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Sunday, January 03, 1982

01.03.2007 - Wednesday Open Thread

This is your open thread for Wednesday, January 3, 2007. Please post random links and off-topic discussions here.

21 comments:

Tim,Vic and Mr.B said...

I keep hearing that since commercial realestate here is strong, housing will remain strong. Though that may seem logical, It does not necessarily hold true. San Diego has had a booming commercial demand, office space and retail vacancies quite low, yet the housing market has plummeted. I have a friend in San Diego who sells commerical realestate and is still doing quite well. He is so thankful he is not a residential agent. another friend of mine is a commercial contractor, also doing very well, and also thankful he is not residential. So there is one prime example of the residential not following commercial.

Grivetti said...

I keep hearing that since commercial realestate here is strong, housing will remain strong.

Actually, having a residential crash and not a commercial crash is somewhat rare, and underlines the susceptability of the residential housing market itself.

In Japan, their 15 year real-estate crash was across the complete board, investors dumped Nissai excess into properties residential and commercial which ballooned its bubble to unsustainable heights...

The 'smart money' has shied away from commercial excess, and has been saving these past 6 years of post-tech-bubble crash. The Silicon Valley companies are awash in cash, expanding business but not hiring... ergo, commerical realestate prices remained nominal

The 'lemming investors' rushed into the only asset class available, residential real estate, armed with silly unsustainable mortgage products....

For the most part, since the average joe investor dumped stocks for housing, the average joe investor's portfolio's decoupled from commercial real estate...

Apples and Oranges IMHO

SeattleMoose said...

Seattle home prices have hit an all time high of 444K. Source is here

I believe this to be due to falling inventory which has "fallen off a cliff" over the last month or 2 as people pull their homes off the market and wait for the "spring miracle".

Changes nothing but it will bring out the bulls for another month or so.....

Tim,Vic and Mr.B said...

Well it may well bring out the bulls, but keeping in mind, as the bulls say when asking prices go down, they are only asking prices and not selling prices.

Tim,Vic and Mr.B said...

the difference being that when asking prices go down, selling price likely follows. The opposite is not as true

Lake Hills Renter said...

I've read in a couple of places recently (here?) that lending standards will change at the end of January, but I haven't been able to find anything about it my feeble searching. Anyone have any info/links on this?

If there is one thing that will start a crash IMO, it's cutting off housing demand by turning off the credit spigot.

Lake Hills Renter said...

Wow, looks like the MBS market is starting to dry up too. From Ben's blog today:

“The private company, which made higher-cost mortgages for borrowers with imperfect credit scores and income gaps, relied on Wall Street to fund its loans, buy them and sell them off as securities. Last month, as defaults on the risky loans rose, the Wall Street firms seized millions of dollars of Ownit’s capital to compensate for losses and then shut off the money spigot entirely, Dallas said.”

FinanceGuru said...

http://www.realestatejournal.com/columnists_com/blueprint/20061228-blueprint.html

This is for Mr. Bubbles that asked for more of my references yesterday. It is a good article that contains many facts. Overall it mentions that the Seattle market is still hot (or at least warm).

FinanceGuru said...

http://www.realestatejournal.com
/columnists_com/blueprint/
20061228-blueprint.html

MisterBubble said...

I didn't ask for anything, guru.

How many times are you going to spam the comments with the same links?

FinanceGuru said...

Mr. Bubble - "You "doubt" the market will tank? Great. You have an opinion. And as the old saying goes: opinions are like assholes. Everybody has one."

Yesterday you posted this comment towards me for not posting references (when I mentioned that I posted it earier in a previous post). So Im going back and reposting my data sources for you to read the articles. Just trying to satisfy you with some facual figures (which are abundant in the articles I have posted...and yes there was some fluff, yet the numbers they post dont lie about the Strong Seattle Market.)

Tim,Vic and Mr.B said...

Mr. Finance,
the latest article you submit for evidence that Seattle housing market will stay strong talk about commercial real estate and lists seattle as

"4th behind behind New York, Washington D.C., and Los Angeles, out of 45 markets in its prospects for commercial real-estate investment next year in a recent survey of industry executives by PricewaterhouseCoopers and the Urban Land Institute."

Have you seen the housing trend in each of those cities? Not a pretty picture if you are a seller. which all comes back to my first post this morning. and the job growth in each of the afore mentioned cities is rich as well. Anywhere from 16,000-24,000 new jobs, (Seattle is estimated at 23,900 new jobs according to the PSBJ) None of this, I don't think sir, has the ability to turn around a mass thought of being reluctant to purchase an overpriced, piece of crap that the bank will take over in 2 years.

redmondjp said...

financeguru said: . . . yet the numbers they post dont lie about the Strong Seattle Market.)

What is that quotation about lies, damn lies, and statistics?

Living on the Eastside, and having worked for companies located as far south as Auburn and as far north(east) as Monroe, I have real trouble believing some of the numbers. There are hundreds of empty commercial business locations scattered all over the Eastside. Pick an city--any city--drive around in the industrial areas and be amazed at the number of "FOR LEASE - (X)XX,XXX sq. ft." signs posted. Granted, much of this space may be currently designated as warehouse/light manufacturing, but can easily be retrofitted to cube farms.

This is reflected in the quote from the last article that you linked to: "The warehouse sector is struggling to absorb a surge in newly built properties." Hmmm.

I always like it when there's a nugget of pure gold inside the giant boulder of fluff--just like that single-sentence gem from the article referenced in the 12/31 thread about the local RE market:

One serious factor that could affect it: affordability.

Related to this article, I was at a New Year's Eve party with a friend who is an HR consultant and works with some of the people quoted in that article. I asked her what the average raise was this year--her answer--3.8%. Didn't get to ask her how, if housing prices keep going up at many multiples of the rate of salary increases, people will be able to keep buying houses.

We've had some spirited discussions on the RE bubble at previous gatherings, with our other friends groaning and trying to quickly change the subject! It's kind of like discussing religion and politics!

darth_s said...

Interesting article:

http://money.cnn.com/magazines/moneymag/moneymag_archive/2006/12/01/8395143/index.htm

If you have the printed edition of the this Money magazine issue, 12/06, page 108-110 – It has a lot more detailed graphic presentations. One key statistic that surprises me is the median mortgage payment as percentage of income. For Seattle, it is 32%, which is higher than Washington DC at 29%, Boston at 30% and Phoenix at 28%.

In the article, it predicts that the housing in Seattle will have 0% appreciation in 2007, which again surprises me because for the 100 biggest housing markets, Seattle is the only market with median mortgage payment of more than 30% which will not have negative price growth for this year. In the mean time, the prediction for Washington DC is -4.7%, Boston is -1.8% and Phoenix is -6%. I think that Seattle should be around -2% or -3% to reflect the following conditions:
- The price premium for Seattle should be comparable to Washington DC or Boston
- The rent vs. own cost is lower in Seattle compared to the other 2

Assuming that all other being equal: economic growth, land scarcity, etc.

FinanceGuru said...

darth_s - Please repost the url address, as it got cut off.

The Tim said...

Too many homes are on the market, and prices are falling fast in a lot of cities.

HTML is your friend. See step six here for how to create a link like the one above.

plymster said...

Thanks for the post darth_s. At least someone around here posts articles with data that actually back up their arguments.

financeguru - I don't think you are being intentionally deceptive in your posts, but this is the second time you've mis-charactarized a link to support your empty "strong housing market" arguments. Please be more careful in the future. Tim's pretty good about letting everyone speak here, but you're only going to make enemies if you continue to post erroneous data and half-truths.

MisterBubble said...

Guru,

The comment you have quoted was in response to the nonsense you posted in yesterday's open thread:

"I doubt the RE market is going to tank like all the RE Bears are predicting. The only thing that will cause a RE crash in Seattle would be a terrorist strike in America (God forbid) or several large companies laying off massive amounts of people. Aside from that the market will most likely slow to single digit appreciation." (emphasis mine)

I don't care how many times you link to that lame WSJ article on commercial real estate -- your "evidence" doesn't support your claims.

In case it isn't clear to you, I didn't ask you to spam this thread with links, you're not convincing me that your opinion is correct, and judging from the other responses, you're annoying everyone else.

In short: give it a rest. Go study reading comprehension or something.

plymster said...

Just to lighten things up around here, here's a link for mister bubble:

Mister Housing Bubble

Grivetti said...

The only thing that will cause a RE crash in Seattle would be a terrorist strike in America (God forbid) or several large companies laying off massive amounts of people.

mwhahahahaha!!! I love it, what delicious hilarity!!

As for your first ridiculous comment, apparently a terrorist strike in lower Manhattan had little to no affect on real estate prices there, so go ahead jihadistan! do your worst!!!

But the second one? Well, Boeing Puget Sound nuked 18,000 well paying jobs in 2001, and that apparently didn't slow the buffalo jump into overpriced Seattle real estate. Along with the gazillion tech-jobs that went down the toilet with residential real estate.... so, ironically, I'd say both your worst case scenarios show the Seattle RE market, remarkably resilient in the face of those two downfalls....

But you know what's going to bring a RE crash to Seattle? ... yep, a Real Estate Crash!!! the national one...

It'll be the drying up of the cheap credit spigot along with tightening lending standards (nationwide!!), coupled with resetting of exotic mortgage rates, people will be forced to SELL! SELL! SELL!!

Its going to be like a gigantic going out of business sale, with houses priced to move!!!

That and the 2007 recession, sure ain't going to help the situation. You can't buy and sell Zunes amongst the Seattle landed gentry solely, the house-poor nation needs to pony up as well.

MisterBubble said...

I love that image, plymster. I want to make it into big stickers, and conduct my own personal jihad against condo placards and real estate advertisements....