Snohomish Co. loses a little ground, King Co. very slightly up

Combined Condo/ SFD home prices in King County were 1.38 percent higher than a year ago, and Snohomish County prices were off by 6.93% from a year ago. Volume (number of houses sold) is off by about 1/3 for both counties.

The Seattle P.I. says, "in Washington, 2.35 percent of mortgages were at least 30 days past due in the first quarter, up from 2.25 percent in the prior quarter and 1.78 percent in the first quarter of 2007, according to the Wall Street Journal.......The national rate was 4.46 percent in the first quarter, up from 3.98 percent in the prior quarter and 2.92 percent in the first quarter of 2007."

I'd say we are still doing quite well compared to the rest of the country, and not so bad even without that added perspective. 'Bubbleheads,' have little to cheer about--there is still no sign of a tunnel at the end of the light. A breather in home prices hardly constitutes the huge crash the Seattle Bubble site's devotees and author have so confidently predicted for so long.

They keep trying to justify gloom, and as usual, they find lots to be gloomy about, but somehow, no actual home price crash in our area manifests itself. They remind me of the cartoon I saw somewhere long ago where two buzzards having a slow spell converse. One says to the other, "Patience my a--, I'm gonna kill something!" Well, good luck with that, 'Bubbleheads.'

Another uneventful month passes in Seattle real estate

There is very little change in prices compared to a year ago, with King County Condo/Residential prices up .5%, and Snohomish Condo/Residential prices down about 1 1/2%. Volume is down by about 1/3, perhaps implying that buyers are still spooked about the market, and sellers aren't budging, or perhaps it is just too hard for many buyers to get financing with the mortgage markets in turmoil.

Pierce County, which I don't usualy cover, is down by almost -8%, and Kitsap, which is just across the Tacoma Narrows Bridge from Pierce, is down by even more, at -11+%. Volumes are down in both counties, as well. (All figures are for combined SFD / Condo closed sales.)

Stable prices

They say no news is good news. There is very little change in prices compared to a year ago, with King County Condo/Residential prices up 4%, and Snohomish Condo/Residential prices down about 1 1/2%. Volume is up abut 25% in King County, and about 10% in Snohomish Co. In the stock market, upticks in volume are said to confirm prices, meaning that a lot of people consider them reasonable, so I'd say that this is a pretty stable market.

Inflation and home prices

Do home prices increase as the dollar declines in value? In the long run, of course they do. Inflation is simply the decline in the value of a currency compared to the prices paid for goods and services. Check out these charts, and see if you see any correlation:

Increase in home prices

Decline in value of dollar (Inflation)



Why do I mention this? The way the Fed is slashing interest rates reminds me of old Western movies in which people on a train fleeing an enemy chop up and burn the furniture in the passsenger cars to supply the steam engine with fuel. I can't think of a surer way to increase inflation.

"Reality" is unreal

Apparently, recent reports regarding foreclosures in our area were greatly exaggerated because the reporting company was counting a number of filings twice!

See: From the Seattle P.I.

The Left Hand Knoweth Not the Right-

I was reading Money on the Cnn website today. I read two current articles on that site. One predicted run-away inflation. Read the 'Inflation article,'

The other article predicted a decline in housing prices Read the 'Housing prices will decline article.'

The problem with this is that these ideas are diametrically opposed. I was 30 years old in 1980, and I saw inflation hit 18%. This means that the dollar declines in value at the rate of 18% a year (if it continues for a year,) and that conversely, the prices of things, such as gold and real estate, go up at 18% a year. When this happens, your mortgage is getting paid off at the rate of not only whatever you pay over the interest rate when you make a house payment, but it also gets paid off at the rate of inflation. So, if you pay one percent over your interest, and the interest rate soars to 18%, then you get to walk in 7 League Boots--your mortgage gets paid off at the rate of 19%.

Meanwhile, any nickles, dimes, and quarters you have stashed away are going down in value at the rate of 18% a year. What do you think people do when they realize this is happening? Save more, or buy stuff like gold and houses? What would you do? Remember, this isn't just a theory--we baby-boomers watched this happen.

I sold my bonds in 1980 (bonds = money) and bought stock (stock = things.) Meanwhile, the pundits at Business Week declared that the stock market was dead. Yes, at the same time that inflation was hitting 18%. The teaser on the cover was, "Is the stock market dead?" and you had to read the article to find the pundit declaring that the answer was "Yes." Business Week has a spread on their website featuring their covers through the decades. I notice they didn't feature that one in the article, but I remember it as though it were yesterday.

Readers may view a description of this Business Week cover, and an interesting spin on it here: Read "Contrarian Indicators" article

Foreclosures: The bad news is the good news

In psychology, the context and attribution that you give a fact, which presents it in a positive or negative light, is called the "frame." This Seattle P.I. article gives both the positive and negative frames for information about recent filings for mortgage foreclosures in our area. I wish that all articles about real estate were equally balanced.

The article rather alarmingly informs us that foreclosure filings are up by 93% from a year ago, and 127% from a month ago. The article then notes that King County foreclosures filings are proceeding at the rate of one per 1,033 homes, and that the national average is one per 617 homes. In Nevada, it's one per 152 households. In Stockton, one per 99 households. Sounds pretty good, right?

You can have it either way, depending on the context you choose to put the information in. The writer mentions our good economy without mentioning just how good it is. I heard on the news recently that our state's unemployment is the lowest that it has ever been, since they started keeping employment statistics. That is pretty darned good.

Read Article

Bubble-believers sight a tunnel at the end of the light

A reader posted a comment in response to my last post, prompting me to check out the statistics he cited. Seattle resale residences have indeed dropped almost 10% since last summer. I don't normally pay much attention to any statistics but YOY, because YOY statistics correct for seasonal variations. (The opposite of what the poster stated, which left me wondering if that was what he really meant.) As I stated in my last post, YOY home prices were flat for our area in November. (I primarily follow resale, or existing, house prices, since that what I mostly deal with, and that is the figure which I quote unless I state otherwise.)

I was asked to give a CMA (a market price valuation) for a home in north Everett yesterday. In order to correct my comps (the sale prices of similar recently sold properties nearby,) I checked the movement of the market in the Everett area since last summer, and found that the median home in Everett was down by about 5% since last summer. At any rate, the steady upward climb of home prices in our area has stopped at last.

This brought a question to mind that I have asked a number of times, but which no poster has responded to, which is, "What percentage price decline is necessary to validate the 'Bubble' theory?" So, I surfed on over to Seattlebubble.com to see when "the Tim," started his site. There were some discrepancies, but it seemed that he started making regular posts in the summer of 2005. So, I looked up the statistics for median home prices in June of 2005. The median home price of a resale house (not including condos)at that time was $375,000. The median home price this November for houses in King County was $435,000, or 14% more than it was in June of 2005.

If "the Tim" was predicting a crash in home prices then, shouldn't that imply that he expected a significant decline from $375,000? Let's say that he was suggesting a decline of 1/3 from that figure. That would be $247,000 for a median home in King County, or a decline of 43% from the current price.

Well, dear readers, do any of you anticipate this? I certainly don't. I would be quite surprised if YOY prices declined more than 15% or so, absent a financial catastrophe or a large exodus of people from our area.