Wow, Aubrey Cohen over at the P-I is really slipping lately. First he prints the prediction that Seattle will see "slight year-over-year price declines this spring or summer," and now he has penned an entire article about Bill Fleckenstein's "not-so-rosy" outlook for local real estate.
Like many economists and real estate professionals, hedge fund manager Bill Fleckenstein thinks Seattle's housing market is, relatively speaking, in decent shape. But, while others see Seattle as a bright spot, he describes it more as just a little less dark.I don't really have much to add. I've been reading Bill's stuff over at MSN Money for a while now. He's a sharp guy, and was accurately warning of a national slowdown and credit tightening well before it all began. I'd think carefully before dismissing his local predictions just because they don't reflect your preferred version of the future.
The national market is going through "probably one of the biggest, most dangerous bubbles we've had in this country," said Fleckenstein, president of Seattle's Fleckenstein Capital, MSN columnist and a panelist Tuesday at a forum on housing trends sponsored by the Greater Seattle Chamber of Commerce.
Although Seattle is in better shape, its home prices will go down, Fleckenstein said after the meeting. Asked if he would buy a home in Seattle now, his response was an immediate, definitive "no."
"I really think it was more of a lending bubble and an abdication of responsibility by the lending institutions," he said. "Anybody with a pulse could borrow any amount of money."
Meanwhile, the rising home values created equity, which homeowners cashed in to live beyond their means, Fleckenstein said. He said the [national] market peaked in mid-2005 and has serious potential for prolonged trouble.
Real estate prices declined for a decade after Japan's equity bubble burst in 1989, with commercial property values falling 90 percent and home values down 70 to 80 percent, Fleckenstein said. "You can look to see what happened in Japan as where things could go."
The ultimate depth of the fall is not yet knowable, he said. "When the tide starts to go out, then you start to find out all the crazy stuff that's gone on."
Fleckenstein said the recent tightening of lending standards could affect the lower end of Seattle's home market, while the national fallout would hit the city's higher-end buyers.
(Aubrey Cohen, Seattle P-I, 01.31.2007)