Poll: A year from now, Seattle-area homes will cost…

Please vote in this poll using the sidebar.

A year from now, Seattle-area homes will cost...

  • ...more. (13%, 23 Votes)
  • ...less. (68%, 122 Votes)
  • ...about the same (±2%). (19%, 34 Votes)

Total Voters: 179


This poll will be active and displayed on the sidebar through 09.12.2009.

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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.

16 comments:

  1. 1
    David Losh says:

    While we are at the last of the Congressional vacation and mom, dad, and the kids are set for the school year, every body settling into thier new homes, the last of the great housing debate can come to a close.

    In two weeks Congress will be back generating disturbing news about the economy. The claims will be that Health Care will bankrupt us, and the auto industry needs more help. Unemployment is rising and as Congress debates the news will be more and more disheartening.

    The spin of the Christmas Holiday shopping will be flat or less than last year. People will stop spending. They don’t need to spend at the store.

    Let’s say you want to buy a house. You can go to craiglist and agree to take over some one’s loan. If it is thirty year fixed and you have money to put down why not apply that money to some one’s principle balance to amortize the laon quicker? You would set up a blind escrow account that will make the payments directly to the bank from an escrow account of mutual acceptance. You could cash out in ten years, or just pay it off. You would hold a quit claim deed in the event something happens, better yet an attorney would hold the deed.

    My point is that we will see a shadow economy for years to come. That won’t be good for Real Estate prices or the economy. We will have to get to cashe before we can leverage again. The quickest way to do that is to pay off what is already in circulation.

  2. 2
    Kary L. Krismer says:

    RE: David Losh @ 1 – First, most deeds of trust have due on sale clauses.

    Second, I’m not sure why anyone would want to go that route and have their finances possibly affected by a third party (reference either the buyer or seller being affected by the other).

  3. 3
    db says:

    Good articles re Seattle RE today:

    http://www.nytimes.com/2009/09/05/business/economy/05charts.html – Seattle #1 in commercial loans in arrears

    http://seattletimes.nwsource.com/html/localnews/2009814427_bravern06.html?syndication=rss – catch the bit burried in there re condo pre-sales. Only 1/4.

  4. 4
    softwarengineer says:

    RE: Kary L. Krismer @ 2

    Yes Kary

    I agree with David’s direction but when the “rubber hits the road”, who in Hades with cash now-a-days has that kind of cash for Seattle real estate and more importantly, if they have the cash and the brains to save, why in Hades would that group invest in RE?

    We need a poll to put light on Tim’s poll….how many people voted Seattle RE won’t go down and have a massive savings account outside of RE too? LOL

    Even the very rich are holding a crucifix to RE investing now-a-days. They’re too busy saving. LOL

  5. 5
    Scotsman says:

    David Walker: “America now owes more than Americans are worth—and the gap is growing!”

    For this one reason alone homes will cost less each year going forward for some time. We haven’t even stopped digging the hole, let alone started to fill it in. And until we do, home prices will continue their decline.

    “Mr. Walker’s own speeches are vivid and clear. “We have four deficits: a budget deficit, a savings deficit, a value-of-the-dollar deficit and a leadership deficit,” he tells one group. “We are treating the symptoms of those deficits, but not the disease.”

    http://online.wsj.com/article/SB10001424052970203585004574392620693542630.html

  6. 6
    Scotsman says:

    Is the Federal Government just another version of Aubrey II ?

    “I can get ya anything that you want…”

    http://www.youtube.com/watch?v=BGRN39oifsE

  7. 7
    David Losh says:

    RE: Kary L. Krismer @ 2

    Foreclosure also affects your finances. A blind escrow account pays the mortgage. The bank is never informed of a sales. The Quit Claim Deed is held by the attorney. This was pretty standard at a few times in the past thirty years.

    If you can not refinance or finance a property at the face value of the Note the bank has the right to foreclose.

    They did away with assumable loans and wanted non judicial foreclosure as recourse.

    Does that make sense today? How actively do you think a bank is going to pursue a performing Note? How would the stock holders react to that? How about the investor? The borrower does have the right to contact and negotiate with the Note holder. They don’t have to respond but I think they would pay attention to a bank trying to foreclose on a Note that is paying.

    You can say we are in new territory, but as an investor who has never had credit, never had income, and never qualified for a loan, until recently, I can state as fact there is another way to do business without a bank. Banks are the enemy. We are at war against compound interest. Most investors get that.

    All the problems today stem from the fact that mom, dad, and the kids were sold property based on investor standards of return. Now that we are all in the investor boat you have to beat the bank.

    You can whine around about how screwed we all are or grow an appendage and do some screwing.

    Business is War. There are no rules. You fight or die.

  8. 8
    Kary L. Krismer says:

    RE: David Losh @ 7 – I wrote about this before, about a year ago, over at SREP, but it was the Garn Act (federal) that made due on sale clauses enforceable. Before that our state Supreme Court held that they violated state law. In my piece I noted that most the states with laws similar to ours were places that were hard hit (e.g. CA, AZ, FL from memory–Google Krismer and Garn act to find out for sure.), and that repealing the Garn act would be a good way to help the markets in those states (without any investment of federal money).

    Anyway, I agree it doesn’t make sense to not allow an assumption, but I think you’d have a hard time getting an attorney (or escrow) involved in the process today since it is clearly in violation of the contract.

  9. 9
    Kary L. Krismer says:

    Here’s what I wrote at SREP–it’s unusually short, so I’ll just quote it here:

    Let me begin by noting I do not purport to be an expert on this subject. Most of what I’m about to right is from memory, with only the specific statute and case names having been looked up. That said:

    In 1976 the Washington Supreme Court restricted the use of due on sale clauses as an improper restraint on alienation, absent a showing that the enforcement was necessary to protect the security. Bellingham First Fed. Savings v. Garrison, 87 Wn.2d 437. That decision was based in part on decisions from other parts of the country, most notably, California, Arizona and Florida.

    In the early 80s, the Congress responded by preempting state law, making such clauses enforceable. 12 U.S.C. 1701j-3. So now, due on sale clauses by banks are enforceable. (As a side note I think this only applies to bank loans, and Washington’s case law also only applies to bank loans.)

    Quite frankly, I really doubt there was a reason for this legislation back in the 80s, other than for politicians to obtain campaign contributions. But the time has now come to repeal this legislation.

    Due on sale clauses are standing in the way of people who cannot make their payments selling to people who can. By repealing this act, there would be instant relief in some of the most hard hit states, including California, Arizona and Florida.

    The repeal of the act might also be a solution to the problem with short sales. If someone is slightly upside down, some buyer might be willing to take over the payments on the chance that property values would appreciate in the future. Without formal assumption of the loan it would be a relatively low risk transaction. And again, it could get buyers in trouble out of their bad situation.

    The beauty of this proposal is I think it would apply to all existing loans. The clauses are enforceable only due to federal preemption. Remove the preemption and the preexisting state law would once again be applicable.

  10. 10
    Jonness says:

    Ira:

    I love your ad!

  11. 11
    Indy says:

    I don’t think the “loan-assignment” concept makes sense in our current environment. As far as I understand – it was one of many creative, unconventional financing responses to the high inflation rates of the late 70’s / early 80’s. Buyers couldn’t get anyone to write new, low-rate mortgages, and so they tried to “adopt” the rates and payments on old, existing mortgages. Sellers couldn’t sell because buyers couldn’t get cheap credit. But the rate of “new mortgage creation” business (and all those useful fees) threatened to drop precipitously for the banks if these arrangements were not prohibited.

    But I don’t believe that math works out in the current environment, where prices are declining and rates are rock-bottom (and where the government will do anything and everything to help the banks extract fees and return to solvency). Why would someone adopt a higher-face-value note, at a higher or adjustable-time-bomb interest rate, when they can get a 30-year-fixed, historically-low-interest-rate, next-to-nothing-down, loan today? I’m open-minded about it though, so if you can show me some numbers that demonstrate the concept I’m willing to change my mind.

  12. 12
    Kary L. Krismer says:

    RE: Indy @ 11 – You’re right that the motivation do to the act is different now, but I think you’re wrong that there’s no motivation.

    Back in the 70s/80s it was because of the interest rates jumping up so much. That meant that the existing loan had value to the existing owner. It’s sort of like how if you have a great lease (low rent that runs out for at least 10 years), you can sell your business for much more money. I hadn’t thought of it before, but perhaps that is what kept prices from falling in Seattle during that high rate environment. The sellers were realizing on their mortgages? Very possible.

    Now the motivation is different. It’s more like the ads you always see in the want-ads where someone is selling their car only requiring that the buyer take over payments. For a buyer wanting to move into the property, that has 3.5% down, there’s really no reason at all to do this, and a lot of reasons not to. For the seller it’s perhaps their one best chance of avoiding foreclosure, but also has risks. On the buyer side it probably makes the most sense for those wanting to load up on rental properties–and there are a good number of such people out there. For one thing, I think such sales require 25% down with a new loan, so for the rental buyer it would really conserve capital.

    So before it was that the seller had something valuable that they could sell along with the house, and now it’s more that they have something they just want to get rid of.

  13. 13
    TJ_98370 says:

    By Jonness @ 10:

    Ira:

    I love your ad!

    Too funny. I did not recognize Ira as being the “Starving Realtr” at first.

  14. 14
    David Losh says:

    RE: Kary L. Krismer @ 12

    The point would be to make a down payment directly to the principle balance and amortize the loan quicker.

    Every time a new loan is generated there are fees and a new amortization schedule. The way things are going today it will take decades to get rid of all the over value Notes that have been traded.

  15. 15

    “Too funny. I did not recognize Ira as being the “Starving Realtr” at first ”

    I wonder how many people are actually clicking on the ad, or if people just think it’s just a weird photo.

  16. 16
    Sara says:

    RE: Ira Sacharoff @ 15

    Guilty, if it weren’t for all the comments i would have passed it off as a funny picture!

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