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.


  1. 1
    cutienoua says:

    50/50 That’s helpful!

  2. 2
    David Losh says:

    As long as I’m here arguing with Kary about nonsense I might as well express my opinion on this subject.

    2013 will be after the Presidential elections so there may be more financial certainty, as the Republicans like to say. The larger issue is in Europe, and China. I just look over seas and know that we are in desperate times outside of our control.

    The banking system however is all commingled. We have defaults in our mortgages, but we have a mechanism to address that. Over seas the mortgages in default are still on the books as collectible. In the United States we see a problem, over seas, from what I look at, there may be a problem, but the politicians don’t address it, look at it, or have a way to deal with that.

    Cramming down sovereign debt in Greece does nothing for the people who live, and work there. It’s the same in Spain, and Italy. We could talk about Northern Africa, but they don’t have the same problems, they do have unrest.

    So I don’t think buying is a good idea. We are in a global market place, and we should pay attention to that. Until there is a global consensus on real solutions, taking out a mortgage is foolish.

    The real question is if this is a time to take on debt, in the form of a mortgage.

  3. 3
    Ben says:

    Even forgetting macroeconomic issues like the EU, 2013 will be a better time.

    There is basically no real good inventory right now. It seems like people are doing everything to avoid selling houses. Rightly priced nice houses disappear quickly.

    By 2013 more inventory should be flushed through the system and more realism should be in it as well.

  4. 4

    Inventory can’t be worse in 2013, can it? So there should be more and better houses to choose from. Will prices be higher in ’13? Maybe, but unlikely to be more than 2% higher, and there’s just as good a chance they’ll be lower. Interest rates? I haven’t a clue.

  5. 5
    David Losh says:

    and I disagree about inventory. Let’s say people wise up next year and decide to sell. Let’s say we have a lot of houses come onto the market, as they should, if you have money tied up in property it’s only going to diminish.

    OK, let’s pretend that all of that is true, which by 2013 it won’t happen, people will continue to hold out.

    The real question is if this is the time to take on a quarter of a million dollars in debt. Should you pay for a quarter of a million dollars in debt just to have a depreciating asset.

    Let me put this into a perspective. I was in and out of college, and university for six years without any debt. Today people talk like it’s just a fact of life. Debt is by far the biggest problem we face, and it is unsustainable.

    The old idea of getting a degree, having a family, buy a house, and put a car in the driveway is just debt ridden.

    The second part is the jobs market where you have a limited time of paying your debt. Contract labor is taking over. You have five to seven year contracts. Companies want labor guarantees. You don’t have stability in the jobs market which makes debt more risky.

    I know I sound a lot like Scotsman, but I see a day coming where it all gets to a breaking point.

  6. 6
    Matthew says:

    More inventory and lower prices. Possibly prices stay flat. Interest rates probably about the same.

    Seems like a no brainer to me. How is this a 50-50 vote so far? Do people honestly see a substantial rise in housing prices next year or are people just reading the question wrong?

  7. 7
    Scotsman says:

    A mild winter in the central valley has ranchers prediciting a higher than usual survival rate for pink pony foals during the spring birthing season. A bumper crop, as they say. Ardell is manipulating statistics as I type, getting ready to support her prediction of rising prices by summer. JLS has a framed picture of the new Audi RS8 hanging behind his desk- this is the year it finally happens. Maybe a new trophy wife to go with it?

    Need I go on? The bottom is in- north of I-90! /sarc

  8. 8
    Dorothea says:

    RE: David Losh @ 2 – Not addressing the validity of your observations (you’ve got your hands full with Kary, anyway), let me say this:

    In the past few months of being a bubble-reader, between SWE and posts like this, I’m pratically afraid to even live in a house anymore! Nay, I’m actually frightened even SEEING houses now, stark reminders of everything horrible in life, from debt to world dysfunction.

    /just me sitting in my yurt

  9. 9
    Dirty Renter says:

    RE: Scotsman @ 7
    If one of the foals ever make it to Emerald Downs, I’m claiming it, price be d*mned.

  10. 10

    Different parts of the U.S. will bottom out at different times….and different parts of the greater Puget Sound region will bottom out at different times. We’ll be bouncing around the bottom for awhile…2013-2014.

    Home values reaching the bottom is only one of several possible reasons why ppl should consider whether to buy or wait. As Matthew said, we already know rates are going to be kept artificially low for the foreseeable future.

    Now is a good time to buy if you’re a marginally qualified borrower as underwriting guidelines will continue to get tighter for ppl with a low credit score, low down payment.

    Folks who want to buy in 2012 have to be okay with seeing their home’s value possibly go down further, and some people are okay with that.

    …and for the record I voted “2013” in the weekly poll bc 2014 was not an option.

  11. 11
    Hugh Dominic says:

    The answer is “no”.

    It might be the same but it will not be better. Factoring in a year of waiting, it might even be worse. Prices will not decline meaningfully. If you want to buy a house you should.

  12. 12
    Scotsman says:

    Being serious, 2012 probably isn’t a bad time to buy a house if you’re interested in living in it. It’s still not time to invest in real estate.

    I’d be much more concerned about what might change in 2016/2017 on the macro scale than current events. If one were to buy a house now I’d suggest going with the minimum down on a 5-7 year adjustable to limit both monthly expenses and total exposure and and not refinancing (into a recourse loan) until the future was a bit clearer. If in 5-6 years we get inflation home owners win. If we get more muddling along it’s a draw. If we get some sort of collapse everybody loses and it doesn’t really matter, does it?

  13. 13
    Pegasus says:

    If Obama wins a second term and it appears he will, then 2012 will be a banner year for housing. Reasoning…..if Obama can fool over 50 percent of the voters into voting for him a second time after what he has done…er….not done then the real estate industry should have no trouble in convincing a significant amount of those very same people that they must buy now or be priced out forever.

  14. 14

    By Matthew @ 6:

    More inventory and lower prices. Possibly prices stay flat. Interest rates probably about the same.

    Seems like a no brainer to me. How is this a 50-50 vote so far? Do people honestly see a substantial rise in housing prices next year or are people just reading the question wrong?

    Not sure how you get a better supply off of lower prices . . ..

    But as to your last comment, people could answer based on many different considerations. Some here probably are voting the same way, but disagree with others who voted with them.

  15. 15

    Kary said” Not sure how you get a better supply off of lower prices . . ..”

    The theory is that as prices continue to not rise, underwater sellers will just capitulate and their homes will end up on the market, either with the sellers bringing money to the table, or via a short sale or foreclosure. Certainly a lot of sellers are stuck right now..They’d like to sell but their homes are worth 100 to 150 thousand less than they paid. The payments are difficult, barely doable, but they can’t refinance because they have no equity, and they’re paying a higher interest rate. What are the choices?
    A. Keep struggling, muddle through it. House prices will go up eventually.
    B. Hire Luigi. Make it look like it was an electrical fire.
    C. Give it back to the bank. Hire an attorney.
    D. Try to arrange a short sale. There’s no shortgage of shyster real estate agents who are now ” Short Sale Experts.”
    E. Keep making the payments but learn explosives making. Practice on the bank.

  16. 16
    David Losh says:

    RE: Dorothea @ 8


    The way I look at it we will have a new generation of renters, with an abundance of rental property. We already saw it in small segments of the market.

    I was down town today and saw a half dozen cranes. I know three of those cranes are for apartment buildings, and we haven’t seen much apartment building for the past ten years. Now Obama wants to whole sale property to hedge funds as rentals from Fannie Mae, and Freddie Mac. I keep hearing from investors who want long term rental income.

    It seems to me that in the next four years people will rent, and save.

    I’m also going to throw the commercial Real Estate market under the bus. This is the time for companies to build facilities for long term growth. I don’t see leased commercial space as attractive as buying commercial property.

  17. 17
    Jonness says:

    By Ira Sacharoff @ 15:

    D. Try to arrange a short sale. There’s no shortgage of shyster real estate agents who are now ” Short Sale Experts.”

    I looked at houses this weekend (south of I-90), and I saw nothing but short sales. I guess people actually buy these things? What a royal PITA!

    Seriously, how do people stomach buying a short sale? Is there an easier way?

  18. 18
    yukon dave says:

    It is starting to look like the real estate world is going to turn for some funny reasons. All major real estate holding companies are driving up rents because of demand. As demand rises for rent, two things are going to happen. Either more people will buy homes instead of rent as rental prices go up or we are going to have to build more low price housing.
    As the banking world is now given the go to foreclose on houses, it will be bad for a bit longer and should flush out bottom faster. Lets not forget that the rest of the world is not a safe haven. China had its first major real estate bubble burst and had a 30% drop in December alone. Either way the market will come back eventually.

  19. 19
    Jonness says:

    Rent now, or be priced in forever!


    “Examining 250 properties around the U.S., and going through close to 40 client files to project the financial impact of owning real estate versus liquidating it, Arzaga, an adjunct professor in personal finance at the University of California at Berkeley, found that, “100 percent of the time it was better to rent, rather than own.””

  20. 20
    Scotsman says:

    RE: Jonness @ 19

    “So while home ownership may sound glamorous, you need a lot of money to make it work, without much guarantee of positive returns in a post-bubble era. Indeed, Arzaga cites himself as an example of how home ownership doesn’t pay off. His residence is today worth $1.5 million, about 17 percent less than what he paid.

    So why not sell? For Arzaga, it’s a lifestyle choice, and one that he doesn’t regret, since his big money-making investments are elsewhere.”

    Like I’ve said for a while, home ownership is a luxury for those who can afford it. You don’t have to be rich, but you need to be financially solid and understand the choices you make.

  21. 21

    RE: Jonness @ 17
    Sometimes, even just getting to view a short sale home can be a royal PITA. The agent remarks will list the occupant’s phone number, and state that you must contact them before showing. But many short sellers don’t have a strong motivation to sell and leave. Not paying a mortgage is serving their needs right now, and the results will be the same, ultimately, whether their home is sold as a short sale or on the courthouse steps as a foreclosure. But they’ve been contacted by some real estate agent who wants to “help them” save their credit, and agreed to list the property as a short sale.
    About a year ago, I saw a short sale listing asking to contact the seller if you wanted to see it, but if there were no answer, just go ahead and show. I went in with my clients. Surprise! The seller was passed out on the living room couch in his briefs, with 60 or so beer bottled strewn throughout the living room floor, and the kitchen redolent with the odor of rotten meat. We didn’t stay long.

  22. 22

    By Jonness @ 17:

    By Ira Sacharoff @ 15:

    D. Try to arrange a short sale. There’s no shortgage of shyster real estate agents who are now ” Short Sale Experts.”

    I looked at houses this weekend (south of I-90), and I saw nothing but short sales. I guess people actually buy these things? What a royal PITA!

    Seriously, how do people stomach buying a short sale? Is there an easier way?

    They don’t tend to buy them. They may be a significant percentage of the actives and pendings, but they are typically less than 150 sales a month (King County, SFR), no matter what the volume of sales that month.

    Number from NWMLS sources, but not compiled by or guaranteed by the NWMLS.

  23. 23
    David Losh says:

    RE: yukon dave @ 18

    I asked an apartment building developer about the increased rents, and he said it’s a fast market place. They will continue to increase rents until units aren’t renting, then they will lower rents until they do.

    It sounded so simple, and of course that’s right. It’s like home sales on a volume basis, with less risk, because the income is averaged over many units.

    People, right now, are willing to pay to be close in to the new Amazon jobs.

  24. 24
    whatsmyname says:

    RE: Jonness @ 19
    Atlernate title: Stock pimp discovers you should put your money into stocks!
    The quotes from McBride were worthwhile.

  25. 25
    bd says:

    I think 2013 won’t be significantly different from 2012.

    The banks will continue to unload their properties, so there may be some remaining price declines, but nothing like the past four years. The distressed listings will continue to suppress supply coming from solid home owners.

    Unlike a lot of folks on the bubble boards, I don’t imagine a lot people biting their nails, waiting to get into the market. A large number of folks who really couldn’t handle their obligations have already had their hands forced, and it’s not 2008, no one is surprised by the current sale prices. I don’t see a lot of listings chasing the price declines down in the same way they did in 2008.

    Unfortunately for buyers, the same dynamics that increase affordability (lower price to rent ratio) also mean that for many potential sellers the numbers tip in favor of renting out their place rather than selling it. Of course, there are folks like the guy from the most recent post for whom that makes no sense. You can’t have bought at peak and you have to be willing to rent long term for the equation to make sense, but there are plenty of houses and owners that fit that category.

    Of course, my perspective is skewed by the fact that I live in one of the more high-demand, close-in Seattle neighborhoods where renting out houses is common and doable.

    Outlanders have to do their own calculations. For them, I can make no predictions.

  26. 26
    Jonness says:

    Americans have witnessed massive wealth destruction. Unemployment (U6) is at 15%. Many people who are working have had their salaries frozen. Leveraged bets, such as housing, turned and bit them, and their stocks have not fared well. Thus, the retiring baby boomers are no longer contributing to a huge bubbling increase in economic growth.

    IMO, the taxpayers have been robbed, and the money has been cleverly redirected by the politicians and Fed out of the taxpayers’ pockets and into the corporations (banks, etc) who pay for the ads that teach people who to vote for. The banksters get cold hard cash for the moment, and the taxpayers get strapped with hot soft debt forever. IOW, zero interest rates aren’t all they are cracked up to be.

    But this is what most people want; thus, they vote for the same cast of cartoon characters time and time again. Then again, the baby boomers want the next generation to pay for the coke binge, and they have the majority vote, so…

    I looked into the short sales I drove by last weekend and discovered an alarming number of them were purchased with no money down. Going forward, a certain amount of the bubble era demand will not be allowed to buy homes that previously could. This supply must be reabsorbed by those who can afford the lifestyle.

    During the bubble run-up, the majority of Americans felt the wealth effect, and it caused them to borrow and spend. Now they feel the wealth destruction effect, and it will continue to cause them to be tighter with their money. Although this will continue to dampen the economy as a whole, including the housing market, things are slowly getting better. IMO, it will be a very drawn out process. In hindsight, we won’t really be able to point to a single month and claim, we should have bought in that month, it was the bottom. The trough will be so wide, that the bottom will really come down to one’s own personal financial and living situation. When is housing affordable for you as an individual, and how long do you plan on living there? How much money can you save by renting, rooming with others, or living in your parents’ basement while house prices continue go down, trend sideways, or slowly appreciate? This is what is important in today’s market. No longer do you have to worry about “missing the magic moment in time.” You need to be able to afford to buy a house as well as contribute to your retirement account, children’s educations, cash on hand, etc.

    As Kary likes to say, some people truly can afford to buy homes. I believe, for these folks, now is not a bad time to buy if the stars align in other areas. These people don’t mind paying for a lifestyle if it turns out they lose some money. And if it goes the other way, all the merrier.

    But for the majority of people, it still isn’t a good time to buy. In order to buy, these people should pay down their debt, increase their savings, and live beneath their means long enough to get to the point where they can truly afford to buy a house. The current long trough at or near the bottom of the housing market (depending where you live) will provide plenty of opportunity to improve people’s financial situation every day for the rest of their lives.

    Debt deleveraging takes time, both for countries and for individuals. Thus, most of us have-nots have plenty of time to build a better life. It starts one step at a time and typically requires years to achieve.

    Nobody knows where the bottom is. I’ve long predicted we will most likely witness the Seattle Case-Shiller index reset back to a minimum of 2003-level prices. Seeing how we are currently at July 2004 levels, I still believe this is a reasonable forecast and represents perhaps a further 8% loss. Then again, the maximum downside risk is well beyond this, so one should only buy now if they can truly afford to. For the cash-strapped hopeful buyers among us, it’s a great time to live beneath your means and save up a down payment. I have done so for many years now, and it has radically changed my financial future for the better.

  27. 27
    joe dirt says:

    RE: David Losh @ 2

    Yes we are in a global economy, and many countries have had a stronger recovery trend than the U.S. under Obama. E.G. China, India, Australia, Canada, Germany, Mexico, South Korea, Brazil …

    I would not wait to buy if one finds a good foreclosure/short sale.

  28. 28
    joe dirt says:

    RE: Jonness @ 26

    The majority of people have jobs and are doing OK.

  29. 29
  30. 30

    By joe dirt @ 28:

    RE: Jonness @ 26

    The majority of people have jobs and are doing OK.

    I would agree, but the standard is a bit higher than a 49% unemployment rate! ;-)

  31. 31
    David Losh says:

    RE: joe dirt @ 27

    I always like talking about what a great job Obama did. In my opinion we dodged a bullet that other countries still haven’t addressed. You may want to rething China, Australia, Mexico, and Canada.

    Lately Obama has made some bad political choices, that I’ll give you.

  32. 32
    Jonness says:

    By joe dirt @ 28:

    RE: Jonness @ 26

    The majority of people have jobs and are doing OK.

    Unfortunately, that’s not how economics works.

    The peak unemployment rate during the two previous recessions was and 7.8% and 6.3% respectively. It is currently 8.3% and hasn’t been below the previous recession peak since Sept. 2008. The last time the Civilian Employment-Population Ratio was below where it is today was when we were first emerging from the 1982 recession, which, unlike our current recovery, resulted in a sharp upward V-shaped recovery.

    Civilian Employment-Population Ratio

    (I suspect the large increase after the 1982 recession has a lot to do with an increase in 2-income families. And what the 8.3% unemployment rate does not reveal is, a large percentage of the new jobs have been low paying jobs.)

    The current unemployment situation in this country is not what professional economists consider “OK.” However, many laymen probably don’t see the economy for what it really is due to unemployment benefits, food stamps, welfare, and other programs that have been put in place to help those in need who are suffering. In the old days, you could judge economic pain by the length of the soup lines. These days, you have to look really hard in order to see if the person next to you in line at the grocery store is using an EBT card. Unfortunately, neither soup lines or EBT cards qualify people to purchase homes.

    Americans on food stamps as jobs are outsourced

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