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Friday, November 13, 1981

Monday Open Thread

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

33 comments:

Steve said...

It seems to me that Seattle is currently experiencing significant price reductions and the next set or two of numbers will reflect this. Yes I know, current numbers show inventory increasing with increasing prices. However, when I look at Ziprealty, I see most homes not moving at current prices and price reductions on a lot of homes. I did a search of Seattle north to just South of Sheridan Bch and included Kirland and Bellevue for homes between $500k - $750K. The search showed 301 SFRs with 108 with at least 1 price reduction. It seems to me that the well priced decent homes (and I find most homes around seattle are not decent) do move but most homes sit on the market for months even with multiple price reductions.

Neither a BH or HH, just someone looking to buy around Seattle and having seen the RE collapse begining to unfold in southern california, am interest in the dynamics unfolding in WA too.

synthetik said...

Where do you live now Steve?

meshugy said...

Hi Steve...price reductions on zip realty don't necessarily reflect declining house prices. People have been posting messages like this for over a year (i.e. Seattleprice drop). But prices have gone up at an extraordinary rate despite the price reductions seen on zip realty. The reason is that these reductions are usually people lowering the prices of greatly overpriced houses. So despite the reduction, the house actually sells for more then it would have a few months ago.

Grivetti said...

But prices have gone up at an extraordinary rate despite the price reductions seen on zip realty.

Define extraordinary

PepeDaniels said...

This is a question I'll throw out there since things seem slow so far this Monday :)

I have some friends who live in the Langley, WA area and they have a small house and an acre or so. The house is fairly new and started off (according to zillows) in the low 200's. It's about 5-8 y/o. It spiked into the high 400's and has now lost or dipped into the mid 300's.

It's totally nuts that this place would be worth anything approaching the 300's let alone the high 4's. It's a nice setting but a very modest house.

I think Eleua may have recently posted something on the relatively high cost of living on an island off of the coast. I understand that a lot of people live and work on Whidbey etc. and that may be a different story. Still, it seems that the relatively high cost of getting off of these places to work, play etc is relatively high. $12-$15 a roundtrip seems high before touching the gas pedal. With energy costs almost certainly going to go up (for both cars and ferrys) how can those places hold their already too high prices?

Just curious what you guys think about the costs/benefits of living in places like Bainbridge/Whidbey etc.

Grivetti said...

Just curious what you guys think about the costs/benefits of living in places like Bainbridge/Whidbey etc.

South Whidbey's nice if you're a homebody, but be damned if you can find amenities approaching what we're used to on the mainland... You have to either drive up to Oak Harbor for retail (Which ain't all that) or wait in ferry traffic at Clinton... Variety of restaraunts and grocery stores is also extremely limited. If you're not into convenience, by all means...

meshugy said...

Define extraordinary

Seattle Price Drop (what happened to him, did he give up and buy a house?) was posting these zip realty price reductions back in Jan. He claimed these were clear evidence of a crash THIS year. Let's see what happened:

King County Res Median Jan 06: $390,000

King County Res Median Oct. 06: $440,000

It's quite clear these price reductions had no negative impact on house values....in fact they increased at a feverish pace. A whopping $50K increase in 10 months. $5,000 a month gain....did you save that much renting?

Grivetti said...

Here's what I find extraordinary 'Shug...

Majority of New WA Mortgages "Nontraditiona"

Or as I would put it, majority of new mortgages 'suicidal'

Grivetti said...

$5,000 a month gain....did you save that much renting?

Actually I made that and change on my 401K with the pick-up of the S&P and other assorted mutuals... now that's "equity"

MisterBubble said...

"prices have gone up at an extraordinary rate despite the price reductions seen on zip realty. The reason is that these reductions are usually people lowering the prices of greatly overpriced houses."

Ignoring Meshugy's use of ambiguous exuberant adjectives, there is some reason to believe that this might be true.

Back in July, I did an analysis of homes sold in June in two Seattle neighborhoods (Magnolia and Ballard), based on the sales data in the King County eSales database, and normalized everything to find the price per square foot in each neighborhood. Here's what I found (in greatly summarized form):

Ballard (eSales area 086):


Price/sq.ft....#2005....#2006

$200...........3........0
$300...........16.......3
$400...........20.......16
$500...........12.......8
$600...........3........3

Magnolia (eSales area 390):


Price/sq.ft...#2005...#2006

$200..........0.......1
$300..........10......2
$400..........17......11
$500..........12......17
$600..........7.......7
$700..........4.......4
$800..........1.......0
$900..........0.......1

So here we have data for a "starter" neighborhood, and an "upscale" neighborhood. If you plot these histograms, you find that the 2005 and 2006 data closely track one another at the high prices, but that there are fewer sales at the low prices in 2006 than in 2005.

Of course, this begs the question of what this data actually means (i.e. does the drop in low-end sales indicate a lack of supply of equivalent properties in 2006, or an increase in demand?), but either way it was clear that there was in increase in home sales prices per square foot between 6/2005 and 6/2006. This was despite rising inventory and slowing sales in 6/2006, in addition to anecdotal reports of price reductions....

I need to repeat this analysis for more recent data, but Meshugy has a point (however exaggerated) that the price reductions in the MLS don't necessarily reflect a slowing market.

MisterBubble said...

"A whopping $50K increase in 10 months. $5,000 a month gain....did you save that much renting?"

Whatever. Sell your Ballard sh*tbox, shugy. See how much you've really "earned."

You keep forgetting that there's a canyon-sized gap between changes in median home prices, and changes in your home price. You also forget that unless you're planning to rent (cheaper...for now) or move to a less-expensive part of the world, you'll have to pay proportionally more to buy your next home.

Of course, that's the bitter, bitter irony that makes me laugh at the arrogant folks who have visions of equity sugarplums dancing in their bubbly little heads: a rising tide raises all ships. And unlike stocks, bonds, and other liquid investments, sooner or later, you're going to have to pay for a new boat.

Even if this bubble never pops, I can't wait to see what happens when a generation of boomers tries to simultaneously cash out of their "retirement ramblers," only to find that they have nowhere else to go.

Yet another reason why retirement planners agree: a home is not an investment.

Steve said...

I could make the argument that price reductions are not yet reflected in DQ numbers due to the homes with price reductions not selling at currenbt pricing levels. The homes that are currently selling are well priced good quality inventory that often close at asking price or higher if they receive multiple offers. Self serving argument I know. I do think the ultimate question is whether Seattle really is that different to the rest of the country or does Seattle just lag behind California by 6 - 12 months. I don't know the answer...I am just another Californian looking to escape California and buy a decent home in Seattle, Portland, Austin or Denver. Fortunate in that my job allows me to live anywhere in North America.

I reside in Los Angeles and the one take away I have after viewing multiple Seattle houses at open houses is that the quality of Seattle inventory is extremely low. I frequently leave a house wondering how the current owners can live in the place let alone have the balls to show the place to strangers.

Grivetti said...

Fortunate in that my job allows me to live anywhere in North America.

Good Gawd man! Why live in a metro area at all? If I were you, I'd be checking out places like Taos NM, Ashland OR, Burlington VT, places of beauty with a mix of culture and 'normal' RE prices

Steve said...

Unfortunately I need to be near a major airport as I fly every week or 2.


"Good Gawd man! Why live in a metro area at all? If I were you, I'd be checking out places like Taos NM, Ashland OR, Burlington VT, places of beauty with a mix of culture and 'normal' RE prices "

Eleua said...

pepedaniels,

I have not been posting much, as I have been occupied with other things - primarily laughing my ass off as gasoline in Poulsbo is $.15 higher since 11/7, which was the low. Anyone else see anything like this?

Yes, I think island communities have extra costs associated with them. If you live on Bainbridge Island, and you need some basic retail, you have to drive 20-30 miles to Silverdale, unless you can find it in Poulsbo (WalMart or Home Depot). Often times, Kitsap is lacking in higher end or specialty items, so you are off to Seattle.

A Seattle trip is almost $30 for a round trip, before parking, gas and the risk of driving in a congested urban area.

Where am I going with this? If you incur an extra $400-$800 every month just because of where you live, you have to treat the ferry costs as non-deductible living expenses. This has to come directly off the amount one can divert to housing payments.

Yes, as EVERYONE will say, IF you work right in downtown Seattle, the ferry is a great way to get to work. Yes, that is true. Any moron can see that. However, everytime I hear some housing bull chirp about all the job growth, it isn't about a job in the urban core of Seattle, but jobs in Everett, Redmond, and Bellevue.

That is a freakish nighmare of a commute from Bainbridge Island.

If you live in Seabold (NW Bainbridge), it's 15 minutes to the ferry during commute times, plus a 30 minute wait, plus a 40 minute ferry ride, plus 15 minutes to I-5, plus the last leg of your commute.

Assuming you work 30 minutes from I-5 and Seneca, you are looking at a 15+30+40+15+30= 2h 10m ONE WAY!!!

If you are big wheel at your employer, and make enough scratch to buy your "Bainbridge Island dream home," you are looking at at least a 10-11 hour day. So, with 14 of your 24 hours taken up just working, you have 3 hours for your morning prep, dinner, evening prep, and family time. Your entire weekend is likely spent driving to and from Home Depot, and maintaining your aging $650K rambler.

Good luck.

Once the romance of ferry life wears off, it is just another annoying reality of island life. This reality will have to weigh on home prices.

$600/mo at current rates is worth almost $100K in a home mortgage, depending on how your taxes go.

If your garden variety rental on Bainbridge wouldn't cashflow at 40% of it's current price, what will be the eventual fallout in housing prices? Many homes wouldn't cashflow at 25% of their current list price. Factor in another $100K off, due to commute costs unique to Bainbridge/Whidby/Vashon, or any other community in the Westsound region, and you have the makings of a real disaster.

It has all worked, as long as prices continued to escalate. We have not tested the market in the other direction.

In a declining market, why would you buy if it is far, FAR cheaper to rent? With all the new construction, and second homes on BI, there will be plenty of rentals.

That's why I'm not joking when I say "20 cents on the dollar by 2010."

synthetik said...

My job allows me to live anywhere too, which is why we chose Seattle.

Anyway, most places I've lived do not count basement as square footage. This is not true of Seattle.

I'm sure this is skewing things a bit. Before we moved from San Diego to Seattle back in February 06' I ran a bunch of comparisons... and noticed you could get quite a bit more house for $100-150K less (not true anymore) -- all based on square footage.

Upon moving up here we found that all these homes included semi or fully remodeled basements in their listings.

How can one call an area "liveable space" or include it in the square footage when there are no windows and rediculously low ceilings?

navygator said...

pepedaniels

I lived in Oak Harbor (Whidbey Island) from May03-Oct05. Those were the worst 2.5 years of my life. If you enjoy any type of shopping or eating at a restaurant (other than fast food) forget Whidbey. If you like hiking, bird watching and staying in your house 300 days a year Whidbey is for you.If you intend to commute onto the Island via ferry keep in mind that in the summer months you could have a 1.5-2 hr wait to get back on the island. You will also have to leave the island if you need any type of special medical care. As an example the hospital in Coupeville only started offering epidurals 24 hours a day in I think 2002/2003. They just didnt have enough Anesthesiologists to cover 24 hours. We were under the Navy's healthcare and had to travel numerous times to Madigan Army Hospital and Seattle Children's Hospital for care. And the housing is now way overpriced (I know you are all shocked). We bought for $225K and sold for $340K. There is no way I would have bought our house for 340K! IMHO the islands are a great place to vacation but forget living there. My friends and I who have left refer to it as Alcatraz.

dalas said...

"my neighbor defaulted, there must be a bubble!"

you guys were better off just quoting newspapers.

Mr. bubble, enlighten us with your "lack" of knowledge again please.

dalas said...

basement doesn't count as living space in Seattle, not sure what you are referring to. if you pick up any random appraisal, you will notice that basement is not included in calculation.

I just love the amount of accurate information being used by the "contributors".

redmondjp said...

. . . primarily laughing my ass off as gasoline in Poulsbo is $.15 higher since 11/7, which was the low. Anyone else see anything like this?

Yes, this exact same thing happened over here on the Eastside--prices went up the day after the election--I am primarily focused on diesel prices since I have three diesel vehicles, and at one station I drive by every day, diesel went from $2.55 to $2.90 the DAY AFTER the election. Related?? Who knows. Could be that they got their first batch of ULSD (ultra low sulphur diesel) which is now required (and is being used as an excuse for higher diesel prices).

But it does seem like RUG went from $2.3x to $2.5x since last Tuesday as well. Coincidence?

Changing gears, I drove around the northernmost part of the West of Market neighborhood in Kirkland yesterday to see how the teardown-replacement is progressing. 4-5 years ago I used to walk around there with my girlfriend (now wife), and there was one new house that sold for almost $1M back then (absolutely no view either) and we couldn't believe it. Thought that it couldn't go any higher than that.

Well guess what? $1M is CHEAP now for that neighborhood. $1.5M seems to be the going rate now for new construction (this is for houses with no view of the water). There are still a few pre-1960 houses tucked in between the McMansions, most of which seem to be in pretty good condition, although I'm sure they will continue to succumb to the wrecking ball . . .

I did notice significantly more FS signs than I have seen in years past, however. Even some "price reduced" signs (yeah, $1.5M to $1.4M WOO HOO!).

synthetik said...

>I just love the amount of accurate information being used by the "contributors".

Hey, I never said I was perfect; however every open house I have been to DOES include the basement into their square footage calculations.

If I'm wrong, I will gladly apologize.

Eleua said...

In defense of Synthetik...

I run through houses that include finished basements in their advertised amenities (extra bedroom, extra bath, extra kitchen, extra living area)

While I normally don't bring my yardstick when I freeload at open houses, I always see finished basements (with little or no windows, carpet over concrete, cheap paneling, and musty odors) included with the normal living space.

This is especially true in older homes, where there are only two original bedrooms, with the third being located in the renovated basement.

6'-6" ceilings! Yikes!

MisterBubble said...

There's no need to "defend" synthetik....don't feed the troll.

Geon said...

If the basements are "finished" they count 'em towords the sqft....that's for sure.

I noticed on hgtv in atlanta, they don't count the basement, finished or not.

meshugy said...

The Housing Tracker is now showing a 2.4% decline in inventory. The month of Oct is gone and we are now back to Sep. #s.

Richard said...

primarily laughing my ass off as gasoline in Poulsbo is $.15 higher since 11/7, which was the low. Anyone else see anything like this?

It's only up $.11 in Ballard...

CRichard said...

Meshugy, what is the point of your HousingTracker post? Are you trying to say that the seasonal drop in inventory means that there is no housing bubble?

For those that understand the difference between secular and seasonal trends, here is the YOY change in inventory for the HousingTracker Seattle data:

8/14/2006-22%
8/21/2006-25%
8/28/2006-30%
9/1/2006-26%
9/7/2006-28%
9/14/2006-26%
9/21/2006-30%
9/28/2006-32%
10/1/2006-34%
10/7/2006-34%
10/14/2006-35%
10/21/2006-37%
10/28/2006-37%
11/1/2006-37%
11/7/2006-36%

Oh, and I guess the 1% drop on 11/7/2006 is proof that YOY inventory levels have now peaked and that sellers can stop reducing their prices.

rentalbliss said...

In my nieghborhood I have noticed 1 sale SFH in about a month, and a couple listings fall off the MLS with no sale. With all the listings around it would probably translate to 2%-3% easy, but will be back in the spring.

Kaleetan said...

11/1/2006-37%
11/7/2006-36%

This is an interesting trend.

Is this 1% drop related to the drop in interest rates during early fall?

I am under the impression that there is a significant hiring spree currently going on by employers drawing well paid, educated, rich, out of staters seeking escape from the east coast and california.

PepeDaniels said...

eleua said
In a declining market, why would you buy if it is far, FAR cheaper to rent? With all the new construction, and second homes on BI, there will be plenty of rentals.

A Seattle trip is almost $30 for a round trip, before parking, gas and the risk of driving in a congested urban area.

Where am I going with this? If you incur an extra $400-$800 every month just because of where you live, you have to treat the ferry costs as non-deductible living expenses. This has to come directly off the amount one can divert to housing payments.


And other's comments as well.....including the higher costs of renting in those places.

All of these comments confirmed my suspicions including the friend's referring to Whidbey as Alcatraz! I managed to piss off my friends with a similar comment about the island when I first came out here.

Some people say the ferry rides are their decompression time, time to make cell calls, etc. etc.. I agree that ferry romantization wears off pretty quick. Of course the "down" time is not optional when you are in a hurry or just don't have that time etc.. It's not like highway commuting but still, it's a lot of time and $. I would think you're right, not everyone's going to just step off of a shuttle from the ferry and walk into their office or whatever fantasy people might have about it. Additionally, some of the ferry's don't seem to run late, so it can restrict staying late at events, bars, etc.....

What's amazing to me is that people are sometimes paying rather high rents at this point.

Go figure.....

MisterBubble said...

"Is this 1% drop related to the drop in interest rates during early fall?"

No. Generally speaking, inventory goes down in the winter as people pull their properties off of the market and wait for the holidays (and the cold weather) to pass.

This year, however, listings have actually remained flat going into the winter, indicating a definite slowdown, and a possible increase in seller desperation.

wansuiclay said...

Like Steve, I have moved up from Southern California (only because of MS) and have noticed the same things.

Houses up here are definitely pretty dumpy/depressing as compared to San Diego/LA/OC. My personal estimation from actively looking at homes for 4 months is that there are only about 10-15% of the 500K range inventory up here which is worth dropping 1/2 mil on. Those houses, not surprisingly, are getting multiple offers still today. (I was out bid on two such house last month) The inventory in SoCal seems alot nicer and only marginally more expensive right now.

Just my observations.

synthetik said...

Multiple offers are very common these days. I think you should buy a home ASAP before you are priced out forever.