Monday Open Thread
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14 comments:
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.
But prices have gone up at an extraordinary rate despite the price reductions seen on zip realty.
Define extraordinary
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...
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?
Here's what I find extraordinary 'Shug...
Majority of New WA Mortgages "Nontraditiona"
Or as I would put it, majority of new mortgages 'suicidal'
$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"
"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.
"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.
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
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."
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!
There's no need to "defend" synthetik....don't feed the troll.
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.
"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.
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