Video Two-Pack: Pent-Up Supply & High End Condos

Here are a couple of videos for you today.

First up, Zillow Chief Economist Stan Humphries on Yahoo News:

Here’s the money quote:

We think that the amount of pent-up supply that we have of people on the sidelines, combined with the amount of foreclosures that we have, combined with the current negative equity rates and the foreclosures they are going to produce in the future—all that combines to keep more supply than there is demand for the near term. We think it’s going to take three to five years for us to work through this.

“Pent-up supply,” you say? That sounds like a familiar concept, like one I’ve heard somewhere before

Next up Aubrey Cohen of the Seattle P-I gets some face time on CNBC’s 4-headed talk-box. Skip ahead to 2:25 in the video to jump past the blah blah about condos in Florida.

Aubrey’s take on the current market in Seattle:

Our prices have been bouncing around pretty much at the same level for nearly a year now. Our sales are up year over year, of course a year ago they were nothing to write about. We’re seeing now some of the fallout hitting some of the higher end, because of condo projects.

I got the impression that Aubrey wasn’t being “optimistic” enough for the CNBC hosts.

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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.

33 comments:

  1. 1
    The_Dude_Abides says:

    I watched that episode a few days ago and thought Aubrey was measured and simply told the truth w/ no spin. Diane Olick also seems to throw wet blankets on the hyper-REbulls.

  2. 2

    I wonder why they even picked Aubrey. I like him, but he hasn’t covered Seattle real estate for about a year now. He’s the P-I’s aerospace reporter.

    Also, what set of properties did they use to claim that Seattle’s sales were up only 5% from February? King County is more like 50%. Aubrey understated it when he said they were “nothing to write home about” a year ago. They were record lows a year ago.

    Finally, I think Aubrey understated the amount of new construction going on around here. I find it rather surprising, but it is happening, especially in south King County.

  3. 3
    ray pepper says:

    Did you know Aubrey is actually Donnie Iris…??

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

  4. 4
    David Losh says:

    WOW!

    The woman from the Boston Globe was the best example of prepared remarks I’ve ever seen. She obviously knows who pays her.

    If I’m reading the stats correctly in the past few years people with a down payment and good credit have bought millions of housing units that are dead inventory for the next 5 to 7 years before they can hope to appreciate in price. Lenders have moved on to emerging market places in Asia, Europe, South, and Central America. We would include Africa and the Middle East, but those are specific markets where Usury is frowned on.

    No, I really don’t see home prices doing anything but get more, and more, and more affordable. If you’re a buyer today you need to be at least 10% below market to break even and expect a decline in asset value for the next 5 years.

    The math is clear that we had double digit price run ups in 2006 and 2007, and if we are only down 20% today we need to be much lower in the prices we offer.

    The problem is all the selling that’s going on. Don’t look at the facts, don’t look at the market, look at those interest rates.

  5. 5
    David Losh says:

    RE: Kary L. Krismer @ 2

    The developers have to build in oder to get the up front fees, and costs paid for by the bank.

  6. 6
    The Other Ben says:

    Aubrey’s a dude? I had no idea.

  7. 7

    RE: Kary L. Krismer @ 2
    I’ve also noticed a bunch of new construction in South King County. I wonder how much of it is sold?

  8. 8
    Buford says:

    By ray pepper @ 3:

    Did you know Aubrey is actually Donnie Iris…??

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

    No kiddin’! How funny!
    That was my favorite song growing up.

  9. 9
    wreckingbull says:

    RE: Buford @ 8 – That song is too good to be referred to in the past tense. Pedal still goes down in the Z28 when those power chords flow through the 6×9’s.

  10. 10
    Chris says:

    They called Aubrey “She”, right?

  11. 11

    Another Related Real Estate Analyses

    Article in part:

    “…Bailout watchdog Neil Barofsky says the Obama administration’s $75 billion Home Affordable Modification Program (HAMP) is posting “disappointing results” in part because its definition of success is “essentially meaningless.”

    The HAMP program is just one of the myriad ways the government has tried to revitalize the housing market. But recent data, including record low new-home sales, weak existing home sales and falling mortgage applications, suggest Uncle Sam is struggling to hold up the housing market….”

    http://finance.yahoo.com/tech-ticker/govt.-vs.-the-market:-housing-fundamentals-too-weak,-even-for-uncle-sam-yftt_449382.html

  12. 12
    singliac says:

    RE: Chris @ 10 – I noticed that too.

  13. 13
    Scotsman says:

    It’s hard to see prices rising when personal income is down and interest rates are headed up. It’s also hard to get a good inflationary spiral going under these conditions, although many will claim inflation is just over the horizon.

    Here are the new personal income stats. As this is a government stat, be sure to read down to how it is calculated- it’s not always what you think:

    http://www.bea.gov/newsreleases/regional/spi/sqpi_newsrelease.htm

  14. 14
    Dan C says:

    Has anyone seen/heard anything on a further extension of the first time homebuyer credit? Given the looming deadline, I am surprised the NAR is not banging down the doors at the White House.

  15. 15
    HappyRenter says:

    I don’t understand why having good credit score, a down payment, low interest rates and the willingness to stay in that house 7-10 years are the only prerequisites to go and buy a house. What about job security? What if you suddenly can’t match the monthly mortgage? That issue is underestimated. Your monthly mortgage payments can be up to 45% your income before taxes. That’s kidding.

  16. 16
    LA Relo says:

    Developers also have to finish construction by Jun 30 before the $8000 bribe expires. I heard mention of new bribes recently, but I’ve read nothing on it. The gov’t just wants to prolong the correction at our expense to help the banks.

    All this pent up demand? B.S. Everyone would buy a house if they could afford it, but they can’t until prices get where they should be. You have 3 types of buyers, right?

    – Move up buyers: virtually gone, (unless they bought more than a decade ago) and will be for at least another year or two
    – First time: this is the only activity on the market IMO, thanks to the $8000 credit that gives people who normally can’t save money a down payment. That’s not a recovery, and this is a limited pool.
    – Investors: RE agents are flipping foreclosures, and want-to-be landlords are buying REOs, but a purchase from a bank is not a recovery, you still need a buyer, and rents are flat at best.

    I’ve been hearing about pent up demand since Subprime losses were “contained at $50BN,” and housing was experiencing a soft landing.

  17. 17
    theref says:

    RE: ray pepper @ 3
    The lead singer of the Jaggerz. They were a hometown band in Pittsburgh. Before their hit “The Rapper”, they used to do local bars and did great doowop medlies.

    To stay on topic: Pittsburgh is on many lists as a great place to buy RE. The reason is that housing there never participated in the bull market. Nobody can sell and move to Florida-solving at least one problem.

  18. 18
    CCG says:

    By Dan C @ 14:

    Has anyone seen/heard anything on a further extension of the first time homebuyer credit? Given the looming deadline, I am surprised the NAR is not banging down the doors at the White House.

    They probably realized there’s no demand left to steal from the future and are frantically trying to dream up other ways for their government servants to distort the market.

  19. 19
    WestSeattleDave says:

    RE: HappyRenter @ 15 – The NAR certainly has been quiet on this issue, as have the usual suspects in Congress. The credit certainly has not stirred up the same hoopla during round 2 that it caused the first time around. Perhaps everyone who wanted the $8k bought their house, and the rest realized how much of a gimmick it was.

  20. 20

    By Ira Sacharoff @ 7:

    RE: Kary L. Krismer @ 2
    I’ve also noticed a bunch of new construction in South King County. I wonder how much of it is sold?

    I don’t tend to have clients that deal in new construction, but on some of them they do seem to be selling. At rather attractive prices. Once the developers have that much money into the dirt, they need to do something to get it back out. The house could be a loss leader to sell the land! ;-)

  21. 21

    RE: WestSeattleDave @ 17 – My guess is no one wants to go public on it until near the end. My guess is that also it will not be extended, unless maybe there’s some way to do it without Senate action. The health care vote probably prevented it, because I doubt a single Republican would vote for an extension at this point. A Congressional pay raise probably wouldn’t pass the Senate at this point.

  22. 22
    ray pepper says:

    RE: wreckingbull @ 9

    Buford AND wreckingbull. Yes. I also loved that “Aubrey” riff …Class of 84!!! ….But nothing drives my 6×9’s better then these chords:

    http://www.youtube.com/watch?v=D5_oPyavUaw

  23. 23
    The Tim says:

    By Dan C @ 14:

    Has anyone seen/heard anything on a further extension of the first time homebuyer credit? Given the looming deadline, I am surprised the NAR is not banging down the doors at the White House.

    Not that the NAR is known to be the most honest bunch, but they were saying in December pretty explicitly that they would not pursue another extension:

    No more extensions of tax credit for first-time home buyers

    Proponents of the $8,000 credit for first-time buyers and the $6,500 credit for move-up buyers made it clear during the debate on Capitol Hill that the benefits would not be renewed when they expire. And a lobbyist for the National Assn. of Realtors confirmed that at the group’s annual convention last month.

    Lawmakers “made us promise practically in blood that we would not come back” for another extension, Linda Goold, the Realtor group’s director of tax policy, told her members.

    During the debate, Sen. Johnny Isakson (R-Ga.), a former real estate broker and a longtime proponent of the tax credit, promised his colleagues, “This is the last extension.”

    And Senate Finance Committee Chairman Max Baucus (D-Mont.) said, “It is important that this tax credit does not become a permanent fixture of the tax code.”

  24. 24
    Buford says:

    By Kary L. Krismer @ 20:

    By Ira Sacharoff @ 7:

    RE: Kary L. Krismer @ 2
    I’ve also noticed a bunch of new construction in South King County. I wonder how much of it is sold?

    I don’t tend to have clients that deal in new construction, but on some of them they do seem to be selling. At rather attractive prices. Once the developers have that much money into the dirt, they need to do something to get it back out. The house could be a loss leader to sell the land! ;-)

    Some developers also tie the development and the home building into a single finance package.
    Gotta keep feeding the monster that you have created, even if there is no demand for it.

  25. 25

    RE: The Tim @ 23 – I know a lot of you don’t like the credit at all, but my concern is that the expiration of this credit is actually pretty good from both a timing and procedural view, especially compared to the last expiration. My concern is that if they extended they would screw up the expiration and do more harm than good.

  26. 26
    Choc Donut says:

    good houses in good locations at good prices (under 300k) are still selling. At the last expiration of the tax credit, a bunch of homes dropped on the market, now they’re selling. Better homes in better hoods seem to be steadily creeping down under 500k. I heard of someone who listed their home in Montlake for 975k after someone nearby sold theirs for 1.2 million, but the buyer was from MSFT so maybe they’re dumb with money, and maybe the rumor is false. Anyway, someone listing a home that doesnt have a great view or is on the lake for 975k in this market is on straight up crack.

  27. 27
    me says:

    Spot on. I am looking for homes, and even as a first time buyer, I can tell you there is hardly anything attractive out there.

    One of the big reversals that isn’t priced in yet is that todays’s buyer must expect price depreciation – paying a premium for a house that’ll be worth 10% more a few years hence makes sense; pricing in the “it’ll probably lose 10% over the course of the next few years” makes this an entirely different ballgame.

    Every single place that I have come across so far that was reasonably priced had some major deficit – ranging from water damage or mold to the place that… wait… was a “great opportunity to build a new house”. Ahem.

    I the amount of rent I’ll pay for the next 10m will be less than the difference in prices between now and then.

  28. 28
    Jonness says:

    paying a premium for a house that’ll be worth 10% more a few years hence makes sense; pricing in the “it’ll probably lose 10% over the course of the next few years” makes this an entirely different ballgame.

    Exactly! And if you’re putting down a healthy down payment instead of financing 100% of the costs, signing on the bottom line becomes even more of a concern.

    The consumer is tapped out, and the banks won’t lend. Saving up a down payment while home prices go sideways to down makes better sense than taking a 10% hit. And what if that 10% turns into 25%? It’s just too risky to buy right now. I suspect it could be 3 years before it makes sense to jump in the game and leverage up.

    In the meantime, I suggest those waiting to jump in live frugally and continue to grow their savings. Get as much equity together as possible and shun the thought of becoming a debt slave from now until you’re gray.

  29. 29
    HappyRenter says:

    RE: me @ 27

    We made the same experience last summer shopping for homes. There was this house in North Seattle for 450K which would have been better to totally rebuild it. The agent told us: “What you are getting here is a great location and a house you can remodel according to your own taste”. Right, the only thing left was the location.

  30. 30
    SeattleMoose says:

    yawn….more happy talk spin. Wake me up in 2012 when Seattle prices have finally bottomed out. Economy still bad, companies not hiring, more layoffs coming, and prices still not in line with wages.

    The only people optimistic about the RE “recovery” are those who have a vested interest in RE. Of course most sources quoted for RE news have this very conflict of interest and that is why the MSM RE news is a waste of time.

  31. 31
    corncob says:

    By Choc Donut @ 26:

    good houses in good locations at good prices (under 300k) are still selling.

    Those exist? I’ve never seen one around here…

  32. 32
    Cheap South says:

    RE: corncob @ 31

    Set your Redfin search at $300K for the whole region and have them e-mail you the results daily; you will get over 100 new hits per day (plus 20-40 revised). The few homes that look good are in Monroe, in the sticks on the islands, all over North Pierce, Marysville or Lake Stevens. What comes up in King is mostly to remodel.

  33. 33
    P says:

    RE: corncob @ 31

    Yea, and tell me what you define as “good location”?

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