Just heard the news that my friend, David Losh, passed away. I’m still a bit shook up about it.
You will be missed, David. You will be missed.
A Recitation of the Rosary will be Tuesday, October 22nd at 7 PM
Hoffner Fisher and Harvey Chapel
508 N. 36th St, Seattle
Mass of Christian Burial will be Wednesday, October 23rd at 4 PM at Christ the King Catholic Church
405 N. 117th St., Seattle, with a reception to follow in the parish hall.
Home prices are beginning to trail down toward year end with an abrupt 5% decline in the last 30 days.
While we are still at 12% increase for the year following the downturn, this is more than merely seasonal change, in my opinion. Every year has a “Spring Bump” that usually does not sustain at peak levels past June-July. A downturn in August is always expected and the market continuing flat to down to year end is also expected.
What’s different this time?
1) We are coming off a bubble created by home buyers vs home sellers. In 2012 it was a Seller’s Market where home prices were primarily driven by sellers asking more for their homes and the buyers complying with the sellers’ desire. 2013 increases were largely driven by buyers aggressively competing for the same homes. The buyers giveth and the buyers taketh away will be the message of 2013 from here to year end.
2) Mortgage interest rates increased by a full 1% immediately prior to this “seasonal” downtown. How much of this decrease is seasonal and how much is interest rate driven? Difficult to separate that out, but if you go back to reason 1 above we can see the market deflating the bubble created by those buyers who were racing to beat the interest rate increase. The race is over. Yes there are some buyers who are still trying to beat the next interest rate increase, but nowhere near the aggressive level of buying while mortgage rates were still under 4%.
3) The stock markets are dipping at the same time. This is not a small factor. Seattle Area Home Prices often if not always emulate the stock markets. When the stock market is going up and there is a slight downturn in home prices created primarily by seasonal factors..well than you can see it’s simply a seasonal correction. But when we are at the same time seeing stories like Dow Jones – Is the Bull Market Over? and S & P Corrective Phase Could Last Until Early October, we know that the Spring Bump correction phase will likely last until every drop of seasonal push is drained, which is usually October 15th.
We can expect a one week or two week robust period in September, because we always have one for usually no good reason. But the season is over…and then some. 2012 was a good year. 2013 was a year that was too good for sellers and not fun for buyers. 2014 should look more like 2012 than 2013.
Don’t expect anything but down from here to year end.
Removing the Must Appraise Clause.
BEFORE you as a buyer of a home agree to “remove the must appraise clause” you need to know that means more cash from you the buyer of an undetermined amount. You also need to know the Finance Contingency does not usually cover not having enough Cash to Close.
Cash bridges the gap between Appraised Value and Sold Price in a Housing Recovery. 2012 not so much. Early 2013 we are seeing “remove must appraise clause” as a condition of acceptance in multiple offers more so than last year. I did see a few last year. Mostly flip houses with a huge change in price from “bought at foreclosure” to 3 months later “sold as flipped house” at almost twice the price as the flipper just paid for it.
This year removing the “must appraise clause” in most all upwardly mobile neighborhoods has become a given.
Sellers are not necessarily choosing highest offer in multiple offers, unless that highest offer also is all cash with no must appraise clause OR the buyer is willing to fund the appreciation with cash.
Because this is so very common right now, and will continue to be so through at least this season into August, people need to know what that means.
LENDERS are not supposed to Fund a Housing Recovery.
THAT is WHY we had a Real Estate “Bubble”.
Lenders bridging the gap between Appraised Value based on “comps” and what a buyer is willing to pay for a house, is a lot of stale air…a bubble. Appreciation fueled by cash from the home buyer is a more stable and historically common form of funding home price appreciation.
Agents get mad when a house doesn’t appraise. That’s just crazy thinking. Let’s take a look at an example as to why that is. Let’s assume the homes are equal in all ways in the example below.
Asking Price – $500,000.00
Last home sold in neighborhood – $485,000
House before that sold – $470,000
House before that sold – $460,000
$500,000 Asking Price house goes into multiple offers and sells at $515,000.
Buyer is putting 20% down. 20% down of WHAT? Buyer thinks he is putting down 20% down of the Purchase Price. BUT the lender says they will fund 80% of Appraised Value or Purchase Price…whichever is LESS.
Very important to understand that your 20% down plus The Lender’s 80% does not equal 100% of the Purchase Price when the market is rising.
If the house appraises at $475,000 in the example above, and the Purchase Price is $515,000, then the lender will loan 80% of $475,000 or $380,000. The buyer’s 20% of the purchase price is $103,000.
$380,000 80% of Appraised Value + $103,000 20% of Purchase Price equals $483,000 and not $515,000. The GAP is $32,000. That means the buyer has to bring $135,000 downpayment to the table vs $103,000. He needs to bring 20% of the purchase price PLUS the difference between 80% of appraised value and his 20% of Purchase Price.
That $$$ difference between what the buyer intended to pay as “20% down of $515,000” and the 80% of Appraised Value that the Lender is willing to lend IS “The Housing Recovery”
That “Housing Recovery” needs to be fueled with an additional cash infusion by the buyer of the home, NOT additional loaned funds as part of the mortgage.
People are asking if this is another “Housing Bubble”. All Market Appreciation does not create a “bubble”. Appreciation fueled by lenders is a bubble. Appreciation fueled with hard cash dollars from the buyer is market appreciation. BOTH can be lost when the market goes down.
No one can tell you what prices will be in 5 years or 10 years or 15 years when it is time for you to move on and sell your house. The only issue is IF the market at the time you sell creates a negative result between what you paid and what you sell for, is that lost money your money or the bank’s money?
In the future, based on cash fueling the recovery vs lenders fueling the recovery, the negative result will not create short sales and foreclosures to the same degree that it did after “The Bubble Years”.
Appraisers can take the comps and deduct from the result if they want to cover the lenders better. They can STICK WITH the actual comps. They can be instructed to add x% for a rising market. In the Bubble Years they added x% for a rising market PER HOUSE vs PER YEAR! That is where they went terribly wrong. Instead of adding 5% for a year…they added 5% to every house! Consequently 6 sales in 4 months created appreciation of 6 times 5% or 30% increase in 4 months. THAT was “The Bubble”.
Yes buyers are ticked off when they have to pay more than Appraised Value with cash infusion. BUT historically that is the ONLY way for a market to appreciate…without creating a new Housing Bubble.
Lenders should not fund appreciation of the Housing Market. Lenders should not stretch to “The Sky’s the Limit” appraisals and loans. Hopefully that is a lesson learned in The Bubble Years that will not repeat itself moving forward.
BEFORE in the heat of multiple offers you say YES! to removing the must appraise clause or Bridging the GAP between 80% of Appraised Value and your 20% down, KNOW what that means. It means you need more money…or be willing to lose your Earnest Money if you don’t have enough to bridge that gap.
How much more money do you need? No one knows…until the appraisal comes in. You DON’T know that number on the day you decide to win in multiple offers, by pulling that “must appraise” clause.
BUYER BEWARE time.
Gone are the days when you can advertise “must see!” to sell your home, as if people have to come into your house as the first step in the home buying process. You can scream that from the roof top all you want, but unless you have a location that would cause anyone and everyone to come to and into your home, it’s all about the photos.
So where do your start? You start with The Three Basics – Paint -Floorings – Clean
Once you have your walls and floors together (see post linked above) you move to taking your “test photos”. Once you know which angles will end up in the 15 Photo Display, then you stage those “photo areas”. because it’s all about the 15 mls photos!
The cost to stage the above townhome was $2,500 BUT I staged it myself within the cost of Listing the home. I used that $2,500 as follows. $1,500 to refinish those now gleaming, satin finish hardwood floors on the main floor and $1,000 to have the place painted. We also put in all new carpet and the $1,000 to paint was for the main pro painter and did not include the prep-tape-helper. I use a painter who let’s me bring the “helper” myself, to save on cost.
Of course there are whole HGTV shows devoted to ALL of the steps that lead to FIFTEEN GREAT MLS PHOTOS.
I just try to give you a snapshot of the process…one blog post at a time. Both of the above homes are recent. The top one closed in December of 2012. The lower photos are of a Pending townhome over in The U-District. The top one sold in 1 day, the lower one in 2 days. The top one took SEVEN WEEKS to get ready for market. The lower one about THREE WEEKS.
So “SOLD IN ONE DAY” took from September 7th to October 25, 2013 to get it ready to list…and sold on October 26th as to Offer and Acceptance. The lower one “SOLD IN TWO DAYS” took from January 6, 2013 to Jan. 26 to get it ready to list…and sold on Jan. 28 as to Offer and Acceptance.
A few recent real life examples…to give you an idea of what it takes to get your house from Day One to SOLD.
There was so much fear mongering going on about “The Fiscal Cliff” it was starting to feel like being tied to a chair and being forced to watch The Shower Scene from Psycho. The stock market rallied up in response to it just being OVER WITH! But should we just be happy that it’s over with? Did the final agreement impact homeowners?
Doug Tingvall of RE-LAW sent me a quick synopsis of how the deal impacts homeowners “for now”. I asked him to post it publicly as I think it might be of interest to homeowners and homebuyers. I don’t see much in there that is alarming or even much of a change, but maybe I’m missing something. Read Doug Tingvall’s full synopsis HERE
While Doug’s Article does not seem to have a place to ask questions or post a comment, if you have questions you can post them here and I will see if Doug has some time to answer them for you.
The summary is worth a quick read and many thanks to Doug Tingvall for sending it over to us.
I like this first picture of a TV placed in a main floor or lower level bedroom because honestly, here in Seattle, this is often the case. In fact this particular photo reminds me of the house I sold for Dustin Luther, the owner of Rain City Guide, a few years back.
The light streaming in from the left reminds me of the french doors he had leading out to the deck and yard. I sold a similar home with french doors out from the bedroom on the main level over in Phinney back in 2005 or so.
If you are buying a reasonably priced home in Seattle vs on The Eastside, the above photo likely represents what “a family room” will look like, given homes built in the early 1900’s didn’t have real “Family Rooms” or even Formal Living Rooms and Formal Dining Rooms to a large extent.
The next photo cracks me up as it reminds of the time when high ceilings, loads of windows and lots of natural light was first added to “The Family Room” and it was renamed “The GREAT Room”. I remember John Orobono saying to me, “Ardell, we love our new house, but I have to hide in the closet with a TV to watch the football game, because there is too much glare on the TV during the daytime”.
Of course they make “low or no glare” TV screens now to assist with this “problem”.
Over the Thanksgiving Holiday I was playing Just Dance 4 at my daughter Tina’s. This lower placement in the photo below is likely more common for today’s family that plays games on their TV and watches “TV” on their laptops. 🙂
The above picture reminds me of my friend Kevin Tomlinson of South Beach Florida as it has that monochrome austerity with a bold splash of color that he favors as to Interior Design.
So back to the original question “Where Does the TV Go?” Well…builders…NOT over the fireplace!
I was running some stats the other day for Kirkland, Bellevue and Redmond home prices and the graph below came out a bit oddly, as if all prices are trending to 200 to 207 per square foot. I say “oddly” because some went UP to there while others went DOWN to there.
That is not to say that median home price within these various Elementary School boundaries of Rockwell, Mann, Einstein, Alcott and Audubon are all running together. In fact there is quite a variance as shown in the graph below.
As noted in my original post the numbers are graphed from low to high in this manner vs to start from zero…which would show the flatter market consequence, would not permit you to see the actual numbers one on top of the other, so I caused them to spread more dramatically only for the ease of reading the underlying data detail.
Rockwell Elementary…very consistent as would be expected given its “close in” location to Redmond Town Center and the general lack of new construction of single family homes within its borders.
Mann elementary still one of the best “bargain” areas relatively speaking and when lucky enough to find a good house there like the one my clients purchased between 2 and 3 years ago, within the timeframe of the charts, Mann continues to be one of the best places to get a home at a fair price that is not too far out.
Einstein…well the fluctuation there is greater for a few reasons some of which have to do with the school and some of which has to do with the decline from “new” to “used” and the turnover of homes too quickly back 2 or 3 years ago causing the dip. But looks like it is recovering nicely from all that.
Alcott and Audubon tell the story of people being willing to go a bit further out to get a newerish house, as in not built in the 60s or 70s, with a large yard at a reasonable price. Clearly 98053 and Sammamish have both been the surprise change in market conditions in 2012. Even though “close in” is still preferred, the willingness to go out further for good house and great school like this one my client’s purchased this year with more land than being closer in was definitely a game changer in 2012 for Redmond.
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Required Disclosure – Stats in the post and the charts and graphs herein are not compiled, verified or published by The Northwest Multiple Listing Service.
On a cumulative and median basis, prices are trending slightly up in the 3% to 6% range. But that is not to suggest that buyers need to panic, or sellers should be getting overly optimistic, as to potential sold prices.
A Cautionary Tale that Multiple Offers can lead to Discrimination in Housing…somewhat inadvertently.
I had a young couple ask me if they should submit a “love letter” to the owners of the home with their offer. I had not heard the letter called “a love letter” before, but it reminded me that I had used a letter like this back in 2006 or so when the home had over 20 offers. I included a lovely picture of the couple and their two children.
Fast Forward to 2012. This year there were many multiple offer situations and in one case a lovely old couple who had lived in their home since it was brand new and for over 30 years did not choose my clients and I was told it was not about price. ??? What WAS it about then?
Long story short…my clients did get the home. Sometimes Sellers say “I want a nice family who is going to raise their family in “our” home the same way we did”. They identify with the buyers of the home and want to picture a “loving family” in the home that they love so much. They don’t intend to discriminate…but…net result???
There has been a lot of talk over the last 5 or more years about “Why do we NEED an agent?” A reminder that often the agent is the ONLY one in the room who can see when a law is about to be broken…intentionally or not.
We are not licensed to SELL Real Estate.
We are licensed to represent people who Buy and Sell Real Estate.
Many agents believe that they are simply passing paper back and forth between buyers and sellers and must follow the instructions of their clients. This is a CAUTION that many people need to be told when they are entering into that gray area of “unlawful” as it is not always blatant discrimination.
Sometimes the seller asking
“which offer is from that cute couple with the baby?”
IS discrimination.
The agent should say: “Let’s look at these offers on their merits, without regard to WHO is making the offer”. People who discriminate often do it quietly, without notice, and sometimes scream the loudest that they are NOT…when someone calls them on it.
The basic Real Estate questions in 2012 have been:
1) Are prices UP or DOWN, going UP or DOWN…at bottom, in recovery, recovered?
2) Is Inventory low…will it get better…where is the shadow inventory?
To answer these questions I am using data from the Lake Washington School District, as it represents a good mix of all possible “home” types. It also gives you a framework of how to develop a similar snapshot in your area of interest.
First let’s look at the snapshot of what people chose to purchase YTD 2012.
Key: 1C Black is One Bedroom Condo, 2C Turquoise-Blue is 2 Bedroom Condo, 3C Purple-Blue is 3 bedroom condo/townhouse, 1S Yellow-Gold is a 1 story home, B/T Pink is a Bi-Tri level and 2S Green is a 2 story home with or without a basement.
Let’s add to that some historical perspective to see if those current choices represent a shift of any kind.
Now we add the impact of price changes on those volume graphs as to what people choose to buy…as prices change.
Back to the original questions…answered by Property Type in the order they are represented as to # of people choosing to buy them.
TWO STORY HOMES
First, let’s be clear as to what a “Two Story Home” is and is not. A two story home is where the children go UP to bed. It is not a 2 level home where the children stay on the same floor as the kitchen when they go to bed or when they go downstairs to bed. I say children as the Master Bedroom can be on the main floor in a two story home. A 2 story home can have a basement or not and in the graphs above these homes are represented in GREEN.
The 2 story home is by far the majority preference, if one can afford anything they want.
Prices have been pretty stable since 2009.
Prices are down roughly 19% from peak pricing.
Volume is pretty much fully recovered given we don’t expect volume to reach “zero down” levels.
Shadow Inventory is in 2 places for the 2 story homes.
First there are the homes ON market that are simply overpriced. Technically you have a 3.65 month supply currently “For Sale”, but only a one month to 1.5 month supply that is actually priced to sell based on current pricing. I’m being generous there allowing for homes to be 10% over where they need to be. A full 60% of 2 story homes for sale are priced at more than 10% of where they need to be…or above 110% of the price at which they will actually sell. These stay “in the shadows” and are basically invisible to those who are buying homes, until they have a price change.
Second are the homes that were bought in volume between 2002 and 2007 that are either underwater or just not yet offered for sale by the people who bought them. About half of those homes will come into the market in dribs and drabs over the next 3 to 5 years. Some will be short sales and foreclosures. Others will simply be homes bought from 2002 through 2006 or so that are not underwater. We don’t expect to see a huge surge of those coming on market all at once, so they should not impact the market by a large amount at any one given time.
Part of the reason for the decline in volume is that builders have shifted over to Northshore School District and Issaquah School District, due to the lack of available land. That probably won’t change in the near future.
TWO BEDROOM CONDOS, B/T SINGLE FAMILY HOMES & 1 Story Homes
Interesting that these three segments represent about the same market share as to real estate purchases overall.
The B/T Single Family Home is a Bi or Tri Level Home. It can be a one story with basement, a split entry or a tri level…sometimes a “multi level”. It is represented as bright PINK in the charts above.
Pretty much fully recovered as to volume, given they are not building more of these.
Prices have really leveled out well at 23% under peak pricing.
I don’t expect much MORE Shadow Inventory to come out of this class of housing that is not already ON market, but overpriced. A FULL 75% of these homes are on market…as overpriced…by a LOT.
The One Story Home has not yet settled into to a recovered position!
Still falling in both volume and price.
The Two Bedroom Condo is in the same boat.
Look at the 2nd graph and you will see these three housing segments, PINK, TURQUOISE & GOLD converging pretty much at the same point in 2009.
It’s important to note that there will be continual shift here for some time to come. When people can buy a B/T home for the same price as a 1 Story home…the 1 Story home suffers. Mostly due to the extra basement square footage in a B/T home. The 2 story condo taking the same place on stage is surprising…and being caused by the stability in price of the 3 bedroom condo-townhome.
LOTS of Shadow Inventory in the 2 Bedroom Condo and prices have much further to fall.
The 3 bedroom condos…mostly townhomes…are hard to call. They are running too close in price to the Single Family Home and way over the price of a 2 bedroom condo. I would have to say they are going to fall until they are closer to the 2 bedroom condo price than the Single Family Home price. But that’s a rough guess.
No Surprise…the One Bedroom Condo is dropping like a stone. They were pushed up in value and favor back when everything else was priced out of reach. For the most part people are just holding them as rental properties. LOTS of Shadow Inventory here, especially the underwater newer ones.
SUMMARY: The 2 story home and the Bi and Tri level homes have pretty much recovered and should stay relatively stable. Everything else has a long way to go before they have settled at a bottom as to both volume and price.
To determine where all that might be headed you might ask yourself these questions.
Looking at the price of a 2 bedroom condo at $170k and the price of a 3 bedroom condo at $315k…which would you buy? Is ONE additional bedroom worth an extra $145,000??? Probably not. That is what is holding up the pricing on the 2 bedroom condo, and why the 3 bedroom condo or townhome has further to fall.
Same goes for the 1 story home and the 3 bedroom condo-townhome. At some point the 3 bedroom newer townhome is winning over an old 1 story house without a basement…for other people not. These two have yet to come to an appropriate balance.
That’s it for now. The market should slow down a bit now that we are at 30 days to school starting. That is only as to new contracts and not August Closings. A good roundup of where we are…until we have the 4th Quarter results. in.
Everything should drop from here a bit and the big question is…Will the year END higher than it began?, and if so…in which market segments.
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Data in this Post and the Graphs is not Compiled, Verified or Published by The Northwest Multiple Listing Service. The dates used per year are from January 1 to August 1 in each respective year.
Lumia 900 Windows Phone
One of the exciting things about being a real estate agent is you can really integrate technology in a meaningful way on an every day basis. I don’t have all the gizmos and gadgets just to “have” them. I can’t imagine doing business without them.
I recently upgraded to the Lumia 900 which I think was new to AT&T when I got it, but not “new” generally speaking. I liked it so much that I bought matching nail polish and even matching outfits to go with it. 🙂 I do miss the Samsung Focus now and again, but my partner Kim still has it, so I can switch over if needed. So far I think the audio is better on the Focus as is the camera. The audio is a Nokia hardware problem…well, actually it’s as good as the iPhone I had before the Samsung Focus, but the Samsung product is superior to both the iPhone and the Nokia Lumia 900. Still…the Lumia is exciting for a lot of other reasons and I like both of my Windows Phones better than I did the iPhone…and that’s saying a lot.
I have not used Outlook for a long time having switched to gmail. One of the reasons is I deal with very large file attachments often and Outlook just couldn’t handle that well. Yes…maybe it was more secure, but thinking every home flyer or contract was “too large” to go into my inbox was a huge problem for my business. gmail never seems to block any of my emails with large attachments.
I switch back and forth from chrome to IE but generally only use IE when I “have to”, which is for contracts. That I “have to” kind of ticks me off, I have to say.
Well today we have a new “Outlook” experience, and I’m going to give it a whirl. Many of my clients work at Microsoft and I try to test out all the newest things and use them in my business. A fair amount of my clients work at Google as well, so I try both and use the best of each. The only product I have that is neither is my iPad, but I have to say the new Lumia 900 Windows Phone (coupled with some annoying NWMLS snafus in the newest upgrade) has all but made my iPad obsolete. But that’s another story.
Here’s what Microsoft has to say about their new Email Journey: