Monday Open Thread
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31 comments:
Noticed on my walk in to work this morning, that the gargantuan McMansions on the 7300 block of 12th Ave NW have had a price reduction! The largest one, which has its price listed on its flyers, is finished now, and has been reduced from $875K to an amazing **$869K**.
Vulture buyers, get this one before it's gone. Seriously, if you walk your dog in the Ballard area, you should visit this block just to see how comical it is.
Actually, there are three of these hulking beasts, all built out to the lot lines, standing high above the other houses in the neighborhood. The middle one now has a lonely occupant! I wonder if he'll ever have neighbors. Maybe his is a true luxury house -- he can afford to have entirely empty houses on either side of him as noise buffers.
The worst ones I've seen in the north Ballard slope area are these massive houses around 7000 10th Ave NW, with a monster 2-car garage mouth that opens up to the street. What a horrid design, vast slabs of concrete instead of a lawn.
The rest of the new Ballard is townhome condo purgatory. What a mess.
ditto on that, christiangustafson
I remember back a few months to some 'Rhodes article about the high going like "gangbusters" in Seattle... then there's this whopper a few houses up from me in Phinney/Ballard.
MLS: 26104420
Albiet, a nice house actually, but it has been sitting on the market for a good 3 or 4 months without a nibble.... Although it hasn't seen a price reduction down from the 1.3 million its commanding at the moment. The owners obviously have no incentive to sell, but my guess is that they, ironically, put it on the market after the news article previously mentioned appeared in the paper...
My brother lives in Florida, and tells me about the simply mammoth developments that go on forever, with for sale-signs more plentiful than people. It definitely sounds like Florida is due for a crash with over-building like that.
But from what I can tell, Puget Sound just hasn't seen the same massive build-up that Florida has. yes, I see spots of new homes dotted around the East-Side (where I live), but I don't see huge new sub-divisions. Maybe this more restrained level of construction in the Puget Sound will ensure that the real-estate downturn isn't very severe.
A dozen years back, I read in a personal finance primer that a household should spend no more than 2-2.5x its gross annual income on a house. Interest rates were higher then.
Now I see households buying properties priced at a multiple of 5 times or greater their gross annual incomes. Mortgage rates are hovering around 6%, maybe a little more. Is there a formula using a multiple and an inversely correlated mortgage rate percentage? Like multiple of income times mortgage rate = 20?
Maple Valley has huge new subdivions. There's also a new subdivision, albeit smaller, being built in Redmond just north of Microsoft on 40th St -- "From the $1 Millions!".
I saw a report on Q13 last night about the Denver housing market (explain that to me), and after all the doom and gloom from the report, one anchor turned to the other and said "I'm glad that's not happening here." Wait for it, babe. Wait for it.
Acres of forest are being ripped out at Snoqualmie ridge for more new subdivisions. They've just completed one new area with space for 25 houses, with two to three more to follow.
I'm not sure what he paid (how do I find this out?)
I found out how much my landlord paid by looking at the King County records website. I was surprised I could actually see his mortgage paperwork right there online, just by knowing the address. I was even more surprised he has a 30-year fixed. For some reason his new property wasn't there.
I talked to a few people today for the first time that haven't been following the real estate market. It was a pretty frustrating experience. There weren't any arguments, but the same old addages kept coming up when I talked about how I thought prices would be coming down -- "real estate always goes up", "buy now or be priced out of the market", etc. I encouraged them to do the research and decide for themselves, and pointed them to as much data as I could, but they still looked at me like I was a little off. As much as I talked about wages and ARMs and interest rates and such, making the case for at least the potential of prices falling, all I got back was glassy eyes. Fortunately, none of these people are buying. I was just trying to make them understand why I won't buy right now.
Zillow seems to update their stats pretty regulary. Last month it showed my house at $464K. Now it's up to $475K.
I won't seriously check back for 10 years....$673,232
Zillow has a second quarter Seattle market analysis up. It focuses on their "Zindex" aggregate data.
Press release.
PDF of the data "analysis".
Nothing earth shaking, though the per-neighborhood graphical displays are somewhat interesting.
As much as I talked about wages and ARMs and interest rates and such, making the case for at least the potential of prices falling, all I got back was glassy eyes.
Exactly! You've just described the mentality of 99% of the buying public out there. Most people don't even know on which continent Iraq/Afghanistan reside, let alone have any clue about the impeding ARM/i-o crisis and the credit fueled psychology of the housing bubble. If they're susceptable to propoganda, they're just going to listen to the Real-Estate fueled local press to get their "news" and parrot the silly-mantra's of the used-car-dealers that are our local Agents/Lenders.
Most people are sheeple, they follow crowds and dismiss dissident voices. Why? Because its not as much work and its herd mentality... Unfortunately following the herd's a bad idea if you're a Buffalo heading for the jump, or a recent house-poor/money-renter heading for the proverbial credit cliff
Thanks Mash...that's very cool!
Matt,
I asked my mom if I had a twin and was separated at birth, but she said no.
Anyway...
You are so right about the higher math, and just how dumb all the Amurihkun Sheeple are.
Back in '88, Newsweek had a factoid that went like this:
What is the area of a 4cm x 6cm rectangle?
Less than 1/3 of the 17yo kids in the USA could answer it correctly.
OK, so if those kids are now 35, and in their prime house buying years, what are the odds they understand:
A=P[(i(1+i)^n)/((1+i)^n-1)]
What happens to P as i increases and A is held constant?
As my freshman calculus teacher said, "Because LIFE is a story problem."
If you want a more in depth study of the subject matter discussed in the "Credit Cliff" article, try my Clearcut Bainbridge blog.
A longer article with the same subject matter is here.
eleau,
I'm an only child so... (at least that's what my folks told me), anyway.. I'll check out your post
Considering people's least favorite subject is math, let alone geography (both of which BTW are integral to real-estate) and the sickening amount of debt the US public is willing to take on, its obvious that you're dealing with an undereducated public, or an indoctrinated public.
And even here, despite Seattle's super-high university degree per capita (although, I'm sure 95% of those graduates took the bare math minimum to fulfill their collegiate requirements) does not make us immune... analytical objective thinking is not taught at college, it is experienced through applied knowledge.
One has to ask what makes an educated public, my answer is a curious public, and by listening to the mindless automotans barf "real estate never goes down", "Seattle's different", and "get in now before you're priced out forever"... its obvious that curiousity is far from their priorites.
As I've always said, uneducated opinions are less valid than educated ones... When some knuckle-dragger espouses some pathetic talking point and says "well that's my opinion", you're in your right to say that his opinion is silly and no relevant...
This isn't communism, not all opinions are equal
The SDCIA message board cotinues to become more and more intriguing.
A few weeks ago it turned bearish and began reading like the best of the bubble blogs.
now it's got trolling realtors trying to convince former specuvestors to come to their part of the country and buy because it's "different" there.
the replies from the formerly enthusiatic "investors"?
"Spoken like a lying Realtor!"
this crash will be amazing. Like no other I've seen.
'shug & synthetic,
My "elestimate" is $120K in 2010.
You heard it here first.
E
this crash will be amazing. Like no other I've seen.
No kidding.
We are going to have to resurrect Cecil B. DeMille to make the movie that can capture the pain and drama of the imploding housing market.
Millions of yuppies commiting suicide, financial ruin of GenX, national bankruptcy, war, famine, and Californians forced to talk about something other than real estate (oh, the horror!)...
There is only so much you can do to protect yourself against the financial fecal vortex that will engulf all of us, so I plan to ride it out, as best I can (debt free), and be a witness to history.
It will be a multi-generational, epic event.
Fortunately, I happen to live some place special, so the fecal vortex will hit all of you losers, and leave me completely unscathed. My neighbors all tell me that BI real estate never goes down (the 280 BI realtors trying to make a sale, is another matter). Bainbridge is located in another unique place called the Pacific Northwest, and according to all the press releases, we are so special, we will never see a hint of a price drop.
The West Coast (which is where the PNW is located) is also so unbelievably sacrosanct, it will not only avoid any nasty downturn, but it will double in price every three years for the next 3 millenia. How this happens when wages are flat just goes to show how rarified we are.
In fact, the West Coast is "blue state," (actually, all the liberal pinko states were red until the mid 90s, but now we are blue. WTF?) and the Boston-Washington corridor is also a bunch of blue-staters, and they will never go down. Colleges, finance, and political power will keep them afloat. They all move to Florida, Nevada, or Arizona when they get tired of the Northeast (at least the ones that don't move to Bainbridge), so the swamp and the desert join the reality-free zone of real estate that is bulletproof.
So, that leaves Texas and a handful of other toothless morons that will be responsible for the financial black hole that is on the horizon. Yup, you heard it here first. Those Republicanish, nuclear family types that buy 3000sf brick homes, 15 miles from their employment, for 2x income are the most at risk.
Dumb bastards.
Eleua,
So, based on your predictions, is there a "safe" place to put my nest egg?
I have recently transferred most of my net worth into a number of savings accounts at or above 5%.
If the shat really hits the fan and interest rates go Jimmy Carter again, won't savings rates adjust so I'm at least keeping pace with it? Is there a scenario when that won't happen?
Also, some of the cash is not FDIC insured due to 100K limit. Should I even worry about that?
Seems like metals is the next bubble and I'm really just concerned about preserving equity.
Signed,
GEN-xer
Actually, I don't think Seattle is all that different. California also seems to be holding up well:
Home prices in deep freeze
Los Angeles led the nation's largest cities, racking up a gain of 14.6 percent.
Gen X er,
This is my GUESS.
Let's start with what I don't want.
Anything purchased with leverage over time (having to take out a loan to buy something). As interest rates climb, the values of that will diminish. This is where housing falls.
Bonds. As Jim Grant says, "Return free risk."
The US dollar. The FED will panic and burn the dollar.
Overpriced stocks.
Now, what I want.
I want to stay away from just about everything that has been in vogue for the past decade. I would want to keep something that is not a direct function of the US$, and ideally would want something that would increase as our scenario unfolds.
I would also want to keep things out of the perview of the US government, as they will raise taxes on the few winners.
This sounds like metals, foreign currencies, and some short-sales/puts on the really sexy, stocks that Boomers tend to hoard. As they puke them up to save their McMansion, they should have a dramatic reduction in value.
A man I respect buys Canadian Treasuries as a hedge against the US$.
This is what I am doing, and this does not mean that it will work. My only advise is not to back up the truck and do it all at once. Ease yourself into it and learn as you go.
There is no sense trading one follicle killing nightmare for another.
Oops, I forgot the most important thing.
Pay off your debts and keep it that way.
Nothing makes you enjoy life better, sleep sounder, and save faster than being debt free.
eleua-
Does your spouse actually find your gloom and doom attitude sexy?
I lived under debt for many years but buckled down and paid it all off about 2 years ago. The key was changing my lifestyle. I already had a good paying job, but I had too many bills and was paying too much for housing, etc. I got a really good deal on a rental place, saving me a lot of money, and that was the lynchpin to changing my lifestyle and paying off my debts. Now I'm better off than I have ever been before financially by far. And it turns out, I'm happier without the fancy car and apartment, as much as I liked them at the time. Now my money goes into savings and retirement, and the occasional travelling.
Mrs. E finds the fact we are debt free and free from the cult of Homeownership-at-any-cost very sexy.
Finding yourself in a SITCOM (single income, three children, oppressive mortgage) is not as funny as one might think.
Thanks for your concern. Things in that department are very bullish.
When you don't have to work to pay off your debts, it is amazing how much time you can free up for that kind of thing. An extra $2000/mo (difference between mortgage and rent) frees up some extra coin to give the Mrs. a treat, now and then. Apparently, she likes that.
I don't think my neighbor to the south has had any boom-boom in weeks. He is never home, and when he is, his time is spent working on his sweat equity.
Actually, when I theorized that living debt free was the best thing to make you sleep well, and enjoy life, I misspoke. It is the second best thing.
E
Never confuse what you want with what is.
I don't see myself as a pessimist, just a realist. Watching my country financially disembowel itself is no fun. I wish it were not so.
However, it is what it is.
Standing in the middle of a panic and screaming "Remain calm! All is well!" is rather stupid. If you could see the panic coming, you might be better off by saying "Save yourselves!"
I love optimists. I just find their sugar coated Bravo Sierra a bit too much to digest, from time to time.
All bull, all the time is for Cramer, CNBC, and the NAR.
Eleua,
What if I were to just leave most of my wealth earning 5% in savings accounts (or more as int. rises) -
Then, when the fear and panic has set in, I will be in a good position to purchase income property/passive income.
That's kind of my goal for the next 2-3 years.
Are you saying that buying Canadian treasuries would be a safe bet against keeping the money in FDIC savings accounts because of inflation and devaluation of the dollar?
Forgive my ignorance.
What do you think about General Electric? I own 1800 shares which makes up the bulk of what I still have in the market other than Vanguard SP500 index fund and retirement monies.
It seems the market is having a temporary blip on the upside - I don't expect it to last.
I don't -need- the money, however I don't want to wait 10 years for it to rise. GE seems like a value buy, after all Buffett has been purchasing quite of bit of it in the last year or so.
I could sell it now at a small profit. What do you think?
Homebuilder optimism sinks
If one is a contrarian and long-term investor, it may be interesting to check out Value Line Investment Survey for the homebuilder stocks that have been pummeled so far they have attractive price/sales ratios and are selling at book value (D.R. Horton) or below (Hovnanian Enterprises).
The homebuilders are now in the uneviable position of having to dump land.
Today on CNBC, Bob Toll was quoted as saying that they needed to find Greater Fools to unload it onto.
It is fascinating that Home Builders and the investors on the SDCIA board have begun, just this week, trotting out this Phrase "Greater Fool".
Fortunately for them, there are still some left.
gen-xer,
I don't know your situation. If you are worried that GE will drop in value, you might want to buy some PUT options to protect your downside.
If you are worried that you will miss out on any upside, you could buy the calls.
Either way, that will protect your position. GE is not a very volitile stock, and the options are pretty cheap. You could lock in your price all the way to mid-January 2008, take your $60 grand, and only be out $4K. The $60K in a brainless CD would produce enough to cover the cost of the options, so the only thing you would miss would be any dividend. That's not bad peace of mind.
I don't have GE on my radar, so I am ignorant as to its proper valuation. Generally speaking, I think most stocks are overpriced in today's market.
The only hard advice I would give is to take a profit when you can, and put yourself in a position to sleep well at night.
If you are interested in real estate, cash will be king in the next few years.
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