Excerpts from My Blog. Gene Quinney The Real Estate Pundit. September 2006
Panic Not My Puget Sound Neighbors. Rejoice.
The resilience of the Pacific Northwest housing market is a much desired commodity among the panic stricken in other large metropolitan areas whose so called "housing bubble" has began to deflate, much to the joy of alarmists whose historic prophecies of doom and gloom echo in cyber space seeking shelter on computer screens of anti-growth and wealth be darned nay-sayers...But here's the simple truth. Some areas are realizing a decline, but NOT the down fall of civilization as we know it like some of the media have portrayed it. Mortgage interest rates for instance are and will remain historically low. Housing prices at their current level could take quite a hit and still remain a good investment historical speaking.
It's all relevant. A high price to you, may not be a high price to your neighbor. The cyber space grumblings are probably from folks who, for whatever reason, be it economic or emotional detachment (not wanting to pay what the market dictates because they THINK the prices are too high) have been priced out of the housing market so they hope for a market decline to bring prices down to what THEY "think" is a fair price or one that they can afford. Unfortunately we all might suffer if the doom and gloomers have it their way.
My advice to everyone is to remain calm. We around the Puget Sound region have no reason to be influenced by the declining markets in California or Arizona, or the East Coast or Mid West. Our local economy is strong. Unemployment is low and spirits should be high just like the prices. Just kidding...About that last part.
The long-feared housing bust has arrived. Nationally speaking, anyway. If history is any indication, King County may escape it, according to a Seattle Times analysis of single-family-home prices. It shows that appreciation rates have risen and fallen, sometimes precipitously. But not once since 1985 through recession years, interest-rate spikes, wars and employment downturns has the countywide median price of a single-family home fallen, although it's come close."
A federal study, which goes back further, reveals nine months of Seattle-area price declines in the early 1980s that were followed by quick recoveries.
"Seattle has never been a market that's prone to price drops," said economist Matthew Gardner of Gardner Johnson, a Seattle-based land-use-economics firm. "The way it works is, prices climb, plateau, stay there and then climb again. You might see an area where there was a short-term drop but not an across-the-board drop."
Gardner predicts Seattle-area home prices will soften but not sink.That's seconded by economist Dick Conway, co-author of the Puget Sound Economic Forecaster. He estimates that local appreciation will slow to 2 to 3 percent a year, roughly what it was in the mid-1990s and much different from the double-digit appreciation we've seen in recent years. But realistically, is there any reason Seattle's prices shouldn't take a dive if that's happening in other cities? San Diego home prices are already shaky, and the area may not have seen the worst. A market-risk index compiled by PMI Mortgage Insurance calculates that San Diego faces nearly a 60 percent chance that home prices will fall in the next two years â€" the highest for any U.S. city. Boston, Sacramento, Los Angeles, San Francisco and San Jose all have a 50 percent or greater chance of price dips, PMI says.
Then there's Seattle: about 11 percent. "When we see declines in prices, it's nearly always driven by a local economic shock first," said Mark Milner, PMI Mortgage's chief risk officer. "So what this index is basically answering is how vulnerable Seattle is to a local economic shock: not nearly as vulnerable as Southern California. "Seattle-area job growth is among the strongest in the country, Milner said, and the local unemployment rate is below its long-term average. Equally important, he said, is that Seattle's housing prices, while high, are still more affordable to local residents than prices in other coastal cities.
King County's most volatile time occurred between 1989 and 1993. First came the boom years of 1989 and 1990. "Those were exceptional years for population and job growth," Conway said. Housing demand, propelled by a strong economy and buyer speculation, pushed prices up 45 percent in two years â€" a spike that hasn't been duplicated since. This is based on the Times analysis of home sales per square foot, a measure that allows for accurate cost comparisons regardless of house size. While sellers rejoiced, buyers took it in the pocketbook: The median-priced King County house, which cost $97,500 in 1988, fetched $145,000 two years later.
Panic Not My Puget Sound Neighbors. Rejoice.
The resilience of the Pacific Northwest housing market is a much desired commodity among the panic stricken in other large metropolitan areas whose so called "housing bubble" has began to deflate, much to the joy of alarmists whose historic prophecies of doom and gloom echo in cyber space seeking shelter on computer screens of anti-growth and wealth be darned nay-sayers...But here's the simple truth. Some areas are realizing a decline, but NOT the down fall of civilization as we know it like some of the media have portrayed it. Mortgage interest rates for instance are and will remain historically low. Housing prices at their current level could take quite a hit and still remain a good investment historical speaking.
It's all relevant. A high price to you, may not be a high price to your neighbor. The cyber space grumblings are probably from folks who, for whatever reason, be it economic or emotional detachment (not wanting to pay what the market dictates because they THINK the prices are too high) have been priced out of the housing market so they hope for a market decline to bring prices down to what THEY "think" is a fair price or one that they can afford. Unfortunately we all might suffer if the doom and gloomers have it their way.
My advice to everyone is to remain calm. We around the Puget Sound region have no reason to be influenced by the declining markets in California or Arizona, or the East Coast or Mid West. Our local economy is strong. Unemployment is low and spirits should be high just like the prices. Just kidding...About that last part.
The long-feared housing bust has arrived. Nationally speaking, anyway. If history is any indication, King County may escape it, according to a Seattle Times analysis of single-family-home prices. It shows that appreciation rates have risen and fallen, sometimes precipitously. But not once since 1985 through recession years, interest-rate spikes, wars and employment downturns has the countywide median price of a single-family home fallen, although it's come close."
A federal study, which goes back further, reveals nine months of Seattle-area price declines in the early 1980s that were followed by quick recoveries.
"Seattle has never been a market that's prone to price drops," said economist Matthew Gardner of Gardner Johnson, a Seattle-based land-use-economics firm. "The way it works is, prices climb, plateau, stay there and then climb again. You might see an area where there was a short-term drop but not an across-the-board drop."
Gardner predicts Seattle-area home prices will soften but not sink.That's seconded by economist Dick Conway, co-author of the Puget Sound Economic Forecaster. He estimates that local appreciation will slow to 2 to 3 percent a year, roughly what it was in the mid-1990s and much different from the double-digit appreciation we've seen in recent years. But realistically, is there any reason Seattle's prices shouldn't take a dive if that's happening in other cities? San Diego home prices are already shaky, and the area may not have seen the worst. A market-risk index compiled by PMI Mortgage Insurance calculates that San Diego faces nearly a 60 percent chance that home prices will fall in the next two years â€" the highest for any U.S. city. Boston, Sacramento, Los Angeles, San Francisco and San Jose all have a 50 percent or greater chance of price dips, PMI says.
Then there's Seattle: about 11 percent. "When we see declines in prices, it's nearly always driven by a local economic shock first," said Mark Milner, PMI Mortgage's chief risk officer. "So what this index is basically answering is how vulnerable Seattle is to a local economic shock: not nearly as vulnerable as Southern California. "Seattle-area job growth is among the strongest in the country, Milner said, and the local unemployment rate is below its long-term average. Equally important, he said, is that Seattle's housing prices, while high, are still more affordable to local residents than prices in other coastal cities.
King County's most volatile time occurred between 1989 and 1993. First came the boom years of 1989 and 1990. "Those were exceptional years for population and job growth," Conway said. Housing demand, propelled by a strong economy and buyer speculation, pushed prices up 45 percent in two years â€" a spike that hasn't been duplicated since. This is based on the Times analysis of home sales per square foot, a measure that allows for accurate cost comparisons regardless of house size. While sellers rejoiced, buyers took it in the pocketbook: The median-priced King County house, which cost $97,500 in 1988, fetched $145,000 two years later.
