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Saturday, March 20, 1982

03.20.2007 - Tuesday Open Thread

This is your open thread for Tuesday, March 20, 2007. You may post random links and off-topic discussions here.

Be sure to also check out the forums, and get your word in the user-driven discussions there!

40 comments:

Eric said...

From the PI:

Homes overvalued by 31.7% in city, report finds.

http://seattlepi.nwsource.com/business/308223_overvalue20.html?source=mypi

Shawn said...

I have been watching the RE bubble for years. I see Seattle as a mini example of what has just happened nationally. You have all the sellers saying this can go on forever because, yadda, yadda, yadda. But, just like the rest of the world, there is a point where the customers are priced out and then the product must either sit on the shelf or reduce its price.

Fast forward, this goes on forever, a new med home now costs 55 million and the med income is 70k, who are the buyers?

Most people told me that the RE bubble would go on forever, and now everywhere on the news its about the bubble bursting. Seattle is just a bit behind on the timeline. Give it a year or two and it will have a bursting bubble.

Want some psudo proof? Go to a RE web site, look that the price of the home, go to ehome and see what folks in the neighborhood are making, and you see that those who live there cannot buy their own homes, if bought today. And when the med income person cannot afford the med priced home, well, again you have no customers.

Just wait, it is coming. Basic economics does not choose favorite cities to ignore.

Ashutosh said...

So where are the rentable homes?
Ok. I agree with the analysis that I read on this website that the houses are overvalued. But then where are the decent houses that I could rent? I am ready to pay rents close to 2K but houses that rent for close to that are nowhere to find. Where as if I want to go out and buy a place for 450K there are aplenty. Look at the number of listings on cragslist for-rent section and redfin for sale section and you'd know what I'm saying

biliruben said...

I think we are starting to see some panic, as the true colors of the REIC start to shine through.

First I'm told I smell, and therefore should think twice about going to Ballard, over at RCG.

Then I see JD essentially saying that renters cannot hope to improve themselves until they own. Talk about all your self-worth tied up in an object!

Then I see Tai saying that the rich are buffeted from the great unwashed humanity and the reality of the real estate market behind his high walls and gated communities paved with gold!

What is Seattle thinking it has become!

Wow.

I'm almost hoping for a severe crash just to give some people some humility.

Unfortunately these things always hit the poor hardest, because they have the least buffer, so I still hope for a softer landing.

Fortunately high-end housing, contrary to Tai's daydreams, usually takes it hard and deep in downturns, so maybe the rich and haughty will feel a bit of pain yet.

rentalbliss said...

I have another topic that was sort of hit on in the last thread. I often drive through downtown Kirkland to downtown Bellevue, I am amazed at all the comercial space that is available. It seems %75 of the buildings and office parks have for lease space available signs. When looking around Bellevue I see at least 10 cranes in my sight. Anyone have any ideas on how many are commercial and how many are condos. I have been reading stories from California that business are leaving due to high rent and overhead leaving alot of empty space. Does anybody see this happening on the eastside? It does not look at all tight in the available commercial space from what I see, and is the high rents and high cost of living here going to drive new business away. Just some things I have noticed and don't know how to evaluate my observations.

Grivetti said...

Hahahaha...

nice link eric, I'm sure the Tim will post but a few quotable gem sticks out...

"Sure, prices have gone up, and they've gone up rapidly," said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University. "But we're still in a situation where the market fundamentals are extraordinarily strong."

market fundementals extraordinarily strong? hahahahah! Like Superman was 'extraordinarily strong', able to defy gravity, spin the earth backward, stop a freight strain with his hands, kind of 'extraordinarily strong', sweet! I believe you!!!

Then there's this joker, Matthew Gardner...

"We've got high incomes, we've got a job growth rate twice the rate of the country as a whole, we've got growth management,"

What and arse, job growth? Dude, yeah, I know, apples are rotting off the tree in Wenatchee with no one to pick 'em, all those jooobs!!! ... what's that? you mean fundementals say its INCOME GROWTH RATE that matters, oohhhh! That doesn't sound right, does it?

meshugy said...

The PI article seems to jive with what's happening in the street. If we're at 31.7% overvalued, and markets top out at 35%, then that seems to explain what's going on in Seattle. Despite troubles in other markets, we are still seeing decent appreciation. But it's slowing down...so we'll probably top out and flatline for a while.

But if you look at the troubled markets in Florida and CA, they had 150% appreciation and are as much 80% overvalued! Those are markets that will crash...31% overvalued just isn't enough. And as Crellin mentioned, the fundamentals in Seattle are very strong are far beyond the national average: jobs, population growth, etc.

FinanceGuru said...

Seattle is estimated to be 31.7% overpriced, yet its still under the 35% threshold...so this means we are ok, right? The overall appreciation was about half as much as other parts of the country on a percentage basis in the past 5 years, thus any decline (if any) would be smaller than areas such as San Diego. Only makes sense from an economic perspective.

http://seattlepi.nwsource.com/
business/308223_overvalue20.html

I predict that prices will have single digit appreciation this year ~5% and this is the stance I have held since I bought in June 2006…however my condo has appreciated 11% (based on a comparable unit sold in my building) since I bought, so at least I have a small buffer in prices declining so far…hey something is better than nothing.

FinanceGuru said...

thats ironic, I posted this article before I even checked the posts...lol

Daniel said...

I tried to register for the forums, but it asks for a VIP keyword of the city? I put in Seattle SEATTLE seattle and it does not work.

Someone help me please.

synthetik said...

have held since I bought in June 2006…however my condo has appreciated 11% (based on a comparable unit sold in my building) since I bought, so at least I have a small buffer in prices declining so far…hey something is better than nothing.

not when "something" is a depreciating asset that may force you into BK. ...and June 2006! Not sure how much more of a "peak" buyer/FB you could possibly be.

Luckily Clonapin is available in generic form.

Eleua said...

But if you look at the troubled markets in Florida and CA, they had 150% appreciation and are as much 80% overvalued! Those are markets that will crash...31% overvalued just isn't enough.

I find it interesting that "other" markets may sell for 20 cents on the dollar, but not ours.

I have to wonder about the wisdom of those that see turmoil all around them and still engage in the very behavior that was the runup to all the damage they see in others.

You can drive drunk on a country road and see all the wrecked cars from others doing the very same. Just because you have not been killed, does not mean you won't. It is not time to hit the gas pedal.

Some laws are universal.

MisterBubble said...

"I am ready to pay rents close to 2K but houses that rent for close to that are nowhere to find."

Maybe you have eye problems. I just did a craigslist search, and it took all of five minutes to find houses for rent, in Seattle, for less than $2k per month. If you're willing to consider condos, you have your pick of the luxury new construction in desirable neighborhoods.

The trolls just aren't what they used to be, are they?

The Bruce said...

"So where are the rentable homes?"

I can't speak for Seattle, but I found a new home to rent in east Bothell near 522/405 for $2000 / mo, 2300sq', on a hill with a nice view, built into the Bothell Wetlands area. We really like it so far, and the kids like Kokanee Elementary School (Woodinville). My mortgage + property taxes on this home would have been $3500 with the 10% down (couldn't afford 20%). I saw plenty of other rentals available for $1800-$2200 within a 5-6 mile radius when we were shopping. Seattle may be a different story, but the rental market here (just relocated from AZ) was nothing like trying to find a rental in the Bay Area when we moved there in '00. I will rent until it makes sense to buy again, and I can afford 20% down. Tough to save much supporting a family on a single income, but I am holding out hope that the market will come back to earth someday so that my savings will = 20% down on a decent SFH again.

Eleua said...

Evolution of delusion.

Other markets may crash, but not the PNW.

Kitsap, Pierce, and Snohomish may crash, but not King County.

Issaquah, Renton, and Maple Valley may crash, but not the Lake Washington Basin.

Kirkland and Redmond may crash, but not Bellevue, Mercer, and Seattle.

Bellevue and Mercer may crash, but not Seattle.

Sodo, Georgetown, Capitol Hill, and Fremont may crash, but not Ballard.

Ballard may crash, but not my street.

My neighbors just got foreclosed, but not me. My values are still appreciating.

Hey! This padded room is going up in value.

MisterBubble said...

"I find it interesting that "other" markets may sell for 20 cents on the dollar, but not ours."

I find it interesting that six months ago, big baby blue and his sidekick gooroo were having verbal aneurysms at the mere suggestion that Seattle home prices were overvalued. Now, apparently, we're not overvalued "enough" to have a crash.

Seriously -- you guys crack me up. Keep up the funny.

Eleua said...

If we are overvalued by 31%, that takes a $750K house down to $572.5K.

A $177.5K whacking (prior to RE fees) is going to leave a mark. How many people have that much skin in the game?

Does anyone think that, after watching a fair to nice home drop almost $200K in price, buyers are not going to hold on to see if there are any more fireworks? Wouldn't sellers just want to get out, or do you think they are in for "the long haul?"

To put into perspective, that is about 2 years worth of income for people in the market for that house. How would you like to work 2 years for free and not get a tax break?

This reminds me of when Juniper Networks was beginning its swan dive. I was laying over in MSP and went to the Mall of America, just to check it out. There was a Charles Schwab or some other dead-fish retail outlet in the mall (remember those?). It was staffed by some 20 something kid and I chatted him up on stocks (I was an ass back then, too). He said that JNPR was a great buy (probably $180+/-), and that he was going to go "all-in" if it ever hit $150.

"Good luck with that," was my response and I moved on.

JNPR bottomed at $5 and now sells for a very optimistic $18.70.

Believe me. If there EVER was a "special" stock back in the day, it was JNPR.

synthetik said...

imagine if we had had the foresight to do put options on THOSE stocks!

Richard said...

If you're having trouble finding reasonably priced rentals in Seattle, look at Maple Leaf - you can rent a brand new, granite & maple decked out townhome for $1/sq ft/month. Or, an older house with a yard for the same amount.

This is basically the same rate that properties in this neighborhood were renting for 5 years ago. The only difference was back then there were no new townhomes available for rent.

Chris said...

Looking for rentals? Come to the communities just north of Seattle! I'm renting a 1300 sq ft house on .25 acres for $1100/month. My rent has been stable for the last 4 years since I've lived here, with only a $50 increase that whole time. My landlord knows that we have LOTS of choices on the north end; very nice houses for rent at about the same price are all over the place.

There is one house 1/2 mile from where I live that sits on the shores of Lake Ballinger that has been empty and up for rent for 6 months. My guess is that they are probably VERY motivated to deal on monthly rent by now.

If this crazy run up in housing prices was really due to only a housing shortage, then wouldn't rental prices increase just as much? Why have rentals been steady as a rock through all of this?

refractedthought said...

Hey! This padded room is going up in value.

Heh, Tai got me thinking about the same progression, except I would end it with:

"My bathroom will never go down in value. Don't you know how hard it is to find a good toilet downtown?"

Eleua said...

Some of us HAD a $10K order on $100 strikes all loaded up. Unfortunately, I had a nagging suspicion that the bulls would have saved it, and I had a slam-dunk put position flame-out on me just prior, so I chickened-out.

It was the short of the century, and I let it go.

Shoulda, woulda, coulda...

Calculating the ROI on that makes me cranky.

Eleua said...

What about those multi-million dollar crappers on the Seattle waterfront?

If it costs over $1M for bums to drop a steamer, then it only stands to reason a Ballard crap-box must be worth $4M. It probably has 2 thunderbuckets, so there is $2M, plus all the other stuff.

Sounds reasonable to me.

refractedthought said...

Add another $500k easy with granite seats.

The Tim said...

Daniel,

The "VIP Code" should just be "Seattle". Make sure there are no spaces before or after.

If you are still having difficulties, shoot me an email. (click "The Tim" for my profile page with my email address).

meshugy said...

I find it interesting that six months ago, big baby blue and his sidekick gooroo were having verbal aneurysms at the mere suggestion that Seattle home prices were overvalued. Now, apparently, we're not overvalued "enough" to have a crash.

Funny how I'm always used as a barometer on this site.

If Meshugy posts too much, it's because he's nervous about the market crashing.

If Meshugy posts too little, it's because he's nervous about the market crashing.

If Meshugy says prices are going up, it's because he's nervous about the market crashing.

If Meshugy says prices are going down, it's because he's nervous about the market crashing.


etc, etc....just look over the past year. It's always the same. Seems like everyone enjoys it...maybe I should start charging admission.

Grivetti said...

Funny how I'm always used as a barometer on this site.

I wouldn't call you a barometer, an annoying braggart at times, maybe, but definitely not a barometer...

Eleua said...

If Meshugy changes his avatar, it's because he's nervous about the market crashing.

Cool avatar. It reminds me of one of the funniest movies ever made.

Jazen said...

Oh yeah? Well check this out, Washington is mentioned with Kali and FL
http://money.cnn.com/2007/03/20/news/companies/new_century.reut/index.htm?postversion=2007032014

Ashutosh said...

Thanks @misterbubble, @the_bruce and @chris for your replies.

Believe me I am not trying to troll here. I am renting right now and just want to move into a better house/condo.

I am looking for something on the eastside (kirkland, redmond, bellevue, sammamish) between 1500-1750 pm and there isn't a decent place available. I have been looking for a month now. On the contrary a 375K-425K condo/house is easy to find.

I see that there are places like Maple Valley, Bothell that have good houses available at cheap rent but not in this part of eastside. What you get is mostly old ramblers.

The point that I am making here is that once you have kids, family and want a nicer home then unfortunately there aren't any options other than buying a house however overpriced it might be.

MisterBubble said...

"Funny how I'm always used as a barometer on this site."

Dude -- you're not a barometer. Barometers make useful predictions.

You're more like a stopped clock.

(And for the record? I think the Hebrew Hammer is gonna stick.)

Eleua said...

Dude -- you're not a barometer. Barometers make useful predictions.

ROFLMSWAO!!!

uptown said...

Ashutosh:

I had no trouble finding listings; yes they were older houses, but they were also on large lots in established neighborhoods.

This website is called "Seattle Bubble" for a reason; don't expect a lot of sympathy for those still willing to buy.

confused said...

Eleua-

Don't remind me about JNPR. I was that 20 something kid trying to put people people into JNPR, I actually liked JDSU or EXDS better. What a horrible nightmare. I found out what margin was really all about.

When I first got into real estate I slowly started to see the same thing happen. I figured to lose your ass once in your life was enough. Well, enough for me.

God, I hate that industry. Real estate is better as long as you aren't on the resale side. It will probably be bad on all sides pretty soon. If I only had the forsight then.

msrelo said...

Ahhh good old EXDS... My roommate at the time took a bath on that one! He is still looking for a get rich quick scheme... I was a major in finance at the time and sold my meager holdings in a mutual fund (for a tidy profit) before things got bad.

Eleua said...

Confused,

Sorry to open an old wound.

At least you were smart enough to learn from your experience. That is more than I can say for 95% of everyone else that lost their ass on overhyped stocks, and now seeks to lose everything else on overhyped houses.

Thanks for understanding a point that I have been trying to make for almost a year on SB: It is not the underlying asset that makes it dangerous, but the mindset behind the behavior.

There is ABSOLUTELY NO DIFFERENCE between the stupidity that ran up stocks in '99 and the stupidity that has run up houses today.

None. It will end in the same grotesque fashion.

The Bruce said...

Ahutosh - the 'price point' for decent places seems to be $1800 for SFH rentals, having searched Craigslist.org and NWsource for months. You just need to keep an eye on craiglist a couple times a day until something pops up. The good stuff does rent fairly quickly - as well it should, when the alternative is buying a 450k Kirkland fixer. Just keep hitting craigslist and you'll find something, although you may have to be willing to stretch to 2k...

Jazen said...

Yet another link from a very wise investor/instructor/teacher/guru.
http://www.thejournalnews.com/apps/pbcs.dll/article?AID=/20070318/BUSINESS01/703180350/1066

synthetik said...

Dude -- you're not a barometer. Barometers make useful predictions.

Actually laughed out loud on that one... funniest line in a week - at least.

disgruntledengineer said...

Just wanted to remind everyone (especially the bulls) that Seattle's closest neighbor, Portland, is not doing so well. Anecdotally, I've heard there's quite a glut of inventory down there, and I personally know of a couple having a hard time selling the family house to be able to move to flyover to follow a job. People were saying the same kind of crap down there, everybody wants to move here, it's so beautiful, and the economy is so great (Intel, Nike, and ???). Golly gee, they're only a 3 hour car drive away from us. Don't you know it, even houses in the suburbs of Portland (down there, the "Westside" is probably equivalent to the "Eastside" here), cost $450000 to $600000 for anything decent. Now, I KNOW that the median income in Portland is lower than Seattle, so what gives? Oh yeah, it's all the Cali EL's. $500000 for a house in Hillsburrito? Give me a break!