Seattle Bubble

Rain City Guide, Seattle Real Estate Professionals, and Seattle Bubble all get mentions in Aubrey Cohen’s latest piece for the P-I: Debate over real estate goes online

Real estate agent John “Mack” McCoy wasn’t expecting an argument when he started blogging about housing and commenting on other posts and news stories online.

“I started out thinking that people might be interested in what a real estate professional has to say about buying and selling homes,” he said.

“Now, it seems that the audience is (composed) of people who want to tell real estate professionals what they know about buying and selling homes.”
…
“I’m not speaking from the perspective of someone who has something to sell, but rather just a guy that is taking in a ton of information and trying to process it all to make it easier for other people to get beyond the sales pitches and find out what’s really going on,” [Seattle Bubble author Tim] Ellis said.

The article is worth a read, although there’s not really any new information in there for anyone that has been following any of those three sites. I guess the purpose of the article is more to point out the online discussion to folks that tend to just read the newspapers.

If you want to know why people don’t tend to trust real estate agents, here’s a great example from a Q&A with Bill Hutchinson, president of the Thurston County Realtors Association in The Olympian:

Q: Given where the market is today compared with a couple of years ago, what would your advice be for sellers and buyers now that the market has slowed down a bit?

A: Right up front, this is a great time to buy. Interest rates are historically low; we have a great inventory of homes. As a buyer, what more can you ask for?

What more indeed. How about a reasonable price? Is now a “great time to buy” if finding a reasonably priced home is your top priority? Is now a “great time to buy” if you have a 5% down payment and your house drops 10% in value in the next two years (highly likely), and you have to sell a house that’s worth less than you owe on the loan?

I’m not anti-realtor as a rule, but I definitely am against the variety of realtor who insists that “it is always a great time to buy,” no matter the circumstances. That’s just dishonest.

(Jim Szymanski, The Olympian, 02.19.2008)

A couple of national outlets have had interesting stories about Redfin in the last few days. Since you’re not likely to read about it in the “we pretend Redfin doesn’t exist” local agent blogs, I thought I’d highlight them here. First up is a New York Times story that claims the bursting of the real estate bubble isn’t stopping Redfin (or Zillow, Terabitz, and Trulia) from growing.

It was late October, and Redfin, an online real estate brokerage firm based in Seattle, had received just three months earlier a $12 million investment led by the marquee venture capital firm Draper Fisher Jurvetson. In the interim, the mortgage industry melted down, foreclosures spiked and housing sales slowed to a crawl. Now, one of Redfin’s biggest markets, Los Angeles, was battling a series of wildfires and Redfin’s sales had stopped cold.

Redfin was not the only victim of bad timing. Venture capitalists poured about $50 million into three other real estate Web sites last year — Zillow, Terabitz and Trulia — only to watch the market enter a historic slide.

Now, although most of the real estate industry wishes it could fast-forward through 2008, these online start-ups are surviving nicely. Each company recently reported strong sales and increases in Web traffic. Trulia surged to the top by the end of 2007, from sixth place in 2006, according to Nielsen Online.

Although these sites are not growing as quickly as they might have during a bullish market, they are at least growing.

“In September, we thought it was maybe the beginning of a very long downturn,” said Glenn Kelman, Redfin’s chief executive. “But for whatever reason, the last few months have been very strong for us.”

The second story, from Forbes, chronicles some of the unique trials Refin has faced as they have positioned themselves as an alternative to traditional brokerages.

Glenn Kelman, Redfin’s chief executive, knew it wouldn’t be easy to shake up the real estate brokerage business. Tradition-minded and protective of their turf, Realtors don’t take kindly to discounters. Still, says Kelman, he scarcely anticipated the dirty tricks aimed at his online discount brokerage.

In southern California Redfin’s for-sale signs are often knocked down, stolen or smashed. In Seattle a traditional Realtor posted Kelman’s address online, and a sturdy Redfin yard sign at his house was soon hacked down. In a national forest near Yosemite National Park someone affixed fake Redfin bumper stickers to signs, trees and rocks to make the company look like a shameless promoter and defiler of the environment. After Redfin staffers removed the stickers, which they have never used to pitch the Seattle company, the trickster started tossing the signs, attached to weights, into branches of sequoias. “I never considered how violent the reaction to us would be and what that would mean to our customers,” says Kelman, 37.

Yikes. If that’s how some of these real estate “professionals” act, I guess I can understand why many of my bubble-blogging counterparts around the country have chosen to remain anonymous.

(Bob Tedeschi, New York Times, 01.28.2008)
(Christopher Steiner, Forbes, 01.2008)

Continuing The Tim’s trend of quick posts, I thought I would add this to the flurry of news today. King5 ran a news piece last night that is summarized in this article, entitled Home sellers upping incentives in crowded market

The piece quotes Reba Haas, one of the contributors over at Rain City Guide. She is quoted as saying:

“There’s too many people coming here for us not to have it continue to be strong,” said Haas.

Let’s see how that statement stands up to reality. Here is the most recent report on immigration from the Washington Department of Licensing.

Wow. Looks like the number of people coming to Washington is actually off 21.6% year over year. Perhaps some fact checking is in order?

As the mortgage industry begins to crumble and home prices are declining across the nation, the local media and blogging real estate insiders seem to be getting a bit anxious. Maybe it’s just me, but take a look at some of the recent headlines:

Home values here still rising (Elizabeth Rhodes, Seattle Times)
Seattle-area homes are holding value, Zillow says (Aubrey Cohen, Seattle P-I)
No, Chicken Little, the sky isn’t falling… (Reba Haas, Rain City Guide)

Many recent reports such as these seem to have a tone of: “I swear, the housing market in Seattle is still strong! The mortgage mess won’t affect us at all, really!” Who can blame them, really? What else are people whose income depends on the continued strong performance of the local market going to say?

You’ve probably all seen the “Cycle of Market Emotions” on other housing blogs:

The Cycle of Market Emotions

Although it takes an ounce of actual critical thinking to see the cracks in Seattle’s housing market as of now, I believe that those most involved in the market can feel it in their bones. Whether they are consciously aware of it or not, the fear of what’s about to happen is starting to come through in what they write. Based on what I’m reading out there, I would place the general market sentiment in Seattle right now at somewhere between “Anxiety” and “Denial.”

Of course, some people are more willing than others to be frank about the situation facing us today. To her credit, Jillayne Schlicke over at Rain City Guide appears to be one of them, recommending in a frank post about the snowballing troubles at Countrywide, she recommends that employees there “polish your resumes and quietly begin making inquiries.”

And let’s not forget our old friend at the P-I, Bill Virgin, who pipes in on the ongoing mess with his usual wit and insight:

You can’t help reading the accumulating horror stories in the mortgage market… without shaking your head and wondering, “What were they thinking?”

Not the borrowers. The people making the loans.

The borrowers certainly deserve to be asked, “What were you thinking?” The explanations offered in answer range from, “I didn’t read it” to “They didn’t explain this to me” to “Maybe I fudged the numbers a bit” to “I didn’t count on my job/the housing market/ interest rates/the economy going bad on me.”

If ignorance born of laziness is unattractive in consumers, it’s inexcusable for the industry that was generating and selling these loans. Alternative explanations are hardly more absolving: Inexperience (”Housing markets only go up, right?”), hubris (”I know what I’m doing, those other clowns don’t.”) or greed (”As long as I get the loan made and sold, it’s not my problem.”).

The real world is not tolerant of such excuses, and it is a harsh grader on those who ignored, or never learned, the principles of responsible financial management.

Of course, it’s my opinion that anyone who didn’t see this kind of mess coming years ago was either not paying attention or willfully ignorant. I leave it as an exercise to the reader to determine which group of people falls into each category.

Who can say how this is all going to unfold in the coming months and years. All I know for sure is that these are definitely interesting times.

(Elizabeth Rhodes, Seattle Times, 08.18.2007)
(Aubrey Cohen, Source, 08.13.2007)
(Reba Haas, Rain City Guide, 08.18.2007)
(Jillayne Schlicke, Rain City Guide, 08.20.2007)
(Bill Virgin, Seattle P-I, 08.20.2007)

Click to enlarge - © Tim S. Kane 2007

It’s drizzling, my body is extremely sore from digging post holes for 1,600 lineal feet of fencing and I’ve got about 40 feet to go, so I’ll take this opportunity for my Seinfeld (mostly about nothing) market commentary. And before you all laugh at me as a homeowner dumping money into my fence, I’m saving over $10K in labor. And no, I’m not getting ready to sell. Ok, so it’s taken me all of July to do it. Oh, it’s Aug. 3rd?

• Anyway, so my wife is fixing her hair this morning and says: “what the heck is going on with all these lenders going out of business?” No, it’s not that she is unaware of the situation, far from it, but more so it was a remark of “this is crazy.”

• Late last year and early this year we had escrow transactions fail to fund with some lenders that are now RIP. I don’t know if too many people were paying attention like I was, but that was a clear indication to me that something was wrong, back then. A while back chief RCG mortgage correspondent, Rhonda Porter and I discussed New Century and her conversation with an New Century Account Exec. indicating that all was well. We both know the result.

• Many of the readers on this board are significantly more astute in investing in the stock market than I, and some may be experienced at shorting stocks. Personally, I’ve got less than 5% in the market because I equate investing in the stock market in some cases like gambling. I never win in gambling. Ever.

  That said, I would watch the action of title companies with closer scrutiny. Because of the market turmoil there has been an upward increase in title claims due to ….drum roll…fraud, etc… That hurts earnings. Furthermore, I get the sense that a major title insurance player could merge or gobble up another. Consolidation is highly active in this environment and was during the last downturn.

• Speaking of home improvement, one of the best ways I know of to hedge against a market downturn is to learn how to do improvements to your house, as a do-it-yourselfer. Owning can be expensive with unknown things cropping up: heating system, drive by mail box bashers, plumbing issues, you name it. I’ve saved tens (more, but I can’t publish it here because it is a closely held secret) of thousands because I rarely pay retail labor costs. Sure I’ve made costly mistakes, but I’ve saved much more.

• The refinancing gravy train has slowed down. A lot. LOT.

• I have access to Street Of Dreams discount ticket coupons ($3 off) for WEEKDAY only visits. I thought it was really good this year with lot of emphasis on woodwork (the good houses) which is my style being that I grew up in a 1906 Craftsman on Capitol Hill in Seattle. The show is through August 19th. If you’d like a coupon, please e-mail me at tim@legacyescrow.net and I’ll get them into the mail to you.

Have a good weekend and I’ll see you at the Red Sox game tomorrow. It’s my son Andrew’s ninth B-day tomorrow and if you wish him happy birthday here at Seattle Bubble, he’d get a kick out it thinking he’s famous.

- S-Crow