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SEattle Times explanation for market defying economics

GetMeTheHellOutOfCAGetMeTheHellOutOfCA
edited June 2007 in Seattle Real Estate
Why do prices prices continue to rise when supply rises? Times claims buyers can trade up and buy more home.

Local home sales cool off; why are prices still hot?

Comments

  • JazenJazen
    I read that stupid article. Reaching, really reaching. I like how they get a local "expert" from the University to shead some light on the subject. Dumb.
  • deejayohdeejayoh
    It's quite simple - median price isn't really a good indicator of the market - especially when the shape of the distribution is changing, as it is now.

    Crellin was saying essentially the same thing everyone here is saying, but in a nicer way. He says people are buying "more" (meaning nice places are more affordable), we say no one is buying the turds. Two sides of the coin.
  • femtofemto
    This inanity is bugging me--very reminiscent of "analysts" explaining back in 1999 why unprofitable dotcoms with were worth billions. I wonder if we can find a historical example of the "rising inventory, sales lagging, prices steady" phenomenon to send to these reporters. Sellers always want the highest price and lower them only reluctantly, and I don't think many of them realize that they're facing vastly more competition (i.e. inventory) than a year ago. This situation is obviously unsustainable, because eventually many sellers *have* to sell at some price, but how long they can hold out is an interesting question--weeks, months, a year? There must be some precedent (SF Bay in the 80s/90s?) we can point them to. If I had to guess the critical period is some multiple of the maximum age of comps accepted by banks for appraisals--perhaps 4 months? If April was the start of this scenario should we see values falling measurably by July?
  • bilirubenbiliruben
    In the last downturn, inventory went down as people who couldn't get their price simply took the house off the market.

    In this downturn, the opposite is happening. There are so many speculators and Builders desperate to get out that cannot take the house off the market that inventory to exploding.
  • S-CrowS-Crow
    Median Sales prices for Snohomish Co this Spring-

    Residential only:

    March $382,500
    April $375,000
    May $345, 000

    Wish it were not so, but it is what it is.

    And with upward pressure on mortgage rates, this will be an interesting late Spring and Summer season. Some people are getting bounced down quite a bit in qualifying with the rate pressures over the last month or so.
  • JazenJazen
    biliruben wrote:
    In the last downturn, inventory went down as people who couldn't get their price simply took the house off the market.

    In this downturn, the opposite is happening. There are so many speculators and Builders desperate to get out that cannot take the house off the market that inventory to exploding.
    For some I/O and ARM resets won't allow them to wait it out. So they must sell or risk foreclosure due to unmet payments. I have no sympathy, for I too was greedy once and will remember what it cost forever.
  • georgegeorge
    At least Crellin gets it right here:
    Elizabeth Rhodes wrote:
    Sellers, still believing their homes are worth top dollar, price them at that. But buyers know the market is softening so they feel free to shop around. Sales slow and, as even more houses come on the market, inventory increases.

    Finally, sellers either cut their listing price or agree to take less.
    My prediction of March 2008 for a YOY drop is still on the table - Mr. Meshugy doesn't seem to want to bet against that prediction. Any takers?

    Could turn ugly next year if you combine it with the big economic picture.

    darkow-sm.gif
  • phinneygirlphinneygirl
    Having just bought a house in early May, I feel I may be one of the "suckers" who bought in at the top. On the other hand, I feel we got a good deal on our house and only paid the ask (which seems to have been purposely set low in anticipation of a bidding war, but then other circumstances came into play that allowed us to get it for the ask). We don't plan on moving for many years.
    Earlier in the year, March/April, we lost 3 houses in absurd bidding wars (all going for $50k+ over ask). As we've been detoxing ourselves from the market, we've seen the inventory grow in neighborhoods that were a black hole for our price range only months ago.
  • S-CrowS-Crow
    Phinney Girl-

    If you are in for the longer term-say out five years or so- don't sweat it. But the insane multiple offer biddem' up $50K over asking is largely over. It happens in pockets still, but it is not routine as it was in 06'.

    There is nothing more irrational than getting involved in multiple offer situations in the 7th, 8th and 9th innings of a major real estate run up. But that's just my opinion.

    And, being that I'm "Bearish" working actively in this market (wife and I own small escrow business up in Everett), I see how people are financing these purchases. There has been a lot of serial refinace customers, a lot of sub-prime stuff and a whole lot of 100% nothing down deals to help sustain and ENABLE the run up.

    UP in my neck of the woods (snohomish co. )there has been what I would consider a healthy pressure downward on prices.

    For example, March 07' Median Sales prices for single family homes was $382,500 and end of May it dropped to $345,000. The weakness is building. I don't like it, but it is what it is.

    S-Crow
  • mike2mike2
    S-Crow wrote:

    If you are in for the longer term-say out five years or so- don't sweat it. But the insane multiple offer biddem' up $50K over asking is largely over. It happens in pockets still, but it is not routine as it was in 06'.

    There is nothing more irrational than getting involved in multiple offer situations in the 7th, 8th and 9th innings of a major real estate run up. But that's just my opinion.

    Looking at some of the resales on the market now at or below last years prices I can only assume that quite a few people got screwed during these bidding wars and ended up buying a junk house after waiving inspection.

    It's unfortunate, but anyone that willingly participated knew the risk they were taking.
  • phinneygirlphinneygirl
    The problem is, people get too emotionally attached to certain properties. We knew we were getting into competitive situations with our offers, we tend to like the "cute" craftsman style homes, and we are not unique in our taste.

    One house we were one of the crazy people willing to pay well over the ask (though the price was set very low, nearly $100k below the zillow). Granted, it was a house that needed a lot of work, but we saw the potential. We were willing to pay $80k over the ask, and when the bidding war insued with offers we were asked by the sellers agent to drop all of our contingencies. We declined that offer (my husband is way too rational to do something as crazy as drop contingencies!) and we figured that our $$ would prevail. Now that the house has closed and we've checked the sales record, it actually went for $15k less than our top offer. Those people must've been willing to take the risk we would not, dropping contingencies.

    In hind sight I am glad that we didn't get that house, because we are much happier with the price and condition of the house we found a week after that deal failed.
  • S-CrowS-Crow
    Phinneygirl,

    Patience can pay handsome dividends.
  • uptownuptown
    phinneygirl -

    I know plenty of people who bought at the top of the last California boom. All managed to come out of it with large profits. The trick is none were heavily leveraged (20% down was the norm), and all bought in very good areas, but not the most expensive.

    The funny thing about bubbles is that all boats rise together, even a POS will be priced like it's best neighbor; which in a normal RE market would not be true.

    Enjoy your new home.
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