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Tuesday, May 09, 2006

Million Dollar Homes "Worth Every Penny"

Okay now this is just weird. Remember how the Times and P-I articles about April home sales both had an inordinate focus on the sales of really expensive homes? Well guess who else joined the party? The Everett Herald, with a story ironically titled Worth every penny.

The dream of buying a million-dollar home is unattainable for most working families.

Yet 2005 saw a huge increase in luxury home sales throughout the Puget Sound area - including Snohomish County, where 83 homes valued at $1 million or more changed hands. That's up from 23 in 2004.

Whether it's a two-bedroom older rambler on acreage in Arlington or a posh condominium in Edmonds, there is something for everyone in the price range of our dreams - and more people are buying high-end homes than ever.

"I don't necessarily think it's a trend," said Greg Hoff, owner of the Edmonds Windermere Real Estate office. "I would call it just the general housing market."

What used to be a $500,000 home is now a $1 million home in many areas. Although Hoff is always a little surprised when he sees a home sell for seven figures, he's no longer taken aback.
Perhaps Herald writer Christina Harper read the Times and P-I articles the day before and felt that Snohomish County needed similar coverage, perhaps it was a total coincidence, or perhaps "Christina Harper" is yet another pseudonym used by our favorite real estate reporter Elizabeth Rhodes. Who knows.

Whatever the case, one thing that the Herald article amazingly leaves out is the obligatory declaration by a local realtor that "the notion of a bubble is definitely dead."

(Christina Harper, Everett Herald, 05.07.2006)

41 comments:

Anonymous said...

And we wonder why median price in general still goes up? Throw a few million dollar homes in to the mix and that's what you get.

But with the YOY median decreasing in Millionaire Heaven Medina for 2 months straight, this could end soon.

March '06 YOY: -30.5%

April '06 YOY: -10.14%

matt said...

Yes, we've reached the 'new paradym plateau', a brave-new world of Real Estate like mana from heaven...

Well, considering wages have been flat as a pancake for the past 5 years and actually in the red with regard to 'real wages', where's all this magic money coming from to buy 7-figure homes?... dead relatives? pots of gold buried in the backyard?

I'm guessing its probably equity rollover from the inflated RE bubble and exotic lending from the cheap money glut. Call me crazy, but its just a hunch

seattle price drop said...

I'm sure the people in Laurelhurst who've had their million dollar homes on the market for months are hoping these articles work their magic!

lesserseattle said...

the median home price is not overly affected by a few million dollar sales...no more than it would be by $800k sales or even $600k sales. it only really emerges when there are fewer low sales to offset the high sales.

two series:

$1,000,000
$1,000,000
$1,000,000
$250,000
$200,000
$150,000
$150,000

mean: $535,714
median: $250,000

$600,000
$600,000
$500,000
$250,000
$200,000
$200,000
$150,000

mean: $357,143
median: $250,000

the median is the same in these two series although there is a $180,000 discrepancy in the mean or average.

when the tech industry in Seattle contracted, there was a large inventory of houses on the market in the $500k and up range--many taking price reductions. yet the median home price kept marching upward until it buoyed the more expensive tiers of housing above it. now, if those houses coming down in price didn't negatively affect median home pricing on its face, then why would it have a substantially different effect on the way up?

i am not trying to be argumentative but the median home price is the best metric and it is not qualititatively sensitive to individual house prices beyond the position of that price in an overall series.

regarding Medina: it has a population of less than 3,000 people. figuring 2.5 people per household indicates 1,200 units of housing. figure that MAYBE 1% of those houses are on the market at any given time and you have 12 houses. these are also high end homes which usually take longer to sell than conventional houses. add
these together and you have a market that is not reliable for a metric like median home price. for Medina, I would say that the average home price might be a better metric...and even that requires a leap simply because there are not many houses that will go on the market. people that live in Medina do not inhabit the same economic world as first time home buyers. these are people (generally) that can afford to live there and (generally) don't finance themselves into the ground to get there. this weblog looks for harbingers of a contracting market--i reply that looking to Medina for those indications is probably not the best place.

looking to Medina is similar to analyzing Jackson Hole, WY and looking for signs of a weakening housing market. it might come, but you are going to waste a lot of good time looking for information while interesting activity is happening in other areas and passing you by.

if you want to watch what is happening, check places that are heavily leveraged and have a median home price that is far above traditional affordability indices. check for foreclosure proceedings on the King County website and see where they are. hell, go down on the courthouse steps one Friday and watch. it is very interesting.

i recommend watching the Renton Highlands, Kent and Puyallup as a good microcosm for analysis. when a weakening in single-family detached comes, it will start out there (in my opinion). for close-in Seattle, watch the condo market over the next eight months. that is where you will see the close-in market weaken first (in my opinion).

anyway, glad this weblog is out there and glad Tim is updating frequently. too bad that some of the commentary is getting acerbic but that's the nature of weblogging; people get very emotional about their real estate or lack thereof.

Anonymous said...

Both the median and mean are equally bad, if you use them to summarize data that isn't distributed symmetrically. If most of the homes sold last month were in high-end markets, both the median and mean home prices would jump, but the reality would be far more complicated to explain.

What we really need to know are statistics on home sales within particular price ranges -- are homes below $400k experiencing a slowdown? Homes worth more than $1M? Who knows...?

lesserseattle said...

those searches can be done and if i was not flooded at work i would pull up some data for Tim and this blog. information that breaks out the stratas of pricing and considers condominiums separately is the right strategy for what you are looking for.

some good indices would be the wider Kent/Auburn/Puyallup area where there has been plenty of new inventory entering the market. transitional neighborhoods in Seattle would be another good one, like Beacon Hill, Columbia City and the Rainier Valley. the Ballard condo market would be a good one to watch for weakening--tons of inventory coming online. if you want to look for weakening toward the higher end, look in the neighborhoods east and north of Capitol Hill, those places have gotten a little heady with speculation. take those places and break out your data in $50k to $75 intervals. trying to paint with too broad or too narrow of a brush might is not as reliable as knowing exactly what trends you are looking for and what they will mean.

Dukes said...

Denial runs strong in Seattle, it is a shame because all they are really doing is sucking in the very LAST few lemmings.

This type of hype with no counter opinions from people with common sense is criminal, and it will cause the pain up here to be all the worse.

Dukes said...

Same story: here are the 24Hour NWMLS statistics:

New Listings 767
Back on Market 66
Price Increases 62
Price Reductions 326
Contingents 32
Pendings 581
Solds 413
Expireds 60
Inactives 130

Lemmings still buying but not keeping up with New Listings. Price Reductions usually about half the amount of New Listings on a daily basis.

meshugy said...

Hi Dukes,

What area are those stats covering? Just King County?

You're showing 700-800 new listing a day...that would mean there is over 20,000 new listings a month. King country only had 4,741 new listings last month.

You must be looking at the stats for the whole state of Washington. Honestly, that tells us very little about King County. All those price reductions, expirations, etc are probably crap land around the tri cities, enumclaw, or some other god forsaken place.

Can you give some more info on what this data?

'm

Dukes said...

Meshugy, that is a good point. I know that his access is for the NWMLS, now having said that I am not sure which exact areas this covers.

Obviously, it must include more than just King county, so I guess it gives us a general flavor of what is going on up here in the NWest.

seattle long term buyer said...

in a situation where the number of homes sold is 3K or so, the median is a very sensitive number...

if it was 20K homes sold, then it would be more stable...

People who unload houses first are those who have the most to lose... and the investor who bought a 500K or so house isn't necessarily dumb... he probably reads these blogs and watches the news... he knows the game is up...

the average buyer/investor living in his investment is more likely to buy into the hype and hang on to his home as much as he can... or he has no choice.. he needs to live somewhere... plus he probably has a spouse who doesn't want to move... or kids that don't want to transfer schools...

i wonder if there's any sense in comparing in a graph the median vs the mean and seeing how much disparity exists between the two...

Christina said...

if you want to watch what is happening, check places that are heavily leveraged and have a median home price that is far above traditional affordability indices. check for foreclosure proceedings on the King County website and see where they are. hell, go down on the courthouse steps one Friday and watch. it is very interesting.

This sounds like my idea of a schadenfreude good time. What's the URL for checking the foreclosure court schedule?

lesserseattle said...

Go to the King County Recorder's Office at the link below. In the drop down box, search for Notice of Trustee Sale. Input the dates for which you are searching and go. Most of the sales that will come up will not be for another few months. The ones that are currently coming up for sale were likely filed months ago. From May 1, 2006 through today, 60 of these notices were filed. If someone were to put in the parameters and do a month by month search, it might yield some interesting information.

http://146.129.54.93:8193/search.asp?cabinet=opr

There is some schadenfreude that could be derived from these but many are just good people that went sideways in divorces, etc. The ones that make me giggle are those that bought $700k houses and never made the first payment on them.

Anonymous said...

Could someone post links to the other info about Elizabeth Rhodes and her aliases? Sounds interesting!

Thanks

The Tim said...

anon @ 1:39,

I was referring to this post, where I quipped "Seriously, is 'Kathy Mulady' really just a pen name of Elizabeth Rhodes or something?" I don't seriously have any real information that would lead me to believe that Ms. Rhodes actually writes under an alias.

Of course, this comment assumes that you were serious. If not, I suppose the joke's on me.

Anonymous said...

hey tim,

thanks, i was serious - it honestly wouldn't suprirse me at all to find out it was actually true.

and thanks for keeping up this site - great info!!

thanks,

meshugy said...

Inventory seems to be dropping this week...

This morning the #'s were:

King County: 7,205

Seattle: 2,095

Today at 1:45pm:

King County: 7,179

Seattle: 2,084

Here's what happened the last few days:

Monday:

King County: 7,214

Seattle: 2,107

Sunday:

King County: 7,249

Seattle: 2,127


Realtors have told me that most new listings come up on Wednesday...maybe we'll see a spike tomorrow...

'm

Anonymous said...

Meshugy,

Oh my god! Eleven listings in six hours!!! At this rate, we'll be out of houses by the end of next month!!!!

Seriously. Stop being silly. The trend line between "this morning" and "1:45 PM" tells us nothing. For all we know, the decrease in listings could be panicked realtors yanking their previous listings to promote "freshness".

Tim's plot (in the previous post) was a good use of statistical data. You're just worrying the numbers to death....

meshugy said...

Hi Anon,

Yes...I'm being a nerd. But it's fun!

Anyway, the major trend is that they have been going down since Sunday. For a week before that we were going up pretty fast and now are trending down again.

'm

S Crow said...

We'll my neighbors house two doors away at $1.02 mil. just sold (pending). And we have another transaction just in yesterday at approx. $850K. And mind you, this is roughly 30 miles north of Seattle in the Snohomish area, so there are clearly buyers out there doing deals in that upper range.

Lots of homes are coming on the market. Yesterday morning on way to pick up a cup of java and head to work, I saw a "Sign-Poster's" truck (the people who post the for sale signs)at the stop light. The pick-up truck was was packed with signs. Obviously the guy wanted to get an early start. I confess, I grined. With several days of 800 plus listings coming on the market per 24 hr time period, I thought, man , it sure is late in the Spring season to get a little push. Maybe the nice weather over the last 10 days?

Dukes said...

Here you go Meshugy here is a "price reduction" in your much heralded Ballard area...

http://seattle.craigslist.org/rfs/158011998.html

meshugy said...

Thanks Dukes...

I actually have been watching that house...they originally had that ugly as hell 50s brick thing up for $540k! Even at $480K it's way overpriced.

It's mostly likely a flipper in trouble. Was bought last May for $419K. They're probably getting nervous and need to unload it fast...

Here the record: 1514 73rd Ave NW

I don't think Ballard is any better then other Seattle neighborhoods. It's just a good place for me...

'm

Anonymous said...

You'll also notice that the aforementioned property has an ARM (1yr Treasury ARM, Fixed for 3yrs that just adjusted UP in March). Seen by continuing to the County document search site and go to Deeds of Trust recorded for the subject or any home.

Dukes said...

Well Meshugy you could have fooled me. From the way you have made Ballard sound it is like the streets are paved with gold.

My advice is to sell now and buy your house back in 2 years for much less. Just a thought.

Anonymous said...

Didn't you hear dukes? They're building a 'great wall' all along Phinney Avenue to keep out the Bear Barbarians from crossing in forever, I live here and its a bizarre utopia where cash literally pours out of dingy craftsman, I don't really even need money anymore, I just give the grocery store my address and they give you a wink with the "You're good for it because you live in Ballard'!!!" I have a slot machine like apparatus built into my wall, every day my house makes and extra $1000 in appreciation, the cash just flows out onto the floor... I've stopped working! Its a miracle here, a grand experiment, euphoric to say the least!!!!

meshugy said...

Thanks for loan info anon...

Dukes: We're pretty happy with this house so I think we'll keep it for now. We could live here the rest of our lives, so I think we should be able to weather any trouble ahead.

'm

Dukes said...

Very funny anon 7:18 - but the sad part of your commentary is that I bet there are a whole slew of people who ACTUALLY feel that way.

Meshugy: You won't feel the same way if you are 100K upside down. You will be saying to yourself..."self...why am I paying a mortgage for 100K more than this house is worth?" That is when you look in the mirror and panic sets in.

It is going that way, just a matter of time.

lesserseattle said...

that is actually not the house in the ad.

the link to it on metrokc is here:

http://www5.metrokc.gov/reports/property_report.asp?PIN=0461002150

note the owner's name is the same as the email addy.

lesserseattle said...

original list on it was 495k, listed early April. no other records for it that i saw. purchased in '95. no flipper.

Eric D. said...

Barbara, our honest reporter at the TNT, has confirmed with local realtors and data that Tacoma is now a buyers market. Remember Tacoma is only 37 miles away- Seattle will have to follow our lead (and Snomomish's county!) soon enough. I just hope the Seattle buyers don't get discouraged and run up house prices in Tacoma again..

Anonymous said...

Eric D- How true, maybe you guys should issue ID cards to keep us Seattle "House Happy Fools"
out!!

We can cause a lot of devestation when we're determined.

What do you say folks- is it time to set our eyes and Tacoma and catapult it to HOT!!!! RED, no make that BLUE- isn't blue the HOTTEST part of the flame.

HOT HOT HOT RE FOREVER!!!! AND EVER!!!!

Jackson Wallace said...

Anybody who pays a million dollars for a home in the Seattle, short of an acre on lake washington (no others) is an idiot. I've known people in medina, and while a lot of them are either gazillionaires, many are people whose families have been in the area for generations, and probably own
scads of rental RE or whatever.

A million dollars in the bank would guarantee you at least a 50k income doing nothing. With that money you could go a lot of places and
live in a lot of great spreads in a lot of gorgeous places, including places
where spring doesnt come in Feb for two weeks and then rain on the weekends for months until July 5. This place is great because its mellow and its not the hellholes that most major US cities are, but cmon, there is still hawaii, santa barbara etc. Paying a million dollars for a home in Edmonds is drinking the whitebread bluehair suburban koolaid.

I agree that I bet there are people sweating out there on the peripheries.
Stock 'advisors' were claiming that exurban growth was another one of those 'new paradigms.' While it may be true that people can work from a distance with the net, from what I've been reading, people that bought in rural areas around other RE hotspots are losing their marbles right now, and prices are shooting downwards. Noone wants to live that far away
with energy costs being what they are.

Its happened, Exurban is DEAD. That may be the only thing that saves
Seattle condos, depending on supply. Shoddy construction is an issue
appearing as well, but mostly elsewhere seemingly.

Anonymous said...

People who buy million dollar homes are idiots? Can't you say the same about expensive cars and expensive jewelry? If someone can afford such a home, he is not going to puke his guts out if gas is at $5 or even $10. Another food for thought: not everyone's wage has been stagnant.

Jackson Wallace said...

to Anon,

Of course someone who has amillion dollars to burn isnt gonna care about $5 gas. I'm not talking about the TINY percentage of those who have money to burn. Problem is, many Americans imagine themselves to be wealthy when they are not. They leverage themselves into ever-increasing debt because they like to pretend to be rich. If you anything about economics, youd know that the masses of poulation support the economy, not a small percentage of rich people. This of course, is an effect of drinking Republican koolaid for 20 years. So yeah, someone who buys a million dollar home without having
another say 5 million is an idiot. And anyone who pays a million dollars for a home in Edmonds is an idiot unless its a ten acre estate, and then they're still an idiot, because living on Lake Washington near Seattle or Bvue is about the only place in the state a home should be worth that much. The nouveau-riche never get it. Such is the American wealth stepladder psychology.

Jackson Wallace said...

By the way, i dont suppose $10 gas, which isnt happening, wouldnt just utterly destroy the American economy, and you're so-loved wealthy person's company and investments wouldnt go into the dumper as a result. Think a little about interconnected economics before slavishly worshipping the rich guy.

Love live the immune rich man that we admire and love so much! I'm in the poorhouse, but Long Live that Suburban Rich Guy!!! He's my Hero!!!
Man, Americans are lapdogs to power....

Anonymous said...

It is very convenient for people like you to think everyone who is living large and the rest of America are making only minimum payments on their credit cards every month. If that makes you feel better, more power to you.

$10 gas will destroy the American economy? Maybe, maybe not. One thing for sure is oil/gas/refinery stocks will go even higher than they are now.

As long as one lives below his means, there is no problem. If one doesn't, well, poor and stupid often go hand in hand.

seattle price drop said...

Anon 1:02-

Well said, if people live below their means, they're fine.

Problem right now is, too many Americans are doing the oppposite.

Jackson Wallace said...

yeah, another sure thing is that MSFT would be a great stock forever, and its been going only down since 2000 after the six times it split. I dont have your crystal ball to tell me whether oil and gas stocks will go up forever, but you dream as much as you need to. You imagine there's never gonna be another energy or metals or stock or RE downturn, and then I'll scoop it up when you're boohooing.

I didnt say the truly rich arent rich, although I could easily say that most of them inherited their wealth and didnt earn it, for instance, the Waltons, including that anti-labor wench daughter of Sam's, but that doesnt contradict my point that a lot of Americans who claim they are living large are just pathetic shells in debt to their eyeballs. Statistics bear this out, so you go to your country club and blow $200 on dinner to prove to yourself you're still special. Then ponder why this country might fall apart because of 'class warfare'.

Anonymous said...

Everyone can spend some time studying the stock market and improve performance. But you sound like you want to be poor just so you can complain about the rich because being rich just ain't right.

The poor are often the ones you are ranting about. Credit card debts, spending without thinking. Aren't these the same people you are advocating for?

Nick said...

"I didnt say the truly rich arent rich, although I could easily say that most of them inherited their wealth and didnt earn it,"

And I can easily say that you are shockingly wrong in your assertions. Please provide some statistics supporting your claims. This should be very interesting. You are perpetuating a myth.

Anonymous said...

What I want to know is, why would anybody who is "rich" be looking at a housing bubble blog?

Crap, if I was sitting pretty it's about the LAST thing I'd be doing with my time.