February Reporting Roundup

I'm going to do the monthly reporting roundup a little differently today. I'm going to keep it simple. What you see below is a list of my favorite line from each of the local writeups.

• It's too early to say if this spring's home sales will be a repeat of last spring's frenetic activity, but February's home sales point to it...
• Northwest MLS officials said the increase in pending sales and sales prices were "signs of a rejuvenating market."
• This sets the stage for a hot spring market throughout Western Washington.
• NWMLS officials said that low interest rates, coupled with the area's job growth, will "sustain a healthy housing economy throughout the Puget Sound region."
• The newest numbers, released Wednesday, put the median cost of a single-family home within Seattle proper at $440,250 — out of the reach of most workers...
• [Northwest MLS officials] blamed February's lower number of closed sales on bad weather in preceding months and dismissed concerns about the increasing number of homes on the market
• [J. Lennox Scott] expects activity [near job centers] to cause a "chain reaction of sales up the price points in the coming months."

Wow, everything's just coming up roses, isn't it?

January Reporting Roundup

Let's have a look at the local press reaction to the market's continued slowdown, shall we?

First up, the poster child for slowdown denial in the media, Elizabeth Rhodes. This month she actually managed to sandwich a morsel of reality in between the excuses and the unbridled optimism:

A nasty dose of winter last month meant sales of single-family houses and condominiums were down 4 to 14 percent throughout the four-county central Puget Sound region, according to the Northwest Multiple Listing Service's monthly report released Wednesday.
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"People were not buying in January; it was the weather," said [Jack] Cosby, an agent in Prudential Northwest Realty's Kent office.
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Besides the weather, two other factors — the number of properties on the market and the rate of home appreciation — point to a continued sluggishness of the market.
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Compared with a year ago, countywide listings were up 25 percent in King, 31 percent in Snohomish, 42 percent in Pierce and 46 percent in Kitsap.
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Near the month's end the market started to pick up, said Judy Hay, an agent in Coldwell Banker Bain's Bellevue office.
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Likewise [RE/MAX Broker Pat] Reagan also sensed a month-end rally with "more appointments being set up to see the interiors of homes, as opposed to just shopping on the Internet."

If that continues this month, spring sales will be strong, Reagan said.

"But if we have a very bad February," added Cosby, "it doesn't look like it will be that good of a year. Still, I'm an optimist, and I do believe in our area the market will be fine."

Keep the faith brother, keep the faith.

The silver medal for bubble boosterism goes to our good friend Aubrey Cohen, who points out some interesting statistics and then does his darndest to explain them away:

Seattle's median home price in January was the lowest it has been in a year, according to statistics released Wednesday.

The median price of $379,990 was down from $420,000 in December, according to the Northwest Multiple Listing Service.

A seasonal decline is consistent with recent years, but Seattle's January median home price also was lower than King County's median — a first since at least 2001. King County's median home price in January was up 8 percent from a year earlier, while the median for all 19 counties in the Northwest MLS was up 10.6 percent.

"That's odd," Bob Melvey, assistant manager at Windermere Real Estate's Ballard office, said of the Seattle numbers. "My personal experience doesn't jibe with the stats."
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The median price could be dragged down by the sale of condominiums...
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Melvey speculated that town homes ... might have made up a larger chunk of Seattle's sales in January.

"I've noticed a lot of town homes in what I would consider not desirable neighborhoods coming on the market, and they're at pretty low prices," Melvey said.
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Shifts in how home sales are distributed among Seattle neighborhoods also could be to blame, said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University.
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Crellin said he expects prices to go up in general, but said they would not go up as fast as they did in the past couple of years and they could decline in higher-end areas or those with many speculators.

Absolutely delightful. You know, I am really starting to enjoy reading this kind of stuff. It just gets more and more ridiculous with every passing month. Moving on...

Lastly, we check in with Mike Benbow at the Everett Herald, who seems to believe that prices will continue to rise no matter how low sales drop or how high inventory gets.

Home sales in Snohomish County continued to slow significantly in January, but that didn't stop a double-digit increase in the median price, according to the Northwest Multiple Listing Service.

Following a trend that emerged last summer, inventories rose substantially and sales dropped from prior-year levels. Prices rose more slowly than they had a year ago.

But the combined median price for single-family homes and condos still hit $348,000 in January, a 16 percent rise from a year ago, when the median was $299,950.
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Listing service officials said January sales started slowly because of the bad weather but picked up significantly later in the month.

"Pent-up, frustrated people who, due to snow, wind and rain, postponed looking, found their way out of the house and into open houses," said Kathy Estey, managing broker at John L. Scott in Bellevue.

That's the ticket. The market only appears slow because, you know, we had three days of snow last month. Yeah.

Addendum 02.09: I missed the Devona Wells' article in the Tacoma News-Tribune yesterday, so here it is now. Better late than never.

Pierce County median home prices in January were the lowest in eight months, pointing to a market still better for buyers than sellers.

While trending flat, the median sales price of $266,725 did inch upward from the same month last year by 5.3 percent, according to figures released Wednesday by the Northwest Multiple Listing Service.
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"I think sellers are realizing that there is a whole lot more competition out there," [real estate agent Mike Larson] said.

A strong economy and relatively low interest rates, however, should make for a healthy 2007, he said.
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"What's going to be interesting is to see what happens outside the winter months. When spring and summer hit, we’ll have our increase, probably 5 percent or 6 percent," [real estate agent Dick Beeson] said.

Pretty much the same template as the P-I article. Quote the stats, then quote plenty of local real estate "experts" telling us all that it'll be okay, nothing is broken.

Stay tuned for even more lame excuses and blind optimism approximately 28 days from now. It's sure to be an entertaining show.

(Elizabeth Rhodes, Seattle Times, 02.08.2007)
(Aubrey Cohen, Seattle P-I, 02.08.2007)
(Mike Benbow, Everett Herald, 02.08.2007)
(Devona Wells, Tacoma News-Tribune, 02.08.2007)

December Reporting Roundup

After just nine months of increasing YOY home inventory and fourteen months of declining YOY home sales, the local media has apparently taken notice. Even Elizabeth Rhodes at the Seattle Times can't ignore the slowing trend:

In fact, buyers weren't racing to make offers anywhere in the central Puget Sound area last month, according to home-sales numbers released Friday by the Northwest Multiple Listing Service.
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But nowhere could the drops be attributed to a lack of homes to choose from.

Indeed, last month the number of houses and condos available increased 48 percent in Kitsap County, 42 percent in Pierce, 34 percent in Snohomish and 24 percent in King, compared with the previous December.

I can hardly believe I read such a thing with Ms. Rhodes' name on it, but there it is in black and white. I guess the inevitable slowdown has become impossible to ignore.

Aubrey Cohen chimes in at the P-I with what I think may be the first in-print prediction of actual YOY price declines for the Seattle market.

"It's more of the same," said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University. "My expectation is that we're moving into a period where sales are going to remain strong, but certainly not as strong as they had been, and where prices are going to be moderating and stabilizing."
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Michael Simonsen, chief executive of Altos Research, in Palo Alto, Calif., has noticed cooling in the Seattle home market.

"Any comparison with last year is down in terms of demand and numbers of sales," he said. "Not great but certainly not falling through the floor."
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Simonsen predicted that Seattle would start seeing slight year-over-year price declines this spring or summer, although he said the city had a strong economy, and its housing market would fare better than outlying areas.

"While we see some positive things to keep the bottom falling out, we don't see any big catalyst that will let prices jump upwards," he said.

Price cuts might not reassure already skittish buyers, Simonsen said. "I kind of think that people are attuned enough to the bubble headlines that if we see year-to-year price declines that might even scare people."

Of course, it just wouldn't be a news roundup without an article proudly proclaiming what a "healthy market" we have. This month's optimism comes to us courtesy of Mike Benbow at the Everett Herald:

December home sales dropped in Snohomish County, but prices continued to rise, according to information released Friday by the Northwest Multiple Listing Service.
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December followed the trend for about the last six months where listings rose dramatically, sales slumped and prices continued to climb. Unlike many areas of the country, prices in the county continue to rise each month.

"The market is really healthy now," [Windermere broker Vern Holden] said. "I think everyone prefers the more balanced market we have today compared to a year ago."

And just to round out the experience, here's John Gillie at the Tacoma News Tribune with your monthly dose of lame excuses:

In a twist in the law of supply and demand, median December home prices in Pierce and 18 other Washington counties were substantially higher than in the same month in 2005 despite a larger supply of homes on the market and fewer sales.
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December figures released by the Northwest Multiple Listing Service on Friday followed the pattern seen for several months, stubbornly refusing to join the price deflation that has happened in other markets as the supply of homes increases and sales slow.
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...sales undoubtedly have been affected by the dose of miserable winter weather – record rains, devastating winds and heavy early season snow – Washington has had the past two months.

Things should get really interesting if we do actually see YOY price declines this year. I can't wait to hear the excuses for that.

(Elizabeth Rhodes, Seattle Times, 01.06.2007)
(Aubrey Cohen, Seattle P-I, 01.06.2007)
(Mike Benbow, Everett Herald, 01.06.2007)
(John Gillie, Tacoma News Tribune, 01.06.2007)

Dead Tree Press For Seattle Bubble

I know you all totally keep on top of all the popular Canadian magazines, so this is probably totally old news to you,* but Seattle Bubble got its first mention in a mainstream dead-tree publication last week, in an article in Maclean's titled Bubble, bubble, toil and trouble.

As with politics, the real-estate blogosphere is a place for people who feel deceived by the "mainstream media." "I got tired of the grinning chimps on local media boasting about million-dollar condos," says Alan Ashton, a 40-year-old single parent who regularly visits his local "bubble blog," the Vancouver Housing Market Blog (van-housing.blogspot.com). Ashton, who rents, recalls sharing his views once on a pro-investment real-estate website. "I got positively roasted by bullish real-estate types. Any suggestion I made that affordability was becoming a problem was met with outright hostility."

"There's a fair amount of emotion when you're talking to people who would like to buy a home but aren't willing to commit financial suicide to do it," says Timothy Ellis, author of the blog Seattle Bubble (seattlebubble.blogspot.com). "And that emotion was a large factor in creating the bubble itself."

Mr. Chong wins points for not taking me completely out of context (as I've more or less come to expect from the "mainstream media"). Here's my full quote:

There's definitely a fair amount of emotion in the air when you're talking to people who would like to buy a home but aren't willing to commit financial suicide to do it. And I think that emotion was definitely a large factor in creating the bubble itself. People bought into the argument of "get in now or be priced out forever!" Or they saw people selling their houses for tons of money and got in so they could get some of that action. Most financial bubbles have emotion as one of the major underlying causes.

For those that are interested, in the extended post below is the full text of my email interview with Kevin Chong, the author of the article.

View/Hide Full Interview

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1. How did you come to have such knowledge of interest rates, housing starts, etc? (It's all Greek to me, as a writer.) What you do for work? Have you had many media requests already?

Anything that I know about interest rates and general housing numbers I have only learned from watching the market for about the past year and a half. I do have a fairly strong background in mathematics, as I am an Electrical Engineer for a living (designing circuit boards for control systems), but aside from that I really don't know anything that anyone else couldn't figure out if they spent the same time I have on the subject.

As far as media requests, yours is actually the first. The media in Seattle only seems interested in getting their real estate quotes from people in the business of selling real estate. Go figure.

2. I know so many people who have stories where they could have bought a place five years ago that has tripled in value. Do you have one of those?

Five years ago I was still in college, accumulating a fairly sizeable amount of debt in the form of student loans, so I wasn't in the position to buy a house, overpriced or not. I got married a few months out of college, and my wife and I decided that it would be in our best interests to pay off all our debt before incurring any more in the form of a house. We have been successful in paying off about $40,000 in debt since late 2002, and that's something I'm quite proud of. We don't owe any money to anyone.

However, hindsight is of course 20/20, and had we known that real estate would skyrocket the way it has, we probably would have kept our debt payment at a minimum and bought something, even if only to sell it a few years later and walk away with $100,000 or more. I don't regret our decision, but the way real estate has gone in the meantime is certainly discouraging. Although, we're currently living with 100% free rent, so I really don't have much to complain about at all.

3. Has there been any recent developments that have been encouraging or discouraging to you and your belief in the bubble?

Looking at the monthly MLS numbers for the Seattle area (King County), there's been a definite trend toward sanity in the market. You don't see it reflected in the median price yet, but the "hot hot hot!!!" market of 2005 is definitely gone. Although it is currently quite subtle, the trends of declining sales (year on year) and increasing inventory are a signal of hope to me that Seattle is finally cooling off.

4. What, in your opinion, is the most commonly held argument for people who see the a continuing spike in the market, and why is it incorrect?

"Supply and demand" is probably the one I hear the most. They cite the growing economy in our area, and the growth management restrictions, and claim that there just aren't enough houses to go around. The main thing I disagree with in that argument is the demand side. As I said, sales have been decreasing (sales in April 2006 were down 10% from April 2005), and despite the "robust economy" our area supposedly has, wages in King County have actually decreased in the past few years. So where on earth is all this money coming from to continue to drive prices through the roof? A recent article in our largest local daily newspaper had one sentence in it that was quite telling. It said that people making the median wage in King County have only 45% of the necessary income to afford a home. Demand cannot continue to grow when no one can afford the price of homes in our area. It's as simple as that.

5. Why do you think bubble blogs are so enormously popular? Whom do you think is your typical reader? Do you think Internet-savvy people (i.e. those who are aware of the tech bubble of a few years back) are more pre-disposed to see a bubble? Do you think the bubble has anything to do with emotion?

I think many people are turning to blogs for news for a couple of reasons. First, they are tired of the same old predictable stories from conventional news outlets. Take a look at this post (http://seattlebubble.blogspot.com/2006/05/sizzling-strong-dynamic-crazy.html) to see what I mean when I say predictable. Secondly, blogs are able to offer a much more focused view on a subject. Newspapers try to cover the whole range of news topics and cram it all into a daily package. Blogs can focus on a very specific topic (such as a housing bubble in the Seattle area), are not limited by space, plus they have the full resources of the whole Internet right at hand.

I think the typical readers of Seattle Bubble probably don't own homes, but wish that they could, and are frustrated by the complete insanity that housing has taken in the past few years. They are definitely tech-savvy, and I would venture to guess that many of them followed the tech boom and bust quite closely too. Your question about emotion is fairly vague. There's definitely a fair amount of emotion in the air when you're talking to people who would like to buy a home but aren't willing to commit financial suicide to do it. And I think that emotion was definitely a large factor in creating the bubble itself. People bought into the argument of "get in now or be priced out forever!" Or they saw people selling their houses for tons of money and got in so they could get some of that action. Most financial bubbles have emotion as one of the major underlying causes.

6. If the bubble does burst, where would you see your blog going from there? Would change its name to the Seattle "I Told You So" Housing blog? Or would you quit blogging? Or start blogging about your home renovations?

If the bottom does fall out of the market, there will definitely be a lot of interesting stories to write on my blog all the way down to the bottom. It's called the "Seattle Bubble" blog, but I think a better title may be the "Seattle Real Estate Price Trends" blog. That's not as catchy, though. When it comes down to it, I'll probably keep up the blog as long as there's a decent amount of interest. I've been seeing 500-600 visitors per day the past few weeks and it seems to grow by 25-50 daily visitors each week. If the market tanked, and my readership tanked with it, down to maybe 50 or fewer readers per day, I might consider hanging it up. Maybe.

7. Do you think the mainstream press coverage about real estate has been fair and unbiased, or do you think there is a bubble-building slant to their coverage?

In Seattle specifically, there's definitely a slant toward poo-poo'ing any talk of a real estate bubble. They constantly quote realtors and other people who profit from increasing home prices, or they highlight people who have recently bought houses, but rarely do they talk to people that are sitting the market out because it's just too crazy. Not never, but rarely.

In the national (USA) and international media I've been noticing more and more articles pointing out the seriousness of the situation and the real danger that is posed by such ridiculously high prices. I think it's probably easier for big news outlets and magazines to be more even-handed, since they don't have a huge number of local realtors and mortgage brokers filling up their advertising budgets.

8. Are there any favourite posts I should read that will sum up your arguments?

I pretty much summed up where I stand in my "About the Blogger" post, here: http://seattlebubble.blogspot.com/2005/08/about-blogger.html The one major point I would add to that is that some people say it's stupid not to get in now, because interest rates are on their way up. But a lot of very smart people think that housing is likely to drop in price, possibly by as much as 35-50%. If I buy a house in five years for 50-65% of its current cost but at a higher interest rate, my payments may be the same as they would be now, but 10 years later when interest rates drop I can refinance. You can't refinance away the mistake of overpaying 35-50%.

9. Do you have any favourite bubble blogs? What do you think about Zillow? Any other real estate sites on the internet that you like?

The Bubble Meter blog (http://bubblemeter.blogspot.com/) based near Washington, DC, is one of the most entertaining and informative bubble blogs. I really liked the "There is no housing bubble!" blog, which was extremely satirical and quite amusing. Unfortunately the author decided to take it offline. If you would like to see what he did write, you can check out my archive here: http://timothyellis.googlepages.com/nohousingbubble.html (it would make the most sense to start at the bottom and work your way up). I try to keep on top of all of the blogs that I link to on my sidebar, though. It's not as daunting as it sounds, thanks to Bloglines, which puts them all in one place for me to read.

There aren't really (non-bubble) real estate sites that I especially "like." The local real estate blog Rain City Real Estate Guide (http://www.raincityguide.com/) is interesting once in a while, although I'm not particularly fond of the attitude of one or two of their contributors. Zillow is certainly interesting and fun to play with, but I have a hard time taking it seriously at all as a real tool that would be helpful in doing any actual sales research.

10. One more question... do you think there are many real-estate voyeurs on the internet. Has it become a pastime for many people?

Definitely the readers on my blog that comment regularly make heavy use of the various "voyeuristic" tools out there. Many of us are constantly looking up how much certain houses sold for, what they're asking now, etc. Since it's all public domain information, I wouldn't really call it voyeuristic in the truest sense of the word, but it's definitely a hobby that's growing as we (I think) finally reach the top of this real estate madness.

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*I love the fine art of sarcasm.

(Kevin Chong, Maclean's, 05.29.2006)