Portland worst, Seattle first

In my perusals of real-estate blogs this morning, I ran across a link to Housing Predictor, a site which has recently published a forecast for the top and worst performing housing markets in 2008. Housing Predictor describes their business as follows:

We examine more than 20 micro market characteristics in each market place, including income levels, employment trends and changes, school enrollment, business trends, regional political influences, real estate sales history and current housing market velocity. The factors are all considered to come up with each local market forecast.
All of the information is gathered from hundreds of independent sources the staff develops without bias for the real estate industry to issue the forecasts.
Today Housing Predictor is consulted by the nation’s foremost investment houses, mortgage companies, real estate companies and most importantly consumers for our forecasts. Housing Predictor maintains more than an 85% accuracy rating with its forecasts.

Here is how they show Portland and Seattle in their forecast.

  • They have Portland in their forecast as #23 on their worst performing markets, anticipating an 8.9% decline;
  • Seattle shows up on their forecast at #21 on their top performing markets list with an expected 3.8% increase.
  • Given what I have seen in the performance of the Case-Shiller indices for the two cities – I found the prediction of a 12.6% spread in appreciation rates to be, well – interesting.

    Portland vs Seattle

    Prior to 2001, year over year appreciation rates in Seattle and Portland seemed to oscillate on different frequencies – but since then have tracked each other very closely. The spread in appreciation between Portland and Seattle has not been that great since 1991. I guess anything could happen – but I suspect the returns in at least one of these markets are going to challenge their claim of 85% accuracy. Perhaps it will be worthwhile to delve more deeply into similarities and differences between these two markets in a later post.

    Edit:

    Note that this piece has now been the subject of a cheap-shot post by our good friend Ardell over at Rain City Guide – who referenced it in her post entitled “Seattle Bubble Says Seattle Markets Going UP!“.

    Most of you, I hope – caught the sarcastic references to the source – for those how didn’t (e.g., Ardell), you might want to read this article

    0.00 avg. rating (0% score) - 0 votes

    40 comments:

    1. 1
      deeplennon says:

      “Yakima, Washington in eastern Washington State won the #1 position with forecast appreciation of 7.1% after appreciating strongly in the past year. Yakima still has a fairly active market, despite mortgage woes.”

      What incredible logic!

    2. 2
      disbelief says:

      Quick everybody move to Yakima :-)
      Checked out this site and my impression is it’s pretty week. Seems kind of “thin” (like a facade) – I especially take great confidence in the repeated claims of “independence”. But where are the profiles of their leading contributors, their researchers, economists, etc.? That’s probably the most telling thing.

    3. 3
      disbelief says:

      Oops, I meant “weak”

    4. 4
      deejayoh says:

      Disbelief – I’d agree with your assessment – it does seem like a pretty weak site. but it was a slow news day :-)

    5. 5
      SunTzu says:

      Perhaps the out of sync in prices between Portland and Seattle during the late 90’s could be partially explained by the Internet phenom. Since Portland didn’t really have a vibrant S/W and dotcom industries as Seattle did. At that time Seattle certainly attracted more people as a high-tech hub…..

    6. 6
      disbelief says:

      No worries deejayoh :-) these post subjects are good to, because some of these self-proclaimed authorities deserve to be picked apart. There are probably folks relying on these kind of sites as “expert” information.

      From my quick research: Housingpredictor.com was founded by MIke Colpitts, a FL Realtor, and former “professional Journalist”.
      http://activerain.com/housingpredictor

    7. 7
      S-Crow says:

      Interestingly, the Case-Shiller indices track the beginning of Seattle area downward movement around the time I noticed listings starting to show “price reductions.” This coincides with my unscientific observations that the winds started blowing the other way around late 2006.

    8. 8

      In the recent “boom boom” years, it’s been relatively easy to make fairly accurate predictions. I’d be awfully surprised to see a 3.8% increase in Seattle in 2008.
      My range for Seattle for 2008 would be somewhere from a 5% decline to flat, no increase.

    9. 9
      newbie says:

      Hey everyone…sorry for the off topic post. But does anyone know of good blogs to read about other financial area’s? (especially the stockmarket). I am sick of reading the same thing on all the “financial” websites out there, I am looking for discussion from real people.

      I have learned a lot from this blog and want to keep going.

      perhaps seattlebubble.com/investment/ could be founded =). (you don’t need any free time right Tim?)

    10. 10
      Bits_of_Real_Panther says:

      The methodology isn’t transparent but they certainly can’t be called cheerleaders with a forecast of double digit depreciation in several major metro areas

    11. 11
      Q says:

      I guess http://www.realestateadd.com wasn’t catchy enough.

      About The Author: Mike Colpitts is the publisher of Real Estate Add, a consumer oriented real estate website, which keeps consumers up to date on local real estate market conditions in all 50 states. Visit http://www.RealEstateAdd.com

      And I suppose he’d like to sell you a condo in Florida:
      http://www.destinfloridare.com/default.html

    12. 12
      Buceri says:

      Full time realtor; now that business is dead in Florida, part time fortune teller.

    13. 13
      Buceri says:

      Inventory is inflating nicely as Spring approaches slowly. In the first 10 days of the year we went up about 800 units, nice. Pace should increase rapidly in a few weeks. (now play evil laugh)

    14. 14
      deejayoh says:

      Inventory is inflating nicely as Spring approaches slowly. In the first 10 days of the year we went up about 800 units, nice. Pace should increase rapidly in a few weeks. (now play evil laugh)

      yeah, normal increase in inventory between December and January is about 10%. We ended the year at ~8100 SFH so we’ve nearly hit the average at 1/3 of the way through the month.

    15. 15

      So does there seem to be a lag time from when the inventory starts to increase to when prices start to fall?
      Along the same lines, will there be a lag time from when inventories start to fall and when house prices start to rise?
      Would that be a good indicator to think about buying?

    16. 16
      deejayoh says:

      So does there seem to be a lag time from when the inventory starts to increase to when prices start to fall?
      Along the same lines, will there be a lag time from when inventories start to fall and when house prices start to rise?
      Would that be a good indicator to think about buying?

      Ira – I covered that topic a while ago in this post.

      Short answer is that it takes about a year after inventory increases show up for prices to start adjusting. Not sure what it will look like on the way back – if the model will still hold. Thus far, it has been reasonably accurate.

    17. 17

      Thanks. I do remember seeing that now, but I can hardly remember what I ate for breakfast this morning, let alone something posted in June.
      I had a great system for winning at the racetrack. It worked very consistently for a while until it stopped working. So, yeah, models don’t always hold.
      Every presidential election from 1960 on was won by the candidate who was taller, and if they were the same height, the candidate with more hair. That model stopped working in 2004, when Bush defeated the taller and more haired Kerry.

    18. 18
      Olaf says:

      Yeah, that http://www.housingpredictor.com site is just a front. If you poke around a bit, most of its links pretty quickly send you to this site: http://www.realtystore.com
      Also, the site is hosted on GoDaddy.com, the favorite service provider of scoundrels and internet con artists.

    19. 19
      Matthew says:

      Can anyone look at the Case Shiller graph and honestly believe that we were not in a bubble????

    20. 20
      Ibought says:

      Mathew,

      Actually…the bubble has burst. So, aren’t we technically out of the bubble?

    21. 21
      S-Crow says:

      See that part of the graph on the very far left? What you don’t quite see is the Spring of 1990 where we had a ton of inventory come on the market as the correction moved forward. Look at the rate of drop within the 6 mos. time period from Jan. 1991 through summer 1991. That was prime time selling season mind you.

    22. 22
      Dan says:

      Hey deejayoh: Thanks for posting housing predictor. That site has tons of good info if you read through it on every state. And hey there aren’t many places where it goes to realty store any way. There’s way too much content for it to be anything but good cynics! Read it !

    23. 23
      just_checking says:

      Can someone check if the author of that website recently got his NWMLS RE license ? ;)

    24. 24
      Angie says:

      Every presidential election from 1960 on was won by the candidate who was taller, and if they were the same height, the candidate with more hair. That model stopped working in 2004, when Bush defeated the taller and more haired Kerry.

      Right. In recent years, the indicator has turned to, “Whoever gets the most financial contributions from the manufacturers of vote-counting instruments”, or perhaps, “who has the most ruthlessly partisan secretaries of state willing to disenfranchise voters of the opposing party”.

    25. 25
      Markus says:

      Four of the seven homes in my neighborhood (Juanita/Kirkland) have sold in the past 4 weeks. The three remaining are way over-priced, been listed for more than 60 days, are vacant, and look like remodeled flips. If the Feds drop the rate down a percent or two, then at what point do you say purchasing/refinancing a home makes sense? When a 30YR mortgage is 3.5% even those three remodeled flips will sell. Are you folks really so sure that you will see a huge drop in prices… I’m 10 minutes from Bellevue and Redmond and I just don’t see prices dropping much further…

    26. 26
      Moe Ronn - Realitor® says:

      If the FED keeps dropping interest rates, you’ll have to rent out your children to buy food because our money won’t be work crap. Lower interest rates are what caused this problem in the first place. Prolonging the pain only makes the disease spread; deeper, wider. Remember when they said, “oh, it’s just contained to the sub-prime market”. Seriously, we’re on the verge of crisis and no one really cares. Let the band play on, pull another cork.

    27. 27

      Marcus, haven’t we heard this mantra over and over “Location, Location, Location”. It is also about timing and ofcourse the price affects the selling.

      Amarjit Sandhu
      500realty.net

    28. 28
      David McManus says:

      #
      Angie said,

      on January 11th, 2008 at 10:15 pm

      Every presidential election from 1960 on was won by the candidate who was taller, and if they were the same height, the candidate with more hair. That model stopped working in 2004, when Bush defeated the taller and more haired Kerry.

      Right. In recent years, the indicator has turned to, “Whoever gets the most financial contributions from the manufacturers of vote-counting instruments”, or perhaps, “who has the most ruthlessly partisan secretaries of state willing to disenfranchise voters of the opposing party”.

      Angie, I thought we were cutting out all the political discussion. This is a Seattle housing bubble board, not NPR or Fox News.

    29. 29
      bitterowner says:

      Markus,
      The 30-yr rate does not correlate with the Fed rate. Yields on 10-year and 30-year Treasury securities are typically used to set long-term mortgage rates. These yields could very likely move in a direction opposite the Fed rate, making long-term mortgage rates higher, particularly if inflation/US dollar value become problems

    30. 30
      softwarengineer says:

      I DONT KNOW ABOUT PORTLAND’S CITY LIMITS, BUT I IMAGINE ITS TRUE FOR SEATTLE’S

      I have any of you wondered like me how in the world did they even sold any amount of Seattle homes for like $200-400K in the 90s, let alone $600K lately. There’s hardly anyone that qualified, let alone the ones that did, that would pay that much for small old Seattle shacks clumped together on dinky lots with energy leaky 2X4 frames.

      My guess, and you Bubble Brains out there can get the statistics, 30-50% of the Seattle city limit home owners got their homes through inheritance, not through money made on their own. I’d also add these high price homes were/are higher in price today/yesterday by making sure the old owners, retired moms and dads, got massive property tax breaks before giving them to their kids. In my book, that’s unfair, not the property tax breaks to the retired people, the fact that it was not a King County lean against the inheretance [with interest too]. Imagine how much road money, bridge money, money for real math science teachers, etc, etc that would have given the Seattle area. Imagine how wonderfully low real estate prices would be today, if all property tax reductions for retirees was collectable after retirees died, with interest too!

      The kids receiving inheretance don’t deserve a free poperty tax ride, the rest of us don’t get it, we pay full property taxes!!

    31. 31
      Chris says:

      This is completely off topic, but in case anyone finds it as interesting as I do:

      1. My favorite condo owner in phinney ridge has now had his $1650 rental attempt sitting empty for at least 30 days. He posted it again here:

      http://seattle.craigslist.org/see/apa/537722383.html

      still on redfin here:

      http://www.redfin.com/stingray/do/printable-listing?listing-id=1321331

      If he rents it, he will be losing around $1500/month, but last month he would have lost around $3K carrying it empty.

      2. This one is amazing:

      http://seattle.craigslist.org/see/apa/537086019.html

      I jog by it four times a week. I thought for sure it was custom built for some millionaire, but I guess not. They are trying to rent it for $3500/month. The listing says “Viking and other high end appliances”. Who puts that kind of stuff in a rental? Who builds a brand new, huge house on greenlake, then tries to rent it? I’d guess this is a failed spec house, and they are hitting the panic button after failing to sell it.

      The listing says “Owners are licensed Realtors”. I’d say these guys are about to have a license to lose some serious money.

    32. 32
      Displaced Seattlite says:

      I am living in Bethesda, MD now, and paying $3750/mo rent. Beats the $5K it would cost to buy the equivalent here, but that 3500/mo house on Greenlake is looking pretty nice from here.
      Check out this local (DC) take on depressed values.
      http://www.washingtonpost.com/wp-dyn/content/article/2008/01/12/AR2008011200269.html

    33. 33
      Olaf says:

      That Greenlake house looks like a complete money pit. Don’t you hate being at the losing end of the house-flipping fad?
      One certain sign that a house is a faux-luxury flipper is the phrase “Brazilian rosewood,” (or, in the case of the Greenlake house, “Amazonian rosewood.”) As if wood from Brazil is somehow special. I happen to know a thing or two about the Latin American wood-veneer trade, and nine times out of ten, stuff that’s marketed as Brazilian whatever is actually dyed softwoods from a tree farm. Authentic rosewood doesn’t even grow in the Amazon. It’s the Corinthian leather of woods, and, by extension, these houses are the 1976 Chrysler Cordoba of real estate. (They should get Ricardo Montalban to do their ads… maybe they’ll move a few more units before the whole market tanks.)

    34. 34
      helium3 says:

      It’s interesting. I was living in Portland during the period in the graph were housing appreciation dropped to the 2% region in the late 90’s.

      As I recall, 97/98 was when the “asian flu” happened. You know, when the currency of a bunch of Asian countries nearly collapsed. Portland didn’t have the dot-com companies that Seattle did, but there were certainly a large number of semiconductor fabs in the suburbs.

      When that happened there was a lot of talk locally about it seriously hurt the local fabs, though I don’t really know why.

    35. 35

      bitterowner is correct. I expect rates to go back as we get closer to the when the Fed cuts their rate(s). Traders will view this as inflationary which bonds react negatively to. The only mortgage that is directly impacted by the fed’s funds rate is a HELOC as they are tied to the prime rate (add 3 points to the fed funds rate and you have the prime rate).

      The Fed cutting the funds rate is great for home owners who have a balance on their HELOC.

    36. 36

      oops…I meant to say “I expect rates to go back up”.

    37. 37
      ray says:

      A great topic for you Tim….Dick Beeson a Broker for Windermere in Pierce County wants all the Price Reduced Signs removed from their listings. He believes the Pierce County market is on the rebound. Buyers will think they should sit on the side-lines when they see all these signs up. He wants them all gone by Tuesday and has encouraged other Brokers to implement the same.

      Devona Wells reported this in her blog in the News Tribune.

      I say GOOD LORD! Are their still Agents who put those up?

      Ray Pepper
      Broker
      http://www.500Realty.net

    38. 38
      david losh says:

      The difference in Portland and Seattle is that Portland is a planned city development. In the 1990s Portland was building a down town core that had sat in a holding pattern for what seemed like a decade.
      Seattle on the other hand was bought, sold, and traded by our billionaire benefactors. Can you say SLUT?
      For good or bad can you think of another city in America where a billionaire has the tax payers build a stadium next to his now prime piece of Real Estate?

    39. 39

      I dont see large downward movements in any of the desireable parts of Seattle, though prices of some homes on the edges are going down, and overpriced jokes are sitting. I see good deals in good locations selling, though. I think people from other parts of the country want to escape to Seattle because it’s kind of mellow and buffered. As far as Pierce and Snoho counties, who wants to live in those dreary dumps?Condos downtown don’t seem to be dropping much either, except in questionable buildings. Seattle was newer to the RE show after the dotcom collapse, and lots of areas were still cheap. I dont know if we’re gonna retrace the last few years of crazy rises, though, without a real economic contraction locally. Asia and the economy as a whole havent totally bought it yet. Our RE prices will depend entirely on whether that happens.

    40. 40
      Garth says:

      The city of Portland may have a plan, but I know that the lure of no income tax and lower prices in Vancouver, Camas and Washugal have drawn a ton of people from Portland into huge developments and good public transportation makes being in the suburbs and working downtown more reasonable than in Seattle. The sprawl across the bridge in SW Washington is much larger and newer than anything around here.

      What I am seeing is the biggest problems are in places where developers built and brokers sold large new developments, concentrating overextended buyers with risky financing into small areas.

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