Bubble Link Roundup Extravaganza

The stories have been piling up in my inbox at a faster rate than I’ve been able to post them lately, so that means that it is time for another bubble link roundup. I’ve got a lot of ground to cover in this post, and I don’t want to totally clutter up the front page, so click below to read the entire post.

Local public radio chimes in on the “Seattle is Special” debate, with a surprisingly original report full of insight and revelations about Seattle’s unique economy. Oh, wait… no—that’s not an accurate description at all. Actually it’s yet another rubber-stamped report full of the obligatory quotes about “strong fundamentals” from Glenn Crellin, Dick Conway, and a handful of local real estate salespeople.

Bellamy Pailthorp, Why Puget Sound Real Estate Bucks National Trend:

The northwest is a bright spot in an otherwise faltering national housing market. When stocks took a dive last week, many analysts blamed it on mortgage woes and dramatically falling home prices around the country. Yet housing prices in the greater Seattle area continue to rise. As KPLU business and labor reporter Bellamy Pailthorp explains, the northwest economy is often out of synch (sic) with national trends.

Meanwhile, over in Ballard (a.k.a. Pink Pony Central), they’re experiencing a “massive housing demand” from a “diverse mix” of people, all dying to get in on the gold rush before Ballard “runs out of dirt.”

Rebekah Schilperoort, Massive housing demand here:

According to Gunnar Hadley, a realtor with Ballard Windermere, 60 percent of everything sold here for the first five months of the year were condominiums and town homes. Hadley, who specializes in condo sales, called that an “impressive” statistic.

“That’s truly crazy,” he said. “There’s clearly a massive demand here.”

While real estate sales are sluggish around the nation, Seattle, and especially Ballard, seems to be one of the exceptions, he said.

“You can be going 120 miles per hour and slow down to 90, but you’re still going 90,” Hadley said.

“Eventually we will run out of dirt,” [Ballard realtor Brent Sanders] said.

In the meantime, homeowners will continue to flock here, predicted Lauren Martin, a developers’ representative…

“Ballard is just hot – it’s one of the hottest,” Martin said. “It has such a unique feel.”

Unfortunately, it would appear that there are some parts of Seattle’s economy that require more than fuzzy feelings and positive reporting to keep afloat. Thanks to the national housing slowdown, HouseValues, a Kirkland-based agent referral service, continues its death march.

Drew DeSilver, Market puts the squeeze on HouseValues:

The deteriorating national housing market continues to batter Kirkland-based HouseValues, which Tuesday reported sharply lower revenues, said it would lay off 100 workers and closed its Yakima call center.

“We were in the early stages of building a very talented team in [Yakima], but given the dramatic change in our environment it simply no longer makes sense to invest in an additional facility at this time,” HouseValues Chief Executive Ian Morris said in a conference call with analysts.

The job cuts and Yakima closure follow January’s layoff of 60 people in HouseValues’ Kirkland office, as the company shut down its business of generating leads for mortgage providers.

You’re also increasingly up a bit of a creek if you’re looking to the state to make home buying a viable prospect, as they’re simply unable to keep up with the demand. Hmm, could demand for state assistance be spiking because people are no longer able to Option-ARM, zero-down, and liar-loan their way into homes they can’t afford?

Devona Wells, First-time home buyer? Not so fast:

A well-used state program for first-time home buyers has drastically restricted eligibility because it’s unable to meet borrower demand.

Before May, a single buyer in Pierce County could earn up to $73,000 and qualify for a House Key loan. Today, the income requirement tops out at $34,800, with a return to the more generous limits not expected until January.

And, even then, the House Key program could face the same issue that caused it to rein in lending three months ago.

Next up, a trio of gushing articles about all the grand things the city of Seattle is doing to “innovate in housing issues” and “make homeownership a reality.”

Greg Nickels & Tom Rasmussen, Seattle makes good on its commitment to affordable housing
Denise Whitaker, Seattle city officials looking for ways to make housing more affordable
Rebekah Schilperoort, Housing costs have risen beyond the reach of many

And lastly, The Olympian takes a look at the growing trend of home staging in the slowing Thurston County housing market.

Rolf Boone, Home sellers look to decor to entice buyers:

Chad and Melissa Stussey of Tumwater put their 2,600-square-foot home up for sale in March. After a month on the market, they lowered the price and then did it again just to be a little more competitive, Melissa Stussey said.

Finally, they moved some excess furniture into a storage unit and “staged” their home by rearranging existing furnishings to improve its chances of a sale.

“The more you walk through houses, the more you realize it does make a difference,” she said about their staging efforts.

More South Sound homeowners are staging houses themselves or using professional stagers to help stimulate sales in a real estate market that now firmly favors the home buyer.

Hey, this sounds a little familiar… Didn’t we read this article before? Yes, yes we did. Back in November, Mr. Boone wrote a very similar article on the same subject. You may recall that when this article originally appeared, I made the point that home staging is “not a cure for a house that is just plain overpriced.” According to Thurston County records, the home featured by Rolf in the article did finally sell. In May. For $22,000 under asking (roughly 7%). At least most of the hopeful sellers in the latest article are staging and lowering their price.

(Bellamy Pailthorp, KPLU Radio, 08.02.2007)
(Rebekah Schilperoort, Ballard News-Tribune, 07.31.2007)
(Drew DeSilver, Seattle Times, 08.01.2007)
(Devona Wells, Tacoma News Tribune, 07.31.2007)
(Greg Nickels & Tom Rasmussen, Seattle P-I, 07.30.2007)
(Denise Whitaker, KOMO TV, 07.20.2007)
(Rebekah Schilperoort, Ballard News-Tribune, 07.31.2007)
(Rolf Boone, The Olympian, 07.22.2007)

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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
    rose-colored-coolaid says:

    I think Olympia is in trouble. I drove through part of it to visit a friend a little ways back, and they were renting a small house. The entire neighborhood was just a line of houses, that had been built recently. Out of maybe 100 homes, I got the impression only 30% were populated. These were new, and had postage stamp yards, selling for $200k.

  2. 2
    MS-Drone says:

    Where do people get the idea that a 7% reduction is a large amount? It seems that so many people go to the grocery and buy meat on sale for 20%-30% off of list, but then think that a $10k reduction on a $400k house is a “huge reduction”… yeesh, that’s only 2.5%! I just love irrational consumers.

  3. 3
    Nolaguy says:

    When that $10k is “on paper”, it might not seem significant.

    But if somebody has to sell their house with “only” a 2.5% loss, then that $10K plus closing costs is a huge amount of money for most people to write a check for. Especially people that probably bought with 0 down…

    A 5% reduction on a 500k home? Ouch…

  4. 4
    kpom says:

    “A 5% reduction on a 500k home? Ouch…”

    It’s the Magic Of Leverage!

  5. 5
    Garth says:

    An article in the WSJ yesterday listed out some investors, hedgefunds and such that are affected heavily by the subprime problems. Three German, three US, two Australian, one in the UK and one in Japan.

    All of this mortgage risk is spread around and those without effective risk management are the companies that are going to lose money.

    If a p

  6. 6
    IAmCornholio says:

    An article just appeared on the Wall Street Journal’s web site:

    Lenders Broaden Clampdown on Risky Mortgages (sorry, subscription required).

    In a nutshell, it states:
    – the market for sub-prime & Alt-A Mortgage-backed bonds is gone
    – Large lenders are no longer funding sub-prime & alt-a
    – Wells Fargo just raised their 30-year Jumbo Prime Fixed rate to 8%. It was 6.875% last week!!!

    To put this in perspective, the monthly payments on a $350,000 30-year loan at 6.875% is $2445/month. The monthly payments on a $315,000 30-year loan at 8% is… $2443/month. That is a 10% difference in the loan amount to accomdate this rate jump. Think this will have an affect on house prices?

  7. 7
    Demersus says:

    Keep in mind that a 5% drop in price on a $500K house is equivelent to a 10% gain in appreciation on a $250K house. IT IS A VERY SIGNIFICANT TREND! And, the percentages are likely to get quite a bit higher, perhaps even double digits in some areas. That’s going to wipe a lot of people all the way out of the game.

  8. 8
    tlw says:


    Please note the term Jumbo:
    Wells Fargo just raised their 30-year Jumbo Prime Fixed rate to 8%. It was 6.875% last week!!!

    Google for jumbo loan. It’s the non-conforming rate for loan that is greater than $417,000.

  9. 9
    rose-colored-coolaid says:


    Thank goodness! If a significant percentage of homes in Seattle were selling for more than $417,000, the rate hike might effect us. Phew!

  10. 10
    tlw says:

    I wouldn’t have said anything if IAmCornholio had given the example for the difference in payment for a loan amount > $417k. S/he gave the example for a loan of $350,000.

  11. 11
    a bit out of context says:

    long time reader, first time poster

    concerning 30 yr fixed rate hike: I rent a townhouse in the central district for $1500/month including wsg. two doors down, they’re trying to sell an identical one for $300k (MLS#: 27129941, if you’re interested).

    according to the above rates, that is a premium of more than 50% to own vs rent identical spaces (down to the low end marble, fake fireplace, and easily marred bamboo). all this in a neighborhood that could easily crash more than most if/when the bubble goes.

    i understand that rate doesn’t apply b/c it is Jumbo, but i’m guessing it’d be close

  12. 12
    Garth says:

    Is anyone seeing any sales where they are at a loss to the last sale in the mls data?

    I just find crazy things like this:


    In the area where I look at recent sales, all I see going down in price is overpriced flippers

  13. 13
    Nude says:

    I think, since Seattle is lagging behind again, that it will be a few months before we start seeing price reductions to the break even point. Once people start getting desperate, then you’ll see more fire sales.

    I did find this little gem though…

    Purchased for $626k in 7/06, now being offered @ $625k. Assuming a 6% commision, they stand to lose quite a bit of money on the deal… even if they get the asking price.

  14. 14
    Buceri says:

    Fresh off the presses…..

    American Home Mortgage to close Friday
    Friday August 3, 6:52 am ET

    “NEW YORK (Reuters) – American Home Mortgage Investment Corp plans to close most operations on Friday and said nearly 7,000 employees will lose their jobs as the lender becomes one of the biggest casualties of the U.S. housing downturn.”

  15. 15
    wreckingbull says:


    American Home Mortgage was primarily an Alt-A lender, not sub-prime.

    The cancer has spread and the great credit contraction is now officially underway…

  16. 16
    Alan says:


    You can often figure out anomolies in sales data by looking at public records. When land is subdivided the numbers look particularly confusing (which is not the case for this house).

    For the house you listed, it was purchased in 3/2005 for $475k. The next transfer was between what looks like a law firm and a mortgage company. To me, that looks like it was foreclosed on and did not sell at auction.

    The next transfer was in 10/2006 for $410k. That went from the last mortgage company to a mortgage guarantee company. It looks like the first mortgage company had insurance and the second company paid off the insurance and took the house.

    The insurance company then sold the house to an individual in 3/2007 for $452k. That individual transferred the property into his own LLC and is now trying to sell it for a quick profit.

    The individual in question has been very, very active in RE in KC since 2001 and has been involved with at least nine properties.

    You can find all of this information at:

  17. 17
    Garth says:

    These are the tightened standards according to that journal article.

    “Many now are focusing on loans to borrowers who are willing to document their income, can make a down payment of at least 5% and have a history of paying bills on time.”

  18. 18
    res says:

    Today’s rent vs. own comparison:

    I have a friend who just started renting in Wedgewood for $2,100. A very similar house in the next block is for sale for $600,000. Assuming 20% down (anybody have $120,000 sitting around?) and 8% on a jumbo mortgatge, this works out to a mortgage payment of $3,522, plus taxes and insurance, and the opportunity cost of not earning interest on that down payment … Is everybody ready for 50% house price declines?

  19. 19
    Ruisenor says:


    I have seen a few listings in Snoqualmie ridge which are underwater to their purchase price. Most anything I have found listed that was purchased in the ridge in 2006 is flat to slightly underwater.

    Here is one example, down 10K from a 7/2006 purchase.

  20. 20
    Grvetti says:

    “That’s truly crazy,” he said. “There’s clearly a massive demand here.”(Ballard

    No… just because there’s 1550 building permits does not mean theres the demand for ~400K condos… remember, massive supply actually lowers demand

  21. 21
    Garth says:

    A 50% decline in house prices in Seattle is just not going to happen anytime soon.

  22. 22
    Old Ballard says:

    No, but one can only hope.

  23. 23
    Matthew says:


    I have a feeling it will happen faster than you think.

  24. 24
    synthetik says:

    Got PUTs?

  25. 25
    BanteringBear says:

    It’s official, no doc loans (Alt A) are now gone. These stated income loans were the primary driver of prices over the course of the past several years. Without them, people can no longer qualify for homes, as they don’t earn enough money. Sellers are now officially screwed. Only the premium properties which are priced right will sell from here on out. And, of course, to people who earn lots of money, and can document that income.

  26. 26
    MisterBubble says:

    When the Seattle Times starts telling the truth, how bad have things become?

    One thing missing in jobs boom: high pay


    As a rule, economists say, higher-wage jobs support lower-wage ones: The Boeing machinist buying camping gear helps sustain the sales clerk who sells it to him. As high-paying jobs boomed during the 1990s, so did those further down the wage scale: The same tech boom that generated 14,485 software jobs (average pay, including options payouts: well over $250,000) created 36,430 administrative-support jobs (average pay: about $23,560).

    But until fairly recently in the current expansion, lower-paying jobs were being created without much of a bump in higher-paying jobs. So where was the support coming from?

    Housing. More specifically, the housing boom that has boosted home values across much of the state and sent Seattle-area home prices into the ionosphere.

    As house values soared and mortgage rates fell, homeowners had the best of both worlds. Even if you lost your dot-com job and were temping to pay the bills, you could refinance your mortgage or tap into your home’s equity to maintain your spending levels. And tens of thousands of people did just that.

    Ouch. Lizzie — tell me it ain’t so!

  27. 27
    The Tim says:

    Nice find, Mr.Bubble. That will probably be tomorrow’s post!

    edit: I fixed your link.

  28. 28
    MisterBubble says:

    Thanks for fixing the link, Tim. I look forward to seeing your take on it, tomorrow.

    (aside: now the italics are borked. :-P)

  29. 29
    The Tim says:

    <i>italic</i> = italic
    <em>italic</em> = italic
    <span style=”font-style: italic;”>italic</span> = italic
    Hmm, seems to work for me…

  30. 30
    MisterBubble says:

    Nono….on the post with the quote. The italics got wiped out on half of the quoted text, making it look like my commentary.

  31. 31
    The Tim says:

    Ahhhh, I see. Must have happened in the edit process. I put it all into a <blockquote></blockquote> for you.

  32. 32
    MisterBubble says:

    Wow…they did it again! Top headline on seattletimes.com:

    Zero-down mortgage? Big lenders saying no

    Many years ago, a 20 percent down payment for a home was the norm. But as prices escalated, fewer people could afford that. After all, 20 percent of $500,000 — the cost of a middle-class suburban house in the Washington, D.C., area — is $100,000.

    No-down-payment mortgages came into play about a decade ago, at first for wealthy borrowers with stellar credit. The idea was to give those borrowers loans that allowed them to buy houses without having to liquidate other investments, said Sean O’Boyle, a vice president at SunTrust Mortgage in Chevy Chase, Md.

    “But the model deteriorated, and it became available to just about anybody in recent years,” he said.

    In part, that was because lenders assumed that as long as home prices kept climbing, borrowers unable to afford future mortgage payments could sell or refinance. But once home prices dropped in many parts of the U.S., that option evaporated. Delinquencies and foreclosures surged. With urging from federal regulators, lenders tightened their policies.

    I’ll admit…I’m a little concerned. Did someone hog-tie Lizzie? Where are the Strong Jobs? What is this “zero-down” loan they speak of? Financing? What financing?!?! Where did the pink ponies go??

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