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Friday, September 30, 2005

10-15% Price Increases In Seattle "Modest"

Here's yet another story for you with the premise that Seattle is not in a bubble at all. This one comes courtesy of the Seattle P-I.

Home prices in some parts of the country might be primed for a decline, putting a drag on the nation's economy, but Seattle apparently could avoid the problem of a price bubble.
...
But economists and real estate analysts who study the Seattle-area market believe it isn't part of that phenomenon.

Rather, they said, the Seattle area is seeing relatively modest home appreciation rates -- in the neighborhood of 10 to 15 percent per year. Those rates are a product of an inventory shortage coupled with demand, they said.
What kind of insane world is it when 10 to 15 percent per year is considered "modest"? Granted, they said "relatively," but to me just because 10 to 15 percent is less than the increases in Boston or Florida doesn't mean we're not in a bubble, just that we're in somewhat less of a bubble.
Douglas Pedersen, a Seattle economist, agreed that the area housing market is not seeing the extreme home appreciation rates of other cities. But affordability, he said, is an issue for some potential buyers in the region.

"We have high home prices relative to household incomes," he said.
Hmm, where have I heard that concern before? Oh yeah, here. And here.

(Seattle P-I, 09.30.2005)

3 comments:

marin_explorer said...

What kind of insane world is it when 10 to 15 percent per year is considered "modest"?

10-15 is never considered "modest" or normal. 5% is actually on the high side. This is just the same boosterism seen in nearly every metro paper. One wonders how many publishers are hedging their businesses with real estate.

Those rates are a product of an inventory shortage coupled with demand, they said.

What shortage? They're constantly erecting new condos and home developments. I won't blame to paper for stupidity, because they're probably just getting their "data" from local realtors.

Say, have you ever found stats for the % of Seattle and outlying RE sales that are bought for speculative reasons? That might reflect how much "demand" will be short-lived.

John Law said...

the thing you have to worry compaed to boston is how much california money is in your market. like reskeptic pointed out, 10-15% is high. shiller pointed out that over the long term houses only appreciate a little bit over inflation.

Caveman451 said...

"Rather, they said, the Seattle area is seeing relatively modest home appreciation rates -- in the neighborhood of 10 to 15 percent per year. Those rates are a product of an inventory shortage coupled with demand, they said."

OK, here's where I fall off my chair and wonder why I'm workin' retail and not bringing down the big bucks as an economist.

Aren't an "inventory shortage" and "demand", in this case, the same thing? Has anyone ever head of an "inventory shortage" coupled with no demand???

That's part one.

Part two happens when an equilibrium is once again established and the resale value of those unaffordable homes drops below what the suckers paid for them.

As in a bubble busting.

The one thay say isn't happening.