is having enough common sense to say no and to point out it makes no sense. Note the article also mentions that it’s even hard to determine the number of foreign buyers in Vancouver!

  248. 248
    Doug says:

    RE: steven @ 238 – The 2 biggest wastes of money in the modern world are weddings and cars. Both are equivalent to literally setting fire to your cash and expensive versions of either should only be bought, in my opinion, once your NW is >$100mm.

    As for living in a $2mm home, sure, it’s probably a bad idea if you’re levered at the maximum possible LTV and can just barely service your monthly debt. Nonetheless, it’s still an appreciating asset and I doubt Deerhawke still has a mortgage on it. And really, a $2mm+ home in the Puget Sound area isn’t that much any more. Take a quick look at all the sales of at least $2mm in the past 2 years any where close to Seattle — pretty shocking.

  249. 249
    Erik says:

    RE: Doug @ 243
    2 million seems like a lot to me, but I live in a condo next to Somolian refugees at high point. 2 million is about what it costs for a decent house in a decent area of Seattle. I’ll take my Somolian refugees over Everett the sexual predators of Everett any day.

  250. 250

    I was doing more research on the foreign tax issue, and it probably also violates the 14th Amendment of our state constitution. That requires taxes to be uniform within a class of property, and most real estate is one class. They had to enact a subsequent amendment to provide for the low income senior tax rate.

    http://leg.wa.gov/LawsAndAgencyRules/Pages/constitution.aspx

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