Home Prices Recover in Kirkland 98033

Many around the Country are asking what a Home Price “Recovery” will look like and what will create it. If you have been home shopping on The Eastside close to the 520 Bridge, you are likely amazed at the strength of that market in recent weeks.

Kirkland 98033 is not the only market experiencing this phenomenon, as I first noticed the activity and price increase in the Cherry Crest neighborhood of Bellevue 98005. But since I recently represented a buyer client who closed on a home in Kirkland 98033 near Downtown in the Lakeview Elementary School area about a block from Google, I am focusing on this area first.

While back in October and for the 4th Quarter of 2010 we were talking about whether home prices in King County overall were running in late 2004 levels or early 2005 levels,

Kirkland 98033 has bounced up to February 2006 levels!

Before you jump to the conclusion that this segment simply had a lower % of Short Sales and Bank Owned Property…not so. A full 42% were “distressed” properties. Even with that drag of an additional 5% to 6% down created by the “distressed property sales”, the prices are running at February 2006 levels.
kirkland 2011

None of us are holding our breath for prices to reach peak levels, and I don’t anticipate that happening for many years. But if you chop off the extreme peak of 2007, home prices in 98033 are clearly recovering nicely.


There are several contributing factors.

1) Googleopening in 98033 in late 2009 and hiring a significant number of people in recent times.

2) High Elementary School Rankings – While all of the schools in 98033 don’t enjoy the highest ranking status, those closest to Google and Downtown Kirkland do. Peter Kirk Elementary, Lakeview Elementary and Ben Franklin Elementary, all in 98033, help support and boost home values in these areas. To be fair and balanced, I did not segregate these schools in the stats and included all school areas of 98033, at least one of which ranks fairly low.

3) Anticpated 520 Bridge TollThe soon to be imposed Toll to cross the 520 Bridge has had an impact on home prices closest to that Bridge. Some have moved from Seattle over to the Eastside to avoid the Toll. Some who work on the Seattle side, but prefer Eastside Schools to Seattle Schools, have moved as close to the Bridge as possible to cut down on fuel costs and time delays to compensate for the negatives of the toll.

Kirkland is clearly one of the best places to live in the Seattle Area, and always has been, especially the area closest to it’s Downtown on the Lake. The reasons for that are many, and the subject of another post.

So yes, the Recovery is clearly “Cherry-Picking”.

A few other amazing facts. Of the 44 homes sold in the First Quarter of 2011 in 98033 that were NOT short sales or bank-owned properties, 18% sold in ONE WEEK or less with 23% selling in two weeks or less and a full 50% selling within 90 days. Clearly though the distressed properties were very high at 42%, they were not creating a huge drag on the non-distressed properties. The median for non-distressed properties was a whopping $646,000. Very close to the full median price of 2006 overall.

This is what a “Recovery” looks like. It doesn’t reach peak…but…it looks pretty darned good to homeowners in 98033.


(Required disclosure: Stats in this post are not compiled, verified or published by The Northwest Multiple Listing Service.)

Real Estate – The #1 Question

The #1 Question in Real Estate is “How Much is THIS Home Worth?”

Every single person who is buying a home or selling a home is going to ask that question. Most people doing a refinance need the answer to that question as well.

1) A home seller needs to know the highest possible price they can sell for.

2) A home buyer needs to know the lowest possible number than can “get it” for…BUT they also need to know the maximum amount they SHOULD pay for it. The answer is often not one in the same.

3) A person planning to refinance, needs to know how much an appraisal will say it is worth, which isn’t necessarily the same method of valuation used by home buyers and home sellers.

Why do you need to know that Home Prices in King County are at early 2005 levels? Because that fact should lead you to some generally true conclusions.

1) If you are a seller thinking about selling your home, and you bought it between 6/2005 and 12/2008, you would be starting from the assumption that you CAN’T GET WHAT YOU PAID FOR IT”. If you bought it in 2001 and never refinanced it, then you should be able to sell it and walk away with positive net proceeds.

2) If you are a buyer wondering what to offer against the seller’s asking price, and he is asking more than he paid for it in 2007…well…you probably need to walk away. Maybe not see that home in the first place.

3) If you are thinking about refinancing and you bought the home in 2007 with zero down, you likely can’t. So save yourself the cost of trying.

Are there exceptions? Well, only a fool says never or always. But if you think you ARE the exception, you better have a really, really good reason why.

I know…your house is different. Your neighborhood is better. REALLY? Usually not as much as you think.

A good example of the dangers of applying Home Sale Statistics improperly, is in Redmond.

The Median Home Price in Redmond is up 66% from 2001 to Present, but not THAT house. That’s why you need to know when an area is running much higher or lower than the overall County market stats, and WHY.

Overall median price in Redmond is up 66% from 2001. Based on that true fact”:

1) A seller (erroneously) lists his home at 66% more than he paid for it in 2001. The house was built in 1985. He paid $350,000 + 66% + “negotiating room” = $599,950. He lists it at the highest possible price he can “reasonably” get for it. And he wants at least $575,000. This based on an article he reads saying Median Home Price in Redmond is up 66%, which is true…but not for HIM.

2) A buyer who reads my blog sees that 66% only applies if you include homes built in or after 1990. He sees that the % increase for homes built in Redmond prior to 1990 carry a median price of 42% more than 2001, vs 66% more. So while the “lowest price” the seller will accept is $575,000, the highest price he might be willing to pay is $500,000. We’d need to test homes built in the 80’s vs ALL homes built prior to 1990 to know for sure what a “reasonable” price for that home would be.

3) A person refinancing may expect it to appraise at $580,000, using the same logic as the seller in 1) BUT the appraiser may come up with $550,000 based on “3 comps”. This assuming the “average buyer” will pay closer to what the seller wants, than what the property is actually “worth”. An appraiser only looks at what people paid recently, not whether or not those few buyers were correct in determining “price to pay”.

There’s Good Reason why The #1 Question in Real Estate is what is THIS home WORTH?”

It’s one of the hardest questions to answer correctly. Keeping up on where home prices are generally (early 2005 levels) gives you a leg up on simply “What is the seller willing to take?”. But local stats can be misleading, if you don’t take the time to take it down to Apples to Apples.

Information is of Great Value! Knowing how to apply that information…is PRICELESS.

How to find your “Dream Home”

Finding your Dream Home starts with determining if you can afford your Dream Home. Let’s say you have decided that you want a two story house, one with at least 3 bedrooms on the 2nd floor. Now add that you work at the main Microsoft Campus and want a home within a reasonable distance to work.

Start by taking out a map and drawing the area within which you would like to live. For the purpose of this example, I drew the map based on where most of my clients who want to live near Microsoft draw these lines. For example, most wouldn’t live on Finn Hill, so Finn Hill is not in this sampling. Most would not live in Bothell. So Bothell is not in this sampling. I can’t use a “radius” of the campus, as most don’t consider the other side of Lake Sammamish to be better than a little “further” in pure distance into Kirkland vs “around” the Lake. So I’m using a polygon, many sided, map area.

Your “mapped area” may vary, but use this as a guide, and apply to your own mapped area.

I’m using a “12 month rolling basis” here to include the most recent data and exclude the oldest data, and yet still have enough sales in the sampling to produce enough relevant data. For the most part it is 2010, but includes the most recent data available in Jan. 2011 to date, and excludes the oldest info from Jan of 2010.

Before you go out looking at houses, you want to begin with some reasonable expectations.

graph (26)

The Data above tells us that the majority of two story homes in the mapped area sold over the last 12 months existed in zip codes 98052, 98033 and 98004. Now let’s look at price.
graph (28)

I only used some of the data to produce this post. You can see the rest of the raw data HERE.

By using these simple techniques, you can easily see that you likely need to spend about $650,000 give or take and look in 98052 and 98033 primarily. But what if you want to spend $500,000 and want a home that is not older than 5 years.

Simple…just test that parameter.

98052 2-story built in 2006 or later sold in the last 365 days for $500,000 or less = one house.

98033 there was also only one house sold fitting those parameters, but it was far from being finished new construction. There is also one in pending. Both required cash buyers as the property was not in a condition that could be financed.

So now you have to ask yourself, is “The Dream” a “house” or a “home”? Do you change the “what” and look for an older home of a different style in a great neighborhood with a great school? Or do you up the price in order to get everything you want, if you can afford it, but didn’t “want” to spend more than $500,000?

Point is, you don’t have to go out to “look” for your Dream House before testing your Dream against Reality. Setting a realistic objective saves you time and maybe money as well. By staying home and making this decision, you may opt to keep the price low and change your expectations as to house. If you get too vested in the outcome of “newer 2 story house of not more than 5 years old”, you may start pushing on price to get “it”.

Consider all of the factors of “dream home” including neighborhood and schools, before getting your heart set on one particular style or age of home.

Bellevue Neighborhoods – Get your home sold the first time around Tip #2


Condition of your home to sell:

Reason #2 (If you missed the first reason you can find it here) that your home will not sell is that your home is not showing well.  Buyers don’t want to walk in the front door and be overwhelmed with STUFF…whether you collect tea-cups, love antiques, have a plane collection, etc.  Buyers shouldn’t know what your hobbies are and therefore you should remove those items before putting your home on the market.  You also don’t want to have a wall of photos showcasing Bobby’s entire 30 years of life…Now, we don’t believe that every single picture needs to be removed as it should show that a family could or does live there.  When a closet is opened your mouth shouldn’t drop to the floor when all the contents are beginning to fall out on top of you.  The more items you have stuffed away, the more a buyer is going to think that there are storage issues with the home.  Same goes for shelves, counters, etc.  The Kitchen doesn’t need to highlight all of the items you might use over a span of a month from the waffle maker to the toaster, the juicer, etc.  It’s OK to have 2 small units on the counter but that’s a max.  Fido’s dog bed is pretty important to him but when there are showings or open houses you’ll want to remove the smelly dog bed and please, don’t leave your dirty laundry out. Furniture shouldn’t be covering up the fireplace or the large living room windows (all focal points in the room). If there was a honey-do list (we all have them) it’s best to get those items buttoned up prior to putting your home on the market.  If it was obvious to you it’s going to be obvious to a buyer, an inspector and the Realtor representing the buyer.

Just remember, a home should be clean and inviting!  The buyer needs to see themselves being able to move in and live there.  Your home may work for you as it is but if you really want to sell then please remember these basic tips.

Bellevue Neighborhoods – Get your home sold the first time around Tip #1


You want to sell your  home the first time around…if you don’t follow this step then don’t be disappointed if your home doesn’t sell the first time?  We will outline below the reasons that could be hindering the sale of your property.

Pricing your home right to sell:

There are many things that could be hampering your ability to sell your home.  One main reason could be that your home is not priced accurately. Pricing your home is a strategy that unfortunately, many fall short on. One clear sign is that you haven’t had much, if any, traffic in the first week or two that your home has been listed. If you’ve had small amounts of traffic, what feedback are you receiving on your home?  You may not be aware of the feedback as many agents don’t follow up with the agents who have shown your home.  Did you know there’s a software program that will email you the feedback the same time your agent receives the feedback?

Don’t think, “I’ll just put my home on the market at this higher price to see what happens and then I’ll reduce the price if need be.”  You need to price your home with the current market NOW.  The higher the price the less likely you’ll be to have showings on your home.  Even with a price down, the additional time on market that you have on your home due to overpricing at first generally means you’ll get even less than the current market value as a buyer will wait for the price downs and will think that there’s something wrong with your home due to the time on market.

Remember, one of the main reasons your home will not sell is because of price.

Bellevue Neighborhoods – Mid-Century Modern Homes in Bellevue


Mid-Century Modern Homes are scattered throughout many Bellevue Neighborhoods. If you are looking for that Mid-Century Modern Home in Bellevue you have come to the right place?  Having happened back into popularity over the last few years, it is not hard to find updated homes for you to call your own. There is a lot of discussion as to what defines the “Mid-Century Modern Home

How To Begin the Home Buying Process

Unfortunately most agents are trained to have a buyer make a list of everything they want in a home as the first step in the home buying process. Left to their own devices without this “push” in the wrong direction, RARELY does a future home buyer start by making a long list like that. It is a “sales” tool to lock you into a close-able position. Don’t buy into that logic by handing a “salesperson” a big list of what you “want”.

Three of the most common “first steps” to buying a home in my 20 years in this business have been:

#1 – Highly Ranked Schools

There is always a lot of controversy surrounding the topic of “best schools” as determined by a ranking system or online school ranking site. Still, many parents use these sites when determining where they are going to be buying a home. My clients tend to use a combination of these two sites:

GreatSchools.org ranks the schools on a scale from 1 to 10. Yes, I have actually seen a school on The Eastside ranked as “1” on a scale of 1 to 10. Makes you want to go peek in the windows and see what the heck is going on in that school. There is also a “star” system, but that seems to be generated by parents whose children already go to school there, so take that with a grain of salt and read the full comments of the parents vs the “3 star” or “5 star” ranking.

There may not be much difference between a 10 ranked school and a 9 ranked school…but clearly there must be a difference between a 10 ranked school and a 4 ranked one. If you love a house in an area serviced by a school ranked from 1 to 4, at least go to that school to try to determine why it has such a low ranking. You WILL get more home for your money if the school is ranked lower but each buyer has to decide where their priorities lie. For many…it is best school their money can buy vs best home regardless of quality of school, and the price per square foot of the home will often reflect that difference.

Another site my clients use, and they usually use both sites for comparison purposes, is:

SchoolDigger.com I like the 1 to 10 ranking system of GreatSchools.org better than the 1 to 5 ranking system of SchoolDigger.com, but I LOVE the display on a map of the schools with “balloons” showing the school ranking. Gives you a better visual of where that you can then match up to a home search map tool. I wouldn’t use these sites to look for homes though. The best real estate search tool for many, many reasons is Redfin.com, but my guess is if you are reading a real estate blog like this one…you already know that.

Even if you do not have children in school, you need to be aware of the impact of school rankings on home values so that you are using the correct “comps” when determining a fair price for a home. You don’t want to use a 10 ranked school as a comp for an offer to be made on a home in a 2 ranked school! Unfortunately, even appraisers haven’t learned that one yet. Be ahead of the curve. Do not be fooled into thinking that “School District” is the ONLY criteria to be used. There are often major variances within a school district.

Some School Districts like Lake Washington School District have a great online map of each school’s boundaries. Boundaries do change from time to time, so be sure to check with the district once you have found a home. Give them the exact address and know that if you are on the border between two schools vs dead center in the middle of the defined area…well, change happens and likely more near the edge lines. This is most important for people planning to have children or who have very young children who are not yet in school.

#2 – “Close-in”…or not “close-in”.

Wanting to buy a house that is “close-in” is more often a “move up buyer” request than a 1st Time Homebuyer request. Sometimes it is the opposite. They bought “close-in” and now want to be far away from “it all”. Unfortunately some learn the hard way how important it is for them to be close to or far away from…something. Everyone’s something is different. First Time Homebuyers tend to look at the WHAT vs the WHERE, and often end up someplace they hate being, causing them to rethink that where and move “out” if not “up”. In fact going from a bad “where” to a good “where” often means moving UP in Price but DOWN in home quality, size and amenities. The wrong where often results in more home for the money, which is why First Time Homebuyers tend to choose them more than experienced homebuyers.

You will often see “Great ‘close-in’ location!” in a real estate ad. What “close-in” means is different in each area. On the Eastside it could mean close to Microsoft, close to Redmond Town Center, close to Downtown Kirkland. On the Seattle Side it usually means you can walk to a coffee shop (and other shops). For those who don’t expect to walk to work, “close-in” could mean a reasonable bus or drive commute time. NOT “close-in” is a little easier to describe than “close-in”. If you have to drive for a half hour to get some milk…you are NOT “close-in”.

There are many variances on this “close-in” theme, and they are as different as people can be different. It’s a personal decision that you REALLY need to spend a lot of time thinking about. Some people hate the noise level of being too “close in” to shops that can also have very noisy restaurants and bars with drunk patrons very late into the night. Some people like to walk to enjoyable amenities, but be as far away from work as reasonably possible. Some people like to be very close to work, but in a private and quiet location when they get home and NOT close in to noisy businesses.

If there is ONE HUGE MAJOR MISTAKE of homebuyers that stands far and above beyond the rest of the mistakes you can make, it is to look at “a house” and make an offer on it, without adequately discovering what is around it. The MINUTE you think you may want to make an offer on a house, spend as much time as possible around that house before negotiations are complete and the home inspection “out” phase is passed. Park your car in front of the house and take long walks in every direction. Say hello to the neighbors. Don’t be afraid to do that! You don’t need to 3rd degree them with a list of questions, nor should you do that. But you should knock on the door and meet the neighbors to see if there is anything alarming to you about them. Why don’t people do that? No one wants to be “close in” to a problem neighbor…no one.

It’s very simple to get “drive times” now without having to leave your computer. Just put in the address of the home and various destination points into a service like Bing Maps and it will give you the estimated drive time. Be sure to double check that during rush hours IF you plan to be driving to and from during rush hour.

#3 Style of Home

Once you determine your suitable where(s), it is time to study the potential whats of that where that are IN YOUR PRICE RANGE.

IMPORTANT NOTE: Many homebuyers are afraid of Future Home Values. Take note that IF you buy a split entry home for too close to the max price for that style of home, you will not likely be able to get paid back for those improvements when you sell.

Yesterday I posted some rather harsh realities for people who want to be “close to Microsoft Redmond Campus” as in within a 2.5 mile radius of 148th Ave NE and 36th. Of great significance is the age of home possibilities.
microsoft age

As you can see in the chart above, a large majority of the homes available and sold in that area were built more than 20 years ago. So wanting a house not more than 10 years old within a mile or two from work at an affordable price may look great on your “WANT” list…but easier said than done. That is why it is important to study the makeup of the area you choose, before going out to look at homes.

Besides the age of home, the style of home is also an important factor. You may “like” granite counters and stainless steel appliances…but that is NOT “real estate”. Way too many people choose a home by its “finishes”. A newer 2-story home that has laminate counters and ugly carpet MAY be better than a less favorable home style with hardwood floors and granite counters, depending on your needs and price range.

BIG NOTE: IF YOUR BEDROOMS (AT LEAST 3 OF THEM) ARE NOT A FULL FLIGHT OF STAIRS ABOVE YOUR KITCHEN AND LIVING AREAS…IT IS NOT, NOT, NOT A 2-STORY HOME! I have met many a seller in a Split Entry or 1 story with basement who said “we have always called it a 2-story home”. Reverse floor plans, and I have seen several on market recently, are a little harder to define. If the view from the main level on a reverse floor plan is knock your socks off awesome…well, let’s just say it better be.

Here are 3 examples of how to look at the general range of possibilities before going out to look at homes to buy.
microsoft type

In the pie chart above you can see that the majority of homes in that area (within 2 miles of Microsoft) regardless of price, may be a home style that you simply do not care for. It is important to know that before going out to look for your “ideal home” in an area that may not have it in your price range. Do you go further out to find “it”…or do you stick to living near work? A personal decision you should make before going out to look at homes. Have a backup plan!

Besides availability, there is a matter of cost. Below I charted all of 98052 using the current YTD median home price of $540,000 as a guide. This first pie chart below breaks down the style of homes sold so far in 2010 costing $540,000 or less in Redmond 98052. Often 2 story also equals “newer home”. Not always…but often…on the Eastside vs in Seattle proper.

graph (8)

Once I go over the median home price, the breakdown of home style changes dramatically, as shown in the pie chart below. This is VERY important to home buyers in the first group. IF you bought the highest priced Split Entry home UNDER the median home price…note that NO Split Entry Homes were sold above that median price YTD 2010. Future home appreciation is not simply about “the market” as a whole. There is a point at which there simply is no room for upward movement given you simply cannot compete with newer homes and newer home styles regardless of how you may improve that home.

graph (9)

It is pretty simple to graph out your potential and likely choices in your price range in the area you hope to live. It’s OK to look for a needle in a haystack…you just have to know that before you begin the process. What has NEVER happened in the past, is not likely to happen in the near future. If 1% of the people were able to do what you are trying to do, that is important to know the same as it is important to know if 60% of the people were able to do that in recent history.

You clearly will be able to change what you “WANT” a lot easier than you can change the makeup of homes built in a given area. If it never was built, you likely can’t buy it. So do your homework before you step out the door and get caught up in making quick on the fly changes in your overall home buying plan. Be prepared and you will make a wiser choice.

(required disclosure: The stats in this post and its graphs are not compiled, verified or posted by The Northwest Multiple Listing Service.) They are hand calculated by ARDELL.

Great Cause, Seattle Seahawks Ticket Drawing, Us in our Pajamas!!!

Hopefully you’re following along with our 365 Things to do in Seattle WA…but in case you haven’t heard about it yet we wanted to pass along our day 41 to you.  We are involved in a wonderful event raising money for local foster kids and the event is scheduled for this Sunday at Kirkland’s Tech City Bowl.  Our team is:  Striking Realtors and we’ll be dressed in our pajamas.  We would love it if you could make a donation to help these local foster kids and when you do you’ll be entered to win a pair of Seattle Seahawks Tickets 3 rows from the field.  Find out more about the drawing and the event on our 365inSeattle event and see how you can help.

Does #Fail = “Shadow Inventory”?

While my clients buy and sell in both Seattle and The Eastside, I often use The Eastside when diving deep into the stats, because the age and style of homes is easier to compartmentalize. My recent posts showing #FAIL in Bellevue, Redmond and Kirkland have raised the question “Does #FAIL = Shadow Inventory?”.

@darinpersinger on Twitter says: “I would be interested in knowing how many of those #fails were REPEAT #fails”

WaileaKid comments on the post here on RCG said: “All those red lines in the graphs above are the hopeful sellers that tried to sell in a market that they knew was falling. With the green shoots of recovery just beginning to show, these sellers will be out with a gusto. This is exactly the shadow inventory a lot of people are talking about. Looks like it will kep the prices suppressed for quite some time.”

Seattle Bubble Forum commenter, Barista, says: “Just look at all the failed attempts over this year. This looks like a huge shadow inventory to me.

Since my recent posts raised the question, seems only fair that I should answer it. For those who haven’t been following along since I started posting #FAIL stats on Christmas Eve, #FAIL = the total 2009 Expired, Cancelled and Sale Fail Release stats.

For the purpose of answering the question, I am going to use Redmond 98052 stats. These stats will not match the “Redmond” post on my blog, as I did not separate 98052 from 98053 in that “Redmond” post.

Let’s start with an overview of Redmond 98052:

98052 stats

I’m going to start with 3 bedroom townhomes. Only 4 on market, 3 Pending and 38 sales year to date. Looks like a pretty strong sellers market in that group until you get to the #31 #FAILed attempts. Let’s see if there is any Shadow Inventory in there, and if so, why.

My first thought was maybe they were early in the year, but no. 14 in the first half and 17 in the 2nd half.

Going through the #FAILS one by one is tedious. I’m going to show the results for the first seven properties and then summarize. Seeing a few of the “stories” will help you judge my accuracy, as it is a subjective process. I originally had all of them listed, but it made a long post beyond reasonably long.

#FAIL #1 = Shadow Inventory.- Looks like they decided to stay when they couldn’t get their price. Plenty of equity. No mortgage. Not going to come back as a distressed sale. It was $40,000 overpriced then $30,000 overpriced, then they quit.

#FAIL #2 and #3 = Shadow Inventory – Priced well when they took it off market for the holidays. Started out $100,000 overpriced which is A LOT in this price range. Over 30% over priced. On market for well over a year, but priced properly by they time they quit. Will likely come back after the holidays. Nice place. Could use a little staging help.

#FAIL #4, #5,, #6, #7, #8, #9 This one’s been failing repeatedly. 6 of the 31 #FAIL’s for 2009 are this one townhome. Went into escrow several times and fell apart on inspection several times even though it is a newer townhome. Just a train wreck. It may be shadow inventory forever, so I’m not counting it as shadow inventory. It should be rented.

#FAIL #10 = SOLD – No big story. Started out a little high. Relisted with a 5% reduction and it sold. A “normal” #FAIL.

#FAIL #11, 12, 13, 14 (Plus 5 in 2008) This is one of those agent’s that lists for 30 days so it expires and she picks up a new listing number. It’s a SOLD now for almost $100,000 less than when it started.

#15 Overpriced = Shadow Inventory Overpriced by about $50,000 for a year with no price change. The first agent quit after 30 days, likely because they wouldn’t do a price reduction. It will be back eventually.

#FAIL #16 It was a rented property when it was listed and looks like after a half hearted attempt to sell it, they continued to rent it. I wouldn’t call it a shadow inventory unless you want to call all rented property shadow inventory.

So, to answer Darin’s question, 20 Properties Failed 31 times. So let’s call 2/3rds of #FAILS = the number of properties involved.

To answer Does #FAIL = Shadow Inventory? Of the 20 properties remaining after step number one I would say it’s about half Shadow Inventory and 25% SOLD and 25% not coming back anytime soon.

I didn’t see any that were short sales or any that could become short sales or foreclosures. Most had plenty of equity.

Going back to the chart insert anyone interested in 98052 should print that out. Lots of detailed breakdown there of everything that happened in 2009. We’ll take the 653 #Fails less 1/3 for Repeat fails of same property = 435 less 25% SOLD = 325. Maybe 250 are Shadow Inventory and the rest will stay as rentals for some time.

REQUIRED DISCLOSURE: Stats in this post are not compiled, verified or posted by The Northwest Multiple Listing Service.

An Alternative Approach To Home Buying

Historically, a homebuyer first calculates how much home they can afford. They either do this on their own by calculating a % of their gross income, or they go to a lender who produces a home price “suitable” to their financial situation.

When you need a new coat, do you calculate how much coat you can afford? Sometimes, yes, if you are on a limited budget. But more often you simply buy one you like at a reasonable cost. Why isn’t home buying more like that? Probably because there is limited access to what “reasonable cost” is for a given area. Let’s take the time to study “reasonable cost” and also promote asking your agent this question: “Is the home I am buying a reasonable cost for this area, based on ALL homes recently SOLD here?” Remember, you are not asking for “3 comps”. You want to know how valid this price is for this particular area, generally speaking. In other words, you want to know if this is going to be a reasonable cost IF and when you have to sell the house you are buying.

When people are looking for a home to buy, they are mostly looking at homes for sale. They may look at homes that sold nearby “the comps”, but rarely do they look at a complete picture of what has sold vs. what is for sale.

Let’s look at how that may skew your perspective.
graph (14)

A quick study of price in Kirkland looking only at homes for sale at this time (graph above), would lead you to believe that the Housing Market in Kirkland is 60% or so under $800,000 and 40% or so over $800,000, with about 25% over a million dollars.

Now let’s layer in the number of homes SOLD in those price ranges in 2009 YTD (graph below). You will quickly see that 66% sold for under $600,000 vs. 60% under $800,000, and over a million is not 25%, it is more like 10% of the current “market”.
graph (15)

Now we get to the part my clients find MOST annoying about me. Let’s look at the home you are buying from the standpoint of you being the one trying to sell it. You cannot focus on a home’s weaknesses unless you can switch your mind from buyer to seller. Honestly, most of my buyer clients can’t do that no matter how hard they try, especially if they are first time buyers, and so I have to do it for them. But the visual below helps drive home the point that you may fail to sell this home you are buying today, even if you do all of the right things when it comes time to sell it.
graph (16)

There are many ways to use this information. First I’m going to ask you to look at the worst statistic in the graph above. I know most readers of this post are not in the $1.6 million plus price range. But look at this segment so that you can more easily “get” the point, and then apply it to your price range.

Green = Only 9 sales above $1.6 million

Blue = 44 people are currently trying to sell homes above $1.6 million

Red = There were 116 Failed Attempts to sell a house for over $1.6 million in 2009 YTD



(Funny, I just checked that for the umpteenth time because it is so startling, and now there are 10 vs. 9. Still, same point.)

Sorry for yelling, but I wanted to make sure you got that point 🙂 What is a #FAIL? It’s a cancelled, expired or “Sale Fail Release”. That is not 116 properties. One of those 9 homes that sold could = 5 or more failed attempts to sell, before it actually sold.

Only the first two price segments, homes sold for $400,000 or less, had fewer failed attempts than homes sold. That’s roughly 1/3 of all homes being purchased in Kirkland. That means 2/3rds of all home buyers will likely have a difficult time selling. The degree of difficulty increases as the price increases.

You may ask “Do all agents look at the #FAIL stats?” The answer is “used to be”. Factoring in the “Failed to Sell” properties when doing a Comparative Market Analysis became a little “old school” during the hot market. Fewer properties failed to sell, and fine tuning a home valuation prior to making an offer was not standard modus operandi. I remember a new agent coming to me in 2005 asking “Where’s the button I push to tell me the home value?” I laughed; they did not. 🙂

I was trained to note “for sale” in blue, sold in “green” (real $) and Failed to Sell in Red as in STOP! But during the hot market there was no STOP sign and no brake peddle, for the most part. Newer agents were rarely if ever taught how to use the brake peddle, nor did one come with the training.

Let’s look at why that was.

In 2001 in Kirkland, 555 homes sold at $300,000 or less with 364 #Failed attempts.

In 2004 in Kirkland, 291 homes sold at $300,000 or less with only 50 #Failed attempts.

By 2006 in Kirkland only NINE (9) homes sold at $300,000 or less and only 1 #Failed attempt.

Who could train an agent how to value a property and how to consider the #Fail rate in a market like that? Why would you? So most agents who got their license in the last 5 years have a tendency to ignore the #Fail rate. Hopefully this post, in addition to assisting buyers and sellers of homes, will also suggest to a few agents that #Fail rate is immensely important to the home valuation

There is no button to push to tell you what to do with those #Fails. Valuing a home is returning to the “art form” that it once was, with subjective consideration of the #Fails. So back to the question: What is a “reasonable cost” for the area where you have chosen to buy? It’s a combination of the price paid by the majority of home buyers in that area AND the #FAIL rate for that price.

Take a look at Bellevue, for example. One of the biggest mistakes you can make in Bellevue is getting qualified at $1.5M and then trying to find the house closest to work that fits that price. You may end up with a McMansion on a busy road. A “McMansion” is not just a big house. A “McMansion” is a big house “worth” $1.5 million, stuck in the middle of an area where 90% of the homebuyers pay $500,000 give or take for a home. Perhaps taking that same house out of there and putting it in 98004 in the right location, transforms it into a home at “reasonable cost” for that area.

I’m using a somewhat ludicrous example to make a point, but buying an $800,000 home in an area where 92% of homebuyers paid $500,000 or less, can be equally “unreasonable”. Maybe not when you are buying it, but when it comes time for you to sell it.

Take a look at these graphs of Redmond. What seems to be the “reasonable cost” there? Different people will look at that same chart and answer it differently. About half the people paid $500,000 or less. If you only want a new house, you may work up the graph to only include homes built since 2003 or so. But do your homework. Work up a graph and don’t stop at “homes for sale” as shown in the first graph in this post.

An Alternative Approach To Home Buying may be deciding WHERE you would like to live, and then paying a “reasonable cost” for that area, even if that price is much less than you “can afford”.

When you need a new fleece hoodie, it really doesn’t matter that you can afford to pay $5,000 for it, does it? You’re still probably going to pay about $100 or less for it. If you look hard enough you can probably find a fleece hoodie for $5,000, or get someone to custom make it for you. But why would you?

Required Disclosure: Stats in this post are not compiled, verified or posted by The Northwest Multiple Listing Service.