NAR: Seattle Coming Up Roses!

There haven’t really been many interesting stories out there in the last few days that are Seattle-specific, so I guess now is a good time to post the NAR’s Home Price Analysis for Seattle Region (pdf) I haven’t bothered posting it yet because it’s not really anything new or interesting, but rather the same rah-rah real estate fluff you’ve come to expect from the NAR. Here are some choice quotes.

  • Home prices, though high, are affordable when compared to those in California markets.
  • Because of the strong increase in home prices over the past two years, mortgage debt servicing costs have risen significantly. Nonethless, [sic] the debt service cost relative to household income stood at 23% — only a tad higher than the national average of 22%.
  • Local job growth has been strong. The three-year job growth of 3.5% easily tops the national pace. Gains have been particularly strong in 2006.
  • Job growth attracts additional potential homebuyers to the market and limits the number of “forced home sales” (as was the case in the early 1980s and 1990s). This suggests that any price decline will likely be short lived given the additional buyers ready to enter the market.

Granted, none of these statements are necessarily false, but it’s clear that they’re being very careful which facts they choose, in order to paint the rosiest picture possible.

  • However, the biggest risk is the drastic slowdown in home sales activity that could result from further measurable increases in interest rates. Should the 30-year average fixed rate approach 8% (from its current 6.8%) as a result of too much monetary tightening by the Federal Reserve, home prices in the region could well decline.

Newsflash guys, a slowdown in home sales activity is already under way. But hey, at least we’re making a little bit of progress toward the truth. If you recall, a year ago they were saying that price declines would occur “only under extreme unlikely scenarios” such as “mortgage rates rising to 10.5% in combination with 3,000 job losses could lead to a price decline.”

  • A more relevant measure [than home prices] for assessing the risk of a home price bubble is the median mortgage servicing cost relative to the median income. This ratio is at near the local historical average. It implies no widespread financial overstretching to purchase a home in the region.

What they conveniently fail to mention here is that this is only possible because of the wide variety of risky, “exotic” loans that are now available.

  • Only 3% of new loans had a loan-to-value ratio of greater than 90%. Therefore, prices would have to decline by more than 10% to have a measurable impact on foreclosure rates.

That number sounds really low to me… too unbelievably low. I have a feeling that when they say “of new loans,” they’re counting 80/20 loan combinations as two individual loans that are neither one for more than 90% of the value of the home that was purchased. How convenient.

Oh, and if the “Additional Discussion Points” on page 8 sound familiar, that is because it is the exact same drivel that they included in last year’s PDF on page 7.

All in all, what we have here is another disappointing showing from the NAR. If they’re going to have any chance of convincing a thinking person of a strong, resilient Seattle housing market, they’re going to have to come up with something more than this steaming pile of tired catchphrases and misleading statistics.

(National Association of Realtors®, 07.2006)

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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. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.


  1. 1
    synthetik says:

    “Though ARMs are the best financing choice for some homeowners”

    Oh yeah? You mean the FB’s that want to induce bankruptcy ASAP?

    This thing seems like it was written by an 8th grader.

    “So part of the recent year’s increases are attributable to the “catch-up” effect”

    …and the rest of the year’s decreases will be attributed to the catch-up effect.

    Wow, I love the discussion points toward the end. This is the kind of document that all realtors carry in their back pocket… sometimes the inconvenient truth of their profession pops up and they must whip it out and re-brainwash themselves.

    “It is difficult to get a man to understand something when his livelihood depends on him not understanding it.” -Upton Sinclair

  2. 2
    seattle_slow says:

    “This thing seems like it was written by an 8th grader.”

    C’mon synth, give ’em a break. It’s more like 10th grade.


  3. 3
    Dukes says:

    I have a feeling that we will see all manner of justifications coming out that will deny reality up here, we have to remember just how many people’s pay checks are DIRECTLY tied to this sinking ship.

    Brace yourselves, put on your hip waders because the $hit will be getting even deeper from those folks who have to try and move this stuff.

  4. 4
    SeattleMoose says:

    On the other blogs the wild card that seems to be ripping holes in the bubble is the retreat of speculators/flippers from the market.

    That in and of itself is HUGE for places like FL, AZ, and CA.

    We are talking about people holding up to 30 “investment properties” thereby tightening supply and driving up prices.

    But of course, the absence of this from the article indicates that flippitis is NOT part of the reason that prices here have doubled and in some cases, tripled over the last 7 years here in “God’s chosen city”.

    I think Seattle is gonna end up being so “special” that the whole country is going to experience 50% price drops…EXCEPT for Seattle.

    So Seattle will have the highest RE prices and you know what that means…EVERYONE will want to move here because obviously, WE are special.

    So bring that bubble on. The higher our prices are relative to everywhere else, the more attractive we become.

    Pure logic….

    Note: The last 3 paragraphs have been approved by Susan Ryan.

  5. 5
    stephen says:

    The game for these folks now is to stir buyers to think the slump is short term and they better buy now while prices stagnate/retreat slightly (slightly being the mantra).

    It may very well end up that way but they of course have no better vision into the future the rest of us. Bubbles don’t exist based on fundamentals and they seldom play out in an orderly fashion. Stock market bubbles crash, RE bubbles unwind.

    Fact is for the first time in a number of years buyer’s can pick through the market looking for a house that fits their budget and not be driven by a manic almost blind desire to buy a house, any house, before they are priced out…

  6. 6
    Nolaguy says:

    “Should the 30-year average fixed rate approach 8% (from its current 6.8%) as a result of too much monetary tightening by the Federal Reserve , home prices in the region could well decline.”

    This is great.

    What does the NAR think is “too much” monentary tightening?

    Further, this wording means the NAR disagrees with the Fed’s actions if rates were to rise “too much”.

    Does the NAR know better than the Fed where rates should be?!


  7. 7
    Eleua says:

    Does the NAR know better than the Fed where rates should be?!

    Neither inspire confidence, IMHO.

  8. 8

    […] factors.” Classic! Here’s what I had to say about their malarkey at the time: All in all, what we have here is another disappointing showing from the NAR. If they’re […]

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