How Long Can Huge Price Gains Continue?

To me it's not a question of whether or not the ridiculous price gains of recent years will continue, but rather how long will they continue? Though other parts of the country have shown some signs of slowing, in the Seattle area the answer is apparently "a little longer."

King County's home price increase means the median home cost $385,000 in August -- $56,000 more than the median home cost in August 2004, according to figures released on Monday by the Northwest Multiple Listing Service.

That's a 17 percent year on year increase.

In Snohomish County, the median price of homes soared 23 percent to $296,725, while the figure for single-family houses soared 24 percent to $311,525, the first time it has climbed above $300,000.

Yowza. Considering that even by semi-rational financial standards, my wife and I shouldn't spend much more than $240,000 for a home, it looks like we'll be continuing to rent for a while.

Maybe the bubble non-believers are right, and prices will never drop. Maybe we missed the time to "buy now before it's too late" and we've been priced out forever. I rather doubt it though.

(Kristen Millares Bolt, Seattle P-I, 09.13.2005)
(Bill Kossen, Seattle Times, 09.13.2005)

Snohomish County Budget Balanced on Home Sales

Are local governments setting themselves up for budget troubles if/when housing takes a downturn? That is to say, are they taking increased revenues from the high volume and high price of home sales and using them for regular operating expenses, rather than treating it as a surplus?

More tax money is forecast to flow into Snohomish County coffers in 2006, but the county appears to be in a tight budget year anyway.
...
The county is riding a wave of higher-than-expected tax revenue collections, chiefly real estate excise taxes from high home sales prices and the number of homes sold. Those taxes are forecast to be $19.7 million by year's end, up $5.6 million.

For Snohomish County it would appear that the answer is "yes."

(Jeff Switzer, Everett Herald, 09.12.2005)

What's Special About Seattle?

One of the arguments that is frequently heard from people who don't think there is a real estate bubble in Seattle is that the Seattle area is somehow special, and has unique characteristics that will protect it against real estate price corrections. Although I agree that Seattle is a wonderful place to live (why else would I be here?), I also recognize that every place has a list of unique characteristics.

However, I am still an open-minded kind of person, and I know full well that there are lots of people around that look at other markets in the country and see a bubble, but think that Seattle is either not in a bubble or has special protection against a bubble bursting (i.e. - price decreases). So, I would like to hear from you. What is it about Seattle that makes it special and immune to a price correction in real estate?

Please keep your comments on the subject of why Seattle is special/unique, as opposed to arguing why it is not. Next Friday I'll post the opposite question.

Early Slowdown Signs in Olympia

Following up on the Olympia market is today's story in The Olympian: Home sales surge in August

He noted that there were 1,038 homes listed for sale last month, a 9 percent increase from 955 listings a year ago. Also, he said, homes that sold last month were listed an average of 45 days, 8 days longer than in July.

"That's due to a lot of new construction and reflects new developments available in the marketplace," [Jerry] Wilkins [manager of the Olympia MLS] said.

While these are both sure signs of a slowdown, that didn't stop prices from continuing to make record gains.

The region's $237,900 median sales price in August set a record that was 26 percent higher than the $189,500 median price of a year ago.

However, if the increasing inventory is a trend that continues, prices will eventually slow down with it. How long will that take and will it really happen? Who knows.

(Jim Szymanski, The Olympian, 09.07.2005)

Anecdotal Evidence

I don't know if actual inventory is going up in the greater Seattle area, but I do know that I have noticed more "for sale" signs cropping up in my neighborhood lately. Just for kicks, I decided to take two of the recent listings and keep an eye on them. For variety, I have selected a single family house and a condo, roughly a block away from each other. Here is the basic information on each of them:

Kenmore House

MLS#: 25111059
Parcel #: 0114100633
Address: 7015 NE 181st St, 98028
SqFt (house): 1,400
SqFt (land): 13,167 (0.3 acres)
Last Sold: pre 1991
Listed: ~3 weeks ago
Tax Assessed Value: $209,000
Asking Price: $350,000

Kenmore Condo

MLS#: 25126417
Parcel #: 8035550050
Address: 7218 NE 182nd St, 98028
SqFt (house): 1,473
SqFt (land): N/A
Last Sold: 08.11.2004
Listed: ~1 week ago
Tax Assessed Value: $207,000
Asking Price: $274,950

What I'll do is keep my eye on these two properties to see if they sell, how much they sell for, and how long they take to sell. I'll keep you updated in the coming weeks.

Would You Pay $200k for 500ft²?

Although this isn't a news item so much as it is a blatant advertisement (a.k.a. "press release"), I still found it to be another interesting sign of the times.

Called Mosler Lofts, the 12-story condominium project is located near downtown restaurants, shopping and attractions, and Seattle Center. The lofts will range in price from the mid $200,000s to $1+ million.
...
The condominiums will range in size from approximately 500 SF to 2,000 SF.

$200,000 for 500ft²... what a steal! But hey, you can't put a price on envy, right?

"This new development is truly an enviable location -- where New York meets Seattle."

Mosler Lofts, where Seattle wages pay New York prices!

(Business Wire, 09.06.2005)

How Will Katrina Affect Housing Markets?

The New York Times today has an article that asks whether the effects of the hurricane will shorten or extend the housing boom (bubble):

Hurricane Katrina destroyed hundreds of thousands of homes, threw at least a million people out of work, disrupted supply lines for businesses and brought misery to untold numbers. Will it also put an end to the housing boom?

There are good reasons to think so: the storm has led to rising oil prices and shortages of building materials, and is likely to shake consumer confidence. But most experts think the housing market's five-year run still has a way to go before it peters out.

In a weird twist of fate, the storm could even extend the housing boom, which in recent weeks had seemed to be running out of steam.

I think this is a valid question. You can't just wipe an entire city off the face of the nation without some sort of residual effects. But how will this effect the Seattle area, or will it at all? The Seattle Times reports that thousands of displaced people will be making the Seattle area their temporary home.

Washington state is expected to start welcoming at least 2,000 evacuees from the hurricane-devastated Gulf within three days, likely placing them at military facilities or other temporary housing.
...
The evacuees, many of whom may be sent to King, Snohomish and Pierce counties, could stay six to nine months, according to officials.

The arrival and temporary stay of a few thousand people whose homes have been destroyed is unlikely to have any noticeable affect on our local housing market, but there are other national factors mentioned in the NYT article that could well cause some ripple effects up here:

• skyrocketing oil prices
• shortage of building materials
• shaken consumer confidence
• dancing mortgage rates (heading down immediately following the storm)

How will these affect us? I certainly don't know, but I'm interested in hearing discussion about it all. What do you think?

(Motoko Rich, New York Times, 09.05.2005)
(Lisa Chiu, Seattle Times, 09.05.2005)

Seattle Civil Defense Manual - 1951

Okay, this isn't related to real estate or housing bubbles, but it is related to the Seattle area, and I thought it was interesting enough to make a quick post about it here. I've just uploaded a pamphlet / magazine from 1951 called the Seattle Civil Defense Manual to my personal site.

It's a 25 page booklet that instructs local residents on how to be prepared for an atomic attack. Of particular interest are pages 10 and 11, which contain pictures of Seattle and other Puget Sound points of interest as they existed 54 years ago. Also amusing is the list of hundreds of "Subversive Organizations in the U.S." on pages 22 and 23. Actually the whole thing is somewhat amusing in a twisted sort of way.

Check it out.

Talking About Me Behind My Back

It seems that my blog interests at least a few people other than myself. Thanks to the wonders of StatCounter, I have unearthed the blog posts of some other interested locals. These fine individuals are none other than:

• Jim Miller, who says that my focus is "narrow, but tremendously important, especially in this area."
• Timothy Goddard, who contends that "Housing bubbles (as opposed to real estate bubbles) don't really happen — everyone wants to own a home, so demand never goes down." (A claim with which I would beg to differ.)
• Dustin at Rain City Real Estate Guide somehow got the idea that I have "posted some interesting observations."
• Tom of Seattle Property News who posits that there may be "a regional bubble in online real estate sites."

Do you have any thoughts on the points made by some of these other local blogs about Seattle's bubble(s) or lack thereof? Be sure to read the comments on those posts, as I posted my own thoughts on a few of them.

P.S. (Timothy Goddard's blog seems to be experiencing difficulty at the moment. Be sure to check it out in a few days.)

Thoughts On Posting

I'd like to take a few moments to share about the posting frequency here. Due to the very specific nature of the topic that I have chosen to dedicate this blog to, there is actually a rather limited supply of new information available at any given time that is worthy of posting. There are plenty of news stories every day about the housing bubble in general, and they are nearly all magnificently covered at The Housing Bubble 2 and other similar "bubble blogs" (linked on the right). Repeating and re-hashing topics that have been covered elsewhere is not something that I am interested in doing. In fact, before I started this blog I actually performed some internet searches to make sure that a similar blog did not already exist.

Rather than adding yet another voice to the discussion on the more general topics, as I have stated before, I intend to keep this blog's focus centered on the specific topic of "news and discussion about the real estate / housing bubble, specifically as it pertains to the Seattle area." As such, if there is no news about Seattle area real estate or housing on a given day, there probably won't be any posts (unless I think of a good discussion topic). Other days, there might be five or six posts. There will be busy surges and boring lulls. I expect it to be quite random, and I just wanted to make sure that anyone reading this doesn't come on a five-post day and expect it to be like that every day.