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Name: seattleeric
Nickname: seattleeric
Member since: 2006-06-10 15:08:59
Website URL: http://seattlerei.blogspot.com
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Doctor, I have this weird ...

January 28th, 2007 at 12:17 pm

I’m guessing that your home fit the profile for a flipper investor. They’ll send out 1000 letters to homes matching this profile, and bet that there will be 1 or 2 that may bite. I get these all the time.

Is your agent spending your money without asking your permission?

January 10th, 2007 at 4:03 pm

Ardell:

I think the market will take care of this issue. If Redfin can execute well, and if consumers prefer the lower fees (1%), then the market will eventually push Realtors into doing the same. You’re just ahead of the curve. Realtors (a good sampling leaving comments here) are clearly defending their turf. They sure as hell don’t want to give up the automatic 3% without a fight. It’s human nature.

You’re ahead of the curve here. You’ll battle the headwinds until consumer preference finally hits the tipping point. Your individual mission to put the consumer first would be best leveraged if you could get the attention of traditional media outlets. That’s where the average joe is. Blogs are cool, and may one day be a force to be reckoned with, but the audience is small.

Go big, Ardell. Go big and send the Realtors scrambling. :)

Zillow, Redfin and "Us"

December 14th, 2006 at 8:02 am

Russ:

We’re in agreement after all! My bad for not reading closely enough. Ardell would like to see a perfect world, one in which brokerages align their business models with what is ‘fair pricing’. However, as you point out, unless the market dictates that they take such a stance (they see consumers moving en masse to discounters). Additionally, Ardell asks that ‘the industry admit that sometimes…the 6% model doesn’t fit the issue at hand’. I think the industry does recognize this. That’s why Redfin, Zillow and the like are moving in strongly. The industry isn’t the big brokerages who want to keep the status quo. If that were the case, the industry would be a monopoly that would be swatted down like a fly. The appearance of the discounters is the industry recognizing the need for smaller commissions.

Zillow, Redfin and "Us"

December 13th, 2006 at 7:33 pm

I think Russ has got it wrong. There are many examples in business where companies hesitated to canibalize existing sales channels in order to pursue new, innovative sales channels. And in most cases, companies waited until it was clear that a critical mass of consumer demand or behavior would guarantee the success of new channels.

The only reason I don’t see why the major brokerages wouldn’t pursue such a strategy is due to their franchised organization. Individual franchise owners are fragmented; they’re free agents and wouldn’t readily toe the company line should corporate decide to create a distinct, free-standing discount brand. Heck, fast food franchise owners often make their dissatisfaction known when they don’t like a cutting edge advertising campaign (e.g. Burger King). They sure as hell wouldn’t sit back while discount houses opened up in their backyard.

That said, if the Redfins and Zillows and whomever else grab a respectable percentage of transactions, there’s no way the big guys will ignore this, notwithstanding Russ’ view to the contrary.

Right now, they simply aren’t feeling enough heat. I think that this means one of couple of things. Either they are in denial, or their number crunchers and forecasts don’t show that discounters are yet a strategic risk. Just because bloggers and bubble believers alike sing the praises of the new crop of innovators, doesn’t mean that consumers are moving en masse. Until they do, the big boys will be loathe to shift. But, shift they will once their market share is in jeopardy.

To sum up, and in my opinion, these big brokerage companies aren’t managed by idiots. Especially if they are public companies, and have to answer to shareholders on a quarterly basis, they will make whatever moves necessary to ensure that they continue to grow their market share.

Snowing in Seattle

November 28th, 2006 at 8:22 am

My mother-in-law (who lives with us – don’t ask) took 6 hours to get from Group Health in Redmond/Bellevue to almost the top of Juanita Drive (where I had to rescue her with the Yukon. It’s nuts.

This is the worst since the big evening commute snow storm back in ‘90 or ‘91. Same thing. The snow caught everyone off guard who were at work. I ended up walking from downtown Seattle to Wallingford. I’ll never forget that walk.

Lots of people around here won’t soon forget their walks last night either.

Is Seattle Bubble Proof?

November 3rd, 2006 at 3:44 pm

Sorry somehow my post got cut off when I clicked to publish.

4) I would stick to homes in the starter price range of $300K or less. Faster rehab turnarounds due to less work needed.

5) I would buy only wholesale houses. These are properties in distress, or where the seller needs to sell quickly. The cost basis on these are low enough to market them at lower than market prices once rehabbed.

Will we continue to do flips given the problem moving our current two properties? Yes, but only when certain conditions are met – right price, right location, ideal floorplan, etc. In other words, we’ve learned a lot from our mistakes, and won’t make them again. Will my primary RE investing focus be on flips? Nope – too much competition in this market which is transitioning to a balanced, flattening market (in my opinion). My dollars are being funneled to other parts of the country, with a focus on cash flow.

We are fortunate, however, to have a large liquid asset base to withstand the liquidity crunch that might have befallen others in our situation. That said, at this point, holding out for a price that brings in our target profit is out the door. I want to clear our plate of inventory, and free our cash. We’re also fortunate that we’ll still net a profit from our five flips when all is said and done, given the success of the first three.

Is Seattle Bubble Proof?

November 3rd, 2006 at 3:30 pm

Redmond:

Correct, our houses aren’t moving, and it’s frustrating. If I were to turn back the clock, what would I do differently? Many things!

1) I would pick properties that are more marketable. The west seattle house has no off street parking, this is definitely affecting the number of intersted buyers.

2) I would have not listed in the Fall. This is more applicable to West Seattle, since the remodeling work was done in only 45 days.

3) I would have hired a different contractor for the Seaview house This was actually a good acquisition. What killed us was the massive cost overages in both construction budget and holding costs. If not for the 6 months to finish the project, I could have got it on the market in June…and it would have sold quickly then.

4) I would stick to homes in the starter price range =

Is Seattle Bubble Proof?

November 3rd, 2006 at 9:38 am

Opposition is a bad term. Perhaps bubble believers are better described as extreme protagonists to a disputed future probability.

Is Seattle Bubble Proof?

November 3rd, 2006 at 7:06 am

Tim-

Step back a moment – can’t you consider that others might view your position just as immutable? You said it yourself, ‘everything can look rosy right up to the turning point’. You may very well be proven correct with your assertions of a bubble burst, but clearly you refuse to consider and discuss alternative viewpoints, clingly tightly to your own views. By dismissing Ardell’s analysis of current data as relevant to any bubble discussion, though which you seem to agree supports her assertations, you show yourself as unable to consider other scenarios besides your singular view of the housing market.

As per your assertion that it’s foolish to dismiss the possibility of future price declines based solely on what is selling today, I think it’s just as narrow-minded to predict a Seattle bubble solely on the recent experiences of other housing markets. In both cases, only time will tell. And since that’s the case, I don’t know why it’s so offensive (to either side of the issue) to engage in conversation. It’s not like two sides arguing about the sky being blue, with one arguing that it’s red – now that would be an impenetrable paradigm.

The truth is the people get so stuck in their own beliefs, they are unwilling to consider other beliefs.

Is Seattle Bubble Proof?

November 2nd, 2006 at 9:45 pm

Remember, unlike most of the youngin’s posting here, Ardell has probably experienced – first hand, as an adult – previous market corrections (89-90, 79-80). Even though many of you point to reams of data, time and time again, the only previous bubble ‘experience’ referenced is the stock market correction of 2000-01. I think it’s extremely arrogant to discount the sum of Ardell’s experience and the data she’s pulling. You may mock her data analysis skills, but have you ever thought that based on her experience, as goes the behavior of the entry level homes, goes the market?

The bubble people seem so fixated on their arguments, that they can’t step back and actually consider the merits of her argument.

Perhaps she’s off the mark, but don’t dismiss her hypothesis out of hand. For being so data driving, Tim, I’m disappointed that you didn’t engage Ardell in a more analytical way. You simply fall back on tired old cliches

Buying wisely in any market

October 26th, 2006 at 12:47 pm

Actually, we’re still in a secular bear market since 2000 (the previous secular – or generational – bull market lasted is generally recognized as having lasted from 1982 to 2000), experiencing a cyclical bull market. The S&P (a better, broader and superior representation of the stock market) would have to exceed its high by 10% to move into a secular bull market again. These secular markets last 8 – 20 years, so we have a few more years until the S&P will surpass 1700.

There will never be a real estate bubble

October 10th, 2006 at 4:13 pm

Actually, the only reason I linked there because it seemed relevant to Eleua’s opposition to Joe’s argument regarding diversity. I have no problem with him expressing his opinion. It was simply another data point where he was coming from.

I do agree that the pressure to be PC has gone overboard in many ways. In Eleua’s other blog, about Bainbridge Island, I think you see a discussion that is much less shocking at first glance, but dives into many of the same issues the Eleua has with a liberal city such as Seattle.

Also, Eleua…there’s nothing wrong with being shocked. Very different perspectives and viewpoints are shocking to those not used to hearing them. I think judgement is best left to be made on how people respond and react after the shock wears off.

There will never be a real estate bubble

October 9th, 2006 at 9:39 pm

Joe:

Here’s how Eleua really feels about diversity. It’s very telling. Now I see her preference for the flyover states.

There will never be a real estate bubble

October 9th, 2006 at 7:50 pm

You would go through the hassle to get 5% ROI, because adding in tax benefits (e.g. depreciation), you get a greater than 6% return on that investment. Additionally, as I mentioned, that return is pretty stable even as housing prices fall, whereas CD rates will fall much lower, tied to lowering interest rates, that will inevitably follow dramatically falling prices.

You are probably right about the boomers. Some are forecasting a massive, long term stock market drop due to the boomers having to liquidate – by law – their IRA and 401K holdings as they get older.

I too have enjoyed this discussion! :)

There will never be a real estate bubble

October 9th, 2006 at 7:43 pm

E –

If you’re correct about a 60-75% reduction in housing prices by 2010, the shockwave to the economy would be devastating, ney, nearly catastrophic. Wouldn’t this look more like the great depression than a recession? And if so, everyone loses – homeowners and renters alike. Unemployment spikes, renters lose their jobs, homeowners lose their jobs. The stock market falls, GDP goes negative. At least homeowners have bankruptcy as the great equalizer. Everyone will be sitting at the bottom of the barrel with a 75% meltdown, and no one will be in the position to buy

Just sitting on the sidelines won’t seem to protect you (or others) from the impact of the burst. If you believe this, how do you plan to protect yourself from inevitable outcome? I ask this sincerely. What investments would protect you?

There will never be a real estate bubble

October 9th, 2006 at 7:27 pm

> Once property cash flows

Eleua – I have recently bought properties in Tulsa and Buffalo. I’ve been ridiculed by the bubbleologists for buying in these depressed areas (well, Buffalo fits that bill anyway). But I bought these properties with 30 year fixed 80% LTV loans, at an average price of $60,000, with an average cash on cash return of 30%! If I use the free cash flow to increase the principle paydown, I’ll own these properties – and have free and clear cash flow – by 2020. Doesn’t that seem like a good real estate investment to you?

Properties in our area can’t cash flow here unless you can park around 50% of the purchase price in cash. However, even for investors that buy with 100% cash, they’re still getting 5% ROI, and this is the form of income. For the younger generation, this is (obviously) uncommon, but for the baby boomers, this type of investment provides 5% whether or not the price of that home goes up or down. In fact, if prices deflate/crash, rents here that have been lagging will increase as the increase in renters drive up rents, actually increasing the return for these all cash investors. The baby boomers are generally more interested in income than protecting principal as they retire and need money to live.

There will never be a real estate bubble

October 9th, 2006 at 6:44 pm

Eleua – I take it you’ll be buying in 2010?

There will never be a real estate bubble

October 9th, 2006 at 5:39 pm

Oh…and to Synthetik – I turned off comments on my blog because by sharing my mistakes and what I’ve learned from them, that disseminated across the bubble world like blood in a pool of sharks.

There are only so many “I told you so”, and ‘too bad you’re going to ruin your family’ comments that I’ll put up with. I enjoy constructive criticism and comments, but when the volume is turned up by the bubble brown shirts, blustering with their schadenfreude, it’s not worth keeping the comments option going.

What’s ironic is that in my blog, if any of these bubble people actually would read and hear what I’m saying, they would see I’m not blind to what’s going on in the market, and that I’ve made changes to adapt to the changing market. However, most bubble people are so black and white (get out now or lose it all), that they can’t even appreciate what I’ve taken away from many of their more lucid arguments.

Synthetic – you keep telling me to dump my houses, dump my houses, twice now! I am trying to sell two of my houses…I’m not going to give them away, but I am also not going to be caught just behind the curve that is dipping market right now. I’m guessing that my use of ‘dipping’ instead of ‘crashing’ will continue to bring the bubble people to flame me. Why? Because since I haven’t completely capitulated to their perspective, I must be crushed. Until I admit utter defeat, I will be a target, no matter how honest I am, or how much I actually take away from their point of view.

There will never be a real estate bubble

October 9th, 2006 at 5:27 pm

The polarity here is akin to the far reaches of the political Left and Right. The bubble believers/defenders are like the Democrats (who feel Iraq will doom the nation), and the non bubble people are like the Republicans, who feel winning the war is necessary for national security.

Looking at it it this way, there is no middle ground – there is no way to reconcile the two sides. No matter what one side says, no matter how strongly they believe it, the other side doesn’t accept it as ‘the truth’ or even as a relevant fact.

What will it take for both sides to agree? If the market dips and flattens, and reaches an equilibrium, will there be peace? Or will both sides tell the other ‘I told you so’, and retreat to their echo chambers, awaiting for the next cycle when the interests of each collide so violently.

Fascinating potential! ;)

There will never be a real estate bubble

October 9th, 2006 at 12:22 pm

I’m curious, Synthetik…what’s your background. If we are all insiders, then clearly you consider yourself an outsider. What are your credentials? What is your objective for your completely anonymous comments and posts?

Are you in lending, and see first hand the way people are getting into binds with bad loans? Are you a renter who is waiting for the market to bottom out to get the best deal? Are you a homeowner who bought at the top, and regret your choices? Just curious.

Granted, I post anonymously, but provide enough background info to (at the very least) give you ammo to take shots at me behind your veil of complete anonymity.

Just curious why you get so aroused at fighting back most comments on this blog. Most open minded people have discussion. I actually respect your last comment. The issue you have with Galen about seeing the comments as a joke is valid. But why defend them at all? You would expect insiders to defend other insider views, but I can’t see why you would waste time on this and other blogs, unless you have something to gain from your position.

Just curious.

Eric

The Wisdom of Crowds

October 9th, 2006 at 11:46 am

I’ll never do away with considering fascinating potential, they are just words, after all. When it comes to action, I tend to stick more closely to the conservative side of the ‘what ifs’.

A line from the second Matrix movie comes to mind, to paraphrase:

“Hope..it’s at the same time both man’s greatest strength and his greatest weakness”

The Wisdom of Crowds

October 9th, 2006 at 11:22 am

Good snark! And you’re right, I’m still new to the game of investing, and with each deal, learn to avoid the same mistakes. I blog warts and all. Some readers will revel in my mistakes, for sure. But my goal is that others might learn from the mistakes I made.

Also, note my use of the conditional tense in the last paragraph of my post. By no means do I see myself as an expert forecasting the impact of the housing futures market (I’ll leave that to the crowds :) , rather, the potential is fascinating, and that is what I wanted to highlight….the ‘what if’ factor.

The Wisdom of Crowds

October 8th, 2006 at 12:16 pm

Jcricket:

Given you haven’t read the book, and given that your only exposure to this concept is my very minimal post on the subject, I can understand your skepticism.

Crowds is a loaded word in our culture. A better term (but not as catchy on a book title) might be critical mass intelligence (maybe not :) . When trying to grasp this concept as individuals, we load up our biases in how it’s perceived. For example, if you’re like me, you probably ignore and never click on those annoying banner ads online. However, these companies running these ads sell products day in and day out through this advertising channel. There are people out there who click and buy.

In the same way, with a large enough and diverse enough ‘crowd’, the group intelligence rises to the top.

I highly recommend you read the book to get a better understanding on the topic than I can give. Also, the reason he spoke at our client summit (I worked for a large, publicly traded digital marketing company) was the relevance to marketing, and how tapping into the ‘crowds’ can lead product development down the right path, thereby saving millions by making the right decisions.

The Wisdom of Crowds

October 8th, 2006 at 6:52 am

Galen, good point. Furthermore, Surowieki posits that financial gain isn’t necesssary for a good predictive market assuming it’s large and diverse enough.

As for Ardell vs. Greg, that looked more like paramutuel betting, and I put my money down on Ardell – not because I was convinced she could out post Greg – but because she was a 7:3 underdog at the time, and I thought she had a better than 30% chance of beating Greg (alas, little did she know she was up against the Terminator of blogging. :)