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Monday, May 01, 2006

"Home Prices To Climb Substantially"

Here's another gem from Ms. Rhodes of the Times:

Q: We bought our house in 1996 for the same price as the sellers who bought it in 1990. We'd like to buy another house, but are hesitating for fear we're about to enter another zero-appreciation cycle. Are conditions right for that to happen?

A: Let's take a historical look at those conditions.

The year 1990 was the high point of a brutally hot housing market that began two years earlier. In 1990, 50-plus King County neighborhoods recorded appreciation of 30 percent or more, according to a Seattle Times analysis based on price per square foot of single-family homes sold that year.

Fueling this, recalled veteran property appraiser Alan Pope, was a strong economic base that was adding thousands of new jobs, attracting both investors and new residents from other states.

In 1991, runaway appreciation stopped. Home prices rose only modestly for the next few years. Why? Again it was the economy, said Pope, owner of Alan Pope & Associates in Redmond. Boeing restructured and thousands of jobs were lost through 1994. The Japanese economy took a nosedive. Pacific Rim investment money shriveled.

Now we're at war, and negative economic indicators are on the horizon, most notably spiking fuel prices and a slow but steady rise in mortgage interest rates.

Are those negatives enough to offset an otherwise robust local economy and cool our home market? Only time will tell.

However, after weighing all factors, Pope anticipates Puget Sound-area home prices to climb substantially this year and next, mostly because the region's major employers, including Boeing, are doing very well.
I have a hard time believing that housing prices have room to "climb substantially" for two more years. Unless all these Boeing and Microsoft jobs are $100,000 gigs, which I kinda doubt.

(Elizabeth Rhodes, Seattle Times, 04.30.2006)

16 comments:

Anonymous said...

even if they were 100k gigs they would still be hard pressed to afford the average priced home in this area.

Oil rising and interest rates aren't the only economic problem. How about the fact that the dollar is now viewed worldwide as a bad investment? Also, the 1.2 trillion in re-adjusting ARM's in 2007 should make quite an impact as well.

Anonymous said...

Pope anticipates Puget Sound-area home prices to climb substantially this year and next, mostly because the region's major employers, including Boeing, are doing very well

Utter and complete NONESENSE!!!! I'd like to know who's paying Mrs. Rhodes to puppet this ridiculous notion. You can add a gazillion jobs, if they're not paying well into the 6-figures, no one, I mean no-one from Boeing will throw down 500K+ for your average dingy moldy northend Craftsman, NO ONE!.

Unless they're completely insane and grab one of those 'funny-money' mortgages that's quickly withering on the vine, which by reading this articles about dimestore fools mumbling 'gotta get in, gotta get in' over and over again, isn't too surprising.

I find it absolutely crazy that this suckers lining up for bidding wars/no-inspection mob scense aren't reading anything about these crappy pyramid scheme loans they're signing onto. When in god's name did this nation decide its alright to jump feet first into a situation outside the 20% 30yr. fixed realm.

Pope's a snake-oil salesman, nothing less, nothing more.

meshugy said...

Since the MLS #s for April will be out on Friday, I think it'd be fun if everyone made some predictions.

Here's mine:

Inventory is rising in most areas, but still tight compared to a normal market.

Prices are still creeping up, but not at the staggering pace of April 2005.

Queen Anne/Magnolia area will see little or no appreciation, all other areas will continue to catch up until they top out at around 430K median price.

'm

Eleua said...

I read this and thought I would summarize.

"Despite all the fundamentals moving against the housing market, we expect substantial appreciation, despite historical precedent."

Of course they expect substantial appreciation when the economy is raging, stagnating, or contracting.

All bull, all the time.

I mean "bull" in every sense of the word.

Anonymous said...

My predictions for King County:

Sales will be up slightly, month-over-month, but significantly (>= 10%) down, year-over-year. Inventories will be slightly (<5%) down, year-over-year.

Median single-family prices will be up over last month (and last year), but will not top $415k, reflecting a slowing month-over-month growth rate in appreciation.

Elizabeth Rhodes will write a fawning article, fellating the intrepid North Seattle frat boy who purchases a half-million dollar bungalow with an I/O ARM and a liberal infusion of cash from mommy and daddy, encouraging her readers to get their "investments" while the getting is good....

Surkanstance said...

Unfortunately, I think that real-estate bears (like me) will continue to be on the defensive in the Seattle area for a couple quarters yet, at LEAST. Until we start seeing listing volumes really grow substantially, and hear of people struggling to sell their homes, my acquaintances are still going to keep thinking I am barmy.

I can talk till I am blue in the face, but all my theories as to why we are skating on thin ice won't matter until the numbers actually start to change. Maybe I will just have to suffer as a pariah for another year or so...

meshugy said...

Looks like it's still pretty competitive in Ballard. This house just sold on April 19th:

8034 22ND AV NW 98117 two

3bdr/1b 1240sq ft

Asking: $425K
Sold: $451K

The Tim said...

That's some good stuff, emcityjill, and no, I hadn't seen it before. According to their comprehensive report, Seattle was 34% overvalued in 2005, the 12th-most overvalued city in the nation! I'll have a look over this and probably make a post about it later.

Thanks!

Surkanstance said...

Is there a link to the HSBC spreadsheet? I've seen the report but didn't notice how to get the spreadsheet (other than subscribe to HSBC).

Surkanstance said...

Sorry. I found the link to the spreadsheet:

www.research.hsbc.com/midas/Res/RDV?p=pdf$sessionid$=6zOnlnEmxv6TSI|BSINU5CN&key=dpc74ypkpv&n=122667.XLS

Surkanstance said...

This HSBC report is definitely interesting. However, it is still lacking some key data I would like to see to determine "frothiness".

- Housing construction trend data for the Puget Sound.
- Mortgage type trend data for the Puget Sound (e.g. % of option ARMs, 100% interest, negative amortizations, etc).
- Trend data on the % of down payment in puget sound area.
- Trend data on the number of investment purchases in the Puget Sound vs home occupiers.

I suspect that we may see a high correlation to the degree of bust a given region experiences and the prevalence of dodgy mortgages that had been issues. It would be interesting to see how our region stacks up.

Anonymous said...

The 'New Economist" article provided by Emcityjill is exactly the kind of concern I've been seeing on the CNBC "Worldwide Exchange".

Foreign economists have been watching the US housing market with alarm for months now. They've been saying all along that it's going to take down the US economy.

Too bad Americans couldn't have acted a bit more responsibly over the past few years. But, who the heck cares about ANYTHING else, economic, social, political, etc., as long as you're "getting rich" off your inflated home value TODAY. To h*ll with the future.

The fact that so many Americans still can't see the harm in this is beginning to disgust me to no end.

Anonymous said...

Mikhail-

S Crow has reported over and over on this site and his own about risky mortgages in the Puget Sound.

I believe the percentage is around 70%.

That sounds plenty high enough to me to cause some damage.

As to the amount of "investment" properties, haven't seen any %'s for that.

Anonymous said...

Just a quick chime in on that "100K"
jobs.

You have to consider that the salary
for software professionals with
4-5 year experience is around 70-80K.
Throw in a spouse who also works
in the same IT field and you have
easily got 140-160K/year.

I agree that not everyone is an IT
person, but there are quite a few in
this area.

As mentioned earlier, the real sign
of a slowdown is "rising inventory".
Unfortunately we are not there yet :(

Anonymous said...

s crow, just curious about what kind of risk your company takes on when they deal with the glut of 100% ARMS?

Do you sell that risk upstream, ala Fannie Mae/Freddie Mac?

Anonymous said...

thanks s crow, I think I knew that about escrow companies, I just wasn't sure, if like you said, you were tied to a broker, etc...

Yeah, I can definitely see how you're getting a first-hand look at the implosion, look forward to hearing from you as things get even more 'zany' RE-wise here in Seattle