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Saturday, May 06, 2006

"Sizzling," "Strong," "Dynamic..." "Crazy"

Now that the local press has spoken, let's check in on yesterday's predictions.

"enthusiastic stories ... cheering on the huge price gains" - check

Elizabeth Rhodes, Seattle Times
When million-dollar homes, traditionally the slowest to sell, start flying out the door, it's a strong signal that the market is sizzling.
Kathy Mulady, Seattle P-I
Kim Dales knew the Laurelhurst house with its waterfront view in a traditional neighborhood, recent remodeling work and a $3.7 million price tag was going to do well on the market.

But even Dales, an associate broker with Windermere Real Estate, was impressed with the flurry of offers — all cash — that followed the first showing of the house last week.

"proclaiming that the idea of a bubble in Seattle has been once and for all dispelled" - check

"I don't think there's a question in Seattle anymore about a bubble market," [Chris Pauling, a Prudential Northwest Realty owner] said. "We'll continue to have good, strong demand."
"Seattle isn't in a bubble, our inventory is awful," [Mike Skahen, owner of Lake & Co. Real Estate] said. "Tell people to put their houses on the market for goodness sakes."

"completely ignore [increasing inventory and decreasing sales]" - ¾ check

The report showed that scant inventory is taking a bite out of sales and helping pump up prices.
For the rest of us, home prices continued their double-digit climb, fueled in part by a small inventory and fewer houses on the market. While prices were up, total sales for the month were down compared with last year.

Okay so the Times did say that sales had "a bite taken out" of them, whatever that means, and the P-I actually explicitly mentioned that sales decreased. But the P-I loses points for the demonstrably false claim of "fewer houses on the market." See for yourself that in King County there were 5,397 houses on the market in April '05, and 5,526 on the market in April '06 — a 2.39% increase. Now if they had said "fewer homes on the market," that would have been accurate, as the "res + condo" inventory was indeed down 1.05%.

I did get 2 out of 3 predictions right about the actual numbers (listings flat, pending sales down 10%, median closing price $408,000), but I am clearly much better at calling what the local reporters are going to spout off than I am at forseeing the numbers themselves. One thing I did not predict however was that both the Times and P-I articles would have such an inordinate focus on the high-end sales. (Seriously, is "Kathy Mulady" really just a pen name of Elizabeth Rhodes or something?)

"The upper end is crazy; it's wild," said Barbara Shikiar, a Windermere agent who handled one of the sales.

The million-dollar market heated up about a month ago, Shikiar says, and now "there are so many people waiting for the right thing."
And apparently for some, price was no object. Bidding wars and all-cash deals invigorated the high-end and luxury home market. Sales of single-family homes costing more than $1 million increased 37 percent, compared with the same time last year.

High-end condominium sales more than doubled during the same period, according to the Northwest Multiple Listing Service.
Could this be an indicator that we are seeing the pre-fall spike that commenter Snoho_Renter theorized?
I think a brief sharp rise in median price will be a precursor to a slowdown, although there is no evidence that the current spike is that precursor. In particular, once affordability finally gets too high, the bottom end of the market will slow first, which will bias the mix of sales towards the higher end.
It certainly looks like that might be exactly what is happening. I do wish we could get some kind of statistics about the actual properties that are being sold, like acreage, square footage, etc. Without such information it's impossible to tell what is really going on here. Increasing inventory and decreasing sales can't continue to result in increasing prices. Basic economics just doesn't work that way.

(Elizabeth Rhodes, Seattle Times, 05.06.2006)
(Kathy Mulady, Seattle P-I, 05.06.2006)


The Tim said...

Sorry this is a bit "late." I do like to sleep on the occasional Saturday. I'll get to the surprisingly even-handed Tacoma News Tribune article later today.

For now, it's time to get me some breakfast.

Anonymous said...

Seattle future homebuyers must be getting dizzy!

Headlines continually contradict economy and housing. Who's fibbing?
1) Saturday's Seattle Times Business Section headline:
"Roaring Job Growth Slows"

Front page Sea. Times, "Even high-end homes get snatched up quickly."
(Um, yeah,to lock in low rates before they rise more...see 10Yr Bond activity Last week)

2) Mike Skahen (Lake & Co Real Estate Broker/owner/NWMLS Director):

From today's Everett Herald Busines Section, Skahen remarks, "I think fears of a bubble in Seattle have vanished with recent news about our strong economy and above average rates of appreciation."
(um, did Mike know the Times was going to run an article contradicting that statement?)


3) Merit Financial of Kirkland, Wa. lets go over 300 staff as Department of Financial Institutions steps in. CFO remarks filing bankruptcy due to misteps and that refinancing has 'slowed.'

4) Consumer spending drops to lowest level in four months according to the Federal Reserve. (Everett Herald Business, Sat. May 6,2006 & Seattle Times Bus. Section)

5) "Job Picture suggests growth is moderating" - AP story Everett Herald, Sat. May 5, 2006)

6) Job picture slows, so DOW takes off to close the week with major gains, anticipating the FED will not raise interest rates at the next meeting.

Strange how job growth moderates,consumer spending decreases, interest rates rise, the DOW takes off and King/Snohomish median prices attain all-time highs as inventory slowly rises, overall sales slow, pending sales slow--and this is May, not early-mid December, when real estate is seasonably slow.

It's like Bagdad Bob :"The Americans are not here, everything's under US GI's walk behind him, small arms fire overheard in the background and M-1 Abrams tear down Sadaam's Statue."

I am LMAO.

Anonymous said...

My friends bought a home in Newcastle recently. They knew they were overpaying but with household income over $150,000. A $600,000 home is managable.

Anonymous said...

Interesting that high-end homes are selling like hotcakes....

especially this interesting little note, that they're paying cash and one of them was from San Diego (equity refugees?)

I think this is what they call in the speculative bubble-cycle as the euphoria of the 'permentaly high plateau'.

And if we've learned anything from the past few years, the rich are getting richer and the poorer are getting poorer.

And what are these jobs they're talking about? Everytime I look at the new numbers its #1 construction #2 restaraunt/sevice... we've been through this 'booming economy' malarky, it was the tech-boom and the hype was what people were making.

There is nothing about right NOW that justifies the Seattle housing bubble, other than speculation and cheap money... absolutely nothing.

KOMO TV 4 said...

What a coincidence. A post on media lies just when it hit me how complicit they are in this whole thing.

Last night, 20/20 ran a very damaging report on the housing market.

In the last 10 minutes of the show, KOMO 4 came on with this announcement:

"Seattle Market still frenzied! Hard to be a buyer when everything gets bid up!! Details at 11 !!!"

Naturally, I stayed tuned. I've been watching the Seattle market for months now, sensing we hit the top last summer and watching sales under asking price. I was curious ,where in Seattle were houses still flying off the market at bidded up prices?

Absolutely flabbergasted to see them zero in on a neighborhood that I am familiar with: Bryant. This is a neighborhood that has consistently been going at or below asking for MONTHS now.

Also very interesting to see that this ploy of scattering TONS of realtor business cards on the kitchen counter is in fact a dirty trick to make it seem that the house has generated more interest than it has.

How do I know it's a trick? Because a friend of mine put a house on the market about a month and 1/2 ago. She and her husband moved out to a rental.

the next weekend they stopped back at her house and she told me:

"You wouldn't believe how much interest there's been! there were at least 50 business cards on the kitchen counter! I'm sure it will sell soon!!"

I thought, huh, maybe this market really IS stronger than it appears. 50 business cards is a LOT.

That was a month and a half ago. They have had NO offers on their house. I fear they have missed the boat on selling.

The "50 business cards" fraud, the lies from Seattle realtors and now even from LOCAL NEWS tells me one thing:

This market is TOAST.

Never, ever does one need to LIE when a product is selling well.

I am disturbed by the complicity between the media and the RE complex.

I am disturbed that a well-established news team would lie to consumers.

Dukes said...

Today's 24 Hr NWMLS #'s

New Listings 680
Back on Market 53
Price Increases 80
Price Reductions 234
Contingents 23
Pendings 344
Solds 244
Expireds 57
Inactives 67

New Listings 680, Price Reductions 234...I don't know how ANYONE can deny that houses are selling for LESS than listig price!

seattle price drop said...

Oh brother, this gets more and more sickening. According to Kathy Mulady of the PI "high end properties are being swooped up". She refers to a Laurelhurst home. My specialty!

Here's is page one of the Laurelhurst mansions that are still available.

WARNING! ACT QUICKLY! These homes in danger of being swooped up!!:

3360 Laurelhurst Dr DOM/260..OP/3,250,000..reduced/3,075,000

4450 Laurel Dr

4317 55th Ave

4125 NE Surber

3911 47th

5051 50th

3802 47th

6667 Windermere


Anonymous said...

I love that the representative mansion-buyer is from San Diego. Reminds me of the anecdotal starter-house buyer in one of the stories recently who turned out to be someone's rich mom.

Where are the stories of regular Seattle families buying property? Hmmm. As long as the magical Microsoft continues to bring out-of-state millionaires, I guess that magical Seattle real estate is golden.

In other news, Warren Buffett is warning of a major real estate downturn. I mean, not that he has the business experience or powers of analysis of our local RE reporters ...

"If you look at the 10Ks that are getting filed [by banks] and compare them just against last year's 10Ks, and look at their balances of 'interest accrued but not paid,' you'll see some very interesting statistics [implying that many homeowners are no longer able to service their current debt]."

PepeDaniels said...

I'm reposting much of this from another thread. For those who found me boring from before - my apologies!

This does appeaer to be the same load of crap that happened in South Florida.

The media down there was as out of the loop as anywhere. I suspect papers feel that it's not a great way to sell papers by telling everyone that their houses are overpriced by 10-20%.

I'm sure the papers love the revenue from all the real estate ads....maybe the papers are land owners themselves as a corporation?

Believe me everyone thought they were Donald Trump in Florida and to some extent they were getting filthy rich if they sold at the right time.

If one goes back and reads the sunsentinel on line you'll see "old" articles (like 3 months ago) raving about the hot South Florida market......right before it's started to avalanche to today's situation.

I know South Florida's not Seattle and every place has it's own set of variables but .....gimme a break, these little houses going for 4K plus?

On threads related to the media and their reporting on the market in Florida you'd see the same things from skeptical bloggers. You couldn't tell whether they'd (the media) lost their ability to reconcile contradictory information or were part of the scam.

If the NYTimes was willing to or unwittingly being pimped out by the pentagon to sell a war where tens of thousands are killed then the Seattle RE market is really chump change despite what people think of it here.

KOMO TV 4 said...


It's not boring. It's very informative to hear that the FLA media, which people up here think of as the WHACKY market, did the exact same thing as they were imploding.

Very illuminating.

Does this mean that in Seattle we are beyond the "denial" stage and full throttle into the "fear" stage.

Isn't that where you'll grasp at any straw to convince yourself "this is not really happening"?

I suspected we were approaching the fear stage last Sept. when a bunch of very sleazy realtors got on the Seattle Craigslist to hype RE on a daily basis.

seattle long term buyer said...

the smell of desperation in the air is amazing...

It's interesting how the 20/20 feature must have made some realtors cut short their dinner and made a frenzy of calls to their favorite newsource...

In fairness to the reporters, that's just what they are... they report...

somebody else writes their news for them... and that somebody seems to have ties to the RE conglomerate... or is a F'Buyer himself..

Anonymous said...

It seems a little unlikely to me that there is some kind of conspiracy afoot. More likely that reporters are lazy and just fit a story to local conventional wisdom rather than really spend the time and energy to investigate the numbers.

Anonymous said...

But isn't somebody somewhere ultimately resposible for checking facts?

I had a couple friends who were newspeople. they were constantly researching this that and the other thing.

Mark Miller was the KOMO reporter last night. Who WROTE that report?

Really, it's not hard at all to get at least SOME facts regarding the RE situation. There are several websites right now that include DOM and price reduction info.

It takes 2 seconds to check that. Anybody who bothered to check would see in an instant that Seattleites no longer have to "rush out and buy a house before the next guy beats you to it".

At best, really sloppy reporting.

At worst, a total cover-up and effort to spread disinformation.

PepeDaniels said...

KOMO TV 4 said...

It's not boring. It's very informative to hear that the FLA media, which people up here think of as........

Thanks Komo

There seem to be two things that are very different here from South Florida (maybe the east coast market in general vs. the west?).

One, salaries are traditionally much higher here than states in the south (more union work/better educated folks).

Two, I don't think there's a condo market here to rival the eastern seaboard in general. I think an increase in condo building and sales is the equivalent of throwing gas on an open fire. Though I think I've seen pieces in the Seattle Times & PI about Ballard's condo market and the building of many new condos there right?

These two things alone may delay or slow the bubble here. It's hard to tell.

Still I think Seattle runs a very real risk of becoming too expensive for people to come to and make a living/live.

Look at what I understand has happened in Fremont. A former hippy zone, it's now too pricey for hippies. I think that may be the hidden cost in the real estate crisis. It takes neighborhoods and communities that grew out of a number of needs and factors and turns them into chips for a poker game only the wealthy can play. It's a shame really.

I'll rant about condos for second. Maybe in limited numbers they aren't a problem. But I think many on the Florida boards would argue that the condo market is the first market for a shaky buyer to get into and the first market to get out of. They are subject to wild swings in value because they are more about what the market's pushing not what people really value. It just adds a layer (growing) of instability into the neighborhood without adding a valuable component to it.

Interestingly, I keep hearing "condo's" mentioned when talk/articles turn to downtown development. These are cheap buildups for firms that seem to go hand in hand with larger constructions. In my opinion, if you start to see an acceleration of condo building you're turning a corner.

Often times people who are trying to scratch their way into owning something shouldn't really be buying anyway but feel compelled to. If you take away enough affordable rental units from people, many of those once responsible renters will start trying to get mortgages they can't afford.

Unfortunately, our government has chosen to turn it's back on sensible lending regulation & fueled the fire by keeping interest rates so low.

PepeDaniels said...

From the Buffet article linked above:I would be surprised if there aren't some significant downward adjustments, especially in the higher end of the housing market.

I'm shocked he didn't mention anything about special exceptions like Seattle! (haha)

Wasn't Seattle recently listed in like the top five most expensive places in the country???

Anonymous wrote:
But isn't somebody somewhere ultimately resposible for checking facts?

If this area does go the way of other overpriced markets the disconnect between facts will become as compelling as anything else you'll see. If you start seeing two headlines on the same page that contradict each other you'll know you've hit Flo-duh levels of analysis.

Anonymous said...

What's funny is how the realtors do truly have the eternal optimist view that makes it seem like the market is roaring. I would hate to be one of the last fools who rushes in to buy at this point in the housing cycle only to lament the poor decision 6-12 months down the road when the entire market comes to a grinding halt.

The $2 trillion plus in ARMs and rising interest are the water that will douse this fire as it still simmers in the NW. The reality is that inventory is growing and sales are slowing...very much. Look at the specific areas when the Times publishes them. In much of the East side (where I track) the sales have dropped more than 20% YOY. Robert Shiller (Yale Economist who accurately predicted demise of stock market) says the only thing that matters is volume, not price, he said price is a lagging indicator and only reflects the few homes that the relatively wealthy could afford. Not the reality of the masses who are currently experiencing record gas prices, slow wage increases, record inflation in Seattle area (where real wages are down almost 10%).

Fortune also called Seattle the most overpriced market in the country, not due to it's absolute prices, but the fact that the economic fundamentals do not support the current prices.

Seattle will definitely commiserate with the other bubble areas once the spring season ends...and it's been very weak with respect to volume.

what's it all about? said...

"When you see 2 headlines on the same page that contradict each other then you'll know you've reached Flo-duh levels of analysis."

Ha! thanks Pepe. I have actually seen that already in the Seattle Times RE section. It DID make me skratch my head and wonder... looks like we're there...

seattle price drop said...

That Tacoma article Tim's got on the top of this page is a breath of fresh air. Take a look.

Anonymous said...

Many news readers and reporters don't know much more than an average person. They go with the flow. If anyone watched Maria Bartiromo's embarassing performance on Jeopardy, you'd know what I am talking about. It is unfair to generalize but for crying out loud, she was the face of CNBC and her knowledge was either limited or simply not there.

seattle price drop said...

I assume you're refering to the interest rate guffaw last week w/ Maria. Here's the difference:

While, yes, it did show her to be not the brightest bulb in the pack, the fact is, there WAS a lot of back & forth about the rates and nobody actually KNOWS where they'll go til May 10. ie. The facts are not there to check.

With the RE situation in Seattle, the facts ARE there to check- and easily available to everyone, reporters included.

Heck, there's a really good chance that half of the media people in Seattle probably personally know somebody by this point who is in the process of being stunned by DOM's or price reductions.

They have GOT to know that it's changed and they've also got to know that they can do some quick research and get some FACTS and a balanced picture.

Or maybe they only do that in Tacoma.

Anonymous said...

The south and thier wages are not the same as south florida and MIAMI.

All the "rich NY'ers" move from NY to south miami to buy up real estate.

It's the same thing that is happening on the west coast with the californians moving up to seattle. Different cost different direction in regards to migration.

I've lived in Seattle, NY, and Florida. Trust me, i've seen it.

seattle long term buyer said...

Part of what fueled the Florida craze were all the people with equity from the northeast (NY, NJ, CT, etc) that cashed out on their outrageously priced homes and bought speculative vacation homes in Miami...

There may not be as many high paying jobs in S. Florida, but there are more people there than here... (census is not accurate as a lot of the retirees move north in the summer and south in the winter)...

I drove down there in the fall and all the rest stops were full of 60-70 y.o. couples going south for the winter...

I agree that Seattle's real estate market is being pushed up by SoCal equity (people planning to retire here/pure speculators)...

As the SoCal market dries up, they are going to cash out and retire early and move elsewhere...

with prices in Seattle the way they are, those SoCal refugees will likely head east rather than north... but some will make it here..

So we will see a bit of activity this summer from the SoCal migration... but in the fall when those people stop buying, who ever ends up holding on to investment property in Seattle will likely be very uneasy and it will all come down to when their ARMS adjust or how much equity they have left...

those who have no equity will not sleep until they've sold their homes...

PepeDaniels said...

Anonymous said:
The south and the wages are not the same as south florida and MIAMI.

Yeah Anonymous, you're right about the differences between South Florida and the south as a whole.

South Florida, in addition to being called "gods waiting room", is also referred to as "the 5th borough" due to so many New Yorkers being there.

Still, wages are widely known as being too low in Florida. Similiar reasons exist for this and many parts of the south. NY, where I'm also from, has a much better history in terms of Unions, workers rights etc (Like Seattle)

Anonymous said...

Good summary of ths situation Long-term-buyer.

Fall is also when I think everyone will acknowledge RE is dead- for the reasons you point out and others.

The long long equity party will finally be over.

time to start dealing with REAL vs. imagined money again.