June NWMLS: Demand Down, Supply Up
June NWMLS numbers are out (pdf). Short story: King County median home sold for $434,950, which was 16% more than June 2005 (compared to 15.51% May '05 - May '06), and 1.64% more than May 2006. Active listings continued their climb, up 17.17% from June 2006, while pending sales continued their slide, down 10.14% from a year prior.
Look for the rah, rah, real estate stories in all your favorite local news outlets in 3...2...1...
(NWMLS, 07.06.2006)
58 comments:
In a previous thread, someone said...
"In fact, I'm going to correct that percentage and say 100% of the people coming here want to buy once it makes sense to do so."
Wrong! I have never really wanted to buy a house. I like being a renter. And no, I am not a deadbeat -- I'm 43 years old, single, and gainfully employed. And I like someone else having to worry about the plumbing, the replacement windows, the landscaping, etc.
I read this blog (and TheHousingBuggle.com) because I want to know about the larger economic picture. When RE crashes, lots of other sectors will be affected. I want information and opinions about good places to rent, where I should look for my next better-paying job, etc.
I do not want to buy a house or a condo. I want to move up to a better rental apartment. "Rah, rah, real estate stories" have no effect on my non-existent buying decisions; they're just more useful information about the region as a whole.
--SeattleSis
Seattle Price Drop had been reporting some weakness in Laurelhurst (area 700). The June MLS # show a whopping MOM $19,750K gain in Laurehurst! Wow...that's good for even YOY..but that's MOM. Probably the biggest jump in all of King County.
Laurelhurst Median Prices:
May 06: $430,000
Jun 06: $449,750
Jun 05: $406,00
YOY price gain is $43,750. Seems to be performing very well. I should have kept my condo over there...I probably could have gotten another 50K for it this year!
Sorry...Laurelhurst is area 710. median #s are right though.
Madrona/Leschi (area 390) wins the hottest hood in Seattle award: YOY appreciation was 28.3%! a nearly 100K increase in median price from 349K to 449K.
The Eastside also rocked with a 24.99% YOY median increase of over 100K from 412K to 515K. The MOM increase was also huge. The May 06 median for the Eastside was 484K...so that's a 31K increase in one month (from 484K to 515K).
It's still looking like Seattle is a feast for speculators...if you can turn a house around for 30K in one month! When will this boom run out of steam?
More homes for sale in King County, but prices keep climbing
Rising home prices come on top of rising mortgage interest rates — a double whammy for homebuyers. Mortgage-money provider Freddie Mac reported today that 30-year fixed-rate mortgages now average 6.79 percent — the highest rate since May 2002. Last year at this time the rate was 5.62 percent.
This what I find really amazing, the double whammy of rising interest rates and prices. In most cases prices are over 50K higher, but the higher interest rates just kill you. And they're not going back down for decades. Your average median home buyer has to pay over $500 more per month then if they had bought the same house last year. Amazing...
Here in Kitsap county, there are for sale signs for as far as the eye can see. However, about half of those have "price reduced" planted on them. I unfortunately am entering as a seller into this market as I need to unload my property before a pending move and the prices drop any further.
Wow, who would've thunk it? an MLS post dripping with Meshugy goo... stunning...
Wow, who would've thunk it? an MLS post dripping with Meshugy goo... stunning...
Hey Dukes...where have you been?
You've been posting those #s since Jan...why haven't we seen any reduction in prices? All we've seen is rapid appreciation, which tells me the stats you're getting don't mean much.
Seattle Median Price
Jan 06: $376,995
June 06: $415,000
If there are so many desperate sellers, why has the median price gone up 40K in 6 months?
Tim...didn't you say "be nice?"
Thanks for checking in with the numbers Dukes- we've missed your reports!
I've been noticing alarming upticks in price reduceds in some zips- up to 50%- and it's interesting to see that it's apparently spreading out a bit further than the areas I check on.
To the Kitsap County seller: Good luck unloading that house! Fortunately for you, there are still a lot of buyers out there with their heads in the sand about this.
So you've got a window of opportunity here before everyone on the planet realizes RE is toast.
If you could somehow filter out all posts on this blog except Meshugy's, that'd go a long way towards getting your house sold!
At some point though, as they filter into main stream media, people will start to hear reports such as the one yesterday in the Wall Street Journal.
At that point, it'll get really hard to sell a home at anywhere near these dream prices.
The super smart money's already out. Last chance for the plain old smart money to leave this get rich quick scheme behind.
Wishful thinkers get burned. Nothing new about that.
Good luck selling your house!
Dukes-
While you were gone, somebody figured out a way to go by M's posts easily. Just click on "said" after his name and his comments disappear.
Although it can be fun to read the posts of people trying to reason with our resident troll, if you can't take it/him, just blot him out.
S crow had another great post on the Housing Bubble blog today about trouble at his office in Snoho.
People (and their loan officers!) insisting that they didn't owe as much as their neg am loan stated when they went to sell their home.
Very wierd. To me, it sounded as though even the loan officer did not understand the loans they were handing out.
Not too hard to imagine I guess.
Clicking on "said" works like a charm.
And if you want a laugh, you can always not click.
Meshugy,
I've stood up for you in the past, but I'm having a real hard time interpreting your recent string of posts as anything other than intentional antagonism. Seriously:
The June MLS # show a whopping MOM $19,750K gain in Laurehurst!
...
I should have kept my condo over there...I probably could have gotten another 50K for it this year!
...
In most cases prices are over 50K higher, but the higher interest rates just kill you. And they're not going back down for decades. Your average median home buyer has to pay over $500 more per month then if they had bought the same house last year. Amazing...
...
All we've seen is rapid appreciation...
If that's not throwing gasoline on a fire I don't know what is.
I prefer that the conversation here be on topic and civil, and I still reserve the right to delete hateful or profanity-laden posts, but you're on your own on this one, dude.
Reap what you sow.
Price drop and Dukes,
Hey guys...I think it's cool that you guys have the guts to put your money where you mouth is and wait out the market. That's an admirable quality...
But, you also have to admit we simply aren't seeing any real weakness in the market yet. Just fooling yourself with the price reduction listings on zip realty isn't going to change the fact that prices are appreciating quickly in Seattle and King County. Just look at the MLS records...only one area of King County shows a negative YOY price...and that's area 300 with a 1.97% drop. Considering it 's the worst part of KC, I'm not too worried.
Every other area is showing big gains..most are double digit increases and many are over 20% higher then last year. It's undeniable, houses are getting more expensive at an alarming rate.
The big crash you foresee may come...if that happens, I will congratulate you on your foresight and perseverance. However, you've been totally wrong so far....since you guys started posting in Jan., telling us the market was crashing as we speak, we've seen nothing but big gains.
Well said, dukes.
I would like to add that it's very easy to have a rising median sale price in a declining market, if the low-end falls before the high-end:
$100k, $200k, $300k, $400k:
median = $250k
$300k, $400k:
median = $350k
Of course, we can't know what's *really* going on until MLS releases more granular data....
If that's not throwing gasoline on a fire I don't know what is.
Why is commenting on the market throwing gasoline on the fire? Unless everyone is in such denial they don't want to talk about what is really going on.
I didn't make those #s up...it's all in the MLS.
You are the worst kind of shitty troll Meshugy, because you feign interest and concern about a bubble in Seattle, but you are so chicken hearted as to your fear that you mask it by hunting for perversely positive articles. You are scared Meshugy, face it, otherwise you wouldn't get your twisted little thrills by coming here and posting realtorspeak all the time.
immature posts rife with foul language and personal insults aren't throwing gasoline to the fire!!???
"Commenting on the market" is in and of itself not throwing gasoline on the fire.
Throwing gasoline on the fire is commenting on the market using emotionally-charged words like "whopping," "kill," and "amazing," with a very liberal dose of exclamation points.
Your 02:18:51 post is a good example of commenting on the market without resorting to a highly antagonistic tone. Most of your posts have been level-headed and reasonable, just like that one. Your earlier posts in this thread however, were anything but.
Meshugy-
I have not responded to you in months because I think you are a trully bizarre person and worth ignoring.
But, just to set the record straight, nobody was talking about the market "crashing " last winter.
I believe the term used was "turning".
Or maybe some even used "heading for a crash".
The fact that you do not understand the difference between "turning" and "crashing" goes a long way towards explaining your bizarre behavior.
So that's it for now, I'll be ignoring you again.
Maybe I'll say "howdy" when the market crashes.
Last winter, it was hard to determine "crash or downturn"?
The last few weeks the signs are increasingly pointing towards outright crash.
So, til the market crashes- Adieu
Throwing gasoline on the fire is commenting on the market using emotionally-charged words like "whopping," "kill," and "amazing," with a very liberal dose of exclamation points.
Still seems like a double standard...should I use terms like "bullshit news" and "shitty troll " instead?
Again and again, please forgive Mesh. His behavior is understandable. His lizard brain can only see a few blocks from his house and read a few “selective” numbers from the NWMLS and fantasize all kinds of pipe dream. It’s IMPOSSIBLE for him to comprehend the macro picture.
blatantly antagonistic
That's pretty funny coming from you Dukes....
No double standard here. I haven't deleted anyone's posts, and I responded to you because you called me out. Yeah, Dukes' post is antagonistic as well, but guess what he was responding to... one of your posts!
I've always said that there's only two kinds of comments I'll delete: spam, and excessive profanity / hateful bile. While I don't particularly appreciate any profanity, I'm not going to delete a post comment for using s__t twice—especially not when it's a response to posts that seem designed to instigate just such a response.
That's all I have to say on the matter.
and read a few “selective” numbers from the NWMLS
Like the whole column that says "% Chg price vs yr ago." and only 1 out of 35 has a negative #. Gee...that's really selective.
a response to posts that seem designed to instigate just such a response.
That's not the case...it's only seen that way if you don't want to acknowledge current gains in the market. The gains we've seen in June were huge...I don't see why commenting on it should deemed as instigating a fight. Unless you're overly sensitive to begin with....which is obviously the case.
If the #s were negative I'd comment on it as well....if they were hugely negative, I'd say so. But they're not.
Anyway, I still think you're doing a great job with this site Tim. I'll try not to use any exclamation points in the future. Keep up the good work!
Damn, I did it again...
The last few weeks the signs are increasingly pointing towards outright crash.
So, til the market crashes- Adieu
Oh c'mon. You can't get out now! Your chance is imminent to start gloating :-) Lamer!
Look - I'm not bullish on real estate like meshugy. I'd say I'm neutral - I'd guess that prices in Seattle will trade sideways at the low-end and drop at the high-end over the next 2-5 years. I would agree that real estate is a highly risky "investment" to get into right now. Despite that I don't feel threatened by someone like meshugy or that everyone who has bought a home since 2002 is a moron.
I look at meshugy as an optimistic RE watcher who keeps posting statistics that favor his arguments. He's not making up the statistics, even if he is ignoring others. And there is at least a slight hint of reality ("when will this boom end") in his postings, if you look for it.
To me the conflicting statistics (rising pendings, rising prices, bearish sentiment, rising rates, etc.) are all pieces of conflicting information. I can't see taking all the info and simply concluding "crash here, crash everywhere, crash now or "boom forever everywhere" arguments. So deeper analysis is warranted.
So I choose to read this blog, read http://bubblinfo.com, read the paper and even read what Gregory Wharton wrote at the PI. The latter seemed especially provacative. I'm not sure I agreed with all of it, but I didn't just dismiss it like many on this board did.
The trend of of dismissing outright things that disagree with one's conclusions is certainly a characteristic shared by both RE bulls and bears right now.
I'm not bullish on real estate like meshugy.
I'm not bullish, the market is. I believe we are headed for a slowdown. I think we'll return to 3-6% appreciation...or at worst flat prices which would mean a slight reduction in real prices overtime.
I actually think it's pretty stupid to buy a house now....last year was good because the prices were lower and the interest rates were lower. Now it's a tougher choice....I probably wouldn't do it.
see what I mean?
Dukes, I've always said the market would slow down and possibly go flat. Go back and look through my posts...
That's the irnony of your attacks on me...I actually agree with you on many issues!
didier,
You're right about the definition of the median, but remember that to take the median of an even number values, you must average the middle two. That's what I did in my examples.
Otherwise, I agree with what you said. I think that the low-end market is probably stagnating, and that the majority of the sales are taking place on expensive properties. It is ominous that the median is rising so quickly, because the statistical property that makes the median attractive in these situations is that it is insensitive to extreme values.
The NWMLS doesn't want to do it, but it would be very interesting to go to the King County public records site, and get information on closing prices for the past several months. I bet we'd see a bell curve that is shifting rapidly to the right.
Clarification on previous post:
The interesting plot would be the histogram of sales prices, versus the histogram of asking prices.
If the bell curve of both shifts to the right (more expensive) then it's just a case of a rising tide. If, on the other hand, the sales histogram shifts to the right, and the asking price histogram stays fixed, then we know that the Forces of Economic Evil are at work....
If you believe that a bubble exists in Seattle (which I do), then this data certainly isn't clearly supporting it.
The only thing a pro-bubbler can take from the data is that inventories are up, YoY and sales are down YoY. The market activity is cooling.
YoY prices advancing could mean that of the fewer buyers out there, they are still willing to pay inflated prices for homes (perhaps with a suicide loan the locked in previously?)
I wish we could see more data - like price/sq.ft. or individuals sales.
"First they ignore you, then they ridicule you, then they fight you, then you win."
-- Mahatma Gandhi
WOW! 'shug and dukes locked in a steel cage match! My money is on dukes (anyone who is a regular reader of Fleckenstein, is going to win).
Meshugy, taking a snapshot of today, or looking back six months does not predict the future. Your analysis of the housing market in Seattle reads exactly like the "bull" analysis of stocks over the past 8 years. About 90% of bull-analysis consists of some varient on the "prices are moving up; get on board before it's too late" theme.
Contemporary bulls are notorious for driving full speed down the highway, with the rear-view mirror as thier guide.
Bears can't look to price action for justification, so they look at fundamentals. Your average bear is far more informed than your garden variety bull. Bears concentrate on sustainability, fundamentals, and economic imbalance, so they can spot upcoming economic dislocations.
Trust me. The Seattle/Ballard market is setting itself up for a whopper of a fall. One day it will be good, and the next day, we will be wondering what happened to all the buyers.
According to The Tim, 38% of all growth in Washington comes from x-Cal. That's an enormous amount coming from one, and percariously overpriced, area.
When California inverts, Seattle (x-Ballard) will be disemboweled.
California is in the process of inverting.
I have the same feeling too. Mesh really pissed me off for his blatant, shameless bullish talk. For a few days, I saw no message from him and I was so glad. He should join Tim Dunn’s blog. If someone really wants to reinforce his/her point of view, he/she can always go to the OTHER blog. I believe that we should have open discussion. But, we also have to accept that this blog, by its name, is a blog for people who believe that there is a Housing bubble in Seattle. A bull is welcome here, but he/she should better come up with a DAMN good reason to defend his/her position, not BS talk like Mesh.
Meshugy, you say that you expect appreciation to lower to 3% a year or so at worst. So you are basicaly saying that homes right now are affordable, since the prices won't drop. Would you say that is a correct characterization of your position? And if so, how do you see people continuing to afford homes at these levels? Wages have not kept up with home price increases, so do you expect people to dish out larger percentages of their income for housing, or do you expect people to survive on ARMs they can't afford? Or do you expect wages to increase to match?
This is an honest question. I really want to know your logic behind home prices continuing to increase, even if it's at 3%. It seems to my layman eyes that the average joe can't afford to buy without an ARM or serious percentage of income dedicated to housing. How can this be sustainable?
Since I originally came here for data analysis, I'll try to contribute something on these numbers rather than stirring the pot.
Things seem to be showing signs of topping out in my neck of the woods, area 720.
Mar 06: 47 sales, median $375K
Apr 06: 63 sales, median $332K
May 06: 48 sales, median $382K
Jun 06: 60 sales, median $359K
Year-over-year inventory is up for both May and June after having been down in March/April. Seems to be a story of minor price fluctuations inversely relating to inventory, with signs of inventory heading up.
Pending sales have been about steady, though, so no demand dropoff. (Sign of job health?)
What does it all mean? I dunno. But it's certainly not full steam ahead with no end in sight.
Does anyone know how to upload a spreadsheet (Excel '97) to this forum?
I've thrown together a little something that will put this whole "Real Estate will only go up, even without incomes" nonsense to rest.
In the event a spreadsheet can't be loaded, here is the basic premise.
Start with your median annual income and median home price.
Calculate PITI.
Divide PITI by monthly income. This gives you the percentage of income that PITI consumes.
Give income an annualized growth rate of 3%. Give house prices an annual growth rate of 9%.
Project this out a few years. See when PITI passes 100%.
Now expand the columns for various interest rates. See how much earlier PITI passes 100%.
Traditional ratios are 28-32%. We are well beyond that. People still have to pay taxes, gas, electricity, botox, coffee, ferry tolls, cable TV, internet, education, food, insurance, Wal Mart, etc.
I always liked lotteries, as they were a tax on people who are not very good at math. I guess modern home ownership is much the same.
Eleua,
What you're describing sounds just like what I described in this post, and added a sheet to my Seattle Bubble spreadsheet for people to play with the numbers themselves. The sheet is titled "CatchUp".
That is pretty close to what I just threw togther. I like your assumptions, although I think the modern bulls are throwing more than 30% of gross income into PITI.
I sent you an email, and if you don't mind, could you tell me how you uploaded that spreadsheet onto your forum?
Thanks,
E
File uploading/linking for dummies*:
1 - Create a Gmail account (if you don't already have one). I can send you an invite if you email me.
2 - Sign up for Google Pages with your Gmail account.
3 - Once inside Google Pages, click the "Page Manager" link, and in the Page Manager click the "upload" button in the "Uploaded stuff" box on the bottom-right side of the page.
4 - Click the "Browse..." button and find the file you want to upload.
5 - Once it's uploaded it will show up in the list under "Uploaded stuff." You can right-click the file name from there, and select "Copy Shortcut" (IE) or "Copy Link Location" (FireFox), to get the link to the file.
6 - You can either just paste that link in here, or use html like this:
<a href="your_link_here">Seattle Bubble Spreadsheet</a>
Of course, replace the part inside the quotes after href= with your link, and choose whatever text you want in place of "Seattle Bubble Spreadsheet.
If you have any other questions, I'd be happy to answer them.
*(no offense intended, just a play off the well-known book series)
Awesome. Thank you very much.
My email is on your server and I need a GMAIL account.
BTW, no offense taken at the Dummies title. Knowing you are a dummy is the only way you learn.
Proud men learn nothing.
E
To the Anon who thought it would be very interesting to know what homes actually sell for:
You're right. It's facsinating. Keep track of some in your area of interest and check on the King County website a month or 2 after they've sold.
I did that last winter and found out that something like 45 out of 57 homes on my list had sold under asking- some by huge amounts.
A real shocker. That's when I knew the market was turning.
Wow. How many posts did I have to scan through to skip over the bullshit bickering between the little kids on this topic? Seriously, meshugy and co. you gues added nothing to the conversation but time and space. Grow up and contribute to an adult conversation.
Statistics are bullshit (as P&T once said). You can pretty much use them to back any position you want. The people on this forum feel strongly that we are in a bubble-market and there are a few who think we aren't. Both people are using the same sets of data to prove their point. Stats can be manipulated on either side.
Also, quoting random people (i.e. Bill Fleckenstein ) seems pretty arbitrary since I know of a number of financial advisors who don't see a pending crash. These people are very successful at making money for their clients so they aren't crack pots, but are predicting something different. I assume Bill is also good at what he does. Once again, you can find an expert to back any position you want.
Finally, I don't understand what affordability has to do with the housing market. NYC, SF, LA all have insane housing prices (and have for a long time) which put home ownership out of the reach for a lot of people. In some cases, people tolerated very long commutes and in other cases, people just rented for 10 years. Bubble or No-Bubble, I don't understand why affordability directly affects the market as long as there are enough people who can support the market. I guess I'm asking if these places aren't bound by the affordability than why should Seattle?
Exactly. NYC has been "unaffordable" for a very long time. I am not saying Seattle prices have to reach NYC's level but I think people can really reach deep into their savings and cut spending if they want to buy/maintain their homes. When it comes to desire and desperation, someone can certainly sink everything into a home and nothing towards retirement. Just because many people here refuse to do so doesn't mean others feel the same way.
hey shugs, what say you, me and our home equity go out for a drink tomorrow night at the Barking Dog? there's no point in trying to talk sense to a bunch of pissed off renters that missed the boat. i've heard some good things about Burien--maybe they can get in there before it's too late.
You are absolutely right above anon. If people want to forgo all other forms of spending and quit saving for retirement so that they can "buy" a house in Seattle, that's their business and their choice.
BTW, NYC has numerous programs, rules, incentives for affordable housing and people in NYC pay a lot in taxes to make sure they maintain a semblance of a middle class there.
I guess we could do that in Seattle too.
So lets tax the sh#t out of those who can afford it to subsidize everyone who's priced out.
And lets run all the consumer related businesses into the ground- everything from the corner coffee shop to the mall- while people spend every last dime on a home.
That way, you guys who've bought in the past few years get to keep your equity forever.
Keep Real Estate unaffordable for everybody!
To heck with the rest of the economy!
Can someone tell me in more detail what you think will happen?
I just sold my house and am now worried that if I buy another place it will be just in time for the crash. I'm trying to figure out whether I need to live with a friend for 60-90 days or rent an apartment for a year. I really really really don't want to rent an apartment for a year. I can't stand apartment living, but if I thought buying a house right now might equate to throwing away 50k then obviously renting would tolerable.
When you guys talk about the bad times coming, what exactly do you mean?
a) Home appreciation slows down significantly - ex: 6%
b) Home appreciation slows to under inflation
c) Home appreciation stays around 0% +/-
d) Home values drop year over year somewhat
e) Home values drop year over year by 10% or more
I guess one could argue that b, c, d, and e all show a decline in home values. If the Fed screws up and causing Hyperinflation, won't see home values decrease in real dollars but not in value. Anyone have any predictions about how long this down-turn will last? Will prices ever come back up? I wouldn’t mind buying at today’s prices if I through 5-7 years down the road I would make enough money for it to be a good idea.
What happens when you owe more than the property is worth and you want to sell?
My gut tells me that the owner needs to cough up the negative equity, but what if that negative equity is 100k or more. Would they need to file for bankruptcy? I was reading the PI blog and some guy mentioned that banks used to allow you to just walk away from the property and I guess the bank eats the difference. I always thought you would have had to file for bankruptcy in order to get out of your mortgage and that was before the new bankruptcy laws. I have no idea what would happen now.
anon @ 9:33
housing deflation takes far longer than anyone on this board suspects. it is a long and arduous process. but during that time, there are still benefits to ownership, like not being a renter, enjoying a good interest rate and the mortgage interest deduction.
depending on how overvalued you think Seattle is, it might not happen at all or might take ten years. one thing is for sure, no one that posts here has a clue how long it will take. just a bunch of opinions, conjecture and prayers.
to get a sense of what you might be looking at, go to the Chicago Mercantile Exchange and check the futures over the next nine months in some of the metropolitan markets (Seattle is not available for trading) and see how over/under bid you think they might be. examples: Las Vegas is offering options at a 1.5% reduction in 9 months but Miami is offering at an 8% reduction for that same time period. Boston is down 4%. San Diego is at 1.8% down. the composite of all the markets is down 4.9% for a nine month option.
i trust that all of the people on this board are already deeply shorting these indices. after all, they all seem to have $100k disposable and it only costs roughly $60k to pick up the contracts in the most bubblicious markets (which Seattle is not even close to being part of).
Anon 9:33-
Please start reading some of the following blogs as they will give you concrete information about the housing bubble:
The Housing Bubble Blog
The Northern New Jersey Bubble Blog
The Marin Bubble Blog
Tim has provided links to these blogs on the front page.
They can provide you with a wealth of facts that keep pouring out on a daily basis concerning the US economy and housing bubble.
If you read the "housing bubble blog" in particular, the comments sections are sprinkled with tons of links to illuminating articles that will help you make up your own mind.
Be forewarned though, nobody who reads these articles would touch RE with a ten foot pole for at LEAST 4 or 5 months. And everybody believes it will continue to down for several years.
So there is a definite bias there. But the problem is the evidence is so overwhelming that it's hard to not be "biased".
Also, if you have cable, watch CNBC now and again. They have been talking about RE all year and every single expert, foreign and US, is absolutely convinced that the US housing market is in for a fall. The only place they differ is 'how much' of a fall.
Guestimates go anywhere from 10-50%. The guestimates have been showing increasing percentages throughout the year. The 50% was mentioned for the first time yesterday in a Wall Street Journal article.
I know that RE promoters have been telling people that, even if RE prices drop slightly, they'll rebound within 5 years.
The problem with that thinking is that this build-up has lasted 10 years now and gone to fantastical heights. Too many people have too much "invested" (emotionally) in this market. That could lead to a long long drop, way longer than 5 short years. In the end, depending on the amount of financial pain people have gone through with their house, we could end up in a situation where people are sick of RE and just don't want to go there.
You've got to do the research yourself to decide when you want to get back into the market.
But I think most people would agree that renting for one year is a very good idea.
Or stay with your friend a few months- by fall we should be seeing the first cracks in the bubble in terms of prices heading downward. Then, depending on what you've learned and can see in the local market, you can buy in the fall or go out and find a rental.
Good luck and have fun learning!
anon 955,
There are good people on this fourm that can probably tell you exactly what would happen. S-CROW comes to mind as a subject matter expert.
Here is my amateur understanding of what happens when your value is less than what you owe.
Example:
You buy a house for $600K, with $100K down, and a $500K Trust Deed.
Your best offer is $400K, and you want to sell.
Your lender could allow the sale, and take what is called a "short-sale." Your $100K is gone, and your lender eats another $100K, and the buyer gets a clean title.
The lender might try to negotiate some form of payment plan, with you, to recoup his $100K.
If you balk, the lender could nix the deal, and hold out for a higher price, while you continue to make payments.
If the lender accepts a short-sale, you attach that $100K of forgiven debt as income on your IRS form - ouch.
If you quit making payments, the holder of the Trust Deed takes you through non-judicial foreclosure. You are out, and your equity is gone. In theory, your credit is shot to hell, but the current environment has lenders giving big loans just one year after foreclosure - insane.
The county auctions off the property. The lender will usually bid the amount outstanding on the deed, and take posession. If someone else bids more, the lender extinguishes the debt, and the high bidder takes posession.
If the lender takes posession, it is called REO property, and there is a limit as to how much the lender can hold, before he is forced to sell. While the property is held REO, the lender tries to sell it on the open market.
S_CROW can probably confirm or correct what I have said.
I don't know how the new BK laws play on this. Normally, by state law, the only recourse the holder of a non-judicial Trust Deed has, is the house, and foreclosure. They normally can't come after your other assets. Second and third mortgages are another matter.
I'm not a lawyer. This is not advice.
Synthetic-
OMG I think you're right, M's just a plant, not a "real" person.
That's why he always sounds so wierd and outside his body-/mind- cuz he's assuming an identity.
OK, here we go...
For all of you that think housing prices can outstrip income for all eternity, I invite you to download this spreadsheet and see just how basic math prevents that from happening.
I started with Bainbridge incomes and housing prices in '93, and '00, and projected them to the future. Bainbridge incomes have averaged a 3% increase, while the home prices have averaged 9%.
The matrix shows what percentage of gross income will be consumed by PITI, under given interest rates, and growth rates.
Historically, lenders would get testy if your PITI consumed more than 28% of your gross income. As you can see, that standard has been defenestrated.
How many years until it takes 100% of the median income to buy the median house?
Axe yourself...what would happen to home prices if historical ratios were to reassert themselves?
My advice is to start drinking heavily...
NOW, it's completely apparent to me that Meshugy is not a homeowner, not a musician or writer. Just a plant - a shill, someone or something to create a dissenting voice in the hopes of minimizing damage to the RE industry here in PNW.
These conspiracy theories are so funny...the violent reaction that most people on this board to any positive news in the market speaks volumes about your insecurity. I've never said anything mean to anyone, never said 99% of the things people accuse me of. I've always said the market will slowdown. I just don't believe there will be a crash in Seattle. That's all...otherwise I agree with the premise of this blog and most of the people on it. housing simply can't continue it's current upward trend. The idea that I work for the RE industry or that I am somehow singlehanded trying hold back an oncoming RE crash is so childish...gee, can't you come up with something better then that?
I'm just a homeowner following the news...and there's no denying that houses are getting more expensive here at a rapid rate. Do I think it's a good thing, no. But it's happening...and when I comment on it I get jumped on by everyone. Again, that sort of behavior tells me just how insecure everyone is. Massive denial...the "la la la" stick your fingers in your ears "i can't hear you" routine. Sorry folks, prices in Seattle are going up...at some point we may see a crash but we simply aren't even seeing the faintest sings of it right now.
Post a Comment