Around the Sound: 2017 Puget Sound market wrap-up

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It has been quite a while since we looked at the housing stats for the broader Puget Sound area. Now that 2017 is over, let’s update our “Around the Sound” statistics for King, Snohomish, Pierce, Kitsap, Thurston, Island, Skagit, and Whatcom counties.

First up, a summary table:

December 2017 King Snohomish Pierce Kitsap Thurston Island Skagit Whatcom
Median Price $635,000 $449,950 $319,900 $315,000 $285,000 $325,000 $311,000 $350,000
Price YOY +15.5% +12.5% +12.2% +11.1% +2.2% +4.8% +10.8% +7.2%
Active Listings 1,168 625 1,447 380 468 262 290 447
Listings YOY -28.7% -30.8% -12.7% -39.6% -30.9% -19.9% -11.9% -9.3%
Closed Sales 2,094 1,032 1,276 389 414 137 150 226
Sales YOY -2.8% +10.0% +1.9% -10.0% -1.0% +6.2% -12.8% -1.7%
Months of Supply 0.6 0.6 1.1 1.0 1.1 1.9 1.9 2.0

Prices are climbing and listings are declining across the board, but sales were strangely mixed. December closed sales were up from a year earlier in Snohomish, Pierce, and Island counties, while falling everywhere else.

Here’s the chart of median prices compared to a year ago. Every county turned in a gain, with the smallest increases seen in Thurston and Island, and the largest in King and Snohomish.

Median Sale Price Single-Family Homes

Listings were down significantly from a year earlier everywhere across the board. The last time any of the Puget Sound counties saw a year-over-year increase in inventory was August and September in Whatcom County. King, Snohomish, Pierce, Thurston, Island, and Skagit have all been in the red for a year or more.

Active Listings of Single-Family Homes

Despite the decrease in listings, closed sales were up ten percent in Snohomish County, and also saw slight increases in Island and Pierce. Sales were down everywhere else, with the largest year-over-year decline seen in Skagit County at -13 percent.

Closed Sales of Single-Family Homes

Months of supply is minuscule everywhere. What else is there to say?

Months of Supply Single Family Homes

Finally, here’s a chart comparing the median price in December to the 2007 peak price in each county. Every Puget Sound county except for Island County has now exceeded the previous peak median price.

Peak Median Sale Price Single-Family Homes

In summary: There’s never been a better time to sell a home in the Puget Sound, and arguably there’s never been a worse time to buy.

If there is certain data you would like to see or ways you would like to see the data presented differently, drop a comment below and let me know.


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.

107 comments:

  1. 1
    Kmac says:

    Should I assume that the “months of supply” chart is indexed off of 6 months to reflect that 6 months is considered a balanced market?

  2. 2
    Brady says:

    RE: Kmac @ 1 – Yes.

  3. 3

    It’s amazing how widespread the low “months supply” figures are, and that the highest is under 2 months.

    I’m glad Tim updated this more regional data. We tend to focus a lot on King County.

  4. 4
    The Tim says:

    RE: Kmac @ 1 – Yes, six months of supply has historically been considered a “balanced market,” so I chose to show the bars as decreasing/increasing from six. to visualize that.

  5. 5
    N says:

    Could we take this as further evidence that the current market is not primarily driven by the growth of high wage jobs in King County. If it was how do you explain the low inventory and increasing prices in Bellingham, Spokane etc. Certainly a factor for King but maybe not the #1 driver.

  6. 6

    By N @ 5:

    Could we take this as further evidence that the current market is not primarily driven by the growth of high wage jobs in King County. If it was how do you explain the low inventory and increasing prices in Bellingham, Spokane etc. Certainly a factor for King but maybe not the #1 driver.

    Inventory yes, prices no. King County sort of stands out on the price front. It does though make me wonder what is driving the inventory in the other counties. I’m not aware of any tax issues.

    (BTW, no opinion on Spokane.)

  7. 7
    Kmac says:

    By Kary L. Krismer @ 6:

    By N @ 5:

    Could we take this as further evidence that the current market is not primarily driven by the growth of high wage jobs in King County. If it was how do you explain the low inventory and increasing prices in Bellingham, Spokane etc. Certainly a factor for King but maybe not the #1 driver.

    Inventory yes, prices no. King County sort of stands out on the price front. It does though make me wonder what is driving the inventory in the other counties. I’m not aware of any tax issues.

    (BTW, no opinion on Spokane.)

    Perhaps driven by monetary policy and the store of value….?

    I think this is also going on in fly over country [outside of WA] to some degree.

  8. 8
    ARDELL DellaLoggia says:

    RE: Kmac @ 7

    Not unusual to have no inventory as to single family homes this time of year in many markets. I wouldn’t read too much into it until April.

  9. 9
    N says:

    @ Ardell 8 – I was referring to the inventory, or lack thereof, that has been happening for a couple of years now (not just this winter).. and this includes Spokane, plenty of places in so called fly over country etc… Another words low inventory isn’t just a Seattle thing.

    Maybe it is a simple as more demand than supply as a result of the pent up demand and no building during the down years + wall street snapping up those homes. And as has been pointed out it isn’t necessarily that much less inventory has been out there but that demand has snapped it up so ending month inventory is lower.

  10. 10
    Green-Horn says:

    The Law of Supply & Demand?
    Still valid in Seattle despite all valiant efforts of the the Seattle Council of Socialist Commissars?

    How can one understand the substitutibility of multifamily rental apartments for owner occupied single family homes? Let’s say if we hold the supply of the single family homes relatively fixed and then vary the number of multifamily rentals, what factor of potential homeowners will be satisfied by the alternative of apartment living? Has anybody analyzed this? For example what share of potential home buyers would be long run satisfied by alternative multi-family rental products, 30%, 50% or 70%?

    Observe the increasing “inventory” of multifamily product to compete with single family product.

    In Metropolitan Seattle, there are currently 24,554 apartment units under construction and an additional 35,009 units in the development pipeline, counting only units in buildings with 50+ apartments, according to Apartment Insights. These are the towers that are sprouting like mushrooms. This does not include condos that are purchased by investors and then show up on the rental market. And it does not include units in smaller buildings.

    This comes after nearly 12,000 units were completed in 2017. And according to Axiometrics, nearly 8,000 units are scheduled for completion in the first half of this year alone. This is the phenomenon that “crane counters” have been witnessing for a while.

    Check out wolfstreet dot com /2018/01/09/seattle-apartment-market-rents-hit-by-new-supply/
    Comments there are also interesting and perhaps worth reading.

    Anybody care to comment or share more systematic ways to think about this?

    Even if holding single family properties still looks ok at this stage of the cycle, holding a multifamily rental property or merely a project in planning for future development of a multifamily rental property looks much more challenging.

    Other thoughts and observations?

  11. 11
    ESS says:

    RE: Green-Horn @ 10

    How can one understand the substitutibility of multifamily rental apartments for owner occupied single family homes? Let’s say if we hold the supply of the single family homes relatively fixed and then vary the number of multifamily rentals, what factor of potential homeowners will be satisfied by the alternative of apartment living? Has anybody analyzed this? For example what share of potential home buyers would be long run satisfied by alternative multi-family rental products, 30%, 50% or 70%?

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

    Green – do you know – or anyone else, the general size of the apartments that are being constructed. Are they primarly one and two bedroom, 500 -750 square feet? Do these high rise apartments have any three bedroom apartments in them?

    We lived in Vancouver BC’s West End for a while. For the uninitiated, Vancouver’s West End is a series of primarily high rise apartments located between the commercial area of downtown Vancouver, and Stanley Park. Same type of housing as in Belltown/ SLU, although in my opinion, a nicer area with easy access to a world class park and beaches. We rented a studio apartment in a building that only had studios and one bedroom apartments. While adequate as a newly married individual contemplating my next career move, I don’t know if I would want to stay in a small apartment for the next 25 years, and would I want to basically own an apartment rather than rent? And who knows – even some brogrammers may put down their video games long enough to go off and get married. And what to do with the crumb crunchers if they show up? A one or two bedroom apartment gets REALLY small when they are added to the family mix.

    As to your point comparing apartments to single family homes, it would be interesting to determine how many new single family homes are being built in Seattle and adjoining areas. From what I can tell, not many, and they are very expensive. Are townhomes considered single family homes when computing the number of new single family homes? Not in my book if I was a potential buyer, and I assume others would also think the same way. In some ways a nice apartment in a well designed building provides more privacy than a townhouse or a row house. So even if there is a glut of apartments, or condo conversions, it still may a huge jump from an apartment with a new legal identify as a condo to a real house (i.e. – separate residence with dirt on four sides separating you from the residence next to you. There still may be a shortage of single family homes, especially those that are affordable.

    Thus – one wonders if one will eventually divide housing statistics into two categories, true single family houses – and everything else. It may be two different markets that react differently.

    So we shall have to wait and see what happens with these different types of housing.

    For those of you able to access the Wall Street Journal, there was an article about the glut of high rise expensive apartments in Denver. Apparently some of the lower income tenants that are moving in are getting rent vouchers so they can rent the units at market value. Which creates both supply and demand problems, as well as conflict between those paying the full freight and the subsidized individuals. Interesting stuff.

  12. 12
    wreckingbull says:

    RE: ESS @ 11 – I think two hermetically sealed markets is a vast oversimplification. The two are interrelated in many ways

    – Glut of apartments affects SFH rentals.
    – Glut of converted condos affects SFH sales
    – Glut of apartments affects classic rent vs. buy calculations

    Your specific demographic of the wealthy, growing family is certainly one to consider, but there are many other at play too, and I’m not so sure children drive this migration like they used to, especially in Seattle now.

  13. 13
    ess says:

    By wreckingbull @ 12:

    RE: ESS @ 11 – I think two hermetically sealed markets is a vast oversimplification. The two are interrelated in many ways

    – Glut of apartments affects SFH rentals.
    – Glut of converted condos affects SFH sales
    – Glut of apartments affects classic rent vs. buy calculations

    Your specific demographic of the wealthy, growing family is certainly one to consider, but there are many other at play too, and I’m not so sure children drive this migration like they used to, especially in Seattle now.

    You may very well be correct. On the other hand, I did notice that in Vancouver BC , mid range condos had a significant price increase, while single family houses decreased in value. So the decrease in value of one segment didn’t put a damper on the other. Of course Vancouver BC – different market, with other factors up there (i.e. – foreign investors a major force) that we don’t have in the Puget Sound area.

    Will have to see what happens to both rents and sales of single family houses if and when the apartment rental market becomes saturated. And will have to see what will happen if rents flatten out if all these folks that are sharing will move out on their own and take up some of the slack. Maybe it is fun to have roommates while in one’s 20s, probably not so great in one’s 30s and 40s.

    Still am interested in exactly what the size of the units are in these high rise apartment buildings. I thought I had read somewhere that there is a lack of three bedroom apartments. Which makes sense if catering to a young single tech crowd.

  14. 14
    Weasel says:

    Pierce county is where its at, adjacent to King co and has the best transit connectivity with King (commuter rail with stops in multiple town centers), and cheaper than Snohomish! Go Pierce! :-)

  15. 15
    Maui Wowie says:

    At the moment, I’m looking at to buy in Marysville area. I can get more house for my money than Seattle I wanna stay away from the bidding wars in Seattle area.

  16. 16
    Richie Valez says:

    Where is sustained home price growth supposed to come from?

    Consumer debt is already at record highs. Same with auto loan debt, student loan debt, and retail trader margin interest. Unemployment rates cannot get any lower. Hell, even Bitcoin and every other altcoin has been pumped to the moon, courtesy of retail leverage provided by credit card companies and wealthy/institutional money reaching the peak of desperation.

    At the same time the possible causes for a reversal are too many to count.

    We’ve reached the point in King and probably many other areas where anyone shopping for a house has either caved already and bought an overpriced POS or has given up. Hence you see sales plummeting, with the occasional “rich” stock grant recipient or California immigrant spending a small fortune and driving the average price up. Yet these people willing to pay a crazy amount for what little is for sale are fewer and fewer, certainly not numerous enough to sustain an uptrend.

    The mortgage interest deduction just got capped. The 10 year treasury trend has reversed and mortgage rates are climbing much higher. Institutional money is already fully invested in housing from after the last bubble bursting, and if anything will head for the door. Yield seeking behavior in the form of institutional buying+renting and mortgage lending is going to dry up if bonds continue to drop in price. The Chinese just announced today they are going to start tapering US treasury purchases.

    When I was shopping for a jumbo mortgage in King 1 year ago it was all hedge funds providing the securitization. Maybe I happened upon an odd mortgage broker who loves hedge funds, but I’m thinking more likely it was simple yield seeking behavior. That made sense in ZIRP but what if ZIRP is over? Hedge funds don’t need to move somewhere else to sell. The Fed has raised several times and is still on a path to raise more into 2018. 2017 was the worst year for the USD in a decade. If 2018 shows a rise in the USD it will weaken foreign demand.

    Then there are good old fashioned black swans. We’ve got 3 air craft carriers parked on Kim Jong’s doorstep and neither he nor Trump is willing to back down. Putin is in the annexation mood and the USA has decided to get into a full on proxy war with Russia in Ukraine, providing lethal aid for the first time. ISIS has finally lost all of its territory, sending thousands of die hard terrorists back home to the West. The EU is shaky as ever, but for some reason everyone thinks that whole business is over.

    Yet with all this risk we have never seen equity volatility this low for this long, since the 1920’s. Folks are fooling themselves if they think the music will keep on going like this for much longer. I wouldn’t bet on the exact date the good times end. Bubbles always seem to go on longer than you think, but there’s clearly way more downside than upside at this point. Who knows what will prick it, but something always does.

  17. 17
    S-Crow says:

    Another entrant into reducing total real estate commission fees: REX Real Estate Exchange

    From Housing Wire: https://www.housingwire.com/articles/42245-rex-real-estate-exchange-which-operates-outside-mls-raises-15-million

    I wonder if this will gain traction.

  18. 18
    Anonymous says:

    http://www.businessinsider.com/seattle-apartment-market-faces-onslaught-of-new-buildings-2018-1

    Seattle downtown rents drop by 6.6%. Start of the dawn. Home prices to come down by end of this year or start of next year.

  19. 19
    Toad37 says:

    RE: Richie Valez @ 16 – they’ll let it drop, in a scary fashion i might add, when they’re ready with an alternate currency. I’m trying to figure out if it will be good or bad for existing mortgage holders. Gut says in the long run it should be good for existing mortgage holders?

  20. 20
    Ian says:

    RE: Green-Horn @ 10 – Keep in mind that a vast majority of the new apartments coming on-line are targeting the high end. If you own at the low end/outside the urban core, there will still be rent appreciation to be had, but not much, around 6%. I’d say that in general, this summer is a good time to cash out a 4-plex.

  21. 21
    Erik says:

    RE: ess @ 13
    I just read seattle has the 3rd most amount of foreign investors. I wonder how we compare quantitatively to Vancouver?

    Wreckingbull has a history of low quality comments, but I agree with him here although I’m no expert myself. You’d think that an apartment glut would soon bring down prices of other real estate. Too many apartments will turn into condos when they cannot be rented.

    This is how I think of it… I’m a dumpy low life software engineer looking for shelter. I can buy a 1500 sq ft home for $750k or I can buy a condo for $350k. Although simple minded with limited intelligence, I would think the software engineer would buy the condo so they can afford more video games and Diet Coke.

  22. 22
    Matt P says:

    By Erik @ 21:

    RE: ess @ 13
    I just read seattle has the 3rd most amount of foreign investors. I wonder how we compare quantitatively to Vancouver?

    Wreckingbull has a history of low quality comments, but I agree with him here although I’m no expert myself. You’d think that an apartment glut would soon bring down prices of other real estate. Too many apartments will turn into condos when they cannot be rented.

    This is how I think of it… I’m a dumpy low life software engineer looking for shelter. I can buy a 1500 sq ft home for $750k or I can buy a condo for $350k. Although simple minded with limited intelligence, I would think the software engineer would buy the condo so they can afford more video games and Diet Coke.

    This is a parody account right?

  23. 23

    By Erik @ 21:

    RE: ess @ 13
    I just read seattle has the 3rd most amount of foreign investors. I wonder how we compare quantitatively to Vancouver?

    It doesn’t really matter because only the Vancouver number is likely real. No one tracks where someone who buys real estate in the US is from, at least not on a large scale.

    BTW, in the past condos weren’t being converted because they couldn’t be rented. That conceivably could happen, but that wasn’t the driving factor in the past.

  24. 24
    ess says:

    RE: Richie Valez @ 16

    Where is sustained home price growth supposed to come from?

    ——————————————————————————————————————————–

    Inflation over the years.

    A longer term personal perspective. When I was a young foolish undergraduate student, I bought an interest in a duplex in the U district. We all swallowed hard when we purchased the property for 28 thousand dollars. With taxes and repairs. we were worried that we would not be able to meet the monthly mortgage – 180 dollars. One of the dumber things I did was to not buy out my partners when we sold, as the house was too close to the university and my wife and I didn’t want to live amongst students as we had transformed into adults. One of the smarter things was use my share of the proceeds of the sale of the U District house to hold on to our first house and plow it into a second house.

    I had no idea how much all prices, as well as real estate prices could climb over the years because of inflation. I figured selling the premises for almost 5x what we paid was a pretty good rate of return over a 14 year period. No way could I imagine that the premises could sell for 30x what we sold for it. I would have sooner believed that little green men from Mars were moving into the neighborhood than imagine that property would be worth in excess of 800K.

    I think we are in the same historical fiscal ship navigating the same inflation waters. I would hazard a guess that the possibility of deflation is well past and we are coming into another round of inflation over the next few years.

  25. 25
    Brian says:

    The sustained home price growth comes from the treasury bull market of the past 30 years, which brought with it ever-decreasing mortgage rates (read: increased home purchase power) and sent investors to real estate for safe-ish returns that beat decreasing bond yields.

    If that reverses, which it seems to actually be starting to do over the past year, I think it will have quite an ill effect on real estate prices for many years to come. Investors will go back to bonds, which will have higher yields again, and home buyers will struggle with affordability due to higher mortgage rates.

    Home prices will still rise, but go back to following this historical trend that was established before the massive bond bubble:
    http://www.jparsons.net/housingbubble/united_states.png

  26. 26

    By ess @ 24:

    RE: Richie Valez @ 16

    Where is sustained home price growth supposed to come from?

    ——————————————————————————————————————————–

    Inflation over the years.

    That and just population growth, as long as you’re looking at just a specific piece of property and not median/mean values. As more and more people work and desire to live in a particular location the prices will go up because that is by definition more demand.

    If you’re looking at these two different components, inflation will apply across a broader area (e.g. all of King County), while the population factor will apply more to only certain more desirable areas. It may be that less than 5% of the population can afford those more desirable areas, but as the population increases, the number of people who can afford those areas should (hopefully) also increase, increasing the demand.

  27. 27

    RE: Green-Horn @ 10
    Where do the 10s of Thousands Park [if its downtown Seattle]?

    How can they all commute to work on the already over-stuffed and perpetually in construction inadequate freeways the last 30-40 years?

    I know just do it and find out its just another HORRIBLY failed health care bill?

    I know tax us to death? We’re doing it now and its useless…

  28. 28
    N says:

    @ Erik 21 –

    Both the $750k house or $350k condo you mention likely will take a back seat financially to the option of renting. Renting is the best deal of the 3 today and if the markets are going in opposite directions that gap will get even wider.

  29. 29

    Amazon HQ2 Move to Mid-west Soon??

    The new high tech workers from the blue collar states don’t look like Seattle-ites at all. They look like farm kids….LOL….They’re stealth bidding for Amazon jobs and the coveted HQ2 location…so who cares?

    https://apnews.com/a1b28040c37e42ca8070bd74aee34f01/Local-governments-won't-say-what-they're-offering-Amazon

  30. 30

    Chinese High Tech Moving Out of Silicon Valley

    The Seattle area too?
    https://www.yahoo.com/finance/video/why-chinese-workers-leaving-silicon-034643597.html

    Don’t ever become the most livable city….it means you are becoming the most unlivable overpopulated mess, on its way down the toilet?

  31. 31
    Erik says:

    RE: Kary L. Krismer @ 23
    My ex girlfriend’s dad put up a huge apartment complex in new castle in about 2003. He couldn’t get the apartments rented sufficiently, so he converted them to condos and sold them. I heard it’s easier to build and apartment complex and convert them to condos than it is to get permits for a condominium.

    From what I’ve seen and read, apartments do get converted to condos when they do not get rented.

  32. 32

    RE: ess @ 24

    ” I figured selling the premises for almost 5x what we paid was a pretty good rate of return over a 14 year period. No way could I imagine that the premises could sell for 30x what we sold for it. I would have sooner believed that little green men from Mars were moving into the neighborhood than imagine that property would be worth in excess of 800K.”

    Can you tell us more about this 30x over 14 years property? Your math suggests it was purchased for $26,600 in 2003 or 2004 and currently sold for over $800,000. I don’t doubt the $800,000, but where did you buy something for $26,600 14 years ago that is selling for over $800,000 today?

  33. 33
    Erik says:

    RE: Matt P @ 22
    Right, I have no association with the those types except when I reply to Wreckingbull’s comments on this site.

  34. 34
    Anonymous Coward says:

    By Kary L. Krismer @ 26:

    By ess @ 24:

    RE: Richie Valez @ 16

    Where is sustained home price growth supposed to come from?

    ——————————————————————————————————————————–

    Inflation over the years.

    That and just population growth, as long as you’re looking at just a specific piece of property and not median/mean values. As more and more people work and desire to live in a particular location the prices will go up because that is by definition more demand.

    If you’re looking at these two different components, inflation will apply across a broader area (e.g. all of King County), while the population factor will apply more to only certain more desirable areas. It may be that less than 5% of the population can afford those more desirable areas, but as the population increases, the number of people who can afford those areas should (hopefully) also increase, increasing the demand.

    Actually, if you’re increasing population and NOT increasing the number of units, you don’t increase demand, you just move the entry point for a unit to the right on the bell curve of potential buyers. For a first order approximation of the thinking… say there’s, 500 houses in a desirable, close-in, built out neighborhood. If the population consists of 1000 households, then the cost of the cheapest unit will be what the median household is willing to pay. If another 9000 households move to the area, those houses can be filled with only the top 10% of buyers.

  35. 35
    Anonymous Coward says:

    By Richie Valez @ 16:

    Where is sustained home price growth supposed to come from?

    Unemployment rates cannot get any lower.

    Well, if unemployment rates really cannot get any lower, wouldn’t we expect to see wage increases?

  36. 36
    Blake says:

    Just read this… a note of caution in the midst of the current (rational/irrational?) exuberance.

    Investors Should Heed the Warning From Treasuries:
    Bonds, not stocks, have been the better predictor of the two recessions in the 21st century.
    https://www.bloomberg.com/view/articles/2018-01-08/investors-should-heed-the-warning-from-treasuries

    … Narrower spreads between two- and 10-year Treasuries also reflect speculation that the Fed’s stated objective of raising the federal funds rate three times in 2018 may not be met. If the economy slows significantly after an initial burst of optimism over the tax cuts, the 10-year yield is likely to fall further even as the two-year yield rises with Fed tightening, eventually resulting in an inverted yield curve. Yield curve inversion was the harbinger of recessions in 2001 and 2007–2009.

    While recessions have always been preceded by the two- to 10-year spread going negative, a negative spread has not always ended in a recession. For example, the inversion of the yield curve in May through June 1998 did not deter gross domestic product from rising in inflation-corrected terms by more than 3 percent in 1999 and during the first half of 2000.

    This has led some market watchers to suggest that a potential negative spread should not be a source of concern. There are several reasons I disagree with this sanguine view.

    First, wage growth remains anemic despite the quintupling of the Fed’s balance sheet since the financial crisis and the still-low interest rates almost 10 years later. This may not be offset by the recent tax package. Nonpartisan institutions such as the Congressional Budget Office have calculated that the benefits of the tax cuts are tilted heavily in favor of upper-income earners who are not major consumers. Consumption accounts for about two-thirds of U.S. gross domestic product.

    Second, the new regulations incorporate reduced government spending on health care. This will discourage consumption by low-income and elderly Americans even as lower tax rates are intended to increase spending.

    Third, a pickup in economic growth is contingent on companies responding to the lower corporate tax rate by hiring more workers and increasing their wages. Global competition from low-cost producers will limit U.S companies’ ability to achieve these goals, and stock buybacks and increased dividends are the more likely outcome. That is why the recent surge in equity prices is a logical outcome even as inflationary expectations remain low, resulting in lower bond yields.

    (f* that! “Tonight I’m gonna party like it’s 1999!!!”)

    Excellent comment to that article: “I would postulate that the Fed after a decade of extraordinary easing using the ZLB and $4.5T in cumulative QE should reduce its balance or slightly increase interest rates, but not do both simultaneously as proposed in the Fed minutes. These actions have never been attempted before unless the Fed is purposely attempting to create a recession.”

  37. 37
    Blake says:

    By Anonymous Coward @ 35:

    By Richie Valez @ 16:

    Where is sustained home price growth supposed to come from?

    Unemployment rates cannot get any lower.

    Well, if unemployment rates really cannot get any lower, wouldn’t we expect to see wage increases?

    That economic “law” about the relationship between unemployment and wage inflation appears to have been disproven over the last few years. Unemployment is low, wage growth is anemic… and corporate profits are through the roof! THAT seems to be the formula: low wages -> high profit margins. “Rocket science” eh?

  38. 38

    RE: Anonymous Coward @ 34 – I don’t see how that isn’t increasing the demand. You have 9000 more people, part of which can actually afford the place. That seemingly is the definition of increased demand.

  39. 39

    By Blake @ 37:

    By Anonymous Coward @ 35:

    By Richie Valez @ 16:

    Where is sustained home price growth supposed to come from?

    Unemployment rates cannot get any lower.

    Well, if unemployment rates really cannot get any lower, wouldn’t we expect to see wage increases?

    That economic “law” about the relationship between unemployment and wage inflation appears to have been disproven over the last few years. Unemployment is low, wage growth is anemic… and corporate profits are through the roof! THAT seems to be the formula: low wages -> high profit margins. “Rocket science” eh?

    You’re accepting the unemployment figure as being the correct number. There are still a lot of people on the sidelines, and their slowing coming back in moderates any wage increases.

  40. 40
    Rupert D says:

    Most recessions are pretty short in tenor with an impact nothing like that occurred following 2008. Its difficult to understand the RE bearish comments on this site given the supply demand imbalance and other fundamentals. I would suspect the majority of bearish comments and doomsday predictions are from real estate professionals who think that scaring readers into believing the Seattle RE bubble is about to burst will generate additional transactions that result in more real estate agent commissions. Good luck with that! Real estate prices do not turn on a dime, there will be ample signs when a real downturn begins to happen….so readers do not pay attention to the doomsday posters, just pay attention to the data.

  41. 41
    uwp says:

    By N @ 28:

    Both the $750k house or $350k condo you mention likely will take a back seat financially to the option of renting. Renting is the best deal of the 3 today and if the markets are going in opposite directions that gap will get even wider.

    Renting is the best deal today? Have you run the numbers?

    https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html

    Putting in a 750k house, 7 year stay, 20% down, 4% mortgage, leaving appreciation and rent growth alone (3% and 2.5%, both conservative I think), dropping property taxes to 1%/year, closing costs to 2% (15k), maintenance to .5%/year, insurance to .25%/year and leaving everything else alone I get buying that 750k home better than a $2,000/month rental.

    And I am 95% sure your 750k home will be nicer than a 2k/mo rental.

    EDIT: I ran the same numbers with a hypothetical 350k condo with $350/mo HOA dues, and it says buy if rent is higher than $1,200/month.

  42. 42
    Doug says:

    By Rupert D @ 40:

    Its difficult to understand the RE bearish comments on this site given the supply demand imbalance and other fundamentals.

    Your rational, logical thought process will not be tolerated around here.

  43. 43
    Doug says:

    By Blake @ 36:

    the 10-year yield is likely to fall further even as the two-year yield rises with Fed tightening, eventually resulting in an inverted yield curve.

    Weird, almost exactly as I’ve been saying since first ever posting on this blog.

  44. 44
    ess says:

    By Ardell DellaLoggia @ 32:

    RE: ess @ 24

    ” I figured selling the premises for almost 5x what we paid was a pretty good rate of return over a 14 year period. No way could I imagine that the premises could sell for 30x what we sold for it. I would have sooner believed that little green men from Mars were moving into the neighborhood than imagine that property would be worth in excess of 800K.”

    Can you tell us more about this 30x over 14 years property? Your math suggests it was purchased for $26,600 in 2003 or 2004 and currently sold for over $800,000. I don’t doubt the $800,000, but where did you buy something for $26,600 14 years ago that is selling for over $800,000 today?

    Perhaps I didn’t make myself clear. We held on to the property for 14 years, but we bought it in the mid 70s and sold it in the late 80s.

  45. 45
    Green-Horn says:

    By ess @ 24:

    RE: Richie Valez @ 16

    Where is sustained home price growth supposed to come from?

    ——————————————————————————————————————————–

    I think we are in the same historical fiscal ship navigating the same inflation waters. I would hazard a guess that the possibility of deflation is well past and we are coming into another round of inflation over the next few years.

    Exactly this.

    The next crisis will not be exactly the same as the last…

    Unless the Fed tightens excessively and suddenly to prevent said inflation…
    Then yes another deflationary liquidity contraction will echo the last GFC.

  46. 46
    Green-Horn says:

    RE: Erik @ 31
    What economic and legal regulations and incentives govern condo conversion?

    Many are predicting that many of the rental apartment glut flooding the market will eventually be converted to condos. What’s the timeline for how that might unfold?

  47. 47
    uwp says:

    Maybe the buy vs rent argument is close these days, but it is nowhere near as clear as it was in 2006/2007.

    I rented a nice 4br house in north Ballard in 2007 that I would guess was worth around $650-700k at the time (per my recollection and working backwards from it’s sales history of 600k in 2013). We paid $2,000/month. That was a time when renting made sense, and the SeattleBubble was helpful in pointing out those facts. The NYT calculator says the rent/buy tipping point would have been closer to $2,500/month at 6% interest rates.

    Today, if you want something with more than 2 bedrooms that is close-in, a $750,000 house is much more appealing than a $2,500/month rental, and as long as people in Seattle have money and listings are somewhat scarce, people will bid them up. If you want to bet on rental prices falling to make up for it, the rent drops have to be pretty drastic (ie. more than 20% drop just to get to the break-even rent/buy calculation), plus, have fun moving and/or haggling with your landlord every year.

  48. 48
    ESS says:

    By ess @ 44:

    By Ardell DellaLoggia @ 32:

    RE: ess @ 24

    ” I figured selling the premises for almost 5x what we paid was a pretty good rate of return over a 14 year period. No way could I imagine that the premises could sell for 30x what we sold for it. I would have sooner believed that little green men from Mars were moving into the neighborhood than imagine that property would be worth in excess of 800K.”

    Can you tell us more about this 30x over 14 years property? Your math suggests it was purchased for $26,600 in 2003 or 2004 and currently sold for over $800,000. I don’t doubt the $800,000, but where did you buy something for $26,600 14 years ago that is selling for over $800,000 today?

    Perhaps I didn’t make myself clear. We held on to the property for 14 years, but we bought it in the mid 70s and sold it in the late 80s.

    Further correction – the house that we bought would now sell for about 30 -35 times what we paid for it, not what we sold it for. I noticed the mistake – my excitement over thinking about increase of house prices in the Seattle area which is going to fund a pretty good retirement for my wife and myself. Sorry for the confusion.

  49. 49
    N says:

    @ uwp 47 –

    Every time I look at what the payments would be on a home I conclude from a cash flow perspective it is cheaper to rent, not to mention the fact you need to put $100k+ as a down payment. The home we rent for under $2,200, according to Zillow is worth $600k+. In the last week I saw two similar homes for rent at $1,995 and $2,100 in my area, both would easily sell for $600k+.

    Long term, sure its a good bet you’ll do well if you can handle the payments but strictly from monthly outlay buying is not preferential.

    But I don’t see how rents would have to fall 20% to make renting break even vs buying. Maybe if you put 50% down??? For a $750k house with 20% down, how would you possible get your payment down less than $2,800 or so… more than $2,500 a month rent.

  50. 50
    ESS says:

    By N @ 28:

    @ Erik 21 –

    Both the $750k house or $350k condo you mention likely will take a back seat financially to the option of renting. Renting is the best deal of the 3 today and if the markets are going in opposite directions that gap will get even wider.

    Now that is a very interesting comment to a small “mom and pop” landlord such as myself. Why? Because unlike so called experts whose only relationship to real estate business is writing their rent check once a month and thinking that landlords are trying to get every last dollar out of their tenants, there are other factors involved. For example – if there are more renters out there because the economics of buying are just not there, it actually makes life easier for landlords, especially the “moms and pops”. That is because the quality of the tenants is increased if there are more of them out there trying to rent premises. Before the last bubble, I noticed a significant decline in the quality of tenants we were getting because at that time anyone with a pulse could buy a house. I know I am not the Lone Ranger when I say that in a world where there are many other things going on other than just being a landlord, having a good tenant who takes care of the premises and pays their rent promptly, those premises may be rented below market value without annual increases of rent. If it can be avoided, it may not be worth it to raise the rent on a good tenant yearly because it is advantageous to at least this landlord to get less rent while knowing that there is a good tenant in place and there won’t be any vacancy. In the real estate rental bizz – top dollar for rents isn’t everything when you don’t have shareholders to answer to.

    On the other hand, make it onerous to be a landlord such as in Seattle with all sorts of rules, and even better yet institute rent control and see what happens. The moms and pops will sell to major corporations that are only interested in a top dollar return on their investment. Guarantee there will be rent increases every year they can do it. And those mom and pops still in the business will demand top rental dollar to insure that they keep up when government tells them how much they can raise their rents each year.

    No more giving people breaks by increasing their security deposit if there is a limit to what the landlord can obtain because of governmental meddling in the free market place. We once did exactly that which would be illegal in Seattle, and after the tenant re-established her credit and bought her own place, we received a very nice thank you note from her specifically saying thanks for giving her the chance to rent our place, get things back together to the point she could buy her own place. Think that is going to happen in Seattle with all the regulations in place? Doubtful. No one is going to take the chance.

    Furthermore, rent control almost guarantees that “moms and pops” like me will raise the rent each year to the maximum regardless if there is any need to do so. With rent control, there isn’t as much tenant turnover because everyone needs to stay in place to keep their “good deal” rent controlled unit. If the landlord doesn’t raise the rent to the maximum allowed by law each year, that raise is forever lost, regardless of new taxes or expenses that may necessitate an increase in rent that is above the statutory allowance , but yet is still lower than fair market value.

    The problem with wishing for change is that sometimes one gets what one wishes for, and sometimes it isn’t as great as what they think it is.

  51. 51
    toad37 says:

    AMZN 20 yr

    Euphoric blow-off or sustainable? Not sure in this central bank managed market… at some point it likely retests that breakout at $408 ?

    https://content.screencast.com/users/toad379304/folders/Jing/media/9dff329e-799c-485f-bab6-f9c00f539bbf/2018-01-11_1346.png

  52. 52
    uwp says:

    By N @ 49:

    But I don’t see how rents would have to fall 20% to make renting break even vs buying. Maybe if you put 50% down??? For a $750k house with 20% down, how would you possible get your payment down less than $2,800 or so… more than $2,500 a month rent.

    Because there is more to the calculation then simply monthly cash flows. Even in year one, 30% of your mortgage payment goes to principal (equity). The NYT calculator is quite good at taking most variables into account, including the opportunity cost of your down-payment and the earnings you would theoretically have on the savings from a smaller rent payment.

    If you can handle the monthly payment, and plan on staying put for 5+ years, a house you can rent for $2,200/month would make more sense to buy 625k.

    https://i.imgur.com/2uTAB4k.png

  53. 53
    N says:

    @ uwp 52 – I get your point but your still talking about buying a house with a cap rate of less than 3%, not a very attractive investment on the surface.

  54. 54
    uwp says:

    By N @ 53:

    @ uwp 52 – I get your point but your still talking about buying a house with a cap rate of less than 3%, not a very attractive investment on the surface.

    Yeah, I wouldn’t be scooping up GEMS like our friend Erik :)
    Especially condos.

  55. 55
    Joe_Clave says:

    Would like to see the median home price to household income ratio chart.

    Please and thank you.

  56. 56
    Eastsider says:

    RE: uwp @ 41 – Your numbers are unrealistic. Round trip closing costs is close to 10%. Maintenance cost is definitely not .5% a year. I would put it at 2% or more a year. (IRS depreciation schedule for residential rental buildings is 27.5 year.) There is no way owning is cheaper than renting in this market, especially for condos with HOA fees of $1k+/mo (negative cap rate!) I am not sure what your motivation is but your claim has no basis in fact. That said, one can always make a case for homeownership irrespective of cap rate. For landlords, there are far superior investment alternatives. Rentals are really lousy investments in the current Seattle market.

  57. 57
    Erik says:

    RE: uwp @ 54
    To go from poor white trash to white trash with some condos means taking risk. I was spawn from the ghettos of north Everett, so I feel I’m doing well compared to where I started. I’m not stacking chips yet, but give me time. My rents will go up. Women will want me. Men will want to be me.

  58. 58
    uwp says:

    RE: Eastsider @ 56
    You are spending 15k per year on a $750,000 home? What are you doing, adding a new roof in the even years and re-painting it in the odd ones?

    And $1,000+/month HOA fees?!? We were talking about $350,000 condos, not 1.6 million dollar ones.

    As far as my motivation; I have no desire to drive up housing prices. A drop in prices would be a net-positive for me (unless it went along with a recession which is likely). I just think if you do the math, buying a house to live in makes sense (even at $700,000).

  59. 59
    uwp says:

    RE: Erik @ 57 – Erik, I’ve got nothing but love for you, and appreciate your input on these boards. Seattlebubble would not be the same without you. Good luck to all the housing longs!

  60. 60
    ESS says:

    RE: Eastsider @ 56

    . Rentals are really lousy investments in the current Seattle market.

    —————————————————————————————-

    Amen to that Eastsider. I was talking to my buddies in the Tulsa area, and their kid owns a rental house that appraises at about one hundred thousand dollars. He is leasing it for one thousand dollars a month. Try getting that type of return in the Seattle area real estate market.

  61. 61
    uwp says:

    Have I encouraged purchasing rental properties?

    I am simply pointing to a buy vs rent calculation and saying “Hey, it isn’t crazy to buy a home in Seattle. In fact, it might make some small amount of sense.”

    Which apparently means I have secret ulterior motives.

  62. 62
    Justme says:

    RE: ARDELL DellaLoggia @ 8

    Agree.

    I will state it more strongly: December active listing numbers mean next to nothing, as shown by year 2017. Dec 2016 also had a record low of EOM active listings, but by mid-year 2017 the new-listing graph was ranked 10/18 for the 2000-2017 period. Meh to the meme that “inventory” matters one hoot.

    I will repeat this in every thread where anyone invokes, directly or indirectly, the “inventory == supply” falsehood.

    Supply = Newlistings + Inventory + Pendings – Delistings + FailedClosings
    Demand = Closings + Pendings
    Inventory = StaleOverpricedInventory + RecentInventory

  63. 63
    Justme says:

    I will also take exception to the oft-cited meme that “6-months of inventory” is required to get a balanced market. Having a stable revolving “6 months of inventory” means that approximately 5/6=83% of existing listings do not sell each month. That is not a balanced market. It is a market where the sellers have no pricing power whatsoever, and the buyers only will buy the 17% best deals.

    The “6-months of inventory” meme is invented by the RE Industry so that they almost never have to declare a sellers market. Realtors do not like sellers markets, because there is no urgency and their clients (the sellers) are unhappy and will not pay them big bucks during price declines.

  64. 64

    RE: Justme @ 63

    I was surprised The Tim “ratified” the 6 months since in the past he has basically said the same as you and changed it to 3 months some time ago.

    You can’t use a 12 month average, but if you are doing it based off the number sold in the same month the year before, 3 months would probably work well enough. Six months was pre-internet and set in areas with low volume. It doesn’t work well here.

  65. 65
    whatsmyname says:

    By Justme @ 63:

    I will also take exception to the oft-cited meme that “6-months of inventory” is required to get a balanced market. Having a stable revolving “6 months of inventory” means that approximately 5/6=83% of existing listings do not sell each month. That is not a balanced market. It is a market where the sellers have no pricing power whatsoever, and the buyers only will buy the 17% best deals.

    The “6-months of inventory” meme is invented by the RE Industry so that they almost never have to declare a sellers market. Realtors do not like sellers markets, because there is no urgency and their clients (the sellers) are unhappy and will not pay them big bucks during price declines.

    Did you mean a buyers market? A seller’s market is one in which sellers have the pricing power, and prices tend to increase.

    I will repeat this in every thread where anyone falsely invokes the characteristics of a buyer’s market as being a seller’s market, or vice versa.

  66. 66
    David says:

    RE: Erik @ 57 – Erik: Apartments are built and converted to condos because of the onerous construction defect litigation and fiscal requirements to maintain funds to cover the condos. There is a statute of repose date (which is the absolute drop-dead date for any litigation on a building) which, once passed, allows the developer to convert and sell apartments and not worry about condo construction defect claims.

  67. 67
    Eastsider says:

    RE: uwp @ 58 – You are way underestimating the cost of home ownership. Here are some potential expenses – roof replacement, leaks, repaint, windstorm damage, sewer repair, plumbing repair, appliance repair, driveway repair, chimney repair, furnace maintenance and repair, yard maintenance, tree removal, pest control, new carpet, kitchen and bathroom remodel, etc. There is a rationale behind IRS’s 27.5 year depreciation schedule.

    $1000/mo HOA for a $350k condo in downtown Bellevue is not uncommon only a few years ago.

  68. 68
    Green-Horn says:

    By Eastsider @ 56:

    RE: uwp @ 41 – Your numbers are unrealistic. Round trip closing costs is close to 10%. Maintenance cost is definitely not .5% a year. I would put it at 2% or more a year. (IRS depreciation schedule for residential rental buildings is 27.5 year.) There is no way owning is cheaper than renting in this market, especially for condos with HOA fees of $1k+/mo (negative cap rate!) I am not sure what your motivation is but your claim has no basis in fact. That said, one can always make a case for homeownership irrespective of cap rate. For landlords, there are far superior investment alternatives. Rentals are really lousy investments in the current Seattle market.

    Can you suggest regions, in Washington, the US that you think are attractive?

    Basing decisions primarily on rental income and ignoring the capital appreciation potential as many do, never seemed satisfactory to me.

    In their report emerging-trends-in-real-estate, PWC seems to think Seattle will still be #1 in 2018 , followed by a fair margin by Austin, Salt Lake City, Raleigh Durham, Fort Lauderdale….

    But I’m also convinced that by now there is less headroom for further appreciation in Seattle and other markets might have more space to grow.

    Perhaps one could wager that Seattle’s prosperity continues to seep to neighboring cities like Tacoma & Bremerton, like San Francisco’s boom has infected Oakland and rapidly made that place crazy expensive too?

    Are you looking outside the region?
    Nearby values east of the Cascades or on the other side of the Sound?
    Vancouver, Washington?
    Maybe our dear Erik can give us some tips on investing in Crackhouses in Everett?

    Or do you find the Seattle Metro so close to fully valued, that one might be better off to pick an entirely different horse that isn’t yet quite as exhausted as Seattle probably is after such a great run…?

  69. 69
    Justme says:

    RE: Ardell DellaLoggia @ 64

    Technology does have something to do with it. It is so easy to make an electronic offer now that getting under contract need not take any more than 1 week after a new listing hits the market. Technology is also one of the main reasons why there are so many multiple-offer situations, it takes almost zero effort to generate 10 different offers if you have already done 1.

    I’m not sure I want to even use the “inventory” concept to characterize a market. It will just get used to create a “the shelves are empty” FOMO scare among buyers. With technology and “just-in-time” delivery, inventory is an outdated concept. There is always more supply in the pipeline.

    Correction:

    >>Realtors do not like sellers markets
    Realtors do not like BUYERS markets (is of course what I meant)

  70. 70
    Green-Horn says:

    I’d like to bring your attention to this crowd-sourced resource.
    Obviously, since it’s crowd-sourced, we get what we pay for with regards to the data quality.

    Please share your opinion on the accuracy and reliability of the data…
    https://www.numbeo.com/property-investment/region_rankings_current.jsp?region=021

    Nevertheless, they offer some interesting global comparisons on housing affordability.

    Take a look at the maps to see how more affordable housing is in the US than in Europe or Asia.
    https://www.numbeo.com/property-investment/gmaps.jsp?indexToShow=getPriceToRentRatioOutsideOfCentre

    https://www.numbeo.com/property-investment/gmaps.jsp?indexToShow=getHousePriceToIncomeRatio

    Many say that property values in America’s boomtowns will inevitably bounce back to normal when gravity and common sense reassert their power. Yet it is also possible that the US is entering a new era in its economic history, when its previously plentiful space has already been used up and its cities are crowded and developed to full capacity based on existing technical and regulatory context. In this case, the trajectory of American property markets facing inelastic supply may resemble more that of crowded European cities than the previous eras of the United States from when it was yet undeveloped with plentiful space available for easy building and urban expansion.

  71. 71
    Eastsider says:

    RE: Green-Horn @ 68 – Haha. I can’t tell how long this bubble will last. Capital appreciation potential?! Were you thinking the same in 2007? LOL.

    Ess@60 mentioned about the Tulsa area…

  72. 72

    By Justme @ 63:

    I will also take exception to the oft-cited meme that “6-months of inventory” is required to get a balanced market. Having a stable revolving “6 months of inventory” means that approximately 5/6=83% of existing listings do not sell each month. That is not a balanced market. It is a market where the sellers have no pricing power whatsoever, and the buyers only will buy the 17% best deals.

    The “6-months of inventory” meme is invented by the RE Industry so that they almost never have to declare a sellers market.

    I’d agree with the first point. I was down in Olympia a couple of years ago and much less than 60 months was much better than what we were going through up here at the time. I think it was between 24 and 30 months at the time, but I don’t recall for sure. It was much more relaxed, where you could actually take a week to decide without 80% of your options disappearing.

    FWIW, I’ve always heard some agents say 6 months is balanced and others say 3 months. But I think with your math you’re falling into the same “inventory= supply” trap. Six months does not mean that 83% don’t sell each month, because many will never sell, and others are coming on the market, sort of like today where a lot of the standing inventory is old, but in that market it would just be even older because sellers wouldn’t give up so quickly. Good listings would still sell within a month in a six-month market, but that’s 3x as long as it takes in this market where buyers need to act fast.

  73. 73

    By Justme @ 69:

    RE: Ardell DellaLoggia @ 64

    Technology does have something to do with it. It is so easy to make an electronic offer now that getting under contract need not take any more than 1 week after a new listing hits the market. Technology is also one of the main reasons why there are so many multiple-offer situations, it takes almost zero effort to generate 10 different offers if you have already done 1.

    I’m not sure what you’re basing that on. The NWMLS forms system is more property based than buyer based. Subsequent offers on different properties are not that much faster to prepare than the first offer for a buyer, other than you’ll have saved the buyer’s name and contact information (the seller’s name is hopefully auto-populated).

    Where technology has helped is with electronic signatures. You no longer have to meet the client in person each time an offer is prepared, although personally I do think it’s a good idea to meet in person with the first contract if the contract terms haven’t been discussed before that first signing. After that, you can just explain the differences between the current offer and prior offers. And there will be differences either due to the property or the seller. It’s not like you just substitute a different seller name, address, and legal description.

    I’m also not sure where you get the one-week thing. Even before electronic signatures it was possible to get an offer to a seller the same day as the listing went active with an expiration the next day. Technology hasn’t really changed the timeline, what’s changed it is sellers purposefully extending the time to consider offers so that as many offers as possible will come in. Three or four years ago there were even rumors that the Department of Licensing was going after agents who had a habit of accepting offers too early too often. They apparently understood what the hot market meant for sellers and what was in the sellers’ best interest (apparently better than some agents).

  74. 74

    By Kary L. Krismer @ 72:

    I was down in Olympia a couple of years ago and much less than 60 months was much better than what we were going through up here at the time. I think it was between 24 and 30 months at the time, but I don’t recall for sure.

    I have no idea what kind of unnecessary math I was doing there, converting years into months to create even longer periods. It should have been 6 months, not 60 and between 2 and 3 months.

  75. 75
    Kmac says:

    RE: Justme @ 63

    Now you went and stepped in it….

    I like the thoughts that are bouncing around in here tonight by the folks that don’t chime in that often.

    Please keep doing so.

  76. 76
    whatsmyname says:

    By Justme @ 69:

    I’m not sure I want to even use the “inventory” concept to characterize a market. It will just get used to create a “the shelves are empty” FOMO scare among buyers. With technology and “just-in-time” delivery, inventory is an outdated concept. There is always more supply in the pipeline.

    This is actually a really good concept, and transferable too. Certainly, there is always the danger that some people will use the “demand” concept of closings and pendings to create a FOMB (fear of missing buyers) scare among sellers. Closings and pendings are really demand that has been recently removed from the market place shelf. Demand in the here and now is people who have been unsuccessfully looking to buy, and people who will start looking to buy; really, a kind of inventory of buyers. Tough to count, but there is always more supply in the pipeline.

  77. 77
    Ross says:

    By Kary L. Krismer @ 73:

    By Justme @ 69:

    RE: Ardell DellaLoggia @ 64

    Technology does have something to do with it. It is so easy to make an electronic offer now that getting under contract need not take any more than 1 week after a new listing hits the market. Technology is also one of the main reasons why there are so many multiple-offer situations, it takes almost zero effort to generate 10 different offers if you have already done 1.

    I’m not sure what you’re basing that on. The NWMLS forms system is more property based than buyer based. Subsequent offers on different properties are not that much faster to prepare than the first offer for a buyer, other than you’ll have saved the buyer’s name and contact information (the seller’s name is hopefully auto-populated).

    Where technology has helped is with electronic signatures. You no longer have to meet the client in person each time an offer is prepared, although personally I do think it’s a good idea to meet in person with the first contract if the contract terms haven’t been discussed before that first signing. After that, you can just explain the differences between the current offer and prior offers. And there will be differences either due to the property or the seller. It’s not like you just substitute a different seller name, address, and legal description.

    I’m also not sure where you get the one-week thing. Even before electronic signatures it was possible to get an offer to a seller the same day as the listing went active with an expiration the next day. Technology hasn’t really changed the timeline, what’s changed it is sellers purposefully extending the time to consider offers so that as many offers as possible will come in. Three or four years ago there were even rumors that the Department of Licensing was going after agents who had a habit of accepting offers too early too often. They apparently understood what the hot market meant for sellers and what was in the sellers’ best interest (apparently better than some agents).

    I know you like to take issue with Ardell’s comments, but she is absolutely right.

    I’ve bought 2 homes. The first one in 2009, which was all paper based. Everything was paper based. I had to physically meet my agent, ask a million questions. Then I reviewed the terms and did research. Each change I wanted had to be redrawn. Then I brought the offer to my attorney, who pencilled out a bunch of changes, then it went to the seller, who was a bank, who added addendums. It took around 3 weeks to get to mutual acceptance.

    My second home was in 2015. Everything was done electronically. We looped in my attorney over email. Edits were simple. Then it went to the seller, who was across the country, and handled electronically through their attorneys. With a similar level of review and modifications, we got to mutual acceptance in a few days.

    Much about the real estate process has become more efficient through computers,including:
    – finding a home. Redfin and other online tools are great for filtering and eliminating potential homes
    – paperwork, as mentioned
    – coordinating with lenders, attorneys, title, closing

  78. 78

    By Ross @ 77:

    I know you like to take issue with Ardell’s comments, but she is absolutely right.

    I’ve bought 2 homes. The first one in 2009, which was all paper based. Everything was paper based. I had to physically meet my agent, ask a million questions. Then I reviewed the terms and did research. Each change I wanted had to be redrawn. Then I brought the offer to my attorney, who pencilled out a bunch of changes, then it went to the seller, who was a bank, who added addendums. It took around 3 weeks to get to mutual acceptance.

    My second home was in 2015. Everything was done electronically. We looped in my attorney over email. Edits were simple. Then it went to the seller, who was across the country, and handled electronically through their attorneys. With a similar level of review and modifications, we got to mutual acceptance in a few days.

    Much about the real estate process has become more efficient through computers,including:
    – finding a home. Redfin and other online tools are great for filtering and eliminating potential homes
    – paperwork, as mentioned
    – coordinating with lenders, attorneys, title, closing

    Well first, those were Justme’s comments, not Ardell’s. Justme was responding to Ardell.

    Second, if you’re dealing with attorneys things will be slower, and that is the real difference. Agents act a lot faster than attorneys will, and that is part of the reason the Washington Supreme Court gave for allowing agents to complete purchase and sales contracts. I deal with attorneys with some frequency on real estate matters and attorneys tend to think that a one day turn around is fast (attorneys doing 1031 exchanges being the exception), where agents often get things turned around in an hour or less. If it’s some pre-listing decision and action by an attorney can take a week or more.

    Back after we purchased our house in 2007 one of my comments is that we took a long time to negotiate with the seller to get his price down, and that I wished more buyers had that kind of patience. That period of negotiation was about three weeks, but a large portion of that time was just allowing the seller to sit and contemplate nothing happening. It had little to do with preparing or transmitting paperwork. Three weeks is a very unusual period of time for an agent based negotiation period regardless of the technology used.

    I looked up a transaction I had in 2012 before I started using electronic signatures regularly, and the listing went active at about 9:30 in the morning, we had an offer in that evening and it was accepted the next day. If an attorney had been involved my clients would have likely lost out because even back then the seller had received another offer. But the point is, even with wet ink signatures, that transaction was put together in roughly a day and a half.

  79. 79
    ESS says:

    Today’s Seattle Times – new construction is having an effect on the apartment rental market. Amazing – the theory of supply and demand actually works. Can this mean a dampening of enthusiasm for both “affordable housing” and rent control schemes?

    As per a previous discussion where I suggested that there is a dichotomy between single family houses and apartments, the below referenced article suggests this in the last paragraph. Quoting the Seattle Times article, the author concludes with the following:

    https://www.seattletimes.com/business/real-estate/seattle-area-rents-drop-significantly-for-first-time-this-decade-as-new-apartments-sit-empty/

    “The rental slowdown runs counter to the for-sale housing market, where home prices continue to shoot up unabated at the fastest rate in the country. A key difference is that there are very few new single-family homes being built in the region, in contrast to the frenzy of apartment construction.”

    Does this apply to the rental of single family houses also? Time will tell. But the author is correct – I haven’t seen many new houses built in the Seattle area, and certainly not modest size “starter” homes.

  80. 80
    Anonymous Coward says:

    By ESS @ 79:

    But the author is correct – I haven’t seen many new houses built in the Seattle area, and certainly not modest size “starter” homes.

    At 1400-1800sq for a 3/2, the rowhouse/townhouse is the new starter house. And judging by the areas I frequently transit, those are starting to be built in appreciable volume. (Take a look at North Delridge and Georgetown…) The only caveat is pricing seems to be $600-$800k…

  81. 81

    RE: ESS @ 79 – My thought about that article was that it needed more information–as to the rental market. As I understand it, the new units are largely higher end units. Given that, how are the rents being affected in some of the older, not so nice, units? Is the availability of those high-end units having any impact at all on the lower end units? Also, what’s the impact on units further out from Seattle?

    As to the resale market, I would see the availability of these apartments would have the biggest impact on the condo market, and maybe also the townhouse market. I’m not sure they are an attractive substitute for people interested in stand-alone houses.

    BTW, here’s a link to the article: https://www.seattletimes.com/business/real-estate/seattle-area-rents-drop-significantly-for-first-time-this-decade-as-new-apartments-sit-empty/

  82. 82
    ESS says:

    By Anonymous Coward @ 80:

    By ESS @ 79:

    But the author is correct – I haven’t seen many new houses built in the Seattle area, and certainly not modest size “starter” homes.

    At 1400-1800sq for a 3/2, the rowhouse/townhouse is the new starter house. And judging by the areas I frequently transit, those are starting to be built in appreciable volume. (Take a look at North Delridge and Georgetown…) The only caveat is pricing seems to be $600-$800k…

    Out of curiosity, I have toured some of those row/town houses. No thanks – not for me, and I suspect a great many other potential buyers – if given the economic choice. But as the price of single family houses in the area is somewhere in the stratosphere – for many potential buyers – there may not be much choice. As I have stated previously, having lived and been in many apartments – I would rather reside in a well designed sound proofed apartment than some of these townhouses that offer no privacy, the units and most windows face each other, and everyone is driving, parking and talking outside of one’s bedrooms.

  83. 83

    RE: ESS @ 82 – My problem with a lot of the townhouses is they are too narrow. Also, many of them effectively have shared driveways, which is just likely to lead to problems when you want to get into or out of your garage.

  84. 84
    ESS says:

    By Kary L. Krismer @ 81:

    RE: ESS @ 79 – My thought about that article was that it needed more information–as to the rental market. As I understand it, the new units are largely higher end units. Given that, how are the rents being affected in some of the older, not so nice, units? Is the availability of those high-end units having any impact at all on the lower end units? Also, what’s the impact on units further out from Seattle?

    As to the resale market, I would see the availability of these apartments would have the biggest impact on the condo market, and maybe also the townhouse market. I’m not sure they are an attractive substitute for people interested in stand-alone houses.

    BTW, here’s a link to the article: https://www.seattletimes.com/business/real-estate/seattle-area-rents-drop-significantly-for-first-time-this-decade-as-new-apartments-sit-empty/

    That’s the problem with statistics – they never quiet provide the entire story.

    I am still wondering what the breakdown of all this new construction is – how many 2 and 3 bedroom apartments vs one bedroom apartments. If what you say is correct about the future resale market – it may only be limited to smaller apartments/conversions, as my understanding is that very few 2 and 3 bedroom apartments are going up. The fact that there is a glut of one bedroom apartments for sale as newly converted condos doesn’t help the newly married couple with a kid on the way.

  85. 85

    Starter Homes in King County

    Died out in the 90s. No room for them and the large ones too…

  86. 86
    uwp says:

    You know what is rarely mentioned in the breathless articles about the potential for more apartments to be built this decade than in the previous 50 years combined, is how Seattle’s population peaked in 1960 and declined for decades, not reaching the previous population until the year 2000.

    Gosh, maybe a city that is among the fastest growing in the nation might build more apartments in the coming decade than when it was on a multi-decade streak of losing population?

    Fun fact: Seattle added 3X more people in 2016 alone, than from 1960-2000 total.

  87. 87
    Matt P says:

    Using a % of value of a home for yearly maintenance is silly because the value is mostly in the land. A $200k house is basically the same everywhere and while your labor costs for maintenance might run a little higher, a $300k 3/2 house with $100k land value needs about the same amount in maintenance costs as $750k house with $550k land value.

  88. 88

    By Matt P @ 87:

    Using a % of value of a home for yearly maintenance is silly because the value is mostly in the land. A $200k house is basically the same everywhere and while your labor costs for maintenance might run a little higher, a $300k 3/2 house with $100k land value needs about the same amount in maintenance costs as $750k house with $550k land value.

    It actually should be lower as the price increases, because the more expensive house may be more likely to have a mortgage the owner can’t afford. ;-)

  89. 89
    uwp says:

    RE: Kary L. Krismer @ 88 – What do you think a good budget range for a median Seattle SFH should be Kary?

  90. 90

    By uwp @ 89:

    RE: Kary L. Krismer @ 88 – What do you think a good budget range for a median Seattle SFH should be Kary?

    I was just making a joke, with a bit of social commentary. IMHO some people borrow way too much money just to maintain a certain lifestyle–and that goes on well into the seven-figure properties. So it’s not so much what the house costs, but the decision about how much to borrow.

  91. 91
    wreckingbull says:

    By uwp @ 61:

    Have I encouraged purchasing rental properties?

    I am simply pointing to a buy vs rent calculation and saying “Hey, it isn’t crazy to buy a home in Seattle. In fact, it might make some small amount of sense.”

    Which apparently means I have secret ulterior motives.

    The rent/buy equation is much different today than it was back in 2006. Like many here, I rented a water-view palace for 30 cents on the dollar vs. buying. Today it is much closer, possibly favoring buying by a small margin, if you can stomach what you get for your money.

    I think a better calculator would have a geographical facet to it. Rent / buy / buy somewhere else. Smart people are understanding this and realizing that some of the areas we used to make fun of on Almost Live! are going to be tomorrow’s Capitol Hill and Ballard.

  92. 92
    uwp says:

    RE: Kary L. Krismer @ 90 – Yeah. But I do wonder what the folks here think is a reasonable maintenance budget is. Am I way off? Apparently Eastsider thinks someone purchasing the median home in Seattle should be setting aside $15,000 per year.

    IMHO things like the IRS depreciation guidelines or the general “1% of home cost” are more directed toward the average US home owner (ie. ~250k). I can believe a home in Seattle costs more to maintain than a house in Tulsa, but is it 3x as much?

  93. 93

    RE: uwp @ 92 – About the only major variables I can think of off the top of my head would be siding–if the house has some sort of wood composite siding you’d need to budget for that. I have seen houses on hillsides where the top floor is three or four stories up, and that probably costs more to paint. I think most of the places that required shake roofing have changed their requirements. Some heating systems require more maintenance than others and some are more expensive to replace.

    Remodeling would be the most expensive, but that’s entirely optional.

  94. 94
    wreckingbull says:

    RE: Kary L. Krismer @ 93 – I keep meticulous receipts, and I would say that 1% over the long term is about right as a rule of thumb. It’s not so much the big things, but the big things *and* the much more common small things that add up.

  95. 95
    Kmac says:

    As pointed out by Matt P above –I don’t think a percentage of value is appropriate because land value variables.

    Just some back of the napkin figures showing average life expectancy of items in the house that will need attention at some point, in today’s dollars and using what I think is an average $ amount over a 25 year span:

    1 roof replace @ $20k
    3 exterior paints @ $21k (7k ea)
    1 vinyl window replacement @ $10k
    2 water heaters @ 2k (1k ea)
    1 wood deck replacement @ $8k
    1 gutter replace@ $3k
    1 driveway repairs @$3k
    1 furnace replace @8k
    ———————————————

    Just the above items, with 10% sales tax added amounts to $81,000 over 25 years-
    or apprx $3,250/yr

    double this figure to $6,500/yr to cover you for int. paint, appliances (not really part of home anyways), landscaping and yard.

    The list could be endless, but this may be a start for the consideration…..

    Possibly slightly more than 1% of value in a “normal “non-desirable” market” would have you covered for basic items over the long haul.
    More expensive homes, because of land value, might even be lower than 1% of value maintenance because the structures are all very similar in an apples to apples comparison.

    I think 15k a year is way high for most properties.

    Edit: as I was typing this up, I see wreckingbull responder similarly.

  96. 96

    RE: Kmac @ 95 – Sad that window replacement has become a thing. I think now they are moving to fiberglass, so everyone can jump on that boat.

    I think your driveway repairs might be too low, at least if it requires replacement. Too high if not.

  97. 97
    Kmac says:

    RE: Kary L. Krismer @ 96
    Yeah, driveway repairs are just that, small patches, not replacement. (and I was originally thinking asphalt-not concrete. If concrete, then yeah you are right)
    Also factoring that most newer homes on a small lot have about a 20′ – 24′ long drive.

    The problems with the windows isn’t necessarily the frames, although the early 90’s vinyl did have some issues with decomposition, they mostly had the uv thing figured out by ’97 or so.
    Most often insulated windows older than 20 years, no matter the brand, have an issue with failing seals on the insulated unit.
    Some manufacturers [w/ lifetime warranty] may even cover that if you can produce the original paper work, but only if…..

  98. 98
    Eastsider says:

    $15k/yr is not really exorbitant if you plan to keep the home up to date and in good shape. For example, if you look at some of the older home assessments, their structures are a zero. That is, they have no value (land aside) and are teardowns. If you don’t mind living in the same house that your grandparents lived in with minimal update, that is your choice. Labor and material costs have increased dramatically in the past decade. Also, you can’t compare labor and remodel costs in Tulsa vs Seattle or San Francisco.

  99. 99
    Kmac says:

    RE: Eastsider @ 98

    You may be accurate, but the word maintenance was used, not updating or improving….

  100. 100
    Justme says:

    RE: uwp @ 86

    >>Fun fact: Seattle added 3X more people in 2016 alone, than from 1960-2000 total.

    Is the 2016 number based on those bogus OFM numbers? Is the 1960-2000 based on census (it matches decennial/census years). In that case, perhaps it would be more accurate to say: Seattle built 3X more person-dwellings in 2016 than the net increase of residents in Seattle between 1960-2000.

    There. Does not sound so HOT anymore, does it?

  101. 101
    Eastsider says:

    RE: Kmac @ 99 – Yes, every homeowner has a different idea of maintenance. Many apartment buildings undergo major renovations every 10-20 years. This is happening all over the Eastside. Many condo HOAs have to levy substantial special assessments because of underfunded reserves. Homeowners should take note and set aside reasonable reserves because they will need the fund one day.

  102. 102

    RE: Kmac @ 95

    I roughed up a Reserve Study for a Single Family Home back in 2011 along the lines of the way a condo association does it to put aside the right amount every month to repair and replace. It came to about $400 a month back then.

    http://raincityguide.com/2011/03/17/single-family-home-reserve-study/

    The price of the house not particularly relevant but the size and age of the house would be.

  103. 103
    Kmac says:

    By Ardell DellaLoggia @ 102:
    The price of the house not particularly relevant but the size and age of the house would be.

    Yep… totally agree.

    But since so many here like “rule of thumbs”, like 3x lots…. ;-) I think 1% of value minus .25% either direction will suffice as a “rule of thumb” (but your results may vary- LoL)

  104. 104

    By Eastsider @ 101:

    RE: Kmac @ 99 – Yes, every homeowner has a different idea of maintenance. Many apartment buildings undergo major renovations every 10-20 years. This is happening all over the Eastside.

    There are some high-end condos that do things even more frequently than that.

    Condos are sort of like law firms. Both may do renovations more or less frequently than what you would do if you were the individual decision maker.

    On the condo front, one other issue can be a wide disparity between the units with the owners of the more expensive units wanting things done more frequently than the less expensive units.

  105. 105
    Trillo says:

    RE: softwarengineer @ 29

    When I spent some years at MSFT not too long ago before retiring young, there were plenty of farm boy, country girl personas still left over from many of the “originals” from 20-30 years ago. In fact, it looked a lot like a farming community I lived in for a brief time when I was a kid where you saw acid washed jeans, mullets, and some ladies with hair down to their Ars that looked like they either cut it themselves or never cut it at all. These stylish individuals also have and drive a Ferrari or two so it was always fun to watch the new Gen Y’s come in and make fun of people and then realize they knew not of what they speak. Many of these fine, stylish people make up many of the multi-M$ GM set that are still there so they have always had a regional flavor of the original ag/blue collar communities surrounding them as they had to pick up massive head count during the boom growth years. They also absorbed quite a few local manufacturing workers before off-shoring and those people became PM’s and rose and rose and rose as it happens when you have a start up and then rapid growth. It’s all hands on deck, grabbing whoever as as fast as you can. They essentially still have the style they started with and really don’t and don’t have to give a flying flip about what anybody thinks….and those folks will always have ability to impact housing prices as will their kids. There are still a lot of em around.

  106. 106
    Richie Valez says:

    “Its difficult to understand the RE bearish comments on this site given the supply demand imbalance and other fundamentals. I would suspect the majority of bearish comments and doomsday predictions are from real estate professionals who think that scaring readers into believing the Seattle RE bubble is about to burst will generate additional transactions that result in more real estate agent commissions. “

    I find it difficult to understand why people seem to think Seattle RE exists in a vacuum, like Seattle is just going to grow and grow and grow and the current pace, like the laws of physics say the Earth will keep spinning.

    The truth is Seattle RE in 2017 is largely equal to Amazon’s stock price growth or decline. That means the question of Seattle RE equals an analysis of risks to Amazon’s stock price prospects.

    Maybe the disconnect is because real estate investing is far more popular with Joe/Jane Six Pack than stock analysis…maybe it’s because people have just drunk the Kool Aid that Amazon will rule the earth…who knows. The point is a lot can go wrong with Amazon’s stock, which is not the same as Amazon’s business, and few in real estate seem to connect the dots. There are all sorts of risks macro and micro. Amazon depends far more on its stock for payroll and retention than most large companies.

    On top of the potential downside from AMZN stock, now, with the HQ2 news, it’s not even sufficient to say if AMZN continues to grow, then Seattle RE will too, because now Amazon is diverting future employment growth away from Seattle. The more home prices inflate, the more incentive Amazon will have to divert even more. Seattle’s politics continue to go even harder left and resentment toward Amazon continues to build. The reasons to decouple with Seattle are growing by the day. Avoiding sales taxes were the reason Amazon ever decided to locate itself in Seattle. As of recently that is no longer a factor. Amazon is paying sales tax all over America. The biggest benefit to growing employees in Seattle is gone.

    Does that mean 2008 will repeat? Not necessarily. A garden variety recession or 30% market correct that happens every 8 years or so will hit Seattle harder in 2017 than ever before in its history because of Amazon. Actually it wouldn’t even take a recession to hit Seattle real estate. Anything having to do with Amazon or its allocation of future growth to Seattle would also do it.

  107. 107
    Kmac says:

    2017 is so yesterday…..

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