Is the Housing Bubble Fear Over?!?!

Seattle Bubble announced about a half hour ago that it is changing it’s name to Sound Housing News.

If that’s not a sign of the times…I don’t know what is. Talk about “Breaking News”!

“Seattle Bubble

This entry was posted in Industry Talk, Seattle Real Estate Guide and tagged 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

92 thoughts on “Is the Housing Bubble Fear Over?!?!

  1. Bubble Blogs coming ON to the scene had GREAT meaning. Likewise their disappearance will also be meaningful.

    The day you Google “bubble blog” and find them gone after a certain day…that day will be a memorable one.

  2. I have been reading the Seattle Bubble for 2 years and feel that it is one of the best places to get real statistics and information in regards to the Housing Market here in the Sound. I think that the Seattle Bubble is changing it’s name as it continues to evolve as a source of information for buyers and sellers and renters and investers and agents. The name change does reflect the changes in the market and also the readers, just like Zillow has added Rentals to it’s site. I disagree with you Ardell if you are suggesting that the name change means that the Bubble in the Seattle Market is over. I believe that it is painfully clear that this downturn in real estate across the country and yes, even here in Seattle is far from over. I moved here 2 years ago and rented a house, I was a home owner for 16 years prior. I continue to choose to rent because I don’t see stability in the housing market and I believe prices will continue to decline. I see bank owned and empty homes popping up all around me. I negotiated a significant rent reduction this year and believe that this spring/summer I will have many more options. I started reading the Seattle Bubble to become a better informed investor. When I do have confidence to invest in real estate again, I would choose to work with an agent that has been realistic about the market over the past 2 years and the future. I am sure that you also believe that you are helping people to make a good decisions, just like the agent 2 years ago who tried to sell me a house similar to the one that I rent for $2300 month for $750 000. I know that many choose to buy rather than rent because there is a stigma in renting, and there weren’t many nicer homes for families to rent but that too is changing rapidly. I am not being negative, but only realistic and making responsible choices for my family. I also think that many more people will do the same in future…I hope.

    • Dear Writer,

      You mentioned and I quote

      “I believe that it is painfully clear that this downturn in real estate across the country and yes, even here in Seattle is far from over. I moved here 2 years ago and rented a house, I was a home owner for 16 years prior. I continue to choose to rent because I don’t see stability in the housing market and I believe prices will continue to decline.”

      What types of supporting evidences have you seen which leads you to believe that the price will continue to do down?

      It’d be nice if you could share any of your supporting evidence. Thanks!

        • 1) I’d like to make it clear that “writer” is apparently the writer of the comment, not the post i.e. Dawn

          2) David,

          Last I saw (some time ago) The_Tim on Seattle Bubble was calling for a maybe further decline of 2% vs. “substantial”. I am not as frequent a reader of Seattle Bubble as you are. Can you post a link to anything there that shows a prediction % for future anticipated decline in King County?


          • What? Like I said every one thinking of buying or selling a property in the Seattle area should spend a few hours reading Seattle Bubble at

            Let’s see, Tim says 2% with virtually no previous Real Estate experience and that should be taken as a real number, but I say substabtial, and that seems questionable.

            You asked for links, I gave you links, you’re asking for the indicators I give you the indicators.

            This really isn’t a debate. Prices are declining, they are continueing to decline and all indications are that after the government stops interferring prices will decline even more.

            I would really like to see why you think prices should stabalize. There is nothing out there that says they should.

  3. Dawn,

    I don’t think when you take a home price “and adjust it” for seasonal factors or inflation, that that is REAL data. Just my opinion.

    As to the market decline being “over”, I don’t think we’ll see a substantial downward trend again in the next decade. Movement 5% this way or that is of course “normal”. I don’t think we’ll see much change at all for a couple of years.

    Some think interest rates will go up a lot. I don’t agree. For those that think interest rates will go up, waiting for better prices is likely not a good idea.

    Call me a Pink Pony or Cheerleader if you want, but I have a long history of evidence that is not my style. I was happy to call it down, and down, and going down…when it was. I was happy to call the bottom as well. If someone wants to say that was wrong if the market goes a dollar below that, well that’s just silliness.

    Do you expect another 22% decline on top of the one we had?

  4. Ardell,

    I read alot about the economy using many resources such as books, media, blogs, websites, observation and talking to people. I don’t just read the Seattle Bubble and come to a conclusion about the Housing Market. I don’t find the data that is analysed on the Seattle Bubble to be incorrect, in fact, I have been shocked at how misleading and inaccurate regular media has been in contrast. I also find the comment section to be very informative and often leads me to further info through links to other media. I respect your opinions, that’s why I read your site, like I said I think you believe what you say. From my research, I think that we’ve put too much importance on interest rates and low payments, and not enough on personal affordabilty. No one can predict how much the prices will decline or over what period of time. My opinion, today, is that housing in this area is not a good investment and is unstable, otherwise I would buy a house. This opinion is based on many things, supply and demand, affordability, credit, foreclosures, bankrupcy, job growth, income growth and common sense. In my case, I am living in a very nice house at a much lower cost than owning. I think that there will be many more rental properties on the market here that are more affordable than ownership. I am happy with my choice to rent, and I think that there will alot of growth in that field over the next several years. I think there will be alot of growth in property management.

  5. Thank you, Dawn, and I do not disagree with you at all with regard to house as investment vs. other options for investment, unless they are getting an awesome deal, which are not as easy to come by as some think. But if a young family wants to buy a home, I do not see much reason for them to be waiting at this point. Do you?

    I think moving from rental to rental can be disruptive for children, but that’s the mother or Nana in me speaking, not the real estate agent.

  6. I thought that I was being respectful with my comments, but I do take offense to your last comment since I have 3 children. Are you really suggesting that there is some kind of instability in our lives because we don’t own a house? I think that is absurd when you consider the stress and uncertainty that homeowners are experiencing. I think that you are in the business of selling houses and the dream of home ownership, but I am surprised that you would sink to mama (or NANA) guilt in your debate.

  7. Dawn,

    It always confuses me when people talk about “investment” and then about “a home to live in”. They are not the same to me. I don’t mean to offend you. You said investment, so I did not think it was a decision about a principal residence for your family. It’s not because I’m an agent, as I felt the same when I was a kid and we were poor but we owned our home. I felt the same when buying homes when my children were small. I was not always an agent, but it could be a generational thing.

  8. The debate with Dawn is exactly the type of sales tactics that I object to.

    It’s sales talk.

    Of course residential home prices are going lower, of course interest rates are going up, and driving home prices even lower.

    It’s the economy that we have, have always had, and a simple apparition of ten years won’t change it forever.

    Home prices have to be in line with income. The family home is the biggest investment most people have. It’s been that way for 60 years. How does the last ten years, OK, five years, change those two very basic things?

  9. So Dave, if a Dentist tells you it’s time for a cleaning is that “sales talk”. Is he just trying to sell a service? Serious question. Maybe it is. I don’t see it that way, but maybe my brain is twisted beyond repair 🙂

  10. I’m sorry, but that’s more sales talk. The dentist has nothing to do with the conversation.

    This woman is waiting for the residential housing market to correct. That is what all economic indicators say to do.

    If you own a property, and want to sell, or need to sell, that’s exactly what you should do. A buyer should get the lowest price they can afford to pay off quickly for a purchase.

    If you can afford $400K, then buy for below $300K with the intent of paying it off by applying additional payments to the principle balance so it will amortize quicker.

    This is the market place we are in. Home prices need to be lower, and possibly even lower than the economy we have because of the issues of unemployment and foreclosure.

    • I still fail to see how this statement was either “offensive” or “sales talk”:

      “I think moving from rental to rental can be disruptive for children…” Clearly it is even MORE stressful to move children if you own and have to sell frequently. If you are likely to switch jobs in the near future, buying is not a good idea.

      But if you have the landlord saying “you need to move” that is very, very disruptive to anyone’s life. Anytime you have to move because someone else said so…it’s not a good thing. The more children and pets you have, the harder it is.

      When your child wants to paint their room or put posters up or do anything in “their home” and the answer is “no, we can’t because the owner of the house said so”…not as good as owning your own home.

      It’s how I see it and I don’t think that is offensive or “sales talk”.

  11. David,

    “Life is what happens while you are waiting for the grand moments that never come.” I agreed wholeheartedly in Jan of 2008, and clearly said so. I just don’t agree that at this point in time the forward projections suggest that someone should wait unless they have no compelling reason to buy a house in the first place.

    If you go back to the day that Seattle Bubble started, you will not find prices being substantially different than they are today. Loose lending started sometime in 2003 but didn’t “catch on” as a mainstream funding source until later.

    I also don’t agree with your pay it off as fast as you can advice. Much better to save 6 months worth of expenses as a security cushion than put all of your extra cash on to the mortgage. As to buying for $300,000 if you can afford $400,000, my advice would be to buy on one income if you can vs. two.

    Having a paid off mortgage in case you lose your job is likely not as good as having 6 months with of expenses in liquid cash.

  12. Seems to me Rain City Guide is one of the places you go to get more info if you are buying a house. Seattle Bubble is where you go to justify in your own mind why you are not going to buy a house. Both are a valid source of info.

    If a house price in 2007 was $450,000 and you can buy it now for $350,000 I would look at those two prices without making the $100,000 look like less of a savings by adjusting for inflation or seasonal advantage or… I would see two sale prices in black and white, one being $100,000 less than the other.

    I would also not view $198 per square foot for a house on a busy road as being better than $215 per square foot for a house in a better location.

    How we view the stats, even though we are both looking at the same data, is quite different.

  13. Last night I sat at Claim Jumper Southcenter with 6 guys from my basketball league until after closing. 2 of the guys waited for everyone to leave and then began to ask me for advice on their home. I already knew what the questions would be. Its the same questions I get emailed and asked of me every week.

    It goes something like this…

    “We owe 550k on our home in Fairwood. It just appraised at 405k when we tried to re-fi. Our payment is 3700. We want to go back to renting and have a “simple” life with just a 1500.00 rent like it was before.” We are unable to save any money straddled by this mortgage.

    Both families have children. 3 boys in one and 2 in the other.

    I educated the ramifications of cessation of payments, living in the home and saving money up till Trustee sale, and short sale. After we talked both familes had told me they made their decisions 3 and 4 months back and hadn’t made payments for the last 4 months. They just wanted reassurance they were doing the right thing.

    In the end I gave my usual advice. If you do whats in the BEST INTERESTS of your FAMILY then you always made the right decision.

    The millions of homeowners that have made this decision and WILL MAKE their decision in the coming years is very caustic on the family unit. We MUST support families and their decisions they are forced to make. Morality is out the window and financial commonsense must be utilized.

    Renting has become a god send to so many prior homeowners. I rented for 9 years while in college and would surely do it again even with my 3 children. My children seem to welcome change (we have moved 3x in the last 6 years) and find it exciting, but always within a 3 mile radius and never changing schools.

    I believe its what goes on in the house that matters not the house itself.

  14. Ray,

    Perhaps clouding my thinking process are the number of times I had to move my children around the Country so my ex-husband could get a better job and make more money. I remember my daughter saying “Dad, we would much rather you worked at McDonald’s, so we could stay in our home, than get a bigger, nicer house someplace else!” Through her tears she knew in her heart that moving for more was not as good as staying put and making enough.

    I’m sure you know those moments in a mother’s life, hearing great wisdom through the tears of a child, will never go away for me. Yes, it affects my advice that I experienced that, and there is nothing I can do to change that.

  15. I grew up in the same home for my 1st 19 years. My wife ALWAYS reminds me of this. However, she also understands that each time we move there is a reason behind it and has supported it just prior. She just complains during the process and I get the usual…”This is it Ray…I will not be moving again!”

    I say of course not…………………………….haaaaa

  16. I have a friend who is a Pacific Northwest native. Her Dad bought fixer after fixer and they moved from house to house after he renovated and sold. It was apparently his source of income to do this. She is greatly damaged by all the moves and feels she had no childhood as a result.

    It is not a small or laughing matter to move children repeatedly. Not saying everyone can stay put, but moving and moving should not be done without every effort to not make it so.

    I will do a post on “moving with children” next, as I feel this is a topic that deserves it’s own place for discussion. Heading to a meeting in Bellevue…will write it later today.

  17. OK.. I recommend you and everyone watch the Disney movie “UP.” It was obviously produced knowing that millions of homeowners will have lost their homes in the coming decade. A powerful message that reinforces the family unit and not the structure around it.

    That was my take at least.

  18. Once we had hoped taking my ex to see The Family Man (I think that was the name of the movie) with Nick Cage would drive the point home regarding status and work vs. home and family. It didn’t. 🙁

    As to your wife saying “no more moves!” Ray. the last move was the straw that broke the camel’s back for me and mine. One too many is not easily corrected.

  19. Ardell, it seems to me that you are only offering emotional reasons for buying a house. We are in a whole different environment now. The scenerios that you are describing “tears of the children” and being forced to move are happening to many families that own a home (not really the bank owns most of them) I have prepared my family for this downturn since 2007, I have no worries about moving and finding a nice home for my family, nor are my children tramatized by the prospect of moving. A house is just a house, it’s the family that make it a home. The negative things that you described on children result from many things other than “moving”. Many home owners are faced with financial stress, job loss or insecurity, investment losses and future worries. Every person around me is very worried about the money that they have lost in their homes and many families are split over real estate. You are living in fantasy land if you think that people will continue to buy a house if you remove the “investment” factor. The houses here are not affordable and they will continue to decline. I do agree with you, alot of people have bought homes for the wrong reasons, and many feel an emotional attachment to owning, but other factors will be too powerful to ignore. I know that this transition is difficult for many to understand. Anyway, I sincerely wish to encourage all not to be afraid of change, approach it with a good attitude and make good choices for your families, be united and you will have content and happy children. God Bless and Happy Holiday’s

  20. …an “investment” means looking for a positive return competitive with other investment options.

    That is NOT a requirement for most people looking for a “home” for their family.

  21. Maybe I am using the term investment incorrectly, I am not willing to risk losing money. The house that I am renting at several hundred a month lower than mortgage, taxes and MA has dropped at least $150 000 since I moved in.

  22. Dawn,

    I appreciate your having this talk with me for the benefit of other readers. MANY are using the word “investment” …”incorrectly”. Bottom line REAL answer is different for everyone. Some are willing to lose $1,000 some $10,000. Knowing the real facts is a must in my business, and “good investment” and “good home” are almost never a match, and people need to hear that and know that.

  23. Let me be clear about the investment factor. It is my opinion, after being involved deeply for thirty plus years in the Real Estate business, rather than Real Estate sales, that prices will drop further.

    That town house you bought this year, last week, for $300K will drop to $180K to $220K, which are the prices you should have paid.

    Greed, and builder ignorance pushed up the price for that town house to $300K.

    A Real Estate is the land.

    The phrase “through the tears of the children,” even the reference to Nana are sales techniques used to get the client to emotionally attach. The dentist comparison to teeth cleaning is a classic false agreement question, “Oh, of course, that soundes reasonable.’

    I’ve also taken the full set of Dale Carnegie sales training, Tommy Hopkins Sales Training Camp, and was thinking of taking over the George Hawkins Real Estate Investing Seminars in the 1980s. Real Estate is a business. People need to buy based on a sound financial basis.

    In the next few years walking away from a mortgage will be the same as walking away from a crumby land lord. It’s unfortunate that bankers in this country chose to steal as much money as they did, but it happened.

    Banks will be land lords for years to come, and land lords will be lucky if some one gives them the gift of cash on a monthly basis. Rents will drop, and prices of homes will drop.

    Blaming mommy and daddy for the bank’s mistakes is starting to irritate me.

  24. David,

    Blaming any one person or entity for ALL of the scenarios, is of course erroneous. There are 100 stories in the naked city…and each has it’s own set of circumstances.

    I will never understand why my children become “a sales technique” in your mind. If I cared about your opinion, I’d be furious at that insinuation. Lucky for me I really don’t give a RA about your opinion.

    I have tried to be kind to your rantings and blatherings for a very, very long time. You only come here to rattle my cage. It’s obvious you just don’t like me. I’ve given you every chance to be a mensch…but you just can’t seem to stop being a total jerk

    • Ouch…..Ardell, I believe you and David should meet Ira and myself at Claim Jumpers in South Center for lunch in Feb 2010. It looks like I will be losing my bet with Ira and have to treat him. I’d like to get Tim to come as well.

      I have met both you, David, and Ira. You are all wonderful people. The tone in these blogs gets very harsh. I just had a recent skirmish with Kary Krismer and I have no doubt he is just as nice.

      Once you meet someone in person, hear what they have to say, and understand where its coming from, it all makes sense. David is actually very funny in person and I enjoy reading his often comedic off the wall stance.

  25. Ray,

    When you share a personal story that is painful and someone deigns to come by and piss on it…well, you know. I am Italian after all 🙂 I think he just doesn’t like me. He’s been this way for a very long time now.

    Your insight is appreciated. It’s possible I’m being overly sensitive, but generally I’m not. Maybe I’m just in a bad mood…that does happen from time to time.

    What’s your read on it?

  26. My read is this. David is always “over the top.” Thats what makes him fun to read. I used to always comment that it appears David is off his meds again. But, he is very fun to read and I enjoy watching people interact with him.

    I don’t think he dislikes anyone on this forum or Seattle Bubble. His sentiment has changed ALOT in the two years and has become bearish going forward in the investment in real estate. Rightly so, I may add.

    I’m just shocked that all the bashers of our model has stopped. I have not had to defend 500 Realty for nearly 6 months!! I was shocked to read today how much Jillayne felt used by RCG. I was wondering why she was no longer here.

    The M Realty LLC I believe truly damaged this site but I hope Dustin is profiting more from his decision. Dustin was also very nice to myself in our emails back/forth. However, prior to my second story on Tales From The Darkside he stated he wanted the readers to be more focused on consumer friendly material. Not, real-life stories of insane behavior of professionals in our industry.

    Either way I enjoy both sites but as you know spend 90% of my time on Bubble while 5% here and Red Fin blogs.

  27. Thanks Ray. I appreciate your taking the time. As to bashers of your model “stopped”, I think you just took a little getting used to 🙂 Your personal stories (especially the ones you send me via email) show that you are a special person. For me it’s more about the people than “the biz model” and you have clearly taken the time to reveal yourself. I for one appreciate that very much. Send us a pic of your happy kids on Christmas!!!

    Happy Holiday’s again. You always make me smile.

  28. I think Ray is right in that things online just get blown way out of proportion, and in person is whole different kettle of fish. I’ve met Ray and David, and in person they’re both quite likable. ( OK, online sometimes reading their posts my reaction is ” Who’s got the straitjacket?”).
    I haven’t met Ardell in person, but have read her posts for a long time, and I can almost guarantee that in person I’d like her a lot. Maybe it’s my Garden State roots showing, but what’s not to like?
    Then again, I do like people I disagree with…

  29. Ray, the voice of moderation, go figure.

    Emotionally attaching to a client is a sales technique.

    Dawn came here with her well reasoned opinions and she brought up the tears of the children. I read her comments, I was addressing her comments.

    The family home is an investment, people need to hear that. Every one should be buying the family home with the idea they are investing in the future for thier children.

    • Its Xmas David. I’ll start Bashing again in January! LOL

      Dawn is very saavy and she already knows the answers she is looking for.

      The market is going no where but trend line down for the next decade but there will be GEMS to be had. You already know my opinion on real estate….I will reiterate it.

      ITS AN INVESTMENT Its ALWAYS an investment when you choose to buy and not rent. Many investments in our lives sour. I have made many horrible stock selections in my life and also have been part of various LLC’s that gave properties back to the banks. Holding onto a toxic asset can drag an entire portfolio down and it will do the same to a family.

      But, the fact is life MUST go on. The amount of homes coming back through short sales and foreclosures will astound the masses. We must never judge and always support the decisions people make because it makes financial sense for them. I pound the table when I say ALL THESE HOMES ARE COMING BACK. Its not a question of if….Just When…………..There will be no appreciation and with the cost to sell at 10% in this State people will be educated on SHORT SALES and on living in their home to the bitter end and letting it foreclose.

      I support all the decisions of the families and assure everyone….This too will pass. Do what is financially sensible and people like Dawn already know the facts, and she owes it to her friends and family to educate others.

  30. Ira,

    I feel the same way about you.

    In the long run I don’t think it is me personally that David doesn’t like. He very often says that Rain City Guide “scares” him. Some people have to “choose sides” and I think those who think that way think they have to choose Seattle Bubble OR Rain City Guide.

    Reminds me of the World Series this year. I’m more than happy to root for the Phillies without having to “hate” the Yankees. But most people are not like that, apparently.

    Happy Holidays to you, Ira! I read you often in the comments on Seattle Bubble. I don’t comment much on what you say because most times I agree with you.

    I was speaking with a representative of WAMP Washington Association of Mortgage Professionals yesterday. His outlook was different from miine, but he agreed that was because he was based out of Tacoma. Sometimes differences have more to do with where we work than what we think. I think that is the case With Ray and David and you and I. If we were all working in the same geographic area, we’d probably agree more than we do.

  31. David,

    I don’t think Ray is trying to “sell” me when he tells me the story of his being Santa at his children’s school. Yes, I absolutely agree that it endears him to me and that I like him better for revealing that part of him.

    I find that children move more easily the younger they are. Someone said to me the other day that they attended 5 or 6 different high schools, and they were not happy about that at all. It is not uncommon for people to consider the impact on children of moving and I don’t think it is a “sales technique” to discuss that.

    In fact, it means people should NOT move too often, and isn’t that counter to being a “sales” or “let’s keep churning” message? If it were agent-centric I’d say yes, move up and often. I was saying don’t move up and often. The opposite of a sales pitch, I would say.

  32. Ardell,
    I agree with everything you wrote, except, in my case I HAVE to hate the Yankees. I don’t have to hate the Mets. I had dual loyalties as a kid to the Phillies and Mets, growing up just outside of Trenton. But The Yankees? I have a moral obligation to hate them. I don’t have to hate Yankee fans, poor misguided souls that they are. But it’s very deeply ingrained in me to hate the Yankees. I’ll be tolerant and accepting of everything else and everybody else, just lemme hang on to my Yankee hatred.

  33. Ray,

    My Mom once wanted to write a children’s book called “If it’s not yours; don’t touch it!” Basically about not pulling people’s flowers out of their gardens and not picking up food from one aisle in the grocery store and putting it down someplace else in the store.

    When we were kids, there being 7 of us, we used to have to sit with are hands folded on the steps when we went to other people’s homes, until our parents were ready to leave.

    For us, being in someone else’s house had a different level of care and was quite less comfortable than being “home”. That is how I view children in a rental house. “It’s not ours, so be careful what you do here.” I know the one year I lived in a rental home with my children I was constantly saying “be careful! don’t spill on the carpet!” and “no, you can’t pin posters on your bedroom wall.” and “no we, can’t take that wallpaper out of the room, it’s not our house.”

    Our ideas are formed by our experiences. That doesn’t mean we can’t change our minds as we grow older, but I haven’t. I think you have more freedoms in a house you own than in a house you rent. That’s just how I see it, and I don’t think it has anything to do with the fact that I am a real estate agent. In fact I’m quite sure it does not. I have to admit it annoys me when people say “you think that way because you are an agent!” In this particular case, I’m quite sure it has nothing to do with whether or not I am an agent.

    The house I grew up in was not pretty, it was a storefront on a main road with a trolley car out front. It cost my parents $7,000 and is now a hole in the ground if you look at it from an aerial view. We lived there from 1957 when I was 3 to 1974 or so just after my Dad died. My mom couldn’t sell it at all and just left it, but she always said “the house owes me nothing”. She raised 7 children there and calculating the rent for the same period would have been well over what she paid for it.

    People buying and staying in those homes longer is not a bad thing…unless you bought at peak in 2007. But if you bought at the previous peak of 1989 or any other previous peak, that would not hold true. Who is to say that this particular “peak” will not play out the same as the 1989 peak? I think it will. In 1991 when I visited people’s homes who wanted to sell, they were all upside down. Just how it was then and how it is now. This market is not a new phenomenon. It looks the same to me as the market I started in 1990, in Jersey-Philly. Pretty much exactly the same.

  34. Ira,

    I think the people spewing hatred at the TV screens at the Yankees is what caused the Phillies to lose. Bad karma 🙂 I saw the final game with Rhonda and her husband and some friends. I urged them to please stop the hate of the Yankees…to no avail. Though I must admit I liked the phrase: “Yuck the Fankees” 🙂

  35. My perspection is that anyone buying a “home” today, for the children, better make a really good deal. I would suggest any family needs to get involved with bank owned properties directly from the bank and make some really low ball offers.

    You need to be buying at least 20% below today’s market. Never give the bank a dime of down payment, if you do decide on giving them the privledge of giving you a loan. If you need to walk away in the future, don’t walk away from your money.

    If you are a family you are obligated to look out for that family. If you feel you must buy today, rather than wait until at least next September or October, then you need to pay at least 20% less than today’s pricing and probably more.

    Banks are being forced to make loans to home owners today. They are not doing you any favors by giving you a loan. You need to be tough and have your wits about you. Play hard ball and get your mind in the game. This is no time for emotions.

  36. David,

    I use 37% under peak as my rule of thumb…but generally we land in about the same place.

    I wouldn’t say “not a dime” in down payment, but FHA 3.5% is a good option given the fact that the rate you get today is assumable by the buyer when you sell the house. For those fearing interest rates will go up driving home prices down, that is a good way to keep the value of your house in better position. Being able to offer a lower rate when you sell will be a buffer against decline in home prices.

    What financing today, David, gives a buyer the option of “not a dime” in down payment? Enquiring minds want to know. If you factor in the $8,000 credit and rationalize that the credit is paying the down payment after the fact, that covers homes up to $225,000 or so. Perhaps that covers most homes that you see vs. ones that I see.

    • that covers homes up to $225,000 or so. Perhaps that covers most homes that you see vs. ones that I see.
      Ooooh, Ardell!
      I showed a listing of David’s on Queen Anne Hill. It was 849,000 dollars, a price not out of line for the area. Gorgeous house.
      225,000 dollar home? I want one of them, as long as it’s got four bedrooms, a quarter acre, and within walking distance of the Kirkland waterfront.

  37. Ira,

    You inadvertently raise a VERY interesting point. An agent is a bit “two-faced” in that we represent both buyers and sellers generally.

    When an agent lists a house for $850,000 and then publicly says “don’t spend a dime on down payment” as buyer advice, how does he explain how one might buy that $850,000 house without a dime down payment?

    I would seriously like to know how a buyer can buy an $850,000 house in Queen Anne…ZERO down today.

    I’m not saying David only sells homes up to $225,000. I’m saying that his advice of NO down payment does not “fit”, unless he knows a source of “not a dime downpayment” for that or other homes priced similarly.

  38. I can’t really speak for David, but I can attempt a translation. When he says ” not a dime of downpayment” I don’t think he means that zero down loans are a good thing. In fact, I think what he means is that people should save their money and pay all cash for homes, so there’s no need for a down payment.

  39. Ira,


    David said: “Never give the bank a dime of down payment, if you do decide on giving them the privledge of giving you a loan.”

    That may sound pretty cool, but really. How practical is that.

  40. You see this is more of the sales aspect. You are quoting out context of the over all point.

    Banks caused the collapse of housing prices. Any down payment you give them is a gift of cash to them. This is money you are going to lose.

    If, in fact, banks were in the business of lending money they would be lending on the value of the asset. Banks know, and have known for a long time, that the price of the asset is far in excess of the value. That’s why the are harping on the down payment and strength of the borrower.

    I’m making this point strongly because any one buying a house today is paying way too much. I released that listing and all listings. I sent my license back to Olympia and am moving to another brokerage model until after the tax credit is gone. In the mean time Real Estate prices will continue to decline.

    I think it’s very naive to think that inflation will float the housing market in my life time. Johness over at the Seattle Bubble has made another very clear argument for why housing prices need to reduce much more.

    OK, I’ll say it. My new blog at has the magazine format, because I like it, and I think buyers need good agents, aggressive agents, to represent them. In my opinion buyers need to be smart and informed.

    That’s why I like Ray Pepper of 500 Realty. He has been honest, straight forward, and says out right that people should educate themselves. Ira has had a consistently strong position of advocating for the buyer.

  41. David,

    My question is VERY simple and not sales talk. How do you propose that someone buy a house with “not a dime of down payment” using financing? That was your advice to buyers of homes. Now HOW do they do that?

    I am quoting you. If you can’t answer the question than your advice was “ill-advised”.

    As to your sending your license back to Olympia and quitting the real estate biz, well, good for you. I’m very happy about that. I will continue in the field, and as such cannot give advice that makes no sense. I have to stay in the realm of what is possible.

  42. I’m advising people not buy right now, and if they do buy they should be extremely aggressive and avoid sentimentality.

    I can change my business model from a listing agent to a buyer’s agent by changing companies. You have changed companies a couple of time in the past couple of years.

    You are attempting to bait me.

  43. There’s a balance, David. It really is not all dollars and sense. I think the market in areas I work in the lower price ranges of $650,000 and under for single family homes has the chance of moving 5% this way or that back and forth. It is a house to house and property to property scenario.

    Recently my clients are both buying and selling in early 2010. So if the market goes down they may have been able to buy for less BUT they would also sell for less by waiting…no? If they need a different house, what are they waiting for? You can say everyone should sell and rent and buy later, but the odds are equally in favor of buying now and selling later…which by the way seems to be more popular these days.

    Yes and no as to my changing companies…it’s somewhat semantics for me, since I can always flip in and out of the Company owned and brokered by my partner. Even when I appear to be “out” I am in. I took two 6 month gigs in the last 5 years or so, but I am always 1/2 of a team that is Sound Realty.

  44. Back to being told you have to move when you rent vs. buy. Just saw a rant on twitter from someone I know:

    “…Informs you and your small son that you have 2 weeks to move out because the lease is up and…and it’s Christmas. Would you be upset?”

    Deciding to move is a tough decision. Needing to move for you own reasons is often difficult. Needing to move because of the landlord’s reasons with 20 day notice can be earth shattering.

    I’m not saying everyone should buy a house. But if the reason you aren’t is you expect the market to go down another 2% to 5%, there are worse things than the market going down another 2% to 5%.

    There are clearly pros and cons to both, but rarely do I see people being truly honest about the cons of renting. People scream bloody murder when a house they are renting goes into foreclosure and they have to leave. If you do rent, be sure it is not vacant and being rented because the owner is behind 4 months in their mortgage payments.

  45. Ardell,
    Do you really believe that there are people out there who aren’t buying a house simply because they think that home prices are going to decline 2-5%?
    I don’t. I think those people who aren’t buying due to price reasons fear that prices are going to decline a lot more than 2-5%. I think if people knew for a fact that prices were only going to decline another 2-5% sales would be a lot higher. Home prices are down 20 something percent from the peak in the Seattle area, and some people believe that we are going to see continued substantial declines.
    Real Estate agents have lost a lot of credibility in recent years, and are not generally thought of as people who give impartial practical advice. Instead, they’re now seen as self serving hucksters. Step right up. Everyone’s a winner.

  46. Ira,

    First I would like to say that I have plenty of clients at the moment 🙂 I am not discussing the topic because I need more clients, nor do I see it as part of my “job” to convince people to buy vs. rent. When people contact me, they have already made that decision.

    I also don’t think it is a good market for investors.

    What I am saying is that if someone wants to buy a house, and they are spending a considerable amount of their time reading real estate blogs and waiting for that right time, are they also looking for a guarantee that the home price will go up in a short period of time? Maybe they are, and maybe there’s a certain % that want that guarantee. But not being realistic about the negatives of renting and not weighing the pros and cons realistically, is not a good thing either.

    On the bright side, my daughter just convinced her landlord to let them have a kitten for Christmas 🙂 My grand daughter is very happy.

    It is part of my “job” to probe all opinions regarding where home prices are going. But it’s hard to pin people down on that. Yes, I think home prices will bob along at 5% this way or that. But if the expectation is wanting another up/bubble scenario, then maybe that’s wishing for the wrong thing…no?

  47. What really scares me Ira, is that people are looking too hard for an overall trend, and not hard enough at property specifics.

    In January of 2008, overall trend was HUGELY important as in not a good time to buy anything. But today if someone thinks “good time to” is relevant, that can be dangerous as there are many, many overpriced homes on market and will continue to be throughout 2010 and probably through 2013 and beyond. I still see people pricing OVER what they paid in 2007. So overpricing will continue likely until we get back up passed peak…which could be 10 years from now if ever.

    If people don’t shift from “trend watching” and buy into market is flat (which I think it will be give or a take 5%) they may be the one buying the $100,000 overpriced house, thinking it only has a 5% leeway. In fact it has $100,000 plus 5% leeway.

    Trend watching at this point can be a dangerous pastime for home buyers.

    A neighborhood where every house sold at peak is also not likely going to fall in the median range as to down from here, as it may have a continuous stream of upside-down sales for many years to come.

    It’s time to look at the trees…not the forest.

  48. What I am saying is that if someone wants to buy a house, and they are spending a considerable amount of their time reading real estate blogs and waiting for that right time, are they also looking for a guarantee that the home price will go up in a short period of time? Maybe they are, and maybe there’s a certain % that want that guarantee. But not being realistic about the negatives of renting and not weighing the pros and cons realistically, is not a good thing either.
    First off, I was never intending to imply that you hold onto your opinions as a way to gain customers. Other agents, maybe. But you? You’re from New Jersey. How could you be anything less than honest?:)
    And I agree that renting does have it’s negatives, as does being a home owner. I really don’t think that people want a guarantee before buying that the home will appreciate in a short period of time. More like they want near certainty that they are not going to continue to see double digit annual declines.
    I’ve had potential clients approach me, telling me that they probably wanted to hold off buying for six months or a year. I’ve never tried to convince them one way or the other, other than to suggest that I thought that prices would not likely be higher six months from now, but if they wanted to start looking now, I’m here for them. What do I know? Do I look like Jeanne Dixon?

  49. Looking at the trees rather than the forest is fine advise.

    Find the GEMS!!!! Ray Pepper of 500 Realty has always been right about that.

    A couple of things that I watch are foreclosures and unemployment. Banks have been holding foreclosures pretty close to the vest. Six months ago there were reports of 15 million vacant homes in the United States and recently the claim is there are only 2 million foreclosures. It makes no difference which is correct because the unemployment figures are so high.

    Millions of Americans have lost jobs and are just holding on. It won’t be long before every one realizes the housing market is not going to be what it was the past eight years. There is no reason to continue to pay for an asset that is declining in value. There’s no hurry to buy. Yes, you may be able to find a deal today, but the probability is, that if you wait, you will pay less over all.

    The Real Estate Housing Bubble is very much still with us. It has been stalled by a trillion dollars of government interference. The even bigger problem is that the banks and financial institutions took that money, invested in the stock market, traded currencies, made huge profits and are paying the money back faster than expected.

    That trillion dollars that was supposed to help the housing industry got redirected into other ventures. Housing has been hung out to dry. No one needs it. The money has already been made, and the financial markets are moving on. I suspect manufacturing will be the next bubble, maybe there will be some saving the commercial loan market, but housing? Forget about it.

    So I can see where housing is going to be really, really cheap. We here in the United States just built millions of housing units. We’re still building. In 2008 there were 129 million housing units for 105 million house holds. Even supply and demand would estimate a pricing correction a lot more than 5% one way or another.

    Every economic indicator would say we are in for a substantial decline in the Real Estate prices.

    If you own and want to sell, now is the time. Lower the price to below market and hope some one will buy it. If you want out, send it back to the bank, millions of people will. If you like the home you have then plan on paying it off. If you are a land lord, be very grateful some one is giving you the gift of rent money. If you don’t want the property send it back to the bank, or sell it as quickly as you can, the longer you wait the more you will lose.

  50. David,

    Take a neighborhood built in 1991 with only 5% turnover during the bubble years. What I’m saying is that neighborhood has much less chance of huge changes in value caused by future foreclosures, than a development built in 2007. Everyone bought at peak in that area!

    Do you see no difference?

    Of course you have to check the 1991 area to see how many cash out refinances happened as well. But I do not see both of those areas moving forward at the same potential rate of decline.

    When “King County goes up 4%” in 2009 Spring Bounce, what that really means is one area went down 4% and another went up 8%. Trying to apply overall “stories” to a specific home purchase or sale, can be very, very bad. During the way down from 0 to 22% down…they were at least all moving in the same direction. When the percentages narrow, you have to look closer to home for data. Otherwise someone is calculating that 4% down area as flat or 4% up, a potential 8% of purchase price mistake.

  51. David,

    Can you please post any links to ANY sources saying Seattle will go down 10% or more from here? I have not seen anything at 5% or less.

    Case Schiller I think said 3% or so down from here in Seattle.

    You say EVERY one says…and I can’t find ANY predictions of double digit declines expected in home prices in Seattle from here.

    Clearly if everyone WAS saying prices are expected to go down in double digit fashion, we would want to see that. So please post the links. Thank you. [Sniglet doesn’t count 🙂 ]

  52. Ira, is that Sniglet? 🙂 Seriously, who is that? Whoever it is, is calling Seattle and Tacoma pretty close to each other. I only do North Seattle and close-in Eastside, which I don’t see falling any where near the same as Tacoma. So I would not agree with whomever that is.

    If you go to when I called bottom, I think we can go down 3% to 5% from there, so I’ve never counseled people to spend above that. BUT if you count the 4% spring bump in 2009, then that 4% down plus 5% could be 9%. Depends how you work your stats. I work mine from the same bottom point of February 2009. Most call that “seasonally adjusted”. I just stop dead in my tracks at “bottom”.

  53. “Every economic indicator would say we are in for a substantial decline in the Real Estate prices.”

    That’s different from ” You say EVERY one says…”

    OK, let’s take the foreclosures and unemployment out of the equation, which you are chosing to ignore. Let’s also take out the TARP money that was infused into the banking system that was supposed to get them “lending” again. Banks invested in the stock market instead and did a little carry trade.

    Let’s take the Census data saying there are “129 million housing units for 105 million house holds.” and set that aside.

    A local source is saying:

    The majority of mortgage professionals share the opinion that rates will be going up this spring. And why not? Several factors indicate rates could move up very soon.

    The big one, the Fed’s expiration date of their MBS (Mortgage Backed Securities) purchase program set to expire in February of 2010. Even Spencer Rascoff, COO of, mentions this phenomenon on an interview he had on Bloomberg on October 12th.

    Let’s just stick with the interest rates and the end of the tax credit propping up pricing.

    If you like cnn, here is a report of the effects of the tax credit and mortgage backed securities purchases on FHA:

    BTW the Case Shiller numbers for Seattle in 2010 are not available, nor is the 20 city index. The 10 city index indicate a 34% drop in over all prices:

  54. David,

    Most of my clients are buying at dip to 35% ish under peak already in 2009. So we are ahead of that game. If you buy bank owneds and short sales at 30% to 37% under peak and the market is running at 20% under peak, you don’t have to fear the “could go down another 5-9%”. You already took that into consideration.

    As to interest rates up in Spring…up to what? If you’re buying a house for $900,000 that appraised for $2 million at peak…who cares? The lot was bought for $700,000. $200,000 or so for the house is not going to turn out bad…just isn’t.

    Have another one that assessed at $1.1 mil my clients are getting for under $700,000. Again, it’s the trees, not the forest. Buy wisely and for well under current market value and you’ve already beat that game.

  55. Your saying, and have been saying throughout the thread that the Housing Bubble is still very much real.

    Let’s take the $2 million dollar house, the trees rather than the forest. A $700K lot, using the rule of three should be able to bear a $2.1 million house. Can that lot, that neighborhood, support a $2.1 million house?

    You can’t be ahead of the game at 34% below peak pricing. We had two years of double digit appreciation and one year at just below. Saying we are going back to 2003 and 2004 pricing throws out the window that the previous appreciation was based on a false economy.

    You have to go back to 1998 and adjust appreciation from there.

    This was a hard thing for me to get my mind around. My family and I took a trip to Spain, and then to Peru in 2008. Condos in Barcelona that I could have bought for $30K in 1997 were selling for over $200K. In Peru, today, with a global economic melt down condo prices have doubled and tripled since 2004.

    It’s a global phenominon. Moodys threatened the credit rating of Greece a few weeks ago. Housing prices there had gone through the roof since 1995. There has been a global expansion in housing going on since 1998.

    Tech money, left the stock market, and went into housing. Look at the the charts and graphs. It’s just spooky. That money is now migrating out of the housing market and my suspicion is it will go into energy, and manufacturing. Commercial lending will be creating the next bubble.

    For now, as much as people want to focus on local markets, we are a long ways away from stability in housing. Once the people who bought last year, and this year, based on a continuation of a false economy, realize that the market is continueing to decline they will be walking away from properties.

    By false economy I mean an economy where profits were made from selling these mortgages, that have been created globally. In Peru, for example, people will continue to pay because they have no choice. That money will go into banks that will invest it elsewhere. In my opinion all of Europe is in deep trouble and will be digging out for decades.

    Here, in the United States, we just walk away. We don’t have to care about the housing market, or the banks. We walk away.

    Now you tell me, what that does to the price of housing?

    • David said: “Your saying, and have been saying throughout the thread that the Housing Bubble is still very much real.”

      I don’t think I said that.

      David said: “Let’s take the $2 million dollar house, the trees rather than the forest. A $700K lot, using the rule of three should be able to bear a $2.1 million house. Can that lot, that neighborhood, support a $2.1 million house?”

      It’s on the market at $900,000 WITH the house on it already…or mostly on it 🙂 There is no $2.1 million house today…that was at peak. Peak no longer exists EXCEPT as to the lot price of $700,000 because it was bought at peak and included in the now, new $900,000 price.

      David said: “You can’t be ahead of the game at 34% below peak pricing. We had two years of double digit appreciation and one year at just below. Saying we are going back to 2003 and 2004 pricing throws out the window that the previous appreciation was based on a false economy.You have to go back to 1998 and adjust appreciation from there.”

      No…you don’t. Subprime started in 2003, not 1998. Some did OK and some didn’t. That puts non-distressed property at 2005 prices and short sales and bank owneds at 2003-2004 prices. Prices in Seattle are NOT going down to 1998 levels.

      Thanks for the dance, David. I ignored the out of Country references…I will only go there with you if you buy my plane ticket.

      You sent your license back to Olympia? Why did you do that? Are you going to stand on the sidelines and watch us work for awhile?

  56. The $900K house is the perfect example. If the property can’t support a $2.1 million dollar house the lot isn’t worth $700K, it’s only worth $300K. The house was worth $900K but sold in excess of that.

    That’s what I’ve been saying. What a property sells for, the price some idiot pays for a property, makes no difference to the value.

    BTW what does sub prime have to do with it?

    That was only the last of the bank Note creation. Banks were creating mortgages that they could sell as quick as they could.

    You have to look at the bigger picture. The price of housing units is nothing in the big scheme of things. It’s over, done, finished, the money has been shaken out of housing. You buy it, you pay it off. That’s the way it’s always been and always will be.

    I moved my license to Windermere in 2006, I think. I was selling my properties and telling anyone who would listen to sell theirs. If you had property in 2005 and 2006, that was the time to get rid of it. A buddy of mine had some apartment building on Queen Anne that he sold, his wife sold a storage facility. Every body was in a panic to unload in 2006. I finished my last project that year.

    Windermere made sense.

    All of my friends and family make fun of my little businesses, all are related to working on properties. I owned Aardvark Home Inspections from when I was pushing home inspections in the early 1980s. I have Rot Work, Seattle House Painting, Seattle House Cleaning, Seattle Janitorial, Kill Mildew, and my flag ship A Spring Cleaning preparing properties for sale since 1988. I started working on properties when I was 15.

    What I am working on now is Seattle Labor. I think businesses and home owners are going to need casual labor, cheap day labor, to do home projects. In my opinion the days of the fancy trucks and architects are done also. People don’t have the money.

    Lat month I launched my blog at to promote Real Estate companies and agents in the Seattle area. We’ll incorporate my blog into that. Fixer Fixer was started as a journal of whole house projects with the Do It Yourselfer in mind.

    Growing up our family went to school with the MacPherson family. It just kind of rubbed off. Most every body I know or have known in my life is in the Real Estate business.

    So all of my past clients have had the opportunity to sell. If I do another deal it will probably be in low income housing.

    As far as the real estate brokerage business, I am interested in it. The graphic on the site is from my Jet City Real Estate site. I may do that, there’s no rush, the Real Estate market is in a dead limbo until the government gets done with it.

  57. Thank for sharing all that, David.

    An important point you and I raise is something readers should not miss. Not only has high end been impacted much more than any other sector, over $1.M, lower priced homes in those same areas are also greatly impacted by the land value factor.

    Supply and Demand of lot values has been hit even harder than “home values”, given builders were snapping up anything they could get their hands on in 2004 and 2005 and beyond, driving up the land values even more than home values. There was more “bubble” in the value of the lots which transferred into home values on new construction at 3X minimum and usually 4X.

    When David says $700,000 lot equals $2.1 million or $900,000 reduces to $300,000, it is the basic principal that lot values represent 1/3 of total resale price of new construction. We often calculate the reduction in volume and translate it to home value decline. Rarely do we mention this very important factor of builders not wanting lots. That could literally take demand of tear downs all the way to zero. What’s a property worth when no one wants it at any price because they can’t get financing to build anything on it?

    This affects modest housing in these premium neighborhoods as well. Often the first thing to go in a recession is the “air” of snob appeal, prestige, premium neighborhoods built entirely on “everyone wants it”.

    When the market was going up and up, agents were not saying “pay what the comps suggest”. No one was pointing at the last 3 prior sales to keep prices down, not even the appraisers. Now agents are saying “look at the comps” because it will turn your head back in time to a higher price point. Even now though the market was basically flat, comps will point you to looking an Spring Bump prices in winter.

    As to “what does sub-prime have to do with it?” In much of the Country prices started failing in 2005 when Seattle Area was moving full steam up. Our market screeched to an almost dead halt consistent with the day subprime lending stopped in August of 2007, so sub-prime has everything to do with it.

    Looking at the big picture in Barcelona is not as important as looking at the little picture of local market factors. Condos losing their FHA status will impact that community much more than any global factor and also kick value over to the condo complex that did not lose FHA status or that gained FHA status. Again with the trees.

    The $900,000 house we speak of has a problem that may cause it to be not financeable at all. Once the only buyer is one with all cash, the price of that one specific property will decline much more than the area as a whole. Again with the trees.

    Back to David. You are not the only agent I am hearing from who had a side or hobby business or businesses that they are now falling back on. Many agents whose primary activity was finding lots for builders and selling new construction are in the same boat. My expertise is first time buyers and what I call “a family trade”. Good solid neighborhoods only, no high end to speak of, just plain folk wanting a reasonably modest home for their family. I never did commercial, very few investors and rarely seasoned ones, mostly first time investors for long hold period. No starry eyed people looking for huge profits in short term flips. So my business hasn’t changed much except for 2008 when I was telling people to wait.

    Should people continue to wait? I wrote a post once that said if you are asking IF you should buy now, the answer is no. Lacking a compelling reason to do so for your family needs, there are better things to do with your time and money. But if someone wants a home for their family, there has never been a more important time to approach that goal well, and with as much caution as you can muster. That often means driving a hard bargain and buying a bank owned or short sale.

    An issue that has come up recently is that not every deep discount is either or a bank owned or short sale. The absolute best deal one of my clients got last year was during the week of foreclosure, BUT technically not a short sale. The owner had put 50% down when he bought it, so the deep discount did not involve negotiations with the seller’s lender. Again with the trees.

    The bubble is over as to the forest. Prices will drag this way and that at bottom as to overall stats for a long time. That puts the onus on the buyer and seller of each house to be very careful that the value is apparent on each property specifically. That is a much harder market for those who are not leaving it to wait for better days. The agents who stay in the game have to keep their head in each task at hand, and comparisons to a condo in Barcelona is not going to cut it in this market.

    Home buyers will have to be very wary when selecting an agent as the desire to sell TO them vs representing their objective will be much higher than usual, but not as bad as it was in 2008. If you buy before April 30 for the tax credit purpose reasons, you have to be very careful not to overpay for the property just to get $8,000 or $6,500 back from the tax credit. If you buy in May or June you have to look very closely for the discount that may come from the credit ending (if it does in fact end) and not look at “the comps” from two months ago when the credit issue was elevating volume.

    It’s going to be a hard year to do things well as the rules will change on May 1 and no one knows exactly what the fallout will be for the majority of Spring Bump.

    For sellers who normally wait for Spring, this is NOT a normal year. Get on market early. The $8,000 credit is much more important to home buyers than those flowers you are hoping to plant in May when the credit is gone.

  58. A year ago there may have been sage advice in what you’re saying. This year is entirely different. The extension of the tax credit pretty much nailed the coffin shut.

    I have outlined here repeatedly why there should be concern for any one thinking of buying a home this year. All things considered people should wait until the tax credit is gone, interest rates tick up, maybe a lot, and let home prices fall.

    It’s very important to remember to buy what you can afford to pay off quickly. You’re going to need equity in order to move up.

    I’ve been doing this a long time. You’ve got to know when to hold em, know when to fold em, know when to walk away, and know when to run.

  59. David,

    People don’t pay their homes off “quickly”. I don’t see that as reasonable advice. I think people need to check with their tax preparers as many people are advised by their accountants not to do that. Even if owning free and clear is a good thing, it is not a particularly practical expectation.

    I don’t disagree with you on the tax credit, but the stimulus of it is working for a reason and that reason is people want that $8,000 and don’t want to be the one to buy in July without getting the $8,000. The impact on prices of the credit will likely be as small as to home value as it was on the upside. 2% to 4% and it will not be instantaneous. If you only wait until May or June, you will likely only use $8,000 with no benefit as to home price.

    As to interest rates, they’ve been running between 4.75% to 5.5% for quite some time, and I don’t see that changing. We may see 6%, but I don’t think we’ll see anything beyond that in 2010 or 2011.

  60. We are coming into 2010. There will be a lot of economic changes as there are after every Census. The data will take a couple of years to filter, but for sure that data will look bad for the mortgage industry.

    At the end of the last decade the data showed a robust economy, that may have been exhuberant, but hardly out of line. This year will show the stark disparity of income to home prices.

    People looking at $8K should remember they are paying that in the asking price. That 2% to 4% price increase is exactly the credit they are getting. Then when you factor in you will be paying that back over 30 years, with interest, it makes no sense.

    You will need to be paying down the principle balance up front to take advantage of the amortization schedule. The only way you will be building equity is by a principle balance reduction.

    I’d suggest to any one reading this thread to spend a few hours reading the Seattle Bubble at

    There are many examples I could give for why I believe that we will be in a prolonged period of Macro Deflation, but you have time to figure this out for yourselves.

  61. I’m going to pull an Ardell here and ask her to cite a specific post by Tim @ Seattle Bubble where he even remotely suggests that we’re due for only another 2% decline. I can’t find one. I did see a recent post of his where he suggests that Seattle area homes probably have another 10% to drop to find their natural equilibrium.

    • Hi Ira,

      Seems to me it was a Case Shiller post of at least a few month ago. I can’t find the exact post but found this gem of a quote while looking:

      “The best recovery hundreds of billions of government “stimulus

  62. Ardell,

    Back in my high school days, the “Huskies” were the cross-town rivals. We had buttons for football and basketball games that said “Huck the Fuskies.” Good stuff.

    My speculation:

    SFRs (houses and condos) under $400K will go down in price another 5-15% if/when Congress quits subsidies like paying certain people to buy houses, buying all the mortgage paper, 3% down payments, etc. Further, if the banks actually foreclose on “homeowners” that have stopped paying (i.e., the “staying but not paying” program), prices will go down even more. [And, if the banks simply allow an ever increasing amount of people to not pay their mortgage without any consequence, then sooner or later (sooner) no one will pay – why be a sucker?]

    In the $400K-$800K range, prices will sink another 10% even if the pay-to-buy, no-money-down, staying-without-paying policies continue. This is basic supply and demand.

    In the >$800K (and especially over $1.5M) range look for another 25-35% reduction from 1/1/10 to 1/1/12, as foreclosure and short sale become market price leaders in “expensive” properties.

    On top of all of the above, interest rates will eventually creep up (maybe not until 2011) and as a result, prices will go down. Buying “now” to lock in low interest rate is a suckers game. There is never a reason to buy to lock in a low rate (refinancing is a completely different story). If you are paying cash for an illiquid asset like a SFR, you are especially foolish to buy when rates are low, since your cash is worth so much more when rates are high.

  63. SFRs (houses and condos) – Patent guy, those will not move in unison and I have not done stats for condos in forever. Lots of problems will come due to changes in FHA financing guidelines for condos.

    $400 to $800 is also not a range moving in unison in the market I work in…I was going to continue based on stats I did a few weeks ago, but rather than do that from memory I will recheck the stats and do a post in response to your comment.

    This whole rates will go “up” conversation annoys me 🙂 How much? Up to where they were a few months ago at 5.5%? Up to 8%? I can’t respond to “up” as up .5% or even 1% from 4.75% is not “up” to me. Prices down 2% is not “down” to me and rates up 1% from a low point is not “up” to me.

    People in general have to get used to a range of value and a range of interest rate and stop expecting everything to be even-Steven. Too much drama in “OMG! rates are up .25%” these days.

    Oh…and Happy Holidays PG!

  64. David,

    That is a GOOD thing, David. Truly it is. “Cherry picking” loans is a good thing. The housing market needed to adjust accordingly, and that is ALSO a very good thing. The adjustment will take us back to 2005 as it has. Only question is very early 2005 or 3rd quarter 2005. We’ll be fine. Life is good. Merry Christmas.

  65. Happy Holidays to you, Ardell (it used to be “Merry Christmas” … but I digress).

    Yes, I am generalizing. After all, we are predicting the future, so a few gross generalizations and rounding errors are OK. On mortgage rates, sorry it bugs you, but I’m referring to a few points (e.g., 30 year conventional fixed loans in the 8s and 9s), not a quarter or two of a percentage point nibbling at the edges. But, I agree with you that nothing big is likely prior to the mid-term elections late next year.

    I don’t think you dispute that housing prices are being propped up, or that if the props are taken away, prices will drop. Maybe the props will last for years and become permanent like the almighty mortgage interest deduction. Heck, Congress may even figure out that allowing people tax forgiveness on a defaulted mortgage balances encourages people to quit paying their mortgages. Who knows?

  66. Patent Guy,

    Housing prices were propped up by falsely low interest rates since 9-11. Nobody complained then. Not sure why that is.

    Thanks for the 8% to 9% so I can say …no. Not gonna happen 🙂 If you say “up” and I say “no” then I am “wrong” if they go up 1/8th of a point and we all know how I hate to be wrong.

    Merry Christmas!!! (for the record, if I KNOW I will see someone again before New Year’s Day, I say Merry Christmas. If I may not see them again until February I say “Happy Holidays”, which technically includes Valentine’s Day if I don’t see them until Easter.

  67. Banks are done with residential Real Estate. There is no rational reason for them to continue to carry Notes on over priced assets. I don’t see a market for those Notes no matter how well they are packaged.

    Here’s a great thing about longevity in the Seattle market place. We had the Boeing scare in the 1970s. Like Detroit is now, we were threatened with declining employment or employment prospects. The saying was that the last person to leave Seattle should turn out the lights.

    People were giving properties away, literally.

    We are now in the midst of a national, if not international, market place that is very similar. It’s just getting started.

    Housing, or housing units, became a big part of the consumer spending equation. Right now the consumer is saddled with debt. That debt will be harder to get, and harder to service. As consumers are forced to pay down debt they will either walk away from mortgages, or pay them off. There are no other choices.

    As far as cherry picking loans, banks are strapping in the last set of suckers that they think will give them the gift of a mortgage payment for the longest possible time. Banks are cashing out.

    In thinking that the next leg of the economy will be in manufacturing, housing can then go back to the boring, hard work asset it always has been.

    Sorry, I’ll get to a Merry Christmas in a couple of days.

  68. David Losh,

    Reading through your various above-comments, I agree with much of what you have to say (to my own surprise), but I’m not sure I can agree that “Banks are done with residential Real Estate” if for no other reason than the politics involved. Ultimately, the banks exist at the whim of the government, and we are an entitlement society. If a loud group of would-be voters believe they are entitled to easy bank loans for residential real estate (like they are entitled to free health care, unlimited drugs on medicare, etc)., the politicians will work soemthing out with the banks.

    Forget about what makes sense. As a country, we are well past “making sense” as soemthing that matters in making laws.

    I otherwise agree with you that there are a lot of over-priced assets out there. They will deflate with time to a new equilibrium. Maybe the equilibrium will be based on continuing government subsidies (like mortgage interest tax deduction, cash-for-splinters, etc.) that keep prices higher than they otherwise would be. But nonetheless some sort of equilibrium.

    Merry Christmas, whether you are ready for it or not.

  69. “… housing can then go back to the boring, hard work asset it always has been.”

    Yes! Yes it will! On that we agree. It will be a home, and there will be marshmallow roasts on the bonfire as they burn their mortgage note…and I’m OK with that. Not sure how or why or when it became something other than that…temporarily.

  70. Like I said, it took me a long time to get my mind around the reason prices will decline, and residential Notes will be a forgotten memory.

    It’s global.

    Banks can do anything they want. They can cross between consumer, and commercial lending. In my opinion the consumer is tapped out, not just here, but everywhere.

    The consumer will continue to pay on an over priced home for a long time. That will be cash flow to the banks. Consumers will continue to pay on credit cards to protect the FICO scores. For many years banks will benefit from the consumer loans they made, but I doubt, seriously doubt, they will be going back in, unless, as you say, they are forced to.

    We could debate entitlements, because I am a Constitutionalist. I happen to trust my government more than the insurance industry, or especially bankers. I think the government should have done more to protect the consumers, but that’s done.

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