NWMLS: Pending Sales Predictably Plummet

May market stats have been published by the NWMLS. Here’s a link to the NWMLS press release (not live quite yet): Home sales adjusting after surge before tax credits expired.

Home sales during May tapered off around Washington state following a surge of activity in April as buyers hustled to meet deadlines for tax credits.

Northwest Multiple Listing Service brokers reported 5,242 pending sales (mutually accepted offers) last month, a decline of more than 44 percent from April’s total of 9,438 pending sales. Compared to twelve months ago when members tallied 7,160 pending sales of single family homes and condominiums, the volume dipped about 27 percent, but year-to-date figures show 2010 sales are well ahead of 2009.

It’s pretty difficult to sugar-coat a 44% month-to-month drop. Here’s what that looks like in chart form:

King County SFH Pending Sales

And keep in mind that over a third of pending sales are still seemingly never turning into closed sales. Get ready for the worst July closed sales on record.

Here’s your King County SFH summary, with the arrows to show whether the year-over-year direction of each indicator is favorable or unfavorable news for buyers and sellers (green = favorable, red = unfavorable):

May 2010 Number MOM YOY Buyers Sellers
Active Listings 9,497 +3.2% -3.6%
Closed Sales 1,766 +7.6% +34.6%
SAAS (?) 1.43 -33.3% -38.5%
Pending Sales 1,789 -39.5% -20.3%
Months of Supply 5.31 +70.4% +21.0%
Median Price* $379,000 +1.1% +1.1%

That is quite the dramatic drop in pending sales. Also, it is worth noting that the number of new listings dropped off quite a bit between April and May as well (from 3,756 to 2,698), when most years see an increase. Apparently many people who were thinking of selling realized that the tax credit was their best chance this year.

Feel free to download the updated Seattle Bubble Spreadsheet, and here’s a copy in Excel 2003 format.

Here’s your closed sales yearly comparison chart:

King County SFH Closed Sales

Just as I predicted last month, we bumped up a little from the 2008 line in May, though the increase was less than I expected. Tax credit buyers have until the end of this month to close if they want to qualify for the free cash, so I expect to see another slight increase this month before we drop off a cliff in July.

Here’s the graph of inventory with each year overlaid on the same chart.

King County SFH Inventory

Still inching toward 2009 inventory levels.

Here’s the supply/demand YOY graph. In place of the now-unreliable measure of pending sales, the “demand” in this chart is represented by closed sales, which have had a consistent definition throughout the decade.

King County Supply vs Demand % Change YOY

Sales are rapidly dropping off their massive high while inventory approaches zero. Expect the same pattern next month as well.

Here’s the median home price YOY change graph:

King County SFH YOY Price Change

Nothing really all that interesting here. Last-minute tax credit buyers were probably not the best negotiators in the world.

And lastly, here is the chart comparing King County SFH prices each month for every year back to 1994.

King County SFH Prices

Maybe we’ll just hang out here at 2005 prices for the next five years.

Here are the news blurbs from the Times and P-I:

Seattle Times: Local home sales balloon in May thanks to federal tax credit
Seattle P-I: Pending home sales in Seattle tumble as tax credits end

Check back Monday for the full reporting roundup.

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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.

63 comments:

  1. 1
    drshort says:

    I think a year ago 97% of people on this site would have said no way in hell will the median price be YOY positive in May 2010. Myself included. But it is.

  2. 2
    Everett_Tom says:

    Ye-ouch! Any chance that the pending are just coming back into line with closed sales?

  3. 3
    Dave0 says:

    Wow, that pending sales chart has to be one of the most shocking pieces of data I’ve ever seen here. I would have never expected such a steep drop.

  4. 4
    ARDELL says:

    I expect the biggest impact on declining closed sales to be July 2010 closings and thereafter, given the requirement that escrows must close by June 30 to get the tax credit.

    May was a short month as to business days (20). You will see some of the “by April 30” contracts closing by June 30 requirement. Of the 4 I had in escrow to close in May…3 closed and one is carrying forward into June (bank owned with lender requiring new roof on property prior to funding and closing).

    Another consideration impacting June vs May closings is the end of school. One of my 3 that closed by end of May had a post occupancy for the seller until after school lets out. But most would have put the closing date to coincide with possession and into June past the end of school..

    In the normal cycle, July to year end is a decrease in both volume and price from June…but expect 2010’s results to be amplified in the negative direction relative to historical trend, due to the must close by June 30 requirement for the tax credit.

    To put price into perspective, I see Kary quoting $379,000 as the May median in the comments to the previous post. March 2009 was at $362,700 and June 2009 was $399,000. So we are watching for median single family home price to go below $362,700 vs. “spring bump” pricing. If it was at $362,700 before the tax credit extension/expansion…it should likely get there again without a tax credit. What happens from that point becomes “market factors” without a tax credit.

  5. 5
    ray pepper says:

    “Get ready for the worst July closed sales on record.”

    Lets not get depressed now. We all knew this was coming..They are all coming back. People will not remain stupid forever.

    So celebrate with me here:

    http://www.lewis.army.mil/dpca/sports/8K%20Mud%20Run%20Registration.asp

    No better way to break in the harsh summer then M U D !

    Hope to see you all there!

  6. 6

    By Everett_Tom @ 2:

    Ye-ouch! Any chance that the pending are just coming back into line with closed sales?

    I don’t remember when that change in policy of the NWMLS occurred. I was assuming we were over a year past that.

    The other possibility that could add to the decline (in addition to the expiration of the tax credit) is that fewer people are making offers on short sales and/or that more agents are going to the system where they don’t report the sale pending until the bank accepts (at which time their client would sign off on the offer). Personally I think the NWMLS should outlaw the latter.

  7. 7
    patient says:

    “Home sales during May tapered off around Washington state following a surge of activity in April ” You got to love it. It “tapered off” when it fell 40% but surged when it increased with what, 10%…Nice. Anyway the numbers must be shocking to anyone who thought the Seattle market was in a sustainable recovery or that we were even remotely close to a bottom.

  8. 8
    drshort says:

    By patient @ 7:

    Anyway the numbers must be shocking to anyone who thought the Seattle market was in a sustainable recovery or that we were even remotely close to a bottom.

    I don’t see anything shocking about it. It seems totally reasonable — if you were in the market to purchase a house in 2010, you’d be pretty motivated to make it happen earlier in the year and get the credit.

  9. 9
    drshort says:

    By ARDELL @ 4:

    In the normal cycle, July to year end is a decrease in both volume and price from June…but expect 2010’s results to be amplified in the negative direction relative to historical trend, due to the must close by June 30 requirement for the tax credit.

    Closings will almost certainly be lower, but I think we might see a nice bump up on the median do to a mix shift to high priced homes that aren’t nearly as impacted by the tax credit.

  10. 10
    ARDELL says:

    RE: drshort @ 9

    I don’t see a “bump up” in the 4th quarter, as I think you will see a resurgence of interest in short sales and bank owned properties, now that the close date is not tied to a pre-ordained close date (of June 30) by the tax credit.

    I expect to see more distressed property closings (or at least pendings) in the 4th quarter than high end transactions…and that should balance out to a decline back to at least my previous bottom call of $362,700…if not lower.

    Off topic – I just received a request to review a property (by a client) “on market for 37 days” that has literally been on (and off) market for 10 years! I don’t think I have ever seen that before. Bought in 1995, put on market in 2000…and now a short sale. The property was almost continuously on market, with some breaks, since summer of 2000. They must have borrowed out all of their equity and beyond during that period.

    Post tax credit, distressed properties will again become more and most attractive, in all price ranges.

  11. 11
    patient says:

    RE: drshort @ 8 – For you it might be expected but many thought that the tax credit had jump started the market and put in a bottom. They were wrong. You obviously predicted that the market will once again tank after the credit, if so , you were right.

  12. 12
    The Tim says:

    By patient @ 11:

    RE: drshort @ 8 – For you it might be expected but many thought that the tax credit had jump started the market and put in a bottom. They were wrong.

    Some examples from last month’s NWMLS press release, headlined Brokers Cite Tax Credit and Rising Consumer Confidence with Stabilizing Housing Activity Around Washington State:

    “While the tax credit has gone away, the buyers haven’t,” observed OB Jacobi, a board member of the Northwest Multiple Listing Service. Commenting on the MLS summary report for April, Jacobi described the tax incentives, which expired April 30, with being the “lubricant the market needed,” but credits rising consumer confidence with “driving the engine now.”

    “The home buyer tax credit did what it was designed to do; it helped with stabilizing the housing market which in turn helped stimulate economic recovery,” said J. Lennox Scott, chairman and CEO of John L. Scott Real Estate.

    “It’s exciting to see the stability of the real estate market continue to improve,” said NWMLS director Bobbie Chipman, co-managing broker for Coldwell Banker Bain-Tacoma/Puyallup. “The tax credit seems to have accomplished its purpose,” she added, noting, “It motivated home buyers to enter the market place, creating a synergy that should propel us through the summer months.”

    Yeah, about that…

  13. 13
    ARDELL says:

    RE: patient @ 11

    With $362,700 as “the bottom” from 3/2009…the market should be expected to tank back to that level, and will be a continuation of a flat market vs a decline.

    Until we move down about 4.5% from where we are right now…we will still be above “bottom”. Expect that to happen. If we don’t go down 4.5% from here in the next 6 months…that will be a surprise.

  14. 14
    drshort says:

    By patient @ 11:

    RE: drshort @ 8 – For you it might be expected but many thought that the tax credit had jump started the market and put in a bottom. They were wrong. You obviously predicted that the market will once again tank after the credit, if so , you were right.

    I did think pendings would drop like a rock in May. And I think the median could spike in June/July. But mostly I don’t think one or five month’s worth of data tells us much of anything.

  15. 15
    drshort says:

    By ARDELL @ 13:

    With $362,700 as “the bottom” from 3/2009…the market should be expected to tank back to that level, and will be a continuation of a flat market vs a decline.

    Why should the market be expected to tank back to $362K? The market is in a completely different place than it was back in 3/09. Some things are better (jumbo loans, stock market) and some things are worse (distressed sales).

    I question whether or not many of the distressed properties are viable properties for many buyers. They’re often beat to crap, show poorly, have tons of paperwork, etc.. Most buyers want something turn key and easy.

  16. 16
    wreckingbull says:

    RE: drshort @ 15 – This is true. For those of you starting to look, seeing the sparkle in the turd can be rewarding, as the instant gratification crowd will steer clear. You need to be careful, though. Good neighborhood + fixable ugly + solid bones can be a good find.

  17. 17
    patient says:

    RE: ARDELL @ 13 – Forget the median, think Case shiller. The median is of zero interrest in terms of price bottom since it doesn’t measure value fluctations,sometimes it correlates and sometimes it doesn’t so forget about it. Let’s see where C/S is at the end of the year. Raise your hand if you think it will be higher than the last reading.

  18. 18
    patient says:

    By wreckingbull @ 16:

    RE: drshort @ 15 – This is true. For those of you starting to look, seeing the sparkle in the turd can be rewarding, as the instant gratification crowd will steer clear. You need to be careful, though. Good neighborhood + fixable ugly + solid bones can be a good find.

    I disagree, the distressed properties will tank with the rest of the market. They are no better deals relative to the future of that segment than a non distressed property to it’s segment. It’s just the same old tricks for a “new” segment.

  19. 19
    wreckingbull says:

    RE: patient @ 18 Perhaps, but in my experience, people tend to overpenalize places which are worn-down, but otherwise decent. I personally prefer these places. My market is very odd though, with quite a few retiring Californian Baby-boomers moving in.

  20. 20
    patient says:

    By wreckingbull @ 19:

    RE: patient @ 18 Perhaps, but in my experience, people tend to overpenalize places which are worn-down, but otherwise decent. I personally prefer these places. My market is very odd though, with quite a few retiring Californian Baby-boomers moving in.

    That could be true but why would it only be true now and not in for example a years time if all prices are lower? Would those properties not remain “over penalized”? I would think the answer is yes. So while it can be a good deal relative to other properties at the same point of time I don’t think they are any better deals relative to the future than any other property segment.

  21. 21
    DrShort says:

    RE: patient @ 20

    I’m just speaking as one person who’s looked at a number distressed properties. I can see why their owners game them up so easily. They were almost all piles of crap, or next to a freeway, or sliding down a hill, or moldy, or missing all the doors/appliances/carpet.

  22. 22

    By DrShort @ 21:

    RE: patient @ 20

    I’m just speaking as one person who’s looked at a number distressed properties. I can see why their owners game them up so easily. They were almost all piles of crap, or next to a freeway, or sliding down a hill, or moldy, or missing all the doors/appliances/carpet.

    Lot’s of those issues the owners caused. Either intentionally to try to punish the bank for their own mistake, or simply because they didn’t have the ability (financial or otherwise) to maintain a house.

    There are also those there the owners were trying to improve the place, and again didn’t have the ability (financial or otherwise) to complete the improvements.

  23. 23
    Daniel says:

    By drshort @ 8:

    if you were in the market to purchase a house in 2010, you’d be pretty motivated to make it happen earlier in the year and get the credit.

    Actually: no. I would have assumed prices to be artificially inflated and would have trusted that I can get a better deal later in the year. Especially as I would in general avoid the spring bump and search in fall/winter unless the house I wanted needed serious repair immediately.

  24. 24
    Pegasus says:

    My guess is by the 4th quarter we have in place yet another bigger and betta tax credit, rebate or down payment assistance lobbied for by the real estate industry and paid for by the taxpayer once again. How that will affect prices is anyone’s guess.It will inflate prices once again but not for long. If you get 15,000 this time and you pay 15,000 more for a house and a year later it is worth 30,000 less plus costs to sell how long will it take buyers to figure out they and the taxpayers are the rubes in this poker game? With our media and administration distortions….probably never or at least until they try to sell it.

  25. 25
    Pegasus says:

    Kary and drshort….The industry has a PR and credibility problem now that grows worse every day. Lots of criminal behavior occurred in the real estate and mortgage business and yet almost no one is going to jail. It is being spun as everyone made some errors or were ignorant about what they doing while they collected massive paydays. No one is giving their paycheck back. Obama says it is all a big mistake and will only prosecute a few token criminals. Here is a site that got a lot of play today and sadly it shows the state of mind of the masses losing their homes:
    http://givingbackthehouse.com//

  26. 26
    Urban Artist says:

    I’m not in real estate and have never bought a house, so this may be my lack of knowledge speaking. I guess I would expect that if pending sales dropped that much wouldn’t sellers get nervous and start dropping prices a bit? Do sellers just not know what the market is doing overall? Even in Ballard, Crown Hill area I’m seeing the for sale signs up for longer than usual.

  27. 27
    wreckingbull says:

    RE: Pegasus @ 24 – Bingo. The inability for most people to see this most basic flaw in the tax credit really astounds me. The same is holding true for new auto purchases. A business associate of mine offered $500 under invoice last week and his offer was accepted. Try that during cash for clunkers.

  28. 28
    Jillayne says:

    Pegasus I so want to purchase that DVD. It sounds hilarious! I bet he’s selling hundreds every day.

  29. 29
    ARDELL says:

    RE: Urban Artist @ 26

    Most sellers who have not sold their homes, especially during the credit period, were and continue to be overpriced. Dropping a bit because they are overpriced in the first place is usually the issue, moreso than dropping due to market changes in the short term.

    Showing them all of the people who did sell…while they did not…from the day they listed their property, usually makes more sense to them than market statistics.

    Not everyone who has a house for sale is really trying their best to actually sell it. There are many reasons why people put property on the market. Some are forced to put it up for sale due to divorce or to comply with the terms of a lender if they are behind in their payments. But they are not always motivated to sell it quickly…and sometimes not motivated to sell it at all.

    As I mentioned in an earlier comment, I saw one today that has been on market for 10 years on and off…mostly on. How motivated could that person be if they were not able to sell since June of 2000?

    Others are holding on to a price that will “clear the table” vs. being short. If they don’t have the money to bring to closing or don’t want to, to make up the difference between what they owe and the sale price…they just leave it at that price. To drop the price, they would have to agree to bring the shortfall to closing or succumb to a short sale. Many just stay in that holding pattern with the price at the level they “need”.

    Conversations with sellers regarding market conditions vs. their house and what they want, are not as common as with buyers. Buyers look at market conditions, whether those conditions be up or down, moreso than sellers. Sellers tend to look at their neighbors who sold or are selling, more than they do the market as a whole.

    It’s like talking to parents about their children. You can show them the statistics about teenagers on drugs…but they look at their own child and cannot see that as a possibility for their child…regardless of statistics. Statistics are always about someone else…

  30. 30
    ARDELL says:

    RE: drshort @ 15

    drshort asks: “Why should the market be expected to tank back to $362K? The market is in a completely different place than it was back in 3/09. Some things are better (jumbo loans, stock market) and some things are worse (distressed sales).”

    3/09 is/was “the bottom” and we have to get below that for that not to have been “bottom”. To suggest it will not get back there, is to suggest the tax credit had no impact. I don’t know anyone who holds that view.

    The stock market being better does not help the housing market…in fact it can make it worse. When the stock market tanks, mortgage rates go down. That helps the housing market. The stock market improving from here would raise mortgage rates…so what is good in the stock market is bad for the housing market, generally speaking from here.

    Jumbo Loans doesn’t factor in much. Not enough market activity happens in that range for it to make or break the market overall.

  31. 31

    By Pegasus @ 25:

    Kary and drshort….The industry has a PR and credibility problem now that grows worse every day. Lots of criminal behavior occurred in the real estate and mortgage business and yet almost no one is going to jail.

    I don’t know about the level of prosecutions, but there are lots of financial crimes that happen without prosecution. Years ago in King County you needed to have a level over $1,000,000 or have ripped off the wrong person.

    But if you think about it, the types of things that would result in foreclosure typically would have also had the buyer’s involvement. It might have been slight, such as not correcting an erroneous income entry placed on an application by a loan originator to get the loan approved, but that’s still involvement. The types of things that just resulted in someone getting a more expensive loan than what they could have qualified for was probably not criminal.

    In any case, for years and years too many Americans have refused to admit their own mistakes. Such people always try to deflect blame elsewhere.

  32. 32
    ray pepper says:

    RE: Pegasus @ 25

    I have a primal urge to see this video…Jillayne please buy it and send it to me.

  33. 33

    By Daniel @ 23:

    By drshort @ 8:

    if you were in the market to purchase a house in 2010, you’d be pretty motivated to make it happen earlier in the year and get the credit.

    Actually: no. I would have assumed prices to be artificially inflated and would have trusted that I can get a better deal later in the year.

    There were a lot of people looking beforehand that felt that way, at least partially. They were looking, but not setting April 30 as a deadline. Others were buying only if they could get the credit. And I’m sure there were others again who were not even looking, just waiting for “the damn thing to end.”

  34. 34
    CCG says:

    “It motivated home buyers to enter the market place, creating a synergy that should propel us through the summer months.”

    To paraphrase Ayn Rand, when you hear the word “synergy”, run for your life, as it is the leper’s bell of an approaching looter. It was the watchword of the dot-con bubble, of course.

  35. 35
    The Kid says:

    Doesn’t matter how many tax credits they throw at this thing, or how much irresponsible cheerleading anyone does at this point. I still hear this undertone that all of this is about consumer confidence, when the reality is that the incomes available simply will not support the prices at their current levels, no matter how much confidence people do or do not have. The tax credit expired, everyone stopped buying. Big shocker. I will be interested to see how many people who bought over the last year are defaulting on their loans by this time next year.

  36. 36
    Jonness says:

    I don’t see anything shocking about it. It seems totally reasonable — if you were in the market to purchase a house in 2010, you’d be pretty motivated to make it happen earlier in the year and get the credit.

    People who got motivated about the tax credit prove Einstein was correct.

    “Only two things are infinite, the universe and human stupidity, and I’m not sure about the former.” Albert Einstein

  37. 37
    Ross says:

    By ARDELL @ 30:

    The stock market being better does not help the housing market…in fact it can make it worse. When the stock market tanks, mortgage rates go down. That helps the housing market. The stock market improving from here would raise mortgage rates…so what is good in the stock market is bad for the housing market, generally speaking from here.

    If people are selling stocks to fund their down payment (or to buy outright), stocks do matter. Whatever they can sell gets multiplied 5x (assuming 20% down) and that defines their buying power. I’d bet there’s even a certain micro correlation between the neighborhoods near Microsoft and its share performance.

  38. 38
    Jonness says:

    By ARDELL @ 10:

    I don’t see a “bump up” in the 4th quarter, as I think you will see a resurgence of interest in short sales and bank owned properties, now that the close date is not tied to a pre-ordained close date (of June 30) by the tax credit.

    I believe the tax credit expiring is a partial driver of future prices, but so is an economic slow-down in the 2nd half of 2010 and a brutally sticky unemployment rate. I expect Americans to generally be stupid enough to leverage themselves as far as the government allows, and the government will guarantee a loan to just about anybody with a pulse. Thus, I predict prices will correct downward to historically healthy levels in a very gradual fashion.

    The national debt is over $13 trillion, and the government still sees a need to borrow money from China in order to prop up U.S. house prices above what most people can afford to pay. The bottomless tax dollar pits of FHA, Fannie, and Freddie seal the deal. Without them, the homeownership rate would plummet to levels last seen during the Great Depression.

    But homeownership should not be interpreted literally. Homeownership, for most people, is a thing of the past. These days, people just rent the homes from the banks for the privilege of paying property taxes, insurance, and maintenance fees. And of course, there is a minor tax break for going this route, so that’s a lot of incentive to stay the course.

  39. 39

    By Ross @ 37:

    By ARDELL @ 30:

    The stock market being better does not help the housing market…in fact it can make it worse. When the stock market tanks, mortgage rates go down. That helps the housing market. The stock market improving from here would raise mortgage rates…so what is good in the stock market is bad for the housing market, generally speaking from here.

    If people are selling stocks to fund their down payment (or to buy outright), stocks do matter. Whatever they can sell gets multiplied 5x (assuming 20% down) and that defines their buying power. I’d bet there’s even a certain micro correlation between the neighborhoods near Microsoft and its share performance.

    The falling stock market really hurt the upper end because those people don’t tend to borrow that much money (so the interest rates don’t matter that much to them), and that was where they had their money parked. When you’re going to put over six figures down buying a house, and your wealth goes down by over 30%, that causes you to re-think your purchase.

  40. 40

    By Jonness @ 38:

    Homeownership, for most people, is a thing of the past. These days, people just rent the homes from the banks for the privilege of paying property taxes, insurance, and maintenance fees. And of course, there is a minor tax break for going this route, so that’s a lot of incentive to stay the course.

    In a sense that is very true for those who opt to go the variable rate interest route. They’re either planning on paying different amounts to live some place over time (like renting), or not staying there very long (which is often like renting). When you throw in appreciation/depreciation, it’s sort of like combining renting with gambling.

  41. 41
    David Losh says:

    RE: The Kid @ 35RE: Kary L. Krismer @ 31

    That’s exactly right. A year from now people who bought because of the tax credit will feel cheated. Prices bumped up with all the activity, and now the activity is over. As we go through the summer those people who needed to sell will have to slash prices.

    I also know that those people who rented out the house for the market to “improve” are pretty disappointed. They have severely used properties, diminished savings, and property worth less than when they started.

    By this time next year prices will be at least 10% less than this year, if not more. In this summer it will be clear that people over paid to take advantage of the tax credit. They will be looking at paying back the $7K, or $8K?, I don’t remember, over the next 30 years, with interest.

    It’s one thing to talk about civil damages. Maybe banks unintentionally, did something, or the Real Estate Industry unintentionally did something, maybe the government wasn’t paying attention. It’s another thing to talk about criminal activity.

    Banks worked in concert to defraud the American people by presenting a false economy. It was the government’s job to protect the American people from this scheme to make the economy look good, and encourage people to spend more.

    Banks were well aware that they had several people running up credit card bills, refinancing the family home, then running up more credit card bills. We all know that today, the banks, all the banks, knew that while it was happening.

    Banks are well aware of the valuation of Real Property. It is tied to CPI, wages, debt to income ratios, and sound economic principles. You can get all excited about sales data, that means absolutely nothing to the value of Real Property, but the bank knows better.

    Banks knew they were making loans to people who could not afford the payments, and used investor financing for mom, dad, and the kids. Banks were looking at millions of loans from people wanting the American Dream, but used highly leveraged, short term financing options, for building a Real Estate. The actuaries would tell any one that it was unsustainable without hyper inflation.

    But wait, the banks knew inflation was NOT possible, because they were doing the same things globally.

    Why were just hearing about Dubai in 2008? Why were we hearing all along that things were great in Europe when actually they were just building housing units, globally, for something to do? Why was the price of properties, the hyper appreciation, in Europe never front page news? Why didn’t we get, from any source, that the emerging markets were all issued credit cards?

    Banks issued credit cards to people in Third World countries. We based income reports on 24% credit cards issued in Third World countries. Then banks jacked up Interest rates across the board. Now all the credit is gone, the economy has collapsed, and banks end up with all the money.

    But wait, all those false valuations of Real Property ended up as traded securities.

    I’m sorry, but if I were to do any of what we know banks did, I would be in jail. If I did it with a group of people it would violate the Organized Crime, RICO staues. This is criminal activity on a global scale, and the people in Banks should be jailed, and all assets confiscated.

  42. 42

    By David Losh @ 41:

    Banks were well aware that they had several people running up credit card bills, refinancing the family home, then running up more credit card bills. We all know that today, the banks, all the banks, knew that while it was happening.

    That was happening for probably at least 20 years. Bankruptcy attorneys knew that. ;-)

    People talk about being a slave to the house, but becoming a slave to credit cards was much easier. They lull you in with low minimum payments and profit by the fact that most people either won’t realize they have no way out, or if they do, will try for quite some time to get out.

    It’s not quite so bad now that they’ve raised the minimum payment requirements, but I would like more to be done. For one thing, it should be illegal to solicit a new credit card account via a direct mailing or email.

  43. 43
    Pegasus says:

    Kary @ 42

    “For one thing, it should be illegal to solicit a new credit card account via a direct mailing or email.”

    Great idea Kary. While we are at it lets stop real estate agents from advertising and blogging endlessly. Say…don’t you have some houses to show? Its sunny out….the rubes should be out in force today. Can’t blame the rain for no sales today.

  44. 44
    David Losh says:

    RE: Kary L. Krismer @ 42

    No, this is nothing like before. Cards were issued repeatedly. They just came in the mail. To refinance you had to jump through hoops, the property needed to have, or at least be close to core value.

    No, this was systematic. It’s like a drug dealer, or loan shark, standing on a corner handing out money with the person walking by promising to pay.

    The government needs to confiscate the assets of the banks, and sort this out. I think that’s where this is heading.

  45. 45
    DrShort says:

    By David Losh @ 41:

    A year from now people who bought because of the tax credit will feel cheated. Prices bumped up with all the activity, and now the activity is over. As we go through the summer those people who needed to sell will have to slash prices.

    to say the market is at an equilibrium is more fair….

  46. 46

    By Pegasus @ 43:

    Great idea Kary. While we are at it lets stop real estate agents from advertising and blogging endlessly. Say…don’t you have some houses to show? Its sunny out….the rubes should be out in force today. Can’t blame the rain for no sales today.

    Get up on the wrong side of the bed, or are you always a jerk?

  47. 47

    By David Losh @ 44:

    RE: Kary L. Krismer @ 42 – No, this is nothing like before. Cards were issued repeatedly. They just came in the mail. To refinance you had to jump through hoops, the property needed to have, or at least be close to core value. .

    They did stop the practice of just mailing out cards years ago, but I don’t see how that makes your point. That’s an improvement.

    As to the last point you’re just wrong. Refinance appraisals have been inaccurate as long as I remember. No matter what the appreciation rate at the time, if I had a refinance appraisal that was less than a year old, I could always count on it being a ceiling for the value of the property when filing a bankruptcy. If there was an exception to that, I never found it.

  48. 48
    Jonness says:

    By Kary L. Krismer @ 40

    In a sense that is very true for those who opt to go the variable rate interest route. They’re either planning on paying different amounts to live some place over time (like renting), or not staying there very long (which is often like renting). When you throw in appreciation/depreciation, it’s sort of like combining renting with gambling.

    From my experience of being a prospective buyer watching the market for several years, I find that to be the case. The major driver of my decision to buy is my personal guess on future appreciation/depreciation. I suspect there are many others like me who come to the table with at least 20% down. Putting skin in the game is scary because it is gambling with a large chunk of change. It’s taken a big commitment on my part to save this money, and it would be difficult to see it evaporate.

    OTOH, buying with FHA is essentially paying 3.5% for an option to cash out in the future should the house appreciate or walk away should its price remain flat or decline. But for those who can afford to put 20% down and instead choose to exercise the FHA option, a walk away without declaring bankruptcy could come back to haunt you. It’s a tough play for those who can afford to buy a house the old fashioned way.

    IMO, before the market can heal we’ll need to see the comeback of high-paying jobs available to young people who are graduating from college or heading toward a career in a trade. At some point the driver of the low end needs to be wealth in the pockets of the emerging generation as opposed to tax gimmicks paid for with stimulus money borrowed from China.

    I agree with Ardell that we’ll see additional emphasis on distressed sales in the Q4, because I don’t believe the economy has sufficiently reset to allow for vigorous demand in housing. The current system is propped up with gimmicks based on increasing the amount of govt-backed consumer debt to levels recently proven unsustainable in the private market. To truly address the problem, we need to place more money into consumers’ pockets. But we as a nation are choosing to partake in the opposite of what can actually fix the problem.

  49. 49
    mking says:

    By Jonness @ 48:

    By Kary L. Krismer @ 40

    But for those who can afford to put 20% down and instead choose to exercise the FHA option, a walk away without declaring bankruptcy could come back to haunt you. It’s a tough play for those who can afford to buy a house the old fashioned way.

    Hi. I do not follow that. If you do a low down with mortgage insurance, or a Fannie Mae 3.5% down loan (slightly higher interest rate and no mortgage insurance), and you do not refinance that loan, I do not see what liability the buyer would have that can haunt them (other than trashing their credit) if they allowed the purchased home to foreclose. As I understand it, a purchase money loan is a no recourse loan, and in the event of a default the buyer loses the house and their credit rating, but are not liable for any thing else.
    What do you see coming back to haunt that buyer?

  50. 50

    RE: mking @ 49 – There is no purchase money distinction in Washington state. The only state that I know has that is California, and they very well may be the only state (unsure). Unfortunately, newspapers like the Times like to print stories from other states that give incorrect information, and that’s how these types of rumors start.

    In Washington there is no recourse if they non-judicially foreclose, which happens 99.9999% of the time on residential mortgages–if there is a foreclosure. The big exception though is a second mortgage. In the past, with rising values, if an owner defaulted the second position creditor would typically bid in at the first’s foreclosure sale and then foreclose. Now they don’t, and so the owner is liable to owe the entire debt on the second in many/most situations.

  51. 51
    Pegasus says:

    Kary @ 46
    “Get up on the wrong side of the bed, or are you always a jerk?”
    Pretty much most of the time Kary. Every day of the week except Tuesday. It enables one to spot the other jerks here right away with a special insight. When one proposes to establish a new idiotic law that will never be enforced, one deserves to be confronted with another equally idiotic law that brings it closer to home. That said, there are ways to stop a lot of the unwanted mail and SPAM. SPAM filters and email blocks. Opting out of junk mail and forcing the credit bureaus to stop giving your name out for insurance and credit solicitations works. I did it and it cut my junk mail by 80 percent. P.S. There are already worthless laws for SPAM and junk mail here in Washington State and nationally that rarely get enforced.

  52. 52

    RE: Pegasus @ 51 – It would be relatively easy for the government to restrict how credit cards are offered. I think the government may be the reason that they don’t mail out cards any longer (but that change was so long ago, I’m not sure how that came about). As mentioned, the government does already set the minimum payment amount. And in other areas they restrict how cigarettes and alcohol are advertised.

    This isn’t about junk mail or spam in general, it’s about controlling entities that are already regulated by the government. And more specifically, it’s about switching to a system where when people think they need a new credit card, they go looking for one, rather than constantly having them offered, possibly ending up with more credit than they need or can handle.

  53. 53
    Pegasus says:

    Kary ..@ 52
    We live in a country that has become government of the corporation, by the corporation and for the corporation. Do you really think they are really going to try to restrict the banks from giving you credit cards and charging enormous fees that amount to usury? How about that last credit card law that really fixed everything(according to Patty Murray) for the citizens and now there are untold increased bank fees and 30 percent interest rates. How about that last bankruptcy law that passed? Why did the public go crazy declaring bankruptcy before the new law took effect? Why have the taxpayers been forced to pay for the banking and mortgage crisis? Almost every law that gets passed is a sellout of the American public to corporate America. Look how our new financial reform law has now become a joke. Watered down by 2000 plus financial industry lobbyists.

  54. 54

    RE: Pegasus @ 53 – I would agree with a lot of that, but it isn’t only Congress that controls these entities. For example, I think the minimum payment thing was administrative action. Of course, it’s possible that if an agency did what I suggested, that Congress would act to change it. That wouldn’t surprise me at all.

  55. 55

    RE: Pegasus @ 53 – BTW, I’ve mentioned this before, but on the bankruptcy legislation there was a commission formed that developed changes to the law, just as happened when they enacted the 1978 code. Congress threw it out and substituted the very bank friendly legislation that passed. And as I mentioned, one of the biggest beneficiaries were car financiers, who are often typically assignees of some rather questionable entities (car dealers).

  56. 56
    Pegasus says:

    Kary
    The problem is Kary is that almost all government agencies have become fronts for the corporations that they are supposed to regulate. The FDA, the SEC, the DOJ, Department of Labor, etc, etc are all supposed to be protecting the consumer and the masses when in reality they are protecting the massive corporations. Their true function now is obfuscation of any complaints that arise which allow the corporate looting to continue. Our justice system isn’t much better. Too many administrative judges and career appointed judges who fear to cross the line. No one is protecting we the people anymore. Try filing a code violation in this county if you don’t think this extends into the local arena.

  57. 57

    RE: Pegasus @ 56 – I don’t know that federal judges (Dist. Ct. and higher) feel that much pressure from anyone (unless maybe they want to be appointed to a higher court) due to lifetime appointments. But I’ve heard the judiciary is under a bit of pressure because some possible candidates don’t really want to deal with all the drug cases that go through the federal system.

    But yes, once again we largely agree. Many industries really don’t fight being regulated because it has benefits.

  58. 58
    Jonness says:

    By mking @ 49:

    Hi. I do not follow that. If you do a low down with mortgage insurance, or a Fannie Mae 3.5% down loan (slightly higher interest rate and no mortgage insurance), and you do not refinance that loan, I do not see what liability the buyer would have that can haunt them (other than trashing their credit) if they allowed the purchased home to foreclose. As I understand it, a purchase money loan is a no recourse loan, and in the event of a default the buyer loses the house and their credit rating, but are not liable for any thing else. What do you see coming back to haunt that buyer?

    Sorry. You are correct. That’s what I always thought, but I was confused by a post from Kary a few months back saying the banks could come back on you even if you don’t have a second loan. I see from his more recent post that, while it’s possible, it rarely, if ever, happens. I most likely never read his previous post in its entirety. :)

  59. 59

    RE: Jonness @ 58 – I think what you might be confusing is my statements regarding that paper by the law professor in Arizona on walking away. If I recall correctly, he claimed in that paper that the banks couldn’t come after you for a deficiency on FHA loans. I talked about that probably being because of the subrogation rights of the underlying entity (PMI company, FHA, VA, etc.), and that while the bank couldn’t come after you the underlying entity could come after you. But that assumes they don’t non-judicially foreclose.

  60. 60
    Jonness says:

    RE: Kary L. Krismer @ 59 – Yes, that jars my memory a little bit. Thanks. :)

  61. 61
    David Losh says:

    Sorry, but this is nothing like before. This was systematic fraud committed over a decade, by banks. Banks should have assets seized until a full investigation can be done.

    I’m sorry the bankruptcy laws are in favor of the banks, lenders, and investors. Bankruptcy should be a protection under the law.

  62. 62

    […] the general state of the local housing market:Charting How Much Home the Median Income can AffordNWMLS: Pending Sales Predictably PlummetStill a "Buyer’s Market" in Many NeighborhoodsPosted in Audio & Video | Tagged […]

  63. 63

    […] signs of market improvement) at 5.3 million homeowners. Data on mortgage applications from MBA and pending sales data coming in now from local markets suggests that housing demand plummeted after the expiration of the first-time homebuyer tax credits […]

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