We’re just past the halfway point on the third quarter, and condo prices are getting much lower. Unless we see a major change in the next 5 to 6 weeks, the MPPSF is showing down over 11% from peak At $274 vs. $311. Not a big surprise, as pending stats have been low, so it was only a matter of time before those low numbers in pending status started showing up in the closed sales. Still I wouldn’t be surprised if they bounce up a little by the end of the 3rd Quarter.
Inventory is getting pretty darned flat. For condos the number of properties for sale hasn’t changed much since May. 3rd week of August – 4,082, July 3,958, June 4,049, May 3,953. Pretty much flat for four months in a row.
I’m not even going to talk about pending sales as there is so much junk stuck in there and not closing. For now I’m not counting anything until it actually closes.
King County Condos
2004 – 1Q – 1,694 – $188, 2Q 2,636 – $199, 3Q 2,540 – $196, 4Q 2,176 – $195
2005 – 1Q – 2,066 – $198, 2Q 2,925 – $209, 3Q 2,769 – $226, 4Q 2,266 – $224
2006 – 1Q – 1,956 – $242, 2Q 2.748 – $252, 3Q 2,737 – $269, 4Q 2,217 – $278
2007 – 1Q – 2,042 – $295, 2Q 2,862 – $302, 3Q 2,676 – $311, 4Q 1,618 – $294
2008 – 1Q – 1,258 – $299, 2Q 1,535 – $287, 3Q to date 685 – $274
Residential properties seem to be holding on to value a little better than condos, but still showing more weakness now than they have since late last year. MPPSF is only down 5% – 6% from the peak of $230 to current numbers of $217, and we may not see much of a change in those numbers by the end of the 3rd quarter.
Inventory in the single family markets has flattened out a bit, but only in the last 30 days or so. Some of that is being caused by people renting instead of selling or pulling their properties off market to wait for next Spring.
Residential King county
2004 – 1Q 5,650 – $152, 2Q 9,237 – $160, 3Q 8.737 – $163, 4Q 7,467 – $165
2005 – 1Q 6,402 – $173, 2Q 9,093 – $185, 3Q 9,131 – $192, 4Q 7,301 – $195
2006 – 1Q 5,596 – $201, 2Q 8,248 – $214, 3Q 7,771 – $216, 4Q 6,204 – $217
2007 – 1Q 5,304 – $222, 2Q 7,393 – $230, 3Q 7,944 – $229, 4Q 4,301 – $221
2008 – 1Q 3,640 – $219, 2Q 4,676 – $220, 3Q to date 2,366 – $217
Stats not compiled or published by NWMLS. (Required disclosure)
As is true most years, the prices will start to be better for buyers from now through year end. In the hot markets of the past few years, that only meant that appreciation would slow down. But this year and last year, the prices just kept getting better and better…for buyers that is. If you can wait a year or two, I think prices will be even lower. But if you plan to buy in the next 6-9 months…the next 3 may be better than waiting just a few months longer.
> If you can wait a year or two, I think prices will be even lower.
HOORAY! I love you Ardell!
On a side note, I’m in Jakarta now visiting relatives and the housing bubble is in full effect here. One of my wifes relatives purchased a large 3 bedroom home on spec for 1 Billion Rupiah ($100,000) 18 months ago and now claims it is worth $1.8B Rupiah ($180,000).
She actually told me that I should buy several for investment purposes – and that if I didn’t buy now I’d be priced out of the market.
She said the main reason that prices were going up so quickly (nearly 100% in a year?) was that they were running out of land. Oh, and banks have “new loans” they are offering for the first time since the asian currency crisis when the Rupiah lost nearly 90% of its value overnight.
Sound familiar? Maybe I’ll start a indonesianbubbleblog.com
“But if you plan to buy in the next 6-9 months…the next 3 may be better than waiting just a few months longer.”
You may be right, Ardell, but that’s not really what we see in the other West Coast cities. Presuming we are a year behind, which appears to be what happens historically, it looks like we could see decline be nearly as steep through the spring selling season as what began in the winter.
I’ve become resigned to catching a falling knife in this decline, given where we want to buy and how long it will take to see serious declines in our target neighborhoods, but I would be skeptical it will be significantly worse to wait for spring. My guess is that if I can distract my wife long enough we will see even more choices and a bit better prices.
Of course the mortgage situation is the wild card. Even with duelling 800s and 40-50% down, we may end up paying more.
I’m wondering if pending Alt-A resets will make any thing happen….who knows?
***************
Here’s our stats for all 2005: 71%(not a misprint) of our entire purchase closings were 100% financed, nothing down, no skin in the game, overwhelmingly they were short term Interest only and a good handful had pre-payment penalties.
Our best guess is that the title companies (escrow dept.’s) would have fairly similar stats.
http://seattlemetrorealestate.blogspot.com/2006/06/more-news-to-make-bubble-believers.html
***************
Then again that was written by someone on the internet…so it might be complete hogwash.
biliruben, someone w/your scenario should be fine w/financing… worse case, you could always go FHA. 😉
70Ford–that stat has to be wrong. Perhaps it’s referring to the percentage of 100% financing for alt-a/subprime transactions?
On a post I wrote at RCG with my business stats, 25% of my clients in that time period used 100% financing and 39% used 20% or more for a down payment. http://www.raincityguide.com/2007/03/21/it-may-not-be-your-businessbut-it-is-all-mine/
And there were some that didn’t see anyone like Rhonda at all, because they paid cash! 😉 (That would further reduce the percentage of 100% transactions).
Synthetik,
“She actually told me that I should buy several for investment purposes – and that if I didn’t buy now I’d be priced out of the market.”
So people without a self-interest goad others into buying real estate? The funny part is that Mr. “it is now worth $180,000” will feel like he “LOST” $50,000 if he is only able to sell it for $130,000.
Agents think “lost” equals bought for $100,000 sold for $80,000.
Sellers think “lost” equals total dollars in vs. total dollars out.
Some think “lost” is that they got less than, what they once thought it was worth.
I remember sitting at a coffee shop with a guy bragging to our friend that the property that he bought for $450,000 was now worth a million dollars. Of course the friend asked me, given I’m in the business. I said $700,000 to $750,000. The owner of the property never spoke to me again. I’ve always wondered, since it wasn’t on the market, if I should have just pretended it was worth a million. But then I was never very good at pretending.
Small world…a couple of years later I was presenting an offer to that man.
Thanks for the reassurance, Rhonda! It means more than a lot coming from you.
I am almost certain that 71% quote comes from RCG’s own Tim Kane, though I could be wrong. He primarily works with properties in snohoco, iirc.
Tim would have a good view of LTVs as he works w/a variety of LO’s and agents… my data is limited as I did enter into the subprime market later than most and refused to do a lot of business (offering counseling w/delayed purchase utilizing FHA as an alternative to subprime).
biliruben,
I call it the cycle of hope. In January through May, most sellers are more hopeful that they will get the price that will make them happy. By September though December they lose hope, and begin to accept a price that they can live with. Usually that starts up again in January.
Even Greenspan in one of his latest speeches promoting his new book said that he “hopes” that first quarter of 2009 will bring a change for the better.
Still scratching my head over this one. Owner wanted to list house at $750,000 but is talked down to $699,950 and told it was really worth $550,000. Owner lists it for 30 days in July at $699,950 and takes it off market in August. Rents it out. Then owner says she and her husband would be “happy” with $580,000, but willing to take $550,000…maybe. Plans to put it back on market in April or May of 2009.
What is THAT? What price will they list it at in April of 2009? If someone would be “happy” with $580,000…why are they asking $699,950?
Some people just make no sense to me whatsoever. No…it is not a client of mine. It’s actually an agent selling their own property.
Ardell, I think the part that you’re missing is that a lot of people think that you can put a house on the market for 25 or 30% more than it’s worth, and if a buyer is interested, they’ll make a lowball offer 25-30% under the asking price. They don’t see a downside to a high asking price, because they expect it to be negotiated way down. They think they’re selling a car instead of a property.
Part of the dawning realization that these people have after months on the market is that it doesn’t work that way, and if you’re asking too much, they’ll move on to the next house. Almost nobody makes lowballs that low.
Somebody that I have had the misfortune of dealing with, who is a licensed realtor and should know better, put a house on the market in April for $799,000. After being told by the local realtors that it’s not worth that, it sat there for a month, before he took it off the market and listed it for $600,000. Then, over the course of almost two months, he dropped the price $10,000 a week. Then he took it off the market and relisted it for $500,000.
Talk about a triumph of hope over experience!
Larry,
Without revealing the property, can you tell me what Zillow says it is worth? Both the specific value and the range of value would be nice.
Just curious. Seems if the guy can’t pinpoint within $400,000 or so…he might be better off trusting Zillow 🙂 Sometimes it is pretty dead on. In fact, it’s probably a good time to do a “Zillow Says” check against sold prices. If all of your neighbors homes that sold, sold within a reasonable range of the Zillow Zestimate, chances are yours will too…no?
Pretty soon we’ll be using .95% of Zestimate as a neighborhood factor instead of 1.17 times assessed value.
Interestingly, Zillow says it’s worth $606,000, but Cyberhomes says it’s worth $354,000. That alone should make you wonder about the algorithms and the data that the two systems use. After a little poking around, Zillow is using the correct square footage, and Cyberhomes is using an old number from before 1978. I think Cyberhomes has a clear bug in it, by Zillow is probably a bit optimistic.
Condos for sale everywhere, buy one if you’re chancing.
Condos, condos everywhere, but who provides financing?
I’ve been seeing Zillow running a bit high. Give me the Zip Code and I’ll do a Zillow check. I never use Cyberhomes. Just a Parlor Game 🙂
“Condos, condos everywhere, but who provides financing?”
Let’s go see…
Search…condos closed in August…King County….priced at $300,000 or less:
131 Closed
Sale Price $85,000 two bedroom condo in Federal Way (list price $99,500) Conventional Financing of $72,240 provided by Evergreen
Sale Price $164,000 two bedroom condo in Federal Way (list price $164,900) Ooops..Tax Record says sale price was $160,000 and MLS says it was $164,000. I’ve been seeing quite a few snafus like this lately. Conventional Financing of $128,000 provided by Usaa Fsb
Sale Price $205,000 studio on Captitol Hill (list price $219,000) Conventional Financing of $184,500 provided by Cobalt Mortgage.
Sale Price $219,950 two bedroom condo in Issaquah/Sammamish (list price $219,950) FHA Financing of $216,550 provided by Suntrust
Sale Price $170,000 1 bedroom condo in Issaquah (list price $179.500) Conventional Financing of $136,000 provided by USaa Fsb
Sale Price $240,000 one bedroom condo in Redmond (interesting note – the seller paid $253,000 for it in March of 2007 with 100% Countrywide Conventional Financing) (listed at $249,950) Conventional Financing of $190,000 provided by B of A
That last one says it all…doesn’t it. Also weird…I know the seller. Not a client of mine, but I met him just after he bought it. It’s a small world.
Just saw a last one FHA financed in Bellevue for $203,208 on a sale price of $207,000. While we “say” 3% down FHA, it’s really a weird calculation that is often less than 3% down, but not more. Rhonda can explain this better than I can. The lender shows as Axia Fin’l Llc
Holy Crap, Batman! I just took a peek at the condos over by Microsoft and prices are insanely DOWN! A three bedroom for under $250,000? Two bedrooms under $200,000? Pending Inspection since June 10th??? How long does it take to inspect a condo? A “Sale Fail Release” and more than a dozen cancelled and expired listings.
April closing of $225,000 now can’t sell for less than $200,000 and closing at $193,000 for similar units? Mr. 1 bedroom who closed in April for $192,000, go out and kiss the ground!
Forget looking at comps…this train is still moving fast! It wasn’t too long ago you couldn’t catch one of these out the gate at any price.
I’m not seeing any problem financing condos, as long as they comp well.
I know of a few lenders that will not go as high in LTV on condos as SFR purchases, in certain programs, but generally it is not a problem here.
On the plus side, builders are getting much more proactive about getting their condos FHA/FMA pre-approved.
The short answer to the higher than 97% LTV with FHA is that FHA allows you to finance some closing costs above the the 97% mark.
Adding to Roger’s comment, HOA’s really need to get w/it and become FHA approved if they are not all ready…especially w/the higher loan limits and since FHA will become/is the “it” mortgage.
Condos w/out FHA approval valued $600k and less in our area will have a limited buyer pool…unless they can go “spot approval”. But…why not improve your value by increasing the amount of potential buyers and go through the process to be on the FHA approved condo list?
Rhonda, there should be classes for HOA members to take regarding getting their condos FHA approved … are there any at all?
I’m not certain, but I think getting FHA approval is probably best left to an attorney.
Has anyone on RCG written about the specifics of when a loan is non-recourse in Washington, and the implications of walking way here?
Bili, I’m not sure why it would matter. 99.9% of deeds of trust are non-judicially foreclosed, so there is no deficiency judgment when they go that route. There might be different tax implications if it were also non-recource, I’m not sure, but I think even that might have changed recently.
Where you thinking about something in particular?
Kary – There is just a lot of talk about walking away on a variety of blogs, including Seattle Bubble. There isn’t a lot of good information out there regarding the risk to a homeowner’s other assets if he were to go this route. I understand that most are non-judicial now, but if the lenders were to see a rash of these, they might start making some examples of people, if they have significant assets other than the home.
Say if you lie on the loan, or if it’s a refi. Would they be able to come after your other assets to make themselves whole?
Bili, it varies by state, which is probably why you mentioned the refi. In Washington there is no difference between a purchase money (original) loan and a refinance loan. In California I believe there is a difference.
The reason most go non-judicial in Washington is that there are redemption rights from judicial, and with homestead property, also those rights include the right to live in the property. I believe those periods still run 12 months if they want the deficiency.
The biggest thing that would keep people from walking away is that many people have 80/20 loans, and if the 80 forecloses, chances are they would still owe on the 20. Back even before they made PMI deductible I was telling people that they should consider paying more and getting a single 100% loan to avoid that potential problem. (When it comes to financial planning I like to consider the worst possible scenarios.)
Finally, I hope these people are considering walking away because they can’t make payments, as opposed to because they think their value has gone down. Many/most people are upside down in their car loans, but that doesn’t make them walk away. And also I’d hope that they consult with a good bankruptcy attorney early on in the process. They can answer the types of questions they would have on asset risk. They probably should also talk to someone like Rhonda to get a feel for how it will affect their ability to get another loan at some point in the future–although that might have changed when they need to get the loan in the future.
Bili, this link also applies to the walk-away sitution:
http://seattletimes.nwsource.com/html/realestate/2004343250_harney13.html
It’s by Kenneth Harney who appears in the Sunday Seattle Times. His pieces are generally very good. Click on his name and you get a list of his commentaries/articles.
“Back even before they made PMI deductible I was telling people that they should consider paying more and getting a single 100% loan to avoid that potential problem. (When it comes to financial planning I like to consider the worst possible scenarios.)”
Excellent advice from Kary up there for those buying today with 10% down.
Why thank you Ardell. I wonder if Rhonda has access to some historical numbers from pre-August, 2007 as to what the blended rate was on an 80/20 compared to a single 100%. They payment would be higher, no doubt, but I’d think of it as a form of insurance.
You can also buy some really lousy insurance that pays off your mortgage if you die. I’ve never understood the point of tying life insurance to a mortgage, but ignoring that, you could think of the premium of a 100% loan over an 80/20 as being a form of insurance that would apply in any instance you couldn’t pay. The difference is, you wouldn’t get to keep the house–but that’s sort of true if you’re dead too! 😉
But I would have to ask (again probably Rhonda), are many people getting 80/xx loans anymore? Haven’t the seconds sort of dried up?
Bili said: “but if the lenders were to see a rash of these, they might start making some examples of people, if they have significant assets other than the home.”
Remember that the borrower, by agreeing to have the note secured by a Deed of Trust, causes the lender to give away the ability to go after other assets in return. The Deed of Trust makes it easier and faster for them to have a Trustee Sale, and it wouldn’t be fair if they took the advantages of the Trust Deed without the cost of that benefit…not collecting the shortfall from other assets.
That’s the way I learned it in RE School. Deed of Trust securing the note is a benefit to the lender…in exhange they agree to whatever they get from the Trustee sale as payment in full. That’s why people signing off on short sales and agreeing to pay the remaining debt may not be doing what was originally agreed with the lender, and should consult an attorney.
Re comment 21 Leanne asks “Rhonda, there should be classes for HOA members to take regarding getting their condos FHA approved … are there any at all?”
This is a great idea. Any long-time FHA approved lender (as compared to a newly approved firm whose staff might still be learning all this) can help a homeowners association board get started with the basic deal killers to see if the condo project would even qualify. If not, lenders are the ones who issue spot-approvals (not HUD) and each lender sets its own parameters. This is important for the condo assoc to know, in case a transaction for spot approval is turned down because another lender may say yes.
Ardell, in Washington the deed of trust holder can elect to proceed to foreclose judicially, as a mortgage, but they almost never do because of the speed factors you mention. In California they sometimes don’t have that option (purchase money transactions I believe). I think most other states are probably similar to Washington rather than California, but I’m not sure of that.
I learned that in CA as I traded in my CA for a WA 🙂
As to “other states”, I never saw a Deed of Trust used on the East Coast, but haven’t sold real estate there for over 10 years. Still, I think Trustee Sales are a West Coast thing. Not sure what happens as you move inward from the two coasts.
Seems where you have escrow closings vs. “settlements” you also have Deeds of Trust vs. traditional mortgages.
Thanks, Kary.
I now realize there were more appropriate threads for this conversation. I was actually just looking to see if someone had written something up already. Sorry Ardell.
But as long as we are on the topic, I figure I’ll clarify – I have read a lot about “walking away” nationally (including the linked Harney piece), but because it varies from state to state, I was hoping to get some Washington-specific info. Thanks.
So to summarize:
HELOCs and seconds, they can come after you, and probably will.
Firsts and Refi’s are secured solely by the house, and you are safe, unless they want to get nasty and prosecute you for fraud if you fibbed on your loan app.
Consult an attorney, so at least someone makes money on the deal!
Do I have that correct? Any other details or caveats?
Okay, just saw post 32. So you aren’t really safe at all. They can come after you for the full amount even if you have only a first?
The can but usually opt for the Trustee Sale because it’s faster and I beilieve, lower cost for them.
Kary,
Are Trustee Sales held at the same place as a Judicial Foreclosure? How can the seller or buyer know the difference? Is one called a Trustee Sale and the other a Sheriff Sale?
What about the stuff in the house? Can they take the TV and the stereo if it is owner occupied on a Trustee Sale vs. a Judical Foreclosure?
I saw a story where the lender sendt a team to break in and take everything in the house…problem was the property had been sold a few days before, and everything in the house belonged to the new owner :0
I’ve never been a part of a judicial foreclosure, but I do think the auction is held by the sheriff.
As to the personal property issue, there should be no difference between judicial and non-judicial, except that with a judicial they could try to get some sort of a pre-judgment attachment (and/or after there was a deficiency they could go after personalty). Seizing personalty is rather rare too, absent a security interest type situation (e.g. a financed sale of furniture). I only saw it twice in 20 years, and I think both times were the same attorney. I think he was trying something new.
Bili,
As to going “off topic”, given the declining prices shown in the post itself, it makes sense for someone buying today to choose the type of loan that will be best if the value is lower when you need to leave. So not necessarily off topic, and the reason I highlighted Kary’s statement about 2nds. But I also think he is right that 2nds are not being used today on 10% down loans. 90% firsts with PMI are likely what is most available.
Bili, they have the option of coming after you, unless the note itself states “non-recourse” which is mainly something you’d see in a commercial transaction.
A first position deed of trust, regardless of the type of loan, would be most likely to go non-judicially, absent special circumstances (massive fraud or maybe an uninsured earthquake loss). It is possible for a second to foreclose non-judicially too, so if you only had two loans you might try not paying the second, continuing to pay the first, and hoping that the second would foreclose. They might not, depending on the value.
Ardell, I’d think protecting yourself would be best regardless of trends. As I mentioned, I was suggesting 100% loans well before the downturn. I don’t remember the stats on the chances of being disabled for a period longer than two months, but they’re quite high. And the change of getting laid off is quite high in some professions, etc. There are lots of possible things that can send you into financial trouble, so if it happens, you want to have minimal adverse consequences. And 80/20 wouldn’t be minimal in most situations.
Are you a 100% sure of these answers, Kary? If so, maybe you could write up a post! I’m not particularly interested in past behaviors as much as what a lender COULD do. I think going forward that their habits may change, and people should be aware that it’s not as easy as just mailing in your keys.
“…and people should be aware that it’s not as easy as just mailing in your keys.”
Mailing in your keys is NEVER a good answer unless you sign, I think it’s called “a deed in lieu”. and the banks asks for the keys.
One of the worst situations I have seen (though I had the buyer so he got a great deal) is when a seller left because he couldn’t pay, and the pipes froze and burst. Taking care of the property is important. Dropping your keys off at the bank teller is not an option 🙂
The last 1st and 2nd combo loan I did was in April 08, and it was a rare find at the time.
Some banks are still advertising HELOCs (variable 2nds), but the LTV limits are fairly low.
Like Bili, I would like to see the definitive article or reference regarding WA laws and foreclosures.
I cannot think it ever makes sense to “mail in the keys”, anymore than it makes sense to stomp off mad from an employer. Better to negotiate the best exit you can manage.
I’m sure they have the option, and I’ll try to do something on it, but it’s mainly statutory stuff. There was a recent case on it too, which I’ll try to find.
Here’s something I did before on bankruptcy options:
http://blog.seattlepi.nwsource.com/realestate/archives/129859.asp
Ardell, that’s just plain dumb. If you’re going to leave a home empty for any extended period, you should turn the water off, and drain the pipes. It’s not that hard to do in most cases. It’s probably not a bad idea to shut off all non-essential circuit breakers too, though if you’re walking away, the utility will eventually disconnect the whole thing. And if you have gas, shut it off outside.
People rarely mothball houses properly. It’s so easy for something to bust, and with no one there, you’ll have a grand mess before anyone notices.
What I would want to know is why you would leave before you had to–absent some deal? Being able to stay in the house rent free, and thereby basically save rent for the future, would be very valuable. Just up and leaving prior to foreclosure wouldn’t be too wise.
leanne, I may have to write a separate post for what’s required w/regard to #21.
Rhonda, I think you should! Condo homeowners and HOA’s I think will be delighted to have some frame of reference, or even a step-by-step outline of how to get a spot FHA approval, and/or formal FHA approval.
And here’s a question, if one condo sale does get the FHA spot approval, does that make the next sale in the same complex easier to get a spot approval? Should the next unit’s buyer use the first lender who got the first approval, would that make it more likely the spot would be approved?
Most condos are going to need FHA financing, so any information that can be provided (soon) is going to be helpful!
Ardell, two questions:
1. Maybe I’m blind, or I don’t know what day it is, but aren’t we missing an episode of Sunday Night Stats?
And the real reason I wrote (since you don’t frequent P-I land) . . .
2. Are you seeing a decrease is square footage for August?
1) I do Sunday Night Stats for people to view on Monday morning…from work…Monday was a holiday, so SNS took a vacation.
2) Have to get back to you on that on in this week’s Sunday Night Stats. I’m staging a new listing and umpteen other things and won’t be doing stats again until Sunday night. But I will include the answer to that question when I do.