Weekend Open Thread (2011-04-29)

Here is your open thread for the weekend beginning Friday April 29th, 2011. You may post random links and off-topic discussions here. Also, if you have an idea or a topic you’d like to see covered in an article, please make it known.

Be sure to also check out the forums, and get your word in the user-driven discussions there!

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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.

35 comments:

  1. 1
    Bingo says:

    Here’s an interesting visual of the foreclosure debacle:

    “A Frightening Satellite Tour Of America’s Foreclosure Wastelands”

    http://www.businessinsider.com/satellite-tour-foreclosure-cities-2011-1?op=1#ixzz1KuFPpmIC

    Looks like some prior boom markets have gotten chicken pox ;o)

  2. 2
    ChrisM says:

    Are we in another Depression?

    http://www.nakedcapitalism.com/2011/04/guest-post-gallup-poll-shows-that-more-americans-believe-the-u-s-is-in-a-depression-than-is-growing-are-they-right.html

    Of course, the origins of the word “Depression” are fun. Does anyone still think economics is a science?

  3. 3
    Snigliastic says:

    As someone who is about to jump on a grenade, I am looking for mortgage hunting advice. I have good credit, the 20% down with a large buffer, and a six figure income. What do I do mortgage-wise?

  4. 4
    hoary says:

    By ChrisM @ 2:

    Are we in another Depression?

    http://www.nakedcapitalism.com/2011/04/guest-post-gallup-poll-shows-that-more-americans-believe-the-u-s-is-in-a-depression-than-is-growing-are-they-right.html

    Of course, the origins of the word “Depression” are fun. Does anyone still think economics is a science?

    Ha, I was going to post something similar on this gallup poll. It certainly is depressing that so many believe we are in either a recession or worse. In my mind we are up to our ears in stagnation.

  5. 5
    hoary says:

    RE: Snigliastic @ 3

    Shop around and get quotes from people. Rates have been falling and you will have people competing for your business in this environment.

  6. 6

    Have Any of You Heard That Creedence Clearwater Song, Lookin’ Out My Backdoor?

    Well, ole SWE was lookin’ out his backdoor yesterday and he took his car in for brake work at a neighborhood Walts garage…..I was the only customer there ALL DAY. BTW, this shop isn’t cheap, but the mechanics are old/experienced wizards at their trade there [when they fix it, they do it right and it stays fixed forever]…..I’m trading my old car off soon, so just did the brakes for safety sake….no recommended 100,000 mile stuff added in [my car has 97K on it]. They begged me to do more 100K preventive maintenance work, but I told them sorry….that’s the next owner’s bill.

    I hope they don’t go out of business though, they’re good.

  7. 7

    RE: hoary @ 4

    Yep Hoary

    I’d take a depression with deflation [including home prices] to horrifying stagflation any day [excluding home prices, they’re deflating].

    This witches brew economy is so weird compared to history, no wonder they didn’t include it on the poll….BTW, most MSM polls are rigged IMO anyway, weasle worded and omissions are the usual tactics.

  8. 8

    RE: Snigliastic @ 3

    Don’t Bite Off More Debt Than You Can Chew

    I got a 10/20 loan, knowing I’d pay the bugger off in about ten yrs anyway, but got the 30 yr low mortgage rates that way. If you pay down a normal 30 yr loan they just shorten it, payments stay the same, unless you pay all the principle off at once. And don’t believe even 4-5% are low rates when BECU’s only paying 0.XX% on CDs and Money Markets….it’s loan shark rates looking at it thyat way.

    Ten years of globalization and all our salaries will likely:

    1. be eaten up by stagflation
    2. be reduced drastically.

    IMO….so you don’t want that payment staying the same and stuck for decades that way.

  9. 9

    RE: Snigliastic @ 3 – Realize it’s not all about the rate, and that rates change rapidly so it’s hard to tell who is better.

    One huge issue is the industry attracts a lot of scum. That’s part of how we got into this mess. Just for example, we removed a lender from our referral list when they repeatedly attempted to get our client to go with an owner occupied loan on a 1031 exchange transaction.

    The other thing which will be difficult for you to judge is how likely is it that the lender will actually perform on time. Last year I had a couple of transactions held up by the lender, and one of them should have been about as easy as you could get. That’s why whenever we get an offer in on a listing we ask the buyer’s agent whether the lender is theirs or their clients’ lender. If the latter we’re more concerned.

  10. 10
    pfft says:

    By ChrisM @ 2:

    Are we in another Depression?

    http://www.nakedcapitalism.com/2011/04/guest-post-gallup-poll-shows-that-more-americans-believe-the-u-s-is-in-a-depression-than-is-growing-are-they-right.html

    Of course, the origins of the word “Depression” are fun. Does anyone still think economics is a science?

    you really think a public opinion poll is any evidence as to whether economics is a science?

    the public is always behind.

  11. 11
    pfft says:

    By softwarengineer @ 7:

    RE: hoary @ 4

    Yep Hoary

    I’d take a depression with deflation [including home prices] to horrifying stagflation any day [excluding home prices, they’re deflating].

    This witches brew economy is so weird compared to history, no wonder they didn’t include it on the poll….BTW, most MSM polls are rigged IMO anyway, weasle worded and omissions are the usual tactics.

    you really think we’re in stagflation? inflation is low. we are coming out of deflationary collapse.

    gas prices have been getting a lot of press lately. gas prices have not increased in 3 years. in fact they are down.

  12. 12
    hoary says:

    RE: pfft @ 11

    I disagree with your post.

  13. 13
    ChrisM says:

    RE: Snigliastic @ 3 – You might post your question on Redfin’s Seattle forum. I’m pretty sure Redfin has MB’s they work with.

    My point about economics being a science was too obscure — the entire treatment/respect of the word “Depression” is ludicrous, given it was just a PR stunt by FDR.

  14. 14
    pfft says:

    By hoary @ 12:

    RE: pfft @ 11

    I disagree with your post.

    inflation is under 3%. if you have some alternate data please share.

    gas prices are lower than 3 years ago. that is a fact.

  15. 15
    Dirty Renter says:

    RE: Snigliastic @ 3
    Take out a 15 year mortgage and pay it off in 7 years.

  16. 16
    Dirty Renter says:

    RE: softwarengineer @ 6
    Just got back from Illinois……..

  17. 17
    kutra says:

    RE: Snigliastic @ 3 – Consider a 1 year ARM that can be had for rates between 2.25-2.75%. That will save anywhere between $6000-10,000 a year in interest on a conforming $400,000 loan. Downside is that the loan may have to be refinanced if the economy improves and rates move higher. If things stay gloomy, the low rate ARM would have been the best choice, since rates will stay low or move lower in line with the Japanese experience (20 years of low mortgage rates).

  18. 18

    RE: kutra @ 17 – I’ve read there are Arms that don’t adjust as quickly as some from prior years, but that can be risky because if prices fall and rates rise, you won’t be able to refinance and could be forced to sell even if you have no other reason to. I view it as being like a bad margin call.

  19. 19
    kutra says:

    RE: Kary L. Krismer @ 18 – Prices would have to fall quite a bit to overcome a 20% downpayment if and when it is time to refinance in an environment of rising rates. Plus every year that the loan matures, another 2% will be paid down assuming a 30 year amortization schedule. That would provide enough margin for fair warning. And the situation today is most similar to Japan – there rates have been low for 20 years with prices slipping every year, while here rates have been low for only 4 years with similar price action.

  20. 20

    By kutra @ 19:

    RE: Kary L. Krismer @ 18 – Prices would have to fall quite a bit to overcome a 20% downpayment if and when it is time to refinance in an environment of rising rates. Plus every year that the loan matures, another 2% will be paid down assuming a 30 year amortization schedule.

    Part of the problem the past Arm people got into was that the required equity percentages increased, so while unlikely, maybe in the future they would require 30% down on a refinance.

    I’m just saying there are potential traps out there. If your finances are such that it doesn’t matter then perhaps an Arm is worthwhile. An extreme example would be perhaps having the ability to pay cash but wanting to stay liquid. On the other hand if your finances are not so good, then it could matter. An extreme example of that would be needing the low Arm rate to squeeze into the house in the first place.

  21. 21
    The Tim says:

    This article popped up on the Seattle Times yesterday: Seattle architect Amy Janof and her ‘bliss’ house

    THE RIGHT HOUSE can arrive in many ways.

    Amy Janof got hers through sheer force of will.

    “I had a baby at the time, so I would get up in the middle of the night to nurse and I would look at Windermere, because that’s my crack,” says Janof, the front half of Janof/Hald Architecture.

    “But my husband, Tim, he’s financially conservative, and in August 2007 the house was $1.085 million. Plus, he said it looked like a motel or a dentist’s office.

    “I thought, OK, OK, I bow to you on this one.

    “But I came back a week later, and there was a big sold sign on it. I called my realtor and said, ‘I know this sounds crazy, but could you see how sold it is?’ It was on its way to closing, but I told him, ‘I know this sounds really crazy but could you follow it through?’ I stayed awake all night. I was having a crisis. Ten days later he called and said, ‘Get over here in 30 minutes with a check for $30,000.’ ”

    Today, much calmer, Janof says, “I needed a place for my ducklings.”

    I was curious, so I dug through county records and found the Magnolia house. County records have it at 5 beds, 2.5 baths, and 2,950 square feet. They paid $1,015,000 in September 2007.

    Today similarly-sized homes in Magnolia are selling for a median of $695,000. Zillow pegs this home at $695,000.

    Must be nice to be able to flush $300k down the toilet and still be able to think back fondly on the memory a few years later.

  22. 22

    RE: The Tim @ 21 – FWIW, Corelogic values it at $784k plus or minus about 85k. It’s apparently an architecturally significant home, so if that’s what you’re into . . ..

  23. 23
    Blurtman says:

    RE: The Tim @ 21 – “But all of that is just a scholarly way of saying the Janof house, built in 1956, is cool, daddy-o, cool.” It really hurts to read writing like this. Even a high school newspaper has better.

    But as things that are flushed down the toilet are irretrievable (in a correctly functioing toilet), it is incorrect to state that the buyer and current owner of this property flushed $300,000 down the toilet. If the owner sold at the current market price, this would be an accurate statement.

  24. 24

    By Blurtman @ 23:

    But as things that are flushed down the toilet are irretrievable (in a correctly functioing toilet), it is incorrect to state that the buyer and current owner of this property flushed $300,000 down the toilet. If the owner sold at the current market price, this would be an accurate statement.

    I’m beginning to think you’re an attorney. Only an attorney would specify a “correctly functioning toilet.” ;-)

    Your point though is correct. And when you’re dealing with something specific like a somewhat unique style of house, the claim cannot even be made that it could have been picked up later for less money. That assumes though that the style of that house was important to the buyer.

  25. 25
    pfft says:

    By The Tim @ 21:

    This article popped up on the Seattle Times yesterday: Seattle architect Amy Janof and her ‘bliss’ house

    THE RIGHT HOUSE can arrive in many ways.

    Amy Janof got hers through sheer force of will.

    “I had a baby at the time, so I would get up in the middle of the night to nurse and I would look at Windermere, because that’s my crack,” says Janof, the front half of Janof/Hald Architecture.

    “But my husband, Tim, he’s financially conservative, and in August 2007 the house was $1.085 million. Plus, he said it looked like a motel or a dentist’s office.

    “I thought, OK, OK, I bow to you on this one.

    “But I came back a week later, and there was a big sold sign on it. I called my realtor and said, ‘I know this sounds crazy, but could you see how sold it is?’ It was on its way to closing, but I told him, ‘I know this sounds really crazy but could you follow it through?’ I stayed awake all night. I was having a crisis. Ten days later he called and said, ‘Get over here in 30 minutes with a check for $30,000.’ ”

    Today, much calmer, Janof says, “I needed a place for my ducklings.”

    I was curious, so I dug through county records and found the Magnolia house. County records have it at 5 beds, 2.5 baths, and 2,950 square feet. They paid $1,015,000 in September 2007.

    Today similarly-sized homes in Magnolia are selling for a median of $695,000. Zillow pegs this home at $695,000.

    Must be nice to be able to flush $300k down the toilet and still be able to think back fondly on the memory a few years later.

    you don’t lose until you sell.

  26. 26

    RE: pfft @ 25 – Who would have ever thought that Tim get get pfft, Blurtman and me to all agree on something!

  27. 27
    Blurtman says:

    RE: Kary L. Krismer @ 26 – Seriously. Time to buy that lottery ticket.

  28. 28
    Pegasus says:

    RE: Blurtman @ 27 – All three of you are playing with the same rules that the banksters play by. How did that work out? Loan values have collapsed. No problemo. They have not sold them so there is no loss! Those HELOC’s on homes that are not paying their first mortgage…marked at 100 percent issue valuations when they are really worthless. Any wonder why the reckoning day for foreclosures is taking longer and longer to process?

  29. 29
    Macro Investor says:

    By Pegasus @ 28:

    RE: Blurtman @ 27 – All three of you are playing with the same rules that the banksters play by. How did that work out? Loan values have collapsed. No problemo. They have not sold them so there is no loss! Those HELOC’s on homes that are not paying their first mortgage…marked at 100 percent issue valuations when they are really worthless. Any wonder why the reckoning day for foreclosures is taking longer and longer to process?

    They are all just wearing their finance ignorance as a badge of honor. Whether you sell or not, the money is gone. It essentially follows the rule of sunk cost. Each day you are making a decision — to hold an investment means you would buy it again at the current price and circumstances. To say there is no loss until it’s realized is living in denial.

  30. 30
    David Losh says:

    RE: Macro Investor @ 29

    Well that’s not true of all properties.

    I was talking with a guy this afternoon who asked what I thought his house was worth. Nice guy, smart, owns it free and clear in an excellent neighborhood. He keeps a really nice place, it’s in good condition. He lives alone in a five bedroom two bath home, 1950’s, cosmetically correct, with updates.

    It appraised in 2007 for a million, then last year for $750K. The house across the street went on the market last week for $850K and sold in three hours with multiple offers.

    My advice was that he keep the house. If he wanted to rent it out, and rent some place for a year great.

    Not all houses or market places are the same. I’ve been saying for two years now that you need to know your Real Property value. In his case, even if the economy goes to carp, there will still be people with money who will need to live his life style. In addition his property is huge, it’s private, and has great south west exposure.

    He can rent it out for a premium, or sell for a premium. He still has to live somewhere, and if he sells he will buy. He’s in a prime location, that in my opinion will hold value. If he sells and buys into a lower quality location he would lose more.

    Real Property is complex investment.

  31. 31
    patient says:

    If you buy an item for $100 in one store when it sells for $70 in another did you just flush $30 down the toilet? The answer is yes. It has nothing to do with if you sold it, overpaying is wasting money. If you sell for $150 later you still flushed $30 down the toilet.

  32. 32
    David Losh says:

    RE: patient @ 31

    Actually no because properties are unique in most cases. I have a thousand examples about houses, but I use the analogy of a 1956 Chevy. You have factors of condition, but you can’t compare the car to a 1964, in most cases. Some properties are like that.

    We worked on a property North of Broadview where the house is really a nothing. The three car garage is an architectual wonder. It’s becoming more famous as the years go by.

  33. 33

    By Macro Investor @ 29:

    They are all just wearing their finance ignorance as a badge of honor. Whether you sell or not, the money is gone. It essentially follows the rule of sunk cost. Each day you are making a decision — to hold an investment means you would buy it again at the current price and circumstances. To say there is no loss until it’s realized is living in denial.

    Hardly. Take stocks for example. Some people actually buy stocks realizing that they may go down, and the strategy when that occurs isn’t to sell, it’s to buy more.

    That isn’t really that applicable to houses, but neither is the sunk cost claim you make.

    And again realize my claim was for if you wanted a very specific type of house, as the one in Tim’s example possibly was. I would agree that if you don’t really care that much about the type of house, which is true of a good number of people, then not buying and ending up with even lower prices would be a good thing. But for someone wanting a very specific type of house, not buying could mean not getting what you want and settling for something else.

  34. 34

    RE: patient @ 31 – Google “fungible.”

  35. 35

    By David Losh @ 32:

    RE: patient @ 31
    Actually no because properties are unique in most cases. I have a thousand examples about houses, but I use the analogy of a 1956 Chevy. You have factors of condition, but you can’t compare the car to a 1964, in most cases. Some properties are like that. .

    You could compare it to a 1964 1/4 Mustang. And buying that over list new would have been a very good decision if you still had it and it was in good condition.

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