{"id":13694,"date":"2010-12-16T08:00:15","date_gmt":"2010-12-16T16:00:15","guid":{"rendered":"http:\/\/seattlebubble.com\/blog\/?p=13694"},"modified":"2011-04-04T14:17:43","modified_gmt":"2011-04-04T21:17:43","slug":"best-worst-most-likely-end-of-2010-edition","status":"publish","type":"post","link":"https:\/\/seattlebubble.com\/blog\/2010\/12\/16\/best-worst-most-likely-end-of-2010-edition\/","title":{"rendered":"Best, Worst, & Most Likely: End of 2010 Edition"},"content":{"rendered":"

Back in late 2007, I ran a post where we all postulated about what the coming years would look like for the Seattle-area housing market. Here were my best case, worst case, and most likely cases<\/a>:<\/p>\n

Best Case<\/span>
\nPrices flat to +3% for ten or more years. Local economy keeps chugging, population gradually grows (but not at the predicted level), and density gradually increases. Affordability improves as incomes slowly catch up to prices.
\nLikelihood: <10%<\/em><\/p>\n

Worst Case<\/span>
\nPrices drop to 1997-1998 values over the span of approximately 5 years. National and local economy endure a moderate-to-deep recession for at least as long. Condo projects and cookie-cutter developments are halted mid-construction, resulting in little miniature “ghost towns” scattered throughout the Puget Sound. Affordability shoots through the roof, but very few people are able to qualify for home loans, which require 20% down, and cash-paid closing costs\u2014no exceptions.
\nLikelihood: 20%<\/em><\/p>\n

Most Likely Case<\/span>
\nThe way things are headed as of right now, I expect we’ll see a Japan-style housing downturn. Prices declining 2-5% per year for 7-15 years, eventually shaving off all of the gains of the bubble, and then some. Mild recession (as reported by the government statistics, anyway). Tighter lending standards persist, making it very difficult to get a house without 20% down in cash. Overall public sentiment shifts from “renting is for suckers” to “buying into a declining market is for suckers.”
\nLikelihood: 50%<\/em><\/p><\/blockquote>\n

Three years later, things seem to be shaping up as a sort of mix between my proposed worst case and most likely case scenarios. Home prices around Seattle have only fallen to early 2005 levels on average. We definitely had a deep recession, but technically the actual receding<\/em> only lasted about two years. There were definitely plenty of condo and subdivision developments halted mid-construction, and while lending standards have tightened, they’re still not requiring 20% down and cash-paid closing costs.<\/p>\n

Now that we’ve seen what the initial bursting of the bubble looks like, I thought it would be a good time for another best, worst, and most likely case prediction thread. So here’s my current take on where we’re headed over the next half decade or so.<\/p>\n

Best Case<\/span>
\nBanks succeed in slowly trickling out their foreclosure inventory in a way that avoids generating additional strong downward pressure on home prices. New foreclosures slowly drop back down to historical levels as unemployment also slowly improves. Home prices fall another five percent spread out over the next three to five years, while sales slowly grow back to pre-bubble levels.
\nLikelihood: 5%<\/em><\/p>\n

\"BLAST<\/a>Worst Case<\/span>
\n“Extend and pretend” accounting at the banks finally falls apart, possibly due to the economic turmoil in Europe getting worse and spreading to the US. Recession returns, as the economy loses at least as much ground as it did 2007-2009, if not more. Two or three more major banks fail, foreclosures surge even higher, and home prices fall another twenty percent or more.
\nLikelihood: 20%<\/em><\/p>\n

Most Likely Case<\/span>
\nBased on my recent big picture series<\/a>, I think home prices around Seattle have another ten percent or so left to give up before we get back inline with the local economic fundamentals. Once we get there, I suspect we’ll see home prices remain flat to slightly down while the economy slowly churns through all the bad debt that was accumulated over the decade leading up to the burst of the bubble. It is quite likely that this will take another decade or more. In other words, I still thing we’re basically following in Japan’s footsteps.
\nLikelihood: 50%<\/em><\/p>\n

What’s your take on where we’re headed from here? Let’s hear your best case, worst case, and most likely scenarios for the Seattle-area housing market. Please try to avoid going off on tangents about the global economy that aren’t directly related back to Seattle real estate.<\/p>\n","protected":false},"excerpt":{"rendered":"

Back in late 2007, I ran a post where we all postulated about what the coming years would look like for the Seattle-area housing market. Here were my best case, worst case, and most likely cases: Best Case Prices flat to +3% for ten or more years. Local economy keeps chugging, population gradually grows (but…<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[206],"tags":[14],"coauthors":[],"class_list":["post-13694","post","type-post","status-publish","format-standard","hentry","category-features","tag-predictions"],"yoast_head":"\nBest, Worst, & Most Likely: End of 2010 Edition \u2022 Seattle Bubble<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/seattlebubble.com\/blog\/2010\/12\/16\/best-worst-most-likely-end-of-2010-edition\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Best, Worst, & Most Likely: End of 2010 Edition \u2022 Seattle Bubble\" \/>\n<meta name=\"twitter:description\" content=\"Back in late 2007, I ran a post where we all postulated about what the coming years would look like for the Seattle-area housing market. 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