Sat 29 Apr 2006
Seattle Bubble decided to aim a few barbs at Rain City Guide today about an optimistic article they published about the Seattle real estate market. Seattle Bubble’s take is that we’re on the verge of a huge real estate crash and when the bubble bursts, we’re all screwed. (They also call RCG a blog “by realtors, for realtors” but I just looked at the contributor list and saw only one Realtor out of 12 regular writers, the rest being mortage bankers, agents, lawyers and techies…. And I must say, many of the entries and comments I’ve read there appear to be anti-National Association of Realtors or at least, anti-NAR policies.)
Though I concede that we could be in for a market correction or a slowdown in housing sales and prices, I disagree that it will be of the mammoth proportions that many Bubble devotees believe it will be.
Everyone needs a home, and no matter what the value is, no one will lose money if they don’t sell it. Real estate has always been a buy-and-hold investment and if you’re a flipper, then understand the risks of that….
Seattle P.I. Real Estate Professionals
Statistical Analysis Eases Bubble Talk, Shows Rents Growing
John Cook’s Venture Blog discusses a general internet bubble on his new Bubble Meter.
May 1st, 2006 at 11:53 am
Sheesh, talk about getting semantic… I was using “realtor” in the sense of “any real estate professional” — the meaning that most people outside of the profession understand, despite the best efforts of the National Association of Realtors. I’m well aware that a “Realtor” is technically only someone who is a member of NAR, but I’m also aware that a band-aid is technically only a product made by Johnson & Johnson. “By Realtors, For Realtors” is a lot more catchy than “By Real Estate Agents, Real Estate Lawyers, and Mortgage Brokers, For Real Estate Agents, Real Estate Lawyers, and Mortgage Brokers” — a description that would have technically described 9/12 of RCG contributors, and also been completely lacking in wit.
Also, what would you consider to be a slowdown of “mammoth proportions”? Some commenters on my blog are predicting an 80% drop, or a return to mid-1990’s prices. I defintely think that’s a highly unlikely scenario, but I wouldn’t be surprised to see a 25% drop from today’s prices.
May 1st, 2006 at 1:51 pm
Sometimes I think if I didn’t quibble, I wouldn’t have much to say!
Tim, you’re obviously frustrated and frightened by the current real estate situation and you’re getting sick of living in a garage.
Have faith in your talents to stay employed, bite the bullet, get a “0″-down 5-year ARM and get in the game.
You won’t regret it. It may cost you more in the long run to stay out. You and your wife are both college graduates and I’m assuming, employed. You’re over-analyzing, worrying and thinking too much about it. Anyway, with a “0″ down, interest-only loan, what do you care if prices drop? If you lose your job and you lose the house, you’ll have no equity, right? So, by your estimation, nothing to lose.
Oh ye of little faith! This is America! As Scarlet’s father said in Gone With the Wind: “Land, Katie Scarlet! It’s the only thing that matters!
May 1st, 2006 at 2:33 pm
1 - I am frustrated, but definitely not “frightened” by the current RE market. What do I have to be frightened about, since I don’t have a horse in the race?
2 - My current living situation is just fine, thank you. I’m certainly not “getting sick” of free rent. The building is nicer than many area apartments, plus we have a yard.
3 - I have plenty of faith in my talents to stay employed. I fail to see what that has to do with getting into a risky loan.
4 - “You won’t regret it.” You don’t know that. You can’t know that, and it’s irresponsible for you to make that kind of guarantee.
Picture this completely plausible scenario:
I “bit the bullet” with a zero-down, 5-year ARM on a $350,000 house. 5 years from now, RE has fallen 25%, and my house is now worth just $262,500, losing $87,500 in value when I’ve only paid maybe $25-50,000 in principle. Rates have gone up from 5% to 9%, and suddenly my payments will jump 30%. Refinancing wouldn’t be an option, since the outstanding balance of the loan exceeds the value of the house.
That’s not fear, that’s a rational assessment of the possibilities. If we could afford a nice, decent house with a traditional 20% down, fixed-rate mortgage, we would consider buying right now, since we would be happy to ride out the market for 10-20 years in such a house. What we are NOT willing to do is overextend ourselves to purchase a sub-standard dwelling that may very likely lose value in the near future.
It’s not an issue of faith, it’s an issue of reality.
May 1st, 2006 at 2:34 pm
Oh, and:
5 - You didn’t answer my question: “Also, what would you consider to be a slowdown of “mammoth proportions”?”
May 2nd, 2006 at 8:37 am
Too funny, “you won’t regret it”
You know what happens if you lose your home in a foreclosure and the bank resell’s it for less then what you paid? YOU are charged the difference as income by the IRS. So you will regret it.
Good Luck.
May 2nd, 2006 at 5:39 pm
Ok, let me think. “Mammoth Proportions”? 10%? That would be a lot. I’d be bummed out if prices went down 10% or more…..
One way to insulate yourself from this is to buy an older home that has cosmetic challenges. You know, weird paint colors, forlorn landscaping, that kind of thing. Make sure you get a “good deal” on it when you purchase, make improvements as you go along, live long and prosper, yadda, yadda, yadda….. when you finally sell, make a tidy profit and use that equity to buy a better/bigger house down the road.
I personally do not know anyone who has ever lost money in real estate. I know they’re out there, as I read the stories. I’m just saying that, in my 20+ years in the real estate business here in Seattle, I don’t know anyone who lost money when they sold their house.
September 1st, 2006 at 9:45 am
Keep up the great work on your blog. Best wishes WaltDe