Seattle Not in a Bubble?

An article in the Seattle Times titled Housing market sizzles, shows no sign of bubble would perhaps have more appropriately been titled "Housing bubble sizzles, shows no sign of popping," in my opinion.

Despite conjecture that the local housing market is a high-priced bubble ready to burst, key signs of weakening are nowhere to be seen, according to homes-sales figures released yesterday by the Northwest Multiple Listing Service.

So, because it's not weakening, it's not a bubble? Hmm, strange logic, methinks.

So many buyers are using adjustable-rate mortgages, an avenue to low initial house payments, that this factor alone "is just going to perpetuate the housing market," Kuno said.

Say, didn't we just talk about that?

According to calculations by Merrill Lynch economist Claudia Lokody, local housing prices are increasing much faster than local incomes. That's why she says the Seattle area is overheated.

"Compared to a 15-year average, Seattle is not affordable," Lokody said. "Home prices have greatly outstripped income gains in Seattle and other cities."

That sure sounds like a bubble to me. At the very least, it's not sustainable. My thought: We're in a bubble all right, but unlike other parts of the country that may have peaked last year, we're riding the peak right now. It may last another year, but it can't last forever.

(Elizabeth Rhodes, Seattle Times, 07.07.2005)