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Wednesday, August 30, 2006

Local Media "Starting to Notice Cooling"

Thanks to reader Peckhammer for pointing out an apparently self-contradictory article in today's Seattle P-I. It begins quite predictably, with the usual examples that purport to show that the Seattle market is still hot, hot, hot...

House hunter Vicky Tsai has paid for two inspections of homes she didn't buy: one that she lost out on because she was outbid by $20,000 despite offering $50,000 above the asking price, and another that she passed on after deciding it was too small.
Inspectors and real-estate agents say that — at least for desirable homes in Seattle's more sought-after neighborhoods — purchase offers "subject to inspection" may become as outmoded as offers contingent on the sale of another house. Instead, would-be buyers are paying for inspections before making a bid on the house as is, or forgoing inspections altogether.
"It's becoming a way of life," inspector Fred Grant said while waiting to look over a West Seattle house earlier this month.
Darrell Marsolais, who owns PSI Home Inspection Services, said he has done more preoffer inspections this year than in past years.

"It's just the Seattle market," he said. "Most any house that's being offered in the core Seattle area, there's always multiple offers."
Pre-inspections are "a way of life," there are "always multiple offers," etc... we've heard it all before. But wait! It seems that someone managed to sneak in a snippet at the end about the reality of Seattle's slowing market:
The popularity of preinspections varies from house to house and price range to price range, [Sound Home Inspections owner George] Guttmann said. "Sometimes multiple bids are expected and people do preinspections and it turns out there weren't multiple bids," he said.

He added that he's starting to notice cooling in the housing market, with more signs noting price reductions. The latest statistics show slower sales and more houses on the market than a year ago.
Yeah, "the latest statistics," along with every month of statistics since April. After four straight months of obvious slowing, we're still just getting a passing mention of it in the press. "Annoying News Coverage" indeed.

(Aubrey Cohen, Seattle P-I, 08.30.2006)
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meshugy said...

Yeah, "the latest statistics," along with every month of statistics since April. After four straight months of obvious slowing, we're still just getting a passing mention of it in the press. "Annoying News Coverage" indeed.

Hi Tim...yes, the stats have shown a slow down from last years record sales. However, I think it's only gotten passing notice in the press because it just hasn't slowed enough to really put a dent in the market. There's still a lot of demand and relatively few sellers. Will see a lot more media coverage once sellers start to get really desperate and there's lots of horror stories the press can run. Right now, most houses are selling in a few weeks. A few really overpriced ones sit for a while and then slash a bit off and it goes fast after that. We need houses sitting on the market for months with huge far that hasn't really happened here.

Anonymous said...

Sometimes multiple bids are expected and people do preinspections and it turns out there weren't multiple bids

We learned this fact in July, when on several occassions with different real estate agents, we were told, you really should do a pre-inspection as there will be multiple offers. We balked. Later, we learned, in just about every case, there weren't multiple offers. Sometimes, there wasn't even one offer. (These were 1 and 2 bedroom condos in Ballard.) So what's going on. Do agents learn in Windermere real estate school to push for pre-inspections? Do they get a kickback?

David Aldrich said...

I've told this story before, but it has relevance to this topic:

Earlier this year (spring) I was looking at a house in Georgetown. I was at the open house and talking to the listing agent. I related my recent experience of bidding more than the asking price on a house, but losing the offer to a lower bidder because they waved all inspection contingencies. She told me that if I ever wanted to buy in Seattle, I would have to wave the inspection, or go the pre-inspection route. She also said that inspections weren't really necessary -- you'll just know if something is wrong.

She also told me that one of her clients lost out on 17 different offers becasue they insisted on inspections. Once they finally capitualated, they got a house. Another of her clients insisted on an inspection for a ~$750K house. The seller said, Sure, so long as you give me a $100K non-refundable deposit." The buyers gave the deposit, and ended up buying the house.

The house in Georgetown? I passed. It had a large building on the property which had been constructed sans building permits. That, and the constant stream of FEDEX jets was enough to turn me away fast. I nicknamed it "the aviator's special." The house did sell that weekend, however.

Anonymous said...

Peckhammer, I feel your pain.

Until May I was looking at buying a house. I put a bit on three:

1. Put down bid, had competing bids, lost bid because I insisted on a home inspection (even though I suspect I was high bidder).

2. Put down bid, had competing bids, lost bid because I insisted on a home inspection.

"Why does she want a home inspection? Can't she see that the home is selling as-is? Doesn't she trust that we're not selling a bad house?"

And actually, of the three I bid on, I liked that one best. It was a nice house in good shape and had been well-maintained.

3. Put a bid on house, no other bidders, seller tried HARD to talk me out of an inspection. The inspection failed, due to a bad/lazy/incompetent repair job.

All three sellers wanted no part of a home inspection. The RE agent pushed a "home warranty" as hard as she could, knowing with me that she was pushing a string. (She would get a steely expression on her face each time, like a little kid who knows he has to take the castor oil or else.)

Finally, after being so fed up with looking at utter crapboxes, and also after figuring that it was at least $150/mo cheaper to keep renting AND I get to live in a much safer part of town that is 20 minutes closer to work, I threw in the towel. They can keep their houses, I keep renting, and sooner or later they will find a buyer. Just won't be me.

Anonymous said...

Ugh. Peckhammer, you should pass out puke pans before telling that story :)

Anonymous said...

IMO a market that requires no inspection, pre-inspection, and/or escalation clauses defines a market that isn't following fundamentals and is, hence, a market that I don't want to participate in. It is amazing that people have let the RE professionals have lead the market down this path where the insane seems sane, but isn't that the housing market in general these days?

As for RE talking points, the RE community talks out of both sides of its mouth when it tells us that a house is the "biggest investment we'll ever make" and then turns around and essentially tells us not to treat it like the "biggest investment we'll ever make" by waving the inspection. I've found that most RE logic sounds good when taken out of context and fails to make sense when you attempt to roll it into a comprehensive model.

whetherforecast said...


Well said.

Shadowed said...

No way in hell I'd buy a house without an inspection, particularly with the rushjob remodels going on by flippers these days.

Anonymous said...

No way in hell I'd buy a house without an inspection,

Wise choice LHR, I'm with you all the way. Why? Well for starters, there's hardly a need anymore, the days of Ballard bidding wars are starting to resign themselves to the dustbin. Just like that article pointed out, Realtors (average salary of $12,000/yr by the way... not rocket science here) like many sellers don't understand we hit the peak of the market sometime late summer '05 and are still suckering clients into selling their souls with pre-inspections and waved inspections out of fear of losign non-existent bidding wars...

If you're thinking of not getting an inspection, this article should scare the hell out of you...

The 26-year-old Chicagoan, who's been slowly rehabbing the condo he bought last year, is part of a generation of young homeowners who admit they often have no clue how to handle home projects.

Oh boy! Sweat equity depreciating to blood equity when you crush your toe underneath that granite coutnertop that slid onto the floor.

Dave Payne, a 26-year-old condo owner in suburban Atlanta, knows what he means.

Payne made the mistake of trying to spackle over wallpaper in his condo bathroom, leaving uneven chunks where the wallpaper pulled away from the wall.

Yeah, but at least his dot-condo went up in price a cool 30K right?

You'd have to be insane to forgo inspection, never ever buy anything out of fear or emotion...

john_law_the_II said...



damn fools.

John said...

The bubble breaking means that the rate of growth is slowing, and everyone is banking on a high rate of growth. I just don't see real estate going down, due to the fact that the local economy (for now) is doing okay. Seattle is an anamoly. However, if there is a major burp in the economy, due to some sort of wall street freak-out (phony terror scares, attacking Iran, general infrastructre decay), then the trend may change.

Funny thing is, I just bought a place--in Georgetown, after doing two pre-inspections on two different houses--in West Seattle. The first I walked away from, because it was just too fucked up to live in--even for 237,000, and the other went into contract for less then I had offered because the other party had a bigger down payment; that house went for around 220, and I found out later in the PI that it had some serious problems, ones the inspector didn't catch, and that deal went south. By then I was long gone. I bought the last 3 bedroom for under 250,000 in this city.

Here's my take on the whole situation:

David Aldrich said...

noose papier said:
I just don't see real estate going down, due to the fact that the local economy (for now) is doing okay.

I don't agree, but I am not challenging you to a dual or anything. ;-)

The fact is, though, real estate is going down. Whether it continues to go down remains to be seen.

Anonymous said...

Where does that average realtor salary comment come from? Seems like everybody and their brother became a realtor in the last year or so. Id like to present that statistic to a couple people...

On buying without an inspection. I cannot thank my parents enough for talking me out of buying last year. I was involved the madness of waiving the inspection and bidding wars. If it wasn't for their advice on risky loans and inspections I could have been in a heap of trouble.

Anonymous said...

I just don't see real estate going down, due to the fact that the local economy (for now) is doing okay. Seattle is an anamoly.

Most of the bubble markets have strong local economies. Robert Toll made some mention of this in his address to TOL shareholders earlier this month.

Seattle actually has a higher unemployment rate than Bubble poster child San Diego.

Anonymous said...

When I lived in New Orleans, I bought a few houses where I waived inspection. These were houses that I renovated - not lived in.

But keep in mind, these houses were over 100 years old, and you could buy them for $15-25K. You knew going in that they were a mess.

I would always do a pre-inspection to see just how bad they were before putting in an offer. But, there weren't any bidding wars on these properties because of their condition, and the owners were more than happy to work with you.

Working on weekends, I would renovate one house a year, and make a modest $7-10k - sometimes a little more. It was a hobby, really.

After the hurricane, most of these types of houses were destroyed. And the remaining ones shot up in price because of basic supply and demand.

I decided that buying one of these homes for $80k was too risky for me, but you should have seen how many new "flippers" there were after Katrina. Crazy.

I would never EVER waive inspection on a house I was going to live in. That's insane.

The whole market is a mess - in Seattle, too. It's just the cost of entry is higher here. The lax lending standars have allowed a lot of wanna-be Trumps to emerge. And these people want to make $100k for painting a WWII crap box!!

I've been back in Seattle since April. Working in tech on Lower Queene Anne, renting in Belltown - I'm a happy renter.

Ok. enough rambling.

Anonymous said...

I'm with you NOLA.

If the house is a super deal, under 20K, and you know it's a mess anyway, I'll waive the inspection.

I actually did that once because it DIDN'T MATTER.

Buut there's no way I'd waive inspection on a home priced over 100K and there's also no way I'd believe or buy into the "multiple bids" BS anymore.

I've just heard too many stories from people in Seattle indicating that that line is a lie in too many cases.

It's a great way to get top dollar for a house though. You've got to hand it to these realtors, they really covered all their bases.

Anonymous said...

Look people, waiving inspection is nothing. They could have made you sugar them up by buying their kid a new ipod.

Anonymous said...

The end of any frenzy is when the standards are the loosest. First, inspections are the norm and waiving them is the odd exception. Then slowly people get used to waiving them. Finally, requiring one makes you the odd man out. Soon we'll be back to the times when people would think you'd be crazy to buy without an inspection. Things always go in cycles.

Anonymous said...

Why does everyone want to live in Seattle? To commute to their eastside job? They can get a house without a bidding war on the eastside, and actually have a back yard, less crime, and not have bums picking through their trash...

The SUV is optional :-)