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Friday, March 16, 2007

Mortgage Mess Difficult to Ignore

Take a look at the front page of the Seattle Times website this morning:

That's Coalition warns of "mortgage tsunami", followed by Accounting, executives at lender New Century investigated, Fraud charges at Metropolitan Mortgage & Securities settled, and of course Mess unlikely to break economy.

First off, I don't think the term "mortgage tsunami" is appropriate, since a tsunamis come with little warning and through no fault of those in their path. I'd call it more of a "mortgage harvest," considering that the mortgage banks and homebuyers are simply reaping what they have sown.

And why is it that they would like us to believe that the ongoing mortgage "mess" is not going to "break" the economy?
However, while stocks of subprime lenders have been pummeled, the industry's effect on the broader market is likely to be muted. "All told, subprime mortgages are worth about $640 billion, and that isn't chump change," says Bob Gay, economist and managing partner of Fenwick Advisers. "However, it's only 0.6 percent of annual gross domestic product. ... On the consumer side, it's not like every subprime mortgage is going to default and get repossessed."
Delightful. An argument that basically amounts to "because we say so."

Hold on tight and enjoy the ride, everybody.

81 comments:

E-sidedave said...

This was front page of msnbc.com yesterday. I was surprised no one else commented on it.

http://www.msnbc.msn.com/id/17628941/

info said...

Some folks are definitely going to get burned in all this. However, most of that damage will occur among low income areas of the hottest markets: California, Florida, etc. Your average middle class homebuyer in Seattle will be mostly unaffected by this...the increasing demand in this area coupled with a tight supply will keep prices stable. All the leading indicators show that March will be a strong month, possibly as strong as 2005 or 2006.

T,V & Mr.B said...

Shug, Are you aware that delinquencies on Prime adjustable-rate mortgages are rising much more quickly than those on Subprime fixed rate loans? Glodman Sachs is aware of that and states that the adjustables are the ones to worry about, sub-prime or not. So your theory is a dud as usual. California low income? California's hit is definately NOT in the low income bracket. Your average middle class homebuyer is gonna be decimated.

info said...

So your theory is a dud as usual.

Yeah, people have been saying that ever since this blog was created. A year and half later I'm the one with 150K in equity and the rest of you are priced out.

If buying was a "dud" strategy, then I'll take it over what you've got - zilch.

Terry said...

Relating to the Seattle Times articles -

Does anyone else remember when Alan Greenspan was actually encouraging people to use ARM's instead of traditional fixed rate mortgages. (Feb 2004?)

refractedthought said...

"However, it's only 0.6 percent of annual gross domestic product."

No wonder we're in this mess. These fuckers can't do basic math. $600 billion out of $12 trillion is closer 6%, no decimal point.

octopuswithafez said...

A year and half later I'm the one with 150K in equity and the rest of you are priced out.

That's like saying you're up $150K on the craps table while still having all your chips out on bets while the dice are still rolling. You do not realize the gain until you have either sold or extracted it...

confused said...

info-

I am not sure where you are getting your facts from but let me state a couple. As of 12/31/2006, there is a 1.4 YEAR supply of finshed lots in the King County market at current demand. There is a 4 year supply of land in process. If we went back to the demand levels in 02 and 03 that would put the supply close to 3 years.

And if you want to talk about attached product we have a 1.8 year supply of finshed product with an 8 year supply in process.

I can't even talk about Thurston, Kitsap and Skagit. Those markets boggle the mind. The land constraint market IS a fact IF you are talking about the current GMA's 20 year plan. Unfotunately, there is a whole lot of land for the next 5-6 years. Scarcity is an illusion.

And if you don't think supply in outer areas won't affect Seattle, well, I just don't know what to say.

Oh, and you haven't made a dime until you sell something.

T,V & Mr.B said...

Shuggy my man, I am glad that have your $150K in equity. can you tell me when you plan to cash in on that equity? Utilize it for something tangible? How that equates to anything more than a paper profit?

I cashed out for quite a large profit (bought '95 sold 2006 for 3x what I bought)which I would say is substantially more than zilch.

At this time,according to housing tracker from the peak in October of 2006, asking prices have decreased by 2.5-3% for the area. It looks to me like your vision is pointing in the wrong direction.

I would say selling should be your strategy at the moment, but that is just my friendly advice.

confused said...

"And if you don't think supply in outer areas won't affect Seattle, well, I just don't know what to say."

sorry double negative.

Eleua said...

Note for Synthetik, The Tim, TV&B, Mr. Bubble, Grivetti, Crashcadia, Terry, WTF...

At 0836PDT on 16MAR07, 'Shug made the following announcement:

"Your average middle class homebuyer in Seattle will be mostly unaffected by this..."[mortgage finance problems]

OK, Carnack has spoken. Anyone want to start the over/under on just when he eats these words?

Put me down for April 08.

info said...

Scarcity is an illusion.

Then show me a decent 3bd/2ba house in North Seattle for less then $500K.

They're impossible to find....the SFH is quickly becoming a luxury for the lucky few. The under $500K market is all about townhouses and condos now.

As mentioned in a recent article, the NWMLS median prices are understating the value of SFH because they lump in townhomes, which now make an ever increasing percentage of sales.

Don't fool yourself....Scarcity is very, very real.

Grivetti said...

OK, Carnack has spoken. Anyone want to start the over/under on just when he eats these words?

Actually to tell you the truth, eleau, I'm starting to buy into Synthetik's conspiracy theory that 'Shug may not be info... the only way to be sure would be if 'Shug signed in and said "I'm info"...

dunno

T,V & Mr.B said...

Eleua,
I think you're giving him way too much time to chow down. Ole shug will be gastrointestinally bloated by the end of 07. I could be off, As shuggy says, we been spouting for a year and a half. but the snow ball has started to roll, aint no stopping it now.

Eleua said...

BTW, that was one of the most egregious examples of "Seattle is special" that I have seen in some time.

confused said...

I would say never.


I would settle for a disappearing act.

On second thought, I kind of like the opposing viewpoint.

refractedthought said...

Anyone want to start the over/under on just when he eats these words?

I'm not going to underestimate the power of his delusion. Put me down for June 1.

refractedthought said...

Oh wait, I missed the 08. I'll say June '07, anyway.

confused said...

"Then show me a decent 3bd/2ba house in North Seattle for less then $500K."

I just pulled up 32 in 98133 of which 5 were townhomes.

The Tim said...

the only way to be sure would be if 'Shug signed in and said "I'm info"...

Exhibit A

Eleua said...

I factored in his ability to wallow in denial. Once the market siezes up, he will still go on chirping about how the (asking)prices are still high.

He won't eat his words. Nobody endzone dances when the other team scores.

info said...

I just pulled up 32 in 98133 of which 5 were townhomes.

Post links please...

If it's a fixer upper, on a busy street, in a bad hood, or too far out it doesn't count. I'm talking the desirable areas of N.Seattle: Ballard, Fremont, Greenlake, Etc.

meshugy said...

Actually to tell you the truth, eleau, I'm starting to buy into Synthetik's conspiracy theory that 'Shug may not be info... the only way to be sure would be if 'Shug signed in and said "I'm info"...

Shows you what Synthetic knows....he also thought I was a Realtor. Paranoid guy...I wouldn't take anything he says seriously.

INFO IS ME!!!

Christina said...

Then show me a decent 3bd/2ba house in North Seattle for less then $500K.

Mine, for $370K. I'm not kidding myself -- I'm looking at comparable sales over the past 18 months. And I've got the hidden blessing of having bought last century in a slow-to-appreciate area. But I'm not selling, and I don't look at my house as an investment, and I don't kid myself about my ethereal, illusory home equity, probably from the other blessing of having lived through a boom-and-bust market elsewhere.

But I'll echo that if you have cash reserves equal to the equity you have in your home, and don't plan to sell in the next ten years, you'll probably be okay.

meshugy said...

Oh wait, I missed the 08. I'll say June '07, anyway.

Ok...if that market is toast by June 07 then I'll politely agree with every argument made on this blog for 3 months.

If not, then you do the same for me!

Deal?

meshugy said...

Mine, for $370K.

Address please....I'd like to see exactly what we're talkig about.

thanks!

Lionel said...

In regards to housing availability, you'd think that if there were a real dearth of nice housing in Seattle, good rentals would be hard to come by. I just rented a beautiful 3 bedroom craftsman in Ravenna for under 1700. It wasn't as if it was hard to find. Had I been willing to live in Ballard (more of a commute than I wanted) there have been plenty of nice homes for rent for @ 1600.

I'm guessing that if the house I've rented listed it would be for 450 or so. To purchase anywhere near that price would be a terrible investment. The people who own it undoubtedly bought many years ago, and the 1700 covers their nut. It certainly wouldn't cover a 450K mortgage.

I have to say that I'm a little stunned that people STILL don't get it. Even a month ago, there was very little press in the MSM about the bubble. Now every day there is a story or two in just about every paper, and we're just now seeing the tip of the iceberg.

refractedthought said...

If not, then you do the same for me!

Deal?


I wasn't making a deal, just a prediction. I'd say there's still a slim chance that Seattle's housing market will continue to post ridiculous numbers through June, so I won't stake anything on it.

meshugy said...

Put me down for April 08.

If you look back over the history of this blog, everyone is always saying:

"Next month, week, season, or year....that's when the crash will happen! That's when I'll get my dream house for $50K from a desperate flipper who is in foreclosure. That's when I'll get the last laugh...that's when everyone will know I'm right! Schadenfreude...ha ha ha. I win!!"

But look what happened...prices are higher then ever!

So far, the only one laughing is me.

BTW, remember Seattle Price Drop? What happened to him? He was so sure the end of the world was nigh in Winter 2005. Whoopss...

meshugy said...

there's still a slim chance that Seattle's housing market will continue to post ridiculous numbers through June, so I won't stake anything on it.

Then why do you bother making such predictions if you won't stand behind them? Pretty spineless...

confused said...

info-

Since when is Ballard North Seattle? Fremont? Why not include Eastlake and Queen Anne? 100th to 145th would be more like it. Maybe Carkeek but not Ballard. How long have you lived here?

I already told you they were all in the 98133 zipcode. Fidgure it out. I am not hiding anything. Run it yourself. They are all tehre.

confused said...

Anyone have any historical sites that would have units sold year over year going back 20 years or so?

T,V & Mr.B said...

"So far, the only one laughing is me."
You’ve got that wrong too.

Shuggy, I think the majority of posts on here have stated that we don’t know when it will happen, just that it WILL happen. I put my 07 prediction in there because now the indicators are beginning to surface and all this is just a scratching of the surface.

So far, I don’t really know what your prediction is. Are you stating that you will see double digit gains in your property this year as well? If that is the case, I’ll be your huckleberry.

You aren’t the only one laughing Shuggy, but I’m not laughing WITH you...

PricedOutForever said...

The Seattle area real estate market should be strong - especially on the eastside - this Fall and Winter. Sales of Halo 3 will single-handedly prop up the local economy, end terrorism, and establish world peace.

refractedthought said...

Actually, on second thought, I will make you a deal 'shug.

If King County does not have double-digit YOY sales declines in the month of June, I will never again give you any shit on housing.

And you don't have to give up anything in return. Spout off all you want. The other guys here love it.

seattlehotty said...

And if you don't think supply in outer areas won't affect Seattle, well, I just don't know what to say.

The thing that makes Seattle different is that our road capacity is so awful that it is not practical to live very far away from your job. When I lived in LA, I commuted from Pasadena to Santa Monica (25mi) in under an hour. In Seattle, you can't get from Renton to downtown Seattle (12mi) in under an hour during rush hour most days. They may be building lots of houses in Puyallup, Everett, and so on, but as a practical matter many of the downtown Seattle workers and Microsoft workers in Redmond would not choose to live there and deal with the commute. I would like to see numbers that showed the supply within a desirable distance from the economic hubs of the area, because I think the picture is quite different. I am still buying right now, but my theory is always to buy near features that minimize the risk of depreciation, such as downtown, lakefront, and so on.

In regards to housing availability, you'd think that if there were a real dearth of nice housing in Seattle, good rentals would be hard to come by.

The rental market really has me confused. The subprime fallout is bound to produce more renters from those that do not have down payments to buy, but I agree with you that if you look on Craigslist you see lots of rentals for less than the carrying costs. I think that over the next year or so rents will have to go up, and that many of these rentals you see now are from people who bought a long time ago and have not increased their rents to match the market rate over time.

meshugy said...

My prediction is that the we'll see a slow down to single digit appreciation. That has actually been my prediction from the start of this blog. Go back and see...and guess what, I was wrong! 2006 still had double digit appreciation. But I think 2007 will be mellower. Things will level off and houses will inch higher every year. But a housing crash is not in the cards for Seattle...job growth and population growth and far outstripping supply and will for years to come.

When I bought I figured this would be the case...I knew I'd get in on the fast appreciation for a year or two and then it would level off. So far I was right...$150K in equity in less then two years. But I don't expect it to go up that fast in coming years.

meshugy said...

If King County does not have double-digit YOY sales declines in the month of June, I will never again give you any shit on housing.


I was thinking more about prices dropping...but I guess I can't refuse that since sales were up last month. Overall, I don't expect sales to be the same as previous years. But I do think prices will hold.

refractedthought said...

Road capacity? Oh I don't think I've heard that one before. That's a knee slapper.

Soul-crushing traffic never stopped northern Virginia residents from buying houses hours and hours away from their jobs. And trust me, the traffic there when I left was a lot worse than here.

refractedthought said...

I guess I can't refuse that since sales were up last month.

Are you paying any attention to this subprime meltdown at all?

synthetik said...

So Meshugy is showing his true colors after all.

I liked the old Shug better.

Are you getting laid at all? What's going on here?

Lionel said...

seattlehotty, I don't know that rents will rise. Before I'd settled on this particular one, I'd found one in Ravenna that was going for 1350. At that price, 15 people had called in 12 hours off the craigslist ad. For the one I rented, at 1695, only one other party was interested. I don't imagine that FBers who have recently been foreced from their homes are going to have a lot of cash on hand. Perhaps the places now going for 1000 or so will inch up, but I think the higher end might even come down. I've been noticing an increasing number of townhomes and houses that have clearly been refurbished (granite etc.) coming on the market, and I doubt that the people (flippers) renting had planned on leasing the places out.

As to your commute from Pasadena to SM, be happy you're not doing that anymore. Westbound traffic on the 10 has become impossible, largely due to the bubble - homes in SM have become so expensive that anyone working there has been forced to move East.

BanteringBear said...

meshugy said...

"...a housing crash is not in the cards for Seattle...job growth and population growth and far outstripping supply and will for years to come."

What you fail to address, is that wages don't support current prices long term. And exactly where did you come up with this idea that demand will far outweigh supply for years to come? The supply of homes is up greatly over last year. You're missing the trend. Your blather is nothing but wishful thinking. The idea that all markets will fall, except Seattle is not only laughable, but delusional. Your myopic stance is no different than that of the fellow who bought the last tulip bulb.

And your frequent requests for personal info from others is disturbing; almost frightening. One of your recent posts went so far as to threaten. Your desperation is quite apparent.

searcher said...

Gonna have to agree with refractedthought here, I moved here from northern VA a little bit ago and the traffic here is nothing in comparison. There 11 miles on a 6 lane highway could take anywhere from 1 hour to 2 hours. The work locations in DC were also much more centralized than here. Of course, that whole market is frozen/dropping, especially in the exurbs.

WTF said...

I wager that he'll never eat his words...mostly out of the same inane machismo that's driving his effervescent optimism. He'll just disappear, much like his precious equity.

Shug/Info -

I live downtown, but that's all you're going to get from me. Call me a coward if you want, but telling some nut job exactly where I live is similar to taking out a "suicide loan" and hoping everything works out (kinda like what you seem to be doing)

Hotty -

A shitty commute doesn't magically make my income double...

meshugy said...

Your desperation is quite apparent.

That's another one everyone has slinged at me over the past year and a half. SeattlePriceDrop and Dukes used to say that all the time...again, what happened to them? They were so sure they would cash in on a crashing market in 2006. So sure I'd be underwater...in financial ruins. Always telling me my knuckles were white and the sweat was dripping down my face. But the truth was they're the ones who lost out...

I'm still here happily earning equity in a house that, at today's prices, would be $150K more then when I bought in 2005. And were are they? Still waiting for a crash that never came....and no longer able to afford even the most modest home in Seattle.

EconE said...

When I lived in LA, I commuted from Pasadena to Santa Monica (25mi) in under an hour

I live in LA now. I doubt that you would be able to average 25mph from Pasadena to SM. Sorry.

but my theory is always to buy near features that minimize the risk of depreciation, such as downtown, lakefront, and so on.

true...although the key word here is minimize. I feel that downtown has been overbuilt and the fact that very few resales are turning tells me that this is not an area where risk is minimized.

Waterfront...that all depends. I doubt that the Rainier area waterfront will fare as well as Hunts Point.

The subprime fallout is bound to produce more renters from those that do not have down payments to buy

The only renters that will be "produced" are those that lose their homes. One family out of a house also brings one more house on the market. Those that do not have the downpayment to buy are already renters.

I agree with you that if you look on Craigslist you see lots of rentals for less than the carrying costs

Yup...true true...if you have been following them as closely as I have, you will notice that if you do the math, the rents are only covering the carrying costs of HOA, Property Taxes and a "teaser" payment on an IO loan. If the owners had financed on a 30yr fully amortizing loan then the rents would have to be higher or else they would be losing money every month out of pocket.

BTW...I ran my figures (mortgage payment) using the prices that the owners PAID for their condos...not what they are asking for them now.

I think that over the next year or so rents will have to go up

over the last couple months rents have actually been coming down...especially when one considers the competition and the "freebies" offered. If you read the CL ads...you can see some of the desperation.

I won't even breach the subject of rents vs incomes as one would need an understanding of Economics to digest it. Business and Law don't quite cut it in this scenario.

And Info/Meshuguy...why the financial "long di**" contest. People with money usually don't discuss their finances.

The Tim said...

I'm still here happily earning equity in a house that, at today's prices, would be $150K more then when I bought in 2005.

Dude, if you're so bloody happy, why do all your comments in the last few days sound so angry?

BanteringBear said...

"I'm still here happily earning equity in a house that, at today's prices, would be $150K more then when I bought in 2005."

I call bigtime BS on this statement. Have you had an honest appraisal completed on your house recently? Did you have a realtor run a CMA for you? Have your received an offer from somebody for your house? From what i've read, you're using Zillow's Zestimates. We all know how accurate those are. (Laughing uncontrollably). I smell an empty suit.

SeattleMoose said...

methinx Shugs needs a hug...reality is setting in.

Grivetti said...

Zestimates are nebulous and unreliable at best...

518 28TH AVE S
Seattle, WA 98144

purchased 7/28/2005: $277,000
for sale 10/31/2006: $379,000
price reduced 2/1/2007: $365,000
rented 3/15/2007:

current Zestimate?
$418,000

Again, Zestimates aren't much of a barometer until that property faces market conditions...

EconE said...

I find that Zillow estimates can be misleading in both directions from what I have seen in my neighborhood in L.A.

Many of the houses show "Zestimates" that are 1/3 of what the property would sell for. Granted...the reasoning that most of these homes are valued so low has nothing to do with the home itself but rather than with the length of ownership. The longer the ownership...the lower the "Zestimate" vs other comparable homes.

For example...three of the houses that are within 3 blocks of me are consulate homes. Japan, Canada and Korea. These houses have very low "Zestimates" ...however...they are some of the most prized houses in Hancock Park. Go figure.

WTF said...

Zillow's formula seems to disproportionately weigh recent activity and sales history in coming up with their values.

Grivetti said...

Again, I'm done picking fights with Meshugy... D-O-N-E done, and I won't post his zillow link anymore, but what I don't understand is this...

You say you've racked up 150K in equity but the Zestimate says its only +102K? I know you said the Zestimate at purchase didn't included some remodels, etc...

But my question is this, is it fair to use 2 measuring sticks, your own at purchase and Zestimates now? Have you had your property appraised in the past month to verify Zestimate? Do you know of anyone nearby that's had their property appraised close to the Zestimate value?

Comrade Chairman Greenspan said...

"A year and half later I'm the one with 150K in equity and the rest of you are priced out."

Do not feed the troll, people. You'll only encourage it.

seattlehotty said...

A shitty commute doesn't magically make my income double.

True, I think another factor that is relevant in this discussion is the differentiation between market segments. Most of the people that I deal with are attorneys or other upper income people looking in the $1M+ range, and for most of them they are not going to accept living more than 30 minutes away from downtown, and many have other special requirements like being close enough to drop their kids off at Lakeside on the way into work. They also are not going to buy a house that's less than 3000 sq ft, requires extensive fixing to make current, and so on. In this segment, the choices are very limited. I know of one house (.5 acre in Mt. Baker at $1.6M with an awesome view from Mt. Baker to Mt. Rainier) that received four bids this past weekend (its first week on the market) and the winning offer was in the $1.9M range. Everyone waived contingencies and the house had a known carpenter ant problem (the house was enough of a rarity to this market segment that some fixing was acceptable). The point is that the supply is so slim in this market segment (largely due to the number of millionaires in the Seattle area) that sales and appreciation are not very likely to suffer over the next year.

In other market segments, the story may be very different. If you are in the market for a $400k house, for example, and work in Seattle, then Bothell may be interchangeable with Sammammish and several other areas an equal commute time away. These areas in my experience have been way over built and supply is potentially excessive, and these areas are probably going to see some flat prices or even declines.

Grivetti said...

In this segment, the choices are very limited. I know of one house (.5 acre in Mt. Baker at $1.6M with an awesome view from Mt. Baker to Mt. Rainier) that received four bids this past weekend

Not so sure about that, the following address has been on the block for the better part of 6 months at around 1.2M (zestimate 1.3M)...

5505 2nd Ave NW, Seattle, WA 98107

Nice modern tri-level, great views, beautifully landscaped, in the city, but yet every weekend the sandwich board sits out without a taker...

EconE said...

I know of one house (.5 acre in Mt. Baker at $1.6M with an awesome view from Mt. Baker to Mt. Rainier) that received four bids this past weekend (its first week on the market) and the winning offer was in the $1.9M range.

MLS# please.

Most of the people that I deal with are attorneys or other upper income people looking in the $1M+ range

"upper income"...that's a vague term.

They also are not going to buy a house that's less than 3000 sq ft, requires extensive fixing to make current, and so on

my experience with "upper income" people and their home purchases shows me that they don't wan't someone elses idea of a remodeled kitchen or bath. New kitchens and new baths are ripped out to make way for "different" new kitchens and new baths.

Personally...it disgusts me.

Grivetti said...

Even those with a Phd and decent credit are getting cloven assunder...

Mortgage Bloodbath

Unlike many borrowers who took out subprime loans, Andy Sobel had good credit, a decent job and modest savings, but he needed to stretch to buy a home in the white-hot San Diego housing market in 2004.

I think I've heard Seattle referred to as 'white-hot' about as often as I've heard it referred to as 'red-hot'...

"You never think that this could happen to you. You feel like an idiot," said Sobel, 48, who has a doctorate in education. "You fall down and they stab you."

Feel sorry for the dude, but the best why for them not to stab you, is to have never picked up the gauntlet in the first place...

This is a contagion, and this beast will not sit kindly inside the fold...

acbaldwin72 said...
This comment has been removed by the author.
Vickie said...

Grivetti,
I saw that article today. And as you may remember me stating, I lived in San Diego at that time. the mantra was "Buy now, or be priced out forever". Kinda sounds familiar doesn't it? Mr. Sobel simply followed Shuggys advice and bought anyway that he could. Hey Sobel saw about a 100K increase in one year. He shoulda sold then. But every one was saying that prices will never go down in San Diego. Now he has to sell and will be lucky if he sells it for less than 60K below what he owes on it.

Guess what folks, I just found out that 2 people where I work HAVE to sell their house...RIGHT HERE IN SEATTLE! They can no longer afford their mortgage and can't get re-fi'ed.

Who's got an extra thumb to put in the dike?

T,V & Mr.B said...

Oops, that was s'possed to post under T,V and Mr. B. My wife must have signed on while I was away. sorry

confused said...

Hotty-

Just because a select group of individuals choose to over pay for something does not a market make. When it costs 150k to live in Auburn and 400k to live in Seattle there won't be as high of a demand in Seattle and prices will come down.

You could say that Seattle is insulated more so than other areas but not impervious. How many condo units are coming online downtown? Bellevue?

The average 20 acre parcel will accomodate 100 homes. There are over 5000 condos for sale right now in the Seattle area. That would take an estimated 1,000 acres of land to build that many houses. All of this new constuction is taking place in the most desireable areas. So, I guess I just don't understand how you think we have a limited supply. Have you heard what Paul has planned for South Laek Union or more affectionately Allentown? 10k units. That will save 2,000 acres of farmland.

We may not have a lot of land but we got plenty of sky.

uptown said...

seattlehotty -

You have heard of Mercer Island? 82 listings from 1 mil+ (SFH's over 3,000 sq ft). I hear there is a hwy directly to downtown from there too.

Land is worth more in Seattle because of higher zoning densities. This is not the suburbs; so you pay extra to pretend you live in the suburbs.

synthetik said...

Maybe he's upset about being outed? My think is, if you dont' want people to know who you are, then why use your nickname alongside your realname?

Not very smart if you ask me. Then agian, neither is purchasing a sh*tbox in ballard at the height of the great real estate bubble.

uptown said...

Also seattlehotty -

In Seattle, you can't get from Renton to downtown Seattle (12mi) in under an hour during rush hour most days

Try 518 to 509 to 99.

formanoreasta said...

info -

I couldn't have said it better. Thank you.

I moved here 2.5 years ago. Begged my wife to reconsider buying. Wait, I said, just wait, there will be tons of places to choose from and we can name our price!

Still waiting. Glad I bought last year.

MisterBubble said...

I rarely speculate when the crash is going to come; I don't like to feed the silly trolls whose grasp on logic doesn't extend past "it hasn't happened yet, so it's never gonna happen" (lookin' at you, here, shugy...)

That said, at this point, I'm willing to predict a very rough narrative for the coming year:

1) Today: Subprime implosion begins. Banks finally tighten lending standards.

2) Summer: Demand for condominiums drops off a cliff. First-time buyers are scarce. SFH market will probably continue to hold.

3) Autumn: local MSM starts to take first notice of condo weakness. SFH sales will begin to drop. Bad national economic data begins to emerge. Whispers of layoffs.

4) Winter: Condo inventory continues to rise; sales are stagnant. Local MSM begins to speculate about shaky spring prospects. Condo purchase incentives begin to appear.

5) Spring 08: Holiday retail sales are dismal; layoffs begin, first in the retail sector, then housing, then spreading to manufacturing and industry. Possible stock market instability.

6) Summer 08 and beyond: National economic downturn hits Seattle; Boeing gets first order cancellations; local media report on staggering job losses in construction and real estate. SFH demand begins to drop rapidly....

B said...

Trying to time a market is usually dumb. Most pros would advice against it in almost any asset class. However, this is the first instance I've seen of pros (respected ones, not cranks) selling their houses and going into rentals. It gives me pause whenever I think I'm crazy for not just getting the biggest loan I can afford and buying a crackerjack condo.

Dumber than trying to time a market? Taking on unprecedented levels of debt to buy an asset that "always goes up" because "they aren't making any more land" in a city that is "special".

B said...

Condo sales have already fallen off a cliff - in lots of "special" places in California and other coastal places that are ahead of us on the real estate cycle. At the low end (subprime), no activity. In condos -- ZILCH. Nothing's moving.

Which is no big deal if any of these people bought for the long term, and are going to stay in that condo for at least 8-10 years. In which case, price pretty much doesn't matter. But a lot (almost all, by most accounts) are placing humongously risky bets on appreciation. You don't rent an expensive asset from the bank in hopes that the appreciation will bail you out. This is not how wealth building works. Yikes...

seattlehotty said...

I love the biased wording of the article: he needed to stretch to buy a home and Sobel has lost his home and his savings. How about a more accurate characterization of what happened? He bought more house than he could afford, used all of his savings rather than diversifying, and then failed to make his payments on time. I realize he is not alone in making bad decisions, but this is just the start of the characterization of the problem that is going to result in Congress handing out relief for what the "awful mortgage companies" are doing to "poor innocent homeowners."

Many people I know are so cheap they will stand in line in front of me and dispute $.10 on their grocery bill, but they will buy a house without even thinking or reading what they are getting into. Caveat emptor.

seattlehotty said...

We may not have a lot of land but we got plenty of sky.

confused, I agree with you that there are a ton of condos coming, but I also think that the top end will continue to be chased by the excess of millionaires in this area. In one article (couldn't find it before posting) from around 2005, Seattle was indicated as having the highest per capita number of millionaires of any city in the nation (although LA has the highest total number). Microsoft created 8,000 millionaires alone not to mention all of the bankers, attorneys, accountants, and so forth that became millionaires servicing them. These are people that don't really care about the state of financing, many have substantial fortunes they can leverage without traditional financing.

Not all of those new condos can have an ocean or lake view, especially as new ones build in front of them, so the high end may be much more insulated from this than many suspect. It goes back to the old addage: location, location, location. If you buy the *right* house, you can insulate your risk of when you buy.

seattlehotty said...

uptown: Many of the open listings on Mercer Island don't fit the tastes of the $1M+ crowd. For one, the east side of the island (where most of the listings that sit for a long time are located) is considered less desirable than the west because it gets less sun moisture issues (e.g., mold) are more common. Also, houses that need substantial updates are common on the island. I'm not saying there aren't some stunning homes there (waterfront, west side, up to date), there certainly are, but they get snatched up very quickly.

Terry said...

Actually, I don't understand why people think that there is a problem.

Buy that $800K house right now, if you haven't already, and take advantage of Senator Dodd's bailout plan. Better yet, buy two of them! It's your right as an American citizen to be financially irresposible and not be held accountable.

o said...

seattlehotty---

there are over 20 houses for sale over a million dollars right now in 98112

S Crow said...

Speaking of 98112. Gosh I wish I had bought my folks home in 98112. 23rd E & E Prospect. Taxes are nearly $10K per year. Nope. Couldn't swing that.

Oh well. It's all relative I 'spose. I'll never get the Capitol Hill blood out of me, but I do like the space out in Snohomish. ;>

deepcgi said...

meshugy:

who is going to buy the cheapest houses? without subprime mortgages?

T,V & Mr.B said...

"and no longer able to afford even the most modest home in Seattle"

Shugy, Forman and Hotty. "Buy Now or you'll be priced out forever" has got to be the most idiotic stament in the history of man. If one has any sense of logic, one would realize that if that were true, a peak must be met at some point, in which all buyers would be priced out forever. I think you can figure out the rest. So Shuggy my man. I hope that you will make me this promise.....Don't ever say that again and keep proving your ignorance.

In the history of man and realestate in the united states, no-one has been priced out forever, as a matter of fact, more pain has been felt by consumers that had bought at the peak times and had to wait 10, 20, 30 years to again get their money back

rubyfan said...

With 90% of appraisers reporting that they've been leaned on to inflate prices, it's tough to know exactly what the real price of houses should be:

http://tinyurl.com/36ng6z

Loan brokers are now routinely "dialing for values," Hummel said. "They call up appraisers and say, we've got this sale at $335,000 at such and such an address. Can you get to that number?" If an appraiser answers yes, he or she gets the assignment. If not, the appraiser is bypassed.

Jazon123 said...

Shugs
If'n I were you, I would go and get a home equity line of credit on that 150K, invest it in something even more risky, penny stocks, but not for the long, short them. That way, you will owe, your HELOC loan and the mortgage on a house, worth less than what your mortgage is for AND owe 300K on that stock you shorted.
Good luck, a fool and his money, will soon be parted.

matthew said...

The Shugster has taken quite the turn! Where is the token "Hi (insert name)" to start out his posts? Apparently as the market turns so does his fake b.s. persona. Good, lets see everyone's true colors, lay your cards out there! Lets see the angry shuggy!