NWMLS: Double-Digit Price Drops Arrive in King County

NWMLS statistics for August have finally been released.

The NWMLS press release will be posted at this link when it goes up.

Here is your summary along with the usual graphs and other updates.

Here’s your King County SFH summary:

August 2008
Active Listings: up 16% YOY
Pending Sales: down 16% YOY
Median Closed Price*: $423,950 – down 11.2% YOY

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.

Here’s the graph of inventory with each year overlaid on the same chart.

King County SFH Inventory
Click to enlarge

It looks like we may have finally found the plateau for King County SFH inventory right around the 12,000 mark. I suspect we’ll stay above 2007 levels for a few months more, but may fall down close to last year’s inventory in the winter.

King County SFH Pending Sales
Click to enlarge

Six of the eight years from 2000 through 2007 saw an increase in sales from July to August. This year sales fell five percent month to month.

Here’s the supply/demand YOY graph.

King County Supply vs Demand % Change YOY
Click to enlarge

Still moderating, but continuing the trend of more homes, less buyers.

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

King County Supply vs Demand
Click to enlarge

Months of supply climbed again, up to 6.8 in August, marking one full year of “buyer’s market” levels above 6.0. It looks like sales have begun their yearly descent into the slow season.

Here’s the SFH Median YOY change graph.

King County SFH YOY Price Change
Click to enlarge

Wow that’s a steep dropoff there at the end. Even I am surprised to see it continue falling this quickly. Note that we are now officially in double-digit negative YOY territory. I had to adjust the vertical axis again to accomodate the large drop.

Here’s a bonus graph, that compares King County SFH prices each month for every year back to 1994.

King County SFH Prices
Click to enlarge

Note that August’s median was below 2006 prices.

News blurbs will be posted here as they appear, with the full reporting roundup to follow tomorrow.

Seattle Times: Local home sales fall in August
Seattle P-I: King house value down 11 percent from 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.

89 comments:

  1. 1
    victorchai says:

    No……… We are special………….!!!!
    I refused to believe…..

  2. 2
    Eleua says:

    Resisting the overwhelming urge to gloat…
    Resisting the overwhelming urge to gloat…
    Resisting the overwhelming urge to gloat…
    Resisting the overwhelming urge to gloat…
    Resisting the overwhelming urge to gloat…
    Resisting the overwhelming urge to gloat…
    Resisting the overwhelming urge to gloat…

  3. 3
    patient says:

    So, if we were a super-star last year aren’t we a super-looser now?

  4. 4
    waitingforseattletocool says:

    I don’t understand how 6 months of supply indicates a stable market?

    That would mean a 12% drop in inventory (with same pending sales) or 12% increase in pending sales (with same inventory) results in stable pricing.

    I doubt it … seriously doubt it.

  5. 5
    singliac says:

    I just shed a tear of joy. I moved here last August, and seriously considered buying. Thanks for saving me $40k (so far).

  6. 6
    TheHulk says:

    “Steep drop off at the end”. Why are you surprised Tim? At this time next year I wouldn’t be too surprised to see us 25% down from peak prices.

    I saw Charlie rose yesterday and boy oh boy it wasn’t pretty. Everyone at the table *knows* we are in a recession in the developed countries (aka us, europe and japan). And they were all praying that the developing countries (aka china, india, brazil etc) would have enough demand to sustain any kind of growth. I sincerely doubt that considering all the emphasis on exports those countries have. They have no domestic demand that is comparable to what the western countries are willing to pay for similar products.

    We are on the doorstep of a prolonged global recession for at least 2-3 years. Its not going to be pretty at all. I can only pray it doesn’t start a vicious cycle that ends in a global depression.

  7. 7
    david losh says:

    We’re already seeing the same low interest rate, time to buy, mentality that has pushed the Real Estate market place for the past ten years. Eleven per cent from the very peak is really not what I expected. I expected more.

  8. 8
    deejayoh says:

    Well, just wait until Elizabeth Rhodes gets to put her sunny spin on this one. it will look much better then!

  9. 9
    david losh says:

    You know Ray, I was thinking that maybe you could put the listing numbers of some GEMS up in a comment to see what a GEM looks like from your perspective. Of course it would be best if they were Seattle GEMS.
    There really should be a ton of them now.

  10. 10
    vboring says:

    Look at you naysayers, ignoring the good points in the data:

    1) the YOY change in pending sales is up compared to last month

    2) the YOY change in listings is down compared to last month

    3) inventory is down vs last month

    4) interest rates are approaching historic lows

    Sales this summer were only slow because on nice days people were enjoying Seattle’s natural beauty and on rainy days they were home counting their money from their high-paying tech jobs. Prices are poised to rocket to infinity and anyone still sitting on the sidelines will regret becoming priced out of Seattle forever.

    */ sarcasm

    seriously, though, any thoughts on what the positive spin will be?

  11. 11
    alex says:

    Since we don’t have RAL anymore, I’d like to make one of his points for him, which I find pertinent:

    “Yeah, yeah, go ahead and smile, you dirty renters…” (man, it’s hard to impersonate in written form!)

    “but just wait until the newly-unemployed mortgage-rep, plus his builder brother, and his realtor cousin all line up to compete for YOUR high-tech job”

  12. 12
    Ubersalad, Ph.D says:

    I am on my way out to QFC for a large trout to slap some RE agents around.

  13. 13
    NoMoreWork says:

    At least we still have a wonderfully secure and prosperous organization like WaMu in the greater Seattle area to help steady this housing mess. Whoo Hoo!

  14. 14
    mukoh says:

    Nothing significant one way or another.

  15. 15
    singliac says:

    how is this insignificant, Mucoh? More importantly, how can we get you riled up enough to say funny stuff like RAL?

  16. 16
    The Tim says:

    By violating the comment policy, which will get your comment deleted.

  17. 17
    vboring says:

    to be fair, renters are losers in this situation.

    renters never made mad money on the way up (via ill-advised and often illegal RE gambling. yes, mortgage fraud is still illegal, even if it is entirely ignored nowadays), but we get to foot the bill on the way down (via tax bailouts that are estimated to cost at least $2500 per household, higher inflation, economy-wide contraction, etc).

    sure, maybe renters saved money instead of throwing it away on a mortgage on a declining asset, but what is that money worth today? if you put it in the stock market anytime in the last five years, it is probably worth less than when you put it in. if you put it in safe investments (treasuries, CDs, money market), it is guaranteed to be worth less because rates of return haven’t matched price inflation, and possibly nearly worthless if your money market was invested MBS and evaporated in the last year.

    so, yeah, many smart, moral renters are financial losers, while many immoral, uneducated buyers, flippers, brokers, and Realtors are financial winners through this whole deal of selling overpriced assets to people who couldn’t afford them.

  18. 18
    John says:

    At this point, it is more interesting to see Lehman Brothers and Washington Mutual beat each other to the bankruptcy line. AIG and Citigroup aren’t looking good either. We may be in a full crash mode soon. I wonder why foreign countries stil let America borrow money at such low rates.

  19. 19
    hdizzle says:

    Wow, entering the fall decline pretty early on. I can’t see any recovery happening until spring at the earliest. I kind of had thought August might stabilize things a bit and enter into a long slow decline, but it seems to be picking up pace.

  20. 20
    ActualHomeOwner says:

    Does anyone on this board actually own a home? I realize that the masses love to wallow in doom and gloom, but why such ecstasy over the bubble bursting? No doubt it was a bubble of historic proportions that was fueled by greed, irrational exuberance and negligence, but in the end all home owners lose. I guess we enjoy being right, even at our own peril. I guess it would be more interesting to hear some thoughts from those who are actually selling or affected otherwise. Agents, what are you telling your sellers?

    I did like the guy who offered a prediction of 80% price declines. Did he stop and think what the impact to the US and global economy would be if we even get to 50%?

    What’s the advice for an average person who let’s say was relocating due to work. This person considers themselves to be reasonable and rational when considering financial matters. So you have a house that you purchased in 2000 for $360, you never really believed it was worth $640 8 years later. You listed in the upper $500’s early in the year at your agents recommendation. Your now listing at $490 with some hope of selling around $470-$460. Given historical average appreciation rate adjusted for local income growth over the last couple of decades (I still believe in regional home prices), what’s the likely end game? I just thought with so many people that have predicted every number, trend, metric and news release that the opinions sought would be money (very little now) in the bank.

    Please excuse any sarcasms that were over the top.

  21. 21
    Ray Pepper says:

    Ahh Yes David…The Seattle GEMS!. I have been far too busy to look for Seattle Gems! I know the South End and the collapse of Gig Harbor better then most. I have a list that I track and the carnage continues. But, I agree this is nothing yet. As for my personal investing I continue to focus on the 50-60% off prices in Reno,Sacramento, and Carson. I also love Salem and Albany Oregon. The builders are buried. I need to focus on 500 but these deals keep dropping in my lap and I suspect it will continue for many years.

    Just like the “nasdaq” was talk hit of 2000 “foreclosure” seems to be what I hear at every event. I went to the Puyallup Fair last night to look at the booth we rejected for 7000. The fair seemed empty even on 1.00 rides day. Lastly, get this. The Black Crowes went on stage at 730pm. I looked in the Grandstand and saw maybe 400 people. They were letting everyone in free because only 180 tickets sold. Now, I’m not a big fan but for FREE Im all in!

    Whats my point?????Oh Yes…Prices are coming down down down…Its relatively simple…..Keep living in it for a decade. Sell and take your lumps..Rent with a Lease option..Or just give it back. Non recourse state !!. This will prove to add to the foreclosure rate!

  22. 22
    Joel says:

    so, yeah, many smart, moral renters are financial losers

    That assumes all renters decided back in 2004 (rougly) or earlier to rent. I wasn’t in the market then (still in school). The decision to rent vs. buy for me was in fall of 2006. If bought then and then managed to sell at the absolute peak of the market, I still would’ve been a much bigger loser than someone who rented.

  23. 23
    mukoh says:

    Actual Home Owner:
    Don’t mention 80% around here Sniglet and the like will start bringing up Japan/Djibuti/Zimbabwe and more with nothing but strong facts.

    RAL is still around?

    I just do not see any significant change in the data whatsoever either way.

  24. 24
    The Tim says:

    ActualHomeOwner @ 20:

    Does anyone on this board actually own a home?

    According to one of our polls with the highest level of participation, roughly a third of Seattle Bubble readers “own” or own a home.

    I realize that the masses love to wallow in doom and gloom, but why such ecstasy over the bubble bursting?

    Because maybe falling prices ain’t the “doom and gloom” you think they are.

  25. 25
    patient says:

    mukoh, I think the 10s of thousands of people with resetting ARMs this fall will experience the significance of lenders poundering a yearly depreciation rate of more than 10%. The double digit threshold catches attention. My guess is that -10% already has put many of them underwater ( makes re-financing really hard ) or will put them underwater after another 10% down ( prompts for fat downpayments ). Oh yeah, it’s significant.

  26. 26
    mukoh says:

    patient,
    Are you aware of the programs that the banks currently have put in place to control resetting arms and doing loan mods? The 4 largest private lenders non MAE/MAC have loan mods that will keep the payment the same.

    And Lenders do not pound depreciation knowing the situation.

    Have you seen the interest rates fall about .75% in 1 day?

    If an ARM is resetting at Prime +1 and the current loan is at 5.8% then what will the payment go to?

  27. 27
    Ubersalad, Ph.D says:

    since when is ARM base on Prime, you sure know a whole lot about mortgage.

  28. 28
    mukoh says:

    Ubersalad, HUH?
    ARMS are fixed to either Libor/MTA/Prime indexes with few others sometimes. The language usually states which index how many points index+ and how often the payment fluctuates.

    If someone is fixed to any of those indexes right now any readjustment or reset unless it is Index +3 is not a big difference in payments.

    Few associates in the investment field are fixed to Libor and not Prime and loving it, having a NO mortgage post reset at 5.70% at the moment on their rentals. That is 12 months post their reset.

    Regards

  29. 29
    jon says:

    According to the spreadsheet, Seattle SFH went from $464,800 in July to $428,500 in August. That is a huge jump down for one month. This data seems very odd, considering housingtracker.net has shown no change in listing prices over that time.

    I think it is quite likely they are still having a problem over at the NWMLS and this data will get revised.

  30. 30
    MarkM says:

    I’m one of those darned fencesitter renters. I’ve got a decent salary, great FICO and actually have money for a down payment (though granted not the full 20% at the current prices).

    If it makes some folks on this board feel better to label me loser (cause we know all renters secretly are, right?) I have no problem with that. I fall asleep fast at night when my head hits the pillow and I don’t stress how I’m going to make that mortgage payment (when my ARM resets) or pay back that HELOC loan that I took out when times were good.

    Needless to say that’s a bit of an exaggeration. Obviously a number of homeowners are responsible, pay their mortgages on time, didn’t hear the siren song of HELOC and are doing great.

    But I will say that I’ve had some friends/co-workers lobby me for like the last 2 years very heavily that I should’ve already bought… blah blah blah… and it’s a great time to buy.. and I’ll build up equity….

    I have to say I’m glad I didn’t listen to their advice because I really do feel that home prices will fall further and I do plan to make a purchase but I want it to be on a modest home that’s not going to break me. I still want to be able to go out to a movie and dinner on occasion.

    As far as wallowing in doom and gloom, it’s more disturbing than anything. If someone were to tell you just 2 years ago the following:

    — IndyMac will be taken over by U.S. Gov
    — Fannie Mae & Freddie Mac will be taken over by U.S. Gov
    — Bear Stearns will be acquired on fire sale
    — States will come close to running out of unemployment insurance funds
    — Gas will average $4/gallon
    — Wamu will most likely be taken over
    — Lehman brothers will go under

    Do you think you would have believed it then?

  31. 31
    Ken Mott says:

    Thank God!! Finally some double digit negative growth. Maybe people will believe me now that house prices are going down.

  32. 32
    EconE says:

    As far as wallowing in doom and gloom, it’s more disturbing than anything. If someone were to tell you just 2 years ago the following:

    — IndyMac will be taken over by U.S. Gov
    — Fannie Mae & Freddie Mac will be taken over by U.S. Gov
    — Bear Stearns will be acquired on fire sale
    — States will come close to running out of unemployment insurance funds
    — Gas will average $4/gallon
    — Wamu will most likely be taken over
    — Lehman brothers will go under

    Do you think you would have believed it then?

    Yes. But I was reading housingPANIC more than 2 years ago.

    Most people don’t like to listen to “doom and gloomers”. They write us off as just being “negative” people. Like someone I know who I told not to buy NUE on the 27th of June.

  33. 33
    patient says:

    mukoh, I think you are wrong and I think that lenders do factor in depreciation rate when loans are being made, re-financing and new loans both. Also remember that many ARMs reset from an I/O payment to interest + paying off the principal. And some had teaser rates etc,etc. Spin it the way you like but it’s still significant.

  34. 34
    david losh says:

    After asking Ray for Seattle GEMS I went into the NWMLS to see what I could find. One thing that caught my eye is there are a number of properties selling for over a million dollars. 98 properties sold for over $800K in my Seattle area from the Central Area north to 145th. 421 sold for between $400K and $800K while 218 sold below $400K.
    Of course the average sales price, or median price, won’t move down very quickly without more low end sales. There is a lot of equity to skim from higher end properties. Appreciation of higher priced homes was greater. Higher priced homes retained value for those people who could afford to wait.
    Now what I was looking for is the number of low priced homes, below say $300K. There are some when a year ago there were almost none. Below $400K there is a selection, where a year ago it was all crap. My point would be that statistics aren’t all that when it comes to shopping. If higher end homes continue to trade the data, numbers, will continue to show more activity at higher prices.

  35. 35
    b says:

    ActualHomeOwner –

    The only home owners who “lose” in this situation are those who bought or hugely refinanced during the bubble years, or wanted to cash out at the top and rent forever. For everyone else it should be a wash or let them come out better, although their home is worth less so is the one the would be selling to buy.

  36. 36
    Mike2 says:

    ActualHomeOwner What’s the advice for an average person who let’s say was relocating due to work.

    If you want to relocate, and you can afford to relocate, do it. If you can’t afford it, or don’t want to move, don’t. What’s so difficult about that?

    I relocated from Seattle to DC last year, I wanted to do it, and I could afford it. Every other important factor in the decision was personal. Nobody can give you advice on your personal life, that’s up to you to figure out.

    Housing is an affordability issue. Do the math.

  37. 37
    Mike2 says:

    david losh>/b>

    There is a lot of equity to skim from higher end properties. Appreciation of higher priced homes was greater.

    Tell that to Ardell over at Raincity.

  38. 38

    “— Fannie Mae & Freddie Mac will be taken over by U.S. Gov”

    Yes, I thought this would happen when they raised the conforming loan limit and threw all the jumbos at F&F, but I was thinking maybe 2011, 2012…..not NOW.

    I would like to go on record as being extremely concerned for the future of the FHA Mortgage Insurance Program.

    We’re throwing subprime defaulters into new FHA refis and encouraging people to purchase at 3.5% down, in a declining market. This is a bad move from my perspective but perhaps it has all been planned…..slowly help the banks unload all the toxic loans over many years to come.

    I just hope that day FHA is in trouble is way off in the future. Perhaps I’m being too optimistic again.

    BTW, I was interviewed by a reporter today. She asked me what’s special and different about Seattle. I told her that every city I visit, everyone thinks their city is different and special and that there’s nothing special about Seattle. We will continue to see price declines for quite a while due to rising foreclosures and rising inventory.

  39. 39
    cheapseats says:

    Jillayne,

    I will be interested to see if your comments make the reporters piece.

  40. 40

    I think with the Fannie and Freddie takeovers and lower interest rates we may see a couple of months that are considered good, and real estate experts will proclaim that we’ve hit bottom and we’re on the upswing. That likely won’t actually be the case and we’ll continue to decline after those couple of months.

  41. 41
    Eleua says:

    @ActualHomeOwner #20

    I did like the guy who offered a prediction of 80% price declines. Did he stop and think what the impact to the US and global economy would be if we even get to 50%?

    That would be me, and yes, I have given a significant portion of my time over the past several years to that very topic.

    It’s worse than you think.

    In one week, the US.gov is being forced to deal with the destruction of FannieMae, FreddieMac, Washington Mutual, and Lehman Bros.

    Throw the FDIC at that, and you have a real mess.

  42. 42
    jonness says:

    Tim:

    I tried to register so I could post and article, but I never got an email back. What should I do?

    Thanks!

  43. 43
    david losh says:

    Nothing personal, it’s just business.
    Mortgages have run the course. Mortgage money has over inflated the Real Estate market place. It’s funny that there are predictions that lower interest rates will spur a buying frenzy.
    People over paid for property based on mortgage money? How does that happen? Does 5% money make a $300K house worth $400K?
    Then what about the economic factor of jobs? Do lower rates create higher wages or liquidity? It is the liquidity that we are all missing right now, isn’t it?
    The flow of money just stopped. The price of housing just stopped, then receded.
    Mortgage money, what does that mean? Mortgages, what do we need them for? Why do we need banks to lend us the money to buy a house? Isn’t that really kind of stupid?
    You’re all excited because banks, lenders, mortgages, are over extended. There is concern that the government needs to step in and pay the losses. It amounts to absolutely nothing in the scheme of Real Estate. The goal of Real Estate is that it be free and clear. That’s how you win the game.
    So the mortgage thing is amusing, nothing more.

  44. 44
    jonness says:

    We are just getting started in price declines. Seattle is already ranked as having “moderately high” foreclosure pressure compared to the rest of the nation. Judging from the latest data, I suspect the real foreclosure pressure will now begin. After that, the ensuing downward feeding cycle will take off (actually it’s already begun, but it will pick up momentum). It won’t stop until unemployment peaks and starts climbing down the other side. That’s going to take awhile.

    6% interest sounds good, unless you lose $40k per year for the next several years in a row. Think it won’t happen? Then talk to the unfortunate people who bought a year ago. And if you need more convincing, take a trip down to CA.

    BTW, Seattle’s recent huge drop mirrors the way CA held up for the first 3 quarters after the peak and then tanked.

    In late 2005, the primary driver of foreclosures was fraud and collateral risk. Now the primary driver is the decline in home prices.

  45. 45

    Eleua says, “In one week, the US.gov is being forced to deal with the destruction of FannieMae, FreddieMac, Washington Mutual, and Lehman Bros. Throw the FDIC at that, and you have a real mess.”

    Dont forget about the FHLBs.

    Also, did you see Nouriel Roubini tonight? He’s spewing fire:

    http://www.rgemonitor.com/roubini-monitor/253529/comrades-bush-paulson-and-bernanke-welcome-you-to-the-ussra-united-socialist-state-republic-of-america/

  46. 46
    economist says:

    No doubt it was a bubble of historic proportions that was fueled by greed, irrational exuberance and negligence, but in the end all home owners lose

    No they don’t lose, because they never gained in the first place.

    So the market price of everyone’s house went from (say) 300K to 600K. That wasn’t real wealth, because homeowners in aggregate couldn’t spend it. The only way an owner could get the money was by selling the house, but everyone couldn’t sell their houses at the same time, because then there wouldn’t be anyone to sell them to. An individual could sell their house only to a new owner (a greater fool), and that seller’s gain was the buyer’s loss. Collectively home owners were never ahead.

    Compare this to a rise in oil prices from $50 to $100. That’s a real increase in wealth for oil producers, because they sell the oil to other countries and can buy more of other things for the same amount of oil. They don’t sell the oil to each other.

    What the housing stock of the country is actually worth collectively to its owners is the fundamental value, which is what an asset is worth to the owner if never sold. Which is the present value of what the house would rent for in the future. Which never changed at all.

  47. 47

    Hi cheapseats,

    You never know what the editors will choose. We talked for about 20-30 minutes. She was doing a big piece for canadian television and will be in town interviewing other folks; says it will air next month.

  48. 48
    Eleua says:

    Jillayne,

    It’s tough to argue with one jot of that Roubini article.

    We might not last long enough to imperil the FHA. IF WaMu can’t find its footing or a suitor, then the FDIC will kill us all, as they are not big enough to take on WM. They don’t have the money nor the manpower.

    Did I ever mention that I think this really blows? (can’t use the inverse on SB)

  49. 49
    Angie says:

    Jillayne, thanks for the link to that article. Fire-breathing is an understatement.

    I’ve been skimming the presidential politics free-for-all thread on the forums (hey, I’m on vacation, I’ve got some time on my hands) and I’d *love* to see what a few of the participants there think of this article.

    Some choice quotes:

    “The now inevitable nationalization of Fannie and Freddie is the most radical regime change in global economic and financial affairs in decades. For the last twenty years after the collapse of the USSR, the fall of the Iron Curtain and the economic reforms in China and other emerging market economies the world economy has moved away from state ownership of the economy and towards privatization of previously stated owned enterprises. This trends was aggressively supported the United States that preached right and left the benefits of free markets and free private enterprise…

    Socialism is indeed alive and well in America; but this is socialism for the rich, the well connected and Wall Street. A socialism where profits are privatized and losses are socialized with the US tax-payer being charged the bill of $300 billion…

    This biggest bailout and nationalization in human history comes from the most fanatically and ideologically zealot free-market laissez-faire administration in US history. These are the folks who for years spewed the rhetoric of free markets and cutting down government intervention in economic affairs…

    This is the biggest and most socialist government intervention in economic affairs since the formation of the Soviet Union and Communist China….”

    Whoa! Them’s fightin’ words!

    Personally, I always did Bush had an air of “The Manchurian Candidate” about him.

  50. 50
    Eleua says:

    Angie,

    Find one Democrat that voted against this.

  51. 51

    Whether you agree with him or not ( and I do), Roubini is just a great, clear writer.

  52. 52
    50%off says:

    Actual Home Owner,

    You seem to think that guys like Eleua, Sniglet and myself want home prices to fall 80%! So we’re not thinking about what has to happen to get there. The issue is that we believe things are already so bad and in motion that the 80% discount will come. We may or may not be in a position to capitalize at that point but for certain, we’re not “wishing” for the bad to happen. There is a difference.

    And you’re quite right, it has to be pretty bad to have that happen. Sadly, many here believe it will be bad and even worse than we can imagine.

  53. 53
    Sniglet says:

    I did like the guy who offered a prediction of 80% price declines. Did he stop and think what the impact to the US and global economy would be if we even get to 50%?

    Look no further than Japan and Hong Kong. There are people living there today who have been stuck in the same homes for over a decade because they are STILL under-water from when the bought them, making it impossible for the owner to sell and move. The Wall Street Journal had an article last year about a guy who bought a Tokyo suburb home in 1994, after prices had dropped 40%, only to see them drop another 40% in the coming years, and he is STILL under-water.

    There wasn’t a collapse in Japanese society. This chap still lives his life, goes to work, and pays his mortgage. There are similar stories of people in Hong Kong who’s homes are still worth substantially less than they paid more than a decade ago. There again, the Hong Kong economy hasn’t collapsed, and life still goes on.

    I don’t see why we can’t see a major decline in housing prices WITHOUT also having some break of the space-time continuum. Sure, life will be tougher for many people if we see a major price decline, but it will also mean life will be saner for many of us too (i.e. without everyone chasing the insane idea of quick wealth through get-rich-quick schemes).

  54. 54
    Angie says:

    Sorry, Eleua, the Republicans get the honor of being the deregulators, the pro-business party, the foxes that guard the henhouse. Six of the last eight years they’ve had the White House and the Congress and this is what happens when the consequences all play out. Be careful what you ask for, you just might get it.

  55. 55
    Sniglet says:

    the Republicans get the honor of being the deregulators

    Those republicans who have been occupying the seats of power have little, if any, resemblance to free-market proponents. Sure, they have weakened a few regulations here and there, but they have been plenty happy to step in and bail businesses out when things got dicey. As others have said, it’s the privatization of profits and socialization of the risk…

    Don’t even get me started on the massive spending programs the republicans have embarked upon ranging from everything like farm subsidies and ethanol to prescription drug benefits and pointless wars.

    I am NO democrat, but please God don’t lump me in the same boat as those bone-headed GOPers in DC.

    I believe in deregulation, but I ALSO believe in letting the chips fall where they may, and letting everyone suffer the consequences of poor investment/business decisions.

    For what it’s worth, I voted for Ron Paul in the Washington caucus. :)

  56. 56
    Sniglet says:

    It is a simple truth that the solution and the problem cannot be one and the same. Ironically, Roubini rails against the lack of regulation when it was regulation that created this mess!

    The fact of the matter is there does not need to be regulation of Fannie Mae or Freddie Mac because neither should have existed in the first place. It was government meddling in the free markets that created Fannie and Freddie.

    Government meddling in the free market will always blow up. No matter how many government regulators one threw at Fannie or Freddie, both were going to blow up sooner or later.

    Mish has summed the situation up nicely. It is regulation, and government meddling in the economy, that caused this financial mess. It’s hard to see how “better” regulation can be the solution.

    http://globaleconomicanalysis.blogspot.com/2008/09/roubini-misses-boat-on-regulation.html

  57. 57
    Sniglet says:

    The fact of the matter is there does not need to be regulation of Fannie Mae or Freddie Mac because neither should have existed in the first place. It was government meddling in the free markets that created Fannie and Freddie.

    Government meddling in the free market will always blow up. No matter how many government regulators one threw at Fannie or Freddie, both were going to blow up sooner or later.

    Mish has summed the situation up brilliantly. It’s not the lack of regulation that caused this financial crisis, it is the regulation (and government intervention in the economy) that created the problem in the first place.

    http://globaleconomicanalysis.blogspot.com/2008/09/roubini-misses-boat-on-regulation.html

  58. 58
    Eleua says:

    Angie,

    You missed my point, which does not surprise me one bit.

    Yes, the GOP has the reputation as the fiscal responsibility party. No more. That is why they lost Congress in 2006, not the war.

    The Dems voted for all these bailouts. I am pretty certain that it was 100% unanimous by the Dems, and any resistance came from a minority of Republicans. I’m not certain, but fairly confident of that stat.

    Also, the most egregious examples of mindless RE speculation in the country occurred in the Democrat strongholds, which explains the voting patterns.

    I’m deeply moved that you want to remove the speck from my eye. Please remove the beam from yours.

  59. 59
    economist says:

    Also, the most egregious examples of mindless RE speculation in the country occurred in the Democrat strongholds

    Like Orange County, Las Vegas, Phoenix, and Florida you mean?

    Most of the biggest bubble areas were on the coasts because these areas have always been prone to RE speculation due to land use issues and perceived attractiveness to internal and international migrants. The coasts in aggregate also happen to have had the most support for the Democrats historically. But that’s just a coincidence.

    Within a given geographic area there was no correlation between political leanings and degree of bubble. The whole Midwest from Democratic Minneapolis to Republican Dallas was relatively bubble-free. And as I noted, the coasts and West were bubbly regardless of political leanings.

    You might also want to note that in his acceptance speech at the GOP convention McCain pointed out a couple of Michigan realtors as “victims” of the housing bust.

    McCain’s feeling your pain — if you’re a member of the investment class

  60. 60
    jonness says:

    “Does anyone on this board actually own a home?”

    I own a modest home free and clear that I bought cheap well before the bubble. I will probably keep it for about another decade.

    I’m looking to pick up a second home, but first I have to let the system work through a few years of real estate deflation as I continue to save cash. We are in a completely different economy now than when houses were seen as good investments, so it’s important to not buy based on memory of house purchasing strategies during the bubble. One thing about markets is that wealth strategies are constantly changing. Thus, yesterday’s winning strategy is today’s bankruptcy and perhaps vice versa.

    While that is stating the obvious, I believe the key to buying homes is to not get drawn into debt peonage by becoming overwhelmed with interest payments to banks. Instead, I attempt to borrow as little as possible. I also pay attention to asset inflation and attempt to buy low and sell high. In order to accomplish this, it is imperative to keep an eye on “true value” as opposed to “perceived value.” The latter is constantly jammed down our throats to tickle our impulses and cause us to purchase products. For instance, “Now is a great time to buy. Homes in King County are $53,000.00 cheaper than they were a year ago.” Well that sounds really good until you compare house prices to historical fundamentals.

    IMHO, politicians are nothing more than walking corporate salespeople pitching moral policies to vulnerable citizens too busy working off debt to take a look around and realize the real issues are monetary issues. The corporate financiers skip out on paying taxes and gamble the interest you pay on your mortgage while you pick up the tab for their expenses. As we are finding out, when they bet on the losing side, you also get to cover their losses. Thus, it’s a double burden to the American worker who is already tapped out due to the numerous shell games that so many were lured into over these last years.

    The main difference between us (the laborers) and them (the financiers) is they collect interest and we pay interest. As a slave of the working class attempting to get ahead in life, it’s important to focus on getting on the other side of the interest equation. The most obvious first step to accomplishing this is to pay off your debts and save money until the market bottoms. I’m currently accomplishing this by living very cheaply in a house fully paid for. Also, I have no credit card debt.

    Many people are tempted to jump in as they watch the ship take on water because they feel that “someone” is going to repair the ship any minute; thus, they are getting a good deal. But if you do that and the ship sinks, you’ve spent all your money on a sinking ship and haven’t any left over for a better ride.

    I should say, although I pretend to know what I’m talking about sometimes, I’m pretty new to this whole game and attempting to learn from everyone else. But so far, the above is pretty much the philosophy I’m abiding by until I perceive a bigger better picture.

  61. 61
    Ben says:

    I own my home (well, the bank holds the lien but you get the point).

    I am very happy to have house prices plummet as much as possible, because I have a kid on the way and I would love to have a bigger house with a yard for the young ‘uns. I don’t care if my place loses value, because I can afford for that to happen and it just brings other property within reach of my ability to pay for it.

    Then again, I bought in 2003, not 2006, so I did not throw 7x my salary into my house. I pay less in mortgage than my friends in the same zip do to rent a place half the size. I bet I would feel different if I bought near the peak – who wouldn’t?

  62. 62
    Buceri says:

    “There wasn’t a collapse in Japanese society. This chap still lives his life, goes to work, and pays his mortgage. There are similar stories of people in Hong Kong who’s homes are still worth substantially less than they paid more than a decade ago. There again, the Hong Kong economy hasn’t collapsed, and life still goes on.”

    Sniglet — I have no idea if this is pertinent; but those are societies of heavy savers. Where economic growth depended on exports and not local consumption.

    How many of those Japanese got money out of their equity to go shopping, and now they are left holding the bag???

    Our home owners have (had) all their eggs on their home’s equity, LCD TVs, the Wii, and those damn SUVs they can’t sell.

  63. 63
    Buceri says:

    There is obviously an error on the price drop reported.

    I was told the bottom was last month…or May?……no, wait, April?….March?….Febr…?

  64. 64
  65. 65
    The Tim says:

    Thanks for the link, Garth. For those following alone at home, the Senate vote on the “Foreclosure Prevention Act of 2008” (aka – pour craploads of taxpayer dollars into F&F) was:

    For: 43 Ds – 27 Rs – 2 Is
    Against: 13 Rs
    No Vote: 6 Ds – 9 Rs

    The House Vote:

    For: 227 Ds – 45 Rs
    Against: 3Ds – 149 Rs
    No Vote: 6 Ds – 5 Rs

    It’s bipartisan socialism. Hooray! But yes, 13+149 (true) Rs did vote against, versus just 3 Ds.

  66. 66
    george says:

    What’s up with this?

    The bottom line here is that for prospective sellers these are bad numbers, and what they’re going to have to evaluate is whether this is the right time for them to put their home on the market.

    So Glenn Crellin in the Seattle PI is saying sellers need to think about waiting to put their houses on the market. Is that even legal?

    If Real Estate agents as a group advise sellers as a group to withhold supply isn’t that a violation of US anti-trust legislation? How is this different than OPEC holding back the supply of oil?

    How about sellers drop their prices instead? It makes no sense to wait. You lose a lot of money every month your house sits on the market. Do the math and cut prices before we see 20 percent price cuts.

  67. 67
    gpxl says:

    I own my house as well. I think this site does a good job of presenting data without too much of a bias. Anyone with a brain and a bit of awareness could have seen we were in a housing/debt bubble that was unsustainable and should have invested appropriately. Those that feel the need to “gloat” at this point are just being immature. The decline of housing and financials is hurting most Americans while the rich are getting bailed out by the government with OUR money.

    Anyway,… if you didn’t get greedy during the run up in housing, a pull back is a good thing for those looking to move up. I know a few people doing exactly that right now. IMO they’re doing so a too early, but they’re all good with their finances and it’s their money so who am I to doubt them?

  68. 68
    Eleua says:

    Garth/Tim,

    Thanks. There were 3 responsible Dems on Capitol Hill.

  69. 69
    Ron says:

    Are We Just Fortunate that The Masses Really Dont UNDERSTAND Whats happening? or better Yet, what Potentially could be happening.. Maybe this Ignorance is what keeps everything Going?

    People overall are so Blindly ignorant.. to whats occuring- Bear Sterns, Freddie, Fannie, Washington Mutual, Lehman, City- the list goes on… people dont want to hear it, however were potentially looking at something very depressing-ion?

    Hopefully this all works out over the next 12-24 months.. fingers are crossed.

  70. 70
    Ron says:

    Really this Isnt a Housing Bubble..
    Its a Credit Bubble… housing was just the Side Effect.

  71. 71
    EconE says:

    YAWN…all these people who come in here and call people like Eulea “immature” need to realize that this site has been around a LONG time and had they known the “darn chocolate lollypop buttered popcorn stuff that comes from my round brown hole” that we had to put up with they’d understand Eleua’s post.

    Not only did we hear our share of “gloating” by homeowners…we we’re told to get ARM’s by certain people in the industry that shall remain unmentioned….and browbeated relentlessly by them.

    Oh…and BTW ….Seattle is late to the party. It’s going to be much more than a “pullback” or a “correction”

    Hey Tim…I can censor myself!…no need for a word filter!

  72. 72
    The Tim says:

    EconE, you crack me up.

  73. 73
    EconE says:

    Sorry…Eleua….not Eulea It’s too early for me.

  74. 74
    EconE says:

    I aims to please Tim!

  75. 75
    vboring says:

    Sniglet,

    The US situation is different from Honkers* and Japan for two reasons:

    1) nonrecourse loans
    2) comparatively lax personal bankruptcy laws

    Tokyo homedebtors ate their losses for decades. In America, people have been abandoning their debts as soon as they see negative equity, transferring the losses to the financial system. The seized-up financial system is what is killing the economy, because Americans (and American companies) can’t tie their shoes without acquiring debt.

    *common antipodean slang for Hong Kong, not derogatory

  76. 76
    Sniglet says:

    In America, people have been abandoning their debts as soon as they see negative equity

    Is this really true? Tanta at CR has been railing on virtually of the “walk-away” claims are backed up by anecdotes, and that there seems to be no real hard data to support it. Yes, many people are “walking away”, but it isn’t at all clear that any significant portion of these defaulters actually have the wherewithall to continue making payments if they really wanted to.

    As far as Japan or Hong Kong being better off due to their savings rates, the cases I hear of people who are stuck in under-water homes doesn’t seem to support the theory that everyone there is awash in savings. If so, these people wouldn’t be “stuck” and could just pay off their loans anyway.

    Heck, Japan pioneered the super long-term loans (100 year mortgages, etc). If the Japanese were so flush they wouldn’t have any need for such financial innovations.

  77. 77
    vboring says:

    Regarding sentiment and silly Seattle smugness:

    Will the seemingly inevitable impending failure of WaMu finally crush the “Seattle is special” belief system?

  78. 78
    vboring says:

    Sniglet,

    I have no idea if the term “walking away” is valid, but a 9% default rate (on all mortgages of all types nationwide) appears to represent mortgages being abandoned intentionally, especially when you take into account the fact that we haven’t seen people abandon their personal debts in such ridiculous numbers, only their mortgage debt.

  79. 79
    gpxl says:

    Maybe I should have stated gloating on both sides is immature. I’ve been a lurker on this site for a bit, but I’ve been following Ben Jones’s Housing Bubble Blog pretty since inception so I know how bad homeowners can get as well. But the bottom line is the trajectory our local (and national) economy is on is not one to celebrate or gloat about. It won’t just take out greedy speculators from the bubble, but people that were conservative in their finances as well.

  80. 80
    patient says:

    gpxl, I think the financially conservative like myself will be fine. Most of us welcome a purge of the debt loving society even if it means tougher times for a while in terms of frozen salaries, high interest rates, less government money or even a forced change of employment.

  81. 81

    ActualHomeOwner, I’m in exactly the boat you’re describing. My wife and I just relocated from California. We got married in summer 2002, and wanted to start a family outside the city. At the time we planned to be in California for several years, so buying a house seemed to make sense. And we saw prices skyrocketing, so we jumped right on it and bought a 1,300sf 3br SFR in Concord for $385,000. (Hour-long ride on the train to get into the city.)

    That house bubbled up to about $600,000 in late 2006. If we hadn’t been super busy with work, raising our new daughter, and growing our son (pre-natally), we would have sold. Kicking ourselves a bit over that. In mid-2007, we *did* have our son. And then in fall 2007, I realized that if we didn’t sell RIGHT NOW, we’d be underwater. We also realized we wanted out of California (wanted less heat and dryness, less insane real estate, less commute).

    Cue four months of frantic home staging and remodeling, job hunting, and relocation planning. Thank God I got a killer job with Microsoft. Then finally we put the home on the market on early March 2008, for $479,000.

    Four days later the home ACROSS THE STREET went on the market for $449,000. Thanks to Seattle Bubble and other bubble blogs (thehousingbubbleblog.com), I knew it was going to get worse, and quickly. We wanted to sell RIGHT AWAY. So we immediately dropped our price to $439,000. Three days later we got a solid offer (10% down, no contingencies) for $425,000. We took it, and we closed escrow four weeks later, and we loaded up the trucks the next day. (The relocation people were shocked that we had sold BEFORE moving — apparently we were the ONLY people they’d seen in California that year who’d managed it.)

    So we walked away with essentially zero profit, but we had paid down some of the mortgage, and at least we got that cash back out. Now we’re renting and watching the local average price graphs plummet. We’re thinking winter 2009 or winter 2010 before we’ll buy up here — relocating (with a new baby) was the most stressful thing we’ve ever done, and we need a couple years of peace :-) (not to mention we need the local prices to hit some kind of bottom, e.g. the local average price YOY monthly delta flattens back to near zero.)

    Basically, if you have to relocate in a hurry in this market, then:
    – STAGE. Paint, recarpet, refurnish, make the place look immaculate. Buyers have to go “wow” when they walk through the door.
    – SELL FAST. The buyers who come see your place in the first week are the ones who are seriously in market. If you don’t hook some of those people, you won’t get more later. You have to set the price competitively out of the gate, and if the game changes in the first week, drop the price in the first week. That will only do you good.

    Or, you could hold out for what you think you’re entitled to. Good luck with that. THANK GOD we aren’t in that situation!!!!!!

  82. 82
    Civil Servant says:

    What I’m not looking forward to is kind of the opposite of gloating. For instance, we know a few people who have bought this year without doing any research. Real-estate agents said Jump and so they did. If I have to listen to pity parties and woe-is-me-who-could-possibly-have-predicted-this, my natural sunny good nature just may falter. It’s half a million dollars or more, you clowns, and much much more over the life of your 30-year mortgages. I don’t care what geniuses you are at work, that doesn’t absolve you of the responsibility of basic analysis and due diligence towards your households. Sheesh.

  83. 83
    Eleua says:

    Me? Immature? Guilty as charged.

    Now, my “gloating” is not targeted toward a homeowner that is now experiencing pain that they can not withstand, and whom is too busy with their normal life to pay attention to matters like credit bubbles, CDS, investment banks, securitization, etc.

    I am gloating that we are finally being shown to be correct in our thesis, and the complete (insert nasty, profane adjective here) morons that populate the other side of the argument should be disregarded as either thorough economic retards, or lying snake oil salesmen that have their own personal circle of Hell awaiting them. THEY (not us) are the ones that contributed their misplaced “advice” to millions of people that are now staring down the gun at financial ruin.

    In my defense, I have always been nudging people to sell while they can and become bystanders in the economic malestrom that is descending upon us. Those that are long-time SB regulars know this.

    Anyway, the fact that RAL, Meshugy, KLK, “MACK”, and Lizzie are now forced to confront economic reality is best summed up in the following YOUTUBE (suitable for SB viewers)

    http://www.youtube.com/watch?v=Abcgpn2UTV8

    (I can’t seem to embed that address.)

    Now that we have everyone’s attention, let’s have a truly productive educational experience.

  84. 84

    “So Glenn Crellin in the Seattle PI is saying sellers need to think about waiting to put their houses on the market.”

    Actually home sellers, if they HAVE to sell, should put their homes on the market NOW. Prices will continue to go down into next year.

    Glenn doesn’t work for WAR. (Wash Assoc of Realtors)

    He’s an academic and works for Wazzu and accepts grant money from the State Department of Licensing to conduct real estate-related statistical research.

  85. 85
    mollyacartwright says:

    that’s my girl. thanks for the clarification, jillayne. :)

  86. 86
    The Tim says:

    Jillayne @84:

    Glenn doesn’t work for WAR. (Wash Assoc of Realtors)

    No, technically he works for the state at the Washington Center for Real Estate Research (WCRER). More specifically, he works for the Washington State Department of Licensing, the WCRER’s primary source of funds. Guess where the money the DOL sends the WCRER comes from?

    The most consistent [source of WCRER money] is the funding received from the Department of Licensing’s Real Estate Research Account, which is replenished through a $10 surcharge for real estate research on each new and renewal real estate license issued.

    Source (pdf)

    So, while he may not work for the WAR, he basically works for every licensed real estate agent in the state.

  87. 87
    george says:

    I’d still like to know from the lawyers in the room. If Real Estate agents as a group advise sellers as a group to withhold supply why isn’t that a violation of US anti-trust legislation? A conspiracy to limit supply seems like a problem.

  88. 88
    jonness says:

    Jillayne @45

    Thanks for the link. I’m a big Roubini fan. If you haven’t come across this video yet, you might appreciate it:

    Roubini and friends

  89. 89

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