NWMLS: Some Small Signs of Market Softening in March

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March market stats were published by the NWMLS yesterday. Before we get into our monthly stats, here’s a quick look at their press release.

Puget Sound Area Home Sales Slow (But Not Prices)
Traffic isn’t the only thing that is gridlocked around many Puget Sound communities. “We’re experiencing gridlock in the Puget Sound housing market,” suggested J. Lennox Scott in reaction to the latest statistics from Northwest Multiple Listing Service.

“We are virtually sold out of inventory and there’s a pipeline of stalled buyers,” commented Scott, the chairman and CEO of John L. Scott, Inc.

The year-to-date drop in pending sales versus first quarter 2015 is a reflection of tight inventory, according to MLS members. “It’s not for any other reason except there aren’t enough homes coming on the market to satisfy pent-up buyer demand,” stated Scott.

We can trust J. Lennox Scott’s assessment of the underlying forces at work in the local housing market, because he has always been 100% correct in his previous market analysis. Oh. Wait.

CAUTION

NWMLS monthly reports include an undisclosed and varying number of
sales from previous months in their pending and closed sales statistics.

Here’s your King County SFH summary, with the arrows to show whether the year-over-year direction of each indicator is favorable or unfavorable news for buyers and sellers (green = favorable, red = unfavorable):

March 2016 Number MOM YOY Buyers Sellers
Active Listings 2,157 +12.2% -21.2%
Closed Sales 1,910 +43.6% -8.7%
SAAS (?) 1.43 +10.6% +9.5%
Pending Sales 2,877 +25.1% -11.0%
Months of Supply 1.13 -21.9% -13.7%
Median Price* $531,250 +3.2% +20.7%

First the good news for buyers: Inventory saw a slight uptick in March, and the year-over-year drop shrunk significantly from -29 percent in February to -21 percent in March. Sales also appear to be slowing down slightly as both pending and closed sales are down around ten percent from a year ago.

Now the bad news: The median home price shot up to a new all-time high, and the year-over-year median price was up a record-breaking 21 percent.

It is worth noting that when the last bubble burst, sales were declining for nearly two years and inventory was climbing for about a year before home prices eventually peaked.

Here’s your closed sales yearly comparison chart:

King County SFH Closed Sales

Closed sales were up from February, by a similar amount to most years. The year-over-year drop in closed sales was the largest decline we’ve seen since November 2010. If this keeps up, 2016 could be the turning point for this cycle. Or the last few months could just be a blip. We’ll know more in a few months.

Here’s the graph of inventory with each year overlaid on the same chart.

King County SFH Inventory

Total inventory is at its lowest March level on record. The good news is that the 12 percent month-over-month increase in listings is the largest February to March increase on record.

Here’s the supply/demand YOY graph. “Demand” in this chart is represented by closed sales, which have had a consistent definition throughout the decade (unlike pending sales from NWMLS).

King County Supply vs Demand % Change YOY

Both the red demand line and the blue supply line inched toward buyer’s market territory in March. The demand side of the chart is further in buyer’s territory than it has been in over five years, but the supply side is still deep in seller’s market territory, which is the biggest driving force of the market right now.

Here’s the median home price YOY change graph:

King County SFH YOY Price Change

Year-over-year price growth inched up from +19.8 percent in February to a record-breaking 20.7 percent in March. That surpasses the previous peak gain of +20.0 percent that was set in October 2005.

And lastly, here is the chart comparing King County SFH prices each month for every year back to 1994 (not adjusted for inflation).

King County SFH Prices

Another ridiculously high level for the median home price. There’s never been a better time to sell your home.

March 2016: $531,250
July 2007: $481,000 (previous cycle high)

Here’s this month’s article from the Seattle Times: Squeeze on homes for sale extends to several counties

Check back later for the full reporting roundup.

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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

83 comments:

  1. 1
    GoHawks says:

    I have the utmost respect for Tim and the great job he does, but is it really softening (even slightly) if the months worth of supply is shrinking and prices are breaking new record highs?

    Yes pendings are down, but that is to be expected with so little to select from. Inventory is down more year over year than pendings.

  2. 2
    II says:

    This is the beginning of the fall in prices let’s just be realistic here. Who wants a 7.5k a month mortgage in an ok neighborhood. Inventory matters, of course but there is plenty of land and old homes with large lots developers can buy and build. People who are moving to this area not necessary tied to this place and will wait, apartments are popping up everywhere, take a look at Bellevue, old town, 5!!! apartment complexes all new, under construction, this is within two blocks. Go and check it out, Main street Bellevue, Prices will come down, sell before they start falling

  3. 3
    Cap''n says:

    RE: II @ 2

    How’s business as a listing agent going for you?

  4. 4
    sleepless says:

    I have noticed a considerably higher number of for sale signs in the Clyde Hill neighborhood. I wonder if the trend indeed starts to change…

  5. 5
    sleepless says:

    In my humble opinion, the home prices should come down at least 30% to be “affordable” again. The incomes are just too low to afford these prices.

  6. 6
    redmondjp says:

    In my Redmond neighborhood, the second of four new Quadrant homes has now been on the market for 33 days without a buyer (with houses #3 and 4 to be on the market shortly). Properly-priced homes in this area typically get sold in 4 days or less with multiple offers, so are we at the peak right now, or is the home just overpriced? Only time will tell . . .

  7. 7
    sleepless says:

    By sleepless @ 5:

    The incomes are just too low to afford these prices.

    I mean the working class americans, including high tech jobs, not the “investors”. I guess, the “investors” can tolerate even higher prices.

  8. 8
    ii says:

    RE: Cap”n @ 3
    Cap”n, no real estate agent here, I am just saying that to buy a $1M home with 10% down, a family with one or two kids should be making at least 350k. This is the rule for those who want to build wealth and not just put all their eggs in one basket (such as home, the most iliquid (in the historical terms) investment one can ever make). I am not saying people with such household income can’t buy 1M plus house, they can, of course, but they will be house rich and money poor and will be taking on too much risk. Real estate is risky, look at 2008-2013, look at Marriott that almost went out of business in 90th an since own very little real estate and choose to be a management company. However, those who know they will live in a houase for the next 20+ years should go ahead and buy because in a very long term their house will appreciate, it is just that most people stay in their homes 5-10 years….. and being underwater will be very bad….

  9. 9
    greg says:

    RE: ii @ 8RE: ii @ 8

    I think most people earning 350K PA, have more than 100k to put down on a home.

  10. 10

    RE: II @ 2
    Yes II

    I’d add to your blog….just where are these $1500-5000/mo for rent tenants coming from? Almost ALL the people I know that rent make like $50K/yr [or less] if they’re lucky [like two incomes]. They combine incomes to afford rent too….that’s even more RISKY for a landlord when one tenant friend leaves.

    Seattle Bubble needs to specify the tenant average income [also how many duel friends live in the same apt]. Now that’s a bubble indicator statistic IMO.

  11. 11

    By GoHawks @ 1:

    Yes pendings are down, but that is to be expected with so little to select from. Inventory is down more year over year than pendings.

    You could add lower sales as being affected by inventory too. Comparing either while inventory levels are so low is really questionable.

    Inventory is really the driving factor right now, and you can see that in the price too.

  12. 12
    GoHawks says:

    RE: Kary L. Krismer @ 11 – Well said Kary. I just didn’t see the market is slowing, prices are going to start falling message in the data like a few others have.

  13. 13
    CDer says:

    In general, I feel like the market hinges on 3 major factors in terms of demand – the amount of people renting, the amount of people buying, and the amount of people moving to the city. I wonder if Tim could write a post discussing the trends of all 3 in general terms, to see if there are any correlations with these numbers. We talk about the increase in population (best quantified by the amount of new drivers licenses issued each month), but I also read that there is now a surplus of apartments in some areas. Is this true? Or is this because of the affordability of these luxury apartments? Also, have the prices of rent gone up just as intensely as housing prices?

  14. 14
    SFraz says:

    How many zombie houses are sitting in the Seattle area? Are the banks sitting on them?
    “Too often, to the banks these homes are little more than numbers on an Excel spreadsheet. We need to work to show the banks that these are homes in communities and when they sit empty and when the squatters come in, there is a ripple effect.”
    http://patch.com/oregon/portland/portland-mayor-hales-has-plan-fight-zombie-houses-0

  15. 15
    ii says:

    Well, I think it is a bubble…. Those who own homes on this blog, go check the open houses this weekend and ask yourself if you would buy the homes you see for the asking price or above.
    Those who think Amazon and Microsoft employees going to drve the prices up, do you know what these companies pay to their employees, especially the entry levels that are making up the large population of newcomers? Do you know that their salaries are low (to the point that technically, if lenders don’t do creative stuff, these people can’t even qualify for a decent mortgage because it is based on the salary and not the total compensation), remember, Jeff Bezos salary is 160k so everyone else makes way less. Same with Microsoft, those are not paying well. So, I am not sure what tech jobs people are talking about….. Who is it that pays so much that people can afford multi million dollar homes? Maybe I am completely wrong, maybe people are getting paid so well that there is no bubble….

  16. 16
    Erik says:

    RE: sleepless @ 4
    Look at King county inventory numbers. They have never been this low at this time of year in history. We probably have 3 more years of low inventory with large price increases.

    Nudge me when King county inventory hits 6000. Until then, there is no reason to sell.

  17. 17
    Erik says:

    RE: II @ 2
    Wanna make a wager? I will bet you my car for your car that this is not the beginning of the decline in housing prices. I think 2016 will be a double digit increase in King county. Likely the same for 2017 and 2018. I can’t see a decline until atleast 2020. And when it does go down, it will go down about 20%. Housing prices will go up more than 20% between now and the decline.

  18. 18
    ii says:

    RE: Erik @ 17
    Erik, it depends on the type of car you have, by 2020 we both will have new cars, lol.
    I hear you, I am looking on the East side so my opinion is based on what I see there. The prices are way too high in Bellevue and Kirkland. So from what I see in this area, the prices are getting out of control. There are some many things to consider and factor in, it is not just the house itself but the schools, the traffic, neighbors, etc. So, maybe it makes sense to split this market in this blog into segments and further into the neighborhoods.

  19. 19
    Buyer says:

    It’s very obvious that the low inventory is the major driver for the market.

    This makes understanding the reasons behind the drop in inventory very important for predicting the future of Seattle’s RE market.

    Why is the inventory so low?

    (1) Is it because prices became very high to the level that people who want to sell are having hard time finding a new place to move to? and that’s why they aren’t selling their current homes?

    (2) Is it because the construction of new homes is very slow compared to the population growth and that’s in turn is making (1) become more and more severe?

    (3) Is it because a large number of home owners (especially those who own investment properties) believe that prices will continue to go up and it’s better to hold on and wait to maximize their gains?

    If all the above are valid reasons, are they equally important? what is the contribution of each of them to the problem?

    If the most contributing reason is 1 or 2, then I believe any change to the current situation will happen slowly and will take a long time (a couple of years).

    If 3 is the most contributing reason, then a change of seller’s sentiment might happen at anytime and grow quickly as a snowball once triggered.

    I wish I can find statistics that help me identify and quantify the reasons behind the low inventory because that’s the key for understanding the current RE market in our area.

    (Please excuse my poor English and poor writing skills).

  20. 20
    Erik says:

    RE: ii @ 18
    I am familiar with that area. I moved from Kirkland to Seattle in 2014.

    King County inventory is record low. Kirkland and Bellevue are in King County. The only way prices will go down soon is if inventory spikes up above equilibrium soon. That will not happen. If you are waiting to buy, you will continue waiting for a long time.

  21. 21
    ESS says:

    By ii @ 15:

    Well, I think it is a bubble…. Those who own homes on this blog, go check the open houses this weekend and ask yourself if you would buy the homes you see for the asking price or above.

    _____________________

    I own my own home, I attend a number of open houses both in my area and in Seattle. I tell myself – I wouldn’t buy the home in question for the price that is being asked. But for many of the houses that went on the market at the end of the week to catch the open house on the weekend, they are pending the following week. So someone is buying these properties right away.

    So who is buying those homes?
    Here is one answer

    http://www.seattletimes.com/nation-world/tech-firms-in-pricey-san-francisco-see-exodus-to-seattle/

  22. 22
    SFraz says:

    RE: ESS @ 20 – Chinese cash is flooding into San Francisco. The higher the price, the happier they are. This, in turn, is causing the tech peeps, unable to afford to live in Silly Valley, to migrate to Portland and Seattle.
    http://www.doctorhousingbubble.com/china-real-estate-buying-us-eb5-visa-chinese-cash-buyers/

  23. 23

    By SFraz @ 14:

    How many zombie houses are sitting in the Seattle area? Are the banks sitting on them?
    “Too often, to the banks these homes are little more than numbers on an Excel spreadsheet. We need to work to show the banks that these are homes in communities and when they sit empty and when the squatters come in, there is a ripple effect.”
    http://patch.com/oregon/portland/portland-mayor-hales-has-plan-fight-zombie-houses-0

    I know banks don’t make the best decisions, but if there are still any zombie houses that would take special type of stupid.

  24. 24
    ii says:

    Yes, it makes sense< Chinese money. I heard that in Canada there was a petition being signed to either not allow foreign funds and individuals to buy homes or to tax them at very high rates. I also thought Canadians were stopping the birth tourism (meaning no citizenship for kids born from foreign parents in Canada if they came just to give birth). So, this is very interesting. I can't compete with these investors, they pay cash and just dont care about the price in trying to get the money out of China.

  25. 25
    Ess says:

    By SFraz @ 21:

    RE: ESS @ 20 – Chinese cash is flooding into San Francisco. The higher the price, the happier they are. This, in turn, is causing the tech peeps, unable to afford to live in Silly Valley, to migrate to Portland and Seattle.
    http://www.doctorhousingbubble.com/china-real-estate-buying-us-eb5-visa-chinese-cash-buyers/

    There are many reasons why Portland and Seattle are growing – beautiful areas, mild year round climate, easy access to outdoor activities, etc, but one only has to compare the affluent areas of Los Angeles or SF area to understand that Puget Sound area prices, even in places such as the east side or in the more attractive neighborhoods of Seattle, are much less than comparable places in LA or SF. What we view as outrageous prices are for many from California, bargains.

  26. 26
    GoHawks says:

    RE: ii @ 18 – “”The prices are way too high in Bellevue and Kirkland. So from what I see in this area, the prices are getting out of control.””

    Seems like many of our opinions on here are primarily driven by what we want to happen. If one is looking for a home, then these prices have to come down and are way overpriced etc.

  27. 27
    Som says:

    I think over the last 6 months, the worst affected areas, in terms of pricing for buyers, has been Sammamish. I think I know why – Sammamish was still priced below what salaries can afford. So the pricing had to be normalized.

    What I do find stupifying is the sudden speed of explosion in pricing in the last 6 months. We are talking 25%+ increase in less than 1 year:

    https://www.redfin.com/WA/Sammamish/21607-NE-22nd-Ct-98074/home/264345
    (this went pending for around 890K)

    Compare this to houses next door:
    https://www.redfin.com/WA/Sammamish/22237-NE-21st-Way-98074/home/263311
    https://www.redfin.com/WA/Sammamish/22316-NE-19th-St-98074/home/262154
    https://www.redfin.com/WA/Sammamish/2025-222nd-Ave-NE-98074/home/262996

  28. 28
    Anonymous Coward says:

    RE: Som @ 27 – How do you know it went pending at ~$890k. That doesn’t seem to appear anywhere on the redfin link…

  29. 29
    Doug says:

    Agree with many here on both sides of the argument, but not a single person has mentioned the biggest and most important variable in home prices: interest rates!

    Until Janet starts hiking in a meaningful way I have no reason to believe prices can’t continue higher. Admittedly, I’m a permabear when it comes to the US economy, but I don’t see a scenario that will allow the Fed to tighten for a frighteningly long time. And even if she does hike (and this may seem counter intuitive), the long end isn’t going anywhere. In fact, the 30-year UST yield will likely plummet driving mortgage rates even lower as the curve inverts which in turn will drive prices higher. The 30-year is down 40 bps since the Fed hiked in December. Figure that out.

    I don’t claim any of this makes logical sense, but welcome to Econ 101 when you’re in a liquidity trap.

  30. 30
    Som says:

    RE: Anonymous Coward @ 28 – Because I bid on it and my realtor told me that the accepted offer was just short of 900K, around 890K.

  31. 31
    ii says:

    RE: Som @ 30
    Wow, 2,600 sq feet for 890k in Sammamish, good thing you didn’t buy it….
    Well, it is what it is, I am anticipating the fall in prices and am not buying a home at top of the market, too much risk at this point.

  32. 32
    ESS says:

    RE: Buyer @ 19

    Good questions, and I think the answer to your all your questions are yes, understanding that there are still other reasons why inventory is so limited.
    As to question number three – not only are the investments properties increasing in value, but rents are going up as well, and vacancies are down thus there are three reasons to continue to hold and not sell.
    As to the future, no one knows for sure. Educated guesses can be made based upon all the information at hand, but other than the fact that most real estate investments increase in value over time ( the increase in value and the amount of time both subject to external influences), no one is 100% sure of what is going to happen in the short term.

  33. 33
    ESS says:

    Here is a story that proves that real estate issues, like the old adage about politics, are local.

    This story appears to be in contradiction of what is happening in Puget Sound, where everyone wants to live close to Seattle or Bellevue.

    I also find interesting that young buyers have no interest in buying a “starter” home (love the lingo – there is no such thing as a starter or finishing home ). Having goals of getting the biggest and best right off the bat just increases frustration and anger , not to mention the problems associated with being house rich and cash poor.

    What is shocking to me is the percentage of young buyers who expect the bank of mom and dad to not only help with the down payment, but also the monthly mortgage payment. I don’t remember so many banks of mom and dad in the business of real estate when I was growing up.

    http://www.marketwatch.com/story/first-time-buyers-are-skipping-the-starter-home-and-saving-for-the-big-house-in-the-suburbs-2016-04-06

  34. 34
  35. 35
    Dana says:

    My wife have been looking to buy for well over a year now (first offer in 2014). We have made 8 offers and lost all of them. We went 25% over on the last house and still didn’t get it.

    We rent in Mt. Baker in a non-updated 3 bd/2 bth (2bd/1bth main, non permitted finished basement with 1bd/1bth). Lots of deferred maintenance.

    Landlord told us last year he wanted to sell to us, but then 3 weeks later said that he was going to keep it because house prices are going up 20% for year and wants to use this as his retirement fund. Wanted $625k for it

    If inventory stays this low, I don’t have any reason to believe that he wouldn’t get that at some point, even though it is worth ~$500k. If the market gets to that point, maybe a bunch of people will finally put their houses on the market? Maybe?

  36. 36
    BlockHead says:

    By ii @ 15:

    Those who think Amazon and Microsoft employees going to drve the prices up, do you know what these companies pay to their employees, especially the entry levels that are making up the large population of newcomers? Do you know that their salaries are low (to the point that technically, if lenders don’t do creative stuff, these people can’t even qualify for a decent mortgage because it is based on the salary and not the total compensation), remember, Jeff Bezos salary is 160k so everyone else makes way less. Same with Microsoft, those are not paying well. So, I am not sure what tech jobs people are talking about….. Who is it that pays so much that people can afford multi million dollar homes? Maybe I am completely wrong, maybe people are getting paid so well that there is no bubble….

    Newbies (talking about the software engineers) at most large tech companies out here (Microsoft, Amazon, Facebook, Google) pay just fine even for the newly college hire. The new hires are earning six figures at least just on salary. And Jeff Bezo’s salary may only be 160k, but you haven’t include his bonus or stock. There is a reason he is currently #5 on the Forbes list.
    There doesn’t need to be any creative ‘stuff’ to get a decent loan for them. A single bread winner working in the tech company could easily get a loan for 500k+ home. A loan for a million or multi million dollar home could be had if they have an existing property, sizable down payment, or dual income. Given the low inventory combined with well paid tech employees, people are going to bid up these homes currently on the market regardless if the property is really worth the going price. I’ve heard of many tech employee’s paying 10+% over asking to beat out the other multiple offers. So yes you can blame them at least partly for driving up the prices.

  37. 37
    BlockHead says:

    By Dana @ 33:

    Landlord told us last year he wanted to sell to us, but then 3 weeks later said that he was going to keep it because house prices are going up 20% for year and wants to use this as his retirement fund. Wanted $625k for it

    I think your landlord thinking is common among most people whom are buying now, they see it as an ‘investment’ and may be falling into the mistake of recency bias. Few ever wants to sell when the price is going up, most foolishly sell when the price is going down and usually down below the price they could have sold for. So he may not end up getting what he wanted for it.

  38. 38
    Blurtman says:

    By Som @ 27:

    I think over the last 6 months, the worst affected areas, in terms of pricing for buyers, has been Sammamish. I think I know why – Sammamish was still priced below what salaries can afford. So the pricing had to be normalized.

    What I do find stupifying is the sudden speed of explosion in pricing in the last 6 months. We are talking 25%+ increase in less than 1 year:

    Low crime. Good schools. Bellevue and Seattle bedroom community. Lots of Softies. H1B’s. Furreigners. New homes are going for over $1 million. And the town keeps the riff-raff out (and you know who you are.)

  39. 39
    Dana says:

    @BlockHead #37

    You’re totally right. We are willing to pay now to avoid the bidding wars and he would also save the Real Estate fees. When a house just down the street with 4 bds, 3bths and a MIL that was 100% remodeled sold for $680, he is crazy thinking he will get $625 for his house that would need $150k to get to that level. But so it goes.

    I am in that $650k price range, and it seems like everyone is also in that price range. If we could just be in the $850, we would have an easy time buying a house that is significantly nicer than some of these Listed-at-650-sells-for-750 houses.

    Our biggest problem is that we are paying $2400 for rent, have a new family, and want to have a place to call home. Everything appears like a bubble, but if it takes 3-5 years for it to drop to a point where we aren’t competing, that is too far along for us to want to have our “home”. Investment or not, we want a place to live for the next 20 years.

    It truly is a depressing time to be a buyer.

  40. 40
    Erik says:

    RE: Dana @ 39
    You should overpay for something at this point. Prices will keep skyrocketing for the next 3-5 years. Prices accelerate at the end of a bubble until it bursts. This is the first portion of quickly accelerating prices. Your landlord knows it, I know it, sounds like you know it down deep. Now get out there and overpay!

  41. 41
    Brian in Seattle says:

    Regarding the surplus of apartments in some areas, I would say that’s true at the high end of the market. Just from searching on Craigslist at some of the new 40 story apartment towers that have opened up, there’s a few offering 1 month free rent and some just two weeks free. Also have a friend on capitol hill in one of the newer buildings and his rent didn’t go up at all this year.

    There’s gotta be a limit on how many people want to rent and can actually afford a 1bdrm-2bdrm from $1800-3500 a month, especially when you can rent a whole house in most neighborhoods in Seattle for $2000 and up.

  42. 42
    Doug says:

    By Blurtman @ 38:

    By Som @ 27:

    I think over the last 6 months, the worst affected areas, in terms of pricing for buyers, has been Sammamish. I think I know why – Sammamish was still priced below what salaries can afford. So the pricing had to be normalized.

    What I do find stupifying is the sudden speed of explosion in pricing in the last 6 months. We are talking 25%+ increase in less than 1 year:

    Low crime. Good schools. Bellevue and Seattle bedroom community. Lots of Softies. H1B’s. Furreigners. New homes are going for over $1 million. And the town keeps the riff-raff out (and you know who you are.)

    Oddly enough, there are a ton of foreclosures in Sammamish. Not suggesting anything, but I’ve just noticed a lot out there when looking.

  43. 43
    Doug says:

    By Erik @ 40:

    RE: Dana @ 39
    Prices will keep skyrocketing for the next 3-5 years. Prices accelerate at the end of a bubble until it bursts.

    Exactly. Look at a price graph. Prices are certainly up and to the right, but I’m not seeing the parabolic move you need for it to be considered bubblicious. Until I see a sustained vertical move similar to what Vancouver is seeing, I’m not willing sell.

  44. 44
    ESS says:

    By Dana @ 39:

    @BlockHead #37

    Our biggest problem is that we are paying $2400 for rent, have a new family, and want to have a place to call home. Everything appears like a bubble, but if it takes 3-5 years for it to drop to a point where we aren’t competing, that is too far along for us to want to have our “home”. Investment or not, we want a place to live for the next 20 years.

    It truly is a depressing time to be a buyer.

    —————————————————–

    There are some other factors involved. One should not be too surprised at the increased interest a homeowner will take in local politics and the (out of control) spending when you own your own residence and you get to pay your real estate taxes more directly. As a tenant, you get to hand over your taxes to the landlord, he or she pays them for you and the landlord gets the deduction, and generally the renter has no idea how much the taxes are. Furthermore, homeowners take a greater interest in their communities than renters. Make sense – when I rented – who cared if there was some rezoning proposal for the area, or some issue about the roads. What did I care – I was only sticking around for a few years.

    Furthermore, as a renter, you know what you will have to pay in rent. Five years rent, assuming no increase of rent = 2400 x12x5 = 144, 000 dollars. A pretty good piece of change considering at the end of that period, all you will get is a friendly wave and thanks from you landlord and nothing else to show for it. I understand, there might be a chance you would lose money – as well as you may gain equity if you bought a house at present. But you know you will be out a great deal of money if you continue to rent. So you have to balance everything and make the (hopefully) correct decision based on a multitude of factors.

    I don’t envy the decisions you have to make. If we all knew what the next five years were going to bring, we could all get rich. People have all sorts of ideas of what the future will bring when it comes to any type of investment – the only thing I am sure about in the future is what I am preparing for dinner, and even that can change.

  45. 45
    Som says:

    RE: Blurtman @ 38 – Of course, but this did not change in the last 6 months. My question is what happened all of a sudden in Sammamish to warrant the 25% jump in prices?

  46. 46
    SFraz says:

    RE: Kary L. Krismer @ 23 – Portland is experiencing the same inventory shortage and price increases. They have the zombie house issue. Why wouldn’t Seattle have this problem?

  47. 47
    SFraz says:

    RE: Doug @ 42 – One of the streets in Sammamish has 4 empty homes. Purchased by Chinese cash for extended family, if needed, but mostly for investment. They have no interest in leasing them.

    Sneak Peak! Bringing Issaquah and Sammamish to China!
    http://www.christinekipp.com/sneak-peak-the-kipp-team-in-seattle-luxury-living-magazine/

  48. 48
    SFraz says:

    “Pang estimates that 90 percent of them are in the U.S. on EB-5s. He has since invested in property in downtown Bellevue, where construction of a 6,000-square-foot house is underway, as well as parcels in Sammamish, Newcastle, and Newport Hills. ”
    http://425business.com/chinas-export-to-the-eastside-opulence/

  49. 49
    Erik says:

    RE: Dana @ 39
    I was thinking about your situation and had an idea…

    You could divorce your husband and marry SWE, someone that frequently comments on this site. You were attracted to your current husband for whatever reason and made a child that carries his genetics. Now you need security that your current husband cannot provide, such as a home. SWE owns a few homes in the area. You could take your child and move in with SWE. His ex-wife sucked the life out of him. I think you two would be a good match. He’ll even pay for your children to go to a university when it’s time as he’s done for his other children.

  50. 50
    Erik says:

    RE: Doug @ 43
    Yeah, however you wanna look at it. If you see think inventory is going to go over 10000 in the next few years, you wouldn’t want to buy. Very unlikely that will happen though.

  51. 51
    Som says:

    RE: SFraz @ 47 – I think this is what has happened. Ms Kipp and others have unleashed Sammamish on the Chinaman. And the prices have shot up 25% in 6 mos.

  52. 52
    Blurtman says:

    By Som @ 45:

    RE: Blurtman @ 38 – Of course, but this did not change in the last 6 months. My question is what happened all of a sudden in Sammamish to warrant the 25% jump in prices?

    Are you extrapolating from a limited number of data points? I hope you are right about the $890k price. That home is older and smaller than mine.

  53. 53
    lost says:

    It is strange but based on intuition prices will soften in 2 years and based on data points you provided they would go up for the next year or so. … so far all these people at Microsoft, Amazon, Google, Boing, Starbucks, Facebook ….who have money going to be renting apartments just to buy a house at higher price later.

  54. 54
    Cap''n says:

    RE: Blurtman @ 52

    If that’s the case, I am feeling a deep sense of loss or confusion regarding your formerly quasi believable attacks on bankers, the elite, and the hyper concentration of wealth.

  55. 55
    Blurtman says:

    By Cap”n @ 53:

    RE: Blurtman @ 52

    If that’s the case, I am feeling a deep sense of loss or confusion regarding your formerly quasi believable attacks on bankers, the elite, and the hyper concentration of wealth.

    Por qué?

  56. 56
    Dana says:

    RE: Erik @ 49

    Too bad I’m a guy, but I’ll just pretend you said “wife”.

    Maybe I’ll just by a mobile home with a riding lawnmower.

  57. 57

    By SFraz @ 46:

    RE: Kary L. Krismer @ 23 – Portland is experiencing the same inventory shortage and price increases. They have the zombie house issue. Why wouldn’t Seattle have this problem?

    Well first, I’d be skeptical of any reports of zombie houses anywhere, except maybe Detroit. The press often hypes these things.

    Second, as I recall, Oregon’s decision regarding MERS really impacted their foreclosure process. I don’t recall the details but from memory I think it basically required the MERS DOTs to be judicially foreclosed. Here in Washington the MERS decision barely had an impact on the process.

  58. 58
    Cap''n says:

    RE: Blurtman @ 54

    I just envisioned a one bedroom house, lots of old school punk 7″ splits on a broken coffee table, stickers on the walls, and a type writer for your manifesto work. But a million dollar house is cool too.

  59. 59
    Blurtman says:

    By Cap”n @ 57:

    RE: Blurtman @ 54

    I just envisioned a one bedroom house, lots of old school punk 7″ splits on a broken coffee table, stickers on the walls, and a type writer for your manifesto work. But a million dollar house is cool too.

    Ha, ha. Nope, Craftsman style two story. I bought way back in 2005, still on the upward slope of the bubble, but thankfully not the peak. And home wealth, like stock wealth, ain’t real until you cash in. BTW, I am a child of the working class. A second generation ‘Merican. My Dad did not attend high school, let alone college. I am the type of person whose improved station in life is what ‘Merica is supposed to be about. Let the little people get some, why dontcha?

  60. 60

    By Kary L. Krismer @ 57:

    Well first, I’d be skeptical of any reports of zombie houses anywhere, except maybe Detroit. The press often hypes these things.
    .

    Here’s one of the reports I was thinking of. http://legacy.king5.com/story/news/local/2014/08/03/13163688/

    Going to the underlying city link, unlike the King piece, they don’t claim the properties are bank owned, but instead just abandoned and encumbered by a loan. But just reading through the news report you’d think these were all bank owned properties. In reality, that is hardly true.

    The first property wasn’t bank owned until almost two years after the city placed them on the link, and they haven’t been bank owned now for over 2 years (but they are still on the list).

    The second property has never been bank owned.

    The third one didn’t become bank owned until 2014 (but might actually be a zombie property currently).

    The fourth one has never been bank owned.

    The fifth one have never been bank owned.

    Skipping down to the more current ones, the last one added 11/2015 has never been bank owned.

    The second to last one added 8/2015 has never been bank owned.

    The third to last one added 8/2015 has never been bank owned.

  61. 61
    Jasper says:

    RE: Dana @ 39 – Believe it or not, some real estate agents do not believe in pricing for bidding wars.

    I know of a nice house in North Seattle that was not priced for a bidding war, that was priced in your price range. (The price has since been reduced, so maybe it will get bid back up?) It is listed on the MLS. If you added two or three triple pane windows (so that the bedrooms had light on two sides), it could be a very nice house.

  62. 62
    Jasper says:

    RE: Kary L. Krismer @ 60 – My understanding is that the category of “zombie” homes includes houses with very delinquent payments, where the bank holds off on finishing a foreclosure because the bank does not want to take on liability and carrying costs. (Or maybe the bank does not want to have to mark the loan to market, or give up servicing rights.)

    Often, the homeowner leaves, and thinks that the property will revert to the bank. The homeowner might not be aware that they still technically own the property.

    Thus, checking whether a property “has never been bank owned” does not tell you whether the property is a “zombie” home.

  63. 63
    Mike says:

    RE: ii @ 8 – Why would someone only put $100K down on a million dollar home? I’m sure people do it but a lot more roll the equity from their previous residence into the down payment. If they’re move up buyers in Seattle that’s going to be more like $300K-$400K down. That would put the affordability point somewhere around $175K annual income. Most dual income professional families are at that level or above.

  64. 64

    RE: Jasper @ 62 – It would take a lot of research to figure out any particular property. The one above that has been bank owned for 2 years could have a title issue or be caught up in litigation/bankruptcy somehow. I did once run across one property where there were three mortgages and it wasn’t clear which was in first position (for reasons I won’t go into).

    Otherwise, the only reason I know that a bank wouldn’t want to take ownership would be environmental cleanup costs. Say an oil leak or maybe a meth lab. Not sure how those ever get resolved.

    But if it’s a house of any value, without title or litigation concerns, the bank isn’t going to purposefully (as opposed to negligently) delay foreclosing.

  65. 65

    By Mike @ 63:

    RE: ii @ 8 – Why would someone only put $100K down on a million dollar home?

    Because this is America, where people want to live beyond their means! (Or maybe the rate they can get on a mortgage is lower than other business debt they are covering.)

  66. 66
    Azucar says:

    By BlockHead @ 37:

    By Dana @ 33:

    Landlord told us last year he wanted to sell to us, but then 3 weeks later said that he was going to keep it because house prices are going up 20% for year and wants to use this as his retirement fund. Wanted $625k for it

    I think your landlord thinking is common among most people whom are buying now, they see it as an ‘investment’ and may be falling into the mistake of recency bias. Few ever wants to sell when the price is going up, most foolishly sell when the price is going down and usually down below the price they could have sold for. So he may not end up getting what he wanted for it.

    Regarding selling when price is increasing vs. decreasing, as long as both are equally close to the peak it doesn’t really matter, does it (other than it’s good to sell on the down side because then as you rent while looking for a replacement to buy the prices are decreasing, instead of increasing).

    If you are planning to sell in a short timeframe, I don’t think it’s foolish to sell when the prices are decreasing – the sooner you sell the less the price will have decreased by the time you sell. Similarly, it is kind of foolish to sell quickly while prices are increasing, as if you wait a bit you’ll get more (that’s what “prices are increasing” means, right?).

    Of course, I think it is a little harder, and definitely more stressful, to sell as the prices drop, as you don’t have multiple people offering more than you’re asking… but if you end up getting the same price why not live in the place a few more months and sell on the down side of the peak instead of on the up side?

  67. 67
    aa says:

    RE: ii @ 15 – II

    you are completely wrong. some mortgages look at base salary only but others do look at total compensation if it’s declared on your tax forms by your employer as part of your salary package. we’ve been watching the market for ages now and houses that we wouldn’t want at the prices they are asking are selling in days for more than they are asking. People are buying. And the jobs aren’t necessarily entry level that people are moving here for. we also have a TON of foreign investors buying here. Given the combination of tech and FI I am not seeing the bubble here. we have become an attractive alternative to california. we aren’t as droughty and our housing prices are still cheaper than there. (ditto with vancouver) our taxes are also better. IMO it’s going to get a lot worse and stay there. Seattle is just massively growing with no room to grow into.

  68. 68

    RE: Kary L. Krismer @ 65

    Because some lenders are offering them no PMI on 10% down, so why bother to put more “skin in the game”? They can use the extra money to buy a rental property.

    Just got a notice about more loosening from the lenders:

    “Effect 3/28/2016, (X) has expanded our loan to value/combined loan to requirement for conventional high-balance loans ($417,001-$540,500) based on a Freddie Mac’s announcement in response to market changes. Minimum down payment is now 5% (previously 10%). What this means is that we’re able to offer less money down for this loan type or now allow the financing of private mortgage insurance premium. We’re excited about this announcement as it allows for more buyers to qualify with additional payment options in our increasing value for home prices! At the end of the day, this loan can look a lot like a VA loan where the mortgage insurance is not paid monthly. Here’s a prior blog written explaining PMI options. http://www.keaneloans.com/2012/03/20/pmi-no-longer-tax-deductible-choose-your-financing-wisely/ This is impactful to high cost areas; King, Pierce and Snohomish counties.”

    I’m still on vacation until late Sunday, but the “no monthly PMI” on a Conventional loan (vs VA and FHA where it is common) is something I will read when I get back. Usually that means people can finance the PMI and people who don’t see PMI in their monthly payment are often fooled into buying with a lower downpayment. Sad, but true.

    I don’t see this new change in lending standards as a good thing, generally speaking. With 5% down and people financing their PMI and closing costs, this is getting to look a lot like the zero down days.

  69. 69
    Cap''n says:

    RE: Ardell DellaLoggia @ 67

    It does seem like we are getting too fast and loose again. The government’s fetish with home ownership seems to drive a lot of it. Look! Prices are too high! Hard working people can’t get into homeownership! Let’s let paying the cable bill in a timely fashion excuse that one slip up on the boat payment, and a low down payment is good for America. These people will buy homes and build wealth…..

  70. 70
    Mike says:

    RE: Ardell DellaLoggia @ 67 – yeah but you sort of missed the signs last time as well, so what’s different this time?

  71. 71
    Cap''n says:

    RE: Mike @ 69

    Oh snap! And neither of you are qualified to be president. Burn!

  72. 72

    By Mike @ 69:

    RE: Ardell DellaLoggia @ 67 – yeah but you sort of missed the signs last time as well, so what’s different this time?

    I think a huge part of the problem is people thinking that they can look at the statistics above and predict anything. Tim sort of does that too above where he says: “It is worth noting that when the last bubble burst, sales were declining for nearly two years and inventory was climbing for about a year before home prices eventually peaked.”

    The last time our market crashed it wasn’t due to our market! We were just starting to get into that super-crazed markets that had hit CA, AZ, FL and others, but it was what happened in those places, more than what was happening here, that brought our market down.

  73. 73
    ARDELL says:

    RE: Mike @ 69

    Not sure where that came from. I don’t know anyone who can predict an abrupt change in lending standards. I don’t think that is remotely possible. We’ve had this conversation before Mike when you lash out at me for no reason.

    What in my comment #67 speaks right or wrong to you? It’s a comment that is fact based about a change in lending standards.

    What nerve of yours did I hit and how?

  74. 74
    ARDELL says:

    RE: Kary L. Krismer @ 71

    What brought the market down was an abrupt change in lending standards. Jumbo loans became non- existent overnight and for an extended period. Zero down loans became non- existent.

    These things happened on or about 7/31/2007. The market changes that followed were a snowball rolling downhill.

    I didn’t “miss” it. It was pretty hard to miss. Paying close attention to changes in lending standards is a predictive tool. That’s why I am sharing it here today with specific lender quotes, as this info doesn’t go public in a timely manner otherwise.

  75. 75
  76. 76

    RE: ARDELL @ 73 – We’ve gone over this before. You weren’t publicly bearish until 4/17/08. http://raincityguide.com/2008/04/17/seattle-real-estate-2008/

    What’s interesting is that your 4th quarter 2008 prediction was rather close on price, but you didn’t warn us of the huge financial crisis that would develop at the beginning of that quarter. So it’s sort of yet another situation of having a 50/50 chance of correctly picking direction (or 33/33/33 if you want to include no change), being right, but not for the right reason. And but for that huge 2008 crisis, you would have been overly bearish.

  77. 77
    ARDELL says:

    RE: Kary L. Krismer @ 75

    I didn’t realize it was my job to “be publicly bearish” at the time. :) I knew on 7/31/07 that the market would turn. My clients clearly knew. This is why I am posting lending changes as they happen now. :)

    Loosening standards, as we are seeing now, is not the same as turning off important price supportive lender products back in Summer 2007, but as noteworthy as rate change.

  78. 78
    BlockHead says:

    By Azucar @ 66:

    Regarding selling when price is increasing vs. decreasing, as long as both are equally close to the peak it doesn’t really matter, does it (other than it’s good to sell on the down side because then as you rent while looking for a replacement to buy the prices are decreasing, instead of increasing).

    You’re right IF you know when the peak is. The problem with that statement is expecting people to know when the peak of the market is. Your statement make it sound like everyone knows when the top of the market is already. Why not ask all those people who were upside down on their mortgage why didn’t they sell during down turn near the peak. And why can’t everyone on this blog agree on when the top of the next bubble will be.

    By Azucar @ 66:

    Similarly, it is kind of foolish to sell quickly while prices are increasing, as if you wait a bit you’ll get more (that’s what “prices are increasing” means, right?).

    So why is you hear people say ‘darn I should have sold xyz company’s stock when it was $xxx dollars’. It’s foolish to think anyone knows how much to wait and when they are get maximum value for it. What you are saying is anyone can accurately timing the market which is just not true. Evidence of this is Buffet is winning his bet against the hedge fund managers. Most people cannot predict accurately when to buy and sell at the right times. If you’re looking to sell something of value, do it because you think there is better use for that value in another form. Whether it to stock as retirement in a safe bond, reinvest into the stock market or to blow it all on the roulette wheel. It’s only foolish to look back at it in hindsight after you sold and say you could have gotten more instead of looking how to get more value going forward.

  79. 79
    Blurtman says:

    RE: Kary L. Krismer @ 76 – Folks are always predicting crashes or booms, and given enough time, they will ultimately be momentarily correct. Anyone who in retrospect did precisely time a call was likely only the beneficiary of coincidence. Things go up and down over time. As the dollar trends downward over time, assets priced in dollars will always go up in the very long term. Best of luck to those who are attempting to market time a RE transaction.

  80. 80
    greg says:

    By ARDELL @ 77:

    RE: Kary L. Krismer @ 75

    I didn’t realize it was my job to “be publicly bearish” at the time. :) I knew on 7/31/07 that the market would turn. My clients clearly knew. This is why I am posting lending changes as they happen now. :)

    Loosening standards, as we are seeing now, is not the same as turning off important price supportive lender products back in Summer 2007, but as noteworthy as rate change.

    I appreciate the excellent information and insights that you provide. Many other agents who post on this site and others, spend there time telling the world how great they are and providing only to most basic insights. Instead they mostly spend their time defending their profession and attacking anyone who questions the MLS’s dominance of the market and its pricing control.

    I hope you keep posting your thoughts on the market and continue to explain the hows and whys of the industry.

    Thanks.

  81. 81
    Azucar says:

    By BlockHead @ 78:

    By Azucar @ 66:

    Regarding selling when price is increasing vs. decreasing, as long as both are equally close to the peak it doesn’t really matter, does it (other than it’s good to sell on the down side because then as you rent while looking for a replacement to buy the prices are decreasing, instead of increasing).

    You’re right IF you know when the peak is. The problem with that statement is expecting people to know when the peak of the market is. Your statement make it sound like everyone knows when the top of the market is already. Why not ask all those people who were upside down on their mortgage why didn’t they sell during down turn near the peak. And why can’t everyone on this blog agree on when the top of the next bubble will be.

    By Azucar @ 66:

    Similarly, it is kind of foolish to sell quickly while prices are increasing, as if you wait a bit you’ll get more (that’s what “prices are increasing” means, right?).

    So why is you hear people say ‘darn I should have sold xyz company’s stock when it was $xxx dollars’. It’s foolish to think anyone knows how much to wait and when they are get maximum value for it. What you are saying is anyone can accurately timing the market which is just not true. Evidence of this is Buffet is winning his bet against the hedge fund managers. Most people cannot predict accurately when to buy and sell at the right times. If you’re looking to sell something of value, do it because you think there is better use for that value in another form. Whether it to stock as retirement in a safe bond, reinvest into the stock market or to blow it all on the roulette wheel. It’s only foolish to look back at it in hindsight after you sold and say you could have gotten more instead of looking how to get more value going forward.

    I wouldn’t try to time the market in stocks, and I even moreso wouldn’t in real estate (which is much less liquid), but I was just pointing out that your sentiment (I think that you were suggesting that you should sell while prices are increasing and buy… or at least not sell… while prices are decreasing) shouldn’t be unilaterally applied. If someone (aka Erik) thinks prices are going to keep increasing for a while, then it might make sense for them to hang on a bit, especially if they are planning to “move up”. If the market trajectory is up, and you sell at a given time and then buy sometime after that, it will be difficult to move up because prices will be going up while you are looking to buy. Conversely, if the market has already peaked and is on the way back down, if you sell and then rent for 6 months while looking for a place (and places start to become more and more available), by the time you buy you will be buying in a lower market and will be able to get more for a given amount of money.

    Of course, you are totally correct that if you miss the opportunity to sell for more than you owe then you’ll be underwater… but if we’re talking about someone who bought a couple of years ago then they probably have at least 20 percent of prices declining before they are underwater.

    The stock market is a little better from the standpoint of getting out (you can put a stop loss sell order in and sell if what you have drops more than 10 or 20 percent) and hang on while a stock rapidly increases… but stocks also have less momentum that real estate (less tendency to get going in a direction and keep going that way) and are a lot more volatile, so timing the stock market is a fools game in my opinion. “Sort of timing” the stock market, by dollar cost averaging (investing the same dollar amount every month or quarter), I think is a good idea if you have a long enough time horizon and what your are investing in is somewhat volatile compared to the rate at which it is gradually increasing.

  82. 82
    kenmorem says:

    RE: Blurtman @ 79
    except for those smart guys in The Big Short. they timed it pretty well, but of course were 1 in a million…

  83. 83
    boater says:

    By Mike @ 63:

    RE: ii @ 8 – Why would someone only put $100K down on a million dollar home?

    Because they can find an investment vehicle paying more than the loan interest rate for the other $900k would be my first guess.

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