2007 Predictions
What do you guys think we're going to see in the housing market this year?
I know this was discussed a bit on the blog, but I thought I'd bring it up here too. Even though I am a bear on the market as you guys know, I have a very strong suspicion that this year is going to be more stagnant than falling. I wouldn't even be surprised if this spring is somewhat strong. I think we're still too far behind the curve compared to the rest of the country and there's too many people that still think we're different here and prices will grow to the sky. The mass psychology is still too optimistic, thanks in large part to the Seattle P-I IMO. I still think we will see the downturn the rest of the country is already seeing, I just don't know if it's going to be this year. I don't have anything to back any of this up but my gut feelings and pessimism.
I know this was discussed a bit on the blog, but I thought I'd bring it up here too. Even though I am a bear on the market as you guys know, I have a very strong suspicion that this year is going to be more stagnant than falling. I wouldn't even be surprised if this spring is somewhat strong. I think we're still too far behind the curve compared to the rest of the country and there's too many people that still think we're different here and prices will grow to the sky. The mass psychology is still too optimistic, thanks in large part to the Seattle P-I IMO. I still think we will see the downturn the rest of the country is already seeing, I just don't know if it's going to be this year. I don't have anything to back any of this up but my gut feelings and pessimism.
Comments
As for predictions...well, gosh. Chang Mook Sohn, the state's chief economist, has been predicting some form of decline in the market for years. Eventually, he's going to be right and in a big way. But he'll have ended up calling it wrong (in many people's eyes) a lot of times by then. We're in the same boat.
Right now there's a bit of a spurt as the folks that are anxious to cash in list for maximum dollars and sell to some of the folks that are going to buy no matter what. As the year progresses, I guess that I sort of expect to see fairly stagnant prices at least through the summer, hopefully with relatively low sales volumes and building inventory. Then we may see the first wave of serious price drops in the fall.
I freely admit, however, that I could be a year off or more.
Once the MSM even starts to hint about such things, which they are, people will realize what is happening. And then of course it will be blamed on the MSM for purpetuating the self fullfilled prophecy.
I certainly hope that you are right! The REIC is certainly pushing their message hard in their multiple-section paid advertisements in the Seattle papers. It does suggest a certain desperation on their part.
Anecdotally, there are quite a few houses sitting on the market in Tacoma for long periods before selling (or not). I haven't seen any statistics for Tacoma/Pierce Co listings, but I do wonder if Tacoma will prove to be a sort of canary in the ever-so-deep hole in the ground that this lemming market has dug.
At any rate, you I notice on my ride to work, which takes me many different routes, many more homes on the market. Last summer when we bought (yeah, almost at the peak) the houses for sale were few and far between. And now I see For Sale signs sprouting like mushrooms after a spring rain. And I live in the low-priced side of town. I know the mid- and high-priced sector of the market should be weak, but not the 'starter' homes. (I love the term 'starter home.' My wife and I both are forty with college degrees and we moved into a 1929 home built new for a coal miner. But 1,000sqft is enough for us.)
Same thing can be said of Ferndale, Lynden...everywhere both in the city of Bellingham and outside there is an overabundance of homes for sale. And more being built all the time. I work with a bunch of builders and things are not slowing at all up here. And I won't even start on the condos. :roll:
I'll take a wild stab at a very specific prediction. This is a fool's game, but as long as I have little skin in it...
My prediction is that we see an initial slight increases in price in March and April, flattening in mid-summer as we start to fall into a national recession, then a huge up-tick in inventory, and a decline in prices YOY, inflation adjusted by July. We see our first nominal YOY decline by September.
I'll even throw out some actual for SFH (res):
Inventory, median King County price, month:
5423, 440K, Dec (actual)
6100, 450K, Jan (est)- 5932, 429K (act)
6800, 445K, Feb
7500, 455K, Mar
8200, 455K, Apr
9100, 450K, May
9200, 440K, Jun
9300, 435K, Jul
9900, 430K, Aug
10500, 410K, Sep
10500, 395K, Oct
9000, 390K, Nov
8500, 390K, Dec
I probably will be way off, but I thought I'd take a shot!
I urge others to do the same. Ardell? Rhonda?
I have been looking down in the Puyallup area for a few months, the inventory is pilling up and nothing is selling. I visited a new development yesterday to take a look, nice palces reasonable (by comparison) prices. The sales have been open for months all the homes completed with MLS #s for 222 days, so far total sold 4. I do not see this picking up anytime soon. I could not believe how much they are building down there, that is not even completed yet aside from all the completed inventory. in each of the new exsisting developments there are at least 5 to 10 resales, as if people cannot get out fast enough and are all competing for virtually no buyers. Pierce county is definately the canary in the coal mine, once the numbers and horror stories come out for the surrounding areas and the rest of the country Seattle is toast.
Well now I can tell that you're just lying. We're out of land. There's nowhere else to build. That's a fact.
Shortly after I saw huge roadblocks at which point I had to turn around..........
Inventory, median Res King County price, month:
5423, 440K, Dec (actual)
6100, 450K, Jan (est) - 5932, 429K (act)
6800, 445K, Feb (est) - 6124, 430K (act)
7500, 455K, Mar
8200, 455K, Apr
9100, 450K, May
9200, 440K, Jun
9300, 435K, Jul
9900, 430K, Aug
10500, 410K, Sep
10500, 395K, Oct
9000, 390K, Nov
8500, 390K, Dec
I think due to the ongoing credit tightening, the price declines could come sooner than expected. I think its all going down after March.
It's all about the defense.
It will be interesting to see what the loss of 100% LTV options do for the pendings and inventory going forward.
I'm going to second the prediction that March will be Seattle's last boom month. After that, sales are gonna get pretty anemic and must-sell inventory will skyrocket.
Looks like I nailed prices for March, and I'm a month early on inventory.
There have been more sales the last couple months than I expected. I didn't take into account those that simply feel they need a house at at any price who finally were able to find one. After the flipper wasteland that comprised the majority of inventory over Nov, Dec, Jan, when actual, livable homes came on the market they looked great in comparison. There was some pent up demand that I would guess will dissipate pretty quickly.
I also underestimated that their are still investors trying to "get into the game" at this late date. Not to down-play the high level of education Seattlites have on average, but there are still a lot of clueless morons here.
5423, 440K, Dec (actual)
6100, 450K, Jan (est) - 5932, 429K (act)
6800, 445K, Feb (est) - 6124, 430K (act)
7500, 455K, Mar (est) - 6762, 454K (act)
8200, 455K, Apr
9100, 450K, May
9200, 440K, Jun
9300, 435K, Jul
9900, 430K, Aug
10500, 410K, Sep
10500, 395K, Oct
9000, 390K, Nov
8500, 390K, Dec
There are a healthy amount of people that don't know much about the the markets and r.e. business and it's used against them as consumers. The thing is, I can't entirely fault them for a bit of ignorance, because their lives do not revolve around real estate---a far cry from some in my line of work that believe the WORLD revolves around them/r.e.
Then again, I have another friend who DID buy. He now has a townhouse in Ballard (his latest purchase) a 4-plex in Kent that he hasn't been able to sell, and a house in Burien. I like him and all, but he IS a moron.
For all of this to come to pass (i.e. for a panic to ensue, and the real-estate bubble pop) we will have to see the second foot fall in the financial industry, with some major disaster coming out of the blue such as the HSBC warning earlier this year. Next time, it will be some major player in the Alt-A space (CFC anyone?). This will likely happen when the great wave of mortgage resets happening through 2007/2008.
Anyway, I think that the financial industry will continue to be able to bluff it's way along until the end of 2007. Keep in mind that it takes quite a while for a distressed home-owner to actually wind up in foreclosure. So, it not not be till the second half of 2008 when the people who are stuck with payments they can't make (when they reset in the fall of 2007) actually start losing their homes, and lenders have to take the hit. Until then, lenders can keep pretending everything is hunky dory.
I like the whole sub-prime bailout idea, give people a get out of jail free card, who have defaulted on their mortgage, because they were too stupid to realize they couldn't afford the house they were buying. Makes me want to run out and get a risky I/O loan or something like that. I love not having any responsibility and letting the taxpayers pick up my tab!
5423, 440K, Dec (actual)
6100, 450K, Jan (est) - 5932, 429K (act)
6800, 445K, Feb (est) - 6124, 430K (act)
7500, 455K, Mar (est) - 6762, 454K (act)
8200, 455K, Apr (est) - 7649, 465K (act)
9100, 450K, May
9200, 440K, Jun
9300, 435K, Jul
9900, 430K, Aug
10500, 410K, Sep
10500, 395K, Oct
9000, 390K, Nov
8500, 390K, Dec
Still running about a month behind on inventory, though my guesses are getting closer.
I underestimated a tad the April increase, but still doing pretty well, I think.
Now we will hopefully see some rational buyers take over, after the spigot of subprime and Alt-A no-docs slow to a trickle.
5423, 440K, Dec (actual)
6100, 450K, Jan (est) - 5932, 429K (act)
6800, 445K, Feb (est) - 6124, 430K (act)
7500, 455K, Mar (est) - 6762, 454K (act)
8200, 455K, Apr (est) - 7649, 465K (act)
9100, 450K, May (est) - 8689, 469K (act)
9200, 440K, Jun
9300, 435K, Jul
9900, 430K, Aug
10500, 410K, Sep
10500, 395K, Oct
9000, 390K, Nov
8500, 390K, Dec
Inventory is starting to climb close to my predictions, but median prices are required (required I say!) to begin their descent very soon.
Like yesterday!
I suppose you could try and buy a house today and tell the seller he's "required" to sell it to you for $19K less the asking. But something tells me you'll just get laughed at...
http://biz.yahoo.com/ap/070607/wall_street.html?.v=33
Thanks for playing though...
Translated to Mortgage rates... In ONE DAY monthly payment on a median priced home ($469K) went up by $55/month. If this keeps up there are going to be thousands more first time buyers priced out by August.
Just since May 1st, the monthly payment on a median priced home has gone up roughly $170, or $2000/yr. (All calculation assume Interest Only Mortgage)
What's that - something like $400-500/month, using your math Mike?
ouch.
Doubtful, there are so many houses sitting on the marekt at 30+ days right now. 250+ just in Queen Anne and Magnolia. I imagine an offer $19k under list would probably be taken very seriously.
http://market-ticker.denninger.net/
Is this your favorite blogger? he's fast becoming mine too!
I tend to agree with respect to anything that hasn't sold in the first 30 days. Good stuff is still going fast, and bad homes are sitting. $20K under asking is a fair offer for a property that isn't in demand.
If the particular home happens to have been purchased at the market peak last summer and has some defect, $20K off last years purchase price may be in the works. Last year at this time any old POS was selling, and the only thing going for $20K off 2005 prices were foreclosures that never even made it to the MLS.
Now is when we see the real cost of bidding wars and waving inspections.
yup, that's the one. I don't know what his credentials are, but I always find his analysis fascinating. Good mix of technical and fundamental discussion.