Matthew Gardner: “It’s not a housing bubble”

I’m still not really sure whether or not we’re in the midst of another housing bubble in the Seattle area, but here’s a strong sign that we might be: Local real estate cheerleader and permabull Matthew Gardner is loudly proclaiming that “No, it’s not a housing bubble.

Matthew Gardner
Matthew Gardner (LinkedIn)
No, we’re not in a housing bubble. Now is a good time to ask your boss for a pay raise. And we need to forget about the recession — it was a long time ago.

Those are the conclusions of economist Matthew Gardner.

“I’m an economist, it’s my job to worry and find bad things, that’s why it’s a dismal science,” said Gardner, who works for Windermere Real Estate in Seattle. “I’m trying to find bad things and I’m having a problem with it.”

Try not to laugh out loud at that last bit.

Are You Missing the Real Estate Boom?: The Boom Will Not Bust and Why Property Values Will Continue to Climb Through the End of the Decade - And How to Profit From Them - by David Lereah, National Association of Realtors Chief EconomistWhile Gardner used to at least maintain the illusion of impartiality, working as an independent economist with his own firm Gardner Economics, since 2015 he has been on staff at Windermere as their chief economist. And we all know how impartial economists are when they’re directly employed by real estate salespeople. Exhibit A: The book “Are You Missing the Real Estate Boom?: The Boom Will Not Bust and Why Property Values Will Continue to Climb Through the End of the Decade – And How to Profit From Them,” written by David Lereah in 2005 when he was Chief Economist for the National Association of Realtors.

In order to have proper context for Gardner’s current prediction, let’s take a look at his track record when it comes to predicting the Seattle-area housing market.

According to an over-the-top positive February 2007 Seattle Times article headlined “The year of the condo in downtown Seattle,” he told “an audience of about 700 that demand for new places to live downtown will remain ‘very positive.'” As we know, that didn’t turn out to be very accurate.

Here’s an excerpt from a May 2007 Seattle Times real estate Q&A:

Q: I expect to see an actual drop in the market sometime around the end of summer. Now taking into account that many of the advertisers in your section of the paper are builders and real estate agents, what is your opinion, why, and when do you expect the present trend to actually start dropping?

A: I believe that we are in a situation where we are seeing a more-rational market and one that is returning to the more-moderate pace that we saw earlier in the decade. This is not a bad thing. I do not think that we are going to see price declines, rather we will see slowing price increases with well-located, well-priced and well-marketed houses still selling well.

This was just two months before home prices in the Seattle area peaked, eventually falling over thirty percent.

In October 2007 Gardner was predicting “a leveling off — with increases of roughly 3 percent — for a couple of years.”

Even after prices started falling sharply, Gardner remained unrealistically optimistic, claiming in early 2009 that home price appreciation would return in 2010. Of course, prices did not bottom out until early 2012.

So perhaps you can understand why, when I read something like this from Matthew Gardner today, I’m more likely to believe exactly the opposite:

The dynamics that led to the last housing collapse aren’t in play, locally or nationally, he said. Borrowers are more sound. Home building is slow. And more first-time buyers are looking for a home.

“So we have limited supply, we have good demand, we have great credit and we’re not over-leveraged and the interest rates are staying low,” Gardner said. “Housing prospects across America look pretty good as far as I can see.”

“As far as I can see” is the important qualifier there. All that Matthew Gardner ever sees is a rosy outlook for real estate.


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.

263 comments:

  1. 1
    Brian says:

    Home building is slow.
    – Matthew Gardner

    I guess he doesn’t count apartments as homes.

  2. 2
    Nick says:

    God. I just want it to pop already.

  3. 3
    uwp says:

    By Brian @ 1:

    Home building is slow.
    – Matthew Gardner

    I guess he doesn’t count apartments as homes.

    As The Tim would say, that’s a hovel, not a home.

  4. 4
    Scott Weitz says:

    RE: uwp @ 3RE: uwp @ 3

    He must be a Lawerence Yun disciple who Im pretty sure never once has said anything negative about Real Estate yet is a “Chief Economist”. The hard part is people actually look at “pros” like this as authorities yet couldnt tell you who Robert Schiller is.

  5. 5
    The Tim says:

    By Scott Weitz @ 4:

    The hard part is people actually look at “pros” like this as authorities yet couldnt tell you who Robert Schiller is.

    And even fewer have a photo with him ;)

  6. 6

    Village Idiots Like Him

    Design our Seattle freeways to clog up like parking lots the last 40 years by overpopulating accesses with over building on access streets with cul-de-sac housing developments and apartments. Then allege growth is good? LOL

    Thank God I’m a typical Seattle home owner, I don’t work here, retired and travel the freeways 10AM-1PM only. You “average household per capita lower paid workers” can eat cake and pay/take the expensive trains that generally don’t function for your commutes at all [but pay your $300 car tabs anyway] or take a 4 hour commute to work on our metro bus system, pay your expensive parking bills too and save hardly any retirement cash…..LOL…then you die.

  7. 7
    Seattle Citizen says:

    Everyone in this forum feels the same and you never disagreed, Why do you feel different only when Matthew Gardner says?

  8. 8
    The Tim says:

    RE: Seattle Citizen @ 7 – I don’t understand the question. I don’t think it’s accurate to say that “everyone in this forum feels the same” about anything. And I’ve been pretty consistent lately in saying that I think we might be getting into another bubble, but I’m still not sure.

  9. 9

    RE: The Tim @ 8 – I’ve been pretty consistent saying that any predictions are pointless (particularly by real estate agents and Zillow) and that larger companies just hire people to make up numbers so that they can issue a press release and get some publicity/attention.

  10. 10
    Justme says:

    “a leveling off — with increases of roughly 3 percent — for a couple of years.”

    That sounds a lot like what bubblemongers say on this blog all the time.

  11. 11
    Seattle Citizen says:

    RE: The Tim @ 8
    The supply is very less and the demand is high. Way too many people in Seattle than houses available. Can anything change this trend unless Amazon starts laying off? Amazon does not seem to in that track in near future. Even if there will be a recession, do you think housing prices in Seattle will be hugely impacted?

  12. 12

    Still working my way through Misbehaving, by Thaler, and one topic he brings up a bit is the “endowment effect,” which succinctly is that people value the things they own more than they would if they are just thinking about buying the item. An example he uses is a season ticket holder might not be willing to pay the spot market price for a ticket (say $800), but is unwilling to sell the ticket they paid only $200 for for $800. They would instead go to the game. Thaler has not brought this up (yet), but I wonder how much of that pertains to our current real estate market?

    Given the fairly long time many people thought it wasn’t a good time to buy or sell, I wonder if the existing owners have inflated the value of their property in their own minds more than typical in the past? And when you factor in costs of sale with over-valuing your own property, you’d have to have a much better house to move to in order to even break even. That type of thinking could really keep our inventory low, because remember that in the past a significant part of the inventory was people buying and selling.

    Over the longer term it could also help explain long-term rising prices. The endowment effect would make prices even more sticky downward because people would be overvaluing their homes and be less willing to sell. Eventually the buyer market would have to give in to be able to buy. And individually, it clearly explains a lot of sellers I’ve run into over the years!

  13. 13
    Doug says:

    Economist for Windermere? Come on. Why even give credence to this schil by reposting his thoughts here?

  14. 14
    Doug says:

    Very sad. Seattle’s backwards policies causing companies to relocate. Throw a business tax on top and this is quickly becoming a bad business environment. Not good for real estate.

    http://www.king5.com/news/local/seattle/longtime-sodo-business-moving-says-homeless-encampments-to-blame/484408842?utm_campaign=trueAnthem:+Trending+Content&utm_content=59e8e83119694a0007efb651&utm_medium=trueAnthem&utm_source=twitter

  15. 15
    Brady says:

    RE: Kary L. Krismer @ 9 – I don’t think The Tim’s predictions in 2006 and 2007 were pointless.

  16. 16
    Brady says:

    Matt Gardner was wrong in 2007, but I don’t think he is wrong now in the City of Seattle. There is no bubble.

  17. 17
    N says:

    I guess it should be pointed out this is the same guy who has called for a recession within the last 12 months.

    https://www.bizjournals.com/seattle/news/2017/05/02/seattle-recession-windermere-chief-economist.html

    http://features.crosscut.com/seattle-tech-economy-recession-vulnerability-boom-bust

    But while wages have been soaring (3.6 percent annually in the Seattle metro area) they’re not rising nearly as fast as rents (9.7 percent) or home prices (11.8 percent). “You see rents growing at 15 to 20 percent over the last two years, but show me where incomes have gone up to match,” says Mathew Gardner, chief economist at Windermere. “They haven’t.” That’s one reason Gardner predicts a local downturn by 2018.

  18. 18
    John P says:

    I’ve been monitoring the Port Orchard/Gig Harbor area for over the past year (looking to buy – but not wanting to buy in the peak). Tacoma policing and homeless strategies are becoming very similar to Seattle’s (which are not effective in my opinion) — I want out of here. Recently, there has been quite significant reductions in prices of higher priced homes (420-600k) in Gig Harbor/Port Orchard. The cheaper ones are still selling pretty fast, but with a much higher sq foot cost. I wonder if this may be a sign of a cooling market, starting at the top and in the surrounding areas. Any thoughts? Is anyone else seeing this too or have any comments?

  19. 19
    Doug says:

    RE: N @ 17 – LOL

    Let’s pool some money together and see if we can get him to turn bearish.

  20. 20
    Doug says:

    RE: John P @ 18 – Reductions in a vacuum is sort of useless as we don’t know what the list price was.

    What’s the trend on the sale price per sq ft of similar sized houses?

  21. 21

    By Brady @ 15:

    RE: Kary L. Krismer @ 9 – I don’t think The Tim’s predictions in 2006 and 2007 were pointless.

    They were based mainly on price, and the local price wasn’t what caused our fall, AND we’re now way above that price.

    There was another poster here named Euelua, or some such thing, whose reason for being bearish was actually much more accurate. The problem is picking from the many to find the one that is accurate, and I certainly didn’t do that.

  22. 22
    Erik says:

    RE: The Tim @ 5
    Cool picture Tim.

  23. 23
    Eastsider says:

    RE: Doug @ 14 –

    Also check this out –

    With expansion, Washington State Convention Center agrees to provide more than $80 million in public benefits
    https://www.seattletimes.com/seattle-news/politics/with-expansion-washington-state-convention-center-agrees-to-provide-more-than-80-million-in-public-benefits/

    Why is the $80m ‘public benefits’ tax not going into city’s coffer? Has the Community Package Coalition taken over city’s budget?

    Alex Hudson, executive director of the First Hill Improvement Association, noted that the agreement is four times the size of the Pine Street Group’s initial offer.

    “I think the convention center wants to be doing what’s right for the city,” Hudson added. “We just helped them understand that the public wanted this to go forward and that this would be the best way to do it.”

    Alex who? This seems like an outright extortion to me. Btw – the top three commenters on the article share my sentiment (bribe/payoff/hush money/smokescreen/Democratic pork/shake down).

    Amazon would be crazy not to look for a new HQ.

  24. 24
    Erik says:

    RE: John P @ 18
    If you are looking for price appreciation or good renters, buy in Seattle or eastside. Pierce county is where the poor people will continue to migrate to as time goes on. It’s cheap because most people don’t want to live there. There are some rich slum lords in that area, but all the ones I know that had rentals in the dirty south sound suffered pain. King county are college educated desk people and pierce county is construction workers and car wash attendants.

    I learned a hard lesson renting to people in Everett, tacoma’s dirty brother to the north. Renting to poor people is tough. Seattle rentals are easy to find great low testosterone tenants to rent to.

  25. 25
    Blake says:

    By Seattle Citizen @ 11:

    RE: The Tim @ 8
    Even if there will be a recession, do you think housing prices in Seattle will be hugely impacted?

    LMFAO!! Yup yup…. Seattle is different! Yup yup… Amazon and other Seattle companies will not be affected by a recession.

  26. 26
    Action says:

    By Kary L. Krismer @ 12:

    Given the fairly long time many people thought it wasn’t a good time to buy or sell, I wonder if the existing owners have inflated the value of their property in their own minds more than typical in the past? And when you factor in costs of sale with over-valuing your own property, you’d have to have a much better house to move to in order to even break even. That type of thinking could really keep our inventory low, because remember that in the past a significant part of the inventory was people buying and selling.

    Over the longer term it could also help explain long-term rising prices. The endowment effect would make prices even more sticky downward because people would be overvaluing their homes and be less willing to sell. Eventually the buyer market would have to give in to be able to buy. And individually, it clearly explains a lot of sellers I’ve run into over the years!

    Ding ding ding! You hit the nail on the head.

    Now you’re getting the hang of behavioral economics. People being reluctant to sell at a price even though they would not be willing to buy at that price.

    Although you could argue that this is also somewhat rational since there is a real cost to selling (realtor fees and moving costs) as well as higher interest rates now than when they refinanced. But I would guess that when you factor all those costs in, people are still irrational in their selling price vs. what they would be willing to pay.

  27. 27
    N says:

    Interesting times for our neighbors to the north:

    http://vancitycondoguide.com/mortgage-stress-test-january-2018/

    In other words, if you secure a 5 year fixed mortgage at 3.09%, the amount you’ll be able to borrow will be assuming a rate of 5.09% even though you’re technically still borrowing at 3.09%.

    This ultimately helps mitigate risk in the event of a housing downturn while creating a much safer lending environment. However, per estimates from Better Dwelling, it could reduce borrowing power by as much as 25%. Huge.

  28. 28
    Deerhawke says:

    RE: Action @ 26

    I saw people in Q4 of 2010 who were late in foreclosure. They angrily refused to agree to a short sale (or really to any sale) because they had been offered double that amount in the spring of 2007. I asked them if they would consider buying a similar property at the price they were refusing and the answer was a resounding no. Classic example of why RE prices are so sticky downward.

    I think one of the reasons prices are rising right now is that people are so convinced that if they sell, they will be leaving a lot of money on the table. They want to hold out as long as possible and sell at the very last minute before the downturn. They are convinced that with no particular expertise in the field, they will be able to call the top.

  29. 29

    By Action @ 26:

    Although you could argue that this is also somewhat rational since there is a real cost to selling (realtor fees and moving costs) as well as higher interest rates now than when they refinanced. But I would guess that when you factor all those costs in, people are still irrational in their selling price vs. what they would be willing to pay.

    There’s even some rationality to the ticket example I gave. You really shouldn’t be willing to buy at the same price you would sell, because there’s a bit of government interference in the transaction–income taxes. To sell at $800 the person would have a $600 tax gain, so you wouldn’t really be getting $800. Also, just because they only paid $200 for the tickets, it doesn’t mean that is all they are worth to them. We only know that they weren’t worth $800 because they wouldn’t be willing to pay that much, but maybe the tickets were worth $600 to them.

  30. 30

    By Deerhawke @ 28:

    I saw people in Q4 of 2010 who were late in foreclosure. They angrily refused to agree to a short sale (or really to any sale) because they had been offered double that amount in the spring of 2007. I asked them if they would consider buying a similar property at the price they were refusing and the answer was a resounding no. Classic example of why RE prices are so sticky downward.

    I’m not sure that’s a good example, at least if you assume that the bank would forgive the deficiency, which was somewhat typical, and that there would be no tax consequence. For such a short seller the price would be immaterial. That type of attitude likely just meant they didn’t really want to sell–as was the case with many short sellers. I think some even tried to do short sales to drag out foreclosures.

    The buyers of short sales though really had it good. They were not only buying at a time when the market was down, but also buying a type of property where they had much less competition, so they could buy below FMV. Unfortunately not everyone could play in that game, because the time of closing was so uncertain. That made it even better for those who could!

    A better example would be some sellers I met who did an incredible amount of research on property sales in the area, complete with spreadsheets, but still managed to conclude that their house was worth much more than it really was. It was so bad you could even tell that just by looking at the spreadsheet! And the market proved them wrong over the course of four different listings.

  31. 31

    By Action @ 26:

    Now you’re getting the hang of behavioral economics.

    BTW, except for Thaler saying economists think people will act like in their traditional models, I really haven’t had an issue with anything in his book (although some of the history is rather dull). I’m sure there were economists who thought people acted as in the models, but I don’t recall being taught that.

    In fact, I remember being taught something called the “Theory of Second Best.” I’d have to look up exactly what it was, but it connects up with my prior comment about the ticket sales and income taxes. Government interferes with markets and gets them away from optimal results. The Theory of Second Best was about how the market performers should adjust from standard models and by doing so they could get to a better result even than if the government wasn’t interfering. I remember the professor wanting a T-shirt that read: Second Best is Better!

  32. 32
    Ira Sacharoff says:

    As far as Matthew Gardner can see is about two inches in front of him. He’s in that category along with weather forecasters and stock market analysts: They can be wrong a great majority of the time, but never lose their jobs, and often get new, higher paying jobs.

  33. 33
    Cap''n says:

    RE: Action @ 26

    In addition to the monetary cost, moving is a PITA. The thought of moving yet again drives me to want a significantly higher price to sell than what I would pay for my current home.

  34. 34
    Chuck says:

    Hello all! Long-time lurker, first-time commenter.

    I find this talk of a bubble interesting, because in a way it sets a mood in the mind that we should be expecting something negative which may or may not come to pass. In fact, Robert Shiller wrote about this very psychological phenomenon in today’s NY Times with respect to the panic of 1987.

    https://www.nytimes.com/2017/10/19/business/stock-market-crash-1987.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=second-column-region&region=top-news&WT.nav=top-news

    Just thought it would make some useful reading for all of the perma-Bears out there. Cheers!

  35. 35
    Justme says:

    Robert Shiller became a total wimp after he got the Nobel Prize. Now Shiller is acutely aware that he is a big and recognizable name, and he is deadly afraid of being the guy that gets the blame for bringing the markets down to their real values, as opposed to their massively inflated bubble values.

    That’s why he writes these waffling semi-warnings about bubbles. He wants to cover his behind by issuing tepid warnings, but at the same time not be seen as the person that “caused” the crash. That is also a main reason why he will write lengthy articles about the mechanisms of market panics, rather than the real reason for market panics: Massive overvaluation, and people taking huge risks and gambling that they will be able to get out before the crash hits.

  36. 36
    Green-Horn says:

    RE: The Tim @ 5RE: Doug @ 14

    What could we ever do so such economists and scientists became our idols instead of entertainers & sports stars?

    Let’s face it, actors don’t do much more than play make believe, many of whose “pretending” isn’t even particularly great or removed from their own popular personalities.

  37. 37
    Brian says:

    By Justme @ 35:

    Robert Shiller became a total wimp after he got the Nobel Prize. Now Shiller is acutely aware that he is a big and recognizable name, and he is deadly afraid of being the guy that gets the blame for bringing the markets down to their real values, as opposed to their massively inflated bubble values.

    That’s why he writes these waffling semi-warnings about bubbles. He wants to cover his behind by issuing tepid warnings, but at the same time not be seen as the person that “caused” the crash. That is also a main reason why he will write lengthy articles about the mechanisms of market panics, rather than the real reason for market panics: Massive overvaluation, and people taking huge risks and gambling that they will be able to get out before the crash hits.

    Interesting thoughts. It did seem vague and hesitant to draw any real conclusions. But worth the read anyway.

  38. 38

    By Green-Horn @ 36:

    RE: The Tim @ 5RE: Doug @ 14

    What could we ever do so such economists and scientists became our idols instead of entertainers & sports stars?.

    Are you forgetting about Seattle’s own Bill Nye? ;-)

    I’ve never understood the fascination with stars, or TV shows like ET. I really don’t care at all about the stars’ personal lives or politics. Just not a big deal. I’ll like actors if they’re particularly good at playing different and varied roles (e.g. Hank Azaria), or if they happen to get a particularly good role (e.g. Ferris Buehler); or even if they happen to play basically the same character as every character they play, but that character is likable (e.g. James Garner). But I don’t like them just because they are famous (e.g. virtually any Kardashian). I almost wonder if it’s because we don’t have royalty in this country–the stars get the attention royalty would receive.

    But to Green-Horn’s point, I think this country could definitely step it up a bit when deciding who we look up to.

  39. 39
    Justme says:

    RE: Brian @ 37

    That being said Shiller has done great work, such as the Case-Shiller housing index methodology, and I would be honored to meet the guy — but I would give him an earful about being so tepid about bubbles.

    I don’t know how Tim met him, would you care to tell us the backstory Tim? (or a link if it has already been written about).

  40. 40
    S-Crow says:

    RE: Justme @ 39 – When he (Dr. Shiller) spoke at Seattle Pacific U. The connection of SPU may also be faculty member Dr. Doug Downing (PhD in Economics from Yale).

  41. 41
  42. 42
    The Tim says:

    By Justme @ 39:

    I don’t know how Tim met him, would you care to tell us the backstory Tim? (or a link if it has already been written about).

    I got to meet him after a talk at Seattle Pacific University in 2009. I wrote a post about his talk here: Robert Shiller at SPU—Psychology and the Housing Market

  43. 43

    RE: Kary L. Krismer @ 12
    Another Good Read Kary

    Is Peter Straub’s 1990 Mystery novel….it reminds me of the open border Progressive Seattle area politics. Selfishness, lies and coverups are a Fascist [yes, Progressives included] society’s indirect ways to ignore majority truth and “bully their loser brainless path to destruction and crime.

    This mind block problem has been with us for decades, its just got suddenly MUCH WORSE.

  44. 44
    Brian says:

    By The Tim @ 42:

    I got to meet him after a talk at Seattle Pacific University in 2009. I wrote a post about his talk here: Robert Shiller at SPU—Psychology and the Housing Market

    On that note, what’s the deal with that Ray Pepper guy and $500 Realty? I hear his name mentioned in poor context all the time. But that company sounds interesting:

    Per the website 500realty.net:

    If the seller sets the buyer agent commission (also known as “Selling Office Commission” and SOC) at 3%, then you will receive 2.25% of the home price refunded to you on or after closing. Please keep in mind $500 Realty has a $3900 office minimum per transaction.

    I take it the work done on their part is very minimal? Do they even write up an offer for you?

    When I eventually buy, I don’t need an agent that looks through listings for me or takes me on tours. Just write the offer and get me through closing.

  45. 45
    Erik says:

    RE: Brian @ 44
    Ray Pepper is a great guy. Some people on here are jealous of him because he became wealthy during the last housing bust. He played all his cards right and was able to get out of a tough situation with minimal damage. Ray cares about helping people. Most the people on here including Tim care that you follow the rules that allow rich people to get richer and poor people to get poorer. I don’t understand that, but I think it has something to do with software people only knowing how to follow rules.

    From reading Ray’s comments on here, I was able to go from a situation where I was living paycheck to paycheck with lots of stress to what I would consider a much better position with solid rentals in pretty decent areas of Seattle. I’m not smart enough to tell you what to do in real estate, but Ray is someone to listen to. Call him and he will probably talk to you. That’s what I did and he offered me some good advice that was life changing.

  46. 46
    Justme says:

    I’ve been going down a lost memory lane of sorts, reading seattlebubble posts from 2006, 2007, 2008, 2009, ….

    Wow, where are all those people now? I had heard David Losh is dead. Too bad, the posts I read from him were good. Nowadays, the majority of posters are builders, landlords and agents. Seems like they all started piling in around 2011-12, when Fed bubble reflation scheme started in earnest.

  47. 47

    By Brian @ 44:

    On that note, what’s the deal with that Ray Pepper guy and $500 Realty? I hear his name mentioned in poor context all the time. But that company sounds interesting:

    Per the website 500realty.net:

    If the seller sets the buyer agent commission (also known as “Selling Office Commission” and SOC) at 3%, then you will receive 2.25% of the home price refunded to you on or after closing. Please keep in mind $500 Realty has a $3900 office minimum per transaction.

    I take it the work done on their part is very minimal? Do they even write up an offer for you?

    I think Ray does pretty much full service work, and I don’t have an issue with him as an agent (although back in the day he did say that if there was another offer on a property his client was making an offer on he would recommend pulling out–that never made any sense). Also, at one time his web-page did miscalculate the savings.

    The issue with Ray is his so-called “investment” activities, and more to the point, trying to sucker other people into them.

    Oh, and BTW, based on Erik’s response he still hasn’t Googled the term: “Offer in Compromise.”

  48. 48
    Erik says:

    RE: Kary L. Krismer @ 47
    I followed Mr. Pepper’s “investment” strategies and it took me from poor white trash to white trash with Seattle rentals that is no longer poor.

    Ray paid cash for 20 rentals and got an offer of compromise where he had to pay some money he could have used to buy another rental. Big whoop. Ray won because he sacked up when it mattered.

  49. 49
    Hugh Dominic says:

    By Kary L. Krismer @ 29:

    By Action @ 26:

    Although you could argue that this is also somewhat rational since there is a real cost to selling (realtor fees and moving costs) as well as higher interest rates now than when they refinanced. But I would guess that when you factor all those costs in, people are still irrational in their selling price vs. what they would be willing to pay.

    There’s even some rationality to the ticket example I gave. You really shouldn’t be willing to buy at the same price you would sell, because there’s a bit of government interference in the transaction–income taxes. To sell at $800 the person would have a $600 tax gain, so you wouldn’t really be getting $800. Also, just because they only paid $200 for the tickets, it doesn’t mean that is all they are worth to them. We only know that they weren’t worth $800 because they wouldn’t be willing to pay that much, but maybe the tickets were worth $600 to them.

    I think the principle is incorrect for a different reason. Arranging a transaction and making a decision represents work. People don’t want to do work, at least not for free. For the tickets (or house) that you already own, no work remains to enjoy it. The difference that you’d measure in the buy/sell motivation level is the user’s cost of that work.

    I bought a house last year for $x. I also invested months of painful effort in the process. If you ask me whether I would want to sell it for $x to buy a different house for $x there is no way I would say yes.

  50. 50
    Blake says:

    Excellent comment by Hugh.

  51. 51
    Hugh Dominic says:

    2018 is going to be soft. Our price gains are built around importing wealthy people from out of town for $200k salaries. They are the buyers driving prices. Well, my friends at Amazon are saying that many departments are overhired now. The brakes are getting put on as we speak. And that’s not even related to HQ2.

  52. 52
    Blake says:

    We’re also at the end of a business cycle and the central banks are bound and determined to raise rates…

  53. 53

    By Erik @ 48:

    Ray paid cash for 20 rentals and got an offer of compromise where he had to pay some money he could have used to buy another rental. Big whoop. Ray won because he sacked up when it mattered.

    You still don’t get it. Those two things don’t happen–at least not without committing a federal crime. You believe Ray–that’s a problem.

  54. 54
    seattlenewbie says:

    yet if everyone on here listened to ray in 2010, they would all be rich….

  55. 55
    Mikal says:

    He must be on our presidents short list to run the FED.

  56. 56
    Mikal says:

    I realize this is way out of topic. I moved here in 92 fresh out of college and there were always way more homeless people here than Minnesota. My dad from the midwest was horrified when he visited then. Imagine now. The only difference now is they aren’t drunks. Most of those tents are being lived in by people hooked on opioids. Tim’s right in that the bubble may be here or is close. No one should be buying right now.

  57. 57
    Erik says:

    RE: Hugh Dominic @ 51
    Sounds like the same rhetoric people always say at this time of the year when gains slow. All the housing data would say you are wrong.

  58. 58
    seattlenewbie says:

    mikal you should take a trip to CA or really anywhere. It is way worse there, I had people shooting up in front of my house all the time, and I lived in a residential SFH area.

  59. 59
    seattlenewbie says:

    residential SFH area with home values well north of 1mm.

  60. 60
    Erik says:

    RE: Kary L. Krismer @ 53
    I’m not going to step into the real estate law arena with you because you will destroy me. I’m a drill bit organizer that owns some rental property.

    Ray helped me and I’m grateful. Wreckingbull and his moron goon squad urged me to go down with the ship and keep paying on a mortgage in trashy north Everett. Ray told me to give it back to the bank. Giving it back changed my life for the better. Never living in a scum hole like Everett again as long as I can afford it.

    If you are poor and you follow the rules these people on here tell you to follow that keep rich people rich, you will stay poor and unhappy. People need to understand that if they don’t pay thier mortgage in Washington state, they are free to go. Write the bank a cese and desist letter and enjoy the free rent until the bank kicks you out. If you are poor and don’t have equity, you have nothing to lose! Next crash I’m going to do what mr. Peppers did and walk out of the flames wealthy. I will not cower down to your fancy lawyer talk Mr. Krismer. Buy houses for cash at the auction from the rent collected on your foreclosed homes, pure genius.

  61. 61
    Blurtman says:

    Financialization has permeated everyone’s thought processes, and is regarded as the sacrosanct arbiter of value. You have X people making Y median income, there is Z inventory, and therefore price should be megabucks. But that is only one way to look at things.

    There is also the arguably subjective metric of value. After all, we are not logical calculating robots. Life cannot be reduced to mathematical formulas. And looking at prices versus value, I would say Seattle is in a bubble, even if financial analysis argues otherwise. Bubble. Folks are getting crap and paying for it.

  62. 62
    Jason says:

    RE: Blurtman @ 61 – Crap compared to what? Value is defined by the X people making Y income. Seattle relative prices are mega cheap compared to many places in the world. Look at Caracas for example.

  63. 63

    RE: seattlenewbie @ 58RE: Mikal @ 56 – I suspect the number of homeless people in various states/areas is fairly well correlated to the severity of the weather in the winter if you adjust for population.

  64. 64

    By Erik @ 60:

    Ray helped me and I’m grateful. Wreckingbull and his moron goon squad urged me to go down with the ship and keep paying on a mortgage in trashy north Everett. Ray told me to give it back to the bank.

    Ray could actually be sanctioned by the Department of Licensing for giving that advice. But on that topic, what is that place worth now relative to what you owed? And what is your ability to get normal financing on the places you’re buying currently? Is that foreclosure still hanging around your neck?

    Ray was advising everyone to go into foreclosure because “They’re all coming back” meaning he thought real estate prices were going to continue to decline. He was obviously wrong on that and to the extent people believed him because he is a real estate agent they probably suffered greatly. But Ray was hardly alone giving that advice.

    I tried to find this, but several years ago there was a law professor who did a piece advising more people to do short sales. That professor was stepping well outside his area of expertise, not only on the law (variation by state and between individuals on income tax consequences), but also as to predicting the future. He was basically saying the market would take way too long to recover and that people should just bite the bullet back then. So anyway, Ray was in good company, but that doesn’t excuse the fact that he should not have been advising you to go into foreclosure. One of the things Micheal Hellickson had his real estate license yanked for 10 years for was giving distressed owners legal advice.

  65. 65
    Blurtman says:

    RE: Jason @ 62 – As stated, you can assume financialization is your god, but it is not anything else than a calculation. There is no reflection of value but the mathematical.

    What a bargain, $552sq.ft! Nice staging but a waste of money.

    3620 1st Ave NW Unit A
    Seattle, WA 98103
    $789,000
    Price
    3 Beds
    2.25 Baths
    1,430 Sq. Ft.
    $552 / Sq. Ft.
    https://www.redfin.com/WA/Seattle/3620-1st-Ave-NW-98107/unit-A/home/17383456

  66. 66
    Action says:

    RE: Blurtman @ 61
    How are you determining value? Are you comparing what $x buys you today vs. what you think $x should buy you based on your past experience or in other areas?
    But just look at how much more expensive and difficult it is to build housing now. Materials and labor costs for construction have gone up almost as much as home prices. NIMBYism and antigrowth attitudes are at a all time high as well as more restrictive environmental policies and regulations. While the measurement of inflation have been kept low due to globalization and technology advancements, these have not kept the price of building new housing low.

  67. 67
    Eastsider says:

    RE: Blurtman @ 65 – $3600/mo for next 30 years LOL. Assuming you first come up with $150k down payment haha. At 30% housing/income ratio, you will need an income of $143k/yr for an ‘apartment’ on a 1300sf lot. SMH.

    Btw – Seattle median household income is $80k. A typical Seattle family can’t even afford this tiny apartment. And there is no bubble?

  68. 68

    By Action @ 66:

    RE: Blurtman @ 61
    How are you determining value? Are you comparing what $x buys you today vs. what you think $x should buy you based on your past experience or in other areas?

    Value is obviously very subjective. Personally you’d have a hard time getting me into a property with much less than an 8,000 square foot lot, but that’s what most the new construction has been for the past many years. Then other people wouldn’t be caught dead in a multi-family building/condo, but in the right area I could see that would have some appeal for me when I get older (and certainly was appealing when I was younger).

    But also it depends on your wealth/income. For the average person air travel consists of travelling coach after finding the lowest cost option, even if that means stopovers. For people like Trump and Paul Allen it may consist of owning a Boeing aircraft. And that’s why there are numerous condos in the L.A. area that sell for 8 figures.

  69. 69
    Blurtman says:

    RE: Action @ 66 – Value is subjective, but also relative. Having a bed in the kitchen versus the bathroom is relatively more valuable, but it still sucks. My neighbor paid $552/sq.ft. for his 1,200 sq.ft. town home, while I got a great deal at $450. You both are still getting reamed.

    Where does the dumbing down of quality of life end? http://www.businessinsider.com/craziest-microapartments-around-world-2016-9

  70. 70
    Erik says:

    RE: Kary L. Krismer @ 64
    I short sold. 6 months after the negative mark hit my credit it was removed from my credit. I asked the credit company to prove it happened and it was magically removed from my credit report. It’s not illegal to ask them to prove it. I waited 2 years before I could buy again. I basically lived in that Kirkland condo while I remodeled it for 2 years and sold for a windfall. After the windfall, I started buying at the auction with the money from the Kirkland Remodel.

    I did nothing wrong. I worked within the rules I was given to transform my financial situation drastically in a short amount of time. I suggest others work within the rules as opposed to being bullied into staying poor by rich people and ignorant code monkeys.

  71. 71

    RE: Erik @ 70 -You think that taking action to get something removed from your credit report by asking them to prove something happened that you knew happened isn’t doing something wrong? Think about that.

    Here’s a story. I once went to a Continuing Legal Education seminar on real estate scams, and the speaker was explaining how easy it was to get people to admit the bad things they had done. The reason? They were taught to do those things by unscrupulous scammers, and thought there was nothing wrong with what they had done. So they readily admit to every part of the scam.

    You might also want to check out section 5b, question k, here:

    https://www.fanniemae.com/content/guide_form/urla-borrower-information.pdf

    Note, I’m not familiar with all the varied loan applications, but I’d be surprised if there are many that don’t ask about short sales now.

  72. 72
    whatsmyname says:

    RE: Blurtman @ 65
    I kind of feel you on this (and the related posts down thru 69). But I think the answer is that financialization in a market economy does set prices. We set value by choosing among the various options.

    Unit A is set in an area I once would have liked to live in, but no longer. It is not to my taste. I don’t like attached neighbors, and I don’t really care about new or newish. I wouldn’t value it enough to pay half the price, but some people value things oppositely to me. That’s how it is. The buyer of that space wouldn’t likely want my place – which I much prefer. There is individualized value in action.

  73. 73
    Justme says:

    RE: Hugh Dominic @ 51

    Amazon has overhired? The internal empire-building has peaked? Say it ain’t so!

    By the way, Deerhawke reported on Oct 4 about going to a cocktail party that appeared to be well-populated with Seattle newcomers with fancy professions other than being an Amazonian or software in general. The implication being that demand was going to be strong (“long-term bullish”). It sounded suspiciously like a party whose main intent was to snag new buyers, and/or reward/celebrate recent ones, or perhaps to infect the prospective new buyers with the enthusiasm of the recent ones.

    This was such a contrast to what you posted, HD, that I had to go back and re-read the DH comment, and make some remarks about it. One of the things about DH posts is that he writes in a very cagey style. He rarely if ever makes any claims about the short term.

    http://seattlebubble.com/blog/2017/10/02/september-stats-preview-last-gasp-inventory-2017/comment-page-1/#comment-265709

    My money is on HD, not DH, if you don’t like losing money in the short term and you like higher gains in the long term.

  74. 74

    RE: Kary L. Krismer @ 71
    Yes Kary

    I was at a Toastmasters meeting at the Kent City Hall Thursday and a bank manager Toastmaster spoke on a HORRIFYING news worthy topic [not likely on the news BTW, why not?]]….a Muslim women wearing a scarf over her head was told to remove her scarf so her hair color was visible for the security cameras in the bank. The bank manager threatened 911 if she didn’t comply. All Hades broke loose after that….

    I was evaluating the speech and recommended the Covey Management/Leadership Resolution Method [everyone wins and no one loses]….non-partisan, IOWs. I reminded the “thin skinned” progressive slanted manager that her bank manager is also likely under extreme stress recently/lately over the recent credit bureau hacking of Social Security Numbers, Credit Card Numbers, Debit cards and PINs. My personal Debt Card was most likely copied recently from a Tacoma 7-11 cash machine equipped with a chip copier, then the “identity fraud” organized crime team sent a virus to my laptop while they stole $700 from my checking account. They got blank chips from an internet site to copy my debit card. They most likely virus ed my laptop that evening to shut down my account balance surveillance from my bank to continue the thievery. My MasterCard was also breached twice and its old VISA number replaced twice….all this happened in the last 6 months.

    Trump wants this organized crime ended [police in Tacoma knew about the organized crime cash machine if I could figure it out?] . He’s suggesting a fix that HORRIFIES Progressives….replace ALL ILLEGAL DUPLICATE SSNs [the banks, credit bureaus and Social Security Administration know about the duplicate identity fraud SSNs, but do nothing] with a new bio metric sysem {?} and if you’re illegal and Trump catches you this way, you simply return to your motherland on your own dime [jobless in America]. ya can’t duplicate bio metric, like finger prints…

    Progressives are HORRIFIED now.

    That’s why the banks are nervous about loans and short sells Kary….its a HUGE legal MESS out there.

  75. 75
    Jasper says:

    RE: softwarengineer @ 74 – There are two problems with biometric passwords:

    1. You accidentally leave copies of your password all over the place. Anything you touch with your fingers can pick up a copy of your finger print. Any camera can take a picture of your face.

    2. You cannot change your password.

    And yes, you can duplicate someone’s finger prints. Essentially, you print a glove that has the finger prints on it. Or you compute the hash that corresponds to the finger prints, and pass that to the program asking for your finger print hash. This method requires replacing the finger print scanner.

  76. 76
    Jasper says:

    RE: Justme @ 73 – Actually, Deerhawke makes short term predictions all the time. And he bets huge amounts of money on them. Specifically, he bets that he can buy a piece of property cheaply enough that he can build a house on it, and sell it about a year later without losing his shirt.

  77. 77
    redmondjp says:

    By Jasper @ 76:

    RE: Justme @ 73 – Actually, Deerhawke makes short term predictions all the time. And he bets huge amounts of money on them. Specifically, he bets that he can buy a piece of property cheaply enough that he can build a house on it, and sell it about a year later without losing his shirt.

    And that plan works wonderfully, so long as the market keeps going up during your project.

  78. 78
    Bubble Trouble says:

    Almost as good this classic. I say almost because this guy will forever be #1. 21 reasons to buy real estate in Phoenix…..in 2006 Phoenix is different, everyone wants to move to Phoenix. Sound familiar? The more things change the more they stay the same.

    http://www.bloodhoundrealty.com/BloodhoundBlog/114/21-reasons-to-bank-on-the-phoenix-real-estate-market/

  79. 79
    Bubble Trouble says:

    By Kary L. Krismer @ 38:

    By Green-Horn @ 36:

    RE: The Tim @ 5RE: Doug @ 14

    What could we ever do so such economists and scientists became our idols instead of entertainers & sports stars?.

    Are you forgetting about Seattle’s own Bill Nye? ;-)

    I’ve never understood the fascination with stars, or TV shows like ET. I really don’t care at all about the stars’ personal lives or politics. Just not a big deal. I’ll like actors if they’re particularly good at playing different and varied roles (e.g. Hank Azaria), or if they happen to get a particularly good role (e.g. Ferris Buehler); or even if they happen to play basically the same character as every character they play, but that character is likable (e.g. James Garner). But I don’t like them just because they are famous (e.g. virtually any Kardashian). I almost wonder if it’s because we don’t have royalty in this country–the stars get the attention royalty would receive.

    But to Green-Horn’s point, I think this country could definitely step it up a bit when deciding who we look up to.

    Bill Nye? LOL

    https://pics.me.me/two-of-these-people-are-actual-scientists-so-called-actual-19849229.png

  80. 80

    By redmondjp @ 77:

    By Jasper @ 76:

    RE: Justme @ 73 – Actually, Deerhawke makes short term predictions all the time. And he bets huge amounts of money on them. Specifically, he bets that he can buy a piece of property cheaply enough that he can build a house on it, and sell it about a year later without losing his shirt.

    And that plan works wonderfully, so long as the market keeps going up during your project.

    Not necessarily. I’ve commented in the past on how a flipper bought a house near me years ago during the downturn and still did okay. A novice would have been wiped out. Now admittedly the flipper was probably benefited greatly by the lack of competition in purchasing. The same flipper might find this same market more difficult.

    And yes, I realize Deerhawk may be new construction, but the same considerations apply. When the market started turning around builders who had bought building lots for less than the cost of the prior improvements to them did rather well.

  81. 81

    RE: Bubble Trouble @ 79 – Actually I remember Bill Nye mainly from Speed Walker and The High Five’n White Guys on Almost Live. Note the “;-)” and also the conclusion of the post (which I’ll admit had little to do with Bill Nye).

    But thanks for the background on him–I’d not done anything to research him. I supposed next you’re going to tell me that Al Gore isn’t really a climate scientist! ;-)

  82. 82
    Justme says:

    RE: Jasper @ 76

    He makes huge short term bets, but then uses the long-term-everything-will-fine spiel to convince people to buy his product even though it may very well drop in value in the short term. Like I said, he is a cagey guy. He would not want to get caught admitting on this blog that he knows his buyers could lose money in the short term, would he?

  83. 83

    RE: Justme @ 82 – What’s it matter if a long term purchase goes down in the short term? No one pays over $500,000 for a house to live in it a couple years or even 10 years.

    I notice few people now bring up my buying in late 2007 anymore. As I’ve noted, I weighed the risks before that purchase and subsequent sale of the old residence, but now I have obtained “free rent” roughly equal to half the cost of the property, the property is worth more than when I bought it, and I’m still not to the point in my life where I planned on selling it when I bought it. Going back further, I’ve owned my own residence for almost all of my adult life–and even the first purchase was just before a downturn and turned out fine.

    It’s actually when you get close to planning to sell that the short term is important. Sort of like those retirees I’ve mentioned in the past who retired in 2009-2010. Long term in their lives they had done well, but the short term really hurt a lot of them. Similarly, that’s why if you’re buying a house you don’t hold your down payment in the form of stock (well that and the whole fraud thing if you don’t disclose it).

  84. 84
    Blurtman says:

    Reamed. Exceptionalism, not.

    $680,000
    List Price
    4 Beds
    1.75 Baths
    2,770 Sq. Ft.
    914 N 79th St, Seattle, WA 98103
    https://www.redfin.com/WA/Seattle/914-N-79th-St-98103/home/301068

    $699,900
    List Price
    8 Beds
    3.5 Baths
    5,828 Sq. Ft.
    15124 Fairlawn Ave, Silver Spring, MD 20905
    https://www.redfin.com/MD/Silver-Spring/15124-Fairlawn-Ave-20905/home/10563461

  85. 85
    Bubble Trouble says:

    By Kary L. Krismer @ 81:

    RE: Bubble Trouble @ 79 – Actually I remember Bill Nye mainly from Speed Walker and The High Five’n White Guys on Almost Live. Note the “;-)” and also the conclusion of the post (which I’ll admit had little to do with Bill Nye).

    But thanks for the background on him–I’d not done anything to research him. I supposed next you’re going to tell me that Al Gore isn’t really a climate scientist! ;-)

    Of course not. His specialty is computer science, he did invent the internet after all.

  86. 86
    Deerhawke says:

    RE: Justme @ 73

    Justme, thanks for trying to buildmy street cred by calling me “cagey”. I appreciate the effort.

    In fact, I have a pretty simple straight-forward approach to the world. Tell things the way you see them and then let people figure out whether they should believe it or not. I am that guy in the poker game who when he makes a substantial raise, everyone else folds, because they know I don’t have the ability to bluff.

    You say I “rarely if ever make any claims about the short term.” Maybe you also missed what I posted on October 17th at 10:46 am
    __________________________________

    I think I am basically short term bullish, medium term skeptical, and long term bullish.

    __________________________________

    Or maybe you missed this more specific posting the following day on October 18 at 9:54 am. The loose topic was Amazon’s hiring in Seattle.
    __________________________________

    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.
    __________________________________

    Talk is cheap. I can tell you that I believe these figures enough to back it up with my checkbook. I wrote a large check this week to buy a corner view lot in Leschi to redevelop. I am putting together deals in the CD, Magnolia and West Seattle. I am currently building in Wallingford and Fremont. That is me putting my money where my mouth is– in the short term.

    Justme, you say “My money is on HD (Hugh Dominic), not DH (Deerhawke), if you don’t like losing money in the short term and you like higher gains in the long term.”

    Really, what money are you betting exactly? And how much? Please feel free to be specific.

    Call, raise …or … fold ?

  87. 87
    whatsmyname says:

    RE: Justme @ 82
    You’re right! Even though my parents, grandparents, aunts, uncles, and parents of my friends all owned their own houses, I never planned on doing that – until some cagey builder talked me into it.

    Did you know stocks and bonds may very well drop in value during the short term? Cash goes down in the long term. I certainly hope you are not loading up your 401K with that kind of junk. You can’t even pretend it’s a home for living in.

  88. 88

    RE: whatsmyname @ 87 – All assets have some risk. They should be avoided at all cost!

  89. 89
    whatsmyname says:

    RE: Kary L. Krismer @ 88 – Absolutely!!!

  90. 90

    RE: seattlenewbie @ 58
    Hitler [Fascist] Took The Guns Away from the Citizens

    One of his first Progressive like actions.

  91. 91

    RE: Bubble Trouble @ 85
    Theoretical Global Warming and Seattle Real Estate High Prices Overlook the Same Root Cause:

    Overpopulation. Its mainly mammals [like dogs] and humans that cause it. But we’re not bright enough or honest enough to admit it.

  92. 92
    Bubble Trouble says:

    By Kary L. Krismer @ 88:

    RE: whatsmyname @ 87 – All assets have some risk. They should be avoided at all cost!

    Maybe we should let the govt manage everything for us. Think of all the stress we’d avoid if we just let smart people in Olympia/DC take care of us from cradle to grave. No more assets for anyone. And the added bonus is total income equality for one and all**.

    ** Except the smart people who do the managing, they will be more equal than everyone else

  93. 93
    Bubble Trouble says:

    Out: Downsizing

    In: Upsizing

    https://www.zillow.com/blog/uptick-in-upsizing-219648/?utm_source=zillow&utm_medium=banner&utm_campaign=sept_house_ads&utm_content=4

    “For Rhiannon Kruse, moving to a bigger home was about facing the music. For five years, Kruse and her husband had squeezed themselves into a downtown Seattle high-rise. At 700 square feet, their home meant giving up a dresser to cram clothing into an under-the-bed storage space, and limiting the number of guests they could invite over for dinner. Even Kruse’s parents had to stay in a hotel after making the six-hour drive from Oregon to visit; there just wasn’t enough space for overnight guests.

    So when Kruse’s husband broached the idea of moving into a much larger house just outside the city limits, it took a little bit of convincing — but not much. The couple fell in love with a 2,700-square-foot new construction home about 15 miles north of the heart of the city.”

    I’ve always been skeptical on the downsizing/tiny house “movement”. When it comes down to it very few people want to be crammed into a few hundred square feet. Problem is in Seattle and other high cost cities, people are forced to live like that due to the exorbitant cost. So instead of admitting the insanity, they put lipstick on a pig and said look how wonderful it is that grown adults live in apartments smaller than their college dorm rooms. PROGRESS!!! Hey after all think of all the awesome $14 avocado toast sandwiches you can eat within walking distance! Right? It’s all nonsense, and it’s nice to see someone call out the BS.

  94. 94

    RE: Bubble Trouble @ 93 – LOL. I think the Realtor website just had an article about the opposite trend and how people were afraid they’d be stuck with their larger house. Being most likely questionable nonsense (as is likely this article) I didn’t read beyond the headline.

  95. 95
    Deerhawke says:

    Above in this thread, Robert J. Shiller was referenced. He wrote an interesting piece in the NY Times business section this weekend that reflects on the Black Monday drop on October 19, 1987.

    https://www.nytimes.com/2017/10/19/business/stock-market-crash-1987.html?_r=0

    When people ask me what would make me more bearish about the Seattle real estate market, my response is always the stock market. I have mutual funds that add a half a point or so per week and I honestly do not understand why.

    Schiller doesn’t understand why either. Or rather he does, and doesn’t trust the market.

    https://www.cnbc.com/video/2017/10/16/robert-shiller-confidence-in-market-valuation-lowest-since-2000.html

    I think it is a good time to review everything Schiller has said or written in the past few months. He is one really smart guy.

    I think one of these mornings we are going to see a pretty substantial drop in the stock market. The circuit breakers stop trading when they fall 20% in one session. After that, everybody is going to take a few months before they go back to buying anything big like a house.

  96. 96

    RE: Deerhawke @ 95 – I remember reading Shiller’s article earlier, and his mentioning the 20% one, but I do recall others that kick in earlier but don’t last as long. Your post caused me to actually bother to look it up.

    https://www.cnbc.com/2015/08/24/when-do-circuit-breakers-kick-in-cnbc-explains.html

    Oh, and yes I agree the stock market could impact our housing market–particularly the upper end.

  97. 97
    bob's yer uncle says:

    RE: softwarengineer @ 91

    You heard it here first. Dogs are the root cause of Seattle’s high real estate prices! If only we weren’t all too dumb to to admit it. :(

  98. 98

    Here’s where you can move if you don’t like living around tech people. You have a choice of seven states.

    https://www.geekwire.com/2017/7-u-s-states-no-cities-bidding-amazon-hq2/

    I’m a bit surprised that AK would have made a pitch for HQ2, and that VT didn’t.

  99. 99
    Doug says:

    Nice thoughts from Dalio. The growing disparity of wealth is making it extremely difficult for the Fed to correctly set policy and a black swan event (nuclear war, natural disaster, etc) is the only thing that keeps assets from continuing their march higher.

    And even that will be short term in nature. We have reached an escape velocity of sorts with regard to the absurd % of wealth controlled by the top 10% of the world. Honestly not sure what could completely reset things outside of a US default. Until then, I see no other rational option but to remain long hard and financial assets and probably invest some % of your portfolio in crypto as a hedge.

    http://www.zerohedge.com/news/2017-10-23/ray-dalio-explains-what-most-important-economic-political-and-social-issue-our-time

  100. 100
    Bubble Trouble says:

    By Deerhawke @ 95:

    Above in this thread, Robert J. Shiller was referenced. He wrote an interesting piece in the NY Times business section this weekend that reflects on the Black Monday drop on October 19, 1987.

    https://www.nytimes.com/2017/10/19/business/stock-market-crash-1987.html?_r=0

    When people ask me what would make me more bearish about the Seattle real estate market, my response is always the stock market. I have mutual funds that add a half a point or so per week and I honestly do not understand why.

    Schiller doesn’t understand why either. Or rather he does, and doesn’t trust the market.

    https://www.cnbc.com/video/2017/10/16/robert-shiller-confidence-in-market-valuation-lowest-since-2000.html

    I think it is a good time to review everything Schiller has said or written in the past few months. He is one really smart guy.

    I think one of these mornings we are going to see a pretty substantial drop in the stock market. The circuit breakers stop trading when they fall 20% in one session. After that, everybody is going to take a few months before they go back to buying anything big like a house.

    Stocks aren’t really that overvalued if you look at the long term. Dow was at 10K in 1999. It’s at 23K in 2017. That’s about 5% a year compounded return over the past 18 years. Not at all unreasonable. Especially given that between 1966 and 1981 stocks pretty much didn’t budge at all. This past decade and a half made up for that lost decade and a half.

    And yeah we will have another correction. Will it be 10%? 20%? 30%? Who knows. Will it be this year, next year, 5 years from now? Who knows. Anyone who claims to know these things precisely is blowing smoke. Timing the market is impossible and not advisable. As the old saying goes, the market can behave irrationally longer than you can stay solvent.

    And we’ve had a few mini-crashes over the past few years. Summer 2015, Jan 2016 (when oil crashed to under $30), Spring 2011 during the budget standoff. And then within a few months, nobody even remembered.

  101. 101
    Bubble Trouble says:

    By Kary L. Krismer @ 97:

    Here’s where you can move if you don’t like living around tech people. You have a choice of seven states.

    https://www.geekwire.com/2017/7-u-s-states-no-cities-bidding-amazon-hq2/

    I’m a bit surprised that AK would have made a pitch for HQ2, and that VT didn’t.

    Alternate Headline: Here are 7 states that don’t like to throw away money by bidding on something they have a less than 0% chance of getting. And not so much states, but cities within states. Have you seen some of the cities on the list of 238? Spokane! Yeah they’ll move the HQ 250 miles away to a city that has 400K people even though their #1 criteria is a city with 1M+ people. San Juan, Puerto Rico? ohhhhh kay. Anchorage? LOL. Why not the North Pole? Greensboro, NC. Again 200K population with a regional airport. And on and on. Some of these city councils/mayors should be sued by their citizens for such stupidity.

  102. 102

    RE: Bubble Trouble @ 100 – In other words, better than average governments? ;-)

  103. 103
    N says:

    @Bubble Trouble 99 –

    That’s an interesting way to look at it, but doesn’t take into account earnings, P/E ratios or the like. By many measurement, including P/E, stocks are considered slightly over valued to way overvalued today. Not yet to 1999 standards yet though (which is interesting since that is what you based your analysis of on).

  104. 104
    Bubble Trouble says:

    By N @ 102:

    @Bubble Trouble 99 –

    That’s an interesting way to look at it, but doesn’t take into account earnings, P/E ratios or the like. By many measurement, including P/E, stocks are considered slightly over valued to way overvalued today. Not yet to 1999 standards yet though (which is interesting since that is what you based your analysis of on).

    I just picked 1999 since 10K was a milestone.

    P/E ratios today are high-ish by historical standards. But not eye poppingly so as some bears would have you believe. Right around early/mid 90s level. And the rest of the decade, if I recall, was pretty good for stocks :)

    http://www.macrotrends.net/2577/sp-500-pe-ratio-price-to-earnings-chart

  105. 105
    Brian says:

    With interest rates so historically low (there are poor alternatives to stocks), it’s no wonder why stock P/E ratios are so historically high. However, when the Fed starts unloading its balance sheet, it will certainly put pressure on those high P/E ratios.

  106. 106
    Eastsider says:

    RE: Brian @ 104 – Agreed. People betting on stock market and real estate are counting on interest rate staying low.

  107. 107
    Deerhawke says:

    RE: Eastsider @ 105

    In December 2015, the Fed Funds Rate was increased from 0.25 to 0.5% and since then has seen three more .25% increases. It currently stands at 1.25%. Yet this past month, you could get a jumbo mortgage for 3.875%. I believe that is actually the same or a bit lower than last year at this time.

    This defies all the normal rules of monetary theory–and nobody seems to be capable of explaining it. Perhaps one of the reasons we have such asset appreciation is that nobody really believes that interest rates really will rise.

  108. 108
    Erik says:

    If we were meeting in a room I’d make sock puppets, but use your imagination…

    Mr. Shiller, how do we identify a housing bubble?

    Robert Shiller: Money can be multiplied using government interference. Just like a baby cries for milk, consumers cry for aid. Governments and instincts cause exuberant capitalization by consumers. Yak yak yak and on and on for about 10 hours rehashing the same message.

    Mr. Sowell, how do we identify a housing bubble?

    Thomas Sowell: Let me first explain the anatomy of a housing bubble and then give lots of examples. For a housing bubble, you need credit expansion in the form of very low interest rates, and loosening credit standards for poor people. Land restrictions also help drive up prices whether they are natural in coastal cities or invented by our government.

    Robert Shiller is great and I’ve listened to him a lot, but he is very wordy and just wants to talk theory. If you just want the answers that will help you be a successful real estate investor, Thomas Sowell is wayyy more practical.

  109. 109
    Doug says:

    RE: Deerhawke @ 106 – Mortgage rates closely track the 10y UST, not the Fed funds rate. And the 10y has nothing to do with Fed funds.

    Said another way, the Fed doesn’t control interest rates. Interest rates are solely driven by inflation and GDP expectations. It’s not a matter of people not believing, it’s simply that inflation and GDP won’t increase.

  110. 110
    Rupert D says:

    Gardner states…….
    The dynamics that led to the last housing collapse aren’t in play, locally or nationally, he said. Borrowers are more sound. Home building is slow. And more first-time buyers are looking for a home.
    “So we have limited supply, we have good demand, we have great credit and we’re not over-leveraged and the interest rates are staying low,” Gardner said. “Housing prospects across America look pretty good as far as I can see.”

    Anyone who is aware of the many causes of the last RE recession in 2008+ will recognize what he says is true. Anyone who has some experience in other parts of the country where there is a lot of land to build on understands why prices increase so little there. In Seattle there is virtually no vacant land and new construction is only achieved by tearing an existing house or building down. Housing prices have been going up for decades and decades in Seattle. When will the current cycle change…when housing becomes unaffordable and businesses lay off enough people. Otherwise demand for housing, population and job growth, high paying jobs and the preference for living in Seattle will keep the ball rolling…but perhaps the YOY price increase of 13% will slow to 5%.

  111. 111
    Eastsider says:

    RE: Deerhawke @ 106 – Fed funds rate sets the short term interest rate. The long term rate is set by the market. In particular, the 30-year mortgage tracks the 10yr treasuries. We are now in a peculiar situation where the Fed is pushing up the short term rate against the long term rate it does not control. As a result, we have a yield curve that has not been this flat since 2007 and risks inverting if the Fed persists in raising rates. Traditionally when the yield curve inverts, we are in a recession.

    The world is currently flooded with liquidity. Even if the Fed tightens, it may not have as big as an impact. IMO, the current asset inflation has pretty much run its course. Asset prices may not crash but could be stuck in this price range. As Bubble Trouble@99 pointed out, stock market did not bulge for 15 years between 1966-1981. But then again, Seattle is ‘different’. LOL.

  112. 112
    Eastsider says:

    By Rupert D @ 109:

    In Seattle there is virtually no vacant land and new construction is only achieved by tearing an existing house or building down. Housing prices have been going up for decades and decades in Seattle.

    I don’t recall anyone saying this in 2009…. It’s like saying that the stock market has been going up for decades and therefore you should put all your money in the stock market. You have been reading too much news haha.

  113. 113

    By Brian @ 104:

    With interest rates so historically low (there are poor alternatives to stocks), it’s no wonder why stock P/E ratios are so historically high. However, when the Fed starts unloading its balance sheet, it will certainly put pressure on those high P/E ratios.

    By Eastsider @ 105:

    RE: Brian @ 104 – Agreed. People betting on stock market and real estate are counting on interest rate staying low.

    I read Brian’s comments as being more the low rates are causing the high stock prices. Money has to go somewhere, and when there’s a full page ad in the Seattle Times advertising 1.25% on savings, money will flow elsewhere.

  114. 114
    Doug says:

    RE: Eastsider @ 110 – Yes, but I would just say the yield curve inverting does not mean we’re in a recession at that moment. Historically, a recession has not officially started for 6-12 months after 3m-10y has bottomed. The bond market is the smartest market and is serves as the canary. The stock market typically lags the bond market and, at least in past recessions, you’ve actually had the opportunity to get out at the top if you simply listened to the yield curve.

  115. 115
    Smith says:

    Just joining this conversation. Gardner’s comments in the OP don’t seem to be qualified – more like someone saying they have a hunch. Some data or analysis into his position would be helpful. However, even a broken clock is right twice a day and a lot of celebrity analysts these days tend to repeat their message for years on end until that moment they end up being correct.

    Shiller is a case in point:
    http://economistsview.typepad.com/timduy/2017/10/no-better-than-the-rest-of-us.html

    I’m wary of bears and bulls who repeat their message ad nauseam, but I also recognize that as time goes by we may eventually agree for a moment. Under today’s state of affairs, I agree with Gardner that there seems low risk for prices in the housing market.

    Housing prices are high because demand is high and supply is low. The only way for housing prices to moderate or decline is to remove the demand and/or increase the supply.

    Less demand does not appear on the horizon – the Seattle economy is increasing and the national economy is plodding steadily forward. The latest Wall Street earnings numbers are respectable. Barring a major outside event, it’s hard to foresee the crisis that will bring about the next recession at this time. There will be another recession in the future, but under today’s conditions it doesn’t appear imminent. The seeds of the next recession are indeed probably in the ground and growing right now, but what they are is too early to tell. But also note that I don’t believe that the Fed unwinding will unwind the national economy with it – I believe its effect will be minor. There are reasons for that which are best discussed elsewhere. Higher interest rates will tamper demand – we’ll have to see how that plays out in the next several years.

    Supply is increasing – slowly, as is the nature of the housing market. I am seeing a lot of developments going into the construction phase all around me (east Snohomish County). These should hit the market in the next couple years. The question is if this construction boom will satisfy demand – probably a fair amount, but the supply/demand balance is skewed so far right now that it’s hard to see how enough supply could balance it out.

    As per wikipedia, an economic bubble is usually a condition of excessive liquidity chasing too few investments, causing values of good and bad investments to rise well beyond their intrinsic value. I can see some truth to that in the housing market, but the question is what will cause the bubble to pop, when, and by how much. Again, under today’s state of affairs, it’s hard to foresee what will pop it and when. I believe that rising interest rates could soak up some of that extra liquidity that creates numerous cash offers to over-bid on marginal properties – but interest rate actions by the Fed are slow and known well in advance, and so it would take some time for that process to play out.

    As per the Harvard law: “Under controlled conditions of light, temperature, humidity, and nutrition, the organism will do as it damn well pleases.” This applies to markets as well – they’ll continue on their path for as long as they please. It will change at some point, but in the short term it’s best not to fight it.

  116. 116
    Brian says:

    By Kary L. Krismer @ 112:

    I read Brian’s comments as being more the low rates are causing the high stock prices. Money has to go somewhere, and when there’s a full page ad in the Seattle Times advertising 1.25% on savings, money will flow elsewhere.

    Yes, that’s what I meant.

    Additionally, the money’s also been going into real estate as the “risk” in real estate has been worth the reward – it has had significantly better returns than bonds or savings accounts while being “safer” than the stock market. The stock market can crash in a day while real estate can take months. Add on rental income (aka dividends) and you have a very juicy, relatively safe investment.

    If interest rates go back up, however, the money will start flowing back from real estate to bonds/savings. Especially since real estate returns will decrease due to the affordability pressure on home buyers from higher mortgage rates.

    This is why I think the Fed unloading the balance sheet talk is scary for real estate investors. I suppose the only solace is that it will be somewhat slow – only $50B/month or $600B per year.

    The 30 year bull market for bonds has essentially been a 30 year bull market for real estate. And the 30 year bull market for bonds might be over, so…

  117. 117
    Southsounder says:

    First time poster…

    I also believe asset prices (both stocks and RE) are fully valued. For stocks, we are near historical highs on a P/E ratio. And I feel the consumer is stretched debt wise. This might be purely subjective but I’m seeing a lot of new cars driving on the roads and have read recently of a slow down in the auto market. Without wage inflation, it appears people have taken a low interest rate and pushed out the length of the term to keep their payments low.

    Also, regarding RE, I believe most buyers purchase off monthly payment vs purchase price. So, there are 3 likely scenarios: rates rise and RE prices decrease, rates essentially stagnant and RE prices slowly creep upwards (or vice versa), or the consumer is stretched and can no longer afford to increase their debt levels via CC, auto, or housing debt. Again subjectively, I’ve seen a lot of my friends (I’m in my 30’s) increase their debt load to the point where any marginal dollar increase in pay is going towards debt service rather than increasing debt.

    Or wages are about to go on an upward trajectory. I’m not a tech worker though so maybe I’m just not seeing the wage inflation that is happening in that sector.

  118. 118
    Doug says:

    RE: Brian @ 115 – While we might be nearing the end of the 30 year bond rally, I don’t think that real estate will necessarily reverse with it.

    The population isn’t shrinking and land isn’t growing.

  119. 119
    Brian says:

    By Doug @ 116:

    RE: Brian @ 115 – While we might be nearing the end of the 30 year bond rally, I don’t think that real estate will necessarily reverse with it.

    The population isn’t shrinking and land isn’t growing.

    That may be the case, but over the past 15 years, national population has grown 15% and the number of housing units has grown 17.5% (source St Louis Fed). So it’s not like housing inventory hasn’t been keeping up.

    Ordinary people will always be buying homes to live in. Real estate’s problem is companies like Blackstone that bought billions in homes during the crash to rent as an investment. They’ve been riding the wave and at some point will want to cash out.

    With shareholders to satisfy, if those investment returns aren’t cutting it anymore, they’ll sell and move onto something else. Decreasing rents and rising interest rates (better investments elsewhere) could cause them to re-evaluate.

  120. 120
    ARDELL DellaLoggia says:

    Anyone thinking this is not a bubble just doesn’t have the correct definition of what a bubble is.

  121. 121
    Voight-kampff says:

    RE: ARDELL DellaLoggia @ 118

    Given you think we are in a bubble, how do you advise your buyers?

  122. 122

    RE: Kary L. Krismer @ 112
    Yes Kary

    And speaking of real estate and retirements, 401Ks are like 1% interest [maybe 2% LOL]….why so low? My financial advice to all 401K locked box penalty for early withdrawal accounts….clean ’em out ASAP and get them into a cash MM. What difference does it make to transfer to to an unlocked box?

    Why are they 1-2% [forever IMO]….real estate low interest mortgage loans are the root cause folks, we need higher loan rates on savings to help us retire, if we’re ever gonna. BTW, new data [not Fake News] shows Americans living much shorter life spans and early retirement lengthens your lifespan, whether ya like it or not.

  123. 123
    Bubble Trouble says:

    By softwarengineer @ 120:

    RE: Kary L. Krismer @ 112
    Yes Kary

    And speaking of real estate and retirements, 401Ks are like 1% interest [maybe 2% LOL]….why so low? My financial advice to all 401K locked box penalty for early withdrawal accounts….clean ’em out ASAP and get them into a cash MM. What difference does it make to transfer to to an unlocked box?
    .

    Don’t all 401k accounts have a money market option? I thought they had to have one by law. I haven’t had a 401k in ages but I’m pretty sure they all had that option.

  124. 124
    uwp says:

    I wouldn’t look to softwareengineer for details on pretty much anything.

  125. 125
    Matt P says:

    RE: softwarengineer @ 120

    Only that low if your are in all bonds, but why would you be?

  126. 126
    uwp says:

    RE: Matt P @ 123 – Because the crash is gonna come any day now. This run from 2009 to now is just an extended dead-cat bounce.

    Any day now.

  127. 127
    Erik says:

    RE: ARDELL DellaLoggia @ 118
    I don’t believe we are in a bubble until we have hyper supply. We do not have hypersupply therefore we are not in a bubble.

    At 2632 houses for sale in king county, you really think we are in a bubble? Please explain.

  128. 128
    Erik says:

    RE: uwp @ 124
    Ha! Dead cat bounced higher than the previous peak, yeah right.

  129. 129
    whatsmyname says:

    RE: Erik @ 126 – I think you misunderstood uwp, who is only trying to point out that open border progressives at the Fed have conspired with idiot democratic do-gooders in Congress to allow foreign bonds to come into the country and steal the interest earnings of good old American bonds. The result can only be a massive meltdown so “horrifying” that the smart money will be soon recognized as the guys who put their savings into change jars.

  130. 130

    I think the biggest risk to our markets (including local housing) could very well be something triggered by some sort of political instability. And I’m not thinking about just Trump, I’m also thinking of most of the other 536 other politicians in DC, not to mention our judiciary, which itself has become very political. That is probably a greater risk than even North Korea.

  131. 131
    Deerhawke says:

    RE: ARDELL DellaLoggia @ 118

    Ardell, how long have you thought we were in a bubble? When do you think it is going to pop? When will we know we are close? Do you think it is all asset classes or just real estate?

  132. 132
    S-Crow says:

    RE: Erik @ 126RE: Deerhawke @ 129https://youtu.be/vBJ-p0ybhzs?t=9s

    Not to pre-empt a possible answer from Ardell but here’s a video to view featuring some of the top finance minds and it get’s interesting with the charts around the 8:20 mark.

  133. 133
    Eastsider says:

    RE: Deerhawke @ 106
    UST 10yr yield has been creeping up lately. Looking at the chart right now, UST 10yr yield at 2.45% is .1% higher than a week ago, .4% higher than the low on 9/7, and .65% higher than a year ago. However, it is still about .15% below the peak hit earlier this year.

    According to Mortgage News Daily, the latest 30yr rate just shot past 4% at 4.02%. This is something to watch. When we hit 4.5%-5%, the housing market will likely stall.

  134. 134
  135. 135
    Justme says:

    RE: Brian @ 104

    Correct about Fed unwinding QE, Brian is one of the few persons in this subsection of the thread that understands what is going on.

    RE: Eastsider @ 110

    Let’s not forget that for long term bonds (including MBS mortgage bonds), the Fed has been a very significant actor in the market ever since 2008. Hence statements such as “long term interest rates are set by the market” are technicallly true, but glosses over the fact that the market is heavily manipulated by the Fed.

    RE: Doug @ 108
    RE: Deerhawke @ 106
    (and many more posts)

    My god, are you paying attention at all? The Fed has now been engineering down the long term interest rates since 2008, and several of you still are unable to grasp that the Fed controls the long term interest rate WHEN IT WANTS TO. Yes, QE has been in maintenance mode (reinvestment mode) since 2014, but as of this month the QE unwind has started, with a 10B/month runoff. I wrote about this in June,

    But even if you ignore or just dismiss what I have written about QE unwind, would you now have heard about this through other channels, or are many heads still firmly buried in the sand?

    [shaking head]

  136. 136

    Sorry for the delay and unfortunately I don’t have time right now to run stats to go with my responses to the various questions as I am playing beat the clock with a photo shoot on a new listing. Still have some fake beds to make… But briefly:

    #119 Not sure I understand the question. While I go into much more detail with my clients than I do when chatting here or when answering questions addressed to me on Quora and some other places, I don’t “change my tune” if that’s what you are getting at. I’m not at the “Oh my God…do not buy!” stage that I was in late 2007 and most if not all of 2008. Even then there were people who needed to buy for their own very personal and compelling reasons. So it depends on why they are buying. Most recently someone answered “…because my co-workers are telling me I should…” and I told them to tell their co-workers to fk off. I don’t say things like that often, but that’s not a good reason to be buying. In different markets I might not be so third degree about their Big Why or so blunt in my answers. But this is not the time to be pussy-footing around.

    #125 Erik, Ask yourself where the price of any given house would be if there were one buyer for that house vs 17. The answer is not in the “inventory”, but rather in the sustainability of the number of crazy-ass buyers pushing prices to the moon. At minimum the “bubble” is that portion a buyer is willing to supplement with a cash infusion to bridge the gap between appraised value and sold price.

    #129 Deerhawke, You and I almost always agree on most everything, so my answers to that may mirror yours. When it comes down to “all asset classes”, the ability to hedge and average is very different than someone buying a home for their family to live in. Since early 2016 the smart money would dollar-average in or out of most markets, given an abrupt switch to an all-cash position or ever going to full all-cash position is not usually the smart move except in dire circumstances like a war breaking out as to getting out or an all time low because a black man got elected as to getting in. But an 18 vs 12 month dollar averaging play was clearly wise since the beginning of 2016 and will stay that way if nothing changes for at least 18 months. I don’t expect a change within 6 months. I do expect a change within 18 months. If at the end of 18 months we haven’t had a change yet, then I would be even more bearish than I am now.

    #130 I had to breeze through that link Tim, but I’ll watch it again when I’m at twiddling my thumbs waiting for offers to come in stage. :) Anyone who is saying otherwise to the majority of the initial quotes is wearing a short skirt and waving some big fat pom poms. While I may admire their spirit in a “Isn’t Zig Ziglar just great!” kind of way, it’s clearly unfounded for anyone to expect an upswing to continue out much further than 18 months at this point.

    As to my #118…there is AIR in this bubble and even more so than most any other Bubble in any market to date. Talking strictly about housing, residential, in the markets where I work which are pretty much the Prime markets. In the last bubble we, as listing agents, tested the market with an asking price of 5% more than the last sale in the area until that didn’t work. This market is floating on a cloud of irrational buyers being forced to the point of irrational by the sheer number of them all wanting the same houses. To a large extent the majority of those are new to the area and also new(er) to the Country. Those who are new to the Country are in many cases “accidental immigrants” unlike the immigrants of yesteryear who came with zero intent to return to their countries of birth.

    There is a big difference between market appreciation and a correction and a bubble that is going to pop…just a matter of when. We passed the point of appreciation in the first quarter of 2016 and are now riding on an air bubble. Lots of Americans have been threatening to leave the Country…but that’s just angst and frustration. But for people who only came here for a specific job…it won’t take as much to convince them to be elsewhere as it is for families who have lived here for a couple or more generations. All it will take is a new shiny job offer in a place with cheaper home prices for them to say ciao! or more aptly namaste with a bow out.

    – It’s been a better time to sell than to buy since early 2016 and increasingly so with every passing month.

    – More people who were half thinking about selling in 2006 and missed the boat are now realizing that past 1st and 2nd quarter of 2017 they may be crying the same blues they were in 2008 with nothing to blame but their own greed if they keep rolling the dice.

    – people who are staying and still working with families here are cashing in their big gains and buying down to hedge their bets.

    – Novice Builders are overpaying for lots starting in early 2017. Flippers are overpaying for projects since mid 2017. Not quite biting them in the butt yet unless they bought the wrong house in the wrong place, but starting to show signs of weakness (as S-Crow pointed out a short while ago.)

    Anyone who is NOT thinking we are in a bubble, who is denying that there is at least some degree of air in the bid ups and prices created by too many buyers wanting the same house (vs not enough sellers) is in denial. It really is as simple as that. Seattle is more often “special” than not in past history as local factors can sometimes negate the impact of a correction. But the next swing will not be a correction of small magnitude. The evidence in not in the stats. The evidence is in 40 buyers becoming 20 buyers becoming 12 buyers becoming 5 buyers becoming 2 buyers. Right now we can still see a large bid up created by only 3 buyers in some places, so the stats won’t tell you when we are at the end of the road.

    You simply have to ask yourself the same question I posed to Erik. What would that sold price be if there were only one buyer with an offer? The difference is air. Air in the price is a bubble.

  137. 137
    Doug says:

    RE: S-Crow @ 130 – I liked the video, especially hearing what Kyle Bass had to say, but it lost some credibility as soon as Jim Rogers appeared. The production of it also makes it come off as just another hit piece which we’ve seen over and over again.

    The problem with this video is that it could have been published any time since 2013. There’s nothing new presented. Stop me if you’ve heard this before: asset price are too high, interest rates are too low, if interest rates increase then LOOK OUT! Worst crisis ever!

    And yes, that is absolutely true. But do you think the Fed and central banks all around the world don’t know that too? They will do everything they possibly can do to make this a “beautiful deleveraging” as Dalio would say. And so far they have actually done a remarkable job.

    The ultimate question you have to ask yourself is do you really believe there will be an upward shift in the yield curve? That means the short end and the long end both increase by 200-400 basis points. If you believe that can actually happen then by all means sell everything.

    Prices for everything are obviously very high. I just don’t know what the catalyst is that knocks over the first domino.

  138. 138
    redmondjp says:

    RE: Doug @ 134 – Here’s one possibility as to the first domino: the end of the dollar as the world’s reserve currency. Taking the long view of history, it will happen, but the question is when, and the second question is what will replace it?

    There have been some interesting things going on recently, such as China getting Special Drawing Rights (SDR) with the IMF. Also, the recent Saudi-Russian agreements. We live in interesting times.

  139. 139
    The Internet Remembers says:

    Reminder: Ardell is probably a great person, and good agent, but take her predictions with a dose of history…

    Here is Ardell failing to warn people to sell at the top even though she can “feel…taste… and smell” the market in Spring 2007 (the last decent time to sell a house until the recovery):
    “As I’ve said before, 2007 feels the same as 2006 and not like 2005. But there is a huge backlog of buyers who want what the market isn’t readily offering.”
    Also notable for her dismissing the idea of a banking crisis.
    http://raincityguide.com/2007/02/26/seattle-area-appreciation/

    Here is Ardell pushing back on the idea of a RE bubble in Seattle in December 2007:
    “ Last I looked prices were up and days on market were longer. Where did a bubble burst?”
    “You have to chuckle though. Isn’t it like standing outside and saying it’s 42 degrees day in and day out for three years?”
    http://raincityguide.com/2007/12/02/which-st-joseph-statue/

    Here is Ardell calling bottom in February 2009:
    “The market is shifting. …But I’m calling it…we’re at bottom.”
    http://raincityguide.com/2009/02/07/were-at-bottom/

    Here is Ardell buying a house in late 2005 for 850k, trying to sell it in late 2008 for 965k, dropping the price to 850k in 2009, and eventually losing it at 550k:
    “This was a good two year decision and I do not regret it.”
    http://raincityguide.com/2008/02/15/get-ready-to-sell-with-ardell-part-1/
    https://www.zillow.com/homedetails/127-10th-Ave-Kirkland-WA-98033/48716514_zpid/

    In conclusion: who knows what will happen.

  140. 140
    Blake says:

    By Doug @ 134:

    RE: S-Crow @ 130
    But do you think the Fed and central banks all around the world don’t know that too? They will do everything they possibly can do to make this a “beautiful deleveraging” as Dalio would say. And so far they have actually done a remarkable job.

    Prices for everything are obviously very high. I just don’t know what the catalyst is that knocks over the first domino.

    #1… No the Central bankers aren’t very confident in what they are doing. Their models have been wrong and they are puzzled!
    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”. (end quote)
    Note: They will cause economic damage… how much is anyone’s guess?

    #2. We now know what “triggered” the last financial collapse: JP Morgan. So it may not be an exogenous shock, but another planned crisis where the insiders position themselves to make a killing… again!
    JPMorgan to pay $1.42 billion cash to settle most Lehman claims
    https://www.reuters.com/article/us-jpmorgan-lehman-idUSKCN0V4049
    It resolves the bulk of an $8.6 billion lawsuit accusing JPMorgan of exploiting its leverage as Lehman’s main “clearing” bank to siphon billions of dollars of collateral just before Lehman went bankrupt on Sept. 15, 2008, TRIGGERING a global financial crisis… JPMorgan, which had been Lehman’s largest secured creditor, was accused of exploiting its leverage as Lehman’s main “clearing” bank to siphon critical liquidity in the last few days before Lehman went bankrupt on Sept. 15, 2008. (end quote)

    Note: JP Morgan vigorously denied these accusations for years, but then paid $1.4 billion to pay them off. Do you think they made more than $1.4 billion when the crisis hit?

  141. 141
    Blake says:

    By redmondjp @ 135:

    RE: Doug @ 134 – Here’s one possibility as to the first domino: the end of the dollar as the world’s reserve currency. Taking the long view of history, it will happen, but the question is when, and the second question is what will replace it?

    That might happen as China is forcing the Saudis to sell oil to them in yuan now! But I still think the collapse of the dollar would happen after the next financial collapse. When banks and funds around the world start to dump their dollars and US bonds, you better believe it’ll get very ugly!! I always thought this wouldn’t happen in my lifetime, but it may be sooner because confidence in the US has been declining mostly due to the lunatic we have sitting in the White House!
    https://seekingalpha.com/article/4113239-yuan-replace-u-s-petrodollar-worlds-reserve-currency-bullish-gold
    “This obviously has huge implications for the U.S. petrodollar. China’s crude imports averaged around 7.6 million barrels a day in 2016. At $50/bbl, that equates to trading of an estimated $138 billion on an annual basis.”

  142. 142
    N says:

    No one is probably surprised that California sales are down year over year for the past 12 months, but it’s interesting to note that 28% of sales were closed below list price.

    https://wolfstreet.com/2017/10/25/california-pending-home-sales-drop-plunge-in-the-san-francisco-bay-area-as-housing-bubble-2-gets-complicated/

  143. 143
    Bubble Trouble says:

    By Blake @ 136:

    By redmondjp @ 135:

    RE: Doug @ 134 – Here’s one possibility as to the first domino: the end of the dollar as the world’s reserve currency. Taking the long view of history, it will happen, but the question is when, and the second question is what will replace it?

    That might happen as China is forcing the Saudis to sell oil to them in yuan now! But I still think the collapse of the dollar would happen after the next financial collapse. When banks and funds around the world start to dump their dollars and US bonds, you better believe it’ll get very ugly!! I always thought this wouldn’t happen in my lifetime, but it may be sooner because confidence in the US has been declining mostly due to the lunatic we have sitting in the White House!
    https://seekingalpha.com/article/4113239-yuan-replace-u-s-petrodollar-worlds-reserve-currency-bullish-gold
    “This obviously has huge implications for the U.S. petrodollar. China’s crude imports averaged around 7.6 million barrels a day in 2016. At $50/bbl, that equates to trading of an estimated $138 billion on an annual basis.”

    I’ve been reading about this nonsense for 15+ years. One day the dollar will get dethroned….that day isn’t anytime soon.

    As for the lunatic in the white house, causing confidence in the US to fall….you’re right. DJIA going from 16K to 23K since election day is proof. That’s what usually happens right? Confidence in a country plummets and then its equity markets increase 25% in less than a year.

  144. 144
    Doug says:

    RE: Blake @ 140 – Yes, I myself have actually said on this blog that central banks are making it up as they go. I won’t argue that.

    Central banks don’t know what they don’t know, but they do know the surest way to fall back into recession is to pull the rug on asset prices. That is to say, the next crisis will be caused by something that no one, or at least very few, saw coming.

    My contrarian self is telling me that if everyone, retail and institutional investors alike, thinks it’s a bubble then there’s good reason for it to fly higher. It doesn’t make sense to me that it’s so obvious for the masses and while it seems obvious to me as well, that just makes me ask myself, “what am I not thinking about?”

  145. 145
    Blake says:

    RE: Bubble Trouble @ 143
    Re: “As for the lunatic in the white house, causing confidence in the US to fall….you’re right. DJIA going from 16K to 23K since election day is proof. ”

    So… you think stock market gains reflect “US standing in the world?”
    Reality is a b*itch: https://www.economist.com/blogs/graphicdetail/2017/06/daily-chart-19
    Or do stock gains reflect anticipation of a $1.5 trillion handout to corporations or other “regulatory” goodies such as the recently passed bill denying consumers the right to a jury trial when big banks screw them over?
    … “It preserves a two-tiered justice system where banks can have their day in court but deny their customers the same right… As a result, companies like Wells Fargo and Equifax remain free to break the law without fear of legal blowback from their customers.”

    As for lunatic… there is little doubt about this now is there? He is a narcissistic charlatan and he’s never had to be accountable for his words and deeds… until now. He just keeps making things up and lying and digging deeper. Only his most faithful followers believe what he says. I always like asking the Trump voters I know how they like him now that he has reneged on almost every campaign promise he made… they are not happy and he is polling as the most disliked President since Nixon was impeached. And this is during a time of relative prosperity! Imagine where he’ll be when the economy goes into the sh*tter?

  146. 146
    ARDELL DellaLoggia says:

    RE: The Internet Remembers @ 139

    Can’t tit for tat that well on my phone but yes I did tell people not to buy in late 2007 and in 2008 and in fact took a hiatus from Selling and took a short term gig as a designated broker to maintain integrity.

    Can’t tell where the last bit is coming from til I’m done staging this house. I sold the house. Is sold “lost”? Maybe. I don’t think so. Sorry I couldn’t time my divorce more to your liking. Shit Happens that way sometimes. :)

    “E” and I used to joke about my not giving a RA about banks, but I can’t read that link right now. For the record, I still don’t for the same reasons.

    Correct I called bottom that made front page news above the fold around the time of Obama’s Inauguration. I still stand by it and still one of the most accurate calls of that time. I don’t know anyone who bought then that is bitching about that call today.

    Find a client of mine wailing or complaining on the Internet? They certainly have that opportunity, I’m visible and vocal enough. I’ve never seen one client of mine with a bad story on the Internet in 27 years of my assisting people buy and sell houses. Maybe I missed it. You seem to be good at finding old stuff. Find that.

  147. 147
    Matt P says:

    RE: Justme @ 135

    What do you think of Wolf Richter’s report on their balance sheet the other day where he saw they haven’t actually dumped the $10 billion they said they would but instead actually increased their assets? Did they lie about unwinding QE or is there just some sort of lag?

  148. 148
    whatsmyname says:

    By Eastsider @ 106:

    RE: Brian @ 104 – Agreed. People betting on stock market and real estate are counting on interest rate staying low.

    You know who’s really counting on interest rates staying low? Holders of bonds.

  149. 149
    Brian says:

    By Matt P @ 147:

    RE: Justme @ 135

    What do you think of Wolf Richter’s report on their balance sheet the other day where he saw they haven’t actually dumped the $10 billion they said they would but instead actually increased their assets? Did they lie about unwinding QE or is there just some sort of lag?

    It’s interesting, but if you look at the graph, there’s lots of ups and downs. I think tomorrow is the next release – will be interesting to see if it goes down $20B or not.

  150. 150
    StupidLifeDecisions says:

    RE: The Internet Remembers @ 139

    based on her posts here, i think ardell sounds like a wonderful agent. i refuse to buy in an over priced seller’s market, but if i were buying, i would beg her to be my agent. she would probably have to end up firing me as a client though.

  151. 151
    Eastsider says:

    By whatsmyname @ 148:

    By Eastsider @ 106:

    RE: Brian @ 104 – Agreed. People betting on stock market and real estate are counting on interest rate staying low.

    You know who’s really counting on interest rates staying low? Holders of bonds.

    Nah, they would be governments and junk bond issuers – Netflix and Tesla lol.

    Savers (i.e. pension funds and retirees) want high interest rates.

  152. 152
    whatsmyname says:

    RE: Eastsider @ 151 – Rising yields = lower prices. When rates go up, the value of your bond portfolio goes down. Every pension fund knows that.

  153. 153
    Erik says:

    RE: StupidLifeDecisions @ 150
    I can confirm that Ardell is the best agent I’ve had by a long ways. Very hard work ethic. Ardell would not quit a client unless they were unethical. She disengages her desire for money and does people right because that is what is in her heart.

    That said, there a guy on here named “corndogs.” Corndogs was a slumlord in the south sound that bragged about making money off the sweaty backs of poor people in the dirty south sound.

    Anyway corndogs said real estate agents are equivalent to carnival ride tenders. They can sell the ride and put you on it, but their knowledge stops there. I believe agents are too close to the product to judge the market with accuracy. For investing advice you want to talk to investors, not agents.

  154. 154
    Bubble Trouble says:

    By Blake @ 145:

    RE: Bubble Trouble @ 143
    Re: “As for the lunatic in the white house, causing confidence in the US to fall….you’re right. DJIA going from 16K to 23K since election day is proof. ”

    So… you think stock market gains reflect “US standing in the world?”
    Reality is a b*itch: https://www.economist.com/blogs/graphicdetail/2017/06/daily-chart-19
    Or do stock gains reflect anticipation of a $1.5 trillion handout to corporations or other “regulatory” goodies such as the recently passed bill denying consumers the right to a jury trial when big banks screw them over?
    … “It preserves a two-tiered justice system where banks can have their day in court but deny their customers the same right… As a result, companies like Wells Fargo and Equifax remain free to break the law without fear of legal blowback from their customers.”

    As for lunatic… there is little doubt about this now is there? He is a narcissistic charlatan and he’s never had to be accountable for his words and deeds… until now. He just keeps making things up and lying and digging deeper. Only his most faithful followers believe what he says. I always like asking the Trump voters I know how they like him now that he has reneged on almost every campaign promise he made… they are not happy and he is polling as the most disliked President since Nixon was impeached. And this is during a time of relative prosperity! Imagine where he’ll be when the economy goes into the sh*tter?

    He’s reneged on every campaign promise? LOL. Sure dude, you keep going with that. It’s really amazing how a year later you guys are still shell shocked. The word’s economy is on fire, first time in a loooooong time and you people think it’s like 1933 out there. Oh well….see you in 2020. And it’s funny how all of a sudden leftists are against corporate bailouts, when just a week or two ago you were screaming how horrible Evil Trump was for NOT giving health insurance companies hundreds of billions of dollars. You guys are so rabid you don’t even know what you hate anymore. It’s so pathetic.

    PS: How’s your gal Hills doing these days? I hear she’s driving a Ford Fusion with GPS installed. I also hear a new poll in Florida has her up 7%. It’s going to be an early night.

    Oh and will you attending any of the scream at the sky events next week? That should be fun.

    http://www.dailymail.co.uk/news/article-5014519/Liberals-scream-helplessly-Trump-win-anniversary.html

  155. 155
    Bubble Trouble says:

    By Erik @ 153:

    RE: StupidLifeDecisions @ 150
    I can confirm that Ardell is the best agent I’ve had by a long ways. Very hard work ethic. Ardell would not quit a client unless they were unethical. She disengages her desire for money and does people right because that is what is in her heart.

    That said, there a guy on here named “corndogs.” Corndogs was a slumlord in the south sound that bragged about making money off the sweaty backs of poor people in the dirty south sound.

    Anyway corndogs said real estate agents are equivalent to carnival ride tenders. They can sell the ride and put you on it, but their knowledge stops there. I believe agents are too close to the product to judge the market with accuracy. For investing advice you want to talk to investors, not agents.

    Taking advice from a real estate agent on whether or not to buy a house is like asking a car salesman if you should buy a car. It’s ridiculous when you step back for a second and realize that you are asking a house sales person for advice on whether or not you should buy a house. And then doubly ridiculous when you ask should I buy the cheaper house or the more expensive house, and expect the answer to ever be “buy the one that makes me less money on commission”.

    But it’s weird that virtually all other sales people are looked at skeptically and the default position is assume they are lying or if not outright lying, manipulating the truth. Yet for used house salespeople, for some odd reason, the masses think they’re experts in the field and give unbiased advice.

    If Suzanne researched it, I guess it has to be a good idea, right?

  156. 156
    Eastsider says:

    By whatsmyname @ 152:

    RE: Eastsider @ 151 – Rising yields = lower prices. When rates go up, the value of your bond portfolio goes down. Every pension fund knows that.

    Yes, but you are still wrong. Savers (i.e. pension funds and retirees) want high interest rates. Talk to any financial advisor.

  157. 157

    By Bubble Trouble @ 155:

    Taking advice from a real estate agent on whether or not to buy a house is like asking a car salesman if you should buy a car. It’s ridiculous when you step back for a second and realize that you are asking a house sales person for advice on whether or not you should buy a house. And then doubly ridiculous when you ask should I buy the cheaper house or the more expensive house, and expect the answer to ever be “buy the one that makes me less money on commission”.

    You should never rely on an agent for advise on whether or not to buy or sell. Ardell and Ray Pepper are perfect examples of the reason why not–they don’t know what the future holds, but that doesn’t stop them from making predictions which are often far off base. Even ignoring how difficult predicting the future is, real estate agents receive no training on basic economics or anything else useful to know where prices are going to head. You need to make the decision yourself on if and when to buy or sell, and my advice would be to do so based primarily on something other than what you think the immediate future holds, because you too will likely also get the future wrong.

    But I think BT is a bit off base on the more expensive or cheaper house comment. There is obviously some correlation between how nice a house is and how much you’ll likely have to pay to actually buy it. But it’s not like a buyer will look at 10 houses and rank their preference as to the houses in the order of list price (or even the later sale price). Of the 10 houses that fit all their basic criteria the buyer might only actually be able to envision in owning 2 of the 10. And the agent won’t be the one telling them which of the 10 they like best. As two the two houses the agent should be able to tell them advantages and disadvantages for each, but probably not which one to make an offer on (subject to maybe something like thinking a one seller might not like the buyer’s financing package, or some such thing). The job of an agent is to assist in making decisions, not to make decisions.

    I would also note that for the typical buyer the range of prices they are looking at is so narrow that the commission difference based on price is effectively nominal. And that gets a bit to the heart of a lot of issues here. People think they know a lot more than they do about real estate transactions. Here BT is focusing on something very minor. Even people who have done over 10 transactions often know relatively little about real estate transactions, but the simple fact is you don’t understand real estate transactions just because you’ve bought and sold a couple of houses. That is in part because you probably didn’t understand the nuts and bolts of what was actually going on when it was happening!

    Within the past year I ran into a couple who thought they understood what to do, so they hired a limited service broker–one of the worst I’ve ever run into. Between the ignorance of the sellers and the ignorance and incompetence of their agent things really didn’t work out well for them at all. In their case I’m not even sure what made them think they knew how to sell a house because their experience was rather limited. But they were confident they did know what to do. I see a lot of that same confidence in people who post here.

  158. 158

    RE: Eastsider @ 156 – No, it is you who is wrong. It was perfectly obvious and clear what whatsmyname was saying in post 148. People who own fixed rate debt instruments lose value as interest rates rise. Saying something obvious like “they want to earn higher rates” doesn’t change that, or in any way make what whatsmyname said wrong. That you’re making the responses you are just shows you don’t understand the topic.

  159. 159
    randomseattledummie says:

    RE: Kary L. Krismer @ 158

    I think a key point is being missed. Rising interest rates hurt the principal value of the bond however if you hold to maturity you don’t lose money assuming the bond doesn’t default. My assumption which could be wrong is that we are talking about some sort of federal government bond where if we have to worry about default we have to worry about a lot of other much more terrifying things.

  160. 160
    Deerhawke says:

    RE: Ardell DellaLoggia @ 136

    Ardell many thanks for your thoughtful reply. I always like to hear a response based on someone’s experience and evidence, rather than ideology, canned view of the world, etc. What you wrote here is very perceptive :
    _________________

    The evidence is in 40 buyers becoming 20 buyers becoming 12 buyers becoming 5 buyers becoming 2 buyers. Right now we can still see a large bid up created by only 3 buyers in some places, so the stats won’t tell you when we are at the end of the road.

    You simply have to ask yourself the same question I posed to Erik. What would that sold price be if there were only one buyer with an offer? The difference is air. Air in the price is a bubble.
    _________________

    From now on, when I have an agent trying to sell me on a piece of land and they are in hyperbole mode (“It could be so awesome. This would be so huge for you. etc, etc.”), I should just ask them what it would be like if we built the most amazing house and only one buyer made an offer. What would the sale price be?

  161. 161

    Here’s an alternative model that makes a bit more sense than typical. The firm will buy the house if their buyer’s financing doesn’t come through, so that financed buyers can better compete with cash buyers.

    https://www.geekwire.com/2017/real-estate-brokerage-flyhomes-vows-purchase-homes-deals-fall-helping-clients-hot-housing-markets/

    The problem–with only a $2M letter of credit it’s incredibly underfunded, even if they can turn these things around quickly.

  162. 162
    Bubble Trouble says:

    By Kary L. Krismer @ 157:

    By Bubble Trouble @ 155:

    I would also note that for the typical buyer the range of prices they are looking at is so narrow that the commission difference based on price is effectively nominal. And that gets a bit to the heart of a lot of issues here. People think they know a lot more than they do about real estate transactions. Here BT is focusing on something very minor. Even people who have done over 10 transactions often know relatively little about real estate transactions, but the simple fact is you don’t understand real estate transactions just because you’ve bought and sold a couple of houses. That is in part because you probably didn’t understand the nuts and bolts of what was actually going on when it was happening!

    It’s buying and selling real estate, not finding a cure for cancer for crying out loud. You provide a service, but bring that ego down a notch or two. The title company does all the transactional work anyway. And yeah I probably don’t understand every nut and bolt of how airlines work either, but I don’t need to pay someone 6% to buy a ticket on Delta Airlines.

  163. 163

    RE: Bubble Trouble @ 161 – I have no idea why you think the title company does all the “transactional work.” They only do things that pertain to recording documents with clear title and handling funds. Most the documents are prepared either by the real estate agent or the lender (the vast bulk by the lender due to incredible duplication and verbosity).

    But great example on airline tickets. That’s almost the exact same example Thaler gives in his book, Misbehaving. Buying airline tickets is a somewhat rather routine transaction. And it’s also rather simple and you get feedback pretty quickly on how you did. That is something that the average consumer can easily take on. Buying real estate is considerably different and doesn’t tend to be done with the same frequency or give the same quick feedback. From the book:

    Psychologists tell us that in order to learn from experience, two ingredients are necessary: frequent practice and immediate feedback. . . . We do small stuff often enough to learn to get it right, but when it comes to choosing a home, a mortgage, or a job, we don’t get much practice or opportunities to learn.

    Real estate transactions lack both the frequency and the immediate feedback. BTW, two other things he mentioned that we don’t do well is picking a spouse (only 1-3 times for most of us) and saving for retirement (once).

    Then there’s also the understanding part I brought up. Lots of agents do a fair amount of transactions, but many of them don’t understand what is actually happening. So they don’t learn either. Think about it. For centuries people saw the sun come up every day, but for most of those centuries they didn’t understand that the earth revolves around the sun, so despite the repetition they didn’t learn anything for centuries.

  164. 164
    ARDELL DellaLoggia says:

    RE: Deerhawke @ 159

    3x lot :)

  165. 165
    ARDELL DellaLoggia says:

    RE: StupidLifeDecisions @ 150

    I fire people all the time. They don’t leave though. :)

  166. 166
  167. 167
    Eastsider says:

    RE: Kary L. Krismer @ 158 – I am not disputing the inverse relation between bond and yield. But savers (seniors/pension funds) do want higher interest rate. The current low interest rate is eroding their capital and standard of living. It is ridiculous to believe that retirees want interest rate to move lower so their existing bond/CD portfolios increase in values. Talk to a financial advisor if you are still confused.

  168. 168
    ESS says:

    By Kary L. Krismer @ 165:

    Taxes? We don’t need no stink’n taxes! We can ban em!

    http://realtormag.realtor.org/daily-news/2017/10/26/new-zealand-ban-foreign-buyers?tp=i-H43-Bb-xc-14Y9H-1p-CIlP-1c-14f3q-1yJvCx&om_rid=15860919%20&Om_ntype=RMOdaily&om_mid=3696

    Hmm, New Zealand – same type of terrain with mountains and forests – same issues with earthquakes – maybe those disappointed foreign buyers will come here to buy residential property instead. They can shake here as well as in NZ and our trees are just as nice.

  169. 169

    RE: ESS @ 167 – Actually, NZ is far worse than us for earthquakes.

    RE: Eastsider @ 166 – No confusion here, other than why you think that’s the issue, or even disputed.

  170. 170
    ARDELL DellaLoggia says:

    RE: Eastsider @ 166

    I agree wholeheartedly, from my days as a portfolio manager.

  171. 171
    jon says:

    Now Zillow’s chief economist is saying it’s not a bubble. https://www.geekwire.com/2017/seattles-housing-market-growing-twice-fast-san-franciscos-signaling-tech-exodus/

    Same old story, they look at today’s supply and demand numbers, and they assume those numbers will change very slowly. Recent history teaches us otherwise. But they are paid to act like they know what is going to happen, so they act like they know what is going to happen.

  172. 172
    whatsmyname says:

    By Eastsider @ 166:

    RE: Kary L. Krismer @ 158 – I am not disputing the inverse relation between bond and yield. But savers (seniors/pension funds) do want higher interest rate. The current low interest rate is eroding their capital and standard of living. It is ridiculous to believe that retirees want interest rate to move lower so their existing bond/CD portfolios increase in values. Talk to a financial advisor if you are still confused.

    So bond holders = retirees? No, sorry, much bigger world than that. You seem to have forgotten that your original premise was about betting what increasing (not decreasing) interest rates will do to asset classes. If you’re surprised by the information, I guess you can goal post shift your way to retirees. Who will notice? I will.

    But back to your new problem: If one’s bond portfolio doesn’t provide enough coupon to maintain its capital, guess what … it will generate the same coupon after rates go up. The only difference will be that the erosion of capital value will be immediate. There is, in your example above, no surplus to ladder up into the new rate. Of curse you can take the loss, and feel good about getting a better rate on less capital, but you put less capital out there as a big part of the problem. Winning?

    Oops. Forgot Pension funds. It’s not their wealth. They don’t care. They have money coming in and obligations to meet. It’s all about matching cash flows.

  173. 173
    S-Crow says:

    RE: Kary L. Krismer @ 162RE: Bubble Trouble @ 161 – What does Escrow do? Read on:

    I literally just walked in the door tonight around 9pm. What was this escrow owner doing? Signing clients in Redmond, Woodinville and lastly in Silver Firs in Everett so these sales can close and…….. commissions get paid. What did we do from 8-5 today? Yup. Transaction work: however I won’t bother telling folks what goes on because most people in the business just think we have a magic button that says, “open escrow, close escrow ” and don’t have a clue.

    I’ll make about $1500.00 gross before expenses on an average $500K sale. My Crime Policy and E& O insurance runs me about $8-10 grand annually on average before our office closes one transaction. We have to pay for our audits from the Dept of Financial Institutions that regulates ecrow co’s. This early Oct. we are entering our 15 yr. of serving the public. We just closed a manufactured home where the commission paid was $8,000 on a $80K sale (not , $800K). I closed it for $250 bucks and have to personally run these transactions in to the county excise desk, Treasurer’s desk for taxes and over to Dept. of Licensing. We work our rear ends off with peanuts for pay. Rhonda Porter who advertises on this blog was smart. She was in escrow and got the heck out and went into lending. She’s probably laughing at me and I don’t blame her, lol.

    Yes, Title and Escrow do a HELL of a lot of work with huge risk on our plates because we are the folks drafting the legal docs/Deeds and working along with Title for recording the documents at the county, sometimes IN PERSON when the **it hits the fan or Title Co’s e-recording stystem goes bezerk. But for agents it is not tangible and you don’t see it. Agents think that producing a Title Policy is just snap of the fingers. They have no idea what abstracting is and some of the research can take HOURS on end. I get Title Policy’s sent to me at crazy times of the night…..meaning Title Officers are working behind scenes well into the evening hours to get it done so agents can get the glory. We are currently dealing with a very complex problem that will potentially require a Quiet Title Action…..it’s just not something that an agent deals with, nor wants to deal with.

    You’ve probably noticed that I don’t have time to be on a blog a lot as well. I get that agents and Loan Officers need to market property and services online but goodness!, sometimes it seems like all they do are on Facebook all day long with personal stuff or Twitter. Escrow and Title back office staff dont’ have time to do that.

    Oh and by the way….Agents if you have a public facing office (ie, office with a window right on a public right of way/sidewalk…..you really need to turn your PC monitor in such a way that we can’t see what you are browsing. That’s all I’ll say about that.

  174. 174
    whatsmyname says:

    RE: whatsmyname @ 171 -“There is, in your example above, no surplus to ladder up into the new rate. ”

    My bad. You will have some bonds maturing at face value which you can then ladder up. But you will spend years in recovery.

  175. 175
    ESS says:

    https://www.seattletimes.com/seattle-news/seattle-ranked-nations-no-2-coolest-city-just-behind-this-west-coast-rival/

    At least Seattle is in a cool bubble. This is the kind of stuff that attracts the younger crowd, who are willing to put up with higher housing costs both as a percentage of income and per square foot. This has been the story for years in Manhattan NYC, where people pay a fortune in rent for tiny unpleasant residences.
    Furthermore, Seattle is tops when it comes to coffee and beer. A good thing – people will need lots of caffeine to keep awake as they work their second jobs in order to pay their rent, and lots of alcohol in order to drown their sorrows when thinking about the cost of housing.

  176. 176
    GoHawks! says:

    Amazon, Google, and Microsoft are up just shy of $150 billion today. They employ 10’s of thousands in this area. While many are correctly asking about the relation between incomes to price, are we underestimating the impact on the stock prices of local companies. You can buy a $1.5 m home with an income of “only” $120,000 if you have a lot of stock options.

  177. 177
    Erik says:

    RE: S-Crow @ 172
    I like the new attitude mr. Crow. Since you changed your emoji from your profile pic to a cool crow with shades your demeanor has changed. Let it rip!

    I think I speak for all of us when I say I’d love to read an agent vs escrow fight. Those agents need to be knocked off thier high horse.

  178. 178

    RE: S-Crow @ 172RE: S-Crow @ 172 – I’ll stand by what I said, and I think I have a pretty good idea what escrow does (and I was not including the work title insurance companies do issuing and updating commitments as you are, which is a bit odd since I don’t believe you’re connected to a title company). But typically escrow creates relatively few documents besides the deed and the closing statement (which they coordinate with a lender if there is one). Maybe I have a different idea what “transactional work” is, but I consider it to be negotiating and creating documents, like what an attorney would do in other fields if they say they do transactional work.

    What I will say is one of the most unfair things about escrow is you don’t get paid when the deal flips. Early on and that might not be so bad, except for the possibility that one of the parties will object to where the EM is to be returned. But later you could have considerable time into the matter. And I believe you have to follow up on reconveyances actually happening after the bank gets paid, which I’m sure is a PITA. But the worst thing is almost undoubtedly the time deadlines, money coming in late and agents bothering you during the day impacting your ability to meet time deadlines. I’m sure it is high stress, but that doesn’t mean you do most the “transactional work.”

  179. 179

    Here’s a story about Wallingford residents complaining about upzoning.

    http://komonews.com/news/local/wallingford-residents-push-back-against-seattles-plans-to-upzone-neighborhood

    I will say I feel for them. Having a house in close proximity to multi-family housing sucks. One can only hope that the increase in value from the upzoning exceeds the decrease in value for being next to such a complex (and that they don’t mind moving). The worst case would be if you’re next to property that gets upzoned and built on, but your property’s zoning isn’t changed.

  180. 180

    By whatsmyname @ 173:

    RE: whatsmyname @ 171 -“There is, in your example above, no surplus to ladder up into the new rate. ”

    My bad. You will have some bonds maturing at face value which you can then ladder up. But you will spend years in recovery.

    I wonder if investors trying to avoid interest rate risks have shortened the period for the bond due date on the new bonds purchased in this low interest environment? That would seemingly make sense, given it’s unlikely rates would drop too much further. I think you’re right it it would be years to recovery, but maybe only five or something relatively short.

  181. 181
    Doug says:

    RE: GoHawks! @ 175 – And speaking of…how are those AMZN shorts working out for the naysayers? Maybe they’ll average up their short positions at today’s new all-time highs.

    Think about all that equity that vests every quarter that needs a home, figuratively and literally. But uwp was right, any day now…

  182. 182
  183. 183

    RE: Kary L. Krismer @ 181

    This is the only place where I have seen them called a “split-entry”. In PA they are “bi-levels”. In Jersey they are “Raised Ranches”. In NY they are “Splanches” (split ranch homes) also “Raised Rambler” and one similar to ours called a “Split Foyer”. I still call them bi-levels sometimes so people understand they are not a split level home. A split level has steps from the kitchen level to the bedroom level, even if only a few steps.

    For pretty much the first time in history the bi-level is overtaking the split level in value. Mostly because people are adding skylights and knocking out the walls in the main living areas to create an open floorplan.

  184. 184

    RE: Ardell DellaLoggia @ 182 – What you call a split level I would typically call a tri-level (unless of course it had more than three levels).

    The reason I like the term split entry, besides it being used locally, is it describes where the split is! If you think about it, depending on topography, a split entry otherwise isn’t much different inside than a two story or one story with daylight basement.

  185. 185
    Eastsider says:

    By whatsmyname @ 171:

    So bond holders = retirees? No, sorry, much bigger world than that. You seem to have forgotten that your original premise was about betting what increasing (not decreasing) interest rates will do to asset classes. If you’re surprised by the information, I guess you can goal post shift your way to retirees. Who will notice? I will.

    Where did I mention bond holders = retirees?

    But back to your new problem: If one’s bond portfolio doesn’t provide enough coupon to maintain its capital, guess what … it will generate the same coupon after rates go up. The only difference will be that the erosion of capital value will be immediate. There is, in your example above, no surplus to ladder up into the new rate. Of curse you can take the loss, and feel good about getting a better rate on less capital, but you put less capital out there as a big part of the problem. Winning?

    Pension and retirement funds use laddering, and generally hold bonds/CDs to maturity. The ‘immediate’ erosion of capital value is largely irrelevant. They don’t sell their bond holdings when interest rate drops just to realize capital gains. They are more concerned about generating income from bond holdings.

    Oops. Forgot Pension funds. It’s not their wealth. They don’t care. They have money coming in and obligations to meet. It’s all about matching cash flows.

    Hmm… this is just your opinion.

  186. 186
    Deerhawke says:

    RE: ESS @ 174

    I am totally ok having SF remain the coolest kid in the class. It gives us something to stay a bit Northwest humble about and gives us something to strive for. Salutatorians always do better than valedictorians over the long term.

    In a few years when we have removed the viaduct, built a fabulous waterfront esplanade, rebuilt the convention center, and have a new light rail system in place our standing may change.

    Nah, what am I thinking? Let’s look on the dark side.

    Amazon is hitting the wall. (Oh wait, what was that in the paper today?). But Microsoft is doing just terribly. (Hmmm. Something about them in the paper today too.) Ok, Starbucks and Costco and REI are really struggling. ( Well… maybe not.) OK, Google and Facebook are still in California. (But growing at light speed here.) OK, I’ve got it– it is now just too expensive to start new companies here. (Yeah, but we have this wild innovative/entrepreneurial culture and we are starting lots of them.) Well, the weather here is truly bad. (Sure, but global warming is making us feel more like San Diego over time.) Ummm…. this business of being pessimistic about Seattle is not easy.

    Wait. I’ve got it. The Mariners are still losing and the Sonics are still in Oklahoma! Who the H would want to live in a place like that?

  187. 187
    Green-Horn says:

    Wow.

    I regret I don’t have any $AMZN shares, but they’re up 13% this morning.
    $MSFT is also up 7%.

    Amazon’s market capitalization grows >60 billion in a morning and Microsoft’s increases >40 billion…

    Anybody with any idea how much of this accrues to local household net worth?

  188. 188
    wreckintgbull says:

    By Kary L. Krismer @ 183:

    RE: Ardell DellaLoggia @ 182 – What you call a split level I would typically call a tri-level (unless of course it had more than three levels).

    The reason I like the term split entry, besides it being used locally, is it describes where the split is! If you think about it, depending on topography, a split entry otherwise isn’t much different inside than a two story or one story with daylight basement.

    Yes. I grew up in a crappy split level, then my family moved to a crappy split-entry. Two very different layouts. The split-entry is by far the most idiotic of the two. Today’s ‘open’ floorplans will not age well either, and when I look at new construction, it seems they are already losing favor. Nothing like frying bacon right behind the living room couch.

  189. 189
    Sid says:

    WOW. AMZN over $1100.
    Local housing prices probably went up over 2% in the last 24 hours.

  190. 190
    ARDELL DellaLoggia says:

    RE: Kary L. Krismer @ 183

    A split entry is Very, VERY different from a 2-story in value. Two levels doesn’t equal a “two story” home by any stretch of the imagination. I agree somewhat as to topography of split entry and one story with basement, but they don’t value out the same as to market value vs appraised value.

    Have you ever seen an appraisal that uses a two story as a comp against a split entry? I have one if you need an example.

  191. 191

    RE: Eastsider @ 184

    I think the difference in opinion depends on whether or not the portfolio manager is using a bond fund vs an individually staggered bond portfolio. Used to be we could use stock funds but not bond funds to meet the objectives of widows through to unborn children. We only used bond funds if the portfolio was too small to create a decent staggered portfolio of bonds. But institutions got lazy and started using bond funds when they did not apply…because it was easier for them to do that.

    To Kary @179…it takes a LOT longer than 5 years. 5 years is a step-stool, not a “ladder”. :)

  192. 192
    redmondjp says:

    RE: Deerhawke @ 185 – Here’s something to chew (or stew) over:

    https://www.seattletimes.com/seattle-news/homeless-in-seattle-as-wealth-in-king-county-has-boomed-so-has-the-population-on-the-streets/

    All told, we are spending almost TWO HUNDRED MILLION DOLLARS PER YEAR for the homeless in our local area, and the problem just keeps getting worse.

    Just think of the infrastructure improvements, additional light rail and bus lines, and other value-added investments we could make with that money that would completely transform our area.

    Instead, we are setting up ‘safe’ injection sites, which will soon be provided with taxpayer-provided ‘safe’ drugs (with Big Pharma laughing all the way to the bank).

    Put that in your syringe and inject it.

  193. 193

    By ARDELL DellaLoggia @ 188:

    RE: Kary L. Krismer @ 183

    A split entry is Very, VERY different from a 2-story in value.

    I don’t think I ever suggested anything different (although in this market the difference has narrowed as buyers scramble to find a house). Obviously they are valued differently.

    I was talking about inside the house–if you never stepped outside the two would be virtually identical, although most two story houses don’t have a landing in the middle of the stairs.

  194. 194

    By Ardell DellaLoggia @ 189:

    To Kary @179…it takes a LOT longer than 5 years. 5 years is a step-stool, not a “ladder”. :)

    That was my question though. If you’re buying low rate instruments to replace matured instruments, why would you extend out the maturity date any longer than necessary? If you’re in a higher rate environment you would do that to preserve the income (and also maybe take some gains if rates declined). But I’m not seeing a reason to do that in a low interest rate environment. You’d seemingly want to go out far fewer years, because then the new low rate instruments would mature sooner and hopefully interest rates would be higher when they did. The risk of them being lower rates in the future would be less if the rates are already very low.

  195. 195
    Deerhawke says:

    RE: Ardell DellaLoggia @ 136
    RE: Deerhawke @ 159

    So, Ardell, I have been mulling this over. Last year, there really were a lot of listings that drew 20 or 30 offers. That seemed to last into the end of the first quarter of 2017 and then things quieted down to 3-5 offers. During this summer I know of one new construction house in Wallingford that only drew one offer (although granted he listed it in the first week of August.) I would guess that anything that is rationally priced now still gets 3 offers.

    My question is this: where did those other people go? What did they decide to do?

    Off the top of my head, I think the answers could be:

    1) Admit Defeat: I decided it is not worth it. I gave up. I am just going to rent (or move back in with my parents).

    2) Bug Out: At these prices, I decided not to take the job and instead am going back to Kansas City. Or… I decided this is crazy so I put in for that transfer to our Provo office . Or… This helped me decide that I hate my job so I put my effort into a job search and took another one in Pocatello.

    3) Postpone: I got burned out. I will try again some other time, maybe during the summer when everyone is on vacation or during the Thanksgiving/Christmas/New Year holidays.

    4) Change Expectations/Area: I decided I couldn’t afford Ballard so I found a place in Greenwood (Shoreline, Edmonds, the south CD, Beacon Hill, Rainier Valley, Tacoma, etc).

    5) Change Expectations/House: I decided I couldn’t get a decent house in the neighborhood I want, so I am going to take on a serious fixer.

    6) Other: Who knows what this would be, but there is always an “other” course of action.

    Do you have a sense that a lot of people just gave up or moved away? (#1 or #2)

    My sense is that most of those 20 or 30 bidders pass through #3 (the pause to reflect) and then moved on to #4 or #5.

    A young agent I know has positioned himself as the person who you will help you get over not finding that perfect place in Wallingford, Greenlake or Ballard. He will help you find something quite nice in north Maple Leaf, Lake City, North City, Cedar Park, or Edmonds. His clients are all #4’s.

    I find myself bidding against young couples for teardowns all the time (usually they win). They believe they can remodel something that was not a good house when it was brand new, but hasn’t had any real maintenance since the Johnson administration. These folks are clearly very optimistic #5’s. They are not willing to give up on the neighborhood they want, but they will be giving up all of their weekends and holidays for the next few years.

    My theory is that this market isn’t coming to an end because we are not seeing 20-30 offers. I think the market is expanding to absorb the people who made all of those offers last year. Those 20-30 people who were making those offers last year took their lumps and decided to change course. They are either buying really bad remodel opportunities or they are moving further out (or maybe both). The market is spreading out. I see people living in Greenwood north of 85th who never would have lived there five years ago. I see people living in Rainier Valley who I absolutely would not have imagined there five years ago. Call it gentrification if you like.

    Ardell and others. Your thoughts?

  196. 196

    RE: redmondjp @ 190 – You’re mixing issues by adding in safe injection sites. Safe has many meanings, including the fact that this is less likely to occur.

    http://www.cbc.ca/news/canada/kitchener-waterloo/cambridge-volunteer-group-needle-clean-up-1.4369176

    It’s not like without the safe injection sites people are not going to use illegal drugs. Far too many drug policies are based on that false alternative choice.

  197. 197
  198. 198

    RE: Deerhawke @ 193 – How about maybe the Seattle up-zoning I just mentioned earlier today, and the Seattle income tax making Seattle proper less attractive? Remember, of the three NWMLS areas that fell YOY last month, two of them were in Seattle proper.

  199. 199
    Blake says:

    By Bubble Trouble @ 154:

    By Blake @ 145:

    He’s reneged on every campaign promise? LOL. Sure dude, you keep going with that.
    …And it’s funny how all of a sudden leftists are against corporate bailouts…
    PS: How’s your gal Hills doing these days?

    Reading comprehension isn’t your strong suit eh? I wrote “almost every campaign promise he made.”
    I could list 25 promises he’s broken – i.e. “draining the swamp” by putting 3 Goldman Sachs people in charge of his economic team, lying to coal miners about bring their jobs back and only allowing domestic steel for the Keystone pipeline etc etc… Name three campaign promises he kept?

    Leftists like me have always been against corporate bailouts… what so-called leftists were for corporate bailouts? Wall Street Democrats like Hillary? If you think Hillary is a leftist then you are clueless. Not “my gal” Hillary… I despise her. There was consensus on this blog before the election that this was the worst election and worst choices we’ve ever had. The system is corrupt and we had to choose between the two most despised politicians in America! Hillary and Trump are both corrupt and delusional. The corruption of both the Republican and Democratic parties by big money is one of the main reasons I am pessimistic about the economy. The insiders will keep lining their pockets and there is no effective law enforcement or checks and balances. Just watch…

  200. 200

    By Blake @ 197:

    If you think Hillary is a leftist then you are clueless. Not “my gal” Hillary… I despise her. There was consensus on this blog before the election that this was the worst election and worst choices we’ve ever had. The system is corrupt and we had to choose between the two most despised politicians in America!

    Those were my thoughts here, but I don’t think I’ve ever expressed what was the consensus here on any topic, so I doubt that was the consensus here. ;-)

    Your first sentence I quoted reminded me of this video–one of my all time favorites (Caution, NSFW):

    https://www.youtube.com/watch?v=GLG9g7BcjKs

  201. 201

    RE: Kary L. Krismer @ 191

    No. A “2-Story” has bedrooms up a full flight of stairs from the kitchen. A split entry has them on the same level. How is that “the same from the inside”?

  202. 202
    Blake says:

    By Sid @ 187:

    WOW. AMZN over $1100.
    Local housing prices probably went up over 2% in the last 24 hours.

    Hah!
    It’s funny that people here are touting the fact that AMZN went up 13% in one day as a positive sign for the market and Seattle housing.
    1st: The vast majority of AMZN workers have no stock options. AMZN has been giving them only to higher level people.
    2nd: The market is so smart that they figured out that AMZN is suddenly 13% more valuable today… but just a few months ago it got to $1,050 then dropped 100 points in the next few weeks. It is “herd behavior” and hot speculative money…
    My father invested in a sleepy welding company stock many years ago -LECO – and it has done very well. In the last few months LECO has gone up 20%, then down 20%, then back up. Today it dropped 6%. Why? There was no news or earnings reports that drove these changes the last few months. It is speculative money, not long term investors.

    Look at this graph of stock market margin debt:
    https://www.yardeni.com/pub/stmkteqmardebt.pdf

    And companies have been buying back their own stock at a record rate the last 4 years! Only slightly exceeded by the 2nd and 3rd quarters of 2007. (Stock buybacks like this were illegal until 1982)
    https://www.yardeni.com/pub/buybackdiv.pdf
    …and figure 8 shows that total gross issuance of stocks has been negative for years! Fewer stocks to buy leads to…??

    The frothiness of this market is not a good sign!! Corps have been buying their stock to drive up prices (and borrowing money to do it!) and there is record levels of margin debt – – speculation.

    How many of you are running out to buy AMZN at $1,100 per share? Why not… it’s going to the moon!

  203. 203
    Blake says:

    By Kary L. Krismer @ 198:

    By Blake @ 197:

    If you think Hillary is a leftist then you are clueless. Not “my gal” Hillary… I despise her. There was consensus on this blog before the election that this was the worst election and worst choices we’ve ever had. The system is corrupt and we had to choose between the two most despised politicians in America!

    Those were my thoughts here, but I don’t think I’ve ever expressed what was the consensus here on any topic, so I doubt that was the consensus here. ;-)

    Your first sentence I quoted reminded me of this video–one of my all time favorites (Caution, NSFW):

    https://www.youtube.com/watch?v=GLG9g7BcjKs

    Hah… hilarious… thx! Hillary “dry humping corporations for years!” Great line…

    I only said there was a consensus on this blog because when we discussed it a year ago not one person responded that they liked the choices. Usually there is more dissension on this blog… IN case you didn’t notice! (sarc)

  204. 204
    Deerhawke says:

    RE: Kary L. Krismer @ 196
    RE: redmondjp @ 190

    I think you put your finger on the real dark side of the success of Seattle which is the dramatic increase in homelessness. This is a good article. I will look forward to seeing the rest of the series.

    https://www.seattletimes.com/seattle-news/homeless-in-seattle-as-wealth-in-king-county-has-boomed-so-has-the-population-on-the-streets/

    Long story short, we are just going to need to pay a great deal more to deal with this issue including drug counseling and treatment, mental health counseling and treatment, transitional housing and longer term low-income housing. That is part of the price you pay to live in a civilized society.

    I know about developing low income housing and have done one cool project. However, Seattle is paying the kind of $/sf pricing for low income housing projects that developers would normally charge in Laurelhurst or the Highlands. We are absolutely not getting our money’s worth. The money being spent could go, easily, twice as far in providing people at the margin with housing.

    To your point, Kary, I agree with you that it is not all roses and light in Seattle. The Seattle City Council seems to be heading in exactly the wrong direction on a range of issues. With Tim Burgess leaving the council, there is one less person there who can have a reasoned conversation with business people and not view them as demons. Even Sally Bagshaw and Bruce Harrell who were on the left wing of the council at one time now look rather reasonable by comparison. The rest seem intent on keeping pace with Sawant. O’Brien, a guy who went to Lakeside and Duke before getting his MBA at the UW has become a full-on Sawant brown-noser.

    Lots of room for optimism in Seattle, but if you need to be brought back to earth a bit, our city council can make you more pessimistic in a hurry.

  205. 205
    Green-Horn says:

    RE: Deerhawke @ 202

    The local authorities are actually doing the best possible thing to reduce housing costs.
    By reducing the quality of life, tolerating chaos, filth, disorder, property and violent crime, the place will be less attractive to any who are capable enough to fill demanding well-paid jobs. They’re going to eventually conclude that all whatever charms the natural setting and mild climate are, the big-city problems aren’t worth it. Seriously, to any of those of you with families… do you let your kids go off and play in parks & playgrounds filled with bio-hazards, trash, zombies, junkies, pan-handlers and various other unsavories? I understand that these people have every right to enjoy the same public facilities that ordinary wholesome law-abiding families do, but ordinary wholesome law-abiding families are eventually going to say no thanks to the chaos. Midwestern winters are great. They kill all kinds of irritating biting pests & parasites that would otherwise make the summers even more intolerable.

    The concern about the homeless misses the mark. Their problem is huge, but it isn’t one of low-income and housing affordability, theirs is one of no income, mental illness, addiction and lacking normal regulated lives. The public authorities waste way too many resources on these very visible very noisy very messy but sadly hopeless cases. Meanwhile there is a genuine problem about housing affordability for the working-classes of low and middle incomes. People with ordinary jobs are a single rent-increase from being priced out of the area. Those lucky enough to qualify for the very few oversubscribed rent-subsidies or subsidized low-income housing units make up a vanishingly tiny but fortunate minority. Hoping that the lucky few that get one of these spots will be a solution to the housing affordability crisis is about as silly and unrealistic as believing that inheritances & trust-funds will help young people afford housing. It’s really coming down to that though, the only people who can afford to live in a coveted top tier place like Seattle are:
    1) Those who bought their homes here (or in places like Cali) ages ago when they were still affordable
    2) Those who are gifted with natural intrinsic brilliance & conscientiousness that they earn the big bucks to be able to pay off group #1 to sell
    3) Those who are lucky enough to get one of the too few units of subsidized housing that still cost >$350k to produce.
    4) Those who are lucky enough to inherit from group #1 or who bring their trust fund from elsewhere outside of the area… Brooklyn probably ain’t the only place drawing Trustafarians like moths to a flame.

    So unless you and your family can afford to buy your kids their housing when they grow out of your home, they’d better be brilliant enough to pay off group #1. Otherwise, they’re leaving the area. You’ll be having to get on a plane to visit those grandkids, should they ever be able to afford any.

    Seattle is well on its way to being one of those places in which you have to be really rich or really poor & needy to be able to survive.

    The “Let them eat cake!” motto for our era?
    Anybody in the middle can commute from Kent, Tacoma, Everett or else move away to OKC or KC.

  206. 206
    Green-Horn says:

    While my blood’s boiling a bit, I can’t resist asking:
    Does it bring anybody else’s blood to a boil that drunks & junkies get handed a place to sleep or even a private apartment of their very own in some of the most expensive locations of prime real estate, meanwhile working people who have to the privilege of not only paying market rents & home prices while suffering awful commutes from these more affordable distant places, are also the taxpayers who are financing the the transfers, subsidies and programs for the needy who get to enjoy the benefit of better location and real estate?

    http://www.npr.org/sections/health-shots/2012/01/19/145477493/a-permanent-home-that-allows-drinking-helps-homeless-drink-less

    It’s no rules, laissez faire, let the good times roll, all to be enjoyed from a comfortable taxpayer financed perch on some of Seattle’s most expensive prime real estate. This “drunk house” is no longer even controversial. The ever ratcheting progressive agenda of more tolerance and more goodies for the needy, helpless and hopeless has since moved on to a campaign to enable junkies to enjoy their fixes in the safety, hygiene and comfort of professionally medically supervised tax-financed and government provided opium dens.

    What’s next?, Safe, convenient housing in prime locations to enable junkies to get from their crash pad to their fixing facilities without too much effort? If you’re living near these facilities, get ready for the zombie-junkies, who have already been haunting your neighborhood, breaking into your homes and leaving messes everywhere. These “neighbors” might finally be able to settle down and establish some roots!

    As for the “drunk house” at 1811 Eastlake, market rate studio apartments in that neighborhood go for >$1500++ a month. Anybody else think it might make more sense to warehouse these drunks someplace cheaper where they might just as happily drink themselves to death? An approach that would seem obvious to me that would enable municipal & regional authorities to afford more subsidized & public housing would be to sell some of the prime real estate that’s under existing shelters and use the proceeds to buy much much more space in places where it’s also cheaper to build.

    But that’d never fly.

    Apparently the bleedy hearts of Seattle have decided that the needy, the moochers and the junkies have more right to live on the blessed prime real estate of Seattle than the squares and the taxpaying chumps who allow all the professional do-gooders to spend other people’s money on their doomed social engineering experiments.

  207. 207

    RE: Bubble Trouble @ 154
    Yes Bubble Trouble

    The new politically correct is upon us….its symbolized by hardly “no one” in the Seattle area wearing a dead Progressive dynasty prison “run by the inmates” scandal Seahawk advertisement tee shirt anymore….called/identified now as the NFL protesting on our time/dime.

    Soon….at a theater near you too….no more local tax [includes property tax gang] deduction for JUMBO loans in Seattle? Why should the “more fiscal minded” electoral college states for Trump subsidize JUMBO debts tax deductions for Seattle? The answer is simple, the rich must eat cake like the middle income have had to do for decades now in Seattle, whether the local rich elite home owner foreign bent Progressives smell the coffee or not [give ’em some slack, Progressives generally lack common sense and fairness….].

    Ohhhh….another thought as you gulp your afternoon Starbucks…incorporate the middle income lower tax rates and it forces corporations to close down foreign profit factories because manufacturing in America is cheaper then [20% Corporate tax rate]. there goes the foreign corporate stranglehold on Seattle gang….down the profit toilet just like the spoiled/rich/sick NFL management and players.

    And the new manufacturing in America gun to the head causing the demise of the NWO has to happen or we can’t pay our deficits off….think about it.

  208. 208

    By Blake @ 201:

    Your first sentence I quoted reminded me of this video–one of my all time favorites (Caution, NSFW):

    https://www.youtube.com/watch?v=GLG9g7BcjKs

    Hah… hilarious… thx! Hillary “dry humping corporations for years!” Great line…

    I haven’t watched that for a while, but the line I remember is something to the effect of Hillary on most issues being to the right of Theresa May!

  209. 209
    Deerhawke says:

    RE: Green-Horn @ 204

    We like to believe that we live in a world where privilege and luck don’t matter. We would like to believe that we have earned everything we have. We feel a sense of superiority to those we pass on the streets who are dressed shabbily and smell bad. We take some comfort in the belief that they deserve their problems and we shouldn’t have any sympathy for them.

    But if you have had a beloved family member who ended up on the streets, you might feel different. My big brother was that guy who was a true math and science genius. Great sense of humor, great dancer, Report to the Nation Eagle Scout who met President Kennedy at the White House. Full ride at university and graduated Phi Beta Kappa at 21. He went off to Oxford on a Fulbright and came back a year later raving about angels and demons. Schizophrenia is not pretty. And I don’t think my brother — or anyone else– deserves it.

    I don’t know why your blood boils, but it is probably not really those people you see on the street. They are just the trigger. But given how you are ranting, you might be closer to their situation than you might want to admit.

  210. 210
    Blake says:

    Re: “It’s no rules, laissez faire, let the good times roll, all to be enjoyed from a comfortable taxpayer financed perch…”

    Sounds like you are talking about todays insider, crony capitalists? I work downtown and encounter and observe the homeless and beggars every day. I’d say more than half of them have significant mental illness and at least 80% have substance use disorders. A disproportionate number are Vets. I work with Vets… and the VA is pouring tons of funds into homelessness and substance use disorders. It is a crisis with no easy solution.

    I can tell you their lives are in crisis and they are not “enjoying a perch”… they are in the gutter!

  211. 211
    whatsmyname says:

    By Eastsider @ 184:

    Where did I mention bond holders = retirees?

    You “refuted” a statement about bondholder financial interests with an argument about retiree desires. Conflation is definition, my friend.

    Pension and retirement funds use laddering, and generally hold bonds/CDs to maturity. The ‘immediate’ erosion of capital value is largely irrelevant. They don’t sell their bond holdings when interest rate drops just to realize capital gains. They are more concerned about generating income from bond holdings.

    Yeah, I made a clarification on laddering at maturity back on post 173. “Realizing” the capital loss in a market where interest rates are increasing also is not often done, so there is no event to be seen. But earning 2% when the market earns 4% is definitely erosion. Getting your face value back after 2 and 3 and 4 and 7 years of that would be relevant to me. Ask your investment advisor about inflation and time value of money.

    Hmm… this is just your opinion.

    “It’s not their wealth” is a fact. I don’t mean to slam the providers; I know they do their best. But losing money spread across thousands of beneficiaries by following a professionally approved plan is typically much less painful than losing money for yourself. If that’s my opinion only, fine.

  212. 212
    ARDELL DellaLoggia says:

    RE: whatsmyname @ 209

    It’s not your opinion only, but it’s also not the only opinion. Many would and do feel worse to lose someone else’s money than losing their own. You just don’t seem to be one of them or maybe you never found yourself in the position of being responsible for the wealth plans of others. It depends how much discretion the manager has.

  213. 213
    ess says:

    RE: Deerhawke @ 193

    Deerhawke

    I am in the 4th category – when we were young, poor and starting out, we altered our expectations and moved to South Snohomish County. But that wasn’t last week or last year – that was 30 years ago. We didn’t have the money to buy in north Seattle – so to paraphrase Horace Greeley – head north young man (and woman).

    For a while we regretted leaving the area that I had wanted to reside in north Seattle. But that move enable other positive developments, including but limited to the following:

    -actually purchase a residence rather than renting, and start to build equity
    -allow us to hold on to the first house when we bought a second one, and then purchase a third home as a rental which later became our residence while renting the other two
    -enable us to participate in the price increases that Seattle has enjoyed. While the housing was less expensive in South Snohomish County, housing up north has increased in price almost proportionally to Seattle housing
    -limit real estate taxes as less costly housing has lower property taxes. In the past few years, that has become a real issue for many individuals in Seattle, The money alone saved on real estate taxes has financed either a yearly trip to Europe or a cruise for us, and that is money better spent than sending it to the government twice a year.
    -have larger lots – allowing a greater sense of privacy and the ability to have a larger garden
    -have access to shopping, including almost any chain or box store. We have both a business and two regular Costcos within four miles of our house. We have many more options within four miles in South Snohomish County than most folks in Seattle do, and we can easily reach them by car which is not the case in Seattle
    -Enjoy small downtown environments in South Snohomish County while having the benefits of a big city environment such as Seattle close at hand
    -have property in two towns where the primary government focus is on running the town, not grandstanding by taking irrelevant political stands such as condemning the Keystone pipeline and condemning the rich. The roads in both towns are in much better shape than the pothole messes that are considered Seattle streets while Seattle politicians waste time on matters that are irrelevant to their actual jobs
    -have access to Seattle with a short drive down Interstate 5. Yes, there is more and more traffic – but most Seattleites can’t get around efficiently from one Seattle area to another. And as heading east or west in Seattle is a challenge. We in South Snohomish County can often drive to Seattle locations faster starting from South Snohomish County than residents in Seattle heading to other parts of Seattle

    The biggest negative? The relatively poor public transportation in South Snohomish County. Unless one is near Interstate 5 and the Sound Transit bus system (soon to be replaced by the light rail), it can be difficult if not impossible to conveniently get around by bus in this area. Buses run infrequently, and may not go exactly where one needs to go. A car is necessary for more trips than Seattle is, but on the other hand, plenty of people who reside in Seattle drive rather than avail themselves of public transportation. But as Snohomish County is by some estimates the second fastest growing county in the US, the bus service will improve, especially after light rail comes to the area

    Many individuals in South Snohomish County commute to jobs, especially in the downtown Seattle area. Yes, it may be more time consuming, but that is offset by the fact that most of them are paying significantly less for the same housing 5-10 miles north of those expensive Seattle neighborhoods.

    And the added expense of housing in the popular areas of Seattle is significantly higher, thus comes at a financial sacrifice for those who purchase there. For every 100,000 dollars of housing expense that is financed through a 30 year mortgage ( not accounting for the cost of jumbo loans or tax consequences), the added expense is approximately 477 dollars a month at 4% interest. Add another 50 -75 dollars or so a month for increased real estate taxes, and that is some serious additional money. Paying an additional two hundred to four hundred thousand dollars for a house in a popular north Seattle neighborhood as juxtaposed to a comparable house in South Snohomish County involves some serious financial commitment to a popular neighborhood or area.

    And the best part about Snohomish County for those wannabee Seattleites avoiding high Seattle housing prices? Starbucks recognizes that there are people residing in this area and they have actually opened outlets up here – so it is safe to come up here and not be coffee deprived!

  214. 214
    Bubble Trouble says:

    By softwarengineer @ 205:

    RE: Bubble Trouble @ 154

    Soon….at a theater near you too….no more local tax [includes property tax gang] deduction for JUMBO loans in Seattle? Why should the “more fiscal minded” electoral college states for Trump subsidize JUMBO debts tax deductions for Seattle? The answer is simple, the rich must eat cake like the middle income have had to do for decades now in Seattle, whether the local rich elite home owner foreign bent Progressives smell the coffee or not [give ’em some slack, Progressives generally lack common sense and fairness….].

    .

    The debate goes like this:

    Democrat: We have to tax the rich!!! Rich people are evil and need to be eliminated.

    Republican: Mmm, OK, let’s get rid of state and local tax deductions which disproportionately benefit the rich, especially those in places like Seattle and San Francisco. You know cities where all the residents also hate rich people and are always screaming for higher taxes.

    Democrat: Whhhhaaaaaa? Dear sir you are worse than Hitler!!! I said we have to TAX THE RICH, not remove deductions for the rich.

    It’s truly an amazing dynamic. Democrats and the MSM (but there I go repeating myself) are actively fighting Republicans who want to raise taxes on the rich. We live in Bizarro world.

    I benefit from SALT deductions but would gladly give it up and the MID as well, in exchange for lower rates and a simplified tax code.

  215. 215
    whatsmyname says:

    RE: Ardell at 210
    I have never been a pension fund portfolio manager, but I am sure it would be more painful for me to let down my family than the families of strangers. I am not ashamed of that.

    I would love to have a provider who truly felt worse losing my money than theirs because that person could fix both our problems by using their assets to make up my losses. Finding that person seems speculative at best.

  216. 216
    Bubble Trouble says:

    By Green-Horn @ 204:

    While my blood’s boiling a bit, I can’t resist asking:
    Does it bring anybody else’s blood to a boil that drunks & junkies get handed a place to sleep or even a private apartment of their very own in some of the most expensive locations of prime real estate, meanwhile working people who have to the privilege of not only paying market rents & home prices while suffering awful commutes from these more affordable distant places, are also the taxpayers who are financing the the transfers, subsidies and programs for the needy who get to enjoy the benefit of better location and real estate?

    http://www.npr.org/sections/health-shots/2012/01/19/145477493/a-permanent-home-that-allows-drinking-helps-homeless-drink-less

    My blood stopped boiling about crap like this long ago. My only silver lining is that the people most affected by this, are the same ones who vote for Democrats who implement this insanity. Have fun with you new neighbors Mr. and Mrs. Uber Progressive Amazon Tech Worker who just bought a $800K condo!!

    It sucks but Obama transformed this country from one where work was rewarded to one where work is punished and being a full time drunk or drug addict is now the new American dream.

  217. 217
    Ray Pepper says:

    They are all coming back! Not a question of if….. just when. Wait. That was 10 years ago!! Guess they all came back.

    Live in Seattle?? . I’d rather watch Kary, every weekend, assisting Ira in picking up toothpicks with his ass cheeks.

  218. 218

    By ARDELL DellaLoggia @ 210:

    RE: whatsmyname @ 209

    It’s not your opinion only, but it’s also not the only opinion. Many would and do feel worse to lose someone else’s money than losing their own. You just don’t seem to be one of them or maybe you never found yourself in the position of being responsible for the wealth plans of others. It depends how much discretion the manager has.

    This answer could also fit Bubble Trouble’s comments regarding agents wanting their client to buy a slightly higher priced property to get a slightly higher commission. That totally ignores the satisfaction that an agent gets when they manage to get their client a great buy (or dissatisfaction when a buyer loses self-control and makes bad decisions–a situation where we have terminated our relationship with the client).

    People who have never been responsible for dealing with other peoples’ legal or financial matters don’t understand how some professionals can put their clients’ interests ahead of their own, or even act as a true fiduciary. True it’s not all professionals. In the legal field an attorney with a lot of trial experience is not necessarily a good thing. They may prefer to get the hours and hours of billing a trial entails over negotiating a settlement.

  219. 219

    RE: Kary L. Krismer @ 215 – Or another way to think about this. I really doubt that many listing agents remember bidding war situations as: “The bidding was crazy, it got me an extra $3,000!” And agents are reportedly rather good at multiplying numbers in their head by .03. ;-)

  220. 220

    RE: Kary L. Krismer @ 215 – And finally (maybe), looking at the other side–the bad: Consumers will often ask who the “top agent” is in their area. Presumably by that they mean sales volume. Many if not most of those agents though are probably agents the consumers should stay away from. There are individual agents who put to shame some of the alternative models posted here from time to time, if “to shame” means outperforming in sales volume.

    But you need to look into what those agents did to get that result, beyond mere advertising. If you look over the facts found in the disciplinary action against Michael Hellickson and his wife, you would be shocked. But they are hardly alone in this industry as the bad apples (and they are currently sitting out 10 years suspensions of their licenses).

    So to be clear I am not suggesting that all agents (or attorneys) put their clients’ interests ahead of their own. But a lot do, and I’m hoping most. But of the high volume agents, I only know of one I would hire to sell my own house, and even then I would say no to some of the practices.

  221. 221
    Saffy The Pook says:

    Re: Deerhawke @193

    If the the 20-30 bid situation has truly become a rarity and been replaced by a 2-3 bid situation, I’d call that a much more sustainable dynamic. If I were an optimist, I might even go so far as to call it a symptom of a bubble deflating to merely a hot market in a controlled manner.

    I don’t really know, but I think your #4 is the most common reaction, as evidenced, at least circumstantially, by influx rates to Pierce and Snohomish (see https://www.seattletimes.com/seattle-news/data/new-residents-pour-in-pierce-snohomish-counties-top-the-nation/ ). This has been matched by the spread of appreciation rates over time from Seattle proper to King County, and then to Pierce and Shohomish. Both neighboring counties have a lot of space to absorb Seattle RE refugees so the rate of appreciation hasn’t been as quite as high but it’s still significant.

    Support for an extremely expensive and long-term public transit infrastructure is probably another indirect indicator that #4 is in play. Many of the folks buying farther out still need to work in Seattle.

    Anyway, I suspect the reduction in bid volume is due to a reduction in the number of “qualified” buyers in Seattle and other very expensive locales to those in the highest income/wealth brackets. People are now self-selecting rather than hoping they’ll get lucky. Those with good incomes who used to be able to afford Seattle are now bidding farther out and those with decent incomes still farther.

  222. 222

    By Saffy The Pook @ 218:

    Re: Deerhawke @193

    If the the 20-30 bid situation has truly become a rarity and been replaced by a 2-3 bid situation,

    I doubt there are any accurate stats/information on that, but assuming it’s true that could be due to better pricing too. Getting 20 bids on a house can result in a lower priced best offer than getting 3-7 bids. There is a risk to pricing too low.

    (BTW, I’m basing that statement on just one fact scenario I’m aware of, where a similar if not better house listed close to one of my listings reportedly received a huge number of offers, but sold for less than my listing which only received 3 or 4 offers. Apparently the bidder on the other house were not willing to go too much over the list price, which was very low on that other house. Which gets to my first point–most agents are not required by anyone to report how many offers they received, but I’m not sure why an agent would ever voluntarily report/brag that they got 20 offers, because it possibly means the price set was too low.)

  223. 223
    Doug says:

    RE: Blake @ 200 – You’re right, the factory workers who put tape on the boxes before shipping them probably don’t receive equity, but those aren’t people who would buy a house in Seattle anyway.

    Generally you’re wrong about the amount of equity distributed at Amazon. I thought everyone knew that no one at Amazon makes more than $160k base. Everything over that is comp’d through equity.

  224. 224
    Bubble Trouble says:

    By Doug @ 220:

    RE: Blake @ 200 – You’re right, the factory workers who put tape on the boxes before shipping them probably don’t receive equity, but those aren’t people who would buy a house in Seattle anyway.

    Generally you’re wrong about the amount of equity distributed at Amazon. I thought everyone knew that no one at Amazon makes more than $160k base. Everything over that is comp’d through equity.

    So when the stock market bubble crashes……

  225. 225
    Doug says:

    RE: Bubble Trouble @ 221 – Any day now…

  226. 226
    GoHawks! says:

    RE: Doug @ 222 – how does a market crash from an all-time high?

  227. 227
    Bubble Trouble says:

    By GoHawks! @ 223:

    RE: Doug @ 222 – how does a market crash from an all-time high?

    Is this really the new thing? We can’t have a crash because it’s at an all time high? LOL

    Every crash started from all time highs. See 2000 and 2007 for the two most recent examples.

  228. 228
    ARDELL DellaLoggia says:

    RE: Kary L. Krismer @ 219

    The number of offers tells us how many buyers are “in play”. Given the prices are rising due to excessive demand, how many buyers are still active is an important tracking point.

    An agent is not supposed to list at the price it might sell for but rather what they could prove out to an appraiser with three comps, what it would appraise for. One most recent high price is not enough to hang your hat on.

    That’s why a bid up over list with 5 or more buyers should not have any weasel out clauses including no must appraise clause.

    Though I don’t like pulling the entire finance contingency as I don’t think anyone should be penalized if they lose their job. That’s just cruel

  229. 229
    GoHawks! says:

    RE: Bubble Trouble @ 224 – The stock market struggled for months before it rolled over in both of those examples. You make it sound like the end is imminent.

  230. 230

    By ARDELL DellaLoggia @ 225:

    RE: Kary L. Krismer @ 219

    The number of offers tells us how many buyers are “in play”. Given the prices are rising due to excessive demand, how many buyers are still active is an important tracking point.

    But you’re missing my point. There is no data on the number of offers obtained on listings. Maybe a tightly controlled firm like Redfin might know how many offers are obtained on each of their listings, but they are just a relatively small player. No other firm is likely to know how many offers are obtained on each of their agents’ listings.

    So yes, the number of offers would tell us how many buyers are in play, but there is nothing that tells us the number of buyers.

  231. 231

    By ARDELL DellaLoggia @ 225:

    RE: Kary L. Krismer @ 219 – An agent is not supposed to list at the price it might sell for but rather what they could prove out to an appraiser with three comps, what it would appraise for. One most recent high price is not enough to hang your hat on.

    That’s why a bid up over list with 5 or more buyers should not have any weasel out clauses including no must appraise clause.

    Your approach is considerably different than mine. I wouldn’t rely on just one comp not due to appraisal concerns, but due to buyer concerns. If you’re hanging your hat on just one comp you’re probably over-pricing and might not attract any buyers and then be forced to cut your price and end up with less than what you would have received if you’d properly priced.

    I only worry about appraisal concerns (including language about low appraisal) when it comes time to assess offers. But we’ve discussed that enough in the past.

  232. 232

    By Kary L. Krismer @ 227:

    So yes, the number of offers would tell us how many buyers are in play, but there is nothing that tells us the number of buyers.

    This should have read: “So yes, the number of offers would tell us how many buyers are in play, but there is nothing that tells us the number of offers.”

  233. 233
    Shau says:

    RE: Justme @ 46 – So right. Have been lurking here since 2007. And often wondered why commenters from those days do not comment here anymore, as they often offered perspective that made more/concise sense to me than lengthy technicalities from some folks now. Miss those guys. RIP Mr. Losh.

  234. 234

    RE: Kary L. Krismer @ 229

    I don’t know every house but I know enough to keep my finger on the pulse. When you are the listing agent of course but also if you are submitting offers most every week you know. Most agents will tell you how many offers they received whether you win or lose, but not if you weren’t in the game at all.

    The one I’m working on now had major bid-ups in the neighborhood back in Spring and Summer. The $820,000 sold for $932,000 and the $870,000 sold for $985,000. Just ran all of the more recent stats for Bellevue, Kirkland, Issaquah, Redmond and Sammamish and list prices starting with a 9 don’t have the impact as much as those starting with an 8.

    Each list price is a decision as to lowest price acceptable or highest hope to achieve. Either way I’m not putting an 8 on the front and will be the highest price ever asked vs received. Tough call. If it were April I’d be thinking differently than November.

    Will decide soon and before mid next week. When agents were telling all of their buyers they “had to” offer up to 10% more than list, you had to allow for that in the ask. I think 4th quarter buyers tend to be the ones who don’t listen to their agents, so I’m leaning toward the high side at the moment even if it takes a little longer to sell that way.

  235. 235
    Bubble Trouble says:

    By GoHawks! @ 226:

    RE: Bubble Trouble @ 224 – The stock market struggled for months before it rolled over in both of those examples. You make it sound like the end is imminent.

    I didn’t mean to say it was imminent. As I said earlier above, that it’s impossible to time these things. It could start tomorrow it could start in 2 years. I don’t know, nobody does. But it will start at some point. and if the entire Seattle real estate market is pinned on Amazon stock options…you can see where the Seattle r/e will be once the equity markets begin their correction.

    And if you look at 2007, it was a slow and steady decline that started Oct/Nov 2007. The real crash didn’t come until Sept 2008. But between late 2007 and Sept 2008 stocks fell about 15% before the bottom fell out.

  236. 236
    ARDELL DellaLoggia says:

    RE: Bubble Trouble @ 231

    Regardless of whether or not home buyers are directly impacted by a general stock market decline, a significant downturn will impact home buying activity and consequently prices if it is a sustained downturn. Consumer confidence plummets. Buyers will wait for the housing market to follow suit, and rightly so. They will also have less confidence in their job security.

    So yes, you are absolutely right that the housing market moves in tandem with the stock market, most of the time. The extended timeframe is just the lag.

  237. 237

    By Ardell DellaLoggia @ 230:

    RE: Kary L. Krismer @ 229 – I don’t know every house but I know enough to keep my finger on the pulse.

    No, you don’t. That’s ridiculous to even claim. There is no data and no one in real estate in King County has access to enough information to even begin to guess. Even if you happened to talk to 100 other listing agents about 100 specific listings you wouldn’t know that information.

  238. 238
    ARDELL DellaLoggia says:

    RE: Kary L. Krismer @ 233

    Kary…you don’t seem to know how the market works. Every agent knows a lot about a specific area and we connect on a “need to know” basis. It’s always been that way since long before the Internet. Key is “need to know basis”. You don’t waste an agent’s time because you want to write an SB comment or are “just curious”. But when you are determining a list or offer strategy…you need to tap into more than individual, personal experience knowledge.

    The key players share. But it is a pipeline that will be cut off if you abuse it. Your publicly ridiculing most every agent may be why you are not a member of the pipeline. It’s a valuable tool.

  239. 239

    RE: ARDELL DellaLoggia @ 234 – You don’t seem to know how the world works, or much about statistics. Also I would add that agents shouldn’t be disclosing the type of information we’re discussing without client permission, which would be another impediment to getting such information.

    The bottom line is the data doesn’t exist and no nonsense out of you changes that fact.

  240. 240
    ARDELL DellaLoggia says:

    RE: Kary L. Krismer @ 235

    Statistics only go so far in this biz…but you know that. You just like to pull my pigtails. :)

  241. 241

    By ARDELL DellaLoggia @ 232:

    RE: Bubble Trouble @ 231
    So yes, you are absolutely right that the housing market moves in tandem with the stock market, most of the time. The extended timeframe is just the lag.

    Although the national market does tend to follow the real three year SP500 change, the impact is small. It certainly is not as strong a relationship as implied in your comment.

  242. 242
    ARDELL DellaLoggia says:

    RE: LessonIsNeverTry @ 237

    The relationship is never with 100% surety. But if someone buys a house shortly after a dramatic drop in the stock market (I use the DOW as an indicator not the SP&P -old school) and they are underwater 6 to 18 months later, they can’t say “who woulda thought this could happen”. It’s an expectation, not a sure thing.

  243. 243

    By ARDELL DellaLoggia @ 236:

    RE: Kary L. Krismer @ 235

    Statistics only go so far in this biz…but you know that. You just like to pull my pigtails. :)

    Yes, it’s me. /sarc

    Seriously, I point out there’s no data, and then you start spouting off a bunch of nonsense for no reason trying to refute the claim I made. (Ditto on the two story/split entry response that I didn’t even bother to respond to.)

    The closest thing we have to data on buyers is the keybox data, but that isn’t terribly accurate because it includes agents going into their own listings and agents previewing, and excludes buyer visits at open houses. Also, if I recall correctly it’s of the entire NWMLS system and not broken down even by county.

    I agree statistics aren’t everything. For example, I no longer say that the C-S data and the NWMLS median data reflects the health of the market. But this market for the last couple of years has been just as unhealthy as the market during the downturn–just unhealthy in a different way. But that’s an entirely different issue than whether data even exists to judge.

    But as long as we’re on the topic of buyer demand, this statistic is probably relevant, but obviously it includes some renters too, so it’s more relevant as showing increased demand for any type of housing, not just demand to buy housing.

    https://www.seattletimes.com/seattle-news/data/florida-newcomers-surge-the-latest-on-another-year-of-record-breaking-growth-in-seattle-area/

  244. 244
    Brian says:

    By Kary L. Krismer @ 239:

    But as long as we’re on the topic of buyer demand, this statistic is probably relevant, but obviously it includes some renters too, so it’s more relevant as showing increased demand for any type of housing, not just demand to buy housing.

    https://www.seattletimes.com/seattle-news/data/florida-newcomers-surge-the-latest-on-another-year-of-record-breaking-growth-in-seattle-area/

    All these newcomers are moving in from sunny places. I’d be willing to place a bet that they won’t last long here. Or at least, as soon as the economy starts to turn for the worse here, they’ll be the first ones out the door – back to their year-round warm and sunny climates and old friends and family.

  245. 245

    The New Data is Out for High Priced Real Estate on the Coasts

    California [for example] is losing $140 billion in revenues over the next decade due scarcity of homes and high rents….the companies can’t function when the workers can’t afford homes…its that simple.

  246. 246

    RE: Kary L. Krismer @ 239

    Kary, Take a step back to the beginning of the conversation. Pulling this from Deerhawke’s 159 vs the very beginning.

    “Ardell many thanks for your thoughtful reply. I always like to hear a response based on someone’s experience and evidence, rather than ideology, canned view of the world, etc. What you wrote here is very perceptive :
    _________________

    The evidence is in 40 buyers becoming 20 buyers becoming 12 buyers becoming 5 buyers becoming 2 buyers. Right now we can still see a large bid up created by only 3 buyers in some places, so the stats won’t tell you when we are at the end of the road.”

    Repeating my last sentence there “…so the stats won’t tell you when we are at the end of the road” and add because the end of the road is when we don’t have a lot of buyers bidding the price up from FMV to Bubble territory.

    So Kary, My point was “the stats won’t tell you…” So your arguing that the stats aren’t readily available isn’t helpful. We do need to keep track of how many offers are coming in so as to recognize when those numbers are changing. So it is important to gather that information by any means possible. We can’t get the info for all houses, but even when you and I run mls stats, we don’t have the full picture given many homes are selling off the mls. There is no “perfect” data and sometimes we have less than we’d like and even less than we need. But we still have to get as much as we can and use it as best we can.

    My focus is a bit myopic at the moment because I am choosing a list price and using comps from a more robust season. I’m leaning toward the price that won’t be dependent on a crapload of offers. Today is picture day so I’m out of time on choosing list price. While I hate to list at a price much, much higher than anyone has ever listed before in that neighborhood, the imperfect data as to # of offers suggests that I need to go closer to the bid up prices than the list prices of those comps, because there are fewer buyers in play.

    I know you don’t like when I am being “predictive”, but there will always be a predictive element to what we do. There’s no way to escape that aspect of our duties.

    I don’t quite understand your seller permission comment. We often get calls from appraisers asking the details of the sale including # of offers. Do you tell appraisers you have to ask the seller for permission before responding?

  247. 247

    RE: Brian @ 240 – I think there’s always a risk of that when you transplant yourself from one area to another, and it’s not just due to weather. Family, friends and new bosses/co-workers also play a role.

  248. 248

    RE: Kary L. Krismer @ 235
    Yes Kary

    See the blog above to reveal what statistics on insane Seattle home prices are doing to local businesses, like Amazon….Washington’s got to be like a $30 billion loser because of high priced real estate assuming the California statistics apply to Seattle proportionately.

  249. 249

    By Ardell DellaLoggia @ 242:

    I don’t quite understand your seller permission comment. We often get calls from appraisers asking the details of the sale including # of offers. Do you tell appraisers you have to ask the seller for permission before responding?

    RCW 18.86.040(1)(d) provides that one duty of an agent is: “(d) Not to disclose any confidential information from or about the seller, except under subpoena or court order, even after termination of the agency relationship . . ..”

    Deciding whether to disclose offer information is up to the seller (they consent to sales information in the listing and P&S agreement), and they have virtually complete control over that. They can direct their agent to not disclose anything about offers, to let people know how many offers were made, or to disclose not only how many offers but pricing information. And note this duty expressly continues to apply after termination of the relationship–after closing.

    Note above I referenced a past listing and said that it had 3 or 4 offers. I purposefully didn’t identify the listing (in part not to “ridicule” the agent who priced to low), but in any case on that listing the client did give me permission to disclose how many offers were received (although perhaps not in that context).

    BTW, I don’t recall an appraiser ever asking me how many offers were received. More often they ask about condition of the property or seller concessions, and the latter can be minimized by simply inputting the information into the NWMLS system when you record the sale. But to answer your question, yes I do consider whether disclosure of the information to an appraiser would be confidential information and don’t make the assumption that the former client wouldn’t care.

  250. 250
    Scotsman says:

    Future antitrust action might be the biggest risk to Seattle housing prices: http://market-ticker.org/akcs-www?post=232508

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