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Tuesday, July 21, 1981

Weekend Open Thread

This is your open thread for the weekend. Please post random links and off-topic discussions here.


Anonymous said...

CA equity locust alert -
driving past my local UHaul lot I noticed the following sign:

"Large trucks to anywhere in CA $199"

I guess there's a glut of large trucks coming here from CA and they're desperate to get some going back at a major discount...

jcricket said...

That reminds me of 2000 and 2001, where there was a shortage of UHauls in CA as many people left in the wake of the dot-com bust

Anonymous said...

2 things:

1) How does a foreclosure affect the average person? Reason being, why shouldn't I buy a house with zero down and wait for it to go up. If it doesn't or goes down, I can let the bank foreclose and I haven't lost any money. This isn't tongue and cheek question, but it isn't satirical either. If what you guys are saying is true, then why not let the banks take the risk?

2) Article in WSJ yesterday seemed to paint Seattle in an above average light compared to other markets.

Eleua said...

Well, if the pattern follows, then can we assume there will be a massive migration from the bi-coastal bubble areas to flyover country?

Will people leave California, Florida, Arid-zona, Nevada, Boston-NYC-Washington, and move to Salt Lake, Dallas, Houston, KC, Minneapolis, Denver, St. Louis, Atlanta, Memphis, Cincinati, etc.?

We know that nobody will ever leave Seattle - we are just too special.

Eleua said...

I think you can leave your house to the bank, provided you never refi-ed or took out a HELOC/second. I'm not a lawyer, but I think the lender's only recourse is the house.

Your credit is probably going to be shot to hell, but in today's environment, you only have to sit out for a year.

I had a lengthy conversation with a Seattle based "financial planner" and he was advising people to do just that. Take out a zero-down loan and roll the dice. If it goes your way, pocket the tax free money. If it goes against you, hand the keys to the bank and move on.

Just think, this guy has a state license to spew that crap.

So, if that is the case, picture the amount of inventory that banks are going to be carrying when this thing blows.

Many that refi-ed or took out HELOCS (the vast majority) are going to have their creditors hound them for the rest of their lives. From what I know, the new BK law prevents the upper half of income earners to jettison debt in BK.

It would appear that peonage will be the order of the day.

Imagine buying a home in that environment. Prices are going to be very cheap when this sorts itself out.

Anonymous said...

"The darkest hour of a man's life is when he sits down to plan how to get money without earning it."

- Horace Greeley

Anonymous said...

Does a second mortgage (to avoid PMI) always mean a HELOC? We have a fixed rate, fixed term second mortgage is that same as a HELOC?

Eleua said...

S-crow might be the best one to ask on that one.

A HELOC is just a revolving consumer line of credit, that uses the perceived equity in the house as collateral, so I doubt it would be a second.

I think the second is just a subordinate loan to the original trust deed.

Hope that helps.

The Dave said...

People from California move to Seattle and pay inflated prices for houses. People from Seattle take that cash and buy a nice place in Spokane or Kitsap and Retire. People from Spokane/kitsap take the cash and by a double wide on acreage in Montana....or Sequim.

I am renting a house in Kitsap to an older couple who were offered $500K for their house in Kent. They are building a retirment house next to their daughter on a bit of land in the woods. They were glad to sell and move further out.

Also, people will be less inclined to move here or will leave when they get ready to settle down. We have a hard time hiring new engineers because we can't pay them enough to buy a house. They would rather stay in Houston TX in their big houses. Living in Seattle is "romantic" but it does not necessarily make economic sense. If you don't care about the mountains and the sound and you need a 4 bdrm house for the wife and kids then it is very unlikely that you would uproot and move here for an $80K job where you would be paying $400 for a house. You can still make near that in Houston and live like a king.

But if you want to be "special" and live in Fremont or Ballard, you swallow the pill and buy a $400K fixer. Personally I like it here. But I am a romantic, and I don't need a big house. Not ready to swallow the pill, but I can see where people would.

Peter Taylor said...

Forbes has a great article up on MSNBC right now.

"Attack of the real estate rip-offs"

"Urge to cash in on the housing bubble has spawned an industry of schemers"

seattle price drop said...

The chief economist for the California Assoc. of Realtors, Leslie Appleton Young, said today that there will be no "soft landing" and she doesn't kow why she ever said there would be in the first place.

The article's linked at todays (July 21) Housing Bubble BLog.

We may be losing our CA equity locusts soon.

Here's the link for the NAR report finding that many homeowners are just plain in over their heads when it vomes to house payments:

Christina said...

From the Housing Affordability report (Adobe PDF, unknown size)

60% of respondents answered that the increase in interest rates on home loans are either a small worry or not a worry at all.

Then on page 10 of the above referenced report, 42% of the respondents who do have a mortgage (63% of the respondent base population), have an interest-only mortgage, 17% have an adjustable rate mortgage, and 3% have a balloon or other large payment due in the next five years.

So 41% of the mortgage-holding respondents have a fixed rate mortgage. Crikey.

<snark>The people who prepared the questions and statements from the report have poor American English grammar skills ("Me and my spouse's have...). Maybe they're the kind of RE pros who misuse 'principle' for 'principal' as well. </snark>

Eleua said...

We may be losing our CA equity locusts soon.

Careful with the idle speculation, you got me all excited.

That is a day that can't come fast enough!!!

When that happens, you can check the Bainbridge police blotter for a late-30s, white male, father of 3, that was arrested for being excessively intoxicated, disturbing the peace, and dancing naked on the roof of his house.

Western, make room for one more!

I'll throw a party that will be bigger than Saturnalia, Mardi Gras, and the MTV "Lost Weekend" with David Lee Roth all rolled into one.

Anonymous said...

"For those that believe we are moving towards a 'soft landing', nonsense."

-Chris Thornberg, Chief Economist UCLA Anderson Forecast.

For all those that believe that we are not in the midst of a financial crisis and housing meltdown, the word to describe your thinking is a robust late Chris Farley saying, "fool. How can you not see the writing on the wall."

Yeah, and the Sonics are going to stay in Seattle. Howard's true colors are showing loud and clear.

Do you think he can't read markets? Do you not think that he knows attendance will drop due to corporate and personal spending reductions?

Smart cat. Cashed in to the greater Fools from Oklahoma.

dash_point said...

take the cash and by a double wide on acreage in Montana....or Sequim

LOL...Sequim is pretty overpriced for Clallam, IMO--maybe for their so-called "mediterranean climate", or all that lavender.

Eleua said...

Don't Californians refer to Sequim (or as they pronounce it - SEE kwim), the Blue Hole?

Whenever I drive through there, I see the Californiaesque housing developments, and wonder why does someone move from sunny California to Washington and live in the same conditions.

dash_point said...

Don't Californians refer to Sequim [as] the Blue Hole?

Well, I suppose that "rain shadow" moniker wasn't started by them, but rather by local businesses who wanted to sell them property. "Lavender, mediterranean, bla bla" It truly goes both ways.

Eleua said...

Yeah, I'm sure Jace, and a bunch of Bainbridge RE agents advertise in California, and tout the good life.

Heaven only knows they couldn't make much of a living selling to locals - which is why this is going to be so ugly when it finally collapses.

dash_point said...

which is why this is going to be so ugly

Despite that endemic, unbridled optimism--I'd have to agree. Local "investors" should know better, but I bet most visiting investors don't have a clue. Then again, everyone should know better, since this insanity is happening all the way to San Diego. Different price points--same general effect.

Peckhammer said...

1) How does a foreclosure affect the average person? Reason being, > why shouldn't I buy a house with zero down and wait for it to go up.
> If it doesn't or goes down, I can let the bank foreclose and I haven't lost any money.
> If what you guys are saying is true, then why not let the banks take the risk?

First, the banks aren't taking any risk. They sell your mortgage as soon as they can... to Korea.

Second, for banks that do take risks, there is this little thing called "governemnt bailout," and that my friend means that you and I will be paying the bill.

Third, half the country is about 2 paychecks away from living in the street.

SeattleMoose said...

SEATTLE RATED "MOST OVERPRICED" BY my name to see article.

No bubble here folks...because WE REALLY ARE SPECIAL!!!

Anonymous said...

I personally know three households that are planning to move to the Seattle area from Sacramento, CA. They are ordinary folks without huge budgets, in fact the first is my MIL who will be looking for a modest condo/townhouse. She just sold a house for $307k

Then BIL/SIL who bought a home in Sac for less than 100k in 2000 have just put their house on the market for $350k. They are hoping to sell before prices collapse even further. They never did any cash out nonsense so they will have a good downpayment.

So the Californians are still coming (if they can sell their home..)

SeattleMoose said...

The article I referenced above is dated a year ago....

So I am just posting "old news". Therefore, the article is invalid because in one year:

1) Prices are even higher
2) Interest rates are higher
3) Traffic is worse (CA eq locusts)
4) Wages are flat
5) CA equity locusts are still descending on the city

I would say this year we have a "lock" for a "3 peat".

Go Seattle! You be SPECIAL!!

marin_explorer said...

"CA equity locust alert"..."So the Californians are still coming (if they can sell their home..)"

Someone will be very disappointed if they hope to apply a Sacto sales price to a Puget Sound home, unless we're talking the rural outskirts. I still find talk of a "CA plague" amusing, because it was the same song I heard in my hometown decades ago.

Despite all that damaging speculation (which includes Calis) not all moving to WA are going to screw up the state. Many are sincere folk that want to carve out a saner life for themselves--and contribute to a local community. (Something they couldn't find in CA.) I know because many friends moved up to WA (some natives), while I grudgingly live down here. Something to think about when anyone paints Calis with a broad brush.

Anonymous said...

One factor of house market is determined by those "house flippers". How much persentage of the houses are flipped could tell if the current market is bubble or not. We could write a program to find any houses that are changed owner in half year for example.
Any thought?

disgruntledengineer said...

I'd like to know the percentage of houses in King County that were purchased using 0% down, IO, ARM or any other variable rate interest loan. I'd like to know what price those houses were, and then the yearly income of those that purchased them. I'd also like to know how many of these were purchased by families or groups of investors. Then I'd like to know how many other properties those families or groups of investors currently possess. I want to know how many people are playing the game, and how many are just trying to maintain a place to live.

meshugy said...

Here's a ballsy flip:

This house was bought last December for 400K. severely outdated, but a craftsman with good bones and a cool little extra house in the back.

7048 19 AVE NW

After over 6 months of remodel and an addition, landscaping, etc. Well over 100K of work..maybe even 200K. Now for sale at 825K

7048 19th Ave NW

Will they pull it off? If they get their price, it will probably be at least a 200K profit. I don't think they'll get that much..nice hood and the house looks amazing. But too high for guess is they will get 550-600K for it. Which might mean a loss for the flipper....

disgruntledengineer said...

meshugy...what they did to that house is amazing! It looks totally brand new. I find it absolutely incredible how a house's shell can be completely reformed to breath new life into it. Quite a resurrection. What I also find amazing is how the house's value can perceivably go up by $425,000, with new decorative siding, landscaping, a new roof. I'm sure they even redid the whole inside, put in some new furniture and appliances. I only skimmed over the listing...stainless steel and granite tops? Whatever, I'm sure it's nice. Is the house safer to live in? Is it more private? Does it also come with brand new friendly neighbors? Does it make Ballard that much "cooler" that people will flock to it? Does it really add $425,000 worth of estate to the community? Is the house "better"? Is it more structurally sound? Did they put $425,000 worth of new security devices and equipment to improve the security of the home? See...that's what I don't get. Where did they get the $100,000 to $200,000 to make improvements to it anyway? That's incredible. Why do small business loans even exist these days? Do they?

meshugy said...

The flippers name is Helen Mansfield...she owns a house on Queen Anne which she took a $200K HELOC out in Feb. So I think it's safe to assume she put around 150K-200k into the new house.

See: Deed of Trust

Records also show she put nothing down on the new house...she took a 425K loan out on a 400K house.

Anonymous said...

The households I mentioned moving up from CA do not want to be in the city of Seattle. My understanding was that this blog covers Seattle and surrounding communities.

My MIL wants to be in Monroe as she is retired. She lived outside Sacramento in a small town so Monroe suits her needs and budget.

SIL/BIL also want a smaller community and they are looking at Duvall. They have no interest in taking on a ginormous mortgage. Although Duvall may seem like the back of beyond to all you Seattlites it is still in King County, has good schools, a decent arts community, and is surrounded by natural beauty.

My BIL is just finishing up a Masters in healthcare. There are many jobs up here in his field and they are offering a 10k signing bonus, plus relocation costs. He will be earning more but his mortgage will not be much more than they are currently paying. My SIL however, is a mortgage broker!!! (Part time, while BIL was in school.)So she is not expecting that to last and will probably work instead in our family business.

In my own experience it seems like the Boomers in our family are buying stuff like there's no tomorrow while the Gen Xers are much more fiscally responsible.

Capitalistchristian said...

Fiscal responsibility seemed to wave goodbye to our country since the 1950 - or 60s. Between the boomers and gen xers the savings rate in this country is ridiculously low. Perhaps that is because many are using our govt as a role model. Only problem with that is that they can always print more money where you and I cannot. I don't think that we have made any significant dent in our large national debt in my entire lifetime. It is going to hurt us someday.

Anonymous said...

If "they" start to print money and we have hyper inflation and a worthless dollar won't it be important to have hard assets, such as a house? (As well as investments in foreign currency like the Euro?)

Insane borrowing/lending is not the way to go, but property will still be important when our national debt gets called in.

Eleua said...

Hard assets are good for inflation. The problem is that assets that are so big that they are purchased with borrowed money can be losers.


Unless the inflation hits incomes, your ability to pay for something is essentially frozen, while the stuff you NEED to buy (prozac, botox, viagra, food, energy, medicine) become more expensive.

This lowers the amount of money you can put towards discretionary things, like housing.

Housing is discretionary? Certain parts of it are. Shelter is a need, but a nice pimped-out craftsman in Ballard is not. You can live, albeit not willingly, in a POS apartment in the multi-lingual part of town.

Second, as inflation rages, so do interest rates. As the banker takes more of the fewer dollars you can put toward your Redmond Garagemahal, the seller takes disproproportionately fewer, which equates to a massive price reduction. The amortization formula is leveraged, so a little drop in "p" chops off a massive amount of what the seller gets.

If inflation was a good thing, we would welcome it, rather than give lip service to avoiding it.

Eleua said...

Inflation is almost a universal blight. Exceptions are:

-shorting bonds (highly risky)

-owning highly divisible, and fungible assets (metals)

-being diversified into a foreign currency that is not inflationary, which is a guess, and will still put you square in the sights of the 110,000 IRS agents that will treat your hedge as income.

-Owning a business that is largely cash-n-carry, and purveys goods that people need and can afford as the price of it goes up. Good luck. Most of these businesses are heavily scrutinized by customs and the DEA.

meshugy said...

Here's some recent sales over the last month in Ballard. Still a very tight market with prices climbing. Most houses are going at or above asking. A few overpriced houses went slightly below asking. Basically, anything under 400K in Ballard is junk. Under 450K is a fixer. The nicer homes are all above 475K now.

Last year you could have gotten a fixer for 350K and a nice house for around 400k.

First price is asking, second is the sold price.

2650 NW 64th St 435,000 445,000
3023 NW 60th St 475,000 447,500
7502 Mary Ave NW 499,950 473,000
2246 61st St NW 495,000 495,000
7510 17th Ave NW 439,000 435,000
2613 NW 63rd St 419,900 508,000
8325 22nd Ave NW 459,950 459,950
5912 26th Ave NW 375,000 425,000
6541 21 Ave NW 365,000 395,000
2650 NW 64th St 445,000 445,000
7535 Jones Ave NW 450,000 450,000
6804 28th Ave NW 434,950 445,000
8052 16th Ave NW 349,000 324,000
6602 28th Ave NW 500,000 500,000
7551 17th Ave NW 399,000 402,000

The star seller is this one: 2613 NW 63rd St

Went for almost 100K over asking....


Anonymous said...

Hi meshugy, may I have the timestamp of those transactions?

meshugy said...

Hi meshugy, may I have the timestamp of those transactions?

What do you mean? If you need more info, you can look them all up on the parcel viewer.