Let’s take out the Crystal Ball and a mountain of stats and make some predictions for 2008.
Here are my predictions for residential (not condo) sales in 2008:
16,500 will sell by year end.
3,583 sold in the first quarter (fact not prediction)
4,455 will sell in the second quarter
4,950 will sell in the third quarter
3,927 will sell in the last quarter
Sales of residential property peaked as to volume in the 1st quarter of 2006. We have been in a “volume down – prices up” cycle from the 1st quarter of 2006 through most of the 3rd quarter of 2007.
A little history regarding volume:
2001 – 22,425, 2002 – 23,921, 2003 – 28,804, 2004 – 31,091, 2005 – 32,821, 2006 – 27,816, 2007 – 23,375, 2008 prediction 16,500.
Volume started dropping in the 1st quarter of 2006, but the condo market picked up that drop to some extent until the 3rd quarter of 2007. So prices continued up as volume declined.
A little history regarding prices:
2001 – $252,000 to $269,000, 2002 – $269,000 to $277,000, 2003 – $277,000 to $300,000, 2004 – $300,000 to $328,000, 2005 – 328,000 to $389,000, 2006 – $389,000 to $439,000
last quarter of 2006 – $439,000
first quarter of 2007 – $445,000
second quarter of 2007 – $470,000
third quarter of 2007 – $469,000
fourth quarter of 2007 – $439,000
first quarter of 2008 – $435,000 (same as 3rd quarter of 2006)
Prices continued up through the 2nd quarter of 2007, continued up in the first part of the 3rd quarter and headed down in the tail end of the 3rd quarter ending at pretty flat.
My price predictions are:
$429,000 for the 2nd quarter of 2008
$400,000 for the 4th quarter of 2008
You guess the 3rd quarter.
So volume peaked in the first quarter of 2006 and prices peaked during the third quarter of 2007.
Will be interesting to see where actual compares to my predictions as we head into the 2nd quarter of 2008. If the darned sun doesn’t come out and stay out, 2nd quarter may fall short.
I think if we hit around 16,500 by year end, we will have bottomed out as to volume, but not price. I think prices will be down 15% from July of 2007 to end of December 2008. Volume will level out and prices will continue to fall.
I predict that agents will think I’ve been too tough on these market predictions and the general public will think I’ve been too soft and 5% will say I caused it all to happen 🙂
“Statistics not compiled or published by NWMLS.
Ardell, this must be the most realistic predictions I’ve seen from any real estate agent in this market. You are gaining credibility. If I choose to use an agent when I think it’s an ok time to buy you have just made the list of potential canditates.
Way to stick your neck out, Ardell. Hopefully Kary’s paying attention.
People want value from their professional, and looking forward and trying to predict what will happen with house values is the biggest value that you can get from an agent, imho.
Paying attention? It’s meaningless. Why should I pay attention. There’s no data to back any of it up. No analysis. They are just guesses–predictions is too lofty of a term.
I’ll repeat what I said in another thread. Would any of you advise anyone to invest or not invest their money based on what a real estate agent predicts? I described doing that as foolhardy in the other thread. Does anyone disagree with that assessment?
Ardell may end up being right with one or more of those numbers, but it will merely be luck.
I agree with biliruben and also think that it’s very important that I feel that the agent accurately knows and understands the current market conditions so we can use it to my advantage in the strategy and execution of the buying process. This impacts all important decisions as offer levels, relative home value, probability of better values coming along etc, etc.
“There’s no data to back any of it up.” ???? Mountains of data, Kary. I only posted some of it, but clearly there’s data to back it up.
You think I’m throwing darts at a dart board over here?
Mountains of data? You’re sounding like Marcia Clark! 🙂
Where are your employment and unemployment data? What will interest rates be? Gas prices? All those things, and many more, will affect the results.
I hope back when you were a stock broker you didn’t just look at past stock patterns to advise your clients what to buy and sell. That’s basically all you’re doing here.
No Kary, it’s not all I’m doing here. If I told you “all I’m doing here” it would fill a book. This is a blog.
Remember, I was the only one in the room who pared down the stock holdings in all of my clients’ stock portfolios the week before Black Monday back in 1987. While everyone around me was getting irate and panicked phone calls, my clients were calling to say thank you. 🙂 I switched to real estate in 1990.
tj and biliruben,
I appreciate your support. It’s not easy being me.
I would have to agree with Ardell on this one. Even just looking at something as simple as historical rent to own averages the prices of homes have a long way to come down. Has anyone read Fortune, The Wall Street Journal, etc… lately?
Did anyone see the 60 minutes episode where they interviewed Robert Schiller of Yale about the housing market? The graph of historic prices with the little people in the car going up up up the hill then teetering on the top.. where are we going they say??
Here is a link to the graph: http://www.investingintelligently.com/wp-content/uploads/2006/08/a_history_of_home_values.png
When you look at how the Seattle area has followed the other markets that have already come down off of their highs how can you NOT think that home prices will come down at LEAST 15%?
Ardell, it’s truely commendable that you have come out and posted those projections on your blog. I have heard agents privately talk about the current situation and predict that prices would fall but nobody is ready to put some numbers to back their hunch.
I would agree with tj here that you gained a lot of credibility just by being so courageous as to post such numbers that reflect the ground reality. Most agents I have seen are foolishly optimistic about the market and are more concerned about their part of the commission rather than their clients best interest.
Peter,
I think the 2nd leg, which is the affect of the mortgage markets and the 1st leg for Seattle, will be the double whammy for the rest of the Country. No one will escape that 2nd leg, and those who think the worst is behind them will have a rude awakening.
I don’t care where you are in this Country, anyone calling this point “bottom” will have to eat some words in the next 3 years.
Can people afford to pay cash for these homes? My guess is no.
Is it harder to get a loan now? My guess is yes. Do you you have a few less qualified buyers to buy homes? I’d guess less.
Supply and demand, eh?
Even if I’m wrong, it is meaningless. What is meaningful is what the majority guesses. Would you guess they have taken a “wait and see” attitude? Or would you guess they are buying homes at a break neck pace? The stats I’ve looked at ….show they aren’t.
We’ll all make our own guesses, I suppose.
Thanks for the insight on what is going on in the market, Ardell.
When I want hilarity, I go to seattlebubble. When I want an accurate snaphot of current market conditions, I come here.
You’d have a lot more credibility if you’d predicted the top, but even that would be luck. Predicting a continuing decline isn’t really doing much at all.
But again, how many of you people that agree with Ardell think that people should invest money based on the projections of a real estate agent? You’re only agreeing with her because you agree with her result, not her method. If her opinion was it was going to go up from here, I think the comments here would be different–except mine–I’d still think her predictions were meaningless.
For a buyer’s agent, it may not be quite as essential to have a good feel for where the market is trending and share that with your client. Presumably you are representing someone who is interested in buying right now, and so you go out and get them the best house for the best deal at the moment.
But when listing a house, I think it’s much more important to have a strong idea of the market trends.
If prices are trending up, then you may price it 5% high without much down-side risk other than maybe an extra mortgage payment or two, and you might catch someone who falls in love and pays your price.
If prices are trending down, as they are right now however, pricing 5% too high might be a complete disaster, as your listing goes stale and the market continues to decline, you lose buyers and your house’s value continues to deteriorate as you chase the market down.
In Seattle for example, folks who priced 5% too high last summer are looking into the maw of a 20% loss for their mistake if they continue to drop it in small increments.
In my case, I estimate my shack is losing a $1000 a week.
A nice house on the Eastside is probably losing 10 grand a month in value. If your listing agent doesn’t recognize that, they are worse than worthless to you. They are an albatross around your neck who are losing you 10s if not 100s of thousands of dollars and then asking for thousands or 10s of thousands more for their “help”, all the while saying “how was I to know?”.
You better damn well do your best to have some idea, if you are charging that kind of jack for your services. If it takes looking at employment, population increases and decreases, increases in supply, rents, incomes or whatever, just do it!
Kary, personally I don’t take anyones advice on when and how to invest. I gather objective data from different sources and make up my own mind. That said, it is important for me to see that the agent I choose to cooperate with is able to gather and analyze data to make predictions of the likely impact on current prices and the price direction in the short to midterm term future. It shows that the agent is up to date, experienced and intelligent enough to draw logical conclusions and in this type of market can put aside own wishes and interrests and not let them color the predictions. I expect no guarantees on predictions but they need to be realistic. Imo Ardell just proved that she can do this.
Say Ardell sold widgets for company X, and had been for 20 years, and knew her competition inside and out. If she comes to me and says “supply is up with increased competition, people are having trouble paying for our widgets so demand is down, and I think the market for widgets is going to be very soft for the foreseeable future,” then yes, I would sell my stock in company X. It would be insider trading quite probably, but you get the idea.
She’s an expert in widgets, knows or should know all there is to know about the widget market, and I’m paying her to tell me whether I should buy or sell stock in widgets. Who else would I listen to about the future of company X stock price?
For you Ardell: link
and for you Kary: link
“You’d have a lot more credibility if you’d predicted the top”.
I did. To the day! Look up the exact peak price day on Radarlogic for Seattle. It was 8/27/07. That was the day I took a job as broker of Brio 🙂
I told several people who only wanted to stay for a year or two to rent and not buy last year. I also told two of my clients to sell who had bought properties through me and had substantial gains and two years ownership so no capital gain. They didn’t. But I told them they should and still tell them they should.
I concentrated on sellers, and buyers who had long term plans to stay in their homes. Then I took a job for six months as a Broker to see which way the tide was turning without needing to convince people one way or the other. I helped agents get their listings sold while at Brio. Concentrated on sellers.
It doesn’t matter though, does it Kary? I could get the people over here who I told to rent and not buy and it could point to the exact day we hit peak, and you’d still say it was “luck”, wouldn’t you?
“For a buyer’s agent, it may not be quite as essential to have a good feel for where the market is trending and share that with your client.”
It’s very important, Biliruben. Especially when you feel or they know that they will not be staying for more than a year or two.
True dat, Ardell. I’m not saying it’s not important, but if you have a buyer who is set on buying, knowing the direction of the market isn’t as essential as using that information in pricing a home correctly. Regardless of how much staging you do and how much lipstick you stick on a house, price matters the most.
Bili:
“You better damn well do your best to have some idea, if you are charging that kind of jack for your services. If it takes looking at employment, population increases and decreases, increases in supply, rents, incomes or whatever, just do it!”
Methinks Bili just may have more than a passing interest in listing agents these days! 😉
Ardell, you didn’t say — or at least I missed it. Are these numbers and predictions for KC?
Personally, I don’t follow large areas all that closely. I suppose they give us a regional trend and stuff to write about, but don’t help a specific buyer or seller all that much.
Currently, what I’m seeing is that this market is all over the board. Seller’s markets in certain price ranges in Seattle and the Eastside. The upper end, especially rural, is very tough buyer’s market.
When inventory absorbs and dips under 3 months supply, prices generally rise. There is a delay on prices going down AND going up as supply changes.
Lack of upper end sales may affect both median and mean, especially in areas with sellers markets in the low end. The Eastside is particularly vulnerable to this. In Redmond, for instance, inventory in the lower price range is absorbing, however in the rural upper end….well….not so good. I think we’ll see the low end appreciate, but with no upper end support, medians and means will fall statistically.
Core area markets are behaving much differently than the outlying areas.
Bili is correct when he says it’s time to have a strong listing agent.
Sellers who listen (and act upon) good advice from a strong and experienced listing agent will profit more in this market than those who don’t. Bili, sometimes good agents give sellers exactly what they need to be successful, but the seller doesn’t listen well. Great agents have more effective communication methods and skills, but still occasionally get stymied by an uncooperative seller.
Ardell is also correct in that a market savvy buyer’s agent is just as essential.
I
I think your predictions on pricing through 2008 are on the money.
The major investment banks are calling for a nationwide market bottom in late 2009.
My estimate is that since Seattle peaked late, the bad loans are going to surface later than in other cities.
Ardell wrote: “I did. To the day! Look up the exact peak price day on Radarlogic for Seattle. It was 8/27/07. That was the day I took a job as broker of Brio :)”
Well I thought the market would top (and then crash) the day I got my license. 😉
No one seems to be answering my question. Would anyone think it wise to buy or sell (or not buy or not sell) based on what a real estate agent thought the market was going to do?
People like to hear what they want to hear (this thread is an example of that). I was having a discussion with someone recently about the market, and I gave my opinion twice that no one really knows. The response was: “But you still think real estate is a good long term investment, right?” (Think about it.)
Maybe it’s just me, but I think Kary needs to get his own blog.
I blog for the P-I, but what, you want everyone to have the same opinion? That would be rather boring.
What’s funny is except for Ardell, one year ago probably most the people supporting her now were complaining that real estate prices were too high because real estate agents were somehow driving up the price. They only want real estate agents to make predictions when it fits their viewpoint.
BTW, I can’t find a link for this, but I seem to recall Case-Shiller revised their forecast for 2007 three or four times during the year.
“My estimate is that since Seattle peaked late, the bad loans are going to surface later than in other cities.”
You got THAT right. We haven’t scratched the surface yet.
Greg said: “Ardell, you didn’t say — or at least I missed it. Are these numbers and predictions for KC? Personally, I don’t follow large areas all that closely. I suppose they give us a regional trend and stuff to write about, but don’t help a specific buyer or seller all that much.”
I used to think that way too, Greg. Until I realized it was like saying “But not MY kid, never MY kid.”
No one seems to be answering my question. Would anyone think it wise to buy or sell (or not buy or not sell) based on what a real estate agent thought the market was going to do?
That’s what people pay a Real Estate agent for. It’s not a commissioned sales position.
Top March 2007 fall August 2007. 2008 10% below 2007 , 2009 20% below 2007.
2005 was the divergence from straight line appreciation. 2006, 2007 went up 20% from straight line. It makes sense to hit back to normal before resuming appreciation. On top of that you can figure in the regular 4% appreciation from 2005 to 2009 at 16% so it gets to be kind of a wash or 4% decline in pricing based on straight line appreciation.
Say What?
Wow, Ardell, now you’re really gone off the deep end.
You think the King County numbers (March median off about 3.3% from March 2007 and volume off 34.3%) mean the same thing to someone in area 320 (March median off 7.7% and volume off 56%) as someone in area 720 (March median up 4% and volume at 100%).
You think Seattle will eventually have the same problems with bad loans as Detroit, it just started later? Seattle and Tacoma won’t even have the same level of problems.
“Seattle and Tacoma won’t even have the same level of problems.”
Careful Kary…that sounds dangerously close to a professional opinion.
Kary,
I used to be a CCPS (Certified Corporate Property Specialist) for Coldwell Banker. “beats me” wasn’t a good answer, ever. I started real estate in a market just like this one. I’ve lived and worked through it before.
“The ends of booms seem to be associated both with surprises at the increase in supply of the underlying investment, and the negative effect of this increase in supply on price.” Sound familar? Inventory up, volume down dramatically, but…what? Doesn’t mean nuttin’?
“The intensity of the public reaction to the stories of human foolishness was augmented by a feeling that not only were people foolish, but also that in many cases they had been duped, they had been had.” Sound familiar? Sub-prime and mortgage crisis?
“As the boom unwound, in 1888 and 1889…Newspaper ads for real estate became more defensive…A May 1888 real estate ad included a map of the city around the site…You will find it to be CLOSE INSIDE, with all the convenience and advantages of living…” Sound familiar? “Closer-in” Close to what? Close to Green-Lake, Close to Microsoft, Close to Dowtown this or that, “CLOSE INSIDE”. It’s the last battle cry of the final toehold 🙂
Nothing new under the sun for those who are not too blind to see.
The above quotes are from: HISTORIC TURNING POINTS IN REAL ESTATE By Robert J. Shiller June 2007
Here’s the link. It’s a good read.
http://cowles.econ.yale.edu/P/cd/d16a/d1610.pdf
Kary asked: “Would anyone think it wise to buy or sell (or not buy or not sell) based on what a real estate agent thought the market was going to do?”
I spent a good many years telling people what to buy and sell and when based on what I thought the market was going to do. My clients were mostly old widows whose future depended on my choices. That doesn’t make me always right, but I guess it makes me try really hard to be so. Perhaps it is a foreign concept in real estate and real estate agents, but not fiduciaries. A fiduciary doesn’t push or pull or “answer objections”.
“People like to hear what they want to hear…”
That’s OK, as long as that doesn’t change what we have to say. You can’t bend with the wind or buckle to what people want to hear. It’s hard. It sometimes makes people want to work with someone else. But that’s the difference between being a fiduciary, a person of good counsel, and a salesman.
No Kary. Not Detroit. We’re not Detroit. But are we more special than say…Hollywood? San Diego? You’re pulling too far there, Kary. Stop fighting it.
Volume of residential sales first quarter, King County
2001 – 4,662, 2002 – 4,964, 2003 – 5,479, 2004 – 5,650, 2005 – 7,295, 2006 – 5,596, 2007 – 5,304, 2008 – 3,582
Can’t see the handwriting on that wall, Kary? Doesn’t look all that vague to me.
And that’s the reason the public wants access to the data. If we are not going to use the data to provide good counsel, then we have lost the right to be self governed and proprietary as to the data.
We can teach a monkey how to fill out the forms. If people don’t trust and listen to their agents with regard to HOW to fill out the form and WHAT to put in the blanks, and agents are just order takers, then the public will and should win on all fronts.
It’s not about the paperwork…never was. Lawyers can’t replace us. Online services can’t replace us. Only we can make ourselves of no value and obsolete.
Wow, Ardell- I’m not easily impressed, but this post made me sit up and take notice. Kudos for having the courage to tell it like it is! Should my next real estate transaction require a Realtor, you’re it.
I find it interesting that most agents seem to focus on a particular neighborhood, and tend to overlook the greater picture. This causes them to miss larger trends that will eventually affect their target areas. For example, while some areas of Seattle proper are still doing a good job of maintaining value/prices, the outer edges of King County are clearly suffering. I have a friend who bought into Trossachs(?), a Buchan development on the Eastern edge of Sammamish in August, 2006, paying $790k for 3080 square feet. There are now several homes, one of which is an exact copy, for sale in the $685-$725k range. NONE of them are moving, many have been for sale since last Fall. My friend figures he has lost close to $100k, plus another $60k in transaction costs if he had to sell. With this in mind, it’s hard to listen to those who say Seattle is different. Seattle isn’t different, it’s just going to be the last to be hit. The same pattern is evident in a whole host of similar cities.
To answer Kary’s question, yes, I think most buyers will come to expect trend and financial analysis from their agents, as well as very concrete and specific analysis of specific neighborhoods. Any agent that can’t provide that, along with a track record of being correct, will find themselves replaced by a web based service that does, probably at a lower cost.
People are going to lose so much money on real estate over the next 5 years that their expectations will be changed for at least a generation. The days of being able to sell real estate based on a perky personality, glamor photos in a regional magazine, and 40 hours of training are coming to an end.
Ardell,
It’s been a while since we’ve chatted.
I guess you finally took the red pill.
Better late than never.
Best Wishes,
Morpheus
I would agree about broadening your perspective in order to get the bigger picture. I have spent some time researching the Real Estate market in Japan over the last 20 years and it is amazing how looking back in history at an event can lead to insights about future behavior.
Yes, Japan seems like a world away but looking closely there are remarkable similarities between what happened in Japan and what happend (is happening) in the US.
This article was published in the New York Times way back at the end of 2005. It might seem like an eternity to many people but I like to look at the housing market in slow motion because it doesn’t tend to move like the stock market.
http://www.nytimes.com/2005/12/25/business/yourmoney/25japan.html?pagewanted=all
“You think the King County numbers (March median off about 3.3% from March 2007 and volume off 34.3%) mean the same thing to someone in area 320 (March median off 7.7% and volume off 56%) as someone in area 720 (March median up 4% and volume at 100%).”
If you think prices are really up in 720, you haven’t been paying attention.
John wrote: Careful Kary…that sounds dangerously close to a professional opinion. ”
I don’t have a problem stating opinions (obviously). I do have a problem with agents making predictions. IMHO it’s completely irresponsible, so it’s a hot button topic for me.
Agents are not qualified to make predictions, and I don’t think anything Ardell has stated changes that opinion, as will be evident in my next post.
Ardell wrote: “Volume of residential sales first quarter, King County
2001 – 4,662, 2002 – 4,964, 2003 – 5,479, 2004 – 5,650, 2005 – 7,295, 2006 – 5,596, 2007 – 5,304, 2008 – 3,582
Can’t see the handwriting on that wall, Kary? Doesn’t look all that vague to me.”
Give me a break. What are you doing? Drawing a trend chart and thinking the trend will continue? That’s extremely simplistic. You aren’t doing any forecasting at all.
People don’t buyer or sell houses in 2008 because of how many people bought or sold houses in 2007 or earlier. People buy houses based on their income situation, their job situation, their family situation, etc.
Ardell wrote: “And that’s the reason the public wants access to the data. If we are not going to use the data to provide good counsel, then we have lost the right to be self governed and proprietary as to the data”
Who’s talking about data? I provide data. I just don’t try to do a simple interpolation of where the next data points will be.
People should be given data about their neighborhoods. I do that all the time to show them how strong or weak their neighborhood currently is. I don’t try to tell them how strong or weak their neighborhood will be several months down the road. No one knows that.
Conrad wrote: To answer Kary’s question, yes, I think most buyers will come to expect trend and financial analysis from their agents, as well as very concrete and specific analysis of specific neighborhoods. Any agent that can’t provide that, along with a track record of being correct, will find themselves replaced by a web based service that does, probably at a lower cost.”
Analysis yes. Not a problem with that. But I’ve yet to find one source that has a track record of being correct with predictions (and I don’t think Ardell has come even close in that regard to showing that.)
billiruben wrote: “If you think prices are really up in 720, you haven’t been paying attention.”
Well obviously there are issues with the median, but you also have to look at volume too, which is why I also provided that.
In actually pricing a particular home a good agent would never use data as wide as even an entire NWMLS area (and it certainly wouldn’t be for all homes in any physical area).
Ardell was trying to claim that the King County numbers were more important than local numbers (in response to Greg’s post). That’s just crazy talk. King County data is sort of like the average family having 2.7 children–not a statistic that means a lot to any particular family.
Conrad wrote: “I have a friend who bought into Trossachs(?), a Buchan development on the Eastern edge of Sammamish in August, 2006, paying $790k for 3080 square feet. There are now several homes, one of which is an exact copy, for sale in the $685-$725k range. NONE of them are moving, many have been for sale since last Fall. My friend figures he has lost close to $100k, plus another $60k in transaction costs if he had to sell. With this in mind, it’s hard to listen to those who say Seattle is different.”
I would have advised your client to avoid that property. I don’t like new construction for a number of reasons. When I was looking for my own house, anything built this century was ruled out.
If your friend had bought a better property, they wouldn’t be suffering so much, if at all (they might be at break even).
That said, I’m sure there are a lot of people that bought older homse in 2006 that can’t sell them for what they paid (net of closing costs). But you aren’t going to be able to tell them that looking at the King County data or even the data for their NWMLS area.
This is really a sad moment for the Real Estate Industry.
People are going to lose so much money on real estate over the next 5 years that their expectations will be changed for at least a generation. The days of being able to sell real estate based on a perky personality, glamor photos in a regional magazine, and 40 hours of training are coming to an end.
In the same comment this guy talks about on-line services for less, like a computer geek is going to give this guy better data, than a real estate agent. Real Estate is a commodity. It’s predictable and neighborhood analysis is a very small piece of any puzzle.
The Japan factor doesn’t take into account the emergence of China as an economic force. We used to do a lot of business using Japan as an intermediary today we deal directly with a Communist country daily. How about that Euro, anybody else think it’s over valued?
Economic research is a part of my day. I spend two hours a day at least with the Real Estate market, then finally my area of work is about seven miles around. Real estate is a twenty four hour a day seven day a week business, you snooze you lose. It’s a vicious brutal business that requires constant vigilance.
That’s what people pay us for. They pay us to know what the market is going to do and when. Why else? Why doesn’t the public get forms on line and do it themselves. The forms are State mandated. What do they need you for? If you can not provide more than opening doors or an opinion who needs you?
Dave losh wrote: “That’s what people pay us for. They pay us to know what the market is going to do and when. Why else? Why doesn’t the public get forms on line and do it themselves. The forms are State mandated. What do they need you for? If you can not provide more than opening doors or an opinion who needs you?”
They pay us to know what the property is worth at the time the deal is done. If they’re paying a dime for a future prediction of the overall market (as opposed to say the desirability of the property or neighborhood), they’re paying more than the prediction is worth.
BTW, you seem much more coherent today. How about taking another stab at answering my question? After your “Say What?” I was saying the same thing. 😉
Conrad,
And it seems like just yesterday you said you weren’t a fan 🙂
Morpheus!!! Yes, it’s been quite awhile.
If I wasn’t paying attention to what you said, I wouldn’t have been looking as hard for signs of weakness. I didn’t take a pill, but it’s pretty hard to ignore the fact that the lending standards changing and elevating is in and of itself changing the market. In fact I really don’t know how Kary can’t see that.
Thanks for stopping by.
Ardell must be beyond rich being able to foretell the future. She must’ve made a killing in the stock market before the crash in 2001, and obviously in the real estate market since 2001.
I can just imagine her following the trends and predicting more of the same…If the market is going up, she says its going to continue to go up. If it’s going down she predicts it will continue to go down. haha.
I know on Queen Anne, houses continue to sell for big prices, and all the homes that sit are overpriced or in terrible locations.
Also…
With the ability to predict these trends, why did you leave the stock market game?
Peter,
I don’t have to go that far away. In fact I’m amazed at how similar the current market is to the one I started in back in Jersey. The parallels are uncanny.
Ardell was the biggest Koolaid drinker on this board just 6-12 months ago. She’s done a 180 and now all the bubble-heads think her opinion is super fantastic, since she sells these widgets and all. Her marketing ploy is working perfect I would say. But at least she is accepting reality, whatever the reason.
Bili, I think predictions by anyone are just predictions – accuracy of predictions comes from behind, not ahead.
As to buyers, I do think a buyer is most affected by a changing market, and therefore buyers needs experienced agents, who will help them choose the best (ie, smart or ‘safest’ house/condo). Many neighborhoods will hold their value better in a down market than others, yet even in slower areas, there are sweet spots of strong value. And, there are always motivated sellers. A lot depends on how long a buyer plans to stay in the home they purchase.
No matter how many of you think renting is the best option, there are millions of people across the country who will never think renting is their best option. I happen to agree that for the majority who want to own, that they should. Not all, but most.
As to sellers – if a seller wants to sell today, he’s faced with only today’s market, not next years market. Properties are selling each and every day, and as usual, they are the ones that have 3 things going for them: PRICE TERMS CONDITION
** Price, your location matters. Price below your comparable solds, not above. Price correctly in the beginning.
** Condition. Did you do all the things you’re supposed to do?
** Terms: ie, Pay buyers closing costs, Pay a reasonable commission. Some owners may offer to carry a note, secured by a Deed of Trust.
There is no secret to selling: price, terms and condition are the keys.
If a seller meets all three items, has a good agent to position them well in the market, they will sell. Some neighborhoods will sell in less than a month, others might well take 4 months or more.
And, something that I haven’t seen discussed on any of these real estate blogs:
The value of POSITION. What I mean by this, is the description and presentation of a property matters to the buying audience (and the agents too). A good, brief marketing description of the property, good (not mediocre) photos of the property (no nighttime photos please, black windows are a real turn-off), and keeping the house flyerbox stocked with professional color flyers, which list the asking price. (I hate flyers that don’t list the price :-).
I have listed many properties that another agent has previously listed, and felt that much of the reason they often were not successful in getting the property sold was presentation: a poor description, poor flyers, poor internet presentation and photos.
I had one last year where the previous agent described that someone could park a zillion cars in the driveway, but never described anywhere in the listed description the beauty of the half-acre backyard with it’s grassy lawn, huge deck and gorgeous cedar trees. Oh Yeaaa! Parking for 10 cars, what a lame feature to highlight. There are a lot of lame descriptions out there, and they do affect a buyer or an agents desire to get out of the car to go inside … Or worse, if you can’t get them away from their computer to make an appointment to see your house, you’re really not positioned well at all!
Here is a suggestion for those thinking of selling. If you’re talking to an agent, or several, ask them to email you 5 or 6 of their listings they have had that have sold. It doesn’t matter if these properties are recent — what you are looking for is how they PRESENT their clients properties. Read thru their descriptions, look at the photos, and see if you like their style. If they are sloppy, full of typos or misspellings, poor photos — this isn’t the right agent.
Presentation matters, it is the FIRST IMPRESSION, and as they say, you never get a second chance to make a good first impression :-)!
We will see if you crystal ball speaks the truth!
# 42, Kary, you are so correct about new construction. It’s risky.
“With the ability to predict these trends, why did you leave the stock market game?”
I wasn’t “in the stock market game” in the manner you seem to envision. I was a bank employee trustee. The trust business changed with the Glass Stiegel Act permitting non-trust holdings at brokerage firms the advantage of participating in mutual funds and money market funds. Plus widows no longer accepted that “the husband’s” money would be left to them “in trust” and their lives “managed” by people whom their deceased husband selected. Plus I had my third child and needed more flexibility in my work schedule.
I’ve given the factual response, but if people are coming in just to shoot the messenger, I’m not up for “target practice” with me personally as the target.
Let’s not cross the line guys.
“And, something that I haven’t seen discussed on any of these real estate blogs:”
Just write it, Leanne. You blog for the PI. Kary blogs for the PI. Whatever I am not doing that you would like to see done, or whatever I am doing that you would like done differently…just write it on your blog platform.
#24 Sherry has a point. Rather than taking everything sideways and off topic, why not just write a post on the PI that fulfills your need to correct? Link to this post and offer your counter opinions. Pretty simple stuff for bloggers, and the usual practice of bloggers.
Shane wrote: “Ardell was the biggest Koolaid drinker on this board just 6-12 months ago. She’s done a 180 and now all the bubble-heads think her opinion is super fantastic, since she sells these widgets and all. Her marketing ploy is working perfect I would say. But at least she is accepting reality, whatever the reason.”
Accepting that as factually true, what does that say about her predictive abilities?
BTW, I don’t think I was here a year ago, but I was against making predictions even while are market was heading up. I had no idea when that would end–although obviously the news from August gave some indication there’d be at least a few tough months.
Hi Ardell, I wasn’t suggesting you do something differently. I simply had a response to Bili’s stuff, and wrote it extemporaneously, and likely will follow up with a longer article for the PI side.
I was under the impression that you welcomed all discussion, and that Dustin’s article from earlier this week stressed that too.
Ardell wrote: “Just write it, Leanne. You blog for the PI. Kary blogs for the PI. Whatever I am not doing that you would like to see done, or whatever I am doing that you would like done differently…just write it on your blog platform.”
I’d agree Leane got a bit off point there, but what she’s talking about is something I addressed just yesterday in one of Aubry’s pieces:
I wrote: “When you’re selling a home, your bait is your listing. You want it as attractive as possible. Part of that is price. Part of that is the appearance of the property. Part of that is the commission.” I should have added marketing.
http://blog.seattlepi.nwsource.com/realestatenews/archives/136551.asp
But perhaps her post wasn’t so off topic by negative implication. She was discussing what was important in representing buyers, who she described as being “most affected by a changing market.” She did not include the ability to make predictions as being something important.
Will wrote: “We will see if you [sic] crystal ball speaks the truth!’
Every time I go to the NWMLS store, they’re out of crystal balls! 😀
Kary,
The mortgage industry did not tighten it’s standards 12 months ago. What the Seattle Area is experiencing is a direct result of the tightening of mortgage standards.
Clearly if the mortgage industry went back to 580 credit scores being good enough, subprime loans and stated income as the norm, the market would get better. Lacking that change, the market will react to tighter lending standards.
It’s not rocket science…it’s not really even crystal ballish…it’s the mortgage industry. Things simply cannot “get better” unless lending standards return to their previous position. I don’t see that happening. Do you? I’m sure you don’t.
Yet you refuse to accept that the changes in lending standards has and will continue to impact real estate sales and prices.
Back to Shiller’s paper on “Historic Turning Points in Real Estate”: “The ends of booms seem to be associated both with surprises at the increase in supply of the underlying investment, and the negative effect of this increase in supply on price.
I don’t know if Ardell’s numbers will turn out to be exactly correct, but the trend is correct, and the trend is what matters. Our job is to help clients take advantage or protect themselves in the market, and if we aren’t talking about the risks and speaking honestly about where we think things are headed, we are doing them a disservice.
For what it’s worth I blog for the PI and I agree with Ardell. I have for a while now. So, we are not monolithic over there, but I also don’t have time or energy to out-shout some of the more vocal personalities (on both sides) on that blog. I have a business to run, after all. But last year, when I whipped out my Magic Eight Ball, I caught hell from both sides when I said I saw the market trending down. Bubbleheads thought I was too conservative, other “Pros” thought it was irresponsible to make predictions. Okay fine, no predictions, but if I see a trend, I think it’s my responsibility to talk about it. I do so in person with clients all the time, and on the blog when I have time. (Blog posting is inversely proportional to paying work, in my case at least. Ardell can manage to do both–which is amazing to me!)
Anyway, from where I sit in Snohomish county the trend is obvious–has been for a few months now. Last summer it wasn’t–I think last summer/fall we were all staring at the numbers going, “what the heck?” but we just hadn’t reached the tipping point yet. Would Seattle defy economic principles? With rising inventory, falling demand, would we somehow manage to continue to see appreciation?
I think we know the answer to those questions now. I know we do in Snohomish county. And I believe it’s true what they say about how price increases are like a ripple in a pond, they ripple out from the center, and decreases ripple in from the outer edges. If Snohomish county and Pierce are in trouble, that is not good news for King. Your market may always be stronger than ours but if our prices unwind far enough, it will have an effect closer in.
What has surprised me in my area is how quickly things have happened. Even since January, it’s been interesting to watch. Last fall, I believed there would be a “slow unwinding”–that is not how things are panning out. I kind of thought that sellers would be a lot more “stubborn” on holding the line on pricing but what I didn’t account for was the effect of new construction. Areas that are overbuilt have been deflating like mad, and that in turn affects the markets surrounding them. You can diss new construction all you want but most buyers I talk to want new or “like new” and if the builders offer them incentives, slash prices, etc., that’s the way they will go.
Anyway, the bottom line is if people can’t get a loan, or can’t qualify for what they could have previously, they can’t buy a house, or can’t buy as much as they could have previously. That’s going to affect pricing. It has to. We have a lot of underlying fundamentals that may keep our market healthier than other parts of the country but that doesn’t mean that when the whole country has the flu, we are going to be immune. Maybe we won’t be as sick for as long. But you will still want to stock up on Kleenex and Advil.
Besides, I don’t see how anyone can look at what is happening with $/sf anywhere in this region and argue that the current trend is not that prices are dropping. The median price may not be telling the story, but $/sf and % Orig. List/Final Sale price are. All you need to do is look at those numbers and it’s obvious what’s happening.
Also, for what it’s worth, I think for those of us who try to be even handed on this issue and look beyond what’s good for our pocketbook, those Bubble bloggers have had an effect on our thinking. They lend balance to the discussion and I think that is a very healthy thing.
In closing: Go ARDELL!
Actually ARDELL, I wrote about guidelines beginning to tighten over a year ago on Feb. 13, 2007…”No Love for the Subprime Borrower“.
Sandy wrote: “I kind of thought that sellers would be a lot more “stubborn
Kary, not making any predictions is better than making the biased unrealistic ones that is the norm for agents and the NAR I’ll give you that much. However, realistic predictions beats no predicitions imo. Your proffession has a credibility problem and by keeping quiet you don’t change anything as long as the majority of agent/broker predictions are unrealistic ones. If you care about the reputation of your profession you should probably welcome posts like this one. And regarding earlier predictions and attitudes they are history as soon as you change them. I.e no reason to bring up old sins and rub them into someones face when they are no longer valid or trying to force someone to admit they were wrong if that was the case. It’s also not very productive to rate the validity of a prediction based on past predicitions. It’s better to rate the prediction on the relation to fundamentals. This is what makes it realistic not the accuracy of past predicitons.
tj,
I even value predictors who are consistently incorrect. At least you know to do the opposite of what they say 🙂
My problem is this: “Where a neighborhood is well kept up, I will point that out, but where there’s a mess across the street I’ll let the buyer notice that…
Thanks, Leanne.
Ardell wrote: “When someone will speak up about the positive, but mum’s the word on the negative…not fair.”
I already explained that as being a patent/latent issue. I point out the negatives when I think they are not obvious to the client. And I don’t want my hypersensitivity on neighborhood issues affect them. If I let my own sensitivities affect what I did, I’d never show a house with vinyl siding. What I do instead is point out what the siding is, and what the benefits/risks are. (As an aside, it’s amazing to me the number of people that don’t know about the types of siding–probably explains why vinyl siding even exists.)
Also, since I wasn’t making predictions about price back when the market was hot, it isn’t exactly like I’m only pointing out the positive and not the negative. And when asked, I’ll openly state I don’t know where prices are headed.
As I mentioned before (I hope it wasn’t this thread), I really didn’t like attorneys who obtained clients by promising unrealistic results, or answering legal questions they didn’t really know the answer to, just to appear more credible to their clients. To me this is the same thing. We may have guesses as to where things are headed, but to try to influence a client’s decision based on that guess just isn’t right.
Leanne – could you explain the process I would need to go through were I to “carry a note, secured by a Deed of Trust”?
What does that mean?
– But again, how many of you people that agree with Ardell think that people should invest money based on the projections of a real estate agent?
The answer to your question would depend on whether that particular real estate agent offered sound advice or was spewing rhetoric. You have to do your own research as well. To do otherwise would be the equivalent of financial idiocy. You could rewrite this to say “Would you invest $500,000 in real estate based on the opinion of 1 person?” The answer, of course, is “Are you high?”
– You’re only agreeing with her because you agree with her result, not her method.
Speaking for myself, unlike those who speak for everyone – I agree with her position because I take her stats and other information that is available and we have reached the same conclusion; A current upswing in prices is unsustainable at this time and in the foreseeable future. Do you really want her to post everything from the cost of rice in Thailand to the average Puget Sound electric bill to justify that people have less cash available? That’s rather hilarious. This is a snapshot on a blog, not an exclusive on Bloomberg.
She called it a prediction. I call it supply and demand. The end result is the same.
tj wrote: “Kary, not making any predictions is better than making the biased unrealistic ones that is the norm for agents and the NAR I’ll give you that much. However, realistic predictions beats no predicitions imo. Your proffession has a credibility problem and by keeping quiet you don’t change anything as long as the majority of agent/broker predictions are unrealistic ones.”
Well, I guess I’d say predictions of people that have no particular training in making such predictions are worse than no prediction at all (and that comment is based not on Ardell’s qualifications, but agents in general). And by expertise, I don’t mean having attended a three hour clock hour course entitled: “Where is the Market Headed.” I mean a PhD in Economics and access to economic data and forecasts. And even then, I’d still call the predictions worthless.
I think the industry would be much more credible if there was an ethical rule against agents making any predictions of future price trends, including statements such as: “It’s a great time to buy.”
70Ford wrote: “The answer to your question would depend on whether that particular real estate agent offered sound advice or was spewing rhetoric. You have to do your own research as well.”
First, thanks for answering.
But how can you tell the difference? Is the difference between sound advice and rhetoric simply whether it matches your own research? And if so, what’s the point of even getting the advice?
I’ve touched on this before, but in the stock area I do believe in some charting theories (mainly resistance levels and certain trends). But I think the real estate market is far too slowly moving for that type of thing to mean much, if anything.
Also, another factor to consider, which can throw predictions way off, is people’s attitudes. Using Intel stock as an example, the potential problems at Intel were somewhat obvious back in the late 90s (as I recall), but people kept investing in it because it was a darling stock. Well home ownership is also a darling of the American people. And that’s a factor you can’t put into any mathematical formula. Both spouse now typically work to reach or even further that desire.
Which will win out? Financing? Interest rates? The desire to own a home? No one knows.
“I already explained that as being a patent/latent issue. I point out the negatives when I think they are not obvious to the client.
I get that part. I don’t get why you are pointing out when the lawns and homes nearby are well maintained, but not when they aren’t. Isn’t that just as obvious and not “latent”?
“We may have guesses as to where things are headed, but to try to influence a client’s decision based on that guess just isn’t right.”
Very often someone calls me who says they are only planning to own a property for a year or two. Telling the truth is more likely to lose a client than gain one.
As to the good, I’m not sure that is as obvious. When I said that I was thinking of this modest little neighborhood in Kent where the house was on a dead end street. The neighbors obviously spent a lot of time dealing with their yards, an unusual amount for houses in that price range. I thought that was worth pointing out.
As to the second, a year or two time frame is always problematic. You have to increase 9% just to break even after closing cost. I don’t have a problem at all letting someone know that (or even someone who mentions a slightly longer period).
Kary said:
“But how can you tell the difference? Is the difference between sound advice and rhetoric simply whether it matches your own research? And if so, what’s the point of even getting the advice?”
The point is that if you’ve done your research well and the agents predictions matches yours you get answers on two very important questions:
1. The agent is knowledgeable and able to make realistic and logical conclusions.
2. The agent will understand your strategy and follow specifications not only becuase you say so but because he/she believes in them. This makes everything smoother and more efficient.
Okay, I can see that.
It might also be useful for ruling out a third possibility:
3. The agent is just trying to blow so much smoke up you . . . that you can’t see straight. 😉
Kary – people make predictions about the direction of prices of everything and anything all the time. There are numerous careers where all people do is these sorts of analyses. Sure, their not alway right, but they often are in the ballpark.
Just because the guys NAR hires to do these predictions are incompetent or corrupt doesn’t mean it can’t be done and done well. On a national and regional level, there are people qualified to make unbiased predictions on housing prices, and they do. Some of them generally do a pretty good job. On a local level, it may very well be that those who have their boots on the ground, RE agents, particularly agents with a bit of facility for economics, are the most qualified to make reasonably accurate predictions.
Just because you can’t see yourself being qualified to do so doesn’t mean it can’t be done, and done well, by the right agent. Maybe Ardell is that agent, and maybe she ain’t. Time will tell.
biliruben wrote: “Kary – people make predictions about the direction of prices of everything and anything all the time. There are numerous careers where all people do is these sorts of analyses. Sure, their not alway right, but they often are in the ballpark.”
Yep, but they’re often wrong and always have more training than a 60 hour course, none of which covers how to predict where prices are headed.
I’d disagree about there being some competent predictions–but perhaps I’m just unfamiliar with them. Can you cite any?
Billiruben wrote: “On a local level, it may very well be that those who have their boots on the ground, RE agents, particularly agents with a bit of facility for economics, are the most qualified to make reasonably accurate predictions.”
I’d really have to disagree with that. Would having 45 credits of Econ at the UW with probably a 3.8 to 3.9 average qualify as a “bit of a facility for economics?” I have that, but what I don’t have is access to the data (or the statistical background to do much with it). And I also disagree with the boots on the ground comment. No individual agent sees enough of the market. The example I give is my wife and I didn’t see the volume issue in December, because we were damn busy–too busy to track the stats for the month. The best information we have is the data, and that’s all past data.
Can I cite any?
Sure. Shiller is the most famous, but there are a number of professional economists working for investment banks and such that come out with predictions. Obviously NAR’s Yun comes out with his “this is the bottom, and it’s up-up-up from here!”, garbage nearly every month, and then then revises, but I don’t consider them qualified, so maybe we agree there.
The one I read the most is Calculated Risk, who hit his national prediction nearly right on the money for 2007. And 2006 as well, I think.
I’ll try to link to it in the next post, but I often end up in the spam filter when I put a link in.
If you don’t read Calculated Risk, you should. It put’s the lie to Lar and Mack’s nonsense about the value of anonymous posters.
Here’s his 2007 prediction post:
http://calculatedrisk.blogspot.com/2007/12/looking-back-at-2007-housing.html
Biliruben,
Just shoot me an email anytime you get caught in the spam filter. I can fish it out.
# 68, Bili, it means you act like a bank for your buyer for some of your equity.
Generally, you’d be in a second position on title, with the buyers new first mortgage in first position (the bank won’t let you go first either :-). Let’s say you were selling for $500,000, and the buyer has $50,000 down, but for some reason, can’t get a decent interest rate on a second loan for $50,000. You might offer to carry a promissary note for $50,000, at xyz interest rate, which would be secured by a Deed of Trust. The Deed of Trust lets you foreclose judicially in the event the buyer defaults on your note, and you get your property back in that event. Not too likely to happen, but the DOT is important to have for your security.
The first lender will likely require that your note has a reasonable interest rate (6, maybe 7%), and amortize over 30 years, and carry a balloon payment of no sooner than 5 years for the amount due at the end of year 5.
It’s not always needed to get your property sold, but sometimes, it can help a particular buyer. Some sellers have tons of equity, and with a strong down payment (I favor 30% or more, for safety to you),
will carry the note/DOT for 70% of the value of the property. We don’t see that very often, but sometimes, retired people who own their homes free & clear may like the income. It’s also something seller should consult with an accountant prior to agreeing to do.
Interesting. Thanks, Leanne. I don’t think I’d dabble with that in this market, however, even if I didn’t want to just plow all my equity into our next house.
Back in 2004 I did one exactly as Leanne describes. I had the buyer client and sold his property July of 2007 at a substantial gain and the loan from the previous owner was paid in full. All worked out. But it worked out because the property went up 6 times the private note value. I doubt that would happen from here looking 2 years out.
# 83 Bili, yes, it is extremely rare that it makes sense for a seller to do, but for the times it works, like for Ardell’s clients # 84, it’s smart, and can be quite easy to set up.
And, keep in mind, that if interest rates on bank CD’s and the like stay so low, many sellers will lots of equity may well think that a note and DOT is a better return for them. There is no reason that the note has to have a 5-yr balloon, it could be 7 -yrs, 10 or more.
For a seller to get say 6% interest isn’t a bad idea, if it makes sense for his/her tax situation.
Hi Kary,
Last summer while on vacation at a dude ranch with my kids in northeastern Oregon, I read about the demise of Countrywide and completely freaked out. Here I am in the middle of nowhere and my industry is starting to fall apart. The other guests wanted to know why I was so upset and I told them all that this is the beginning of the end, if C-wide is going down that means the entire mortgage marketplace is going to get a whole lot worse.
I’ve gone on record for months now telling everyone that defaults and foreclosures are going to go up, yes even here in Seattle
I’m on record as predicting a continual tightening of underwriting guidelines, even more so than what they are now, until we start to see defaults slow down.
I’m no economist; I can’t do the number guessing. I’ll leave that to The Tim, Seattlebubble readers, Ardell, and CR.
Realtors and mortgage folks ask us for predictions because consumers are asking.
We need to help consumers.
Now more than ever, Realtors (and mortgage folks) can help consumers with our predictions. We don’t have to be perfect.
BTW, I wrote about rocket science and calculating results one year ago.
http://www.raincityguide.com/2007/04/13/this-just-in-zero-interest-loans-at-a-cost-of-zero-with-a-monthly-payment-of-zero-apr-0/
I am on record as saying that it took 7 to 9 years to get here and it’s going to take 7 to 9 years to unwind this mess because our government will step in and try to fix things, which will only prolong the defaults.
2007 was year 1. We have a long way to go.
Jillayne,
3-5 to unwind not 7-9. No fun if we agree. Now will RCG and we be around to see whose right in 5? ahhh…where’s that crystal ball. No I think that question needs to be asked of the tarot cards. I’ll bring them to girls’ night out…when it stops snowing.
If we keep modifying loans without fully underwriting the file, and we keep freezing interest rates, we’re just postponing the inevitable that much longer. I’m making a long prediction because I do not believe the politicians can stop themselves from trying to intervene.
The more the politicians intervene, the longer this will take. Many of these folks will be right back to where they are now in a few years and what are we going to do then, give them another loan mod and interest rate freeze?
Combine government intervention along with rising interest rates, tightening underwriting guidelines and larger downpayment requirements and we are adding years on to the unwind process.
I’ll bet you a drink. At the 7 year mark, we’ll check back in and see how we’re doing. That would be 2014. I still plan on being around then!
bili, I meant local number predictions. I hardly care about King County by itself (which I don’t think Case-Shiller does), so national numbers predictions don’t really mean much to me. I was looking for accurate local predictions of local counties.
Jillayne, predicting that foreclosures will go “up” is a bit different than predicting volume numbers or price. Ardell and I both agree volume will almost certainly be down this year. That’s easy. Price is hard to the point of being impossible.
BTW, think back to the price predictions that were being made while you were on vacation.
Locally? I don’t know any economists who would attempt that. Too much psychology, not enough N for economists in the local region, short-term I would think. That’s why I think the best you can do is the folks who are seeing the listings, sales and the houses that are sitting. Talking to the buyers and sellers and seeing what’s selling and what’s sitting and judging sentiment. Who’s best at doing that?
Amateurs take shots. I have, for instance, and haven’t been too far off. I have made predictions, though not rigorously, since 2003 for the national market and 2005 for the local one. I have gotten the trends right, but not the precise timing.
In some senses these sort of predictions are easier than they ever been, however, because the causes are global this time around. Everywhere is going to be effected, it’s just a matter of degree.
Sometimes you look at the forest and sometimes you look at the trees. To look at one and not the other is an incomplete analysis.
Sellers too often only look at their immediate vicinity. I had a conversation with an agent yesterday who was putting a property on market and only looked at a two block radius for stats. Sellers often only look at and talk about their immediate neighbors, and look too close and too far back. “Last year the guy down the street…”
Reality is you have to think like a buyer in the market today and predict 60-90 days forward, when you represent a seller. A buyer will look in a price range in a broader area, most times. So you have to look at “if they don’t buy this, they will buy that”. To price appropriately for your competition, you have to look at what buyers may buy instead, and often that is not only about that neighborhood. Rarely does a buyer restrict themselves to a given neighborhood.
I’m working on a townhome complex in Redmond. Both ends work against the middle in that the best will sell and the cheapest will sell and in between there’s no compelling reason to buy. So “the middle child” sits on market while the best keeps selling at the highest price and the cheapest keeps selling because it’s the cheapest.
Then you have to calculate the increase in buyers for the next 90 days vs. the previous 120 days. You often have as many buyers buying from 4/15 to 7/15 as you did from 10/1 through 4/15.
End units vs attached walls on both sides. Updated vs. not updated. Unimproved end unit vs overimproved interior unit. In the back on a no traffic street. Up front where everyone who lives there drives by on the way in and out on a through street. On the trail, close to the trail, busy end unit on the corner of two heavy traffic streets vs quiet end unit. T-house.
After you do ALL that to price the property for sale and get in on market, you NEVER look at the comps again! Reality is what it is, and has no hindsight once on market. Now it’s all about supply and demand, and the comps won’t save you. Any seller looking at comps, and hanging on to the comp value while buyers keep passing them by and buying something else, is holding on to a dream in the past.
That is why an agent MUST predict present to future, as the past won’t save you once on market. Predicting what buyers will do in the next 30 to 60, is what we DO. To say we don’t predict as agents, makes no sense. What the property would have sold for in the last 120, once analyzed for list price, is of no value. Only today and tomorrow matter once on market.
Once on market you have to pay close attention. If buyers are all buying at a different complex, then being the best or cheapest in this neighborhood won’t save you. You have to look at what buyers are buying in that price range, no matter where or what it is.
When people choose single family over townhome, as single families have dropped below the price of the townhome, you can’t only look at “like-kind” properties in your analysis.
You can’t do “stats” on a hyperlocal scale, because it is an analysis of “the trees”. To do an analysis based ONLY on “the trees”, and not the forest, will give you a false result. That false expectation can be devastating to your seller client.
Many people are asking me “Should I sell now, or wait until next year?” That’s why I MUST predict with some degree of accuracy. It’s not a skill I can decide not to have. We must answer the question with some degree of certainty. Even though the seller realizes that this year vs. next year is an unknown, they still have to make a reasonable evaluation of what to do, and they need the agent to participate in that predictive process.
Sure it involves other factors, personal factors. But all things must be considered and balanced, and we can’t leave out where we expect the market to be a year from now, by refusing to predict.
Ardell is correct, sellers always do well to think like buyers, in every market. The days of ‘accidental’ sales due to sheer lack of inventory are gone, and hooray for that!
Kary said, “Jillayne, predicting that foreclosures will go “up
Clearly investors and people doing flips would have been better served by an agent who could “predict” better than simply saying “of course you will make money when you are finished” when selling them a remodel project several months ago.
There was a point where we simply stopped saying yes and started syaing no…and that “trend” had to be determined BEFORE it actually happened, not 7 days later.
Ardell, no one is saying that you’d price based on a two block radius. I seldom go smaller than a mile (the exception would be a condo with a lot of activity). That sellers will look at too small of an area for their comps is not support for your position that the NWMLS area stats are not more valuable than the county wide stats.
And trying to set a price for a particular property is in a way predicting what a buyer will likely agree to pay for a property. But doing that for the immediate future is not even remotely similar to what you’re doing in the OP. Apples and oranges.
billiruben wrote: “Locally? I don’t know any economists who would attempt that. Too much psychology, not enough N for economists in the local region, short-term I would think. That’s why I think the best you can do is the folks who are seeing the listings, sales and the houses that are sitting. Talking to the buyers and sellers and seeing what’s selling and what’s sitting and judging sentiment. Who’s best at doing that?”
Well it’s good to know I’m not missing something locally.
As to the rest of your post, I’ll say this again. Any individual agent sees too little of the market to get an overall feel even of the present. We were busy in December when apparently other agents were not. We had no idea that would be the lowest volume December for the NWMLS in six years (per one of their press releases).
I think if you wanted to make agent predictions mean something you’d have to do a survey of a statistically relevant sampling of agents. It would be sort of like Consumer Confidence numbers. I’m not sure that would mean much though, for it would probably be overly optimistic at times and overly pessimistic at other times, affected mainly by sales volume at the time. And the further out you went (e.g. over two months) the less it would mean.
Ardell wrote: “No, they are related. While an appraiser and a buyer may discount one sale at lowest price, they won’t discount foreclosure price if there are only 4 comps and ALL are foreclosures.”
I don’t think an appraiser would EVER use a foreclosure as a comp. Foreclosures are distress sales.
Ardell wrote: “Say you can’t or won’t predict…that’s OK. But stop saying I shouldn’t, because you won’t or can’t.”
What I’m saying is no one should base a decision on your prediction or that of any other agent. You can predict all you want. My point is it’s a pointless exercise.
I’ve lived in this area over 50 years. Based on that experience, and the review of some data off the web, I predict it will rain on July 4, 2008. Make your plans accordingly–it’s based on years of experience and mountains of data. 😀
Kary said: “I don’t think an appraiser would EVER use a foreclosure as a comp. Foreclosures are distress sales.”
Well, then you’re wrong 🙂 That simple. They will. If there is one in 6 six sales that is a foreclosure, they will not count it. But in areas today where all 6 or 5 of six or 4 of 6 are foreclosures, they clearly will not act like they don’t exist.
Kary,
I agree you shouldn’t. There, we agree.
Living in an area and going to real estate school for 60 hours does not make an agent, and clearly does not make one who can predict well. There, we agree.
Maybe only 5% of agents can and should do it. But don’t say no one can as it IS what we DO. Anyone with a license for 5 years or less may not “get that”, but it IS what we DO.
When did you switch from attorney to agent, Kary?
I have to go show property…be back later…
Sigh. Yes, appraisers use foreclosure/REO sales as comps.
Appraisers work on behalf of the lender. The lender must know what’s going on in the market. We already had a long discussion thread on this topic over on seattlebubble.
If I were a homebuyer, I would definitely want to know if a comparable REO sold in that neighborhood and if so, for how much. Lenders need to know this as well. Appraisers do address this in the appraisals.
Jillayne’s correct. Appraisers must address the neighborhood–including foreclosure/REO property…here’s an example of guidelines from one of the lenders I work with:
Ardell wrote: “When did you switch from attorney to agent, Kary?”
About two years ago, but when I was an attorney I was involved in the sale of houses.
Are you really sure you want to start comparing professional data? I’ve purposefully not gone there, but I’ve been doing pretty well in this market. I suspect you would have liked to have had my wife and I as agents over at Brio while you were broker there.
As to this market, I just said over in P-I land this morning I was worried about pricing in a declining or mixed market. Really though, it’s not that much different–assuming you have the data. If you have a property that is unusual, making finding comps difficult, it is hard to price in a weaker part of King County. But that generally requires something odd with the property, like a mother-in-law, waterfront, two kitchens, remodel, or some other thing that makes the property atypical for the area. We still have more than enough volume that pricing most houses isn’t really an issue (where the clients will listen to you).
Jillayne wrote: “Sigh. Yes, appraisers use foreclosure/REO sales as comps.”
I could see where an appraiser would report such things, because a bank would need to know that to make a decision. And I’m only addressing foreclosure stales, not REO sales, so maybe that’s our difference. And I was assuming an appraisal for a non-forced sale or mortgage transaction.
But foreclosure sales do not fall within the definition used of “Market Value.” From an appraisal:
“Definition of market value: The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undu stimulus Implicit in this definition . . .: (1) buyer and seller are typically motivated: . . . (3) a reasonable time is allowed for exposure in the open market. . ..”
Sales that don’t meet that situation wouldn’t be a comparable sale.
Rhonda quoted:
1. The appraiser must report on the primary indicators of market condition for properties in the subject neighborhood by noting the trends of property values (“increasing
Fortune made a prediction: http://mag1.olivesoftware.com/ActiveMagazine/welcome/Time/Fortune/TFM-12-November-2007SGRVPS.asp
Pages 76-88. There is a graph towards the end that talks about Seattle.
And this issue was back when Seattle was the brightspot of the country.
Money Magazine made a prediction in their October, 2002 edition.
The Seattle-Tacoma-Everett area was likely to have a bubble, as was San Fransisco and Detroit. One out of three ain’t bad. How much money would you have lost listening to that advice?
They also said Boston no, and Colorado Springs and Naples, FL maybe. Odd choice of picks.
It’s apparently based on data from someone at economy.com named Celia Chen, their head economist.
BTW, I think Boston peaked in 2005, while San Fransisco may have peaked in 2006. Whatever, Boston, their no pick, peaked before their yes picks.
I don’t know about Detroit’s peak. I’m getting the pricing information here, which I believe is accurate (but no longer up to date).
http://mysite.verizon.net/vodkajim/housingbubble/
Thanks for the link.
The thing about these predictions is that it is nice to look back and see how everyones predictions turn out. When I look back at Warren Buffet’s predictions throughout the years it is spooky how more often than not he seemed to have a sense for what was going to happen in the future. I guess that explains how he was coined the nickname of the Oracle of Omaha though.
The seattlebubble.com website had a post on predictions awhile back. Of course the sites owner was the closest to being correct in his predictions from the beginning of 2007. I doubt he would have posted if he wasn’t that close though.
I take all predictions with a grain of salt since nobody can really know what the future holds. There could be some devastating natural disaster or some other major event to throw trends off course.
Peter, if you’d like to send me an email, I’d be happy to send you a PDF of that Money article. It was sitting in my mom’s bathroom for years when I saw it, and I thought it funny.
As to the natural disaster, you’re right. I forget the context, but on another site someone was crowing about the good decision they’d made in August, 2001. I don’t remember what exactly the decision was, but whatever it was, but for 9/11, his results could have been considerably different. It wasn’t that he made a good decision, he made a lucky decision.
Finally, I always say the biggest threat to real estate prices is a pandemic. That conceivably could take us back to 1950s prices (adjusted for inflation).
Points about what comps appraisers will use are many. If an appraiser is appraising a house in an area with increasing or stable sales (1 – 3 months market time), with more than 3 or 4 comps that are not distressed sales, and sees 1 foreclosure, he will not use that foreclosure as a valid comparable. The foreclosure may not even be mentioned in the appraisers comment section.
Not all foreclosures will be mentioned in all appraisals. In fact, if we pick a recent sale, hire 10 appraisers, and don’t post on this blog till the appraisals are all in, I’ll bet we see huge variances …
It worries me that the lenders may not be able to pick their own appraisers. Most of you don’t remember the days in about the mid-80’s when an FHA appraiser was chosen from the FHA appraisal list, and you got whoever was ‘next’ in line. Appraisals took more than 90 days … OMG it was a nightmare. Not only was the wait time insane, but when you finally got the appraisal back, it often killed the deal, low value or harsh work orders. I hope today there are more checks and balances – back then an FHA appraisal would ‘stick’ with the property for 6 months, and you couldn’t get rid of it. Sometimes you could work with the appraiser to correct value by providing comps, and that was good, but it seemed at the time that there should have been a better way of handling the problems created by a few appraisers. There were a couple who were famous – and if you got their name, you cringed!
Leanne, it’s still that way with VA appriasals…it’s luck (or unluck) of the draw.
Kary,
Something you said in one of the comments above, #42 to be specific that caught my attention. I am planning to look for houses soon and the only properties I was looking at was the constructions in this century. You seem to have exact opposite criterion. Could you please elaborate a bit more? I think some of the reasons to rule out newer properties are that the newer properties are built too close to each other without much backyard or front lawn. Apart from that I can’t think of any otehr reason.
PS: This discussion might not be pertinent to this post so it’s ok if you want to talk about it in your blog over at P-I.
I personally wouldn’t touch houses slapped up during the bubble-boom, mainly due to concern for quality of underlying construction. Too few qualified construction workers, too many houses being built. My ma bought a new townhome, and though the finishes are nice, she is regretting not looking more deeply. A counter is already separating from a wall.
They also don’t hold their value nearly as well as older homes around these parts.
Rhonda, unluck of the draw is an awful thing :-)!
Chaina, here’s my opinion on new built since 2000. It’s all about the location. And, I am not a condo fan of since 2000 … just think of all the condos you’ve seen shrouded due to poor siding or window installation issues, or poor building materials …
Land is scarce, so the builders have to go farther and farther out to gain large plats of land to build subdivisions on. In a downward cycle, those outlying areas, all built new, all built pretty much in the same time frame, are the often the weakest points in the market.
A lot of what goes wrong with newer properties regarding value, is that if nearly everyone buys in the same market cycle, they often are selling in large numbers during another market cycle, and so you have more competition right in your own neighborhood than a more seasoned neighborhood. (Seasoned means old, just like me!)
Bili’s concern may well be valid, but some builders have excellent reputations for quality, and there are many who deserve that excellent reputation. A small builder also can be excellent, or terrible, so have a good building inspection when you buy.
I definitely agree with Bili regarding older homes – they hold value, and some of that is charm, but a lot of is is location location location.
My guess is Ardell is going to feel much the same way.
Chaina, I think the others and you have hit on most the points. Land size, density of neighborhood, location, potential construction issues yet to be discovered. I’d add plastic pipes–I hate plastic pipe. And as I just mentioned in P-I land, in brand new construction you don’t know whether your neighbors will be neat, keeping up the property, or pigs, trashing the property.
A lot of that can be taken care of with money. More money a bigger lot, less dense neighborhood, copper pipe, etc. But I share a lot with the bubble bloggers when it comes to what I’m willing to pay for a house. And I’m a bit old fashioned too. I like real wood siding, roofs supported by 2x6s on 16″ centers etc.
New probably has the biggest advantage in the quality of wiring, but you can go back a quite a few years there without issue.
New is also being discussed here:
http://blog.seattlepi.nwsource.com/realestate/archives/136749.asp#comments
It’s also a hijack of a thread. There’s a more recent thread discussing new condos, but the discussion of new is in the thread on a particular NWMLS area. 😀
I haven’t done much new in the last 18 years. Hardly at all really. Besides yes or no or this one vs. that one, there’s not a lot I can add to the equation. Which upgrades to take or not for resale, which lot. Hardly worth even my low rate most times. In a flat to down or even moderately up market, they don’t hold value as well most times. I rarely recommend new. New is always risky and almost always a bad where.
I don’t even really follow new because my clients don’t seem to have a lot of interest in it (especially after I mention the pigs that will be moving into the neighborhood–maybe it’s related?) 😉
Last month I think it was about 20% of the sales in King county–but I have no idea if that’s normal or not.
But to come back on point, that is another thing about predictions. To predict prices you’d have to track new construction–permits, etc. Because new construction can easily flood the market with supply (especially with condos, but with houses too). And that doesn’t show up in your past data. To some extent it doesn’t even show up in your current NWMLS data, because not all the properties in each complex are listed.
And while permits and such probably aren’t applicable to Ardell’s 9 month time frame, new construction can still affect things. Unlike resale owners, we know new construction owners don’t have the option of just going off the market and waiting until next year. Instead, they may be forced to start dumping, which would cause resale prices to go down too.
“But to come back on point, that is another thing about predictions. To predict prices you’d have to track new construction–permits, etc. Because new construction can easily flood the market with supply (especially with condos, but with houses too). And that doesn’t show up in your past data. To some extent it doesn’t even show up in your current NWMLS data, because not all the properties in each complex are listed.”
I have factored that in, Kary. Just because I don’t show all of the detail doesn’t mean I based my opinions on what you are seeing. A bigger factor for me has been the slowdown in builders buying property to build on, and the days on market of projects completed. Also the profit or lack thereof of builders, slashing prices, increase in builder incentives…etc.
Let’s just wait and see how close I am by year end, Kary. Personally I think I was being generous with my numbers so as not to start a “pandemic”. Sellers need to be less arrogant and buyers need to be more cautious. I do not regret sending that message.
We GET that you don’t like it. We GET that you don’t feel an agent should predict in a manner that might cause buyers to be reluctant to buy. Though something tells me that the part where sellers may be reluctant to over price, would meet with your approval.
Thank bili, leanne, kary and ardell for chiming in on my new vs old question. At the risk of diverting again from the original topic of this post, here’s one more question: Leanne, you mentioned that some builders have great reputation.
I am new to this area and couldn’t find much information about the reputations of various builders in this area. From colleagues, I heard that murray franklin > Camwest > Quadrant but is there a formal system of rating builders? Is there any other place where one can find such informtion?
No matter where I have worked in this Country, there has always been a direct relationship between cost and quality. Once the cost of land is factored out of the equation, the lower the cost the poorer the quality.
I mention this as I have seen a great custom builder also do a crappy townhome complex. The reputation of a builder does not always equal everything he builds is great. Cutting cost equals cutting corners…no matter who is building it.
If the builder is known for the cheapest home prices, then you can’t expect the quality of a high priced custom builder. Comparisons in similar pricing often produce the same results. It could be easy to say this builder is better than that one, though we are not permitted to do so 🙂 But the reality is for the builder with the lesser reputation, the price tag on the home is also dramatically less.
ARDELL – you constantly amaze me! You are one of the bravest people I have the pleasure of knowing and so smart! Way to stick your neck out there – any buyer or seller would be lucky to be your client.
I look forward to more of your predictions:)
I’m going to do a twist on Sunday Night Stats tonight. Have an inspection in Seattle later today that will likely run into the evening. But I’ll start on it after I get back and after I eat dinner.
Hopefully, agree or disagree, people who read both Seattle Bubble and RCG will be better off for having done so. It’s like watching a conservative get more liberal and a liberal get more conservative and seeing them get closer to one another as a result.
Anyone who says “but two years ago you said…” doesn’t understand how blogging expands the vantagepoint of the writer even moreso than the reader.
I never thought of it as “brave” to tell the truth. But I do recall being onstage at Inman last year and thinking “Isn’t it sad that the primary reason I’m up here on this stage speaking to over a thousand people, is simply because I’m not afraid to be honest.” It’s pretty sad when you think about it.
# 123, Chaina, there isn’t a trustworthy source for general info on reputations of builders. A lot is going to be anecdotal, from your coworkers, and your agent.
A possible way, and I haven’t tried this yet, but if you like a particular builder, have your agent search by the builders name (your agent can search under owner name is likely the best way),
and see how many pendings and closed sales this builder has in the past 6 months. If the neighborhood is new, and only 1 or 2 houses have sold, then find another neighborhood this builder has built in, and see if his properties are actually selling. This won’t tell you quality for sure, but it can be a sign of general respect for this builder.
No matter who is the builder, don’t buy new without a home inspection. Builders may not allow your offer to reject buying the place on trivial work needing to be done, but the inspection often catches mistakes and is a tool for correction. Years ago I had a builder sup miss insulating an attic, and the City inspector missed it too on his inspections. The builder was delighted we caught it, and all ended very well.
I don’t do a lot of new construction, but when I do, I insist that we look always at the future: why will this condo/home sell well in the future? If the answer isn’t quite clear, don’t buy it.
And, in a down market is new a really bad idea? Mostly yes, but not always. Some builders are quite smart about making a deal happen, and may well have very good buying opportunities. But, make sure you’re not buying house # 12 in a 250 house subdivision … ditto on a condo. Buy last, not first.
I’m not certain, but I think new may get you some implied warranties in Washington State. Their being useful would be dependent on the builder still being solvent.
Somewhat related, years ago I represented a buyer where their builder went under (they owned the lot and contracted to have it built on). This was before the change in the law regarding liens and construction loans. Anyway, I don’t recall the details, but they came out rather okay because this builder was so big and so trusted that very few of the suppliers sent the requisite notices to be able to claim a lien against their property. That was good because most/all of their construction loan had been paid out to their contractor.
Leanne,
Why would someone want to buy last? Won’t they be guaranteed the worst location that way? I lost you on that thinking.
Ardell, read the piece in P-I land on failed condos. Also, by being last you can probably negotiate the best price.
http://blog.seattlepi.nwsource.com/realestate/archives/136782.asp
But you’re right, you’re not going to get the pick of location. But in a lot of new developments, that might not matter much.
Ardell –
Kudo’s for the predictions. I don’t know how you find the time for all the banter with Kary
FWIW – I think your prediction is more bearish that what either Tim or myself posted in January. Bubbleheads indeed
Oh, and going back all the way to comment #18 – the peak for Radarlogic was 6/26/07. The published date was 8/27. I think you may have grabbed the date from the wrong column.
deejayoh,
shhhhh…Kary wouldn’t have studied the data to find the discrepancy 🙂
Wow, I’m out of town for a couple of weeks and look what I’ve missed. Ardell predicting price declines in Seattle, surely this is a sign of the apocalypse isn’t it?
And what’s the deal with this whole “no one can predict a market” b.s,? Is it not reasonable to assume that a massive increase in inventory and a decrease in sales volume is going to put downward pressure on prices? Does it really take a rocket scientist or Yale economist to figure that one out?
Look at every other major metro area in the US that has a substantial runup in prices and inventory. They are now all turning negative. Not thinking that prices will go down really makes you look like an ostrich with your head in the sand.
# 129 Ardell, for new construction, houses, not condos – buy towards the end of a plat/subdivision development for best resale, as well as best price from builder. Obviously, don’t buy it if it is a crappy lot or house – but a smart builder is going to save something good for last, just like a smart card player.
Buying in the beginning of a plat/subdivision is the fastest way to lose money that I know of in a down market. In an up market, maybe a good way to buy speculatively, but we do not have an up market today – and if you look at most of the intense problems of foreclosure across the country, they are heavily pocketed in new construction neighborhoods.
Condos …. again, buying last means less risk to the buyer in more ways that most imagine. Read this Seattle PI detail by Larry Cragun:
http://blog.seattlepi.nwsource.com/realestate/archives/136782.asp
Ardell wrote: “shhhhh…Kary wouldn’t have studied the data to find the discrepancy :)”
Not a source I would even check. I really don’t care about sources of historical data other than the NWMLS because that’s the market I function in. Also, most other data simply isn’t timely (as the delay noted here indicates). Finally, data that includes FSBOs is pretty much irrelevant to what I do, for a number of reasons.
But I suspect I look at data a lot more deeply than you do. I’d never describe what you did above as being “mountains of data.” 😉
Kary,
If you look at the data a lot but you don’t want to use it to make any projections, then what do you really do with the data? Wouldn’t that be the primary use of data?
Matthew wrote: “And what’s the deal with this whole “no one can predict a market
Chaina wrote: “If you look at the data a lot but you don’t want to use it to make any projections, then what do you really do with the data? Wouldn’t that be the primary use of data?”
The primary use of the data for real estate agents is to determine the value of property today (or some time in the past if necessary). They use the data in the same manner as appraisers, although with different methods.
Predictions are sort of a parlor game. Fun for some, but really not much good for anything useful.
Kary said: “Predictions are sort of a parlor game. Fun for some, but really not much good for anything useful.”
A young man who recently came home from Iraq and is currently in school asked me if he should buy a condo or rent. I’m looking at all of his reasons and the probability of his staying in the place he may buy in for a long period of time. The likelihood that he will stay in the condo after he gets out of school and gets married as planned.
He saved quite a bit of money while in the service, all hard earned. I think very hard and predict the best I can before answering him, because that is what he expects and trusts me to do on his behalf. He doesn’t think it’s “a parlor game”.
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Kary,
Believe me, I understand markets. The timing is the difficult part, the long term trend in this market is clear:
Prices are moving down.
Hi Ardell,
What a hornet’s nest you stirred up!
My area of Southern California is tracking something like your neck of the woods. The only difference in my take for this area has to do with pent-up demand. I’m seeing a lot of buyers saying they will hold off; resulting in reduced sales volume. On the other hand, many sellers are deferring their plans as well. Consequently, the run-up of inventory hasn’t been great so far. If inventory patterns hold, we might very well see a change of buyers mood in the Oct 08 – Mar 09 time frame.
The reason: Year over year comparisons will be to this year’s very low sales volume (commencing Oct 07). This might cause some of the “pent-up demand” type buyer’s to get off the fence.
The unknowns are: What will inventory levels get to this summer? Will the economy hold up?
It’s way too early to place bets on either.
Thanks for your post.
“This might cause some of the “pent-up demand
Busted!
Thanks for taking the time for such a thoughtful response, Ardell.
Thanks, I guess, for referring to me as a “wishful agent” – in the 20 years I’ve been in this business I don’t think anyone has referred to me as a wishful thinker before.
I should have expanded a little about our inventory down here in the Glendale, Pasadena area. In single family (non condo) homes we have virtually no new construction – no land, no new homes. Our inventory levels are up to about 1035 homes on the market now with 622 sold in the 1st quarter. A current inventory of about 10 months.
Foreclosures are up from 1st q 2007 of 43 to 163 1st q 2008. Notice of defaults are running from 110 to 140 per month. Some of those are multiple notices on the same house. Apart from that, most of the NOD’s will likely result in REO’s (less a few short sales). If it turns out to be true that defaulting loans peak this summer or shortly thereafter (with the wave of resets expected this summer) things should begin to heal next year; perhaps as early as next spring. This depends (as my earlier comment mentioned) upon the economy in this area holding up and upon overall inventory levels.
Based on our current numbers I anticipate a price decline of between 10 and 15% over the next 12 months with the sales rate running at their current levels relative to last year.
So, I guess I was being optimistic – perhaps even indulging in a little wishful thinking – because the economy may very well not hold up. If it doesn’t we certainly will see more sellers, many of whom will be the same old banks with new REO properties. Time will tell. In any event, thanks for popping the soap bubble.
I do, however, think that the press coverage will start to shift when the year over year sales comparisons are based on the lower numbers (40-50% lower in my area) that we have experienced since the August 2007 home-finance “Grand Reckoning” occurred.
Finally, I really do believe there will be less fence sitting after Nov./Dec. this year. Calling it “pent-up demand
LOL. My pleasure, John. I’ve been watching Manhattan Beach, Hermosa Beach and Redondo Beach/Torrance Beach. I know those areas better. When it hits bottom you’ll know. I’ll be buying a 2nd home on “the Avenues” 🙂
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The original blog entry was a lot more interesting than all the bickering that followed in the comments.
I’m not sure why there is such issue as to whether the blogger makes a prediction or not. Everybody’s got an opinion, and the reader is going to make up his own mind about whether to agree or not. And I find people tend to believe what they want to believe anyway.
Furthermore, we the thrill-seeking public LOVE predictions. Look at the long-running and ever-popular horoscopes column. So, it’s all entertainment to some degree, be it from the Economist or a blog or some random word synthesizer.
Ardell in the OP wrote: “My price predictions are: . . .$429,000 for the 2nd quarter of 2008”
The problem with making specific predictions so short term is that the real numbers come up short term.
Not sure what you’re going to say the number turned out to be, but you were off by quite a bit because April, May and June were:
448,500
440,000
449,700
Kary,
You’re kidding, right? LOL! I won’t be looking back at these predictions until early next year. I think I’ll be a little high on volume for the third quarter and a little short on the second.
If the last quarter is exactly 3,927 they’ll be dragging me to Salem to burn me at the stake 🙂
As I said in this week’s post, I’m not doing the 2nd quarter stats for a few days. Predictions are only good fun when you look back at them in toto. No one expects complete accuracy, but I’m hoping to be close on at least a few of them.
It’s just fun, Kary. You missed the part where it was supposed to be fun.
Oh, so then it’s only fun. You no longer advise your clients when to buy and sell based on your beliefs as to where the market is headed?
Kary,
You’re not really pretending to not know which way the market is headed, are you? There isn’t a buyer or seller in the Country pretending not to know anything about “where the market is headed”. In all honesty, I thought I was being generous in my prediction that volume will end up at 16,500. And my prediction is that the market will be 15% down from the high by year end.
Since you don’t have an opinion on the matter, mine will likely be more right than yours.
Here’s the bottom line quote, Kary. “I think if we hit around 16,500 by year end, we will have bottomed out as to volume, but not price. I think prices will be down 15% from July of 2007 to end of December 2008. Volume will level out and prices will continue to fall.”
Come see me around Jan 10th. Clearly people should proceed with caution and act in a manner consistent with expectations that the market will be down, likely for 3 years or more. Do you really disagree with that? How can the mortgage crisis, the short sales, the foreclosures (more to come) not have an impact? How can days on market doubling and tripling and volume sold dropping by half, not have an impact?
I see many agents still predicting that prices will be up “in the long term”. Isn’t that the same as saying they will be down in the short term? Aren’t we already seeing that happen? Do you think sticking your head in the sand and pretending not to see anything is a responsible position to take? I’ll make you a bet, Kary. The minute there’s any positive signs, lots of agents will all of a sudden see a whole lot more than they choose to see lacking something positive to say. That’s just not fair.
“You no longer advise your clients when to buy and sell based on your beliefs as to where the market is headed?”
Of course I do. I always have and I always will. I just wrote three posts on the subject a few days ago. One addressed to sellers and one addressed to buyers on my blog, and one addressed to agents on Active Rain. They received an all time high hit count, so someone must have seen them. I don’t only blog here on RCG, Kary.
I just took a peek at the PI, and all I can say is…you’ve got to be kidding me! Oh well, as I said before, I won’t come over there and bother you guys.
This piece received a lot of hits, but that doesn’t mean it was worth anything. There’s a difference between being popular and being right.
I still say agents shouldn’t make predictions, and if they do, clients shouldn’t act based on the predictions. That would be foolhardy.
And again with the PI thing. Here/there. I don’t get it. You’re free to post there, and I’m free to post here. Are you looking for a site where people only agree with you? This is a consumer site (unlike the PI) and IMHO consumers should know not to listen to agent predictions of the future.
NAR just changed their 2008 forecast. You may want to check that out, Kary. Clearly we can forecast as well locally as they can nationally…no?
As to “here/there” I don’t expect you to be different than you are.
If many didn’t listen to and believe that real estate could only go up, do you really think there would be so many surprised people today? It really isn’t a matter of agents not predicting, Kary. They do it all the time and you know it. It only becomes a “problem” when they are not projecting a rosy picture.
Check out NAR’s 2008 forecast. If they are changing their minds to down for 2008 halfway through the year (but still saying up in 2009), I think that’s a sign that I am more right than you would like me to be.
As to clients being foolhardy for listening to me, I have not had that experience to date, nor have they. Clearly I expect them to own their own decisions, but advices must be timely and of value…because it is part of what we do. I do offer services with no opinion…that service costs less.
Kary said: “This is a consumer site (unlike the PI)…”
The PI is not a consumer site? How so?
It’s for “Real Estate Professionals”, Ardell. All others will be scoffed at, denigrated and brow-beaten until they grow weary of the abuse and leave.
Bili, have we abused you over there? I don’t think so. No posters that only have comments about kool aid, they might take some abuse, but thoughtful posters, no.
And Ardell, NAR? Give me a break. They can’t predict their next bowel movement.
Not lately, of course I haven’t posted over there lately.
Take a look at the top post right now, however. Mack with a post cherry-picking his favorite “market segment” and an interestingly chosen time-frame which has little value except to drop bait, trolling for someone fool enough to refute, then “pounce goes the Realtors!”
Neither entertaining nor informative. Just stupid. Why bother.
Well at least Mack is consistent with his little area and property types. Elizabeth Rhodes, in contrast, just picks and chooses whatever numbers happen to be negative.
But hey, the May numbers shouldn’t have caused anyone to jump of a bridge, and the June numbers shouldn’t cause anyone to get too excited. One month does not a trend make.
Huh. I didn’t read Lizzy’s latest, but the last 100 of hers I did read, she was consistently choosing whatever numbers were the most Realtor-friendly (I won’t say positive, because positive is more affordable, not less, in my book).
I agree with you, however. No biggie either way. Just another datapoint in a long, slow slide back to the rational. That’s why I can’t fathom why Mack bothered, other than maybe to bait.
I was out all day. Did I miss Kary’s answer to this?
“Kary said: “This is a consumer site (unlike the PI)…
Sorry, I missed the repeat of the question.
Over in P-I land we will discuss some of the same topics as here, e.g. statistics. But we also discuss things that are really of more concern to only agents. For example, even though our volume is less than here, you’ll find a lot more discussion of Form 17 and the distressed property law in PI land. Craig’s recent piece on Form 17 as an Addendum would be something that would fit better over there, IMHO.
Although it does vary. Right now the topics are perhaps just as much of interest to consumers.
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Hope this thread isn’t dead. Leanne (comment 82), was there a particular reason why you said to foreclose judicially? I’m in pretty much exactly that situation; in second position and in default on a house that has lots of equity. I want to foreclose, but I can’t seem to get a straight answer as to what happens to the note in first. Will a judge make sure that the minimum bid is enough to pay everyone off?
If I go the non-judicial route, how exactly does that play out? Keep in mind that the total amount owed is approximately 60% of market value. The buyers are just being idiots.
George,
It looks like you have enough at stake there to get legal assistance. Not a good idea to rely on blog comments to pursue what you are doing there. Get thee an attorney.
George, we don’t even know what state you’re in. It varies by state, but it’s unlikely you’d want to go judicially.
I agree with Ardell that you need an attorney. If you’re local (King/Snohomish), email me and I can refer you someone. Or perhaps Craig does that sort of work (foreclosure).
Time is not your friend because interest is possibly accruing on the first.
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