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Tuesday, May 16, 2006

Prices Slowing, "But Not Here"

You may have seen the generic story in the news yesterday about home prices finally slowing down. What you may not have noticed was that the Seattle Times reprinted the story from Bloomberg News and added their own little gloating bit to it.

Home prices fall in some U.S. cities, but not here

Home prices in the first quarter fell in several U.S. cities for the first time in at least 15 years, more proof that the Federal Reserve is winning its campaign to cool off the housing market, a trade group report says.
...
But 60 metropolitan areas, including Seattle-Tacoma-Bellevue, saw double-digit appreciation. The median price of an existing single-family home in the Seattle area jumped 16.4 percent, to $338,600, from the first quarter of 2005.
...
The pace of home sales in Washington shows signs slowing, but prices continued to climb in the first quarter of this year. About half of Washington's 39 counties reported fewer sales this year than in the first three months of 2005, but "the market remains very strong," said Glenn Crellin, director of the Washington Center for Real Estate Research in Pullman.
Has anyone else here read the Hitchhiker's Guide to the Galaxy books? (Although I enjoyed the movie, the books are still much better.) In the third book, Life, the Universe, and Everything, the main character Arthur happens upon a flying party. Allow me to quote from this brilliant novel:
The mess is extraordinary, and has to be seen to be believed, but
if you don't have any particular need to believe it, then don't go and look, because you won't enjoy it.
...
So other factors come into operation, like when the drink is going to run out.

Now, because of certain things which have happened which seemed like a good idea at the time (and one of the problems with a party which never stops is that all the things which only seem like a good idea at parties continue to seem like good ideas), that point seems still to be a long way off.

One of the things which seemed like a good idea at the time was that the party should fly - not in the normal sense that parties are meant to fly, but literally.

One night, long ago, a band of drunken astro-engineers of the first generation clambered round the building digging this, fixing that, banging very hard on the other and when the sun rose the following morning, it was startled to find itself shining on a building full of happy drunken people which was now floating like a young and uncertain bird over the treetops.

Not only that, but the flying party had also managed to arm itself rather heavily. If they were going to get involved in any petty arguments with wine merchants, they wanted to make sure they had might on their side.

The transition from full-time cocktail party to part-time raiding party came with ease, and did much to add that extra bit of zest and swing to the whole affair which was badly needed at this point because of the enormous number of times that the band had already played all the numbers it knew over the years

They looted, they raided, they held whole cities for ransom for fresh supplies of cheese crackers, avocado dip, spare ribs and wine and spirits, which would now get piped aboard from floating tankers.

The problem of when the drink is going to run out is, however, going to have to be faced one day.

The planet over which they are floating is no longer the planet it was when they first started floating over it.

It is in bad shape.
The problem of when the drink is going to run out is going to have to be faced one day.

(Kathleen M. Howley, Seattle Times, 05.16.2006)

31 comments:

Anonymous said...

Is it any wonder that the words "smug" and "seattle" both start with the letter "S"

Anonymous said...

I'm fine with being in the second tier group of 60 major cities whose median hasn't fallen yet.

Our turn will come.

First goes Boston, LA, San Diego, Chicago, etc. That's already happened.

Then goes the next group, Seattle included.

christiangustafson said...

The same high levels of suicide financing are here in Seattle. The same wave of defaults and bankruptcies will arrive here, too.

I used to think that the dotcom phenomenon was going to be great for my generation, that we were getting firsthand, front-line experience in entrepreneurial capitalism. Then I went to work for one, and witnessed the binge spending, the incredible waste, the complete lack of discipline and focus.

The HELOC party is the same thing. The smart people re-fi'd their mortgages and locked in historically low rates, at, say, 15 years. The idiots fired up the HELOCs, spent it all and then some. The idiots drained their 401Ks to speculate in condos. Read von Mises about "crack-up booms", it's frightening but spot-on true.

It is SO important that the responsible, the debt-adverse, not hold the bag for this mess when it all washes out, whether through FNM bailouts or runaway inflation. We refuse to buy a haus until 20% down and an inspection is the standard once again.

Kudos, Tim, for revamping the blog over the last few weeks. You had been dormant, but have stuck to your guns and have done very well with it lately. RE will be affordable in Seattle again one day.

christiangustafson said...

Correction, sorry. By HELOC, I meant to say "second mortgage".

Apologies if I was inexact.

Anonymous said...

I used to think that the dotcom phenomenon was going to be great for my generation, that we were getting firsthand, front-line experience in entrepreneurial capitalism. Then I went to work for one, and witnessed the binge spending, the incredible waste, the complete lack of discipline and focus.

Let me guess... ONVIA?

emcityjill said...

Can somebody tell me how to figure out how long a particular property has been on the market and whether or not they've reduced their price? There's this house up the street from my apartment that I've been snickering at because I swear it's been for sale for three months. MLS# 26029415

I think it's nauseating that people believe they can sell a 3 bedroom house for 575K.

Incidentally, Fremont/North Queen Anne is about to suffer major traffic headaches for the next couple of years due to work being done on the Fremont Bridge. The north side of the hill is about to become a very inconvenient area to live in. I expect to see heightened traffic on the residential streets as frustrated commuters bypass Nickerson and Dexter and thread their way up the hill. I wonder if this will have any effect on sales, or perhaps rent. I guess time will tell.

seattle price drop said...

emcityjill-

Unless you are a realtor, I don't think you have any database you can access to get that info.

It used to be you could go to Zip and see the DOM's. You can still do that, but for the past 2 months or so, things get pulled and relisted as new a LOT. So the DOM's roll back to "1".

If you get a zip account and check it everyday, you can catch that when it happens.

Speaking of DOM's, I'm seeing stuff that disappeared last winter from the MLS but never showed up in the tax records as sold. They're back on the market now, hoping for that spring rally I guess!

One of those homes is a craftsman in Fremont. I wish I had made a note of how much they wanted for it last winter. I know it hasn't gone UP in price but I'm not sure how much of a "discount" they're offering now.

Eleua said...

anon 8:38

The first tier is falling into what is considered a "good" economy. When Smug-attle falls, it will not have that economy there to catch it.

Think Juniper Networks back in '01 and '02. They were still going up when all other techs were cratering. Then, JNPR went from $244 to $5 in just a few months.

The Tim said...

Oddly enough, the home emcityjill listed hasn't been pulled and relisted. According to ZipReality (free login required) it's been languishing on the market for 76 days, and has experienced three price reductions:

Price Reduced: 03/23/06 -- $625,888 to $598,888
Price Reduced: 04/19/06 -- $598,888 to $578,888
Price Reduced: 05/11/06 -- $578,888 to $575,888

As spd said, ZipReality is your best tool, but if the home has been taken off the market and relisted with the new low price (like some people I know), they aren't going to be able to help you.

The Tim said...

Ooohhh! Even more interesting, the home emcityjill listed was purchased only one year ago, for $415,000!

I smell a flipper... in fact, I smell a scared flipper.

emcityjill said...

Equally interesting is this ridiculously priced condo masquerading as a townhouseacross the street from my apartment in N Queen Anne that has been for sale for about as long as the frightened flipper's house (it's about two blocks away). Looks like they've had it relisted though, since it falsely claims to have only been on the market for a couple of weeks. I park across from the for sale sign every day, and it's been up two months at least.

Dukes said...

Good post Tim. I eluded to this phenomenon in my other post on another of your threads.

Trends end, parties come to an end, they were fun for some while they lasted but they ALWAYS end in pain. A good indicator of how painful it will be is the sheer DENIAL that it will happen.

The real problem that people will have with this is that real estate is ILLIQUID in a down property market unless drastic reductions in price are present.

It is not like clicking the "sell" button for stocks. People literally get STUCK, they can't get out, they suffer, they don't know what to do, they are upside down and life goes from GREAT lets use some equity to go to Italy - to, "holy shit, we better pare back on expenses".

Mikhail said...

It's a little off-topic, but I just had to smile reading the Hitch-Hiker's guide quote.

One of my fondest parts of the book was the section about the poet who lived in a swamp and wrote on the back of dried habra leaves about his deep longing for a rich girl who he was destined never to have.

Many centuries later, some marketers take a time-machine to go back and get the endorsement of this poet for some ink. This makes the poet rich, he leaves the swamp, and marries the girl he had so pined about. He then re-copies all his poems onto Habra leaves, using a late edition of his works as the reference (using the ink he was endorsing, of course).

Just a marvelous vignette of the problems with time travel...

I suppose it also speaks to the fact that "getting" things we want doesn't always make things "better".

Dukes said...

emcity, that listing 26065810 shows on the NWMLS that it has been on the market for 57 days.

It was REDUCED from 499K to 449K, still ridiculous but a reduction nonetheless.

Originally purchased by this owner in 1996 for 179K.

emcityjill said...

Thanks dukes!

It seems to me that houses in ultra desirable, high end Queen Anne are taking a lot longer to sell than they were. It's heartening to see that the frenzy has cooled a bit. My prediction is that we'll see a typical spring jump in sales, and price reductions will be the norm as sales stall by fall. The media will be chirping a new tune about Seattle real estate by Thanksgiving, and we'll be reading the manual to a whole new RE ballgame by next spring.

I'll be buying a house in 2011.

Anonymous said...

The Fremont flipper is disgusting.

Who thinks that they can get a >$200k appreciation in one year? Honestly.

These sorts of things make me believe that there should be no mortgage interest tax deduction, and that capital gains on property should be taxed at 95% in the first five years.

Punks. I hope they bust.

Anonymous said...

I used to think that the dotcom phenomenon was going to be great for my generation, that we were getting firsthand, front-line experience in entrepreneurial capitalism. Then I went to work for one, and witnessed the binge spending, the incredible waste, the complete lack of discipline and focus.

Let me guess... ONVIA?


My wife tells me of the orchids they had in the offices there, and the catered lunches...

seattle price drop said...

Actually, if that guy is a flipper, he doesn't seem TOO scared yet. Asking for a 165K profit indicates a lot of optimism to me.

If he was scared he'd be asking 435K.

I HAVE seen some scared flippers in my perusings of the MLS and county records. People who bought for 450K last year. On the market for 625K this year, reduced to 550K, off the list, back on for 495 and still reducing.

Those are the people who are getting scared. Some of them are getting awfully close to what they paid last year.

I've seen 4 or 5. And I wasn't even looking for them. The County records could be a pretty interesting read as this thing plays out!

Anonymous said...

Added line from the 'editor' should have had the lead..

"Home Prices Fall in Some Cities, But Not Here... Never Here, NEVER!! YOU HEAR ME!!!! NEVER!!!" *whimper* *whimper*

Its amazing how much the S.Times is humping for the RE industry in this town, what would be interesting is to see what percentage of their advertising revenue comes from Realt-whores....

emcityjill said...

The house isn't in Fremont, it's on the north slope of Queen Anne, approximately half way up the hill. I am possibly splitting hairs, but I think it's an important distinction. I am pretty they splashed some new paint on it, which warrants the price increase (insert sarcasm here) over what they paid for it a year ago. I haven't seen people so much as walk into it yet, and they've had at least two traditional open houses, with balloons and the whole nine yards.

I agree with the assertion made a while back that we will see prices slowing in the high falutin' properties first. I think we're starting to see it already. My landlord, on his way to deliver a rent increase notice to my neighbor, just proudly told me how his son recently bought a house in Shoreline and how his kid definitely "did the right thing given the market today, otherwise he never would have gotten in." Then he told me that rents were going up all over the city, and how all of Seattle is hiring college grads like crazy, there's jobs a'plenty for everyone.... and isn't it just wonderful to be alive in a time like now? I wanted to throw up.

Dukes said...

emcity...unbridled optimism is very typical in the calm before the storm.

People were bailed out of the dot com mess by rising real estate prices, then people did the unthinkable in my mind - they borrowed against their homes to finance everday consumption and luxury items.

What we have just lived through I think will go down as one of the most profligate, irresponsible periods on the part of supposedly intelligent people in our history.

Anonymous said...

Outside of the 1920's.

Anonymous said...

emcityjill-

That is such a sad story about your landlord and his son.

Chalk them up as examples of what happens when a person only pays attention to a local media gone berserk with "saving the day".

This is starting to remind me of 9/11. Remember how, after years of signals, we were all so shocked because the media never focused on the truth of what was happeing behind the scenes in our world?

There are going to be a lot of people who "never saw this coming" despite all the real information that's been circulating for months now.

matt said...

Here's a great blurb from the PI

"The economic expansion in this state is nearing historic proportions," said Employment Security Commissioner Karen Lee. "Unemployment is hovering near all-time lows and we've had another month of widespread job growth. Construction is especially booming this year."

wow, isn't this like saying, "Thank God for Global Warming, think how much we'll save on our monthly heating bills!!!"

Isn't there one canary in Washington State's Cole Mine that can overwhelm the hubris?

matt said...

sorry, 'Coal' not 'Cole', lest I be lambasted for exhuberrent typos...

Anonymous said...

I believe that would be "exhuberant" Matt
(wink).

Anonymous said...

5th straight month of declining sales in Southern California. That's our barometer folks.

When you can buy a nice house in San Diego for 3 million, no need to go to Laurelhurst with your bucks.

article title: "End Game of the Cycle in CA"

See the article at: "thehousingbubbleblog"- link on front.

Anonymous said...

Don't they say that when California sneezes Seattle catches the flu. I think we're going to be bed ridden with a 102 degree fever very soon...

Anonymous said...

Ain't that the truth.

Goldeneye977 said...

I am a prospective buyer too, living in Seattle, but I am frustrated at what I am seeing here. I have been waiting for the past 3 years for prices to fall and I really wish I hadn't. What I have seen here makes me come to the uncomfortable conclusion: Prices in Seattle are here to stay. Seattle seems to be fundamentally strong in every way as far as housing is concerned. Too bad for all of us FTBs. I just need to muster up enough courage to buy a house now.

hzg said...

"The median price......jumped 16.4 percent,..... from the first quarter of 2005."

FROM THE FIRST QTR OF 2005 ? Gimmee a break.

When the year over doesn't look so good lets resort to year over two year numbers