Seattle Bubble

The P-I ran an interesting little article by Aubrey Cohen today: Turmoil rattles local real estate market

The recent nationwide economic turmoil appears to have intensified already prevalent skittishness among buyers and lenders — and helped persuade sellers to get real.
…
The turmoil has increased the fear of buying now, only to see prices fall even more later, said Ryan Thompson, an agent in John L. Scott Real Estate’s Seattle Center office. “The other end of the fear is a lot of people are uncertain about their own jobs, their own income.”

Buyers also are asking more questions and are less willing to make snap buying decisions, said Melinda Eley, marketing manager for builder Polygon Northwest.

It’s disturbing to me that buyers asking questions and avoiding snap decisions is seen as a negative, and a sign of a lousy market.

Matthew Gardner, a local land-use economist who works with developers, said the economy in general, including the housing market, has come to a grinding halt.

“Banks aren’t lending banks money right now, so they sure as heck aren’t lending to anyone else,” he said. “The effect is paralyzing.”

Sounds like a bit of a different tune than Mr. Gardner was singing in July last year:

“It’s not happening in Seattle to any degree whatsoever,” local land-use economist Matthew Gardner said Wednesday. “We’re not really seeing any fallouts.”

Also amusing to me in today’s article is that Mr. Cohen calls out Moody’s for their consistently overly optimistic predictions:

Moody’s latest forecast is for Seattle-area prices to fall 17 percent from last summer’s peak, with the bottom coming around the end of next year.

The company probably will revise that to a bigger drop, based on the national situation, in coming weeks, Gledhill said.

He acknowledged that most economists, including those at Moody’s, consistently have underestimated the length and depth of the housing market’s swoon.

“For most economists’ lifespan this is unprecedented. We really haven’t seen this before and it’s been driven by different events than what we’re used to,” he said. “It’s probably also somewhat just optimism.”

No kidding. Note that even as recently as last October, Moody’s was predicting that Seattle home prices would increase 3% in 2008.

If the ever-rosy Moody’s is saying we’re in for a total 17% drop with a bottom in late 2009, a pretty good guess would be that the bottom will probably not come until 2010 or 2011 at the earliest, with a minimum 25% drop.

Also of interest is the general sentiment being expressed by commenters in the P-I’s “Sound Off” to the article. Even just a few months ago, any real estate article in the P-I was littered with pink pony supporters piping in to say that the bottom is in and Seattle real estate is bound to head back up any day now. Now it seems that such comments have become virtually extinct.

Perhaps reality is finally sinking in.

(Aubrey Cohen, Seattle P-I, 09.29.2008)