Seattle Delightfully Immune to Housing Downturn

Another day, another syndicated Associated Press article reprinted in the Seattle Times with an abundant dose of rah-rah local cheerleading awkwardly thrown in by Elizabeth Rhodes (additions in italic): U.S. home prices drop for quarter; not so here.

U.S. home prices marked a quarterly decline for the first time in 13 years in the third quarter, according to government data released Thursday that provide fresh evidence of the housing-market slump.

But Washington cities continued to defy that trend.

U.S. home prices dipped 0.4 percent nationwide in the July-September period, compared with the previous quarter, the Office of Federal Housing Enterprise Oversight (OFHEO) said.

Biting the hand that feeds youBut prices in the Seattle-Bellevue-Everett region rose 1.24 percent, OFHEO found.

“Rising inventories of for-sale properties are clearly having a material impact on home prices,” said Patrick Lawler, the agency’s chief economist.

Washington state, however bucked that trend, with 6.98 percent price growth year over year. That was the fifth-highest in the nation behind leader Utah at 12.89 percent.

In other news, a prominent video game journalist was allegedly fired over a negative review of a game which was highly advertised on his employer’s site, serving as an example for journalists everywhere of what happens when you bite the hand that feeds you.

Now everyone go out and buy a condo. Right now.

(Marcy Gordon / Elizabeth Rhodes, Associated Press / Seattle Times, 11.30.2007)

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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
    Grvetti says:

    This is what is so entirely frustrating about Liz Rhodes, because unlike Aubrey, there’s not even the vaneer of impartiality to her reporting…

    I’ve stopped writing her because her responses are less thought out than a parrot. My big beef with her is that when I would bring up the “conflict of interests” argument, she spews the following (and I’m paraphrasing)…

    Seattle Times advertisers have NO sway over our reporting, they’re not even located in our building, they’re located next door!

    Wow, so I guess that’s all that’s required in business ethics is a physical separation of advertiser and reporter and voulais!!! No conflict of interest… Ah our “un-biased” corporate media… Do they teach this sort of indoctrination in journalism school?

    Personally I viewed that response as a Mea Culpa on Liz Rhodes part. In addition to this none sense she has also made the anemic point when questioned about her reporting (and I’m paraphrasing again)…

    I don’t sugar-coat the facts, I just REPORT.

    Yes, I’m sure that’s what PRAVDA told its readership as well. “See, I just report what your government officials say, I don’t sugar-coat anything.” Yes, yes, so if we hear nothing but Realtor talking points month-after-month, we can rest well that we’re getting the complete picture.

    Personally, I’d treat the Liz Rhodes articles as a laboratory of why, in this country, our ‘so-called’ journalistic sources are not serving the people but serving their pay-masters instead. This is what Noam Chomsky called “Manufacturing Consent”.

    As Agent Mulder would put it…

    The Truth is out There (just not in the Seattle Times)

  2. 2
    Plymster says:

    This is a bit off topic, but I thought I’d mention it, in case Tim hasn’t seen it yet.

    U.S., Banks Near a Plan to Freeze Subprime Rates

    Personally, I think this may be the best proposal I’ve heard to stem the bleeding, though it may not have enough of an effect since it doesn’t do anything about HELOCs or the Alt-A market. It’ll be interesting to see how LIBOR changes if this plan goes into effect.

  3. 3
    BubbleBuyer says:

    Talk about creating a moral hazard. Rewarding imprudent people for being, well, imprudent. At least we aren’t throwing tax dollars at these gamblers. However, it remains to be seen the degree to which this move will increase the borrowing costs of people that borrow within their means. Perhaps the Vegas should refund gambling losses if you can prove you couldn’t afford to lose in the first place.

  4. 4
    number six says:

    Nice to see I’m not the only Penny-Arcade reader here The Tim. When the items in my RSS feed aggregator start to cross-reference each other from the comic heading to the news/blog heading it makes for a surreal Friday morning.

  5. 5
    S-Crow says:

    From that same article Plymster refers to:

    “If I ever saw a role for government, it is…to bring the private sector together when innovation has really outrun our ability to deal with it,” Mr. Paulson said. He is expected to talk about the administration’s approach to the housing crisis at a conference Monday.

    Hmm. Replace “innovation” with “the disaster we created.”

    I have debated the issue of “Bailout” so much over the last year. I genuinely believe the closed door meetings going on recently and in weeks past are nothing short of trying to bail out the financial institutions who enabled this garbage to occur in the first place. The idea of bailiing out existing homeowners (while noble on the surface) humors me, particularly from my vantage point of our office closing these toxic loans originated/created by many of America’s finest.

  6. 6
    50%off says:

    Yeah, in one way it’s a reward for imprudence. But think about it again. They’re trapped for a long, long, time even so. Being a ‘debt slave’ isn’t really very rewarding IMO.

  7. 7
    deejayoh says:

    Don’t know if others saw this, but Tim got mentioned over at Seattleest for his comments on Aubrey Cohen’s reporting

    Real Estate’s Going Up! Up! Up!

    It’s become fairly commonplace for the brighter real estate bloggers, like Timothy “The Tim” Ellis over at SeattleBubble, to mock P-I reporter Aubrey Cohen once a month. See Cohen–the P-I’s lead real estate reporter–writes an article about the state of the national housing market once a month when the industry standard Case-Shiller numbers are released…

  8. 8
    Lake Hills Renter says:

    I already know several people around the office that are cancelling their Gamespot subscriptions after the firing.

  9. 9
    on topic says:

    yeah, i’m with 50%off. being underwater on a fixed rate loan for a depreciating asset doesn’t sound like much of a reward to me.

    all it will do in most cases is prolong the pain.

    or does anybody really think that house prices will settle at a new plateau relative to incomes? that owning has become permanently less affordable in almost every large city in the world?

    surely the banks and gov’t realize a big correction is in order. it is just a question of how long it will take, who pays for it, and how.

  10. 10
    rose-colored-coolaid says:

    on topic,

    Of course prices will settle on a new plateau compared to incomes. Define PtI = Price to Income.

    Year 0 : PtI 3.0x – starting state.
    Year 1 : PtI 3.3x – start of bubble.
    Year 2 : PtI 4.0x
    Year 3 : PtI 4.7x – bubble peak.
    Year 4 : PtI 4.3x – first permanently high plateau.
    Year 5 : PtI 3.5x – second permanently higher plateau
    Year 6 : PtI 2.7x – new plateau.

  11. 11
    AgentSmith says:

    Looks like prices on the Eastside increased almost 10% in a week. Anyone have a theory? Mine is that the cause is rumors of a govt. bailout and the planned interest rate cut in December

  12. 12
    on topic says:

    the gov’t wants stability, so they will help prevent foreclosures

    the banks want as many people as possible to stay in their houses and pay as much as possible for their loans

    so, maybe the banks’ initiative is best for almost everyone.

    a long, slow decline in prices will help the banks extract as much money as possible from “owners”, and will help the gov’t prevent a crash.

    the only losers will be “owners”, some of whom will be surprised in 20 yrs by how bad of an investment owning a house was and will wonder why they didn’t walk away from their loan, and potential “owners” who will have to choose between renting for life and investing wisely or “owning” and investing poorly

  13. 13
    NostraDamnUs says:

    “Now everyone go out and buy a condo. Right now”

    No, you should rent. That gives you flexibility. Never having to worry about owning anything or assuming any kind of responsibility. Nothing beats renting.

  14. 14
    Buceri says:

    Rose colored – so you are saying that with an average $75K household income (just a guess); the new plataeu would be $202K. Correct?
    If so, I like your plateau.

  15. 15
    on topic says:

    fortunately, many people do not have an intuitive understanding of inflation, so they will think that their home was a reasonable investment as long as it sells for at least as many dollars as it was bought for.

    nevermind that the price in real dollars will have declined by 50%

  16. 16
    Affluent Bitter Renter says:

    “No, you should rent. That gives you flexibility. Never having to worry about owning anything or assuming any kind of responsibility.”

    That’s right – if you are renting, obviously you are not accepting responsibility in any other part of your life. Only property ownership matters when measuring maturity.

  17. 17
    Grvetti says:

    Here we go…

    As they say, I wouldn’t call the last part of a ship to sink “temporarily the most driest”… but that’s what we’re getting.

    What if fails to mention is that nothing’s selling, although there’s some beautiful excuses in the mix, much to the delight of bubble-boosters

  18. 18
    Plissken says:

    People who use the expression “reverting to the mean”as a mantra make me laugh.

    The post WWII era that saw the blossoming of the middle class was a historical fluke. The fact is, lots of things are diverging from the mean and in the absence of any effort on the part of the public to defend their interests they won’t revert back any time soon.

    Your house costs 5x the median income vs. 2x a few years ago for the same reason your average exec makes 400x your salary when the ratio was 40x only 30 years ago.

    Are CEO salaries, college tuitions or the cost of medical care going to revert to the mean? Why should house prices?

  19. 19
    DrShort says:

    “Your house costs 5x the median income vs. 2x a few years ago for the same reason your average exec makes 400x your salary when the ratio was 40x only 30 years ago.”

    Much lower interest rates over the past 5+ years have allowed people to afford more house for a given salary.

    People qualify for a loan and mentally justify based on the monthly payment, not the total cost.

  20. 20
    Bellevue Ave says:

    the idea that you could afford MORE house is irrelevant if you cant afford ANY house.

  21. 21
    on topic says:


    let’s assume that enough people will always assume that a house is a great investment.

    in this case, people buy as much as they can afford based on monthly payments and downpayment.

    so, reduce the downpayment and intro interest rate and people will buy more expensive homes simply because they can, driving prices up.

    increase, or at the very least require a downpayment and qualify people based on the ultimate payment rather than the intro payment and you are suddenly back at the mean. since people cannot possibly pay more than they can qualify for, even if they want to.

    to maintain todays prices, you have to maintain last years lending practices.

    lending practices determine the market price.

    again, this assumes that enough people will always think buying a house is a great investment at any price, which may or may not be a valid assumption.

  22. 22
    Plissken says:

    “on topic”,

    You used the word “people” 6 times and here lies your mistake. You assume that only _people_ are house buyers.

    I would counter that the recent runup in prices was engineered to ensure that in the future most real estate is not owned by _people_.

    As I said, the post WWII era with its prosperous middle class and record levels of home ownership was a fluke.

  23. 23
    b says:

    Plissken –

    What incentive would non-people (I assume you mean corporations) have in continually driving up the price of something they are also trying to purchase? If anything, normal people with bad math skills are why house prices have risen dramatically (assisted by the lenders of course). When a business decides to buy something, they are not going to decide based on the option-ARM first month teaser payment and the fact it has pretty countertops.

  24. 24
    on topic says:


    with the record level of home price inflation came record levels of home ownership. “home ownership” being the measure of how many “people” own homes, where “people” is defines as private individuals or families, not corporations, conglomerates, or secret councils.

    this bubble was created by individual greed coupled with shortsightedness, not conspirital banks.

  25. 25
    WestSideBilly says:

    Your house costs 5x the median income vs. 2x a few years ago for the same reason your average exec makes 400x your salary when the ratio was 40x only 30 years ago.

    Are CEO salaries, college tuitions or the cost of medical care going to revert to the mean? Why should house prices?

    Apples to lemons, limes, and oranges.

    Housing prices have historical relationships with income (or more specifically rents, which track together) because they’re assets that must be paid for directly. The only way prices of homes deviate from income is if lending requirements change. If only 15% of households can afford to buy, what do the other 85% do?

    CEO prices have skyrocketed by and large because the profits were there and the boards who decided CEO salaries are filled with CEOs of other companies – mutual backscratching, basically. That, and the companies who own large portions of the stock haven’t pushed back on CEOs to cut back. Capitalism at its finest.

    College prices went up as demand for college educations went up. Demand went up because more people could pay for college, both with easier to access loans and several generations of parents who had the means to support kids until they were 24.

    Health care… well, that’s just a mess.

  26. 26
    just_checking says:

    I read the “sub-prime interest freeze” and the first thing that popped to my mind was “great ! reward irresponsibility”.

    Make no mistake, this will get passed due to the election year and in the end, the fiscally responsible ones will be left holding the bag :(

  27. 27

    Hold on a second. I don’t think it will pass that easily. Why would banks say yes to this subprime bailout idea when they have contracts with investors specifying a certain yield due on their investment?

    I think it’s a big charade by the politicians to show the voting public that they’re “doing something” about “the foreclosure problem”

    When all is said and done, if any plan passes, I predict it will be so watered down, it will have minimal effect, like FHA Secure.

  28. 28
    Scotsman says:

    The plan may well pass, but it won’t be much more than a band-aid on a crushing wound. The banks are in much more serious trouble than most are aware of, and the decay is just starting. If you doubt this, please tell me how Citi can make money borrowing it from the Arabs at 11% and lending it out at 7%. Borrowing at those interest rates only makes sense if impending liquidity is your top concern. They’re done, just not officially dead yet. The same is true for Countrywide and many others. The banks will agree to freeze rates, because a lower rate collected and the cash flow produced beats a non-producing/foreclosed asset tipping towards the liability side. But it only delays the inevitable, it won’t save anyone.

  29. 29
    Ira Sacharoff says:

    A certain number of these properties are going to go into foreclosure, and the lenders aren’t allowed to and don’t want to hold onto a lot of foreclosed property, so maybe they’ll agree to it because a. it might actually cost them less to agree to a lower rate of return, and b. lenders these days are seen as demons and need to do something to make themselves appear as the good guys.

  30. 30
    S-Crow says:

    “They’re trying to keep the you-know-what from hitting the fan until after the election,” he said. “The rhetoric is ‘We’ve got to help homeowners,’ but the reality is it’s designed to help the fat cats, Wall Street. It’s bailing out the lenders.” – Peter Schiff, president of Euro Pacific Capital in Connecticut.

    Just as I mentioned earlier in the comment thread. I love straight talkers, no BS.

  31. 31
    just_checking says:

    It is definitely a bailout of the lenders/fin. institutions in the guise of helping the “homeowners”. But, since it is couched in languages like “helping americans keep a roof etc.” not many will be wiser

  32. 32
    TheDexter says:

    Still waiting for your 20-40% decline in values. We show net increase of 3% for 2008 for Seattle.

  33. 33
    bitterowner says:

    TheDexter –
    You may wish to remove your blinders, look around you and see what’s really happening to the real estate market. Do you think anybody, even on this blog, expects 20-40% declines overnight? Evaluate current trends and draw your own conclusions. If you are comfortable with where the market is heading, then good for you – keep your business model unchanged and enjoy life while breathing easy and, dare I say, without the need to go out of your way and post taunting comments on blogs. If, however, what you see disturbs you or makes you nervous for the future of your business, then prepare accordingly. Posting “neener-neener” comments on this website (I always find them interesting) won’t change things and doesn’t seem a particularly clever marketing move.

  34. 34
    Affluent Bitter Renter says:

    An interesting post on the Bend bubble blog. (BendBubble2, current post). The Bend RE market is dead, dead, dead, and the guy who runs the bubble blog has overheard a couple of RE agents telling clients wanting to sell homes to read the bubble blog!

    The agents are apparently engaged in what we called in the consulting business “managing the client’s expectations”, and are using the bubble blog as a way of indicating that the seller has to cut their sales price a long, long way from their wishing price to have any hope of selling the house.

    I wonder how long it will be before Seattle RE agents start using SeattleBubble as a similar resource?

  35. 35
    WestSideBilly says:

    Still waiting for your 20-40% decline in values. We show net increase of 3% for 2008 for Seattle.

    How are sales for November?

  36. 36

    […] not to worry, because the Seattle area is temporarily the most driest part of the sinking ship that is the housing market. Mears said he’s confident of financial […]

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