What Does a “Recovery” in Real Estate Look Like?

When you read a story claiming that a “recovery” is just around the corner for real estate or that the housing market is “recovering,” what does that mean to you?

Reaching for the Sky

Some people (mostly people who bought near the peak and real estate agents) think recovery means that home prices and home sales volumes will get back to the peak levels seen between 2005 and 2007. That is of course wishful thinking. The prices and sales volumes we saw during the bubble were ridiculously unsustainable, as documented on these pages during the last few years before the house of cards finally collapsed.

Personally, “recovery” is a loaded word when it comes to real estate. People who think that somehow the market will recover to anything that even remotely resembles the bubble seem to be confused about what “recover” really means.

Here’s Merriam-Webster’s definition of “recover”:

to bring back to normal position or condition

Here is Seattle area’s home price to income ratio over the last 22 years:

Seattle-Area Home Price to Income Ratio

It looks to me like the last few years were the recovery. During the housing bubble home prices grew grossly out of whack with local economic fundamentals, but between 2007 and 2011 they have been brought “back to normal condition.”

So what exactly are people expecting out of a future “recovery” in real estate? From what I can tell, it looks like the recovery is nearly complete.

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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.

98 comments:

  1. 1
    redmondjp says:

    I bought my home in late 1997, with the sale closing in early 1998. It’s nice to be lucky at least once in life!

    I think the answer to this question boils down to that all-too-familiar RE mantra: location, location, location. My house is a teardown, the lot underneath it is a clay mudpit for 8 months of the year, but I live 1.5 miles from Microsoft, and that’s why it currently has value – because other people want to occupy the same space and are willing to pay to do so. Will this still be the case in five years? Ten years? Twenty? I have no idea. Nobody thought that IBM would ever decline or that GM would go bankrupt, so past performance really doesn’t mean much, as the fine print says.

  2. 2
    HappyRenter says:

    Ok, the recovery is complete. The question now is: Where do we go next? Are prices going to dip further like after the housing bubble in the early 90’s? Or, are they going to stay flat for years to come? Or, are we going to see another bubble?

    These questions might not be relevant to a prospective buyer, but still interesting enough to ask.

  3. 3
    gr8day says:

    According to dictionary.com- “recover” means:

    1. To get back to regain (something lost or taken away)
    2. To make up for or make good (loss, damage, etc., to oneself).

    There are some who would say that the real estate market has recovered – as they think that they will get back the value that was lost fairly soon – and ‘make up” for their loss – usage #2

    I think that the real estate market has recovered – we are getting back the pricing that seems appropriate – (price to income) – usage #1. This usage would mean that we regained some sanity.

    Actually, I am not even sure if this is the bottom – I would not be surprised if prices went up 4% per years like the old days….or if this spring is just a temporary bump. Unemployment is rising (no job, no house)…so it may be a temporary bump.

  4. 4
    sofwarenginer says:

    I Agree With the Bloggers Above

    Much of this is just reading vague tea leaves. If Sen Cantwell is correct and Boeing Seattle lacks the 21,000 skilled folks to replace the Boomers leaving/retiring in 5-7 years….even just selling boatloads of dinky 737s in the future won’t happen either. Subcontract it out [outsource] some scream instead, no viable skill there either and there’s a BIG problem with that strategy too….the 737 Renton tools are “pile driven” into the Lake Washington swampland, kind of hard to move it all somewhere else where there’s no decent skills there anyway.

    Why wasn’t Sen Cantwell screaming about this when she first took office, about 8 years ago? Its too late now.

  5. 5
    SG says:

    What if growth in higher wage earners outpaces addition of new homes? Home prices will continue to increase in that case – the per capita income of the entire population only makes sense if everyone is considered a potential home owner. The reality is that not every can (or should) own a house.

    So, if there are 100k homes in the Seattle area, what’s the median income of the top 100k wage earners (or households) and what’s the historical trend of home prices to median or per capita income of this subset?

  6. 6
  7. 7
    ChrisM says:

    When I think about a recovery, I imagine a housing market where 30 year mortgage interest rates are at least 6%…

  8. 8
    wreckingbull says:

    RE: ChrisM @ 7 – This is the point that gets overlooked time and again here, thus my bad car analogy in the other thread. We can’t even begin to use the word ‘recovery’ until the rate manipulation stops.

    Maybe that is starting. Uncle Ben may be signaling that 2.3 trillion in treasury and mortgage purchases is enough.

  9. 9
    Pegasus says:

    Right now it is all about the monthly payment that one can afford and finance. I think it is a better way to look at this than price to income. Outside of the flippers the majority of buyers are still buying with very little down especially first time home buyers. It is still all about the monthly payment that one can afford. Bankers are still being more restrictive now than they were in the bubble years but with rates where they are many buyers are stepping up and ready to buy. There is a reason that the FHA, Fannie and Freddy are doing most of the financing in one way or another. With the low interest rates and lower prices buyers think they are getting a bargain.

  10. 10
    Mitch says:

    To me, recovery means that there is balance in supply and demand, that the glut of foreclosures are flushed out, and that there is a healthy (but not overheated) level of home and commercial construction. Then prices will take care of themselves, if markets, interest rates, and credit approvals are not manipulated as they have been in the past.

  11. 11
    Dweezil says:

    Recovery seems to depend on your opinion of ‘bad’. Some consider current pricing to be bad because it is not 2006 pricing, while I consider bad to be 2006 pricing and the past 5 years to be recovery.

  12. 12

    Like Tim said, and Dweezil just reiterated, all depends on what you mean by recovery.
    Between the mid 1990’s and 2007, home prices were going up at an unsustainable clip. But memories are short. People think that what just happened will continue to happen. The idiot is not on the endangered species list. Real estate agents were spreading their economic “wisdom” that things were different this time, that prices were just going to keep going up forever. People bought into that. It was like the stock market in 1929. Joseph Kennedy senior sold all his stocks just before the stock market crash, claiming that as soon as you started hearing stock tips at the shoeshine and from the elevator men, it was time to get out.
    Who would want to “recover” to something like that?

  13. 13
    ARDELL says:

    I know what recovery does NOT look like…it doesn’t = going back to believing that real estate NEVER goes down and this past down market was a once in a lifetime fluke of some kind.

  14. 14
    Scotsman says:

    If you bought in 2006 you’re still waiting for “recovery,” and it’s a long way off.

  15. 15
    corndogs says:

    RE: Scotsman @ 14 – Actually, per the median home price graphs on Trulia you can break it down by number of bedrooms. In Seattle a 3 bdrm or a 4 bdrm now has a median price that is higher than the 1st half of 2006. Last time I checked prices were still going up. You might want to rethink your view on that.

    http://www.trulia.com/real_estate/Seattle-Washington/market-trends/

  16. 16
    corndogs says:

    RE: krs @ 6 – You forgot to mention the part about the inventory continuing to decrease and median prices increasing by another 5%. (Seems a little more relevant than the part you reported). I mean, eventually total sales volume starts to be come a function of what’s available doesn’t it? Although Nationwide inventory is 6+ months, there are a lot of hot job center areas with less than two months inventory…. sales will start dropping in these areas, if more units don’t hit the market…

  17. 17
    Jonness says:

    So what exactly are people expecting out of a future “recovery” in real estate? From what I can tell, it looks like the recovery is nearly complete.

    IMO, real estate cannot recover until the unemployment rate goes down in earnest. Until then, you’re just being fooled by the magic of the printing press.

  18. 18

    By Mitch @ 10:

    To me, recovery means that there is balance in supply and demand, that the glut of foreclosures are flushed out, and that there is a healthy (but not overheated) level of home and commercial construction. Then prices will take care of themselves, if markets, interest rates, and credit approvals are not manipulated as they have been in the past.

    RE: Mitch @ 10

    I like this comment and would like to ad that a healthy recovery “should” follow a valley in home values.. That “valley” or “plateau” should last at least a couple of years.

  19. 19

    By Ira Sacharoff @ 12:

    Joseph Kennedy senior sold all his stocks just before the stock market crash, claiming that as soon as you started hearing stock tips at the shoeshine and from the elevator men, it was time to get out.

    I had a similar experience with someone I know watching CNBC—a lot!

  20. 20

    By Jonness @ 17:

    So what exactly are people expecting out of a future �recovery� in real estate? From what I can tell, it looks like the recovery is nearly complete.

    IMO, real estate cannot recover until the unemployment rate goes down in earnest. Until then, you’re just being fooled by the magic of the printing press.

    I think you need to look into the numbers. For a situation like California, that’s probably true. Seattle possibly not true. The difference?

    Not too many people move to a state with 12+ percent unemployment. In contrast, people are moving here with jobs. So the unemployment rate here could stay near it’s current level with there still being upward pressure on prices–at least in certain areas.

    Obviously though, lower unemployment would be better, all other things being equal.

  21. 21
    wreckingbull says:

    I’ll add another criterion.

    When cheerleaders like corndogs feel they have no need to show up here with their pom-poms, perhaps that signals the recovery has occurred.

  22. 22
    Tim McB says:

    I’d say a recovery looks like home appreciation at 0.25%-0.5% over the rate of inflation as it was for the first 100 years. And as Chris said 30 year fixed mortgage rates at or above 6%. The former I think we’ll see for the next few years the later probably not at least for the next 5 years or more.

    http://observationsandnotes.blogspot.com/2011/07/housing-prices-inflation-since-1900.html
    (Most of the way down.)

  23. 23
    mojo says:

    I’ve been watching real estate in Eastlake/Westlake/Queen Anne/Cap Hill for about 10 years. I was hoping for more of a price drop before I bought, but unfortunately I don’t think it’s going to happen…despite the “rate manipulation” that previous posters have mentioned.

    The fact is that the wage demographics in Seattle has changed a lot since 2000 (especially around SLU). I remember when Razzmataz strip club and the Pink Elephant car wash were the predominant business on Denny, and you couldn’t walk by the park without being harassed by bums and prostitutes. You still get a little bit of that up where Eastlake parallels I-5, but nothing like it was before. It’s not just SLU…QA/Eastlake/Cap Hill neighborhoods are all more “gentrified” now. The development of SLU has drawn in biotech and technology companies that bring with them throngs of employees that are compensated above median income. As I look around the skyline – I see just as many cranes now as I did in 2006-2007…but they are all building commercial space and way-to-expensive apartment buildings instead of condos. Expecting prices to revert back to 1990-2000 “norms” ignores that fact that most of these neighborhoods are different places now then they were back then.

    The bottom line is that dual income families with 60k+ salaried jobs are becoming the norm in high-demand neighborhoods close to downtown. Tim’s chart and post #5 by SG are spot on in the neighborhoods I’m looking at living in – home prices have dropped some (not as much as I expected) because wages continue to rise.

    I’m not saying prices are headed up, I’m just saying anecdotally it looks like Tim’s analysis is spot on here and it looks like prices have bottomed out in my neck of the woods.

    Full disclosure – I do not own a home and I do not intend to buy one in the next 72 hours.

  24. 24
    ; says:

    your chart looks a little different from this chart using Case Shiller data:

    http://housingcorrection.com/medianpricechart/CaseShillerAbsoluteVsMHICensus.htm

    your chart uses per capita income while the housingcorrection chart uses household income.

    “recovery” is, i guess, your way of calling bottom.
    i’m going to go against the crowd and say we’re almost, but not quite there yet.

  25. 25
    Madame Defarge says:

    My my, so many bottom callers. So much knitting to be done! My nice long shawl shall keep me warm this winter.

  26. 26
    ARDELL says:

    RE: ; @ 24

    It always confuses me when anyone talks about “a bottom” during “Spring Bump”. Isn’t it pretty much a fact that bottom can never happen during Spring Bump?

  27. 27

    RE: ARDELL @ 25 – Yes, if you want to pretend you can predict the future, then you should make the bottom call in February, so it will be at least several months before you’re proven wrong. Making a bottom call now is very amateurish. ;-)

  28. 28
    Lo Ball Jones says:

    The upswing in real estate went on for what seemed like 30 years…and every time it hit an “unimaginable” high it continued to soar. So who is to say every time it plateaus, its just ready to reach yet another inconceivable low? Same with gold, same with AAPL.

  29. 29
    Keith says:

    Tim,
    I think your affordability index which includes interest rate is a more reasonable way to chart this. Also — some kind of adjustment needs to be made based on what class of city we are (which has changed a bit over the last 20 years.)
    By class I mean that how sensible this price to income ratio appears is directly affected by the amount of external interest in the city. Example: I bet this metric would look very different for not just Paris/NYC/SF — but how about for DC/Vancouver/Boston?

  30. 30
    ARDELL says:

    RE: Kary L. Krismer @ 27

    Haha! I gave that a thumbs up! Actually it was two years…but who’s counting. I didn’t realize people expected a flat market to be a flat line vs “bumping along the bottom”. Miscalculated people’s perception on that one.

    True an L shaped “recovery” is drawn as if it is shaped straight down and straight across (as opposed to a V shaped Recovery), but I didn’t know people would hold that to be a literal representation. Clearly people involved in market movements would not.

    If you go from peak to present you will see the L with 2/09 as a significant point that called for the end of the general decline. Then pinging this way and that way with no real direction afterward.

    But I do understand your need to split hairs. It’s just “Who You Are”, and I have come to love that about you. :)

  31. 31
    Ray pepper says:

    If I sold 2.5 mill worth of homes this month then we are either recovered, obama bounce, or the buyers are attracted to my insanely good looks. I suggest the latter.

  32. 32

    By ARDELL @ 30:

    Actually it was two years…but who’s counting. . . .

    If you go from peak to present you will see the L with 2/09 as a significant point that called for the end of the general decline. Then pinging this way and that way with no real direction afterward.

    If you just go back two years, and only look at the King County non-distressed median, it’s been rather flat. Of course your mileage may vary depending on neighborhood (e.g. north or south of I-90) and type of house, etc. Most people here though don’t zero in to that extent, unless maybe it’s their own house, . . . or my house.

  33. 33
    David Losh says:

    We are at the very top of the market, and have hit the ceiling on prices that we will be stuck with for a lot of years, depending on what the government does next.

    I don’t see anything that would drive up prices for housing. There is a lot to say about why the price of housing units should decline.

  34. 34
    pfft says:

    Only slightly falling is the new recovery.

  35. 35
    2kt says:

    RE: David Losh @ 33

    Low inventory is the best price driver in the world, Mr.

  36. 36
    Topdog says:

    Bernanke is pumping, agencies are lending, interest rates continue falling, agents are hyping, low down payment affordability is climbing and banks are still squirming. Anything that needs to be artificially propped up is not for the duration a stable structure. Let the waves of Puget Sounds slosh at it a little while. Give it 18 months then stand by for Elliott Wave three. The bottom is in when the natural free market price is allowed to be established.

  37. 37
    Topdog says:

    Home at 6 times income is historically very high. An interest rate trap unless one plans to live there for 30 years. In the 1970’s rule of thumb was median home purchase price = 2.25 times median household income. Then interest rates were about three times today’s so an adjustment needs to be made for affordability. With 3% inflation, consider today’s 3.5% interest is a mirage that will go away.

    One should be safe at 3 times household income or to base their home mortgage loan payment qualification with the assumption of a 9% interest rate and resulting P&I mortgage payment at 25% of income. A $77K income should cover a $240K home with 20% down, $200K loan $19.2K annual payments. Then just bank the $8.4K annual savings if you lock a 3.5% rate with $10.8K annual payment.

  38. 38

    By 2kt @ 35:

    RE: David Losh @ 33

    Low inventory is the best price driver in the world, Mr.

    Some people just don’t understand economics at all. Dave doesn’t even understand why tomatoes are cheaper in Mexico!

  39. 39

    By Topdog @ 36:

    Bernanke is pumping, agencies are lending, interest rates continue falling, agents are hyping, low down payment affordability is climbing and banks are still squirming. Anything that needs to be artificially propped up is not for the duration a stable structure. Let the waves of Puget Sounds slosh at it a little while. Give it 18 months then stand by for Elliott Wave three. The bottom is in when the natural free market price is allowed to be established.

    All those are good points, but there’s also the passage of time.

    In the car industry they pretty much know low sales will end at some point as cars wear out. There’s a similar effect in real estate, although it’s now where near as certain. Eventually people want to move on with their lives. We’re now 5 years from the peak of real estate, when the herd changed direction and moved the other way. 5 years is a significant portion of someone’s adult working life. At some point they may want to stop waiting.

  40. 40

    By Topdog @ 37:

    Home at 6 times income is historically very high. An interest rate trap unless one plans to live there for 30 years..

    Not necessarily. First, you need a decline in prices for it to be a trap. Second, rising interest rates can make assumable loans valuable. Third, the repeal of the Garn Act would make loans in almost all the important states valuable in a rising interest rate environment, because property could be bought subject to the loan.

  41. 41
    David Losh says:

    RE: 2kt @ 35

    Low inventory may work for tomatoes, but hardly works with housing units.

    We spent decades ensuring we would have high density construction, but we got town houses instead. Now we have to bull doze the town houses to make way for high density construction.

    We have the ability to build an unlimited number of housing units, to add to our over supply.

    It’s ridiculous to talk inventory with housing. Any one can buy a house, any time, for the right price, terms, and conditions.

  42. 42
    David Losh says:

    RE: Topdog @ 37

    Absolutely. Prices are very high, and the investment quality is extremely low.

  43. 43
    dynomite says:

    RE: 2kt @ 35 – Don’t encourage him, he’ll just say more stupid stuff.

  44. 44
    DMac says:

    RE: sofwarenginer @ 4

    Your comment about the lack of viable alternatives to Boeing’s work skill labor shortage misses the 800 – pound elephant in the room. The fact that the company has moved a substantial portion of their Dreamliner work to a new plant in South Carolina, even after being threatened with retaliatory actions by this administration and their Big Labor cronies. Look for that trend to continue to right to work states that have the skilled labor necessary, albeit without the insane work rules and demands that commonly accompany labor contracts with big unions.

  45. 45
    DMac says:

    RE: Ira Sacharoff @ 12 – Joe also was one of the prime market manipulators, it was the main reason why FDR put him in charge of the stock market after it imploded. FDR told an adviser that it was better to have the “fox watching the hen house” then anyone else at the time.

  46. 46
    DMac says:

    RE: corndogs @ 16 – Corndogs, are you in actuality David Lereah, by any chance?

  47. 47

    RE: DMac @ 44 – Look to see how productive they are in SC first. Two of Boeing’s subs already gave up the ghost in SC, and even Boeing only plans on the SC plant producing half the planes as the Everett plant (once they clean up the various messes with the planes already partially assembled).

    When you look at these things you don’t just look at hourly wages, you look at efficiency too.

  48. 48
    DMac says:

    RE: Kary L. Krismer @ 47 – KLK – I didn’t realize that was the case – point taken. But when you look at other industries that have moved to right – to – work states, the overall long – term trend appears to be in their direction. I’m thinking specifically of the foreign automakers who have established factories in the southern states, and the quality of their products do not appeared to have suffered (at least compared to their previous home – sourced output). Perhaps the kind of specific qualifications needed in terms of aircraft assembly is not available in states like SC – but I’d bet you dollars to donuts that at some point in the near future it will be. BTW, I’m not anti – union by any means, my wife’s been a flight attendant at AA for over 20 years, and their union actually tried to do the right thing by the company; they gave back over 20% of their overall pay and benefits in order to keep the airline out of bankruptcy after 9/11. And what did they get for their magnanimity? Management voted themselves huge bonuses when the company went into the black, and said screw off to the rank and file. All with the predictable result the company finds itself in today.

  49. 49
    corndogs says:

    RE: DMac @ 48 – Are you really David Losh? You’re every bit as ignorant. Nice how Kary just schooled you. “I didn’t realize that was the case – point taken” translation “oops, I didn’t have a clue what I was talking about” Your wife and co-workers took a 20% pay cut and stayed because they had no better offers in the free market, which is good proof that they were overpaid in the first place. It’s ridiculous to present their decision to stay as altruism, they’re still just sucking the biggest titty they can find, it just so happens it got 20% smaller.

  50. 50
    DMac says:

    RE: corndogs @ 49 – project much, Cornholio?

  51. 51
    corndogs says:

    RE: DMac @ 50 – Your brilliance shines. Anymore wisdom regarding the state of the economy or real estate?

  52. 52
    DMac says:

    RE: corndogs @ 51 – Nope – I’ve been a lurker for a few months, and have gleaned quite a bit of knowledge from the commenters here. The only RE markets I have any direct knowledge of was my last place of residence, Chicago. But I really don’t respond to those showing such a level of hate and vitriol such as yourself – so try to have a good weekend, regardless.

  53. 53
    jesus christ says:

    so right! any so called “recovery” is illusury, the systemic problems with our economy, fiat fractonl reserve banking system, massive banking fraud and the level of natiional corruption is the root cause of en entire paradigm shift in the prcieved reality of any true market valuation. THE ENTIRE SYSTEM IS BROKEN FOLKS! remeber, homeownership a lifestyle choice,its not suppose to be anything else.

  54. 54
    2kt says:

    RE: David Losh @ 41

    Dave, you make no sense.

  55. 55
    2kt says:

    RE: Kary L. Krismer @ 38

    “Anyone can buy tomatoes any time!”

  56. 56
    David Losh says:

    RE: Kary L. Krismer @ 38

    Kary, you should have quit while you were ahead.

    You have a lack of knowledge, and ability.

    Every square inch on earth is for sale, some one just has to ask the right questions.

    So maybe you can buy tomatoes any time, it’s simple a matter of price, terms, and condition.

  57. 57
    David Losh says:

    RE: 2kt @ 54

    You’re a cheer leader, so yes, for you I make no sense.

    You must mean that the NWMLS, or Multiple Listing Services around the country don’t have as many listings in the data base as you would like to see, online, I suppose.

    Well then I suggest you start talking to people. Most people realize by now that holding on to the family home is a suckers bet. Holding onto to property in general is much more risky than it has ever been.

    Best of luck to you, it couldn’t happen to a nicer person.

  58. 58
    David Losh says:

    RE: corndogs @ 49

    I haven’t read the comments yet, but this guy is probably making some sense to have you off the deep end.

    It’s late, I’ve had a long day, maybe tomorrow, if I have time, I’ll take a look.

  59. 59

    By 2kt @ 55:

    RE: Kary L. Krismer @ 38

    “Anyone can buy tomatoes any time!”

    Huh? My point was that both the supply of tomatoes and the demand for tomatoes is different in Mexico. Maybe you meant grow tomatoes at any time? That’s part of the reason the supply would be different down there, but the biggest difference in price is likely due to demand. People in Bellevue would likely be willing to pay more for tomatoes than people in Skyway. Income levels affect prices paid for tomatoes.

  60. 60

    RE: David Losh @ 56 – David, you don’t understand economics. Take an economics course and come back here when you can say something that isn’t totally stupid.

    Try to read post 59. It’s likely way over your head, but try to read it and understand it. Your comment about the price of tomatoes just demonstrates who you don’t understand economic concepts. But despite that huge gap in your education, you think you can go around espousing your opinion about the current value of this and that, and where that value is headed. It’s laughable.

  61. 61
    2kt says:

    RE: Kary L. Krismer @ 59

    My comment was senseless and nonsensical. It’s point was to underscore that Dave’s comments were completely ridiculous.

  62. 62
    2kt says:

    RE: David Losh @ 57RE: <a href='#comment-173634'

    Dave, every investment has risks associated with it. You can lose a lot of money in the stock market, bond market, gold market, commodities market, etc., etc., etc.

    That said, when you can get cash return of 5%-6% when 5-year government bonds yield short of 1%, it's not bad on comparative basis.

    Low inventory levels (for any kind of a product) benefit the price to the upside. This is just a fact of economics.

  63. 63

    By 2kt @ 61:

    RE: Kary L. Krismer @ 59

    My comment was senseless and nonsensical. It’s point was to underscore that Dave’s comments were completely ridiculous.

    Ah, fighting fire with fire! ;-)

  64. 64

    By 2kt @ 62:

    Dave, every investment has risks associated with it. You can lose a lot of money in the stock market, bond market, gold market, commodities market, etc., etc., etc.

    You can even lose with cash. The only way to not risk loss is to not have any assets.

    Low inventory levels (for any kind of a product) benefit the price to the upside. This is just a fact of economics.

    That’s true, all other things being equal, including demand remaining constant. Low inventories of Blackberry (RIM) phones possibly wouldn’t impact price that much.

  65. 65
    David Losh says:

    RE: Kary L. Krismer @ 60

    What’s laughable is that you are attempting to insult me.

    You don’t have that ability.

  66. 66
    David Losh says:

    RE: 2kt @ 62

    Price benefits only apply if you capture that price. If you bought in December, and sold in June, then you have a price benefit. You need to have the cash in hand.

    If you are talking rental income, well yes, that can be a great return, but it is a job.

    If you want to build a Real Estate portfolio, yes, it can be a very lucritive way to invest. I don’t dispute that.

    What I dispute is that every property is a good investment. I dispute looking at broad statistics, sales data in particular, and making generalized statements about the investment quality of Real Estate.

    In building a Real Estate portfolio you need to throw a lot of stuff at the wall, it’s a job. You can wait for the market to come to you, or you can create your market place.

    So telling me there is low inventory? Come on, there are millions of people who want to unload property.

  67. 67
    David Losh says:

    RE: Topdog @ 37RE: Topdog @ 36

    The best part of your comments is that the Real Estate market place is propped up. That’s the single most important part of today’s market place.

    I think governments are ultimately propping up the banking system, but the effect on Real Estate has been to keep prices artificially high. Some market places are stabalizing.

    The consumer needs to have the ability to afford what they buy. That’s going to be the hardest part. Wages are stagnant, and declining, along with all the people who are unemployed.

    It’s great to talk about company profits, but until the consumer can afford to pay for things without HELOCs, credit cards, and easy financing terms there will be no recovery.

  68. 68

    RE: Kary L. Krismer @ 59
    You ever shop in supermarkets in “the ghetto”? Things like tomatoes, if available at all, are extremely expensive. You can’t even buy a tomato in Skyway these days.
    The problem with attacking Dave Losh about a comment he made about tomatoes is that it’s like an inside joke. I don’t read every comment every person makes every day. I’ve got other things to do. So I don’t know what David said, only that you’ve repeatedly attacked him for it.
    A fresh tomato, in season, is a wonderful thing. For most of the year, tomatoes are these hard, waxy, flavorless things that cost way too much. Like a lot of houses for sale, they’re pretty from the outside. And, like a lot of houses for sale, they’re lacking character and cost way too much.

  69. 69

    By Ira Sacharoff @ 68:

    RE: Kary L. Krismer @ 59
    You ever shop in supermarkets in “the ghetto”? Things like tomatoes, if available at all, are extremely expensive. You can’t even buy a tomato in Skyway these days.
    The problem with attacking Dave Losh about a comment he made about tomatoes is that it’s like an inside joke. I don’t read every comment every person makes every day. I’ve got other things to do. So I don’t know what David said, only that you’ve repeatedly attacked him for it..

    I brought it up tomatoes as an example of his not understanding economics in response to someone else pointing out David’s lack of understanding of how inventory affects things. The comment you missed was his noting that tomatoes are cheap in Mexico, post 144 in the politics thread. It just stuck out because it was so absurd.

    The people who have been irresponsible have been the government of the United States. Now why are medical costs lower in Canada? Why are the price of winter tomatoes lower in Mexico? It’s just kind of the system the United States has set up.

    Maybe Skyway isn’t the best example of places to buy tomatoes, but I would disagree that you can’t buy them cheap in lower income neighborhoods if you look around. A small store is likely to have higher prices, but there will be stores with lower prices in many neighborhoods. As to Skyway, I’m not even sure if either of the two stores that are on Renton Avenue are still open. The point though was that prices tend to be higher in places with higher incomes. That’s because there’s greater demand. That, by the way, is why houses tend to be more expensive in Seattle/Bellevue than in West Virginia. It’s the higher income levels that drive prices up. So having cheaper tomatoes in Mexico should be no real mystery (even ignoring the fact they are easier for consumers to grow down there).

    Years ago Safeway took some heat in the press for pricing the same thing differently in different neighborhoods in the greater Seattle area. I think they may have taken so much pressure that they gave up the practice. Presumably that means lower prices for Bellevue residents and higher prices for residents of Renton. Thank God the press is protecting us! /sarc

  70. 70
    David Losh says:

    RE: Kary L. Krismer @ 69

    You just don’t have the ability.

    From commnet 144 of the Political thread:

    “The people who have been irresponsible have been the government of the United States. Now why are medical costs lower in Canada? Why are the price of winter tomatoes lower in Mexico?”

    Because they are, that’s the answer, and the thread is about how I think the United States should open it’s borders.

    The discussion about my opinions of an open border are a direct result of comments Blurtman made.

    It’s a discussion. It’s give, and take, no right, or wrong, it’s a process.

  71. 71

    By David Losh @ 70:

    Because they are, that’s the answer, and the thread is about how I think the United States should open it’s borders. .

    You don’t have the ability to understand things, so you think they just are? People like you used to think the world was flat, and later that the sun revolved around the earth. People who don’t understand things think lots of funny things.

    In any case, even if the US totally opened it’s borders to trade in tomatoes, tomatoes would be just as cheap in Mexico, and just as expensive up here. Where do you think a lot of your produce comes from already?

  72. 72
    David Losh says:

    RE: Kary L. Krismer @ 71

    Like I said Kary, you just don’t have the ability to make a point.

    “Why are the price of winter tomatoes lower in Mexico?”

    Because that is where tomatoes can grow in our winter months? Is that better for you, or should we rehash another minor point of an over all discussion that has nothing to do with you.

    You are tilting at wind mills that don’t exist, making arguments where there are none, and it’s positively pointless.

  73. 73

    By David Losh @ 72:

    “Why are the price of winter tomatoes lower in Mexico?â��

    Because that is where tomatoes can grow in our winter months? Is that better for you, or should we rehash another minor point of an over all discussion that has nothing to do with you.

    Wow, I’ve said it several times now, and for some reason you think I said it’s because that’s where tomatoes are grown in our winter months. No wonder you don’t understand anything, you don’t understand simple English! I haven’t even mentioned the word “winter.” Nor have I focused on the supply side. I’ve focused on the demand side. Again I would suggest you take a course in basic economics, or not discuss issues involving the value of anything.

    I’ve not even touched on your Canada drug issue. Your understanding of that is just as bad.

  74. 74
    Blurtman says:

    RE: David Losh @ 72 – Enough about tomatoes!!!

    What about pizza pie????

  75. 75
    Howard says:

    By Blurtman @ 74:

    RE: David Losh @ 72 – Enough about tomatoes!!!

    What about pizza pie????

    Didn’t the pizza discussion happen a few months ago?

  76. 76
    David Losh says:

    RE: Kary L. Krismer @ 73

    Kary, you chose to focus on tomatoes. That’s what you do.

    It was my mistake to buy into your BS.

    I apologize.

  77. 77
    David Losh says:

    RE: Blurtman @ 74

    It was my fault no one elses. I saw it, bought into it, my mistake, sorry.

  78. 78
    Blurtman says:

    RE: Howard @ 75 – My vote goes to the candidate who promises free pizza for everyone.

  79. 79

    By David Losh @ 76:

    RE: Kary L. Krismer @ 73

    Kary, you chose to focus on tomatoes. That’s what you do.

    It was my mistake to buy into your BS.

    I apologize.

    No David. The focus is on how YOU don’t understand what affects values, specifically here how income levels affect demand which in turn affects prices.

    Again you seem to have a hard time understanding even the topic. Tomatoes are only the latest example.

    And what I say isn’t BS simply because you are incapable of understanding it.

  80. 80

    By Blurtman @ 78:

    RE: Howard @ 75 – My vote goes to the candidate who promises free pizza for everyone.

    I remember when candidate McGovern suggested giving everyone $2,000. That proposal didn’t go over too well back then–different times. Maybe he should have said 400 pizzas!

  81. 81
    corndogs says:

    RE: David Losh @ 70 – David Losh said…

    “It’s a discussion. It’s give, and take, no right, or wrong, it’s a process.”

    No, there’s definitely a right and wrong. The discussion process is so a group of people can air conflicting viewpoints and march toward a better understanding of the truth. When you insist on saying stupid stuff like inventory doesn’t affect housing prices, all people involved take a pause on the path to the truth. It isn’t like some people are kicking around the idea that inventory affects prices, substantially all people know this to be a fact….

    So to partake in discussions about real estate in the future you should do 1 of 3 things.

    1. Admit that the laws of supply and demand pertain to real estate so we can continue with at least the basic premise that even a caveman understands..
    2. Explain to everyone without ambiguity why the cities that have record low inventory also have coincident rising prices and explain why the two are not related.
    3. Close your pie-hole and try to learn something.

  82. 82

    By corndogs @ 81:

    1. Admit that the laws of supply and demand pertain to real estate so we can continue with at least the basic premise that even a caveman understands…

    There’s no need to get insulting!

    http://media.tumblr.com/tumblr_m08752ll3P1qb8x3g.jpg

    Seriously, David isn’t the only one on this website who doesn’t understand supply and demand. The majority of Americans don’t understand simple economics.

  83. 83

    By Blurtman @ 78:

    RE: Howard @ 75 – My vote goes to the candidate who promises free pizza for everyone.

    I wouldn’t vote for a candidate just because he promised a free pizza. It would need to be good pizza. The candidate promising a free Domino’s pizza would lose my vote. But if they were going to fly in a DeLorenzo’s pizza from Trenton whenever I had the urge, I’d probably vote for Idi Amin or Joe Stalin.

  84. 84
    ARDELL says:

    RE: Kary L. Krismer @ 82

    Well then, it’s a really good thing that you can know and remember everything…for everyone…on just about every possible topic. :)

    I’d like to back you up David, but I wholeheartedly admit that I don’t know beans about tomatoes except how to make pasta sauce with them. :)

  85. 85
    David Losh says:

    RE: Kary L. Krismer @ 79

    It is completely BS. Now you want a discussion about the demand side of tomatoes, where you are attempting to direct a discussion into a corner.

    It’s total BS.

    Now if you really want to redirect the discussion to who can pay the prices for Real Estate, then you are onto something.

  86. 86
    David Losh says:

    RE: corndogs @ 81

    I can buy a property any day, at any time. There is no lack of supply in housing because I only want one certain property, at a certain time. If I decide to buy my neighbors house, I just have to pay the price, or set terms that are acceptable to him, or come up with conditions to make the purchase more palatable.

    We just saw a peak period where we had all the inventory any one could want and prices kept climbing. Now that prices are declining it doesn’t mean those housing units went away, they are still there, that supply of housing is still out there, it just isn’t in the data base that you look at.

    Just to be more clear, why don’t you tell me that they aren’t making any more dirt so the price of Real Estate has to go up. The one I like is that there is water on two sides of us so of course the price of Real Estate has to go up.

    You’re not here for a discussion. You have an opinion, and I have mine.

    I think the price of housing will have to continue to decline, and that the wage base is a much more viable indication of where pricing will be.

  87. 87

    By David Losh @ 85:

    RE: Kary L. Krismer @ 79 – It is completely BS. Now you want a discussion about the demand side of tomatoes, where you are attempting to direct a discussion into a corner..

    Now I want a discussion on the demand side? Check out posts 59 and 69! I’ve been talking about the demand side of tomatoes this whole time. Sometimes I mention the supply side, but the focus has been on the demand side because that’s what’s so absurd about you even mentioning the price of tomatoes in Mexico.

    You just can’t understand what I’m talking about because you lack an understanding of basic economics. That causes you to call what I say “BS.” Again, just because you don’t understand something, that doesn’t mean it’s BS. It just means you’re ignorant on a topic.

    How many times are you going to keep responding to what I say with total nonsense and denial? It’s getting tiring.

  88. 88

    By David Losh @ 86:

    I can buy a property any day, at any time. There is no lack of supply in housing because I only want one certain property, at a certain time. If I decide to buy my neighbors house, I just have to pay the price, or set terms that are acceptable to him, or come up with conditions to make the purchase more palatable. .

    Let me explain supply to you, so that you’re at least on the same page as the rest of us.

    Let’s pretend instead of only wanting one particular house, you want one house on a certain street, and that there are 12 houses on that street.

    If you’re only willing to pay $100,000 then the supply of houses available to you is not 12, it’s likely zero, because no one would want to sell at such a low price.

    If you’re willing to pay $200,000, then maybe one owner would be willing to sell to you, but that might be a short sale, and the bank might not be willing to release for $200,000, so the supply would still be zero, not twelve.

    If you’re willing to raise your price to $250,000, then perhaps you might have two properties you could actually buy for that price, so your supply would be two, not twelve.

    Let’s assume further that the highest any of these houses would appraise for is $300,000. If you offered $300,000 you might only have four people be willing to sell, because most people are not interested in moving. If you were willing to offer $400,000 for a $300,000 house, you might get six people willing to sell, not twelve.

    The point I’m making is simple: The “supply” is not the total number of houses out there! Supply is dependent on price.

  89. 89

    By David Losh @ 86:

    We just saw a peak period where we had all the inventory any one could want and prices kept climbing. Now that prices are declining it doesn’t mean those housing units went away, they are still there, that supply of housing is still out there, it just isn’t in the data base that you look at.

    I explained what’s wrong with your second sentence in my prior post. As to the first sentence, you have it backwards. The inventory was high in 2007 because the prices were high. Just as in my prior post more people were willing to sell to you at $400,000 than $300,000, the same thing was true in 2007.

    Also, it’s supply and demand. You can’t just look at one but not the other to determine where prices will head. When we’re discussing low inventory, it’s not just the absolute number. It’s not 5,000 versus 8,000. It’s relative to the number of people looking. 100 active listings could be too much supply for King County if you had a year where only 12 people were looking to buy.

  90. 90
    David Losh says:

    RE: Kary L. Krismer @ 89RE: Kary L. Krismer @ 88RE: Kary L. Krismer @ 87

    What does this have to do with the price of tomatoes?

    So you see my point of view, you are chosing to ignore it while making a rambling set of comments that are total BS.

    Prices were higher so there was more inventory? Well then all we have to do is raise prices.

    Really? Is that the basic economics?

    You are too easy of a target.

    Yes, I understand the economics, I took the same classes in 1972, but I recognize the world has changed a lot since then.

  91. 91
    Blurtman says:

    RE: Ira Sacharoff @ 83 – Stalin, yes, but only if his offer incuded anchovies.

  92. 92
    ARDELL says:

    RE: Ira Sacharoff @ 83

    I once saw a guy get elected to President…of an HOA Board…by offering his neighbors a free oil change. :)

  93. 93
    Howard says:

    RE: Ira Sacharoff @ 83

    It would have to be here for me http://newparkpizza.com/

    A bit infamous, but my favorite…

    If someone was to provide me with a weekly pie, I would even campaign for them!

  94. 94

    RE: David Losh @ 90 – David, 87 has to do with the tomato discussion. The other two comments had to do with your more recent post. I was trying to explain some basic economics to you.

    Again, it’s not BS just because you cannot understand it. Go back and read 88 and 89 again. Try it maybe 10 times. That might be sufficient for something to sink into that dense head of yours.

  95. 95

    By David Losh @ 90:

    Prices were higher so there was more inventory? Well then all we have to do is raise prices.

    Really? Is that the basic economics?

    You still have it backwards. Are you really that dense? Or are you just trying to mess with me?

  96. 96

    By ARDELL @ 92:-

    I once saw a guy get elected to President…of an HOA Board…by offering his neighbors a free oil change. :)

    Was that slang for something? ;-)

  97. 97
    ARDELL says:

    RE: Kary L. Krismer @ 95

    No. That would be a lube job. :)

  98. 98
    Doug says:

    This post is spot-on. I bought near the bottom, and I expect my house to appreciate at something around 2% a year for the next 10 years. House prices were so inflated that we priced an entire generation of young working adults out of the market, and we’re not going back to that.

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