Bubble Collapse Imminent: Seattle Still Immune

National economists are waking up to the reality of a housing bubble, stating in a report that a downturn in the housing market could mean a million lost jobs. But what about here in Seattle? The Seattle P-I adds their own reporting to the AP report:

Much of the nation has had a lovely real estate boom for the past five years, but the house party is almost over, and the cleanup won't be pretty.

That's the word from economists and investors who have watched housing prices march ever higher.

"The collapse of the housing bubble will throw the economy into a recession, and quite likely a severe recession," warned a July report by the Center for Economic and Policy Research.

Oh yes, it's been so lovely, hasn't it? Just so rosy and wonderful. Unless you're a first-time homebuyer trying to get into the market. Then it pretty much sucks. Too bad for you.

The dire warnings aren't region-specific — beyond hitting most places where home values have appreciated most. But many experts on the Seattle-area economy have suggested that the elements of a classic bubble — one in which prices could be expected to suddenly reverse directions — aren't apparent here.

Not that a sudden drag in the national economy wouldn't be felt here, perhaps at least flattening the 10 to 15 percent gains housing prices have shown annually in recent years.

Ah yes, it's my favorite news-reporting tactic: Referring to unnamed "experts" in order to back up the picture you're trying to paint. Don't worry, the worst that will happen is for prices to "flatten." The sky is definitely not and will definitely not be falling.

Others point to simple supply and demand. Bubbles have their own psychology — a neighbor tells you at a party that her house has tripled in value, and you feel like an idiot for renting — but supply and demand operates on logic, which has to kick in at some point.

Such factors could affect the Seattle market, though the region's heavily tech-influenced economy has continued to attract young, well-educated people to the region — keeping market pressure on the limited number of homes available.

And what about that loss of a million jobs? Will none of those be in Seattle? Of course not, the influx of young well-educated people is sure to continue forever! There's never been a better time to buy!

Another indicator of a bubble — unsold homes sitting on the market — also points down nationally. The ratio of inventories to sales has been rising rapidly in recent months and now stands at its highest level since 1996, according to Wachovia Corp.

That's another area where Seattle projects a different picture than the national numbers.

The supply of houses on the market in King and Snohomish counties in October declined by 10.7 percent and 2.7 percent, respectively, compared with October 2004. That drove the median price paid for a house up by 20 percent in the two counties, to $390,000 in King, and to $258,600 in Snohomish.

Maybe I'm just naïve, but isn't that how Boston or New York looked a year ago? Wouldn't that just mean that Seattle is lagging behind the bubble dynamics of the rest of the country, as opposed to not being in a bubble at all?

(Seattle P-I Staff and News Services, Seattle P-I, 11.12.2005)