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Tuesday, October 06, 1981

Friday Open Thread

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

25 comments:

S Crow said...

Eric Fetters of The Everett Herald reports that Intermec sales are slumping:

"It is clear ... at this point that our sales shortfall from prior guidance will be substantial," Larry Brady, the company's chairman and chief executive officer, told investors Wednesday afternoon.

In light of the sudden decline, the Everett-based company will look at cutting costs in the coming months, Brady added. He did not elaborate, and company representatives could not be reached late Wednesday to comment on the possibility of layoffs.

Lastly, he mentioned customer worries about an economic slowdown, saying the last time Intermec experienced such a fall was at the leading edge of the last recession.

synthetik said...

Some of you might be wondering why foreclosure rates are so much higher in "fly over" states like Colorado.

here's a story that helps explain why.

The credit bubble/FED monetary policy is a nationwide thing because it has allowed homeownership rates to skyrocket. People that wouldn't normally be able to afford homes were now able to get subprime loans.

So for some of these people, keeping up with payments on a 80 or 120K home with loans resetting has been difficult.

Stated income and mortgage fraud only exascerbates the issue.

synthetik said...

This means that prices don't have to appreciate in those states to cause an increase in funky loans... that actually makes it worse; they're all upside down.

Eleua said...

Synthetik,

I agree with your overall assessment, but why not in the sexy, hip-n-trendy, uber-chic, see-and-be-seen, aren't-I-the-smartest-thing-you-have-ever-seen, parts of the country?

Does it have to do with the expectations of those areas? The Eastern half of the bubble is the Boston-NYC-DC corridor, and their retirement haven of Florida.

The Western half is California and the echo-bubble of the rest of the West.

NY and California have always been expensive, and that is where a disproportionately large segment of the Boomers live. Those are also the financial services capitols of America, and financial services is just about the only industry left in the USA.

When you live in San Francisco, you expect homes to be expensive and rise in price. When you live in Dallas, you don't.

I think this is a case of a bubble begetting a bubble. Flyover Country just doesn't have the expectation of rising home prices, as the portions of the country that are home to the self-proclaimed "creative class."

You need expectations to create a bubble.

Peter Taylor said...

Don't know if this has been posted or discussed yet:

Realtor.org's Seattle Research

There's a ton of hilarious stuff in there (check out the "Additional Discussino Points"). Here's the main points:

Home Price Analysis for Seattle Region

*Home prices in the region have significantly strengthened in recent months. After posting two
straight years of double-digit gains, prices continued to move strongly with a 16% gain in the first quarter of 2006 from a year ago.

Mortgage rates, which have risen roughly one percentage point since last summer, have not made
an impact in the Greater Seattle-Tacoma region. Home prices, though high, are affordable when
compared to those in California markets.

Because of the strong increase in home prices over the past two years, mortgage debt servicing costs
have risen significantly. Nonethless, the debt service cost relative to household income stood at 23% -- only a tad higher than the national average of 22%.

*A recent increase in new home construction reflects builders' response to the strong price gains.
However, builders need to be mindful of not oversupplying the market.

*The share of adjustable-rate mortgages (ARMs) rose in the first quarter to 47% from 40% just a
quarter earlier. Though ARMs are the best financing choice for some homeowners, they also carry interest-rate risk. An increase in ARM usage in the region is raising the regional risk of defaults and financial strain.

*The percentage of homebuyers who utilized sub-prime mortgages (those with rates more than 3 percentage points higher than the average market rate) was much lower in the region than it was for the nation as a whole. Also, a significantly lower percentage of mortgages was used to buy second/investor homes. Such conditions bode well for lowering risks associated with foreclosures and quick sales.

*Local job growth has been strong. The three-year job growth of 3.5% easily tops the national pace. Gains have been particularly strong in 2006. Not surprisingly, the mortgage delinquency rate in the first quarter for the state was well below the national average.

Job growth attracts additional potential homebuyers to the market and limits the number of “forced home sales” (as was the case in the early 1980s and 1990s). This suggests that any price decline
will likely be short lived given the additional buyers ready to enter the market.

*However, the biggest risk is the drastic slowdown in home sales activity that could result from further measurable increases in interest rates. Should the 30-year average fixed rate approach 8% (from its current 6.8%) as a result of too much monetary tightening by the Federal Reserve, home prices in the region could well decline.

Mikhail said...

Synthetik raises an excellent point about the fragility of real-estate markets in "fly-over" country. My view is that the ENTIRE United States has been in a massive real-estate bubble, not just the coastal areas that get so much attention.

Sure, some remote regions might not have seen double-digit appreciation in the last few years, but many of these places might well have had outright real-estate BUSTS if it wasn't due to the easy credit inflating real-estate throughout the nation. I think it is mis-leading to just look at the places with the greatest appreciation and assume that they will be the only ones hit in a downturn, or even suffer the most.

Sure, I expect that places that have experienced phenomenal price appreciation (Seattle anyone?) will feel a lot of pain in the coming downturn, but many other out-of-the-way spots will hurt enormously too.

MisterBubble said...

I have to take exception with the smug references to Colorado as "flyover country"...it may be in the middle, but having lived there for years, it has a lot in common with Washington (which is mostly "flyover country" too, you know....)

In particular, Denver and Seattle are demographically quite similar. Both have high education levels, fit, urban professionals, and relatively high median incomes (not to mention some of the most gorgeous natural scenery in the world!)

The biggest differences between Seattle and Denver, are that Denver has more room to sprawl, and less waterfront property. These factors may tend to put downward pressure on prices there, but my gut instinct is that Denver was just ahead of the housing bubble curve -- desirable neighborhoods were dramatically inflating in price during the late 90s, along with the usual gentrification, condo-ification, and yupp-ification that goes along with rising home prices. Very much like what's going on here, now, actually.

Eleua said...

mikhail,

I would not put forth the idea that Flyover Country is immune from the aftermath of the bubble. It will get hit, as people did lever up to extend their standard of living beyond what they could afford.

I just think the coastal areas will get hit harder, as there is much more "potential energy" in those markets.


Mr. Bubble,

Flyover Country is a smug term. I use it to highlight that very fact. I have lived in Dallas, and if you have ever travelled on American Airlines, it is the very definition of Flyover Country.

I find the smugness of the coastal areas to be quite fatiguing. The fact that someone lives here seems to confer, at least in their own opinion, some form of higher order intelligence or self-worth.

That is one reason I anxiously await the impending housing crash. Humble pie is exactly what we need.

synthetik said...

alright bitches...

Eleua, I expect the high investor states (CA, FL, AZ, NV, WA, MA, DC, OR) will get hit just as hard or harder in terms of foreclosures.

My feeling is that it will take a bit longer because the majority of these people BELIEVE(D) they are more shrewd financially. Their investment bets might make slightly more financial sense than those who live in MI, CO, SC, OH, IL. I'm assuming they have more cash and are going to ride the denial train all the way to the end. Also, there are more investors vs. CO, meaning they may have been less likely to take a funky loan vs. the 45K HS football coach in CO.

So ultimately they may have more time before that fateful knock at their door-- vs. the people in CO and MI who got taken by mortgage fraud.

(my ass-talking idea is that specuvestors still make the toxic loan mistake but not to the degree that middle-america first time home buyers in "frenzy" mode would)

And for you... Mr. Bubble.. you are indeed correct. I meant nothing by it however these terms become part of your vernacular.. I'll try to scrub it form my mind and be more kind to Jesusland.

Many people speak of "third world countries" but maybe we should focus on calling them "developing countries"

I thought the PC stuff went out the door around 10 years ago???

synthetik said...

Just for anecdotal evidence, when I was living in San Diego 2003-2004 was full of talk about speculation in SD, Vegas and Phoenix.

Somewhere in Mid/late 2004 everyone started to talk about Colorado.

I think you guys are damn lucky that housing appreciation flatlined in SD after that... otherwise you'd probably have seen much more speculation in Colorado.

Either way it looks like you guys are f'd.

MisterBubble said...

I'll try to...be more kind to Jesusland.

Har. Say whatever you like about that country. In my view, Colorado is much more an example of Huntinshootinspittinland than it is an example of Jesusland.*

*with the notable exception of Colorado Sprintgs, which is downright creepy.

synthetik said...

HAY! Look, we found 810,000 more jobs!

Oddleif said...

Spin Box alert! Once again, YoY prices are being used to mislead people...

http://seattletimes.nwsource.com/html/localnews/2003292454_webhouseprice07.html

synthetik said...

can you check that link? I can't seem to get it to work.

thx

dalas said...

That's been my argument all along. It doesn't have to be a bubble to deflat the price, a soft landing will hit hard as well. The price will cool down significantly, but don't bet on it dropping below 2005 value in higher up neighborhood in Seattle.

The Tim said...

The link: Latest home-sales numbers show definite slowdown

Shocking to see those words above an article written by Ms. Rhodes.

synthetik said...

I don't know if it had any effect, but I emailed her yesterday to PLEASE write a story about the slowdown.

In other news, you might have seen that The Donald and Robert Kiyosaki have teamed up to suck more money out of you.

I'm sure Kiyosaki knew there was a bubble... why didn't he write a book telling everyone to "hold off" on reading his latest blovations on making $$$ in real estate until after the bubble bursts?

synthetik said...

Reading the article you can see she still lays on some spin by first talking about how "sales were up 9.4% the first single digit increase in 24 months"

Then next paragraph "Compared with September 2005, King County home prices were up 8.6 percent last month, to a median price of $360,000. Median prices were lower in Snohomish County ($330,000) and Pierce County ($276,000), but both reported double-digit increases compared with the same month last year."

Instead of saying "inventory is up" she says "32 percent more properties on the market"

I guess I'm splitting hairs and I'm sure she has a lot of pressure to make even the worse news still shimmer with a tad of hope...

Still, I'm really impressed that she even printed the article.

rentalbliss said...

I have been tracking the reduced and new prices for the Seattle-Tacoma area on craigslist, and today the reduced jumped from an everage or 150 to 222 and new price from average of 500 to 873. This seems like quite a big jump to me.

synthetik said...

Just further proof that Greenspan is just another Bush Crony

"Worst May Well Be Over" in US Housing Slump

Bush is now saying our "Economy is Strong" and "Wages are going up"

Time to throw in the towel bub...

Eleua said...

I am a Republican, but this cheerleading the economy is downright embarassing. Rush Limbaugh, Mike Medved, Sean Hannity and the like are all telling us that our perceptions are wrong.

Just because ONE FREAKING INDEX makes a new high (on extremely weak breadth, while all others are 40 to 60% off their highs) does not mean that people can't feel the pinch of inflation, stagnating wages and shorts-soiling terror of their house losing value.

Al.com has an uncanny ability to get it wrong at every inflection point, with the exception of the inflection points he controlled.

It is going to be a big, fugly mess.

NotMyRealName said...

Rentalbliss said I have been tracking the reduced and new prices for the Seattle-Tacoma area on craigslist, and today the reduced jumped from an everage or 150 to 222...

I've been watching that too. Specifically, the number of postings on seattle craigslist real estate for sale section with the word "reduced" . This jumped from around 140-150 to around 220 in the last week or so. It isn't clear if this is actually an increase in the # of postings, or if the adds are just staying around longer. It is pretty easy to write a program to pull in the data and sort the ads by date. Maybe I'll do that this weekend (although I have to work...).

biliruben said...

I miss 'shugy.

seattle long term owner said...

did shugy's funding get cut now that Rhodes is openly admitting to the market cooling down?

Or did I miss something

synthetik said...

I think he's distraught at not being able to post anonymously.

I know I am... ;P