Warning: New Housing Bubble Ahead

This comment left by Ryan strikes me as a clear warning sign of another housing bubble inflating in Seattle.

Just pulled the trigger on buying a townhouse in Fremont for $745k. Haven’t closed yet so don’t want to link to the MLS. Thought I would share my thinking on why I bought and what the situation was like.

List was for around $650k. Property had multiple offers, most within a few $k of the accepted price. List to accepted offer in about 7 days. Three quarters of a mil for a townhouse seems insane but we feel good about the purchase for a few reasons:

  • My office is on the same block as the unit, can’t beat that commute
  • I’ve lived in Fremont for years and want to stay for the long haul both a resident and business owner
  • The unit was unusual in a number of ways, all good. Exceptional build quality
  • Units sold nearby with same square footage for similar price that are absolute garbage (3807 Fremont Ave N I’m looking at you)
  • We wanted a house but didn’t have the capital to buy and then remodel, most things in our geographic range needed work
  • I felt good about the potential future appreciation of the property due to being so close to all of the major tech employers

On the downside it’s definitely on the high end of what anyone paid for a townhouse in Fremont and there is no way around the fact that it’s insane amount of money. If tech is in a bubble it still feels like the early stages of the bubble and we didn’t see the situation improving. Mid term (5 year range) it seems that traffic will get drastically worse as everything under construction comes online, so it seemed smart to set up our lives not to have to leave the neighborhood.

Just one perspective from someone helping to inflate both the tech and housing bubble.

Here’s what concerns me the most:

  • $745k for a townhouse. In Fremont.
  • The home sold for $100k over list price with multiple offers at that level.
  • The buyer cites that he “felt good about the potential future appreciation” as partial justification for paying so much.

I still don’t think we’re likely to see another big price crash (yet) but stories like this one definitely scream “housing bubble” to me.

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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.

171 comments:

  1. 1
    First Time Homebuyer says:

    The market in Seattle is once again out of control! Take for example this house near the University of Washington. https://www.redfin.com/WA/Seattle/6236-36th-Ave-NE-98115/home/314472

    Listed at 679k on March 4th and sold for $860k on April 9th.

    Sometimes it is clear to me that the listing agent is purposefully underpricing a home to get a bidding war and they actually get more than what they could have if they listed it at “market value”.

    However sometimes it is unclear as to why these insane bidding wars are continuing. People need to do extensive research on their homes before just blindly walking into one of the biggest decisions of their lives. Look up the king county property details on the home. See what it sold for in the past. Look at the taxes paid. See what it was appreciated at in 2000-2004 before the bubble. Yes the interest rates are still low, but guess what? If they go back up to 7-8% in the next 10 years then your house is not going to be worth as much because it’s all about what people can afford. Unless you are in the tech business of Microsoft, Google, Amazon…etc then unfortunately you are just like the rest of us who have to live with wage stagnation and you wouldn’t be able to afford any homes in Seattle if interest rates increase.

    This is why I bought my first house knowing that if I had to live there for the next 30 years I would be comfortable in that house and in my neighborhood. I still feel like I overpaid buying a $450k house. It’s in a good neighborhood with good schools, but growing up I would have never even imagined paying almost half a million dollars for my first home.

    End rant.

  2. 2
    David B. says:

    Yeah, that comment on the previous thread caught my notice, too.

  3. 3
    Iancredible says:

    Not all bubbles pop. What we are seeing is the new SF. Tons of demand, lots of jobs bringing people in, little supply, renting getting out of control, and a geography that makes certain locations more desirable. It’s not hard to see why prices are so high.

  4. 4
    David B. says:

    RE: Iancredible @ – “What we are seeing is the new SF.”

    No — we are not. What we are seeing is a new Seattle housing bubble. This “Seattle is the new SF” trope has been part of every Seattle housing bubble I’ve experienced since the late 1980s. Barring some sort of huge disaster, Seattle won’t ever catch up with SF’s housing prices.

    Most people prefer the drier, sunnier climate California offers. The SF Bay Area also offers far more career opportunities than Seattle does. Regulations in California make it significantly more difficult and expensive to add housing supply in comparison to Seattle. Therefore, with respect to its larger cousin to the south, Seattle lies somewhat below SF on the continuum that begins with places like SF (high cost, high economic opportunity) and ends in rural Mississippi (low on both scales).

    If Seattle ever did manage to catch up to SF price-wise, it wouldn’t last. People would see that for the same amount of housing money they could get weather they liked better and more job opportunities, and they’d choose SF over Seattle. And said choices expressed over society as a whole would promptly reestablish the traditional price differential.

  5. 5
    Iancredible says:

    @ David

    Couple of questions for you.
    1: What will be the catalyst to start this ‘pop’ of the bubble

    2: When will this pop happen?

    3: Do you rent or own?

    It bothers me when people are calling this a bubble. The only way this is a bubble is if
    1: A major company leaves this area.
    2: Some sort of natural disaster or epidemic (war disease)

    And i wouldn’t even consider these bubbles, because this would hurt pricing even if it was growing at the rate of inflation.

    The prices are the way they are because people have money and more people want to live here than what’s available. Lots of things would have to change for this not to be the case.

  6. 6
    Keith Kyle says:

    I’m not sure I follow your logic on this one. Fremont is an attractive close in neighborhood and the north end of DT, in particular, is going through a mega-boom.

    Is that argument that town houses can’t be worth $750k (or higher in time?)
    We know that is false (I won’t bother linking to multi million dollar urban townhouses, can we just agree that they exist?)

    Is the argument that the exuberance is excessive and is about to pop?
    Seems really early to be making those kinds of predictions. Amazon and Expedia (and maybe Alibaba?) havent even opened their primary campuses yet. Not to mention Facebook, Twitter, Apple, and too many other companies to mention making moves for space in DT Seattle.

    If anything – I think we have good reason to think that the current cycle will push Seattle prices well beyond what people previously considered possible. If Alibaba moves here we’ll be a much bigger target for Asian money as well. Things are moving fast now – they could get completely crazy before getting “normal” again.

  7. 7
    David B. says:

    RE: Iancredible @

    “It bothers me when people are calling this a bubble. The only way this is a bubble is if
    1: A major company leaves this area.
    2: Some sort of natural disaster or epidemic (war disease)”

    Which of (1) or (2) happened circa 2007 and 2008? Be specific.

    Non-sequitur questions deliberately not answered.

  8. 8
    Angelo Rivera says:

    Here is my most recent story!

    We put an offer for $75k above listing on a 2,000 sq ft home in Wallinford listed for $725k. We thought we were a little crazy because the house last sold for $526k in 2006.

    Home received 22 offers (really!!!) and winning bid was $950k!!!! Almost $1 million on a 2,000 ft craftsman with nothing special other than “cute”.

    Needless to say that me and my wife gave up on buying a home this year.

    Our realtor thinks that this market is the craziest he has seen and it’s been driven by fear of people “missing out” on the additional appeciation.

    Curiously our landlord just notified us that he won’t increase our rent this year because of increased apartment competition popping up in the area.

    Bubble anyone!?

  9. 9
    Keith Kyle says:

    #7 – Washington Mutual, who was the largest DT employer at the time and the largest S&L in the country.

  10. 10
    First Time Homebuyer says:

    FYI:

    My interest rate was 4% (with APR of .25%) and my mortgage on a 450k house is $1,877/month (just for the mortgage…not including the property tax, home insurance & PMI which adds up to $2,400/month).

    If my interest rate was increased to 5.75% (which is not out of the question in the next few years) my mortgage payment would be $2,211/month (just for the mortgage)

    That’s $334/month more than what I pay now and I honestly don’t think I would be able to afford that. With childcare costing over $12,000/year (yes for one kid) and other expenses (gas for heating, electricity, W/S/G, cell phone, groceries, gas for car, car insurance & maintenance) I am barely scraping by.

    So if the interest rates do rise as they are projected to then I would never be able to afford a $450k house.

  11. 11
    Lore says:

    Husband and I just bowed out of the market, refusing to increase our offers more than 10% over asking (and losing out on four offers over eights weeks’ time–one that went for 21% above list ). Growth is strong, but inventory is the real issue right now.

    We are paying just about the steepest rent in Ballard ($2300/mo for a 1/1 with secured parking), and still our annual rent expenses are only ~5.5% of the home prices/condo prices+condo fees in our neighborhood. So yes, rent on comparable units is very high. But housing has suddenly (since February of this year) bubbled way above that.

    When inventory does finally balance out (maybe 3-5 more years? Seattle Times published an interesting map of approved large-project residential construction), it will not be pretty for homeowners.

  12. 12
    Anonymous Coward says:

    RE: First Time Homebuyer @ – You used an ARM because you couldn’t afford a 30 year fixed? I’m bullish at this point but this would be another data point supporting the “bubble” theory.

  13. 13
    Jack says:

    RE: David B. @

    Ongoing war in the middle east was catching up to our economy in 2007-2008.

  14. 14
    Iancredible says:

    @David

    The regulations on banks were responsible for 2007/2008. I never will claim they are perfect now… but they are a lot better now than they were back then. Also, as you have read on on this board and from others who have purchased houses, is that a lot of these homes are either cash or huge down payments. It’s not like people are just putting 0 down, 3% down, or balloon mortgages.

    And my other questions are relevant. If people can’t claim what will pop the bubble, then there isn’t a bubble.

    HousingBubble: New term used by people who can’t afford a house and blame ‘made up’ future possible economic failures as a reason not to purchase.

  15. 15
    Keith Kyle says:

    I don’t know what townhouse he ended up buying — but there is stuff like this in Fremont. I can see the argument for something like this vs. something further out or older — considering the state of SFH stock around Seattle.

    https://www.redfin.com/WA/Seattle/3640-Dayton-Ave-N-98103/unit-A/home/75213398

  16. 16
    David B. says:

    RE: Iancredible @ – “If people can’t claim what will pop the bubble, then there isn’t a bubble. ”

    Factually incorrect. It’s completely possible for a situation to be such that a general prediction is easy to make while a specific one is difficult to impossible. In fact, it’s rather common for this to be the case.

    Seriously, now — You’re not going to assert that just because I can’t predict what the high temperatures are going to be on Independance Day and Christmas Day this year (within one degree Fahrenheit), that therefore I have no business making the assertion that the former is certain to be warmer than the latter, are you?

    Getting back on subject, it’s _far_ easier to tell you’re in a bubble than it is to tell what the initial catalyst will be to that bubble’s inevitable popping.

    “HousingBubble: New term used by people who can’t afford a house and blame ‘made up’ future possible economic failures as a reason not to purchase. ”

    Pure _ad hominem_. And, in this case, a factually incorrect assumption to boot.

  17. 17
    Anthony Cacallori says:

    WOW! Poor Ryan getting his own call-out post! That’ll teach him to reply so earnestly before this brood of vipers!

    This is definitely a white hot market, but not a bubble yet. I see strong demand meeting limited supply, no?

    1 – inventory is still historically low, hence the bidding wars (low supply)
    2 – lots of high paying jobs moving to town (high demand)
    3 – rents are high and rent price growth is accelerating which makes buying more appealing
    4 – competition from cash buyers at an all time high
    5 – foreclosure rate is back to normal, which pushes prices up
    6 – 15% of Seattle homes are still underwater! (they haven’t allllll come back)
    7 – mortgage rates are still at an all time low, obviously making payments much more affordable
    8 – new home completions are still a fraction of what they were during the boom
    9 – land prices are waaaay up in the last two years which is increasing the construction cost/unit for SF
    10 – one other interesting thing is that remodel permits are at an all time high. Are people staying put?

    I can easily imagine a scenario where things run wild for another couple of years. My best guess at what will finally bring prices under control are:

    1 – mortgage rate increases to 6-7-8%? (seems pretty unlikely this will happen any time soon)
    2 – more multi-family supply comes online which makes renting a cheaper alternative. I would not hold my breath for new construction SFH supply coming online in Seattle for less than $750-$800k a pop.

    In general, I’m pretty bullish on the job growth prospects for downtown Seattle, so I don’t think high-wage employment is going to dip. We’ve had a substantial amount of multifamily housing permits issued in the last few months: literally historically high amounts. But how long will it be until those units finally come online?

    Should’ve invested in some Seattle REITs the last few years. I bet those guys are making an absolute killing.

    *Sources for above statements are Zillow, KC assessor data, BLS and WA-ESD*

  18. 18
    SeattleGuy88 says:

    First time commenter, long-time reader. A few people have posed the question: what could cause the bubble to pop?

    My three comments (#3 is most important):
    1) Interest rates – no need to dive deep. If interest rates rise (they need to at some point), affordability changes, further pushing up the affordability index. When I worked at a homebuilder in 2006/7 we tracked the affordability index and used it to project consumer purchasing power and house sale conversion at a projected price. We should all be tracking the same as consumers (Tim regularly posts this index).

    2) Seattle companies. There is the scenario where an anchor company such as boeing/msft/amzn/goog has Seattle layoffs. People tend to downplay this but as someone who has worked at msft and amzn – it is not sustainable for companies to always grow employment at 15%+ per year, even if the company is growing (can’t grow employees past revenue growth forever). Even without massive layoffs, it’s not unreasonable to expect a slow-down in employee growth rate or subtle downticks in # of people employed. Boeing tends to go boom/bust in terms of layoffs because they don’t “attrition” as many people – modern tech companies can do this in smaller swings because attrition is part of the culture.

    3) Company stock prices impacting income – this is the major domino for me and the easiest to fall.
    At MSFT and AMZN, as your compensation grows, a larger % is based on stock shares (you can see this on sites such as glassdoor.com or ask an AMZN or MSFT employee). For example, if you make 200k total comp at AMZN, roughly 50% of your income can be tied to stock shares. Thus if stock prices cut in half, your total income would decrease by 25%. MSFT has similar comp structures but a bit more bonus based for high earners. So if you believe the current stock market is slightly inflated (which I do), even if nothing catastrophic happens to local companies, a stock price drop is possible (look at a 10 year chart on msft or amazon). This would have a large impact on the high-earners in Seattle who are supporting the elevated housing prices.

    For reference, Tim had a post about equity vs. income: https://seattlebubble.com/blog/2015/03/13/are-seattle-homes-being-purchased-with-income-or/

    For reference, a simple stock market measure is “ratio of the total market capitalization to the total dollar value of the GDP.” And any time that valuation stands at more than 100% of the total goods and services in the economy means it is time to be wary about common stocks. It’s a logical conclusion that the economic output of a country and the earnings of its companies, and so their valuation, should bear some relationship to the attraction of investing or not investing (http://www.forbes.com/sites/robertlenzner/2014/02/22/the-stock-markets-valuation-is-at-a-dangerous-115-2-of-the-gdp/).

    The ratio today is 115.1% of the $16 trillion GDP. In the year 2000, just before the market cracked in the dot-com bubble, the market capitalization was 183% times the GDP, according to a chart published recently. In 2007, just as the housing credit bubble was bursting, the ratio was 135% times the GDP. These are all times when the stock market looks overvalued.

  19. 19
    First Time Homebuyer says:

    No I have a 30 year fixed loan. My loan rate was 4% but then there is the APR that they add to that so it calculates up to a 4.25% 30 year fixed loan. I would NEVER do an ARM. That’s just a disaster waiting to happen. RE: Anonymous Coward @

  20. 20

    RE: Anonymous Coward @

    He said his rate was 4% which is not an ARM rate. Not sure why he’s thinking his rate would go up if it’s not an ARM, but 30 year fixed rates are less than 4% now and have been for quite some time. I haven’t seen an ARM rate be 4% in a very, very long time.

  21. 21
    ronp says:

    I think close in, walkable, transit friendly neighborhoods, will retain their value even with a significant local recession.

    I wonder if the light rail extension to Husky stadium opening in January (hopefully) then Northgate in six years is inflating the north end a bit more? Sounds like this is a localized bubble? Easy bike ride from Fremont to Husky stadium on the Burke Gilman. Great bike lane on Dexter to Facebook, Amazon, et al. A townhome in Fremont is a great purchase.

    I am just happy there will be a nice restaurant opening soon along my bike commute – http://www.ravennabryant.org/2015/04/former-bill-the-butcher-site-to-become-two-restaurants/

    Headline – “New breweries and restaurants increase home values in Seattle!”

  22. 22
    LarryB says:

    Right now, people are pouring into the city proper. Where are they all going to go? The estimate is something like 100k in the next 10 years.

    Even if it’s half of that, are we adding that many housing units? And how many of them are actual houses, not townhouses.

    We won’t be SF because we are allowing for increased density – something that’s politically impossible there, but we probably will be SF Jr.

  23. 23
    Seattleboomerang says:

    All I know is we have been living in other countries for 6 years and are currently considering a move back; there is a huge demand for homes and not enough supply in the popular (commutable areas with good schools) of Seattle Met.

    I think what is happening worldwide is that in a global market place certain cities and areas are drawing very well educated native people and many well educated international migrants as well as investors and creating places dominated by an emerging international upper-class. London has become completely unaffordable for ordinary workers, money is streaming into housing from Russia, China, America – everywhere. One of my best friends from New Zealand cannot believe how much housing prices have increased in her nation in the last 5 years. Again a lot of money in NZ and Australia is from China.

    While living abroad we have found ourselves living in what our community of friends call ‘the bubble’ (not the housing kind). A place made up of people from all over the world who are being moved around by big companies and governments and their families go with them. In this community of people we have people from India, Korea, Russia, Mexico, Bulgaria, Spain, Nigeria, America – you name it. What they all have in common is education and work experience that has flung them onto this superhighway that is flowing round the world. Of course, many of the western countries such as the USA and UK have seen an increase in poverty since 2008 but for those in ‘the bubble’ they are unaffected.

    I am really quite stunned at the sudden economic turnaround in Seattle and all the cash flooding into housing because it mirrors other popular cities around the world. This may not be a bubble but more of a realignment of class structures at a worldwide level. Bellevue for example has a lot of diversity, but not great economic diversity. The people arriving from India and China are those from their countries with the ability to move to another nation and succeed at a high level. They speak English (a foreign language) to a usually excellent standard and they have usually already received a great education from their home countries.

    As major cities become extremely expensive and native people move out to towns that are more affordable, the cities are becoming often quite different from the countries in which they are situated. We could end up with extremely wealthy islands concentrated in popular cities with high-paying jobs while most citizens earn a lot less and live in communities much less balanced economically compared to the 20th century.

  24. 24
    Anthony Cacallori says:

    RE: SeattleGuy88 @

    Agree on interest rates. Using Ryan as an example, if rates were 6% that’s an extra $10k per year for the mortgage+taxes – that seems like it would impact affordability for most people. But when will rates go up and by how much?

    It’s definitely true that if one of the Seattle-area’s big-three $90B/year companies had substantial layoffs it would percolate into the regional housing market, but whether that will happen is anyone’s guess. I wouldn’t count out Amazon’s continued growth near-term too. They have thousands of job openings in Seattle and that big three-tower project of theirs isn’t even finished.

    Much of the anticipated job growth in Seattle is from additional businesses moving here so they can poach talent. The tech feeding frenzy is really just getting going as you now have Expedia moving to Seattle, WY is currently building their new HQ in Pioneers Square (stating they want to attract talent in Seattle as opposed to Federal Way), Facebook is adding jobs, BABA is possibly moving to the “Silicon Canal” in Fremont. It seems like there is a new article of who is moving to town every other day or so. Maybe it’s all hype, but none of the data I’ve seen suggests a slow down in tech…yet.

    You kinda lost me at the stock talk and (I think) Tobin’s Q ratio(?), but the saying: “the market can stay irrational longer than you can stay solvent” seems appropriate.

  25. 25
    Blake says:

    What will happen once interest rates start going up??

    Larry Fink – manager of BlackRock and $4 trillion in assets – says that he and his colleagues running the insurance companies and managing pension plans need interest rates to go UP!
    http://finance.yahoo.com/news/low-interest-rates-creating-havoc-fink-122318382.html

  26. 26
    Blake says:

    RE: Iancredible @
    Re: “The regulations on banks were responsible for 2007/2008.”

    Ho ho ho… I corrected that typo for ya!
    The *lack of* regulations on banks were responsible for 2007/2008.

  27. 27
    Macro Investor says:

    Folks, rapidly escalating prices are always a result of EMOTION, rather than logical judgement. Fear of missing out forever, or being stuck in a 2 hour commute, or what ever your situation is. Many here are asking good questions — like what is the catalyst for this bull market to correct, or when will it happen? Some are throwing up their hands and asking why this bull market has such long legs.

    I can answer that very simply. Go to this URL and take a quick look a the chart:

    http://www.businessinsider.com/10-year-us-treasury-note-yield-since-1790-2012-6

    The peak of this chart was 1982. Since then, rates have fallen off a cliff. It has been a bond bull market for 34 years. Since 1790, that’s right — when the US was born — rates were NEVER this low.

    Bonds are in the longest and most overblown bubble, probably in human history. That is why every investment out there seems insane since 2000. Stocks, real estate, jewelry, art — they’re all having wild swings because so much historically low rate money is looking for anything with a decent return.

    Incidentally, this is also why there’s a starbucks on every corner, and big box stores, and barely profitable companies like amazon and netflix can even exist. They can borrow for next to nothing, so there’s little risk in building and expanding.

    I was lucking to be a young macro investor in 1982, just starting my masters in finance. Lots of professors were around explaining why the “crazy” fed was jacking rates up into the high teens. It was like a front row seat to a ballgame with the coach coming over and pointing out what to watch.

    This is long, so I’ll sum up. Most of the price appreciation for real estate can be explained by the dramatic fall off in rates since 1982. Also, many of the jobs created only exist because companies have taken on cheap debt and expanded so much. If you are buying a house and hoping more price appreciation will help you out — good luck. At some point, a lot of investments are going to go bad and a lot of jobs will disappear too. I don’t think it will be in the next few years, though.

  28. 28
    Seattleboomerang says:

    Macro Invester – does this apply to the huge increase in real estate prices in many western nations around the world too? Especially since 1995?

  29. 29
    Macro Investor says:

    By Seattleboomerang @ :

    Macro Invester – does this apply to the huge increase in real estate prices in many western nations around the world too? Especially since 1995?

    Yes. Every major central bank has done the same thing. In many ways our CB is the big daddy that drives them all.

    Some of the bond yields in Europe are actually negative. I know that sounds impossible.

  30. 30
    Alex says:

    I think the next post should be a comparison of these bubble denier comments with bubble denier comments from 2006.

  31. 31

    Wow, this really took off.

    I agree that the market in its current state causes some concern, but I have a problem with one individual’s bidding war being evidence of a bubble. Bidding wars going above reasonable value happen even in bad markets if two people really want the property.

  32. 32
    billybeer says:

    Macro Investor nailed it: This is all about interest rates. It is sad how few out there understand what world-wide central banks are doing to us and that this environment is not normal. Still, I would expect a bit more perspective from folks on this blog: A sub 4%, 30 year fixed rate loan is not normal! Literally nobody has ever seen rates this low – ever. Germany just sold a 2 year note for -0.25% yield (yes, negative). The Japanese central bank is actively buying equities on the open market! If that doesn’t tell you there is something seriously fishy going on, I don’t know what will.

    Our central bank’s overnight lending rate has been at all time lows for the past seven years. This was an “end of the world” type of response in 2008. Seven years later, would you say the current economic situation is bad, let alone the worst thing you’ve ever seen in your lifetime? No? Exactly. The Fed should be raising rates right now. I doubt they have the courage to do it because the stock market might go down a bit (heaven forbid) if they do and banks might need to think about how to invest money again.

    Also, if you think we have done anything meaningful to stop another 2008-esque downturn from occurring you are sadly mistaken. Dodd-Frank is so full of exceptions it is nearly useless. We now have even fewer banks holding even more assets than in 2008. We changed accounting rules so its nearly impossible to tell what assets a bank is holding (never mind what they are worth!) and have continued to allow deposit banks to act as investment banks and speculate in the stock market (or say, VC firms in Silicon Valley). Worst of all, we taught all of the same banks that the government is here to bail them out when they lose all of their money.

  33. 33
    Blurtman says:

    RE: billybeer @ – Perceptions of the economy are heavily influenced by your personal situation and that of your family and friends, don’t you think? The room service dude at a Boston harbor hotel offered this report: When Billy Clinton was president, they could get all the overtime they wanted. Under George W., they weren’t working 5 days a week, and no overtime. Under Obama they are back to 5 days a week, but still no overtime, but they are too busy to give vacation time. So this fellow felt secure, but knew that things could be better. Based on that, I bought some highly leveraged equity funds. Bullish!

  34. 34
    Mike says:

    Again, the older houses in Fremont cost more to own when you factor in the repairs and updates. Granted, ‘feeding’ the house should end at some point, after which monthly ownership cost will drop down to a more reasonable level, but it takes years to get to that point. Buying an older house might cost less up front, but the only way to maintain that lower ownership cost is to let the place deteriorate further.

  35. 35
    BellevueTheLivable says:

    The low inventory is also a symptom of increasing prices, not just the other way around. For example, I purchased my home less than 18 months ago and its well beyond my budget due to appreciation today. My salary has failed to increase at 15% per year despite my best efforts. So if I decide I want to move somewhere else I will have to downsize further or worse move to Kent. That’s dumb, it would take forever to drive to the awesome livable Bellevue from Kent!!

    The Tim posted a graph a few weeks ago that plotted the prices and the inventory both as a functions of time. It showed that inventory stayed low until prices leveled out, then shot up as prices fell. Inventory increases trailed price declines for the last housing cycle. This makes sense doesn’t it? Isn’t the poster named Erik saying he would want the blood of the buyers first born before he would sell? He and everyone else are right, you don’t let go of a temporarily rapidly appreciating asset. The tune will change when prices start falling. Bet you can’t sell as fast as I can.

  36. 36
    Erik says:

    Nice to see new commenters on here. Getting pretty tired of some of the same ole idiots, not including me.

    You can’t fit 100k people into Seattle! They will have to live out in the Wild West Seattle. We are a rough group out here, but we want are real estate prices to go up too. They put a Rudy’s barber shop and whole foods in Fauntleroy. Both those establishments are good at predicting where the bomming areas are. Come get your homes in west Seattle. We are cheap here. We are a little tougher of a crowd, but we won’t hurt you if you bring in cash. $:)$

  37. 37
    Rudolfo says:

    Bubbles pop. This one shows no evidence of that.
    If it does not pop, it is not a bubble – by definition.

    The reason that Ryan paid $100k over asking is because the unit was underpriced, given current conditions. The change is fast.

    I believe the largest change we will see in the next few years is that the rate of increase will slow as interest rates creep up. Or as Iancredible mentions, there is an event of large impact.

  38. 38
    Ryan says:

    @Anthony Cacallori, thanks! I have to admit to being more than embarrassed that my comment made it’s own post. Definitely more attention than I was hoping to attract. I am happy to see a vibrant discussion forming though, I had been looking for intelligent conversation on the bubble before buying and wasn’t finding it.

    @Keith Kyle I’ll follow up on this thread when we close with the listing so people can compare.

    @The Tim way to make a first time buyer nervous! Another metric I’d be curious to hear your thought on: our closing price is 27% over a previous sale of the unit in 2003. Does that make it seem more or less crazy? Can you elaborate on `The buyer cites that he “felt good about the potential future appreciation” as partial justification for paying so much.`? I get that markets are simply what people are willing to pay, but is that a bubble? Or just anticipating that Fremont and Downtown will continue to be employment centers, and that as traffic gets worse being close in will be even more valued. Maybe I’m just caught up in the frenzy but that seems different than “I’ll be priced out forever!”. I’m more thinking along the lines of “close in walkable neighborhoods will continue to appreciate at a regular clip”.

  39. 39
    redmondjp says:

    RE: Erik @ – You’re right, Erik! Many of those people won’t live in Seattle at all . . . they will live on the Eastside, in high-density buildings such as those going up on the old Group Health campus in Redmond, along the future path of the light rail line. Ground-floor retail; coffee up before you go. UN Agenda 21 living for the win!

    Only the 1% will be able to afford single-family homes in the future, so get yours while you can.

    The Quadrant home prices in my neighborhood (not even built yet) have increased by $75K just since last summer . . .

    Remember, it’s different this time, no bubble here, get pre-qualified for that sub-4% loan and start writing your love letters to the sellers on how you will treasure and cherish their house fahevah. And then get a bunch of techie roommates so you can afford the monthly nut.

    Forget West Seattle, the commute sucks and it will be only worse once the viaduct comes down. Come on over to Redmond, where the jobs and the light rail will be in, um, uh, well, we aren’t really sure when it will get here, but our super-smart leaders keep insisting it will be very soon. So keep voting for those transportation levies so we can this thing finished!

  40. 40
    A says:

    RE: Macro Investor @

    That is a rather strange comment given differing interest rate targeting regimes globally. Term premiums AND inflation expectations have fallen in most developed nations over the last couple of decades, despite heterogenous money base movements and exchange rate controls. It’s also somewhat messy to use central bank “interest rates” to describe the effects of target rates and longer yields, as if they were equivalent. Mortgage rates are better correlated with 10 year, rather overnight rates, and if you think the relationship between the fed funds target and the yield curve expresses prima facie, then you aren’t thinking enough.

  41. 41
    Anonymous Coward says:

    RE: Ryan @ – “Can you elaborate on `The buyer cites that he “felt good about the potential future appreciation” as partial justification for paying so much.`?” The reason your comment is a sign of a bubble is because “future appreciation” is not traditionally considered a sound justification for the purchase of a primary residence. First, in “normal/healthy markets”, people buy a home because they want to live in it for a long time. Additionally, primary residences have historically made pretty lousy investments* as the 100+ year trend for US housing prices is that the market tracks inflation; nothing more, nothing less. When the buyers in a market all start buying because they think the home will rapidly appreciate in the near future it means they aren’t buying to live in it for a long time. It also means they’re thinking about houses as if they’re assets which will appreciate like an equity.

    *They can function as a fantastic inflation put as they allow one to lock in their housing costs for 30+ years, but an inflation put is a very different type of investment than an equity.

  42. 42
    GoHawks says:

    Lovin’ all the comments. Three questions I don’t think get asked often enough:

    1. What if interest rates don’t rise a meaningful amount of another 3-5 years? I know, I know, they “have” to rise. However consensus has been that they are due to rise any minute…….for the past 5 years. Global rates have fallen to new lows lately. As is often discussed on this blog, consensus is often wrong. Rates could stay lower longer than most think.

    2. The Tim and Anonymous Coward hitting on Ryan for his honest comment on feeling good about future appreciation strikes me as funny. Ryan is a first time buyer in an instant access world. Everyone knows the “value” of every home online these days and most popular websites list future appreciation projections for the area/neighborhood on their website. Buyers today are given information in a different package and we are surprised when they behave differently? It’s ironic that since the internet went mainstream with housing information, that homes have pretty much appreciated/declined 10% +/- per year, as volatile as the stock market.

    3. Does something have to be a bubble just because it appreciates or just because it’s in a neighborhood that you don’t currently live? Seems like many of the posts are anger/jealousy based and are not grounded in logic.

    Ryan, I hope you are happy in your home for many years to come and that it all plays out well for you financially. No need to hate on the guy.

  43. 43

    By Anonymous Coward @ :

    RE: Ryan @ – “Can you elaborate on `The buyer cites that he “felt good about the potential future appreciation” as partial justification for paying so much.`?” The reason your comment is a sign of a bubble is because “future appreciation” is not traditionally considered a sound justification for the purchase of a primary residence. First, in “normal/healthy markets”, people buy a home because they want to live in it for a long time. Additionally, primary residences have historically made pretty lousy investments* as the 100+ year trend for US housing prices is that the market tracks inflation; nothing more, nothing less.

    I’m not sure where to start. Prior to 2007, future appreciation was THE reason people bought. People planned on buying and then moving in 2-3 years, and repeating that cycle as frequently and as often as possible. And that type of thinking really got people into trouble as they bought places that really didn’t fit their needs very long (e.g. a couple with a one young child and eventually planning another buying a 2 bedroom condo).

    Also, that housing tracks inflation over the long run is a bit misleading. That’s like saying a person’s IQ is 100 because that’s the average IQ. Do you really think that a piece of property on First Hill or Capitol Hill has only tracked inflation over the last 100 years? But even ignoring that, it ignores the fact that most RE transactions are leveraged, greatly increasing the effective return. And that’s what lead to the situation in the prior paragraph of people buying with some frequency. Even after accounting for costs of sale, the appreciation allowed for greater and greater down payments amounts, and nicer and nicer properties. Worked really great until the expected increase in value became actual decreases in value.

  44. 44

    By Ryan @ :

    @Keith Kyle I’ll follow up on this thread when we close with the listing so people can compare.

    I had not followed this closely enough to note that you had not closed yet. I’m a bit curious about how the Listing Agent dealt with the appraisal issue in Form 22A. I’m assuming you’re not a cash buyer, but are making a down payment well in excess of 20%. Do you still have an out if the property doesn’t appraise, or did the LA insist that the bidders remove that language?

    FWIW, one thing you did say makes some sense. Needing to fix up a property can be rather expensive. Just a kitchen remodel alone can easily cost $40,000, or more, and that ignores the headache of living through a kitchen remodel. So in that regard, it is somewhat amazing what some of the less well maintained properties are going for. I’m thinking of one in particular in North Seattle where it’s a house with a lot of potential, but it seemingly sold for the price it would be worth in that fixed up condition. So to some extent I’m a bit more concerned about people paying too much for properties which really are not in that great of condition. I’m not sure they know what they are getting themselves into.

  45. 45
    SaffyThePook says:

    The Tim, I was surprised that on this data-driven site you built an entire thread around a single anecdote with very little data analysis to support it.

    If you look at a chart of “Seattle Area” home appreciation (e.g. this one from 1997 – 2014 http://www.jparsons.net/housingbubble/seattle.html), you’ll see two distinct and stable seven-year stable trendlines, 1990-1997 and 1997-2004.

    I’ve lived here through both periods. During the first one, both Boeing and Microsoft were doing well and generating wealth. During the second one, there was a solid tech boom as the local economy diversified beyond Boeing and Microsoft. Then came the bubble and crash from 2004-2012, followed by what appears to be another short but stable trend from 2012 to present.

    You can download the spreadsheet behind this graph and do some interesting fitting exercises. If you fit these different eras with fixed rates of inflation, you find the following:
    1990-1997 appreciated at 3.5%
    1997-2004 appreciated at 7.25%
    2004-2012 appreciated at 0.5% and
    2012 to present has been appreciating at about 11%.

    Obviously, 11% is unsustainable but what’s interesting is if you combine the bubble/crash era with the 2012-present era. The appreciation rate over that entire time from 2004-present is only about 3%. We haven’t yet reached the heights of the bubble, much less reached the level that would’ve resulted from the uninterrupted extension of the 7.5% appreciation trendline from 1997-2004 (about 20% higher than the peak of the bubble).

    If you look at the structure of the economy, it’s not that superficially different than the 1997-2004 era, with lots of tech jobs concentrated in the urban centers, East and West. What is different is that those tech jobs aren’t being created by VC-funded startups with unsustainable business models. This time, they’re being created by large, established, profitable tech firms that will likely stay that way or at least be able to weather economic shocks much better than the startups could. The other thing that’s changed is that the population has grown significantly since 2004 while our transportation infrastructure has not, leading to long commutes and a desire for housing that’s proximal to job centers.

    Based on the above, my guess is that the impending interest rate hike(s) will cause an inflection point in the current trend and establish a new one in the 3.5%-7.25% window, but it won’t be the same for the entire “Seattle Area”. I suspect the in-city locations East and West will be closer to 7.25% while the burbs will settle closer to 3.5%. FWIW.

  46. 46

    By Kary L. Krismer @ :

    And that type of thinking really got people into trouble as they bought places that really didn’t fit their needs very long (e.g. a couple with a one young child and eventually planning another buying a 2 bedroom condo).

    Speaking of buying property that doesn’t meet the buyers’ needs very long, look what Pete Carroll did! ;-)

    http://www.bizjournals.com/seattle/morning_call/2015/04/seahawks-coach-pete-carroll-sells-his-6-1-million.html

  47. 47
    danny says:

    I bought at/near the peak in 2007, $380K for a 700 sq ft home in Madison Valley. Never thought prices would dip and spike like it has, but I don’t see things slowing down much in the next 5 years or so.

    For those who do decide to buy, my one advice is to buy in a good area (if possible) and things will work out in the long run.

  48. 48
    Angelo Rivera says:

    RE: danny @

    Your data goes only to 2014. Am I looking at your chart correctly? Because I believe the increased “bubble” talk is due to the craziness of the market for the last few months (late 2014 and 2015).

  49. 49
    Angelo Rivera says:

    RE: SaffyThePook @

    Sorry Danny – I meant to reply to another poster.

    Does your data go to 2014? Am I looking at the chart correctly? Most of the “bubble talk” is due to the craziness in the market in the last couple of months (2014 and 2015). Particularly March, which saw an increase of +19%.

  50. 50
    Eastside says:

    I’m definitely feeling the bubble in Sammamish and Issaquah. I’m starting to think that I could gain more in appreciation of our house by buying a house up there as compared to where we are now (another city in the Puget Sound). I’m also feeling pressure that if I don’t buy now, I’ll be priced out forever. This should not be the case since I’m already a homeowner, my house should appreciate at generally the same rate as most Eastside homes over the long run.

    I’ve seen homes in Issaquah Highlands that have been purchased last fall, remodeled, and now the owners are asking $100,000 more than what they paid for it – justifying it from their remodel. I’ve also seen foreclosed homes that are being sold for $200,000 more now than just a few months ago, and not ones that were trashed on the inside.

    I’m starting to see the return of flippers that are buying, holding, and then selling homes.

    I’ve seen a lot of justification for high prices on the eastside. Chinese buyers. Chinese interest in good schools. Amazon/Microsoft engineer salaries. Etc. etc. But engineers normally can’t afford $1 million for a house. Doctors and executives can but there are only so many doctors and executives.

    It is worrysome to anyone that Microsoft is powering our housing market, yet in the consumer world, Microsoft is a has-been? They have few new products that are killer applications and they have dropped the ball on both the search engine business and the smartphone business.

    Yes, I think we are in a bubble on the Eastside.

  51. 51
    SaffyThePook says:

    By Angelo Rivera @ :

    RE: SaffyThePook @

    Sorry Danny – I meant to reply to another poster.

    Does your data go to 2014? Am I looking at the chart correctly? Most of the “bubble talk” is due to the craziness in the market in the last couple of months (2014 and 2015). Particularly March, which saw an increase of +19%.

    The data extend through April, 2014.

  52. 52
    Angelo Rivera says:

    RE: SaffyThePook @

    So how does the recent (2015) acceleration fits in your current trend? Honest question here…

  53. 53
    Angelo Rivera says:

    RE: SaffyThePook @

    So how does the recent (2015) acceleration fits on the graph trend? Honest question here…

  54. 54
    Lore says:

    RE: Lore @ – Just wanted to correct my comment: we only offered on 3 (forgot we didn’t pull the trigger on one). Anyway.

  55. 55
    Ryan says:

    @various, I’m surprised at the fixation on the “potential future appreciation therefore it’s a bubble” comments. It was last on my list for a reason! I’m invested in staying in Fremont, there is little available that seemed suitable and I can afford the unit I’m purchasing. That was 95% of the decision making process for me. The only reason I would want to sell this unit is if I could afford to buy, remodel and maintain a house nearby. If that didn’t come to pass for 10+ years I expect we’d still be very happy with what we bought.

    @Kary L. Krismer I might get the exact language wrong, but my understanding was that if it appraised for less the lender would be ok with that as long as we increased the down payment by the amount of the delta between offer price and appraisal price, which we would have been able to do. It was a non issue for us as it appraised at the offer price.

  56. 56

    RE: BellevueTheLivable @
    No, The poster named Erik would sell right now if there was enough profit involved, even if the buyer demanded that Erik throw in his grandmother as part of the deal.

  57. 57
    pfft says:

    Interesting. I’d need to see price/income ratios first though.

  58. 58
    wreckingbull says:

    It’s interesting how criteria have changed over the years. I rarely see people talking about “ability to afford home in the face of [job loss, illness, other loss]” The high-flying tech industry has left us all a little cocksure, it seems.

  59. 59
    pfft says:

    Remember this. Neighborhoods change and where people want to live do too. A neighborhood might change if the right amenities are added or a new employer. Houses are usually built in nice neighborhoods were people are optimistic that this is where they want to live. People don’t build new homes in bad areas. What was once a nice area might be a bad one. That doesn’t mean it can’t go back to being a nice area.

  60. 60
    Anthony Cacallori says:

    By Eastside @ :

    It is worrysome to anyone that Microsoft is powering our housing market, yet in the consumer world, Microsoft is a has-been? They have few new products that are killer applications and they have dropped the ball on both the search engine business and the smartphone business.

    I am hardly a MSFT cheerleader but their net income was $22 billion dollars last year. Fear that MSFT will be shuttering it’s windows wouldn’t keep me up at night.

    Great thread BTW! Thank you Ryan!

    The general consensus in the thread and among forecasters seems to be that rates will rise soonish. I guess I would say that I wouldn’t go-to-wall on that prediction. Rates actually could stay the same or theoretically go lower. My personal opinion is that the Fed won’t raise rates until core inflation reaches 2% or headline inflation picks up nicely thanks to a big swing in oil. They’ve made it clear that when they do raise rates it could be either fast or slow based on that periods economic data. It’s a crapshoot.

    One politically-loaded conspiracy theory I’m surprised I haven’t seen regards our presidential elections. One way or other, consciously or unconsciously, it wouldn’t surprise me if that impacts how they make decisions.

  61. 61
    Seattleboomerang says:

    My husband and I are not in tech. Also, when we bought our home in 2000 on the Eastside we bought because we liked the neighborhood and we wanted somewhere to live. Then we started having kids and needed more space but could no longer move within our neighborhood as the real estate market entered the bubble. Luckily we had a small house on a big lot and just razed and and started over. It was actually cheaper for us to build new than do a big remodel as our foundation was not built for a two story.

    I will admit (regarding Kary’s comments) I could’t understand how people were affording the crazy prices as we were on good money and couldn’t afford our own neighborhood anymore. This is because I had no idea so many people were willing to take out very high risk mortgages. Brokers were telling us we would qualify for some insane amount and I would just say – “why the hell would I want to borrow that kind of money?” We stuck with our 30 yr fixed but obviously refinanced once we built.

    I remember thinking something was very wrong when I realized everyone I knew had someone in their extended family who was a mortgage broker. In our family it was my sister-in-law.

    However our neighborhood held it’s value through the bubble. It went down but didn’t collapse and is still considered highly desirable. I actually think Ryan sounds like he made a purchase that makes a lot of sense. Think of all the money he will save by hardly needing to drive and all the time he will gain. He also loves his neighborhood and understands the market area. Being in the same block as his work is worth a ton of money in my opinion. Having the shortest commute possible is a big priority for us.

  62. 62
    Chandler says:

    RE: billybeer @ – Just want to say that if we’re looking at the 10 year yield curve, it would be more accurate to use the 10 year “real” yield curve instead. Because it is adjusted by inflation.
    https://www.quandl.com/data/USTREASURY/REALYIELD-Treasury-Real-Yield-Curve-Rates

  63. 63

    RE: Ryan @

    That is correct, Ryan. If you are 20% down the bank will lend you 80% of the purchase price or appraised value, whichever is less. As long as you bring the difference between the loan funds and the purchase price to closing along with your closing costs, the lender doesn’t care whether it appraises or not. It merely sets the loan amount at a lower point, if and when it doesn’t appraise.

    Lenders are tougher on appraisal if the buyer is weak and more lenient on appraisal if the buyer is strong. The appraisal protects the lender to the degree the lender deems it needs protecting. If someone is 50% down and over qualified, as example, the odds it own’t appraise are much slimmer than if someone is FHA or VA minimum down. The more risk to the lender, the tighter the constraints on the appraiser’s instructions from the lender.

    P.S. I am very curious which townhome this is. I think it is across the street from one my client bought last year when the single family homes in the area were bidding up by $100,000 on a regular basis, but the townhomes were not at that time.

  64. 64
    David B. says:

    RE: Ardell DellaLoggia @ – That happened to me. Appraisal low by $1000 on a 20% down purchase. I just paid the extra $1K out of pocket. Not worth dragging it out and quibbling with the appraiser over less than 1/2 of 1% of the purchase price.

    If you put 20% or more down, you don’t get zinged paying for the lender’s mortgage insurance, either. Another plus, assuming you have the money.

  65. 65
    LarryB says:

    By wreckingbull @ :

    It’s interesting how criteria have changed over the years. I rarely see people talking about “ability to afford home in the face of [job loss, illness, other loss]” The high-flying tech industry has left us all a little cocksure, it seems.

    There are a lot of people looking at affordability. My wife and I just closed on a house two days ago. Throughout our search, we used our ability to pay both the loan and what our liquid assets would look like after we made the downpayment. Our main motivator for buying was having a predictable housing cost when we retire.

    Also, banks are being much more careful than they were back in the run-up to ’07.

    Sure, there are people out there stretching to the edge to buy $1.3MM micro-mansions in Ballard. We could have gone to about 25% more than the highest offer we made along the way but chose not to.

    In the end, we wound up “underbuying” when we fell in love with a modest Cape Cod on a large lot in West Seattle. That means we can build a DADU sooner, and make our long-term costs even lower.

    We’re not alone in this. Our agent said that she’s been working with a lot of people who are focusing on what they can pay rather than what they can buy.

  66. 66
    billybeer says:

    @GoHawks – Interest rates not rising is actually what I think will happen over the next five yars or so. Mainly because the Fed has shown several times now that they are willing to help blow massive bubbles and are too fearful in making the stock market go down by their actions. If the don’t raise rates, the party continues and we will most certainly be in a massive bubble (in everything! equities, bonds, housing, etc) and it will not be fun when it pops.

    @A – That is true regarding the 10 yr rate correlation to mortgage rates vs. the overnight lending rate. However, the yield curve is stupidly flat right now as well and with QE in the mix, i’m not sure that correlation still holds up under our current conditions. Beware looking at past correlation when it is clear that you are dealing with data unlike the past.

    @Kary – Excellent point regarding the (mis)use of leverage during the previous housing boom. Funny how I’m only allowed to bet 2x my holdings in a margin account for equities but buying a house at 5x leverage is considered “normal” let alone the people putting only 5-10% down (10x-20x leverage) being acceptable.

    @Ryan – It sounds like you put more than 20% down, got a lifetime-low fixed rate and can afford the payments. That puts you well into the top 10% if not top 5% for household income in this region. Even if things do take a dump in five years chances are you will be fine. The folks I know that had to foreclose or short sale did silly things like zero-down and variable rate loans.

    In particular for Seattle, this lack of inventory is just making things silly. That and we have put all of our eggs in the Amazon basket, for better or worse.

  67. 67
  68. 68
    Ryan says:

    @wreckingbull, I totally get the cocksure thing. Right now for me personally things are firing on all cylinders. My clients are happy, and there is more work than I can handle. I’ve seen it change on a dime twice now in my career and that’s always in the back of my head. I feel sorry for the kids who are coming into tech jobs straight out of college and think this is normal. As a long term trend I expect tech to stay strong, but not without a few years here and there of misery.

    @Seattleboomerang we close in early may, I’ll post the listing on the thread even if it’s gone cold.

  69. 69

    By Ryan @ :

    @Kary L. Krismer I might get the exact language wrong, but my understanding was that if it appraised for less the lender would be ok with that as long as we increased the down payment by the amount of the delta between offer price and appraisal price, which we would have been able to do. It was a non issue for us as it appraised at the offer price.

    I wasn’t looking at it from your point of view. I was looking at it from the sellers’/listing agent’s point of view. Their not insisting on striking that language is nuts when they have a bidding war situation because it would allow the buyer to back out–even if they have the ability to bring more money. And that period to back out would be even longer than the inspection period!

    Some firms have an addendum which deals with the issue by locking the buyer in to a point–for example it might say that they will bring in up to $40,000 more if the property appraises low.

    But when you’re dealing with multiple offers you don’t want to give one buyer who may have bid $5,000 more the ability to back out simply because the appraisal comes in below the sales price, when you know for almost a certainty that the appraisal will come in below the price.

  70. 70
    jason says:

    Amazon and Microsoft are big employers offering high salaries in the area, but worlds apart in terms of finances. One only need to look at their balance sheets and earnings statements. If Wall Street decides they are sick of holding a large cap stock with an absurd EPS like Amazon’s, there could be some serious humble pie sent their way. Then they might actually have to charge for shipping or sell their kindles above cost! A drastically lowered Amazon stock could have huge implications for Seattle real-estate. It’s like they have become the poster child of the complex, highly leveraged, speculation-driven economy we see today.

    But then again, tech as a whole has never been very good at managing its own growth. I’d guess it’s mostly due to being so highly driven by venture capital and speculation.

    I like what Seattleboomerang was saying about the international scale of this and what we are seeing in other “privileged” cities around the world such as London – High degree of economic opportunity coupled with effectively no affordability even relative to the higher salaries those areas offer. I’d say at some point that has to give. Either potential employees saying to hell with it and/or corporations moving their offices to someplace cheap and “uncool”

    I think it’s all a house of cards to some extent and eventually things will have to de-leverage. The only question is if it will happen slowly over time or all of a sudden.

  71. 71
    GoHawks says:

    RE: Anthony Cacallori @
    It is ironic that MSFT makes a billion profit per month, and people are using words like worrisome.

    The biggest different imho when compared to 2004-2007 is that the quality of the buyer pool is significantly better. 20% down is now near the minimum, when that was considered a lot back then. Even if/when prices do flatten out, it’s not like recent buyers will be underwater right away.

  72. 72
    Blurtman says:

    I hope home prices go the the moon, but it doesn’t have to be the bursting of a RE bubble to bring down home prices. A stock market crash would do the same. And the TBTF’s are even more TB than they were during the last 2007-2008 crash, a mere 7-8 years ago.

  73. 73
    Erik says:

    If this s a real estate pump and dump, I think this thing will keep pumping itself up for at least 5 years. If you are renting, it would make a lot of sense to buy and sell a few years from now. You will probably be up $100k.

  74. 74
    SaffyThePook says:

    By Angelo Rivera @ :

    RE: SaffyThePook @

    So how does the recent (2015) acceleration fits in your current trend? Honest question here…

    It doesn’t, but I don’t think you can call a bubble based on a few month’s worth of froth. Once we pass a year of >>11% appreciation, I’d call it a real trend.

    I do believe the Fed will start to raise rates this year and think the only reason it hasn’t happened yet is the collapse in fuel prices. I don’t think they give a crap about stock market inflation but they do care about housing inflation. Outside of housing, I think the ongoing drought in CA, TX, and elsewhere will be felt in higher food prices that counteract the deflationary effect of lower fuel prices. I’m guessing there’ll be an interest rate increase in the second half.

  75. 75

    By GoHawks @ :

    The biggest different imho when compared to 2004-2007 is that the quality of the buyer pool is significantly better. 20% down is now near the minimum, when that was considered a lot back then. .

    Nope–3%. Although you’re not going to win many bidding wars with a 3% down offer, unless maybe you can show a lot of other funds.

  76. 76
    Ithinkimgonnabarf says:

    I think I’m going to start buying and flipping houses in Seattle.

  77. 77
    Erik says:

    RE: Ithinkimgonnabarf @
    You should. I had 5k in 2011 and 2 years later I had 128k buying and selling. If I can do it, anybody can do it. Buy in a good place at a good time.

  78. 78
    scaredy cat says:

    Prices certainly do seem to be climbing quickly right now. I’m not sure if we are in a bubble or not though if appreciation continues the way it is now we seem likely to end up in one. I do know that this article in the Washington Post today frightened me:

    Wary homeowners offered new ways to finance their next move

    http://www.washingtonpost.com/sf/business/2015/04/17/wary-homeowners-offered-new-ways-to-finance-their-next-move/

    Some quotes I saw in the article that really frightened me included:

    ‘Lenders are introducing products aimed at getting would-be sellers and buyers off the sidelines and into the game’

    and

    ‘To woo prospective customers, lenders are also backing off some of the stringent requirements introduced in recent years.’

    We’ve seen that movie before and it doesn’t end well.

  79. 79
    whatsmyname says:

    By Macro Investor @ :

    This is long, so I’ll sum up. Most of the price appreciation for real estate can be explained by the dramatic fall off in rates since 1982.

    Here’s an interesting thought experiment: Here is the FHFA HPI calculator: http://www.fhfa.gov/DataTools/Tools/Pages/HPI-Calculator.aspx
    It won’t calculate back to 1982, but it will go back to 1991. It says that the Seattle house index at $100 in 1991 would be at $279.94 in 2015, but the Detroit index for $100 in 1991 would only be at $165.70 in 2015. To your point, was there a radically less dramatic falloff in interest rates inside Detroit?

    Here is the government inflation calculator: http://www.usinflationcalculator.com/ It says that something purchased in 1991 for $100 would cost $173.36 today. That would seem to be a not insubstantial portion of the increase in housing in Seattle (62%), and of course more than 100% of the Detroit increase.

    I think these facts do not support your conclusion.

  80. 80
    Seattleboomerang says:

    I thought you would all appreciate this. This was in my inbox this morning from a real estate agent that keeps me on their mailing list.

    “We couldn’t resist sharing the results of a truly impressive bidding war that took place in the Montlake neighborhood of Seattle earlier this month. I had a chance to tour this home before it sold and it was certainly a special property from a location and architecture standpoint – though it did need some renovating. However, neither of us anticipated the escalation in price that ensued come offer review day!

    14 offers in total, with two buyers bidding it way up .. from the list price of $880,000 to $1,600,000! Yes, you read that correctly. Can’t say we’d ever seen an MLS statistic showing a sales price as being 182% of the list price.

    The listing agent, a friend of ours, said the two top bidders were both already Montlake residents who wouldn’t live anywhere else!

    Clearly our market is continuing in this somewhat frenzied state – though there are still some properties out there offering the opportunity for a buyer to negotiate – they are just much more few and far between.”

    Here is the listing: https://www.redfin.com/WA/Seattle/2101-22nd-Ave-E-98112/home/137956

  81. 81
    ChrisM says:

    Labor participtaion rate. Learn it. Love it.

    http://data.bls.gov/timeseries/LNS11300000

  82. 82
    ChrisM says:

    Labor force participation rate. Learn it. Love it.
    http://data.bls.gov/timeseries/LNS11300000

    In other words, we are so f*d.

  83. 83
    Azucar says:

    I’m not saying that I definitely think that we are in a bubble, but if we…. when it pops there will be a lot of good fodder for “Friday Flashback” posts in the comments in here.

  84. 84
    Rudolfo says:

    By Ithinkimgonnabarf @ :

    I think I’m going to start buying and flipping houses in Seattle.

    The challenge right now is finding something to buy that you can pull a profit from.

  85. 85
    Troy says:

    Without an ARM to force them to sell, I think many owners would take the pain of an asset price decrease over time — that is, as a decrease in real value rather than a cash loss on the principal.

    I can imagine someone facing a 15%, $75k decrease in value choosing to stay in the house.

    I could see a bubble “popping” as 5-10 years of relatively low transaction volume and small value decreases in nominal terms, but significant decreases in real terms (and lack of labor mobility, quality of life, etc.)

  86. 86

    By Ithinkimgonnabarf @ :

    I think I’m going to start buying and flipping houses in Seattle.

    Here’s the topic for Tim’s next post on evidence of a bubble. ;-)

  87. 87

    By Erik @ :

    RE: Ithinkimgonnabarf @
    You should. I had 5k in 2011 and 2 years later I had 128k buying and selling. If I can do it, anybody can do it. Buy in a good place at a good time.

    Your timing was considerably different than the current situation. Buying a bank owned listing in 2011 and selling in 2013 you’d have a hard time not making money. Now it’s much tougher to find that good deal.

  88. 88

    By Azucar @ :

    I’m not saying that I definitely think that we are in a bubble, but if we…. when it pops there will be a lot of good fodder for “Friday Flashback” posts in the comments in here.

    Maybe Tim should switch it up and have bearish comments from 4-5 years ago in the Friday Flashback.

  89. 89
    Bob says:

    I’ve read through the comments and don’t see any discussion of how long a person plans to be in a house. If you buy a house that is overpriced, but you plan to stay in it for 20 years, you won’t lose money and your risk is low. You won’t overpay in the long run because you can lock in a low-interest rate for those 20 years. If you may lose your job next year and need to move to another location, that’s a high-risk scenario you should stay away from.

    Also, people need to remember that real estate is anchored by salary and jobs. Lots of new people have moved to Seattle for jobs, which brings more money into the economy, but remember only one family lives in a house. Housing prices should correlate with the wage earnings of the average family in the area. Over the past 10 years, we’ve seen salaries stagnate, but home prices have risen about 100%. The companies won’t be raising salaries to alleviate that problem, so the most likely scenario is we’ve reached a plateau. I wouldn’t buy a house now if you are depending on appreciation.

  90. 90
    Mike says:

    By Seattleboomerang @ :

    I thought you would all appreciate this. This was in my inbox this morning from a real estate agent that keeps me on their mailing list.

    “We couldn’t resist sharing the results of a truly impressive bidding war that took place in the Montlake neighborhood of Seattle earlier this month. I had a chance to tour this home before it sold and it was certainly a special property from a location and architecture standpoint – though it did need some renovating. However, neither of us anticipated the escalation in price that ensued come offer review day!

    14 offers in total, with two buyers bidding it way up .. from the list price of $880,000 to $1,600,000! Yes, you read that correctly. Can’t say we’d ever seen an MLS statistic showing a sales price as being 182% of the list price.

    The listing agent, a friend of ours, said the two top bidders were both already Montlake residents who wouldn’t live anywhere else!

    Clearly our market is continuing in this somewhat frenzied state – though there are still some properties out there offering the opportunity for a buyer to negotiate – they are just much more few and far between.”

    Here is the listing: https://www.redfin.com/WA/Seattle/2101-22nd-Ave-E-98112/home/137956

    I don’t know what to say about that other than I’m glad I bought a Mid Century Modern when I had the chance to find one at a decent price.

  91. 91
    Ithinkimgonnabarf says:

    It seems like a no-brainier… Buy a house, slap some paint on the walls, lay down some sod, add new appliances… Sell for double a year later. With Amazon adding jobs from now to eternity prices will alway go up. Right?RE: Kary L. Krismer @

  92. 92

    RE: Kary L. Krismer @

    I agree, but a similar unit sold right before his in his small complex for $43,000 less and another sold a few months after he sold at $33,000 less than the price he achieved. It was not all about the timing. None others have sold since, but it remains possible that even if another sold now, they would not greatly exceed the price point he achieved. Timing does help, but there is a lot more to achieving gains than mere timing.

  93. 93
    ronp says:

    Great thread, I hope the 2015 bubble slows gradually for all the recent buyers sake. You have to live somewhere (if you are not an investor) and if your home does what it traditionally does — track inflation, then you are good to go (if transaction costs don’t wipe out the appreciation).

    I still find it hard to believe people can afford these prices though.

  94. 94

    RE: Ardell DellaLoggia @ – I was focusing more on when he got in. Buying a bank owned where the public listing comment warns you about the financial difficulties of the association makes for an easier (albeit riskier) entry point.

  95. 95
    Blurtman says:

    A good trade, a 45% gainer, in the land of milk and honey.

    04/08/15 Price change $739,900-4.1%
    03/07/15 Listed for sale $771,900+51.4%
    01/11/12 Sold $510,000-2.2% $160 Public Record

    http://www.zillow.com/homes/for_sale/Sammamish-WA/pmf,pf_pt/house_type/58380555_zpid

  96. 96
    Observer says:

    Let’s party like it’s 2006!

    http://www.seattlepi.com/local/opinion/article/Home-ownership-delineates-today-s-economic-divide-1217673.php

    “With friends who have also been lucky enough to land a Columbia City cottage or a Shoreline rambler, there’s a sense of shared joy and relief. I remember feeling like this in fifth grade when my best friend and I landed parts in the school play: “Thank God we both got in.” We toast our hefty mortgages and spend long evenings discussing hardwood floor finishes, crown moldings and our all-important soaring equity.

    But with friends who have not yet “squeezed in” to the housing market, I am reminded of how I felt when I got accepted by my first choice for college and my best friend got nothing but rejections. What do you say to each other? I try to offer soothing assurances: “I hear there are still some great deals up north.” “600 square feet is plenty of room!”

    But no matter what I say, I know we all feel like they have probably missed their chance, like they didn’t buy their ticket on the last spaceship flight off a planet that’s about to explode. I fear they’re doomed to move back to Missouri in order to afford more than a studio condo on the fringes of the city.”

  97. 97
    LarryB says:

    By ChrisM @ :

    Labor participtaion rate. Learn it. Love it.

    http://data.bls.gov/timeseries/LNS11300000

    Bureau of Labor Statistics Unemployment Rate by County

    http://www.bls.gov/lau/maps/twmcort.pdf

    Hmmm, what color is King County? National figures are interesting, but local is what counts.

    For the foreseeable future, demand is going to increase because of all the new, well-paying tech jobs and supply probably won’t unless the newly above-water ’06-07 buyers move somewhere cheaper. I think this is highly unlikely. As for affordability – relo packages and starting bonuses are starting to appear again.

    Retirees might move away, but most of them bought ages ago, have lots of equity and have the freedom to move somewhere a lot cheaper. Personally, I never understood the “run away to retire” thing.

    My new house is flanked by elderly neighbors who have allowed their homes to melt around them. If they sell anytime soon, I expect developers to buy the houses, tear them down and replace them with new houses that will sell for 60% more than mine. (They just built a house like that on the block.) My property value will rise with the neighborhood – a solid, upwardly transitional part of West Seattle.

  98. 98

    RE: Kary L. Krismer @

    Yes…but he also sucked up buying it with the people IN it! The kid’s got guts and that’s what paid off for him. :)

  99. 99
    wreckingbull says:

    By LarryB @ :

    My new house is flanked by elderly neighbors who have allowed their homes to melt around them. If they sell anytime soon, I expect developers to buy the houses, tear them down and replace them with new houses that will sell for 60% more than mine. (They just built a house like that on the block.) My property value will rise with the neighborhood – a solid, upwardly transitional part of West Seattle.

    Many of us purchased good homes at a good time. That being said, the amount of reflective back slapping that has been going on here has really reached a fever pitch. I guess buying homes in this low-inventory, highg-price environment tends to induce a little post-purchase cognitive dissonance. I guess that it understandable. When townhomes get to 750K, we are not talking about peanuts.

  100. 100
    Mike says:

    By wreckingbull @ :

    By LarryB @ :

    My new house is flanked by elderly neighbors who have allowed their homes to melt around them. If they sell anytime soon, I expect developers to buy the houses, tear them down and replace them with new houses that will sell for 60% more than mine. (They just built a house like that on the block.) My property value will rise with the neighborhood – a solid, upwardly transitional part of West Seattle.

    Many of us purchased good homes at a good time. That being said, the amount of reflective back slapping that has been going on here has really reached a fever pitch. I guess buying homes in this low-inventory, highg-price environment tends to induce a little post-purchase cognitive dissonance. I guess that it understandable. When townhomes get to 750K, we are not talking about peanuts.

    Some of us purchased in the lower price higher inventory environment 3 years ago. Is back slapping ok?

  101. 101
    Erik says:

    RE: Ira Sacharoff @
    I would NEVER EVER EVER sell my grandmother for a profit….unless the buyer brang cash to the deal of course. Give me enough cash and I could buy a new grandma.

  102. 102
    Erik says:

    RE: Lore @
    Hahaha!!! Are you trying to scare us into selling? Hahaha!!
    You’d be an idiot to sell right now and even a bigger idiot not to buy cough cough you cough cough your husband cough cough.

  103. 103
    Erik says:

    RE: Mike @
    Wreckingmouse doesn’t have the sack to pull the trigger so he lashes out at those who did. He is an old bitter jealous hater.

  104. 104
    John Dovey says:

    It’s good to hear talk about bubbles again!

  105. 105
    Erik says:

    RE: John Dovey @
    A lot of us totally want to see this thing over inflate and then blow up in societies face. We just don’t want to be the ones left holding the bag.

    I have learned a lot of lessons from commenters on here. If it all happens again, I will definitely be rich.

  106. 106
    Shoeguy says:

    It definitely feels like we are in the 2005ish area of the next Housing Bubble.

  107. 107
    Shoeguy says:

    By Erik @ :

    Nice to see new commenters on here. Getting pretty tired of some of the same ole idiots, not including me.

    The Bulls all ran from this site a few years ago with their tails between their legs, now they’re back flinging the same poop they were flinging at the Bears back in 2006.

    I predict that they’ll disappear from here again after the next housing crash.

  108. 108

    RE: Shoeguy @

    More like 2006. Last year was 2005.

  109. 109
    whatsmyname says:

    By Shoeguy @ :

    It definitely feels like we are in the 2005ish area of the next Housing Bubble.

    So in theory, only 7 more years until you are comfortable buying a house?

  110. 110
    GoHawks says:

    RE: Erik @ – Many on here are looking for a crash……what if prices correct by going sideways? Market rarely gives what most are looking for……

  111. 111
    David B. says:

    RE: LarryB @ – “As for affordability – relo packages and starting bonuses are starting to appear again.”

    Hardly just _starting_ to appear. I got a starting bonus 2 years ago when I was hired at my current job.

  112. 112
    ES says:

    There may be a difference between the last market sell off and this time around. The last time, the amount people were paying each month for a house was much higher than the amount landlords were getting for rents. I noticed that houses for sale would cost the prospective purchaser up to double the amount of money each month rather than renting a similar house in a similar location house. It is much different these days — in some cases it is either cheaper or one can break even if one buys as compared to renting, especially accounting for tax allowances. Plus these days, both vacancy rates for rentals, as well as available inventory for sale is much lower. Lets face it, the Urban Growth Management Act which has limited the amount of available land while increasing costs for what is actually still available, the Great Recession where not enough housing was built to keep up with population growth, and a huge net positive migration is all impacting the real estate market. Seattle is perceived as a great place to live, and a great place to start a career, and many individuals have been moving to this area just for that reason. For homeowners and those who own rental property – it is a great ride. For renters and those desperate to buy – not so wonderful.

  113. 113

    RE: David B. @ – And relocation packages have been around a long time too.

  114. 114
    Anthony Cacallori says:

    By Kary L. Krismer @ :

    Maybe Tim should switch it up and have bearish comments from 4-5 years ago in the Friday Flashback.

    The top post in the SB link below offers some quality pie-in-sky reading for you Kary ;) (I couldn’t link the actual post because SB censored one of the words in the post name)

    https://seattlebubble.com/blog/tag/ballard/

  115. 115
    Rudolfo says:

    By GoHawks @ :

    RE: Erik @ ……what if prices correct by going sideways?

    Once interest rates go up, this is where I would place my bet – prices stagnating for several years after this rush while interest rate increases gobble up any price increases.
    The only unanswered question for me during this upcoming period is: where will all the newcomers settle, farther north and south?

  116. 116
    boater says:

    RE: Rudolfo @ – my guess is if prices stabilize you’ll see inventory increase dramatically. Lots of would be sellers are remodeling due to low inventory and fear that the price increase between when they sell and when they find a home they’d like to buy mean they might not even be able to buy the home they just sold in a year. I’d look at selling and taking a gain to move but there’s nowhere i want to go on the market.

  117. 117
    Natalia Orinko says:

    RE: Erik @ RE: Erik @

    Brang??

  118. 118
    Shoeguy says:

    By Ardell DellaLoggia @ :

    RE: Shoeguy @

    More like 2006. Last year was 2005.

    I had 2006 typed out, but I didn’t want to be TOO pessimistic. But yea, I would agree with 2006.

    The sentiment all seems to be lining up with ’06. The Bulls arms are all broken from patting themselves on their own backs at the “instant equity” they’ve accumulated by overbidding on an overpriced property by tens of thousands of dollars.

    Buyers are frantically trying not to miss that miracle equity train by clawing over each other on multiple offer situations and are then relieved when they “won” and are paying more for the property than it sold for in ’06.

    Bull condescension towards renters has all the bile that it had back then. What fools renters are for missing that train because….it’s different…this time…again…?

    What the Federal Reserve has done to artificially re-inflate the Housing Bubble is downright terrifying and will have even worse consequences than it had the last time around, unless they think they can print another 10 trillion dollars to dig us out of a hole again.

  119. 119
    LarryB says:

    By Kary L. Krismer @ :

    RE: David B. @ – And relocation packages have been around a long time too.

    Yes, both have been around a long time. I got a very generous package when I moved here in ’05. That said, almost all companies discontinued those kind of deal sweeteners after the great banking crisis. They’re only now becoming common again.

  120. 120
    LarryB says:

    By the way, this is what’s different now – huge population growth. Supply and demand is the most basic force in the market. Do you really think there’s going to be a magical day when the real estate fairies wave their magic wands and inventory booms while tech workers flee?

    http://blogs.seattletimes.com/fyi-guy/2014/05/22/census-seattle-is-the-fastest-growing-big-city-in-the-u-s/

    http://www.seattle.gov/dPd/cityplanning/populationdemographics/aboutseattle/population/default.htm

    And look at line 3
    http://quickfacts.census.gov/qfd/states/53/5363000.html

    Most of the new housing units coming online are townhouses, rental apartments and condos; not so many net-new SFHs. Unless the city starts allowing replatting in SF5000 and SF7200 zones and higher coverage ratios, there ain’t a lot of room for ’em either.

  121. 121
    Anonymous Coward says:

    By Shoeguy @ :

    By Ardell DellaLoggia @ :

    RE: Shoeguy @

    More like 2006. Last year was 2005.

    The sentiment all seems to be lining up with ’06. The Bulls arms are all broken from patting themselves on their own backs at the “instant equity” they’ve accumulated by overbidding on an overpriced property by tens of thousands of dollars.

    Buyers are frantically trying not to miss that miracle equity train by clawing over each other on multiple offer situations and are then relieved when they “won” and are paying more for the property than it sold for in ’06.

    What I’m hearing is buyers patting themselves on their backs at the PITI versus the rent on a similar place. And that’s very different than ’06.

    Just yesterday I talked to someone who purchased in ’07 and deeply regretted it for several years. Then they refi’d into a 15 year at 2.x%. Now they’re very happy as the payment is less than renting an equivalent house. Needless to say, that’s a peak bubble property that’s not coming back…

  122. 122
    Deerhawke says:

    It is interesting to note that most of the commentary on this site has gone from anti-bubble to ambivalent (bubble-curious) to pro-bubble in only a few months.

    Now it seems we are just trying to predict where we are in the cycle. Is this 2005 again? Is it 2006? Nobody has yet taken the position that this is early 2007 and the slide is only a few months away.

    Do I hear 2007? 2007? Raise your paddle high please. Very well then, 2006 going once, 2006 going twice. Last call for 2007…..

    Let’s go back to some basics.

    I am an in-city spec builder. In mid 2006, I remember having the distinct feeling that all the percentages and values were out of whack. Builders were paying so much for lots (beating out all my offers) that the only way they could possibly make money is if building costs remained constant and new home prices went up 10-15% per year. I remember thinking about it and then going back and dusting off some books from grad school. This led to more research. Late in 2006 and during the first 2 quarters of 2007, I sold off my whole portfolio of projects in process. I had just started to think that maybe I had been a little too hasty when…. well you know what happened then.

    Here is what I was reading:

    Charles P. Kindleberger, Manias, Panics, and Crashes: A History of Financial Crises (Wiley)

    Charles MacKay, Extraordinary Popular Delusions & the Madness of Crowds (Wordsworth )

    Robert J. Shiller, Irrational Exuberance, Princeton University Press

    If there is one person who I would be following to know where we stand in terms of the next bubble bursting, it is Robert Shiller.

  123. 123
    LarryB says:

    By Anonymous Coward @ :

    By Shoeguy @ :

    By Ardell DellaLoggia @ :

    RE: Shoeguy @

    What I’m hearing is buyers patting themselves on their backs at the PITI versus the rent on a similar place. And that’s very different than ’06.

    Yep. My 3BR apartment’s rent is higher than PITI on the house we just bought. Our main motivator for buying is knowing what housing will cost when we’re older.

    We’re also going to build a DADU (a.k.a. backyard cottage). That’ll pay for itself quickly enough that our mortage will eventually be covered by the rent. And when the mortgage is gone – supplemental income!

  124. 124
    TheWoods says:

    “But engineers normally can’t afford $1 million for a house”

    Single programmers or programmers with a stay-at-home spouse and kids can’t. But a married couple who both work in tech can. Even with a kid. Two senior programmers in their 30s should be pulling in north of $300k/year. Even if you take away an extremely high $2k/month for daycare for the kid(s) that’s plenty for a million dollar house.

    The dual-tech-income households are *exceptionally* hard to compete with.

  125. 125

    This post is primarily about a property that bid up by $100,000. This morning I am dealing with two clients and two houses that are asking $100,000 more than they should be asking. They are in completely different areas geographically.

    The buying public deciding a house is worth $100,000 more is a lot less frustrating than a seller deciding his house is worth $100,000 more than any one else’s house.

    With limited inventory it is a lot more problematic when a long awaited new listing comes out of the gate with a seemingly unrealistic price tag. This could be a tipping point. If sellers start being overly optimistic causing good homes that would otherwise be bought to sit on market for months on end, they could easily turn a seller’s market into a buyer’s market.

    I have recently heard a few Buyer’s Agents recommending people just offer 10% over asking in bidding wars. But I’m hoping that these two dramatically overpriced listings do not sell and that people are at least paying some attention to whether or not the asking price is remotely realistic.

  126. 126
    Blurtman says:

    Get in now everyone, before it is too late. There has never been a better time to buy.

    Gems! Gems!

  127. 127

    RE: Blurtman @

    Actually aren’t we closer to the reverse of that statement?

  128. 128
    redmondjp says:

    By Ardell DellaLoggia @ :

    RE: Blurtman @

    Actually aren’t we closer to the reverse of that statement?

    If you squeeze a lump of coal hard enough, it turns into a diamond!

  129. 129
    Kevin K says:

    Greater Fool Theory – A theory that states it is possible to make money by buying securities, whether overvalued or not, and later selling them at a profit because there will always be someone (a bigger or greater fool) who is willing to pay the higher price.

    From Smart Money perspective, you will know when the party is over. Blackstone and et el will dump their holdings first which consists of new, existing, condos, apartments, and semi-finished units. Flippers will run into the market very excited due to new found inventory, but their margins will be tight due to commodity price reversal. Especially oil!

    My position is that we are in a bubble. A DEBT BUBBLE which RE is part of. The dollar will lose the world reserve status in May time frame, Chinese Yuan will be added, maybe gold, and we will transition to special drawing rights (SDR). IMF has the only clean balance sheet and is being discussed as we speak with World Bank.

    If you want more info about SDR and the new bretton woods agreement, please read here. http://philosophyofmetrics.com/category/sdrs-and-the-new-bretton-woods-2/

    It’s not if…. It’s when…. I’m not going to claim I know it all, but I took some time and I tried to learn it to a point where I can comfortably talk about it. I’m not sharing this so that you guys live in FEAR, the good guys are winning and we will eventually have debt jubilee. Good luck guys!

  130. 130
    Mike says:

    $717K for 1100 sq ft 3/1 in Whittier Heights, $158K over asking. Huh.

    https://www.redfin.com/WA/Seattle/7033-9th-Ave-NW-98117/home/495028

  131. 131
    Angelo Rivera says:

    RE: Mike @

    Wow! $160k over asking for that.

    This is the description from the Redfin realtor.

    “”Don’t judge a book by its cover.”

    Lol!

  132. 132
    Cap''n says:

    RE: Angelo Rivera @

    Hey. Still came in below what townhouses are going for in fremont. Seems like a steal.

  133. 133
    Weasel says:

    By ES @ :

    [snip] For homeowners and those who own rental property – it is a great ride. For renters and those desperate to buy – not so wonderful.

    Been through all this before in New Zealand about 10 years ago, everyone I knew had bought houses, the market was on fire, houses were selling before people could get offers in. I had just returned from travelling and got to stand by and watch as houses became no longer affordable, it is pretty depressing, noting worse that missing the last boat, you really do feel doomed. The economic meltdown in 2008 did little, prices went down in some places, but generally held at insane levels, basically for the average person house ownership is a thing of the past.

    Came to America about 3 years ago and I couldn’t believe how cheap houses were, with the US economy starting to pickup I could see the same situation unfolding, talk about Déjà vu! Seems the stars aligned perfectly this time around for us, got a great job offer in Seattle a year ago, moved here, finally had 2 years of US credit history behind me, bought a house (more house than I had ever dreamed of owning in NZ – 1800sqft split level on 1/4 acre lot is unheard of!) in a nice part of Puyallup 4 months ago, still work in downtown Seattle, commute via Sounder – my commute might be longer than some, but rather sit on a train for 45 minutes @ $15 a month than hassle with parking, and stop/start traffic. Bubble or not, planning on staying here for a long time, I consider my self very lucky to be one of the single digit percentage of the worlds population that owns and lives in a safe modern home.

  134. 134
    Kip_Wallbanger says:

    This website was created on the premise that we were in a housing bubble.
    Data and anecdotal evidence supported the bubble theory.
    Everyone flocked here to dismiss the bubble.
    Their words have been immortalized.

    Tim now believes we may have entered another bubble.
    Data and anecdotal evidence rhyme as before.
    Everyone is flocking here to dismiss the bubble.
    ………..

  135. 135
    Victoria says:

    I recently purchased a home here in Washington after moving from California. We closed on a home that was listed for $50k more than any other home in the same neighborhood, after agreeing on a price with the sellers to reduce that amount by $15k (so I still paid at least $35k more than anyone else would be paying in my neighborhood). The sellers were a family that had lived there for 8 years, so it wasn’t a flip. I agreed to pay more for this home only after reviewing all of the related paperwork to the home, reviewing the recently sold comp homes and visiting the other for sale homes in the neighborhood. The home was meticulously maintained…new furnace, new A/C, new water heater (all three with recent service/checkups), three car garage, new roof, new windows, high end window coverings, new carpet, new paint, fully remodeled 1/2 bath, fully remodeled kitchen with quartz countertops, fixtures changed from brass to polished nickel, new backyard fence. Receipts and manuals for everything. It also had a very unique kitchen layout that is great for entertaining as well as daily use. They also left all the TV mounts and one of their TVs (they asked us first, it was nicer than ours so we agreed).

    Visiting the other for sale homes, they had poor layouts and were mostly original (1980’s) and were at the awkward age where a lot of things need to be replaced because they are breaking down. One of them also smelled like cat pee. Could I have bid lower and did all of the same work on one of those houses? Probably. Would I have saved money doing so? Who knows…when you start to tear things up you might find more major things that need to be replaced. It certainly would’ve disrupted our lives for several months remodeling a whole house to get to where the house we’re currently in is at.

    We put 20% down on this house (our house in CA gained 40% from 2012-2014, we put 3% down to get the CA house). Are we underwater now? Maybe. But I don’t have to worry about replacing my fence, water heater, furnace, A/C, or roof like I see some of my neighbors doing right now because it’s all new.

    Our jobs here are infinitely more stable than they were in California (where I lived in California, I had two other places I could potentially work and here in the Seattle area I have over 15). My husband could only find part time work in CA and now he’s full time with the same company here. We’ve increased our income by 70% simply moving from CA to here. For others at the company I was working at, if they could move here they’d instantly see a 30% increase in their salaries and a drop in the cost of living. It’s no wonder that a lot of them that are moving here ask me about buying a home, because it’s suddenly possible for them.

    It’s hard to see affordability when you’re stuck in one place for a long period of time. In California I thought I couldn’t afford anything and we were just scraping by. At the time we left, I couldn’t have afforded much more house than the one we owned. Moving here, I was able to take the profit from my old house and effectively double my house size (which is more appropriate for my family size) without much increasing the mortgage payments I was used to. I could definitely see this by simply browsing Redfin from California, and it certainly contributed to me accepting the job that brought us here. So while affordability looks bleak, for new people moving in with tech jobs and cash under their belt, when comparing rent prices to buy prices in highly desirable areas (which I did, and completely put me off of renting), it seems much better to buy.

    Anyways I rambled a bit, but for me I chose to pay more than what the market showed for my neighborhood because the current quality and state of the home gave us a place to live that we could very comfortably afford. I didn’t really think about appreciation as a factor in my purchase because I don’t intend to sell for a very long time. ,The house is home for us–where we live, where our kids grow up, and where we enjoy our lives.

  136. 136
    Jack says:

    RE: Kip_Wallbanger @ – …..except that the data do not rhyme as they did before (won’t rehash previous comments on this.)

  137. 137
    Mike says:

    RE: Victoria @ – Ouch. If you’d bought here in 2012 with 3% down you’d have around 35% equity by now. At least you managed to find a place. In some of the more desirable neighborhoods even 20% down isn’t going to win you any bidding wars in today’s market.

  138. 138
    James Wilson says:

    Well it did in our case. Four of the competing offers on the house we won had less than 20% down! And it was in one of the so-called “desirable neighborhoods.”

    Get ready, this bubble is gonna pop any second!

  139. 139
    Erik says:

    RE: Rudolfo @
    West Seattle is where newcomers will go. We have vast fertile fields here still. It is unclaimed territory still. We just need a light rail or tunnel to get us west Seattle people to the jobs.

  140. 140
    Mike says:

    RE: James Wilson @ – Which neighborhood?

  141. 141

    RE: James Wilson @

    And it was in one of the so-called “desirable neighborhoods.”

    By whose definition? Was it South of Downtown or North of Downtown? Was it under $400,000 or over $400,000? South of Downtown in Seattle, Renton, Auburn, Federal Way, Maple Valley and many other areas under $400,000 price point still have many homes purchased with less than 20% down in competing offers. North not so much until you get to Lynnwood-Everett. Maybe some Shoreline as well.

    It’s more about the price point of under $400,000 than area. But some “so called desirable neighborhoods” have few if any single family homes priced at $400,000 or less.

    From a seller’s perspective % down worries do tend to fade if the offer price is significantly higher than the cash or high % down offers in most, though not all, cases.

  142. 142
    One Eyed Man says:

    I generally agree with Blake’s comment that the last bubble was a banking related credit bubble (in part caused by lack of regulation) which fed the housing bubble. If things are about to head south for housing it probably isn’t because 2016 is like 2006. 2016 may well be more like 1990 than like 2006, but 1990 was also to a large degree banking related with the S&L crisis.

    Due to the threat of rising interest rates, the environment of 2016 is probably more like 1978 than either 2006 or 1990, although the current economy lacks the general wage price inflation of the late ’70’s and 80’s. Perhaps we have to go back to the 1950’s when mortgage rates were last in the 5% range and the federal debt was last in excess of GDP to find the best time comparison. I haven’t checked, but I think interest rates and mortgage rates generally increased very slowly over the extended period of the 1950’s and ’60’s. If so, we may well be looking at a plateau in the stair step of price growth much like some of the old guard used to tout as being the historic rule for Seattle prices.

    I tend to believe in reversion to the mean as the most probably long term outcome so if your time horizon is more than 5 years, a return to average long term growth in line with inflation, which is currently below 2% would seem reasonable, probably with some moderate fluctuation both above and below the inflation curve.

    Caveat: As long as any move in price doesn’t have a huge economic impact, I don’t personally care that much about what happens to housing prices (as opposed to financial asset prices). We are debt free and most of our net worth isn’t directly affected by residential real estate prices. If I were young I would have tied up some sub 4% money for the next 30 years as a great arbitrage on long term mortgage rates and inflation. If I were a real estate investor or just a huckster, I’d be advising to buy and hold on debt financed residential real estate for the long term even at current prices.

  143. 143
    James Wilson says:

    This is in the North Seattle area actually and well above $400k.

    We learned through communication with the realtor that the sellers actually leaned towards the higher down payment even with a lower price since they had some uncertainty whether the house could appraise otherwise. Apparently this is a safety net in two ways: (1) Buyers with larger down payments are in a better position to cover the difference if it appraises under value (2) The lower price of our offer (although not the lowest) seemed to be more realistic to the sellers.

    So take cover everyone!

  144. 144

    RE: James Wilson @ – Being a price above the likely appraised value is a legitimate concern for a seller. As I mentioned above (I think–that was a long time ago), that would typically allow the buyer to back out. Stated differently, if they get cold feet they could act on it when the low appraisal came in. But there are ways of dealing with that. The real issue is how much extra cash does a buyer have, not how much they are offering or how much they are putting down.

    It’s really bizarre to me how agents want to pin down buyers with pre-inspections and waiver of Form 17, but at the same time leave an contingency so large you could drive a truck through it. And at certain prices it’s a contingency which is almost certain to occur, and which typically occurs much later than an inspection response, at a point in time where many of the other better buyers might have found something else to buy.

  145. 145

    By One Eyed Man @ :

    Due to the threat of rising interest rates, the environment of 2016 is probably more like 1978 than either 2006 or 1990, although the current economy lacks the general wage price inflation of the late ’70’s and 80’s.

    It’s almost the exact opposite of the late 70s. In the late 70s we had one commodity driving prices higher but the Fed claiming down on the economy because they thought that price action was inflation. Now we have that same commodity making things cheaper and driving a significant portion of what economic growth we do have, but the Fed still has its foot on the gas.

    If oil prices go back up significantly, we might have a similar situation, but that would depend on how the Fed reacted, and this time we would merely be going back to fairly recent oil prices, so it wouldn’t be such a shock or get such over-reaction.

  146. 146
    David B. says:

    RE: Kary L. Krismer @ – “It’s almost the exact opposite of the late 70s. In the late 70s we had one commodity driving prices higher but the Fed claiming down on the economy because they thought that price action was inflation. Now we have that same commodity making things cheaper and driving a significant portion of what economic growth we do have, but the Fed still has its foot on the gas.”

    Funny you should post that — pretty much the same thought recently occurred to me and I was going to share it here.

  147. 147

    RE: David B. @ – Would you have typed “clamping down” as “claiming down” too? ;-)

  148. 148
    One Eyed Man says:

    RE: Kary L. Krismer @

    You might want to check your data on oil prices, inflation and interest rates. Oil prices weren’t driving inflation in ’77 and ’78. Oil prices came back down to some extent after the spike of ’73 and ’74(?) and were flat in ’76 thru ’78. Oil prices didn’t go up again until 1979. But inflation and mortgage interest rates were already going up in ’77 and ’78. Increasing mortgage rates and inflation in’77 and ’78 weren’t caused by oil price increases.

    But that’s somewhat irrelevant as I still think that the ’50’s and early ’60’s are probably a better comparison for 2015 as my post stated.

  149. 149

    RE: One Eyed Man @ – That’s not how I remember it, but even on those facts oil basically doubled in price in the mid 70s and that would take a bit of time to work its way since oil is used in making and transporting so many things.

    http://inflationdata.com/inflation/inflation_rate/historical_oil_prices_table.asp

    and

    http://www.wtrg.com/oil_graphs/oilprice1947.gif

  150. 150
    Mike says:

    A rational (non-bubble) housing market should in theory track what is happening in rents. If the cost of renting spikes because of an influx of affluent workers there would be something strange going on if purchase prices didn’t track with a similar increase (in monthly PITI).

    The guy works in Fremont and wants to live close to work. He can buy this townhouse and pay somewhere around $3,300 for PITI. For that he’s presumably getting something roughly similar to this: https://www.redfin.com/WA/Seattle/812-N-36th-St-98103/home/303618

    OR

    He can go rent an apartment nearby that is likely smaller (974sqft 2br/2ba) for $3,125. See this:
    http://www.epiapartments.com/p/apartments/floor_plans_5922/seattle-wa-98103/epicenter-apartments-5922 [By comparison we rented at Epi when we first moved to Seattle in 2007 and paid like $2,100 for a much bigger unit with a roof deck, so rent is over 50% higher now]

    Paying an extra $175 a month (before accounting for tax deductions for someone likely in a 30%+ marginal bracket) for a bigger space seems like a no brainer as long as he is confident he’ll stay in the area for 5+ years. And Fremont isn’t a bad place to commute to SLU or Expedia’s new digs either so he’s not particularly job locked by being there. If rent doubles against over the next 8 years he’ll be well ahead and even if it doesn’t keep shooting up he’s not really behind where he’d have been renting.

  151. 151
    Wanttobuybutnotatthatprice says:

    Hi im a first time commenter. Actually I’m a first time reader. I found this site out of pure frustration and typing in the google search 2015 housing bubble. I wanted to know if others were thinking what I’m thinking. I’ve been watching the market since 2005 when I bought a condo in Bellevue for $160k. In 2006 it was worth $250k because that’s what my neighbors were paying. I wanted to sell and make the money but where would I buy? The prices had gone up everywhere. ( sounds familiar) It was going to keep going up and up maybe even $400k! Glad I didn’t miss out I was sure patting myself on the back. Then I got divorced and the market kept dropping and dropping. I had an idiot agent that “helped” me sell it for $140 in 2010. ( agent messed up and I didn’t sue in time) its now “worth” $260-$270. Excuse me I feel sick…. Bleh bleh heave ho.
    Now after repairing my credit and saving some money got remarried and now have a few kids I can’t even afford Renton. OMG WTF! This feels all to familiar. It smells like 2006 to me. I think it’s going to pop because it increased to quickly. If you “gained” money on your home you believe it’s real don’t pat yourself on the back! It’s not real till it’s in your hand. I’m only 35 but it seems to me that things are swinging up and down drastically and emotions are high which really doesn’t lead to good decisions. I’m going to stay grounded and hold out for the price I believe it’s worth a fair price based on math and statistics. I’m going to even make offers for what I believe it’s worth. Thanks for this website and the commenters. It’s really helping me figure things out.

  152. 152
    Blurtman says:

    RE: Wanttobuybutnotatthatprice @ – Good luck! It is hard to precisely time a market, and incomprehensible that folks on this website (not you) believe it can be done in the RE market. What frequently ties folks to a given area is job and family and friends, and preference for the area. There are other livable places than the greater Seattle area. I hope you can find a home that you truly enjoy.

  153. 153
    redmondjp says:

    By Blurtman @ :

    RE: Wanttobuybutnotatthatprice @ – Good luck! It is hard to precisely time a market, and incomprehensible that folks on this website (not you) believe it can be done in the RE market. What frequently ties folks to a given area is job and family and friends, and preference for the area. There are other livable places than the greater Seattle area. I hope you can find a home that you truly enjoy.

    +1 on that!

    Even us homeowners are in a similar (but bigger, nicer) boat – due to a growing family, I’d like to get a 4BR house now and I can’t really swing it unless I borrow at least twice what I did to buy my existing house (which is almost paid off). Even with all of my existing equity. So I am also looking at what it would take to add onto my existing house as that may be my only cost-effective option at this point. I’m not complaining, but it is definitely frustrating (especially when I visit all of my friends and see the nice, big houses that they are living in).

  154. 154
    Marc says:

    RE: Wanttobuybutnotatthatprice @ – Wow does this sound familiar! I was you in 2006 when I found this site. I was just sick with the way prices were flying and buyers were making crazy decisions just to get a house (inspection – who needs it, abandoned oil tank – no problem). Tim’s site did a great job to educate me on why it was not a good time to buy so you know what I did? Ignore that good advice and bought a house. Closed in August, 2007. Ask anyone on this site when the peak of the bubble was? Ouch!!

    It sucked to watch the value freefall but we could afford it and were happy with the house. Had two kids, finished the basement, and continue the fight against a sewer line that is near death. And you know what happened? The market rebounded. House is worth an easy 30% more today than what we paid at the top of the market, maybe more.

    The point is, if you’re time horizon is short (1 to 3 years) don’t buy. If it’s longer (3 to 5) think about buying but be price sensitive. If it’s 5 to 10 years or longer, don’t lose sleep over paying a little too much here or there for a house you like. Life is frigging short and renting a tiny box for a mint and not being able to paint your walls or crank your stereo BLOWS. Buy a house, make it your home, and don’t friggin sweat the rest.

  155. 155
    Marc says:

    RE: Marc @ – Pardon the embarrassingly bad grammar and typos. Really should read what I right before hitting enter.

  156. 156
    Tim says:

    RE: Iancredible @
    Your comment:
    “It bothers me when people are calling this a bubble. The only way this is a bubble is if
    1: A major company leaves this area.
    2: Some sort of natural disaster or epidemic (war disease)”

    Neither of those two were the case when we were in the last bubble. The same thing is happening now actually. Housing cannot outpace the median household income….. Which for Seattle is $68K.
    so how long do you think housing can outpace income? Foreign investors inflate prices, but that won’t last forever either.

  157. 157

    By Tim @ :

    RE: Iancredible @
    Your comment:
    “It bothers me when people are calling this a bubble. The only way this is a bubble is if
    1: A major company leaves this area.
    2: Some sort of natural disaster or epidemic (war disease)”

    Neither of those two were the case when we were in the last bubble. The same thing is happening now actually. Housing cannot outpace the median household income….. Which for Seattle is $68K.
    so how long do you think housing can outpace income? Foreign investors inflate prices, but that won’t last forever either.

    I would disagree with both of you. Clearly there can be more than two causes for a decline in price, but the median income argument is and always has been total nonsense. Not everyone wants to buy a home (which is why they are building so many apartments) and not everyone uses income to buy a home.

  158. 158
    LarryB says:

    By Tim @ :

    RE:
    Housing cannot outpace the median household income….. Which for Seattle is $68K.
    so how long do you think housing can outpace income? Foreign investors inflate prices, but that won’t last forever either.

    It’s the marginal buyer that determines market price, not the median ability to pay. As long as there is one person willing to pay a high price for a house, that’s where housing costs are pegged. Unless something happens that drastically increases supply or reduces demand, housing prices aren’t going down.

    That’s how supply and demand works for housing. As long as the influx of high-income families continues, housing prices will continue to rise, especially in the city proper. They’re the marginal buyers, and they want houses. If they’re coming from the Bay Area, our rapidly rising prices are perceived as a screaming bargain.

    The only supply increases I can see will come from the construction of multiple townhouses on former SFH lots, and from a possible increase in retirees moving away now that their houses are worth more,

  159. 159
    Angelo says:

    So according to people that recently bought a home in this market, prices will go up forever unless we go to a nuclear WW3.

    Based on the people that haven’t bought, we are in a bubble that will burst in everybody faces with the next tech bubble.

  160. 160
    Mike says:

    Agree – marginal buyers are what matter. The median income would only really apply if everyone owned, but in the real world a significant and growing portion of the population will rent. So what matters, is the median income of the 60% (or whatever the figure is) of the population that wants to actually buy. I’d expect that when you look at the median income of that group the income skews a lot higher.

    For that pool of potential buyers the marginal buyer is probably most influenced by rent and commute. You look around and are faced with crazy rental costs for something nice, not much lower rental costs for something dumpy, or something nicer but still not much cheaper with an hour long commute and then you decide what a house is worth to you.

    And that is why this feels like less of a bubble since rents are leading the charge, which indicates that the cost of housing is going up not the cost of investing in real estate. In 2007 we didn’t have City Councilmembers doing political stunts over rent control.

  161. 161
    Seattleboomerang says:

    Most buyers need a home to live in, the investment is a bonus. We have a family and we need a home but at the moment inventory is low for buying and renting. If it was purely a bubble renting should not be affected. I am not a Bull or a Bear I am just someone who needs housing. Our family makes significantly more than the medium quoted and yet there is little to buy in neighborhoods we are interested in.

    It seems to me on this site that the needs of families are not taken into consideration. It is often discussed from an investors perspective or young single tech buyers and renters. Once you want or have children and you need some space and hopefully a yard near decent schools and amenities you are looking for a place to live in for a decade or more. This area is teeming with families. The last census showed that Seattle Metro has increased it’s number of married couples with children. I personally know three friends who have grown children in their 20s who are moving back to the Seattle area with a spouse in tow. There is just an increase in the need for housing. I wish it was different but I really don’t see this like the bubble that burst in 2007/8. Many people have a very good salary and savings and are struggling to find a house.

  162. 162
    redmondjp says:

    RE: Seattleboomerang @ – You are right about families. Sure, it’s super-cool to live in an upscale apartment or condo, until you have kids and want somewhere for them to play, plus good schools nearby (be they public or private). The Agenda 21 plan that is being implemented now in our area does not account for that.

    Only the wealthy will own SFHs in the future, as they are considered far too wasteful of our precious land and resources.

    I went to an open house in a fantastic kid-friendly neighborhood in Carnation last Sunday, and did not make an offer because the home is in the 100-year floodplain (but wasn’t when it was built – go figure). Due to the incredibly high demand right now, this issue alone won’t stop most buyers (but I’m not ‘most buyers’;) so there is no price discount in place to compensate for this negative. If one goes to sell in a down market, this could be a tie-breaker issue between your house and another one that doesn’t have the issue.

  163. 163
    Macro Investor says:

    By LarryB @ :

    It’s the marginal buyer that determines market price, not the median ability to pay. As long as there is one person willing to pay a high price for a house, that’s where housing costs are pegged. Unless something happens that drastically increases supply or reduces demand, housing prices aren’t going down.

    Your first sentence nails it. But then you contradict yourself in the 2nd sentence. Are you a real estate agent? Because you implied that it is very easy for prices to go up, but very hard for it to go down. That is a lie.

    If the marginal buyer sets the price, then all it takes for prices to fall is for that marginal buyer to withdraw his offer.

    That is why buying into a bubble is dangerous to your financial health. Bidding wars are emotional. People are scared of being priced out forever, being stuck in south king, or some other worry. All it takes is a shift in emotions, and buyers can sit on the fence. What can cause that? Use your imagination. News headlines, TV, some other city or lifestyle that’s more “cool”.

  164. 164
    Seattleboomerang says:

    As long as the jobs keep being created people will keep moving into the area and with a lack of public transportation close in neighborhoods will always be the last to fall in price and the quickest to recover.

  165. 165
    Ryan says:

    Well that was quite a thread! This was the purchase in question, purchased for $745k:

    https://www.redfin.com/WA/Seattle/3824-Evanston-Ave-N-98103/unit-1/home/56413

    Happy to have rung in the next housing bubble as far as SB is concerned?

  166. 166

    RE: Ryan @

    Yes, it is the one I was hoping for in my comment 63 and the one Seattleboomerang guessed in comment 67. My client bought a slightly larger one across the street this time last year for $573,000 when the homes were bidding up $100,000 on a regular basis but the townhomes were not. That is why I was hoping for “34th and Evanston”.

    Not exactly the same style…but still.

  167. 167
    Blurtman says:

    RE: Ryan @ – 3.7% per year from 2004 roughly. It’s a nice looking place.

  168. 168
    SeattleRenter says:

    By Blurtman @ :

    RE: Ryan @ – 3.7% per year from 2004 roughly. It’s a nice looking place.

    I noticed the $475 monthly HOA fees listed on the Redfin website (57k over 10 years, assuming same monthly fee). Does that appreciation account for the HOA? Or more specifically, how would that HOA factor into the overall economics of the purchase? Just trying to get my head wrapped around those fees as I am a current renter and I if I do buy, it will likely be a townhome with HOA fees.

  169. 169
    Starquest7000 says:

    RE: First Time Homebuyer @ 10 – Why would your interest rate increase? Didn’t you get a fixed 30 year mortgage? Anything other than that would be disastrous. The interest rate WILL increase. It has to for us to regain stability in our economy.

  170. 170
    First Time Homebuyer says:

    I guess my example was confusing. I have a 30 year fixed loan at 4%. My interest rate will not change.

    I was just trying to show what my payments would have been if the interest rates were around 5.75%.

    I think the interest rates will rise in the next few years and I think it will make houses much less affordable, so the prices would have to stagnate at that point. At least in Seattle.

  171. 171
    Mick Russom says:

    RE: David B. @ 4

    SF has zero opportunity now. Its easy to get a job, but for a single family home you will be spending well over 50% of a dual income family’s income just to tread water. Only the insane think there is a yellow brick road left. I have done startups for 15 years and unless you are a founder or an exec even a successful exit will do nothing to dent your mortgage. With single family homes in good school areas being well north of 1 M and overbidded by 400k right now, SF is a disaster. Smart companies will start to build out operations in other states. We are already seeing that with even Google building out in Georgia and the like.

    I’ve watched San Fran burn to the ground. The traffic is horrible and the public transit is trash. The schools are horrible, even “10” schools churn out losers. Most companies are importing talent -san francisco home grown kids are losers than cant compete. There is no water. The government is a total disaster. The state has unfunded liabilities out the wazoo and the CalPers pension and healthcare system is really set to collapse.

    I dont think SF will cool off, but the quality of life is horrific.

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