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Comments for Seattle Bubble



local real estate news, statistics, and commentary without the sales spin.



Last Build Date: Wed, 17 Jan 2018 05:55:18 +0000

 



Comment on Around the Sound: 2017 Puget Sound market wrap-up by Kmac

Wed, 17 Jan 2018 05:55:18 +0000

2017 is so yesterday.....



Comment on Around the Sound: 2017 Puget Sound market wrap-up by Richie Valez

Wed, 17 Jan 2018 03:51:33 +0000

"Its difficult to understand the RE bearish comments on this site given the supply demand imbalance and other fundamentals. I would suspect the majority of bearish comments and doomsday predictions are from real estate professionals who think that scaring readers into believing the Seattle RE bubble is about to burst will generate additional transactions that result in more real estate agent commissions. " I find it difficult to understand why people seem to think Seattle RE exists in a vacuum, like Seattle is just going to grow and grow and grow and the current pace, like the laws of physics say the Earth will keep spinning. The truth is Seattle RE in 2017 is largely equal to Amazon's stock price growth or decline. That means the question of Seattle RE equals an analysis of risks to Amazon's stock price prospects. Maybe the disconnect is because real estate investing is far more popular with Joe/Jane Six Pack than stock analysis...maybe it's because people have just drunk the Kool Aid that Amazon will rule the earth...who knows. The point is a lot can go wrong with Amazon's stock, which is not the same as Amazon's business, and few in real estate seem to connect the dots. There are all sorts of risks macro and micro. Amazon depends far more on its stock for payroll and retention than most large companies. On top of the potential downside from AMZN stock, now, with the HQ2 news, it's not even sufficient to say if AMZN continues to grow, then Seattle RE will too, because now Amazon is diverting future employment growth away from Seattle. The more home prices inflate, the more incentive Amazon will have to divert even more. Seattle's politics continue to go even harder left and resentment toward Amazon continues to build. The reasons to decouple with Seattle are growing by the day. Avoiding sales taxes were the reason Amazon ever decided to locate itself in Seattle. As of recently that is no longer a factor. Amazon is paying sales tax all over America. The biggest benefit to growing employees in Seattle is gone. Does that mean 2008 will repeat? Not necessarily. A garden variety recession or 30% market correct that happens every 8 years or so will hit Seattle harder in 2017 than ever before in its history because of Amazon. Actually it wouldn't even take a recession to hit Seattle real estate. Anything having to do with Amazon or its allocation of future growth to Seattle would also do it.


Comment on Real Estate Heat Index off the charts in 2017 by Kary L. Krismer

Tue, 16 Jan 2018 23:43:02 +0000

By uwp @ 114:
By Kary L. Krismer @ 106:
Just to put things in context, one of the stupidest things I ever heard an agent say was to price a house by taking its purchase price from years ago, and multiply that by the ratio of the current NWMLS median for the NWMLS area over the same number from the date the property was purchased. Ignoring the fact that different house types would have different rates of appreciation, even an NMWLS area is not sufficiently "local."
I agree that "guidelines" are only guidelines, but I use a similar bit of math to estimate sales price with moderate success, probably +/- 5% with what the house eventually closes at. Then again, I'm not an agent :).
On the topic of being an agent, I could see maybe doing that if you had a client who wanted a higher price than what you were suggesting, and the math worked out to support your number. And I could see it would have a bit more merit if the client's house was priced near either the mean or the median when purchased and you used the calculations based off of whichever it was. If the price were far from the mean or median I'm not sure what it would really tell you. Ignoring that, if you narrowed it down to zip code it might work even better. I've never done that though and would prefer a more detailed analysis.



Comment on Real Estate Heat Index off the charts in 2017 by Kary L. Krismer

Tue, 16 Jan 2018 23:38:24 +0000

By S-Crow @ 113:
Buying or Selling in Seattle? Just received Final Electrical Bill from City Light from a closing J-U-L-Y 2017. It's January 16, 2018. Agents, please inform your sellers refund disbursements can take this long. We have others from closings last year that we are waiting on. It is nothing short of a mess and the Seattle Times article this past weekend sort of shed a light (no pun intended) on the billing issues. S-Crow
You should have seen my transaction for a client buying a HUD property in Seattle, back when HUD required you use their escrow--the worst escrow in the world! It was ridiculous because Seattle Utilities' payoff was always padded in an amount that exceeded the escrow's authority. After two extensions they finally found a solution, and it involved putting the utilities in my client's name before closing, and without permission! I don't remember why that helped, but it worked.



Comment on Real Estate Heat Index off the charts in 2017 by uwp

Tue, 16 Jan 2018 20:49:32 +0000

By Kary L. Krismer @ 106:
Just to put things in context, one of the stupidest things I ever heard an agent say was to price a house by taking its purchase price from years ago, and multiply that by the ratio of the current NWMLS median for the NWMLS area over the same number from the date the property was purchased. Ignoring the fact that different house types would have different rates of appreciation, even an NMWLS area is not sufficiently "local."
I agree that "guidelines" are only guidelines, but I use a similar bit of math to estimate sales price with moderate success, probably +/- 5% with what the house eventually closes at. Then again, I'm not an agent :) Obviously, if I was seriously looking at a home or something I would dig deeper, but it's handy for seeing something pop up in my neighborhood with a list price designed to get a bidding war and have a quick rough idea of where it will end up.



Comment on Real Estate Heat Index off the charts in 2017 by S-Crow

Tue, 16 Jan 2018 20:41:26 +0000

Buying or Selling in Seattle? Just received Final Electrical Bill from City Light from a closing J-U-L-Y 2017. It's January 16, 2018. Agents, please inform your sellers refund disbursements can take this long. We have others from closings last year that we are waiting on. It is nothing short of a mess and the Seattle Times article this past weekend sort of shed a light (no pun intended) on the billing issues. S-Crow



Comment on Real Estate Heat Index off the charts in 2017 by Kary L. Krismer

Tue, 16 Jan 2018 18:49:49 +0000

By Kmac @ 111:
I think doing R-49 in the attic would probably have a reasonable payback period Limiting air flow is a key to efficiency as well as adding insulation.
I should have mentioned that our ductwork was both sealed and insulated. That had an incredible impact on our heat bill--more than a 20% savings. We also did the crawlspace insulation at the same time, but I'm attributing most of the gain to the ducts. We did the attic later and quite frankly I didn't notice a bill change at all, and I keep rather good track of energy use, noting also outside temperature. It did help slightly in the summer keeping the house cooler. What I always wonder is what's the payback period on new window frames, particularly if the old ones were already two-pane. Of course there are other benefits over aluminum, like less condensation, but I can't imagine the payback is less than 10 years.



Comment on Real Estate Heat Index off the charts in 2017 by Kmac

Tue, 16 Jan 2018 18:19:15 +0000

By Kary L. Krismer @ 108:
By softwarengineer @ 104:
Imagine a proportional utility bill on an old 2x4 frame insulation...mine is 2x6. 50% more insulation HAS to make a big difference to you folks that don't understand math and science.
That's why I said insulation could be updated "to some extent." The walls are typically the exception because of the use of 2x4s, although there are some enclosed ceiling areas that have issues too. For my house the two biggest energy savers were insulating the ductwork and getting rid of the Honeywell thermostat which did not allow an adjustment of swing. It's amazing what they didn't insulate back in the days of cheap energy. Most houses built before sometime prior to 1960 might not have any insulation in the walls.
You could add foam and then new siding, but that is expensive and a negative return on dollar for many years... I think doing R-49 in the attic would probably have a reasonable payback period Limiting air flow is a key to efficiency as well as adding insulation. I have noticed that in my detached shop, that is finished on interior, that if I keep the heat at a steady upper 60's - 24/7 - I am using way less electricity than if I turn the heat down at days end. The thermal mass of the concrete, drywall and everything else in the room absorbs heat and radiates it back. And much less moisture problems as SWE suggests. I also keep some Dri-Z-Air cannisters in 2 opposing corners and empty them every other week. No more cycling the heat up and down - just one consistent temperature.


Comment on Real Estate Heat Index off the charts in 2017 by softwarengineer

Tue, 16 Jan 2018 18:12:32 +0000

RE: Kary L. Krismer @ 108 - True Kary They also have Seattle area leak detection specialists to assist energy efficiency patching on old structures....but I'll be blunt Kary...anyone who understands the basics of thermodynamics knows insulation is the key, if not sole solution, to energy efficiency. Ask a good home inspector....they'll tell ya the same thing....



Comment on Real Estate Heat Index off the charts in 2017 by N

Tue, 16 Jan 2018 17:58:28 +0000

https://wolfstreet.com/2018/01/16/sales-prices-of-manhattan-office-buildings-as-chinese-buyers-absent/ While not residential and not Seattle, I wonder if anyone has any insight to what the current demand from Chinese buyers is like given its been most of a year since the tighter controls on outflows from the Chinese government. Of course if they are using the tactics from the above article I posted perhaps they are getting around it.



Comment on Real Estate Heat Index off the charts in 2017 by Kary L. Krismer

Tue, 16 Jan 2018 17:55:34 +0000

By softwarengineer @ 104:
Imagine a proportional utility bill on an old 2x4 frame insulation...mine is 2x6. 50% more insulation HAS to make a big difference to you folks that don't understand math and science.
That's why I said insulation could be updated "to some extent." The walls are typically the exception because of the use of 2x4s, although there are some enclosed ceiling areas that have issues too. For my house the two biggest energy savers were insulating the ductwork and getting rid of the Honeywell thermostat which did not allow an adjustment of swing. It's amazing what they didn't insulate back in the days of cheap energy. Most houses built before sometime prior to 1960 might not have any insulation in the walls.



Comment on Real Estate Heat Index off the charts in 2017 by N

Tue, 16 Jan 2018 17:55:18 +0000

An interesting read on what lengths some chinese apparently go to in order to buy canadian property. Wonder if this applies here? http://vancouversun.com/opinion/columnists/douglas-todd-explosive-b-c-court-case-details-seven-migration-scams



Comment on Real Estate Heat Index off the charts in 2017 by Kary L. Krismer

Tue, 16 Jan 2018 17:48:58 +0000

By wreckingbull @ 102:
RE: Kary L. Krismer @ 88 - Kary, let's be honest here. That daft old trope is stupid. How about "All real estate is a mix of local, macroeconomic and irrational psychological trends" Does that work for you?
Stupid would be too strong of a word because "local" matters a lot all the time. Changes in macro conditions and trends are somewhat infrequent. But yes those other two factors do come into play. Just to put things in context, one of the stupidest things I ever heard an agent say was to price a house by taking its purchase price from years ago, and multiply that by the ratio of the current NWMLS median for the NWMLS area over the same number from the date the property was purchased. Ignoring the fact that different house types would have different rates of appreciation, even an NMWLS area is not sufficiently "local." It's not uncommon that being some direction from a certain road makes a considerable amount of difference in value.



Comment on Real Estate Heat Index off the charts in 2017 by softwarengineer

Tue, 16 Jan 2018 17:24:20 +0000

RE: softwarengineer @ 104 - Educated Idiots Believe Open Border Asian engineers will make insulation unnecessary....after all, they are so much better than lower paid American ones....LOL Unrelated to post....did you hear t the Detroit Auto Show? Trucks are King now. FCA [American Engineered Dodge] stock is leading the Big Three. 31% dividend GROWTH. Not only did Americans design them; they're highest quality and cheapest in price too. The Toyota Corolla is priced about the same as a Dodge Charger. What is American made anyway? It sure isn't American engineered anymore....LOL.



Comment on Real Estate Heat Index off the charts in 2017 by softwarengineer

Tue, 16 Jan 2018 17:14:51 +0000

RE: softwarengineer @ 103 - Its Also a Great Selling Point Too I can sell the house and brag about my $354/mo Christmas Heating/Light electric bill on my 1460 SF rambler design....it was high and its a selling point [I don't need incense covering up the mildew odor when listing the house....LOL]. Leave your heat on high if you like clean air in the winter...ask an allergy doctor if you want to disagree. Imagine a proportional utility bill on an old 2x4 frame insulation...mine is 2x6. 50% more insulation HAS to make a big difference to you folks that don't understand math and science.



Comment on Real Estate Heat Index off the charts in 2017 by softwarengineer

Tue, 16 Jan 2018 17:05:44 +0000

RE: Kary L. Krismer @ 59 - Old Versus New Houses??? Ask a recent Bellevue home Owner about the rusty water from the 60 year old Bellevue infrastructure. Ask a New Home Owner in the Seattle area how big their lot is. Ask a Seattle home owner where guests can park. Ask an Amazon worker how they can pay rent in Seattle with their dinky pay. Old homes are not energy efficient and I'm sure old home owners would never admit they keep the heat off to save money and this causes mildew BTW...do you like a nice warm clean smelling house in the winter? Buy a small energy efficient one then....my heat is never turned down. I don't like mildew.






Comment on Around the Sound: 2017 Puget Sound market wrap-up by Trillo

Tue, 16 Jan 2018 07:16:02 +0000

RE: softwarengineer @ 29 - When I spent some years at MSFT not too long ago before retiring young, there were plenty of farm boy, country girl personas still left over from many of the "originals" from 20-30 years ago. In fact, it looked a lot like a farming community I lived in for a brief time when I was a kid where you saw acid washed jeans, mullets, and some ladies with hair down to their Ars that looked like they either cut it themselves or never cut it at all. These stylish individuals also have and drive a Ferrari or two so it was always fun to watch the new Gen Y's come in and make fun of people and then realize they knew not of what they speak. Many of these fine, stylish people make up many of the multi-M$ GM set that are still there so they have always had a regional flavor of the original ag/blue collar communities surrounding them as they had to pick up massive head count during the boom growth years. They also absorbed quite a few local manufacturing workers before off-shoring and those people became PM's and rose and rose and rose as it happens when you have a start up and then rapid growth. It's all hands on deck, grabbing whoever as as fast as you can. They essentially still have the style they started with and really don't and don't have to give a flying flip about what anybody thinks....and those folks will always have ability to impact housing prices as will their kids. There are still a lot of em around.



Comment on Real Estate Heat Index off the charts in 2017 by toad37

Tue, 16 Jan 2018 04:34:56 +0000

Most of the REIT's I'm pulling up are close to or in a bear market (20% off the highs) https://www.screencast.com/t/LyylEygo1U https://www.screencast.com/t/LlMFVOBEMkhl https://www.screencast.com/t/XqVGNAe9Xv https://www.screencast.com/t/EzfX3F38f



Comment on Real Estate Heat Index off the charts in 2017 by Matt P

Tue, 16 Jan 2018 02:44:21 +0000

By Kmac @ 99:
RE: ARDELL DellaLoggia @ 96 - I did say "outside of CORE areas", and the examples you gave are inside those core areas. I never disputed that people are paying those prices, my argument is is it realistic or sustainable if we have some kind of hiccup in the local economy and is it your place to question how much the seller paid for something? Look, all I am saying, like what was mentioned earlier by others, is that what works in one area won't necessarily work in others. People hear you go on and on about 3x lot and they think "gee let's head north and we can buy this land and we will build a nice home and it falls into the 3x paradigm etc. etc". Can you say UP SIDE DOWN? But, I want to hear more from Matt P about the Little House that Could. Even though the valuation process that was put forth seems to agree more with my method of valuing older properties, the presentation seems somewhat discomforting for some reason. At 3x lot you are in a different place than the piece's author. Good day! Edit: I see Matt P chimed in while I was typing this out...
RE: Kmac @ 99 - Basically, land is overvalued out in the suburbs because there is not enough high density housing inside the core of the city. You'd be crazy to build 9x $500k land value in the suburbs because no one is going to want to live in apartments that far out and a house than expensive would never sell or fit on the property. That's why they're going so far in the first place. But with land so overpriced, ever larger and more expensive houses are being put on them to justify the land value, but there's only so high that house can go. We're finally seeing a construction boom bringing in more apartments which will turn into condos which will bring people back into the city and drive down land values outside the city - if it keeps going. If there's a large correction again, the cycle will start over, apartments won't get built, projects under construction and in the pipeline will be cancelled, and we'll go back to land values outside the city going crazy again because we don't have the high density housing we need. A lot of it is a NIMBY problem where people simply won't admit that large apartment buildings are the answer.


Comment on Real Estate Heat Index off the charts in 2017 by Kmac

Tue, 16 Jan 2018 01:31:42 +0000

RE: ARDELL DellaLoggia @ 96 - I did say "outside of CORE areas", and the examples you gave are inside those core areas. I never disputed that people are paying those prices, my argument is is it realistic or sustainable if we have some kind of hiccup in the local economy and is it your place to question how much the seller paid for something? Look, all I am saying, like what was mentioned earlier by others, is that what works in one area won't necessarily work in others. People hear you go on and on about 3x lot and they think "gee let's head north and we can buy this land and we will build a nice home and it falls into the 3x paradigm etc. etc". Can you say UP SIDE DOWN? But, I want to hear more from Matt P about the Little House that Could. Even though the valuation process that was put forth seems to agree more with my method of valuing older properties, the presentation seems somewhat discomforting for some reason. At 3x lot you are in a different place than the piece's author. Good day! Edit: I see Matt P chimed in while I was typing this out...



Comment on Real Estate Heat Index off the charts in 2017 by Matt P

Tue, 16 Jan 2018 01:26:53 +0000

By Kmac @ 95:
RE: Matt P @ 92 - The Little House That Could story seems to suggest that when a property has an improvement/land ratio of 3/1 that it should be re-developed back to a 9/1 ratio. ,(or some other higher ratio number where the improvements far outweigh the land value) Doesn't that fly in the face of the suggestion on here that the redevelopment must follow the formula of 3x lot and that a $600k lot must have a $1.2 million dollar improvement for a total value of $1.8 million - no ifs, ands or buts? This newly developed property would be a 2/1 (improvement/land ratio), which is even more under utilized than the example in the story. Maybe a $1.8 million dollar property should be a 200k lot (8/1 ratio-$1.6 improvements/200k lot) or perhaps a $600k lot should have a $4.8 million dollar improvement [YIKES!] placed upon it for a total value of 5.4 million (8/1 ratio).
RE: Kmac @ 95 - Yes, that is right. Traffic problems in the US are caused by the lack of population density. Seattle, San Francisco and Los Angeles should look more like NYC with a much more concentrated core, which would then spur better public transportation, but instead we just get sprawl until traffic is untenable and people are commuting from 4 hours away as is the case of people coming from Sacramento into the Bay area every day. We're too far along to simply scrap everything and start over, but continually building bigger houses and more and more expensive land is not going to make these places better, but maybe that will just crystalize Seattle's size and stop growth. I doubt it, though.


Comment on Real Estate Heat Index off the charts in 2017 by jon

Tue, 16 Jan 2018 01:09:25 +0000

By ronp @ 94:
RE: wreckingbull @ 43 - According to http://nursinghomediaries.com/howmany/ of the 78 million baby boomers 3.9 million will end up in nursing homes or assisted living. So good odds of dying from a fall or other causes in your house or apartment!
That article makes so many internal contradictions that it doesn't seem trustworthy enough to try to decipher. Here is a more reasonable and comprehensive set of statistics: http://news.morningstar.com/articlenet/article.aspx?id=564139 eg. 40%: The expected percentage of deaths in the U.S. occurring in nursing homes by 2020.



Comment on Real Estate Heat Index off the charts in 2017 by ARDELL DellaLoggia

Tue, 16 Jan 2018 00:51:57 +0000

RE: Kmac @ 95 - Haha! I think you added the “no ifs, ands or buts” part. LOL! Busy work day. I’ll try to respond to questions late tonight. I gave you three valid examples. No comment? You just don’t want it to be so even though I sent you proofs?



Comment on Real Estate Heat Index off the charts in 2017 by Kmac

Mon, 15 Jan 2018 23:24:37 +0000

RE: Matt P @ 92 - The Little House That Could story seems to suggest that when a property has an improvement/land ratio of 3/1 that it should be re-developed back to a 9/1 ratio. ,(or some other higher ratio number where the improvements far outweigh the land value) Doesn't that fly in the face of the suggestion on here that the redevelopment must follow the formula of 3x lot and that a $600k lot must have a $1.2 million dollar improvement for a total value of $1.8 million - no ifs, ands or buts? This newly developed property would be a 2/1 (improvement/land ratio), which is even more under utilized than the example in the story. Maybe a $1.8 million dollar property should be a 200k lot (8/1 ratio-$1.6 improvements/200k lot) or perhaps a $600k lot should have a $4.8 million dollar improvement [YIKES!] placed upon it for a total value of 5.4 million (8/1 ratio).



Comment on Real Estate Heat Index off the charts in 2017 by ronp

Mon, 15 Jan 2018 21:59:56 +0000

RE: wreckingbull @ 43 - According to http://nursinghomediaries.com/howmany/ of the 78 million baby boomers 3.9 million will end up in nursing homes or assisted living. So good odds of dying from a fall or other causes in your house or apartment!



Comment on Real Estate Heat Index off the charts in 2017 by toad37

Mon, 15 Jan 2018 21:21:44 +0000

It's cool looking at all the WA co's long term stock charts PCAR https://content.screencast.com/users/toad379304/folders/Jing/media/d17faf15-6bfb-44a2-abae-822ef8f63784/2018-01-15_1327.png



Comment on Real Estate Heat Index off the charts in 2017 by Matt P

Mon, 15 Jan 2018 20:58:14 +0000

Read this about incremental improvements. It talks about the 3:1 rule. If goes much more in depth on the rest of the blog if you are interested:https: //www.strongtowns.org/journal/2017/6/12/the-little-house-a-story-of-incrementalism Full series on incremental growth: https://www.strongtowns.org/journal/2017/12/12/the-power-of-growing-incrementally-series






Comment on Real Estate Heat Index off the charts in 2017 by Kmac

Mon, 15 Jan 2018 19:56:09 +0000

By Ardell DellaLoggia @ 77:
RE: Kmac @ 74 - It really isn't because I say it is. I didn't make it up and it is not an "exact" science. Unfortunately agents have a ton of sometimes stupid rules that make it harder for me to describe to you here than to a client. But I'm going to go out on a limb and break a rule before going to bed by using examples. Not really allowed in a public forum for me to do that, but this is an important point for people to know. I didn't just make it up and I do test it often and I don't repeat it just because I heard it somewhere. https://www.redfin.com/WA/Bellevue/12829-SE-2nd-St-98005/home/508379 Lot on the above was $660,000. 3 x lot would be $1,980,000 sold for $2,098,000. Close enough. https://www.redfin.com/WA/Kirkland/10834-108th-Ave-NE-98033/home/461367 Lot on the above was $625,000. 3 x lot would be $1,875,000 sold for $1,750,000. Close enough. https://www.redfin.com/WA/Kirkland/8643-NE-124th-St-98034/home/282428 Lot was $412,500. 3 x lot would be $1,236,000. Sold for $1,328,000. Close enough. It's after midnight and I pulled those in 5 minutes without Cherry picking. The first three I saw. This is an important Rule of Thumb, because if you see that the builder paid $300,000 for the lot and is asking $1,500,000 for the new house...you have to know that something is not right. Maybe you still buy it for $1,500,000...maybe you don't. But at least you know you have to come to some rational reason why you would. Maybe it's a personal reason. Maybe it's because you have money to throw away and plan to die in the house so you don't care. But you should still know the rule and why you are breaking the rule. Off to bed. :)
Boy, that got lost somewhere in moderation land didn't it. Now the post numberings are all screwed up. If I am able to get a killer deal on something (anything), does it make sense that a future buyer gets their panties in an uproar because they can see what I paid for it? Or does the real estate agent get upset that THEIR formula isn't at play and they need to look like the smart one in the room? Please tell me why it matters what a seller paid for what they are selling if it is obvious that the new house appraises at the agreed price and everyone is good with it otherwise.





Comment on Real Estate Heat Index off the charts in 2017 by Kary L. Krismer

Mon, 15 Jan 2018 18:04:06 +0000

By wreckingbull @ 84:
By ess @ 79:
All real estate deals are local
I think the experience of 2008-2009 pretty much disproved this old mantra. Oh, and also one of the hilariously timed books from our old friend David Lereah https://www.amazon.com/All-Real-Estate-Local-Sellers/dp/0385519222
I'd disagree. Although that was a national event, some localities and property types did much better than others. In simple terms, some localities and property types are more volatile than others. As an example, for waterfront property that would have been a great time to buy and a poor time to sell. Surprisingly, to me at least, in contrast, Seattle condos held up fairly well.



Comment on Real Estate Heat Index off the charts in 2017 by wreckingbull

Mon, 15 Jan 2018 17:37:16 +0000

By ess @ 79:
All real estate deals are local
I think the experience of 2008-2009 pretty much disproved this old mantra. Oh, and also one of the hilariously timed books from our old friend David Lereah https://www.amazon.com/All-Real-Estate-Local-Sellers/dp/0385519222



Comment on Real Estate Heat Index off the charts in 2017 by Eastsider

Mon, 15 Jan 2018 17:36:39 +0000

RE: ARDELL DellaLoggia @ 80 - The "3x rule" applies only to a small number of mostly expensive neighborhoods. On the Eastside, there are neighborhoods of half-century old houses valued at $600k+ (mostly 'land' value!). No builder will build $2m new homes in a neighborhood of teardowns using the 3x rule. For example, when is the last $1m+ new house built and sold in Lake Hills?



Comment on Real Estate Heat Index off the charts in 2017 by softwarengineer

Mon, 15 Jan 2018 17:20:46 +0000

RE: Matt P @ 36 - Ya Gotta Move Out of Seattle if You're Too Old to Afford It? LOL.....tell that to the West Seattle Scandinavians who have lived in Seattle all their lives with their families... $40K is lots of money? I'm rolling on the ground in laughter.....what planet do you live on? BTW, they make like $2K/YR in the 3rd world and live in ditches....what you really mean is we need to spread the wealth, after all the Rich Elite Progressives allege the world owns and controls America, not its voters?



Comment on Real Estate Heat Index off the charts in 2017 by wreckingbull

Mon, 15 Jan 2018 17:13:05 +0000

Ardell, why would someone use a rule of thumb for a transaction as large as RE purchase. If it were my money, I would put together a detailed analysis with global and transaction-specific variables. I would run a handful of different scenarios though the model. All easily done with a free afternoon and a spreadsheet.



Comment on Around the Sound: 2017 Puget Sound market wrap-up by Kary L. Krismer

Mon, 15 Jan 2018 17:12:42 +0000

By Eastsider @ 101:
RE: Kmac @ 99 - Yes, every homeowner has a different idea of maintenance. Many apartment buildings undergo major renovations every 10-20 years. This is happening all over the Eastside.
There are some high-end condos that do things even more frequently than that. Condos are sort of like law firms. Both may do renovations more or less frequently than what you would do if you were the individual decision maker. On the condo front, one other issue can be a wide disparity between the units with the owners of the more expensive units wanting things done more frequently than the less expensive units.



Comment on Real Estate Heat Index off the charts in 2017 by ARDELL DellaLoggia

Mon, 15 Jan 2018 16:43:27 +0000

RE: Kmac @ 76 - For agents, the most important application of the 3x lot rule is when choosing a list price for an old house. Again, speaking in the context of why old and even dilapidated “houses” can sell for what appear to be ridiculous prices from a buyer’s perspective. AKA “Why should we pay almost a million dollars for this crap box?”. The answer to that is always about the land value. What happens in Wenatchee stays in Wenatchee and this is not “Wenatchee Bubble”. I assume where a building lot can be had for $25,000, people aren’t paying obscene prices for a crap box. :) When we see an agent list an old house for $200,000 under land value because they don’t know the 3x lot rule, it’s embarrassing to the profession. It is also very costly for the consumers in total. The last time I saw that happen there were about 50 offers and no, that is not great. My mind automatically calculates the 30 or more of that 50 who were relying on that list price having a rational basis when doing a pre-inspection. At $500 per pre-inspection, that’s $15,000 of money down the toilet due to agent error. A “house” shouldn’t list for less than the value of the dirt it sits on. So while people who build may not like the rule, it is an important concept in markets where land value is high and highest. Another application has to do with a buyer’s expectations as to the condition of the house. If you are paying lot value, then the house is free. A free house might have many defects and understandably so. In other markets I have worked in where we were selling a “crap box” for $1.5 Million lot value, we did so “as is; sight unseen” to drive that point home. It might have termites. It might have a recalled old electric panel. It might need a plumbing upgrade from galvanized pipes. But not the seller’s concern if it is being sold at lot value. So while there are limited applications and primarily where land values are exceptionally high, it is still an extremely important rule for people to know. It follows the same logic as the foreclosure discussion. Foreclosures are supposed to be so cheap that defects are a non-issue. When that is not the case, as others are pointing out due to overbidding at the auction, mistakes will be made. But if you buy a “house” at 1/3rd the value that a new house on the same lot would sell for, the house is free. If you choose to live in a free house you just paid a million dollars for because you like the pricey neighborhood and commute, go for it. But don’t whine that it’s a “crap box”. Lots of valuable applications to the 3x lot rule...where crap boxes sell for obscene prices.
Reply Comment on Real Estate Heat Index off the charts in 2017 by ess

Mon, 15 Jan 2018 15:55:35 +0000

By Kary L. Krismer @ 78:
As to the other two threads, both involving "rules of thumb," perhaps the real message is that if you're going to be involved in a real transaction (actually make an offer) you should work with some real numbers that pertain to the specific property.
Or to paraphrase Tip O'Neil who popularized the phrase " all politics are local" All real estate deals are local



Comment on Real Estate Heat Index off the charts in 2017 by Kary L. Krismer

Mon, 15 Jan 2018 15:47:33 +0000

As to the other two threads, both involving "rules of thumb," perhaps the real message is that if you're going to be involved in a real transaction (actually make an offer) you should work with some real numbers that pertain to the specific property.



Comment on Real Estate Heat Index off the charts in 2017 by Kary L. Krismer

Mon, 15 Jan 2018 15:43:42 +0000

By Kmac @ 66:
By Kary L. Krismer @ 31 BTW, just so that you know, if you plan on being a true flipper, you need a contractor's license and bond. Consult an attorney about your specific situation.
This was enacted in 2008 and the rcw's were revised. As far as I can tell, it was revisited in 2015 and was changed by SB 1749. http://lawfilesext.leg.wa.gov/biennium/2015-16/Pdf/Bills/Session%20Laws/House/1749-S.SL.pdf So it looks like you do not need to be a contractor to flip a house at <12 months, but ONLY IF you have CONTRACTED with a licensed contractor to do the work.
There's still an issue if you're overseeing the contractor, which could make you a contractor yourself, and drag you back in. That would probably be true of most flippers, and at least argued in litigation if there were a problem with the house. The consequences of being unlicensed are so severe I wouldn't risk it, and instead opt to be licensed and bonded (preferably cash bond).



Comment on Real Estate Heat Index off the charts in 2017 by synthetik

Mon, 15 Jan 2018 15:26:03 +0000

It looks like Erik is the new Meshugy.



Comment on Real Estate Heat Index off the charts in 2017 by Kmac

Mon, 15 Jan 2018 14:42:01 +0000

After thinking about this 3x lot thing overnight, perhaps it is kinda like the home maintenance "rule of thumb" that was being chatted about on the last entry. A house is a house- very similar no matter the specific area. The land is what makes the difference. Expensive land= house is a lower percentage of the completed value. More rural area= house is a higher percentage of completed value. I've built houses east of the cascades that were 5x and 6x lots, meaning the land was cheap by Puget Sound region standards and the total dollars of projects was much, much lower. ($165,00 1200 sq ft house on $25,000 lot) Nonetheless, I think a blanket statement about 3x this- 3x that encourages unsophisticated land buyers, who go out to cheaper pastures, to pay too much (and take all reason away from the market).



Comment on Foreclosure Timeline in Washington State by Greg Lovern

Mon, 15 Jan 2018 09:04:57 +0000

Noob question here -- where do I find listings of Notices of Trustee Sale? I understand they are public record in WA, but where do I find them? I tried google.



Comment on Real Estate Heat Index off the charts in 2017 by Ardell DellaLoggia

Mon, 15 Jan 2018 08:25:19 +0000

RE: Kmac @ 74 - It really isn't because I say it is. I didn't make it up and it is not an "exact" science. Unfortunately agents have a ton of sometimes stupid rules that make it harder for me to describe to you here than to a client. But I'm going to go out on a limb and break a rule before going to bed by using examples. Not really allowed in a public forum for me to do that, but this is an important point for people to know. I didn't just make it up and I do test it often and I don't repeat it just because I heard it somewhere. https://www.redfin.com/WA/Bellevue/12829-SE-2nd-St-98005/home/508379 Lot on the above was $660,000. 3 x lot would be $1,980,000 sold for $2,098,000. Close enough. https://www.redfin.com/WA/Kirkland/10834-108th-Ave-NE-98033/home/461367 Lot on the above was $625,000. 3 x lot would be $1,875,000 sold for $1,750,000. Close enough. https://www.redfin.com/WA/Kirkland/8643-NE-124th-St-98034/home/282428 Lot was $412,500. 3 x lot would be $1,236,000. Sold for $1,328,000. Close enough. It's after midnight and I pulled those in 5 minutes without Cherry picking. The first three I saw. This is an important Rule of Thumb, because if you see that the builder paid $300,000 for the lot and is asking $1,500,000 for the new house...you have to know that something is not right. Maybe you still buy it for $1,500,000...maybe you don't. But at least you know you have to come to some rational reason why you would. Maybe it's a personal reason. Maybe it's because you have money to throw away and plan to die in the house so you don't care. But you should still know the rule and why you are breaking the rule. Off to bed. :)


Comment on Real Estate Heat Index off the charts in 2017 by Eastsider

Mon, 15 Jan 2018 06:48:33 +0000

RE: Kmac @ 74 - Some builders will do 3x or even less because they are not risking their own capital. If the market declines by 10%, it will easily wipe out profits and more. In a 20% down market, these builders will be gone.



Comment on Real Estate Heat Index off the charts in 2017 by Kmac

Mon, 15 Jan 2018 06:09:43 +0000

I guess what the problem is is that you are stating that the lot is the lot because" I say it is".... To me, the lot isn't necessarily what YOU say it is. Seems RE folks try to dictate what things are by using some arbitrary formula on the front end. Guess it works in some areas. I do the math with givens and I know what the selling price is within reason before consulting any RE professional, and then do a reverse engineering on the numbers. Maybe it come down to most builders are willing to do anything just to stay busy. Although, I have noticed that some savvy small builders have a permit in hand within days of actual closing on the lot. Perhaps this technique mitigates some of the risk of the time value- ie: less holding costs. And please Ardell, don't take this personally, as I really like the contributions you always seem to offer up... And as far as ID goes, I read a couple weeks ago that ID is the fastest growing state now.



Comment on Real Estate Heat Index off the charts in 2017 by ARDELL DellaLoggia

Mon, 15 Jan 2018 05:18:41 +0000

RE: Kmac @ 71 - We were talking about old houses that cost a lot of money. That’s why we were talking lot value being 1/3rd the price a new house in its place would sell for. If a builder can put a house there and sell it for 2.1M, he will pay $700,000 and throw the old house away. An owner occupant buyer will outbid the builder. A flipper will pay less than both in most cases, when they can. Though as S-Crow pointed out, some are getting burned right now as the margins are too thin due to competition. When you see it run up toward the builder getting 3.5x lot, the price of the next teardown goes up to bring it back to 3x lot. When you see builders getting 4x lot, the bubble will burst in the next cycle.



Comment on Real Estate Heat Index off the charts in 2017 by S-Crow

Mon, 15 Jan 2018 05:04:24 +0000

RE: Kmac @ 71 - Your approach will provide dividends to you and I'm guessing it already has. I can't tell you how may small builders and contractors did not stay disciplined during the last run up and I'm seeing cases of it today. By the way, maybe you should consider Coeur d'alene for building. "Bubble? What Bubble?" : http://www.cdapress.com/local_news/20180113/bubble_what_bubble Labor/Employment Info for Northern Idaho: https://labor.idaho.gov/publications/lmi/pubs/Northern.pdf



Comment on Real Estate Heat Index off the charts in 2017 by Kmac

Mon, 15 Jan 2018 03:28:08 +0000

By Ardell DellaLoggia @ 70:
RE: Kmac @ 69 - Kmac: "I would NEVER pay 150k for a lot to put a 450k home on (3x) but I *might* pay 110k for a lot to put it on (4x)" Not following you there. If you are building a house for yourself you would want a 2x, not a 4x. 3x is the right price for a spec house on a tear down lot. Or more correctly, 1/3rd is what the old people should get for their old house that the builder is going to tear down. That establishes lot value. Find the closest newest house that sold as a NEW never lived in house recently to get the 1/3rd number. 4x would be overpaying . You don't want to build a 4X unless you are a builder trying to make a killing. An owner occupant will pay more than lot value for a teardown and a flipper will pay less than a builder for a teardown. Of course people make mistakes everyday, but if someone pays $800,000 for a new house on a $150,000 lot, well, then you know you did it wrong. But yes...you can still do it. If there are no new houses in the last 5 years anywhere near you, the lot value may be close to nil if the builders don't want it at all. When the houses are really cheap but not bad houses, it usually means the land value isn't appreciating.
Huh...? What I am saying is I(and many others) may look at a lot (or offer on) if it is roughly at about about a 25% value to the finish new construction sell price (I refer to this as 4x) You seem to be saying that the new construction sell price should be at 33% of the new construction sell price? I am talking vacant land and you seem to be talking land with a tear down on it.???? A tear down would take an additional 10k to get rid of so I would deduct that from the vacant land value as a buyer. Yeah, I guess I'm not competitive on the race to nowhere.