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. 251
    ARDELL DellaLoggia says:

    RE: Kary L. Krismer @ 245

    Concessions seems more confidential info than number of offers, or at least as much so given it’s a contract/negotiation point.

  2. 252

    By ARDELL DellaLoggia @ 247:

    RE: Kary L. Krismer @ 245

    Concessions seems more confidential info than number of offers, or at least as much so given it’s a contract/negotiation point.

    But Paragraph i of the P&S agreement and Paragrpah 9 of the listing agreement both authorize such disclosure (reporting the Agreement including “price and all terms”) after closing. The number of other offers isn’t part of the agreement or a term of the agreement. So yes, it may be something the seller may not want to disclose, but they agreed to it. The confidentiality terms of the RCW no longer apply, because there’s consent.

  3. 253
    Blake says:

    By Scotsman @ 246:

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

    “If you think Washington’s going to regulate Big Tech, I’ve got a bridge I’ll sell you”
    http://www.businessinsider.com/tech-company-regulation-2017-10

    Antitrust? LMFAO!
    Congress and the courts are in the bag for big $. Heck even Ruth Bader Ginsburg clerked under Robert Bork who established precedents regarding monopolies that make any antitrust suits almost impossible to bring. The D@mnDems and Repugs see no evil as the big corporations buy out their competitors!

  4. 254
    Blake says:

    Nothing to see here… carry on!

    China Bond Selloff Spreads to Stocks as Deleveraging Risks Mount
    https://www.bloomberg.com/news/articles/2017-10-30/china-stocks-tumble-most-in-two-months-as-bond-selloff-continues

    https://www.bloomberg.com/news/articles/2017-10-29/the-biggest-stock-collapse-in-world-history-has-no-end-in-sight
    … PetroChina, the first $1 trillion company, has lost $800 billion in value.

    https://www.bloomberg.com/news/articles/2017-10-25/-minsky-moment-hangs-over-world-swimming-in-debt-quicktake-q-a

    -snip-
    How does the idea apply today?

    Record borrowing around the world has some warning of another Minsky moment. The IMF, in October 2016, reported that the debt of governments, households and nonfinancial firms “is currently at an all-time high,” at 225 percent of global gross domestic product. A year later, the IMF warned about “a continued search for yield where there is too much money chasing too few yielding assets, pushing investors beyond their traditional habitats.” If a Minsky moment is on the cards, it could be triggered when central banks rein in ultra-easy money supply and raise interest rates. The risk of a Minsky moment these days is often linked to China, the world’s second-largest economy.

    How widespread are Minsky fears about China?

    For a while now, some economists and analysts have warned that China is due for a Minsky-level reckoning. The argument is that China’s government has overseen an unsustainable pace of credit creation that is bound to end in tears. State-owned banks are said to be covering up bad loans and propping up zombie companies that are dragging on the wider economy. But others argue that China’s government assets outstrip its liabilities, and as long as the economy continues to grow, doomsayers will be proven wrong.

  5. 255
    ARDELL DellaLoggia says:

    RE: Brian @ 240

    Most of my clients moved here from another Country, some very recently. Sunnier countries.

  6. 256
    Doug says:

    Uh oh. July-to-August CS HPI only up 0.18%

  7. 257

    RE: Doug @ 252 – I read elsewhere that Seattle is up 13% YOY. Tim should give the C-S thread a scary Halloween theme for buyers.

  8. 258
    Doug says:

    RE: Kary L. Krismer @ 253 – Yes, sir. I’m calculating Y-o-Y at 13.21%.

    Interesting to see SF as the only major metro down M-o-M. I can already hear the bears…

    I know Tim will have the numbers later today, but just for fun here are your Y-o-Y August gains since 2011.

    August ’17: 13.21%
    August ’16: 11.27%
    August ’15: 7.60%
    August ’14: 6.54%
    August ’13: 13.18%
    August ’12: 3.36%

  9. 259
    uwp says:

    By Doug @ 252:

    Uh oh. July-to-August CS HPI only up 0.18%

    That’s almost as bad as when Seattle CS HPI was flat July-August of 2014.
    We all know what a bad sign that was for house prices going forward.

  10. 260
    uwp says:

    By Doug @ 254:

    RE:
    Interesting to see SF as the only major metro down M-o-M. I can already hear the bears…

    Also looking at SF CS HPI: it was down July-Aug in 2014 and in 2015.
    Neither seem like horrible purchases in hindsight (currently).

  11. 261
    Deerhawke says:

    RE: Ardell DellaLoggia @ 242

    Kary and Ardell, I thought I might offer my thoughts on this discussion. In certain environments, norms dramatically outweigh laws in importance. This is one of the main differences between international and domestic politics.

    Let me give an example. When I was a kid, there were all kinds of laws against hitch-hiking, but nobody paid much attention to them, especially if you were wearing an armed services uniform. But the laws were rigorously enforced when the hitchhiker looked like an oddball, a prostitute, etc. The laws were there, in essence, for when law enforcement felt they needed them.

    Whatever the rules may be about client confidentiality, people in the real estate world talk all the time. Sometimes it is professional discussion and sometimes it is just bragging and gossp. But a tremendous amount of information is passed between and among agents informally. And it is valuable to have access to that information.

    When I am pricing a house, there are 3 agents I call for information because I know that they are the ones who are each in close touch with a dozen others. Their opinions on the state of the market are worth a lot to me and I weigh them carefully.

    There is an old expression that “Good news travels fast, but bad news travels much faster.” If a spec builder does not honor a list-back promise, or even appears like he might not, every agent who makes some part of their living selling development dirt knows about it within 3 days. No website exists for this kind of thing. It is all old-school communications. Telegraph, telephone, tell-a-real-estate-agent.

  12. 262

    By Deerhawke @ 261:

    RE: Ardell DellaLoggia @ 242 – Whatever the rules may be about client confidentiality, people in the real estate world talk all the time. Sometimes it is professional discussion and sometimes it is just bragging and gossp. But a tremendous amount of information is passed between and among agents informally. And it is valuable to have access to that information.

    Undoubtedly they talk, but when they start talking about specific properties (or ones that are easily identifiable from context), then the agent needs to start worrying about confidentiality, and more importantly, realize that disclosure is the clients’ decision and that some clients are more sensitive and/or unforgiving. So the idea that a network of agents would be talking about and forth about how many offers they’ve been getting on their listings in a certain area is rather scary (particularly in context of my final point below).

    As to the three agents you call, I suspect they get a lot more information off the NWMLS system than off their contacts with other agents, although I’ll admit new construction may be different. Outside of new construction (or maybe some very high end areas) there are no physical areas I’m aware of where there are only certain agents listing properties or even most the properties. Also subtle differences between properties and their marketing can lead to greatly different results. Sure they can supplement what they learn from the NWMLS from other sources, but the NWMLS data is probably their primary source.

    Finally, I would really question the value of the information you get from other agents on certain topics. I’m not only concerned about their exaggerating or perhaps purposefully deceiving to benefit themselves or a client, but also just that their thoughts might not be very good. A lot of the bad agent practices that have been popping up have been due to agents discussing things among themselves–which is why both I and Washington Realtor’s Legal Hotline lawyer have been cautioning against agents falling for the “monkey see, monkey do” trap.

  13. 263
    ARDELL DellaLoggia says:

    RE: Deerhawke @ 261

    …and there was always rat kid who no one told nothing. :)

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