NWMLS: Inventory up big from 2017, sales slip

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October market stats were published by the NWMLS today. Home prices were basically flat from September, and inventory dropped a bit but was up dramatically from 2017. Sales continued to slip from last year as well. September’s year-over-year listing growth was an all-time record at 68 percent, but October’s 86 percent blew that out of the water.

The NWMLS hasn’t published their press release yet so let’s just get right to the data.

CAUTION

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

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

October 2018 Number MOM YOY Buyers Sellers
Active Listings 4,873 -6.5% +86.1%
Closed Sales 2,052 +11.9% -15.9%
SAAS (?) 1.29 -25.5% +24.8%
Pending Sales 2,295 +2.3% -16.8%
Months of Supply 2.37 -16.5% +121.3%
Median Price* $670,999 +0.4% +6.5%

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

King County SFH Inventory

Inventory fell seven percent from September to October, and was up 86 percent from last year. Before this year, the highest year-over-year inventory gain was 61.3 percent way back in February 2008. The number of homes on the market was at its highest October level since 2011.

Here’s the chart of new listings:

King County SFH New Listings

New listings were up five percent from a year ago, but began the usual seasonal decline month-over-month.

Here’s your closed sales yearly comparison chart:

King County SFH Closed Sales

Closed sales rose 12 percent between September and October. Last year over the same period closed sales dropped three percent. Year-over-year closed sales were down 16 percent.

King County SFH Pending Sales

Pending sales were up two percent from September to October, and were down 17 percent year-over-year.

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

King County Supply vs Demand % Change YOY

For the last few months we’ve been charting new territory in year-over-year inventory growth.

Here’s the median home price YOY change graph:

King County SFH YOY Price Change

Year-over-year home price changes edged down from September to October.

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

King County SFH Prices

October 2018: $670,999
July 2007: $481,000 (previous cycle high)

The Seattle Times hasn’t posted their story yet. I’ll probably update this post when they do.

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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.

514 comments:

  1. 1
    Ohd1122 says:

    So who will blink first- buyers or sellers? That’s the real question.

  2. 2
    brady says:

    Surprising bounce for sales.

  3. 3
    uwp says:

    RE: Ohd1122 @ 1 – I have been reliably informed that the buyers are on strike and sellers are rushing for the exits.

  4. 4
    steven says:

    wow this is bigger than i thought. number of sales is probably due to some of the buyers not recognizing the free-falling trend and thinking it’ll bounce back sometime soon. i presume sales fall for the coming winter will be brutal. if you guys are still thinking this will equliibrate to a balanced market.. your dreaming. i missed the peak, but i’m glad i got out just in time watch the free-fall

    the reality is, nobody wants to be the sucker paying the highest, and when inventories are stockpiling as much as they are now with discounts happening left and right, it’s hard not to know that you’re the sucker.

  5. 5
    steven says:

    RE: brady @ 2

    the bump happens annually it appears also due to people wanting to finish purchase/sale before the winter comes and everybody leaves housing market.

  6. 6
    Market Psychologist says:

    RE: uwp @ 3 – You know it, buddy! Check out that YoY PLUNGE – 15.9% , when there are 86.1% more precious homes YoY. Maybe realtors should start hanging out at microbeweries more?

  7. 7

    Although the increase in inventory as a percentage is a great attention-getter, it’s still the 7th lowest in the past 18 years, and well below the average for that time. That increase can only be viewed as healthy.

    In contrast, the sales decrease has been significant at least two months in a row, so that rules out a few of the causes (especially smoke). Those other potential causes have been discussed enough, but clearly not a strike situation, particularly given higher prices should result in fewer sales.

    One thing notable not in the stats above is the average time on market increasing. For the solds it’s up about 8 days, about 33%, pendings 10 days, exactly 33.333%, and the actives only 5 days, but less than 10%. I would have expected the actives to be higher as a number and a percentage.

    Also, this is missing about 30 transactions, but the median original list is about $10k higher than the list at time of pending, and the selling price is down about another $5k. Those are much smaller differences than I expected, but that’s probably due to many agents/sellers not over-pricing originally.

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

  8. 8
    whatsmyname says:

    Holy smokes!!! We’ve got the 13th largest October inventory on record. We might need it though, if, as it appears, the Amazonians start realizing that there maybe isn’t exactly an HQ2 after all.

    Meanwhile, buyers were crowding the October exits at a median rate.

  9. 9
    Justme says:

    RE: whatsmyname @ 8

    Correction: We have the largest inventory of the last 7 years. Current active for-sale inventory has not been exceeded since 2011, when the 2008-2012 bust of the 2002-2007 bubble was still ongoing, with plenty of foreclosures, and a high number of REO and short sales listed.

    With active listing up +86.9% YOY, and closed sales down -15.9% YOY, the number of listings per actual buyer is about 2X what it was last year same time. Yes, indeed, there is a crowd of sellers congregated at the King County exits, looking for a buyer.

    (this is a monthly public service announcement for new readers that have not discovered yet that Whatsmyname loves to post distorted interpretation of inventory statistics)

  10. 10

    By Justme @ 9:

    RE: whatsmyname @ 8

    Correction: We have the largest inventory of the last 7 years. Current active for-sale inventory has not been exceeded since 2011, when the 2008-2012 bust of the 2002-2007 bubble was still ongoing, with plenty of foreclosures, and a high number of REO and short sales listed.)

    Deceptive much?

    Out of curiosity, what’s your game? Are you just a permabear, or are you the opposite of Erik a year ago who was trying to drive up the market with comments?

  11. 11
  12. 12
    Justme says:

    Kary’s claim of deception is a deception. Not just a distortion, but an outright deception.

    Is Kary just a perma-collector of commission, is that his game? You decide. Maybe a new name, a perma-beaver, always striving to make the water accumulate where he wants it?

  13. 13
    Justme says:

    RE: Kary L. Krismer @ 11

    Dear reader: The number of offerings near doubled YOY, but the buyer activity (number of sales) was smaller (absolute count) than the year before. Quite deceptive, some people say :-). Them buyers used to buy nearly everything offered, but then they suddenly buy only half! Darned deceptive buyers!

  14. 14

    RE: Justme @ 12 – Bull, back during any of those prior Octobers with lower inventories most everyone was complaining about how bad the inventory levels were. But nice try being deceptive again–no one is falling for it.

    Also, please state what your game is if it isn’t deception.

  15. 15
    Deerhawke says:

    The KC YOY prices showed a good deal more strength than I expected. I would have put it in the range of 3%, not 6.5%. We even eked out a small month on month gain.

    Given rising inventory, DOM, rising interest rates, etc,etc, this is surprising. Perhaps it is a lag effect or a statistical sampling anomaly. It will be truly interesting to see happens during the last two months of the year.

  16. 16
    whatsmyname says:

    RE: Justme @ 9 – Superimposing one fact over another fact is not a “correction”. Calling it that is a factual error if done by ignorance, or misrepresentation if done knowingly. Which would you say is the right answer there?

    I love your use of percentages to make small numbers big, and big numbers small. Are you fool enough to think that pretty much everyone doesn’t know better? No need to answer.

    I also like your psa for your “readers”. Do you imagine they want advice from a property virgin who will not say how long he’s been (unsuccessfully) wanting to own a house? I don’t, so I’ll ask again. How long have you been looking?

  17. 17
    whatsmyname says:

    By Justme @ 13:

    RE: Kary L. Krismer @ 11

    Dear reader: The number of offerings near doubled YOY, but the buyer activity (number of sales) was smaller (absolute count) than the year before. Quite deceptive, some people say :-). Them buyers used to buy nearly everything offered, but then they suddenly buy only half! Darned deceptive buyers!

    p.s. “dear reader”. Note that Justme ignores the range and distribution of the sample to concentrate on change from the low outlier. Statistics?

  18. 18
    Matt P says:

    Price will always lag inventory because house purchases take time.

  19. 19
    Deerhawke says:

    RE: Matt P @ 18

    Clearly. But by now, the market has had ample time to factor in — and process– the changes that were quite apparent by April. Even allowing for people who are very, very slow on the uptake, a lag effect of an extra quarter should have allowed the market to fully reflect the new reality by now.

    From what we can see in the charts above, what we saw in October is that :
    — inventory peaked for the year and is now trending downward in a normal 2014 trajectory
    — closed sales not only stopped declining but rose 12% for the month
    — pending sales also stopped dropping and rose 2% for the month
    — KC median prices stopped dropping and rose MOM by 0.4%

    Lots there for an optimist to like.

  20. 20
    Brian says:

    By Deerhawke @ 19:

    From what we can see in the charts above, what we saw in October is that :
    — inventory peaked for the year and is now trending downward in a normal 2014 trajectory

    Lots there for an optimist to like.

    You mean like the inventory trending downward at the end of 2007?

    A lot of the 2018 graphs look like 2007.

  21. 21
    Eastsider says:

    By Deerhawke @ 19:

    From what we can see in the charts above, what we saw in October is that :
    — inventory peaked for the year and is now trending downward in a normal 2014 trajectory
    — closed sales not only stopped declining but rose 12% for the month
    — pending sales also stopped dropping and rose 2% for the month
    — KC median prices stopped dropping and rose MOM by 0.4%

    Lots there for an optimist to like.

    #2 and #3 might be seasonal.
    #4 does not mean home prices rose MOM. That you will have to wait for the release of CS home price index.

  22. 22
    Matt P says:

    RE: Deerhawke @ 19

    That standard seasonal decline is still going to leave us with a higher inventory than we’ve had for several years once the new year rolls around and inventory starts climbing again. That will tell whether we’ve hit a permanent price plateau or if we’re in for a decline.

  23. 23
    Justme says:

    RE: Kary L. Krismer @ 14

    >> “everyone was complaining about how bad the inventory levels were”,

    And then the inventory nearly doubled, but buyers nevertheless wanted to buy FEWER units than they did before, when inventory was about half. Very deceptive! LOLOLOLOL.

  24. 24
    Notme says:

    Oh noes, superimposed
    the contrast hurts my eyes, brain
    prefer balderdash

    -a bubble-monger strategy haiku

  25. 25
    Notme says:

    Property virgins
    defend honor, just say no
    make das REIC bend knee

    -a puritanical bubble-strategy-that-works haiku

  26. 26
    Notme says:

    Beaver will sell you
    house with entry underwater
    it’s the price you pay

    -a bubble haiku

  27. 27
    Voight-kampff says:

    By Justme @ 23:

    RE: Kary L. Krismer @ 14

    >> “everyone was complaining about how bad the inventory levels were”,

    And then the inventory nearly doubled, but buyers nevertheless wanted to buy FEWER units than they did before, when inventory was about half. Very deceptive! LOLOLOLOL.

    For a counterpoint to just me’s constant crowded exists declarations like:
    Buyers nevertheless wanted to buy fewer units…

    I know several people that are very much still in the game
    So…
    It’s also possible BUYERS are lining up at the entrances, waiting patiently. Waiting to see what shakes out. Flippers are exiting fast, no doubt , but a patient homeshopper has no reason not to wait for a minute, and see what shakes out, how many more choices they might have. And possibly a little better price, and with an offer with more protections
    After years of 2week closing-no contingencies- no inspection. I think this is great news.

  28. 28
    Eddiemaster says:

    RE: Voight-kampff @ 27 – several things have happened since the start of the week. Dems won back the House and stock futures is pointing up with tech leading the morning after. HQ2 has been split into two cities, which to me is a factor to stop the outflow of speculative investments. Now Seattle buyer have no more ‘reasons’ to wait on the sideline…
    It is also highly likely that the Fed will stop or slow the unwind of balance sheet by end of next year, so the mortgage interest will likely plateau or drop slightly then. For buyers who want to get a home to live in long term it may mean locking in whatever rate they can get because rate will only go higher. The rate is still low by historical standards.
    Just IMAO Justme enjoys reading the numbers a certain way, reaching bearish conclusions, and trolling the comment section. Be aware that people don’t take kindly the trollers and that it is easy to troll a troll. And NotMe, I just stop reading all your haiku (apology to whasmyname) that seems to be shortened versions of JustMe’s trolling comments. I’ve assumed that others have stopped reading them as well, not that you will stop anytime soon.

  29. 29

    By Voight-kampff @ 27:

    After years of 2week closing-no contingencies- no inspection. I think this is great news.

    There were a lot of bad practices that developed during that period which have mainly gone away. The lack of inspections wasn’t good for buyers or sellers, and the statute of limitations has not yet passed for claims against ignorant sellers and listing agents. The hangover from that might last a while.

    On the other hand, some of the practices were just risky for buyers, such as going with no financing contingency, but good for sellers (assuming you consider a failed sale with retention of earnest money good). Those situations have likely played their way out at this point in time.

    And finally, prices moderating some is likely healthy for the market. I always worry when there’s a double digit YOY price increase.

  30. 30

    By Eddiemaster @ 28:

    RE: Voight-kampff @ 27 – several things have happened since the start of the week. Dems won back the House and stock futures is pointing up with tech leading the morning after. HQ2 has been split into two cities, which to me is a factor to stop the outflow of speculative investments. Now Seattle buyer have no more ‘reasons’ to wait on the sideline….

    That’s probably overstating it a bit. Personally I don’t think our tax burden is all that bad, so it’s not a hot-button issue for me. Seattle proper though just passed a tax for education and the slight shift in Olympia might make an income tax more likely. And that King County voted to pass the carbon tax is also likely to cause some local concern for the future. So those people sensitive to taxes are not likely as optimistic as you are. Increased taxes could cause more sellers and fewer buyers (or at least buyers at a lower price).

  31. 31

    By Justme @ 23:

    RE: Kary L. Krismer @ 14

    >> “everyone was complaining about how bad the inventory levels were”,

    And then the inventory nearly doubled, but buyers nevertheless wanted to buy FEWER units than they did before, when inventory was about half. Very deceptive! LOLOLOLOL.

    Have you ever looked to buy a house in your life? Your ignorance is so extreme that I really doubt you have, unless you’re one of those people who are not at all picky about what features, design and neighborhood a house offers. The inventory situation is hardly great for buyers, it’s merely much better than what it was.

    And again, with the HIGHER prices (and taxes) it’s natural that buyers would want to buy FEWER houses. You and pfft both really need to take a course on basic economics. Again, extreme ignorance showing, giving you the benefit of that doubt that your goal isn’t deception.

  32. 32
    Eddiemaster says:

    RE: Kary L. Krismer @ 30 – I don’t think I’ve mentioned taxes in my post, mostly because I was focusing on recent news. Also I’m not sure what companies would be impacted by carbon taxes, likely not tech companies or Starbucks, nevertheless the carbon tax initiative is being rejected so it will be a non factor.
    I can see the argument of property taxes considering the rental plateau as property owners aren’t able to pass increase in tax burden down to renter as easily anymore. But I think the impact is more limited for a median or average home buyer, not the case for a retired and lower income or entitlement dependent home owner. For now the tax system is still highly regressive and there still isn’t an state income tax.
    It sounds like you believe we will get state income tax sooner than later and that would be valid factor when it does become one. For now the mortgage under writing shouldn’t consider it and neither would the potential buyers who want to live in a house. I don’t think that everything has to go towards favorable direction for buyers. There will be a new norm, and given the recent factors I was thinking that we can finally move forward.

  33. 33
    Eddiemaster says:

    RE: Kary L. Krismer @ 31 – maybe consider a different tactic against trolls like Just/Not me. Your reaction is probably exactly what they are hoping for. Try trolling back, even though I don’t think that’s your style, or just one liner to completely dismiss them :p

  34. 34

    RE: Eddiemaster @ 32 – I brought up taxes because you stated there was no reason to wait. Taxes are a reason. As to what I said about taxes, it was from the point of view of a person where taxes are a hot-button issue, not my own position.

    As to an income tax, I think that is possibly more likely on a state level given the Democrat’s gains in Olympia. But they will need to start small due to the possibility the tax will remain unconstitutional. I think that’s why the talk is of a capital gains tax. If that only generates a small amount of funds it won’t cause a budget nightmare if the tax gets struck down.

  35. 35
    Deerhawke says:

    RE: Brian @ 20

    Brian, I started selling off projects in the second quarter of 2006 and was mostly out by July of 2007. I have a very real sense of what 2008 was and was not.

    Somewhere well before Lehman blew up, a sophisticated bystander could not only see that a big change was coming, but knew the general financial mechanism. If you were paying attention, you knew the what and the why of what was coming. Like me, you might have understated the extent of the damage, but you would have had the general contours.

    If you are making the case that we are heading toward another 2008, go for it. Make that case fully. Tell us all the what and the why. Otherwise pardon me if I take you for someone who is trolling or trying to talk down the market for personal reasons (and good luck with that).

  36. 36
    Eddiemaster says:

    RE: Kary L. Krismer @ 34 – I used single quotation mark around the word reason in my post, it was meant to poke fun at all the bearish comments and headlines have been saying that midterm election and HQ2 will move mountains for Seattle RE. Maybe I should had used double quotation? I’m not good with these things.
    I definitely don’t discredit the effects of tax, as I’ve previously said in past posts. But that is the reality that isn’t going away. Whereas HQ2 decision and midterm election are passing news by now, so we can get on and find the balance of true supply and demand.

  37. 37
    Eddiemaster says:

    RE: Deerhawke @ 35 – he cant make the case as he was trolling/fear mongering. You don’t reach that type of conclusion from inventory trend of 3-4 months.
    Out of curiosity, what metrics did you use in 06 to determine that execution? How did you evaluate the debt risk at that time? I’ve been trying to come up with ways to evaluate. Granted right now is just not bad but I wonder if things can get bad really quickly.

  38. 38
    Brian says:

    RE: Deerhawke @ 35
    I’m not saying it’s another 2008 (in magnitude), just that all of the graphs look like when prices last peaked. If you can’t see that then I don’t know what to tell you.

    What’s with all you “bulls” calling the “bears” trolls? Is that you way of diminishing our opinions and hoping we’ll go away?

  39. 39

    RE: Kary L. Krismer @ 30
    The State Taxation Initiatives All Failed

    I just looked them up…it wasn’t even close either…

  40. 40
    Eddiemaster says:

    RE: Brian @ 38 – you are bringing up 2007, so I don’t think you are merely saying that the graphs look the same. Actually where are the graphs of 2007 that you compared to, I’m curious to see those, seriously no sarcasm.
    I think there is a level of understanding that graphs are a result of underlying forces and therefore an in-depth explanation is warranted. There is very little actionable items to be made by just looking at the RE inventory graphs without knowing why and what. To capture 2008 without being just lucky, you had to had accessed certain info and digested it in ways that main stream wasnt able to fully grasp, the similar methodology should be done today. And therein lies the important distinction between market reaching a moderate normalization vs recessives price drop.
    Anyway in Ray Dalio’s words, productivity always go up over time regardless of debt cycles, so higher highs and higher lows in stock and real estate are expected. Therefore a bear is more likely to be wrong than a bull, and more likely to be labeled a troll. Although Erik was a bull troll in some instances.

  41. 41

    RE: Brian @ 38
    Yes Brian

    Another strategy the bulls use; asking for the proof of the bear opinion, like some research article that doesn’t exist, because its “gut” opinion. They use “gut” opinion all the time and see nothing wrong with that BTW. Sometimes, like now, its all we have.

  42. 42
    sfrz says:

    RE: Eddiemaster @ 28 – The name calling speaks more about you than them.
    I remind you what the Tim’s Seattle Bubble is about. (BTW- Tim has already expressed his love for the Haikus- Keep em comin’!)

    Please refer to the Seattle Bubble home page:

    “Don’t take anyone’s word when it comes to what will likely be the largest financial decision of your life. Do the research for yourself and determine if the market is right for you. That’s what Seattle Bubble is for: providing a resource where regular people can assess the local housing market on their own.

    Seattle Bubble promotes responsible home ownership by fighting ignorance, myths, and stereotypes. If you are a real estate agent that depends a steady flow of naïve home buyers or sellers, you probably won’t enjoy this site. However, if you are interested in buying or selling a home around Seattle and want to try to understand what’s going on in the market, this is the place for you.”

  43. 43
    Eddiemaster says:

    RE: sfrz @ 42 – please, spare the lecture, I don’t need to be PC about it when I see someone trolling. I could alternatively start trolling people as well, but that defeats the purpose of this blog. Have you been reading the haiku from NotMe yourself..?
    No I am not an agent of any sort. Neither am I an economist. What I am is a long time holder of real estate in the King County, I’ve held a townhouse through the last crisis and invested a crap load in real estate in 2012/2013. So I’m immensely vested and interested in the direction of the market based on these discussions. I would sell and collect profit if the conclusion is high probability of over 10% drop in price. I’m not bullish or bearish, I just want the data and sensible explanation. So far bull has build a much better case than the bears, so I might not unload that significantly comes spring.

  44. 44

    RE: sfrz @ 42
    The Midterms Turned Out a Split Decision: 50/50

    That can’t usher in a repeal of the GOP tax cuts for social spending; the equity market reacted today, stocks are up.

    https://www.yahoo.com/news/takeaways-split-decision-trump-democrats-083338371–election.html

    Its good for the stock market and with the future middle class tax cuts [phase II] in 2020, when they expire if Trump lost, which doesn’t seem likely now….

    Pelosi can ignore the crumbling infrastructure bi-partisan agenda and the health care overall needs, and demand more Trump impeachment documents, but no Senate agreement there…gridlock. They’ll have to get something done anyway. The next couple years will be interesting and yes, as unpredictable as Seattle Real Estate.

  45. 45
    Justme says:

    RE: Eddiemaster @ 33

    It’s real hard for for perma-bulls and perma-beavers to resist fighting back against the facts. They are so used to their propaganda working, that when it fails, they become really, uh, distressed.

    @Eddiemaster is a new name, but more of the same.

  46. 46
    Eddiemaster says:

    RE: Justme @ 45 – LOL classic Justme!!

  47. 47
    Notme says:

    Oh noes, percentages
    they make my profit smaller
    sometimes I hate them

    -a bubble-monger haiku

  48. 48
    Notme says:

    Personal motives,
    bulls noble, civic-minded,
    just helping the young!

    -a bubble rationalization haiku

  49. 49
    Market Psychologist says:

    RE: Eddiemaster @ 46 – whatever you do, Eddie, just remember not to panic!

  50. 50
    Redon says:

    The CRASH is here, just don’t know how bad is going to end. I think at least 30% down with in next two years. You don’t need to buy the bullsh… of some agents trying to lecture people here. Now the millenials are becoming smarter and doing their homework, in fact they do not need an agent at all to buy/sell. I fired three of them, and I am not going to hire another agent again!

  51. 51
    uwp says:

    I love all the posts around here acting like buying/selling a house is as easy as a share of stock.

    “Sell now. Uproot your family. You will surely find a comparable rental-house that is in your school district and a reasonable price. The savings will more than cover transaction fees, taxes, and hassle. Plus you will time the market perfectly on the buy-side as well!”

    “New rentals are offering move-in specials. You will save 2k for one year on your 25k/year rent. Moving is such fun! Let’s do it every year.”

    “Oh yeah, don’t buy now. Wait for an unspecified amount of time. Just like I told you last year. And the year before that.”

  52. 52
    sfrz says:

    RE: Eddiemaster @ 43 – Exactly my point. You probably are on the wrong site because, per Tim’s statement on the home page:

    “The Bottom Line

    The most important thing to remember is that the decision of whether or not to buy is a personal one that only you can make. Don’t let a blog or a real estate salesman make that decision for you. Consider all the options and risks, and make an informed decision based on your unique circumstances. If you find a home that you love, at a price that you’re comfortable paying (i.e. – you wouldn’t be upset if the price dropped another 10-20%), and you plan to live there for a long time, then go for it. If you are looking at a home as a place to invest your money, then you should probably reconsider.”

  53. 53
    Eddiemaster says:

    RE: sfrz @ 52 – I see. So I shouldn’t take opinions too seriously. That’s hard for me sometimes. I’m not trying to be perma bull here because I do think it makes sense for the price to go down, and in all honesty by how much is just conjecture at this point. I just wonder why people say by 30% or by 10%.
    If I were a perma bull, I would had agreed with Erik and continued to buy in 2017. But I don’t see why I’m categorized to one extreme if I don’t agree with the other.

  54. 54
    Eddiemaster says:

    RE: Market Psychologist @ 49 – I most certain won’t, thanks for the advice.

  55. 55
    N says:

    Well we are already down approx 10% from the spring high (based on the $80k drop as reported by the Seattle Times).

  56. 56
    Jeff Kraus says:

    RE: Eddiemaster @ 28 – I have to tell you that Jus Me, and especially Not Me make many of the posts that keep me coming back to watch y’all troll each other. Trolling folks with how much you don’t like their trolling is rather drab. Sorry to burst your bubble, as you seem to like to think you’re above all this.

  57. 57
    pfft says:

    By Justme @ 45:

    RE: Eddiemaster @ 33

    It’s real hard for for perma-bulls and perma-beavers to resist fighting back against the facts. They are so used to their propaganda working, that when it fails, they become really, uh, distressed.

    @Eddiemaster is a new name, but more of the same.

    I remember in 2010 or 2011 I said it looked like RE was becoming less bad and all I got was grief. Now the bulls(vested interests) are in complete denial. Love it.

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

    -Upton Sinclair

    “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

  58. 58
    pfft says:

    Do You Wanna Be Right, or Do You Wanna Make Money?
    https://ritholtz.com/2010/10/do-you-wanna-be-right-or-do-you-wanna-make-money/

    I am sure there are permabears who have sat on the sideline all throughout the run up in stocks and housing and are still renting. LOL. You are doing it wrong sitting on the sidelines yelling about the Fed while gold has been stuck in Nowheresville.

  59. 59
    pfft says:

    By softwarengineer @ 44:

    RE: sfrz @ 42
    The Midterms Turned Out a Split Decision: 50/50

    Are you kidding? The Big Orange Baby can’t do anything now without Democrats helping out. He faces investigation after investigation like why he puts babies and kids in jail and why he did so terrible on Hurricane Maria recovery among many other issues.

  60. 60
    whatsmyname says:

    Justme,
    Here is my guess. You decided to go for it in late 2012. But by Spring 2013, you decided to wait until the buying crowds thinned out, or maybe you had decided prices were already too high by then. Of course, you’re the guy with the facts; so how close am I? Within a year?

  61. 61
    Eddiemaster says:

    RE: Jeff Kraus @ 56 – Reading about posts that troll others is why you keep coming back..? And trolling the trolls is distasteful to you compared to trolling the bulls. Ok gotcha, u do u.
    I’m not even the bullish guy here, just didn’t think the bull trolling as warranted without substance.

  62. 62
    Eddiemaster says:

    RE: pfft @ 57 – again, build the logic up from beyond a hunch. It really doesn’t matter if you are bull or bear, no one can deny that 08 crash came from risky debt, so if you are saying so, then let’s see what the basis is now. Rather than avoiding to present the research or ideas, you just resort to saying that 08 happened repeatedly.
    It’s funny several are suggesting that I’m bullish even though I haven’t bought anything since early 2013, and am contemplating on unloading (maybe I’m already too late). I’m here to debate about these things and see what people are thinking about basing on their analysis. Sure it’s not a place to get economic predictions, but I don’t make decisions based on one source anyway, and this blog seems give an interesting perspective. Clearly from the title of the blog I will get to hear from many bearish sentiments and that’s fine.

  63. 63
    Deerhawke says:

    By Matt P @ 22:

    RE: Deerhawke @ 19

    That standard seasonal decline is still going to leave us with a higher inventory than we’ve had for several years once the new year rolls around and inventory starts climbing again. That will tell whether we’ve hit a permanent price plateau or if we’re in for a decline.

    Back in the day, you knew that the only stuff left on the market after Halloween was a mixed bag of overpriced listings, crappy listings with problems, estate sales, and hasty relocations. Nobody who had a choice would list during the last quarter of the year if they could possibly wait until January. What was unusual in 2016 and 2017 was that people were buying that stuff– and often at drastically inflated prices.

    I think that right now a lot of the overpriced inventory is getting pulled and re-priced. A lot of the crappy inventory is getting pulled, getting some cosmetics/marketing and getting re-priced. That process will continue. And there will be fewer estate sales and relocations because people know that this of all quarters is a really bad time to list a property.

    And so, as always, the last quarter of the year will see the market clear. What is different is that this year people have gotten their hands smacked. Unlike 2016-2018, they will know better than to try to add another greedy 8-10% to their prices and then rigging things to be bid up another couple of percent.

    The word is out that 1st Quarter 2019 prices are the same as Q4 2017 prices.

  64. 64
    eddiemaster says:

    RE: whatsmyname @ 60 – Haha you are giving Justme way too much credit for knowing to buy in 2012. Parent’s basement is most likely where it will continue to stay and conjure up all those nonsense. Oops I know I will get flamed for this, those perma bears are so sensitive, but being wrong qtr after qtr for the past 5-6 years will do that to anybody.
    Oh hey! Trolling is easy, anyone can do it!

  65. 65
    Eastsider says:

    People with vested interests in RE are generally bulls. I believe the most bullish comments here are made by agents, developers, builders, and Erik! So if you are looking for advice here, you should definitely discount their views.

    That said, current headwinds include (high) interest rates, QT, and (low) affordability. Positives are robust economic conditions and real wage growth. Of course you should always consider local factors…

  66. 66
    Matt P says:

    By Deerhawke @ 63:

    By Matt P @ 22:

    RE: Deerhawke @ 19

    That standard seasonal decline is still going to leave us with a higher inventory than we’ve had for several years once the new year rolls around and inventory starts climbing again. That will tell whether we’ve hit a permanent price plateau or if we’re in for a decline.

    Back in the day, you knew that the only stuff left on the market after Halloween was a mixed bag of overpriced listings, crappy listings with problems, estate sales, and hasty relocations. Nobody who had a choice would list during the last quarter of the year if they could possibly wait until January. What was unusual in 2016 and 2017 was that people were buying that stuff– and often at drastically inflated prices.

    I think that right now a lot of the overpriced inventory is getting pulled and re-priced. A lot of the crappy inventory is getting pulled, getting some cosmetics/marketing and getting re-priced. That process will continue. And there will be fewer estate sales and relocations because people know that this of all quarters is a really bad time to list a property.

    And so, as always, the last quarter of the year will see the market clear. What is different is that this year people have gotten their hands smacked. Unlike 2016-2018, they will know better than to try to add another greedy 8-10% to their prices and then rigging things to be bid up another couple of percent.

    The word is out that 1st Quarter 2019 prices are the same as Q4 2017 prices.

    Agree, although wage growth only seems to be at a local level. Also, Mortage apps fell to 4 year low nationally. Lot of mixed signals out there right now.

  67. 67
    Deerhawke says:

    By Eddiemaster @ 37:

    RE: Deerhawke @ 35
    Out of curiosity, what metrics did you use in 06 to determine that execution? How did you evaluate the debt risk at that time? I’ve been trying to come up with ways to evaluate. Granted right now is just not bad but I wonder if things can get bad really quickly.

    In 2006 I came to the conclusion that the market 1) had moved too far too fast and 2) the reason was that people who had no business buying real estate were able to buy. And 3) they were doing it really easily.

    There were a lot of examples. I met a recent Ethiopian immigrant who had just bought a 4-plex in Columbia City. I assumed he was sent family money from his home country but he told me that he had borrowed all the money, 100%, from 2 local banks. He had managed to get a refi loan on a property he did not yet own and used it as the down-payment on the property. His cousin was a shady loan broker who put the whole thing together and saw this as a humorous example of how capitalism worked in America. He made jokes about it.

    I met a cabbie in Reno who had bought and flipped several houses and managed to buy half a dozen new houses as rentals. He told me he had read some real estate investment books a few years before and started with almost nothing. I did not see this guy as some heroic Horatio Alger story. He was ignorant, bigoted and freely admitted to lying on his loan applications.

    But the bigger thing that had me convinced we were in a bubble was that I saw other builders buying deals that made absolutely no sense. Or rather they only made sense if the market went up 10-15% per year. I was routinely outbid on everything I looked at. Eventually real estate agents treated me with disdain. They stopped wanting to bring me deals because I was a “cheapskate” who was just wasting their time. They took those deals to other builder/developers who bought everything they brought them.

    It became clear that everyone in my business had thrown out the normal multiples. And the banks were giving those guys as much money as they wanted. All you needed was an over-active id and the ability to use the kind of lies and bluster we routinely hear from the orange blimp on Pennsylvania Ave. The banks ate it up.

    So I slowly began to unwind my positions, offering to sell projects to other developer/builders. They too treated me with disdain. Was I losing my nerve? No guts? In financial trouble? My line was to blather about taking money off the table to achieve greater work-life balance.

    Then there was a turning point on a soccer field. I was talking to another Dad on the sidelines and he started talking about a speech he was going to give to a private investment group. Clearly a smart guy with an understated style. Amherst undergrad, Harvard MBA and PhD. He had worked at the New York Fed. I asked him what his speech was about. He started talking about mortgage backed securities, credit default swaps, CDOs, synthetics, etc. etc. When he started to talk about how much more money there was in mortgage bonds than actual mortgages, a bell went off for me. I stayed calm while I asked him a lot of questions, but at the end of that interminable game, I practically sprinted off the field.

    I never built a complex economic model. It came down to this. I saw a lot of stupid greedy people who were allowed to do a lot of wild and crazy things. Why? Because a lot of smart greedy people on Wall Street were allowed to do whatever they wanted. Eventually the music would stop and I wanted to have a chair. Those were my metrics.

  68. 68
    Deerhawke says:

    RE: Matt P @ 66

    “Lot of mixed signals out there right now.”

    I completely agree. I am not that worried about local or regional economy or even the pullback in real estate nationally because of the rise in mortgage rates.

    What worries me is the poisonous leadership in DC and the strong possibility of a constitutional crisis. That is never a good thing for business.

  69. 69
    pfft says:

    By Eddiemaster @ 62:

    RE: pfft @ 57 – again, build the logic up from beyond a hunch. It really doesn’t matter if you are bull or bear, no one can deny that 08 crash came from risky debt, so if you are saying so, then let’s see what the basis is now. Rather than avoiding to present the research or ideas, you just resort to saying that 08 happened repeatedly.
    It’s funny several are suggesting that I’m bullish even though I haven’t bought anything since early 2013, and am contemplating on unloading (maybe I’m already too late). I’m here to debate about these things and see what people are thinking about basing on their analysis. Sure it’s not a place to get economic predictions, but I don’t make decisions based on one source anyway, and this blog seems give an interesting perspective. Clearly from the title of the blog I will get to hear from many bearish sentiments and that’s fine.

    Inventory is going up and sales are going down. I said weeks ago to look out for YOY sales that go negative. The inventory surge and plunge in sales is happening in a lot of places.

    “no one can deny that 08 crash came from risky debt, so if you are saying so, then let’s see what the basis is now.”

    Prices are just too high debt or no debt.

    Not to mention we have the President’s SALT increase and the tariffs. They are definitely creating some uncertainty.

  70. 70
    Macro Investor says:

    By Deerhawke @ 68:

    RE: Matt P @ 66

    “Lot of mixed signals out there right now.”

    I completely agree. I am not that worried about local or regional economy or even the pullback in real estate nationally because of the rise in mortgage rates.

    What worries me is the poisonous leadership in DC and the strong possibility of a constitutional crisis. That is never a good thing for business.

    There’s nothing to worry about at all. Rates are rising at a slow pace that business can adjust to. Prices are high, and the marginal buyer will be priced out. But that’s just a normal market correction from super greed to balanced.

    People here seem to think it’s either a raging bull market or a crash. Usually markets just slog along sideways. Too much fear porn driven by media types looking for the latest click bait. People without emotional control that get baited, over and over again.

    If someone out there believes a crash is coming, make a case with facts.

  71. 71
    pfft says:

    By Eastsider @ 65:

    People with vested interests in RE are generally bulls. I believe the most bullish comments here are made by agents, developers, builders, and Erik!

    Think of Annette Bening and Buddy Kane from American Beauty. Not that I mind enthusiasm.

  72. 72
    pfft says:

    By Macro Investor @ 70:

    By Deerhawke @ 68:

    RE: Matt P @ 66

    “Lot of mixed signals out there right now.”

    I completely agree. I am not that worried about local or regional economy or even the pullback in real estate nationally because of the rise in mortgage rates.

    What worries me is the poisonous leadership in DC and the strong possibility of a constitutional crisis. That is never a good thing for business.

    There’s nothing to worry about at all. Rates are rising at a slow pace that business can adjust to. Prices are high, and the marginal buyer will be priced out. But that’s just a normal market correction from super greed to balanced.

    People here seem to think it’s either a raging bull market or a crash. Usually markets just slog along sideways. Too much fear porn driven by media types looking for the latest click bait. People without emotional control that get baited, over and over again.

    If someone out there believes a crash is coming, make a case with facts.

    We are in a raging bull market. It’s reversing. You crash argument is a red herring. There is no case for the RE market going sideways in the last 40 years. Do you have a source? If the market is going sideways people can save money, take time choosing a home in a good area and won’t have to panic buy a moss pit.

  73. 73
    pfft says:

    Funny how conservatives said on here that the high cost of living and the seattle city council’s taxes were going to drive the new HQ to somewhere less expensive and then they move 1/2 of it to…Queens. Epic fail. Anyone want to own that one?

  74. 74
    Eastsider says:

    By pfft @ 73:

    Funny how conservatives said on here that the high cost of living and the seattle city council’s taxes were going to drive the new HQ to somewhere less expensive and then they move 1/2 of it to…Queens. Epic fail. Anyone want to own that one?

    You don’t know what incentives Queens offered Amazon. I bet Queens is a much better deal for Amazon the corporate than Seattle. Boeing relocated HQ to Chicago for the same reasons.

  75. 75
    Eastsider says:

    By Macro Investor @ 70:

    There’s nothing to worry about at all. Rates are rising at a slow pace that business can adjust to. Prices are high, and the marginal buyer will be priced out. But that’s just a normal market correction from super greed to balanced.

    People here seem to think it’s either a raging bull market or a crash. Usually markets just slog along sideways. Too much fear porn driven by media types looking for the latest click bait. People without emotional control that get baited, over and over again.

    If someone out there believes a crash is coming, make a case with facts.

    I’m not saying that a crash is imminent or coming. But much of the asset inflation in the past decade can be attributed to QEs and negative real interest rates worldwide. We just started the reversal in the US months ago and Europe and Asia will be following suit in the coming months/years.

    I think you are discounting the impact of rate increase, even at a slow pace. Marginal businesses that survived on cheap financings in the past decade will fail. Sears filed for bankruptcy just weeks ago and there are many more to come. IMO this is a good development as the market is finally functioning. The question is how far interest rate can normalize before the market chokes.

  76. 76

    By Macro Investor @ 70:

    People here seem to think it’s either a raging bull market or a crash. Usually markets just slog along sideways. Too much fear porn driven by media types looking for the latest click bait. People without emotional control that get baited, over and over again.

    If someone out there believes a crash is coming, make a case with facts.

    Good connection to the press/media. What they write is designed to get eyeballs, not inform. They want to create either fear or hype. People read such stories on numerous topics and carry that over into their daily lives.

    And unfortunately for the most part the members of the press are stupid. Despite very low approval ratings for the press and this election demonstrating that about half the population doesn’t share their political views, they will continue to cover stupid things Trump does (hype/fear) rather than things Trump actually does (news).

    But despite our nation having become much more politically polarized, I don’t think the first point about promoting hype and fear deals is a result of the press’ activities. It is merely human nature to be concerned about the future.

  77. 77

    By pfft @ 73:

    Funny how conservatives said on here that the high cost of living and the seattle city council’s taxes were going to drive the new HQ to somewhere less expensive and then they move 1/2 of it to…Queens. Epic fail. Anyone want to own that one?

    I think you’re restating the argument. The argument was that the anti-business attitude of the Seattle City Council was going to drive business elsewhere. That has not changed, nor has Amazon expanding to other cities

    https://www.seattletimes.com/seattle-news/politics/councilmember-sawant-says-seattle-could-slow-police-hiring-cut-bureaucrats-to-replace-head-tax-money/

    That idiot Sawant even called out Paul Allen after his death for not being generous enough with his money, even though he gave something like $2B away during his lifetime. Seattle’s government remains pathetic judged by any other municipal or county government in the state of Washington.

    But as long as you want to call out positions, how about owning up to this one from the prior thread?

    By pfft @ 78:

    The blue wave is going to be a tsunami. Enjoy!

  78. 78

    By Eastsider @ 74:

    You don’t know what incentives Queens offered Amazon. I bet Queens is a much better deal for Amazon the corporate than Seattle. Boeing relocated HQ to Chicago for the same reasons.

    Boeing did get tax incentives to move to Chicago, which is odd given that they only moved about 500 employees. It was a considerably different situation employment-wise.

    https://www.chicagobusiness.com/static/section/hq.html

    I’m sure those 500 highly paid employees love Chicago winters and paying a state income tax. /sarc

  79. 79

    RE: Kary L. Krismer @ 77 – I should add there are other reasons business wouldn’t like Seattle, but those too have their root cause in the Seattle City Council.

    http://mynorthwest.com/1167146/rantz-homeless-punching-urinating-seattle-pioneer-square/

  80. 80

    RE: Kary L. Krismer @ 79 – And more recently published, this:

    https://www.seattletimes.com/opinion/city-of-seattles-inertia-on-street-crime-is-intolerable/

    But these are the complaints of captive businesses, that cannot move out of the area (but could possibly move out of Seattle proper).

  81. 81
    uwp says:

    Here is how I knew in 2006 real estate was going to fall apart:
    https://en.wikipedia.org/wiki/Casey_Serin (he actually went to high school where I grew up)

    The RE market in other areas had started to fall, but Seattle still thought they were special.

    I can’t remember if I was a SeattleBubble reader before Sept 2006, but I do remember the early days where it was just vertical text (was it just run on Google’s platform? WordPress?). I don’t think TheTim had started with the charts and graphs yet, maybe he had, it was a long time ago. But I definitely remember the early days of SeattlePi’s RE blog, Elizabeth Rhodes, the SeattleBubble forums being pretty active, Meshugy, Ardell’s “Rose-Colored Glasses,” all the highlights!

    It is sort of funny being on the “bullish” side now. (If bullish just means I don’t think we are going to repeat 2007-2010.)

  82. 82
    Eastsider says:

    Google is ramping up presence in NY too.

    Google Plans Large New York City Expansion
    https://www.wsj.com/articles/google-plans-large-new-york-city-expansion-1541636579

    Google is gearing up for an expansion of its New York City real estate that could add space for more than 12,000 new workers, an amount nearly double the search giant’s current staffing in the city, according to people familiar with the matter.

    The plan, which hasn’t been previously disclosed, would give Google room for nearly 20,000 staff in the city, including those it has now—rivaling the approximately 25,000 jobs Amazon.com Inc. is projected to add if it completes plans for a major new office in New York.

  83. 83
    No Name Guy says:

    So, what defines a “crash” in local prices? Seems like a bit of disagreement on that.

    Crash, slow down, correction…meh.

    Prices are set on the margin….as rates go up, initially the weakest marginal buyers are forced out (unless prices come down to keep them in the game). There may be perceptions on potential sellers that its time to get while the getting is good. Extra marginal sellers? Perhaps….or not.

    In any event, some quick, simple to calculate Excel math on rates vs prices / principal.

    Assumptions: 30 year fixed, 20% down payment. Assume a buyer, as most buyers do, can afford a fixed payment, so adjust principal / price to hold payment fixed, as rates change. Assume taxes and insurance are constant. Calcs are per 100k, so multiple up as needed.

    Is this perfect? Nope…but as engineers do, getting an understanding of the order of magnitude on a first rough calc to scope a project is very informative.

    Payments are 421.60 in each case from the PMT function in Excel.
    Prices are (Principal / 0.8) = total price

    At 3%, principal is 100k, total price would be 125,000.
    At 4%, principal is 88,309, price is 110,386. This is 88% of the price at 3%.
    At 5%, principal is 78,536, price is 98,170. This is 89% of the price at 4%.
    At 6%, principal is 70,319, price is 87,899. This is 89.5% of the price at 5%

    Using Freddy Mac Data
    http://www.freddiemac.com/pmms/pmms30.html
    Interest Rates back in Nov 2016 were 3.77%, Nov 2017 were 3.92% and Sept 2018 were 4.55%.

    Its hard to say exactly where rates will go, but clearly marginal buyers are going to be pressured at 4.55% vs 3.77%. That ~3/4% difference in rate translates to a potential buyer being able to afford roughly 7-8% less purchase price (again, assuming they’re limited by the payment). What happens at 5%? 5 1/2%? The same marginal buyer who can afford the same monthly payment will only be able to afford an even less expensive house than they could at 4.55%

    Add to the actual ability to afford less of a house is perception. And this is a big bugaboo of the Fed – perceptions of inflation / price action. The Fed is paranoid about deflation because they perceive it becomes a feedback loop. If buyers THINK prices will go down next week, why buy today, especially if the buyer CAN wait. Buyers leave the market. Fewer buyers = lower demand = lower prices = buyers waiting longer until prices drop more = …….. Then again, this would be offset at some level by a raising interest rate environment – get the cheaper mortgage today, rather than paying higher rates tomorrow. Which of these two will dominate, or will they simply cancel each other out? Back in the early 80’s, my parents rushed to buy in a rising rate environment to lock in the lower rates. Then again, prices were also going up so they were doubly motivated there to buy sooner than later…had prices been dropping, the dynamic they experienced would certainly have been different.

    Interesting times……

  84. 84
    Redon says:

    The tricky bad advise that mortgage lenders and RE Agents are promoting now to buy while the rates are low! Here is why I would say is better to buy while the rates are up and prices low: When you buy lower price and higher interest rate, you start building equity right away, and chances to be under water are very low. If you buy when the rates are low and prices high, and suddenly a 10% price drop happens, you are underwater. And the worst is if need to sell, you wont be able! I feel bad for people who bought 2016 to 2018. Stop getting advise from RE Agents, Builders, and investors, they do not care for you. They just want to make that quick profit from you.

  85. 85
    Eastsider says:

    By No Name Guy @ 83:

    If buyers THINK prices will go down next week, why buy today, especially if the buyer CAN wait. Buyers leave the market. Fewer buyers = lower demand = lower prices = buyers waiting longer until prices drop more = …….. Then again, this would be offset at some level by a raising interest rate environment – get the cheaper mortgage today, rather than paying higher rates tomorrow. Which of these two will dominate, or will they simply cancel each other out?

    You might want to consider that many people are already priced out of this market. Look at affordability index.

  86. 86
    Market Psychologist says:

    RE: uwp @ 81http://fortune.com/2015/06/17/subprime-mortgage-recession/

    While subprime borrowers default at a higher rate than prime borrowers, Fierra said in an interview with Fortune that the data shown above suggest that the foreclosure crisis would have happened even in the absence of such risky lending. “People have this idea that subprime took over, but that’s far from the truth,” says Ferreira. The vast majority of mortgages in the U.S. were still given to prime borrowers, which means that the real estate bubble was a phenomenon fueled mostly by creditworthy borrowers buying and selling homes they simply thought wouldn’t ever decrease in value.

    ____________________

    Subprime helped the last bubble, but was not its cause. Prime borrowers living in la-la land was the cause. Sound familiar?

  87. 87
    Notme says:

    Das REIC blamed subprime
    but REIC’s loose lips sank the ship
    evr’one SHOULD know that

    -a 2002-2007 bubble history haiku

  88. 88

    RE: uwp @ 81

    Maybe take a cue from RE related stocks, since investors are always forward projecting?

    NASDAQ is at 7530 compared to 52 week high of 8133 and low of 6630.
    NYSE is 12646 compared to 52 week high of 13637 and low of 11820.
    DOW is 26196 compared to 52 week high of 26951 52 and low of 23242

    Now compare to RE related stocks:

    Zillow hit an intraday 52 week low today of 29.94.
    Zillow at 30.02 compared to a 52 week high of 65.70 and a low of 29.94
    Redfin at 15.10 compared to a 52 week high of 31.50 and a low of 14.46
    ReMax is at 33.71 compared to a 52 week high of 61.27 and a low of 33.38
    Reology (several combined Brokerages) is at 19.22 compared to a 52 week high of 28.07 and a low of 17.43

    Hard to make a case for Bullish as to RE with those numbers.

    I was going to use % but have to get to a sewer scope.

    As you look at median price changes, remember you are not seeing net prices. Going from overbids with no inspection contingency, to price drops and sold under asking, you still don’t see the seller credits and seller repair negotiations. The new roof before closing, the new furnace before closing, etc…

    The 2 big changes of Buyer Credits and Seller Paid Replacement and Repairs from Inspection Negotiations is another “price drop” on a net basis that doesn’t show in the stats. Same with Builder buydowns and incentives.

    Did a check yesterday and homes with weakness, of course, are getting hit a lot harder than new/newer houses and close in Eastside faring better than other parts of King County.

    The weaker locations and houses are getting pulled down fast and faster since they were riding high for not as much good reason as the better locations and products.

    Sellers need to adjust not only to price and bidding, but massive inspection requests. You will soon see a Tim post from the past “why are so many Pendings failing” as a lot more people are cancelling on inspection. If seller is thinking they took a hit on price, they often fail when asked for more…at inspection time.

    The market shifting to “normal” is also about process and concessions and not merely volume and closed price.

    Being Bullish would result in those almost at 52 week low RE stocks being a “buy” signal causing the stocks to rise. Not happening. Watch them.

  89. 89
    No Name Guy says:

    RE: Eastsider @ 85

    I already did, which is implicit in the “weakest marginal buyers get pushed out first” statement.

    Implicit is that some ALREADY were pushed out by prices going up, even as interest rates held generally constant at the low levels (sub 4% from Dec 2014 to Dec 2017, except a brief excursion into the low 4’s, meanwhile Case Shiller Seattle went from 179.2 to 232.5 over that same time scale).

    Additionally, I’d add that I kind of distilled down the buyers economic power to a point in time – right now, with the fixed payment assumption. I suspect that interest rates can change on a lot faster time scale than the buyer can change their economic power (how fast can rates go up vs saving more, getting raise, changing jobs for better salary, etc)

    Now, will some of those already pushed out “want to be buyers” be able to come back in and be actual buyers? No doubt yes, but I’d suspect that it will depend on how interest rate vs price action plays out.

    If prices drop faster than interest rates go up, then total payments would drop, allowing some currently priced out people to reenter the market. If rates go up and prices drop such that they cancel each other out and payments hold about constant, then its kind of moot that prices are dropping – that wouldn’t improve affordability (again, holding economic power of the buyer constant in the short term).

  90. 90
    Joe says:

    Per Seattle Times, the median home in Seattle has dropped $80,000 from Spring highs. In other words, home prices have been dropping at a rate of about $500 per DAY, $3500 per week, or $14,000 per month. That puts things into perspective, and this is why sellers are panicking (or should be). Only the early sellers will capitalize on this once in a generation opportunity.

  91. 91
    eddiemaster says:

    RE: Market Psychologist @ 86 – Interesting read and thanks for the source, I am taking some time to digest the original article as well some of the researches from the authors at Wharton. A big takeaway for me personally is the risk assessment based on foreclosure tracking, correlating with LTV and distress probability that the source article discussed.

    To me it is still far fetch to claim that prime mortgage caused the crisis from the foreclosure plot given the highly speculative nature of the real estate market at the time and the risk that subprime lending posted. It is almost like saying that subprime mortgage didn’t cause the speculation, and that doesn’t sound correct. Subprime mortgage origination roared to about a qtr of all mortgage origination in 2006, and much of which was securitized to make investment banks lots of money. The level of speculation was highly fueled by the banks’ easy lending policies to whomever. Then the Fed rate increased and the subprime debt can no longer be serviced.

    As for the foreclosure numbers, the article did admit to subprime mortgage initially outpaced the prime mortgage in foreclosure. And that sudden spike in foreclosure did the large investment firms like Lehman in because they were triple leveraged in these securities. That shock wave cascaded down and sent the economy into spiral. I still remember my next door neighbors in Issaquah, a couple with prime mortgage and good incomes, decided to default because they didn’t think it would be worth it to be underwater, which at that time seemed logical. Additionally there were layoffs everywhere due to the economy shock, further exacerbating the prime mortgage foreclosure. That to me explain the eventual catching on of prime mortgage foreclosure number, rather than saying that prime mortgage holders caused the crisis.

    The original research article is quite dense, but seems to be an interesting perspective. Thanks for that!

  92. 92
    Brady says:

    RE: steven @ 5 – Actually the past four years the average is a 4% drop in sales from Sept to Oct. An INCREASE by 4% this year is notable and it shows the september sales volume cliff was overstated.

  93. 93
    uwp says:

    By Ardell DellaLoggia @ 88:

    Being Bullish would result in those almost at 52 week low RE stocks being a “buy” signal causing the stocks to rise. Not happening. Watch them.

    I’m “bullish” on Seattle RE because I think this is a fine time to buy if you want to live in a house, are planning on staying for a while, and can afford the payments.

    I’m not bullish because I think you can buy a house now and sell it in the Spring for 10% profit.

    Even with the price drop the last few months, the monthly payment for a median home buyer right now is probably higher than it would be if you bought in January 2018.

  94. 94
    eddiemaster says:

    RE: Joe @ 90 – I don’t think the daily loss can be explained by such straightforward math. It should be non-linear distribution with losses more concentrated on the speculators as they for one don’t live in the properties so they don’t care for the house as much, and two they rush to sell and are willing to take price hits. I’m just conjecturing because it makes sense. But still would wait to see how things play out in a few months or another 2 qtr to see where price can normalize. Supposedly the short term rate hike goes til mid 2019 and the balance sheet unwind slows or stops by end of 2019. Not sure about trade war, but there is optimism to end it with China in 2019 as well.
    I don’t understand politics, so not sure what midterm will do for the economy and the re-distribution of asset market either.

  95. 95
    N says:

    @ Ardell – To your point, it seems all the home builder stocks are down 20-40% YTD. Morningstar has the residential construction benchmark down 29% YTD.

  96. 96

    By Joe @ 90:

    Per Seattle Times, the median home in Seattle has dropped $80,000 from Spring highs. In other words, home prices have been dropping at a rate of about $500 per DAY, $3500 per week, or $14,000 per month. That puts things into perspective, and this is why sellers are panicking (or should be). Only the early sellers will capitalize on this once in a generation opportunity.

    Part of that is seasonal, part of that is just that bidding wars result in sales above FMV, and part of that is an actual decline in value that is not seasonal. When you look at the market that is near or above median, that was one that was particularly hit by the middle factor (bidding wars) and given their position in the price range they’d have an undue impact on the median.

  97. 97
    Webinator says:

    Anyone watching the national scene in comparison? This could cast doubt on certain local cause theories (e.g. local taxes, amazon slow-downs, especially low affordability in Seattle proper). If others nationally are experiencing the same trends, its probably not our local problems causing it.

  98. 98

    RE: Ardell DellaLoggia @ 88 – I’ve never understood why anyone would invest in a RE brokerage corporation, like RE/Max or Reology. They don’t have anything other than their name. Every agent could leave tomorrow if they wanted. Sure that’s not going to happen absent an event, but it could happen. In contrast, Ford has its factories and designs, Safeway/Albertsons has its leases and location, etc. Those RE brokerage stocks are sort of the Bitcoin of stocks in that there’s nothing behind them, just the expectation of the future.

  99. 99
    Matt P says:

    By Kary L. Krismer @ 98:

    RE: Ardell DellaLoggia @ 88 – I’ve never understood why anyone would invest in a RE brokerage corporation, like RE/Max or Reology. They don’t have anything other than their name. Every agent could leave tomorrow if they wanted. Sure that’s not going to happen absent an event, but it could happen. In contrast, Ford has its factories and designs, Safeway/Albertsons has its leases and location, etc. Those RE brokerage stocks are sort of the Bitcoin of stocks in that there’s nothing behind them, just the expectation of the future.

    Every business is just a name. If their employees all left en masse, they would all be near worthless regardless of whatever was left over. Those tangible goods could be auctioned off, but no one who owned stock would get anything as more senior creditors would get theirs first.

  100. 100

    By Matt P @ 99:

    By Kary L. Krismer @ 98:

    RE: Ardell DellaLoggia @ 88 – I’ve never understood why anyone would invest in a RE brokerage corporation, like RE/Max or Reology. They don’t have anything other than their name. Every agent could leave tomorrow if they wanted. Sure that’s not going to happen absent an event, but it could happen. In contrast, Ford has its factories and designs, Safeway/Albertsons has its leases and location, etc. Those RE brokerage stocks are sort of the Bitcoin of stocks in that there’s nothing behind them, just the expectation of the future.

    Every business is just a name. If their employees all left en masse, they would all be near worthless regardless of whatever was left over. Those tangible goods could be auctioned off, but no one who owned stock would get anything as more senior creditors would get theirs first.

    No, re-read what I wrote regarding assets (factories, designs, locations, patents, etc.). But employees are very unlikely to leave in mass. Employees would need to find other work and be picked by an employer. The agents at those firms are not employees. They are independent business people virtually all of which would be welcomed at virtually any other brokerage. All that is keeping them at their current firm is inertia and a minimal level of satisfaction as to the services provided. At worst the agents would lose their existing listings that are not under contract.

  101. 101
    Eastsider says:

    By No Name Guy @ 89:

    I already did, which is implicit in the “weakest marginal buyers get pushed out first” statement.

    I was merely pointing out that your “weakest marginal buyers” include the vast majority of young residents. Unlike their parents, many will never be able to afford a house in Seattle at today’s prices.

    https://seattlebubble.com/blog/2018/09/21/the-difference-between-affordable-and-actual-home-prices-hit-an-all-time-record-in-may/

  102. 102
    Anonymous user says:

    And the rates went up yet again today.

    “US mortgage rates jump to highest level in nearly 8 years”
    https://www.seattletimes.com/business/us-mortgage-rates-jump-to-highest-level-in-7-years/

  103. 103

    RE: uwp @ 93RE: Kary L. Krismer @ 100

    You are both missing the point which is the last sentence of Kary’s post “there’s nothing behind them, just the expectation of the future.”

    Given they have nothing to trade on put the expectation (of the real estate market) of the future…there’s your pure BEAR signal. En masse they are running near the 52 week low, contrary to the overall market. Combine that with N’s input in #95 and there is no Bullish signal for RE.

    As to uwp #93 you are just saying that you are willing to buy a house in a bear market. That doesn’t make you bullish. It just means your personal needs may be strong enough to be thankful for the current weakness. Bullish means you are expecting the prices to go up. You admit you are not…in the near term. So you are just someone buying into a bearish market for you own, good, personal reasons.

    As to Webinator #97, the overall market nationally and in particular in IT influenced markets like Bay Area and other rapid growth markets like L.A., the downturn “scene” is the same and in fact started before Seattle. The arguments here are more about the old “BUT…is Seattle more Special”. Oft times it is, but this is not one of those times. Though I do expect The Eastside to be boosted more than Seattle proper given the number of Companies moving some focus there due to Seattle politics.

  104. 104
    eddiemaster says:

    RE: Ardell DellaLoggia @ 103 – I wouldn’t have as much confidence in the logic of extrapolating these specific companies’ stock performance to the real estate market prediction, as much as I like the ease of doing so. Individual companies have different cash burn (especially with startups like Redfin and Zillow who want to disrupt traditional methods) and reasons for earning expectations that lead to stock fluctuation. So while it is true that stock is a discounted value of the future, these stock prices are just the future value of the companies themselves, with varying weighing of the actual real estate market.

    Realogy holdings has been in decline since peaking in mid 2013
    Re/Max has almost non-existence trading volume to be a good indicator of anything but itself as a company
    Redfin has been heavily investing in itself, with the marketing cost up significantly, but it has some guidance with housing doubt.

    If anything Dow Jones REIT index roughly correlate with historical events of real estate movements, and you might have to look very close to find anything worth building confidence over.
    However, the result this time will be multi-factorial, a simple stock charting won’t do it. The industry’s ability to hire workers and not slash jobs while maintaining growth trajectory is more important to the supply and demand curve. If you want to talk about stock in relation to real estate, both AMZN and MSFT and several others have far outpaced the local real estate price index gain by significant margin over the years. There isn’t that much of a story there.

  105. 105
    biliruben says:

    “You don’t know what incentives Queens offered Amazon. I bet Queens is a much better deal for Amazon the corporate than Seattle. Boeing relocated HQ to Chicago for the same reasons.”

    It might be okay for Amazon. It is not going to be a picnic for workers, if they are asked to relocate. Housing is far more expensive, and if you think taxes in Seattle are bad (they aren’t), NY is far worse. Not only do they have a high state income tax , they have a high city income tax. And they have a property tax that’s nearly double what Seattle’s is. And a sales tax north of 8%. Seattle is nearly tax free in comparison. At least for high-earning tech bros. For the poor, it’s pretty much the worst place to live.

  106. 106

    By Ardell DellaLoggia @ 103:

    RE: uwp @ 93RE: Kary L. Krismer @ 100

    You are both missing the point which is the last sentence of Kary’s post “there’s nothing behind them, just the expectation of the future.”

    Given they have nothing to trade on put the expectation (of the real estate market) of the future…there’s your pure BEAR signal. En masse they are running near the 52 week low, contrary to the overall market. Combine that with N’s input in #95 and there is no Bullish signal for RE.

    I think maybe you meant to click on someone else for reply, unless you think I missed the point of my own post! ;-)

    But as to the quote, I’d say the same thing about those two firms when the market was headed up, and in fact said the same thing about the one of them when they were involved in a leveraged buy out back in 2008 or so.

  107. 107
    Eastsider says:

    RE: biliruben @ 105 – High tech salaries are higher in NYC and San Francisco. Employee transferring to those cities will receive salary adjustments.

    Also, many high tech graduates want to work and live on the east coast. Amazon will not have trouble finding tech workers there, neither will Google. (See my earlier comment on Google expansion in NYC,)

  108. 108
    pfft says:

    By Eastsider @ 74:

    By pfft @ 73:

    Funny how conservatives said on here that the high cost of living and the seattle city council’s taxes were going to drive the new HQ to somewhere less expensive and then they move 1/2 of it to…Queens. Epic fail. Anyone want to own that one?

    You don’t know what incentives Queens offered Amazon. I bet Queens is a much better deal for Amazon the corporate than Seattle. Boeing relocated HQ to Chicago for the same reasons.

    Anyone can offer incentives. With someplace else with a lower population they could have gotten a lower cost of living and subsidies.

  109. 109
    pfft says:

    By biliruben @ 105:

    the poor, it’s pretty much the worst place to live.

    Yes and no. You don’t need a car to get around. If you are poor in the burbs or the country if your car breaks down you are screwed. In the city you still can take the bus or subway. You can always walk or ride your bike. There are some people who walk for miles. Plus there are so many people and friends around that can help or can loan you a car. You can also walk to government and non-profits that will help you.

  110. 110
    pfft says:

    RMAX has name recognition. People won’t leave because of that. If they left where would they all go? It’s like if everyone bought stocks at the same time because of some indicator. The stock topped in OCT 2017 fwiw.

    It has a billion dollars in market cap. Obviously there is value in the name.

  111. 111
    Matt P says:

    By pfft @ 109:

    By biliruben @ 105:

    the poor, it’s pretty much the worst place to live.

    Yes and no. You don’t need a car to get around. If you are poor in the burbs or the country if your car breaks down you are screwed. In the city you still can take the bus or subway. You can always walk or ride your bike. There are some people who walk for miles. Plus there are so many people and friends around that can help or can loan you a car. You can also walk to government and non-profits that will help you.

    Yes, NYC isn’t that bad for poor people. The median income of NYC is still pretty low, around 85k per household, which means 50% make less than that. They also have rent control. It’s probably the best city in the US for poor people. Transportation is cheap, food is pretty cheap, and housing is cheap if you don’t make much. This is relative poor of course – what’s poor in NYC isn’t going to be poor in other places, but all things being equal, NYC is much better.

  112. 112
    Market Psychologist says:

    RE: eddiemaster @ 91 – I think you may be giving too much credit to “prime” borrowers. They may have been able to afford the home they bought, like your neighbors who foreclosed, at the price they bought, but the real issue was the value of the home. It wasn’t worth what they paid for it, so they walked away. Even though they could afford the payment. Again, the issue was they bought a bunch of bitcoin and then realized it was junk after the smart money left.

    You also acknowledge that subprime was a small percentage of the total amount of loans issued. How could this small group of people—many of who were poor people buying in poor communities—affect the price of your neighbors in Issaquah?

    It’s all a mania, no subprime needed.

  113. 113

    By pfft @ 110:

    RMAX has name recognition. People won’t leave because of that. If they left where would they all go?

    pfft, I appreciate the fact that you try to post things that are actually real estate related and not political, but seriously, how can you possibly ask that question? It makes me wonder if you are even local. Real estate agents have a lot of choice as to where they associate their license.

  114. 114
    Eddiemaster says:

    RE: Market Psychologist @ 112 – I think you are way underestimating the effects of the subprime mortgage in based on just one white paper, which clearly pointed out that it was taking an alternative view from most other scholarly studies.
    I’ve actually taken some time to read the research that your beloved article is based off and there are quite a bit of assumptions that the authors should be questioned on. For instance, it just downplayed the rise of subprime defaulting both by percentage and total quantity that led up to the crisis and continued to focus on the fact that prime mortgage default eventually outnumbered the subprime default when the crisis had clearly already been underway, and yet kept claiming that prime mortgage was the problem child.
    Also the LTV model the article highly endorsed, which I thought may be an interesting indicator for current state, showed the uptick in LTV value in subprime that deviated from linear trend starting in 04’ and peaked at mid to late 07’, whereas the prime mortgage LTV stayed flat or was actually in down trend (a good thing) going into 06’. To me that is a good indicator of speculative bubble forming based on subprime not to mention what we know about MBS.
    I won’t pretend that the big banks have been paying billions in fine to DOJ over literally subprime mortgage securitization is due to them lending to only quality individuals.
    I don’t mind saying it again because it makes sense, subprime mortgage made the banks a boat load of money, so they didn’t mind that it fueled speculation the way it did. That was a harsh landing that kick the economy over the cliff.
    In alternate universe where there is no subprime mortgage securitization, yes there will still be increase in property value from prime mortgages. But because the mortgage origination can’t then sell off the mortgage in MBS, it will have to hold onto the mortgages, so it’s little incentives to take on the risk of subprime due to higher chance of default. That is a good way to slow speculation, which allows for softer landing rather letting the triple leveraging get investment banks into bankruptcy and sent shock waves through the finance system.

  115. 115
    Luke says:

    RE: Ardell DellaLoggia @ 88

    Ardell, thank you for being a reasonable and honest real estate agent. Your clients are lucky to have you. Unfortunately, I think most agents are essentially snake oil salesmen who either are not capable or do not care to provide reasonable and honest perspective on the market to prospective buyers.

  116. 116
    Eddiemaster says:

    RE: Market Psychologist @ 112 – Im fairly sure that you didn’t read the white paper that your beloved article is based off because they are saying different things, it almost seems like the article wants to grab reader attention by twisting the actual theory in the white paper. Well it worked on you obviously.

    I’ve actually read the white paper that your article is based off so here we go. the author acknowledged that his viewpoint is very different from the majority of scholarly studies, and you quickly realized that he wasn’t talking about the cause of the crisis, contrary to what you seemed to think. Instead, the author is making the point that the crisis wasn’t just an event of subprime mortgage default, but prime mortgage default as well, which are true statements. Both did happened and because most mortgages were prime so there were more prime default than subprime. The authors were NOT talking about the causes of the crisis.

    He discussed that the subprime lending increased and peaked at over 20% of all mortgage origination just before the crisis and that the subprime default outnumbered (so of course by % as well) the prime default initially. Now at that point I don’t know why he didn’t think that he was making the case for subprime defaulting being the cause of the crisis. But the cause of the crisis was not his focus as the cause had been established over and over.
    If you still want to cling onto the idea that the subprime mortgage crisis that has had several banks forking over billions in fines over specifically subprime mortgage securitization, was due to prime mortgage lending, go right ahead. I don’t mind wrecking your logic every single time.

    And no I did not acknowledge that subprime lending was a small percentage of all loan origination. I don’t consider over 20% a small number.

  117. 117
    Eddiemaster says:

    RE: Matt P @ 111 – plus when it’s cold out and you can’t afford housing, you can just sleep on the subway! LIC would be pretty cool for the new Amazonians. The energy and art/food scene out there is tremendous. And one thing you won’t miss there is the Seattle freeze, which is actually a thing that seemed to infect even new transplants. Although NY’s winter really is no joke, compared to drizzles of rain.

  118. 118
    Notme says:

    A *fine* time to buy
    be underwater 8 years
    or check yourself now

    -a decisions, decisions bubble haiku

  119. 119
    Deerhawke says:

    RE: Market Psychologist @ 86

    This is an interesting alternative perspective to the standard perspective. After lots of papers are presented at lots of conferences, the consensus will emerge that the original perspective was mainly right and the alternative perspective was overstated but valuable nonetheless.

    Boy Scouts are taught to think of a successful fire as composed of tinder (dried grass, wood shavings), kindling (sticks, branches), fuel (logs) and structure (teepee, criss-cross). You don’t get an oak log to ignite with one match. You don’t get the financial system to burn that fast and that hot without the kind of financial tinder and kindling provided by subprime (and all the derivative synthetics based on subprime).

    Normal people don’t run away from a 20% downpayment and incur incredible credit damage unless they feel that everything around them is burning like Paradise California.

  120. 120
    Eastsider says:

    RE: Eddiemaster @ 116 – There is an extensive article on Wikipedia on the subject Subprime mortgage crisis. Despite the title of the article, subprime is just one of many contributing factors. IMO US households were simply overleveraged. The ratio of household debt to disposable personal income rose from 77% in 1990 to 127% by the end of 2007. As of Q2 2018, the ratio stands at 98.4% and my take is most of the decline is due to defaults during the crisis.

    https://en.wikipedia.org/wiki/Subprime_mortgage_crisis

  121. 121

    RE: eddiemaster @ 104

    I use multiple other means and felt certain real estate would recede by 10% or more as to price in the latter part of the 3rd quarter through the 4th quarter based on the Dow correction back in February. At that time someone objected to my using The Dow, which I admit is pretty Old School but given I attended Wharton in the early 80’s, I do tend toward old school methods.

    I have the advantage of having a front row seat and am not using the RE stocks as a means to form an opinion. I am simply stating that when consensus nationally is bearish and one is trying to be bullish, perhaps looking at the RE specific stocks en masse will help tamp down the optimism.

    Locally we have some market pockets that have doubled in price since 2014. Back in February my suggestion was if gain were the primary reason for the purchase and property retention, hanging in for more was ill-advised. BUT there are so many imaginary lines geographically in real estate.

    What I am seeing are some areas that didn’t double in that same time period refusing to believe that they don’t deserve to have doubled like their friends at work did. They got more for their money (and in many cases “more” was new/newer vs older house) back in 2014 by purchasing 2nd or 3rd tier locations vs the first tier that has doubled, but refused both then and now to believe there is any good reason why they are not first tier. To a large extent, that is where the overpricing is coming from. The market pockets that doubled are still moving well without price cut, so the poor 2nd and lower tier locations and properties not only did not double, but are also the first to get hit on the downside.

    Generalizing in King County right now leads to wrong conclusion. If the overall market is down 10%, that actually levels out to someone not being down at all or 5% to every someone that is down 15% to 20%. Running in to pick up the lowest bargains is what causes people to end up at 4th tier locations or properties. There is no great deal without good reason. The trick is to find the good reason that is correctable, and location is rarely one of those reasons except on a gamble.

  122. 122

    RE: Deerhawke @ 68
    LOL Deerhawke

    Constitutional Crisis Over What? Firing Mueller when he should have recused himself along time ago for political bias? LOL…you Open Border Party folks are so funny.

    What legal policy did you pick out wannabe attorney? The real attorneys can’t agree on most of the policy on presidential application and either can you.

  123. 123
    Market Psychologist says:

    RE: Eddiemaster @ 116 – LOL! A minrory of broke people caused housing prices to go up everywhere! Do you listen to yourself? Was your Issaquah neighborhood based on comps in white center or Everett? Subprimers were brought in at the last moment to sustain the bubble.

    As for the “cause,” I was speaking broadly, as in the bubble was composed of a large majority of prime borrowers, so it’s there that we must look for what went wrong.

    Believe whatever helps you sleep at night!

  124. 124
    uwp says:

    By Ardell DellaLoggia @ 103:

    As to uwp #93 you are just saying that you are willing to buy a house in a bear market. That doesn’t make you bullish.

    That’s why I put “bullish” in quotes.

  125. 125
    Eddiemaster says:

    RE: Eastsider @ 120 – We got ourselves a chicken and egg discussion. It essentially boils down to why the households (actually triple leveraging investment firm as well) got to over leveraging is the reason I keep calling out the subprime lending practices as the primary driver of the 08’ financial crisis.

    During the years that led up to the 08’ crisis, and thanks to Market Psychologist’s Fortune article, the cited research (not the article itself) gathered millions of data points regarding subprime and prime LTV in initial mortgage origination. You clearly see the breaking up trend of LTV in subprime mortgage origination while the prime LTV held stead or even dropped slightly. Then you compound the fact that there was significant increase in % of subprime mortgages as well as high % of subprime mortgage being securitized during the same period. That correlated well with the accelerated increase of annual housing price index.

    As for the prime mortgage holders, I’m sure some of them were speculator of some sort, but the bubbles has primarily been about risky debts, which have higher interest rate or ARM that’s subjected to rising rate eventually (so much easier to default), those are the level of risk that caused the crisis. The prime mortgage defaulting that came subsequently after the Lehman shockwave was a bit of mixed bag job loss, fear, and sure a level of speculation.

    As for today, I’m definitely not bullish (so bearish) short term because there has been a crap load of speculation and market imbalance. But as for actual % decline or probability of crisis, I don’t know how one can be so confident.

  126. 126
    Eastsider says:

    D.R. Horton, a national builder with a big presence in the Seattle market, is bearish in the housing market. But… Seattle is different!, says the bulls.

    D.R. Horton Tumbles Most Since 2015
    https://www.bloomberg.com/news/articles/2018-11-08/d-r-horton-tumbles-most-since-2015-as-ceo-calls-market-choppy

    Rising home prices, combined with the jump in interest rates over the past year, are weighing on demand in the U.S., especially for more expensive properties. On a call with analysts, Chief Executive Officer David Auld said the market has been “choppy” in the past four or five weeks. A “little momentum is slipping from the market,” he said.

  127. 127
    Eddiemaster says:

    RE: Market Psychologist @ 123 – u seem to worry about people’s sleep and mood, almost as if that’s a diversion tactic to your whimsical mediocre logic.

    Subprime was “brought in at the last moment to sustain the bubble”.. lol you just keep proving my point that you didn’t read the research that your favorite article is based upon. Go read it and look at the tables and graphs.
    It’s a waste of time to argue with someone who is about confirmation bias (and yes you will probably replied by saying that person is me or something unoriginal). All good man.

    Thanks for the Fortune article nonetheless lol

  128. 128
    Eastsider says:

    RE: Eddiemaster @ 125 – No doubt subprime was a factor leading to the crisis. But speculation was probably the reason why we even got there. Everyone was leveraged to the max and banks were happy to loan money because US home prices never fell! Many ‘prime’ borrowers owned multiple properties then. Now we experience annual price increase in excess of 10%. Perhaps people are confident that home prices will only move higher. And the FED was happy to supply the liquidity during the run-up in prices. Do you sense the parallel? Anyway, we are now in QT phase which means prices will likely stall or even decline. That’s my 2 cents.

  129. 129
    Eddiemaster says:

    RE: Ardell DellaLoggia @ 121 – that’s good stuff, thanks. The pocket perspective is not someone who isn’t day to day with real estate can get a good sense of.

    I respect your opinions from past comments. I just didn’t want people who also respect your opinion to take much weight in certain stock performances to housing. Obviously I should state that if the poor stock performance leads to layoffs that impact local real estate, then the correlation should increase.

    I do have questions for you or Kary, hopefully you can help. If there is reduced real estate transactions (balance of low inventory from decent job market and ppl wanting to lock low rates they got, with slower job market growth and decreased affordability) after the speculators have been squeezed out, can the price action become more stabilized and gradual increase with inflation (historically since 75’ housing price index about double the inflation) or does low inventory continues to mean downward pressure on price? And how would one gauge the % of speculation? Is there a more up to date LTV stats available somewhere?

  130. 130
    Eastsider says:

    A key indicator on the health of housing market is affordability. “Affordability, according to the 2nd quarter reading, is the lowest since mid-2008. “ It has probably gotten worse since then. The latest (low) affordability reading parallels those of years leading to the crash.

    Share of “Affordable” Homes Falls to 10-Year Low
    http://www.mortgagenewsdaily.com/11082018_housing_affordability.asp

  131. 131
    Eddiemaster says:

    RE: Eastsider @ 128 – We are likely arguing for similar sentiments but putting emphasis on different parts of the equation.
    Some correction I have for you is that banks weren’t lending because they thought price will keep going up. While that expectation helped, but it was because banks can then collect the loan origination fee and securitize the loans and sell them to other investment banks or Fannie Mae (the ignorant ones), thus passing on the risk of having the mortgage actually defaulting. So it was a win win for anyone who want in on real estate and the mortgage origination banks. Because of CDS the subprime defaulting risk was overlooked.

    The reason I keep going back to subprime is because the high correlation between the uptick in % subprime mortgage origination and sheer quantity securitized up to 08’. I’m saying that the increased subprime practice not only caused significant speculation but equally importantly also significantly raise the risk for investment bank. The Fed was attempting to tighten starting 04’ but the yield inverted (no meaningful increase in mortgage interest rate) it was too late to prevent the collapse of the banking system. The collapse of Lehman sent shockwaves through highly intertwined banks and at least governments started raising rate in 04’ so it had some tools for QE.

    Yep we are in QT with unwinding the doings of QE impacting the long term rates. Increased Price pressure from mortgage is here for most likely at least a year out. But the major difference is the subprime lending % as well as significantly lower level of subprime mortgage securitization. While I agree the local market will suffer more for speculation because of local business boom I don’t see nearly as much of risk debt that is crisis-inducing. To qualify as a crisis, It’s duration and magnitude of the recessive period.

  132. 132
    Eddiemaster says:

    RE: Eastsider @ 130 – affordability will change based on wage growth as well. Job reports have been decent with wage growth. Many areas has also had worse affordability than Seattle. I suppose it’s all relative. But I’m not sure of the confidence level in price action.

    For the bears out there, why not capitalize on the beliefs by shorting with real money or debt? Heck, do a HELOC to short housing stock so u hedge if you don’t want to sell.

  133. 133

    RE: Luke @ 115

    Thank you Luke. I know a great number of good agents, but I expect the way they speak with me is different than the way they speak to their clients in many cases. The only time I hear the “snake oil salesman” rhetoric is at Open Houses. In that case the agent is either talking to the buyer as a representative of the seller or there for their own personal interests, given no one walking in and out hired them to represent them.

    If you are speaking about agents who don’t represent you, I think they are allowed to be “snake oil salesman” up to the point where you hire them to represent you. :) That is legally not correct in this State, but practically speaking, the reality. Their main function is to represent their client well and that shifts depending on whom they represent when you are speaking with them.

    I won’t lie for anyone. But I am always mindful of who I do and don’t represent when speaking with people.

  134. 134
    Matt P says:

    By Eddiemaster @ 117:

    RE: Matt P @ 111 – plus when it’s cold out and you can’t afford housing, you can just sleep on the subway! LIC would be pretty cool for the new Amazonians. The energy and art/food scene out there is tremendous. And one thing you won’t miss there is the Seattle freeze, which is actually a thing that seemed to infect even new transplants. Although NY’s winter really is no joke, compared to drizzles of rain.

    Seattle is definitely better for the homeless because of the milder climate and more tolerant police. I don’t consider them poor, though. They are destitute and in another category.

  135. 135
    Joe says:

    There’s an old saying – “Don’t try to catch a falling knife”. This is especially true after someone throws a knife 50 feet into the air, like they did with Seattle real estate.

    Don’t try to get too cute and fancy with the details, as this is equivalent to being lost in the trees within the forest. The only thing that matters now is we’ve had a decade long RE price climb to unimaginable heights, spurred by low interest rates. Now, rates are raising for the longer term and the negative feedback loops are kicking in. Those waiting for confirmation of the 40% price decline will be the ones that incur a 40% price decline. It’s only down 10% so far.

    If you are a millennial looking to buy a house and are worried that rates will keep rising, you would be right to worry. However, that is no reason to buy an overpriced house that is dropping $14,000 per month in value. That would be like jumping out of the pot and into the frying pan. Best to wait one to three years until the knife has dropped.

  136. 136
    eddiemaster says:

    RE: Joe @ 135 – I would suggest millennial buying something small and in prime location (if commuting isn’t insane) than to not buy at all, especially when you can leverage the eager sellers. That way you lock in a still historically low rate, which is only going up, and you limit the downside risk because of location and the lower price due to small size (hence it isn’t 14k a month based on the speculative continuous 10% drop). This would be a hedge in case the bears are not correct.
    Although Ardell suggested that properties in prime locations still sell well, so not saying that execution isn’t going to be painless by any means.

  137. 137
    pfft says:

    By Kary L. Krismer @ 113:

    By pfft @ 110:

    RMAX has name recognition. People won’t leave because of that. If they left where would they all go?

    pfft, I appreciate the fact that you try to post things that are actually real estate related and not political, but seriously, how can you possibly ask that question? It makes me wonder if you are even local. Real estate agents have a lot of choice as to where they associate their license.

    I am not trying to post on RE topics I AM posting on RE topics. Things are finally getting interested. Your RE posts have offered really nothing but denial about the state of the RE market. And you do it so soon after the last epic RE crash. You forgot everything so soon?

    Remax is a brand name. There aren’t that many brand names especially to absorb all the RE agents of a billion dollar company. They can’t all hang their shingle and go out on their own. Name recognition means something. Sure anyone can go anywhere, but they aren’t are they?

    I still find it telling that RMAX stock topped out a year ago. Is RMAX to RE as Sotheby’s(also a RE co.) is to the art market and general economy? BID(Sotheby’s) topped out last June…

  138. 138
    Market Psychologist says:

    RE: Eddiemaster @ 127 – Listen, Eddie. I worry because I care. If you cared to ask me, I would have told you that I sleep great because I am not dependent on a house of cards for financial security.

    Now, to your regurgitation of mainstream media analysis. How exactly did subprime inflate a national housing bubble? Look beyond the obvious and you might get somewhere.

  139. 139
    whatsmyname says:

    By Joe @ 135:

    The only thing that matters now is we’ve had a decade long RE price climb to unimaginable heights, spurred by low interest rates.

    Wait, what? RE prices have been climbing since 2008? Even the 2012 to 2014 increases should have been unimaginable only to those who couldn’t imagine 5 to 7 years in the past. Are you getting too cute and fancy with the details?

  140. 140
    eddiemaster says:

    RE: Market Psychologist @ 138 – U got me, I don’t worry about you because I don’t care.

    Keep going with your anti-mainstream attitude and assumption that anyone who doesn’t agree with you are just as delusional as mainstream media. Hey that sentiment sounds familiar.. which President shares that mindset? Hmm… perhaps you are presidential material too.

    Until you put your money where your mouth is, it’s just all talks. Go ahead and short something highly relevant to housing price. Lots of prime mortgages out there, per your logic, bubblicious it must be. But you must have gotten tired enough of losing arguments and not making any equity gain for a good part of the decade, so tired that you sleep very well~ Cheers!

  141. 141
    BacktoBasics says:

    When you look at Seattle real estate, you will find house price reduction and building cost increasing. If you are building a new house or remodeling, you will find cost increase from labor and material. So on side existing house price reduction and on the other side price inflation. So when two prices are converge, we could predict another wave of housing price increase. Low unemployment, wage increasing, import price increase, all these will lead to housing price inflation.

  142. 142
    eddiemaster says:

    RE: BacktoBasics @ 141 – Those are the tailwind factors, some people on this blog focus on the headwinds, but consider the name of the blog. I may add that with oil going into bear market since Q3, perhaps that will lower the inflation, causing the Fed to cool it with the already gradual rate hike and the balance sheet unwind. That may help with biz growth and slower increase of mortgage rate.
    To me it is very difficult to say, however, that the tailwinds will win out at least a year out considering the good case that the headwinds are building. But no certainty in conjectures, best to hedge and protect yourself.

  143. 143

    By pfft @ 137:

    By Kary L. Krismer @ 113:

    By pfft @ 110:

    RMAX has name recognition. People won’t leave because of that. If they left where would they all go?

    pfft, I appreciate the fact that you try to post things that are actually real estate related and not political, but seriously, how can you possibly ask that question? It makes me wonder if you are even local. Real estate agents have a lot of choice as to where they associate their license.

    I am not trying to post on RE topics I AM posting on RE topics. Things are finally getting interested. Your RE posts have offered really nothing but denial about the state of the RE market…

    No, you’re only trying to post on RE topics if posting requires giving legitimate information. The idea that all the Remax agents couldn’t go elsewhere is absurd. You obviously don’t know how real estate brokerages work.

    What specifically do you think I’m in denial about. What facts have I posted which are wrong?

    Oh, and how about owning up to the Blue Tsunami comment? Still waiting on that one. ;-)

  144. 144
    pfft says:

    By Kary L. Krismer @ 143:

    By pfft @ 137:

    By Kary L. Krismer @ 113:

    By pfft @ 110:

    RMAX has name recognition. People won’t leave because of that. If they left where would they all go?

    pfft, I appreciate the fact that you try to post things that are actually real estate related and not political, but seriously, how can you possibly ask that question? It makes me wonder if you are even local. Real estate agents have a lot of choice as to where they associate their license.

    I am not trying to post on RE topics I AM posting on RE topics. Things are finally getting interested. Your RE posts have offered really nothing but denial about the state of the RE market…

    No, you’re only trying to post on RE topics if posting requires giving legitimate information. The idea that all the Remax agents couldn’t go elsewhere is absurd. You obviously don’t know how real estate brokerages work.

    What specifically do you think I’m in denial about. What facts have I posted which are wrong?

    Oh, and how about owning up to the Blue Tsunami comment? Still waiting on that one. 😉

    Kary is uninformed on just about everything. Democrats will get almost 40 House seats, picked up a bunch of GOV seats and picked up something like 350 local seats. The House victory was a historic one.

  145. 145
    Luke says:

    RE: Eddiemaster @ 129

    lol.. so housing has appreciated double inflation since “75’”? I want what some of what this guys smoking..

  146. 146
    Eastsider says:

    RE: Luke @ 144 – Eddiemaster is a housing bull although he doesn’t say so directly. LOL.

  147. 147
    Eddiemaster says:

    RE: Luke @ 144 – lol go pull up the chart and do your own calculations. U might be surprised with what u don’t know.

  148. 148
    Eddiemaster says:

    RE: Eastsider @ 145 – I most definitely was in 2012. No shame there. And what have u done that u are so proud of..? Being subjective n cling onto the word affordability with limited context? Lol go ahead and short housing, u won’t, because u r all just talks. Perma bears already way behind in asset value, prob can’t afford to lose more.

  149. 149
    Luke says:

    RE: eddiemaster @ 136

    You are parroting the RE industry BS. When interest rates are rising quickly you absolutely should NOT be buying. There is plenty of excellent research from various US and international financial institutions and academic institutions showing significant rate-elasticity of housing prices, in the 5 to 6% range. Put simply, when rates are going up, there is significant downward pressure on prices. Buying at a lower price and higher rate introduces the purchaser to significantly less financial risk should they want (or need) to sell the house in the short- to medium-term.

    Anyone suggesting a buyer should urgently buy to “lock in low rates” when rates are going up should NOT be trusted.

  150. 150
    Notme says:

    Your opinion is wrong
    because you don’t own any
    only owners are right

    -a strange-argumentation-is-no-stranger bubble haiku

  151. 151
    Luke says:

    RE: Eddiemaster @ 146

    I looked.. you pick a very convenient starting point. That would be like me choosing the period of 2009 to 2012 to make a case for long-term RE returns. Try this..

    https://www.pragcap.com/robert-shiller-dont-invest-in-housing/

  152. 152
    Eddiemaster says:

    RE: Luke @ 149 – ahh now that u so confidently labeled the current situation based on perma bear bibles, how can one refute in the temple of perma bear without backlash?
    I particularly enjoy the way you just twisted my words to imply that I just encouraged buying everything everywhere. Maybe u don’t understand what hedging means, I shouldn’t put that past u. But then again, you are so confident that housing will crash right, so why bother hedging? Keep twisting it up!

  153. 153
    Eastsider says:

    By Eddiemaster @ 147:

    RE: Eastsider @ 145 – I most definitely was in 2012. No shame there. And what have u done that u are so proud of..? Being subjective n cling onto the word affordability with limited context? Lol go ahead and short housing, u won’t, because u r all just talks. Perma bears already way behind in asset value, prob can’t afford to lose more.

    Oh dear. How many times have you repeated such tactics here?

    Comment #28 #33 – Justme, NotMe
    Comment #37 – Brian
    Comment #43 – sfrz
    and so on…

    How about holding onto your properties and stop trolling here? As I pointed out in comment #65, people with vested interests in RE are generally bulls and their views should be discounted.

  154. 154
    Eddiemaster says:

    RE: Luke @ 151 – I picked whatever earliest date I could easily find for housing, which was 1975, and just went from there. The long duration matters for more data points to represent the overall trend. Even if I picked 20 years later, the result is still the similar that housing price gain far outpaced inflation, and that SPX far outweighed housing price gain. The rich do just get richer as perma bears get left behind. I am not saying triple leverage on junk bond and things will just go up, but try to understand why price actions occur in relation to risk and debt servicing, then you can hedge better to limit loss.

    Case Schiller probably wouldn’t say what he said about specific coastal markets. Plenty of people made a crap load along the coast. And for those who bought early in the cycles, the rental income sets people up for cash flow. And with that said, I’m ready for the bears to pour on the Haterade! Bears just can’t wait for things to drop in value to make themselves feel better about missing out with all the money in savings account and CD~

  155. 155
    Eddiemaster says:

    RE: Eastsider @ 152 – oh yea u must be referring to the rest of the bear packs. It’s quite simple when dealing with you people, just poke at where it hurts.
    If I see nonsense rhetoric by the bears, I’m going to call it out. If anything I learned something as I debate. But if u must know, I’m here to get a sense of whether I should unload the properties or not and to what extent. Of course it is easier to just keep renting them out for the cash flow, so I really need some convincing if the situation is so bad. If that makes me a bull, so be it. On this blog u have to be one extreme or the other I guess. So expect more “trolling” as I’ve expected the same from the bear pack.

  156. 156
    Impartial Observer says:

    Been a reader for a while, never commented before. Here’s my take on the Seattle real estate market. There have been 3 main drivers of escalating real estate prices over the past 5 years or so:

    1. Prices were probably under the natural market level to begin with (overreaction from financial crisis)
    2. Very low interest rates
    3. Very large number of new high paying tech jobs(Mainly Amazon going from 10K ee’s to 40K ee’s)

    Those 3 factors were the perfect storm for escalating prices. For that price growth to continue, those factors would need to remain intact. However, all 3 of those factors have turned less favorable for escalating prices:

    1. Prices are no longer low
    2. Interest rates have risen (although still historically low)
    3. Tech will not be hiring as many ee’s over the next 5 years as over the previous 5 years (not saying tech will stop hiring, just saying it won’t be anything like the previous 5 yrs)

    I see many comments predicting the extremes (crash or continued boom), but I don’t believe either of those are the most likely outcome. I think most likely prices remain relatively flat for the next few years.

    It’s fun and interesting to debate various details and aspects of the market, but if you’re really putting your money where your mouth is (and we all are in one way or another) I wouldn’t be putting mine at either of the extremes going forward.

  157. 157
    Luke says:

    RE: Eddiemaster @ 153

    This has already been addressed elsewhere. Long-term real return on residential real estate is approximately 0. After accounting for upkeep, taxes, and transaction costs, it is negative.

    http://www.multpl.com/case-shiller-home-price-index-inflation-adjusted/

  158. 158
    kenmorem says:

    By Eastsider @ 152:

    By Eddiemaster @ 147:

    RE: Eastsider @ 145
    How about holding onto your properties and stop trolling here? As I pointed out in comment #65, people with vested interests in RE are generally bulls and their views should be discounted.

    so anyone without interests in RE are generally bears and their views should be discounted too, huh? so who’s left???

  159. 159
    Eddiemaster says:

    RE: Luke @ 155 – u still on this. Ok, this set of data is inflation adjusted, and still trending up similarly to what I’ve already said about housing price gain far outpacing inflation, based on this graph, for at least the past 60 years. Lets hear your explanation that if the return is zero as you want to believe, why wouldn’t the line stayed flat over time. I don’t even know how you were interpreting this graph to be arguing back.

  160. 160
    Eddiemaster says:

    RE: kenmorem @ 156 – yea the kind of logic that’s just tossed out… just have to dust off the shoulder and move on.

  161. 161
    Blurtman says:

    Flee while you can! The homeless are gathering at Lake Sammamish for a final assault.

  162. 162

    By pfft @ 144:

    Kary is uninformed on just about everything. Democrats will get almost 40 House seats, picked up a bunch of GOV seats and picked up something like 350 local seats. The House victory was a historic one.

    Wow, talk about denial! Care to mention the Senate?

    I don’t like either Democrats or Republicans, but the big difference between the two is Republicans actually realize that not everyone agrees with them. Democrats actually expected a huge turnout and change in results as a result of all the things Trump did and all the press coverage. It didn’t happen because not everyone agrees with the Democratic party message (assuming it has a message).

    What we ended up with was a split decision and even on the House side something within historic norms for off-year elections. I don’t think you can read too much into 2018 for 2020, but the fact that Democrats didn’t do well in statewide elections isn’t a good factor for them.

  163. 163

    By Luke @ 145:

    RE: Eddiemaster @ 129

    lol.. so housing has appreciated double inflation since “75’”? I want what some of what this guys smoking..

    The truth is probably somewhere in the middle. It probably does better than tracking inflation when you’re looking at an individual property, particularly one in the city.

    Using the condo I bought in 1977 as an example, there aren’t that many comps recently in the building, but it likely went up at least 6x where inflation went up only about 4x in that period. If you’re tracking broader area statistics, such as the county median, you’d get different results because new houses are being built further out.

  164. 164

    Getting back to the local market, I really have to wonder in what scenario anyone here thought that the end of the historic seller’s market would be in any way pretty? In 2009 we didn’t have such a strong prior market, but an extreme economic shock caused considerable damage. But even if you take that shock factor away as being an initiating cause, and assume a continuing strong economy, you’re not going to go from the market we had in 2015-2018.5 to just a plateau condition for prices. The only question is how messy is the transition to a more normal market is going to be, and how long is the messy condition going to remain. That’s part of the reason I never like extended double digit price increases, because at some point that will stop and when it does it will not be a smooth situation and many (including the press), will try to over-hype what is happening.

  165. 165
    Luke says:

    RE: Eddiemaster @ 157

    It’s clearly reverting to a long-term return of nothing.

    Here’s a similar chart for stocks..

    https://z822j1x8tde3wuovlgo7ue15-wpengine.netdna-ssl.com/wp-content/uploads/2012/12/RCUBE2.jpg

  166. 166
    Luke says:

    RE: Kary L. Krismer @ 161

    Ahh, one of the snake oil salesmen has decided that he’ll arbitrate truth based on… a ballpark approximation of what he thinks the return might have been for a condo he once owned. Thanks for playing, but my assertion is based on Shiller’s analysis of repeat sales for thousands of properties over more than a hundred years. I think I’ll believe Shiller’s analysis over “that one time I bought a condo”.

    Real long-term return is 0.

  167. 167
    sfrz says:

    Check out the used house salesperson spin. It doesn’t mean prices are falling. Don’t believe your eyes, just listen to my soothing voice. No cause for panic! Same type of hype and repeated nonsense you hear football players and coaches say over and over when they are interviewed. Same verbage from each crowd. Over and over. The REIC gang are preparing crow for their Thanksgiving feast. Party like it’s 2007!

    “As more inventory enters the market, buyers have more options,” she said. “Bidding wars are less likely and we are seeing some price reductions. This does not mean that houses are falling in value; it means that the rate of appreciation is decelerating.”

    While the current real estate market is certainly different from the frenzy conditions present last May, Spencer said there’s no cause for worry.

    “Concern about the housing market can come from confusion,” she said. “Reach out to your trusted real estate advisor to get clarity on the housing market in your area of interest.” http://www.kirklandreporter.com/life/entering-the-winter-real-estate-market-what-to-expect/

  168. 168
    Eastsider says:

    RE: kenmorem @ 156 – Reading comprehension… LOL

  169. 169
    Eddiemaster says:

    RE: Luke @ 164 – lol choosing to just ignore even your own supplied graph. Cling onto that belief and pass it down if or should you choose to have offsprings. The society always has a need for the low paid workers wih no assets, you guys provide the best services.
    No worries, autonomous driving will make those 50 mile commute from apartment to work less demeaning.

  170. 170
    Eddiemaster says:

    RE: Luke @ 163 – ok I see. You are actually trolling me by telling that all these assets classes have zero gain once adjusted to inflation regardless of the graphs that you supply saying completely different thing. Damn it, fool me once, shame on me!
    Maybe u just hold onto bars of real gold then

  171. 171
    Eddiemaster says:

    RE: Kary L. Krismer @ 162 – that is my concern as well, the local adjustment should be particularly harsh due to speculation with the national factors not helping. And it’s better that this happens now then another year or two of worsened speculation and possible slowing economy.
    On the other hand I’m not seeing the similar risky debt factors such as MBS securitization of subprime, in fact subprime ARM loans has been largely reduced since the crisis and kept low in % origination. So there isn’t a trifecta that we would see in 07’. But yes, the level of speculation remains a significant concern for the short term.
    Echoing what Ray Dalio has been saying, the new crisis won’t be due to housing, but somewhere from the political and populist crisis, compounded with healthcare and student loans.

  172. 172
    Luke says:

    RE: Eddiemaster @ 167

    Do your parents know you’re talking to strangers on the computer?

  173. 173
    whatsmyname says:

    RE: Luke @ 164 – S&P Case Shiller says buy S&P stocks, not real estate. S&P stocks have grown an inflation adjusted 4,000% since 1870, which is exceptional for an index launched in 1957. But no worries, this has been back checked by a large Wall Street financial firm.

    Does Case Shiller have thousands of good quality paired sales from enough locations in 1890 to establish statistical significance? Possibly, maybe, doubtful. Would it recognize that virtually all Seattle houses from 1890 are now downtown commercial property? C’mon. Does the chart really say zero? No, but hey; this is good corporate information from S&P, so down with snake oil salesmen.

  174. 174
    Webinator says:

    @Luke 163 and 164

    Hi Luke,
    I’m glad you brought up the long-term value subject. It’s one I’ve thought about a fair amount as a long-term owner. This is how I put all these seemingly different perspectives together. I’m interested in feedback on the soundness of this working theory:

    I’ve always assumed that homes, more or less, cost what people make. Given that the CPI is, approximately, an adjustment of prices per changes in what people make, homes prices should stay roughly constant over time in real dollars. I think your data supports this.
    But the “yes, but” in the back of my mind about this general conclusion is the loss of the “urban-flight” effect in the averaging of the data across urban/rural areas. In other words, there are likely winners and losers in a given county or state since 1975, and lately the winners have been tech-cities. But if you average in the areas where those tech workers grew up and left, the signal disappears.

    I’d be interested in seeing an analysis of real estate value over time against distance to a tech-city center. I think the line through the points would not be flat. Said another way: if you won the big gamble of investing by choosing to buy a house in a high-tech area over a manufacturing/farming area, your return over time was better than 0 since 1975. If you lost that initial gamble, your return was worse than 0.

    Of course, this is all amateur conjecture, so I could be missing something important. I have just noticed a similar phenomenon for in-city house values in Seattle, Washington DC, Boston, Miami, LA, San Fran, Portland, New York, Chicago, Vancouver, and Toronto; they have become less affordable since the 70s, while rural houses have become more affordable. But averaged together, I think you are right; they have remained about the same level of affordability.

  175. 175
    Eddiemaster says:

    RE: Luke @ 170 – Keep ignoring the fact the my ridicule of you still stemmed from you not being able to interpret your own supplied graphs to own up to that nonsense 0 return you have been preaching.
    Oh.. maybe u r the one smoking something good, but no thanks I don’t smoke.

  176. 176
    Luke says:

    RE: whatsmyname @ 171

    The chart title didn’t provide the full description of how prior years were derived, so it must all be lies?

    The chart I posted is a derivative work of the Shiller data used in his book Irrational Exuberance. You can find the original data and additional information here:

    http://www.econ.yale.edu/~shiller/data.htm

    The methodology and data are sound.

    The real long-term return of US stocks is approximately 6.5% / year.

    The real long-term return of real estate is 0.

  177. 177
    Eastsider says:

    RE: Webinator @ 172 – Yes, home prices appreciate faster in a booming city. I’m sure Detroit home prices were doing great sometime in the past. Will Seattle continue to be a booming city in 30 years? You are paying premium for houses in Seattle today. If you are an investor, you will make way more money investing in tech stocks than Seattle assuming the growth in tech continues. That said, premium today is excessive based on even tech income.

  178. 178
    whatsmyname says:

    RE: Luke @ 174RE: Luke @ 174 – You missed my math error. The S&P chart claims 4,000 times, not percent. That would be 400,000% – inflation adjusted. CPI adjustment for 1870-2018 is 19.27X, so a dollar into the nonexistant 1870 S&P 500 would be a nominal $7.7 million today. Not for me to question the credulity of the faithful. I expect that in in 148 years, you will be doing very well. Hey, me too, because I’m a corporate guy with 401K’s in the stock market. My personal experience is to have made a lot more in real estate, but I am foolish enough to think that mortality counts.

    Also, 121 to 201 is not zero. Sound methodology means justifiable, not correct or complete. Shiller is not so sure of his omniscience as you are. But party on. With all the similar piercings these days, it’s refreshing to see a guy with an intact nose, but fish hooks in his lips.

  179. 179
    biliruben says:

    RE: Kary L. Krismer @ 161

    I’ve owned and sold 2 houses in Seattle, each for 5 years during historic runups. Couldn’t have timed it better. Sold in 2007 and sold in 2017.

    On paper we made a bundle. In truth, we lost money. All the profits and more going to maintenance and transaction costs (i.e. Realtors and the countless fees and taxes).

    Houses are not investments. You should think of them as homes. A place to live. Our society would be much better off.

  180. 180
    Luke says:

    RE: Webinator @ 172

    There is compelling evidence that the reason real estate tracks inflation is because it actually tracks affordability. This is also why changes in mortgage rates have a direct impact on price, with a 1% increase in mortgage rate resulting in an approximately 5-6% reduction in price.

  181. 181
    Notme says:

    The index talks to me
    tells me to buy now, look it!
    no wonder the trouble…

    -a bubble-monger-communicating-with-the-index-gods haiku

  182. 182
    Luke says:

    By whatsmyname @ 176:

    RE: Luke @ 174RE: Luke @ 174 – You missed my math error. The S&P chart claims 4,000 times, not percent. That would be 400,000% – inflation adjusted. CPI adjustment for 1870-2018 is 19.27X, so a dollar into the nonexistant 1870 S&P 500 would be a nominal $7.7 million today. Not for me to question the credulity of the faithful. I expect that in in 148 years, you will be doing very well. Hey, me too, because I’m a corporate guy with 401K’s in the stock market. My personal experience is to have made a lot more in real estate, but I am foolish enough to think that mortality counts.

    Also, 121 to 201 is not zero. Sound methodology means justifiable, not correct or complete. Shiller is not so sure of his omniscience as you are. But party on. With all the similar piercings these days, it’s refreshing to see a guy with an intact nose, but fish hooks in his lips.

    RE: whatsmyname @ 176RE: Eddiemaster @ 173

    Are you debating the returns shown in the chart with yourself?

    Go back to your hole.

  183. 183
    Luke says:

    RE: whatsmyname @ 176

    Shame on me for not nitpicking your earlier post. I’m not sure what your point is in this post.. are compounding stock returns blowing your mind?

    Maybe this is how we can get you to understand why the chart I posted of real returns on real estate indicates no return. If the return was even 1% / year, we should see an approximately 4x (400%, for those who struggle with the math) return in the period shown in the chart. We don’t. Instead we observe price trends that are not statistically different from NO real return.

  184. 184
    Webinator says:

    RE: Luke @178:

    This makes sense. I actually thought it was more like 7-9% reduction in price per 100 bps at our current position of ~4-500 bps. When I buy a property, I try to buy low, but I don’t count on it. I assume 0% real change in value over the period I own it (20-40 years), minus 6-10% for commissions, staging, for-sale fix-ups, etc. The game is in the rental income for me: a steady cash source that I can improve with my own skills and efforts if it falters, unlike some other popular investments.

    RE: Eastsider @ 175:

    I do suspect that in-city properties are experiencing a long-term bull market associated with the growing value of enterprising creativity over resource extraction/conversion (ag/manufacturing). I imagine the builders of early hydro projects in the midwest steel towns couldn’t imagine their bull market ending. I wonder what the next one will be that draws people out of the cities. Perhaps we will simply oscillate between a premium on human brain capital and resource capital. Water and power could again be dominant factors in some future arrangement of enterprise where these are limited resources and everyone can program.

  185. 185
    Eddiemaster says:

    RE: biliruben @ 177
    I also have anecdotal scenario as well, in 2012 I bought a property for just over one million, and the property was last transacted at 500 bucks in 1950. That’s a simple math of 2000x, granted this is a lake front tear down, so gains are not even across the board.
    So it would be nice to see your actual numbers. If I assume a 7-8% annual increase during each year if your timeframe since those are trough to peak years, 1% on annual property tax, 10% transaction fee in the end, and if you didn’t exceed 500k and lived in the house, then there isn’t capital gain tax, so that boils down to how much maintenance and insurance and interest afterincome tax deductions you had for expenses. You should see north of 20% net increase with the entirety, not counting the leveraging of the mortgage, which could take you well to doubling the down payment.
    Please help us out here.

  186. 186
    David says:

    By Notme @ 179:

    The index talks to me
    tells me to buy now, look it!
    no wonder the trouble…

    -a bubble-monger-communicating-with-the-index-gods haiku

    Someone complimented you on your Haiku skills and you’ve since turned into the Hugh Hefner of Haikus. Is your name Evan? Do you share panties with your girlfriend (emphasis on ‘friend’)?

    Give it a rest.

  187. 187
    Luke says:

    RE: Webinator @ 181

    Rate elasticity will change depending on a number of factors. The actual elasticity in Seattle right now could certainly be higher.

    I don’t debate the merits of investing in real estate for rental income and tax benefits (depreciation).

  188. 188
    Eddiemaster says:

    RE: Luke @ 180 – That is true about the 1% outperformance leading to over 4x if inflation adjusted from 1870. But that’s lacking a bit of context as inflation numbers were historically highly volatile up until mid 80’s. before then you see as high as 18% inflation or deflation of 10%, but overall a higher pace of inflation. The US monetary policy has certain target inflation rate that’s using to avoid these situations. The validity of the measures is another topic of debate, but I suspect the high inflation of over 10% will be a thing of past especially when we go away from oil.
    So you can make the argument for since 1870. And I’ll stick to what I think is more realistic conjecture of since 1980’s, per math it should work out to be more than 4% annualized over after inflation adjusted. In the end, only one of us will be right.

  189. 189
    Eddiemaster says:

    RE: Webinator @ 181 – for the rental game, do you not adjust the holdings based on headwind risk? That’s what I’m trying to determine. What would be your reasoning behind not selling? Because you bought relatively cheap with lower rate, has positive cash flow, in the long term at least match inflation, and not pay transaction fees?

  190. 190
    Matt P says:

    What’s the weekly update look like?

  191. 191
    whatsmyname says:

    RE: Luke @ 174 – There is nothing in your link to prove the validity, or even to fully explain the data Shiller relied on. There is a nice link to the 11 city, house futures market, (available for trading now), that he and Case were working on when fame fell into their lap.

    Your assurances are so far based upon your own supreme confidence that this is so – which is not too impressive a basis. You failed to respond with any substance to my nits on Shiller’s work, especially regarding Seattle.

    As to the S&P 500, I’m no stranger to compounding. I question the historical reality vs the theoretical reality. Again, 87 of the 148 years are “made up”. Please, do what you like. I am too busy losing real dollars to house people like you. Fortunately, it is their real dollars that I am losing, and I get a good cut.

  192. 192
    Notme says:

    To haiku or not
    or compliment your writing?
    your snout is pretty

    -a bubble meta-haiku

  193. 193

    By Luke @ 164:

    RE: Kary L. Krismer @ 161

    Ahh, one of the snake oil salesmen has decided that he’ll arbitrate truth based on… a ballpark approximation of what he thinks the return might have been for a condo he once owned. Thanks for playing, but my assertion is based on Shiller’s analysis of repeat sales for thousands of properties over more than a hundred years. I think I’ll believe Shiller’s analysis over “that one time I bought a condo”.

    Real long-term return is 0.

    Read again. I said the result would be different if you’re dealing with larger groups of properties, such as an entire county. Case-Shiller locally deals with three counties, and other areas nationally.

    But go ahead and think that a block of land in downtown Seattle only appreciated in value at the rate of inflation over the years. You after all are an Internet poster who clearly is knowledgeable. /sarc

    I would add that just keeping up with inflation would be a great result for most people given that they are heavily leveraged.

  194. 194

    By Eddiemaster @ 169:

    Echoing what Ray Dalio has been saying, the new crisis won’t be due to housing, but somewhere from the political and populist crisis, compounded with healthcare and student loans.

    The next crisis almost never is about what the prior crisis was about. There’s always something different. The only exception that comes to mind is arguably WWII.

  195. 195

    By biliruben @ 177:

    On paper we made a bundle. In truth, we lost money. All the profits and more going to maintenance and transaction costs (i.e. Realtors and the countless fees and taxes).

    Houses are not investments. You should think of them as homes. A place to live. Our society would be much better off.

    I would tend to agree with the last statement. If you want to invest in residential real estate, buy at least a duplex, if not an apartment. (But I’m not saying this is a good time to do so–no opinion there.)

    But as to the first point, I’m a bit surprised by the 2017 results. I’ve seen people who did next to nothing pocket pretty good sums after only owning a short time. But if your maintenance costs were really remodeling expenses, that would be different.

  196. 196
    Eddiemaster says:

    RE: Kary L. Krismer @ 191 – I should had strengthened that statement by saying that if the crisis isn’t caused by housing, then should we expect the similar level of price decline as if crisis were caused by it?

  197. 197
    Justme says:

    Weekend Update:

    It is time for the weekend update of for-sale inventory for KC/SFH. Listed inventory is at a 6 year high, not exceeded since 2012. The King County SFH for-sale listings declined by 72 units from last week to 4348, a number last exceeded (same week) in 2012. As usual, inventory peaked on Friday evening.

    11.09.2018 18:00 4348 (-72) droop= -72/4476=-1.6%
    11.02.2018 15:00 4476 (-245) droop=-245/4721=-5.2%
    10.26.2018 17:00 4721 (-101) droop=-101/4829=-2.1%
    10.19.2018 22:00 4829 (-29)
    10.12.2018 17:00 4858 (-12)
    10.05.2018 17:00 4870 (-21)
    09.28.2018 20:00 4891 (+54)
    09.21.2018 17:00 4837 (+2)
    09.14.2018 18:00 4835 (+235)
    09.07.2018 19:00 4600 (+230) Friday after labor day
    08.31.2018 19:00 4370 (-103) Friday before labor day
    08.24.2018 17:00 4473 (+112)
    08.17.2018 18:00 4361 (+88)

    Compare with same week(s) in 2017:

    11.10.2017 19:00 2390 (-101) droop=-101/2489=-4.1%
    11.03.2017 17:00 2489 (-170) droop=-170/2659=-6.4%
    10.27.2017 23:00 2659 (-121) droop=-121/2780=-4.4%
    10.20.2017 18:00 2780 (-73)
    10.13.2017 19:00 2853 (-48)
    10.06.2017 19:00 2901 (-70)
    09.29.2017 22:00 2971 (-21)
    09.22.2017 20:00 2992 (-20)
    09.15.2017 18:00 3012 (+80)
    09.08.2017 19:00 2932 (+234) Friday after labor day
    09.01.2017 17:00 2698 (-258) Friday before labor day
    08.25.2017 20:00 2954 (+14)
    08.18.2017 20:00 2940 ()

    The seasonal droop continues, but has slowed. Yet again, 2018 is drooping considerably less than 2017 same week. There continues to be an elevated crowd of sellers at the exits of the King County SFH market: The SFH absolute inventory level is 1.82x (4348/2390) what it was last year (2017). The absorption rate appears still to be dropping, even in the context of some recent reports that pending sales counts are increasing. More sellers than buyers, in other words. Something will have to give, I’m guessing PRICE.

  198. 198

    By Eddiemaster @ 193:

    RE: Kary L. Krismer @ 191 – I should had strengthened that statement by saying that if the crisis isn’t caused by housing, then should we expect the similar level of price decline as if crisis were caused by it?

    Maybe, maybe not. The decline in the late 70s, early 80s was caused at least in part by the S&L crisis. How the housing market reacted then was different than how it reacted in 2009. But the earlier period was a lot different in that there was significant inflation and high interest rates, something lacking in 2009.

    My point was more that future events tend to be different than prior events. If they weren’t you could make a ton of money just looking at stock charts.

  199. 199
    Justme says:

    Weekend Update, graphical edition:

    Weekend active inventory update, King County, graphical edition. As always, click on link, then click once more for enlarged view.

    King County SFH active for-sale inventory 2017-versus-2018 on 2018-11-10
    https://imgur.com/a/OMKGRBE

    King County Condo active for-sale inventory 2017-versus-2018 on 2018-11-10
    https://imgur.com/a/BLBe8tA

    Wow, look at that condo for-sale inventory holding up. I still want to make fun of David Lereah: Condo listings seem to have reached “a permanently high plateau”. In fact KC condos are within a dozen or less listings of not being exceed since 2011, whereas 2012 has been the recent benchmark to compare to.

    The SFH seasonal droopage is more obvious, but as a fraction of inventory (percentage) it is considerably less than in 2017.

    Happy Open Houses. Show’em some data :) Or better yet, stay home and let the silence do the talking.

  200. 200
    Eddiemaster says:

    RE: Kary L. Krismer @ 195 – I would agree with not solely use stock charts to base large decisions. But sector trend and news do give indicators to overall decision making. So you can take cues on these things. And people do make a fortune from trading on the understanding of cause and effects. It is important to know the why.
    The debt crisis repeats over and over again. The sequence of events are similar so you can study history to see what actions and movements are about to occur. While you don’t have to chase the % specifically, you just want to be in the right direction with proper hedging. Bridgewater makes a killing by being a historian and adapter of data science.

  201. 201
    Eddiemaster says:

    RE: Justme @ 196 – typical Justme with that confirmation bias to so quickly jump to fear mongering. Good thing Tim doesn’t just look at inventory and be done with his analysis. Short housing stock if you are so sure, triple leverage up to maximize your gain!!!

  202. 202
    biliruben says:

    I am guessing we are pretty typical. People just don’t like to think about anything beyond the bought and sold numbers. They should.

    First house – bought for 250K, sold for 300K. There’s your 20%.
    New roof, a couple downed trees, a new fence (built myself), inflation, and the dreaded 6%. A wash.

    Second house – bought for 650K sold for 735K. Significantly more than 20% down, because. Jumbo. Probably overpaid going in, but we had looked at a lot of houses, and we wife couldn’t deal with losing another. Unobstructed view of lake over the Burke.
    Expensive water main replacement (boring new line 180 feet). Took the view basement down to the studs, rewired and sheet-rocked and reframed myself. Inflation. 6%. Wash. Probably could have made a little more if held for another year (zillowing at 900K+ now), but long-distance land-lording sucks. Sold late 2016, now that I think back.

  203. 203
    Joe says:

    East Side in trouble?

    This nice clean house only two minutes from Microsoft would have sold above ask in one weekend in 2017. Now, it sits on the market with only 40 page views on Trulia. I guess nobody wants to catch a falling knife, for good reason. Buyers are waiting to see how low the market will go. It could be a long wait as prices drop.

    https://www.trulia.com/p/wa/redmond/6119-145th-ct-ne-redmond-wa-98052–2118551595

  204. 204
    Joe says:

    I believe the price declines will accelerate from here. Over the past few months, there were genuine questions about the direction of the market, so houses sold during that time frame were only modestly down from peak. Now that the downward trend is firm and indisputable, both buyers and sellers will be dropping prices without hesitation. Look for more extreme changes over the next few months and watch it accelerate this Spring. Of course, if we enter the recession everyone expects in 2019 and jobs dry up, this could be an optimistic forecast. The last decline was about 40%. We are see a 10% decline so far this time around, so we have a ways to go.

    Meanwhile, Chinese money dries up as their stock market tanks. The US stock market has established its own downtrend. Interest rates are scheduled by the government to rise a full percent by this time next year.

  205. 205
    Matt P says:

    By Justme @ 196:

    Weekend Update, graphical edition:

    Weekend active inventory update, King County, graphical edition. As always, click on link, then click once more for enlarged view.

    King County SFH active for-sale inventory 2017-versus-2018 on 2018-11-10
    https://imgur.com/a/OMKGRBE

    King County Condo active for-sale inventory 2017-versus-2018 on 2018-11-10
    https://imgur.com/a/BLBe8tA

    Wow, look at that condo for-sale inventory holding up. I still want to make fun of David Lereah: Condo listings seem to have reached “a permanently high plateau”. In fact KC condos are within a dozen or less listings of not being exceed since 2011, whereas 2012 has been the recent benchmark to compare to.

    The SFH seasonal droopage is more obvious, but as a fraction of inventory (percentage) it is considerably less than in 2017.

    Happy Open Houses. Show’em some data :) Or better yet, stay home and let the silence do the talking.

    That condo graph is wild. If it stays plateaued like this and then goes up again in the Spring, we’re going to hit condo numbers never seen before and good luck to all those apartment projects that are decided to switch to condos now because there’s an apartment oversupply.

  206. 206
    Eddiemaster says:

    RE: Joe @ 201 – I don’t disagree with the possibility, I just disagree with the unwavering certainty. I don’t understand why no one has come out to short housing stock and yet everyone is so sure of the decline. Does no one care to capitalize on the crash? That has always been my issue with people who hold strong bearish sentiments. Put your money where your mouth is if you are that sure, won’t even fault you for hedging against the short.
    I will be hedging against housing decline if I eventually choose to hold onto to properties. Just haven’t decided to sell yet.

  207. 207
    Luke says:

    RE: Eddiemaster @ 203

    Remax, Redfin, and Zillow have each lost almost half their value since just this past April. If you didn’t short already you may be too late.

    You’ll definitely want to wait until you are absolutely sure the prices have dropped before you sell ;)

  208. 208
    Eddiemaster says:

    RE: Luke @ 204 – so you are saying that going forward these stocks that you pointed out won’t fall further.. thus not worth shorting? And if that’s any indication of housing market (as you are linking the two together by saying their names), how does that corroborate with your prediction of housing crash? Let’s hear you try to claw out an explanation for that cute little logic now. My guess is you will just completely changed the subject again.

    I bought in late 2012 and early 2013, you would have to really bet that the US economy or even local economy is just going to be mediocre/sucking going forward to be so bearish long term. Meanwhile my cash flow more than covered the debt service cost, and I can sell one and be completely deleveraged. So yea… keep wishing on the worse, it has served you so well in life so far, I’m sure ;p

  209. 209

    RE: Joe @ 200

    Coincidentally, that is one of the neighborhoods I was tracking earlier today.

    I was doing it for Luke to show the growth trend and that is one of the neighborhoods I like to follow for a number of reasons. They were built between 1984 and 1988 in three phases and originally cost between $135,000 and $155,000. Doubled by 1998 or so, selling at $270,000 to $310,000. Doubled again by 2005-2006 selling at $540,000 to $620,000. Recently doubled again with a 1987 built and sold for $164,000 selling last year for $1,025,000 and a 1984 built originally sold for $146,000 selling for $1,221,000 (bid up almost $200,000) in May.

    I like tracking that neighborhood as it has no big land value incentives like water views or close to “town”. Just close to Microsoft, though my clients and friends in there never worked at Microsoft. Largely original condition homes except for normal repair and replace and some updating. In other words, no tear downs or “effective year built” houses to speak of. There are about 160 “like kind” products to work off of, so you get enough data without huge variance in home age or style. Modest sized homes running from 2,000 sf to 2,700 sf for the most part, but some of the smaller ones have always sold for more than some of the larger ones. So size was never the most important price factor there.

    I also ran Chevy Chase as it was one of the first neighborhoods to go in right after the 520 Bridge was built and opened in 1963. Chevy Chase was built between 1964 and 1966. While there are still 15+ original owners in the 140 homes neighborhood, I can’t see the original prices. The first price showing was in a resale in 1977 selling for about $50k and 1978 for about 60k. They doubled by 1988, selling in the $110,000 range. (Smaller than the Sheffield houses which were selling for more at that time.) Doubled again by 1998 selling in the $220k range. Doubled again by 2005 selling in the $440,000 range and recently doubled again going from $550,000 or so in 2014 to $900,000 give or take recently.

    Because there was no Bridge running across Lake Washington until 1963, there are very few houses built prior to Chevy Chase. The draw wasn’t Microsoft for either of those neighborhoods. It was just the beginning homes of The Eastside, for the most part due to the Bridge in 1963, especially as to Chevy Chase in 1964. Kirkland is different, as it was always a Port City and easier to access coming up and around from Lake City Way.

    So back to $146,000 Sheffield House in Redmond Selling for $1,220,000 earlier this year. That kind of growth is not standard around the Country where it takes decades for a house to double in value.

    A quick jump to Renton for comparison and 1984 built for $70,000 sold for $440,000 and a $55,000 in 1984 sold for $520,000.

    I am not commenting on the house Joe linked to, as agents cannot, but amazing coincidence that it happened to be in the group I was tracking earlier today.

    I started in the exact same market as 2008 back in PA/NJ in 1990 where prices had drastically increased from 1985 to 1989 or so and by 90-91 there were a lot of underwater homes. Same in L.A. where I worked subsequently. Huge up late 80’s. Drop 89-91. Flat to modestly down through 93. Builders getting a bit braver by 95 and full steam ahead from 98 to 2005. That was true for a lot of the Country. (not Seattle Area).

    The main difference Nationally is people came to closing with the shortfall. They didn’t sell short. They just walked into closing with a check for the loss. Likely why it didn’t make big headlines like the most recent crash. Seattle didn’t see any of that I don’t think because the little City and burbs were growing by leaps and bounds due to new Bridges and Microsoft and other factors. That is why Seattle is always counterbalancing by checking to see if they are are going to be “special” once again. People laugh about the Seattle is Special, but for the most part during previous hosing downturns Nationally…Seattle Area was in fact special.

    For some reason that last part makes me want to go watch Dirty Harry again. :)

  210. 210
    Luke says:

    RE: Eddiemaster @ 205

    Stock prices are the expected future revenues discounted to present value. That is, current stock price is already taking into account expectations of the future.

    How much of a downturn would equate to half the present value of future revenue streams of Remax, Redfin, and Zillow? It appears that there is already an assumption of significant downturn in real estate built into these stock prices.

  211. 211
    Blurtman says:

    By Luke @ 207:

    RE: Eddiemaster @ 205

    Stock prices are the expected future revenues discounted to present value. That is, current stock price is already taking into account expectations of the future.

    Business school nonsense. The price is what folks will pay for it.

  212. 212
    Impartial Observer says:

    RE: Blurtman @ 208 – “What people will pay for it” is based on future earnings. It isn’t just a feeling or a hunch. Luke is correct.

  213. 213
    Eddiemaster says:

    RE: Blurtman @ 208 – lol I doubt he has an MBA. It’s true that stock price is what ppl want to pay for it, but valuation based on future earning growth still matters to attract investors. We were already on this earlier in the comment section that these stocks don’t correlate with housing price index and I’m not going to redo the reasoning since Luke just wants to keep bringing old logic that’s refuted. If anything I think HomeDepot, Restoration Hardware, and REIT stocks would be much better correlated than the disrupt young companies like Redfin or Zillow.
    I want to be done with commenting this weekend, sorry for bothering all the bears. I’ve gain some new perspectives and ways to evaluate risk. Ultimately I will elect to sell two of the properties and keep the rest comes this spring, as part of the hedging going forward. This isn’t because I think a 40% drop is feasible, that wouldn’t set us back to 2012 price, which I don’t think is realistic for a crisis not stemmed from risky mortgages debt, but an investor (a nicer word for speculator) chases yield, there are other ways to get it.

  214. 214
    Macro Investor says:

    By biliruben @ 199:

    I am guessing we are pretty typical. People just don’t like to think about anything beyond the bought and sold numbers. They should.

    First house – bought for 250K, sold for 300K. There’s your 20%.
    New roof, a couple downed trees, a new fence (built myself), inflation, and the dreaded 6%. A wash.

    Second house – bought for 650K sold for 735K. Significantly more than 20% down, because. Jumbo. Probably overpaid going in, but we had looked at a lot of houses, and we wife couldn’t deal with losing another. Unobstructed view of lake over the Burke.
    Expensive water main replacement (boring new line 180 feet). Took the view basement down to the studs, rewired and sheet-rocked and reframed myself. Inflation. 6%. Wash. Probably could have made a little more if held for another year (zillowing at 900K+ now), but long-distance land-lording sucks. Sold late 2016, now that I think back.

    RE: biliruben @ 199

    So, basically your living cost was the interest + taxes/insurance. Not bad. But you make a very good point. Most people just look at price sold vs price purchased and think they got rich. In reality, realtors and the gov’t get rich and you do okay.

    Rent vs buy isn’t really a big difference. Renters “waste money” on rent. Buyers waste money on interest. In other words, you either rent a home or you rent money. Sometimes one has a better outcome than the other, based on timing and luck.

  215. 215
    Eastsider says:

    By Eddiemaster @ 209:

    I’ve gain some new perspectives and ways to evaluate risk. Ultimately I will elect to sell two of the properties and keep the rest comes this spring, as part of the hedging going forward.

    Getting rid of not one, but TWO properties! LMAO.

  216. 216
    Luke says:

    RE: Eddiemaster @ 209

    Huh.. so you’re going to add more inventory and help push prices even lower. Thanks, buddy!

    Sucks that you waited until inventory is already so high, prices are already well off the peak, and we’re entering the holiday season.

  217. 217
    Blurtman says:

    By Eddiemaster @ 209:

    RE: Blurtman @ 208 – lol I doubt he has an MBA. It’s true that stock price is what ppl want to pay for it, but valuation based on future earning growth still matters to attract investors. .

    I understand the theory, and it may have use in modeling stock prices for revenue generating companies, but it is just that. And a bit of guess on future revenues for non-revenue generating companies. But investment finance is sociology more than science.

    Bonds are more amenable to a mathematical valuation than stocks, and as bonds underly the mortgage market, look at interest rates and watch home prices. Now if interest rates were going up and there was a new gold rush in California, home prices would rise nonetheless, but I suppose there would still be some miners who might have been able to but when rates were lower.

    Has anyone posted an analysis of the change in interest rates and home prices?

    Best of luck with your investments. So far, over time in the USA, home prices do go up. Just a matter of your time horizon and preference for allocation of treasure.

    Have a nice weekend!

  218. 218

    RE: Eddiemaster @ 148
    You May Have a Point

    Some of the worse drug pushing of high priced real estate [requiring like 50% net pay to make the mortgage payment] was during the 80s….Cocaine was popular then too….LOL

    There was an out-of -focus buyer [stoned?] back then that bragged about how her and her husband always bought in when the price was about to collapse….it was almost a merit badge of intelligence to them….LOL

  219. 219

    RE: Blurtman @ 213
    Bonds Have Been Sinking in Giant Losses the last Couple Years

    Because mortgage rates and interest rates in general are vectoring higher and higher…

    Welcome to the world of no Quantitative Easing needed.

  220. 220

    RE: Kary L. Krismer @ 192
    Yes Kary

    The difference in “looks” between a house just “white-washed” for open house and a “complete remodel [with new roof]” an inspector would have trouble analyzing without an x-ray machine looking for covered up cracks, mildew, rot and insect infestations…a good coat of cheap adhesive and white paint and it “looks” just like the remodeled one….LOL

    The glued cement foundation cracks to the basement/crawl-space and brick chimney fire danger cracks from past earthquakes can be masked too…there’s a glue gun cover up product for all surfaces at Home Depot now….LOL….lots of white paint and brushes too, for the “building inspector” coverups…

    I’d be a “snake-oil” Flipper too, but I wouldn’t sleep nights….

  221. 221
    Blurtman says:

    By softwarengineer @ 215:

    RE: Blurtman @ 213
    Bonds Have Been Sinking in Giant Losses the last Couple Years

    Because mortgage rates and interest rates in general are vectoring higher and higher…

    Welcome to the world of no Quantitative Easing needed.

    But the risk free rate on 30 years may wind up at 4%. Been a long time and it’s been even higher. Put your $3 million in a 5 year and live off the interest.

  222. 222
    Notme says:

    Spew propaganda
    keep going two weeks on end
    oops, it did not work

    -a now-wants-to-sell-in-spring bubble-monger bubble haiku

  223. 223
    Eddiemaster says:

    RE: softwarengineer @ 218 – your explanation sucks once again. Using drug as a reason to differentiate then and now? We got an pain med (plus whatever legalized or non legalized drug) problem that’s larger than what it ever was.
    Poor softwareengineer is probably just too high to come up with sensible algorithm that makes him remotely employable as an actual SW guy. Gosh sure hope the government doesn’t slash the entitlement that you must sorely depend on.

  224. 224
    Eddiemaster says:

    RE: Eastsider @ 215 – yep, likely getting rid of my two lowest priced properties, combined over 1.5 mil, and I got them for 850 combined. Oops my bad didn’t mean to make your tiny 10k CD account feel even more pathetic lol you won’t even sniff 800k in your lifetime so keep up the hate!
    Sure I might not get 1.5m when I do sell but timing the peak isn’t what any of us can do, u included. And hey I might not even sell and just keep going with the rental cash flow should I deem the real estate to be in better shape going forward. But that’s the thing, I have flexibility to ride it out, you have just a keyboard, a full head of hate, and an empty bank account LOL

  225. 225
    Eastsider says:

    RE: Eddiemaster @ 224 – Good luck getting your $1.5m next spring. And stop being hateful.

  226. 226

    RE: Blurtman @ 221

    The Long-term Bond [10-30 years] is About -2% YOY

    Perhaps you are talking junk bonds like power plants and California Debt??? There are many classes of bonds out there, my figure is the average of general investors. There’s gems everywhere though, even in the trash heaps…one man’s worthless garbage is a cheap investment to riches?

    Bonds go down when saving interest [mortgage too] is going up.

  227. 227

    RE: Eastsider @ 225
    Your House Investment is Only Worth

    What the escrow ink documents at signing….not a penny [or $100Ks more] more. The winds shift fast lately, the price decreases can be MASSIVE, like out-of-control LA wild fires…

  228. 228

    RE: Eddiemaster @ 223
    At least I Have a Retirement

    Your property taxes and rental slums are better than a real income? I’m rolling on the ground in laughter now….have another swig off that Black Label you’re swigging….Seattle Open Border folks love their MASS booze. It fogs their conscience. Do you smoke tobacco too?

  229. 229
    webinator says:

    RE: Eddiemaster @ 224
    OK everyone. I am a newbie poster here, but I have an ask: Is there a way that we could take a collective pause and agree to bury the virtual hatchet? I understand feelings of frustration over communication; it is surprisingly difficult sometimes, seemingly pointless at other times. But Tim generously created this comment section as a venue for us to share our theories and debate our underlying logic. Getting personal may be satisfying in the moment, but it degrades the public space he made.

    I’m here to share experience and thoughts. Your stories help me with real estate planning, but more importantly, they help me when I’m stressed.

    This was most noticable in 2013/2014: You know that gum probe test your dental hygenist performs to see if you have gingivitis? I was chatting with my hygenist the other day and we ended up looking at my old records of these measurements. What was interesting was that there was a period in my life where I started developing gum inflamation. It was 2012-2014. This was about the time I was in the thick of learning how to lose my shirt short-platting residential lots. Each day, I would come home and enter new info into my spreadsheet and see my return on invested money, blood, sweat, and tears move 5-30K. The “learning” was killing me.

    Of course, I was saved by rising Seattle real estate, but also by these posts. When I think back on my personal stress at that time, I remember reading these articles and comments and appreciating that I wasn’t the only one struggling with a real estate vision at the time.

  230. 230

    RE: softwarengineer @ 228 – I’m not going to pretend Eddiemaster’s claims are real, but yes rentals are better than retirement income. Retirement income is not as likely to get you by when you need assisted living. Rental income is reduced by depreciation expense, and if your spouse happens to pass away you can start the deprecation over again at higher levels. That’s a reduction in taxes without any cash outflow. And those property taxes of which you speak are deductible from the first dollar on rental properties.

  231. 231
    uwp says:

    Not sure if looking at Redfin or Zillow stock prices is a good proxy for housing… Zillow stock peaked in summer 2014 and trended down (more than 50% loss) pretty much until spring 2016. Then it went on a crazy run and more than tripled from Feb 2016 to this past summer.

  232. 232

    After Reading the Blogs Above, Here’s my MOM Investor’s Report Repeated for Oct 2018 [In Case Ya Missed It]

    Oct 0.26% (0.78%) (6.84%) (10.06%) (7.94%)
    YTD 2.38% (2.26%) 2.98% (0.30%) (8.92%)
    Last 12 mo 2.79% (1.90%) 7.32% 3.07% (6.48%)

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

    The BIG LOSERS in Oct were stocks [especially foreign ones]…the Long-term CDs went UP about 25% over last year’s rates so far [from 2.5% to 3.1% trending YOY so far]…Long-term bonds lost about -2% YOY….so far….the data is average general [OPM Retirement Data], but matches general Money Market trending at BECU.

  233. 233
    Matt P says:

    You don’t lose money in bonds unless you sell them (or if they’re corporate bonds and the company goes bankrupt, but that’s why you shouldn’t buy corporates anyway, take your risk in stocks).

    You shouldn’t sell bonds unless there’s an emergency and even then – you’re supposed to be buying them for retirement years down the rode and turning them in at maturity, so saying long term bonds are down is a bit misleading. Maybe it matters to bond traders, but not to anyone else.

  234. 234

    RE: Kary L. Krismer @ 230
    Theoretical Kary

    I’d have to see ALL the numbers in writing to believe it…Erik flipped fast and furious and he did make money….but he’s no landlord. Ardelle gave some great location examples [I’d hire her if I was a buyer]….but good gosh Kary, when can we just retire and not be working?

    Retire and live longer, additional work/stress [add in your own retirement care giving time for yourself to survive] hours as a landlord in Seattle and additionally have sleepless nights worrying about Trump’s interest rate hikes destroying your paper retirement [that home deed doesn’t put burgers on the table or a new roof on your house]? Some of best friends are retired landlords now…

    Why is it deemed evil and bad planning to simply just retire, its not that hard to save like a $1M and live on it for like $5K/MO [around 0% saving interest] for like 18-28 years [saving interest going up above 0% under Trump]?….much simpler way to retire without all the work and RISK. You only get one life, enjoy a LONG ONE. Early retirement lengthens our lives BTW, and this is “priceless”. Working women get more heart disease too, i.e., my sister needed a pace maker from Teaching full time…the AHA agrees with me on this issue too.

    Oh the Summer “wild fire” Sanctuary City smoke is back and effectively closes Disneyland and Yosemite in CA in October/November too….Ocean Shores and the Space Needle next? The Autumn Wild Fire Smoke reached Michigan fro CA BTW…

    https://www.wxyz.com/news/smoke-from-california-wildfires-reaches-metro-detroit-michigan

    The winds are swirling the smoke around like toxic chemicals spewing from a Chinese Lithium Battery production facility….or like many hydrogen bombs exploding without the Plutonium….HORRIFYING.

    Trump blames the CA Forrest Service Management for the wild fires and so do I.

  235. 235
    uwp says:

    By Kary L. Krismer @ 162:

    Wow, talk about denial! Care to mention the Senate?

    It didn’t happen because not everyone agrees with the Democratic party message (assuming it has a message).

    What we ended up with was a split decision and even on the House side something within historic norms for off-year elections. I don’t think you can read too much into 2018 for 2020, but the fact that Democrats didn’t do well in statewide elections isn’t a good factor for them.

    Democrats were never going to take the Senate in 2018. No one was projecting that. The mere fact that they got close is a testament to the wave. They were defending 10 seats in states Trump won (some he won by a landslide). But they did win the seats in states they need for the 2020 election (MI, PA, WI), added AZ, and kept FL close.

    Meanwhile, they had the biggest Democratic seat gain (+38 or +39) in the House since Watergate. All while winning the House popular vote by a margin that will end up being larger than Republican wins in 1994 or 2010. And you don’t think the Democratic message won out over Republican?

    It was a Blue Wave.

    The places statewide elections are a problem for Democrats are ones where people don’t live. Give statehood to Puerto Rico (3+ million US citizens) and DC (more populous than Wyoming and growing), and fix gerrymandered House districts then see what message the American People actually support.

  236. 236
    Notme says:

    Das REIC wants to double
    the price of roof overhead
    we must be polite

    -an it-would-be-uncivil-to-fight-back bubble haiku

  237. 237

    By uwp @ 231:

    Not sure if looking at Redfin or Zillow stock prices is a good proxy for housing… Zillow stock peaked in summer 2014 and trended down (more than 50% loss) pretty much until spring 2016. Then it went on a crazy run and more than tripled from Feb 2016 to this past summer.

    Also, Zillow is not a real estate company, and Redfin had announced some sort of new stock offering if my memory serves. Zillow might even be countercyclical to real estate since in a bad market agents might be more likely to advertise.

  238. 238

    By Matt P @ 233:

    You shouldn’t sell bonds unless there’s an emergency and even then – you’re supposed to be buying them for retirement years down the rode and turning them in at maturity, so saying long term bonds are down is a bit misleading. Maybe it matters to bond traders, but not to anyone else.

    Or ladder them so that if you do need to sell the loss will be low, and if you don’t need to sell you can invest the proceeds in a higher rate bond.

  239. 239

    By uwp @ 235:

    Meanwhile, they had the biggest Democratic seat gain (+38 or +39) in the House since Watergate.

    . . .

    It was a Blue Wave.

    I believe you have your facts wrong. Clinton lost over 50 in 1994 and Obama once lost over 60. 37 is the average for unpopular presidents. And I think I read somewhere that 29 was average overall, but I don’t remember for what period.

    https://news.gallup.com/poll/242093/midterm-seat-loss-averages-unpopular-presidents.aspx

    So Blue Wave, maybe, but pfft was claiming a tsunami would occur.

  240. 240
    uwp says:

    By Kary L. Krismer @ 239:

    I believe you have your facts wrong. Clinton lost over 50 in 1994 and Obama once lost over 60. 37 is the average for unpopular presidents.

    I said “biggest Democratic seat gain,” ie, this was the best year for Democrats in the House in 40+ years (which is true).

    And comparing this year to 1994 and 2010 in a more macro sense almost makes things look worse for Republicans. The economy (GDP/Unemployment) should be strong winds at the back of the GOP in comparison to ’94 and ’10, and yet they still got shellacked. Sure Trump is unpopular, but why can’t they run on this great “message” that you say they have? All their “popular” policies like tax cuts and…

  241. 241
    Eddiemaster says:

    RE: Eastsider @ 225 – I was just trying to match the level of ridicule you guys are throwing at me. My apologies though this isn’t a place that should bring the worst out of people.

  242. 242

    By uwp @ 240:

    Sure Trump is unpopular, but why can’t they run on this great “message” that you say they have? All their “popular” policies like tax cuts and…

    I think you may be confusing me for someone else. I’ve not said the Republicans have a good message, only that the Democrats don’t have a message. I don’t like either party and have been hoping for a third party to rise up for probably 20 years–one that is economically conservative and socially progressive. Neither party is economically conservative.

  243. 243
    Eastsider says:

    By Matt P @ 233:

    You don’t lose money in bonds unless you sell them

    Not true. Bonds fall when inflation rises. So the interest you receive from bonds has less value when inflation moves higher. I.e. you lose money when inflation goes from 1% to 2-3%.

  244. 244
    Eastsider says:

    RE: uwp @ 240 – If you think we had a blue wave, you must also believe we had red tsunamis in Clinton and Obama midterms. Cognitive dissonance No? LOL.

  245. 245
    Eastsider says:

    RE: Eddiemaster @ 241 – Apology accepted. LOL.

  246. 246
    uwp says:

    By Kary L. Krismer @ 242:

    I’ve not said the Republicans have a good message, only that the Democrats don’t have a message.

    Well, as much as you keep trying to downplay it, whatever the Democrats ran on in 2018 seems like it worked pretty well.

    Just because Democrats lose a Senate seat in North Dakota, a state of 700 thousand people that Trump won by 35%, or Beto only came within 2% of winning freaking Texas doesn’t mean they have no message.

  247. 247
    Eddiemaster says:

    RE: Eastsider @ 243 – sigh.. just when I thought you might stop filling this comment section with false knowledge. If you are trading bond, yes you would lose money when yield goes up. But if you hold it until the maturation, you don’t actually lose money. Matt P was correct, and you are only half correct.

  248. 248
    sfrz says:

    RE: Eddiemaster @ 223 – Wow. Just wow. Your comments are over the top insulting and cruel. I hope the Tim bans you from this site. You walked in here swinging a sledgehammer.

    Maybe if we ignore him he will go away, as no one wants to interact with a bully. :)

  249. 249
    Eddiemaster says:

    RE: softwarengineer @ 228 – lol I’m glad you still got that sense of humor when you are just living between social security check to the next. Be proud of the misery! I’m in my mid 30’s so I’m not even thinking about retirement entitlement, to me it’s a lost cause when national debt service cost exceeds GDP. But please don’t pretend that the younger generation should buy into your financial logic with the way of life when you are depending on something that we won’t. The country will likely just increase taxation on the rich to fund your retirement income, so I guess I’ll say that you are welcome in advance. Be more grateful.

    Also, we drink Blue Label, get it right.

  250. 250
    Eddiemaster says:

    RE: sfrz @ 248 – ahh a perma bear got its feeling hurt. Please, I retaliate when attacked. Didn’t somebody said I was smoking something? Lol yea you guys were all be respectful all along huh?

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