January 9, 2008 at 12:46 am
· Filed under Bites of Kitsap, Bremerton WA Real Estate, Buyers, Port Orchard Real Estate, Poulsbo Real Estate, Real Estate Bites, Sellers, Silverdale WA Real Estate, Sparks from Sparky
“But concerning that day and hour no one knows, not even the angels of heaven,
nor the Son, but the Father only.” ~ Matthew 24:36
Okay, let me start off by saying that I mean no disrespect here. I am just as anxious for the 2nd Coming to happen as the next card-carrying evangelical fundamentalist (Come quickly, Lord Jesus!). But it seems that lately, we’ve had just as many people attempting to forecast the future of real estate as we do those who’ve attempted to predict the date and time for the return of the Son of Man.
In both instances, it’s simply a best guess. No one knows for certain what’s going to happen and when. Certainly there are indicators and previous cycle patterns to analyze and compare. But the reality remains, no one knows for certain.
But in real estate, there is one thing we can say with confidence - “No Two Markets are the Same!”
Just because some Wall Street ‘wannabe’ claims that the 2nd Great Depression is looming right around the corner, doesn’t make him right. Those guys earn a living on speculation! And if one more TV News Starlet, scratching her way to higher ratings, refers to the current housing market as a ‘Holocaust,’ I promise I’m gonna hurl!
Are there areas in the US housing market where things are tough? You betcha! In some places, prices are dropping, valuations are decreasing, and foreclosures are rising at an alarming pace.
But there are just as many housing markets, if not more, that are experiencing ‘normal‘ conditions. By ‘normal,’ I mean, experiencing the usual cycles historically associated with the real estate market. Every 8 to 10 years or so, we go through a market adjustment. After enjoying several years of very fast or brisk activity, the market begins to slow.
It is during these downturns, that the pessimistic media naysayers of ‘doom & gloom’ act as though these kind of cycles have never happened to us before. The constant bombardment of their incessant negativity begins to affect us, and their created perception starts to become our reality.
Certainly, if one lone trader can adversely affect the cost of crude oil, then the constant negative bombardment of media hypesters can easily influence our perceptions over the current real estate market.
The real truth is that real estate is bad in some places, but not so bad in some, and still fairly good in others. Please, don’t allow the Media’s broad brush strokes to paint an incorrect picture of YOUR market. If you’re looking to buy or sell, consult with your local real estate professional. No one is better equipped or knows your market more intimately than someone who is actively involved in providing expert representation in your specific area.
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Bob Broad wrote @ January 9th, 2008 at 1:22 am
I’m in Portland. Transactions are down. Inventory is up. Prices are too. Still. Our city planning and reverence for green spaces meant that we did not over-develop earlier this decade. Most of our development has been condos, and that’s where our inventory is highest. The problem is short term, and our inventory problems should start to get worked out mid-way through the year. I expect prices will drops will extend beyond that, but 2009 looks better. The macro trend in Portland is the addition of $1M new residents over the next 15-20 years; combine that with public policy and city planning that favors density, and it’s hard not to be bullish over the medium to long term.
Just to chime in, things are good in my little area of West Virginia. Homes are actually selling faster than a year ago and we’re expecting a busy spring. Now that we’re out of the holidays, things are already beginning to pick up.
Our biggest problem is that people THINK there is a problem and hesitate to get into the market.
Oh you are so right, Rich. Even in my county the different area’s have different days on the market and some have taken a hit worse than others. Ann Arbor still only has a cold but other parts of the county have pneumonia.
Hear, Hear!!
I won’t try to say that last year was an easy one, but I agree fully that this is a normal market. Dips in any market are as normal as when the market is overly brisk. And, like you, the media hype gets under my skin. Good post Sparky. 
Rich - great points here. The local market is so critical to examine and there are numerous examples of that here in Southern California. Yep, overall sales have dropped but consider the record year we had a few years ago? And what you see in the media are the county averages that are not an accurate reflection of many local market where sales in some are up, prices are up and so on. Other communities are taking more of a hit. With inventories in many communities in the 5 - 8 month range, things are NOT what they appear to be in the media.
What IS encouraging is that a number of buyers I have talked to SAY they ignore what the media is saying because they know it is not accurate and they are researching things on their own (or with my help). Bravo.
I like the analogy. Interesting how in both cases, the doom saying often comes from those within the circle and not necessarily those on the outside.
I’ve painfully listened to many radio shows as I’m driving around where people are trying to predict this is the end times (most often referencing Matthew 24). I have also been in 2 real estate offices locally here in the past few months where it felt more like a morgue. I went to one as an invitee of the broker to learn what they were all about, the other I was there to meet with a cross sale agent. Both offices were loaded with negative conversation about the market.
If those who claim to be followers of Christ can’t accept that we’re to be prepared at all times, and those who claim to be real estate professionals can’t accept that we often make our own market, this trend will continue.
Bait and switch? Hardly! Anyway- I couldn’t agree more. Real estate is local. Very local. Some particular neighborhoods even within a city can be suffering while others are going gangbusters. The media likes to do a wide sweeping generalization about the market, when it is impossible for them to really understand the micro-markets.
The media has blown the whole thing out of proportion. The media is calling for tougher restrictions on mortgage brokers when there has never been a mortgage broker approve a loan. Lenders do that. The people who should be to blame for the mortgage mess are the ratings agencies. They rated the paper as investment grade, which make it salable on Wall Street. If they had done their job properly, we would not be in this mess because there would have been no buyers for the paper, so it would not have been written in the first place. The media has failed to place adequate blame on the ratings agencies, and they have blown the entire problem so out of whack that it is affecting ALL real estate, which is so very unfortunate. People should not be deterred by the media from buying real estate. Many metropolitan areas are doing very well in terms of real estate. All is well in many, many cities and areas across our great country.
[...] This phenomenon of “bad news sells” isn’t exclusive to Bonita Springs Florida. From Kitsap to the Blog by the Bay everyone has grown sick tired of it - moving on to sick and tired of being sick and tired. It’s like the media is now just trying to “out bad-news each other”. [...]
Sparky wrote @ January 11th, 2008 at 12:11 am
Bob: I think that reflects the Pacific Northwest in general. We’re fortunate to have such consistent and steady and somewhat ‘controlled’ growth. Thanks for stopping by!
Sarah: Glad to hear things are doing well in your small corner of the world. Yes, the media is impacting activity here as well. But local blogs like this are an excellent means of stemming the negative tide!
Missy: Great analogy! There are markets within markets, and even here on the Kitsap Peninsula, some areas are harder hit than others. But overall, we still have a fairly stable market, relatively speaking. Good to see your smiling face pop up here!
Buckwheat: Bite Me!
Jeff: Yes, today’s Buyers are much more sophisticated and don’t buy into everything they hear or read. The beauty of conversational blogging is that we can voice our experienced opinions, and counter what the mass media portrays. Thanks for poppin’ in!
Matt: Nice to see another local blogger among the comments! It’s hard not to be adversely affected by all the negativity. Especially when agents start leaving the office to pursue other vocations, and your listings languish for so long. But there are opportunities to be made! Regardless of what the market dynamic is, people will always be relocating, buying and selling. Nice to see you here on SBB!
Ginger: Don’t get me started on the whole ‘Bait & Switch’ thingie! The media rarely ever gets the full picture on anything. They simply concern themselves with was creates good ratings or stirs emotions. Now all the news agencies are crying “Recession!!” …wonderful.
Sparky wrote @ January 11th, 2008 at 12:15 am
Wade: I think the blame should be shared by many, not just the ratings agencies. In a brisk market, many people get lazy or greedy. It’s unfortunate that the media does have such influence. There are many Buyers out there who could benefit from the market right now.
Chris: Thanks for the Link Love!
Watch the banks.
People overpaid for homes for several years, and the banks enabled this. The securitization of mortgages is going to end up as a stick-figure of it’s former 600# self, because the banking industry will experience the consequences for not doing its due dilligence and promoting wholesale fraud.
Homes are worth what people can pay and thier expectations of financial return. When banks have an endless supply of money to throw at housing, and people have a high expectation of tremendous financial return, home prices go up dramatically.
If the banks can no longer securitize, and they demand 20-30% cash down payments, while people reasonably expect home prices to continue to fall 10-20%/year, home prices will fall dramatically.
No place is special or immune from these phenomena. Kitsap is a middle-class community, and home prices need to reflect that. Pretending that we are immune from economic reality will only make those who participate in that fantasy unexpectedly poor and destitute.
Countrywide was “saved” to prevent the actual market value of securitized mortgages from having price discovery. Had that occurred, securitization would have ended immediately, and the chain-reaction of cross-current financial defaults in the US banking system would have reached critical mass.
Yes, that is how depressions start. This is, by no means, over.
Sparky wrote @ January 13th, 2008 at 11:07 am
Devil’s Advocate: We’ve missed you! I agree with several of your points. But I’m curious…is your whole purpose of existence to simply sit back and tell everyone “I told you so” when the financial world eventually implodes? What exactly do you expect the common home consumer to do? Live in their cars and pray for a quick end? My whole point to this article was to provide some measure of balance to what the media naysayers are promoting. Kitsap County is NOT immune, but it’s NOT Florida, Stockton or Detroit.
I would imagine that you probably own a bomb shelter and regularly require your family to conduct ‘duck & cover’ drills?
Sparky,
It is nice to be missed. My point is not to come over here and shake the cage for my personal amusement, but to help provide some balance to people that have never considered that real estate might be a financial millstone in their lives.
No, I am not interested in any “I told you so” vindications. If we get what I think we will get, people will not be interested in anyone doing a victory lap. The hardest part of going against the crowd is learning to bite your tongue more than letting it fly.
My goals are to provide for my family while avoiding unnecessary risks and trendy hazards.
What do I expect the common home consumer to do?
The time for prudence is starting to pass. I live in Kitsap with a family and I seem to get by just fine without owning a home. We don’t live in our van. I’ve got 2 acres on the beach and it costs me about 1/3 of what it would cost me if I rented by using the intermediary of a mortgage. Why the living options seem to fall into the binary possibility of “owning” or being homeless is something that I just don’t have the sophistication to understand. I seriously question the wisdom of Kitsap homeowners who are pressing their bets on a turnaround in residential real estate. My guess is they will be ruined if they can’t continue to meet the payment structure of their mortgage. Those that can will be taking paper-profit losses in the neighborhood of 60-80%. Yes, you read that correctly.
Also, there is absolutely nothing the government can do to amelioriate the situation. Economic reality is just that - reality.
Yes, the informal financial caste system we have established puts me on the verge of being an “untouchable,” but I seem to be just fine. That extra $3500/mo that I save, along with sidestepping the capital depreciation of “my largest investment” makes me sleep very well. Not having a 7% transaction cost is also a plus. By the way, that $3500/mo is tax-free.
While we are not Florida, Stockton, or Detroit, we could still lose a huge amount on the homes we all own. Incomes in this area are low. Even Bainbridge incomes don’t justify homes at half the price they are currently selling. One thing we all need to keep in mind is that Florida, Stockton, and Detroit all use the same banking system we do to finance our homes. Be careful before you look down your nose at other parts of the nation. Stockton has many foreclosures because it is severely overpriced…just like us. Don’t confuse timing with immunity.
Regarding the “measure of balance,” to what the national media is saying about our housing market and finance system…
I can assure you that the national media is being extremely dovish and is not reporting 90% of what is really happening. There are many reasons for this. The most obvious is that most Americans are preoccupied with their personal amusements and don’t have time to follow dry subjects like finance. Also, those that write the news don’t want to confront the realities of their own endangerment, and finally we like to always believe in a better tomorrow. After all, who likes for people to think of them as digging bomb shelters?
I do enjoy the avuncular nature of your blog, and the fact you have given me an informal “official” status here.
All the best,
OSBBDA
synthetik wrote @ January 13th, 2008 at 11:15 pm
Wow. I’m shocked.
I thought that by now it would be clearly understood that home prices were going to fall everywhere - even in Kitsap.
I don’t think it’ll be as bad as Detroit, Miami, Las Vegas, etc… but I can easily envision 50-70% drops from the peak in 2006.
Deflation is a bitch.
Sparky,
I couldn’t agree with you more! I believe it was Gary Keller who phrased it ever so eloquently:
“Real estate is a local business, driven by local buyers and sellers, and best served by local professionals.”
– Gary Keller, Founder, Keller Williams Realty
“Real estate is a local business, driven by local buyers and sellers, and best served by local professionals.”
…and supported and financed by global credit markets.
The seemingly intentional self-delusion in these matters is simply mindblowing.
I went to a blog of a big, Eastside RE agent 11 months ago (before it started) and told her that I smell a banking crisis, and that RE will take it on the chin because of that.
Her answer? “I don’t give a RA about banking. This is about real estate.”
This is now a running joke between the two of us.
Sparky wrote @ January 14th, 2008 at 4:20 pm
Dear OSBBDA,
Their intentions are honorable, and not necessarily self-delusional. There is truth resident in both of your views. You obviously provide a much larger ‘Big Picture’ approach, which, unfortunately, is rather lacking within our industry. They teach us how to ‘fill-in’ the blanks and practice RE law without really practicing law. We pride ourselves on knowing our respective markets intimately by spouting off ‘Days-on-Market’ and ‘Absorption Rates.’ And a good many of us are genuinely committed to representing our client’s best interests above our own. But the majority of our rank & file do not understand the undercurrents of what drives and affects the ‘Big Picture’ of real estate. If we truly endeavor to professionally counsel our clients accordingly, a grasp of even just the basics of global economics would benefit the process tremendously.
Your views and perspective are welcomed here, and could certainly balance our delusions.
Uncle Sparky
Ricardo: thanks for stopping by! I apologize for not returning your call during the Christmas Holidays. How was your visit to Seattle? I hope we have the opportunity again in the near future!
I think RE agents are valuable for knowing their current market, and being able to match houses with buyers.
I think that RE agents get themselves into trouble when they start forecasting and dishing out financial advice without understanding anything beyond their immediate market. It’s one thing to ‘talk your book,’ but another to do what you are ill-equipped to perform.
Sparky wrote @ January 15th, 2008 at 2:48 pm
I think ALL of us get into trouble when we start to venture outside the realm of our chosen discipline(s). I’ll let YOU fly the planes, and I’ll be the home matchmaker. Thanks for assigning us ’some’ semblance of value.
Great Post Rich, and also a good discussion.
I made similar observations on my blog recently when I had the nerve to make predictions about 2008. Our Alaska economy is still putting right along, and real estate is following right behind. The Matanuska Valley is a bedroom community in the state so our real estate activity follows the state,s economy.
But, we are in a global economy and Alaska is a tiny microcosm of it. It’s hard to believe, but true that if the national or global economy gets sick…we will “feel the pain”.
Rich,
No need to apologize..I mean it “was” the holidays!
I absolutely loved Seattle! To be honest, it’s my kind of weather. Nothing like the weather here in Los Angeles! But alas my girlfriend says “we’re not moving!”
We were in for the week and drove up to Vancouver where I found more great weather. All in all, the trip was great! I hope to post some pictures later, maybe on Active Rain or my home blog.
Till next time!
RB
Jeff W wrote @ January 27th, 2008 at 12:11 pm
I am thrilled that there are you out there that are not falling deeply into depression about the Kitsap real estate market. Yes the media and their bosses do the spin and misrepresent the truth in such ways that they should be ashamed.
Kitsap County is growing big time. Lowels would not of built their new store in Port Orchard area is they thought we are doomed.
What bothers me when we read about Kitsap County is how certain areas of Kitsap are rarely given exsposure . Areas like Harper, South Colby, Southworth. These are wonderful waterfront communities that few have any knowledge of but has lots to offer. Condo living is going to be costly and condo fees will be a continual rise but not in the community of Harper for Harper Cove is a residential community with wonderful people and wonderful homes. Not in developements where you must pay for increasing association fees but homes that belong to you and except for the gov. do not have a say with any desires of change , color, etc. Communities such as Harper are going to become even more rare for those who desire a freedom that developements and condos do not offer.
Over a hundred million dollars has come into Port Orchard area, Manchester , and five more resturarnts are soon open. Developers and Business Investors are laying the ground work to rebuild Port Orchard into a mult purpose zone of stores and condos. There are inestment groups from Portland, Gig Harbor, and out of State that weaving the fiber of new developement. So down the future areas like Harper, South Colby, and Southworth will become even more quality living than it is presently.
Once Manchester first Condo has sold off all their condos priced closed to a million bucks and because they have city sewage system , more will begin to pop up.
Areas like Harper , Southworth, and South Colby are still on safe and good septics which means will retard such thoughts of condo life for years to come.
Harper Esctuary is getting a face life, Harper Park is great with a baseball field and walking paths, Old Corneal rd. that runs along the waterfront is great for the walkers and animals. Harper fishing dock offers excitement for th fishermen. Yes I am surprised just how little attention our areas here get attention unless those who do know want to keep our area a secret for many seniors who have held the properties here are on the move so those who know want to have that leaverage of purchase.
If Kitsap Property speak about areas to view they should be mentioning Harper Cove, South Colby and Southworth.
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