Why this insider blogs at Seattle Bubble & Rain City Guide

So, why do I contribute from time to time and participate on Seattle Bubble Blog and over at Rain City Guide? Isn't that like not a good idea?

I'll write as I think, so here goes:

I read, collaborate and discuss housing here because it offers one of the very best cross sections of consumers who are interested in housing. Housing impacts our daily lives, whether you currently rent or are a future, existing or past homeowner. This blog has them all (consumers), mostly absent of insiders who stick around to comment, except for Ardell Dellalogia, whom I've encouraged to join in on the discussion and has both here and at RCG.

Sadly, it's a shame other allied real estate pros don't participate. My sense, right or wrong, is that other folks in the business do not want to be scrutinized or singled out and be the fodder of any blog. I wish this were not the case, but I think it holds true. I also believe there are many people in the business who agree with a lot of what is being discussed in this forum, confirmed from many conversations I have outside the confines of this blog. The real estate community, while large, is small. Enough said.

One of the other reasons that I participate is that I learn. A lot. From everyone. I just wish I had some way of an RSS feed for Eleua's comments. I admit it. Sometimes I just scroll to find his military flavored comments that nearly make me pull a muscle from laughing so hard. Sometimes my kids wake up at midnight from the laughter in my office. They murmur to each other: Dad is on that blog again!

Commenting on this blog has not been counterproductive to myself personally or professionally. Oh, I've had my fair share of hate mail over the months, but I never take it personally. I participate because I have a lot to offer from a perspective that has a unique vantage point: we (escrow) see everything (finance, lending programs; the good and bad as well as real estate issues) from the lens of escrow—a traditionally neutral party (arguable).

If there is anything that concerns me the most about real estate it is that far too many consumers go blindly into a transaction without the best information and receiving full disclosures of fees, any affiliated business relationships, who is paid what, when and why? Most problems associated with a transaction, either purchase/sale or refinance, could be avoided by full transparency and integrity-driven, consumer-FIRST practices. Unfortunately, consumer-FIRST practices are not always on the radar. Sometimes it is off the radar completely.

The difficulty with escrow is that you must maintain a fact-based approach to assisting consumers with closing documents and loan paperwork. By the time a consumer signs paperwork the efficacy of the transaction and question "should I be doing this," hopefully has been previously answered. Sometimes it is not. I say it is difficult because with a "neutral party poker face," we cannot get into a discussion of "gosh, you are paying $10,000 in fees to get $20,000 cash back on your refinance!" It is also difficult watching a 90 year old very bright and fully cognizant woman refinancing her home, again. Probably the most difficult professional day in my life.

For years, real estate has been used as an additional vehicle to build wealth. From my experience, it has been a wealth builder for those who treat the primary home as a place to put down roots. Long term. I recently had the pleasure of meeting with a gentleman who has several properties as long term investments. The youngest in his portfolio was purchased about eight years ago, most much older. Over the past three years, it was an odd day to not hear a buyer, while signing closing and loan doc's, comment about how much equity they would realize. Where did "I'm buying the house because it's a place I want to live" go? It's not that housing should not be a part of asset growth, but when it becomes THE only way to go in the minds of many, many are going to be sadly disappointed.

Does my participation and others' have an impact on the market, its psyche, or whether or not our Puget Sound region is experiencing a bubble as defined by each individual? Should the real estate community be critical of the media now? Is it the classic double-standard? No comment during the run-up, but when the winds blow the other direction, should the media be criticized?

My best guess is that my participation has little to no impact by itself. The market changes were occuring well before I stumbled upon this blog or others. My belief is that, at its core, this blog is helpful to consumers. Buying a home is a large transaction. Seattle Bubble and other blogs provide an alternative and fresh approach to understanding economic dynamics that are in play in our local markets. Filter out cheerleading and rants on both sides and you'll find gems of relevant information. The cumulative power of hundreds of bloggers discussing real transaction issues, market nuances and news is what makes this and other blogs powerful. How influential is difficult to quantify.

Regarding the criticism of the media discussing housing bubbles: in my opinion, this is the more humorous of ironies. Look, there is no doubt in my mind that housing is a large, very large, contributor to our economy. I don't want the housing sector to be hit hard, but what did anyone expect with the enabling and complete abandonment of sane lending practices? As I said to the lender account executive from LA who drove up to Seattle visiting mortgage brokers, "what did you expect was going to happen to all these borrowers with Option Arms and 100% financing?"

While Rain City Guide is a fantastic blog, even though some of my comments or topics may be thought of (8 min. 30 sec mark of the podcast) as controversial, its core audience is allied real estate professionals. The core audience of Seattle Bubble is largely consumers: including people interested in buying a home, existing homeowners like me and others. Each blog serves its own purpose. I would be interested in knowing how many hits Rain City Guide gets from actual consumers vs. industry insiders, but I don't know how you could track it.

Living within or under your means starts with educating yourself about home ownership, when it's right to make that step and the critical stage of understanding financing. Learning strategies to keep more money in your wallet within the realm of buying or selling a home is an important factor in building your future nest egg. Stay tuned.

Inman Talks Bubble Blogs

This is just a quick note to point out the first article in a series about Bubble Blogs over at Inman News (the all-real-estate, all the time "news" outlet). Since articles over there are only free to view on the day they're posted, you might want to check it out today. I was interviewed for this series by the writer, and I assume/hope that some piece of my interview will crop up in the continuation of the series later this week.

The list reads like a prophecy for real estate Armageddon: The Housing Bubble, Housing Panic, Housing Doom, Ready to Burst, Bubble Meter, Southern California Real Estate Bubble Crash, Seattle Bubble, The Jersey Shore Real Estate Bubble, Southern Maryland Housing Bubble News — and the list goes on and on.

These are titles for real estate blog sites among a giant genre that is devoted to a discussion on housing bubbles and the possibility of a real estate market crash. Despite the sensationalist blog names, the creators say their aim is not to scare people into hiding. Rather, they want to empower consumers with information and commentary about real estate and economic statistics so that they can make more informed decisions about housing.

I'll be sure to post the link if my interview comes up, and I'll probably post the complete text of my Q & A with Glenn as well.

(Glenn Roberts Jr., Inman News, 02.12.2007)

Update 02.13: "Meet the Bubble Bloggers, part 1 has been posted. Read Glenn's interview with John McLeod, co-blogger at HousingDoom.com.

Update 02.14: Part 2 is up. Read Glenn's Interview with Patrick Killelea of Patrick.net

Update 02.15: Part 3, Patrick Veling, real estate industry analyst and consultant.

Buy A Downtown Condo RIGHT NOW!

Many of you pointed out the latest in a series of paid advertisements masquerading as reporting in yesterday's Seattle Times. The apparent purpose of the "article" was to convince the reader that 2007 is a great year to buy a condo in downtown Seattle, at any cost.

[Condo developer David] Thyer insists that Seattle isn't like other cities, where developers are struggling with an oversupply of new condos. There's a demand for condos in downtown Seattle, he says, drawing a contrast with the speculative buying frenzy that has led to a boom-bust scenario elsewhere in the country.

On Friday, political and business leaders met over breakfast at the Westin Hotel for an annual review of downtown Seattle. Real-estate economist Matthew Gardner shared Thyer's optimism, telling an audience of about 700 that demand for new places to live downtown will remain "very positive."
...
Developers say the new condos will sell, but will they sell at the prices developers want?
...
In Miami and Las Vegas, developers have had to drop their prices after condos outnumbered buyers.

Part of the problem is that many buyers regarded their new condos as investments and had no intention of living in them.
...
[Dean] Jones [president of Realogics, a local condo-marketing firm] estimates that speculators accounted for 30 percent or more of all new condo purchases in Miami and Las Vegas, compared with "no more than 15 percent" in Seattle. Now, developers require buyers to disclose if they intend to live in their new condos in an effort to limit speculators, Jones said.

Ada Healey, a vice president at Vulcan Real Estate, said speculators represent a "very modest minority" of its buyers. Thyer, president of R.C. Hedreen, said he tries to limit speculators to no more than 5 percent.
...
[Seattle real-estate agent Brett] Frosaker counts at least four projects where a significant portion of the condos sell for $1 million or more. Never before, he says, has downtown seen so many ultra-expensive condos come online at the same time.

"A lot of research shows there's a market for them," he said. "But it hasn't been proven yet."

So, a bunch of condo developers, condo marketers, and real estate agents all say that "it's different here." What a shock. And what evidence, pray tell, do they have to support that assertion? Estimates, intentions, efforts, and (I'm just guessing on this one) a sprinkle of pixie dust.

Matt Goyer, proprietor of the local condo enthusiast blog Urbnlivn also had some critical thoughts about this article that are well worth reading. Considering that he is already a condo believer, it is commendable that he takes these cheerleading articles with such a large grain of salt. Kudos, Matt.

(Amy Martinez, Seattle Times, 02.11.2007)
(Matt Goyer, Urbnlivn, 02.11.2007)

Our Present Real Estate Cycle

Just for kicks, let's take another look at the home price YOY change graph that I posted on Wednesday.

Click to enlarge

I noted that the downward curve on the right that represents the last nine months looks fairly steep. But just how steep is it, compared to the rest of the graph?

In order to get a feel for the "cyclic nature of the market" I ran some calculations. Since things were slowing down at the beginning of the available data (1993), I defined a complete cycle as a slowdown, trough, speedup, plateau. I calculated the average month-to-month change in year-over-year home prices for each slowdown, trough, speedup, and plateau.

In other words, when "appreciation" was on the rise, how quickly was it rising? When it was declining, how quickly was that? I did a little number-crunching, and here are the results.

Cycle #1: January 1994 — June 1998
Slowdown: January 1994 — March 1995
Median YOY Start: +5.33%
Median YOY End: -1.77%
Total Change: -7.10 points
Time Elapsed: 14 months
Average Monthly Change: -0.51 points

Trough: March 1995 — September 1995
Median YOY Start: -1.77%
Median YOY End: -1.82%
Total Change: -0.05 points
Time Elapsed: 6 months
Average Monthly Change: -0.01 points

Speedup: September 1995 — February 1998
Median YOY Start: -1.82%
Median YOY End: +15.10%
Total Change: +16.92 points
Time Elapsed: 29 months
Average Monthly Change: +0.58 points

Plateau: February 1998 — June 1998
Median YOY Start: +15.10%
Median YOY End: +14.67%
Total Change: -0.43 points
Time Elapsed: 4 months
Average Monthly Change: -0.11 points

Cycle #2: June 1998 — April 2006
Slowdown: June 1998 — March 2001
Median YOY Start: +14.67%
Median YOY End: +0.35%
Total Change: -14.32 points
Time Elapsed: 33 months
Average Monthly Change: -0.43 points

Trough: March 2001 — June 2003
Median YOY Start: +0.35%
Median YOY End: +1.72%
Total Change: +1.37 points
Time Elapsed: 27 months
Average Monthly Change: +0.05 points

Speedup: June 2003 — October 2005
Median YOY Start: +1.72%
Median YOY End: +20.00%
Total Change: +18.28 points
Time Elapsed: 28 months
Average Monthly Change: +0.65 points

Plateau: October 2005 — April 2006
Median YOY Start: +20.00%
Median YOY End: +18.17%
Total Change: -1.83 points
Time Elapsed: 6 months
Average Monthly Change: -0.31 points

Cycle #3: April 2006 — ???
Slowdown: April 2006 — Present
Median YOY Start: +18.17%
Median YOY Present: +10.13%
Total Change: -8.04 points
Time Elapsed: 9 months
Average Monthly Change: -0.89 points

As you can see, the slowdown we are currently experiencing is nearly twice as rapid as either of the two previous slowdowns since 1994. Clearly this does not tell us anything about what is going to happen in the near future, but it's definitely an interesting point to note, and one that you're not likely to read in the local newspaper or the blogs by those in "the industry."

Down and down it goes, where it stops... nobody knows.

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.
...
"People were not buying in January; it was the weather," said [Jack] Cosby, an agent in Prudential Northwest Realty's Kent office.
...
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.
...
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.
...
Near the month's end the market started to pick up, said Judy Hay, an agent in Coldwell Banker Bain's Bellevue office.
...
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."
...
The median price could be dragged down by the sale of condominiums...
...
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.
...
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.
...
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.
...
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.
...
"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.
...
"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)

Guess What? Inventory Up, Sales Down.

An inside source has supplied me with the latest NWMLS statistics, and they tell exactly the story you would expect if you've been paying any attention at all during the prior nine months. For what is now the tenth month in a row, inventory was up and sales were down YOY. In fact, sales have been in the negative YOY since November 2005, making January the fifteenth consecutive month of declining sales.

Here's your SFH summary:

January 2007
Active Listings: up 22% YOY
Pending Sales: down 6% YOY
Median Closed Price: $429,495, up 10% YOY

As is the custom, I have uploaded an updated copy of the Seattle Bubble Spreadsheet that contains the relevant data. The public NWMLS pdfs are not available yet, but when they are I will update this post with the link. [Update: And, here it is.]

Here's the supply/demand YOY graph:

Click to enlarge

It would be a stretch to call the upward curve on the sales graph a "recovery" since it is still in negative territory, but sales are certainly now slowing as much in the last few months as they were during the summer months. Will we see the all-powerful "spring bump"? We'll know in just a few months...

Here's the chart of supply and demand raw numbers:

Click to enlarge

Finally, just because I'm in a charty type of mood (also I'm in Atlanta and there's nothing much better to do), here's a graph of the YOY percent change in the median sale prices of single-family homes in King County since 1994:

Click to enlarge

Wow, that latest dip sure is steep... Huh.

Condo Shoppers Lie Low

This article appeared on the front page of the Puget Sound Business Journal early this month. While typically not read by the general public, "Biz Journals" are widely circulated throughout the business community. Local businesses use the publication to keep tabs on their customers and competitors and to stay abreast of local business news.

I've posted the entire article with permission as it's currently only available to subscribers of the Journal. Enjoy!

Puget Sound Business Journal
February 2, 2007
by Justin Matlick

Walk into the "Trio" condominium project's Belltown showroom, and it looks like many other glitzy condominium projects rising in downtown Seattle. Many of Trio's units, when they're completed this fall, will feature bamboo floors and faux-granite countertops. Tenants will share a roof deck just a block from the new Olympic Sculpture Park.

But there's one key difference between Trio and some other recent projects: It isn't selling.

With a median price of $405,000, the project opened for presales in December 2005 and, as of Jan. 7, had sold just 28 of its 116 units, according to the Fat Report, a monthly newsletter that chronicles local condo sales.

Trio is among a growing number of struggling condo projects in Seattle. A downtown Seattle high-rise project at Fifth Avenue and Madison Street has sold about 52 of its 126 unfinished condominiums since September 2006 [sic]. Lumen, a 94-unit project in Seattle's Lower Queen Anne neighborhood, started selling in June 2005, and roughly a third of its units are still up for grabs. In Ballard, a project dubbed Hjarta, which started presales in October, had sold seven of 79 units as of Jan. 7, according to the Fat Report.

The stagnant sales could pick up once the projects are completed, and don't mean Seattle has been dragged into the condo tailspin now affecting markets in Las Vegas, Boston and other cities -- some recent local projects have sold out within days. Still, many local developers and real estate watchers agree that Seattle's condominium market is decelerating for the first time in years.

The reason: With thousands of local condos slated to go up in the next few years, buyers believe the recent period of rapid price appreciation is disappearing, and it's taking away the buy-now urgency that fueled the local boom with it.

"Buyers have a lot more to choose from and are playing a bit of a waiting game," said Mark Schuster, president and chief executive officer of the Schuster Group Inc., a Seattle-based real estate development company.

Nationwide, the condominium outlook is bleak in cities such as Washington, D.C., where a rush to build left the market oversaturated. In the fourth quarter of last year, developers in the Washington metro area switched roughly 5,900 projected condos into rental apartments, while plans for another 2,500 new condominiums were shelved, according to Delta Associates, a research firm based in Alexandria, Va.

While the Puget Sound region's housing market is slowing -- in King, Pierce and Snohomish counties, the Northwest Multiple Listing Service has reported falling home sales and rising inventories since last summer -- none of the real estate professionals contacted for this story were aware of any local projects being canceled or postponed, and most economists agree that the local market is well-insulated against a dramatic decline.

According to Dick Conway, co-publisher of the Puget Sound Economic Forecaster newsletter and Web site, the ongoing Boeing boom, a Microsoft hiring spree and strong demand for the region's exports from Asia set the stage for an ongoing population inmigration that should keep housing demand steady.

"We have very strong fundamental demand for housing because of population growth," Conway said.

The critical question facing local condo buyers: whether supply will outstrip that demand. While it's nearly impossible to predict how many condos are too many, it's apparent that the region's developers remain in the throes of a condo-building spree.

Developers in King, Pierce and Snohomish counties filed permits to build 8,300 units of multifamily housing, including apartments, condominiums and townhomes, in 2005, according to Conway. That number rose to 11,200 last year.

Meanwhile, developers are converting apartments into condos at a rapid clip. Roughly 7,000 apartments were transformed into condominiums in 2006, or were scheduled to hit the market soon, according to Dupre + Scott Apartment Advisors in Seattle.

The bevy of new projects "has probably put a little rain on the sales parade," said Lin Shih, a Seattle real estate agent who specializes in condos at Coldwell Banker Bain. "Buyers think that, with all these new developments coming up, they can be picky."

Another factor: a widespread belief that the days of rapid price gains are over. "When the market was hot, people knew they were buying today for ready-made appreciation," said Brett Frosaker, owner of Columbia Real Estate in Seattle and publisher of the Fat Report. "Now they're starting to wonder if today's condos are listing at tomorrow's prices."

According to Frosaker, a project's sales typically accelerate once it is completed, in part because buyers feel more comfortable seeing the actual units instead of showroom mock-ups.

Nonetheless, some projects have sold rapidly in the presale phase, especially lower-priced developments targeted at first-time buyers. The 251-unit Moda project in Belltown, for instance, came on the market for presales last summer and sold out within days, according to Frosaker. Many of Moda's condos were small units priced under $300,000.

Looking ahead, Frosaker believes this summer could be a ripe time for condo buyers to get good deals, especially as the bigger projects get closer to completion and their developers feel a greater sense of urgency to fill them up.

"With all these projects fighting tooth and nail," Frosaker said, "summer might turn into a great buying opportunity." Schuster believes demand will remain strong enough to support current price levels. "I don't see price drops being part of the equation even if there were a significant slowdown," he said.

What do you think? Pretty objective, no? Why aren't we getting this "fair and balanced" type of reporting from most of our friends over at the Times or PI?

What makes this article unbiased in regards to residential real estate is the fact that 100% of its advertising is B2B related.

From my own personal experience, the B2B world (especially in the business networking community) have little use for the B2C crowd (i.e. real estate clerks and mortgage brokers). Since B2C types are usually dealing exclusively with consumers, it can be difficult for them to provide B2B referrals, and, worse yet, they often attempt to solicit business from their fellow networking partners.

Newspapers such as the Seattle PI and Times are co-conspirators to the REIC as they rely heavily on residential real estate advertising for their revenues, often leading them to distort the truth.

(Justin Matlick, Puget Sound Business Journal, 02-02-2007)

Urban Growth Boundary Malarkey

A common argument about housing prices that I've personally noticed popping up frequently in the last few weeks is that they are as high as they are here in King County thanks in very large part to the Growth Management Act (GMA). Specifically, the argument claims that the Urban Growth Boundary (UGB) has so limited the available land to build on that the supply of new homes simply has not been able to keep up with increasing demand.

Here are two simple reasons that the UGB argument is nothing more than a red herring and a canard:

Reason #1: The UGB pre-dates the present run-up by roughly 10 years.
The UGB was put into place in 1992, and has remained largely unchanged since. If the UGB were to blame for high home prices, one would expect to see home prices begin to shoot up shortly after its enactment.

From January 1993 (the earliest month I have data for) to January 2002, the median closed price of single-family homes in King County increased an average of 6.3% per year. However, from January 2002 to December 2006 (the most recent month I have data for), the median increased 11.1% per year.

If the UGB is to blame for the ridiculous run-up in prices, why were its effects not noticed until ten years after it was enacted? That makes no sense.

Reason #2: King County was not alone in the home price run-up.
Many cities and counties across the entire country have experienced runaway home price growth over the past five years. UGBs cannot account for this near-nation-wide phenomenon. Absolutely zero evidence been provided to explain the notion that even though King County home prices jumped up by an unprecedented amount, it was not due to the factors that drove home prices up elsewhere in the country. If it is granted that these macro-economic factors had a hand in driving up King County home prices, why blame the UGB?

It would take quite a stretch of the imagination, combined with a healthy dose of tortured logic to attempt to claim that although home prices in King County were skyrocketing at nearly the same time as the rest of the nation (delayed by ~1 year), it was for an entirely different reason. Oh, and by the way that reason is a law that was passed ten years ago.

Yeah, that's the ticket.

(King County, History and Background of the Comprehensive Plan)
(HistoryLink, Urban Growth Boundary)

Bubble Link Roundup

It's time for another link roundup: a list of links that are worth posting, but not each as their own post. Some of these are Seattle-specific, some aren't.

• Keith at Housing Panic provides a concise history of the housing bubble.
• Calculated Risk expects a recession in '07 and explains what would change his mind.
• The state legislature might take a short break from the important business of neutering the initiative process and imposing an income tax to pass a bill "protecting" renters from condo conversions.
• Matt Goyer points out some of the problems Vancouver, BC is facing thanks to the condo boom there.
• Blogging Realtor Susan Ryan takes Bill Fleckenstein to task for not providing data, yet utterly fails to provide any data of her own.

Seen any other good snippets lately?

Pop Quiz Time: Fundamentals or Speculation?

Here's a pop quiz for you. Take a look at the following two tables and try to determine which one more closely resembles a market based on fundamentals, and which one represents a market based on speculation.

Median Household Income vs. Average Rent: 2000-2005

Year	Med. Income	% Chg	Avg. Rent	% Chg
2000	$53,200	+3.9%	$784	+3.9%
2001	$55,900	+5.1%	$826	+5.3%
2002	$58,000	+3.8%	$838	+1.5%
2003	$59,200	+2.1%	$821	-2.0%
2004	$60,400	+2.0%	$803	-2.3%
2005	$60,700	+0.5%	$810	+0.9%
Total 2000-2005		+14.1%		+3.3%
Average Yearly		+2.67%		+0.65%

Median Household Income vs. Median Home Price: 2000-2005

Year	Med. Income	% Chg	Med. Home	% Chg
2000	$53,200	3.9%	$225,000	4.9%
2001	$55,900	5.1%	$235,000	4.4%
2002	$58,000	3.8%	$249,000	6.0%
2003	$59,200	2.1%	$265,000	6.4%
2004	$60,400	2.0%	$289,950	9.4%
2005	$60,700	0.5%	$332,000	14.5%
Total 2000-2005		+14.1%		+47.6%
Average Yearly		+2.67%		+8.09%

These figures come from the most recent King County Benchmarks Report, released yesterday. Both the Times and the P-I have their usual un-insightful blabs about it, if you're into that sort of thing.

If the implication of these numbers is not obvious to you, you are either:

• willfully ignorant of basic economics
• incapable of comprehending basic math
• in the real estate business
• all of the above

How anyone can argue (with a straight face) that home prices are based on "fundamentals" when those very same "fundamentals" have somehow allowed rents to climb slower than incomes is beyond me.

(King County Budget Office, Affordable Housing 2006, 01.2007)
(Sharon Pian Chan, Seattle Times, 02.01.2007)
(Aubrey Cohen, Seattle P-I, 02.01.2007)