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Tuesday, January 26, 1982

01.26.2007 - Friday Open Thread

This is your open thread for Friday, January 26, 2007. Please post random links and off-topic discussions here.

42 comments:

Travis said...
This comment has been removed by the author.
T,V & Mr.B said...

And they all said they expected the continued rise this morning. Quite a dismal outlook, hence a sell off.

Sales of New Homes Plummet in 2006
Friday January 26, 10:06 am ET
By Martin Crutsinger, AP Economics Writer
New Home Sales Plunge by Largest Amount in 16 Years


WASHINGTON (AP) -- Sales of new homes plunged in 2006 by the largest amount in 16 years as the nation's housing industry suffered through a sharp contraction after five boom years.
The Commerce Department reported that sales of new single-family homes totaled 1.06 million units for all of 2006, down 17.3 percent from the all-time high for sales of 1.28 million units set in 2005.

After setting sales records for five straight years, sales of both new and existing homes suffered sharp declines last year, and that has caused ripple effects throughout the whole economy.

Grivetti said...

Shug' said...

I just checked the zillow link you posted and it shows my house at $501K which is an all time high. Not too much to worry about....that's $124K appreciation less then two years.

Dude, lay off the wacky-tabackey, paleez!!!

For starters, your house was at 496K, like yesterday, at a hit of around -6K from its all time high of 503K back in the halcyon days of ...uhmmm... like late December. Ergo, 501K not equal to 503K.

And where you get the 124K of appreciation is just beyond me. Dude, you bought that place for 431K!!!!!! I don't care how much you thought it was worth at the time, you still bought it for 431K!!!! You're paying 431K!!!!!

Congrats, you've seen around 60K of appreciation over the past 1.5 years (not including the 3% RE fees, property taxes, maintance).

Its almost done as well as my investment portfolio, congrats!!! The only difference is I'm totally liquid.

Mikhail said...

Anyone care to make predictions as to what will happen to the Puget Sound real-estate market by January 2008? Will we have a rise in inventory? By how much will median prices rise or fall?

I'll take a stab, and predict that there will be a 20% rise in inventory from 2006, a similar 20% decline in sales, and maybe a 3% drop in prices. Rental rates will have risen another 3% to 5%.

I am guessing that the real blood-bath (for the Puget Sound) won't occur till 2008.

confused said...

I am betting inventories swell by at least 30% when you throw multifamily. How many million + condos can one city absorb in 4 months. Sales will be down another 10-15% until prices come in line. There will be no California equity effect so this might be worse and prices should come down by about 10% by next January. I have to conceed that this may take longer but feel we will have a 20% drop to the bottom. Whether that takes 12 months or 120 months I don't know.

象象 said...

there is always a spin by the media:
'In the home-sales report, sales of single-family homes increased by 4.8% to
a seasonally adjusted annual rate of 1.120 million, the Commerce Department
said Friday. November sales rose 7.4% to 1.069 million, revised from a
previously estimated 3.4% advance to 1.047 million."

Christian said...

Anecdote from my walk to work this morning through Allentown (along Westlake). The old building for Pacific Nissan at Mercer & Westlake is emptying out, a great old car showroom.

At some point they changed to sell Range Rovers and mostly used Jaguars. I bet the slow sales of these vehicles, combined with the roadwork on Westlake to install the Allentown trolley, pushed their hand. The lot of used Jags on the south side of Mercer still looks full and open. Anyone want to buy used Jaguar?

There is a sign on the window asking for comment to the Seattle Board of Health. Apparently the car showroom is going to become some sort of pet daycare kennel. Will this support the area residents' exciting urban condo lifestyles?

T,V & Mr.B said...

Regarding the PI headline about downtown housing staying strong, Ms. Cohen said she too was suprised about the headline as she doesn't write them. I think that shows what the editors want to convey...They are schills for the Real Estate Industry.

T,V & Mr.B said...

I am predicting Fire and brimstone coming down from the skies. Rivers and seas boiling.
Forty years of darkness. Earthquakes, volcanoes...
The dead rising from the grave.
Human sacrifice, DOGS AND CATS LIVING TOGETHER- mass hysteria

Mikhail said...

Going out on a limb, I would agree that the Puget Sound real-estate scene could sour much more quickly than I currently expect if there was some outside shock that sped things up. Some major lenders went belly up, or there was a stock-market crash, for example, could change real-estate sentiments over night.

Maybe that is what will eventually happen: the Puget Sound market will keep chugging along nicely until the growing declines in the rest of the nation result in some big shocking event. Perhaps Seattle will never experience a "gradual" decline, and just wake up one morning to realize that the world changed.

tacoland said...

Homebuilders getting crushed again today - Centex Corp (CTX) technical breakdown. I’m going to gamble on the short side.

T,V & Mr.B said...

finance guru. I have a question and I figure you would be the guy to answer. I am no financial guy so don't understand a lot of the connection on rates etc....Do home lending interest rates have more of a connection to bond demand or to Fed interst rates? if bonds decrease, do home lending interst rates decrease as well? not sure how all this plays with each other. BTW Finance, I strongly disagree with your last comment yesterday regarding home price appreciation in san Diego. See yesterdays post.

Mikhail said...

T,V & Mr.B: "Do home lending interest rates have more of a connection to bond demand or to Fed interst rates?"

Mortgage rates are correlated to treasury bond yields. The greater the demand for US treasuries, the lower the interest rates for both the bonds and mortgages.

The Federal Reserve rates do NOT have a direct correlation to what happens with US treasury bonds. There are long periods of time where US treasury bond yields are rising while Fed rates are dropping, and vice versa.

Also, keep in mind that the rates for different types of mortgages can vary substantially, and do not necessarily move in tandem. Sub-prime mortgages have higher interest rates, and are more a function of the appetite for high-risk assets by investors than the state of US treasury bonds.

In fact, you could very easily have a situation where concerns about the economy drives huge demand for US treasuries (as a safe asset) that results in very low traditional 30 year fixed mortgages rates, while at the very same time the preference for safe investments (like US treasuries) leads to declining demand for high-risk sub-prime mortgage paper. Thus, you could have low 30 year fixed loans, and high sub-prime mortgage rates. And all this can occur wither either rising or falling Fed interest rates.

I hope I have managed to leave you even more confused. Unfortunately, the more one examines the various financial markets, the more one realizes that their relationships are complicated, and that there really aren't any simple correlations that hold true all the time.

Jim Davis said...

The government will fix the problem of high prices.

According to the Washington Association of Realtors website at http://www.itsapriority.com/, the State government is the cause of high home prices and the lack of supply of reasonably priced homes. Those all-knowing legislators in Olympia just need to allow local communities to increase taxes in order to build the infrastructure needed to accommodate population growth and allow builders to increase the supply of new homes that the average person can afford. And one other thing, those money-hungry builders need to price their new homes in relation to what it costs them to build rather than what the market is willing to pay.

This recent business of an increase in the supply of homes AND increasing prices in Puget Sound area must just be a myth.

sash said...

folks dont expect any remarkable price slump if you expect to buy a house around redmond=kirland-bellevue the MS zone. MS is going to hire even more people. More folks will get sick of traffic and want to move closer.

Mikhail said...

Sash: "dont expect any remarkable price slump if you expect to buy a house around redmond=kirland-bellevue the MS zone"

Huh? Since when was a good job market able to sustain run-away real-estate bubbles? The down-turn occuring in many parts of the country are occuring at PRECISELY the same time as those regions are having significant job growth.

Further, if the broader Puget Sound region starts feeling significant real-estate declines, then it would ABSOLUTELY have an impact on the Bellevue/Redmond/Kirkland area. There is a price differential at which Microsoft employees would decide it was just worth it to commute from Kent, Bothel, or Everett.

In the end, however, I just don't buy the argument about Puget Sound (or Microsoft) exceptionalism. Our region is part of the national economy, and if there is a major contraction in credit (with lenders going belly up, a loss of demand for sub-prime mortgage securities), the Puget Sound will be hit just as much as anywhere else.

Just what would happen to the Redmond/Bellevue/Kirkland market if all sub-prime lending vanished? I don't care how many people Microsoft is hiring, if the sub-prime market vanishing, and lending requirements tighten, the real-estate market in those areas will be creamed. In fact, if Microsoft jobs were so amazingly wonderful for the regions housing market, why is it that sub-prime, and exotic, mortgages have been rising so astonishingly much in this area?

Finally, anyone who thinks Microsoft is some kind of perpetual money machine that will keep on growing indefinitely will wind up sorely disillusioned one day. Microsoft is a great company, but they themselves are not immune from recessions, and will inevitably face some major retrenchments, and restructurings just like every other major enterprise.

T,V & Mr.B said...

Mikhail,
Thank you for that. It does explain it. I couldn't remember the correlation. Agreat job of explaining.

And I certainly agree with your assesment of any Microsoft employment gains.

wreckingbull said...

Sash, let me get this striaght. You are saying that Microsoft has the ability to single handedly prop up the entire Eastside?

I don't care how many jobs they add or even much these purported jobs pay. Their employees are a drop in the bucket when it comes to overall Eastside housing demand.

Microsoft it at its zenith now. While they were busy building their latest dinosaur, AKA Vista, the world around them changed.

confused said...

Builders aren't the ones making a ton of money. Most don't make 10%. Many small builders will be BK this time next year.

Nolaguy said...

Microsoft Profits down 30%

http://business.scotsman.com/index.cfm?id=136752007

FinanceGuru said...

Nolaguy - You dont know what your talking about. MSFT exceeded their EPS and $ profit estimates for the current quarter and year.

The reason the profits are down 30% is that Vista sales were postponed until 1Q07...so the profits were just deferred. Overall they exceeded Wall Street estimates.

Mikhail said...

financeguru: "Overall they exceeded Wall Street estimates."

True, Microsoft exceeded estimates. But this is NO guarantee they will continiue to exceed estimates, or that their business will continue to grow as much as it has in the last 5 years. Technology changes, and general economic condititions could easily throw Microsoft for a loop.

I am NOT saying that I think Microsoft is a bad company or anything. I am just saying that they aren't different from any other firm, and EVERY company goes through rough patches. On that basis, Microsoft has so far been extraordinarily lucky not to hit a big pot-hole. I wonder how long the luck will hold...

Lake Hills Renter said...

Here's one Microsoft employee who has decided to rent instead of buy solely because of the escalated housing prices. I wonder how many more there are?

T,V & Mr.B said...

That Zune is such a big hit, we can only hope Vista will be as good.... No sorry, that was mean. Obvioulsy there are a few doubts on how well this will go over, otherwise the anticipation of it's release would be shooting the stock substantially higher that the mediocre boost it is getting. Reviews have not been overwhelmingly great. it is a wait and see. I certainly wont add any to my portfolio.

sash said...

do you guys see the prices even inching down for a decent house (not 30 yrs old) in the east side? at best I see them flat. and the houses are going off quite quickly. In the past couple of weeks especially I have seen some really nice houses in the 600 to 650K$ range fly away within 7 days of listing. How do you explain that?

Alan said...

I thought that MS paid less than industry average because they offer such incredible benefits and career flexibility.

MS wages are not propping up the market now or in the future.

Lake Hills Renter said...

We must be looking at different parts of the east side. I'm seeing some houses sitting for sale for literaly months. I've also seen quite a few price reductions on the ones I've cared to check. This is all in the 164th Ave area south of Micrsoft -- residential Redmond and Bellevue.

The Microsoft benefits are indeed fantastic. I don't know how my salary fits with industry average because I don't really follow it. I'm pretty happy with it. It's the most I've ever made in the industry other than the outrageus pre-dot-com-bust salary I made for a year. It certainly allows me enough to do the things I want and save quite a bit.

Alan said...

sash,

At an open house in Bridal Trails I met an investor who own six investment properties and was thinking about buying the one we were looking at.

The house around the corner from us in south Bellevue recently sold for $600k and immediately went up for rent.

It is only two data points, but I see more speculation than residence purchasing in the Eastside.

sash said...

Examples of properties that have flown away:

http://www.windermere.com/index.cfm?fuseaction=Listing.ListingDetail&ListingID=17264664

http://www.windermere.com/index.cfm?fuseaction=Listing.ListingDetail&ListingID=17250946

wreckingbull said...

My opinion is worth what you paid for it, but the Eastside will feel pain before Seattle proper does, just like Kent/Maple Valley/Smokey Point are starting to hiss right now.

MisterBubble said...

Nolaguy - You dont know what your talking about. MSFT exceeded their EPS and $ profit estimates for the current quarter and year.

Don't be a jerk, finance"guru". MSFT beat EPS because they guided the estimates down, and you know it.

Nolaguy's summary was 100% correct -- Microsoft profits are down 30%, year-over-year.

Mikhail said...

Another data point: I work at Microsoft too, and know quite a few colleagues who have investment rental properties in the East-side. A number of them have been griping about how they can't get enough income to cover all their expenses...

Geon said...

sash said...
Examples of properties that have flown away:

The haven't sold yet, they're STI. Well, at least they look good to somenone, I wouldn't buy them, that's for sure.

biliruben said...

There's a number of newer houses around Redmond in that price range that have been on the market for a couple months.

It doesn't mean anything with regards to predictions of price declines.

deepcgi said...

Here's an anecdote. I grew up in Houston during the oil boom years. My parents sold their house at the height of it, in 1982. It was a 4 bedroom, 2 1/2 bath with a 1/2 acre of land for 225,000. Less than two years later one of the great american housing bubbles of our time had popped and Houston was a disaster area. Similar houses in the area were going for less than half of that price.

Just for grins, last night I checked the current value of our old home online.

The home is now described as 5 bedrooms 2 1/2 baths with jacuzzi tub, and 1/2 acre of land worth 256,000. Twenty-three years and the price has hardly moved. Even after adding a bedroom, I'll bet they couldn't sell it for 235,000 in the current market. And remember there has been 23 years of inflation since then.

I realize that this situation is different. But ask a Houstonian who was there; they understand housing bubbles. It is a very real possibility that this train wreck won't come to rest for another 2 to 3 years - and then take 5 to 6 more to recover. If you think we are getting out of this with only 20 to 25 percent price reductions you're dreaming. This bubble is massive. It may even bounce upward over a full 12 months. In fact, the tech stock crash from six years ago may not be over. Maybe, you consider my long term view absurd and overly pessimistic, but... tell that to Houstonian who tried to sell a house in 1984.

Puget Sounder said...

http://www.redfin.com/stingray/do/home?MARKET=seattle#market=seattle&lat=47.680688580992545&zoomLevel=15¤tLocation=&long=-122.20646381378175&residential=true&condo=true&min_price=500000&max_price=1000000&num_beds=2&num_baths=&time_on_market_range=-&min_listing_approx_size=&max_listing_approx_size=&sold_within_months=0

Ridiculous listing of the day. $450/sq foot in Kirkland? No. Just no. Come on -- this is a block from a used-car lot on Market Street. It's not even in downtown Kirkland proper.

matthew said...

Deepcgi,

Moved to the PNW from Houston in 1991.. We had a mansion that we sold for 212,000... Houses in that neighborhood have barely appreciated at all....

deepcgi said...

yeah, we were really lucky. that's why it drives me crazy to hear people say "the value of real estate never goes down"

Alan said...

Regarding Houston... Was anyone saying there was a bubble at that time but that Houston was special?

deepcgi said...

No, it was all "location, location, location". Houston is where the oil companies are. And Houston is where the insurance companies are. That's where the jobs are. The world will always need oil and insurance.

I would say the same goes for the Tokyo real estate crash. Wouldn't you?

Ardell DellaLoggia said...

Puget Sounder,

I can't identify the property by"
http://www.redfin.com/stingray/do/home?MARKET=seattle#market=seattle&lat=47.680688580992545&zoomLevel=15¤tLocation=&long=-122.20646381378175&residential=true&condo=true&min_price=500000&max_price=1000000&num_beds=2&num_baths=&time_on_market_range=-&min_listing_approx_size=&max_listing_approx_size=&sold_within_months=0

Are those the new condos on the West side of Market or the new townhomes further up East of Market? Both are ON Market Street. Seems you are talking about the ones across from the Sears building.

Do you have an mls #?

Ardell DellaLoggia said...

Puget Sounder,

If you are talking about 631 Market, the largest unit priced at just $1.349 mil is $731 per square foot. The lowest priced one at $649,000 is $617.51 per square foot. At least one is $493 per square foot.

Given the way the building sits, the PPSF differential is likely about view considerations. Would still prefer them to the townhomes up the street for over $900,000 at $319 per square foot where everyone is looking into your entire home that drives on Market Street.

I think the prices are too high for being ON Market Steet, but the car lot is not a factor. More the traffic and noise issue generally on Market Street.

The most valuable land is not near the bar and restaurant noise "in Downtown Kirkland Proper". Ceiling height is fast becoming an issue for Kirkland Condos and a rebalancing of price per square foot between older vs. newer.