{"id":991,"date":"2007-07-30T10:18:54","date_gmt":"2007-07-30T17:18:54","guid":{"rendered":"http:\/\/seattlebubble.com\/blog\/2007\/07\/30\/credit-crunch-to-determine-who-flinches-first\/"},"modified":"2007-07-30T10:18:54","modified_gmt":"2007-07-30T17:18:54","slug":"credit-crunch-to-determine-who-flinches-first","status":"publish","type":"post","link":"https:\/\/seattlebubble.com\/blog\/2007\/07\/30\/credit-crunch-to-determine-who-flinches-first\/","title":{"rendered":"Credit Crunch to Determine Who Flinches First"},"content":{"rendered":"

More words of wisdom from the P-I’s Mark Trahant<\/a>, who seems increasingly out of place in the stubborn, denial-prone local media.<\/p>\n

\n

I’ve been on vacation and had a chance to travel around the West. In many of the places I visited, concerns about a real estate crisis are growing. People are starting to fear what this means for them personally. The interesting thing about coming home is the narrative in Seattle remains “we’re different.”<\/p>\n

I continue to be skeptical. I think the region’s housing market is playing a regional version of the “Prisoner’s Dilemma.”<\/p>\n

…<\/p>\n

The game is the same if it’s about money — or really anything else. If players cooperate, they maximize their potential. When they don’t cooperate — someone loses big time (and someone else wins).<\/p>\n

The Seattle real estate version of the game is a bit more complicated, but it starts with a huge supply of housing inventory. Everyone trying to sell a house is competing with other people trying to sell houses.<\/p>\n

Folks want to sell their house for as much as they can. So they keep it on the market, looking for that one buyer. (Although Seattle’s prices remain strong, the indicator to watch is the inventory of unsold houses and condos.)<\/p>\n

As long as everyone plays together — and sticks roughly to the price they want (even if it means staying on the market forever), Seattle’s prices will continue to be fine.<\/p>\n

But if I am selling a house — and see my neighbors sticking to their prices — I have an advantage by selling at a discount. If I am early enough, I can play the Prisoner’s Dilemma to my advantage.<\/p>\n

On top of that, there is another twist. Some home sellers cannot afford to drop their price because that would result in negative equity. They’d have to come up with cash to close. (I did that once and is it ever painful.) That notion is an additional incentive for those who decide to get out early and discount; they know their competitors cannot match their price.<\/p>\n<\/blockquote>\n

Mark is spot-on here (although he gets one detail of the Prisoner’s Dilemma incorrect—the best outcome is if neither<\/em> confesses, not both), and does a good job of explaining why Seattle is in fact not<\/em>special. Take the time to read the entire article.<\/p>\n

(Mark Trahant, Seattle P-I<\/a>, 07.27.2007<\/i>)<\/p>\n","protected":false},"excerpt":{"rendered":"

More words of wisdom from the P-I’s Mark Trahant, who seems increasingly out of place in the stubborn, denial-prone local media. I’ve been on vacation and had a chance to travel around the West. In many of the places I visited, concerns about a real estate crisis are growing. People are starting to fear what…<\/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":[],"tags":[90,129,30,94],"coauthors":[],"class_list":["post-991","post","type-post","status-publish","format-standard","hentry","tag-seattle_is_special","tag-inventory","tag-lending","tag-trahant"],"yoast_head":"\nCredit Crunch to Determine Who Flinches First \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\/2007\/07\/30\/credit-crunch-to-determine-who-flinches-first\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Credit Crunch to Determine Who Flinches First \u2022 Seattle Bubble\" \/>\n<meta name=\"twitter:description\" content=\"More words of wisdom from the P-I’s Mark Trahant, who seems increasingly out of place in the stubborn, denial-prone local media. 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