02.09.2007 - Friday Open Thread
This is your open thread for Friday, February 9, 2007. Please post random links and off-topic discussions here.
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37 comments:
ITS TIME TO SELL OUT NOW AND CASH IN YOUR CHIPS
If we had hindsight, we would have sold all our stocks before the 2000 collapse in the market. The smart investors did just that.
The same applies to real estate, only don't wait too long and do lower your price to grab all the Seattle Area equity now you can ASAP.
See a great article written today on this subject:
http://biz.yahoo.com/brn/070208/21029.html?.v=1&.pf=real-estate
SELL NOW OR BE PRICED IN FOREVER!
I have a hypothetical question:
My friend "Bob" purchased a 4 bedroom home in Green Lake in 2003 for $425,000, pulled some equity out of the house for repairs/renovations and now has a 30-year fixed mortgage with $435,000 outstanding for a house valued currently at approximately $690,000 - or $255k in equity (+/- 2500 monthly mortgage). He has a family and a well-paying job; mortgage is large but he pays less than 25% of gross earnings on the home. He is engaged in the community and likes his neighborhood.
Would you give him the advice to sell? If so, how likely do you think thathe would be to sell even if he risked some loss of equity.
A lot of Bob's would have to decide selling is a good option to make the market tank.
If Bob is going to live there for a while, likes his house,didn't buy for an "investment" then why would he sell? No reason to. Equity is subjective and floats up and down and doesn't mean a thing unless you sell or cash in on it. As long as he doesn't stretch himself on payments, then all is good.
Bob's extremely lucky. He won't be one of the rats scurrying off the sinking ship.
"Interesting, the Huling Brothers manager arrested for stealing from a disabled customer is flipping a house in Loyal Heights. Purchased 9/29/06 for $455K, it's listed now for $762K."
How do you know it's him?
If so great place to go and break a window or two...
The Huling Bros. manager should be in jail, not pimping out his ramshackle. And, if any of the money that was stolen went into this house - it should be confiscated from him and awarded to the victim.
So Mr. Tim Dunn over at Seattle Bubble? has finally posted on his blog. simply stating the numbers but with key words on drops by "only" and on prices rises using favorable terminology. He's funny in a sad sort of way. He also doesn't mention the 40k drop in Seattle home prices.
Oddly enough, I can't seem to post on his blog. Does he know who I am and has blocked me?
I apologize if someone has already posted on this:
Congressional Investigaton of Subprime Lenders
Re: the pathetic shadow site "Seattle Bubble?" - he reviews every post, and decides which to let through.
I tried to continue a perfectly amicable conversation on the previous post, but he never posted the last two comments.
He's not worth the effort. I like to hear the other side as much as anyone (well... maybe a lot more than most, as you will see if you venture over to RCG), but he is not willing to have a discussion on equal terms. He can only maintain a conversation if it's rigged in his favor.
I recommend just leaving him alone.
>SELL NOW OR BE PRICED IN FOREVER
*laugh*
>BOB: only %25 of income
What does "bob" do for a living? How "recession proof" is his line of work? What would happen if he was unable to make those large mgt payments on a 425K note?
I'm not suggesting he sell, however it may be possible to find a suitable home to RENT, possibly a bit more modest in his same area.
That's a big mortage and my greatest fear would be job loss or a health issue that prevented him from working for awhile.
Hypothetically, if it were me, I'd probably try to sell, take $200K in profits and RENT a home in the same area for $1750-2500/mo. I'd also put my home on the market ASAP to try to beat all the spring sellers to the punch.
Rain city guide is a blog spot for local real estate agents. many of them are acknowledging that prices are going to go down however, now they calculate gains for somebody who bought in boom years and selling now.
http://www.raincityguide.com/2006/04/29/bubble-blog-roundup/
I have a hypothetical question:
My friend "Bub" purchased a 4 bedroom home in Ballard in 2003 for $425,000, pulled some equity out of the house for debt consolidation and now has a NEG I/O ARM mortgage with $500,000 outstanding (and increasing) for a house valued currently at approximately $690,000 - or $190k in equity (+/- 2200 monthly mortgage/taxes/insurance). He has a family and a decent-paying job; mortgage is large and he pays more than 40% of his take home pay on the home, and rising with his ARM. He is engaged in the community and likes his neighborhood.
Would you give him the advice to sell? If so, how likely do you think that he would be to sell as his car and house house payments eat up all his expendible income and his credit card bills (formerly consolidated) start to escalate?
I don't think the "Bob"s are going to have as much impact as the "Bub"s are. And there are a whole lot of "Bub"s out there.
"In none of the top 10 U.S. markets can the average wage earner afford the average home," said Daniel Mudd, Fannie Mae chief executive, at a recent conference sponsored by Citigroup.
That INCLUDES Seattle.
I AGREE WITH YOU SYNTHETIK
I think "% of NET PAY" for a roof over your head shouldn't exceed 15%, especially if you're over 50 in age. At that age, you better be on the slide to retirement and thinking "HOME TITLE" in your hand.
Here's my "maximum % of net pay" (the money you can spend after ALL DEBTS) for a home based on age:
Age 20 (Too young, you'll be luck to out of mom and dad's house)
Age 30 (25-30%) if this new world order doesn't keep household incomes stagnant, but the last 5 years that's exactly what's happenning.
Age 40 (20%)
Age 50 (15% going to 0% fast)
Now, how much should you put into an investment home too? (0%, unless the first one's paid for, then see figures above)
Am I right on? I imagine realitors would have heartburn living with my numbers, but they don't have to figure out how they're going to retire on half an income with a monstrous mortgage and high square footage utilities with maintenance.
Changes things when you put it that way, doesn't it. Most financial planners would say I'm right on by the way.
I just read the raincity guide threads with the people trying to convince the realtwhores that it is not always a good time to buy.
It made me imagine the conversation I could have with my dog, telling him he wasn't hungry. Frustratingly useless.
I commend Tim and the others who even try. If you can convince just a couple people not to leverage their future by buying in to the current ponzi scheme, then I think you have done a great thing.
Biliruben,
I have been following your comment conversations over at RCG and I just have to say that I'm impressed at how much futility you're willing to tolerate.
I have tried to have discussions over there in the past, and while they do manage to remain civil, it usually ends up feeling like I'm trying to explain electrical engineering to an art major.
Their paradigm (I hate using that word, but it's the most appropriate here) is just so different from my own that they truly seem incapable of comprehending the points I try to make.
We moved to Seattle last summer from MPLS. suburb (where we were connected and involved) to RENT in Kirkland. We are guilty of viewing renters as less than, until now. Debt free and watching this market from our safe nest gives such great satisfaction. We are able to participate in even more community events because we are not re-doing the house, and we are sleeping great at night without the $500,000 note we would be paying back to buy the kind of house we are used to living in. We did give up sq. ft. but have enjoyed the new living. We wait for the right deal.
I post on RCG just because I know that others read it. I really don't care about the RE agents but some poor schlep might stumble upon the blog, read what I have to say, and therefore check out this blog and make a more well informed decision on whether to buy right now or not.
I figure its good to take the fight to their turf once in a while.
synthetik, softwarengineer, debtfree: thanks for the responses.
The Tim -
Yeah - they're friendly enough, as long as you couch the discussion in terms they are used to, which is sometimes hard. It helps if you at least acknowledge the possibility of wanting to buy at some point in time. They can then justify spending time bantering with you.
Ardell's pretty funny, and she's just genuinely an extremely positive, hard-working person. She tried to be open-minded enough to ponder our point of view, I think, but her day-to-day job simply wouldn't allow her to come to the logical conclusions. She would have to quit her job if she did.
Marlow's another story.
Galen is just playing the game because he has to if he wants to continue doing what he likes to do (Shack Prices, at the moment), and his non-confrontational style is pure Seattle, so it works.
I haven't gotten a good impression of the lawyers over there yet. They seem to be a bit more open-minded.
Anyway, it's probably just a waste of my time, but they do have a unique, and sometimes useful perspective, as well as (unfortuntely) access to information that we don't. They have a lot of collective real estate experience, and I learn something now and then.
I wanted to register and convey;
I transferred my family into Seattle/Kirkland Nov-06. Before we made the move/transition we decided to rent to find the right neighborhood/house/amenities as close to my office as possible (downtown Kirkland)…after scouring the MLS & driving countless miles on the eastside, we have decided to continue renting. The housing market seems to be less than stable, and inventory seems to be rising.
Wanted to share an periodic email Seattle and Washington Property Market Overview I receive from a predominant Seattle Realtor every month or so.
Dear ,
The Seattle housing market statistics for January were just released and as usual the local media are quick to throw out headline articles to sell Newspapers. It is interesting to see how the two newspapers slant their articles when they get their information from the same source - the local Northwest MLS.
I thought that this month I would send you the real data from which we all work to cut through the confusion.
You will find below the complete statistics for "sold properties only" in King County and split into Single Family Homes and Condos. I also am giving you the Average Price and the Median Price (50% of sales below and 50% sales above) as well as the "days on market" figure. You can also compare them with this time last year. (If you would like other county breakdowns then please e-mail me)
I have also broken it down into the different areas of King County so that those of you who are looking to move onto Mercer Island are not too disappointed when you can't find a home for the King County median price of $ 429k.
Here is the Seattle PI story
http://seattlepi.nwsource.com/local/302836_housing08.html
Here is the Seattle Times story
http://seattletimes.nwsource.com/html/businesstechnology/2003561915_homesales08.html
I also have my own personal "rules of real estate" anecdotes after buying and selling our own personal homes around the world irrespective of market conditions, bubbles etc.
Every house we liked and wanted to buy always cost more than what we wanted to spend
Every house we bought was over our initial budget
Every house in our budget range - we didn't like
Every house we sold we thought was the best house in the neighborhood and should get top dollar
Every house we sold went for less than we wanted
Best Regards
Ian
Seems defensive?
I thank this site and contributors for the information here.
I have a question. When I lived in San Diego, I used to be able to find, and would often get from agents, monthly price per square foot numbers. why don't we have that here or where can we find that?
Wow. He's sending you "days on market" as a reliable stat? I think that borders on the criminal (it's certainly false advertising).
And those anecdotes:
Every house we liked and wanted to buy always cost more than what we wanted to spend
Every house we bought was over our initial budget
Every house in our budget range - we didn't like
In other words, "My professional advice is to live beyond your means and spend more than you're financially able to."
Every house we sold went for less than we wanted
What about when people were outbidding each other and selling prices were routinely 20-50k higher than asking? Did you not get what you wanted (your 3% commission) then?
TVB - I get a paper flyer which lists sold price/sqft numbers for my neighborhood. I've seen them around for asking, but not sold, I think... Shack Prices actually has the $/sqft sold number listed in their Sold Shacks comps.
Another cool tool to keep an eye on the loan tightening situation is Scotsmansguide
I don't begin to understand it, but it looks like it works both ways:
Brokers can advertise loans for which they are searching for lenders (which I linked to), as well as lenders soliciting ranges for which they would be willing to write loans.
A Lake Union house boat just dropped from $650,000 down to $625,000. Looks like some of the specialty stuff is having a tough time getting offers.
If you believe that inflation is rising then buying a house now might be a good idea.
You can borrow a huge amount of money at a low interest rate. If the inflation rate surpasses your fixed mortgage rate then your debt will shrink in real dollars. On the other hand, your real estate should appreciate at the same level as inflation.
Even if the real estate value drops relative to inflation, you might still come out ahead because of the low interest debt.
Why would you think inflation is rising, Alan?
It's hard to predict, because it depends in large measure on the actions of the Fed, but I would guess we are more likely to follow in the path of Japan, with a credit contraction and deflation.
In which case, cash is king and debt is a 200 lb weight around your neck that grows heavier every day.
Here is my personal favorite house on the market...
http://tinyurl.com/2tcllj
Who wouldn't want to live in a 760,000 dollar dome??
Zillow estimate of 648,000! He thinks he can get 110,000 more than Zillow is estimating... Hmm... considering its been on the market for 156 days I'm not so sure!
Looks like a poster on Urbnliving is having trouble selling his place at the Braeburn complex:
http://www.urbnlivn.com/2007/02/08/help-a-reader-sell-his-place-at-the-braeburn/
"The price is what really throws me. I originally had it listed at $469,950, or about $417 per square foot. I just dropped it to $459,950, or $408 per square foot! The same floor plan (with a killer view) sold in November for $540,000 or $480 per square foot. Now a view certainly adds value, but look at the spreadsheet below. My unit is highlighted in orange. To me, it looks like a steal!"
Yeah I commented on that, what a tool!
I do not know what inflation is going to do. I misread display name's comment of "inventory is rising". I seem to do that a lot.
I stand by my comment though that buying might be a good idea if you expect inflation to increase.
"A Lake Union house boat just dropped from $650,000 down to $625,000. Looks like some of the specialty stuff is having a tough time getting offers."
Not just the specialty stuff. I have posted about a unit in my building several times. This unit is rather entry level and it's now been on the market for 170 days, and has dropped, over this period, from $370K to $325K.
My advice in all this? Buy the book entitled On Death and Dying (Paperback) by Elisabeth Kubler-Ross. The stages of death parallel what we are seeing in the real estate market.
Crashcadia...
My experience is with Economics (EE would have killed me back in college).
I feel that the "mainstream" economists weren't so much as "wrong"...but rather were trying their best to avoid mass panic by just coming out point blank and saying "this is what's up".
The information will gradually become more negative...and most likely will be more in line with what they were probably thinking all along in private...but I would still be wary of what they say as they will titrate out the information verrrrrry carefully.
just my 2c
What good is an economist who won't tell you the truth if it hurts?
"If you believe that inflation is rising then buying a house now might be a good idea.
You can borrow a huge amount of money at a low interest rate. If the inflation rate surpasses your fixed mortgage rate then your debt will shrink in real dollars. On the other hand, your real estate should appreciate at the same level as inflation."
Alan,
Sorry to call you out on this, but this is one particular urban myth that I would like to see die a quick and grizzly death...
Your premise is ONLY true IF your income rises at or above the inflation rate.
If your income stagnates below inflation, you will find the money put toward servicing your debt will shrink, as other staples suck more money away.
If your income rises at a rate lower than inflation, but higher than your debt rate, you will still lose big time as food, medicine, energy, auto, insurance, retail, etc. will actually eat your paycheck faster than you can pay off your debt. Your debt will actually INCREASE as a portion of discretionary income.
Also, unless incomes increase at-or-above inflation, others will find themselves in the same boat. They will put LESS money toward the purchase price of items that are purchased with debt (houses, cars, college educations...) Additionally, interest rates will rise in this environment, which will put a large amount of downward pressure on the resale value of those same time-based purchases (housing).
You would find yourself with a shrinking discretionary income (standard of living), and shrinking asset values (wealth).
Inflation is usually good in the very short term, but hideously ugly in the medium and long term.
That's why inflation sucks. If it was a good thing, we would have inflation running at 25-30%, and love it.
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