Here’s the full intro from the show’s website:

Hi, I’m Max. I’m an engineer and inventor. A couple years ago I sold my self-driving virtual reality software company to Amazon for a few hundred million dollars. After my contract at Amazon was up, I started working on my next major market disruption: a quantum bagel toaster.

I thought I finally had a working prototype that would project an instant bagel-toasting vortex onto any surface, but when I put the bagel on it, the bagel fell through and disappeared. After some experimentation I came to a stunning realization…

I know this sounds crazy, but it seems that I have accidentally invented a device that opens a portal to another dimension.

Each week I visit a new dimension and I’m documenting my incredible travels and discoveries on this podcast.

If that sounds funny and/or entertaining to you, subscribe and listen on iTunes, Stitcher, Google Play, or just go listen on the show website. Each episode is about twenty minutes long and we’re releasing new ones each week on Tuesday morning.

Thanks in advance for checking it out, and enjoy the show!

Now back to your regularly scheduled programming…

The post Shameless Plug: Subscribe to Dispatches from the Multiverse, Tim’s new podcast appeared first on Seattle Bubble.

Check it out:

via The Verge

The post Cool: $140k “Micro-Home” packed with smart home features appeared first on Seattle Bubble.

https://www.youtube.com/watch?v=QlRm6Y5iVfw

Wow. It is like the people at Quicken Loans who are responsible for promoting their Rocket Mortgage app somehow completely missed the previous housing bubble and the massive economic fallout when it burst.

Yes, let’s make it super easy for everyone to buy homes! What could possibly go wrong?

Neil Irwin at The New York Times summarizes the issues with this ad: The Super Bowl Ad That Set Off Economic Alarm Bells

The hackles this raised among the economic commentariat was instant. For a while during the Super Bowl, certain segments of Twitter were dominated not by talk of Peyton Manning and Cam Newton, but by snark. “Rocket Mortgage: Let’s do the financial crisis again, but with apps!” tweeted Dave Weigel of The Washington Post.
…
Reducing paperwork and bureaucratic hurdles to a mortgage are desirable in isolation; the homebuying process is laden with hidden fees and conflicts of interest that can add thousands of dollars to the price of a home purchase.

But the Quicken Loans ad goes a step further, with the narrator asking what would happen if the Internet “did for mortgages what the Internet did for buying music, plane tickets and shoes,” then showing a woman getting a home mortgage with the press of a button on her phone.

If taken too literally, this could get people in trouble. A home mortgage is the biggest financial obligation most people will take on. If you buy the wrong music, plane ticket or shoes, it’s probably not a crippling financial burden, where the wrong mortgage can be.

The current problem with the housing market is that supply is too low, not that demand is too low or that people can’t get a mortgage when they want one. There’s certainly something to be said for simplifying and streamlining the mortgage application process, but it should be focused on convenience for people who are already otherwise buying a home, not somehow luring suckers into buying homes because of how easy you made it with your app.

The post Rocket Mortgage Super Bowl Ad: Let’s Repeat the Bubble! appeared first on Seattle Bubble.

https://www.youtube.com/watch?v=20n-cD8ERgs

“Suzanne Researched This” became a big inside joke among those who didn’t buy the hype at the peak of the bubble. This commercial was so egregious that even Slate wrote an article headlined “The Nastiest Wife on Television.”

About a year after this ad aired, I happened to catch a radio show segment that was basically the real world “rest of the story.” Suzanne Researched This: Part 2

Well, we bought a house two years ago, and ever since we bought the house it’s always been “we bought it because you wanted it,” and every time we have financial struggles, it’s my fault because we bought a house that he said we shouldn’t buy, so… that’s… I guess the stresses of the house are getting more intense because our interest is going up so it’s been sort of like the past month I’ve been hearing him talk a lot about that.

Here’s the full audio of the cringe-worthy Dr. Laura call:

On a related note, this 2006 “Real Financial Heroes” video is a pretty great skewering of homebuying mania. For context, it’s a parody of a series of Budweiser ads from the time called “Real American Heroes” that used the same style and music.

“Top Ramen tastes a lot better when you eat it off a granite countertop.” Classic.

The post Friday Flashback: Suzanne Researched This appeared first on Seattle Bubble.

During the last bubble it was nearly impossible to turn on the radio without hearing some form of scammy “riches in flipping” ad during the commercial break. I don’t listen to the radio that often, but in the rare instances that I do tune in recently I’ve been hearing a lot more of that same kind of garbage. For example, I’ve heard this one on KIRO more than a few times lately:

How would you like to make some serious cash flipping houses in your area?

Hi, I’m [censored], founder of the [censored] Real Estate Academy. Over the last few years my elite team of committed house flippers has been using my three step “Fortunes in Flipping” system to buy and sell properties for quick profits and long term financial gains.

Now it’s your turn to have the same investor success. For a limited time I will send anyone that calls a free copy of my “Fortunes in Flipping” kit that will show you how easy it is to get in, get out, and get paid! There’s no catch, I even pay the shipping cost.

In my free kit I eliminate all the guesswork and I break down the process for evaluating properties for a quick turn and instant profit and I show you how to access some very unique financing programs to finance your deals.

If you dig around online you’ll find that this particular scammer lures you in with the free seminar then tries to take you for a few thousand bucks for his three-day seminar. At the three-day seminar his slick salespeople will attempt to soak you for upwards of $30,000 to buy into his “system.” Oh, and the “very unique financing programs” apparently include financing real estate purchases on credit cards.

Yikes.

The post Scammy Real Estate Ads Back in Force appeared first on Seattle Bubble.

For those who have been living in a TV culture vacuum for the last seven years, Parks & Recreation was an NBC TV show about local government and politics in a small fictional Indiana town. Although the show never really ventured to the west coast, they managed to slip a 30-second gag about the Seattle real estate market into their series finale last week.

I got a laugh out of it, anyway. Although, the thought that “giant commission checks” will still be common for real estate agents nearly a decade from now is somewhat depressing to someone who would like to see more disruption in that part of the market.

You can pre-order the complete series of Parks & Recreation on DVD on Amazon here.

Note to NBC lawyers: This 36-second clip is posted under the Fair Use Doctrine, for purposes of commentary.

The post Seattle Real Estate in 2023 (via Parks & Recreation) appeared first on Seattle Bubble.

The post This is why I love the Eastside appeared first on Seattle Bubble.

Here are a few of the tips I shared for finding a cheap rental in the Seattle area, and some relevant links to previous posts on the topic:

• Avoid the overly “trendy” areas (e.g. Ballard, Capitol Hill, etc.) if low price is a priority.
• Search on off-beat rental sites, including various local property management sites.
• Literally drive around your target neighborhood with an eye out for “For Rent” signs.
• Sign up for an RSS feed of your Craigslist rental search to get alerted immediately when a new rental listing hits the market.
• If your job is near a bus line or other reliable transit option, open up your search to further-out areas with direct transit to your job.

Rents have risen quite a bit recently, but in general I expect the rental market to ease up over the next year or two as all of the apartments currently in the pipeline come online, flooding the market with supply.

The post How To Find Cheap Rentals Around Seattle appeared first on Seattle Bubble.

Some of the videos appear to be for her custom site http://savedfromforeclosure.com/:

Others seem to be computer-generated from the MLS info on her various high-quality listings:

There goes my weekend.

The post Guess Who Has Her Own YouTube Channel? appeared first on Seattle Bubble.

The whole thing is worth a watch, but the real fun starts at the 5:38 mark, when host Tom Layson has Zillow’s Senior Economist Svenja Gudell and Tacoma agent and former NWMLS head Dick Beeson in studio for some Q&A.

After introducing the guests, Layson confronts Beeson with the chart from this 2008 Seattle Bubble post in which I annotated a graph of falling home prices with bottom-calling quotes from Beeson.

I’m not picking on you here, but I have a little chart from 2007 and 2008 that your friends at Seattle Bubble put together there, and you’ve called the bottom at least three times during the two-year period.

Gudell can be heard laughing in the background.

Layton goes on to ask Beeson if he’s ready to call the bottom again today, to which Beeson’s reply is to hem and haw for a few minutes and not really commit to anything.

Just for grins, here’s an updated version of the chart for today:

I wasn’t able to find any bottom calls since mid-2010 from Dick Beeson. It seems that he may have finally decided to stop setting himself up for ridicule like that.

The post Dick Beeson Finally Reluctant to Call the Bottom appeared first on Seattle Bubble.

That’s what happens when you make a big public announcement about intentions to convert to condos, scaring away all your good tenants, then fail to follow through because you stupidly kicked off your plan just as the housing bubble was beginning to deflate.

From Eric Pryne’s write-up over at the Seattle Times:

The buildings’ previous owner, Walton Street Capital, of Chicago, bought them in 2006 for $44 million, and at first pursued a plan to convert Smith Tower to condos.

The housing crisis killed that proposal; meanwhile, office tenants fled the historic tower, which opened in 1914.

It’s now more than 80 percent vacant, according to court records, and monthly rents don’t cover the building’s operating expenses.

Walton Street defaulted on the mortgage last year, and CBRE began pursuing foreclosure shortly after it acquired the debt in September.
…
At CBRE’s request, a King County superior-court judge in December appointed a receiver, Goodman Real Estate, of Seattle, to take over management of the tower.
…
According to Goodman’s latest report to the court, another CBRE affiliate has begun marketing the building to prospective tenants. There’s interest in two complete lower floors and suites on three other floors, the report says.
…
Goodman representatives have told him they expect to have the tower at least 50 percent occupied by the end of the year.

So it sounds like the dream of the Smith Tower Condos is dead.

The post Smith Tower Foreclosed appeared first on Seattle Bubble.

It’s a great time to be a seller… if you can afford to sell at today’s prices. And it’s a great time to be a buyer… if you can be really patient and are willing to tolerate being out-bid numerous times if you’re shopping for “move-in ready” homes in a trendy neighborhood.

Mostly it’s a frustrating time to be either buying or selling in today’s market.

As one commenter put it recently:

The “bottom” isn’t looking nearly as fun as it sounded like…

The post Buyer’s Market? Seller’s Market? Neither, Really. appeared first on Seattle Bubble.

If you’re looking for evidence of a real estate comeback, just check out any Sunday open house in Ballard, a popular Seattle neighborhood.
…
This particular house just went on the market last week. It’s a small, two–bedroom, 1927–era home. It’s on a quiet street with neat houses and well–kept lawns. It’s close to parks and a popular elementary school.
…
Jed Kliman is the listing agent. He works for Windermere. He says the home has been completely renovated, and all of the fixtures and appliances are brand new.

My conversations with Deborah about the unusually anti-seasonal decline in inventory provide some statistical context for the Ballard anecdote she found.

Here’s the listing of the home featured in the story: 8021 29th Ave NW

Note that the listing agent counted the entire 1,180 square foot unfinished (and short—look at how close to the ceiling that broom stands) basement, which doubles the MLS-listed square footage of what is in reality a 1,180 square foot, 2 bedroom, 1 bathroom home.

That said, the home appears to have the nicest possible finishes that you could reasonably put into a house that size. The whole place practically sparkles in the listing photos. Deborah confirmed to me that it looks just as nice in person.

What is a 2-bed, 1-bath, 1,180 square foot home north of 80th street worth today? Over the last six months or so, the most that any similarly-sized home has sold for in that area is $300,000. On the other hand, there are currently only 10 homes for sale in the 98117 zip code priced $400,000 and under, so “entry-level” inventory in that neighborhood is pretty slim.

And Kliman says it’s priced right: $389,000. And he expects it to go fast. He says there are a lot of people looking to buy homes in Ballard, and very few houses for sale.

…with so few properties on the market, the competition to buy a home is now fierce. Remember that house in Ballard? Well, agent Jed Kliman set a deadline. Offers had to be in the day after the open house.

So how much do you think this little barely-in-Ballard home will end up selling for?

Go ahead and click the photo above and head over to the listing to check out the photos before you make your guess… It’s okay, we’ll wait…

Okay, ready?

Kliman: “So, we have six offers, and there is a seventh being emailed over in the next 10 minutes or so.”
…
Kliman didn’t want to disclose too many details to KUOW, but he was willing to tell us that all six buyers were offering the full price of $389,000, or higher. Two people offered cash, two had already done inspections. Kliman and Therrien spent a couple of hours behind closed doors making phone calls to agents. Then, the deal was done.

Owner Joe Therrien was stunned. He says the bidding war took him entirely by surprise. He didn’t think anyone would offer full price for his house.

“…this is roughly equivalent to winning the lottery for me.”

$400,000-plus for a 2-bedroom, 1-bath house in that location? Seven offers, two all-cash?!? Who are these people? I mean sure, inventory is low, but why would buyers be so desperate that they would pay over $335 per square foot in Loyal Heights? Head over to KUOW’s site to listen to the whole tale and see if you can make any sense of it.

I have to say, the corridor bordered by the ship canal on the south, 85th street on the north, Puget Sound on the west, and Lake Washington on the east is pretty much the last place I’d want to be trying to buy a home right now. For whatever reason, that area seems to have turned into the Twilight Zone of Seattle real estate in 2012.

The post KUOW on Low Inventory and Over-the-Top Anecdotes appeared first on Seattle Bubble.

Since there’s no substantive post for today, enjoy this classic video in which Hitler learns about the bursting of the real estate bubble instead.

See you tomorrow with more content.

The post Real Estate Downfall appeared first on Seattle Bubble.

This video brings up a number of questions:

• Who is this nebulous evil entity that is “threatening the dream of home ownership”?
• How does a moving van across the street mean that my grandkid won’t be able to buy a home?
• Wouldn’t it put many NAR members out of business if everyone who bought a home stayed as long as the grandpa character in this ad?

Maybe NAR should stick to the painfully literal ads like the one with the family actually physically sitting on a fence.

The post Even More Delightful NAR Propaganda appeared first on Seattle Bubble.

[hana-flv-player video=”http://seattlebubble.com/blog/wp-content/uploads/2011/09/Colbert-New-Monopoly.flv”
width=”600″
height=”338″
description=”Colbert Report – New Monopoly”
player=”5″
autoload=”true”
autoplay=”false”
loop=”false”
autorewind=”false”
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You can watch the entire segment on the Colbert Nation site, but I just wanted to share that brief segment, since I’m a sucker for housing bubble humor.

I’d probably buy Colbert’s version of the game, if only for the novelty laughs. Or maybe they could sell it to schools to use as an educational tool.

The post True-to-Life Housing Bubble Monopoly Remake appeared first on Seattle Bubble.

The pink pony has returned to Seattle!

I swear I had nothing to do with this. Turns out there is this whole weird nerd subculture that consists of dudes that are obsessed with My Little Ponies. They call themselves (I am not making this up): Bronies. Apparently some of these Bronies were in attendance at PAX this weekend.

Of course, I couldn’t resist stopping the pony-carriers and having my picture taken:

Pink pony power!

The post The Return of the Pink Pony! appeared first on Seattle Bubble.

My favorite is the one with the family literally sitting on a fence. The last one isn’t technically a “flashback” since it’s currently airing, but the message that anyone who doesn’t buy a house must hate America and love unemployment is just too rich to pass up.

The post Friday Flashback: NAR Propaganda Montage appeared first on Seattle Bubble.

I thought I would continue the Knife-Catcher series by focusing a little more on our specific home selection process. Here are the basic steps we went through when looking for a home:

1. Look at listings online.
2. Narrow list, tour homes.
3. Either:
   • Eliminated all toured homes, back to step 1.
   • Re-tour homes of interest, make an offer.
4. Get offer response, make counter-offer, etc.
5. Conclude offer process, back to step 1.

Once we had narrowed down which neighborhoods we wanted to focus our home search on, we basically started scouring every home on the market up to about 20% above our maximum target price (accounting for low-balling a stale, overpriced listing).

As we browsed homes online and decided which ones to tour, we used a shorter version of the criteria that was described in the neighborhood post. Basically, we were looking for homes that had at least 1,000 square feet, two bedrooms, a 5,000 square foot lot, off-street parking for two cars, and a usable basement. If a home lacked one or two of the items on the list, we might still tour it if it was cheap enough.

We had no lower price limit, and even toured one home that was listed at $84,900 (that one basically needed to be completely gutted—among other issues, the overpowering stench of cigarette smoke permeated the whole home). All told, we toured over two dozen homes, spread across seven or eight outings.

Most of the homes we toured were eliminated from consideration almost as soon as we stepped in the door. Those that made it past the first cut usually merited a second tour, then an offer. During the second tour we would usually shoot a walkthrough video to share privately on YouTube with our close friends and family. Here’s a compilation of the opening shots from those videos on the five homes we made offers on:

Here’s a summary what happened with the five homes we eventually made offers on. Most of these required significant work, which we were ready and willing to do ourselves if we could get a good enough deal on the home.

Even when we had extended an offer on a home or were under contract on the first and last homes, we continued our search online, constantly looking for something that might better line up with our needs, comparing to new rentals in the area, and watching sold trends.

All in all, the process was fairly tiring, and isn’t something I’d particularly enjoy doing again any time soon. Fortunately our hunt was focused on attaining actual home ownership rather than some sort of first step on the mytical “equity ladder,” so I don’t think it’s a process I’ll be repeating in the near or mid-term.

The post Knife-Catcher: The Tour, Offer, Tour Meat Grinder appeared first on Seattle Bubble.

Up 1.6% March to April.
Down 6.9% YOY.
Down 29.7% from the July 2007 peak

Last year prices rose 1.0% from March to April and year-over-year prices were down 2.8%.

Interesting that here in Seattle this year we’re getting a bigger spring bounce than last year, when the tax credit was juicing sales and everyone was making one last mad dash for the free government money.

[Update]
FYI, Tim was on the Ross and Burbank show on 97.3 KIRO this morning. Here’s a brief excerpt from their story write-up:

Tim Ellis, with the Seattle Bubble, tells 97.3 KIRO FM’s Ross and Burbank that the increases are pretty standard for the spring.

“Every spring prices tend to go up. It’s pretty seasonal and predictable.”
…
Ellis says the only times in recent history when prices didn’t see a spring increase was in the thick of the crash.

“In 2009, even through the spring, prices were falling pretty steadily,” says Ellis. He says against those numbers, there is reason to celebrate today. “It’s definitely optimistic in that we’re not crashing anymore, but it’s not like ‘Oh wow, let’s break out the champagne glasses and toast our equity all of a sudden.'”

Ellis says these seasonal increases are to be expected, and doesn’t necessarily speak to a larger upward trend.

And here’s the audio (~10 minutes):

[End of Update]

Here’s an interactive graph of all twenty Case-Shiller-tracked cities, courtesy of Tableau Software (check and un-check the boxes on the right):

Washington DC is still the only city still in positive YOY territory, but this month 13 cities managed to squeak out month-over-month growth.

Hit the jump for the rest of our monthly Case-Shiller charts, including interactive charts of all 20 cities.

In April, thirteen of the twenty Case-Shiller-tracked cities experienced smaller year-over-year drops than Seattle (or saw year-over-year increases):

• Washington, DC at +4.0%
• Los Angeles at -2.1%
• New York at -2.8%
• Atlanta at -3.5%
• Dallas at -4.0%
• Denver at -4.1%
• Boston at -4.2%
• San Diego at -4.3%
• San Francisco at -5.5%
• Miami at -5.6%
• Las Vegas at -6.2%
• Charlotte at -6.6%
• Cleveland at -6.8%

Falling faster than Seattle as of April: Detroit, Tampa, Chicago, Phoenix, Portland, and Minneapolis.

Here’s the interactive chart of the raw HPI for all twenty cities through April.

Here’s an update to the peak-decline graph, inspired by a graph created by reader CrystalBall. This chart takes the twelve cities whose peak index was greater than 175, and tracks how far they have fallen so far from their peak. The horizontal axis shows the total number of months since each individual city peaked.

In the forty-five months since the price peak in Seattle prices have declined 29.7%, slightly less than last month, up off the low.

Here’s the “rewind” chart, to show you how much was gained, and then given back up over the last six-plus years:

The blue line on August 2005 represents the month that this site launched. As of April 2011, there have effectively been zero price gains since September 2004.

For posterity, here’s our offset graph—the same graph we post every month—with L.A. & San Diego time-shifted from Seattle & Portland by 17 months. Everyone but Seattle continued to get worse on this chart. Year-over-year, Portland came in at -9.2%, Los Angeles at -2.1%, and San Diego at -4.3%.

I think this graph is still worth posting if only to display how the government’s massive intervention in the market screwed with the natural flow, causing all the markets to rise simultaneously, and once the artificial support was removed, to come crashing back down to reality simultaneously.

Note: This graph is not intended to be predictive. It is for entertainment purposes only.

Check back tomorrow for a post on the Case-Shiller data for Seattle’s price tiers.

(Home Price Indices, Standard & Poor’s, 06.28.2010)

The post Case-Shiller: Seattle’s Spring Bounce Picks Up Steam appeared first on Seattle Bubble.

Here are the audio segments (the first is about seven minutes long, the second about 10 minutes):

It’s interesting to note that in the second segment, Dori’s guest was Howard Bono, the subject of a number of recent posts on these pages. He makes basically the same argument about the ethics of walking away that I made in this pair of posts from a year ago:

• On Misguided Ethics and Walking Away from a Mortgage
• Did Banks Act in Good Faith During the Bubble?

I mostly agree with Howard’s comments on the air, although it is pretty disingenuous to claim that “most of the time you don’t get to review it [the mortgage contract], most of the time you don’t even read it” (at about 4:20 in the second clip). If you’re going to walk away, take responsibility. If you didn’t read the mortgage contract that’s nobody’s fault but your own. You certainly had an opportunity to review it, you just declined that opportunity.

The post Dori Monson Tackles Walking Away from Your Mortgage appeared first on Seattle Bubble.

Thanks to everyone who has served our country and to those who continue to do so.

On a less serious note, here are some classic memories of the late great housing bubble: 2003-2006.

Regular programming will resume tomorrow.

The post Happy Memorial Day appeared first on Seattle Bubble.

Wednesday afternoon, Redfin CEO Glenn Kelman posted an interesting story on Redfin’s Seattle blog: "Everything Changed in the Past Six Weeks"

Bryon Ziegler, part of Redfin’s crack Capitol Hill team, just wandered into my office to talk about bidding wars. The last ten straight offers he has handled all turned into bidding wars. This isn’t just the usual $300,000 bank-owned property being auction-priced for a quick sale.

Except for maybe Belltown condos—which are like a vast, derelict Atlantis, all underwater—every decent listing seems to be getting multiple offers. Bryon just put in a multi-million dollar all-cash offer on a home that had been on the market for 300+ days, only to have two other offers turn up at the same time.

“Everything changed just in the past six weeks,” Bryon said. “In February, you were the savior if you came in with an offer. Now, the reaction is: take a number. And if you don’t come with all guns blazing, you’re usually a day late and a dollar short.”

Glenn & Bryon tipped off King5, who picked up the story and ran with it last night (although they inexplicably gave a Coldwell Banker agent a lot more face time than Redfin—what’s up with that?):

I haven’t seen any particularly strong uptick in any of the stats I watch on a regular basis, but the action that Bryon and this Coldwell agent are describing seems to be a very recent phenomenon, so it might take a month or two to show up in the closed sales data if it’s a real trend. Redfin isn’t the type to perennially make claims like “open house traffic is up” and other vague sales pitches in a shameless attempt to pump the market (which is a large part of why I joined them), so I’m inclined to believe that there’s at least something to the claim.

I’d be interested to hear from anyone who has actually been shopping for a home close-in to Seattle in recent weeks. Are you seeing the kind of intense market that is described in the above video, or is that kind of action limited to a specific, narrow band of property types and locations?

The post Claim: Seattle Real Estate Market Suddenly Heating Up appeared first on Seattle Bubble.

Here’s the audio, in case anyone is interested (~10 minutes):

Thanks for having me on again, John!

The post Tim Talks Housing With John Curley [Audio] appeared first on Seattle Bubble.

I’m just going to let the video speak for itself.

The post Real Actual Home Improvement appeared first on Seattle Bubble.

John seems to have a bit more confidence in my local housing expertise than he did in 2008. To be fair though, I didn’t actually get to meet him when I recorded that program, so I didn’t really get a good chance to make my case that it was a good time to wait.

The post Audio From Tim’s Appearance on The John Curley Show appeared first on Seattle Bubble.

Is It Ethical To Walk Away From A Mortgage?

More than a third of homeowners in the Seattle area now owe more on their mortgages than their homes are worth. If you’re underwater on your mortgage, is it ethical to walk away? Have you done it? Would you ever considering it? Or do you think it’s unethical? Call our listener feedback line now at 206.221.3663. Walking away from a mortgage is the topic on KUOW Wednesday (2/16/2011) at 12:20. (call in # during the program: 206.543.5869)

Call in with your comments and questions. Although I’ve made my position on this issue pretty clear here in the past, my main role on the program today will be to address the overall issue from a more neutral perspective.

[Update: Here’s the audio from this afternoon’s program.]

[End of Update]

Speaking of radio… I was flipping through the local AM radio stations recently, and I happened to land on Dave Ramsey’s financial advice show. If you’re not familiar with Dave Ramsey, his basic schtick is that he is anti-debt to the extreme.

As luck would have it, the caller that was talking with Dave when I happened to tune in was calling with a question about Seattle-area real estate. Here’s the audio from the call, and a transcribed excerpt:

Caller: In 2006… we bought a condo. Of course, knowing we would be gone in four years and knowing of course that our condo would sell… at that time we got a 5/1 ARM and were doing interest-only. Well, of course the price went down… I moved out of Washington… We owe about $157k on it, and it was appraised a few months ago at $164k.

Ramsey: What’s your plan with the condo?

Caller: Ultimately we would love just to be done with it. But, we know at this point that if we try to sell it, not only are we going to lose that $36,000 we put down, we’ll end up paying a little on top of that. So [selling] it just doesn’t seem like a real good option, at this point.

Ramsey: You’ve got two options. One is you lose some money on it now, or you let [the loan] adjust this once, rent it for another year, and then dump it next year, regardless. In a year it may come up enough that you don’t actually write a check. But the $36,000 is gone, dude.

Ramsey starts off strong. His point about sunk costs is a good one. If you’re holding onto a home because of money that you’ve already lost, you’re not doing yourself any favors. The money you’ve lost is already gone. Get over it and move on.

However, Ramsey doesn’t stop there. He rolls right on through his area of expertise and into a realm in which he is obviously not well-versed…

Caller: Do we just start paying a bunch of principal now, just to get the loan-to-value ratio better so we can re-fi and get a 15-year…

Ramsey: No, I would save up the money and sell the condo in one year. Let it adjust, and let’s let this market recover. The market is recovering. Ever so gently, but it is recovering. As some of this inventory burns off, these prices in many markets are going to recover. Where in Washington is it?

Caller: It’s near Tacoma. It’s in Puyallup.

Ramsey: That’s a pretty good market.

Caller: Okay.

Ramsey: That’s a pretty good market. A pretty stable economy. It’s not one of those that’s just got the wind whistling through the streets kind of thing. I’m thinking I give this thing a year, and see how much it heals. But as far as the $36,000, I wouldn’t be worried about it. The question is now: Do we keep this liability or not? The answer is no, on the long term.

Yikes. Advising someone to hold onto a condo in Puyallup? Sorry, but condos in Puyallup are the kind of housing stock that people were only really interested in because we were in a frenzied housing bubble, and they were convinced that they would be priced out forever if they didn’t buy something, anything as soon as possible.

From the numbers this caller gave, it sounds like he spent somewhere in the ballpark of $180,000 on his condo. The median listing price of condos currently listed in Puyallup: $100,000. The total number of condos sold in Puyallup in the last six months: 5.

Here’s a Puyallup condo that sold for $218,000 in August 2006. It’s currently pending at $85,000. Here’s another that sold for $185,000 in January 2006. That one is currently listed for $79,900 (with no takers, apparently). If the caller thinks he’ll be getting anywhere near $164,000 for his condo, he’s probably dreaming.

Condos in Puyallup are not going to suddenly become a hot commodity a year from now. That market is dead. This is why you don’t take real estate advice from a national talk show host. Here’s hoping the caller does some research of his own and lists sooner rather than later.

The post On the Radio: Walk Aways and Puyallup Condos appeared first on Seattle Bubble.

Before we get to the local dead tree press, here’s a bonus link to my appearance last Friday on KUOW’s Weekday program. I was in-studio for the entire hour with Lynn Robertson (a Queen Anne real estate broker) and Glenn Crellin via phone. Here’s the audio:

All righty, let’s have a look at the source material from the NWMLS itself. Here’s their press release: Motivated buyers returning to the housing market

Dramatic increases in open house activity and shrinking inventory are fueling optimism among members of the Northwest Multiple Listing Service. Commenting on the just-released MLS report on January’s housing activity, one director stated, “There is a strong belief in the industry that the worst is behind us and we can look forward with confidence.”

photo by Flickr user London Permaculture

Darin Stenvers, managing broker at John L. Scott in Bellingham, who made that comment, also noted consumers are gaining confidence and buyers may be seeing what they believe is the bottoming of the market. “I’m very optimistic about the housing market for 2011 and the buyers and sellers should be as well,” he exclaimed.
…
In King County, the median sales price on last month’s sales was $333,500, a drop of 4.7 percent from twelve months ago when it was $350,000.

Brokers attribute part of the price drop to sales of distressed homes (in general, meaning homes under foreclosure or impending foreclosure).

“Distressed properties are making up an increasingly greater share of sales than a year ago, and that trend is expected to continue,” observed Jacobi. Noting the sales price for distressed properties could be 20-to-30 percent less than for normal sales, he said “it’s no surprise that a greater percentage of low-priced distressed properties is pulling down the median price.”

In case you still haven’t figured it out… lower prices for homes (like every single other product one might purchase) means more people buying. Go figure. These continued price declines are the main reason I’m breaking from many other commentators with my prediction of a slight increase in home sales in 2011.

Read on for my take on this month’s local news reports.

Eric Pryne, Seattle Times: King County median home price for Jan. hits 6-year low

Sales of distressed homes are on the rise in the Seattle area — and they are helping to drive prices down, real-estate professionals say.

House prices in King County in January sank to their lowest level in nearly six years, according to statistics released Thursday by the Northwest Multiple Listing Service.

The median price of single-family homes that sold last month was $356,000, the service said. The last time it was lower was in April 2005.

Brokers and other observers said prices are dropping because distressed properties — foreclosed homes and short sales for less than a seller owes its lenders — make up a growing share of total sales.

A Windermere Real Estate analysis of listing-service data found that distressed sales accounted for 35 percent of all house and condominium sales in King County last month, up from 27 percent a year earlier.

Those sellers often are willing to settle for less.
…
Buyers closed on 1,017 houses in the county in January, 6 percent more than in January 2010. It was the first year-over-year increase since June, when popular federal homebuyer tax credits expired.

But it’s probably not the start of a trend, professionals said, because the tax credits spurred a surge in sales during the first half of last year that will be difficult to equal in 2011.

These are points I’ve been making for at least a few months. Distressed sales are driving prices (down), inventory pretty much sucks, but sales are picking up slightly thanks to lower prices.

Gerry Spratt, Seattle P-I: New MLS home-price report not all gloom and doom

The median home price is a six-year low, but economists have warned that sales of distressed properties will be a drag on prices for the foreseeable future.

“I think the first half of 2011 is going to continue to be really rough as you have those foreclosure properties moving through the pipeline (driving down prices),” Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University, said last month.

But it’s not all bad news.

Pending sales – considered the best indicator of market activity – were up 19.58 percent in January compared with December, although they were down 6.57 percent year-over-year.

In Seattle, pending sales of single-family homes were up 23 percent from December and down just 1.92 percent from last year. The median price of $390,000 was unchanged from December, but down 6.02 percent from last year.

Wait, what? It’s not bad news when you look at pending sales—a highly unreliable figure—and compare month-to-month with the month that always marks the low point for the year? Sorry, that doesn’t make any sense. Oh wait, no wonder. It’s the P-I’s sports reporter, Gerry Spratt at the helm again instead of Aubrey Cohen, who actually understands the real estate market.

Mike Benbow, Everett Herald: Home sales in county improve in January

Home sales in Snohomish County rose in January, providing some hope for real estate agents who have survived tough times in recent months.

There were 533 homes sold last month, the Northwest Multiple Listing Service reported Thursday. That’s a 7.7 percent increase from January of 2010.

The listing service noted that activity at open houses increased last month, typically a poor selling time for homes.

Why oh why does any reporter pay any attention at all to this open house nonsense.

Maybe I’m not looking hard enough, but I can’t seem to find any stories about the January NWMLS release in either the Tacoma News Tribune or The Olympian. Point me in the right direction if I’ve just overlooked it.

(Eric Pryne, Seattle Times, 02.03.2011)
(Gerry Spratt, Seattle P-I, 02.03.2011)
(Mike Benbow, Everett Herald, 02.04.2011)

The post January Reporting Roundup: Clearance Sale Edition appeared first on Seattle Bubble.

Credit goes to Jonathan Coulton for the music and Jarrett Heather for the video.

Hat tip: BoingBoing

The post Slick Video Commentary on Suburbia appeared first on Seattle Bubble.

Mr. Hagar dropped by the comments to defend his statments:

I was talking about a growth rate, not absolute figures. The Blog’s figures are based on April stats from the Gov. My figures are from the stats. supplied by the DOL “Net Drivers License” for September, which is why we have different figures. The State and PSCG uses the DOL numbers as an interim between the population update supplied by the Budget Office.

Net drivers licenses are nice since they are reported on a monthly basis and are usually only 60 days behind reality. The bad side is they don’t count the population, only people obtaining drivers licenses (add for kids, subtract for illegals). However, they are good at indicating the direction in growth and over the years have been reasonably accurate.

Drivers licenses increased by:
> 14,209 in July,
> 11,010 in Aug and
> 12,100 in September.

These three months indicate a growth RATE of approximately 120,000 (ish) for the year. The year to date stats. indicate Washington has grown by approximately 65,544 ending in Sept. That’s a healthy growth. Very similar to growth in the mid 90’s and 2004/2005.

There are a couple of major problems here. One was pointed out by reader NumberMonkey:

Using drivers licenses as a seasonal proxy is pretty awful because registration is highly seasonal. Both immigrants and new driver residents prefer to register in summer. So your growth rate figure is going to be badly overstated in summer because of your poor data selection.

NumberMonkey is right. It makes no sense with a highly seasonal data series such as migration to select the three busiest months of the year and interpolate an annual rate from those numbers. In fact, it’s downright misleading. Unless of course you think it’s valid to claim—based on July-September data—that Seattle’s average high temperature is 72° year-round.

There’s another problem with Richard’s method though. Head over to the Department of Licensing page to grab the driver license data he refers to and you’ll notice the following warning just above the download links:

Note: The calculation of net migration is not recommended due to incomplete or delayed reporting of surrendered license data by other states or countries.

In other words, Richard is doing exactly what the DOL says not to do with their numbers.

Here’s a visualization of actual net migration via the OFM, the annual sum of net drivers license data from the DOL (that they specifically warn is not net migration), and the “annual rate” of net drivers licenses based on July-September data:

Of course, the fact that he’s applying an invalid method of annualization to a set of data that users are explicitly warned against using in exactly the way he’s using doesn’t matter, according to Richard:

I understand both warnings and of course Summer has higher figures. I’ve been tracking population growth for quite a while. Chart the DOL figures over the past 10 years. Overlay that with Census figures of actual growth. You will note a correlation. It’s not exact and that was not the direction I was going. I think… that while people are trying to nit-pick a figure, they are missing the point… The Seattle area is growing and the figures are looking nice, especially after what was going on last year.

Actually, I’m not seeing much of a correlation at all in the above chart. But that shouldn’t matter, according to Richard. Who cares if the data is way off? You’re missing the point! The point is, a recovery is just around the corner!

Just like how in August 2007, home prices were due to keep going up!

John Maynard: Richard Hagar, I want to ask you about real estate prices in Seattle. Where do you think they’re headed?

Hagar: Well, here’s the good news. I don’t think they’re going down. … I think for the rest of the year, and maybe into the first month or two of 2008, our property values are going to remain fairly neutral. I don’t see any up, but I don’t see any major downturn in any of these prices.
…
We’ve got something going on in the state of Washington that very few other people have. We have a phenomenal economy. We have growth going on like you will not believe. We have—in the state of Washington, roughly a hundred and twenty thousand people move here every year. …That’s the net.
…
Maynard: So, if I understand what you’re saying, you’re saying prices are going up, and will continue to do so?

Hagar: At a much slower rate than they have over the last five years, yes.

In my opinion, Mr. Hagar should stick to the subject of real estate mortgage and appraisal fraud, and stay out of the market forecast business.

The post Hagar: Never Mind the Bogus Data, Recovery is Here! appeared first on Seattle Bubble.

Host Marcie Sillman discusses foreclosures and the Seattle-area housing market with guests Richard Hagar (real estate agent and appraiser) and Linda Taylor (housing director at the Urban League) in Foreclosures, The Housing Market And You.

Here’s an audio excerpt of the really juicy part (about 90 seconds), along with a transcript.

Sillman: Sandra says she would like to have a definition of a restored housing market. “If we don’t want to return to the inflated market, what does recovery mean, when we’re looking at our housing market here [around Seattle]?”

Hagar: Well, if we stay here in the Puget Sound region, which is… yeah—we’re in really good shape. We have a thing called ‘Growth Management’ that limited how we could build houses, where we could build. And so, we don’t have the oversupply like Phoenix has. In addition we have, right now, about a hundred and twenty thousand people a month moving to the state of Washington. That’s net growth. That absorbs a lot of standing inventory.

So what we are seeing is—in fact, we’re already seeing it as we’re doing appraisals—certain neighborhoods have already started a recovery. What that means is that their prices aren’t going down. In fact, we’re starting to see some price increases in some select neighborhoods moving up. So that’s a good news there. We’re still seeing out—areas beyond Marysville, south of Tacoma—their values are still going down, they’re still in a world of hurt, but we’re already seeing some of that turnaround.

Taylor: We’re seeing a lot of it. We’re seeing an awful lot of it.

Sillman: We’re seeing a turnaround?

Hagar: Yes. It’s going to be a cold winter, there’s no question about it. But when we start seeing interest rates at four percent and less, a hundred and twenty thousand people moving here—our economy’s doing a whole lot better than Vegas, or LA, or others—

Taylor: Everyone.

Hagar: Spring will be good.

If Richard Hagar, real estate agent and appraiser said it, it must be true, right?

Well, maybe not…

We have a thing called ‘Growth Management’ that limited how we could build houses, where we could build.

Indeed we do, but that hasn’t stopped new housing supply from outpacing demand across the Puget Sound, even throughout the frenzied bubble years.

And so, we don’t have the oversupply like Phoenix has. …our economy’s doing a whole lot better than Vegas, or LA, or others.

Totally irrelevant when discussing what a real estate recovery will look like here in Seattle.

In addition we have, right now, about a hundred and twenty thousand people a month moving to the state of Washington. That’s net growth. That absorbs a lot of standing inventory.

Wow, that would absorb a lot of inventory… if it were even close to being true. According to the Office of Financial Management’s official population estimates, the state of Washington’s population grew by approximately 65,000 people between April 2009 and April 2010. That’s a whopping 5,400 a month. In other words, Mr. Hagar was off by a factor of twenty-two.

Actually I’m being generous to Mr. Hagar here, because technically he quoted 120,000 a month in net migration, not population growth (babies aren’t exactly capable of buying houses, after all). If you look at OFM’s migration numbers, we’re not even looking at 65,000 a year. We’re growing at a rate of just 26,000 a year, or 2,150 people a month—55 times smaller than what Mr. Hagar claimed on-air.

Here’s what the last 10 years of statewide growth in housing and migration looks like:

Note that most likely the net migration is about double the number of new households actually moving into the state, so unless that blue bar is twice the height of the red bar, we’re still not even absorbing the new housing inventory, let alone the standing inventory.

…when we start seeing interest rates at four percent and less, a hundred and twenty thousand people moving here… Spring will be good.

Indeed, if we truly saw as many people moving here every month as we did throughout the entirety of the last three years, there is no doubt that the real estate market would have a hot spring!

[Update]
A few commenters have pointed out that Mr. Hagar likely meant to cite a net migration of 120,000 people per year. That’s probably true, as he has been citing that figure at least since late 2007:

John Maynard: Richard Hagar, I want to ask you about real estate prices in Seattle. Where do you think they’re headed?

Hagar: Well, here’s the good news. I don’t think they’re going down. … I think for the rest of the year, and maybe into the first month or two of 2008, our property values are going to remain fairly neutral. I don’t see any up, but I don’t see any major downturn in any of these prices.
…
We’ve got something going on in the state of Washington that very few other people have. We have a phenomenal economy. We have growth going on like you will not believe. We have—in the state of Washington, roughly a hundred and twenty thousand people move here every year. …That’s the net.
…
Maynard: So, if I understand what you’re saying, you’re saying prices are going up, and will continue to do so?

Hagar: At a much slower rate than they have over the last five years, yes.

You would have been right not to believe the growth cited by Mr. Hagar. As you can see in the chart above, even in the peak migration year of 2006, Hagar’s 120,000 figure still overstated growth by 50%. As migration has declined by nearly 70%, he continues to claim the bogus 120,000 figure, becoming more incorrect each year.

[Follow-Up: Hagar responds, we stand our ground]

The post Massive Imaginary Migration to Drive Seattle Recovery appeared first on Seattle Bubble.

With a 71% year-over-year increase in RealtyTrac’s report, the Seattle area ranked #1 as the metro where foreclosures increased the fastest. Obviously, this sent the local media into a frenzy, running stories with startling headlines like these:

• Seattle area hit by foreclosure epidemic
• Foreclosures rise dramatically in Seattle region
• Western Washington sees biggest annual spike in foreclosure activity
• Foreclosures hit region hard | Seattle-Tacoma: 71% increase nation’s largest

Of course, as any regular reader of Seattle Bubble is no doubt aware, RealtyTrac’s eye-popping headline number leaves out an important piece of the puzzle: SB 5810.

SB 5810 is a law that was passed by the Washington State Legislator in April 2009 that basically added some additional red tape and an extra 30 days to the process that banks must follow when repossessing a home through foreclosure.

As we discussed at the time, the result of SB 5810 was a massive spike in foreclosures in the first half of 2009 as banks rushed to “beat the clock,” then a subsequent lull in the third and fourth quarter as the local foreclosure pipeline slowly filled back up.

Here’s a quarter-by-quarter chart of Seattle-area foreclosures that I produce for Sound Housing Quarterly that graphically illustrates the effect of SB 5810.

Comparing the third quarter 2010 to the third quarter 2009 is obviously going to give you a distorted view of what is really happening with foreclosures. While they are clearly on the rise here in Seattle, the true increase is nowhere near as dramatic as RealtyTrac’s report implies.

There was one local news outlet that avoided the urge to turn RealtyTrac’s data into an attention-grabbing—but misleading—headline. KUOW (94.9 FM) contacted me yesterday morning to get my take on the data, and allowed me to explain the effect of SB 5810 on the year-over-year numbers on the air.

Here’s the audio from my appearance yesterday on KUOW’s “The Conversation”:

KIRO 7 TV also contacted me yesterday morning, and I provided a concise explanation of the effects of last year’s legislation in a pre-recorded session for them, but they cut that part out and focused on the sensationalism instead. *sigh*

Here’s KIRO 7’s clip from last night’s 6:30 “Eyewitness News”:

[Update: KIRO filed a DMCA takedown notice on the video. Classy. I’ve filed a counter-notice that gives them 14 days to either sue me or YouTube puts the clip back up. In the meantime, enjoy this clip instead.]

[Update 2: The original video is back up on YouTube. Thankfully it appears that KIRO has decided not to sue me for giving them free material followed by free promotion. Thanks, KIRO!]

The post Local Media Misdirects Massive Foreclosure Freak Out appeared first on Seattle Bubble.

Their wide-ranging conversation touched on everything from walking away to buying at “the bottom,” but this exchange with a local caller was what really caught my attention.

Ludden: Let’s bring a listener in, someone who is about to get married and buy a house, I believe. Trevor in Tacoma, Washington. Hi there.

Trevor: Hi, how’s it going?

Ludden: Okay. So tell us about the big decision you’re contemplating now – the home, not the marriage.

Trevor: Well obviously marriage… And we’re waiting until we’re married because then we will be able to better combine our incomes, and one of the main reasons why we haven’t bought a house beforehand or at least haven’t started looking yet is we have so much student loan debt.

It actually takes up 30 percent of our income every month, and when we look towards mortgages, even though we have a sizable down payment, the – just the consumption of our incomes every single month by the student loans is enough for most mortgage companies to say, well, you have to think about this further because we’re not going to give you a loan.

Ludden: So have you tried to get approved or pre-approved for a mortgage and been told no?

Trevor: Yes, and I still have to go to many more companies, but we’ve been denied by two – well, preemptively denied just based on our…

Ludden: But Trevor, if you’ve got 30 percent of your income going out to student loans, why do you think now is a good time for you to buy a house?

Trevor: Well, at least in this neck of the woods, I think that the prices are getting pretty close to bottom, and even if it isn’t going to be the bottom for another two or three years, I’m planning on having the house for seven to ten years.

What’s really frightening is that despite already being denied financing twice, the caller appears to be completely resistant to reason. When the host tries to point out that throwing a mortgage on top of student loans that take up 30% of their income might not be the best idea, he completely blows it off, spouting some realtor-esque nonsense about buying at the bottom.

Hopefully Trevor is not a reader of this site, because if he is, I have done a lousy job of getting across my point that you should buy a home when the timing is right for you, not just because you think we’ve “hit bottom” or because rates are low or because homes are a good deal.

Just in case Trevor is a reader, I’m going to make this crystal clear: When nearly a third of your income is being siphoned into existing debt payments, it is not a good time for you to buy.

The post Is “The Bottom” Always a Good Time to Buy? appeared first on Seattle Bubble.

An excerpt:

If you’re looking for an investment, consider stocks and bonds, coins or comic books. The days of buying a house for big profit might be gone forever.

Some experts think the housing bubble might have burst for good.

“Personally I think that’s kind of a good thing. I think that’s what we need to get back to, because this whole mindset of personal residences as a way to build wealth and to get really rich, I think has been really counter to the notion of affordable housing and people being able to get into the real estate market,” says Tim Ellis, from real estate blog SeattleBubble.com.

Meanwhile, Zillow’s “Chief Economist” Stan Humphries was on NPR’s Talk of the Nation yesterday saying basically the same thing: Era Of Homes As Piggy Banks May Be Over

Host: So, as opposed to the biggest and most important investment for the family, maybe houses should be regarded as something like a giant car? Something that is a durable good, that eventually you use up.

Humphries: That’s right. I don’t think that’s a bad analogy. Essentially housing is a utility that you consume like electricity. We consume housing as a utility. It’s a shelter for us.

It’s interesting how dramatically Zillow seems to have changed from the place people go to revel in their booming equity to one of the most prominent voices for a prolonged, flat bottom in home prices.

What about your social circle? Are your friends and family still believers in the “your home is your best investment” cliche, or has the bursting bubble dispelled the notion that housing always appreciates?

The post Is the “home as a profit engine” paradigm finally dying? appeared first on Seattle Bubble.

I was watching the classic real estate flick The Money Pit this weekend, and this scene in particular stood out to me. Note that The Money Pit was released in 1986, well before anyone outside of academia or government had any clue what the internet even was.

Fortunately by the time I was old enough to start thinking about buying a home, there were already a variety of halfway decent options for searching real estate online. When I watched this scene, I was amazed at how far this industry has come in the past twenty-five years.

I feel serious pity for anyone who had to experience the type of situation depicted above when making most expensive purchase of their life.

Full disclosure: The Tim is employed by Redfin.

The post Real Estate Search Hell appeared first on Seattle Bubble.

Here’s the audio:

If you’re visiting for the first time after hearing the interview, here’s the post I mentioned on the air: Goldman: Seattle Home Prices to Fall 22% More by 2012

And here are a few recent posts that summarize the general state of the local housing market:

• Charting How Much Home the Median Income can Afford
• NWMLS: Pending Sales Predictably Plummet
• Still a "Buyer’s Market" in Many Neighborhoods

The post Welcome KOMO 1000 Listeners appeared first on Seattle Bubble.

Financial Blogger On Ethics Of Mortgage Modification

A full transcript is available at the link above. Here’s an excerpt.

SIEGEL: But what’s the risk of providing some kind of mortgage relief, whether it’s a suspension of full monthly payments, or whether it’s a reduction in the principal for somebody whose house plummeted in value and who is also unemployed and really will have a very hard time making the payments regardless?

Mr. RITHOLTZ: From a broad perspective, again, you’re keeping them in a house that they can’t afford, and they’d be much better off going to a place that leaves them a little spare change in their pocket, as opposed to just draining everything they have to make those payments.

Secondly, if these banks have their balance sheets just festooned with bad loans, we’re not allowing them or not forcing them to do what they’re supposed to do, which is take the write-down, get it off their books, free up some capital and move forward as a healthy lending institution.

Barry also wrote some additional thoughts on this issue on his site last week: More Foreclosures, Please…

It may sound counter-intuitive, but the best thing for the nation (but not necessarily the banks) is to allow the foreclosure process to proceed unimpeded.  We need more, not less foreclosures.
…
We should allow the real estate market to experience a healthy price normalization process. Even though home prices have fallen dramatically, they have yet to reach their historical means relative to income or the cost of renting. This is to say nothing of the usual careening past the median towards under-valuation that typically follows a massive mis-allocation of capital.

I agree with Barry 100%.

Also related: with all the foreclosure prevention and delay programs going on, it’s hard not to feel like you’re basically a chump if you pay your mortgage. Many stay at home for free as banks defer evictions

It’s been 16 months since Eugene and Patricia Harrison last paid the mortgage on their home in Perris, Calif.

It’s been 11 months since the notice got slapped on their front door, warning it would be sold at auction.

A terse letter from a lawyer came eight months ago, telling them that their lender now owned the house. Three months later, the bank told them to pay up or get out by the end of the week.

Still, they remain in the yellow ranch-style home they bought seven years ago for $128,000, with its views of the San Jacinto Mountains. They’re not planning on going anywhere.
…
Throughout the country, people continue to default on their home loans — but lenders have backed off on forced evictions, allowing many to remain in their homes, essentially rent-free.

Several factors are driving the trend, industry experts say, including government pressure on banks to modify loans and keep people in their homes.

The post Foreclosures: Better to let them happen appeared first on Seattle Bubble.

First up, Zillow Chief Economist Stan Humphries on Yahoo News:

Here’s the money quote:

We think that the amount of pent-up supply that we have of people on the sidelines, combined with the amount of foreclosures that we have, combined with the current negative equity rates and the foreclosures they are going to produce in the future—all that combines to keep more supply than there is demand for the near term. We think it’s going to take three to five years for us to work through this.

“Pent-up supply,” you say? That sounds like a familiar concept, like one I’ve heard somewhere before…

Next up Aubrey Cohen of the Seattle P-I gets some face time on CNBC’s 4-headed talk-box. Skip ahead to 2:25 in the video to jump past the blah blah about condos in Florida.

Aubrey’s take on the current market in Seattle:

Our prices have been bouncing around pretty much at the same level for nearly a year now. Our sales are up year over year, of course a year ago they were nothing to write about. We’re seeing now some of the fallout hitting some of the higher end, because of condo projects.

I got the impression that Aubrey wasn’t being “optimistic” enough for the CNBC hosts.

The post Video Two-Pack: Pent-Up Supply & High End Condos appeared first on Seattle Bubble.

Jillayne on spotting the bottom…

Is this the bottom? I think we’re going to be asking that question of each other for a long, long time. …I believe that the bottom is going to be not hard at all to find, because we’re going to be there for a long time.

This falls right in line with the forecast Spencer Rascoff gave last week at the PNWHS and Seattle RE Barcamp, where he shared Zillow’s data-based prediction of “at least three to five years of basically flat home values.”

On whether Seattle is special…

Every real estate agent that I talk to, no matter what city I travel to, says: “Yeah, but our market’s special. Our market’s different. We have pockets,” et cetera. Okay, you know what? Doesn’t matter. Everybody thinks that, right? Because we don’t want to think that it will happen to us.

That mindset was so prevalent here in Seattle that it has its own tag here: Seattle_is_special.

On real estate making up so much of the economy…

We have to wean our economy off the real estate finance and building sectors.

I couldn’t agree more.

Some good insights from Jillayne. Worth a listen for sure. You can subscribe to Michael’s podcast here.

The post “We’re going to be at the bottom for a long time.” appeared first on Seattle Bubble.

While there were no real estate related topics at Thursday’s event in Seattle, last week there were 65 different Ignite events held all over the world. I was browsing through the worldwide video site and I came across this talk from the Sydney Ignite event: Why journalists lie – and how you can benefit by Inga Ting.

Since picking apart poor journalism is something of a pastime here at Seattle Bubble, I found the talk to be fairly interesting.

Maybe I’ll try to put together a talk of my own for some future Ignite Seattle event. For the title I was thinking I could go with something tame like “Making Sense of Real Estate” or perhaps something a little more colorful like “How to Play the Real Estate Game and Not Get Screwed.” What do you think?

The post Some Insight Into Why Real Estate Reporting Usually Sucks appeared first on Seattle Bubble.

Excerpting from the online story text:

Realtor Sandra VanderVen shows us a condo off Alki beach that has been on the market for a year and a half.

“It almost seems like you could put a free sign out!” VanderVen jokes about the situation, but she’s nervous.

In her entire career she’s never had a property sit on the market for this long and she’s not alone.
…
Agent Randie Stone on the other hand has been selling along Alki for 25 years. The last thing she’s willing to do is cut down on price.

“My saying is, we still sell properties here, we don’t give them away,” she said.

She believes condos are a luxury item, they may take longer to sell, but in the end she says they will.

“Everything will even out, it will get better. It just will,” she said.

Below are Zillow’s and Redfin’s stats widgets for Alki Beach condos. The situation actually doesn’t look nearly as dreary as they make it sound on the news report. Although I suppose when you’re living in a fantasy world where you truly believed 2005 and 2006 sales levels would continue forever and ever, even “normal” is pretty frightening.

Zillow Home Value Index

More Alki Home Values

The post King 5: Alki “The Bermuda Triangle of Real Estate” appeared first on Seattle Bubble.

Foreclosures are up in Washington State. What’s your experience with foreclosure in this housing market? You can call into the program today between 12:40 and 1 pm at 206.543.KUOW (5869) / 800.289.KUOW. Or call our listener line to leave a message before the show: 206.221.3663.

The show’s producer asked me what my take is “on the foreclosure problem / solutions,” to which my succinct response was that “it is a regrettable mess, but unfortunately one that must play out in order for the housing market and the economy as a whole to return to a healthy state of sustainable growth.”

Guy’s other guest will be Linda Taylor, Housing Director at the Urban League, who I am told has a “different perspective.”

Update: Here is the audio from the segment. I come in about 7:45 into it.

http://seattlebubble.com/blog/wp-content/uploads/2010/01/2010-01-04 – KUOW on Foreclosures.mp3

The post KUOW on Foreclosures: Today at 12:40 appeared first on Seattle Bubble.

“Tired of setting your money on fire every month?”

“Stop throwing away your money renting!”

Maybe you thought that the dramatic and decisive collapse of the housing bubble would have rid us of this type of nonsense marketing. Well, you thought wrong. The twist this time though, is that the advertiser in question isn’t pushing residential real estate, but 800-1,500 sqft garage bays in a sort of garage condo type building.

Setting Your Money on Fire

Tired of setting your money on fire every month, renting storage?
…
Lots of you… have stuff you love or hobbies you love with no good place to put it or do it! GarageTown solves that problem forever, while you make a smart investment in commercial real estate.
…
Stop paying rent!

You Don’t Even Have to do the Math

If… you’re renting commercial space, your cash flow is taking an unnecessary beating.
…
Stop throwing away your money renting, and start saving by owning.
…
Check out the five-year financing plans available. You don’t even have to do the math! We did it for you!

I thought you all might get a good afternoon laugh out of those ads.

The post Stop Setting Your Money on Fire Every Month! appeared first on Seattle Bubble.

Tune in to the Weissbach show today at 5:30 PM on AM 570 to hear me (The Tim) discuss the local real estate market with host Peter Weissbach. See Tuesday’s post for a little more info on Weissbach’s program.

If you’re at a computer, you can listen online here.

Update: If you missed the program, here’s the audio.

Thanks again to Peter for having me on!

The post Tim on the Radio Today (for real this time) appeared first on Seattle Bubble.

The post Simple Four-Point Plan to Fix the Economy appeared first on Seattle Bubble.

Not too surprisingly, they put a pretty positive spin on the whole thing. The word they were getting from all the real estate “professionals” that they spoke with was essentially “buy now, look how low rates are!”

I didn’t say that now was a bad time to buy, because it isn’t. However, I also didn’t say that everyone should just jump in now and buy buy buy. Prices are still falling in Seattle, and will likely continue to fall for the next 6-12 months (at least). If getting the lowest price is important to you, now is probably a good time to take a “wait and see” approach.

I also gave the reporter the following examples of the monthly payment math based on low interest rates vs. falling home prices. The payment below refers to the total monthly payment of PITI (Principal, Interest, Tax and Insurance).

• $400,000 home, $40,000 down, 5% interest: $2,366 payment
• $400,000 home, $40,000 down, 4% interest: $2,152 payment
• $360,000 home (10% price drop), $40,000 down, 5% interest: $2,113 payment
• $360,000 home (10% price drop), $40,000 down, 6% interest: $2,314 payment (still lower than the first scenario)

In short, jumping into the home buying decision primarily because of low interest rates does not make any sense. Refer again to my five self-examination questions:

• Do you like the home well enough to stay there for at least 5-10 years?
• Do you feel that the home is priced fairly?
• Can you afford it using a conventional 30-year fixed-rate loan?
• Do you have a minimum 3-month emergency fund that is not part of your down payment?
• Would you be able to handle it both financially and emotionally if the value of your home dropped considerably after purchase?

If the answers to all of these are yes, then maybe now is the time to buy for you. Note that interest rates only factor in to one of the above questions.

Addendum: Jillayne makes an excellent point in the comments below:

I’d like to lobby hard to add one more thing to Tim’s list: What’s your plan B if you decide that you need to sell the home (for a million different reasons) but cannot sell.

Can you RENT it out for enough to cover the payment so you can move someplace else?

Having a plan B helps a person sleep at night but maybe I’m just too fiscally conservative.

I don’t think that’s too conservative at all. You should definitely have a “Plan B.” Again, keep in mind that my five questions are a minimum. Ideally, my personal preference is to plan on stay ten years or more, have 6-12 months of cash reserves, and even be able to afford the house on a 15-year mortgage.

The post Q13: Now is a Once in a Lifetime Buying Experience appeared first on Seattle Bubble.

The post The Crisis of Credit Visualized appeared first on Seattle Bubble.

It’s starting to look like we may be special after all… just not the way some folks imagined.

The post MSNBC on Super Special Seattle appeared first on Seattle Bubble.

Note that I do not personally consider myself to be a “real estate guru,” as the TV folks seem to have become fond of calling me (though I am flattered).  While this program got some minor points of fact incorrect, the piece as a whole is good, and I feel it did a good job of accurately reflecting my views on today’s housing market in Seattle.  I’d like to extend my thanks to Jamie Ross for inviting me to be on the program.

The crew also interviewed Jillayne Schlicke of Rain City Guide fame, as well as Mack McCoy from SREP.  Apparently those segments will be aired at a later date.  When they do air, I believe you should be able to find them at this link.

The post Seattle Bubble on Canadian Real Estate TV appeared first on Seattle Bubble.

The post Debt: The American Way appeared first on Seattle Bubble.

First let me say that while I am flattered that John Curley and Jim Dever referred to me as a “real estate guru,” that is not a title that I have ever or would ever give myself. As I said in the segment, “I’m just a guy doing all this research, and putting it out there for you to see as well.” I hope that you find this resource to be of use.

Seattle Bubble is the Seattle area’s top resource for news, analysis, commentary, and community discussion on the local real estate market. We focus on productive discussion, improving understanding, and dispelling myths.

Please take a moment to look around the site. Drop by the About Page for a brief summary of what we do.

Here are some recent stories that summarize what’s going on in today’s real estate market around Seattle:

• Case-Shiller: Seattle Prices Rewound to Summer ‘06
  This link shows that despite John Curley’s apparent skepticism about falling home prices in Seattle, the best available index indicates that as of February, prices have fallen back to levels last seen in July 2006.
• NWMLS: Anybody seen my spring mojo? I can’t find it.
• March Neighborhood Months of Supply Update
• Puget Sound Counties March NWMLS Update

For anyone that is interested but didn’t catch Evening Magazine tonight, you can view the video on the KING 5 website, or right here (if you don’t mind YouTube’s lousy quality).

Update: Sweet, you can view a much higher-quality version on YouTube itself (but I can’t embed it).

The post Evening Magazine on Tim Ellis & Seattle Bubble appeared first on Seattle Bubble.

You can listen to the full three-minute segment on NPR’s website. Here’s a little clip of my appearance:

The house Mr. Kaste and I were standing in front of, which he says “may be the last gasp of Seattle’s bubble” is 145 NW 76th St, 98117, which I mentioned on the Audacious Flips and Renovations thread in the forums. Bought for $315k in 2005, now asking $800k.

At the end of the segment he used a quote where I talked about housing braggarts getting what’s coming to them. He was definitely fishing for a comment like that during the entire interview, so I’m not surprised that it ended up on the air. However, taken alone, it sounds like I’m cheering for people’s financial destruction, which is not the case.

Yes, I admit that I’ve got some schadenfreude with respect to one specific set of people: blowhards that simply would not shut up about their home’s ever-rising “value” during the bubble years (such as…). But do I take pleasure in seeing anyone foreclosed on or losing their job due to recession? Of course not.

All in all, I think it was a good segment. The UW professor quoted in the piece does make a good point that more people than just bubble-buyers are going to suffer as this unwinds. However, I agree with Sniglet’s comment in the forums that a bailout “will prevent the economy from properly re-balancing itself and clearing out mal-investments.” Recessions suck, but sometimes they are necessary to get the economy back to a solid foundation. I made this point in my interview with Mr. Caste, but obviously that clip didn’t make the final cut.

The UW professor said that “people depend on their home equity,” which is certainly true, but should they? This needs to be allowed to play out naturally so we can get back to a rational, sound economy.

The post Seattle Bubble Speaks out Against Bailouts on NPR appeared first on Seattle Bubble.

You can listen to the full segment at the link above. Here’s a short excerpt from the beginning:

It seems that most of the people that called in were against a government bailout, despite the fact that both Hilary Clinton and Barack Obama would like to spend billions to do just that. I don’t like to get too much into politics on here, but I have to wonder if the democratic candidates really have their finger on the pulse of their base when so many people from a town like Seattle call in to say that they disagree with both of them.

Anyway, the program is an interesting listen. I wish I would have known about it while it was airing and could have called in.

The post Local Public Radio KUOW On Government Bailouts appeared first on Seattle Bubble.

Please take a moment to look around the site. Drop by the About Page for a brief summary of what we do.

Here are some recent stories that may interest you if you want to know what’s going on in today’s real estate market around Seattle:

• Will Higher Government Loan Limits Boost Seattle’s Market?
• NWMLS: Inventory Skyrocketing, Sales in the Gutter (Still)
• February Neighborhood Months of Supply Update
• Puget Sound Counties February NWMLS Update
• $100,000+ Price Cuts in Suburbs Around Seattle

If you’re looking for more content that gets to the heart of Seattle’s real estate market, I recommend you take a look at the following posts:

• Rent vs Purchase: A Comparison
• Gangbuster Job Growth, Lackluster Incomes
• Big Picture: Supply vs. Demand
• or, if you’re a number-crunching kind of person, any of the posts in the stats category

For those of you that aren’t new, and didn’t catch KING 5 news tonight, I will update this post later with the video clip. For now you can view the video on the KING 5 website here. Check back later tonight or tomorrow morning for an embedded video on this post.

Update: Here’s the video that I uploaded to YouTube:

Update 2: Neat, I found out that you can view a noticeably higher-quality version of the YouTube video by going to this link. Unfortunately I can’t seem to embed this version without it stretching it vertically. Oh well.

The post Welcome KING 5 Viewers! appeared first on Seattle Bubble.

For regular readers who did not catch my segment on the radio this morning, here it is. FYI, although I was on for the whole hour, the actual length of the segment is only about 33 minutes after removing the news breaks and commercials.

For a limited time, you can also grab an mp3 of the segment directly from 710 KIRO.

I felt a lot better about this appearance than the last time I was on the Dave Ross show. Probably because I was the primary guest for the entire hour, so I had a lot more time to make my points. There are of course still some things I would have liked to get in but was unable to, such as addressing the “they’re not building any more real estate” arguments that some of the callers brought up, but on the whole, I think I presented the facts well.

The post Welcome 710 KIRO Listeners appeared first on Seattle Bubble.

For regular readers who did not catch my short segment on the Dave Ross show this morning, here it is:

I was caught a bit off guard at how short it was, and was hoping to make some additional points. Hopefully next time I can actually join Dave in-studio for an entire hour-long segment. I’d love to be able to have more time to discuss the issue with Dave and respond to calls.

The post Welcome 710 KIRO Listeners appeared first on Seattle Bubble.

The Bottom Line: Now is not a good time to buy a home in Seattle.

Here’s why:

• Irresponsible, loose lending drove prices to artificial highs, pricing out responsible individuals and families that just want to make a decent down payment and get a traditional loan on a reasonably priced house.
• We are presently seeing a return to responsible lending standards, as the banks experience the consequences of writing loans to people who did not have the ability to pay them off. As lending standards continue to tighten, further downward pressure will be placed on home prices.
• Macro-economic factors drove home prices up, and will in turn bring prices back down (yes, even in Seattle).
• Home prices in Seattle did not rise as fast or as far as other places in the US, and likely will not fall as far. However, they will most likely fall.
• Why will prices fall? Because the current level of local home prices is not supported by any of the fundamentals that drive a healthy housing market:
  • Incomes (1, 2, 3, 4)
  • Employment (1, 2, 3)
  • Population (1, 2, 3)
  • Rents (1, 2)

  All of these factors are indeed positive for the Seattle area, but prices began to rise out of control while Seattle was still recovering from being hit particularly hard by the dot-com recession. Thanks to the aforementioned easy lending, home prices during and since Seattle’s economic recovery have risen much faster and higher than these positive fundamentals support.

There are lots of people (like myself) who have little to no debt, great credit, and a good down payment, but are not willing to buy into an inflated housing market. We are not against home ownership. We are against taking out massive, dangerous loans to finance an otherwise unaffordable and overpriced asset. We are perfectly content to wait out the declining market, and will not be suckered by real estate salespeople who perpetually repeat claims that “now is a great time to buy.” They said that about the national housing market, and they were wrong. Once the home price drops were irrefutable, they began declaring that “the market has hit bottom” every three to four months.

Don’t take anyone’s word when it comes to what will likely be the largest financial decision of your life. Do the research, 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.

P.S. (I’d like to improve / refine this post and make a copy to link at the top next to “Home” and “Forum” as an “About” page. If anyone has any suggestions for improving this post with that end in mind, such as additional posts that should be linked or main points that I left out, please share your ideas in the comments. Thanks!)

* I tried to record the interview through the online stream of KOMO 1000, but halfway through they cut into the feed with an ad for a casino that ran for the entire remainder of the call. KOMO host Nancy Barrick is going to email me the audio tomorrow morning, and I will post it here sometime thereafter.)

Update: Here’s the audio from the interview on KOMO today:

The post Welcome to Seattle Bubble appeared first on Seattle Bubble.

Please take a moment to look around the site. I recommend you take a look at the following posts:

• Rent vs Purchase: A Comparison
• Gangbuster Job Growth, Lackluster Incomes
• Big Picture: Supply vs. Demand
• or, if you’re a number-crunching kind of person, any of the posts in the stats category

For those of you that aren’t new, and didn’t catch KING 5 news tonight (as of this post, you can still catch it at 11:00 PM on KING 5), I’m hoping to update this post later with the video clip. Check back later tonight or tomorrow morning.

Update: Here’s the story on the KING5 website: Housing prices predicted to drop (thanks Deejayoh!).

Update 2: Here’s the video. I apologize for the lousy quality. I had some issues with my TV capture card last night and had to use a roundabout method to digitize this.

Oh, one more thing… Here’s the Fortune article they’re referring to in the newscast: Real estate: Buy, sell, or hold?, and here’s their specific take on Seattle. It’s the same article I mentioned (but didn’t yet have a direct link to) a few days ago in the post: Fortune: Price-to-Rent Correction Forecasting.

The post Welcome KING 5 Viewers! appeared first on Seattle Bubble.

If you can’t listen to the audio, here’s a partial transcript:

Ryan: When my husband comes home from work today—if he comes home, ’cause he’s calling and saying he’s not going to come home—I’m wondering how, or what to say to him. He had like, a flip out last night that continued into the morning. I actually had to leave with our kids because he was actually breaking things. This is not typical behavior of his at all, and I’m just really nervous—

Dr. Laura: Was he drinking?

Ryan: He doesn’t drink, no.

Dr. Laura: What do you think caused this big flip out?

Ryan: Well, we bought a house two years ago, and ever since we bought the house it’s always been “we bought it because you wanted it,” and every time we have financial struggles, it’s my fault because we bought a house that he said we shouldn’t buy, so… that’s… I guess the stresses of the house are getting more intense because our interest is going up so it’s been sort of like the past month I’ve been hearing him talk a lot about that.

Dr. Laura: Well, wait a minute. You mean, you bought a house when you really couldn’t afford it?

Ryan: There you go. [nervous laugh] Exactly. Exactly. And I kinda pushed to buy the house because I thought we could, even though I really should have listened to him…

You should take the time to listen to the entire three-and-a-half minute call (player below). Due to the format of Dr. Laura’s show, we don’t know where Ryan was calling from, but thanks to your friendly neighborhood housing bubble, situations like this are playing out across the country with increasing frequency.

For anyone that is confused about the title of the post, be sure to check out the original “Suzanne Researched This” commercial:

https://www.youtube.com/watch?v=20n-cD8ERgs

The post Suzanne Researched This: Part 2 appeared first on Seattle Bubble.

Update: I was on the air for roughly the first five minutes of the program. The discussion was primarily driven by Brian’s questions, so I wasn’t able to work in as many points as I would have liked, and I certainly could have said “uh, um, er…” a bit less, but this site definitely got some decent free advertising.

Here’s the portion of the program I was on for:

Only three callers were able to get in a word before the topic transitioned to something else. Here are a few highlights:

John in West Seattle:

I conduct six or seven real estate purchases a week and I see the problem with your guest, the facts of the Seattle market do not fit his theory. … Real estate values are subjective, they’re based upon what people want for their own reasons. There is no objective value that can be placed at any given location or time. … Housing prices go up because that’s what people are willing to pay. … People are speculating when they buy real estate, they hope it will appreciate in value over the years, but in a strict sense of speculation, that would apply to investment properties.

He sounded fairly angry, and he also called the Global Insight study “hogwash.” If I had been able to respond to “I conduct six or seven purchases per week” John (i.e., a real estate agent), I would have pointed out that he is correct, real estate values are subjective. However, home prices have very suddenly spiked up at a historically unprecedented pace in the last five (or so) years.

Has Seattle suddenly become far more subjectively desirable during that time? No. I have covered this nonsense argument in a number of posts, most notably A Question Of Affordability, last November.

Gary on a cell phone:

The “hogwash” comment is absolutely dead on. It’s just a function of the market. People pay what they’re willing to pay, and people sell what they can sell for. A couple factors that make our market higher than a lot of other areas are at least two things: One is a lack of transportation infrastructure, and the other thing is the Growth Management Act

The transportation argument would perhaps partly explain why Seattle proper is so expensive, but unfortunately for Gary’s argument, pretty much the entirety of King, Pierce, and Snohomish counties have seen similar spikes in home prices over the last five years. As far as his Growth Management claim, I’ve covered that here and here.

Scott on a cell phone

I’ve been in the lending side for the last ten years. … Seattle is over-inflated. If you talk to any banker, lending institution, they will tell you, their biggest worries are the big metropolitan areas: San Francisco, Seattle, Los Angeles… where you’ve had such growth in the appraised value. … There are a lot of realtors out there who are over inflating the value of these homes. … The bubble may not burst, but there will be a serious deflation in the next few years, and it’s gonna be based on the fact that the lenders have had enough.

Scott’s points were pretty much right on. He sounded like somebody that has a pretty good grasp of what’s going on before our very eyes with the interplay between home prices and lending.

I have audio of the segments of the show with the callers. If you’re interested in hearing it shoot me an email. Hopefully I’ll have another chance in the future to get the word out.

Seattle Bubble Tip Jar

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