Case-Shiller: Seattle On Top Again in June

Let’s have a look at the latest data from the Case-Shiller Home Price Index. According to June data that was released this morning, Seattle-area home prices were:

Up 1.4 percent May to June
Up 13.4 percent year-over-year.
Up 19.4 percent from the July 2007 peak

Over the same period last year prices were up 1.4 percent month-over-month and year-over-year prices were up 11.0 percent.

Home price growth in Seattle as measured by Case-Shiller show no signs of slowing. Seattle leads the nation yet again in year-over-year home price growth. However, there was one city that passed Seattle in month-over-month price gains in June—Detroit, of all places.

Here’s a Tableau Public interactive graph of the year-over-year change for all twenty Case-Shiller-tracked cities. Check and un-check the boxes on the right to modify which cities are showing:

Seattle’s rank for month-over-month changes hit #1 in February and has held that position since then, through May.

Case-Shiller HPI: Month-to-Month

Hit the jump for the rest of our monthly Case-Shiller charts, including the interactive chart of raw index data for all 20 metro areas.

Seattle’s year-over-year price growth edged up yet again from May to June, to a new post-peah high. The highest level since October 2006. Yet again in June, none of the twenty Case-Shiller-tracked metro areas gained more year-over-year than Seattle. In fact, none of the other cities even saw double-digit growth. From February through August of last year, Portland had been in the #1 slot above Seattle.

The same eight cities as last month hit new all-time highs again in June: San Francisco, Denver, Atlanta, Boston, Charlotte, Portland, Dallas, and Seattle.

Here’s the interactive chart of the raw HPI for all twenty metro areas through June.

Here’s an update to the peak-decline graph, inspired by a graph created by reader CrystalBall. This chart takes the twelve metro areas whose peak index was greater than 175, and tracks how far they have fallen so far from their peak. The horizontal axis shows the total number of months since each individual city peaked.

Case-Shiller HPI: Decline From Peak

In the 119 months since the price peak in Seattle prices are up 19.4 percent.

Lastly, let’s see how Seattle’s current prices compare to the previous bubble inflation and subsequent burst. Note that this chart does not adjust for inflation.

Case-Shiller: Seattle Home Price Index

Here’s the Seattle Times story about this month’s numbers: Seattle leads nation in home price growth for 10th straight month

Check back tomorrow for our monthly look at Case-Shiller data for Seattle’s price tiers.

(Home Price Indices, Standard & Poor’s, 2017-08-29)


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.

171 comments:

  1. 1
    Doug says:

    I think the most interesting detail here is the continued deceleration in Portland’s Y-o-Y growth since last summer. I was always confused about the growth story there.

  2. 2
    Marc says:

    Holy moly! I don’t know how someone can look at these charts and not think we’ve got a serious bubble happening. Sure Seattle is special but no place is that special.

    The other thing that is fascinating to me is how much the tone of this blog has changed since the last peak. Back in 2006-07 everyone here was a major bear and everyone over at RainCityGuide was super bullish and it was really Crips versus Bloods anytime someone crossed over to comment. Now, the majority of comments here are bullish and Rain City Guide is a forgotten has-been. Coincidence?

  3. 3
    Erik says:

    Seattle is beating the a$$ end out of San Francisco!

    To all Seattle software engineers: I’m sorry for making fun of you and your personalities. Please take over this Artificial intelligence stuff. If the Seattle code monkeys can do well in this arena, Seattle really will be the new San Francisco and condo prices will hopefully follow suit. Notice I said “new” and not “next” because we are stealing their talent.

    We need to figure out how to loosen up our immigration so we can start stealing Canadian code monkeys from Vancouver too. Imagine stealing programming talent from our brothers to the north and south. Real estate prices would get insane.

  4. 4
    GoHawks says:

    Cue up the bears saying the same thing they have been since early in 2014.

    Low rates, high local stock prices, nothing for sale, increasing population, equals rising prices.

  5. 5
    ESS says:

    By GoHawks @ 4:

    Cue up the bears saying the same thing they have been since early in 2014.

    Low rates, high local stock prices, nothing for sale, increasing population, equals rising prices.

    As per rates – there not low – they are amazingly/ incredibly low as of historical norms. Imagine a lending institution actually making a loan for thirty years with no recourse in the event interest rates shoot up. It is a deal I would not wish to make as a lender.

    Seattle is in the top 20 metropolitan areas in terms of population – but not the highest in terms of housing prices. Thus I wonder what they are saying in places such as SF, LA, or NYC?

  6. 6

    By Marc @ 2:

    Rain City Guide is a forgotten has-been. Coincidence?

    Wow, it’s apparently dead. I hadn’t noticed and haven’t been to the site for so long I had to actually type it all out in my address bar.

  7. 7
    Doug says:

    RE: ESS @ 5 – To me, the 10y UST at 2.13% actually seems very high. A quick look at some other 10y yields:

    Switzerland: -0.21%
    Japan: -0.01%
    Germany: 0.34%
    Netherlands: 0.47%
    France: 0.65%
    United Kingdom: 1.00%
    Hong Kong: 1.47%

    I’ve been a bond bull for a very long time and believe we will see our own 10y trading with a 1.00% yield in the not too distant future (I don’t know when).

  8. 8
    Deerhawke says:

    RE: Doug @ 7

    Maybe I have a bit of Seattle location bias, but even when you look at the US national stats, the economy is really kicking along. The Fed has been talking pretty seriously about cutting back on the throttle. I naturally thought interest rates were about to spike (that is fear in part since I am about to list a house at nearly $2 million.) I am grateful that after rising a bit but they now are softening and heading back down.

    So really, can someone explain this? Why are rates so low?

    I am part of that generation that remembers getting 14% on a CD. After that, my first home mortgage seemed cheap at 9.825%. Why is it that there is no fear of short, medium and long term inflation?

    What are your projections for mortgage rates, Doug?

  9. 9
    Deerhawke says:

    Kary, a few quick questions.

    A while back you wrote some very useful pieces on Form 22A. The one I always read before listing a house is the seller’s perspective. Here it is:

    http://seattlebubble.com/blog/2015/11/16/statewide-form-22a-financing-contingency-the-sellers-perspective/

    Anything to add to this? Any updates?

    Also, I remember you saying that you cannot keep any earnest money in excess of 5%. Still true?

  10. 10
    Brianna says:

    RE: Deerhawke @ 8

    This article might make you feel better about listing your home, even if the interest rates rise: http://www.thetruthaboutmortgage.com/home-prices-vs-mortgage-rates/

  11. 11
    GoHawks says:

    Doug, it looks like Fed Funds futures traders agree with you.

    Market thinks Fed could hold off on rate hikes for another year — at least.

    https://www.cnbc.com/2017/08/29/market-thinks-fed-could-hold-off-rate-hikes-for-another-year-at-least.html

  12. 12
    N says:

    By Erik @ 3:

    We need to figure out how to loosen up our immigration so we can start stealing Canadian code monkeys from Vancouver too. Imagine stealing programming talent from our brothers to the north and south. Real estate prices would get insane.

    How does more labor supply which generally equates to lower wages mean higher real estate values. Or are you suggesting jobs will be relocated rather than just candidates.

  13. 13
    Green-Horn says:

    Hate to refer to everyone’s favorite scandal sheet, Zerohedge,

    http://www.zerohedge.com/news/2017-08-29/home-prices-80-us-cities-grow-twice-faster-wages-and-then-theres-seattle

    but they have some interesting remarks about Seattle real estate. Most interesting are the two graphs at the bottom that illustrate relative affordability of real estate in various markets. Even though they spotlight the extraordinary property value appreciation in Seattle, their graphs that show local income to property value ratios make Seattle look like one of the nation’s most affordable markets.

    Really makes you think about which markets are most sustainable….

    Nevertheless, last week’s Seattle Times article about Seattle’s economy being uniquely dependent on a single company does highlight a major risk. For me I worry most about the ubersocialist Seattle being an ironically tempting target within reach of North Korea’s Kooky Kim the Kid looking to go out in a blaze of radioactive mushroomy glory. But if that comes to pass, property values will be the least of our concerns even if it does present Seattle a historic redevelopment opportunity.

  14. 14
    Green-Horn says:

    RE: Deerhawke @ 8

    I think Deerhawke answers his own interest rate question, when he compares to the rest of the country to Seattle’s local economy which is really kicking along. If one examines the rest of the country, their economies aren’t doing well but are hardly overheating. Indeed the energy exploration & development industries have taken a beating with low oil prices and some regions have been dipping while others have hardly gotten out of the starting gate. The Fed can’t exactly slam the brakes just because a couple outlier regions look like they might be threatening to overheat. Indeed inflation has consistently fallen short of Fed hopes and expectations. For quite some time the central bank has not been so successfully with its attempts to jumpstart inflation.

    Even though inflation hasn’t been an issue, that doesn’t mean it can’t suddenly become one, which makes the inflation question so very important. Some statistics indicate that we’re at full employment, yet wages haven’t been rising. Bottlenecks in labor, perhaps in the construction sector might be what eventually bring back wage pressures and inflation.

    Perhaps Deerhawke or somebody else directly involved property development and construction could report experience and expectations regarding developments in the labor market and construction costs in that industry?

    I’ve been hearing about bottlenecks and delays among contractors & builders. It’s not just land scarcity & appreciation that’s making housing more expensive.

    Can any of you report about this?

    How much have construction costs risen as a share of new homes?

    What else could you share about their “pipeline” for adding more manpower to increase capacities?

    How much will their wages in construction need to rise to be enough to draw more labor to the region & industry?

    How skittish are builders & contractors about adding too much capacity at this stage of the cycle?

    Indeed how late in the cycle do they perceive it to be?

    As always thanks for sharing as much as you do.

  15. 15
    Green-Horn says:

    RE: Deerhawke @ 8

    I think Deerhawke answers his own interest rate question, when he compares to the rest of the country to Seattle’s local economy which is really kicking along. If one examines the rest of the country, many of their economies are doing fine but are hardly overheating. Indeed the energy exploration & development industries have taken a beating with low oil prices and now the automotive industry is also facing market saturation. Not to mention what’s been happening to retail… Some regions have been dipping while others have hardly gotten out of the starting gate. The Fed can’t exactly slam the brakes just because a couple outlier regions look like they might be threatening to overheat. Indeed inflation has consistently fallen short of Fed hopes and expectations. For quite some time the central bank has not been so successfully with its attempts to jumpstart inflation.

    Even though inflation hasn’t been an issue, that doesn’t mean it can’t suddenly become one, which makes the inflation question so very important. Some statistics indicate that we’re at full employment, yet wages haven’t been rising. Bottlenecks in labor, perhaps in the construction sector might be what eventually bring back wage pressures and inflation.

    Perhaps Deerhawke or somebody else directly involved property development and construction could report experience and expectations regarding developments in the labor market and construction costs in that industry?

    I’ve been hearing about bottlenecks and delays among contractors & builders. It’s not just land scarcity & appreciation that’s making housing more expensive.

    Can any of you report about this?

    How much have construction costs risen as a share of new homes?

    What else could you share about their “pipeline” for adding more manpower to increase capacities?

    How much will their wages in construction need to rise to be enough to draw more labor to the region & industry?

    How skittish are builders & contractors about adding too much capacity at this stage of the cycle?

    Indeed how late in the cycle do they perceive it to be?

    As always thanks for sharing as much as you do.

  16. 16
    Deerhawke says:

    RE: Green-Horn @ 13

    Actually I think that Seattle is a bit of an anomaly in terms of its rapid growth, but the rest of the US economy is turning over very nicely.

    In 2010, one in ten people were unemployed and now unemployment is down near 4%. Economists are again having debates about what constitutes frictional employment. The erosion in labor force participation seems to be slowing and may be one reason inflation is somewhat under control. There is some data that people who exited during and after the Great Recession are starting to re-enter the labor force.

    But still, I would have thought we would have seen more inflation. I would have thought the bond market would start to pick up on this and that we would have seen a lot more movement in interest rates. I am not at all unhappy about it– far from it. I just can’t say I really understand it. I would love to hear people’s theories.

    In terms of the construction costs, all of us are trying very hard to do more with less. Costs are definitely rising but there is a lot of resistance and a lot of tools to resist with.

    I hope to build 4-5 homes this year and I have one participation partner running my sites, but no employees. All of my subs are trying to pass on cost increases for materials and labor, but I (and other builders) are fighting back by buying more of the materials ourselves direct– often on the internet.

    It used to be that my concrete finisher ordered the concrete and marked it up. Now I have my own account and save a lot. My door supplier consistently had problems getting my order for hardware right, so now I order it all on the internet. My electrician was complaining about the cost of can trims and I started buying them through Amazon. I save a bunch and get more reliable delivery. My plumbing supplier sent me a notice about price increases so I bought the whole package through Build.com. My appliance supplier was a putz who kept screwing up and so now I get my whole $14,000 appliance package online and have it delivered to the site. Next will come flooring. Next will come doors.

    What I find now is that I can buy most of parts and pieces for a house online and save. This is part of the process called disintermediation.

    Commodity items like lumber, sheetrock and trim I buy locally but they know they have to add value or their business will slip away. Specialty items with a skilled ordering and delivery workforce like windows, I buy locally but buy through a rep. and know that I am paying for the expertise.

    My front porch is always full of boxes, but I often put $100,000 on my credit card in a month and had over a million FF miles last year. It is nice to fly on vacations for free.

    But the real focus for me is on having better and less-management intensive labor. If their costs go up, they had better be more productive or they will lose the work. I see a lot of reinvention going on so that people can produce more work with less labor.

  17. 17
    Erik says:

    RE: N @ 11
    Code monkeys are software engineers and computer programmers and they are paid loads of money. We need them here to help drive up Seattle housing prices.

  18. 18
    Doug says:

    RE: Deerhawke @ 8 – I guess I would argue the economy isn’t really doing that well as indicated by persistently low rates. It’s been well documented that this continues to be the worst recovery in US history. We have put a debt bandaid over the wound and have effectively created a zombie economy now in serious danger of falling into a liquidity trap.

    Sure, Seattle is doing great, or at least some people in Seattle, but interest rates reflect the state of the country, not one city with 700k people. You don’t have to drive very far in any direction to see the sheen of the boom quickly rub off. The middle class is getting left behind in our surrounding suburbs, across the country, and globally. Look no further than the populist events of Brexit and the election of Trump if you need supporting evidence.

    As for Fed speak, I spent the first half of my career on an interest rate trading desk watching global macro headlines and central bank nonsense. It’s my opinion that central banks have no clue what they’re doing and are writing the book as they go. I remember when they first released the “dot plot” and started using it and forward guidance speak to get the long end of the curve to move. This was something that had never been used in history, but they simply couldn’t get the yield curve to steepen. The always opaque Fed literally didn’t know what to do other than to tell the market that rates will be higher in the future.

    And now rates are headed back down as the Trump promises fade, the business cycle becomes frighteningly long, and inflation is nowhere to be found. And if those things hold back the Fed from continuing to tighten, export countries might be forced to buy UST to suppress their own currencies in the event they need to devalue on the heels of a weakening dollar. Oh, and North Korea just fired a missile over Japan so there’s that demand for safety as well.

    Maybe my bearish perspective keeps me focused on the negatives, but I really can’t find any positive catalysts that would put upward pressure on rates. But this doesn’t mean there aren’t opportunities! Asset prices will continue to climb and especially so if rates fall as I think they might. The world is awash in money searching for yield, and while reaching for yield always ends badly, I don’t believe we’re there yet. I too frequently post to just listen to the yield curve, but yeah, listen to the yield curve. It is the canary in the coal mine.

  19. 19
    GoHawks says:

    RE: Deerhawke @ 15 – I think Deerhawke might have just answered our question regarding low rates/low inflation. Using technology, he is able to avoid higher prices (inflation) being passed on to him.

    A nice computer once cost $3,500 now it’s $700. A cell phone $4,000 now $400. Yes, I realize medical costs and school tuition are through the roof, but technology has kept inflation low.

  20. 20

    By Deerhawke @ 9:

    Kary, a few quick questions.

    A while back you wrote some very useful pieces on Form 22A. The one I always read before listing a house is the seller’s perspective. Here it is:

    http://seattlebubble.com/blog/2015/11/16/statewide-form-22a-financing-contingency-the-sellers-perspective/

    Anything to add to this? Any updates?

    Also, I remember you saying that you cannot keep any earnest money in excess of 5%. Still true?

    The form has changed slightly since that was written. Most the changes are technical, but the one that is not is the seller now can respond to a low appraisal notice by offering to reduce the price to the appraised value. The buyer can then either respond by indicating that they have the funds to do that or terminate.

    I don’t remember the percentage, but there is a statutory percentage which is deemed safe to keep. That statute has not changed to the best of my knowledge, and 5% sounds about right.

    The other change in that area is they have created a low appraisal form. DO NOT EVER USE THAT FORM! It is extremely poorly drafted. IMHO it’s better to just use simple language that states at what price the buyer can send a low appraisal notice and then deal with the consequences of that under Form 22A.

    Oh, and not that it’s relevant to your question, but never ever accept an offer in a multiple offer situation where you are bumping up the price based on the escalation clause form–35E. Counter instead, perhaps giving them the first page of the contract that would bump the price up. The problems with that form are multiple, and even the forms manual advises against its use.

  21. 21

    RE: Deerhawke @ 15 – Just out of curiosity, do you use Dunn Lumber at all? I had a recent project where their prices were lower, they were the only one to have the stuff in stock and their delivery charge was 25% of the others (the others being Lowes, HD and McLendon’s). It’s the first time I’ve used them since I moved 10 years ago–they are sort of hidden away in Renton.

  22. 22
    Minnie says:

    RE: Deerhawke @ 15

    Just curious – when sourcing materials, do you have any concerns about the quality or that they may be counterfeit? Have you ever ordered something that you felt was potentially counterfeit?
    I often wonder how builders save $ and if its by purchasing lowest grade materials, and how “low” do they go? As a consumer how do you (or I) identify that a building material is a fake?

    I see a lot of fakes nowadays on Amazon, you name it; sunglasses, jewelry, beauty products, shampoos, etc. A few years ago a friend brought me some counterfeit beats headphones from Hong Kong and wow, they looked amazing and just like the real thing, and then after a few uses they just completely broke, casing and all. My point is, a good fake looks good until….it doesn’t. That really opened my (naive!) eyes.

    I can’t imagine that the counterfeit industry will not continue to grow until we are all left with watered down consumer products that were a shadow of what they once were.

  23. 23
    Blurtman says:

    RE: Deerhawke @ 15 – A GIGO economic analysis, Deerhawke. The UE rate can be a very misleading metric. Imagine if only 10% of the population was seeking a job because there weren’t many, and that all 10% were employed, the UE rate would be zero, but a lot of people would not be working.

    The labor force participation rate (LFPR) is a much better metric and tells a different story. Definition: Labour force participation rate is defined as the section of working population in the age group of 16 and older in the economy currently employed or seeking employment.

    The LFPR is still at historical lows but seems to have stabilized. https://tradingeconomics.com/united-states/labor-force-participation-rate

    You also have to look at wages. If good manufacturing jobs are being replace by barista and waiter jobs, that can’t be healthy.

    Slow wage growth is a key sign of how far the U.S. economy remains from a full recovery.
    http://www.epi.org/nominal-wage-tracker/

    And lest you think that retiring boomers are driving the LFPR down, in workers 65 and older, the LFPR has been heading up. Perhaps many cannot afford to retire. https://fred.stlouisfed.org/series/LNU01375379

  24. 24
    MGSpiffy says:

    Ok Everyone. Don’t worry. The bubble is about to pop soon and I will let everyone know the exact day as soon as it is scheduled (probably in mid-October)…

    Yes, I’m about to attempt to purchase a house (an off market transaction) here in King County for ~$1M. As soon as the ink dries, the markets should reverse nationwide into a near free-fall, assuming it holds true to the pattern of nearly everything else in my life so far. :)

    In all seriousness, it’s pretty nerve wracking despite the what should be a solid position to make the move from. But as long as the interest rates don’t move, it’s not huge increase from remaining renters, and it’s pretty clear we’ll be staying put in the area for 10 to 20 years.

    Here goes nothing…

  25. 25
    Deerhawke says:

    RE: Doug @ 17

    I agree that this economy suffered tremendous damage during the Great Recession and it was a very long slow slog of a recovery. It could have been a much, much worse recession and much slower recovery if we had not had such good political and economic leadership. No kidding. I mean that. It is easy to criticize from the sidelines, but the Obama administration and Bernanke/Yelen did some heavy lifting while movement conservatives talked about paying down the debt (since it worked so well between 1929 and 1932) and wackos like Rand Paul suggested a return to the gold standard (good grief). The policy was more like a debt tourniquet than a debt bandaid, and it was definitely making it up as you go along, but at least it stopped us from bleeding out. Always a good thing.

    I go out there a lot and think Burien, White Center, Carnation and even Granite Falls are doing pretty well. I spent part of my vacation this summer in Lincoln, Grant and Grays Harbor counties. They sure looked way more prosperous than a few years ago.

    The good research by economists, sociologists and pollsters is forming a consensus that Trump is not in the White House because of economic issues. White people– including the white working class– were dramatically better off under the Democrats and Obama. But they were still unhappy because of issues of race, gender, ethnicity, immigration and that basket of issues called identity politics. I come from the white working class and work on a daily basis with those in the white working class. A lot of them have nice new tools and nice new trucks these days. They were not happy to have to bring in a black guy to bail the country out of the mess caused by Bush and company. The last thing they wanted was an eat-your-broccoli Mom in a pantsuit in charge for the next four years. David Brooks has parts of it right in his piece in the Times today.

    https://www.nytimes.com/2017/08/29/opinion/trump-identity-politics.html

    I am hearing more and more about Yelen just letting the US grow through the debt. Retire some bonds at each auction but don’t raise the discount rate. The debt gradually goes down, the economy keeps growing and eventually the debt is just less important overall.

    Of course Yelen may not be there past February. I don’t see that Gary Cohn or someone else with the qualifications to be the Fed Chair would do much different. But who knows with Trump. Maybe he will have a new job for Scaramucci and you won’t have to think so hard to figure out Fed speak.

  26. 26
    Doug says:

    RE: MGSpiffy @ 24 – Congrats and just ignore the noise. If your time horizon is 10-20 years and you’re buying this to be your primary residence and not as a spec play you’re going to do just fine, and probably really well actually.

  27. 27

    By Minnie @ 22:

    RE: Deerhawke @ 15

    Just curious – when sourcing materials, do you have any concerns about the quality or that they may be counterfeit? Have you ever ordered something that you felt was potentially counterfeit?
    I often wonder how builders save $ and if its by purchasing lowest grade materials, and how “low” do they go? As a consumer how do you (or I) identify that a building material is a fake? .

    How do you know something you bought at Lowes or Home Depot wasn’t purchased previously by someone DIYer and damaged? That’s a huge problem at those stores. They take stuff back and just shove it back on the shelves.

    I once bought a shower-head at Lowes and found damage from a prior purchaser and when I returned to the store all the other product of the same type had been opened previously, and some were clearly damaged. More recently I bought a GFCI at HD which had been previously opened and at least readied for install. It’s very annoying to buy what you think is a new product only to discover it isn’t. At least Fry’s is good at indicating what products are returns and offering them at a discount.

    I will admit I’ve had a similar incident with a third party seller on Amazon, but never with Amazon selling directly or even fulfilled by Amazon.

  28. 28
    Deerhawke says:

    RE: Kary L. Krismer @ 20

    Kary thanks for this. I appreciate the advice.

    RE: Kary L. Krismer @ 21

    Dunn Lumber… I am there all the time. They keep things in stock, they have knowledgeable people and they have a store on the north and south end of my territory (south Wallingford, north Greenlake). I would not buy a whole lumber package from them (too expensive) but for fill in items and custom items, they are great.

  29. 29
    Deerhawke says:

    RE: Minnie @ 22

    This is a really good point. You have to be careful not to buy fakes online. Good designs get knocked off all the time. You have to do your research and read the reviews carefully . If you get past the first few profile reviews, you will see things like, “Don’t buy. Cheap Chinese knockoff. It will break in no time.”

    Actually, I have found that if you are diligent, you can find real artisans making creative things and selling them online. My house numbers come from a guy in New Mexico who has a water jet cutter in his barn. My mailboxes come from a guy in New Hampshire who is a great designer and a fanatic about quality. Both of them have been knocked off by Chinese imitators, but they continue to do well and build a base of people (like me) who buy from them over and over again.

    My bigger problem is people who steal boxes off my porch. Last year I had a half dozen doorknobs stolen. What in the world could a tweaker do with stolen doorknobs? Kind of hard to fence.

  30. 30
    Marc says:

    RE: Deerhawke @ 25 – Wow, how about a source to all of that good research and consensus on Trump. I didn’t vote for Trump and can’t bear to even hear him speak but man, I think you’re really chugging the mainstream media koolaid.

    Any attempt to reduce why any particular politician got elected to a single reason is folly. A big part of what’s wrong with people today (and I don’t mean you personally) is we have such short attention spans and preoccupations with crap like the Kardashians and what some dumbass on Facebook had for dinner that most of us can’t or won’t grasp the reality that the world is a complex place and there are many, many different and very often competing reasons why things are the way they are. Instead, we want it dumbed down to a 15 to 30 second sound bite and a catch phrase.

    As for why interest rates are so low, it’s unequivocally the result of trillions and trillions of dollars created out of thin air by central banks and pumped into the global economy. That money has to go somewhere and there really is such a thing as too much of a good thing. As soon as those central banks collectively withdraw that support (the Fed may have stopped but the ECB and JCB are still pumping it out in mindboggling amounts every month), that’s when it will begin to get real. They will let interest rates rise in hopes a true, self-sustaining recovery has been achieved. Unfortunately, that won’t be the case because higher interest rates will end up decimating stock prices when the discount rates adjust accordingly. Moreover, the debt repaymant on all this massive debt (both public and private corporate) will prove too much at higher interest rates. Nonperforming debt and default rates will climb substantially and then all hell will break lose.

    Another major recession will follow and those same central banks will quickly lower rates back down to zero or below and throw more quantitative easing at it. And it will probably work to some extent, once again they’ll pull the globe back from the economic brink. But the massive debt overhang will remain and have grown much worse.

    This cycle will repeat at least one more time and perhaps 2 or 3 times but all the while the large majority of people will be worse off. At some point it won’t work anymore and the financial house of cards will collapse. I don’t think this means anarchy or civil war or anything like that, rather it will be like Puerto Rico going insolvent (and soon Illinois). Bond holders will eventually get told “sorry but we’re not going to pay you” or only a percentage of what we actually owe. Their will be great gnashing of teeth and all manner of misery but in the end, the world will go on. The business of America will still be business she just won’t have that same sterling credit rating she used to. But even that will bounce back because investors have short memories and love to rationalize.

    Some might say the US government can’t default because they can always print more money. Yes, they can but only so long as people will accept it. Just ask Venezuela or Weimar Germany. At some point not even a printing press works anymore.

  31. 31

    RE: Kary L. Krismer @ 6

    The owner moved to California a LONG time ago. I sold his house, went pending, in December of 2006. Just didn’t make sense for him to keep operating a Seattle site. They moved some time before July of 2006 and he originally started the site for his wife who was an agent at the time. He now has a different wife. :)

  32. 32

    By Deerhawke @ 29:

    My bigger problem is people who steal boxes off my porch. Last year I had a half dozen doorknobs stolen. What in the world could a tweaker do with stolen doorknobs?

    You probably don’t want to think about that one too much! ;-)

  33. 33

    RE: Ardell DellaLoggia @ 30 – Yes, I recall that, but I thought he transferred or sold it to someone else. It continued well beyond 2006.

  34. 34
    Anonymous Coward says:

    RE: Marc @ 30 – I get the too-much-debt-and-QE (I,II,III,IV….) leading to a small downturn quickly leading to hyperinflation (and systemic writing off of debts). What I don’t get is why this is NOT an argument for buying as much real estate as possible. I mean the standard way to position oneself for hyperinflation is to buy hard assets; if possible, by taking on as much fixed rate debt as possible. And housing is one of the few investments that lets you do exactly that. And, at the same time, it even helps lock in your housing costs at today’s nominal prices!

  35. 35
    Erik says:

    Good jobTim! By only showing the US-National and Seattle Case Shiller housing price index, it is easy to see that Seattle is raging and not so much the rest of the United States.

    The four most dangerous words in investing is “this time is different,” but all the data would suggest “this time is different.”

  36. 36
    sleepless says:

    By Doug @ 7:

    RE: ESS @ 5 – To me, the 10y UST at 2.13% actually seems very high. A quick look at some other 10y yields:

    Switzerland: -0.21%
    Japan: -0.01%
    Germany: 0.34%
    Netherlands: 0.47%
    France: 0.65%
    United Kingdom: 1.00%
    Hong Kong: 1.47%

    That is because every single central bank in the world prints money like there is no tomorrow. Think about it, who in their right mind would buy gubmint bonds at effectively negative yields unless they can resell them at even lower (more negative) yields down the line? End the money changers!!!

  37. 37
    ARDELL DellaLoggia says:

    RE: Kary L. Krismer @ 33

    No

  38. 38
    sleepless says:

    By Anonymous Coward @ 34:

    RE: Marc @ 30 – I get the too-much-debt-and-QE (I,II,III,IV….) leading to a small downturn quickly leading to hyperinflation (and systemic writing off of debts). What I don’t get is why this is NOT an argument for buying as much real estate as possible.

    RE: Anonymous Coward @ 34 – The downturn in the key here. Since most of the housing in bought on margin, it is hard to pay the debt back during the downturn. This is why the home prices go down during recessions.
    Regarding hyperinflation – this is exactly what we have in stocks, bonds and housing. Some people see no inflation, i guess, some people need to wear glasses. Look at the housing market, the institutional buyers and overseas “investors” suck up most of the inventory (at least they did a couple of years ago). The easy credit enabled corps to borrow cheap and instead of investing into the productivity and expansion, they simply buy back their shares. This is why we have multi-bubble economy.
    In contrast, we have free market in digital world. Look at the prices of electronics, such as TVs, computers and cellphones. Things like cloud computing, etc, all go down. The reason is – free market, better productivity, competition. Look at the industries where the gubmint has direct intervention – healthcare, education, housing – everything becomes more and more expensive by the day. What is perceived as assets has been going up in the last several years – bonds, stocks, housing, crypto currencies. Gold is an exception though because the gubmint and central bankers hate gold. And if you buy your “asset” with cash, you have nothing to worry about. If you buy your “asset” on margin, during the downturn you get margin call!

  39. 39
    wreckingbull says:

    By Deerhawke @ 29:

    RE: Minnie @ 22

    My bigger problem is people who steal boxes off my porch. Last year I had a half dozen doorknobs stolen. What in the world could a tweaker do with stolen doorknobs? .

    Discard the box of stolen doorknobs and go steal some more packages, with virtually no risk of any repercussions, since SPD has made it quite clear they don’t pursue this type of crime.

  40. 40
    sleepless says:

    By Erik @ 35:

    The four most dangerous words in investing is “this time is different,” but all the data would suggest “this time is different.”

    It is exactly the opposite, the data suggests this time is NO different. It is business as usual, more debt and more “free” money. What do you expect when every single central bank in the world keeps printing. What is different this time is the scale. The debt has never been higher! The next downturn will make 2008 look like a walk in the park.

  41. 41
    sleepless says:

    BTW, many of you (Karry, Deerhawke, Erik) claim the economy is great! Why is the FED so afraid of raising interest rates then? Why do we have $20T in debt and $200T more in unfunded liabilities? The debt sealing, i guess, should not be a concern then. If the economy is so great, we should be able to pay our gubmint debt in no time :) :) :).
    78 percent of workers live paycheck to paycheck
    1 in 3 Americans Has Saved $0 for Retirement
    Pensions crisis
    You’re not getting a raise and nobody knows why

    The matter of fact, if you are not a “code monkey” (as some trolls call SWEs), you are pretty much missing out on the “recovery”. It is called the longest, jobless recovery for a reason despite of the $Ts of printed money.

  42. 42

    By sleepless @ 41:

    BTW, many of you (Karry, Deerhawke, Erik) claim the economy is great!

    Huh? Is there someone named Karry here? Assuming you meant me, I’ve never claimed the economy is great–well maybe the very local economy driven by tech, but not the national economy. I’ve specifically been critical of rather pathetic job growth numbers and the accuracy of the unemployment figures. But even when you look at GDP, the growth rate has hardly been what you would call great!

    What we do have is a good economy in tech.

  43. 43

    By sleepless @ 41:

    You’re not getting a raise and nobody knows why

    There are at least three factors at play that have caused stagnated wages.

    Lower demand for labor due to increased automation.
    Greater labor supply due to population growth generally exceeding job growth (or even losses).
    Greater labor supply due to immigration (legal and otherwise) as well as trade deals (which eventually will lead to a bigger pie, but initially create labor competition).

  44. 44
    Minnie says:

    RE: wreckingbull @ 39
    I relish the opportunity to discuss law enforcement in Seattle! OK, so this is a departure from real-estate for a minute, please skip this post if you are not interested. I intend to sh*t on Seattle the way Erik sh*ts on Everett! :-)

    You’re right, package theft, car-break-ins, etc are not being pursued by SPD and I know this several times over through first hand experience. Depending on what district or neighborhood in Seattle you live in, there could be one officer on duty (for example, Queen Anne and Magnolia sometimes have just one officer on duty for BOTH areas!). Due to increased pressure from the politicians, SPD is looking the other way at a lot of things.

    I once called SPD to report someone who was actively trying to break into cars, I was watching this person go up and down the street looking into vehicles with a flashlight and trying doors and when I called SPD asked me if I had a weapon and turned the tables on me as to what “I” was doing….are you kidding me?!?

    It really fires me up when I see SPD speed traps, knowing that there are so few officers available and that they aren’t doing anything to curb petty theft, junkies on the street, RV drug houses, etc.

  45. 45
    wreckingbull says:

    By Marc @ 2:

    Holy moly! I don’t know how someone can look at these charts and not think we’ve got a serious bubble happening. Sure Seattle is special but no place is that special.

    The other thing that is fascinating to me is how much the tone of this blog has changed since the last peak. Back in 2006-07 everyone here was a major bear and everyone over at RainCityGuide was super bullish and it was really Crips versus Bloods anytime someone crossed over to comment. Now, the majority of comments here are bullish and Rain City Guide is a forgotten has-been. Coincidence?

    Perceptions are funny. To me, all the stepped-up cheerleading around here feels a lot like 2007. I am waiting (with a nervous twitch) for Angry Larry Cragun to show up, along with that bearded RE agent who made the cringeworthy rap song about the basement-dwelling Seattle Bubble losers.

  46. 46
    Doug says:

    RE: wreckingbull @ 45 – Is there a link to that song?

  47. 47

    All I want to know is if The Tim is on bubble watch.

  48. 48
    Erik says:

    RE: sleepless @ 41
    I never said the economy is great! I actually think the economy will crash In the not too distant future. The only times the CAPE ratio has been this high was before the Great Depression and before the Great Recession. I wouldn’t say I know much at all about economics, nor do I really care to dig deep into the subject. I do know a little about the Seattle housing market and real estate bubbles. I can tell you from what I’ve learned Seattle housing market is only heating up. Likely to have a correction and head up even stronger.

  49. 49
    sleepless says:

    By Erik @ 48:

    RE: sleepless @ 41
    I can tell you from what I’ve learned Seattle housing market is only heating up…

    It is, until it isn’t. Seattle market is driven by a single force – free money. Whether it is over-leveraged tech with unicorns like snapchats, twitter and alike or Asians laundering freshly printed money from the main land China. Yes, it may take some time before Chinese government runs out of printer press paper or VCs run out of cash, but at some point they both will. When? Who knows, but when it happens, it would be rather rapid and devastating.

  50. 50
    wreckingbull says:

    RE: Doug @ 46 – I can’t believe I did this, but here you go.

    http://blog.seattlepi.com/realestate/2007/10/12/i-tease-the-bubble-bloggers/

  51. 51
    Doug says:

    Stumbled upon this today and just loved it. A great reminder for bulls and bears alike — myself very much included.

    https://pensionpartners.com/put-these-charts-on-your-wall/

  52. 52
    Doug says:

    RE: Erik @ 48 – What is the scope of “crash” in your opinion?

    I’m personally horrified by your bullishness on Seattle housing coupled with your indifference to economics. Are you suggesting that economics, good or bad, will have no impact on our local real estate market?

  53. 53
    Blake says:

    By Doug @ 18:

    RE: Deerhawke @ 8 – I guess I would argue the economy isn’t really doing that well as indicated by persistently low rates. It’s been well documented that this continues to be the worst recovery in US history. We have put a debt bandaid over the wound and have effectively created a zombie economy now in serious danger of falling into a liquidity trap.

    And now rates are headed back down as the Trump promises fade, the business cycle becomes frighteningly long, and inflation is nowhere to be found. And if those things hold back the Fed from continuing to tighten, export countries might be forced to buy UST to suppress their own currencies in the event they need to devalue on the heels of a weakening dollar.

    Good points Doug! The economy is limping along with 2/3rds of the country seeing their wages aren’t even keeping up with 2% (official) inflation, ~1/3rd of the country seeing some improvement, and the top 0.1% laughing all the way to the offshore bank! And – as Blurtman pointed out – labor force participation rates have not recovered, so there are fewer wage earners… fewer consumers. Restaurants and malls are in bad shape. When this crappy recover ends it’ll be VERY ugly! And it will end…

    Here’s the graph for M2 money velocity: https://fred.stlouisfed.org/series/M2V
    … do you see any inflation coming on? The central banks have failed. W/o rising prices and wages debts cannot be paid down. The Fed has been inching up interest rates only so they can CUT them when the economy turns south! And… they will go negative, because that is the only option they have, but it has less and less effect.
    https://www.bloomberg.com/news/articles/2017-08-14/central-banks-told-to-embrace-negative-rates-as-recession-looms

    We are in a classic “Minsky moment” – liquidity trap. As you can see in the above article, over $8 trillion is currently “invested” in bonds that yield negative interest rates… $8,000,000,000,000! And that WILL go higher in the years ahead! The monetarists want to punish savers and force them to invest (hence the looming war on cash/gold/silver)… but they are pushing on a string.

    Things will get very interesting in the near future… major disruptions are looming: robots taking jobs, solar/wind driving the price of oil down and down, rising inequality causing political instability… and the end of the long term debt cycle. Hold on!

    But I’m sure Seattle will be spared… ;-)

  54. 54
    Doug says:

    RE: Blake @ 53 – The M2 chart is scary, and yes, I 100% agree negative rates are coming.

    I have a HELOC at L+3.50% which currently puts me at 4.74%. While I prefer to aggressively pay it down, I do believe that LIBOR will go back to 0% at some point so maybe I should be investing that money instead? The mortgage debate has been beat to death on the Mustache forums and I’m personally in the pay-it-off-camp.

    Re: Seattle being spared, I get your sarcasm, but I look at the economic backdrop as bullish for our market as well as other major cities around the country. If we are truly on the verge of helicopter money, real estate should do very well.

  55. 55
    uwp says:

    RE: wreckingbull @ 50

    Good find. I can’t believe that stuff is still out there. The internet never forgets.

    Another Mack McCoy gem:
    http://blog.seattlepi.com/realestate/2011/02/05/were-at-the-bottom/
    Even manages to be snippy about a bottom call from the Tim that was… right on the money.

  56. 56
    Erik says:

    RE: Doug @ 52
    Market correction = less than 10%
    Bear market = 10-20%
    Crash = greater than 20%

    Again, I’m not an economics guy, so double check me. I remember hearing that in a book Tony Robbins wrote about money. I should probably reread it because I didn’t retain that much of it. I believe he also said there are generally 2 bear markets or corrections before a crash. Please correct me if I’m wrong, because I read it quickly. We haven’t seen a correction or a bear. Average crash cycle is 18 years. 18/3=6, 2012+6=2018. My guess is we’ll have a correction or a bear market next year. With housing, I don’t plan to sell for a correction or bear market anyway, so I don’t really care when the correction or bear will hit.

    I’m planning on selling a condo next year unless we hit a bad market. That will give me plenty of capital to reinvest if we do have a downturn. I’m watching for the crash though. That’s when I plan to drop my real estate portfolio on the code monkey’s heads and buy it back from them for pennies on the dollar.

  57. 57
    Marc says:

    RE: Anonymous Coward @ 34

    First off, I don’t think the next recession we have will lead to hyperinflation in the United States. And that’s even if it’s as bad as the last one or even the Great Depression. I think the road before us is long enough that the U.S. and Europe can kick the can through at least one more major recession and probably more than one. But, at some point before the end of this century, the sh!t is gonna hit the proverbial fan and then anything is possible.

    As for owning hard assets through a hyperinflationary environment, yes that’s much better than being invested in stocks or bonds so long as you own it outright or can afford to carry the debt service until it passes. How long that will take is uncertain and there is a probability greater than zero that if hyperinflation hits the U.S., social constructs like real estate ownership may break down. So, there’s a good argument for diversifying and putting some wealth into things more fungible and mobile. Gold comes to mind and a fair amount of ammo (jeez, I sound like a doomsday prepper).

    You posit the strategy of “taking on as much fixed rate debt as possible” to buy real estate. All I can tell you is being heavily in debt for speculative reasons (or any reason for that matter), is not at all appealing to me. The upside is if you make it through, you emerge the other side with a fabulous return on your investment and get to tell everyone how smart you are. The downside risk is that you can’t cover your debt and end up losing everything.

    There is absolutely a time and place for applying leverage to improve returns but make no mistake, it is gambling plain and simple. As they say, pigs get fat, hogs get slaughtered. When the day comes that I think hyperinflation is on the horizon, I will be looking to sell everything and move. The potential upside is not enough to risk whatever wealth I’ve accumulated.

  58. 58
    Blake says:

    RE: Doug @ 54
    If we are in a deflationary environment then there really is no where to hide. But you really don’t want to be heavily in debt. I do like “real” assets… but would not buy into Seattle now.

    Erik: Since they “liberated” Wall Street in the 1990s we’ve seen one financial crisis after another: ’97, 2000, 2008. Each worse than the previous… What makes you think the next “correction” will be only a 10 or 20% drop and what do you think will pull us out of it?
    Easy money?
    Deficit spending?
    WWIII?

  59. 59
    Ross says:

    By N @ 12:

    By Erik @ 3:

    We need to figure out how to loosen up our immigration so we can start stealing Canadian code monkeys from Vancouver too. Imagine stealing programming talent from our brothers to the north and south. Real estate prices would get insane.

    How does more labor supply which generally equates to lower wages mean higher real estate values. Or are you suggesting jobs will be relocated rather than just candidates.

    Maybe in the short term. In the longer term, more smart immigrants generate more successful businesses that drive demand for more employees.

  60. 60

    RE: Erik @ 3
    Code Monkey 101 Taught in College????

    Nope Eric….all it takes is like Gates has; a high school diploma…..get A+ Code Monkeys like Windows 95 and 98 did, NW high schools is where they came from.

  61. 61

    RE: Blake @ 57
    Savvy Investors

    Are the opposite of Seattle area home buyers….i.e., uninformed Milenials with a bag of cash from inheritance….they don’t buy low and sell high. Mostly a bunch of investment dummies.

  62. 62
    StupidLifeDecisions says:

    By sleepless @ 49:

    By Erik @ 48:

    RE: sleepless @ 41
    I can tell you from what I’ve learned Seattle housing market is only heating up…

    It is, until it isn’t. Seattle market is driven by a single force – free money. Whether it is over-leveraged tech with unicorns like snapchats, twitter and alike or Asians laundering freshly printed money from the main land China. Yes, it may take some time before Chinese government runs out of printer press paper or VCs run out of cash, but at some point they both will. When? Who knows, but when it happens, it would be rather rapid and devastating.

    Agreed. It’s amazing how the bulls don’t see what the real estate market here is dependant on. Guess they’ll find out in within the next two years. I think sooner though.

    The beauty of the crash is it will be two or three things going wrong at once, with some fun side effects to increase the devastation. I will be enjoying it immensely when all the greedy landlords have to lower their rents or let their units sit unoccupied while everyone is moving away and there is an influx of new units on the market. Also when software engineers/coders/programmers find out it is no longer their job market and when silicon valley and related find out they can’t actually change the world after all. And when companies like amazon find out you actually have to earn profits to support your stock price.

    For all you sanctimonious landlords and techies out there, everyone else is footing the bill for your ill gotten gains, so it will be good for you to suffer some financial difficulties yourself. Most of you are long overdue for some humbling life lessons that will make you a better person in the long run.

  63. 63
    sleepless says:

    The guy sums it up nicely so 5 yo can understand: https://www.youtube.com/watch?v=DLrASzwC-HI

    Enjoy :).

  64. 64
    Blurtman says:

    Your wealth reflected in home equity is unactualized paper wealth. Perhaps the best way to actualize it is to sell. But then if you want to own in this area you are back on the hamster wheel. So do some arbitrage. Sell in Seattle, and take your chips to a different table in a different part of the country.

  65. 65
    Erik says:

    RE: softwarengineer @ 58
    The people with the right skill at the right time hit it big and retired early.

    I calculated stress on airplanes and the tooling that makes them for over 7 years. I imagine the day to day is similar to that of a code monkey. Everyday, the same thing. A lot of money in it, but it’s not for me. I’d prefer to take a lower paid job managing the monkeys or working with customers.

    They also don’t teach you how to buy housing and rent it out, which is probably the easiest way to make money.

  66. 66

    By StupidLifeDecisions @ 60:

    For all you sanctimonious landlords and techies out there, everyone else is footing the bill for your ill gotten gains, so it will be good for you to suffer some financial difficulties yourself. Most of you are long overdue for some humbling life lessons that will make you a better person in the long run.

    Sanctimonious? Ill gotten gains? Hypocrite much? Please list off all of your assets and how much below fair market value you’re willing to sell them for. Thank you. We await learning of the bargains you are going to shower us with. Special interest will be given to listed stocks offered well below their current trading price.

  67. 67

    By Blurtman @ 62:

    Your wealth reflected in home equity is unactualized paper wealth. Perhaps the best way to actualize it is to sell. But then if you want to own in this area you are back on the hamster wheel. So do some arbitrage. Sell in Seattle, and take your chips to a different table in a different part of the country.

    That would work well if you happen to be retiring now, or relocating for a different job. Otherwise, not so much.

    During the 2007-2010 downturn the people I felt the most sorry for were the ones who were retiring during that period. They went from having a nice little nest egg to little or nothing from their house.

  68. 68
    Doug says:

    RE: Kary L. Krismer @ 65 – For what it’s worth, I recall reading a Mustachian thread about a couple who retired just before the recession and held their assets through the collapse. They said it was terrifying, but they just tightened things up, lowered their safe withdrawal rate and came out with a higher net worth than they had at the beginning of the recession.

    Most retirees don’t have that kind net worth to begin with or the market savvy to stay invested in a period of such volatility, but it is possible.

  69. 69
    kenmorem says:

    this has been an excellent comment section so far. very much appreciated.

    i, too, am a little bearish. i think the run’s coming to an end in the next year+ and i’m looking at ways to deleverage from RE. we have 2 rentals + a primary residence.

    – one rental (condo) in queen anne is paid off and is a no-brainer to keep IMV (for many reasons other than being paid off).

    -the other in northgate is a townhouse purchased in 2006. LTV is about 55%. cap rate is well under 1%, but appreciation over this last run-up has been nice. when light rail is completed (2021) and the pedestrian bridge crosses i-5 at the community college, it’ll be an 8 minute walk to the light rail station. VERY TEMPTED TO SELL, but long-term seems like it could be well-positioned.

    i am definitely concerned about the next bubble burst and the huge inventory being built up right now in puget sound. i could easily see rental rate plummet if/when tech shrivels up. i don’t see AMZN or GOOG or MSFT disappearing, but like others have mentioned, the little tech companies that have 0 profit and no actual need in society could disappear in a heartbeat.

    would love to get some opinions on sell vs. hold for the townhouse.

  70. 70
    Erik says:

    RE: kenmorem @ 67
    Keep it. I own up there off 145th street. Yours is better positioned though. I’d keep it and rent it out until you die. It will easily pay itself off and generate easy money every month. Another idea is to sell it to me and let me do what I just told you to do so I can steal your earnings.

  71. 71
    ronp says:

    RE: kenmorem @ 67 – I think you are fine selling or keeping your townhouse, but if you keep it, just make sure you don’t sell it in the middle of the next downturn. The other issue is what other investments do you have that are non-real estate? Portfolio theory says you need a mix and you need to take into account an asset allocation for your age. So if you sell what asset classes will you distribute the proceeds to?

    Maybe you still have a job and get a monthly paycheck – there are some tax considerations too…

  72. 72
    Blake says:

    By StupidLifeDecisions @ 60:

    Agreed. It’s amazing how the bulls don’t see what the real estate market here is dependant on. Guess they’ll find out in within the next two years. I think sooner though. …
    And when companies like amazon find out you actually have to earn profits to support your stock price.

    Amazon has grown fast and Seattle is becoming quite dependent upon AMZ…
    Anyone remember Boeing and the bust in the 1970s?

    Now about that Amazon beast…
    Moody’s on Amazon: “Weakest of the Big US Retailers”
    https://www.nakedcapitalism.com/2017/08/moodys-on-amazon-weakest-of-the-big-us-retailers.html
    … “A substantial amount of the Moody’s report debunks, as we have, the idea that Amazon’s Whole Foods purchase represents a serious threat to the grocery industry. O’Shea stresses that Whole Foods is too small to do much damage, comparing its less than $20 billion in sales to WalMart’s $200 billion in grocery revenues, Kroger’s $130 billion, and Costco’s $50 billion:
    “The perception that as soon as Amazon enters a product category, it immediately wins is also flawed, said the analyst. While Amazon is clearly disruptive, it does not dominate any category in which it operates. In consumer electronics, for example, Amazon has about a third of the share of Best Buy Co. Inc. “Online sales still account for only about 10% of overall U.S. retail sales, with a much lower percentage in the grocery segment, leaving the big brick-and-mortar retailers, led by Walmart, still really formidable competitors in the industry,” he wrote.”

    Previously, even the Seattle Times gave Amazon’s “fresh” grocery delivery a bad review!
    http://www.seattletimes.com/life/food-drink/no-just-no-6-amazon-style-reviews-for-new-amazon-fresh-pickup/

  73. 73
    N says:

    @kenmorem 67 – You don’t provide much specifics as to basis, potential taxable gain + dep recapture etc. How long have you owned the property?
    Are you cash flow positive?
    If you keep, are interested in keeping forever and have it paid off or simply betting on the market appreciating further in the medium term.

    You mention 1% Cap which would immediately indicate you should sell and put your money in something with a better return but of course there are major transaction costs and tax consequences and if your cash flow positive and your tenants are essentially going to pay it off for you it may fit you to keep it.

  74. 74
    Doug says:

    By StupidLifeDecisions @ 60 – “Guess they’ll find out in within the next two years. I think sooner though.”

    Another call for the end being near. Add it to the growing pile of too early (wrong), market timing calls exemplified here: http://thereformedbroker.com/2017/08/30/the-dumbest-call-of-the-era/

    Seriously, everyone, is the yield curve inverted yet? Even when it does eventually invert, we’ll still have 6-12 months of lead time before the ish officially hits the fan. The bond market is smarter than the stock market and smarter still than all the sound bites we get on a daily basis from clueless media outlets.

  75. 75
    Erik says:

    RE: N @ 71
    Cap rate? Cash flow?

    Who gives a rats a$$? Here in Seattle, I think the best play is to hold onto as much property as long as you can like the game of monopoly. Sell your worst assets based on age, risk, how you think the area will do, quality of tenants in that area, etc. Unfortunately this is not a math problem, or I would he good at it. This is about having a low risk stable investment in a good area. Kenmoron would be a fool to sell a good townhouse in North Seattle. I think he knows that, he’s just looking for an “ataboy” from seabub commenters to boost his confidence.

  76. 76
    N says:

    By Erik @ 72:

    RE: N @ 71
    Cap rate? Cash flow?

    Who gives a rats a$$? Here in Seattle, I think the best play is to hold onto as much property as long as you can like the game of monopoly. Sell your worst assets based on age, risk, how you think the area will do, quality of tenants in that area, etc. Unfortunately this is not a math problem, or I would he good at it. This is about having a low risk stable investment in a good area. Kenmoron would be a fool to sell a good townhouse in North Seattle. I think he knows that, he’s just looking for an “ataboy” from seabub commenters to boost his confidence.

    Haha. I would expect nothing else from you. Cash flow doesn’t matter when your gaining 13% a year, it will matter when your down 13% a year. This play of holding on as long as you can is exactly what many thought in 2006 right? Just having good inflation alone will make you rich, well we know how that ends.

    When a majority act like cash flow doesn’t matter and economics don’t matter all that tells me is something can’t be sustained. I know I know you read a book from someone who knows how to time markets cause its so easy, probably spent $5k to go to a hotel seminar and learned how to make millions using OPM because its all the rage again.

    http://www.marketwatch.com/story/these-charts-could-blow-up-every-bit-of-advice-youve-ever-gotten-about-investing-2017-08-30

  77. 77

    By Blake @ 70:

    Previously, even the Seattle Times gave Amazon’s “fresh” grocery delivery a bad review!
    http://www.seattletimes.com/life/food-drink/no-just-no-6-amazon-style-reviews-for-new-amazon-fresh-pickup/

    I’d give all of Amazon Fresh a bad review. I’ve used it for a period of months two different times. The first time I quit due to inventory issues–they had a hard time keeping stuff in stock, and if they don’t have even one item you’re still looking at a trip to the store.

    The second time was just the packaging was becoming overwhelming. I’m not really a person to give a crap about banning bags and such, but one delivery from Fresh using their then newest method of packaging would fill up about a third of my large recycle bin! The method before that was also a lot of bags, although most of them were returnable. Personally I liked the plastic totes that were used during my first use of AF.

    Also, their produce sucked both times, so again a trip to the store anyway, but at least that could be a produce store. Meat was difficult too, depending on the type of meat. They had some great options there, but others where you wouldn’t want to buy.

  78. 78

    By Erik @ 72:

    RE: N @ 71
    Cap rate? Cash flow?

    Who gives a rats a$$?

    Financial data? We don’t need no damn financial data! /John Belushi

    https://i.pinimg.com/736x/3e/4c/32/3e4c3282f4343c54c445c468b9c3b55a–saturday-night-live-bees.jpg

  79. 79
    kenmorem says:

    the cash flow vs. appreciation is always an interesting, and difficult, subject to me. the notion of having a property in the midwest and a cashflow of 8% sounds great. but, when you have seattle going at 15% year, that makes cashflow irrelevant, until the next crash and future vacancies. paper value doesn’t pay the mortgage.

    anyway, ronp & N:
    – other assets include $330k of funds through retirement accts (mostly ROTH, some taxable)
    – if we sold, i would consider either 1031ing it into a higher cash flow property, or taking 1/2 the proceeds to pay down primary mortgage (320k @ 3.375%/30yr) and reamortizing, and keeping the other 1/2 for the next rainy day market timing opportunity.
    – my wife and i are still employed, me FT, her 2 days/week as we have a 1 year old
    – townhouse has been owned since 2006 (purchased with a friend) and was last refi’d in 2012. not eligible for the 2 in 5 year rule.

  80. 80
    ESS says:

    By kenmorem @ 79:

    the cash flow vs. appreciation is always an interesting, and difficult, subject to me. the notion of having a property in the midwest and a cashflow of 8% sounds great. but, when you have seattle going at 15% year, that makes cashflow irrelevant, until the next crash and future vacancies. paper value doesn’t pay the mortgage.

    anyway, ronp & N:
    – other assets include $330k of funds through retirement accts (mostly ROTH, some taxable)
    – if we sold, i would consider either 1031ing it into a higher cash flow property, or taking 1/2 the proceeds to pay down primary mortgage (320k @ 3.375%/30yr) and reamortizing, and keeping the other 1/2 for the next rainy day market timing opportunity.
    – my wife and i are still employed, me FT, her 2 days/week as we have a 1 year old
    – townhouse has been owned since 2006 (purchased with a friend) and was last refi’d in 2012. not eligible for the 2 in 5 year rule.

    Don’t worry Kenmorem, we have the same number of properties, although have owned them longer than you. We have the same discussions and debates between us as I am sure that you are having in your household.

    Do we dump the smallest of the houses that is free and clear – move to Arizona and use the rest of the proceeds to fund us until we can maximize our social security while getting a manager to rent the two remaining properties for us? Should we continue to hold on to all three properties and rent them all out and try to find a place in Arizona? Should we sell the smallest house and pay off our mortgage, stay here and live off the proceeds until we can maximize social security? Should we apply for ss earlier and invest the proceeds of the house sale? Sell everything – trying to maximize the 2/5 rule and then move? Do nothing but raise rents to market levels? Who knows? Some of the decision is based upon what one’s future prognosis of the Seattle/Puget Sound real estate market will be.

    As you well know – there are so many variables in making the decision that there are probably no right or wrong decisions, only what is best for you. The cynic in me says that because of your wonderful Seattle government leadership, your townhouse should increase in value and rents skyrocket. Why? With all the social engineering that the Seattle government is attempting to implement, the end result will be not only higher rents – but more valuable housing. Government intervention always makes things bad for the majority, for the benefit of the lucky insider few. Exhibits A,B,C – NYC, SF., London all have rent control and are some of the most expensive cities in the world to reside in. While there is no rent control in Seattle (yet), the other “reforms” that are being implemented will only make rents go up, as someone has to pay for the expense of the expense and damage cost by social engineering. In a hot real estate market such as Seattle – it isn’t the owner……

    Good luck in making a decision!

  81. 81
    Erik says:

    RE: N @ 76
    I’m a poor person. I make a moderate salary working for a company that makes billions off of my sweat and hard work. The only way I see out of my situation is real estate. I’ve made some great moves so far to help me to get out of poverty. What I did was risky. I just figured, I’m poor already, what do I really have to lose? Wreckingbull and his code monkey brothers told me I was stupid and to diversify blah blah blah. Diversify $100 gets me nowhere.

    By taking on risk, I changed my situation. I bought some Seattle condos at the king county auction for approximately 80% of their fair market value, some more and some less. The condos aren’t positive cash flow. I’m going to sell my most risky investment that I have the most money into next summer. That expected profit should be enough money to sustain my negative cash flow for 20 years. If the market doesn’t crash before next year, I should be on stable financial ground. I think I have a very high probability of doing well. Now I will have some really good rentals that wil likely have positive cash flow in the next few years. If I need some cashola, I can refinance one of those condos or sell one.
    Unless you are a trust fund baby or a computer programmer in the 80’s, you gotta take risk to get a reward. The caveat of that is to take smart risk and have a good plan.

  82. 82
    wreckingbull says:

    By ESS @ 80:

    By kenmorem @ 79:

    Don’t worry Kenmorem, we have the same number of properties, although have owned them longer than you. We have the same discussions and debates between us as I am sure that you are having in your household.

    Sounds awful. How do you have the strength to go on? :)

  83. 83
    OA says:

    RE: Erik @ 81

    How many condos do you own in total?

  84. 84
    wreckingbull says:

    RE: OA @ 83 – I’d like to see a monthly cash flow statement and a balance sheet from The Empire. Since he is in the business of dispensing daily RE investing advice here, it might be interesting for us plebes to see some numbers to go along with the story.

    It well help those of us who are not code monkeys or Trustafarians, right?

  85. 85
    greg says:

    RE: Doug @ 18

    Great post Doug. wish there was a rep system here.

    I agree pretty much with everything you said . “awash with money” … .. Your post hits it square on the nose.

  86. 86
    ess says:

    By wreckingbull @ 82:

    By ESS @ 80:

    By kenmorem @ 79:

    Don’t worry Kenmorem, we have the same number of properties, although have owned them longer than you. We have the same discussions and debates between us as I am sure that you are having in your household.

    Sounds awful. How do you have the strength to go on? :)

    It is tiring when you are getting all cut up by blackberry bushes that just love to attack rental houses. And next month one of the houses is getting a new paint job – inside and out – lots of work.

    On the other hand, just having a couple of rentals has transformed my entire adult life, both in terms of affording advanced university tuition, and having the ability to walk away from a nine to five career (actually nine to nine six days a week) to start our own business and to travel to various interesting places during the slow times. We haven’t gotten rich off of real estate – but it sure afforded us both choices and opportunities to do the things in life that really matter – and slaving away at a job one hates sure isn’t one of them.

  87. 87
  88. 88
  89. 89
    ess says:

    By vj @ 87:

    https://www.youtube.com/watch?v=ejRYI2hlTXM

    Interesting video – thanks for posting

  90. 90
    QA Observer says:

    RE: vj @ 87

    Is the concept of Chinese buyers still anecdotal as some say on this site?

    What concerns me is the last line in the piece indicating that the Chinese developer will sell approximately 40% of it’s units to Chinese nationals. I thought there was some sort of equal housing opportunity laws that prevent this type of procurement.

    The culture of Seattle is changing. Change is inevitable. The lack of driving skills of newcomers has definitely decreased road safety.

  91. 91

    By vj @ 87:

    https://www.youtube.com/watch?v=ejRYI2hlTXM

    Just your typical BS story on this foreign buyer topic. Their proof:

    1. One agent says over 50% of his overseas buyers are from China. Now there’s a stat for you–the percentages of part of one agent’s business. Very convincing. /sarc
    2. The same references to web site searches on a foreign website–presumably Juwai.com. Web searches aren’t really very good evidence of anything. Web hits aren’t even that good of an indication of how interesting someone finds a webpage. But hey, my listings tend to get at least 300 views, so from that I can assume that I collect 3% on each listing 300 times.
    3. And a new one–someone selling a project “expects” a certain number of foreign buyers. A prediction of the future as evidence of the amount of foreign buyers. I don’t know why I even bother arguing against such strong evidence! /sarc (As noted, this company probably has some explaining to do because that comment does raise Fair Housing issues.)

    So to answer QA Observer’s question (“Is the concept of Chinese buyers still anecdotal as some say on this site?”), it is anecdotal and so much less.

    But to be clear, I am not trying to claim that there are no such buyers, or on a related topic really stupid investors who leave property vacant. I’m saying there are not good statistics for that type of activity.

  92. 92
    ess says:

    RE: Kary L. Krismer @ 91

    Maybe what Tim and this website needs to do is arrange for another movie night for Seattle Bubble enthusiasts.
    The movie of choice?
    Beijing Meets Seattle.

  93. 93

    RE: Erik @ 65
    I Did Stress Analysis on the 757/767 Wing too!

    Did it for a few years, found out Boeing really hates engineers, quit immediately after inventing the Master Control Drawing for the 757/767 manufacturing engineering….invented Computer Aided Manufacturing before CATIA and CADAM. Boeing gave me a 5% raise for the invention….good grief!

    Its FAR worse now…..we taught Japan all our aerospace secrets. American dummies.

  94. 94
    Erik says:

    RE: wreckingbull @ 84
    You’re not a plebe, you’re a pube.

  95. 95
    Erik says:

    RE: softwarengineer @ 93
    That’s a pretty funny coincidence. I worked the wing too. Stress analysis gets even more laborious for the composite 787. The stress notes are like 4x as long, yuck.

    Now I work with the manufacturing side. I just talk to people and go to meetings, which is a lot more fun to me.

    Us people that bring value to the world need to stick together.

  96. 96
    Erik says:

    RE: OA @ 83
    Enough to care about the housing market. Seems like bad form to post that on here. I’d rather we all share knowledge and not judge each other by what we have. I’m sure there are some very wealthy people on here that don’t share what they are a real estate mogul. I can tell you I am not a real estate mogul, but I did put myself in a pretty better position by investing in real estate. Hopefully I didn’t just jinx myself.

    The difference between me and a lot of people on here is that I was able to go from paycheck to paycheck to being able to afford some investments. I can tell you that it involves taking on risk although it seems everyone on here is ultra risk adverse. If you wanna make some casheroo, buy something, live in it for 2 years while you fix it up, sell it and hope you profit. You may make money or you may fail. If you are a 9 to 5er like myself, it’s the best option I know to get started. I am still doing that same plan only with a little more money to pay contractors and a little less remodel work. I know how to buy at a discount too, which helps.

  97. 97

    By ess @ 92:

    Beijing Meets Seattle.

    LOL, but I do like foreign movies, and had not heard of that one, so good idea!

  98. 98
    Weasel says:

    Either way, thanks to what ever forces are at work, 2.9 years into first home ownership with a small 4% downpayment (Thanks to WSHFC for lending us that @ 0%!), I just completed a refinance to a 20 year loan, lower interest rate, got rid of PMI, and repaid WSHFC 27 years early. When all said and done I wiped 7 years off for a small increase of $100 a month on the payment :-)

  99. 99
    Erik says:

    RE: Weasel @ 98
    Good job weasel. Now sell and take your profit and buy 3 more.

  100. 100
    Cap''n says:

    RE: Kary L. Krismer @ 91

    Jeezus Kary. You’re like big tobacco. “It’s only correlative, can’t prove causation.” Yes, question the value and source of data, but at some point you have to give in (maybe just on the 3+ million properties). Smoking causes cancer, GHG emissions are the primary contributor to climate change, and foreign (Chinese) money is affecting aspects of our RE market. Ignore at your peril.

  101. 101
    Weasel says:

    RE: Erik @ 99

    If I got what it was valued at, I’d walk away with 80k after costs. Problem is I could only afford to buy the same thing in the same market?! Not sure how you’d turn that into 3 houses. Our street got caught just inside the South Hill neighborhood rezone, went from single family to high density, so it might be worth hanging on to this place in the longer term.

  102. 102
    Erik says:

    RE: Weasel @ 100
    If a get lucky and make a smart buy at the auction it costs me like 20-25k to pay my fees and get it rented. That’s best case scenario though and things can easily go sideways. That’s why I thought you could buy a few.

    High density rezone is good. Could mean some rich person is planning to develop your area? I’d rent it 2 years and think about selling it. You may double your equity with an extra 2 years of renting it and won’t pay capital gains tax since you lived there 2 of the last 5 years. In the meantime you can buy a new one and maybe do the same thing you did with the south hill house. Rinse and repeat.

  103. 103

    RE: Weasel @ 100 – You two are sort of talking about apples and oranges when it comes to situation. You’re talking about what you did with respect to the house you live in. Erik is talking about taking the equity in your house and using it to leverage into other properties.

    But technically even assuming you wanted to become a real estate investor, you wouldn’t need to do as Erik suggested. You could just somehow borrow against your equity and use that money to buy an investment property. Note though that would mean having a second mortgage on your house, with all the implications of that, including continuing liability in the event the first forecloses. And also to get financing on an investment property (not using hard money loans) you’d need to have probably a minimum of 20% down, if not 30% (I’m not up on the current borrowing standards for investment property).

    What you’re not going to be able to do is buy three more houses using the low down residential financing intended for people who will be living in the house.

  104. 104
    Weasel says:

    RE: Kary L. Krismer @ 102

    Quite correct, and at this point I don’t have enough equity to pull out to put into something else. Lender wanted to keep the loan under 75% of the appraised value, and it came in at 70%.

    That and I don’t have the spare time to get into property investing on the side. I’ll just stick with that I’ve got for now :-)

  105. 105
    S-Crow says:

    House Flippers Triggered the US Housing Market Crash,
    not poor subprime borrowers a new study shows.

    There’s a lot of this article that I agree with. As I’ve said before ad nauseum: debt loads do not discriminate just because someone lives in 98112, 98105, 98109, 98119, 98199, 98004, 98005, 98033, or 98052. AMZN, SBUX, COST, MSFT, BA all were here in 05-08′. That did not stop the market from correction.

    All the market has to do is SLOW and time on market will increase which will put enormous pressure on highly leveraged speculators.

    Momentum and psychology clearly can overshoot housing values on the way up as they did on the way down.

    When everyone is talking about getting rich in real estate and driving around in brand new cars, trucks and toys showing up in driveways that are not paid for with earned income (ie, using the housing ATM machine) and people saying leverage does not matter nor debt loads is when you probably have a top.

  106. 106
    Ron says:

    I have a property worth about a million, but it isn’t the place I want to be long term. I worry that if I don’t secure what I really want now, I’ll be priced out forever. But if I sell first so I can buy my long term property, I fear that I won’t be able to secure it since people will bid up much higher than it is worth and / or I am willing to pay.

    Seems like everything is a compromise! If the market were more rationale, it’d be a much better environment for everyone.

  107. 107
    Erik says:

    RE: Weasel @ 103
    Just buy a new place and move into it. Get a leasing agent to rent your other place for you. It’s the only way I know to get out of working for someone your entire life.

  108. 108
    Weasel says:

    RE: Erik @ 106 – The problem with that is the lack of equity in the current house, I’m only 25% in, maybe that’s enough, I really don’t know, but personally wouldn’t be comfortable extending my self that far yet.

    The place we have now is cosmetically tired and un-renovated, but in a good area – specifically sought that because it’s easier to change your house than it is to move it somewhere else. I’ve been slowly improving it funds permitting, but it needs more work to get it to a standard I’d be happy to rent it out.

    One limitation I have is location, I must be-able to commute to Seattle on public transit, that alone automatically rules out most of the market, we looked and lurked for about 6 months before we found and bought this place. Bonny Lake walking distance to the park and ride is about the only other place I’ve discovered that I’d consider an upgrade to. Another way to go would be buying an existing rental as the location doesn’t matter so much to me, and keep it as is.

    Either way it’s not a bad idea, I know plenty of people who’ve done that, including my parents, so it’s certainly something I have given thought to :-) It’s going to take time to build more equity, and it’s possible the market over the next 2 or 3 years will help like it already has, we’ll see how things go.

  109. 109
    ARDELL DellaLoggia says:

    RE: S-Crow @ 104

    That happened in the late 80’s crash and for a time thereafter you had to prove a home equity loan was being used for something that contributed to the home’s collateral value. This East Coast. People were buying cars and toys with home equity lines so the interest was tax deductible. Other forms of loan interest were not tax deductible. I guess that’s still true and encourages people to use home equity as a form of credit to get the interest deduction. They should change that.

  110. 110

    By S-Crow @ 104:

    House Flippers Triggered the US Housing Market Crash,
    not poor subprime borrowers a new study shows.

    I’m not sure I buy that, but I’ve only read the article, not the underlying study that the article is based on. The two problems I see with that from reading the article are:

    1. The seem to be basing being an investor or flipper on having more than one mortgage. Assuming they can actually track that, it’s not clear that they were excluding those who had 80/20 and similar type loan packages. The increase in two or more mortgages could have been just due to that type of loan package being extremely popular back then, and what they might be really tracking is having less “skin in the game.”

    2. The lack of correlation between low credit scores and foreclosures is likely do to the very well known problem that credit scores are a lousy basis for making home loans. And unfortunately, even though new credit score products exist, few lenders are using them today. Ken Harney just did a piece on that within the past two months. But anyway, having a high credit score generally involves having a record of paying debt, so having a car loan and six credit cards with 25% of limit borrowed against them doesn’t harm your score, because being such a person makes you a great candidate for a new car loan or another credit card. That’s what the score was designed for . But having such debt does not make you as good of candidate for a house loan as someone without such debt, all other things being equal. But that doesn’t get reflected in conventional credit scores, and that’s why they are not good tools for home loans.

    Finally, not really a criticism of the article, but there were an increased number of flippers back then, and the newer ones probably did get into trouble with the downturn in the economy. That was often due to lack of experience, and some of those probably would have failed anyway. But there were other flippers who did okay through the crisis–managing to sell their projects bought before the downturn, but not with the profit they intended. My own anecdotal evidence based on my own fixer listings is that buyers now are less likely to be using their own cash to buy projects compared to a few years ago, and instead using hard money (so that technically the sale isn’t contingent on the property being appraised and qualifying for a loan, etc.). If the same thing was happening in 2007 I could see that would lead to more defaults, but I only remember seeing one flipper project actually end up getting foreclosed and then listed by the creditor. Maybe those failed projects typically get bought by another flipper at the foreclosure sale, but I don’t recall seeing that either.

  111. 111

    By ARDELL DellaLoggia @ 108:

    That happened in the late 80’s crash and for a time thereafter you had to prove a home equity loan was being used for something that contributed to the home’s collateral value. This East Coast. People were buying cars and toys with home equity lines so the interest was tax deductible. Other forms of loan interest were not tax deductible. I guess that’s still true and encourages people to use home equity as a form of credit to get the interest deduction. They should change that.

    I seem to recall something similar about limits on what you could deduct being based on what you paid for the house and/or added to it. Basically the interest on the loan amount could not exceed what could be borrowed based on your tax basis. And I do think that was probably a good idea, but it did lead to inconsistencies where the amount you could deduct was based on when you bought. Also, it probably was difficult to administer because a simple audit for a tax year would require determining basis in a house.

    The current rules for deducting are not quite as simple as for loans taken out before 1987. Checkout the flow chart on this IRS page!

    https://www.irs.gov/publications/p936/ar02.html

  112. 112

    Here’s a link to the Harney article I mentioned regarding lenders still using bad credit score systems for home loans.

    http://www.heraldtribune.com/news/20170827/kenneth-r-harney-fannie-and-freddie-stick-with-outdated-credit-scoring

  113. 113

    RE: Kary L. Krismer @ 110

    Per the link, yes it was “late 80’s” as I said and specifically October 13, 1987 which was before the crash and near the end of the upswing. Also per your link, after that time you were not supposed to deduct HELOC interest if you used it to buy a car or for any spendings that were not substantive improvements to the home. But I doubt many know this when they use it to that purpose and doubtful that everyone follows those rules in the link way down near the bottom, even if they use a professional tax preparer, especially if they do a cash out refi vs a separate line of credit.

  114. 114
    ess says:

    http://nypost.com/2017/09/02/are-we-headed-for-another-housing-collapse/

    Interesting article from the other side of the country. Seattle is mentioned a number of times, and various interesting charts including the list of ” tightest” housing markets. Notice Seattle is way up there.
    And one person indicates that 700K – I million is a “starter home” in Seattle.

  115. 115
    sfraz says:

    RE: ess @ 113 – Interesting indeed. Each of the quoted “experts'” income depends on ever rising, never popping multiple world-wide bubbles. The lemmings spouting “it can’t happen here” and “it’s different this time” will be cheerleading as the ground crumbles under their feet. Interesting as to what you can make people believe and how different it can be to what they actually experience. “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” Upton Sinclair

  116. 116
    Erik says:

    RE: sfraz @ 114
    Please quantify or use reasoning to tell us why you think we are in a bubble an it’s about to crash. Based on historic data of housing bubbles, we are definitely not in a bubble. We have none of the typical signs of being in a bubble. Do you mean correction, because that is very possible? A crash at this point would be extremely unlikely.

  117. 117
    sfraz says:

    RE: Erik @ 115 – Because there was no remedy after the last crash, only can kicking. People choose to believe what they will. “The Fed has kept the pedal to the metal, repeating the errors of the 2000s by fueling a credit driven bubble in residential real estate. This time around, the bubble is more focused on affluent areas of the country, but the result is likely to be more tears.” https://app.hedgeye.com/insights/61625-the-fed-fueled-bubble-in-residential-real-estate?type=guest-contributors

  118. 118
    N says:

    By Erik @ 81:

    RE: N @ 76
    I’m a poor person. I make a moderate salary working for a company that makes billions off of my sweat and hard work. The only way I see out of my situation is real estate. I’ve made some great moves so far to help me to get out of poverty. What I did was risky. I just figured, I’m poor already, what do I really have to lose? Wreckingbull and his code monkey brothers told me I was stupid and to diversify blah blah blah. Diversify $100 gets me nowhere.

    By taking on risk, I changed my situation. I bought some Seattle condos at the king county auction for approximately 80% of their fair market value, some more and some less. The condos aren’t positive cash flow. I’m going to sell my most risky investment that I have the most money into next summer. That expected profit should be enough money to sustain my negative cash flow for 20 years. If the market doesn’t crash before next year, I should be on stable financial ground. I think I have a very high probability of doing well. Now I will have some really good rentals that wil likely have positive cash flow in the next few years. If I need some cashola, I can refinance one of those condos or sell one.
    Unless you are a trust fund baby or a computer programmer in the 80’s, you gotta take risk to get a reward. The caveat of that is to take smart risk and have a good plan.

    Poor is all relative, I am in that category too supporting a family and do not own houses in the Seattle market, you own several but say your poor. Your right Real Estate in this market and certainly at this time looks to be a ticket to wealth but I’ve just seen these cycles and had the best plans fall apart (especially when I had cash flow negative properties betting the good times would continue). As long as your building your 401k and such then its great. But to say Real Estate is the only way to change your fortunes is a stretch. Especially in this day in age when I can private label something easily on Alibaba and sell it on Amazon. Lots of other ways to create income and wealth.

  119. 119
    Doug says:

    RE: sfraz @ 117 – This article does a good job of using a lot of different charts to show what happens when interest rates are low for a prolonged period of time.

    But just saying housing or other assets are in a bubble and therefore must come down isn’t convincing logic. More convincing would be to explain why and how interest rates will rise and if that can’t be done then there’s no reason to not continue to be bullish.

  120. 120
    formerSeattleite says:

    https://qz.com/1067557/robert-shiller-wrote-the-book-on-bubbles-he-says-the-best-example-right-now-is-bitcoin/

    Really good article.. there’s no mention of real estate, but I thought it was just a great article on the idea of a ‘bubble.’

    “I have something I call a valuation confidence index. I don’t have it really up to date because it’s only a six-month moving average based on small surveys. Maybe I should expand my size.
    But valuation confidence is at the lowest it’s been since around 2000. In other words, people think the market is highly valued. They don’t have to look at CAPE. People think it. I know that. Both individual and institutional investors. We are in a time of mistrust of the market.
    The only time mistrust of the market was lower since 1989 was in 2000. So around 2000, the peak of the dot-com bubble. It seems like the mindset is somewhat similar to the dot-com mindset. And that brings us to the FANGs [Facebook, Amazon, Netflix, and Google], as well. High-tech companies are probably more exciting, as they were in 2000.”
    […]
    “Monetary policy has entered a new regime. The only historical precedent for when interest rates were low for anything like this long was in the 1930s, the Great Depression, and how did that end? It ended with World War II.
    It doesn’t tell you what’s going to happen now. Why are long-term interest rates so low? It’s a big thing. It’s been trending down since 1982. There’s been a downtrend around the world in long-term real interest rates.”

  121. 121
    Jens says:

    RE: Minnie @ 44

    Yep, speed traps are easy money to pay for all those 80K cars they have to have every year. And yet…when my mom lived out on Whidbey Island, she mentioned a couple years ago how the county wanted a tax levy increase to cover the 8 new cars at 80K each that the sheriffs said that the HAD TO HAVE just for the South End. When I went to visit her during Thanksgiving, I could not believe how many Police cars I saw between her home off of 525 Freeland and just the short drive to the post office. Not once, but several times through out my visit. Now this scene has become a joke for our family each time we visit. How many can we count one way and it’s usually between 2-3 one way and 4-6 round trip. And the articles in the south record are relentless about how they do not have enough staff. It reminded me of when I used to live in CA where you would see a cop a block in all of the suburban areas raising riches through tickets and yet you could get your car or home broken into that night and not a cop in sight…only after the 911 call with a knife in your back can you get them to come.

  122. 122
    Sarah says:

    Seattle’s real estate market keeps chugging along after the brakes got slammed on Vancouver – Chinese investors went south of the border, it seems!

  123. 123
    Jens says:

    RE: softwarengineer @ 60

    Thank you! And Jobs (Drop Out), And Michael Dell (Drop Out)…

  124. 124
    Weasel says:

    By formerSeattleite @ 120:

    “Monetary policy has entered a new regime. The only historical precedent for when interest rates were low for anything like this long was in the 1930s, the Great Depression, and how did that end? It ended with World War II…”

    Call me uneducated on the topic, I’m curious as to how the great depression contributed to WWII?

  125. 125
    redmondjp says:

    By Weasel @ 124:

    By formerSeattleite @ 120:

    “Monetary policy has entered a new regime. The only historical precedent for when interest rates were low for anything like this long was in the 1930s, the Great Depression, and how did that end? It ended with World War II…”

    Call me uneducated on the topic, I’m curious as to how the great depression contributed to WWII?

    It has been said that all wars are bankers’ wars. And did you know that American industrialists partly financed the rise of Hitler? Now why would they do that? ;)

    Also, by having the rest of the industrialized world’s economic engines bombed, it gave a tremendous advantage to domestic business interests for many years. Plenty of fascinating reading to be had on the topic. And if you really want your mind blown, read carefully about exactly what happened that supposedly set off WWI, and then try to figure out how that started a world war.

    The military-industrial complex is alive and well, and notice how Trump has promised to be very generous to them (a good life insurance policy, if you ask me). They love having a perpetual state of war somewhere on the planet (exhibit A: the Middle East).

  126. 126

    By Weasel @ 124:

    By formerSeattleite @ 120:

    “Monetary policy has entered a new regime. The only historical precedent for when interest rates were low for anything like this long was in the 1930s, the Great Depression, and how did that end? It ended with World War II…”

    Call me uneducated on the topic, I’m curious as to how the great depression contributed to WWII?

    The depression was not just in the United States. It was a contributing factor to Hitler’s rise to power. And Hitler pretty much started WWII on his own.

    https://www.britannica.com/biography/Adolf-Hitler/Rise-to-power (Search for 1929).

    Arguably though, WWI contributed the most to WWII. The terms Germany had to deal with were pretty overwhelming, caused resentment and made their economy even more difficult.

    Also, over here prior to our entry into the war the economy still was not doing that great. The selling of arms to England (and others) helped significantly in getting things going again. But that also lead to our being able to join in. And related to that . . .

    Not sure about Japan’s economy, but possibly their goals were a bit more limited and but for what was going on in Europe (and our building up) they might not have attacked the US (pure speculation).

  127. 127

    By redmondjp @ 125:

    The military-industrial complex is alive and well, and notice how Trump has promised to be very generous to them (a good life insurance policy, if you ask me). They love having a perpetual state of war somewhere on the planet (exhibit A: the Middle East).

    Prior to WWII things were significantly different. The military wasn’t set up with funding for a constant state of war readiness. Between WWI and WWII the armed forces was well under 500,000 troops. After Korea they were typically over 2,000,000, although they started dropping in the 1990s, probably because spending shifted more to technology. People became less important–sort of like our job market.

    http://www.alternatewars.com/BBOW/Stats/US_Mil_Manpower_1789-1997.htm

    BTW, there possibly is less war now than at any time in the past 200 years. It’s just that there’s more coverage of the wars we do have.

  128. 128
    formerSeattleite says:

    By Weasel @ 124:

    By formerSeattleite @ 120:

    “Monetary policy has entered a new regime. The only historical precedent for when interest rates were low for anything like this long was in the 1930s, the Great Depression, and how did that end? It ended with World War II…”

    Call me uneducated on the topic, I’m curious as to how the great depression contributed to WWII?

    German economy was not doing well. High unemployment. This put many people back to work and lifted their economy. It was one of Hitler’s excuse.

    WWII was just a continuation of WW1.

  129. 129
    Erik says:

    RE: N @ 118
    It’s harder when you have a family. I just support me and I’m pretty sure relatives would feed me and I’d survive any financial stress, so I take big risks.

    If I was in your situation, I’d buy a condo in Seattle and move my family into it. I’d sell in 2 years if there was substantial profit to be had. If not, I’d stay put and sell when I could make 100k. After you have some profits, it’s game on. You can buy at the auction for under fair market value.

  130. 130
    Doug says:

    By formerSeattleite @ 120:

    Monetary policy has entered a new regime. The only historical precedent for when interest rates were low for anything like this long was in the 1930s, the Great Depression, and how did that end? It ended with World War II.

    Actually the closest thing to our current liquidity trap is Japan’s ‘Lost Decade’ which will soon have to change its name to ‘3 Lost Decades’.

  131. 131
    Minnie says:

    RE: Erik @ 129

    Selling in 2 years….ouch. Buying something with a plan of selling in 2 years not only seems risky (to me)…its costly (as you know) to get in and out of something….excise tax, real estate fees, escrow, staging….capital gains. Unless you’re talking about a 1031 exchange which I didn’t see any reference to but OK. If you don’t account for all of those losses, 100K profit gets eaten up pretty quickly.

    Also wanted to ask about maintenance costs for a rental property…this is a serious question for all landlordss; how do you figure out your maintenance costs? Every furnace, roof, water heater, side sewer, etc will need replacement at some point. Do you calculate that in amortizing it on a monthly basis? Or do you just roll the dice and hope for the best case scenario that it won’t break/you won’t have to fix it on your dime? It seems that maintenance costs of a property are pretty astronomical if you ask me, and anyone buying a rental property in this market is considering these costs in their rent I’m sure but I’m just wondering how you do it.

    When I was thinking of renting out my house (decided to sell it), my calcs were indicating that it was really difficult to make my nut if I included inevitable maintenance costs. In order to convince myself I would be making any money at all I really had to take a “glass half full” optimistic approach to on-going maintenance.

  132. 132

    By Minnie @ 131:

    RE: Erik @ 129

    Selling in 2 years….ouch. Buying something with a plan of selling in 2 years not only seems risky (to me)…its costly (as you know) to get in and out of something….excise tax, real estate fees, escrow, staging….capital gains. Unless you’re talking about a 1031 exchange which I didn’t see any reference to but OK. If you don’t account for all of those losses, 100K profit gets eaten up pretty quickly.

    I agree, but the only one of those that goes away in a 1031 exchange would be the capital gains (and recapture). I think Erik’s point though was you could exclude the tax gain because you moved your family in and it was your residence.

    Erik didn’t give a price point, but to keep the math easy let’s say you buy at $400,000 and sell for $100,000 more. Your costs of sale except for the federal income tax would be about $45,000 (assuming the stereotypical 6% commission), so your gain would be $55,000, and your tax gain would the that plus whatever depreciation you took–the recapture amount taxed as ordinary income. If a qualified residence that gain would not be recognized, so you’d be left with $55,000.

    I think the bigger point though is your first one–that gain is not that certain to occur.

  133. 133
    Bubble Trouble says:

    By Minnie @ 131:

    RE: Erik @ 129

    Also wanted to ask about maintenance costs for a rental property…this is a serious question for all landlordss; how do you figure out your maintenance costs? Every furnace, roof, water heater, side sewer, etc will need replacement at some point. Do you calculate that in amortizing it on a monthly basis? Or do you just roll the dice and hope for the best case scenario that it won’t break/you won’t have to fix it on your dime? It seems that maintenance costs of a property are pretty astronomical if you ask me, and anyone buying a rental property in this market is considering these costs in their rent I’m sure but I’m just wondering how you do it.

    I assume 1% of the cost of the house in maintenance/repairs per year. $200K house = $2K for example. Over the long term my rental properties have been in the ballpark. Newer homes will cost less, but even for new homes, things can and will break.

    Also depends what you mean by maintenance? Is lawn care maintenance? I don’t pay for that, my tenants do. Same with snow removal. Maintenance to me is servicing the HVAC system, pest control, replacing water filters in the fridge, stuff like that.

    Also home warranties greatly minimize the risk. I have one for all my properties. Costs $300-400 depending on the size of the home.

  134. 134
    Bubble Trouble says:

    https://www.cnbc.com/2017/09/05/almost-half-of-top-us-housing-markets-are-overvalued.html

    “Prices just keep soaring while incomes fail to keep pace. Even historically low mortgage rates are not helping enough. At the end of July, of the top 50 markets, based on housing stock, 46 percent were overvalued, according to CoreLogic.

    Price appreciation is strongest in the Pacific Northwest and in Denver, where some of the tech industry has migrated, ironically because Northern California housing became so expensive. “The sharp increase in prices in Washington and Utah has been especially striking, with home price growth in both states accelerating by 3 percentage points since the beginning of this year,” said Frank Nothaft, chief economist at CoreLogic.”

    But don’t worry Seattle. It’s special here. Cuz….stuff!! In Seattle everyone is an Amazon billionaire so incomes don’t matter. Or something.

  135. 135
    Doug says:

    RE: Bubble Trouble @ 134 – If Diana Olick of CNBC says so then it must be.

  136. 136

    RE: Bubble Trouble @ 134 – What was interesting from that was this: ” In fact, Redfin, a real estate brokerage, reported 35 percent more requests for home tours in July, compared with July 2016. It also, however, reported that the number of offers dropped 11 percent.”

    I’m not sure what counts as a request for a tour–if they’re counting number of showings, number of active clients or something in-between. If it is number of showings, I wonder what’s driving that. Offer fatigue?

  137. 137
    Bubble Trouble says:

    By Doug @ 135:

    RE: Bubble Trouble @ 134 – If Diana Olick of CNBC says so then it must be.

    Seriously? Wow.
    Ok would it make you feel better reading the same data from oh, I dunno, the Mortgage Professionals of America? Or are they lying as well?

    http://www.mpamag.com/market-update/home-prices-up-6-7-says-corelogic-78068.aspx

    You do understand this concept of a news wire service, yes?

  138. 138

    RE: Bubble Trouble @ 137 – I think the problem is the data, and that the reporter doesn’t really understand or discuss the issues. At least CNBC, unlike your second link, defines what is meant by overvalued. But neither begins to mention the fact that it’s really comparing one inaccurate number (Corelogic’s house valuations) with an arbitrary number (10% over what Corelogic considers a sustainable price).

    Again I’ll quote On Being A Data Skeptic by Cathy O’Neil:

    Finally, sometimes businesses don’t actually want data people to do meaningful work–they just hired them as ornaments for their business, as marketing instruments to prove they’re on the cutting edge of “big data.”

    That’s all this is. Just throwing out meaningless statistics that will create some press buzz and get the name Corelogic in the news.

  139. 139

    RE: sfraz @ 117
    Another Rattle Snake Tossed in the Housing Value Chicken Coop for Seattle Mortgage Tax Deductions

    Hurricanes Harvey and Irma now too [to destroy Florida this weekend?] Right now when the debt ceiling is being negotiated and “Tax Loopholes” for the Elite are being butcher axed so our country can survive.

    Its all on the chopping block now…..not just working mans’ wages….DACA [amnesty] now too, as it appears TOTALLY unimportant compared to survival of American citizens now. The DACA amnesty efforts is now up to Dems to get a majority vote for “legal” legislation now. LOL….did anyone sat dead on arrival for home mortgage loopholes for the rich too????

    North Korea about to push the button???? Missile Defense Expenditures not so funny of an idea now? The NWO is a hurricane victim now….underwater from OVERPOPULATION.

  140. 140
    Bubble Trouble says:

    By Kary L. Krismer @ 138:

    RE: Bubble Trouble @ 137 – I think the problem is the data, and that the reporter doesn’t really understand or discuss the issues. At least CNBC, unlike your second link, defines what is meant by overvalued. But neither begins to mention the fact that it’s really comparing one inaccurate number (Corelogic’s house valuations) with an arbitrary number (10% over what Corelogic considers a sustainable price).

    Again I’ll quote On Being A Data Skeptic by Cathy O’Neil:

    Finally, sometimes businesses don’t actually want data people to do meaningful work–they just hired them as ornaments for their business, as marketing instruments to prove they’re on the cutting edge of “big data.”

    That’s all this is. Just throwing out meaningless statistics that will create some press buzz and get the name Corelogic in the news.

    Come on man, you’re killing the messenger.

    CoreLogic has been around for 25 years. It’s not like they’re some no name company that just popped up and is looking for some publicity. And R/E istheir core business focus. If CoreLogic’s data is fake, then I don’t know what will ever be real for you. I also suspect if they said now is a great time to buy you’d be all over it as evidence that we’re not in a bubble

  141. 141

    RE: Bubble Trouble @ 140 – Not trying to kill the messenger unless you mean CNBC and that MPA entity–certainly not you. I’m well aware of who Corelogic is, and they were the main target of my criticism. That they have been around awhile does not make their automated valuation system any more accurate than Zillow’s. And then there’s their assessment of what a sustainable price is multiplied by 1.1. That’s the made up number. Comparing one inaccurate number to a made up number doesn’t really mean much.

  142. 142
    Bubble Trouble says:

    By softwarengineer @ 139:

    RE: sfraz @ 117
    Another Rattle Snake Tossed in the Housing Value Chicken Coop for Seattle Mortgage Tax Deductions

    Hurricanes Harvey and Irma now too [to destroy Florida this weekend?] Right now when the debt ceiling is being negotiated and “Tax Loopholes” for the Elite are being butcher axed so our country can survive.

    Hurricanes happen. Every time one shows up, it’s the end of the world. And then a week later everyone forgot it happened. It’s amazing how the MSM builds these events up and treats them as if they have never happened before. And even more amazing how the general public acts as if Irma is the first hurricane to ever exist in the Caribbean. Hint: it’s not.

    I lived in FL for 3 years and in that time went through a couple of hurricanes. Despite what CNN tells you, for most people who live there, it’s a big meh. Go to Publix, buy a lot of beer, and make sure your generator is full, because you will lose power most likely. Unless you live right on the beach (which 99% of Florida does NOT), it’s much to do about nothing.

    And if you haven’t seen the latest news, Miami isn’t getting evacuated after al.. The latest model has it going further east and potentially just grazing S. Florida. Everyone at CNN is bummed of course. Now what will they yap about for the next 72 hours? Maybe they’ll find evidence Trump once ate Russian salad dressing or something.

    A

  143. 143

    By Bubble Trouble @ 140:

    I also suspect if they said now is a great time to buy you’d be all over it as evidence that we’re not in a bubble

    I’m not sure what I’ve ever said that would make you think that. Fake data is fake data. Bad news coverage is bad news.

    But beyond that, the idea of overvalued and undervalued is not something I deal in. I deal in the real world where you determine the value of property based on what similar properties are selling for in the same area. Now one individual property may sell above or below someone’s opinion of FMV, but the idea that an entire market can be overvalued or undervalued is just nuts.

  144. 144
    Bubble Trouble says:

    By Kary L. Krismer @ 141:

    RE: Bubble Trouble @ 140 – Not trying to kill the messenger unless you mean CNBC and that MPA entity–certainly not you. I’m well aware of who Corelogic is, and they were the main target of my criticism. That they have been around awhile does not make their automated valuation system any more accurate than Zillow’s. And then there’s their assessment of what a sustainable price is multiplied by 1.1. That’s the made up number. Comparing one inaccurate number to a made up number doesn’t really mean much.

    I meant Corelogic not me, sorry if I didn’t get that across.

    All CL does is aggregate data. You may disagree with what the data means, but you can’t argue with the data itself. If you look at the long term trend, 1/2 the cities are overvalued compared to the long term. This is a very standard metric for asset valuations. Every hear of the 50 or 200 day moving average for stocks? Same idea. You look at a period of time and determine whether the current value is above or below the average of that period of time.

  145. 145
    Bubble Trouble says:

    By Kary L. Krismer @ 143:

    By Bubble Trouble @ 140:

    But beyond that, the idea of overvalued and undervalued is not something I deal in. I deal in the real world where you determine the value of property based on what similar properties are selling for in the same area. Now one individual property may sell above or below someone’s opinion of FMV, but the idea that an entire market can be overvalued or undervalued is just nuts.

    It’s not nuts it’s very rational. The entire market of Seattle is overvalued. Some of it is more overvalued than others. But it’s all overvalued. And it will all come crashing down. The only question is when, not if. But I’m never going to convince you. Just like no house sales people could be convinced in 2006.

  146. 146
    GoHawks says:

    RE: Bubble Trouble @ 145 – You will be right at some point. The question is, are you so wrong on your timing first that it makes being right on the overvalued thesis less beneficial. If someone shouts overvalued and prices rise 40%, then they drop 15% and crow, see I was right!

  147. 147

    By Bubble Trouble @ 144:

    I meant Corelogic not me, sorry if I didn’t get that across.

    Great.

    All CL does is aggregate data. You may disagree with what the data means, but you can’t argue with the data itself. If you look at the long term trend, 1/2 the cities are overvalued compared to the long term. This is a very standard metric for asset valuations. Every hear of the 50 or 200 day moving average for stocks? Same idea. You look at a period of time and determine whether the current value is above or below the average of that period of time.

    Actually, I can argue with the data itself. It is inaccurate, and like Zillow they probably publish stats on how inaccurate it is. And even at 5% plus or minus, that would throw their percentages of over/under valued way out of wack.

    As to your second part, if they said something like the median prices are X% above the six month moving average, I wouldn’t have a problem with that. But for individual properties you can’t calculate their moving average any better than their value. Moving averages can be calculated on past sales. But that moving average doesn’t necessarily mean the property is over or under valued. If you include distressed properties then Seattle was probably below the moving average from sometime in 2009 to maybe sometime 2012. and above the moving average from 2013 on. That only tells you that the market is rising or falling, not whether it’s over or under valued.

  148. 148
    Doug says:

    RE: Bubble Trouble @ 145 – If the median home price is $650,000ish, or whatever it is, what do you think fair market value is? $500,000? What level of correction do you think we need to get back to fairly valued?

  149. 149
    justme says:

    RE: S-Crow @ 315

    S-crow, That was useful information you posted about Everett recently . I’m going to try a cross-reference your post from the previous thread. Maybe it works.

    I looked up Erik’s former home turf of 22nd St and Oakes St (apparently called the Bayside area) on the map, and it seems to be right north of downtown. I also looked the area up on
    https://communitycrimemap.com/, and I did not see a very intense amount of crime compared with downtown.

    At the same time, I wonder about south instead of north: How about Tacoma versus Everett? They are both about 37miles from Seattle downtown. Any opinions on Tacoma, from you (or Erik)?

  150. 150
    N says:

    https://wolfstreet.com/2017/08/29/the-us-cities-with-the-biggest-housing-bubbles/

    Some interesting charts – I know most of you here will discredit the story and perhaps for good reason but at the very least the charts are interesting. You say this is only happening in Seattle, yet Denver prices have grown at a rate double the pre recession level compared to Seattle (43% to 20%).

  151. 151
    Erik says:

    RE: justme @ 149
    I lived in Tacoma and it was a lot of poor military people. A lot of people begged me for money when I lived in Tacoma and got mad at me when I wouldn’t hand over my money. When someone goes to the military from another state and later gets dishonorably discharged, they join a gang and live in Tacoma. Tacoma is tough, but there are better areas. You can try to avoid the bad areas, but they over rule the good areas, so it’s a small consolation in Tacoma.

    If you can afford it I would highly recommend getting a smaller house or condo in Seattle or the east side. S-crow lives in Snohomish, that area is nice too. It’s probably worth the commute if your other choices are everett or Tacoma. The area you live in matters and you should sacrifice something other than location. Take less space. Live in a condo. Sell a kidney. Nobody should have to suffer in Everett. Tacoma is also a bad option in my opinion.

    S-crow tried to sell Everett as equivalent to Snohomish. I’m not sure how he sleeps at night with that on his conscience. I think he’s trying to be nice cause Tim lives there. I won’t lie friends, Everett and snohomish are polar opposites. Snohomish is a cute little town with lots of friendly people. Everett is dirty and full of child predators and and prostitutes.

  152. 152
    greg says:

    RE: Kary L. Krismer @ 143

    Kary overvaluation is real and applies to more things than stocks. RE can indeed be overvalued, sure it might be harder to see for some than others, but valuations speak to expectations of future gains or loses.

    i am little surprised you don’t grasp this, but then you seem to like absolutes . i am sure you could go google valuation and figure it out . It is not too complex but if i explain it you will try to shift ground and pretend you meant something else like you always do. so perhaps it is better you just go figure out how and why real estate can be over or undervalued. it is not that hard .

  153. 153
    whatsmyname says:

    RE: N @ 150 – Great charts, but are we seeing bubble 1 followed by bubble 2, or are we just seeing secular trends with sometimes a panic in the middle?

  154. 154
    OA says:

    RE: Erik @ 151

    “I lived in Tacoma and it was a lot of poor military people. A lot of people begged me for money when I lived in Tacoma and got mad at me when I wouldn’t hand over my money. When someone goes to the military from another state and later gets dishonorably discharged, they join a gang and live in Tacoma. Tacoma is tough, but there are better areas. You can try to avoid the bad areas, but they over rule the good areas, so it’s a small consolation in Tacoma. ”

    One can say the same exact thing about Seattle. I’ve worked in Seattle from 2006 to 2014 (by seattle center, south lake union area, and pioneer square). I work in Bellevue now (and love it), I avoid Seattle as much as I can. I had some friends come from out of town and I took them to Seattle few weeks ago and was shocked by the amount of homeless people there. We were there for about 20 mins and decided to go to Bellevue instead as we wanted to walk throughout the city. They didn’t mind leaving.

    I’m aware of the homeless issues there, but was surprised to see that number exponentially increase the past few years.

    Yes, the price appreciation in Seattle is crazy right now , but one can live in Tacoma for a portion of the cost and experience the same big-city lifestyle.

  155. 155
    Doug says:

    RE: N @ 150 – I’ll admit, the charts look a little parabolic. But if real estate is a good hedge against inflation, that may be exactly what we’re witnessing here.

    While the Fed would have us believe there is no inflation, everyone who actually has to work and pay for things knows there is massive inflation all around us.

    I don’t know.

  156. 156
    ess says:

    Erik

    I enjoy reading about your property exploits and I wish you nothing but success. I certainly hope you become the real estate magnate of King County. Interesting to hear from an investor who is taking (hopefully prudent) risks ( as almost all investments are). There will always be the gloomy Guses out there about virtually every type of investment. if I had listen to them, I would not have bought an interest in a U District duplex many years ago, my first foray into the real estate investments. While we no longer own that investment – it enable me to buy a full interest in another house with the proceeds of that sale.

    My question to you. Assume real estate prices in the Seattle area don’t increase over the next few years, but in fact decreases anywhere from 10 -30% with a corresponding downturn in the economy and subsequent increased rental vacancy. That scenario is entirely possible because virtually every real estate market takes pauses before continuing on its upward path. Do you have any plans for reducing your rents in order to rent out the premises that you own, and how much can you lower the rents before it becomes a hardship? Have you given that scenario any consideration?

    Our rents have always been competitive, but in the great housing crash of 2007 etc, we dropped the rents by about 15% on both houses and were able to rent them. Happily these were long term investments – so the rents still supported all the ongoing expenses, mortgages and taxes, with a bit left over for some fun activities.

    Or to put the question in another manner – what is plan B if plan A goes awry?

  157. 157
    sfraz says:

    RE: Erik @ 151 – I have had several lifers swear that you should go east/west. NOT north/south in your daily travels. North Bend is the new Bellevue.

  158. 158

    By greg @ 152:

    RE: Kary L. Krismer @ 143

    Kary overvaluation is real and applies to more things than stocks. RE can indeed be overvalued, sure it might be harder to see for some than others, but valuations speak to expectations of future gains or loses.

    i am little surprised you don’t grasp this, but then you seem to like absolutes . i am sure you could go google valuation and figure it out . It is not too complex but if i explain it you will try to shift ground and pretend you meant something else like you always do. .

    Rather than say over/under valuation isn’t something “I deal in,” I should have just said I consider it all BS. I’m familiar with the concept. A stockbroker will say a stock of over/under valued depending on whether they want you to sell or buy. It makes about as much sense as “profit taking.”

    I believe in the concepts of economics and the market. Something might be higher or lower price than you think it should be–that’s a matter of opinion. There’s no way to quantify that as over or under valued by a certain amount unless you want to aim for some arbitrary number, like a PE of a certain level, etc. And you can claim something is over or under valued all you want, but that doesn’t mean the market will head that way no matter what multiple or fraction of a stat you use as a guide–the buyers and sellers will determine that.

    Returning to the topic of houses, when someone wants to buy or sell a house I don’t try to determine whether the market is too high or too low. I try to determine what the market is. That is real, the other is just fantasy.

  159. 159
    Erik says:

    RE: ess @ 156
    Good question ess. My plan is to sell 1 condo next year which will net me more than enough to sustain years of a down market. The proceeds will be more than enough to weather the negative cash flow that would happen if/when things go sideways. If I really get caught with my pants down and the market tumbles before I sell, I’ll have to pull from my traditional ira and take the 35% tax hit, which is a very unattractive option for me. Yeah, if the market dumps within the next year, I will be pretty unhappy with myself. If it dumps after that, I’ll be fine.

    I like reading your comments too, so keep up the good work.

  160. 160
    Erik says:

    RE: sfraz @ 157
    East is just so expensive because the code monkeys drive the prices up. Very nice areas east and west though. North is probably the best bang for your buck. Snohomish, lake Stevens, Monroe, all lovely areas at a good price. If you commute to Seattle, it will be difficult.

  161. 161
    Erik says:

    RE: OA @ 154
    Seattle encourages homeless people to live here. I’m not sure why, but I think they migrate here from other cities. Bellevue is very clean and it’s a nice safe place to be. I use to hangout in Ballard and Fremont. Now I just hangout around the junction in west Seattle. Those places seem pretty safe to me.

    I think it depends on where you go in Seattle. Try out the junction in west Seattle. Go to talaricos pizzaria and get the bloody hog. After 3 of those, I have a pretty good night.

  162. 162

    By Erik @ 160:

    RE: OA @ 154
    Seattle encourages homeless people to live here. I’m not sure why, but I think they migrate here from other cities.

    First, I’m not certain your last claim is correct, but I do think homeless people tend to migrate to bigger cities. What Seattle offers the homeless is probably largely offset by our weather.

    But second, I don’t know why you expect anything Seattle does to have a reason or be well thought out. Note I am not generally an anti-government person. Over the years here I’ve said very little bad about King County or any other local city. I have been critical of the legislature for writing poorly drafted legislation. But overall I understand the shortcomings of government (e.g. it tends to be inefficient). But Seattle is just nuts. Moving outside the city limits of Seattle was the best thing I ever did, and it wasn’t because of the crime (Skyway was actually low crime at the time) or any of the people. It was about the completely ineffective if not counter-productive government.

    The only exception I can think of is I was critical of Renton wanting to fine grocery stores when customers stole their shopping carts. The stores are victims of a crime and the city wanted to fine them. Not sure how that ever turned out, but it seems more like something Seattle would do.

  163. 163
    sfraz says:

    RE: softwarengineer @ 139 – Let’s not forget the solar flares! This puppy’s goin’ down!

  164. 164
    S-Crow says:

    RE: justme @ 149 – The point I was trying to convey to Erik about homelessness, mentally ill or drug related people was that they are not concentrated solely in Everett, specifically on Broadway Ave. The homelessness problem is all over the place including the regulars that pan handle at specific spots in Snohomish almost everyday. I understand he was unhappy about his housing situation as he expressed and wanted to purchase in Seattle.

    Snohomish (unincorporated) is a huge area and offers a lot. If someone is going to spend substantial sums on housing in closer in communities near Seattle then the greater Snohomish area should be on the radar due to the space/land and lots of recreation and access. Commuting into Seattle or Bellevue for work is a hassle; commuting to Everett Boeing plant is doable as thousands do every day. However, some are willing to deal with employment in Seattle/Bellevue for the benefit of being in a less densely populated area as in unicorporated Snohomish. My kids growing up here had substantial benefits vs living in closer in communities: a large horse/western gaming community is here and so it was good for my daughter who is heavily involved in equestrian circles for training, lessons, breeding, and care. Good sports scene for my boys in baseball and basketball. Lots of summer water sports and winter sports activities within and hour drive. I grew up on Capitol Hill ( I know the scene very well), moved to Queen Anne during college then onward to Ballard, Edmonds and finally settled here in the Snohomish area.

  165. 165

    Check out Amazon’s plans for a second HQ in a second city!

    https://www.geekwire.com/2017/amazon-build-second-hq-outside-seattle-seeks-proposals-cities-5b-campus-50k-jobs/

    It will be interesting to see the reactions of cities. Do they want the jobs even seeing the problems other cities have faced as tech jobs move in? I suspect they will.

    Once they announce the winner though, Erik should start buying condos there! ;-)

  166. 166
    justme says:

    RE: Kary L. Krismer @ 164

    Damn, Kary, I was about to post that. Don’t you ever sleep? Anyway, the 40k number of people that work at Amazon HQ (per Dow Jones Newswire) will stagnate or drop. Yay, Seattle. I think Everett should put in a bid for HQ2, as they call it.

  167. 167
    justme says:

    RE: S-Crow @ 163

    What about the Tacoma versus Everett angle, got any opinions on that? I’m starting to think Federal Way myself, might be a good pad to land on for a while waiting out the inevitable decline?

  168. 168
    Erik says:

    RE: S-Crow @ 163
    It’s news to me that snohomish has a homeless population. Hopefully your city can keep them from multiplying.

    While your daughter is riding a decorated horse across an arena while people applaud her and your son goes to sports camp Everett kids are huffing toxic chemicals from a bag and fighting for turf. I don’t kinda know Everett from driving through and googling stats on it. I lived there for 6 hard years. I know a lot of kids in the neighborhood. They all are from bad homes and have problems.

  169. 169
    ess says:

    RE: Kary L. Krismer @ 164

    Clearly Amazon is growing so fast there is no way the Seattle headquarters can absorb the numbers that are needed to operate the Amazon operation, especially with its recent and future acquisitions. And Amazon’s Seattle office space is slated to grow some 50% in the next few years, so it isn’t as if Seattle is suddenly being abandoned. That is still a great deal more well paid employees for the Seattle operation in the immediate future.

    Not only does Amazon obtain physical diversification which protects itself from natural disasters (ex – hurricanes, earthquakes etc) but it can obtain a variety of economic concessions from both its new home, as well as its old one. Boeing played that game very successfully when it opened a second commercial airline operation back east. Bezos built an amazing empire in a short time by being really sharp, and this move confirms it.

    Kary, I think there is no way a metropolitan area will reject a major employer locating in their location even with all the associated problems. The source of income is just too tempting for most politicians, whose addiction to spending tax revenue is probably stronger than drugs are to an addict.

    On a happier or sadder note (depending on which side of the real estate divide one finds oneself), the latest increases in property values. Note Shoreline had some amazing increases in real estate prices. The Seattle tidal wave has traveled north and has hit Shoreline prices with a vengeance. Or perhaps those who are being priced out of the Seattle market are migrating north. Add light rail coming to Shoreline, and that area is looking pretty good for buyers priced out of the Seattle/Bellevue area. Complicating matters is the level of available housing for sale, which continues to drop.

    http://www.seattletimes.com/business/real-estate/king-county-home-prices-surge-18-percent-most-on-record-for-this-time-of-year/

  170. 170

    RE: justme @ 165 – Insomnia. I’ve taken to getting up if I wake up, rather than just trying to go back to sleep. Doing that rather than just riding it out is somewhat natural–Google “second sleep.”

    RE: ess @ 168 – Yes, I wasn’t suggesting they were abandoning Seattle, but the rate of growth is somewhat amazing. Quite frankly, I don’t know how they manage that or even plan for it.

    As to your other comment, I almost joked that they put the data center people in charge of HQ planning–wanting redundancy in case of natural disaster.

  171. 171
    Doug says:

    RE: justme @ 166 – if you’re thinking about FW, you might as well just go to Auburn. Basically the same location, but cheaper.

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