Seattle Immune to Financing Woes?
When the question is "how will the current home lending meltdown affect the housing market in Seattle," the answer depends on who you ask. For instance, if you ask #1 Seattle real estate cheerleader Elizabeth Rhodes, the answer is something to the effect of: "Seattle is special. Don't worry your pretty little head about it."
Q: Local real-estate experts keep saying Seattle's housing market will stay strong because the local economy is strong. But I think all the subprime loans going bad will mean a lot more houses on the market and prices here will sink. Why don't you report that?Those are certainly some convincing statistics Ms. Rhodes has pulled out. Unfortunately, she still employs her mad misdirection skillz in composing the answer. The reader didn't ask "how does Seattle's rate of subprime mortgages compare to other cities?" Nor did they say "the subprime lending implosion is already affecting Seattle." Rather, they pointed out the high likelihood that the subprime mess will adversely affect Seattle's housing market. Granted, it may not affect Seattle as much as other areas with higher percentages of subprime loans, but there is no reason to believe that it will not have any affect.
A: Let's start with an interesting fact from Douglas Duncan, chief economist for the Mortgage Bankers Association: More than one-third of all homeowners have paid off their mortgages (or paid cash). This significantly decreases the potential for overall risk.
However, the growing crisis in the subprime mortgage industry, fueled by an increasing number of mortgage defaults, is real.
How much of an effect it may have is very location-sensitive, said Bob Visini, a spokesman for LoanPerformance, a California company that tracks nationwide mortgage activity.
The Seattle/Bellevue/Everett area "is exposed," but way down the list, Visini said.
The Seattle area is in the bottom 20 percent for subprime mortgages among 331 major metropolitan areas — far below other parts of the country, particularly parts of Texas and California's Central Valley where subprime accounts for nearly a fifth or more of all mortgages. At the top of the list was McAllen, Texas, where some 26 percent of loans are subprime.
By comparison, only 7.9 percent of all Seattle-area mortgages were subprime at the end of 2006 (ranking 278th out of 331), down from 8.7 percent the previous year.
And only a fraction of those loans were in trouble — some 7.6 percent at the end of 2006 were 60 days late or more, a sign foreclosure is looming. This put Seattle in the bottom 10 percent.
On the other side of the media spectrum, ask Mike Benbow of the Everett Herald the same question, and he might say: "Foreclosures are already on the rise, and will likely increase. If the country heads into a recession, the housing market will almost certainly suffer even more."
Others are using risky loans, such as those where they're paying only interest for a while, to get into homes they can't afford. That can only lead to trouble.Wow, it's refreshing to read something that honest in the media once in a while. Foreclosures up 41 percent in King County? Funny, I must have missed the article in the Times where Ms. Rhodes covered that. I thought our housing market was the picture of perfect health. How could foreclosures be rising so quickly? Hmm.
In fact, it already has.
A recent article in the Puget Sound Business Journal quoted RealtyTrac Inc. as saying there were 2,377 foreclosures on homes in Snohomish County last year, a 35 percent increase over 2005.
That was lower than King County, where foreclosures rose 41 percent, and Pierce County, which showed a 58 percent hike. But it was higher that the 25 percent increase for the state as a whole.
Such a sharp increase in foreclosures tells us there are problems in the industry.
A local or national recession could trigger even more.
What am I trying to say here?
I guess that a rising local economy has kept the housing market relatively strong locally, but that things could change rapidly if economic circumstances change. Now, more than ever, home buyers should be careful about the types of loans they're using and not expect home appreciation to bail them out of a purchase they never should have made.
(Elizabeth Rhodes, Seattle Times, 03.17.2007)
(Mike Benbow, Everett Herald, 03.19.2007)
63 comments:
I think Rhodes is right on this one...there just aren't enough subprime mortgage holders in Seattle...and there's so much demand that anyone who actually does get in trouble can sell before they actually foreclose.
...there's so much demand that anyone who actually does get in trouble can sell before they actually foreclose.
Dude, did you even read the second half of the post? Foreclosures were up 41% in King County in 2006 compared to 2005. That's despite double-digit appreciation.
References, Meshugy?
Shug -
I can see why there are rose-colored glasses on that icon of yours...
I found this article interesting. It appears that Spain and Ireland are also "special".
http://www.ft.com/cms/s/cb9a843a-d5be-11db-a5c6-000b5df10621.html
Dude, did you even read the second half of the post? Foreclosures were up 41% in King County in 2006 compared to 2005. That's despite double-digit appreciation.
Tim, how come you always refer to me as "Dude?" Seems like I'm the only one bestowed with that honor.
Of course there are some foreclosures, but they're up from record lows so a 41% increase doesn't mean too much.
I, personally, don't even care to speculate about what percentage of what loans will go bad. Each individual loan came with its own set of circumstances. I just like to kick back and watch them unravel as they will.
There is but one thing to look at when considering whether or not prices will crash in any city or town in this country. Appreciation. Was there a hyperinflation in values? If so, then it's going to crash. Plain and simple. All of the price gains in ALL markets were the result of speculation. They were completely independant of wage growth. Anyone saying otherwise is a liar or a fool.
"How is she so wrong?"
It isn't a matter of "right" and "wrong" -- it's a matter of twisting data to make an argument that cannot be made with that data.
"33% of all home are paid for."
...which could be lower than other cities. We don't know, because this fact was presented (suspiciously) out of context.
See the misdirection? When it comes to talking about sub-prime loans, Lizzie is all about the comparisons to flyover country. Paid-down mortgages? Not so much.
"of those 8% that are subprime, only 8% of those are in trouble."
With a big, fat, "...so far" hanging in the air like a dying fart.
In other words, this little factoid tells us nothing about what might happen -- it tells us only the way things are. In contrast, Mr. Benbow presents data that tells us where things are going -- foreclosures are rising quickly in King County.
(Incidentally, I realize that you're a troll, kaleetan, so you don't have to reply. I'm just posting this for the edification of people who might read your posts and think you're making a reasonable argument.)
"Tim, how come you always refer to me as "Dude?" Seems like I'm the only one bestowed with that honor."
The big blue baby cries.
Hear yee Bantering bear and an Amen to that! Though I've said that several times, it has never been stated as well as you put it.
As I was dining in the cafeteria at work today, I was startled by a co-worker who threw a newspaper across her table in disgust and blurted "Stupid B..ch!" My co-worker left the room and I wandered over to see what she had been reading. Low and Behold, it was this very article.
I happen to know, that this co-worker is one of the few I mentioned a few posts back that is on the verge of losing her house.
I wonder how many more people are out there locally who read that and have that same reaction.
My boss saw the article and knows my opinion and said, Oh Did you see that? it won't affect us. I just smiled at him. Of course I don't discuss this with him as he is paying a $3,500.00 mortgage on a home in West Seattle he just bought when he thought "buy now or be priced out forever" last June.
And another thing.....I am really tired of hearing about the sub-prime thing. the Sub-prime is not the do all and end all of the rising home prices. it did have an effect, and it will have an effect on the way down, but it is just the tip of the ice berg, or the bottom rung of the ladder to use a better anology. It is those with good credit that got into stuff they can't afford that will do all this in.
So articles telling me that sub-primes won't hurt Seattle mean very little to me. When I see some figures that state more than 75% of the homes bought over the last 3 years wer bought with a 30 year fixed rate loan with 20% down, then I will believe that Seattle will not be affected.
They have conveniently left out Pierce, Thurston and Kitsap Counties which will be hit the hardest. Those three counties will drag down the Emerald City. Foreclosures will be greatest in Pierce. We have definitely gone passed the tipping point IMO.
You mix oversupply, the military and an economy heavily invested in the home construction industry and you can see where things could get interesting.
Oh, and a good credit score doesn't pay your mortgage. It just gives you the rope to hang yoruself. There is a couple in our office who bought a new home 2 years ago with a 440k mortgage. They just bought another house for just over 500k, I have no idea what their mortgage is but doubt it is much under 500k. That is close to a million dollars in debt. They didn't sell teh other house. He said he can rent it out for 2200 which covers his mortgage. Really? Must be an ARM. My calculations on a 400k mortage is aorund 3k.
Meshugy-The impact goes beyond the % of Subprime loans in Seattle. The Subprime implosion will drive tougher lending standards for Subprime, Alt A and above tiers. The result will be few buyers, which will drive down prices at some point. See the article below for additional perpsective.
http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/WarningThisMessWillOnlyGetWorse.aspx
"articles telling me that sub-primes won't hurt Seattle mean very little to me. When I see some figures that state more than 75% of the homes bought over the last 3 years wer bought with a 30 year fixed rate loan with 20% down, then I will believe that Seattle will not be affected."
Exactly, TV&MB.
Once again, the local REIC mouthpieces are focusing on the incredibly short-term, and missing the larger picture: risky loans are not limited to sub-prime borrowers.
The older couple down the street who bought 30% more dream house than they could afford? That's a risky loan.
The newlywed couple who just bought a new Ballard townhome with zero down and an adjustable rate? A foreclosure waiting to happen.
The 26 year-old "investor" with good credit and a $70k/year job at Boeng, who purchased a $600k Greenlake townhome using an I/O mortgage? A future Suzie Orman caller.
The term "priced for perfection" truly applies to these situations. They aren't in trouble yet, but if anything goes wrong, these people will know what it's like to feel real financial pain. We aren't talking about people in trailers, eating cat food and shopping at Goodwill -- this credit bubble has financed an unsustainable lifestyle for many otherwise well-off people.
misterbubble-
well said. i want to frame that.
Mydquin,
Subprime lending isn't about cash-flow; it's about credit ratings and the risk associated with those with lower credit scores.
These are the people who have blemished credit or limited credit histories. Traditionally, they haven't shown the ability to always meet their financial obligations and are accepting a higher rate from the lender who is pricing their risk, in order to fix or establish their credit.
The sub-prime problem is because those making the loans did not properly compensate for the risk involved in making so many of these loans to so many people that are set up for failure.
The cash-flow problem can affect mortgages at any level. Especially those who had the expectation that appreciation would cover up the loose ends of their financing. This situation is tenuous at best.
I'm more worried about folks with good credit, who borrowed more than they can afford. That's the area that will finally scare the MSM.
Rhodester's horse-pucky arguements are ridiculous...
However, the growing crisis in the subprime mortgage industry, fueled by an increasing number of mortgage defaults, is real.
Next stop, rocket science!
The Seattle/Bellevue/Everett area "is exposed," but way down the list, Visini said.
really? 15.5% exotic financing in the metro area is not 'over-exposed'? You've gotta be kidding!
By comparison, only 7.9 percent of all Seattle-area mortgages were subprime at the end of 2006...And only a fraction of those loans were in trouble — some 7.6 percent at the end of 2006 were 60 days late or more
What you've really got to look at is the exotic-mortgage tally and not necessarily the sub-prime prolifieration. For starters, if you have great credit, it means nothing if you're NOW unable to pay the bills...
Sub-primes are the canary in the coal mine.
Mortgage loan sharks didn't for some reason, pull out a drawer of dodgey loans for the sub-prime victim, Toxic loans were open to all, and by the stats, the credit-wise fell hook-line-and-sinker for this craziness as well.
It'll just take a little longer before the bottom drops out...
mister bubble:
"...this credit bubble has financed an unsustainable lifestyle for many otherwise well-off people".
Unfortunately, for Seattle and the rest of the country, this is the unavoidable truth. The money has been borrowed and the dollars have been spent and now all we can do is watch this thing unfold.
Sometimes I envy those who are blissfully asleep, unaware of the trouble ahead. At least they'll have had the pleasure of flying first class before the plane crashes.
Whatever the problem with is with subprime, we have only begun to see what lies ahead.
The meat of the ARM market has its readjustments coming in the next 33 months. We are at the beginning of that window.
If things are this bad with the very beginning of the adjustment to reality, what are they going to be like in 2 years?
If the bulk of the ARMs had been adjusting upward for the last 3 years, and things were only like they are now, I'd be with Lizzie and 'Shug.
Mydquin
"However, flawed examples, like Mr. Bubble's, give the false impression that the problem is more widespread than it is."
I've looked over Mr. Bubbles post over and over and don't know what the hell you are talking about. He gives no flawed examples of anything. He simply states, and I totally agree with him, that sub-primes are not the total culpability of the un-natural inflated prices to homes here, nor will they be the sole culprits to the natural and un-avoidable fall of those values.
Their contribution is this; it has raised the red flag, of which lenders will, either voluntarily or by mandatory regulation, be forced to tighten lending standards. This will affect all borrowers, be they sub-prime, Alt-A, or prime to a stricter guide-line in which they will have to adhere to, in order to obtain financing. This will contribute greatly to a demand decrease, invariably decreasing the price point. ( Is any part of this statement open for debate?)
However, the Biggest contributor to the inevitable decline in values to this and every region, will be the forthcoming fallout of those loans which do not fall into the sub-prime category that is so publicized at the moment. It will be those that are scantily mentioned in the news that are of good credit standing, but have purchased a home, (like many, many of those in the Seattle) at the inflated price despite the fact that they cannot, through traditional lending standards, afford. ( I ask here, is this a debatable statement, or can we all agree that home prices are inflated, for what-ever reason, and that median income does not equal median price point?)
Those that have secured their homes via these methods, will ultimately pay the piper with higher mortgage payments than they anticipated, and can’t afford, forced to re-finance, which will be far more difficult or impossible, and ultimately be required to sell.
The logical conclusion is clear to see.
"I don't disagree that there has been some shady lending going on and back-end loaded mortgages are inherently more risky. However, flawed examples, like Mr. Bubble's, give the false impression that the problem is more widespread than it is."
You're wrong, mydquin. Wtf and I are correct.
Sub-prime lending is primarily determined by credit score, and documentation of income. Risky loans to people with documented income and good credit (the examples I gave) are referred to as "Alt-A" paper.
But thanks for playing.
The net effect of all of this mortgage turmoil is two fold; there are now fewer people "qualified" to get loans, and those who have loans that required double-digit appreciation to stay afloat are about to sink.
This means that there are fewer potential buyers and that people will have a tough time holding onto their purchases.
If you own your home outright OR have a mortgage you can actually afford and don't lose your job - you'll be fine.
Question is, how many people are going to be "fine"?
rentalbliss,
I agree, but you have to wonder whether the problems caused by risky loans were mostly due to good old fashioned greed as opposed to just being naive.
As the market starts to deteriorate, is fear going to be the next major market driver?
It's true that subprime implosion is effecting other sectors of lending. Not to anyone's surprise, Alt-A is next on the list of endanger species.
Base on imap, good portion of West Bellevue, Clyde Hill and Medina have not been involved as part of the bubble. I don't think there were any real argument that sub 400k houses in the edge of KC and other counties in Seattle area is at risk. But as far as the area that most of you are priced out of, it would appear that you guys will still be priced out of it.
Here's my logic:
Price of a house is determined by neighborhood, hence the reason why appraisal comparison is within one mile of the subject property. In a high end neighborhood, few buyers may over-extend themselves to move in, but majority of the neighborhood should be in the comfortable range. Given that scenario, the risk of bubble bursting is minimized. Majority of the neighborhood remains stable, and the very quality that made this a great neighborhood would continue to attract other "qualified" buyers into the neighborhood. As the crazy double digit appreciation winds down, weeding out the "wannabes", the neighborhood would again belong to those who can actually afford it.
I think it would be a great idea to map out KC and have the authors of this blog identify the areas and discuss accordingly.
Tai said: "It's true that subprime implosion is effecting other sectors of lending. Not to anyone's surprise, Alt-A is next on the list of endanger species.
Base on imap, good portion of West Bellevue, Clyde Hill and Medina have not been involved as part of the bubble."
Are you saying that not many homes in Bellevue have "exotic" mortgages (e.g. option ARM, 100% interest, 0 down, etc)? If not, I wonder where all these types of mortgages are concentrated in King County. The map of misery I saw a while back seemed to show that well over 20% of mortgages in the Seattle area were of this new-fangled exotic variety (i.e. which is NOT the same thing as subprime).
I would have to think that if the lending industry substantially cuts back on all these exotic loans that there would have to be some sort of impact in the Puget Sound. Heck, even if it were places like Renton and Bothel that were creamed, that would have a knock-on effect in even the tonier districts, since some people would rather buy further out if the price differentials increased enough.
Imap shows that roughly 40 - 50% of the houses in that area have not refi or sold within the last three years.
Using the logic of the high-end neighborhood, I believe the area is pretty safe.
"So thanks for clarifying that these examples are supposedly Alt-A loans after the fact."
Gee, mydquin, I'm sorry. I guess when I wrote:
"risky loans are not limited to sub-prime borrowers"
my thesis was a bit too subtle and difficult for you to interpret. Mea culpa.
The impact of the sub-prime market pull back and subsequent dominoe affect of borrowers unable to refinance and purchase is already taking place. The pace at which this takes place is not known at this point.
Transactions not funding due to lenders pulling the plug on loan programs, some on the closing day, is occurring. Just hit the the lending blogs/message boardsto get to get a glimpse into the picture on a national scale. If you spend a few minutes and scroll down you'll see the requests for refinance or purchase scenarios and notice the credit quality of those seeking financing. The good news is that there are a substantial amount of borrowers refinancing or buying with very good incomes and credit scores. The problem is that those households with suspect loans and credit worthiness may default and those homes will affect values.
My post at Rain City Guide a few weeks ago tried to address this issue. The borrowers who are on the fringe and need to refinance had better get moving. The first time buyer pool will shrink somewhat and that has a direct impact on the sellers who will move up the ladder by taking equity and placing it into their next home.
The trick to manage this problem is to keep the first time buyer market from completely stalling. The recent commentary on the potential Government bailout and FHA stepping in to assist those in trouble probably has many executive offices breathing a sigh of relief behind their smirks of "well Wally, we dodged another bullet." We'll see.
:)
Tai,
" few buyers may over-extend themselves to move in, but majority of the neighborhood should be in the comfortable range. "
You aren't taking the follow through logical steps.
the problem is the "few" buyers. Say 1 buyer overextends himself in golden manor. is strapped and must sell. Who will buy his house at the over-indulgent 25% increase in price that has been happening. Another person who can't afford the mortgage? We have determined that this will discontinue. There are not enough people in Seattle who can purchase all of the 500-600K homes. there just isn't. Most of the neighborhood bought thier homes for quite a bit less as they have been there 10 years or so. So John doe HAS to sell his home, and the person who just sold their home in San Diego took a hit, so he is gonna lowball them. Even if San Diego Sunny Boy Fred didn't take a loss, he won't have as much gain as he would have previously. So Morose Cloudy John will sell for less than he wants, or face forclosure. That will affect every other home in the area, even if people aren't strapped.
Mydquin, Your assumption is that just because some-one is prime, means that they haven't gotten into a house that is over their head. again, Median income in Seattle does not afford the amount of 500-600K houses to be taken with a traditional loan. Prime (myself included) borrowers have refied or bought with the same loosey loans as primes and alt-A's . They had to to get into the house that they wanted. I think that is the point you are missing. Do you know how many Prime borrowers there are out there? I can't remember the percentage, but it is very, very low compared to sub and alt A
"You aren't taking the follow through logical steps.
the problem is the "few" buyers. Say 1 buyer overextends himself in golden manor. is strapped and must sell. Who will buy his house at the over-indulgent 25% increase in price that has been happening. Another person who can't afford the mortgage?"
I think you're the one that isn't following logic. If this is a high-end neighborhood (ie. West Bellevue, Medina, Clyde Hill), one house going down won't cause a dent. In fact the house is unlikely to be in the foreclosure market due to the high demands. The house will not fall under neighborhood threshold, the demand simply won't allow it. If that house ever goes into foreclosure market, there will be multiple bids in front of KC office on Friday morning. Old established neighborhoods will maintain its price, unless you can offer a better scenario that it won't.
I would be willing to wager that a majority of readers here, probably 90% or more, have never been involved with real estate for more than 20 years. These cycles are tremendously long, we will never see another bull cycle as we have seen in the past 10-15 years in our lifetimes. My best estimation is the next 20 years will be a very bumpy ride. Buckle up.
I'll pose a scenario:
Vuecrest, most desired neighborhood in Bellevue. It has always been expensive and highly sought after. You can't find anything in that neighborhood for less than one million today, and without a doubt is inflated by the market.
A new resident made some equity gain in an old house in Kirkland and decided that he wants a piece of this neighborhood. He used his equity for 10% down and bought a home using 90% option arm after beating 5 other offers.
The guy defaults, you think the neighborhood will crash and burst?
Tai, I have a question for you. Would you have said the same thing about san diego? That the better neighborhoods wouldn't be affected?
Tai,
I'll pose another scenario: if 20% of the buyers in the Puget Sound vanished overnight, would that have any impact on over-all housing prices?
Let's even say that those 20% of buyers were just at the lower end of the market. Sure, they wouldn't be the ones looking to buy a home in posh Bellevue neighbourhoods, but if the starter home markets in Bothel and Kent crashed, then there would be fewer people able to cash in on their homes and upgrade to nice areas of Bellevue.
The way I see it, the people who have been getting exotic mortgages in the last few years have only been doing so because they can't really afford the homes they are buying. If the lending industry ceases to offer these products it HAS to have a huge impact on the Puget Sound real-estate market.
It's not a matter of what percentage of homes have these dodgy mortgage products, what matters is the percentage of buyers who rely on such products in order to buy at all. Don't forget that prices are set at the margins: you only need a slight drop in purchasers to have a BIG change in pricing.
Tai....It might be the straw that breaks the camel's back. One never knows.
Real markets are driven by supply and demand. Speculative markets are driven by fear and greed. The real estate market has gone far from a normal supply and demand market. Seattle has avoided so far what is happening across most of the US. Markets that break last are typically dramatic movers in the opposite direction while they play catch up to the rest.
Housing is somewhat different because it is buffered by the slow speed that transactions take place because most residences are occupied. Foreclosures and sales take time. Zillow would have you believe that your house is changing value everyday like the stockmarket does. Your house doesn't. This slowness just means that when the direction changes it will last for a very long time.
1. Remember ALL markets are based on the greater fool theory. Someone is the last one to buy at every top. Perhaps it is your example in Vuecrest. 2. When the tide turns it is not very obvious to most. The moaning and screaming of the media comes later towards the bottom, not the top. 3. The masses(homeowners and investors) are lemmings. They will never see the cliff as they jump up for the last time into the market abyss. 4,5&6. repeat number three(The masses(homeowners and investors) are lemmings. They will never see the cliff as they jump up for the last time into the market abyss.)
you only need a slight drop in purchasers to have a BIG change in pricing.
Hi Mikhail,
That's not really true in the Seattle market...take a look at the records:
In Feb 2001 there were 1861 pending sales...that over 20% less the Feb 2007 pending sales, yet prices were still going up despite over 20% less buyers.
It's going to take over 100% more inventory and over 50% less buyers to really see some price drops. Since that isn't likely anytime soon...it should be smooth sailing for the next few years.
Let's all declare who we are please:
a) renters
b) home owners
c) real estate agents
Let's all make a simple forecast.
1) Will there be a Fed interest rate hike anytime soon?
2) When will we see signs of a dip in the Seattle market? Q1/Q2/Q3/Q4 2007/08/09/10/11?
3) What is the scale of that dip?
-----------------------
I am a renter. I'm actually looking to buy a house right now. Why? I just want to own my own house. I hate moving, I want to settle down. Don't expect it to appreciate.
I predict a dip in Q3/4 2008. But it'll only go down to 2001/2 levels. As a potential homeowner, I won't care since I intend to keep it for at least 10 years.
Shugy, By June, You will have 100% more inventory. And a lot less capable buyers than what you have now. I am so glad you are finally catching on and becoming a bubble head.
Tai,
I don't need to give you a what if. I watched it happen in a matter of a couple of months in one of the nicest neighborhoods in San Diego. AND it didn't have the catalyst of a credit crunch. I watched a million dollar house dwindle to a 750K house. Who bought that home? A prime borrower. I can see a house that originally listed at 975.00 now on the market for 800K and has been sitting for a year. Very nice home. Zestimate on the home? 1.2 Mil. You can check out La Jolla, Ritzy homes at 500K less than what they originally listed for of 1.5-2.5million. Nobody here is saying you will get 1.5Million dollar home for 350K, but they are all affected.
Shugy, By June, You will have 100% more inventory.
100% inventory in of itself won't matter. Current inventory is 6,124 ...so you're predicting 12,248 listings by June. That would be the highest on record....at least since 2000. But if sales were up it wouldn't matter.
So you're predicting 12,248 by June and also a major double digit drop in YOY sales?
BTW, current inventory is among the very lowest for February over the last 7 years. The lowest was Feb 2006: 4,999 listings. Nearly every other Feb over the last seven years was higher..as high as 8,358 listings in Feb 2003. So we still have very, very low inventory.
I can't comment on San Diego, because quite honestly I don't know San Diego. However, I used Vuecrest and it is a great local example. If you can find a specific example of a neighborhood in San Diego that resembles Vuecrest, I would like to see that.
Like I mentioned, you guys are jumping all over the map using one house in one neighborhood and referencing it on another neighborhood and its market. I hightly doubt that Vuecrest can ever burst with more than 10% drop. The neighborhood has a waitlist of people trying to get in, how can such neighborhood be bursting in bubble.
My suggestion is simply, map out the neighborhood of KC or other areas if you like, and identify each neighborhood and predict its possibility of bursting. Then we can argue using the houses from that neighborhood. Bellevue, Clyde Hill and Medina simply do not fit in the argument you guys are presenting in this blog.
My god, the denial I'm seeing is hysterical. I'm laughing out loud here.
Don't you guys understand. Seattle is SPECIAL!!!
Denial? How about cold facts:
http://timothyellis.googlepages.com/nwmlskingcountybreakouts02.02-present
Look up 520, which represents West Bellevue/Clyde Hill. Look at appreciation, active listing, pending sales and closed sales.
Wow, 520 had a 50% drop in closed sales. That doesn't look very stable to me at all. In fact, the median sale price is a useless metric paired with a drop like that.
I was going to say "alright, let's see what it looks like three months from now," but it already looks bad.
Pairing it with lower active listing from YOY, it could simply represent a higher demand than supplies, which is true if you know anything about that market at all.
Active listings went from 165 to 156. Closed sales went from 51 to 25. The numbers don't seem to jive with your theory. But maybe I just don't understand how special 520 is.
Bellevue has perhaps the BEST public school district in the country according to Newsweek, along with millions and millions of dollars pouring in to develop its high-end commercial district.
Clyde Hill and Medina...it's like saying Beverly Hills would crash in the bubble.
real estate is very local and we could argue all day how one street will appreciate and 2 blocks away is going down...
but the bottom line is when the neighbors 2 blocks away start to foreclose and their property values drop, eventually (and it may take a while) those comps will cause the zip code to drop value...
but real estate is still very local... so if you believe you've found the perfect neighborhood, go put your money where your mouth is and buy that vuecrest home...
then I'll buy it from you in a few years at a discount...
refractedthoughts, you're OBVIOUSLY not from the Eastside.
Can anyone that actually know the market put up an argument about 520? These bubble bursting trolls actually think they can afford Vuecrest even at 20% off?
What's with the "think they can afford" BS? Is this really about you avoiding the unwashed masses?
Yes, I am OBVIOUSLY not from your stick-up-the-ass part of town.
Tai,
I don't know which planet you're from, but hang out a while till you get to know all of us... before thinking we're all a bunch of poor losers renting their lives away... I own but that doesn't make me different from the renters... I'd sooner be renting actually... (SLTO)
that said I probably can't afford that vuecrest home that's asking for 1.5mil right now but 2 years ago when it sold for 800K I definitely could... can you?
actually I don't care... and if you live in vuecrest, the value of the neighborhood for me just went down... nothing worse than snotty neighbors are snotty neighbors who think just coz they have a bigger HELOC, they're better than you...
as to your question, I don't know bellevue and don't care for the traffic in the area... thankfully my work will never bring me there 99% of the time...
But true, Medina won't get hit by the bubble (at least not obviously), multi-million dollar homes are a whole different market that represents a small niche... there's no point in discussing them IMHO...
Tai,
I certainly understand you train of thought. I had that train of thought as well in the neighborhood I lived in in San Diego. I thought due to the location, views, schools, homes etc, Mission Hills San Diego would be immune to any decline. People in La jolla and fairbanks ranch thought the same. Fairbanks Ranch BTW is the most expensive and most affluent neighborhood in the united states.
No, I wont be able to afford a Fairbanks ranch home....ever, but is has been affected.
It doesn't matter the neighborhood, when you have drastic inflated rises in value, you also have deflation at some point in time. That being said, I had stated in the past that the high end is often less affected, because these are the people who aren't affected by the economy as much and can plunk down a million without thinking twice.
This is not the area of discussion on this blog. the whole point is that with lending standards tightening, over-inflated rises in values, etc...90% of sellers and buyers will be affected with overall value declines.
Shugmeister, Dude!
"That would be the highest on record....at least since 2000. But if sales were up it wouldn't matter."
SFH & Condo inventory June 05 = 12,275
"current inventory is among the very lowest for February over the last 7 years"
Current sfh& condo inventory is higher than the two previous years.
And as I posted week, since the peak price in October 2006, asking prices have dropped by 2.3-2.8 percent
SFH & Condo inventory June 05 = 12,275
I was only talking about SFH, not condos.
Are you prediciting over 12,000 SFH in June 07?
Shugy-shugarama, It certainly is plausible. or even 14,000 sfh and condos. wouldn't count that out as a possiblity.
Ain't predicting it though. I don't know what is gonna happen except that values will go down eventually.
I find it interesting that the word "mortgage" literally means "death vow" or a "dead pledge".
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