The Third Bubble …

It has often been said that we have even more of a bubble in real estate agents than we have in real estate prices. In fact we have had three concurrent bubbles – house prices, number of purchases, and number of agents. Unfortunately for the members of the residential real estate sales profession, we are making a lot more ‘progress’ on reducing the first two bubbles than we are on the third bubble.

Last week I went through an exercise of trying to track the growth and reported decline of the number of licensed agents in King County, including metro Seattle and Bellevue, who are members of the Northwest Multiple Listing Service. I had heard that the NWMLS had expected about 25% fallout in 2008. As I got into it, it looked like taking the transaction volumes and median prices at the same time might produce some interesting insights into agent incomes and the desirability of the profession. ( I admit that I considered an alternate title for this post: ‘The Grass Is Not Always Greener…’)

So here’s what I found, using year-end data from published NWMLS statistical reports, but doing my own analysis (and making my own errors – please let me know if you find some or think I missed a point of interpretation).

First are three charts to show the Three Bubbles of King County Real Estate:

Second is to show how the growth in number of agents has affected the average number of transactions per agent. A couple of notes on methodology here. For transactions per agent, I split each transaction into two sides, and then just divided the total transaction sides by the number of agents. For the 2009 estimate, I took the business volume for the first four months, through April, and factored it up by the same ratio as the last 8 month of 2008 were to the first 4 months of that year. We’ll get another check on it shortly with the May 2009 data.

(Required disclaimer: Statistics not compiled or published by the Northwest multiple Listing Service)


Note how the average number of transactions per agent have been dropping dramatically as the total number of agents rises and the total number of transactions falls. Total number of agents is only down about 10% so far. Some people expected a far faster fallout rate, including NWMLS in one talk I heard, but the inhibiting question is probably ‘Where would they go for an alternate job in this economy?’ A related article from Inman News appeared in the Times last Sunday – Less Experienced Hands Leaving the Business.

And third is to show how the combination of all three factors plays out in average agent earnings. For nominal earnings, I assumed 2.5% commission on each transaction side – we don’t always get 3%, and we often have to give up a bit here or there to keep everyone happy and on track. The data behind the charts is stored here.


So for the average agent (and I recognize that most clients would prefer to deal with an above average agent), earnings have dropped from a decent professional income to a pretty marginal income. Last year (2008) it was a little over $30,000 – about $15/hr if you work full time, and this year looks worse. How about $10/hr?

I guess the grass really isn’t always greener…

Remember When There Was No Bubble?

It’s been 4 years – let’s reminisce for a moment, shall we?

I remember. I also remember incurring the wrath of the bubble blogger set with a slightly too subtle dig at the no bubble stance. For the record I said that saying there is no bubble was a “crazy statement.”

But my predictions (which I’m having trouble finding) were imperfect. I predicted a 10-25% decline in home values at the worst and thought the likely bursting of the bubble (which I fully acknowledged!) would actually be a persistent leak – that we would have flat prices for 10-15 years while inflation ate away values.

I thought the government would be so averse to home prices dropping that they would do everything to keep them stable – even at the expense of the economy. Apparently I underestimated the size of the problem. Or I overestimated the powers of the government. By a lot.

And we aren’t out of it yet. This crazy prediction is already true for parts of California (from this post):

>How much do you expect the $400,000 to $500,000 market to drop?

If we have a “soft landing

Sunday Night Stats – Best and Worst

First, it’s been pretty obvious in the last 3 to 4 days that people are reacting to the interest rates being at 4.75% to 4.875% recently.  I can honestly say agents are not instigating this momentum, as all of the calls I have received have been directly from buyers that I’ve never spoken with before.  In fact I have had more calls to see property from buyers than I have had showings from agents.  It’s like a large part of the agent marketlace is MIA.  I’m hearing similar stories of “agents retreating” from Vancouver.  A sign that first quarter 2009 is clearly going to be on the upswing.  But let’s look at some more of the here and now tonight.

The Best:  Townhomes – the under $500,000 variety – net even a Buyer’s Market really – not a Seller’s market either.  A balanced market in Townhomes in Redmond where almost ALL townhomes sell for under $500,000 and North of Downtown in Seattle.  Location issues are more of a concern in Seattle than Redmond, as most townhomes in Redmond are built in larger, well located communites.  In Seattle they are often smack on a main arterial.  So be discriminating as to location and lifestyle and not just space issues.

Only a 5.7 month supply of townhomes in Redmond 98052 – not even a buyer’s market

Hard to believe with all the gloomy news, I know, but yes there is a market segment that is still performing well.  That will clearly improve in 2009 if rates stay this low, so we could even see a Seller’s Market come back in Redmond Townhomes in the not too distant future.  Still, I’ve seen prices taking a beating in the last 60-90 days.  Let’s see if lower rates and low supply pulls that back to stable.  I think that will happen for Townhomes in Redmond.

Now for the Opposite Extreme – The Dark Side – The Scariest Stat of all Sundays

Over FOUR YEARS of Inventory!  Where you ask?

Kirkland 98033 in the $1.2M plus market.  115 for sale and only 7 closed in the last 90 days.  See detail.

Compare Single Family Homes – Kirkland 98033 above to Redmond SFH 98052 below:

They look like Chirstmas Balls 🙂  The more red you see, the less green and blue, the weaker the housing market.  Redmond is doing pretty good until you get over $750,000.

Two story townhomes under $500,000 are definitely the IT segment both in Seattle and the Eastside.  Kirkland just doesn’t have enough of them like Redmond does.  Not sure what happens when you get out to Cougar Mountain and other not “close-in” newer townhomes.  I don’t get out that way very often, and last I looked there was a reason why I don’t go out there very often.  Every time it snows, I get calls from people who want to sell them and move closer to work.

Well, that’s your Sunday Night Stat “Christmas Balls” edition.  Hope you’re enjoying your “White Christmas”.


Rain City Radio: Join the Conversation with Tim Ellis today at 4pm!

Please join us as we have a conversation about the Seattle bubble and the Naked Loon starting at 4pm PST!

All it takes to get involved is a telephone OR an internet connection:   You can call in to listen to the show via any phone… You can log into TalkShoe to stream the show to your computer and/or take part in the chat.  All the details (and there really aren’t many) can be found on Rain City Radio’s Talkshoe page.


What a great conversation!   Thanks again Tim for taking part in Rain City Radio.   And if you missed the live call, then you can listen to Tim tell us all about how/why he started the Seattle Bubble, some of the things he has learned, what inspired him to start the Naked Loon and much more!   Just click on the play button on the widget to the right!

Also, I am excited to announce that next week, we’re going to have a conversation with Justin of the Capitol HIll Blog!  (same time/same place 4pm on Tuesday, July 8).   I really enjoyed our conversation last week with Tracy from the West Seattle blog and I’m hoping to learn a similar amount about Capitol Hill next week!  🙂

Next Week on Rain City Radio: Tim Ellis

Seattle Bubble ScreenshotFresh off an great conversation with Tracy Record of the West Seattle Blog, I’m really excited to have Tim on our show next week!   I’m sure we’ll talk about all things Seattle bubble as well as Tim’s great new parody project: Naked Loon.

Please set aside Tuesday, July 1st at 4pm to join us!   And if you have some suggested topics you’d like us to cover in the conversation, then please let me know in the comments!

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.

How about those SEO tweaks?

I thought about labeling this post “Does SEO work?” or something similar until I realized that is just stupid. SEO stands for search engine optimization and not only does it work, but in many ways, it is the basis for why blogs work so extremely well for promoting yourself as an expert within a niche topic (as Rhonda has done… Or even a nationally recognized expert!)

So where am I going? I recently had another meetup with my project blogger and I realized I hadn’t made some simple SEO-related tweaks to his wordpress blog that I made to RCG last December. The tweaks I made were to:

  • edit the title tag of all my posts
  • add keywords to the blog

I gave one update to this post, but essentially failed to follow through, so I’m hoping to remedy that right now. 🙂

First, I’m a bit surprised that many of my one week observations held steady. For example, RCG is still the #1 result for [Agent Recommendations]. Also, RCG has essentially dropped off of Google’s radar for a search that used to be our #1 organic traffic generator: [Seattle Real Estate]. My expectation was that Google’s algorithms might be temporarily confused by my changes to the site, but that they would pick up our new configuration after a while and continue to drive us traffic on this key search term. No such luck after four months.

As a matter of fact, I’m pretty sure that Google is still somewhat confused. My logic stems from the fact the page Google has decided is most relevant (using this search term) from RCG changes on a weekly basis. This week it is the link to Robbie’s articles which shows up somewhere down the middle of the page (if you show 100 results per page on Google as I do)


However, the real genesis of my SEO tweaks were to see if I could get the “other” search engines to send RCG a higher percent of our organic traffic. The idea is that Google was sending about 92% of the organic traffic to RCG and I wanted to see if I could get MSN and/or Yahoo to send more. As you can see from this Google Analytics chart for stats from the month of March, 2007, I failed:


Google sent 91.73%, or approximately 92% of all organic traffic to the site in March of 2007, which means there was essentially no change at all! In other words, the SEO-related changes I made did not have the intended effect of increasing the percent of organic traffic that RCG received from non-Google sources.

However, I’d be ending too soon if I made it sound like the SEO changes were not beneficial. Here is the marketing summary from Google Analytics for the month of March 2007 compared to the month of November 2006 (i.e. well after the changes to before the changes!).


What you see is that our visitors from organic sources is up 138% between those months and the visitors from organic Google searches is up 139%. This is almost double the increase from “referral” sources which makes me think that the changes I made to the site were effective and not just background growth!

(Of course, it can’t go unnoticed that the Seattle Bubble sent us over 2000 visitors in March. Wow! That’s well worth a juicy link to the most bubblicious real estate site in Seattle. 😉 )

Also of note… Google really seems to like our article on moving to Seattle. I love that my “little bit of serendipity” has turned out to be so helpful. You can never tell what post is going to kick start an interesting conversation.

Finally, as a treat, I thought I would present the chart that never fails to impress at my seminars. In March 2007, there were almost 25K people who came to RCG once and never returned. 🙁 (that is NOT the impressive part…). On the flip side, there are over 1,800 people who have visited the site more than 200 times.


For the RCG contributors (and commenters!) who wonder how widely that your stuff gets read, realize that there are a HUGE number of people who read without ever letting their presence be known. If you fall into that category (at least 95% of the regular readers do), feel free to introduce yourself in the comments any time! (The first comment is free.) 🙂

So, to wrap this up as a “project blogger” post… I’d highly recommend that anyone starting their own blog get Google Analytics. It’s free, easy to use, and provides a wealth of information about how people use your site! 🙂

New-home sales plunged… blah blah blah… largest amount since 1990… blah blah blah

I am sure everyone in the industry (or who follows the industry) has heard the same thing.  I actualy meant to publish this blog in late January when the PI posted the article… but better late than never.  I know lots of my clients, investors and friends have been asking me this same question for a while now.  So what do I say to them? OR… What do I say to all of those real estate bubble watchers!

The reality is that two thirds of the households in the U.S. lived in their own home in 2000. In 2000 the median value of these homes was $119,600. This is 18% more than the median value in 1990, and more than double the median value in 1950 of $44,600 (in 2000 dollars).  With a quick look back at 2006 and you see the national average was $224,900.  That is an 88% return in those 6 years or a 15% annual average.

So houses dropping by more than 8% last year is not that bad in the slightly bigger picture.  It still is not an easy pill to swallow considering prices are down 17.3% from 2005.  Which seems crazy, but considering the stats in 2005 was averaging a 24% increase a year and an average price in 2005 of $264,932.

This is a conversation for a different day, but if you want to take in to account that most of these homes on average were purchased with a down payment of 20% or less.  Let’s assume your mortgage was equal to your payment (just to keep it simple).  That means on average in 2000 a home owner’s (roughly) $40,000 down payment would have returned that original down payment + another $64,932 in 2005 a 162% return!  Not as good, but still a steller return using 2006 numbers, still a 50% return.

That is what I say

Whose priority is it?

During the local evening news, I’ve been seeing what appear to be political ads. What’s strange is that the election ended months ago, so the timing of this multi-media blitz is rather curious. The ads in question, are part of the It’s A Priority media campaign paid for by the Washington Association of Realtors. The ads encourage folks to contact their lawmakers to address the housing crisis in Washington state.

[photopress:ItsAPriority.jpg,full,alignright] At first, I thought it was a public relations / branding effort by the WAR, but I’m seeing the ad way too often for that to be feasible reason. Oddly enough, like our friends in Seattle Bubble land, I can’t help but wonder what the ulterior motive is. Perhaps, I’m confused because the ads don’t really have a clear “call to action”, other than contact your legislator. Most political ads have a clear and simple message (vote No or Yes on this initiative or that candidate) and these ads are rather vague on what they want me to do (other than make this cause a priority).

Here I am thinking the local economy and housing market is healthy, and now I’m seeing ads paid for by Realtors telling me that home prices have gone up too much and that’s not good. I’m confused here, aren’t housing prices supposed to go up? Microsoft, Boeing, and a cast of a hundred start ups are hiring and growing, so by all appearances the local economy doing well enough. Why don’t I see these kinds of ads when I visit California (which would seem to be a more logical place for a housing bubble that might occur)? What’s the real purpose of the ads?

The folks in bubble land believe it’s a ploy to loosen land use restrictions to allow greater density of smaller (i.e., “more affordable”) homes. I suppose that makes as much sense as anything else I’ve heard, but I wanted to get a second opinion before I form my own conclusions.