Puget Sound's Market Conditions Update

Every New Year, my husband’s family makes a trip to Ocean Shores with most of his brothers and sisters and nieces and nephews. It is a tradition that we look forward to which includes as much bowl games you can cram into a weekend, razor clamming, go karts and I get to read the newspaper from front to back while everyone else in our hotel room is still sleeping.

To my delight in the Dec. 30, 2006 issue of The Seattle Times, there is an article forecasting the local 2007 real estate market called Looking ahead: The sky isn’t falling for the Puget Sound market

70 thoughts on “Puget Sound's Market Conditions Update

  1. That last sentence is real stretch Rhonda…..

    My belief is that despite what the ‘experts’ say, that real estate is greatly overvalued in the Puget Sound area. The market has already slowed tremendously and foreclosures are picking up due to all the ‘creative’ mortgages placed in the past few years.

  2. Rhonda,

    I think you inadvertently contradicted yourself. If first time buyers are getting priced out, what does that mean for the rest of the market?

    The lower expectation also means ‘not enter the party and continue to rent’.

  3. Rhonda,

    I have a simple question. Is there ever a time when you would advise someone that now may not be a good time to buy? (Assume that the person in question does not intend to move in the near future.) If so, please describe the circumstances that would lead you to make such a recommendation.

  4. Hi Tim,
    Good question. There are times when I would recommend a person not buy a home, such as:

    They need to work on their finances or improving their credit.
    If they anticipate changes in their employment or if they do not have steady employment.
    Someone who has too much going on in their life presently (such as a divorce, illness in the family, etc.).

    Here’s a specific example. Last year, I had a mother bring her two children (sounds funny calling them that, if I recall correctly, they were 21 and 22) to me to become preapproved. The mother did not want her kids paying rent and wanted them to become homeowners. I thought it was, at the very least, a great experience for her kids. I reviewed their credit and completed a loan application with them. They did not have enough established credit nor did they have a long enough employment history to qualify for an “a paper loan

  5. Rhonda,

    Thanks for your answer. Does a Realtor have any duty to their clients (especially FTHBs) to talk about the macroeconomic environment before their purchase, or only a duty to to talk about the microeconomic issues you bring up? Or, is it the duty of the FTHB to research this before they even contact a Realtor?



  6. Bud,

    You may get differing opinions on this, as in ask ten agents…get ten answers. But I’ll weigh in here.

    I would likely address both macro and micro issues if:

    1) The client asked those types of questions

    2) If the situation warranted that I do so

    I would not say it is a “duty” to do so, but obviously if someone is an investor, the situation would more often warrant it.

    Likewise, if someone is relocating here from someplace else, the situation would most often warrant it.

    If someone were buying a condo in the same building they have lived in for ten years and trading up from a one bedroom to a two bedroom, the situation might not warrant it.

    Use schools as an example, for clarity. Do I have a duty to tell people about the schools if they have no children and have no intention of having children. Maybe not. Sometimes yes, if schools have an impact on value for that house.

    As to FTHBs specifically, honestly, sometimes they get a headache with the enormity of it all. I would evaluate macro and micro and advise them accordingly, but not necessarily discuss the topic. If their choice of house is “poor” due to macro or micro issues, I will point out the specific reason and my opinion of what and why. But not discuss macro beyond that unless they want to…they usually do not.

    If you would like both macro and micro issues addressed, simply ask your agent to address them. But no, I would not assume that they would or should, if that is important to you…make it known.

    I am an agent, but have not been a member of NAR since getting my Broker’s License. I don’t think there’s a difference with regard to your question. Let’s see what others may have to say on that.

  7. Bud-

    I don’t know if agents have a “duty” or are obligated to discuss macro-economics of the market—that being a buyers market or sellers market and all the implications that go with it. Agents do have a fiduciary duty to their clients and with that comes a host of things that are really consumer centered around a sale itself. How far that duty extends beyond that circle, by getting into the question of should I buy or not, becomes tough. Consumers should be aware of market conditions on their own via different means such as internet research. I’m not an expert on the subject of agents fiduciary duty by any stretch because I’m not in the sales end, only escrow. Obviously, an an industry professional I have a personal opinion as does everyone else. Heck, I receive a lot of mail from agents at my home discussing the market with headlines being “we are not in a bubble, there is no bubble, sales down but prices are going up,” etc….

    In our escrow office consumers ask ALL THE TIME, “is my interest rate ok? What do you think about the market? I’m going to make so much equity,” and so on. Because escrow is neutral, I refer them to their loan officer or agent for obvious reasons.

    Russ Cafano? Maybe he could shed light on the subject of agents fiduciary duty extending into the realm of market health and macro-economics?

    Agents have a duty to act in good faith to their client in an honest and ethical manner. If an agent or loan officer believes the market is healthy, however they come to that conclusion, then you cannot fault them. It boils down to consumer objectives. Unfortunately, when your livelyhood, as mine does, relies on the swings of the real estate market, to discuss the market without rose tinted glasses may cost you income. For good or bad, that just the way it is.

  8. Bud would have to give the State he is in, as Fiduciary is not the standard here…but it may be where he is. Also, someone already asked Russ if Realtor equals Fiduciary even though WA does not…not sure if he answered that yet. I didn’t see the answer…just the question.

  9. Real Estate blogging it seems is nothing more than a pissing contest between real estate agents in different states with different sets of real estate laws between them, where both sides of the conversation are left more confused than they were before; while the everyday consumer reading the blog has not a clue in *beep* what was being discussed and could care less!

    Discussing micro and macroeconomics…. please write an article on this topic, I could use the extra points submitting your articles to my economics professor!

  10. Tim seems to be talking about what would consist of neg. omission and how far an agent would have to go to discover material fact. Macroeconomic prinicpals would need to be discussed if there is a material fact that could affect the property, but then again, why in the heck are we discussing MACRO when RE is local in nature and more or less affected by microeconomic forces instead?

    When we move to the discussion of macroeconomics we are more or less speculating than proving facts and it’s not material fact when one is speculating so… Makes no sense but economic speaking, economics in general is all speculation no matter how you you twist it in the long run.

  11. Rhonda ends her initial post talking about first-time home buyers. FTHB, if priced out of the market within their chosen geographical area, traditionally look farther out, OR they look at condos, which is a great place for some of the younger, FTHB to start. Knowing this, and knowing the condo market can be very different from houses, and geographical market conditions vary, I believe it is in the FTHBs best interest to become educated by his or her Realtor or agent about the market economics both micro and macro before writing an offer. I might even add, although this could be topic for a longer post, it might be in the client’s best interest to be referred to an agent who specializes in condos, or specializes in that farther-out geographical area.

    Not doing so would not be putting your client’s interests above your own need for a paycheck.

    To what degree a Realtor or agent educates his or her clients is one way agents all differentiate themselves and earn their value.

    To what degree Realtors or agent puts their client’s interests above their own, no matter if we’re talking duties of statue or fiduciary, is another way you INCREASE your value in the eyes of consumers.

  12. “Also, someone already asked Russ if Realtor equals Fiduciary even though WA does not…not sure if he answered that yet. I didn’t see the answer…just the question”

    Missed that one, sorry.

    The REALTOR COE is not limited to what the law requires but goes above and beyond the law with higher standards. While it is certainly not crystal clear, based on Standard of Practice 11-2, one could argue that the agency obligations as defined in the COE are those of a common law fiduciary even in states that have eliminated common law fiduciary duties. This would impose a higher level of care in certain circumstances than state law requires. Remember, though, that violation of the COE is not a violation of law and is only actionable in the context of a REALTOR Association ethics hearing.


  13. Speaking of the Realtor Code, it’s all BS in NC as nearly everything in there is a license law here in our state. Not sure what the laws are in other states, but 99% of what is in our codes are license laws. License laws of course are different from state laws! 🙂

  14. Russ, do you think going above the law and into fiduciary territory increases a real estate agent or Realtor’s value to the consumer, decreases it, or neither?

    DSB, I agree with you. When codes of ethics merely restate the law, they are worthless. A fine example of this is when a code provision states something like “members of our organization will adhere to all federal fair housing laws.”

  15. I guess it would make sense that any higher duty level would deliver more absolute value to the consumer. That said, I don’t think that the average consumer “values” the relationship with their agent in the context of a true fiduciary and so, from the consumer’s perspective, this would add little perceived value.


  16. How do you define value? Being in the trenches, my clients call me on just about anything real estate, mortgage or home repair (etc.) related. I’m sure they would do the same with any agent they have a relationship with.

  17. Rhonda,

    Being a resource for valuable information is not synonymous with being a fiduciary. I did not say that agents had not value. I think that some agents bring a lot to the table. I did say that I don’t believe the average consumer of brokerage services views their agent in the context of a fiduciary (i.e. one who puts their own economic gain behind that of their client).


  18. Regarding fiduciary obligations we, first, have a very clear discussion with our investor clients about fiduciary duty having to do with the selection process of properties that we might show them, meaning, we don’t cherry pick investments and choose those we’d like to buy before showing them to clients. Secondly, we discuss that when we have multiple clients with similar purchase requirements they are all given the same information at the same time (when our automated system runs or in bulk email) and it’s up to them to make timely decisions on the information. Third, if we have multiple clients putting in an offer on the same property we make sure to let them know that other client’s of ours are submitting offers but we won’t let them compete directly against each other on price but we will not discuss any other terms with the independent parties. We’ve only had one property in almost 4 years now where this has even happened and the terms that the seller chose had to do with time to close. We tell the clients to write the offer based on the terms they are willing to offer.

    If there is a particularly good property we will make sure our signed agency clients see it before we send it out to prospective folks as well. This way we make sure our clients have preferential treatment and they value that we treat them in this manner. There are plenty of agents I’ve seen that get their license strictly to line their own pockets by having access to the NWMLS data – no more, no less. You can tell by the fact that they rarely to never market anyone else’s property other than their own and you can usually find the purchase or owner info to show the trend. The ones that really “chap my hide” are those that then try to not provide a Form 17 (seller’s disclosure statement) even though they’ve done a full remodel – and in many cases they are poor remodels at that. I’m sure most agents can identify a few of these (or more) in their own marketplace.

  19. DSB –

    Going to write as I think along, so excuse typos or writing skills….

    Macro-economics does play an important role in housing. Commodities such as lumber has an impact: lumber prices have dropped. Because of dropping demand for building, lumber companies have shut plants down, laying off employees who then gain employment elsewhere or go on unemployment. Copper prices have risen over the last few years and has had an impact on building: electrical and plumbing (recent storms highlighted theives stealing downed power lines to sell in the black market or stealing copper wire from newly built homes nearing completion).

    Oil market/prices certainly trickle down to other price sensitive industries: delivering of goods, production of oil by-products etc…(inflationary issues)

    Real estate is local, but macro/global economic factors play quite a role in the capacity to aquire a home. The strong or weak dollar and how foreign investments by other countries impact the bond market & general economy, playing a role. Interest rates play a large role as we have currently experienced.

    The fact that we have had failed purchase transactions due to local buyers unable to sell property in other markets also show that the ripple effect can influence other markets.

    I’m not disagreeing with you, but am pointing out that opening one’s horizon outside of the world of real estate is part of gaining a fundamental picture of local market health. Sometimes I wonder if people in my industry become a little desensitized or tunnel visioned to towards things outside of the world of real estate.

  20. We have 2 licensees on my team and we disclose to our clients up front if there is another offer from one of our clients being written on the same property. It was a main reason my partner and I both got licenses so that we could each work with clients as in this kind of scenario if a client so chose. As I said earlier, we provide the disclosure of this information to our buyers the moment we know it might occur. We also give the buyer the opportunity to seek different representation if they so choose and/or are uncomfortable with it. It’s also spelled out in our buyer’s agency agreement that was approved by our attorney. The situation has only presented itself once but we are clear with clients at our first meeting with them if we have other clients with similar interests. It’s a major discussion in all of our prospective client meetings where we cover agency law and our buyer’s agency forms. We give our clients plenty of time to review the documents and tell them they are free to have an attorney review it and we also post at the top of the agency agreement that they are signing a legal instrument and recommend they have it reviewed by legal, tax or other counsel as they see fit.

    Considering there are always small to substantial differences in each client’s situation it is rare that 2 clients want the same property or that they respond within the same time frame to write an offer. It’s happened once in 3.5 years. Agency law doesn’t preclude us from showing the same property to separate buyers and I’ve not yet found a specific statement that states we can’t do what occurred (particularly with 2 licensees involved) and without full disclosure and agreement by the buyers involved. We had our clients sign documents that stated they had received the disclosure and that they were willing to continue with the offer presentation.

    If you’ve got some specific info I should know about I am open to being educated about it. I’m posting the RCW info on buyer’s agency for WA State below from their site http://apps.leg.wa.gov/RCW/default.aspx?cite=18.86 for anyone that is interested in reading it.

    RCW 18.86.050
    Buyer’s agent — Duties.

    (1) Unless additional duties are agreed to in writing signed by a buyer’s agent, the duties of a buyer’s agent are limited to those set forth in RCW 18.86.030 and the following, which may not be waived except as expressly set forth in (e) of this subsection:

    (a) To be loyal to the buyer by taking no action that is adverse or detrimental to the buyer’s interest in a transaction;

    (b) To timely disclose to the buyer any conflicts of interest;

    (c) To advise the buyer to seek expert advice on matters relating to the transaction that are beyond the agent’s expertise;

    (d) Not to disclose any confidential information from or about the buyer, except under subpoena or court order, even after termination of the agency relationship; and

    (e) Unless otherwise agreed to in writing after the buyer’s agent has complied with RCW 18.86.030(1)(f), to make a good faith and continuous effort to find a property for the buyer; except that a buyer’s agent is not obligated to: (i) Seek additional properties to purchase while the buyer is a party to an existing contract to purchase; or (ii) show properties as to which there is no written agreement to pay compensation to the buyer’s agent.

    (2)(a) The showing of property in which a buyer is interested to other prospective buyers by a buyer’s agent does not in and of itself breach the duty of loyalty to the buyer or create a conflict of interest.

    (b) The representation of more than one buyer by different licensees affiliated with the same broker in competing transactions involving the same property does not in and of itself breach the duty of loyalty to the buyers or create a conflict of interest.

  21. Russ,

    Clearly ALL of my clients view my role as putting their interests ONLY and my monetary interests NOT. Consequently I hope you are incorrect that most consumers do not want this, or view their relationship with their Real Estate Professional differently.

    I don’t think you would expect that…in fact I do not think you would want that. But I think you are more the rarity than the norm, in my experience.

  22. Reba

    Here is the issue. Throughout your post, you use the term “our client”. If “our” means you and your partner, and both of you are forming an agency relationship with the buyer, then what you are doing is not permitted. While you can certainly show the same property to competing buyers, a buyer’s agency duty of loyalty would prohibit writing up an offer for a buyer when you have already written one for another buyer.


  23. It is very limiting to never take on two buyers who want the same thing at the same price in the same area. So far I have managed to do that for 16 years. But find that harder here on the Eastside than anyplace else I have worked. Could run into that problem next year for the first time. Lots of people want $350,000 or so near Microsoft. And there’s not enough of that to go around.


    Do you advise buyers you represent without contract that they are put behind those who sign contracts? Sorry if I missed that. Going back up to read that again. Doesn’t WA Stature require you to represent them without contract? On what basis to you put them “second”. Wouldn’t it be more ethical to refer them to another agent who doesn’t do that?

  24. Russ,

    Then how could Reba justify making sure all the buyers who signed contracts, get to see houses before telling “the others”. Isn’t that like saying…here are the houses no one wants?

    I must not be reading Reba’s comment correctly, “‘If there is a particularly good property we will make sure our signed agency clients see it before we send it out to prospective folks as well. This way we make sure our clients have preferential treatment and they value that we treat them in this manner.”

    Reba, who are those other people who are getting info after the people who signed agreements? Is there a disclosure to them regarding their placement in “the system”?

  25. You know, as soon as I hit “post” on my comments I sensed it was likely a bad post to put out there because suddenly there would be questions that are random and that don’t cover the full spectrum of the situation. It’s the one bad thing about blogging because it becomes fragmented. At least it’s bringing up some interesting remarks and questions.

    There is a difference between a client and a prospect. Clients we work with sign an agency agreement – either a listing or a buyer’s agreement depending on their transaction. Prospects might be people who showed up at a class we conducted but who have told us they aren’t ready to move forward yet but they’re interested in the market. They could be a referral from a former client that liked our services and they had a friend that showed interest. It could be the person signed up for our newsletter via the Internet so they’re part of a general prospecting marketing campaign. Clients are the people that have met with us, gone through a pre-approval process, given us extensive details (typically) about what they’re looking for in a property and have shown that they are ready, willing, and able to buy. When I say that we send out a bulk email to others after giving our clients first opportunity it is this scenario that I’m describing.

    Many agents have a pool of prospective clients but they may not yet have moved from “I’m thinking about it” to “I’m ready to sign an agreement with you” stage. Agency is a transaction based relationship – if someone tells us they’re just “interested” in investments it doesn’t mean that we count each of those people as a client – they are a prospect until they’ve gone through our usual process and signed an agency agreement. Not far off from the parallel of someone putting down a retainer on an attorney. The attorney doesn’t represent you till this happens and you sign an agreement. In our case, you sign an agreement but we don’t get paid until, or unless, someone buys a property.

    Prospects that aren’t signed clients know that we aren’t working specifically for them until we sign an agency agreement – they are told so in their meetings with us.

  26. C’mon Dustin, it’s Ardell that’s tough. I just come along for the ride (right Ardell?)


    I disagree with your analogy regarding legal relationships. Rendering legal advice and not the signing of a Fee Agreement is the start of the attorney-client relationship.

    Likewise, according to the Agency law, the buyer agency relationship begins upon you providing “real estate brokerage services” to a buyer, regardless of when you actually may sign a buyer’s agency agreement. “Real estate brokerage services” are defined as any service for which a real estate license is required. As a result, the minute a real estate licensee provides a buyer information on a house that might meet their criteria in the hopes of procuring that buyer, the licensee becomes their agent. There could be other examples but that seems to be one that is very clear. As an agent, unless waived in writing, the licensee now has the obligation to “make a good faith and continuous effort to find a property for the buyer” unless the licensee terminates that relationship.


  27. Russ,

    I think you and I discussing “fiduciary” and how WA doesn’t require it, though some like I “can’t help doing it”, educates the consumer regarding not expecting it from all.

    If the State doesn’t require it, then all do not deliver it. I do still find fault with the State NOT requiring it. In one way we are “perceivedly” the BEST life has to offer, being the only State with representation at first contact. What a beautiful stance. And then I see that some alter that message to “ONLY” if you sign a contract.

    How can a State Stand Up and Shine as the ONLY State with representation as the default, when the practitioners dilute it to something lesser? It just floors me.

    Reba…don’t take this personal. I’ve been “on this” since I attended the ABR class and they taught that buyers are only represented if they sign a contract. I say NOT in THIS State…that is just not true here.

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