NWMLS Stats: Market Still Crumbling, Sorry.

Wow, January stats from the NWMLS are already here. When the press release with pdf links is released I’ll post it here. (Update: Here it is.)  For now, here’s the summary along with the usual graphs and other updates. Now with bigger chart thumbnails!

Here’s your King County SFH summary:

January 2008
Active Listings: up 56% YOY (new record)
Pending Sales: down 31% YOY
Median Closed Price*: $435,000 – up 1.28% YOY

I’m surprised to see the median holding its ground at $435,000 for the third month in a row, but with sales at all-time lows, the changes in the median price are becoming less and less informative every month.

Here is the updated Seattle Bubble Spreadsheet, and here’s a copy in Excel 2003 format. Click below for the graphs and the rest of the post.

How many months in a row can I be surprised at how fast YOY inventory is growing? Yowza, 56% more homes on the market than January 2007, which itself had 22% more homes on the market than January 2006—that’s crazy. The green square on left side of the graph below shows just how crazy inventory is getting. We’re starting 2008 at a higher point than the peak of any other year save for 2007.

King County SFH Inventory
Click to enlarge

The total number of sales continued to plummet in January, down another 31% from last year. As you can see below, this is the worst January on record since before 2000. The months of supply held its ground at exactly last month’s level of 7.54. That’s now five straight months of MOS above 6.

King County SFH Pending Sales
Click to enlarge

Here’s the supply/demand YOY graph. It looks like I might have to adjust the vertical axis if current trends continue. Higher for the inventory and lower for the sales.

King County Supply vs Demand % Change YOY
Click to enlarge

Here’s the chart of supply and demand raw numbers:

King County Supply vs Demand
Click to enlarge

Here’s the SFH Median YOY change graph. Have we bottomed out? I doubt it.

King County SFH YOY Price Change
Click to enlarge

Here are excerpts from the blurbs from the Times and the P-I. Check back tomorrow for the reporting roundup.

Drew DeSilver, Seattle Times: Homes sales slump in January in Puget Sound region

Home sales continued to sag in the four-county Puget Sound area last month, and median sales prices — with the sole exception of single-family homes in King County — slipped further, more proof that the region has joined in the nationwide housing slump.

Data released today by the Northwest Multiple Listing Service showed just 2,712 closed sales in King, Snohomish, Pierce and Kitsap counties last month, a 35.4 percent drop from the 4,197 recorded in January 2007. Nearly 3,300 sales were pending across the region, 32.4 percent fewer than a year ago.

Aubrey Cohen, Seattle P-I: Seattle-area house prices edged up in January

Seattle-area house prices edged up in January from a year earlier, while condo prices dipped.

The median house price was $430,000 in Seattle, $435,000 in the county and $334,000 in the 19 counties in the Northwest Multiple Listing service combined, up about 1.2 percent in the city, and 1.3 percent in the county and region from January 2007, the listing service reported.

Although statistics do not show sales picking up, local real estate agents have been saying since early in the year that they see activity picking up.

Forget statistics. Agents can feel the recovery in their gut.

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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.

106 comments:

  1. 1
    Joel says:

    Cue the “lying with graphs” comments in 3, 2, 1….

  2. 2
    Mike says:

    I know that the charts don’t lie, but with the one month delay between the charts and agents’ experiences, is it possible that things really are picking up? Or do they say that every time?

  3. 3
    Jonny says:

    Condos down 6.7% in one month. That’s an annualized rate of 80%. I think SFH will fare better, but we might see a condo crash here. IMO, many condos that are selling for $300-$400K are not worth more than $150-200K.

  4. 4
    S-Crow says:

    I think you have to take things into perspective. Like I mentioned in the forum, people were used to things moving at 100mph instead of 50, which feels like 20mph. I do believe that people are dipping their toes into the water right now, but those that are have the means to do so. Scheduled closings in our office are as robust as ever. Although the mix of transactions are weighted towards refinance work, we are receiving a good amount of purchases to close.

    Snohomish Co median sales prices are down for SFH’s. Outer tier areas (Snohomish for example) are feeling more price pressure than exquisitely presented homes, priced well in the city of Seattle.

  5. 5
    Marc says:

    Purely anecdotal, but the number of new clients retaining us in the last couple weeks has really picked up; both transactions and litigation/disputes. E.g., a client in Mason County got an offer within one day of listing on a flat fee MLS website. It’s a triple wide and he never even got a sign in the yard. Another client in Sammamish received three offers after the first weekend on market. Another buyer client is making a back up offer on a large tract in Snohomish County, although that one’s a pure FSBO. Anybody else seeing a difference?

  6. 6
    matthew says:

    Spring bounce, Spring bounce! Just you wait for the spring time bounce!!!

    The area around Microsoft is still holding up well, all will be saved!!!

  7. 7
    matthew says:

    BTW, yes Jonny the condo market is going to crash, and crash hard! The builders are still building like mad, the glut is going to be over whelming.

    Market crash in 5….4….3….2…………….

  8. 8
    johnnybigspenda says:

    What the Housing ‘Apocalypse’ Prophets Aren’t Revealing
    posted on: February 05, 2008

    http://seekingalpha.com/article/63150-what-the-housing-apocalypse-prophets-aren-t-revealing

    There are four adages that drove this article’s creation and content:

    1. If enough people say the same thing often, loudly, and dramatically enough it becomes fact/reality.
    2. People will tell you what they want you to hear, “the housing market is headed into the eternal abyss, — believe me, I am an expert.”
    3. People will tell you what is to their benefit, ie. “Housing and Financial Stocks are Tanking — SELL” ie, (I have shorted housing/financial stocks – I want you to sell, “it is for your own good”).
    4. When doing your own analysis – always look for what is NOT being told/sold.

    So What Do We “Know”

    1. Housing prices are dropping in many markets, especially those that were overbuilt or speculated – yup.
    2. Foreclosure rates are up – yup.
    3. Financials have been decimated by write downs, often related directly or indirectly to the mortgage market – yup.
    4. Housing construction has slowed, and home builders are suffering, construction unemployment is up – yup.
    5. ARM rates are resetting – the consumer can’t afford them, and they are foreclosing even faster! Well….(Interesting how this “prophecy” hushed with FED rate cuts.)
    6. Mortgage rates, due to Fed cuts, are down – (Shhh! Heretic! You’ll ruin the widely prophesied economic demise of Amerika!!)

    What the Housing “Apocalypticists” Aren’t Telling You

    No “doom prophet” has mentioned the Mortgage Bankers Association weekly mortgage applications survey in the deluge of economic fear-mongering. They don’t want you to pat attention to it – or grasp its ramifications. The survey compiles data on about 50% of US mortgage applications submitted the previous week. The “survey contains 15 indices covering application activity for fixed rate, adjustable rate, conventional and government loans for home purchases and refinances. A new report is posted every Wednesday with the previous week’s market activity.”

    Thus, the MBA survey is a representative data sample, publicly reported primarily as indices. My interest is to highlight the shift in those indexes from July 07 to 01/25/08 as representative of mortgage application behavior by consumers, and indirectly, by lenders.

    This is not NAR hype material. The survey is a contrarian gold mine to the current housing mantra, (thus I expect a howl of apocalypticist’s ire for revealing this “anathema” data that will be minimized, demeaned, trashed, etc.)

    What follows was compiled from the MBA news release data from the end of July, 2007 to January, 25, 2008. Here is what I think I have learned:

    1. The Market Composite Index of application activity increased 42.4% from July 07 to 01/25/08. MBA states that the current composite index reading is 70.7% higher than January 06. (People are filing mortgage applications like crazy. What the heavens are they filing for?)
    2. The home purchase index is relatively flat for the last 6 months. (Doesn’t seem they are applying to buy more new or existing homes. What are they up to?)
    3. The refinancing application index is up 66.2% since July. Most change occurred in January 08. (Yowsers! Refinance your home and not buy a new one?! How novel!)
    4. The refinance applications “market share” has increased from 39.4% in July to 73% of last week’s applications. That is a 33.6% change or an 85.3% increase in refinancing applications that mortgage bankers are perusing over compared to July 07. (John Q Public is figuring out how to take advantage of the FED cut. “Moral hazard” – you say).
    5. The conventional loan index is up 42.3% since July, (Some people are still credit worthy.)
    6. The government loan index is up 44.1% since July. (The FHA, etc. is still in business).
    7. The adjusted mortgage rate [ARM] application market share has dropped from 22.3% in July to only 8.6% of last week’s filings. That is a 61.4% decline. (We are cutting our ARM’s off. Consumer’s generally don’t want ARM refinancing, and lenders do not want the ARM reset risk problem.)

    Well! This doesn’t match the envisioned “housing market collapse.” Nightmare interrupted?

    Implications for Homeowners: “My brother, a leading economic indicator”

    My brother bought a new house with an ARM in August, 07. Post the first rate cut, he threw some cash into a fixed rate refinancing, and is now saving over 6K a year in cash flow. Why this tale?

    1. Homeowner’s that refinance out of ARM’s are getting into lower cost/lower risk fixed rate loans that free up cash, or reduce expenses.
    2. Refinancing either increases their cash flow to pay down debt, save more, or to spend more – (What? Increased consumer spending? How absurd!)
    3. Refinancing, and further rate cuts, if they occur, may lead to increased home purchases.
    4. The consumer is not stupid – while analyst and economists are crying “house price collapse,” some consumers are waiting for prices to drop to afford the housing they would like to purchase, when it is affordable – at the right price. American consumers may see the current environment as “houses going on sale,” as time passes. For example, another family member just purchased their third housing property this past year and refinanced the other two — the other two are rentals. While this has not been easy and added lots of grey hairs, negotiating with panicky lenders, it made cash flow sense. Time will tell.

    Implications for banks and mortgage companies:

    1. Lenders, banks, etc. are being able to re-rate the risk of home loans as these applications are approved. Applications are going through a more stringent process. Approvals will be perceived as more sound, with reduced lending risk.
    2. Lenders, banks etc. are getting rid of ARM’s that carry a higher default/credit risk, which should help to ultimately reconfirm debt/risk ratings on their debt. This will sometime reduce the perceived risk of CDO’s etc. and help ease the banking and mortgage lending crisis.
    3. As banks and lenders regain rating credibility by refinancing, they too stand to benefit from increased lending/borrowing to fund future housing loans.

    So apocalyptic prophets of doom – have at this.

    For the rest of you, another adage: All things are not as they seem.

  9. 9
    Alan says:

    I think that mortgage rates continuing to fall are convincing more people to buy. I know that it has moved me closer to the buy camp (but I still haven’t seen anything I really want at the price and location I want).

  10. 10
    deejayoh says:

    So let me recap the article
    – more people are refininancing their homes
    – like the author’s brother.

    Did I miss anything?

  11. 11
    laxtosnoco says:

    I suspect the really low rates will goose Feb & March results a little. However, there’s just too much inventory to keep prices propped up for many more months.

  12. 12
    deejayoh says:

    Oh, and perhaps the author should have picked up this release from the MBA, showing that – at the same time refinances were increasing in share, overall issuance of mortgages is expected to decline 16% next year. is that a good thing too? The guy at MBA who has access to all the data seems to think not so much.

    Mortgage originations expected to fall in 2008
    CHICAGO (MarketWatch) — Fewer people will be obtaining mortgages this year than in 2007, with total mortgage production expected to drop 16% to $1.96 trillion in 2008, the Mortgage Bankers Association said Monday.
    If the projections hold, it would be the first time since 2000 that total mortgage originations fall below $2 trillion, the group said.
    The principal concern of the current credit crisis lies in the possibility that banks will eventually run out of capital,” said Doug Duncan, MBA’s chief economist, in a news release.
    “Banks are running up against capital limits as they write down the value of assets at the same time they are putting loans on their balance sheets because the markets for securitized products are essentially closed,” he said.

  13. 13
    shane says:

    So people are:
    1. Refinancing quite a bit
    2. Spamming for mortgages

    And this somehow overwhelms all the other news happening in the housing food chain? What a sad little article.

  14. 14
    johnnybigspenda says:

    Just wanted to bring to the forefront that there IS an alternative opinion out there… I’ll bet 50% of the readers here only read this blog as their ‘seattle realestate info source’….

  15. 15

    The fall out in the economy is reportedly the number 1 reason why people are seeking counseling in Seattle this past month as reported by goodtherapy.org seattle blog. However, they also reported that due to less cash flow, therapy and counseling in Seattle is down.

  16. 16
    disbelief says:

    Diane, johnnybigspenda’s therapy doesn’t seem to be working though.

  17. 17
    Ray Pepper says:

    From the perspective of 500 Realty in the last 3 weeks we have been slammed. 1 home in crown hill we sold today and it was on the mkt just 1 day. Puyallup home sold with 2 back-ups. Wrote up an offer last night in Tacoma only to have another offer accepted at a higher price. Subject home was 495k we offered 465k. higher offer prevailed. 1 mill home in Maple Valley I have closing next week at 880k. 2 other clients I’m submitting on tomorrow.

    I asked 1 of our in-house Mtg reps how many delas are you currently working on and he said 8. 2 set to close next week. 1 month ago he had 1. WOW!

    Personally I know we are trendline down in housing prices for years to come but people are out there looking and finally pulling the trigger!

    http://www.500Realty.net

  18. 18
    just_checking says:

    There is always a little pent-up demand that gets released every Jan/Feb.
    In a normal year the momentum will carry it into the spring and further.

    The million dollar question is – Will 2008 be a normal year ?

  19. 19
    anon says:

    2008 is headed for a large decline in seattle. I’ve lived in other large coastal cities and just recently come here, and frankly, seattle is just behind the curve. same old pattern, same result. if you look at medium incomes and rental values here, buying prices, especially in the in-city neighborhodds, are way too high to be in sync with the local economy. inward migration can only go so far- with economy troubles and the housing slump, less people will be able to come here from elsewhere. and when they do, what might have been a bargain 2 years ago ($450,000 for an amazing view home) is now a ripoff ($750,000 for a fixer). It doesn’t add up, and it won’t last. I went to a dozen open houses last month and none of them have offers. perhaps some properties are selling, but there is a large segment sitting on the market here while sellers hope for the best and ignore reality. I will not buy here until we see 2005 range prices; i.e., prices remotely in line with rental values.

  20. 20
    joker says:

    many realtors are still preaching buy buy buy, so what? A sucker is born every day. Meanwhile, those of us at the median income level cannot afford a median house and are priced out forever, go figure.

  21. 21
    Joel says:

    What the heavens are they filing for?

    Credit crunch is making it hard to qualify. Potential borrowers have to apply multiple times before they can get approved (assuming they get approved at all). This is way old news, but this is the first time I’ve heard of someone dumb enough to not realize that more mortgage applications is a symptom of the mortgage problem.

    I’ll bet 50% of the readers here only read this blog as their ’seattle realestate info source

    That’s a really good idea for a poll. We actually already had one asking about local blogs where only 25% responded that they only read seattlebubble. If it was expanded to any real estate related news source, I’m sure that would be much lower. Personally I read RCG, blownmortgage, calculatedrisk, patrick.net, market-ticker.denninger.net, ml-implode.com, and urbnlvn on a regular basis.

  22. 22
    John says:

    This is like the dead cat bounce in the stock market. “Bargain” hunters are going to be cut by the falling knife.

  23. 23
    jess/pumpkin says:

    After a year’s worth of hand-wringing, we finally decided we didn’t want to wait anymore and put everything together to buy last month. Guess what? We were out-bid on a house in Magnolia that had been on the market since July, and I’ve since watched as house after house that’s been on forever goes into STI. Now the last two weeks I’ve noticed brand-new listings that fit our requiremnts go STI within a few days before we could even see them in person. House across the street from us (Maple Leaf) went on the market Friday, we saw it Saturday, were not smitten right away and have been “thinking” about it, and it went STI today (we weren’t terribly excited with it, but the anecdote is hard to let go of). Yes, houses are moving quickly now inside the city limits. The new inventory is terrible (and very little), and I’m starting to think that our max $650K limit is going to keep us at the slum level (little Ballard poo-boxes).

  24. 24
    deejayoh says:

    Jess – here are the stats from estately today. it’s kind of fun to watch

    42,783 total properties for sale
    467 properties added today
    29 properties already sold today

    that sound like a hot market? here’s my small sample: I’ve been watching 7 properties for the last 2 months. Only 1 has sold, 2 have been taken off the market. The rest are still sitting there

    small samples can give very different results – but facts are pretty clear that this is the slowest market in a decade.

  25. 25
    bitterowner says:

    jesspump,
    I believe seven SFH’s sold in Magnolia in January.
    Seven….
    One day you may drop by the person who outbid you and leave a thank you note in their mailbox.

  26. 26
    MisterBubble says:

    Yeah, it’s funny…I walked by the used car lot yesterday, and the salesman told me that the funky-smelling, green 2001 Volvo I was looking at was sure to go fast. He told me that I’d better make an offer today, because he had lots of interest in it. Said they weren’t makin’ any more green 2001 Volvos….

    Think he was lying?

  27. 27
    Sniglet says:

    Don’t put too much stock in the Mortgage Banker’s Association index of mortgage applications. It does NOT tell the whole story in what is happening to mortgages.

    For one thing, the index only covers lending at banks, not mortgage brokers. It only makes sense that traditional banking lenders are seeing their share of mortgage issuance increase seeing as how the mortgage broker industry has already been gutted (i.e. most of the issuers mortgage brokers worked with have either went out of business or stopped whole-sale operations).

    Secondly, the MBA index doesn’t tell you what percentage of the mortgage applications are actually approved. It is widely known that many more people are having their applications declined than in the past due to the constantly tightening lending criteria. Some people are actually approved, but find the lender renegging on the last minute just as the property are going into escrow. For all we know 20% of the mortgage applications reported by the MBA might ultimately be denied, where virtually none were a couple years ago.

    Thus, there are perfectly good reasons why the MBA index would be spiking EVEN as the real-estate market crumbles.

  28. 28
    Angie says:

    Gotta love the numbers! It’s fun to watch this all unfold.

    Jess, you sound really frustrated, and it’s gotta be hard. I hate to say it but I think you’re “Exhibit A” in the Seattle Is Special category. $650K is a fricking huge amount of money, and you’re willing to sit and wait and worry about finding something in your budget in those, what, three N. Seattle zipcodes.

    Obviously you’re not alone. I think Ray’s right, that there are a still a LOT of people who’ve been watching the market, biding their time, building up their down payments, ready to make a move when things soften up.

    Jess, if you look a little farther afield and I’ll bet you’d find something spectacular. I just had a look at what’s in my zip code between $600 and $650. Check out MLS 28008673. Mount Baker is a *great* neighborhood, the house and yard are is drop-dead gorgeous, and is that an Aga in the kitchen? Damn.

  29. 29
    magnolia44 says:

    we close in magnolia this month, i was a bubblehead for years but its grandmas home and we did ok… about $90k off of a realtor appraisal last July. Not great and i put the realtor as overinflated anyway. So we waited a long time saved and now jump in. Its scary but hey its magnolia :) were special right…jk.

  30. 30
    David McManus says:

    “We were obligated to sell it,” said Harlan, who’s staying temporarily in her husband’s new house in Marysville while she looks for a new home for herself and her three children. “Were we happy with the price we got? No.”

    http://seattletimes.nwsource.com/html/businesstechnology/2004168797_homesales07.html

    Can I be the first to say “What a greedy …..!”

  31. 31
    Alan says:

    magnolia44, Did you buy a house that your grandmother used to live in? If so, I would say that the sentamental value could possibly compensate for the premium you paid.

  32. 32
    vboring says:

    in the area of economics i read the following every day:

    http://calculatedrisk.blogspot.com/

    http://seekingalpha.com

    http://housingpanic.blogspot.com/

    http://globaleconomicanalysis.blogspot.com/

    http://www.minyanville.com/library/search.htm?search=Article&advanced=1&contrib_id=15

    http://www.cnn.com/WORLD/

    some of it is alarmism or perma-bear talk, but some of it is actually useful.

    this morning, calculatedrisk had a post about off-balance sheet securitization and how it will no longer be an option for lenders. this is kind of a big deal for future loan availability:

    http://calculatedrisk.blogspot.com/2008/02/end-of-off-balance-sheet-securitization.html

  33. 33
    Cougar says:

    jess/pumpkin – I made an fair offer on a condo yesterday that was at the top end of the market, only to have my offer be countered because there was a better offer pending. WTF!! Since I had my bleacher crowd words ringing in my ear here at Seattle Bubble – I walked. It’s not going to stop me from looking and writing a fair offer for something I want, because I know the area I want to live in doesn’t have a high turnover. I keep coming back to this blog for a great point of view outside of my perfect world in my mind!

  34. 34
    deeplennon says:

    From Mr. Cohen’s article:

    “I’ve been hearing it’s better for the buyers now,” said Patti Studley, a Seattle resident who has looked at homes for about a year. “I will buy any line of BS Dick Beeson feeds me.”

  35. 35
    Jess-Pumpkin says:

    Yes, I am frustrated, I’ll admit that (and I think those with whom I’ve tussled on the forum can attest to that). $650 is a LOT of fricking money, I agree, and maybe that’s why I’m so frustrated, too; I still feel like “for $650 we should be able to get views and a big yard and so much space we get lost like in those idiot radio commercials for the builder (I don’t remember which one, but y’all know the ads I’m talking about).” We too have been waiting and watching for over a year, and getting really tired. Yes, I am looking at a small sample, but that’s because we need to be in-city with easy access to Wallingford and UW. The house in Magnolia was fabulous and perfect for us — and we were compromising on it being in Magnolia (I hate Magnolia). Maybe I will leave the new owners a note…

    Angie, I have been flirting with the Mount Baker area. It would be easy for hubby to get to work downtown, but it would make the trip to Wall/UW a real hassle, plus I’m not hip on child going to Franklin or Cleveland if he doesn’t stay parochial for HS (we’re Frank/Clev alums). If the N. Seattle inventory doesn’t improve in the next few months, you may find me in your neighborhood snooping around!

  36. 36
    Jess-Pumpkin says:

    Angie- that is a beautiful house! The problem is that it’s only a 2/1, and what I neglected to tell everyone here is that if we do pay $650, we’re tapped out and won’t be able to do any remodeling or basement finishing (ay! there’s the rub!). If we max out and pay $650, the house needs to be ready to go (3+ bed/1+ bath).

    Just out of curiosity, why do so many homeowners pave over the grass in their yards? I saw another great house near Carkeek Park where they had turned their entire back yard into a poured cement patio! Not good for dogs and kids…

  37. 37
    Sniglet says:

    Jess said: “for $650 we should be able to get views and a big yard and so much space we get lost like in those idiot radio commercials for the builder (I don’t remember which one, but y’all know the ads I’m talking about”

    Fear not. I fully expect that such properties will be going in the $300K range by 2010. The unwinding of the credit bubble is JUST getting started, and the shoes are starting to fall faster and faster. Our market is just a little behind the rest of the country, but we will see the benefits of more affordable housing when Boeing and Microsoft start shedding staff when their sales plumet sometime in 2009 or 2010. We are JUST now starting to see firms report a slow down in business growth (GOOG, CSCO, AMEX, etc). As the recession deepens this slow-down in growth will morph into outright contraction, and then the lay-offs will start flowing fast and furious.

    Also, the criteria for mortgages is going to get FAR tighter over the next two years. All this will add up to much more affordable housing in the Seattle area, don’t you worry. All it takes is patience…

  38. 38

    Jess,
    Hang in there. I’m seeing nice houses that are 650 or less that have yards and 3 bed, 1+ ba..you might have to expand your boundaries a little( I don’t mean Puyallup), more like Interbay, or Greenwood..
    Re: why homeowners pave over their grass/
    It’s tempting, I tell you. Lawn mowing is a pain in the butt, and it keeps growing, fast. What I’ve done a lot of is dig out grass and either put in other plants or an ecoturf type product which is a dwarf grass mixed with wildflowers, and requires much less frequent mowing.

  39. 39
    Sniglet says:

    Ira said: “you might have to expand your boundaries a little( I don’t mean Puyallup), more like Interbay, or Greenwood”

    Sure, maybe you could find a home for $650 today by expanindg one’s range. However, with a spot of patience (till 2010, say) you will get exactly the home you want AND in the location you want for half of today’s price (or more).

  40. 40
    Jess-Pumpkin says:

    Thanks, Ira, we’re looking there, too. The only N. Seattle neighborhood we don’t really want but will stomach is Magnolia, and the only N. Seattle neighborhood we are absolutely against is the heart of Ballard (west of 8th or so). I thought Interbay was all condos & townhouses, though, unless you mean the west slope of QA (saw a house I liked above Interbay, but it’s about $90K over-priced).

  41. 41
    Angie says:

    for $650 we should be able to get views and a big yard and so much space we get lost

    Well, you can, but not within a 10 minute bike ride of the UW campus. And, with all due respect to Mr. Sniglet, I doubt anyone ever will again.

    My husband commutes to the U every day from down here, mostly by bus, and it’s totally doable.

    How about something like MLS 28013938? 3BR/2Ba, 2300 sf, nice sized yard, big deck but lots of grass and garden. It’s maybe 15 minutes to the U right up Lake Washington Boulevard and though the Arb, maybe 20 if things are really congested at 520. And at $590K you can put some money away for private HS, if your kids don’t get into Garfield or something. (I still maintain that the gentrification trend is catching up to the South End schools and they’ll be seeing a lot of positive change in the next several years, mark my word. I see it all over in the elementaries down here and HS will follow.)

  42. 42
    Alan says:

    JP, Maybe this is the sort of place you expect to get for $650k. Texas is a pretty great place to live. They don’t have a state income tax either — although property taxes will run you 2-3% a year.

    http://www.texasmls.com/perl/mls-1.pl?agent=winans&ListingID=10642657

  43. 43
    Sniglet says:

    Maybe I am completely missing something here, but I can’t quite get my head wrapped around the idea of actually looking at buying ANY property right now, not when it is more than likely that average prices will be at least 50% lower in a few years. I suppose that if a person is wealthy enough not to care about their home dropping 50% in value, then it is well and good to go ahead and buy. But I just don’t think most people are in that position.

  44. 44
    deejayoh says:

    I just can’t add together a few “I got outbid” anecdotes and come up with a trend here that suggests a rosy outlook. Look at the facts. Absorption rate was 13% last month. To put that in perspective, it’s the lowest rate seen since 1992. And that’s only because that’s as far back as I have seen data. This market is glacially slow. Check that, given global warming, glaciers might be faster. If you missed out on a house – move on to the next one. There are more houses on the market today than there have been in 20+ years. You can’t complain about the selection.

    While I don’t subscribe to the “50% off” forecasts – I really don’t think there is anything to suggest that the market is seeing any fundamental improvement. You can check the “MAI” over at altosresearch.com – it’s essentially a weekly snapshot of the absorption rate. For Seattle proper, it was sitting at 17% as of Saturday.

    That’s not “doom and gloom”. It just is what it is. Sunny realtor tales about lines out the door at open houses notwithstanding.

  45. 45
    David McManus says:

    Yeah, Alan, a *****-ing mansion!

    That’s a bit of motivation for me to start the job search down there again. I can already hear the smug-PNWers, though.

    Texas, ewwww. They have, like…..sun. And real heat. And the people, like…..are friendly. Not passive agressive. Ewwwww! We’ll stick with Boeing, M$, lakes, ponies, blah blah blah blah

  46. 46
    Sniglet says:

    deejayoh said: “I don’t subscribe to the “50% off” forecasts”

    I guess Eulea and I still have some proselytizing to do, but we won’t give up. Not so long as there are still mis-guided souls that need to be saved…

  47. 47
    deejayoh says:

    Sniglet, I’ll take the back side of a bet that we don’t see 50% off median price in seattle

  48. 48
    b says:

    Jess –

    Why are you so impatient to spend $650k? One year is not very long if you anticipate living whereever you buy for a long time. If you don’t plan on living there for a long time then there is no reason to buy, you will have barely dented the principle on that mortgage after 5 years. Patience is key in life if you want to live comfortably and without worrying about crushing debt all of the time.

  49. 49
    Jess-Pumpkin says:

    My brother lives in Corpus Christi and loves it. That’s quite the house, though (I don’t think we can call it a McMansion since I don’t see a dozen identical houses right on the lot line).

    I can’t explain why those of us on the ground are experiencing something different from what Deejayoh’s numbers indicate. Realtors ™ say that real estate is local, but perhaps we can say that buyer-wannabes are local. I’ve been so frustrated this last year because my reading and chart-studying tells me that prices are going down, but my personal experiences and watching my own neighborhoods of interest indicate otherwise.

    OK, I have to get off the bubble board and get back to work now — unexpected unemployment would make this all moot!

  50. 50
    Jess-Pumpkin says:

    b- I’m not going to rehash it all now how much renting sucks and we’ve been waiting to buy again since we sold our last house Aug 06. We want some permanency, want to finally settle in and be done with the “when we move” talk, we got killed on our 2007 taxes, we miss gardening, so on and so forth. We’re looking to stay put for at least ten years if not longer — hopefully a house to carry us through empty-nestism and to retirement.

    OK, now I really have to get back to work~~~

  51. 51
    Sniglet says:

    deejayoh said: “I’ll take the back side of a bet that we don’t see 50% off median price in seattle”

    I’ll definitely take that bet, if the time frame was till 2012. I feel confident in 40% price drops in 2010, and think it is possible we could see 50% declines by then, but just for safety I’d want to wait to 2012 to be sure to see the 50%.

    Frankly, I feel we could even see declines in the 80% range, but I won’t take bets on that. I think we are just now entering the largest real-estate decline since the great depression.

  52. 52
    BubbleBuyer says:

    I can sympathize with challenges of buying in Seattle even in a flat to declining market. We bought 12 months ago when the market was relatively hot but showed signs of slowing and managed to find close to our dream house in a great neighborhood and ended up paying 6% under asking which was close to our walk away price. You have to kiss a lot of frogs before you find your princess.

    The challenge of trying to find something decent is that Seattle housing inventory is a tale of two markets. There is a subset of quality homes that are properly priced, move in ready (or close to this) and set the price expectations of most sellers. These homes sell rapidly because they are desireable and properly priced. Then there is the rest, for the most part, poorly maintained, poorly located, ugly or renovation requiring homes that are overpriced. These sit on the market for a long time before they eventually sell when the price is dropped low enough.

    If you are looking for the desireable fairly priced home you may be up against other buyers. By the way, we walked away from any situation where we were in a competitive situation and I think this is always a good strategy. The other route is to find the house with good bones in a good location and make an offer on it with the intent of doing the required renovation to make it what you want. I think the latter strategy get’s you the most house for the best price in the long run. Good luck.

  53. 53
    MrRational says:

    Whenver I see talk of “increased inventory” I always have to wonder how much of that inventory is from distressed sellers versus those who are just looking to “cash out” our upgrade to something else. We’ve had record appreciation the past few years and it wouldn’t surprise me one bit if most of this inventory was from people who are still way ahead in terms of equity and won’t be so inclined to drastically lower prices (especially when you consider our relatively low foreclosure and default rates).

  54. 54
    b says:

    Jess –

    If you are that close to retirement then I find it very strange you are so ancy to blow your cash on a new home right after bubble peak. If you sold in Aug 06 then you probably walked away with a shitload of cash, unless you were refi-ed up to your eyeballs. I know that personally I would rather rent for a couple more years (sounds like you need to move to a better rental) and have an extra $200k for my retirement 10 years away. I am much younger so I am not in that situation, but tying up all of your now-free cash into another home seems like a big mistake if you are close to retirement. Your underwater mortgage will not pay for that unexpected illness.

  55. 55
    Jess-Pumpkin says:

    we’re not close to retirement — hub turns 40 this year. I said we hope to be in the house to retirement. That’s a LONG TIME from now (in other words, we are not looking to turn the house quickly).

  56. 56
    disbelief says:

    These folks that are wondering what they can buy with a $650,000 loan, should realize that these home’s cost little more than half that five or six years ago. This translates to an astronomical rate of appreciation when compared to historical trends.
    What was also unique to this period (i.e., the last six years or so) was a complete breakdown in sensible lending standards.
    Even if Seattle is a bit different, the fact remains that this run-up coincided with these unprecedented lending standards, and the run-up in values nationally. That should be enough reason to at least wait a while, to see what happens this year. Especially when you can rent a similar home for about half the cost of owning.Hate to keep re-hashing these basic points, but it seems to be necessary for some of the more recent readers.

  57. 57
    disbelief says:

    home’s = homes

  58. 58
    deejayoh says:

    I’ll definitely take that bet, if the time frame was till 2012. I feel confident in 40% price drops in 2010, and think it is possible we could see 50% declines by then, but just for safety I’d want to wait to 2012 to be sure to see the 50%.

    sure. here are your scenarios
    – 40% off takes us back to July 2002 pricing; to hit that by end of 2010 = 3.5 yrs of 18% declines
    – 50% off takes us back to June 1999; by 2012 = 5.5 yrs of 12% declines
    – 80% off takes us back to April 1986

    happy to take any of those scenarios. I’ll even give you 2:1 odds on the last one!

  59. 59

    Huh. Median SFH for King Co has been exactly $435,000 for the last three month, all in a row. I have data that goes all the way back to Jan 2002, and I don’t see a pattern like that anywhere.

    What are the odds of getting exactly $435,000 three months in a row. Me thinks the stats are being juiced somehow. I know have to look at these #’s with some doubt from here on out.

  60. 60
    patient says:

    Jess, your motivation and inpatience is very close to what my wife’s used to be until she understood that it would only take a 25% decline in prices and an unexpected loss of income or relocation( if we get a recssion this is not far fetched even with our records of +15 years of same employeer employment ) for us to be underwater with the result of vaporizing our downpayment and either seriously dent our other savings or endup in foreclosure with trashed credit rating. This is not the time to make inpatient or irrational decisions of this magnitude.

    Listening to talk from people whose income depends on transacations is part of what caused the bubble, do yourself a favour and make decisions based on verifiable fundamentals as the staggering increase in inventory and decrease in sales.

  61. 61
    deejayoh says:

    oops sorry, 40% off should be 14%/year. copy/paste error. Doesn’t matter.
    You are still predicting worse declines than Miami, Vegas, Phoenix, or anywhere else.

  62. 62
    alex says:

    jess/pumpkin:
    Here’s one theory to explain the unpleasant feeling you see when the house you want gets sold – even thoug all indexes are saying the market is in the toilet:

    1) there’s an upper substract of the market (say, the top 10% houses, as measured by a subjective “desirability” index) which is much hotter than everything else. Let’s call this “Prime Slice”.

    2) There ARE buyers. Lots of people have money and can get credit – it’s just the buyers are all skittish. This huge inventory buildup also means there’s a surplus of “cautious” buyers, all waiting like hawks to prey on anything that comes up on “Prime Slice”.

    So… if you want to benefit from the buyer’s market, you have to stay out of the “Prime Slice”. Sad but true.

  63. 63
    b says:

    deejayoh –

    14% / year declines are not that unrealistic, those markets you cite have already experienced similar or higher declines last year. Seattle is behind the curve, but will be caught up by summer when the spring bounce has turned into the spring tidal wave of inventory and continued slow sales.

    In the BA where I currently live, the California Assoc. of Realtors themselves are predicting 8-10% median declines this year. That is likely highly optimistic since they were calling for 4% a few months ago, and of course “normal” appreciation a few months before that.

  64. 64
    Alan says:

    There were 20 pages of results for houses between $600k and $650k. That wasn’t the nicest one I found, just one of the first that I saw that I liked. I mostly posted it because of the lot size. Keep in mind that the annual property tax on that house is likely in the $20k range. I pay around half of that to rent here (although I don’t have the same level of luxury).

    Many of the houses in that search do look like McMansions.

  65. 65
    Chris says:

    This is off topic, but here is a fun rental/sale double listing. For sale on redfin 84 days:

    http://www.redfin.com/stingray/do/printable-listing?listing-id=1294052

    Posted on craigslist for $1550:

    http://seattle.craigslist.org/see/apa/566132376.html

    Redfin doesn’t list a purchase price, but if you assume they are trying to get out around break even after commission ($315K mortgage), then their mortgage carrying cost is around $1850 for a 6%, 30 year loan. Taxes are around $200/month. With maintenance they probably have carrying costs around $2200 or $650/month over their rental price.

    Of course, if they have a high-interest 2nd, or they have a sub prime adjustable, their carrying costs could be much higher.

  66. 66
    singliac says:

    I don’t mind the realtors “juicing” the numbers for a couple months. Let’s be more compassionate to those poor agents. They just need to buy enough time to look for new jobs.

  67. 67
    singliac says:

    Here’s some new pleasure reading:

    http://money.cnn.com/2008/02/07/news/economy/home_sales/index.htm?section=money_topstories

    I hope no Seattlites think that this will actually affect us! We are isolated from all of this depreciation business. It’s almost as if we’re protected by a large protective bubble of some sort. Yeah, that’s it…the bubble will save us all.

  68. 68
    Sniglet says:

    deejayoh said: “You are still predicting worse declines than Miami, Vegas, Phoenix, or anywhere else”

    Actually, I fully expect these kinds of price declines to occur generally across the US. The credit bubble impacted every region. Even those areas which didn’t see large appreciations (e.g. Denver) are seeing fall-out. Without the bubble those areas likely would have crashed long ago.

  69. 69
    Chris says:

    Incidentally, I agree that 50% off isn’t realistic.

    Take the example I just posted above. Assuming you could get $1550/month rent for it, then you will hit the ‘rent saver’ support level (people who buy because its cheaper than renting) at around a 20-25% price decline, and the ‘investor’ support level (people who buy, rent it out, and see positive cash flow after expenses) at perhaps a 30-35% decline.

    But 50%? I think even a 30% decline will bring a lot of rent saver/investor money out. Not that there will be a big bounce, but the market will find a bottom when the rent-saver/investor see solid fundamentals.

    Other leading cities are well on their way to 20-30%, that, followed by a long-period of near-inflation appreciation, strikes me as realistic.

  70. 70
    John says:

    Jess,

    http://seattle.craigslist.org/search/apa?query=magnolia&minAsk=min&maxAsk=max&bedrooms=3

    You seem to be buying too much into the romanticism of homeownership. You have only been renting for a year and a half. What has already gone wrong?

    Now is not the time to capitulate and plunk down your cash. The credit crisis is not going away overnight and the market is not going to re-inflate tomorrow.

  71. 71

    Buying a house isn’t always a rational decision, or thought of as an investment. Some people just have that “nesting” urge, and can’t seem to do that in a rental.
    I’m not at all saying that this is a good time to buy, in fact I got into a little argument with a fellow real estate agent when she told me me that ” now is a great time to be a buyer”, but it’s better than a year and a half ago when people were waiving inspection clauses and putting in escalator clauses, bidding up the price to make sure they got it. There might be a tiny bit of that still going on in certain areas, and as someone advised here a few minutes ago:
    if you’re in a situation where a house is being competed for, walk away…there will be other nice houses available, and a typical realtor trick is to try to get people to go against each other to bid up the price and make the place seem more desirable. Don’t fall for it. I was representing a buyer about 6 months ago and the listing agent told me that we needed to get the offer in fast because they were reviewing offers in three days. We submitted an offer, it was the only offer, and was rejected outright because the seller ( or their agent) refused to budge on price.
    I noticed that the home remained on the market for another couple of months, and sold for the same amount that we offered.

  72. 72
    b says:

    Chris –

    You are assuming that those people can get mortgages and easily. This will not be the case, which is why declines will be more severe than what you are saying. How many people do you know with $80k in the bank to buy a $400k house? Even in rich Seattle there are not that many. Without 95-100% LTV loan products available, huge amounts of potential buyers are wiped out. That is why this real estate cycle is much different from other ones, it is not just house prices you must consider but also the availability of credit to buy those homes with.

  73. 73
    WestSideBilly says:

    Tim (or DJO), do you know when Case-Shiller comes out?

    I had a “discussion” about housing prices (specific to Bellevue at the time) and the January MLS numbers (SFH holding steady) gave everyone ammo to “prove” me wrong. I have a hard time believing the steady SFH pricing is anything more than a mirage created by a shift towards move-up sales. If that’s the case, Case-Shiller should show it. Otherwise, the astronomical inventory is not having any effect on prices people are paying.

  74. 74
    The Tim says:

    WSB,

    Case-Shiller data is released on the last Tuesday of each month. The data is for the period two months prior (for example, November data was released on the last Tuesday of January).

    Therefore, January data will be released on the last Tuesday of March. And yes, I suspect you are correct in that the “stable” median price is an illusion created by the record low sales.

  75. 75
    magnolia44 says:

    50% is a bit much I am a bubblehead and buying ….i see 10% this year maybe 10% next year then back to normal.

    20% off maybe 25-30% in outlying areas.

    I got in 10 – 15% below peak value and i have plenty of sweat equity to add we will be able to make it through. I am looking at this place as an expense, a nice place to live and call home right outside seattle. Its not a “major investment” although it would be nice.

  76. 76
    deejayoh says:

    14% / year declines are not that unrealistic, those markets you cite have already experienced similar or higher declines last year. Seattle is behind the curve, but will be caught up by summer when the spring bounce has turned into the spring tidal wave of inventory and continued slow sales.

    a) only one market has fallen at a rate greater than 14% – Miami clocks in at -16.5%, but has been falling for less than 1 year. Here are the stats based on C/S:
    Market/ CAGR since Peak/ Yrs since peak
    Miami 16.5% 0.9
    Las Vegas 11.4% 1.3
    Tampa – FL 11.1% 1.3
    Atlanta – GA 10.7% 0.3
    Los Angeles 10.6% 1.2
    Phoenix – AZ 10.5% 1.4
    Detroit – MI 9.4% 1.9
    Charlotte – NC 9.1% 0.3
    San Diego 8.5% 2.0
    Seattle – WA 7.9% 0.3
    Dallas – TX 7.6% 0.4
    Washington 7.5% 1.5
    San Francisco 7.1% 1.5
    Composite 6.7% 1.4
    Composite-20 6.5% 1.3
    Minneapolis – MN 6.3% 1.2
    Cleveland – OH 6.3% 1.3
    Portland – OR 4.6% 0.3
    Denver 4.0% 1.3
    New York 3.9% 1.4
    Boston 3.9% 2.2
    Chicago 3.6% 1.2

    b) your “behind the curve point is a good one”. we have precedents, and there is no market that is “ahead of the curve” that is dropping at the rate sniglet is suggesting – and half the sub-prime resets are behind us.

    So perhaps if Seattle turns out to be the worst of the worst both in terms of intensity and duration of the downturn, we might see 3.5 years of 14% off. Most signs point to us being the best of the worst. It’s bad, but not cataclysmic.

    Don’t get me wrong – I’m a believer, but I stop short of drinking the Kool-Aid.

  77. 77
    b says:

    deejayoh –

    The year has just begun my friend. Look at those declines, then add in the impact of the credit crunch currently under way. Slow roast with several quarters (at least) of recession and what do you get?

    I used to believe similar to what you did about my own market and Seattle as well, that we would probably see 5-10% declines for a couple of years then stagnation. That was until I began reading about the credit crunch and its impact in various financial newspapers and blogs. From what I can discern, its going to be quite an epic implosion and one that only began in earnest a few months ago.

  78. 78
    SunTzu says:

    “From the perspective of 500 Realty in the last 3 weeks we have been slammed. 1 home in crown hill we sold today and it was on the mkt just 1 day. Puyallup home sold with 2 back-ups. Wrote up an offer last night in Tacoma only to have another offer accepted at a higher price. Subject home was 495k we offered 465k. higher offer prevailed. 1 mill home in Maple Valley I have closing next week at 880k. 2 other clients I’m submitting on tomorrow.

    I asked 1 of our in-house Mtg reps how many delas are you currently working on and he said 8. 2 set to close next week. 1 month ago he had 1. WOW!

    Personally I know we are trendline down in housing prices for years to come but people are out there looking and finally pulling the trigger!”

    What a great piece of self-serving advertisement in the same line as those traditional RE agents……..

    Yeah, I was at the U Village last weekend and the place was packed, I couldn’t even find one open parking spot !! What recession are people talking about ??!!

    Like I’ve said before, wait till the recession hits Seattle then we’ll see what happens to RE…….

  79. 79
    rose-colored-coolaid says:

    I’ll definitely take that bet, if the time frame was till 2012. I feel confident in 40% price drops in 2010, and think it is possible we could see 50% declines by then, but just for safety I’d want to wait to 2012 to be sure to see the 50%.

    sure. here are your scenarios
    – 40% off takes us back to July 2002 pricing; to hit that by end of 2010 = 3.5 yrs of 18% declines
    – 50% off takes us back to June 1999; by 2012 = 5.5 yrs of 12% declines
    – 80% off takes us back to April 1986

    happy to take any of those scenarios. I’ll even give you 2:1 odds on the last one!

    Just out of curiosity, do you wish to include inflation in your bets? If you assume 4% inflation a year, a return to 2002 prices is actually only a 25% decline in the USD price.

    Ah, inflation. ROI’s tricky pal.

  80. 80
    deejayoh says:

    Just out of curiosity, do you wish to include inflation in your bets? If you assume 4% inflation a year, a return to 2002 prices is actually only a 25% decline in the USD price.

    um, no. Nominal prices. Inflation is one of the reasons I don’t go around making 50% off predictions…

  81. 81
    Sniglet says:

    There are plenty of examples around the world where there have been massive real-estate price drops without the need of a major war or catastrophe. Many places in Asia suffered a massive downturn in ’98/’99. 50% price drops were not unheard of in Bangok, Hong Kong and Indonesia. In fact, even with the recent real-estate boom there many properties are still worth less than their ’90s peaks. People in Hong Kong who bought at the peak are still stuck uner-water in their appartments.

    Of course, there is always Japan as an excellent case study. Their prices dropped around 80%, and many places are still worth less than 50% of their peak values. There are PLENTY of Japanese people who are still stuck in homes they bought in the late ’80s, uable to move because they still owe a fortune on the mortgage.

    These examples demonstrate that not only can major price decline happen, but they also needn’t be apocalyptic. It’s not as if Japanese or Thai society went into anarchy due to their property busts. Such an event isn’t to be as feared as most people think.

  82. 82
    Scuba Steve says:

    David McManus // Feb 7, 2008 at 9:38 am
    Texas, ewwww. They have, like…..sun. And real heat. And the people, like…..are friendly. Not passive agressive. Ewwwww! We’ll stick with Boeing, M$, lakes, ponies, blah blah blah blah

    I know you were joking around, but the heat and humidity can be brutal sometimes. I’m sourcing a new dash for my car to replace the one the sun destroyed. Wish I had a pic to post. The sun is hard on plastic headlights that every car comes with these days too.

  83. 83
    deejayoh says:

    Thailand is a mess. They had a coup in 2006, are still in the grips of a junta, and are fighting an serious Muslim insurgency in their southern provinces. not exactly what I call stable
    Hong Kong is one of the most expensive places in the world for real estate.
    and it was land prices that dropped 80% in Japan . Not housing prices.

  84. 84
    WestSideBilly says:

    The year has just begun my friend. Look at those declines, then add in the impact of the credit crunch currently under way. Slow roast with several quarters (at least) of recession and what do you get?

    You also have to consider the extremely low interest rates and the possibility that the Fed will keep dropping them as the lesser of two evils. If 30 year fixed rates get down to 3.5-4% a lot of people might jump at the chance to lock that rate – even if they are overpaying for the property. Not saying that’s sound finances, but short term memory is of 10% pricing increases throughout the ’00s, not the stagnant prices of the 80s or other past local recessions. “Get on the equity train!”

  85. 85
    Sniglet says:

    Ok, I stand corrected. Japanese residential home prices only dropped 64% from peak.

    http://www.iht.com/articles/2005/12/25/business/bubble.php

    By the way, there was no coup in Thailand back in 1998. Moreover, the muslim insurgency was not that big of issue until recently.

  86. 86
    nitsuj says:

    http://money.cnn.com/2008/02/07/news/economy/homeowners_views/index.htm?postversion=2008020716

    “”This survey reveals that despite the data to the contrary, people either aren’t paying attention to their housing market or are in denial about their own home’s value,”

  87. 87
    Lake Hills Renter says:

    Anyone who thinks Texas doesn’t have passive-aggressive people has never lived there. ;)

  88. 88
    Garth says:

    How on earth are we going to be the worst victims of the housing bubble here with the lowest rate of homeowners 30 days or more past due in the country, substantially less appreciation than other bubble markets, and a lack of large new developments?

    If you define a popped bubble as a 10-20% decline, we are not even close to there yet. There were no CDO’s in the japan bubble, and the stock market was a bigger factor as well, as I have said before, Japan is not a good comparison.

  89. 89
    John says:

    Be patient. We may or may not be Japan. But how about Hong Kong? They started dropping in 1997 and they are now back to those prices. 10 long years. Their RE is in another bubble currently because of the rush of all the mainland Chinese money. So unless foreigners are coming to Seattle in droves like they do in NYC, this pig won’t stay up for much longer.

  90. 90
    deejayoh says:

    This is turining into a pointless argument. what’s your bet? happy to take your money

  91. 91
    Sniglet says:

    Ok. I’ll bet $100 on a 50% decline in nominal Seattle median house prices in 2012. :)

  92. 92
    deejayoh says:

    Sniglet // Feb 7, 2008 at 4:06 pm

    Ok. I’ll bet $100 on a 50% decline in nominal Seattle median house prices in 2012. :)

    Done. From today’s $430k to $215k median SFH by end of 2012.
    That doubles my total investment in the housing market ;-)

  93. 93
    deejayoh says:

    oops sorry – from $425k to $212.5k. I am mathematically challenged today. I grabbed the 2006 price.

  94. 94
    biliruben says:

    Is that a hundy in 2007 dollars or 2012? ;)

    Garth –

    people don’t stop paying their mortgage if they can still refi, which they can still do here. Defaults and Foreclosures follow price declines, they don’t precipitate them.

    It isn’t true that we have had substantially less appreciation than other bubble markets. We are just below 3 times the median of 10 years ago, and the bubbliest markets are just above 3 times the median of 10 years ago.

    We too shall fall, 20% bare minimum, not adjusted for inflation. Much more likely 30-40%, and condos and townhomes 50%+.

    Even a piddly 20% will send foreclosures sky-rocketing, and extend the slide back to affordability.

  95. 95
    Sniglet says:

    deejayoh,

    If the median prices fall as much as I’m predicting would you increase your investment in housing even more (as in buying an actual abode)?

  96. 96
    deejayoh says:

    oh, yeah – I will be buying at some point. My extreme scenario is we knock off 30-40% overvaluation in Seattle, so 1/1.35 = 75% of today’s price. Depending on what happens to income growth and interest rates, I figure 15-20% is more a realistic range for a downturn

    Of course if I lose, I have to pay you back in depression dollars – which will be worth a bunch more. I don’t see any way home prices fall 50% without widespread deflation.

    Who knows what that $100 will buy!

  97. 97
    deejayoh says:

    oh – and FWIW the other $100 I have invested in the housing market is a bet with a guy that home prices will be lower in Sept 2008 than they were in Mar 2007. I guess I effectively have a straddle between 0 and 50%

  98. 98
    b says:

    WestSideBilly,

    You are assuming someone wants to lend to people at 3.5-4.0% down the road, with the credit situation unfolding I would not be so sure about that.

  99. 99
    Angie says:

    I just came across an article by Liz Pulliam Weston about the changing standards for mortgage lending these days. She’s a great personal finance writer and I encourage you to check it out.

    By way of advanced warning, the article is entitled “A homebuyer’s market? Hardly”, but she also cites Seattle first among cities that have had “resilient” housing markets. Hopefully no one’s delicate sensibilities will be offended.

  100. 100
    bitterowner says:

    Whether or not Liz Pullman Weston is a ” great” personal finance writer is debatable. In any case, much of her argument is that it is suddenly tougher to get a loan to buy houses. The obvious implication is that it will be more difficult for many to qualify for a loan, even if housing prices plummet. If you look at the reasons why this is the case, the situation does not bode well for the housing market. The scenario she describes certainly wouldn’t help support high housing prices, and might even serve to accentuate a decline in housing prices (through even greater loss of demand). I find it hard to imagine how anyone would celebrate this as a sign of sustained housing appreciation. Also, re: the resiliency of Seattle’s housing market – seems like a perspective from the rearview mirror rather than looking ahead.

  101. 101
    JimN says:

    Bilirubin

    I agree, prices are the key. If they continue flat or decline, defaults will accelerate. Subprime (and of course fraud) are the sentinels. People quickly realize even if interest rates fall, servicing debt on deflating capital makes for a good way to lose even more money. Isn’t negative leverage a biatch! There’s a lot of press lately about “walking away.”

    Paulson and co realize this. Things like freezing rates, increasing conforming limits etc are being utilized to slow the process to avoid severe econonic shockwaves all at once.

  102. 102
    Garth says:

    Bill,

    I don’t much like the median, as I have yet to see it act in a predictable way except when prices are climbing the fastest.

    Using the case shiller index, seattle has been way below the bubbliest markets.

    Looking at zillow for my house, my parents MI house and some friends around Seattle I am seeing more like a little under 50% over 10 years, definately not 3x.

  103. 103
    Garth says:

    not 50%, doubled over 10 years (100%)

  104. 104
    biliruben says:

    Case Shiller?

    SD is at 2.91 SF is 2.84 what they were in 1997, and we are 2.50 times. Sure, they went higher. I submit not qualitatively higher, however. I don’t see anything that would spare us their fate, though perhaps not quite as extreme a fate.

  105. 105
    Garth says:

    The lack of decent transportation and large developments in Seattle proper seems to be having quite an impact in comparison to every other large market in the country.

    I just don’t see a coming glut of good inventory (the inventory I am seeing linger in seattle has problems that prevent conventional loans, as-is, estate) like you are seeing in Phoenix, Miami, Las Vegas, Nor Cal etc. Nobody built anywhere close to the amount of these types of houses here as they did in other parts of the country. It is pretty clear now that the highest density of suicide loans and substantially overvalued housing that creates foreclosures has been in large developments.

    Paul Allen recently answered some of the South Lake union questions by renting 11 buildings to Amazon as well.

    http://seattlepi.nwsource.com/business/346949_blume11.html

  106. 106
    biliruben says:

    I think I’m missing your point here. I don’t think there were too many large housing-tracts in SF or SD-proper either. I don’t think we are going to suffer the fate of Vegas or Phoenix, with a vast-wasteland of developments consumed with the returning desert. I merely think we in Seattle are not immune from the effects that are being felt in every country in this nation, and those effects are going to be dire and painful.

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