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Sunday, August 02, 1981

Wednesday Open Thread

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

22 comments:

Peckhammer said...

Return of the Feudal System

The threat of rapidly rising housing costs in Ranier Valley, which will force many low and moderate income families to move out of the neighborhood in search of affordable rents and home prices, has sparked interest in a modern Feudal system.

This modern Feudal system, aka “The Community Land Trust model,” uses a dual ownership structure to lower the barriers to homeownership. Under the TCLTM, buyers own their home and a 99-year renewable lease to the lot under their home. Thus, the cost of land in the housing equation is greatly reduced, which makes the housing more affordable. The community land trust model provides homeownership opportunities to people who might otherwise be forced out of the city.

Is this the future for Seattle, or will there be a never-ending supply of rich buyers to keep prices escalating until a magnatude 9.0 earthquake causes a correction in the housing market?

Anonymous said...

Anyone know how the Spokane market is faring? The Spokesman Review is rah rah on housing and condo starts. Is it possible developers (invaders!)are leaving Seattle/San Diego/Las Vegas to do their damage in the Inland Northwest? It does seem like the residential market is cooling.

Dukes said...

I was in Spokane this weekend. I viewed 2 houses in South Hill (nice area) that recently took 50K haircuts. This was really interesting as one of them is right on Rockwood Blvd., which is a really nice area.

Nice, cute little houses sell in Spokane, but I was talking to this realtor (Jeff) who posts on Craigslist alot. He told me that over 30% of his sales were equity locusts from CA and Las Vegas. But, the trend has slowed. It is only a matter of time in Spokane as well.

Dukes said...

Here is something interesting from Bill Gross over at Pimco, www.pimco.com - Gross is quoting from the paper that Greenspan and company did last year on housing. It didn't get much play at the time which I thought was incredible, anyhow, here is the money quote:

"We find that real house prices are pro-cyclical and tend to reach a maximum near business cycle peaks, often after a prolonged period of buoyant growth in activity has raised output above its potential level and inflation pressures have begun to emerge. Subsequently, real house prices fall for about five years and their previous run-up is largely reversed. Real GDP growth slows during the first year or so after house prices peak as do growth rates of private consumption and investment.
House price booms are typically preceded by a period of easing monetary policy with FF rates bottoming out about three years before house prices peak. Rates then reverse quickly (after the peak) in response to falling GDP growth.


People really need to wrap their brains around what old GMan said there.

Dukes said...

If you look at the quote above and read the financial news you will see that we just hit a period where GDP is now slowing. Check!

5 years of falling house prices...Check! (already started in most areas, Seattle is next)

It is all cyclical, to believe otherwise is to fit into the old axiom: "a fool and his money soon go different ways."

seattle price drop said...

NBC Nightly news is doing a piece on toxic mortgages tonight, Wed., 6PM, chanel 5.

plymster said...

Nice post, dukes. I am continually impressed with your informative posts. You're one of the reasons I keep coming back to this blog. I'm glad to see you posting more again.

seattle price drop said...

Yep, we've precisely followed everything G-span said.

Next stop, falling home prices with the "previous run up being largely reversed".

But hey! Your friendly local realtor knows better than the guy who helped engineer the whole thing!

seattle price drop said...

Ditto on Plymysters sentiments Dukes.

Peter Taylor said...

Check out the Mercer Island Oasis.

Sales history:

Sale Date 12/2/2004 Sale Price $565,000
Sale Date 12/21/2004 Sale Price $610,000
Sale Date 3/3/2006 Sale Price $640,000

Today's asking price? $866,000. Yes, you too can have "newly refinished oak floors, new carpeting, new double-paned windows, new 6-panel doors, granite bullnosed counter tops, freshly painted inside and out, new 200 AMP electrical service. New stainless steel appliances in kitchen" for only $226,000.

matt said...

peckhammer, you must have missed the brand new Bentley they threw in the garage to sweeten the deal, right?

matt said...

Caution, flipper house ahead!!!

Anecdotally, this one is a howler! Right across the street from a friend of mine's place...

MLS# 26105178

purchased in 10/05 for $339,000
originally on the market for $475,000, price reduced to $444,000.

Besides the upiquitous granite countertops and stainless steel appliances, a little floor tile here and there, nothing has been done to this house, NOTHING. I've seen the evolution over the past year and since this place has been purchased, its sat empty.

Its now August, still empty, and it might have fetched up around $1800/month as a rental, so the flippers are already down 18K the way I see it (P/E ratio-wise).

They had a two hour open house once, but it was on a Tuesday afternoon! Ha! My friends say the flipper is an agent herself, which begs the question, are the Realtors(TM) beleiving their own hype?

Why in God's name would some one purchase a house when they can look in the tax records and see they're getting ripped by a flipper? It just makes no sense!

The Tim said...

On the topic of those in the real estate business believing their own hype...

A friend of mine that reads this blog (but hasn't commented) was telling me the other day about a couple he knows that just bought a home for $800,000 in Southern California, and financed it with some sort of negative-amortization loan. The real kicker... the male of the couple is in the mortgage business! So yes, apparently many of those that are out there pumping up real estate as the best thing ever do indeed believe their own hype.

Chris, if you're reading this, I'm sure everyone here would enjoy hearing more details...

Dukes said...

Matt said: "Why in God's name would some one purchase a house when they can look in the tax records and see they're getting ripped by a flipper? It just makes no sense!"

To do this people are banking on nothing more than them NOT being the greater fool (GF). But, like the old saying: "last one in is a rotten egg" it applies to real estate as well.

Although there are more harsh terms for it, F@&#%@CKED Borrower (FB), BagHolder (BH), Schmuck etc...

As long as prices rise, they are OK. But as soon as they STOP rising (they don't even have to decrease immediately) then they are in trouble. They are stuck in the absolute worse asset to be stuck in. Now, they are swinging huge monthly nuts, and if they are flipping, they are swinging more than one, maxing out ccards and destroying themselves financially...sounds fun...!!

Dukes said...

spd said: "But hey! Your friendly local realtor knows better than the guy who helped engineer the whole thing!"

How true and a great point!! I don't know how many times I have debated people (SDCIA board comes to mind) where I have made reference to Sir Printsalot (Greenspan) attempting to end the insanity. He has come out and said that asset prices are TOO HIGH and that they REVERT TO THE MEAN! And that after long periods of low risk, risk levels begin to rise. It is how it always works, a period of relative stability leads people to take on greater and greater levels of risk to seek the same returns, if people looked at ANY financial history they would know this.

But people living in bubble fantasy land (like some who post here...no names mentioned) refuse to believe the man who gamed the whole damn thing as SPD points out, people have been warned, if they choose to listen is another story entirely.

plymster said...

I think I may have some information on why Texas, OK, etc. might have high foreclosure rates. Today, Mish's latest post discusses mortgages, deed trusts, deficiency laws, anti-deficiency laws, statutory vs. judicial foreclosures, etc.

Hope that helps, Christina.

meshugy said...

Here's an interesting article from BMI:

Housing Bust: Just Kidding!


As the Business & Media Institute has documented, the media have been warning of a bursting housing “bubble” for almost five years. And some reports are still emphasizing the negative. NBC continued its series titled “Housing on the Bubble” on July 25. And on July 29 ABC continued the seller-focused housing gloom. But some reporters have had to admit that previous claims of economic catastrophe were exaggerated.

“One of the key economic indicators that actually drives housing prices is the employment picture,” Gibbons added. “And the employment growth right now is very strong in Houston, Dallas-Fort Worth, also strong in Seattle, Raleigh-Durham, Charlotte. So some of these markets, actually prices are actually headed up.”

Anonymous said...

Take my house, Please! A new listing today in Kirkland, mls 26127002, $899K, bought 12/06 for $422K...

My wife would like to buy now, but I won't pad this guys bankroll.

We've been in the market since October last year after selling our houses to a developer and have seen many listing like this.

Anonymous said...

House was actually bought 12/03. for 422K

sue said...

But Anon 11:29, don't you want this seller to have a nice retirement fund?

Why so stingy? SOMEBODY'S got to fund this sellers future.

I guess he figures better you than him!

Nolaguy said...

What a bargain!

http://seattle.craigslist.org/see/rfs/189772284.html

Complete with "new laminate flooring"!

Anonymous said...

Wooo.... laminate flooring. Now that's worth going into some major debt over!