Depends on what the meaning of “stable” is…

Forbes just loves to frame their articles around lists. You may recall Seattle showing up frequently on previous such real-estate-related lists, such as Best Places to Flip a Home (#1), Richest Cities In The U.S. (#8), Best Cities For Jobs (#34), and Most Overpriced Places In The U.S. 2005 (#1). Well, lucky us, we made yet another Forbes list: America’s Most Stable Housing Markets (sort of like picking out the warmest hangouts in Antarctica).

Nationwide, home prices are falling, sales are sluggish and the number of foreclosures is mounting. Ask any economist and you’ll hear that things are bad, and likely to get worse.

Unless you live in Seattle, where the market is slowing but fundamentals remain strong.

“Fundamentals remain strong” appears to be nothing more than code for “prices haven’t fallen… yet.” Here in Seattle, things aren’t yet “bad,” but they are almost certainly likely to get worse. I guess being “barely ok, and likely to get worse” is enough to catapult us to the top of the list.

The Emerald City has experienced strong price appreciation over the last six quarters, and that’s expected to continue in the new year, though at a slower pace. In addition to a very low housing inventory and a strong sales rate…

Wait, did he just say “a very low housing inventory”? That’s a riot. And while sales have been slowing YOY for 21 of the last 22 months, I will grant that through July, it could still be described as a “strong sales rate.” July’s sales were higher than every year outside of 2003-2006. Of course, with the tightening mortgage market, sales in August came to a screeching halt, coming in lower than any August since 2001… but we’ll let that slide, since Forbes probably isn’t working off of data that current.

…there are few non-conforming and high-risk loans on the books than in other cities, which means the area will likely see fewer defaults in the coming months than the rest of the country’s markets.

Really? I suppose with a statement as vague as “than in other cities,” it’s true. But the list of qualifying “other cities” is frankly pretty short. We’re right up there with most of the other cities that started experiencing increasing foreclosures once the appreciation music stopped. For more on the loan picture, check out this and this.

To arrive at our list, we teamed with Moody’s to develop three prediction models based on a range of factors that affect how prices move. These include, among other things, the state of local economies, new construction contracts, foreclosure rates, local credit markets, sales rates, affordability and inventory.

[From the slide show:]

Median home price:$395,000
Annual price change from 2006: 8.9%
Projected price change to 2008: 3.09%

Moody’s sure seems to be fickle with these predictions. Just last month CNN reported on “an analysis conducted by Moody’s” that showed prices in “Seattle-Bellevue-Everett” declining 2.9%.

Also, it’s not at all clear from the article what specific geographical area they’re referring to when they say “Seattle.” It’s definitely not just the city of Seattle, where the median home price sat at $439,000 last month. It’s also apparently not King County, where the median is $415,000. My best guess is that they’re using some combination of King, Pierce, and Snohomish counties—which makes the prediction of continued price increases seem even more unlikely to come true.

In related news, the author of this piece and the previously-featured “Best Places to Flip a Home,” Matt Woolsey, contacted me after my post about that article:

I came across your blog while looking for information on Seattle real estate and I must say a lot of the analysis looks great. Your apparent desire to punch me in the face regarding the flipping story is of some concern to me for my next visit to your city, but I nonetheless will continue to follow your site. For future consideration, you should know that all of our stories are comprised of data driven analysis

For the record, my comment that I would “really like to gut-punch these reporters” was tongue-in-cheek. You have nothing to fear in Seattle, Matt. Well, not from me, anyway. I can’t speak for anyone that giddily jumped into the market to flip a house after reading that article, only to find that the time for flipping in Seattle is long gone…

(Matt Woolsey, Forbes, 10.01.2007)

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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
    Garth says:

    Using zillow, you can see flipping pretty easy.

    Do a search on current for sale listings only and change the filter Sold within to 3-12 months, and you can easily see who is flippin’

  2. 2
    rose-colored-coolaid says:

    Anyone else out there starting to wonder just how much longer some of these enterprises have? Forbes has been god awful at least since the mid 90s. Cramer, as has been pointed out on this site several times, is a great person to listen to if you want to lose money. Meanwhile, really great analysis from people like Jim Jubak is seen by a much smaller number of people.

    We talk about a free market eliminating the losers and keeping the winners. This is many of our justification for why specuvesting is failing. So how long until these lousy sources of information go out of business?

  3. 3


    Here’s an excerpt:

    “….Realtors following this thread ought to continue to be reminded that the “anyone can get a loan” party is OVER and FHA ought not be thought of as an easy and fast way to inject corpses with an FHA drug to bring them to life as first time homebuyers. Said another way: just because anyone, even zombies, could have received a subprime loan in 2006 doesn’t necessarily translate into FHA-approvable borrowers in 2007 and 2008….”

    I like the corpse reference to a potential 1st time buyer. The rest of the article:

  4. 4
    redmondjp says:

    Did anybody watch the premiere of the new (soon-to-be-cancelled) ABC comedy Carpoolers right after the (even-more-soon-to-be-cancelled) Cavemen last night?

    The wife of one of the carpoolers is a real estate agent who flips a house three times in one day! Funny indeed!

    Methinks the script was written in, oh, 2005 maybe?

  5. 5
    TJ_98370 says:

    Considering the current credibility crisis of Moody’s Investors Service (ratings agency), use of info / data from Moody’s severely compromises the reliability of their predictive models, in my opinion. (Moody’s and Moody’s Investor Services are both part of Moody’s Corporation (MCO)). Just look how accurate their “mark to model” AAA ratings were for Bear Stearns sub-prime CDO’s!

  6. 6
    explorer says:

    Great zingers as usual. I seem to remember that Forbes uses the Metropolitan Statistical Area’s (MSA’s), that the census uses to define a particuar area of analysis.

    Moody’s and S &P are certainly suffering from a credibility gap. Not that they ever were gospel to me. But hey, they also did their part to promote this situation too.

    Why most MSM have ignored Shiller until recently sez alot about willful ignorance and denial, and the disconnect between pundits and what is/was happening in the street, IMHO.

  7. 7
    B&W NIkes says:

    Wow. And it goes on… “It largely reflects that these markets never went through the boom and aren’t going through the severe bust,” says Mark Zandi, chief economist at Moody’s “Price growth is not great, but [these markets] are not having house price declines. [All markets] are experiencing pricing problems, but in these markets it’s less of a problem.”
    Price growth not great? Doubling almost tripling in less than ten years? I’ll have whatever he is having.

  8. 8
    biliruben says:

    softwareengineer- I think Jillayne might take offense at being called a Realitor(sic). The spelling isn’t what would bother her.

    She is, among other things, RCG’s conscience, and she uses her pulpit well.

  9. 9
    on topic says:

    it is a comparative article, claiming Seattle is amongst the most stable large cities in the USA.

    within this category, we did have lower absolute appreciation and for this reason alone our market probably will be more stable, barring unforeseen local economic troubles

  10. 10
    Alan says:

    Maybe inventory is at an all time low after you adjust for inflation!

  11. 11

    It might be true to say that Seattle is amongst the most stable large cities in the US, but The Tim pretty much took apart every point of the article. We are in for definite price decreases and if you cannot see it, you are fooling yourself (and maybe your clients?).

    In the past 24 hours alone on the NWMLS, there were 720 new listings and 697 price reductions on existing listings compared to 275 sales closed. This is a continuing trend and does not add up to constant appreciation.

  12. 12
  13. 13
    Ira Sacharoff says:

    Seattle area prices might still be going up for now, but forces are at work to mask the real figures. What I mean is that all kinds of incentives are being thrown out there, and are not counted in the statistics. For condos, “we’ll pay your HOA dues for a year, OR 5k in closing costs paid, or 5k bonus to buyer!, or free cadillac!, and those don’t count. Sure, there are parts of this area where sales are still doing well, but I’m seeing nice houses, which have had substantial price reductions, still sitting unsold months after being listed.

  14. 14
    TJ_98370 says:

    If you read the linked article from WSJ, click on the “See detailed chart” link in article. According to the chart, 40.5% of Seattle homes on the MLS have been reduced in price and there has been a 4.0% increase in number of homes listed in Sept compared with a month earlier.
    Home-Price Outlook takes Another Shot
    Trading on CME Indicates a Decline Into Late 2011
    The outlook for house prices is getting even gloomier as traders on the Chicago Mercantile Exchange bet on steep price declines and the number of homes for sale grows.
    Traders on the CME expect home prices in 10 major cities to drop an average of about 10% from mid-2007 to November 2011, according to an analysis by Tradition Financial Services Inc., New York, of prices for housing futures traded on the exchange.
    The contracts have been trading since May 2006 but last month were adapted so that traders could bet on prices as long as 60 months into the future. The trading is based on expected movements in the S&P/Case-Shiller house price indexes……

  15. 15
    jon says:

    “In the past 24 hours alone on the NWMLS, there were 720 new listings and 697 price reductions on existing listings compared to 275 sales closed. ”

    But the only net increase in listings, going by the numbers in the upper left of this page, are in King County condos. King County SFH are still where they were on 9/20. It could be that the seasonal trend following the Sep peak is masking an underlying weakness, but it’s not the end of the world yet.

    What is the figure for vacant homes in Seattle?

  16. 16
    Be Consistent says:

    There you go again – you can’t have it both ways. I’ve read it in the past and you’ve agreed that your analysis is based on King County – not Seattle. If you did your analysis on only in city desirable neighborhoods this site wouldn’t amount to much. Seriously – either change the name of your blog to King County Bubble or be consistent in talking about just the city. You can’t have it both ways. Although I guess you have to try to keep your “theory” above water. Really, I’m sorry you live in the sticks too but you don’t have to be mad at all of the folks who live in great in city neighborhoods. Enjoy your next conversation with Tim Eyman.

  17. 17
    The Tim says:

    “Be Consistent,” you’re funny.

  18. 18
    James says:

    I challenge Mr. Woolsey (and anyone who subscribes to his stable assessment) to go to Redfin (or similar map based RE site), zoom in on the Seattle area (area boundaries of your choice), and click on homes at “random”.

    How many look owner occupied? How many look vacant (or flipper staged)? Looks like lots of vacancies to me. Not only is inventory higher than it has been in a while (and climbing), but the type of inventory is worth looking into before any fundamentally sound “stability” assessment can be made.

  19. 19

    […] kidding. Note that even as recently as last October, Moody’s was predicting that Seattle home prices would increase 3% in […]

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