The Seattle Bubble

April 22, 2019

On this episode of the show we talk to Tim Ellis of the Seattle Bubble. The Seattle Bubble is a long running real estate blog.

On this episode I’ve used https://www.temi.com to provide a transcript of the interview. That transcript is below. It is a little rough. Tell me what you think.

Jason Rigden – This is talk to Seattle and I’m your host, Jason Rigged on this episode. We have Tim Ellis from the Seattle bubble. How are you today?

Tim Ellis – I’m doing well, thank you.

Jason Rigden – So could you tell me about this website?

Tim Ellis – Yeah, Seattle bubble. So I started it back in 2005 when anyone who’s been around for a that long might remember that the real estate market was pretty crazy back then. Uh, similar to the way it’s felt the last few years actually. But of course we all know how it turned out. There was turns out there was a giant housing bubble and it all burst very spectacularly. Took down the whole economy, all that. But 2005, there was a lot of uncertainty about, you know, was this hot housing market, you know, was it real? Was it, you know, founded on solid fundamentals, that kind of thing. And I really was just looking to buy a house.

I knew nothing about real estate and my background is electrical engineering and I wanted to buy a house, but the market was crazy. And I thought, you know what? I’m going to figure out what the heck is going on with the market. And you know, in 2005 blogging was still newish popular ish, I guess. And so I thought, you know, I’m doing all this research, gathering all this data. I may as well put it on a blog because I found out there was a, in my research I found a handful of sort of national blogs that we’re focusing on. The question of, you know, is there a housing bubble at the time? And there were a few local ones in places like Phoenix or San Diego, but there was nothing in the Seattle area. So I figured I may as well start the blog. And it was sort of this voice in the wilderness type of thing because at the time there was a lot of real estate blogs in Seattle that were run by local real estate agents.

So they were, you know, very, you know, Rah Rah cheerleader, nothing’s wrong. Rose colored glasses kind of stuff. Very, very sales pitchy. But my vote, my blog was sort of much more pragmatic and like, let’s look at the data and see what’s going on. So it was, uh, yeah, just kind of snowballed from there. Never really marketed the blog or anything like that, but it’s a kind of grew organically because a lot of other people had the same sort of questions about what was going on in the market and, and, uh, when everything kind of crashed, all of a sudden I was the local expert that was the only one locally who had really been pointing all these things out.

Jason Rigden – Yeah. When you first started, how did people in real estate react to you? I remember like a lot of hostility towards you.

Tim Ellis – Absolutely. Yeah. Anyone who is in the real estate industry, well, not anyone, but most of the people in the real estate industry were very hostile, um, up to an including just open mockery.

Uh, there was one agent who, I’m not gonna name necessarily, but he, he was making like these posts on his blog that were just really openly mocking me by name and my site and like just calling us, calling me names and implying that I was, you know, childish or stupid or whatever else. Um, turns out he doesn’t really blog anymore. I’m not sure if he’s in real estate at all anymore, but, uh, but yeah, it was most of the sort of traditional real estate agents were very hostile to the concept of anyone suggesting that there might be something like a housing bubble, even though I was never saying, you know, we were going to see markets crashed the same way in Seattle that they were likely to in Phoenix. Uh, you know, I was just saying something’s wrong. Like there’s going to be a correction. And, and just even just suggesting that at all was just like heresy to most of the real estate industry. The one, the one big exception to that was Redfin and I got to know some of the people at Redfin, uh, through my blog and eventually ended up working there and I’m actually back there again now. So, uh, yeah, little side plug I guess.

Jason Rigden So you’ve been doing this blog for a long time, much longer than most people have been the most blogs, a lot don’t last this long. Like what’s kept you motivated all this time, you know?

Tim Ellis – Uh, well at the beginning obviously it was sort of motivated by a, a drive to figure out what the heck was going on in the market. Um, I felt like I got a good handle on that and then it was sort of shifted to a motivation of like, well let’s, you know, let’s watch and see when this all comes crumbling down. And then, you know, in 2008, that really happened in force and then it was sort of for a few years there, it was like the motivation shifted from then from at that point to sort of more of a, well, let’s see how far this is going to go. Let’s, you know, really try to figure out like, when is, when are things going to hit the bottom?

Because that turned into kind of a fun game, uh, during the bust, you know, is, it wasn’t a fun time in general, but, but for, for the blog, it was kind of a fun, fun game to sort of figure out, like, when is the market really going to hit bottom? And to kind of poke fun at the real estate agents who said literally every single month it was the bottom. And, uh, you know, eventually we did kind of hit the bottom in early 2012 and things started rebounding and I called it around that time. Uh, and I think there were a handful of other bloggers who are doing similar things to me who also were all kind of calling the same thing. Calculated risk is a national blog that focuses on economic data and stuff like that. And he called the bottom right around the same time and we were right and the market started rebounding.

And then for awhile it was, you know, again the motivation kind of shifted to like, okay well let’s see like how, what’s this recovery going to look like? And that’s actually one, one incidence where I was definitely off base. You know, I really thought that it was going to be more of a slow recovery, uh, just kind of a, a steady climb out from the bottom. But things kind of like rebounded really sharply, a lot more sharply than I expected. And, and honestly, actually the last three or four years have been, uh, I wouldn’t say I’ve lost motivation cause obviously I’m still been maintained the blog, but I’ve been posting a lot less frequently for a while. And that’s because up until about a year ago, it was like three or four years of just the same thing. Like Yep, the market rebounded really sharply. Prices are skyrocketing.

There’s very few listings, a ton of competition. Like if you’re trying to buy a home at socks, like that was the story. Like every month for three years there was just like no change and it started to get really boring following the housing market. And just kind of like, unfortunately, I mean for myself, we actually did end up buying a home in 2011, uh, about six months before prices bottomed out. So, you know, I did pretty good as far as that goes. But my interest in maintaining the blog has always been not just for my own personal benefit to try and time to market or whatever, but really is more of like an educational thing to like help help other people who don’t necessarily have the time or the resources or the expertise to really understand what’s going on in the housing market to it, to have a place where they can come and sort of like see like high level what’s going on.

And you know, just got really frustrating there from like, I’d say about 2015 to 2018, early 2018, like in those years it was just like, you know, the market kind of sucks unless, unless you have a home to sell and you’re going to move out of the area and not try to buy another home. Like this market is just, it’s just unfortunate for, for everybody. And, uh, and in the last year or so, it’s actually started to turn and get a little more interesting things or things have been softening up, like more, more homes are coming on the market. Um, and, and that actually has coincided with, uh, my return to Redfin. So I’m, I’m, it’s kind of fun because I’m not only blogging about the local real estate market here in Seattle on my blog, which is completely still completely my own thing, independent. Uh, but I’m also am able to now have access to sort of like the national data and compare like, well how does Seattle compared to all these other markets around the country?

Cause Redfin has the data and you know, San Francisco and San Diego and New York and Phoenix and Chicago and you know, all these areas that are, um, that are, every housing market is kind of acting very differently right now. And there’s some interesting trends as far as that goes, where, you know, when, when you’re just looking at Seattle, you may have like a certain perception of the market that’s a, that’s not entirely complete. You know, it’s, it’s a very different situation. I feel like now to what it was, um, you know, 10 years ago or I guess 11 years ago now, like before the market collapsed where it was like every single market was overheated. Um, whereas now it seems like there’s some markets that are actually kind of still heating up in other markets that have kind of cooled off a bit and Seattle is sort of more in that latter category.

So it’s a, it’s, it’s kind of becoming an interesting time again to really try to parse out what’s happening and that that’s really what motivates me is like that it’s, there’s just interesting like even if I, I’m not interested in buying another house or selling my own house, just what’s going on in the market. Like is, is an interesting thing and it’s fun to kind of try to decipher that for people.

Jason Rigden Another thing, you’re pretty well known for it. There’s amazing chart. How do you make those charts and decide what data to like use.

Tim Ellis – I’ve spent a, well yeah, over a decade now kind of refining. Oh. And certainly when I go back and look at a lot of the stuff that I posted 10, 12 years ago, I, I, I feel like stuff that I posted back then that I thought was looked really good.

I am kind of embarrassed to have now. Um, you know, I’m almost all the charts that I posted in there literally just excel. Uh, and it’s just serve, I’ve spent a lot of time play around in excel and really like playing, playing with a lot of, you know, I almost, none of the settings are defaults, you know, there I’m doing a lot of, uh, kind of tweaking of the colors in the lines, shapes and all this kind of stuff to, to really make something that I think paints a real clear picture of what’s going on. That’s my goal anyway. Hopefully I kind of accomplish that some of the time. Yeah. I mean you really have elevated to an art form, Huh? Well thank you. Yeah, I do. I do. Uh, like I said, I do, it is something that I try to put a lot of effort into is like making the charts nice and informative and clear. And like I said, I try not to use sort of the excel defaults, which don’t necessarily put out something that looks all that great.

Jason Rigden – You get a lot of comments on your posts. How do you handle those comments sometimes that are quite hostile?

Tim Ellis – Yeah. You know, it used to be back in the, you know, 10 years ago, I used to read every single comment that was posted on there. I do not have the time for that anymore and I have a rapid, generally a pretty hands off policy. I do. I do have a policy of, you know, if somebody’s being just really outright hostile and name calling and, and just kind of over the top, I’ll, I’ll, you know, delete comments or I’ve, I have gone as far in the past is to just completely block people’s access to leave comments and stuff like that.

But generally my sort of philosophy is, you know, theoretically we’re all adults and we can, you know, have a conversation without getting completely, um, you know, personal and nasty about it. But, uh, yeah, I’m, I mean it, there’s definitely some, some heated discussions in there, but I feel like for the most part it’s, uh, it’s, I’ve seen places that where things can really spiral out of control on the Internet and it’s, I feel like even though sometimes things get a little, get a little heated and hostile, maybe it’s not a, generally it’s not too bad.

Jason Rigden – Do you think we learned anything from the 2008 real estate crash?

Tim Ellis – You know, I hope so. Um, I definitely feel like the general perception is a lot different now than it was pre the crash. There’s, there’s less of a sense of, I think for a lot of people have like, I have to buy a house no matter what.

You know, buying a house is the best thing in all situations cause it’s, you know, it’s not like I’m, I’m obviously pro real estate. You know, I own a house, I work for a real estate company. I think home ownership has a lot of advantages, but I think that the crash did sort of, um, instill a sense and a lot of people of like, well maybe it’s not always the best idea to buy a house no matter what. You know, if you’re gonna, if you’re gonna have to stretch your budget too far or get into, you know, too risky of a loan to buy a house, you know, maybe you shouldn’t. Or if you’re not, if it’s a place that you’re not playing on staying for, you know, five years, seven years, maybe you should think about not buying. And, and I think that some of those lessons certainly have kind of stuck after the, the bus because it seems like, you know, the, even though the market is really hot, again, it’s, it’s sort of a very different underpinning than it was, you know, 12 years ago when things were crazy and everybody was getting really dangerous loans and stuff like that.

Like we’re, we’re s we’re seeing a little bit of that start to creep back in. But you know, so far it seems like people are doing a lot better job in a bite. People, I don’t just mean like individual home buyers, but like institutions, uh, and stuff like that are doing a much better job I think of being more prudent now than than they were, you know, before the previous buster sort of. I think it’s sort of shattered the illusion that it’s okay to make any kind of risky bet you want on, on housing. Whether that’s again at the individual level or at an institutional level because house prices always go up. You know, that was sort of, I feel like the, the fantasy, the fictional belief prior to the bust was that doesn’t matter how dangerous your your investment is, if it’s, if it’s with real estate, because home prices always go up.

And I feel like that’s the one thing that, that people don’t necessarily just take for granted anymore is that they understand that home prices could stop going up. They could even slip a little bit and, and people were making decisions that, that are informed by that knowledge, at least.

Jason Rigden – For many people there’s been a big change and in maybe like the last 10, 20 years where, you know, home ownership used to be kind of expected. And now for a lot of folks, you know, especially writers, you know, that it feels like it’s unattainable. Do you think that that’s had any effect on the region as a whole?

Tim Ellis – Yeah, absolutely. And I feel like Seattle is an area in particular that, you know, one of the things we used to joke about on the site during the last, you know, bubble before things bust was a lot of the people who thought there was no real estate bubble would basically make all these arguments about ways that Seattle was somehow special and unique and different from every other market and that there was no housing bubble in Seattle, even if there was another markets.

And at the time we made fun of that a lot. And I think that that was justified, uh, to make fun of because it was kind of a ridiculous thing back at the time. Um, but really, honestly in the last 10 years. And I think driven largely by Amazon but also, you know, all the other tech that’s been setting up here both locally and you know, outpost from the bay area. Um, the Seattle market really has kind of like fundamentally from a market where like somebody who’s not making you know well into the six figures in tech can, could afford to buy a home, you know, 10 years ago or you know, 20 years ago and now it feels like it’s, it’s not as much of an attainable thing. You really have to be making like a lot of money if you want to buy a home.

Certainly anywhere in the city proper. And, and it’s even kind of like the prices of have gone up quite a bit even, you know, in the rest of King County and Snohomish and pierce even, I mean, right now in, in my, I live up in Everett and I feel like the homes that I’m seeing selling in my neighborhood are going for like double what I paid just eight years ago. And that’s, to me that seems kind of crazy. And, and yeah, I definitely feels like sort of a shift in the Ma and the mindset of, of what’s what’s attainable in this area specifically. And I feel like that that’s not necessarily the case everywhere. There’s a lot of places where, where you can’t afford to buy a home on a more modest income if you’re not, you know, like I said, working in tech, making six figures, etc. Um, but, but yeah, in Seattle area specifically, like there has been kind of a shift because the economy has sort of shifted so heavily into this very, very tech driven sector and, and yeah, I don’t, I don’t necessarily know that it’s for the better, you know, I kind of do miss a, the time when you could afford to buy a home without having to be sort of in that, that elite industry. But it’s a, yeah, that was, it is what it is now, I guess.

Jason Rigden – Well, I definitely see in city politics and in Seattle, yeah. This really clear divide that I see of homeowners and renters. I think that’s kind of one of the reasons why this, uh, you know, city council races become so polarized. It’s this, they, they’re so far apart.I’ve been your host, Jason. Rick didn’t, if you want to support the show, why don’t you follow us on social media? Where at? Talk to Seattle on Twitter and Instagram. Thank you for listening.

Tim Ellis – Yeah, yeah, definitely. There’s a, the end and it seems like in a lot of scenarios, the people who own homes in Seattle, I think a pretty good percentage of them still are probably people who have owned homes for decades. And so you have a, I think in a lot of cases, a, almost like a generational gap there as well, where the homeowners are tend to be from the, you know, the older generations and the renters tend to be from the younger generations and they obviously have very different priorities, not just when it comes to, you know, sort of real estate concerns but, but all kinds of concerns. And yeah, that’s definitely a growing divide I think in the Seattle area for sure.

Jason Rigden – So you’re an expert on Seattle real estate and there’s a question that comes up quite a bit and maybe you can shed some light on it. Does Seattle or the Seattle area have a problem with foreign buyers coming in and buying real estate as an investment but not necessarily to live in it.

Tim Ellis – Yeah, the foreign buyer thing has been an interesting ride scene question. It’s something that I was hearing a lot about a few years ago and I feel like the problem is I’ve looked into it a few times and there’s, nobody really has any like hard quantifiable data on that because it’s sort of, there’s, there’s not some sort of registration you have to do when you buy a home. There’s not, you can’t really know just by looking at public records, you know whether the buyer of a home is from around here or from a different state or from a different country. And so it’s mostly speculation and anecdote based and, and, and just just basing it on sort of that the trend seemed to peak a few years ago and in the last year or so since the market is kind of cooled, I haven’t really heard anywhere near as much about that issue particularly. And maybe that’s part of why the market in the Seattle area has cooled is partly because the interest from some of these, uh, out of country buyers has dried up a little bit.

But, you know, I, I never really felt like it was that big of a factor, um, on the market. But on the flip side, the thing is when you’re, when you have a market, this is tight as ours has been, where there’s been so few homes for sale, you know, it doesn’t take that much to really like, like of pressure in a particular area to really move the needle kind of dramatically when it comes to things like prices. So, you know, it could have been an issue. I don’t think it’s really much of an issue anymore.

Jason Rigden – And you think we’re in a bubble right now?

Tim Ellis – Ha. I, I still wouldn’t call what’s going on right now in the Seattle market. A bubble. Um, it does, like I mentioned earlier, it feels like the sort of the underlying fundamentals are very different than they were, you know, 12 years ago before the previous bubble burst.

We don’t have people buying homes on, on just fantasy financing. You know, the, the so called Ninja loans, no job, no income, no assets, uh, you know, that kind of stuff has gone. In fact, a large percentage of the homes are actually still being bought with cash. Um, and I don’t have the exact number on that like right in front of me, but it’s a number larger than you I’ve been your host, Jason. Rick didn’t, if you want to support the show, why don’t you follow us on social media? Where at? Talk to Seattle on Twitter and Instagram. Thank you for listening.think. It’s not like single digit percentage of the homes that are bought with cash. It’s like in the double digit percentage is still I believe. And so it’s uh, I don’t think that we can really say like, oh, we’re definitely in a bubble and certainly not the kind of a bubble that we would expect to see. Like a giant dramatic crash like we saw before. You know, I do think we have seen things kind of take a pause and sort of flatten out a bit over the last year and we started to see this, I’m actually about a year ago, little less than a year ago was when I first started to notice something was changing in the market.

And that was specifically that a lot more homes were coming on the market than we had seen in previous years. And that trend has continued for about a year now where we’ve, we were at like crazy record, low inventory levels in early 2018 number of homes on the market was like rock bottom and we’ve bounced back quite a bit from there, which is, you know, really great news for like sort of cooling things off a little bit. But, but even though we’ve seen that really bounced back up quite a bit, we’re still, when you look at sort of like the balance between the number of homes for sale and the number of people that are out there buying homes, like it’s still really a seller’s market. So I don’t think that it’s, we’re likely to see it suddenly and dramatically shift to a buyer’s market anytime soon, unfortunately.

Cause I would, I would love to see that, but I, you know, it’s, it doesn’t, it doesn’t feel like a bubble to me. It just feels like there’s just still a lot of demand now what we may see, you know, there’s a big, the big question I think is what’s going on in the economy as a whole, the greater, you know, high level of economy, you know, are we going to see a recession and what, what might happen to the real estate market, uh, when a recession hits because eventually we’re going to have another recession. And, and that’s sort of the big question to me. Like, do we see things to serve like pause for a few years and, and home prices just kind of flat line or do they drop a little bit, you know, even if they do, I don’t really see prices dropping more than like maybe 10%, but even that like seems like a lot at this point. So I dunno, it’s hard to say.

Jason Rigden – And how can people support your work?

Tim Ellis – How well, right now I do have a sort of a membership thing going on Seattle bubble. It’s kind of a do your own patreon type of deal, uh, that people can, can basically support my work on a monthly basis or on a yearly basis. And we have sort of like an insider club basically where we’ve got a private slack channel and I’ve got, I share my, like spreadsheets with everybody who’s, who’s on the membership list. Uh, they can just open up the raw spreadsheets, not just, you know, the image charts or whatever and see all the underlying data, uh, that I’m using to, you know, kind of track what’s going on in the market and have a direct line to me through the slack channel and that kind of stuff. So yeah, that’s, uh, that’s on my site. There’s a little subscribe link on the Sidebar, so yeah.

Jason Rigden – Well, thank you so much for coming on the show today.

Tim Ellis – Of course. Thank you. You’ve been listening to talk to Seattle.