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Wednesday, January 24, 2007

"This is a great time to buy a home."

Check out this absolutely delightful paid advertisement masquerading as a "guest editorial" in today's Seattle Times. It's penned by Mr. Samuel L. Anderson, the executive officer of the Master Builders Association of King and Snohomish Counties.

The media have been all abuzz over the past year about the softening in the housing market.
...
At the same time, local analysts point out that even though home sales in the greater Puget Sound region have slowed, now is still a good time to buy a home, particularly in our area.

What does this slowdown really mean for consumers? Is it wise to sit back and wait for a home in the hopes that prices may drop? Most real-estate experts in our region say don't bet on it.
Oh really? Okay, well why is that exactly, Mr. Executive Builder Man?
One reason we have not experienced the steep decline seen in other markets is that while other parts of the country face an oversupply of housing, we do not.
So you're saying that supply is not growing faster than demand, so we're not headed for an oversupply? Interesting... very interesting.
Here in Washington state, the Growth Management Act (GMA) actually limits the supply of new housing entering the market by directing where new development can occur. As long as GMA is in place, we are very unlikely to find ourselves in a housing glut.
Growth management act, huh? You don't say.
Another key factor is that the area in and around Seattle has a healthy supply of jobs and a strong regional economy — factors most experts agree help keep prices from falling.
What a compelling argument.
Sitting on the fence waiting for the absolute best deal is a gamble that prevents consumers from taking advantage of buying a home, while prices are moderating.
...
In today's housing market, the real risk is in waiting to buy a home.
...
Unlike some cities where the real-estate market is in a slump, the Seattle area is healthy and analysts feel certain it will stay that way. As a result, the deep discounted prices some consumers have been hoping for simply won't be happening here.

For consumers sitting on the sidelines, the bottom line is simple. Homeownership is always attractive. Besides being a stepping-stone to a future of financial security, homeownership provides a sense of community and personal satisfaction. In fact, studies show that homeowners are more content with their lives, enjoying a stronger sense of belonging and increased activity in community groups.

The equation is simple: Since housing is always a smart investment and interest rates are still near 40-year lows, savvy consumers know this is a great time to buy a home.
Well dang, I'm convinced. Now is a great time to buy, and I'd better be quick about it or else I'll be priced out forever, doomed to be a miserable, broke, dissatisfied loner, renting from the man for the rest of my life.

(Samuel L. Anderson, Seattle Times, 01.24.2007)

24 comments:

Mikhail said...

What I would like to know is what examples Mr Anderson would like to cite as times when it was NOT a good idea to buy? Is there ever a time when buying isn't a good idea?

My own personal view is that the decision to buy is really a highly personal one, based on your financial state of affairs. If you can afford to only owe 3 times your annual income (or less), and spend less than 15% of your pay on the home, then go for it and buy. It doesn't matter if it is the market is rising, falling, or flat.

However, if you have to really stretch your finances to buy, then DON'T do it.

It's that simple.

Comrade Chairman Greenspan said...

I especially like the way his tone conveys how he wrote that steaming load solely for YOUR benefit, Mr. Consumer, out of the goodness of his heart, because he only wants you to come to Jesus like all the other good little sheep. Kind of like in 2000 when the ITAA was kind enough to take time out from lobbying Congress for fewer H-1B/outsourcing restrictions to explain to ignorant IT workers why they didn't need to unionize (like the ITAA). Sort of a noblesse oblige thing, curing the poor childlike corporate serfs of their silly little delusions, for their own good.

Peter said...

I've actually started looking seriously at homes in the $400k-$500k range and have toured probably at least a dozen from the Kennydale Area up to Juanita/Kirkland. Here's what I've noticed:

1) Pretty much everything you've heard about flipper renovations is true. These people are morons. I've seen some work so shoddy that it would blow your mind. We toured a home in Newport Hills and the owners were still there - he pointed at the electrical plates and said, "we upgraded to the latest style!" Um, yeah. You went to Home Depot and dropped a hundred bucks and spent the afternoon with a flathead screwdriver. No.

2) The $400k-$500k unrenovated properties are bottom of the barrel garbage. Borderline unliveable. Most of these are in such a state of disrepair they will probably need to be torn down. We saw a house in Finn Hill that had been vacant for quite some time. It smelled like death. My wife said, "this place is haunted!" I saw something - I'm not sure what - but it was brown, papery, and slightly organic looking in the fireplace. I asked our agent what it was and she just said, "let's get out of here!" And a steal at only $450k.

3) Prices are all over the board and don't appear to be based on recent nearby sales or appraised value + whatever. People are just asking whatever they feel like and seeing if they can get any bites.

4) The increase of inventory is definitely accelerating. It's all crap though.

5) Most builders are idiots. They will shoehorn a house into just about any space, regardless if the front door of one house is directly facing the house next door. Yeah, I want to look out of my living room window and see my neighbor reading the newspaper in his bathroom. Most are still not offering concessions.

6) I'm not seeing any of these houses move. No one is buying them. However, if a decent house at a decent price does get listed, it is snapped up immediately. The crap is sitting forever though.

7) This has been one of the worst and most depressing experiences of my life. I've seen more than one house that *could* have been nice but had been ravaged by a flipper and had the price jacked up $100k from the purchase price a year ago. It seems every flipper runs out of money and you can tell exactly where they did - 4 out of 5 rooms will have hardwood floors, for example. The last one will have 30 year old filthy carpeting in it. 3 out of 5 closets will have been redone - the last two look like something like the meat locker from Texas Chainsaw Massacre.

Anyone who thinks this is a "healthy market" is certifiably insane.

Alan said...

I know what you mean, Peter. My wife and I went to an open house a few weekends ago. We could tell that the owner had done some shoddy renovations, but we thought we would have to redo it and so we would have wanted a discount *because* of the renovations (if we had even wanted the house -- which we didn't because the floorplan was horrible).

I enjoy messing with the realtors. They ask if I am in the market and I say, "No, I'm currently priced out of this market. I only make $X per year." (where X is significantly above the mean income for the area). The last realtor I said this too got excited and started telling me that the owners would probably sell for less than the asking price and that he could get me a good deal on the house.

rentalbliss said...

I could not agree more. Just take a look at redfin for awhile the number of flps is astonishing, take a crappy house in a so-so neighborhood and jack up the price $100k, and does anybody look at sales history when they buy these dumps?

I agree most are not selling $400k for a 980 sq ft rambler, gimme a break, they were $320k in June and still overpriced. I have to admit the craziness and stupidity of this market really gets to me more than maybe it should. I just don't see how this will end well. What good does it do this country to not have middle working class families afford ANY home.

B said...

Peter:

Wow, I haven't been looking as hard at as many properties as you have, but your observations exactly parallel my own. What a strange twilight-zone of inventory and comps we're looking at right now.

I came back from the last place we walked through (SFH in Greenlake listed at $699, which was absolute junk inside) with a resolve to renew my apartment lease through 2007 - let the flippers flop.

The only thing worth less than a "fixer" is a house where someone did a crappy remodel/flip on a fixer. Now I have to tear out all your shoddy garbage and re-do it. Honestly!

Merger Dog said...

Peter, It depends on where you are looking. There are nice, often brand new 1300-1600 sqft townhomes to be found for $400-450k. Eastside is a bit more expensive though.

Terry said...

You people are such a group of nattering nabobs of negativity. Just do it! Get an ARM with the increasingly popular cash-back option. What's the problem here?

confused said...

There is no way I could buy right now. Fighting off my wife is something else. Just wait spring is almost here. People will get desperate. Far too many builders with HUGE inventory. You can only feed the alligator for so long until the bank tells you to sell or they will do it for you. A lot of small builders are aleady BK thye just haven't doen the math yet.

Lots of incentives in the Bothell area. Rate buy downs to 3.375% smells of desperation.

Terry said...

Hey, if you don't want to do a neg am ARM, the 50 yr fixed is available! (Maybe we'll soon have the 90 yr fixed like what they did in Japan) Like Tim says, you don't want to be priced out forever!

Even if affordability wasn't an issue, can anyone in their right mind justify paying $400K for a house that was priced at $250K three years ago?

This is NOT a great time to buy. This is an INSANE time to buy!

confused said...

terry-

I could not agree with you more. I was looking at 3/2 houses in Carnation less than 2 years ago for 220k. Flippers came in and snatched them up through 25k in upgrades that I could care less about and puthem back on the market at 310k. I like Carnation but the charm of a small town is the small town price, though steak adn beer night on wednesdays is nice.

Deja Fouts Realtor said...

Wow- I am glad I don't live any where that is like Seattle, as far as housing prices. Ok IA is not as hip or as vibrant as WA. 400K for a less then 1000 Sqft house(THAT'S Crazy). I could buy 4-6 houses like that here for that money. Not that we don't have flipper that don't know what they are doing too. But we do have some flippers working in the lower end that turn dumps in to something livable again.

B said...

Buying a house in Seattle in 2006/2007 == Borrowing money to buy MSFT at $120

Comrade Chairman Greenspan said...

Don't worry b. MSFT will go back to $120 any day now so that MSFT employees can keep prices at insane levels forever while our salaries climb at ~3%/year. I already emailed Hank Paulson and Ben Bernanke to let them know we're $90 undervalued. Ben will deliver a monstrous liquidity injection tomorrow and Hank will let the banks know they're to use it only for buying up MSFT stock.

Uncle Bill has already issued a press release stating that anyone who doesn't buy Vista is a bitter loser renter who hates housing, America, and freedom.

Bush was supposed to upgrade MSFT in his SOTU speech last night but I guess he forgot. The terrorists win again :(

Christina said...

I was reading a community newspaper outside my local library branch and encountered another "this is a great time to buy" article. As I skimmed, I saw of course no mention of affordability, or income/mortgage ratios.

"Whether a first time homebuyer or a seasoned real estate investor, all the indicators seem to point to January as an optimum time to purchase a home." -- Right, because you know people who earn $150K/year were only waiting for the median SFH price to rise even more before buying.

marc said...

The article mentions that "In November, prices for all home sales were up 12.7 in Snohomish County" What exactly does this mean? 12.7 for November ony? 12.7 for the quarter ending in November? 12.7 since the beginning of the year until November? It is hard to take this guy seriously.

I am ready to go back to Indiana where I can get a huge well built house for 150k or less. Starting to wonder what the heck I am doing here. There is nothing all that special about Seattle.

stephen said...

If you are going to buy (like we are) it is extremely important to do loads of homework and tons of driving. We've been looking since the first and still haven't set foot in a house. One passed the drive by sniff test but fell out due to the flood report.

Knowing the market, if a deal appears we will be in a positin to take advantage of it. The trick is to not force it, there's no need to panic, smile.

biliruben said...

That's fine, as long as you don't have a wife.

Last house hunt, I was prepared to look for years. She wasn't. I was able to hold her off for 6 months, but that was getting into dangerous territory.

This house hunt, I am not going to even broach the subject until I feel the market's right.

I've told her 2010. It may be sooner, but I won't tell her that.

Lake Hills Renter said...

Reason #139 not to get married. (again). =P

B said...

Or, marry a sane spouse who doesn't let his or her emotions make life-changing financial decisions...

burbed said...

You Seattle guys are so whiny.

Have you ever seen what $599,000 gets you in the Bay Area?

http://www.burbed.com/2007/01/17/599000-includes-street-art-on-street-sign/

burbed said...

Doh... forgot the a href:

http://www.burbed.com/2007/01/17/599000-includes-street-art-on-street-sign/

(BTW, I'm just being snarky)

Terry said...

Hey burbed,

Are those genuine granite counter tops?

Terry said...

The associated verbiage confirms that they are new granite countertops. Wow! That would do it for me!