Real Estate – Why DATA is the New Black

Early Friday evening one of my favorite long term clients asked me this question: “Why is the market so slow these days? I have an alert for ($) houses in (zip code) and I barely get a couple of hits every week west of (the freeway). Almost always tear-downs.” (actual specifics from his email removed)

My first data set pulled was a line up the number of homes sold where I primarily work (North King County – North of I-90), by month, over the last 6 years from 2009 to 2014 YTD. This to answer only the first 8 words of his question “Why is the market so slow these days?” The easy answer would be “because it is past October 15th”. I test my knee jerk response by pulling all of the relevant data to be sure I am not answering like grandma in a rocking chair pulling some now irrelevant data from her long term memory bank. I also do this because I need to discover why this person’s current perspective may vary from the long term norm.

Something may recently have happened leading this person to believe that the standard progression is no longer the realistic expectation. I value his thought process as part of how I answer the question…by first pulling the data…lots and lots of data.

The line graph below documents the data pulled for the last 6 years. But as I almost always do when pulling stats, I went back 12 years because data expires! More on that in graphs 4 and 5. Since I almost never regurgitate already documented data from other sources, but rather only trust the data if I calculate it myself, I usually go back as far as my data source will allow, which in this case was 12 years.

First I test my perception that 2014 is not a low inventory year, even though there are tons of articles saying that inventory is low. Many articles talking about the frustration of buyers with “low inventory”. But look…no…my perception is indeed correct. The red line is the “low” or at least the first half of 2009 depicted in the red line. The green line of this year is not only NOT “low”…it is pretty close to the high over the last 6 years.

To be clear, I am using “homes worth buying” as “inventory” and the proof that they ARE homes worth buying…is someone actually bought them.

Volume 2009-2014

After I peruse some of the recent data as an attempt to start at the point where he may be coming from when asking the question, I dive into my own “expert opinion” perspective, which is my 2001 baseline. This information is really already carved in my brain, but since I turned 60 this year I figure it wouldn’t hurt to double check that my memory is still accurate. ūüôā

Volume 2001 baseline

I actually did all 12 years before honing in on the actual answer to the question, which comes from comparing 2014 with 2013 and 2013 with both 2001 and 2005.

To determine which were the correct comparison years, I had to first pull ALL of the data that the data source would allow.

While yes…my knee jerk answer of “because it is October” would have been correct, by pulling all of the data I can see from the variance of the actual stats from 2013 against the baseline of 2001 exactly why the question made 100% sense from this person’s perspective at the time he asked it.

This person, along with every average homebuyer, is looking week to week over a period of 6 months to 18 months for a home to buy. They have no “baseline perspective”. Their expectations come from more recent history’s actual activity, and rightly so, with no way to tell if the last 6 months was exceeding or under performing standard market expectations.

The bar graph below explains where the expectation may come from. I have 2005 in there just because it is the one year over the last 12 years when the most number of homes were purchased (ipso facto “available” to be purchased), so highest inventory year. But the key to answering the question is in the 12% of June 2013.

If you look at every piece of data on this page which looks at all 12 months for all 12 years in 6 different comparative charts…12% of a full year’s total inventory being available to buy in one 30 day period is pretty much unheard of! That was June of 2013.

I had another client who started looking in early 2013 and did not buy the house they could-should have purchased in June of 2013. After that they were progressively and continuously disappointed with the number of homes that came on market for months and months afterward. They had no way to know that the volume of homes coming on market since they started looking were many more than the normal market expectation.

In hindsight every subsequent month looked pss-poor in comparison. Pretty much all activity if you started looking in April of 2013, and didn’t purchase by June-July of 2013, is looking relatively dim. BUT in reality inventory is not dim. Inventory, the number of homes you can expect to choose from, is in fact currently performing at or over market expectations adjusted weekly for seasonality. All this can be gleaned from the 12% spike in that bar graph, noting the rational explanation as to why your expectations may be “off” by comparing relatively recent actual data against 12 years of data comparisons.

Basically that makes us both right. I’m right at “because it’s October” and the person asking the question is right to consider the options dim based on more recent relative comparison.

Volume 2001-2013-2005

Posting the data and graphs that helped formulate the above. Worth noting, while I brought forward the Red Line year of 2009 to note inventory low point, the graph below shows that the 12 months of low inventory started in the 2nd half of the gold line of 2008 and proceeded to the lowest point of Jan and Feb of 2009, which some of my readers may remember as “my bottom call” that made front page news at the time.

Volume 2005-2008

Looking above and below at the thick green line of 2014 inventory against the high inventory years of both 2004 and 2005 you can easily see why all of the articles calling 2014 low…and actually they were saying that last year in 2013 as well, are simply not true.

Volume 2001-2004

While my analysis will continue to use 2001 as a baseline, you may want to use the bar graph below to set your expectations. This is the average good homes on market based on the average of 12 years worth of data.

I use 2001, as many of the variances over the last 12 years are influenced by Tax Credit Incentives coming in and out and artificial interest rate jockyings…not to mention all of the massive changes in loan approval criteria over this same period. For that reason 2001 is still the purist baseline by which to compare and contrast other market influences as they come and go from time to time.

WHY IS THE MARKET SO SLOW THESE DAYS?

Getting back to the first 8 words of the original question…because based on normal seasonal activity you can expect that there will be HALF the number of homes coming on market that are worth buying by December than in May. “coming on market” activity is the month prior to the sold month. So highest SOLD volume in June will = highest number of instant alerts of new listings coming to your phone in May.

Expect the numbers to increase from December through May and then begin a decrease through year end before beginning the next climb.

Volume 12 year average

WHY IS DATA THE NEW BLACK?

Because it saves you time and reduces your stress to DRILL down the data from the general comparisons above and fine tune your actual parameters before you waste any time looking for something that doesn’t exist in the place where you are looking. That brings us to the 2nd and 3rd part of this person’s question ” I have an alert for ($) houses in (zip code) and I barely get a couple of hits every week west of (the freeway). Almost always tear-downs.” (actual specifics from his email removed)”

Only 25 houses were sold using a full $150,000 spread with your $ amount as the cap in the whole 6 months of “high season”. So expecting 2 a MONTH in low season let alone 2 a week…is an invalid expectation. Expect ONE really good one a month from here to February of 2015.

“Almost always tear-downs” means you are looking for a nice home at the price of the land alone. Again an invalid expectation. Changing your price to what that home will sell for there is not an option. Changing your choice of what to a tear down is also not a reasonable option.

The only answer to your dilemma is to change the where and not the price or the what.

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

VERY “Walkable”…but is it SAFE to walk there?

walkscoreI am very happy to report yesterday’s news that WalkScore has added a crime overlay, something I have been asking for since WalkScore first came about.

Local residents often roll their eyes when they see an awesome walk score attached to an area where it is simply not very safe to walk after dark AT ALL. Not a big problem for local residents, but what about the many people relocating to The Seattle Area who are relying on various internet tools to guide them in their search for a home in their new City?

I have not tried the new tool out extensively, but from what I have seen the crime grade does NOT reduce the walk SCORE, so a previous score of 87 will still be a score of 87. BUT if you take the time to study the color coded crime map after viewing the score, you will be better able to judge an area now than ever before. Previous to this change I have always recommended that people use Homefacts.com to pull the crime data and photos of local registered sex offenders. Not sure if the changes to walk score will replace that need or not, but I am very happy to see that they are finally acknowledging that some very “walkable” neighborhoods as to their scoring…are in reality sometimes not very safe to walk in at all.

Try it out, as I will, and let me know what you think.

A while back I spelled Seatttle with…

three “t’s” on the sidepanel and was surprised just how much traffic it brought. Because I was more concerned with being professional than traffic, I fixed the type, but Mary just reminded me of the effectiveness of the error, so I thought I’d try it out again! ūüôā

And if you are looking for Seattle real estate information, dont’ be discouraged if you landed on this page! ūüėČ We’ve got tons of great stuff on this site!

To highlight just a few: Ardell gives local condition stats ever Sunday, Rhonda provides mortgage rate updates every Friday, and I wrote a post about moving to Seatttle a while back that is loaded with questions, answers, insights, dangers, etc. from people. (There are almost 500 comments to date!)

Why did YOU move to Seattle?

Seattle attracts many people to move here from other states, if you did why? 

In 1994 I moved to Seattle for lots of reasons, a job was not one of them, but many people do move here for work reasons.  I am wondering  about those of you who moved to Seattle, why did you?   I know some of Rain City Guide contributors are natives (lucky you!) and others moved here from elsewhere.  Oddly enough many people I have met or know moved to Seattle from Chicago, Karen Kirr here at Rain City Guide, moved here from Chicago and has been chronicling her experiences here on RCG.  

I’ll kick this¬†off with a few of my reasons:¬† I transferred within my company from San Diego to¬†the L.A./¬†Orange County area and it never felt like home to me even after 5 years.¬†¬†Since my family had already moved away from San Diego¬†to Alabama years before,¬†I was looking for another place.¬† I wanted to be able to buy a home (something I would not have been able to in California)¬†and get away from what I called “relentless sunshine”…because coffee is better savored in cooler weather!¬† The place¬†had to have a metropolitan¬†feel to it and be supportive of the arts.¬†¬† Be close to mountains and water¬†because¬†views are important to me…they calm me and give me a sense of space and proportion.¬† I choose to move to Seattle because it seemed to have what I was looking for.¬† The decision¬†was a leap of faith since I did not know anyone who lived here,¬†and it¬†has¬†turned out to be a wonderful choice for me, I¬†love living in¬†Seattle!¬†

I am curious, why did YOU move to Seattle? 

On the flip side, what do YOU Seattle or Washington Natives find to be the best things about living in Seattle?

Wow! What a ride!

About an hour ago I walked out of Move’s offices for the last time as an employee. For those of you who’ve been around RCG for a while, you’ll remember that I took a position as Director of Consumer Innovations at Move with great enthusiasm back in April of 2006. Taking the position was a huge deal for me and my family and now that I’ve decided to leave,

The amount I learned working with the people at Move was incredible. I enjoyed learning a tremendous amount about product development, marketing, PR, corporate development and much more in little over a year-and-a-half. I was laughing with another employee earlier today because we both felt we had gotten an MBA’s worth of education in an incredible short-time period.

Interestingly, I’m actually more bullish on Move now then at any time since I started getting my hands dirty at the company. The new members of the executive team are bringing on top-notch talent and starting to make some hard, but necessarily, decisions around product development and business models. My decision to leave had very little to do with the long-term prospects of the company and much more to do with the role that I would be able to play in these changes. (Plus, it didn’t hurt that some opportunities opened up in the world of consulting that were just too good to pass up.) ūüôā

Talking of outside opportunities… Now that I’m no longer affiliated with Move, I plan to talk (a lot) more about ways that real estate professionals can engage consumers using online technologies. But rather than clutter up this perfectly good blog about Seattle real estate with my industry rambles, I’ve decided to focus those conversations on 4realz.net.

Please consider joining me on 4realz.net. I promise to be interesting enough that it will become a must-read (and a must-feed) for anyone interested in the future fringes of the real estate industry.

Autumn season always one to savor

As we stride into October, I’ve found myself wondering where the year has gone (like we all do). It was a year ago this weekend that I journeyed to Seattle from Chicago and was spontaneously whisking my way through Seattle with a friend and touring the gargantuan Mt. Rainier. And though the temperatures are quite brisker this year than when I visited last year, longtime residents have insisted this year’s September weather is an anomaly. But there’s nothing like watching the lush greenery morph into bright reds and oranges and leaves dance from trees. Autumn has always been my favorite season, so, in spite of my sometimes overwelming schedule, I’ve been taking advantage of some of the local events. With Fremont just a stone’s throw away from my home, enjoying Oktoberfest was a given, though it seemed slightly overhyped.

Both the Fremont and Ballard farmers markets have become mainstays when it comes to my Sunday routine. When I first dropped by Ballard’s market, I could not believe the breadth of the vibrant vendors and just the vast amount of fresh fruit, fish, dairy etc. all centered in one dwelling. The Pacific Northwest and the Midwest versions of farmers markets, not surprisingly, are just not comparable.
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Recently, I managed to take a jaunt via the Victoria Clipper to Victoria, B.C., with my Mother while she was visiting from Chicago. Our weather could have been a smidge better during the morning portion of our trip, but the afternoon sun that poked its head through the ominous clouds more than made up for the initial gloom. The absolute pure beauty of Victoria is just breathtaking; it melds modernity with antiquity in a dynamic that gives it a cozy and classy, yet hip feel. If you have never been there, you must try High Tea at the picturesque Empress Hotel (pictured), which is nestled amid much grand beauty. Replete with tea sandwiches, petit fours and other delicacies, the overall afternoon tea experience is something analogous to what you would enjoy in London, and you should not skip it if you plan to spend time there.

Now that fall is upon us and the full-fledged rainy season is soon to set in, I am quickly warming up to Rihanna’s hot last-summer song, “Umbrella.” It seems it will be a good IPod song now that I am riding the bus to work and grad school ‚Äď yes, I barely drive my car anymore and I can’t stress enough how much it thrills me. Banished from my mind are the days of braving brutal Naperville, IL traffic. It always seemed no matter how prematurely I left for work there was always a snag (usually random, unannounced lane closures, courtesy of seemingly construction) that would prevent me from being punctual.

Although I have some trepidation about Seattle’s impending winter, when I think about trudging through Chicagoland’s cumbersome snow and the street salt and muck that constantly encapsulated my car, and often my clothes, I’m hardly fazed. The tepid temperatures here have been a welcome change and as long as we don’t have to cope with negative figures, frequent clouds and snow, it will be a breeze to endure.

The newbie's assessment: SEA v. CHI summers!

It’s amazing how when you move thousands of miles away from your comfort zone your life inevitably takes a 360 degree spin. This summer has been breezier and more brisk than I’ve ever experienced, primarily because it was my first Seattle summer and first (of many) away from Chicagoland.

My top 10 list of why Seattle summers significantly trump the Windy City summers (augment the list if you wish!!!):
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1. That’s easy ‚Äď no humidity, stickiness or blazing heat that makes you feel like your feet will sink right through the molten-like ground.

2. No need to wear tank tops or shorts everyday, if at all.

3. If you live in Seattle you’ll barely, if ever, clamor for an air conditioner (every Chicago-area resident knows that the air conditioner is a summer mainstay if you are to survive).

4. You can haphazardly cross the summer streets without worrying about getting plowed over by erratic cabbies. Shortly after my arrival here, I could not help but be shocked when I realized the immense respect Seattleites have for crosswalks.

5. The constant picturesque views that the amalgamation of the sun, Space Needle, Puget Sound and surrounding lakes provide.

6. No bugs – or barely any. Ever live in Chicago? Pesky mosquitoes are summer bullies that relentless chew you up with no respite. Bugs love the muggy Chicago summers, and they are a constant companion to the blistering heat.

7. Wearing outerwear at night; you definitely won’t require a jacket on a summer evening in Chicago.

8. Coffee chillers are not necessary. Not a big fan of coffee chillers, always like mine piping hot and during summers in Seattle it doesn’t get fiery enough to yearn for a chiller instead of a cappuccino or drip.

9. The seafood is wondrous, though this is not exactly summer specific since this is the Pacific Northwest.

10. The Cabernet Sauvignon tastes so much sweeter when you are not dripping sweat.

Announcing the next great real estate blogger…

As many of you probably already know, I’ve been searching for a secret weapon that will help me win the Project Blogger competition…

[photopress:slide0001_image002.jpg,full,alignright]About a week ago, after many very interesting conversations (and many wonderful options!!!), I finally settled on my apprenticeliterally.

Interestingly, I was inspired to “Go Hollywood” with my choice after Ardell picked a Floridian based on his looks. I asked some people around Move if they knew of any Hollywood stars who might be interested and thanks to a direct connection with Trump (he’s been known to purchase the Featured Home product on Realtor.com!), I was able to connect up with Kendra Todd. ūüôā

But beyond any celebrity, the main reason I picked Kendra is that she thinks big! Trump big! The tipping factor was that in our conversations, she convinced me that she really understood how important blogging would be if she was going to dominate her local market (the State of Florida). And yet, at the same time, she didn’t want to limit herself to Florida issues. (Florida real estate isn’t that interesting…)

I think it is safe to say that over the next few months you can expect great things from Kendra’s real estate blog!

Seattle in Top Ten for Continued Appreciation- Want to know Why?

We’ve talked alot on RCG about whether we’re in a bust or a bubble real estate market and we in the Pacific NW have been watching the rest of the country and wondering, Why all the gloom? Bankrate.com and today’s Seattle times have some explanation that can provide perspective:

Last week, Bankrate.com unveiled its forecast for the changing real estate market in the U.S. over the next few years – ten markets where housing prices and values will continue to remain strong, ten markets where appreciation will pretty much top out and the ten markets that are most likely to experience a decline. They talked to experts, studied public and private databases, analyzed market trends and examined the analysis of many others.

The ten “bubble blowers,” where appreciation should continue to grow, are:

  • Boise (ID);
  • El Paso (TX);
  • Albuquerque (NM);
  • Seattle (WA)/Portland (OR);
  • Salt Lake City (UT);
  • Raleigh (NC);
  • Philadelphia (PA);
  • Atlanta (GA);
  • Little Rock (AR); and
  • Cincinnati (OH)/Birmingham (AL) (they were too close to call).

Just why this is happening in the Pacific NW is the subject of this mornings Seattle Times article by Elizabeth Rhodes. She sheds light on why Seattle is breaking the national trend toward stagnating or dropping home prices. Her article notes that the average home prices have taken a steep hike in the last year and appear to be continuing the rise.

Citing the NWMLS statistics that came out on Thursday, median closed price of King County single-family homes has shot up almost 12 percent in the past year, reaching $405,000 last month (and up from $392,950 in February).

Interestingly, sales are down, but so is inventory. In March 2004, there were 7,156 homes for sale countywide. March 2005’s inventory was 5,244 homes. This March recorded a further drop, to 5,100. This is the pinch that causing the rise in prices.

At the same time, the local economy is growing and employers are adding jobs, bringing more potential buyers to the area. So the competition for available homes is strong and prices are reacting accordingly.

We agents have been experiencing this hot market all spring as we did through most of last year, possibly feeling the market fluctuations first. We’re out there in it, pricing homes to reflect the low inventory and coaching buyers for the best positioning in a multiple offer situation. I just watched the price of an Eastside condo jump $20,000 in a two week period!

Fremont: the Center of the Universe!

While it has nothing to do with the MIT Forum, I thought it would be fun to present and comment on the TurnHere video of the Republic of Fremont along the lines of Dustin’s post on Ballard.

The video is a lot of fun and gives a great perspective on the funky, hip side of Fremont, while also acknowledging Fremont’s changing demographics.

The Russian in me can’t help but comment on the statue of Lenin that sits in a parking lot of a local Taco Del Mar. Roger Wheeler gives a brief history of the statue on the Fremont Chamber of Commerce website:

Poprad, Slovakia is the place, 1978 the year our story begins. Emil Venkov won a commission to sculpt and cast a bronze statue of Vladimir Ilyich Lenin, Russian revolutionary leader. He worked for ten years, finishing in 1988 – just in time for the regime to collapse. Demand for Lenin bronzes was nil, with the exception of visiting American teacher Lewis Carpenter. He was intrigued by the bold and unusual design, Lenin striding out of – what – rifles, flames, wheat? Carpenter decided to take the statue home with him, a decoration for a Slovakian restaurant maybe. He decided big time. He mortgaged his house, bought the statue for $13,000, then paid $28,000 to truck it to Scandinavia and ship it via the Panama Canal to Washington state. Carpenter was killed in a car accident in 1994 and his mother, Lydia, was left with a seven-ton Lenin in her Issaquah back pasture. Lydia called Carpenter’s Fremont sculptor-friend, Peter Bevis. Bevis and the Fremont Artwalk Committee were looking for something big to kick off their event. Lenin was just certainly that. After much welding and grinding and banging at Bevis’ Fine Arts Foundry Lenin was ready to thrust his way into Fremont history, being unveiled at Artwalk amid much carping, griping, and fist banging from critics and former countrymen who remembered Lenin as something other than heavy-duty art. Lenin is for sale. For a mere $250,000 (obo), you too can join Lenin’s well-traveled history.

Fremont attracts many local artists there are quite a few galleries. One of my favorites is Frank and Dunya, which features art and collectibles from artists from all over the world.

Some other things mentioned in the video include:

  • The weekly Fremont Sunday Market is an outdoor European-style Market has something for everyone!
  • With the charm of an old home setting, the Fremont Coffee Company is one of the best coffee shops in Fremont (but definitely not the only great one!).
  • The Fremont Troll that sits under the Aurora Bridge is definitely a fun attraction. Interestingly, a street that leads into the troll was recently named Troll Avenue.
  • Sonic Boom Record is a great local record store.