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Sunday, May 20, 2007

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Thursday, May 17, 2007

Tired Stereotypes About Renters

You've heard these stereotypes about renting, circulated by people and organizations with a financial interest in selling you a mortgage:

  • Renting is for poor people.
  • Renters don't get involved in their community.
Here's a specific example of these arguments, courtesy of the NAR:
Low- and moderate-income families, as well as minorities, are the groups that homeownership eludes the most.
Homeowners are motivated to stay abreast of local issues to protect their investment.
In turn, involvement in community quality-of-life issues helps prevent crime, improve childhood education and support neighborhood upkeep.

- NAR, Homeownership Talking Points
I mention these because a semi-related story in today's Seattle Times caught my attention. In the first three paragraphs it gives a strong counterpoint to these talking points we often hear repeated by those in the home sales business. (emphasis mine)
On the 40th floor of a Seattle skyscraper, in a nondescript hearing room, a young Queen Anne couple sat on one side of a long table. On the other side sat their opponents — lawyers defending a city permit to tear down an old church next door to the couple's rented house.

On this particular day, the Queen Anne couple, Tyler Crone and Jorge Barón, looked far less like the working parents of a 3-year-old daughter and 15-month-old son and more like who they also happen to be: Yale-educated attorneys, one with a master's in public health, both on a mission. There the couple sat, confident, attired in suits, with briefcases of exhibits — and armed with witnesses who pounded home a single, emotional message: Don't poison our children with a toxic cloud of lead dust.

Bill Merkle, a real-estate broker involved in the deal to develop the church property, watched the spectacle with frustration, having never before seen such formidable neighborhood resistance to a demolition.
Surely there was a typo. That doesn't sound like renters at all.

Or maybe it's time to rethink the view that renters are somehow inherently unfortunate, lazy, ignorant, and/or stupid.

(Sanjay Bhatt, Seattle Times, 05.17.2007)

New Housing Bubble Blog: Portland

Just a quick note to point out that Seattle's riverside neighbor to the south—Portland—has its own housing bubble blog: Portland Housing Blog.

Drop on by and leave Clint a comment or two.

Wednesday, May 16, 2007

WCRER: Affordability Still at Record Lows

First quarter data has been released by the WCRER. There's not much new information about King County that isn't already in the Seattle Bubble spreadsheet, but it's worth noting anyway since their audience is somewhat broader than Seattle Bubble's.

Here are a few quotes from the fluffy, feel-good AP report:

Washington's housing market remains a pricey bright spot, but that means renters are seeing fewer opportunities to become home owners, a study finds.

There were 26,720 homes sold statewide during the first three months of 2007, a 9.2 percent drop from the same quarter in 2006, according to statistics released Tuesday by the Washington Center for Real Estate Research at Washington State University in Pullman.

But the median price of $300,800 in Washington was 7.4 percent higher than a year ago. That compares to a 1.8 percent decline in the national median price for a single-family home during the first quarter.
Dennis Rose, 2007 President of Washington Realtors, said Washington's economy is helping keep home prices high.

"Strong job growth, coupled with a commitment to quality of life issues, is helping Washington avoid much of the pain of declining home prices observed in other areas," Rose said.

The Housing Affordability Index uses median home prices, mortgage interest rates and family incomes to measure the ability of a middle-income family to afford mortgage payments on a typical home.

In Washington, the affordability index climbed for the second consecutive quarter, mostly because the mortgage interest rate declined slightly during the first quarter, the WSU center said.
Is anyone else getting tired of the state Realtors' It's A Priority campaign and their endless disingenuous quotes about "quality of life"?

To give you some context on that quote that the Affordability Index "climbed for the second consecutive quarter," check out this graph (found in the Seattle Bubble spreadsheet):In King County, after plummeting from 121.3 in the second quarter of 2003 to a low of 69.2 in the third quarter of 2006 (a 52.1 point drop), the index has "climbed" a whopping 1.5 points in the past six months.

Let's throw a party.

(John K. Wiley, Associated Press, 05.15.2007)

Tuesday, May 15, 2007

King County Foreclosures Keep Rising

April foreclosure stats from RealtyTrac have been released. No surprise: area foreclosures still on the rise.

More Seattle-area homeowners are facing foreclosures this month, but the region remains far below the national rate, according to new statistics released Tuesday.

The Seattle area, defined as King and Snohomish counties, had 760 foreclosure filings in April, up 16.7 percent from March, but down 2.2 percent from April 2006, according to RealtyTrac, an Irvine, Calif., company that tracks foreclosure filings. The April rate of one foreclosure per 1,287 households -- better than the national rate of one for every 783 households -- ranked the region 128th out of 229 U.S. metro areas.

"Washington has really not followed into what is happening nationwide," said Marc Gaspard, administrative director of the Washington Mortgage Lenders Association. "Certainly if you look at the Puget Sound region, our housing market may have slowed a little bit, but it's still a very strong market."

King County alone had a much worse month, with foreclosures up 37 percent from a month ago and 1.7 percent from April 2006. Its rate, however, still was lower than the national rate, one foreclosure for every 1,347 households. State foreclosures were up 1.15 percent from March and 7.2 percent from a year ago, with one per 1,396 households -- good for 23rd among states.
Although the trend is up, it is true that foreclosures are only slightly up. However, even without an economic downturn (local or national) things can change quite quickly.

But don't you worry, we're special. That will never happen here. The real estate agents quoted in the paper told me so.

(Aubrey Cohen, Seattle P-I, 05.15.2007)

Monday, May 14, 2007

Wanted: Construction Job in Seattle

Either this report is a fabrication, or the guys in question haven't been clued in to how special Seattle is...

Construction workers from across the country came to the Cedar Rim Apartments in Newcastle for a major remodeling project.

They worked for weeks but were only partially paid. Now, some are stranded and taxpayers are footing some of the bill.

Donald Gill and Marc Cox are now stranded thousands of miles from home with no money, no jobs, and no way back.

The men are two of 14 construction workers who answered a Craigslist ad offering good pay and plenty of work to come refurbish apartments.
Somehow the deal went bad and the workers were left to fend for themselves.

Gill says he worked for three weeks but was only paid for one.

Now, a month without money, he and Cox have resorted to food stamps, paid for by Washington taxpayers, to survive.
Somebody should tell those guys that thanks to Seattle's perma-hot real estate market, there are plenty of construction jobs out there building new homes in a futile attempt to meet our area's insatiable home-buying demand.

(Eric Wilkinson, King 5 News, 05.13.2007)

Friday, May 11, 2007

The Ringing "Ka-ching From a House in Seattle"

Here's yet another boilerplate national real estate article rah-rah'ing Seattle's apparent resilience:

Amid all the news of plummeting national housing numbers, the premise still holds true that all real estate is local, and nothing supports that premise more than the statistics on local home price appreciation. The ka-ching from a house in Seattle rings just as dramatically as the bell tolling for a home in Detroit.

Home prices and sales, while certainly susceptible to national macro-economic factors, such as mortgage rates and lending standards, rely largely on the local economy and local supply and demand. This is precisely why home prices in Seattle are up 10% from a year ago, according to the S&P/Case-Shiller Home Price Index, but down nearly 8% in Detroit. It's the booming tech industry versus the slumping auto industry.

Home prices in Seattle have been on a tear, up for four months in a row, to a median price of $465,000 in April, according to the Northwest Multiple Listing Service. Confounding matters even more, the bulk of the homes that sold in Seattle in March went for above asking price.

"We just have a very strong market," says Sara Hasan, financial analyst for Seattle-based McAdams Wright Ragan, a regional brokerage firm. "Two of the major employers are Microsoft and Boeing, and both are doing very well."

Not to mention that Google has moved into the very limited real estate in the area, which makes another point: Seattle has very short land supply, further diminished by a growth management act, which restricts where and how many single family homes can be built. Limited land supply plus strong employment equals pricey homes.
That's a convincing-sounding equation. Too bad that actual research shows it doesn't at all explain Seattle's high home prices. It's more like limited land supply (growth management) plus strong employment equals a plausible, but entirely false explanation for continued (but slowing) home price gains.

It's not that we don't have somewhat limited land and strong employment. It's just that when you actually take the time to do your research you find little to no correlation between those factors and home price gains.

(Diana Olick, CNBC, 11.05.2007)

Wednesday, May 09, 2007

Prices In Seattle Still Hot, Hot, Hot!

Check out this delightful piece from today's Wall Street Journal: Where home prices are hot now

The housing news isn't all grim. Even as prices sag nationwide, there are several cities in the country where home values are climbing smartly.

Portland, Ore., Boise, Idaho, Seattle, Salt Lake City, Houston, Austin, and Charlotte and Raleigh, N.C., are among the cities bucking the national trend. Homes' appreciation there between the fourth quarters of 2005 and 2006 far exceeded the national average of 5.9%, according to the Office of Federal Housing Enterprise Oversight.

In some markets, like Boise and Seattle, the appreciation jumped well into the double digits.
Let me stop right there for a moment. The phrase "well into the double digits" didn't strike me as reflective of reality, so I took a look at the actual OFHEO report (pdf). Sure enough, according to the government, homes in Seattle appreciated 14.5% from Q4 '05 to Q4 '06. NWMLS stats and the Case-Shiller index both reported lower figures:
Dec. '05 - Dec. '06
OFHEO HPI: +14.5%
S&P/Case-Shiller HPI: +12.1%
NWMLS Median (Res, King Co.): +12.0%
I think the difference lies in the following (emphasis mine):
OFHEO calculates appreciation based on repeat sales or refinancings of the same single-family properties.
Including refinancings may have worked in the past, but for whatever reason, it is now apparently skewing the numbers a bit higher than they are in reality. With that in mind, let's take a look at some of the other claims made in the article...
There's no single secret of these cities' apparent success, but many of them missed the housing boom of the past five years. From 2001 to 2005, annual appreciation in these cities was between 2% and 5%, far slower than the 7% to 12% national average, according to the Office of Federal Housing Enterprise Oversight.
Between 2% and 5% from '01 to '05? Really? No, not really:
Quarter: OFHEO, Case-Shiller, NWMLS
Q4 '05: +17.2%, +18.5%, +17.3%
Q4 '04: +10.1%, +11.4%, +9.9%
Q4 '03: +5.3%, +7.1%, +11.3%
Q4 '02: +4.5%, +4.1%, +3.3%
Q4 '01: +5.6%, +4.5%, +5.6%
Looks like we got a late start, with only slight price increases in '01 and '02 but from '03 on, it was off to the races.
Now, their economies are strong...
Good thing our local economy is completely immune to any potential slowdown in the national economy, right?
...and housing prices are still perceived as affordable, luring buyers into the market.
Now it's just getting ludicrous. No one but an ex-Californian perceives homes in Seattle to be "affordable."
The growth of Portland, Salt Lake City, Boise and Seattle can be attributed in part to an influx of former Californians and people opting out of slumping Las Vegas or Phoenix.
Ah, well there you go.
While some worry that a new group of cities could face a boom-and-bust cycle, local real-estate agents and economists predict stable growth for the near future.
In other news, local burger franchise owners and beef producers predict stable growth for the near future in their own industry, as well.

Lest you still come away from the article with a puffed-up opinion of Seattle's superiority, take a look at the seventeen cities with higher appreciation than Seattle (according to the OFHEO):
  • Bend, OR
  • Wenatchee, WA
  • Provo-Orem, UT
  • Salt Lake City, UT
  • Boise City-Nampa, ID
  • El Paso, TX
  • Flagstaff, AZ
  • Corvallis, OR
  • Mount Vernon-Anacortes, WA
  • Longview, WA
  • Myrtle Beach-Conway-North Myrtle Beach, SC
  • Wilmington, NC
  • Miami-Miami Beach-Kendall, FL
  • Ogden-Clearfield, UT
  • Salem, OR
  • Tacoma, WA
  • Mobile, AL
I guess the Salt Lake City area is even more specialer than the Puget Sound.

(Dean Treftz, Wall Street Journal, 05.09.2007)

Tuesday, May 08, 2007

April Reporting Roundup

Here's a compilation of what your local press (aka real estate advertisers) had to say about last month's home sales data from the NWMLS. It's depressing to think that these sources are where most people get their news of the market from...

Elizabeth Rhodes, Seattle Times:
King County home prices keep rising, bucking national trend
Buying a home here: You'll pay even more

"Overall, people have been getting worn out paying what in their opinion is an inflated price," Martin said.

Plus there are significantly more properties to choose from compared with a year ago.
Mrs. Rhodes' article is riddled with inaccurate assertions such as a claim that decreasing sales are "explained" by increasing inventory (huh?), and a quote that sales activity is "improving" and "at a faster pace than last year." She also says "Whether April will be the strongest month remains to be seen," when in fact it is already known that March experienced both more sales and larger price increases than April. Take home lesson: When reality isn't as rosey as you'd prefer, just pretend that it is!

Aubrey Cohen, Seattle P-I:
Home sales in city shoot up 14% in April
Anshul and Christine Pandhi were in their second week of seeing what they could get for $500,000 to $700,000 if they moved from Tacoma to Seattle.

"It's expensive," Anshul Pandhi said. "In our price range, the pickings are pretty slim."

John and Sahrah Marcantonio sold their Woodinville house in November and have been renting in Seattle while looking for a house in the city.
Sahrah Marcantonio was pessimistic about the market, but didn't care.

"I think it's a bubble, we're at the peak of the bubble, and yet, I want a house now," she said. "It's for the long term."
Aubrey's article was much more even-handed than we've come to expect. I was floored by the quotes he managed to get out of recent home buyers.

Devona Wells, Tacoma News Tribune:
Housing market still shows signs of slowing
The jump in the number of Pierce County houses and condos for sale puts the county at a six-month supply, generally considered the point a market moves from one favoring sellers to one favoring buyers, said Dick Beeson, a Windermere real estate broker and MLS director.

"The news is, pay attention, sellers, you’re not going to have the spring and summer you usually have," he said.
Apparently the market just south of us is a bit harder to spin in a positive light. Of course, that doesn't mean they aren't trying...
...though sales have slowed, [John L. Scott agent David Gala] said Tacoma homes under $400,000 remain hot. Two of his listings priced at $250,000 and $210,000 sold in the last week after multiple offers, Gala said.

But agents say three to six months tends to be the time it takes to sell a home today. As recently as two years ago, homes often sold in a few days.
Mike Benbow, Everett Herald:
Buyers drive up condo sales
While Snohomish County houses are less expensive than in King County, they're still out of reach for many people in the market, especially with the tightening of loan qualifications that has followed the recent increase in home foreclosures.

That has attracted more people to condos and their much lower price range.
Those buyers had better get into any type of home they can possibly afford, because as everyone knows, if they don't buy now, they'll be (you guessed it) priced out FOREVER!

Rolf Boone, The Olympian:
Condos sustain housing market
The pace of new South Sound loan applications has so far been strong this year, said Jeff Devlin, a Wells Fargo Home Mortgage consultant. Devlin said he doesn't sense the "doom and gloom" today that hung over the real estate market a year ago.
Hmm. Year over year pending (res + condo) sales down 15%, listings up 50%. SFH median up 9% vs 23% (April '05-'06). But the market is in better shape today than a year ago. Yeah.

Just for kicks, here are a couple of stories from a little further out in Western Washington than we usually focus on.

Dave Gallagher, Bellingham Herald:
Home sales slowing as supply rises

Evan Caldwell, Longview Daily News:
Region's home sales bucking U.S. trend

(Elizabeth Rhodes, Seattle Times, 05.08.2007)
(Aubrey Cohen, Seattle P-I, 05.08.2007)
(Devona Wells, Tacoma News Tribune, 05.08.2007)
(Mike Benbow, Everett Herald, 05.08.2007)
(Rolf Boone, The Olympian, 05.08.2007)

Monday, May 07, 2007

Listings Way Up, Sales Continue Descent

It's time for April statistics from the NWMLS. King County SFH summary:

April 2007
Active Listings: up 38% YOY
Pending Sales: down 10% YOY
Median Closed Price: $465,000, up 11% YOY

Sales continued their descent, making April the 17th of the last 18 months to register a YOY decrease in pending sales. Likewise, inventory continues to balloon, registering the highest YOY increase to date.

Despite the downward pressure of increasing supply coupled with decreasing demand, median prices still rose $10,000, for a 10.85% YOY increase. Apparently the increasingly small number of people that are still buying are all too happy to continue paying higher prices. Perhaps they're frightened of being priced out forever.

Months of supply bumped back up to 3.00.

As is the custom, I have uploaded an updated copy of the Seattle Bubble Spreadsheet that contains the relevant data. Here is the recap NWMLS pdf.

Here's the supply/demand YOY graph:

Here's the chart of supply and demand raw numbers:Here's the graph of YOY percent change in the median sale prices of single-family homes in King County since 1994:I predict that the $10,000 increase in median prices will be the primary focus of our friends at the Times and P-I.

Tick, tock, tick, tock...