September Stats Preview: Sales drop over 25 percent from 2017 as listings continue to pile up

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Home sales volume was at its lowest September level in six years for both King and Snohomish County last month, dipping over 22 percent from a year ago. As a result, the number of homes on the market hit its highest point since early 2012. Foreclosures are still at all-time lows.

Now that September is wrapped up, let’s have a look at all of our early indicators for the month.

Here’s the snapshot of all the data as far back as my historical information goes, with the latest, high, and low values highlighted for each series:

King & Snohomish County Stats Preview

Rapidly declining sales is the biggest thing that jumps out to me in this month’s data, so let’s look at total home sales as measured by the number of “Warranty Deeds” filed with King County:

King County Warranty Deeds

Sales in King County fell twenty-four percent between August and September (a year ago they fell fourteen percent over the same period), and were down twenty-seven percent year-over-year. That’s the largest year-over-year drop since May 2009—just eight months after the financial collapse kicked off in September 2008.

Here’s a look at Snohomish County Deeds, but keep in mind that Snohomish County files Warranty Deeds (regular sales) and Trustee Deeds (bank foreclosure repossessions) together under the category of “Deeds (except QCDS),” so this chart is not as good a measure of plain vanilla sales as the Warranty Deed only data we have in King County.

Snohomish County Deeds

Deeds in Snohomish dropped nineteen percent month-over-month (versus a drop of thirteen percent in the same period last year) and were down twenty-two percent from a year earlier.

Next, let’s look at our inventory charts, updated with previous month’s inventory data from the NWMLS.

King County SFH Active Listings

Snohomish County SFH Active Listings

The number of homes on the market in King County rose nine percent from August to September. Year-over-year listings were up 64.6 percent from September 2017, which is down just a bit from the all-time high year-over-year gain of 65.5 percent that was set just a month earlier in August.

In Snohomish County the month-over-month inventory increase was smaller at six percent, but the year-over-year growth was still sizable at 35 percent.

Hit the jump for the foreclosure charts.

Next, here’s Notices of Trustee Sale, which are an indication of the number of homes currently in the foreclosure process:

King County Notices of Trustee Sale

Snohomish County Notices of Trustee Sale

Foreclosure notices in King County were down twenty-six percent from a year ago and Snohomish County foreclosure notices were down thirty percent from last year.

Here’s another measure of foreclosures for King County, looking at Trustee Deeds, which is the type of document filed with the county when the bank actually repossesses a house through the trustee auction process. Note that there are other ways for the bank to repossess a house that result in different documents being filed, such as when a borrower “turns in the keys” and files a “Deed in Lieu of Foreclosure.”

King County Trustee Deeds

Trustee Deeds were down forty-nine percent from a year ago. The only time there have been fewer trustee deeds than we’ve seen during 2018 was in late 2003.

Note that most of the charts above are based on broad county-wide data that is available through a simple search of King County and Snohomish County public records. If you have additional stats you’d like to see in the preview, drop a line in the comments and I’ll see what I can do.

Stay tuned later this month a for more detailed look at each of these metrics as the “official” data is released from various sources.

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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.

127 comments:

  1. 1

    In the prior thread, post 13, I mentioned the NWMLS September sales for King County looking light near the end of the month, but that it was hard to predict due to the typical surge at the end of the month and late reporting by agents. It’s still looking light, and being down only 25% even seems a bit unlikely.

    General impressions of data again from NWMLS sources, but not compiled by or guaranteed by the NWMLS.

  2. 2
    Webinator says:

    My general impression is that we are bumping up against the basic economics of home purchasing; homes that don’t make sense to buy (vs. rent) are not attracting buyers. Those that are continue to sell. Aside from a substantial drop in rates, which feels unlikely to me, we would need to see rents rise (wages) to see any further gains in sale prices. Wages will only go up if larger companies like Amazon change up their job listings. They seem to have exhausted their current labor pool categories at the moment. Maybe they will gain some resolve on Seattle hiring once they determine their alternatives elsewhere in HQ2.

    As for the 18-year cycle theory here, my guess is that it will show up in the mid 2020’s as it has in the past as a 2-3 year period of sub-prime bank loans that increase low-end demand. But it doesn’t always dominate the trends. Other cycles will likely be in play at that time. One that occurs to me as a possible counterveiling wind is long-term perceived risk to principle. This risk premium could result in higher rates driven by inflation or even insurance difficulties associated with an increasingly unpredictable weather environment.

    Of course, real estate tends to attract speculators, so there will always be irrational swings. I just think these swings will be moderated going forward due to a more mixed story on real estate as a good investment, leaving west coast tech demand providing a floor and affordability holding the ceiling close above.

  3. 3
    Brady says:

    This still shows 1.8 months of supply in King County and 1.4 months of supply in Snohomish County. Still a seller’s market. If the actives doubled tomorrow then we would be in a stable market.

  4. 4

    Can Sellers Qualify to Give Up Their Low Interest Rate Mortgages and Refinance to Higher Rates to Sell Now at Higher Rates?

    Lord only knows. They may be stuck in their existing Jumbo Loans too. Many have older 2nd mortgages at lower rates too. Its a mess.

    The approximate 11% King County property tax hikes for 2019 just adds gasoline to this hypothetical concern….many can’t afford to sell now? I need help with this new paradigm Bubbleheads, more data or analysis available?

  5. 5
    Justme says:

    Here is detailed look at KC (King County) inventory in 2018 so far.

    KC SFH Inventory 2017 versus 2018 so far: https://imgur.com/a/UB12mtq
    KC Condo Inventory 2017 versus 2018 so far: https://imgur.com/a/YAyDDzj

    This is hourly inventory as sourced from Estately. It is not hourly new listings, hourly pendings, or anything else. But it paints a very interesting picture nonetheless. The contrast between 2017 and 2018 (so far) is quite significant.

    As I mentioned in my weekend update (previous thread), the KC/SFH inventory graph for the first time caught up with the 2014 inventory graph. On that same note, the KC/Condo graph already blew past the 2014 graph in the week after Labor Day week. Here are the graphs 2014 versus 2018-so-far:

    KC SFH Inventory 2014 versus 2018 so far: https://imgur.com/a/73YZnC8
    KC Condo Inventory 2014 versus 2018 so far: https://imgur.com/a/TMsmRZl

    @TheTim: I posted the above in the previous thread but it would better to have it here, I think. Also it was in moderation because 4 external links. Feel free to approve this one and ditch the other one if that suits you.

  6. 6
    Justme says:

    Sales at 6-year lows, inventories at 4-year highs in King County. Bubbles deflate suddenly. And then they burst for real.

    (@TheTim, I think there is a bold type tag in the main posting that is spilling into the comment section and making comments boldface?)

  7. 7
    N says:

    We are about at the time we saw the peak inventory number last year. Assuming this is about peak for this year the 65% rise in year over year peak inventory is quite a rise. At the beginning of the year some of us were speculating if we would see any rise in inventory or if it would be flat or down again.

    Amazing to think that the last two months of year over year inventory gains around 65% are the top two YOY gains EVER. Granted a decade ago you had a larger inventory base to start with but given what the environment and economy looked like then to how it looks now its really amazing 2018 beat 2008/2009.

  8. 8
    Webinator says:

    @ softwareengineer #3
    Hi SWE,
    Sounds like you are trying to evaluate some of the micro-economics of potential sale trasactions from the point of view of the seller. This is an interesting tack. I think this is an important point of view to understand in conjunction with the buyer’s.
    In your question above, you ask: “Can Sellers Qualify to Give Up Their Low Interest Rate Mortgages and Refinance to Higher Rates to Sell Now at Higher Rates?”

    I interpret this to mean: Do rising rates depress offers from homeowners looking to move?

    My thoughts: I think they do, but the recent rise in home equity for this crowd allows them to buy that much higher, at least to the extent they have not used up that equity via HELOCs. So I wouldn’t worry about this group. Rising rates are a much smaller negative effect for them than the positive of rising prices. Its the first-time buyers that are probably struggling to make purchases where they want to live.

    As to the additional tax burden of homeownership: assuming they are staying in the same tax area, the additional tax is similar to rising rates: small in comparison to their equity windfall.

  9. 9
    uwp says:

    By N @ 5:

    At the beginning of the year some of us were speculating if we would see any rise in inventory or if it would be flat or down again.

    Inventory at the beginning of the year was at a 19 year low. It would be pretty nuts if it had dropped again. People would have been offering up their first-born in bidding wars.

  10. 10

    RE: Webinator @ 6
    Great Input and Opinion Webinator

    Albeit, it would also be nice if we could actually track the base data before guessing what it means?

    Perhaps a new chart is needed in the future….sellers that don’t qualify to sell with higher interest rates on jumbo Loans [base numbers graphed over time]? It might be a small percentage of sellers as you predict, but the amount of listed properties to all Seattle SFHs is a small percentage too…

    The market gage is focused on a small percent anyway. One thing is for certain, old trending theories before 2017 may likely be useless. Change is inevitable and savvy investors put facts over Mother Goose soothing reads…if I had believed everything the establishment pC thinking told me, I’d be broke now…LOL

  11. 11
    N says:

    @ UWP – You are 100% correct, BUT at least on this board there was hardly anyone who actually thought inventory would rise much, if at all. And they were right through the spring buying season.

  12. 12

    RE: Webinator @ 6
    Tax Concerns Are Real

    The sudden like exponential rise in property tax is not just something to sweep under the rug any more….in all my 30 years of home ownership in the Seattle area I’ve never seen the YOY rises this horrifying. The future or retirement planning is becoming a joke now…

    We need a property tax respite in King County to let incomes catch up IMO. S-crow wouldn’t put it this blunt, but I know he gets it. It also explains no listed open houses in my 140 unit SE King County gated community, with no other reasons detailed?
    ns no list

  13. 13

    RE: N @ 11
    Unpredictable

    Is the Seattle real estate market today IMO.

  14. 14
    Matt P says:

    All this continues to point to speculation. Normal buyers are still buying based on what they can afford, but it was speculators that created the bidding wars and drove up prices and at the slightest provocation, they disappeared. We’ll be returning to a more normal market now.

  15. 15
    Matt P says:

    Test, was trying to close out the bold tag, but it’s not having it.

  16. 16
    Justme says:

    RE: Brady @ 3

    Disagree about the criterion as to what constitutes a sellers market. The reality is that anything more than about 1.5 months worth of inventory really is a buyers market. If a listing cannot get an offer in 2 weeks and close in 4 additional weeks (1.5 months total), that listing is just overpriced surplus.

    If you want to be very charitable to sellers, you could say that 2 months worth of listings per 1 month of sales is about balanced. Half the listings are not overpriced, and the other half is not.

    The standard propaganda from the Real Estate Industrial Complex is that 4 or 5 or 6 months worth of listings is required for a “balanced market”. Of course that claim is total balderdash propaganda designed to make buyers feel urgency, and to make sellers feel that REIC is on their side and protecting their riches (or debts, as the case may be be).

  17. 17

    By softwarengineer @ 4:

    Can Sellers Qualify to Give Up Their Low Interest Rate Mortgages and Refinance to Higher Rates to Sell Now at Higher Rates??

    If their old loan is assumable (e.g. FHA), then they could sell their property for more! I don’t think we’re any where near the interest rate difference where that would be significant, but some day. . . . Particularly attractive would be the older FHA loans where the PMI-like payment drops off.

  18. 18

    By Justme @ 16:

    RE: Brady @ 3

    Disagree about the criterion as to what constitutes a sellers market. The reality is that anything more than about 1.5 months worth of inventory really is a buyers market.. . .

    The standard propaganda from the Real Estate Industrial Complex is that 4 or 5 or 6 months worth of listings is required for a “balanced market”. Of course that claim is total balderdash propaganda designed to make buyers feel urgency, and to make sellers feel that REIC is on their side and protecting their riches (or debts, as the case may be be).

    Thank you for your non-professional opinion, which basically would say that we’ve probably only had a seller’s market once in the past 30 years (just a guess). That is absurd. Also, you fail to account for the fact that in any market a significant percentage are going to be bad listings that are either overpriced or in lousy condition (or both). There’s nothing wrong with a listing taking a month or two to sell, but we’ve been spoiled lately with a market where things would sell in a day or two but for offer review dates and such.

    I agree with your second point that 4, 5 or even 6 months is too long to be a seller’s, but I don’t have a problem at all with the idea that three months is a balanced market, anything less a seller’s market.

  19. 19
    biliruben says:

    Anyone else have an issue where it takes hours for their posts to show? Any fix?

  20. 20
    Justme says:

    RE: Kary L. Krismer @ 18

    In other words, the propaganda that it was a sellers market has been working well. It has really been mostly a buyers market, but all the propaganda made the buyers act as if it was a sellers market, and the sellers (and potential sellers) acted that way as well. But then suddenly the buyers went on a little strike, for various good reasons, and then it became a buyers market in a hurry.

    There is a lesson for buyers in here. Just say NO. That’s one good way to burst a bubble.

  21. 21
    uwp says:

    By biliruben @ 19:

    Anyone else have an issue where it takes hours for their posts to show? Any fix?

    This happens to me if I post a comment with more than one link in it. I think it goes into moderation?

  22. 22
    David says:

    RE: Justme @ 20 – Eventually you have to live somewhere. And if total available inventory declines more, buyers could see marked increases in the base price of a house. Or the condition of available houses continues to decline.

    This assumes the Metro continues to increase in population.

    Of course, housing isn’t really an investment for most people, it is a liability. Kind of like food. A stock, for instance, I can buy and sell for a profit. Then never buy another stock again – just book the profits. If I sell my house though, unless I buy a cheaper house, is just going to churn into another house. Therefore, for most people, a house is a liability either through deterioration or continued taxes and expenses.

    But try living without shelter for a short time and see how that goes.

  23. 23
    Justme says:

    RE: David @ 22

    So many false assumptions, so little time. The population increase is much slower than the supply of housing in Seattle, otherwise there would not be so many empty new units. David knows this, but he is playing for the gallery of the uninformed. New readers can search google with “site:https://seattlebubble.com FIB”. For example, start here

    https://seattlebubble.com/blog/2018/09/18/new-listing-absorption-softens-more-as-pending-sales-slip/#comment-274334

    There are plenty of places to live. There is a whole giant apartment supply bubble in Seattle. Craigslist is chock full of rental offerings. There is no shortage. Only overpricing.

  24. 24
    The Tim says:

    By Justme @ 6:

    (@TheTim, I think there is a bold type tag in the main posting that is spilling into the comment section and making comments boldface?)

    Yup, thanks for pointing it out. Rookie mistake. Fixed now.

  25. 25
    Bumble says:

    Reading about the recent decline in y-o-y sales, I wanted to share our story as happy Seattle renters.

    My wife and I have lived in South Lake Union for 10 years. Yep, even before Amazon. Renters all the while. As we eventually finished school and our incomes grew, we were always one step behind the meteoric rise in Seattle real estate values. We wanted to buy in 2012-14, but we couldn’t afford it.

    Now we can afford to buy, but we don’t really want to. Our rent rose 80% in 10 years, but that rise has stopped cold. Our rent is cheap compared to a mortgage. We enjoy renting in the city, close to work, friends, events, etc. Earlier this year we bought a weekend house on a Puget Sound island for a price much cheaper than a 3 bed 2 bath in Seattle or many of its suburbs. We have our urban city apartment, and our idyllic weekend house.

    We could ditch the urban apartment and instead buy a mainland house in the suburbs, but why? At the risk of sounding like a jerk, we don’t want to live in a suburban house that is likely in mediocre shape in a mediocre neighborhood with a terrible commute even if it might be a “better investment.” Quality of life would decrease. Add to that the cost of mortgage interest, property taxes, buying a second car, etc., and I think there is a compelling financial argument against it too. Buying right now seems like a bad deal all around for us.

    So in the current climate, we are happy renters. Seems like there are many of us.

    That is our experience and thinking anyway.

  26. 26
    David says:

    RE: Justme @ 23 – So you’re saying historically low inventory is somehow causing a housing surplus?

  27. 27
    Justme says:

    RE: David @ 26

    Nice try. Now, repeat after me:

    There is a big difference between housing inventory and LISTED FOR-SALE inventory.

    Let that sink in for a moment, dear reader. Yup, the housing is there, even if it is not for sale at any particular moment. On the other hand, listed for-sale inventory ain’t looking so bad these days, either, is it ;-)? Please refer to the subject matter of this thread, and Justme @ 5.

    As new (to me) commenter @Bumble indicated above, there is no need to be urgent about buying anything at today’s prices, even as prices are sliding down. No need to jump into a bad or outright rotten deal. Just rent, rest, and resist. The REIC will try again to create urgency to buy. It is what they do, after all. Don’t fall for it.

  28. 28
    Notme says:

    You say it’s ur-gent
    it’s urgent urgent urgent
    what das REIC must do

    -a musical journey bubble haiku

    ( already started rewriting all the lyrics…for some other time).

  29. 29
    David says:

    I remember reading SB when it was devoted, I guess exclusively, to the idea that Seattle was overpriced dramatically. No one could afford Seattle. Everyone was priced out. Then Tim bought a house. I was shocked.

    Resist.

  30. 30
    whatsmyname says:

    RE: Justme @ 27 – This is the perfect solution; it took me totally by surprise. I agree with you and Bumble. Keep renting, but buy a house for the weekend.

  31. 31
    Erik says:

    RE: Bumble @ 25
    Not sure where to go here…

    You wanted to save money, so you bought a second home outside the hottest job center in the USA and you still pay rent in the SLU? Either I’m not understanding, you are trolling, or there is more to the story.

  32. 32
    wreckingbull says:

    If you spend any amount of time in Island, Skagit, and San Juan counties, you would know that what Bumble is doing is not uncommon. I have met others in my area who have done literally the same thing. They keep the Seattle, job, which more than pays for the Seattle rental, but enjoy a much higher quality of life in the outlying area. I doubt it is for everyone, but apparently things have gotten bad enough in Seattle that people are doing it.

  33. 33
    Hmmm says:

    Likely not trolling. I’m in a similar situation where I could rent my apartment in the city have a great commute and buy a little cabin for less than a mortgage, taxes, interest, maintence etc would cost me in King County. Quality of life would indeed be higher, but you could argue it’s not the best financial move (I don’t think it’s that bad either, there’s a cost to commuting, and still building some equity). My rent is less than annual interest on a typical king county mortgage for the first 10 years, and my commute to downtown is 15 minutes by busRE: Erik @ 31

  34. 34
    steven says:

    i think most people can at least agree on correction happening although a matter on degree and duration of correction may defer. how much are you people expecting the degree of correction to be in speaking of seattle in general ? 20-30%?

  35. 35
    David says:

    Another point in favor of continued housing price increases is that:

    1) There was a recession at the end of the Obama regime.
    2) Therefore there was an Obama Depression at the beginning of his regime, and an Obama Recession of his regime. (perhaps brought on by the idea of Hillary Clinton being President?)
    3) THEREFORE, Trump’s revival of the American Dream has created an expansion that is about 20 months old. Plenty of room to run with expanding exports, new trade agreements, and a booming economy.

  36. 36
    biliruben says:

    RE: uwp @ 21

    Thanks. I’m not posting any links.

    I think this explains why this blog’s comment section is dominated by the same dozen folks it was 10 years ago. They are the only ones who can post in a timely way, and any new blood gives up.

  37. 37
    The Tim says:

    RE: biliruben @ 36 – Your comments are all going into moderation so I have to manually approve each one. Only yours are doing this (and the ones with lots of links, as mentioned). I think what might be going on is that you have an official WordPress account for posting comments but you’re not logged into it. Since you’re using the same email address as the registered account the site thinks you might not be legit so it sends your comments to moderation.

    Try logging in to the blog and commenting while logged in. It will (hopefully) fix the issue.

  38. 38
    David says:

    RE: steven @ 34

    Good question. I honestly believe that the coming recession will be very very different. China, Russia, and the Europeans have already created payment systems beyond the U.S. SWIFT system–they will not need to buy our debt any more for trade. We took them down the last time and they have learned their lesson. The U.S. consumer is not their primary concern any more as the emerging markets are becoming more important.
    Further, any country with a trade deficit needs to have its deficit funded externally by the exporters like China who know the US cannot pay them back any more (it is mathematically impossible now to pay back the national debt). As such we can’t force the rest of the world to bail us out the next time as in 2007. As such, as the demand for the U.S. debt dries up in the next recession due to the massive treasury issuance, interest rates will shoot up. The Federal Reserve will not be able to cover it all without currency destruction, and I think they will choose the currency over housing and stock markets. Time will tell, but if things go the way they are, prepare for 9-11 percent mortgage rates. Food for thought, interest rates have gone up 1% on the 21 trillion national debt, which amounted to 210 billion increase (interest payments on national debt are now the fourth largest expense). Do the math as the debt and the interest rates rise.

  39. 39
    biliruben says:

    RE: The Tim @ 37 – Cool. Thanks Tim. Let’s see if it worked.

  40. 40
    The Tim says:

    RE: biliruben @ 39 – I had to moderate once but now that I’ve approved it once when you’re logged in, they should post without issue after this… I hope.

  41. 41

    By Justme @ 20:

    RE: Kary L. Krismer @ 18

    In other words, the propaganda that it was a sellers market has been working well. It has really been mostly a buyers market, but all the propaganda made the buyers act as if it was a sellers market, and the sellers (and potential sellers) acted that way as well.

    In other words, you don’t have a response for my post so you pretend I said something I didn’t say in order to support your original point which was complete nonsense.

    In the prior thread I mentioned how people tend to think in extremes, that things are either going to be complete disaster or near utopia (and how the press tends to encourage that). Clearly you are in the former group.

  42. 42

    RE: wreckingbull @ 32RE: Bumble @ 25 – Or you could do what I did. I have free access to a nice place on a lake over on the Kitsap Peninsula, and when we lived on a busy street in Seattle we would go there quite a bit. Now I live next to forest land, can only see less than a handful of houses from my backyard and we’ve not gone there even three times in 12 years. There are reasonably priced serine places that are not so far out.

  43. 43
    Millennial Engineer says:

    Here’s an annecdote that I believe nods to a changing market:

    House came on market Friday. I and spouse viewed the house at an Open on Sunday. We like it, get in contact with our agent and return late Sunday night to check it out again. Form 17 had some questionable issues (roof, pest) that gave us pause so we decided that while we want to make an offer we’d like some more information. We contact listing agent that evening (email/voicemail since it’s late) with the plan to write up offer Monday AM. Come Monday AM we find the house went pending late Sunday. The seller took the first offer, which was at/under asking and waived inspection. In addition to us one other buyer was wanting to make an offer as well. Due to the condition of some items I don’t believe it was worth quite what they were asking, so I had no concerns about being drug into a bidding war, but that’s not to say the other parties wouldn’t have come to the table.

    If a house cannot make it through it’s first weekend without a seller holding out for multiple offers, it definitely signifies a changing market. I’m glad to be rid of the “offer review date” daze. Over the summer it was a bit of a joke to see a house that had been on the market for 30+ days with it’s original review date in the listing — oopps, someone missed the mark on that one, eh?

  44. 44
    Matt P says:

    Amazon $15 min wage for all US employees. That is going to cut into already thin margins on the retail side.

  45. 45
    wreckingbull says:

    RE: David @ 35 – Your recent posts are starting to sound like this guy:

    https://imgflip.com/i/2j7r1k

  46. 46
  47. 47

    RE: Matt P @ 14
    Yes Matt

    Bloomberg had an article about Manhattan real estate tanking in price…the article blames Jumbo Tax mortgage deduction limits from the tax cuts…

    https://www.bloombergquint.com/onweb/manhattan-home-sales-tumble-in-a-market-clogged-with-listings#gs.iuQUJBs

    I feel so sorry for the rich elite unable to afford these over priced units….poor babies. Seattle high tier impacted by Trump’s tax deductions too?

  48. 48
    wreckingbull says:

    RE: Matt P @ 44 – I am amused at how everyone pulls this $15/hour figure out of thin air. $15/hour at Amazon distribution center A (i.e. Bellevue, WA) can mean a very different quality of life than $15/hour at Amazon distribution center B (i.e. Mobile, AL)

    Being a technology company, I would have been more impressed if they put together a model which takes cost of living inputs and pays a different, livable wage in each area they employ workers. This is likely a non-starter with their razor-thin retail margins.

  49. 49

    RE: Justme @ 46

    Now It Only Takes Six Amazon Incomes to Afford Rent in Downtown Seattle

    Let’s pop open the champagne!

  50. 50
    biliruben says:

    That will be huge for the distribution center down here in NM. Most folks here make half that.

  51. 51
    The Tim says:

    RE: biliruben @ 50 – Sweet, your comment posted without going into moderation. Looks like the stuff we did last night worked.

  52. 52
    biliruben says:

    RE: The Tim @ 51 – Thanks for your help, Tim! And glad, for the blog’s sake, it was just me and not an epidemic!

  53. 53
    David says:

    RE: wreckingbull @ 48

    It is not just the livable wages that matter in the economic models. American consumer used to be all about discretionary spending. If rents and mortgages take at least half of your take home pay, what else is left after food, insurance, car payments, etc.? So far people have made up the difference with debt, but we will soon find out that which cannot go on forever won’t. Either the housing bubble has to be deflated so people can free up discretionary spending once again, or the government has to continue to borrow on our behalf to keep up the spending before we end up with a currency crisis.

  54. 54
    Justme says:

    RE: David @ 53

    If you are not David-dogsnout-avatar I suggest you pick a different username. If you are David-dogsnout-avatar, remember to use the same email address or whatever it is you changed that causes the avatar to change,

  55. 55
    N says:

    The living wage/min wage issue seems to be viewed through a political lens but the reality of Amazon at $15hr min, Target increase to $15min, Walmart increase to $11min is mostly driven by economics and the tight labor market. Companies are trying to adjust to higher turnover and flat out not being able to find people to do the jobs and responding by enhancing benefits in some way, pay, vacation etc..

  56. 56
    DavidE says:

    RE: Justme @ 54

    OK, thanks. I am not David-dogsnout-avatar, so I will be DavidE from now on.

  57. 57
    John Atanasov says:

    I wonder if Seattle has become less appealing. 10 years ago, the weather was also shitty, but it was a very livable town with beautiful nature and neighborhoods. Now it is being slowly overtaken by homeless people, traffic is bad, and on top of that has become as expensive as a real city.
    So buyers are finally fed up with this and are considering the alternatives. Economy is still going strong, 5% interest is very low, software developers at Amazon are making 300k a year, easily.

  58. 58
    DavidE says:

    RE: John Atanasov @ 57

    I think congestion has to do with seeking alternatives to Seattle. Have you gone hiking lately around here? Even on a weekday you can’t escape the crowds, the dogs, and people talking on cell phones all the time. I have to drive for as long as two hours to go on a quiet hike, and even that is not a safe bet.

    Traffic has gotten steadily worse in Seattle and 3+ hour commutes are not uncommon. At some point you wonder why you would pay such a large sum for a house in an area whose quality of life is steadily decreasing.

    And to your other point, software engineers making 300k+ are not very common. The ones who made it at Amazon did so with total compensation and not just base salary. They got in at the right time before the stock skyrocketed. Most people burn out at Amazon and leave (or are kicked out) within two years of being there. For most wage earners Seattle is not a friendly city.

  59. 59
    pfft says:

    By David @ 35:

    Another point in favor of continued housing price increases is that:

    1) There was a recession at the end of the Obama regime.
    2) Therefore there was an Obama Depression at the beginning of his regime, and an Obama Recession of his regime. (perhaps brought on by the idea of Hillary Clinton being President?)
    3) THEREFORE, Trump’s revival of the American Dream has created an expansion that is about 20 months old. Plenty of room to run with expanding exports, new trade agreements, and a booming economy.

    Never will be enough LOLs for this post. LOL as SWE says.

  60. 60
    DavidE says:

    I am not sure how many people here read John Hussman’s weekly commentary. He very accurately predicted the 2000 tech crash and the ensuing housing crash. He talks about market psychology as being the driving force in the U.S. for both the housing and the stock markets. Once the psychology turns there is no stopping it. Seattle housing was based on the fairly tales about Amazon’s infinite growth and the Fed money printing machine keeping the real estate markets up.

    The cracks in that belief are appearing: people are realizing that the Fed is not all that powerful and the market forces are indeed at play. Every bubble starts with credit expansion and a new lie to justify that this time is different. The new lie has been that the Fed will never allow the market to go down, and this is what will crash everything far worse than anything else since there will be no safety net without the Fed. With the invented yield curve upon us and Fed balance sheet reductions starting in October, there will be no stopping the avalanche. Hussman predicts a 75% crash in the stock market and up to 50% hair cut in heated housing areas like Seattle. People laughed at him both in 2000 and in 2008 when he said the same things.

  61. 61
    wreckingbull says:

    By biliruben @ 50:

    That will be huge for the distribution center down here in NM. Most folks here make half that.

    Absolutely. It is still good news for workers, especially in those areas with lower prevailing wages. I agree with ‘N’ to a certain point – although I think this is likely 80% market forces and 20% PR.

  62. 62
    wreckingbull says:

    RE: DavidE @ 58 – This is OT, but the next hiker I pass with a GD bluetooth speaker blaring out of their backpack will find said bluetooth speaker quickly relocated to an area in their aft quadrant.

    What is up with this? I started noticing it about 2-3 years ago.

  63. 63
    pfft says:

    By DavidE @ 60:

    I am not sure how many people here read John Hussman’s weekly commentary. He very accurately predicted the 2000 tech crash and the ensuing housing crash.

    HIs mutual funds had a terrible period of underperformance.

    Learning From a Lagging Mutual Fund
    The once-highflying Hussman Strategic Growth Fund weathered the crisis but missed the rally
    https://www.wsj.com/articles/learning-from-a-lagging-mutual-fund-1426259640

    If you stick around long enough you run into a lot of these guys. Predict the crash but miss the recovery. Like Peter Schiff.

  64. 64
    David says:

    By pfft @ 59:

    By David @ 35:

    Another point in favor of continued housing price increases is that:

    1) There was a recession at the end of the Obama regime.
    2) Therefore there was an Obama Depression at the beginning of his regime, and an Obama Recession of his regime. (perhaps brought on by the idea of Hillary Clinton being President?)
    3) THEREFORE, Trump’s revival of the American Dream has created an expansion that is about 20 months old. Plenty of room to run with expanding exports, new trade agreements, and a booming economy.

    Never will be enough LOLs for this post. LOL as SWE says.

    Fed’s Powell sees ‘remarkably positive outlook’ for economy that may be ‘too good to be true’
    https://www.cnbc.com/2018/10/02/feds-powell-sees-remarkably-positive-outlook-for-economy.html

  65. 65
    pfft says:

    By wreckingbull @ 62:

    RE: DavidE @ 58 – This is OT, but the next hiker I pass with a GD bluetooth speaker blaring out of their backpack will find said bluetooth speaker quickly relocated to an area in their aft quadrant.

    What is up with this? I started noticing it about 2-3 years ago.

    The worst is when you think someone is talking to you but they are talking into their headset.

  66. 66
    pfft says:

    By David @ 64:

    By pfft @ 59:

    By David @ 35:

    Another point in favor of continued housing price increases is that:

    1) There was a recession at the end of the Obama regime.
    2) Therefore there was an Obama Depression at the beginning of his regime, and an Obama Recession of his regime. (perhaps brought on by the idea of Hillary Clinton being President?)
    3) THEREFORE, Trump’s revival of the American Dream has created an expansion that is about 20 months old. Plenty of room to run with expanding exports, new trade agreements, and a booming economy.

    Never will be enough LOLs for this post. LOL as SWE says.

    Fed’s Powell sees ‘remarkably positive outlook’ for economy that may be ‘too good to be true’
    https://www.cnbc.com/2018/10/02/feds-powell-sees-remarkably-positive-outlook-for-economy.html

    So glad Trump saved us from that invisible Obama recession! MAGA!

  67. 67
    David Eden says:

    RE: pfft @ 63

    David, while I agree with you partially regarding the timing of the crash, you have to understand that these economic manipulations in housing and stock markets have gone on far longer than Hussman, Shiller, or even Warren Buffet predicted. In the last 8 years world’s central banks have printed 22 trillion dollars combined, which has generated over 200 trillion dollars in credit given the fractional reserve system. This is why a wooden shack in Seattle goes for a million; much higher in Vancouver BC, and a Toyota Land Cruiser goes for over 70k and college costs so much.

    The subsequent crash is always a a function of the previous credit expansion. Soon the people who bought in Seattle in the last two years will find out.

  68. 68
    DavidE says:

    RE: pfft @ 63

    While I agree with you partially regarding the timing of the crash, you have to understand that these economic manipulations in housing and stock markets have gone on far longer than Hussman, Shiller, or even Warren Buffet predicted. In the last 8 years world’s central banks have printed 22 trillion dollars combined, which has generated over 200 trillion dollars in credit given the fractional reserve system. This is why a wooden shack in Seattle goes for a million; much higher in Vancouver BC, and a Toyota Land Cruiser goes for over 70k and college costs so much.

    The subsequent crash is always a a function of the previous credit expansion. Soon the people who bought in Seattle in the last two years will find out.

  69. 69
    Deerhawke says:

    RE: Bumble @ 25

    I really like your creative approach. Given how much rental housing has been built over the past several years, it is likely rent will be flat for a while.

    This reminds me of friends who did something similar in New York City. As a couple, they decided against kids so they did not really need more than their rent-stabilized 1 bedroom plus nook on the Upper West Side. They bought a lovely old place up on the Hudson that was a train ride and a taxi fare away. They kept their car there and were even able to give up their expensive parking spot in the city. Eventually their 5+2 schedule became 4+3 and then, for one or both, often 3+4. Best of both worlds.

  70. 70

    By biliruben @ 50:

    That will be huge for the distribution center down here in NM. Most folks here make half that.

    It will also help them get higher quality employees in those locations, where such employees might be relatively scarce. It could also be a sign that the labor market is actually tightening.

    The interesting thing about it though is Amazon is probably the company further ahead with robotics replacing employees than any other company, and this will probably just accelerate that, assuming it doesn’t show that they are already well ahead in implementing their plans. So in a way it’s sort of like Netflix saying they will start paying all of their employees who handled DVDs $15 an hour.

  71. 71

    By DavidE @ 58:

    RE: John Atanasov @ 57

    I think congestion has to do with seeking alternatives to Seattle. Have you gone hiking lately around here? Even on a weekday you can’t escape the crowds, the dogs, and people talking on cell phones all the time. I have to drive for as long as two hours to go on a quiet hike, and even that is not a safe bet..

    I have not been on a serious hike for years, so that’s sad to hear. Is that true even on hikes that have serious elevation gains? I always found that to be a better way to get away from people over going further distances.

  72. 72
    wreckingbull says:

    RE: Deerhawke @ 69 – It can work quite well. As seniority increases in a career, a work schedule can become more flexible. Eventually the in-city rental can be relinquished. That NYC situation sounds very cool. While I used to enjoy my 1-2 days a week in Seattle, I no longer do, as it has become such a dump.

  73. 73
    wreckingbull says:

    RE: Kary L. Krismer @ 71 – These days you need to get further away, and do so early in the morning. A hike which is up a nasty FS road does hurt either, and these tend to be the better ones anyway. N Cascades is still very crowd-free.

  74. 74
    uwp says:

    By DavidE @ 60:

    I am not sure how many people here read John Hussman’s weekly commentary. He very accurately predicted the 2000 tech crash and the ensuing housing crash.

    If you had invested $10,000 in Hussman’s fund on the eve of the 2007/08 crash (9/30/07) you would now have around $4,700 left. If you had put that money in a S&P 500 index instead, you would have over $24,000.

    Here is chart of Hussman’s own fund from accurately predicting the crash 10+ years ago:
    https://i.imgur.com/f9Kaihp.png

    I’m sure when the market falls he will claim he was right all along.

    EDIT: Even if you go all the way back to him predicting the tech bubble correctly, $10,000 invested in his fund since inception (July 2000) is worth $10,400 now. While That same 10k in the S&P is worth over $28k.

  75. 75
    Justme says:

    UST 10Y bonds reached a new 8-year high today at 3.129%. Mortgage rates are therefore under upwards pressure as well. Both UST 10Y and 30Y mortgages are still considerably below typical historical values.

    Reference:
    https://www.cnbc.com/quotes/?symbol=US10Y

  76. 76

    RE: Bumble @ 25
    Even Ten or Twenty Years Ago

    That was smart thinking for folks just in Seattle for like 5 Years on a job assignment….its a paperwork and cost nightmare to resettle from an old mortgage…rent is easy, ya pack and leave…cost is not just money, its time too folks. Ya think the garbage companies pay $25/hr base pay to separate blue can garbage rather mix/throw it all in the landfill anyway, I’ve got a bridge I can sell ya….LOL…BTW, I’ve watched ’em mix it all together anyway.

  77. 77

    RE: Justme @ 75
    Yes Justme

    The Sep 2018 Numbers are Out Today on SWE’s YOY Economic Data Report

    Sep 0.24% (0.62%) 0.57% (1.76%) 0.91%
    YTD 2.12% (1.48%) 10.54% 10.85% (1.06%)
    Last 12 mo 2.72% (1.05%) 17.88% 16.22% 3.15%

    Long-term CDs, Long-term Bonds, American Stocks, Foreign Stocks, Foreign Stocks

    Interesting numbers, the big one is saver interest long-term and hence, approximate mortgage rates predictions in the future. Its up will over 20-25% in 12 months….cooled down some since mid year, but roaring none-the-less much higher. BTW, a 20-25% increase in mortgage rates is a lot more than 20-25% increase in monthly payments….those monthly payments go exponential, not linear on interest higher rates.

    On other related trends….the American Stocks are soaring with Trump’s fair trade deals compared to foreign stocks…they used to be about the same growth with big trade deficits. LOL…FCA is the stock market king now [I’m looking at my red Charger smiling], even Toyota [and all other Asian/European automotive stock too?] is a joke in comparison now. GM and Ford outsourced too much and are suffering now too. Detroit becoming the new money Mecca? FCA bringing MASS manufacturing back to Detroit from Mexico a great call it appears now. I still miss my Italian CEO that died, he did great work on FCA emphasizing American engineering over high priced Asian/European engineering. BTW, the Fiat Italian engineered cars are doing horribly too….LOL

  78. 78
    Justme says:

    The slowdown in sales and related price reductions are widespread around the US. The Denver Metro Area is just one of many. A drop of 30.5% in SFR sales YOY in September is quite radical, IMO. What happened to those much ballyhoed shortages of houses? Seems to be no shortage of SFR in Denver anymore, perhaps there never was one?Perhaps not even in Seattle?

    http://housingbubble.blog/?p=149

    A report from the Denver Post in Colorado. “Home sales in the metro Denver area fell precipitously in September, forcing sellers to cut their asking prices and pushing up the inventory of properties available for sale at an unprecedented rate, according to a monthly update from the Denver Metro Association of Realtors.”

    “‘The housing inventory and home price adjustments are normal and expected,’ said Steve Danyliw, chairman of the DMAR Market Trends Committee. ‘What’s not normal? Sales of single-family homes priced over $500,000 dropping 33 percent from August to September. For those sellers, that’s real turbulence.’”

    “Metro Denver’s housing market has shown signs of cooling since early summer. But it practically froze over in September, and that meant sellers faced a bumpy ride, especially owners of more expensive properties.”

    “The number of single-family homes sold in September, across all price ranges, dropped 30.5 percent from August and is down 21.4 percent compared to September 2017. Condo sales fell a dramatic 42.9 percent on the month and are down 17.3 percent year-over-year. The inventory of homes and condos available for sale at the end of September shot up to 8,807, an increase of 7.04 percent from August and 16.1 percent compared to a year ago.”

  79. 79

    RE: wreckingbull @ 72
    Yes, 30% of Workers Tele-work Anyway

    I imagine experienced and skills are needed for working from home too. I did it for about ten years.

  80. 80

    By Millennial Engineer @ 43:

    Here’s an annecdote that I believe nods to a changing market:

    If a house cannot make it through it’s first weekend without a seller holding out for multiple offers, it definitely signifies a changing market. I’m glad to be rid of the “offer review date” daze.

    Thank you for that report, but I don’t agree with your assessment that not making it to the review date signifies anything. That happened a lot over the past several years, and was one of the main problems with the review date system setup by the NWMLS. The seller could decide to accept an offer early. Sometimes it was the agent doing that, and sometimes it was the seller just relieved to get an offer.

    But I too will be glad to get past the review date situations, largely for that reason. I only used that once on my own listing before realizing how stupid it was. It only works if you don’t do due diligence on offers, because what happens is all the offers come in near the deadline. The system I have used prior of just requesting X days to review offers (to have an expiration date on the offer X days out from when sent) is a far preferable method of dealing with making sure a listing gets adequate exposure to the market.

  81. 81

    RE: David @ 38
    Thank God IRS Revenue is Currently MASSIVELY Growing With Tax Cuts and Fair Trade

    The higher interest rates would kill our American budget without the stock and tax revenue spike. No one could have predicted this new paradigm….that economic budget chief billionaire Trump appointed either got extremely lucky or he knows what the Hades he’s doing anyway. Thank God we have skills and experience in government now….to think these old folk billionaire geniuses just do it because they love America [its not like they couldn’t just retire….LOL]. God bless them.

  82. 82
    Matt P says:

    By Justme @ 75:

    UST 10Y bonds reached a new 8-year high today at 3.129%. Mortgage rates are therefore under upwards pressure as well. Both UST 10Y and 30Y mortgages are still considerably below typical historical values.

    Reference:
    https://www.cnbc.com/quotes/?symbol=US10Y

    Almost up to 3.15 now. Nice for savers.

  83. 83

    RE: Millennial Engineer @ 43 – This is actually an interesting account for another reason, but only if you imagine that the property was one that ME had actually been interested in and disappointed to see it go away. That of course would be more likely if the house was a better house.

    Depending on how picky you are as a buyer, finding a home you’re interested in making an offer on can be difficult. When we were looking for a new home we looked at over 80 houses before finding two the both of us were interested in. And that was back in late 2007 when there was a ton of inventory. Back then though we didn’t need to worry too much about the house disappearing, and had the luxury of negotiating for a few weeks with the seller.

    Fast-forward five years to 2012, when the market was finally much different. Only about 2.5 months of supply, but multiple offers and quick sales were common even in the areas that were not the hottest areas lately. That was before offer review dates, and so I found it necessary to preview listings the day they came on, write up an offer if I thought my client would be interested, and then show it to them that evening. Even doing that and getting the client’s offer in the same day the house was listed my client was not the only offer on the house he bought (and he wasn’t the highest offer either). So the point is the seller’s market goes back a long way in time and included periods where the absorption rate was roughly where it is today.

    Connecting up the two points though, assume you’re a picky buyer who unless lucky will need to look at many houses before finding one you like. If that’s the case having a house you’re finally interested in go quickly to another buyer will be a rather significant event in your house hunting. That is less likely to happen today than a year ago, but still not all that unlikely.

    2012 data from NWMLS sources, but not compiled by or guaranteed by the NWMLS.

  84. 84
    uwp says:

    By softwarengineer @ 81:

    RE:
    Thank God IRS Revenue is Currently MASSIVELY Growing With Tax Cuts and Fair Trade

    That is just plainly wrong.
    Q1 tax receipts were down 6% YOY, and Q2 was down 5% YOY.

    Here is a link to tax receipts the last five years:
    https://fred.stlouisfed.org/graph/fredgraph.png?g=ls4l

    IRS Revenue the first two quarters of 2018 has been below the first 2 quarters of 2017, 2016, and 2015.

  85. 85
    sfrz says:

    Seattle making a “U”-ee- Woh hawse…goin’ south wasn’t in the plan: https://www.redfin.com/blog/data-center

  86. 86
    Justme says:

    RE: Matt P @ 82

    Oh, and those mortgage rates. The QuickenLoans.com rate for 30Y/fixed/20%-down jumped intraday today, from

    4.750% (4.865% APR) observed at 09:58 this morning
    4.875% (5.144% APR) observed at 10:55 this morning

    I think these are not jumbo loans, either, just regular. Sellers had better start reducing their prices more.

  87. 87

    By uwp @ 84:

    By softwarengineer @ 81:

    RE:
    Thank God IRS Revenue is Currently MASSIVELY Growing With Tax Cuts and Fair Trade

    That is just plainly wrong.
    Q1 tax receipts were down 6% YOY, and Q2 was down 5% YOY.

    Here is a link to tax receipts the last five years:
    https://fred.stlouisfed.org/graph/fredgraph.png?g=ls4l

    IRS Revenue the first two quarters of 2018 has been below the first 2 quarters of 2017, 2016, and 2015.

    Due the quarterlies really matter? I could see it would for things like the gas tax, where the use is known each quarter, but for income taxes you really wouldn’t have a good idea of what was collected for 2018 until after April 2019.

  88. 88
    uwp says:

    By Kary L. Krismer @ 87:

    Due the quarterlies really matter? I could see it would for things like the gas tax, where the use is known each quarter, but for income taxes you really wouldn’t have a good idea of what was collected for 2018 until after April 2019.

    They are year over year comparisons for the quarters which I think makes sense. Companies and the IRS have already adjusted withholdings for 2018.

    Sure we will have a better picture after an entire year, but we are already halfway there.

    Do you think people are going to be writing bigger checks at tax time because they under-withheld this year?

  89. 89
    Notme says:

    Das REIC in action
    half the posts are distractions
    but bubble still bursts

    -a bubble haiku

  90. 90
    seamille says:

    3.18% on the 10Y after hours and US wage growth at a 17 month high. The Fed has the cover to keep hiking until something breaks. For all those interested, legendary investor Howard Marks of Oak Tree Capital published his quarterly memo which was particularly relevant to some of the excesses we have seen due to abnormally low rates.

    https://www.oaktreecapital.com/docs/default-source/memos/the-seven-worst-words-in-the-world.pdf

    I think we may have seen the top in the Seattle RE market, or will see it in the spring with one final push depending on where rates go from here. I don’t foresee a dramatic crash like others are calling for as no two economic cycles are the same, and this one has little of the outright fraud like the previous. I could make a case though for a 15-30% haircut on current levels playing out from 2019-2022.

  91. 91
    Eile says:

    got alot of price drop email from Redfin. I guess sellers can’t sell at their price anymore.

  92. 92
    steven says:

    RE: Eile @ 90

    honestly the drops are quite scary at this point… it’s anywhere from 2-4% per month and on top of that people usually close at 2-6% lower than listing. at this pace, we’ll be at least -25% from peak by summer. (i’m speaking only for belltown/d-town). california seems to be declining as well as other states but not nearly as fast..

  93. 93
    steven says:

    i always thought correction was coming either this year or next but at this point it’s a matter of correction vs crash for seattle at least. although most ppl will still say correction and i tend to agree, it may be quite a harsh correction

  94. 94

    By uwp @ 88:

    Do you think people are going to be writing bigger checks at tax time because they under-withheld this year?

    Maybe, but there are typically safe-havens for estimated payments, and I believe that applies to both individuals and corporations. I’m assuming, but don’t know for certain that those safe havens were adjusted down due to the tax cuts, the same as the estimated withholding was adjusted down due to the tax cuts. So if your safe haven was $100,000 it might only be $80,000 after the tax cuts passed. If so, it wouldn’t be surprising if a lot of taxpayer entities reduced their estimated tax payments.

  95. 95
    Eastsider says:

    I don’t think anyone knows if there will be a correction or a crash. Volume has been low in the run up. Thin volume generally implies high volatility. 5% mortgage rate is psychologically significant for buyers. If you need to sell, it is still not too late IMO. Very few sell at peak prices anyway.

  96. 96

    By Eile @ 91:

    got alot of price drop email from Redfin. I guess sellers can’t sell at their price anymore.

    By steven @ 92:

    RE: Eile @ 90

    honestly the drops are quite scary at this point… it’s anywhere from 2-4% per month and on top of that people usually close at 2-6% lower than listing. at this pace, we’ll be at least -25% from peak by summer. (i’m speaking only for belltown/d-town). california seems to be declining as well as other states but not nearly as fast..

    There were more price drops in the past 7 days than new listings! So yes, a lot of agents/sellers overpriced.

    But as to Eile’s comment, don’t assume that the reduction in median is reduction in value. As I’ve mentioned repeatedly, the median (and possibly C-S) was affected by bidding wars where buyers paid more than FMV. And as I’ve mentioned repeatedly, using those properties as comps can easily lead to sellers/agents overpricing.

    Data from NWMLS sources, but not compiled by or guaranteed by the NWMLS.

  97. 97

    The NWMLS also keeps some limited statistics on keybox activity. Unfortunately they only show raw numbers going back one year, so if you don’t record the data (which I don’t) you can’t make long term comparisons. Also, the data is system wide, so it’s not broken out by county. Finally, the data would include agents going into their own listings. With those disclaimers . . .

    The one YOY data piece they show is a graph of the current week to the same week last year. That shows the lockbox activity was up slightly (less than 3%) every day except Friday, which was about even.

    That would suggest that it’s not a lack of buyer interest driving the changes, and support the idea that seller prices are too high and or the condition not up to par for the price.

    Edit: They have a PDF printout which does give YOY information, and slightly different graph information. The keybox activity for August 2018 was roughly 220k and roughly 231k for 2017, so slightly down for the month. Again, this is system wide, not just King County.

    Data from NWMLS sources, but not guaranteed.

  98. 98
    Voight-Kampff says:

    RE: Kary L. Krismer @ 96

    Maybe im wrong, but assuming all sales are arms length transactions, isn’t FMV determined by the sales price, regardless if there are bidding wars? In a colder market, would you also exclude sales in which the buyer negotiated a great deal?

  99. 99

    By Voight-Kampff @ 98:

    RE: Kary L. Krismer @ 96

    Maybe im wrong, but assuming all sales are arms length transactions, isn’t FMV determined by the sales price, regardless if there are bidding wars? In a colder market, would you also exclude sales in which the buyer negotiated a great deal?

    We’ve already discussed that very recently, and my response was FMV is what a hypothetical buyer and seller would buy/sell for in normal conditions. That if you agreed to pay me $25,000 for an ordinary quarter, knowing it was worth only 25 cents, the FMV of the quarter wouldn’t be $25,000. I also discussed an actual bidding war, with two buyers sitting at a table, where they each acknowledged that the property was not worth what they were bidding. The winning bid was above FMV and well above the appraised value.

    But Justme of all people also recently posted a fairly good definition of market value.

    Market value is the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised, and each acting in what he considers his own best interest; (3) a reasonable time is allowed for exposure in the open market; (4) payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

  100. 100

    RE: Kary L. Krismer @ 99 – Sorry I can’t edit the post above to finish my thought.

    Anyway, that definition relates to what I’ve been saying about the hypothetical listing for $500,000 bid up to $600,000. Unless the seller and listing agent were way off the mark the house was not worth $600,000 and trying to sell a comparable house for that price would likely be doomed to failure, even if the market stayed the same. You need to look at the probable price something would sell for, not a crazy price that something else did sell for.

  101. 101

    RE: Kary L. Krismer @ 99

    I’ve been licensed in 5 States. My favorite definition of “market value” was from my New Jersey real estate license class. “The price at which neither party is exceedingly happy”. If anyone is saying WooHoo!, it wasn’t “market value”. Many sellers ended up with prices they couldn’t believe in some of these bidding wars. They were beyond “exceedingly happy”. They were dazed! :)

  102. 102

    RE: ARDELL DellaLoggia @ 101 – LOL. That’s not a bad simple little definition.

  103. 103

    RE: Voight-Kampff @ 98

    In appraiser lingo it means “without undue influence”, so if someone blindsided an old person to get a great deal…then that would not be market value.

    On the seller side recently, the “undue influence” was the lack of inventory. In an ideal world, an agent lists the price at what they expect it will appraise for and if it sells for more, the buyer waives the appraisal contingency on the amount over list price. If a seller lists it for more than they know, based on comps, it can appraise for…they may just have to back up the price to appraised value if there is an appraisal contingency. So sellers are not supposed to list at the highest price it might sell for in a bid up. They are supposed to list it at what it could reasonably appraise for.

    The difference is not “appreciation” until there are enough bid up sales (usually 3) to prove out that price with 3 comps. So yes…it can become “market value”, but one sale in a bid up is not enough. You need 3.

  104. 104
    wreckingbull says:

    RE: Kary L. Krismer @ 99 – I don’t know. I’m not sold. If there are shady things going on during the offer evaluation process, then I might agree, but the market is the market. If buyer wants to be an idiot and add an auto-escalation clause to their offer, they are free to do so and often do.

    I don’t see the value of making this subjective ‘those weren’t real sales’ designation. Are you saying that all the buyers in the last two years bought homes knowing that they were overpaying? Your quarter example seems to suggest this.

  105. 105
    wreckingbull says:

    RE: ARDELL DellaLoggia @ 103 -Low inventory is not undue influence. It’s a market condition! An example of undue influence would be owners conspiring to hold properties off the market in order to create an artificial shortage and drive up prices.

  106. 106

    RE: wreckingbull @ 104

    Only the ones that didn’t appraise and the buyer had to pay the difference between appraised value and sold price in cash, because their lender wouldn’t finance that portion of it. Some bid ups did appraise; some didn’t. When the buyer was asked to come up with the extra money because the lender couldn’t find sufficient value…they knew they were over paying because they had to reach into their pocket to get the money to close.

    It wasn’t a secret.

  107. 107
    Voight-kampff says:

    I think I understand what Kary and Ardell are saying, but to me, the market is what the market is. Even in the recent bidding wars, a buyer still desires the best price they can get, but if they are in competition with other buyers, they will have to increase their bid. They don’t always know how high they will have to go, so they escalate up to what they are willing to pay, in the current market.

  108. 108
    Eastsider says:

    As long as the transactions are arms length and exposed to the market (i.e. not private sales), their sale prices should be considered FMVs. If you disagree, and many do including appraisers, you would have missed out buying your homes in the last few years. Most sales, especially in multiple-bid situations, would not have ‘appraised’. Then the next thing you realize is all of them became comps for new sales. So don’t listen to these ‘professionals’. Nobody gets rich listen to stock brokers. LOL.

  109. 109
    DavidE says:

    RE: Notme @ 89

    It is a myth that the Fed sets the long-term interest rates. The fed follows the market rather than leading it. Jeffrey Gundlach called this situation brilliantly two years ago when everyone was predicting negative interest rates. His prediction about 6% on the 10 year bond is coming true (and 8-9 percent mortgage rates in the same time frame).

    His rationale is based on the deluge of treasury debt issuance (1.27 trillion borrowed in 2018 alone). In 3-4 years, interest rate payments on the national debt will equal 1/3 of the Federal revenue with no room to lower rates any more. Mortgage rates are headed much much higher according to Gundlach. Note that he said this in 2016, so in 3 years we should hit his target. The top in Seattle was indeed Spring 2018, and many seattle real estate millionaires will soon realize that a house can really be an “illiquid asset.”

    https://www.barrons.com/articles/gundlach-bond-yields-could-hit-6-in-five-years-1478929496

  110. 110

    RE: Voight-kampff @ 107

    That’s not really how it played out. In the beginning yes. People were bidding $5,000 over other people and it went for that. But when the offers got to be 6 or more and the “cap” was $100,000 over asking, people bid $5,000 or $10,000 over other offers…up to $100,000 or $150,000 over asking. They didn’t expect it to go to “cap” price. But more and more agents were putting the $5,000 over someone else’s “cap” instead of over the other offer price. It was an odd phenomenon that caused prices to go out of whack pretty quickly. When a neighborhood goes up 30% in one 60 day period because of that happening, that is not “fair market value”.

    In those same neighborhoods when the bidding stopped suddenly, the prices receded fairly quickly back to “normal”. High, but not as crazy high.

  111. 111

    By wreckingbull @ 104:

    I don’t see the value of making this subjective ‘those weren’t real sales’ designation. Are you saying that all the buyers in the last two years bought homes knowing that they were overpaying? Your quarter example seems to suggest this.

    No, I’m not saying all buyers overpaid. What I’m saying is that some got caught up in a frenzy and did overpay.

    It’s the flip side of what was happening in 2009-2011, when some properties (REOS and short sales) were poorly marketed and sold for less than FMV. If you look at the median during that period it fluctuated greatly, while the median of non-distressed homes stayed in a relatively narrow range (380k-420k) for a long time. The value of those non-distressed properties wasn’t changing much, but the median was going up and down. For the last 2-3 years the median has increased due partially to some houses selling in a frenzy.

    One more thing. It isn’t necessarily selling significantly above list that is the sign. I did today see a comp that sold well over 50% above list, but was still below FMV. It was a bankruptcy short sale, and I didn’t check it out enough to see why it was listed so low. I’m only talking about houses where the listing agent and seller made a reasonable assessment of value and it went well beyond that price. There were enough of those situations that it did impact the median.

  112. 112

    By Eastsider @ 108:

    As long as the transactions are arms length and exposed to the market (i.e. not private sales), their sale prices should be considered FMVs. If you disagree, and many do including appraisers, you would have missed out buying your homes in the last few years. Most sales, especially in multiple-bid situations, would not have ‘appraised’. Then the next thing you realize is all of them became comps for new sales. So don’t listen to these ‘professionals’. Nobody gets rich listen to stock brokers. LOL.

    You do raise a good point about needing to appraise. Many of these overbid houses were either cash or high down payment where the appraisal didn’t matter much. The one I mentioned with the buyers sitting across from each other were two high down payment buyers.

    And you’re also right about the fact that those sales might become future comps for an appraisal. Hopefully appraisers would be ethical enough to exclude them, just as hopefully most agents would be smart enough to not price based off of them. But I’m sure it happened.

    But they are not good evidence of value. And if you don’t believe me I have a quarter I will sell you for $25,000. ;-)

    But you are wrong that you would have missed out on buying by not playing that game. Lots of buyers were also waiving their inspections, but they didn’t need to play that game either. Agents were talking buyers and/or buyers were talking agents into doing all sorts of crazy things in that market. That doesn’t mean that was something you had to do. It was just something some people did, and yes you would loose out sometimes because of it. That didn’t feel good, but it was for the best.

    Finally, for those buyers who were not high down payment, they and their agents did need to care about what the appraiser said. That helped keep them in check. As I’ve said in the past, it used to be that paying cash would get you a slight discount, but in that market paying cash was an opportunity to pay more!

  113. 113

    By Eastsider @ 108:

    . So don’t listen to these ‘professionals’. Nobody gets rich listen to stock brokers. LOL.

    I don’t get the dig. I’ve been commenting for months on the need to be concerned about appraisals, and also the need to not overprice a listing. As to the latter, I mentioned several times two similar houses in my neighborhood where one was listed close to FMV and quickly sold above close to a price another house was listed at, and that other house took about two months to sell very close to the list price of the other house. And I’ve also mentioned the two overpriced condos that would never appraise for list, where we went after both sellers and finally got one to cave at a price about 10% lower than list, offering low appraisal protection for a small amount below and it still didn’t appraise for that. While our transaction was pending a cash buyer snapped up the other one for close to list, apparently not realize how much lower our pending deal was. Which buyer was better represented?

    And I’ve been very critical of the practice of waiving inspections, both from the buyer and seller side. I’m sure a number of those transactions are going to come back to haunt the sellers and agents involved as the buyers hire attorneys.

    I wasn’t unduly giddy about the market heading up and was very concerned about many of the agent “monkey-see, monkey-do” practices. As to the market now, I’m not that concerned, although I do realize there will be some sort of hangover from the prior activity. Could it reach a collapse state? Sure, but one thing’s for sure, this was never going to unwind in a pretty manner. The only question was when would things start to move to a more healthy market.

  114. 114
    DavidE says:

    RE: Kary L. Krismer @ 111
    “As long as the transactions are arms length and exposed to the market (i.e. not private sales), their sale prices should be considered FMVs. ”

    I think both of you raise some valid points. But how do we know what the FMV is for anything at all when interest rates drop to zero and are kept there for 10 years? All this bidding frenzy was done during a time when interest rates were dropped to the lowest ever (with many bonds trading negative in the European Union). I think all those who bought anything in the last few years (stocks, bonds, homes, etc.) will bear the pain of what is to come when interest rates find their equilibrium again.

  115. 115
    Eastsider says:

    Another note about FMV is that it seldom matches an independently appraised value. Sometimes FMV is higher (‘overpaying’) and other times lower (‘underpaying’). It does not mean either is ‘wrong’. The market dictates FMV when a house is sold in an open market at arms length.

  116. 116
    DavidE says:

    By Eastsider @ 115:

    Another note about FMV is that it seldom matches an independently appraised value. Sometimes FMV is higher (‘overpaying’) and other times lower (‘underpaying’). It does not mean either is ‘wrong’. The market dictates FMV when a house is sold in an open market at arms length.

    Exactly, and when interest rates are kept so low for so long, market dictates that money has become practically worthless and will continue to be so since no one expects interest rates to rise. FMV is therefore suspended in such an environment.

    The rude awakening comes when rates do rise, and now we are seeing the consequences with panic price drops. The stock market will follow soon since it is a trailing indicator and has been kept alive with stock buybacks with cheap money. I think that will hugely impact the Seattle housing market since we have some high flying stocks like Amazon, Boeing, and Microsoft.

  117. 117
    Matt P says:

    By seamille @ 90:

    3.18% on the 10Y after hours and US wage growth at a 17 month high. The Fed has the cover to keep hiking until something breaks. For all those interested, legendary investor Howard Marks of Oak Tree Capital published his quarterly memo which was particularly relevant to some of the excesses we have seen due to abnormally low rates.

    https://www.oaktreecapital.com/docs/default-source/memos/the-seven-worst-words-in-the-world.pdf

    I think we may have seen the top in the Seattle RE market, or will see it in the spring with one final push depending on where rates go from here. I don’t foresee a dramatic crash like others are calling for as no two economic cycles are the same, and this one has little of the outright fraud like the previous. I could make a case though for a 15-30% haircut on current levels playing out from 2019-2022.

    3.219 and still climbing, good day today.

  118. 118
    pfft says:

    By David Eden @ 67:

    RE: pfft @ 63

    David, while I agree with you partially regarding the timing of the crash, you have to understand that these economic manipulations in housing and stock markets have gone on far longer than Hussman, Shiller, or even Warren Buffet predicted. In the last 8 years world’s central banks have printed 22 trillion dollars combined, which has generated over 200 trillion dollars in credit given the fractional reserve system. This is why a wooden shack in Seattle goes for a million; much higher in Vancouver BC, and a Toyota Land Cruiser goes for over 70k and college costs so much.

    The subsequent crash is always a a function of the previous credit expansion. Soon the people who bought in Seattle in the last two years will find out.

    All I read was one long excuse for why Hussman was wrong. If he is such a genius why did he not see the recovery? He didn’t read about what the Fed was doing?

    There is an old saying. Would you rather be right or make money? Some people would rather be right.

  119. 119
    DavidE says:

    By pfft @ 118:

    By David Eden @ 67:

    RE: pfft @ 63

    David, while I agree with you partially regarding the timing of the crash, you have to understand that these economic manipulations in housing and stock markets have gone on far longer than Hussman, Shiller, or even Warren Buffet predicted. In the last 8 years world’s central banks have printed 22 trillion dollars combined, which has generated over 200 trillion dollars in credit given the fractional reserve system. This is why a wooden shack in Seattle goes for a million; much higher in Vancouver BC, and a Toyota Land Cruiser goes for over 70k and college costs so much.

    The subsequent crash is always a a function of the previous credit expansion. Soon the people who bought in Seattle in the last two years will find out.

    All I read was one long excuse for why Hussman was wrong. If he is such a genius why did he not see the recovery? He didn’t read about what the Fed was doing?

    There is an old saying. Would you rather be right or make money? Some people would rather be right.

    And that my friend, is your illusion: there was no “recovery” as you say, and that is how the central banks fooled everyone. All we had was a debt binge without solving any of the structural problems (world wide debt has increased 40% in just 10 years since the last recession, just look at subprime auto and student loans). We will all soon find out as much of that phantom wealth disappears.

  120. 120
    pfft says:

    By uwp @ 74:

    By DavidE @ 60:

    I am not sure how many people here read John Hussman’s weekly commentary. He very accurately predicted the 2000 tech crash and the ensuing housing crash.

    If you had invested $10,000 in Hussman’s fund on the eve of the 2007/08 crash (9/30/07) you would now have around $4,700 left. If you had put that money in a S&P 500 index instead, you would have over $24,000.

    Here is chart of Hussman’s own fund from accurately predicting the crash 10+ years ago:
    https://i.imgur.com/f9Kaihp.png

    I’m sure when the market falls he will claim he was right all along.

    EDIT: Even if you go all the way back to him predicting the tech bubble correctly, $10,000 invested in his fund since inception (July 2000) is worth $10,400 now. While That same 10k in the S&P is worth over $28k.

    Active management sucks.

  121. 121
    DavidE says:

    RE: pfft @ 120RE: pfft @ 120

    Remember that Hussman has not lost his investors’ original money, which is more than I can say for the Wall Street crooks. It is better to have low returns than to be Enroned. When this whole charade falls apart his investors will thank him (just as they did in 2000 and in 2008).

  122. 122
    pfft says:

    By DavidE @ 119:

    By pfft @ 118:

    By David Eden @ 67:

    RE: pfft @ 63 –

    David, while I agree with you partially regarding the timing of the crash, you have to understand that these economic manipulations in housing and stock markets have gone on far longer than Hussman, Shiller, or even Warren Buffet predicted. In the last 8 years world’s central banks have printed 22 trillion dollars combined, which has generated over 200 trillion dollars in credit given the fractional reserve system. This is why a wooden shack in Seattle goes for a million; much higher in Vancouver BC, and a Toyota Land Cruiser goes for over 70k and college costs so much.

    The subsequent crash is always a a function of the previous credit expansion. Soon the people who bought in Seattle in the last two years will find out.

    All I read was one long excuse for why Hussman was wrong. If he is such a genius why did he not see the recovery? He didn’t read about what the Fed was doing?

    There is an old saying. Would you rather be right or make money? Some people would rather be right.

    And that my friend, is your illusion: there was no “recovery” as you say, and that is how the central banks fooled everyone. All we had was a debt binge without solving any of the structural problems (world wide debt has increased 40% in just 10 years since the last recession, just look at subprime auto and student loans). We will all soon find out as much of that phantom wealth disappears.

    I’ve heard that so many times. I guess there has never been a recovery in over a 100 years? The fact is that household debt was greatly reduced. I believe it’s still pretty low compared to the last 26 years. Again all I hear are excuses for events that were both public and much discussed.

  123. 123
    pfft says:

    By DavidE @ 121:

    RE: pfft @ 120RE: pfft @ 120

    Remember that Hussman has not lost his investors’ original money, which is more than I can say for the Wall Street crooks. It is better to have low returns than to be Enroned. When this whole charade falls apart his investors will thank him (just as they did in 2000 and in 2008).

    His funds have massively underperformed and we have to believe that he will sidestep the next crash. People like Jim Rogers, Peter Schiff and others thought they were smart enough to do that and they failed. One guy who was on a great streak, I can’t remember his name, doubled down on mortgage stocks and maybe even banks the last time. He had to leave the company.

  124. 124
    DavidE says:

    RE: pfft @ 122

    Respectfully, you are stating your own opinions and not facts at all: “The fact is that household debt was greatly reduced. I believe it’s still pretty low compared to the last 26 years. Again all I hear are excuses for events that were both public and much discussed.” Without facts all you have is just an opinion, but I have some sobering facts as shown below (and much more if you study the subject and on Peak Debt and Debt Deflation).
    Also, I think the guy you mentioned in your post was Whitney Tilson.

    https://www.bloomberg.com/news/articles/2018-04-10/global-debt-jumped-to-record-237-trillion-last-year

    https://www.theguardian.com/news/datablog/2015/feb/05/global-debt-has-grown-by-57-trillion-in-seven-years-following-the-financial-crisis

  125. 125

    By Eastsider @ 115:

    Another note about FMV is that it seldom matches an independently appraised value. Sometimes FMV is higher (‘overpaying’) and other times lower (‘underpaying’). It does not mean either is ‘wrong’. The market dictates FMV when a house is sold in an open market at arms length.

    You’re basically defining FMV as the sales price, and could have just substituted sales price for FMV in that sentence.

    I still have that ordinary quarter you can buy for $25,000, if you want to own the world’s highest FMV ordinary quarter (until someone else makes an even worse purchase decision).

  126. 126
    Jason says:

    RE: Kary L. Krismer @ 125 – But there are a ton of quarters available in the marketplace, and they don’t have much utility outside of being a piece of currency.

    Housing is more than an investment. It’s shelter, which everyone needs. Unlike quarters, it’s been in terribly short supply. Although I think the prices are nuts, I even put an offer on a house this spring because I want a place to live. I lost because I refused to waive inspection. I think the winning offer should be counted as a valid transaction – it’s what succeeded in the market at that time.

    You can argue that the market is disfunctional or irrational, but of my friends who actually succeeded in buying a house in the last few years, the stories all seem to involve escalations and waived contingencies. It still seems to me like those transactions should count, since that seems to be the reality of the market.

    It seems like you might be looking at FMV largely from the perspective of advising sellers on listing price. That’s obviously important, and I’m sure there’s a lot of thought that goes into it. As a potential buyer, I’m just interested in the final outcome, regardless of how the parties arrived at that spot.

  127. 127
    Hal Thompson says:

    If you’re paying attention, this is all pretty predictable: http://www.economicprinciples.org/

    Super low interest rates have created another housing bubble. This is predictable since low borrowing costs (easy money) lead to higher prices. Some of the price increases have to do with wage growth in the Seattle area (i.e. highly paid software developers), but we have reached a point where home prices are too expensive even for these highly paid people. Now throw in rising interest rates and there is nowhere for prices to go but down. Over the long run, growth in housing costs can’t outpace wage growth, especially when interest rates are going up.

    The question isn’t whether we will have a correction, but how deep of one. When NYC property prices are in free fall, you know there are hard time ahead:
    https://www.cnbc.com/2018/09/30/nyc-real-estate-becomes-a-buyers-market-as-homes-take-longer-to-sell.html

    It has been obvious for at least the last 3-4 years that price growth in Seattle was disconnected from market fundamentals. Even with cheap 30 year money it has been a lot cheaper to rent a house than to buy one. This can’t continue forever. Eventually the difference between renting and owning must equalize to some degree. It can’t be 100% more expensive to do one versus the other, since in general most people are economically rational. This is partly what we’re seeing now; rental prices are going down, in response to increased inventory, which ultimately must impact the price to own as well.

    It seems like there is less speculative activity on the part of unsophisticated purchasers than last time, which may make this time a softer landing. However, there are some people who got way ahead of their skiis in the last two years that are going to get burned (fix and flippers, $100-300k multiple offer overbids). The indications were there earlier in the year, when we started to see fix and flip projects being sold off unrenovated at below the price they were acquired for. The cheap, short term debt is drying up, which has knock on effects throughout the economy. The only question is whether the central banks will let the pain happen this time, or continue to punish savers and economically responsible individuals by dropping interest rates again at the first sign of trouble.

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