Remembering The Insanity
Marlow Harris of 360 Digest forwarded me this great example of the kind of story you won't be seeing anymore in the coming years.
We were to present our offer the next evening as one of 10 offers (!). I told my realtor that I'd rather pay too much for the house than lose it. We debated how far over list price we needed to go to win the bidding war. We decided on a strategy to just go in with a blank check and I went to the store to buy little pink running shoes for the soon-to-be-born baby girl as a sweetener to the deal.That story happened in 2003. It's hard to believe that the madness lasted as long as it did, but at least it is finally coming to an end.
We gave them a signed contract with the amount line left blank and told the sellers to fill in whatever amount it would take to get the house.
(Eric, Redfin blog, 05.11.2006)
37 comments:
Lat's hope that buyers get a clue and are just as excited about lowballing as they were about bidding up.
Buyers pushed these prices up. Buyers can take them down again. And they'd be fools not to.
The direction of his market is all in the hands of buyers now.
Let's get it back to: median income, 20% down, 15-30 year mortgage, affordable. And don't stop til you get there.
Total revolt against 40 and 50 year loans, ARM's etc.
Wherever the market lands within those parameters is where it lands.
We do not need the city to build affordable housing.
Once the housing market becomes affordable again, the problem will take of itself.
Do you want your tax dollars to go to subsidizing housing for people priced out of an overpriced market?
Or do you want the market to correct back to the place where it is affordable and allows people to take care of themselves?
My God what a bunch of hidious Jazzbos, its a business deal for crying out loud, never, never listen to the line 'Well, that's what you have to pay' and baby shoes? For Chrissakes!... guess what, you don't 'have to pay' anything if you don't want, unless its the hangman... Walk away...
Sellers can smell desparation a mile away and whatever you do, do not let some one know how desparate you are for whatever it its they're selling, they'll steal you blind...
People have gotten so emotionally wrapped around the axle in the RE mania of Seattle, they've lost all sense to greedy irrational emtion.
Here's the latest from California:
Southland home sales at five-year low, single-digit appreciation
Indicators of market distress are still largely absent. Financing with adjustable-rate mortgages has declined in recent months. Foreclosure activity is edging up from its bottom, but is still low. Down payment sizes are stable, as are flipping rates and non-owner occupied buying activity, DataQuick reported.
Friends of mine put their house on the market about 45 days ago. (Bad timing, I know).
Two realtors gave them estimates of what it would sell for. They need to sell quick as they want out of Seattle.
The first realtor said 435K.
The second said "I'll sell it in a week for 485K".
They went with the second, who they said was a "very good realtor". I assume that the criteria for "good realtor" is whoever says my house is worth more money.
Now they're taking the price down in 5K increments. We'll see how that goes. They're really stressed about this.
I told them they should go with the 435K and may end up either 1) getting stuck with the house or 2) chasing the market down.
Who the heck buys a house that's only been reduced by 5K? The whole thing is just stupid.
Did anyone see this?
Microsoft plans big expansion
Overall, Microsoft said in February that it would spend $1 billion to add room for 12,000 employees in 3.1 million square feet of additional space over the next three years.
Wow..that's a lot of people. I wonder how this will impact housing.
'm
Um, not to be rude, but did you bother to read the rest of the article, or even the rest of the paragraph, where it said But not all of the space is slated for new hires. Part of the goal is to alleviate overcrowding, Gellos said.
And then further down:
"This is really an effort to consolidate and get the whole sales group together in one spot."
...
The company, which employed 61,000 people as of June 2005, has said it expects to add a total of 4,000 to 5,000 employees worldwide this year, 40 percent of them in the United States, and most of those in the Puget Sound region.
That would be in line with the steady but relatively slow growth that Microsoft has experienced since the 2000 tech bust.
Far from the 4,000 per year (12,000 in 3 years) number that your quote implies, it looks more like it will be closer to 1,500 per year. And nothing says that all of those will be people moving in from outside the area.
I'm not saying Microsoft's hirings won't affect real estate, but I don't think it will be a very large effect compared to other factors in the grand scheme of things.
I didn't say they were all new hires...the point is they are hiring at least 4,000 people which is a lot considering the high wages at Microsoft.
If they were laying people off I'd say it'd be a sign of a weak local economy. But they're expanding and hiring which means more $ and greater demand for houses.
That Microsoft article is very interesting.
For the better part of this year I've been hearing "Microsoft's hiring! 10,000 new jobs coming to Seattle!!"
It's usually said in the context of "that's why RE will keep appreciating here while the rest of the country tanks".
READ this article folks! In it, Microsoft repeatedly says it doesn't have firm plans for new hires AND the Bellevue RE agents are the one who are saying "Microsoft's hiring!!!"
that on top of what Tim outlined above.
Great article! I am so glad to finally know what's behind this "Microsoft's hiring" gossip that's been circulating in Seattle. It really does look like it's been merely a way to prop the RE market.
Spread by realtors! Sheesh! Who would've thunk it?
Anyway, as we learned from last Sundays Seattle Times article, even professionals in Seattle don't make enough to afford a home here unless they take out toxic mortgages, buy with friends, get a crapper in the CD, and take on boarders.
And it looks like Microsoft's not planning any new hires til later in 2007. I think by that time buyers will have well and truly had it with going out on such a shaky limb to by a piece of crap home for 400K.
They just may be demanding some VALUE for their money by then.
P.S. - Wages at Microsoft aren't all that high. Certainly not high enough to justify the real estate price insanity for the whole Seattle area.
You know, I'm collecting enough information here maybe I'll make a whole post on the "Microsoft carries Seattle real estate" myth.
meshugy - I hear McDonald's is hiring too. I wonder what effect that will have on the real estate market?
Come on. Even if Microsoft is hiring 4,000 new people per year (pure bunk) you are discounting a few things.
1. Not all of the new Puget Sound hires will come from outside the area. Probably a fair majority will already reside here.
2. Microsoft culls the bottom part of the herd and a good number of Microsofties get ticked off and leave the company.
What will the effect of all that hiring and all those great (yeah right) Microsoft salaries be on the Real Estate market? Very slight.
In addition to all that was said about MS; I used to work for them for 5 years in L.A. They are just as interested in "consolidating" functions that can be into tax free Nevada via their slightly lesser-known brother "Microsoft Licensing Corp" based out of Reno Nevada. Go to Reno, and all the talk about town with the realtors is "All the new Microsoft Jobs".
Duh...
You're right. Microsoft salaries are NOT that high. Frankly, I'm not even sure they'd qualify as "professional" level.
I think people harken back to the good ol' days of the Microsoft stocks cash in when a lot of employees got rich over night and started this whole mess.
I know a lot of people who cashed out. They were very wealthy 10 years ago. Not anymore.
And with MS stocks doing as poorly as they have been, not looking for a repeat of the late 90's tech millionares.
By the way, George Soros sold a ton of his MS stock today.
Very interesting tidbit, John Doe. Thankyou.
Great link to the MS wages story Tim.
10 years ago: stock options= rich
5 years ago: constant back and forth about "temp hiring"= way to keep salaries down
this year= wages haven't risen beyond 2004 levels for most employees.
I'm so glad we're finally getting to the bottom of this MS BS.
I'm in tech. I'm also going to chime in with the building chorus -- Microsoft is lackluster, in terms of tech-sector pay.
There's a reason for this: Microsoft has cachet, and it's big enough to guarantee a steady income, for a long time. They don't pay glamorously high wages, because they don't need to.
Sure, once upon a time, options made a lot of Microsofties rich. Those days are over. Today, if you want to chase the big money, you work at a startup, and assume some risk.
Regardless of Microsoft, it looks like the job situation in Washington is very good right now.
State’s jobless rate hovers near all-time lows
“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.”
As I said before, Meshugy is either a troll or a scared homeowner… Deep down, he knows and feels that the party is ending… But he is trying desperately to hang on to every tiny bits of “good” news, no matter how much it is distorted or twisted by the realtors in order reassure himself that the boom can go on forever.
Response to Meshugy:
The new statewide spree of hiring, led by construction, marked the 33rd straight month of employment increases. At this level, economists say the state is enjoying full employment.
Construction hiring led the way. What a coincidence. I get how it works now! We just hire more construction workers to come in and build more houses, and those construction workers will buy the houses and build more, thus requiring more construction workers who will buy more houses and build more houses! It's a true virtuous cycle. And it will never end!
Meshugy - Ameriquest, WA Mutual, and other mortgage companies are laying off workers in droves. I wonder if that will impact housing demand?
Just saw an interview on Worldwide Exchange with a Brit, David Morrison of Man Spread Trading.
He was talking about how foreigners have basically lost confidence in the US economy.
He said: "Us consumer spending was about the only thing holding the econmoy together. And most of the spending was based on people extracting equity from their homes. Now that the housing party is over, he expects little growth out of the US. He also said that extracting equity from houses was not a solid growth strategy for an economy anyway".
The American interviewer looked speechless and shocked. And she's not really a complete dummy, I've seen her many times before.
It looks like there are a LOT of Americans who just have no clue that we have produced nothing for the past several years and the whole "jobless recovery" was based on selling overpriced houses.
It was interesting to hear sby come out and voice these facts in public, on TV.
Been waiting for months for sby. to mention the elephant in the room.
It is pretty scary to me the implication that your housing market is perceived as depending on Microsoft.
Looks like we're in for a rough ride:
Housing slowdown to be widely felt
Welcome to the party, Meshugy.
Or in other words: duh.
Eric- it was in fact newly minted MS millionares who kicked it off in the 90's. Everybody and their brother took over from there. The frenzy was ON.
Other parts of WA started later, along with other parts of the country, and no, that had NOTHING to do with MS.
http://www.dqnews.com/ZIPWA.shtm
Gives sales and volume price for may areas in Puget Sound region. It is interesting to compare volume with price, because a real decline would have both lower prices and higher volume, a significant rise would have good volume coupled with increasing prices, and low volume would imply that buyers and sellers just weren't yet agreeing as to market values.
And, may I say, those of you who think that realtors set market values have never worked as realtors. Many sellers just pick the realtor who suggests the highest price. I, myself, avoid setting prices. I just give detailed market data.
And what, pray tell, is a real market price, if not the price at which something is actually sold on an open and free market?
I see lots of talk about real value, with absolutly no definition thereof, except some vague but deeply held emotion.
Hey Mr. Dunn-
How's this for "real value": about the price of renting the same property.
"I told my realtor I'd rather pay too much for the house than lose it"
See, Mr. Dunn, even that silly buyer knew he was paying too much.
Those days will soon be over. We're gonna save the American economy by putting an end to this nonsense.
Determining market value for a home is like trying to figure out a reasonable P/E for Google. There is no set range for P/E. Is 10 too low? Is 80 too high? There are many other variables involved in valuation.
As far as Microsoft's "lackluster" pay is concerned, $100k can get a $600k home and that's not counting the spouse's income.
"Mr. Dunn, realtor":
Aside from the fact that the real estate market is neither "open" nor "free," I would suggest that it is very easy to find the "real" value of a home: it is, very simply put, the value you derive from living there. Everything else is speculation.
From this perspective, Anon 10:06 is exactly correct -- the rental value of a property is a very good measurement of its "real" worth. No vague emotions required.
Anonymous 10:25:
I can't speak for non-technical employees, but starting programmers at Microsoft don't make anywhere near $100k per year. Try half of that number.
Here's an interetsing report:
State home sales flat, prices surge
Looks like King County took the biggest hit in sales last quarter (down 10%). But the state as a whole only dipped .3%
Crellin said the raising of interest rates by the Federal Reserve Board is the main reason for the flat statewide market.
But he cautioned that the market appears flat only in comparison to the superheated housing sales of recent years.
``The market remains very strong,'' he said, especially compared to the rest of the country.
See:
http://money.cnn.com/2006/05/03/news/economy/realestateguide_fortune/index.htm
Below is a cut and paste from a popup on the above page. Fortune and CNN consider some markets overpriced by as much as 30%--places like L.A., Boston, New York, etc.
Seattle-Tacoma, WA
Average home price: $311.0
Fair value estimate: $286.9
Percent difference: 8%
Rating: Fair Value
Mr. Dunn,
#1 - I have covered the "fair value" assessment, here.
#2 - Spamming over 20 of my posts with the same comment is unacceptable. You are now no longer welcome here.
This happened in 2003? No way, there was no way this could have happened in 2003. You guys are so gullible is the fact that why most of you think the same way.
No matter how many MS is going to hire, their salary isn't going to supprot the price ... 5 years ago, a new hire makes $70K. Five years later, the MS niew entry level salary is $75K. I know many MS employees have been working her efor 5 years, they make < $75K now.
Does McDonald hires 1000000K employees support a median home price >400K?
Re: Meshugy's link: "State home sales flat. prices surge"
Check it out folks. It's a YOY "surge".
Totally irrelevant when coming off the top of a bubble period.
Here's why, just as an example:
First quarter '06 RE:
Median US home price: 217,900K
gain from one year ago: + 10.3 %
loss from 3 months ago: - 3 %
YOY are irrelevant at the end of a bubble.
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