Housing sales fall in 40 states; but not in Northwest
Jon Ribary on 02 16, 2007
[photopress:sputtering_starts.gif,thumb,alignright]Interesting story of the differing views from US (not U.S.) and those outside of the Rain City. One of my development partners (Mike) is from Michigan and is one of those 40 states with falling sales (not to mention increasing unemployment). As if the bubblers need any more endorsement to foster their cause the Seattle Times reported Housing sales fell in 40 states… but not the NW yesterday. Before I read the story in the times Mike sent me the view from the vast majority of the country as seen on CNNMoney.com ‘Housing starts plunge‘.
The CNN reported that housing starts fall much more than forecast, to their lower level since ‘97. They go on to add what in turn I call the LARGE BUILDER EFFECT; permits also fall as single-family permits hit 6-year low. The Large Builder Effect is a trend that occurs and will effect new housing starts about 12 months down the road when the permits are issued (permit times vary in each municipality).
So what does this mean? The nation’s leading homebuilders have all reported declining sales and prices for new homes(hence the fall in permits). Another partner of mine Snohomish County builder I know actually expressed the same views in November, but said since the first of the year his sales have bounced back to their expectations and he is continuing to submit for permits.
Do people behind the Rain City Curtin have their blinders on? Time will only tell, but if history is any guide (and I am NOT a historian) I would guess in time, with a smaller supply of products, demand will eventually grown so even though sales may be sluggish, over a 3 year window sales will continue to grow.
NOTE: I am leaving town after today, but I will do my best to reply to comments.
About the Author: Jon Ribary
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68 Responses to “Housing sales fall in 40 states; but not in Northwest”
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The thing about that headline, is that it’s just not true. The headline and the first paragraphs of the AP article state that sales are falling. Sales absolutely are falling in the NW. According to the latest stats from the NWMLS, sales fell 9.0% across the counties that they have been tracking since last year.*
The first paragraph also mentions declining prices in some areas, which indeed does not yet apply to the NW. However, the headline “Housing sales fall in 40 states; but not in Northwest” is demonstrably false.
*The totals row on page 1 of the NWMLS statistics shows a total decline of just 5.9%, but you will notice that they added sales from Clark County for 2007 into their total, while 2006 has no sales recorded for Clark since they were not yet tracking it. The result is an artificially high value in the ‘%chg’ column for Pending Sales, and an artificially low value in the same column for New and Total Active Listings. (Total listings were up 33.4%, not 39.0%).
P.S. (Is this the same Jon that left the angry-sounding comment on Seattle Bubble yesterday?)
LOL…poor Jon. He’s not the “bubble Jon”. I checked before when the angry Jon commented there.
Tim, prices falling is not accurate. The lower price range always moves more in the first and last quarters. Just because more lower priced properties are selling, than higher priced properties, doesn’t mean prices are falling. It means more volume in that price range.
People sell their condo/townhome in first quarter and buy in the higher tier in 2nd and 3rd quarter. Get your head out of the stats…they don’t mean what you think they mean.
Prices don’t “fall” unless same product sells for less. You have to look at the trees…not the forest.
Ardell, I’m afraid I don’t know exactly what you’re responding to. I didn’t say prices were falling here. I simply said that sales are on the decline here (despite a growing population).
Are you trying to claim that prices are not falling in other parts of the country? Interesting you should mention “same product” sales, because repeat sales is exactly what the Case-Shiller Index is based on (pdf).
The Case-Shiller Index shows prices headed down in many of the 20 markets they track, as well as overall in the composite of all 20 markets (although not yet in Seattle, as I said).
Tim,
Some day we’ll have to meet for coffee, so I can teach you how to read the stats. I’ll be out of town next week. But maybe the week after that. Let me know. Be happy to walk you through it.
How delightfully condescending.
I guess that’s a no (again) on the coffee meetup. You really should take the time to understand the stats better. You have a lot of readers.
I just saw someone asking your real, real estate questions on your blog Tim. You really should have a huge disclaimer that you are not licensed to give such advices.
Ardell,
For you to imply that I am incapable of comprehending the meaning of the numbers in the NWMLS (Consolidated) Statistical Recap is insulting, to be frank. We’re not talking rocket science here, and as someone with an education in electrical engineering (a very math-heavy field) I think I have a greater-than-average capacity for such things.
Sales are declining YOY overall in the counties tracked by the NWMLS. Do you deny this fact? If you deny it, why don’t you explain right here how this claim is false?
I don’t need to be “taught” how to read a spreadsheet that lists simple totals and the percent difference from one column to the next. The only tricky thing about the spreadsheet is the inclusion of Clark County in the 2007 data totals, as I mentioned above.
Also, last I checked, our country had not become quite so statist as to require a license for the mere offering of a (non-legal) opinion. So I think I’ll go ahead and pass on the “huge disclaimer.”
I apologize for the tone of this post but to tell you the truth, you are coming across as extremely condescending, and I’m not really in the mood for it.
Tim,
I meet with professionals all of the time to put our heads together and review market trends.
Since you are not in the industry, have never owned real estate as far as I know, and are giving real estate advices to a large number of consumers on a daily basis, I think it odd that you have no passion to expand your knowledge on the subject.
If it is condescending to suggest that a 16 plus year veteran in the business might know a little bit more about real estate than you, I’d say your ego is inflated beyond your experience.
Meet with some other agents, if you like. But get the benefit of some real info beyond just the stats, if you are going to give advices to people buying or who just purchased real estate.
Talking about stats is one thing. Giving real estate advice borders on practicing without a license.
Oops, forgot this wasn’t my “article”. Sorry Jon. I saw advices to someone who bought a condo in Issaquah over at Seattle Bubble that made my head spin. Way off base.
Guessing at stats is one thing. Giving people real estate advices is another.
Ardell-
You have my full authorization (hopefully this isn’t legally binding
) to answer on my behalf (especially while I am gone)
YOU GO GIRL!!!
If it is condescending to suggest that a 16 plus year veteran in the business might know a little bit more about real estate than you, I’d say your ego is inflated beyond your experience.
Go back and read what you said in comment #4. You didn’t extend a general offer to teach me “a little more about real estate.” You offered specifically to teach me how to “read the stats.” Since I had just linked to the NWMLS recap, it is a fair assumption that these were the stats you were referring to.
What is condescending is implying that I don’t know how to read a simple spreadsheet. I readily admit that there is much about real estate that I have yet to learn. Why else would I read RCG? It’s certainly not because I enjoy having these kind of arguments.
Also, I have to take issue with your assertion that I am “giving real estate advices to a large number of consumers on a daily basis.” In fact I rarely give “advice” on my blog. The vast majority of what I post is data analysis and commentary. There are not daily posts of me telling people “don’t buy a home” or “stay away from realtors!” It’s not a real estate advice blog, it’s a real estate “news and discussion” blog.
Dang it, that first line was supposed to be italicized, as it’s a quote. It showed as italicized in the preview. That seems like a bug.
Tim, you are giving real estate advice on your blog.
Selected quotes from today’s Inman interview with The Tim. I selected only comments that Tim says about himself.
http://www.inman.com/inmannews.aspx?ID=62226
“Also, I do not claim to be an expert on issues of real estate or economics, and I have never received formal training nor held a job in either of those fields.”
“an ‘amateur enthusiast’”
“I definitely believe that I am qualified to make predictions and assertions regarding the local housing market.”
“I do not have a “background” in real estate or economics. My formal schooling and career experience is in the field of electrical engineering. As someone with a very analytical mind, able to seek out and process data, I feel that I have built a fairly complete picture of the local real estate market.”
“I really do not feel that I am in a position to make assertions about markets outside of Seattle.”
“my definition is simple”
“I can’t really say whether we still are or not, [inflating]”
Tim,
Said with compassion, it is extremely difficult to come up with a simple theory in any field. Most proposed theories start out complex and work their way up to simple. If you have discovered a new proposed theory, I highly encourage you to send your bubble theory data to the Harvard Center for Joint Studies on Housing.
http://www.jchs.harvard.edu/
You will be doing the world an incredible favor by having your work analyzed by people who are way smarter than any of us are in these matters.
If you want to start local, here’s a link to the Wash Center for RE Research over in Pullman. With all honesty, I encourage you to share your simple proposed theory with their group. Here is their web link.
http://www.cbe.wsu.edu/~wcrer/
They might be able to help you by making your proposed theory richer, so you can learn even more about real estate analytics. That is, if you’re open to learning from people who know more than you do.
Not everyone is.
Are you?
If so, I highly recommend the coffee with Ardell.
Ardell,
I really don’t understand your complaint with The Tim. He said that sales are falling in the PNW, which is true.
You responded that prices are not falling – true (for now), but irrelevant to The Tim’s statement.
You are tearing down an argument that he never made. Also, while we are on the subject, you were very condescending – delightfully so, I might add.
Anyone who visits The Tim’s blog can readily tell that he is not a RE professional. Anyone that confuses The Tim for a licensed professional is an idiot.
The subject matter of a bubble in PNW real estate is facinating to everyone on the forum, otherwise they would be at the Anna Nicole Smith forum.
It doesn’t take much of an egghead to read a spreadsheet. It takes a true “professional” to make the spreadsheet say what it isn’t saying. If he passes on that object lesson, I can certainly understand why.
While we are on the subject of math, advice, and being a professional, I wonder how many people have heard your explanation on what happens to the value of a debt based asset as interest rates rise from historic lows? How many people have heard your professional analysis of what the absolute disembowelment of the subprime lending sector means for the entire real estate pyramid? I am sure that your loyal customer base is fully aware how the “bottom” is in concerning the RE market (even though it never went down), when the NAR states that affordability is still at historic lows.
Answers to questions like these are available in great detail at The Tim’s forum. I never hear them discussed on pro-real estate blogs. All I ever hear is how listening to people like The Tim, or his regular contributers, is going to make consumers miss their window of buying opportunity.
It should come as no shock that the “professionals” have the most difficult time offering advice which is counter to their economic well being. At the same time, people that are not teathered to the REIC might have a clear perspective on just how all the anti-bubble talk is just a bunch of self-serving twaddle.
Question for all of you RE professionals…
Is it against the law to offer advice in matters related to real estate if you do not hold a license?
I can understand that it is against the law to masquerade as a licensed RE professional when giving the advice, but it would seem to me that an electrical engineer, small business owner, or airline pilot may comment on matters of their choosing under the protection of the First Amendment to the US Constitution.
If I notice that someone is dry, red, hot, and it is July in Dallas, do I need to be a licensed physician to say “you are probably dehydrated, go drink some water and sit in the airconditioning?”
If I notice that a company has not filed their 10Q for some time, their inventory is building, their customers are reporting horrible results, and their executives are selling stock at record number, do I need to be a licensed financial advisor to say that it might be a good time to sell that stock?
Jillayne Schlicke said:
Tim, you are giving real estate advice on your blog.
Even though I completely disagree with your statment, Jillyane, (having followed and participated in Tim’s blog for the past year) I find it hilarious that you are so upset about this–the fact that (gasp) somebody would actually seek RE advice from a “non-profesional” (oh, the horror) seems so threatening to you. Any RE ‘professional’ (and after spending 6 years in engineering school, I take issue with that moniker as well, but that’s for another time) has a VESTED INTEREST in making a sale, as that’s how they make a living. How in the world can somebody who is trying to make their living TRANSACTING (buying or selling), be seen as an impartial source of information on what they are trying to transact?
Tell me this, can you even fathom in your mind, Joe Blow walking onto a car lot and having a salesperson try to talk them OUT of buying a car? Ain’t gonna happen! Why? See above . . . If that salesperson is good, they’re going to work every angle (no money down, creative financing, cash back, etc, darn these all seem really familiar for some reason) to see Meester Joe driving off that lot in a car–any car, regardless of whether the car, or the ‘deal’, is even in Joe’s best interest (and after talking to real people I know about the financial particulars of their car purchases, I just have to walk away and shake my head, thanking God that I don’t sell cars for a living.
So, what’s a person to do, if they want objective, unbiased information about purchasing something, like a house, which is the largest purchase by several orders of magnitude, that any person is ever going to make in their entire life? Go to somebody whose living is made by transacting houses? Read the RE section of the Sunday paper? Talk to lending agencies who, again, are primarily interested in maximizing transactions? Read those bulk-mail flyers that start out with “the house down the street from you just sold for $XXX,XXX?
Hmmm, well, I don’t know, but I’d rather go seek out information from somebody who has nothing to lose or gain from giving me the straight scoop and in no way benefits financially from their advice, er excuse me, their opinion. Enter the blogosphere to the rescue! Oh but wait! Not just any blog, as some blogs are run by people who have a financial interest in . . . uh, well we’ve already covered that, haven’t we?
I will grant you that some of the RE bubble blogs are just as biased about the presence of a bubble as all of you RE people are about the absence of one. But I will say that most of the bubble-bloggers have nothing to gain financially by their opinion (unless you count ad revenue from their websites), and yes, there are probably a few that are bitter about missing out on their change to make a quick buck in RE.
And Tim, well, he’s certainly expressed his opinions on his blog (that’s what a blog is for, right? Personal expression?), in addition to as much statistical and factual information about the local RE market as he can get his hands on. He doesn’t stand to gain or lose (financially) by his interpretation of the data, and he does his best to analyze the data and present it in a clear and meaningful way, and then to facilitate discussion thereof. This is what any analytical person is going to do–try to separate the fact from fiction, reality from the ’spin’. RE ‘professionals’ don’t do this (vested interest), builders don’t (vested interest), the Sunday Times/PI doesn’t do it (vested interest, too much RE sales/builder/developer revenue), mortgage brokers don’t do it (vested interest), car salespersons don’t either (no vested interest, but they’re just too busy trying to sell you a car).
What I found simply fascinating about the series of Inman interviews with the bubbler bloggers is that for the most part, they all had the same or very similar answers to the exact same questions. That smells like ‘THE TRUTH’ to me–hallelujah!
I may have been a bit premature with my whole analysis of the First Amendment. After all, I am not a licensed attorney with the Washington Bar Association.
I am a licensed professional. My license allows me to operate heavy, large, jet turbine powered aircraft that haul passengers and cargo for money. I can do so in any weather condition, allowed by the FAA.
If one of my passengers notices that we have a starboard engine fire, and we are leaking fuel at a large rate out the wing, and says that we might want to land in Salt Lake City, rather than press on to Chicago, I’m not going to freak out and report them to the FAA for pretending to be a pilot.
My guess is all this talk of how offering advice on a blog is tantamount to practicing without a license is just a cabal of “professionals” trying to quash dissent, and protecting their income stream.
Sad. Very sad.
One thing is for sure. RE professionals have experience and perhaps access to information that the rest of us do not. Maybe Ardell thinks The Tim is on to something…
She doesn’t provide facts and data. Instead she has resorted to fear tactics and condescension. When his argument was irrefutable, she made up her own false argument for The Tim so she could refute it.
I’ve learned a lot from you reading RCG Ardell, thanks. But gosh give the guy a break.
Question to real estate agents:
Do you walk into a car show room and says, “I want to pay sticker price.” ? Probably not.
Do you not do your own research, talk to people, review reports, etc about the car/dealership before making a car purchase? Or do you just trust everything the experienced and professional car sales people tell you?
Hi redmondjp
I am not upset at all about anything Eula wrote.
I find fascinating that The Tim went away for a few hours earlier tonight, blogged about his exchange with Ardell on his own blog, which I read, and then all of a sudden all kinds of comments appear out of nowhere defending The Tim over here on RCG.
This doesn’t bother me. It’s just interesting.
RedmondJP, usually what people do is they try to gather lots of information and then sometimes they ask people who they respect and trust. Friends, family, co-workers, and so forth. Then they make a decision to take a step towards buying a home. I really like your analogy about buying a car. It’s a good one.
It sounds like you’re comparing real estate agents to car salesmen, a comparison that they don’t like. I’m not a real estate agent.
What a consumer needs is someone who has the duty to put his or her interests above his or her own interest, and I do hear this in your comment #17. We’ve debated fiduciary duties many times here on RCG. There are many real estate agents who DO conduct their business in this manner, whether or not they are required to.
Hi Eula,
You’re funny. And I’m saying that in a nice way.
From your comment #I16 [If I notice that someone is dry, red, hot, and it is July in Dallas, do I need to be a licensed physician to say “you are probably dehydrated, go drink some water and sit in the airconditioning?”]
No, but that person might have needed gatorade instead of water, and getting up and walking into a cool room might make him or her faint, by following your advice. Or maybe he or she is just a sunburned, red-headed, “hottie” that has no idea why you just told him or her to go drink some water.
On The Tim’s blog, he clearly is giving opinions and advice to consumers about buying and selling real estate where the consequences are much higher. As Sponge Bob would say, “good luck with that.”
I just asked to have coffee with him. Second time I’ve asked him to meet me for a cup of coffee. Even offered to buy the coffee.
Bloggers meet all of the time. In fact when we travel, we try to hook up with fellow bloggers as much as we can. Compare notes. Talked with a guy in Cape Cod on the phone the other day. I didn’t agree with his “taking back the mls” philosophy, but we enjoyed the exchange and both got some insight into how the other thinks.
I question a sincere interest to expand knowledge, if a person only wants to look at spreadsheets, and not introduce any real information about real property, and just crank out numbers.
It is a misnomer that I would make any more or less money in changing markets. I started in one of the worst markets in history. I’ve never seen a time when no one is buying or selling real estate. Why does it matter if it is a bad market or a good market to a real estate agent? Are you suggesting there will come a time when no one wants to buy or sell a house?
This is the second time I’ve asked to meet “The Tim” for coffee. We live pretty close to one another. We could meet halfway at the Starbucks in Juanita. A five minute drive for each of us. If someone is really that interested in real estate, you’d think they’d drive five minutes to have coffee with a “fellow real esate blogger.”
But I’m out of town next week…so it can wait, again.
Eleua,
“It doesn’t take much of an egghead to read a spreadsheet. It takes a true “professional” to make the spreadsheet say what it isn’t saying.”
I LIKE that!
I would just like to hear Tim admit, just once, that had he bought anything the day he started the bubble blog, he’d probably have $80,000 to show for it. There’s a condo right near him right now that was bought in 2005 for $140,000 or so selling today for $220,000 or so.
Just once I’d like him to say, “Gee, maybe I should have jumped in the market THEN instead of waiting for “a bubble to burst”. Or maybe, “Hey everyone who I didn’t scare into not buying when I started this blog, good for you! You all did very well indeed!”
Woodinville,
I see no one selling for less than they paid for a property in this area. I hear builders begging for the opportunity to purchase a piece of land.
A one bedroom condo across from Microsoft has had a 65% increase since the bubble blog started. I think 65% is a phenomenal return. Where’s the comment that says, “Hey! I could have afforded a one bedroom condo back then and I could sel lit now and walk away with the equivalent of a year’s salary!
Let’s add all of the gains in real estate in King County, since the day the Bubble Blog started. What would THAT add up to? That’s a spreadsheet I’d like to see. Now that number would be mindboggling and a REAL truth.
I would like to know if any of the visiting bubble bloggers who are reading and commenting will hire a real estate agent when you’re ready to buy or sell your home, or if you’re planning on doing everything by yourself. (Even if you’re not planning on buying or selling until several years from now.)
I honestly am curious.
Thanks for sharing. I’ll be back online in the morning to read your comments.
Jon,
No fair writing “bubble people bait” and then running off to Maui
“…defending The Tim …”
Is that bad? I take Ardell to say that people shouldn’t talk (blog) about the real estate market unless they are licensed RE professionals. In a way we are defending ourselves. As potential buyers and sellers of homes (to live in, not invest in), we need this discussion. Why would real estate professionals be against it? If the real estate market is robust, no bubble blog in the world will bring it down. And Ardell will be selling so many homes that she’ll have no reason to rant and rave (and offer people statistics training) on a real estate blog.
Jillayne,
I guess my question surrounds the legality of what happens on bubble oriented blogs. Is it against the law to opine, advise, and bloviate about real estate transactions on a blog dedicated to exploring that topic?
I have no problem for getting Johnny Law after someone claiming to be a licensed RE professional, charging money, and dispensing advice when they are not licensed to do so.
I have a big problem with veiled threats from RE professionals telling some electrical engineer that he is coming close to practicing without a license, just for giving his opinion, and his opinion just happens to be contrary to their personal and professional ambitions. See posts #7, 9, 10 and possibly #14.
I do more opining on SB than the proprietor, so bring it on. Anyone who thinks that someone who posts with an avatar of an insane metal head in a patent leather straight jacket is a serious, licensed professional needs professional help of another sort and probably shouldn’t be out in public unsupervised and off their meds.
When RE professionals start acting like professionals, rather than used car salesmen or pawn shop brokers, I’ll take them seriously. Until then, my views of RE professionals are best summed up at:
http://clearcutbainbridge.blogspot.com/2006/04/math-for-real-estate-professionals.html
Enjoy your evening. All the best,
E
Ardell,
Personally, I think that you are the most credible Realtor that I have seen on any of the blogs so far. You present your POV in an honest fashion, and I have not seen you say anything outlandish yet.
However, today on this blog I see Tim say that sales are down in the PNW. And then you respond by talking about prices. I don’t think that you are dense, so now I am thinking that you are trying to mislead people.
Maybe you confused prices for sales in Tim’s comment, but when he clarified you did not apologize, and you did not state whether he was right or wrong. The link he gave shows pending and closed sales clearly down for Jan 07. You would do a lot to regain credibility by admitting that Tim was right here.
Jill,
Of course I will hire a real estate agent when I am ready to sell/buy. They are only one piece of the puzzle though. I’ll rely on a real estate agent, a lender, a home inspector, an escrow agent, a handy man, and a mover. But above all, I’ll rely on my brain.
“Trust, but verify.”
-Ronald Reagan
Regards,
Wood
Ardell,
What’s your point? It doesn’t matter if Tim could have made $80K or $380K. If he thinks the market is insane and overvalued, does the fact that he could look back and see his lost opportunity make his assessment invalid?
I may drive drunk 100 times and never get pulled over by the KC sheriff. Does that mean that it is prudent to get liquored up and drive? What happens when I do get pulled over, or what happens when I become a quad because I slammed my car into a telephone pole? It is all about risk management – a topic that is probably completely foreign to most people engaging in RE transactions of late.
Right now, the market is validating the view that RE is a good investment. That may not be true in 6 months. It is a matter of risk allocation. The market is risky, and the rewards are not there for many people. For some, this is perfectly sane.
The thing I find interesting is the RE bulls only talk about price action, and they avoid discussing fundamentals like hippies avoid good hygiene. Bears prefer to discuss economic fundamentals, historical patterns, and risk.
Not long ago, the NAZ validated the view that you could buy any POS stock, and it would double every 9 months. Just about everyone that believed that market message was ruined. People that bought did not consider fundamentals, but only looked to price action, and the advice of financial professionals, who made lots of money selling overpriced pieces of crapstock.com.
The bears were kicked in the teeth every day until mid ‘00. The view that fundamentals eventually trump rearward looking price action was validated in a big way. History is going to repeat this in the housing market (except Seattle, as we are just TOOOOOOOO special).
Now, I am certain that you see absolutely no connection between what happened in the turn of the century NAZ and today’s housing market. Most people don’t. Speculative markets are not as much about commodity allocation as they are about human nature. Human nature has not changed one bit in thousands of years. The outcome of this is already set in stone – we are just awaiting the timing.
Good luck,
E
Ardell,
If the market is currently validating your point of view, does that make it right?
If the market turns, and now your POV is contrary to the market, does that make it wrong?
How can the same thing be both right and wrong? How do you break the tie?
The market told us that a kilo of gold was a bad investment, but at the same time, Enron, Pets.com, Juniper Networks, and telecom stocks were the place to be.
One year later, all those stocks were destroyed, and precious metals were doubling every 15 months. At what time was it prudent to own gold and not own Pets.com? What was the difference between that point in time and 3 months prior? How about 3 months prior to that?
If your answer relies on price action, then that answers everything. If your answer relies on fundamentals, then Pets.com was never a good investment, and gold was a good one.
When prices of homes are 10-15x income, and 250% of rental value, you gotta think something is outta whack.
The more outta whack something is, the more violent it tends to move to get back into whack.
E
Would I use a RE professional when I go to buy a house?
Perhaps for clericial purposes, but not for any market based advice. I cut the cord with the Wall Street cabal back in ‘98, and it has been a real blessing. I don’t need to pay someone big bucks to have them sell me stuff THEY don’t want. Their research is pretty shoddy.
Certain things are necessary evils. It is best to minimize or eliminate your exposure to those things.
“I see no one selling for less than they paid for a property in this area. ”
Past performance does not guarantee future results.
“Let’s add all of the gains in real estate in King County, since the day the Bubble Blog started. What would THAT add up to? That’s a spreadsheet I’d like to see. Now that number would be mindboggling and a REAL truth. ”
Those are the same prices that are way out of line with the fundamentals.
I did buy in 2000. I’m almost free and clear today (6.5 years left). I don’t want to see a bubble burst. But the foundation that my equity is resting upon seems shaky. I’m not a real estate expert, but it seems to me that the mechanism of all of the recent appreciation you mention is as (if not more) important to understand as (than) the numbers themselves. Is it market fundamentals? Or is it creative financing during a time of negative savings rates and record household debt and stagnant incomes and low rent to home values?
Regards,
WoodinvilleHomeowner
Ardell said:
“Hey everyone who I didn’t scare into not buying when I started this blog, good for you! You all did very well indeed!”
This is in reference to The Tim’s blog at Seattle Bubble. Given her posts in #7, 9, & 10, it is reasonable to infer that her advice is for people to buy homes and get in on a great investment. Giving advice to the contrary is tantamount to practicing without a license.
If that is the case (and it is), then as long as the market continues skyward, Ardell is giving good advice, and The Tim is leading people to financial impotence.
It then follows that if the market turns, The Tim would be our hero, as he deflected many away from digging their own financial coffin by buying an overpriced PNW house. It also follows that anyone that advised anyone to buy a house in this market will have participated in their financial ruin. This would be especially egregious if they were a licensed professional and reaped a financial reward for sewing the seeds of financial destruction in their clients.
Better hope that market never turns. Perhaps this is where all the angst against the Real Estate Bubble Complex is coming from.
Wow…I didn’t realize that you guys fought back and forth so much inbetween the blogs.
I’ll put my money on the EE and the Pilot…I’m sure that they didn’t get their degrees from University of Phoenix like Jillayne…and I have spoken with Ardell on the phone and well…
Hi EconE,
I’m not interested in fighting, and I’m definitely not fighting here. I do find the psychology of blogging fascinating. It’s interesting how Ardell and Tim have gone on to do other things last night and this morning and how Tim’s fans are over here now defending him, and how others might choose to view this as a war and then take sides. Fascinating.
A.A. Edmonds CC
B.S. UoPhx
M.A. Antioch U, Seattle. Set to finish this one on December and then I will move on to a Ph.D.
UoPhx is a great option for working adults who want to finish a degree but can’t attend traditional classes during the day because they work full time. The guy who started UoPhx is now a millionaire. He was one of the first to start a for-profit academic institute.
EconE -
Excellent point. In my work as a recruiter I’ve noticed that my clients pass on people with UoPhx degrees routinely and with extreme prejudice.
I have a friend who finished his masters degree about 5 months ago at UoPhx who is still unemployed, even in this market. He’s currently selling an MLM product door to door while working on getting his real estate license.
What a wasted opportunity to have a real debate.
All I can say is attack the message, not the messenger.
Stop focusing on people’s background, education or experience, or lack-thereof, and discuss the very valid points that both sides bring to the table.
Ardell – instead of trying to rely on your (I’m sure) considerable charm over a cup of coffee, why don’t you discuss the points that Tim makes in the comment?
Bubble-meisters – On the one hand, we discuss the lack of transparency that we see from the numbers coming out of the MLS and the like, and then we dismiss someone’s argument that offers an inside look on where those numbers may be insufficient. That’s sorta silly.
#40.
” The guy who started UoPhx is now a millionaire. He was one of the first to start a for-profit academic institute.”
So, I guess I have followed the right strategy, which is not to go to the UoPhx, but rather to go to the school that the guy who started UoPhx went to (Reed).
Still working on the millionaire part of the equation though…
Biliruben:
What valid points are they bringing to the table?
Eleua,
“Right now, the market is validating the view that RE is a good investment. That may not be true in 6 months.”
My “complaint” if you will, is that over a very long period of time, the message doesn’t seem to change regardless of realities in the marketplace. Clearly if the day comes when someone buys a property based on my advices, and looks back and says that wasn’t good advice, I would have to fess up. But that has not happened to me in 16 plus years. Because in some markets you need to be more cautious, and I change my advices accordingly.
Clearly hindsight has 20/20 vision. All I’m asking is for someone to “fess up” and say, “Jeez, we may have done an injustice to those people we scared from buying when we started, who could have seen a 65% return since that time.” Some accountability.
I would be more than happy to discuss the stats of the trees. Individual pockets of value. Where is appreciation 8% vs. 35% in a year? But to lump all of the stats together and only look at that one portion that might support one simple chicken little theory, is not a valid analysis of the available statistics.
I find when you meet someone, your onlne communication improves. When you can “consider the source” better, having met the source, the communications become of more value. Most bloggers at least pick up the phone and put some reality into the online conversations. Never, ever had anyone except Tim refuse to do so.
Redmondjp,
“He doesn’t stand to gain or lose (financially) by his interpretation of the data”
You and I had some “discussions” that were real estate specific. Did you feel they were “tainted” by self interest because I am a real estate agent? Be honest. I didn’t think so, but I’m not the best judge, of course.
I get the general impression that Tim and others would gain if the market would “come down to their level”. So creating a fear of buying, is in fact, self-serving. Not intentionally necessarily, but if the “complaint” is that housing prices are just to high for them, doesn’t creating a fear of buying fulfill a self serving purpose for them?
I look at Forbes and Moody’s…that’s unbiased…calls for no downturn in Seattle. That’s unbiased. Not someone who may want to buy real estate in the future at lower prices.
Jon,
I can understand where you are coming from in regards to this subject. I agree with your developer Mike from Michigan. I can also find it to be believable that sales are down in 40 states.
Michigan is dealing with a multitude of factors one being as Mike from your article has pointed out and that being unemployment.
I have posted on this subject just as of early this morning at http://apellatabletalk.spaces.live.com and I hope that it supports what the developer is bringing to mind.
After reading the post I am so glad that I have found this community, not only is it educational and entertaining it is logical talk.
I am a licensed real estate appraiser in the State of Michigan so I will not comment on your licensing or consulting and/or giving advice as it pertains to the State of Washington, but I will follow the subject closely.
I do have a question, does the sales price data that you are referring to in your post reflect seller or buyer concessions?
Michigan data does not include that as a factor and most mls reports do not factor in such data.
Sales prices and sales volume are two things that very at different times of the year for different reasons and as such I always try to look at the whole picture, but that is also with any set of numbers rather they refer to the stock market or sports tallies.
I did find Jillayne post 23 and 28 to be great topics for future articles
In number 23 the quote
It sounds like you’re comparing real estate agents to car salesmen, a comparison that they don’t like. I’m not a real estate agent” hits on perception of consumers
And
In number 28 in regards to use of a real estate agent for selling or buying
Touches on consumer perception, but is also a great marketing topic too.
Well keep up the great work I can not wait to see what the next discussion will be!
Forbes, unbiased? You are joking, right?
I you want something that is closer to unbiased, I suggest the Economist.
Question: If I stated that we had a national housing bubble in 2002 and prices continued to increase until 2006, was I wrong in 2002?
Answer: No.
Explanation: Identifying a housing bubble, a situation where speculation-driven prices are not supported by fundamentals (e.g. rents and income), is one thing. Predicting when this bubble will collapse is something else. And as Shiller, the Economist editorial staff and many others have said repeatedly, it is very difficult to predict the collapse of a bubble as bubbles are inherently irrational.
However, bubbles do eventually collapse… the only question is when. ALL bubbles collapse. ALWAYS. And the longer they continue, the worse the collapse will be. This particular bubble, looking at the Case-Shiller Index, is far worse than anything we’ve experienced before in US residential real estate (and probably globally as well). Consequently the correction will be particularly severe.
Given that the downturn has already started in most markets, it is only a matter of time until all overvalued markets face a correction. Seattle and the PNW started up after many CA markets, so it is not surprising that the PNW is following the CA markets down. How long will it take for this to play out? I haven’t the faintest idea. Nor does anyone else. But I can predict where we will end up: below the long term Case-Shiller trend line (markets always overcorrect on the down side of a bubble).
Fundamentals vs. trends. Remember when all sorts of Wall Street Analysts mocked Warren Buffet for pulling out of the stock market in 1998-99? Gosh, he sure gave up a lot of profit as the market continued it’s upward march for another year or so. I wonder why people call him the sage of Omaha?
Real Estate Professionals… will eventually be hired on a flat fee basis to help with contractual agreements, show homes, etc… The fallout from this crash will provide the necessary public animosity to finally make this necessary change a reality. Would I personally take advice from a Real Estate agent? Not in a million years. They may very well know something about a market, but the financial incentives are structured to discourage an agent from acting in my best interest as a buyer (or seller for that matter).
“Clearly hindsight has 20/20 vision. All I’m asking is for someone to “fess up” and say, “Jeez, we may have done an injustice to those people we scared from buying when we started, who could have seen a 65% return since that time.” Some accountability.”
Ardell,
I’ll “fess up”. I have benefited from the type of return you mention. But does this mean I won’t lose it in the next month, year, or 5 years? I, for one, would prefer a solid 30% that’s based on market fundamentals (one that grows at least near historical rates) than a 65% based on speculation and loose lending. Please explain why this does not make sense to you?
Wood’owner
Hi Mark,
Regarding comment #41 about recruiters passing up resumes from UoPhx grads, do you have any data available that shows the reason companies reject resumes is solely based on their UoPhx degree or is this just your own opinion? Would your viewpoint change if you took in more data, namely the thousands of UoPhx alums gainfully employed?
Ardell,
Your point is valid, provided you don’t look at history of fundamentals.
The NAZ bubble started in ‘95 and in earnest in ‘97. If I was telling people that had no clue what they were doing that they were taking on a huge amount of risk in ‘98, was I wrong to do so? It was almost 2 years until the top. There was quite a bit of money left to be made speculating in crapstock.com.
YES, people have made money by hitting the “I BELIEVE” button and buying real estate. There is probably still money left out there. That is not my point, nor has it ever been.
My point is (now pay attention, as there will be a quiz) there is a tremendous amount of risk involved in what people are doing with residential real estate. This risk outweighs the potential rewards at this time. When the NAR states that affordability is at historic lows, one has to wonder how they can use that info and call a bottom.
I wonder how many of your clients actually take a good hard look at risk. I’m not talking the standard “past performance is no indicator of future results” boilerplate, but serious cogitating over what happens if they can’t make the payments on an upside down mortgage. How many of your clients are aware of the gravity surrounding the implosion of the engine of the latest housing boom (subprime lending)?
I distinctly remember conversations with people that were buying YHOO, AMZN, GLW, and JNPR in the last stock boom. It was all about price action, and not about risk. When asked what they would do if their positions were cut in half, 100% said they would use the opportunity to buy more. That is also the mindset of today’s RE buyers (at least the ones that won’t give the keys to the bank and walk away).
If you want to know why my message doesn’t change in the face of the market reality, is the risk/reward continues to skew toward insanity. If the risk changed dramatically, I would reevaluate.
If you are giving advice strictly on price action, I wonder why you need a license to do so. Zippy the Wonder Chimp can look at a chart and extrapolate into the future. That takes absolutely no talent whatsoever or expertise of any kind.
You talk of how you would show caution in a risky market, yet there is not one hint of caution in any of your postings. This is the riskiest market in our lifetime. All the caution is coming from the bears.
So, before you respond, please ask yourself:
Q: What is Eleua’s main beef with today’s real estate market?
a) He is bitter that he missed out
b) He hates renting 2 acres on the beach for 1/3 of what it would cost to PITI.
c) He thinks there is no money to be made speculating in RE.
d) He thinks home ownership is for sissies.
e) He thinks the risk (both probability and magnitude) is far too great for the amount of reward.
I breathlessly await your response.
Eleua
Providing a “center” for RE professionals since 2006…
Bubble bloggers,
From what I gather, it looks like your biggest concern with the real estate industry (and you have many, but the biggest concern coming out of this dialogue) is that real estate industry analysts take the data and spin the analysis to feed their own interests.
However, bubble bloggers are doing the same thing that they accuse real estate industry analysts of doing: taking the data and adding subjective analysis to feed their own interests.
If you don’t agree with me, I’d love to read a longer article on Seattle Bubble about this, and I’ll gladly join you over there for a fun debate.
You may have many, many concerns about the real estate industry. Predatory lending, lenders hiring people with zero knowledge and putting them to work as loan officers, increasing the minimum level of education for real estate agents, high title insurance premiums v. low claims. Many people in the real estate industry agree with you on these topics.
What I’ve learned after reading all these comments is that bubble bloggers have tapped into an undercurrent of consumer dissatisfaction with the industry as a whole. Now that I’ve had a chance to interact with you here on RCG, I’ll looking forward to stopping by from time to time and visiting you on Seattle Bubble.
Best Regards.
Jillayne,
We have daily “open threads” to discuss ANYTHING you want about RE.
Most conversations are pretty cordial. However, if you try to pimp any of your products or services, the conversation will degenerate to fixed bayonettes pretty quickly.
I look forward to seeing you on SB.
Hi Eleua,
LOL. Thanks for the warning. Will do!
Jillayne
Okay, on the topic of anecdotal evidence versus statistics, I have a question that is not intended at anyone directly, but may be best answered by anecdotal observations.
So, I recently moved up here from San Diego, CA, and now work for the state. The monetary compensation is, well, underwhelming, and unless the state actually decides to put more money into education, its not looking to improve anytime soon.
When I interviewed in March 2006, I started looking at homes (on the internet) from Green Lake and Maple Leaf all the way around Bothell Way to Bothell (where my husband and I work). Part of my decision to move up here was based on what I could buy for between $400-$500k price range. Even though property was moving fast, it seemed like there were always a collection of good, livable homes available. Now I’m here and earnestly looking around, and it seems like “all the good ones” are gone, despite the increase in inventory. Raising the price range up to (strangled groan….) $550k doesn’t necessarily bring quality properties back in either. So, what is the take on this? Is the collection of homes available decreasing in quality, or am I just getting much pickier now that I am actually living here (and have a personal look at neighborhoods and what a split level home really feels like inside)?
If it is truly the former, it may be the fact that other buyers are just as picky (or getting pickier?) and letting the ‘dog’ inventory build. The same thing happened in San Diego, and then it truly did morph into a buyers market….most of it filled with overpriced dog properties. Quality properties still moved, albiet a little bit slower…
“From what I gather, it looks like your biggest concern with the real estate industry (and you have many, but the biggest concern coming out of this dialogue) is that real estate industry analysts take the data and spin the analysis to feed their own interests.”
No. I would say that our more fundamental concern is that Realtors (TM) and mortgage bankers make their money on transaction commissions.
Therefore it is always “a great time to buy and sell real estate”. Therefore, my two-year old could get a jumbo 80/20 negative amortization loan to buy a luxury downtown condo $200k over comps. Therefore, an whole lot of folks are going to get hurt. And even those of us smart enough not to get caught up in the hype are probably going to pay taxes to help bail out Fannie Mae and the financial system when this all comes crashing down.
It is all about incentives, and the incentives are all wrong.
Holy cow did this ever get out of hand.
All I was trying to do was point out the simple fact that sales are in fact declining in the Northwest, contrary to the title of this post.
I certainly didn’t mean to incite this kind of quarrel. I’m sorry I even bothered.
Eleua,
Funniest line: “My point is (now pay attention, as there will be a quiz)”
Quiz Answer: e
Worthiest Question: You talk of how you would show caution in a risky market, yet there is not one hint of caution in any of your postings.
Caution is a case by case scenario. Family wants to buy a home with three kids and a dog. They have tons of money and other investments. Caution to them only involved the weaknesses in the property they wanted to buy. Not market general long term pricing type cautions. I asked, “How long do you plan to live here?” Answer: “Until my 2 year old graduates from high school”. I say, well none of these will be the easiest to sell (hence why they are “for sale”, so as long as it’s a long term purchase, and you want it, OK.
Not every person has the same risk factor. Did have some people in from out of town who wanted to buy an investment property. Short hold. Rent for 2-3 years. Not my normal type of client. I recommended two things. One near Microsoft and Redmond Town Center (not on market – pocket listing) or maybe a towhnome in Seattle for low maintenance and no major improvements needed. Pointed out the negative cash flow on each.
Everyone is different, Eleua. There is no “one size fits all caution” that can become a blog post. So maybe the area I know that has had 35% appreciation each year for two years will fall down to 25%…still good. Those that only went up 8% or are obsolete styles of homes or poor locations…different cautions, but still good choices for people who are just worried about home and family. They can still afford those.
I don’t want to teach Tim how to do what he does…I want to teach him how to do what he doesn’t do, that is more pertinent to real, real estate advices. I want to teach him how to take the stats down to a more relevant level.
Woodinville Homeowner,
Makes sense…just a tad glass half empty. Most people don’t think too much about what their house will sell for in 5 years. And no one really knows either. Most huge losses in housing prices have come from company decisions, like what would happen if Microstoft shut down or moved to another State? Those issues would affect prices more, and created areas like Allentown, PA and Bristol after U.S. Steel waned.
“fundamentals”? Who can know when a major area employer is going to belly up or leave town? Those are the biggest risks I’ve seen.
Eastside RE Shopper,
I don’t understand why someone would select out number of sales as any kind of indicator. If I have many buyers, but nothing in inventory yet worth buying, why is that any indication of the real estate market? Inventory sucks and is low. I don’t see that as a market indicator in any way shape or form.
At least say, “Every house sold continues to sell at a huge increase over prior sales, but YOY sales are down”. Some kind of balance, instead of trying to pull out the one factor and call that significant, when it isn’t. Or at least post it with a few other significant stats for balance. Some good..some bad. But not always, always, chicken little the sky is falling bad only.
Bud,
Maybe Forbes isn’t unbiased, but they used Moody’s data and they had some cities going down, some going down further than others, and Seattle going up.
That seemed credible to me, if only because they didn’t cast a rosy picture on all areas. In fact seattle was one of the only ones they had going up. So sounded credible to me.
WAIT…I’m changing sides.
no…I’m still a firm believer in the bubble.
BUT…
there has NEVER been a better time to buy RE.
I want this bubble to grow out of control.
I have no financial interest in it….I just want to be witness to the worst depression our country has ever seen.
I might even dumb myself down enough to turn on a television so that I can SEE the sensationalism…and not just hear but WATCH the horror stories.
Popcorn anyone?
ARDELL said…
“So maybe the area I know that has had 35% appreciation each year for two years will fall down to 25%…still good.”
so why are you selling houses ??
You should be BUYING houses…there are tons of them…I’ll find ya a loan.
25% a year…man…you are gonna be a Bazillionaire!!!
Ardell,
I agree that
“Most people don’t think too much about what their house will sell for in 5 years.”
But you also said,
“Agents think about resale before they buy, not when it is time to sell.”
Yes you said this in the context of assessing a home’s weaknesses. However it’s not too far a stretch to also apply it to market weaknesses.
And by the way the glass is neither half full or half empty – it’s twice as big as it needs to be.
Thanks for your response.
Ardell,
You say the right message is “Every house sold continues to sell at a huge increase over prior sales, but YOY sales are down”. The title of this blog post we are talking over is “Housing sales fall in 40 states; but not in Northwest”.
a) The title of this blog post is not nearly as balanced as what you are suggesting people say. People are pointing out the negative because the post was not balanced. People have a tendency to point out what was missing. The pdf pointed to by Tim points out that the title of this post is not only misleading but plain wrong. If they want to make a positive point, they should say that prices are up, not sales.
b) Housing sales are down. I welcome a discussion of why this is (and I agree with you that crappy inventory is a part of things). I disagree that the number of houses on the market is the big factor. I think that the number of *quality* properties on the market is the big factor. There is plenty of overpriced crap out there right now.
I find the characterizations that both sides are making in this debate hilarious and childish. People making fun of what college somebody went to are the worst of the lot. This is asinine. When somebody is attacking the source of the information rather than discussing the information, you know that they have no argument. This is why I don’t watch talk shows on TV.
Am I a part of the bubble boosting crowd? Depends on your definition I suppose. I own a townhouse, so I stand to lose equity if the bubble pops (maybe even all of it). But what is the situation that I observe?
I make quite a bit more than average, and my salary is not enough to pay for a
(continued, looks like blog software munched on my post)
3 bedroom house in Redmond. Is it a sustainable market when above average salarymen cannot afford starter homes in the suburb that they work? I argue not. This is all the evidence I need that the market has to correct some time soon.
I think that the slowing sales are a result of this. The money is drying up. How many people can afford entry level property with 20% down right now? Or even 5% down with a fixed rate loan? If people with entry level stuff cannot sell (because nobody can afford it) then how can people with the next price tier up get people to buy?
The funny money loans, low interest rates and out of state equity locust money will be gone soon. Downward price pressure will result. I don’t think it will drop to pre-2004 levels overnight though. A lot of people will just not sell houses, so once things start going down they will go down very slowly, until housing is so cheap again (like 10 years ago around here) that everybody buys it like gangbusters and forgets that it ever went down.
Ardell,
Why don’t you teach us all how to read the stats. I wasn’t aware that a real estate license = spread sheet reading master.
But what do I know, I only took college level economics and accounting at a major division 1 college. I don’t have a real estate license, I probably can’t read a spreadsheet and/or understand market trends.
Please enlighten us all on how to read the data. What are we all missing?
EVERYONE-
Thank you all for your comments. I am heading out of town now, so I will now be signing off… aka… turning off the comments.
Jon