The Tim Is On Non-Vacation
Speaking of going to California... that's just what I'm doing (you think I get up at 4:00 AM for fun?). I shan't return until Sunday night, so please feel free to use this post as an open discussion to discuss any stories I miss while I'm gone. If I somehow manage to find a usable computer with a descent internet connection I may try to make a post or two, but don't bet on it.
Try to be nice to each other while I'm gone. Seriously, there's no reason to be rude. There is such a thing as a friendly disagreement.
32 comments:
Like I've always said, when places like Spokane and Boise see a 'rise' in urban-village projects and condo-mania, this "Boom" (if there really ever was one...) is done folks.
http://www.idahostatesman.com/apps/pbcs.dll/article?AID=/20060616/NEWS02/606160359
The Barbarians are at the Gates and they're hungry for correction. Soon they'll cross the Rubicon and be pounding on the ironclad gates of the 98107
Who says they aren't making any more land?
Prime property to be available -- with great view
I really hope the don't ruin Discovery Park....I went there the first day I moved to Seattle. I couldn't believe a park like that was in the middle of the city!
CNBC tonight, Thursday, 8 PM Eastern (5 PM Pacific?), one hour special:
"Real Estate Survival Guide"
"Navigating the downturn, What Now?"
Here's how the guy announced it:
"Will your house EVER be worth more than it is right now- even if you live to be 2 or 300 years old?" (!!!)
Now THAT was funny!
Matt- I agree, I knew the end was near when I went to Ustate NY a couple years ago and they were attempting to inflate RE prices and sell to people from NYC.
A previously 60K brownstone on the market for 300K- looks CHEAP to a New Yorker!
The money drain that some of these previously rich people are going to suffer because they didn't thoroughly understand the local RE scene is going to be impressive.
Hope they like living in their new town! They could be there for a good long while . Unless they can afford to sell at a loss of course.
I'm starting to look at it as a transfer of wealth from rich to poor.
Here's a trully intersting development:
Home for sale ads that give a monthly payment only- NO SIGN of how much the home costs or type of loan needed to GET the monthly payment that is advertised.
Check out "Homes and Land of Seattle and Snohomish County", vol. 27,# 24.,page 31.
It's in your grocery store this week.
Monthly payment only ads brought to you by Keller Williams Realty.
Note: this practise is illegal in some states, apparently legal in WA.
Maybe it's practises like this that's pushing up WA foreclosures?
I really hope the don't ruin Discovery Park....
Lord, taking prime land like that and turning it into a homeless shelter or public housing would be a shame. But this is Seattle.
wtf?
does this mean someone bought this pre-sale and is trying to get a renter *now*???
http://seattle.craigslist.org/see/apa/174389973.html
I just saw the CNBC special on Real Estate.
They seemed to be saying that, outside of markets like Cinncinatti that haven't appreciated in the first place, real estate would be going down everywhere in the US.
Is this the message that others took away from that show?
Re: CNBC special -
Schiller said prices are going down in most US cities that have epxerienced significant appreciation - up to 40%. The other "guests" were all real estate types who squirmed, sweated, and got very defensive. It was unfcomfortable just watching them. CNBC did a good job painting a negative picture of the over-inflated markets and the slow down now in full swing in those markets. Anyone who doesn't follow this much who saw the special will definitely have got the message the party's over... Even the real estate types had to admit it's time for sellers to lower their prices to clear the increasing inventory.
That special was pretty amazing. Yes, Anon, the heat is definitely on.
Even Suze Orman, an RE bull til a few months back, said RE was going to be "bad".
Even David Lereah, the biggest RE bull of the century, conceded that the market was not merely "flattening", but there would be price drops.
The only person who was even remotely optomistic, was somebody I've never heard of from Century 21. But not even he was rah rah over RE.
This is a clear signal to people who need or want to preserve equity: now's the time to sell.
Hey Meshugy.
What do you think of the new McMansions going in on the 7300 block of 12th Ave NW? I walk past them on my morning walk to work each day. Garish, built to the lot lines, with a huge mouth of a garage to front the sidewalk. I've seen this design in numerous places in upper Ballard / Crown Hill.
Priced at $875K. What a steal!
Hi Christian...my stomping ground is mostly west of 15th, so I haven't seen the McMansions you speak of. However, I can easily imagine what they're like...at least a dozen have been built in the last year in my area. Always the same story...small 1500 sq ft bungalow gets demolished (worth 300K-400K) and replaced with a 4000 sq ft McMansion (worth 800K to 1 mil. Every single one has sold before being finished...they don't even bother to put a for sale sign up.
A glorified 800 sq ft shack behind me that was a rental just sold for 340K. It sold in two days and went for 10K over asking...they must have paid cash because it was on the tax records within days. Probably a developer...and they're already ripping up the front lawn. I think it's a forgone conclusion that I'll have gleaming cedar shake, granite topped McMansion in my own back yard! Good thing my view of Rainier is in the other direction....
The more troubling aspect of all this McMansion building is that it's eliminating affordable single family homes. They're ripping out smaller, more affordable homes and replacing them with million dollar ones. Usually the original bungalows are neglected, but could easily be remodeled and sold for less then half of what these McMansions go for. Another related phenomenon is the number of houses that are having additions put on. Seems like 1 out of three houses in Ballard has, or is in the process of having an addition put on. Effectively increasing their worth, usually into the 500K to 600K range. So it seems that prices are not only be pushed up by a shortage of houses for sale...they're being pushed up even more by the total lack of smaller, more affordable construction. Pretty much every single family home that is new is totally huge...no one is building anything smaller then 2000 sq ft...actually I don't think they're even building anything smaller the 3000 sq ft!
The more troubling aspect of all this McMansion building is that it's eliminating affordable single family homes. They're ripping out smaller, more affordable homes
Just like the large, older homes that were cut up into 3 to 8 apartments, these places will be back on the market within a few years as 'affordable' housing.
Very true. It's happened over and over again, from Victorian times to present.
Those McMansions will make great triplexes one day. I'm not worried about 'em.
In the old days lenders used a "28/36" ratio, meaning:
(a) Your monthly mortgage, taxes and home insurance should not exceed 28% of your gross monthly income.
(b) You monthly debt, including your mortgage should not exceed 36% of your monthly gross income.
If you go to Fannie Mae's affordability calculator (http://www.mortgagecontent.net/scApplication/
fanniemae/affordabilityDispatcher.do) the percentage is now a "variable/50" ratio, meaning:
(a) Your monthly debt, including your mortgage (incl. taxes & insur.) should not exceed 50% of your monthly gross income.
(b) Your monthly mortgage, taxes and home insurance should not exceed 50% less the percent represented by your non-home debt.
I ran this scenario through the Fannie Mae calculator:
* I set the income to $58762, which is the median household income in King County for current homeowners.
* I set the monthly extra debt to $300.00 (for a car pmt, credit cards or whatever).
* I assumed $30K was available for a downpayment - and figured that would be 10% (since the calculator required a % here for it to be applied as a down pmt).
*I assumed closing costs of 2%.
*I assumed monthly taxes and insurance costs would equal 0.25% of the sales price.
* I asked for interest rates from 6% to 7%.
RESULT: The price this/these buyers could "afford" with a standard loan ran from $272,090.81 at 6% to $253,120.53 at 7%.
ANALYSIS: The purchase prices reflect the high end of what people "can afford" (given the high debt/income ratios Fannie Mae is using, the down pmt amt, the low "other" monthly debt amt). I believe median prices of homes will drop to these levels, and even lower if interest rates rise -- barring a significant increase in median household income. Right now, per Housing Tracker, the median home price in the Seattle area is $439,900, which means the median price would need to drop approximately 38% to reach the $272K level. I believe that is, at a minimum, what we are in store for. Hang on.
Nice to see Tim's got the site back up.
Here's some news from the UCLA Anderson Report:
'Flat home prices' predicted
"The bottom line is when you look down the California history and the history of other states, you only see a significant decline in home price ... in recessions. And it has to be a fairly big recession," Ratcliff said. "So since I'm not looking for a 1990s-style recession any time in the next two years, I'm not predicting that kind of decline in home prices."
In short, to significantly push down home prices, California's economy would have to tank, losing many jobs. That's unlikely to happen, the study says.
That's good news for homeowners and bad news for aspiring home buyers.
"There definitely is this contingent that secretly hopes that home prices are going to tank so they can afford to buy a home," Ratcliff said. "And that's just not going to happen."
Sorry, here's the correct link:
'Flat home prices' predicted
"There definitely is this contingent that secretly hopes that home prices are going to tank so they can afford to buy a home," Ratcliff said. "And that's just not going to happen."
Well, well, well....
If that just doesn't say it all.
I'm curious if Ratcliff has ANY metrics to justify his prediction. I doubt he has anything other than some SWAG and a boatload of wishful thinking to justify his prediction.
Remember when tech stocks would never go down? We were told they would just taper off and allow earnings to catch up. Anyone who believed that in '00-01 found out the hard way that was not true.
I would also say that there is a larger "contingent" that believes there will be no significant rollback, because their economic livlihood depends on high and unsustainable RE prices.
Real Estate will tank. Bank on it.
Anybody out looking at houses over the weekend? Seemed like more houses and fewer buyers. Several agents said things were "changing." There seemed to be at least one Wedgwood listing that is going to get bid up, but elsewhere things looked downright slow. Just curious if anyone else had anecdotally similar experiences. At the very least, it seems like inventory is piling up.
Also -- I was really enjoying that series of articles on the market that Gregory Wharton was blogging over at the PI real estate section. It's taking forever for him to finish it, though. Hope he gets around to posting the conclusion soon. If you haven't checked it out, I recommend it.
Sign me up, that's a super deal. It's almost more expensive *not* to buy.
t.s.,
I haven't noticed any market distress yet in Ballard. I just checked the MLS for Ballard and it's bone dry. There are very few new houses up for sale.
Here are some sales from the last two weeks (first # is asking, second is the selling price)
6724 Earl Ave NW 390,000 410,000
8343 23rd Ave NW 450,000 450,000
7736 17 Ave NW 492,500 492,500
3028 NW 66th St 429,000 457,500
All went at, or above asking. Business as usual....
New home sales surged in May
--Increase surprised economists who had predicted a slowdown
http://www.msnbc.msn.com/id/13554596/
Thoughts?
Re new homes sales surged in May:
I haven't read the article you sight. But I've been hearing about it all morning on CNBC.
Did the article mention that new home "sales" do not subtract the amount of cancellations?
And that the amount of cancellations are at 30%?
IMO that's great background info that puts the statisics in perspective.
But the foreground info is a whopper of a reason for the Fed to continue raising rates.
Am praying for a .50 hike in rates on Thursday.
Talk now of 6% by winter.
Thanks 'shug. How do you get those closing figures so quickly after sale? When you say last two weeks, I assume you mean when the paperwork closed, which is at least a couple of weeks from the offer date, right? I'm just trying to figure out if your figures actually refer to last month's market conditions as opposed to this month.
I looked at a few this weekend in Ballard and didn't think things seemed crazy at all. One house seemed like a decent deal at $450K and there hadn't been any preinspects lined up by Saturday afternoon. . . just my random observations, but it was very odd to have realtors volunteer that the market has started slowing down in the last two weeks. It surprised me.
p.s. Anon - the Fed does not set mortgage rates.
Here are the listing and sold dates for those houses:
5/5/2006 6/19/2006
5/15/2006 6/21/2006
5/16/2006 6/19/2006
5/17/2006 6/8/2006
The thing is, the excise tax records "sold date" is the closing date. Unless a house was paid for in cash, usually it takes 2-4 weeks after a sale for the house to close. All of these houses were off the MLS a week after they were listed. But didn't close till a month or so later.
Do you have an address or MLS# for the Ballard house for $450K?
Regarding May new home sales - many recent articles on patrick's site document the fact that new home builders are massively discounting and/or offering huge incentives to keep sales up. Also, one article today shows a link between incresed new home sales and cancellations from other existing homes as buyers realize that they're over paying for a resale when when can get a screaming deal on a discounted new home. Finally, new home sales don't account for cancellations as indicated above. Net result - hard to see it as a sign of stength...
My friends were selling their Edmonds/Lynnwood home FSBO, then gave it to a realtor who listed it for $18K less. Last week it was showing a "pending" sale. Now it back to "active." Tomorrow I may find out the scoop, but I've thought the home was originally overpriced by $30-50K.
I'm sure they are disappointed! Hopefully, they can get it priced right and unload it before the end up chasing the market down for months (like my parents in Florida).
Fellow bloggers, I feel quite certain we are at the crest.
Good luck to your friends.
Friends of mine got out by the skin of their teeth by reducing 40K.
That was several weeks ago though and it does feel like things are speeding up.
Other friends are "still making up their minds when to put house on market". Dawdling.
seattle price drop
Thanks for the feedback. I think the situations with our friends are very telling.
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Here's a little insight into the future - from the Houston Chronical:
Forclosure Troubles Ahead
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