Seattle Bubble Says Seattle Markets Going UP!

As seen on Seattle Bubble:

“Seattle shows up on their forecast at #21 on their top performing markets list with an expected 3.8% increase.”

Seriously in 2005 when the housing market was positioned to go UP, Seattle Bubble started the Gloom and Doom Blog.

Now after it has DOUBLED in some places against their predictions of Bubbles Popping, and is showing signs of weakness…WHAT?  Going UP.  I couldn’t believe my eyes.  Not saying it isn’t, just couldn’t believe my eyes.  Talk about being at the wrong place at the wrong time…twice.

Sorry everyone, I just couldn’t help myself.  The Empire Strikes Back!  I knew that picture of a guy talking out his butt would come in handy one day.

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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

304 thoughts on “Seattle Bubble Says Seattle Markets Going UP!

  1. seriously??? We just had conformation of YoY price declines. I think you may be celebrating now but by the end of the year you will say, “what was I thinking?” By the way, how exactly do you think Seattle will keep the prices up without the easy lending of the past and flat/declining wages. Recession anyone?

  2. “I knew that picture of a guy talking out his butt would come in handy one day.”

    My, my, my – such venom for an early Sunday morning!

    Actually, if you read the comments, the study being reported on is being viewed very skeptically (among other things, the study predicts that Portland RE is going to tank, which seems curious coupled with a forecast that Seattle RE is going to do well) – it is hardly being presented as a recantation of the points that Seattle Bubble usually makes.

    I’m sure that all the people who bought houses in 2005 in Seattle are pleased as punch with their investments at the moment…

  3. Just worthless predictions, IMHO. But there is at least one a reason why Portland could go down while Seattle would go up.

    I’m not sure what they do down in Oregon, but I believe our Governor is proposing additional funding for the first time home buyers program offered through the Housing Finance Commission (or whatever it’s called). Financing affects demand, and demand affects price.

    That’s the problem with trying to predict prices–too many things affect them.

  4. Breath deep, Ardell. No need to take cheap-shots, completely misrepresenting the position of internet bloggers. It won’t make the future any better.

    Before alienating a broad swathe of folks over at Seattle Bubble, you should perhaps consider who they are, from a business perspective.

    Largely they are people looking for a house. In Seattle. With money.

    A few RE agents have realized that these people are actually future customers, and have reached out to them.

    You have decided to piss them off with absurd posts and name calling.

    Who they gonna call?

    I know. You’re a hustler and will never lack for business. But jeez – is irrational venting really worth destroying potential future clients?

  5. Abr,

    I’m just having fun. I figured we were due at least one cheap shot.

    “Actually, if you read the comments,”

    Don’t you think that’s kinda funny since when I said this in an interview” …”I’d have to say my favorite blog to read is Seattle Bubble, where the people talk and not the agents. I learn a whole lot more from… but there’s more info in the comments there, than anyplace else in the Blogosphere for me”

    I got slammed for getting info from the comments instead of the blog posts. Now it’s the reverse?

    Anyway, Tim knows I was just having fun. After two years of blogging, I was due at least one cheap shot at their expense given how much they’ve picked on REALTOR’s generally, don’t you think?

    It’s a gorgeous, sunny day in Seattle! No venom here!

  6. Seriously Biliruben,

    You’re kidding right? I don’t couch my words to appeal to everyone, and my clients would be the first to tell you that I do not hold back on my advices for fear of alienating them.

  7. I’m confused, if the dollar’s value drops by 3.8% against other currencies does that mean a home value still goes up if it it priced in dollars?, is the 3.8% increase including or excluding the ever popular rolling of closing costs into the final home price?

    I think this requires more research, where is my dart board and tarot cards, seriously 😉

  8. I’m confused. Does anyone think that I said the market is going up by 3.8%? I was just taking a cheap shot at Seattle Bubble. Neither they nor I said it.

    But to answer your question, YES! Puleez. If the market goes up it goes up, if it goes down it goes down. Do you really think home buyers and sellers stop to think about exchange rate? If they lose money or gain money, they do not compare the dollars to other currencies.

    Do you think the price of milk went down when the dollar weakens? NO! You buy the milk and you compare it to what you’ve paid in the past, not what people in another countries pay for their milk.

    Exception…Canadians do run across the border to buy anything that isn’t nailed down when the dollar weakens, just for the pleasure of having done so.

  9. OK, so I think I get it now from your clarification.

    Everything goes up or down in price, so we need to compare it to the price in the past.

    So given that real estate in Seattle is only predicted to be up 3.8% which no one at Seattle Bubble or in this Blog even stated, as an investment Seattle Real Estate next year does not have too good a return on investment. So I should look for something to invest in that Candians will buy that they can take home with them 😉

  10. Assuming you live in the US, absent major changes the value of the dollar wouldn’t be relevant to the pricing of a home here. It would affect your planned foreign investments, or the investments of foreigners here.

    It’s sort of like being on a bus. The bus may be going 60 mph, but so is everyone riding the bus with you. That’s you buying a house in the US, assuming you live here. If you’re thinking of investing elsewhere, you might want to look at the speed of other vehicles in comparision to the bus.

  11. I was Google Image searching the web for recent photos of my idol Ann Wilson of Heart. I found this “Ardell” person’s gravatar photo. Hey! It looks a lot like recent Ann Wilson ones, where she shows only a teeny slice of her whole head for reasons I can’t imagine.

    Is “Ardell” a pseudonym for Ann Wilson? I ask because her posts suggest more of a pop artist’s approach to reality, not some boring and responsible businesslike manner. Way more fun for clients I bet!

    And I do agree with “Ardell”/Ann that cheap shots are just fun and friendly!

  12. The reason prices in Seattle are going to go up 3.8% is that all the bubbleheads who’ve sat on the sidelines since 2005 finally feel vindicated by that miniscule dip in the Case-Schiller index in December. They were all finally proved right and there was an actual decrease in home prices. Now they can go out and spend that mountain of cash they’ve been accumulating with their two years of wage inflation and deep deep rent discount they’ve been enjoying as a result of taking advantage of the little old ladies who own their current residences! Now, at long last, they can get that immaculately maintained Wallingford bungalow or Bellevue mid-century-modern period piece–at a price they *deserve*!

    They can feel like they got a grrreeat bargain and lord it over the next generation of struggling renters. A perfect outcome for the dedicated bubbleheads!

    And of course since they are legion, the sudden onrush of competition will start to drive prices up again.

  13. Angie…that was funny. Since when has saving to make a down payment a bad thing? It seems responsible to me. How is this in any way taking advantage of “little old ladies”??? I fail to see the link. The C-S index has been negative for more than the month of december here in Seattle FYI. As far as buying right now at a price “deserved”, we are far from prices correcting to reasonable levels (think about rent vs purchase ratios or even price vs income levels). Lording purchase prices over the next generation of renters…that seems to be the “buy now or be priced out forever” mentality that got us to where we are now. Bubble heads are looking for the prices to come down to levels where the average person can actually afford to buy a house. There will be no sudden onrush of buyers to reinflate prices. Prices doubled in the past few years…did wages double or was it due retarded lending standards? As an example, in 2005 I was making 60K/yr and was offered a 500K home loan with no money down (I believe it was a neg am no doc loan)!!! This was in Washington so don’t think these lax lending standards didn’t happen here. I thought that was insane and walked away (much to the disappointment of my RE agent).

    This deflation of prices in Seattle is in its infancy and there will indeed be affordable housing again. If you don’t believe that you will be in for quite a shock.

  14. Bwahahaha. Future customers? For what, a doublewide trailer? Bubbleheads can’t afford a house in Seattle, never will hence the reason for all the whining from that camp for the past 3 years. Seriously, if you read their rants they essentially need to see a 50% correction in housing prices to afford a home here (or as they claim “justify home purchase) and that obviously won’t happen.

    The 20 something whiners out there need to realize home ownership is not a right but a privilege in this country. Better roll up those sleeves and work harder and smarter if you want to own. The fault you are on the outside looking in is squarely your own. Sorry.

  15. Sam. I don’t think you quite understand what has happened oner the past few years. All my friends who are home debtors couldn’t afford to buy their own houses at todays prices. They are by no means poor, but make very decent salaries (90-100K). Gives that, up until a few years ago, you needed 20% down and a max of 2.5-3x salary as a price point for a house, how are the current prices sustainable (please realize lending standards will move back to this model)? How can a person making close to six figures not afford the same house that he purchased 3 years ago? Please answer this question with facts.

  16. RWS…but wait a minute. Will they buy enough shoes to make a difference in Nordstrom stock? No. Will they buy enough real estate to affect the local market…Yes. See how that works?

  17. tomasyalba,

    LOL…I’m Just ARDELL. It’s not a pseudonym for anything.

    Yes, one cheap shot against so many from them in two years it’s a wonder I can drink a glass of water without it sprouting from all the holes from their cheap shots at me and my profession.

    It’s like the kid that bites everyone being surprised when someone bites them back once.

  18. JG,

    There was a day in May of 2005 when I told two clients Buy NOW!!! One did and now has a profit of 100% before costs. The other didn’t and waited a little over a year and paid 32% more for the same thing which is now selling at 100% more than it was the day I told him to buy it. So he still has a gain of 68%.

    We get it. If you find an agent who ALWAYS says it’s a good time to buy…well, you can find hundreds of them. Whose fault is it? The agent’s like me or the buyers who choose them?

    I’m shifting the focus of me and my office to sellers. We say SELL, not because the market is going down, but because they have a huge profit to take. Or not. It is their home after all. But we do tell them when it is a good time to sell.

    Is it a good time to buy? Of course it is not as good a time to buy as it was the day I screamed BUY in May of 2005. So I just helped some people sell at a huge profit and buy a short sale property at a modest discount.

    I always do the right thing when my clients let me. They don’t always let me.

  19. Samuel,

    I rarely spend a lot of money on anything except my housing cost. But I got a gift certificate from a client to Ruth Chris Steak House and was appalled at the number of small children sitting in there at those prices. $8.00 for a baked potato!

    The gift certificate was for $175 and the bill for just Kim and I was $190 with NO WINE, ONE DRINK and I didn’t “buy” a salad. The place was MOBBED! Lots of children too.

    I said to myself, is this where the bubble people eat and then cry that they can’t buy houses? Seriously. I was curious. I was eyeing everyone up and down looking for the ones with bubbleheads.

  20. Ardell. You seem to be unique in the world of Re agents. Good for you!!! I certainly don’t blame you for the situation the RE market is in or how it is destroying the economic situation is the US, but the reality is that your customers who bought and are up big will see their equity decrese in the comming years. If they took out HELOC’s they are in a very bad situation. I have a friend who bought in 2001, saw his home appreciate 2.5x and thought he was rich. He is only rich if he sells and takes the profits off the table or else its just paper wealth. Then what? he has to buy another overpriced house or rent. Unfortunately, he took out the HELOC (against my advice) for close to the new value of the house. He no longer feels rich and is almost underwater. Like many, he bought/consumed stuff…plasma TV, car, vacations…He can’t borrow anymore against his house (this happened to many homeowners and was in part responsible for much of the spending/consumption that occured over the past few years). I hope you advised your customers to stay away from using their house as an ATM machine and that they can realize their profits before they vanish. Keep doing the right thing and take care!!!

  21. lol ardell, I think the people at Ruth Chris were paying with HELOC’s…

    The 2005 Bubble heads weren’t wrong, they were seeing the national trend and Seattle was just 6-12 months behind the curve…sorry but no apology here. I don’t think you were right as the RE mantra is its always a good time to buy;)

    Bubble heads just see the DATA skewing from the norm and then interpret the data as the bubble forming. We were right.

    I became a bubble head when I saw the light when I was offered a 500K loan on 60K income in 2005. Instead of buying then (and most certainly being financially screwed now) I have saved substantial money for a down payment…

  22. 1) But they won’t sell. Even the one that should because he’s only 21, was 19 when he bought. I keep telling him to sell it and rent right next door to where he lives now…but he won’t. He loves his place. At least I have it in writing that I told him what to do. If he sells later at a loss, I have the letter in my file. Why won’t he put that $75,000 in the bank (after costs) and rent? I don’t know. Can you talk to him for me 🙂

    2) None of my clients use HELOC’s NONE! I explain thngs better before they buy. Though the lenders were often angry and telling me it’s none of my business. If one of my client’s has a HELOC, then they did it behind my back and against my advices.

    Oh…exception, just remembered. I told the guy who was waiting for his 401K payment in 30 days to do the HELOC, since he was paing it off in 30 days. Some people should have HELOC’s. I had two clients like that. If you are going to pay off the 2nd quickly, then HELOC is OK and often best.

    JG, I advised my clients at LEAST as well as you would have…likely even better. You seem to think some things are wrong. I know they are right in certain circumstances, and when that is. There is no BAD loan product. Just improper applications.

  23. I’m not unique. Did someone really think when 1 in 5 people in King County decided to get a RE license, that meant that now most people were “as good as us”. Is the public really that stupid?

  24. “I don’t think you were right as the RE mantra is its always a good time to buy;)”

    Where do you get off putting words in my mouth? I’ve been blogging for over two years and I’m PROLIFIC. You go find it from ME and I’ll eat those words. If you can’t, apology in order.

    Some bubblehead is blaming me for a house sold in Sammamish that I’ve never seen or had anything to do with. That’s defamation of character.

    Who SAID that there is such a Mantra and that mantra EVER came from me? No fair…and you know it.

  25. Kary, that’s a great analogy regarding the bus. So if I understand it correctly all the people who are in the bus going 60 mph were homeowners and the RE market in Seattle, and all the folks going 25 MPH and being left behind were everyone else including the overall wage and economic growth of the Seattle area?

    I think at this point everyone has been pulled over by the Economic Police, or the I-5 of the Seattle economy has plans for future closures and ineffective re-routes?

  26. JG,

    CLUE for you. I have more people BEGGING me to TELL them it’s always a good time to buy than you can ever imagine. THEY say it and I won’t agree and it pisses them off.

    Time to put the blame where it belongs…the people who want to hear that.

  27. JG,

    Why didn’t you just go and find better professionals and buy something you could afford. You’d have an extra $80,000 inthe bank right now if you did.

    You shoulda called me 🙂

  28. Yes Ardell, I have not heard you say it’s always a great time to buy. I am quoting the NAR and the vast majority of RE cheerlearders in the MSM.

    The reason I didn’t get another professional to help me buy is that I was relocating to the west side of the state and wanted to make sure the area I was moving to was the place I wanted to live in the long run. When I moved I found the prices to be inflated and realized it was due to lending out of control. I have been patiently waiting and saving. As for the extra 80K in the bank…it’s only in the bank if I take it out of my equity or sell…the mindset of money in the bank has/will destroy many homes (see CA, FL, AZ, et. al)

  29. Well…I came to this blog to learn more about the local real estate market because eventually I would like to purchase something in the area once I am able to get my finances in order after putting some things on pause to go to graduate school. This is one of several local blogs I read, including (GASP!) I enjoyed this blog for some of the more informational posts about the mechanics of purchasing property.

    This post will be the last I read at this blog. After finishing this comment…I’ll be removing it from my google reader feeds.

    This post by Ardell is the worst example of flat out open trolling I’ve seen on a real estate blog…and the comments have just been worse since then. This is all nothing more than you, Ardell, using your platform as a writer for this blog to pick a fight…and you’re pretending to be the victim while doing so.

  30. No JG,

    You are incorrect. The person I sold a $130,000 condo to back then (not the $100,000 one) I also sold FOR him at $207,500 last year. It IS money in the bank and he did rent.

    When you can’t afford a $600,000 house, you buy what you CAN afford and wisely. Then you sell it to buy up.

    That’s the history of the United States for Crissake. I help more people sell and buy, than 1st time buyers. They DO take the money into the next upleg. That’s the part bubbleheads are missing out on.

    Whaa, whaa, I don’t WANT a condo people are the stupidest people in the world! Not necessarily today, but two years ago when Seattle Bubble was appalled that I called them whiners.

    I was right JG…every step of the way. I still am for my clients. I just don’t have a big universal answer for Mr. Everyman. That’s what they want. Some guarantee that is the same for all property and all people. That’s just stupidity waiting to be fleeced.

    That’s like wanting a lawyer to say everyone wins their lawsuit, instead of paying for the right answer to their situation. If you beg someone to give you rose colored glasses, someone’s going to sell them to you for as much as they can. Whose fault is that? The guy who wanted to buy them, or the guy who sold it to them.

  31. So, I don’t get it. This is just a joke post then?
    It might help your readers realize it’s a joke if you actually linked to the seattlebubble, rather than some place else.

  32. I’m more than happy to give mechanics posts and often do. If I can’t have ONE LOUSY POST for MYSELF…well…what can I say except CIAO!

    I clearly am entitled after two years of doing what everyone else wants.

  33. Ardell,

    MSM=main stream media

    It’s great to take profits from a good investment. That is capitalism. The part you are missing is that things are going to get ugly when people who thought they would be able to refinance from suicide loans, because realestate always goes up (per MSM), are not able to and they will not only lose their home(already happening all over the country and starting to happen here) but be unable to buy anything else.

    As far as buying a condo, why would I pay more than twice what I pay for rent to buy an apartment/condo? Your customer is wise to rent now.

    If you have been right every step of the way, what are your projections for the home prices going forward? In one year? two years?

  34. This thread seems to be suffering from a signal to noise ratio problem (love that term, Kary).

    I had posed a question a while back, just wondering if there was data.

    I had speculated that the decrease was in large part from investors (both professional and amatuer) heading to the sidelines, waiting for a more attractive entry price. That has been frequently mentioned as one of the significant differences in markets that have experienced a steeper decline in value that ours.

    Does the decrease in local home sales (and rising inventory) have a legitimate correlation to occupancy type, and is that data available? What about new listings on the market? Are investors selling their properties a higher proportion of the market than previously?

    Anyone, anyone….Bueller?

  35. “I had speculated that the decrease was in large part from investors (both professional and amatuer) heading to the sidelines, waiting for a more attractive entry price. ”

    Roger, I don’t think you will see much interest from investors in the near future. Most of the pros have gone on to greener pastures. They see realestate as a depreciating asset (which it is now) for the forseeable future and will be unwilling to be a knife catcher in such a market. Add to this strict lending standards and the speculative investor will go bye bye. No more easy money (see country wide and WaMu et al.)……..

  36. Ardell –

    I really thought you were above this. Your post completely misrepresents what is written on Seattle Bubble -and since the post in question was mine, I take offense.

    The post quotes a third party source that predicted seattle would be one of the top markets in 2008. It also notes the SAME source says portland will be one of the worst. It then points out that, since seattle and portland have tracked each other very closely for the past 8 years, it is a pretty ridiculous forecast.

    Positioning the subject matter of the post as you have is disingenuous at best.

    Thanks for reading, but I expected better from you. Perhaps I should reevaluate.

  37. oh, and also – good idea to not provide a link to the ACTUAL post so people couldn’t see how badly you misrepresented the content. -but to instead respond “That would be inappropriate. The snippet is the point and the link is correct. Trust me…I’ve got it right. ”

    classy, very classy.

    perhaps you would be better served spending your time looking up the term “histogram”, so you could actually create one?

  38. Pingback: Seattle Bubble » Blog Archive » Portland worst, Seattle first

  39. JG,

    Real Estate is always the same in that for every 100 properties there is maybe, one worth buying. Our job is to find that one. Not to pretend all 100 are worth buying.

    So maybe it will be 1 in 500 after all that happens. My job is still to find the one.

    It doesn’t matter if it’s a hot market or not. It doesn’t matter if it’s a seller’s market or a buyer’s market. We have to find the one house that suits the buyer’s purpose and is also one worth buying.

    As I said, people don’t always follow my advices. But those who say I am “a troll”, (I thought trolls ran around other people’s blogs trolling) are wrong. I can’t pretend that the market is going to move all in one direction ever. People losing their houses is one thing. People losing them for less than they paid 2-3 years ago means there’s something else going on, and that’s not prices dropping.

    1) they bought the wrong house in the first place
    2) they did a cash out refi on top of that
    3) they made the house worse than they found it instead of better.

    One of my buyers just picked up a house for less than the owner paid for it in early 2007. The bank lost a lot of money in a short sale. It wasn’t because the house is worth less and prices are down. It’s because they pulled some stuff out thinking they were going to fix and flip it and never put it back.

    Looking at “price histograms” and “data” might make you feel warm and fuzzy (you generally) so that everyone can be an expert, and pretend real estate is about huge trends instead of good individual selecton. But that’s just NOT how it works, and everyone really knows that right?

    How long do we have to pretend that playing with oneself is the way to go about this so we don’t hurt anyone’s feelings?

  40. deejoyah,

    I read Seattle Bubble all the time. It’s one of the few blogs worth reading for me. I posted my honest reaction. It’s not a joke, though it’s a cheap shot because I didn’t feel like reading more and more and more to get YOUR point any more than any one is obligated to read all 5,000 posts I’ve ever written to get my point.

    Point is, I was FLABBERGASTED at this point in time to see Seattle Bubble quoting an UP prediction the way that you did. I’ve seen Many articles saying these things were dead wrong when they were dead RIGHT on Seattle Bubble.

    The trend of saying the market will go down when it was going up hurt people. Now I see the reverse. In any context, that is equally wrong. Do you really think everyone who reads blogs is going to take the time to scour every detail to get what YOU meant? Naive at best, hurtful at worst.

    My piece is accurate. The link is to the appropriate source that said that Seattle is going up, and the snippet is from Seattle Bubble. Nothing inaccurate about this piece at all. In fact clearly more accurate than anything anyone has said I said (that I didn’t say at all) over the last two years from the bubble camps.

    Go back to 2005 and find all of the whippings of agents and real estate writers who were dead right at the time. No one cried for them, did they.

    I can’t believe a blog that makes sport of tearing real estate agents to absolute shreds is whaa-whaaing about one measly snippet. It’s like the bully who beat up the whole school yard for two years crying for protection when they get a little paper cut.

  41. Hey Deejayoh,

    What do you think would happen if I put links to RCG in my comments on Seattle Bubble? Not that I mind your doing this one, because it’s totally appropriate for you to be doing that. But you know darned well that I’d be slaughtered if I did that on Seattle Bubble.

    My point is, that there’s no question but that Seattle Bubble is a place to go to whip the agents. A tiny little snippet shouldn’t turn their would upside down. It’s an accurate snippet, not misquoted, and I was sure to leave the link in so people would not attribute you as the underlying source of the prediction. Very accurate. Absolutely accurate.

    We don’t let people rip anyone to shreds here on RCG, including Seattle Bubble. You let everyone whip Realtors to shreds there for years. Stop whining. It’s not even close to an insult by comparison.

  42. “As far as buying a condo, why would I pay more than twice what I pay for rent to buy an apartment/condo? Your customer is wise to rent now.”

    Not every client is wise to rent now, but read my lips. I said that the 21 year old with the $75,000 profit should sell and rent now. Not necessarily so for all people.

    The problem with Seattle Bubble is it seems to want all people to move in unison, which is always bad advice. Never say never or always.

  43. “Talk about being at the wrong place at the wrong time…twice.”

    Ardell, are you saying that the bubbleheads were wrong the first time by predicting declines when the market went up. And now are wrong again because they are now predicting the market will go up when in fact it is going down?

    If this is correct, part of your comment is that you think the seattle market will decline this year.

    Please confirm if I understand your point.

  44. Nolaguy,

    When I have a client who has seen 100% appreciation since May of 2005 to present, I say SELL! The market certainly has more of a propensity to go down than to go up at this point. When I was in the stock business, we took gains. The gain taking often caused a “correction”. Also we’ve lost 20% to 30% of the buying power. If that’s not a big yellow light, I don’t know what is.

    While the housing market doesn’t work quite that way, for sure if someone does not have a need to be in a house for more than 5 years. If they think they may be moving in two years, they had better rent or buy very, very carefully.

    Anyone buying real estate today has to be a whole lot more careful than those selling. Don’t you agree? And if someone is leaving Seattle NEXT year, I would recommend they sell now rather than wait.

    It doesn’t take a rocket scientist or a price histogram to tell someone that after a run up like we have had, the market has more of a chance of plateauing or going down, than going up.

    In fact it is an EXCELLENT DAY to start Seattle Bubble 🙂 I expected to see the normal Gloom and Doom over there cranked up a notch. Not some prediction of a 3.8% increase being quoted.

    Yes, I still have buyer clients. But we are looking for exceptional bargains unless they are going to stay till they die. Not a good time to speculate that the market is going to go up vs. down. Buy wisely and only if you are planning to stick around.

  45. Hey Deejayoh,

    Here’s a snippet for you:

    ARDELL at RCG said, “The market certainly has more of a propensity to go down than to go up at this point.” LOL You don’t have to link to anything. Take the snippet and Happy New Year.

  46. Roger,

    You’re the Loan Doctor. You must have access to a skazillion professionals who can answer your questions. It’s Sunday, so I’m off to work on my Sunday Night Stats post.

  47. I work for a national mortgage company based in the southwest who only deals in jumbo loans and AAA credit and if you don’t think that there is a serious price corretion on the horizon you are on crack.

    Oh, and I feel I lost about 50 IQ points reading this blog.

  48. SouthWest…OK! I’m hoping for 2001 pricing in L.A. Beaches myself. I think it might get there. When I see a one bedroom condo in Redondo Beach for $300,000 again…I’m buying a weekend getaway.

  49. Ardell:

    Long day, huh? Sorry about that.

    No, I don’t know where to find that info (re the percentage of investors that have left the local market). That’s why I asked. I didn’t mean to imply an obligation for you to provide the info, but there might be readers and users of this site that might know. This seems to be a place to access local professionals and experts to get that kind of obscure data

    If I can find the info on my own, I’ll try and bring it back here.

    It’s not a big thing, just curious.

  50. No problem Roger,

    Just wanted to get that straight. If someone has that answer for you, great. I have two selling, if that helps. Maybe three by tomorrow. Two because they bought to build and sell, and one because the tenants and repairs are getting to be too much for her. That’s a high % of my contacts given I do primarily owner occupied tramsactions.

    Most of my sales of investor property are 1031s, so they are not “leaving”, just trading out. Last one I did like that closed in November. Sold his 4 plex in Ballard in July and bought a three house on one lot thing in Des Moines in November.

    Leaving…do you mean not doing a 1031? I know an older couple doing that and re-investing in pooled 1031 funds. I advised against it and did not represent them though. They had $12 million in property and I felt the pooled investments was too risky, so I passed on the opportunity. Not sure what they did. I can check though. They were just getting too old to maintain the properties and didn’t want to hire a property manager.

    I told them to keep them and hire a property manager or sell them and consolidate. Or just take the money and pay the taxes. I don’t believe in REITS or Bond Funds as an investment. Only Stock Funds, individual real estate investments and individual bonds. Saw too many losses in REITS in the sixties. Big ones. Bad ones. Same thing happens with bond funds when they try to keep the income return high.

  51. Roger,

    Unlike some blogs, RCG is not “a forum” we are expected to answer the comments on the posts that we write. So unless you are addressing a commenter by name, you are asking the writer.

    I just thought of that. Rhonda had the same issue with you. If you ask a question or comment on someone’s post, it is work for them. So just be conscious of that set up. That’s why she asked why you didn’t get your own blog 🙂

  52. czb,

    Thanks for asking. All is A-OK. Just me being me. I’m a Gemini 🙂

    I wrote the short post last night after coming home from Chris Steak House at Belle-Square. Maybe I was a little TOO relaxed. It just struck me funny when I read it over at SBB. Didn’t think it would cause an issue given how many times we get whacked over there.

  53. I don’t understand why this is so hard for you to comprehend Ardell.

    The Seattle Bubble has been quoting -and discussing- UP predictions for quite some time now. That’s actually a huge part of the site, breaking down predictions and looking at the underling reasons. They’re usually pretty flimsy: Boeing, Microsoft, Water, Pink Ponies!

    Your assertion that people have to “scour every detail” of the blog to get to the point is disturbing. There are a few basics to reading, and I guess if you stop in the middle articles after a paragraph then you will get pretty confused, but it’s not a habit to get into.

    And finally, your refusal to link is just plain poor etiquette.

  54. Poor Renter

    1) OK

    2) Actually I said that about “scouring every detail” to be kindly to Deejayoh, and say maybe I missed his point. But I just re-read it again, and I still feel the same way that I did when I read it last night. Could be the difference between his style and The Tim’s. Regardless, readers do not always see what writer’s intend. Such is life, as in now.

    3) I only wanted the short snippet and the link in it was placed there by Deejayoh, not me. I think people are missing that. I don’t link in my posts very often, it just isn’t my style of writing. The only reason there was a link there is because it was SBB’s link, not mine.

    I don’t like to link often, as too many agents use it to slap each other on the back too often, as in “link-love”. Just my style. No intent intended. True to form, that’s all.

    We rarely talk about Seattle Bubble here, even though it’s my favorite blog, because it creates too much controversy. We clearly let things pass when they talk about us and agents generally. Probably too much so.

    Just gave my honest input. Very short too in the post. Creates too many problems to talk about them or link to them. It’s a shame really. I’m never going to see things the way they do or vice versa. Is that a surprise to someone?

  55. Ardell Wrote: “They shouldn’t have been reading Seattle Bubble two years ago. You are making MY POINT. I WAS RIGHT, they were WRONG. Where’s the apology?”

    Um. No. There are lots of people who SHOULD have been reading Seattle Bubble two years ago. Seattle has lots of people who bought homes thinking of it as a foolproof investment and that there was NO WAY for them to NOT come out ahead. Just ONE example in my neighborhood in West Seattle (Highland Park): House purchased in March of 2006 for $365,000. They tried to sell the house at a break even price this summer and were unable to. Many people who bought two years ago and need to sell this spring are going to find that they have managed to lose a lot of money – especially compared to how much more they paid every month to own rather than rent.

    There are already plenty more stories of financially screwed home buyers just in my little corner of Seattle who would have been better served to know the risks they were getting into when they bought a house in 2006 and 2007. Risks that were talked about at SeattleBubble but downplayed at RainCityGuide with articles such “Is Seattle Bubble Proof?” (Answer: Yes!)

  56. Curtis, Ardell and I disagree a bit on this, but IMHO, if your time line is only two years, buying probably isn’t the best course. Given that the costs of sale can be 9%, you need 4%+ appreciation a year, assuming no wear and tear on the property (which is possible).

    Also, you indicate that the people in West Seattle tried to sell the house at break even. No wonder they didn’t sell it. They were pricing based on something other than the market. The most extreme example of that that I’ve heard of was the recent front page Sunday Times story of the guy with the $600,000+ condo. The Times was all over that as an example of how soft eh market was. What they didn’t disclose was that he’d only bought about 4 months prior to going on the market, and priced it at roughly 9% more than paid four months earlier. I wrote a piece on that here:

    (Although the pricing to break even was something I realized in one of my later comments.)

    But there are also plenty of people who bought in 2006 you can sell today at a profit after costs of sale. Finally, I really don’t think that Seattle has experienced evidence of a bubble–yet. To say there’s been a bubble you need to have had a significant decline.

  57. Curtis,

    One of my pet peeves is that there seems to be a huge contingent that wants the market to move in unison. They want the market to make them wiser in their housing choices. That simply is not the case.

    There are always houses that are better to buy than others and there are always people buying homes. We don’t have the luxury of wanting it to be a good time to buy or a good time to sell. Most people buy and sell homes for life reasons and not investment reasons. So generic “good” is a misnomer.

    There’s is a wise choice in any market. But most people want to read something that takes away their responsibility to purchase wisely. Nothing removes an individual’s obligation to do their due diligence and make appropriate selections.

    I talk to agents every day who want the same. It amazes me really that people continue to want to think that they can buy anything, anywhere, and it should always go up.

    Any single family home or townhome that was $365,000 in Seattle in 2006 was likely that low for a reason.

    I can honestly tell you that I received emails from people about “dirt cheap houses” in West Seattle. My response was, “and why do you think that house is dirt cheap”? They wanted to think it was because it was “a bargain”. Often the house that doesn’t appreciate while others do, won’t appreciate after purchase either. I don’t do West Seattle because of those pockets that…well I’ll tell you what I told one of our investors…”we wouldn’t touch that with a ten foot pole”.

    I am always more right when helping clients choose an individual home out of the many available, or to say wait for the next good one, than anyone who wants to think any choice is always good or bad due to market conditions.

    Seattle Bubble is simply the opposite of a Realtor Cheerleader. Most people know the power is only in their hands to make wise choices. Not buying because of SBB or buying because of a Cheerleader, is never the right answer.

    If people spent more time choosing the right professional for advices than they do choosing the house they like, they’d be much better off. They’d rather make a blanket decision that all agents are the same, and they can buy on their own seeking guidance from generic market observations.

    Some day I’ll make a note of how many times I tell someone NOT to buy dozens of homes until we find the right combination of good value and one they like. It’s hard work. I give them a headache, I really do. But that’s the type of effort it takes to make right selections.

    If 1 in every 100 houses for sale is the right choice. No more than 3 usually. Then there are 99 to 97 people buying “the wrong homes at the wrong price” out of every 100. That’s true in every market.

  58. Ardell:

    Thanks for the explanations and anecdotal data re investors. I did not realize that you (and other authors) were required to answer comments.

    I am fairly new to the conventions and manners of this site, and of the blogosphere in general. There seems to be a pretty wide range of acceptable behavior. I feel I have a pretty good sense of how to treat people in the “virtual” world, but there is an appalling lack of civility in the world of e-opinions.

    This seems counter-intuitive, because the intelligence required to engage in a written debate creates a higer barrier to entry, and I would assume that would weed out the playground repartee (Did not!…Did too!… Did not!”

    From a new person’s observation, it seems more like you (the authors) create a meal, and then throw it in the midst of a snarling pack of dogs, and see how it ends up! :). That can’t make the authors happy, but I suppose it would be worse to create the meal, and have the starving dogs turn their backs on it!

    There is some entertainment value in watching the fray, but not much of value is learned.


    3. David Losh – October 24, 2006
    Hello Joe!
    These are good questions!
    First, it’s always a good time to buy and it takes two to three years of holding a property to maximize profit. I always advocate a thirty year fixed mortgage, but use Adjustable Rate Mortgages for myself.

    LOL… No, I wasn’t looking for this post because there are probably a kajillion like them. There was a garbled message that appeared under the blogroll to the right. I clicked on it and found this immediately. How are those adj rate mortgages working out now Dave?

  60. Adjustables are sometimes good, sometimes bad, but they scare the heck out of me, so I’ve always avoided them. That’s what happens when you get your first fixed loan in 1978, and then watch interest rates climb to levels that were thought impossible. That’s probably cost me a ton of money over the years, but a lot less worry.

  61. Posts like this are why I have minimized my time on this blog lately.

    Hilarious how people at this stage can still be staring down the barrel of a gun and still think Seattle is special. We have already seen YOY decreases in prices in both Seattle and King County and people are already trying to find explanations other than the simplest one “financing is gone and houses are not affordable”.

    Inventory is already starting to rise dramatically. Come July we’ll be seeing 5-10 percent declines YOY. Will you still be here finding excuses?

  62. Matthew, financing is not gone. Check out the post I just wrote on 100% financing. What has been removed is some of the subprime crazy 100% stated income. And…there’s still some subprime out there too. Don’t shoot the messenger…I’m just letting you know.

  63. Matthew wrote: “Hilarious how people at this stage can still be staring down the barrel of a gun and still think Seattle is special. We have already seen YOY decreases in prices in both Seattle and King County and people are already trying to find explanations other than the simplest one “financing is gone and houses are not affordable

  64. Kary/Rhonda-

    All financing is not gone, but the financing that drove the bubble the last few years is. Rising demand is meaningless unless the increased population can afford a house. So what if we add 30k people to Seattle that make 40k a year. They can’t afford to buy into this market.

    I’ve been calling a banking/credit crisis on this blog long before the current credit crunch and was ridiculed for it. I also predicted negative YOY appreciation this winter and people said I was crazy. If you look at the recent month-month decline of prices in this area you will realize that come July (peak of 2007 was in July) things are going to get downright scary. Sales are down, inventory shooting up. Add that in the mix with a slowing economy and current recession, things are going to get ugly fast.

    You can ridicule the bubble heads all you want, but the fact of the matter is I’ve been right a lot more than the people I have argued with on this blog throughout this year. Who was saying that CFC was in a death spiral back when they were trading at 45? ME. Who was saying you would start to see major banks in serious financial trouble with billions in writedowns? ME. Who said you would see negative YOY prices at the end of 2007 beginning of 2008? ME. People were laughing at me in the beginning of 07, bet you aren’t laughing now! Seems to have taken a more serious tone these days.

  65. “They can’t afford to buy into this market.”

    This is what I don’t get. If the agents were “wrong” back when they said buy now or you’ll be priced out, then why are you complaining that everyone has been priced out? Sounds to me that those who said that back then, were right. No?

  66. Priced out for the time being, until the prices come crashing back down to reality.

    Supply and demand. If the demand goes down due to people being priced out, the price will eventually come back to where people can afford to buy. Hence why you are seeing skyrocketing inventory right now.

  67. For the sake of those wishing to buy who can’t, I hope you are correct. Though I don’t wish losses on anyone. I had the pleasure of meeting a young girl today who wanted to buy a condo. I checked in her area, which was way down in Tukwila, and only 4 properties sold in her price range in the last six months.

    I told her to call again in July, as she will get a raise then, and we’ll check again or I’ll try to find her one off market with no commission issues. That might help.

    Two years ago she could have accomplished her objective, but not today. I certainly don’t wish that she will forever be “priced out”, but she is at the moment.

    Since you are “affluent”, you can probably buy in any case. Some are not so lucky.

  68. Matthew,

    Depends how many people need to sell and how many choose to simply go off market and wait for better times. You need more of those people needing to sell…at any price. Not all will go that route.

    We’ll all have to pay attention and see what happens next.

  69. Mathew wrote: “If you look at the recent month-month decline of prices in this area you will realize that come July (peak of 2007 was in July) things are going to get downright scary.”

    If you look at the month to month increases in March to July, that was scary, and that’s a large part of the reason for the fall from the peak. Even without the mortgage mess, that wasn’t sustainable (median increases of over 20% at an annualized rate). Unfortunately I was busy looking at YOY increases at that time and missed it.

    The problem I see being caused by the current mortgage situation is this. Median prices are irrelevant because first time buyers don’t tend to buy median properties. They trade up. But you need financing for buyers at the lowest level for the second time home buyer to trade up. And if the second time home buyer can’t trade up, then that eventually works its way through to the third, fourth, fifth, etc.

    Oh, and one other point someone made–a lot of the people moving here can afford the houses here, so it does increase demand. But even if they can’t, it drives up the rents. And that can cause an existing renter to look to buy.

    See any connection between the last two paragraphs? Things work there way through the system. You can’t just look at the first change.

  70. You guys crack me up. Should we all sing “in the year 2525, if man is still alive” 🙂

    What do you think “for good” means? It means that boy of 19 cannot buy that condo again for $100,000 within a timeframe he can reasonably establish for purchase. If it even hits $150,000, I’ll let you know.

    When one of his co-workers can buy next door to him at the price he paid, we’ll talk. If someone thinks all this YOY crap means they can go out and buy property at historical lows, they are kidding themselves.

  71. I think I just got it Kary. There IS a bubble. We are “bursting someone’s bubble” when we don’t pretend with them that they can buy at 2001 prices soon.

  72. Not soon, Ardell. Nobody claimed soon, as far as I can tell. Prices are sticky on the way down. I’m targeting 2009-2010 for a move up, but still expect prices to continue to fall after that.

    But I do fully expect a new condo that sold in 2007 for 200K to one day (not soon) sell for 100K again, adjusted for inflation. You are right to share your “sell!” advices. I’d also guess Kirkland view lot tear-downs to be available for 450K or less early next decade.

    Kary – can you link your population numbers for me? I looked at them last year, and saw increases of 1-2% annually for the last decade. Nothing to pressure housing supply.

    I do recall some mention in the paper of a bit of a blip, with higher in-migration in 2007, but I really have no idea how that sort of thing would be determined. Census estimates are just that, and intra-census surveys have a pretty high standard error. Do you have solid numbers?

    There’s not much point in trying to predict a bubble after it’s already happened, now is there. At that point, all that remains is worthless “I told you so’s” and “…the lamentation of their women,” to quote the Governor of California (there was an article in the NY Times recently about how women were disproportionately targeted for subprime, and are now disproportionately defaulting).

    And he currently hears the wails, as LA is already down 15.8% from their peak and continuing to plummet off a cliff.

    But LA ain’t special like Kirkland.

  73. Wow. I just cruised by here over my lunch hour at work – I haven’t seen such desperation in a long time. It is not rational to buy if you don’t absolutely need to. Prices are declining. These are facts. Any reasonably aware person would choose to wait, which is what causes price deflation. What’s 6% commission on a deflating number?

    Good luck with your Enron stock or Seattle condos or whatever you bought.

  74. Billiruben, look at the link to the article at the top of the why did you move here thread. What prompted that was the story about population increases. There’s some data there.

    S, I’m going to parrot Mack over at the Seattle P-I blog and point out that the opinion of an anonymous poster doesn’t really mean much. Prices have declined from their high this Summer, but YOY they’re virtually the same. Typically you look at YOY not month to month (which is why I missed the crazy run up this summer–the YOY figures weren’t that alarming). Whether prices are still falling, that’s another matter entirely.

    From my own business I’d say the buyers are coming back out after the holidays. But I’ll admit that from my own business I wouldn’t have guessed that the volume in December would be so alarmingly low. I had other reasons to suspect they would be, but not from what I was personally seeing (actual bodies not numbers).

  75. biliruben, I forgot to mention, LA’s prices have been much more volatile than Seattle’s for many years. So it’s not that Seattle is special, but Seattle hasn’t gone through what LA has. Well perhaps it did in March through August, but that run up was much smaller and shorter in duration than what LA saw.

  76. “…the opinion of an anonymous poster doesn’t really mean much.”
    – Kary

    No doubt. Just my wild-assed guess. I own a home already, so if my opinion is correct, I’m poorer. I have no agenda.

    Agents who need clients in order to make money can’t claim that.

    People have to decide for themselves how to weight the various opinions. Do you weight the opinion of someone with an agenda but more experience, or no agenda but less experience?

  77. I will echo biliruben’s sentiments.
    The attempt to color all of those who believe that there will be a significant deflation in home prices as barely post-pubescent Ramen-eating Mama’s couch-sitting jobless losers with an empty bank account is quite self-serving for those in the real estate industry.

    Some, possibly many of those who share this pessimistic view on the housing market own houses already (that have appreciated far beyond what they think is reasonable) and have the ability to analyze statistics and draw relevant conclusions from other forms of education and training. These same people are expressing an opinion that they have come to despite having no incentive at all to do so.

    However, it very much suits real estate professionals to continue denigrating those whose opinions run counter to their financial best interests. As such, in order to lend some credibility to their opinions, I will agree to quit my job, pick up a Playstation 3 and a crate of Ramen from Costco on my way home, start wearing baggy pants, start using zit cream again (Clearasil – does that stuff still exist?), and call my Mother and tell her I’m moving back to the basement couch. I’m sure my mother in law the realtor will tell my spouse: “I told you they were a no good bubble-believer.”

  78. “…LA’s prices have been much more volatile than Seattle’s…”

    I agree. But we are in a different world now. This has been a global credit bubble. Ask Lar.

    So since this bubble started, which I personally think was 1997, LA’s prices have risen to about 3.4 times their value then, based on Case-Shiller. Seattle’s prices have risen to about 2.5 times their 1997 value.

    So in order to get back to those prices, LA needs a 70% haircut, and Seattle needs a 60% haircut in prices. Figuring that inflation takes accounts for about 30%, LA will experience a 40% haircut from the peak bubbliciousness (25% more) and Seattle a total 30% haircut (maybe 25% more as well). I’ll give it 5 years, though the timing is always harder to predict than the amount.

    That sounds about right to me.

    I’m Bullish and conservative, in my humble opinion. Just ask Eleua.

  79. biliruben, the portion you quoted was my response to “S” not to you. You’re only semi-anonymous since you offered to reveal your identity in the move to Seattle thread. 😉 And in any case, you aren’t saying that someone shouldn’t buy unless they absolutely need to. Advice like that is worth what you pay for it.

    But don’t worry, I don’t value any-one’s opinion on where the market is headed. There’s not a single source (person, group, company) that I give any weight to.

  80. czb wrote: “The attempt to color all of those who believe that there will be a significant deflation in home prices as barely post-pubescent Ramen-eating Mama’s couch-sitting jobless losers with an empty bank account is quite self-serving for those in the real estate industry.”

    Don’t exagerate. The people at NAR have jobs! 😉

    And BTW, I don’t value their predictions either. I read somewhere that they revised their predictions at least 8 times in 2007.

  81. Ah – gotcha, Kary. Missed the S. Thanks for clarifying.

    My opinion along with double-tall Mocha with whipped-cream is still worth $2.75.

  82. But those things change, and perhaps they changed for reasons other than financing.

    Look at houses now compared to houses built in the 50s or before. Back then 1 bathroom was the norm, then 2. Now 1 bathroom homes are functionally obsolete and some homes have a master bath for every bedroom. People are willing to spend more because they expect more.

    But again, don’t get me wrong. I’m not saying prices won’t drop. I’m just happy trying to figure out what’s going on now–I don’t think or worry about the future.

    Which reminds me of a story–barely. On another general interest site someone was bragging about whatever transaction they had done, and what a good decision it ended up being. I really don’t remember what that transaction was, but I remember when they did it–August, 2001. But for 9/11, their decision might have been horrible rather than great. But they were totally ignoring that fact when they were bragging.

  83. Scenario:
    New Construction
    Prior sold price within the last year: 1.1 Million
    Short sale price: $670K
    Neighborhood comps: $700-725K

    a) was fraud involved in the purchase?
    b) did the homeowner use 100% financing?
    c) a +B
    d) none, this couldn’t be happening in our area.

  84. There could be any number of explanations for that. A few come to mind quickly.

    First, if it’s an established neighborhood, the neighborhood comps wouldn’t mean much. They might not be comparable at all.

    Second, the property could have been damaged in some way, or discovered to be defective. New construction is not without risk.

    Third, assuming it was a true short sale, I wouldn’t suspect mortgage fraud. With that price, I’d assume they put a significant amount of money down (I’m assuming a first and a second and that the second would be getting something from the short sale).

    Fourth, they could have just overpaid. It happens.

  85. With stocks, I generally scoff at market-timers and technicians, Kary. So I think I agree with your sentiments.

    However, I pay extremely close attention to P/E ratios, margins, growth rates, debt, income and other fundamentals. Those things tell you the health of the company. The don’t tell you when their stock price will rise or fall tomorrow, but if they are bleeding money with no end in sight, you know eventually that unless something changes, that price will go down.

    I think of price/income and price/rent ratios as the fundamentals of housing. Sure, they have changed in the past, generally when either the government changes some tax-break or regulation or when some good, legitimate innovation occurred in lending which allows folks to own more house for less. And perhaps occasionally when a city or region moves into a different tier – super-star cities theoretical economists call it, iirc.

    I don’t see that any of that happened in Seattle over the last 10 years. I’ve been sitting right here watching closely, and all I’ve seen is a massive credit bubble come… and now go. Along with that, you get the fleeting money and the pin-striped suits hawking condos in the Other Coast Cafe, but that won’t last long. I don’t see reason the historical relationships won’t return, and the sooner the better for the sake of Seattle’s soul.

  86. Kary,

    You said “Oh, and one other point someone made–a lot of the people moving here can afford the houses here, so it does increase demand”

    Um, you might want to phrase that in the past tense. California and most of the other parts of the US are dried up and drying up. The equity locusts is an endangered species.

    You said “I’m just happy trying to figure out what’s going on now–I don’t think or worry about the future.”

    You don’t need to look that hard to figure out what is going to happen. Look at all the other major metro areas around the US. Read the Case-Shiller charts. There is plenty of data out there to show us where we are headed. Look at both the M to M and YOY data and it looks to me that July of this year is going to be pretty bleak.

    I’m predicting a 5-10 percent decrease July 08 from July 07. What’s your prediction?

  87. Matthew, I was thinking more of the income to qualify for a loan. I haven’t seen any high income positions for people going to work for MSFT, but I have seen that with some other companies.

    As to the second comment, LA has gone down probably three times in the past 20 years. Does that mean Seattle did that too? Nope. Real estate is local, sometimes incredibly local.

    As to the third point, I don’t make predictions as to the price of real estate. They’re worthless exercises. Too many factors affect the price of real estate. You’d need to forecast interest rates, employment levels and countless other items which in themselves are impossible to predict with any kind of accuracy. I thought I’d made that point, but perhaps it was another thread.

  88. Kary,

    That is the problem. You are thinking that the current situation is similar to the past. It is not. This is not a typical “local” real estate bubble. It’s a national credit bubble. We are in a nation wide credit crunch. Yes certain areas will be worse off than others, those are the areas that appreciated the most. While Seattle will most likely not go down as hard as Florida, SoCal, Nevada, etc, we will not be immune. Lax lending and easy money is what contributed the massive appreciation the last 4-5 years in Seattle.

    We can see this thing play itself out in a number of ways. The bubble could burst, and we could see a sharp correction. The bubble could slowly leak, and we could have a slow/slight correction over a number of years. Or prices could plateau until wages increase to match prices. Take your pick.

  89. Kary,

    Thats cool that you don’t like to make your predictions. I’m a “put your money where your mouth is” type of guy. We’ll see if my July prediction is accurate, just like the other predictions I have made so far were.

  90. bili,

    I have seen a market drop 50% after a 100% runup, and it happened pretty quickly. The drop happened quickly and the return to same value took five years and then surpassed it. The key for the Seattle Area will be if there are enough financeable people in a given area to support prices. I think it will be spotty, in that regard. Some areas well do better than others and the drop won’t be spread evenly.

  91. “Yes certain areas will be worse off than others, those are the areas that appreciated the most.”

    Matthew, it usually doesn’t work that way. Quite the opposite actually. The hotter areas appreciate the most, move first and go down last. That’s why agents say “location, location, location”.

    Less desireable locations start selling well when there are more buyers than sellers. When there are fewer buyers, there are still enough to sustain the most desireable areas and the less desireable locations go down first. If the market picks up before the downward pressure gets to the most desireable areas with the highest appreciation, it escapes unscathed.

    Think about it. Would you buy a house on a busy road if there were many for sale at the same price in quieter locations? For homes on busy roads to sell high, there has to be few to no options in better locations. In an oversupply, homes on busy roads will suffer first and hardest, even though they didn’t appreciate as well as some homes in better locations.

    It is also true that “the bigger they are, the harder they fall”, but the cause of those being the ones who enjoyed the highest appreciation in a hot market, will also be the reason they sustain their price levels the longest in a down one.

  92. biliruben wrote: “However, I pay extremely close attention to P/E ratios, margins, growth rates, debt, income and other fundamentals.”

    While I agree those numbers are important, have you ever found a stock where say a PE ratio gave you a clear buy/sell signal?

  93. What you often see with stocks is what I call panic buying and selling. When the PE gets to a historical high for a stock, the stock price might also be at a historical high, and rather than being a sell signal, that could be a buy signal. And the reason for that is people see how great the stock has done recently, and want to buy it, and the people who own it are largely happy owning it, and don’t want to sell. So demand outweighs supply and sends the price and P/E even higher. And that direction can continue for some time, before the stock falls (and if it falls it may not fall to where it was). The point is the PE ratio doesn’t tell you when that will happen.

    I like the stock analogies because many of the same factors are at play, just over longer time periods. That’s why you see things like say people snapping up Los Vegas pre-built condos never intending to move in. That’s an example of panic buying. And like the stock situation, I don’t believe there’s any ratio, or collection of stats that will tell you when the direction of prices will change.

  94. BTW, the front page of the P-I reminded me of an example of panic buying. Boeing in the first half of 2007.

    Their stock price reached a new high, and continued up from there, even though they were in the process of developing a new plane, using a new technology, and even though the most recent new plane from Airbus suffered production delays. I don’t track the PE of Boeing (it’s typically pretty low), so I don’t know how it’s PE number was doing at the time. Maybe the PE did indicate a top (and I mean by comparing it to prior PEs that indicated a top, not that the PE was high and then dropped).

  95. “While I agree those numbers are important, have you ever found a stock where say a PE ratio gave you a clear buy/sell signal?”

    Krispy Kream? Palm?

    I general though, I agree with you. You need to look at a variety of metrics. You can often guess where they are going long-term if they have a P/E of 200 and a earnings growth rate of 2%, but that doesn’t mean they won’t double tomorrow.

    Housing was like that over the last decade. It was obviously over-priced, but people bought into the mania. You knew where it was going long-term, but it could (and did) double before it got there. I knew that, knew the mania was still going strong, and the intangibles were there and it still made some reasonable economic sense to buy an over-priced house in 2004, so I did.

    Today, no f’in way. The mania’s gone, so we are seeing the fundamentals take over. It’s hard to get the timing down, but today in housing is about as obvious and easy as it gets.

    The direction is down, it’s just a matter of how fast and how far.

  96. I don’t think you can compare skepticism towards the housing market to technical analysis of the stock market. Recently, I’ve noticed Realtors criticizing bubble-bloggers for trying to ‘time-the-market’ and ‘buy-at-the-bottom.’

    This is not a valid criticism. Bubble-bloggers are not examining charts for ‘head-and-shoulder’ patterns or ‘resistance levels.’ Study after study has shown that this kind of technical analysis is pretty much nonsense.

    Instead, you have people questioning the relative value of an item compared to alternatives (renting) and vs. historical norms. That’s not market-timing, that’s some basic thinking and evaluation.

    What do you think people who bought a $450k house in San Bernardino or Stockton two years ago should have done? Should they just have resigned themselves to the fact that starter homes 1 1/2 hours from civilization just cost that much these days? Or perhaps they would have been better off figuring out that renting was less than 50% as much per month and that the same house cost $200k two years earlier?

  97. Lax wrote: “Instead, you have people questioning the relative value of an item compared to alternatives (renting) and vs. historical norms. That’s not market-timing, that’s some basic thinking and evaluation.”

    And if you’d done this in 1980, and not bought, how would you have done?



    Has there ever been a period of time where this worked? Real estate has been outragiously priced for 30 years.

    And again, it ignores my point that the houses build since at least 1990 or so have been much larger, more grand houses, that command a higher price than the 2 bedroom, 1 bath units built in the late 40s and 50s. When you’re looking at means and medians, perhaps we should also be looking at the mean and median age of the houses, because as we move forward in time a larger percentage of the houses will be the houses that command a higher price, naturally raising the median. People are choosing to spend more of their income on housing.

    The point is, things change over time, and trying to compare them to some historical norm isn’t that useful. The historical norm for the price of gold was around $300 an ounce in recent years, so I guess buying gold at $600 an ounce would have been nuts, right? And that was so nuts that obviously buying it now at around $900 would be really crazy.

    On a related note, Biliruben didn’t quite answer my question when I asked what stocks he found he could buy or sell based on PE. He answered Palm and Krispy Kreme. What I was looking for wasn’t examples of companies that had high PEs and fell, but instead, companies where say you knew to sell at a PE of 90 and buy at 60. There are lots of companies with high PEs that fall (and lots with low PEs that fall). People point to these single factors (or combinations) all the time, but they really don’t tell you where we’re headed, they tell you where you’re at.

    Again, I’m not saying prices won’t come down. I’m saying no one has made a convincing argument that they will come down.

  98. “When you’re looking at means and medians, perhaps we should also be looking at the mean and median age of the houses, because as we move forward in time a larger percentage of the houses will be the houses that command a higher price”

    I don’t think that’s true at all for the Seattle Area, Kary. I’m listing one for $1.7M that was built in 1909.

    Don’t you think the skewing of the median is due to view considerations. Seattle has more water than most any place in the country, and consequently more views. In King County, houses selling at high prices are often old houses that have a view, not newer houses build since 1990.

  99. “Real estate has been outragiously priced for 30 years.”

    Not like today, comparing the ratio of median house prices to median incomes. See the graphs at Seattle Bubble that demonstrate this.

  100. I used to live across from the Stimpson-Green mansion, so I know there are some very nice older houses. But your point is good that not all older houses are smaller houses that won’t command a good price, so the mean/median age might not be all that useful. Maybe mean/median bathrooms would be a better factor.

    The point was more that the “average” house built over time has changed, and as you move forward in time that also changes the “average” house sold. Even if population, employment levels and GNP stayed steady, you wouldn’t expect the average price of a house to remain steady, because the average house changes.

    The view concept is interesting. Years ago you probably didn’t pay as high a premium for views, because they were easier to get. Go back far enough (90 years) and probably every house had a view. In comparison, if you’re within the city limits, and it’s not a tear down, you’re probably building on a lot with no view (except maybe of power lines), and a steep slope.

  101. “People are choosing to spend more of their income on housing.”

    It’s not necessarily that people are choosing to spend more of their income on housing – it’s that lax lending lending standards allowed people to borrow more money on a given income, allowing an significant escalation in bids for housing. Given that the lax lending standards are going away posthaste (see the news from Wall Street), people are going to be unable to bid current prices for housing, and the housing market is going to have a significant correction.

  102. ABR wrote: “Not like today, comparing the ratio of median house prices to median incomes. See the graphs at Seattle Bubble that demonstrate this.”

    You could have said that 30 years ago (except for the reference to Seattle Bubble). 😉

    You’re missing my point. My point is comparing median house prices to median incomes is pointless. It just tells you things are expensive, it doesn’t tell you where we’re headed. Go to city X, find where that ratio was when the prices started to decline in that city, and then see if that same ratio is present in other cities. Did they:

    A. Fall before reaching that same point.
    B. Fall after reaching that same point.
    C. Continue rising after reaching that same point.
    D. All the above.

    I suspect the answer will be D, because the ratio doesn’t tell you anything.

    Also, I’ve said it before, but that particular stat is really pointless. People don’t buy houses based only on their income. Their wealth also factors into it. Wealth and income are not perfectly correlated.

    Maybe I should pick my own stat. I’ll compare house prices to life expectancy at birth of babies born presently. I predict housing prices will rise over time as the life expectancy rises, because there will be more demand for houses the longer each person lives. I’d bet if I graphed that out, it would match my prediction. But it would be meaningless. It wouldn’t tell us where we’re headed.

  103. ABR wrote: “It’s not necessarily that people are choosing to spend more of their income on housing – it’s that lax lending lending standards allowed people to borrow more money on a given income, allowing an significant escalation in bids for housing.”

    Lending does raise demand, which raises prices, but it’s still a choice. People could choose to buy a 1 bathroom house and save money.

  104. Kary,

    The pricier lots at GreenLake, have views of the Lake. The pricier houses in Kirkland have views of the Lake. The pricier houses in Seward Park have views. Same with Downtown Condos.

    I’ll do a median price of homes with and without water view and/or mountain view considerations.

    Using bathrooms will be useful as well, given the pricier older homes have mostly been remodeled, and have added more square footage and baths by going down to the basement level and adding second floors, in many cases. My house was once a 2 bedroom 1 bath bungalow of 900 square feet or so built in 1921. Now, it looks the same standing out front, but it is over 3,000 square feet with a huge 5 piece master bath with jucuzzi and 2 headed walk in shower, a 750 square foot master suite due to a second floor addition, and has two full baths, a 3/4 bath and a 1/2 bath. So bathrooms will help account for the expansion of older homes.

    I’ll play with that and see what I come up with.

  105. Ardell, I’m not saying views don’t command a premium, I just don’t have a clue how that premium has changed over time.

    BTW, one of my favorite jokes was from Gary Shandling (sp?) This was years ago, so he was only speaking of a million dollar view, but his line was: “For $1,000,000.00 I want to open the drapes and see naked breasts pressed against the glass.”

  106. LOL!!!

    Over time is not as important as the now, Kary. We both know that when the houses were built on Magnolia Bluff, no one seemed to care about the view. Hence all the tudors with tiny windows facing the awesome view.

    People joke about “The Teacher’s View” where you stand on the toilet and crane your neck to see it. But reality is that many homes in Seattle that could have had an awesome view, simply ignored the view when building the home. That does not happen today. If you build a new house were a home with tiny windows once stood, you increase the value dramatically by expanding the windows and adding a second floor. So I don’t think it’s about time…it’s about windows 🙂

  107. Maybe it’s time for a TV show called “Lifestyles of the Poor and Disgruntled” to run side by side with “Lifestyles of the Rich and Famous”. Or was that Roseanne 🙂

  108. “Lending does raise demand, which raises prices, but it’s still a choice. People could choose to buy a 1 bathroom house and save money.”

    People are much less likely to “stretch” to buy a house if they don’t think that buying a house is a great investment. It’s when they think that housing prices are going up 20% a year that they are willing to spend 60% of their income on housing (and, as I noted, the lenders aren’t going to let people borrow money in the future if they are going to be spending 60% of their income on housing).

    Also, although real estate has always been cyclic, the ratio between median house price and median income has been pretty stable for a local area. Arguments that such real estate valuation standards are no longer relevant precisely mirrors the arguments made during the tech bubble that traditional methods for valuing stocks no longer mattered – that there was a “new paradigm”.

  109. ABR wrote: “Also, although real estate has always been cyclic, the ratio between median house price and median income has been pretty stable for a local area.”

    ABR wrote: [In response to my claim that prices have been outrageous for 30 years] “Not like today, comparing the ratio of median house prices to median incomes. See the graphs at Seattle Bubble that demonstrate this.”

    Which is it? They’re the stable, or the ratios are out of whack today? These statements you made seem contradictory.

  110. “They’re the stable, or the ratios are out of whack today?”

    The ratios are out of whack today, driven by the lax lending standards. Restore traditional lending standards, and it is a reasonable expectation that the ratio of housing prices to median incomes will return to historical norms.

  111. Affluent bitter renter, I bought my first home at 21 (more than a couple of years ago) which was a 3 bed/1 bath “continental” way out in NE Tacoma while working downtown Seattle and taking the bus to work/home. FWIW we stretched quite a bit and were able to make this purchase thanks to FHA financing. We did not view our home as an investment (although it did provide a great return and the down payment for our next home). It was just “our first home”.

  112. Kary Krismer Wrote: “If you look at the month to month increases in March to July, that was scary, and that’s a large part of the reason for the fall from the peak. Even without the mortgage mess, that wasn’t sustainable (median increases of over 20% at an annualized rate). Unfortunately I was busy looking at YOY increases at that time and missed it.”

    “(which is why I missed the crazy run up this summer–the YOY figures weren’t that alarming).”

    “So it’s not that Seattle is special, but Seattle hasn’t gone through what LA has. Well perhaps it did in March through August, but that run up was much smaller and shorter in duration than what LA saw.”

    Sorry Kary, only bringing this up since you mentioned it multiple times, but where was the crazy run up?

    Here are the Seattle S&P Case-Shiller numbers for 07:

    Jan: 183.92
    Feb: 184.85
    Mar: 186.44
    Apr: 188.89
    May: 190.68
    Jul: 192.30
    Aug: 192.14
    Sep: 191.66
    Oct: 189.86

    Prices went up 3.06% between March and August?

    Also, in regards to LA vs Seattle, between January 04 and September 06 (when LA peaked) LA was up 54.8%, Seattle during that same period was up 47.1%.

  113. Matthew, I’m just seeing your comment (sorry for my late delay). Tim is right, there still is stated income loans at either a very high rate or requiring a very high credit score.

    And please point out where I have ridiculed a bubble blogger… I don’t recall doing so.

  114. “FWIW we stretched quite a bit and were able to make this purchase thanks to FHA financing. We did not view our home as an investment (although it did provide a great return and the down payment for our next home). It was just “our first home

  115. Deeplennon, here are the MLS numbers (mean then median):

    January 2007 523,952 429,495

    February 2007 512,521 429,925

    March 2007 566,835 454,950

    April, 2007 563,619 465,000

    May, 2007 590,867 469,000

    June, 2007 575,419 470,000

    July, 2007 595,483 481,000

    August, 2007 593,957 477,345

    September, 2007 583,645 450,000

    October, 2007 551,019 443,950

    November, 2007 540,453 435,000

    December, 2007 534,967 435,000

  116. The latest C-S data is back from October, but you are right, Kary. My guess is It won’t get negative YOY until March-April.

  117. Case-Shiller compares sales on the same property. It is also always three months stale. Median YOY was still positive in October. It shouldn’t surprise that C-S is also showing positive from back then. The March-April report will give data for December-January.

  118. Yes Kary, I’m aware you said annualized and that you were referring to median #s, and now that you’ve posted them I know you were referring specifically to median SFH only for King County specifically.

    The Case-Shiller index, as you should already be aware, is considered the most accurate gauge of home prices that there is. You’ve in fact pointed out how, as a local realtor, preferring C-S may suit you well better the October Case-Shiller index YOY was higher than the October Median SFH K.C. price YOY, (+3.3% vs +0.9%). All that said, I don’t see how 3% (annualized to 7.2%, which is less than 03, 04, 05 or 06) is a big run up in prices, and between you and me regarding your L.A. vs Seattle comments, 47.1% in 32 months -is- a significant run up in prices.

    Oh and Case-Shiller is similar to HPI in that they track the sales of individual houses, though they don’t include refi’s like the main HPI index does.

    Side trivia: annualized between July and November there was 28.7% decrease in ‘median’ house prices. 😉

    and to play the guessing game with biliruben, I think the February C-S #’s will be the first to go negative. For those waiting they come out the last Tuesday of every month for the month two months prior.

  119. Case-Shiller doesn’t better suit me at all. The NWMLS data is available within about a week of the close of a month. And as you noted, I can limit it to certain types of properties and certain areas (although I’ve never figured out how the papers break out the Seattle numbers since the areas don’t track the city line perfectly). King County is about as big of an area as I would ever use.

    The NWMLS data only excludes basically the FSBOs, and quite frankly I’d rather exclude them (they can be low or high for any number of reasons).

    BTW, you can access a portion of the current data here (with additional data for King and Snohomish).

  120. Rhonda,

    Only the first part of my post was addressed to you, the rest was to Kary, sorry for the lack of clarity in the post.

  121. Matthew, rest assured I’d ridicule (or at least challenge) someone bullish on the real estate market too. I don’t believe in these silly predictions. It dates back to the late 90s and seeing people in Internet sites make predictions on stock, and people on CNBC doing the same thing. Competely worthless information, IMHO. And determining where a single company’s stock is headed should be a lot easier task than predicting where real estate prices are headed.

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