why aren't tightening lending standards impacting Seattle?
I admit it: I am perplexed as to why the nation-wide tightening credit standards aren't having that much of a negative impact on the Seattle and Eastside markets. Is it that most of the people buying in this region have great credit and hefty down-payments? Are lenders applying lower credit standards to purchasers in Bellevue, Redmond, and Kirkland than elsewhere in the country?
When lending standards started tightening several months ago I was anticipating some beginnings of pain in the Eastside market fairly soon, but this doesn't seem to be the case yet.
Yes, I know that we are "12 months behind" the rest of the country. But that just doesn't make sense seeing as how we are subject to the same general credit and financial trends gripping the nation.
Is it just that the Eastside really is special?
When lending standards started tightening several months ago I was anticipating some beginnings of pain in the Eastside market fairly soon, but this doesn't seem to be the case yet.
Yes, I know that we are "12 months behind" the rest of the country. But that just doesn't make sense seeing as how we are subject to the same general credit and financial trends gripping the nation.
Is it just that the Eastside really is special?
Comments
1. The transportation sucks. North/South is three lanes, and East/West are five lanes. There are three buses-vs-100,000 BMWs operating on the east-side. If you work in Redmond, you either buy in Redmond/Bellevue/Kirkland, or you spend 2.9 hours a day sitting in traffic.
2. All of the good schools in Washington are in Bellevue. Many parents will mortgage their own future to put their children in the 'best' school.
3. ...
4. Profit!
So, is the Eastside the one exception to US real-estate, where people really one really should buy or be priced out forever? If the Eastside is doomed to perpetual real-estate appreciation, then it makes sense to go into hawk up to the eyeballs to grab whatever Bellevue property we can get our hands on.
I don't have an answer, but only a possible explanation.
Credit tightening will hit the lower income borrowers prior to the high rollers. It will eventually hit them, but not yet. Also, the standards are not really that tight. Going from 0% down to 5% down is a big deal to someone who barely qualifies for a loan, but not to someone with high incomes and prior equity. When you need gold-plated references for income and 20% down in YOUR OWN MONEY, you will see problems. Good references and 20% down isn't that draconian; it was the norm just a few years ago. It was the deviation from this standard that caused the housing bubble.
I don't know how much the NINJA loans have stopped. I still hear the same hucksters on the radio trying to force mortgages on people. My guess is the credit tightening is largely eyewash. Banks and loan brokers still need to feed off the fees they charge for these loans, so they will do just about anything to keep the party going.
Washington still gets a bunch of X-Cals. They come with a boat-load of equity and they set the margin price. Wait until California gets shut off and you will see price drops at the high end.
This bust is starting at the lower end and the outlying areas, which is counter to what I expected. It will eventually reach the big shots in the expensive 'hoods, but it will take some time.
You could be right. Nevertheless, I also find it perplexing to see the markets declining so slowly in California. We keep reading about the massive increases in inventory, but sales keep happening in places like Orange County and prices have certainly NOT crashed there. The areas that are hurting the most are the outlying regions (e.g. Bakersfield, Sacramento, Imperial Valley). But the large metro-regions like Silicon Valley and San Francisco are hanging on quite tenaciously.
This raises yet another of the confounding aspects of our current real-estate downturn. I read of different trends from different parts of the country. There are plenty of stories about how even up-scale neighbourhoods are facing a lot of foreclosures in some states. In other places it only seems to be the lower income homes that are suffering all that much. Is it that lending standards have just been different from state to state and city to city?
What further throws me for a loop is how any kind of lending using the new-fangled exotic loans (e.g. 100% interest, negative-amortization, no down-payment, etc) are still being funded. Are there really investors out there still willing to buy up CDOs with these kinds of loans at par (i.e. for no discount) even with all the horror stories swirling around regarding Bears Sterns and derivatives markets in general?
It's all very puzzling.
It is waaayyy too early to pull the "maybe Bellevue is special" card. RE bubbles deflat slooowwwwllllllllyyyy. I was in the last big CA bubble in the early 90's....took 6 years from price peak to price bottom. If we use that model and assume NOW is the price peak here in Seattle+6 years until bottom = 2013.
Which exactly what I have been saying all along....2013.
Once the lending system seizes up, you can bet the housing market will fall off a cliff - even in Bellevue, Ballard, and Bainbridge.
That Bear Sterns fund needed to get saved or the entire system would be unravelling as we speak.
I disagree...
My husband works in Redmond, and we live in Seattle. He goes to work from 10:30ish to 7:30ish and oftens takes less than 25 minutes to drive each way. Second, regarding the schools, the Eastside schools are not the best, I know - I am a prduct of them. Sure it's fine if you want your children to go to a homogenous white breed school where the snotty students drive nicer cars than the teachers...personally I'd rather my children grow up with a little more diversity and "real world" understanding (surprise, surprise, the majority of the world is not like the eastside). A third point...most of the houses on the eastside are uninspiring 70's and 80's style boxes (with big ugly attached garages out front)...the houses have no character compared to those in the Seattle neighborhoods.
I think the higher gas prices are an important secondary factor as to why the outlying areas are getting hit the hardest. Its hard to justify the cheaper mortgage payment when you are shelling out 500 a month or more for gas for the commute to your job.
"Drive until you qualify" is the mantra for many. This is why the outlying areas are starting the burn.
You want ugly houses go to Sammamish,Issaquah (new ones) cookie cutter things that you can put your fist through it seems.
Schools wow iam shocked by your statement,im a graduate of Sammamish and it was horrid when i went there but cmon the International School isnt just for the rich its a lottery here in Bellevue and the International is nationaly recognized.
In all fairness, I could say the same about...well most of King county. For the most part, this area was built in waves. Whether you're talking about uninspiring 50's-60's suburban houses, the uninspiring 70's-80's box houses, or the uninspiring 90's-today McMansions.
Anyways, diversity is a joke. There's nothing wrong about working with people of various backgrounds, it's just there's nothing intrinsically right about it either. Better is to treat those around you with respect.
WOW! If it wasn't for the ugly reality of HIV, I'd ask you to be my blood brother.
Off topic, but maybe of interest to some - the Pacific Northwest is mentioned in Ben Jones HBB (July 6).
The Clearest Sign Of A Slowing Market In Washington
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