Sunday Night Stats – Best and Worst

First, it’s been pretty obvious in the last 3 to 4 days that people are reacting to the interest rates being at 4.75% to 4.875% recently.  I can honestly say agents are not instigating this momentum, as all of the calls I have received have been directly from buyers that I’ve never spoken with before.  In fact I have had more calls to see property from buyers than I have had showings from agents.  It’s like a large part of the agent marketlace is MIA.  I’m hearing similar stories of “agents retreating” from Vancouver.  A sign that first quarter 2009 is clearly going to be on the upswing.  But let’s look at some more of the here and now tonight.

The Best:  Townhomes – the under $500,000 variety – net even a Buyer’s Market really – not a Seller’s market either.  A balanced market in Townhomes in Redmond where almost ALL townhomes sell for under $500,000 and North of Downtown in Seattle.  Location issues are more of a concern in Seattle than Redmond, as most townhomes in Redmond are built in larger, well located communites.  In Seattle they are often smack on a main arterial.  So be discriminating as to location and lifestyle and not just space issues.

Only a 5.7 month supply of townhomes in Redmond 98052 – not even a buyer’s market

Hard to believe with all the gloomy news, I know, but yes there is a market segment that is still performing well.  That will clearly improve in 2009 if rates stay this low, so we could even see a Seller’s Market come back in Redmond Townhomes in the not too distant future.  Still, I’ve seen prices taking a beating in the last 60-90 days.  Let’s see if lower rates and low supply pulls that back to stable.  I think that will happen for Townhomes in Redmond.

Now for the Opposite Extreme – The Dark Side – The Scariest Stat of all Sundays

Over FOUR YEARS of Inventory!  Where you ask?

Kirkland 98033 in the $1.2M plus market.  115 for sale and only 7 closed in the last 90 days.  See detail.

Compare Single Family Homes – Kirkland 98033 above to Redmond SFH 98052 below:

They look like Chirstmas Balls 🙂  The more red you see, the less green and blue, the weaker the housing market.  Redmond is doing pretty good until you get over $750,000.

Two story townhomes under $500,000 are definitely the IT segment both in Seattle and the Eastside.  Kirkland just doesn’t have enough of them like Redmond does.  Not sure what happens when you get out to Cougar Mountain and other not “close-in” newer townhomes.  I don’t get out that way very often, and last I looked there was a reason why I don’t go out there very often.  Every time it snows, I get calls from people who want to sell them and move closer to work.

Well, that’s your Sunday Night Stat “Christmas Balls” edition.  Hope you’re enjoying your “White Christmas”.


70 thoughts on “Sunday Night Stats – Best and Worst

  1. I wonder how much of an effect jumbo loan limits are having on sales over 750K? The same for sales under 500K with the new FHA loan limit in 2009? Will we have lots of sales under 500K, and very little above that loan limit?

  2. This from a post I wrote on January 18, 2006, one of my first posts on RCG.

    “While only 48 properties sold over $1.3 million…there are currently NINETY (90) N I N E T Y!! for sale!!! (In Kirkland 98033) That is almost a TWO YEAR supply! I’m not shouting at you, but I find that incredible. Yesterday one of my agents posed this question. Her client was buying a condo for $142,500 and was worried about “the bubble bursting

  3. I think that has a big impact mike. Also, in Kirkland and Redmond detached homes below $500k is absolutely junk. I don’t think it has anything to do with a preference for Townhomes it’s likely all about the price. People can or will no longer pay the $700ks and up of the peak bubble days. It’s over.

  4. mike,

    I’m doing a study on that for a local bank with portfolio loans on property in the $850,000 range. In fact it’s one of the reasons I did all of the Christmas ball stats in the last few days, as the report is due today.

    I’m not quite finished, but yes, jumbo loans are inded a HUGE factor and yet…everyone’s being relatively quiet about it. Lenders are often pretending there is a HUGE availability – small print (IF you can jump through these 42 hoops).

    I’ll be doing a post on a completely new valuation tool for home buyers that measures the health of the community around the property being purchased. One CAN research if where they are buying is going to be hit hard by the second wave of resets, as seen on 60 Minutes last night. It’s a ton of work, but it can be done. Won’t be getting to that post today…but soon.

  5. tj,

    In Rivertrail (one of my favorite places) you can get a 1,500 square foot home with 2.5 baths and a two car garage and a small patio/yard (even expensive new houses have small patio/yards these days) for $450,000 to $500,000.

    1) Most people I know who sell their townhomes there hate to leave

    2) When they sell for $450,000 and spend $650,000, the value added for the extra $200,000 does not seem worth the price difference.

    They still have a two car garage, a small yard, 3 bedrooms and a nice kitchen after spending $200,000 more.

    PLUS, most people don’t like to do yard work anymore. MOST people prefer gas fireplaces to wood burning ones. MANY people like being able to walk to Bella Bottega and Downtown Redmond. Many like the direct access to the Burke-Gilman Trail and being able to bike or walk to work.

    It’s not just about price…it’s what you get for the price. “Should I spend $200,000 more to have a basement I put a lot of crap in that I don’t need?” “Should I spend $200,000 more to have 1,000 more square feet I don’t need, and will stress me out trying to keep it clean?”

    There’s a lot to be said for the fact that you can stay in a 3 bedroom, 2.5, 2 car garage townhome pretty much indefinitely. if market conditions don’t improve. You may have to stay there due to market conditions…but you won’t get “stuck” there.

  6. I’m definitely a big fan of Redmond, and look at Sixty-01. Sure you can find stuff you don’t like about Sixty-01. But really…for $250,000 or less for a 2-story townhome on the lake with covered private parking by your front door? Ducks, geese, gym, pools, lakes, fountains…less than $250,000 for a townhome?

    Townhomes have a LOT to offer in Redmond, especially with self contained conveniences or “walk to” locations.

    You may not like them tj, but they are a fabulous housing source for many.

    OH, and before I forget, I finally went up to visit those brand new $250,000 Quadrant built “twins” I mentioned in my Affordable Housing post up on Redmond Ridge. They were pretty much sold out. Sure, you could point out a ton of stuff you don’t like about them. But at that price, they went like hotcakes in one of the worst housing markets in years.

    Attached housing…it’s a staple we need more of. Remember, most major cities (like my hometown of Philadelphia) have been built on the concept of attached housing and good mass transit for over a hundred years. That Seattle wasn’t originally built from that mindset, does not make the option inferior. It is not a new concept.

  7. I’m not saying that there aren’t any nice Townhomes or that there aren’t people who like them. What I’m saying is that the reason Townhomes still have some activity is purely based on the price level. If detached homes were in that level they would see action as well, likely more than Townhomes do. It’s no shift in preference from sfh to Townhomes that is taking place instead the reason is sfhs are priced out of the market. The thought that Kirkland and Redmond can carry these $700k and up homes is to me a result of the bubble mindset and is not based on fundamentals of the purchase power of the demographics in those areas but on loose lending and overly optimistic investors/builders.

  8. Regarding Townhomes I think it’s an attractive option for dense urban areas, not so much for the suburbs. There are always exceptions but in general I would think the people who prefer suburban living also prefers a detached home. People who live in the burbs often do it to get some space and peace/privacy which is to some extent compromised in a Townhome.

  9. I ran some numbers for the market I’m interested in.

    All of these numbers are for SFH under $350k.

    98007: (east Bellevue)
    – 3 sold in the last three months
    – 1 on market
    – 1 MOS
    This means it is a strong seller’s market, but the single house for sale has been on the market for 80 days.

    98008: (far east Bellevue)
    – 5 sold in the last three months
    – 4 on market
    – 2.4 MOS
    – Still a strong sellers market. Houses on market have been listed for 55, 76, 77 and 187 days.

    98052: (Education Hill in Redmond)
    – 7 sold in the last three months
    – 8 on market
    – 3.4 MOS
    – Houses on market have been listed for 29, 40, 45, 55, 121, 154, and 184 days.

    I find it interesting that the houses sit on the market for months in what is supposed to be a seller’s market.

  10. Alan,

    That’s a different ballgame and not about buyer’s market or seller’s market. It’s about who wants them at any price at all. Most would rather have a townhome than a SFH at those prices in those areas…and what troubles come with homes at those prices. IMNSHO, you would be much better off going for the short sales above that price, than the ones listed at $350,000 or less. Getting a $450,000 listed short sale for $350,000 would be the route I would recommend…and I have a bead on the best one if you are ready to approach. Has its problems, of course. Can’t expand on a blog, but give me a call if you’re interested.

    There was a time when a builder or flipper might have them…but unless it’s a foreclosure or short sale, not likely in this market. People will stretch their price for something a tad better for $400,000.

  11. Most people clearly do not want the headache of doing their own improvements, and living in squallor while doing so. I’m sure you all know one or two people (I do) in Redmond who bought to fix years ago, and never fixed. Living in sub-standard conditions is no picnic for extended periods of time.

  12. tj,

    Not so. The suburbs offers attached housing at half the price of dense areas and still at great discount to detached housing.

    Main reason they buy it tj? Because it’s newer. Nice kitchen. Nice bathrooms. Even at the same price most people pick newer townhome over old needs work SFH quite often.

    When you are taking a shower in a gross bathroom, the fact that you got a good deal on the place isn’t much comfort.

  13. How can prices take a beating if it is a sellers or balanced market? If sellers really have the negotiating advantage won’t they negotiate for higher prices?

  14. Hey, Cougar Mountain is great! For sledding! The park there is incredible,and huge!

    Newcastle Rocks!

    It’s too bad rates haven’t improved much in the true Jumbo 30 yr fixed. We’ll keep an eye out for improvements.

    That said, there are some VERY good rates in Jumbo territory (above $506K) for ARMs, with lower LTV’s (70%).

  15. Roger (and lower LTVs 70%) is the BIG mouthful that’s being written and said parenthetically, vs. being shouted.

    Most think 20% down will do it…but then everyone starts shuffling their feet and looking for 30% to 50% down.

  16. Cautious Buyer,

    There’s a lot more to a market than a balancing act, as I pointed out to Alan.

    Absorption Rates, buyer vs seller market, is only a way to look at the big picture. On a small picture throw absorption rate out the window and deal with the real facts at hand.

    Bargain prices on Seller’s Market inventory is being had since September and through year end. Low interest rates are already pushing those prices up and by spring (in those small pocket seller markets) many will have missed the boat…until maybe next last quarter of 2009.

    Looking back at sales and forward at buyer activity and then back at the present gives you a different answer than Absorption Rate and months of inventory will calculate out to. October 15th through end of November or December 15th is always the best time for a buyer to negotiate, even in a Seller’s Market pocket location. Sellers who came on market in July don’t want to wait until the next year, and by October 15th they get pretty negotiable.

    Often those who don’ sell be end of December can raise their prices in the new year and sell at those higher prices. I’m not talking a lot higher…but a smidge higher almost always works when buyer activity increases.

  17. Ardell:

    I know, the difference between 70% and 80% on a $1M home is $100K!!! That’s not pocket change.

    But, I have to remind myself that people that buy $1M homes MAY have that kind of flexibility with cash, and liquid assets.

    And, when you are looking at a spread in the cost of money of 3% (say 5% at 70% down, vs 8% at 80% down), it may make sense, to a select few folks.

  18. And why do you think they ask for 30% down or more for a favourable rate? It’s a good question to ask yourself if you are looking at property in that range.

  19. Roger “And, when you are looking at a spread in the cost of money of 3% (say 5% at 70% down, vs 8% at 80% down), it may make sense, to a select few folks.”

    Don’t tell me the lesson wasn’t learned when the spread of money on the 20% – 2nd @9.25%”made sense” from the profit standpoint on the spread…don’t tell me someone would make that mistake on an 80% LTV vs. a 70% or more LTV. That’s greed talk. Aren’t we finished with greed talk in the mortgage markets? Please tel me we are.

    The only person I see doing that deal today is someone’s parents.

  20. tj,

    It allows for another 10% drop. The 1st historically only wants to fund 80% of value. 70% today is perceived by those lenders as 80% down the road. They are giving a minimum 10% fall spread on property values.

  21. Back to “I don’t give a RA about Banks” 🙂

    I call it all the story of Olga.

    When Banks took the time to look at the detail, they matched their debits and credits and they made sure each loan was hand underwritten and made sense, I worked at a Bank.

    Then they fired Olga. She matched the debits with their specific corresponding credits by transaction #. Big bank swallowed our little bank, fired Olga, and said no need. It will all come out in the wash. Months later they came to me and said “we’re out millions of dollars, what do we do?”

    With no Olga’s…the big picture is beyond fixing once it get’s screwed up to the level that no one can “put Humpty Dumpty back together again”.

    Until they go back to keeping every loan package in a tight box with a ribbon on it that makes sense…it’s just another road to ruin.

    When I told Eleua I didn’t give a RA about banks, it wasn’t because I didn’t see it coming…it’s because I was there when the Banks decided not to give a RA about sound business practices. Until they turn that around…it’s just another waiting period to the next bailout event.

    My sister always says the Country went to hell in a handbasket when we came off the Gold Standard. I think we’re both right to some degree.

  22. I agree with your points on townhomes Ardell. We just started looking at them – the pros and cons finally hit home (pun intended) and we opened up to the idea. There are just so many out there that were put up hastily – and they’re devoid of any charm at all.

  23. I’m not sure who’s greed you are talking about.

    Hopefully, not mine. I’m only reporting what I see on the wholesale rate sheets.

    When money is the subject, greed must be accounted for (another less perjorative term might be reward). And of course, risk must be accounted for as well.

    Unlike conventional loans (under $417K, or under $506K locally), which are explicitly backed by the US government (and they are purchasing them now, too), Jumbo loans are purchased entirely by private investors, and NOT backed by Fannie and Freddie.

    This is what investors feel they must be paid, I suppose, to make the loans for RMBS, absent those guarantees.

    Kind of scary, when you think about it.

  24. Roger,

    Don’t take anything personal…I don’t know you well enough for it to be personal 🙂

    But a 3 -5 spread for risk didn’t work…isn’t now working…who the heck would be thinking like that now? Maybe 10 years from now when they forget about all this…but now? No excuse. No one should be even trying to find a lender who will get big eyed over the spread.

    EXCEPT the lender already in the fire. If the builder’s lender who is looking at a huge shortfall is willing to fork over 80% LTV Jumbo to the buyer…great. Replacing a bad situation with a better bad situation…that I can see happening.

  25. Darren,

    “Charm” can be hard to come by in any new construction at reasonable cost, not just townhomes. Owners can add charm with built in corner cupboards, built in storage/window seats in bay window areas. Recently saw a condo in Bellevue Manor with arched cutout in the dining area wall recessed slightly into the closet in the next room. Some amazingly creative small touches can add “charm”. On a large stair turn landing you can add a fake window with lighting behind it.

    Small improvements create big charm and set your townhome apart as different. In a sea of all the same…a little imagination goes a long way at little cost.

  26. Ardell:

    We may have a different definition of spread.

    To be more specific regarding my definition: I am talking about the differing costs of money to the borrower from different lenders at different terms, not what the broker is charging.

    Par rates for Jumbo loans are all over the place in wholesale. Here is just one example, and by no means the most expensive, or the least .

    A major lender is offering rates using the smallest discount points available charged, but no payment to broker from lender, assuming good credit, purchase, 80%LTV, as follows

    30 yr fixed, conventional ($417K) 4.875%
    30 fixed, jumbo conv ($506K) 6.75% (.5 pts)
    30 yr fixed Jumbo ($506 and up) 7.875% (.5pts)

    A different lender is offering

    5yr ARM 5.125% (.125),

    assuming good credit, purchase, 70% LTV (80% not available from that lender at any price, nor is a 30 yr fixed), loan amount up to $850K.

    I’m not saying that someone should pay 7.875% for a fixed Jumbo loan, I’m simply saying that is what at least one major lender is charging. I cannot imagine that they have many takers.

    It is a market with very uncertain rules, right now.

    Bring back Olga!

  27. Always enjoy your Sunday night stats and look for them every Sun night/Mon morning. Not sure if I ever told you that before. Today’s post was especially eye-opening. Thanks for doing this Ardell.

    Makes me wonder what things will look like in these areas once the Alt As and Prime Arms start resetting.

    Question for Roger:

    Who on earth would be interested in an ARM loan at all these days?

  28. Jillayne wrote: “Who on earth would be interested in an ARM loan at all these days?”

    That should be part of the questions on a mortgage application: “Are you interested in an ARM?”

    If they answer yes, that should then be a bigger disqualifying factor than answering: “Have you ever filed bankruptcy?” or “Have you ever had a property foreclosed?” Yes answers to those other two questions could be explained. 😉

  29. That’s funny!

    Frankly, at conventional loan levels, no one. I haven’t had a discussion about ARMS in many months, at the conventional level.

    The advantages of an ARM these days (for conventional loan sizes) is nowhere near enough to compensate for the additional risk.

    However, the difference in pricing for Jumbo loans (between ARM and fixed) is such that it would be irresponsible NOT to discuss those options with borrowers.

    There’s considerable debate whether today’s conditions and policies are going to lead to catastophic inflation or deflation, or neither.

    I’ll make my bet on the inflation side, and substantially higher future 30 yr fixed rates, but no prediction on exactly when that occurs.

    I’m certainly advising anyone that can qualify, to get into a fixed rate now.

  30. Thanks Jillayne,

    There’s never been a better time…to buy in the best area you can afford. Defining best area = lowest absorption rate. A market that can hold it’s own in the worst of times also rises more in the best of times.

  31. I am sure that the recently lower rates will encourage some people to buy homes, but these low rates are actually pretty scary. Rates are low because investors are running as fast as they can for the safety of government backed securities (e.g. T-bills, GSE debt, etc), which is driving down yields.

    This is the loud siren sound of deflation. Who wants to buy a depreciating asset even if the interest rate is 0%? Just look at Japan. They’ve had EXTREMELY low rates for almost 20 years, yet that hasn’t done much at all to stoke inflation. Tokyo area homes are still some 80% less than they were during the ’89 peak.

    I have a podcast that explains why low mortgage rates are something to fear.

  32. Ardell wrote: “There’s never been a better time…to buy in the best area you can afford. Defining best area = lowest absorption rate. A market that can hold it’s own in the worst of times also rises more in the best of times.”

    I’d agree absorption rate should be looked at, in part because you don’t know what the market will be like when you want to sell. But I don’t agree with the last part. If market prices in an area are volatile they will be volatile up and down. And if the absorption rate is bad, prices will be volatile downward.

    Take Magnolia. I haven’t run absorption rate numbers, but just from my memory of the listings, I’d guess they’re pretty bad. And prices have been falling significantly In a hot market those prices would probably rise faster than prices in an area with a low absorption rate.

    So, a low absorption rate now would mean you’re more likely to sell at any point, but that you might not get the same appreciation going forward.

    All that said, I’m not sure worrying about future appreciation is the best basis on which to buy a house. Using Magnolia as an example, I wouldn’t buy there hoping for great appreciation. I’d buy there if I actually wanted to live there! That in my mind is the more important part of the process. The low absorption rates would be a concern, and I’m not sure that would be outweighed by the potential for greater appreciation in the future.

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