Puget Sound Counties November Update

Let’s take a look at November NWMLS statistics from around the sound. Unfortunately, I’m a bit behind in updating the cool interactive charts, so a few static snapshots will have to do for this month. You can of course still download the spreadsheets in Excel 2007 and Excel 2003 format.

Here’s our usual table of YOY stats for each of our seven covered counties as of November 2009.

November 2009 King Snohomish Pierce Kitsap Thurston Island Skagit Whatcom
Median Price 6.3% 11.6% 5.0% 7.5% 8.9% 24.7% 24.1% 7.8%
Listings 19.2% 22.2% 21.4% 26.4% 13.7% 2.1% 2.1% 10.9%
Closed Sales 81.1% 120.1% 81.1% 55.6% 59.6% 86.4% 162.8% 87.9%

Here’s a simple chart of closed sales in each county in November 2008 and November 2009:

Closed Sales: November 2008 & 2009

Every county around the sound got a nice closed sales boost from the combination of a cruddy November 2008 and the fake expiration of the homebuyer tax credit. Sales in Snohomish and Skagit were more than double 2008.

Here’s the comparison of median prices in each county at their respective peaks and in November 2009:

Thurston is still turning in the smallest overall decline at 18.5%, while Island and Skagit have both hit over 30% so far. Still no clear sign of a bottom anywhere around the sound.

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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.


  1. 1
    HappyRenter says:

    Thanks Tim for these nice charts. I am interested in seeing the same charts for closed sales and median prices for the different Seattle neighbourhoods. Can I find this somewhere? Thanks!

  2. 2

    Ring of Fire

    remember the ole Johnny cash song:

    “….down, down, down….in that ring of fire…”

    That’s Seattle home prices.

  3. 3
    b says:

    Really puts into perspective how truly deep last years “end of the world” sales drop was.

  4. 4
    EconE says:

    Off topic.

    By ARDELL @ 27:

    Interesting story, I really. I sold it short. I submitted an offer in 2008 and WAMU turned it down. A year later the same buyer offered $150,000 less and they approved it. Odd, but true. When I submitted the offer in 2008 I was not behind in my payments. I had to be behind in the payments and on the Trustee Sale list before they would consider the offer, by then they got $150,000 less plus the missed payments. So they lost $200,000 by rejecting the 2008 offer offhand. Go figure.

    It appears that $300,000 was lost rather than the $200,000 claimed.


    Why should I EVER trust a Realtor?

  5. 5
    AMS says:

    RE: EconE @ 4 – I guess the “So they lost $200,000 by rejecting the 2008 offer offhand,” was meant to add another $200,000 to the losses.

    But never once did she correct any of the rest of us that continued to bring it up.

    I have my own opinion, and I’ll let you decide if she was deceptive.

  6. 6
    AMS says:

    “Here’s the comparison of median prices in each county at their respective peaks and in November 2009:”

    I’d be nice to see 2008 data here so we can see just how stellar 2009 might be. Peak, 2008, 2009.

  7. 7
    Scotsman says:

    RE: EconE @ 4

    Originally closed Sept. 2007- after the August mortgage collapse. You would think a Realtor could see what was coming by then.

    A friend of mine closed that same month on his $800K dream home, then bought a second “investment” home not too much later, both with “funny money” loans. He’s lost both of them, and now lives with his wife and two kids in his mother-in-laws basement. Some people know so much they never need to listen to others or think things through.

  8. 8
    Scotsman says:

    So I guess the charts above do a pretty good job of refuting the idea that rising closed sales mean higher prices. How many folks will see the increasing sales and decide that means increased demand? How many will further assume increased demand means higher prices are inevitable? Where is Lennox Scott when we need him?

    One issue going forward will be convincing folks that relationships that have held in the past may not be true in the current economy. Many will be shocked to see prices continue to fall in the face of rising sales, or interest rates headed up in a deflationary environment. Just because such relationships haven’t been the norm during the last 30 years doesn’t mean they aren’t possible. We’ve got to continue to focus on the larger context, both the political and economic environments, when working to identify the relationships between variables.

  9. 9
    One Eyed Man says:

    RE: Scotsman @ 7

    These two listings are across the street from each other in Issaquah Highlands. Both were bought by Realtors in about 2006 for around a million dollars. Both were foreclosed this year and are on the market as REO’s for about 75% of the 2006 sale price.

    It seems to be a problem for a lot of agents. I think a lot of them were the “true believers.” It most cases, like Ardell, it appears it was a lottery ticket that didn’t cost much out of pocket or may even have paid them some cash up front. Unfortunately very few of them were winners and even fewer had the financial capability to cover the loss with their bookie.



  10. 10

    By AMS @ 6:

    “Hereâ��s the comparison of median prices in each county at their respective peaks and in November 2009:”

    I’d be nice to see 2008 data here so we can see just how stellar 2009 might be. Peak, 2008, 2009.

    One thing “wrong” with looking at the 2007 peak is that it was extreme and short-lived. Very few people bought/sold at those prices. While the median peak was $481,000 for King County, there were only 6 months above $450,000, and the median from February to July went up more than $50,000!

    With 20/20 hindsight I do think we were headed into exactly what a lot of other cities headed into–a speculator fueled unsustainable rise in prices. The mortgage crisis of 2007 short-circuited that, and kept our losses from being as large as what some other cities went through. But for that national even our local peak would have probably exceeded $500,000 easily, especially since even with that event we brushed up against $450,000 again a couple of times in 2008.

  11. 11
    AMS says:

    RE: One Eyed Man @ 9 – I have made very well on many deals, and I have lost on many other deals. That said, I would not suggest that to someone that it’s a great deal to buy something that I lost $350,000 on. There is a difference between lying and just telling falsehoods. I do agree, however, that Ardell didn’t plan on losing so much money. I do think it was also attractive to her to get the $34k up front, even if there was going to be a future loss.

    Remember there was a time when there were many people who thought that a more expensive house only meant you were making more money…

  12. 12
    AMS says:

    RE: Kary L. Krismer @ 10 – It might be expected that as incomes grow so do housing prices. Sure there is a lot of noise in the data, but falling incomes and rising home prices are not a likely combination. Similarly, I am yet to find a good example of falling home prices and inflation. If we are going to see any ‘high’ levels of inflation, then home prices will likely stabilize first.

    The 2008 prices would also help establish a trend.

  13. 13
    AMS says:

    RE: Kary L. Krismer @ 10 – One more comment on this topic.

    You correctly point out that very few homes sold at the peak values, yet many, basically all, owners valued their homes at those peak prices. However, if prices would have kept going up, then those 2007 prices would be considered low.

  14. 14
    Scotsman says:

    RE: Kary L. Krismer @ 10

    “The mortgage crisis of 2007 short-circuited that”

    This is a really good point- I’d go so far as to say Seattle was really just getting to a fever pitch when the events of Aug. ’07 brought everything to a dead stop in a few weeks time. It would be interesting to know how high prices would have gone if the money had continued to flow.

  15. 15

    RE: AMS @ 5 – I still think you people are being suckered by Ardell and her very crafty diversion of attention. The reason that the story of her house was brought up was to counter her current predictions. You’re focusing on when she bought instead of when she sold.

  16. 16
    AMS says:

    RE: Kary L. Krismer @ 15 – Quite honestly, and frankly, my personal opinion is that she is a lying [deleted—unnecessary name-calling]. Is that clear enough?

    (It is for this very reason that I suggest hiring various professionals.)

  17. 17
    Scotsman says:

    RE: AMS @ 16

    Oh come on. She was a struggling single woman, alone in a new town, an ethnic minority, just trying to provide for her children. She had to fight corruption, misogyny, and a host of adverse circumstances, all of which were beyond her control just to establish a foothold and credibility in the society she hoped to serve. She did it for the children, with the help of the village. Cut her a break.

  18. 18
    AMS says:

    RE: Scotsman @ 17 – Exactly right, if you believe her…

    (Let’s not forget about the hundreds of thousands of dollars in losses…)

  19. 19
    David Losh says:

    Ardell and I slugged it out about her Seattle Bubble post. She brought up some sentimentality about why you should buy rather than rent.

    Her point was we would bottom out at 34% off peak prices which would bring us back to the 2004 pricing.

    I started thinking about how that didn’t make sense so I researched a little bit.

    Inflation has been moderate for a long time. The price of housing has been a steady climb since 1998. Let’s even say inflation was 5%. If housing prices were keeping pace with inflation that would mean prices would double in 20 years. They actually doubled in 10 years or less. In the last three years of the bubble, home price appreciation was double digits.

    It seems to me there is a lot of room for prices to decline given the current circumstances with deflation.

  20. 20
    EconE says:

    RE: AMS @ 18

    I always loved the claim (literally) that she could “smell appreciation” in Kirkland.

    But anyhow…off on another tangent.

    I was down in Fort Lauderdale this summer…an absolute ghost town seemingly, with many many empty retail spaces.

    So…I started looking at condos there.

    Did you know that many…if not most units that have a negative value?

    You heard me right.

    I’d find rentals (privately owned waterfront condos) all day long listed at $800-$900/mo.

    The sales prices ranged all the way from the mid $100’s to the $200’s.

    However, in many of the buildings, homeowners dues covers everything but your phone putting them in the $600/mo range. They don’t list HOA’s on the MLS there…you have to ask.

    Taxes there on a 200k place would run roughly $300/mo as the millage rates are so high (a bit lower if you claim the homestead exemption)…you can check tax estimates for Broward County here…


    If you were given a condo for free, your monthly outlay would be $900 vs. $800 for rent.

    It was so crazy that I didn’t even need to consider the “special assessments” that are inevitible in condo ownership.

    It’s even uglier on the million dollar+ condos.

    Chew on that for a while.

  21. 21
    AMS says:

    RE: EconE @ 20 – “If you were given a condo for free, your monthly outlay would be $900 vs. $800 for rent. ”

    Small correction:

    “…would be $900 plus the cost of capital vs. $800 for rent.”

    HOA = $600
    Taxes = $300

    Cost of capital (direct or opportunity) is not included.

    So you have to come up with $100k to $200k and then you get to pay the $900/month and accept the associated risk and benefits of the ownership position.


    Just rent at ~$800/month.


  22. 22
    Ray Pepper says:

    “my personal opinion is that she is a lying [deleted—unnecessary name-calling]. Is that clear enough?”


    This is the webster definition of [deleted—unnecessary name-calling].

    I think you are way out of line………It appears you believe she should have stuck with an asset that was upside down 300k? Are you insane? I would call her an idiot if she kept paying on that. Furthermore I call Steve Tytler’s Broker pal in Az an idiot for paying on a home that is worth 250k with a Mtg debt amount of 500k. It will eventually be a short sale or foreclosure as well. People are only stupid so long.

    Just tonight I got call after eating at Cheesecake Factory (uuggh) that a Mtg Broker friend has short saled his home. I knew nothing about it. He was horribly ashamed. After hearing his situation I also said he would be an idiot to keep paying. Morality is out the windows friends and it comes down to common sense. In my LLC’s we have let go 6 homes go thus far in different states because they were toxic to the portfolios. Is there shame? Not one bit. We invested and lost. I buy stocks and not all are winners and I sell for losses and gains. Would I EVER hold onto a home upside down 300k? 200k? 100k? NEVER!!

    When all these properties were purchased we all made promises to pay. If we break our promise we lose the collateral. Right? That was in our contracts. Are people whores for not being able to sell their homes and move on with their lives?

    I assure you all this and I have said it maybe 50x here on Bubble. They are all coming back. People will not hold onto these upside down assets. Its not a question of if……………..Just when………..Family first ALWAYS and let the bashers bash away…..Listen to nobody. Its your money and its your life.

    A home is and ALWAYS will be an investment when you choose to Buy. It is nothing more and never will be.

  23. 23

    RE: AMS @ 16 – I think that’s going a bit far. She probably thinks she can predict the future, so she’s not a liar. (And no, don’t read anything into the fact I’m not mentioning the other comment–I’m not accepting that by not addressing it.) But I do think she’s done a fantastic job taking attention away from that fact by focusing on something earlier.

  24. 24
    AMS says:

    RE: Ray Pepper @ 22 – I know too many agents that have had the client’s pants down before the client realized his belt buckle was undone… Just sign here.

  25. 25
    AMS says:

    RE: Kary L. Krismer @ 23 – It’s tough to prove intent. Financial motive is one consideration. There is lying by omission–intentionally leaving critical details out.

  26. 26
    Ray Pepper says:

    Furthermore I ask you all this:

    What kind of NUT JOB would continue to pay on a MTG upside down 300k? I mean seriously……….I know I know…Someone who loves their home and doesn’t see it as an investment. I SAY BS….At the 1st sign of trouble it would be on the mkt as a short sale/foreclosure quicker then I can eat the Pretzels at Claim Jumper.

    Would a Priest continue to pay? (maybe) An elected official (they better). A Doctor…Well 1 of my sales this year the good doctor had to come up with 63k to close even after I educated him about a short sale…So yes, I guess a Doctor would……….. but heres the catch…………………The Doctor had the dough………………Most people don’t.

    There will be millions of American whores by your definition. They will keep coming and coming…..unless of course MTG CRAMDOWN……Nothing else…..

    Drop that rate to 2%?…Think HAMP will work??..THINK AGAIN IT WILL NOT WORK! Still upside down and in our Mobile Society it will be short saled/foreclosed at another date in the future.

    Bank on it!

    BTW this is not a campaign to SAVE ARDELL. This is my campaign to save everybody that is in this situation. Everywhere I go and everyone I speak to its the same thing over and over. My God Greenspan you really fucked up!

  27. 27
    AMS says:

    RE: Ray Pepper @ 26 – If a person had a high expectation of future high housing price appreciation, then he should pay if possible. Part of the problem with this whole ethical approach is that most business based lenders would do few, if any, favors for the borrower. In fact, with the packaging and selling of mortgages, there is little option for borrowers to work with those who own the debt.

  28. 28
    EconE says:

    RE: AMS @ 21

    Is there a cost of capital if you pay $0?

    Even then it’s more expensive to own.

    I can point to some ugly examples in Seattle also.

  29. 29
    Scotsman says:

    RE: Ray Pepper @ 22

    “In my LLC’s we have let go 6 homes go thus far in different states”

    What?? Gems gone bad?? Is that a bit of self justification I detect in your protestations?

    There are no gems out there right now. And what may look like a gem today will be dull pyrite within years. I’d even suggest betting against the Fed- because it’s made up of nothing but blow-hard puffery. The only thing that matters in the end is cash flow. and in a high unemployment, over capacity, non-producing, deflationary environment the cash you have and count on today will be gone tomorrow. Bet on that.

  30. 30
    Ray Pepper says:

    RE: Scotsman @ 29

    Scotsman I bought my 1st home in 1995. I have had about 50 GEMS and thus far 7 crappers. All crappers were purchased within the last 5 years. One could argue they were not that crappy but in my book if its not income producing and has no ability to generate appreciation its a crapper. I have NEVER held onto any real estate asset that doesn’t produce me monthly returns ESPECIALLY in a deteriorating asset environment. I have also purchased many horrible stocks including: CHTR,EXDS,MSTR,BSQR,FFIV,MLNM,SCLN, INSP, God I can go on and on…..

    So Yes, I have had GEMS gone bad…..But, I’m only 43 and wiser by the year. This last 5 years was an education for a lifetime and I continue to get educated more and more everyday that goes by. I’m fascinated by this recent market rally and extremely bearish going forward. However, investing 101 never fight the FED………I’m not betting into this mkt strength. Good God…Look at SRS..

    BTW where is Roubini?

  31. 31
    Ray Pepper says:

    RE: Scotsman @ 29

    Scotsman where are you placing your CASH?

    If I may ask? You are obviously the MOST respected BEAR on the Bubble.

    My 7 year old just loves your Avatar.

  32. 32
    EconE says:

    Here’s an interesting Seattle example.

    You can rent this Madison Park condo for $4000 a month…


    It’s been on the market a while so I’d bet you could negotiate it down to $3500.

    It’s also for sale for $1,775,000.


    Monthly Maintainance is $2107

    Monthly taxes are roughly $1050

    So, roughly a $3150 a month cash outlay if you plunked down $1,775,000.

    Pop quiz…

    How much would you pay for this place in order to save a few hundred a month over rent?

  33. 33
  34. 34
    Scotsman says:

    RE: Ray Pepper @ 31

    All cash- short term treasuries are the rule for everyone in my family. I’m hoping things hold together long enough for me to complete a process started a year ago- getting rid of any asset I have that can be converted to cash- boats, cars, etc. There is nothing I own now that I won’t be able to buy for less within a year or two, perhaps much less, so why keep it when the opportunity cost of doing so could prove to be very high?

    When the time comes I favor options trading over stock ownership- defined risk and potentially leveraged rewards. And they work just as well with the market going up or down. They have worked very well in the past.
    Income producing real estate and a retirement home are on the agenda once a sustainable upward trend in the economy emerges. This isn’t it.

  35. 35
    Ray Pepper says:

    RE: Scotsman @ 34

    How old are you Scotsman?

    What do you define as an exp of “Income producing real estate.” Please describe what you will buy, pay, rent it for, and expect your returns to be.

    My highest income producers are mobiles I have on their own land. I purchased all for about 40k and they rent for about 750-900 per month. I continue to look for these but they continue to get gobbled up. They are simply the best for income producing real estate with returns of greater then 20% each month.

    I have never been able to match the monthly income returns on any stick built home. Can you? Do you expect to?

    BTW, I too am holding a very high cash position, the most ever for my portfolios simply because I cannot find anything at the present time. Everything is getting gobbled up so quick at the auctions.

    Why would you NOT just take a long position in SRS if you feel the capital markets are impending doom? From 250.00 down to 7.00 makes it a very enticing long……..

  36. 36

    By Ray Pepper @ 31:

    RE: Scotsman @ 29

    Scotsman where are you placing your CASH?

    If I may ask? You are obviously the MOST respected BEAR on the Bubble.

    My 7 year old just loves your Avatar.

    Sniglet and Eleua are worthy competitors, it’s just that Scotsman posts more. I respect them all, and don’t discount what any of them have to say about the real estate market. I’m not about to proclaim Scotsman the King of the Bears. Crown Prince, maybe.

  37. 37
    see it clearly says:

    RE: Ira Sacharoff @ 36

    We haven’t seen Eleua at all recently, anyone know what he is up to these days?

  38. 38
    EconE says:

    RE: see it clearly @ 37

    Saw him recently commenting on ticker-forum.

    I think he’s more into sites like that.

    I do miss having him around.

    Damn smart guy.

  39. 39
    AMS says:

    RE: EconE @ 28 – The cost of capital for $0 is clearly $0, but usually these purchases are even worse once you factor in having to give up a $500,000, or $100,000 to $200,000 in your Florida example.

  40. 40

    RE: Scotsman @ 8

    You Got It Scotsman: Its Simple Supply and Demand

    When working folks’ wages are in short supply, the demand for stuff goes down. Deflation may be masked by higher retail prices, but let’s be real, who pays retail anymore?

    I will admit college tuition and medical expenses are inflationary, but that drum beat can’t go on as working level household incomes decrease [and don’t average in the top 1% of household incomes to equate phony household income increases, a lot of good that 1% does general retail trade anyway].

    A great article on why deflation matters in home purchase financial planning, states in part:

    “…In a recent article on lifestyle mistakes by mortgage borrowers, I gave an example of such a mistake that touched a nerve on the part of some readers. I said in the article that many borrowers would find irresistible the deal I labeled a mistake, and I was right. Some readers did find the deal I described to be irresistible, and they were completely convinced that I was wrong to say it was a loser.
    The borrower in my example had a 6 percent loan with a $200,000 balance and 10 years to go. She is offered a 5.75 percent refinance for 30 years that will reduce her monthly payment from $2,220 to $1,267. Although the borrower was not required to put up any cash, upfront charges amounting to $17,000 had to be financed — that is, included in the loan amount.

    The readers who said that this deal would have been irresistible to them focused on payment savings and ignored or understated changes in the borrower’s loan balance. They are payment myopic, which is a pervasive malady among households who never seem to be able to get out of debt….”


  41. 41

    RE: EconE @ 38 – I seem to recall him getting attacked when he’s here for some reason I don’t understand. So it’s not too surprising he’s not here much.

  42. 42
    AMS says:

    RE: softwarengineer @ 40 – Cash flow versus expense.

    There is an expense of $17,000 to refinance, but no cash flow, as it is rolled up in the loan. $17,000 to refinance $200,000? Monthly cash flow is improved, but at a high expense.

    It’s all about those “low monthly payments.” So many people suggest that principal balances don’t really matter…

  43. 43

    RE: Kary L. Krismer @ 41

    You and I Have Been Attacked Too….LOL

    The trick is to agree to disagree, not disappear from the website….some of my best advice comes from those I generally disagree with, but are willing to show their cards and rationale. Sometimes we never agree, but hopefully with smiles on both our faces.

    I’m also sure I’ve switched folks on their opinions too, and vice versa….its called intelligence.

    In Toastmasters we practice the art of persuasion and believe me, you never stop learning that art for the rest of your life.

  44. 44
    Ray Pepper says:

    RE: Kary L. Krismer @ 41

    We’ve all been attacked……………………………….Its why we come back……………………..Love it!!

    I think hes gone due to his bearish calls for the market to crash below the 6500 bottom.

    Same with Roubini. What happened to him? Never see him on CNBC anymore….

    Eleua maybe a bright guy but if you placed your bets with his calls you would have lost everything.

    At some moment in time he may prove to be correct but as each day goes by he becomes more erroneous with his calls of the crashing of the capital markets.

  45. 45

    RE: AMS @ 42

    I Like the Blogger’s Comment Below the Article:

    “Except when the house sells for $150K when you go to sell”

  46. 46
    AMS says:

    RE: softwarengineer @ 45 – I love it when people tell me how much their car costs in monthly payments…

  47. 47

    RE: Ray Pepper @ 44

    Roubini Shut His Free News Website Down

    As the economy worsens, free news websites become pay per view. Roubini joined that crowd. I wonder how long news papers can keep free websites going too?

    The quality of Roubini’s news went down too, too much false optimism hedging on welfare to the rich and we all know it just creates recovery with no jobs. Roubini admitted it, but never emphasized it as important. Lou Dobbs did the same thing with emphasizing real estate bailouts and concurrent good news economy blabberring [with jobs going down the toilet], soon all his audience disappearred in disgust. Roubini is in the same conundrum IMO.

    The trouble is, if Roubini’s NY University base is having serious budget problems, Roubini or the mainstream news would never tell us. I do know that NY, Cal and Florida are states sufferring horrifying budget crises and yes, state college funding gets butcher axed too. hence pay per view news….LOL….

  48. 48
    AMS says:

    RE: softwarengineer @ 45 – This reminds me, in part, of fuel economy.

    As a few people, “What gas mileage does your car get?” I expect some answer that reflects MPG. I’ve had some good answers, including some that describe driving conditions, weather, and so on. But then there are a few good ones, such as:

    “It costs $40 to fill it up.”
    “It doesn’t take much gas.”
    “About $20 per week”

    With other information the MPG could be figured out, but so often people concentrate on the cash flow without respect to expense.

  49. 49
    AMS says:

    RE: softwarengineer @ 47 – Traffic tickets will probably be increased $5 for the Judges’ retirement fund…

  50. 50
  51. 51
    One Eyed Man says:

    RE: softwarengineer @ 47

    NYU is a private university SWE so New York’s budget issues probably don’t directly affect them. They did lose something like 24 million in the Madoff scandal, but their endowment is about 2 billion so that loss probably wouldn’t affect Roubini either.

  52. 52
    Along for the ride says:

    SoftwareEngineer – cant agree with you more! ring of fire!

    I am a long time reader of Karls blog, and his main montra “Math doesnt lie” is nuts on!

    Folks, however this rides out I wish you all well, and blogs like these have been a god send allowing us further information and prepare as we see fit.

    Boy its going to be fun seeing prime rates back at 7% next year.

  53. 53
    Chris says:

    RE: Ray Pepper @ 22

    It clearly is immoral to break a promise (to pay a mortgage or anything else). By the logic of morality being out the window it would follow that it would be okay to buy a car with no money down and drive it without paying until it was repossessed. Is it a smaller dollar amount or a negative impact to your credit rating that makes that a bad choice? Maybe being $100k or more underwater is so oppressive that renegging on the commitment is preferable to breaking a very significant promise to pay (even if one has the ability to pay).

    Morality is not out the window. The high probability of concractual agreements being honored is part of what makes the US economy work – as opposed to the economy of Nigeria and other countries where a promise to pay has little meaning. I would not choose to do business with anyone who had such a cavalier attitude about breaking a promise to pay.

  54. 54
    EconE says:

    RE: AMS @ 48

    I’m always asked about my gas mileage.

    People are surprised when I tell them that I average about 25 MPG.

    I sure wish that MPG carried over to the track (6MPG +/-)

    The other question is “how much is an oil change”

    When I tell them $200, their jaws drop, but after I explain that it only needs to be done every 15,000 miles, their next comment usually is….

    “Let me know when you want to sell”.

  55. 55
    S-Crow says:

    RE: Chris @ 53 – agreed Chris. This is a real problem where people are choosing to walk away from their housing obligations. I can understand the argument when you have job loss, but from my perspective quite a few people were buying homes essentially broke anyway.

    We have a real social dilemma when people choose to only take their profits when they can make money but when they have their asses handed to them because of stupid financial decisions it’s ok to socialize their losses on other neighbors and communities who live within their means.

    In the escrow business, we are not afforded the opportunity to consult with people to help them with a mortgage as part of their long term financial management.

  56. 56
    David Losh says:

    RE: Chris @ 53RE: S-Crow @ 55

    Read the Note.

    The lender has the right to foreclose. The lender has recourse. The lender has all the recouses and the borrower just has to pay. If the fraud perpetrated by the Banking Industry and Financial Markets were kept to the United States that may be one thing, but people will literally starve in some countries. Dollars will be sucked out of the global economy. There will be a death toll.

    Talk to me about that morality before you tell me about a promise to pay.

  57. 57
    Ray Pepper says:

    RE: Chris @ 53

    I disagree 100% Chris. Morality has nothing and I mean nothing to do with it. Its a contract. If you break a contract you suffer the consequences. The consequences are you lose your home (collateral) and suffer serious credit ramifications. Your parallel to a car purchase is inept because we are talking 100’s of 1000’s of dollars.

    I was an investor long before I became a real estate Broker. I placed my funds in numerous LLC’s that were dragged down by investments that soured the portfolios. I never placed my funds in for MORAL reasons only for investment. Our LLC’s have numerous people like me in them but my vote counts as much as all the other people who placed funds in. On each of the properties in question I voted to return the properties to the bank. Two people disagreed but they were outnumbered. If the properties were to have remained in the portfolio as a group we would have lost another 160k thus far or 16k each as of Dec 2009.

    “I would not choose to do business with anyone who had such a cavalier attitude about breaking a promise to pay. ”

    Chris you can choose to do business with whomever you like for any reason you like. An investment for myself and family is to make money. If I want to give money away I have ALOT of nice charities at the top of my list. We took our lumps and adhered to the contracts we signed.

    Its always about families first, for nobody will watch out for you Chris more then yourself. If you believe people should and will continue to pay on Mtg’s that are upside down then you will be shocked at what you will be seeing in coming years.

    Go ahead and shoot the messenger but I’m here to defend all the people who have made a decision they never thought they would have to. Move on with your life and this too will pass. Life is far too important. Let the bashers bash.

  58. 58
    Ray Pepper says:

    Chris and S-Crow..Heres your moral play………………


    Not the walking away from Mortgages.

  59. 59
    S-Crow says:


    There are moral problems all over the World. I’m going to choose to stay on the topic Chris mentioned. There is a saying, “the borrower is the slave to the lender.” A conversation completely absent at the closing table (based on my experience) was that of “DEBT load.” On the TIL (Truth in Lending Statement presented to borrowers) it discloses how much the cost of credit will run over a fully amortized loan. It is a staggering amount if you decide to actually comprehend how much the cost is, unless you pay the house off early: a very wise thing. The primary conversations borrowers had (sometimes with agents present and LO’s present) at the closing table was one of “how much money I’m going to make via the equity gravy train.” One of the core issues facing lenders in the US today is how to curb social behavior of people that decide it is OK to walk away from obligations when you have the means to meet your obligations as difficult as it may be.

    Was I paying a premium for my office lease to be in business? Oh yes. Did I want to pay less the last two years? Oh yes. But, I signed a contract. As a small business person, I do not sign leases long term (served me very well) and I do not sign leases without the means to pay the entire lease without making a dime. In other words, I have the cash. Why do I have the cash? Spend less than you earn. And, borrow very little. Is my way abnormal? Yes. Because normal today for a lot of people means “broke.” Is my way of doing business for everyone? Nope. But I know several small business people who are massively in debt and it’s taking a toll on marriages, etc…

    When you have a society that moves from social norms of accepting law and order to that of, well, I bought my house in the summer of 2007 because I couldn’t lose in real estate and today my house has lost 25% of it’s value and that I/O ARM I signed isn’t so palatable now, so, I’m just going to walk away……………………that presents the ingredients for problems much more serious: no law and order resulting in potential chaos.

  60. 60
    AMS says:

    RE: S-Crow @ 59 – “On the TIL (Truth in Lending Statement presented to borrowers) it discloses how much the cost of credit will run over a fully amortized loan. It is a staggering amount if you decide to actually comprehend how much the cost is, unless you pay the house off early: a very wise thing.”

    Pay high interest money off as soon as possibly. Delay paying back cheap money as long as possible.

    Loan me $1B at 0.25%, and the interest payments will be a significant dollar value, but the value of the cash is greater than 0.25%, so I will earn a positive yield on the spread.

    When housing was going up 20% per year, 8% money looked cheap.

  61. 61
    S-Crow says:

    RE: Ray Pepper @ 58 – Yes, I read that Ray. I had a short sale seller tell me not so long ago (I think in October) that the only person to blame in his mess was himself. Refreshing when someone has the integrity to say that. I’ll bet this guy will be better for it in the future. Too many people worship at the Alter of Self and want to blame everyone else.

    Have a great Holiday Ray, Merry Christmas to you and your family.

  62. 62
    David Losh says:

    RE: S-Crow @ 55

    Let’s even forget about the people who were out and out swindled and go back to the myth of the global economy. Let’s talk about mortgage backed securities that are sold in a global market place for paper profits. It’s not just the thugs at BoA or Wells Fargo, it’s every country in the world with banks making home loans on over appreciated assets.

    Greece, just got a Moody’s credit rating warning. Massive land price appreciation. Spain, on the verge of a collapse. Peru, quadruple home price appreciation in the past five years. Dubai, Shanghai, Berlin, take your pick the same game was played out around the world, but you want me to give a bank more money.

    We are in store for a major correction in housing prices. The banks don’t care. They made their money by selling the Notes. They are collecting servicing fees. Banks have more cash than they know what to do with. The consumer on the other hand is struggling.

  63. 63
    David Losh says:

    RE: S-Crow @ 59

    Ahhhhhhhhh the investor in Real Estate argument. That must be it. All those people who were going to make a killing in equity.

    Sorry, but people were panicked into buying by hysteria.

    You have outlined the perfect argument for rational thinking and are comparing that to people who thought they were buying a home to provide for the family.

    You were smart, they were stupid. Because they are so stupid that they actually thought they were doing something good for their family they should just pay up for being stupid. Those ignorant, filthy, stupid, people who came into your company, and signed papers, for all that money, they could never pay back. Those stupid people should just stop thinking, and pay.

    Now let’s forget about what the contract says, don’t think about the specific recourses that are outlined in a fifty page loan document, just pay because you promised to pay.

    Come on, the banks wanted foreclosure. They went to Congress to get quick foreclosure. It’s a part of the legal document, so pulling a head trip on somebody who follows the contract, the bank prepared, is pretty lame reasoning.

  64. 64
    Ray Pepper says:

    RE: David Losh @ 63

    David this was one of your BEST Blog Entries EVER!

    Merry Xmas to you as well Tim and the Fam!

  65. 65

    RE: Ray Pepper @ 64
    Just curious Ray:
    Doesn’t your brokerage get subsidized by a lender, allowing you be as reasonably priced as you are, in exchange for you mentioning that lender to clients?
    I’ve got no problem with that at all, but….is this lender aware that you recommend homeowners walk away from upside down mortgages?
    I’m not sure how I feel about this one. Like S Crow, I choose to live frugally, always spend less than what comes in, and I have absolutely no attachment to looking successful. I also hate debt and view it as an albatross, so do my very best to not accrue it, and if I do, I pay it off as quickly as possible. Not saying this makes me superior, just one of my many idiocyncracies…And yes, when you sign a contract, you should read it and try to live up to it.
    But…in recent years lenders were going out of their way to demonstrate how you couldn’t go wrong taking out a huge loan with them, and all they seemed to care about was whether you had a pulse or not. They certainly have a lot of culpability here. Lending standards were way too loose. Blame government policies if you like, which encouraged banks to lend to people who had less money, were in minority neighborhoods, etc, but it’s not like these banks resisted. No, they were doing somersaults about how much lending they were doing, and then having these loans hidden, packaged, and sold. Some of these bankers should be in jail, not getting bailouts.
    Then they sit on their hands once short sales are proposed, and once foreclosure happens they sometimes keep the houses empty and off the market. I can understand the anger towards banks. They should be helping out communities while making a little money in the process, but instead greed got the better of them, they lost sight of the long term and their role in building and sustaining communities,and they should pay the price.

  66. 66
    Chris says:

    So, essentially what you’re saying is that you’re going to sign contracts with a promise to pay as a borrower. But what you’re not disclosing to the lender is that if this investment goes up you’ll honor the contract and make your payments; but if the investment goes down you will walk away and leave the lender with “collateral” which results in a loss for others to cover. If that is your position as you go in to these deals then it’s indefensible. I’d agree with your position if you were clear about that with the lender and said “hey, we should pay mortgage insurance because if by chance this investment goes south I’ll just walk”. But the spirit and letter of the mortgage contract requires repayment with foreclosure as a last resort and remedy for non-payment (borrower breaking the contract) not the intent of the contract. Your approach provides you with all the upside benefits while not taking responsibility for the downside risk because you’re willing to lie about your promise to pay.

    You’re right about the mechanics of how this all works – and you can certainly squirrel everything away you can for you and your family at the expense of taxpayers and the banks you do business with. I just disagree with that approach to doing business and I’d suggest that if someone doesn’t really mean to keep a promise to pay they shouldn’t sign their name to a contract with that language. That’s really the fundamental point – if you think it’s okay to lie in that sense then we’ll never agree on this issue.

    On the other hand, I do understand that many households are hopelessly underwater and out of work and walking away may be their only option.

  67. 67
    Chris says:

    Sorry, 66 was me, not sure why it says Anonymous. RE: @

  68. 68

    RE: Ray Pepper @ 57 – Your LLC’s don’t give rise to the moral issue, first because they are not entities that have morals, and second because by operating in an LLC you’re expressly letting the lender know that you’re not guaranteeing the debt personally

    But I really don’t understand how you can say breaking a promise does not raise moral issues. Clearly it does.

  69. 69
    David Losh says:

    Your saying millions of people, globally, here, in Europe, in Asia, in South America, all signed contracts for loans they never intended to pay if the value of the collateral went down. Millions of people all had the idea that they were going to get rich by buying a home and when their little scheme didn’t work they decided to give up the family home, get yelled at by their wives, uproot the children, as a part of some master plan to defraud the poor little banks who did nothing but try to help this family.

    It’s because all these families decided not to honor a fair and legitimate debt that the tax payers had to step in.

    Where was banking regulation? Where were the economic advisers as this check kiting scheme was unfolding? Why didn’t the President of the United States stand up in Congress in 2006 and say something needs to be done?

    Ahhhhhhhh the I live within my means and debt is a bad thing argument. I saw that unfolding in Peru. The difference between today and ten years ago is consumer credit. Of course these people, who live on a dollar or two a day are going to have a hard time paying things off, but the economy is booming. I’ll save this for another time, but debt is all that has floated this economy. You should all be grateful some one is buying something somewhere or you’d be living in a card board box. Oh wait, there wouldn’t be any card board boxes.

  70. 70

    RE: David Losh @ 63 – So your morals are dependent on your intelligence? Maybe we shouldn’t prosecute stupid people for crimes?

  71. 71

    RE: Ira Sacharoff @ 65 – Just so people outside the industry are not mislead, not all agents/brokers get compensated by lenders. At times the offices I’ve been associated with have had related lenders, but I’ve never used one, and if I had the only benefit would have been indirect (through “profit share”). I’ve never received compensation on a client getting a loan through a certain source. Our lender(s) and escrow(s) are picked on their ability to: (1) Provide good customer service; and (2) Reliably perform a service on a timely basis without a lot of oversight.

  72. 72
    Ray Pepper says:

    RE: Chris @ 66

    I will reply to Ira and Chris.

    Ira we cannot be subsidized by Lenders because it would be a RESPA violation. Just like we cannot collect from Title and Escrow. We have 6 Preferred lenders that clients get referred to at various times throughout the transaction. To use 500 Realty you must be Pre Approved with any lender within the last 90 days or our Agents will not tour homes with you. Because 500 Realty remains the best deal in the business for Buyers we recommend they check with one of our Preferreds by sending a copy of their GFE to Lenders we trust in the area AFTER they reach Mutual Agreement. The Buyers are required to sign our Buyers Agency agreement before our Agents tour homes as well. We do this to protect our fellow Agents who have “sometimes” have spent many hours with clients and then when a Buyer hears of us they drop their Agent “cold turkey”. We did this since inception. We both know loyalty is limited in real estate but I must say 500 Realty has a near 100% retention rate (obviously) because of the financial incentive.

    “So, essentially what you’re saying is that you’re going to sign contracts with a promise to pay as a borrower. But what you’re not disclosing to the lender is that if this investment goes up you’ll honor the contract and make your payments; but if the investment goes down you will walk away and leave the lender with “collateral” which results in a loss for others to cover. If that is your position as you go in to these deals then it’s indefensible. ”

    Absolutely not Chris. You are saying this. This is my statement so you can quote it.

    Take care of your family 1st and utilize financial common sense. Millions of Americans will be and have been selling short their property and letting it foreclose because it makes financial sense for reasons such as job loss, divorce, illness, family, etc. We are a mobile society and people MUST move. In Washington State it costs an additional 10% to sell with Agent fees, Excise, title, Escrow. Thousands of sellers will be unable to sell because they are underwater. They will be forced to sell short and those that cannot the property will foreclose. As real estate professionals we must guide consumers and educate them as to what happened: http://www.500realty.net/crisisofcreditvideo.php

    We should never recommend to anyone that they should be MORALLY BOUND to a contract when the contract specifically states the ramifications of not paying. Millions have had to make decisions they never had wanted and I support the decisions. This Mortgage Crisis has caused severe hardship on families (remember I’m from Nevada and I have seen and touched the collateral damage) and its toxic on the family unit.

    I have been an RN for 10+ years in Washington State and will always support the individual and their family. I will always offer my opinion based on their individual situation and compassion. Morality is “out the window” but I understand what you are trying to convey. You simply have not lived in the shoes of these millions of Americans.

    I will leave you with this. These upside down homes will end up as a short sale foreclosure anyway. Its just a matter of time. Unless Mtg Cramdown or further Fed Stimulus is produced causing properties to appreciate wildly they will ALL come back. They are all coming back Chris. Its not a matter of IF just when.

    Support the masses and listen to each and every story as I do.

  73. 73
    David Losh says:

    RE: Kary L. Krismer @ 69

    What about banks? Banks were smart, so can we prosecute them? I mean, if you are reading into my comment that we shouldn’t prosecute stupid people, can we prosecute smart people?

    Come on, this is two years later. What I am surprised about is that people are still blaming the consumer when we have all this new information. Dubai is such a perfect example. They built hotels on sand that was dumped into the sea and people invested in that. The loans were packaged and sold.

    What I’m saying is that millions of Americans bought homes for their families. I doubt very much all those millions of people had the idea they were going to get rich. In my opinion those millions of people bought homes for their families, took the risk, because they were afraid of being priced out of the housing market.

    You guys are saying people were so stupid that the only motivation they had was that they were going to get rich in an appreciating housing market. I’m saying I doubt those millions of people were that smart, or stupid.

    I think the very vast majority of people bought, refinanced, bought stuff for the kids, for the family. I think the vast majority of people would pay if it made sense for the family.

    I put the blame for the global economic collapse on the governments and the banks.

  74. 74

    I’m saying you can’t morally break a promise by claiming that you were too stupid to understand what you were doing. There might be an exception for fraud, bait and switch, etc., but loan products have so much disclosure that basically it comes down to people not taking the time to read and understand. And if there wasn’t that disclosure, then they probably do have a legal out.

    Finally, keep in mind I’m only discussing the strategic default–those who can pay without any significant hardship, but choose not to. They just made a bad decision, and it is not moral to not perform when the only excuse not to is having made a bad decision.

  75. 75
    Ray Pepper says:

    This link provided by Scotsman sums up Strategic defaults to a tee…………

    This is for you Chris !


  76. 76

    RE: David Losh @ 72
    Right on, David. Maybe what some of the lenders did may not have legally constituted fraud, but it came close, and personally, I’d like to see just a few of them publicly executed on TV.

  77. 77
    EconE says:

    I wonder how many of these “promise keepers” have ever been divorced.

    If so, what happened to “for better or worse til death do us part”?

    Aren’t those vows made before God?

  78. 78
    David Losh says:

    RE: Kary L. Krismer @ 73

    I have been very understanding in this promise to pay discussion without bringing up any of the tricks that were used by loan originators.

    From my perspective, my retirement plan has been to move out of this country. My surprise came when seeing home prices in Greece, Spain, Morocco, Mexico, and now Peru go through the roof. If we were to say Las Vegas, Miami, or Arizona, maybe, just maybe, I could say OK, exhuberance got the better of people and they paid too much for housing.

    It was Peru that turned that corner for me. They now have credit cards. When home prices here were tanking the price of housing started going up there. It’s like lenders could, at will, drive up prices, and they can.

    By easing credit, big banks can create a false economy. Think about that for two minutes. You give every body a credit card, maybe they have never seen one before, and tell them they can make easy payments for things they never thought they would ever have in a life time.

    You would take that chance.

    In the process the economy looks great. For a few years everything is selling, malls open up, development goes in, prices go up, and then one day, it just stops.

    Now you want to blame the consumers. Now you want to say they should have ignored the great economic conditions. You want them to have thought that the job they had was only temporary. You wanted them to be smarter than the world that they lived in.

  79. 79
    Eleua says:

    Eleua maybe a bright guy but if you placed your bets with his calls you would have lost everything.

    At some moment in time he may prove to be correct but as each day goes by he becomes more erroneous with his calls of the crashing of the capital markets.

    I’m still alive and kicking and am flattered that I seem to be missed by some. I will say that any proclamations of me possessing some form of brilliance is certainly misplaced. IMAO, the only things needed to see this coming crack up in housing, and the capital markets are a casual knowledge of economic history, and a freshman ECON 101 knowledge of what makes up “demand.” Back in 2006, we were all on SB discussing if housing was a prudent buy, or if it was fraught with undue risk. Folks like Meshugy, and some RE agents were claiming all the usual nonsense about “real estate always goes up” and how Ballard craftsman homes were never a bad buy, at any price.

    Synthetik and I were making the opposing POV, which recent history has shown to be correct. In fact, the problems with RE has caused the global economic problems because the entire global economy was based upon a fraudulent growth of a RE bubble, which caused or enabled, the entire credit bubble to grow to unsustainable levels. Yes, overbuying a Ballard craftsman was partially responsible for the global debt bomb finally detonating.

    As for “my calls”…

    My calls were for RE real estate, even PNW real estate to begin a rollback in price that would not be comfortable nor contained at “leveling out until wages caught up” or “only a 10-15% drop, and then back up” or some such twaddle. Yes, I went out in 2006 and claimed that we would see “20 cents on the dollar by 2010,” and I have about 370 days left on that. I do not offer trading advice, although by way of reminder, I did notice that we lost about 50% on the various indicies as the housing bubble popped.

    Yes, the US Treasury, Goldman Sachs, and the FED are all committing crimes (as in deviation from the written laws) to give the illusion of a healthy credit market, and this has caused prices in stocks to rise dramatically off the bottom. I will remind anyone who cares that for this to happen, the FED has had to buy in excess of 100% of the maturing MBS’ and has stuffed US debt onto the balance sheet of all its operators for the past year. This is to keep an artificial bid under the credit markets, thus keeping interest rates low, and finally preventing the panic.

    The ONLY thing separating us from where we are and complete financial obliteration is the wholesale ignorance of such matters by the American people. Just as people thought “real estate (especially Bainbridge RE) always goes up,” people will soon be disabused of the idea that the FED is omnipotent and the US.gov is bigger than the market.

    The next 100 days will be very interesting. The FED has said it will not only end its QE and MBS program, it will delever all it has purchased in 2009. I think Ben is FOS; there is NO WAY he can do that without causing an outright crash, as any delevering will cause rates to rise, as well as a monster rally in the dollar, with all asset classes getting crushed. This includes gold, stocks, and Bainbridgeislanddreamhomes.

    Officially, I think Ben is lying and will continue to buy. He will do so until the broader credit markets cut him off, at which point there is an uncontrollable descent. The US.gov can’t borrow forever. They won’t have the cash flow to sustain the debt and people won’t have the excess money to lend.

    As for listening to me and “losing everything”…

    I just had Christmas dinner at my rented house, where I entertained 20 people, two of which were my Boomer Aunt and Uncle. In 2007, they had Uncle Sugar buy their home in a relocation program, because they couldn’t sell. I told them that they are getting lucky and should be glad Uncle Sugar bailed them out, bank their savings and rent twice the home at half the price.

    Nope. I’m just a punk kid and don’t understand that real estate always goes up.

    Well…Christmas dinner would have been sunnier if my Aunt wasn’t so upset about being way upside down on her 4000sf McMansion. Yes, I bit my tongue and didn’t run the entire “I told ya so” routine, but she knew. In fact, everyone I gave unsolicited advice about buying a home over the past year, that disregarded it, has ended up eating around $100K (on average) in equity loss. Some will hold out and lose it all. My ex-landlady (a RE agent, no less…) has dropped her ask price for her two acres on waterfront by 20% in 8 months and has not one offer. She has had one bona-fide “look.”

    We are getting deflation. Make no mistake about that. Ben has had to resort to outright fraud to keep the illusion of inflation going, but he is losing. His thesis is flawed. For all his purported brilliance, he made a fundamental blunder. He assumed that economic cycles are natural and inevitable, without understanding that economic cycles are ultimately about credit origination and asset encumbrance. He thought that if he just became a “Super SIV,” or temporary toxic waste dump, the banks would clear and he could then sell the sludge into the rising market. He has been shown to be wrong.

    I could go on for a long time, but this will have to suffice. I have always enjoyed SB and most of the posters. I didn’t leave because I was abused, offended, or out-foxed. No, I have a life, a job, 3 kids, a wife, and a myriad of other interests and obligations. SB was great when I was here, and I assume it has only gotten better in my absence (kinda “by definition”). I’ve dished it out and can take it.

    The action is in the credit markets. We are witnessing history, the kind that was last witnessed in 1930. Those of you who are familiar with that year know what I am talking about.

    20 cents by 2010. It will be close, but I like my chances. There simply will be “no bid.”

    Oh, yeah…BOA is going to push 6X the amount of foreclosures into the market this coming year. They know what’s coming. All other banks will do likewise. If you didn’t sell into this “strength,” you deserve what you get.

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