Real Estate Heat Index off the charts in 2017

After the final 2017 Seattle-area real estate sales data was released last week by the NWMLS, I updated my chart of the “Residential Real Estate Heat Index” for King County single-family homes and condos.

As a reminder, the “Residential Real Estate Heat Index” is an index that rolls changes in the median price, new listings, total inventory, pending sales and closed sales all into a single number to measure the relative “heat” of the market. Note that this index only looks at the real estate sales market. It does not factor in any other economic conditions such as wages, interest rates, rents, etc.

Below is the latest data for the heat index of King County single-family homes and condos. It has been quite a while since I last updated this chart, and… holy cow.

King County Residential Real Estate Heat Index

At 213.9, the latest King County heat index dwarfs the average level seen during the last bubble (42.6). Keeping with the trend we saw during the previous bubble, the condo heat index is even more out of control, coming in at 334.3 in the fourth quarter (more than five times the 61.4 average during the last bubble).

Based on this measure, we have been well into bubble territory since late 2015, and things have gotten seriously out of control since then.

However, as I mentioned earlier, this index doesn’t account for external economic factors at all. The current situation is definitely very different from last time, and we need to look at a more complete picture before we can definitely say this is a new bubble. I’ll be updating some of those broader charts later this month.

Still though… damn.


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.

538 comments:

  1. 501

    RE: Kmac @ 498 – It is public, well except maybe the bankruptcy stuff–I have an account for that I use. But this is all stuff found on government websites.

  2. 502
    David B. says:

    RE: Blurtman @ 488 – Followed, of course, by even greater outrages since the lesson in all that is that you CAN get away with it.

  3. 503
    Blake says:

    Don’t know how much to read into this, but the stress tests the Fed will put the banks through this year have these assumptions:
    Real GDP drops 8.9% (-7%)
    Housing drops 30% (-24%)
    Commercial RE drops 40% (-30%)
    Dow drops 65%! (-50%)
    (2015-17 stress tests)
    https://www.bloomberg.com/news/articles/2018-02-02/fed-toughens-stress-test-as-banks-await-trump-s-promised-relief

    The Dow has more than tripled since ’09, so -65% is not outrageous. It could drop 10,000 points and then it would only be back to early 2016 levels! Only 600 today…

    I’m glad the Fed is tightening the stress tests. They obviously don’t want a repeat of 2008! I wonder how many banks may fail. And how many have “off books” liabilities that are hidden and ripe for lawsuits in 2020 and beyond! Nah, they wouldn’t do that! ;-)

  4. 504

    By Kmac @ 498:

    In fact title has hit me with the same issue before with people around the country with judgments against them and I had to prove that it wasn’t me before closing.

    First, it’s only judgments in the same county that are important for title purposes.

    That is extremely common, to the point it is routine. You just need to fill out information that lets the title company determine it’s not you. I’m not talking about common name situations and specifically warned against that possibility. There was a Jessie Jones piece a couple of years ago where some inexperienced agents apparently didn’t have a clue how to deal with that and went to a TV station for help. They should have been embarrassed.

    BTW, this is a reason to try to always take title with your middle initial if not your full name, although someone with a name like mine that isn’t so important.

    But I’m talking about a judgment which was actually owed by the buyer. It wasn’t just someone else with the same name.

  5. 505
    Alyx says:

    RE: redmondjp @ 489 – Amazon isn’t interested in a better product, they want to stomp out competition and they are using AWS revenue to subsidize this.

  6. 506
  7. 507
    greg says:

    RE: Kary L. Krismer @ 491

    to be fair, it get harder and harder to generate a coin and there is an exact number that can ever be made.
    Bitcoin is more like gold than it is like a stock. both have limits (at least on earth) and both get harder and harder to mine… Not saying bitcoin is gold, it is NOT . but it is much more like gold than stocks.

    i am not a fan of bitcoin as such, but the underlying tech seems to be rock solid and could be used to replace fiat currencies in the future..

    I when we get a listed fund or ETF i will most likely buy in assuming it is reasonable. but only as part of my fun stuff which stops me from meddling with the serious stuff …

  8. 508

    By Kary L. Krismer @ 464:

    By Ardell DellaLoggia @ 456:

    There is also a gray area as to whether a mere “upload to docs” constitutes “legal delivery” and whether the days to cancel can begin before there is an accepted contract. Usually I cover this by including it in the offer to prove delivery.

    . . .
    I think the problem with that would be merely proofing when a document was uploaded. I’m not even sure if the NWMLS could tell you that if they were subpoenaed.

    . . .

    This topic of attachment to the listing was the topic of this week’s Washington Realtors’ video. The answer is basically no.

    https://www.youtube.com/watch?v=h6wGnX8b8FM&feature=youtu.be&_cldee=a2FyeUBraG91c2VhZ2VudC5jb20%3D&recipientid=contact-a6d36679d15c480c931b053fb3232503-5c8be29bdfb74e1fa887b5aced48d890&utm_source=ClickDimensions&utm_medium=email&utm_campaign=Friday+Video&esid=acdb35c7-6108-e811-9c21-00155d101210

  9. 509
    David says:

    RE: Blake @ 501 – This is BS. THe ONLY real use of crypto would be for flash transactions immediately convertible back to $USD, $RMB, $JPY etc.

    And if the Federal Government figures out that the funds were from illegal activities they will confiscate your funds, property, etc as money laundering.

    Ask a BTC owner to provide audited financials of their crypto holding? You will get nothing. Nothing to explain the underlying value showing cash flow, etc. I’ve owned BTC and sold it QUICK once the price started to decline.

  10. 510
    ARDELL DellaLoggia says:

    RE: Kary L. Krismer @ 506

    I knew it was no, but so many, pretty much everyone, is treating it as yes so I decided to be kind here and call it “gray”. :)

  11. 511

    Although not legally responsible, this is really largely the agent’s fault, as well as maybe their lender. Buyers should be educated about this scam when they are in the home-buying process. We’ll even go so far as to physically pick up and then hand clients the wiring instructions from the escrow and tell them to use no other instructions.

    Also, I’m not sure what security escrows use on their email systems, but agents should make sure they’re using a system with two-factor authentication.

    http://komonews.com/news/local/its-gone-scam-takes-tacoma-couples-money-dash-dream-of-buying-home

  12. 512

    By ARDELL DellaLoggia @ 508:

    RE: Kary L. Krismer @ 506

    I knew it was no, but so many, pretty much everyone, is treating it as yes so I decided to be kind here and call it “gray”. :)

    Well with enough time and money you could probably hire an expert to prove your case, but it better be a damn large earnest money! ;-)

    As you noted originally though, most offers come with the Form 17 returned, so I’m a bit surprised Annie is getting a bunch of questions about that.

  13. 513

    RE: Blake @ 501
    The Rich Elite Just Used the MEMO Release as a Smoke Screen for Profit Taking

    They were waiting for the “little guy” to invest into the growth spike [sound likes Seattle Real Estate to me], then profit take….it happens all the time. Even Reagon’s doubling of the stock market had profit sell-offs too.

    I’ve studied the market for decades and this is normal. They scoop up short term gains and buy later after the plummets. That’s why folks fear the stock market BTW.

  14. 514

    RE: Kary L. Krismer @ 510
    Legal Mumbo Jumbo Can Be Word Smithed Anyway the User Likes

    The local/federal governments are gifted at making MEMOs and policies unreadable to the public or even professionals to mask their lack of productivity and promote their own job security. I used to read government policies MEMOs in orientation training [they all should be unclassified BTW]…..then stopped reading them and went straight to the tests….I always scored high grades anyway too.

    Now we find out the crooks are even making normal MEMOs classified to hide ’em from the public eyes. The government elite treats us like DIMWIT sheep and steal our money.

  15. 515

    SWE’s Financial Seattle Real Estate Economic Report for Jan 2018

    Jan 0.20% (1.14%) 5.72% 3.34% 5.00%
    YTD 0.20% (1.14%) 5.72% 3.34% 5.00%
    Last 12 mo 2.33% 2.40% 26.40% 19.59% 27.99%

    Some changes from December….all stocks sky-rocketed month to month. Long-term bonds collapsing due to interest rates creeping up and mortgage rates and inflation [higher wages and more employment] going up. Good news can be bad news if you invested it wrong….LOL

    Order of data: long-term CDs, long-term bonds, American stock market, foreign stocks, foreign stocks

  16. 516
    Erik says:

    Seattle is not the next Vancouver as Vancouver real estate prices are driven mostly by foreign money. Seattle is not the next San fransisco as San Francisco real estate prices are driven by a low supply of housing. Seattle is the next Toronto as Toronto real estate prices are driven by high paying jobs and foreign investments. Seattle is still a great place to invest in the longterm. Prices may or may not have gotten too high in the short term.

  17. 517

    By Erik @ 514:

    Seattle is not the next San fransisco as San Francisco real estate prices are driven by a low supply of housing.

    Say what? I’ll give you San Francisco has even more challenging geography than Seattle, but there’s still a shortage of housing here.

  18. 518
    Ross says:

    By Erik @ 514:

    Seattle is not the next Vancouver as Vancouver real estate prices are driven mostly by foreign money. Seattle is not the next San fransisco as San Francisco real estate prices are driven by a low supply of housing. Seattle is the next Toronto as Toronto real estate prices are driven by high paying jobs and foreign investments. Seattle is still a great place to invest in the longterm. Prices may or may not have gotten too high in the short term.

    Toronto doesn’t really have all that many high paying jobs.

    Average wages in Toronto: $68,110 CAD [1]
    Median wages in Seattle (2015): $80,349 USD [2]

    Toronto wages are lower than several other smaller Canadian cities, and Toronto cost of living is relatively higher. Toronto housing prices are being driven by foreign investments (as Vancouver became too expensive, Toronto was the second choice), easy availability of loans, and a bubble mentality that housing can only go up.

    [1] https://en.wikipedia.org/wiki/List_of_Median_household_income_of_cities_in_Canada
    [2] https://www.seattletimes.com/seattle-news/data/80000-median-wage-income-gain-in-seattle-far-outpaces-other-cities/

  19. 519
    Erik says:

    RE: Kary L. Krismer @ 515
    San Fransisco government has implemented many restrictions on building new apartments and condos, which has driven prices up in San Fransisco. Seattle does not have those same restrictions on new apartments and condos. San Fransisco won’t tear down affordable housing and put in a high rise with lots of housing units. That causes prices to go up as more residents move to the area.

    How do I lobby to keep inventory low like San Fransisco? That could be the key to keeping rents high.

  20. 520

    On the topic of Bitcoin, it’s now down about 50% from its 30 day high and about 40% of its all-time high.

    If you are making an offer on a listing and needing to use funds held in Bitcoin (or similar) for all or part of the purchase, then you either need to liquidate prior to making the offer or disclose those assets as being such. Failure to do so could cost you your earnest money (or worse).

  21. 521
    ESS says:

    RE: Erik @ 516 – How do I lobby to keep inventory low like San Fransisco? That could be the key to keeping rents high.

    Erik – it is very simple. Lobby your representative to repeal the state wide ban on rent control, and insist that your jurisdiction institutes some sort of rent control measure. After all, it has worked so well in cities such as NYC and SF.

    Rent control is a program insured to limit the number of new lower income residential units that are constructed, and dramatically increase the cost of all housing. Of course as a condo owner, you are in danger of being swept up in the governmental rent control net. So you must also advocate that single family houses and condos are not included in the rent control process. Lets stick it to the large developers – after all – they are responsible for all the housing ills that permeate US society.

  22. 522

    I wonder if this “preemptive margin call” is what is driving the fall in Bitcoin. It’s now down to about $7,300. I also wonder what the exposure of the banks is to existing credit card debt used to buy Bitcoin (and whether they at least charged a cash advance fee for such purchases).

    https://uk.reuters.com/article/us-lloyds-bank-uk-bitcoin/banks-in-britain-and-u-s-ban-bitcoin-buying-with-credit-cards-idUKKBN1FO0UL

  23. 523
    David B. says:

    RE: ESS @ 518 – Rent control in SF (by state law, so this applies to rent control anywhere in California) exempts new construction, so rent control is not what is preventing the creation of new housing units. Zoning and the permitting process is. SF is one of the most difficult places in the country to build new housing. (And the other surrounding cities in the region aren’t much better.)

  24. 524

    By David B. @ 520:

    RE: ESS @ 518 – Rent control in SF (by state law, so this applies to rent control anywhere in California) exempts new construction, so rent control is not what is preventing the creation of new housing units.

    That’s the argument always given by people who don’t understand economics or business, but it’s nonsense because people do not build apartment to get rent only for the first year. At some point the rent control will kick in, or even if set only for buildings built before a certain date the fear will be that the politicians will change that at a later time.

    Also, it literally is nonsense, because how could you possibly have rent control on a property that has never been rented before? Rent control restricts increases in rent.

  25. 525

    RE: Kary L. Krismer @ 521 – I stand corrected on that last post. Apparently SF hasn’t changed the date for which the rent control applies for quite some time. It seemingly goes back to 1979! (At least for the main part of it–not sure about things like charging for utilities.) But you would still have the concern about becoming covered at some later point in time.

    For those who are covered, complying with the ordinances seems to be rather burdensome.

    http://sfrb.org/rent-ordinance

  26. 526
    David B. says:

    RE: Kary L. Krismer @ 521 – Rent control has not been extended to new construction in SF since 1979. Any post-1979 construction is exempt from rent control. Are you seriously arguing that 39 years is insufficient to recoup one’s investment in rental property construction?

  27. 527

    RE: David B. @ 523 – I corrected the post, but I am shocked that SF has exercised such restraint. I’m not familiar with their city government, but I would not expect Seattle’s government to be so restrained.

    BTW, I checked on their ordinance because I was wondering how they handled that. I was expecting something like five years of exemption, which wouldn’t be worth much.

  28. 528
    N says:

    Erik @ 514:

    Prices may or may not have gotten too high in the short term.

    Whoa, this sure doesn’t sound like Erik.

  29. 529
    Erik says:

    RE: David B. @ 520
    Let’s lobby for both rent control on new housing as well as increase the complications of zoning and building in Seattle. We need to stop these new investors from driving rent prices down!

  30. 530
    Erik says:

    RE: N @ 525
    All this new condo inventory scares me. If we have too much supply, it will be a bad situation for honest landlords and prices could take a hit.

  31. 531
    N says:

    @Erik 525 : Absolutely, you should be scared in the short to medium term, but I would argue this isn’t unexpected and happens most every cycle. Builders respond to rising rent and lack of supply by collectively overbuilding. Then again after having rents go up 50%+ in recent years many should be able to handle what the market may do from here.

  32. 532
    David B. says:

    RE: Kary L. Krismer @ 527 – It’s not the City and County of San Francisco that’s exercising the restraint. It’s a state law, as I already mentioned earlier. If SF tries to extend rent control past 1979 on its own, a state court would instantly nullify said city law.

  33. 533
    David B. says:

    RE: Kary L. Krismer @ 527 – Moreover, if rent control was the prime driving factor in housing unaffordability in SF, you’d expect a significant disconnect between the costs of being a renter and the costs of being a homeowner. Namely, SF would be an extraordinarily expensive city to rent in, but not to purchase a home in.

    But you don’t see that; both renting and buying a home are expensive there. Which is precisely what one would expect to see if the prime driving factor was restrictive zoning and permitting (which affects both types of housing).

  34. 534
    Deerhawke says:

    NWMLS figures are out for January.

    Same old same old. Solid demand. Pathetic Supply. Prices up year on year.

    http://www.northwestmls.com/index.cfm?/News–Information/page/Latest-Press-Release

    Breakouts have been posted for January as well

    http://www.northwestmls.com/library/content/statistics/KCBreakouts.pdf

  35. 535
    Deerhawke says:

    The Seattle Times has its write up online. The spring market has clearly started with a bang.

    King County’s median price is now $628,000. Seattle has gone above the median price set last summer and hit a new high of $757,000. But West Bellevue has basically doubled in the last year and now has a median of $2.27 million.

    https://www.seattletimes.com/business/real-estate/king-county-housing-market-kicks-off-2018-even-hotter-than-before-as-seattle-breaks-price-record/

  36. 536
    Deerhawke says:

    But probably nobody really noticed this news about the surging real estate market because they were way too preoccupied trying to figure out how badly their stock portfolio got crunched today. Nearly a 10% drop in the Dow since Friday.

    It will take a few weeks to tell what this represents and how it will play out.

    It could be that a month from now, the received wisdom may be that all of the asset markets are overvalued and we need to just be more cautious.

    Or it could be that a month from now, people will be looking back and thinking that was an interesting little blip in the market back there at the beginning for February.

    Or it could be that a month from now, the settled opinion is that we have over-invested in equities and we should be diversifying into other assets… like real estate.

    What is your read on the situation and how will you play it?

  37. 537
    Blake says:

    Here’s some perspective:
    https://twitter.com/ReformedBroker/status/960624654682673152

    My take…. there is A LOT of hot money flying around the world. Much of it margin debt. This is why ALL asset classes drop at once.

    But 10% in 2 trading days is a big hit. Today’s point loss was more than the entire Dow was worth in 1984!!

    Paper losses they say…

  38. 538
    Blake says:

    RE: Blake @ 537
    Or… it could get worse! Futures pointing to Dow dropping 1,200 tomorrow morning!
    https://twitter.com/CNBC/status/960731237395632128

Leave a Reply

Use your email address to sign up with Gravatar for a custom avatar.
Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Please read the rules before posting a comment.