Ask the Industry Insiders Why “It’s a Great Time to Buy”

I’m in the process of sending interview requests to some of our area’s prominent industry insiders that we frequently see quoted in the local media proclaiming that “now is a great time to buy” or other such sales pitches. We give these people a hard time on here for their comments in the local press, and I think it would be fair to give them a chance to fully defend their comments and explain their rationale to the Seattle Bubble readership.

So far I have sent requests to:

Unfortunately, Lennox’s Director of PR has already denied my interview request with him.

If you have any additional individuals that you think we should interview, let me know in the comments. Furthermore, if you have specific questions you would like to see asked, leave those in the comments as well. I can’t promise that I’ll ask every question that is posted, but I will do my best to include the most relevant and interesting ones in the interviews.

General questions for any and all of the interviewed industry insiders are acceptable, as are specific questions for one particular person. I’d like to expand the conversation and give the “other side” a fair shake.

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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.

48 comments:

  1. 1
    Matthew says:

    First!

    I’d like to ask them if now is a great time to buy, what is tomorrow?

    Or more directly, how much lower, if any, do they see the market dropping.

  2. 2
    jon says:

    Maybe I’m wrong, but I haven’t seen another MLS region that is as open with its data as NWMLS. I think that helps home values by giving buyers the confidence that they are making the best decision. Are there any plans to make other regions as transparent?

  3. 3
    Scotsman says:

    Beverage? Check!
    Snacks? Check!

    This is going to be great.

    Hat tip to J. Lennox Scott for getting us off to an as-expected start!

  4. 4
    rose-colored-coolaid says:

    I would ask a two part question.

    1) Given that all statics evidence suggest prices are decreasing across the board (at increasing rates even!) how much lower do they expect median prices to drop.
    2a) If they admit prices are likely to go lower, why is it good to purchase a highly leveraged commodity in a declining market? In all other markets this is referred to as “stupid”.
    2b) If they claim we have reached a bottom, point out other calls they have made about a bottom in the past year or other times in the past year it’s been a “good time to buy” and ask why they believe in the midst of a global recession and the flurry of local layoffs that today is the best time to buy.

    2a I’m really interested in the answer. 2b is just to point out that their shill-ness.

  5. 5
    DavidB says:

    Lawrence Yun would be a good one to interview.

  6. 6
    BeerdedOne says:

    Isn’t it apparent to everyone by now that, with a very few notable exceptions, ‘industry insiders’ have no clue (or will not acknowledge) how this piece of the puzzle fits into the broader economic meltdown? Without that understanding/disclosure there can be no adequate, or even rational, answers to the ‘time to buy’ question.

    IMO, we’ve moved far, far beyond the need to debate this question any longer, as the solvency of the entire banking industry, and even the ability of the federal government to finance a projected $2T fiscal deficit for the coming year are now topics genuinely up for debate.

  7. 7
    Counter Point says:

    First of all, I don’t believe anyone knows or can predict the bottom until the bottom till we have passed it. Warren Buffett’s advice for the stock market “Be fearful when others are greedy and to be greedy only when others are fearful.” is also applicable to real estate.

    There is a ton of fear now in real estate – but that doesn’t mean that prices won’t fall further. Just as folks in 2003-2006 thought that prices would keep increasing 6+% forever, i think people now believe it will keep going down forever maybe even to a 80-90% drop.

    As always, you have to evaluate whether its a great time to buy for you – If you find a house you really like, and plan to live there a while, and can afford the payments, this is a great time to buy when everyone else is fearful. In the long run, you will do much better than people who will only buy when the market has recovered and it’s clearer that you will see constant price increases.

  8. 8
    gglockner says:

    I don’t have the specifics, but it would be interesting to compare then-vs-now. Suppose someone said “now is a good time to buy” 2 years ago (that’s the part I would need someone to dig up). Then we would say “well, such-and-so, your forecast that ‘now is a good time to buy’ would have cost a buyer X% in equity in the last 2 years, so when you say today that ‘now is a good time to buy’, on what do you base your claim?”

    I’m not looking to make them seem foolish, but I would like to get them to explain their logic – why they were convinced back then (erroneously) and what makes them convinced that they’re right now. Then the rest of us can judge.

  9. 9
    TheHulk says:

    3 Questions I can think of:

    A. These folks have been “calling the bottom” for a while now. On what basis does Yun (the chief *cough* *cough* economist for the NAR) make these calls? Does he have come kind of a prediction model? If so, why not disclose it for review by other mainstream economists?

    B. Most of the people here believe that Seattle RE will return back to inflation indexed values from the pre-bubble era, which would put it around circa 2001/2002. Can you give us specific reasons why this wont happen?

    C. What are the implications of the huge numbers of ARM resets coming down the pipeline in 2009/2010? With the economy in a recession and home values falling (and keep in mind we are now in the winter dead zone “selling” season) wouldn’t it be logical to expect more foreclosures in the Seattle area?

  10. 10
    Johnny says:

    I have been watching this website for a few years now and have never posted so this is a first for me. As far as the list of people you want to draw into a debate on your website, don’t most of the people listed have jobs where they work in real estate all day long? This website is far from objective and it seems that actual industry professionals might not want to engage in a debate where the moderator has already painted them into a corner.

    I mean, I understand the brokerage community saying that it is a good time to buy; from a broker’s perspective, it is always a good time to buy. In an up market there is the promise of further appreciation and in a down market there is blood in the water, so to speak. The other guys like Doug Conway are economics and market analysis people who’s information I have found to actually be quite objective. I believe Doug’s firm does a lot more than tell people to buy houses and they seem to be well regarded in economic forecasting and since Doug earns a living doing it, I would imagine that he has some idea of what he is talking about.

    Real estate is cyclical if I’m not mistaken and it seems that if you know what you are doing there are always opportunities to invest. Also, if you just want a home to live in without a landlord, it may be a good time for you to buy if you are planning on staying in a house without using it as a short term investment plan.

    It seems difficult for anyone, blogger, economist, broker, to officially call a bottom, but as prices decline and sellers become more desperate, it will be a good time to buy for at least some people. If you didn’t make money on the largest real estate boom Seattle has ever seen in the past three years and you are not going to buy in the downturn of those prices, when do you, as the moderator and participant in your own debate, think that it is a good time to buy as an investor or as a regular home buyer?

  11. 11
    harbored says:

    Dick Beeson is the guy I want to hear from

  12. 12
    Blu says:

    Everytime they say “Now is a good time to buy”, it means another 1% drop in the next month

    I have been hearing this for 10 months resulting in a 10% down.

    Keep going!

  13. 13
    sampai says:

    Tim, when would you say it’s a good time to buy?

  14. 14
    olaf says:

    Now is certainly a BETTER time to buy than any other time since about 2003. No bidding wars, no time-pressure, no seller ‘tude.

    Sure, median prices will probably fall more, but if you can find a seller who’s up against it and understands the market is sliding, he’ll give up some of that future depreciation.

    That’s what we just did. 15% off their asking price.

    Remember: You’re not buying stocks in something called the seattle real estate market. You’re buying a specific house. If you’re tough-minded, you can pay 2010 prices, today.

  15. 15
    Flotown says:

    Q1: “you stated in July 2007 that ‘now is a good time to buy.’ Can that call be chalked up to incompetence or are you an industry shill who knows better?”

    Q2: (Todd) – “double digit appreciation.” Seriously? (in best Tina Fey impersonation)

  16. 16
    EconE says:

    What do you say to the people who you put into houses that are now upside down after having called “bottom” for so long?

    What do you say to the people who you put into a toxic loan, feeding them the “you can refinance later” line only to find out that they can’t?

    Should a simple “sorry” suffice, or do you just completely avoid these past clients hoping that you never see them in the grocery store?

    After the implosion of the major Ienders, investment banks, record foreclosures etc. etc. etc….how can you still use the word “cyclical” with a straight face?

    Why is appreciation so important? Don’t you want your children and grandchildren to be able to afford homes? Or would you rather children just start learning in Kindergarten that they are “priced out forever”.

    In retrospect, doesn’t the concept of being “priced out forever” seem ridiculous?

    Do you see the similarities between housing over the last number of years and a ponzi scheme?

    Why does the RE community continue to latch on to ‘Forbes’ predictions, yet cast aside the opinions of more credible economists such as Shiller or Roubini?

    How on earth can you call yourselves “experts” if you couldn’t see all the warning signs, yet those of us that you mocked could?

  17. 17
    Lake Hills Renter says:

    Oooh, I like EconE’s questions best. =)

  18. 18
    The Tim says:

    Here are the questions I have put together so far:

    1) Median home prices have been falling in the Seattle area since late summer 2007, and are down 10-20% from their peak values (source: NWMLS). Given the drop so far, how much further do you expect prices to fall?

    1a) If you believe that home prices are at or near the bottom, what specific evidence can you cite to support this view?

    1b) If you believe that home prices will drop further, what makes it a smart decision for potential home buyers to buy a highly leveraged asset in a declining market?

    2) Housing and population data from the Census Bureau show that from 2000 through 2007, construction of new housing units in King, Snohomish, and Pierce County exceeded household growth by 60% (see this post for further details and citations). During this same time, incomes increased less than 30%, but home prices increased over 85%.

    How do you explain this rapid increase in Seattle-area home prices that has been so disconnected from the fundamentals that traditionally drive the housing market?

    3) What do you predict will happen (on average) with local home prices in 2009?

    3a) Specifically, what data do you base this prediction on?

    3b) Same questions, for 2010-2015.

    4) Given the loss/sale of WaMu and Safeco, Boeing’s troubles with strikes and customer financing of new plane purchases, Starbucks’ massive drop in profits, and Microsoft’s “re-evaluation” of its hiring plans, how do you think the Seattle-area economy will fare in a prolonged recession, compared to the rest of the nation?

    5) Is there anything else you would like to say about the Seattle-area housing market to the readers of Seattle Bubble?

    I’m trying to avoid any openly combative questions here, and while I appreciate the straightforward nature of some of the questions like EconE suggested in #16, most of my interviewees did not really “put people into” overpriced houses or toxic loans.

  19. 19

    I really like Olaf’s comment.

    Remember: You’re not buying stocks in something called the seattle real estate market. You’re buying a specific house. If you’re tough-minded, you can pay 2010 prices, today.

    I like the idea of inviting folks to add their two cents to the discussion, but as Johnny noted you have already painted them into a corner and we can all see your readers foaming at the mouth.

    This much I know about real estate prices. When the prices are dropping, many of my clients will choose not to buy a house. When prices are climbing at record rates, my phone will ring with people wanting to buy, especially “investors” looking for a quick flip.

    If you are smart enough to see the bottom (whenever it appears) – buy as much as you can afford. The rest of us will just have to buy a house when it make sense for our own personal goals and needs.

    (written at the same time as Tim’s comment above. I do like your fair questions and look forward to the answers.)

  20. 20
    buyStocks says:

    I also like EconE questions.

  21. 21
    Joel says:

    I like the idea of inviting folks to add their two cents to the discussion, but as Johnny noted you have already painted them into a corner and we can all see your readers foaming at the mouth.

    Umm, I think they’ve painted themselves into a corner and everybody here is just pointing out their glaring mistakes and extreme biases. But you’re right we shouldn’t have really combative questions no one is going to sign up for an interview where they’ll just be assailed constantly even if the attacked are well justified. You shouldn’t ask questions in general where you’re looking for a specific answer because what is the point?

  22. 22
    gglockner says:

    The Tim: Great questions. Anyone care to predict the odds that The Tim is going to get a “yes” from anyone?

  23. 23
    The Tim says:

    So far I have received a yes from Todd Britsch, a no from Lennox Scott, and no response from the other three.

  24. 24
    EconE says:

    Your questions are lobs Tim. I don’t throw lobs. I prefer high, inside fastballs. I like to think of my questions as “food for thought”.

    As far as “putting people into overpriced houses and toxic loans”…perhaps your chosen interviewees didn’t personally…but their “minions” did…and I doubt they ever gave it a second thought.

  25. 25
    Alan says:

    What percent of the housholds in the Seattle area do you believe should be able to purchase a median priced home (including SHF and condos)?

  26. 26
    Ray Pepper says:

    Well if you Buy in the next 36 months you get a New T Shirt. Hows that for incentive. A 3 year SUPPLY! Take your time and find the GEMS!

  27. 27
    sampai says:

    Tim’s questions are interesting enough that I’m going to try answering them:

    “1) Median home prices have been falling in the Seattle area since late summer 2007, and are down 10-20% from their peak values (source: NWMLS). Given the drop so far, how much further do you expect prices to fall?”

    About 10-15%.

    The Seattle Case-Shiller HPI is currently about 170. If you assume 5% appreciation every year from 2000, it should be around 150. So prices will drop about 10-15%.

    “1a) If you believe that home prices are at or near the bottom, what specific evidence can you cite to support this view?”

    Home prices are not yet at bottom. See above.

    “1b) If you believe that home prices will drop further, what makes it a smart decision for potential home buyers to buy a highly leveraged asset in a declining market?”

    A potential home buyer should only buy if he can get a home at 2004 or 2005 prices. e.g. a Short Sale or a REO property. If he can buy at those prices, the price will correspond to a reasonable HPI of about 150.

    “2) Housing and population data from the Census Bureau show that from 2000 through 2007, construction of new housing units in King, Snohomish, and Pierce County exceeded household growth by 60% (see this post for further details and citations). During this same time, incomes increased less than 30%, but home prices increased over 85%.

    How do you explain this rapid increase in Seattle-area home prices that has been so disconnected from the fundamentals that traditionally drive the housing market?”

    People are irrational sometimes and cause bubbles that need to be corrected,

    “3) What do you predict will happen (on average) with local home prices in 2009?

    3a) Specifically, what data do you base this prediction on?

    3b) Same questions, for 2010-2015.”

    Based on reasonable assumptions about HPI, prices will fall 10-15% from now, and then appreciate at about 5%/year on average for the next 5 years.

    “4) Given the loss/sale of WaMu and Safeco, Boeing’s troubles with strikes and customer financing of new plane purchases, Starbucks’ massive drop in profits, and Microsoft’s “re-evaluation” of its hiring plans, how do you think the Seattle-area economy will fare in a prolonged recession, compared to the rest of the nation?”

    Our housing bubble wasn’t massive. The correction won’t be massive.

    “5) Is there anything else you would like to say about the Seattle-area housing market to the readers of Seattle Bubble?”

    Buy if you can get 2004 or 2005 prices today. Deal with banks (Short Sales, REOs.) “Normal” sellers are delusional and should be avoided.

  28. 28
    Jillayne says:

    Hi Tim,

    How about:

    Is your firm planning on doing anything to help the large number of homeowners facing foreclosure in this region?

    Tim, they may provide an answer with the “rising interest rate” argument: “buy now because interest rates may make it unaffordable to buy in the future.” Maybe you could give them the analysis on this ahead of time and ask for their comments

  29. 29
    Thomas B. says:

    Just more examples of how “realtors” have no ethics and are not on the side of the buyer. They continue to push propaganda stories to boost their bottom line. They are willing to blame everyone except themselves for the problems. It makes me sick. It’s like watching Ken Lay tell every that Enron is a good company and to buy stock because it’s going to the moon. I wish realtors that lie like the Enron bunch go to jail like the Enron bunch.

  30. 30
    Mike2 says:

    I’d like to know if they think the King County market is over or under built, and why. With supporting figures, and explicit assumptions.

  31. 31
    Mike2 says:

    Johnny

    As far as the list of people you want to draw into a debate on your website, don’t most of the people listed have jobs where they work in real estate all day long? This website is far from objective and it seems that actual industry professionals might not want to engage in a debate where the moderator has already painted them into a corner.

    McCain did the Daily Show. If any of the supposed “RE experts” are intimidated by a local blogger, what does that say about their confidence?

  32. 32
    Ray Pepper says:

    Thomas B…….Its all semantics..Realtors always say its a Great time to buy. I see their commercials daily on CNBC. They are actually saying…”Its always a great time (for others) to buy.” The incentive to SELL (3-6%) ALWAYS and I mean ALWAYS places their interests ahead of their clients. The system has been broken for a very long time but I assure you the Buffet is rapidly coming to an end.

    We will all look back in amazement that people actually paid 4-6% to List and Sell their home. Try not to be so hard on the Agents. So many are in short-sale status, foreclosure, and Bankruptcy that they now realize “the jig is up.” They never knew it was coming!

  33. 33
    Thomas B. says:

    Ray… thanks for the words. I’m sure the rest of America is frustrated at this mess. Certainly, I was frustrated when I bought my first home. I did the majority of work and realtor just filled in the blanks on a pre-printed contract. I was frustrated when she tried to push me to a larger more expensive home. I was frustrated during negotiations when she fought me on the price, even though it was the seller’s decision to accept the offer or decline, not hers. The next few realtors I dealt with were exactly the same. Then I have to listen to their tripe on TV and it makes my blood boil. I’m still amazed they refuse to admit there was a bubble, even though all the numbers point to that fact. It’s crazy. I knew there was a bubble back in 2005. That’s why I never bought during that time frame. Realtors, like Ken Lay, said it’s going to the moon and you better jump in. That’s when you should worry. I was right.

    I’d rather pay a lawyer to do the negotiations since they will actually negotiate. There are so many more advantages to using a lawyer instead of a realtor – flat fee; they are pitbulls in negotiations; they do what you want; you can customize contracts, etc.

  34. 34
    Eleua says:

    I would love to see them answer question 1a with something other than what they pull out of the discharge end of their alimentary canal.

    I would like to see ONE person in the REIC do some ACTUAL MATH on how we can properly determine investment value of a piece of property.

    I won’t be holding my breath.

    Tim,

    Bring a camera to capture the dumb looks you will get to those questions.

  35. 35
    shawn says:

    I don’t think there is anything to gain by being interviewed by The Tim. If they choose to be interviewed, then it answers the question that they are not to bright. If they choose not to be interviewed, then it suggests that they are smart enough to know better than to have been telling folks now is a good time to buy. So, by asking them to be interviewed, we do gain some insight. But it is not to their interest to have to account for what is not acceptable.

  36. 36
    Peckhammer says:

    “Bring a camera to capture the dumb looks you will get to those questions.”

    I produce a popular web-based show that’s not about real estate — but if Tim lands someone really interesting, I’d be willing to donate time and resources to video record that interview. It could then be hosted here on Seattle Bubble.

  37. 37
    DaveyDave says:

    1. In retrospect, what do you think we could or should have done differently that would have helped avoid our current rate of real estate value depreciation?

    1a. Put differently, what are the top 3 lessons we need to learn from recent real estate events?

    2. What changes do you see happening in the real estate industry as a result of this?

    3. Are there measures that you are currently pursuing that will help the market stabilize?

  38. 38
    AndySeattle says:

    sampai // Nov 11, 2008 at 4:41 pm
    Tim’s questions are interesting enough that I’m going to try answering them:

    And you are?

    Are you one of:
    * Todd Britsch of New Home Trends ?
    * Dick Beeson, Windermere broker and NWMLS director ?
    * Matthew Gardner, local economist ?
    * Dick Conway, local economist ?
    * J. Lennox Scott, CEO of John L. Scott ?

  39. 39
    The Tim says:

    Update: I also sent a request to Dan Klusman of the local Master Builders Association (the group behind the website RightTimetoBuy.org), and his response was “I’d be very interested in this. Thanks for the opportunity.”

  40. 40
    EconE says:

    OK Tim…tell me…if they answer a question with the usual bunk that we used to get from Meshugy…are you going to be polite, smile and nod…or can we get some good eye rolling and putdowns for their stupidity if they think that the audience here is going to buy their BS?

  41. 41
    The Tim says:

    Let me put it this way… if the answers I get from these folks are transparent BS, I’ll definitely be calling them on it. Hopefully we’ll get some thoughtful, well-reasoned responses. Hey, a guy can dream, right?

  42. 42
    Scotsman says:

    CHS has a great post today that rebuts the “now is a great time to buy” crowd. Lots of pictures and data:

    http://www.oftwominds.com/blog.html

  43. 43
    Gene says:

    If you’re talking to the Master Builders Association, I’d definitely try to discuss the BuiltGreen program, and ways to make new homes more affordable in the long run. Basically what are builders doing to help offset long-term costs of new homes, and does this provide an opportunity for growing the BuiltGreen program further?

    During downturns new construction can get to be “cheaper” (quality and price), yet I think sustainable homes will likely both sell and hold their value better long term.

    Ok, it’s more of a “leading question” than a question, but…

  44. 44
    EconE says:

    @43

    Why on earth would Tim want to find out about some greenwashing “builtgreen” program put together by the builders? Should he ask what the bathroom fixtures are?

    Questions like that are only setting the builder up with…as you say…LEADING QUESTIONS…so that the builder can talk up his product and little else.

    I would call the builders on their questionable practices, ask them about how they feel about building homeowners underwater by making the new homes nicer than the old ones but sell them for less.

    I’d ask them about their cash back scams, the free pools, free upgrades, free cars etc and how they feel about how that manipulates median price data.

    I’d ask builders “Why were so many of you partnered with Countrywide and other Toxic Loan Purveyors”

    Id also ask “why is it that EVERY sector of the industry promotes this “Right Time To Buy” garbage when the bulk of foreclosures seem to be in NEW developments across the country.”

  45. 45
    Dan from MBA says:

    I am Dan Klusman, Communications Director with the Master Builders Association. I received Tim’s list of questions and am happy to respond. I’ll send my answers to Tim ASAP.

  46. 46
    Jillayne says:

    Thomas B in comment 29 is making a good point about Realtor ethics. Realtors say they are different from real estate agents because of their Code of Ethics (which, by the way, is very well drafted when compared with other industry associations.)

    Why not talk to members of the Realtor organization?

    Washington State Assoc of Realtors
    Steve Francks
    1-800-562-6024
    http://www.warealtor.org/aboutus/officers_staff.asp

    OR
    Seattle King County Assoc of Realtors
    Russ Hokanson
    425-974-1011
    http://nwrealtor.com/displaycommon.cfm?an=1&subarticlenbr=6

  47. 47

    Hi,

    I’m a Realtor in Downtown Vancouver, BC, Canada and our real estate market has begun to fall, but not quite like it has in the US. I think it is a good time to buy as buyers can negotiate on price which until very recently here was a very difficult thing for buyers to do.

  48. 48

    […] close to bottoming out in pricing as I expected.” Oh, and for the record, Mr. Beeson declined the offer I extended to him to respond to specific questions about the housing market and defend his position with specific […]

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