Friday Flashback: “It’s no wonder people are confused.”

Today’s Flashback comes from March 2008: Area’s housing isn’t doom and gloom, experts say

Area real estate professionals and politicians want to clear something up.

Now is a good time to buy and sell real estate in Snohomish County, no matter what people may be hearing about the national market.

The panel of industry experts held a town hall meeting in Lynn­wood on Thursday for that purpose that drew about 200 people.

Ron Sparks, Coldwell Banker Bain“There is no shortage of information or opinions, and so many reports seem to conflict with each other,” said Ron Sparks, a moderator of the panel and a vice president at Coldwell Banker Bain. “It’s no wonder people are confused.”

The local economy is strong, unemployment is low, rental prices are increasing faster than the price of homes, interest rates are low, inventory is good and “safe, stable financing” is available, Sparks said. It’s not a bad time to sell, but sellers need to be more flexible at the negotiating table, he said.

Many of the speakers, including Sparks, pointed the finger of blame firmly at the media, which he said are confusing the public by publishing headlines designed to appeal to emotions and reports that “mix and match” local and national information. Sparks compared the real estate market to the weather: What’s happening in San Diego isn’t helpful here.

The answer, he said, is to take media reports with a grain of salt, look for the source of the data cited and work with a local real estate expert.

That darn media!

Here’s what I wrote about this nonsense at the time:

Yeah, it’s that dog gone confusing media. If not for them, the housing market would be just peachy. Give. Me. A. Break. Talk about grasping at straws.

Note that Seattle-area home prices peaked in July 2007, nearly a year earlier.

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
    Jonness says:

    This kind of idiotic forecasting is partially due to the non-sense teaching that real estate is 100% neighborhood specific. When one overlooks the combination of national AND local factors that influence pricing, they are bound to get it wrong.

    The truth is, national factors are generally stronger than local factors when setting markets (but both have a significant influence). Neighborhood prices deviate within the national outlook; not vice versa.

    Mr. Sparks allowed himself to believe what was easiest to believe. Most likely, he was so fearful of opening his eyes and accepting the truth that he lost his shorts.

    Never trust a man in a suit.

  2. 2
    Jonness says:

    Speaking of national factors, a very interesting turn of events has occurred. David Rosenberg (the bear) has turned into a bull. Here are 12 reasons while he believes in the U.S. housing market:

    1) The bond rally has pushed down mortgage rates to 3.6% from 4.3% a year ago.
    2) The Credit Managers’ Index of lending professionals climbed to 55.1 in January from 54.9, indicating that mortgage guidelines have eased.
    3) Mortgage credit across banks has climbed 4% at an annual rate over the past four weeks.
    4) Employment in the 25-34 age group increased 2.6% in the last 12 months — the fastest pace in 15 years.
    5) Among first-time homebuyers, the employment rate is at a six-year high at 76.6%.
    6) In the past year, net household formation has grown 10 times to 2 million. That’s the highest level since July 2005.
    7) It now takes less time to sell a house — the median time between building completion and sale is three months, versus the historical norm of five months.
    8) Home inventories are also below historical levels. There is a “razor-tight 4.4 months’ supply of existing homes on the market for sale.”
    9) The University of Michigan home buying plan index has held a 12-month high in the past two months.
    10) Residential construction as a share of GDP is at 3.3% in this economic cycle. That’s lower than the 5% average and the lows of previous recessions.
    11) Single-family building permits surged to near-seven-year highs at the end of 2014, up 8% on a year-over-year basis.
    12) Data from the National Association of Home Builders showed that home shopper traffic in the past three months is on par with the strongest level in 2005.

  3. 3
    Blurtman says:

    “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

    Substitute “home equity,” “retirement,” or “happiness” for “salary.”

  4. 4
    ronp says:

    Always worth looking at the rent vs. buy calculator.

    That being said, it sure is nice to have control of a lot and the structure. Helps to have nice neighbors either way, renting or buying.

    Save your money and dollar cost average into equities – too.

  5. 5

    By Blurtman @ :

    “It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

    Substitute “home equity,” “retirement,” or “happiness” for “salary.”

    And that’s why people employed in other areas (and politicians) didn’t foresee the near collapse of the banking industry due to derivatives and such. Things were good. People were making money.

    Looking back on it I think we were a bit lucky that the collapse occurred when it did. If our market had continued to act unrestrained in the same manner as other markets had (which would have been very likely given human nature), we would have had a much bigger mess to clean up. We would have had a lot more people underwater for a much longer period of time, both due to higher prices and more years of sales at a relatively high volume. And I think the knowledge of what did occur to real estate prices helps restrain that type of price action a bit, and that is also good. Although on that point, memories can be very short lived.

  6. 6
    Erik says:

    RE: Jonness @
    #8: 4.4 months of inventory? In King county? I thought we were around 2 months?

    Please explain #6.

  7. 7
    Blurtman says:

    Here you go, Erik. Relatively new home in a quiet neighborhood. Faces lake Sam but zero view, however. Still occupied with a pricey Mercedes parked outside. The outside looks fine. Folks bought at the peak, and still slightly underwater, but likely have equity so why the foreclosure?

  8. 8
    Erik says:

    RE: ronp @
    My opinion is that if you can buy in seattle, you should if you will be there 2 years or more. Based on supply and demand, it is very likely to see large price increases in the next 2 years or more. Inventory won’t suddenly catapult. Market changes take time. It will likely be a sellers market with low inventory the next couple years unless we have an unforeseen event or a computer company leaves. People like seattle. I think more computer companies will come to this area and prices will go up a lot more.

    Plus, we know now that if worse comes to worse, you can just walk away from your mortgage thanks to washington being a nob-judicial state. Seems dumb not to own in the area right now.

  9. 9
    Erik says:

    RE: Blurtman @
    Yeah, seems weird. I would buy it, but I don’t have a job and I have that condo on Alki still. I want to buy on the eastside during the next slump in the high tech industry.

    Maybe the owners refinanced a bunch or are going through bankruptcy?

  10. 10
    Jay says:

    RE: Erik @ – Well, you probably have to wait a long time to buy on the eastside then.

  11. 11
    FlipperInSeattle says:

    @7 and @9 – you didn’t see the 2nd. In 2007 they took out a 400k 1st and a 294k 2nd. The first is almost 70k in arrears now…

    Best case, they might be able to sell and walk away with nothing (after taxes, commissions, etc). They might be a little under. The challenge for buyers in that spot is the 2nd mortgage is a recourse loan – always better to try a work-out than a walk-away…

  12. 12
    Blurtman says:

    RE: FlipperInSeattle @ – Hey, thanks for that. At least they have a pricey Mercedes (maybe).

  13. 13
    Jonness says:

    By Erik @ :

    RE: Jonness @
    #8: 4.4 months of inventory? In King county? I thought we were around 2 months?

    Please explain #6.

    Erik, the first sentence of my post indicates “national factors.” Seattle is much tighter than the overall national figures.

    As far as David Rosenberg’s 180 degree forecast reversal, I think he likes to be on the opposite side of the popular opinion. I’m less sold on near-term inflation than he is, which makes me less contrarian at-the-moment. I do agree with him though, that most likely, in the long run, the Fed will remain too loose for too long.

  14. 14
    Mike says:

    By Erik @ :

    RE: Jonness @
    #8: 4.4 months of inventory? In King county? I thought we were around 2 months?

    Please explain #6.

    #6 – Basically it’s when people move out of their parents house, or out of shared housing (roommate) situations and get their own address.

  15. 15
    BacktoBasic says:

    Interest is so low at 3% (7 year ARM). It is usually 6%, now it is 50% of normal rate. If you have a job pays you decent wages. You do need to buy to get the tax benefit also. We are in the mid-cycle of economy recovery, it is too stupid not to buy.

  16. 16

    RE: BacktoBasic @ – I don’t understand why anyone would get an ARM with interest rates so low, but then I lived through 12%+ interest rates.

  17. 17
    Jay says:

    RE: Kary L. Krismer @ – Yeah, I think the fixed 15 year or 30 year mortgage is a better choice than the ARM.

  18. 18
    Jonness says:

    By Mike @ :

    Please explain #6.

    #6 – Basically it’s when people move out of their parents house, or out of shared housing (roommate) situations and get their own address.
    Thanks. Much of the increase can be attributed to newly formed renter households. The rental vacancy rate is the lowest it’s been since 1993. Interestingly, the homeownership rate is the lowest since 1994.

    With new household formation outpacing construction, it appears we are waiting on wage growth as the remaining outstanding factor in getting things going again.

  19. 19
    Mike says:

    RE: Jonness @ – I think the real explanation here is the household formation rate was so low for a long time it didn’t take much of an increase in absolute terms to show a sudden spike. Much like how housing starts spiked up but are still half the long term average.

    It’s a noteworthy trend if it continues.

  20. 20
    boater says:

    I was just reading the pamphlet sent with my property taxes. It says King county is the second fastest growing county in the nation. I assume thats on a percentage basis but i haven’t looked it up. At any rate it helps explain the demand we’ve been seeing.

  21. 21

    RE: boater @ – I would doubt that’s on a percentage basis. A smaller county would be more likely faster growing, because it would take fewer people. But I suppose it’s possible that King County is the smallest county that actually has a decent economy to attract people.

  22. 22

    RE: Jonness @

    Explain This

    Got my property tax assessment on 2/13, my home and land dropped 19%….property tax on my SE King County unit dropped $500/yr.

    Its not as low as it ever got, but $23K below what I paid for it in 1999 and $10K lower than what it was assessed for in 1999.

    Thank goodness I live in one of the most desirable least expensive neighborhoods in SE King County, the one that barely qualifies the larger pool of home buyers my realtor neighbor tells me and has the most interest traffic as a result.

  23. 23
    Mike says:

    RE: softwarengineer @ – You don’t want the larger pool of buyers, they’re the same idiots that lost their homes in the downturn. You want discriminating buyers that have $$$$$$$ to spend buying something above average. That’s where the strength is in Seattle real estate.

  24. 24

    RE: Mike @

    Yes Mike

    We need that minority too, I was talking about the much larger general home buyer base my realtor neighbor was referring to, the general hoard working middle incomes that wants a house.

    In 1999, my realtor told me I could afford much more home [and debt]; but I told her its a new change coming, the old rules will be contradicted. I saw pay on a downward spiral, especially the bottom 90% with the changes in our world. I felt comforted on long-term residence planning this way…..but a caveat to my decision, the short-term flipper lives by short-term profit and the higher priced units will mean the highest profits the investor can make in Seattle, if they play their cards right. Every situation has rules and policies, the investor that thinks out of the box can be walking on thin ice today….when before it was the “cat’s meow”.

  25. 25
    Mike says:

    RE: softwarengineer @ – I think what you’re not accepting is a lot of the south county sucks. People don’t really want to live there, they’re only potential customers for that area because it’s priced low. The median buyer in KC is paying around $500K, the areas you’re referring to are in the bottom quartile, meaning 75% of buyers are choosing to live somewhere else. How is 25% the “larger home buyer base” exactly? (especially considering how many bottom 25% homes sold to investors lately) I think you’re conflating people that would like to buy with those who are actually doing it. That hasn’t been the case since 2007.

  26. 26
    boater says:

    RE: Kary L. Krismer @
    sorry should have posted the exact quote. They said king county is the 2nd fastest urban county in the country .

  27. 27
    Jonness says:

    By softwarengineer @ :

    RE: Jonness @

    Explain This

    Got my property tax assessment on 2/13, my home and land dropped 19%….property tax on my SE King County unit dropped $500/yr.

    Its not as low as it ever got, but $23K below what I paid for it in 1999 and $10K lower than what it was assessed for in 1999.

    The outlying areas are still struggling. That said, I’m surprised your assessor is dropping your value this year. There must be some interesting comps in your neighborhood.

    All 3 of my properties continue to go up in value. I have a hearing at the Board of Equalization tomorrow to attempt to get the assessor to delve into a touch of reality. Much to my dismay, after winning last year’s appeal, I learned you have to redo the appeal every year, because the assessor simply uses the same BS method as the prior year without any regard to your victory.

  28. 28
    boater says:

    RE: Jonness @
    if you want it to be permanent you need then to attach something negative to the property description. But then its on ile for all potential buyers to see.

  29. 29
    Mike Bates says:

    Mitch McConnell says the current economic recovery coincides with the Republican party taking control of the senate. Elect more Republicans and suddenly things are getting better.

    Is there a parallel here?

  30. 30

    RE: Mike Bates @ – Other than some people maybe now expecting taxes to not as likely to be increased in the future, I don’t see any likely causation there. The price of energy would likely be a greater cause for any improvement in that limited time frame. Even more likely is it’s just part of the normal economic pattern.

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