- February 4th, 2010
- by Galen
- real estate
Crystal Ball: 2010 Home Sales Will Surprise – In a Good Way
Some background:
From late summer through October 2009, Uncle Sam offered first-time buyers $8,000 if they bought a home by the end of November. As a country we “brought sales forward” – we convinced people who would otherwise have bought in December or January to buy in November.
How Sweet?
When the November numbers were released, the National Association of Realtors and the media feigned surprise that sales were so strong (up 7.4%). (“November home sales leap,” “November existing-home sales surge“). But it was no surprise. Everyone watching the market knew it was going to happen.
Then in December, existing sales plunged 16.7%, even though the tax credit had been extended. This wasn’t a surprise to anyone watching the industry either. People who wanted to buy did so in November and by the time the extension was announced — just 34 days before it would’ve expired — nearly every person who could’ve used the credit had already made an offer. But “plunged” makes for good headlines.
Our prediction:
We have a crystal ball here at Estately: Home search traffic.
See, before prospective homebuyers apply for mortgages, or choose agents, or go to open houses, they dip their toes in the market by searching for homes on our site. When our traffic spikes, we see spikes in home buying a few months later. And we finally have some good news to report!
2010 will start slow–January sales will be off. (Estately’s partner agents helped a lot of people buy homes this January – many more so than last year – but we’re fairly certain that has more to do with us than the market.)
Sales will be low because people who would have put in an offer that would close this winter already did so in the fall — they wanted that $8,000. (Note: that means less competition if you are buying a home right now.) We also expect low sales for January because we saw soft traffic in November/December.
Spring and summer of 2010 will be different! Every year, there is an annual increase in people searching for real estate from December to January. But this year we are seeing a much bigger bump – 80% bigger. This year we are seeing 40% more people searching for homes on Estately in January than we were in December. That’s a huge change in homebuyer sentiment.
Home search traffic is a leading indicator: we saw traffic really jump last August – three months before sales jumped in November. Based on previous annual trends, this dramatically increased interest and traffic will translate to strong home sales this spring and summer.
Regionally, the Big Winners are Chicago, Atlanta, San Diego and Seattle with huge bumps. The rest of California – and especially Sacramento - not so great.
Here is a table ranking the markets we are in:
|
|
Disclaimer: This is a short-term prediction. I’ve personally been a pessimist about the real estate market since 2004. But back then I jumped the gun, since the market continued to rise for 2 years. And I didn’t quite expect the magnitude of the 2006 correction, either (what a ride!). Whatever happens in 2010, long term, I believe we’re in a holding pattern for stocks and home prices – there will be upward swings and downward swings. The Case Schiller index seems to show way less room for prices to go down than it did at the peak of the bubble and thankfully homebuilders have virtually stopped building. Mid- to Long-term home prices and sales are stabilizing.
And a nod to the contrary evidence out there is warranted: While Google Trends seem to contradict me (see Seattle Bubble for analysis), I’m skeptical of Google Trends as a measurement tool here – buzz about real estate, home prices, and mortgages can cause “real estate” searches, but browsing homes on an MLS-based search site like Estately means business.
Join the discussion »- September 4th, 2008
- by Galen
- Blog, real estate
Interview with The Tim of Seattle Bubble
Tim Ellis is the founder of SeattleBubble.com, Seattle’s premier bubble blog. It’s the place to go for serious market discussions. A typical post will pick up 50+ comments, which is virtually unheard of on blogs that don’t allow anonymous posters. I’ve interacted with “the_tim” over the last couple of years on Rain City Guide and at Seattle Bubble and met him in person at a real estate blogger dinner last summer. He was a nay sayer when the conventional wisdom was real estate could never go down in value.
We at Estately asked him to do this interview in part because we are fascinated by market predictions, by metrics and the people who wield them, and we’re fascinated by the success The Tim has found with Seattle Bubble.
Tell us a little about yourself – your age, where you live, your job.
I’m currently twenty-eight and I live in Kenmore (it’s just west of Bothell and north of Kirkland). I’m self-employed, pursuing a variety of projects both online and offline, of which Seattle Bubble is one.
Do you own a home? Did you own before you started worrying about the bubble?
My wife and I do not own a home yet, but we would definitely like to someday when it makes sense. I started Seattle Bubble in fall of 2005 after we had spent several months looking around for houses. I wouldn’t say I am or was “worrying about the bubble,” I just was seeing things that didn’t make sense and wanted to get as much information about the market as I could. I figured if I was putting all this time into gathering the information, I may as well put it online for other people that might be interested.
What interested you in the housing bubble and when did you decide to start it? Was there one event or something that inspired you?
As we looked at houses in the Bothell / Woodinville area in 2005, we found that even with our above-average income a tiny mobile home was about the best we could afford without taking out an unacceptably dangerous loan. That seemed seriously out of whack to me, so I started researching the market, which led me to newspaper articles and blogs about the “housing bubble.” Many cities had their own blogs specifically exploring the housing bubble for that area, and since Seattle didn’t have one at that time, I figured I may as well start it myself.
Why do you care about the bubble? Home owners want to “root for the home team,” but why spend time and energy rooting against it?
I care about the housing bubble because I don’t think that the rapid price gains we’ve seen in recent years is good for anyone, home “owner” or not (does someone that put zero down and got an interest-only loan really “own” anything?). When prices get out of hand as they have in Seattle since 2004, it becomes harder and harder for people to get into “entry-level” houses, which inevitably affects the entire market. It’s also dangerous for the economy as a whole (as we are now seeing) for so much to be riding on permanently increasing home values.
Are there other blogs that inspired you or continue to inspire you today?
When I first started researching the housing market I stumbled on a handful of other “bubble blogs,” including Ben Jones’ Housing Bubble Blog, Calculated Risk, and Rich Toscano’s Professor Piggington. Piggington is probably my favorite housing blog out there today. I love his tagline: “In God We Trust. Everyone Else Bring Data.”
What are your three all-time favorite posts on the Seattle Bubble?
Probably my favorite posts are the ones where I dig into the data to see if the clichés spouted by real estate salespeople hold any water. For example, I tackled the “we’re running out of land / homebuilding isn’t keeping up with population growth” claim in the post Big Picture: Supply vs. Demand (follow-up here). I examined the claim that job growth has been a primary driver of Seattle home prices in the post Does Job Growth == Home Buying Demand? I guess my third favorite would be Seattle Soft Landing: Do The Math (and its 2008 follow-up), where I explored what it would look like for prices to “flatten out” while incomes catch back up.
What was your goal when you started Seattle Bubble? Have your goals changed?
When I started Seattle Bubble, my goal was just to take all this research I was doing for myself and put it online to share with others. Today I’d say those goals are largely unchanged. I just want to provide a good resource where people can find out what’s really going on in the local housing market. Your only other source of this kind of information is newspapers and TV reports, which rarely do more than republish real estate press releases.
If there is one metric to judge the size of bubbles, what would it be?
There are many economic fundamentals that you can compare with housing prices, but I think the best metric is probably rents. Seattle Bubble contributor Deejayoh did a great post on this subject back in January: Rents to Rise, or Home Prices to Fall?
Is the bubble popping in the way you thought it would (as dramatic, faster, slower, etc)? Anything happening differently?
I didn’t really have much of an idea how things would play out once we finally topped out and started the ride back down. My best guess has been that the decline will be spread out over many years, but there are so many factors at play that all I really know is that things will be going down, and we won’t be returning to 10%+ appreciation any time soon.
Where do you see the housing market going from here – 2 years out? 5 years out? 10 years out? Will the world end? Will you ever be gung-ho about buying a home?
See above. My guess is that prices will decline 10-20% for a few years, then be flat to slightly negative for 5-10 more years after that. But who knows. I think once the correction plays out the housing market and the overall economy will be in a much better place than we are today, and I think everyone should be looking forward to that time, not trying (in vain) to stop it. I guess I’ll be “gung ho” about buying a house when it makes financial sense and the housing market is finally healthy again. I define “healthy” as home prices that are in line with their historic relationship to rents and yearly price gains of 3-5%, tops.
It’s clear that the bubble has hurt the economy, but do you see anything good coming out of it?
Hopefully we’ll learn from our mistakes and in the future we’ll avoid repeating the “irrational exuberance” that inflated this whole mess in the first place.
Are you just a cheapskate real estate lover who is rooting for the downturn so you can get a mansion on the cheap?
Join the discussion »Hah! How about just a financially prudent guy that wants to buy a modest house to live in without taking out a suicidal loan?
- August 1st, 2008
- by Galen
- Blog, real estate
Seattle Bubble wonders aloud if Seattle and Portland are “outliers”
I’m no prognosticator, but I do like reading others’ predictions. Seattle Bubble has a nice chart comparing the amount of upwards price movement during the boom against the amount of downward price movement in the recent, ehem, “soft” market. The takeaway:
Join the discussion »This snapshot does appear to support the assertion that there is a good correlation between boom and busts cycles across markets -and that generally speaking, the more you go up, the more you go down. But there appear to be outliers versus the trend: Namely, Detroit on the down side, and Seattle, Portland, Charlotte, and possibly New York on the up side. This is interesting to me because the relationship between up and down markets is usually cited as evidence that the Seattle market will remain relatively stable compared to other markets – when according to this view, we appear to be bucking the trend and perhaps poised for a fall. We are down 7% to date when the trend line suggests we should be off 15-20%.
