Friday Flashback: “The Market is Returning to Normal”

After mentioning how much the real estate reporting in the Seattle Times has improved, I thought it would be fun to take a look at a classic piece from November 2006, less than a year before home prices in the Seattle area peaked (emphasis mine).

Home sales drop, not prices

Prospective homebuyers who’ve been frustrated by too much competition for too few homes — your time is now.

But don’t expect to find widespread price breaks, because home prices are up.

Increasing inventory is giving buyers more clout, said Lennox Scott, chairman and chief executive of John L. Scott Real Estate.

“We’re adjusting from a frenzied market back down to a strong market,” Scott said. “Buyers have selection.”

“I’m amazed the market was basically on steroids for as long as it was,” [Windermere Ballard assistant manager Bob] Melvey said. “It makes sense it’s going to have to take a rest. But even with this absorption rate, it’s not as if the market has tanked and the sky is falling.”

It’s a two for one deal! Classic Elizabeth Rhodes and classic J. Lennox Scott.

This article is built 100 percent on data talking points and quotes from home salespeople. Zero input from any serious economists, academics, or researchers, just a very lightly rehashed press release. It was an extreme disservice to Seattle Times readers at the time, but hey at least we get a laugh out of it eight years later.

Aubrey Cohen’s article about the same data in the Seattle P-I was considerably better. I can’t find the original article on the P-I website anymore, but here’s part that I quoted in my post at the time.

It’s a buyer’s market, if buyer’s loaded.

More and more home sellers are chasing fewer and fewer buyers, but those who did buy in October paid more than buyers did the month or year before that, according to housing statistics released Tuesday.

“They keep saying it’s a buyers market,” he said while looking over a Montlake home last month. “Prices haven’t changed. I don’t see any reduction.”

Zand, who is planning to move back to the area from San Jose, Calif., said prices have declined there.

The statistics show the market is returning to normal, said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University.

Glenn Crellin’s analysis at the time wasn’t all that on point in my opinion, but at least Aubrey talked to buyers and an economist, not just salespeople.

Here’s what I had to say about all of this at the time:

Is it possible that while the housing market collapses in the rest of the country, Seattle just “returns to normal”? Sure, anything is possible I suppose. However, with the inventory still increasing YOY at a faster rate every month, and sales still on the decline, I have to wonder what mysterious force is going to stop these trends once the market has become “normal”?

So much for that orderly return to normal.

It would be good keep all of this in mind as you think about the current market frenzy…

The purpose of our Friday Flashback series is to remind people why it’s never a good idea to base your home purchase decisions on the word of someone with a vested financial interest in selling as many homes as possible for as much as possible, no matter what. If you’ve got a good example of local home salespeople or other industry shills on record making fools of themselves in the years before the bubble burst, shoot me an email.
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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.


  1. 1
    Blurtman says:

    I believe it is called “Talking your book.”

  2. 2
    RandomNumber says:

    Now if there was some way that we didn’t have to wait multiple years for the fever to run its course and for buying to become practical again. Hopefully there is eventually a leveling, and not just a brief window followed by another frenzy. I’d love to see an calm market instead of a bipolar one.

  3. 3

    RE: RandomNumber @ 2 – Robots are the answer. Humans are too emotional.

    Although I have in the past made a rather simple suggestion that would help prevent too rapid of upswings. Loans are typically based on a certain percentage down payment. Make them also dependent on a certain percentage of value a year prior. So for example if you were doing a 5% down conventional, the sale price would be no higher than 111% (or some other number) of what it was worth the prior year (assuming similar condition). That would make appraisals a bit more expensive, and it wouldn’t stop cash buyers, but it would slow the rate of appreciation down.

  4. 4
    Shoeguy says:

    Every single one of those articles sounds like it was written in October of 2014. Every single one.

    Want me to link some examples?

  5. 5
    whatsmyname says:

    RE: Shoeguy @ 4
    Please do. I especially want to read about “more sellers chasing fewer buyers”, “increasing inventory”, and “they keep saying it’s a buyers market”. Extra credit for the “frenzied market” we just had, or “I’m amazed the market was basically on steroids for as long as it was.”


  6. 6
    Shoeguy says:

    RE: whatsmyname @ 5

    The first article talks about buyer frustration at too much competition for too few homes, but that inventory is rising, so NOW is the time to buy. All his talk about the frenzied steroid market needing to take a rest, but the “sky isn’t falling” is the same talk today about double digit growth over the last year not being sustainable and that a “slowdown” in price gains was to be expected, but “housing is returning to normal” in spite of mortgage applications being at 1995 levels and Millennials and first time buyers sitting out.

    The sentiment today is the same sentiment as 2006, that after a rapid run up in prices while sales dropped off that things would somehow just softly plateau indefinitely. That isn’t what happened then, and judging from the charts coming out today, that isn’t what’s happening now.

    As far as the second article – There are fewer buyers today as prices rise. First time buyer percentages are in the toilet and institutional investors are pulling back rapidly, yet “returning to normal” is all you hear today from the same experts again, even though mortgage apps are at 20 year lows.

    2006 was on steroids driven by rampant buyer speculation and liar loans. 2013 was on steroids driven by rampant corporate speculation while first time buyers disappeared. Neither run up has any legs once the mania and speculation ends.

  7. 7
    Blurtman says:

    RE: Shoeguy @ 6 – So you are saying it’s a good time to buy?

  8. 8
    whatsmyname says:

    RE: Shoeguy @ 6
    Activity is, as it has been, above median, but not spectacularly high, and certainly not on steroids. I don’t see a pattern of decreasing activity, formerly frenzied markets, talk of a buyer’s market, or increasing inventory. When you offered to link up to articles featuring things like this, I was excited. I never envisioned that they would be your own unpublished article which almost appears to be a response to my post. You can imagine how disappointed I am.

    P.s. you should really become familiar with the whole hedge fund investment thing. These guys don’t get into something NEW unless they perceive it to be radically undervalued, and they stop acquiring long before prices hit par. That is the business plan. The structure of these instruments make it a lot easier for them to get out of the instrument than for the housing stock to get out of the entity. Good luck, though.

  9. 9
    Erik says:

    RE: Shoeguy @ 6
    No no no no no. You are not thinking clearly shoe salesman.

    You said, “inventory is rising, so NOW is the time to buy.”

    You couldn’t be more wrong. In general, things that push prices up are affordability and low inventory. When inventory goes down, that puts upward pressure on housing prices. And as interest rates go lower and salaries go up, that puts upward pressure on housing prices.

    When inventory goes up, that puts downward pressure on housing prices. That makes now a worse time to buy in that respect. It isn’t exactly that simple, but those are some of the fundamental rules. Again, this is all just supply and demand. I became on owner in August, so I would like to see interest rates go down and supply to go down so the price of my home goes up.

  10. 10
    Erik says:

    RE: whatsmyname @ 8
    I agree. We bounced off the bottom because smart investors snapped up housing because it was so cheap. I think in my area atleast that housing is still slightly undervalued. People on here are going bonkers from the rapid increase, but that is the natural progression. I wouldn’t be surprised to see double digit appreciation the next couple years.

  11. 11
    whatsmyname says:

    RE: Erik @ 9
    I do think your area has potential. As the more centralized areas recover first, they get pricey, and more demand gets necessarily pushed further out. Your neighborhood, and your place benefit from that, plus the not-easily substituted feature of being right on Puget Sound.

    It is funny how many people on Seattle Bubble “helpfully” warned potential sellers in 2007 of the overshoot prices would do on the downturn. Completely forgotten on the other side, though. No concept of recovery – only a bubble.

  12. 12
    Erik says:

    RE: whatsmyname @ 11
    Hahaha! That’s why it’s Seattlebubble and not Seattlerecovery. These dummies have no concept of what happens after the bubble pops. They just focus on the bubble. They live in fear of the hammer dropping.

    My area is near the job center, which is recovering first. The problem with my area is going north on I-5. It’s a pain in the a$$. That is why people don’t want to move here in my opinion. I go South, which isn’t too bad. If they put another on ramp to downtown my area would boom.

    The median age in my complex is 70 because they don’t have to go to work downtown. I am hoping they take Bertha, that tunnel bore machine, straight from Alki to South Lake Union. I don’t see that happening anytime soon though.

    I do not have sinks, countertops, or appliances at the moment, but I still like living here. When I am done remodeling, I don’t mind hunkering down out here and fishing off my front porch with a bottle of something strong.

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