Forty-seven percent of Seattle’s adults hold bachelor’s degrees, the strongest proportion of college-educated residents in any big city.

However, a new study by Forbes lists America’s ten most educated cities (again mis-titled as the “smartest cities”), and Seattle is nowhere to be found. Here’s the complete list:

#1 Boulder, CO
#2 Bethesda, MD
#3 Ann Arbor, MI
#4 Cambridge, MA
#5 San Francisco, CA
#6 Durham, NC
#7 Fort Collins-Loveland, CO
#8 Washington, DC
#9 Bridgeport, Stamford, and Norwalk, CT
#10 San Jose, Sunnyvale, and Santa Clara, CA

The methodologies of the two studies sound fairly similar, so I’m left wondering how Seattle went from #1 to below #10.

Using data from Sperling’s BestPlaces, we looked at data from the 200 biggest metropolitan areas in the U.S. and ranked them based on the percentage of the population age 25 and over with at least a bachelor’s degree.

Whatever our percentage of degreed adults truly is, I don’t think that an “educated” populace is some kind of magic bullet that will keep housing prices rising. I only really bothered mentioning this because some people made such a big deal about Seattle’s #1 position in the April study.

Personally, I don’t put much stock in Forbes, but I know a lot of people do, so being left off of their list probably comes as a bit of a blow to the collective ego of our city. Oh well. At least we were the reigning champions for eight months.

(Elisabeth Eaves, Forbes, 12.15.2006)

The post Forbes’ "Smartest" Cities—Where’s Seattle? appeared first on Seattle Bubble.

Almost every dollar Todd Asher earns is spoken for. He has one daughter in college, another in high school and a toddler in diapers.

“We made a decision to have my wife stay at home with our 18-month-old son, so we’re living off my income, paying for tuition, diapers and everything else,” said Asher, of Sammamish. “We’re all about making money go as far as possible.” Asher, 39, has found a way to save a little each month through an interest-only mortgage loan. He diligently puts the savings into his 401(k), an individual retirement account and mutual funds.

“My goal when we purchased our current home was to buy the most house for the least amount of money and then save, save, save,” Asher said.

Does this logic sound a bit off to anyone? What happened to the idea of living below your means?

Some mortgage specialists and financial planners believe unconventional home loans could be good tools to help consumers put away money for their future — if they’re disciplined enough to invest the mortgage savings.

If homebuyers invest the extra $160 to $200 they save each month on an interest-only mortgage, then it “absolutely makes sense,” said Jeff Tisdale, a broker at Skye Mortgage in Bellevue.

Totally, Jeff.

But Paul Merriman, founder and president of Seattle-based Merriman Capital Management, said every dollar a young homeowner invests now from mortgage savings will make a surprising difference when he or she retires.

Consider this scenario: A 30-year-old homebuyer invests $200 a month in a Roth IRA for five years. With a 10 percent compound rate of return (based on the S&P 500), he will have $15,312 in five years. Then, because he faces a higher mortgage payment of principal and interest, he stops contributing to the IRA. Even if he adds nothing more to the investment, the money continues to multiply.

“They will have $267,185 at age 65 and they will be able to take tax-free distributions of $16,031 (6 percent) the first year,” Merriman said. “If they continue to earn 10 percent while taking out 6 percent, they will take out over $500,000 and have $585,435 left at age 85.”

Consider this scenario: Based on the last 35 years of inflation, $267,185 will only be approximately $53,034 in 2042 dollars, which probably won’t even buy you a Hyundai (assuming there are any fossil fuels left in which to operate it)

I think it’s also safe to consider that whatever McMansion they purchased will be worth much, much less than their purchase price in years to come. Money isn’t free and without exception debt -always- must be repaid. How will this paycheck-to-paycheck family ever get out from under this house?

“Most people want everything now, and they come back every two years looking for more money,” he said.

He also has families who “come back a little richer” each time with more money in the bank.

“I can’t keep track of what people do once they walk out my door,” Tisdale said. “I can tell you that the ones who are committed to investing their savings are rare.”

The home ATM has all but dried up. The American public is now in their 19th consecutive month of negative savings. This family and many like it are are literally living on borrowed time. What’s the point of an interest only loan when you can rent a suitable home, closer to work, for much less than “buying”. Why put yourself under such pressure, especially when you aren’t building any equity?

A house has become more of a consumer product than an investment, especially based on current false valuations and the way they are physically built today.

This family is only one job loss, sickness, or interest rate hike away from a CH13 bankruptcy. The American Dream is looking more and more like a nightmare. The suburbs with their large McMansions will be the slums of the future.

(Linda Thomas, Seattle Times, 12.16.2006)

The post Seattle Times Pumps Interest Only Loans appeared first on Seattle Bubble.

Redfin, Zillow, Zip Realty, For Sale by Owner in the MLS companies, these all represent the newer “alternative” business models… Why should “Traditional Brokers” HELP the Alternative Business Models to succeed? Because WE NEED them, now more than ever, all of us. The consumer needs them. The industry needs them. We need a whole lot more flavors of Kool-Aid out there.

That’s right, you read it straight from the agent’s keyboard: traditional brokers, real estate websites, discount brokers, FSBO tools… they’re all just different flavors of Kool-Aid! So drink up, consumers. Drink up!

In other RCG-related news, contributor Galen Ward has finally launched his fancy real estate search site ShackPrices.com. I have to admit, it’s got a sharp interface on top of zippy functionality and lots of nice features. I could definitely see it becoming my favorite real estate search tool.

Now if only there were some real estate out there worth searching for…

(Ardell DellaLoggia, Rain City Guide, 12.12.2006)

The post Drinking the Kool-Aid appeared first on Seattle Bubble.

October
[A]: “I fully expect things to pick up the first part of the year.” Although the pace of sales has slowed, there are no clear indications that overall prices are going to decline, real estate analysts say. Data released yesterday support their view.

November
[B]: …industry analysts said [the] housing boom seems to be coming to a quiet end. The balloon isn’t bursting, they said, but it’s losing steam.

[C]: …sales of existing homes and condominiums declined … last month. Even with the decline in sales, the median price of an existing home sold last month rose [year-over-year].

December
[D]: sales … declined in the month of November. … The median price for a home sold last month was up from a year ago. … “The current pace of home sales activity remains historically strong. … I truly believe the housing market will continue to expand. But rather than the double-digit price appreciation we’ve seen, we might see that drop to a 5 or 6 percent appreciation sometime toward the end of next year.”

Nothing new, right? It’s pretty much more of the same—what we’re used to reading whenever the local rags start talking about real estate in the greater Seattle area.

Only, there’s a few details I didn’t mention about the above quotes. They’re from last year, they’re not from the local rags, and they’re not referring to Seattle.

On a suggestion from reader John Law the II, I went searching for news reports from a year ago about the nationwide housing market (quotes C & D), and for good measure I pulled a few quotes from San Diego as well (A & B). What I found bore an eerie similarity to the kinds of things we’ve seen printed in the local press regarding the Seattle market the past few months.

So, a year ago the “experts” were predicting continued (but slowing) appreciation, with no price declines. Let’s see how well those predictions held up.

San Diego, October 2005: “Although the pace of sales has slowed, there are no clear indications that overall prices are going to decline, real estate analysts say. Data released yesterday support their view.”

San Diego, December 2006: “San Diego County housing prices slipped 6.9 percent last month, the biggest year-over-year drop on record.”

Nationwide, December 2005: “‘I truly believe the housing market will continue to expand. But rather than the double-digit price appreciation we’ve seen, we might see that drop to a 5 or 6 percent appreciation sometime toward the end of next year.'”

Nationwide, November 2006: “…the median price for a home sold dropped to $221,000 in October, a decline of 3.5 percent from a year ago. That was the biggest year-over-year price decline on record.”

Obviously this doesn’t prove anything about what is going to happen here in Seattle in the coming year. However, given the theory that the housing market in the Northwest lags California (or the nation as a whole) by about a year, I think it’s an interesting comparison.

At the very least it just goes to show you that the so-called “experts” either didn’t know what they were talking about, or were intentionally misleading the press. So why should we believe what they’re saying today regarding Seattle’s market, when the numbers seem to be saying something else?

(Emmet Pierce/Roger M. Showley, San Diego Union-Tribune, 10.18.2005)
(Emmet Pierce/Roger M. Showley, San Diego Union-Tribune, 11.12.2005)
(Martin Crutsinger, Associated Press, 11.28.2005)
(Charlie Herman, ABC News, 12.29.2005)
(Roger M. Showley, San Diego Union-Tribune, 12.13.2006)
(Martin Crutsinger, Associated Press, 11.29.2006)

The post Housing Bubble Time Warp appeared first on Seattle Bubble.

Although few experts predict home values will fall dramatically in 2007, many economists say prices throughout the West – particularly California and the Southwest – won’t improve for 12 to 18 months. The Pacific Northwest, where home prices are enjoying double-digit appreciation, is a rare exception.

Building booms in many markets over the past half-decade, combined with mortgage interest rates that have increased about 1 percent in the past year, have resulted in residential real estate stagnation in most markets.
…
One of the few exceptions to the nationwide slowdown is the Pacific Northwest.

In Washington, the number of houses sold in the third quarter of 2006 dropped 16 percent – but the median price surged nearly 12 percent from the same period last year, to $300,900, according to the Washington Center for Real Estate Research. In Seattle’s King County, the median price surged 14 percent to $432,600.

The dot-com bust of 2000 hammered the region, which shed a disproportionate number of manufacturing and technology jobs in the following half-decade. Homeowners there haven’t enjoyed the same run-up as investors elsewhere, said Glenn Crellin, director of the WCRER at Washington State University.

“Our real estate market essentially came to the party a little late. As a result, we’re going to be able to have a softer landing than many of the other communities nationwide,” Crellin said.

Speaking of the WCRER, while their latest report (pdf) shows building permits down across much of the state, King County is the glaring exception, with the number of units that building permits have been issued for up sixty-two percent. What was that they said about building booms leading to stagnation? Hmm…

I just love how skyrocketing real estate prices are always described in such positive terms in the media. “Home prices are enjoying double-digit appreciation,” and our market “came to the party a little late.” It’s always so fun when the price of goods increase faster than the consumers’ ability to pay!

We may have come late to the “party,” but apparently we’re not going to learn any lessons from the markets that were first to the party, and first to experience the hangover.

I also loved this little gem in the article:

About 97,000 Californians moved to Washington in 2005, making it the fourth most popular destination for Californians after Texas, Arizona and Nevada. Oregon was fifth, with more than 83,000 ex-Californians, the department reported.

California’s departing homeowners typically use their substantial equity to fund their next real estate investment. Although some Seattle and Portland residents grumble about “Californication,” the trend has helped keep home prices there rising, said Brian Kreick, broker for Lynnwood, Wash.-based Kreick Realty Group.

“I have clients from southern California who can’t believe what they can get up here for the money,” Kreick said. “I showed one guy a house in Redmond that was $830,000 and still needed a new kitchen. He thought it was a great deal.”

Oh yeah, that sounds like a great deal… What’s that saying about a fool and his money?

(Rachel Konrad, Associated Press, 12.11.2006)
(WCRER, Housing Market Snapshot, 11.2006)

The post Pacific NW a "Rare Exception" (for now…) appeared first on Seattle Bubble.

First off, although I haven’t mentioned it explicitly before, Seattle Bubble is available in an RSS feed. If you use a service such as Bloglines or Google Reader, you can subscribe to either the RSS feed or the Atom feed to get your daily Seattle Bubble fix. For your convenience, I have added these links as well as a few subscription buttons for specific online readers to the bottom of the sidebar on the right. If there are additional services you think I should add buttons for, let me know.

Every now and then, I receive an email from someone who is wondering why I stopped making posts (even though I haven’t stopped at all). Usually this is a problem with the user’s internet browser, and can be solved by clearing the cache. If you don’t know how to clear the cache on your browser, here is a good page that explains the process for most browsers. Another way to avoid this problem is to subscribe to the Seattle Bubble feed as described above.

Also, don’t forget to set your bookmarks to SeattleBubble.com. I hope to find a dedicated server for Seattle Bubble sometime early next year, and once I do, SeattleBubble.blogspot.com will cease to be this blog’s primary address.

Lastly, I’d like to take another moment to point out the tip jar. If you find that Seattle Bubble has been an interesting and useful service to you, consider dropping me a few bucks. I’m proud to keep Seattle Bubble advertising-free, and your donations help me resist the temptation of advertising dollars. Thanks to all of you that have already donated.

The post Programming Notes appeared first on Seattle Bubble.

Median Closed Sales Price (Res): $435,000
Median Closed Sales Price (Condo): $260,000
Active Listings (Res): 7,250
Pending Sales (Res): 2,000

If the numbers come out close to those, that would pretty much fall in line with my expectations for the close of this year. YOY listings would be up ~32% and sales down ~14%, while the median price falls back slightly to early summer levels (but up ~12% YOY).

I also predict that if pending sales are in that ballpark, there will be no shortage of claims in the press that the slow sales are “due to the unusually wet weather.”

What are your predictions?

The post November Market Predictions Anyone? appeared first on Seattle Bubble.

Do you steam when you follow up on a newspaper advertisement for “cozy cottage” and find a falling-down fixer? Can the term “waterfront access” accurately describe a public boat launch three miles away?

Advertisements sometimes are too complimentary and do not accurately describe the property for which they were written. Some homeowners and creative real estate agents, like many people in the sales game, dress up a product prettier than it actually is to lure the largest number of potential buyers — especially when the market has slowed in many neighborhoods.
…
In Washington state, Puget Sound residents are spoiled and often take for granted the number of properties with amenities in this region. The numerous bodies of water coupled with terraced hillsides offer area residents view opportunities not available in most areas of the country.

But don’t get carried away if you are a seller attempting to write an ad. A “peekaboo Sound view” should be more than standing on a toilet and cranking your neck to get a glimpse of water through the neighbor’s trees in winter.

Now check out this quote (first posted as part of a comment, then in a separate blog post) from one of Seattle Bubble’s most vocal prognosticators, Eleua:

“peakaboo view” = in the dead of winter, during a 50 knot gale, you may, if conditions are perfect, be able to use a 500 power telescope from the upper windows in the laundry room, and be able to see more than 1/4 mile for half of a second.

Granted, not exactly the same wording, but Inman’s story certainly sounds to me like it was “inspired by” Eleua’s “Rosetta Stone.”

What’s the most egregious example that you have personally seen of an overly-rosy property description?

(Inman News, 11.29.2006)

The post Rose-Tinted Listings appeared first on Seattle Bubble.

Summer, the prime time for selling a home, was approaching and Jeanne and Eric Mehan wanted to sell fast.

In the rush to sell before fall, the Woodinville couple acted on some bad advice.

Put it on the market, full of clutter, not cleaned, at top price, even if it’s not ready, advised their real estate agent. Let’s market your home to a flipper, someone who wants to buy it, fix it and resell. Let’s see if we get a nibble and you can work on it in the meantime, the agent told them.

Wow, that was some bad advice. Weren’t the flippers mostly gone by fall?

The agent took marketing photos of the laundry room with the toilet seat up and dirty clothes piled on the floor – with his cell phone camera.

The Mehans’ house got some foot traffic and a few offers for half the $475,000 asking price. Meanwhile, the precious summer season faded. The agent suggested pulling the property off the market and re-listing.

Half of the asking price! Now we’re talking…

“At that point I wanted nothing more to do with him. I fired him,” Jeanne Mehan said.

Now it was fall and the holidays were around the corner. Could they sell their home quickly during a traditionally soft market?

The months before Christmas are often considered a difficult time to sell a home. Potential buyers are hunkered down for the holidays and sellers don’t want to mess with listing a home during those busy months, the thinking goes.

Fewer people are buying single-family homes and condominiums in November, December and January, according to statistics kept by the Northwest Multiple Listing Service.

Pending sales were at their highest last year in June, with 8,896 recorded in King, Snohomish, Pierce and Kitsap counties. By December, sales had dipped to almost half of that, with 4,837 recorded.

That doesn’t mean selling is going to be a cakewalk. Houses need to be priced what they’re worth, agents need to market homes aggressively and sellers need to be willing to clean and fix problems, Deptuch said.

Buyers are pickier than ever, she said. Buyers expect the walls to be painted and the carpet to be in good shape. They want homes clean and free of clutter. Buyers want to walk into a home and feel like it could be theirs, she said.

The Mehans moved extra belongings into storage and hired professional cleaners. They painted the house in and out, replaced dated garage doors and put in a new lawn. The house got new light fixtures, doors and carpets.

The result: the couple put their house on the market for $429,999. Within a dozen days they received three offers and a sale is pending.

Don’t you just love a happy ending?

(Debra Smith, HeraldNet.com, 11.26.2006)

The post Sell It In The Slow Season appeared first on Seattle Bubble.

Percentage of Reduced Listings Per Market.

Ventura County:
10/22: 51.3%—> 11/18: 50.3%

Sacramento Metro:
1/30: 30.5%—> 10/20: 49.0%—> 11/18: 49.0%

Orange County:
1/30: 22.8%—> 10/20: 45.8%—> 11/18: 45.0%

San Diego County:
1/30: 26.3%—> 10/20: 43.9%—> 11/18: 42.9%

Phoenix Metro:
1/30: 28.0%—> 10/20: 43.2%—> 11/18: 42.2%

Riverside County:
1/30: 27.3%—> 10/20: 40.2%—> 11/18: 39.5%

Las Vegas Metro:
1/30: 21.0%—> 10/20: 40.0%—> 11/18: 39.9%

Los Angeles County:
1/30: 21.8%—> 10/20: 39.6%—> 11/18: 38.8%

Seattle Metro:
1/30: 17.1%—> 10/20: 33.0%—> 11/18: 33.9%

Santa Clara County:
1/30: 13.6%—> 10/20: 30.8%—> 11/18: 32.7%

2006 Price Reduction history in Seattle, showing the clear trend.

11/18: 33.9%
10/20: 33.0%
09/14: 28.1%
08/13: 25.2%
07/13: 24.0%
06/13: 21.8%
05/13: 20.3%
01/30: 17.1%

(data courtesy of ziprealty.com)

The post Trend: More Price Reductions for Seattle appeared first on Seattle Bubble.

Click to enlarge

The decline in affordability from Q2 to Q3 was relatively minor, due to lower interest rates in Q3, combined with a smaller increase in the price of homes than previous quarters.

WCRER Director Glen Crellin is quoted in the Associated Press article about these latest figures as saying “home ownership depends on the ability to purchase the first home, and too often that is more a dream than a reality.” First time buyer affordability in King County also reached a new low, coming in at 38.8 for the quarter. In a “normal” market in King County, first time buyer affordability tends to be in the 60’s. If first-time buyers really do get priced out forever, who will existing homeowners sell their homes to when they want to upgrade?

I don’t see how this trend can possibly continue for much longer.

(Nicholas K. Geranios, AP via Seattle P-I, 11.22.2006)

The post WCRER: Affordability Continues To Drop appeared first on Seattle Bubble.

Imagine buying a home and moving in, only to find out later that the house was never yours at all.

It’s a mortgage scheme that’s caused financial pain and heartache for many families in Western Washington.

It’s a scam so bizarre it’s hard to believe anyone could pull it off.
…
How can you possibly buy a house and find out later it’s not yours? After studying hundreds of pages of real estate records, e-mails, and phone logs, the KING 5 Investigators have figured it out.

Liza Bautista, a polished mortgage broker, who routinely touts her churchgoing ways, is at the center of it all.

Bautista often tells clients she’s a Christian who likes to help people with rocky credit buy their first home.

Mary Pelayo is one of those people.

She saw an ad for Bautista’s business that sounded perfect: “Want to buy a house, credit problems? We can help.”

“It was awesome,” Pelayo said, “until it all started falling apart.”

The bombshell that showed something was wrong was name on the mortgage bill, not Pelayo, but Lydia Pagdilao.

Lydia Pagdilao says someone must have forged her signature. The documents show she owns the Pelayo’s house, but she says she’s never heard of it.
…
Every person whose signature was forged, like Lydia Pagdilao, had given their financial information to Liza Bautista in the past for deals that were legitimate.

Later, when Bautista couldn’t get loans for families with credit problems, like the Pelayos, she secretly replaced their paperwork with information she took from clients with good credit.

With the deals pushed through, she collected her commissions.
…
“Shame on them, how can you do this to innocent hard working people?” Pelayo asked. “I mean, it’s everybody’s dream to own their own home.”

Although the article says “it’s hard to believe anyone could pull it off,” I don’t find it hard to believe at all. It’s really just a small step beyond the risky (but legal) financial situations that a large number of people are willing to put themselves in so they can “own” a home. I wonder what percentage of people actually read and (mostly) understand the mountains of paperwork that they’re required to sign during the home buying process, versus the number of people that just sign whatever the mortgage broker puts in front of them.

I think that as long as people are blindly enthusiastic about getting into a home (whether or not it’s the right decision for them at the time), there will be ample opportunity for shysters to pull this kind of garbage.

As an aside, it really pisses me off when people like this call themselves Christian and yet have no qualms with taking advantage of their fellow man. That’s about the furthest thing from Jesus’ message that I can think of. However, that’s a subject for another blog.

(Susannah Frame, King 5 News, 11.20.2006)

The post Congratulations, You’re A Homeowner… Psych! appeared first on Seattle Bubble.

I choose to present this particular dataset for the following reasons:

1) SFH prices tend to be less volatile than condo prices.

Since 2001, the YOY change in SFH median price has ranged from 0.35% (Mar-01) to 20.00% (Oct-05), a total spread of just under 20 points. Condos: -5.21% (Aug-02) to 22.08% (Jul-06), a total spread of over 27 points. The maximum month-to-month change in the SFH YOY figure was a 6.32 point drop (April to May ’01), with 10 months experiencing a greater than 5 point change from the previous month. Condos: a 21.54 point jump (Dec-01 to Jan-02), with 19 months experiencing a greater than 5 point change.

2) Consistently quoting SFH figures provides an easy comparison.

The monthly reports in the newspaper often seem to cherry-pick whatever statistic supports the “angle” that they chose to take for the story. By picking one dataset and sticking with it, I feel that I provide the readers with a better baseline for what’s really going on.

3) Frankly, I’m just more interested in SFH’s.

I make no value judgments regarding any person’s choice of whether to buy a condo or a SFH, but for me personally, I’m just not all that interested in condos. That is not to say that a condo buyer and a SFH buyer are “not equal in [my] eyes,” or that condo purchases aren’t “worthy,” just that what goes on in the condo market doesn’t interest me as much. That being said, I do have a number of charts of the condo numbers in the Seattle Bubble Spreadsheet, which is always available to anyone who bothers to click the link on the sidebar.

The post Seattle Bubble Stats: Where are the Condos? appeared first on Seattle Bubble.

“St. Louis Fed president William Poole said, according to Bloomberg News. ‘As long as the housing problem remains confined to housing, there’s really nothing the Federal Reserve can or should do.’”

Realistically, I don’t think this will be the case. From a business perspective, I’m watching cash flow more intensely than ever. Will it trickle down to my Holiday spending? No question.

Another comment:

“I don’t think we’ve seen the bottom yet, and I don’t see anything that says it’s going to get significantly better in 2007,” said Bob Nardelli, Home Depot’s chairman and chief executive officer.

Mr. Nardelli said job losses in the home construction market are the worst he’s seen in 35 years, and the pain is starting to spread to the home renovation market.

“The loss of jobs . . . in the home construction market is at unprecedented levels,” Mr. Nardelli told analysts on a conference call yesterday. “Home builders [are] basically writing off earnest money and liquidating land. We’re starting to see a lot of that unemployment find its way over to the small repair and remodel contractors.”

Problems in the housing sector have also begun to affect how consumers spend their money. In October, U.S. retail sales fell at an annual rate of 0.2 per cent — the third consecutive monthly decline, according to a U.S. Commerce Department report yesterday.

My east coast bureau chief (brother & family from Massachusetts) is coming home for the Thanksgiving break next week. I’ll get his housing report.

Is there an “economic” levee built around Puget Sound & vicinity strong enough to withstand the clear real estate correction going on outside our state lines? Or, are there leaks showing up locally? Speaking of leaks… anyone else experience the Snohomish river flooding and shutting down HWY 9 last week? Unbelievable traffic. Took me 1 hour 50 minutes to get my kids to school in Everett.

The post The Puget Sound "economic" levee: will it hold? appeared first on Seattle Bubble.

Belltown – Experience fine dining while warding off homeless and addicts

Capitol Hill – Enjoy wearing your fauxhawk while calling 9-11

Denny-ile – Denial over the negative appreciation in your recent downtown Seattle condo purchase

Eastside – Close to Microsoft. Location, Location, Location

Fremont – Hippies have been displaced by hipsters

Goldilocks – Seattle RE is not too hot or cold – it’s just right!

House poor – A condition many Seattleites may find themselves facing in 2007.

Irrational District – Someone needs to open a pizza joint up in this mug and fast

Jobs – Becoming increasingly scarce in any field related to real estate and other sectors tied to consumer spending starting in 2007

Klondike Gold Rush Museum – History of yet another asset bubble

Lake Washington – It’s great if you have the $2M entrance fee

Mudslides – Increasing property values since 1901

Neighborhoods – If you can afford them, Seattle has some nice ones

Occidental Park – see Belltown

Pike Place Market – Much ballyhooed place for bruised fish and pan handling

Queen Anne – In need of a 40% haircut

Renting – A wise alternative to buying in this market. Have a little patience and buy beautiful Queen Anne view homes for pennies on the dollar by 2009.

Sailboat – A great place to live after your house capsizes

Tooth & Nail – How you’ll be fighting to make the payments on your 1960’s boxy Ballard money pit

Unemployment – What goes up when consumer spending goes down as a result of the housing bust

Vulcan – A company that consistently makes wise investment decisions

Weather – A major draw for the “equity locusts” of California

XXX – A city so liberal it proposes ridiculous laws (4 foot rule)

Y – Why not buy a house today?

Zoning – New zoning laws will finally allow all those Vancouver-like condos to be built downtown, thus cementing our bubble-proof status .

A parody of this post.

The post Our Town A to Z appeared first on Seattle Bubble.

People will go to great lengths these days to own property, especially packages with added value. Despite the high cost of housing — a 38.3 percent increase in Skagit County alone in the past year — buying activity is up and inventory down.

Bzzt—three lies in one sentence. According to the most recent NWMLS figures, Skagit County home prices were up just 5.27%, sales were down 27%, and listings were up 51% in September vs. a year earlier. August figures are similar.

Skagit home sales have been driven by three principal demand sources, according to Jim Scott, president of the North Puget Sound Association of Realtors and owner of Windermere Real Estate/James Scott Associates in Mount Vernon.

“One is the continued growth of our county’s work force, another is the desirability of our county as a place to live and raise kids, and the third is pressure from tight housing supplies south and north of us,” he states. “We value our climate and our culture so much we’re willing to pay a premium to protect and enjoy it.”

Inventory in Snohomish County (south of Skagit): up 28% YOY. Inventory in Whatcom County (north of Skagit): up 72% YOY.

According to the latest figures from the 17-county Northwest Multiple Listing Service (NWMLS) in Kirkland, the average price of a home in Skagit County in August was $318,454. That was a drop of 8 percent from July when the mean was $344,440, but considerably above that for the previous August, when it was a mere $230,250.

You might be wondering: “why are they referring to average prices instead of median, and why are they using August numbers, when September statistics have been out for a month?” Well I don’t know why they would choose to print average prices, but it is rather convenient that the average they quote is considerably higher than the August median of $270,000. As far as the August vs. September question, the median dropped about $5,500 from August to September, which doesn’t really fit well with the title “Staying Strong” subtitle.

Where in many locations around the country the housing boom shows signs of slowing — the so-called “bubble” bursting, as some pundits would have it — sales activity in Skagit County has increased appreciably over one year, from 645 units in August 2005 to 972 in the same month this year, even though pending sales dropped from 259 to 209 in the same period and new listings decreased from 307 to 300.

While they did manage to sneak a little bit of truth into this paragraph (pending sales drop & new listings) the author apparently needs to take a course on how to read the NWMLS report. What the writer refers to as “sales activity” is actually total number of active listings—inventory.

Our real estate reporting here in Seattle usually leaves a lot to be desired, but at least the local papers don’t waste our time with completely false data like this. Of course, if they do, rest assured that I’ll be here to call them out.

(Skagit County Business Pulse, 11.2006)

The post Skagit’s Housing Market Staying… Strong? appeared first on Seattle Bubble.

‘It’s a great time to buy or sell a home,’ says $40 million marketing push

It might go down as the “Got milk?” moment for the housing sector.

Just as dairy associations, with their widespread ads, have tried to convince Americans of the many benefits of milk, the National Association of Realtors will begin promoting the notion that buying a home is an unalloyed good. Their $40 million campaign boldly declares: “It’s a great time to buy or sell a home.”

The ads will try to counter the drumbeat of dour housing data and news by making the case that historically low interest rates, a large supply of homes on the market and the group’s forecast of rising prices next year make now an ideal time to buy a home.

The campaign, developed by the Most Agency, based in Newport Beach, Calif., starts today with full-page ads in The Wall Street Journal and USA Today. It will make its way into other newspapers, including The New York Times, over the weekend and onto television and radio networks early next year.

“In visiting our local associations and state associations, we were hearing our members saying, ‘We are getting beat up out there,’” said Thomas Stevens, president of the trade group that represents 1.3 million real estate agents and owner of a real estate brokerage firm in the Washington, D.C., area.

“We think we need to tell them that the stars are aligned right now, and the conditions are ideal for buyers,” he added.

Independent economists, however, are somewhat more skeptical. Many predict that sales and prices, as measured by the association, which fell in August and September from a year ago, might decline further because there are too many homes on the market and because the rapid run-up in prices has put home ownership beyond the financial reach of many people.

“You can make the case that prices will rise in areas of the country that did not have a bubble,” said Ethan Harris, chief U.S. economist at Lehman Brothers. But “in the hot markets, I would say you are in for a two- to three-year adjustment in prices, not a collapse but a steady drop in prices.”

So far, prices have not dropped in the Puget Sound area. In September, the median price in Pierce County was up 1.35 percent from a year ago.

Harris recommends that buyers base their purchase decisions on whether they intend to live in an area for a few years, not on the outlook for home prices.

(Vikas Bajaj, The New York Times, 11.03.2006)

The post Got Bankruptcy? appeared first on Seattle Bubble.

The post There’s Never Been A Better Time To Buy! appeared first on Seattle Bubble.

The plan was to buy a steal-of-a-deal house on the east side of Olympia, remodel it and resell it quickly for a tidy profit – pretty much like they do on TV.

But that was 10 months ago, back when South Sound’s real estate market seemed almost un stoppable. After nearly four months on the market – and a few painful price reductions – Arle and Elisa Seaton of Tumwater, and their agent Craig Gunn, recently decided to enlist the services of staging professional Karen Nielsen.

Her mission: to bring the vacant, architecturally dated 80-year-old house to life – to help make it look more like a “home” by employing rented furniture, plants and accessories.

“I thought if anything is going to sell this house, that’s what’s going to do it,” said Gunn, who has worked as an agent with Olympia Real Estate for about four years.
…
“Your house is a commodity now,” said Sterling Stock, an agent with Windemere Real Estate in Olympia.

“Yeah, you’re staying there until it sells, but it’s a competition, and you are competing for a limited number of buyers. They’re going to compare your house to all of the other houses they’re looking at.”
…
Earlier this year, Stock hired Nielsen to stage a home that had sat on the market for about four months. It didn’t need much work.

“We added some window treatments,” he said. “We took out a bunch of their furnishings that just didn’t lend itself to showing very well.”

The outcome?

“It sold in seven days,” Stock said.

The Seatons are hoping for similar results after they host an open house from 2 to 4 p.m. today. The 2,375-square-foot home at 1008 Tullis St. in Olympia is listed for $329,900.

Since the story was posted ten days ago, I was curious to know whether the magic bullet of staging did the trick for the Seatons. Apparently not, since the home is still listed as “active” on the MLS. Bummer.

Unfortunately, I get the feeling that the Seatons (who paid $239k for the home last November) are going to need more help than a staging can offer. The most recent (September) MLS statistics for Thurston County show residential listings up 95% from last year, sales down 17%, and a median sold price up just 2.4% since they purchased the home—essentially stagnant since hitting $250,000 in February. Furthermore, a search of the Thurston County assessor’s office shows that just three properties in the neighborhood have sold for more than $300,000 so far this year.

I do think that the business of staging stands to increase as the real estate market continues to slow, but it’s definitely not a cure for a house that is just plain overpriced. Incidentally, my wife recently completed the Residential (Interior) Design program at the Art Institute. Maybe she should start her own staging business.

(Lisa Pemberton, The Olympian, 10.22.2006)

The post Home Staging Tries To Fight Slowing Market appeared first on Seattle Bubble.

In recent years, economic development boosters both in Seattle and on the Eastside have increasingly focused their efforts on attracting biotechnology companies, citing their potential for creating high-paying jobs.

But banking on biotechs can be as risky as betting on dot-coms, or, for that matter, betting on racehorses.

One local stock analyst told the Journal recently that he and his colleagues refer to early stage biotechs as “casinos” because of their 90 percent failure rate.

But conversely they are also referred to as “The Promised Land” by analysts like Paul Latta of McAdams Wright Ragen in Seattle. That’s what he calls biotechs that can successfully bring multiple drug products to market because of the profits they generate.

Biotechs that fail to reach the “promised land,” however, are bound to either eventually disappear, along with the jobs they provided, or get sold, which often also results in layoffs.
…
Despite the long odds facing early stage biotech ventures, industry observers and local economic development boosters say the benefits to the area that those companies provide, even if they are sometimes short-lived, far outweigh any the risks.

“It is worth it,” said Maura O’Neill, the former president of Explore Life, a regional economic development group that teamed up with the city of Renton a few years ago in an effort to establish a “Science City” hub for biotechs on land that Boeing was thinking of selling off.
…
The good news, O’Neill said, is that many of those soon-to-be-former Icos employees will likely elect to remain in the area and either go to work for other biotech companies, which will strengthen them, or perhaps even start up new biotech ventures.

As long as the Puget Sound region is home to outstanding medical research institutions such as the University of Washington and the Fred Hutchinson Cancer Research Center, it will continue to attract biotech and lifesciences companies, and/or birth new ones, O’Neill said.

I don’t personally think that the presence or absence of bio-tech companies in our area is going to be what makes or breaks the real estate market. This article appears to support that opinion. There are people that like to throw that into the debate though, and I thought this article was worth pointing out.

(Clayton Park, King County Journal, 10.29.2006)

The post Don’t Bet On Biotech? appeared first on Seattle Bubble.

Those were the days, back in the spring when the flowers bloomed and the housing market sizzled.

Washingtonians had such confidence last spring that they spent with abandon on computers, hotel rooms, jewelry and other items.

They spent 10.5 percent more than they had a year earlier, the largest increase for taxable retail sales in Washington since 1990, according to April-to-June data released Monday by the state Department of Revenue.

Rising gas prices didn’t wreck the mood and are not included in the retail-sales data.

Economists say the spending has calmed since then, doused by a slowdown in the housing market and slower employment growth.
…
The state’s economic growth and therefore the spending are propelled by employment gains, particularly in high-wage sectors such as aerospace, software and construction, Sohn said.

So, the spending is “propelled by employment gains,” but when it “calms” it’s because of a slowdown in the housing market? What a delightful contradiction. I fail to see how a 10.5% retail spending increase can be attributed to “employment gains.” Were 10.5% more jobs added? Did everyone get a 10.5% raise? Smells like false assertion to me. I think it’s much more likely that the spending increase is primarily the result of home equity extraction and a declining savings rate.

Maybe it’s just me, but the news that people are spending increasingly more as incomes stay practically flat doesn’t seem like something to celebrate.

(Melissa Allison, Seattle Times, 10.31.2006)

The post Retail Spending Spikes In Washington appeared first on Seattle Bubble.

Research company Morgan Quinto released its latest “safest and most dangerous cities” rankings today, and overall, the Puget Sound did not fare particularly well. The Associated Press story reprinted in the P-I explains a little bit about how the 371 cities were ranked:

Cities are ranked based on more than just their crime rate, Morgan said. Individual crimes such as rape or burglary are measured separately, compared to national averages and then compiled to give a city its ranking. Crimes are weighted based on their level of danger.

While no city in Washington showed up on the “25 Safest” or “25 Most Dangerous” lists, the only Puget Sound city that managed to break out of the bottom third of the list was Bellevue, at #57. Seattle came in at #262, more dangerous than 70% of the cities that were ranked. Federal Way, Everett, & Kent fared even worse, ranking 277, 283, and 289, respectively. However, in what probably comes as no surprise to most of us, the lowest-ranked city in the Puget Sound (and even the whole state of Washington) was Tacoma, coming in at a miserable 324 (more dangerous than 87% of the ranked cities).

Here’s a table with all the cities from Washington State that were ranked:

I just thought this would be worth pointing out in the context of the “Seattle is a hugely desirable place to live” argument that we frequently hear regarding home prices. For the record, seventeen cities in California ranked higher than Bellevue, our area’s safest city on the list.

Seattle is a nice place to live (I like it here, really!), but I think we would do well to remember that it’s not some kind of perfect paradise.

(Christopher Leonard, Associated Press, 10.30.2006)
(Full Rankings: Associated Press, 10.30.2006)

The post Puget Sound Cities Not Very Safe appeared first on Seattle Bubble.

Imagine checking on a vacant rental house you own, only to find a family you don’t know living there.

It happened this week to a King County man. But the people who were living on his property insist they paid another man they thought was the owner nearly $6,000 to move in.
…
Mike and Lia Lester claim that they and another couple rented the house after seeing an ad on the Craigslist web site.

They met a man they thought was the owner of the house and paid him $5,700 in rent and security deposits and he gave them the keys to the home.

Now, they say they’ve been scammed.
…
Sean Stewart doesn’t know who they paid — but it wasn’t him. Stewart owns the house and he’s never met the Lester’s.

“I feel sorry for anyone who gets screwed like this,” he said. “There’s no doubt about that.”

The problem is Stewart has other renters moving in next week, so he says the Lesters have to go.

Doh. Seriously though, that would really suck. How would you even protect yourself from a scam like this? Demand to see the title to the property before moving in?

Of course, if the Lesters had just gotten on the equity escalator, they wouldn’t have put themselves into such a vulerable situation to begin with.

(KOMO Staff, KOMO, 10.28.2006)

The post Offbeat Weekend News: Home Rental Scam appeared first on Seattle Bubble.

Thanks to the reader / college mate that sent this in. Seattle got a mention in yesterday’s Wall Street Journal story: Home Prices Keep Sliding; Buyers Sit Tight.

The air continues to seep out of the U.S. housing market, according to the latest data, and some economists are warning that prices will keep declining through much of 2007.

The National Association of Realtors yesterday reported the biggest drop in home prices since the trade group began compiling price data in 1968. Specifically, the association said the median price for home sales completed in September was $220,000, down 2.2% from a year earlier. That matched a revised 2.2% decline in August. In addition to being the largest price drops in at least 38 years, the back-to-back declines are the first time median home prices have fallen since 1995.
…
Seattle has been one of the strongest markets in recent months but is showing signs of losing some steam as inventories of unsold homes rise. In 17 counties of western and central Washington State covered by the Northwest Multiple Listing Service, the median price in September was up 9.4% from a year earlier, the first single-digit increase in two years.

Mike Skahen, owner of real estate brokerage Lake & Co. in Seattle, says inventory is still lean in good neighborhoods near the area’s biggest employers. But the overall market is slowing to a more normal pace as “buyers are feeling they can be more selective.”

That seems to be the line I’ve been hearing a lot around here lately. We’re just “returning to a normal market.” That is certainly possible, but with the increasing rates of declining YOY sales and building YOY inventory, I’m not quite ready to accept that assertion.

(James R. Hagerty, Wall Street Journal, 10.26.2006)

The post Seattle "Losing Some Steam" appeared first on Seattle Bubble.

Here is a glimpse into the local Puget Sound market from an individual heavily immersed into building and who I would characterize as exceptionally credible. Below are a few of the weekly e-mail updates I’ve received over the past several weeks. The individual works for a large builder and has agreed to let me post some of the e-mails:

End of September update:

…and I don’t ever read about the builder’s side of things on your blog or any blog about Seattle. The newspapers never talk about it. It is very wierd. Our inventory around the sound has increased 85% from last year. Sales have totally fallen off. Some builders are planning on functioning on fewer neighborhoods but increasing their sales rates to stay at the same level. So instead of have 8 communities selling 5 a month you have 4 selling 10/month. The problem with that is that you have 1-3 field managers per neighborhood and 1-2 sales agents and so on. We just had just about every sales agent buy a new 35k-60k car in teh last 8 months. The average age is probably 30.

1st week of October Update:

Last week, we had 8 sales and 7 cancellations. This is beginning to be the story everywhere. We still have quite a bit of traffic but for other builders it is different. It has dropped off 75%. Builders are using incentives but it is not working. They can’t even get people to show up. The poeple that didn’t buy contingent I feel sorry for. Land prices have come down, but it still doesn’t pencil

2nd week of October Update:

….Standing inventories are becoming a big problem for some.

3rd week of October Update:

They have a lot of inventory down there. We aren’t planning on buying anything unless it is of compelling value. I have been tracking standing inventory, specs, which is getting interesting. Most site agents I talk to all say the same thing. Traffic has stopped, not declined, stopped. The further out markets are feeling it first. 80% of our buyers are on ARM’s, not the toxic kind. It’s the only way they can afford to buy.

Today (Oct. 25th) Weyerhauser announced a decline in earnings.

“While anticipated, the housing market decline was more abrupt and drove wood products prices and demand into a deeper plunge than expected,” said Weyerhaeuser Chief Executive Steven Rogel in a statement.”

So, if there are any small builders, contractors or supply side people that would like to comment on local experiences, please fill us in.

In other news

Our escrow office has experienced a lot more refinances lately. I am seeing more fixed rates than in months past, but ARM’s are still king. Refinance business has sustained our business over the last two years. While our market share has increased by taking baby-steps and being very fiscally conservative, we do know of companies (escrow & mortgage) that are showing the earmarks of struggling.

Today, Fidelity National Title announced it will eliminate 650 jobs. Personally, while I understand they answer to Wall Street, I find this hard to stomach because title companies have been absolutely raking in obscene amounts of income while riding the appreciation wave over the past few years. For those new to purchasing, title insurance premiums are based upon the sales price of a home, generally speaking. When home prices go up, premiums tag along for the ride.

In contrast, when you close a home sale at a escrow company like ours, our price is generally fixed, irrespective of the sales price. In other words, there is not necessarily more work in closing a $250,000 home vs. a $800,000 home. Same goes for refinances. I just can’t understand why consumers fall for all the fluff out there. I don’t care where people go to do business, just shop for crying out loud. Sorry for the rant, I just can’t believe some of the settlement companies are charging people $250.00 for loan document e-mail fees. In years past, loan documents were delivered overnight by UPS or FedEX. Today, they are e-mailed which is highly streamlined to save time. So now you see these junk e-mail fees. Total garbage. I wonder what junk fee will be invented next?

This week I had the pleasure of telling some clients that they would not be receiving more money back than anticipated when their cash-back refi closed. Why? $10K ‘n change pre-payment penalty. That takes the cake this month.

More to come…

The post The Supply Side of Real Estate appeared first on Seattle Bubble.

About the last place a prospective homebuyer might want to peruse MLS listings these days is in one of the country’s most expensive markets, like San Francisco, where the median cost of a single-family dwelling has jumped 37 percent since 2003. (It’s now more than triple the national figure.)

A couple of leading economists, however, think buyers shouldn’t be intimidated, even if prices in these markets go into a slump. San Francisco, New York, and a small handful of other big cities may suffer dramatic swings in a downturn, but their long-term trends “are so strongly upward that if you’re willing to buy and hold, it’s a good strategy,” says Todd Sinai, an associate professor of real estate at the Wharton School and coauthor of a recently released study called “Superstar Cities.”

The same logic, Sinai says, applies in other inflated markets like Boston, Los Angeles, and Seattle.

Given the admission that there may be “dramatic swings in a downturn” I guess I don’t really understand the “bubble-proof” label. If they were making the usual claim, that the worst case scenario is for prices to level off for a few years, then it would make sense. It seems more like they’re just pointing out the cities with the best long-term growth prospects, and I actually don’t disagree with their assessment. Seattle is a desirable place, and will likely take a less severe beating as the housing bubble busts. However, that hardly makes us “bubble-proof.”

Their reasons for including Seattle on this list are all the ones we’ve heard dozens of times before:

Seattle has a lot going for it physically, with its green landscape of towering trees laced with bays, inlets and rivers connected to Puget Sound.

But what makes the city effervesce is its status as the epicenter of the software industry, courtesy of Microsoft, and the birthplace of other marquee giants like Starbucks and Amazon.com. As these companies have grown, so has their demand for workers.

Other attractions include access to natural beauty, an active lifestyle and a lively pop music scene: Seattle is a home to numerous heavy metal and grunge bands. All this spurs demand for Seattle’s tight housing supply.

Not to mention historically low interest rates and loose lending standards…

(Paul Kaihla, Business 2.0 Magazine, 10.25.2006)

The post Bubble-Proof Superstar Seattle appeared first on Seattle Bubble.

First off, you may have noticed that the “About This Blog” section on the right has been transmogrified into “Read These Posts.” I realized that there were some posts that I was consistently referring back to, that I feel really do the best job of getting across the major points we’ve explored on this blog. The idea behind the “Read These Posts” section is that if a newcomer to the blog reads through each of those posts, they’ll have a pretty good summary of what’s going on in the Seattle housing market, with respect to the bubble. If you have any additional posts that you think should be included, or if you think that one of the posts that are included shouldn’t be, please let me know. It’s a work in progress.

Secondly, although Synthetik has already pointed this out in a comment thread, I wanted to draw attention to the fact that the domain name / link SeattleBubble.com is now functioning. For now, it just forwards to the “old” address (seattlebubble.blogspot.com), but my not-too-distant plan is to migrate to a fully-hosted WordPress blog, which would just use the address SeattleBubble.com. So get a head start, and change your bookmarks now.

Lastly, I thought I would point out the “tip jar” link on the right side. Believe it or not, I added this only because it was privately requested by readers. I started this blog primarily as a way to keep track of the changing Seattle market conditions for myself, but it has morphed into something much bigger. As a result, I do spend quite a bit of time finding interesting things to post, and working on original content. Unlike many of the other “bubble blogs,” I have not resorted to advertising, and I intend to keep it that way for the forseeable future. Honestly, writing this blog is its own reward, but I definitely don’t mind getting a few dollars out of it now and then. So, if you like what you’ve been reading, and have been wishing for a way that you could repay me, now you have it. Unfortunately, for those of you that despise what you read here and wish I would just shut up and go away, I haven’t yet figured out a way to make an “un-donation” link, so I guess you’re just going to have to keep leaving snide comments.

That’s all for now. If you have any suggestions of ways to make this blog better, this thread would be a good place to speak up.

The post Seattle Bubble Announcements appeared first on Seattle Bubble.

Seattle-based Washington Mutual blamed a 9 percent drop in its third-quarter profit Wednesday on a slowdown in its mortgage business.

The drop was more severe than Wall Street analysts had expected, and shares of WaMu stock fell $1.70, or 3.89 percent, to $42.01 in after-hours trading.
…
WaMu has eliminated nearly 10,000 jobs in the past year as it tries to become more profitable.

“The housing market is clearly weakening, with the pace of housing price appreciation slowing in most regions of the country,” Chief Executive Kerry Killinger told analysts and investors in a Wednesday conference call, held after the close of regular trading.

“We are also experiencing somewhat higher delinquencies and loan losses,” he said.

WaMu reported a profit of $748 million, or 77 cents a share, for the July-through-September period. That was down from $821 million, or 92 cents a share, a year ago, marking the second consecutive quarter in which WaMu has failed to report a profit increase.

Analysts had been expecting a profit of 93 cents a share, according to a poll by Thomson Financial.

“Patience is running out,” said Fred Cannon, an analyst at Keefe, Bruyette & Woods. “2007 is really going to be a watershed for the company.”

It is important to note that $748 million is still an awful lot of money. I’m not trying to say that WaMu is in dire straights, I’m just pointing out that Seattle’s economy is most certainly tied to nationwide events. If housing (or the economy as a whole) takes a serious downward turn nationwide, Seattle will not be unscathed. We’re not that special.

(Amy Martinez, Seattle Times, 10.19.2006)

The post WaMu: Housing Slowdown Driving Down Profit appeared first on Seattle Bubble.

It’s not as if the bubble bloggers are going to pick up the slack with full page ads sticking their thumbs at the real-estate industry, and encouraging to general public to stop buying.
…
Hey, the quickest way for the bubble bloggers (like us) to influence the editorial policy of our local papers is to start taking out negative advertisements about our housing markets.

As soon as anti-bubble content becomes the biggest financial contributor to the paper, we will see a complete about face in article bias.

Maybe Tim should start holding out a tin cup for donations to place anti-bubble ads in the Times?

The conversation just took off from there:

Nolaguy: If we paid for it, I wonder if the Times or PI would run a full page add that was “anti real estate”?

Mikhail: …for a 6 inch by 6 inch ad we would need to raise $17,438.4… Seriously, if we really could pull something like that off (i.e. getting enough people to donate to a Puget Sound housing boycott advertisement) that would likely generate a lot of publicity, beyond publishing the ad itself. And if the papers really were silly enough to decline the ad, we would have an early Christmas, and be able to take our story to the national media and get a LOT of coverage.

synthetik: $17K is a lot of scratch. I think it might be possible if a website was created around this endeavor and then posted on all the national blogs (HB, HP, etc). Might be fun to try… If they wouldn’t run the ad we could donate the funds to charity.

However, not everyone has warm fuzzies about throwing around that kind of money. Plymster suggested some other possible activities:

$17K? You guys are saving waaaayyyy too much money renting.

I disagree with handing $17K to one of the key creators of the bubble. Why not just hand WaMu a giant novelty check for $1 trillion dollars to cover next year’s ARM resets?

If you really want to raise awareness, build up a fund that donates money to debt education, and then send a press release to the appropriate news rags. Then you’d be doing some good and not contributing to the problem.

Or you could buy me a ladder so I can get off my high horse. ;-)

A few people suggested some cheaper methods of advertising:

msrelo: Maybe I don’t have a full understanding of how the ad sales work but it seems like a single page insert is cost effective.

Wanderer: Alternative to the PI: I just called Seattle Weekly and got the following quotes: 1/2 page = $1471, 1/4 page = $732, 1/8 page = $389. Those rates are for a single week and there is ~10% drop for 4 weeks consecutive.

Wanderer takes it a step further and starts proposing fundraising methods and ad print subjects:

Wanderer: I personally would put in $200 toward a 1/4 page add the first week to get some attention and then follow it up with a 1/2 page add the next. I am relatively new to the scene, but I would trust synthetik and Tim to put together a well thought out and RATIONAL explanation of:

real estate fundamentals

where the current market stands relative to them

current trends locally

what the REI wants you to believe

Many, many, people will dismiss it as paranoid anyway, so it really needs to be conservative and not over the top.

There are of course still questions of whether this would even be a valuable exercise:

synthetik: If you were firmly plugged into the matrix like most people, wouldn’t you simply dismiss the ad? Wouldn’t people wonder what we all had to gain?

Wanderer: It would be hard to convey motives in a 1/2 page article, so it probably isn’t worth trying anyway. Anyone that is going to ask, “What do you have to gain from this?” probably can’t answer the same question about the writers of the RE section. For me, there is value in just putting out good information where very little currently exists.

Which brings me back to ad print and to Eleua‘s comment:

If all of you are serious about this…

It would probably be best to collect all the turbo-Bull quotes from late ’05 early ’06, and string them all together. Show just what REIC shills all these bulls have been.

Then you ask if you would spend $500K on the wisdom of those Carnacks. If not, why not?

Perhaps you can also include quotes from all the Wall Streeters back in the late 90s. Let the inquisitive reader draw his own conclusions.

I think before anyone gets too serious bandying about large sums of money, we would need to come up with a simple way of getting people’s attention. Printing a half-page essay about “fundamentals,” “unprecedented run-ups,” and “ARM resets” would be a waste of money. Very few people would read it, and of those that did, you would probably convince about 0.1%. I think Dilbert creator Scott Adams neatly sums up what is necessary in a situation like this:

The challenge was that the bad ideas sounded terrific to the uninformed person. You couldn’t kill these particular bad ideas with logic because the arguments against them would be too complicated. You had to go in through the back door.

I suggested a few cleverly designed, hypnosis-inspired phrases that were the linguistic equivalent of Kung Fu. They were simple (that’s my specialty), and once you heard these phrases, they made any competing ideas seem frankly stupid.

I think that Shiller’s home price graph is a good example of the kind of thing that Scott is talking about. So that’s the challenge. Come up with a simple phrase, image, or series of phrases that make buying a home at the peak of the bubble “seem frankly stupid.” If we can do that, then I think we can consider buying some ad-space.

The post Advertising the Bubble appeared first on Seattle Bubble.

“With all the dismal reports about the home real-estate market, don’t lose track of something critically important: Mortgage interest rates have been falling quietly but steadily for weeks, and are now at their lowest level in half a year, barely a percentage point above 40-year lows.”

New mortgage applications are up sharply, the number of pending home sales is up, the national economy continues to expand moderately, and the rate of unemployment just declined again — to 4.6 percent. All of which begs the question: Just what kind of housing bust is this anyway? With gloom-and-doom purveyors forecasting imminent crashes in dozens of metropolitan areas, how could such key fundamentals as jobs, interest rates and even pending home sales simultaneously be trending in the opposite direction?

Kohn sees no imminent bust or crash in housing at all. It is a “correction” that’s under way — a cyclical rebalancing of a marketplace that got too hot for too long in some parts of the country, and is now heading back toward more “normal” conditions, where prices are more in line with what consumers can afford.

Not all home sellers have fully grasped the altered realities in their markets — that they’ve got to reduce their asking prices if they truly want to sell — so the process is still unfolding. Re-priced houses, in turn, should stimulate greater numbers of potential buyers to get off the sidelines and make offers.

The nationwide 4.3 percent increase in pending home-sales contracts, reported Oct. 2 by the National Association of Realtors, could be a sign that Kohn’s prediction is already taking shape.

Second, said Kohn, the housing correction — expressed through new home
starts — “may be closer to (its) trough than to (its) peak.”

A final key factor, Kohn said: “Continuing growth in real incomes should underpin the demand for housing, and as home prices stop rising, help erode affordability constraints.”

Mike Moran, chief economist of Wall Street’s Daiwa Securities America, minces no words: The financial press and TV news shows are overly dramatizing what is a normal and long-predicted cyclical rebalancing, and “portraying it as a catastrophe.”

“[Housing] is going through a correction that’s badly needed,” Moran said. “The key issue is whether it is orderly or disorderly.” And all signs point to a continued orderly process, not a breakout bust or panic.

Doug Duncan, chief economist of the Mortgage Bankers Association, points out that national housing-sales numbers are merely rolling back to 2003 levels — “and that was a record year.”

Serious sellers and buyers shouldn’t be misled by predictions of imminent crashes, Duncan says. Not only do the doom reports ignore the positives out there in the marketplace — mortgage rates in particular — but “the rhetoric is just way overwrought.”

In this fable, will the Bears will eat Goldilocks in the end?

(Keith R. Harney, Seattle Times, 10-14-2006)

The post Goldilocks Has Analgesia appeared first on Seattle Bubble.

With the number of homes for sale rapidly increasing the last few months, and the pivotal month of October now nearly halfway over, I think it is a good time to take somewhat of an in-depth look at inventory. I refer to October as “pivotal” because as far back as I have reliable data (2000), inventory has always decreased from September to October. If inventory increases this month, I believe we will have truly turned a corner.

Some of the local papers in the last few months have claimed that the Seattle area is becoming a “buyer’s market.” Personally, I think that’s malarkey. I’m a potential buyer, and there’s still no way I’d touch this market with a ten foot pole. It has been said by some commenters on this blog that in order to see any significant slowdown in price appreciation and a return to a “balanced market,” the Seattle area would need to experience a two-to-three-fold increase in homes for sale. Let’s take a look at some historical inventory data to see how that claim holds up, and to explore the following questions: What does a true buyer’s market look like for the Seattle area? How soon will we at least experience a balanced market?

Unfortunately, I have been unable to obtain solid MLS data on inventory & sales any further back than the year 2000 (if anyone out there can help me on that, I’d love to hear from you). However, I was able to locate a number of data points back through 1993 via the Seattle Times archives. All of their reports from that time period give numbers from the “Puget Sound Multiple Listing Service,” which includes all of King, Snohomish, and “North Pierce” counties. When I refer to record highs below, the time period under consideration is from 1993 to the present. For the purposes of comparing current (post-2000) data to these historical figures, I’ll be assuming that 75% of listings and sales in Pierce county take place in “North Pierce.” With that introduction, here are some of the interesting data points I found.

Record High Inventory (pre-2000)

As well as I can tell, the record high inventory in the two-and-a-half county region was 17,292 homes in July 1996. (The Seattle P-I claims that the summer of 1994 had 23,000 homes on the market, but that figure is not corroborated by the Times—which put the number at 14,000-15,000,—and is so far outside of every other number I can locate, that I believe it to be a typo.) That month saw 3,315 pending sales, making the Months of Supply (MOS) 5.22, while YOY appreciation stood at 5.1%. For the most part, it looks like that was a fairly “balanced” market.

Record High Inventory (post-2000)

The all-time (since 1993) record high inventory appears to have been in the summer of 2003, just as housing mania was really taking hold in Seattle. Specifically, June 2003 had 20,807 homes for sale in King, Snohomish, and North Pierce counties. While the number of homes on the market was quite high, so was the number of pending sales: 6,396. The MOS for June stood at 3.25, and appreciation hovered around 3-5%. I’d call that a seller-friendly market.

Record High Months of Supply & Record Low Pending Sales

Going back a bit further we find that late 1994 to early 1995 had an even more balanced market than 1996, possibly even tipping slightly in the buyers’ favor. MOS exceeded 6.0 from October ’94 through March ’95, while YOY appreciation was 3-4%. The record high MOS was 6.89 in December 1994, a month that also saw the record low pending sales of just 1,726.

Current Situation

So where do we stand currently? Last month there were 19,173 properties for sale in King, Snohomish, and North Pierce counties. Note that this is very near to the record high inventory of 2003, while the 5,530 pending sales are slightly fewer than June 2003. September’s MOS comes in at 3.47. A year ago, the 2.5-county region had an MOS of just 2.13.

The Future?

If September’s YOY trends (+36% listings, -17% pending sales) carry through to 2007, next September we will be looking at approximately 25,994 properties for sale, 4,595 pending sales, and 5.67 MOS. Of course, no one really knows whether the current trends will continue. Looking at the trend of the last few months’ YOY numbers, it would be fairly easy to make the case that inventory will increase even faster, while pending sales decline faster.

So does inventory need to double for Seattle to be a balanced market? No. Even if sales held steady where they are (not likely), we would only need approximately 70% more inventory to reach a balanced market. Personally, I think we are likely to see the elusive 6.0 MOS balanced market as early as next spring, and no later than next winter. Will it stop there? What will happen if the greater Seattle area sees 8.0, 9.0, 10.0 or even higher MOS? I think it’s possible, and based on the historical data, I think it could push “appreciation” into negative territory.

Your thoughts, corrections, and analysis are welcomed.

The post Let’s Talk Inventory appeared first on Seattle Bubble.

You might have seen Rain City Guide’s recent post by Galen Ward, “There will never be a real estate bubble” and the comments that followed.

It appears that Galen posted the above article simply as a joke about the heat over Susan Ryan’s post “Just Say No to Bubble Talk” post as well as others over on the Seattle PI-sponsored Seattle Real Estate Professionals blog.

Side Note: Notice how Susan Ryan’s latest posts do not allow comments and contain very long images that scream “Get thee behind me, and much further down the page ye satanic bubblehead posts!”

Rain City’s Galen e-mailed me, wanting to know why his post had irritated me so. I responded that I felt the blog appeared to be a REIC cheerleading forum (seems like a reasonable assessment if you take a gander at their authorized bloggers) My apologies to Galen for misinterpreting his post as potentially malicious.

Here is part of his response:

“My take on our blog is this: we have 2 tech people (myself and Robbie) who rarely talk about real estate specifics, a lawyer who talks about lawyer crap, Dustin who has posted one negative story in his life, and Ardell and SeattleEric.”

I accept this and move on until this evening when I find this puff piece posted on Rain City. Ardell writes a completely benign article about the shocking truth of banks owning a large portion of our assets (unless you happen to be wealthy).

I noticed this quote right away:

“I was perusing The Tim’s blog while writing something on my blog earlier today, and ran into the comments regarding King County median income and median home prices, again. I never seem to draw the same conclusions as other people.”

She fails to link Tim’s blog but does a nice job of linking her blog post (which takes aim at Tim’s “In A Nutshell” post, which she apparently believes is poorly written and hard to understand) as a “oh by the way”.

My point is this: If the “Rain City Guide” is not a Real Estate Cheerleading blog, then why is Ms. Ardell DellaLoggia allowed to use it as a pulpit?

When I first moved to Seattle, the Rain City Guide was the first blog I came across. “Great resource!” I thought. I’m just a tad upset because I know how many hits this site gets.

How many people with homeowner envy are reading these articles? How many will be pushed into Greater Fooldom after reading it? Would you be interested in hiring Ardell as your realtor when you are ready to enter the housing market?

Me, not so much.

Note: If you do choose to post on one of the above mentioned blogs, please be civil and think your arguments through all the way. I realize it can be difficult, however it won’t go far in helping persuade potential home buyers from understanding our position. Thanks ;)

(Ardell DellaLoggia, Rain City Guide, 10-10-2006)
(Galen Ward, Rain City Guide, 10-09-2006)
(Susan Ryan, Seattle Real Estate Professionals, 10-08-2006)

The post Nutcracker appeared first on Seattle Bubble.

This PDF was attached to the e-mail.

Hi Chad:

The bubble isn’t bursting here!

Please see this breakdown of renting vs owning.

I thought you might find it of value.

Hope things are well.

:)

Jen

Jennifer Fisser
REALTOR (R)
ZipRealty, Inc.
Licensed in California
Licensed in Washington
jennifer.fisser@zipRealty.com
Toll Free: 1.800 CALL ZIP x4824
Cell: 206.890.0131
Fax: 206.508.0848
My Profile: http://www.ziprealty.com/agent/jfisser

Pick any complete sentence out of that PDF, google it, and you’ll see that this article is being circulated all over the place.

Can you smell the desperation?

“Nearly a full third of households are still renting…but if you are one of them, you could be paying a hefty price. Additionally, the children of the baby boomer generation are close to or at the home buying age, but these “echo boomers” could mistakenly decide to put off the purchase of a home because of all the noise about a “bubble” in home prices.”

Another Darren Meade quote, from his website

“No one should ever have to lose there [sic] home and live on the street, especially when you have already spent half your life building your career”

Irony at its finest.

(Darren Meade, American Chronicle, 08.19.2006)

The post The Bubble Isn’t Bursting Here! appeared first on Seattle Bubble.

Seattle’s median home price in September was up just 4.4 percent from a year ago and down from both July and August, according to new statistics. It’s the lowest year-to-year increase and the first time prices have dipped two months in a row since January 2004.

The median home sold for $400,000, down from $405,000 in August and $420,000 in July, and up from $383,000 in September 2005, according to numbers the Northwest Multiple Listing Service released Friday. The number of homes on the market shot up 30 percent from a year ago, while sales were down by nearly 16 percent.

One caveat is that condominiums made up slightly more of September’s home sales than a month ago and significantly more than a year ago. The typical condo sold in September cost 32.4 percent less than the typical house, pulling down the median for all homes combined.

Are they suggesting that the median price went down because more condos were sold? Seems plausible if you don’t believe in bubbles…

The slowing market means buyers can take more time to find just what they want, Crellin said. “A year ago, the environment was such that if you could afford a property you almost had to make a bid on it, no matter how much you liked it.”

Crellin’s message for sellers? “Don’t panic.”

“Yeah, it’s going to take a while to sell a home,” he said. “The mere fact that it hasn’t sold in the first couple of weeks is not an unusual situation.”

The slowing market means buyers watch television, read articles online and listen to radio broadcasts. The slowing market means buyers may decide not to buy at all. If someone is telling you not to panic, that generally means it is time to panic.

During peak times in the market, buyers might have set aside qualms about the floor plan and jumped at the place, she said. “Maybe that sense of total urgency has lessened a little bit.”

Realtors also say stories about the slowing market, particularly nationally, have some holding off.

Now we’re getting somewhere.

Realtor Marty Grasa, also of Windermere, said he had two clients who held off on buying through the summer and now can’t afford what they want.

“They waited themselves out (of the market),” he said.

One is Cat Cabalo, a lawyer who said she originally started her condo search in 2004, then suspended it later that year because she “was convinced the bubble was going to burst.”

One condo with everything that Cabalo wanted sold for $188,500 in 2004, she said. “Now if I were to find something comparable I would have to spend, I would say, at least $250,000.”

She missed the equity train by sheer dumb luck.

After watching her friends buy homes and gain equity, Cabalo looked again this spring. By August, news of the slowing national home market, evidence of Seattle condos taking longer to sell and her busy schedule led her to suspend her search again, despite regrets about her previous decision.

“I just told myself I’d rather wait,” she said, adding that she planned to do more research on the local market.

Crellin expects the region’s home market to settle into year-over-year price increases near the rate of inflation, which tends to be about 3 percent. He also cautioned against applying national stories to the region.

I like this Crellin person. Really tells it like it is. I used to have a computer integration business and sold quite a few PC’s. I had a few customers that would hem and haw over buying a new computer and then wouldn’t go through with it because they knew the price was going to come down soon after they purchased.

In the world of the computer PC, it’s always been like that. Prices always go down, so to some it never seems like the right time to buy. Those people forgo the productivity gains of a faster system to try to save a little, then end up wanting the newer, more expensive model with more bells and whistles – then the process starts all over again.

Realtors love to create the fear in buyers that if they don’t commit quickly, they’ll never be able to get in the game. Or, as we see above, to insinuate that she not only missed the boat but prices are going to continue to increase – although at the slightly moderate rate of inflation.

“We have to be very careful not to assume that trends that are taking place in Florida and California are going to be replicated locally,” he said. “I think our market is more resilient.”

I would think that Crellin needs to be more careful in the words he uses and in the direction he is taking the reader.

(Aubrey Cohen, Seattle PI, 10.07.2006)

The post Seattle PI’s Take on Sept. NWMLS Numbers appeared first on Seattle Bubble.

“More reductions are possible,” said Tim McGarry, vice president of corporate public relations. “It is true that there may be more in the future.”

The post WAMU to cut 140 at Lynnwood Loan Centers appeared first on Seattle Bubble.

While South Sound home sales year to date are running 6 percent ahead of sales through all of 2005, higher inventories continue to slow the pace of sales, according to preliminary data released Wednesday by the Olympic Multiple Listing Service.

Active home listings have nearly doubled since September 2005, rising to 1,764 homes last month, compared with 991 last year, the data showed.
…
In September, 380 homes were sold [in Thurston County], compared with 443 last year, resulting in a preliminary 14 percent decline, the data showed.
…
Wells Fargo Home Mortgage Consultant Jeff Devlin said the market’s cooling effect has been necessary because home price increases were beginning to outpace incomes.

“Homes on average were appreciating no less than 10 percent in the last few years,” he said. “Well, incomes haven’t increased with it. We just do not make as much in South Sound. Something had to extinguish the fire a little bit.”

Just “a little bit,” mind you… so far anyway. Olympia has been experiencing the biggest inventory surge in the Puget Sound area. Between King, Snohomish, Pierce, Kitsap, and Thurston, I expect either Thurston or Kitsap will be the first to experience an actual drop in year-over-year prices. I wonder what Jeff Devlin will be saying then.

(Rolf Boone, The Olympian, 10.05.2006)

The post Olympia Experiences "Necessary Cooling Effect" appeared first on Seattle Bubble.

The percentage of Seattle residents who … own their homes increased over the past five years — even though home values and mortgage payments rose much faster than incomes, data the U.S. Census Bureau released today shows.

According to Census numbers, the trend in Seattle also was true in the county, state and nation, although the chasm between income and home values widened more in the city.

Local economists said low interest rates were the biggest reason more people were able to buy their own homes between 2000 and 2005. They also worried about what the trend might mean for coming years.

During that period, “we got home ownership levels nationwide really at record highs, to a point where I’m not sure it’s sustainable,” said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University.
…
Crellin expects nationwide homeownership rates to stagnate or even drift downward in the next several years.

“Obviously, we can’t sustain the disparity between incomes and housing prices that we have at the present time,” he said. “What I am expecting is prices are going to remain pretty much on a plateau for a period of time as incomes catch back up.”

Ah yes, don’t anybody worry about the historically unprecedented run-up that home prices have experienced in the last 3-5 years. The much-lauded soft landing will save the day. Depending on what Mr. Crellin means by “pretty much on a plateau,” and how quickly incomes actually increase, his scenario would mean stagnant home prices for anywhere between six (totally flat home prices, incomes increase by 5% per year) and twenty-five years (1.5% per year home price increases, incomes increase by 3% per year).

It would seem to me that if home prices stay stagnant for even three or four years, there will be repercussions that will put downward pressure on prices. People can’t refinance out of suicidal financing when they don’t have any magical equity. And who wants to buy an asset that isn’t appreciating at all? The soft landing just doesn’t seem to add up.

(Aubrey Cohen, Seattle P-I, 10.03.2006)

The post "Prices plateau as incomes catch back up" appeared first on Seattle Bubble.

A post by Susan Ryan over at the PI’s RE Blog proclaims “Just Say No to Bubble Talk”

“As I’ve said repeatedly, stock market terms do not apply to real estate. There is no real estate bubble and never will be. A decrease in acceleration is not an implosion (or even a pop).

Kendra Todd of the Apprentice has a (sic) article on Yahoo Real Estate about the non-bubble. It’s a pretty good explanation of what’s happening around the country in real estate.”

Even more absurd than the idea of her post is her mentioning of Apprentice star Kendra Todd. Her new book “How to Make Millions in Real Estate” is really making a splash over on Housing Panic.

Just say no didn’t work for Nancy Reagan either…

Update: The Tim here, reminding you that if you choose to leave comments on Susan’s post, please keep it civil. There’s nothing wrong with passionate discussion and disagreement, but there’s no need to be mean or spiteful about it. Thanks.

(Susan Ryan, Seattle Real Estate Professionals, 10.02.2006)

The post There Is No Spoon appeared first on Seattle Bubble.

Home builders are advertising more incentives. “Price Reduced” placards hang below “For Sale” signs. And the house down the block that you’d thought would sell in a few days? It’s been on the market for a few months. For buyers, it’s great news. They can be more picky. They have an easier time negotiating prices. They can ask for – and probably get – the washer and dryer with the house or a few items knocked off the inspection report.

For sellers, now isn’t the time to mess around.

Woo. Throw in a washer and dryer and we’ve got a deal! These people don’t get it. It’s not a buyer’s nor a seller’s market. There will be many GF who follow the market down – they’ll get taken to the cleaners as well.

And … what do they say is the cause?

A rash of condominium projects and new home developments have caused a spike in Pierce County’s inventory, said Dick Beeson, a broker with Windermere/Commencement Associates in Tacoma and a director with the Northwest Multiple Listing Service. The county currently has 6,225 homes and condos for sale – a 53 percent increase from last year at this time and the highest inventory for at least the last five years, according to MLS data.

“If you drive through Tacoma now, you’ll see a lot of ‘For Sale’ signs that you didn’t see last year,” Beeson said. “It slows everything down. It means buyers are taking their time.”

Cathy Reed put her brick Tudor in North End Tacoma up for sale in May. In the two years she’d owned the home, Reed did a lot of work, including finishing the basement and painting several rooms. But the competitive market forced her to pay even more attention to details – and reduce her price three times, from an asking price of $479,000 to the sale price of $399,000.

“Every little detail had to be right,” Reed said. “That wasn’t the way it was last year.”

Just give it a few months ;)

(Kelly Kearsley, Tacoma News Tribune, 09.30.2006)

The post This Wasn’t The Way it Was Last Year appeared first on Seattle Bubble.

In my opinion, of all the pieces written on the market, this one by syndicated columnist Ken Harney has the potential to really put the hammer down on mortgage qualifying under no-doc, low-doc or ‘stated-income’ loan products (‘oft referred to as liar loans). The impact and ramifications of this little change initiated by the IRS is surely going to, at minimum, put concern into borrowers who have purchased a year or so ago and are looking to refinance again in the near future (read: those with ARM’s and HELOC’s).

There has been much discussion about the impact of non-traditional loan products that are driving the market, including the article The Tim refers to in the prior post. To pass the muster test, one should really ask the question, “if you take away the stated-income and 100% nothing down purchase loans used to purchase scores of homes across the country, where would the market be?” It would be a much different market and my income including many allied real estate professionals would be, well, less.

On Monday the IRS will be initiating an electronic mechanism to speed up audits on Form
4506 -T, which every borrower signs just prior to closing (and of which I am very familiar with in assisting clients with signing closing and lending paperwork).

The form authorizes the lender or the investor providing the money for the mortgage to obtain transcripts from the IRS summarizing the borrowers income and tax data for four years. The form must be signed by the borrower and can be used only during the 60-day period following the date of signing.

This development is huge.

By electronically (via secure internet I presume) allowing lenders to obtain IRS tax data on the borrower in only a business day or two will dramatically speed up audits and could potentially stop refinance and purchase closings dead in their tracks BEFORE the transaction closes—if data from the IRS is “curiously” different from what the borrower claims as income. This is huge. And, it is huge in that it will reduce F-R-A-U-D.

And it is big news for the following observations:

1) I think back on all the 100% borrowers that closed purchase transactions through our own office and across the country. Many will be refinancing again.

2) I think back on all the refinance business closed over the last three years, 2005 in particular. Many refinanced into other ARM products and increased their base loan amounts higher than that of their original mortgage Note (for debt consolidation, among other things of bling bling nature).

3) Forget about market conditions for the moment: If these borrowers refinance again, they will no longer be able to go ‘no-doc or stated-income’ without the potential for scrutiny by a quick IRS electronic audit, prior to closing. In other words, many will not be able to refinance, due to income discrepancies–including the potential to see prior IRS 1040 income which may not have jived with the EXISTING loan in which the borrower is trying to refinance again. In other words, it could trigger the potential to see earlier fraud.

If that’s not enough,lending standards, outside of the IRS audit conduit, may make it difficult enough. Read below!

Federal Banking Regulators are poised to tighten lending standards as guidelines were published last week by the Office of the Comptroller of the Currency.

From Inman News: Testifying before members of the Senate Banking Committee last week, Kathryn E. Dick, deputy comptroller of the Office of the Comptroller of the Currency, said, “Underwriting standards that do not include a credible analysis of a borrower’s capacity to repay their entire debt violate a fundamental principle of sound lending and elevate risks to both the lender and the borrower.

That could mean fewer borrowers will qualify for nontraditional loans that many in the banking and real estate industry say have helped buyers purchase homes they would not have been able to afford using a traditional mortgage.

Obviously I’m no fan of a difficult market, but it appears that the “perfect storm” analysis just might have more merit than I’d like to believe. This is one call where I really hope to be wrong.

The post The Mother of all Weekend News appeared first on Seattle Bubble.

Evidently, Susan Ryan at the P-I Real Estate Blog thinks so…

An article in today’s PI on the institutional investor interest in Seattle, highlights one of the reasons the local residential real estate remains strong.

Low office vacancy rates and investor/retailer interest in commercial property means more people working dowtown and wanting to live near where they work. If you’re not one of them — as in you can’t afford a home or condo close in — it seems hard to believe that there are enough folks who can afford to live in town to sustain the prices. But there are.

The problem is that there aren’t enough houses to buy. It’s kind of a weird point in the market cycle. There are both more buyers actively seeking homes that are still in short supply with other buyers afraid to buy right now, scared by what’s happened in other parts of the country and the unrelenting news coverage of the real estate downturn in those places. They don’t want to get stuck with a property bought at the top of the cycle.

But with the strong Seattle economy, in order for there to be a downturn, there has to be a flurry of homes coming on the market — like when sellers trying to cash out before prices drop. It is that glut of homes for sale that that makes them get cheaper. So far there’s no flurry, no glut.

It’s like a collective holding of breath with buyers and sellers both waiting to see who will blink first.

Blink. Blink.

(Susan Ryan, Seattle Real Estate Professionals, 09.29.2006)
(Andrea James, Seattle P-I, 09.29.2006)

The post A Glimmer Of Hope? appeared first on Seattle Bubble.

NEW YORK (CNNMoney.com) — Home price increases have slowed nationwide and even reversed in many markets. Inventories are up and new home builders are cutting back. More and more sellers are having difficulty selling their properties.
…
For some sellers selling their old home quickly is critical: They’ve already made other plans.

Tom Shipp, Seattle: “My partner and I purchased a new home in Seattle, before we listed our current home on the Eastside. Our agents were confident that our current home would sell in 2 weeks and advised that we not make a contingent offer on the new house. . . . [the bid] was quickly accepted.

Ninety plus days, a second mortgage, and a bridge loan later we are still trying to sell our Eastside property! We just made our first double mortgage payment and are feeling desperate and depressed. We are supposedly still in a “hot” market and our property has what the agent’s say are the three mandatory factors for a quick sale; price, location, and condition.”

(Les Christie, CNNMoney.com, 09.28.2006)

The post More Homes Than They Could Afford appeared first on Seattle Bubble.

“…living with mom and dad, or mom and dad-in-law, is just practical. The Gwinns are using would-be rent money to pay off debts and save up to buy into Seattle’s out-of-reach housing market. And they are not alone.

While moving home with a spouse has been common in many cultures, now it seems to be hitting the U.S. mainstream for economic purposes — at least in pricey cities such as Seattle.

More than 22 million adult sons and daughters were living in a household maintained by one or both parents in 2005, compared with 15 million in 1970, according to Census Bureau statistics. Fourteen percent of all U.S. families included at least one adult child in 2005 — up 3 percentage points since 1970; a Census analysis attributed the increase to delayed marriage and increasing costs to set up and maintain a household.

Kate Gwinn, 26, said some of her friends moved back in with their parents for a while before they bought houses, and these are young people with good jobs.
“It’s like what all the cool kids are doing,” she joked.

“The problem is, home prices outpaced income growth,” center Director Nicolas Retsinas said. “Moving in with mom and dad gives you that sort of breathing room to catch up.”

This USA Today article provides slightly different statistics.

“Since 1970, the percentage of people ages 18 to 34 who live at home with their family increased 48%, from 12.5 million to 18.6 million, the Census Bureau says.”

Peronally, I could never move back in with my parents. My dad watches Fox News 24/7 and my mother would insist on washing my underwear… ew.

(Aubrey Cohen, Seattle P-I, 09.28.2006)

The post Failure to Launch appeared first on Seattle Bubble.

“Traditionally, in real estate, you’d have to go to the county records office or the police station, and pore through dusty file cabinets, to get the information that a Web site such as Redfin.com can display in a couple of clicks. “We want to organize information geospatially,” says Redfin CEO Glenn Kelman, “so people seeking a home can capture the gestalt of the neighborhood.” For example, the home seeker can ask why a house is more expensive than others in the rest of the neighborhood, and the seller can respond by adding information to the map about recent renovations, even posting before-and-after pictures. Such features keep the average user on Redfin for an impressive 72 minutes a week. “The map is basically a centerfold–it’s pornographic,” Kelman says.”

This -is- pretty cool, but does the geospatial gestalt image capture all the neighbors with toxic loans, or provide a ratio of the likelyhood your suburb will become the next shantyhood?

“From 15,000 feet, the $2.5 million house at 123 Highland Drive in the Queen Anne district of Seattle doesn’t look like much. The roof is a nondescript gray square; the yard, a tiny patch of fuzzy space. This doesn’t bother Matt Bell, a 33-year-old sales executive in the market for a new home. He is focused on the numbers flickering at the bottom of the Web browser two feet in front of him, the constantly refreshed statistics such as average property value, county tax records, local schools, and previous selling prices. “Eh,” he sighs. “It’s $538 per square foot, but the neighborhood average is only $420.” Opting not to leave a comment on the house’s open blog, Bell abandons 123 Highland and zooms back out over the city, the neighborhood numbers blurring to keep up with him.”

Only $420 per square foot! You’ve got to be smoking something.

I have two questions. One, how does a 33 year old “sales executive” purchase a 2.5M home, and two, how do you think this crash will impact Redfin? Personally, I like Redfin. Any company that seeks to simplify the home buying process and rid of us realtors deserves respect.

The post Redfin Is Pornographic appeared first on Seattle Bubble.

The apartment market continues to tighten in King and Snohomish counties, thanks to robust job growth and a trend toward converting units into condominiums, according to a new report from Seattle-based Dupre + Scott Apartment Advisors Inc.
…
Overall, landlords are optimistic, the research firm said, with three in four surveyed planning to raise rents by 4.7 percent over the next six months. Buoyed by the economy, the average rent for the Puget Sound area is rising, up 5.6 percent to $856 from $811 a year ago.

In preparing its apartment vacancy report, the research firm surveyed roughly 80 percent of properties with 20 or more units. Results do not include new apartments or properties undergoing extensive renovation.

I find it quite interesting that this study only focuses on complexes of 20 or more rental units. What this means is that it totally fails to account for individual condos or homes being rented out. As flippers become unable to sell, and 100%-financed families find themselves unable to afford their homes, it would seem that individual units are likely to come onto the rental market in greater numbers. Also, as I’ve said before, a 5% increase in rent is hardly going to break the bank for most people.

In my opinion, one of two things will have to happen to make owning a better choice than renting once again (the way things should be).

• 15-20 years of 5% rent increases, while home prices stay flat
• a few years of 5-10% home price declines

Or some combination of the two, which is what I believe is most likely.

(Puget Sound Business Journal, 09.25.2006)

The post Apartment Market Tightens: Panic, Ye Renters! appeared first on Seattle Bubble.

Additionally, I’d like to announce that for at least the short-term future, I’m turning off anonymous commenting. If you want to post a comment, you’re now going to need to go through the minimal effort of creating an account on Blogger. You’re not required to in any way associate your real name with a Blogger account, or even make your email address public. I just want the conversations to be easier to follow, and for people to have at least some minimal accountability for what they say.

Lastly, with the addition of a third regular poster, I’ve made some slight style changes in how the posts are presented. Specifically, I moved the “posted by” part from the bottom of the post up to the top, just underneath the headline. I’d appreciate feedback on whether this design provides an obvious enough differentiation between the different post authors.

I hope that you find these changes to be beneficial, but I welcome both positive and negative feedback. Feel free to email me (you’ll find the address in my profile) if you’d like to make your comments off the record. Thanks!

The post Seattle Bubble Announcements appeared first on Seattle Bubble.

Of course, it’s really none of your business, but inquiring minds want to know.

That’s one of the great (or not so great) things about Zillow. You can pry into someone’s life and be as rude as you please. After all, it’s public information right?

If you wanted to take it one step further, you might already know that you can view the actual deed of purchase online at the King County Recorder’s Office at no charge.

It’s possible to see what type of loan they have, what interest rate and the actual terms.

Do you know anyone that may have bitten off more than they can chew? Who knows, maybe you’ll be able to save them from financial ruin.

Post the story here, sans any personal info of course.

The post Friends Don’t Let Friends Buy Sub Prime appeared first on Seattle Bubble.

Taking off the top 33.8% of the current King County median single family home price of $435,000 would translate to a new median of $287,970. That would be a roll-back to 2002-2003 prices, which is about when I thought homes were expensive, but priced fairly for the area.

The “Most Overvalued Market in Washington State” prize gets awarded to Bellingham, coming in at 54.3%, followed by Mount Vernon at 45.5%. On the opposite end of the spectrum are Kennewick and Yakima, overvalued by 5.9% and 9.1% respectively.

(Global Insight, 09.20.2006)

Update: Two comments were made regarding my remarks above that I wanted to take a moment to address. I apologize for not getting to this sooner, but this is literally the first time I have been in front of a computer for longer than 2 minutes since making this post.

First, JohnS pointed out that 33.8% “overvalued” is not the same as “take 33.8% off the top.” Indeed, rather than subtracting 33.8%, I should have divided the current median by 133.8% to arrive at $325,112 (25.3% less than today’s median) as Global Insight’s fair value for Seattle. If a $325,112 home were 33.8% overvalued, it would come in at $435,000. $325k is a bit more than I think the median King County home should be selling for, but it’s still a heck of a lot more reasonable than $435k.

Second, Meshugy brought up the following bits from the methodology pdf:

Users sometimes misinterpret the valuation metrics by assuming that a particular degree of overvaluation implies that house prices are destined to decline by that amount.
…
This would not necessarily be correct for the following reasons. First, housing markets tend to adjust very gradually and price declines, when they occur, have historically averaged 14 quarters in duration. Because house prices determinants generally improve over that time (especially population density and incomes) we observe that price declines are about one-half the initial degree of overvaluation (see Appendix C in House Prices in America: Valuation Update). Secondly, we caution against over interpreting the metrics since the historically normal dispersion of valuations is quite wide. Specifically, our model has a standard deviation in house price valuations of +/-13 percent, meaning that any valuation between 13 percent overvalued and 13 percent undervalued should be considered statistically normal.

If you read what I said above, you will notice that I did not say (nor did I claim the study was saying) that home prices would drop 33.8% (or 25.3%, as the case may be). I simply pointed out what home prices would be if they were not 33.8% overvalued. Furthermore, if home prices in Seattle declined by 16.9% (one-half the degree of overvaluation) over the course of the next three and a half years, the median home price in the summer of 2010 would be $361,485, roughly where it was last summer. If you want to derive some comfort from that, be my guest. I think most people would define that as a pretty hard landing.

Also you should note that as per the standard deviation mentioned above, the Seattle market could be anywhere between 20.8% overvalued and 46.8% overvalued. According to Appendix C of the study, historically:

The more severe the overvaluation, the greater the subsequent declines tended to be.

The more severe the overvaluation, the shorter the duration tended to be.

Personally, I think the possibility that Seattle is overvalued by 46.8% is pretty severe, and something we should be paying serious attention to.

The post Global Insight: Seattle Overvalued By 33.8% appeared first on Seattle Bubble.

Zillow.com hopes that homeowners will help improve the valuations on its site by voluntarily offering details about their homes that are not found in county property records.

Some homeowners, however, expressed concerns that those facts could lead to deeper analysis by tax assessors, a fear that King County Assessor Scott Noble said is not completely unfounded.

“In today’s market, most people wisely don’t let the assessor inside if they come knocking,” said David Ruble, 45, a principal at Olympic Consulting Group.

“Posting home-improvement information on Zillow would effectively let the assessor in your front door to discover such goodies like granite countertops, premium appliances, marble baths and other improvements.”

That could lead to a higher tax bill, he said.

How delicious. The homeowner updates Zillow’s information, gets a new, higher Zestimate for their home, and then later receives a higher tax bill as well. Of course, on the way down I imagine that Zestimates will fall a lot more quickly than tax assessments, but that’s neither here nor there, really…

The end of the article had a bit of information that I thought was interesting:

However, Bill High — a licensed appraiser in the state — says Zillow may be crossing the line between collecting housing information and providing an appraisal.

“One of the problems facing appraisers is the position taken by the (Appraisal) Institute and the state that merely giving an opinion of value, even ‘off the cuff’ and to a friend, constitutes the making of an appraisal and requires compliance with the relevant state laws and Institute regulations,” High said.

“Zillow, meanwhile, does the same thing, using the same tools and techniques, but takes no responsibility for the accuracy of its work nor the havoc their mistakes might create.”

In his view, Zillow should be held to the same standards as appraisers who are liable for their estimates.

Is it just me, or is something is really screwed up with our laws when offering an off the cuff opinion of value legally constitutes an appraisal? Shouldn’t the standard be a bit higher than that? If that’s how low the requirements are for a legal appraisal, it’s no wonder the cash-out re-fi train has been chugging along so fast.

(John Cook, Seattle P-I, 09.21.2006)

The post Update Zillow—Pay More Taxes? appeared first on Seattle Bubble.

As rising interest rates and growing consumer debt push more families into financial trouble, consumer advocates and state investigators warn that people on the brink of foreclosure are increasingly falling victim to scams aimed at squeezing them out of their homes.
…
Foreclosure-rescue scams are on the rise as “a collision of events” force more people into foreclosure, said Chuck Cross, division director of the state Department of Financial Institutions, which investigates such fraud. Homeowners who took out mortgages they could barely afford or borrowed too much against their equity are prime targets.

If foreclosure scams are truly already an issue in our area despite the supposedly still robust housing market, imagine what it will look like when things really slow down. Yikes.

(Phuong Cat Le, Seattle P-I, 09.21.2006)

The post Foreclosure Scams Prey On Suicidal Loans appeared first on Seattle Bubble.

A once-proud hub of innovation left to languish as brilliant people, new ideas and dazzling products bubble up elsewhere. An urban wasteland that’s left wondering — as Detroit was with cars — how it lost its mojo with software and the Internet.

That’s the dire message Microsoft’s top executives are sending to legislators, educators and anyone else who will listen. And nobody is arguing with this simple truth: The state is doing a terrible job producing computer scientists. Those whiz kids who will make computers smarter, faster and more useful for everyone.

“At a certain level, it’s simply a tragedy,” says Brad Smith, Microsoft’s general counsel. “It’s a lost opportunity for the next generation of people growing up in Washington state.”

Microsoft’s warning may sound strange in a region that has thrived from the technology boom of the past 15 years. But Smith says there’s no such thing as stability in his business: You’re either innovating or falling behind. The industry can turn faster than a Detroit SUV.

The sometimes-bumpy boom has created more than 300,000 high-tech jobs statewide, and the big money flowing from those jobs employs hundreds of thousands more in traditional industries. The state estimates there will be nearly 30,000 openings for computer specialists in the next decade, and the technology they create is needed in every industry from fishing to aircraft manufacture.
…
Yet consider this: Just 160 seniors graduate in computer science or computer engineering each year from the University of Washington, home to the state’s most respected program. Another 90 finish graduate degrees.
…
By contrast, Seattle has, almost by accident, become the most educated city in the U.S. Engineers and computer specialists make up a higher proportion of the workforce here than just about anywhere else.

That’s because fresh graduates are flooding into Microsoft, Amazon.com, Google and other companies with operations here. But they’re not from Magnolia or Mukilteo. They’re coming from Boston, California, India.
…
But the fact that the state is not coming close to producing even its fair share of computer scientists has many worried.

With other states and countries — think India and China — leaping ahead in the technology race, Seattle may find it harder to continue luring top talent here, and companies may decide to take their toys elsewhere. Seattle’s boom-and-bust history could repeat itself.

The shortcomings of public schools and universities here may already be discouraging some talented people from coming, Smith argues, because smart people want to live somewhere they can send their kids to great schools. There may be an unfounded complacency that Seattle’s natural assets will continue to draw people.
…
Meanwhile, Microsoft continues to add workers locally at the rate of 4,000 a year.

In this year’s record class of 5,400 UW freshmen, 300 say they’re hoping to graduate in computer science or engineering. Even if none dropped out or changed majors, the class of 2010 wouldn’t amount to a month’s supply of new workers needed just at Microsoft’s Redmond campus.

I found the assertion at the end of the article to be somewhat dubious. Where does that 4,000 per year number come from? Reporter Nick Perry doesn’t say. Did he pull it out of his… hat? Who knows?

You may recall that back in May I looked at the subject of how many jobs Microsoft is really adding to the Puget Sound. Taking the statements of official company spokesman Lou Gellos and applying some relatively generous assumptions, I came to the conclusion that Microsoft is adding roughly 1,350 new jobs per year to the Puget Sound.

Furthermore, if you take a look at the official State labor data for employment totals in the “Software Publishers” industry, you can see that state-wide, the number of employees is not even growing at 4,000 jobs per year. The numbers are more like 2,500 to 3,500, across all “Software Publishers” in the state (xls).

So what’s the deal, Mr. Perry? Do you care to back up that 4,000 per year figure?

[Update: I located this article in the Seattle P-I that sort-of confirms Mr. Perry’s claim. Microsoft did indeed “boost its employee ranks by 3,938” in the Puget Sound during their previous fiscal year. I stand corrected on that.

I say “sort-of” because it should be noted that: “Explaining the increase, Microsoft spokesman Mark Murray cited factors including upcoming product launches.” So it definitely seems like a stretch to say that “Microsoft continues to add workers locally at the rate of 4,000 a year.” “Continues” implies something that has happened in the past, and will keep happening in the future. From ’04 to ’05 they added just 1,388 jobs to the Seattle area, and judging by the statements of the company spokesman, last year’s jump is just a spike due to the imminent launch of upcoming products. Mr. Perry is using a single accurate statistic to paint an inaccurate complete picture.]

Leaving aside the possibly bogus Microsoft growth data, basically the jist of the article seems to be that thanks to a few high-tech companies (Microsoft, Amazon, and—to a lesser extent—Google), Seattle is drawing in far more smart workers than it produces, but unless we shape up, we could easily lose that draw, and be left behind in the high-tech industry.

Although these companies are big, and they may be paying handsomely to attract talent from around the country & world, I still don’t personally think that will be enough to keep Seattle’s outrageous home prices afloat. Honestly, you’re talking about tens of thousands of jobs—maybe a few hundred thousand—in a region of over 3.4 million people. If you think Microsoft and kin are enough to keep Seattle’s bubble from bursting, I think you may be in for a bit of a letdown.

(Nick Perry, Seattle Times, 09.17.2006)

The post Seattle’s Tenuous Smartness appeared first on Seattle Bubble.

My opinion is that if people did have a significant down payment or ability to get a fixed rate, they would. And, as I research Meshugy’s sales findings, we do find the potential for a couple cash buyers. I did not post whether people had a fixed rate or ARM or whether or not it was a short term ARM at 6 mos, 1yr or longer. The majority were ARM’s.

You can bore yourself to death researching this stuff by going to the public records site of King County. Since I do this type of work all day and have tools to do it quickly, I’ll save you the trouble by showing my findings below. I find no particular pleasure or fascination with researching this stuff. It’s kind of like asking “Eleua” if it’s cool flying 737’s, 757’s or other aircraft all day. Probably excruciatingly routine, save for the occasional bumbling drunk who talks non-stop to anyone who care’s to listen during the fly-over-country flight in which Eleua is at the controls.

The following are recent sales Meshugy discusses in his comments today. Note some of the recent back to back sales and selling prices.

8348 24th Ave NW 499,950 487,500 —

No Deed of Trust recorded yet or none which would indicate a possible cash deal.

3258 NW 56th St 699,000 684,000 —

existing loan at $547K; sold previously at $375K 10/13/05

6528 26th Ave NW 475,000 379,000

Meshugy may have this wrong by accident. It was listed for $379K and sold for $379K (940 sq ft home on a 2550 sq ft lot—now that’s small!

8016 20th Ave NW 419,950 425,000

100% financed nothing down (notice price increase in this scenario? Artificial appreciation? Now this sales price will be used as a comp for another home. Existing loans: $318,750 & $106,250, Sold previous $360K on 12/3/04

5807 17th Ave NW 394,500 375,000—

basically fully encumbered at $300K 1st mtg/$56,250 2nd mtg. , Sold previous on 7/28/2000 for $184K

7310 23rd Ave NW 575,000 573,000 —

$417K 1st mtg./$98,700 2nd Mtg.

6513 Jones AveNW 429,950 429,950 –

100% financed @ $343,5501st /$85,850 2nd; Sold previous on 8/30/2004 @ $319K

2835 NW 73rd St, 409,950 409,950—

it previously sold 9/10/2004 and was 100% financed at $325,000 back then.

8346 29th Ave NW 439,000 440,000—

existing $352K 1st mtg/ $66K 2nd mtg. and previously sold 100% financed 7/8/2005 for $318,000

7524 30th Ave NW 410,000 425,000—

existing 1st at $340K & $63,750 2nd .

7302 23RD AVE NW 450,000 450,000–

$211,096 due in one year (interesting) as it is a junior lien position, which could mean many different things.

———————-

Have a good night. My wife is yelling at me that Million dollar listing is on TV. Bravo Channel. Gotta go have some laughs. Bye.

S-Crow

The post How people do it appeared first on Seattle Bubble.

I just love it when random people drop by this blog and get the feeling that they need to set me straight. Here’s a recent example of this phenomenon that I found particularly amusing.

The discssion (sic) is really lame for those who have a choice between buying a home or renting a home. For many there is no choice, they will rent all their lives as my mother did because she was far too poor to buy anything. For those with a choice the decision is to pay-off the landlord’s mortgage or to pay-off your own. Millions of old people have some security because they own their own home free and clear. As for prices, they will go up, supply and demand ditcate (sic) this. No they will not come down. Population grows geometrically and land does not grow, there is a finite amount. People need to be in cities, that’s where the jobs are and they by their numbers will drive up the price of homes.

If you can buy without overextending you should. If you think you will make more money in the future and you are wiating (sic) to buy consider housing has gone up consistantly (sic) at about 7% per year. That is 7% of the average priced home today of $350,000 or $24,500/year. Wait long enough and you will not be able to buy. I should say no one can guarantee that homes will continue to go up, but baring (sic) a nuclear war and major distruction (sic), I think we have to go with the numbers.

Have a great day…

Let’s see how many of the boilerplate pro-real estate, anti-bubble arguments Mr./Ms. anonymous managed to cram in there:

• paying the landlord’s mortgage
• home ownership = security
• population growth
• not making any more land
• job creation
• home prices never go down
• buy now or be priced out forever!

Excellent work anonymous—seven real estate truisms in just two short paragraphs. I also really enjoyed the declaration that “If you can buy without overextending you should.” Because you just know that nobody that’s been buying lately has been overextending.

At any rate, I hate to disappoint you anonymous, but I’m going to go ahead and continue this “really lame discssion” for a while longer. Maybe we’ll see you again in about a year.

(anonymous comment, About the Blogger, 09.12.2006)

Update: An anonymous commenter below brings up a very good point:

The thing is, most of those arguments are ORDINARILY true. That’s what makes the bubble so dangerous, people understand that homeownership is usually better than renting. What they don’t understand is that there are some situations where buying is suicide.

I totally agree that under ordinary circumstances, some of the above sentiments are true. I suppose that would make it conventional wisdom. The problem is that people are blindly accepting conventional wisdom in a very unconventional time, when critical thinking is called for.

The post Drive By Commenting appeared first on Seattle Bubble.

Home sales in western Washington declined for the sixth straight month in August amid surging inventory, while home prices maintained double-digit annual growth, according to the latest report from the Northwest Multiple Listing Service.
…
In Pierce County, the “biggest story is the multitude of choices buyers are enjoying,” according to NWMLS director Dick Beeson. “Many buyers feel empowered and are waiting to see if prices will start to fall,” said Beeson, the broker/owner of Windermere Real Estate/Commencement Associates.

What these buyers might not realize is even though inventory has expanded, prices have continued to climb, so their indecision can be both costly and frustrating when the house they’re considering gets sold to someone else, NWMLS reported.

Beeson expects prices will continue to climb, but at a more modest rate, probably in the range of 4 percent to 7 percent annually. Interest rates will remain very reasonable, he believes, and may even drop slightly.

It’s an interesting implied assertion that prices will continue to climb indefinitely at a faster rate than wages. I suppose eventually only Bill Gates and Paul Allen will be able to afford homes, and anyone that allows themselves to be overtaken with costly indecision, not buying a home before they are priced out forever will just have to rent from the new upper class—the homeowners. Say, that sounds familiar…

(Inman News, 09.14.2006)

The post Inman Weighs In On Latest Washington Stats appeared first on Seattle Bubble.

Real estate experts expect to see slowing sales and price gains and increased inventory, but nothing resembling a bursting bubble, when the Northwest Multiple Listing Service releases its August numbers today.

“I’m eager to see what the statistics are going to show,” said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University.

Windermere Real Estate President Jill Jacobi Wood said she is looking forward to having local numbers to balance the grim news from areas such as California.

“It’s kind of dismal in some of these places,” she said Monday.
…
There are still a lot of buyers out there, Jacobi Wood said. “Our prices are still below the cities that are as desirable as ours.”

I guess Glenn Crellin should be reading Seattle Bubble, where we’ve known for nearly a week now what the statistics show. Although, I wouldn’t exactly call the numbers all that much of a “balance” to what’s going on in parts California. To me the local numbers appear to be neutral and trending down.

Apparently they wait until the “recap” sheet is released to write their stories. If there are any significant differences in the numbers between the summary sheet I reported on last week and the recap sheet, I’ll let you know.

Update: The August recap sheet has been posted. There are no significant differences as far as I can tell.

(Aubrey Cohen, Seattle P-I, 09.12.2006)

The post P-I August Numbers Pre-Report Report appeared first on Seattle Bubble.

An abundance of homes on the market has turned the once white-hot seller’s market into one that is more buyer-friendly, according to South Sound real estate professionals.

Home sales fell 11 percent in August, according to preliminary data released Tuesday by the Olympic Multiple Listing Service.

Higher inventory levels also meant that homes spent more time on the market, according to the MLS.
…
Comparing August-to-August home sales is bound to reflect a significant drop because last year was so robust, said Olympic MLS Manager Jerry Wilkins.

He acknowledged that the housing market is stabilizing.
…
Another factor is the construction of new homes coming on the market that might not be reflected in the Olympic MLS data, said Jim Greene, owner of Greene Realty Group.

Many new homes are sold before they are even listed, he said.

“What’s happening is there is an abundance of new construction,” Greene said.

Although they don’t provide the actual number in the article, listings have increased 94.7% in Thurston, topping 2,000 in August, compared to 1,031 in August 2005. Regarding new construction, they bring up a good point that has been mentioned on this blog a few times recently. With the number of building permits up 43% in King County, it seems that the Seattle area is poised to experience a continued increase in inventory (listed and not) for the forseeable future.

(Rolf Boone, The Olympian, 09.06.2006)

The post "An abundance of homes" in Thurston County appeared first on Seattle Bubble.

With a five-month head start on Seattle Bubble, Rain City Guide was pulling in about twice as many unique visitors per month in March—roughly 15,000 to Seattle Bubble’s 7,500. Now let’s fast-forward to the present. Here are the most recent visitor graphs for RCG and Seattle Bubble:

Woo-hoo! Not only did we catch up with Dustin and crew, we passed them up, and pulled in approximately 30% more visitors last month. The August stats for Seattle Bubble show just over 30,000 “unique visitors” to Rain City Guide’s 23,000 (my rough guess based on Dustin’s chart). I’m using Google Analytics as the source of the data for these graphs (in order to directly compare to Dustin’s graphs from the same source), however you can poke around the public Statcounter stats for yourself if you’re interested.

Since I’m totally and unashamedly copying Dustin on this post, here are a few interesting tidbits from the Google Analytics stats:

• 24% (7,185) of visitors in August arrived through Google searches.
• 23% (6,979) of visitors last month came through their bookmarks or typed the address in directly.
• The top three blogs referring traffic to Seattle Bubble in August were The Housing Bubble Blog (5,235), Vancouver Housing Market (1,604), and Bubble Meter (747).
• Many of you are tech-savvy, as 31% of you are using the superior web browser Firefox. Firefox + Adblock + Filterset.G Updater FTW!
• The top 10 search phrases that landed people on Seattle Bubble account for 40% of all search engine traffic.
• Of all the unique visitors in August, 3,622 visited Seattle bubble more than 200 times.

One stat from Dustin’s post that I found somewhat amusing was that Seattle Bubble is the blog that referred the most visitors to RCG in August. Note that they do not even link back to us on their front page. :^(

Congrats to Dustin & the Rain City Guide crew on their continued growth. Since our “target markets” are quite different it’s not really fair to directly compare graphs like this, but I enjoy some good-natured competition. And besides, now I can say that Seattle Bubble is “Seattle’s most popular real estate blog.” :^)

The post Tooting Seattle Bubble’s Statistical Horn appeared first on Seattle Bubble.

You have got to see the video online at FoxNews. Look on the right side of the main page and click on the video “brutal beating.” I imagine CNN or other news outlets are picking up this story as well.

I just saw the reporter interviewed on Foxnews at Bill O’Reilly’s show. Don’t you just love what real estate attracts?

UPDATE: Go to his actual station at San Diego’s Fox6news where they have better coverage via the video.

The post Reporter attacked uncovering real estate fraud appeared first on Seattle Bubble.

Anyway, after waiting for just over an hour this morning at the doctor’s office so my daughter can get a physical and be cleared for the upcoming soccer season, I headed out to do the last minute shopping and then attend their school orientations. What a mad house of adults scurrying around like ants from classroom to classroom. Pretty hilarious. I think the adults were more stressed out than the kids.

As the event ended and I headed back to the parking lot, I counted ELEVEN cars that had either sold signs in the back window area over the seats, a Realtor license plate cover, or some lettering signage on the side of the windows or rear windows indicating they were Realtors. Then I counted six other cars: mortgage brokers. Then I counted me,in escrow. I wonder how many other people are in the business that didn’t advertise on their cars.

Then I started thinking. Maybe websites like Trulia.com or Zillow.com should not only post houses and sale history, but they should post all the Real Estate agents and allied real estate professionals on a map too. It would be amazing to see how many dots would show up. Just in my own neck of the woods, we have six immediate neighbors homes for sale, one is a Realtor, one is in construction, my next door neighbor (not for sale)is a builder who was impacted negatively due to the recently ended labor strike for Cement Drivers. We have another active builder just up the street and another homeowner nearby within a 5 minute walk who is a loan officer. Wow.

I guess the economic engine in housing is really quite real. A lot of people are directly impacted by housing. One of the title reps we work with on a regular basis and who stops by our office asked my wife how business was last week. We had a decent August, but it was the reps tone that was a little startling. She said title orders for her dropped off like a rock. This is a rep who has a lot more clients than we do. A lot more.

If any of you are refinancing or thinking of purchasing or selling, please keep us in mind for your escrow needs. We are highly mobile and assist clients all over the Puget Sound area.

S-Crow

The post There are a lot of people in real estate appeared first on Seattle Bubble.

Real estate in the Pacific Northwest is still being pumped up by fleeing Californians. Californians (retiring baby boomers in particular) see that their homes have reached record prices and they’ve been selling. They are flooding into neighboring states with pockets full of cash, buying homes larger than the ones they sold for prices that seem, by comparison, pretty low and, in the process, driving up prices in the Northwest, particularly in the Portland, Ore. and Seattle metro areas.

The Northwest’s real-estate boom is likely to continue, albeit a bit slower, because those Californians are still moving around and also because that region’s economies are strong, Yun says. Both cities are riding a strengthened technology sector. Seattle is going strong on orders for Boeing aircraft and increased international trade at its port.

Ironically, the title of the report is “Boom to bust, almost overnight.” So, they acknowledge that things can rapidly turn around, while at the same time assert that strong growth will continue, apparently indefinitely. How delightful.

(Marilyn Lewis, MSN Money, 09.04.2006)

The post "Boom is Likely to Continue" appeared first on Seattle Bubble.

According to a just-released study by John Burns Real Estate Consulting, one of the preeminent researchers in the field, of the 100 largest metropolitan areas (based on annual permit activity):

• 13 markets are below their historical median affordability level
• 3 are exactly at their median
• 84 are above the median.

…
Nine markets have even worse affordability levels than when mortgage rates were 18 percent+ in the early 1980s: New York, Washington, D.C., Los Angeles, Seattle, Portland (Oregon), Baltimore, Edison (New Jersey), Nassau (New York) and Naples, Fla.

Burns’ methodology compares current affordability in each market to historic affordability in the market to determine whether housing is more or less expensive in the market than in price downturns.

Excellent. But don’t you worry your little head, because wages will catch up, our education will save us, and our job market is invincible. There’s no bubble here… there can’t be.

(Jason Knott, CEPro, 08.31.2006)
(John Burns, John Burns Real Estate Consulting, 08.31.2006)

The post Seattle’s Housing Barometer: Bubble appeared first on Seattle Bubble.

The reader who e-mailed me this article suggests maybe that the opposite is true. People are searching to see what homes are listed for in their neighborhood to gauge possible list prices.

According to some Internet data miners, online search queries could be a better economic indicator.

Over the past five weeks, there’s been a 42% increase in the number of Internet searches involving the phrase “homes for sale,” according to Hitwise, a firm which measures Web traffic.

I for one hope that the market continues on it’s track in the Puget Sound region, but my sense is that this Fall will be an indicator of where the market will go. Thing is, I thought that to be the case last year. So,what do I know?

The post CNBC : Online housing searches indicate bounce appeared first on Seattle Bubble.

House hunter Vicky Tsai has paid for two inspections of homes she didn’t buy: one that she lost out on because she was outbid by $20,000 despite offering $50,000 above the asking price, and another that she passed on after deciding it was too small.
…
Inspectors and real-estate agents say that — at least for desirable homes in Seattle’s more sought-after neighborhoods — purchase offers "subject to inspection" may become as outmoded as offers contingent on the sale of another house. Instead, would-be buyers are paying for inspections before making a bid on the house as is, or forgoing inspections altogether.
…
"It’s becoming a way of life," inspector Fred Grant said while waiting to look over a West Seattle house earlier this month.
…
Darrell Marsolais, who owns PSI Home Inspection Services, said he has done more preoffer inspections this year than in past years.

"It’s just the Seattle market," he said. "Most any house that’s being offered in the core Seattle area, there’s always multiple offers."

Pre-inspections are "a way of life," there are "always multiple offers," etc… we’ve heard it all before. But wait! It seems that someone managed to sneak in a snippet at the end about the reality of Seattle’s slowing market:

The popularity of preinspections varies from house to house and price range to price range, [Sound Home Inspections owner George] Guttmann said. "Sometimes multiple bids are expected and people do preinspections and it turns out there weren’t multiple bids," he said.

He added that he’s starting to notice cooling in the housing market, with more signs noting price reductions. The latest statistics show slower sales and more houses on the market than a year ago.

Yeah, "the latest statistics," along with every month of statistics since April. After four straight months of obvious slowing, we’re still just getting a passing mention of it in the press. "Annoying News Coverage" indeed.

(Aubrey Cohen, Seattle P-I, 08.30.2006)

The post Local Media "Starting to Notice Cooling" appeared first on Seattle Bubble.

As one blogger responded: “talk about rearranging the chairs on the Titanic.” Maybe a little too late, the damage is already done.

The post Lender Tightening within 60 days? appeared first on Seattle Bubble.

Single-family houses and condominiums in the area that includes Queen Anne had a median price of $483,000 in June, up 13.7 percent over the past year, according to the Northwest Multiple Listing Service.

Janet Gabbert, 65, and her husband bought their house on in 1968 for $22,500. "And we thought we were being taken," she said with a chuckle.

"Even for an attorney with a good salary, it’s getting difficult" to buy a house on Queen Anne Hill, said Jeffrey Valcik, an associate broker with Windermere Real Estate.
…
While most homes are single-family houses, condominiums and apartment buildings are going up.

Helen Bigelow, 81, has lived in the area for 13 years and lamented the redevelopment on the hill.

"It’s horrible," she said, while taking a break from grocery shopping. "They’re tearing down some of the lovely old houses … they replace it with a lot of boxes with no grass, no flowers."

With the new development comes more traffic and difficulty in finding parking.

But that just comes with the territory of being what Valcik calls Seattle’s most sought-after neighborhood.

What really strikes me as crazy is that the price of homes just five years ago on Queen Anne has now become what you can expect to pay in much less desirable neighborhoods like West Seattle, Mountlake Terrace, or even Ballard. It’s understandable that a place like Queen Anne will have considerably higher prices than other parts of the county. I just don’t believe that it’s sustainable for prices to be so high that even affluent people with high-paying jobs have to stretch to afford a home in the "sought-after" neighborhoods.

(Bibeka Shrestha, Seattle Times, 08.27.2006)

The post Unaffordability Spotlight: Queen Anne appeared first on Seattle Bubble.

“‘Certainly, the housing market is undergoing a measurable adjustment,’ Lawrence Yun, senior economist with the Realtor association, said. The bloated inventory levels, Mr. Yun said, indicate ‘a very sudden change which I have never seen before.’”

-Lawrence Yun, NAR economist.

Earlier this year, he mentioned that he expected Seattle to achieve 30-40% median price increases. I’m no fan of economic problems, but I don’t see how the 30-40% increase in median prices will happen.

The post Lawrence Yun is back appeared first on Seattle Bubble.

This morning at CNBC.com, Reuters news services is reporting that the Department of Justice has dropped charges against Fannie Mae and has concluded their investigation. Fannie Mae was “fined” $400 million.

“The Justice Department probably decided that there was little to be gained by bringing charges against the company because that would only punish shareholders, who have been punished enough,” said Josh Rosner, a housing analyst with Graham Fisher & Co. in New York. “But that does not mean that former executives are not being scrutinized.”

My last post a couple weeks ago about this scandal… I recall thinking and suspecting that some very very high level talks would take place behind closed doors. Seems like my hunch had some merit.

Fannie Mae gets a pass. Unbelievable. Franklin Raines and all his former Fannie Mae executives under him—do you really think this guy will get prosecuted? Time will tell, but when this guy is connected to Washington the way he is, it’s going to be difficult.

The post Free Pass: DOJ drops Fannie Mae charges appeared first on Seattle Bubble.

Given the variety of opinions expressed in the discussions on this blog, I am curious about the general statistical status of the readership, with respect to the issues that we focus on. To satisfy my curiousity, I have created the following series of polls. Vote in as many or as few as you like. The poll is completely anonymous—I have no way of even associating an IP address with poll selections. Please vote only once for each question, and please be honest. Feel free to use the comments to discuss the results or suggest additional/future poll questions.

FYI, “own” is in quotes because as long as you are still carrying a mortgage, it’s really the bank that owns your home.

The post Seattle Bubble Poll Time appeared first on Seattle Bubble.

We agreed on one issue. I was early thinking that our market was exibiting bubble like tendencies. Mostly because of witnessing first hand the type of financing making it possible for consumers to purchase homes that in markets of past, there was no way the borrower would qualify. But the other reason was due to being personally involved in multiple offer situations back in the fall of 2004. I knew right then that the buyer of the home that successfully out bid ours and two other parties, probably paid more than they should have. But who am I to judge. Maybe for reasons unknown to me, the property was worth it to them. You can never fault someone for that. I would also guess that the other buyers were not armed like me with the mortgage information about the existing seller, nor armed with information that the home had just been purchased three months earlier.

The question of whether the Seattle market will follow the footsteps of other markets that have had sales drop off significantly is what our argument was really about. In localized areas of our market, multiple offers still continue. Sales levels are dropping off ( I know I know, the “median” thing…). I can tell you that our summer business was less than that of ’05. Bummer.

In escrow, from my perspective, there is no other position in real estate where you see the good and bad in a real estate transaction. You see and hear it all. Almost without question, 95% of the comments excited buyers make at the signing table relate to the home as an “investment,” and a good portion of those words are from first time home buyers. These comments from buyers really contradict other real estate agents who have only recently blogged about telling their clients they should treat their home as a place to live, first, and as an investment later. It seems to me the tune is changing. The clients we have seen over the past 2 yrs. seem to have that glossy-eyed-equity look in their eyes. Recently I’ve read many comments from agents on real estate blogs both locally and nationally, who say they are telling clients to stay away from ARM’s and not get in over their heads, along with the “buy the home to live in vs. investment” talk– I understand agents who say this in a genuine manner and spirit, but it just doesn’t jive with the conversations I have with many of their clients, nor the financing that the buyers are still receiving. Although ARM’s are falling off in favor, they are still THE 30 yr fixed program of the day. In other words, ARM’s are still King. Don’t believe me? Go to any open house and check out the financing sheet provided by the agent’s favorite mortgage broker. I’ll bet more often than not you’ll see only ARM programs and no 30 yr fixed rate quoted on the rate sheet. Many of the clients at the signing table openly talk about the equity gravy train. Don’t get me wrong, I don’t believe that buying for investment purposes is a wrong analysis. It depends upon the property and the reasons of the purchase. My best guess is that buyers have learned this ‘real estate only goes up in price’ thinking through conversations with agents, friends, relatives, business associates etc.

Then the bombshell

I have never heard of an agent ever tell a client that they should not buy. I’m sure there are cases out there, but, generally, I have never heard of it. Recently, I had the pleasure of signing some clients who were sellers. I asked the sellers in casual chit-chat conversation where they were headed or moving to. They said, ” no where, we are staying put, but our agent suggested that we wait to buy until the market settles down.” I was stunned. I almost asked them to repeat what they said, but decided it was innapropriate given my position. Apparently there are Realtors out there in our Seattle market, perhaps experienced and seasoned, that believe we are in fact in a bubble. Perhaps there are more than we know of. Any experienced agents want to chime in? Both bearish and bullish invited.

The argument wraps up

So, in continuing with our argument, we eventually settled with a psuedo question: What is a “normal” market for our area. What is not normal? Moreso, for all the bubble believers on this blog who rent, how can you determine the bottom? It’s tough enough to predict market tops, so when will you make a determination to buy? If prices do fall, yet inflationary pressures continue, interest rates will rise to counter it; your price drop advantage may or may not be helpful to you in that situation. What if the Seattle market and vicinity DOES NOT experience the hard sales price drops that other markets are experiencing and will continue to experience as this conundrum unfolds.

Your transparent escrow friend,

S-Crow

The post My heated argument & bombshell shocker appeared first on Seattle Bubble.

Among Washington’s largest counties, King County sales declined 13.7 percent, Pierce County slipped 10.7 percent, Snohomish County slid 11.8 percent, and Spokane County declined 11.9 percent.

The sharpest declines were seen in Island and Jefferson counties, each of which experienced nearly a 33 percent dip in sales.

Only three counties – Yakima, Thurston and Grant – reported modest increases in the number of homes sold.

But prices continued to increase across the state, though at a slower rate.

Here is an updated version of my graph of WCRER’s numbers for King County.

Click to enlarge

The Affordability Index (refer to my previous post for the definition) for King County continued its descent, down almost 7 more points to 70.4—the largest drop in the index in two years. One thing that is interesting is that rather than reporting inventory (# of homes on the market), the snapshot includes the number of units for which building permits have been issued. Although that measure was up just 6.7% statewide, King County had an astounding 4,217 units for which permits were issued last quarter, up 43.2% from last year. Remember that King County is already in the midst of a trend of increasing inventory and decreasing sales. If supply keeps shooting up (bolstered by increased building) and demand continues to wane, real price drops won’t be far behind.

(WCRER (pdf), 08.2006)
(Associated Press, Everett Herald, 08.21.2006)

The post WCRER: Sales Slipping, Affordability Tanking appeared first on Seattle Bubble.

Washington’s jobs picture was mixed in July, and revised data shows that the first half of 2006 wasn’t quite as red-hot as first appeared.

The state added 8,700 jobs last month, according to seasonally adjusted figures from the Employment Security Department, but the unemployment rate edged up to 5.3 percent from 5.1 percent in June.

Evelina Tainer, chief economist for the department’s Labor Market and Economic Analysis branch, said the increase in the jobless rate wasn’t statistically significant. But since the rate was as low as 4.6 percent as recently as March, it’s worth watching.
…
Instead of the 6,900-job average monthly gain that had been previously reported, Washington actually added an average 5,400 payroll jobs each month between January and June.

"On the whole, I think the numbers are still looking pretty good," Tainer said.

8,700 new jobs is definitely better than the previous six months. However, it’s interesting to see exactly where those 8,700 jobs are coming from (and where jobs are leaving):

Wholesale and retail trade in the state showed the biggest job drops last month, respectively losing 800 and 1,000 jobs, since June.
…
Education, both public and private, posted the strongest gains in the month, a total of 6,200 jobs. However, Tainer questioned whether that was due more to the quirks of the seasonal-adjustment process than real growth, noting that those same sectors lost 6,400 jobs in June.
…
Statewide, professional and business services, something of a catchall category for white-collar jobs, added 2,200 jobs in July, with most of the gains coming in managerial, administrative and support jobs.

Construction, which has been one of the mainstays of the state’s economy, lost 2,000 jobs last month, due entirely to declines in the heavy and civil-engineering sector.

In King and Snohomish counties, though, 3,000 construction jobs were added in July, and manufacturing added another 1,300 jobs.

The P-I offers some additional analysis:

The largest job growth occurred in government (up 4,200 jobs), education and health services (3,100 jobs) and professional and business services (2,200 jobs).

Retail trade lost 1,000 jobs, financial services lost 300 and information lost 200.

So disregarding the odd fluctuation in education, we’re really only talking about a net 1,500 jobs. Not exactly an economy to write home about. However, there is definitely some ammunition in there for the Seattle is Special crowd, what with construction jobs decreasing statewide (by around 5,000 jobs!) but increasing in King & Snohomish. I also notice a distinct failure to mention what’s going on with jobs related to real estate. Presumably they were mostly flat last month. Particularly interesting to me is that retail is floundering. Perhaps the housing ATM is drying up, even here in Washington?

Whichever way you slice it, it’s pretty difficult to skew these numbers to fit a "Seattle’s economy is booming" argument. I think at best, we’re treading water right now.

(Drew DeSilver, Seattle Times, 08.15.2006 )
(Drew DeSilver, Seattle Times, 08.16.2006)
(Dan Richman, Seattle P-I, 08.16.2006)

The post July Jobs: Mixed Bag appeared first on Seattle Bubble.

Yakima County’s housing market is showing signs of bucking a national cooling trend.

It is just one of three counties in the state — along with Grant and Thurston — where second quarter sales activity increased over the year.

Yakima County’s home sales jumped 9.3 percent, according to data released last week by the Washington Center for Real Estate Research at Washington State University.

The county’s median home price also increased, by 5.4 percent to $133,500, said center director Glenn Crellin, who notes that Yakima missed out on the huge gains that other markets, such as Seattle, have seen in the last few years.
…
Higher rates have not had the same dampening effect in Yakima [as in CA & FL], where median prices are still some of the lowest in the country, [NAR economist Ken] Fears said.

Local real estate agents say there are plenty of ready buyers here — supply is not keeping up with demand.
…
Fears said the county has a solid economy and slower price increases — an ideal environment for a healthy housing market.

Rich, the Prestige Realty broker, said other factors such as the area’s proximity to wine regions and recreational activities will also draw people to the area — and create more demand for homes.

"We’re in the middle of it," he said. "I don’t think it’s going to end anytime soon."

In Yakima it actually might not end anytime soon. It sounds like they have been fortunate to miss out on the insanity that the Puget Sound housing market has experienced in the last few years. Moderate appreciation, affordable homes, and strong demand—everyone is a winner. Contrast that with Seattle: Unsustainable appreciation, ridiculously over-priced homes, and weakening demand… You tell me which housing market is healthy and which one is likely to catch the flu.

(Mai Hoang, Yakima Herald-Republic, 08.21.2006)

The post Picture A Healthy Housing Market: Yakima appeared first on Seattle Bubble.

So what is it about this subject that makes people get just downright mean? Real estate enthusiasts throwing out the “bitter renter” insult, and bubble believers cheering on the economic destruction of their neighbors… Obviously not everyone involved in the debate stoops to those levels, but there are enough examples of these kinds of attitudes out there that it tends to color the entire debate.

On an almost unrelated note, I was “interviewed” by Frank Sennett for the Spokane Spokesman-Review a few weeks ago. Here’s my 15 seconds of Spokane fame:

Seattle Bubble is a real-estate blog with teeth. It focuses on signs of a hard landing for the housing market. Tim Ellis, a twentysomething electrical engineer, started blogging about a bubble after encountering what he viewed as unrealistically high prices while house hunting last year.

But unlike the proprietor of Housing Panic, who seems almost gleeful about a crash, “I try to keep a fairly level head about the subject,” Ellis said via e-mail. “I don’t really get why some bubble bloggers seem so excited about the very real potential for a serious economic downturn. It’s certainly not a prospect that thrills me, considering that any economic pain is likely to be felt across the board, which includes me.”

Heh… A blog with teeth. Amusing.

So like I asked in the subject… Why can’t we all just get along? You’ve got your opinion, I’ve got mine, and we each do what we think is the best given all of the information available to us. What do you care if someone else doesn’t see things the way you do?

(Frank Sennett, Spokesman-Review, 08.07.2006)

The post Why Can’t We All Just Get Along? appeared first on Seattle Bubble.

Seattle has no coherent "tax plan": Or finance, revenue, fiscal or spending plans for that matter. It hasn’t for over 20 years. A succession of irresponsible Councils and Mayors (that we insist on re-electing) seeking short term gratification has seen to that.
…
Instead of a measured, predictable tax package for very specific, prioritized needs we get an endless, open ended "all at once" debacle and xmas tree wish list that still includes money for needless things like Paul Allen SLU beautification.

Reckless tax and fiscal policies make this city that much more unaffordable for all but those who can blithely pay for our "new urban" paradise while unwittingly contributing to the very sprawl they decry: When everyone else is driven to more affordable areas outside Seattle – along with many of the businesses that employ them.

There is a direct correlation between taxes, sprawl and affordability. So many people here are in denial about that reality – you can’t simply tax, grow or densify your way to affordability and a quality city. The concepts are mutually exclusive if badly applied – as in Seattle.

Poorly applied and rapid ramp ups in taxes raise housing prices and mortgage qualifications, stagnant business growth and cause decline in real revenues as the increased taxes are eaten up by more service demands that density creates. If this continues, a city inevitably declines as demographics and businesses leave for cheaper pastures, ie, the ‘burbs.

The real bill will come due in just a few years, when the inevitable economic downturn combined with higher taxes that narrow the base and discourage businesses will bring both an actual DECLINE in tax revenues across the board and a grinding halt in City business and population growth.

With the usual Hobson’s choice of cutting services vs raising taxes even higher, setting up the potential for the classic revenue "death spiral".

An experience well documented in just about every other American city the last 30 years – including memory challenged Seattle, once again the caboose on the train of national experience.

Smugness, arrogance, delusional growth projections, pseudo – environmentalism and the attitude "its different this time" are no defense against the lessons of history.

You should really go read the entire comment.

This was cross-posted on both Seattle Bubble and Seattle Traffic.

(Face Reality, Seattle P-I (comments), 08.16.2006 )

The post Seattle: Smug, Arrogant, Delusional? appeared first on Seattle Bubble.

There are dozens of grand homes — daresay mansions — such as the Westwold in Snohomish County. Yet despite their size, these houses have gone somewhat unnoticed in a real-estate market usually characterized by new subdivisions.

From Woodway to Mukilteo to Lake Stevens, Snohomish County is home to some luxurious estates. With high bluffs on Puget Sound to the west and many lakes, the county has prime real estate for homes that rival those in King County’s upscale areas.

There are large homes along the bluffs in Mukilteo and south Everett — former Everett Mayor Ed Hansen has one. There are some grand estates on Lake Stevens, including a 10-bedroom home once described in a real-estate listing as a "castle on the lake."
…
Elizabeth Erickson, a real-estate agent and owner of Gallery Homes in Mukilteo, said luxury homes have always been something of a buyer’s market.

Pulling listing data for Mukilteo, where she does most of her business, she said that for the 22 active "luxury" listings in that city, there probably are two or three buyers at any one time. The average time those homes have been on the market is 91 days, she said.

With luxury homes and their amenities, the rich can pick and chose.
…
Large homes started popping up in the county at about the time the railroad got here, said David Dilgard, a history specialist with the Everett Public Library’s Northwest Room.

People first got rich here through land speculation, Dilgard said. A parcel in what would become Everett became exponentially more valuable when the railroad came to town in 1892.

Many unlucky speculators, however, literally died waiting for the train.

"In this area, speculative nonsense was always kind of the rule rather than the exception," Dilgard said.

I think that quote applies to a lot more than just the luxury real estate market, even if it wasn’t meant that way.

From the other side of the fence, John L. Scott himself makes the case that luxury real estate sales are climbing their way out of a post-dot-com slump.

The dominant story in the Seattle/Puget Sound housing market over the past five-plus years has been historically low interest rates leading to record first-time buyers and record home sales—primarily in the more-affordable price ranges. During this time of abundance for much of the housing market, luxury real estate sales were slowly recovering from the residual effects of the dot-com decline in early 2000, which saw luxury home sales plummet in a matter of months, causing values to fall, and a surplus of inventory to flood the market. However, time and a stronger economy have helped heal the luxury market, and 2006 is showing continued signs of improvement for the highest echelon of the Puget Sound housing economy.
…
The past few years have been a time of recovery for the luxury market, but the first half of 2006 is appearing to follow the ten-year cycle as described above by Alan Pope. The proof is in the stats which indicate that while inventory continues to rise, so too do the number of buyers and the absorption levels. Sales are definitely strengthening with a 50% increase over year ago totals. However, inventory levels are higher too. In June 2005, there were 1,428 million-dollar-plus homes on the market, compared to 1,839 available properties in June 2006. While inventory is higher, so too is the absorption of this inventory—up by nearly two percent compared to the first half of 2005. All of this points to clear indications that this segment of the market is trending upward.

The largest influence on the local luxury real estate market is the Puget Sound Economic Cycle, which is currently running contrary to much of the rest of the country because our largest corporations, such as Boeing and Microsoft, are hiring—including at the executive level. The Puget Sound region continues to see migration from California and other areas outside of the Northwest because of the economic opportunities and quality of life that is available here. Furthermore, the record sales over the past few years in the more-affordable and mid-priced housing markets have caused a chain reaction of sales that are now being felt in the high-end.

And of course for good measure, Mr. Scott made sure to throw in your daily dose of the "Seattle is Special" mantra. I should trademark that phrase. Maybe come out with a line of t-shirts or something.

Seattle is Special

(Brian Alexander, Seattle Times , 08.16.2006)
(J. Lennox Scott, RISMedia, 08.17.2006)

The post Conflicting Reports On Luxury Homes appeared first on Seattle Bubble.

Linda Peterson’s 1,200-square-foot rambler in Monroe has the same avocado-colored sinks it had when she bought it in 1975. She and her husband, David, finally replaced the shag carpet a few years ago, but few other improvements have been made.

Imagine their surprise when they received a notice from the county assessor that their property’s 2006 assessed value had jumped more than $86,000 from the previous year.

"And I’m thinking, ‘For what?’ I can’t imagine why," Linda Peterson said.
…
Snohomish County properties had an average increase of 20 percent in assessed value this year from 2005, according to a report from the county assessor.

That’s almost double the 11.3 percent increase in property values statewide, according to the state Department of Revenue. It’s also a leap for Snohomish County, which saw increases of about 11 percent in 2004 and again in 2005.

A blazing real-estate market in Snohomish County is to blame, County Assessor Cindy Portmann said.

"As long as people keep buying at these prices, market values will continue to climb," she said.

But former King County Assessor Harley Hoppe, who now helps homeowners with appraisals, property taxes and appeals through his firm on Mercer Island, thinks that assessed values are sailing so much higher not because of the market, but because of county officials.

"This is a criticism of Pierce, King and Snohomish counties. They’ve gone to the max height of the market and it’s scaring residents," said Hoppe. "It’s absolutely ridiculous. Values do not increase like this."

I agree. It is absolutely ridiculous. But unfortunately for homeowners, soaring tax assessments is a reflection of the absolutely ridiculous housing market. You know, the double-digit year-over-year gains that have been persistently trumpeted in the news outlets for years now? I’m sorry, but this story just gives me the impression that as a group, homeowners just want to have their cake and eat it too. Sorry darlin’, the real world just don’t work that way.

(Kathy F. Mahdoubi, Seattle Times, 08.16.2006)

The post Shocking: Tax Assessments Continue Climb appeared first on Seattle Bubble.

A steady stream of potential buyers flowed through a big Craftsman house a couple of blocks from Green Lake on Sunday, apparently undeterred by its $695,000 asking price.

The house went on the market Aug. 8, but listing agent Mark DeSpain of Windermere Real Estate was not taking offers until today. He was expecting to get several.

“There was a time in the last couple years when you could get away with (waiting a week to accept offers) in almost any neighborhood,” DeSpain said. Now, he said, it’s possible only in certain high-demand areas.

DeSpain is backed up by new estimates released Monday by the Seattle online real-estate company Zillow. com for the first quarter of 2006.

Zillow pegged the median home value in Green Lake at $521,916 in June — up by an annualized rate of 32.2 percent from three months earlier, compared with 16.5 percent for the city as a whole. Broadview, Wedgwood, Westlake and Windermere were up by an annualized rate of more than 40 percent.

Wait, wait, wait a minute… Is there really a neighborhood in Seattle called Windermere? I’ve never heard of it… Can someone enlighten me here? [Update: Thanks to commenter Richard, I have discovered the elusive Windermere neighborhood.]

And now back to your regularly scheduled real estate cheerleading:

Zillow showed much lower appreciation in some other city neighborhoods, and even declines in Broadway and downtown. But the city’s overall number was still impressive compared with the national increase of 6 percent.

“The market’s still strong, particularly in desirable neighborhoods like Green Lake,” DeSpain said.

“Green Lake is hot, hot, hot right now,” said Susan Ryan, a real estate agent with Coldwell Banker Bain. “The amount of money that people are willing to pay to live in Green Lake boggles the mind.”

Write that down, all you potential home-buyers out there. Real estate in Seattle is “impressive,” “strong,” and “hot, hot, hot…” Have I ever mentioned how much I love, love, love the balanced real estate reporting that comes out of Seattle’s dailies?

(Aubrey Cohen, Seattle P-I, 08.15.2006)

The post Zillow Releases Market Report, P-I Swoons appeared first on Seattle Bubble.

As the South Sound real estate market cools from overheated to warm, sellers are increasingly offering price reductions in order to speed up sales.

Real estate agents say the recent appearance of homes marked as “Price Reduced” indicates that this summer’s housing market is cooler compared with a year ago.

Last summer, the Thurston County housing market was so active that it was common for homes to sell before they were listed.

But this summer, inventory levels and interest rates are higher, and newly constructed homes continue to come onto the market, contributing to longer selling times.

In July, there were 1,633 active listings, compared with 1,031 for the same period last year, according to the Olympic Multiple Listing Service.

Some agents, though, speculate that because builders don’t always list all of their new homes, inventory levels could be much higher, in the range of 2,200 to 2,500 homes.

Obviously they’re not to the “meltdown” point yet, as the median price is still going up (although quite a bit more slowly than in King County—just 5% from January to July). But with the number of listings increasing this fast, and more new construction coming on the market every month, will Thurston be the first Puget Sound county to turn?

(Rolf Boone, The Olympian, 08.13.2006)

The post Olympia Inventory "Substantially Higher" appeared first on Seattle Bubble.

August 11, 2006–Federal Deposit Insurance Corp. Chairman Sheila Bair says federal banking regulators are still a few months away from finalizing guidance on interest-only and payment-option mortgages.

This shows that the “guidance” and any recommendations will probably not occur until some time later (as in 2007).

The post US Financial Systemic Risk: Fannie Mae & Freddie Mac appeared first on Seattle Bubble.

Name & phone number have been liquified to protect the—well, just as a courtesy. In case you are wondering—no, they are not a REALTOR®, so I guess they don’t have that pesky code of ethics to be concerned with.

Thanks to my former coworker JP for the heads up on this.

The post Spotted In Monroe appeared first on Seattle Bubble.

The "For Sale" signs are staying out longer. House prices are easing as sellers try to lure in buyers.

The big question now: Will the nation’s five-year housing boom turn into a devastating bust that could derail the overall economy?

"We recognize the risk … and we are watching it very carefully," Federal Reserve Chairman Ben Bernanke told Congress recently.
…
"So far, the correction in housing has been orderly, but there is a significant risk that this orderly correction could become more chaotic," said Mark Zandi, chief economist at Moody’s Economy.com.

"The housing market has been driven by euphoric optimism about future house price growth. That could quickly change to dark pessimism, and we could see sales and prices fall much more than expected," Zandi said.

That may be true nationally, but Seattle and the rest of Washington area continue to see double-digit growth in home prices, although there are more homes on the market than a year ago, according to the latest data from the Northwest Multiple Listing Service.

I wouldn’t mind so much if the talking points were something like "…but Seattle has not yet seen as much slowing as elsewhere." It would get a little old after a while, but at least it would be an accurate statement of fact. But instead, the local media’s line is almost uniformly "Seattle isn’t slowing now, and we’re completely immune to any serious slowdown, ever." Prices may fall significantly, but not in Seattle. It’s just not possible.

Really what it boils down to is a local manifestation of the prevailing national sentiment reported on back in April.

…71% of consumers say it is likely that a housing bubble and collapse of prices could occur in the United States within the next year. Twenty-four percent say such a housing bubble is not likely. In contrast, a much smaller number of consumers, 32%, expect the collapse of a housing bubble within their own area in the next year, and 65% say it is not likely.

You’d like to think that the people that bring us our news would be more objective than the obviously fickle American public, or that they would at least set their biases aside and just report the facts, but clearly that just isn’t the case.

(Martin Crutsinger, Associated Press, 08.10.2006)
(additions by: Aubrey Cohen, Seattle P-I)

The post Slowing Housing Market? NIMBY! appeared first on Seattle Bubble.

Home sales activity in King County is slowing compared to last year’s blistering pace. But don’t bother waiting for prices to plunge, similar to what happened to tech stocks when the late ’90s dot-com bubble burst.

While the number of homes and condos sold in King County last month is down 12 percent from a year ago, "that doesn’t mean we’re in a bust market by any stretch of the imagination," said Glenn Crellin, executive director of the Washington Center for Real Estate Research at Washington State University.

Crellin and other local housing market observers believe home prices in King County will keep climbing, albeit slower than the past couple of years.
…
Crellin said 2006 is shaping up to be another strong year for home sales in King County, even though it’s off the record pace of 2005 and 2004, which may have created unrealistic expectations for some.
…
Despite concerns of housing bubbles in some parts of the country, including California, Arizona, Florida, Las Vegas and Washington, D.C., Crellin said King County will not likely see an overall reduction in home prices, although prices of some individual properties may fall.

The Puget Sound region differs from other parts of the country where there is greater cause for concern about housing bubbles because property sales to investors — which can boost prices beyond normal appreciation levels — has not been as great here, Crellin said.

Different, different, different… Seattle is different! Wait, what’s the basis for the assertion that we haven’t had many investors? Is there any reference to solid statistics to back up that claim? Let’s see… no. I can only assume that we’re basically taking Crellin’s word on that one.

And if you think that anti-bubble chant was shrill, just wait until you feast your eyes on the gem from the Herald:

Home sales in Snohomish and Island counties dropped in July, while the number of homes on the market increased.

The law of supply and demand and even common sense would tell you that means the area’s soaring home prices finally have started to fall.

But common sense is wrong.

Median home prices in Snohomish and Island counties rose 18 percent and 19.5 percent, respectively, during the past year. And they’ll likely continue to go up for a while.

In addition, analysts said, there’s little chance here of the sort of bursting housing bubble that has pushed down home values dramatically in other parts of the country.
…
[Windermere broker Vern] Holden said he expects homes to continue to appreciate in this area.

"I don’t believe we’ll see a bubble," he said. "We have a limited amount of product on limited land in a desirable area with a strong economy. We are a port community, we sit on a north-south corridor. We have manufacturing, we have technology and all sorts of amenities for people. We’re lucky. We’re doggone lucky."

Phew! Oh man, we are lucky. No other place in the entire country is desirable, has a strong economy, and amenities! Let’s hear it for the super special Puget Sound and the death of common sense! Woo!

(Clayton Park, King County Journal, 08.08.2006)
(Mike Benbow, Everett Herald, 08.08.2006)

The post Two More July Anti-Bubble Reports appeared first on Seattle Bubble.

The post Greed at all costs appeared first on Seattle Bubble.

Home sales in western Washington fell for the fifth straight month in July, as year-over-year prices continued their impressive double-digit growth, according to the latest report from the Northwest Multiple Listing Service.

Brokers reported 8,496 sales last month, down 15 percent from a year earlier when 9,999 sales were recorded, according to MLS statistics. Realtors report that the consistently rising inventory has been a major factor in the sales slowdown.

Area-wide there are about 9,000 more listings now than at this time a year ago, NWMLS reported.
…
Although both prices and inventory are up compared to a year ago, J. Lennox Scott, chairman and CEO of John L. Scott Real Estate, emphasized the importance of keeping those figures in perspective.

“One year ago, King County (Seattle) had only 1.7 months supply of housing inventory available; today we have approximately 2.3 months of available inventory,” Scott said. “While this represents an increase, we are still well below the national average of five to six months. This is especially true in the markets close to the job centers where competition and demand for homes are still strong, causing prices to continue to appreciate at a steady pace.”

D’Ann Jackson, president of the Seattle-King County Association of Realtors and the broker at John L. Scott’s Mercer Island office, expects the market will continue to level out. Commenting on the slower sales, she said, “I think buyers who entered the market a little later this spring either bought already or got frustrated with the lack of inventory and multiple offers.” Move-up buyers are having difficulty finding the right properties, she observed, noting some are spending more to get “at best something comparable,” and others may be waiting until after vacation to resume their search.

Of course, they still managed to slip in a few of the usual qualifiers. I love how they try to explain fewer sales than a year ago by saying that buyers are “frustrated with the lack of inventory,” which happens to be significantly higher than it was last year. Also, I wonder if Mr. Scott will ever get tired of the “strong demand around the job centers” line that he’s been using rather frequently since May. I know the news outlets won’t get tired of quoting it.

Anyway, nobody worry. Our inventory is still “well below the national average,” and we’re just “leveling out.” Sales will pick back up when buyers get back from vacation, or recover from the heatwave… or… something.

(Inman News, 08.08.2006)

The post Even Inman Acknowledges Seattle Slowdown appeared first on Seattle Bubble.

We haven’t actually lived in any of these places. We’ve only bid on them. And lost. In this housing market, we’ve tried to tell ourselves that we shouldn’t get attached to any of the houses we bid on. The chances of actually getting one seem so low … . And yet, how can I even think about bidding that much money on something I am not actually attached to? Just writing that check for earnest money is enough to make me sweat. Would I write a check that high on something I only had lukewarm feelings about?

And, of course, there is the time spent with the house itself. First I visit. Then I visit again and in our case there is at least one more visit to bring the parents by. By this time, I have usually mentally painted every room in the house, placed most of the furniture and planted a few flowers.

The housing market. It’s taken many sweet memories away from me, even if they are technically memories of things that haven’t yet happened. We’ve gone through four real-estate agents. Our social life has been completely stifled because we spend all of our free time driving around, looking for a place to live. And friends who say “you’ll find the house you’re meant to be in” are wearing us thin.

After we find one, we usually spend some time in a local coffee shop writing out the offer. The amount of money we are willing to spend has shot up dramatically from when we started this process. We sign page after page of legal documents, wondering if this will be our last offer, or if we are only just beginning.

I can understand getting a little attached to a home that you’re hoping to get, but when you let that emotional attachment become your driving force, you become a part of the problem. I would like to buy a house, but while the price of homes has shot up in the last few years, the amount of money I’m willing to spend has barely increased at all. What possible justification could I have to allow it to “shoot up dramatically” other than sheer emotion?

A home is worth a certain amount of money to me. If home prices don’t eventually come back in line with my expectation of their worth, I will either never buy, or move to a land of reasonable value. I won’t play the “keep on jacking up your offer prices” game. Forget that.

(Wendy Lawrence, Seattle Times, 08.04.2006)

The post Emotionally Attached appeared first on Seattle Bubble.

“I have a keen interest of Ethics in Business, particularly real estate. A good portion of my comments, questions and posts are with this in mind. And, frequently, our office comes across ethical issues that we encounter or observe from clients, loan officers and Realtors that we work with everyday.”

– Tim Kane (Blog handles: anonymous, Tim, S-Crow, Chief Errand Boy)

Consumers get the short end of the stick.

Title Insurance is a necessary function in the purchase or sale of a home. I’m posting this topic here and also over at Rain City Guide (a blog predominantly for Realtors and other professionals who work in the industry). It will be interesting to get commentary from both sides. Realtors don’t really hang out much or at least post comments in the open at Seattle Bubble and consumers don’t really comment that often at Rain City Guide. If only a few consumers new to home buying learn a little about title insurance, then I’ll be happy. I believe this will be educational for everyone.

Background:

Title Insurance is one of the least understood, yet one of the most expensive closing costs consumers will encounter in a purchase and sale of a home. Recently, title insurance companies have been under significant pressure to clean up their act. Many state investigations (insurance commissions or Attorney Generals), including here in Washington State, have looked into and filed cases against title insurance companies for alleged kickback schemes involving real estate brokers, lenders and builders. Many high profile cases have led to significant settlements with title insurance firms.

I hope to post the issue simultaneously on both blogs so that, if people are interested, you can get quite a glimpse into how both consumers and Realtors address the issue.

Many facts I’ll present are eye opening, controversial and alarming. Title insurance is huge business. Huge. Realtors, lenders and builders steer clients to affiliated business relationships (ABR’s) they have, including title companies. It raises questions that I’ll try to answer:

• Are affiliated business relationships created with consumers best interests in mind or is it used to steer/control another profit center in the revenue generated by the transaction?
• Why do title insurance companies never advertise to the public?
• Why is title insurance so expensive?
• Why do only four or five title insurance companies have a stranglehold of 92% of the entire US market?
• Why does the maverick State of Iowa ban title insurance companies? And how can they self insure at half the cost of title insurance firms in other states?
• If you own a home, did you shop for insurance or were you steered by the agent, builder, lender or escrow firm you worked with?

In the quest of my “Consumer Driven” mantra, stay tuned.

The post Title Insurance: Kickbacks, Competition & Prices appeared first on Seattle Bubble.

Snohomish County’s apartment market is feeling the squeeze, with the second-quarter vacancy rate dropping from 5.6 percent in the first quarter to 4.6 percent, according to apartment research firm Cain Inc.

The Seattle-based firm attributes the healthy rental market to continued job growth, inmigration and housing costs.

“The widening housing affordability issue caused by higher interest rates and surging home values is making renting the only housing option for more and more people,” the company said in its quarterly report. “Yet, since the rental market has been flat for the past five years or so, renting is attractive and affordable to many.”
…
While Snohomish County’s vacancy rate of 4.6 percent bettered King County’s 4.8 percent, King County enjoyed a dramatic decrease in concessions, from $18 to $9. Snohomish County’s declined from $12 to $9. At this rate, overall concessions should disappear by the end of the year, according to Cain.
…
Throughout Snohomish and King counties, a total of 223 newly constructed units were added to the inventory during the second quarter of the year. At the same time, however, 401 units were removed from the inventory through condo conversions in Everett, Kirkland, Issaquah, Seattle and Federal Way.
…
“We anticipate that the 2 percent quarterly increase in rent levels that we have experienced this year will continue through the remainder of the year,” according to Cain.

With interest rates on the rise, and year-on-year home appreciation still in the double digits, renting still looks like a much better deal to me. I’ve been reading anecdotal tales of commenters here of rent increases anywhere between 4% and 10% in their latest lease renewals. In Monday’s open thread Peter Taylor made the following comment:

Housing isn’t affordable in King County, period. Renting is getting more expensive and home prices are bordering on insanity. Personally, I’ll wait it out a while longer but if there’s no change in the next year or so I’ll be pulling up stakes and finding a job and a home in a more affordable area of the continent. Maybe even another continent.

Seattle’s quality of life isn’t so great that I’d pay outrageously to live here. There are those that will, however, and I have no intention of competing with them to see who the bigger fool is.

I wonder how many people in the Seattle area feel the same way. I wouldn’t say I’m quite to that point yet, but if the affordability level of Seattle continues to get worse, I can easily see getting there. Why pay luxury prices for slightly above-average goods?

P.S. (For those of you keeping score at home, five out of the fourteen paragraphs in the linked article end with the same phrase: “according to Cain.” That’s a 35.7% “according to Cain” usage rate, according to Cain.)

(SCBJ Staff, Snohomish County Business Journal, 08.01.2006)

The post Rents Climbing In 2006 appeared first on Seattle Bubble.

Here they come folks! When the market is hot the real estate gurus on the hotel circuit start buying full page ads in the papers. You know the type: Carlton Sheets, David Allen’s “Creating Wealth….Seminars”, Bobby Blair Systems, William McCorkle (federal prison now) and the all the others…

When the market is turning, here they come again—changing their spin. Inferring that the market is getting tough and there are bargains to be found, today’s Seattle Times full page ad on the back side of the business section states:

“How to find real estate for 30%-50% below market value.” – ad for J.G. Banks, legendary probate investor.

Everyone is invited. It’s free!

Regards,
S-Crow

The post Coming Next Week! How to buy real estate 30-50% off! appeared first on Seattle Bubble.

Yesterday, I took my son to the dentist. Busy reception room. You get the picture– kids sprawled on the floor with toys and books and one child playing a video game. A couple parents were sitting next to me. The conversation between them was about housing. Both ladies were discussing buying property to fix up and sell. About five minutes into the conversation another lady started to talk about “horrific “real estate prices etc….I was a classic scene right out of Seinfeld! It was like Jerry’s parents arguing with George’s parents.

The back and forth about this and that was hysterical. I just buried my head in my National Geographic magazine and listened.

Sound familiar?

At Home Depot

This past Monday I went to Home Depot to get some blocks for a small project at our house. While in the checkout line I listened to two contractors talk about the hot market. I was tempted, but elected to stay out of the conversation.

As I mentioned in earlier threads, there are a lot of people that seem to be “out of the loop” for a lack of a better term regarding tracking the market in a meaningful way. There are cases where I just itch to get in on the conversation. But, sometimes it’s more interesting to be the bug on the wall, per se.

Real Estate talk is everywhere: coffee shops, super markets, dentist offices, etc….

What’s your story? Been to open houses lately? What’s the chatter? I’m sure you all can share some intersting situations. Perhaps some funny ones too.

The post Real Estate Talk: It’s everywhere and funny! appeared first on Seattle Bubble.

“The interest rate on their mortgage had risen to 9.5 percent, from 3.5 percent three years ago. They didn’t have the equity or good credit to qualify for refinancing at a lower rate.”

This quote was from Ben’s ‘the housing bubble’ blog this morning and it perfectly illustrates the misconception that I hear all the time: “my interest rate is adjusting soon, but can only go up or down by the 2 % cap.” Sort of. Keep reading your promissory note!

The error in understanding is due to focusing on just one cap rate. But there are two. One cap rate is the maximum rate the loan can achieve, the ceiling–usually 5-6% over the start interest rate. The other cape rate centers on how much it can adjust each adjustment period, typically no more than 2% up or down. But here’s the kicker: the 2% cap rate is triggered ONLY AFTER the 1st adjustment period. Thus, your interest rate can skyrocket at the first adjustment all the way to the maximum full interest rate cap (ceiling) on the note.

In the above scenario you can see the borrowers recently hit their 1st adjustment period and were shocked that the rate adjusted up to the full 9.5% ceiling, which was 6% over their initial starting interest rate.

Head up to the attic and find the box where your closing papers are and start reviewing your promissory notes so you can plan accordingly. Loan programs vary and the above scenario may or may not apply to your situation.

The post Interest Rate Change Misconceptions: Cap rates appeared first on Seattle Bubble.

To help borrowers qualify for a home loan and to get payments in line with a lenders loan program, it is necessary for the taxes and insurance to be dropped as a portion of the monthly payment. The term PITI (Principle, Interest, Taxes & Insurance) does not apply to throngs of borrowers across the country. For many today, the term is “I”. They only pay the interest, literally.

For borrowers that could not qualify under the lowered standard of just Interest only(but still pays taxes and insurance as part of the monthly payment) , some lenders dropped it lower and eliminated the taxes as part of the payment. The line in the sand was drawn: either qualify this way, or, no new home.

The lending standards of “low, lower, lowest” gave me a chuckle. It reminded me of the Seattle Mariner vetaran pitcher Jamie Moyer who baffles batters with his slow, slower and slowest wizardry of pitches.

But where does this leave the borrower? Obviously, they must budget for paying property taxes on their own. Taxes are not cheap. If a borrower is stretched to the limit without property taxes included in their mortgage payment what is the probability of budgeting and paying property taxes when due? Many probably won’t, or can’t.

Today, in the Orange County Register, county officials announced that property tax delinquencies have reached an 8 yr high while sending out bills to the sweet tune of $3.8 Billion in tax revenue, the largest bill for property owners in 15 yrs. Well, it’s not a big deal in Organge County. You can skip payments for 5 yrs before they can take your home—if the lender doesn’t beat them to it.

The post Pity for those with no "PITI"? appeared first on Seattle Bubble.

Click to enlarge

And here’s the money quote from the write-up:

Nontraditional loan products can be appropriate for financially savvy borrowers with low credit risk. Indeed, many of these products have been offered for years to such borrowers, and credit quality generally has been good. What has changed, however, is how these loans have been marketed and used in recent years. Lenders have targeted a wider spectrum of consumers, who may not fully understand the embedded risks but use the loans to close the affordability gap.

The degree to which mortgage market innovation, fueled by significant MBS liquidity, boosted home sales last year is unknown. Anecdotal evidence suggests that affordability and financing played a strong role in extending the volume component of the mortgage credit cycle last year. For example, there is a correlation between nontraditional mortgage loans and home price growth. An analysis of state-level data from LoanPerformance Corporation shows the penetration of IOs and pay-option ARMs for nonprime borrowers into areas with strong price appreciation and reveals a strong positive relationship between the concentration of such loans and home price growth (see Chart 4). This analysis illustrates the recent development of borrowers increasingly using IOs and pay-option ARMs to purchase homes they might not otherwise have been able to afford. A June 2006 study by Harvard’s Joint Center for Housing Studies also confirms this trend.

Analysts are concerned that higher-risk borrowers are more likely to be affected by a major payment shock during the life of their mortgage and may be more likely to default. Compounding this possibility is the fact that the increasing availability of mortgage credit is occurring at a time when mitigating controls on credit exposures have weakened.

A number of readers agreed with the FDIC’s statement. You would expect that more “nontraditional” mortgages would mean more defaults (and therefore more foreclosures). However, that hasn’t really panned out in Washington State (yet). Although we’re 6th-highest on the graph above, with around 55% of mortgage originations being nontraditional, we are down at number 18 for foreclosure rates, with 1 for every 1,460 households. Not only that, but as reader Christina pointed out, many of the states with the fewest nontraditional mortgages have surprisingly high foreclosure rates. (For example, Texas, Indiana, Ohio, Oklahoma, and Tennessee all have less than 30% nontraditional mortgages, but higher foreclosure rates than Washington.) Christina asks:

I want to know why on the chart of negatively amortizing loans, the states on the low end of the line have the highest percentage of foreclosures.

Sarah gives a possible explanation:

Christina- here’s my guess, those areas did not appreciate as wildly as some others, so people were not able to unload as quickly and for ever greater amounts of $ and wound up in foreclosure.

CA foreclosure rates have only recently been starting to go up, now that the market has finally turned there.

It’s the areas with the greatest amounts of appreciation that were forced into using the neg am loans as houses became increasingly unaffordable.

But the flip side of that is that those same areas, for a time anyway, were able to sell homes quickly and at a profit to avoid foreclosure. Since everyone was on the mania train and there were buyers aplenty.

As the market turns, my guess is they’ll be plenty of foreclosures in the most egregiously overpriced markets, Seattle included.

I agree with Sarah’s analysis. The big question is what will happen if/when appreciation levels off (or heads into negative territory), while interest rates continue to climb. I’ll leave that as an exercise for the reader.

(FDIC, Summer 2006)
(Press Release, RealtyTrac™, 05.16.2006)

The post Majority Of New WA Mortgages "Nontraditional" appeared first on Seattle Bubble.

“According to a new report by the Mortgage Asset Research Institute, “stated-income loans” deserve their nickname of the “liar’s loan.” MARI says that almost 60% of the stated-income amounts are exaggerated by more than 50%.”

Is this for real? Does this suggest that nearly 60% of those borrowers who “stated” that their income was $8000/mo., really made $4000/mo.?

The post "Stated Income" Loans = Liar Loans? appeared first on Seattle Bubble.

There have been a few comments recently requesting additional features on Seattle Bubble, such as something similar to “Flippers in Trouble” or “Lowball!” seen on other blogs. While I would love to add such content to Seattle Bubble, my time is limited (it’s not like I’m getting paid for this). However, my invitation still stands for anyone who would like to join up as a contributor to Seattle Bubble. So far S Crow is the only person to take me up on the offer. Just shoot me an email if you’d like to become a team member of Seattle Bubble.

Of course, I will be maintaining a certain standard for posts on this blog, so I reserve the right to revoke posting privileges of anyone if I don’t feel that they’re meeting those standards.

The post Blog Format Notes appeared first on Seattle Bubble.

“‘I’ve never seen a soft-landing in 53 years, so we have a ways to go before this levels out,’ Countrywide CEO Angelo Mozilo said on a Tuesday conference call. ‘I have to prepare the company for the worst that can happen.’”

Of course, we all learned that Washington Mutual announced late last week that it sold it’s entire government mortgage servicing business and a portion of conventional portfolio to Wells Fargo.

How else can you comment on that? Speaks for itself. We all can take MSM for what it is, but the proof-n-the-puddin’ is not what is said (except for a transparent CEO at Countrywide), but rather watch what the CEO’s and Corporations do!

The post "I’ve never seen a ‘soft-landing’ in 53 yrs" appeared first on Seattle Bubble.

Well, Sue hates me. Actually, just teasing. But, she thinks that my picture of Mt. Rainier is rather boring and may not add to this blog. Geez, who couldn’t take a shot of Mt. Rainier with a warm and clear evening like we enjoyed. It was staring me right in the face and I have a good interest in photography even though I’m a beginner.

Sue and others would like to bring up actual cases of problematic loans, days on market, price reductions etc….and cases where people have a probability to go delinquent. I’ll tap more into this discussion as the blog evolves.

Two key points to internalize:

1) The first is that a change in market psychology is well underway here locally. For example, just months ago, as late as Fall of 2005, our market had virtually no price reductions at all. It wasn’t on the radar. The very fact that we have price reductions in listing prices confirms that the real estate community understands this. Price reductions are now common place, incentives from builders are common place and there are some instances where sellers are offering more of a sales commission than normal. For example, a listing may give notice that there is a sales commission bonus of $1000, if a full price offer is accepted by a specific date.

The market change is being felt by Realtors and allied real estate professionals we work with out in the market place. It is being talked about. It is being addressed in staff meetings and is being discussed by various national r.e. speakers that cater to the Realtor community.

One of the very first clues of this was the title of seminar put on in Seattle from national real estate sales trainer, Brian Buffini, earlier this year: “how to survive in a changing market.” While I’m not a licensed agent, it was telling that a sought after sales trainer was even discussing the market change to those he serves.

2) My gut feeling is that there is a large pool of potential buyers that have no idea of the realities of the market. This is just an observation and no fault of their own. The world (and I’ll have tomatoes thrown at me about this from our friends in the business) does not revolve around me, real estate and sales folks. People have lives to live, work to do, family to tend to, people to visit, and real estate is NOT on the radar in the manner in which many believe.

People are worried about other things: car payments, vacations, a sick family member, world events (I’m concerned about the impact of middle east turmoil for one), sporting events, school, etc…

The take away here is that the psychology is changing, and there is a new medium, called blogging, that when real estate is on the radar for consumers, they can get information that they did not have readily available during the last bona fide market change in our area. And this new medium will continue to have a major impact on the scale and swiftness of the unraveling of the markets across the country.

The post Sue hates me: not really, but she and others want the dirt. appeared first on Seattle Bubble.

Photo: Tim Kane -July 25th, 2007, 8:30pm.

Hello Bloggers. Gosh, I have a bunch of topics to discuss. No time this evening but here’s a quick sneak preview of what’s on my mind:

1) Today’s above the fold front page headliner in today’s Herald:
“DIG DEEP: New Homes Top $500,000K“ (emphasis Herald).

2) This evening in south Everett I had the unique pleasure of discussing housing with Banner Banks’ Chairman, President & CEO (including mingling with Bank Directors & VP’s.) It was quite a fun discussion. Oh, and their stock hit a 52 week high today. Full disclosure: Our company, Legacy Escrow Service, Inc., trust account is with Banner Bank but I hold no stock in Banner Bank.

My topic is: “Suits vs. a guy in shorts (me): Puget Sound Real Estate is poised for more growth.”

3) “Appraisers sound off & it’s not pretty.”

4) Artificial Appreciation Revisited & Confirmed: Closing cost contributions offset by seller price escalation.

5) Affiliated Business Relationships in Real Estate: it’s costing consumers a bundle.

6) Title Insurance: Why one state banned Title Companies, issues its own state backed insurance for its citizens who are taking the savings to the bank.

Any one of these topics you would like me to address sooner than later? Or, you can tell me, “I don’t give a rip.”

I’m game for other topic suggestions on insider questions anyone may have. Both selling or purchasing for that matter.

The post Topic Previews appeared first on Seattle Bubble.

Q: Our home has been listed for sale with several different realtors for almost two years. We have reduced the asking price by about $35,000. It still hasn’t sold. All the realtors who inspect our home say how nice it is. But we have received only two purchase offers and they both involved taking other houses in trade. We want to sell for cash and move to a better climate. However, we’re not going to give our beautiful home away. Any suggestions how to get our home sold?

Wow. It’s pretty hard to imagine that same column being written in 2006. Even if a home listed in 2004 was overpriced, it probably would have looked like a bargain by late 2005, without any reduction in price. When was the last time you saw a nice, relatively well-priced house sitting on the market for more than a few weeks? I don’t think it used to be such a rare occurrence, and it seems likely that it will soon be common again…

The second question is even better, coming at you from August 1991:

Q: How much below the asking price should we offer for a home which we want to buy? Last week we saw a home which will be perfect for us. We are now in the process of pre-qualifying with a mortgage lender to be sure we can afford to buy it. If we decide to make an offer, how much below the asking price should we offer? The real-estate agent says it is a bargain at its full asking price. We agree. Once this house hits the multiple listing book in a week or so I’m sure it will sell quickly. Should we offer the full price to be sure we get the house?

A: Never offer the full asking price. Well, almost never. Unless you offer less, you will never know at what price the house could be purchased. Please believe me there is no worse feeling than to have the seller accept your first offer. If that happens, you know you probably could have bought for less if you had offered less.

It’s almost funny to imagine that there was a time when “always offer under the asking price” was considered sound advice. Of course, real estate enthusiasts would have us believe that we’ll never see such a time again—that double-digit appreciation will slow to 4-6% appreciation, demand will be strong, and prices will keep going up, up, up, forever and ever, amen!

I predict we’ll be reading columns that bear a striking resemblance to those above within the next five years.

(Bob Bruss, Seattle Times, 11.14.1993)
(Bob Bruss, Seattle Times, 08.11.1991)

The post Memories: Stale Listings & Low-Ball Offers appeared first on Seattle Bubble.

I am generalizing from the 100’s of homebuyers I’ve met, plus the watercooler talk from the many agents I’ve known, and I know that buyers list of “wants” quickly become “needs” and color their entire search.

Granite countertops, restaurant-quality stainless steel appliances, custom tile and other finishes, hardwood or bamboo floors, perhaps some skylights, high ceilings, designer fixtures, a master suite with a separate bath, 2000, 3000, 4000 or more square feet, a two or three-car garage, huge yards, the list goes on and on. Larger homes, larger lots, further and further away from the city.

There is still plenty of room right in the city limits to build attached homes, cottage homes, townhomes, cozy, sustainable homes, yet many people don’t want them, and they’ll drive 50 miles away from the city and mortgage themselves to the hilt to get them.
…
Are Americans spoiled?
…
What is this about? With increased concerns about the environment, why this consumer-driven drive toward conspicuous consumption and wealth? Why this sense of entitlement? Why is the Street of Dreams one of the most highly attended events of the year?

Obviously, this is a huge topic best addressed by sociologists, but it’s my observation that these attitudes are pandemic in our society and cannot be sustained for much longer. Hence the upward spiral of prices and increasing anxiety on the part of buyers, builders and politicians.

Marlow raises some interesting points and poses some good questions. Are American’s spoiled? I say heck yes—it’s not even a question. Personally, I’d like to own a home, but I don’t have any sense that I deserve to. The reason I’m sitting out of “the market” right now isn’t that I can’t afford to buy the home I want or that I think I deserve, it is because I’m of the opinion that even modest homes are ridiculously overpriced. But I digress.

I definitely agree with Marlow that the prevailing attitude of entitlement cannot be sustained for much longer. What is it going to take to collectively snap us out of it? It seems to me that a painful bubble burst might do the trick, but what if the real estate talking heads are right, and that never happens?

(Marlow Harris, Seattle Real Estate Professionals, 07.19.2006)

The post The Insatiable Homebuyer Appetite appeared first on Seattle Bubble.

Perhaps as a sign that folks are starting to care, the shares of mortgage-insurance underwriter MGIC Investment (MTG, news, msgs) sank 5% on July 18, despite its win at “beat the number.” This is a bit of the linkage I’ve been looking for, in terms of potential rot from the housing sector spilling into the financial sector.

In other words, some folks are beginning to rethink the notion of loans against homes as impregnable assets. In my opinion, any company that has profited by aiding and abetting the housing ATM is in trouble — and at serious risk, if it has a leveraged balance sheet with its assets being loans to houses.

I make those comments based on what I can see has gone on, and I’m sure that lots of unusual business practices have gone on that we have no knowledge of. Just as we didn’t find out about Enron, WorldCom, options-backdating, etc. until the tide went out, we have yet to discover what borderline, if not outright criminal, behavior occurred in the housing mania.

When the stock market begins to connect the dots and that recession looms, all hell is going to break loose. Exactly when that occurs, I do not know, but it’s coming.

Large financial players have been doing a lot of hedging behind the scenes. Last week Seattle’s Washington Mutual announced it sold $140 Billion worth of it’s entire government and part of it’s conforming loan servicing portfolio to Wells Fargo.

Remember the old saying, “watch what people do, not what they say” —about the markets. I regularly get reports from my brother who lives in Massachusetts and travels around New England regularly—said over the weekend his wife’s co-worker’s house has been on the market for months and now has gone into default. In his classic accent, “the maaaaket is wicked bad. No one is buying.”

I get the feeling the Seattle area R.E. markets are really going to do much better than I initially expected. Will this S-Crow be eating crow or are we lagging far behind other markets around the country?

The post Dry Rot: Rot from housing spreading to financial sector appeared first on Seattle Bubble.

David Wilson lives in Fremont, Dan Griffiths and Mary Anne Lyman in Tacoma. Andrew Chen’s home is in Newcastle, Roxann Harr’s in Auburn, Nancy Andersen’s in Federal Way.

They all work for the same insurance company — in Enumclaw.

They’re living, breathing examples of a demographic reality the U.S. Census Bureau has quantified for the first time:

Despite the dramatic surge of new jobs in suburbia over the past three decades, most people in this and other metropolitan areas don’t work in the same communities in which they live.
…
Lack of affordable housing in some of the region’s job centers is a factor. But there’s much more at play.
…
More than 70 percent of Enumclaw’s working residents commute to out-of-town jobs. And more than 70 percent of the people who work in Enumclaw live somewhere else.
…
Some say they don’t live in Enumclaw in part because housing there is too expensive. Nancy Andersen, who commutes from Federal Way, talks of a dumpy rental house near the insurance company’s office that’s on the market for $900 a month.

“That’s outrageous to me,” she says.

Randy Bannecker, housing specialist with the Seattle-King County Association of Realtors, says lack of affordable housing prevents many people from living where their jobs are.

“Typically, people want to live closer to work,” Bannecker says.

I know that living close to work is a high priority for me, but I’m actually not convinced that’s the case for most people. Maybe I’m off-base here, but I think most people base their idea of a desirable neighborhood primarily on touchy-feely things, with logical considerations like proximity to employment (and even affordability) being more of an afterthought.

People want to live in a neighborhood that “feels safe,” “feels friendly,” and looks nice. If they have kids, the reputation of the schools is a big consideration. Well-manicured lawns and smiling friendly neighbors (but not too friendly, we value our privacy after all) make a neighborhood “desirable,” and if it’s affordable and/or close to work that’s just a bonus.

…which is why people will pay through the nose to live in Ballard, even though they may work in Redmond.

(Eric Pryne, Seattle Times, 07.22.2006)

The post NewsFlash: Living Close To Work Not A Priority appeared first on Seattle Bubble.

“No matter what you’re selling, conventional wisdom is that the FUD Factor (fear, uncertainty and doubt) tends to freeze buyers in their tracks.” He goes on to say that,”If we do a good job of telling our story, I think prospects will realize it’s a time to buy, not a time to stall.”

Certainly real estate will be purchased and sold in any market. Does he have a good point?

The post Contrarions guilty of the FUD factor: fear, uncertainty, doubt appeared first on Seattle Bubble.

Owning a sports franchise is like buying a Monet painting. The immediate payoff is psychological, not financial; in fact, ownership is likely to be a financial drain. A work of art doesn’t pay interest; it does generate expenses for security, insurance and preservation. The financial payoff comes when it’s sold — if a buyer can be found who is willing to pay more than the original purchase price and accumulated losses.

In other words, the Greater Fool Theory — which is what the Seattle real estate market is based on these days. People are paying outrageous prices for homes, even properties they know they’ll have to pour money into for renovation or upkeep, with the expectation that when it’s time to sell, they’ll be able to recoup their purchase price and those remodeling and maintenance expenses by finding a Greater Fool who will pay enough.

As long as an owner has confidence the pool of Greater Fools has not been drained, the issue becomes whether there’s enough psychological benefit from owning a team, a house, or a Monet to put up with the losses — and the wallet is thick enough to endure them. The former Sonics ownership group decided the trade-off wasn’t worth it, especially when a live one showed up on the doorstep, checkbook in hand.

I think Bill may well be the first person in the “mainstream media” in Seattle to actually openly admit that. Kudos, Bill.

(Bill Virgin, Seattle P-I, 07.20.2006)

The post Real Estate Insight Hiding In Sports Talk appeared first on Seattle Bubble.

Not that long ago, when the Pacific Northwest was the nation’s economic wallflower, adding 9,200 jobs in Washington over a three-month period would have been cause for celebration — or at least hopeful smiles.

But Tuesday’s jobs report, which showed payrolls in the state grew by 3,800 jobs in June and closed out the second quarter with a 9,200-job net increase, was more evidence that Washington’s economic engine has shifted into lower gear.
..
In the fourth quarter of 2005, Washington’s jobs base jumped by 41,100; in the first quarter of this year, it grew by another 32,200 jobs.

In contrast, the 9,200 jobs added in the second quarter seemed a bit, well, underwhelming.

The reasons aren’t hard to find. Rising mortgage rates have made the region’s homes even less affordable, which has cut into housing demand and in turn slowed hiring in construction trades.

Each month from September 2005 to March, the construction sector added more than 1,000 jobs; from April to June, by contrast, construction added just 300 net new jobs.

Underwhelming, but certainly not unpredictable… As real estate continues to slow, the jobs market is likely to slow as well. 3,800 new jobs created across the state last month is decent, and it would be nice if that rate of economic growth continues. I just don’t think that it will. If the number of home sales continues to drop, we will soon find out just how much of our economy is based on selling each other homes.

(Drew DeSilver, Seattle Times, 07.19.2006)

The post Job Growth: 71% Shave From 1st Quarter appeared first on Seattle Bubble.

Rising interest rates have cooled the housing explosion around much of the country, but in the Puget Sound region, real estate remains king.

And the queen is the over-the-top but never disappointing model home.

I’m not referring to the minipalaces laid out in the Seattle Street of Dreams — although a step through the annual event’s custom doors begs the question of whether affordable housing exists anymore.

I’m talking about the model homes showcasing the miles and miles of new housing developments springing up along the Interstate 90 and Interstate 5 corridors. From Seattle to Puyallup to North Bend and back, developers are building for the hordes to come.

And they’re coming. This region remains desirable for jobs and livability. And despite the jaw-dropping housing prices, on sunny weekends throngs of home shoppers wander in and out of model homes like they’re touring art galleries.

Expect this trend to continue as Sound Transit and the possibility of light rail turns the suburbs into attractive urban-like enclaves.
…
If cars evoke who we are today — SUV’s for the hip and fertile, Buicks for the conservatives and mini-Coopers for the aspiring gazillionaires — houses are being built to reflect who we aspire to be. We hope someday to be the hobbyist puttering around the hobby room or the fitness buff splayed on a yoga mat in the garden room. We want to be the grande dame gliding down the winding staircase to greet a guest in the two-story foyer.

And thanks to the miracle growth of real estate, many of us can. The aphorism that a rising tide lifts all boats is a principle at work here. People are using equity in existing homes to move up. Median home prices in King County shot up 16 percent last year. Try to mimic that on Wall Street.

There are drawbacks. Any gold rush inevitably leaves someone in the dust. The future may be rosy for some but for others it may consist of laboring underneath zero-down, interest-only, short-term ARMs, one of many creative and scary mortgage packages out there.

I’m just going to let that one speak for itself.

(Lynne Varner, Seattle Times, 07.19.2006)

The post Probably Not A Minority Opinion appeared first on Seattle Bubble.

Title insurance is big business and exceptionally lucrative. Real estate online news source, Inman news, reported earlier this year that in comparison to homeowners insurance or medical insurance where two-thirds or more of the premium actually goes to pays claims, title insurance claims are under 10% of premiums collected.

Title companies, builders, lenders and real estate brokers have been under scrutiny this year by HUD and several states (Washington, California, Colorado, New Mexico among others) due to the proliferation of setting up what are called captive reinsurance companies or other affiliated business fronts created to skim referral fees off the backs of consumers.

Earlier this year several of the most prominant title companies and parent companies that operate around the country and in our market have settled these alleged cases without admitting any wrong doing. Naturally.

It pays to shop and discern fees for title, escrow and lenders when buying AND selling a home.

Ethics in real estate. Is it an oxymoron?

The post Real Estate Kickback Schemes Marches On appeared first on Seattle Bubble.

After years of perceived slights, King County Executive Ron Sims is extending an olive branch to the county’s rural population: a three-part proposal to give rural businesses a regulatory break.

The legislation is still in its infancy, but after citizen comment and one or two rewrites, it could result in small but helpful code revisions that would make operating home-based businesses and animal-care services a lot easier in rural King County, executive staff members said Monday.

The proposal is the result of a series of meetings with rural residents, many of whom were upset with the 2004 regulation known as the “critical area ordinance,” which required rural property owners to leave up to two-thirds of their land in a natural state.
…
“We’ve been reluctant to increase the kind of housing we allow, but this strikes a good balance,” said Sims’ senior policy adviser, Karen Wolf. “We’ll get some public input on this, but we think it does the trick.”

“The trick” likely being to appease the populous just enough that they perhaps do not vote for Initiative 933, which is intended to:

…protect the use and value of private property while providing for a healthy environment and ensuring that government agencies do not damage the use or value of private property, except if necessary to prevent threats to human health and safety.

I doubt the paltry efforts of Mr. Sims are likely to affect the success of the initiative, but I also don’t know whether the initiative will really affect home values. What do you think?

(Amy Rolph, Seattle P-I, 07.18.2006)

The post Land Use Regulations To Loosen? appeared first on Seattle Bubble.

“We’ve built an entire economy on selling each other homes.” – Rich Toscano

The post New Enonomy: selling each other houses appeared first on Seattle Bubble.

2005:
April 1283 (Median $283,250)

May 1165 (Median $287,000)

June 1473 (Median $295,000)

2006:
April 1134 (Median $331,254)

May 1133 (Median $339,950)

June 1347 (Median $350,000)

The rise in median prices are remarkable YOY & MOM and that’s with less sales and rising inventory in 2006. That is one whale of an increase in median price any way you look at it.

To bears, is this a clear sign of irrational appreciation? To bulls, is this a sign of or result of continual economic health? Some experts are predicting a more modest single digit appreciation for the remainder of 2006 in our Puget Sound area market.

The post Pinpoint Stats: Snohomish Co. appeared first on Seattle Bubble.

It’s Summer.

Lot of projects are underway for many homeowners. For those considering homeownership, perhaps one of the strategies for buying a home is to consider a fixer.

Sweat equity is one way to produce equity the old fashioned way. It requires time, hard work, a creative mind, tools, money and some know how. If you end up doing a good portion of the work yourself vs. hiring contractors you will save a lot of money and gain equity in the value of your home.

Consider buying a fixer.

I’ve never purchased real estate other than a fixer. Initially it was by necessity. I had to buy piece of junk in Ballard or we were going to continue to rent. After our second fixer in Edmonds, we purhased the fixer we currently reside in out in Snohomish and it’s been a very long haul. I’m still working on the house, but have saved over $100,000 in bona fide labor costs by doing it ourselves. Two years running has taken a toll. To be brutally honest, you can get burned out. Further, I’m cheap. I hate to spend money. I still drive a 12 yr old minivan. I also have three very easy ways to destroy things: kids.

My introduction to housing was by accident. The start was participating in a renovation of a home my college roommate purchased on Queen Anne Hill in Seattle back in 1989. At the time I really didn’t know how he bought it. As a punk kid fresh out of college thinking I knew-it-all, I admit I was envious of his good fortune. The market was hot. Fast forward to today with my experience, I now know how he did it and didn’t do it, but that will be saved for another posting. I had no experience in home improvement whatsoever. Since then I’ve gained skills little by little until having a well rounded background in most everything. I’m still weak in framing, but then again I don’t build homes for a living.

I won in Las Vegas. (this really deserves it’s own post)

Do you have friends who always say this, but they don’t tell you the amount they lost? Real Estate can be the same. It’s so funny, because I have a friend who’s wife always spills the beans about how much they really made (code for lost) weeks after they come back from Vegas. And lose they did. We’ll, I’ve made many mistakes in fixing a home that have cost me plenty. No bones about it. For example, see the photo below.

One of the best screw up’s on record, at least that I’ll admit to on a public blog is the following: every square inch of our home’s interior walls (except for baths) were covered in dark paneling. No probelm I thought. Just peel them off, touch up the drywall, texture and paint. Nope didn’t happen. The previous owner glued them all down with stuff they must use on the Space Shuttle. Destroyed the drywall taking the paneling off. Retail cost: $8500 error.

For some people, they don’t mind sore muscles, running all over town for supplies, and being constantly filthy—it’s starting to get to me now, never mind that I’m not 25 yrs old anymore. The satisfaction of making a house your home is clearly a highlight. It’s not for everybody and it does cost hard earned money. If you can’t afford to buy a home that is “move-in-ready” or new construction, consider buying a home that needs improvement. You can save on the purchase price and build equity the old fashioned way while enjoying the satisfaction of being a do-it-yourselfer.

How about you? Would you consider a fixer if you were a first time buyer? I did and it has paid dividends every time.

Just a liiiiittttle too far down my driveway. Plus a few choice words and $800 pain.

Cheers,

S-Crow

The post Sweat Equity: money in the bank appeared first on Seattle Bubble.

Fewer homes have been on the market on the Island over the past six months and slightly fewer homes sold as compared to last year. Prices for those that did sell were up 15 percent over last year.

“The market in the first half of this year has remained strong,” said John Deely, broker of the Mercer Island Coldwell Banker Bain office. “Again, this year we have seen an increase in both the average and median prices for active, pending and sold properties, however the rate of increase has slowed from previous years.”

Island sellers have waited longer this year. The average time on the market for sold properties was 86 days as compared to 59 days in 2005 — nearly four weeks longer.

June, however, has been a good month. Sixty Island homes sold — more than double the number last June. And some properties have had a lot of action.
…
While interest rates have been rising as of late, [Mercer Island John L. Scott broker D’Ann] Jackson believes home prices will continue to appreciate in King County, although not necessarily at the present pace.

“We live in a vibrant area that continues to attract new residents, thanks to the region’s improving economy, Jackson said.

“I think we’ll see good steady growth (in home prices) in the months ahead,” she said.

Home prices continuing to appreciate at a “good steady” rate while wages continue to stagnate would indeed be magic.

(Reporter Staff, Mercer Island Reporter, 07.13.2006)

The post Real Estate Market "Magic" appeared first on Seattle Bubble.

We’ll it’s not really a dirty little secret, but like my mother-in-law says about certain things taboo, “we just don’t talk about that.” One of the least talked about facets of home price appreciation and what we see on the majority of the purchase transactions we close that were 100% financed, is this little secret: It’s simply sellers jacking up the sales price to cover the buyers request for paying closing costs. The cause and effect: artificial appreciation and compounding that spirals house prices upward absent of fundamental economic drivers.

Ok, fine you say. What’s the big deal. What’s the big deal??? Let’s discuss the ramifications of this because it is quite remarkable. In a recent transaction at our office a home (numbers are for example only) was listed for $450,000. It was sold for $458,000. The seller was quite happy with just accepting a full price offer, but here comes a very enthusiastic buyer that is qualified to purchase the home, but like many buyers, is cash poor. So the buyer and seller agree to artificially increase the appreciation of the home via a sales price increase that covers the closing costs for the buyer. While this appears to be somewhat routine, the inertia from compounding price appreciation from this sale and others identical to it, creates a domino affect that is hard to stop. Think about this. If our firm has closed 75 of these transactions (and we have) in 2006 alone, imagine what the title companies who dominate the market must be closing, in each county (King, Pierce, Snohomish etc…). Now think all across the state. Now think all across the country. The numbers could be staggering.

Was the true market price of the home really nearly $460,000? The seller boasts that he got over the asking price and the neighbor down the street named Ted, says, “boy, since Roy got $460,000, I’m going to ask $465,000. The appraiser and/or comparative market analysis (CMA) from the local Realtor shows only the sold prices, not how they achieved the price. And, there we have it. All those homes that sold for over asking or were they? Not exactly.

When Ted the excited neighbor lists his house with Mary, the local Realtor, for $465,000, they expect a quick sale. Just as they thought, here comes Joe & Jill Buyer, and they do the same thing and ask for the seller to pay closing costs and they increase the sales price to $475,000. Tongue-in- cheek, Voilà! the appraisal comes in at exactly $475,000. And this cycle goes on and on.

A recent comment I placed on a post at the Seattle P-I Real Estate professionals blog discussed this very scenario and the reasoning why my wife and I pulled out of a multiple bid situation in the late Summer/early Fall of 2004.

Regards,

S-Crow

The post Housing Appreciation: the dirty little secret appeared first on Seattle Bubble.

With apartment vacancy rates declining and job growth increasing, real-estate investors are snapping up properties in anticipation of a three-year boom in the multifamily market around Seattle.

Local investors are beefing up holdings, and out-of-state investors are buying large buildings, even as developers take more apartments off the rental market and convert them to condominiums.
…
Dupre + Scott Apartment Advisors, a research firm in Seattle, reports apartment vacancies were 4.6 percent as of April, down from 6.5 percent a year ago. This is the first time the rate has fallen below 5 percent since 2001, the firm said.

Starting next spring, rates are predicted to dip below 4 percent and stay there through the end of 2008. Dupre + Scott expects rents will rise about 5.2 percent a year.

Condo conversions play into the dipping vacancy rate, Bosl said.

He cited Dupre + Scott data that indicate that in 2005, more apartments were converted to condos and taken off the rental market than new apartments were built and added to the market.

“Seattle is a favorite of the investment community now,” said Peter Larsen, a principal with Paragon Real Estate Advisors in Seattle, a firm that sells buildings with 10 to 100 units and typically priced from $1 million to $12 million. “People’s expectation of rising rents is outpacing their fear of rising interest rates.”

Larsen said mid-sized buildings his firm represents are selling faster, with some properties moving in only 30 days.

Of course, one thing this article doesn’t mention is how many condo conversion apartments have come back on the market as rentals as the “investors” try to turn a buck… That’s the kind of real investigative reporting I can only dream about in Seattle.

However, even if the claims made in this article are 100% true, I would still be convinced that renting is by far the better deal right now. You can get a pretty darn nice apartment for $1,250 per month—far less than even most interest-only mortgages on condos around here. Even if rents go up 5%, you’re only looking at an increase of $62.50 per month, barely pushing you over the $1,300 mark, and still a far cry from the cost of a mortgage.

So maybe mildly rents really is a win-win situation for everyone. Renters still pay far less than they would owning, and apartment owners turn a greater profit.

(Jane Hodges, Seattle Times, 07.08.2006)

The post Rents Predicted To Rise… Still appeared first on Seattle Bubble.

“We’re seeing a consistent trend here, a flattening of the market,” he said. “It (the strong housing market) hasn’t come to an end but it is certainly leveling out.”

New construction and new listings have pushed inventory levels higher, he said.

“I don’t want to characterize it as a glut, but we’re substantially higher,” Crandell said.

Since January, active residential listings have risen from 931 to 1,452 in June, according to Olympic MLS data.

Unfortunately, that’s apparently not the kind of reporting that some people want to hear. Check out this snippet from a comment posted to the Olympian’s story:

I do love how the Olympian constantly trumpets that “the market is softening”, “sales figures are down” when in fact we have one of the best markets in the region. They way I look at it – it seems that if you own a house that falls in the “median range” odds are you will see close to $25,000 in appreciation in one year. That equity can be the difference in setting you and your family up for the beginning of financial security versus spending one more year renting. Home ownership still remains the single best way to gain financial equality and frankly I’d like to see the city/county doing more to get people into home ownership.

If that’s how most readers feel, it’s no wonder the Times and P-I continue to publish real estate booster fluff. They are both experiencing seriously declining circulation and the P-I is likely to vanish completely soon, so it’s not too difficult to imagine why they might want to stick to printing the stories that people want to hear.

Fortunately my favorite area real estate reporter Barbara Clements doesn’t play that game. She tells it like it is, with both sides of the story.

The price of homes in Pierce County continued to climb in June, as did the number of homes with a “For Sale” sign in their front yard.

The median price for a home in the Tacoma area climbed by 17 percent to $275,250 for the year ending in June, according to new Northwest Multiple Listing Service numbers released Thursday.

But that price hike came despite a 45 percent increase in the inventory of homes on the market this June over the same period in 2005. More than 5,500 residential homes and condominiums were on the market in Pierce County during the month.

In King County, inventory increased by about 17 percent, while the median price of a home in June was $387,500, a 15 percent jump over the prior year. In Thurston County, the median sales price for a home was $254,000 or a 14 percent increase over last year. Inventory in that county increased by almost 80 percent, to 1,726 active listings.

“I think someone hit the accelerator in March,” said Dick Beeson, an MLS director and broker at Windermere Real Estate/Commencement Associates in Tacoma. “I’ve never seen such a big influx of property come onto the market in such a short period of time.”

But Beeson noted that pending sales are only off by about 12 percent when compared to last year.

I love that. “only” 12 percent. Sure, it’s not a huge decline, but when sales are up 12 percent, real estate enthusiasts tend to use words like “whopping” or “surge.” When it’s down 12 percent, it’s “only” 12 percent.

(Rolf Boone, The Olympian, 07.06.2006)
(Barbara Clements, Tacoma News Tribune, 07.07.2006)

The post Balanced June Reporting Outside Seattle appeared first on Seattle Bubble.

Yes, I’ve seen that Mr. Wharton has posted the grand culmination of his “there is no bubble” analysis. Given the depth and care of his analysis, it deserves more than a “summarize the linked article” type of post. I’m working on a mildly in-depth response, but it’s not ready yet, and I’m taking today off because it’s a holiday, dang it. I have also seen the story in the Olympian about young couples sacrificing themselves and their finances to the god of the mortgage. I’ll probably have a post dedicated to that one tomorrow. If those of you who are reading today could hold off your discussion on those topics until later this week, that’d be great.

So here’s the article I am going to post today. As many of you probably saw over the weekend, Washington’s population has grown by about 120,000 people in the last year.

Booming King County cities have contributed to Washington’s population surge in the past year. The state population has increased by 120,000, pushing the total to nearly 6.4 million, and more in-migration is expected as the state economy continues to pump out new jobs.

While Snoqualmie was far and away the fastest-growing city in the state the past six years — with a 379 percent population jump — Issaquah (74.5 percent) and Maple Valley (34.7) ranked second and third among King County cities. Nearly a third of Issaquah’s growth was driven by annexations, while Snoqualmie’s population skyrocketed with construction of thousands of homes in the massive Snoqualmie Ridge urban village project.

“It will slow down in the next three or four years,” said Anthony Hemstad, Maple Valley’s city manager. “We are rapidly using up our buildable land. In future years, more of the growth will be retail and commercial rather than residential.”
…
Washington’s employment has been growing twice as fast as the national average and is proving to be a magnet for strong population growth, said Theresa Lowe, the state’s chief population expert.

If the trend continues, Washington will grow to 6.8 million people by 2010 — an increase of 1 million over the course of this decade.

“As always, continued growth depends on how Washington’s employment opportunities stack up against what other states have to offer,” Lowe said in a report released by the governor’s budget office.

Washington added 77,000 jobs last year and is on track to produce another 95,000 this year, the Office of Financial Management said.

When this article was pointed out in the comments over the weekend, one commenter suggested that “More jobs = more $ = higher housing prices.” I actually agree with that basic formula. Here’s the thing, though. The state as a whole gained 120,000 people. Obviously some of those were from births. According to the article, “in-migration accounted for 81,000 of the new 120,000 Washington residents,” and obviously even some of those who migrated here were children, so let’s actually assume that the number of employable adults that moved to Washington is roughly equal to the 77,000 new jobs that were added in the last year. Okay, good.

So really if you’re going to take something economy-related away from this article about Washington’s population, it’s the 77,000 new jobs. I could repeat myself, but it gets tiring after a while, so I’m just going to point out that I’ve already posted my thesis on the job situation. Nearly 30% of those 77,000 new jobs were in construction and real estate. So when housing starts to significantly slow, a huge chunk of the job growth is going to vanish. When the job growth slows, in-migration will slow. When in-migration slows, the flow of jobs is down to a trickle, and housing is ridiculously expensive, where will that leave us?

(Jamie Swift, King County Journal, 07.01.2006)

The post Washington Population Up 120,000 appeared first on Seattle Bubble.

Evelyn Tapsak drives past the old Magnolia Elementary nearly every day, and what she sees confounds her — a big brick school building on the crest of a hill with a view of Puget Sound, sitting vacant as it has for most of the time since the Seattle School District closed it in 1984.

"How can the district be in such debt and let that property just sit there and not do anything with it?" the longtime Magnolia resident asks. "It’s amazing to me. It doesn’t make sense."

District officials, facing a multimillion-dollar budget shortfall, are beginning to ask similar questions. As the School Board prepares to close schools — adding to the district’s inventory of surplus buildings — officials are taking the opportunity to re-examine their real-estate holdings and look for ways to make more money in a booming market. Even selling property — something the district has rarely done — is on the table.
…
Community centers in Phinney Ridge and the University District are among a handful of short-term tenants that pay a discounted rent of 50 percent fair-market value because the district attaches value to the youth and family services they offer.

West Seattle parent Kris Aamot thinks the district should stop subsidizing the rents of those tenants and instead should maximize revenues from those properties to fix existing schools, such as elementary schools in his section of town where students are being taught in portable classrooms.
…
Not every property is tailor-made for a community use, however. The former Oak Lake Elementary on Aurora Avenue North, for example, became the Oak Tree shopping center after the district leased the land on a long-term basis to a developer.

"That was logical," Roe said. "Businesses on Aurora were growing up all around that school."

There may not be logic, however, in keeping Magnolia Elementary what it is now — an almost-always-empty building that the district pulls into service only for emergencies to temporarily house a school. The board could decide to lease the building, or even sell it.

In another part of Magnolia, the district sold the former Briarcliff Elementary in 2003 to a developer building a subdivision of tightly packed houses. Neighbors often complain about the housing, calling it a poor fit with its surroundings.

Gee, let me think… rent out property at 50% of (already relatively low) market rate, or sell it and pocket hojillions of dollars… tough choice. Seriously though, It seems that we’ve got yet another counter-example to the "they aren’t making any more land" argument. Closed schools is just one possible way that more land for homes can come onto the market.

(Stuart Eskenazi, Seattle Times, 07.03.2006)

The post Seattle Schools Look To Cash Out appeared first on Seattle Bubble.

A number of readers pointed out these comments by Bainbridge Island portfolio manager and part-time prophet Carl Haefling (who I admit I’ve never heard of):

It takes time for the housing market to fully unravel, we are in the early stages of stage 1. Stage 1 is where the market begins to recognize that prices have reached levels that reduce affordability and thus the number of possible buyers. Sellers, who have been holding back selling for fear of not selling at the top, begin posting signs advertising their home, usually at prices that reflect the highest paid for a similar home, and suddenly the inventory of homes foresale explodes. This has already happened in many parts of the country. This stage may take one to three years to fully unfold.

Stage 2 is price cuts by those who are becoming convinced that the market has softened if they want to sell their home they better cut prices. Once those “reduced” signs start appearing, buyers start reducing offers, even on properties that have been already reduced. Prices will drop far lower then anyone thinks possible in stage 2.

Stage 3 is the exhaustive phase. Buyers are afraid to buy, investors have no liquidity, mortgage requirements demand a high down payment and supporting cash flow, and the press is filled with articles claiming real estate is a terrible investment. (which happens to be true in the previous 5 years).

There are serious other problems that will contribute to this cycle, including a decline in the buying power of the middle class, tilting demographics which will reduce the number of possible buyers beginning about 2010 for real estate and possible shifts in values of owning vs. renting.

While many parts of the country may be “in the early stages of stage 1,” I don’t think we’d doing ourselves any favors to try to claim we’ve reached that point yet in Seattle. The market is clearly not as hot as it was last year, and there are some definite slowing trends for those that choose to see them, but by and large the Seattle market is so far oblivious to what’s going on everywhere else. When scenes like the one pictured above become commonplace, we’ll know that we’ve finally reached “stage 1.” As of right now, I had to bike three miles to a specific location to get a picture of a corner with six for sale signs.

How soon will we actually reach “stage 1”? Or will we even reach “stage 1” at all? It’s anyone’s guess. They always say that bubbles last longer than any rational person thinks they will, so who knows?

As a side note, one of Mr. Haefling’s predictions brings up something I’ve been thinking about for a while:

And one of the unseen values will be the desire to downsize as the cost of insurance explodes, the cost to heat and air-condition accelerates, and the cost of maintenance become detriments to ownership.

When people start to downsize, what will they do with all the stuff they’ve collected to fill their McMansions? I’ve got this feeling that they won’t readily part with their precious consumer goods. As such, I predict an uptick in the popularity of self-storage facilities. I’ve actually been mulling the thought of buying some stocks in Shurgard and Public Storage. What do you think?

(Carl Haefling, The Big Picture, 06.30.2006)

The post Signs Of What’s To Come? appeared first on Seattle Bubble.

If Boeing’s stock ends the day near Thursday’s closing price of $83 a share, employees will receive Boeing shares worth about $5,500, and the regional economy stands to get an infusion from the bonuses.

The windfall, worth hundreds of millions of dollars, will go to an estimated 191,000 full-time, part-time, current and retired employees companywide — 63,000 people in the Puget Sound region — who have worked at Boeing during the past four years. Workers who have been with the company for just a portion of that time will get smaller, pro-rated stock bonuses.
…
Bret Bertolin, a senior economic forecaster for Washington state, said the bonuses will have more significance to the local economy than when Microsoft paid out its $3-per-share special dividend in November 2004.

The reason, he said, is that the vast majority of the dividend went to big shareholders like Bill Gates, Paul Allen and Steve Ballmer, rather than to rank-and-file workers. Gates gave his $3 billion windfall to his foundation, which spends its money around the world.

Even so, Bertolin doesn’t expect the checks to lead to a big boon in state tax revenue. Even with the rosiest of estimates, he said, it could generate only $20 million of tax revenue, relatively small change for a state that expects to collect $28.9 billion in tax revenue in the current two-year budget cycle. Most of the windfall is expected to be spent in retail.

The bonus represents 6.8 percent of the $5.1 billion payroll for the aircraft-manufacturing industry in Washington state in 2005.

Just what we needed to stretch this party out for just a little bit longer.

(Luke Timmerman, Seattle Times, 06.30.2006)

The post Big Boeing Bonus… Bubble Booster? appeared first on Seattle Bubble.

South King County residents have more problems with obesity, feel less safe from neighborhood crime, and are more likely not to have health insurance than those who live elsewhere in King County, according to a report issued today.

The Seattle Foundation’s report, "A Healthy Community," says South King County lags some or all of the county on nine quality-of-life indicators, while scoring best in one area: affordable housing.
…
"We have been the poorest part of the county for years," said Duclos, chief executive officer for a nonprofit agency that provides temporary and permanent low-income housing.

Families with low incomes are drawn to South King County for affordable housing, said Kathryn Horsley, of Public Health – Seattle & King County.

"They may be able to afford to live there but they can’t afford health insurance," Horsley said.
…
But the cost of housing in South King County has now increased to the point that some are moving to Pierce County, Duclos said. That means driving farther to jobs and spending more on gas.

What people need are better-paying jobs and help saving money, Duclos said.

"When you don’t have money to spend, it’s real hard to learn how to save," Duclos said.

Unless wages start to see some serious increases, if the cost of homes keeps going up for much longer, and rents really do increase the way that some people seem to want, it’s only a matter of time before the Seattle area population stagnates and begins to shrink. I mean, if people can’t afford to live, they’ll leave, right? What other choice is there?

(Steve Maynard, Tacoma News Tribune, 06.27.2006)

The post South King County: Affordable Slum appeared first on Seattle Bubble.

…the comparative value of new construction for the median Seattle home is $326,600 not including land.

That would actually be a pretty solid reason for housing prices to be as high as they are right now… if it were true. See, the thing is, I’m not convinced that it is true. Most of you probably read the news reports yesterday proudly proclaiming that sales of new homes nationwide were up in May. In those reports was an interesting tidbit of information about the price of these new homes:

The median price of a new home did drop to $235,000 in May…

So, nationwide the median new home is selling to the consumer for $235,000, but in Seattle the cost to the builder to construct the median home is $326,600? $235,000 is the actual median sales price across the entire US, and does include land. Making what I think is probably a low-ball assumption that only 15% of the cost of these homes comes from the land itself, and allowing for developer profit of just 5%, the construction cost estimate obtained by looking at the actual median sales price comes in at $188,000—over 42% lower than Mr. Wharton’s estimate.

So here’s my question: Are construction costs in Seattle really 70% higher than the nation as a whole (without figuring land into the equation), or are Mr. Wharton’s numbers a bit… off?

(Gregory Wharton, Seattle Real Estate Professionals, 06.21.2006)
(Martin Crutsinger, Seattle P-I, 06.27.2006)

Update: Mr. Wharton posted the following response in the comments, and I feel it is only fair to add it to the main post:

As the original author of the linked article, A few things:

For all these reasons and more, I stand by my analysis.

The post New Construction Costs In Seattle appeared first on Seattle Bubble.

Eric Boerner was shopping for a house in the Seattle area when he decided he couldn’t stomach the idea of a real estate agent pocketing thousands of dollars in fees for work he’d rather do himself.

Did he really need someone to drive him around? And who could choose the best school for his 5-year- old daughter better than he?

So when Boerner checked out Redfin.com, a Seattle-based home-buying Web site, and saw a modern four-bedroom house in Lake Forest Park he liked, he took the plunge.

He hit the red "buy it" button, and made an offer.

Sight unseen.

"It seemed kind of surreal to throw a half-million dollars into a house, but I have a lot of trust in my own judgment," said Boerner, 39, who made the offer online from California as he and his family were preparing to relocate to Seattle last month.

So as their primary example of someone that has kicked the real estate agent habit, they chose an arrogant Californian, so flush with money that he’s willing to throw it into a house he hasn’t even seen, let alone had inspected? Wowzers.

"We represent a buyer or seller throughout the entire process. Redfin does not," said Bill Riss, chief executive of Coldwell Banker Bain. He said Redfin’s model relies heavily on other full-service real estate agents, who often end up showing Redfin clients’ properties.
…
Riss said full-service companies like Coldwell offer an edge, particularly in hot real estate markets like Seattle, where homes sell quickly, often with multiple offers.

"It’s a choice of how you value your time over your money, and do you truly understand the entire real estate process?" he said. "The question is, are you trading off something?"
…
Boerner eventually lost the Lake Forest Park home when the seller backed out of the deal during escrow, leaving him and his wife, Lynn, scrambling. Instead, they found a four-bedroom house for $390,000 with a deck overlooking a wooded backyard in Mountlake Terrace. They toured that one before closing the deal through Redfin.

I love the "particularly in hot real estate markets like Seattle" bit. So basically what they’re saying is that the popularity of the real estate agent has nowhere to go but down? Oh, and $390,000 in Mountlake Terrace? At a whopping 8% less than last month’s King County median, now I know what the Seattle Times means when they called Mountlake Terrace the "sweet spot for affordability".

(Phuong Cat Le, Seattle P-I, 06.24.2006)

The post How To: Ditch The Buyer’s Agent appeared first on Seattle Bubble.

Try to be nice to each other while I’m gone. Seriously, there’s no reason to be rude. There is such a thing as a friendly disagreement.

The post The Tim Is On Non-Vacation appeared first on Seattle Bubble.

Chang Mook Sohn, the state’s chief economist, said today that his outlook for tax collections for the 2007-09 biennium shows ever increasing revenues that lawmakers use to pay for public schools, colleges, prison and most other state programs.

Despite $3-a-gallon gasoline, consumers are still on a spending spree, Sohn said. That translates into higher sales and real estate tax collections for the state.

However, people are spending more money than they’re making, which Sohn finds worrisome because it can’t continue indefinitely. Consumers appear to be cashing out some of the value of their homes to fuel their spending, he said.

"Clearly, the consumer is over-extended," Sohn said.

Yes, it is called a negative savings rate. Spending more than is earned is no big deal anymore. Hey, the government does it all the time, so why shouldn’t consumers do it, too?

Of course, the fuel for the consumer spending spree (and by extension the state revenue boom) is likely to dry up soon. Surprisingly, Mr. Sohn is very frank about that distinct possibility .

State coffers will swell by more than $959 million over the next three years, erasing a projected state deficit that had worried the governor and legislators.

Still, even with that good news, revenue officials raised warning flags, predicting that a slowdown in the construction industry will drag down the state’s economic expansion before long.
…
The state’s sizzling construction and housing sector is ripe for a major correction and other factors could hammer the state and national economies in the next few years, said ChangMook Sohn, the state’s chief economist.

Sohn said the state isn’t expected to dip into a recession, but that signs of a slowdown are on the horizon.

"We can’t assume that this hot economy can continue into the next biennium," he told the forecast council, a bipartisan panel of legislative and administration financial experts. "My worry is that even this number could be too optimistic."

His biggest concern is that the state’s recent economic and revenue expansion has been heavily dependent on a single sector of the economy, the construction and housing industry.

That sector accounts for about 7 percent of the overall state jobs, but the construction and housing surge in recent years has accounted for 20 percent of the job growth, he said.

That’s not sustainable and the number will surely drop back to more usual numbers, he said.

But don’t worry, Boeing, Microsoft, Amazon, and Valve will surely pick up every last bit of slack.

(Joseph Turner, Tacoma News Tribune, 06.15.2006)
(David Ammons, Seattle P-I, 06.16.2006)

The post State’s Chief Economist Warns Of Slowdown appeared first on Seattle Bubble.

What history tells us will happen is that prices will level off, and appreciation rates will reflect your average inflation rates (on average) until wages catch up with home prices and the fundamentals start to match back up.

As most of you know, this scenario is commonly known as the “soft landing.” Actually it’s a slightly harsher version of the traditional soft landing, in which appreciation rates dip down to 5-6% as opposed to falling all the way down to the level of inflation (traditionally 2-3%). So if this version of the soft landing is true, just how long will it take for wages to “catch up with home prices”? For the answer, let’s get our Excel on.

To begin, we need some good starting data. Let’s assume for the sake of this argument that in the first quarter of the year 2000, homes were “affordable.” The Washington Center for Real Estate Research (WCRER) “affordability index” for Q1 2000 was 96.6, so this is likely a fairly accurate assumption. So, let’s take a look at the housing market vital statistics for the year 2000:

Q1 2000
Median Home: $245,000
Median Household Income: $54,590
Interest Rate: 8.21%
Affordability Index: 96.6
Tim’s Affordability Index: 93.0

Since I don’t know how WCRER calculates their affordability index, I created my own. The calculation I used is simply 30% of the median monthly income divided by the monthly payment on the house (assuming 20% down and a 30 year mortgage). So, what does the situation look like now? Here are the most recent numbers:

Q1 2006
Median Home: $399,500
Median Income: $60,700
Interest Rate: 6.15%
Affordability Index: 77.1
Tim’s Affordability Index: 77.9

Ouch. Not so affordable anymore. Home prices have increased an average of 8.5% per year, while wages only increased an average of 1.8% per year! No big deal though, right? Prices will just “level off” and wages will catch up.

Let’s make some (relatively optimistic) assumptions and see what the “wages will catch up” scenario would look like. Let’s assume home prices “level off” to 2.5% annual increases. Furthermore let’s assume that interest rates increase just 0.125 points each year until they top out at 8.00%. Lastly, let’s assume that wages increase at 5% per year. Under that scenario, my affordability index reaches the 2000 level of 93.0 in the year 2021. That’s fifteen years of stagnant home prices, under a relatively rosy set of numbers.

What if interest rates go up 0.25 points each year and top out at 10%? Look to afford a home in 2029. What if instead wages only increase at 4% per year? Homes become affordable again in 2031. What if I tweak the numbers ever so slightly and assume 3% home price gains, 4% annual wage increases, and a maximum interest rate of 9%? Don’t expect to afford a home until 2053.

Keep in mind that these figures totally ignore the already high and still increasing expense of the 20% down payment. Inherent in the calculations is the optimistic assumption that people will somehow manage to come up with the money. In the first scenario I outlined, the affordable home in the year 2021 would cost $578,595, requiring a $115,719 down payment. The median household income would be $126,191.

Maybe I got the formula wrong. Or maybe the “soft landing” scenario is a steaming pile of… well, you know. Honestly I have no clue what’s going to happen. Maybe it really will be 10-20 years before homes become affordable again. For your enjoyment, I have added these calculations to a new sheet in the big Seattle Bubble spreadsheet. Feel free to download it and play with the numbers yourself. If I’m way off base and making inappropriate assumptions or using stupid equations, please let me know.

Sources:
(Home Prices & Affordability: WCRER)
(King County Incomes: King County Government)
(Interest Rates: Federal Reserve)
(Inflation: InflationData.com)

The post Seattle Soft Landing: Do The Math appeared first on Seattle Bubble.

In the next series of posts on the subject, I’ll investigate Seattle housing prices and associated economic conditions. Some of the answers I’ll discuss may surprise you, no matter which side you’re on. It turns out that Seattle real estate prices are unsustainably high in many cases, maybe even ripe for a serious correction, but outside of the condo-flipper market there is no bubble…yet. The situation presents a very real problem for our city, and we need to start thinking about remedies.

He’s about a third of the way through, and so far I’m relatively impressed with the balanced view he is presenting. It’s certainly a lot better than the fingers-in-ears, “la la la, I can’t hear you” approach we’ve seen on other local real estate blogs. I may not agree with all of the conclusions he comes to, but at least he is giving the subject a genuinely thoughtful analysis.

I’ll probably post about this again as he gets further along in the series.

(Gregory Wharton, Seattle Real Estate Professionals, 06.12.2006)

The post Local Real Estate Blog Talks Bubble appeared first on Seattle Bubble.

The monthly jobs report from the state Employment Security Department often is full of seemingly contradictory data, but May’s report was even murkier than usual.
…
Beneath the confusing headline numbers, there’s considerable evidence for a simple conclusion: Washington’s surging economy — fueled in large part by the feverish real-estate market — is simmering down.

The 2,100 payroll jobs added in May, for instance, were the fewest since September 2005, when jobs actually fell. April’s job gain was revised downward, to 3,900 from 5,200.

Since January, the state has added fewer jobs each month than the month before. On a quarterly basis the same trend holds true: After adding 41,100 jobs in the fourth quarter of 2005 and 33,300 jobs in the first three months of this year, Washington has grown by just 6,000 jobs so far this quarter.
…
No matter how you slice the numbers, though, the state’s economy appears to be growing more slowly. A big reason, economists suspect, is the cooling of the Northwest housing market.

Statewide, the housing market in the first quarter was "basically flat" compared with the same period in 2005, said Glenn Crellin, director of Washington State University’s Center for Real Estate Research.
…
The state’s construction sector, which had added a revised 300 jobs in April and 8,500 jobs since the beginning of the year, lost 500 jobs last month — the first construction-jobs losses in a year. Real estate and rental leasing, however, gained 100 jobs in May, on top of the 200 gained in April.

Aerospace continued strong, adding 400 jobs last month and 6,600 over the past 12 months.
…
Professional, scientific and technical services — a hodgepodge category that includes lawyers, accountants, architects and computer-systems administrators — added 1,400 jobs in May and 6,100 over the past 12 months.

Growth in that category, [Evelina] Tainer [the Employment Security Department’s chief economist] said, generally reflects the overall health of the state’s economy.

I’ll agree that overall the state economy is still in good health. But I can’t help but think that this is just the beginning of a downward trend that will grow much larger than the optimists think. I really hope I’m wrong.

(Drew DeSilver, Seattle Times, 06.14.2006)

The post Slowing Real Estate Slows State Economy appeared first on Seattle Bubble.

This week, the Pierce County Assessor-Treasurer’s Office will mail the annual “Value Change Notice” postcards to owners of 246,754 residential properties.

The 22.2 percent increase in average house values is based on data from 2005, when the real estate market was rolling like a freight train. This year, the housing market is cooling off, partly because of a slight increase in interest rates, experts say.
…
The county’s biggest cities, including Tacoma, Lakewood and Puyallup, all saw increases in average house values of up to 22 percent. In Tacoma, for example, home values jumped from $188,293 in 2005 to $228,652 in 2006 – a 21.4 percent increase.

But smaller cities saw bigger increases.
…
Zenker described those smaller cities as “sleeper towns” where “people just want to be there.” Pacific, for example, has offered affordable housing for people who commute north for jobs in Seattle and elsewhere in King County, Zenker said. But the big jump in values in Pacific (35.3%) indicate its role as an island of affordability is “pretty much done.”

It will be interesting to see if the property tax valuations actually decrease if/when the bubble busts and the price of real estate in the area goes down. If anything is “sticky on the way down,” I’ll bet it’s property tax valuations.

(Aaron Corvin, Tacoma News Tribune, 06.11.2006)

The post Pierce Property Tax Valuations Up 22% appeared first on Seattle Bubble.

As Kirkland becomes a destination for new luxury homes — many taking maximum advantage of the lot space — residents worry that the new houses are changing the feel of their communities.

The concerns have led the city to take a hard look at the rules for determining how large homes can get. Proposed changes will be presented at a public hearing tonight.

The issue is not unique to Kirkland. Across Puget Sound, communities are seeing small homes on modest lots being replaced by much bigger homes that often seem out of scale and overwhelming to neighbors.
…
To [Loren] Spurgeon, [chair of the city’s Market Neighborhood Association,] more out-of-scale homes mean fewer people can afford to live in Kirkland, making the city less diverse.

"It’s improving the value of the homes, but the blowback from it is that retired folks are unable to continue to live here," Spurgeon said.

Others have mixed feelings. Russel Smith has lived in his home on Seventh Avenue West since 1967 and, while he’s not happy that his taxes have increased, he said the new homes improve Kirkland’s appeal.

"It is changing the quality of life," he said. "I’ve lived here since 1967, and back then it was a town of little bungalows that were thrown up quickly for the ship workers. I didn’t think it looked too nice."

Hmm. I think he’s got a point. Here’s my plan: Every home within a 5 mile radius of each of King County’s downtown centers should be no less than a $350,000 condo or a $700,000 McMansion. All apartment complexes should be converted, and all small old houses should be torn down and replaced with more "appealing" homes of no less than 3,000 square feet. Also, no home (condo or house) is allowed to be without granite countertops. If we implement my plan, King County will have the most appealing cities on the planet! It’s foolproof!

(Lisa Chiu, Seattle Times , 06.08.2006)

The post McMansions Cramp Kirkland’s Style appeared first on Seattle Bubble.

What difference can three years make in terms of rising real estate values?

In the case of Country Glen Apartments in Kent, which recently changed owners for the second time in three years: about $5.8 million.
…
Jim Claeys, a commercial real estate broker with CB Richard Ellis in Seattle, issued a press release Monday announcing the property sale, but did not name the buyer or sellers.

Claeys, who represented both parties in the transaction, described the buyer and sellers as private investors from California.

So here’s the interesting question. Why is the California buyer willing to pay $5.8 million more for the apartment complex than it sold for 3 years ago (a 50% increase)?

1. They expect to jack up rents by 50%.
2. They expect the real estate to appreciate by 50%.

Choose one.

(Clayton Park, King County Journal, 06.06.2006)

The post 3 Years, 50% Appreciation appeared first on Seattle Bubble.

Seattle’s strict growth- management policies and an economic rebound are buffering the region’s real estate market from cooling trends. The number of new jobs has outpaced building permits for single-family homes and condos by 30% the past 15 months. Though single-family home sales fell about 7% in April, compared with April 2005, there’s only a three-month supply of homes in the Seattle market — half the national average. That’s largely why prices rose nearly 18% that month, according to the latest data available.

There’s something really fishy about those numbers… Take a look at the graphic on the right. It shows the median home price in Seattle at $275,700, while all of Washington State is $320,000… huh? Not only is that backward (I’m certain that Seattle has a higher median than the state as a whole), but even if you simply reverse them, the $320,000 number doesn’t match up with any numbers I have available. They’re talking about April, so take a look at the April MLS numbers. King County median home price: $377,000. Seattle median home price: $410,000.

They highlight some 950 sqft. house with a price tag of $279,000 as the “median-price home.” Not only is a home that cheap nearly impossible to find in Seattle, but good luck finding such a house at that price pretty much anywhere in King County. I have to wonder… what were they smoking?

Regarding the write-up portion, I don’t really have anything to add over what we just discussed last month. There is however an active discussion on the topic going on over at Sound Politics, where contributor Matt Rosenberg seems to think that the primary reason that Seattle home prices have gone so high is growth management.

The “no affordable housing” plaint also betrays an ignorance of the effect – especially pronounced in other Seattle communities – of the basic laws of supply and demand under the heavy hand of regional growth management regulations.

I would buy that argument if Seattle was alone in its wild appreciation, but the housing bubble is not a localized phenomenon.

(Noelle Knox, USA Today, 06.05.2006)

The post Seattle "Buffered From Cooling Trends" appeared first on Seattle Bubble.

This year’s larger inventory of South Sound homes for sale might be keeping homes on the market longer and slowing prices down.

For the past four months, it has taken longer for homes to sell compared with last year. And for the first time in May, the gains in year-to-year median sales prices took a noticeable drop, according to Olympic Multiple Listing Service data.

Regardless, the number of Thurston County homes sold in May was 15 percent higher than last year, leaving the number of homes sold up 9 percent from January through May this year.

Current active listings in Thurston County are about 1,277 homes, up from 879 the same time last year, the listing service reported Monday. New homes that have come onto the market are responsible for much of the increase in listings.

"Inventory is having an impact on prices," said Jerry Wilkins, manager of the listing service.

I love how they give the sales figure in percentage and the inventory as an absolute number. It makes them much harder to compare that way. FYI, the figures provided translate to a 45 percent increase in inventory. Directly comparing the 45 percent inventory increase to the 15 percent sales increase makes it a little harder to be stubbornly optimistic.

I also love how these real estate enthusiast types can admit that things are slowing down, but still phrase it in an extremely positive way:

Future monthly median increases might not top 20 percent, Wilkins said.

Aww.

(Jim Szymanski, The Olympian, 06.06.2006)

The post "Inventory is having an impact on prices" appeared first on Seattle Bubble.

Question: I’m remodeling a rental home that I plan to sell, but I’m worried that the housing market might go bust before I finish the renovations. Someone suggested I put it on the market before it’s finished, but I’m not sure this is a good idea. What do you think?

– Arlene Sund, Seattle, Washington

Answer: I don’t think there’s any doubt that housing prices have begun to cool down after their torrid run of the past five years. Recent stats from the National Association of Realtors show that the median price for a single-family home in the U.S. fell about 3 percent between the end of last year and the first quarter of this year.

That doesn’t mean prices have fallen everywhere. Indeed, they’re still rising in many parts of the country, even if not quite as robustly as they were before.

And what really matters is what’s going on in your area. So you’ll not only want to check out price trends in your city, which you can do by clicking here, but your neighborhood as well, in which case talking to local realtors is probably your best bet.

Aside from getting info about whether selling prices have been trending up or down, you’ll want to ask local agents whether the inventory of unsold homes increasing, the number of weeks listings spend on the market before selling is on the rise and whether sellers are having to make price cuts and other concessions to sell.

So, according to this “expert,” the best possible resource out there to gauge the direction of your local market is the National Association of Realtors? I find that advice to be questionable at best. I think Arlene would get a much more complete picture if she were to consult… oh, I don’t know… maybe this blog? Sure, I’m biased, but I post on all the local market news, I don’t just cherry-pick data that supports my bottom line (maybe because I don’t have one).

(Walter Updegrave, CNNMoney.com, 06.02.2006)

The post Ask The So-Called Expert appeared first on Seattle Bubble.

"We must dramatically increase access to decent, affordable housing," said Mayor Greg Nickels in his State of the City speech March 6. "Most of it will be produced, not by government but by the market through private investment."

The mayor is correct. Most lower-cost housing is old private housing. The best way to open up old private housing is to build new private housing. The city should encourage that — but the people who create new private housing do not believe this city does. They say Seattle is unfriendly. If you want a place that welcomes builders, go to Spokane. Go to Tacoma. Go to Renton.
…
In each of these stories, money matters, but in each of them time matters more. It’s harder to put a number on it, but it’s real. The builders are the supply side of the economic equation. The denser the regulatory air, the slower they work and the fewer units that get built. Over time, that affects the supply of housing and its price city people have to pay to move to Seattle.

I can think of more than a few city government habits that aren’t very friendly, toward businesses, tourists, drivers, homeowners… pretty much everyone. It’s almost as if Seattle’s government would be happier if everyone just left Seattle and never came back. So hey, at least they’re putting a crimp on both the supply and the demand side of the equation—that way it all balances out.

I love Seattle, but when I think of the government around here I have to hold back the bile.

(Bruce Ramsey, Seattle Times, 05.31.2006)

The post Government Hinders Affordable Housing appeared first on Seattle Bubble.

Step 2) Interview several realtors. Do this with an eye to finding out who will be truthful and represent your interests well when the time comes to buy.

I just got back from a talk with a realtor. I walked in off the street, no appointment.

I asked questions like:

• how’s the market between this year and last?
• Where do you think this market is going?
• How many people took out ARM’s in this area?
• Do you think we’re heading for a lot of foreclosures?

Many of us would like to eventually purchase a home, once the market settles down, so the subject of how to select a real estate agent (or whether to go through an agent at all) is definitely a relevant one.

Personally, I’ve got a black list of people I’ll definitely never work with, consisting of the various agents that have emailed me or left comments on here basically telling me how stupid I am not to jump into real estate NOW.

So are you using this interesting time in the market to screen agents for the future when you are ready to buy? What kinds of questions would you suggest asking to separate the wheat from the chaff?

The post Bubble-Screening Real Estate Agents appeared first on Seattle Bubble.

A California developer of an office complex that will break ground next month in Snoqualmie aims to convince small business owners here that it’s better to own their space than to rent one.
…
While the company prefers to call its units “individual business properties,” as opposed to condos, the concept behind its Venture Commerce Centers is “almost identical to the residential model,” said Berryhill.

“Most people have discovered it’s more advantageous to own your own home than to rent,” said Berryhill. His company believes the same holds true for business owners.

“If you know you’re going to do the same thing for the next five, 10 or 30 years, rather than pay a landlord for 30 years, it makes a heck of a lot more sense to own your own property,” Berryhill said.

I’ll give them that if you’re talking about 20-30 years, then owning is probably better. But buying 5 years from now after prices either drop or “stagnate” would be even better, don’t you think?

(Clayton Park, King County Journal, 05.23.2006)

The post Always Better To Own Vs. Rent? appeared first on Seattle Bubble.

Could the real estate action be shifting to the heartland, the vast swath of middle America that wasn’t really touched by the hyperinflationary housing boom?

That’s what a new statistical analysis of housing price cycles in 100 major metropolitan areas suggests could be over the horizon. Its author, Christopher L. Cagan, director of research and analytics for First American Real Estate Solutions, examined historical housing price movements and concluded that metropolitan real estate markets can be classified into three behavioral categories
…
Hybrid markets, which have linear, slow-growth characteristics for periods, followed by periods of moderate cyclic-style appreciation. They never boom quite like Florida or California, but they also never need to correct like the more volatile markets either. Cagan includes Chicago, Seattle, Minneapolis-St. Paul, Detroit and Phoenix in this category.
…
Most of the cyclic markets “are at, or have already passed, the peak” of their cycles, he says. Absent unseen economic shocks, the shooting-star markets aren’t likely to crash or burn. They’re just not likely to see anywhere near the price growth they have gotten used to in the recent past.
…
…if you’re in a linear or hybrid market where the local economy is adding jobs and population, who knows? If Cagan is correct, you just might be poised for higher-than-average price gains over the coming few years. Make the most of it.

The unbridled optimism of some of these “analysts” is almost enviable. None of the “shooting-star markets” are “likely to crash or burn”? Nice. I also love how this analyst had to perform a complex “statistical analysis” to place cities into three categories that basically equate to mild, hot, and hot HOT HOT—a task most of us could probably have done just by sitting down with a paper and pencil. Seattle isn’t as hot as South Florida or the San Francisco Bay? You don’t say.

(Kenneth R. Harney, Washington Post, 05.27.2006)

The post Seattle: Hybrid Cars & Hybrid Real Estate appeared first on Seattle Bubble.

The King County Housing Authority, which recently reopened its waiting list for rental assistance for poor residents, received 11,778 applications in a two-week period — an all-time high for the agency.

That is a 74 percent increase over the number of applications received when the waiting list was last reopened in June 2002, housing authority officials said.
…
Housing officials say the high demand reflects a countywide shortage of affordable housing.
…
A recent Seattle P-I analysis revealed that in King and Snohomish counties — the state’s most prosperous region — nearly 300,000 people live in poverty even though at least one family member works full time.

“This reflects the hard reality that housing costs continue to significantly surpass incomes, including wages,” Norman said.

As long as home prices keep going up and up, everything’s dandy, right? I mean, who cares about working class people being able to afford a roof over their heads? Yes, I’ve talked about this at length in the past, and apparently the problem has only gotten worse since then. Shocking!

(Debera Carlton Harrell, Seattle P-I, 05.25.2006)

Update: Speaking of people rooting for rents to climb… Just after I posted this I stumbled upon a relevant post over at the P-I’s Seattle Real Estate Professionals blog. Here are some choice quotes:

It’s true, Zag11, that rents have not kept up with purchase prices for homes and condos, so rentals represent a better bargain right now — IF you don’t count appreciation. And since appreciation isn’t guaranteed, it shouldn’t be counted when calculating one’s monthly expenses.
…
Since the housing market is cyclical and rents are extremely low compared to mortgage payments, that part of the cycle is due for what we laughingly call a “correction.” I’m sure you’re feeling that your rent needs to be “corrected.”
…
Say you jump right in and snag that 2k a month condo. As rents begin to rise, your payment starts to seem not-so-out-of-line. Before you know it, your payment starts to seem downright cheap when you see what your friends’ newly inflated rent payments are and note that their money goes to line their landlord’s pocket, while you’ve been raising your net worth with every payment.
…
All of this makes now a good time to buy — before rents go up — because housing prices will likely be higher then too. This assumes that it is not excessively burdensome for you to make the seemingly-large-at-the-moment payment. Stretching your budget to buy a home = good. Breaking the bank, putting yourself in financial peril, risking bankruptcy with the slightest decrease in your income = very very not good.

You heard it folks, straight from the real estate professional. Rents are going to experience a 200-300% upward correction “before you know it.”

(Susan Ryan, Seattle Real Estate Professionals, 05.24.2006)

The post Even Rent Unaffordable To Thousands appeared first on Seattle Bubble.

nice clean spacious condo w/territorial view, lots of storage, assigned parking in garage. located near public parking and shopping. gated community w/lots of amenities. new plumbing, new elevator. wont last long at this price.

Setting aside the author’s apparent disdain for the Shift key, what I find most amusing is the claim that it "wont last long." According to ZipRealty, this gem of the 70’s has been on the market for 75 days. At first I thought that they forgot to type the apostrophe in "won’t," but maybe "wont" (see definition 2) is exactly what they meant to type.

Heh.

The post Wont Last Long appeared first on Seattle Bubble.

Washington Mutual Inc., the nation’s largest savings and loan, notified 1,400 workers in Washington and Florida on Tuesday that they will lose their jobs as part of the company’s cost-saving strategy.

About 850 workers at the company’s call center in the Seattle suburb of Canyon Park were told they will be laid off by the end of July, spokeswoman Darcy Donahoe-Wilmot said.
…
"It’s part of our strategy announced last year to move back-office jobs to lower-cost locations," Donahoe-Wilmot said.

I certainly wouldn’t call a shifting of employees from one part of the country to another much of a portent of industry trouble, but it still translates to 850 jobs lost in Washington, and at least bears mentioning.

(Associated Press, Seattle P-I, 05.23.2006)

The post More Banking Job Shrinkage appeared first on Seattle Bubble.

Since 1998, voters have passed five levies: $117 million for education, $86 million for low-income housing, $72 million for the Seattle Center and community centers, $198 million for parks and $167 million for fire-fighting facilities.

The result is a four-fold increase over the past 10 years in what the average homeowner pays for levies. The owner of the average home in Seattle 10 years ago paid $104 for voter-approved levies. This year, the owner of the average home — assessed at $399,200 — will owe $459.

Today, Mayor Greg Nickels is expected to propose a new levy and other taxes — not for shiny new buildings, but to repair roads and bridges. His citizen advisory committee has suggested a levy of $25 million a year, and Nickels may choose to go higher.

"The need is clear, not only for the routine work of paving streets but also for the bigger projects, such as our aging bridges," Nickels said in his State of the City speech in March when he announced that he would explore a new way to fund repairs.
…
The new road-repair levy would signal a departure from how Seattle has used levies in the past. Previous levies were sold to the voters like Procter & Gamble products — offering something new and improved, such as new parks, fire stations and community centers.

This levy would improve roads but not pay for any new ones. The money would fill potholes, repaint crosswalks, repave roads — in other words, pay for tasks voters have come to expect government to include in its general budget.

Granted, Seattle homeowners seem only too happy to spend far more money than necessary for overpriced real estate and granite countertops—and a few hundred dollars per year isn’t going to break anyone’s bank. But what is the deal with begging for more money just to do (supposedly) routine maintence? What in the heck are they doing with the general budget?

Nickels said the city needs new money for road repairs to make up for funding that used to come from the state.

I don’t quite buy that argument, and as it turns out, neither does the state legislature.

State Senate Transportation Chairwoman Mary Margaret Haugen, D-Camano Island, said she was "aghast" at Nickels’ complaints about state funding. In the $8.5 billion gas-tax package the state passed in 2005, Seattle received $2.8 billion for projects like the viaduct and the 520 bridge, and an additional $2 million a year for maintenance, she said.

"The largest share certainly went to Seattle," Haugen said. "That was one of the things that people had heartburn about in the rest of the state."

So, we’re getting billions of State dollars for all kinds of fancy projects, but we have to jack up the tax on (already stretched) homeowners to afford to fix potholes? Something just doesn’t add up. I could be way off base here, but I can’t help picturing Mayor Nickels sitting at his desk with dollar signs in his eyes, thinking about the soaring property "values" in Seattle and wondering just how much more in taxes the populous will tolerate.

This was cross-posted at both Seattle Bubble and Seattle Traffic.

(Sharon Pian Chan, Seattle Times, 05.22.2006)

The post Homeowners To Fund Road Repairs? appeared first on Seattle Bubble.

There are signs the pace of home sales in Washington is slowing down, but prices continued to climb in the first quarter of 2006, according to the Washington Center for Real Estate Research at Washington State University.
…
The report is produced in conjuction (sic) with Washington Realtors.

[Center director Glenn] Crellin said the raising of interest rates by the Federal Reserve Board is the main reason for the flat statewide market.

But he cautioned that the market appears flat only in comparison to the superheated housing sales of recent years.

“The market remains very strong,” he said, especially compared with the rest of the country.
…
Buying a house continues to become more difficult in Washington.

The Housing Affordability Index – which measures the ability of a middle income family to buy a median price home with a 30-year mortgage – slipped further below 100 in the first quarter.

The statewide rate of 93.3 meant that a typical family had only 93 percent of the income required to buy a median-price home. Buyers in seven counties faced index values below 100, with the problem especially big in San Juan, Jefferson and King counties, which had values ranging from 37.1 to 77.1.

The full numbers from the report are available in PDF form directly from the WCRER. In my opinion, the most important bit of the report is the “affordability index,” which is described by WCRER as follows:

Affordability index measures ability of typical family to make payments on median price resale home assumes 20% down payment. First time buyer affordability assumes a less expensive home, lower downpayment and lower income.

A score of 100 means that the “typical family” can afford the median home. Take note that the “first time buyer affordability” rating in King County is just 43 percent. Not that this is particularly new information, I just think it needs to get more press. Seattle has basically become a place where only the rich (or those who already own) can afford to buy a home. Apparently the local press doesn’t have a problem with that.

The Affordability Index has never really been all that great for first time homebuyers in King County, hovering between about 60 and 70 from the early nineties through about 2003, but ever since then it’s just been tanking. Take a look:

Click to enlarge

I created this graph using the WCRER Build Your Own Report tool, which has data for the Washington housing market going back through 1994. For reference, I have overlaid the median home price (red line). You can see that as soon as the median price started shooting up at an abnormal rate, the affordability index began plummeting.

Rah, rah, real estate!

(Nicholas K. Geranios, Associated Press, 05.16.2006)

The post Affordability Continues Downward Slide appeared first on Seattle Bubble.

Our first report is from none other than our favorite organization, the National Association of Realtors®. Surely you already know who the NAR is, but I want to quote from their NAR Overview page anyway: “The core purpose of the NATIONAL ASSOCIATION OF REALTORS® is to help its members become more profitable and successful.” This is what their 10 page report, Home Price Analysis for Seattle-Tacoma-Bellevue (published during the third quarter of 2005), pruports to prove:

With home prices rising strongly in most parts of the country, there has been widespread media coverage on the possibility of a housing market bust. A thorough analysis of the Seattle-Tacoma-Bellevue metro market, as detailed below, reveals that there is little danger of this. In fact, the local housing market is in excellent shape with a potential for significant housing equity gains, particularly for homebuyers who plan to remain in their house for the long run.

Furthermore, in a section called “Stress Test,” they claim that:

• Price declines in the local market are unlikely according to our stress test.
• The local housing market will experience a price decline of 5% only under extreme unlikely scenarios. For example, mortgage rates rising to 10.5% in combination with 3,000 job losses could lead to a price decline.
• Such scenarios are highly unlikely. Most credible forecasts predict the region will create 60,000 to 100,000 jobs over the next 24 months and mortgage rates will hover around 7% by the end of 2006, which bodes well for future price gains.
• Even in the unlikely event of prices declining by 5%, most homeowners will maintain sizable equity build-up in their homes.

But I think my favorite part of their report is the “Additional Discussion Points” section. I believe in political circles they are known as “talking points.”

• Home price declines are very rare. In fact, the national median home price has not declined since the Great Depression of the 1930s. Stock market collapses, the OPEC oil crunch, economic recessions, and even wars have not negatively impacted national home prices since the 1930s.
• There have been few times when local prices declined. In nearly all these cases, the price declines were accompanied by sharp prolonged job losses. It is difficult to foresee a price decline in a job creating economy.
• Homes trade far less frequently than financial assets (about one home sale every 7 to 10 years for most homeowners). There are also larger transaction costs associated with selling a home due to the lengthy careful examination demanded by home buyers and sellers. Therefore, home prices are not prone to fluctuations as in the stock market. There are neither panic sells nor margin calls associated with homes.
• Many non-quantifiable factors could be important for this metro market in determining home prices. Access to cultural life, the quality of museums, nearby local and national parks, water views, exclusive neighborhoods, weather, the international airport, city vibrancy, restaurants, and a host of other non-quantifiable factors could have an important influence on the overall pricing.
• There are immense tax benefits to owning a home.

If all of this sounds strangely familiar, it’s probably because the local media has been dutifully repeating it nearly every chance they get. Or maybe it’s because you spend a lot of time over at the Rain City Guide (I kid, I kid).

Our second report is from HSBC, which in their own words is “one of the largest banking and financial services organisations in the world.” Here is the summary paragraph from their 110 page report, A Froth-Finding Mission – Detecting US housing bubbles (published January 2006):

We suggest that about half of the US housing market is frothy and that this ‘bubble zone’ may be overvalued by as much as 35-40%, after taking into account low interest rates and tax advantages. Current valuations imply a large permanent reduction in the risk premium and/or a sizable step up in future capital gains, not all of which, we think, is justified. The ‘bubble zone’ accounts for 50% of US GDP, or over USD6trn, nearly the size of the German, French, and UK economies put together. In other words, it’s big. Therefore, when these housing bubbles begin to deflate, it is likely to have substantial macroeconomic consequences.

As you can see, HSBC’s report is not focused specifically on our area. However, Seattle does show up rather prominently in their table of “Potential over/undervaluation: cities” (page 6). Coming in at the 12th-most overvalued market, Seattle is rated as 34% overvalued. Doing a little quick math, taking 34% off the 2005 year-end median price for King County of $393,000 comes to $259,380. Along with their (very) detailed report, HSBC has released an incredibly fancy Excel spreadsheet, HomePulse, that allows you to choose specific cities across the country and see a plethora of graphs detailing all the facts and figures that the report was based on.

In stark contrast to the NAR report, HSBC found that

Using HomePulse, we find evidence that about half the housing market is ‘frothy’, even after taking into account the benefits of low mortgage rates and tax advantages. We suspect around 40% of US housing units are frothy, but by value, that proportion rises to about 60%. Annual homeowner costs relative to rent or income are higher than in the late 1980s for the US as a whole and as high as the early 1980s (when mortgage rates were over 16%) for the ‘bubble zone’. As a result, the required capital gains to financially justify buying versus renting have never been higher for many areas.

So there you have it. The heavy hitters come out and argue both sides of the bubble debate, each supposedly analyzing the facts, but coming to completely opposite conclusions. Are both (or either) of these sources trustworthy? I guess that’s for you to decide.

(National Association of Realtors®, Q3.2005)
(HSBC, 01.2006)

The post Seattle: Froth Or No Froth? appeared first on Seattle Bubble.

People are scared. Outraged. And angry. Upset that they can’t buy a house or upset that they did.

Certainly there is some truth in her observations, but I’m not sure that she has it entirely right. Are some of us outraged, angry, or upset? Sure. Although (thankfully) the back and forth here is nothing compared to the Craigslist housing forums, there’s definitely a degree of anger at just how ridiculous the whole situation has gotten. But scared? Fear is something that I just don’t see in the comments here. Most of you don’t own a house, so what is there to be afraid of?

Although there are many emotions wrapped up in the bubble debate, I personally believe that most bubble believers base their conclusions on logic and a reasonable assessment of the situation. Of course, for people that are totally wrapped up in real estate, that’s a difficult thing to comprehend. Difficult, but perhaps not totally impossible, as demonstrated by another comment from Ms. Harris:

Being the consummate real estate professional that I am (tee-hee!), my first reaction is to run to these folks and offer assistance to help them become proud homeowners. Imagine my surprise to find that many of the people who comment on Seattle Bubble do NOT want to own a home! Or, at least, they don’t want to own a home if it means living in a crappy house with a huge mortgage.

In our real estate office, it’s constant rah-rah for real estate and we spend hours helping buyers figure out how to get the home of their dreams. So it’s just interesting to read another opinion when it comes to owning a home.

If you decide to comment on Marlow’s post, please be nice. Unlike some of those in real estate, she is clearly willing do have an open dialog about the issue.

So what’s your bubble belief driven by? Are you angry and upset, and just looking for “facts” to fit your perception, or is it the facts that are making you angry? What other emotions do you feel about the bubble?

(Marlow Harris, Seattle Real Estate Professionals, 05.18.2006)

The post Emotional Bubble appeared first on Seattle Bubble.

The city council’s housing committee voted May 16 to put off a motion that would grant $1.5 million in tax breaks to a University District developer in exchange for "affordable" rental units that would cost nearly $200 more than the average rent for the neighborhood. The average rent for a one-bedroom apartment is $757, according to local rental analysts Dupre + Scott.

In exchange for the tax break, the developer, Lothlorien Apartments, would make 30 percent of its units "affordable" (that is, costing no more than 30 percent of a renter’s monthly income) to renters making up to 70 percent of the Seattle median, or $38,150 for one person. For a one-bedroom, that works out to $1,022 a month.

For most of the Seattle area, "affordable housing" isn’t really an issue—as long as you rent. In many neighborhoods rent comes in well below the 30% "affordable" threshold. Before we moved to our current free digs, my wife and I were paying just $850 per month for a nice two-bedroom townhouse in Woodinville, which figured out to under 20% of our monthly income (which consisted of only my paycheck, and was almost exactly at the median). I imagine that there is a need for more "low income" housing, but for people making the median household income down to as low as 60% of the median, there are plenty of "affordable" options.

(Erica C. Barnett, The Stranger, 05.18.2006)

The post Tax Breaks For "Affordable" Rent appeared first on Seattle Bubble.

What I believe is most useful is to look at overall trends. Incidentally, there happened to be an article about that very topic in this morning’s Seattle Times.

Washington added jobs last month, but at a slowing pace, while the increased number of people entering the labor market nudged up the unemployment rate.
…
So far this year, each month since February has seen fewer jobs added than the month before.
…
Despite the slowing pace, job growth continues to run ahead of predictions.

Okay, so our general jobs picture looks pretty good, although the rate of improvement is slowing. So which specific industries are responsible for the most new jobs?

Driven by a sizzling housing market and a resurgence in commercial real estate, the construction industry added 1,100 jobs last month and has grown by 20,000 jobs, or 11.4 percent, over the past year.

In addition, the real-estate sector of the financial-services industry added 800 jobs last month and 1,600 over the past year.

Professional and business services, a motley category that includes everything from architecture to waste disposal, added the most new jobs in April, 1,700.

Aerospace added 400 jobs last month.

It has grown by 6,700 jobs, or 10.3 percent, over the past year.

The strength of the real-estate and aerospace industries particularly benefited the Puget Sound region.

What do you know… construction and real estate are among the leading sources of new jobs, together accounting for 21,600 new jobs in just the past year. Interestingly, while "aerospace" is probably mostly Boeing, one thing I did not see in this article was any mention of the darling of the real estate cheerleaders—Microsoft. Didn’t we just see an article yesterday about a humongous Microsoft expansion? Aren’t they bringing thousands of high-paying jobs to our area every year? Well, not quite. While the headline shouted Microsoft plans big expansion, the article tells [insert Paul Harvey voice here] the rest of the story.

Overall, Microsoft said in February that it would spend $1 billion to add room for 12,000 employees in 3.1 million square feet of additional space over the next three years. That plan includes the space at Lincoln Square, company spokesman Lou Gellos said Monday. But not all of the space is slated for new hires. Part of the goal is to alleviate overcrowding, Gellos said.

The Lincoln Square lease will also address the fact that Microsoft’s sales team is spread across a number of buildings, Gellos said.

"This is really an effort to consolidate and get the whole sales group together in one spot," he said.
…
Microsoft isn’t altering its employment projections for the current fiscal year, which ends June 30, Gellos said. The company, which employed 61,000 people as of June 2005, has said it expects to add a total of 4,000 to 5,000 employees worldwide this year, 40 percent of them in the United States, and most of those in the Puget Sound region.

That would be in line with the steady but relatively slow growth that Microsoft has experienced since the 2000 tech bust.

Let’s see, 40% of 4,500 is 1,800 new MS jobs in the USA. "Most" could mean as low as 51%, but I’ll be generous and assume that 75% of those jobs will be in the Puget Sound. 75% of 1,800 makes a whopping 1,350 new jobs that Microsoft is predicting they will bring to our area in the coming year.

Hey, 1,350 is almost enough to balance out the 1,600 real estate jobs that were created in the last year. Hmm, but what about the 20,000 construction jobs? "But wait," you say. Microsoft hires highly paid professionals. Surely 1 job at Microsoft is the economic equivalent of at least half a dozen construction jobs, right? Well, maybe not quite.

Base compensation has become a bigger issue since the value of Microsoft options fell with its stock. In 2003, the company phased out options and began using smaller stock awards to supplement salaries, ending the era of the fabled Microsoft Millionaire.
…
[Internal Microsoft pay documents] indicate that in Microsoft’s current fiscal year ending June 30, the company budgeted for average merit increases of 3.2 percent for workers in technical positions. It also budgeted for a 1.7 percent rise in promotion-related compensation.

Also disclosed are salary ranges for technical jobs, not including sales and service-related positions. The salaries range from a minimum $25,500 up to a maximum $285,000.

So here’s my thesis: Jobs (at least partly) drive housing. The job situation in Washington (and the Seattle area) has been doing pretty well lately. However, a large amount of the job growth has been in housing-related industry. Therefore, when housing slows due to other forces (such as increasing interest rates or higher lending standards), the job market will slow, thus causing housing to slow further. Lastly, high tech jobs—including Microsoft—are not growing at a fast enough rate to rescue us when/if construction and real estate experience a significant slowdown.

Your thoughts?

(Drew DeSilver, Seattle Times, 05.17.2006)
(Todd Bishop, Seattle P-I, 05.16.2006)
(Brier Dudley, Seattle Times, 03.09.2006)

The post Let’s Talk Jobs appeared first on Seattle Bubble.

A new HGTV show called "My House is Worth What?" is coming to Seattle to find folks who’d like a free home evaluation — and a TV appearance. Here’s what they’re looking for:

Energetic homeowners who are:

• Planning to move or refinance.
• Wondering how much value a recent renovation has added.
• Willing to submit a photo of their families, along with their home’s exterior and interior.
• Considering using equity to finance a wedding, college education or other milestones.
• Considering major renovations.

Way to be late to the party, guys. It’s no wonder they’re looking in Seattle, since we’ve got to be one of the few places left that you can find "energetic homeowners" that are excited about the prospect of "using equity to finance…milestones." I predict that if these shows even last on season, they definitely don’t make it past 2007.

(Sandy Dunham, Seattle Times, 05.13.2006)

The post Cable TV Arrives Late To Party appeared first on Seattle Bubble.

Many first-time buyers swiftly learn that if they want to get into a home they’ll have to make accommodations.

Although there are several types — buying with friends or others, thinking smaller, driving farther — the most popular are buying fixers and finding cheaper neighborhoods.

There’s a particularly interesting number given in the article:

A household of four earning median income in King County can, conservatively, pay $327,180 for a home. But they won’t have many options on the single-family home front except along the King County line, said Elizabeth Grebenschikoff, a real-estate agent with Quorum Real Estate Laurelhurst in Seattle.

If you put 20% down ($65,436—tell me, who has that much?) on a $327,180 house, you’ll have a mortgage of $261,744. At an interest rate of 6%, the monthly payment on this mortgage would be about $1,570. The median household income in King County is $55,114, or almost $4,600 per month. $1,570 is 34% of that. Again, I would like to point out that “the generally accepted definition of affordability is for a household to pay no more than 30 percent of its annual income on housing.” (US Dept. of Housing & Urban Development) So, I don’t know where Ms. Hodges pulls that $327,180 number from, or how she can consider it “conservative,” but whatever.

The second article focuses primarily on numbers, and leaves me confused as well.

Using conservative lending estimates from the National Association of Realtors, a household would have to bring in $96,428 to buy that $405,000 home — and that’s with a 20 percent (or $81,000) down payment. With nothing down, make that $120,535.

Now we’re actually using the word “conservative” correctly. $96,428 per year is $8,035 per month. 30 percent of that is $2,410. Monthly payments on the $324,000 mortgage ($405,000-$81,000) would be just under $2,000. So by my calculations, that actually is a conservative estimate. The way I figure, you would “only” need to make $77,000 (and somehow have $81,000 in the bank) to afford the median home in King County. Again, whatever.

While Seattle isn’t considered a “bubble” market, the median price of single-family homes in King County has been rising by double digits every year for several years — 11.9 percent (from $362,000 to $405,000) from March 2005 to March 2006 alone.

Median income in King County hasn’t risen as quickly as home prices. Last year, median income in King County was $77,900 for a family of four; $63,120 for a two-person household; and $55,230 for singles.

Okay on this one I’m going to have to call bull. The most recent figures that I’ve seen are from 2004, and as I said above, they put the “median household income” at $55,114. How could the median household income be lower than even the median single income quoted above of $55,230? Furthermore, the most recent data (again, 2004) on “median family income” for King County puts it at $71,814, not $77,900. Either the author of this article has seen some new numbers that are quite a bit higher than the 2004 data, or they’re just making things up.

Can anyone shed some light on this? Where are these numbers coming from?

(Jane Hodges, Seattle Times, 05.14.2006)
(Jane Hodges, Seattle Times, 05.14.2006)

The post "Affording" A Home In King County appeared first on Seattle Bubble.

As communities develop their visions for the future, they are deciding how much land is needed for their growing populations. Washington State, under the 1990 Growth Management Act, and dozens of cities and counties around the country, have drawn geographical boundaries designed to halt sprawl and concentrate development into urban growth areas (UGAs). By channeling growth into these urban areas, and assuring the appropriate infrastructure is available, government intends to encourage economic development even as it preserves environmental quality.

But early examples of how these policies actually play out in real life demonstrate that growth management can have serious, unintended consequences. It has contributed to increases in land prices and development costs. These, in turn, have driven up new housing prices and placed an upward pressure on prices for existing housing.
…
The debate has also heated up in King County. In line with the state’s Growth Management Act, King County established its urban growth boundary in 1994. Combined with soaring job and population growth in the mid to late 1990s, housing prices in the UGA skyrocketed.

Wow, if they thought housing prices had "skyrocketed" in 2001, I can only imagine what the authors of this paper must be thinking now. (Interestingly, a recent blog post at the Washington Research Council—currently on their front page—claims that "…the supply/demand balance will remain tight in this market, and that argues for house prices to remain firm here.") It should be noted however, that the word "bubble" does not appear anywhere in the above article.

Personally, I think that King County entered bubble territory around 2002-2003, and while the Growth Management Act certainly isn’t putting any downward pressure on prices, I don’t think it is responsible for pushing us into this crazy unaffordable mess. What do you think?

(Washington Research Council, 03.26.2001)

The post Growth Management Bubble? appeared first on Seattle Bubble.

Google just released an interesting new feature yesterday: Google Trends. One of the interesting features of Google Trends is that it gives you a list of the top ten cities that have searched the most for whatever terms you put in. Obviously, I decided to try it out with the search term "housing bubble." Here is the resulting graph:

Click to enlarge.

Not surprisingly, interest in a housing bubble seems to have peaked late summer of last year, around the same time that the housing bubble was getting the most news coverage. Also not surprisingly, Seattle doesn’t appear in the top ten list of cities searching for "housing bubble" online. Here’s the top ten list, as of today:

1. Santa Clara, CA
2. Pleasanton, CA
3. San Jose, CA
4. Rancho Santa Margarita, CA
5. San Diego, CA
6. San Francisco, CA
7. Irvine, CA
8. Reston, VA
9. Washington, DC
10. Sacramento, CA

Actually that’s more like a top five list. San Francisco (1, 2, 3, 6), Los Angeles (4, 7), San Diego (5), Washington, DC (8, 9), and Sacramento (10). Apparently people in the greater San Francisco area are more worried about a housing bubble than anyone else in the country—by a pretty wide margin—and Californians in general are the by far the most worried about their precious bubble being burst.

Unfortunately Google Trends only provides the top 10 so we don’t have any way of knowing how far down the list Seattle would have come in. I suspect it would have been pretty low. I get the general impression that the thought of a housing bubble hasn’t even crossed the minds of most people in our area.

In other Google-related news, does anyone else find it strange that this blog comes in as the #1 result for the search "Seattle bubble" on MSN Search and Yahoo Search, but isn’t even in the top 100 on Google? What’s with that? I don’t know how much good it will do, but Google does provide a quality feedback form that you can complain on if like me, you think that’s somewhat bogus.

(Google, 05.10.2006)

The post Google Trending The Housing Bubble appeared first on Seattle Bubble.

Median price of homes hits $519,000

The median price for homes in King County last month was $519,000, a 16 percent increase over the same period a year ago.

Bzzt—wrong. The median price for houses was $419,500, an 18 percent increase over a year ago. The median price of homes (houses + condos) was *achem* “just” $377,000 (up 17%).

According to the Northwest Multiple Listing Service (NMLS(, a residential real-estate organization that tracks the housing market regionally, the median asking price in King County in April 2005 was $447,000.

The correct abbreviation for the Northwest Multiple Listing Service is NWMLS. You know, as in NWMLS.com? Also, the key you were looking for is ")".

In its report on last month’s market activity, King County was one of only three counties in western Washington that had fewer houses on the market than it did 12 months ago, according to NMLS.

Bzzt—wrong again. Only two counties had fewer houses on the market in April than they did last year (Cowlitz: -1%, Grant: -2%). However, King County did have slightly fewer homes on the market than last year (-1%), since condo inventory decreased almost 14%.

J. Lennox Scott, chairman of John L. Scott Real Estate, called the job centers in Bellevue and Seattle "the epicenter of sales activity." He added, "We continue to see a quick-action market and a strong surge of buyers, but there simply isn’t enough housing supply to meet the demand."

Bellevue (area 530): Pending sales down 13%—closed sales down 40%. Seattle (area 140): Pending sales down 16%, closed sales down 8%. Yeah, those definitely sound like "sales epicenters" to me.

Despite modest increases in mortgage rates, attractive financing, including multiple options for first-time buyers, is sustaining activity, NMLS reported.

Is that, even, a, sentence?

I don’t think I’ve ever seen an article with so many errors, and the whole thing—title included—is only 211 words! I’m no big fan of the real estate reporting in the Seattle papers, but at least their writers passed high school English. You would think with five days to prepare (NWMLS stats were released on Friday), they could have at least gotten the headline correct.

(Federal Way Mirror, 05.10.2006)

The post Error-Ridden Reporting appeared first on Seattle Bubble.

Sometimes selling your own home is easy, especially in a hot market like Seattle. Sometimes it’s tough. Either way, it’s work.
…
While FSBOs might look great on the surface, industry experts and those who sold their own homes agree that homeowners need to consider plenty of caveats and potential pitfalls when they think about selling without an agent.

"When people start to pull back the covers on everything involved in selling their own home, they may decide that hiring a professional real-estate agent is the best path after all," said Brett Clifton, co-owner of Personal Real Estate Support Services in Seattle, which provides consumer real-estate information and links buyers with agents.

So you have the Times propping up the notion that real estate in Seattle is hot, HOT, HOT, while simultaneously actively discouraging people from trying to sell homes without a real estate agent—which by the way should be much easier in a red hot market, right?

Just how much advertising revenue does the Seattle Times receive from real estate interests, anyway?

(Terence Finan, Seattle Times, 05.06.2006)

The post Follow The Money appeared first on Seattle Bubble.

I have a question about the “houses on the market” stat that you called the press to task on for not reporting. Is it an absolute measure or a relative measure? Because certainly hundreds of new houses came on the market last year- definitely enough such that the case is that inventory has DECREASED as a % of total homes. It sounds as if you are saying that it’s purely an absolute measure, which doesn’t seem very helpful to me. And not only have the number of houses increased, but I’m guessing that the population increased also.

Just to make my case using extremes, suppose last year there were 4 million people in the area and 5,000 homes out of, say, 1.5 million total. That would be a “for offer” rate of 3.33%. Now let’s say 200,000 net new residents moved into King County, 5,000 net new homes were built, and 5,100 were “for offer”. OK, so the “for offer” rate would have increased to 3.38%- a 1.4% increase in listings. But the population has increased 5%. So, when considering all the moving parts, have they really “gone up”. I don’t know, you tell me.

Yes, the NWMLS figure of “active listings” (inventory) is an absolute measure. Unfortunately figures like “total homes in region X” isn’t something that we have available to us, so we can’t really know what percentage of “total homes” the “active listings” represents. The reader brings up a good point though, that when compared to factors like total homes and population, an inventory that is holding steady is actually decreasing, and even a slightly increasing abolute inventory is relatively decreasing. However, even though we don’t have a “total homes” figure, we do have one useful thing to compare inventory to in order to gauge the market: pending sales.

To try to understand the inventory versus pending sales situation a little better, I created this chart using the NWMLS data for “res only” in King County from 2001 to the present. I plotted the year-to-year percent change in inventory and pending sales. The thin lines are the actual data for each month, and the darker lines are a smoothed average using Excel’s polynomial “trend line” function.

Click to enlarge.

Here’s what I find interesting about this chart. Around July 2002—arguably around the time that the Seattle market really started to heat up—the trend lines crossed, meaning that pending sales were increasing faster than new listings were being added. That is probably at least one of the reasons behind the extreme ramp-up in prices. However, about halfway through last year the active listings started on the road to recovery, and around December or January the lines crossed again in the opposite direction. Pending sales have been on a steady downward trend since late 2003, but now (absolute) inventory is actually increasing at the same time.

This is what I was referring to when I pointed out the positive numbers in the “% chg. Total actv” column and negative numbers in “% chg Pending sales” column. Despite the lack of statistics on population or total homes, increasing inventory coupled with decreasing sales volume is a clear sign of a slowing market, and it’s frankly quite disappointing that the local press is turning a blind eye to it. If this trend continues, there is no possible way that the median price can continue to rise like it has been lately. It’s just not economically possible.

The post (Absolute) Inventory vs. Pending Sales appeared first on Seattle Bubble.

Clearly Seattle (and many other cities) are lagging the hottest markets in the housing bubble burst and in Seattle at least one thing that’s perpetuating the bubble and keeping prices up is a remarkably low inventory. So the question is: why is inventory so low? The bulls would say it’s high demand (new jobs, inflow from CA, etc) combined with low new listings (“Seattle is such a great place to live people don’t leave”) All this doesn’t pass the smell test. I wonder if new listings aren’t low because increasingly, more and more people aren’t becoming “trapped” in their houses. I’m not just talking of those with exotic mortgages and negative equity or adjustable loans on the verge of resetting here. Normally, in a healthy market, besides those forced to sell (divorce, job loss, etc) there is a lot of “discretionary” selling for many reasons.

I wonder if the discretionary selling isn’t now falling because:

1. Rising interest rates reduces discretionary selling since it would force people to buy a new home at newly higher interest rates. Since so many people are maxed out on their current mortgage there’s not way they could afford to move without a major “step down”.
2. The rapid increase in property values and the concomitant meteoric rise in property taxes means that anyone moving now will immediately “reset” to the current higher tax bill.

It would be interesting to hear why inventory is low from other readers perspectives.

Also, if you refer to the basic math I tried explain to Ardell the RE Agent, you can see that even at a low interest rate, a family with a house that has appreciated will be facing a huge jump in monthly payments if they want to “upgrade” to a slightly nicer house. This is the kind of thing that the local reporters should be looking into and writing the big stories about. So what is the deal with the low inventory—what do you think is the real reason behind it?

The post What’s Behind Seattle’s Low Inventory? appeared first on Seattle Bubble.

If your home’s taking longer to sell, you’re not alone.

Home prices are still going up, even though sales have dropped dramatically when compared with 2005.

And now that it’s spring – prime home-shopping weather – more for-sale signs are popping up in neighborhoods around the South Sound. (Sellers: Read that as “more competition.”)
…
More homes on the market

The Pierce County market has seen a surge of home listings, up 29 percent compared with this time last year.

Fewer transactions

Pending sales, in which offers are made and accepted but not yet closed, dropped by 12 percent last month versus 2005.
…
Local brokers are puzzling over what this means as they look toward the traditional summer selling season. Dick Beeson, MLS director and broker with Windermere Real Estate/Commencement Associates in Tacoma, said the market seems to be “taking a bit of a breath.” “We just don’t know how big a breath,” he added. “We don’t know if it’s a big gulp or kind of a sigh.”

Kudos to Ms. Clements for actually telling the full story of the housing situation in Pierce County. It’s only a matter of time before King County starts to see numbers like these. Maybe then our local reporters won’t be able to ignore the reality that the slowdown is upon us. Maybe.

(Barbara Clements, Tacoma News Tribune, 05.06.2006)

The post Unignorable Slowdown In Tacoma appeared first on Seattle Bubble.

In April, home sales rose 10 percent over last year, according to preliminary data released Thursday by Olympic Multiple Listing Service.

The sudden increase in April home sales is partly because of seasonal factors, such as better weather. But it also reflects Thurston County’s strong economy with 4.3 percent unemployment, said Olympic MLS Manager Jerry Wilkins.
…
From March to April this year, the median price of a home rose from $244,000 to $252,200. The median price of $252,200 in April was 22 percent higher than the median price of a home for the same period last year.

The 10 percent increase in the year-to-year April figures reverses an earlier trend in which March home sales declined by 1 percent.
…
April had 1,113 active home listings compared with 832 for the same period last year, according to the Olympic MLS data.

To hear Rolf Boone tell it, everything is rosy in Olympia. However, note that inventory is up 34% from a year ago, while demand is only up 10%. While not as extreme as last month, when inventory was up 77% and demand up 19%, it’s still a slowing trend.

(Rolf Boone, Olympian, 05.05.2006)

The post Sales, Prices Up Slightly In Olympia appeared first on Seattle Bubble.

Kirkland-based mortgage company Merit Financial will meet with its 300 employees this morning to let most of them go as executives decide whether to file for bankruptcy, according to two people familiar with the company’s plans.

Merit Financial will keep a skeleton staff to process loans in progress, but otherwise will be working to liquidate the company, said the sources.

Merit was founded in 2001, making residential loans during a hot real-estate market. It grew quickly from a company with 12 employees and $50 million in loan volume its first year to passing the $2 billion mark in cumulative loans last May, after just four years in business, according to the company’s Web site. At that time, it had 430 employees and planned to hire more.

Like others in the mortgage business, Merit fell on hard times as the refinancing market dried up. Six months ago, it laid off about 20 people in its lending division and stopped making loans itself, acting only as a broker.

Hey at least there’s always Senor Cartgage Mortgage. But don’t worry your little head about the steady collapse of the mortgage lending industry in our back yard… real estate in Seattle is H-O-T HOT. Get in while you still can, before you get priced out forever!

(Melissa Allison, Seattle Times, 05.04.2006)

The post Merit-less Mortgage Operations appeared first on Seattle Bubble.

Thurston County’s three largest cities were among the most popular destinations for home buyers in the first quarter of the year, according to data released by an online real estate company.

Olympia, Lacey and Tumwater ranked among the top 5 cities around Puget Sound based on users requesting information on homes in the area, according to HouseValues Inc., a Kirkland company that offers online real estate services, such as matching prospective buyers with real estate agents.

Home buyers interested in Olympia, which ranked No. 1 among Puget Sound-area cities in the first quarter, grew by nearly 40 percent, followed by Lacey in second at 35.2 percent and Tumwater in fourth with almost 24 percent, the data showed. West Seattle ranked third.
…
"What Thurston county offers is affordability, quality of life, excellent schools and recreation," said Steve Garrett, the designated broker and co-owner of Windermere Olympia. "That really kind of drives those numbers."

The difference between median home prices in Thurston and King Counties is substantial, according to multiple listing service data. Last month, the median price of a home was around $245,000 in Thurston County, while in King County it was nearly $400,000.

As a result, Seattle ranked 15th in the number of people requesting information about homes in Puget Sound, [HouseValues spokesman Matt] Heinz said.

Come on Steve, let’s not kid ourselves. Olympia may have "quality of life, excellent schools and recreation," but so does Kirkland. Thurston County is nice, but the primary driving factor here is price. People have been priced out of Seattle, and are slowly being priced out of the Seattle suburbs as well. As a result demand is dropping here. Thurston is still at least marginally affordable, so people are still buying houses there.

(Rolf Boone, Olympian, 05.04.2006)

The post Home Buyers Most Interested In Thurston appeared first on Seattle Bubble.

A banking giant shut down all of its branches in Western Washington on Tuesday, leaving thousands of local customers in the lurch, KIRO 7 Eyewitness News reported.

Ameriquest Mortgage is closing 229 branches nationwide, including 26 branches in Washington state.

Peter Demerick of Bremerton thought all he needed to do was fax his mortgage papers in to Ameriquest. But he didn’t expect to get a disconnected number, and now he’s still trying to get answers.
…
"This is absolutely crazy. Ameriquest is one of largest mortgage companies in the United States," he said.
…
Ameriquest is closing all 26 offices in the Puget Sound area. About 4,000 employees nationwide were let go Tuesday and told to take their belongings and go home.

Demerick is sure his mortgage broker had no idea. "I’m sure he was totally shocked. If he knew about this yesterday, he was a great actor. At this point they’re cutting and running."

I expect we will see a lot more of this kind of thing in the coming years as real estate begins its decline.

In other news, I caught this story via the 360Digest blog:

Homestore Inc. this week rolled out a new look for its Move.com home-search Web site, which features existing homes, new homes and properties for rent.

Move reported a net loss of $2.04 million in the first quarter compared to a net loss of $395,000 in first-quarter 2005.

The company reported that the quarterly loss is related to a new rule issued by the Financial Accounting Standards Board, which relates to public companies’ accounting of stock options. "Excluding stock-based compensation expense related to the adoption of (the rule), net income would have been $1.3 million for the first quarter of 2006," Move Inc. reported. Total operating expenses were $55.4 million in the first quarter, up from $44.3 million in first-quarter 2005.
…
Total revenue in the first quarter was $69 million, up 22 percent from first-quarter 2005.

Move.com doesn’t have anything to do with the Seattle area, but I found the story interesting because their soon-to-be "Director of Consumer Innovations" happens to be Dustin of our favorite local real estate blog, Rain City Guide.

(Alison Grande, KIRO 7, 05.03.2006)
(Inman News, 05.03.2006)

The post Ameriquest "cutting and running" In Puget Sound appeared first on Seattle Bubble.

Here’s another trick of the trade: When you sell your house, tell the agent you want to negotiate their commission.

Bill McCabe listed his house with a 4 percent commission instead of the traditional 6 percent — getting the listing agent to drop their commission by 1.5 percent, and the buyer’s agent to drop their commission by a half percent.

That saved McCabe $10,000.

Thanks to a glut of agents and discount listing sites on the Internet, broker Johh Hama told me agents are taking cuts — even if they don’t like to talk about it.

In times when the seller is also purchasing a property as well as selling a property, where there’s two transactions — that’s when you’re in a prime position to negotiate. But don’t expect your agent to volunteer.
…
Remember the bottom line in real estate is it’s all about money.

Indeed, and in this blogger’s opinion, the smart money is getting out of real estate right about now. Despite what the addicted-to-6% agents may be screaming, there are times when land is a bad investment. After the fastest run-up in history, it’s quite likely that now is one of those times.

(Connie Thompson, KOMO News, 05.02.2006)

The post Commission Negotiable—Shh, Don’t Tell! appeared first on Seattle Bubble.

The price of a home may be relatively modest in Pierce County when compared with our neighbor to the north, but that doesn’t mean it’s any easier for a first-time buyer to get into a house here.

"Affordability has been at the lowest level I’ve seen in 12 years," said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University.

For example, the affordability index for all buyers in Pierce County at the end of 2005 was 104, meaning that all the families pulling in the county’s median income, $62,437, could afford the median-priced home, $255,000. The median is the midpoint, with half above and half below.

However, a look at first-time homebuyers, who don’t have equity to put toward a home, shows a drastically different picture, Crellin said.

The affordability index drops to 61 percent in Pierce County. That means first-time buyers here can afford a home priced at 61 percent of the median, or $155,550.

The picture is worse in King County, where the affordability index on a median-priced home, $390,000, is 80 percent. For first-time home buyers, the index falls to 45 percent. That figures out to a home price of $175,500.

Keep in mind that the figures they are quoting are for "families," meaning that single people are completely excluded from those statistics. Here’s a good explanation of the difference between "median family income" and "median household income." Despite the shrill insistence by local real estate cheerleaders, the numbers clearly show two things: 1 – Many would-be first-time home buyers are totally priced out. 2 – If you aren’t part of a "family" that has two incomes, you are priced out.

"Their choices are limited," he said. "Either they have to choose a less expensive home or take out an alternate mortgage instrument."

But as mortgage rates rise – up to 6.61 percent on a 30-year-fixed-rate mortgage in Washington last week – homeowners are finding adjustable-rate mortgages or interest-only products less and less attractive, he said.

Also, the cooling of the superheated housing market is a concern to homebuyers looking at these products. A yearly equity jump of 20 percent is no longer a sure bet, he said.

"I thinking we’re not looking at a housing bubble, but a balloon," he said. "We’re on the verge of deflating, but we’re not looking at any severe reduction of values in this area."

Wow, so many great quotes in there. "Alternate mortgage instrument," "20 percent is no longer a sure bet," and "not a bubble, but a balloon." I especially like the bit about deflating, but not "in this area." Sounds a lot like the polls that came out a few weeks ago where some large percentage of Americans now predict housing reductions, but very few predict such reductions in their own backyard.

(Barbara Clements, Tacoma News Tribune, 05.02.2006)

The post No Family? No Equity? You’re Screwed. appeared first on Seattle Bubble.

We can approve you from your car (i.e. – over the phone). Getting a home loan should be as easy as ordering pizza.

It’s because of companies with that kind of philosophy that we’ve gotten into this mess.

Since the MLS #s for April will be out on Friday, I think it’d be fun if everyone made some predictions.

However, I don’t think I’ll be very good at guessing such things, since that would require understanding the mind of today’s home buyers—who obviously aren’t basing their decisions on logic or reasoning. Despite that, here’s my guess for the "residential only" category. Listings flat compared to April ’05, pending sales down 10%, median closing price $408,000.

PS. Ardell can you point me to some stats (with a link) that show that a “family” is not a first time home buyer?

Thanks.

Her response:

Of course, I’m assuming that was a "tongue in cheek" question :-) My stats over 16 years. About half of my clients have been first time buyers and only one of those was a family with children and they were only in this country a short time. Since I’ve sold in five states since 1990 I can’t "point to the stats". I have had first time buyers who were not young, in their 40’s, but they were single. Just my personal experience.

In my experience, I have had families with two children move from a two bedroom condo to a townhome. Oops, forgot my friend Lori. She rented with her husband and three children until her husband passed away. Then she bought a home, cash, with his insurance money.

So there you have it, if you don’t get a house before you have kids, you can forget ever getting one at all (unless you happen upon an insurance windfall). I kid.

The post Random Thoughts & Observations appeared first on Seattle Bubble.

Another RCG contributor, Ardell DellaLoggia, responded with the following argument:

The Tim,

I never understood the median income vs. median purchase price analogy. If, as you say, King County has increased by 70% since 2000, doesn’t the average family then have a large downpayment from the sale of their current home? A “family” is not usually a first time buyer scenario. Most “families” already own a home that they purchased for much less than its current sale price.

When someone factors the income needed to purchase a home, do they assume zero down or 20% down?

If a young couple purchased a home in 2000 for $250,000, that home would now be worth $425,000, using your 70% increase since 2000. Now that they need a larger home, they have a substantial downpayment. Even if their income stayed the same or only moderately increased, if they bought the first home with zero down, they now can afford more as they won’t need a second mortgage.

I attempted to post the following reply this morning, but for some reason it has not shown up yet. Since I’m impatient, I’m posting it here.

Okay Ardell, let’s do some math.

First I’ll look at your hypothetical couple that cashed out a $425,000 home. So they make $175,000 on the sale (assuming they haven’t been cashing out on their equity with a HELOC or refinancing their credit card debt into the mortgage, which in my opinion is a pretty big assumption…), minus commission (assuming they use an agent), minus whatever other fees or taxes there are… Let’s say they walk away with $150,000, which I think is a pretty generous estimate.

Now, you said that they need a larger home, so you know they’re not going to find it at the same price they just sold for, so let’s say the new place they find is $475,000 – again a pretty modest estimate. They put down $150,000, and get a mortgage for $325,000. At an interest rate of 6.25%, their monthly mortgage payment would be roughly $2,000. That is not even considering taxes, insurance, and other costs of owning.

If this family is making the median household income in King County ($55,114), their gross monthly income is ~$4,600. The historical definition of affordable is 30% of gross income. That would be $1,380 for the median family, which is incidentally almost exactly what the monthly payment would be on a $225,000 loan at 6.25% (their old house). However, the $2,000/month mortgage payment is 45% higher than what would be “affordable” for them. For this family to be able to afford $2,000 per month, they would have to be making $80,000 per year, meaning that their current income is just 69 percent of what is necessary to afford the upgrade.

All that said, I also take exception to the way you just totally write off first time buyers. Tell me, how can the market continue to grow if no new buyers are able to join the party? Are you saying that the market is totally sustainable by simply having existing homeowners trading houses back and forth? Who is being sold to when people leave the market (old folks moving into apartments/group homes, death, speculators cashing out, people moving away, switching to renting, etc…)?

For the first time buyer, the above numbers are even worse. Even if you assume they have $81,000 laying around for a 20% down payment on the median $405,000 house, the monthly payment comes out to $2,000, so they’re in the same boat as the family that is “upgrading” and cashing out on their appreciation.

I restate my position that the only way that many (most?) people can “afford” a house in today’s market is through “exotic” financing. Unless mommy buys a house for you, that is. I welcome you to provide actual numbers that show otherwise.

So how about it? Can Ardell or anyone else out there demonstrate a scenario to me where the “average” family in our area is able to reasonably afford a home without “creative” financing or a large cash gift from mommy and daddy?

The post How Are People Affording Seattle Homes? appeared first on Seattle Bubble.

"Opportunity knocks!" proclaimed a real estate handbill about a five-bedroom home on two acres selling for $288,750.

But here is what you won’t find on the advertisement for the property on Canyon Road East: State and local government agencies suspect the site, once an illegal landfill, is contaminated with corrosive wastes, solvents and dangerous metals, among other hazardous substances.

The owner — a lender that foreclosed on the property — doesn’t have to disclose that to prospective buyers under an exemption in state law. Yet under state and federal law, anyone who buys the land could be obligated to clean it up.
…
In a hot real estate market, buyers might be tempted to waive residential real estate disclosure requirements.

Don’t do it.

Duh. I have to say I still don’t understand how people could get so worked up about getting a house that they would totally waive inspection. We’re talking about the biggest and most important purchase many people will make in their lifetimes, and at the height of the mania last year and in ’04, people were walking into it completely blind. Thankfully as foreclosures ramp up, the mania ramps down, so regardless of state law, the problem will be self-correcting.

(Susan Gordon, Tacoma News Tribune, 04.26.2006 )

The post Disclosure Loopholes Highlighted appeared first on Seattle Bubble.

Folks around here hardly need an invitation to commence remarking about the prices of homes in this market. Wrote one reader: "How can the average price continue to escalate so radically beyond the means of the average household income? I would hope there is some correction on the horizon — though I confess I’ve been amazed that housing prices have continued on the current course for as long as they have."

Amazement is close to becoming a permanent condition around here; for nearly two decades people have been looking at housing prices and presuming that at some point we’d run out of corporate executives or well-paid lawyers or prematurely retired software millionaires to fuel the run-up.

But in two decades, it seems, we haven’t. The median price of closed sales on homes and condominiums was $365,000 in King County in March, according to the Northwest Multiple Listing Service; in Seattle the median price was $407,000, on the Eastside more than $476,000. Each of those numbers reflects a double-digit percentage increase from the same month a year ago.

Obviously there’s enough demand to keep prices as high as they are, and climbing, just as there is still plenty of demand for gas even at more than $3 a gallon.

Okay first off, what is Bill talking about when he says that housing prices have been running up "for nearly two decades"? Even as recently as 2001 housing was still relatively affordable for people making the median wage around here. The real explosion in prices didn’t hit until the easy money started flowing. It is the zero down, interest-only, exotic loan extravaganza (not “well-paid lawyers” and “software millionaires”) that is creating the "demand" Bill refers to, and propelling prices into the stratosphere (relative to wages). When the easy money dries up, the appreciation party will be over.

Secondly, it’s almost as if Bill was reading this blog yesterday, because he seemed to directly respond to the "is Seattle special" question:

Seattle housing prices are going to be higher than other places on the map, given the geographic and regulatory constraints and the attractiveness of the region as a place to live.

It’s true that prices in Seattle are going to be higher than say, Yakima, but that certainly doesn’t mean that the current ridiculously high prices are justified or even destined to stick around much longer. Seattle is attractive, but I hate to break it to you Bill—it’s not magic.

(Bill Virgin, Seattle P-I, 04.27.2006)

The post Housing Prices A "Simple" Problem appeared first on Seattle Bubble.

As markets across the country begin to sputter and slow this spring, here in Seattle inventory continues to be low and prices are still climbing. This of course gives fuel to those that argue that the Seattle area is somehow special, and has unique characteristics that will protect it against any real estate price corrections. Although I agree that Seattle is a wonderful place to live (why else would I be here?), I also recognize that every locale has a list of unique characteristics.

However, I am still an open-minded kind of person, and I know full well that there are lots of people around that look at other markets in the country and see a bubble, but think that Seattle is either not in a bubble or has special protection against a bubble bursting (i.e. – price decreases). So, let’s hear from you. Does Seattle have a secret ingredient that makes it special and immune to a price correction in real estate (Microsoft, Boeing, "limited supply," special desirability, etc.), or are we just behind the curve?

The post Super Special Seattle appeared first on Seattle Bubble.

• 2006
  • In most parts of King County appreciation slows to a crawl through the end of the year. The closer to Seattle you get, the more stagnant the appreciation. Near the end of summer and into fall, inventory begins to build slightly. Realtors and newspapers proudly proclaim a "soft landing."
• 2007
  • Inventory stacks up at an increasing pace, prices are level in some areas, slightly declining in others. By the end of the year, prices in some areas are approaching 2004 levels. Realtors still in denial.
• 2008-2010
  • Prices continue to decline at slightly less than the rate they appreciated in 2001-2005. By summer of 2010, prices are at or near 2002-2003 levels for most areas and holding steady.

Of course, what will really happen depends on so many factors (interest rates, strength of the dollar, foreign investors, lending practices, etc…) that it’s impossible to really predict with any certainty, but that doesn’t stop it from being fun. So what’s your predicted timeline?

The post What’s Your Seattle Bubble Timeline? appeared first on Seattle Bubble.

The roaring construction and aerospace industries helped Washington add 7,900 jobs last month, pushing the statewide unemployment rate back down to 4.6 percent.

That matched January’s jobless rate, before an influx of new job-seekers bumped it up to 4.8 percent in February. The last time the state’s jobless rate was this low was November 1999.

"Washington employers hired workers at a near-frantic pace in March," said Greg Weeks, director of the state Employment Security Department’s work force-data branch. "A lot of industries were growing. This is a very hot labor market."
…
However, the Seattle metro area is still about 5,800 payroll jobs shy of its December 2000 peak.

The state’s construction industry continued to hit above its weight. Construction accounts for less than 7 percent of the state’s payroll jobs but generated more than a quarter of the new jobs added last month.

However, most observers expect high prices and rising interest rates will cool the nation’s — and region’s — housing boom.

I’m certainly not going to say that having more jobs available is a bad thing. However, these jobs that are being added hardly seem like the kinds of jobs that are going to afford people houses in King County. Actually, a large amount of the new jobs continue to be in providing houses:

The construction industry reported the strongest growth, adding 2,100 jobs in March. New construction jobs statewide reflect the "surprising persistence" of the housing boom, Weeks said. Construction jobs increased by 3,600 in January and by 2,400 in February.

"As an economist, I keep thinking the rise in interest rates will have an impact on the housing market, and I’m wrong," he [Weeks] said.

Oh, I don’t think you’re wrong Mr. Weeks. I think the market is just making one last gasp before the frenzy finally dies. By the time construction is completed on all these houses and condos that these thousands of new jobs are building, I think we will be experiencing a very different market.

(Drew DeSilver, Seattle Times, 04.19.2006)
(Dan Richman, Seattle P-I, 04.19.2006)

The post Construction Buoys State Job Market appeared first on Seattle Bubble.

Thurston County’s real estate market has been one of the state’s hottest because median prices here are lower than in Pierce and King counties. This has lured many buyers to South Sound, but it increases their commutes to jobs in Pierce and King counties.

David Schaffert, chief executive of the Thurston County Chamber of Commerce, worries that rising gasoline prices could slow South Sound home sales if buyers decide the higher commuting costs might wipe out potential savings on the cost of a Thurston County home.

“This used to be less of an issue when gas was $1.50,” Schaffert said.

“With higher prices, you have to wonder how it will affect our home development.”

Maybe gas prices will be the breaking point, but the little detail that they just love to ignore is that despite the fact that "median prices here are lower than in Pierce and King counties," they’re still too high to be sustained once the easy money dries up. If people are so stretched that an extra $50-$100 in gas each month is going to break them, maybe they didn’t have any business spending so much on a house in the first place.

(Jim Szymanski, The Olympian, 04.16.2006)

The post Excuses In Olympia appeared first on Seattle Bubble.

Northwest real estate sales slide
Inventory growth helps lift home prices

Home sales in western Washington fell 9.1 percent in March from a year ago, as prices posted another month of double-digit gains, according to the latest figures from the Northwest Multiple Listing Service.

That’s some pretty interesting logic. Increasing supply and decreasing demand "helps lift home prices." It would seem that more appropriate subtitle would have been "Prices up despite increased inventory." But hey, that’s just me.

(Inman News, 04.18.2006)

The post Inman Good For A Laugh appeared first on Seattle Bubble.

In my small neighborhood, I can point out several recent density actions. You decide if they were for the better or for the worse.

• On the corner of Norman and Bradner in the Mount Baker neighborhood, two single-family houses were razed to make room for 10 — yes, 10 — townhouses. These townhouses are priced in the $400,000-plus range. This is affordable housing for whom?

…
Were bus routes added to handle the new riders? No. Were the streets widened to handle more traffic? No. Were the parking lots in the neighborhood shopping areas expanded to handle more cars? No. Were any neighborhood city streets improved? No.

As far as I can tell, the infrastructure has not changed to accommodate the increased density.
…
Where are the affordable houses for those middle-income people who can’t afford the median price of a home? What if they prefer not to pay $300 a square foot for a condo? What about the possibility of rent control? How many more people will be homeless as a result of the density building plan?

The piece is pretty short—I’ve quoted nearly all of it here. Ms. McCarthy doesn’t seem to have a single point she’s trying to make, but is rather expressing general distress at the state of housing and density in Seattle. Obviously I agree that middle-income people don’t really have an affordable option for buying a home in Seattle right now, but I don’t know where she’s coming from with the comments about rent control. Last I checked rent is pretty affordable right now, and despite what the papers say, I haven’t seen it creeping up. It’s certainly frustrating not being able to afford a house, but renting is still a very viable alternative.

(Meg McCarthy, Seattle Times, 03.25.2006)

The post Venting About Housing In Seattle appeared first on Seattle Bubble.

Since I’m now running two blogs whose purposes are to highlight two big problems in Seattle, some may get the impression that I am not fond of this area. Nothing could be further from the truth. My purpose in running both Seattle Bubble and Seattle Traffic is to bring people together to work toward solutions to two of Seattle’s biggest problems. I’m even already mulling the idea of making a Seattle blog trinity by adding a third blog dedicated to all the Awesome things about Seattle…

We’ll wait and see how well I can handle just two blogs first, though.

The post Introducing Seattle Traffic appeared first on Seattle Bubble.

THOMAS JAMES HURST / THE SEATTLE TIMES

My first house, which I bought in Seattle back in 1995, seemed impossibly expensive at the time.
…
The price? $98,000.

This month, the median Seattle home price passed $400,000. It got me wondering: What does that number mean? What if I were 30 today, and just setting out to tap my roots into Seattle? Would I be able to?

Adjusted for inflation, $98,000 in 1995 is about $130,000 today. So I began a search for the $130,000 Seattle house — the same house I barely afforded eleven years ago.

I found it. There was only one. It’s shown in the photograph above.

It’s no charming bungalow, that’s for sure. The city has barred anyone from entering the property.

What’s left of the burned-out shell sits on a car-strewn lot in one of the Seattle area’s most crime-ridden neighborhoods, near Roxbury in White Center.

It sold recently for $125,500, making it the cheapest house with a Seattle address in at least a year.

“We had six or seven offers,” recalls Ken Knoke, the agent who sold it for Prudential Northwest Realty. “They were buying it for the dirt. You can’t usually get dirt around here for that price.”

He added that my search for anything resembling 1995 Seattle, even adjusted for inflation, was futile. No way I’d find even a mobile home parked on a postage-stamp patch for $130,000.

He was right. A dingy, single-wide manufactured home in Boulevard Park with no street frontage goes for $160,000. A double-wide near the charred house is $177,000.

There is a three-bedroom for $125,000 on the plateau east of Renton. But it comes with a warning: “Please stay out! This home is unsafe to enter. Call agent for help.”

Welcome to reality, Mr. Westneat. For once we are on the same page. First time buyers have been priced out for a while now. Of course the problem is, many of them don’t realize that they’re priced out, and happily take on “exotic,” “creative,” or as I like to call it, “suicidal” financing. How someone making $50,000 is able to convince themselves that a “starter house” is worth $300,000 I’ll never understand.

(Danny Westneat, Seattle Times, 04.16.2006)

The post Westneat Clues In—Seattle Wildly Unaffordable appeared first on Seattle Bubble.

The repeal of the CAP initiative Monday was unanimous and underwhelming—an anticlimactic finish for a once-sacrosanct law that limited downtown building heights for almost 20 years. So uncontroversial was the new law, proposed by onetime CAP campaigner Peter Steinbrueck, that the only matter left to settle Monday was how much money to make residential developers pay toward affordable housing: The mayor wanted $10 per square foot; Steinbrueck, and affordable-housing advocates like Real Change and the Seattle Alliance for Good Jobs and Housing for Everyone (SAGE), wanted $20. In the end, Steinbrueck (more or less) got his way: a tiered system in which the fee, called an "affordable housing bonus," increases on floors above the current limit, for an average per-foot bonus of $18.94. The bonus, though contentious, will only pay for about 600 new affordable units downtown (2,600 once an uncontroversial $10 bonus for commercial buildings is factored in)—one reason Steinbrueck called it "a very small contribution toward the very large and growing gap in downtown affordability."

I think that when city officials use the word "affordable" they must mean something different than the way that I interpret that word. I have a feeling that the only real measurable change that will come out of all this will be taller buildings downtown.

(Erica C. Barnett, The Stranger, 04.06.2006)

The post Taller Downtown = "Affordable" Downtown appeared first on Seattle Bubble.

Homeowners seem to enjoy the breathless stories about superheated real estate markets. Pierce County, for example, saw an 18 percent increase in the median price in the last year. In King County it was 12.3 percent; in Thurston, 24.9 percent.

It’s nearly always covered as good news. Apparently we all feel that much richer, given that many people’s personal wealth is tied up in their homes. We tell stories about how much houses in our neighborhoods are going for with a “can-you-believe-it?” shake of the head. No matter when you bought – last year or last century – it’s worth more now than it was then.

The news isn’t so good for the folks who haven’t been able to buy a house because they’re poor or young or coming here from places where prices aren’t so nutty. They certainly have a different reaction to the news.

A rising tide raises all boats, which is cool as long as you have a boat but not so cool if you’re standing on the beach.
…
No one wants the price of housing to stagnate or decline, not even those who have hopes of becoming owners. But bad stuff results from repeated double-digit increases. At the risk of bringing everyone down, here’s why:

• It makes it even more difficult for people to buy homes. Despite lottery advertising, the American Dream is not winning the lottery, it’s owning your own home.

Granted it’s a pretty short article and doesn’t go into any real depth on the serious issues of high home prices, but it’s better than the ra-ra real estate pieces we’re normally limited to. Although considering my own position as well as the nature of many comments on this blog, I have to disagree with his assessment that "no one wants the price of housing to decline." I think plenty of us do in fact want just that.

(Peter Callaghan, Tacoma News Tribune, 04.09.2006 )

The post Newsflash: Rapid Appreciation Not All Good appeared first on Seattle Bubble.

The job situation is misleading. While there may be low unemployment, which is good, the newly created jobs are simply not high-paying enough to support the current housing market. Unless all the jobs being created are executive positions, that is, which I don’t think is the case.

This comment reminded me of an article that was still in my inbox and hadn’t been posted yet. The headline is When it comes to attracting CEOs, Seattle’s not as pretty as she used to be.

At a recent meeting attended by local investors, a principal with a Seattle-based venture capital firm described the challenge he faces convincing top CEO types to move to Seattle to lead his ventures. His primary competition seems to be Silicon Valley, where a robust venture market chases the same business leaders.

Ask a typical Seattleite, though, and he’d be surprised the contest is even close. Seattle or Silicon Valley? He’ll tell you that the Silicon Valley is all about expensive homes, snarled freeways and an embarrassingly low espresso-stand-per-capita ratio. Bad schools, smog and crime, too. Offered a choice, any CEO-for-hire would accept the invitation to Seattle without a thought, right?

It turns out not to be so anymore. According to our local venture firm principal, traffic is becoming a major Achilles’ heel for our region — to the point where it spooks some CEO targets away before they get to the interview. After all, CEOs measure the same things anyone would: affordability of housing, lifestyle, quality of schools for their kids, commute distance to work, etc. Apparently, our traffic is nastier now. In the beauty contest to attract CEOs, it looks like Miss Silicon Valley is leading.
…
Perhaps we can concede the traffic mess to Miss Silicon Valley. But we must have the other parts of the contest won, right? How about affordable housing? Surely we have expensive California beat on that one.

Well, not so much anymore. Our rising housing prices have now put Seattle neck and neck with our competitor to the south. Call this part of the contest a draw.

How about schools? We all know about the crowded and underfunded California public schools.

Guess again. Seattle’s schools just aren’t what they used to be, apparently.

Let’s also not forget the power of our delightful estate tax to drive away business leaders. Remember, the hard facts show that wages in our area are either growing very slowly, or actually decreasing. Where are the hard numbers that demonstrate Seattle’s supposedly booming economy? Sheer numbers of new jobs are nice and all, but if they all pay less than the median there’s no way that new jobs are going to sustain the housing growth we’ve seen.

Sure, we all love Seattle, but what does Seattle have to attract strong businesses and keep them here? Does Mr. Hoban’s point extend beyond just CEOs to good, smart people in general, and even whole businesses? I think it does.

(Tom Hoban, Snohomish County Business Journal, 04.2006)

The post Is Seattle Attracting Good Jobs? appeared first on Seattle Bubble.

Okay let’s try to group the rest of the March articles into one post. The Seattle P-I assures us that everything is perfectly normal.

Pending home sales in Seattle and King County fell again in March, while home prices continued to climb. Real estate experts said the declining sales shouldn’t be cause for concern and likely reflect a “normalizing” of the market after many years of strong sales.
…
More significant, some say, is the reduction in home listings, a reflection of the housing shortage that is also helping drive up prices.

Cute. “Normalizing.” Well at least they didn’t say that there’s a buyer frenzy. And I love how a 3-5% reduction in listings is “more significant” than a 8-10% decrease in pending sales. Yeah, I’m buying it… wait, no—I’m not.

The King County Journal takes it a step further and leads the cheer for the supposedly still-booming market:

Median home sales prices jumped more than $20,000 in one month’s time in southeast King County and almost $12,000 on the Eastside, shattering housing market records.

In southeast King County, the median price for closed sales of homes and condos in March rose to $314,975, up from $294,000 in February and the previous record high of $309,000 set in January.

On the Eastside, the median price of single-family homes and condominiums whose sales closed in March rose to $476,475, smashing the “old” record median price of $464,500 set just the month before.

Northwest Multiple Listing Service officials, who released the March report Thursday, and local real estate agents attribute the surge in home sales activity this past month to the growing economy, relatively low interest rates, “attractive financing” options, and an increase in available properties to choose from.

“Attractive” if you don’t care about prudent investing for the future, I suppose. And what’s with the phrase “surge in home sales activity”? Again, pending residential home sales in King County were down 10.6% from March ’05. I guess since it’s a smaller negative number than February (-14.56%), that constitutes a “surge.” Weee!

Bucking the trend, the Tacoma News Tribune actually dares to report signs of the slowdown:

Homes are coming onto the market and basically sitting there in many parts of Pierce and King counties, according to a new report released Thursday.

But being on the market longer doesn’t mean the homes are any cheaper.

That’s a refreshing bit of relatively balanced reporting on this month’s numbers. Of course, the slowing signs are a bit harder to ignore in Pierce County, with a 27% increase in listings and a 10% decrease in pending sales.

(Kathy Mulady, Seattle P-I, 04.07.2006)
(Clayton Park, King County Journal, 04.07.2006)
(Barbara Clements, Tacoma News Tribune, 04.07.2006)

The post March Sales Figures Roundup appeared first on Seattle Bubble.

More homes are hitting the market and staying there, as housing prices continue to climb, according to new numbers released today by the Northwest Multiple Listing Service.
…
The biggest change was in the number of homes on the market. While inventory shrunk 5 percent in King County, the total number of homes in Pierce County increased by 23 percent when compared with the same number in March of 2005.

The inventory in Thurston County jumped by 77 percent, according to the report.

"People are taking a bit longer to decide, and even with the increase in inventory, there hasn’t been a reduction on selling prices," said NWMLS director Dick Beeson, broker at Windermere Real Estate/Paragon in Tacoma. Beeson called the traffic at local houses "pretty decent."

Looking at the NWMLS numbers (pdf), what I find interesting is that the total number of listings is up 6.79%, while pending sales are down 8.94%. I’m no economist, but I would think that type of situation would put downward pressure on prices. 2006 should indeed be an interesting year.

(Barbara Clements, Tacoma News-Tribune, 04.06.2006)

The post Pierce Also Feeling Slowdown appeared first on Seattle Bubble.

The South Sound real estate market is beginning to evolve from a seller’s market to more of a buyer’s market as inventory levels rise and home prices decline, according to Olympic Multiple Listing Service data released Wednesday.

Active home listings in March stood at 1,047, well above the 568 active listings for last March, the data showed.

As a result, the median price of a home dropped slightly from $248,475 in January to $244,575 in March.

"We are seeing some stabilization in pricing based on the inventory in the marketplace," said Olympic MLS Manager Jerry Wilkins.

Still, the March median price of $244,575 was up 22 percent over the same period last year, according to the data.

Of course, "was up 22 percent over the same period last year" sounds a lot better than "is stalled at the same level it was five months ago in October." It will be interesting to see how they spin it if this keeps up for another half a year and the "same period last year" was the same or higher.

(Rolf Boone, The Olympian, 04.06.2006)

The post Slowdown Marches Northward Through Olympia appeared first on Seattle Bubble.

Is Your Dream House Just Beyond Your Price Range?
posted Apr 04, 2006

Home prices have increased tremendously over the past several years. Whether you’re looking for your first home or would like to buy a nicer home, it seems that no matter what your price range is, the house you really want always costs a bit more. Well, there is some good news.

BECU offers several home loan programs that are designed to increase your ‘buying power’ by either allowing you to qualify for a larger loan amount or reducing your monthly payments. You can save thousands on closing costs too! BECU’s home loan closing costs are consistently lower than other lenders.

Super, so if I can’t afford a house, we can just play with "the numbers" until I can! That’s definitely a recipe for success… Clearly I’m old fashioned, because I just don’t see the underlying wisdom behind intentionally biting off more house than you can chew. Surely prudent saving and spending within a realistic budget is better in the long term, right?

Less (monthly payment) is More (house). Greed is Good. Debt is Wealth.

(BECU, 04.04.2006)

The post Homebuyers Need More Power appeared first on Seattle Bubble.

Developer and Vashon Island Chamber of Commerce president Tom Bangasser said at last week’s Vashon Maury Island Community Council meeting, “People who buy property (on Vashon) to develop it because they can are going to drive the population.”

He was speaking about his interest in analyzing the population capacity of the current Vashon zoning plan.

The comment came in the context of a presentation Bangasser made to VMICC about 45 benchmarks created by King County to trace progress in meeting desired outcomes for the county of the Growth Management Act (GMA) of 1990.
…
Realtor Emma Amiad, asked to speak about benchmark #21, “Supply and demand for affordable housing,” said, listing eight quick points:

• Supply and demand for affordable housing: lots of demand, no supply.
• Homelessness: persisting.
• Apartment vacancy rate: virtually zero.
• Affordability gap: huge.
• Home ownership rate: + -80 percent.
• Trends of costs: up.
• Public dollars spent: almost none other than Vashon Household.
• Rental housing units affordable to low income: almost none.

Then, in a satirical turn, she moved from that relatively bleak vision as she told a short fable about Vashon in 2016, in which Dockton became a condo paradise because Vashon town’s growth was limited by the lack of water availability.

Also in the fable was a tour, “McMansion Tour,” also called “Starter Castle Showdown,” conducted by the Chamber to contribute to its income stream, and open only to houses of 10,000 square feet in space.

She also envisioned Burton and Vashon becoming upscale meccas for regional shoppers and tourists, and she included a new bus service to bring the Island’s work force into town from Tacoma and Southworth.

By contrast, Amiad offered a second fable, one in which small family businesses thrived and affordable cottage home developments as well as accessory dwelling units were in evidence.

And part of the vision was that all the structures were built “green” and capped at 5,000 square feet for a new or remodeled house.

And finally, power would be generated by wind, solar and wave action with Vashon’s power system a model for other Washington rural towns.

I guess I’m just ignorant, because I don’t really see how “green” building and wind power are going to keep housing costs under control. Sure, they’re both noble goals that are great to strive for, but what do they have to do with the price of homes? The only connections I can imagine would seem to put upward pressure on home prices. But hey, whatever floats your boat, Vashonites.

(Vashon-Maury Island Beachcomber, 03.29.2006)

The post Vashon Island’s Affordability Future appeared first on Seattle Bubble.

In the high-stakes game of downtown real estate, the tacky little building at 1315 First Ave. was surely doomed. A group of heavyweight developers, including a billionaire, a wealthy venture capitalist, and a former Seattle mayor, aimed their wrecking ball at Peaches, Kitten, Trixie, and the rest of the struggling dancers at the Lusty Lady theater. They and their nudie house were about to become the next victims of the condofornication of Seattle. Then the inconceivable happened: In a city where rapacious new development effortlessly bulldozes fading history, someone said no to money. Christto Tolias and his family, longtime owners of the century-old, mostly vacant structure housing Peaches and other strippers at the popular peep-show theater, refused to sell the property to ex-Mayor Paul Schell and his fellow hotel/condo developers.

An attorney with knowledge of the deal says the rejected offer was “several” millions of dollars. Stunning as that seems, Tolias made money anyway. Schell and partners in the new 21-story, $120 million Four Seasons hotel and condo tower at First Avenue and Union Street had to regroup, then make Tolias another offer—for air rights above the Lusty building. In the end, the big developers not only didn’t get their prized property, they paid the defiant Tolias $850,000 for thin air.

So what would motivate a downtown land owner to hold on to their property rather than sacrifice it to the relentless drumbeat of progress and piles of free bubble money? Why, nekkid girls, of course. So now we know.

(Rick Anderson, Seattle Weekly, 03.23.2006)

The post 1315 1st Ave Defies Seattle’s Bubble appeared first on Seattle Bubble.

Also, I just had the pleasure to listen in on a conversation between a few coworkers regarding housing appreciation around Seattle. For reference, these are generally intelligent people (engineers) that do not have any particular "in" regarding real estate. Here are some of the quotes that I was quick enough to type:

"I think in some areas (around the country), the bubble is popping, but I don’t think you’re going to see a lot of it around here (Seattle area)."

"Microsoft is here forever."

"There’s nowhere else to build."

To coworker: "I could see your neighborhood leveling off…maybe. But probably not."

"I think we’re not going to see the kind of gains we’ve seen over the last two years… but I don’t think we’re going to go down in price. … I think mine (neighborhood) is going to continue to go up."

It is interesting to hear what average people think about whether there’s a bubble or not. Perhaps in the future I can "seed" some conversations to get a regular pulse on general real estate sentiment.

The post Workplace Anecdotes appeared first on Seattle Bubble.

Consumer prices in the Puget Sound area increased 1.3 percent over January and February – almost double the rate of inflation nationally.

Housing prices, up 2.4 percent, led the increases in the Tacoma-Bremerton-Seattle area, the Labor Department reported Thursday. Grocery prices were up 1 percent in the two-month period, while alcoholic beverages poured a 3 percent increase.

If only our wages were going up twice as fast as the national average, too. Heck, I think we’d be in okay shape if our wages were going up at all.

(News Tribune Staff, Tacoma News Tribune, 03.17.2006)

The post The Increasing Expense Of Living In Seattle appeared first on Seattle Bubble.

While there are some rules of thumb by which lenders gauge the reasonableness of your housing costs, the valuation of your property and the size of your mortgage payment are only parts of the picture.

You’re considered house poor if your housing costs prevent you from:

• Saving the equivalent of 3 to 6 months income in an emergency cash reserve account.
• Setting money aside for your retirement.
• Accumulating a diversified investment portfolio.
• Budgeting for other life events, such as paying for your child’s education
• Buying the furniture you need for your new home, or eating anywhere other than in your new kitchen.

Do you know anyone with the equivalent of 3 to 6 months income tucked away? I don’t think I do. Maybe my parents, but that’s pretty much it. Also, most people’s idea of a "diversified investment portfolio" is a small contribution to the company 401(k) plan and their house. And as far as junior’s schooling, hey that’s what federal student loans are for, right? It’s one thing if you don’t make very much money and you really can’t afford these financial luxuries. It’s another thing entirely when you can’t afford them because you willingly threw yourself into a money pit of a house.

I especially had a good chuckle about this bit of advice:

Be very cautious about using creative financing arrangements, such as interest-only mortgages or optional ARMs, to buy more house than you can otherwise afford. If home valuation increases cool off and interest rates heat up, you could find yourself caught between the rock of making the mortgage payment each month and the hard place of not being able to sell the house for enough to cover repaying the loan that secures it. You don’t want to lose your home to foreclosure because you bit off more than you can chew later.

"Creative financing arrangements" are about the only way first-time buyers could ever hope to afford something around here. I’m not sure what "be very cautious" means, but I would venture to guess that signing your life away on an interest-only, no down payment, adjustable-rate mortgage doesn’t quite fit the bill.

(Patricia Bliss, The Olympian, 03.15.2006)

The post Boilerplate House Poor Advice appeared first on Seattle Bubble.

A coworker of mine recently moved from the Northgate area up to Bothell. Commuting across the 520 bridge every day just finally got to be too much for him. So of course he’s selling his 2-story, 4-bedroom, 2.75 bath house (on ~1/5 acre) in Northgate. His original asking price on this home that he purchased in 1997 for $170,000 was $475,000. After a few weeks with no bites he has lowered the asking price to just under $450,000. As far as I know he still has no serious offers on the table.

Other friends of mine bought a house up in Lynnwood in early 2004 for around $240,000 using a good helping of creative financing—no money down, one loan for 80%, another (interest-only adjustable) for 20%, that sort of thing. Since interest rates have been going up and the interest-only period is rapidly drawing to a close, they have decided that now is a good time to refinance. Now, I haven’t claimed to be anything other than mostly ignorant when it comes to all the ins and outs of home financing and crazy mortgage rules, but their strategy still surprised me. According to my friend, since the home has "appreciated nearly $100,000" they are now able to find a mortgage lender that will roll their two loans into one and give them a good rate, since the amount of the loan (~$240,000) is now less than 80% of the "value" of the house. For all I know this is a common tactic, but it was new to me.

Lastly, remember the condo complex down the street from me, where one unit sold in October for $280,000 and another in December for $300,000? Well yet another neighbor decided it was a good time to cash out, and they listed their unit a few weeks ago for $285,000. I picked up one of the fliers a week ago, and the sign is still posted on the street (sans any "pending" or "sold" slap-ons), but oddly I can’t find it listed on Windermere’s (or anyone else’s) site. Have they given up on selling it already?

The post More Personal Anecdotes appeared first on Seattle Bubble.

A hot real-estate market is going to help Seattle residents cut their losses as the city shakes off the collapse of the Seattle Monorail Project.

Odds are good that this month’s sell-off of 33 of 34 unused lots — which the SMP purchased for stations, a maintenance base and some tight corners along the track route — will recover at least the $62 million spent to buy them. If so, the monorail’s citywide car-tab tax, which began in 2003, would be repealed by early fall.
…
The liquidation of the monorail dream couldn’t happen at a better time, at least for making money. Commercial property values in King County have increased 14 percent since 2004.

“What the monorail has going for it is a real-estate market in the city of Seattle like we’ve never seen,” said Art Wahl, managing director of the commercial real-estate firm CB Richard Ellis. “There’s never been anything close to this. There’s a high demand for real estate, and in truth, not a lot of product.” Wahl’s firm was one of several that vied to serve as SMP’s broker for the land sell-off. GVA Kidder Matthews was selected to handle the land sales.

Of course, if you don’t own a house or a car, or if you live near to but outside of Seattle, the bubble really is nothing but trouble.

(Mike Lindblom, Seattle Times, 03.12.2006)

The post Dead Monorail Lands Softly On Seattle Bubble appeared first on Seattle Bubble.

The living room of the old Ballard house is redolent with the scent of freshly laid oak floors, but as Brent Fosso will tell you, just a few weeks ago, it was a much different scene.

“It was filled with garbage. There were rats. We caught a big one,” said Fosso, holding his hands about 10 inches apart to demonstrate the size.
…
As Seattle’s housing prices continue to skyrocket and home improvement becomes an increasingly popular hobby, people are trying their hands at the “rapid reselling” game. Some are relative amateurs, people with enough skill — or enough audacity — to make run-down homes more presentable and flip them.
…
He’ll add fireplaces, reconfigure floor plans and make other changes so drastic that the house is barely recognizable from its former self. Homes should have certain features for maximum appeal, he says — a fireplace, dining room, gas furnace, rec room and, ideally, three bedrooms.

“Three is the magic number,” Fosso says. “You don’t want to wind up with two, because then you’re limiting larger families. Whenever I wind up buying a two-bedroom house, I try to figure out how I can get a third bedroom in it. Maybe it’s finishing off the basement. Maybe it’s dividing up the first floor a little differently.”

Considering what the word “flip” has come to mean in real estate, it almost seems like an insult to call people like Mr. Fosso “flippers.” I don’t really have a problem with “flipping” when it involves real improvements, not just granite countertops and a more colorful sales flier. When the recent housing madness finally subsides, those like Mr. Fosso who work hard to put real value into junky homes will be the only “flippers” to survive.

(Deborah Bach, Seattle P-I, 03.09.2006)

The post Flipping Fosso Of Seattle appeared first on Seattle Bubble.

The housing market around Puget Sound has slowed from its blistering pace of a year ago, meaning some sellers don’t get multiple offers and some have to lower their prices.

But prices remain buoyant, with the median sales price for a single-family home in King County last month climbing to $392,950, up 14.7 percent from February 2005, according to numbers released Monday by the Northwest Multiple Listing Service.
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Sellers can no longer count on numerous offers for properties with high price tags, but buyers are not calling the shots either.

"It’s more balanced than it was last year, but it’s not a buyer’s market by any stretch of the imagination," said Mike Grady, president of Coldwell Banker Bain, which has 19 offices around Central Puget Sound.

The market is taking longer to ramp up this year, Grady said. People are slower to put homes on the market, partly because of bad weather and distractions from the Super Bowl and the Olympics.

Of course! In January it was football, now it’s the Olympics! Perfectly logical explanations for why the home sales are "taking longer to ramp up." Right.

(Melissa Allison, Seattle Times, 03.07.2006)

The post Olympics To Blame For "Balanced" Market appeared first on Seattle Bubble.

Built to help address the city’s shortage of affordable homes, most of the building’s 19 new condominiums will be affordable to households earning less than 80 percent of the area median income.

The building will be three stories, with units ranging in size and price from studios (beginning at $165,000) to three-bedrooms units (beginning at $300,000).

Yet again I’m finding the definition of "affordable" to be pretty questionable. Assuming you managed to come up with the $60,000 down payment, the monthly payment on the $240,000 loan for that "affordable" $300,000 three-bedroom condo would be nearly $1,600. Given the standard for "affordable" as 30% of gross income, someone a family would have to be making $64,000 to "afford" that kind of payment. Considering that the median income in King County is around $55,000, that "affordable to households earning less than 80 percent of the area median income" bit must be using some kind of fuzzy math. The way I figure, eighty percent of $55,000 is $44,000, and thirty percent of that (per month) is $1,100, which would be the monthly payment on a $165,000 loan (or a $206,000 home if you had the 20% down).

So $165,000 = affordable. $300,000 = I could maybe barely afford that if I could pull $60,000 out of my… hat—but someone making 80% of the "area median income"? Yeah right.

(P-I Staff, Seattle P-I, 03.03.2006)

The post More Fuzzy "Affordable" Math appeared first on Seattle Bubble.

Last year’s booming housing market helped pump up 2005 profits at Kirkland-based HouseValues, but the company’s forecast for the current year led to a 28 percent stock-market pummeling Wednesday.

HouseValues said Tuesday, after the markets had closed, that slower growth in its business from real-estate agents and heavy investment in new businesses would keep its 2006 results well below Wall Street’s expectations.

Wall Street was quick to respond. HouseValues shares, already trading 33 percent below their July 2005 peak, dropped $3.79, or 28.1 percent, on Wednesday, closing at $9.71. That’s the stock’s lowest close since HouseValues went public in December 2004.

This could be our area’s first of many negative effects of the impending drop, or it could be all we see of the downturn. Since I seem to have misplaced my time machine, I’m not able to make that call. Of course that doesn’t mean I can’t wildly speculate anyway. My call? Well let’s just say that I’m glad I didn’t buy a house in the last year or two.

(Drew DeSilver, Seattle Times, 03.02.2006)

The post HouseValues’ Value Drops appeared first on Seattle Bubble.

Some programs available here max out annually but others remain untapped, leaving thousands of dollars in assistance available to people earning as much as 80 percent of the $72,000 median household income in the Seattle metropolitan area. That currently translates to $40,600 a year for an individual and $58,000 for a family of four. Most programs offer deferred payments with low interest rates, and frequently provide up to $45,000 to help with a down payment.
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Washington state ranks near the bottom — 43rd out of 50 — in home-ownership rates nationwide, according to the 2004 Census. Sixty-six percent of households in the state are homeowners. Analysts attribute the low numbers not only to soaring home values in the Seattle area, but also to the state’s numerous military communities, which tend to have lower numbers of homeowners.

The Washington Homeownership Center wants to improve those rates by reaching out to the estimated 300,000 renter households statewide making at least half the median income. Those include many people under age 35, as well as teachers, police officers, firefighters and skilled laborers — the people that Jeffrey Caden refers to as "the glue that kind of holds our state together."

Things like these programs really seem like spitting into the wind when average to below-average houses cost $300,000-$400,000. Even if you get $45,000 for a down payment, you’re still $15,000-$35,000 short, which most people don’t have laying around, even if they make $72,000. And I won’t even begin to get into how unaffordable the monthly payment would be even if you came up with a down payment. It’s really just ridiculous right now, and I don’t see how these programs do anything other than encourage people to get into a situation that they can’t reasonably financially sustain.

(Deborah Bach, Seattle P-I, 02.28.2006)

The post Government-Funded "Affordability" appeared first on Seattle Bubble.

As the Seattle City Council prepares to vote on reshaping downtown Seattle with taller buildings, a heated debate remains over how much residential developers should pay to maintain affordable housing downtown.

Builders who want to profit from taller skyscrapers would contribute to a fund used to create housing affordable for $11-an-hour workers such as Allen and other low-income residents.

Business interests, neighborhood groups and even some low-income housing builders worry that if the city imposes fees that are too high, it could frustrate goals to concentrate new residents downtown.

Additional expenses for affordable housing, environmentally friendly buildings and underground parking could disproportionately hurt developers trying to build less lucrative apartments or condos aimed at the middle class, some argue.

"It guarantees downtown will have only luxury or subsidized housing, which … will not make a healthy neighborhood," said Kate Joncas, executive director of the Downtown Seattle Association.

Certainly if the appreciation of the last five years were to continue, and the City Council imposed more and more fees, that would seem to be a likely outcome. Of course, appreciation isn’t likely to continue this break-neck pace, so a two-caste system seems rather unlikely. Come to think of it, I seem to have heard this argument somewhere else…

(Jennifer Langston, Seattle P-I, 02.23.2006)

The post Looking Into Downtown’s Future appeared first on Seattle Bubble.

Our state is facing a mobile home space crisis. Exploding real estate prices are making the land too valuable for this moderate-to-low income way of life.

According to state figures, 115 parks have closed in Washington since 1989.

In the past year, nine parks have sold or are up for sale in the Puget Sound area, where land prices have risen the most.

Six hundred twenty one families in our area now must find another place to move their mobile homes, 167 in King County alone.

I guess it’s not really surprising, as all sorts of low-cost residential options have been replaced with sardine subdivisions and chicly condos.

(Wayne Havrelly, KIRO 7, 02.21.2006)

The post Mobile Homes Disappearing In Seattle’s Bubble appeared first on Seattle Bubble.

Is it better to rent than to own, particularly as the median price of a home in Thurston County keeps climbing and now approaches $250,000?

Renting offers the advantage of flexibility and a landlord who will take care of repairs; home ownership brings the reward of increased equity and a tax write-off.

But as the difference between the average cost to rent and a typical mortgage payment widens, some experts say renting could be a better option for prospective first-time buyers.
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Taylor, a former Ohio resident who lived in Tacoma for four years and has spent a year in Olympia, describes the prospect of West Coast property ownership as “nightmarish.”

Property values are “grossly inflated,” homeowners’ insurance has become more expensive, and lots are getting smaller, he said.

“I wouldn’t be able to sneeze without offending my neighbor,” said Taylor, 38, who works as a shipping and receiving clerk for Office Depot in Kent.

You don’t say.

(Rolf Boone, The Olympian, 02.19.2006)