How much for the bathroom?

Posted on August 25, 2006 by Dustin Luther

[photopress:WWCG_logo_JPG.JPG,full,alignright]Frances Flynn Thorsen is raising 100K with the Web Women Giving Circle for CARE — a humanitarian organization that works with women to fight global poverty.
There is no good follow up item because everything else is void of the meaning in comparison. I recommend (1) following the links in the first point, (2) donate some money and/or time and (3) repeating the process until it creates an infinite loop of giving.
NAR has whole pages on the social benefits of homeownership. “Homeownership also provides many benefits to the family, children and the community, such as increased education for children, lower teen-age pregnancy rate and a higher lifetime annual income for children, as discussed in the following articles and studies.” Does anyone really believe homeownership causes these things? I don’t doubt that there is a correlation, but causality?
Joshua Dorkin decides to one-up (make that 22-up) Cheryl, and lists his top 35 real estate blogs!
Fliperati is searching for good investment blogs… (I am too!)
How much is a bathroom worth? depends on how bad you gotta go…
Today’s seemingly random plug for a decent person: Seattle Agent Ann Bergstrom.
I noticed some traffic coming from a MarketWatch article on the value of agents despite the web. Looks like RCG is featured in the sidepanel as an area to keep up with real estate trends. Very cool!
Tom has a different take than MarketWatch his comments on how the web is helping agents compete.. He quotes an article I found most interesting because people like Brad Inman and Greg Sterling comment on the type of real estate companies that will survive a soft housing market.
Dean is asking what I (and you) think of 50-year mortgages? Personally, I despise acting desperate in anything I do, and 50-year mortgages reek of desperation.

visitors from planet earth…

Posted on August 24, 2006 by Dustin Luther

I can tell from the number of hits that these list of 10 posts are popular, but they don’t seem to generate much conversation. 🙁 Nonetheless, I’ll keep writing them as long as I’m enjoying myself! 🙂

Christine gives her own top 10 recent stories. I love it!
And Cheryl gives a list of 10 or is 12, maybe 13 great blogs. She’s building up a really nice blog, but then again, I’m partial to stories about the Eagle Rock area.
On the subject of favorite websites, I’m partial to the seriously cool wiki technology behind WetPaint (This is the read/write web or Web2.0). To get an idea of how useful their site can be, I recently set up a wishlist for all of the items that were requested by my daughter’s teacher for the start of her first grade. Now any of the parents in the class can easily see what items that still need to be purchased and if they decide to buy/donate the item, they can let everyone else know by adding a “purchased” next to the item. This is so much easier for everyone involved than the slew of emails and half-updated word documents that were floating around. (Full Disclosure: Wetpaint sent me some free swag (a hat and a t-shirt), but that was only after I showed some definite interest in their product to one of their founders)
[photopress:crazy_lazyBETA.png,full,alignright]Talking web2.0, I was contacted from the same earth aliens as Greg, but unlike him, I had no luck whatsoever with the product. I could download a file (as long as I limited the data to 1 mile radius around a zip), but couldn’t get it to display anything in Google Earth… Nonetheless, you know someone has as sense of humor when they use the Web2.0 logo creator to create their logo.
Looking at the earth put me in a green mood, and reminded me of this article by David Whitten where he’s briefly describes a recent green home tour he took. I should definitely do some more research on green home technology.
Speaking of green, Osman mentions the ecobroker certification for agents who want to be “equipped with additional energy and environmental information and tools that help them provide added value to all of their real estate transactions.” I’m scared to think what the Tomato might throw at this certification. 🙂
Is Marlow aware of the Elvis Impersonation DVD mentioned by Will Hicks out of Memphis?
Mike insists on being interesting: “Don’t blame the housing bubble on a couple years of cheap interest rates. Rather demographics, technology, and financial market innovation have converged to give us a long boom.“
Mike has a somewhat unfair data advantage, but I think agents like Osman, Lisa, and Merv do a great job putting context around local numbers.
I’m looking to add lesser-known real estate blogs to my feed reader. If you are not already listed in my wiki directory, and you are an active real estate blogger writing link-worthy content, let me know by leaving a comment below.

Hair Raising Fears of a Housing Bubble!!!

Posted on May 1, 2006 by ARDELL

[photopress:hair.JPG,thumb,alignright]It is very difficult for young people today to buy with confidence. There are some very real fears, and justifiably so, that housing prices can not and will not continue to rise at the levels they have in recent years. Some ask if they should wait until they have saved 20% down. Historically, most people have bought their first homes with less than 20% down for good reason. There are no guarantees that interest rates will not rise. Interest rates are still, historically very low. How would you feel if you waited to purchase only to find that prices were still high and interest rates were 9.5%?

Renting when you are a family with children has its risks. What do you do when one day the landlord knocks on the door and says “I’ve decided to sell the house and you all have to move out in 30 says”?

Anyone who can qualify for the first time buyer program at First Tech, should consider that option. It is an excellent program, with almost no loan costs and a very low interest rate. Take the time to find the very best loan program that you can and work on your credit score to insure you can get the best possible rate available.

When selecting property, try to convince yourself to buy that diamond in the rough. This way if values do not increase, you will still be able to sell at a profit. Buy the house that needs a lot of cosmetic fixes, but has good curb appeal and is in a decent area. Consider all of those areas that have only increased by 10% or 15% but border on areas that have increased by 30%. Buy that “old people” house in a great neighborhood that everyone else is turning their nose up at because it has sculptured carpet and pinch pleated avocado drapes.

The one sure way to buy with confidence is to ignore the cosmetic issues and don’t be fooled by heavy “staging” that might lure you into paying too much for the house. It has never been more important to buy wisely. It has never been more important to avoid making choices based on creature comforts like “needs nothing”, totally remodeled or brand new, less than 15 minutes to work. Don’t get tangled up in these creature comfort premiums, unless you are willing to face the fact that the tradeoff may be having to sell for less than you paid when you need to move.

There are still plenty of values and many of them require a little TLC like paint and landscaping. Be the smart buyer who isn’t crying the blues in a year or two if prices level out or take a dip.

Am I better off renting?

Posted on May 1, 2006 by Galen

The last bubble discussion got me thinking – is it really so bad to rent? Well, here is a cold and calculated answer: The Motley Fool has a great calculator to determine whether you are better off renting or owning (financials only, you supply the emotional). Even the bubble hand-wringers amongst us might find some buy-friendly scenarios. Unfortunately, if owning is better for you, the calculator does not help you save up a downpayment.

They also have a how much house you can afford calculator, although it seems to have low-balled my estimate.

-Galen

Bubble blog roundup

Posted on April 29, 2006 by Galen

Good news for people who like bad news:

The Housing Bubble Blog (formerly housingbubble2)
Bubble Track (blog)
Bubble Meter (blog)
Housing Bubble (blog) – Apparently Housing Bubble’s last entry in September was so exhausting that they gave up or they declared victory – you decide.
Seattle bubble (blog) – a much longer list of bubble sites here

And a couple of articles:

Speaking Truth or Crying Wolf? (article)
The bubble bellwether index (article)

And if those aren’t enough, I suggest the tongue-in-cheek There is no Housing bubble!

It sure is easy to be a hater, isn’t it?

I think both sides are taking a foolish black-and-white approach to the bubble question; clearly there are some indicators that there is a real estate bubble, but the consensus seems to be that the risk of home prices plummeting is low. Home prices will probably be flat until inflation brings prices back to “normal” levels. My concern is that if house prices do pop precipitously, there are going to be serious consequences for home owners and non-homeowners alike.

A similar scenario, different context: A few years ago, the Fed found itself with a small risk of Very Bad Thing happening. That Very Bad Thing was deflation (remember that?). Few economists were convinced that actual Japan-style deflation would occur, but because of the potentially devastating effect of deflation on the economy, the Fed moved aggressively to combat it (giving us the cheap money we used to buy expensive homes) even though the solution could cause other problems. Why? Here is the economist (login required) in 2002 (slightly out of context):

… however small the risk of deflation, the economic cost would be so high that policymakers should respond as if it were a central risk.

Someone who is looking at a home today or who has a sizeable mortgage on their home today should look at all this bubble talk in the same way; the risk is low that your property value will decline 25% or even 10%, but the risk is certainly there. Specifically:

Do you have enough savings or equity to stay above water if your house loses 10% in value?
Is the risk of falling property values worth the potential upside?
If it isn’t a bubble now, what metrics or signs will you use to tell you if or when it is a bubble? (A corollary: Will those metrics tell you when it is a bubble or when the bubble is popping?)

Perhaps house valuations have fundamentally changed over the last 5-10 years and we there is no risk of house price declines. The one argument I do not buy is that our land use laws are making property more expensive; builders are cranking out hundreds units and making loads of money on each unit, meaning they could continue profiting even at lower price levels.

Galen

Are We Brewing A Bubble In Seattle?

Posted on April 28, 2006 by Chuck

Probably the most frequent single question I get as a realtor from my friends and clients and contacts is “Are we in a real estate bubble?

Can Real Estate ever ‘Bust’?

Posted on March 27, 2006 by Eileen

Last week an investor called me from LA who is a stock broker. Our conversation got me thinking about the rich investment opportunity real estate provides, in spite of all the talk of a bubble burst. I’ve played the stock market for years and have won some and lost some but I’ve never been able to get it down to a predictable outcome. I invest in stocks because I’m told by financial advisors that I need to diversify. However, there is a way to invest that has many more controllable and dependable outcomes – Real Estate! Real Estate will never go out of business, never merge, never have problems with DOJ, never be outdone by the overseas manufacturing industry, never worry about ever changing technologies. There’s always supply and there’s always demand. With the exception of mother nature simply obliterating the landscape, real estate will always be there.

I don’t mean to paint an overly rosy picture here, but having been in the business for, gulp, nearly 30 years, and watching the ups and downs and downs and ups, (I once sold a home to a client with financing at 22%! not to mention using precious gems as a down payment!), I just don’t see the glass as half empty but rather half full. I have been a restaurant and marina owner and a real estate developer and investor, throughout the various market ups and downs. I suggest you look at real estate values over those last 30 years and see how many times they’ve multiplied. And we’ve had 5 or 6 ‘busts’ in that time. As a new licensee, I sold my first home for $32,500 in 1978 and today that home is listed at $495,000 – a multiple of 15 times. We all know this is true, so why are we all sitting around worrying? All this talk about real estate busting like the stock market did is just ridiculous. We’re not comparing apples with apples and even if the prices do go down, it will most likely be short term creating a great buying opportunity, and when prices bounce back we’ll all sit back and have a good laugh at all those naysayers with dour predictions.

I wish I’d taken my own advice in 1986 when I could have purchased 150 homes from a bank for 20 cents on the dollar. I didn’t have the foresight at that time to know what I am telling you now; real estate bounces back and prices rise even higher. Had I bought those homes that year, I’d be writing this from my estate in Maui! I’ve learned my lesson and now I want to share my perspective with you.

So, keep on investing. You may not be able to live off the profits from a short term flip but if you invest with someone that understands the market and the profit potential, you won’t have to worry about any ‘busts’ now or in the future.

Futures and property values: you can bet on the bubble

Posted on February 27, 2006 by Galen

Last November, Slate magazine posted a piece on the housing market futures. The gist: you can hedge a drop in your house’s property values by buying derivatives that pay if the region’s property values drop a specific amount over a specific time period or even if predicted growth doesn’t materialize:

Next spring, however, investors might finally have a better hedging product. Just in time for the apparent top of the housing market, the Chicago Mercantile Exchange is introducing futures and options on housing prices in 10 cities for the second quarter of 2006.

It’s pitched to big institutions, but it would probably benefit individual investors immensely. That is, if they used it. Unfortunately, the individual home owners it would benefit the most didn’t have enough cash on hand to put money down on their house and are currently just paying interest, so they probably don’t have extra money to invest in hedges.

Also, as Ardell eloquently pointed out a while back, different sectors of the market can “pop” at different times and at different rates. Unfortunately, this could only protect against region-wide shifts:

These options will cover large markets—it will be tough to hedge the value of your own house, which depends so much on your particular neighborhood.

I liken it to buying an index fund (or mutual fund) instead of a single stock, although maybe insurance against extreme price swings is a better analogy; the effect is to reduce the upside and the downside of your investment. It doesn’t seem very exciting in the least so I’m putting this one in the “popular after the crash” basket, as it’s hard to plan for hard times when the good times have lasted so long.

So who’s buying on opening day? And can the market correctly predict housing prices over the next few years, or are investors so oriented toward a bubble popping that they can’t see the inherent strength of the market (or vice versa)?
Galen
ShackPrices.com

No Bubble Bursting Here

Posted on January 25, 2006 by ARDELL

Well Galen, when I got pinged to start sussing up some numbers, here’s what I came up with.

True, closings Dec. 05 are down most everywhere. But a second wind has kicked in.

Kirkland Dec .05 closings at 127 were down from 154 in Dec 04 – BUT currently in escrow a whopping 206!

Bellevue more even keeled. Dec 05 at 175 down from 195 in Dec 04. Currently in escrow 200.

The high end is holding its own so far with 27 escrows in Kirkland over a mil and 20 in Bellevue, so no bubbles bursting there yet.

The low end is a scramble. New listings are being gobbled up with multiple offers as fast as they hit the market. A few of them didn’t deserve to be jumped on and I had my buyers pass them by, but someone grabbed them anyway.

One of the reasons Kirkland is way up in current escrows is because we have yet another group of displaced persons being kicked out of their apartments for a condo conversion in downtown Kirkland. Those people are scrambling for new digs and those who don’t want to chance being displaced again are buying instead of renting again.

So no bubbles bursting yet. Question will come when new inventory starts popping in at higher levels when the sun ever decides to come back and stay awhile. If the high end inventory doubles, as I expect it will, the low end will do just fine, but I’m still not sure about the $1.3 million plus crowd.

Oh, forgot. I popped into my old stomping grounds over by Green Lake. Same trend there. 76 closed Dec. 05 vs. 119 Dec. 04 with 136 currently in escrow.

Kirkland stilll leading the pack with 206 now in escrow vs. 127 closings in Dec. Go Kirkland…I mean Seahawks. Actually I’m a Sonics fan. Did anyone catch Ray Allen’s 30 foot shot in double overtime to win the game on Sunday?!?! It was a beaut!! And tonight’s win gives us the first back to back win in awhile. Go Sonics!

Insurance for house price change

Posted on January 9, 2006 by Galen

Last November, Slate magazine posted a piece on the housing market futures and options. The gist: you can hedge a drop in your house’s property values by buying derivatives that pay if the region’s property values drop a specific amount over a specific time period or even if predicted growth doesn’t materialize: