Semantics

Another sign that the sky is not falling, courtesy of P-I real estate reporter Aubrey Cohen's blog... note the term, "declining annual appreciation"... in other words, your home is still worth more. The map above shows how the RATE or speed of appreciation fell, not that prices are lower compared to a year ago. Also note that these stats are based on the sales of the same homes that sold in 2006... so one can imagine that some were distressed sales, whether relocations or for individual financial reasons, pulling the prices down a bit.

And of course these stats factor in the whole metro... Seattle's most popular neighborhoods have much stronger numbers.

"The typical Seattle-area house was worth 1.23 percent more in November and 0.85 percent more in the first half of December than in the same periods of 2006, according to a new report.

November was the 22nd straight month of declining annual appreciation in the Seattle area, according to First American CoreLogic. The area ranked 10th out of 34 metropolitan areas for November's appreciation and 11th for the first half of December."

At the Risk of Sounding Like My Father, Vol. 2

SHOCKER!

'07 home prices not so bad after all

I can only imagine how painful it must have been for the powers that be at the Seattle Times to run this headline. Yup, it's true.

Hmm... sky still above us. Seattle housing market still strong. Buying a house still a good investment, and waiting to buy one will result in paying a higher price.

Shocker.

Recruiting Coup

After some cajoling (mine) and wine (his), my beach buddy C-Note has agreed to occasionally share some wisdom from his many years as a financial consultant and brokerage manager. While he cautions that these are only his opinions, I'd take 'em over a grain of salt any day, unless of course he thought salt commodities were a good investment... Moreover he shares my belief in the long haul, whether it's real estate or the stock market, even as both worlds are suffering the effects of too much media hysteria. So whenever C-Note and I bump into each other on the virtual elevator, I'll be pushing him for the goods...






Yo yo yo, C-Note, whaddup?

What's up with the "whaddup"?! You're less street than me and I'm from Detroit. Promise me you're going to come up with a different name for me soon.

You're right, C, what flies at the beach after a bottle of wine doesn't quite wash here online...

Speaking of things coming out in the wash... Whether or not we've entered a recession, compared to a few months ago everything seems unsure, as opposed to particular sectors or indicators. It's hard to know what to worry about. What are you most concerned about in the U.S. economy?

The unwinding of the credit bubble and crunch (to mix descriptors) is of concern because we've never been through anything quite like it before. Delinquencies could spread to credit cards and auto loans at the consumer level. At the corporate level, the widespread use of financial "derivatives" as well as the broad dispersion of sub-prime loans, could spread the contagion into surprising sectors such as insurance companies.

Near term, I am concerned that the news media's hyper-focus on recession will prove to be a self-fulfilling prophesy. Consumers and businesses alike could slow spending in a wait and see approach, and there it is...recession. With that said though, a little more discipline on the part of consumer borrowing and spending is long overdue.

Long term my biggest concern is the quality of education and subsequently the quality of the labor pool. I fear the future working generations will be polarized....a fraction will be highly educated, creative and innovative, adept at technology, and astute and successful far beyond their parents greatest hopes. The larger fraction will have debased language skills, poor scientific literacy, and be unable to make change at the coffee shop without the help of the POS system.

Hey, we missed my floor... why are you holding down the "close door" button?!

Sorry about that, C-Note, but hey, gives me time to ask another question... Mortgage interest rates have been low for so long that the term "historic lows" is cliche. Where do you expect consumer mortgage rates to go in the next six, twelve and twenty-four months? What factors are you watching?

While a cliché, rates are low and still quite attractive. I expect a push toward higher rates as lending standards tighten and some inflation (energy, agricultural commodities, base metals, etc) works it's way into the system. I doubt we would reach double digit mortgage rates over the next year or two but I think the bias will be upward. The confusing factor will be the behavior of the lending institutions. Will Wamu, for instance, be willing and able to originate new loans in response to demand? Will they have the capital? Will they retrench into a survival mode? Again, many unknowns.

Here's my floor, gotta run.

Can't wait to run into you again there, buddy. I've got more questions, like--

Matt, have I mentioned my new year's resolution to take the stairs for exercise?

Signs of the Times

Not to be insensitive to those going through rough times... but here's another sign that much of the lending crisis, and ensuing housing downturn nationally, is actually a market in the process of correcting itself. The WA Department of Financial Institutions announced this week a big drop in the number of licensed mortgage originators (nearly a third from a year ago) and brokers (nearly a quarter) in our state following the 1 January deadline by which they had to fulfill more stringent testing, licensing and continuing education requirements. Prior to 2007 the mortgage industry was only marginally regulated here. In other words, at least some of the (predatory lending) rats seem to have left the ship.

We know now that across the country, and even here in Washington State, predatory lending practices started to become more common around 2005 as shady operators attempted to cash in on lower middle- and working-class families' fears that they were being left behind by the housing and real estate boom. It's those very loans which in part created the credit crunch this fall.