Let's get a few things straight

First off, who the heck am I to set anything straight...

look here, if you're curious about that.

There is a smokescreen of misinformation in the media and on people's lips (many of whom really should know better) about the current state of Seattle Area Real Estate.

Speaking of the media, I have heard that the person who writes the headlines is not generally the same person who writes the article. Evidently headline writing is a specialty unto itself. That explains a lot.

Probably the most egregious example is when the media makes sweeping statements based on not-enough-data. Such as a recent headline which said: "Seattle Home Prices Slip From Last Year". ($50!!! The median price in Sept 2007 had fallen to 399,950 from 400,000 in Sept 2006) This is no more useful a piece of information than when they were touting the amazing double digit appreciation that was supposedly occurring monthly over the last few years. Those articles are nearly always based on the last month as compared to the same month a year ago, which sounds fine on the surface, but...is it enough information on which to draw any useful conclusions? The real estate market is a fluid dynamic thing---it takes at least a full year to account for the unique set of ups and downs of any given year. In other words, to derive a useful statistical sample one must compare years, not months. It is reasonable to ignore the headlines having to do with the latest market ups & downs.

If you want to know what is happening to your neighborhood feel free to contact me.

Here are annual comparisons of the last three years.

Mortgage Meltdown a myth?!

At least the way the media has been portraying it.

Over the last few years, due to the ever rising national market a group of investors, raters and people-who-should-have-known-better were making loans that you and I would never have considered making. Bad credit, overextended, and often with far too little disclosure to the borrower as to what they were getting into.

When the market levelled off (and especially in the areas where it has fallen due to overheated appreciation before), all of these investors, raters, and people-who-should-have-known-better looked around at what they had done and said, "Oh %&$#!". and stopped what they were doing.

To get a mortgage loan now, it has to make some sense. In other words, loans that you and I would make. There are still some amazingly liberal loan programs with Bank of America's Acorn Program or FHA as just two examples. There is plenty of mortgage money available if you qualify.

The problem that those investors, raters, and people-who-should-know-better created did engender a crisis in another way. The loans they made, in some cases are impossible for the borrower to keep up. Especially some of the Zero Down Option ARMS where not only did the payments begin at an artificially low rate, but until the principal balance got to 110% of the original full loan amount, the payments could be paid on a portion of the interest only, so they were kept doubly artificially low. Sometimes the borrowers were only qualified at that lowest payment and never told what they were getting themselves into! Those situations coupled with a static or depreciating market can be safely called a crisis.

Evidently it isn't all helpless victims losing their homes---many of the foreclosures have been investors who got into these types of loans betting on the market continuing to appreciate wildly who just decided to cut their losses.

From a national point of view the bottom line is that some bad loans were made based on shortsightedness and the perception of an ever-rising national real estate market. Most of those will make it difficult for the homeowner to keep up on their payments but they will find a way. Some will be foreclosed. Foreclosure properties tend to sell for somewhat less and if there are enough of them, they will drive values down over the short term. So again, there is a crisis but not the one the media is selling.

The good news is that Seattle is probably impervious.

The only thing we have to fear is fear itself.

With our growing robust economy, the media is the Seattle real estate market's primary nemesis.

In most of the Seattle area, appreciation has been steady and sustainable ---there never really was a bubble to pop. Also less of those bad loans were made here and the foreclosure rates are predicted to be well below the national numbers.

So only time will tell, but it looks like we are back to a more balanced market after years of the scales being tilted toward the sellers. Properties are still selling though there is a lot of inventory. Odds are real estate appreciation will slow but not end for most of the Seattle area and we will all live happily ever after...

or not.

Date: Thursday, October, 11th 2007 @ 12:53:01 PM
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