Weekend Open Thread
This is your open thread for this weekend. Please post random links and off-topic discussions here.
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10 comments:
that's one fantastic commercial for the Sentinel's favorite local agent:
Jerry W. Jackson can be reached at . . .
Last night at the gym, I was flipping through the channels, and came across a sickening condo advertisement disguised as a story during the Q13 10PM news.
I forget the name of the complex (it was on Queen Anne), but they basically used the cnnmoney.com "bubble-proof cities" fluff-piece to lead into a graphic with the date, time and location of an open house for "fantastically priced" condos ("starting at $239,000!!!") that were "sure to go fast."
They closed the "segment" with some witty talking head banter:
Diane: "boy...can you remember when $239,000 for a condominium was considered a bargain?"
Jack: "I know, Diane...these days, anything with four walls and a roof is a bargain!! Ha ha!"
Aren't there some sort of FCC rules on the separation of advertisement content from newscasts? This was so blatant that it should be illegal....
I saw that one... luxury condos in Queen Anne...
Small little boxes in a very old building... and sale starts today... stand in line outside in the rain or you'll miss out... NOT
Most visitors to open houses aren't in the market to buy a new home
...Ssssshocking! But this is Seattle, right? we're different, I thought people are lining up around the block to get a peak at the next under 500K craftsmans?... houses sell themselves around here, why even bother with an open house at all?
Do you guys go to open houses even though you have no intention of buying?
Nah. Waste of my time. Rather be in the mountains.
Sigh. Just realized that I messed up the talking-head banter.
Diane, of course, said that she could remember when $239,000 was expensive for a condo.
Then they did a live interview outside the condo with Trisha Takanawa. (kidding!)
a sickening condo advertisement disguised as a story during the Q13 10PM news.
Yeah but Q13 is Fox, isn't it? So whaddya expect? You want news, watch a real station, not that sewerpipe.
Haven't watched that station since ST-TNG finished.
I was on the phone with my mortgagor asking which was less gouging for the mortgagee: PMI or HELOC, and I slipped something about "housing bubble" -- I got the kneejerk "bubble-proof" commentary from the customer service rep, big surprise there.
Despite my housing bubble opinion and attitude, I have been invited to more housewarming parties this year than I have in the prior six.
A friend told me her roommate was (once again) considering buying a house. I rolled my eyes and my friend said sharply to me: "DON'T GIVE ME THAT LOOK!" I said that she should "accidentally" leave her browser open to seattlebubble.blogspot.com.
I kinda wanna have a bet going with the spouse and neighbours about how long the $548K house will sit on the market, and what its eventual selling price will be. If only I were brave enough to bring my schadenfreude out in the open!
A present for you.
http://www.homevisors.com/buckfoley/index.html
I was trying to post this on raincityguide in response to Ardell's comments at http://www.raincityguide.com/2006/11/02/is-seattle-bubble-proof/, but my post isn't showing up for some reason so I am posting it here. I'm hoping someone can explain to me how trading-up in a hot housing market makes sense. I don't know, maybe my numbers are too extreme.
I do not understand the trade-up argument.
Let's suppose there are three houses selling at $100k, $300k, and $600k. A TU moves from the cheapest to the most expensive over a series of years. Each time he moves the sales prices at each level increases 50%.
He buys A with 20% down at 6% on a 30-year fixed. His mortage payment is $450. Say he pays down $5k of his principal. He sells A for $150 and has $75k to put into B.
He buys B for $450k and plunks down $75k. Now his mortage payment is $2,200. Assuming our TU did not buy way under his ability, he would need to be making over 4 times his previous income to trade up. Let's say he pays down $20k on this principal. He sells B for $675k and after paying off his mortgage he has $320k. Now he wants to buy C.
C has also appreciated 50% twice over and is now selling for $1.35M. He puts down $320k (23%) at the same deal and now has a mortgage of $6200/month -- requiring another tripling of his income.
Trading up isn't really helping him much. Yes, his equity is increasing, but the prices of larger homes are increasing just as fast and the loan amount he will need is even larger.
As for housing prices dropping, thehousingbubbleblog.com links to an article describing a neighborhood in San Diego where prices have dropped 62% (http://www.signonsandiego.com/uniontrib/20061105/news_1h05peak.html). It is in the upper range as you expect it would be, but that means a $3.2 million house dropping to $1.17 million. A $600,000 house dropping by the same amount would be $228,000. I do not have enough confidence in this market to put that amount of equity at risk.
What happens to our TU after he buys C if prices drop $30? He loses ALL of the equity he has built over the years plus an extra $85k. If is loses his job, get sick, or is transferred and forced to sell he goes pretty deep into debt (although maybe that doesn't matter much since he is brining home $15k month to pay for that last mortgage). Still, how else might he have played this?
Our TU thinks that housing might drop 30% and he sells B, but then rents (Gasp!) Say that rent is running at prices equivalent to price he purchased B (which seems to be representative of the Puget Sound areas as far as I can tell). That is he can rent B for the same prices as his mortgage. He sells B, pockets $320k and rents a similar house for $2200. Based on his equity increase only ($195k) he can rent this house for seven years before breaking even on housing (although that assumes no change in rent -- unlikely unless the market is stagnant). If he can get 10% on his money in the stock market, he can live there for 14 years. If the housing market drops 30% anytime during those seven years (or if managed to find a better deal over seven years) he comes out at least $85k ahead.
Of course if the market continues on its meteoric rise, then he misses out on a great investment. But who can really predict any market. His real mistake was not leveraging himself as much as possible when he bought his first house and taking all of the equity increases and pouring them into investment properties (assuming that those 50% increases were over a short number of years). You (Ardell) seem to be espousing the exact opposite of this. If you truly think housing prices are going to continue rising, you should be encouraging people to buy as much as they can possibly afford (sort of like the guy over at iamfacingforeclosure.com -- but with better decisions and fewer illegalities).
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