Sunday Night Stats – Snapshot of “bottom”

Revisiting my “bottom call” of February 7th.  At the time, even those who potentially agreed with me, wanted more “proofs”.

But in the instant that I “called it”, it was more like watching the horse at Steel Pier diving into the ocean.  You knew the horse was going to land UNDER the surface of the water, even while you were watching it in mid-air.  Basically, the market was taking a high dive off of the beginnings of “spring bounce”. It was like standing on a train platform and watching a bunch of people jump in front of the train.

For those who don’t like to believe that the Housing Market Stimulus Package is going to improve the market, you may take some consolation in the fact that the same stimulus package contributed to “the bottom” call.  The mere hope of thousands of dollars coming, created the instantaneous and abupt change in the marketplace that caused “the bottom” to happen. So you can both credit the Obama Administration for the “recovery” and also blame them for “the bottom”. That should satisfy just about everyone.

Here’s the final snapshot of what I believe is “bottom” and the forces that created it.















The green line is the percentage variance between asking and sold prices.

The shift down from 3.1% to 1% signalled the typical beginning of “spring bounce” in January of 2009. At the time of my bottom call, this percentage shifted from a low point of 1% to a high point of 5.5% almost overnight. You can see the historical data from just before peak to present, with some commentary in this post. The only other time the % variance of asking to sold prices exceeded this 5.5% mark was in February of 2008, BUT that was at a time of high asking prices

This brings us to the blue line.  What you are seeing in December, which is often the lowest point for prices in an given year, is a median asking price of $451,000 (for this market segment) being pulled by a 4.2% variance down to a sold price of  $432,000 and an adjusted median price per square foot down from $256 to $222. Then you see the normal seasonal ascent as asking prices increase (blue line) and the % variance decreases (green line).

Note the yellow dots. Even though asking prices stayed level from 1/1 to 2/1, the prices (yellow dot) increased because the % variance from asking price to sold price decreased (green line).  Watching asking prices rising and dropping does not give you the same perspective of watching that in conjuction with:

Median changes in Days on Market of homes sold

One of the most startling indicators that “bottom” was “in the room” was the insane shift in % variance of homes sold in less than 30 days.

% sold in 30 days or less

As you can see in the above link, the % sold in 30 days or less just prior to peak was 70%.  So it would seem to follow that the extreme low of 13% at the time I called “the bottom” would be “just prior to” bottom. While we don’t yet have all of the sold data for the month of March, the shift upward from 13% to 23% and March to date at 33% is a big sign sign that February 7th or so was and is likely “the bottom”. I find it very hard to believe that number will ever get lower than the 13% it was when I made that “bottom call”.

In writing posts in preparation for this “snapshot of bottom” post, I did visit the volume of sales statistics. But to a large extent I have stopped relying on this data and consider it very old news. The drop from peak as shown in the graph in that link from 181 in June of 2007 to 86 in the short period to September of 2007 was a huge signal that prices would follow. But today I rely less on volume statistics as a sign of anything, because with squeezed equity positions you find more and more sales happening outside of the mls system.  YOY volume is not only “old news” it is also mostly only relevant to agents vs. buyers and sellers of homes these days. Still I provide it for those who like all of the data.

Last but not least, let’s visit the plunge of sold prices in the chart below.















The chart above is where you get the fine tuned visual of watching prices take a nose dive off of Spring Bounce. Perhaps if you didn’t “get” my reference to the Diving Horse in the opening of this post, you can feel it now as you examine the variance in this graph from December of 2008 to March of 2009.  You can almost see the horse slowly climbing up the ramp (from $432,000 to $469,000), and then you gasp out loud as the platform falls out from under the horse as he plummets head on into the ocean ($405,000). My post of February 7th was me “gasping out loud”.

How I chose the market sampling bears some explanation. In my bottom call as detailed by Aubrey Cohen in his article in the PI:

“DellaLoggia said… buyers are consistently calling the bottom at 20 percent under peak pricing” (not including houses that are not in foreclosure or being sold as part of an agreement to avoid foreclosure)…she’s focusing on the North Seattle and East Side areas where she works. She said distressed sales were going for about 37 percent below peak, and areas with a large share of distressed sales would see those dragging down prices across the board.”

So to determine price specific to a subject property, one you choose to buy or one you need to sell, you need to calculate what peak price would have been for that property.  Then you need to calculate the % of distressed sales affecting value.

Since the drop in premium pricing for view property is dramatic in a down market (just as it is accelerated in a hot market), I excluded lake and mountain view property from this sampling. Since very large homes (mostly new or newer) are experiencing a different market influence which is not “at bottom”, I also capped the square footage in this sample to not more than 3,000 square feet.

Making those two initial adjustments, I used the zip codes of 98004, 98005, 98007, 98008, 98033, 98034 and 98052. This gives us both Downtown Bellevue and Finn Hill.  It gives us close to Microsoft and North Juanita.  It gives us an approximate mix of 10% distressed property to 90% not distressed property and it gives us a combined drop from peak to bottom of approximately 30%.

That 30% is a combination of the 20% and 37% quoted in Aubrey’s article,  an extreme reaction by sellers to jump in front of the train with deeply discounted asking prices and the buyers going after that deeply discounted group with a sickle chopping 5.5% off those lowered asking prices.

I did a final adjustment in the red line of this post to equalize the slight variance in median square footage of the homes in the monthly samplings, to be sure the results weren’t skewed by minor sold home size differences from month to month. This is noted as AMPPSF – Adjusted Median Price Per Square Foot.

One thing I know for sure.  It was a whole lot easier to write this original post, than it is to explain it. 🙂

Related posts:

RCG – The Bottom CallRCG Sunday Night Stats – At Bottom , “Agent Predicts Housing Slump’s Demise” – Aubrey Cohen, Seattle PI, My thoughts on Aubrey’s article, Snapshot of Front Page “above the fold”

This entry was posted in General, Housing Market, Sunday Night Stats by ARDELL. Bookmark the permalink.


ARDELL is a Managing Broker with Better Properties METRO King County. ARDELL was named one of the Most Influential Real Estate Bloggers in the U.S. by Inman News and has 33+ years experience in Real Estate up and down both Coasts, representing both buyers and sellers of homes in Seattle and on The Eastside. email: cell: 206-910-1000

108 thoughts on “Sunday Night Stats – Snapshot of “bottom”

  1. Ardell,

    It’s really tough to get the stats to tell something meaningful when using data for a short term period. If you look at the past charts, you will realize the RE bottom does not come and go over a period of a few weeks. The RE bottom is prolonged and stays over at least a few months if not years.

    These would be fun posts to look at in fall and winter when the prices would be down a few more percent.

  2. Waileakid,

    You said “a few more percent”. A couple is two. “A few” is 3 or 4. More than that is “several”. Did you really mean “a few more”?

    I agree that could happen, but the stats today include some sales with up to 6% concessions. I myself did one for a client in that period with 5% seller concession. So “a few more percent” would not change the significance of this post.

    Also you would have to balance the difference in interest rates at that time with the small variance in price. Most buyers are not happy getting a home for 3% less and an interest rate of half to a full percent more. That’s the gamble.

  3. b,

    No one is ever “priced out forever” by mere market conditions. I still remember the day my then husband screamed “interest rates will never be this low again!” They were at 7%. I just laughed.

    Market conditions may change what you buy and where you buy it…but you won’t be “priced out forever”.

  4. Gene,

    The people in the comments of that post didn’t agree, especially the ones from NY who were looking at a 47% price decline prediction. Looks like they are using “affordability” as the standard, and I don’t think NY ever worked using affordability as the standard.

  5. Waleakid: “The RE bottom is prolonged and stays over at least a few months if not years.”

    I don’t think I’ve ever seen it totally “flatline”. The bigger issue that will hold prices down will be the lending and appraisal industry. We are seeing that already. Banks don’t necessarily want to lend against what a buyer is willing to pay these days.

  6. I’m sorry, but I’m just not getting the logic used here. Could you clarify?

    The big drop in closed sale prices is evidence of “the bottom”? It’s especially confusing to me since these months (Feb and March) generally have higher closed sale prices than January and December? If you look at the past several years, March tended to have prices 4% higher than the preceding January then flattened out until September. This is exactly the time when there is seasonal pressure for higher prices, but they’re still falling.

    I get the closed under 30 days is up, but this is a seasonal phenomenon too.

    If you pull of the seasonality and weekly/monthly noise, everything seems to be going lower, lower, lower.

    Lastly, I question any bottom call that doesn’t even address the rapid increase in foreclosures and unemployment.

    But, as always, an entertaining read from Ardell — even if, or because of, my disagreements.

  7. Dr. Short,

    You are correct that areas overweighted with short sales and foreclosures will, even now (at bottom), have a steeper dip. I have addressed that issue in this post.

    But what makes you think that tomorrow’s short sale or foreclosure will sell for less than yesterday’s short sale or foreclosure? Will a short sale in May sell for less than a short sale in December? If so…why?

    I’ve done the best I can to explain from this vantage point with 4 or 5 posts and as many or more graphs over the past three days, here and on my blog. Thats the best I can do for you at the moment 🙂 We’ll have to look back at this as time moves forward.

    The true tale will be told in 4th quarter of 2009, but we’ll have to balance then prices with then interest rates as well, vs. even FHA & VA being under 5% at present.

    Always enjoyable when you stop by. If we all agreed with one another all the time, life would be pretty darned boring.

    P.S. You can’t “pull” seasonality out of the market, as if it is doesn’t count for some reason. As I explained in one of my posts from Saturday in the links, MOST appreciation in any year happens during that season you want to “pull”. If we pulled that season out of every year for the last ten years…would you have a picture of what happened? Of course not. You can’t “pull” any of the data “out”. To what purpose would anyone do that?

  8. Wow.

    I have an I.Q. that tests out on the high side of 150.
    I have a degree in economics, awarded with highest honors, from one of the top 5 schools in the country.
    I have a masters degree in finance from a major university.
    I have decades of exposure to economic research and theory.
    I haven’t had a drink in over 20 years.

    I have no idea how what you’ve posted above is supposed to prove that we have hit bottom. I must… still… have much to learn. Goodnight.

  9. I don’t want to pull the seasonal out. This is the time of year where we should be seeing price increases, not further decreases — even in a flat market. This is the one area where the seasonality doesn’t appear to be holding up.

    But in other areas seasonality is holding up. Sales volume is up, inventory is up, and houses are closing faster than in January. But I don’t think you can look at highly seasonal data points acting as expected, then compare March to January and make the conclusion the market has turned the corner. This would be like using March temperatures compared to January as evidence of global warming.

    Why do I think tomorrow’s short sale will sell for less than yesterday’s? Because, as you’ve pointed out, distressed sales sell at a substantial discount. But they also help set the market price and appraisers pay attention to them (as noted in one of your previous discussions). They drag the market a little lower.

    Then tomorrow’s distressed property comes along and gets the same 20% discount off the now lower market rate. And it drags the market a little lower again. And so on.

    If distressed sales were decreasing as a percentage of transactions or even holding flat, I wouldn’t be so concerned. But they’re increasing at a fast rate while “normal” transactions are exceedingly light. They have the *potential* to take over the market. It hasn’t happened here yet, but it has elsewhere. And it’s been UGLY.

  10. Scotsman,

    There is never a final proof of bottom, until you can look up from it on both sides. I have an I.Q on the low side of 150, studied economics at the Wharton School, but skipped the electives needed to get the degree, I had a glass of wine last night, which is why I did Sunday Night Stats on Monday.

    I can usually figure people out from where they think the Dow will go. If the Dow goes to 4,000…this won’t be bottom for real estate. If we’ve seen the bottom for the Dow at 6,500 or so…then maybe I’m as right as anyone can be today.

    What I don’t know is what will happen to the homes that will never sell. Maybe you can be in charge of that one 🙂

  11. I agree with your big IF, but the market segment I used had very few, only 3, short sales and bank owned properties at the lowest point. Also MANY of the best deals were not short sales and bank owned properties. The builders have been handing out some screaming deals, though some of that is hidden in concessions.

    I know parts of Florida that are practically Ghost Towns. A friend of mine showed a property where alligators had migrated to the stagnant pool water and the buyers ran to their car just in time. The listing agent wanted to know what the buyers thought about the house 🙂

    But here I don’t see that. In fact I see those short sales and foreclosures coming back on market and selling at higher prices. So which do you count as “market value”? The purchase at foreclosure, or the subsequent higher priced sale to the end user?

    If most short sales and foreclosures are bought by investors who sell them at higher prices, why count the short sale at all? Why not count the subsequent sale of the same house only?

  12. Dr. Short,

    The contracts that went into escrow at bottom in February were mostly closed in March. It is March that is way down as to closed sold price. That is not “seasonal”. March being lower than December and January of the preceding year is not a normal cycle.

  13. “That 30% is a combination of the 20% and 37% quoted in Aubrey’s article, an extreme reaction by sellers to jump in front of the train with deeply discounted asking prices and the buyers going after that deeply discounted group with a sickle chopping 5.5% off those lowered asking prices.”

    Yeah but has anyone really been far even as decided to use even go want to do look more like?

  14. Hi Ardell,

    Question: Under what circumstances would you recommend a seller drop his/her price from where it is today, if the house is already priced according to your data: 20% under if it’s not distressed and 37% if distressed?


  15. Jillayne,

    There will be examples that don’t fit the parameters.

    1) View property tear downs. The slide in lot value is more dramatic than the slide in home values. The market for lots has dried up a lot more than the market for homes. When you get to “no one wants it” it usually turns into a rental property. People are more inclined to rent a “tear down” in a great location these days, than they are inclined to buy it.

    2) Low price but no agents allowed. I have seen a couple of these. Nice houses too. But by cutting the price to the point where agents can’t show the property or the buyer has to leave their agent to buy it, they may have painted themselves into a corner. There are so few buyers, eliminating those first time buyers who feel more comfortable with an agent is not likely a good idea in this market.

    3) Low price and low buyer agent fee. Have seen a couple of these. You have to wonder if saving $3,000 was worth it. This is a problem no one really knows how to deal with as it is hard to prove that the lower buyer agent fee is the reason it isn’t selling or why it is selling at the deepest of discounts.

    Number 1 may have to sell the same as a distressed property sale, even though it is technically not in that group. Number 2 may be better off as a For Sale By Owner that allows agents, saving half the fee but not all of it. Number 3 can be great buys for the right buyers.

    In this market segment there are 543 homes for sale. I don’t think there will be enough buyers to buy them all. There will be some houses that no one wants to buy, especially expensive little tear downs that used to sell for lot value.

    Right now, Jillayne, the worst is likely behind us at least for the forseeable near future. I don’t see houses priced at these recommended levels that have been at that price for 60 days with no offers. Condos…another story. I haven’t tracked condos in my posts, but there are clearly a whole lot more condos for sale then there are people who want to and are able to buy them, especially older ones.

  16. In all due respect to everyone and all points of view. We are no where near a bottom and will continue to be no where near a bottom for many years. At best we can hope for is a flat line and I assure you any bumps up in Buying SHOULD be met with educating your clients about the state of our Country and knowledge about pricing their properties according to the current market conditions.

    The foreclosures will continue for many many years and it will easily top current estimates. People are not stupid and will NOT hold onto their depreciating assets while upside down. Mtg Cramdown is the answer and until this occurs widespread we will not stop trendline down.

    We are a mobile society and its not a question of if…………….its just when….it will become a short sale/forclosure.

  17. “At best we can hope for is a flat line”

    I agree that could be the case, Ray. We could see a Spring Bump and the tail end of the year flat to some variance. One of the factors that could make it appear that prices are up when they are not, is hidden concessions that buy down the rate.

  18. Thanks Alan,

    Should I restate that run on sentence to make it more clear for Joel and others, or do you think it would be a waste of time? It seems like he’s trying to say “this is all Greek to me”, so maybe an appropriate response would be to break down that sentence and explain it.

  19. I wanted to reference the buyer behavior that I see now, in the busy season of the year. Yes, there is more activity. Open houses are busier and sales are up a bit. But, in my zip code, the buyer still has a large say in price. The homes that are selling are the ones that are more competetively priced than those of last month. Price per square foot is down. I get daily updates and am able watch each house that takes a price drop as it sits on the market. The houses that are fetching close to asking price are getting that because they are priced lower than houses that came on last month. I have been waiting to buy for 18 months and have no reason to buy now. History dictates that prices will be lower in the winter. So, even if we really have hit bottom, prices will adjust when the “busy” season ends. But, there does not seem to be evidence that the bottom is here, based on the continued drop in price per square foot on listings.
    Additionally, this area will probably need to see an increase in jobs to begin to see real estate prices rise for good. As we are still experiencing contraction in the number of jobs, it seems likely that housing will continue to drop in price.

  20. Hi Ardell,

    As always entertaining and absent any rational relationship to economics, your Wharton education notwithstanding.

    I’ve always found your insistence on looking at real estate activity in a vacuum as a way of denying reality. As evidence for my case, I’d like to point out that today, the only people who are arguing all real estate is local is the NAR and local realtors – your industry.

    Now you are suggesting that we should also look at real estate without considering local economic factors as well – declining employment, rising short sales, continued climb in foreclosures. When drshort pointed out these factors, you ignored them. Again, the only group that is denying their impact is the folks from your industry.

    Are we to ignore banking statistics as well? Rising down payments and FICO scores required to qualify for conforming loans? Adding an anecdote – I have a friend with executive compensation, liquid assets and a stellar FICO (over 800), looking in the seven figure range on the eastside, who is now being told it will take 30% down to get a jumbo. You mentioned the disconnect between what banks are willing to lend and people are willing to to pay. How is that NOT evidence that prices will still fall?

    As I’ve posted before, banks are not acting like we are at bottom. And until they do, we will NOT hit bottom. Consumers are screaming “uncle” and banks are saying “no, WE will let go when WE are ready – and not a second earlier”.

    But in your world Ardell, none of these factors matter. The question: do you still think we are at bottom if:

    – local unemployment continues to rise? to 10%? what about 12%? 15%?
    – lending standards continue to tighten?
    – short sales and foreclosures continue to rise and remain 50% or more of all sales? what about when they are 70% of all sales?

    The second question – what economic situation in Seattle would cause you to reconsider your bottom call?

  21. I don’t think we’ve hit bottom yet, but Atlantic City in the old days was really cool. On the boardwalk the odor was not of the ocean but of the sausage and pepper sandwiches. I saw Gary Lewis and the Playboys at the Steel Pier. I am old.

  22. Ardell wrote: “Banks don’t necessarily want to lend against what a buyer is willing to pay these days.”

    AM responds: That’s because people who don’t plan to pay back money don’t care what they spend. It’s nice to see the banks finally reasserting a role as responsible adults, because far to many buyers are children.

  23. ” I get daily updates and am able to watch each house that takes a price drop as it sits on the market.”

    Patient Buyer,

    This would be more meaningful to me if you would state the relationship of that price to 2008 assessed value using the King Count Parcel Viewer.

    If someone drops their asking price from 1.4 times that value to 1.2 times that value, it is not meaningful. If they drop it from 1.1 times assessed value to less than 2008 (not 2009) assessed value, that is meaningful.

    While assessed values are deemed to be somewhat irrelevant, they are often a good indicator when comparing homes in the same vicinity. If all homes are selling within a range of assessed value to 1.1 times assessed value, someone listing at 1.4 times assessed value and dropping to 1.1 is not a change in the market.

    Many of the ones selling “at bottom” are selling for less than 2008 assessed value. Some of those came on at that price, while other dropped down to that price. The one that dropped down to it is not any different, and does not signal a market moving down.

    If property is selling at 1.1 times 2008 assessed value and then all homes are selling at 1.2 times that same assessed value, the market has gone up. You can’t tell if a market is going up or down by looking at asking price drops as an inidicator.

  24. “…your Wharton education notwithstanding. I’ve always found your insistence on looking at real estate activity in a vacuum as a way of denying reality.”

    Eastside Westside,

    Funny you should mention that as creating a vacuum around the data I’m looking at is something I did learn at Wharton. In fact I had a nasty argument with the Professor when he was teaching us to do that. I said the same thing you are saying to me. I practically screamed at him that it was silly to deny any of the contributing “realities”. I refused to remove certain information from the sample, to study the relationship of isolated factors. He explained that if you don’t do that, you can’t find the root forces of change. It’s simply the difference between the macro class and the micro class, both of which are of great value. The method I used in the first graph in this post is pretty much the textbook example of the micro class.

    “The bottom line is that microeconomics takes a bottoms-up approach to analyzing the economy while macroeconomics takes a top-down approach. Regardless, both micro- and macroeconomics provide fundamental tools for any finance professional and should be studied together in order to fully understand how companies operate and earn revenues and thus, how an entire economy is managed and sustained.”

    Often the break down in communication between me and others who comment is simply that I am looking from the bottom up, while many are looking from the top down. That is why I chose not to comment “against” Dr. Short. He is correct, so why would I argue with him? The readers get to see both micro and macro and that’s a good thing.

    What I bring to the table has to be from the bottom up. What others bring to the table has to be from the top down. I take no offense to your criticism, as you are merely pointing out that some are taking the macro approach and others the micro approach. Both are of value and together the readers get the full scoop.

    Where I admidetly get totally lost is when the conversation goes global and people comment regarding the value of the dollar against the yen or what happened in Japan. I totally admit that I am out in left field with regard to “a global economy” and likely because it was not a global economy at the time that I studied at Wharton. I read those comments with great interest and have often thanked people like Eleua for bringing that aspect to the table, since I cannot.

  25. “As evidence for my case, I’d like to point out that today, the only people who are arguing all real estate is local is the NAR and local realtors – your industry.”

    Eastside Westside,

    Sometimes it is and sometimes it isn’t. For you to suggest none of it is ever local is as bad as anyone suggesting it is always local.

    I don’t expect you to have read and understood everything I have written here for over three years. Prior to July of 2007, the forces WERE local as Seattle was NOT performing the same as most of the Country. It is erroneous to suggest that we were a lagging market in that regard. Local economics were different, and our real estate performance was in kind different.

    At no time did I suggest what happened in July of 2007 was “local” and pointed out many times that the change in the lending industry was NOT local. I also pointed out that the “peak” in Seattle was later because it was not due to the same factors, and the rest of the Country couldn’t possibly hit bottom while we were starting to turn, as they would turn even further down for the same reasons which were not local.

    There is a graph The Tim uses on Seattle Bubble that I republished with his permission which demonstrates this relationship, though he and Deejayoh interpret it differently than I. I think the market forces that bear today are much more uniform across the Country than those that existed prior to July of 2007. They see us continuing down longer than the rest of the Country since we peaked later. I see us turning in unison with the Country and the later peak point being not a lag, but because Seattle did not participate in the first chain of events that created the initial downturn in 2005 for the rest of the Country. Nor did we participate in the same up market as the rest of the Country from 1998 forward to 2005.

    Some things are local…some things are not. To suggest one or the other is always true is equally incorrect.

  26. AM,

    If the bank is not assuming any risk, then why are they still using risk-based pricing? Not fair. Why do they charge a higher rate for lower FICO if that higher rate is not to acknowledge an increased risk factor against some portion not paying back?

    To suggest 100% will or even should pay back is not realistic, nor is it consistent with a bank’s pricing methods.

  27. Eastside Westside,

    You comment is meaty, and it will take me some time to complete my responses to it. Have to run…will continue a bit later. I’m tackling it “from the top down” vs “bottom up” 🙂

  28. Ardell wrote”This would be more meaningful to me if you would state the relationship of that price to 2008 assessed value using the King Count Parcel Viewer.”

    As my dull and untrained mind only attended USC(university of spoiled children), I’m comfortable quoting prices per squar foot averages. These use the sold price of homes in my zip. In Spring 2008, the “average house sold for around $280.00 per square foot. As of Jauary 2009 the average house in my zip is selling an average of $232 a square foot. So, I apologize for not referencing this in my first posting, but I can certainly attest to the fact that houses in my area are definately selling for below 2008 prices. I’m still seeing listings come on at higher than this, but are selling for this or lower than the $232 from January. I’m curious to see how the March numbers will look. I don’t believe we have seen the bottom of this yet!

  29. Patient Buyer,

    I deleted one of your comments because you quoted me as having said something that was said by AM in Comment 30. You then responded as if I had said it, and I had not.

  30. Patient Buyer said: “…but I can certainly attest to the fact that houses in my area are definately selling for below 2008 prices.”

    Everything is definitely selling below 2008 prices. I didn’t say “prices”, I said 2008 Assessed Values. Huge difference. If you give me the map and grid numbers of the Thomas Guide for that area, I can give you some examples.

    The problem with using price per square foot is that doesn’t account for differences in no garage, 1 car garage and 2 car garage. That doesn’t account for differences in lots size and location the way assessed value does.

    Unfortunately, I see many overpaying for a 1 car garage home, as they are using a price per square foot from a two car garage home. Or overpaying for a no car garage home, because they are using price per square foot from a one car garage home. Garages differences don’t come up in price per square foot calculations.

    Try it my way…trust me, it’s better 🙂

  31. Ira,

    That was probably in 1966. My grandparents on my mother’s side lived in Atlantic City then, so I was there and in 6th grade at the time.

    I look forward to meeting you at the Robert Shiller event.

  32. Back to Eastside Westide who said: “Are we to ignore banking statistics as well? Rising down payments and FICO scores required to qualify for conforming loans? Adding an anecdote – I have a friend with executive compensation, liquid assets and a stellar FICO (over 800), looking in the seven figure range on the eastside, who is now being told it will take 30% down to get a jumbo. You mentioned the disconnect between what banks are willing to lend and people are willing to to pay. How is that NOT evidence that prices will still fall?”

    As to the first part, that’s old news now…no? Wouldn’t the fact that many if not most of those changes too place over 18 months ago reflect that we should be getting closer to flat vs. down?

    As to the anecdote, a great example of why I come from the bottom up. I agree with you, BUT most recently I have seen a 15% down product come into play for loan values with a cap of $900,000, so sale price of just over a million. Would knowing that change your feelings? If lending is a little looser now than in September of 2007, but never will be nearly as loose as it was prior that July of 2007, don’t those changes impact your view of where the market will go?

  33. Eastside Westside: “You mentioned the disconnect between what banks are willing to lend and people are willing to to pay. How is that NOT evidence that prices will still fall?”

    Those influences will clearly inhibit the market’s ability to rise from bottom, but should not create pressure down below the comps.

  34. Eastside Westside: “The question: do you still think we are at bottom if:

    – local unemployment continues to rise? to 10%? what about 12%? 15%?”

    It would depend at what income levels those unployment statistics rise in. If there is a loss of minimum wage jobs in retail…then not so much. If there is a loss in higher wage jobs at big companies, causing even those who don’t lose their jobs to be fearful of buying…then yes.

    “- lending standards continue to tighten?”

    I see them lossening, not tightening. They started tight as a drum, then FHA and VA lowered their rates, Jumbo Programs are coming out at lower rates with 15% down, State Bond programs are coming out with downpayment assistance, low PMI rates and some extra tax advantages. Programs are coming in to compensate. I don’t see lending standards getting even tighter. But to answer your question, if somehow tomorrow no one could buy a house without 50% down…absolutely, I’d agree with you. But I don’t see things moving in that direction.

    “- short sales and foreclosures continue to rise and remain 50% or more of all sales? what about when they are 70% of all sales?”

    #1, I do not agree with your premise that these are 50% of all sales. Also, as long as the majority of these go to people who then sell them almost immediately at higher prices, the price at foreclosure is not relevant. The after foreclosure sale to the end user is market value.

    “The second question – what economic situation in Seattle would cause you to reconsider your bottom call?”

    Microsoft leaving town or having massive layoffs.

  35. Ardell:

    The bottom won’t be in until you stop calling the bottom. That’s usually the case in most bear markets. It’s not dissimilar to the stock market. When fools like Jim Cramer stop calling bottoms, the market will likely turn higher for good. That too, in my opinion, is a long way off.

    Also, what exactly does your “study” at Wharton entail? Were you actually accepted into the Wharton School of Business? Or did you simply sign up for some night classes or courses being offered at the U of P for basically any local resident? I don’t understand what you mean that you skipped the electives to get a degree??? The tuition for a 2 year MBA at Wharton is north of $150k.
    Did you actually enroll as a full time student? Who in their right mind, would pay that much money and not complete all courses required for the degree?
    And if you did “really” attend Wharton why would you be wasting time as a real estate agent?

  36. American Socialist,

    I was already a bank officer when they sent me to Wharton. The bank paid for it. It was back in the late 70s, so I doubt costs were at that level. Having a degree didn’t become the be-all-end-all, as it is today, until during the mid-eighties recession, as I recall. Prior to that our Bank President was someone who had started in the mailroom likely 40 years prior. Specialized education and working your way up in life was more the norm of the time. Banks started hiring MBAs when getting them was cheap. I think that was in 1984 or so. Before that time work experience counted for more than a degree, and employers (at least banks) paid for and arranged for specialized education. Once I had taken all of the Economics and Management courses, I took one of the electives. A writing course as I recall. There were no business courses left to take.

    I worked and went to Wharton at the same time. I walked there from my office. I don’t think Wharton modified the class curriculum for me. Macro Economics is Macro Economics, whether you take it at 11 a.m. or 6 p.m.

    I find it hard to believe that the stock market will change if and when Cramer shuts up 🙂 If that it the case, maybe the government will send him money to “bail out” of public view.

    I didn’t become a real estate agent until after I had my third child. I had a 4 year old, a 2 year old and a 6 month old when I started real estate in 1990.

    My sister went to U of P pre-law and Temple Law school. I don’t think her costs for U of P were any different during the day. We were poor. I’m pretty sure she was on full scholarship. I’ll ask her. She lives over by Green Lake. My brother had trouble getting in because he was very sickly all of his life, and died when he was 28. He went to the Charles Morris Price School of Journalism, but his classmates had to take turns carrying him up the steps into the big brownstone building on snow days.

    It was a different time. I don’t think it’s easy to relate current times with the world as it was 30 years ago. We watched DeNiro in A Bronx Tale last night, and it seemed all too familiar. Times have changed dramatically. I sometimes wonder if banks would be better off if they hadn’t switched to worrying more about degrees, than promoting from within based on what people had been taught from the inside.

    I do know there are many young people who feel duped by the promises made if you hold the right degrees, and the insurmountable debt that comes with. Where would education be now if people worried more about what they learned than getting a degree? Where would employers be now if they worried more about people’s ability than the degree they come with when asking to be hired?

    For my children, I strongly promote that they do something they have a passion for, as I think people are happier and have a greater sense of purpose when they work for the work, and don’t dread going to work each day. I don’t live in a world that is about where someone did or didn’t get their degree, nor do I wish that for my children and grandchildren.

    My youngest daughter is visiting as of yesterday. She’s beautiful and talented and a tattoo artist in Venice Beach. I couldn’t be more proud of her for sticking to her guns and pursuing her heart’s passion.

    Aren’t there days when you wonder if having a piece of paper means all that some pretend it does?

  37. To American Socialist,

    I have a Ph.D. (not in Economics, but still). At my college, I interact with quite a few people who have doctorates in Economics.

    That said, Ardell is the most astute economist I have EVER interacted with. Her grasp of the real estate market AND the forces drive Seattle’s market specifically is almost omniscient. I have NEVER encountered such an ability in anyone else.

    So, the piece of paper isn’t always an accurate reflection of someone’s knowledge or capacity to work in a field. And a degree is almost never a good indicator of ethics and integrity.

    Finally, extra kudos to Ardell for keeping her patience and answering everyone politely.

  38. “That said, Ardell is the most astute economist I have EVER interacted with. Her grasp of the real estate market AND the forces drive Seattle’s market specifically is almost omniscient. I have NEVER encountered such an ability in anyone else.”

    Is that a joke? Ardell calls a bottom every new month that goes by. Using this tactic, she’s bound to be right sooner or later. Then again, I believe it will be later rather than sooner. I’ll bet you, your brilliant economist friends, and Ardell dinner at the space needle that this month is not the bottom.

    See you at the Needle. Please bring enough cash to cover my meal and drinks. I consume a lot when it’s free, so please don’t be surprised by the bill I run up. You can all pitch in if you want. I’ll bring a notebook and pen to keep a running total of my consumption and post it here later. I’m bound to set the record for the price of a single sitting!

  39. Jonness,

    Just because you don’t understand what I’m saying, doesn’t make me incorrect. As to Lesley’s comment…I’m pretty sure omniscient is reserved for God.

    I will answer your comment more broadly in tomorrow’s Sunday Night Stats.

  40. Thanks, for posting my post. Sorry for my negative tone, but that goes with the current state of the market. IOW, I interpret your indicators opposite of the way you do. Where is the flaw in my interpretation?

    Green line: Feb-March indicates out of touch buyers are listing their houses too high.

    Blue line: Asking prices plummet Feb-March; yet, variance % skyrockets. This brings us to the interpretation of the yellow dots.

    Yellow dots: As asking prices plummet Feb-March and variance % skyrockets, actual sold prices fall into the sewer. This is a classic pattern seen during a collapsing housing bubble as it exists the sticky phase.

    Purple line: Price per sq. ft. at all time low Feb-March. More of the same.

    “One of the most startling indicators that “bottom

  41. Jonness,

    I figured Newton’s Law. Lesley calling me omnisicient prompted an equal and opposite reaction. Was a Law of Nature, not your fault. 🙂

    I’ll assume you meant sellers there. Look again. The blue line in March is lower priced than March, not higher or even equal to. At the higher asking price in Feb. people paid only 1% (green line) under asking (blue line). In March the asking prices went down (blue line) and they closed at 5.5% under those lower asking prices (green line). So the asking prices were not too high in Feb and when they went lower, the market reacted differently. I say it is because people like those willing to pay 1% less of the higher prices in Feb, decided to wait for the final decision on the $8,000 credit.

    Your comment regarding blue line is accurate.

    Your comment regarding yellow dots…if it is a classic down cycle, why up in Jan, up in Feb, and then plumment in March? Again, I see it is a reaction to the pending credit.

    Purple line…same as yellow dots. Up, up then down.

    The reason I say that is “bottom” is because the adverse reaction just prior to the credit being passed created a “false bottom”. In the other posts in the links you will see a record low of only 13% of homes selling within 30 days during that period. I don’t think we’ll ever see that again. I think that was created by the news of maybe a $15,000 credit…who wouldn’t wait for that?

    I think the credit issue created a pocket of weakness and bottom that will in hindsight be bottom. It was an artificially induced break in the normal cycle, and the market wil spring back to where it would have been without that interruption. Much like the horse who as a result of its sheer weight plunges lower in the water than you and I would, but comes back to the surface, but not the top of the platform where he started (peak).

  42. To Ardell, all forecasters and speculators, omniscient or otherwise:

    I am not a PhD economist. However, as told by a number of former co-workers, now all tenured professors OF economics, that my facility with forecasting and modeling is quite rare. I used to forecast stock and bond indices for a living. I needed to be facile in understanding an economy to forecast such metrics. My training is post-doctoral.

    I’ve also worked building models of how real estate sells – on a city and national level.

    Using Case-Shiller data – not perfect but in IMHO the cleanest (least flawed) data in this industry – it is quite easy to forecast Seattle.

    Using correlation matrices, against SD, SF and LA, over the last ten years, you will find a 98%+ correlation between SEA and what was happening in LA 12 months prior. Ninety eight percent plus. One full decade of data. That means that Seattle has gone up when LA gone up. Down when down. This has been the best predictor of SEA pricing. Better matched than with either San Diego or San Francisco.

    When building an economic model, you want to first be clear that the theory underlying the model is right, so you are not just following some coincidence. Here is why the model makes sense for me(apologies in advance for being pedantic):

    If you look at real estate in context, there is always one place that is more is more desirable somewhere else. While there are individual tastes, there is one piece of land that is more valuable ($$) than any other place on the planet/country/state/county/town/neighborhood.

    Major Metro areas also have different desirabilty. New York v Dayton, OH (no offense to Dayton); SF v Boise; Paris, France v Paris, TX. Why the difference? Lots of reasons – reputation, weather, crime, entertainment, employment, vistas, proximity to water, a few other reasons. The specific why is not important and whether two individuals have different taste doesn’t matter. When you start comparing the opinions of millions of people, preferences start to show up.

    Now, these preferences are not static. As Ardell may recall, New York 2000 was much more desirable than New York 1975.

    Migration Patterns – how the US is made. So how does US real estate work? Amazingly simple on a large scale. First there is NY, the largest city in the country since the first census, and LA. They are the two most important cities in the country because they are the biggest IMPORTERS of population in the US. They absorb over half a million immigrants a year between them. And they EXPORT close to the same number of people every year to the rest of the country.

    Going back to desirability. What creates the balance? Cost of living, which is dominated by cost of housing. If NYC and LA are the most desirable cities in the country, and the cost of living were equal to Omaha, NE or Detroit, you would see mass migrations out of those places to the coasts.

    But cost of living is not the same. Supply/Demand drives the price variation between cities and rarely stays in balance. And the arbitrage the results causes migration between cities until prices balance out.

    So why LA for SEA? Per census data, LA is the largest net exporter of population to SEA. SEA, which depends on importing population from other cities to grow, LA is the 800 pound gorilla in the room. When life gets too expensive in LA, people start calculating the trade-offs. How much bigger/cheaper must the house be in SEA (or PHX or Las Vegas) for me to give up Malibu?

    So why 12 months? Life gets too expensive, more people move away from LA. Life gets cheaper, LA exports fewer people and population growth slows in feeder cities like SEA, reducing the battle for housing.

    With prices beginning their total collapse in LA in Oct/Nov 2007 and the end of the exodus, it is no surprise that one year later we are entering the same kind of slide.

    Another way to look at things is that Seattle is the #4 destination on the West Coast – behind LA, SD and SF. And right now, our prices are comparable to LA and SD and not low enough to attract SF. How many of you know tech people who are considering moving back to SF because of how much cheaper things areback there? Once LA, SD and SF stabilize, there will need to be a new price structure for SEA before it begins to attract large numbers of people from those markets. LA’s impact, because of its shear size, will dwarf the other cities.

    Ardell, as you are fond to point out, you look at things on a micro v macro level. I make no claims about micro demand. I won’t forecast Medina v Kirkland v Queen Anne, though the analysis is similar. In the short term, price fluctuations from neighborhood to neighborhood are quite volatile and won’t follow economic theory. There are arbitrage opportunities even in declining markets. But in the long term (over the period of quarters or years), macro always trumps micro.

    I also think, Ardell, that a realtor’s definition of bottom is different than a consumer’s and that is part of what creates frustration in the conversations in these blogs. As I understand it, a realtor’s view of bottom is when the number of units selling hits bottom where a consumer thinks of lowest price on real estate as bottom.

    From a realtor’s perspective, February may very well have been bottom. Now that some reality has entered sellers’ minds, better pricing is bring people back, banks are releasing more distressed properties and prices declines are accelerating, which will bring more people to the market.

    But as evidenced in every other city, this correction will take time. People decide to move over months and years, not days or weeks.

    Anyway, long post. Apologies for its length. Hope it adds something to the conversation.

  43. Ardell: I was having a little fun with the omnisicient thing. Sorry that it was at your expense. I have a crazy sense of humor, which often leads to lacking class and charm and saying all the wrong things. I.E. my foot ends up in my mouth quite often.

    Yes, I meant sellers. Also, by Feb-March I meant the slope of the line between the Feb and March data points. Sorry for being unclear.

    Eastside Westside: You bring up an excellent point. I expect volume to stabilize before price. However, I think Ardell is referring to the price bottom because she is using price charts in her analysis.

    I’m linking a chart output by a tool I built on my website that dynamically maps prices in 330 U.S. cities. The data was gathered by Global Insight for National City Bank. Since the bank went under, I won’t be able to update the data. Thus, I’ll either deprecate the application or loosely reverse engineer GI’s algorithm using OFHEO data as the base. I’m considering building a Case-Schiller version, since that data is not likely to go away anytime soon. I’ve ignored the website for a few months now though. At any rate, you might find the chart interesting.

    You can play with the app if you want by going to and clicking on the “median price charting tool” (top link in list).

  44. Thank you Eastside Westside for taking the time to answer in detail. I worked in L.A. before here. Seattle area had no where near the appreciation that L.A. did from 1998 to 2005. I am more familiar with the places in L.A. where I lived and where my children still live, in the Beach Cities. Those areas were not running in any parallel fashion to Seattle, and still are not. We’ll agree to disagree on that.

    I am always offended when someone says “a Realtor’s definition” and suggests mine is one in the same as any Realtor, as if we all drink from the same water fountain and are all brainwashed in a baptism of greed.

    When volume first turned down, I was one of the first and only agents who claimed publicly that prices would follow. I do not mistake volume for price, I know the difference. Many agents were angry with me for warning that prices would fall, and in fact blame me for it having fallen. I know I’m not all that important, and what I say does not a market make.

    But this change, Eastside Westside, is in unison. The price and volume plummeting together tells me that the plummet was artificially created by the ‘waiting for” the stimulus package. Bottom is not about a month or a time…it is about the price at which someone can buy, not the median price at which most people do buy.

    My premise is that only the lowest of low sales closed in that reduced volume dip, and that those prices in relation to peak are the lowest.

    People ask me what will make me change my mind about that. What scares me the most is the level at which lenders and appraisers seem to want to push the market further down intentionally. A lender will say they will accept 20% down on a $600,000 sale, and then say the house is only worth $500,000. If the comps say $600,000, but the lender wants to assign a “declining market” discount to fair market value, we are doomed.

    Back to L.A. I’ve seen prices go up 30% in a day in L.A., because cash is king and when people are paying cash, no one can tell them they can’t go up 30% in a day. Seattle is not L.A. in any way, shape or form.

    I think it is ludicrous for the government to spend this kind of money to help the housing market, only to have the lenders tell appraisers to stick their neck on it and push it down. That kind of hypocrisy scares the bejeebes out of me.

  45. Jonness,

    I am enjoying our conversation, and I am enjoying the one I am having with Eastside Westside. I value, respect and appreciate anyone who takes the time and effort to hold up their end of the conversation.

    Comments like #18 annoy me. I usually delete fly by cheap shots with no meat.

    I enjoyed your chart and it helps point out the argument I just made with Eastside Westside. The climb in Seattle is not the same as those other cities from 1998 to 2005. I don’t see the market here as a lagging market to those cities. The other three cities have an almost identical spread one to another, and Seattle is not in step every step of the way.

    Still, lending issues impact this area dramatically. Whatever was influencing the other markets prior to the mortgage meltdown has no bearing in Seattle, and everything that happened since the mortgage meltdown will have a universal impact everwhere including Seattle.

    Some think that we will sink longer than other cities because we peaked later. I think we will pull out faster than other cities for the same reason that we didn’t start going down in 2005 as they did. As long as the major employers can stabilize better than the car industry and detroit, and the non-industry of many Florida cities. I’d rather keep my nose in Seattle stats, and not make comparisons to other cities. Not because I ignore other cities, but I’ve worked many other cities, and Seattle market is not similar in many ways.

    As to the omniscient thing…it’s all in good fun. Lesley is a past client of mine, and so knows me personally. In all fairness she called me “almost” omnisicent and as soon as I saw it I knew it would raise some eyebrows. I am very flattered that my clients feel that way about me, and I value my clients’ opinions a tad more than people who just “read” me and don’t know me or rely on my advices.

    It’s a different relationship. I would never expect people who read me on a blog to value me and my opinions as much as Lesley and my clients do. In fact it would be a bit odd if they did.

    Again, I appreciate your taking the time and effort, and please feel free to post any links to any graphs at any time. I enjoy reading them. Seeing things from all angles helps me. I would not be the person I am today if many did not take the time to come over and club some of the kool-aid out of my brain from time to time 🙂

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