NYTimes: Seattle house prices falling faster than in Las Vegas

[evilDonkey]

NYTimes: http://www.nytimes.com/2011/02/14/business/economy/14dip.html?scp=1&sq=Housing%20Market%20Looks%20Sickest%20in%20Cities%20That%20Once%20Seemed%20Immune&st=cse">Housing Market Looks Sickest in Cities That Once Seemed Immune

In the last year, home prices in Seattle had a bigger decline than in Las Vegas. Minneapolis dropped more than Miami, and Atlanta fared worse than Phoenix.

When I go out and talk to people around town, they say, ‘Wow, I thought we were going to have a 12 percent correction and call it a day,’ ” said Stan Humphries, chief economist for the housing site Zillow, which is based in Seattle. “But this thing just keeps on going.”

Megan and Ryan Dortch tried to sell their one-bedroom Eastlake condo for $325,000 two years ago. They rejected an offer of $295,000 as inadequate. A year later, they relisted it for $289,000, then $279,000, which was less than they paid. Without a sale at that price, they could not afford to buy a place big enough for them and their new baby. They have given up on real estate. They are renting out their old apartment at a small loss every month, and living in a rented house. “I don’t expect the market to get better,” said Ms. Dortch, 31, a customer service consultant.

“We would love to have a house,” said Dan Cunningham, a 41-year-old renter. “I have more than enough for a down payment. I’m preapproved for a loan. But I have to have confidence it’s not going to lose another 20 percent.” He plans to wait until he sees prices rising before making any offers.

[Arctic Dave]

1. Seattle was another market with crazy pricing, makes sense it is coming down also.

My wife and I were looking at condos down there but our eyes bulged out at the prices.

[evilDonkey]

3. 3x incomes

A home should cost (give or take) 3 times a families income. Maybe 4 times family income in a special area.

According tohttp://www.city-data.com/city/Seattle-Washington.html">City-Data the median household income in Seattle is $60,843 per year. That means that when the dust finally settles the average middle class home in Seattle will cost around $200,000 +/-. I wouldn't pay more than that.

That assumes family income doesn't continue to fall.

[Arctic Dave]

6. The condos were about twice that. Crazy.

We are not looking for a house, I'm tired of the yard work and all that nonsense. Plus our daughter is out of the house so we don't need all the extra room either.

[freeplessinseattle]

7. I live in Eastlake, lots of condos sprung up in recent years

The big one near my former workspace was originally marketed as condos, ranging from $250,000 to $400,000-and they are right by the freeway so pretty noisy.

Maybe a few months or so after completion they began offering units as rentals rather than condos, and put up a put up a huge sign on the side of the building with letter a few feet big, "Now Renting".

[Salviati]

2. Good.

Housing prices need to come down. It will hurt people in the short term, but we need to get investors, speculators, and flippers out of the housing market.

[evilDonkey]

5. Bingo!

Yup. A home shouldn't be a speculative investment. It should be a place for families to live.

Tight credit requirements and large down payments may look like a burden but they keep home prices affordable and keep out the real estate speculators.

Once the speculators get involved they drive up prices and families end up paying 3x too much for homes they would have lived in anyway.

[Cant trust em]

4. Until we solve the housing market, we will not see mass job creation.

How can we fill a consumer demand hole if 25% of mortgages nationally are underwater? If you're buried under a mountain of debt are you going to go out and buy that new TV, take that vacation to Disney World or go shopping on the weekends?

[Yavin4]

9. We Cannot Solve The Housing Market Until We Have Strong Job Creation

Income and housing prices are tied together.

[Cant trust em]

10. If income and housing prices are tied together, was there a wage boom in the 2000's that I missed?

[Yavin4]

11. No. There Wasn't. That's Why It Crashed.

During the 2000s, people could "buy" homes without having the income to pay for it. Today, banks require potential home buyers to prove their incomes.

The reason why housing prices are falling in places like Seattle is because home owner cannot sell their homes because there are less buyers.

[Cant trust em]

12. Of course. Which proves that income and housing prices aren't always related as you suggest.

The job market turned sour once the housing bubble popped. It didn't happen the other way around. It's not that people lost their jobs and suddenly people's mortgages became more expensive. People had ARMs that reset and they became unable to make their payments. Their disposable incomes go down and the economy begins to contract.

[Yavin4]

14. You're Putting The Horse Before The Cart

Traditionally, mortgages were issued to people who could document their income, had 20% of the purchase price, and good credit. In the 2000s, banks got away from that practice because they foolishly believed that these NINJA mortgage holders could simply sell their houses when they could not afford the spike in their mortgages.

Today, the banks have stopped that practice and now demand that potential home buyers document their income, have that 20%, and have good credit. The only people who will have that are people with good paying jobs. Thus, you cannot fix the housing the market until you fix the job market.

[golfguru]

17. There were 2 reasons for the easy credit 3 years back

1. Houses were inflating every year. So the banker could not care less if you defaulted on mortgage payments. The bank could easily unload the house, in most cases at a good profit.

2. The bank or mortgage broker could sell the mortgage to Fannie Mae or Freddy Mac who bought all those sub-prime mortgages. So why should the mortgage broker care what your credit rating looked like or if you had the ability to pay.

[Yavin4]

18. And That Era Is Over

Today, you have to prove your income, and that means that housing is re-coupled with income. Hence, housing prices will decline until jobs and higher wages return.

[golfguru]

19. You are right on that n/m

[vets74]

20. Big Bubble II (2003-2008) pumped out more than a trillion ZIRP free $$$$$ to the banks

The banks were awash in Zero Interest Rate Policy giveaway.

Thank Greenspan, Bernanke, Bush for all that. Madness, one more madness to add to our Post 9/11 shames.

Simple descriptive/statistical_history economics tells us that housing prices are determined -- for rational interest rate systems -- by a combination of buyer income and buyer net worth. No mystery why SeaTac is seeing falling prices:

-- Incomes are flat. In fact, median income has declined

-- Wealth for Middle Class families has declined significantly

Here's a simple graph from Pew:



Hell, kiddos, everybody should be seeing declines. The banks are piling houses into inventory, themselves, because they are terrified that selling this "overhang" inventory will cause the whole market to collapse.

Btw: seeing a one-time collapse would be a good thing. Despite the shocks.

Clear off the uncertainty. Clear off the uninhabited houses around the country. Clear off the bizarre betting tactics of the bankers. (They're outright bad at these Black Swan betting problems.)

After the collapse we would see a return of the new house construction industry. That means 2% to 3% rise to employment -- all at lower price levels, of course. Why anybody sensible would try to maintain the Big Bubble fantasy prices is beyond me. These fantasies do not match the income/wealth historical ratios -- that's why housing prices surely have to slide back to late-1990s levels.

[Yavin4]

22. Check Out My Post on DU From 2003 re Greenspan and Interest Rates

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=104x945984

[Cant trust em]

23. You're not asking the question of why businesses create jobs

If they don't see a market that has a foundation for growth, they don't create jobs. They see all of the economic indicators that are topsy-turvy and the negative consumer sentiment. When the believe that expanding and hiring new positions will bring them more profits, then they'll create jobs. But when they read stories like these that say that the real estate markets are still collapsing it's just another indicator that tells them to hold off. People whose homes are underwater and getting even deeper are not increasing their spending.

Secondly, the problem with a lack of homebuying is not just because people don't have jobs, but that prices still have room to fall. Imagine if you were in a position to buy a home right now. Would you do it now or wait a year since you expect the market to continue to deflate? This article predicts that homes will still decrease 5-7% in the next year. We're not going to see the market begin to expand until we hit the bottom.

[formercia]

8. When the Music stops, someone gets left without a Chair.

The "American Dream" is the biggest piece of propaganda bullshit ever perpetrated on the American Public.

[ixion]

13. Housing prices will settle when they get back to real market value

they're getting closer, but they're not there yet.

[vets74]

21. ... when they match historical ratios to income-plus-wealth measures.

The specific ratios vary with housing markets, allowing for variation across geography, income distribution, housing stock factors, etc.

But income drives everything.

I'd bet on housing prices going to 15 years ago, adjusted upward to reflect the skosh of increase incomes.

[ixion]

24. yeah, somewhere between 10-15 years back

[bemildred]

15. Bubbles pop. If you like bubbles, you better like pops. nt

[Warpy]

16. Depends on how long the measuring period is

My dad's house in Florida is now worth 1/3 of what I sold it for in 2006 and I sold it slightly less than 10% under the comps.

Most of the real plunge has taken place since the fall of 2007 in the formerly "hot" areas. Areas like Seattle and Miami are just now having their serious price drops.