Revisiting Jim Cramer’s 2007 Prediction for Seattle Real Estate

Jim CramerJim Cramer, September 2007:

Don’t you dare buy a home now. You will lose money.

[Real estate agents complain, insist that real estate is regional, and there are some places where it is a good time to buy. Cramer responds…]

Seattle, and 10005 are the only two. Maybe Montgomery County in Maryland. Three. That’s it.

So, according to Jim Cramer, September 2007 was a good time to buy a home in Seattle. Everywhere else, home buyers were setting themselves up to lose money, but not in Seattle.

Let’s have a quick check on how that’s turning out.

September 2007
King County median SFH price: $450,000
YOY appreciation: +5.9%

May 2009 (20 months later)
King County median SFH price: $375,000
YOY appreciation: -14.8%
Total price change: -16.7%

Whoops. And for those of you keeping score at home, the drop in Seattle’s Case-Shiller HPI was even more steep, falling 22.2% from September 2007 through March 2009 (the latest data available). In other words, if you bought a Seattle-area home in September 2007 with 20% down, your “investment” is now most likely completely gone.

Not that anyone really thought that Jim Cramer had any credibility (anymore/ever) anyway, but it’s certainly entertaining to revisit proclamations like this once in a while.

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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.

15 comments:

  1. 1
    anony says:

    Calculated Risk has been ripping into him too.
    http://www.calculatedriskblog.com/2009/06/cramer-gets-confused-on-housing.html

    Also can’t forget John Stewart, just for laughs.
    http://www.thedailyshow.com/video/index.jhtml?videoId=220534&title=intro-brawl-street-get-ready-to

    He sure gets a lot of attention.

  2. 2
    Scotsman says:

    BooYah!! He’s… MAD!!

    I like the site where a monkey throwing darts at stock picks has a better net return. Double BooYah.. with cowbell!

  3. 3

    I THINK SCOTSMAN AND “THE TIM” SHOULD BE FINANCIAL ADVISORS: THEY MISSED THEIR CALLING

    The two of them seem to be batting at least 750; while Cramer sounds like a 100 batter at best.

    Did you bloggers see Cramer and the FDIC chairwomen on a CNN townhall meeting a couple months ago? I couldn’t tell which of them I distrusted more….LOL

    Cramer tells the audience the way to revive housing is simply reduce fixed 30 yr interest rates to 3.5% and the brainless audience loudly clapped their hands like trained seals [maybe the audience was paid to be there?]. The FDIC chairwomen smiled and nodded her head “yes”….like the whole Mad circus act was rehearsed before hand.

    Yes, the way out of the current bubble bursting is try to make a new growth bubble even worse.

    Hey Scotsman, you mentioned 3.5% fixed mortgage too…..how the Hades to you pull that rabbit from an already approximate 30 YR 4.6% “Treasury Bond Hat” without stimulus debt supplementing the minimum 5.5-6.0% 30 yr fixed mortgage interest it realistically takes for the bank to make a reasonable profit?

    See my 6/2009 proof:

    http://www.treas.gov/offices/domestic-finance/debt-management/interest-rate/yield.html

  4. 4
    Kary L. Krismer says:

    I think Cramer’s call then resulted in one of my first posts at RCG. My response was his prediction caused me great concern about our market. Turns out the concern was warranted. Cramer is someone you use as a contra-indicator.

    BTW, there are three Daily Show clips on the feud between them. About the best 15 minutes of TV ever.

  5. 5
    anony says:

    The Cramer interview clips aren’t nearly as funny as the Daily Shows leading up to it.

  6. 6
    Kary L. Krismer says:

    RE: anony @ 5 – Agreed. I was referring to the three leading up, in which the first was more about CNBC and Rick Sanatori (sp?).

    Cramer probably really did CNBC a lot of harm getting involved in that. It was even referenced in a Jeopardy question (answer) the other day.

  7. 7
    Herman says:

    RE: softwarengineer @ 3 – Why did Cramer say 3.5%? Is it just an arbitrarily low, subsidized figure? Why not 2.5% Or less?

    I have an idea to revive housing. Government backed -1.5% interest loans. And a free latte. The more you borrow, the more the bank pays you for the next 30 years. That would really get the pricing rising again.

    I would buy a Ballard poo-box craftsman for a billion dollars. At that APR I’d only have to pay back nine hundred million or so over the life of the loan.

  8. 8
    WestSideBilly says:

    Not that anyone really thought that Jim Cramer had any credibility (anymore/ever) anyway, but it’s certainly entertaining to revisit proclamations like this once in a while.

    Tim, while we (bubbleheads) may not place an ounce of credibility on his word, other people do. I’ve seen several stocks shoot up 5-10% in a single day after Cramer recommended them as a strong buy, contrary to the rest of the sector and/or general market. It doesn’t make sense to me; apparently people haven’t seen the analysis of Cramer’s picks over the years.

  9. 9
    Scotsman says:

    RE: Herman @ 7

    “I would buy a Ballard poo-box craftsman for a billion dollars. At that APR I’d only have to pay back nine hundred million or so over the life of the loan.”

    Sure, it sounds like a winning deal, but the taxes are $300 million. Where do you think those subsidies come from? ;-)

  10. 10
    Joel says:

    RE: Scotsman @ 9 – They’re free duh! Anything the government provides is free!

  11. 11
    Kary L. Krismer says:

    RE: WestSideBilly @ 8 – Most the people who watch CNBC believe CNBC (unless they’re looking for contra-indicators).

    Most the people who watch Fox News believe Fox News.
    Most the people who watch the NBC 24 hour news channel, believe it.

  12. 12
    Teacher_Greg says:

    Long time reader, sometimes poster, patient real estate shopper, former condo owner (sold Oct ’06). Now that I have the bio out of the way, I was wondering if you guys could do a post/some analysis of the next wave of mortgage resets. Is this going to be another body blow to the economy? Is this going to be another “if only we saw it coming” style catastrophe coming to a nation near you in Spring of 2010? Or is it more like kicking a guy while he is down and while it certainly won’t help things, it will not have the impact that the first collapse — credit freeze — etc etc did?

    I mean Kramer is now calling a bottom in housing, will he look like (an even bigger) a$$ come next summer?

  13. 13
    The Dude Abides says:

    I watch Cramer nearly every day. You guys are too hard on him. He actually has a good grasp of Wall Street and has been a good commentator on the folly of FAS/FAZ, the machinations of hedgies, and the catastrophic consequences of FASB 157. That said…he is a terrible individual stock picker, changes stances so much as to be dizzying, etc.
    And, yes, I am the guy who has a hard copy of ‘Ten Winners of the New World’ … possibly the worst investment advice ever, and I mean ever, given.

  14. 14
    Mike2 says:

    Montgomery County Maryland hasn’t fared that well either. The nicer / close in areas – Chevy Chase, Bethesda and Potomac are still strong. But there are tons of homes 50% off peak in the outlying/low end areas like Montgomery Village, Germantown, Gaithersburg, Rockville, North Kensington and even Silver Spring (partly inside the beltway).

    This in an area with an unemployment rate that is half the national average.

  15. 15
    Steve says:

    I used to be a big fan of Krammer and recently kinda went luke warm on the guy but this week finished my viewing every day. His jumping around saying go buy because the housing bottom is here just made me think “Well the guy is just a shill after all”

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