03.20.2007 - Tuesday Open Thread
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33 comments:
From the PI:
Homes overvalued by 31.7% in city, report finds.
http://seattlepi.nwsource.com/business/308223_overvalue20.html?source=mypi
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.
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
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.
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?
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.
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.
thats ironic, I posted this article before I even checked the posts...lol
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.
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.
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.
"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?
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.
"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.
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.
imagine if we had had the foresight to do put options on THOSE stocks!
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?
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?"
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.
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.
Add another $500k easy with granite seats.
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).
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.
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...
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.
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
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.
"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.)
Dude -- you're not a barometer. Barometers make useful predictions.
ROFLMSWAO!!!
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.
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.
Yet another link from a very wise investor/instructor/teacher/guru.
http://www.thejournalnews.com/apps/pbcs.dll/article?AID=/20070318/BUSINESS01/703180350/1066
Dude -- you're not a barometer. Barometers make useful predictions.
Actually laughed out loud on that one... funniest line in a week - at least.
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