Home Price Changes: May to September - Median Sale Price of King County Single-Family Homes

Home prices fell more between May and September this year than any previous year

This is a fairly arbitrary measure, but it jumped out to me when I was looking at the chart of yearly home prices in yesterday’s NWMLS post. Between May and September this year, the median sale price of single-family homes in King County has fallen 8.0 percent. Most years home prices rise between May and September. The biggest decline between those months in previous years was 5.7 percent in 2008.

Home Price Changes: May to September - Median Sale Price of King County Single-Family Homes

I’m still not yet comfortable saying that we’re going to see year-over-year price drops soon, but looking at the trend in this data I wouldn’t be surprised if we do before the end of 2018.

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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.

120 comments:

  1. 1
    HomelessBuyer says:

    Potential buyer here. Given the current movement of the house market, we’re gonna wait for about half a year to see where we’re at. Posting one datapoint here that our rent in downtown Seattle is about 2.2k it’s cheap enough with walking distance commute that we don’t want to give up in exchange for an expensive mortgage and more bedrooms.

  2. 2
    Patrick says:

    Same boat as Homeless Buyer. Made a couple offers in Q4 2017 and got blow out of the water even with aggressive escalation clauses and a hefty down payment.

    Got married in in August, and moved into a more comfortable rental in Ballard for $1700/month in April…

    I’d love to own my own home, seriously number 1 or 2 on my list of big lifetime goals right now, but I’m glad I didn’t get one a year ago and I won’t be actively looking any time soon.

    Maybe 6 months from now.

  3. 3
    DavidE says:

    Tim, this is good data. I anticipate a pause in falling prices: many sellers thinking about selling will wait hoping for a price rebound (“the Fed will cut interest rates or do something to support stocks and housing”). They will enter a denial phase for a while.

    That might reduce inventory somewhat and stabilize prices. I think the real panic will begin once mortgage rates approach 5.5% and more and sellers enter the “acceptance” phase (before entering depression).

  4. 4
    Andy Terentjev says:

    Black Swan time and it’s happening in several markets like Denver: https://www.denverpost.com/2018/10/03/denver-housing-market-goes-cold/

  5. 5
    uwp says:

    Did we have the biggest home price gains ever in the 4 months from Dec-April?

  6. 6
    The Tim says:

    RE: uwp @ 5 – Yes, the gain from December 2017 to April 2018 just barely beat out the same period in 2017 and was a little higher than 2012.

    It’s interesting to compare September of the past few years with the June/July peak of the prior year…

    Almost all of the big gains from early 2018 have been erased.

  7. 7

    Just got the email 3 minutes ago that rates popped a full .25% to 5%. This not from my regular lenders, but from one that emails me constantly as to rates and usually shows them on the low side vs reality. So this is a big change and one we have been waiting on. Normally it would pop .125 vs .25 as two spread out .125s or even two .125s close together. So one .25 all at once hitting that benchmark 5% is newsworthy.

  8. 8
    uwp says:

    RE: The Tim @ 6 – I like that “Peak to Sept” graph. Good stuff.
    Thanks Tim!

  9. 9
    GoBlue72 says:

    Its pretty much guaranteed. Bond markets pushed past the 3.00% mark on 10Y Treasuries, which are the primary benchmark index for setting 30 year purchase money mortgages. The market has done so earlier this year, but it was always sniffing at 3.00%, looking around, then getting scared like Punxsutawney Phil, and hovering in the 2.80-2.90% range. Market clearly broke through over last few weeks and firmly planted a new floor at 3.00%. Which in turn appears to have kicked off a technical correction, buoyed in part by a solid jobs report for September and upward revisions to the July and August reports. Unemployment is at a near 50 year low, inflation is higher but still mostly tame, wage growth is up and GDP is picking up.

    We are closing in at 3.25% on the 10 year, though I think there will some sniff and retreat on that in terms of setting a new inflection point, but sure feels like we could get closer to a new floor of around 3.25% faster than we got to the 3.00% floor. And pretty certain that at minimum will close the year with a new market floor around 3.25%. Too as a near a certainty as these things get.

    Ignore anyone watching Fed action – the correlation between Fed overnight lending rates and the long bond is incredibly weak. Pay attention to inflation measures and wage growth, esp if they both start moving up in tandem. Long term rates are going up and only question is whether the 10 year pushes through and ends the year closer to 3.50%, which would be a 100 bp increase since the start of the year. Which would translate into roughly 11% – 12% reduction in homebuyer borrowing capacity since January.

    Ignore any Realtor preaching otherwise – they are just spinning into their sale.

  10. 10
    GoBlue72 says:

    …And as pure anecdote, Amazon techie douches we sold our house in Ravenna-Bryant to a few years ago clearly started believing the hype too late at the party. Listing has been on market for almost 60 days, and they’ve cut the list price 9% over that time.

    It’s starting to get cold in the bathtub…

  11. 11

    By Patrick @ 2:

    Same boat as Homeless Buyer. Made a couple offers in Q4 2017 and got blow out of the water even with aggressive escalation clauses and a hefty down payment..

    Just an FYI, a seller doesn’t really care at all about your down payment unless you can offer part of that (or additional funds) as protection against a low appraisal. If the appraisal is low it doesn’t really matter if the buyer is putting 3, 5, 10, 20 or even 40 percent down, unless the buyer offers low appraisal protection.

  12. 12
    Andy Terentjev says:

    I am a big believer in the Case Schiller index which shows over 50 plus years that residential real estate prices correlate to inflation rates. Obviously for the last 6 years, Seattle and many coastal cities have been much higher then general inflation rates. If, and a big if, Seattle real estate prices revert to average inflation rates, how much do residential prices have to come down to return to the Case Schiller norm. My guess is at least 20% over the next couple of years.

    Tim, maybe this is a silly thought, but you are the best at analysis. Thank you.

  13. 13
    DavidE says:

    RE: GoBlue72 @ 9
    I think it is the quantitative tightening that is responsible. Not only is the Fed not buying bonds but selling, the shell game with the European and Japanese governments buying our debt (with printed money of course) has come to an end. The math is very harsh for home buyers and sellers alike: central banks are not buying and some are selling, and the U.S. Treasury is issuing debt at unbelievable rates (1.27 trillion in 2018). There is far too much treasury supply now and in the future without many buyers, pushing up the 10 year yield along with mortgage rates. If you are a buyer, your choice is to buy now and be under water quickly. If a seller, wait and see your home value plunge.

    It is amazing to me how little home buyers know about the bond market and how it affects them.

    “It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning. “

    Henry Ford

  14. 14

    RE: Kary L. Krismer @ 11

    Change that to Kary doesn’t care… That sentiment is more in your toolbox.

    The seller cares about what their agent cares about and to say there is no difference between 30% down and 3% down is hogwash.

    If you have a higher offer from a 3 % to 5% down buyer and you have a 30% down buyer in the room…you counter the 30% down buyer with the 3% down buyer’s price. Because who wouldn’t?

  15. 15
    Mark says:

    RE: HomelessBuyer @ 1

    Same boat here too. We are in a great financial position to buy, but I’m happy to sit tight for now. The market is clearly turning and we aren’t even in a slowdown/recession in the macroeconomy. That will be the time to buy.

    Rents are also coming down. One place I have been looking at for the last few months is now offering 1 month free rent, and now a $500 pre-paid Visa card for signing a 12 month lease. A new two bedroom runs $2500/month. I’m betting I could negotiate a few more concessions if I play my cards right…the property manager says they’re just 70% occupied and are motivated to get units rented.

  16. 16

    RE: ARDELL DellaLoggia @ 14 – If you had a perfectly good offer for 5% down, and a lower offer for 30% down, it would be foolish to counter the 30% down offer. The 5% could go away and the 30% could say no. Situations where a buyer can walk are not good. If you can get to mutual acceptance (e.g. a perfectly good offer that doesn’t require a counter) you should take it.

    30% offers the seller nothing over a 5% down offer. With either offer and a low appraisal the buyer could come back asking for concessions. And if they don’t get them they can walk. Situations where a buyer can walk are not good. And just being able to put more down does not mean that you’re necessarily more qualified to borrow the rest of the funds. That’s a fundamental misunderstanding many people have.

    Now if you had those two offers, and they were both perfectly good and significantly above your list price, it probably wouldn’t be a bad idea to ask both if they are both willing and able to offer low appraisal protection. That could be worth risking a counter to a perfectly good offer.

  17. 17

    By Mark @ 15:

    RE: HomelessBuyer @ 1

    Same boat here too. We are in a great financial position to buy, but I’m happy to sit tight for now. The market is clearly turning and we aren’t even in a slowdown/recession in the macroeconomy..

    Don’t forget to account for rising interest rates. I haven’t checked the Seattle Time’s author’s math about the payment on 700k before and 640k now (or whatever his numbers were) being similar. but it wouldn’t surprise me if he’s right. But then again, if rates go even higher, the reduction in price might at that time be great enough that there actually is some benefit to the buyer. And also, the more you put down the more likely there would be a benefit, because you wouldn’t be paying as much interest.

  18. 18
    DavidE says:

    RE: Kary L. Krismer @ 17

    Another possibility is the pendulum swinging wildly the other way: banks may over tighten lending standards as rates rise and become too unpredictable. They know that buyers will be underwater perhaps as soon as they buy, and may eventually opt to walk away.

  19. 19

    RE: DavidE @ 18 – Maybe, but that would be assumging banks are rational. ;-)

    We did see something like that in 2009 where private mortgage insurance became more expensive and/or difficult to get. But that technically wasn’t the banks.

  20. 20
    Eastsider says:

    Interesting quote –

    “We are seeing sellers who recently purchased their home putting it back on the market, sometimes without ever moving in,” observed Tina Mancebo, a Redfin agent who works with sellers in San Jose.

    https://www.redfin.com/blog/2018/10/for-sale-home-supply-surges-in-hot-west-coast-markets.html

  21. 21
    Matt P says:

    Whoever is administering the redfin website is truly incompetent. Today I went to look at some houses and it decided I might be a robot and had to click the stupid captcha button. This wasn’t good enough so I had to click those damnable pictures of buses then cars amd pf course it now blocked me. The desktop version works, but I can’t send them site feedback because of more bs captchas and they don’t respond to twitter. I hope they aren’t this incompetent at selling houses.

  22. 22
    GoHawks! says:

    Buyers buy when prices rise and sellers sell when prices decline.

  23. 23
    Joe says:

    Saw the CEO of Redfin on Bloomberg yesterday. He said that more people are departing the Seattle area than coming here. Not only are buyers changing their minds about buying, they are actually moving to different cities. This is supported by search activity on Redfin as well. There are more outgoing searches than incoming searches.

    The smart money is lowing their selling prices as we speak to capitalize on this once in a lifetime price bubble. The smart money knows the stock market is teetering as well, and losses there will exacerbate the RE price decline.

  24. 24
    Joe says:

    RE: HomelessBuyer @ 1

    That’s good thinking. In six months you’ll likely be seeing price declines accelerate and you’ll be glad you didn’t lose a year’s take home pay by being too eager to purchase a home.

    The builders, investors, and flippers will make sure prices drop as sales volume deteriorates. These sellers rely on housing transactions for income, so they have to buy and sell or they cannot make payroll. Don’t listen to anybody who says prices won’t move because sellers won’t reduce prices. All it takes is a few transactions to reduce the market price of all housing.

  25. 25
    Kyva says:

    RE: Joe @ 23 – What do you mean by outgoing and incoming searches? How is it defined?

  26. 26
    Jason says:

    RE: Kyva @ 25 – I think they’re looking at the proportion of people physically using their app in Seattle to search for properties in other markets, vs people physically located in other markets looking for properties in Seattle.

  27. 27
    Kyva says:

    RE: Kyva @ 25 – I found the bloomberg interview with redfin ceo. He didn’t go over how that number is defined but I am guessing something like (searches for properties in seattle area given user geolocation in non-seattle area) vs (searches for properties in non-seattle area given user geolocation in seattle area).

    Perhaps there would be an easier computational definition but I think it should clarify what incoming vs outgoing searches mean.

  28. 28
    David says:

    Redfin CEO also said he anticipates prices rising again in the new year.

    I’m more worried about the low unemployment rate causing a recession. Assuming the UE is the real deal relative to displaced workers from the Obama nightmare.

  29. 29
    Macro Investor says:

    The bull market in bonds (rising rates) lasted 35 years. What if the reverse is true for even half the time? Only old people know what it’s like to live in a normal rate environment. I can tell you it’s kind of fun getting 5-7% interest from a savings account :)

    It was a better world financially. People could afford a nice house on one income. I’m pretty sure you folks complaining about your escalation clauses need a spouses income to compete. It’s not a fun situation to be in, knowing that if one of you gets laid off or sick the foreclosure devil is a real possibility.

    If the general public starts thinking prices are in decline, there will be a rush to the exits. In a more normal real estate market it usually takes many months to sell a house. Once people are under water it can become very emotional. Since it costs 10% to sell, anybody unlucky enough to have bought within the last 2 years is gonna have some tense moments.

    This would be a very good time to sell a house in Seattle. There’s still time. Just a few weeks/months ago people on this board were happy to enter a bidding war. Cash out after one of the luckiest breaks in history.

  30. 30
    David says:

    RE: Macro Investor @ 29 – “I can tell you it’s kind of fun getting 5-7% interest from a savings account :)”

    I’ve been moving out of assets and going all cash for about 2 years. I’d love the banks to pump it up!!

    Moving into cash takes quite a while even in good times. Some of it was liquidated in Japan during the crazy devaluation of the Yen. And also from China with its capital controls causing problems and working hard not to get ripped off in the process. One of the ways to do that and avoid the Chinese problems was to convert their debt into below wholesale/cut-rate prices on certain products and then sell them outside of the country at wholesale prices getting close to double the cash value – though very slooowly. I finished all of this just before the Trump tariffs kicked in. I was warning other business owners that China’s NEW ultra-ultra-nationalist rhetoric was going to bite them and to get cash out of China – at least for now.

    Recently, I’ve been selling U.S. rental properties and other assets.

    Now am looking in Florida for other real property. Florida doesn’t tax the poor to pay for a bus-train (light rail) for the high-earners in Seattle to travel around the rich areas of metro-Seattle. Or run their best employers out of town.

    Also, I’m still seeing prices going up outside of Seattle proper – West Seattle, White Center, Burien.

  31. 31

    By Matt P @ 21:

    Whoever is administering the redfin website is truly incompetent. Today I went to look at some houses and it decided I might be a robot and had to click the stupid captcha button. This wasn’t good enough so I had to click those damnable pictures of buses then cars amd pf course it now blocked me. The desktop version works, but I can’t send them site feedback because of more bs captchas and they don’t respond to twitter. I hope they aren’t this incompetent at selling houses.

    I think that’s a Captcha issue. I had a similar problem on another website last week. It kept popping up more and more pictures I had to click through. I finally gave up.

  32. 32

    We Need More Data

    How many rent and how many buy….percentage of each? The renters can just take a new Midwest higher paid manufacturing job and split Seattle with a smile on their faces. The home owners either have to sell cheaper [?] or rent it out to get that new higher paid job offer…its like an anchor from getting the new American manufacturing jobs out there now.

  33. 33

    RE: David @ 30
    And IRS 2018 Tax Revenue Went WAY Up With Tax Cuts and Tariffs

    So the savers get more interest money and the horrifying federal debt payments are likely solvent too. Win/Win. The losers are the spendthrifts? LOL

  34. 34

    The Past Ups and Downs in Seattle Real Estate Wishful Thinking With This New Paradigm Economy?

    https://www.seattletimes.com/business/real-estate/as-sales-plunge-king-county-home-inventory-has-biggest-jump-on-record/?j=283914&sfmc_sub=5119184&l=1798_HTML&u=5541012&mid=7234592&jb=184&utm_source=marketingcloud&utm_medium=email&utm_campaign=Top+of+The+Times+former+subs_10_6_2018&utm_term=Registered%20User

    Sounds like time to bar down the doors and hope she sells fast? Or just shrug it off as another short down period that will vanish like the OVERPOPULATION wild fire smoke has?

  35. 35
    wreckingbull says:

    By softwarengineer @ 33:

    RE: David @ 30
    And IRS 2018 Tax Revenue Went WAY Up With Tax Cuts and Tariffs

    LOL

    Where are you getting your information? Didn’t this just get refuted in a thread a day or two ago?

    https://fred.stlouisfed.org/series/W006RC1Q027SBEA

  36. 36
    Mark says:

    RE: Macro Investor @ 29

    “The bull market in bonds (rising rates) lasted 35 years. What if the reverse is true for even half the time? Only old people know what it’s like to live in a normal rate environment. I can tell you it’s kind of fun getting 5-7% interest from a savings account :)”

    Fundamentally, the prices of assets are a function of the availability and price of credit, full stop. If we are indeed entering a rising rates environment, we can expect home prices (as well as stock PE multiples) to contract over the long term.

    Getting 5-7% interest from a savings account or a money market fund sounds nice, but if we are returning to a rising rates environment, that’s likely going to be secondary to inflation running hot. In the 70s, you could buy 10 year Treasury bonds at 8-9% – problem was, inflation ran hotter than that, and by the time you got your principal and interest payments back, you’d lost purchasing power. If you wanted to sell the bond before its term, rates had risen and the price of the bond had fallen to account for that. They were called “certificates of confiscation” for a reason. A rising rates environment is bad news for all asset holders – except maybe gold.

    Thing though is I’m not sure we’ve seen the lows in the 10Y Treasury (or the 30 year mortgage yet): once the economy goes into recession again, I think it’s possible the Fed will respond to the deflation by dropping rates to 0% again and re-launching European style QE. You may be able to borrow for next to nothing and then pay the mortgage off a few years later with Monopoly money once the deflationary recession turns into an inflationary one.

  37. 37
    Matt P says:

    By Kary L. Krismer @ 31:

    By Matt P @ 21:

    Whoever is administering the redfin website is truly incompetent. Today I went to look at some houses and it decided I might be a robot and had to click the stupid captcha button. This wasn’t good enough so I had to click those damnable pictures of buses then cars amd pf course it now blocked me. The desktop version works, but I can’t send them site feedback because of more bs captchas and they don’t respond to twitter. I hope they aren’t this incompetent at selling houses.

    I think that’s a Captcha issue. I had a similar problem on another website last week. It kept popping up more and more pictures I had to click through. I finally gave up.

    Sure, but it’s a redfin problem that I was given a captcha in the first place just to look at a house listing.

  38. 38
    Troy Thiel says:

    Yep, this is not a “normal” “balancing” as way too many of the RE industry leaders are saying..AS important as the sales price stats here is Unit Sales count…the Power of a Real Estate Market is Units Sold times Price per population…and Seattle and the area’s is in steep decline..in an area where Home Ownership is already far behind normal rates for major urban areas…especially with the successful and dynamic economy, neighborhoods, culture and nature we have….we are wayyyyyyy underperforming….why? State laws inhibiting a holistic new inventory at affordable price points and types….a 2 class renters/owners economy is good for very few people..primarily apartment owners and the Power elite. We gotta get real with the fixes…STAT!

  39. 39
    steven says:

    can retired ppl qualify for mortgage ? my parents sold their props and just have cash but dont want to spend it all. how do they prove incokbb e and what not?

  40. 40

    By steven @ 39:

    can retired ppl qualify for mortgage ? my parents sold their props and just have cash but dont want to spend it all. how do they prove incokbb e and what not?

    I know some people think reverse mortgages are a scam, but the truth is they are useful in a few cases. You described one, assuming at least one of your parents is 62 or older.

    I recently saw some numbers run for a 70 year old, and they can get roughly 45% of the value of a new house in a reverse mortgage. So if your parents were going to buy a $400,000 house they would only need to pay $220,000 or so. That would leave them only needing to pay taxes, insurance and maintenance. Note the setup costs on reverse mortgages are high, so you don’t want to do it for a short term situation. But it can be a good way for an older couple to downsize while also using less of the cash they receive from their sale.

    Note that percentage they have to pay goes up if they are younger than 70 or if interest rates rise before they do the deal. People who did reverse mortgages a couple of years ago probably got fairly good percentages for their given age.

  41. 41
    Joe says:

    RE: Kyva @ 25

    An outgoing search is when someone living in Seattle searches housing in another city. An incoming search is when someone from another city searches Seattle properties. They can identify the location where searches originate.

  42. 42
    steven says:

    RE: Kary L. Krismer @ 40

    well reverse mortgage would be basically owning a home and selling it in exchange for monthlyh payment. my parents have 1M+ in cash but want to buy a 500k home with a down payment of 150k. can this be done? they have no income otherwise at least in the us

  43. 43
    wreckingbull says:

    RE: steven @ 42 – If at retirement, I had $1 million cash and no income, I don’t think I would be buying a $500K house. I think I would be looking for something less expensive.

    If that was my situation, I would find a part of the country in which I could buy a $250,000 home. I would then use the 4% rule (of thumb) from the Trinity Study and withdraw .04 * 750,000 = $30,000 per year. With no mortgage, living off $30,000 is tight, but doable. They would need to be invested in an appropriate mix of equities and fixed income investments for this to give them a reasonable chance of success.

    ETA: I would also use a rent/buy calculator and investigate the ramifications of renting instead of buying too.

  44. 44
    steven says:

    RE: wreckingbull @ 43

    they have a lot more assets than that and it’s 1m+ as in plus not 1M

  45. 45

    By steven @ 42:

    RE: Kary L. Krismer @ 40

    well reverse mortgage would be basically owning a home and selling it in exchange for monthlyh payment. my parents have 1M+ in cash but want to buy a 500k home with a down payment of 150k. can this be done? they have no income otherwise at least in the us

    There are at least two types of reverse mortgage. One does give a monthly payment. But the other is basically a lump sum payment, so in the example I gave the reverse mortgage would create $180,000 of funds with the balance to come from some other source.

    To get to the point where they would only pay $150,000 of $500,000 they’d probably need to be in their 90s.

  46. 46
    steven says:

    RE: Kary L. Krismer @ 45

    the problem iwith reverse is that in the end they don’t own the house. i want them to keep the house.

  47. 47

    By steven @ 44:

    RE: wreckingbull @ 43

    they have a lot more assets than that and it’s 1m+ as in plus not 1M

    Still, his idea of finding something less expensive is good advice. When you’re retired you don’t need to live as close to major urban centers as when you’re working. And you don’t tend to need as large of place. That’s why I was using $400,000–that would possibly even be higher than what you need if you go even a small way out, say maybe Maple Valley distance. But even further out you could get a rather nice place.

  48. 48
    wreckingbull says:

    RE: steven @ 44 – You will get better answers if you use specific figures and not vague statements. Why do they want to take out a mortgage, especially if they are only spending a small percentage of their net worth on a home? That does not make much sense in my opinion.

  49. 49
    steven says:

    guys.. i don’t mean to be rude but i’m asking for mortgage advice not asset management advice. they’ve done their share of asset management to be multi-millionaires. the theory on the end goal is to make money while doing what they want to do and not be forced to do something they don’t want to do

  50. 50
    steven says:

    RE: wreckingbull @ 48

    so that i can use the remaining balance to create leverage for my investments if and when crash happens

  51. 51
    wreckingbull says:

    RE: steven @ 50 – Fair enough. Let us know how all ends!

    I will say if you are playing with their retirement, seeing a pro would not hurt. The last thing you want is homeless parents someday.

  52. 52
    uwp says:

    By softwarengineer @ 33:

    RE: David @ 30
    And IRS 2018 Tax Revenue Went WAY Up With Tax Cuts and Tariffs

    So the savers get more interest money and the horrifying federal debt payments are likely solvent too. Win/Win. The losers are the spendthrifts? LOL

    Just a friendly reminder that IRS revenue is down and the federal deficit is rising.

    But whatever.

    EDIT: Also, if rates are rising than the interest payments on the debt are probably rising as well.

  53. 53
    pfft says:

    By DavidE @ 13:

    RE: GoBlue72 @ 9It is amazing to me how little home buyers know about the bond market and how it affects them.

    The Tim had a post years ago saying that mortgage rates aren’t as big as a deal as you think when it comes to home prices. If I am not mistaken the last 2-3 years of the last bubble saw mortgage rates increase.

    By the way, are there any other people here who called the turn around in the housing market circa the summer of 2010(?). I was a year early I believe. Any other bulls here?

  54. 54
    Ardell says:

    RE: steven @ 49

    The short answer is they have to show how they will make the payments. If they are going to rent it out, they can use 75% of that rental income as a source of income with which to make the payments.

  55. 55
    Macro Investor says:

    By David @ 30:

    RE: Macro Investor @ 29 – “I can tell you it’s kind of fun getting 5-7% interest from a savings account :)”

    Now am looking in Florida for other real property. Florida doesn’t tax the poor to pay for a bus-train (light rail) for the high-earners in Seattle to travel around the rich areas of metro-Seattle. Or run their best employers out of town.

    Off topic for a real estate blog, but yeah, the light rail makes me shake my head. In the decades that it will take to build this 50s technology commuting will totally change. There will be self driving cars and more telecommuting. There’s a good chance that once finished it won’t be needed. Too expensive, too inflexible. Only gov’t in their infinite wisdom.

    Of course, tax payers will be stuck with the bill for life.

  56. 56
    pfft says:

    By Macro Investor @ 55:

    By David @ 30:

    RE: Macro Investor @ 29 – “I can tell you it’s kind of fun getting 5-7% interest from a savings account :)”

    Now am looking in Florida for other real property. Florida doesn’t tax the poor to pay for a bus-train (light rail) for the high-earners in Seattle to travel around the rich areas of metro-Seattle. Or run their best employers out of town.

    Off topic for a real estate blog, but yeah, the light rail makes me shake my head. In the decades that it will take to build this 50s technology commuting will totally change. There will be self driving cars and more telecommuting. There’s a good chance that once finished it won’t be needed. Too expensive, too inflexible. Only gov’t in their infinite wisdom.

    Of course, tax payers will be stuck with the bill for life.

    Someone has a better crystal ball then me. How long until Seattle wins the Stanley Cup? Isn’t ridership surging?

    I forget I am on a site with a lot of right-wingers sometimes. It sometimes distorts my thinking.

  57. 57

    IRE: Macro Investor @ 55 – I think the trolley cars are even worse in that regard. The whole thing when complete will cover an area I would consider walking distance. And I suspect that when these things were proposed no one went back to look why we had them at one point and then they were taken out.

  58. 58
    Macro Investor says:

    By Mark @ 36:

    RE: Macro Investor @ 29

    “The bull market in bonds (rising rates) lasted 35 years. What if the reverse is true for even half the time? Only old people know what it’s like to live in a normal rate environment. I can tell you it’s kind of fun getting 5-7% interest from a savings account :)”

    Fundamentally, the prices of assets are a function of the availability and price of credit, full stop. If we are indeed entering a rising rates environment, we can expect home prices (as well as stock PE multiples) to contract over the long term.

    Getting 5-7% interest from a savings account or a money market fund sounds nice, but if we are returning to a rising rates environment, that’s likely going to be secondary to inflation running hot. In the 70s, you could buy 10 year Treasury bonds at 8-9% – problem was, inflation ran hotter than that, and by the time you got your principal and interest payments back, you’d lost purchasing power. If you wanted to sell the bond before its term, rates had risen and the price of the bond had fallen to account for that. They were called “certificates of confiscation” for a reason. A rising rates environment is bad news for all asset holders – except maybe gold.

    Thing though is I’m not sure we’ve seen the lows in the 10Y Treasury (or the 30 year mortgage yet): once the economy goes into recession again, I think it’s possible the Fed will respond to the deflation by dropping rates to 0% again and re-launching European style QE. You may be able to borrow for next to nothing and then pay the mortgage off a few years later with Monopoly money once the deflationary recession turns into an inflationary one.

    It is hard to invest in a rising rate environment — but you don’t have to restrict yourself to the long side. Many investors equally consider the short side. The bond/gold market is a lot more complex than people think. They don’t just go up or down with inflation expectations. I know that’s what economists teach. It’s pretty clear that inflation hasn’t gone up and down as rapidly as gold spiked and crashed. Nor has it suddenly jumped up like rates have this year.

    TL;DR… it’s complicated.

    ZIRP was a reaction to a banking emergency. It is unlikely they would do that for a “normal” recession. This is what they’ve been communicating.

    70s inflation was caused by going off the gold standard and gulf countries demanded a lot more unbacked dollars for their oil. What would cause inflation now? Trade has gone global and there are still 5 billion uneducated, poor people ready to drive down wages. If making things in China gets expensive enough, manufacturing will move somewhere else. So where is inflation now. Not in globally manufactured goods. It’s mostly in leveraged assets, like houses and stocks. Or in monopoly-like services like tuition and health care.

  59. 59
    Brian says:

    RE: Macro Investor @ 55

    Yep, I completely agree. I am totally for the light rail that’s going to be completed in the next 5 years or so. But the light rail that costs $50+ billion and not completed until 2050+ is absolutely insane! I wish they would cancel ST3 because I don’t want to pay for that crap.

  60. 60
    David says:

    RE: Brian @ 59 – My whole point is that they raised property taxes MASSIVELY and the poorest areas are not served by this bus-train. If you want to save for retirement, King County is making it clear they don’t give a f#@k. If you are retired on a fixed income, they don’t care. Becuz progressive.

    You cannot ride it to almost everywhere and then they tax your car which you need

    There was just a recent article stating that high-income riders are the most prominent riders this lite-rail boondoggle.

    Keep paying up ‘granma’ because we don’t want to hear your whining.

  61. 61
    Mark says:

    RE: Macro Investor @ 58

    Inflation is coming. The US is running at sub 4% unemployment and wages are finally starting to tick up. CPI is on the move.

    The real long term driver is going to be our now $21T Federal debt and the fact that we are running a $1T+ defecit each year. Shockingly, this is when the economy is in excellent condition, humming along at full employment. The Federal government is also sitting on tens of trillions of dollars of unfunded SS and healthcare obligations to Boomers I suspect will be political suicide to renege on. All that will need to be financed and added into the national debt.

    In the shorter term, we are nine years into an economic expansion with the Fed in a tightening cycle. Historically, that means we are closing in on the end of this cycle. Unless we believe recessions no longer can occur, we eventually we will be in one, tax revenues will decrease and the deficit will grow further. The Treasury will need to finance the shortfall by issuing more debt and restarting QE to make payments affordable. Create that much money to pay for your obligations —> inflation. It’s coming.

  62. 62
    pfft says:

    By David @ 60:

    RE: Brian @ 59 – My whole point is that they raised property taxes MASSIVELY and the poorest areas are not served by this bus-train. If you want to save for retirement, King County is making it clear they don’t give a f#@k. If you are retired on a fixed income, they don’t care. Becuz progressive.

    You cannot ride it to almost everywhere and then they tax your car which you need

    There was just a recent article stating that high-income riders are the most prominent riders this lite-rail boondoggle.

    Keep paying up ‘granma’ because we don’t want to hear your whining.

    Source source source source source link link link source where did you get that?

    By “they” you mean the voters who approved the measure?

    “My whole point is that they raised property taxes MASSIVELY and the poorest areas are not served by this bus-train.”

    You guys don’t give a shhhh about the poor. please. save it.

  63. 63
    Macro Investor says:

    By Brian @ 59:

    RE: Macro Investor @ 55

    Yep, I completely agree. I am totally for the light rail that’s going to be completed in the next 5 years or so. But the light rail that costs $50+ billion and not completed until 2050+ is absolutely insane! I wish they would cancel ST3 because I don’t want to pay for that crap.

    Just of the fun of it (yes, I’m crazy) I went and looked up the published sound transit budget numbers. They state very clearly that the average fare of $4.57 only covers 35% of the cost. So if it paid it’s way (even with record ridership), a ticket would cost almost $14.

    Ridership is now at 80k per weekday. This sounds pretty good until you consider most of those probably rode the bus before. Same routes, same people. Why would a slow train convince many drivers to switch?

  64. 64
    DavidE says:

    By pfft @ 53:

    By DavidE @ 13:

    RE: GoBlue72 @ 9It is amazing to me how little home buyers know about the bond market and how it affects them.

    The Tim had a post years ago saying that mortgage rates aren’t as big as a deal as you think when it comes to home prices. If I am not mistaken the last 2-3 years of the last bubble saw mortgage rates increase.

    By the way, are there any other people here who called the turn around in the housing market circa the summer of 2010(?). I was a year early I believe. Any other bulls here?

    A 1 percent rise in mot rage rates cuts affordability by 8%. 2 percent rise will cut affordability on a 900K home in Seattle by 16%, so prices have to adjust accordingly. I think rise in mortgage rates is indeed a very big deal since you have such percentages on very high numbers (home prices) in bubble areas. The national debt will also soon find out as a 2% rise will make interest payments overtake the military expenditure.

  65. 65

    RE: Macro Investor @ 58 – I’m not sure the rise in gold prices was about fear of inflation as much as general economic fear (which admittedly could lead to inflation).

    And I’m not sure the inflation in the 70s was actually inflation. I think it was more the result of the artificially inflated cost of one significant commodity (oil) working its way through the economy. Technically that is not inflation. But it lead to (stupid) policies that clamped down on the economy as if there were inflation.

  66. 66

    Here’s an interesting article on Seattle’s upcoming education levy. It will be interesting to see how Seattle voters react after the McCleary increases. Note this is not an operating levy, and less than half is going to K-12 because 52% is going to pre-K and then there’s also college scholarships taking up a portion. Be sure to read the opposing piece linked in the article.

    Oh, and finally, I guess we’ll have to wait two years to see how McClearly levels out on taxes, because apparently the legislature passed a temporary measure that will kick in next year. I had missed that.

    https://www.seattletimes.com/education-lab/voters-guide-how-much-will-seattles-education-levy-cost-and-what-exactly-will-it-pay-for/

  67. 67

    By Macro Investor @ 63:

    Why would a slow train convince many drivers to switch?

    I agree with a lot of what you say about light rail. That fares only cover a small portion of cost and that it’s very inflexible and only serves a limited area.

    But this makes me think you’ve never been on light rail. Ignoring the fact that the southern portion is at grade and thus subject to auto accident delays, it is reasonably fast getting into town, particularly if there is traffic. It’s basically an express bus that doesn’t get caught in traffic (absent a train/car accident) and has the ability to change street lights in its favor.

    The main problem is lack of parking for riders, which probably greatly limits the ridership. I went downtown Friday and drove due to concern about finding parking at about 10:30 in the morning. And getting back to the fares, I think my parking was only $7 and the miles driven that much different, so there was no real financial incentive to avoid driving for my short venture into town. The only incentive would be to avoid traffic and parking hassles.

  68. 68
    David says:

    RE: Kary L. Krismer @ 66 – If I could vote on Seattle policies, I would YES. Why? Because anything that nails the pocketbook of the same people who could put Ed Murray into office is good by me. And then follow it up with Jenny Durkan. Anything that burdens Seattleites economically and pushes them out in the surrounding cities works to my economic advantage.

    Also, education money is not going to improve anything other than the public-money supported voter pool of Seattle leftists. No amount of education can improve IQs.

  69. 69

    By DavidE @ 64:

    A 1 percent rise in mot rage rates cuts affordability by 8%. 2 percent rise will cut affordability on a 900K home in Seattle by 16%, so prices have to adjust accordingly.

    Incorrect. Prices will be affected by such changes, but they don’t have to adjust “accordingly” you’re looking only looking at one factor that affects prices. Prices are impacted by many things. So if interest rates rise when other factors would trend toward price increases, prices could stay relatively stable or even rise (as occurred back in the late 70s when interest rates skyrocketed well over 10%), or if they rise when other factors are negative for prices the prices could plummet.

  70. 70
    David says:

    RE: pfft @ 62 – You do realize that Trump is going to win again. And that the Dems putting up that malingering liar Ford and the overt racism expressed by the Left is going to doom the Dems for a LOOOONG time.

  71. 71
    David says:

    By Mark @ 61:RE: Macro Investor @ 58
    “In the shorter term, we are nine years into an economic expansion with the Fed in a tightening cycle. ”

    There was actually a recession at the end of Obama’s second term. The expansion is not really 9 years old.

  72. 72

    By David @ 70:

    RE: pfft @ 62 – You do realize that Trump is going to win again. And that the Dems putting up that malingering liar Ford and the overt racism expressed by the Left is going to doom the Dems for a LOOOONG time.

    You do realize that all you watched was political theater, orchestrated by the parties in concert with one other and designed to rile up each of the parties’ respective bases, right? Just as many people who bothered to watch that farce came away thinking Kavanaugh was the liar as thought Ford was the liar. It depended largely on party affiliation, but also gender. And the entire process had nothing to do with determining the facts. It just drug two people through the mud to benefit the political system.

    Unfortunately it also greatly upset a lot of people and drove a lot of people apart. But that’s the world we live in when you can pick your news sources and websites by their political leaning and get spoon fed information consistent with the way you already think. Anything contrary will upset you. And I’m coming to the conclusion that liberals tend to get more upset than conservatives at opposing views, possibly because their positions are more based on logic than staunch ideology. They are more likely to question the basis of their positions, and thus get upset.

  73. 73

    By David @ 71:

    There was actually a recession at the end of Obama’s second term. The expansion is not really 9 years old.

    Why do you keep repeating that? A miniscule insignificant decline one quarter is not a recession by any definition of the word.

    https://tradingeconomics.com/united-states/gross-national-product

  74. 74
    Benvolio says:

    By David @ 60:

    RE: Brian @ 59 – My whole point is that they raised property taxes MASSIVELY and the poorest areas are not served by this bus-train.

    Yes, typical pandering to all those rich Rainer Valley snobs. The biggest pill to swallow for those rich elite was all the private golf courses and county clubs the lite rail had to slice through on it’s way down MLK way.

  75. 75

    RE: Benvolio @ 74 – LOL. Now that’s funny!

  76. 76
    redmondjp says:

    By Benvolio @ 74:

    By David @ 60:

    RE: Brian @ 59 – My whole point is that they raised property taxes MASSIVELY and the poorest areas are not served by this bus-train.

    Yes, typical pandering to all those rich Rainer Valley snobs. The biggest pill to swallow for those rich elite was all the private golf courses and county clubs the lite rail had to slice through on it’s way down MLK way.

    You think you are being funny, but your example of Rainier (which you misspelled BTW) Valley is EXACTLY where low-income people were harmed. How? The bus routes used to go through the residental neighborhoods, closer to where those low-income people lived. So it was a much shorter and safer walk to the bus stop.

    Once they put the light rail in, they did away with those neighborhood bus routes, so what used to be a 1-3 block walk to the nearest bus stop is now a 5-20 block walk to the nearest light rail station. A single mom working the night shift at a hospital is not going to walk that far, at night, in the winter, in the rain, in that neighborhood.

    So you made our point with your example.

  77. 77
    Bobber says:

    We’re a full week into October and inventory hasn’t dropped one unit yet. In the past, seasonal patterns showed a marked decrease in inventory in October. This is another sign that sellers are panicking. I suspect price declines will accelerate as the smart sellers capitalize on this once in a lifetime housing bubble.

    Meanwhile, potential buyers are backing out. Who wants to be the ultimate bagholder by buying at the top of this bubble. Prices won’t recover in Seattle for many, many years, given country-wide macroeconomic conditions we currently face. The upcoming recession hasn’t even started yet.

  78. 78
    Brian says:

    RE: Bobber @ 77
    As the housing market enters the cold season, this is the worst time for interest rates to be rising again, putting even more strain on affordability. Makes these overpriced mosspits even less appealing, especially without the glamorous sunshine glowing upon them.

  79. 79
    Joe says:

    RE: Brian @ 78

    I can relate to that term “mosspit”. It describes a lot of the overpriced rundown dwellings in Seattle. These things could destroy your financial future, given the purchase price and future costs of fixing them for resale.

    It’s good that people now starting to think about what you actually get for $1M in Seattle. You get a postage stamp lot priced at about $700k and an old musty rotting structure priced at about $300k. When you purchase something like in a FOMO market, you may never be able to resell it, even for half the price. In a tough market like the one we are entering for the next five years, buyers will want perfect houses. The average mosspit won’t cut it.

    I get a shiver just thinking about the average $1M Seattle mosspit. A roof that needs replacing soon. Musty carpets that are least 15 years old. A old furnace and vent system full of dust mites. A yard full of moss. Tiny closets and lack of storage space. Kitchens, bathrooms, and interiors in drastic need fo remodeling. Mold under the flooring and behind tiles. Rats chewing on things under the home. Yikes !! Most of these dwellings may be tear downs in just 20 years. It’s hard to imagine people were buying these mosspits without inspection.

  80. 80
    David says:

    By Kary L. Krismer @ 73:

    By David @ 71:

    There was actually a recession at the end of Obama’s second term. The expansion is not really 9 years old.

    Why do you keep repeating that? A miniscule insignificant decline one quarter is not a recession by any definition of the word.

    https://tradingeconomics.com/united-states/gross-national-product

    Nope. It was bigger Obama downturn than one quarter:

    “In 2015 and 2016, the United States experienced the second type of event.

    There was a sharp slowdown in business investment, caused by an interrelated weakening in emerging markets, a drop in the price of oil and other commodities, and a run-up in the value of the dollar.”

    https://www.nytimes.com/2018/09/29/upshot/mini-recession-2016-little-known-big-impact.html

  81. 81
    David says:

    RE: Kary L. Krismer @ 73

    Nope. It was bigger Obama downturn than one quarter:

    “In 2015 and 2016, the United States experienced the second type of event.

    There was a sharp slowdown in business investment, caused by an interrelated weakening in emerging markets, a drop in the price of oil and other commodities, and a run-up in the value of the dollar.” NYT, 9/29/18

  82. 82
  83. 83
    Macro Investor says:

    By Macro Investor @ 63:

    By Brian @ 59:

    RE: Macro Investor @ 55

    Yep, I completely agree. I am totally for the light rail that’s going to be completed in the next 5 years or so. But the light rail that costs $50+ billion and not completed until 2050+ is absolutely insane! I wish they would cancel ST3 because I don’t want to pay for that crap.

    Just of the fun of it (yes, I’m crazy) I went and looked up the published sound transit budget numbers. They state very clearly that the average fare of $4.57 only covers 35% of the cost. So if it paid it’s way (even with record ridership), a ticket would cost almost $14.

    Ridership is now at 80k per weekday. This sounds pretty good until you consider most of those probably rode the bus before. Same routes, same people. Why would a slow train convince many drivers to switch?

    Wrote this late at night, so I left out an amusing story. When the light rail was fairly new I decided to try it, even though I had other, more direct choices. I had a meeting downtown and not much else to do, so I drove to the tukwila station. At the time that was the furthest station. They hadn’t completed the airport leg.

    I walked up to the platform and waited. And waited. And waited. They were not coming as often as advertised, and all the extra time I budgeted was running out. Finally, I hustled back to my car and drove downtown. Freeway traffic wasn’t too bad and I made it much faster than the train would have. Obviously, because a train going 35 mph down MLK and stopping every few blocks is slower than a car going 55.

    I got to my meeting with plenty of time to spare. My experience was very much like bus commuting, where you never know when they’ll show up… if at all. So I’m pretty confident only dedicated bus users would switch to the train.

    I did try the train again when I had no time pressure, and I was only going downtown to window shop. It wasn’t too bad, but frustratingly slow. My impression was the improvements and landscaping to MLK blvd were nice. The other money spent was a waste.

  84. 84
    Macro Investor says:

    When it comes to local elections I vote “no” to even 1 cent of new taxes. Why? Because it is gov’ts job to prioritize, not raise taxes for every new idea. If the new idea is so important, let them cut something else instead. By asking for more taxes they are saying they are too stupid and lazy to look for spending that is outdated or wasteful.

    Get to work, a-holes. You wanted the job, now do it.

    One of my friends was recently elected to the state house. Over lunch he explained that he worked hard and considered himself an expert on school funding. I asked him if my pet theory was correct — that most of the money is spend outside of the schools on layer upon layer of admin staff. He said that was right. He called the schools “an adult jobs program” and that teaching kids was an afterthought.

    So, especially for school bonds I always vote “no”.

  85. 85
    randomseattledummie says:

    RE: Kary L. Krismer @ 11

    Longtime reader (for better or worse including the comments), don’t post much.

    Kary, just FYI you’re wrong. Maybe “some” buyers don’t care but I have sold (seller, not agent) a lot of homes around the greater Seattle are and I certainly DO care how much my prospective buyer is putting down. More down payment = stronger buyer = higher chance from my perspective of an ability to actually close on the loan or weather the storm of a low appraisal, etc. After having enough deals blow up from low down payment buyers with larger down payments are gold from this seller’s perspective.

  86. 86
    Macro Investor says:

    By David @ 81:

    RE: David @ 80https://www.nytimes.com/2018/09/29/upshot/mini-recession-2016-little-known-big-impact.html

    Pretty interesting the fear mongering over Trump’s election. If he won, the economy would crash, there would be WWIII, a dictatorship, cats and dogs living in sin, etc…

    Now we see more recently, the tariffs are gonna crash the economy, etc… Yet the opposite has happened.

    Anybody remember when the democrats were the party for regular middle class people? What happened to them? Trump is the only prez in our lifetimes actually TRYING to bring back jobs lost to globalism. How can democrats not be kissing his fee? We truly live in bizzaro world.

  87. 87
    Troy Thiel says:

    You’re just dumb..aren’t you?

  88. 88
    wreckingbull says:

    RE: Macro Investor @ 83 – Not just admin layers, but also facilities. My local school district has one of the worst graduation rates in the state, but they do have beautiful new buildings, inlaid hardwood floors, a weight room with a centrally computer-controlled electro-pneumatic weight system, and gas fireplaces in the library.

    When I attended public school, we had well paid teachers and crappy painted cinderblock buildings. We need to pull our heads out of our collective asses and get back to what is important.

  89. 89

    By randomseattledummie @ 84:

    RE: Kary L. Krismer @ 11

    Longtime reader (for better or worse including the comments), don’t post much.

    Kary, just FYI you’re wrong. Maybe “some” buyers don’t care but I have sold (seller, not agent) a lot of homes around the greater Seattle are and I certainly DO care how much my prospective buyer is putting down. More down payment = stronger buyer = higher chance from my perspective of an ability to actually close on the loan or weather the storm of a low appraisal, etc. After having enough deals blow up from low down payment buyers with larger down payments are gold from this seller’s perspective.

    Some do care, because they mistakenly think (or have agents that mistakenly think) that a higher down payment means a stronger buyer (more likely to be able to get financing). That’s not true, which was one of my points. But to explain it further, the low down buyer may want to conserve cash or be more highly leveraged. They might have a more qualified lender. It doesn’t mean they have a lower credit rating.

    The main point though was that the low appraisal provisions kick in with either type of buyer if the appraisal is low. The high down buyer would have more options to deal with that besides asking for a price reduction, but that’s at their option. Low appraisal protection is far more important than the percent down for sellers.

  90. 90

    RE: Macro Investor @ 85 – I still think Presidents get too much credit/blame for the economy, but I agree that Trump is the first trying to claw back jobs. But to that point, it’s not like the prior politicians in the federal government didn’t know globalization would cost jobs and hinder wages, at least short and mid-term. I’m surprised the labor unions didn’t put up more of a fuss.

    As to the lack of an impact on the larger economy (as opposed to segments) from the tariffs, I think that’s likely because other countries really want to deal with us. Trump has not been exactly friendly with Canada and Mexico, but that didn’t stop them from negotiating new deals with us. Also, those tariffs were hurting segments of their economies.

    But finally, the press deals in fear. Almost everything they report has some element of fear that is overblown out of proportion to gain eyeballs and get people to pay attention to an issue in the future.

  91. 91
    sung baek says:

    while i agree that the current picture is correction i actually had question. The current stock market is extremely high, economy is doing well , unemployment low and wage is climbing. I think many people would agree that while rates play a role in affordability but not necessarily determine the housing market.

    What elements do we have that support market correction right now? I understand that psychological economics and herd behavior in humans have strong influence in the market and i agree (it explains the current inventory and closing rates for me) but i was wondering if there are also other elements as well. (exclude homelessness and seattle not being what it used to crap; it’s not like other cities are much better) I think the conversion of apartments to condos is one, but are there others?

  92. 92
    randomseattledummie says:

    RE: Kary L. Krismer @ 88

    My experience is definitely anecdotal but I have found low down payment buyers never are willing or able to come up with more money when low appraisal happen. High down payment buyers many times have been willing (while not contractually obligated) to put more money down to complete the sale .

  93. 93
    pfft says:

    RE: David @ 70 – Trump didn’t eve win the popular vote. He’s not going to pull that off again being so deeply unpopular.

  94. 94
  95. 95
    pfft says:

    By Macro Investor @ 84:

    When it comes to local elections I vote “no” to even 1 cent of new taxes. Why? Because it is gov’ts job to prioritize, not raise taxes for every new idea. If the new idea is so important, let them cut something else instead. By asking for more taxes they are saying they are too stupid and lazy to look for spending that is outdated or wasteful.

    Get to work, a-holes. You wanted the job, now do it.

    One of my friends was recently elected to the state house. Over lunch he explained that he worked hard and considered himself an expert on school funding. I asked him if my pet theory was correct — that most of the money is spend outside of the schools on layer upon layer of admin staff. He said that was right. He called the schools “an adult jobs program” and that teaching kids was an afterthought.

    So, especially for school bonds I always vote “no”.

    A quick google shoots down your “theory.” school budgets are some of the most discussed and voted on things in the nation. Just google it!

    “NCES also breaks down school spending by specific categories within the overall costs of salaries, benefits, purchased services, and supplies. The biggest individual spending category by far is “instruction,” at $6,821 per student annually—or 61 percent of all current spending.

    Instruction is defined by NCES as including “activities dealing directly with the interaction between teachers and students.” It can include instruction that occurs online, and outside the classroom:”

    This myth of layers and layers of administration is not borne out by the data. They spending more money on operation and maintenance.

    The reason why some underperforming districts have nice facilities like pools is that a few districts request money for pools. You can’t just give money for a pool to a few districts. Everyone wants in on that money so the legislature will pass a bill that funds pools(or a weight room) for any district that needs them. It makes sense in that way. Underperforming schools often need more money for extra tutoring and instruction and that money doesn’t always come.

    K-12 Spending: Where the Money Goes
    https://marketbrief.edweek.org/marketplace-k-12/k-12-spending-where-the-money-goes/

  96. 96
    David says:

    RE: pfft @ 93 – Correction: He didn’t win California.

  97. 97
    pfft says:

    By David @ 96:

    RE: pfft @ 93 – Correction: He didn’t win California.

    He won 3 or 4 states by less than 100,000 votes total. He’s not going to win reelection. He might even be impeached by then.

  98. 98
    pfft says:

    Trump the genius.

    “I think we can win the state of California and win it pretty substantially. Now, I’ve been told by all these geniuses, all these brilliant guys — they all say you can’t win the state of California. I think we can.”

    https://abcnews.go.com/Politics/14-states-donald-trump-win-november/story?id=41240078

    Putin couldn’t even help him win California.

  99. 99
    DavidE says:

    By sung baek @ 91:

    while i agree that the current picture is correction i actually had question. The current stock market is extremely high, economy is doing well , unemployment low and wage is climbing. I think many people would agree that while rates play a role in affordability but not necessarily determine the housing market.

    What elements do we have that support market correction right now?

    I won’t go into details (since I could write a book on the topic), but 5 things will lead to a severe correction:
    1. Margin Debt. Stock market margin debt is the highest it has ever been. A mild correction will lead to severe margin calls and many trading accounts blowing up. This is what keeps the Fed up at night.
    2. Money Velocity. The velocity of money is what matters in a capitalist economy (how fast money exchanges hands), not how much of it exists. Money velocity is collapsing.
    3. Government Debt. That part should be obvious to us all.
    4. Trade Deficit. Any country that has a deficit must have it be funded externally. Amazingly, despite all the tariffs we just recorded the largest trade deficit with China in August. They can simply refuse to accept our debt any more or buy less of it (hence rising bond yields).
    5. Corporate Debt is the largest ever in history. 25% of all companies are in fact cash flow negative (including names like Tesla and Netflix). The only thing that has kept them alive is cheap debt. That debt has been rolled over with low interest rates. Their debt will be cut to junk in a severe correction and rising rates environment.

  100. 100

    RE: sung baek @ 91 – Since you’re not a regular here I’ll repeat what I’ve said before as to ONE cause for a correction.

    Sellers/agents got ahead of themselves on prices, and used bidding war prices as being the value of the house they were trying to sell. The example I gave is a house being listed at $500,000 selling for $600,000. What do you do with that as a comp? If that house had been listed for $530,000 it might have sold for $480,00. By only looking at the sold price mistakes can be made because that house probably wasn’t worth $600,000 (unless the seller/agent made a terrible mistake valuing it at $500,000).

    And here’s something I haven’t said before. Whenever you go from a hyper-shortage to a more normal situation the prices will decline. It’s the opposite of them rising. So if you’re not taking that into account in pricing you can be off. And that could have been true even for the past two years at the local level, although the difference there might have been only getting three offers rather than seven.

  101. 101

    By randomseattledummie @ 92:

    RE: Kary L. Krismer @ 88

    My experience is definitely anecdotal but I have found low down payment buyers never are willing or able to come up with more money when low appraisal happen. High down payment buyers many times have been willing (while not contractually obligated) to put more money down to complete the sale .

    Well here’s a related topic. There’s a form 22EF, not widely used, which basically requires the buyer to provide proof of funds three days after mutual acceptance if the right box is checked. My complaint about that form is that is information a seller should have before mutual acceptance, so we tend to ask for proof of funds as part of our offer instructions for all offers, not just cash offers (which is more common).

    Part of the reason to do that is there’s limited knowledge about a buyer and some buyers do things they shouldn’t do. The big one is having an undisclosed sale of property necessary for adequate funds where they don’t using the contingency form. There are also situations where a relative said they are going to gift a down payment, or the buyer has undisclosed partners (which the lender will care about), etc. Those things need to be known and either pinned down or avoided if necessary.

    As to your concern, by getting that information in advance you’d also have some idea of the ability of a buyer to deal with a low appraisal. This assumes though that the POFs isn’t for just enough for the down payment and that they have other accounts they didn’t need to provide proof of. But the point is by asking for more information in advance you’ll more likely know things about the ability of a buyer to deal with a low appraisal. And it’s easier to negotiate them committing those funds in the event of a low appraisal before mutual acceptance than after.

  102. 102

    By pfft @ 93:

    RE: David @ 70 – Trump didn’t eve win the popular vote. He’s not going to pull that off again being so deeply unpopular.

    That depends on whether the Democrats make the mistake of also picking someone who is very unpopular, as happened in 2016.

  103. 103

    RE: DavidE @ 99 – I think they were asking about a market correction in housing, not stocks. Interesting though if Netflix is cash flow negative. I don’t follow them, but just yesterday I was wondering about Amazon financing their productions, like the one I was watching–Man in High Castle. That cannot be cheap. For the most part that’s just funded out of Prime subscriptions. The shows are apparently the hook to get people so sign up for free shipping, and visa versa. It’s not an obvious business model giving stuff away for free.

    As to your post, I thought someone indicated that China had been selling our debt recently. Does anyone have a link?

  104. 104
    wreckingbull says:

    By pfft @ 95:

    The reason why some underperforming districts have nice facilities like pools is that a few districts request money for pools. You can’t just give money for a pool to a few districts. Everyone wants in on that money so the legislature will pass a bill that funds pools(or a weight room) for any district that needs them. It makes sense in that way. Underperforming schools often need more money for extra tutoring and instruction and that money doesn’t always come.

    That’s a nice little story, but it is incorrect. Local bonds (ours is a $20 million, 20 year, for a very small district) pay for this ridiculous stuff. Bond measures have gotten completely out of control recently. If a levy is reasonable, I’ll still vote yes, but I am done with bond measures. This is too bad, because someday they might need money for reasonable improvements, and people will vote no due to the district’s past irresponsibility.

  105. 105

    OMG, this article is almost funny if you read it to the very end. Seemingly an article about a broken clock.

    https://www.cnbc.com/2018/10/05/ron-paul-us-barreling-towards-a-recession-and-theres-no-escape.html

  106. 106

    Here’s an opinion piece on why Canada had to cut a trade deal with us.

    https://www.nationalreview.com/2018/10/justin-trudeau-canada-trade-deal-politics/

    What I found interesting was the information on the lack of popularity of Trudeau, because all we tend to hear about him from the MSM is glowing reports. Granted this is the National Review, but if they’re reporting the polling data accurately that’s interesting. And FWIW, I was recently in Canada and was surprised to hear someone be very critical of both Trump and Trudeau. Maybe if I’d read this article first . . ..

  107. 107
    pfft says:

    By Kary L. Krismer @ 100:

    RE: sung baek @ 91 – Since you’re not a regular here I’ll repeat what I’ve said before as to ONE cause for a correction.

    Sellers/agents got ahead of themselves on prices, and used bidding war prices as being the value of the house they were trying to sell. The example I gave is a house being listed at $500,000 selling for $600,000. What do you do with that as a comp? If that house had been listed for $530,000 it might have sold for $480,00. By only looking at the sold price mistakes can be made because that house probably wasn’t worth $600,000 (unless the seller/agent made a terrible mistake valuing it at $500,000).

    And here’s something I haven’t said before. Whenever you go from a hyper-shortage to a more normal situation the prices will decline. It’s the opposite of them rising. So if you’re not taking that into account in pricing you can be off. And that could have been true even for the past two years at the local level, although the difference there might have been only getting three offers rather than seven.

    Kary how can you say that we are just going from a more normal situation when that is exactly what was said last time and housing still crashed? why is this time different?

  108. 108
    pfft says:

    By Kary L. Krismer @ 102:

    By pfft @ 93:

    RE: David @ 70 – Trump didn’t eve win the popular vote. He’s not going to pull that off again being so deeply unpopular.

    That depends on whether the Democrats make the mistake of also picking someone who is very unpopular, as happened in 2016.

    so unpopular she won the popular vote?

  109. 109
    pfft says:

    By wreckingbull @ 104:

    By pfft @ 95:

    The reason why some underperforming districts have nice facilities like pools is that a few districts request money for pools. You can’t just give money for a pool to a few districts. Everyone wants in on that money so the legislature will pass a bill that funds pools(or a weight room) for any district that needs them. It makes sense in that way. Underperforming schools often need more money for extra tutoring and instruction and that money doesn’t always come.

    That’s a nice little story, but it is incorrect. Local bonds (ours is a $20 million, 20 year, for a very small district) pay for this ridiculous stuff. Bond measures have gotten completely out of control recently. If a levy is reasonable, I’ll still vote yes, but I am done with bond measures. This is too bad, because someday they might need money for reasonable improvements, and people will vote no due to the district’s past irresponsibility.

    Schools get state money for big things they can’t afford same as with spending money on highways and bridges.

    “Local bonds (ours is a $20 million, 20 year, for a very small district) pay for this ridiculous stuff.”

    Doesn’t mean it’s like that all over the country.

  110. 110
    biliruben says:

    By pfft @ 53:

    By DavidE @ 13:

    RE: GoBlue72 @ 9It is amazing to me how little home buyers know about the bond market and how it affects them.

    The Tim had a post years ago saying that mortgage rates aren’t as big as a deal as you think when it comes to home prices. If I am not mistaken the last 2-3 years of the last bubble saw mortgage rates increase.

    By the way, are there any other people here who called the turn around in the housing market circa the summer of 2010(?). I was a year early I believe. Any other bulls here?

    I follow calculated risk. He called the bottom in 2010, and I agreed.

    And bought a house.

  111. 111
    pfft says:

    By biliruben @ 110:

    By pfft @ 53:

    By DavidE @ 13:

    RE: GoBlue72 @ 9It is amazing to me how little home buyers know about the bond market and how it affects them.

    The Tim had a post years ago saying that mortgage rates aren’t as big as a deal as you think when it comes to home prices. If I am not mistaken the last 2-3 years of the last bubble saw mortgage rates increase.

    By the way, are there any other people here who called the turn around in the housing market circa the summer of 2010(?). I was a year early I believe. Any other bulls here?

    I follow calculated risk. He called the bottom in 2010, and I agreed.

    And bought a house.

    Much respect to those who can be bearish and then turn around and be bullish when the facts call for it.

    So many people are just eternal pessimists or optimists.

    There is only one side of the market and it is not the bull side or the bear side, but the right side.
    -Jesse Livermore
    Read more at: https://www.brainyquote.com/quotes/jesse_livermore_138163

  112. 112
    redmondjp says:

    The amount of time left before an election is inversely proportional to the frequency of pfft’s posts.

    Funny how that works!

  113. 113
    uwp says:

    By biliruben @ 110:

    I follow calculated risk. He called the bottom in 2010, and I agreed.

    And bought a house.

    CR got the housing call right on both sides. Very impressive.
    He also has had a recurring “recession watch” the last few years that has been correct as well.
    If he turns bearish, it would be smart to at least to what he’s saying.

  114. 114
    cam solomon says:

    By uwp @ 113:

    By biliruben @ 110:

    I follow calculated risk. He called the bottom in 2010, and I agreed.

    And bought a
    CR got the housing call right on both sides. Very impressive.
    He also has had a recurring “recession watch” the last few years that has been correct as well.
    If he turns bearish, it would be smart to at least to what he’s saying.

    Yeah. Don’t even think he’s on watch right now.

  115. 115
    pfft says:

    By redmondjp @ 112:

    The amount of time left before an election is inversely proportional to the frequency of pfft’s posts.

    Funny how that works!

    I’ve been here since like 2008. This is an old argument.

  116. 116

    By pfft @ 107:

    Kary how can you say that we are just going from a more normal situation when that is exactly what was said last time and housing still crashed? why is this time different?

    I don’t remember ever having said such a thing. Link please, or else you are a lying.

    I’m not even sure what would have been more normal before? Maybe getting below a 10% annual increase in price. Double digit increases do bother me. That though wouldn’t be the same thing. So again you’re likely just a liar. Or else you’re not smart enough to understand the difference.

  117. 117

    By pfft @ 115:

    By redmondjp @ 112:

    The amount of time left before an election is inversely proportional to the frequency of pfft’s posts.

    Funny how that works!

    I’ve been here since like 2008. This is an old argument.

    Quit lying. It may be an old argument (although quite frankly I don’t remember hearing it before), but how long you’ve been here has nothing to do with when you post. You’re a partisan hack and possible a political bot.

  118. 118
    pfft says:

    By Kary L. Krismer @ 117:

    By pfft @ 115:

    By redmondjp @ 112:

    The amount of time left before an election is inversely proportional to the frequency of pfft’s posts.

    Funny how that works!

    I’ve been here since like 2008. This is an old argument.

    Quit lying. It may be an old argument (although quite frankly I don’t remember hearing it before), but how long you’ve been here has nothing to do with when you post. You’re a partisan hack and possible a political bot.

    As opposed to you who as we all know is so neutral?

  119. 119
    pfft says:

    By Kary L. Krismer @ 116:

    By pfft @ 107:

    Kary how can you say that we are just going from a more normal situation when that is exactly what was said last time and housing still crashed? why is this time different?

    I don’t remember ever having said such a thing. Link please, or else you are a lying.

    I didn’t say you said that. Read carefully again for the first time.

  120. 120

    RE: sung baek @ 91

    “…The current stock market is extremely high, economy is doing well…What elements do we have that support market correction right now?”

    I came back to this comment as all too often we tend to talk to each other…people who have commented often and for years. Didn’t want this to go by with no reply.

    The stock market is not really “extremely high” if you look at a long enough period. The market peaked back on Jan 26, went into correction mode the first week in February (10% below peak) and has been floundering for direction ever since. If you look at the market past February or from February, it looks like an upswing. But if you track back to the 52 week number you will see that getting back over the January number was difficult and market direction is defined as movement past that January 26th number. Recently we got past it…but today it boomed down again and so still no relief from being in correction mode.

    Now look at real estate specific stocks like Redfin and Zillow. While many stocks and most stock indexes are running over and under the January 26th peak for 9 months now, these two stocks give you a clearer indication of real estate market expectation. Also watch the rounds of Venture Capital funding that may be propping up the losses.

    Those two real estate specific stocks are currently at 40% to 50% below their 52 week high. Only hindsight has 20/20 vision, but clearly that much of a drop tells you something.

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