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Friday, August 21, 1981

Monday Open Thread

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


Peter Taylor said...

Fleckenstein: Face It: The Housing Bust is Here

Pithy quote:

It's a topic at the heart of another Wall Street Journal piece last week: "How the Fed Lost Its Groove" (subscription required) by economist Henry Kaufman. He notes the explosion of liquidity and debt that has occurred in the last handful of years (though it's been going on longer than that.) Though the federal funds rate has risen from 1% to 5.25%, he points out, this hasn't slowed down a debt expansion or credit availability: "Non-financial debt in the U.S. expanded at a rate of 6% in 2001, grew by 10% in 2005, and has been swelling at an even faster rate this year. At this pace, debt is growing at an astounding 50% faster than GDP."

Kaufman also notes that credit-derivative contracts increased from roughly $4 trillion at the end of 2003 to $17 trillion at the end of 2005. This growth -- in what Greenspan and the Fed think are so wonderful -- "is not just about reducing risk; it is fueling speculation."

meshugy said...

Oh no..Google invasion!

Tech buzz surrounds tower sale

christiangustafson said...

I shopped at COSTCO in SODO on Saturday. So funny how the first thing you see is the plasma TVs. They and granite countertops are the Aeron chair of this bust!

They were staging very large pallets of cat food into the normal grocery areas now, in preparation for the housing collapse.

I'm convinced that COSTCO will provide the physical infrastructure and distribution network from the shift from a service economy to one based on Soylent red, yellow, and green.

Peter Taylor said...

I was at a non-corporate espresso shop in Kirkland yesterday, and the bleach-blonde/fake-tan/designer-clothes lady in front of me had to try 4 different credit cards before she found one that had $5.00 available to pay for her triple mocha half-caf half-soy double-foam whatever. She took so long I almost offered to give her the five bucks in cash if she would just get out of the way.

Lake Hills Renter said...

I'm still bearish on the local housing market, although I'm finding I'm rather impatient about it. Watching the rest of the country start to tank and not here is really wearing thin on me. I still think it will happen, but the speed and degree of the descent are still big questions in my mind.

The idea of waiting 4-5 years for prices to get back to reasonable is pretty disheartening. I refuse to use anything but a 30 year fixed with 20% down, and with a single income -- decent as it is -- that effectively prices me out of the market right now.I'm getting such a good deal on rent, I'm wondering if I should just give up on the idea of buying a house anytime in the next 5-10 years. Maybe buy a wooded lot and build on it in a decade or so with the money I'm saving right now. I'm getting sick of the whole mess.

matt said...

They and granite countertops are the Aeron chair of this bust!

No doubt, you can almost sniff a flipper out by the touting of the obligatory granite countertops.

I'm not sure how much they go for, but its a wag at remodelling that can easily feign the notion of 'sweat equity'... basically, if nothing's been done but a few stainless steel applainces installed adn g-c'tops... its a flipper., stay away, the price of this house has been jacked 100K+ at least!!!

Maybe its all spurned on by the foot-channel, but I find tha irony in the following article "Americans on a remodeling stampede" is the following quote...

One thing we're not doing more of in the kitchen: cooking. The number of dishes Americans make at mealtime has been on the decline. The average dinner in 1985 consisted of 3-1/2 items. Two years ago, the typical dinner was made up of fewer than three items and that number has continued to fall oh the irony!!!

Yes, yes, our brandnew over-inflated kitchens are about as useful as a new Hummer for running the kids to soccer practice...

How are we paying for this conspicious and none-useful consumption!

That's more than I paid for my house. The price on these magazine-article kitchens can really blow people away," he said.

A lot of people could afford to be blown away in recent years thanks to rock-bottom interest rates and a rapid rise in housing prices. The upshot is homeowners were able to tap into a lot of equity and borrow big bucks for major kitchen makeovers.

Oh yes... Let me speculate what the downshot is.. hmmm... probably too numerous to count but I'd go ahead and say sell your Home Depot stock quick! quick!

synthetik said...

Lake Hills Renter,

No worries mate, it is already happening. Growth has been essentially flat this past month and don't forget we were late to this housing colon-rollin' housing rave.

The lemmings have spoken and most of them have already fallen over the ledge. Seattlites are holding a long rope that is tied to the idiots that have already fallen over.

Unfortunately they've forgotten their hunting knives and climbing gear. They're all doomed as well.

Just be patient, it should be a -real- buyers market here in about 2 years.

meshugy said...

Growth has been essentially flat this past month

Was last year at this time too...but look how much prices went up YOY!

Seattle Res/Con Median July 2005: $366,500

Seattle Res/Con Median July 2006: $420,000

Even though growth was flat from June 2005 to June 2006, we still saw a 54K increase YOY. So I wouldn't get too excited about a flat growth. Most of the growth happens in the Spring. This years big selling season is over...we won't really know if Seattle is headed downward till next Spring.

meshugy said...

Sorry..I meant flat from June 2005 to July 2005.

Dukes said...

Lake Hills Renter...'patience grasshopper' all will come to fruition in good time.

Yes Mesh should post some new stuff - the resident cheerleader bit is getting a bit old.

synthetik said...

I'd be willing to bet a great deal of cash that at this point you won't be seeing any more growth for a number of years.

What happened last year is of no consequence to what will happen in the near future.

I'm still new to the area, but one would think that the peak time to sell a home in Seattle would be when the sun is shining.

And it's shining like a mofo!

synthetik said...

I guess what I meant to say is that while appreciation is flat, I'm sure sales are no where near what they were during August 2005.

So I don't see where your seasonal argument has any merit.

Either way,the MSM finally has its claws into the RE crash; the tipping point has been reached. The masses will respond accordingly, even in Ballard.

Eleua said...

Even in Ballard.

WOW! Now, that's a bearish statement! (vbg)

Eleua said...


I like your "while the sun shines" premise.

Many of the FLLs around here are chirping about rents going up. The problem is there are just tons of houses for sale, and many are becoming vacant.

I think it is highly probable that once the summertime weather pattern is in the rear view mirror, many of these owners will be renting their homes out to help stop the bleeding.

Methinks rents will be coming down this fall. If you sign a lease that will allow them to vacate you after June, you will be able to live in a nice place for a song.

Anonymous said...

Tim, if you're going to delete posts, why don't you delete a few of Meshugy's redundant spammings?

He's posted the NWMLS July 2006 median numbers about six times now. It's one thing to want to promote civility, it's another to protect a troll.

meshugy said...

I'm sure sales are no where near what they were during August 2005.

They're lower...but very close. And extremely strong by historical standards.

Seattle Pending Sale July 2006: 1,045
Seattle Pending Sale July 2005: 1,189
Seattle Pending Sale July 2004: 1,077
Seattle Pending Sale July 2003: 1,093
Seattle Pending Sale July 2002: 818
Seattle Pending Sale July 2001: 820

So we have 144 few less sales then last year. But 225 more then 2001! Historically we're are still seeing a huge amount of sales.

matt said...

And extremely strong by historical standards.

Dude, what does this mean?

This doesn't make any sense... are you factoring in population growth? I'm guessing in say, 1900, there probably weren't a 1000 houses withing the city of Seattle..., why don't you get busy in excel and re-normalize your data to "sales per capita/household/what-have-you" and then post those... something substantial.

The Tim said...

Tim, if you're going to delete posts, why don't you delete a few of Meshugy's redundant spammings?

Because "making the same tired argument over and over again" doesn't break any of the three rules. If he was really spamming (like Tim Dunn, Spammer), then yeah, I'd delete it. However, in Meshugy's case, although his arguments all sound the same, at least he takes the time and effort to write unique posts.

Here's my advice: If you are annoyed with the arguments made by any other commenter, ignore it.

biliruben said...

Not to mention our tech economy was busy getting decimated in 2001.

If you showed 1990s numbers, I'd feel better about the comparison.

meshugy said...

are you factoring in population growth?

If we did, the market would look even more bullish. There were 6,000 less people in Seattle in 2000. That means less people are buying more houses.

why don't you get busy in excel and re-normalize your data

I do my best...but how come when synthetik makes vague comment about the market you don't immediately demand reams of data to back it up? Probably because the data doesn't back it up...

meshugy said...

Sorry, I meant ARE 6000 less people NOW in Seattle then 2000.

matt said...

Sorry, I meant ARE 6000 less people NOW in Seattle then 2000.

Okay... so your definition of historical goes back to the year 2000, after the implosion of the tech-bubble here in town and Greenspan knocks interest rates down to silly levels...

So dude, when you go on and on how inventory is tight with regard to historical standard i.e. the year 2000, then you just now offer data that there's less people here now then there was back in 2000, what's the inventory per capita/household/etcetera?...

And if less people are buying more houses, then what's given them the added edge? is it our post-tech-bust economy or is it toxic loans?

You can't have your cake and eat it too, offer up data and conform it to the way you want things to go...

and as far as Synthetik is concerned, he just said...

What happened last year is of no consequence to what will happen in the near future.

He's taken a wag at a future economic predictions, he's not dredging up old disputable historical data and extrapolating wildly into the futre... he's never done that. I happen to agree with him alot because from the national media and economic indicators, things are going south nationally...

KAP said...

As I mentioned in earlier posts, we are "trying" to move from California to Washington, however, our house has been on the market for almost three months, has seen three price drops, and we still have yet to have a "serious" buyer (one that comes with an agent as opposed to the "buyers" that come through during open house)come see the home.
We had been put on the "waiting" list for a Polygon home in the Lakeland area of Auburn. Two weeks after being told we were number 25 on the list and it would be a least a month before the new release, we received a phone call. Apparantly, the first release that had previously "sold out", hence the list, now had some openings. No, we were not yet interested because we had not sold our home yet. We were told they would not be able to put us back on the list if we did not take a home. I said, huh sure okay....pretty darn sure that I would hear from them again. Three weeks later,yesterday, we received a second call. Seems they have worked their way through their list and have come back to our name again and have several house ready for move in. I explained that we had still not sold our home, but had to lower the price and could now not afford their homes, if our home does sell. Asked if they would be willing to make a deal to lower their price. The answer was that they would not have to as their homes would sell at the price point they already had established. I chuckled and said call me next spring when your sitting on a ton of inventory and need to sell it. He said that, unlike California, Washington was different....sure, he said, there would be 'some' price adjustment, but not much, in the coming months. We bantered back and forth for a few minutes about my prediction that Washington would follow in CAs downturn, but he was sure that I was wrong. Afterall, he said, he follows the market. I answered that remark with...1) more than 1/3 of Washington buyers in these past years of growth came from Calif. If no Cals can sell, they will stop buying. 2) this is the second time in 6 weeks that we have received a phone call asking if we were ready to purchase a "move in" ready house (of our choice, btw) and 3) If he was so sure about Washington being "special" then why did he bother to engage with me at all?? one would think that his time would be better spent closing the deal with all those buyers out there. He chuckled, said he expected to get a phone call from me in spring asking to be put on the list again.

One year ago, California new home agents were given the same speach here. Now, they are giving away thousands (over 100k, in some cases) of upgrades, appliances, swiming pools, buying down the rates, paying the HOAs and Mello Roos or just plan knocking down the price of the home. One builder just tried to renegotiate the price of the land he had optioned to build more homes. When they could not reach a "new" agreement, he gave the land back (don't you wish you could do that if your new home lost a ton of value...).
It will happen. By next summer, Washington will be a bonafide buyers market.

S Crow said...

Mesh et at...

Sales in August? We will have to see, because they will be closing in Sept/Oct.

But anecdotally, our small business is absolutely slammed right now. I do think that this may be a push for those locking in lower rates for purchases and those refi-refugees pouncing on 3/4 point drops in rates over the last two weeks or so.

Sorry to be a slow poke with posts, but I have been busy. We'll be up late at the office---I imagine till at least midnight this evening and probably the same throughout these last two weeks before Labor Day.

This Fall will be very interesting. I was thinking "bubble" very early, as early as Fall 2004. Boy has this market marched on and on.

Your Chief 'Front row seat' Market Correspondant,

S Crow said...


Your example of what you are going through is just another indicator of how other markets DO INFLUENCE OUR LOCAL MARKETS!!!

Had a purchase deal fail to close not too long ago because the buyers from San Diego locating to Mill Creek just north of Seattle could not close.

Why? Their house in SD imploded at closing. At closing! Their buyers of their home walked away from earnest money at closing. Unbelievable. Guess what happens to the domino's. THey all fall. My office doesn't get paid, Realtors don't get paid, loan officers don't get paid etc..

In other news, and details later, we had a transaction this past week on it's way to gettting funded and recorded at the county implode at the last second. This is EXCEPTIONALLY rare. The title company called us and said stop, stop, stop. We already had been funded and it failed to close.

Fraud is alive and well.

biliruben said...

Thanks for the updates, kap and s crow.

Like I responded when you first told us of your situation kap - cut deep, get out, and rent.

biliruben said...

I have an old girlfriend who I ran into recently. Tried to sell me her house. I said "half price?" She said sure.

She bought out on Mercer Island, but the sale of her old house in Montlake crashed and burned at closing. Charming craftsman right in the middle of a great Seattle neighborhood.

We aren't special.

She's sweatin' it right now, paying two mortgages and dropping her price 35K. 81 days on the mls and counting.

My good friend's brother is officially freaking out right now. Over-extended himself on a McMansion down in Orlando. Also had a buyer back out. Paying two mortgages. Cut his price 200K and still no bites.

A lot of good people are going to get hurt very badly in this.

Dukes said...

Seattle will go the way of all other markets. The only way that you could make an argument that it won't would be IF you could say that there has been no speculation here.

Now, we all know that there has been PLENTY of speculation here. Add to that all sorts of loony suicide financing that SCrow has documented, and the information that I have received first hand from my brother in law (real estate sales) and my mortgage broker friend and you can see that we are NOT different.

Regardless of the Mesh pompoms that he likes to shake around, we are NOT different and prices will adjust here accordingly.

Anonymous said...

Driving through Ravenna this weekend, I saw multiple "price reduced" signs hanging off of properties on 15th.

That's a "core" Seattle neighborhood, folks. I don't care if these properties were overpriced to begin with -- the party is coming to a close.

richard said...

more than 1/3 of Washington buyers in these past years of growth came from Calif.

Looking on Uhaul's site, renting a 26' truck from Seattle to Los Angeles costs under $500. The reverse trip? $2100.

Seems like they're driving back alot of empty trucks.

meshugy said...

I saw multiple "price reduced" signs hanging off of properties on 15th.

Reduced from what? Who would want to live on a major arterial and pay top dollar? I've seen that happen all the time in Ballard...people overprice their crappy house on a busy street. They take a few reductions....may take a year to sell but they still make twice what they paid for it 5 years ago. I would say that's not a very good indication of a crumbling market. Even with those sorts of reductions, the median goes up, up ,up.

Try driving down a nice quiet street and see how many reduced signs you see.

Dukes said...

So Meshugy, put your money where your mouth is and sell you P.O.S.

Test your theory of how great it is out there. Let us know when you retire wealthy...

Dukes said...

should be "your" P.O.S.

Dukes said...

Here is a little link to the WSJ online edition and an interesting little chart. It shows that ... lo and behold...Seattle has a 27% reduction rate for home prices...let's see the pom pom explanation for this.


Anonymous said...

Lake Hills Renter-

You ought to watch CNBC. The bad economic news gets worse by the day. Should keep your spirits up as far as housing tanking.

Also, I'm guessing you are not really watching the market that carefully here if you really haven't noticed a change towards the downside.

Lots of stuff is price reduced. Lots goes under asking. Condos are already cutting prices.

I think we're on a par with most of the US.

Housing does not collapse overnight. It takes a while to turn that ship.

Chin up.

Anonymous said...


Thanks for your contribution. Love these real life stories that delineate precisely what we've been talking about.

People can't sell so next deal falls through.

Developers say they're having no trouble selling but then keep calling you back to see if you'll buy.

etc. etc.

And yet people in this area STILL think it's different here?

It's exactly the same. You're just ignoring too much info.

seattle price drop said...

The NWMLS has warned realtors here to cut back on de-listing and re-listing properties (in order to mask DOM's and price reductions) after seeing a "marked increase in the practise " here.

I've been seeing this over and over on the MLS lists since I first started watching them closely last winter.

Our DOM's and price reductions are much higher than is admitted.

Realtors here seem to think that this practise is just fine, not unethical, not lying.

There's a post on the NNJ bubble blog where WA. State is mentioned.

When the sh*t hits the fan, this is one of the things that could become illegal as it IS, yes, LYING.

It is a testament to the sleaziness of this industry that they see nothing wrong with this:

According to them, it's just a way to keep a property looking "fresh".

Lake Hills Renter: watch the MLS closely for the neighborhood you are interested in and you will see it's not different here, we're just better liars!

Anonymous said...

Try driving down a nice quiet street and see how many reduced signs you see.

This was north of Lake City Way. 15th is a nice quiet street up there.

Venture out of Ballard once in a while. You might learn something.

Anonymous said...

Another thing, Meshugy:

Here is a list of sales prices:

$200k, $250k, $300k, $350k, $400k

The median is $300k.

Here is the same list, after a devastating slowdown in the low-end market:

$350k, $400k

The median is now $375k.

....and oddly enough, it corresponds perfectly to what we know about the Seattle housing market: falling sales and rising medians.

Eleua said...

I kid you not! I did not write that Kap posting.

I'm telling everyone that this market is going down faster than Paris Hilton in a publicity stunt, once California inverts.

It won't take much to keep people like Kap trapped in their home.

Once our market tanks, many of our "high paying jobs" will be gone, and schlepping real estate will no longer be an option. Lack of jobs will also keep the Californians locked in their multi-lingual wonderland.

Actually, that also brings up the point of the X-X-Cal. You know, the Californian that moved here, and then witnessed out winter weather, (soon to be)lack of jobs, and sold the Roman Villa they had built on five acres of cedars and firs.

Kap, I feel for ya. You are correct on every word of your post. Builders will not keep calling back if they have people lined up to buy their homes. There are a few RE agents that call me, just because I looked at an open house. WITHOUT EXCEPTION, I really throw off the vibe that the house for sale is a bona-fide financial coffin at these prices. Nevertheless, the agent always calls me within the week or two, and asks what phase of the buying process I am.

Last summer, that would never happen. First, there were very few, if any, open houses last summer. There were multiple offers even before the sign went into the yard. No RE agent would spend her summer Sundays sitting in an empty house.

This summer, it really is different.

Picture Kap X 100,000. You can bet every last dollar that S-Crow has only seen the tip of the financial iceberg. This is going to be fugly.

Mark my words. One day, people will go to sleep in their $900K Bainbridge/Ballard/Bellevue home, and wake up in a $500K home. Just as they think they have seen it all, they will hit another $200K air pocket.

Anonymous said...

Eluea ....

Mark my words.

Why would we? What is your claim to fame?

darth_s said...

I live in the East side. Within walking distance of my home, I saw 3 houses on the market for 3+ months. Last year, all houses were sold within 1-2 months after listing. These houses seem to be quite reasonably priced based on zillow and the assumed appreciation of 10-15 % compared to sales of comps last year. Things are undeniably slowing down…

Anonymous said...

Second that. $800K to $1 M is not moving for months. Some new subdivisions have finished speculative homes unsold, no bids and no traffic.

Anonymous said...

I live in the East side. Within walking distance of my home, I saw 3 houses on the market for 3+ months.

Darth_s : Are you referring to the Woodbridge neighborhood in Redmond? I saw those three houses too. They have been on the market since early April.

Eleua said...


I need to check the rulebook. It didn't occur to me that you needed a claim to fame to opine in a forum dedicated to people posting opinions.

Anonymous said...

Do that, sailor. There is a lot of air in your opinions.

Lake Hills Renter said...

Someone needs to read the rules:

No intentional antagonism.
No "anonymous" posting.

meshugy said...

This was north of Lake City Way. 15th is a nice quiet street up there.

Actually, that's not Ravenna. Ravenna only extends to NE 75th St.

The part of 15th you're talking about is farther north and is much cheaper.

meshugy said...

Here's the latest from Thornburg:

Housing prices may fall, but slowly

Here's Thornberg's take.

"I think there is ... potential to have a mild retraction in prices, nothing dramatic. Housing prices are going to go down. The key is they are going to go down slowly, not rapidly."

And when they bottom out in this current cycle, they will probably do so at a high level.

He expects sales to retreat to the level of 1993 or 1994 and price declines totaling 10 percent or more.

Eleua said...

He expects sales to retreat to the level of 1993 or 1994 and price declines totaling 10 percent or more.

I think it is proper to look to the mid-90s for where this market will bottom.

Mid-90s prices.

Eleua said...

"I think there is ... potential to have a mild retraction in prices, nothing dramatic. Housing prices are going to go down. The key is they are going to go down slowly, not rapidly."

And when they bottom out in this current cycle, they will probably do so at a high level.

He expects sales to retreat to the level of 1993 or 1994 and price declines totaling 10 percent or more.

This is a RE bull's wet dream, and as usual, has no basis in any meaningful analysis of the underlying fundamentals of the modern housing market.

Take away the punchbowl of $400K loans for $100/mo, and the granite-etched "fact" that RE only goes up, and you have the makings of an enormous gap down in RE prices.

It will be faster than just about anyone predicts, more severe than we can handle, and last a lot longer than we thought possible.

Think stocks in '00-'02, only without a housing bubble to bail them out.

Peckhammer said...

"may take a year to sell but they still make twice what they paid for it 5 years ago."

They make? Are you reducing the "profit" by a years worth of payments, insurance, taxes, utilities, and maintenance?

Dukes said...

I respect Thornberg and his opinion, but he is NOT factoring in the historic imbalances that are built into this bubble. He is comparing it to the early 90's, which is improper to do as we have blown that period away in terms of speculation and price run ups.

The bears will be vindicated here, and the pom pom carriers (we know who I am talking about) will have nothing much to say by then.

biliruben said...


""My guess is we're going to have a hard landing," he said. "It's ugly out there."

- Aug 14th, after leaving The Forecast and being finally able to speak freely.,1,4462297.story?coll=la-mininav-business&ctrack=1&cset=true

meshugy said...

Hi Bili...the article posted above was dated 8/19. I assume his comments were post UCLA. But not sure...

biliruben said...

Yeah, I couldn't figure out when he said that quote, either.

I suppose they don't have to be contradictory.

He could expect a hard, slow landing. 10% a year for 5 years, say.

Or he could be referring to different geographical areas, thinking maybe the coasts will have a hard landing.

Dunno. All I know is I wouldn't use his opinion as one that thinks prices won't decline, and a fair amount - though perhaps over a few years.