02.03.2007 - Weekend Open Thread
This is your open thread for the weekend of February 03-04, 2007. Please post random links and off-topic discussions here.
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21 comments:
Hmmm... This map doesn't doesn't seem to say anything about the percentage of subprime loans in each region. Does the Puget Sound have a lower percentage of subprime loans than is prevalent elsewhere in the nation?
I know that nationally, subprime originations were something like 20% of all mortgages last year. But maybe our region have a lower than average number?
Very interesting... The paper posted by andymiami indicates that the Pacific Northwest has one of the lowest rates of subprime lending in the nation. Does that mean that our region is not as vulnerable to a subprime melt-down as elsewhere?
"The paper posted by andymiami indicates that the Pacific Northwest has one of the lowest rates of subprime lending in the nation."
So what?
Did you happen to notice that the MSAs with the highest percentage of sub-prime loans were all in the middle of flyover country?
Aside from that, I'll make two critical observations of this paper (based on a quick scan):
1) It discusses only sub-prime loans (i.e. only loans with high interest rates). It doesn't consider ARMs, neg-am, I/O or other "creative" mortgages.
2) It doesn't appear to consider sub-prime purchases -- just refinances into sub-prime loans.
I could be wrong about the second point (as I said, I just scanned the paper), but I don't think this tells you anything about the sort of speculative lending that is driving price increases in Seattle. It appears to adopt a very narrow focus: the percentage of people who are so financially screwed that they have to refinance into high-interest-rate mortgages.
Again, it's very interesting that most large west-coast cities have low percentages of sub-prime loans (according to this report). These cities have also seen the greatest levels of price speculation. I leave the dot-connecting as an exercise for the reader....
Still nothing worth buying that I can afford in the Redmond area after a quick scan of the Coldwell Banker website today.
It is amazing to me that the market has gotten to the point where a man making more than 100k a year cannot find a nice house that he can afford in the area. The fact that some people think that this is not unhealthy is amazing too. I am not looking for an investment so much as a nice place for my family to live.
I reflected earlier today that about a year ago I did not really think that things were all that bad. I think that I have always lived in cities where the real estate has climbed in this fashion, and I have never lived in a city when it is in a slump before.
My biggest hope is that the funny money dries up soon. These 700k-1000k houses in Redmond are only affordable with the flexible lending that is prevalent now. There just aren't that many people making 200k-300k even around here, so when lending comes back to normal, it will be harder to move this property. After that, land prices should drop back down. And then some more realistic properties will come back on the market.
On the way home from Trader Joe's today, on Madison St., (first hill) downtown, my wife and I drove past a "sign twirler".
What was he pushing? Apartments! The sign said:
"Free Furniture from IKEA if you lease today!"
Yep, really tight market we have here.
Two points I would like to make. Actually Misterbubble already made the first one regarding subprime loans... It isn't a matter of "subprime" loans that is the greatest damage. It is ARMS, HELOCS etc... people with good credit, mind you, who will be hurt by all this. Banks as well, as they consider risk in thier per-forma. They expect to lose on a certain percentage of sub primes, but are caught off guard when the low risk loans start to go under.
2nd point regarding Jimmy H's light bulb.
Median does not reflect what is truly happening. San Diego Median has not dropped as much as what reflects the disaster that is happening there. case in point...
House X close to downtown valued in May 2005 at 1,050,000.00 Same house in worse shape two blocks away sold for 1,150,000.00 june 1, 2005. House X listed at 1,050,000.00 July 2005, on market for 10 months until offer made and accepted at 930,000.00. Closed June 30, 2006. Today House x would not be able to sell at 700,000.00. That is a 300,000.00 drop from the peak of May/June 2005. pretty incredible, don't you think?
I see houses there that are larger, have a view, have been on the market for 6-8 months with their listing price dropping by the month and are now well below what house x sold for last june. The Median doesn't even come close to telling this story.
Just to pass time, my wife compares like areas in Seattle to those in San Diego and the house prices. You can actually get a better home in a more desirable location in San Diego than you can here right now for the same price. I bet we never thought we would hear that, but if you are familiar with both cities, take the time to check it out yourself.
Today House x would not be able to sell at 700,000.00. That is a 300,000.00 drop from the peak of May/June 2005. pretty incredible, don't you think?
Not really. Minutes before checking in here I looked at select excise tax details (purchase price, tax) of an acquaintance's Magnolia home, which he and his wife bought for $1.1 million in 2005, yes, at that very May/June peak. Zillow estimates its current resale value at $800K.
"We're Swimming in Liquidity, Aren't We?" by BRIAN PRETTI
http://www.financialsense.com/Market/wrapup.htm
This invaluable website has some great charts from Friday on real estate assets and household debt going back to the 1940's. The "Household Cash Less Liabilities" is a real eye opener.
$1k increase on $600k is not that much.
It is my understanding that the property tax in King county is 1%. A $1k increases only brings that to 1.17%.
Compare this to Texas which like Washington does not have a state income tax. Travis county (where Austin is) has a property tax rate of 2%.
Some of the surrounding counties go as high at 3%.
How would you like to pay $18k a year in taxes on your $600k home?
alan:
So you're saying it's better to be boiled in water than to be boiled in oil? The way I see it the taxpayer is cooked either way. Just shut-up and hand over your money, right? Sorry, I'm going to fight these life sucking government parasites all the way to my grave.
I think what greethum is trying to say is "Waaaaaah!"
Don't wanna pay high property taxes? Don't own an expensive home. You live in a state without an income tax. You can't have everything.
>a year extra for a 600k house in Seattle in prop tax
The same home "owner" in Tampa, Florida would pay about $13,000 a year in property taxes!!
misterbubble:
I don't own any real estate and I still hate our states life sucking government parasites. When are the voters in King County going to realize we don't need any more worthless "Sculpture Parks" and "Taj Mahal Libraries". State and city government leaders are desperately trying to make Seattle into a world class city with our tax dollars. They'll bankrupt the state before that happens.
But it doesn't matter what I think.
When this housing bubble crashes there won't be enough tax revenue left to keep the lights on in the mayors office.
I would suggest this good read that just came out from the UK.
http://www.marketoracle.co.uk/Article303.html
I like his statement that "Don't forget, the “happy talk” in the real estate section of the newspaper is designed to soothe jittery nerves and help sales, not give the reader an accurate picture of a market which is sinking quickly."
to use a few of his word, Any dimwitted optimist who believes the housing market has stabilized is in for a big suprize. And I add that any of those dimwitted optomists that think Seattle will escape this catastrophy is also in for a VERY BIG supirse.
I don't think greenthumb is miserable, just sick of projects like the $60 million Nickels S.L.U.T. Nothing wrong with that.
I still like Seattle, but I liked it more before Belltown nightclubs, the W Hotel, and the term 'world class' came to town.
greenthum:
"When are the voters in King County going to realize we don't need any more worthless 'Sculpture Parks' and 'Taj Mahal Libraries'."
The sculpture park was almost completely funded by private donors. The library was due to a tax levy, but even so, Seattle underspends most equal-sized cities with respect to library funding.
Ben:
"Just go somewhere else. We have a beautiful city that is increasingly world-class, and yet you have people that aren't willing to invest in the public infrastructure for the long-term... and they should just leave."
Ah...what a classic example of the local brand of "friendliness" that truly makes Seattle a "world-class" city....
Ben:
As I said before in my earlier post,"
What I think doesn't matter." Only time will tell who is right and who's living an "Emerald City Fantasy."
I'm buying a condo in issaquah right off of the 90, i'm nervous as hell based on all of these posts. It is under 220k for a 2/2, i'm a first time buyer doing a 30 year fixed, 10% down, 80/10 mortgage. I can easily afford my PITI. Is this not a good time to buy, even if you consider staying in the place for 3-5 years?
greenthum:
No. Just pointed out that states with similar tax laws carry double the tax burden.
How is TX different from WA?
- Maybe WA operates twice as efficiently as TX.
- TX property values are lower. Maybe they have to tax twice as much for the same revenue.
- On the other hand, TX has a lot more land than WA. Although ranches do not get taxed very heavily. GWB's ranch is 1600 acres but his property tax was 'only' around $20k.
- Texas has a strong "pay for yourself" attitude. Anywhere they can they make you pay for services as you use them (more so than NC at least). Still you pay more for your property taxes.
- Texas also passed a "robin hood" law where areas with a lot of property tax revenue have to send some of their money away to support schools in areas with lower property taxes. At lot of people blame that law for the high property taxes.
But none of that really matters. You do not like the government wasting your (our) money. Luckily we live with a government of the people. You can enter government and change it. Run for office under a campaign of cutting all taxes and all services. If your will does not align with the will of the people here then you are always welcome to go try somewhere else where your view will be more popular. Its a great thing about our state system. There is tremendous variation in how local government works.
Or instead of running yourself, you could fund someone to run who agrees with you. Although that starts to sound a little bit like taxes.
Mattg - It's up to you.
There is a chance that your Condo will be worth significantly less than you pay for it 3 to 5 years from now. No matter what anyone says on this site or anywhere else, they can't tell you how big a chance or how much less.
Read. Educate yourself. Make an informed decision.
If what I consider the the worst case scenario happens (there are those here who think this is conservative) then come 2011, when you go to sell and you may only find a buyer willing to pay 140K for your "220K condo". That means you will probably have to pull out your check book and write a check for 50-60K to sell.
For most people, that means they won't be able to move, or they'll have to rent it out.
If the Realtors are right, your condo will at least keep pace with inflation, and you'll be fine.
My recommendation is to look at rents in the area, see what you can rent for a similar apartment, and wait out this period of uncertainty. My guess is the renting will be significantly cheaper than your mortgage, though I don't know Issaquah at all.
What I can feel comfortable with telling you is that you won't be priced out of Issaquah condos over the next 3 years.
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