P-I Columnist Bill Virgin makes light of the housing situation in today’s column, titled How to rein in housing prices? It’s simple. The thrust of the article is a sarcastic proposal to make it illegal to profit from the sale of a home. However, he makes some interesting claims that I can only assume he’s serious about…
Folks around here hardly need an invitation to commence remarking about the prices of homes in this market. Wrote one reader: "How can the average price continue to escalate so radically beyond the means of the average household income? I would hope there is some correction on the horizon — though I confess I’ve been amazed that housing prices have continued on the current course for as long as they have."
Amazement is close to becoming a permanent condition around here; for nearly two decades people have been looking at housing prices and presuming that at some point we’d run out of corporate executives or well-paid lawyers or prematurely retired software millionaires to fuel the run-up.
But in two decades, it seems, we haven’t. The median price of closed sales on homes and condominiums was $365,000 in King County in March, according to the Northwest Multiple Listing Service; in Seattle the median price was $407,000, on the Eastside more than $476,000. Each of those numbers reflects a double-digit percentage increase from the same month a year ago.
Obviously there’s enough demand to keep prices as high as they are, and climbing, just as there is still plenty of demand for gas even at more than $3 a gallon.
Okay first off, what is Bill talking about when he says that housing prices have been running up "for nearly two decades"? Even as recently as 2001 housing was still relatively affordable for people making the median wage around here. The real explosion in prices didn’t hit until the easy money started flowing. It is the zero down, interest-only, exotic loan extravaganza (not “well-paid lawyers” and “software millionaires”) that is creating the "demand" Bill refers to, and propelling prices into the stratosphere (relative to wages). When the easy money dries up, the appreciation party will be over.
Secondly, it’s almost as if Bill was reading this blog yesterday, because he seemed to directly respond to the "is Seattle special" question:
Seattle housing prices are going to be higher than other places on the map, given the geographic and regulatory constraints and the attractiveness of the region as a place to live.
It’s true that prices in Seattle are going to be higher than say, Yakima, but that certainly doesn’t mean that the current ridiculously high prices are justified or even destined to stick around much longer. Seattle is attractive, but I hate to break it to you Bill—it’s not magic.
(Bill Virgin, Seattle P-I, 04.27.2006)