Somewhere Between Anxiety and Denial

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
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)

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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
    patient says:

    Interresting to see that the Seattle Times piece states a sligth decline in Kirkland home values while the P-I’s area breakout referenced in the median post stated a 40% increase in median price in Kirkland. Another indication that the median is a very poor indicator of home value apreciation. I wonder how close Zestimates tracks Case-Shiller and which one is giving the better picture?

  2. 2
    deejayoh says:

    A story on the market rising or falling as calculated by zillow. All I can say is wow. That’s kind of like watching madden football instead of the real thing and then reporting on it like it was the superbowl.

  3. 3
    patient says:

    The problem seems to be to access the “real thing” when it comes to value appreciation? Median and average is obviously misleading. Case-shiller is what I know only available on “Metro” level which spans a bigger area than what the typical buyer and owner is interrested in.

  4. 4
    finance says:

    One thing I have noticed is that the Inventory numbers in the upper left hand corner for King County (the only one I pay attention to) have flatlined over the past several weeks. Not sure what that means, but it will help the housing market to digest it at a more resonable pase…right now at least.

  5. 5
    rose-colored-coolaid says:

    First off, I have seen the Cycle of Market Emotions, and I have to say it’s one of my favorite diagrams. No numbers, no implications, just a pure explanation for how psychology of all bubbles works.

    Second, DJO they do watch madden and report on it like it is the real superbowl. Here’s a recap of how Madden Football predict the Colts victory over the Bears. The predicted score is a little off…but it’s eerily accurate. In fact, Madden is 10-0 in picking the winner, which I’m sure is better than what the real John Madden could do.

  6. 6
    biliruben says:

    Flatlined? I guess, if you think 50-100 additional listings beyond what are sold and delisted a week is flatlining.

    Inventory usually begins to decline in August.

  7. 7
    biliruben says:

    I think most of the rest of the country is solidly in “fear”, btw.

    We’re almost there. Reba certainly has that frightened, put a brave face on, sort of tone.

  8. 8
    Lake Hills Renter says:

    Jillayne is awesome. She’s telling it like it is, in a place where the truth is seemingly squashed. I wonder how long she’s going to be allowed to post over there.

  9. 9
    Joel says:

    It looks like bubbleheads are in the majority of commenters at RCG, so maybe they’re afraid if they dump Jillayne, they’d lose most of their community.

  10. 10
    biliruben says:


    They wouldn’t dare ban her. She has knowledge, experience and credibility and presents her case with tact and solid facts. She teaches ethics to mortgage brokers, for goodness sakes.

    I’m sure they realize that she gives there site incredible amount of credibility, regardless of her feelings regarding the direction of housing.

    She really left Reba spluttering, that’s for sure.

  11. 11
    softwarengineer says:


    Where are they? Perhaps that’s the new face you see that says, “Welcome to McDonalds, can I help you?”.

  12. 12
    Garth says:


    Having read your blog and comments, I still think you are all wet.

  13. 13
    deejayoh says:

    >>Inventory usually begins to decline in August

    Biliruben has it right, inventory is usually flat to a little bit down in August, then back up in Sept (usually peak month)

    I predict this year
    1) Contrary to what Finance says, inventory will be up in August. This is unusual, and I wouldn’t interpret it as a sign of health
    2) October will be the peak month for inventory, as more sellers will hang out with their “wishing” prices. See “denial” stage above

  14. 14
    Reba Haas says:

    I wouldn’t say Jillayne left me sputtering and she actually wrote me offline to say she liked my ability to stay in with the crowd of comments. One thing about RCG is that it isn’t run by a real estate agent, Dustin, so you’ll likely see him allowing a lot more than some other sites might. In fact, a lot of the time, now that he works for, he isn’t involved at all but for occasional dips back in. Two other contributors help to run the site during these times.

  15. 15
    MisterBubble says:

    finance “guru” sez:

    One thing I have noticed is that the Inventory numbers in the upper left hand corner for King County (the only one I pay attention to) have flatlined over the past several weeks.

    08.01.2007: 10206 listings
    08.21.2007: 10475 listings

    Your keen analytical skills continue to impress me, guru.

  16. 16
    matthew says:

    After as many beatings as the guru takes, you’d think he’d stop coming back for more or change his ways. But no, he’s still rolling full speed ahead!

  17. 17
    SLTO says:

    saw the post over at RCG and it’s hilarious…

    anybody who buys a house in this current market (assuming they can get financed) must be out of their minds… and if they lose money then it’s their fault… it’s not like you can’t see it coming… not when even the MSM admits there is trouble…

    unfortunately the only folks that have enough or make enough to get a non-conforming loan likely are too smart about their money to know better…

    when the ice cracks the wall doesn’t fall in chips… it comes crashing down…

    when every house on the street is priced at 417K which one will sell first?

  18. 18
    rose-colored-coolaid says:

    I just have to add something that seems to frequently get lost. It’s in regard to Bill Virgin’s article. Everyone seems to be asking whose to blame, and a lot of them want to pin it on lenders.

    Knock it off.

    We don’t live in a one lender world. Let’s say you’re a lender and you’re smart. It’s 2002-2003 and you recognize people are starting to qualify for loans they can’t truly afford so you refuse them and steer them towards a smaller purchase. Those clients want a big house, so they go elsewhere to less distinguishing lenders. Now you are not making as many loans, while others are getting rich. You have the choice of making loans you think are bad ideas or going out of business. So you decide that if everyone else is doing it, maybe it’s OK after all. It’s almost your only choice.

    There’s plenty of blame to go around. Buyers are to blame for greed. Wall Street is definitely to blame for making the market for mortgage backed securities. The FED is to blame for reducing rates so much that yields fell, forcing pensions and other big buyers to look for other investment grade bonds with decent returns. The guys creating CDO tranches that met those grades are to blame. The rating agencies are massively to blame for rating those bonds so highly. Local papers are to blame for pushing lies.

  19. 19
    biliruben says:

    You’re right, Reba. Maybe spluttering wasn’t right.

    Just plain speechless. After she followed your chicken little post with her CFC post directly contradicting yours, I haven’t seen you address any of the substantial issues she brought up.

  20. 20
    finance says:

    When I pasted my comments in earlier I didnt get the whole portion I wrote. In it I explained that we had this large massive increase in supply during the spring and the increase had moderated to a large degree over the past month. More of a gradual incline rather than a huge increase.

    Do I believe that the market will have a downturn, yes, I have never denied the possibility and estimated prices would be in the +/- 5% range in 2007. So far my predictions have been correct as my condo has appreciated 10.5% (with hard appraisals and locked in that value) since Sept of last year, with about half of that since the beginning of the year (~+5%).

    Overall I often play devils advocate to add some spice to arguements…and do admit it is fun to ruffle some feathers.

    At least Im not a blind optimist like Meshugy, as Im a realist. I make calculated financial decisions and assess the odds of where the market is going. I dont believe the market will decline more than 10% on a median valuation basis during this correction in the city of Seattle (only in the city).

  21. 21
    EconE says:

    Finance…I follow condos pretty much exclusively…ones in your neck of the woods that will have a bearing on what yours is/will be worth in the future. You can claim whatever you want regarding “hard appraisals” but frankly I think that in the end…appraisals don’t mean much other than what a bank may or may not lend on a property. When *you* come into the picture…it’s what it *sells* for that counts.

    With regards to *condo* inventory, if you have kept a close eye on what’s been going on in the downtown area, you will notice that many units have been pulled from the MLS and have not been sold. Many units have not even rented that are not listed in the MLS also but rather on places such as CL and other rental sites…some have sat for many many months. Also I have noticed on my CL searches that all of the search phrases I use seem to bring up more pages of inventory. I did find it interesting that in the last couple of weeks, CL has stopped posting the aggregate number of listings at the top of their categories. I was using those as an economic indicator of sorts as I checked different locations around the U.S. such as Miami, Phoenix, San Diego and Los Angeles. Miami’s numbers were shooting through the roof in the RE section (50k or so) and Seattle…believe it or not…was closing in on Los Angeles. (approximately 18k vs 20k).

    I will say that it is nice to have “devils advocates” on the site and I even appreciate Meshugy’s input. Who knows…maybe he’s actually in a financial position where he can cheerlead for fun knowing that he can laugh off a “potential” equity loss.

    Can you?

  22. 22

    I’m not a Realtor or a lender, but I interact with them daily in the classroom. Here’s my take, looking at the graph from the original post:

    Attendance at Realtor continuing ed classes fell dead in December, right after the windstorm, then we had the snow and ice in January. After that, attendance all across the board has been dead all year. Realtors aren’t coming to class. The first thing they cut out when times are tough is education and training; they’ll put it off until the last possible moment, which means I’m going to be busy next year. The Realtors now fall into a several different categories. (If I’ve missed one, please feel free to add a new catagory)

    1) Eastside and Seattle agents with an established clientele are having a slower year but are still doing fine.

    2) Agents who are working the cream, which means Microsoftie buyers, prance around like the world revolves around Redmond, Mercer Island and Bellevue and seem to have the opinion that if their little corner of the world is fine, the conversation is over. They’re not even in anxiety mode.

    3) New to newer agents who relied on the buyer market are struggling but not yet in panic mode.

    4) Part time grandma agents who write a deal or two a year for extra money are not as affected by all this because their need to support a family is not as great. They’re totally out of the loop on what’s happening with the market.

    5) Agents who are desperately clinging to hope and trying to diversify. Some have already aquired another part time job.

    6) There are very few agents in blind denial. They are scared shitless and don’t want to talk about it because mentioning their fear makes it real and transfers it to buyers and sellers, which means even less business. I’d say the majority of agents I see are in this mode.

    7) Then there are the battle scarred veterans. These folks have lived through many real estate cycles and they’ll live through this one, too. These agents are beacons for the public. They tell the consumer the truth, hard and fast, even if it hurts, and even if it costs the agent their commission. These folks aren’t always avid bloggers because, well because they are usually asleep by 7PM

    In order to become a battle scarred veteran, agents need to live through a cycle like the one we’re experiencing. There are thousands of agents in the Puget Sound area who have never lived through such a cycle. Many will exit the industry. Between now and then, agents might move their license to a place where they pay a low monthly fee without any expectations for production from their broker.

  23. 23
    finance says:

    EconE – I plan to own for many many years, even as a rental once I “grow out of” my space here.

    The rental rates for the first hill area are actually quite strong as many of the hospital workers like to live close to their jobs (or the hospitals rent them out for their higher level semi-perm doctors.) Those that are doing their residencey also like to live within a few min walking distance.

    There have been several sales since it turned condo in June 2006 (all due to job related issues) and they all sold for between 10% and 23% gains. My neighbor bough his studio for $150k and sold it one year later for $185k. A one unit slightly smaller than mine sold for a 21% increase. The main reason theirs appreciated more is that they got in on the very first stages and the developers raised the prices every month in the summer of 2006, thus by the time I locked in my rate unit they had increased the selling price.

    My other theory is that once they start working on the 520 bridge and traffic times from the Eastside to Seattle double people will be more willing to pay a higher price to rent or own near downtown (a 5-10 min walk to the core downtown). Its also a general rule that the closer you are to the downtown core the less your property depreciates in a downturn…thus the max 10% decline I am predicting for Downtown Seattle (for my 98101 zip code)

  24. 24
    rose-colored-coolaid says:

    finance, You are probably correct that the 520 work will have an impact on where people want to live for a while. I would question how it’s going to impact where people want to live though. Every time anyone questions just how strong our economy is, the chorus quickly exclaims that it’s great because Microsoft is adding 10 trillion new jobs in Redmond. I kind of thought the commute was comparable each way across the bridge, so you might have as many people moving from Seattle to the east side as you have moving the other way.

    Thanks Jillayne for your comments. It’s interesting to see where these people are, because I think they may be a leading indicator of where the market psychology is going. Even if the agents in the trenches are fearful, it seems like the average Joe on the street is not yet. The sellers are pricing like they are anxious or in denial, and most people just believe the regular propaganda out of the Times that it’s different here. I appreciating that, at least so far, the east side really is different.

  25. 25
    JohnnyBigSpenda says:

    I love that even within this discussion , there are folks that are in the ‘denial stage’ and others who are in the ‘fear stage’… I think a few may even be in the ‘panic stage’… when everyone here agrees that things will never get better and its all doom and gloom and “realestate will never be a good investment”, that’s when we know we’ve hit the bottom… probably still a year away from that. Remember the .com crash? If you bought AMZN in 2001/2002 at the ‘worst time’, you’d be doing very well right now. But it was tough to do that because everyone thought that they were about to lose their job and that the .com’s were a thing of the past… realestate will be back… I hope for everyone’s sake that they didn’t buy Nortel at $200 in 2000… if so, you are probably going to be taking a hit on realestate as well… tough to avoid ‘when everyone else is doing it’.

  26. 26
    uptown says:


    CL has stopped posting the aggregate number of listings at the top of their categories

    I just replace “min” with “1” in the rent/price search field so that I get a total number of listings. Seems to work.

  27. 27
    CCG says:

    Thank you Jillayne for that detailed report on sentiment, much appreciated. I work at MSFT and even people here will admit that you need two incomes to buy anything decent around here and that many of them couldn’t afford their current houses if they had to buy them today.

  28. 28
    Roger says:

    A friend just sold his first hill 98101 condo. Listed at 239,5 and sold for 219,5 after a struggle to do so. At one point there were 10 units in his building of 120 units for sale.

  29. 29
    Dave says:

    So my wife and I bought a two bedroom in maple leaf for 398k in mid-July. It was for the asking the price, the listing was stale, and the first one house where we weren’t going against four other buyers. We had been looking sice Jan. Considering we got the loan at a decent interest rate (good) with only needing 5% down (better) and it was one of the cheapest houses int he neighborhood (best) – how did we do? It needs a bit of work (not a huge amount – we moved in only painting a room) but do you think we lost out? We plan on being there a minimum of 7-10 years.


  30. 30

    […] Seattle Bubble: Somewhere Between Anxiety and Denial – “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.”“ […]

  31. 31

    […] time for, and some agents are cautiously optimistic that fall will yield more ringing phones.  On the cycle market of emotions, real estate agents on average, are somewhere between anxiety, denial, and fear, depending on the […]

  32. 32
    Don Niehbarger says:

    Interesting to see that most of you think the downturn in the economy has only to do with mortgages and real estate. What about inflation being 14% and rising due to war spending? What about the coming North American Union and integration with Mexico, and the degradation of US wages and services as a result? What about Peak Oil? What about the US being on the decline, and completely bankrupt? What about the US dollar being nearly worthless and other countries are getting rid of their dollars for Euros and gold? The picture is much larger than just mortgages and credit, IMO. There are downturns, and then there are global depressions.

  33. 33
    Greg says:

    Hey Don –

    You should meet my friend. He lives in Texas and keeps all his money in physical gold & gems in a safe in his house. He also has a lot of guns to protect it.

  34. 34
    R Duke says:

    Don N.
    I agree.Instead of between anxiety+denial,I’d say between the devil and the deep blue sea.We’ve let them sell us out,to China,Mexico(north amer.union)etc.The vultures will sort it out,like they always have.

  35. 35

    […] the anger phase of The Kübler-Ross grief cycle, (the second half of the cycle eerily maps the cycle of market emotions) so we don’t continue to cycle back to anger and blame over and over […]

  36. 36

    […] Water Between Fear and DesperationBy The Tim on May 20, 2010 | Leave a responseIt’s been quite a while since we had a look at the “Cycle of Market Emotions.”The Cycle of Market Emotions Last […]

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