As of tonight, prices are showing at down 5% in January vs. the 4th quarter median price per square foot in the graph below. That would take prices back to the 2nd quarter of 2005 at $185 MPPSF (vs $195 4th quarter median). That would also be 20% under peak price of $230. ($230 minus 20% – $184)
I expect the median for the 1st quarter to be higher than that, and the median for the second quarter to be higher than the first. Not by a lot. But clearly there are more people out to buy property in the last week to ten days, than we have seen for the 6 to 8 weeks prior.
Given Friday was the end of the month, I don’t want to post the January stats yet, as some sales will be recorded by the agents during the coming week. That could affect the median pricing somewhat, but as of now, January prices are down, and fairly significantly.
Good for buyers…not so good for sellers.
For now, stick a big red dot on the chart below at $185 MPPSF. That’s where we are as of tonight for MPPSF, King County, Residential vs. Condo.
No stats in any of my posts are compiled or published by NWMLS. All are hand calculated by ARDELL (required disclosure)
Wow.
Do you have a rough idea of the volume of sales? At some point, the volume gets small enough that these median numbers may not be statistically significant…
I have more than “an idea” as to volume. I have all the numbers. But as I said in the post, I don’t like to publish them in the post or in the comments until people have a chance to post the month end closings. Given the early part of January was a holiday and the end of the month is a weekend, the number of business days is short enough…let’s wait a few days and get more accurate numbers.
I agree with you that the number of sales could have an impact, but because of that I did check the median against the pendings plus solds, which is a very large sample, and the results were the same, or at least not higher than I’ve noted, so I’m fairly comfortable that the info is reliable.
The volume numbers are REALLY low, so I don’t want to post them in the incomplete, current version. They are scary enough without understating them 🙂
I did see something quite odd as I was digging deeper to see if the people who purchased in January had significant downpayments. I saw a few loans done by Bank of American with very little down payment. Surprised me.
Does anyone know of a special program at B of A that permit buyers to have less than 10% down?
Thanks Ardell! I look forward (maybe that’s not the right term?) to the posting of the final numbers..
Most years in an up market, MPPSF can be down somewhere in the 4th quarter, but up in Jan. That’s why January is so important as it is a signal that 2009 will be a continued downward trend.
I do think the median will be higher as we move forward, merely because there will be more sales and more higher priced sales from March through June. But given where January is, I expect a big dip in the last quarter again.
As to my clients, I recommend they buy in the next sixty days or wait until the last quarter, if they are primarily price motivated, except for short sales, bank owned properties and other bargain situations. I am seeing significant bargains (much deeper than 20% from peak) in the million dollar markets. The biggest bargains are in properties that would have sold for $1.3 to $1.6 that can be had for a million or so. These are not necesarily short sales, just people who need to sell (usually vacant properties) where the owners have a lot of equity.
It’s a good time for sellers (and HOA Boards) to pay very close attention to anything they can do to improve value to help balance out a bit. One of the problems in a down market is that sellers lose the desire to do their best thinking “they are giving it away” so why should they do anything to improve the condition. That only backfires and makes matters worse.
Do foreclosure sales show up in your MPPSF and sales volumes?
Trustee Sales (most foreclosures here are those) would not show. But many, if not most of those, come on market by whomever bought them at the Trustee Sale. Sometimes it is the lender, sometimes it is an investor. If an “end user” buys a property at the Trustee Sale, then no, it would not show.
I can double check the numbers agains the tax records, which would show these, but I’d have to wait until about 2/15. I’ve done that before, but to me it seems like a duplication to count a sale at foreclosure to someone who is not going to do anything but put it on market, and then count it again a second time. What do you think?
Alan,
As example, I know of a house that was bought for just over $850,000 at a Trustee Sale by an agent who is going to put it on market at $999,950 once the 21 days have past for the people to vacate the house.
Would it be right to count both of those sales back to back and average the median price per square foot of both sales?
I agree. Two successive sales of the same property in a short time frame would bias the numbers towards that house (which might be exceptionally low or high compared to the rest of the market). That biad would become worse when volume is low.
The trustee sales price might be misleading too. A bank might set the reserve price at what is owed on the property. That isn’t necessarily connected to the market price.
It would be interresting to hear from an insider like you Ardell how the general thinking is in the agent offices. Do agents start to realize that the only road to higher volumes comes through the return of affordability or is the general idea still that the market can be “talked up”?
Ardell, where do you think the bottom is? 1Q 04 price, which was $152 MPPSF?
Thank you for your input, Alan. That is how I do it, though I do look in the tax records to try to spot some “end user” transactions that happen outside of the mls.
During the high volume days, high volume via the mls that is, investor transactions were happening inside the mls and duplicated. Flips were showing as two sales back to back in the same year. That is why I look for volume to stabilize back to 2002 levels vs. anytime after that. Actually the reason I look at 2002 is because it is prior to zero down loans being the norm…but accomplishes the same result.
Brian,
I don’t think we can see the bottom from where we are standing. It depends how many agents and sellers can get up to speed as to being a bit more creative and real at the same time. In the last recession like this (East Coast) it took about 18 months for that to happen, prices stabilized at that point and stayed flat for about two years, inched up for two more and then went full steam in most places (not Seattle Area) after that.
Technically we are AT 18 months now, from peak…but too many agents and sellers are still in denial about that, for us to make sufficient progress. The builders “got it” about four months ago…so I expect a full year of getting up to speed ahead of us.
tj,
I think you already know the answer…don’t expect the majority to have a clue…ever. Don’t expect the majority to even talk about “the market” vs. their own interests either.
Not very many are Captains who are willing to go down with the ship, as I am. Go read the SREP blog this morning over at the PI, and Leanne’s post. Your answer is there.
Brian,
The answer I am coming up with most often, at present, is there are really four markets in one.
1) Short sales and Foreclosures
2) Prices where 20% down is acceptable and equals $506,000 loan amount (roughly $630,000 or less as to sale price)
3) Prices that can accommodate FHA loans
4) Jumbo Market.
The jumbo market is and will continue to be a blood bath for at least 7 months from here. The question is will these 4 markets act as separate markets, or will what happens in one influence the others, and if so, to what degree.
The blood bath area is where 1) meets 4)
tj,
The breakdown happens when agents don’t understand that by talking up a market, they are not acting in the best interest of their buyery clients. Their seller client, yes. Their buyer clients, no.
I’ve been waiting fo 15 years for the “representing buyer” part to sink in and create change in how agents think…I stopped holding my breath about 10 years ago on that one.
Thanks Ardell, but I rather not spoil my day with visiting the SREP. I’ll take your word for it.
tj,
🙂 It may be worth the trip, as I am taking counter-point there, today. But I fully understand if you need to wait a couple of hours after having eaten. We don’t want you tossing up your breakfast.
Ardell, I more see a picture where you are putting on scuba gear while the rest of the crew is busy punching new holes in the hull.
Pricing to high and encouraging the sellers to do so with false promises of the market direction is not helpful to sellers. It’s the total opposite if prices continues to fall and not recover within years which is a very likely scenario. Not only do these agents knee-cap their own chance to make a living when volumes are dwiindling they cost their clients big bucks and emotional stress as well. Some might deserve it but many do not.
Ardell, I also cannot understand why agents continue to talk up the market when it is not in their clients best interest. I am a fairly new agent and have been shocked by the ploys my fellow agents pull to get a sale. When I started this business I said I would not follow that behavior and I plan to stick to an honest philosophy. It’s short term thinking to be a car salesmen and I’d like to be able to sleep at night. While I grow my business on hard work, ethics, and honesty, I hope others will follow by my example.
Todd,
You are too far out of area for us to have that discussion here. I see no hope for change where you are, vs. where I am. They tried it in Tenessee…that’s as close as I can get to you for resources that help you. Just do the best you can to look at yourself in the mirror at night, and walk away from any meeting or conversation that promotes otherwise. Best you can do for now.
tj,
It really is not that simple. I’m sure you know that. We must try to achieve the highest possible price when we represent the seller, vs. the buyer. There still ARE buyers who pay those prices here and there…so, as I said, it really is not simple at all. It will take time and nothing can speed things up dramatically.
BTW, my tank is running out of oxygen…so the scuba gear is not going to help me 🙂 Ce la vie!
tj,
Many are renting out their homes instead. It’s a viable alternative for some.
If renting is a viable option that’s just fine as long as it’s not to wait for a promised inflated price to return in a couple of years, it most likely will not. It’s simple not to give sellers false hopes. It’s not simple for a seller to do the math in the risk of chasing the market compared to the chance of catching one of those few bubble buyers. It’s hard to do but it’s important to be realistic and an agent that is giving false hopes is not making it any easier.
Ardell, thanks for your response.
I understand the unemployment rate in this region hasn’t affected the short sales and foreclosures market yet. But at some point, if the unemployment rate keeps going up throughout the first half of the year, as expected, there will be a lot more short sales / foreclosures. I have a property in Bellevue, and around my neighborhood, I have never seen a short sale until about 3 months ago. I talked to the owner, and he said he lost his job and is moving out of the state. I would think he isn’t the only person losing his job and put his property up for short sale. Are we going to see a big jump in SS / FC this year because of unemployment?
tj,
I gave my clients the choice to bite the bullet last year OR rent. I advised them that “waiting and renting” would not likely produce a higher price for at LEAST 3-5 years. It depends when they bought, so the advice per client was slightly different. None had bought exactly AT peak. Back to peak, IF EVER, and I did not give false home as to it coming back to peak, would be at minimum 7-10 years out. My crystal ball has a 10 year expiration time 🙂
I think that was reasonable advice. The choice then is theirs.
Do you think that was “reasonable advice” in your opinion? In addition I told at least 70% of my clients not to buy at all in 2008 and parts of 2007. Not sure about late 2006. A few clients paid me a reduced commission to not provide advices, and to only handle the “process”. So all clients are not treated equally, depending on the service they request and the amount they pay for that service.
If someone wants to hire me to simply do what they tell me to do, at a reduced price, that is their choice also.
Brian,
You are going to see a jump in SS/FC anyway you slice it. Depends on where “you” are looking. Some happen quietly in the shadows 🙂 Put all of the people who are in the mortgage, real estate and building industry and all related services together, and you will have more foreclosures without the “unemployment” statistics. The income of many people is not based on employment/unemployment statistics. Independent contractors, commission incomes, small businesses, etc…even large businesses serving the real estate industry.
We are nowhere near the end of the road as to short sales and foreclosures.
Ardell, I think you gave them decent advice if the wording was more like “likely” than “will”. If you ask me though I don’t think renting with a loss in today’s market will ever give you a positive return. Better to unload at whatever price you can get and put your money into safer, cheaper and easier investments with positive returns even if they are small.
Thank you for posting these stats, Ardell. If sellers and buyers knew this information, the market would be much more efficient and people would have much more realistic expectations. As it is, most are flying blind, and sellers especially are pricing their homes too high. Then they get disappointed when they get no offers and end up selling at a far lower price than they’d expected.
BTW, it’s amazing how closely the changes in your stats match the changes in the Zestimate for my condo! (Thanks to patiently buying a short sale, I’m fortunately still on dry land, despite the plunging Zestimate.)
Hi Sampai,
I hope you are home looking at this awesome sunset tonight 🙂
It was much harder when you started out to buy property, than it is today. There is nothing easy about this market, even when you have a willing buyer and seller.
The big difference, no matter what you do for a living, is you really have to work hard and harder right now to accomplish most anything. The easy days are over, in most every industry, as far as I can tell.
A lot of the problems in today’s market are related to all of the people who got into it for easy money, who honestly don’t know which way to turn right now. They want those days back like a kid wants to live at Disneyland every day.
tj,
I speak in East Coast vernacular, so I probably said if you think waiting until 2009 vs. 2008 is going to get you a better price, there’s slim to no chance of that happening, and I wouldn’t bet on it 🙂
I don’t disagree with you, and clearly have said it’s a better time to sell than to buy from 7/07 until 9/08, but I have to be more careful than you. Sell vs. rent is self-serving in my case, so I have to be very careful and challenge myself on that. Where I have a potential conflict of interest, I have to at least disclose that “sell” vs. “rent” comes with a grain of salt. Even I have to question myself as to how much my personal commission issues influence my judgment on that.
The advice was not the same for all people either. Their personal situation has a major impact on that advice, of course. You have the advantage of being able to generalize. My advice must be geared to each particular client’s set of circumstances. I don’t have one size fits all answers…ever.
Ardell:
Not that you aren’t busy enough….
I came across this article at Calculated Risk (another sidebar…why doesn’t RCG appear on the blog roll there? Seems like a good fit).
http://tinyurl.com/HO-rates
The article address national home vacancy and home ownership rates, both showing significant declines, and pointing to an excess inventory problem.
There was no data for local areas.
Would you know what the historical and present Seattle MSA vacancy and home ownership rates are?
Hi Roger,
That is not a topic I can readily converse on. I’d be stabbing in the dark on that one. Plus, our change didn’t start until late 2007, so I would expect our numbers to be moving in the direction of those charts, but not as far advanced yet as the national statistics. If you look at the 07 vs. 08 breakdown in the link for West Coast, there is no change…I doubt that would be the case in our area vs. say…San Diego.
Answer me this, Roger. Without FHA, what are the odds today of someone getting a mortgage with 10% down on a house priced at $650,000? Seems to me that no one is focusing on the real problems facing homebuyers today. It doesn’t help to have great interest rates, if you need 20% to buy homes priced at $630,000 or less and 30% down to buy anything above that price range.
The chatter is always about the disappearance of zero down mortgages, but that only takes us back to late 2003, for the most part. If we don’t see a come back of 5% and 10% down conventional in a big way, a recovery will be nowhere in sight for many of our local areas with high median prices.
The south end of King County, Pierce County and parts of Snohomish may fare as well as the Country in the long term, but those areas with high prices will take a huge beating for a long time without an option of less than 20% down.
Ardell, would you lend someone $620k of your own money to buy a home today in King County with a $30k deposit? Would you lend someone else’s money that count on that the deposit will be suffiicent as a colleteral to cover the costs of re-possesion and re-sell the home? I wouldn’t so i don’t blame the lenders at all. I applaud them for limiting their risks, it should have happened a long time ago but better late than never.
Ardell:
No problemo, I wasn’t sure if you had a stats source for vacancy rate. My assumption is that it is not as bad as national averages, due to restrictive zoning here.
I agree that true Jumbo financing (above $506K) is not good. Until the US Treasury starts buying those, the rates will be bad (certainly higher than 6%).
You ask about the odds of an approval: I could not give you that, as I would have to have a pool of data (more loans of this type) and more specific info.
There are two primary approval issues.
1. Mortgage insurance, or 2nd loan (for the amount over 80%).
I do not know of a lender offering more than 85% CLTV, so 2nd mortgages are probably out. MGIC says it will provide mortgage insurance at 90% on a Jumbo for a monthly payment of $424.13 ($585K x .0087/12) in King County. They may decline to provide MI, and are most likely getting more strict.
2. A DU approval. I cannot run it without an actual borrower. However, guidelines say that such parameters are possible.
Of course, it has to make it past a real underwriter too.
tj,
I look at the SREP blog and see Leanne looking for a recovery. My point is that 5% and 10% conventional was available back in the 90s.
Is the Country just giving “lip service” to hopes for a recovery? If they not only cut out zero down…but everything in between as well, then stop talking about a recovery…it ain’t gonna happen until we get to 80s pricing without 10% down mortgages and 5% as well.
I don’t care what they do…I just can’t stand all the talk about bottom and recovery, while everyone ignores the true missing link in this market, and it ain’t all about no “zero down” loans.
Any chance you will be at the meetup tonight tj? Or will you be “incognito” to not reveal your tj name? 🙂 I have to post a reminder.
Roger,
“vacancy rate” is more the lingo of the rental markets…I don’t track rentals or do much in the area of rentals.
Roger,
I’m tracking the financing of actual closings in 2009. The only very low LTVs I am seeing are through Bank of America, for some reason. Do you know why that is? I saw a $740,000 loan on an $800,000 sale price in Jan 09. Surprised the heck out of me. Yet, across the board, almost no other closings less than 20% down or more, except B of A.
Ardell, you scared me when you said it would take 7-10 years to get back to peak. Unlike all your clients, I pretty much bought my property at the top: I bought it on July 24, 2007. It has lost about 20% of its value since I bought it, and the trend isn’t slowing down either. At this point, my 20% down payment is gone and I have no equity on this house. I had to move to Chicago after losing my job last year with Bank of America. I don’t know if I could hold it for 7-10 years, but selling it now isn’t an option either, since I will get nothing back and probably have to pay the agents out of my own pocket. The only reason I am keeping it is because NOT keeping it will destroy my credit. It’s very tough.
Ardell, I have nothing to gain in not being anonymous and everything to loose. The internet scares me in terms of the potential to link information about people and make it available to everyone, including maniacs and predators. I have a beautiful family who’s protection and safety trumps everything. Not that I think anyone of the RCG regulars are a risk but this is a blog that anyone can read. If I had a business that could benefit from exposure it would of course be a dfifferent story, so no I will have to decline your kind invitation.
re #38, I think you meant high LTVs.
How do you track financing details on closings? That would be interesting data.
BOA no longer offers wholesale lending, so not much I could tell you there.
I agree that vacancy rate is normally only tracked w/ rentals, but I think non-rental vacancy rate it is a very good indicator of housing supply.
I think the US Govt has got to come around to restoring down payment assistance, to stop further falling home prices (as long as that remains their goal).
And some modest support for the Jumbo market (not much popular appeal for that one, though).
Low interest rates alone are not going to do it.
Brian,
Let me give you the benefit of my historical perspective and why I say what I say and think what I think.
1) Peak market when I started in RE in New Jersey was in 1989. Pretty much the same buying frenzy in 1987 through 1989 that you saw here from early 2005 through July of 2007. Pretty much the exact same type of run-up in prices.
2) Pretty much the same faucet turned off overnight one day in 1989 that you saw here in mid 2007. We went into a cycle where only those who HAD to sell, were selling. Again…pretty much what you are seeing here and now. Many rented instead of selling, stayed instead of selling, etc…
3) Prices did not get back to 1989 levels until 1995 to 1998, depending on the area and house…and did not proceed up until 1998. So the down, flat, next up whole cycle lasted from 1989 to 1998. That would take us to 2016 if we follow the same pattern, and so far we are following the same pattern and then some as to market influences.
4) Add my belief from 40 years of market experience in both of my careers, that “we will always achieve that which has been previously achieved”, it’s just a matter of when. Not sure which economist thinking I derive that from. It clearly isn’t my original idea. Maybe I learned it at Wharton in the 80s…don’t know. But I believe it will happen, and my best hope is very far out for those who bought at PEAK.
5) Let’s talk about PEAK for a minute. Not everyone who bought at a given time overpaid by the same rate. If you were in one of those bid up scenarios with many buyers that went WAY over asking price, then you are in worse shape than if you simply bought something in July of 2007. In that regard, some who bought in the summer of 2006 with a bid up to thousands over asking price, may be in worse shape than you are. If you bought in July of 2007 AND you were in a multiple bid war…not much I can say to make you feel better about that today.
6) The principle I absolutely adhere to, and I attribute to “early” Greenspan, is 7 year up, 3-5 down. Clearly the rest of the Country started up in 1998 and tilted down in 2005. Exactly as Greenspan predicted AND he reminded us of in 2004. So not sure where the surprise comes from. My personal advices were a bit harder, given Seattle Area did not have the same run-up as the rest of the Country from 1998 to 2005 and we were moving conversely to the rest of the Country from 2005 to mid 2007.
7) The influences of mid 2007 in the Mortgage Meltdown affected everyone and everywhere, so trying to sort Seattle Area from the rest of the Country on that one is of no use whatsoever. What benefits the rest of the Country, also benefits us. So Seattle IS still special in that we didn’t start down in 2005, the course of the recovery will be the same nationwide. So by the end of it all, we could experience a better overall net effect, but ONLY in the moderate price ranges.
So the only question left is…what is the price range of your house. If it’s $1.2M…it will be a blood bath. If it’s $550,000…not as bad. If you are renting, then be prepared to do that for at least 5 years. If you can’t or don’t want to hold out for 5 years, then you have to figure out how to sell it at less than 20% off peak. If you bought new construction…not likely going to happen. If you bought ugly…you can do it with aesthetic improvements to the tune of 10% up.
If you bought new construction and in a price range of over $800,000…hmmmm, not much hope on that one. Remember new depreciates at a higher rate, just like a car. That gives you a double whammy of old(er) everything and market depreciation.
If you tell me generally what you bought and price and whether it was full asking price, over asking price…I can pinpoint that better.
Anyone thinking there will be an overall recovery within a couple of years…well, I’m not in that camp in my service area, if anywhere. There would have to be a HUGE change in financing. I think the government will help move the lower end, and have no pity for the higher end.
tj,
I absolutely agree with people who comment being anonymous. It gives you the freedom to ask any question. I LOVE that. So I have no axe to grind as to your being anonymous.
I just wonder if it is of any value to have MeetUps like the one tonight, if no one of importance (like you) can show up, due to preservation of anonymity. I have met several of our readers who I know by moniker, and preserve their anonymity on blog. At a MeetUp that would be impossible, next to impossible.
If the only people who show up tonight are “us”, we’ll still have a good time 🙂
Ardell, there is no pity for “the higher end” and it’s truly unfortunate…they are families too…just because their house cost more or their mortgage is not conventional, doesn’t mean they’re not Americans…they deserve the same support anyone else would receive.
I know of several families who are going through tough times and are losing their million dollar homes. Their story is similar to those who have average homes…they probably lost more since most would have had down payments and many subprime ones were zero down.
It’s tough everywhere.
Roger,
I can see every closing and I can see the mortgage amount(s) of every closing. I can’t search in bulk by LTV, and so have to view them one at a time…very tedious. Consequently I can only do that by Zip Code and only do that “in my service area”.
I do that for the benefit of giving good client advices as to the range of liklihood and possiblities, both buyer clients and seller clients.
I disagree with you on the excess over $506,000, as within the range of HELOC, those rates, which are tied to prime, are actually LOWER than the conforming fixed rate. Best kept secret.
There are too many secrets as to financing right now, both as to good and bad, but I don’t have enough research in 2009 to do a post on that yet…I will…but not yet. I don’t like to post on financing as I am telling you what IS vs. perception, with only hindsight as my indicator. Of great value, yes, but I can only answer What and not Why. Why is more important to me…so I’m getting closer to a broad market perspective, but not there yet.
The problem is that what one person can do, the next can’t. I can see a $740,000 loan on an $800,000, but the credentials of THAT specific borrower come into play. Perhaps he had ten million dollars in that bank, as example. There is no one size fits all advice as to financing right now in the high end…and that is hurting the market in a HUGE way. In many cases it is not as bad as some think, in others it is worse than some think. Still working on it.
Rhonda,
Agree, but the Country as a whole, the “Obama fixes” will focus on lower price ranges than we see here as the norm. That will help Kent and Tacoma and Fife and Orting and Monroe and Bothell, etc…in the long run. Kirkland high end is a bloodbath and unless the local governments care enough to do something, they will have no relief.
Local governments don’t pay attention to such things…and that is a crying shame for their constituents.
Brian,
I missed a piece of what happened to save the “peak buyers” of 1990 through 1993.
No one moved without a buyout in their transfer/new job hire package. The person who hired them, causing them to move out of area at a loss on home value, compensated for the loss as “a signing bonus”.
That won’t help you, but expect to see that as a come back when and if companies need to attract out of area talent. Obviously doesn’t happen in all price ranges, but that will be the ticket out for those with higher priced homes. We ARE seeing some of that now. Go back to my Zillow post of last week or so for CO (Corporate Owned). Those are the people who transferred with buyout packages. Expect to see more of them. At present…there are very few, but they are there and were not needed at all during the up market.
It took a couple of years in the 89 to 91 cycle for buyouts to hit big in 92 or so. That’s where we are now in the cycle.
Ardell: thanks for your great advice.
From what you told me, I am not in as bad of a shape as I thought. No, I didn’t pay over the top over multiple bidders. The house was sold for 500K in the Factoria area in Bellevue. It was an 1955 house, and I believe the house itself is only worth 160K but the land value is 300K based on the info I got from the county. I am renting it out and the rent probably covers 2/3 of the mortgage I am paying now. So it’s not a huge burden for me financially. But 7 – 10 years is a long time. Being that I work in the financial industry, I could lose my job in these 7 years. I am OK for now, but I am always worry about the future. Of course I am going to keep it status quo for the time being. But what if my company annouces a new round of layoff tomorrow, and I am one of the casualties? If I lose my job and have to lose my house, at least I don’t want to have my credit ruined by not paying my mortgage and be put on the SS / FC process. The unemployment benefits just don’t cover the mortgage.
That’s why I fear the SS / FC number this year will skyrocket and depress the house values more. It’s very tough out there.
Ardell: I did get a signing bonus when I moved to Chicago, and they covered my moving expense. But the signing bonus no way would cover my losses in my house value. And with the high inventory of the houses that were on the market last year, there was no way that my company would wait for me for 8, 9, 10 months before I could sell my house to move to my new job. No, the signing bonus was never meant to compensate for the loss of my home value. I think the transfer / new hire program today is very different than what it was 3, 4 years ago. 3, 4 years ago, the house values were in the up trend, so when you sell your house to move to a new area, your sale in most cases will net a profit, not a loss. Now, you not only will sell at a loss, but it will take you a lot longer time to sell your house. I think a lot of people are just like me, not bother to put the house up for sale, but just rent it out and only sell it when the market rebounds.
RE: Vacancy Rates:
The census bureau publishes these estimates here:
http://www.census.gov/hhes/www/housing/hvs/hvs.html
Homeowner vacancies historically sit around 1.7% nationally and 1.0% for the Seattle MSA.
We’ve seen about a 1% bump in both sets of rates. 2007 saw Seattle jump to 1.8, and my guess is it’s now over 2, though the MSA-specific rates for 2008 aren’t yet available. National rates are now at 2.9%.
Rental vacancy rates are much more volatile. Nationally they have been trending up from 9% to above 10%. Seattle’s rental vacancy declined down to around 4-5% over the last few years as we saw condo conversions and houses that used to be rentals plowed into the housing bubble for the owners to PROFIT! That’s turned backwards in a big way recently, and the latest estimates show rental vacancy spiking upwards.
Homeownership rates nationally have reverted back to the level of 2000, wiping Bush’s ownership society into the gutter, and bankrupting millions in the process. We’ll probably eventually settle in around the 1997 level (that’s when I think the bubble began) of around 65-66%, after peaking close to 70%.
Locally, only about half of Seattlites own a home, though the Seattle MSA hovers around 60-65%, with our peak back in 1999 around 67%. We were down to about 62% in 2007, and probably even lower now. That tells me that our bubble was fueled primarily by specuvestors and second-home buyers.
Leanne’s post scares the bejesuz out of me. It scares me much more than all the gloomy stats and projections I’ve read over the last few years. Her fear is palpable, as she lashes out at bloggers, MSM and the Congress to “just do something!”
Her post is the single biggest thing that makes me ponder rethinking buying a house right now.
Contrary to your faith in Greenspan, Ardell, I am extremely confident we will never, ever see prices this high again (adjusting for inflation of course). July of 2007 was the highest houses, on average, will ever be in Seattle or in most of the United States. Sure, we will see houses eventually again increase in price, but it will never come close to the high-water mark we saw during the largest speculative bubble in America’s history.
I’m still buying a house.
Bili, if it’s not too personal to share, may I ask what’s made you get into the market? I wish you luck, BTW–I’ll bet you’ll be able to drive a hard bargain and get a good price.
About the jumbo market taking it on the chin, and Rhonda’s comment at #44 about folks losing their million dollar homes–it’s hard not to be of two minds about that, you know? Of course it’s terrible that peoples’ lives are being disrupted and it’s hard not to feel pity about that. On the other hand, there have always been *much* less pricy options and presumably someone with the financial profile to get into a million-dollar home could have been in a much steadier footing with a less expensive house in a less expensive neighborhood. As someone who bought “below her means” and made compromises specifically so that my family wouldn’t be overextended and thereby endangered, well…makes it hard for me to work up too much sympathy for people presumably smart enough to make a lot of money who didn’t do sufficient contingency planning.
Brian,
The key will be for it to look better than when you bought it. i.e. hardwood floor instead of carpet in some places. If you can sock some money away for improvements like this, that may be your best bet to recapturing some of your down money.
Don’t do the improvements while there are tenants in it though. Do them as new just before you sell it.
Brian #49,
I don’t think in your industry buyouts are ever common, except at very high levels. No company was offering them in the up market…they didn’t need to. With layoffs more popular than hirings, we may not see them make a big come back, except for people with unique talents. But I am seeing a few here and there and expect to see more as we go forward.
“Leanne’s post scares the bejesuz out of me.”
LOL, biliruben. That is so funny. The reality is that agents think telling the truth is depressing and dragging down the market, when in fact screaming for a recovery that doesn’t happen is much worse 🙂
“I am extremely confident we will never, ever see prices this high again…”
Yeah, well I said that about the Dow at 3,000 🙂 Truth is, the “where it has been it will someday surpass” has been historically correct. Though I do understand from your perspective it is really not relevant. Most people will have to move before that happens, so it’s of little or no consolation.
I’ve heard it all, and NEVER, EVER is never true 🙂 “Rates will NEVER be this low again!” I heard at 7%. I didn’t believe it, but my ex-husband did. I laughed.
Prices will, in fact, get back to where they once were for most of the market. Not all, but most. I will be too old by then, and maybe dead, to say I told you so. So I’ll take that opportunity now.
For the record, I attribute the 7 up 3-5 down to Greenspan, not the “where it once was it will be again”. That is not from Greenspan, as far as I can recall. I could just have learned it back in the investment business along with “hanging in the eights”. The stock market getting in the 6s will be the crisis mode sign for me. I get nervous when it stays like this “peeking into the 7s”.
Hey, thanks biliruben!~
Ardell, there are always going to be exceptions made in lending for the “special” buyer….Friends of Mozillo, those who really don’t need the money, where special favors and privileges are exchanged, etc.
I am talking just plain rate sheet pricing. The kind that Joe “a bit above average” gets. Nothing I’m seeing in Jumbo land (fixed rate) comes close to 5%, at 90% LTV.
As far as HELOC type loans in 1st position, yes they can be at remarkably low rates, but the rates are adjustable, and the LTV’s do not generally go as high as 90% (there’s no doubt an exception, somewhere, for someone). Most folks do not have the risk tolerance, nor the financial profile to responsibly accept the risk of a $5,000 payment doubling, or tripling.
I agree Roger, but I saw a few, all B of A, among the meager amount of closings. I’ll revisit that next week in Sunday Night Stats in some detail.
Here’s what I’m seeing, Roger, as to Helocs, etc…
$417,000 roughly 5% quoted at 1 point
$506,000 roughly at 5 3/8ths quoted at 1 point
On a loan over $506,000, the balance in a heloc (within heloc range limits as to loan amount) priced at roughly 4.5%
I expected the amount over $506,000 rate to much higher, but it looks like maybe Prime plus 1 with Prime at 3.5%.
Does that sound ballpark-right to you?
Hey Angie –
Just family reasons. Losing a bit (or more than a bit) of paper equity in a house we are planning on staying in for a decade or two is out-weighed by the pain and disruption of moving over and over again. There are other, more specific reasons, but given our downpayment, renting would cost just about as much as owning for us right now. There just aren’t enough reasons to not buy. losing 100K on paper, which I fully expect to do, is worth not living a transitory lifestyle for the next year or two.
If it were a game, and I just had to pick the right time to buy based on where I think the market is going, I’d probably pick 2010-11. It’s not, though. If we don’t buy, it might mean 3 moves in the next 3 years, where we have already had 3 moves in the last 4. With a wee one, that is brutal.
Our happiness over the next couple years is worth the 100K.
Ardell:
One of the greatest losses in the wholesale/correspondent business is the extreme lack of 2nd mortgage availability.
Of the few I looked at:
1. Has a max loan amount of $500K, max LTV of 80%
2. Has a max loan amount of $350K, max LTV of 75%,
3. Has a max loan amount of $1.5K, max LTV of 85%,
The rates sound about right.
Angie, I give huge kudos (not sure my kudos are worth much!) to folks who live within their means…those who made wise decisions based on what mortgage (or rent) payments made fiscal sense rather than how much home can I buy if we stretch ourselves silly and over-state our income.
I’m hoping that out of our current financial crisis, we (as Americans) return to being more savers and living within our means.
Bili, I totally get it. Kids are amazingly resilient and can go with the flow in all kinds of changes–but stability is also a very very good thing. Not only for kids but for parents. Best of luck, and please do let the peanut gallery know how it turns out.
Rhonda, who knows how it’s all going to shake out, you know? I have a lot of sympathy for people who saw affordability slipping away, who tried to “get on the elevator” in those heady years, and who are struggling now in the aftermath. I lived in that frame of mind for many years (shortly before we were married, my soon-to-be-husband and I went to an open house for a shotgun shack in Ballard for the breathtaking, but still bottom-end, price of $105K…too rich for blood at the time) and I know those challenges/frustrations well. But a few tax brackets up…? Aren’t those people aware of Warren Buffett’s PR schpiel about that same old little house in Omaha???