NWMLS: Seattle housing market still giving the finger to buyers

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

MLS Brokers Detecting Seasonal Slowdown in Some Areas But Expect Price Hikes to Continue in Much of Washington

“October will be the best month for selection and availability until late February,” proclaimed J. Lennox Scott when commenting on the latest statistics from Northwest Multiple Listing Service.

“The pressure cooker for the housing market continues as the typical seasonal market comes into play for new listings coming on the market,” stated Scott, the chairman and CEO of John L. Scott. He noted new listings during September and October typically shrink 30 percent – and even more during the winter months – when compared to spring and summer months.

Buyers may be emerging on news of slightly improving supply. “For only the second time this year the available inventory was over the one-month mark in King County,” said John Deely. “A notable number of new listings went past their offer review date, and more listings had price reductions.”

The only way that buyers may be “emerging on news of slightly improving supply” is if said buyers are delusional. Supply is not improving. It is still at the lowest level it has ever been for this time of year.

Now let’s dive into the numbers for September.

CAUTION

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

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

September 2017 Number MOM YOY Buyers Sellers
Active Listings 3,104 +10.1% -16.1%
Closed Sales 2,512 -10.2% -0.2%
SAAS (?) 1.17 -2.7% -3.9%
Pending Sales 2,736 -11.0% -6.3%
Months of Supply 1.24 +22.6% -15.9%
Median Price* $625,000 -3.8% +16.2%

Still no good news for buyers. Listings are scarce, sales are strong, and prices dipped, but no more than they do every year in the second half of the year.

Here’s your closed sales yearly comparison chart:

King County SFH Closed Sales

Closed sales fell ten percent between August and September. Last year over the same period closed sales also decreased ten percent. Year-over-year closed sales were down less than a percent.

King County SFH Pending Sales

Pending sales fell eleven percent from August to September, and were down six percent year-over-year. It’s rather odd that for 2017 year-to-date, pending sales have been down an average of 3.8 percent from a year earlier, but closed sales have been up an average of 2.8 percent. There’s something strange about that.

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

King County SFH Inventory

Inventory rose ten percent from August to September, but was still down sixteen percent from a year earlier.

Here’s the chart of new listings:

King County SFH New Listings

New listings were down two percent month-over-month, and down four percent from last year.

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

King County Supply vs Demand % Change YOY

Nothing new here unfortunately. As it has been for a few years now, it’s a great time to be a seller and a terrible time to be a buyer.

Here’s the median home price YOY change graph:

King County SFH YOY Price Change

Year-over-year price changes fell a couple points between August and September but still sit at a very high level.

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

King County SFH Prices

Down slightly from August, but still quite close to the all-time high.

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

Here are a few articles about this month’s numbers from local news outlets:


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.

145 comments:

  1. 1
    Go Hawks! says:

    It’s rather odd that for 2017 year-to-date, pending sales have been down an average of 3.8 percent from a year earlier, but closed sales have been up an average of 2.8 percent. There’s something strange about that.

    Could that mean that fewer transactions are flipping? Once a buyer is finally under contract……they want to see it all the way through and not have to re-enter the buyer pool.

  2. 2

    RE: Go Hawks! @ 1 – Or fewer going with an inspection contingency.

  3. 3

    RE: Kary L. Krismer @ 2

    Fewer going with any contingencies of any kind.

  4. 4

    RE: Ardell DellaLoggia @ 3 – Possibly, but not that many fail on finance or title. But the “contingent sale” is probably much more rare in this market. I see them pop up occasionally.

    But I bet it’s mainly due to crossing off paragraph W. ;-) :-D

    (To explain that joke, paragraph W is the information verification period. Some agents incorrectly believe that crossing that off benefits the seller, when actually it’s there to benefit the seller. But the joke is there probably are not even 10 transactions a year in all of Washington state that get flipped based on paragraph W.)

  5. 5
    Erik says:

    Tim said “Nothing new here unfortunately. As it has been for a few years now, it’s a great time to be a seller and a terrible time to be a buyer.”

    I told buyers a few years ago to settle on something and sell it in a few years. If they listened to me, they would have over $100k in their pockets and be able to afford the home they always wanted. It’s not so obvious to buy as it was a few years ago, but it would probably be in buyer’s interests to buy something, and sell in 2 years for a good size profit. We are due up for a recession, which could stall prices, but if that happens, the buyer will need to hold onto it a little longer. Keep buying until 2022, and then let’s reassess.

  6. 6
    Eastsider says:

    Amazon’s Search for a Second Headquarters Could Weigh on Seattle
    https://www.wsj.com/articles/amazons-search-for-a-second-headquarters-could-weigh-on-seattles-growth-1507384800

    Excerpts –

    Amazon is responsible for as many as one third of the jobs created there since 2010, according to Green Street. About 40,000 people worked for Amazon in the Seattle area at the end of 2016, Mr. Bragg said, up from 4,000 in 2010. Another 53,000 jobs can be indirectly tied to the company, he added.

    Amazon hasn’t said why it is expanding its growth beyond Seattle. But the Green Street report speculates that a shift in the city’s regulatory climate might have played a role in the company’s decision to expand elsewhere. For example, Seattle recently approved an income tax on wealthy households, a move that’s being challenged in court.
    “It’s not too hard to connect the dots,” Mr. Bragg said.

  7. 7

    RE: Eastsider @ 6 – On the topic of Seattle policies affecting jobs, I wonder what the Smith Tower elevator operators made before the minimum wage went up? It’s possible they killed off a 100+ year tradition.

    http://www.kiro7.com/news/local/smith-tower-to-start-automating-elevators-after-103-years/620779571

  8. 8
    Eastsider says:

    RE: Kary L. Krismer @ 7 – UW researchers agree with you!

  9. 9
    ESS says:

    By Eastsider @ 6:

    Amazon’s Search for a Second Headquarters Could Weigh on Seattle
    https://www.wsj.com/articles/amazons-search-for-a-second-headquarters-could-weigh-on-seattles-growth-1507384800

    Excerpts –

    Amazon is responsible for as many as one third of the jobs created there since 2010, according to Green Street. About 40,000 people worked for Amazon in the Seattle area at the end of 2016, Mr. Bragg said, up from 4,000 in 2010. Another 53,000 jobs can be indirectly tied to the company, he added.

    Amazon hasn’t said why it is expanding its growth beyond Seattle. But the Green Street report speculates that a shift in the city’s regulatory climate might have played a role in the company’s decision to expand elsewhere. For example, Seattle recently approved an income tax on wealthy households, a move that’s being challenged in court.
    “It’s not too hard to connect the dots,” Mr. Bragg said.

    While I agree with the expressed sentiments of the article, I would also point out the following

    -Only seven state don’t have a state income tax

    -California, the major center of tech in the US has a state income tax rate that members of the Seattle Council can only dream about implementing. No one is taking a hike out of Silicon Valley

    -Amazon just leased the entire office building of one the largest projects just beginning construction. That is not indicative of a company that is about to abandon Seattle just yet. And one can assume that the decision to locate a second headquarters predated the plans to lease the office space.

    I still believe that Seattle can’t accommodate all of Amazon’s growth, and they are parlaying the need for another center into a process that will produce favorable tax and other benefits, both in the new location as well as a panicked Washington State. Savvy business move.

    But if Amazon is truly seeking a second headquarters, and will favor that one over Seattle in due time because of the regulatory climate in Seattle, then it is the fault of the Seattle council, and the voters that voted for those individuals. While it may be bad for a small segment of society to be extraordinarily wealthy, it is even worse when everyone is poor. And the loss of thousands of good paying jobs due to bad policy will only hurt in the short and long run.

  10. 10

    RE: ESS @ 9 – If it were just Seattle’s policies they would merely start expanding to Bellevue, Redmond, Auburn (Weyerhaeuser’s campus), Tacoma and even Everett. I still think they want geographic separation for backup purposes.

    Imagine an earthquake that would leave our area looking like Puerto Rico, and a Seattle city government that complained that FEMA help required too much paperwork. That would be very bad for Amazon services.

  11. 11
    toad37 says:

    RE: Kary L. Krismer @ 10 – Very good point and spot on

  12. 12
    Eastsider says:

    By ESS @ 9:

    -California, the major center of tech in the US has a state income tax rate that members of the Seattle Council can only dream about implementing. No one is taking a hike out of Silicon Valley

    No one is taking a hike out of Silicon Valley?

    Is Silicon Valley At Risk of a Brain Drain?
    http://blog.indeed.com/2017/04/03/silicon-valley-tech-job-migration/

    San Francisco and San Jose had the largest increase in outbound search over the last five years.
    44% of all job seekers located in San Francisco or San Jose are looking outside those metro areas for jobs. This has grown 67% since 2012.
    38% of tech job seekers located in San Francisco or San Jose are looking for tech jobs outside of those metros. This has grown 41%
    San Francisco and San Jose have the the third lowest growth of inbound tech job search at just 2%.

    Movement Out of California Was the Most Influential Driver of U.S. Migration Patterns in Early 2017
    https://www.redfin.com/blog/2017/04/movement-out-of-california-driver-of-u-s-migration.html

    Trend #1: California Leavin’
    We found that some of the most expensive metros had the largest net outflow—the number of local users searching for a home in a different metro minus the number of users from another metro searching for a home in the subject metro. The San Francisco Bay Area topped the list of places with the largest net outflow, followed by New York and Los Angeles.

  13. 13
    ess says:

    RE: Eastsider @ 12

    The point was in reference to whether Amazon as a company would completely abandon an area because of an imposition of a state or city income tax. There is no such indication that major tech companies are doing so in California. For example, Apple just opened up a new headquarters in a state that has an income tax rate that is much higher than anything Seattle is attempting to implement. And in California, state income taxes are legal, while they are not in Washington state (at least not yet).

    Employees come and go from many parts of the US for all sorts of reasons. As a matter of fact – various Californians, not just tech workers, are trying to relocate outside of California. California apparently has so many problems that the net migration out of California is a bigger issue than just for tech employees.

    An interesting survey indicated that Seattle was one of the best markets for those tech workers who needed to rent when income and expenses are considered together. Thus, there is something else going on with Amazon other than a slight increase of taxes that the higher echelon Amazon employees would have to pay. And in my opinion, that something else is the desire of a company that has outgrown its headquarters to locate another center of operations to provide increased location diversity and the physical and business benefits that provides.

    http://www.techrepublic.com/article/here-are-the-15-us-cities-where-tech-workers-make-and-save-the-most-money/

  14. 14
    jon says:

    Amazon won’t be ready to start shifting large numbers of jobs to HQ2 for a few years probably, so they will need some space to grow in the meantime. Once they have space in HQ2, then can simply let the old leases expire.

    I take Amazon at their word that the reason is to help recruit people who do not want to move to Seattle for whatever reason. Some of that is probably the cost of housing. Aside from their rising stock price, their compensation is just not that great. It’s all just speculation what will happen until they announce where HQ2 will be, and that will be based on them looking at a mountain of data from all angles, most of which we don’t have access to.

    As for California out migration, I think a lot of that is retirees fleeing the taxes. The low levels of retirement benefits being paid to residents still residing in high tax states is what makes it look like the blue states pay more to the government than they get and the reverse for red states.

  15. 15
    boater says:

    If Trump’s plan to remove the state income tax deduction from Federal taxes goes through look for more to come to Seattle.

  16. 16

    RE: boater @ 15 – I haven’t itemized personal for years, but what’s the status of deducting sales taxes? That would be going away too (as would probably real estate taxes). So it all might be largely a wash as between states.

    I wonder if they’ll start taxing interest from state and local governments. That would really mess some things up.

  17. 17
    boater says:

    By Kary L. Krismer @ 16:

    RE: boater @ 15 – I haven’t itemized personal for years, but what’s the status of deducting sales taxes? That would be going away too (as would probably real estate taxes). So it all might be largely a wash as between states.

    I wonder if they’ll start taxing interest from state and local governments. That would really mess some things up.

    Not sure on any of the others. I know people moving from California already look at moving to Washington as a 10% raise even if income is the same on income tax alone. Add lower housing costs and Seattle looks good to a New Yorker or SF Bay area tech worker.

    What’s surprising to me is how many international workers I’ve encountered who see Seattle as reasonably priced and more desirable than their home countries. I’d have expected more complaints about the American lifestyle. Mostly I hear we have too much sugar, healthcare is confusing and how much more accepted they are for family decisions. I was not expecting to hear that staying home to raise kids was considered bad and having three kids is crazy.

  18. 18
    ess says:

    http://www.seattlepi.com/local/article/Tech-workers-in-Seattle-have-plenty-of-extra-cash-12264362.php#photo-12530623

    Article in PI. If they have plenty of “extra cash”, then there is room for rent and housing price increases. How about that – Seattle is a pretty good place for tech worker who want to keep their income. I guess they won’t be streaming out of the area to head to greener pastures – apparently, Seattle and area is the greener pasture.

  19. 19

    Is anyone here familiar with the works of Nobel Econ Prize winner Richard Thaler? I’m finding the reporting of his work leaves a lot to be desired. There are at least two books he’s authored: Misbehaving and Nudge, and the former is free on Kindle Unlimited.

    As to the reporting, I think the reporters misunderstand economic teaching. For example, they use Thaler’s examples of free and paid for tickets to a concert as an example of sunk costs. People who pay for the tickets are more likely to stay in adverse conditions (or drive to the concert in adverse conditions) than people who got the tickets for free. I don’t think standard economics ever denied that–it just said that you shouldn’t act that way because the cost of the tickets is a sunk cost–you’re not getting it back either way. And economics has always indicated that many of its various scenarios are based on perfect information and that the world works different than that (e.g. the travel time across two bridges during rush hour won’t be the same in the real world due to the lack of perfect information).

    Anyway, has anyone read either of the two books or have anything to add?

  20. 20
    Rupert D says:

    RE: Kary L. Krismer @ 19
    Having taken Thalers Behavioral Decision Theory course in business school and after interacting with reporters on occasion I doubt the reporter took the time to fully understand the concepts and most reporters are journalism majors and not business/economics majors and have limited time to publish probably missing some of the salient concepts.

  21. 21
    Justme says:

    New Foreclosures in NYC Up a Striking 79% in Q3 2017

    https://www.propertyshark.com/Real-Estate-Reports/NYC-Foreclosure-Report

    Seattle: It is different here! (or is it?)

  22. 22
    Nicole says:

    RE: Kary L. Krismer @ 19
    Thaler’s Nudge concept is about rationality in decision making. It’s not economically rational to ignore sunk costs, but probably most people do, even as they know they are doing it.
    Thaler’s work also relates to people’s concept of the time value of money- people naturally discount the future, so are often unwilling/unable to plan adequately for the future. His work led to a revolution is thinking about and promoting savings: http://www.marketwatch.com/story/nobel-prize-winner-richard-thaler-may-have-added-296-billion-to-retirement-accounts-2017-10-09

  23. 23
    uwp says:

    RE: Justme @ 20 – Charts that went back further than 3 years might be helpful.

  24. 24
    Minnie says:

    RE: Erik @ 5

    “I told buyers a few years ago to settle on something and sell it in a few years. If they listened to me, they would have over $100k in their pockets and be able to afford the home they always wanted.”

    Help me understand your statement, Eric. The way I’m reading is that if someone bought a home in the ‘Seattle Area’ a few years ago they can now sell and buy something not only much better but also have cash to spare? Do you mean buy somewhere else, such as Phoenix? Hmmm. Please explain this to me, it sounds too good to be true ;-)

    My thinking: someone who bought let’s say…..in Everett….. in 2012 couldn’t turn around and buy the “home they always wanted” in Queen Anne, and probably not in Everett either. Because….same market. They’ll do great as a seller but the “profits” will largely get eaten up when they go to buy “the home they always wanted” :-) They’ll likely be competing with a bunch of other offers too. Inventory in 2012 (or even 2014) was much better than today, with a lot more selection. Believe me, I just sold/bought a home (same area/same market) and for now all my co-workers/friends think I’m wealthy. Happy hour on me. HA.

    This market does not encourage home owners to sell and instead makes them want to stay put and watch their home values rise.

  25. 25
    Brian says:

    By uwp @ 23:

    RE: Justme @ 20 – Charts that went back further than 3 years might be helpful.

    Looking at the Q2 2017 report from the same site, they show the chart going back to 2009: https://www.propertyshark.com/Real-Estate-Reports/NYC-Foreclosure-Report-Q2-2017

    Looks to be the highest foreclosure count since Q2 2009. If accurate, that number is pretty significant.

    NYC real estate market problems over the past year is not breaking news. But will it stay secluded to NYC?

  26. 26

    By Justme @ 21:

    New Foreclosures in NYC Up a Striking 79% in Q3 2017

    https://www.propertyshark.com/Real-Estate-Reports/NYC-Foreclosure-Report

    Seattle: It is different here! (or is it?)

    With that kind of a change in our current economy I’d suspect something behind it. Remember how our foreclosure numbers were affected by legislation? Maybe something similar was happening in NY, or maybe they were awaiting a judicial decision on a foreclosure topic. That sort of thing.

  27. 27
    Justme says:

    RE: Brian @ 25

    Thanks, Brian. Data back to 2009 ought to be good enough for most people :)

  28. 28
    whatsmyname says:

    By Justme @ 21:

    New Foreclosures in NYC Up a Striking 79% in Q3 2017

    Fallacy of big numbers; in this case big percentage numbers. Per your report, NYC is strikingly up to 859 foreclosure notices in a city of 3,129,147 households. That is a striking 3 ten thousandths of a foreclosure per household. Tim’s preview shows that here in King County we have 129 NOTS in a land of 819,651 households, or only 2 ten thousandths of a foreclosure per household. If we were to have a 50% increase to match that NYC ratio, we could gain a striking 65 houses of new foreclosure inventory. That would be like going back to March of this year. There’s a game changer for you.

  29. 29
    Justme says:

    RE: whatsmyname @ 28

    Nice try, whatsyourname. NYC **new** foreclosures as of 2017/Q3 is 8-9X higher than at the bottom in 2013/Q2, and in fact the number is now as high as 2009/Q3, right smack in the middle of the housing bust. And you would like us to believe that this increase is not significant? You are swimming in the Nile, and the Nile isn’t just a river in Egypt.

  30. 30
    whatsmyname says:

    RE: Justme @ 29
    8-9X a dollar is still less than $10. The number is the number, and it is only about 50 more than what was the peak number in little old King County Washington – across a city of 7MM. Also, not all NOTS and first foreclosures actually get foreclosed.

    BTW, is it truly stupid to think that what happens in NYC won’t happen in Seattle? How about what happens in LA? How about what happens in Charlotte? Because extremely different things happened in all those cities, (and many more). If you are insisting that one is the model of normalcy, the others must not be. So which is it?

  31. 31
    Justme says:

    RE: whatsmyname @ 30

    Note to readers: Whatsmyname would like you to believe that

    1. NYC foreclosure counts in 2017 matching those in 2009 (~depth of financial crisis and housing bust) is not significant.

    2. that a rapid increase in NYC foreclosure counts is not indicative of further troubles ahead, because, uh, the absolute numbers are still low (which they are not, because they match 2009).

    3. Seattle is different

    My take: if these kinds of numbers were enough to have an ongoing full-fledged bust in 2009, then they are enough to cause one now.

  32. 32
    Question Mark says:

    RE: Kary L. Krismer @ 7 – If you are claiming that Smith Tower finally automated their elevators because of the rise in Seattle’s minimum wage, I doubt that those workers tended to fall into any of the demographics, i.e. first-time jobs, and teenagers in part-time jobs.

    You’re in the business of helping people buy a home. When was the last time you sold a home to someone making minimum wage … ?? …

  33. 33
    whatsmyname says:

    RE: Justme @ 31
    Mr. Housing Virgin would like you to know that:
    There is no minimum size for statistical significance.
    Derivatives beat fact, every time
    The NYC housing market is more meaningful here than the Seattle housing market.
    Seattle cannot be different, therefore it is the same as things which are unlike each other, even if mutually exclusive.

    Also, he knew last December that if you didn’t get your house sold mighty quick last January; you would be out of luck.

  34. 34
  35. 35

    By Question Mark @ 32:

    RE: Kary L. Krismer @ 7 – If you are claiming that Smith Tower finally automated their elevators because of the rise in Seattle’s minimum wage, I doubt that those workers tended to fall into any of the demographics, i.e. first-time jobs, and teenagers in part-time jobs.

    You’re in the business of helping people buy a home. When was the last time you sold a home to someone making minimum wage … ?? …

    I think you’re reading way too much into my comment. Did I mention first time jobs or teenagers? I haven’t been in the ST for years/decades, so I don’t know what the demographics of the elevator operators were. Actually I thought they’d been done away with before. But that doesn’t change the fact that the minimum wage could have done them in, or at least sped up the process.

    I will say though that it’s possible that the minimum wage increases killed this off in another way–even if the wage was over the new minimum. It may have made it more difficult to get employees due to other opportunities. Even if that was the case though, this would still be bad news for those with the jobs currently.

    And it’s not just people who I help buy homes I care for. When Seattle first passed this minimum wage I was concerned about the people who would lose out due to the minimum wage. Increasing it dramatically doesn’t just cause people to make more money the way proponents claim. If it did we’d just raise the minimum wage to $1000 an hour and kill off the lottery. Large minimum wage increases cause some people to loose their employment, and that’s not just due to jobs being shut down as with these elevator operator jobs. It’s also due to people of minimal qualifications not being able to compete with those of higher qualifications living outside Seattle.

    And note I’m not saying I’m opposed to increasing the minimum wage–merely large increases.

    Thankfully the Seattle City Council hasn’t tried to help real estate agents. The suffering they would endure as a result would probably be horrendous! ;-)

  36. 36
    ess says:

    RE: Kary L. Krismer @ 35

    Kary,

    one could say that the elevator business always had its ups and downs.

  37. 37
    Deerhawke says:

    RE: Justme @ 21

    First, I am trying to figure out why you would be looking at New York City when you can just go and look at the housing stats for King County.

    http://seattlebubble.com/blog/2017/10/02/september-stats-preview-last-gasp-inventory-2017/

    You will find that foreclosure notices are down 35-40 percent from last year. Now that is a statistically significant figure. And it is part of a long term pattern of change. Foreclosures have been dropping consistently since 2011. All of that hidden inventory the permabears repeatedly warned us about? Still very, very well hidden. Deep underground I would say. At least six feet underground.

    But if one wanted to argue that real estate in Seattle and New York City are similar, I would agree with them.

    I lived there in the 80’s and the received wisdom at that time was that redevelopment would be limited to certain areas– all of the area south of 125th Street except Manhattan Valley and lower Spanish Harlem down to 96th Street. Brooklyn Heights for sure, but not the rest of “ethnic” Brooklyn. Long Island City, maybe, but not the rest of Queens. That was for doormen and taxi drivers. None of the Bronx. In fact, the South Bronx just needed to be razed so it could be turned from a war zone (remember Fort Apache?) into a big park.

    Half of my kids’ friends live in NYC now. Who would ever imagine that Brooklyn was artisanal and chic? Hipsters living and paying huge rents in Bushwick? Condos along the Gowanus Canal? (That was the place the mob used to dump stolen cars with perforated bodies in the trunk.) Skinny jeans and fixies in Woodside Queens? And there is even redevelopment in the South Bronx.

    As Vizzini would say, “Inconceivable!!”

    A while back I met two young university researchers who were priced out of everything in the north end and I encouraged them to look down near Columbia City. Maybe they could afford something in Hillman City on the border of Columbia City. Nope, already too pricey. I lost track of them for a year or so but saw them at a Labor Day party. They now proudly tell people they are restoring a 1910 bungalow in Brighton. Brighton? Who even knew that was a thing? Who knew that was the name of a neighborhood?

    My prediction is that South Seattle will become our Brooklyn. In a few years, you will be hearing the words “artisanal” and “Brighton” in the same sentence.

    Inconceivable!?

  38. 38
    Doug says:

    RE: whatsmyname @ 33 – This is sort of an interesting piece of the article not commented on: “We’ve created a map showing the distribution of foreclosed homes by zip code across NYC, which shows how a high number of cases are concentrated in the eastern part of Brooklyn and southeastern Queens, while many Manhattan zip codes recorded no foreclosure activity.”

    I would highlight, “while many Manhattan zip codes recorded no foreclosure activity.” So what is happening right now specifically in East Brooklyn and SE Queens? Seems like an isolated event to me.

    Probably just another soundbite Justme is clinging to and using to try to convince the world that now is the time to sell without really factoring in anything else that is happening in the macro environment.

  39. 39
    uwp says:

    I’m trying to remember…
    When foreclosures were previously peaking in NYC in 2009/2010, was that a good time to be buying Seattle real estate, or selling it?

  40. 40
    Green-Horn says:

    RE: ess @ 34

    Something seemingly underappreciated is the historic demographic change our post-modern urban western civilization is experiencing.

    People are marrying later or not marrying at all (at least the kind of educated high earning bourgeois people who could afford homes). Instead of kids, they’re choosing furbabies to accessorize their adventurous travel-filled childless-by-choice lifestyles.

    What’s this going to mean for housing, schools, suburbs and other institutions that we take for granted?

  41. 41
    Bubble Trouble says:

    By boater @ 17:

    By Kary L. Krismer @ 16:

    RE: boater @ 15 – I haven’t itemized personal for years, but what’s the status of deducting sales taxes? That would be going away too (as would probably real estate taxes). So it all might be largely a wash as between states.

    I wonder if they’ll start taxing interest from state and local governments. That would really mess some things up.

    Not sure on any of the others. I know people moving from California already look at moving to Washington as a 10% raise even if income is the same on income tax alone.

    But it’s not really a 10% increase. First off the 10% bracket only kicks in at $500K+ income. For a married couple earning $200K let’s say, the top marginal rate is 9%. But that only kicks in at $100K. Under $100K it’s staggered every $10K or so. So really the effective tax rate is around 8% for the entire $200K.

    But that 8% is really only 6% when you take in the federal tax deduction. And that 6% is really more like 4-5% since the entire $200K of income isn’t taxed, more like $125-150K after all the deductions are taken. Especially if you have a yuuugely bigly big mortgage, which pretty much is a given for someone living in either Seattle or SF. Bottom line is a savings of about $10K by moving to Seattle (or anywhere in WA) from California. It’s somewhat significant, but is it really enough to make someone uproot their life for $800 a month? Probably not. And for many people $800/mo is a small price to pay to live in CA weather vs Seattle weather. And yes I know SF proper weather sucks. But drive a few miles to San Mateo or East Bay and it’s 60 and sunny in January, vs 40 and well you know……in Seattle.

    So yeah there is a tax advantage for Seattle vs SF, but not as much as people think.

  42. 42
    Erik says:

    RE: Minnie @ 24
    I’m talking about decent areas like eastside and Seattle. Buyers that buy in trash heaps like Everett are exempt because that mistake is on them.

    If I buyer bought in eastside or Seattle in 2015 for example, it’s safe to assume they made $100k in equity, right? Well you can buy with 3% down. In this case you could buy a nice house and still have a fat wad of cash in your pocket.

  43. 43
    Minnie says:

    RE: Erik @ 42

    Correct that they made equity by paying down their existing mortgage….but I still don’t think that as a buyer they are that much better off because they are buying in the same market they sold in. I’ll say it again, there were a lot more decent homes even a few years ago. There’s some really bad stuff on the market right now with a lot of deferred maintenance because in this market…..it’ll sell.
    Putting 3% down is going to be REALLY non-competitive if you’re in a multiple offer situation. At least I would be concerned if I was a seller and I saw that.

  44. 44
    N says:

    I was buying this year and 3% is not an option. Every lender I talked to required 10% or higher if you’re buying a SFH. Maybe 3% for condos?

    And that 100k of appreciation is cut by a huge chunk from selling fees and taxes. When you factor that in, as well as the lack of inventory, competition (escalation), and price increases across the market, that money doesn’t really get you anything better than the house you’re trying to sell. You’d have to add a lot of savings you accrued on top of your appreciation.

    I dread re-entering this competitive market even if I see huge appreciation. (But I’m also considering selling after just a year since my house is such a money pit and I’d rather take the loss and just buy new construction… presale)

  45. 45
    N says:

    @ Erik 42 –

    $100k equity true, but lets assume a $700k home value. It would cost $63k to sell the home in most cases so your actual realized gain is less than $40k and that’s before taxes. After taxing the gain your down to $28k (assuming 25% bracket) and then you have a couple years of depreciation you have to recapture and pay tax on (say your base is $600k, you depreciated $21k a year so $43k is taxed at 25% = $11k of depreciation recapture tax) so your final profit is….$17k on that $100k in equity! Congrats!

    Not to mention that you were quite likely cash flow negative every month you owned the home and if you put 3% down, well you were cash flow negative by a large amount so perhaps walked away with a LOSS at the end of the day. And we aren’t even talking about the risk yet.

    This mentality is the same as it was in 2008 and no one thought it would end then either. Your not doing anything special when everyone else is getting similar gains but what you are taking on, perhaps unknowingly, is plenty of risk, especially in taking on properties that you have to feed every month to break even. Sounds so easy and good when times are good doesn’t it?

  46. 46

    RE: N @ 44 – I think a lot of people are really underestimating the gains that people made who bought only a “few years ago.” $100,000 would be minimal, even after costs of sale for many/most areas.

    The problem is though, you’re not going to move to a better place by selling, because those have also gone up. You would be just out your costs of sale, and perhaps more leveraged–depending on how much you put down on the new place.

  47. 47
    justme says:

    RE: Deerhawke @ 37

    >>First, I am trying to figure out why you would be looking at New York City when you can just go and look at the housing stats for King County.

    Answer:

    Seattle bubblemongers on this very blog (*) have been pointing out over and over again that Seattle lagged most of the rest of the nation in terms of the bubble bursting last time around, and predicted that it will behave the same way this time around. If that is true, warning signals such as a rapid increase in NYC foreclosures *right now* should give people pause and make them think twice about participating in the last gasp of the current bubble in Seattle. So I am providing a public service: Avoid buying the bubble, and almost all of us will be better off. Certain people that depend on the ongoing bubble to make a living will be less well off, but that is quite okay with me.

    (*) you know who you are

  48. 48
    whatsmyname says:

    RE: justme @ 46
    Thank you for your service.

    What do you think the part of your article that Doug pointed out, you know, “many Manhattan zip codes recorded no foreclosure activity.” portends for the future of good zip codes in Seattle?

  49. 49
    ess says:

    By Green-Horn @ 40:

    RE: ess @ 34

    Something seemingly underappreciated is the historic demographic change our post-modern urban western civilization is experiencing.

    People are marrying later or not marrying at all (at least the kind of educated high earning bourgeois people who could afford homes). Instead of kids, they’re choosing furbabies to accessorize their adventurous travel-filled childless-by-choice lifestyles.

    What’s this going to mean for housing, schools, suburbs and other institutions that we take for granted?

    Green

    You are seeing radical approaches in countries as to how they handle their own negative birthrate. Japan and Germany are opposite extremes as to how countries approach the problem of a birthrate that is below replacement levels.

    What I find interesting is the entire issue of “furkids”; that animals are substitutes for humans – both as partners and as children. And along with that approach is something that I have observed many times, that certain people are more concerned about the wellbeing of animals than of humans. Animals are taking the place of humans in a society where more adults are single and/or living alone than married. That is a sea change from merely a few decades ago. It is the ME generation on steroids.

    A certain percentage of individuals always respond to the question that they would rather save their dog from drowning rather than another human being if given the choice in an emergency. If you are swimming at a beach with a great many pet owners – better be a strong swimmer.

  50. 50

    By justme @ 46:

    Seattle bubblemongers on this very blog (*) have been pointing out over and over again that Seattle lagged most of the rest of the nation in terms of the bubble bursting last time around, and predicted that it will behave the same way this time around.

    There are two problems with that way of thinking. First and foremost, things almost never happen the same way as they did before. If they did it would be easy to make money in the stock market. If a stock falls 20% and then recovers 30% you would just buy the stock again the next time it fell 20% and then sell when it rose 30%. This also, BTW, is what is wrong with Erik’s constant pointing to how often RE cycles occur.

    Second, Seattle didn’t just lag the rest of the nation, in that that’s not what caused the fall. What caused the fall was the falling prices in highly populated areas of the country together with poor lending practices (including derivatives) caused an international financial crisis and caused Seattle to fall. But for those events, herd mentality and the market action would have likely caused Seattle prices to continue to go even higher.

  51. 51

    RE: Nicole @ 22RE: Rupert D @ 20 – I quickly read the first four chapters (and forward) of Misbehaving tonight. Thaler does seem to say some of the things attributed to him in the press articles, but at the same time I get the feeling that at least one of the press authors I read took the time to read the first chapter of Misbehaving, and not much more.

    So far it’s an interesting book, and the goals are laudable. But I still don’t think standard economics predicts that people will act the way their models suggest. For example, economists don’t say no one will vote, but instead that it makes no sense that anyone vote. But trying to determine the differences is important. And in that regard the suggestion that companies will try to maximize revenues rather than profits (marginal revenue + marginal cost) certainly explains Amazon!

    One thing I did find interesting though. He notes how people will pay less to avoid a risk than they would require to be paid to take on the same risk. So in his example, people would pay less for the only dose of an antidote to a known likely deadly disease they might have been exposed to than they would require to be paid to be exposed to the same disease, where the chance of infection would be the same in either scenario. The numbers were something like paying $2,000 for the vaccine versus being paid $500,000 to be possibly exposed.

    But then he goes on to a situation where spending $42M on making a highway safer would save 1.4 lives a year for 30 years, and he tries to quantify that. I like his methodology, of looking at actuarial tables of deaths in certain professions, and then comparing earnings in those professions, to determine what people actually require to be paid to do risky work. From that he apparently determined that a life is worth approximately $7M, but I completely missed any recognition that the $7M figure is what they are required to be paid, and not what they would pay! Seemingly a lower figure should be used.

    Anyway, good read so far. And again, that book is free for those of you with Amazon Unlimited.

  52. 52

    By ess @ 48:

    You are seeing radical approaches in countries as to how they handle their own negative birthrate. Japan and Germany are opposite extremes as to how countries approach the problem of a birthrate that is below replacement levels.

    What I find interesting is the entire issue of “furkids”; that animals are substitutes for humans – both as partners and as children. And along with that approach is something that I have observed many times, that certain people are more concerned about the wellbeing of animals than of humans. Animals are taking the place of humans in a society where more adults are single and/or living alone than married. That is a sea change from merely a few decades ago. It is the ME generation on steroids..

    With AI and robotics, an ever increasing population might no longer be necessary, and might even be a burden. Before now economies needed ever increasing populations to do well.

    As to people and animals, the Thaler book also touches on that, in a way. People value the life they know about over the theoretical life. In his example, many people would charitably donate small amounts to pay for a known brunette girl’s life saving surgery at a hospital (imagine if she were blonde!), but be unwilling to increase taxes a few cents to fund the hospital in a way that might save a few lives a year. They don’t know those other lives, and don’t value them as highly.

    Well getting to animals, people know their own animals, and if the animal is lucky enough to make it onto the local news, a lot of people will know the animal.

    But beyond that, I think there’s also the thinking that the animal is likely helpless and not responsible for its situation. That might downgrade what people are willing to do for other humans.

  53. 53
    ess says:

    RE: Kary L. Krismer @ 51

    But beyond that, I think there’s also the thinking that the animal is likely helpless and not responsible for its situation. That might downgrade what people are willing to do for other humans.

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

    I remember years ago talking to a person I knew who explained to me that animals were more important to that person than people. At the time I thought it was an odd and sad statement, but I think these days it is much more common view amongst more and more individuals.

    And I agree with you that many people believe that humans are responsible for their own predicament, while animals are not. Couple that observing the homeless constantly in more and more places, and you have people racing by homeless people without a second thought to attend a helpless kitty.

  54. 54
    Doug says:

    RE: Bubble Trouble @ 41 – This is a gross over simplification and just wrong.

    While I’m from the NW and did want to get home one day, income tax was the primary driver pushing me out of San Francisco. I could have easily stayed in San Francisco for life had they no state income tax.

    I remember (around 2012?) when they passed a bill that put an additional >2% on top of the income tax. It was marketed as an “education tax” that would go toward improving public schools. Seemingly a worthy tax on the surface of it. It was only discovered a few months after the tax was approved that the payments were actually going to the retired teacher pension fund (California has a very large deficiency in basic math).

    Sometime later around 2013 or 2014 I remember receiving a sizable bonus and was shocked to see that, after all the bullshit-California taxes, just 50% of the gross hit my net income (I’m not making this up). It was actually that moment that I began putting my Seattle plan together.

    So to mislead people by saying a California-to-Washington move is only worth $800 per month is just nonsense and probably why you just don’t understand the true demand from people fleeing tax-laden states like New York and California.

  55. 55

    RE: Doug @ 53 – FWIW, at the federal level withholding on bonuses is done differently than your normal withholding. Normal withholding tries to approximate what you owe, and works fairly well if you make the same amount each pay period for an entire year. For bonuses they don’t really know how that will impact you, so they used to withhold at a higher rate just to be “safe.” CA may have done something similar too–no idea on that.

  56. 56
    Bubble Trouble says:

    RE: Doug @ 53

    You’re conflating marginal tax rates and effective tax rates. I was responding to the comment that moving to Seattle from CA is a 10% raise. It isn’t. It’s more like 4-5% for the reasons I stated.

    What you’re talking about is your total marginal tax rate on a bonus. Everyone’s bonus works like that because a bonus is always taxed at the highest rate. Doesn’t matter if in CA or WV. You’re confusing effective tax rate on total income vs marginal tax rate on the last dollar earned. And yes that marginal rate is higher in CA vs WA. But the overall effective rate (after taking into account deductions and the federal deduction of SALT), it’s only about a 4-5% difference.

    For a married couple earning $200K, the net after tax difference between CA and WA is about $800 a month.

  57. 57
    district says:

    Even if it is only $800 / month, that’s not too shabby, even for those making $200k. It’s about the monthly payment on the cheapest Tesla Model S. Slogan: “Move to Seattle! Get a free Tesla!” Beats avocado toast.

  58. 58
    Anonymous Coward says:

    RE: Bubble Trouble @ 55 – His math might be off, but he still moved from CA to WA on the basis of it…

  59. 59
    Blake says:

    Important article buried in the Financial Times yesterday. Those who worship low rates and the wisdom of the Central Banks take heed!

    Central bankers face a crisis of confidence as models fail
    https://amp.ft.com/content/333b3406-acd5-11e7-beba-5521c713abf4
    The new masters of the universe are struggling to understand what makes a modern economy tick and their actions could prove harmful
    ….
    And there is increasing concern, even expressed by Ms Yellen, that the underlying theoretical model might simply be rotten to the core and attempts to tweak it are futile.

    “Essentially you are setting policy on things you don’t know and can’t measure and then reasoning after the fact,” says Mr Tarullo. His core argument is that central banks maintain an absolute faith in the model with absolutely no evidence to support it.

    ….The most aggressive critic of the consensus is Mr Borio of the BIS…His concern is that by keeping interest rates low, central bankers have no effect on inflation or the economy other than to increase the level of debt. The result is that it will be harder “to raise interest rates without causing economic damage, owing to the large debts and distortions in the real economy that the financial cycle creates”.

  60. 60
    Eastsider says:

    RE: Anonymous Coward @ 57 – He said he was from here… LOL

  61. 61
    Eastsider says:

    RE: district @ 56 – Based on Glassdoor survey, software engineer salaries in San Jose, CA Area Avg $129,485 vs Seattle, WA Area Avg$119,562. Now your $800/mo difference practically disappears.

  62. 62
    Sid says:

    By Eastsider @ 60:

    RE: district @ 56 – Based on Glassdoor survey, software engineer salaries in San Jose, CA Area Avg $129,485 vs Seattle, WA Area Avg$119,562. Now your $800/mo difference practically disappears.

    I wouldn’t trust glassdoor. Their data is usually few years old.

  63. 63
    steven says:

    actually, considering standard deduction, family of 4 married couple, 200k will net you 11000 a month in california. in washington, you would get 12400 a month. That doesn’t take into consideration the deductions for the state tax which may go away, but even with current tax laws you get 17000 in additional federal tax deductions, which accounts for approximately 4800 a year or 400 per month. so it would be 11400 vs 12400 which is 1000 dollar difference. if the couples had large deduction from mortgage, which again may or may not go away with new tax law, the tax rate will be 25% so gains will be slightly less. so you do get approximately 10% pay increase. for singles it’s 9900 vs 11500 with state tax deduction accounting for similar amount of money. It’s based on take home pay calculator which isn’t 100% accurate but usually way more accurate than bare estimates solely on brackets

  64. 64
  65. 65
    Eastsider says:

    By Sid @ 61:

    By Eastsider @ 60:

    RE: district @ 56 – Based on Glassdoor survey, software engineer salaries in San Jose, CA Area Avg $129,485 vs Seattle, WA Area Avg$119,562. Now your $800/mo difference practically disappears.

    I wouldn’t trust glassdoor. Their data is usually few years old.

    Bay Area programmers are the highest paid in the nation. Try again.

  66. 66
    Eastsider says:

    By Kary L. Krismer @ 63:

    No words.

    http://komonews.com/news/local/seattle-council-members-propose-tax-on-wealthy-businesses

    The money quote – “It’s interesting that the city’s response to Amazon looking for a second headquarters is to propose a new tax on jobs.”

    Amazon will likely pay 20-25% of the new proposed tax.

  67. 67

    RE: Eastsider @ 65 – I thought the best quote was: “There’s no reason they [large businesses] shouldn’t have an opportunity to give back to the folks,”

    Seriously, such a wonderful opportunity. Someone should start an initiative to have Seattle City Council members to give back half of their pay for some worthy cause. They would seemingly like that, and it would benefit a cause. A win-win! ;-)

  68. 68
    boater says:

    Fun fact. When I moved from California to here while working for one of the top 5 software companies my pay did not change. I would be most of those SF workers moving here are not seeing a pay decrease. They are seeing a housing cost and tax decrease though.

    What they aren’t taking into account is California’s incredible access to cheap labor. Housecleaning, daycare, handyman etc all cost much more here.

  69. 69
    Sid says:

    By Eastsider @ 64:

    By Sid @ 61:

    By Eastsider @ 60:

    RE: district @ 56 – Based on Glassdoor survey, software engineer salaries in San Jose, CA Area Avg $129,485 vs Seattle, WA Area Avg$119,562. Now your $800/mo difference practically disappears.

    I wouldn’t trust glassdoor. Their data is usually few years old.

    Bay Area programmers are the highest paid in the nation. Try again.

    Agreed. I meant the avg. salary numbers from glassdoor seem old.

  70. 70
    ESS says:

    RE: Kary L. Krismer @ 66

    Right. Do gooders usually are adept at spending other people’s money – not their own.

    The only positive aspect about this proposed tax is that it is limited to the jurisdiction of Seattle. It would be worse if it was a King County or state wide initiative.

    It is my impression that San Francisco has its share of legislative proposals such as this, as well as high taxes. But are not most of the high tech companies actually located outside of SF proper? Are those areas more business friendly than SF? Perhaps Puget Sound will develop along those patterns – with most new tech companies locating outside of Seattle, but in the Puget Sound area.

    I wonder if Amazon is now considering locating so much of their operation in Seattle a mistake, or is it that as a good corporate citizen they should pay for their “fair share” (in other words – pass on those expenses to their customers).

  71. 71

    RE: ESS @ 68 – I thought I already posted this here, but I can’t find it.

    https://www.geekwire.com/2017/tech-companies-provoking-ire-moving-suburbs-cities-says-urban-history-expert/

    Anyway the recent trend is for tech companies to go to urban locations, unlike say Microsoft which started in more suburban areas. Norton/Symantec/Central Point was even more rural. Not sure what drove the change.

    But I do remember San Francisco having issues with the private transit buses of the tech companies. Not sure though if the workers actually worked in the city.

  72. 72

    RE: Eastsider @ 65 – Here’s another good quote from the council member: “It is our large employers who have benefited most from Seattle’s economic boom,” said Harris-Talley in a statement.

    https://www.geekwire.com/2017/seattle-considers-employee-head-tax-citys-top-grossing-companies/

    How dense to you have to be to think that Seattle’s boom is benefiting the tech companies, rather than the tech companies causing Seattle’s boom?

  73. 73
    Eastsider says:

    RE: Kary L. Krismer @ 70 – Being a smart businessman, Bezos has figured this out a while ago. Name a S&P500 corporation with 2 equal headquarters if you can. Otherwise, HQ2 may well be the next HQ.

  74. 74
  75. 75
    Ross says:

    It’s ridiculous how many new taxes the city is proposing. Whether it be a business head tax, municipal income tax, soda tax, etc. In fact, due to the growth, city revenues are at an all time high. The city coffers are basically overflowing. City council *should* be talking about reducing taxes or at least setting aside a nestegg fund for some future date when the local economy is not doing well. Taxes should be expenditures driven; here we try to find new expenditures to use all of the excess revenue. Sigh.

  76. 76
    boater says:

    By Kary L. Krismer @ 69:

    RE: ESS @ 68 – I thought I already posted this here, but I can’t find it.

    https://www.geekwire.com/2017/tech-companies-provoking-ire-moving-suburbs-cities-says-urban-history-expert/

    Anyway the recent trend is for tech companies to go to urban locations, unlike say Microsoft which started in more suburban areas. Norton/Symantec/Central Point was even more rural. Not sure what drove the change.

    But I do remember San Francisco having issues with the private transit buses of the tech companies. Not sure though if the workers actually worked in the city.

    A relentless drive for younger employees and competition from startups that both favor city vs suburban locations.

    Once the big companies couldn’t force the workers to come to them they had to move to wherever the workers they’re courting live. That tends to be big cities.

  77. 77
    Justme says:

    RE: Doug @ 38

    >>Probably just another soundbite Justme is clinging to and using to try to convince the world that now is the time to sell without really factoring in anything else that is happening in the macro environment.

    Uh, dude: The housing markets in NYC, London, Australia, Toronto, Stockholm and other locations worldwide **are** the “macro environment” (to use your phrase) of Seattle.

  78. 78
    jon says:

    By Eastsider @ 71:

    RE: Kary L. Krismer @ 70 – Being a smart businessman, Bezos has figured this out a while ago. Name a S&P500 corporation with 2 equal headquarters if you can. Otherwise, HQ2 may well be the next HQ.

    Amazon has some cultural factors that make this a more natural progression than it does for other companies. First is that even before AWS they had a philosophy of independent small teams that interacted through defined interfaces and were evaluated independently. That has probably evolved since then as their business gets more complex, but that was their DNA for a while, at least. Second is that the nature of AWS is independent data centers that are a hierarchy of systems to provide redundant failover. That constant attention to the process maintaining independent systems no doubt has an influence on their culture. Thirdly, beyond just AWS vs retail, those are in turn composed of independent stores and services. There are many companies that have grown through acquisition of independent units that are geographically distributed. Amazon has offices in many cities already, so they can already observe and measure the costs and benefits of creating or growing a HQ.

    That’s not to say that they couldn’t start downsizing HQ1 if the local governments start milking them to serve their constituencies instead of helping the business.

  79. 79
    S-Crow says:

    So, I bumped into a friend and his wife at the Leavenworth Octoberfest. He’s VP of a large bio tech firm here and our conversation turned to housing.

    Naturally I talked about the Euphoria and housing debt loads. He mentioned about the layoffs at HomeStreet which has kind of been under the radar. As always, I’ve been more keen not on sheer sales numbers per se but on how people are buying them (ie, financing). I like to look under the hood instead of looking at the pretty paint job and sleek lines.

    Back to the HomeStreet thing: Is this a Canary in the coal mine?This is not what happens in an accelerating steady as she goes market.

    This move is called anticipating and getting ahead of the market.

    While unrelated to HomeStreet it sort of reminds me very much when the late John Fairchild exited the market by selling off Phoenix Mortgage & Escrow— a solid/sage move (for those pro’s who have been though cycles know that at the time Phoenix was a major originator in Seattle) .

    We hear ad nauseum that we just don’t have enough homes/rental units coming online due to the enormous pent up demand? Are loan originations slowing JUST because there are no homes to sell? Is it JUST seasonal?

    I think people should revisit the Demand/ Low Inventory/Seattle is fundamentally different thesis because if this has legs and time on market increases there are a lot of folks that are going to be unhappy. I viewed a very recent interview with Kyle Bass (founder of Hayman Capital hedge fund who called the last bubble) and he commented about the past head in the sand mentality of the Financial/Banking exec’s here in Seattle and Chicago who listened to his presentation thesis at the time. They said they agreed the markets were bubble’s …..just not “here.” We know how that turned out.

    PS. I’m already seeing flippers exit the market at a break even or loss. Loss meaning having to come to closing with a check.

    Off topic: By the way if you have a chance to do the Icicle Ridge hike in Leavenworth it is a very challenging hike to the top (1800 Ft gain) and it taxed me heavily but the panoramic views are incredible if the weather is good and the Fall colors are fabulous. ( could see as far as East Wenatchee). My knees, quads and hips are killing me from the hike down but that’s another topic.

    Have a good weekend.

  80. 80
    Justme says:

    RE: S-Crow @ 75

    Thanks for the perspective, S-Crow. Underwater flippers would qualify as early trend-setters, akin to the proverbial “canaries in a coal mine”,

  81. 81
    Deerhawke says:

    RE: S-Crow @ 75

    I have no real idea what is going on at Home Street, but I can tell you that all three banks that I maintain a relationship with are expanding their lending for spec home construction. They have solid financial controls in place and they have plenty of money to lend. They are talking about the dearth of good deals (inventory by another name) being the main constraint on their lending.

    I for one am glad to see flippers coming to closing with a check. I am actually also glad to see spec builders coming to closing with a check. These are the people who are outbidding me for property and routinely pay way more than it is worth. Then they try to cheap out on everything and hope the buyers are too eager to buy to notice. Early in a cycle, they get away with it as rising prices bail them out. Later on, land prices catch up and they still haven’t learned their lesson. So right about now, the people who blithely overpay for land and don’t have cost controls or a distinctive product get shaken out.

    This is normal. This is how things look as we start to be in a more mature, but still expanding market.

    Flipping is always hard– it only looks easy on the TV shows. But the guys who know how to buy and how to rehab with style and on a tight budget are still doing just fine. In fact, they are doing really well.

  82. 82

    By S-Crow @ 75:

    PS. I’m already seeing flippers exit the market at a break even or loss. Loss meaning having to come to closing with a check.

    If they have more than one project going it doesn’t necessarily mean that they lost money on that project, it just means they borrowed against that project. And they might have done so because they knew it would close earlier.

    But on this topic, on the last house I listed that would be attractive to flippers (if not pretty much only flippers), I was surprised how many were using hard money to buy (but none made the transaction contingent on such financing, FWTIW). Seemed like a much higher percentage than what I’d seen in past similar transactions. I wonder if that is due to necessity, the ability to grab up multiple properties, or a method of risk reduction? Of those, I only noticed one buyer where it might have been to grab more properties.

    On that topic, here’s a recent Washington Realtors’ video on the three types of buyers without financing contingencies.

    https://www.youtube.com/watch?v=uq79jCMi5_I

  83. 83
    Eastsider says:

    By Deerhawke @ 77:

    Flipping is always hard– it only looks easy on the TV shows. But the guys who know how to buy and how to rehab with style and on a tight budget are still doing just fine. In fact, they are doing really well.

    This may be true not long ago. But the risk reward ratio is simply not there in today’s market.

  84. 84

    RE: Eastsider @ 79 – Not really my area, but I suspect they’re dealing with the same bidding war type situations as normal buyers, only sometimes in areas where you would expect bidding, so it’s even worse than normal. Also the novice flippers ignorantly bidding them up is probably a huge problem too.

    Not quite the same thing, but a few years ago we had a buyer bid on an REO bank listing, where the listing said conventional financing would be okay, but there was no way anything but cash (or a hard money loan) would close. We weren’t the highest bidder, but convinced the bank that the higher financed offers wouldn’t close. That sounds good, except for the fact that we wouldn’t have had to have bid as high if the listing has been listed as cash only. A bank might walk away from $20,000 or $30,000 of additional proceeds, but not $75,000, etc. The way the property was listed probably cost my client $50,000 (and gained the bank the same amount).

  85. 85
    N says:

    Inventory Predictions — Looks like we hit peak inventory this year for King County SFH at just a touch above 3,000. Any predictions for:

    1. How low inventory go this winter?

    2. Will we see inventory in 2018 hitting new lows again, at par with 2017 or higher YOY.

    Wouldn’t surprise me at all to see it higher YOY but thats starting from a low base (2017).

  86. 86
    Bubble Trouble says:

    By district @ 56:

    Even if it is only $800 / month, that’s not too shabby, even for those making $200k. It’s about the monthly payment on the cheapest Tesla Model S. Slogan: “Move to Seattle! Get a free Tesla!” Beats avocado toast.

    Heh. Yeah I didn’t say it’s not significant, just saying it’s not 10%. But that would be a good Chamber of Commerce ad campaign. That is if Tesla is still around for much longer, given their layoffs last week and the fact that they’re building 10 cars a day.

  87. 87
    Bubble Trouble says:

    Hemmingway has a great quote about how he went bankrupt…..gradually and then suddenly.

    That’s how recessions happen as well. It starts off with a layoff here, a layoff there. Nobody really pays attention to the gradual part. And then one day…BOOM. We’re in a recession. And everyone is surprised and asks how could this have happened so suddenly?

  88. 88

    RE: Bubble Trouble @ 86 – The Tesla layoffs were apparently performance related, since there were no WARN notices. But yes, they have production issues, and also may be biting off more than they can chew with some of there non-auto areas of interest.

  89. 89

    RE: jon @ 14
    Buy Now Before the Theoretical Price Collapses Because of Amazon Departure?

    LOL…..now that’s a loaded question. Hades, I don’t think it matters that much with the current scarcity of units and the fact that half the buyers “don’t work”….the spoiled rich elite “brainless investors” with their parents’ old money flock to Seattle and grab up scarce units anyway….the American middle class dream has been dead in Seattle for the workers for 40 years now.

  90. 90
  91. 91
    Brian says:

    By Doug @ 90:

    Seattle not letting Amazon go without a fight.

    https://www.seattletimes.com/business/amazon/seattle-leaders-took-to-push-refresh-button-with-amazon/

    Reeks of desperation. If they actually wanted to hit the refresh button then why did they JUST propose (after the HQ2 announcement) a tax on large businesses based on the number of employees?

  92. 92
    Eastsider says:

    RE: Brian @ 91 – Reading the comments section in ST, this stands out –

    The letter goes out on Seattle City Council letterhead, but only five City Council Members signed it.  Even though there is nothing more substantive in this letter than, “Let’s work together,” four City Council members – O’Brien, Sawant, Juarez, and Harris-Talley – did not feel they could support the sentiments in the letter.  Furthermore, only three of nine King County Council members signed it.

    If I’m Amazon, the fact that almost half the council didn’t sign it says more about the current Seattle government attitude towards business than anything actually in the letter.

    I won’t be surprised if Seattle becomes Amazon’s HQ2 in the next 5 years.

  93. 93
    ess says:

    RE: Green-Horn @ 74

    Green

    Thanks for the interesting series of articles that you posted.

    On a more serious note, my wife and I have been both discussing and reconsidering our policy regarding pets for our two rentals. We have recently not allowed pets as they have caused both physical damage (dogs in yards and pee on carpets, cats that claw at carpets and paw at blinds), and produced odors (from cats peeing etc). We have decided to change that policy for a rental that is coming up. The pet owning market is too big to ignore, and a slight premium in rent, as well as an additional pet deposit should cover most potential damage. It also helped to discover wonderful products that really do eliminate cat odors that are now on the market. Many pet owners are responsible renters, as well as many non pet owners who don’t care for the premises. So the response to a pet friendly single family residence for rent should be interesting.

  94. 94

    RE: ess @ 93 – Not only that, but without allowing pets you end up with them anyway, without the extra rent or deposit.

    I’m surprised you don’t have more problems with dogs, particularly small dogs. They tend to be the worst pee offenders. Cats are mainly claw damage.

  95. 95
    ess says:

    By Kary L. Krismer @ 94:

    RE: ess @ 93 – Not only that, but without allowing pets you end up with them anyway, without the extra rent or deposit.

    I’m surprised you don’t have more problems with dogs, particularly small dogs. They tend to be the worst pee offenders. Cats are mainly claw damage.

    Kary

    Interesting that you said that pets show up anyway – that is exactly what happened to us in a prior rental.

    Dogs may pee and claw – but cat pee seems to be much more overpowering and like a diamond, almost is forever. Hard to get cat pee smells out of a house. Plus some cats that are not fixed tend to work over the walls. I had cat smell in one house – couldn’t get rid of it until I finally washed down all surfaces two feet high off the ground including appliances. Glad the cat didn’t know how to use a ladder. The smell magically went away. At least with dog damage to the house we know what to look for and it is readily fixable. More problematic is when the dog owners put the dog on a long run on a part of the property and the dog goes back and forth creating a path when there was none, or just tearing up the grass if there are large dogs. New grass takes a while to grow, and most tenants are oblivious to that damage. All now addressed in the lease so there are no surprises, including the use of expensive sod to provide a quick fix. And with pets – we insure that we get security plus pet fee – no exceptions or messing around with sad tenant stories because pets tend to do damage, and if one has a pet, they should be able to afford to pay for the damage it will most likely cause.

  96. 96
    Deerhawke says:

    RE: ess @ 93

    I have posted on this before. Those people who have dogs, cats, ferrets, etc. do not have pets nowadays. So there is no ability to tell people they can’t have pets or impose extra deposits or fees. Nowadays everyone has an emotional support animal.

    For $100 or so, people can be “examined” for a few minutes by a “mental health specialist” in California (actually a nurse who has worked in a mental health facility) who looks at their checklist and declares that in her professional opinion they absolutely need their animal for emotional support. Presto chango! Fido is not a pet anymore– he just got promoted to ESA! They have documentation to prove it.

    I have gotten around this scam by telling potential tenants that many other people are (shocking but true) trying to game the system. I put on my empathetic tone and say we totally understand that their condition is serious and their particular ESA claim is no doubt valid. But because others are abusing the public’s trust, we ask for their help in fighting this abuse by following our policy that requires them to :

    1) Obtain an ESA letter from a board certified psychiatrist, psychologist or psychiatric counselor with offices in Washington State. This specialist must certify that he/she has a continuing care obligation and will see the tenant at regular intervals to assess/address their condition.

    2) Commit to taking their animal with them to work, school and business trips so the animal can be of use with their condition. If the workplace or school is not on record as being pet friendly, obtain a letter from the employer or school allowing the presence of the animal on the premises.

    At this point, the person usually says that seems like real work and gives up the ESA pretense. You can kind of see them wondering if they can get back that $100 they spent with the nurse in California. They quickly ask how much extra it will be for their pet and how much extra the deposit is.

    Kary, I agree with you that small dogs generally create the most damage. One tenant had a little wiener dog that evidently peed in the corners of her closet every day. After two years, I had to replace the hardwood flooring, the subfloor and the trim after she left.

    My advice is that if you are going to allow pets, charge extra for the extra wear & tear and take a hefty deposit.

  97. 97
    Matt P says:

    You do not need to waive a no pets policy if you rent less than 3 units directly, ie don’t use a broker.

  98. 98
    Deerhawke says:

    RE: Matt P @ 97

    Do you have a citation on that? Statute? Case law? I spent a good long while reading up on this and haven’t seen anything on line to that effect.

  99. 99

    RE: ess @ 95 – Un-neutered male cat pee smells horrendous, and they want to spray! Perhaps it would be prudent to require proof that male cats are neutered. Absent that the main issue would be missing the litter box (shooting over) or a messy litter box the cat won’t use. Altered cats pretty much have a strong instinct to use the litter box.

  100. 100

    By Deerhawke @ 96:

    Kary, I agree with you that small dogs generally create the most damage. One tenant had a little wiener dog that evidently peed in the corners of her closet every day. After two years, I had to replace the hardwood flooring, the subfloor and the trim after she left.

    I went to a vacant listing once where the agent warned of “water damage.” The damage consisted of rusting metal on the corners of walls (whatever that trim piece is called for drywall), and a floor that no longer had any carpeting but was seriously stained all over the house. I’m assuming it was a small dog based on the patterns.

  101. 101
    Deerhawke says:

    Kary, you asked about the new economics Nobel winner Richard H. Thaler. He is a truly interesting (and funny) guy who has done some important work with practical real-world applications. More interesting to me was that he was was a Professor of Economics at Chicago which is the heart and soul of the rational actor model and the push to turn Economics into a subfield of mathematics. He must have a pretty tough hide.

    Here are a couple of interesting articles from the NY Times where he was a frequent guest columnist.

    https://www.nytimes.com/2017/10/09/business/economy/richard-thaler-economics.html

    https://www.nytimes.com/2017/10/13/business/economy/richard-thaler-nobel-silly-but-serious.html?_r=0

    https://www.nytimes.com/2017/10/09/business/economy/richard-thaler-economics.html?action=click&contentCollection=Economy&module=RelatedCoverage&region=Marginalia&pgtype=article

  102. 102
    Deerhawke says:

    Regarding the question of whether Seattle real estate is or is not a bubble, here is an interesting piece that also showed up in last week’s NY Times. I intend to look into and read some of the academics they reference. The original title was “Small Cities are Wilting as Larger Ones Flourish.”

    https://www.nytimes.com/2017/10/10/business/economy/big-cities.html

    I think I am basically short term bullish, medium term skeptical, and long term bullish. This article is about the long term part.

  103. 103

    RE: Deerhawke @ 101 – Thanks, I’m a bit further along in Misbehaving now, and a couple of the things you linked are also in that book.

    I still disagree with his basic premise that traditional economics purports to treat how people act, as opposed to how they should act. If they were teaching how people act then economists would think that no companies would ever go bankrupt! And specifically as to sunk costs that was always, as far as I know, was taught as a way people should act against their instincts.

    That said, I think it is very useful to try to flush out some of the ways people act that are not what traditional economics would think of as optimal. Understanding human behavior can be very profitable in the long term. For example, economists have no problem with prices rising after a crisis, but taking those short term profits creates public relations issues so severe that even Uber has paid some attention to them.

    Also, his story about GM was very interesting, and I would have expected no less. Apparently they were the first auto company to come up with low interest financing to deal with inventory issues at the end of a model year. They asked him in to consult and one of the two things he suggested was that GM try to assess how successful the program was so that they could modify it each year. They responded declining, saying they would instead control year end inventory better in the future! Of course they never did, and eventually that great management led them to a government takeover/bailout.

    Getting back to his main premise, it sounds as if when he was entering economics that the area was getting rather stale. That very well could be true, and what might focus his perceptions.

  104. 104
    SKC says:

    I just searched craigslist for condo in Kirkland and found in my top first 10 listing shows all owned by property management. Here are list of contact i get it from my top searches.. It tells me that most of the house owned by corporate or private firms creating big demand or inventory problem.. Am I miss anything?

    Brink property management
    avenueoneresidential.com.
    Equal Housing Opportunity
    https://knockrentals.com/leasing-teams/EZe2q4V8/North-Pacific?s=cl
    SJA Property Management
    sjapropertymanagement.com
    http://www.prometheusreg.com/seattle-properties/128-on-state
    http://www.elinkrealty.com/Property%20management/onlineapplicationform.html

  105. 105

    RE: SKC @ 104 – Are you sure you’re looking at ownership and not just management? Did you check the county tax records for ownership?

  106. 106
    Matt P says:

    RE: Deerhawke @ 98

    https://www.justice.gov/crt/us-department-housing-and-urban-development

    Straight from the government website. You don’t have to give reasonable accommodation if you are directly renting 2 or fewer single family homes.

  107. 107
    Skc says:

    RE: Kary L. Krismer @ 105 – I see less ownership & more owned by management.. When i did the samething 3 years back it was not like that.. it is very much changed now.. Do we have anywhere record to see how many of them owned by management & owners of secondary property?

  108. 108

    RE: Matt P @ 106 – Assuming you’re talking about this language, I’m not sure I agree with your interpretation.

    Under specific exceptions to the Fair Housing Act, the reasonable accommodation requirements of the Act do not apply to a private individual owner who sells his own home so long as he (1) does not own more than three single-family homes; (2) does not use a real estate agent and does not employ any discriminatory advertising or notices; (3) has not engaged in a similar sale of a home within a 24-month period; and (4) is not in the business of selling or renting dwellings. The reasonable accommodation requirements of the Fair Housing Act also do not apply to owner-occupied buildings that have four or fewer dwelling units.

    I would also be concerned about state law and local ordinances, particularly in Seattle.

    Note this is not something I’ve researched, but I’m concerned that you wouldn’t meet the 4th item above–not being in the business of renting dwellings, not to mention it only says people who sell would be exempt.

  109. 109
    GoHawks! says:

    Amazon has taken 1.2 million in new office space in Seattle since the HQ2 announcement, yep the sky is falling.

  110. 110

    RE: Kary L. Krismer @ 94
    Yes Kary

    According to Mother Earth [a FAR left magazine for Global Warming protection]:

    1 dog = 3 Hummers in carbon footprint; so what is the “carbon footprint” of a human being in “Hummers”?

    You can’t have uncontrolled overpopulation causing Global Warming, when you’re against Global Warming. Its like trying to mix oil and water.

    I know…..scientific analysis is explained away like its a fairy tale by open border progressives.

  111. 111
    Bubble Trouble says:

    By Kary L. Krismer @ 88:

    RE: Bubble Trouble @ 86 – The Tesla layoffs were apparently performance related, since there were no WARN notices. But yes, they have production issues, and also may be biting off more than they can chew with some of there non-auto areas of interest.

    If you truly think Tesla suddenly laid off…err I mean fired…700 people because of “performance” issues, I have a lovely oceanfront condo for sale in Nebraska. Great price. Call me.

  112. 112
    Bubble Trouble says:

    By Deerhawke @ 96:

    RE: ess @ 93

    My advice is that if you are going to allow pets, charge extra for the extra wear & tear and take a hefty deposit.

    I charge a non-refundable $500 fee per pet (in addition to the normal refundable deposit) and an extra $50/mo in rent per pet. So for a year’s lease, $1100/pet which is enough to cover changing the carpet in a couple of rooms. Ideally I’d prefer not to have pets in my rentals, but my tenants are all families with kids and seems like families with kids = a dog as well. So I charge the extra money, the kids don’t have to say bye to Fido, mon and dad have happy kids, I have money to cover damage…… and everyone is happy.

  113. 113
    ess says:

    RE: Deerhawke @ 96

    Deerhawke

    I certainly recall the prior discussion about the ESA issue. I did the research back then, and found it very illuminating.

    One wonders if more and more landlords will provide be discounts for no pets. I assume any attempts to do that will result in litigation. After all, in this area, pets are the new children, and we can’t discriminate against children- regardless of how many legs they have.

    Kary @ 99

    Excellent point about neutered cats – and one I had forgotten. Will try to get only cats that will have the problem “fixed” ahead of time. Wonder if there will be a brisk business in fake neutered procedures for those who don’t want to spend the money.

    With all these additional requirements for animals as well as other requirements that cities such as Seattle implement, it will be those that don’t game the system or have other issues that will ultimately have to pay for others. Landlords are simply going to raise the rent on all units to cover the additional cost of renters having almost a free hand in bringing in almost any type of animal with the resulting damage they cause, or other issues as presented to Seattle landlords.

    This is like rent control – the belief that implementing these actions will solve issues, but actually creates new problems – shortage of housing and higher rents. Not only will all renters be paying more, but the availability of units will be decreased as landlords find other methods to fill their units to avoid problems that they can’t protect themselves from by obtaining pet deposits or larger security deposits. Some people never learn from prior mistaken policies.

  114. 114

    RE: ess @ 111 – I’ve been thinking this service pet issue isn’t really an issue for real estate sales, because the seller doesn’t typically care what the buyer does after they buy. That’s why I haven’t looked into it further. But I could see this might be a big issue for condo associations. Still though not my circus.

  115. 115
    Justme says:

    RE: softwarengineer @ 110

    >>1 dog = 3 Hummers in carbon footprint; so what is the “carbon footprint” of a human being in “Hummers”?

    Come on, you don’t actually believe that, do you?

  116. 116
    Brian says:

    Strange very significant increase in Craigslist rental listings this week. Any thoughts?

    https://i.imgur.com/TionfcT.png

    Will have to see next week if this is just some sort of anomaly.

  117. 117
    Justme says:

    RE: Brian @ 114

    That’s just IMPOSSIBLE, Brian. Everyone KNOWS that Amazon employees have spoken for all available housing until 2024.

    Yeah, /sarc.

    PS: Brian, would you mind posting your raw data? Do you have anything from before April? I wonder if the Waybackmachine could be used to generate it?

  118. 118
    Rupert D says:

    Apparently the end is not at hand….Banks’ credit quality has continued to improve since then, far exceeding many of the expectations on the Street. Interest rates are beginning to rise from historical lows, though, causing some to fear that the higher borrowing costs will spur higher delinquencies.

    Bill Parker, vice chair and chief risk officer at U.S. Bancorp, noted at the event that higher rates could put pressure on some real estate credits and expects multifamily loans to be the first to experience issues. He said problems in a massive debt market like the home loan market would cause greater problems but noted that mortgages have been underwritten to pristine standards, particularly when compared to the practices seen before the credit crisis. The executive said that even though home values have risen considerably, borrowers have verified incomes.

  119. 119
    Rupert D says:

    Banks’ credit quality has continued to improve since then, far exceeding many of the expectations on the Street. Interest rates are beginning to rise from historical lows, though, causing some to fear that the higher borrowing costs will spur higher delinquencies.

    Bill Parker, vice chair and chief risk officer at U.S. Bancorp, noted at the event that higher rates could put pressure on some real estate credits and expects multifamily loans to be the first to experience issues. He said problems in a massive debt market like the home loan market would cause greater problems but noted that mortgages have been underwritten to pristine standards, particularly when compared to the practices seen before the credit crisis. The executive said that even though home values have risen considerably, borrowers have verified incomes.

  120. 120
    Kmac says:

    By S-Crow @ 79:

    Back to the HomeStreet thing: Is this a Canary in the coal mine?This is not what happens in an accelerating steady as she goes market.

    This move is called anticipating and getting ahead of the market.

    My very first home was purchased w/ a loan through that bank in early 90’s.

    Just thought I would repost your link in a format that was more obvious to someone that may be quickly scanning the comments and not notice:
    http://ir.homestreet.com/file.aspx?IID=103809&FID=390491660

  121. 121
    Rupert D says:

    read the Homestreet press release. After having worked several years lending to the mortgage banking industry, cutbacks are common among all lenders when originations decrease which is typically related to higher interest rates that cause a decline in refi loan activity. Wait until the Fed really raises interest rates and then you will see more banks announcing similar cuts in staff as loan originations decline. But for now the Fed has announced it will be very deliberate and slow so it doesn’t cause too much of an economic slowdown. Homestreet is probably too small of a bank to be a harbinger of anything. Anyway in Seattle it is not surprising since the inventory of homes for sale is so slow then the actual real estate purchases should be low meaning the loan origination business is less than in the past….I am sure some of the charts in this article will illustrate what is going on regarding the amount of new mortgage loans.

  122. 122

    Here’s an interesting take on why some (but not all) home mortgage interest should remain deductible. Basically the author argues that in high property value areas a person making $X dollars may be just scraping by, while someone making $X in Kansas City (SWE’s favorite city) could be doing rather well. Allowing the MID would allow some sort of taxing equality between regions.

    https://wanderingtaxpro.blogspot.com/2017/10/so-what-about-mortgage-interest.html

    I’m not a big fan of the MID, but at least this view has some merit.

  123. 123
    Deerhawke says:

    RE: GoHawks! @ 109

    Lets see. There is the 710K of office space in Rainier Tower and the 312K in the Macy’s Building announced yesterday. Where is the other 200K sf you are counting in this figure?

    I would imagine that at some point they will start slowing down as they start to do actual planning for HQ2. But that will not be for a few years yet.

    Gradual interest rate increases may take off some of the froth in this market, but the demand pattern for the next few years looks solid. I think anybody who counts on a double-digit increase again during this next year is going to get his head handed to him– if not this year, then next year or the year after. But it is hard to see that we are going to flat-line or fall this next year. Simply too much demand and not enough supply. I always do my P&Ls at current prices so I am safe if things do actually flatten out.

    I think in 2018 we will be seeing a 6% increase in real estate prices in King County and an 8% increase in Seattle.

    This is right around what I predicted last year at this time and it turns out I look pretty conservative.

    Anyone else out there want to give their prediction? And please give your reasons why you think so.

  124. 124
    Deerhawke says:

    RE: Kary L. Krismer @ 120

    You can argue about the economic merits of the tax breaks, but this is really a political issue.

    You have one of the oddest and most unpopular presidents in our history who was elected by a small number of crucial electoral votes but lost the popular vote by 3 million. He has a rabid minority following, but no popular mandate. His party (if it is actually his party) has a majority in the House and Senate, but has not been able to get big difficult things done legislatively.

    Then this administration is talking about taking away middle class tax breaks like the mortgage interest deduction, the charitable contribution deduction and the state/local tax deduction. Despite all the PR and BS to the contrary, the clear aim is to create tax cuts mainly for big corporations and the 1%, especially real estate developers (like me).

    So a good cloth-coat Republican family in upper New York State making $150K is going to see all its tax breaks eliminated (mortgage interest, the 10% tithe to their church, New York state taxes). And the people who benefit are all the hated hedge fund managers down on Wall St. in Manhattan. Oh, and unless you are a true believing member of the Church of the Laffer Curve, it is clear that the deficit will absolutely explode.

    Weirder things have been sold to the American public (like Donald Trump) but generally when people see their taxes are going to jump, they take a really close interest and get involved.

    I think this so-called tax cut is DOA. Or it will be when it finally arrives.

    I

  125. 125

    RE: Deerhawke @ 122 – I’m not sure there is a firm tax proposal out there, but I think one was to double the standard deduction and take away a lot of itemized deductions (including MID). That would benefit a lot of people–primarily people without mortgage debt. And it would also end some distortions in the housing market.

    As to the corporate tax rate, one argument is you should either eliminate corporate taxes entirely, or eliminate the tax on dividends, because taxing both is double taxation. That double taxation hasn’t seemed to have prevented growth (but likely slowed growth), but avoidance of corporate taxes has moved some corporate activity out of the country. Eliminating the corporate income tax would completely reverse that, but also probably hurt a lot of other countries, whose corporate income tax we effectively subsidize through our tax credits for paying foreign taxes.

  126. 126
    district says:

    By Kary L. Krismer @ 120:

    Here’s an interesting take on why some (but not all) home mortgage interest should remain deductible. Basically the author argues that in high property value areas a person making $X dollars may be just scraping by, while someone making $X in Kansas City (SWE’s favorite city) could be doing rather well. Allowing the MID would allow some sort of taxing equality between regions.

    https://wanderingtaxpro.blogspot.com/2017/10/so-what-about-mortgage-interest.html

    I’m not a big fan of the MID, but at least this view has some merit.

    True as far as it goes, but why should the tax code be responsible for making sure that equal pay in various cities translates to equal standard of living? (or even nudging things in that direction). If Kansas City is more attractive because of its cost of living, it deserves to keep that competitive advantage.

  127. 127
    N says:

    The MID definitely benefits the upper middle class but it’s not exactly reaching the majority of the middle class considering what the median income is and how high the standard deductions are (often wiping out any benefit for MID for many of those folks). Not to mention many in the lower half of the middle class are renters and get nothing.

    Seems realtors and the so called wealthy benefit the most.

  128. 128
    uwp says:

    By Kary L. Krismer @ 123:

    RE: Deerhawke @ 122 – I’m not sure there is a firm tax proposal out there, but I think one was to double the standard deduction and take away a lot of itemized deductions (including MID). That would benefit a lot of people–primarily people without mortgage debt.

    While selling the “framework” and how great it would be to double the standard deduction they always neglect to mention that the tentative plan gets rid of personal exemptions and raises the bottom bracket.

  129. 129

    By N @ 125:

    Seems realtors and the so called wealthy benefit the most [from the MID].

    I think it’s sellers that benefit the most. Either that or I need to increase my commission by over 1000%. ;-)

  130. 130
    ess says:

    By GoHawks! @ 109:

    Amazon has taken 1.2 million in new office space in Seattle since the HQ2 announcement, yep the sky is falling.

    And there is a certain irony that Amazon will be occupying store space once owned by Macys insofar that Amazon’s business model is in great part most of the reason that Macys has had to close so many stores and downsize its Seattle flagship store. Thus in Seattle, home of Amazon Headquarters Number One, the victor will literally lord over the vanquished!

  131. 131
    ess says:

    RE: Deerhawke @ 121

    Lets see. There is the 710K of office space in Rainier Tower and the 312K in the Macy’s Building announced yesterday. Where is the other 200K sf you are counting in this figure?

    Deerhawke

    According to article below – the Rainier Tower and Macys aka old Bon Building is the 1.2 million. Apparently two more floors were included in the old Bon/partial Macys building – bringing the total of square footage taken over by Amazon to the 1.2 million. Apparently, Amazon isn’t leaving Seattle just yet………

    https://www.geekwire.com/2017/amazon-will-move-macys-building-landmark-seattle-real-estate-deal/

  132. 132
    whatsmyname says:

    By N @ 125:

    The MID definitely benefits the upper middle class but it’s not exactly reaching the majority of the middle class considering what the median income is and how high the standard deductions are (often wiping out any benefit for MID for many of those folks). Not to mention many in the lower half of the middle class are renters and get nothing.

    Seems realtors and the so called wealthy benefit the most.

    For a single person, the MID starts phasing out at around $165,000 in income. It’s not really the big game for the “wealthy”.

    Still, let’s do it your way. If the deductible interest on my rental investment becomes more favorable at net than your nondeductible interest (on the same house – that you live in), it increases my advantage to own it while decreasing yours. I benefit from less price competition at purchase and more tenants for my own business.

  133. 133
    Justme says:

    Donald Trump is a landlord, plain and simple. He wants people to be his tenants. So therefore he wants MID to be available only to landlords that buys and rents houses, and not to regular people.

    IMO, nobody should get the MID, neither landlords nor occupant owners. That ought to cut down on the nasty profiteering that is going on.

  134. 134
    Cap''n says:

    RE: whatsmyname @ 130

    Not sure where you are getting that number from….. roughly married filing separately? And the well off seem to do quite well.

    https://www.google.com/amp/s/www.cnbc.com/amp/2017/08/31/that-beloved-mortgage-deduction-skews-to-the-wealthy.html

  135. 135
    whatsmyname says:

    RE: Justme @ 131 – Interest is a business expense, like any other, and common among most businesses. It creates a lower total capital cost which increases feasibility at lower prices.

    The reality of profit or income as a driving factor is an after-interest consideration. There is no coherence in denying interest deductions to certain businesses, or any businesses, except that it appeals to your narrowest and not-very-well-thought-out financial interests. Congratulations, someone has become the manipulative capitalist chiseler that he loves to hate.

  136. 136
    Eastsider says:

    I bet most people commented on MID here do not claim it on their individual tax returns. Itemized deduction is not a big thing in WA because it has no state income tax. The relatively small number of residents claiming MID are concentrated in only a few zip codes in King County. Given the ultra low interest rate today, the deduction is irrelevant for over 95% of housing stock in the state. So stop pretending that people claiming MID are from the ‘middle’ class.

    If we don’t get rid of MID in this low interest rate environment, we will never have a chance when the rate is (much) higher. Do the right thing => get rid of MID today!

  137. 137
    Eastsider says:

    RE: whatsmyname @ 132 – +1!

  138. 138
    Deerhawke says:

    RE: ess @ 129

    Good article. Thanks Ess.

    The article touches on Facebook. I recently spent some time with a senior guy at Facebook. He said FB plans to double next year (headcount and space) and double again the following year. How are they getting people? Mainly stealing from Microsoft by paying substantially higher wages and offering better benefits, a cooler environment, etc.

    My contacts at MS tell me they in turn are hiring as fast as they can– in part because they are being raided by Amazon and FB.

    None of this tells me that we are in for a slowdown in the local for-sale market.

    However, I think we are in for a glut in the for-rent market. Too many apartments hitting the market at the same time.

    At some point in a few years, all of those people living in chic $4-5 per sf apartments in SLU and Cap Hill will want to buy a house. If you want another reason to be bullish on the Seattle real estate market in the medium to long term, that is it.

  139. 139
    ess says:

    RE: Deerhawke @ 135

    Lost in the Amazon shuffle are all the other growing tech companies in the Seattle area. These highly paid individuals should help support the real estate market for the next few years. I wonder which company is going to have a major presence in Puget Sound in the next few years? From what you say, Facebook should be growing at a pretty good clip in this area.

    If your hypothesis is correct that there is going to be a glut of apartments, but high demand for houses, will that demand support the rental market, or will their be a softening of the apartment rental market while the single family market remains strong?

    I also think individuals at some point are going to want to reside in their own house. Especially if they get married and have two legged children (rather than the four legged “furkids” Seattle is famous for). And those folks are going to need something a bit bigger than a one or two bedroom 600 -900 sq foot apartment if they are married and have little ones running about.

    There are also younger tenants that enjoy renting a house rather than an apartment. We are starting to see more of that type of tenant in the past few years.

    The primary difference between a rental house and an apartment is the hassle of taking care of the grounds. Thus we are going to start to offer yard maintenance as an included service, and advertise the rental house as having the privacy benefits of a house, but the convenience of an apartment and/or condo. That should that attract additional potential renters that don’t want to bother with either buying garden equipment, or hassling with mowing a lawn, but are ready to move on to a house, even if they don’t want to buy or can’t afford to buy one. And we have to face reality – tenants that express a willingness to maintain the lawn and garden just don’t do a very good job, and they certainly aren’t interested in trimming shrubs or pulling blackberry bushes. Often yard maintenance comes down to a mowing or two before the tenants move out, and the yard suffers from lack of care. We have been kicking that idea about for years – finally there is unanimity of agreement between us that it is time to relieve tenants of any garden responsibilities, raise the rent slightly to cover some of the cost of professional lawn maintenance, and parlay that into a positive for those who don’t want to mess with gardens, but want the ability to enjoy one. Or in other words – the convenience of an apartment experience in a house.

  140. 140

    By Justme @ 131:

    Donald Trump is a landlord, plain and simple. He wants people to be his tenants. So therefore he wants MID to be available only to landlords that buys and rents houses, and not to regular people.

    IMO, nobody should get the MID, neither landlords nor occupant owners. That ought to cut down on the nasty profiteering that is going on.

    Yes he’s a landlord, but most his tenants are likely businesses (ignoring hotel customers). They deduct on the basis of the interest being a business expense, and I don’t believe anyone (but you) is talking about that going away. That would be totally crazy, because interest can be a huge expense for businesses, and is a real cost.

  141. 141

    By Eastsider @ 133:

    I bet most people commented on MID here do not claim it on their individual tax returns. Itemized deduction is not a big thing in WA because it has no state income tax.

    Huh? What does a state income tax have to do with itemizing deductions? You base it on federal taxes, and that number probably then just carries over to the state (I’ve never lived in a state with an income tax). I haven’t itemized for years, but I think the threshold for a married couple is somewhere in the $22,000 range ($14,000 SD and two $4,000 personal exemptions, or some such thing).

    Assume $5-10k in real estate taxes and you’d need over $10-15k in interest expense. A $400,000 mortgage at 4% interest would generate $16,000 in interest deduction, allowing someone to itemize if their tax bill was over $6k–but not much actual tax benefit. But those are fairly modest tax and mortgage amounts, and the benefits would kick in slightly earlier for a single person (but as someone mentioned, they also start disappearing at higher income levels).

    I think the bigger problem is many people forget about the standard deduction and assume they’ll save on the first dollar spent on taxes.

  142. 142
    Ross says:

    By Kary L. Krismer @ 138:

    By Eastsider @ 133:

    I bet most people commented on MID here do not claim it on their individual tax returns. Itemized deduction is not a big thing in WA because it has no state income tax.

    Huh? What does a state income tax have to do with itemizing deductions? .

    State income tax paid can be itemized on federal income taz. The implication is that in states with high state income tax, a much higher percentage of the population will be itemizing.

  143. 143

    Zillow is apparently updating their 2016 study of rising sea levels in Seattle, and again they apparently don’t think the Ballard locks will be modified as sea levels rise. Either that, or maybe water would get in some other way? I suspect though it’s just more bad data from Zillow.

    https://seattle.curbed.com/2017/10/18/16500452/seattle-homes-climate-change-flooding

  144. 144
    Eastsider says:

    RE: Kary L. Krismer @ 138 – For a family with an income of $150,000/yr, WA sales tax deduction is about $2,000 vs $10,500 CA state income tax deduction.

    In any case, if the standard deduction is increased as proposed, MID will become a non issue in WA.

  145. 145

    RE: Eastsider @ 144 – Okay, that makes sense. I guess though you’d need to compare the sales, income and RE tax load in total, but I think their sales tax is only slightly less than ours, so that would only leave RE taxes being significantly different, and I believe that is very owner specific in CA.

    BTW, I think there was a proposal to end the deduction of most state and local taxes, but again I don’t really follow these proposals closely given that the end result with Congress is likely no legislation being passed and enacted.

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