January Neighborhoods Months of Supply Update

This is coming later than usual this month due to Bottom-Calling Week, but let’s take a look at January’s “Months of Supply” for the 30 NWMLS areas in King County. For an explanation of what months of supply means, please refer to the original neighborhood MOS breakdown post. Also, view a map of these areas here.

January MOS for King County as a whole backed down from December’s record high, coming in at 7.77 (compared to 7.54 for January 2008), bringing the record run of 6+ MOS to seventeen months.

In the graphs below, you’re looking at the MOS for the “Res Only” data from the NWMLS King County Breakout pdfs for the one-year period of February 2008 through January 2009. The bar graph is centered vertically on 6.0 MOS, so that it is easier to visually tell the difference between a seller’s and buyer’s market (i.e. – shorter bars mean a more balanced market). I had been trying to keep the graphs on the same vertical scale, but with MOS skyrocketing in a handful of areas in the Eastside and Vashon, I gave up on that. The charts still all have the King County aggregate figure plotted in red on the far right.

Note that there are a few areas that appear to have no bar at all for a given month—this represents an MOS value at or close to 6.0. It is also important to remember that whatever the reason, over twenty-five percent of pending sales are not making it to closing, which means that these statistics are likely understating the magnitude of the “buyer’s market.”

We’ll start off with the chart that lets you directly compare each area’s MOS to its value one year ago. January 2008 is in red, and 2009 is in blue.

KC SFH MOS: January '08 & January '09

Following below are the breakouts for SW King, SE King, Seattle, N King, and the Eastside, as well as a summary of this month’s data.

KC SFH MOS: SW King

KC SFH MOS: SE King

Note: For Area 701 (Downtown Seattle) we’re using condo data.

KC SFH MOS: Seattle

KC SFH MOS: N King

KC SFH MOS: Eastside

Months of supply generally declined in most areas across King County, with six neighborhoods registering as “sellers’ markets” with under 6.0 MOS—Jovita/West Hill Auburn (110), Renton Highlands / Kennydale (350), Beacon Hill (385), Ballard (705), North Seattle (710), and Shoreline (715).

The cumulative MOS for Seattle proper also backed off slightly, but remained in “buyer’s market” territory at 6.51 in January. The Eastside as a whole dropped three points down to 10.14.

Fifteen of thirty neighborhoods trended more toward a seller’s market than a year ago. Six neighborhoods were above 10 MOS (compared to 12 last month), firmly in buyer’s market territory.

The three toughest markets for sellers were Mercer Island (510) at 46.0 (no that’s not a typo—there were only 3 pending sales on the entire island), Medina / Clyde Hill / W. Bellevue (520) at 14.2, and Downtown Seattle condos (701) at 12.7. 520 yet again extended its 10+ MOS streak, now at 17 months.

The three best markets for sellers as of last month were: Ballard/Greenlake/Greenwood (705) at 4.5, North Seattle (710) at 4.6, and Shoreline (715) at 4.8.

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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.

86 comments:

  1. 1
    Steve Tytler says:

    The key figure to watch is inventory levels in March, April and May which are the prime home selling months in this area.

    If inventory continues to increase this Spring compared to last Spring, that’s a sign that home prices will continue to fall.

    If Inventory levels start to decrease, that’s a sign that the market has turned the corner and the worst is over.

    Real estate is a classic supply/demand economy and the inventory of homes for sale is one of the best predictors of which way home prices are headed.

  2. 2
    obelus says:

    Tytler @ 1: Supply has decreased in many areas because of houses being pulled off the market. That scenario does not necessarily hold water this time.

  3. 3
    Kary L. Krismer says:

    RE: obelus @ 2 – I’d agree and add the key figures to watch would either be closed sales or number of pendings.

    It’s a bit ironic (or even comical) that someone would come in claiming that inventory is somehow a key number in a thread discussing absorption rates.

  4. 4
    patient says:

    I think closed sales is the metric to watch. There is likely a huge shadow supply building in terms of foreclosures and sellers hoping for a spring bounce (that will most likely not materialze) before putting the homes on the market. As long as closed volume is below what is normal prices will continue to drop.

  5. 5
    AmazedR says:

    @1, @3: My new year’s resolution: I’ll derive my own conclusions from eyeballing the Case-Shiller curve, as well as interpreting Tim’s predictions, rather than listening to more Realtor (TM) dribble on when they think the bottom is in.

    i doubt I’m the only one. Tip: save yourself the time of writing the comments.

  6. 6
    Marc says:

    Obelus,

    You seem to be implying that a special signifcance applies to a home that is pulled off the market because the seller is dissatisfied with the price it will likely fetch. I disagree.

    In terms of how such a choice impacts aggregate supply, what matters most is whether a given house is actively on the market or not (i.e., on the MLS or actively marketed on some level as a FSBO, e.g., yard sign, zillow posting, etc.).

    If an owner or sizable group of owners refuse to sell their homes because prices are falling and they prefer to wait for better days, the relative effect is to decrease aggregate supply which, in turn, tends to increase prices (even if only marginally).

    Admittedly, future price expectations of market participants may overcome this marginal effect such that pices continue downward regardless of these particular owners election to not sell. However, the precipitousness of the decline is moderated to some degree by the slightly lowered supply.

  7. 7
    vermillionsky says:

    RE: Steve Tytler @ 1

    I think the important measure is the ratio of supply to demand, not just the amount of supply itself. If the supply increases but demand stays the same or falls, prices will probably continue to fall. If demand and supply both fall, or if demand and supply both increase, it’s tough to say where prices will go.

    Demand isn’t a function of supply, it’s a function of price, income levels, employment levels, availability of credit, consumer confidence, etc. Yes, price may be a function of supply, and thus supply indirectly affects demand, but it also may be influenced by other factors as well (such as unrealistic expectations on the part of the seller). If the supply decreases but income also decreases, or the employment rate significantly increases at the same time, or the stock market continues going down, I don’t see prices stabilizing anytime soon.

    Maybe in the past those other factors were relatively stable, so inventory levels were a good indicator of price stabilization, but I’m not so sure that holds true in this economy.

  8. 8
    patient says:

    Off-topic, JP Morgan to cut another 3000 employees as result of the WaMu take over bringing the total number to 12000. If the same quota of Seattle based employees are impacted it would mean another 1000 people laid off in Seattle on top of the already 3000 announced. Currently there is no info from JPM on where the cuts will take place.

  9. 9
    Kary L. Krismer says:

    By AmazedR @ 5:

    @1, @3: My new year’s resolution: I’ll derive my own conclusions from eyeballing the Case-Shiller curve,

    I can’t imagine a sillier thing to do. That’s basically what Ardell does.

  10. 10
    Kary L. Krismer says:

    RE: Marc @ 6 – I think all that was being said is that inventory numbers are deceiving. That they understate true supply

  11. 11
    vermillionsky says:

    By Marc @ 6:

    Obelus,
    If an owner or sizable group of owners refuse to sell their homes because prices are falling and they prefer to wait for better days, the relative effect is to decrease aggregate supply which, in turn, tends to increase prices (even if only marginally).

    That’s only true if demand remains constant while the supply increases. What about buyers or a sizable group of buyers who give up trying to buy a new home because they can no longer afford it or refuse to overpay for the selection that is available on the market, and prefer to sit back and wait for better prices?

    If demand drops (because buyers are worried about future home depreciation, or if their reserves have been depleted by a falling stock market and they can no longer afford to move or can no longer afford as much home, or if the population starts contracting, etc.), the drop in supply won’t cause prices to increase.

  12. 12
    patient says:

    By vermillionsky @ 7:

    RE: Steve Tytler @ 1

    I think the important measure is the ratio of supply to demand, not just the amount of supply itself. If the supply increases but demand stays the same or falls, prices will probably continue to fall. If demand and supply both fall, or if demand and supply both increase, it’s tough to say where prices will go.

    Demand isn’t a function of supply only, it’s also a function of price, income levels, employment levels, availability of credit, consumer confidence, etc. If the supply decreases but income also decreases, or the employment rate significantly increases at the same time, or the stock market continues going down, I don’t see prices stabilizing anytime soon.

    Maybe in the past those other factors were relatively stable, so inventory levels were a good indicator of price stabilization, but I’m not so sure that holds true in this economy.

    I agree. If a Toyota Corolla was priced at $80k and Toyota decides to cut down on production for sales down to half but you can lease one for $200 a month would you think that will push prices above $80k?

  13. 13
    Marc says:

    Kary,

    Fair enough. I suppose Tim’s absorption rate post is restrained by the fact that it is predicated on the NWMLS’s reported inventory; thus, there’s little doubt that it understates “true” supply. However, it’s about as good as we can get and using the same data source which is collected in a uniform fashion means that period to period comparisons based on the data are, at a minimum, useful tools.

    A relevant question to ask then, is what are the other reasons why sellers are pulling their properties off the market beyond merely being dissatisfied with market prices or other specifically personal reasons (e.g., job transfer fell thru, so seller is staying in Seattle and doesn’t need to sell).

    A seller of a single lot or a relatively modest number of lots cannot siginificantly impact aggregate supply and thus can’t significantly impact the direction of prices (for the larger market or a larger segment thereof – he might, however, be capable of dramatically impacting the price on his street or in his neighborhood).

    A downtown condo developer who decides to cancel all sales and convert to apartments could significantly impact downtown supply and relative prices. However, this choice would increase the rental pool which would tend to depress rental rates which in turn tends to have a deflationary effect on sale prices.

    I guess my larger point is that it would be foolish to only look at one piece of data (absorption rates, inventory, C-S Index). The real estate market is a fluid system with innumerable causes and effects happening constantly. There’s no way to know which particular element has the biggest impact at any given time not to mention that the relative impacts change all the time. You’ve got to look at as much information as you can get to have any hope of predicting what will happen in the future with even the slightest chance at accuracy. And even then, it’s just a guess.

  14. 14
    The Tim says:

    RE: Marc @ 13 – FWIW, I have been posting semi-regular updates on at least the volume of actual delistings for King Co. SFH. That doesn’t tell us why they’re delisting, but it does tell us how many listings are leaving the market without being sold.

  15. 15
    Kary L. Krismer says:

    By Marc @ 13:

    I guess my larger point is that it would be foolish to only look at one piece of data (absorption rates, inventory, C-S Index). The real estate market is a fluid system with innumerable causes and effects happening constantly. There’s no way to know which particular element has the biggest impact at any given time not to mention that the relative impacts change all the time. You’ve got to look at as much information as you can get to have any hope of predicting what will happen in the future with even the slightest chance at accuracy. And even then, it’s just a guess.

    I’d agree, but the biggest factor right now is probably some variation of consumer confidence. As I said somewhere yesterday, I think fear of the overall economy is overshadowing what people think about the real estate market portion of the total economy. And another external factor, the stock market, is also affecting real estate.

  16. 16
    Marc says:

    RE: vermillionsky @ 11

    I would say the comment of mine you qouted is always true, i.e., aggregate supply decreases have a marginally deflationary effect on prices. However, this marginal effect can easily be overwhelmed by other forces which is why I pointed out that future price expectations such as a buyer being “worried about future home depreciation” would tend to decrease demand and in turn depress prices.

  17. 17

    “A relevant question to ask then, is what are the other reasons why sellers are pulling their properties off the market beyond merely being dissatisfied with market prices or other specifically personal reasons.”

    Some sellers are pulling their properties off the market because there just isn’t much interest in their property…they’re not so much waiting for prices to improve as much as waiting for demand to return.

    Or they don’t want to go to extraordinary lengths to have to sell their home, something they didn’t have to do a couple of years ago, when any piece o’crap home with a new granite countertop would have sold in a matter of days.
    Beyond price, buyers right now are a lot more picky and a lot more specific about what they want, and far less willing to “settle” just to own a home.

  18. 18
    Kary L. Krismer says:

    I think a lot of this discussion is confusing the concept of inventory for supply and sales for demand.

    Assuming static supply, inventory would increase and decrease as prices rise and fall.

    Assuming static demand, sales would increase and decrease as prices fall and rise.

    Sales are an interaction of supply and demand.

  19. 19
    Marc says:

    RE: Kary L. Krismer @ 15RE: The Tim @ 14

    I agree with you Kary and I suspect only a fool or an ignorant person would disagree. But I challenge anybody to prove it.

    One thing that frustrates me about many of the people who post to this site is the extremism. The drum beat of I’m right and anyone who disagrees is not only wrong, but an idiot to boot is mind-numbing.

  20. 20
    DaveyDave says:

    There’s a lot of news pieces about the shadow supply with houses pulling off the market, up and coming short sales, foreclosures, etc. You also hear just as much about buyers waiting on the sidelines for something that looks like a market bottom forming. I guess that could be called a corresponding shadow demand.
    I’m one of those potential buyers. But like many people, I’m not willing to buy at these prices. So there’s probably some potential seller out there in my future house not willing to sell at these current prices. It’s a waiting game with time on the buyer’s side.
    Lack of sales volume shows there’s not a lot of buyers and sellers agreeing on price. Volume uptick of closed sales will show when the market is reforming more than MOS, I think. For the most part, closed sales are still plunging.

  21. 21
    Marc says:

    RE: Marc @ 16

    I meant to say aggregate supply decreases have a marginally “inflationary” effect on prices, not “deflationary.”

  22. 22
    Sniglet says:

    Some sellers are pulling their properties off the market because there just isn’t much interest in their property…they’re not so much waiting for prices to improve as much as waiting for demand to return.

    Really? It would be fair to see there isn’t any interest in a given property for the price the sellers want to get. I can’t imagine a case where there is NO interest in a property, regardless of price. Anyone who complains about a “lack of demand” is simply unwilling to accept the current market prices.

  23. 23
    Scotsman says:

    RE: Kary L. Krismer @ 18

    Kary, take a break, go try to sell a house or something, because you clearly don’t have any idea what’s going on.

    “Assuming static demand, sales would increase and decrease as prices fall and rise.”

    WTF? If demand is “static” it doesn’t change, and certainly isn’t responsive to price. Economists refer to that as “inelastic.”

    Further, all of this “analysis” misses the greater point that there are far too many market dislocations to assume any of the traditional definitions of market efficiency are in play at this time. A few sales between the desperate and the uninformed don’t constitute accurate information. If you doubt that, try getting an appraisal that will stand up to rigorous scrutiny.

  24. 24
    Kary L. Krismer says:

    By Scotsman @ 23:

    RE: Kary L. Krismer @ 18

    Kary, take a break, go try to sell a house or something, because you clearly don’t have any idea what’s going on.

    “Assuming static demand, sales would increase and decrease as prices fall and rise.”

    WTF? If demand is “static” it doesn’t change, and certainly isn’t responsive to price. Economists refer to that as “inelastic.”y.

    Wrong, but nice try. The demand curve being static doesn’t mean it’s inelastic. Before you claim other people don’t have any idea what’s going on, you should have some clue yourself.

    A change in the demand curve would assume it shifts either up or down (assuming it’s not inelastic). Thus before a change there might be 30 units sold at $1.00 and 40 units sold at $0.75. After a change that might be 35 units at $1.00 and 47 units at $0.75.

    Demand at any given time is the number of units that would theoretically sell at many different price points. Thus, the number of units can change dramatically without demand changing one bit.

  25. 25
    Kary L. Krismer says:

    By Sniglet @ 22:

    Some sellers are pulling their properties off the market because there just isn’t much interest in their property–they’re not so much waiting for prices to improve as much as waiting for demand to return.

    Really? It would be fair to see there isn’t any interest in a given property for the price the sellers want to get. I can’t imagine a case where there is NO interest in a property, regardless of price. Anyone who complains about a “lack of demand” is simply unwilling to accept the current market prices.

    I would agree Ira in that there are certain houses with certain characteristics that simply are not as attractive as houses without those characteristics.

    I also agree with Sniglet. I think it was Woody Allen’s Take the Money and Run where the family lived under a roller coaster, and each time it went by the house shook violently. In a hot market that house would sell, although not quickly, in a slow market the price drop that it would take to sell that would greatly exceed the drop for other houses.

  26. 26
    Tyler says:

    With Bernanke just yesterday telling the markets that he doesn’t plan on nationalizing (his definition, anyway) the banks, I think that these large banks will have to start dealing with their REO inventory. I think they have been sitting on most activity and waiting to see what happens. Why sell for a huge loss and erode your stock price when .gov may take you over anyway?

    At least where I live, (just north of Portland), I have seen a dramatic decrease in new bank owned homes hitting the market. My gut feeling is that most of the empty McMansions with weeds in the yard are bank owned, just not being sold at the moment.

    The large percentage of bank owned homes has really put downward pressure on the CS numbers, but I think that there is a lot more shadow REO inventory.

    At least this is my hope, b/c I want to buy a house with granite counter tops at 70’s orange vinyl prices.

  27. 27
    Scotsman says:

    RE: Kary L. Krismer @ 24

    Kary, “nice try” yourself. Static demand doesn’t imply a demand curve. It implies fixed, or static demand.

    I’ve got years of post graduate work in this field, and plenty of experience building predictive economic models. I know how demand curves work, and I know what static means.

    Now go sell a house.

  28. 28
    Kary L. Krismer says:

    RE: Tyler @ 26 – I think what you might be seeing is some of the effects of the various mortgage foreclosure moratoriums and such. The stock price of the banks is so in the toilet, I really don’t think a few REO sales is going to matter much.

    On the topic of banks does anyone understand the six months to raise private capital part of the bank stress test? The chance of a bank raising private capital in this situation is about 0.0000001%. It just seems like a waste of six months.

  29. 29
    Kary L. Krismer says:

    By Scotsman @ 27:

    RE: Kary L. Krismer @ 24

    Kary, “nice try” yourself. Static demand doesn’t imply a demand curve. It implies fixed, or static demand.

    I’ve got years of post graduate work in this field, and plenty of experience building predictive economic models. I know how demand curves work, and I know what static means.

    Now go sell a house.

    I really doubt that based on what you write. There’s probably a reason your anonymous. You can claim to be whatever you want. If I were anonymous I’d probably claim to be an astronaut.

    But you’ll be happy do know while I’ve been doing this I managed to help an unrepresented buyer get funds transferred to escrow and the documents are released from escrow. Given the troubles they had I’d almost guess that Chase is going under. ;-)

  30. 30
    DaveyDave says:

    RE: Kary L. Krismer @ 28
    From what I’ve seen, the gov’t. isn’t all that clear on these details. But CNBC has a piece on this topic today where they’re making the point these stress tests will have the unintended consequence of drying up lending even further. Banks will wish to hoard even more cash to pass the tests. Here’s the article link:
    http://www.cnbc.com/id/29410013

    And here’s the gist of it in a quote:

    “The stress test may well create some unintended consequences, and among those unintended consequences would be the chance that banks would hoard capital leading up to the government examinations,” says Greg McBride, senior financial analyst at Bankrate.com.

    Supporters of government efforts to determine the financial strength of the top 20 banks—which began Wednesday—say it’s probably too late for banks to hoard cash. But banks that are deemed to have inadequate ratios will be given six months to raise capital, and McBride said that could be the period in which banks looking to avoid the heavy hand of government intervention hold onto their cash.

  31. 31
    Kary L. Krismer says:

    RE: DaveyDave @ 30 – Maybe that’s the reason the buyer couldn’t get their money out of Chase. It’s not only affecting lending, it’s affecting withdrawals! ;-)

  32. 32
    Ray Pepper says:

    RE: Steve Tytler @ 1

    Inventory WILL increase this Spring and Summer. I suggest we will see a very large spike in sellers trying to unload. Not to mention a sharp increase in short sale listings.

    After talking to about 100 people at The Seattle Home Show I would say 50% understand the terrible mess this nation is in. 25% say its the greatest time in the world to buy. The last 25% are clueless and are more interested in saving up for an LCD.

  33. 33

    “I think it was Woody Allen’s Take the Money and Run where the family lived under a roller coaster, and each time it went by the house shook violently.”

    Close but no cigar. It was Annie Hall, another Woody Allen classic.

  34. 34
    Ray Pepper says:

    My ABK call has been horrible. Those who emailed me appear to be right. I sold 1/2 at open. I went long today LVS and shes running. No more stock tips from me other then: stay short AXP, BANR, and you couldn’t get me to buy GE at 9.00 with your money.

  35. 35
    DaveyDave says:

    Below is a posting from a basically dead link about the 3 markets I follow:.

    Here are some data on local Seattle neighborhoods I follow —

    Ballard (area 705), Magnolia (area 700) and Capitol Hill (area 390). This merely tracks NWMLS median SFH numbers from August ‘07 which is pretty near the peak.

    Area 705: August ‘07-$494,500: January ‘09-$381,500: Percent drop: -23%
    Area 700: August ‘07-$692,000: January ‘09-$550,000: Percent drop: -22%
    Area 390: August ‘07-$650,000: January ‘09-$486,500: Percent drop: -25%

    And then tracking Closed Sales for the same areas and time period:

    Area 705: August ‘07 — 190: January ‘09 — 64: Percent drop: -66%
    Area 700: August ‘07 — 89: January ‘09 — 19: Percent drop: -79%
    Area 390: August ‘07 — 62: January ‘09 — 30: Percent drop: -52%

    So the percentage decrease in Closed Sales is 2 to 3 times more than the percentage decrease in Price. With pricing being stickier than volume, these are more data that show prices still have a long way to come down. Again, Closed Sales I believe are more significant than MOS because it’s an actual indication of market, not just the supply.

  36. 36
    Tim says:

    Maybe one can gauge the health of the local real estate market by how many times Kary posts on a given day?

  37. 37
    dancingeek says:

    RE: Kary L. Krismer @ 24
    Sorry, Kary, but I’m going to have to back Sniglet up on this. It may not have been your intention, but you originally described the demand as being static. That is not the same thing as a “static demand curve.” A static demand is, as Sniglet said, inelastic. The demand has no or very little change irrespective of price. A demand curve is dependent upon price.

  38. 38
    Kary L. Krismer says:

    By DaveyDave @ 35:

    So the percentage decrease in Closed Sales is 2 to 3 times more than the percentage decrease in Price. With pricing being stickier than volume, these are more data that show prices still have a long way to come down. Again, Closed Sales I believe are more significant than MOS because it’s an actual indication of market, not just the supply.

    Evidence, yes, but conclusive, no. I’ve seen a couple of very nice condition houses priced far below their competition that were having trouble selling. One of the three I’m thinking about did get an offer that was accepted.

    The point is, a seller might have to go a long way to find a buyer in this market.

  39. 39
    voight-kampff says:

    sorry for being a little off-topic, and maybe I am missing something obvious,
    but I always wonder
    about all the posters that say we will see 80-90% of peak. Would not just about everyone with a house walk from their mortgage at that point, or is that part of the equation… that banks would ultimately be the ones selling for 80-90% off? furthermore, this prediction must also assume rents decrease dramatically, as these deep discounts would allow all houses to be cash flow properties… right?
    so wouldnt that big of a drop lead to a MadMax-ish kind of situation?

  40. 40
    Kary L. Krismer says:

    By Tim @ 36:

    Maybe one can gauge the health of the local real estate market by how many times Kary posts on a given day?

    Nope, just another way bubble bloggers don’t understand the market on which they comment. My busiest time recently was December 2007 through about March, 2008, and I was able to post just as much then as now.

    Agents tend to work more like students study. 7 days a week from 8:00 a.m. to 10:00 p.m. with lots of time off in-between. Some if it for me is very tedious computer work–hence the need for the distractions.

  41. 41
    Kary L. Krismer says:

    RE: dancingeek @ 37 – It wasn’t Sniglett.

    But in any case, there’s also context. Go back and read what I wrote and it’s clear I wasn’t talking about an inelastic demand curve, and more importantly, it should be 100% clear what I was talking about.

    I was the first person to use the work “static” so it shouldn’t be hard for you to find.

    In any case, I’m not really seeing anyone arguing that inventory equals supply.

  42. 42
    DaveyDave says:

    RE: Kary L. Krismer @ 38 – Kary, they may be priced below their competition, but that doesn’t mean they’re yet priced affordably. If the price is affordable, there will be buyers. Affordability is the metric needed here, not relativity to over-priced homes.

  43. 43
    Kary L. Krismer says:

    RE: DaveyDave @ 42 – I’ll give you that in that two of the three properties I’m thinking of were in what I would call slightly upper end neighborhoods. But still those two were priced under $400,000, one under $350,000.

  44. 44
    dancingeek says:

    RE: Kary L. Krismer @ 41
    Oh man, I really didn’t help my case by subbing Sniglet for Scotsman =)

    I agree that your intention wasn’t to refer to static demand, but that was the terminology you used and what Scotsman keyed in on. I’m just trying to point out that Scotsman was basing his comments on the terminology you used, which isn’t the same as the terminology you intended.

  45. 45
    12000_more? says:

    JPMorgan Chase & Co. said Thursday it will eliminate about 12,000 jobs as it folds in the operations of Washington Mutual Inc.

    Chief Executive Jamie Dimon said the cut was a precautionary move to ensure that the company has financial flexibility should economic conditions worsen. The move will save the company about $5 billion per year.

    Dimon said he is not predicting, but is ready for: A recession lasting two years, a U.S. unemployment rate above 10 percent, and a 40 percent peak-to-trough decline in home prices.

  46. 46
    Astronaut says:

    RE: Kary L. Krismer @ 43
    Now go sell a house Kary…

  47. 47
    DaveyDave says:

    RE: 12000_more? @ 45 – That’s about $400,000 per job per year. Good salaries. Good benefits. Or the bankers are just spewing numbers again…

  48. 48
    mark says:

    You can sell anything if you price it right.

  49. 49

    RE: Sniglet @ 22

    Sort of. Most buyers, especially today, go look at homes a place they could visualize living in. Some houses you need to go into with vision, others you need to go into with a bulldozer. Absolutely, price is a factor, but I’ve shown some houses which were worth less because there was a house on the property. I think the listing read “Needs a little TLC.”, but what should they have said, ” Bring your firebomb?”

  50. 50
    lurker says:

    ack, why do the neighborhoods I want to live in have such a low MOS? I guess everybody else does too.

  51. 51
    jdc98119 says:

    It is very easy to sell a house. Put it up for auction with no reserve and the’ house will sell, guaranteed! The problem is that no one actually owns their home anymore so they can’t sell at any price. The result is a very long and painful depreciation as buyers wait and wait for the price to hit an affordable level. And as a buyer in this situation myself it is not that I’m waiting for some theoretical bottom, I don’t care if my house drops in price after I buy. I don’t care that my car dropped 20% when I drove it off the lot. As long as I can afford the house at about 30% of my income I’m all chips in.

  52. 52
    Scotsman says:

    February 26, 2009

    NEW YORK (CNNMoney.com) — What a turnaround for the American Dream!

    According to a report released Wednesday, the real estate market bust and stock market declines have carved a huge chunk out of the assets of baby boomers.

    So much home equity has been lost that 30% of boomers, aged 45 to 54, are underwater in their homes, according to “The Wealth of the Baby Boom Cohorts After the Collapse of the Housing Bubble. ” The report, released by D.C.-based think tank the Center for Economic and Policy Research, also found that 18% of boomers aged 55 to 64 would owe money at close if they sold their homes.

    The CEPR also found that people who were renting homes in 2004 will have more wealth in 2009 than those who were owners. That’s true for all five wealth groups the study analyzed, from the poorest to the wealthiest.

    “The collapse of the housing bubble, which led to the current recession, has already destroyed almost $6 trillion dollars in housing wealth for homeowners,” said report co-author Dean Baker. “This reality is compounded by the recent collapse of the stock market. Many baby boomers will only have Social Security and Medicare to rely on in their retirement.”

  53. 53
    Kary L. Krismer says:

    “Many baby boomers will only have Social Security and Medicare to rely on in their retirement.”

    Even if you changed “many” to “most” hasn’t that always been true? I’m sure it’s worse now, but it hasn’t been my impression that most Americans are well prepared for retirement, even if well prepared only means being solvent.

  54. 54
    gameboy says:

    I think Kary owes an apology to Scotsman.

    Scotsman was 100% correct. A “given” demand curve should never be referred to as “static”.

    The problem is not just that you were wrong, but you tried to ridicule a person who tried to correct you.

    To make a mistake is human, but to attack a someone who corrects that mistake reveals you as ignorant.

  55. 55
    harbored says:

    RE: jdc98119 @ 51

    JDC: What’s the rush? Have you considered waiting a year? What if prices free fall and your 20% down evaporates? Or you buy a place and both neighbors get foreclosed? Or even worse, a condo and the HOA goes insolvent?

  56. 56
    Mikal says:

    RE: gameboy @ 54 – Scottsman is a 100% Jacka$$. Kary maybe wrong, but if apologies ruled the day here we would all be needing or getting one. What happened to the intelligent banter that was here? Does anyone know a blog that is now supplying good data on the economy without the crap people have been leaving here lately? Where is Deejayoh post ‘s when we need a bunch of em? The brains seem to have left the outfit. Tim could post a little more also. How can anyone that is smart enough to make $250,000 a year complain about their cost in taxes without realizing the sheer stupidity of FEELING that way about it. I leave my occasional crap here to, but come on.

  57. 57
    wreckingbull says:

    RE: Mikal @ 56 – As an old-timer to this blog, I’ll tell you exactly when the tone of the posts started changing: when the predicted crash actually materialized. As the crash accelerates, so goes the civility. Watching the golden goose choke as it gets pulled underwater makes people emotional and angry.

    Remember Meshugy? He was a persistent little bugger, but he was a decent and respectful dude, even though he thought homes would appreciate forever.

  58. 58
    Kary L. Krismer says:

    RE: gameboy @ 54 – Go back and read Scotsman’s response to me. I treated him the same as he treated me.

    Static simply means something doesn’t change. So I was merely saying the demand curve was not changing, which was obvious from the context.

    BTW, I did some Googling to see how the term was used. One use referred to “static demand” for cereal in Europe being expected through 2020. I really don’t think that they were saying the demand for cereal was inelastic, nor did I find any other source claiming “static demand” meant inelastic (although the terms did appear on many pages together).

  59. 59
    Kary L. Krismer says:

    By wreckingbull @ 57:

    Remember Meshugy? He was a persistent little bugger, but he was a decent and respectful dude, even though he thought homes would appreciate forever.

    I don’t have the history here that the rest of you do, or even probably the history on any realty related website that some of you do. So for me the repeated mocking that “Seattle is special” here and on other sites gets a bit old and seems bizarre because I never really witnessed what it’s a response to.

    I will say in real life I have run into a number of people that did think real estate would never go down. I guess that’s what happens when locally prices hadn’t declined for something like 25 years. But in my prior practice I’d periodically run into people from other parts of the country where their real estate had collapsed. And also, never say never. That’s part of what got California into trouble with their energy deregulation–they thought prices would always decline.

    Anyway, the future isn’t a reflection of the past, but a lot of people on both sides like to think that. The future is far more complex.

  60. 60
    David Losh says:

    RE: Kary L. Krismer @ 59

    What?

    Let me help you here. This is getting overly complicated. Nobody cares. The discussion about supply has been going on a long time here. The only conclusion has been that we can’t quantify the supply because so many people would like to sell, if they could.

    That leads us to the bantering about declining prices, the collapse of the global economy, and finally who would buy a house in today’s market. The phrase catching a falling knife on the way down comes up a lot in these discussions.

    Then we go into whether Seattle will follow San Diego’s price decline and what makes people think Seattle will fair better than the rest of the country. Please see the pink pony post over on the forum.

    BTW, LOL, IMHO, demand either is growing or declining, that’s what makes a market place.

  61. 61
    Kary L. Krismer says:

    By David Losh @ 60:

    Then we go into whether Seattle will follow San Diego’s price decline and what makes people think Seattle will fair better than the rest of the country.

    At this point is that even a relevant concern? I’d argue it would be coincidence in any event, but clearly given what’s happened to the worldwide economy, if Seattle goes down in the future at the same rate as San Diego in the past, it wouldn’t be as much because of the prior price action going up as it would be because of the economy.

  62. 62
    David Losh says:

    RE: Kary L. Krismer @ 61

    Geez!

    This is getting overly complicated. Nobody cares.

    That leads us to the bantering about declining prices.

    The phrase catching a falling knife on the way down comes up a lot .

    Then we go into whether Seattle will follow San Diego’s price decline.

    Please see the pink pony post over on the forum.

    You’re having discussions with yourself about symantics.

  63. 63
    Scotsman says:

    If the DOW drops to 4,000 does Seattle’s median home drop to $225,000? 4000 on the DOW correlates with pretty significant deflation, high unemployment, and the loss of additional trillions in wealth/capital. Obama’s higher taxes won’t help either. If you’re into technical analysis, this is a pretty good case:

    http://www.chartoftheday.com/20090227.gif

  64. 64
    Kary L. Krismer says:

    RE: Scotsman @ 63 – I think you could argue that either way. If the Dow drops to 4000 that’s a lot of money that left the market too, at least at to certain groups. That money has to go somewhere (treasuries, gold, real estate, etc.)

    I agree with you on the taxes, especially the ones that hit businesses. To get businesses to do more you need to change the risk/reward ratio, and the easiest way to do that is reduce or eliminate taxes, not increase them. But until he comes up with a bank strategy that works, it probably won’t matter much.

  65. 65
    gameboy says:

    Kary, this is an advice from a totally uninvested third party…

    When you make a silly mistake, it is always better to just say “oops, my bad, that was silly, of course I meant…”. This makes you look like a reasonable well adjusted fellow and makes your posting more valuable to read.

    When you make a silly mistake and you keep denying that you made a mistake and come up with really twisted logic to defend that mistake, you just come off like a stubborn, bull-headed person who believes that he never makes mistake and it is just a waste of time to have a reasonable debate with that person.

    Be a bigger person, admit that you made a silly mistake and move on. Every “Googled” excuse you come up with just notches you down lower.

    Sorry about the OT discussion, this will be my last post on this matter.

  66. 66
    PublicEnemy#1 says:

    I am still of the opinion that most people are going to be truly shocked at how low prices will go on the West Coast.

    Flyover country is going to escape relatively unscathed with the exception of a few markets, most of whom are declining for reasons other than an overheated market.

    Anyone ever visit http://www.housingtracker.net?

    It covers, usually weekly, the latest median asking prices and inventory levels.

    There are plenty of places in the U.S. that never went crazy during the bubble area and not all places in flyover country are depressed areas like Detroit and Cleveland.

    Yes, a lot of the Rust Belt areas got hit hard by the auto and manufacturing downturn, but look at places like Nashville, Louisville, Cincinnati, etc. Inventory is down from previous years and median prices are down, in dollar terms, very little.

    Smaller cities that are below the Rust Belt line and above the Florida Sunshine market. Basically, areas that are along the Mason Dixon line and away from the Coasts. Places that manufacture items that people actually NEED to live.

    Take Cincinnati vs. Seattle… Which is better poised for survival in a downturn? A town that makes airplanes and software that nobody wants or needs to have in order to live, or a town that manufactures toothpaste, soap, corn flakes, canned goods, etc.

    These cities, IMHO, are going to be stronger this Spring than the West Coast.

    Why?

    Housing affordability…

    A home that sells in Seattle for $500K sell in these places for around $100K.

    I don’t want to get into an argument about how much more extra special Seattle is, I am just looking at inventory levels, median prices, etc. and seeing that, at some point, a lot of people are going to reconsider smaller metro areas where you can easily get from Point A to Point B without a toll road, massive traffic, etc.

    Just to clarify, for me, the West Coast also extends from Seattle to Boise, San Francisco to SLC and San Diego to Phoenix.

    Why? Because those places got VERY overheated and are now crashing.

    Look at someplace like Boise… A horrible job market, high desert, snow in the winter, etc.

    Boise had NOTHING to offer people other than cheap housing way back when…

    Now, the jobs are disappearing (Micron anyone?) and there is nothing to support the home prices, just like Bend.

    I am not saying we will see prices drop in Seattle to Louisville levels ($162K being the current ASKING price median in Louisville), but I am pegging a slightly sub $200K median in Seattle Metro when all this unwinds.

    Those $500K West Seattle homes will be just below $200K when this is all done.

  67. 67
    Kary L. Krismer says:

    RE: gameboy @ 65 – It’s not a mistake of anything but perhaps terminology, and I’ll still deny that. Go back and read what I wrote and they dispute the substance of what I was saying.

  68. 68
    deejayoh says:

    By Kary L. Krismer @ 64:

    RE: Scotsman @ 63 – I think you could argue that either way. If the Dow drops to 4000 that’s a lot of money that left the market too, at least at to certain groups. That money has to go somewhere (treasuries, gold, real estate, etc.)

    Huh? Dow drops by 4000 and that money goes nowhere. it was just paper profits that disappeared. poof. gone.

  69. 69
    Kary L. Krismer says:

    RE: deejayoh @ 68 – The net effect of each transaction is zero (or close to it) because for each seller there’s a buyer.

    But what I’m trying to get at is that in a declining stock market people are generally getting out and putting their money elsewhere. To the extent it’s foreign investors getting out, then it’s probably less likely that the money would go into other assets in this country. But for people pulling their money out, it has to go somewhere else. That, for example, probably explains most of the recent change in gold prices.

  70. 70
    deejayoh says:

    yes, but when there is no seller or buyer – because there is no transaction – that phantom equity goes away and the holder doesn’t get the opportunity to put here money elsewhere.

    What percent of stocks trade every day? half a percent? Thats the money leaving the market and going elsewhere. Everybody else is just floating on the tide. And when the market drops 50%, that’s a lot of lost equity that isn’t going anywhere

    It is decidedly NOT a zero-sum game except for those that are making trades – which is a small percentage of those that are in the market.

  71. 71
    Kary L. Krismer says:

    RE: deejayoh @ 70 – I’d agree with that. Bill Gates has never been worth what the numbers indicate, because if he had to liquidate in a short period of time Microsoft stock would be under $1.00 pretty fast.

    But somehow there always seems to be a buyer. For example right now some people are apparently buying bank stocks. I have no idea why given the fact their net worth is subject to question and the government is threatening (or actually) diluting any ownership interest. Given the latter (and what happened to the $8B of private money invested in WAMU), I just don’t understand why there are any buyers.

    Also, you could make the same argument about money in bank accounts–that it’s phantom equity–due to the multiplier effect putting money in a bank has.

  72. 72
    The Tim says:

    By Kary L. Krismer @ 71:

    I just don’t understand why there are any buyers.

    Think about the economy of Las Vegas, and you may begin to understand.

  73. 73
    Scotsman says:

    RE: Kary L. Krismer @ 64

    OK, I’m not going to bother getting into this with you again Kary, but I hope you realize that as the DOW has fallen, very little of the money has been traded out and gone into treasuries, real estate, etc. The vast majority of it has been sitting in pension funds, retirement accounts, etc. That money or wealth has flat out been destroyed- “POOF” and will not be seen again. The impact on net worth, spending habits, future expectations, etc. is very real. It is in the end analysis extremely deflationary as the losses play out through the economy at large. If you think it was “only paper profits” you miss the boat. It was future retirement spending, college savings that now must come from earned income, etc. There is nothing illusionary about it, and to treat it as such only shows ignorance. I’m happy to defer to you on matters related to real estate transactions, etc. but your comprehension of economics would benefit from more listening and less spouting.

  74. 74
    vermillionsky says:

    By Kary L. Krismer @ 69:

    But for people pulling their money out, it has to go somewhere else.

    I hear the teddy bear market is picking up.

  75. 75
    Kary L. Krismer says:

    By Scotsman @ 73:

    RE: Kary L. Krismer @ 64

    OK, I’m not going to bother getting into this with you again Kary, but I hope you realize that as the DOW has fallen, very little of the money has been traded out and gone into treasuries, real estate, etc. The vast majority of it has been sitting in pension funds, retirement accounts, etc.

    If by the last statement you mean that pensions and such have lost a lot of value because they’re sitting on stock, I agree. And I’d also agree that of the total paper losses, very little has been traded out. But do you disagree that there was a net outflow of funds from the stock market?

  76. 76
    Scotsman says:

    Kary, you used to be a lawyer- I expect a higher level of precision in your use of the language. I think I pretty much answered your question in my post @73. Your question, as posed, doesn’t make sense. Economics doesn’t make for good casual conversation or blogging. Specificity and precision count.

    “of the total paper losses, very little has been traded out” ?? Paper loses don’t “trade out” as they are losses, gone, poof, nothing left to trade in or out.

    “there was a net outflow of funds from the stock market” Do you consider “paper losses” an outflow? I’m not sure what you’re getting at here. Value/Wealth? Cash? What are “funds?”

    Let me take a moment to grind a personal axe, the idea that “paper losses” are somehow less real and of lesser impact than the net cash loss one takes when closing out a position. If I have $200K in my daughter’s college fund as of 1-1-07 and a dream that she’ll be going to Princeton in 8-09, I’m feeling pretty good. There’s a good chance I’ll go out and order that new sailboat I’ve always wanted to have in retirement, especially since I found a deal on one, and my wife is going to get the OK to redo the kitchen and family room. Now when I wake up on 2-1-09 and discover my “paper loss” of $150,000 in the college fund, things are going to change. My daughter doesn’t hit the campus for another 9 months so nothing has been sold, and the losses are only “potential” , but to the economy as a whole, they are very real. The boat won’t be bought, and the remodel isn’t going to happen. I’ll be having to pay the difference between what’s readily available in the fund and the cash cost of college out of my pocket , reducing my future discretionary income stream.

    Paper losses defer purchases to the future when cash has been replenished, credit purchases bring future purchases to the present, but at the loss of future purchasing power since you have spent both the future income and the interest expense to have it now. The fact the we as a society have so much debt (stealing from our ability to purchase in the future) and so many “paper losses” (reducing our ability to make future purchases) means that we’re pretty much tapped out for the next several years. That being the case, how do we rebuild our economy, or purchase houses at current rates? We don’t. Hence the issues at hand.

  77. 77
    Kary L. Krismer says:

    RE: Scotsman @ 76 – All I’m trying to get at is that when the market is going up, money is likely flowing into it, and visa versa (unless perhaps money is flowing from the DJIA stocks to Nasdaq or some such thing). The total gains and loses are much greater than the money flowing in and out, but I was focusing on the money going out.

    Think of it this way. Two years ago someone with $500,000 of Spiders (tracking the S&P 500) could have done at least four things:

    1. Sit tight (really bad move–now down about 50%).
    2. Invest in Seattle real estate (bad move now down about 10%).
    3. Put the money into 6 equal sized bank accounts (okay move 6% return).
    4. Invest in gold (good move–up about 45%).

    The original post I was responding to was the Dow going down to 4000. To the extent someone holding stock today thinks that’s likely, they’d be likely today to make decision 2, 3 or 4 (or something else), and unlikely to make decision 1. To the extent there are many such people deciding on 2, 3 or 4, that would be good for Seattle real estate, banks and gold.

  78. 78
    98115_Renter says:

    RE: Kary L. Krismer @ 77

    Seattle RE down 10%???

    Anyway, you can’t make these decisions in hindsight. This is all talk of chasing returns.

  79. 79
    Kary L. Krismer says:

    It was from 2 years ago–Feb 2007, not the peak of July, 2007. The NWMLS median for February was 430k, for July 480k. January was 382k. 48/430 is about 11.2%.

    I’d agree on it being hindsight, but I’m talking about someone who thinks the Dow will go to 4000. Such a person might be worried about gold at around 900.

  80. 80
    Scotsman says:

    If anyone here can explain to me why gold has the allure it does, I’m all ears. The real value of gold as an input in production processes, its commercial value, is significantly less than the current street value. I know people see it as a hedge against inflation and economic uncertainty, but I’ve never understood why. You can’t really carry it around and spend it like cash, and you as an individual can’t use it for anything else. It’s nothing more than another form of fiat money, an item all have agreed will be a store of value… just like the dollar bill it substitutes for. But at least you can start a fire with a bill, or blow your nose, or…

    The next great bubble is in gold, where people wake up to find that they own this chunk of matter that they can’t really do anything with, and that no one wants… because other than decoration and a very few industrial processes, it has no utility or real usefulness. It’s just weird to me, an illogical carry-over from centuries ago and misunderstandings about the validity of fiat verses gold backed currencies.

  81. 81
    David Losh says:

    RE: Scotsman @ 80

    Gold was portable. In my opinion diamonds took the place of gold years ago, but now it looks like gold is making a come back.

    We, in the United States don’t care so much, but gold and diamond trading in Europe, Asia, and the Middle East used to be a big deal. South America, not so much, because they transport dollars. They transport dollars in other parts of the world also, but it’s easier to hide gold, or diamonds for transport.

    In plain language, gold, diamonds, or suit cases of cash are to avoid taxation.

  82. 82
    jdc98119 says:

    harbored: I’m not in a rush at all. It will be years before we’ll see the affordable levels I’m considering. My point is that there are plenty of potential buyers but the pricing is way out of line. I hate the term “on the fence” because that implies potential buyers like me can be pushed over given a little incentive or if the house has some unique quality that will make me pull the trigger. This is how Realtors and clueless sellers think. Bottom line is that if I cannot afford it by traditional measures then I’m not going to buy. Sell me a SFH in 98119 for $250K and its a done deal.

  83. 83
    Kary L. Krismer says:

    RE: Scotsman @ 80 – Well unlike a dollar bill, it does have a more limited supply. But I agree with you it’s probably overvalued right now. That’s why I suggested it might not be the choice for flight to safety right now of someone moving from stocks.

  84. 84
    David Losh says:

    RE: Kary L. Krismer @ 77

    Geez!

    You’re three years behind the curve.

    In 2006 the cracks started to form with the peak of the Real Estate. Real Estate in my opinion was the safe haven for tech stock dollars.

    The problem started with mortgages being written at higher prices than the value of the Real Estate. Some smart financial engineer figured that easy credit could work for mortgages the same as appliances.

    That’s the simple version. money has been making money since 1987, then again a surge in 1998, and finally hitting a wall in 2007.

    If you didn’t cash out in 2006 and 2007, you’re screwed. There are no more “safe” havens.

  85. 85
    Mikal says:

    RE: PublicEnemy#1 @ 66 – What do they manufacture? If you give generalities you are a moron. This country makes next to nothing.

  86. 86
    Angie says:

    Public Enemy @ 66–that sounds a lot like whistling past the graveyard to me.

    A little googling finds that Cincinnati’s unemployment rate (currently, as of news stories in the last two weeks) is three points higher than Seattle’s (9.8 vs. 6.8), and Louisville was at 7.1 percent at the end of December, presumably worse now. The population trends of the last several years show Americans moving away from the midwest and northeast and and into the south and the west. Finally, poverty statistics about “midsized” cities are pretty grim compared to metropolitan areas.

    Taken together, I suspect that the reason those areas escaped the bubble was because people are poorer and demand is lower…and those unemployment numbers sure don’t look like they’re going to help buoy the prices out there

    So my house might end up being worth $50K in two years–but yours probably will too, my friend.

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