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What is all about this too negative of a report.

angrybullangrybull
edited February 2008 in Seattle Real Estate
This report was recently published on business week, though it seems like there is some truth to it, it does not seem to be the complete truth.
The report indicates that the housing prices may reset to the pre boom period prices, indicating a drop of "possible" (though not guaranteed) drop of 39% in the Seattle market.

I had made an offer last week that got rejected, therefore i was considering uping the offer till i came across this report and stopped.

Please take a thorogh look and comment. The smarter people out there, please try and educate the naive first time buyer like me.
Your input is very much appreciated .
thanks
The report : http://finance.yahoo.com/real-estate/ar ... g-Meltdown

Addendums to the report:
Shedding gains: http://images.businessweek.com/ss/08/01 ... dex_01.htm

Dissolution: http://images.businessweek.com/ss/08/01 ... dex_01.htm

Analysis:
http://images.businessweek.com/ss/08/01 ... dex_01.htm

Comments

  • MarkorMarkor
    Yeah Seattle area house prices could fall 50%. But consider the possibility that Seattle has become more popular relative to other cities since the bubble started. Take for example a house close to the Bellevue city center. If the house has increased in value by, say, 70% since 2003, it's hard to say how much of that increase is irrational exuberance (bubble) and how much is due to the fact that Bellevue office space is set to roughly double in size between 2003 and 2010.
  • ira sira s
    Just like the article stated, there are pessimists and optimists out there regarding the housing market...Or so they like to say..I like the idea of home prices dropping, but i don't think I'm a pessimist.
    The Seattle area is expected to grow, and even though we are part of and affected by the national economy, if the local employment scene stays robust and if people do continue to move to the Seattle area, then perhaps the drops in home prices won't be as severe here as they will be in other places.
    Personally, I just can't see local prices dropping 50% from the top. Nationally, home prices peaked about a year or 18 months before Seattle peaked. Does that mean our home prices will decline for a longer period?
    I don't know. But I do know that in desirable neighborhoods in Seattle, if a house is well priced, it doesn't stay on the market long, even now.
    And the whole economy is a mess, nationwide. There's a lot less money out there available for lending, so even with low interest rates, it will take significant price declines to get all these folks eligible for loan qualifying.
    I'm guessing we will see a bottom around the summer of '09, and then a flattening for a couple of years, with prices starting to rise sometime in 2011.
    Since August of this year, the median price of a local house has declined, I'm not sure how much.
    Given the strength of the local economy, I don't think the median price of a Seattle home will fall an additional 25%,
    but I could easily see an additional 10% decline or possibly 15.
    There is a huge inventory of local homes right now, and that number is growing. The effect of that can only be lower prices. So don't worry about "losing out" on a house because an offer was rejected...There will be plenty more to choose from.
  • perfectfireperfectfire
    Markor wrote:
    it's hard to say how much of that increase is irrational exuberance (bubble) and how much is due to the fact that Bellevue office space is set to roughly double in size between 2003 and 2010.

    I don't think it's so hard. Compare monthly rent to monthly mortgage payments on equivalent places and that'll tell you how much is due to speculation.
  • MarkorMarkor
    That would be difficult to do, because we don't know what rents or house prices will be in 2010. Buyers in Bellevue (like me) may be anticipating increased rents due to the greatly expanding (but not yet filled) office space. Presumably many of those who will fill that office space live elsewhere now. That said, a lot of houses I see on the market in Bellevue are now hovering around a 15-year historical price/rent ratio.
  • angrybullangrybull
    Markor wrote:
    That would be difficult to do, because we don't know what rents or house prices will be in 2010. Buyers in Bellevue (like me) may be anticipating increased rents due to the greatly expanding (but not yet filled) office space. Presumably many of those who will fill that office space live elsewhere now. That said, a lot of houses I see on the market in Bellevue are now hovering around a 15-year historical price/rent ratio.

    I am looking for something at or above 1700 sqft, and unfortunately nothing is under 450K. Anything close to 450K - 500K is like 35+yrs old property. How can one use the price/rent ratio to one's advantage?
  • deejayohdeejayoh
    20 years of history would say rent increases pretty much track income increases. So if the new buildings drive incomes, then they might drive rents. If they drive population, developers tend to build more apartments and houses more than quickly enough to meet demand.

    housing-vs-income-small.png
  • MarkorMarkor
    angrybull wrote:
    I am looking for something at or above 1700 sqft, and unfortunately nothing is under 450K. Anything close to 450K - 500K is like 35+yrs old property. How can one use the price/rent ratio to one's advantage?
    I only look at houses > 25 years old. I want good construction! The 1950s-60s houses in particular look great when they're fixed up right.
  • perfectfireperfectfire
    Markor wrote:
    That would be difficult to do, because we don't know what rents or house prices will be in 2010. Buyers in Bellevue (like me) may be anticipating increased rents due to the greatly expanding (but not yet filled) office space. Presumably many of those who will fill that office space live elsewhere now. That said, a lot of houses I see on the market in Bellevue are now hovering around a 15-year historical price/rent ratio.
    Any price premium due to the expectation that a certain amount of office space will be filled by 2010 is pure speculation and part of the irrational exuberance.
  • ira sira s
    Not only are 50's & 60's houses often solidly built, they are also often " Mid Century Modern" cool, think Jetsons.
    Too many recently built homes look just like all the other recently built homes.
  • MarkorMarkor
    deejayoh wrote:
    20 years of history would say rent increases pretty much track income increases. So if the new buildings drive incomes, then they might drive rents. If they drive population, developers tend to build more apartments and houses more than quickly enough to meet demand.
    In the latter case it would be apartment buildings and condos, since there's little buildable land left close in. Those kinds of structures can increase the price of SFHs (if your SFH was an island in a sea of high-rises, how much would it be worth?).

    It's a safe bet that few people will be accepting a new job in a new Bellevue skyscraper for less than $50K.
  • MarkorMarkor
    perfectfire wrote:
    Any price premium due to the expectation that a certain amount of office space will be filled by 2010 is pure speculation and part of the irrational exuberance.
    Highly unlikey that the office space will sit empty. The owners can make more renting at a loss than if the space sat empty. The same reason homeowners sometimes rent at a loss.
  • MarkorMarkor
    ira s wrote:
    Not only are 50's & 60's houses often solidly built, they are also often " Mid Century Modern" cool, think Jetsons.
    Too many recently built homes look just like all the other recently built homes.
    Yep. I subscribe to Atomic Ranch magazine, which is all about MCM. Also those houses often have floor plans that take good advantage of the space, so they can seem as roomy as a larger newer house.
  • deejayohdeejayoh
    Markor wrote:
    In the latter case it would be apartment buildings and condos, since there's little buildable land left close in. Those kinds of structures can increase the price of SFHs (if your SFH was an island in a sea of high-rises, how much would it be worth?).

    It's a safe bet that few people will be accepting a new job in a new Bellevue skyscraper for less than $50K.

    -there is more buildable space than you would imagine. KingCo is the 13th largest county in the country, but one of the least densely built out. Watch the zoning. It is happening already. Where do you think those condos are coming from?
    -Regardless, values near DT Bellevue are likely to rise. Like in Meydenbaurer, Clyde Hill, and Medina. Good for them. I sincerely doubt this is a personal issue or gain for either you or I
    - on the value of MCM architecture, we surely agree. Unfortunately, the tacky overlords of Blah-view are likely to tear these gems down and replace with McMansions tout de suite. Hilltop and Enatai have some real diamonds. I hope they survive.
  • perfectfireperfectfire
    Markor wrote:
    Highly unlikey that the office space will sit empty. The owners can make more renting at a loss than if the space sat empty. The same reason homeowners sometimes rent at a loss.
    If you build it they will come? You could be totally right, but it's still speculation.
  • rose-colored-coolaidrose-colored-coolaid
    Markor wrote:
    It's a safe bet that few people will be accepting a new job in a new Bellevue skyscraper for less than $50K.

    I wouldn't take that bet. Some of the jobs in those buildings are for Google software developers, but others are for bank tellers. Just because an area (Bellevue) tends to skew towards higher paying jobs than another area (Tacoma) doesn't mean it is devoid of poorly paying jobs.
  • MarkorMarkor
    perfectfire wrote:
    If you build it they will come? You could be totally right, but it's still speculation.
    Yes, speculation. But if the owner leases the space at half off the competition, you can bet they'll come.
  • MarkorMarkor
    rose-colored-coolaid wrote:
    I wouldn't take that bet. Some of the jobs in those buildings are for Google software developers, but others are for bank tellers. Just because an area (Bellevue) tends to skew towards higher paying jobs than another area (Tacoma) doesn't mean it is devoid of poorly paying jobs.
    I saw a job posting for an administrative assistant for the city of Newcastle. Starting salary: $48K. The average in a new skyscraper in Bellevue should be well north of that. You're right that some could make less.
  • AlanAlan
    Isn't $50k a year kind of pooly paid in this area?
  • crucifictioncrucifiction
    Markor -

    Your assumption is based on all of that cheap office space being filled up by companies flocking from areas far away to lease in downtown Bellevue. If they are simply moving from one place to another within the area (far more likely) it doesn't make much of a difference. Considering WA corporate tax law, I doubt there is a huge clamoring for companies outside of the area to move in to somewhere like downtown Bellevue if only building space was a little bit cheaper.
  • rose-colored-coolaidrose-colored-coolaid
    Markor wrote:
    I saw a job posting for an administrative assistant for the city of Newcastle. Starting salary: $48K. The average in a new skyscraper in Bellevue should be well north of that. You're right that some could make less.

    I would hardly generalize one salary to an entire population. Bellevue also has a number of restaurants and retail stores. I would expect these to fall much closer to minimum wages. I think the assumption about wages is "who would work in Bellevue for $10 an hour when they can get $9.50 to work in Auburn?"

    If that's your point, I think it's a valid one. My personal guess is that you've got a multi-income household. They bought a beautiful $600k home in Bellevue/Redmond/Kirkland because one income has a high paying tech job. Then they realized the tech job wasn't that high paying, so the other member of the household needs a job. They'd like to get $80,000 a year, but don't have the skills, so they settle for $35,000. At least it pays the bills.
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