Next Housing Market to Crash? Seattle

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There is no doubt that the Seattle/Bellevue area has an affordability problem in regard to housing. The law of supply and demand was tinkered with by the state politicians when they instituted the "Growth Management Act" back in the early 90's. The result of that law was a strangle hold on the supply of housing, which has driven the prices up and out of reach for most folks. In the meantime, the demand side of the equation has kept growing and unmet with any affordable supply. The pricing adjustments are already underway, but due to the lack of choices in the low supply, there will be no substantial large percentage fall back in prices. I have been in the business for 43 years as a lender, appraiser, developer, and broker and am here to tell you that the "tipping point" for the pricing to meet equilibrium is more like a 10 to 15% adjustment downward from the current prices than any other dooms day scenario. Been there in the "Boeing Crash", the REIT crash, Paul Volcker crash, the S&L crash, the Dot.com crash, and this one. Nuttun' new under the sun Chicken Little

John Snider of WA 5:18PM June 07, 2008

Interesting... seems to confirm my suspicions. Although I see my sister's neighborhood in Tacoma is blue... one of the few blue areas I see (besides the port and apparently UPS). But yeah, lots of orange and red all over.
The greater Puget Sound region IS special, just not in this way. We'll feel the effects of a national trend simply because everything is so interdependent today.
No city is an island.

Thorax O'Tool of WA 2:40PM June 07, 2008

Go to http://hotpads.com and zoom in on the Seattle area, then click the foreclosure tab. It's a sea of red, just like Las Vegas and Phoenix.
Don't fool yourself, that Seattle is somehow different and the laws of economics don't apply there.
If people can't afford to buy, and easy credit is gone, prices will fall--BIG TIME!!!

booch221 of AK 1:16PM June 07, 2008

@ Rick Rose: "Talk and write after you do your research."
Garbage in; garbage out....
"According to a recent alert sent by the Anchorage-based listing service to its members, the federal government is putting a "high priority" on investigating whether people within the real estate industry are violating a consumer protection law Congress enacted in 1974 to prevent undisclosed kickbacks and the flow of bad information to borrowers"
http://www.adn.com/money/story/429276.html
The article implies this is not just an Alaska story but it's happening nationwide.

booch221 of AK 12:58PM June 07, 2008

Anyone see the front page of the P-I this morning?House costs are down 2.7% and sales are down 46% for May. The blame it all on negative press ;)
read it here:
http://seattlepi.nwsource.com/local/365949_housing06.html

Thorax O'Tool of WA 7:49PM June 06, 2008

I believe that comparing Seattle to Phoenix and Las Vegas purely based on inventory and sales declines does not make any sense for a couple of reasons:
1) Seattle has one of the most educated workforces in the country (not the highest income)
2) Seattle doesn't have anywhere near the same number of option arms, foreclosure rates, and so on as those cities
3) The city of Seattle itself has the property that is geographically bounded on the West by the Puget Sound and on the east by Lake Washington which puts upward pressure on homes that are in between the two and not too far north or south that you have long commute times. Both Phoenix and Las Vegas are relatively unbounded.
4) There is a mass exodus of wealthy people selling their primary homes in California and replacing them with primary homes in Seattle, much more so than Las Vegas (not sure about Phoenix)
5) If you take the ratio of Seattle's size to the strength of its high tech workforce you will find that ratio is higher than almost anywhere else in the country and definitely higher than Las Vegas and Phoenix. This workforce is significant because the hightech industry is more tied into the global economy than other industries so is relatively stable. In addition, the high-tech industry offers very competitive salaries and most high-tech workers can work remotely in other cities if they need to

Scott White of 2:01AM June 05, 2008

Yeah, I'd say I was too young to care the last time prices dropped. My parents remember it in like 1988 or something, I ought to ask them for more info.
I'm not trying to point the finger here, especially at realtors. The housing/economic woes we're facing are part of a much, much bigger set of issues.
After all, as a commission-based salesman, a realtor HAS to sell to keep keep the kids fed. And I don't fault them for that.
The problem I see, is that they simply exacerbate the problem; selling houses whether or not the buyer can truly afford them in a declining market.
Regardless, I have to look at the numbers on the wall. Nation-wide, nearly all markets are suffering, the most inflated are falling hard. I see a glut in homes that are empty and a rise in foreclosures (3 on my Parent's block and one on mine). I see an increase in inflation, food and energy costs. I see no real increase in wages (my own job put a freeze on raises and hiring 12 months ago).
I work in the millwork industry, doors specifically. 85% of my company's sales are new construction.
Well, not any more. We went from full day, night and swing shifts to a half-full day shift. We went from massive OT in 2006 to barely making 40 hrs now. My seniority has saved me thus far, but cannot be relied on forever. Our customers are going out of business (5 already this year, including our former 4th largest) and the big builders like Soundbuilt, DR Horton and Centex are loaded with empty houses. We went from moving 8,000 units per month last summer to just 3500 (We sell something like 95% of our doors in WA and OR... very little outside the NW).
I'm not talking out of my behind here when I say I see the writing on the wall. No one's building cuz no one's buying.
I'm not an expert, nor do I have an MBA or 30 years in real estate. But I do have common sense, math skills, several business classes behind me and firsthand knowledge of the millwork industry. I've seen family and friends get caught up in the subprime crap and foreclosures.
The writing on the wall tells me things HAVE to go down. Bubble pop, and housing is one of those things that we all need, but you can have too much of.
I'm waiting to let prices drop. Sure, Seattle will likely not be as cheap as Olympia, and that's fine. But they certainly can't remain where they are.
If they drop, I score big time. If they don't (slim chance), I lose nothing.
Keep on the sidelines, it's win-win.

Thorax O'Tool of WA 8:45PM June 04, 2008

Hello,
I have to tell you, as an outside observer, who cannot yet afford to buy in the city (Lake Union/Greenlake area), I would be pretty estatic for the prices to drop (assuming my consulting job was safe). However, I will believe it when i see it. I mean I see the numbers, I understand the imbalance, the argument is solid, but this area is weird man, and to say with assurance that you know one way or another is laying a huge claim (and I am talking to the younger generation on here which i am a part of too) when frankly we were probably too young to remember (or care) the last time housing prices dropped in Seattle.
Mark

Marky Mark of WA 6:30PM June 04, 2008

I bought a quadrant house in mill creek (a nice suburb of seattle 20 mi north) for $380 one year ago. It's got 2,200 square feet, and some very nice upgrades. My mortgage is $1,940 per month (30 year fixed), and I put only 5% down.
Prices here may very well go down, but renting in this area a house this size would cost me at least $1700 per month, and I wouldn't be putting anything toward principal. Who knows how much prices will go down, but from where I'm sitting, many of these homes don't have that much room to go down unless interest rates rise. If they do, I'll just hold onto the property and rent it out.

Nabil of WA 6:29PM June 04, 2008

I really like how the only ones contradicting the premise of this article - that Seattle is in / is headed for home price drops - are the real-estate "professionals" who stand to make more money from selling homes and selling them at higher prices.
Additionaly, to anyone laying claim that they've been in the real-estate profession for X number years, so you have better insight than any of the doom/gloom'ers... where you 2 or 3 years ago? How come you didn't see this mess coming? Wouldn't your years of experience given you this foresight? Well, if i didn't give you the foresight then, then why should anyone have reason to believe it gives you the foresight now to say that things will pick up.

nebulous of WA 6:20PM June 04, 2008