Seattle Real Estate Market Conditions
Jillayne Schlicke on 08 23, 2007
With all the news we’re reading through traditional media channels about the credit crunch, and the tandem reported optimism that Seattle is special and we’re not experiencing a downturn, I would like to open a thread where any person who is associated with the real estate industry in the greater Seattle area can post an update as to how the market in their neck of the woods is doing.
Deborah Burns in this post suggests that all the bad news from traditional media channels is having an effect on home buyers who might be scared to enter the market and become homeowners. We here at raincityguide have been touting the exponentially wondrous benefits of blogging. Blogging as social media means if the real news is being distorted by traditional media in either direction (“the market’s great: now’s the time to buy!” Or, “the world will come to an end if Countrywide goes under!”) then it must mean that we as real estate industry folks now have a beautiful opportunity to do that thing called transparency and give Seattle homebuyers and sellers what they want from their real estate agents and mortgage lenders: naked truth.
[photopress:what_20the_20bleep_20do_20we_20know.jpg,thumb,alignright]I will start by providing a Seattle market update from my vantage point. I am an independent business owner with clients in the mortgage lending and real estate sectors. Among other things, my firm provides compliance consulting to mortgage lenders and real estate brokers, and we provide continuing education courses for real estate agents and Realtors, plus mortgage brokers and loan originators. In December of 2006 we had a huge windstorm mid month that knocked away all business for several weeks as we moved through the holidays. January brought snow and ice and still, the real estate continuing education arena was stone cold dead. It has never picked back up. Real estate classes this year have had very low headcounts. Other instructors (we all know each other and network, referring business to each other when one company has a class that we don’t offer) have reported similar conditions within their classrooms. On the other hand, loan originators in Washington State who work for a mortgage broker must take continuing education now and pass a competency test. Our business on that end is booming because, among other things, we’re offering an exam prep course that is also approved for continuing education.
When real estate agents enter the classroom, they like to talk with each other about what’s going on. Even with low headcounts, I’ve interacted with about a thousand agents this year from all over the Puget Sound region. I do not have access to the MLS so I don’t analyze numbers. Instead, I observe the human, emotional data. Currently, I am hearing that business is very slow, sales are way down, and homes are taking a long time to sell. New construction agents are reporting that builders are lowering their prices to get the units sold. Agents who work with corporate relocating buyers coming in to the region are holding their own. Realtors who are working with home sellers are sharing stories about sellers who are reading traditional media reports about home appreciation rates here in Seattle and are demanding a higher than recommended listing price. Some Realtors are happy with the slow down because they believe that there are too many part time agents in the business. Part timers give the industry a bad reputation, so they say, and full time career agents are too eager to see these folks go inactive. The slower August is giving agents a chance to do those marketing projects they’ve never had time for, and some agents are cautiously optimistic that fall will yield more ringing phones. On the cycle market of emotions, real estate agents on average, are somewhere between anxiety, denial, and fear, depending on the experience level of the agent with newer agents entering the fear phase sooner. Seasoned veterans with an established client base are having a slower year and are experiencing only mid-level anxiety. Agents are also reporting incidents of transactions failing to close due to a change in lender guidelines prior to closing. This is my viewpoint. Now let’s hear from you.
I’d like to put out an All Points Bulletin for any person who works in the greater Puget Sound real estate industry to tell us what you’re experiencing out there. Real estate agents, Realtors, lenders, escrow, title, appraisers, home inspectors, and so forth. I am especially concerned for local mortgage brokers and lenders. When MILA shut down this past March, there were hundreds of employees who arrived for work on a Friday and experienced less than ideal treatment on the way out the door. Title companies are often the first to layoff. Are we experiencing any title and escrow layoffs?
Local lenders: how are you doing? Are the serial refinancers back for more pain? Are the pay-option ARM folks able to refi into a fixed? There was some anticipation that the subprime meltdown would create a mini refinance wave. Has that proved true?
I find it ironic and foreshadowing that the first retail subprime mortgage lender on the implode-o-meter, Merit Mortgage, went under right here in Bellevue in the spring of 2006.
So, who is ready for …what… in real estate?
Anyone?
Anyone?
The answer is “transparency in real estate.”
So who is ready for transparency in real estate?
Anyone?
Anyone?
Bueller?
About the Author: Jillayne Schlicke
- Author's website: http://www.ceforward.com
- More posts by Jillayne Schlicke
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145 Responses to “Seattle Real Estate Market Conditions”
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Dangit! I just commented about this over on Deborah’s post!
It’s been feast or famine this year (so yeah, welcome to real estate, what else is new) but it’s feast right now. Just a different kind of feast. I think Snohomish County is a very different market than Seattle/Eastside, and while our prices are way higher than I ever thought I’d see (having lived here my whole life I remember what houses were selling for 10, 20 30 years ago), we’re still affordable for MOST people with a reasonable income and credit using conforming/FHA/VA loans.
Yes, in areas like waterfront/downtown Edmonds or Mukilteo this is not the case but that is not the majority of our inventory.
Hi Sandy,
I read that! We must have hit “post” at the same time. It sounds like buyers in your market area have not been frightened by the traditional media reporting the gloomy outlook. Would you say that other agents you network with are having the same experiences?
Again, I should have said above that I am only talking about what I personally am experiencing. I think it has actually been pretty slow around my office, I am just having a good month. But, then again, it may not be a fluke since all the people I am working with are hearing from me what I really think about what is currently happening. I am not trying to tell them that a dragon is a fluffy bunny. I am telling them (or trying to tell them) how to fight dragons and not get burned.
What I am seeing with buyers is that they are somewhat fearful (that’s probably good, it means they are paying attention) but I’m just up front with them about what the current market means for them. What I say is, even if prices take a dip over the next few years, if you go fixed rate it doesn’t matter.
This actually hits pretty close to home for me cause we just bought a home in May on a 30 year fixed. Probably paid more than we should have, but it was the house we wanted and the right time for us to move. I didn’t like our exposure to risk buying at that time, so I insisted on 30 year fixed because it’s not like those of us in the industry didn’t know by March of this year that change was in the wind. Hubby thought at first I was crazy not to go for the lower payment, now he understands…
Short term market movement doesn’t matter if you are on a nice long-term fully amortized loan. You just keep paying your mortgage and things will be fine.
Buying a home isn’t just about appreciation, it’s about paying the darn thing off, not refinancing every 3 to 5 years. If you are on the pay-it-off, live there til you die path, it doesn’t really matter what the market does in the short term.
Sandy,
Do you think that the large number of people who had been getting interest-only and negative amortization loans in your region last year have just switched over to get conforming loans? Who were all those people getting these exotic loans anyway (we know they exist since statistics show they made up to a 3rd or our region’s market is recent years), and what has happened to them?
Sniglet–I only know what the folks I am working with are doing. But speaking from what I am personally seeing, people who we might have seen go with other types of sub-prime previously are now going FHA and maybe scaling back on what they are spending so that it is within the allowed limits. This has actually been a transition we have been making since March, and because prices are lower in my area, it’s a transition we are able to make. Pricier areas might find this more difficult.
Just FYI–I have seen a 580 FICO get approved for FHA. Never thought I’d see the day. I think the government insured loans are stepping in to pick up some of the slack.
Hi Sandy,
FHA loans are not underwritten using a credit scoring method at all. HUD looks at the entire picture, not just a credit score: Debt to income ratios, cash reserves in the bank after closing, income, job stability, and yes, the borrower’s credit report. A borrower with poor credit can write a letter explainin the circumstances. FHA approved underwriters analyze the entire picture, which is a much better deal for the borrower because he or she often receives a better interest rate than what would have been offered in the subprime jungle.
One of the reasons why we saw so many people going with subprime instead of FHA is because originating and processing conventional subprime loans is way, way easier and faster than having to deal with all the complexities involved in government lending.
Oh, and one other reason. There are many standards a mortgage broker would have to meet in order to become approved to originate FHA and VA loans, such as paying your originators as W-2 employees (many LOs who work for a broker are paid as 1099 workers), setting up an actual compliance department (instead of having a compliance department that consists of….nothing), and surviving annual HUD audits. Most mortgage brokers would rather forgo all that and slide the borrower into subprime, where the underwriters always said yes and the wholesale lenders competed for a loan originators file by offering higher and higher yields.
You will find FHA/VA loans available at federally chartered banks some (not all) state chartered banks, and some medium to large sized mortgage brokers.
Like I’ve said in other comments, the big winners in the subprime meltdown will be the banks, and the hard money lenders.
Trust me Jillayne I am aware of that. There were a lot of other factors to those folks getting approved but you don’t get a 580 score without having some problems. The main thing that got them approved was a willingness to deal with their issues, fairly high income without much debt, and a hefty down payment.
This is the 4th FHA I’ve worked with since April. That’s when I began “strongly recommending” that my clients get into a fixed rate loan, if at all possible. I wish I would have been recommending it sooner but when lending standards started changing in March I took it as a wake up call.
PS, maybe I work with good brokers, but I can hardly think of ANY that don’t offer FHA, and if they didn’t I wouldn’t work with them. Clients deserve to have access to the full spectrum of options, that is the main advantage to working with a broker in the first place, so if they can’t offer that, there are plenty who can. I am a big believer in FHA and VA. I bought my first place on a VA loan after I got out of the Air Force and graduated from college. Best decision I ever made.
Sandy’s comments are very interesting… It would seem that although many of his customers are still able to qualify under conforming loan programs, it is for lower sums than they would previously have had access to. If nothing else that makes it harder for the market to appreciate as much as it had in the past.
Still, I find it hard to believe that ALL those people who were previously getting interest only, negative amortization, and option ARM loans have simply been able to convert over to conforming products of some sort. If that was the case then we wouldn’t be seeing such carnage, and lay-offs, in the lending industry. I get the distinct impression that over-all volumes of lending is down, not just transferred to FHA/VA, etc.
Hi Sniglet,
I am hearing from the loan originators that borrowers who are trying to refinance out of pay option ARMS are not able to do so because their credit scores are still too low for today’s tighter lending guidelines, plus their payment is currently still low.
Adjusting up to a 30 year fixed means they have to qualify at the higher debt to income ratio. Loan originators are saying that they can no longer make these loans. I ask the question, “so then, what are you doing for these clients?” The answers vary from “I’m still trying to find a lender that will take this loan,” to “we have a credit repair division at our company and we send the client to that division to try and get their credit score raised.”
I hear crickets chirping
It IS awfully quiet on this post tonight, czb.
Sniglet–
1. I am not a he, I am a she. I referred to my hubby in a post above, and we are not that new-age.
2. Good deduction–we are stepping back from pricing that doesn’t work for the clients on a 30 yr fixed and putting them into a home they can afford with a fixed payment. Yes, this will have an effect on sellers farther up the food chain. If not now, then probably before too much longer. That could bring prices down. I don’t know how much, that’s why I say get a 30 year fixed if you want to buy, and then plan on making your payments no matter what. Someday you will burn the note and it will probably be worth more than you paid. Who said we had a right to get 15% percent appreciation every year with never a down year? Hopefully nobody, cause that’s not how it works.
Anyway, really what is the point of spending all your time worrying about dire possibilities that may or may not (and probably will not) come to pass. Just live your life. People have been predicting the demise of the American economy for as long as I’ve been alive and we’ve always managed to muddle through somehow. And the people making those predictions usually are trying to sell you one of those books about investing in gold. And if that is your thing, you should totally go do that.
And yeah, sometimes real estate goes up, sometimes it goes down. And as someone astutely pointed out, prices can’t go down unless there are sales which just illustrates that no matter what happens someone out there will want to buy and someone else will want to sell. And the world will continue to revolve.
3. Who is saying that ALL the former I/O, negam and option people have converted to conventional? Only the ones that are willing to scale back their aspirations are doing that and I don’t know what the rest of them are doing.
Scaling back aspirations is not a bad thing.
We agents can’t tell you what people who aren’t doing anything are doing, because they are not doing anything, therefore, we have no contact with them. The only people we work with are people who actually are doing something. As opposed to talking about doing something, or worrying about doing something.
What is it about part-times that full-timers don’t like?
Here’s an interesting question: is there ever a time when real-estate professionals should counsel prospective buyers that it is NOT a good time to buy?
I am wondering about this as we see some markets where significant future price declines are a virtual certainty. There are parts of Colorado, Michigan, Florida, and California (for example) where the numbers of recent foreclosure notices are so massive that it is pretty much a given that the markets will be flooded with REO properties in a year or so.
What is the responsibility of real-estate professionals in such a market? Should they inform their clients there is a good chance the same properties they are interested in will be selling for 10% to 20% less in a year from now?
Or maybe any advice on what might, or might not, happen in a given market is not really an area real-estate professionals should tread upon. It’s up to the consumers to make a decision that they wish to buy or not, it’s not the job of the real-estate industry to question whether those motives are rational.
I like what Sandy wrote in reply #14 above about “just living your life”. Obsessively focusing on short-term market or economic fluctuations is basically a recipe for constant worry. Of course you should try to insulate yourself from disaster by doing sensible things financially (have an emergency fund, save for retirement, live within your means). And of course you should be educated about trends in the economy (affects your future employment, for one).
But if there’s one thing I’ve started to realize from reading blogs for the past 4 years or so, is that most day-to-day commentary is just noise. I recently cut my feed reader down by about 80% and spent about 99% less time commenting on blogs I read. Guess what, I’m still just as on top of what’s actually going on in the world (probably more so because I’m not distracted by minutia) and more engaged with things that really matter (family, job, friends). Plus I’m less worried about things that are pretty much outside my control.
Sure, I was affected by the dot-com bust (lost my job, so did a lot of friends). If another recession and/or real estate bust happens “big time” I might be affected again, esp if I had to sell my house (not in the plans now, but you never know), but reading 20 bubble blogs or 20 real estate agent blogs each day doesn’t make that any less of a possibility.
The Internet has the unfortunate side effect of making it trivial and “low cost” to endlessly fill ones head with “information” (or at least data), but that doesn’t make doing so a worthwhile endeavor.
The cover of that book will certainly get someones attention!
C Hamberger
Elizabethtown KY Real Estate
I think our job is to let the clients decide based on the best information we can give them. That information should be balanced and include the pros and the cons.
I’m personally not interested in talking someone into buying a house. They either want to buy or they don’t. If they do, I want to help them do it in a way that makes sense for them.
I know there is the perception out there that real estate salespeople will do or say anything to get the sale, but we actually turn clients away on a pretty regular basis. We don’t do it by saying “You’re stupid and I won’t work with you” we do it by saying “here are some of the advantages and disadvantages to this thing you’ve told me you want to do” and then let the client decide. We give them credit for having some intelligence.
A lot of people have made questionable decisions over the last few years, but from my experience they did so because it was their choice to do so, and in many cases they were very well informed as to the risk. Some people are more comfortable with risk than others. In this industry you see just about everything, but if you’re lucky and smart, you can keep yourself and your clients from becoming a cautionary tale.
Sniglet,
If someone is buying a home in those markets,they need to be doing their”home” work.Sell em!
R Duke,
It is ALWAYS a good time to buy! Even if you had a crystal ball, and knew prices would drop 15% the coming year, you will miss out on the enjoyment of home ownership if you postpone. And who’s to say the house YOU love would be for sale next year (well, if you had a crystal ball maybe you would know…)?
If prices have been rising fast for several years, it’s a great time to buy so you too can get rich (and not get priced out)! If prices have been falling for several years it’s a great time to buy so you can take advantage of the LOW prices and wide selection!
In the long run (say 20 years) your home will be worth a fortune anyway (providing your retirement nest-egg), so just don’t trouble yourself with concerns about initial purchasing prices.
Just BUY, BUY, BUY!!!!
Oh, and just make sure there is a pink pony in the back yard…
Oh well, so much for an attempt at intelligent discourse.
From a personal perspective, I’m having a great year and I’m having more fun in this real estate market than I have had in for several years. Because the market is shifting, we’re in a full blown professionals market.
I’m receiving more referrals for both Buyers and Sellers. Friends know their friends need professioanl help because they sense the market is turning.
In yesterday’s market, we really didn’t have to be all that precise on pricing a Seller’s house. No problem…if we missed on the low side, the market immediately swept it to market value. If we missed on the high side we knew that if we didn’t get an offer in the first week to lower the price and it would most likely sell. And condition? Who cared! Buyers snapped up anything decent.
Today, we have to be the shiny penny. Market times have increased. We have to price precisely, with better statistics than ever before. Sellers need to pay attention to every detail. No longer can they afford to be lazy. It takes being on the ball for both Sellers and Listing agent to get the job done.
In working with Buyer’s they are realizing they have more choice. Buyers have the luxury of taking more time to make good decisions. In this market we can truly negotiatie for the financial benefit of the Buyer, often to the point where it’s the Seller now that blinks first.
Sellers and Buyers are starting to understand and are again looking more deeply into agent qualifications.
I work King County’s Eastside. I posted complete July 2007 residential stats here:
http://blog.seattlepi.nwsource.com/realestate/archives/119647.asp
Some neighborhoods are still quite active, many have slowed with longer market times. Inventory is about the same as 2002/2003 levels. We needed more inventory! For several years in a row we experienced 1/3 yearly declines in inventory, to the point the market became overheated.
Sandy,
Sorry, I just couldn’t resist!
I’ve recovered now…
Sniglet-
Thanks for the advice.
As for me getting rich,well,I just lost the yacht.And as for me buying for the long run,(20 years)I think thats now out of the question for me.I have recently been made aware of a rather serious condition.It has resulted in my head swelling up like the baseball player,Barry Bonds.
Funny you should mention a pink pony.I had begun to see pink giraffes wanderin my propery at night,which I initially wrote off to a “miscalculation”of my medication dosage,which has happened in teh past.But now,even finding a pink pony would be tough,since I have recently lost all color perception,and would have to rely on an honest pony salesman.Yourself being in the sales biz.,you know thats not always easy.
I’m staying positive though.Its all ive got left.
P.s Sniglet, jus kidding about the above.
Thanks for playin
The markets that were referred to in #16 may or may not have those lower values, although they do seem to be reasonable possibilities, no one can say for sure about where any market is going to go. People should buy when it makes sense for them, and rent when it makes sense for their particular needs.
Good real estate agents can help by asking potential buyers questions to help determine what their goals are for homeownership:
1) How long do you think you would live in your next home?
a) 10 years or longer?
b) 5 years?
c) 2 years?
2) Does your career involve periodic relocation?
3) How well does your potential mortgage and other homeowership costs fit into your monthly budget?
4) What are your reasons for buying now?
5) What are your expectations for homeownership?
These are just a few questions that would be important to ask and depending on the answers following that line deeper. A good real estate agent will help the potential buyers to better understand their options, offer their (the agents’) opinions or suggest a better strategy so that the buyers can make the decision that best suits their needs. But the decision is ultimately the buyers.
Buying a home should not be like investing in the stock market or other financial programs for most people. And unless someone is an Investor/Landlord who researches the market, evaluates the costs vs return on investiment, can hold the property for longer term appreciation, and understands their risks, they should not treat real estate as an investimate of that sort.
Buying a home is about shelter, and emotional connection to a place for family or individual history.
I help my clients to understand what their options are and offer my opinion as to what seems to work best for them given the information they have given me. I wrote a post about one such couple in June: http://seattlesurbanvillages.typepad.com/seattles_urban_villages/2007/06/sometimes-you-h.html
An update for that couple is we found a rambler that they liked. However, what they liked was so similar to what they currently have that I told them that it did not make financial sense to buy another house, and pay the costs for buying and selling when they could stay where they are at and do some improvements to the house they have lived in for about 15 years. So now they will look to making some of the changes to their current home instead, that is what makes sense in their particular situation.
Great, sensible comments on this post, life does go on….
Okay…MOST of the comments have been sensible!
Great comments this moring. Real estate agents and Realtors Sandy, Greg, and Deborah, thanks for your participation.
Guys, you are always welcome to play in my sandbox. I always did enjoy playing kickball with the boys more than playing pink ponies with the girls. I just returned from a week at a ranch in Oregon with my kids and none of our horses were pink.
Hey jcricket,
How am I doing? I only have two blogs in my feed reader: this one and Seth Godin’s blog. I generally stick to five blogs/websites for market commentary: this one, ml-implode, Brad Inman’s blog, seattlebubble, and calculatedrisk.
What I’m not finding out there is street-level talk about what the bleep is really going on. Yesterday, Inman news published a story with local real estate agents commenting on their market. Phil Hoover from Boise gave an update and admitted to some slowing in his market, but I can’t find any Seattle (Puget Sound area) real estate agent or mortgage lending talk about the people (there’s lots of talk about statistics.) Then I realized I could just ask the myself here on RCG and see what happens.
Hi Deborah,
Pink ponies are a favorite subject over on seattlebubble. I understand it to mean that we’re living in denial of reality when we talk about how the market is great, and how we should always buy, buy, buy real estate because prices will never go down.
Pink pony talk reminds me of one of my favorite real estate characters in a film, Annette Benning playing Realtor Carolyn Burnham in the movie American Beauty chanting:
“I will sell a house today”
“I will sell a house today”
“I will sell a house today”
The stereotypical Realtor who tries to make her listing sound good in the marketing but when buyers walk through, they realize the home is less than, yet Carolyn tries so hard to be cheerful. Instead she comes across as sounding desperate to make a sale.
Jillayne,
try here http://globaleconomicanalysis.blogspot.com/
or http://www.minyanville.com/
Hi C Hamberger,
Thanks for finding us all the way from Kentucky. The first time I travelled to Kentucky to speak at a convention, I missed my connecting flight to Louisville. I was sitting in the airport waiting for my flight to be called for boarding and I never did hear them say Louisville. Instead, the flight crew announced boarding for Lu-bill. No joke. I sat there and watched the entire terminal clear out, and when I finally got up to ask when our flight would be boarding, my plane was lifting off. LOL. I barely made it in time for my presentation. I hope your market is holding ground!
Jillayne,
When talk here on RCG, speculating that zero downs were cuput, first started, I had a zero down offer just starting up. It closed with no problems. So the scuttle-butt didn’t match my reality at that time.
I recently closed on a sale in Ballard where the builder is slated to tear down the 4 plex sold by my seller and put up townhomes. The builder had the absolute right to cancel up to the end because of a non-refundable deposit. That was the last day of July. The buyer proceeded and is still chomping at the bit to get those townhomes built. So from a “new investment” standpoint…again the scuttle-butt of fear didn’t seem to affect the reality of this sale of my client to a builder.
I just got off the phone with a builder who is interested in the property I just listed in Kirkland. When builders are still beating the bushes for places to build, the scuttle-butt isn’t matching the reality. But what the naysayers are talking about here is possibly something that happened after July 31? Possibly too soon to get relevant “stories” in 30 day escrows of August.
I do think it is time for all agents to get up to speed on good LOs vs. ones who have been running with the easy lending spree. Not a good time to be running with the wrong crowd. Agents have to be on their toes more now, that’s for sure.
But lenders seem to be scrambling a whole lot more than agents at this point. That could change in the next 7 to 10 days. Will keep you posted.
Sniglet poses a very good question in comment number 16:
“Here’s an interesting question: is there ever a time when real-estate professionals should counsel prospective buyers that it is NOT a good time to buy?… What is the responsibility of real-estate professionals in such a market? Should they inform their clients there is a good chance the same properties they are interested in will be selling for 10% to 20% less in a year from now?”
I see two possible ways of answering this question. From a legal perspective and then from an ethical perspective. For the legal point of view, I’m going to forward sniglet’s question on to our two RCG attorney bloggers to get their response. My question for our attorneys is, “is there anything in state agency law that requires a licensed real estate agent to counsel against buying (or for that matter selling) a home if an agent has knowledge of a declining market?”
Hi Ardell,
Thanks for the report. Realtors, please invite your lenders stop by RCG and post a comment on what’s going on.
Hi R Duke,
I’ve been to Mish’s website and minyaville as well. I like minyanville because it is written in such a way that even a beginner in economics feels welcome. Mish’s website takes way too long to load and frequently stalls my browser. BUT I do like how he will take a press release and analyze the underlying power relations. Very Foucauldian.
JillyaneJillayne (#29) – I’d say you’re doing pretty well. I’m not arguing there’s no value in blogs or reading the Internet. Quite the opposite. Just that it’s super easy to go on RSS/blog overload and “miss the boat”.Based on advice from a friend, I’d say edit your feed reader to have a daily, weekly and occasionally folder. Only have few feeds you check daily, written by people you trust and who really add value/knowledge – not just snippets, snark, etc. Have a few more you might check weekly, just to get a pulse (but don’t read all their posts). And then maybe a folder for stuff you only check occasionally, when you’re really bored. Don’t go in the weekly/occasionally folder each day
One reason why it’s hard to find out exactly what the “bleep” is going on is that the people you are asking are probably too close to the action. Realistically we only know what we personally are experiencing, or maybe what we’ve heard from others we know.
It’s like if there is a forest fire. If you’re standing in the part of the forest that is burning you might think the whole thing is on fire. Whereas if you are in a part that isn’t, you think everything is fine. You can’t ask either of those folks how much of the forest is on fire…you need a helicopter pilot for that.
So, what is the real estate equivalent of a helicopter pilot?
Hi jcricket,
This is great advice. I’m at the phase now where I know who to trust, and which sites add value.
I don’t think it’s fair to expect re-agents to advice clients to wait with a purchase due to chances of a value decline. To for example say, wait 3 years since it’s likely that you will get a home for something like 30% less and thereby risk bankcrupting their own business in the mean time. I think re-agents should not give any predictions at all to buyers about absolute future value appreciation or depreciation. What they should do is to use their expertise to guide the buyers to the best relative home value due to factors as price, location, condition of the home etc. I also wish the re-industry would stop pushing homes as a safe and great financial investment since it’s not.
Actually I think it would be good if the re-agents stay out of any financial advice other than a homes relative value. Monthly costs etc should be discussed with a financial advisor if you are not sure yourselves prior going to a lender to be pre-approved for a loan. It’s not something to discuss with a re-agent.
Jillayne — thanks for the direct email heads-up. The problem with an active law practice is that it leaves little time for blogging…
Regarding Comment 34: Russ is the better resource for this question, but I’ll weigh in nonetheless. The agent’s statutory (not fidcuciary
) obligations are set forth in RCW 18.86.030 and, for a buyer’s agent, RCW 18.86.050 and for a seller’s agent RCW 18.86.040. As indicated by those statutes, an agent must:
- Exercise reasonable skill and care
- Deal honstly and in good faith
- Disclose all material facts known by the agent
- Be loyal to the buyer and not take any adverse or detrimental action
- Timely disclose any conflict of interest
So, there certainly is not any specificly applicable statutory prohibition on counseling a client to buy or sell in a declining market.
I am unaware of any case interpreting these statutes that reached such a conclusion, either. In fact, I would be surprised if that occurred. A “declining market” may very well be a GOOD time to buy, so I really don’t see a problem there. If a “reasonably prudent” agent would counsel a particular client to not sell (e.g. where client says, “I don’t have to sel at this time but want to sell just when I can get the maximum price — is now a good time?”), then PERHAPS the agent runs afoul of the “reasonable skill and care” requirement. Even that, though, is unlikely, I believe, because in a “declining” market, tomorrow (and the day after that, and the day after that…) may be worse than the day preceding, so arguably today really is the best time to sell.
Short answer: I don’t believe so. In fact, I’d be pretty surprised.
Jillayne
Sniglet asked whether a real-estate professionals has a legal obligation to “counsel prospective buyers that it is NOT a good time to buy.”
Based on the rest of her post, I think the answer (at least in Washington) is that there is no such duty. How can anyone “know” what the market will be like in the future or what the value for a particular piece of property will be in the future. Real estate licensees have the obligation to use good faith and be honest in their dealings. They have no obligation to be clairvoyant, one way or another.
-Russ
Thanks Craig and Russ.
Sniglet, do these attorney opinions help answer your question?
Sandy probably have a good point with the “fire” comment and Ardell indicates a similar situation. I guess indiviudal agents just don’t have the volume to be able to make reliable snapshot on the market conditions. If you close one transaction a month it’s hard to know if that close should have been yesterday, today or tomorrow or if there is a slowdown. You might need someone sitting more centrally in a bigger broker firm, lender or realtor to get a good idea of what is currently going on. Is that a fair assumption?
Hi tj and Sandy,
Yes, that is a fair assumption.
Hi Jillayne,
LOL about the Movie “American Beauty”, I’ll have to watch it again, I was not a real estate agent when it came out!
One of my clients recently expressed to me how irritated he is with how a listing sometimes reads in the lisiting or marketing remarks and how different it is when seen in person…what RV parking?
Okay, what I am seeing right given the mortgage climate. The need to educate both my buyer and seller clients as to what changes are happening with the availability certain types of loans, and how that effects all types of loans. And while there are still many loan choices available, even more careful consideration must be given to understand how a loan program/choice can effect a buyer in the long term.
For my buyer clients, the need to be (extra) careful with choosing a lender and loan type that fits their goals and finances, and to have a backup plan if something changes with their original loan.
For my seller clients, to represent them better I want to know more about the buyers’ lender and loan type. I have this week offered the contact information of a lender who I trust to a buyers’ agent as a backup for a buyer (I represent the sellers) whose lender I don’t know anything about, and neither does the buyers’ agent. The buyer did contact the lender, and will be a great backup if chosen and needed.
Currently I am working with clients who I began working with as long ago as 18 and recently as 2 months, and this is keeping me busy. How the next few months will go, I never know. In real estate your business comes and goes in waves, and so far there has not been enough time to judge how the current mortgage climate will effect my clients and my business.
PS, I prefer sensible, sturdy quater horses to pink ponies!
Okay…ditch the sensible quater horse…now I want a clairvoyant heliocopter!
Deborah–just make sure it is pink. Every real estate agent needs a hot pink helicopter to take clients around in.
I kid, I kid.
Now a Hot Pink Acura MDX Hybrid, THAT is the perfect real estate vehicle. That way you can demonstrate that not only are you environmentally aware, you have a great sense of style too.
“So, what is the real estate equivalent of a helicopter pilot?”
The NAR?
Hi Sandy,
Well, I do have my eye on one of the new DELL laptops that come in colors, and the color I am wanting is….fushia PINK!
I drive a sensible (for my needs) late model Explorer…in practical white!
Joel, I think that would be a person working with for example sales statistics at one of the big realtors or lending institution in the area. Don’t know if there is anyone like that on this blog.
Hmm. Escrow Tim might be a good person to ask.
Jillayne,
The answers from the legal eagles are certainly interesting. However, I am more curious about the “moral” side of the issue, not so much what the letter of the law is. In the case where a real-estate professional has a VERY good idea that prices will be going down (e.g. maybe they have seen a mass of notices of default recently come up for a given neighbourhood), what should one tell a prospective customer? Is it enough to say that the customer is responsible for their own research?
Caveat Emptor has been a part of real estate purchasing for some time now so it is always up to a customer to be responsible for their own research or ability to review and comprehend information provided to them. We’ve had many times where we’ve counseled a client to hold off buying at a particular moment but the reasons run the gamut from recommending credit histories be cleaned up and raised to a better level before securing financing. Other times clients have had huge amounts of outstanding debts (one prospective client had, and I kid you not, about 50 credit cards. Other times recommendations to hold off come with advice to discuss issues with other professionals first, such as a CPA, estate planner, or an attorney.
The best thing a professional can do is to sit down with the client to go over options, reasons for buying/selling, etc and to use those bits of information to guide the client back and forth to develop a base on which to make a decision – and then leaving that up to the client to decide.
Pushing a buyer or seller into doing something they don’t want to do is, to me, an ethical breach. I’ve spoken with people before that have told me such horror stories of experiences they’ve had with other agents but I’m happy to say I’ve never had a client feel that way.
Hi Sniglet,
Minimum moral standard is the law so we start there. Next would be any other source of moral authority for real estate agents. For this, we turn to the NAR Code of Ethics. Not all real estate agents are members of NAR.
http://www.realtor.org/mempolweb.nsf/pages/printable2007Code
I will pull out some relevant articles:
“Article 1
When representing a buyer, seller, landlord, tenant, or other client as an agent, REALTORS® pledge themselves to protect and promote the interests of their client. This obligation to the client is primary, but it does not relieve REALTORS® of their obligation to treat all parties honestly…”
“Article 2
REALTORS® shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or the transaction. REALTORS® shall not, however, be obligated to discover latent defects in the property, to advise on matters outside the scope of their real estate license…”
“Standard of Practice 11-2
The obligations of the Code of Ethics in respect of real estate disciplines other than appraisal shall be interpreted and applied in accordance with the standards of competence and practice which clients and the public reasonably require to protect their rights and interests considering the complexity of the transaction, the availability of expert assistance, and, where the REALTOR® is an agent or subagent, the obligations of a fiduciary.”
“Article 12
REALTORS® shall be careful at all times to present a true picture in their advertising and representations to the public.”
_____
Sniglet,
No code of ethics is designed to tell a person what to do in every single situation. A code provides guidance and supports underlying values that promote confidence in the industry and promote Realtor moral development by motivating a Realtor to think and reflect when faced with an ethical dilemma.
Jillayne, to speak to your specific topic of market conditions… we’ve been having a good year although I know not agents in our office have. Although I have seen MLS statistics that do show our office as having the highest number of listing sales for the area so I would assume that our top agents are still doing well, and we are adding more all the time. I have seen several people drop out but this industry already has a 90% attrition rate for first year people and about 80% attrition for year 2 so not that many stay in it any way.
Our sales have continued growing about 25% per year but I attribute much of that to our business plan and meeting those goals than random market fluctuations. Although we’ve been lucky to have started our business at a time when prices alone helped raise the average sales price on a regular basis. In terms of number of transactions we do continue to grow in that area as well so it’s not just a matter of home price appreciation.
Hello Seattle!
You have a beautiful city. Have been travelling there for the past 4 years.
My wife and I may be asked to relocate to Seattle in the next 9-12 months. We cashed out of our Scottsdale home 2 years ago (thank God), in anticipation of the housing slowdown. We have been leasing a beautiful property for approximately 60-65% of the owners monthly after-tax carrying costs.
My question is this. From my analysis, no area is immune from this slowdown…it’s only whether that particular city is behind the “tsunami curve”.
My sense is that Seattle is behind that curve, and will, ultimately, be swept under. My question is this: what % of owners after tax benefit carrying costs can you lease a property? In downtown? Nearby?
Thanks!
by hello_seattle
I find it interesting that everyone talks about the Seattle Real Estate Market doing so “well” when foreclosures in the Seattle/Everett area for Jan-Jun 07 are up 26% compared to July-Dec 06, and up 7% YTD.
When 700 sq foot condos go for 300K in the Seattle burbs, things do look inflated right now.
Hello_Seattle,
Thanks for stopping by RCG. Although I do not know the answer to your question, maybe one of our real estate agents will jump in with the answer.
Hello scott_g,
I also find it interesting, but not surprising. Most real estate agents are not often working the foreclosure side of the business unless they’re actively working with investors, or if part of their business is doing BPOs for lenders (broker price opinions), or if a real estate agent has a contract to be the listing agent REO (real estate owned) homes that have already been foreclosed.
We’re scheduled to teach the Foreclosure class in September. I’ll have to find out what the head count is for that class. I know the requests for that class plus the class on preforeclosures: Short Sales, are picking up again.
All this talk about the collapse of the mortgage market is making me curious about something.
I bought a condo 18 months ago in Seattle. I paid $280,000, with 25% down and got a 30 year fixed at 6.25% through Wells Fargo.
Do I need to be worried on a personal level about what’s going on? I mean beyond the general effects of a slowing economy, a recession, stock market falling, etc.
Cat,
So long as you feel comfortable with your payments, then don’t worry about a thing. I tell people that they just have to ask themselves how they’ll feel if the place they buy today drops 30% in value in the next couple years. If that doesn’t phase them, then they should just go ahead and enjoy life.
Who cares if your home loses value, you still get to live there.
I want a pink helicopter!
[photopress:55802_CaptCrunch.jpg,thumb,alignleft]
http://www.jsmineset.com/cwsimages/inventory/55802_CaptCrunch.jpg
Sniglet–your bias is evident as is mine. But I don’t think sarcasm benefits anyone. Obviously, a 30% drop in value would be a very big deal to Cat, emotionally if nothing else. But, it’s also very unlikely to happen. It’s irresponsible for you to pretend to have some special insight that allows you to see the future. You do not, and neither do I or anyone else on this blog. Everything posted here is OPINION–nothing else.
I realize it is hard for you to comprehend that housing may not be unaffordable to everyone. But, most of us homeowners manage our finances pretty well, aren’t on ‘exotic’ loans needing to be refinanced, and aren’t overextended. Happy homeowners aren’t that interesting, therefore, you don’t hear that much about us–we are the silent majority. For us, short term market fluctuations aren’t that big of a concern.
Yeah, it’s a bummer to have paid more for a home than it would be worth today if you were trying to resell today, but IF that were to happen (and it’s a big IF) it’s only really relevant to you if you ARE reselling today and have no equity to absorb the fluctuation–which by the way, Cat probably does since she’s been in for a year and a half.
If you aren’t buying or selling today, what prices do today makes no difference.
Sniglet, since you are always going on about being a wise investor, let me ask you this: would you freak out every time a stock goes up or down? No, I bet you wouldn’t unless you:
a) couldn’t afford to be invested in the stock market anyway,
b) had all your eggs in that one basket, and
c) didn’t understand the basic truths about markets, which is that they can go UP and DOWN.
There are no guarantees in this life of the future value of any good or service. When you buy milk at the store, you do so knowing cows could suddenly start producing an oversupply, flooding the market and the price could drop. If you need milk today, what the price of milk does tomorrow isn’t your concern. You make the best decisions you can with the information you have at the time, based on the needs that you have at the time, and then you live with the consequences.
Cat–You made some smart decisions when you bought your home, one of which was making a good down payment, and the other was getting a fixed rate loan. These will help to protect you from any price drops that may occur as you will hopefully have no need to refinance until this all “blows over.” Having been in your home 18 months, you have probably built up some equity since you moved in that will also insulate you.
You could see some short term drops in value over the next year or two, or you may not. No one here can really tell you, because no one here really knows.
Keep this in mind–market values are only relevant to those who are buying or selling. Unless you have a need to do either, I wouldn’t expect the current market to have much of an effect on you.
Oops, shoulda said “buying, selling or refinancing” just to cover my bases. Price fluctuations only matter if you are buying, selling or refinancing. Otherwise, it might be an annoyance, but it’s not really an issue.
Sandy,
I think sarcasm is often in order.When the other team drops the ball,”nice catch” isn’t out of line.As for this inflated nationwide market,”nice catch” may refer to the piano off the 8 th floor.I wont be waving a glove under that one.
Dear Sandy,
Regarding your comment: “Obviously, a 30% drop in value would be a very big deal to Cat, emotionally if nothing else. But, it’s also very unlikely to happen.”
This is a highly irresponsible and self-serving comment.
A 30% drop in home prices would simpy take us back to the valuations that were present a couple of years ago. Given that much of the current increase in domestic real estate values (which one could easily argue are now much more than 30% “overpriced” based on historical, 100 years plus parameters) have been fueled by the previously unheard-of loose lending standards that have quickly become a thing of the past, how would a 30% drop in value be so “very unlikely.” It is a real possibility, and to state otherwise is highly misleading and irresponsible.
I agree that it is impossible to predict the future and that these are merely opinions. How could anyone think otherwise? I simply take exception with how definitively you dismiss what is a very *reasonable” possibility, and one that could be financially devastating for some (not all) recent house buyers. I believe this type of comment is the crux of why real-estate agents get somewhat of a bad rap (much but not all of which, admittedly, is undeserved).
PS: As an aside, I have owned my current house for about ten years, am perfectly happy here, have mortgage payments that are about 10% of my gross monthly income with 5 years to go, have no intention of selling even though I strongly *suspect* its value will decline significantly over the next few years and, in other words, have no self-serving agenda to bias my opinions. I would not be unscathed nor would I delight in a real-estate bust and would have nothing to gain from it. I am generally an optimist and not a doomsdayer. I still *think* a significant decline in house values will happen. Current increases in inventory, the increasing difficulty buyers are encountering in financing large sums of money for house purchases and declining sales statistics support this notion.
I understand why you have to disagree.
Sincerely,
CZB
http://www.forbes.com/feeds/ap/2007/08/25/ap4053912.html
here comes that piano
Sellers still can’t come to grips with pricing their homes properly. Or, should I say agents don’t seem to understand that an overpriced listing is better than no listing. Many agents still take a listing no matter what. The time will come when they start to figure that out. Hopefully by then about 30 % of them will have moved on to other occupations. I have been vocal about reform and a higher degree of professionalism and the one thing good about tougher markets is that it weeds out the goofs. Our industry has tons of goofs.
With more resets coming next year it will be no easier for the majority of the country. The south end where I have been based for 30 plus years has some good values.
agents don’t seem to understand that an overpriced listing is better than no listing – meant
no listing is better than a overpriced turkey. Typing too fast -
Sandy,
I wasn’t being at all sarcastic when I mentioned a possible 30% price decline in 3 years. I am NOT saying there will be a 30% decline, but I do think it is a distinct possibility. If we can have 10% appreciation for several years in a row then there is no reason we can’t see the same in reverse.
Again, I am NOT saying a 30% price drop is in the cards. I am just saying that people should know they will still be comfortable if such a thing happened when they look at buying a home.
As far as my own investments go, I have a pretty high tolerance to risk and have owned many things that have fluctuated more than 50% in value, up and down. I know I can live with such uncertainty, but each of us has to know our own tolerances.
Hi Cat,
I agree with the rest, you only need to worry if you must sell or refinance. Many have subsidized their lifestyle by using their home’s equity to pay off credit card debts over and over and over again.
I would advise against the idea of running up credit card balances and assuming your home’s value will always rise to cover their payoff.
Just as we are giving opinions and advice based on our past experience, consumers reading this blog may also be basing their questions on past experience. Other than death and taxes, it’s all a guess until the future arrives.
Consumers may be thinking about their own job security, lifestyle changes such as an addition to their family which might require a move to a larger home, a sudden drop in income from a temporary medical disability, and so forth. “As long as you can afford your payment, you have no worries” only can take a person so far into the future.
Oh, I forgot, all of us have 6 months reserves stored away in the bank in case of emergency. So in that case, there are no worries.
Unplanned forced change: prepare yourself by saving the money you save on your taxes by writing off that home loan interest.
Hi Don,
Thanks for stopping by. How’s the market down there in Burien? If I’m reading correctly, homes are probably taking longer to sell.
In a way, I don’t blame the home sellers for pounding their Realtors to list it high. Every time they open the newspaper, they’re reading statistics on how home prices are on the rise, giving them the assumption that their home should be priced higher than their neighbor’s home that just sold.
Since we have thousands of Realtors, there will always be an agent willing to list high, in any market (declining or appreciating.)
Hi Jillayne,
I think you hit the nail on the head and have identified the crux of the problem.
Even two to three years ago I remember billboards in the city of San Diego that said “My House is Worth a Million Dollars is Not a Retirement Plan”, and still a majority of residents chose to jump on the band wagon of exponentially soaring real estate values and exponentially increasing numbers of realtors who thought the market’s top was infintiy. Result this year, average increase of .2% in home value, mortgage businesses going belly up, and forclosure rates up 164%.
While home ownership is certainly desirable, due to rampant speculation, timing of buying and common sense becomes really crucial. Right now a lot of folks are focusing on that beautiful flower, but not that brown stuff it’s growing in that certainly looks and smells like something we are really choosing to ignore.
As you also mentioned, diversification is important. Ready access to funds (home equity does not count here), and blended stock and bond investments are important. The fact that many folks had to raid these to get 20% down (if they could even come close to that in Seattle’s current market) has really tied up a lot of savings in one market for which it really looks like signifcant adjustments are on the way.
Jillayne,
Not sure the transparency thing is working out so well. So far you’ve only heard from a handful of agents who appear to be having a bumper season.
At the risk of being an instigator, I thought I’d post what I saw when looking through the Windermere site for SFH in Queen Anne and Magnolia:
210 houses listed for sale.
9 STI (of which only one STI for the 72 houses priced over 1 million $)
4 contingent (of which only one contingent for houses over a million)
Also, interestingly, a few houses that had “sold” signs are suddenly for sale again. Here is the listing for one, where apparently the culprit was a “lost loan”:
http://tinyurl.com/ywo7ac
I am curious as to what real estate agents might think this information means for the state of the current market.
Regarding real estate agents advising clients on market conditions, I wonder if we’ll ever see something similar to financial information for stocks.
For example, when I’m considering buying a stock, I know earnings, cash flow, debt, P/E, book value, etc at a glance (thanks to the SEC).
Why shouldn’t buyers have equally easy access to the fundamentals of their real estate market? Afordability index, population growth, job growth, wage growth, building permit rates, price/rent ratio, etc….
Hi scott_g,
Thanks for the link (click on scott’s name) to the yahoo news report showing Seattle/Bellevue/Everett foreclosure stats. Sure, we’re number 76 out of 100 metro areas, but I wouldn’t expect us to shoot to number 1. Instead, I expect all foreclosure numbers to increase for the next several years, with us staying in the bottom 50, unless the statisticians decide to go ahead and add in Pierce County to the list. That might make our numbers higher.
I mean, when we talk about the “Seattle” market, are we talking about Seattle/Eastside?
When I think “Seattle,” I think the entire Puget Sound region: King, Pierce, and Snohomish Counties.
What do you all think?
Hi czb,
Perhaps all Seattle area real estate agent RCG readers (and others in the industry) are ALL having a GREAT year and are VERY BUSY right now and DON’T HAVE TIME to read this blog and comment because they are VERY BUSY.
Right. Busy manipulating the data.
Here’s a listing that has been for sale for months in Edmonds. I do not have access to the MLS, so I am not sure of the exact date it was put on the market, but Estately shows that it has only been on the market for 8 days. If I recall, the original list price was around $519,000 and now it’s listed at $440K, still way over priced for the neighborhood when homes all around it are listed in the 300s.
This home has been on the market for months.
http://www.estately.com/map#Wa,Edmonds,Upper%20Edmonds/714082/listing_details
Why does the MLS permit its members to manipulate the time on the market like that?
When we are given a press release from the NWMLS in a couple of months, will the average time-on-the-market statistics be accurate or will we be reading manipulated data?
Hi Anon,
I have blogged about a similar idea. For example, (and RCG readers, please correct me if I’m wrong) I believe a securities salesperson has to assess the level of knowledge a customer has, in regards to his or her level of understanding about the way the stock market works, investments, risk tolerance, and so forth.
If a person who holds a securities license determines that a customer has very little practical know how about the way stock market investing works, that person is required to treat the customer in a radically different way compared to a customer who is very investment-savy. Somewhat like what a doctor must do when talking to a patient about a surgical procedure. That’s called informed consent. To my knowledge, real estate agents do not owe these duties.
In the near horizon, the only people who might end up subject to the informed consent provisions, in my opinion, would be loan originators.
“But I don’t think sarcasm benefits anyone.”
“I realize it is hard for you to comprehend that housing may not be unaffordable to everyone.”
But smarmy, condescending comments benefit everybody! So I guess your understanding is that as long as the elite in our society can afford housing, then everything is hunky-dory? The best part is how you spend several paragraphs attacking Sniglet only to come to the exact same conclusion as he does. Nice.
Sandy, you had some good, useful comments above. What happened?
Hi everyone- I found this thread by googling in an attempt to find info on the Seattle market (I’m not an agent or RE pro, only a future, slightly freaked-out buyer). We are finally going to be in the position to buy again mid-September (traditional 30-year fixed), though I have been watching the market for over a year now. Without access to the hard numbers you all have, it had seemed to me that prices for the type of house we want has risen from $475 to $550+ in the last 12 months — ouch! — even though inventory seems larger and houses are sitting on the market for longer. I “discovered” redfin.com a few months ago, which has made my monitoring even easier due to the average statistics with each search (price, ft2, $ per ft2, etc). At the end of July, I noticed that prices started dropping accross the board for all three “map views” that I search (south of the ship canal, ship canal to 103rd, and 103rd to 140th), but now in the last two weeks, the average prices and ft2 is rising quickly with inventory declining. It’s hard to stay calm over this — what are your thoughts? Is this the Seattle market defying Nightline/national media? Was July a minor adjustment and now we’re off again? Seattle housing market’s last gasp? Thanks so much!
Jillayne,
Next time I won’t feel so bad for instigating – you did a much better job than I ever could have. Are you going to get yourself kicked off this website or is this some type of “good cop – Ardell cop” routine?
Perhaps open and uncensored dialogue has finally come to RCG? Deception regarding days on the market seems to be an accepted and unquestioned part of the process and does not reflect well on the ethics nor the transparency of the real estate transaction process. Again, those concerned with the public’s perception of real estate professionals should take note…
Hi J,
I am also a frequent user of redfin and ziprealty and have been focusing on the areas of Magnolia and Queen Anne. There seem to be a ton of town homes coming on the market and also town homes that have been on the market for a couple of months.
I have also noticed what another posted about homes that were “sold” but are now coming back on the market at a reduced rate.
The thing that I like about ziprealty is that it shows when the properties were reduced and for how much.
We definitely want to buy in this area and are looking for a new or newer town home but the prices are dropping and unlike some others I would be totally bummed out if we bought a home and then it decreased in value by 20 or 30 percent. Even if we were to pay cash for it now.
We currently live in Boston but are looking to relocate to the Seattle area in the future.
Thanks for the blog and all of the comments. I feel that any information is good information and don’t mind sorting out what I feel is important. So keep posting!
If you live in Boston Seattle’s going to seem down-right affordable
Seriously, if I didn’t own a home right now and wasn’t in absolute need of having one, I’d probably rent right now. I’m not selling the house I have (fits my family fine, fixed rate affordable mortgage, etc.), but the market is highly volatile right now and it certainly appears inventory is headed up.
Even if prices do nothing but stagnate for a while, increased inventory will give you a lot more to choose from if you’re looking. And given the transaction costs, I wouldn’t buy any house (this goes for any market, basically) unless I was planning to stay at least 7 if not 10+ years.
BTW – Who wouldn’t be bummed if any of their assets went down in value by 30%. Anyone who tells you they wouldn’t be bothered is lying. My 401k took like 5 years to recover from the stock market downturn of 2000 or so (and I wasn’t all in tech stocks, I was just appropriately aggressive given my age). Of course I’m not planning to use that money (and still aren’t) for another 30 years, but it doesn’t make it fun during those 5 years to think you’re “investment” is worth less than you put into it. But it’s silly to think that you’ll always be able to watch your investments just rise and rise and rise. There will be downs with the ups.
Here are some excerpts from Elizabeth Rhodes column in this morning’s Seattle Times:
“Nearly half of the single-family houses for sale in King County, plus 21 percent of the condos, have sales prices high enough to require jumbo loans — and that’s if buyers reduce their loan amount by putting 20 percent down.”
“Their California mortgage broker had unexpectedly lost its ability to provide jumbos — an event being repeated by lenders nationwide as the underlying funding for these large loans grows scarcer.”
“The next day, their real-estate agent, Ryan Rockwell of Coldwell Banker Bain, saved the deal by arranging an extension from the sellers and convincing a loan officer he knew that the couple was “more than qualified.” Hours later, Suzie Sparks, with Landover Mortgage in Bellevue, secured them a new jumbo mortgage.”
“This is not the first deal I’ve seen that’s shaky,” Sparks says. “We hear it every single day from real-estate agents.”
“Home purchases are almost always contingent on financing and “we’re probably in something of a flattening [housing] market right now while we work through this,” says Mike Skahen, owner of Lake & Co. Real Estate in North Seattle. “It makes me a little bit nervous because no one knows where it’s going right now.”
“Last week, his office was handling a $1 million house purchase when the lender went bankrupt. “The buyer is looking for an alternative lender now, and hopefully she can find one,” Skahen says.”
“At Coldwell Banker Bain’s Lake Union office, managing broker Dick Fulton says his sales agents are scrutinizing loan-approval letters from lenders.”
“We’re making sure the buyers we work with are working with a lender who has verifiable and credible outlets for the money,” Fulton says. “A buyer now who is working with a lender we’ve never heard of, we might scrutinize that a little more closely today.”
Full article:
http://seattletimes.nwsource.com/html/businesstechnology/2003853935_jumbo26.html
Jillane, Jillayne,Regarding your comment #78:
About 2 years ago the NWMLS did stop agent manipulation of the data. All listings market times accumulate automatically for MLS stats (CDOM-Cumulative Days On Market). In fact the MLS shows this property to be on the market for 94 days with a start price of $479,950. Further, the agents can access property history, which shows all action on a property for several years (every time listed, sold, etc).
Your source shows it has been on the market for 8 days. This property expired, then was re-listed. This erroneous data was published by an MLS member, not the MLS. I’m sure their data feed doesn’t show CDOM, but only the market time of the current listing. I’m not sure what the MLS rule is for members publishing market times in this example.
K.
If you are buying a townhome in Seattle, a few tips.
Location, Location, Location – The bulk of the ones for sale are in noisy locations. Hold out for a quiet location, as close as possible to attractions. Can you easily walk to a “hot” coffee spot, etc…but not hear the noise of traffic from inside your townhome with the windows open? Why do they always say, “It’s really quiet if you close the windows?”
A little older might be safer value-wise. If it has carpet and white appliances you can upgrade the value with wood floors and stainless appliances (or whatever is in style by the time you sell). Don’t make the improvements when you move in. Do them right before you move out. Condo and townhome values are greatly impacted by minor updating. It gives you a little cushion to buy something that needs interior improvements, and is discounted because it needs updating. Make sure you are getting the appropriate discount on the way in though, that is key of course.
Pay attention to garage access. The front units that have direct access into the garage from the street and look like single family homes are good. The rear unit if it has a yard and straight up garage access is good too…best even, though hard to find. Middle units where you feel like you are taking your driving test to jockey in and out of your garage are the worst. Try putting your car in and out of the garage before making an offer.
Lower price for correctable negatives, gives you cushion. Lower price for busy road and noisy location cannot be corrected…and as inventory picks up, busier and noisy locations will become less and less desirable.
Biggest gains have been on POS single homes, as the lot values have risen as the builders are still buying up those lots to put townhomes on. The crappy house between townhomes on both sides, is often the better purchase. The lot value is in play and not just the structure value. Though the builders will likely snatch up the better choices before you can get one of those.
Hi Greg,
Thanks for participating in our converrsation. Now that you’re here, do you have any advice/thoughts for J and K from comments 81 and 83?
J.
October 15 to Dec 31 is always the best bet every year for lowest price. The prices usually jump in January. No one ever knows if they will or not. They did in 2007 Jan through May, and usually do. It’s a tougher call this year than most.
October 15 to December 31 is when most of the buyers are only looking for best value, so you don’t have a lot of pressure from buyers who will be bidding you up. Also sellers get more real after October 15th and into November…or they come off market altogether until January. If you can find someone who really needs to sell, and play it right if you are the only buyer at the table…that’s your best option as I see it.
And don’t be fooled by staging. Look past it and picture the house totally empty. Don’t rely simply on inspection…check the place out thoroughly before you make an offer. How old is that roof? Could need a roof in two years and still pass an inspection today. You don’t want to buy something and then have to spend a lot of money in the first five years, adding to your cost of purchase.
Not a good time to “fall in love” with a house. Keep the value aspects at the forefront of your considerations.
czb,
We don’t “strategize” here between writers. We are each free to do as we please. As to days on market, that is a function of the website owners. As Greg said, MLS days on market are cumulative, though a few find ways to get around the system…but not often. The invalid days on market is a function of the website showing them by “listing date”, which is the list date of the current mls entry, not the “days on market”.
My understanding was that the cumulative days on market from the MLS was not part of the average IDX download, as it is not warranted as correct data by the source. Not positive about that, but I’m sure I’ve read that somewhere.
P.S. CZB – I thought Sandy and Reba were “the good guys”
Yes,
When looking at market stats, in rising markets and balanced markets, the ACTIVE inventory and PENDING inventory will have higher median prices. There is a lag time before agents and sellers catch on the market is shifting. I’m not surprised at all that the map areas show that (listed) prices are falling. We’re seeing alot of price reductions. On the Eastside, median SOLDS pricing are still rising, and July Pendings were up on several areas, although inventory still rose at a higer rate resulting in higher market times across the board. I won’t be surprised at all if the median prices fall soon.
Nobody can time any market perfectly. In many areas and price ranges BUYERS are starting to have an advantage in negotiation and smart SELLERS will be looking at terms and conditions and asking “Will this contract close?” instead of trying to get the top dollar.
Buyers now have better selection and should be picky, buying the best properties,with the best location and in the best condition on the market. Sellers and listing agents can’t afford to be lazy and take anything for granted.
The online “stats” are a starter, but not complete and accurate. Buyers should hire the sharpest buyers agent they can find. For instance, I use market absorption rates (the ratio between ACTIVE and PENDING inventory by price range/by area) for both Buyers and Sellers when working through pricing. A great agent can interpret the market and feed the correct data so the Buyer can make good decisions in addition to looking out for potholes and negotiating well on behalf of the client.
I’ll be out for the day
.
Joel–
What happened? I allowed myself to get into a discussion where the participants would have been better off just agreeing to disagree. I should have said my piece and then stopped while I was ahead. But, as you have probably experienced for yourself, the Internet makes it oh-so-easy to jabber on long after you no longer have a point.
Sniglet and I look at the exact same market dynamics and have come to similar conclusions but with some fundamental differences. We both think price drops might happen (I also think they might not). The difference maybe is that I think any downward pressure on pricing will be tempered by the fact that those who are not in the position of having to sell in a bad market, probably won’t unless something occurs to force them into it. Job losses, things of that nature. Since local employers seem to be primarily in a hiring mode and are projected to be so for the next few years, that’s a promising sign.
Yes, if the troubles in housing spread to the economy at large there could be problems ahead, but around here I am heartened by the fact that our two biggest employers do a great deal of business overseas with economies that are growing very quickly. Being in So. Snohomish county, the one I am most interested in would be Boeing, and being part of a Boeing family I know there is typically a 2 to 3 year lag between when consumers stop spending and when airlines stop ordering planes, so I am feeling like that is going to carry us through this fairly well.
The real question is how well contained will the problems in housing be. I think they’ll be fairly contained, and if I’m right, I think that any downward pressure on prices will be softened as long as people aren’t acting out of financial distress. Some people will be in the position of doing a forced sale, it’s true, but I think that if the market doesn’t clear some of it’s inventory fairly soon, there will be a lot of sellers who will decide not to sell. At that point, the question will be how much inventory we are left with and what will be the balance between buyers and sellers. When we know the answer to that, I think we’ll all have a better idea where things are headed.
Anyway, in retrospect what I had to say in my comment to Sniglet was not constructive to the dialogue and I apologize.
Sandy,
I am not so sure that Puget Sound’s major employers will go unscathed in the face of a coming recession. I think there is a good possibility that a brewing economic contraction will be global in nature. The same credit expansion that has led to massive real-estate appreciation in the US has swept the globe, with mass speculation occuring everywhere from South Africa and Spain to Shanghai.
Notice how the Spanish real-estate market has begun to tank in recent months (Spanish builders have seen their stocks halve this year alone). In China there are tales of skyscrapers that are vacant since most of the owners were just speculators hoping to flip. I saw a news interview with one person who stayed for days in a line to buy a new condo in Southern China, and it turns out this person represented an extended family living in a squalid flat who hope to get rich. They can’t afford to live in the place themselves. There are also tales of how it is hard to find maids in Shanghai since so many of them have switched to day-trading.
Just look how the recent market disruptions this summer have really been global in nature with financial institutions around the world running into trouble (German banks getting bailed out by government, French banks suspending customer withdrawals, etc).
We’ve seen in the past that foreign contracts for air-craft, software, and all manner of goods can vanish just as quickly as they appear when times get tough. Just how much would it impact the Puget Sound real-estate market if the major employers instituted hiring freezes?
Again, I am NOT saying that a global recession is inevitable, but I strongly believe it is a distinct possibility.
All this just brings me back to my original point: don’t buy a house unless you know you would feel comfortable IF it should drop 30% in value in the next few years. If such an eventuality wouldn’t bother you overly much, then go ahead and buy.
Sniglet, Do you have access to a data that would separate the interest only loans from the negative amortization loans? They are completely different loans and I would venture to say that there are more interest only products than the neg. am. in the information you have provided.
Sniglet–I think this is the fundamental source of our disagreement. I think Puget Sound employers have enough momentum to carry them through this period. In particular Boeing. Microsoft to a lesser extent because they rely to a greater degree on direct consumer spending…with Boeing, the airlines tend to take a while to change direction and most of the American and European airlines have aging fleets anyway which are due for replacement. China, India and other developing nations are ramping up very fast, and even IF they experience a recession in their economy, their way of life has fundamentally changed in the last generation and this would only slow down their expansion, not stop it. Air travel in Asia is very similar to where we were in the 50s and 60s–so I would expect continued fast growth (even if it slows down, it will still be a period of rapid expansion), which means orders for Boeing.
Plus, the A380 has turned into a real fiasco for Airbus–they have a lot of very p.o.’d Asian customers who are largely looking to Boeing now as their supplier of choice.
I realize also that our lending crisis is not of concern only to us but to the rest of the global economy. BUT…in spite of that I think the systems we have in place will do a fairly good job of keeping things as contained as possible. Maybe I ate too much government cheese as a kid or something, but I do have some faith that the central banks will do what they have done pretty well over the last 80 years, which is keep this whole mess contained.
(I bet another thing we probably disagree on is how good of a job they’ve been doing over that period–I think they’ve done pretty well.)
I will agree with you that many things are possible…but I try to spend my time worrying mostly about the things that are *likely*. I just don’t think a 30% drop is likely. But, I think we are going to have to agree to disagree, and watch and see what happens.
BTW–Spain is the Miami of Europe. They have always had high unemployment and the majority of the building there has been for foreign tourist condos. Naturally, they are having problems.
Sandy,
In Japan,some home prices have corrected 80%,Cant happen here?Really?
Hi Greg and Ardell,
Thanks for jumping in to help J and K from comments 81 and 83.
Hi czb,
No, I don’t think I’m going to get kicked off
I believe a blog with only one viewpoint is boring. I like it when we disagree because then everyone learns something by reading through our questions and answers.
Hi Sandy and Sniglet,
What makes your conversation interesting to read, is that I believe that there are many people who agree with Sniglet, and many people who agree with Sandy.
Do you think there might be a third angle out there that might be even better….or perhaps a blended approach to what may or may not happen?
Hi R Duke,
I HOPE that does not happen here. We are so lucky. If you look at statistics from other states that have been heavily affected by foreclosures, we ought to be thanking our lucky stars.
r duke – I never said “can’t happen” I said “not likely to happen.” I agreed with Sniglet that many things are possible, but I prefer to concern myself with what I think is most likely.
I agree with Jillayne that many viewpoints are what make this blog interesting. I don’t think anyone wants to squelch the opposing viewpoint.
I guess I thought I was advocating the 3rd way when I didn’t discount the possibility of a 5 to 10 percent drop. To me that would represent a scenario where the lending problems affect us but the underlying strength of the local economy pulls us through with less damage than could happen elsewhere.
Jillayne, I get the feeling that “transparancy” got most agents to put up the defense and start talking about how good their business is and also to an extent protect the everlasting appreciation mantra.
I find it highly unlikely that re-agents do not have a very good idea of the current market conditions. It is their job to know. It is probably one of the main reasons they are hired by sellers and buyers. I.e that they do know the market conditions at this exact point and time so they can give good advice on how to competetively price a house for a seller and what a reasonable offer is on a property for a buyer. Perhaps if you would have made it a competetion to see what agent has the best sense of the market and then follow up with future statistics there would have been more interresting observations reported. Well, we still do have some answers and it will be interresting to see how accurate they are since it can be good guidance for people looking to hire an agent.
tj,
I do agree with you. So then why would agents who read this blog, choose NOT to let buyers and sellers know what’s going on in their neck of the woods? One would think that a dose of reality would HELP them work in a more productive way with their clients.
Listing agents who believe price reductions are needed would benefit from sellers reading about a slower than usual market. Sellers that have to sell would be more externally motivated to reduce their price.
Selling agents who work with buyers might happy to report that there is an increase in inventory which means more homes to choose from, longer days on the market, and more negotiating power, as reported by Ardell.
I still fail to see how an average agent loses by giving us their local scoop on what’s happening out there.
Perhaps everyone is just too busy writing deals…..and we’ll see glowing statistics reported for August…..
Is there anyone…ANYONE…who thinks it’s a good time for a first-time buyer to enter the under $200K market?
I finally feel financially ready to buy, but then I read blogs like this and feel emotionally shaky about it.
I have been seeing condos take longer to sell in the month I have been looking (Federal Way area). I’ve seen a few price reductions and re-lists. They tell me it wasn’t like this a few months ago, when people offered more than the list and sellers had multiple offers.
I’m not looking to make instant wealth–I just don’t want to feel so scared about a purchase that’s bound to make me anxious even in GOOD times.
Hi Kayleigh,
Thanks for stopping by RCG. I know next to nothing about the Federal Way condo market so I’ve asked the Realtors here on this blog to jump in and help out.
From my vantage point, the questions that came to mind when I read your comment are as follows: Have you been pre-approved by a lender? What kind of loan are you pre-approved for? (I’m hoping to hear that it is a 30 year fixed loan) How much money do you have to put down? How secure do you feel in your job? How much cash reserves will you have after the close of escrow? What is your debt-to-income ratio? (Your loan officer would know this answer). How long do you plan to live in your condo? Will the average rent prices in Federal Way mostly cover your mortgage payment if you chose to move out and decided to rent out your condo?
When I was in my early 20s, I bought my first condo. In order to calm my nerves, I ran through all these things in my mind and had an emergency backup plan, just in case. That seemed to lessen the anxiety, even though I felt “ready” to be a homeowner as a young single woman, and I never regretted buying that first piece of real estate, throughout all the market ups and downs.
“I don’t think anyone wants to squelch the opposing viewpoint.”
http://www.raincityguide.com/2007/08/22/mortgage-industry-news-in-need-of-sensible-moderation/
I have to agree with Sniglet. Most of the world has been affected by the credit bubble. There’s housing bubbles all of over Europe (not just Spain) and in Australia. European and Asian banks are big holders of CDOs. A lot of travel is discretionary and probably one of the first things people cut back on when times are tight. Even if Boeing has enough “momentum” to thrive through a downturn, can one company prop up the economy of the entire Sound or even just So. Snoho county?
The fed caused this whole credit bubble and you think they’re doing a good job? Well, I guess you benefited greatly in the short term by the housing bubble it spawned.
It’s not just Boeing that would be impacted by a global recession. The Puget Sound tech-companies would take a thrashing as well. Corporate PC/software upgrade cycles slow down significantly during recessions and consumers go into cash conservation mode, eschewing electronic entertainment and flashy new hardware/software that isn’t necessary for work or homework.
I still recall how most of the Puget Sound tech-firms had de-facto hiring freezes in 2002, where it was VERY difficult to fill open positions without high-level management approvals. It isn’t hard to see how we could return to such times again.
Thank you, Jillayne.
I have no debt; 15% down, 6 months liquid reserves, no debt at all, pre-qualified for way more than I would dream of borrowing, wouldn’t consider anything other than a 30-year fixed. Don’t know how long I would live there but would like to eventually own a house.
Thank you for the tip about the rent; I hadn’t thought of that.
I’m less worried about my ability to pay than I am about moving so far from Seattle (friends,family, job, etc.). And mostly, worrying that in 2-3 years, prices will drop and I could afford something closer or nicer, but am stuck instead in a home that’s worth less than I am paying.
It might be of benefit to wait six months, but my realtor and lender both warn me that by then, the places I’m looking for might be unaffordable to me.
[...] Buying without an agent August 27, 2007 There’s a lot of discussion about the condition of the RE market (106 comments in 4 days? That’s gotta be a record…). Certainly one concern is whether it is a good time to buy right now. One way to “hedge your bet” (as well as save some money) is to forego the services of a buyer’s agent. When you do so, you can reduce your offer by up to 3% (or get 3% towards closing costs, or a 3% reduction in purchase price, or any other creative way of realizing the 3% savings) as the seller will not have to pay your agent out of the proceeds. Thus, you can buy the house “below market” up front, as the market takes into account the expected commissions to be paid out of the sale proceeds. This provides at least a little hedge against possible depreciation of the property (or, hopefully, significantly slowed appreciation at worst). [...]
Hi Kayleigh,
I think I know where your anxiety is coming from….just a guess, but it sounds like it’s because you’re not sure how long you want to live that far away from your friends, family, and job.
If your plan is to stay in your new place for many (several?) years, then the price fluctuations in the market wouldn’t be so much of a concern.
So why not purchase something closer to friends/family/job now? Is it because prices there are too high?
“It might be of benefit to wait six months, but my realtor and lender both warn me that by then, the places I’m looking for might be unaffordable to me. ”
I think you need to gather as much objective information you can on what is going on in areas that impacts the housing market and then make a decision on what you yourself think is most likely to happen with prices. Do not take any single persons word or advice on what the future will bring. Perhaps be especially wary of advice from poeple who’s income depends on that transactions are being made.
“It might be of benefit to wait six months, but my realtor and lender both warn me that by then, the places I’m looking for might be unaffordable to me. ”
Or they might be cheaper. You might have more choice with rising inventory. Your realtor and lender do not have a crystal ball. Whats for certain is that their commissions will be delayed/disappear if you don’t buy right now using their services. tj hit the nail on the head – be wary of advice from people whose income is dependent on the advice they dispense.
Kayleigh,
Im not a realtor,but I would rent anywhere,then wait for prices to drop.My bet is they will,just about everywhere in U.S.Cash now is thing to have,and ability to bob+weave.Watch next couple months,it will be interesting.Pom pom wavers will be few and far between then.Allow me to give this Florida example.In a Gulf coast Tampa Bay community on beach,there were 250 or so residential properties for sale.Between start of July+start of Aug.,3 were sold on MLS. Two were on market more than 250 days.Looks like a bit of a buyers market shapin up.I know,its different everywhere else.Really????For how long?
For the unsuspecting condo/home owners or prospective buyers, please read this post:
http://seattlebubble.com/blog/2006/07/12/housing-appreciation-the-dirty-little-secret/
to learn a possible reason for the current artificially inflated prices.
This linked post was authored by who-shall-not-be-named here as I don’t want to put him on the spot, but he is a regular contributor here on RCG. And my realtor never told me about this practice!
Hi Kayleigh, you are experiencing what many people go through when they decide to buy away from their usual “community”. I basically read through your post and gathered that you are more likely concerned that by buying far away from your friends, family or work that you’ll become disconnected. It makes sense that this would be a concern to you because personal connections are our most important connections for a healthy sense of well being.
You sound like you’ve got the financial aspect handled well. I’m not sure why your lender and agent think you won’t be able to afford what you’re looking for right now if you have such a strong down payment and financial status.
The difference in buying a condo in Fed Way versus closer to Seattle is simple (I’ll put this here for Jillayne’s benefit), for $200k in Federal Way you can get a pretty decent 2 bedroom condo whereas $200k in Seattle will likely limit you to a studio or small 1bd condo.
I’m in the process of working with a client who is cleaning up his credit and saving some money to buy what he hopes will be a condo in the $100k – $150k range. The searches we are doing for him have 300 sqft studios in Seattle, 500-600 sqft 1BD units in the Renton/Kent area, and 700-900sqft 2BD units in Fed Way. Talk about location, location, location.
Kayleigh, I’d think about your lifestyle and if you are willing to sacrifice a little extra drive time to afford a place you like and with the space you are comfortable with. Will tacking on commute time cause you to become unduly stressed? Another way to handle your concern for becoming detached is to up your offers to host friends and perhaps schedule things to do that will help you and your friends to learn more about where you’re living. Fed Way has loads of parks and is near recreational centers. Heck, the downtown area is potentially going to go through a major change in the next few years now that they’re looking at adding high rises to the city.
You’ll also be closer to Tacoma (some won’t see that as an advantage) so you could host a friend overnight for a concert at the Tacoma Dome or the ampitheater, visit the Museum of Glass, Point Defiance Zoo and more.
If none of these ideas sound like they’ll help to alleviate your stress perhaps you should talk with your “community” and let them know your concerns and see if they’ll be willing to support you during this time. If you hear repeatedly that no one will come to Fed Way to see you, maybe you’ll want to re-consider.
Hi Kayleigh,
A house (or a condo) can be thought of as a part of a person’s “self.” The move away from family and friends might be symbolic of Kayleigh wanting to individualize and be more of your own person. Getting physical distance is one way to do this. On the other hand, Federal Way might feel light years away and the distance itself could be the root cause of your distress.
In any event, you mentioned “I have no debt” twice.
It is rare that a person purchases a home and does NOT want to buy things for the home. It sounds like your concern is any additional debt (perceived or unknown) that may pop up in the future, due to the distance. Let’s take transportation as an example.
If you need to upgrade your car because of the added wear and tear, consider the cost of a higher insurance premium, yearly car tabs, a monthly car payment, the added cost of gas, maintenance, repairs, and so forth. Can your budget handle this?
Whereas if you purchased closer in, you may or may not need to add these expenses.
Lastly, finding a renter for a condo on Capital Hill, is probably a heck of a lot easier than finding a renter for a 2 bd condo in Fed Way. You would just have to be honest with yourself as to if you’d be okay with less space.
TJ, SS, RDuke, Reba, and I are all offering more data for you to consider. Ultimately you are the one in control; you get to make the decision. How powerful! Now be sure to come back and tell us what you decided to do!
Hi Yang,
Thanks for posting the 2006 bubble link.
One way Kayleigh could use the info in that link is to ask her Realtor to find out if the comparable units sold in that condo complex had any seller concessions tacked on to the list price.
Come to think of it, I wonder if ANY of the stats released by the NWMLS would have that data for us? Here’s the query I’d make to the data: Show me the listing price, then compare that with the actual sales price. Break down the actual sales price to show any seller concessions that would have been added on to the sales price.
Could that practice have been making Seattle’s home prices continue to look like they are rising?
Jillayne,
MLS stats have the orginal list price, the list price when it sold and the selling price. It also computes the % of list to sell, price per square foot, CDOM (cumulative days on market), Average Price and Median Price.
The MLS does not have access to Seller concessions. They’re buried inside the contract and Seller consessons can come in may different forms.
However, Sellers were getting concessons in 1960,1970, 1980, 1990, 2000 and 2007.
I can’t see where it’s a big deal.
Although most of you think King, Pierce, and Snohomish Counties are the Puget Sound region .. you overlook the communities served by our biggest ferry runs: Bainbridge and Bremerton.
Those communities, tho quite different, also have a critical mass of residents who work in down town Seattle, in fact there are commuter vans who travel those ferries to major employers.
Hi Kayleigh,
Your reading this post (and looking to other sources for information) and educating yourself so that you can make the best decision for yourself is exactly the right thing to do as tj earlier commented. All the comments regarding your questions have been excellent ways to look at your particular situation.
The only thing further I can add would be the issue of buying now, in 6 months or in a year or two. None of us commenting has a crystal ball so no one can answer that question with any certainty. Everything that everyone has posted and commented about is an opinion on what we each think might/could happen, the amount of the difference between each of our opinions and what actually happens is the “risk”. So here are some ideas.
1) BUYING NOW:
Positive side; would put you in a good postion to buy from a larger inventory and from a better postion to negotiate price/concessions since you will likely not be competing with another buyer. You will be in your new home soon and if you plan on living there 3 to 5 years you should be fine even if the housing market does fall and rebound 10 to 20 percent.
Negative side; you could be buying just before prices do drop significantly (and possibly being able to buy something larger closer to family, friends and job) in the next year or two, so continuing to rent would be an advantage.
Positive side; you know what the interests rates are now.
Negative; you won’t know what the interest rates will be later.
2) BUYING IN 6 MONTHS:
Positive side; the prices for housing may be lower this coming spring when compared to last spring. There could be more inventory (some financially distressed sellers having to sell) and/or fewer buyers (more buyers deciding to wait to see if prices will go lower, or nervous about buying) to compete against.
Negative side; the prices could be higher in the coming spring than you are or will be seeing in this fall/winter. There could be less inventory than usual in the spring if some sellers (those who do not need to sell and can afford to wait for the market to improve) decide not to sell. With the possibility of lower prices in closer in neighborhoods, there might be increased competition from buyers (especially first time buyers) who see an opportunity to buy a condo or townhome in an area that they could not afford a year or two earlier.
Positive side; interest rates could go lower, and more time home buyer programs become available.
Negative; interest rates could go higher and lending gets tighter.
3) Buying in a year or two:
Positive side; you are able to buy at perhaps the lowest point in the market, and are able to find a great deal on a home that you might have only been able to buy as a second or third “move-up” home.
Negative side; you miss the lowest point and prices begin increasing as more buyers and investors enter the market and compete for the best properties, and you have also lost a year or two of owning your own home.
These are just a few things that could happen and some of the positives and negatives I see associtated with them. There are many, many more than I could possibly outline here, since there are so many varibles that could happen.
I wish I had a crystal ball to tell you what is the best thing to do Kayleigh. Educating yourself (as you are doing) to make the best possible decison for you in your situation is your responsiblity and as Jillayne pointed out very powerful! Best wishes on your homeownership journey!
Whoops # 3) BUYING IN A YEAR OR TWO should be in caps.
Jillayne,
Had a standing ovation yesterday for an agent who closed a zero down transction yesterday…two weeks late that was started 6 weeks ago. Also have one falling down on appraisal…jury’s still out on that one. We’re operating under the appraisal clause of the finance contingency with the seller’s agent trying to get an appraisal from a different appraiser. Buyer has 3 days under the Finance Contingency to notify that it didn’t appraise, which they did. Seller has 10 days to offer up a remedy. Will keep you posted on which way it falls.
I hired a transaction coordinator yesterday who has been a loan processor to date. I think it’s a good time to get TCs involved who know the loan process inside and out, since that is where transactions are going to run into glitches for awhile. Also it seemed like the “humane” think to do, given all the layoffs on the loan side.
Just wanted to thank you all who responded. This is the best advice and information I’ve had anywhere, hands down.
I’m still processing and thinking…but more calmly.
Kayleigh,
Sometimes the best thing you can buy is time.The market,real-estate and economy are all gettin hammered in Sept.Jus sayin
Reba,
Any more inside info from your “friend +25 yr. CFC vet. ?” jus wonderin :wink
Hi Deborah, Thanks for helping Kayleigh.
Ardell, thank you for the update!
R Duke, I think we should repost your comment on Reba’s Chicken Little article.
Kayleigh, Please be sure to drop by again if you have more questions and let us know what you decided to do!
I am hearing that local title insurance companies are laying off employees and some are going for a mandatory 32 hour work week in order to save jobs.
I’m also hearing that and some title AND escrow firms are enforcing cancellation fees: about darn time.
Hi Tim,
Oh my. That can only mean that revenue is down at title companies AND that there are lots of cancellations. The only times they enforce the collection of cancellation fees is when it starts getting out of hand, when revenue is down, OR when forced to by the state insurance commissioner. Perhaps we have alll three going on!
Hi Jillayne and Tim,
With the insurance commissioner cracking down, I’m sure that’s influencing title companies to collect fees. They are now required to charge and collect on all property information data except for a basic listing packages (tax records, plat map and deed–I believe).
I’m sure seeing Stewart Title of Sno-Co. fined over 1mil for flagrant abuses has other local title co’s minding their p’s and q’s.
I’ve heard that local title companies have been laying off employees and cutting back hours. At least with cutting back hours, I believe an employee may be able to collect unemployment for the missing hours.
We’re all going thru this.
Lots of cancellations equals lots of people starting something they can’t finish, or not allowing enough time for it TO finish. The system of no charge if cancelled, is dependent on cancellations being the exception. Mostly for inspection issues or Resale Certificate issues in the first week to 10 days. Not for loan can’t happen on day 28 or 29.
Anyway you slice it, it isn’t ONLY about reform in the lending industry. Many reforms are needed, and most on the agent side of things in my opinion. Too many agents had too easy of a time of it for too long. Time for a lot of training for those in the business for 5 years or less, who got the wrong impression regarding what their job does and does not entail.
Time for a rude awakening. Being the agent in the picture is not a “quick catch from lender and drop into escrow” easy job. I took “the Board” down as a sign that getting something into escrow is NOT the important event signalling “game over”.
Buyers with excellent credentials are also smart enough to be most cautious about value. I’ll bet you Kayleigh up there didn’t buy yet. Not a good time to be relying on hindsight.
Title orders consist of prelims on listings (tbds), purchases and refi’s and second mortgages. I was surprised to hear a while back that some purchase cancellations were due to buyers with two offers. I doubt that’s why there are cancellations now.
I would guess it’s failed financing, buyers backing out and listings expiring and maybe relisting with another agent.
Mortgage It in Bellevue laid off approx. 20 employees today. One of them is my little sister.
She was an Account Executive (Wholesale Rep). About half of the layoffs consisted of AEs and the other half are support staff.
That really says something when a company lays off from the sales staff. Right now, sales people are needed badly….unless projections are such that, well, they won’t be needed. I am so sorry to hear of your sister’s layoff, Rhonda.
Ardell,
You make a good point. I wonder if we’re going to start seeing 3rd party providers charging an upfront fee, or requiring to be paid in full upfront due to cancellations, which are fast becoming the rule and not the exception as you mentioned.
Any thoughts?
My other sister, who is also a Wholesale Rep, had to cut back her accounts by 60%. Kind of the same as cutting back hours I guess. The lender is paying less commission but the rep is working just as much. Knock on wood, she still doing well.
David, Last I heard, title companies charge about a $50 cancellation fee. Back in the day when I was in title, we would have to end a relationshiop with a client who had the trend of ordering titles, cancelling and not paying the fees.
Hi David,
Sure, I would plan for that. Appraisal bills, credit reporting agencies, and so forth. If there’s a trend of not being paid, third party vendors have a history of asking to be paid up front or they cut off that client.
Title insurance companies, while not likely to charge an up front cancellation “deposit,” may be more likely to charge for more of their information services such as mortgage leads.
Hi Ardell,
I’m not sure what Kayleigh decided to do, but I did invite her back to share her decision with us! Thanks for pointing out that reform can come from many directions now, not just with lending.
This whole subprime meltdown is a gift to the industry. The majority don’t see it as a gift just yet, but I think you might!
David,
Appraisers do it. Home Inspectors do it. If everyone had to pay for everything up front, maybe they’d be more aware of their odds of making it to the end before stepping into the ring.
That’s what Earnest Money is supposed to be for, but it’s lost it’s edge with everyone expecting to get it back regardless.
Jillayne,
Too many people being hurt by all this to call it a gift. I was freaking out about it since day one, till I played the if you can’t beat em join em game
But don’t cry for me Argentina
At my age, a wild ride can be a good thing. Keeps you young
R Duke, feel free to post it there but I’ve been in plenty of contact with my CW friend and things are just fine. I can answer in more detail on my own post if you want to move it over there.
Hi Ardell,
We had been talking, teaching, and writing about the predatory lending problems for EIGHT YEARS. Nobody listens when the market is on it’s way up, uP, UP!
The gift I see is an opportunity to:
1) define predatory lending and create a new federal law designed to halt this practice.
Today the Mortgage Banker’s Assoc released a report on mortgage fraud where they are STILL not willing to define predatory lending.
Why? because then they’d have to stop doing it.
Predatory lending is not going away unless we do something at the federal level. This entire crisis is an opportunity to DO SOMETHING.
2) Set the bar higher.
For LOs and also for real estate agents. Once people such as underperforming LOs and agents exit the industry, I believe the subprime meltdown is an opportunity to raise standards. If we don’t, as soon as the market turn, they will all come right back, and you and I will be blogging about this again 10 years from now.
We can’t help the hundreds of thousands who end up in foreclosure. Social services are in place to help the most destitute. The rest will become renters again. LOs and Realtors who aren’t producing will enter jobs in other service sectors. Realtors/LOs with a client base will adjust and weather the storm. Good folks like Rhonda’s sister and others that I know who have lost their job will become re-employed. Most everyone will recover.
http://www.realtown.com/Ardell/blog/miscellaneous/predatory-lending-dont-be-a-victim
That was one of my first ever blog posts. Pretty cheesey set up in hindisight, but a lot of the detail is what we are talking about today. I remember in my Inman Podcast saying I just started railing the minute I starting blogging, not really knowing who the heck I was trying to get to hear me.
The faster we turn this around and get the industry back on the right track, the better off everyone will be. Clearly we can’t just all sit around waiting for the government to fix it.
But wait…no…maybe we should change all the contracts into nonsensical crap…that’s a much better way to spend our time right now, isn’t it? All because of a case called Bull. Very appropo, don’t you think?
Jillayne, although this is hurting a lot of people, such a my little sister, I do agree that there are positives that will evolve from this market. LOs will be more scrutinzed. Predatory LOs and Agents who depended on subprime buyers may not survive this market. U/W guidelines are more “real”. There will be fewer toxic mortgages available (such as stated and option ARMs). How mortgages are rated for Wall Street will be scrutinized and corrected, … we have to learn from this and make what we can a positive. What we don’t learn, history will teach us over and over again until we do.
Hi all,
I just heard that Countrywide laid off a bunch of people at their Bothell location yesterday. Sounds like they were working only on purchased, telemarketing leads and laid off these folks a couple of days before they were due their bonuses.
Anyone have any advice for me? I own a townhouse in New Holly (an up and coming area), but live in the Bay Area.
We are pretty close to selling, but a light rail station will open in 2009 that’s just a couple blocks away. How much influence do these things have?
Thanks in advance for any responses.