So, I haven't weighed in on this for three months, because during the Christmas not-shopping season I was unsure whether or not the bottom had been reached.
Well, recent developments make it clear that Jan 30th, 2009 is indeed not the bottom of this crazy-legged all-out real estate implosion. In fact, it's beginning to look like decimation in the traditional Roman army manner is the only possible solution; literally destroy 1 out of every 10 homes.
Just to review -
1) Tens of thousands of local layoffs were announced in the last two weeks.
2) New sales are the lowest on record
3) In fact, the majority of "most dismal" records (fewest sales, worst nationwide declines, unemployment change, etc) are quoted in the following manner: X showed its worst numbers in the 37 years that the measurement has been tracked. In other words, when you see a headline that something is the worst it's been in 20 or 30 or more years, read the byline and it's probably actually been longer than the news even quotes. A rare case where MSM is using the less hysterical headline.
4) Record price drops, and accelerating
5) Terrible Christmas for retail
6) Talk to someone, anyone, and ask them how they feel about the economy, their job, or just stuff in general. 10-to-1 they are somewhere between concerned and terrified.
Actually, I am expecting there to be a significant rally in most assets (stocks, commodities, real-estate, etc) around mid-year (give or take a couple months). No market ever moves in a straight line, not even those of the bear variety.
My best guess (for that is all these short-term timing predictions are), is that we will see asset prices fall significantly through most of February, and hit new 52 week lows in virtually all asset classes. However, once we've hit this "bottom", we will likely rally for a good 3 to 5 months, with a MASSIVE correction (the Dow could rise 50% off it's bottom. However, towards year end I suspect all these gains will be given up, and then some. Nevertheless, I fully expect to see some people calling a bottom during this rally.
A bear market is like a shark, it must keep moving to stay alive. I agree with sniglet on this. The asset class of real estate may not jitter as much as other classes, but this will not be a straight line to the bottom.
It's possiblle that our local economy might not follow the broader nation in the big rally I see happening mid-year. We've been out of synch with the country for the last few years (only now starting to see real pain in real-estate, for example). Thus, it is possible that we could see things get worse in the Puget Sound even as they appear to improve elsewhere.
But this is just an idea I am toying with. Maybe we have finally caught up with the rest of the country and are now in the same phase. Still, it's something to think about...
My thinking is that prices for the few houses that are selling on the Eastside (at least) are generally at least 10% higher than realistic market prices (the prices at which the whole market would be brisk), so a rally this year is unlikely. That 10% would have to be absorbed first.
I'm thinking we rally in the next month or so on media hype and false hopes, then are back in decline by summer. All the international news is at least as bad as our national economy, and there really isn't any sense that things are turning around. The TARP 1 and 2 are seen as failures, the big bailout is seen as a pork bill, earnings are down, etc. While it's true most bear markets are pretty choppy on the way down, there's no rule that says we have to have a big intermediate rally every time. Sometimes a turd just sinks to the bottom.
My current best guess is that the housing bottom will occur sometime between September of '09 and July '10, but we will wallow around the bottom for a couple of years after that.
My current best guess is that the housing bottom will occur sometime between September of '09 and July '10, but we will wallow around the bottom for a couple of years after that.
I actually hope you're right, that we see a 20%+ decline YOY, and we hit bottom next winter. Unfortunately, I fear you are too optimistic.
There was a line of job-seekers snaking around the football stadium, and few employers there. Sniglet's 80% off is looking more accurate every day.
It still seems unlikely to me. But I used to think he was just plain nuts, and now it only seems mildly outside the realm of probability. Actually, I used to think 30% total decline was about right, but after CA saw -30% YOY during parts of last year, I've been forced to reevaluate my assumptions.
There was a line of job-seekers snaking around the football stadium, and few employers there. Sniglet's 80% off is looking more accurate every day.
It still seems unlikely to me. But I used to think he was just plain nuts, and now it only seems mildly outside the realm of probability. Actually, I used to think 30% total decline was about right, but after CA saw -30% YOY during parts of last year, I've been forced to reevaluate my assumptions.
It still seems nuts to me
80% off wipes out 400% of increase. With that prediction you are saying that median prices of a home in seattle will be $96k (off the ~$480k max)
One can blather on about Japan all they want - but the reality is that no market in Japan lost 80% of it's value - and the Japan bubble was much larger than the US bubble
So
- overall size of boom was less in US than in Japan
- Boom in Seattle was less than boom in rest of US. It looked more like the 20 city average than the 10 city average
- No market - even those at the extreme on frothinesss has gone down 80%. in Japan or the US
When I see 80% in LA or San Diego I will believe it might happen in Seattle. Those markets are at about 35%-40% off right now, but I think they are close to a turn around. Inventories are already way down year over year.
When the federal government collects taxes and spends the money, it is equivalent to destroying the money coming in and then paying for the spending by printing new money. The stimulus bill is going to decrease the amount of money destroyed and increase the amount of money printed. It's pretty clear that Congress doesn't really care what happens to the money as long as it enters the system quickly.
An 80% drop in real estate would require that the purchasing power of each dollar would greatly increase. There is huge amount of dollars currently parked in money funds that funded the deficit spending up until now. The talk now is of the Fed buying treasuries. This all means they won't be taking dollars out of the economy and will just be printing government checks that are backed by newly printed dollar bills.
And now the FM's are lowering the standards for refinancing, which is the same as what led to the bubble in the first place.
It's clear they are going to stop at nothing to stop the fall in housing prices. The dollar will just be the next casualty.
Looks like she's basing the call on a single week's worth of stats? I imagine the $15,000 tax credit for homebuyers is factoring into her call as well.
I won't be surprised if the tax credit trick manages to create a 3-6 month false bottom, but in the end I think it will just slow the approach to the inevitable final bottom.
Sniglet's 80% off is looking more accurate every day.
I used to think he was just plain nuts, and now it only seems mildly outside the realm of probability.
Don't tell me I am now getting lumped together with all the "sane" people? I am off my rocker, I tell you, and proud of it! Don't let my deceptivly rational moments fool you.
I won't be surprised if the tax credit trick manages to create a 3-6 month false bottom, but in the end I think it will just slow the approach to the inevitable final bottom.
If it creates a false bottom, it will be later in the year. Why buy now when you can wait until October to cash in on the tax credit?
Looks like she's basing the call on a single week's worth of stats? I imagine the $15,000 tax credit for homebuyers is factoring into her call as well.
I won't be surprised if the tax credit trick manages to create a 3-6 month false bottom, but in the end I think it will just slow the approach to the inevitable final bottom.
Everyone is talking about the tax credit like it is a done deal. It may be a REALTOR wet-dream, but it is only in the Senate version of the bill.
As for Ardell calling a bottom - she seems to have a pretty narrow definition (in these zip codes, for these types of houses...)
Call a bottom on regional index - that takes cojones
Has the Seattle area's real estate market hit bottom?
Most observers say no. But one agent who recently predicted continued price declines set off a tizzy in the local real estate blogosphere over the weekend by declaring: "We're at bottom."
Ardell DellaLoggia, an associate broker with Coldwell Banker Bain and an editor of the Rain City Guide real estate blog, filled in the details Sunday, writing: "While we wouldn't expect to see prices bottom with continued bad news as to layoffs, buyers are consistently calling the bottom at 20 percent under peak pricing" (not including houses that are not in foreclosure or being sold as part of an agreement to avoid foreclosure).
So, once a house is priced at least 20 percent below what it would have been expected to fetch at the market's peak in the summer of 2007, it sells, DellaLoggia said. Some houses priced at larger discounts are drawing multiple offers, but these offers rarely are pushing the sales price above 20 percent under peak, she said.
All this fuss has given me an idea. I'm thinking of making next week "bottom-calling" week on Seattle Bubble. I'll pick five different statistical methods for calling a bottom, and each day will feature a post looking into where the bottom is/will be using one method. I think it will be interesting to see if each method puts the bottom at a similar place.
I think the eastside flops thread would pretty quickly dispel her 20% off peak statement. Lots of 25-30% haircuts off the 2007/2008 sale price and they're not moving.
The media attention is a very good thing for lower prices. Now more sellers will being asking 20% below peak pricing and buyers will start looking for 30% off deals.
The bottom call was a publicity stunt orchestrated over a period of days.
I happened to see the set up when Tim Kane of Legacy Escrow made the bold move of posting an excerpt from Christopher Warren's "how it is possible" memo. I wish you would post it here on the Seattle Bubble.
Well, I had 55 students in my class today including a handful of higher level real estate brokers and NONE of them believe we're anywhere near the bottom.
About five or six, it could have been more, agents said they're starting to see short sales and foreclosures creep into the 700K to million dollar price ranges.
The key signal I am looking for to indicate we have reached a bottom is a full 24 months of NO deterioration in the median prices. I expect to see some false bottoms along the way to the finale. There is no need to rush to buy once we do hit bottom, since prices will drag along for years before there is any sizeable bounce. Patience is the order of the day.
As far as what factors will finally lead to a turn: I would say that when we reach a point where the percentage of home-owners with no equity has returned to historical norms is when things will turn around.
Another class today. 40 agents, south end. Had agents from all over King County and even from Olympia. Everyone agreed that conditions are deteriorating rapidly and there's been a notable uptick in the percentage of NEW listings coming on the MLS each day that are distressed: Short sales or REOs.
We are not at the bottom. And if we were the bottom, my gut is that it will last a few years, maybe longer than anyone prefers.
David L.... I don't think it was a publicity stunt for Ardell. But it certainly is a different tone and I think that is one of the reasons she was quoted in the paper by Aubrey at the Seattle PI.
My post was to place a different perspective on the idea of a bottom, not to disagree emphatically, but to essentially say, hey, I don't think that agents really knew how out of hand things were. The amount of fraud going on was very high and the memo I referred to was to hopefully bring home the idea that the damage to our economy speaks for itself.
Certainly, agents discuss deals over the water cooler, but unless you were in escrow/title or in lending, you were pretty insulated from the "other" market just going 1000 miles per hour. That being refinancing.
What I'm getting at is that the sheer number of transactions (both refinances and sales) title/escrow were closing was just amazing. And, it has always been my contention that the very loans that were being closed were going to put a lot of people out of business and make home owners renters again. It was not something the real estate industry prepared for---the hangover from the party.
Comments
Well, recent developments make it clear that Jan 30th, 2009 is indeed not the bottom of this crazy-legged all-out real estate implosion. In fact, it's beginning to look like decimation in the traditional Roman army manner is the only possible solution; literally destroy 1 out of every 10 homes.
Just to review -
1) Tens of thousands of local layoffs were announced in the last two weeks.
2) New sales are the lowest on record
3) In fact, the majority of "most dismal" records (fewest sales, worst nationwide declines, unemployment change, etc) are quoted in the following manner: X showed its worst numbers in the 37 years that the measurement has been tracked. In other words, when you see a headline that something is the worst it's been in 20 or 30 or more years, read the byline and it's probably actually been longer than the news even quotes. A rare case where MSM is using the less hysterical headline.
4) Record price drops, and accelerating
5) Terrible Christmas for retail
6) Talk to someone, anyone, and ask them how they feel about the economy, their job, or just stuff in general. 10-to-1 they are somewhere between concerned and terrified.
My best guess (for that is all these short-term timing predictions are), is that we will see asset prices fall significantly through most of February, and hit new 52 week lows in virtually all asset classes. However, once we've hit this "bottom", we will likely rally for a good 3 to 5 months, with a MASSIVE correction (the Dow could rise 50% off it's bottom. However, towards year end I suspect all these gains will be given up, and then some. Nevertheless, I fully expect to see some people calling a bottom during this rally.
But this is just an idea I am toying with. Maybe we have finally caught up with the rest of the country and are now in the same phase. Still, it's something to think about...
Brilliant! Call bottom during the good season. Let me guess, November 24th will be the "retail bottom".
I actually hope you're right, that we see a 20%+ decline YOY, and we hit bottom next winter. Unfortunately, I fear you are too optimistic.
It still seems unlikely to me. But I used to think he was just plain nuts, and now it only seems mildly outside the realm of probability. Actually, I used to think 30% total decline was about right, but after CA saw -30% YOY during parts of last year, I've been forced to reevaluate my assumptions.
This was a sad front page photo on the Seattle TImes yesterday.
80% off wipes out 400% of increase. With that prediction you are saying that median prices of a home in seattle will be $96k (off the ~$480k max)
One can blather on about Japan all they want - but the reality is that no market in Japan lost 80% of it's value - and the Japan bubble was much larger than the US bubble
So
- overall size of boom was less in US than in Japan
- Boom in Seattle was less than boom in rest of US. It looked more like the 20 city average than the 10 city average
- No market - even those at the extreme on frothinesss has gone down 80%. in Japan or the US
So IMHO 80% = PIROOMA
When I see 80% in LA or San Diego I will believe it might happen in Seattle. Those markets are at about 35%-40% off right now, but I think they are close to a turn around. Inventories are already way down year over year.
An 80% drop in real estate would require that the purchasing power of each dollar would greatly increase. There is huge amount of dollars currently parked in money funds that funded the deficit spending up until now. The talk now is of the Fed buying treasuries. This all means they won't be taking dollars out of the economy and will just be printing government checks that are backed by newly printed dollar bills.
And now the FM's are lowering the standards for refinancing, which is the same as what led to the bubble in the first place.
It's clear they are going to stop at nothing to stop the fall in housing prices. The dollar will just be the next casualty.
Ardell is calling the bottom!
Looks like she's basing the call on a single week's worth of stats? I imagine the $15,000 tax credit for homebuyers is factoring into her call as well.
I won't be surprised if the tax credit trick manages to create a 3-6 month false bottom, but in the end I think it will just slow the approach to the inevitable final bottom.
Don't tell me I am now getting lumped together with all the "sane" people? I am off my rocker, I tell you, and proud of it! Don't let my deceptivly rational moments fool you.
If it creates a false bottom, it will be later in the year. Why buy now when you can wait until October to cash in on the tax credit?
Everyone is talking about the tax credit like it is a done deal. It may be a REALTOR wet-dream, but it is only in the Senate version of the bill.
As for Ardell calling a bottom - she seems to have a pretty narrow definition (in these zip codes, for these types of houses...)
Call a bottom on regional index - that takes cojones
Seattle price drops are ~1.5 years "behind" places like CA and FL.
We have a long way to go yet.....a very long way.
I happened to see the set up when Tim Kane of Legacy Escrow made the bold move of posting an excerpt from Christopher Warren's "how it is possible" memo. I wish you would post it here on the Seattle Bubble.
About five or six, it could have been more, agents said they're starting to see short sales and foreclosures creep into the 700K to million dollar price ranges.
As far as what factors will finally lead to a turn: I would say that when we reach a point where the percentage of home-owners with no equity has returned to historical norms is when things will turn around.
We are a long ways away from hitting bottom.
David L.... I don't think it was a publicity stunt for Ardell. But it certainly is a different tone and I think that is one of the reasons she was quoted in the paper by Aubrey at the Seattle PI.
My post was to place a different perspective on the idea of a bottom, not to disagree emphatically, but to essentially say, hey, I don't think that agents really knew how out of hand things were. The amount of fraud going on was very high and the memo I referred to was to hopefully bring home the idea that the damage to our economy speaks for itself.
Certainly, agents discuss deals over the water cooler, but unless you were in escrow/title or in lending, you were pretty insulated from the "other" market just going 1000 miles per hour. That being refinancing.
What I'm getting at is that the sheer number of transactions (both refinances and sales) title/escrow were closing was just amazing. And, it has always been my contention that the very loans that were being closed were going to put a lot of people out of business and make home owners renters again. It was not something the real estate industry prepared for---the hangover from the party.