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Friday, October 20, 2006

"...didn't buy their ticket on the last spaceship flight off a planet that's about to explode."

What a delightfully entertaining gift the Seattle P-I has given us this Friday in the form of guest columnist Sarah McCormic's amusing thoughts about the Seattle housing market:

Several years ago, on a stroll around my Ballard neighborhood, I stopped to gawk at the huge price tag on a For Sale sign in front of a modest 1920s-era bungalow. A young woman joined me, grinning ear to ear. "Isn't it great how all our values are going up?" she said.

"Actually, I rent," I said.

Her smile vanished. The woman cleared her throat and we shuffled awkwardly away from each other.

I walked back to the tiny house my husband and I were renting nearby, and felt a little seed of bitterness taking root in my stomach. I thought about the guilty look on the woman's face. She had been crowing about the same rising prices that might keep me out of the market, and I had caught her red-handed.

I was in my early 30s, newly married, and we had just started talking about buying our first house. Our friends were meeting with real estate agents. Everyone we knew was getting hungry for equity. A lot of people were starting to talk about getting "left behind" and we wondered if we might already be too late to the home-owning game.
With friends who have also been lucky enough to land a Columbia City cottage or a Shoreline rambler, there's a sense of shared joy and relief. I remember feeling like this in fifth grade when my best friend and I landed parts in the school play: "Thank God we both got in." We toast our hefty mortgages and spend long evenings discussing hardwood floor finishes, crown moldings and our all-important soaring equity.

But with friends who have not yet "squeezed in" to the housing market, I am reminded of how I felt when I got accepted by my first choice for college and my best friend got nothing but rejections. What do you say to each other? I try to offer soothing assurances: "I hear there are still some great deals up north." "600 square feet is plenty of room!"

But no matter what I say, I know we all feel like they have probably missed their chance, like they didn't buy their ticket on the last spaceship flight off a planet that's about to explode. I fear they're doomed to move back to Missouri in order to afford more than a studio condo on the fringes of the city.
Hah! That is probably my favorite analogy so far of Seattle's housing market—a planet that's about to explode. Only, I have a feeling that Mrs. McCormic may have it backward, about who has missed what chance.

I just don't understand the appeal of spending 2-3 times as much money (or more) for less space and more upkeep. Throw in the very real possibility that all of that "all-important soaring equity" could easily disappear into thin air, and I just don't see how "owning" (aka renting from the bank) is at all more desirable than renting in Seattle right now.

Is it just people's mindset that owning is always better, no matter what? At what point do you step back and say: "wait a minute, renting just makes a lot more sense right now"? If mortgage payments were 5 times comparable rents, would that do it? 10 times? When does the home ownership above all else mindset finally apply the brakes?

Congratulations on your "little house in Ballard," Mrs. McCormic. May you still be so elated about your purchase three years from now.

(Sarah McCormic, Seattle P-I, 10.20.2006)


Eleua said...

Picture this...

In the not too distant future...

Someone looks at the forest of 'For Sale' signs on a Ballard street, and says to someone they assume is a fellow renter, "I wonder which one of these will be the first to the forclosure auction?"

The stunned person says, "I was recently served with a Notice of Default. That's my house over there."


Again, I hate to be a broken record, but this was in play back in the Equity Bubble.

During the '99 runup, people would just assume you are buying all the tech stocks. When I would tell them that "I'm short," they would get this "are you under professional care for your stupidity" tone in their voice.

Funny how NOBODY wanted to talk stocks in '01-03. Now, all they want to talk about is housing, fixer-uppers, equity, Home Depot, granite, and just how dumb renters are. The tone in their voice is EXACTLY the same as it was 7 years ago.

That is why forums like SeattleBubble are valuable outlets. Everyone who is here wants to discuss the topic at hand.

plymster said...

This is the same attitude I get occaisionally from some of the weenies I've worked with about being a contractor instead of an employee.

I don't have the heart to tell them I make half-again their salary, have more mobility, and the same job security (actually better because of the way contractors are treated in accounting). Also, I don't have to politically maneuver at my job (though it's always a good idea to stay "plugged in"), and I don't piss my time away on random, useless "training" or "performance evaluations" where you write 10 pages of BS so someone can justify your 2% raise.

People get trapped in their mindsets, and pass over great opportunities (like selling your house at twice the price it should be) all the time. This is why sheeple get sheared and fleeced.

SeattleMoose said...

When I was transferred to Seattle a year ago I made the mistake of telling my new cube mate that I thought that prices in Seattle were the result of a "mania" and that prices would eventually be forced back down.

We are both professional college-educated people and I thought what was obvious to me was obvious to all.....

Instead, he looked at me and told me quite matter of factly that while he could no longer afford his own home (which in Gig Harbor had tripled in value in just 7 years), he told me in no uncertain terms that I was flat out wrong and that he fully expected prices to keep going up because of Seattle's "special appeal" and because with global warming CA would soon be too hot and everyone was moving here from CA.

I was stunned. I learned quickly to keep my "outrageous" opinions to myself.

But even then I still had problems. A small rotund woman who lives in Somerset and who constantly talks (quite loudly) about the value of her home, asked me the other day where I live. I told her we rent because we cannot afford a home.

She told me that even her 20 something neice just bought a condo in Kirkland and that I was crazy for not getting in on the "gravy train". She told me that at my age it was crazy to rent.

I just smiled. People here as a whole (the supposedly most educated population in America) appear clueless about the bubble and about what is about to happen.

I was tempted to send her a link to this blog but decided to just lay low. I would just become labeled as a "hater" against the "church dogma" of unending appreciation.

It appears that greed and blindness are related...

pacnorwester said...

We actually owned a house in the Southwest prior to moving north to the Puget Sound region. I recall the seemingly endless tasks that had to be done around the house and the relentless drain to my finances that “the American dream” was causing. Sold it, and had a great time moving around the country for a while before settling down here.

It’s often tough to be a renter in this day and age. People constantly call into question your reasoning ability, your financial sense, and your integrity…. Its easy enough to explain to them in dollars and cents how much cheaper (vastly cheaper) it is to rent than to own, how much more free time I have now, nicer place… But doing so just gets you blank stares. People look at you like your some kind of freak. Honestly, sometimes I have to go over it all again in my mind just to make sure; am I really thinking right? It sounds arrogant, but its like being one of a very few sane people swimming in a sea of insanity, and sometimes it makes me question myself.

The problem I think is this: owning real estate in America has always been seen as this really virtuous thing that people do, like going to church or joining the Rotary Club. It’s a symbol that “they’ve arrived”, they are stable now, ready to settle down, raise a family and be part of a community. And up until a few years ago that was all probably true. Now however, due to various factors, real estate has become the latest and greatest Ponzi scheme in history. But this fact has not been realized by the majority of Americans. Their heads are filled with lofty and righteous thoughts and dreams of stability and never ending profits for the rest of their days. Big cars, college for the kids, nest egg for retirement, maybe even a boat, all made easy by that always good, always worth it, chunk of the American Dream called Real Estate!! Trying to explain to them that maybe its not the same as before is tough, kind of like explaining to your Catholic grandma that the good Father So and So that she adored really was a pedophile. She’s just not going to believe it and isn’t going to like you for saying it.

Perhaps this is closer to the point then, Real Estate has been elevated to the level of sacred now. Like Motherhood, Apple Pie and Fireworks on the fourth of July it has entered the lexicon as one of the bedrocks of a good society. Suggesting to people that such base and lowly things like market forces still play a role is heretical.

This from the mouth of a pagan renter.

kpom said...

""...didn't buy their ticket on the last spaceship flight to a planet that's about to explode.""

A good metaphor for the housing bubble, and all you have to change is one word in the article.

Perhaps the author should talk to Seattle Eric about the wonderful, red-hot Seattle real estate market.

Christina said...

At what point do you step back and say: "wait a minute, renting just makes a lot more sense right now"?

When I'm not very happy with where I live (hostile social/political/economic climate that seems too long-term for my liking).
• When I don't have permanent resident or citizenship status.
• When nothing that suits us is available for 3x our gross income.
• When mortgage rates are above 8%.
• When Rentometer tells me my mortgage is higher than the average rent in my area.
• When I can't come up with at least 15% downpayment.

plymster said...

Nice post, Christina! That Rentometer is an awesome tool. Sort of a Zillow for renters.

rentalbliss said...

At what point do you step back and say: "wait a minute, renting just makes a lot more sense right now"

When I realize I pay half of what I would to buy the same house. Live a financially stress free life, save money for my families future, have the things I want now with real money (not credit). Be able to quit my job to take care of family if I need to and not be underwater, because we can support a household on 1 not 2 incomes. Freedom and mobility to move cities, or careers, NOT BE OWNED BY A BANK.

Kaleetan said...

Say WA?

Washington now has a new slogan the media and RE agents can start using to sell how nice and different this place is.


how gay is that?

Eleua said...


Too funny!

I heard that on the radio this morning. I guess that beats our older slogan:

Washington: we are not just serial killers anymore.

Eleua said...

BTW, Seattle paid $200K for that word:


I'm in the wrong business.

Lake Hills Renter said...

Fantastic post, pacnorwester. I'm considering changing my name to "pagan renter". =)

kpom said...

I'll bet she bought Amazon at $100/share too...

The weird thing about this article is the timing - I suspect that now at cocktail parties Seattle homeowners are currently talking in hushed tones about how houses are not selling after four months on the market, not about "20% annual appreciation". A year ago, this article might have reflected the homeowners gestalt, but now?

I think that the article is sort of a magical incantation - Ms. McCormic is starting to fear that she has made a Big Mistake buying a house two years ago (and when does her ARM reset, anyway?). The solution is to ever more fervidly incant "Buy Now Or Be Priced Out Forever", "Seattle Homes Will Never Be Affordable Again" and "Real Estate Can't Go Down", as a way of appeasing the Market Gods, lest they demand an ugly sacrifice.