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Tuesday, August 25, 1981

Friday Open Thread

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

86 comments:

Dukes said...

Good article here on CNNMoney:

http://tinyurl.com/jz9tw

It takes one of Meshugy's arguments to task immediately, you know, the one about strong job growth in Seattle...Myth#1 they call it, read:

"Myth #1: As long as job growth is strong, prices can't go down

You can almost forgive the bulls for stumbling over this one. In past housing recessions, prices fell sharply in markets with severe job losses, like Texas in the mid-80s and Boston in the early 90s.

But the argument that prices can't fall in a good job market doesn't make economic sense: To be sure, a strong employment picture helps demand. But if far more houses are pouring onto the market than can be absorbed by households lured by the new jobs, and if the sellers are pressured to sell, prices will fall.

That's precisely what's happening now in good job markets such as San Diego and Northern Virginia. In this boom, prices soared to such extraordinary levels that builders kept churning out new homes, and owners of existing houses threw a record number of units on the market to cash out. The supply grew so fast that demand, even in strong job markets, simply couldn't keep up.

As usual, for the believers, it's always easier to fall back on a cliché than read the warning signs.


I especially like the very last sentence, as it is so reminiscent of some who post here, "whistiling past the graveyard...all day long"

matt said...

Great find dukes,

Yeah, the other myths hold false as well, especially...

Myth#4: restriction on development in the suburbs ensure low supply, and guarantee rising prices

This is horse pucky. I keep bringing up the following article on Tokyo's Bust and how land restriction DID not keep its real estate bubble aflout. It folded faster than superman on laundry day, and continued for 15 years...

Once Sea-town gets flooded with Condo's, inventory spikes, watch the whole house of cards tumble. Land restriction's got nothing to do with it. And if its too pricey here and the jobs too mediocre (which they sort of are at the moment) people will move someplace else, like Salt Lake, Boise, Spokane... somewhere cheaper. There's no gates out of town, people can just up and move out of here...

matt said...

is it hold false, or hold true? .. whatever

Peckhammer said...

"In this boom, prices soared to such extraordinary levels that builders kept churning out new homes, and owners of existing houses threw a record number of units on the market to cash out. The supply grew so fast that demand, even in strong job markets, simply couldn't keep up."

Well, the problem with this analysis is that it fails to address the core truth about Seattle: Seattle is different, plain and simple.

Take today's article about rentals in the PI this morning:

"Aradia Correnti waited outside of the Phinney Ridge house, but did not apply because the owners would not allow her dog. Correnti said she moved to Seattle from Atlanta four weeks ago, got a job at Microsoft and has been sleeping on couches or in her car while hunting for a place to live.

'It's a race,' she said. 'If you're not there first, you're pretty screwed.'

Correnti said she called one landlord within two hours of an apartment listing and the place was already rented."


There is simply not enough housing in Seattle for the amount of people that need it; people will pay ridiculous amounts of money for what housing is available; employment is strong; and despite massive amounts of new condo inventory coming on-line in the Seattle area, people will throw silly amounts of money on the table with a level of zeal ordinarily reserved for celebrity poker. This includes both buying and renting.

Take, for example, the following quote from the same PI article mentioned above:

"Shelley Santone of Coldwell Banker Bain & Associates owns three rental houses and manages others, including a Magnolia house that got 12 responses the day she listed it at $2,100 a month.

'I really thought $2,100 was going to be a little bit high, and we rented it in a day,' she said. "

matt said...

Well, the problem with this analysis is that it fails to address the core truth about Seattle: Seattle is different, plain and simple.

Ha! Nice one peckhammer... No this is a typical temporary bubble-phenomena seen in other markets, includding Washington D.C. and is a result of the condo-mania stage of the housing bubble which we're heading into, firing on all cylinders.... Yes, greedy condo developers convert, reducing available units, rents go up, units don't sell, then go back on the market as apartments... rental rates drop, etctera...

The only thing different about Seattle is its time-scale... (and apparently is inability to learn from example)...

meshugy said...

But if far more houses are pouring onto the market than can be absorbed by households lured by the new jobs, and if the sellers are pressured to sell, prices will fall.

Hi Dukes....the problem is we're missing the "houses pouring onto the market" part. It goes without saying that ANY market will go into decline if there's way, way more supply then demand. However, that's unlikely here because we simply can't sprawl out in every direction and now, more then ever, people want to live closer to the city (i.e. shorter commute, less gas)

We're not even at 2004 inventory levels yet...which still puts at very historical lows for inventory.

July 2006 King County Inventory: 8,545

July 2005 King County Inventory: 7,066

July 2004 King County Inventory: 9,833

July 2003 King County Inventory: 12,009

It's still a tight market, we need to double the current inventory to see any real reductions in price.

Anonymous said...

Hey P-Hammer,

You have to admint that the one quote from the paper is kind of a weak.

"Correnti said she moved to Seattle from Atlanta four weeks ago, got a job at Microsoft and has been sleeping on couches or in her car while hunting for a place to live."

This chick has to be on left hand side of the bell curve. I am looking at rentals...it is not bad enough where an employed single would be living in a car. True, Rents are increasing...by <$100. Plus, who relocates without having a clue of where they will live (especially for 4 weeks after the fact)? When the paper quotes the village idiot, the rest of the article loses a bit of value.

meshugy said...

Rental housing turns in landlords' favor

"It hasn't been this strong in the last five or six summers," said J. Michael Wilson, an associate broker for Windermere Property Management.

The vacancy rate for buildings with 20 or more units in King County dropped from 6.7 percent in March 2005 to 4.7 percent this March, according to Dupre + Scott Apartment Advisors. The company's latest estimate is about 4.4 percent, Mike Scott said. The average rent for a one-bedroom Seattle apartment has risen from $829 a month in spring 2005 to $861 this spring and a projected $895 this fall.

A rebounding economy has heated up demand for all housing, while rising interest rates have made it harder for people to buy, Scott said.



This reminds me of when I moved to Seattle in 97...apartments were impossible to find. People were lining up at the door for tiny rat holes. That all changed after the dotcom bust....but it looks like were headed back to an ultra-tight rental market.

Anonymous said...

"However, that's unlikely here because we simply can't sprawl out in every direction and now, more then ever, people want to live closer to the city "

Ummmm, and they can sprawl more in New Jersey? New York? Washington DC? LOL.

Peter Taylor said...

This reminds me of when I moved to Seattle in 97...apartments were impossible to find. People were lining up at the door for tiny rat holes.

Sorry Meshugy, but I have to disagree with you on this one. I moved here around the same time and there were plenty of nice, new, clean and reasonably priced rental units - especially on the Eastside.

"Correnti said she moved to Seattle from Atlanta four weeks ago, got a job at Microsoft and has been sleeping on couches or in her car while hunting for a place to live."

Microsoft has a very generous relocation package and they will just about bend over backwards to help you find a place a live. Perhaps she should have gotten the job at MSFT BEFORE she left Atlanta and she could have taken advantage of it.

And, I'm calling BS on this:

Shelley Santone of Coldwell Banker Bain & Associates owns three rental houses and manages others, including a Magnolia house that got 12 responses the day she listed it at $2,100 a month.

A quick search of rental properties in Magnolia on Craigslist turns up 35 rental units. This is pure media pom-pom waving over the non-story of rapidly rising rents.

matt said...

A quick search of rental properties in Magnolia on Craigslist turns up 35 rental units. This is pure media pom-pom waving over the non-story of rapidly rising rents.

Agreed, this is Realtor bubble-booster article masquerading as a viable story... Nothing like inducing a little fear into the market to spurn sales. Since the whole "get in now or get priced out forever" mantra's spent, they've moved on to "hey you bubble sitters, you might as well buy because you'll be sleeping in your car!"

The P.I. can go hang.... nothing but a giant marketing tool for Realtors

synthetik said...

Inventory is steadily climbing here and we are right on course. Look at San Diego's Inventory in late Dec. 05; same ratios as here.

It was during late 2004 and most of 2005 where local media, realtors, mortgage brokers, and other shills were saying "we're differen't here".

I'm seeing a carbon copy here of what I witnessed in San Diego back then.

Evidently, San Diego was supposedly "different" because there was no available land left to build on. Mexico to the south, desert to the Northeast and a mountain range due north up the coast. San Diego also has the best weather in the country (avg. 70F mostly year round).

They were wrong.

synthetik said...

My wife and I have been in Seattle since March and I'm loving it.

Almost no one can understand why would we leave such perfect weather to come to seattle.

Having said that, Seattle's median housing price is only $70,000 LESS than San Diego!!

That, in and of itself should be a good indicator of our current precarious bubble status.

We didn't move here for jobs, lower cost of living (ask forbes?) or any other financial reason. We moved up here for a quality of life upgrade.

I doubt most people living in California would move up here to save $70 or $100K on a house knowing what kind of weather they would be facing during the winter months here. That difference in price will continue to get smaller and smaller as SF, SD, LA lose more of their value.

I wish I owned a statuary or art gallery here in Seattle. Soon, realtors will be scrambling to find new ways to attract more GF.

richard said...

This reminds me of when I moved to Seattle in 97...apartments were impossible to find.

Unless you were willing to make the sacrifice and move to Ballard.

Dukes said...

Looks to me, even by your numbers Meshugy that the trend is moving toward more inventory on the market.

Follow the trend, we will see inventory increasing more and more.

richard said...

Interesting that the Seattle Times quoted their OWN advertised listings for the number of apartments available for rent.
Note the source at the bottom of the graphic

As usual, this article was written with the primary intent of bringing in classified ad dollars. "At the Seattle Times, we can guarantee your apartment listing will appear on a page adjacent to a vague emotionaly charged article about rapidly rising rents - you can't get that on Craigslist!"

biliruben said...

Brilliant!

It's actually the PI, but it's cool they examine their listings for trends.

It's sad that they don't realize this trend actually means that craigslist has gobbled up their revenue.

matt said...

Interesting that the Seattle Times quoted their OWN advertised listings for the number of apartments available for rent.

Yeah, this a complete joke of an article if they're using their own listings as a barometer to test the rental market....

God knows why you would pay $65 bucks to post your apartment for rent for 14 days on the PI website when you could post it on Craigslist for absolutely nothing...

All's this article shows is that Craigslist is rightfully sucking away advert dollars from the dwindling PI classifieds section...

marin_explorer said...

I doubt most people living in California would move up here to save $70 or $100K on a house knowing what kind of weather they would be facing during the winter months here.

I suppose when the SFBay median is 2X of Seattle, a few might consider moving, despite the winter daylight issues. Surprisingly, my winter weather here (on SFBay) is just as intense as my hometown on the Sound. Believe it or not, we get 50% more rain than Seattle(!). Still, that's the exception for most Calis, who might be discouraged to leave their "perfect" weather here.

On that note-- driving through Sequim last Fall, I got a laugh from realtors touting the area as a "unique" spot of "mediterranean california" weather. You don’t say? I guess that doesn’t apply to winter.

Anonymous said...

A 4.7% vacancy rate is historically neutral -- neither landlords nor tenants have room for negotiation.

When I moved to seattle (in late 2000) vacancy rates were below 1% in some neighborhoods. I still found a nice apartment in less than 3 days.

The woman in the PI article must either be a certified moron, or her dog is a horse. Landlords exploit both classes of people. My guess? She's an idiot with a big dog, she moved here with no job prospects, and found out that it costs real money to let marmaduke crap all over a 1906 craftsman....

meshugy said...

Interesting that the Seattle Times quoted their OWN advertised listings for the number of apartments available for rent.

Yeah...that seemed silly to me.

However, the vacany rate stats are really the thing to look at. They've dropped like a rock. They got those stats from another source: Dupree and Scott Aparment advisors.

meshugy said...

Sorry Meshugy, but I have to disagree with you on this one. I moved here around the same time and there were plenty of nice, new, clean and reasonably priced rental units - especially on the Eastside.

You must have gotten lucky...vacancy rates were 1-2% in the late 90s:

HOLD RENT INCREASES, SCHELL ASKS LANDLORDS
`DESPERATION' CITED IN CALL FOR 10% LIMIT


With vacancy rates in many Seattle neighborhoods falling below 2 percent, Schell said he had talked to young families who'd had to move ``over and over" and to seniors ``who face an uncertain future" because of rent increases or condo conversions.

meshugy said...

Having said that, Seattle's median housing price is only $70,000 LESS than San Diego!!

I think you've got the #s wrong....San Diego's SFH median price in July was: $612,000

See: July 2006 Regional Sales and Price Activity

The King County SFH median in July was $435,000.

Peter Taylor said...

HOLD RENT INCREASES, SCHELL ASKS LANDLORDS
`DESPERATION' CITED IN CALL FOR 10% LIMIT


Meshugy, that's an article about the lack of low income housing. There's always been a lack of low income housing in Seattle and there probably always will be.

Nicastro says affordable housing will require new leadership

Tuesday, October 12, 1999


Renters: Renters comprise 52 percent of our population. The rental market is the only affordable housing left in Seattle. We must focus on the crisis that many renters now face.

Monday, March 7, 1994
Upgrade in the Regrade

By REBECCA BOREN
SEATTLE POST-INTELLIGENCER REPORTER


If you walk around Seattle's Denny Regrade, you can find 2,200 pieces of evidence that it may finally be turning into the vibrant urban neighborhood the city has been trying to create for 25 years.

They are the 2,200 apartments and condos that developers have built in the last five years.

That's a 60 percent increase over the 3,500 housing units that were in the Regrade in 1987. It more than doubles the number of market-rate housing units available in the district between downtown and the Seattle Center.

The units range from luxury high-rises that rent for close to $3,000 a month to $400-a-month furnished studios designed for waitresses and bank tellers.


Time is REIT to build apartments
Rental units going up at furious pace in Seattle

Monday, May 3, 1999


In the King, Pierce and Snohomish counties market in the mid-1990s, developers built about 2,400 units per year. In 1998 that jumped to 3,500 units. This year, Dupre+Scott expects 6,000 units, and in 2000, 8,700 units.

See, Meshugy, you're wrong. Sorry.

Anonymous said...

"This is pure media pom-pom waving over the non-story of rapidly rising rents."

Another day, another bought-and-paid-for screech about how rents must go up. As Joseph Goebbels knew, the key is constant, unvarying repetition. Indeed, I wonder why these papers continue to annoy their masters in the Real Estate Mafia by wasting valuable front-page space on something as silly as news? They should just print big, black headlines that read:
IF RENTS DON'T GO UP, THE TERRORISTS WIN
NEW NAR STUDY: RENTING CAUSES CANCER, IMPOTENCE
BERNANKE DECLARES WAR ON RENTERS
LOCAL PEDOPHILE ALSO FOUND TO BE RENTER - Law Enforcement Officials Not Surprised
WE HATE RENTERS - SCREEEEEEECH!

The accompanying story should be:
"It's a new paradigm, and anyone who doesn't buy, now, will be priced out forever. Anyone who does buy will be rewarded with a lifetime of riches as their property gains 15% annually for life.

Renters, and those born in future generations, will be unable to afford a $10 million starter home in 5 years. They will live in tent cities, and Hondas.

This asset bubble is unlike any before it in history - it will never slow down, or pop. The gains are permanent."

Will these papers still be here after the bubble implodes? Who will pay their advertising revenue? What will they talk about?

Peter Taylor said...
This comment has been removed by a blog administrator.
meshugy said...

Meshugy, that's an article about the lack of low income housing.

Right...caused by very low vacancy rates. The reason I picked that article is because it states that vacancies were below 2% in the 98 and that people were desperate for rentals. That was my experience back then too...it led me to buy a condo instead which turned out to be a great investment.

See, Meshugy, you're wrong. Sorry.

Uh...I don't think so. All you did is post some random articles about apartment construction. I don't see anything saying that vacancies were high in the late 90s, because they weren't. That happened after the dotcom crash. But now we're heading back to low vacancies again.

Peter Taylor said...

Uh...I don't think so. All you did is post some random articles about apartment construction.

And all you did was post a random article about a lack of low income housing. Notice that the article you cited didn't decry the lack of rentals available for median and high income earners - because there wasn't a lack of rentals for people with income at those levels. And, if you're claiming you could afford a condo at that time, you certainly were not in the same boat as the low income renter in Seattle at that time.

There was tons of new rental property construction going on throughout the late 90's, as evidenced by the link to the last article I posted.

meshugy said...

And all you did was post a random article about a lack of low income housing.

No...it wasn't randon. I picked it because it said vacancies were below 2%. That was what I was trying to show...

darth_s said...

Based on my experience, I found that it is extremely unproductive and frustrating to argue with Mesh. As long as there is a tiny bit of positive news from the RE, he will beat this dead horse until everyone else gives up.

My plan is to totally ignore this blog until the negative numbers begin to show up clearly in Seattle, which I believe that it will be soon. But sometimes, I still cannot endure those RE spins…

Anonymous said...

The Great American Housing Slump
by Tobin Smith
August 25, 2006

When the real-estate market started to really slow late in the summer of 2005, it was nine months later that we started seeing the breathless accounts of a housing Armageddon hitting the mainstream press.

Bob Toll of Toll Brothers fame came out this week and basically said that in his 40 years he has never seen a downturn in housing without a downturn in employment or some nasty macroeconomic condition that took housing down with the rest of the economy. This time we have low employment, a stable stock market and relatively low interest rates.

So What’s Going On?

Come on people, this is not a tough one to figure out.

The psychology of buyers and sellers has changed. Fear of not getting your offer accepted has been replaced with fear of offering too much or, for sellers, not getting an offer at all. This is the classic end-of-a-bubble mentality, because fear is one of the root causes of bubbles in tradable assets. (A bubble is defined as a rate of appreciation two or more times the standard deviation of long-term asset appreciation trends.)

The fear of not getting your offer accepted in the hottest markets in the U.S. was very well-founded—the supply/demand balance in the market was imbalanced, with too little supply to meet demand.

Where did the extra demand come from for houses, outside of new household formations? Investors. More specifically, new buyers at the margin, just like the new investors in Internet stocks brought new marginal demand to a finite inventory of Internet stocks.

Where has this marginal housing demand gone? Away—or at least away from the previously hot markets.

So, sports fans, take away the marginal buyer who was also the most aggressive bidder at the margin and whose eagerness to buy tipped the purchase and sale of anything sold in the market, and you get falling demand.

This is what we have today in most real estate markets, a lack of the eager buyer at the margin of supply and demand. Now we have real buyers, as in the people who need homes for actual use as a home. And the removal of the buyer at marginal demand has allowed the real buyer to not make the escalator clause/no-inspection offers that drove real estate prices to overzealous heights.

Peter Taylor said...

No...it wasn't randon. I picked it because it said vacancies were below 2%. That was what I was trying to show...

Is it? I thought you were trying to show that you agreed with the media reporting that rents here are going through the roof as proof that rents are rising to match RE prices and therefore Seattle isn't in a bubble.

Whatever happened in 1997 happened in 1997. The simple fact is that the article you posted was complete bunk. Rental housing is definitely not turning to the collective landlord's favor. That article used their own classifieds section (NWSource.com) to show there are hardly any listings and I posted a link to Craigslist showing 3 or 4 times as many. All that shows is their classifieds sales people are a 1/3 or a 1/4 as good as Craigslist at digging up ads.

People are not "lining up at the door for a rat hole" today, so I'm not quite sure how that could remind you of 1997.

emcityjill said...

Geez. I moved from a 3-year stint in Colorado back to Seattle in 1996, and I don't remember having a problem finding an apartment in my target 'hoods (back then they were Greenlake/Wallingford). I've moved about four times since, and have never ever have had to stand in line.

I've been doing some apartment research for my dear boyfriend, who is looking for a new place. He lives on Queen Anne, and would like to stay on Q.A., and I'm having absolutely no problem printing off tons of listings for him each Friday (thank you, Craigslist). In fact, I notice that lots of the same advertisements reappear...and often these are the places that seem kind of "expensive" to me. Maybe I'm not the only one who thinks so....

uptown said...

The new owner of my building dropped rents after he bought it in 2003. So far no rent increases for sitting tenants. This is the cheapest apartment I've had on the west coast since moving west in the late 80's.

BTW - craigslist shows 3354 rental listings for the Seattle-Tacoma area.

john_law_the_II said...

Remember, Seattle real estate always goes up! well, sorta.

john_law_the_II said...

sorry, what I meant to say is that real estate has fallen regionally. however, it has never fallen nationally. well, sorta

meshugy said...

That article used their own classifieds section (NWSource.com) to show there are hardly any listings and I posted a link to Craigslist showing 3 or 4 times as many.

Yeah...as I said before that doesn't tell you much. However, vacancy stats do...and they've been falling like a rock. There's been tons of out of state investors buying up apartment buildings around Seattle...they're all banking on the low vacancy and big rent increases.

From the NY Times:

Rents Are Rising Rapidly After Long Lull

Mike Gain, the co-owner of a property management firm in Seattle, took a step this spring that he had avoided for years: he raised rents. “We had been afraid to do that,” Mr. Gain said. “Over the years, we were actually reducing rents. But we increased rents by 3 to 5 percent and there were absolutely zero repercussions.”


The waiting game is now turning into a triple threat:

1) Higher Home Prices
2) Higher Interest Rates
3) Higher Rents (while you wait)

matt said...

1) Higher Home Prices
2) Higher Interest Rates
3) Higher Rents (while you wait)


Dude, didn't you forget about all those high paying jobs Microsoft and Boeing are throwing around? Hell, you get on one of those gravy trains and you'll have way more than enough to by that flipped moldy craftsman near 65th and 15th NW!

I don't think anyone here has made the comment that survivng the housinb bubble induced great 2007 recession's going to be fun for everyone. It'll drag everyobdy down, down to the non-complicit renting at the margins. We're all going to have to pay for the F'd Barrowers transgressions, right down to you Meshguy, paying your taxes to bail out Freddi Mac and Fannie Mae when we have to bail them out, ala the Savings and Loan scandal...

Wow, you got up a pic? still too scared to drop an email address apparently...

bill said...

Peter Taylor-

I couldn't agree more, this is pure media hype, same as they did with the housing market.

there's no shortage of rentals and you don't have to overpay to get one.

Friends of mine just found a great rental, reasonably priced. They took their time - no mad dashes to "get into rental or be priced out forever."

There have been years when rentals were tight in Seattle. this ain't one of those years.

What a bunch of bull.

sue said...

You're getting desperate "shugy, slipping.

the 10% thing from Schell I remember well.

It was the late 90's ('97, '98??). The price of homes begun it's skyrocket. Everyone was selling homes to cash in. People were buying homes they could NOT afford and then jacking up rents to cover the mortgage payment.

MANY people saw their rents nearly double on a month's notice from a new lanlord.

Seattle, unlike other cities, did not have any laws as to how much a lanlord could raise rents on a yearly basis. It was a free for all.

Ideas were bandied about and finally Scell came up with his whimpy request to property owners: "Please don't raise more than 10% a year".

that was the end of it.

Dukes said...

Meshugy, why don't you take a step back and read your posts here today/tonight. You absolutely do NOTHING but pick arguments with people here.

Do you have a disorder of some sort? Why the need to argue with everyone all the time? What are you trying to compensate for?

Some people -darth_s- don't even want to come here because of you. Shape up, or just shut up, you destroy many good posts here.

Anonymous said...

On Zip, since May, inventory has increased almost 40%. 40% in less than 4 months. How can anyone argue that we're not headed for a huge change in direction? Anyone can look the numbers up, I can't see how anyone can disagree unless they have a vested interest in prolonging business as much as possible. We're in the short run now, there's no way this goes on until 2007. By Christmas everyone in Seattle will know what's obvious...

Anonymous said...

Oh, and I just closed on my condo 2 weeks ago (walked away from 4.85% 15 year) and had over 20 apartment listings to choose from right in the 5-6 block area I was interested in. All of them priced competitively. And most available immediately.

(Oh, and I made out quite well on the condo, I've owned it since '98)

targo said...

Hi folks,
Anybody care to share their expert opinion on the following:
I am planning to sell my current home (North of Redmond downtown) and buy a new, somewhat larger one, in 2-3 years. The old home has appreciated significantly in the last years, and I am concerned about this coming to an end, so I’m thinking about the following possibility:
1) Sell my current home
2) Rent for a few years and invest the money from the sale into something reasonably secure (say, CDs or bonds)
3) Buy a new home
My initial calculation shows the current costs (mortgage interest, property tax, maintenance, and the interest I would otherwise get from the CD) to be roughly equal to the rent. And as I want to sell it at some point anyway, the closing costs would be there anyway.
Obviously, if the prices keep going up over the next few years, I would lose, but if they come down instead, I would win, and it seems to me from recent news that the latter is more likely.
Now, is this a stupid idea? Am I missing something obvious?

john_law_the_II said...

it's over $700 extra a month to buy in seattle than to rent.

Anonymous said...

Right now you are far far better off renting than buying. In 12-18 months people who bought this summer will be crying.

Dukes said...

Targo, I think selling and renting to capture your gains is an excellent plan. Invest safely in CD's, now over 5%, sit back and enjoy your good financial fortune if you get your sales price.

There will be many who will have wished that they do exactly what you are contemplating. I would NOT hesitate as each day will bring Seattle closer to what the rest of the nation is feeling...

SeattleMoose said...

Having been looking for a rental home the past 2 months (my wife is extremely picky) and I can offer these observations "from the field":

1) Rentals are up from 6 months ago (last time we had to blitz KingCo looking..) only in the "elite" areas of town (Madison Park, Denny Blaine, etc.) and then only slightly. Talking to folks in Madison Park I have found out that the Madison Park, Denny Blaine, and Leschi areas all were major targets of CA equity locusts and new MS employees. Hence the largest price increases have been in these areas (e.g. Denny Blaine was #1 on that Zillow analysis posted here last week)

2) In some of the places (Kirkland, Viewridge) the owner literally begged us to rent. In every case it was a flipper (one in Japan, one in CA, and a Seattle "soccer mom").

3) There are decent rental properties on the market that HAD TO REDUCE THEIR PRICE because the owners (in every case a flipper, mostly from CA...could tell from contact area code) initially asked too much and found out that the Seattle market will not bear overpriced rentals. Say hello to negative cash flow.

4) Many rentals languish for over a month or more and the claim about people "lining up at the door" has simply not been observed by this writer....not even once.

We have had no problem finding nice rental houses. The problem has been choosing. Happy to say that we have found a place and are moving in Sept 15th.

There is a "battle of perception" being waged in Seattle by those who are trying to keep Seattles RE "wine and cheese party" going forever.

This same type of battle took place in CA, AZ, ME, and FL and in each case the battle was lost. It will be lost in Seattle as well.

The only thing "different" about Seattle is that in the falling line of dominos it is one of the dominos at the very end of the line.

Seattle will lose too....big time. It's "in the bag".

Dukes said...

Excellent info Seattle Moose. Anecdotal evidence such as you posted is priceless. It shows the reality on the ground.

Realtor speak, and realtor #'s are always designed to paint the rosiest picture possible, then some here post those #'s as if they are scripture...they are NOT.

Thanks for the info...

Anonymous said...

"The only thing "different" about Seattle is that in the falling line of dominos it is one of the dominos at the very end of the line."

Indeed. I read the other blogs and everywhere is dropping big time, horror stories are starting to come out, and Seattle, well, it hasn't happened yet.

Anonymous said...

hey, I'm looking for Mobile Marketing Evangelism roles - in Seattle start ups - I'd like to come prop up your housing market. :)

http://www.daviddalka.com/createvalue/about

seattle long term owner said...

Looking back, I'd like to thank this blog for the info it gave me... although I ended up buying, I under-invested rather than stretching my budget into a bigger home because of the warnings from this blog....

Unfortunately I can see this blog being empty in 6 months... much like other blogs in other states... it's only useful when the bubble was still sight unseen...

now that the bubble is staring us in the face and even public media is unable to deny it (note their sugarcoating still admits the obvious)... the party here and in the actual market will soon be over...

once again thanks Tim for saving me a bundle...

Anonymous said...

Heres a Family Story... Grandparents one passed away and the surivor moved into assisted living.

One Realitive/Aunt got into some Tax problems with the IRS. IRS Took everything they owned. Probably that persons IRS bill will follow for many years to come. This person held a six figure income for years. Her husband worked in a bank and was fired. He was bank vice-president.

Grandmother feels sorry for this person because she thinks that it was her husband that created the mess. When really the two of them did it together. Why should Grandmother reward her and her husband for there lack of money management.

I lived at her house for about 6 months and bill collectors kept calling the house.

After Grandmother moved out of the house my sister and I tryed to make a deal with Grandmother to rent the house this was blocked by the Aunt because she said we werent responsible.

Then not soon after She Made a deal with the surviving grandparent to purchase the house. They didnt have a Legal contract as far as I know. Was making which sounds like rental payments. Lived there for couple years. Then used her son to make the purchase agreement because of the IRS she couldn't actually own. Now her son is the mortgage holder.

The way I see it.. why at nearly 60 years old would you really be so caught up in buying a home. At that point you might just hang up the whole notion. My Grandmother is just over 90.

Anyways when the paperwork was signed the house was actually worth about 125,000. more than the purchase price. 280,000. dollars for a 2 story house overlooking the water. That house is worth a lot more than 280,000 dollars. This house is in everett/Mukilteo area. On top of this the Aunt had borrowed money from Grandparents from years past. About 20,000 dollars which supposidly was included into the purchase price.

Talk about causing family problems.. Grandparents had several children & there is massive anger much not displayed.. Couple people are simply displaying there game faces.

On top of this Grandparents held other piece of real-estate which was given to there other daughter. She is a real estate agent that works in the Mukilteo area and the property Grandmother gave her was in Mukilteo. A piece of Raw land.

The property was owed back taxes with the IRS- grandparents held that property for years.. The Aunt the real estate agent after receiving it turned arround within a short amount of time and unloaded it for about 85,000- apparently the recievers paid the back taxes owed, then again its my idiot brother that thinks this.

(The 2 aunts that recieved both the house and the property in Mukilteo are like best of friends. My mother is sort of a outsider sitting in the middle then my other Aunt lives locally as well. She is the one that has distanced herself the furthest from the family. My mother plays like she somewhat in agreement however on the inside she's steaming from time to time.

(The way I see it that basically my 2 Aunts have taken what was the whole family wealth that was grandparents and kept it for themselves.)

the Purchasers that bought the raw land from my Aunt then turned that property within about 2 years and sold it for 1.3 million dollars. Still a piece of Raw Land with no improvments. Now the other realitives know about this. Talk about a mess...

(possibly that Aunt still had some kickback still in order coming back to her? I have a hard time believing a experienced active real estate agent would sell something for such a low price?

one nosy brother that seems to look up a lot of information on the internet. How does he get this information? Records of property transactions. Can you guys tell me?

He supposidly is somewhat supportive of what my realitive did. He claims that she really didn't have any other options. This realitive took him in as a child maybe thats why. I try to put my game face on because she is my Aunt.

Personally this all happened after Grandfather died. In my opinon Grandmother is not very sound of mind in making this kind of decisions.

Being the Granddaughter Im up in arms. Anyone else here have these kind of stories?

Dukes said...

I politely disagree seattle long term owner. I feel blogs like this, can share valuable information on market conditions, sentiment, specific locations and most importantly Anecdotal information.

When this thing gets kicked into gear up here this will be a place to share lots of good information, we may even convert a few non-believers into what is really going to happen out there.

I see your point, but I think the fun will really start here when the $hit hits the fan.

synthetik said...

>now that the bubble is staring us in the face and even public media is unable to deny it (note their sugarcoating still admits the obvious)...

I hope the blog won't die out. There may be a lull, but there will still be lots of news about where property is decreasing and by how much.

the blog will be a valuable resource to help have a better clue of when to buy.

I think a lot of people will want to stick around and watch the roller coaster ride down.

synthetik said...

Meshugh-

As far as where i got the data for median prices for San Diego and Seattle.

Data is from the "housing watch" website, which takes its data from the MLS.

I'm sure, being a realtor, you have greater access to this information.

SeattleMoose said...

Here are weekly numbers for KingCo Listings (SFH, Land, Condos) since 5/7/06

Date / King Co / Delta / %
07-May / 7302 / /
15-May / 7486 / 184 / 3%
21-May / 7665 / 179 / 5%
11-Jun / 8099 / 434 / 11%
18-Jun / 8154 / 55 / 12%
24-Jun / 8352 / 198 / 14%
01-Jul / 8417 / 65 / 15%
08-Jul / 8758 / 341 / 20%
15-Jul / 9057 / 299 / 24%
22-Jul / 9139 / 82 / 25%
29-Jul / 9044 / -95 / 24%
05-Aug / 9059 / 15 / 24%
12-Aug / 9191 / 132 / 26%
19-Aug / 9348 / 157 / 28%
26-Aug / 9442 / 94% / 29%

I keep this strictly for "trend analysis".

Like I mentioned in my earlier post I have looked at many rental homes over the last 2 months and back in March of this year. All I can say is that the degree of speculation based on what I have is seen....is HUGE. Of about 30 homes we have physically looked at and about 15 others we have played "email tag" with the owner, just about ALL of these homes (with exception of maybe a half dozen), are speculators/flippers. I found one guy who had 8 properties. The kicker was that we was only in his mid-twenties. I strongly believe a large part of the runup has been the artificial tightening of supply due to rampant speculation and hording of properties by "infestors".

As the sales cool and more "infestors" go "red" you will see the SFH market flooded with rental homes with initially outrageous asking rates for rent. Then as they find out they have to lower the price to get someone to actually rent....rental prices will come down right along with house prices. Then the only question is how long can an infestor "bleed cash" before throwing in the towel. Adding more fuel to the meltdown will be unfinished condo projects changing over to rentals as well as apartment to condo conversions......reversing.

Oh yea, and the housing meltdown induced recession.....

Interesting times are ahead.

synthetik said...

As far as renting vs. buying, it would cost me about $2000 more a month for a mortgage to live in the place I do now, were it available to be purchased.

Anonymous said...

The building I'm in was painted a few weeks ago. People in the apartments lowered their blinds for privacy. It surprised me how many of the blinds were still up - all of these units were empty.

Anonymous said...

Paul Krugman Quotes:

"The worst of the bubble is in the Zoned Zone; there are many places where prices have doubled since 2000. And that's where you expect the biggest price falls. The Northeast and the west coast contain most of the Zoned Zone."

"No, D.C. isn't bulletproof. It's somewhat insulated from those nasty macroeconomic events that Robert Toll thought were necessary to produce a housing slump, but D.C. is fully involved in the bubble and pop."

"If you look at the most leading of the indicators on housing, stuff like new home sales and applications for permits, they're off more than 20 percent from a year ago. If that translates into an equivalent fall in residential investment, we're talking about a fall from 6 percent of the G.D.P. to 4.8 percent. And this may be only the beginning; I wouldn't be surprised to see housing investment drop below its pre-bubble norm of 4 percent of G.D.P., at least for a while."

"Add to this the likely effect of a housing bust on consumer spending and you've got a direct hit to G.D.P. of, say, 2.5 percent or more. That's bigger than the slump in business investment that led to the 2001 recession. And the main reason the 2001 recession wasn't as deep as some feared was that the Fed was able to engineer... a housing boom. What will the Fed do this time?"

Anonymous said...

syn-

Data is from the "housing watch" website, which takes its data from the MLS.

Are you referring to http://www.benengebreth.org/housingtracker/? or http://www.housingtracker.net/? or something entirely different?

synthetik said...

http://housing-watch.com/home.aspx?d=90

Eleua said...

Moose,

I think you are spot-on with your prediction of plummeting rents as this selling season winds down. You can be certain that many that are relocating absolutely banked on selling their home within hours of the sign going into the front yard.

So, as they are now coming to grips with having to spruce up the place, and reducing the price a tad, they will soon be facing their kiddies starting school in the new city, and their job demanding more of their time. They will have to leave the house vacant, and pay two mortgages.

To help stop the bleeding, they will have to rent. Look to Sept/Oct as the beginning. When I lived in the Dallas area, this was the drill. If the house didn't sell, people usually rented it out only to try again next Spring.

BTW, if the stock market gets airsick, that will also cast a huge pall over an already skittish homeowner.

It could be interesting. There are going to be a lot of confused people out there.

synthetik said...

http://sandiego.craigslist.org/rfs/198601726.html

lol, desperation in San Diego

Anonymous said...

REAL ESTATE DATA GAMES.

Two of the sites below are from the same source. Now they have redefined the market area and suddenly we have a new median price for Seattle and triple the number of listings. I am wary. Redefining the market area does not help us determine the median price in the Seattle market. So many games are being played.

Maybe they will keep both sites up and running. I plan to check both cites in the future.

The new site.
http://www.housingtracker.net/

Seattle Median listing price for 8/21/06 is $389,950


The old and still existing site.
http://www.benengebreth.org/housingtracker/

Seattle Median listing price for 8/21/06 is $439,900


Here is a different site and it still has Seattle median at $439,900
http://housing-watch.com/home.aspx?d=180

SeattleMoose said...

The best way to determine what the price of any house should be is to go back to 1996 (precisely how far back Zillow goes) and assume 4% increase up to now. THAT is what the house should sell for. And 4% is "generous".

Examples (based on 4% appreciation schedule):

100K in 1996 worth 148K 2006.
150K in 1996 worth 222K 2006.
200K in 1996 worth 296K 2006.
250K in 1996 worth 370K 2006.
300K in 1996 worth 444K 2006.
350K in 1996 worth 518K 2006.
400K in 1996 worth 592K 2006.
450K in 1996 worth 666K 2006. (yikes, bad number)
500K in 1996 worth 740K 2006.

Use this as a realistic pricing guide but start your asking prices based on a 3% increase schedule and you won't go wrong. Upgrade costs should be added on top of these estimates (e.g. if a 100K home had 20K in upgrades then instead of 148K the fair price would be 168K).

Given that some places have seen house prices double or triple since 1996 you can see just how INSANE prices became.

Do NOT support insanity. 4% per year is very fair. Pay no more than that.

The above numbers prove that price corrections of up to 70% will be what it takes to get back to "normal" in the more bubbly areas.

meshugy said...

Redefining the market area does not help us determine the median price in the Seattle market. So many games are being played.

These are all amateur data collecting sites...I'd take their results with a grain of salt. The best resource is to look at NWMLS data...their current median price for Res/Con in Seattle is $420,000. That's up from $366,500 last year...a whopping 14.6% increase!

meshugy said...

Hi Moose,

Do NOT support insanity. 4% per year is very fair. Pay no more than that.

Unfortunately demand has severely outstripped supply...hence the 4% doesn't really apply. My guess is that even in Enumclaw you'd be hard pressed to find a house that only appreciated 4% year since 96.

emcityjill said...

Anybody have any clue (or can tell me where to find out) how many houses in Seattle are FSBO? I've seen lots of signs around, and wonder if it's a significant enough number to skew MLS data.

Also. I personally take ALL data (including MLS) with a grain of salt. I've seen how agents can screw around with databases. For instance, I just don't understand how it's ethical to list one property at least twice with 2 different MLS numbers so it appears "fresh". Wiping out legit DoM data and asking price history seems fishy to me. If a data set is compromised this way, then how are we supposed to trust the reports?

Lake Hills Renter said...

Anybody have any clue (or can tell me where to find out) how many houses in Seattle are FSBO?

Foreclosure.com lists FSBO among their data. No idea how comprehensive it is. There currently are 63 listings for Seattle.

Dukes said...

Once again Meshugy shows up, right on cue to argue that other people's information is "amateur".

It is only the great Meshugy's info that is up to snuff. Once again you are fulfilling your role as an antagonistic troll. Hey, I think that last sentence even rhymes...how bout that...

Anonymous said...

Google may take tower in Microsoft's backyard

By JOHN COOK
P-I REPORTER

Google continues to expand in Microsoft's backyard.

The Internet search giant, which opened a sales office in Fremont three months ago and a development center in Kirkland in 2004, is now taking a serious look at gobbling up nearly all of a 20-story office building under construction in downtown Bellevue.

Anonymous said...

I've got to back up dukes on this one. If you follow this dude Meshugy's posts he does nothing but argue with everyone.

I mean, how foolish is it to tell someone that their data is only "amateur" data. This guy is a joke.

Anonymous said...

meshugy:

How do you picture the future? Two families per home? Endless immigration? Every home turned into a duplex?

Anonymous said...

Is anyone watching King 5 right now? Robert Mak is doing the whole show on the Seattle condo market. We may be a year behind San Diego but our condo market is booming.

Anonymous said...

"Our condo market is booming"

Booming in what way? They are slapping together a ton of condos which are being sold to flippers...that is a false boom which turns into a bust.

I wonder if Mak will have any voices on other than real estate shills, now that would be surprising.

jpsfranks said...

RE Robert Mak:

This is a replay of a program that originally aired earlier in the summer, I believe, so given some of the recent trepidation that seems to be taking hold, it's probably a little out of date.

I've seen his show before, and normally I think it's pretty balanced, but this program was fairly lame. The two experts he had on basically only discussed the livability of downtown condos, and didn't talk much about the current market situation.

Also, as an interesting note, I'm pretty sure that one of the guys that was interviewed early on was the guy who runs the "urbnlivn.com" blog. And yet it seemed to be portrayed as random man-on-the-street style interview. A little dubious.

seattle price drop said...

Condos in Seattle are already slashing prices and offering incentives such as "No HOA dues til 2009"!!! Yes that's right, 2009. Last week it was 2008, the week before that, 2007.

Ayone who is seriously in the market for a condo must already know these things- all they've got to do is follow the RE section of the Sunday Seattle Times. Not too much "work" for even the most clueless of buyers.

So don't count on Robert Mak to prop up the market with a 3 month old show.

Interesting that even NOMA in Ballard is still advertising- they've even got little road signs clear up on 110th and Aurora pointing people toward their place.

Three or 4 months ago I went into their showroom and they went on and on about how everything but 4 or 5 were already sold.

Guess selling those last few is a real b*tch.

Peckhammer said...

"Anyone who is seriously in the market for a condo must already know these things- all they've got to do is follow the RE section of the Sunday Seattle Times. Not too much "work" for even the most clueless of buyers."

Interestingly enough, I've noticed that condo prices are substantially higher than I had imagined -- and it appears that prices have risen significantly in the past few months. Earlier this year, I thought about selling my condo, and I was convinced that it would go for $250K (which I consider ridiculous, but there appears to be an ass for every seat). Today I ran a search for condos in my zip code with similar square footage, building age and amenities and there is nothing under $275K that meets the criteria.

A friend of mine listed her unit in my building a few months ago. It sold for $315K, which was $5K under the asking price. I just noticed another unit listed in my building this past week -- a unit with one less bathroom and one less parking space, and the asking price is $370K. I will be very curious to see what happens.

One more note: A woman I work with just listed her house for sale on Friday. It sold 6 hours later. 12 offers, the winning bidder paying $15K over the asking price.

I am not seeing the slow down, even though I believe all the factors are in place to cause a major meltdown.

Anonymous said...

There are a few links on this very blog that are about downtown condos. The prices are higher than I ever remember and many of the new units are sold quickly. I don't believe most of the buyers are flippers. But the only way to tell is to see how many lights are on at night.

Now that the media is all over the condo mania, maybe we are reaching the top.

zzyzx said...

"The best way to determine what the price of any house should be is to go back to 1996 (precisely how far back Zillow goes) and assume 4% increase up to now. THAT is what the house should sell for. And 4% is "generous"."

Why are 1996 housing prices somehow assumed to be fair and accurate? That rule seems as arbitrary as if I said after prices decreased that the right way to determine a fair price would be to go back to 2006 and add 4% a year.

meshugy said...

Condos in Seattle are already slashing prices and offering incentives

High Pricedrop....then how do you explain that condos appreciated 20% YOY in July? They're actually appreciating faster then houses which appreciated 14% YOY. At some point all the condo development currently going on may flood the market...but right now it seems they can't build them fast enough.

S Crow said...

How do you explain the need for any incentives? Condo or residential.

Why are there any SOC's (selling office commissions)at 3.5% or more?

And that recent Cement Union Strike that just ended? What impact did it have on builders/developers?

A LOT. Cost my neighbor builder thousands, delayed the project by weeks and he's a small fry compared to the many larger projects put on hold in King county.

Anonymous said...

Here is the raw data for Redmond and Seattle as a whole since 5/5. You can draw your own conclusions:

Date Redmond Seattle %
5/5/06 144 22023 0.0%
5/8/06 149 22171 0.7%
5/9/06 149 22203 0.8%
5/10/06 140 22307 1.3%
5/11/06 143 22398 1.7%
5/15/06 151 22587 2.6%
5/16/06 152 22715 3.1%
5/17/06 150 22784 3.5%
5/18/06 148 22975 4.3%
5/19/06 157 23178 5.2%
5/22/06 155 23382 6.2%
5/24/06 149 23419 6.3%
5/25/06 155 23469 6.6%
5/26/06 157 23585 7.1%
5/30/06 149 23747 7.8%
5/31/06 156 23753 7.9%
6/1/06 155 23719 7.7%
6/5/06 168 24196 9.9%
6/6/06 165 24264 10.2%
6/7/06 162 24417 10.9%
6/9/06 157 24684 12.1%
6/12/06 161 24985 13.4%
6/13/06 162 25168 14.3%
6/14/06 163 25303 14.9%
6/19/06 180 25635 16.4%
6/20/06 181 25715 16.8%
6/21/06 173 25914 17.7%
6/23/06 185 26106 18.5%
6/26/06 199 26349 19.6%
6/27/06 194 26440 20.1%
6/29/06 189 26564 20.6%
7/5/06 182 26586 20.7%
7/10/06 193 27380 24.3%
7/11/06 191 27367 24.3%
7/12/06 192 27537 25.0%
7/14/06 196 27849 26.5%
7/19/06 195 28170 27.9%
7/20/06 194 28207 28.1%
7/21/06 193 28340 28.7%
7/25/06 199 28638 30.0%
7/26/06 197 28713 30.4%
7/28/06 192 28835 30.9%
7/31/06 199 28900 31.2%
8/1/06 196 28781 30.7%
8/3/06 203 28984 31.6%
8/7/06 206 29434 33.7%
8/9/06 206 29537 34.1%
8/14/06 208 29964 36.1%
8/15/06 200 30051 36.5%
8/16/06 201 30057 36.5%
8/17/06 199 30149 36.9%
8/21/06 201 30368 37.9%
8/22/06 203 30379 37.9%
8/23/06 207 30389 38.0%
8/24/06 206 30491 38.5%
8/25/06 210 30611 39.0%
8/28/06 211 30743 39.6%

Anonymous said...

You may wish to view his loans.
This will give you a better idea of how solvent he is. To do this in King County go to this website

http://146.129.54.93:8193/search.asp?cabinet=opr

If in Pierce County, go to this website.

http://hartweb.co.pierce.wa.us/localization/menu.asp

If in another county then do an internet search for your county's public records website.

From these websites you will be able to see the loans that this person has taken on properties in the county. If a loan is a fixed loan then the terms will not be displayed. If however the loan is an ARM or if there are HELOC's taken, then the terms will be displayed. Given that he probably used a HELOC in order to extract equity for his speculative new purchase, you should be able to find this. Keep in mind that it may take months for these records to be placed on the public records websites.

This will help you decide if he is a good candidate to rent from.

What I am finding is new subdivisions are filled with ARMs and HELOCs, while order subdivisions are filled with less ARMs but with many HELOCs.

It is good to see that you are renting instead of buying in this market. It is also good to see that you are educating yourself by asking questions of those outside the mortgage/realestate industry.

Crashcadia.

Anonymous said...

ZZYZX:

The reason to choose 1996 is because that is the year Seattle RE began on it's upward trajectory.

Prices rose slowly, in line with inflation. In '96, in many neighborhoods they began a catapult, ie.100K in one year vs. 10K.

So to wipe the slate clean of nonsense, you'd have to go back to the year it started and 2006 for sure wouldn't cut it!