Bubble Trouble: Seattle-Bellevue Metro Housing Market Goes South

The inflection point was July. Conditions have deteriorated since.

Active listings of houses and condos for sale in October in King County – which includes Seattle and Bellevue but does not include Tacoma – nearly doubled compared to October last year, jumping 91% to 5,749 listings, according to data by the National Association of Realtors. This was the largest inventory for sale since the end of Housing Bust 1 going back to 2012.

Inventory for sale started surging off low levels in the spring. In July, it reached the highest level since October 2014; and it continued to soar from then on. By this measure, July marked the inflection point of the housing market in King County. An inflection point is the beginning of the downturn in a market. It’s when the rising line representing the market bends (inflects) and starts going downward. The red bars in the chart mark the months following the inflection point (all data below via realtor.com):

And cuts in asking prices explode. When inventory piles up and sales cannot keep up because potential buyers aren’t buying, motivated sellers roll up their sleeves and see what it takes to move the house or condo, and what moves it are price reductions that are deep enough to meet the market. The market is where buyers are, but they have retreated and sellers are now having to find them. Gone are the price wars when buyers jostled for position for their chance to drive the price even higher.

The chart below shows the number of price cuts per month in King County. By this measure too, the inflection point occurred in July, when price cuts reached the highest point since October 2014. And over the following months, price cuts blew through the roof:

In terms of percentage change from a year ago, in October these price reductions more than tripled (up 205%) from October last year:

So what’s happening to listing prices? These are the prices that sellers are asking for. They’re not the prices that sellers might obtain if and when the unit is actually sold (that would be a measure of selling price). In King County, the median listing price peaked in May at $742,000. This means half of the properties listed for more and half listed for less. The median asking price has since dropped every month, falling to $675,000 in October. This marks a 9%, or $67,000 drop from the peak.

Some of this drop is normal seasonality, as asking prices in the county typically peak in June or July and then drop through January or February. Year-over-year, the median listing price remains up 3.9%.

But that year-over-year increase of 3.9% is a far cry from the double-digit increases that reigned since Housing Bust 1, topping out at 26% during the final throes of the fever in January this year.

Ironically, the “Trump Bump” had a large effect on real estate though President Trump isn’t exactly the most voted-for politician in King County – he got 21% of the popular vote in 2016. I found this to be true also in other metros that are decidedly not in the Trump-zone, such as in San Francisco and Silicon Valley: He got 9% of the popular vote in San Francisco County, 18% in San Mateo County, and 21% in Santa Clara County. But when it comes to home prices in these liberal bastions, the “Trump effect” made property owners a ton of money – if they’re able to get out in time.

In King County, before the 2016 election, the subcutaneous metrics of the market were already losing steam. But after the election, asking prices surged year-over-year, as if sellers had suddenly picked up some magic cues, and bedazzled buyers chased them higher. But that too has now petered out:

The impact on selling prices – the prices at which properties are actually sold – is already visible, even in the Case-Shiller Home Price Index which lags about three months by design (the data released at the end of October was a rolling three-month average for June, July, and August). After spiking for months into June, prices turned around and dropped 2% in July and August, the sharpest two-month drop since Housing Bust 1:

The Seattle metro is a prime example. But prices ticked lower in some of the biggest housing bubbles in the US. Something is afoot. Read… Declines Hit the Most Splendid Housing Bubbles in America  
 

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  114 comments for “Bubble Trouble: Seattle-Bellevue Metro Housing Market Goes South

  1. akiddy111
    Nov 17, 2018 at 7:47 pm

    I live in Bellevue. The majority of homes bought over the last 2 years were bought by Chinese investors or East Indian tech employees. They (Chinese) will routinely pay $800-900k cash for their 3 bedroom rambler in Bellevue and then turn around and rent it out for $2500-$3000.

    There are far more Asians walking around Downtown Bellevue today than Caucasians. The majority white elected council members remind us Bellevue residents that diversity (Asians) is our strength and that is why we need to continue to welcome the world.

    Oh and yes, Bill Gates, Jeff Bezos, Property Developers and Realtors both strongly encourage and wholeheartedly agree with the Council’s sentiment.

    • Bobber
      Nov 17, 2018 at 9:57 pm

      I can vouch for that. I live on the East Side of Seattle, and I estimate the immigrant population is about 70% of the total by my estimation. I frequently do counts when I’m in public places. The percentage has risen quickly over the past five years.

      Immigrants have obviously been driving the home price increases till now, including Chinese investors that rent the houses out.

      I sense the investors have quit buying now that the CAP rates no longer make sense. Home prices have risen too far relative to rents. RE non longer makes sense as a rental investment. As interest rates rise, it gets even worse.

      • Ethan in NoVA
        Nov 17, 2018 at 11:10 pm

        For the ones that don’t pay cash and take out a huge loan. If the market turns south, and they lose their job can’t they just return home and the banks will have no recourse? Perhaps after a nice HELOC?

        • LessonIsNeverTry
          Nov 18, 2018 at 12:26 pm

          WA is a not necessarily a non-recourse state! Judicial foreclosures are allowed. In practice they are pursued infrequently. Still, for anyone planning the jingle mail stop-loss approach in WA, make sure you understand all the legal risks before doing so. What mortgage providers do in good times may not match what they do in the forthcoming bad times.

      • Jon
        Nov 18, 2018 at 12:32 am

        I am from India an immigrant in USA for last 15 years
        I avoid areas with high concentrations of Indians and Chinese
        I left india to be away from India and Indians

        • j
          Nov 18, 2018 at 4:58 am

          Sounding like a true ‘murican there brother !

        • Gershon
          Nov 18, 2018 at 10:33 pm

          My family has had nothing but trouble with immigrants ever since we came to this country.

        • IdahoPotato
          Nov 19, 2018 at 1:20 pm

          Read some history dude. If you wanted to stay away from Indians, you should’ve have stayed away from America, esp. the Pacific Northwest. Asian-Indians have lived here for more than a century.

          I wonder what they have to say about attitudes like yours.

          http://www.wingluke.org/life-in-pacific-northwest

        • Nov 19, 2018 at 5:36 pm

          IdahoPotato,

          I didn’t read Jon’s comment that way. I read it as a deeply personal statement … similar to what I might say: “I left Germany to be away from Germans.” I didn’t leave Germany for economic reasons when I was a kid. I left to escape from it all for personal reasons (you’re reading my book, so know this part).

          I don’t belong to any of the German organizations here in San Francisco, such as the German American Chambers of Commerce (GACC), nor do I go to any of these types of events, nor do I ever speak German (as lousy as it is) with anyone except to occasionally amuse a gaggle of lost German tourists. It’s not that I have anything against them, or against Germans being here. I’m just not interested in them.

        • IdahoPotato
          Nov 19, 2018 at 6:33 pm

          @Wolf

          I don’t see why he threw the gratuitous insult to
          Chinese in there as well. As you know am from India. I don’t go out of my way to seek out Indians. I also don’t go out of my way to insult them as this poster has done time and again.

          You may be more generous in your interpretation, but it is a pattern with this poster. I see it as garden variety trolling. But then I broke my own rule of not feeding the trolls.

    • realist
      Nov 18, 2018 at 12:47 am

      akiddy111, the Davos crowd has created a template for your future in the form of your Canadian neighbors, only a matter of miles to the north of Bellevue. Canada has been re-shaped into the exemplar of the virtues of “diversity”. No less a person than its Prime Minister, Justin Trudeau, has proclaimed it to be the world’s “first postnational state”. Moreover, he said that “there is no core identity, no mainstream in Canada.” And no coincidence, it also happens to have a real estate bubble of epic proportions.

      • Paulo
        Nov 18, 2018 at 10:38 am

        @ realist

        statement: “Canada has been re-shaped into the exemplar of the virtues of “diversity””.

        No, some major cities have been reshaped, particularly Toronto and Vancouver due to the RE flight and money laundering. Trudeau can say what he likes, and may even be elected again, but hot air politicaians are, well, hot air politicians.

        The rest of Canada, which is about 99% of physical reality, demographically is pretty much the same as it’s always been; anglo white regions, native bastions, french speaking. If porportional representation takes hold in politics, who knows what will happen? Hell, even Ontario has reverted the swinging pendelum into white racism.

        Seattle-Bellevue full of tech immigrants. Eastern WA full of right wing conservatives thinking about Idaho.

        Maybe the 21st will be all about rising city states and urban economic zones as nations continue to fall apart. Bellevue has million dollar rentals, and outside the city gates ……?

        • realist
          Nov 18, 2018 at 1:13 pm

          Paulo, you are correct that the large Canadian cities are the most advanced in terms of “diversification”, and that the rural areas are little changed in terms of demographics. Justin Trudeau still has a lot of work to do – looking for his second term!

      • ivan anaconda
        Nov 18, 2018 at 12:48 pm

        As Justin Trudeau says: Welcome to Canada !!!

    • Blueforest
      Nov 18, 2018 at 4:05 am

      Asians owned and lived in downtown Bellevue before the any Caucasian did. There were Japanese strawberry fields where Bellevue Square now is, and before that there were natives. The Japanese were forced to sell their land for cheap due to the Japanese internment.

      • IdahoPotato
        Nov 19, 2018 at 1:22 pm

        Please don’t confuse people with facts.

    • Max Power
      Nov 18, 2018 at 7:08 am

      That’s pretty crazy as it would mean cap rates on those properties are in the ballpark of 2.3%, or about what you could get in a FDIC insured high yield savings account today.

      No sane real estate income investor would ever go for that.

      The question is how would these foreign investors behave once these properties go down 20% or more in value? On the one hand they would be looking at serious capital losses, but on the other hand cap rates would be going up.

      • Dave Chapman
        Nov 26, 2018 at 11:30 am

        These purchases should not be thought of as investments. They should be thought of as “Life Insurance”.
        If China goes Communist again, then anyone with money needs to get out. They are planning to have some kind of investment in a country which has Rule of Law. . .
        It’s not about the cap rate.

    • RangerOne
      Nov 18, 2018 at 10:16 am

      They could easily limit housing abuse by setting up rules that bar non citizens from buying property they don’t intend to live in. This would at least make it possibly harder for wealthy foreign investors to distort our housing market.

      Though I guess they would probably still fin a way and probably pay local people a fee to front for them and buy the home….

    • Shawn
      Nov 18, 2018 at 11:12 pm

      The Tech companies and our warped immigration policies are a couple reasons why Trump is in the White House today. Not just white Americans but Americans of all colors are fed up with this bs.

      • Mike G
        Nov 19, 2018 at 4:01 pm

        Has he actually done anything about H1-B abuse?

      • Dave Chapman
        Nov 26, 2018 at 11:32 am

        Trump imported another 100,000 H1-Bs on October 1, 2017.
        Trump imported another 100,000 H1-Bs on October 1, 2018.

        This was predictable, but does not make the voter happy.

        Trump’s failure to crack down on immigration fraud may cost him the White house, come 2020.

  2. akiddy111
    Nov 17, 2018 at 8:00 pm

    I see from the Seattle bubble web site that Seattle’s Condo supply jumped almost 300% Y/Y.

    Inventory has gone from a tight 1 month supply in October 2017 to a balanced 3.5 month supply 1 year later. The Capitol Hill neighborhood has a 5 month supply of Condos for sale as of October 31st.

  3. Erle
    Nov 17, 2018 at 8:03 pm

    The ridiculous increase in public debt during the “Trump Bump” certainly didn’t last very long. It wasn’t just in the natgoo amount, the state and local bond issuance is off the charts.
    Wisconsin goomint skools increased their debt by 1.2 billion, and likely higher. Nearly every skrewel referendum was passed. One small suburb of Milwaukee that has a relatively new school physical plant along with declining enrollment indentured themselves for 120 million over thirty years.

    • Erle
      Nov 17, 2018 at 8:06 pm

      I know that I am OT but I am tossing out some junk from the hinterlands of spectacularly high property tax.

    • David
      Nov 18, 2018 at 8:02 pm

      Isn’t Wisconsin mostly Samoli now?

      • TropicalSunset
        Nov 19, 2018 at 10:32 pm

        No that is Minnesota that is a mecca for Somali’s (and other African migrants).

  4. van_down_by_river
    Nov 17, 2018 at 8:18 pm

    So, in the enormous Bernanke bubble we are living in, yoy house price inflation of 3.9% is now considered a correction.

    I’m not sure non Seattle residents understand the enormity of the house price rip-off going on up here. Seattle was once a nice place to live, most everyone would agree that’s no longer the case. It has evolved into a bland city, full of strip malls, fast food and horrendous and loud traffic. And the housing stock that greedy sellers ask a million dollars for is terrible, decrepit, moldy, damp, depressing with weedy landscaping on streets with speeding traffic and no sidewalks.

    If you are willing to pay that kind of money you could live in a nice city: SF, NYC, Paris, Rome, Sienna, Berlin and on and on. Why would you want to blow that kind of money to live in this depressing traffic s___hole. If you think I’m exaggerating then go ahead and move here – I dare you. You have been warned, this city is bleak and depressing – being outrageously overpriced is just the coup de gras.

    • Jon
      Nov 17, 2018 at 10:18 pm

      Yup, I moved here from NYC. Much better.

    • Bobber
      Nov 18, 2018 at 10:45 am

      Seattle can be of the best places in the world if you appreciate the outdoors. The scenery is amazing. You can fish world-class salmon, ski the Cascades (including Whistler), camp, walk the beach, sail, boat cruise, ride the ferries, watch the whales, or hike the beautiful trails. These activities are only a few hours from downtown and can be done on a typical weekend. If you plan it right, you don’t spend much time in the traffic.

      I agree the dwellings in many parts of Seattle are generally run down, and there is little community planning, so you wind up with some scraggly looking neighborhoods with a brand new mansion right next to a moss-pit with blue tarps in the yard.

      A related issue is that many long-time Seattle home owners can live in the area only because they bought their home decades ago. They couldn’t afford to own their home at today’s prices. Many of them don’t have the cash flow and can’t afford to keep up with the home maintenance, so you wind up getting moss everywhere. Gentrification is running rampant. They are doing many home tear downs to build new mansions next to the “moss pits”.

      The entire city of Seattle is definitely being “sold” to the top 5% of income earners. There is no doubt about that.

      • Mark
        Nov 18, 2018 at 1:06 pm

        Seattle used to be a nice place to live because of the outdoor activities.

        I *used* to frequent Crystal Mountain and Stevens Pass in the winters. Ten years ago you could drive up there on a Saturday or Sunday morning, find parking, and have a great day skiing steeps with great snow coverage. Now you’ll fight traffic the whole way, not find parking unless you get there at the crack of dawn, wait in lift lines all day, then battle traffic snarls all the way back to the city. Trailheads in the cascades are similarly packed with cars all summer/fall. If you’re going hiking, you need to be there EARLY now.

        As for traffic in the city, forget it. I went out to dinner last night in Queen Anne, and then I sat in an Uber for over an hour to go the 1.1 miles home.

        Rising costs aside, population growth and overcrowding has really killed off my enjoyment of living here

        • Nov 18, 2018 at 1:15 pm

          Try shoe leather instead of Uber. It takes me 15 min to walk 1.1 miles. Feels great after dinner. I walk everywhere here in San Francisco. When I go to the doctor, it’s 8 miles round trip. 45 min each way. Great exercise. No traffic issues. Beautiful views.

          I understand if people have health problems or other issues that walking is not an option, but for the rest, it’s a great solution for anything up to 3-5 miles one way. The weather on the West Coast is made for walking.

          However, different story in Dallas or Tulsa or anywhere where it’s brutally hot. I’d drive five blocks in the summer. Nor would I walk in a blizzard or extreme cold conditions, obviously. But on the West Coast, we rarely see those.

    • NoEasyDay
      Nov 19, 2018 at 11:23 am

      @van_down_by_river-

      >Seattle was once a nice place to live, most everyone
      >would agree that’s no longer the case. It has evolved
      >into a bland city, full of strip malls, fast food and
      >horrendous and loud traffic.

      Sadly the same thing has happened wherever land values have become inflated due to government guaranteed easy credit.

    • KGC
      Nov 19, 2018 at 2:44 pm

      SF, NYC, Paris, Rome, Sienna, or Berlin? Seriously? Have you been to any of those and spent time there? Seattle is cheaper (real estate wise) than SF, NYC, or Paris and the traffic is actually better than either of those. And frankly the weather, and local politics (bad as they are) are still better. As for depressing, NYC has it all over Seattle.

      Rome and Sienna are not that nice, they’re very insular unless you’re a tourist and leaving in the next 48 hours and then the locals are willing to take your money. The recession that’s going to hit Italy is going to make anything in the USA look like paradise.

      Myself, I could do Berlin (my family is German and I’ve lived there) but there’s no way you can get a job as an American and the winters suck. Germans (of course) being well known for their sense of humor and tolerance of foreigners.

      I had a friend spend a few weeks with me this summer. He’s an expat, a teacher with 30 years experience and speaks five languages, who’s lived in Munich for 25 years. All he could do was talk about how much better it was here.

      If you want cheap you have to go somewhere that most people don’t want to be, because of weather, jobs, politics, etc. But don’t be surprised if you don’t find that someone else has got there first and started driving up the costs with money made by cashing out of the bubble when they could.

      I live in the PNW. I like it here. I’ve been all over and still travel (although not as much, only 70 hotel days this year). Things change. Embrace the suck.

    • TropicalSunset
      Nov 19, 2018 at 10:40 pm

      I agree Seattle has lost its quality of life. It’s become a lot more generic. It’s lost its original character. Full of congestion. It’s become a characterless place that is overdeveloped monoculture full of robot-like millennial Amazon and other tech employees that aren’t very interesting people at all. Same thing happened to San Fran…started going down the tubes in the late 90’s dotcom…lost all its original cool character & interesting citizens. SF actually used to be a really cool city believe it or not, I caught the tail end of that in the early 90’s.

      A lot of these cities like SF, Seattle, Portland, Austin…are living off prior reputations of decades ago when they were cool places full of quirky people. Now they are monocultures full of boring H1-B folks and boring engineers that stare at their phones all day and have zero personality.

  5. Nov 17, 2018 at 8:32 pm

    Don’t forgot to mention the lack of sunshine. Lack of sunshine creates depression, and I think depression makes people work more. Sunshine makes them happier, so they go outside and feel better.

    Better industry where it’s miserable. Happier people (who work less) where it’s nicer outside.

  6. Javert Chip
    Nov 17, 2018 at 8:35 pm

    Wolf didn’t say or imply that the YOY 3.9% increase (as opposed to 26% during January) was the extent of the correction.

    More to come on this story…

    • Nov 18, 2018 at 11:45 am

      Indeed. This is just the very beginning — the inflection point, when the upward line bends from one direction to the other (inflects) and turns from upward to downward.

  7. Howard Fritz
    Nov 17, 2018 at 8:56 pm

    Obviously, the speculative investors are running out of confidence in the system, and cheap debt to fuel buyers is drying up as well. As a result asset prices are way to high, hopefully instead of a sudden crash home prices will gradually deflate to their actual worth. More remains to be seen.

    • interesting
      Nov 17, 2018 at 9:13 pm

      “home prices will gradually deflate to their actual worth”

      “median household income in King County was $75,302”

      So using the tried and true metric of 3.5 X income the median house should be ~$265K……see how nuts things have gotten in the RE market? It’s even worse down here in OC. I can’t wait to see all the shenanigans going on that have been hidden from view when the cheerleaders try and explain the coming crash……what they better not f’ing do this time is say “nobody could have seen this coming”

  8. Unamused
    Nov 17, 2018 at 9:00 pm

    ->Conditions have deteriorated since.

    And have therefore improved somewhat.

  9. Nov 17, 2018 at 9:21 pm

    I see just as many cranes and just as many holes in the ground on my bus ride from Everett to downtown through the South Lake Union/Cascade neighborhoods. Sales seem to be slowing but construction has not. Is this a mirror of 2005/06? As far as Seattle goes this is much worse because even during that wild time, which seemed to be more suburban, Seattle itself didn’t disappear. It’s gone now, replaced by disposable glass and steel buildings whose live expectancy is only as long as the inert gas lasts in the thermal pane windows which is about 25 years. Once those windows start to sweat and maintenance is allowed to lapse, and maintenance is the first to go, it won’t be long before the steel structure starts to rust.

    • Nov 18, 2018 at 1:55 am

      Construction plans for these towers are made years in advance. Once construction has started on a project, it’s costly to stop.

      • Arai Godai
        Nov 18, 2018 at 5:47 am

        how long before developers are forced to start renting out glut of newly-built units? I might be moving there next summer for 6 months or so.

        • Nov 18, 2018 at 11:21 am

          When creditors take control of the buildings, they’ll drop rents to fill the buildings. But we’re not there yet – not anywhere near.

          Developers who are trying to sell the building may hope for a bigger payday by keeping units empty rather than dropping the rents. Once rents drop, the value of the building goes down. They may offer big incentives, rather than dropping rents.

          But do shop around.

      • Nov 18, 2018 at 1:04 pm

        The last time I saw projects stopped midstream was 2008-09 when partly finished homes were bulldozed in AZ and under construction high-risers were left to the elements in Laughlin, NV. My guess is Seattle will keep building as long as the banks will lend.

        Home prices have fallen in Everett, 20 miles north of Seattle but industrial and commercial development seems to be keeping up. What scare me is all of this can turn on the proverbial dime and it may already have. It’s just inertia that’s keeping an illusion alive..

    • MC01
      Nov 18, 2018 at 3:58 am

      Construction always lags the end of double digit price increases, sometimes by a couple of years.
      Back in 1997, when Thailand was forced to float the baht and hence ignited the Asian Crisis, property markets in Bangkok, Chiang Mai and other major cities hit a brick wall pretty much overnight as the big spenders and the banks which financed them were cut off from dollar and yen markets pretty much instantly. But contruction continued for at least a year, progressively slowing down as funding dried up and contractors and developers went burst due to unpaid bills and too large debt loads. The concrete hulks and half-finished malls have been largely razed or repurposed over the past two decades, but you can still see a few here and there, like little concrete Ozymandias statues.

      I saw exactly the same in Spain back in 2013 and I am seeing the same again in Italy right now. The real estate market either hits a brick wall or simply runs out of steam but nobody wants to be the first to drop the ball. Asking prices remain high or even very high relative to supply, buyers suddenly become picky and instead of paying asking price may walk away from the deal… yet the contruction cranes are hard at work.
      But work slows down as developers quietly start cutting costs by slashing headcount, subcontractors change often to force them in a bidding war, some finish (exterior painting) may be delayed undefinetely etc.

      Generally speaking a crash (such Thailand experienced) is very painful but allows a quick rebound as bad calls are purged from the system at too quick of a pace for politicians to charge in guns blazing. But a real estate market slowly dying out, such as Japan has been experiencing for over a decade now or Italy and Spain are experiencing right now, is another matter completely. The Bank of Japan has been buying J-REIT’s and financing white elephants (see the chuo shinkansen) to prop up faltering construction firms, but all they can manage is to slow down the decline. Europe has chosen to simply flood the real estate and construction sectors with liquidity, causing all sorts of distortions that will have to be corrected whether the crybullies like it or not.

      • Keiko
        Nov 19, 2018 at 4:27 am

        The real estate market in Japan really hasn’t been dying out for a decade.

        The market for commercial property and hotels is quite vibrant and has been experiencing prices increases.

        Drive around Tokyo or Yokohama and you will see a lot new construction going on much of which is for residential high rise type dwellings.

        Here in Yokohama there was a new tower put up for sale, the Tower Yokohama Kitanaka –

        “Over 6,300 groups visited the sales showroom, and a total of 3,700 purchase applications where made on the 1,126 apartments. One popular apartment received as many as 42 applications.Lucky buyers were selected via a raffle-type system, which is the norm for new apartment sales. 72% of the buyers were residing in the Yokohama and Tokyo area. One and two-person households made up two-thirds of the buyers. Sales first began in November 25, 2017, with 730 apartments on offer. They all sold out on the first day of sales with an average of 2.8 applications per apartment.

        Apartments were priced from 45 ~ 800 million Yen when new, with an average price of around 1,200,000 Yen/sqm.”

        All 1126 apartments sold out in 8 months.

        Here is an article about some projects in Tokyo –

        http://japanpropertycentral.com/2018/03/new-apartments-for-sale-in-tokyo-in-2018/

        Other projects in Kanagawa would takes pages to list.

        All amazing given that the country’s population is falling!!!

        • MC01
          Nov 19, 2018 at 10:20 am

          That’s exactly what I meant: slowly depopulating, aging country building expensive real estate like there’s no tomorrow. Same as in Italy and Spain. That’s not a healthy market, and if it’s not healthy it’s headed for an early grave, if you catch my drift. ;-)

        • Keiko
          Nov 19, 2018 at 5:42 pm

          I think it has more to do with people wanting to live in a big city here in Japan where jobs, transport, and education is close and convenient.

          Those apartments are not really high priced by Japanese standards either.

        • MC01
          Nov 20, 2018 at 1:33 am

          Expensive is always relative to supply. And both Tokyo and Osaka have been building at a strong pace for years now. Of course there aren’t empty apartment towers, but stocks have increased, and increased a lot, since the 90’s.

  10. Former Tech Worker in Redmond, WA
    Nov 17, 2018 at 9:56 pm

    I lived in Bellevue and the adjacent Redmond for about 8 years as a foreign tech worker. Then, the bubble bursted in October 2008 which I promptly lost my tech job and my H1-B work visa became invalid after one month after loosing the job. So it forced me to sell / give away everything that I owned there. I had a modest brand new home in Redmond which I bought at around $269,000 in 2004. After all of the upgrades and closing costs which were added into the mortgage with my 3% down payment, the mortgage for that house was at $312,000.

    After I lost my tech job in the October 2008 and my work visa became invalid after one month, I needed to move back to my country and sold everything that I owned included things like lawn mower, shovel, dishes, glasses, cloths, furniture, car, my brand new home and etc. I managed to sell my home in the beginning of 2009 while I was already back in my country for $400,000. So I had about $90,000 from selling my home which was quite modest comparing that if the Indian couple who bought my home by offering a deep discount from my listing price at $445,000 may have sold my / their home now for about $750,000.

    It was very bitter experience for me when the bubble bursted in 2008 resulting in lost my tech job in October 2008, lost my home and everything else, lost my H1-B work visa and American dream and forced me to move back to my country. I remembered having tears came out from my eyes at the Sea-Tac International Airport in the late at night when one of my friends drove me to the airport in the car that I sold him to catch a flight back to my country.

    • Bobber
      Nov 18, 2018 at 10:15 am

      It’s too bad there is no loyalty in business any more, and no long-term thinking. A large corporation will upend your life without regret if it helps them avoid a quarterly earnings miss.

      • David
        Nov 18, 2018 at 8:36 pm

        It’s just an Indian. His job was one more unemployed American.

        • Gershon
          Nov 18, 2018 at 10:46 pm

          “Just an Indian”? So he deserves to get discarded and cast aside by his corporate employer? You can’t feel empathy for a fellow human being who came here with high hopes of working hard and building a better future, only to see it all crumble?

          Asian schools are stressing the hard sciences and academic excellence, while our “Everyone’s a winner!” public school system is turning out half-educated dolts and slackers. Truth.

    • ZeroBrain
      Nov 18, 2018 at 11:51 pm

      I’m sorry to hear that – our immigration system needs a major overhaul.

      • Former Tech Worker in Redmond, WA
        Nov 25, 2018 at 10:13 pm

        Thank you very much “ZeroBrain” for your empathy and being very human kindness. After I went back to my country for almost a year, I went to Canada as a foreign student as when I first went to the USA as a foreign student as well.

        After completing a university in Canada, I was very struggle to find a decent job in Canada even though I had experience working as a tech worker in Redmond and Seattle. I remember that I was hired as a labourer twice in building a road and in a factory in Canada. Both jobs didn’t last well for me because my advancing age and personal physical ability and strength that I am lacking. Each of the two labour jobs lasted for about 6 weeks before I was terminated as a labourer.

        When I was struggle to find a full-time tech job for about 2 years, I had to go to the food bank every month to get some foods to supplement myself. I remember that one day when I had almost no money in my bank account, I walked into a grocery store and asked the clerk there to give me some foods that they were throwing away when they expired. The manager in that grocery story was kind enough and gave me some foods that he’s throwing away. I just cried and wept while eating that foods outside by the front door of the super market.

        The money that I had after selling my home in Redmond was gone while attending a university in Canada as a foreign student. The tuition and fees of the foreign student in the university in Canada was so expensive together with very high costs of living such as rents and foods in Canada. In the city where I attended the university in Canada where it’s the northern part of the country and is very cold in the winters, a head of cauliflower was sold in that city for about $8 per head. Most of the foods sold in that city have been imported from somewhere else because it’s usually very cold in that area to grow foods.

        Then I landed myself in a training for driving a city bus in a large city in Canada which lasted for 5 weeks out of the total of 6 weeks of the training. I was terminated again because I couldn’t hold my urine and urinated in the bus while driving the bus non-stop for several hours.

        Luckily after about 2 years of struggle doing various odd jobs including working part-time in a department store as a clerk in a minimum wage job, I was able to land myself a job as a tech worker again and I’m now working in Toronto full-time. I also managed to obtain a “permanent residence” status in Canada and have been applying for a Canadian citizenship for almost 6 months now.

        I’m very grateful for people in America and now in Canada to gave me opportunities in the past and current to work in their countries as a tech worker in both countries. I cannot afford to buy any house or even a condo in Toronto now because the real estate prices in Toronto is far beyond my income working here as an entry-level tech worker.

        Thank you again “ZeroBrain” for your empathy and compassion to other human being. All the best to you and Happy in the coming holidays.

    • goudey
      Nov 19, 2018 at 12:54 pm

      “I managed to sell my home in the beginning of 2009 while I was already back in my country for $400,000. So I had about $90,000 from selling my home..”

      Then you are one of the lucky ones. Please.. be quiet.

  11. rosebud
    Nov 17, 2018 at 10:00 pm

    February 24, 2019 marks the 33 year anniversary of King County (Martin Luther King, Jr).

    • Ian
      Nov 18, 2018 at 6:15 am

      During the Nineties I lived in the beautiful state of Washington and understood that it was named after William King who was the Vice President in Franklin Pierce’s administration.

      • Lance Manly
        Nov 18, 2018 at 7:42 am

        Your both right

        On February 24, 1986, a motion to change the namesake to Martin Luther King Jr.[5] was passed by the King County Council five votes to four.[6][7] The motion stated, among other reasons for the change, that “William Rufus DeVane King was a slaveowner and a ‘gentle slave monger’ according to John Quincy Adams.”[8] Because only the state can charter counties, the change was not made official until April 19, 2005, when Governor Christine Gregoire signed into law Senate Bill 5332, which provided that “King county is renamed in honor of the Reverend Doctor Martin Luther King, Jr.,” effective July 24, 2005

        • Ian
          Nov 19, 2018 at 8:08 am

          Thanks Lance; Wolf’s website – and his readers – can always be relied upon to clarify half-forgotten facts.

  12. nick kelly
    Nov 17, 2018 at 10:58 pm

    Once the crane is there it is almost too late to stop, no matter how bleak the outlook. Because land price inflation has far outstripped construction cost inflation, the developer is almost committed from the time they close on the land. The concept of ‘holding property’ is obsolescent and soon to be obsolete.

    But if they’ve gone though the permits, variances, and architect plans, and begun construction, even a lender who regrets the deal may rough it out.

    It takes a real crash to halt construction. I don’t know if we are there yet.

    • polecat
      Nov 18, 2018 at 9:57 am

      It will be a sight to behold to see fir and spruce seedling .. along with a smattering of Scotch Broom .. taking hold, and growing in the interstices of all those towers … as well as the requisite agglomerations of mosses and lichens.

  13. Bet
    Nov 17, 2018 at 11:12 pm

    I am a born and bred Seattilite. A true mossback. I moved out to the peninsula
    Two years ago. I dread the ferry ride to Seattle and deal with the traffic , rampant construction ,it’s an unholy mess. I don’t recognize Bellevue anymore. At the mercer island starbucks last weekend the place was packed with Chinese . They are the premier buyers . My parents house that was sold four years ago has been flipped twice and had gone up by 800k . Who has this kind of money? I am guilty of selling my house to a young Chinese couple. He worked at Amazon. But I knew I had a closing window and was glad to get the hell out. It’s all flush on tech money. Got news Seattle, that too one day gets its reckoning
    I miss my flannel doc marten back water
    The Emerald City
    It’s gone. Forever.

    • MD
      Nov 18, 2018 at 4:41 am

      …so basically you cashed in selling at a high price to a Chinese speculator.

      Ergo – you’re guilty of exactly the behavior which has caused the disappearance of the olde worlde you lament?

      Can’t have it both ways I’m afraid – a ‘backwater’ or ‘kerching! new Audi!’; but not both…

      • Unamused
        Nov 18, 2018 at 8:06 am

        ->Ergo – you’re guilty of exactly the behavior which has caused the disappearance of the olde worlde you lament?

        Dodged that trap, thanks.

        Just remember, your loss is somebody elses gain, although it’s more likely to also be somebody elses loss.

        • Bet
          Nov 18, 2018 at 11:01 am

          I admit to all that. I knew posting that was going to get me recriminations , I posted it to own it . My husband
          Had just lost his job. Too old a graybeard for the start up . The remodel to get the house saleable was money through a fire hose. I was taking care of two elderly parents ,( the new coming America) we were desperate to get out from under a mortgage and sky high apt lease, before interest rates went up , so yes we took it and for
          About 12 % under market at that
          Time. Fall of 2016 . Part of the problem? We are the squeezed out.

    • Nov 18, 2018 at 1:21 pm

      You did the right thing for yourself and your family. I hope the young couple that bought your house gets to enjoy it as long as your family did.

      My daughter and her husband just bought a 1956 house from the original buyers who are now off to someplace cheaper and warmer. It’s just the way the world works..

      In Seattle’s case though, an entire city was wrecked in a massive spasm of greed and it wasn’t the Chinese or the Indians who started it.

      • Gershon
        Nov 18, 2018 at 10:50 pm

        In Seattle’s case though, an entire city was wrecked in a massive spasm of greed and it wasn’t the Chinese or the Indians who started it.

        The Everything Bubble and orgy of speculation since 2009 can be laid squarely at the feet of Ben Bernanke and Janet Yellen, and their deranged money printing.

        • Blockhead
          Nov 19, 2018 at 9:04 am

          You hit the nail plum center.

      • EchoDelta
        Nov 19, 2018 at 2:25 am

        Cities go through cycles and they change over their entire existence. I’m no Jane Jacobs, but growing up in Washington it grew like crazy in that I-5 corridor and along the east west highways. Even when Seattle proper had their “the last guy leaving turn out the lights” billboards there was still some growth and once we switched from bombing Vietnam to settling refugees and getting ready to bomb other people, Boeing rebounded and all the tech industries that were nurtured in its shadow boomed as well. Did those guys complain there were no lumberjack jobs left for the Swedes? No fishing for the Croats and Norwegians? Nope, they went to work and did things that changed the world. To do that it took the world.

        Go to the Danish bakery in Ballard and it is no longer Danes, it’s Vietnamese, African American and others, but the marzipan cake is still on point and the dream lives on after the Danes, Swedes, and Norwegians have moved on.

        • Dave Chapman
          Nov 26, 2018 at 2:38 pm

          The best donut shop in Auburn is run by a Chinese lady who used to live in Cambodia, I think.

          The donuts are still as good as ever. . .

    • goudey
      Nov 19, 2018 at 12:59 pm

      Take the money and run. Don’t look back. You are one of the lucky ones.

  14. KPL
    Nov 17, 2018 at 11:14 pm

    “But that year-over-year increase of 3.9% is a far cry from the double-digit increases that reigned since Housing Bust 1, topping out at 26% during the final throes of the fever in January this year.”

    Prices are increasing slowly but still increasing meaning to say the movie has not started yet.

    It is when the price drops, and then drops significantly and then keeps dropping that things get interesting. But then, the Fed is there waiting and watching in the wings, with their hands ready on the interest rate and QE wheel. Looks like we can expect a replay soon.

  15. Tom Stone
    Nov 17, 2018 at 11:23 pm

    The market turned at pretty much the same time all along the West Coast.
    At this point sellers can drop their asking price to where the market is and take a smaller than desired profit, or chase the market down for 5 years.
    Most will chase the market down.

    • LessonIsNeverTry
      Nov 18, 2018 at 12:36 pm

      This is what fascinates me most this time around. The change was synchronous all along the west coast. I’m not a fan of the “tipping point” concept but it seems apt.

  16. GP
    Nov 18, 2018 at 12:07 am

    … and the cycle continues.

    Next few years would be a great time for contrarians to pick up houses on the cheap.

    “Trump bump”? Worse than Fed ZIRP bump?

  17. earl d.
    Nov 18, 2018 at 2:12 am

    With respect to the broader economy, Seattle area real-estate doesn’t particularly concern me. Median home prices, when adjusted for inflation aren’t a lot higher that than they were in 2008, and unlike most US cities, median income has actually kept pace with Seattle housing cost increases. A quick inspection of housing starts reveal why, with 12,000 in 2017 and a like number in 2018 (detached and multi-unit) Seattle has had a sustain record level of residential housing.

    Most of what we’re seeing there is the market adjusting to new inventory (rental and owner occupied) and perhaps to slightly dampened demand, rather than a move driven by the economic or financial environment. I.e. a functional market with where supply and demand are allowed to respond to price signals.

    CA continues to be much more concerning. There both supply and demand suffer from massive distortion brought about by incoherent local government that both stifles the price signal through price control (rent control) and constrain the production of residential units through draconian zoning ordinances that prohibit most multi-unit development.

    That in and of itself would not threaten a wider contagion of the CA housing scarcity crisis. It’s true poor and working class families would be forced to hang onto their far-flung low cost apartments and suffer long commutes to their jobs providing essential low cost labor for the vast service economy for as long as possible. And once that, individually, becomes no longer tenable, and then either move out of the state or begin the decent into homelessness. This is the cycle that’s been in place in CA for over a decade.

    The economic threat comes from the fact that the extreme housing shortage has plunged an unprecedented number of families into poverty, giving CA the worst overall poverty and the worst child-poverty in the nation when adjusting for housing costs, according to the US Census office.

    That has generated an increasingly strong political impulse to do something. Broadly, there are three possible approaches:

    1) create a two tiered system with middle class property owners owning tremendously appreciated housing assets and a social-housing-class that receives non-appreciating residential assets (purchased for a nominal sum) or direct subsidies to rent those assets.

    The fact that CA’s housing deficit is at least 2.5 million, mean that the prospect of making 1/2 of those units affordable would mean an outlay of more than $1 Trillion, many times the state’s entire yearly budget (current numbers make the cost of even high density public housing $500,000 – $1,000,000/unit )

    2) Use state legislative authority through incentives and coercion to force municipalities to allow more market-rate housing to be built, on a huge scale.

    3) Do something that politically is palatable but practically, at best does nothing beneficial and at worst makes the housing situation worse.

    Of the scenarios, #1 is out of the question due to the astronomical costs. A fact ignored by the proponents various #1 solutions. Scenario #3 is in the short term, perhaps, the most likely scenario, but given extraordinary levels of poverty and homelessness in CA, continuing to allow it to worsen, which #3 would obviously do, continually puts the crisis to the top of the state agenda, meaning that eventually some responsible, moderately intelligent legislator or governor will put in place policies which bring about #2. This would result in a an immediate and sustaining depreciation in housing values. The risk is that say a 10% or 20% drop in residential prices in just CA would wipe out $1 – $2 Trillion in wealth.

    While some number of those home-owners could be stereotyped as dot-com multi-millionaires who paid for their house in cash and brought it to live in, and therefore would scarcely be aware of a real-estate crash, 2008 taught us that it’s not always easy to identify institutional risk. That’s doubly true for housing whose tectonic plates move slowly, far below the surface of financial waters, but whose interlocking friction can sometimes rupture into a temporal economic tsunami.

    In my mind that’s the most plausible of the dark scenarios for ending this longest in history economic expansion with another 2008-esce financial crisis.

    • Nov 18, 2018 at 11:11 am

      earl d.,

      I’ll take a crack at responding to one of the options you mentioned about what California should do – because there is a lot of confusion about this, especially outside California:

      “Use state legislative authority through incentives and coercion to force municipalities to allow more market-rate housing to be built, on a huge scale.”

      Under state law — the 1995 Costa–Hawkins Rental Housing Act — ALL new construction in California MUST BE MARKET RATE. No municipality is allowed to put rent control on buildings that were constructed after February 1, 1996.

      In San Francisco, rent control applies only to buildings constructed before 1979.

      Rent control under the act is prohibited for ALL single-family houses even those with an “in-law” unit. Rent control is also prohibited for condos.

      In other words, rent control is prohibited under the act for anything other than pre-1996 multi-unit apartment buildings.

      There was a proposition on the ballot this time that would have repealed Costa-Hawkins, but it failed by a fairly big margin.

      And if you look around San Francisco, for example, there is large construction boom going on, all of it large buildings, and the rental units in them will all be market rate. The problem isn’t supply; there is lots of supply; the problem is that it is all high-end supply.

      • earl d
        Nov 19, 2018 at 3:41 am

        I would add a couple of additional observations:

        – Local enactment of coercive rent control on newly built properties is indeed prohibited by state law. But social housing is not prohibited, i.e. voluntary rent control of building built with government funds and owned by municipal or non-profit organizations. Although, there are considerable complicating regulations (of course, we’re talking about CA after-all) for subsidized housing as well. However, even though coercive rent control only apply to older structures, it still suppresses the price signal for new construction. Think: some portion of the market price for the unit being rented is made up out of the property owner’s own pocket, there’s no incentive for the renter to engage the market since renting a new unit resets that subsidy to $0.

        – With respect to supply, from an economic perspective, there is never a such thing as too little or too much supply of a good, so long at least there is some form of functional market, i.e. equilibrium will be found between supply and demand. (It doesn’t even need to be an efficient market.) Subjectively if you’re a bull, i.e. are in the market to predominately sell, all supply is too much. If you’re a bear (i.e. in the market to buy, or sell short) then anything that boosts the numbers of buyers or their purchasing power is excess demand.

        – California’s housing shortage therefore can’t be thought of as shortage in economic terms, because absolute shortages are by definition impossible. Instead it is social problems which the current price levels manifest that is the problem:

        1) Poor families, especially those younger and immigrant or minority families are forced to move out of state. The CA irony is that its housing policies have more than offset the sanctuary declarations of its cities, and caused a large net out-flow of undocumented immigrants, especially those from Latin America, that should be the envy of other more xenophobic US states who are hostile to immigrants but have a large quantity of inexpensive hosing and therefore have absorbed CA’s outflow.

        2) Some number of families being priced out will slip into homelessness, rather than emigrating to another state.

        3) Even those who are affluent enough to afford housing, pay a disproportionate portion of their income on housing costs, the result of collective rent-seeking on a vast scale. Put another way high income individuals apply their income to purchasing or renting already built assets whose values are artificially protected by government regulation. This distortion actually *does* rise to the level of an economic problem because it makes the economy much less efficient by distorting the way capital is allocated.

        – To alleviate the poverty, out-migration, and homelessness generating potential of the current crisis a minimum of 2.5 million additional residential units (over and above CA’s current annual production) need to be created, per a study submitted to Governor last year. Of course to improve the above mentioned social parameters those units can’t remain empty. But that’s actually an easy problem to solve through vouchers, supplemental income, but most importantly through the large property price crash building so many market-rate units would entail. It’s that crash that I believe could be great enough to cause a 2008 style global financial crisis. This is the paradox, that waiting so long to address a problem can result in prudent, even necessary, policies having a harsh consequences.

        – San Francisco is indeed undergoing a residential boom of sorts (new units: 2017: 4271, 2016: 4895, 2015: 2472), but the numbers of new units being built are far to few to address the above mentioned social issues – compare to comparable Seattle numbers, units built are less than 1/3, yet SF prices started from a far higher number and job growth much greater. (Note also, even though SF has the reputation for being built up, the vast majority of the city is zoned for single story detached or semi-detached residential construction, so the housing scarcity problem is one of policy, not a forgone question of geography) Even so, given SF’s extraordinarily inflated housing prices, the increase in inventory is sufficient to reduce prices somewhat.

        – RE: ‘high-end’ supply, that’s to a degree of a misnomer. The units being built are not particularly luxurious, being small, amenity poor, with somewhat shoddy finishing details, you won’t find car elevators, full service concierges or spas in the vast majority (if any) of them. The only thing high-end is the price. Reiterating my point on supply and demand, there is no such thing as affordable market rate as the market responds to pair ability to pay with the desire for a product and that pairing tautologically ‘fair market value’. IE SF housing production is exactly sufficient to sustain current very high valuations. What would changes this would be substantial changes in demand (increased interest rates, recessionary levels of unemployment) or increase in supply (relaxing of stringent local constraints on additional units). New unit production is so small that even a dramatic falling of off of new supply hardly makes a difference, e.g. the number of new units finished in 2017 fell by almost 15% yet the impact on the housing market, rental or condo, was nil. Of those things that would pose a risk to the greater economy, it’s the possibility for creating 2.5 million market rate units, many 100,000s of them in the SF Bay area that looms the largest.

    • JZ
      Nov 18, 2018 at 2:02 pm

      Just kill the FED.
      When things go wrong, it can go wrong for a million ways.
      When things go right, it is usually because you have done one thing right.
      Killing the FED will kill lots of wealth transfer mechanisms and restore the nation back to sound wealth creation basis as opposed to wealth transfer basis.
      If you keep the FED, even after you got all of those “local government COERSIVE force” to do what you suggest, other issues will pop up.
      You don’t treat cancer caused headaches. You have to cut the cancer out.

  18. Unamused
    Nov 18, 2018 at 8:02 am

    ->If you are willing to pay that kind of money you could live in a nice city: SF, NYC, Paris, Rome, Sienna, Berlin and on and on.

    Yes, yes, send them there. Don’t send them here. I value my peace.

    Growth is overrated, and the more you have, the more overrated it gets. The castle does not need another wing, or a higher tower, or hungrier crocodiles in the moat. The solar systems have all been upgraded, and the owner does not want to open it to tourists.

    It’s a dog-eat-dog world out there, and I’ve taken myself off the menu.

    • elysianfield
      Nov 20, 2018 at 12:20 am

      “It’s a dog-eat-dog world out there, and I’ve taken myself off the menu”

      Unamused,
      Excellent comment, and I will repost it shamelessly….

  19. sierra7
    Nov 18, 2018 at 11:12 am

    Have a grandson/wife living working in SV. Both are professionals. Income $200K +. Lucky they can afford one part of a duplex rent. Both can’t wait to move out of the Bay Area to somewhere where life is more basic, appreciated, and productive to raise a family.

  20. Memento mori
    Nov 18, 2018 at 11:26 am

    This south California real estate agent doesn’t seem to agree with Wolf and has some valid points
    http://www.bubbleinfo.com/2018/11/17/will-home-sellers-panic/

    • Nov 18, 2018 at 11:38 am

      Ha, that’s funny… “sellers’ panic” — we’re a long time away from a “sellers’ panic.” But we passed the inflection point when the market turns south.

      Jim only shows a chart of NEW listings, not total ACTIVE listings, the way I did. And he hangs his hat on that to show that everything is just fine just because there’s no sellers’ panic. Good luck.

      New listings = new inventory coming on the market.
      Active listings = new listings + unsold listings.

      At this stage in the cycle, when inventory is piling up, it’s because it doesn’t sell. Yes, there is no “sellers’ panic” — I never said there was. But buyers (they’re the market) aren’t buying at those prices, and prices have to be cut to move the unit. And until sellers drop prices far enough to where buyers buy, inventories pile up, even at a steady rate of new listings.

      It’s nonsense to refer to a “sellers’ panic.” A sellers’ panic is one of the last stages of the down-cycle. What we have is the market (buyers) moving away from sellers, and sellers having to chase them by cutting prices. There isn’t even a “buyers’ strike” yet. This is just the “inflection point,” as I said, the very beginning of the turn of the market, when the upward line inflects and turns downward.

    • Bobber
      Nov 18, 2018 at 12:34 pm

      “Jim” also forgot to mention that CAP rates don’t make sense any more. Housing investors have largely left the market, and that was a huge source of demand. The disparity between renting and buying is only going to get more pronounced as interest rates rise, driving all investors from the market.

      You don’t need a seller panic for housing prices to drop. All you need is a few realistic and motivated sellers to make some transactions at the margin, and that brings down the fair market value of all housing stock. The majority of people don’t seem to realize that. 90% of potential sellers can be stubborn and refuse to reduce their asking prices, but they’ll stand by and watch as the other 10% of potential sellers drive the market lower.

      All it takes is one seller in a neighborhood to establish lower comps. Once that happens, nobody wants to buy at a higher price because they all want the same or better deal. Things tend to shift very quickly.

  21. Ron
    Nov 18, 2018 at 11:29 am

    Sooner or later the bulk rental housing business heads for the exits along with the individual housing rental investor. This mini downturn is a the first sign of the exit by next spring and summer it will be a flood.

  22. California Bob
    Nov 18, 2018 at 12:02 pm

    re: ‘But when it comes to home prices in these liberal bastions, the “Trump effect” made property owners a ton of money – if they’re able to get out in time.’

    I dispute this. I sold my house of 22 years in San Jose in April and, of course, watched the market closely for years prior to try to ‘time’ the sale, so I know firsthand of which I speak. The ‘Trump Effect’ did not create the boom in prices; they had been rising steadily–logarithmically, even–since recovering from the GFC. Hardly a day passed by without the SF Chronicle or SJ Mercury News–Wolf should know this–featuring a headline about the ‘soaring cost of housing’ in the Bay Area. Job/salary growth and an immigration spurt fueled the market–perhaps boosted by Chinese ‘hot money’–and this started when Trump was still banging porn stars (could still be, for all I know).

    Yes, the BA is a ‘liberal bastion’–really, more libertarian than liberal–and most of the people I know were depressed by the Trump gaming of the Electoral College (no ‘animal spirits’ to be found). The real ‘Trump Effect’ has been the kneecapping of the housing market by the GOP revenge tactics WRT to their ‘tax reform’ bill (aka the ‘Tax Break for Corporations and the Extremely Wealthy’).

  23. Jeff
    Nov 18, 2018 at 1:24 pm

    I wonder if 50 year old houses really go up in value as they get used and age. I understand a little about supply and demand, real estate cycles of affordability, government regulations, etc. that put upward pressure on prices. In the past 50 years the world has been flooded with dollars that depreciate the value of the dollars that came before. In 1965 my parents new middle class home cost $16,000. When Mom passed away in 2015 it was sold for $245,000 and was considered a starter home. It seems to me the greatest contributor to long term price increases is the loss of purchasing power of paper currencies including the dollar.

    • rosebud
      Nov 18, 2018 at 2:28 pm

      you are correct. Housing has been targeted because banking scholars have a bead on Greshams law, and the enactment of the ancient policy of Lysander. Where good money actually becomes the house itself. Housing, due to its massive size, is relatively difficult to transact, but easier to spot wealth and implement govt policy.

    • Rowen
      Nov 18, 2018 at 3:57 pm

      Another way to look at the situation is to say that the past 50 years have been flooded with buyers, driving up the price of all assets, real estate included.

      Given demographic changes and student debt load, who will buy the homes owned by the Boomers when they’re ready to sell?

  24. Nimesh Patel
    Nov 18, 2018 at 3:32 pm

    What’s the point? If real estate prices decline significantly, The Federal Reserve or the government will intervene. Just like during the last crisis.

    • Nov 18, 2018 at 4:03 pm

      Last time it “intervened” – I suppose you mean its various bailout programs and QE — because credit froze up and because companies that needed to borrow in the credit markets couldn’t fund their payroll anymore, and it intervened because banks were collapsing, and because the economy was threatening to freeze up. It did NOT intervene because home prices declined.

      In fact, the Fed is now targeting inflated asset prices — and it has already named a few categories.

      • Rowen
        Nov 18, 2018 at 6:17 pm

        What really scares me is, if FedGov realizes that the Fed won’t support asset prices, specifically the stock market, and finally gets enough votes to “privatize” social security.

        In that scenario, we’re basically redistributing wealth from the cash flow of future workers to current asset holders…

        Well why not, we’ve already redistributed wealth from the cash flow of future workers to current asset holders via mortgage and student loan payments.

      • michael
        Nov 18, 2018 at 7:32 pm

        My feeble rationale is as follows: The FED intervened in housing to protect the banks after the last crisis. They have pretty much sold most of the liability off to other “bag holders” over the last 10 years. There is no reason for them to protect investors in the next down turn.

        • Gershon
          Nov 18, 2018 at 10:55 pm

          The Wall Street-Federal Reserve Looting Syndicate uses engineered boom-bust cycles as the most efficient means to transfer the wealth and assets of the middle and working classes to its oligarch accomplices in the financial sector. The Fed doesn’t give a damn about retail investor muppets, only about the investment bankers who will be buying up the proles’ distressed assets on the cheap after the collapse of the Fed’s Everything Bubble.

      • Nimesh Patel
        Nov 21, 2018 at 11:38 am

        Wolf, thanks for your reply. That makes sense. Recently with the stock market tanking, The Fed has decided to end the rate hikes by Spring. Doesn’t that show that The Fed is stuck in a corner? If they raise rates then the “everything bubble” deflates, if they keep at it then the various asset bubbles will just keep going up. Quiet the conundrums.

  25. rosebud
    Nov 18, 2018 at 7:04 pm

    More than a few of us are following the Tech Sector’s stock market performance, and with good reason. We live in an age where technology innovation is on the ascendant.

    Through Social media our contribution is scored. A new money is slowly taking shape?

    One of the contributing factors of the value and future value of a house, is that it is a place to breed. Thus if you or your clan plan to breed a lot, you may wish to hedge by hoarding up houses.

    Laws come and go. If the planet continues on its population trajectory it could become unlawful to breed in a house, your social score may have something to do with it.

    I’m only postulating the extremes we could go to. Lots of Iraq’s didn’t understand the presence of US troops blocking roads during Gulf War II, and would merrily detour around the troops. I don’t need to tell you what the Marines response was.

  26. Professor James
    Nov 18, 2018 at 9:18 pm

    I believe the next financial crisis is on our doorstep. You may recall the comment as to how one goes bankrupt…
    ” Gradually, then suddenly.”

    I feel we are on the gradually part now, as we speak. Look around you.
    As you ride down the street, do you not observe empty storefronts? What about the homeless? Increasing or decreasing? Be honest. And speaking of the homeless…When have you seen so many YOUNG people begging and with signs? All this in the “…greatest country in the world…the INDISPENSIBLE nation!” Please.

    When you shop, you may pay the same amount for an item, but isn’t the box or can SMALLER? That’s disguised inflation. And it is eating into your disposable income every day, with every bite.
    Watch a professional sports game lately? Start looking at the empty seats in the stadium. Ask yourself why they can’t fill them?

    So, everyone wants to know when the “crash” will come? I wouldn’t look at it that way. The great depression didn’t happen overnight. It went on for years. The time to change “mentally” is before it happens. You board up the windows before the storm hits.

    Reduce your debt. If you have to file bankruptcy, do it now. Get a clean slate. You will breathe better and freer on the other side. And believe me, because I did it…twice.

    Begin to save money. Saving is not a dirty word. Notice I did not say invest your money. Keep it where you can put your hands on it, but in a safe place. A few months ago, I went to a 7/11 when their system was down. The 2 people in front of me left because they couldn’t pay without using a card. I was the only one who had cash enough for my purchase.

    Learn to stretch the use of items, and economize. These habits will come in handy if times get as bad as they did during the great depression.

    And if worst comes to worst, remember we are all in this together. We will have to stand together and help each other if we are to survive as a nation and free people.

    • NoEasyDay
      Nov 19, 2018 at 3:41 pm

      @Professor James-

      >And believe me, because I did it…twice.

      Are you morally bankrupt?

  27. Dis
    Nov 19, 2018 at 2:14 pm

    Lot of talk here already . . . but not much discussion of Amazon’s decision to shift the company’s ‘center of gravity’ toward the political/financial power pole of the Washington-Manhattan Corridor?

    • Mike G
      Nov 19, 2018 at 4:29 pm

      Amazon Web Services is landing a lot of big government contracts for secure cloud storage. A DC-area pick for an HQ was predictable, I heard it six months ago. They were stringing out the process to get more subsidies and incentives.

    • Nov 19, 2018 at 5:41 pm

      If Amazon’s stock gets cut by 80%, those HQ2 plans get wiped off the table, and cost-cutting will set in.

      • Rowen
        Nov 19, 2018 at 6:54 pm

        I think Amazon getting a 80% haircut would be very close to an Armageddon scenario.

        • Nov 19, 2018 at 7:30 pm

          It got something like a 98% haircut last time :-]

        • Rowen
          Nov 20, 2018 at 12:04 am

          True. But last time, it was a novelty company, barely a speck on Wal-Mart’s radar. Now, it was a trillion dollar company, a major component of countless institutional and retail accounts.

          I guess I just have a hard time separating the twin events of the financial crisis of 2008 and the stock market collapse of 2009. I guess the latter would be more akin to the first DotBomb or Japan’s Lost Decade, unfortunate and painful, but not a panic.

        • Nov 20, 2018 at 12:33 am

          Rowen,

          “Now, it was a trillion dollar company…”

          It’s not a trillion dollar company anymore. It’s a $750 billion company now. It lost a quarter of its value since Sep 5. It can easily go to $500 billion in a few months or a year. And it can take down the remainder over the following year. This thing is so overvalued that a $200-billion market cap would still be rich.

  28. Matt P
    Nov 19, 2018 at 3:56 pm

    The Treasury Department adding Seattle metro area to the list of cities that can no longer have cash purchases from unknown sources is going to have a big impact.

    • Gershon
      Nov 19, 2018 at 9:13 pm

      The Justice Department has for years turned a blind eye for years to drug cartels and other organized crime groups laundering money through US banks and real estate. Our banking system is as hooked on the liquidity from the global drug trade as our despairing rust belt addicts are hooked on opioids.

      Google HSBC and Wachovia’s involvement in laundering drug money for the Sinaloa Cartel, while Eric Holder’s catastrophically-misnamed Justice Department looked the other way.

  29. BADunk
    Nov 20, 2018 at 1:19 am

    You guys are something. Come in Live in Bay Area and you will know your affordability is so much better…

    • Nov 20, 2018 at 1:35 am

      Please don’t tell them to come to the Bay Area. We’re full. It’s far better wherever they are. They need to stay there.

  30. SuzeB
    Nov 20, 2018 at 10:50 am

    Hoping and praying for conditions to deteriorate here in Boston, Cambridge/Somerville. Wishful thinking perhaps for a long term renter like me waiting on the sidelines?

    Many of the property owners I know shake their heads and state rather emphatically it won’t happen here. The Boston Globe agreed back in January 2016 when they published a foreboding article “Think Boston housing is expensive now? Wait 5 years?”. So far, they’ve been correct.

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