Crazy housing market

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Tommy
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Crazy housing market

Post by Tommy » Sun Jun 05, 2016 3:24 pm

In my area (Seattle), housing market became crazy. Buyers bidding for houses. Paying cash. Looks like people buying houses as investment. If they are paying cash, does it mean they are selling stocks? I mean if this is a trend- people not believe in stock market any more and want to preserve money in real estate?

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jjunk
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Re: Crazy housing market

Post by jjunk » Sun Jun 05, 2016 5:14 pm

I dont know if folks are selling stocks to buy real estate but the general mood in Seattle is that if you want to own a home here you better do it NOW! That leads to people making irrational decisions with their money IMO. People feel a pressure to put in high offers and many times are way over asking price. Real estate agents are also pricing things in a way which starts bidding wars, driving prices even higher. A coworker of mine recently sold their home in 3 days for 100k over asking, another got 85k over asking in 24hrs. That feeding frenzy mentality just feeds on itself until it pops.

I know a few who are buying property as investments but I personally have always thought that its a poor choice. Sure, right now you'd do better than the market but wait til that bubble bursts and your illiquid asset is just sitting there with a big mortgage and property tax payment waiting for you. No thanks, I'll continue to rent.

rgs92
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Re: Crazy housing market

Post by rgs92 » Sun Jun 05, 2016 6:00 pm

Didn't this just happen in 2007? Is the job market that hot in the Pacific Northwest or are people from overseas or maybe California all flocking there to live? I heard through the grapevine that Microsoft is downsizing and Amazon jobs are undesirable.

jebmke
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Re: Crazy housing market

Post by jebmke » Sun Jun 05, 2016 6:03 pm

rgs92 wrote:Didn't this just happen in 2007?
In 2007 people were buying houses with mortgages they could not afford, not cash.
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Calhoon
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Re: Crazy housing market

Post by Calhoon » Sun Jun 05, 2016 6:33 pm

In the community where I live in Wisconsin they're building like crazy. At levels far beyond what I remember them in the 2000s around here. In our small town subdivisions are popping up everywhere, as are condos. Hundreds and hundreds of lots and units. Not sure where all these people are coming from. It's a nice area...but not that nice. So, yea, I'm getting this crazy deja'vu sensation.

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Re: Crazy housing market

Post by tennisplyr » Sun Jun 05, 2016 6:41 pm

jjunk wrote:I dont know if folks are selling stocks to buy real estate but the general mood in Seattle is that if you want to own a home here you better do it NOW! That leads to people making irrational decisions with their money IMO. People feel a pressure to put in high offers and many times are way over asking price. Real estate agents are also pricing things in a way which starts bidding wars, driving prices even higher. A coworker of mine recently sold their home in 3 days for 100k over asking, another got 85k over asking in 24hrs. That feeding frenzy mentality just feeds on itself until it pops.

I know a few who are buying property as investments but I personally have always thought that its a poor choice. Sure, right now you'd do better than the market but wait til that bubble bursts and your illiquid asset is just sitting there with a big mortgage and property tax payment waiting for you. No thanks, I'll continue to rent.
In 1981 my wife and I bought a house putting half down on it. Fast forward to today, our home has gone up five-fold, no mortgage. Now I can do/live basically wherever I want. For this guy, I made an extremely wise "investment" in my home. Had I rented for all this years, I am positive I would not be in this favorable position. Prices/mortgage rates were very high then but I made a sensible purchase for us, saved and watched what we spent over the years. Life is good :beer
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vitaflo
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Re: Crazy housing market

Post by vitaflo » Sun Jun 05, 2016 6:53 pm

jebmke wrote:
rgs92 wrote:Didn't this just happen in 2007?
In 2007 people were buying houses with mortgages they could not afford, not cash.
The people selling still need to live somewhere. I doubt all the sellers are without mortgages.

livesoft
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Re: Crazy housing market

Post by livesoft » Sun Jun 05, 2016 7:01 pm

Tommy wrote:In my area (Seattle), housing market became crazy.
Seattle has good jobs. Didn't Expedia build a new campus that they are moving into? And other companies as well?
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jjunk
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Re: Crazy housing market

Post by jjunk » Sun Jun 05, 2016 7:15 pm

tennisplyr wrote:
jjunk wrote:I dont know if folks are selling stocks to buy real estate but the general mood in Seattle is that if you want to own a home here you better do it NOW! That leads to people making irrational decisions with their money IMO. People feel a pressure to put in high offers and many times are way over asking price. Real estate agents are also pricing things in a way which starts bidding wars, driving prices even higher. A coworker of mine recently sold their home in 3 days for 100k over asking, another got 85k over asking in 24hrs. That feeding frenzy mentality just feeds on itself until it pops.

I know a few who are buying property as investments but I personally have always thought that its a poor choice. Sure, right now you'd do better than the market but wait til that bubble bursts and your illiquid asset is just sitting there with a big mortgage and property tax payment waiting for you. No thanks, I'll continue to rent.
In 1981 my wife and I bought a house putting half down on it. Fast forward to today, our home has gone up five-fold, no mortgage. Now I can do/live basically wherever I want. For this guy, I made an extremely wise "investment" in my home. Had I rented for all this years, I am positive I would not be in this favorable position. Prices/mortgage rates were very high then but I made a sensible purchase for us, saved and watched what we spent over the years. Life is good :beer
No doubt home ownership can be a great investment. But, getting into a home in Seattle right now will run you anywhere from 500K-800K and thats typically not a "nice" place. All depends on where it is (of course). We're not SanFran by any means but we're slowly becoming the same. Of course, as a renter, seeing 10-15% increases annually isnt fun either which is why I plan to retire away from this area even though we love it here. As for someone else's question, the majority of the current boom is being brought about by investors from China and new transplants from the Valley (in my experience). The fact that tech jobs are plentiful and Amazon, Google, Facebook, etc + a robust startup environment are all contributors as well.

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Re: Crazy housing market

Post by gkaplan » Sun Jun 05, 2016 9:14 pm

Tommy wrote:In my area (Seattle), housing market became crazy. Buyers bidding for houses. Paying cash. Looks like people buying houses as investment. If they are paying cash, does it mean they are selling stocks? I mean if this is a trend- people not believe in stock market any more and want to preserve money in real estate?

Here is a similar thread started about ten days ago.


viewtopic.php?f=2&t=192017&p=2917767&hi ... e#p2917767
Gordon

itstoomuch
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Re: Crazy housing market

Post by itstoomuch » Sun Jun 05, 2016 9:27 pm

Tommy wrote:In my area (Seattle), housing market became crazy. Buyers bidding for houses. Paying cash. Looks like people buying houses as investment. If they are paying cash, does it mean they are selling stocks? I mean if this is a trend- people not believe in stock market any more and want to preserve money in real estate?
No, we bought with inheritance, Seattle, 2015. Owner had the condo 2/2, unit for sale for 3 months, and had dropped the price twice. We were only bidders, a week after the 2nd price reduction. We did paint, upgraded refrig, countertop, and microwave and had the place rented out the next month. Great location for our the new tenants and at a slightly lower rent than the previous owner had gotten. :annoyed

We already have enuf for retirement without this purchase. This will be passed forward and we will probably do some charitable gifts and pay taxes as other income streams kick in.

YMMV
GL :beer
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stratton
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Re: Crazy housing market

Post by stratton » Sun Jun 05, 2016 10:25 pm

The Seattle real estate market is what happens when there is one month of inventory.

Tacoma and Pierce county is relatively plentiful with 2 to 2.5 months inventory.

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stratton
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Re: Crazy housing market

Post by stratton » Sun Jun 05, 2016 10:27 pm

itstoomuch wrote:No, we bought with inheritance, Seattle, 2015. Owner had the condo 2/2, unit for sale for 3 months, and had dropped the price twice. We were only bidders, a week after the 2nd price reduction.
Considering the market had 1 to 1.5 months inventory last year that owner was way over priced.

Paul
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Re: Crazy housing market

Post by PugetSoundguy » Sun Jun 05, 2016 10:50 pm

livesoft wrote:
Tommy wrote:In my area (Seattle), housing market became crazy.
Seattle has good jobs. Didn't Expedia build a new campus that they are moving into? And other companies as well?
Expedia is moving from the east side of the metro area into a campus on the waterfront in Seattle that was vacated by Amgen, although Expedia will employ more people.

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Re: Crazy housing market

Post by itstoomuch » Sun Jun 05, 2016 11:17 pm

stratton wrote:
itstoomuch wrote:No, we bought with inheritance, Seattle, 2015. Owner had the condo 2/2, unit for sale for 3 months, and had dropped the price twice. We were only bidders, a week after the 2nd price reduction.
Considering the market had 1 to 1.5 months inventory last year that owner was way over priced.

Paul
Perhaps. The identical unit above ours sold for 20% more just 2 months later. IMO, that unit was overpriced.
Timing is {almost} everything. :oops:
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

navyasw02
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Re: Crazy housing market

Post by navyasw02 » Sun Jun 05, 2016 11:45 pm

tennisplyr wrote:
jjunk wrote:I dont know if folks are selling stocks to buy real estate but the general mood in Seattle is that if you want to own a home here you better do it NOW! That leads to people making irrational decisions with their money IMO. People feel a pressure to put in high offers and many times are way over asking price. Real estate agents are also pricing things in a way which starts bidding wars, driving prices even higher. A coworker of mine recently sold their home in 3 days for 100k over asking, another got 85k over asking in 24hrs. That feeding frenzy mentality just feeds on itself until it pops.

I know a few who are buying property as investments but I personally have always thought that its a poor choice. Sure, right now you'd do better than the market but wait til that bubble bursts and your illiquid asset is just sitting there with a big mortgage and property tax payment waiting for you. No thanks, I'll continue to rent.
In 1981 my wife and I bought a house putting half down on it. Fast forward to today, our home has gone up five-fold, no mortgage. Now I can do/live basically wherever I want. For this guy, I made an extremely wise "investment" in my home. Had I rented for all this years, I am positive I would not be in this favorable position. Prices/mortgage rates were very high then but I made a sensible purchase for us, saved and watched what we spent over the years. Life is good :beer
The S&P 500 has gone up 15x since 1981. Without knowing the increase in rental prices since 1981 in your local area, I wouldn't necessarily count it as a sure fire win.

letsgobobby
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Re: Crazy housing market

Post by letsgobobby » Mon Jun 06, 2016 3:03 am

Yes, Seattle is crazy.

http://www.seattletimes.com/business/bi ... tle-homes/

78% of April sales resulted in a bidding war (multiple offers)
56% of April sales were over asking price
average home sells in 8 days, twice as fast as San Francisco

Valuethinker
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Re: Crazy housing market

Post by Valuethinker » Mon Jun 06, 2016 5:55 am

navyasw02 wrote:
tennisplyr wrote:
jjunk wrote:I dont know if folks are selling stocks to buy real estate but the general mood in Seattle is that if you want to own a home here you better do it NOW! That leads to people making irrational decisions with their money IMO. People feel a pressure to put in high offers and many times are way over asking price. Real estate agents are also pricing things in a way which starts bidding wars, driving prices even higher. A coworker of mine recently sold their home in 3 days for 100k over asking, another got 85k over asking in 24hrs. That feeding frenzy mentality just feeds on itself until it pops.

I know a few who are buying property as investments but I personally have always thought that its a poor choice. Sure, right now you'd do better than the market but wait til that bubble bursts and your illiquid asset is just sitting there with a big mortgage and property tax payment waiting for you. No thanks, I'll continue to rent.
In 1981 my wife and I bought a house putting half down on it. Fast forward to today, our home has gone up five-fold, no mortgage. Now I can do/live basically wherever I want. For this guy, I made an extremely wise "investment" in my home. Had I rented for all this years, I am positive I would not be in this favorable position. Prices/mortgage rates were very high then but I made a sensible purchase for us, saved and watched what we spent over the years. Life is good :beer
The S&P 500 has gone up 15x since 1981. Without knowing the increase in rental prices since 1981 in your local area, I wouldn't necessarily count it as a sure fire win.
There's a couple of issues:

- you have to use post tax returns (in Canada and UK, your primary residence is capital gains tax exempt, I realize US is different; but we have no mortgage deductibility)

- that S&P500 return is unprecedented in history. It will not re occur (at least not in US markets) unless we have the mother of bear markets first

- the point about real estate is "other peoples' money" (OPM) your leveraged return is higher, because you borrow most of the purchase price, thus enhancing your returns on equity

For an equal sized equity investment into residential housing and into the stock market, ignoring taxes, you would expect the latter to do better because there is more risk and more volatility. Also residential housing provides imputed rent-- ie you can live in it. That lowers expected returns (but it saves you renting somewhere else).

The big anomaly in all this is of course there is a set of "super cities" that have just blown out even comparables to equities: New York, Boston, SoCal, SF-Bay, Vancouver, Toronto perhaps, London for sure, Hong Kong, Sydney, Melbourne, probably Singapore.

Due to a combination of land use restrictions and a shift towards a bracket of high paying jobs in tech and finance (and healthcare to a lesser extent) primarily, those cities have just flown off the charts since say about 1980. Edward Gleaser, the doyen of urban economists now, thinks it is largely to due with tightened zoning and NIMBY restricting supply.

Whether that will continue is moot.

The long run returns for residential housing do not show great returns-- I think Shiller is fairly clear less than 1% pa real (quality adjusted, maybe not even that). And data from Netherlands since 1630s etc. seems to confirm that, ie it's not only US data.

See Neil Monnery "Safe as Houses: 8 Centuries of Housing Prices" for an erudite and classic summary of the data available, multi country. Also Shiller's website at Yale.

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Re: Crazy housing market

Post by goldenbb » Mon Jun 06, 2016 11:09 am


tecmage
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Re: Crazy housing market

Post by tecmage » Mon Jun 06, 2016 2:51 pm

I made a deal last year to buy a condo in Seattle this year from a friend, he wanted some flexibility on when to close depending on his work. He's keeping the price we agreed upon and man am I lucky that we made the deal then. We used comparables from last Aug when we agreed on the price with a discount for not using a real estate agent. Fast forward to today, I literally can't find anything to compare it to. A little further away from downtown and in the fancier area and it's over 1 million sometimes closer to 1.5 million, a little closer to downtown and it's 1 million for a 2 bedroom with the same sq/ft as the 3 bedroom we're buying.

I told my wife last year that this will be a million dollar property by the time we sell in 20 years, it looks like it'll be a million dollar property by the time we close. Will this market eventually crash? Sure. Will it go up another 30% or more before it does, who knows. All I know is we plan on being here for the next 20 years so I'm sure I'll see the boom and bust cycle a few more times.

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Re: Crazy housing market

Post by bloom2708 » Mon Jun 06, 2016 3:08 pm

This crazy housing market makes me want to sell and rent..I just haven't convinced my wife and kids that this is a good idea.

Is it like the stock market? Whatever I'm "feeling" about the housing market could be right, wrong or somewhere in between. Maybe we have another 50% upside? If's, buts and maybes.

I'd still stick with the theory that you live in your house and should make the best decision based on where you want to live and what you can afford. Don't strive to buy a home. Strive to have a paid off home. :moneybag
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AZAttorney11
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Re: Crazy housing market

Post by AZAttorney11 » Mon Jun 06, 2016 3:13 pm

Phoenix was like that in mid 2012 through at least the first quarter of 2013 (and well before the housing crisis). It's not fun if you're a buyer, but great if you're a seller.

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Re: Crazy housing market

Post by Valuethinker » Mon Jun 06, 2016 4:14 pm

bloom2708 wrote:This crazy housing market makes me want to sell and rent..I just haven't convinced my wife and kids that this is a good idea.

Is it like the stock market? Whatever I'm "feeling" about the housing market could be right, wrong or somewhere in between. Maybe we have another 50% upside? If's, buts and maybes.

I'd still stick with the theory that you live in your house and should make the best decision based on where you want to live and what you can afford. Don't strive to buy a home. Strive to have a paid off home. :moneybag
With the oil bust I am guessing Fargo, ND is not a boom market? Or is that not where you live?

Housing markets have these bubbles and busts, and long periods of doing nothing. A house is a place to live, if you get lucky, you make money on it.

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Re: Crazy housing market

Post by bloom2708 » Mon Jun 06, 2016 4:23 pm

Valuethinker wrote:
bloom2708 wrote:This crazy housing market makes me want to sell and rent..I just haven't convinced my wife and kids that this is a good idea.

Is it like the stock market? Whatever I'm "feeling" about the housing market could be right, wrong or somewhere in between. Maybe we have another 50% upside? If's, buts and maybes.

I'd still stick with the theory that you live in your house and should make the best decision based on where you want to live and what you can afford. Don't strive to buy a home. Strive to have a paid off home. :moneybag
With the oil bust I am guessing Fargo, ND is not a boom market? Or is that not where you live?

Housing markets have these bubbles and busts, and long periods of doing nothing. A house is a place to live, if you get lucky, you make money on it.
I currently live in Fargo. The oil boom was on the west side of ND. Fargo had some residual benefit from the overall boom, but in general the oil boom/bust does not reach the ag based far east. Fargo is in a housing boom. Why pay Seattle prices in Washington? Pay them right here in North Dakota. :shock:

The momentum seems like it finally could be slowing down a bit. Houses selling in hours with 15 offers all over asking price. Things you would not expect in this market. Although with the weather, you do spend an extra long amount of time in your house. :oops:
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goingup
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Re: Crazy housing market

Post by goingup » Mon Jun 06, 2016 4:29 pm

tecmage wrote:I told my wife last year that this will be a million dollar property by the time we sell in 20 years, it looks like it'll be a million dollar property by the time we close. Will this market eventually crash? Sure. Will it go up another 30% or more before it does, who knows.
We've lived in Seattle for about 10 years. It took home prices awhile to return to 2007 peak. My impression is that the market can boom or bust depending on aerospace health. Lots of tech employment now too, so maybe that risk has been diversified.

It's good to remember that trees don't grow to the sky and housing doesn't appreciate forever! :wink:

Bacchus01
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Re: Crazy housing market

Post by Bacchus01 » Mon Jun 06, 2016 7:43 pm

Calhoon wrote:In the community where I live in Wisconsin they're building like crazy. At levels far beyond what I remember them in the 2000s around here. In our small town subdivisions are popping up everywhere, as are condos. Hundreds and hundreds of lots and units. Not sure where all these people are coming from. It's a nice area...but not that nice. So, yea, I'm getting this crazy deja'vu sensation.
Where do you live? I'm in the North suburbs of Milwaukee and there is almost no building going on.

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Re: Crazy housing market

Post by cherijoh » Mon Jun 06, 2016 8:48 pm

tennisplyr wrote:
jjunk wrote:I dont know if folks are selling stocks to buy real estate but the general mood in Seattle is that if you want to own a home here you better do it NOW! That leads to people making irrational decisions with their money IMO. People feel a pressure to put in high offers and many times are way over asking price. Real estate agents are also pricing things in a way which starts bidding wars, driving prices even higher. A coworker of mine recently sold their home in 3 days for 100k over asking, another got 85k over asking in 24hrs. That feeding frenzy mentality just feeds on itself until it pops.

I know a few who are buying property as investments but I personally have always thought that its a poor choice. Sure, right now you'd do better than the market but wait til that bubble bursts and your illiquid asset is just sitting there with a big mortgage and property tax payment waiting for you. No thanks, I'll continue to rent.
In 1981 my wife and I bought a house putting half down on it. Fast forward to today, our home has gone up five-fold, no mortgage. Now I can do/live basically wherever I want. For this guy, I made an extremely wise "investment" in my home. Had I rented for all this years, I am positive I would not be in this favorable position. Prices/mortgage rates were very high then but I made a sensible purchase for us, saved and watched what we spent over the years. Life is good :beer
Ah, but with 1981 double-digit interest rates, housing prices were being kept in check. You have benefitted from an absolute 10+% decline in interest rates which left a great deal of room for price appreciation while still keeping houses affordable. (I also was a buyer in the early 80s and refinancing the mortgage a few times as interest rates headed down was very good for the bottom line :moneybag ).

The same cannot be said for the current environment. I'm with jjunk - people are behaving irrationally. They have very short memories when it comes to real estate bubbles.

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Re: Crazy housing market

Post by goodenyou » Tue Jun 07, 2016 5:08 pm

Crazy housing markets also correlate with crazy property tax markets.
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Re: Crazy housing market

Post by roymeo » Tue Jun 07, 2016 5:39 pm

The entire SF Bay area is like this, too. There was just a recent article about Deep East Oakland being the only place you can find something under 500K.

http://www.eastbaytimes.com/breaking-ne ... s-bay-area

I had been looking in SF but kept being outbid $70-100K by people with a briefcase of cash (rubles or remnibi?) or no contingencies. Or both. When the apartment across the hall from us (in SF, old canning factory lofts, no rent-control) was listed at $950/month more than we were paying we jumped ship.
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stratton
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Re: Crazy housing market

Post by stratton » Wed Jun 08, 2016 1:42 am

Latest NW Multiple Listing report

http://seattlebubble.com/blog/2016/06/0 ... time-high/

The inventory is waaaay low. Sales haven't hit the boom number of units.

Paul
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DoubleClick
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Re: Crazy housing market

Post by DoubleClick » Wed Jun 08, 2016 2:06 am

Where are the buyers coming from if there is all this demand? Either the population increased, which is not true, or buyers are coming from some other geographical area, which should be going through a corresponding price decrease. Even if the other market is a place like the Bay Area, shouldn't that at least reduce the price pressure there a little bit?

Has anyone figured out if this is the case? Or is it something else that I'm missing?

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Re: Crazy housing market

Post by letsgobobby » Wed Jun 08, 2016 2:18 am

DoubleClick wrote:Where are the buyers coming from if there is all this demand? Either the population increased, which is not true, or buyers are coming from some other geographical area, which should be going through a corresponding price decrease. Even if the other market is a place like the Bay Area, shouldn't that at least reduce the price pressure there a little bit?

Has anyone figured out if this is the case? Or is it something else that I'm missing?
wrong: population is growing rapidly:

http://blogs.seattletimes.com/fyi-guy/2 ... n-the-u-s/

"Last year, Seattle grew faster than any other major American city, according to population estimates released Thursday by the Census Bureau."

That was for 2013.

This year:

http://www.seattletimes.com/seattle-new ... us-cities/

"Seattle, for the third consecutive year, is among the Top 5 big cities for population growth, according to data released Thursday by the U.S. Census Bureau."

This is what outsiders don't understand. The demand in Seattle is a byproduct of very high population growth and very high economic growth/job growth. There are many people moving there and a lot of them are for good, high paying jobs. Thus demand is outstripping supply and prices are rising rapidly while inventory stays very low.

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Re: Crazy housing market

Post by DoubleClick » Wed Jun 08, 2016 2:25 am

letsgobobby wrote:The demand in Seattle is a byproduct of very high population growth and very high economic growth/job growth. There are many people moving there and a lot of them are for good, high paying jobs. Thus demand is outstripping supply and prices are rising rapidly while inventory stays very low.
That's very interesting, good to know, thanks for this data.

But if only a part of the demand is because of growing population, are there new houses being built in Seattle? Is the city geographically constrained or constrained otherwise? If not, how is the new housing growth balancing the population growth?

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Re: Crazy housing market

Post by batpot » Wed Jun 08, 2016 4:40 pm

DoubleClick wrote:
letsgobobby wrote:The demand in Seattle is a byproduct of very high population growth and very high economic growth/job growth. There are many people moving there and a lot of them are for good, high paying jobs. Thus demand is outstripping supply and prices are rising rapidly while inventory stays very low.
That's very interesting, good to know, thanks for this data.

But if only a part of the demand is because of growing population, are there new houses being built in Seattle? Is the city geographically constrained or constrained otherwise? If not, how is the new housing growth balancing the population growth?
yes, very geographically constrained. As stratton has stated multiple times in this thread, there's not enough supply to meet the demand...so naturally prices are going up.

The answer in many neighborhoods (e.g. Ballard) is developers are buying a property, only to tear it down, and build multiple townhouses.
Luckily my neighborhood is zoned to 5000 sqft minimum lots (it's one of the reasons we picked it), but I'm not totally confident that it won't at some point get re-zoned.

EddyB
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Re: Crazy housing market

Post by EddyB » Wed Jun 08, 2016 5:35 pm

goodenyou wrote:Crazy housing markets also correlate with crazy property tax markets.
Does the size of the property base actually increase the total tax revenue collected where you live, or is the total budget fixed and then that amount is allocated across properties on the basis of relative values? Sure, at the time of a relative increase in assessment (e.g., if the re-assessment is triggered by the home changing hands) might temporarily increase your share of the total tax burden, but (California aside), won't all the other houses be re-assessed periodically as well? If you put on an addition or do something else that permanently increases the relative value of your home, then that would have a permanent effect on your portion of the tax burden, of course.

quantAndHold
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Re: Crazy housing market

Post by quantAndHold » Wed Jun 08, 2016 5:55 pm

DoubleClick wrote:
letsgobobby wrote:The demand in Seattle is a byproduct of very high population growth and very high economic growth/job growth. There are many people moving there and a lot of them are for good, high paying jobs. Thus demand is outstripping supply and prices are rising rapidly while inventory stays very low.
That's very interesting, good to know, thanks for this data.

But if only a part of the demand is because of growing population, are there new houses being built in Seattle? Is the city geographically constrained or constrained otherwise? If not, how is the new housing growth balancing the population growth?
There are loads of places being built. The whole city is one big construction site. But there are so many people coming that the building is not keeping up with population growth. The city is surrounded by water (downtown is only 3 1/2 miles wide from shore to shore), and commutes get long very quickly. So places with reasonable commutes to job centers are a precious commodity.

Hikes_With_Dogs
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Re: Crazy housing market

Post by Hikes_With_Dogs » Wed Jun 08, 2016 6:05 pm

335k over asking price:
http://seattle.curbed.com/2016/5/9/1164 ... king-price


It makes me want to cash in my gains and move to the East side of the state!

But as described, there's lots of data showing this trend will continue at least for a few more years.

snowman
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Re: Crazy housing market

Post by snowman » Wed Jun 08, 2016 6:19 pm

DoubleClick wrote:
letsgobobby wrote:The demand in Seattle is a byproduct of very high population growth and very high economic growth/job growth. There are many people moving there and a lot of them are for good, high paying jobs. Thus demand is outstripping supply and prices are rising rapidly while inventory stays very low.
That's very interesting, good to know, thanks for this data.

But if only a part of the demand is because of growing population, are there new houses being built in Seattle? Is the city geographically constrained or constrained otherwise? If not, how is the new housing growth balancing the population growth?
The same thing is happening in Denver. Where I live, it's almost like a giant construction site - new subdivisions going up everywhere, major highway getting widened, new roads being built, etc. One would think there are plenty new homes being built to meet the demand - not so. According to experts (I am not one of them, I just read the articles), a healthy inventory is at least 15K homes for sale (30K homes were for sale in 2007). Current inventory is 5K homes, a historically low number.

I tend to agree with other posters in that current trend will continue for a few more years, as these real estate cycles tend to be fairly long. Eventually, supply will meet demand. Here is a map of the US showing where people are moving from and where they are moving to. It's pretty interesting, though not really surprising.

https://www.washingtonpost.com/news/won ... hat-arent/

Gnirk
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Re: Crazy housing market

Post by Gnirk » Wed Jun 08, 2016 7:25 pm

The housing market in Seattle is just plain crazy! House prices, condo prices, and rents have skyrocketed, and continue to do so. My 48 yo single daughter has been trying to buy a condo in Seattle for the past year,( conventional financing and 20-25% down) and in each case offered up to $50K over asking price, and has lost due to either a cash sale by an investor who plans to rent the property, or a buyer who will offer cash above appraisal to the seller. In three cases, her offer was the highest by $5,000-$10,000. She is well qualified, and always has a pre-approval letter from her lender.

The 'burbs are not an option for her--she doesn't drive, so needs to be near a bus-line and walking distance to amenities, such as a grocery store, etc. It's impossible to compete now that all the high-techs and their highly-paid employees are moving into the area.

letsgobobby
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Re: Crazy housing market

Post by letsgobobby » Thu Jun 09, 2016 1:52 pm

The 'burbs are not an option for her--she doesn't drive, so needs to be near a bus-line and walking distance to amenities, such as a grocery store, etc.
That is another factor - a surprisingly large number of young people (under 30) neither drive nor want to drive; getting a driver's license is not the rite of passage it once was, and owning a car does not have the same allure or status as it did 1 or 2 generations ago. Condensed urban living is the in thing, and it's driving costs up.

The WSJ wrote on just this today:

Influx of Younger, Wealthier Residents Transforms U.S. Cities

http://www.wsj.com/articles/influx-of-y ... 1465492762

The Baurs are part of a wave of young, educated, relatively high-earning workers flocking to many American cities at a rate not seen since the U.S. Census Bureau began tracking such data in the 1970s. The shift began last decade and accelerated during the housing bust.

The trend is boosting urban housing values. City rents nationwide are now nearly $1,730 a month on average, compared with just under $1,250 for their suburban counterparts, according to CoStar Group Inc. The average urban home is worth 2% more than the average suburban home, according to real-estate information company Zillow. In 2010, suburban homes were worth 4% more.


And when you consider that since the Great Recession, net job growth in small counties has been zero or even negative, it means that the largest cities and counties in America (population > 1,000,000) have been responsible for 100% of the net economic growth in the last decade. By definition this means housing prices there will skyrocket, because that's not just where people want to work (for lifestyle reasons); it's where they have to work (for economic reasons):

http://www.dailyherald.com/article/2016 ... 160609612/

Counties with more than 1 million people added jobs twice as fast as the least-populated counties from 2010 through 2014. The largest counties continued to have a net increase of new businesses, while there was a net decrease of new businesses in the average low-population county.

fanmail
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Re: Crazy housing market

Post by fanmail » Thu Jun 09, 2016 2:22 pm

DoubleClick wrote:
letsgobobby wrote:The demand in Seattle is a byproduct of very high population growth and very high economic growth/job growth. There are many people moving there and a lot of them are for good, high paying jobs. Thus demand is outstripping supply and prices are rising rapidly while inventory stays very low.
That's very interesting, good to know, thanks for this data.

But if only a part of the demand is because of growing population, are there new houses being built in Seattle? Is the city geographically constrained or constrained otherwise? If not, how is the new housing growth balancing the population growth?
It is adjacent to several bodies of water, so yes.

DoubleClick
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Re: Crazy housing market

Post by DoubleClick » Thu Jun 09, 2016 2:30 pm

fanmail wrote:It is adjacent to several bodies of water, so yes.
The city of Seattle is, but the greater Seattle area isn't, from what I can tell. Are the prices increasing at significantly different rates in the city vs. the suburbs?

letsgobobby
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Re: Crazy housing market

Post by letsgobobby » Thu Jun 09, 2016 2:39 pm

DoubleClick wrote:
fanmail wrote:It is adjacent to several bodies of water, so yes.
The city of Seattle is, but the greater Seattle area isn't, from what I can tell. Are the prices increasing at significantly different rates in the city vs. the suburbs?
yes, they are - but especially during frothy periods, this effect is contagious, as potential buyers are forced to take on longer commutes in nearby suburbs, as a matter of affordability.

Seattle greater is somewhat constricted - there are mountains to the east, and the entire Puget Sound area is already pretty built up. Like a lot of mature American cities, especially in the west, the suburbs offering reasonable commutes are already built out. If your job is in the city proper, there's only so far you can go (stories of 2 hour one way commutes from the Central Valley to the Bay Area during the last boom notwithstanding).

pmirsky
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Re: Crazy housing market

Post by pmirsky » Thu Jun 09, 2016 6:12 pm

We first moved to eastside King county (that's the county that includes Seattle) around 1990. Within 10 years we felt the local area had been thoroughly ruined by development and traffic. Sold the house (for about 2.5X what we paid) in 2006 and moved out of state, but have kept close track of the RE market back there ever since (due to family living there). 10 years later the development/traffic problems must be even worse, but this latest bubble 2.0 is even more insane than the 2006/2007 version. IMO it's a combination of bubble psychology among inexperienced buyers (usually younger "tech" workers) moving to the area, the ridiculously low (one might say non-existent) interest rates and down-payment requirements, Californication, low inventory, and a hyper-aggressive RE industry there (probably like CA -- our RE agent when we sold was a nasty piece of work). Once some of the current over-hyped internet start-up craziness goes away, things may revert. There are many other negatives that are currently being ignored: high crime rates in almost all of the communites around Puget Sound (including the penninsula), insane traffic, depressing weather (rain and "concrete sky") for 8 months a year, a coast that's not user-friendly (too cold even in the summer), the most dangerous volcano in N America plus the expected giant tsunami - these things make the recent RE run-up even more astounding. Regarding inventory - a lot of it was built in the 70's to mid-80's, and guess what, houses don't hold up that well after they've been continuously rained on for 30+ years. Newer developments tend to be on tiny lots.

Also, since this is a financial forum, anything thinking of starting a small business there should make sure to find out about the B&O tax.

PNW1
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Re: Crazy housing market

Post by PNW1 » Thu Jun 09, 2016 6:41 pm

I was born and raised in King County (which Seattle is the county seat of) and have worked and lived in the city of Seattle for most of the past decade. I actually love the overcast and cold climate, but at this point the only thing keeping me here is the fact that my friends and family live here. It seems like it takes twice as long to get anywhere as it did fifteen years ago. I'm frugal and save about 50% of my upper middle class salary, but I cannot imagine buying a home here at the prices that they're currently selling at. Anything within what I consider reasonable commuting distance costs something like seven times the average household income for the city.

Okay, so this is mostly me complaining, and that's not useful. The point I was trying to make is that this feels really bubbly to me. If homes here are too expensive for a person who makes approximately twice the average household income, and who has deep ties to the area, then who aren't they too expensive for? Is everyone just assuming that interest rates will stay incredibly low forever? That the tech industry won't hit a bump? Am I missing something that makes the situation here rational?

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roymeo
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Re: Crazy housing market

Post by roymeo » Thu Jun 09, 2016 6:50 pm

My highschool economics teacher (and coach) told the class that if we learned nothing else for the year, we had to learn this formula:

Unlimited Wants + Limited Resources = Scarcity.

Wants can change (tulipmania) but changing the resources available is a much slower thing. And you have to change the wants pretty radically at this point.
The sewer system is a form of welfare state. | -- "Libra", Don DeLillo

Whakamole
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Re: Crazy housing market

Post by Whakamole » Thu Jun 09, 2016 10:17 pm

pmirsky wrote: There are many other negatives that are currently being ignored: high crime rates in almost all of the communites around Puget Sound (including the penninsula), insane traffic, depressing weather (rain and "concrete sky") for 8 months a year, a coast that's not user-friendly (too cold even in the summer), the most dangerous volcano in N America plus the expected giant tsunami - these things make the recent RE run-up even more astounding.
Also earthquakes. A big part of the area now under development in Seattle is being built on fill, which will undergo liquefaction when the big one comes.

At least there is no income tax.

letsgobobby
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Re: Crazy housing market

Post by letsgobobby » Thu Jun 09, 2016 11:41 pm

Those arguing that Seattle is a fundamentally unattractive place to live make me laugh. Obviously, the facts on the ground belie your own personal feelings. Inordinate numbers are moving there, and apparently want to live there. QED.

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unclescrooge
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Re: Crazy housing market

Post by unclescrooge » Fri Jun 10, 2016 12:15 am

jebmke wrote:
rgs92 wrote:Didn't this just happen in 2007?
In 2007 people were buying houses with mortgages they could not afford, not cash.
Also, we've had almost a decade of inflation. I don't see people adjusting prices for inflation.

Here's an investing look at that very topic.
http://www.realclearmarkets.com/article ... 02202.html

That being said, housing is local, and Seattle could be in a bubble..Although if you look north to Vancouver, you'll see the same homes are even more expensive.

quantAndHold
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Re: Crazy housing market

Post by quantAndHold » Fri Jun 10, 2016 12:59 am

letsgobobby wrote:Those arguing that Seattle is a fundamentally unattractive place to live make me laugh. Obviously, the facts on the ground belie your own personal feelings. Inordinate numbers are moving there, and apparently want to live there. QED.
I had to laugh at the idea of the high crime rate (Seattle has one of the lowest big city crime rates in the country) and the houses all being bought by the unsophisticated rubes in the tech industry (who are young, but are very smart and understand very well how numbers work). I don't like the drizzle or the traffic, but all in all its a pretty decent place to live with great job opportunities.

I live and work right in the belly of the beast, and I don't see people buying houses they can't afford. I see a lot of people who make a lot of money chasing a scarce resource, and paying for their purchases with loans that have very low interest rates. Also, housing prices are still cheaper than in any of the California cities, and a lot of the home buyers in Seattle are bringing California home equity to the table in their negotiations.

The other thing is that it's also expensive to rent. Home buyers are paying a premium over renting, but not a big one.

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