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Thursday, April 20, 2006

Excuses In Olympia

Here it comes... with the housing market in Olympia beginning to experience more signs of a slowdown than anywhere else in the Puget Sound, it's time to bring out the excuses. The order of the day? Gas prices.

Thurston County's real estate market has been one of the state's hottest because median prices here are lower than in Pierce and King counties. This has lured many buyers to South Sound, but it increases their commutes to jobs in Pierce and King counties.

David Schaffert, chief executive of the Thurston County Chamber of Commerce, worries that rising gasoline prices could slow South Sound home sales if buyers decide the higher commuting costs might wipe out potential savings on the cost of a Thurston County home.

"This used to be less of an issue when gas was $1.50," Schaffert said.

"With higher prices, you have to wonder how it will affect our home development."
Maybe gas prices will be the breaking point, but the little detail that they just love to ignore is that despite the fact that "median prices here are lower than in Pierce and King counties," they're still too high to be sustained once the easy money dries up. If people are so stretched that an extra $50-$100 in gas each month is going to break them, maybe they didn't have any business spending so much on a house in the first place.

(Jim Szymanski, The Olympian, 04.16.2006)

44 comments: said... integrates how much homes SOLD for nationwide using the google mapping technology. Simply select city and state from the city menu and click search. If you don't see data for your area simply email with your zipcode and or address and they'll update the site with your info and email you within a few days.

Eleua said...

If $50 extra in gas throws a wet blanket over house prices, what is going to happen when we have double digit interest rates, and sane lending standards, not to mention inflation in medicine, food, botox, viagra, & education? What happens when we are spending $4/gallon on gas?

20 cents on the dollar by 2010.

first_time_buyer said...

whats really so surprising about excuses? they always do find some excuse for the crash and invariably it has nothing to do with the reality. Actually, it goes both ways, while it goes up, they find some stupid reason to justify the prices. I guess people never learn from history and it has an uncanny knack to teach itself in the harshest way possible. Soon they will be done with all the excuses when downtown crashes.

Nick said...

So ridiculous. It's MAYBE $1500 a year difference.

But I still have to respond to this absurdity:

"20 cents on the dollar by 2010."

If I really thought that to be the case, I think I might go out of my way to leverage myself even more. Because if this scenario comes to pass, the economic havoc will be so complete and so total that it will not matter what individual citizens might or might not have done.

Eleua said...

"if this scenario comes to pass, the economic havoc will be so complete and so total that it will not matter what individual citizens might or might not have done. "

I think you are correct, and I still stand by my prediction of 20 cents on the dollar by 2010.

Bubbles burst. That's what they do. The NAZ sold at 15.7 cents on the dollar in just over 2 years' time. That is with, at most, 50% leverage, and the rest in all cash up front.

Housing sells with 125%ish leverage, and criminal lending standards.

The two biggest bubbles in modern history will not end with a nice, orderly 15% correction, or 8 month retrenchment, in housing. As interest rates climb, people will be forced to sell to buyers that hare increasingly difficult to find, and who will have to pay higher interest rates.

20 cents. You heard it here first.

Eleua said...

If in '98 someone said, "Housing will triple or quadruple in cost, in the face of higher $80/bbl oil, and an 85% gutting of the NAZ, and double digit inflation, and the offshoring of "tech" jobs," we would have fetched them some pastels, board games, and committed them to an insane asylum.

Here we are with our housing dollar being worth 27 cents of what it used to be.

Bubbles bust. It's what they do. They sucker everyone in and go bust. The aftermath is ALWAYS worse than if it had never occured.

People will not be able to comprehend how deep this will go. Most of the "bears" will back up the truck at 15% retrenchment (8 month price rollback). They will be decapitated.

20 cents. You heard it here first.

SeattleMoose said...


I am also very bearish on RE but 20 cents on the dollar? Who knows, it could happen but I would guess not more than 50 cents on the dollar. Either way, it is going to be extremely painful and it is going to take several years to before this mess bottoms out.

meshugy said...

This is an interesting fact...I've never heard this before:

Realtors and mortgage lenders are likely to always say that now is the best time to buy. They're not entirely wrong. There's never been a national decline in home prices one year to the next, although examples abound of declines in individual metro markets.

That means consumers should thoroughly research local market trends and have a firm handle on their personal finances.

from: Housing now a buyer's market, but buyers beware

The Tim said...


It looks like your paste buffer decided not to cooperate. Here's the story you were quoting: Housing now a buyer's market, but buyers beware.

Also, which fact had you never heard before? That nationally there has never been a year-on-year decline in prices? I've definitely heard that one. It's one of the main arguments of people that don't believe there's any kind of a bubble.

Anonymous said...

I'm kinda bearish, but unless the housing market takes the economy down in a death spiral, I don't see RE going for much less than .85 on the dollar in most areas during a multi year stagnation in the market.

Even in the early 90's the hardest hit areas of Seattle only saw a 20% decline.

Anonymous said...

20% decline in Seattle in the early 90's?

That's a pretty big decline. It makes me think we could get really trashed this time around.

The US economy was much more solid in the early 90's, loan standards were much higher and RE was not as over-inflated as now.

meshugy said...

Thanks Tim...

Yes, I didn't realize there had never been a national year over year decline in housing.

Will this be the first time in history that the whole market will tank?

Eleua said...

Ask yourself...

How many people could put their hands on the 20% needed for a down payment, provided sane lending standards return to the industry?

For Bainbridge Isl., that would be AT LEAST $120K. I'm not talking about X-Cal equity refugees, I'm talking about your basic Joe Hippen and Mary Trendy couple that live here.

If we get this 15% "correction," that would wipe out almost all equity in the market - no one would have the money to move.

So, my question remains...

If we get a 15% reduction in price, and that takes the equity away, how many people could afford 20% of their home?

How many people do you know that have $100K stashed away? $80K? $40K?

Keep in mind that if we get a hike in interest rates, and the holders of MBS demand higher rates to compensate for all the losers that just defaulted, the stock market is going to tank hard.

$40K anyone? For a $200K house...

I'll bet that less than 15% of Bainbridge households have $50K in free cash to put down on their next home. Those people are either retired, or equity millionaires from California.

College loans, kids college fund, his/her Escalade, Volvo maintenance, botox, viagra, alimony, child support, parents getting ill, mammoth house payments, revolving CC payments, boats, expensive hobbies, business debt...

Who has the cash to put 20% down?

Eleua said...

"Yes, I didn't realize there had never been a national year over year decline in housing."

I guess if you limit your search to the post WW2 era, you might be correct.

Anonymous said...

If you haven't already seen it, there is a GREAT article in the newest Harper's on the coming housing crash. Written by an economist, it paints a gloomy, gloomy picture of the housing market and American economy over the next 10+ years. And it does it with pictures -- graphs and charts of core macroeconomic data.

You housing bubblistas need to read it more than anyone....

Anonymous said...

Keep in mind that if we get a hike in interest rates, and the holders of MBS demand higher rates to compensate for all the losers that just defaulted, the stock market is going to tank hard.

Banks are making more money due to the rising interest rates - specifically due to the huge number of ARMS issued that are readjusting now, and more in the future.

Some people will default, while others will keep paying their higher interest payments.

While consumers were being shortsighted in taking out ARMS when they could have locked in with rates at a 40 year low, banks WERE thinking ahead and issuing loans that boost future profits.

Anonymous said...

"Yes, I didn't realize there had never been a national year over year decline in housing."

This is a national median statistic and doesn't allow one to draw a conclusion about a specific house or city.

Remember, the median American lives in Kansas.

meshugy said...

This is an intresting statistic I just saw at

Listing per Population ratio:

Greater Atlanta
Listing per population ratio 4/20: 1:50

Phoenix/Maricopa & Pinal Counties
Listing per population ratio 4/20: 1:88

Riverside County
Listing per population ratio 4/20: 1:92

Las Vegas/Clark County
Listing per population ratio 4/20: 1:93

Miami/Dade County
Listing per population ratio 4/20: 1:97

Houston Metro
Listing per population ratio 4/20: 1:108

Dallas-Fort Worth Metro
Listing per population ratio 4/20: 1:117

San Diego County
Listing per population ratio 4/20: 1:160

Sacramento Metro
Listing per population ratio 4/20: 1:165

Orange County
Listing per population ratio 4/20: 1:240

Seattle/King & Snohomish Counties
Listing per population ratio 4/20: 1:268

Los Angeles County
Listing per population ratio 4/20: 1:309

San Jose/Santa Clara County
Listing per population ratio 4/20: 1:496

Wow...Seattle only has 1 listing for every 268 people. Only the most competitive Calif. markets are tighter.

meshugy said...

Here's another interesting statistic. This shows inventory in King & Snohomish Counties from Jan. till now. You can see it has gained a little over 1000 listings, but sales per month have also doubled since Jan. But not as hot compared to last years #s. These stats correpsond pretty well to what I see going on around here.

1/2: 7,938
1/10: 8,666
1/20: 8,330
1/30: 8,425

___1/06 sold: 2,468__1/05 sold: 2,491

2/10: 8,703
2/20: 8,607
2/28: 8,527

___2/06 sold: 3,391__2/05 sold: 3,244

3/10: 8,711
3/20: 8,649
3/31: 8,724

___3/06 sold: 4,772__3/05 sold: 5,285

4/10: 8,847
4/20: 9,017

meshugy said...

Yet another intresting stat:

Percentage of Reduced Listings Per Market

Santa Clara and Seattle continue to have relatively low reduced listings compared to more established bubble markets.

Phoenix Metro:
14,278 reduced / 41,946 total inventory = 34.0%

Riverside County:
6,943 reduced / 20,639 total inventory = 33.6%

Sacramento Metro:
3,883 reduced / 12,094 total inventory = 32.1%

San Diego County:
5,884 reduced / 18,636 total inventory = 31.6%

Orange County:
3,633 reduced / 12,297 total inventory = 29.5%

Las Vegas Metro:
5,160 reduced / 18,853 total inventory = 27.4%

Los Angeles County:
8,197 reduced / 32,268 total inventory = 25.4%

Seattle Metro:
1,669 reduced / 8,755 total inventory = 19.1%

Santa Clara County:
466 reduced / 3,446 total inventory = 13.5%

Eleua said...

anon 8:43:50...

Banks may be making money with the higher ARMs, but people who will be holding the MBS will demand higher interest rates to compensate for the falling value of the collateral. This will be mirrored by interest rates in the larger economy.

Highere interest rates will tank the market. My bet is the FED is done tightening and will start to spike the punchbowl again. Consumers of fixed income will start to sell and drive up rates, while the FED is increasing the money supply - inflation.

Once we all lose confidence in "The Great OZ" (the FED), the economy will come completely unhinged.

I still hold to my 20 cents prediction.

seattle price drop said...


The Seattle "reduced" listings are actually higher than that.

The reason being that many properties are pulled and assigned new MLS#'s, then re-introduced as "new" onto the market (but with a reduced price).

As said elsewhere, it is legal to do so in WA. and (according to Seattle realtor), "keeps the property looking fresh and is a good marketing tool".

Last winter the % of reduced homes was edging towards 30%. That's right about when I noticed properties being pulled and re-assigned at increasing numbers.

At any rate, even if the reduced listings were "only" 19%- that's still pretty high, don't you think? Now, if they can somehow manipulate those statistics down to 0-3%, then I'll be impressed!!!

I seriously doubt that in '04/'05, Seattle had 19% reduced listings.

Anonymous said...

Using Ziprealty this morning, I got 413 reduced listings out of 1882 total properties in the seattle zip codes.

That's 22%, right where it's been for the past 3 months +/-2%

The inventory numbers have crept up a bit though. 4 weeks ago we were around 1680 for the same zips, and we had been in a range of 1700-1850 for the first 3 months of this year.

1882 isn't high by any means (2.5 month supply approx) but with sales down 9% heading into the peak selling season I won't be surprised if we see a 25% increase in inventory by Memorial Day.

Condos are sprouting like weeds everywhere.

meshugy said...

Hi Price Drop,

Yes, I've seen a couple of houses I was watching get relisted. That definitely happens...I'm not seeing it happen as much as you are though.

The reductions stats are interesting, but the bottom line is that a "reduction" is only relative to how realistic the original asking price was. As I've said earlier, people are overpricing houses like crazy so it's only natural that they have to give a little when no one bites. But it's clear that most of these houses are still selling at very high, albeit "reduced" prices.

The median sales price is the stat to look at...if we see it go down next month for King county we'll know it's a slow down for real. Until I see that happen, "reductions" don't really mean that much to me.


Anonymous said...

The reductions stats are interesting, but the bottom line is that a "reduction" is only relative to how realistic the original asking price was.

While what you write is obvious, the question is why are Realtors having a 22% error rate on correctly pricing these properties?

And why has the error rate risen lately? Too many newbie realtors that don't know how to establish competitive listing prices?

If the listing agent knows that the price is too high and won't sell, what's the motivation to post it? He's not going to get a commission on a place that sits.

It's in any agent's best interest, and client's best interest to establish a reasonable price at the outset because failing to do that dramatically increases the time and effort required to sell the home.

Anonymous said...


Your first set of statistics are only nominally interesting. It doesn't matter what the ratio is of homes to bodies, if the median body can't afford the median home without predatory lending.

Your second set of statistics were presented out of context. Sales rise in the spring. Always have, always will. It's more important to look at the magnitude of the increase, year-over-year, and as you pointed out, that number is going down -- not good.

Your third set of "interesting" statistics, as others have pointed out, are so easily manipulated as to be useless. But if we assume that they aren't manipulated, it's still curious to find so many price reductions in the white-hot, it'll-go-on-forever housing market.

Cite all the local statistics you want, but the macroeconomic data doesn't lie. People can't afford to buy homes here without leveraging themselves for a lifetime. That can't go on, won't go on, and will pull home prices down once the "easy" money dries up....

meshugy said...

I think the overpricing is simply a result of a tight market. Houses are still selling very fast. In a truly slow market houses sit for months or years. So you have to price very competitively. But in his market sellers know that it's worth it to "go for the gold." Overprice your house...if no one bites then you'll surely sell it in a week or two at a slightly reduce price. There's almost no risk in overpricing because the house will sell anyway. If were to sell I'd do the same thing.

So 19% of homes are getting underbid but the other 81% are usually getting the inflated price (or more) then they asked for. Sounds like a sellers market to me...

meshugy said...

I agree that a lot of the economic data regarding housing is very scary. Mostly affordability which is way out of wack. I'm not arguing that at all....I think it's very likely that it will have to come back to a more normal relationship of income to housing costs.

But, the correction isn't happening yet. That's all I'm saying. I'm waiting to see when it happens and how severe. Some of the predictions made here are valid. But they are just predictions. The market isn't tanking yet. A modest slow down at best....

Anonymous said...

There's almost no risk in overpricing because the house will sell anyway.

Well, that's not true. Houses that sit for too long become "tainted" and get passed over by agents. Correctly pricing a house is a crucially important detail of the sale.

I'm seeing less overpricing in the properties that have come on in the last two weeks. The fact that we are seeing a drop in sales at this time of year, with less inventory, is extraordinary. When inventory increases--the real X factor here--we're going to see price declines in direct proportion.

Anonymous said...


I understand your position – just sold your condo/townhouse for 100+% profit and bought another house that is appreciating rapidly. It is also true that nationwide, housing price “never” went down. But, this is also true that nationwide, we have a highest level of speculation in recorded history. So, “it’s different this time” works both ways.

Maybe this article will sum it up very well:
“The housing boom was fun while it lasted, but the biggest increase in wealth in history was largely an illusion.”

meshugy said...

Well, that's not true. Houses that sit for too long become "tainted" and get passed over by agents. Correctly pricing a house is a crucially important detail of the sale.

Right...that's if they sit. But the thing is they aren't sitting. They get overpriced....a few (according to the stats 19%) get underbid. But it all still happens fast...most houses selling in two weeks. A month at most. There's a few select properties I was tracking in ballard that have sat a long time because they were so bad and so over priced. But those are the exception...98% of what I've tracked in Ballard sold in less then a month (mostly 3 bedrooms/2 bath in 98117)

The bottom line is that I would have to pay over 50K more to get the same house I got last year, if i could even find it (inventory is way down from last year.) I'll know the market has turned when I see houses equivalent to mine sitting for months, getting underbid, and going for 50K less then what I paid in 2005.

seattle price drop said...


You've read the data wrong.

19% of houses are listed at reduced price (per your own data)

More than 80% of houses are sold under asking (per the county tax records for NE Seattle).

The irrational "the house was over-priced to begin with and that's why it's reduced now" argument does not make sense to prove that the market is strong.

It only proves that we have hit the TOP of the bubble (ie. the point at which housing prices can no longer go up).

Is the concept of ever-rising RE prices a religion for you?

Why are you so resistant to data?

Again, do you have a bad loan? If so, try to fix that problem now. Do not depend on ever appreciating RE to save you. There is just too much evidence that we are at the top of the market.

On top of everything else, for the first time since last January, the # of properties have started to steadily increase this week, beginning April 14.

Prior to that there was a daily up/down, up/down happening. That indicated a lot of selling activity.

Now, for the last 7 days, it's been up/up, up/up. Who knows if this trend will continue. But if it does, it's just one more sign.

Instead of only looking for signs that "things are still ok", you really need to start looking objectively at the big picture.

Particularly if a slow-down will bring you financial hardship.

Because, if you look at all the data, and not just a few homes in your select neighborhood that have gone over asking, it is very clear that we are at the TOP.

The next step after the top is usually a decline. If it just plateaus, then it just plateaus.

Or are you buying the realtor BS that prices will remain "flat" before taking off again?

Many realtors now have changed their tune about that and now admit prices could decline. Others are even saying outright that prices will decline.

If plateauing or falling prices will cause you financial hardship, now is the time to do something about that.

The Tim said...

Instead of only looking for signs that "things are still ok", you really need to start looking objectively at the big picture.

Yes, meshugy. You should take lessons in objectivity from someone who goes by the handle "seattle price drop." Heh.

Sorry, I couldn't resist. All in good fun. I do appreciate your comments, spd. In fact I'm quite impressed by the "meat" in most of the comments here. Keep up the good work, people. I appreciate the participation.

seattle price drop said...


After I wrote that, I realized that there are people who need more "proof" of tops and bottoms of RE cycles. You are just one of those people.

So if 50K less than what you bought for in '05 in your own neighborhood is the proof you need, then that's the proof you need.

Personally, I've always been better at calling the tops and bottoms earlier than the "last possible proof".

Which is why I chose the name Seattle Price Drop last winter! Because it was clear to me that the trend was going in the opposite direction of what it had been.

Now there ARE people who caught on well before me. They are the trully brilliant who sold and got out last summer.

We all catch the fact that things have changed at different times.

The really unlucky ones figure it out well into the downturn or upturn. They are the ones who buy too high or sell too low.

meshugy said...

I have a 30 yr fixed with 6.125 interest. No worries here...

I'm not that personally invested in the market....I'll stay in this house for a long time and can ride out any trouble. The only problem I'd have is if my business started to fail and I couldn't pay my mortage...which could happenen.

I do think the market will slow down...again, I just don't think it's happening right now. Just a little slower, that's all.

seattle price drop said...


As for the name, just calling it as I see it, from looking at data.

Sorry if that seems "not objective" to you!

It is true that I AM making one assumption: that is, that when a market that has been run up as this one has begins to turn, it will not stay flat , rather, prices will drop.

If I'd assumed otherwise,, I guess I would have chose "Seattle Price Flat" .

I looked at the market beginning last Fall and noticed a trend of increased DOM's and price reductions here and there.

When I plunked in the addresses of homes sold and found how far below asking they were going for, that's when I knew for sure that something was up.

I did not "wish for a drop in prices" and then go look for evidence.

If that were the case, I would have been calling myself "Seattle Price Drop" since '01 AT LEAST!!

Before last summer however, I think the evidence would have been hard to find at best.

Now it just jumps out and clobbers you over the head. But you have to actually look and follow every property in an area and not pick and choose.

It is very time consuming but I want to know what's REALLY happening out there and not just be spoonfed by the people who are "picking and choosing" what to look at and what to ignore.

Anonymous said...

The bottom line is that I would have to pay over 50K more to get the same house I got last year

You sound like someone who shopped pretty hard--is it possible you just got a good deal? I wouldn't want to analyze a region-wide trend based on one purchase. Good for you though, I'm jealous!

Also, saying that houses are sitting "for only" a couple of weeks to a month is a bit disingenious. Last year at this time how long would you guesstimate houses were sitting? Where there's smoke, there's fire.

Snoho_Renter said...

As a longtime bear that is chomping at the bit for Seattle price drops, I have to agree with meshugy that, for now, there are no clear signs of significant slowing in the Seattle region (although I mostly follow south Snohomish county).

While I think that SPD has an important observation regarding sales versus asking price (which marks a reversal from what I was seeing for last year's summer closings), I don’t think it really matters in terms of popping the bubble, as long a sales continue at a brisk pace. For Snohomish county, the number of closings is up YOY for each of the first three month this year. And I can say from the homes that I have been watching, that most 1970’s split levels in MLT or Lynnwood that are priced between $300-350K are selling in less than a week or two—faster than I have seen since started tracking houses last fall.

For whatever unfathomable reason, people are snapping up houses here. Until that changes and inventory finally starts to match the rest of the country and heads upward sharply, this bubble is still full of air. It is all about the inventory.

meshugy said...

When I was buying a house in April 2005 anything decent sold in a week. The house we bought was only on the market 4 days!

I think it's probably averaging two weeks now.

If anyone is actually out there seriously shopping and bidding, i have a few questions.

The way things worked last April was a house would come on the market. The sellers (who knew they'd get multiple offers) would wait a week and get as many offers as they could and then review them on predetermined day. Is this still going on? Or is back to the less competitive first come first serve system?

Also, you absolutely had to waive inspection. Sellers wouldn't even look at offer if you didn't waive inspection. So we had to have houses pre-inspected (at $100 a pop). We did this three times. We lost the first two bids but got the third. It really sucked to have to pay for inspection and not get the house. The inspector was really nice...he actually felt sorry for us. But these market conditions were very good for his biz, that's for sure. Anyway, are people still waiving inspection to be competitive?

t.s. said...

In my experience, people are still setting a bid day, but on several occaisions where we were semi-interested, no one bid. That included a property in Ballard (that was overpriced).

We paid for preinspections last year, too. It seems different now--I think people are much more likely to make offers contingent on inspection now. Everyone seems more cautious. (Still, there are openings where you still get that frenzied feeling in the air. These are places where the sellers put a cute house out a little below the average asking, I assume to stir up bidding. Just saw one of these a couple of weeks ago.)

Nick said...

There's also the argument that it isn't a "housing bubble" per se, but rather a "pricing bubble". What this means is that the builders are selling so far above their cost, that they will continue to build. Even if prices come off 40%, they could STILL be over their costs. And if that's the case, they will build more and more.

T.S. said...

How much do you figure it would cost to build a 3-bedroom nowadays? I've kind of wondered if this would be an option--buying a plot and building.

BN said...

"It is all about the inventory."

Very true, As I said in the other thread as long as there is low inventory prices will stay up and even climb.

The true sign of a slowdown is the
increase in inventory and longer
time to sell.

Unfortunately we are not there yet.

BN said...

"How much would it cost to build ?"

This largely depends on how high-end you want to go. We checked around a
couple of years ago and it was
around $130-$150 per sq foot for a
decent quality home.

If you can put in some work yourself
(painting, electrical & plumbing fixtures etc.) you can save some money.