Weekly Twitter Digest (Link Roundup) for 2011-04-30

Powered by Twitter Tools

0.00 avg. rating (0% score) - 0 votes

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

    “Seattle Times tries to explain” is being generous. That’s a very poorly written article.

  2. 2
    ARDELL says:

    Tim! Congrats on the multiple kudos from Tableau!

  3. 3
    Jonness says:

    Typically, I think Stan Humphries has a good handle on understanding housing market economics, so I’m pretty certain he realizes house prices are partly a function of what people can afford to pay. When mortgage rates go up, Stan correctly points out less people will be able to afford houses at current prices. Thus, his article seems to indicate he assumes this means these people have been priced out of the market forever, as house prices continue to increase forever in the higher mortgage rate environment. But I’m pretty certain Stan realizes when less people buy homes, it exerts downward price pressure on the market. Thus, what he is really saying in the following article is he believe mortgage rates will rise at the same time unemployment decreases and wages go up.


    Increasing mortgage rates don’t necessarily mean people will have to pay more per month for houses. What matters is, how much money in the economy is chasing the available homes for sale. What this means is, people need to stop fixating on interest rates as the catch-all factor of whether housing affordability will go up or down. It’s also important to factor in jobs and lending standards. Of course supply side is important as well, so one should factor in available inventory, looming shadow foreclosures, shadow listings, pent-up buyer demand, etc.

    I hear people worried about all of the stuff that matters a little, but is, when taken in isolation, nothing more than the small picture. For instance, people are worried that inflation will take off, and house prices will shoot up to the point where they can’t afford them.

    But, inflation doesn’t matter nearly as much as the relationship between incomes and inflation. If wages are not rising, and inflation continues to increase, it means people must spend more on fuel, food, etc, and they have less money to spend on rising house prices. Since people will go to work and eat before they trade up to larger better houses, house prices take a much larger hit in this scenario than fuel and food.

    I’m not necessarily claiming we will experience stagflation (actually we already are to some degree, but it is probably temporary). I’m claiming, what really matters is the amount of money people possess, earn, and can borrow in relationship to the prices of homes they desire to buy. If more money flows into consumers’ hands, this money will typically chase houses and put upward pressure on prices. If mortgage rates simultaneously go up, then people can afford to pay the same amount for houses and more for the loans on the houses, meaning, their overall monthly payment will increase even if house prices stay flat (Stan’s scenario). But if more money does not flow into consumers’ hands, and mortgage rates go up, it puts downward pressure on house prices. Thus, barring another money source, such as through relaxed lending standards, house prices will most likely go down in this scenario to offset the increase in mortgage rates allowing the overall payment remains the same.

    Personally, I’m not watching mortgage rates all the closely, as I see them as a relatively non-important factor. If wages go up, and rates stay the same, then house prices will go up to offset the lower rates. What I am watching, however, is the very iffy job market and trending direction of increased tightening of lending standards.

  4. 4

    RE: Jonness @ 3 – Good balanced post. I would only add that I think a lot of the inflation we’ve been seeing is the result of energy prices and diverting farmland to energy production. Bernanke apparently said in his press conference there was little the Fed could do about that. Ignoring value of the dollar type issues, I would agree.

  5. 5
    WestSideBilly says:

    Thanks for putting more of these on goo.gl Tim.

Leave a Reply

Use your email address to sign up with Gravatar for a custom avatar.
Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Please read the rules before posting a comment.