Tag Archives: Local-News

Is it Time to Refinance to Cash Out?

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rubber duckThe Seattle Times posted an interesting article giving the pros and cons of refinancing homes in order to take out an cash (or a line of credit). Interestingly, the number of people doing this is extremely high with “nearly three out of four homeowners who refinanced through Freddie Mac between July and October cashing out.”

What are the downsides to “cashing out”?

  • By carrying more debt (secured by your house), you put your assets at greater risk if you lose your job, get sick or run into other financial difficulties.
  • More debt also means higher monthly payments, especially if you opt for a 15-year payback term.
  • Refinancing typically costs much more in settlement and loan-origination fees than home-equity lines, unless you have your closing charges rolled into the note rate.

With that said, there are several good reasons to strongly consider an equity line:

  • Convenience and control
  • You pay interest on only the amounts you’ve pulled out, not the approved limit.
  • Most lines allow immediate access to more money using credit cards or checks

Are Home Sales Dropping Too Fast?

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It’s well known that things slow down tremendously in the winter… But none the less there have been some rumblings that things are slowing down too fast and that we might be approaching “bubble territory”. Using some pending home sale data from the NW Reporter, I put together the following chart:
4-County Home Sale Chart

It looks like we’re in a pretty typical October slowdown to me… Seattle homeowners: I’d be curious to know if you are concerned when you see this chart?

Inbox: Where to Live Based on the Quality of Seattle Public Schools?

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I’ve been having a dialog with one of my readers who is looking forward to moving to Seattle. His last email summarized some of the research he has done on Seattle schools, and I thought the entire email is so good that it deserved a wider audience:

Dear Anna —

I’ve got another issue you might want to explore on your blog, and get readers’ feedback. Do people looking to buy real estate in Seattle base their choice of neighborhoods on the quality of schools? From my understanding of the Seattle public school system, it seems that one does not need to consider high schools among ones neighborhood selection criteria, since at least in term’s of today’s system, there’s no admission advantage (other than just being close) that accrues to living in the “reference area” of ones preferred high school. However, there does appear to be an advantage to living in the reference area of ones preferred elementary and junior high schools. And if budget cuts ultimately mean cutbacks in school choice (though that has been averted for the time being), then it’s likely that it will be even more important. So, what this means is that if school quality is important to you, you should look at the neighborhood elementary and junior high schools.

However, if one looks at the Seattle city schools in comparison to suburban schools in terms of grade scores (as tabulated by the Seattle Times School Guide), quite a few elementary schools (e.g., Lowell, View Ridge, Wedgwood, Hay, Lawton, North Beach, Whittier, etc.) compete with the best suburban schools (Mercer Island, Bainbridge Island, etc.). However, at the junior high school level, all but a few junior high schools (Eckstein, Tops, Washington) fall out of step with the best suburban schools. And at the high school level, only the Center School ranks with schools on Bainbridge, Mercer Island, Bellevue, Issaquah and the Northshore. The obvious conclusion, then, is that if you seek top notch schooling in the upper grades, your choice comes down to having your child compete for a place at a few select Seattle city public junior highs or high schools, or else looking at private schools, or moving to the suburbs.

What do you think of this analysis? What other school related-factors are there to consider?

I hope you don’t see this as too self-serving. It strikes me as it is a fundamental part of buying real estate, but is rarely fleshed out in public, probably because of the hot-button racial issues involved.

(I’ve left the writer of this email anonymous at his request)

When he asks if any other factors should be considered, I think of some of the specialty programs that different schools offer. For example, all of the 5th grade students at Greenwood Elementary School are taught how to fly airplanes (Cessna 172’s). I imagine that some parents would be willing to give up a few test score points to know that their child was in a more stimulating environment.

What other specialty programs are there that might be of interest to parents moving to Seattle?

What other school-related factors should he consider in looking for a home in Seattle?

I would definitely like to open up his questions to other readers, so please feel free to leave comments below.

Better Late than Never

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Smiling SashaJohn Cook’s Venture Blog pointed out today that Zillow got a new look and is now looking for beta users… Much to Zillow’s credit, they’ve created an aura of excitement despite the fact that no one knows what their product will look like, or when it will be available.

This got me thinking that it is clearly time for some updates on real estate search. The past two weeks, I’ve been too busy at work (WAY TOO BUSY) to write any posts, so I was glad that Anna took up some slack and wrote about Home Pages. However, I’ve had this nagging need to write a little more about the site, and I’ve finally found some time. Here are some of my notes from my test-drive of Home Pages:

The great:

  • Neighborhood information: It is really great that they’ve integrated so many different layers into their map. Just like Home Values, in the very near future all home search sites will need to include information like schools, parks, etc.
  • Sold Home Info: It’s great to have this information integrated into the search site

The good:

  • Personalized UI/mapping: I really like that they’ve developed their own user interface instead of relying on one of the big three providers (Google, Yahoo, and Microsoft). That should give them lots of flexibility into the future, although it also means they’ve taken on a whole host of update issues instead of passing the buck on that one. I’ll be interested to hear from someone at Home Values about their experience with this hosting their own mapping.

The bad:

  • Small map: Why so small? Blow up the size of the map at least 2X
  • Mac Issues: Elements of the screen don’t show up on my Mac. I lose the entire map at times… (by the way, I don’t notices this problem on my PC at work)

The ugly:

  • Contact Information: I hate websites that make you give personal information in order to get the full features. As a real estate agent, Anna already gets 2 to 3 junk emails a day from House Values (the company behind Home Pages), so I’d hate to think of the consequences of a potential home buyer giving them a phone number. Be VERY weary of giving them an email unless you want lots of emails that border on spam.

Home Pages is the only real estate search site that I’ve seen that even remotely compares to Trulia… and it has one MAJOR advantage over Trulia in that it is using updated Multiple Listing Service (MLS) data instead of screen scraping real estate sites. This is a huge advantage in that I’ve been told via email, IM, comments, etc that the data on Trulia is incomplete and outdated.

In many ways, my heart is really with the Trulia team because I think they are offering a superior search. I really like the clean UI, the RSS feeds, the home statistics, etc. but if they don’t have the most up-to-date homes available on the market, then I’d be hard-pressed to recommend their site to anyone looking to buy a home. For this reason, I’d have to say that Home Pages currently leads the market at the best publicly-available home search. If you haven’t checked their site out already, then use this post as inspiration to get an idea of where the future of real estate search is heading!

Seattle’s hot housing market

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Hot September Market Chart
According to the latest statistics from the Seattle Times, the housing market is still hot. “Homes sold last month in King County were on the market an average 37 days, compared with 52 days for homes sold the previous September. Properties in neighboring counties also were snapped up faster than a year ago.” The article notes that while home prices in Boston and Washington DC have started to decline, our market stays strong.

Interestingly, the home market has remained strong despite the recent increases in interest rates. Frank Nothaft, chief economist at Freddie Mac is quoted in the Seattle PI as saying “The most likely pattern is for mortgage rates to gradually rise over time. It is likely that they’ll hover at 6 percent or just a bit over.” He added that “will translate into somewhat weaker demand for housing, lower home sales volume and lower house price growth.”

Further interest rate increases by the Federal Reserve will likely increase rates even higher:

At the same time, a few consumers prospecting for properties – especially those prequalified by lenders – may be spurred into action by the rising interest rates.

“People may start buying before it (the mortgage rate) goes up any more,” Binczewksi said. “They would make offers because they have rate locks. Now, with rates increasing, they won’t want to lose rate locks.”Further interest rate increases by the Federal Reserve probably will push ARM rates even higher, analysts said.

With the rapid growth in home prices, I’ve seen many of my clients opting for smaller homes and/or condos. The Time article reflects this pattern by showing the the total number of available condos is way down (1,347, compared with 2,121 a year earlier) while the median price is up ($229,950, up from $205,000).

The Reservations of Greenspan

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Church Scene It’s no surprise that Alan Greenspan remains highly skeptical of the housing market, and considering he has access to a lot more data (and a lot better researchers!), I’m going to defer to him on the national issues.

Greenspan continued to register concern about soaring house prices and risky mortgages on expensive homes.

He also repeated his warning about signs of “froth” developing in some local markets that may be driving house prices to “unsustainable levels.”

Here’s are two quotes I found interesting:

  • “The vast majority of homeowners have a sizable equity cushion with which to absorb a potential decline in house prices”
  • “Speculative activity may have had a greater role in generating the recent price increases than it customarily had had in the past”

I think these quotes explain why the Seattle market is going to be fine despite his reservations. The employment market is healthy and I haven’t seen the type of speculation that is occurring in the SouthWest. Here’s a link I wrote a few weeks ago on the riskiness of the Seattle market.

Rising tide lifts all ships…

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revenueWho benefits when housing prices rise? The sellers, of course… But also the local governments though increased property tax revenue. The Seattle PI has an article on how the mayor of Seattle has $15 million to spread around thanks to rising home prices:

In 2000 the average value of a residence in Seattle was $232,800, on which the property tax paid to state and local government was just under $2,832, according to the King County Department of Assessments. In 2005 the average home value had gone up to $368,700 with a property tax bill of just over $3,765.19.

The Seattle general fund budget proposed by Nickels for 2006 is $760 million, up from $717 million last year. It includes more money for street resurfacing and more money for sidewalks, police and firefighters.

“Thanks to a strong local economy, we can expect significantly more sales and business tax revenue,” Nickels said in his budget address Monday. “Strong real estate sales will also provide much more revenue for the city than initially forecast.”

I find the similarities interesting between this article and my post from Monday, where I note that the Federal government (IRS) benefits when flippers don’t pay attention to tax laws.

More In-depth Sale Price vs List Price Analysis

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Me and my sistersIf you were following the comments from my post from yesterday, I said I would follow up with another stab at diving into how the sales prices versus listing price changes over time. Seeing as how it is already getting late (and I’m tired!), I’m going to stop trying to make sense out of the numbers and present what I’ve found so far.

However, before I go any further, I’m going to rant at my fellow real estate agents! For the sake of all of us who actually care about data, please learn to double check your work before submitting listing information to the MLS! I spent more time cleaning up the database due to lazy real estate agents then I did actually creating the charts! Here are some things to look out for (but this list is by no means exhaustive): (1) Spelling: Fremont is spelled with only one “e”, (2) Location: South Lake Union is not a neighborhood located within Ballard and (3)Price: your home that sold for $345,000 probably should not have been listed for $34,500,000.

With that rant out of the way, I thought I would also mention that I’m not the only one surprised by housing numbers today… Hot Property had an article where Amey Stone says reading NAR’s press releases on sales levels “is starting to be a bit of a yawn — sales weren’t quite at record levels, but darn near close to it.” Unless you get tickled by trends and statistics, expect to sleep through the rest of this post…

When I look at the entire Ballard Area as defined by the MLS (this is a huge area that includes places like Greenlake, Blue Ridge, Wallingford, Fremont, Sunset Hill etc). We see the same seasonal trends over the past two years that I identified yesterday. But when we go back another season, the trend becomes much less pronounced.

Adjusted vs Original List Price Chart

Here are the things I found most interesting about the chart:

  1. The seasonal variation is much less pronounced in previous years
  2. There has been a steady trend up wards where the sale price is greater than the listing price
  3. In terms of trends, it didn’t really matter whether I used the original list price or the adjusted list price.
  4. The huge drop in 08/03 is due to some homes in Broadview that were listed way to high!

My speculation is that the patterns identified the above chart have a lot to do with evolving sales tactics by agents. It seems like it has become more and more common for agents to list a home below the value that they think it will sell for… This does two things: (1) It assures a quick sale and therefore a quick commission for the agent. (2) It has the potential to bring in more buyers and thereby raise the final sale price of the home.

When I went to analyze the data at a more local level, things got much messier… Rather than seeing clear seasonal patterns as I did in Loyal Heights, things simply got fuzzy. They got so fuzzy that I’m hesitant to even provide the next chart because it simply looks like an ugly mess…

My goal in creating the chart was to see if the same trend that held up in my analysis yesterday for Loyal Heights, would hold up for other neighborhoods. As the chart above demonstrates, it roughly holds up for all of Ballard, but as the chart below demonstrates, it does not hold up at the neighborhood level. I’ve done enough regression analysis for transportation planning studies to know that a chart like this is going to give meaningless trends.

Sale Price as a Percent of Listing Price for Ballard Neighborhoods

By the way, if you’re interested in the raw data that I used to create these statistics, just email me, and I can send you the Excel file that has all the wonderful (?) pivot tables and charts I used in creating this post.

Also, please feel free to comment on other ideas you might have for exploring the wealth of information that is locked up behind the MLS database. Anna has the key that opens that door! 🙂

In the market for a condo?

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New York, New York in VegasNew condos are sprouting up like weeds in Seattle for a variety of reasons… The Seattle Times has an article worth reading if you are considering buying a condo. Keep in mind that owning a condo is legally very similar to owning a home:

“Most people see condo living as somewhere between owning your own home and renting an apartment, but it’s more like owning your own home. There’s a responsibility that each homeowner has, whether they accept it or not,” said Craig, a board member of the state chapter of the Community Associations Institute, a group that provides educational information about homeowners associations.

“The best advice I can give to anyone buying a condo,” she said, “is to educate themselves as to what they’re buying and to be involved in the maintenance and operation of the condominium.”

If you are in the market for a condo, do your research and try to think of all the potential issues that might arise. Here’s a summary of the advice given in the article:

  • Ask for the key data on the condo, such as the number of units and number of parking spaces.
  • Ask the board for copies of the association’s bylaws, rules and regulations to learn the rules that govern the association.
  • Ask for the Builders public offering statement, which includes valuable information such as a list of the builder’s five most-recent condominium projects, restrictions regarding renting, a list of common amenities and known assessments.
  • Ask the unit owners to provide resale certificates to potential buyers, which should include valuable information such as expected special assessments, ongoing litigation and the amount of reserves available for repairs.
  • Ask for minutes and agendas from past meetings.
  • Ask for a “reserve study” that can give clues on potential structural defects (note that this might not be available.

Real estate ‘flips’ can backfire

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The PI had an interesting article this weekend about how flipping real estate can backfire for the less experienced… The crux of their argument has been said many times before, but is worth repeating: “if you’re not careful with your real estate flips, your investment strategy could produce a sizable payoff for an unintended partner: the Internal Revenue Service.”