Author Archives: ARDELL

About ARDELL

ARDELL is a Managing Broker with Better Properties METRO King County. ARDELL was named one of the Most Influential Real Estate Bloggers in the U.S. by Inman News and has 34+ years experience in Real Estate up and down both Coasts, representing both buyers and sellers of homes in Seattle and on The Eastside. email: ardelld@gmail.com cell: 206-910-1000

The Philadelphia Phillies Win the World Series!!!

Posted on by
18

The curse of William Penn is officially lifted!  If anyone wasn’t sure about that, Joe Blanton’s home run was absolute proof, that Comcast’s putting William Penn up in the sky in June of 2007 was indeed the curse breaker!  No building for him yet, he’s up there on a beam until the building is complete in 2012…but Billy must be happy enough.

For most of Philadelphia’s history, no one was allowed to construct a building taller than the William Penn Statue on top of City Hall.  Mr. Penn looks out toward the Delaware River from the top of City Hall, as I recall, and was visible outside of the window of my office across the street for many years.  In 1987, they built One Liberty Place to be TALLER than Billy Penn.  They tried the excuse that they weren’t “blocking his view”, but apparently Billy was not pleased, as NO sports team in Philly has won since that happened.

So thank you Comcast for not waiting for the building to be finished in 2012 before hoisting Billy Penn up where he belongs…higher than any building in Philly.  Tonight he has thanked you…and so do we.

The Curse of William Penn is LIFTED!

The Curse of William Penn is LIFTED!

Free Taco at Taco Bell

Posted on by
Reply
Taco Bell Steal a Base Free Taco
Taco Bell Steal a Base Free Taco

America wins a free taco today, Tuesday October 28th,  from 2 p.m to 6 p.m.

As part of the Steal a Base; Steal a Taco promotion, anyone can go into a Taco Bell today between 2 p.m and 6 p.m and walk out with a free crunchy, seasoned beef taco.
Jason Bartlett Stole a Base in the 1st Game of the 2008 World Series, winning everyone in America a free taco.  I didn’t read all of the fine print, but it sounds like anyone in line by 6 p.m. gets a free taco, so bring the family!

What should a loan modification look like?

Posted on by
76

I just wrote this long comment on Jillayne’s post, and decided it needed to be a post of its own.  This loan mod returns the risk premium that was not effective at controlling risk.  It didn’t work…give it back. It also makes the lender partly responsible for approving short term income on a long term basis.  It does not involve ANY loss to the lender below the face amount of the notes, and gives them some interest, and saves the homestead.  I think it includes all aspects of consideration for a loan mod, but finding staff competent to come up with loan mods in a short period of time, is not realistic.

What we do know is that the higher risk premium rates, did not cover the risk.

Let’s take an example and see how it plays out, and propose a loan mod.

Family qualified for their current home based on $80,000 a year. $60,000 was salary and $20,000 was two years of consistent bonus or overtime. That was considered conservative lending guidelines “two years of proven history on bonus or overtime

Sunday Night Stats – Prices Dropping

Posted on by
294

Recent King County pending sales continue to dip in price.  There seem to be more bargains in the single family home market than the condo market overall.  But that is starting to change.

In the condo market, of the 628 condo sales pending, only 283 have gone pending since the 1st of October, and the asking prices on those were 3.7% lower than the pending sales from before October 1st.  Considering that condo prices for the 3rd Quarter were only down 7.2% YOY, a 3.7% dip in prices is significant and should bring condo prices down to more than 10% lower YOY by year end.  We’ll have to wait and see where they close out.  Those that have closed so far in October have actually closed at higher prices than the 3rd Quarter, so we may not see the full impact of lower prices until the end of the 4th Quarter in condos. 

In the Residential market, 957 of the 1,893 pending sales went pending since October 1, so less of a backlog on a % basis than in the condo market.  The prices of the recent pendings is only down by a hair, compared to pendings from before October 1.  But pending prices overall and closed prices in October to date are down almost 10% compared to the 3rd Quarter and almost 20% YOY. 

If you are hanging in for the perfect house, you may have to wait until Spring of 2009.  But if you’re looking for an opportunity to buy based on bargain prices, the last quarter has a lot to offer.  Remember, for every bargain priced property SOLD there are 5 or more overpriced properties. So far in October it looks like buyers are choosing wisely and getting some real deals.  But you have to know what you are doing out there.

Kind of like going to a huge shoe sale and picking out the Prada’s from the Payless overstock.

As always, stats are not compiled, verified or posted by NWMLS. (required disclosure – it’s also required that I say that in bold letters, for those who’ve been wondering.)

Is a "short sale" a bargain?

Posted on by
72

Actual info from recently closed short sales:

1) The owner bought it in September of 2005.  They did so many cashout refinances since time of purchase, that I can’t see what the downpayment was at time of purchase.  They tried to sell it for 30% more than they paid for it exactly two years after they bought it (likely due to a 2 year pre-payment penalty) just a month or so into the weak market of late 2007. They moved out and rented it in December of 07.  Then, while it was tenant occupied, they relisted it for sale in February for $50,000 less than their original attempt of 30% more than they paid for it.  They dropped the price an additional $50,000 two weeks later.  They dropped the price an additional $50,000 three weeks after that.  They dropped the price an additional $50,000 five weeks later.  They dropped the price an additional $50,000 three weeks later and dropped another $50,000 five weeks after that.

So $300,000 in price reductions from 30% more than they paid to an asking price that was 13% less than they paid.  BUT then it bid UP to 7% less than they paid for it 2.5 years before.  It either bid up, OR since by this time it was a short sale, the bank may have held out for $50,000 more than the original offer.  At any rate it closed at 7% less than the owners paid for it at 1.12 X assessed value, BUT that was the highest price ever paid in the neighborhood.  The original asking price was 1.5 times assessed value.

The escrow period was 128 days from the time the seller accepted the offer until it closed.

The kicker? A couple of days after this one closed, the neighbor listed their home at 1.08 times assessed value and $50,000 less than the short sale closed at, and it still hasn’t sold.  So the short sale was not necessarily a good buy.  It might have been if it had closed at or less than the final asking price.  But when it closed for $50,000 more than the final asking price it moved from bargain to not a bargain during negotiations and escrow.

Warning: Sometimes seeing $300,000 in price reductions and “short sale” or “foreclosure” at the end, causes buyers to bid UP a property to where it is no longer a bargain.  While I chose this example at random and worked through the history while doing the post and not in advance, it turned out the way many do.  Buyers bid it up or don’t hold their ground when the bank responds to the offer, and 128 days later…not a bargain.

Let’s do another one:

2) Bought in the summer of 2006 with 100% financing for 1.3 times the 2008 assessed value and for double the price the previous owner paid for it in 2004.  Clue.  This person overpaid for it in 2006 and it had the magic words “granite counters”.  Yesterday someone said to me they were going to buy a granite countertop and stick it out on the grass of a vacant lot and sell it for half a million dollars 🙂

Looks like the person who bought it barely (if ever) lived in it, as it was listed for rent within 3 months of closing in 2006.  Apparently someone in 2006 thought paying double what the previous owner paid in 2004 was “an investment”. After renting it out for a year, the owner tried to sell it in the summer of 2007 (before the market turned) for 11% to 12% more than he paid for it.  No takers and it was re-rented.  They dropped the price $15,000 after 125 days on market.  Three months later…still no takers.

They rented it out again and five months later listed it for 20% less than they paid for it.  (Interesting that they listed it for 12% more than they paid for it and then 20% less than they paid for it, without trying anything in between. An agent (not the agent who had it listed and not the same office) bought it immediately as soon as it was listed for 20% less than the current owners paid for it. The short sale escrow lasted 75 days and it closed at the full asking price of 20% less than the owner paid for it in 2006.  The sold price from the short sale was 1.03 times assessed value.

The kicker? The agent who bought it at the bargain price now has it on market for sale or for rent.  Rent price is $1.58 per square foot. Sale price is 1.17 times assessed value.  Would have been a nicer story if the person who got it for 1.03 times assessed value was going to live in it.  Insider gets the bargain and flips it back out on market for a decent price, but not such a bargain.  At least they’re not asking 1.5 times assessed value, but if a nice young family bought it for the bargain price of 1.03 times assessed value, I would have been happier.

I think I’ll go see it this weekend with one of my clients who is in that price range.  Maybe it will sell for less than 1.10 times assessed value.  Not a screaming deal, but worth taking a peek at it.

Moral of the story? Don’t go to an agent and say “I want to buy a foreclosure property” or “I want to buy a short sale”.  We always shake our heads when people do that.  Instead look at properties you like that are in your price range, and if one of them is a bargain, we’ll know it.  Sometimes it’s the foreclosure or short sale, sometimes it isn’t.

I know of another home that was listed for $1.3 million, sold at foreclosure for $800,000 and went back on market at $1.1 million.  No one’s buying it.  So the question remains on this one and the second example above, was it a bargain?  We won’t know until the people who got the bargain and immediately relisted the homes for sale at a higher price, get an offer that sticks.  What we do know is the bargain on those two gets less every day, since both properties are vacant and the owner is paying the carrying costs.

Leave the gun; take the cannoli

Posted on by
162

My friend Geno reminded me today that some are in the “leave the gun; take the cannoli” stage of the real estate market.  It also reminded me of the stark differences between 2008 and the last time I participated in this same kind of market, which was in 1990 and 1991.

I remember leaving the gun and taking the cannoli in Yardley, PA. when I was working for one of my two favorite brokers, Frank Mancuso, also one of my two favorite Franks.  I was working with a nice young family, relocating to Yardley from somewhere else, trying to find a good value in a turning market like this one.  We “targeted” a house where the owner had been relocated by his company too.  We truly held a gun to the head of the “relocation company” during initial negotiations, and then picked the carcass clean at time of inspection in a second round of negotiations.

The similarities?  Only those who really wanted to sell, or HAD TO sell, were selling.  The deepest discounts being the vacant houses where the owner had already moved on, and there was no chance the owner would be coming back.

The differences?  The reasons why people “had to” sell.  Tim’s story yesterday reminded me of when Buddy Ryan was canned by the Eagles in 1991 and everyone in the office was wondering who would be selling his house.  Needing to sell your house in a bad market, especially when the vultures perceive that you NEED to sell it, can be an awful place to be.  Still when the sellers are highly paid people or relocation companies, no one’s wasting any tears.  It’s when the carcass to be picked looks like the family depicted below, that you take pause.

Truth is, people trust professionals to NOT let them, or encourage them to do, what will hurt them. So when you take out the gun and put it to someone’s head so that you can leave with the cannoli…at least look them in the eye when you’re doing it.  Maybe talking someone into doing a short sale is like pulling the plug on someone that was just about to be saved.  Think about that before telling people a short sale is their only or best choice.

The only difference between buying a short sale and buying a foreclosure is whose head is at the end of the gun, and whose cannoli will taste better in your mouth after all’s said and done.

Sunday Night Stats on Monday Morning

Posted on by
14

The Dow’s holding its own so far today. “Hanging in the eights”; as I like to say. I don’t see the day coming yet when my week doesn’t start without checking the Dow when I wake up on Monday morning.

Last night I looked at the homes that sold in Redmond in August for the means of financing.  Where once I saw two loans as in 80/20 and 100% financing, I now see two loans as in conforming and jumbo.  One loan at exactly $417,000 and another for the difference.  I saw a couple of FHA loans in the mix and a couple of cash sales, but by and large the purchases had significant downpayments.  $20,000,000 worth of purchases had $13,000,000 worth of debt.  So 35% down overall.

Looking at who got a good buy and who didn’t, the new bogey appears to be 1.09 times assessed value, by and large.  The fabulous buys went for under assessed value, mostly in the high end near a million dollars.  The assessed values I am using are still the ones that 2008 taxes are based on, so be careful there.  The new ones for 2009 taxes should not produce this multiple.  Up to 1.17 times assessed value is pretty safe, depending on condition of the property, with 1.09 times assessed value being fairly doable and the better sold scenario.

Some of the best buys were those that listed low and sold quickly.  Some of the worst buys were listed high, and while the buyer got the property substantially less than asking price, the net result was still too high.  Remember to double check the multiple of assessed value against the main floor footprint calculation keep apples to apples as to style of home.

I’m not seeing any short sale closings in the mix.  Most are still stuck in pending.  The “decent” buys were popular homes dropping from 1.22 and 1.17 times assessed value to about 1.13 times assessed value.  Those were newer two story homes built in the mid 90s.

The waiting game is playing out where new construction is competing with resale by the same builder in the same community.  It will be very interesting to see what the builders are going to do about that as we head into Winter.  Look for some screaming “offers” from builders…BUT check that against the prices of same model resale before being lured by builder offerings.

Still hard to find a good house at a good price in this market, the best values still going quickly.  For those who see something that “looks good” out the gate, but need a method to quickly evaluate if it is a good buy, asking price divided by assessed value is still a good rule of thumb.  The closer it is to assessed value, the less time you will have to think about it.

Losers in this market are those who take too long to “think about it” and don’t have a good valuation tool.  Some of the worst buys were people who bought houses at substantially less than asking price, but still over market value.  Don’t fool yourself into thinking you “saved $50,000” just because you paid under asking price.

Mostly these are some tips for people who are buying in today’s market.  But sellers can take note as well.  After you come up with your list price, divide it by the assessed value used for 2008 NOT 2009 assessments, and see where that leaves you.  If you have a view  property, the multiples will be higher.  Buy if you don’t, and the calculation comes up at 1.5 times assessed value…think again.

Some stats on sold in September homes without basements:

Redmond – median price per square foot $233 in 08 vs. $284 in 07 prices down 18% volume up 25% from 43 to 54.  Median price down from just under $700,000 to just under $600,000 plus more home for the money as to total square footage.

Bellevue – MPPSF $332 in 08 vs. $318 in 07 prices up 5% volume unchanged at 37/38. Median price up from $685,000 to $739,750. (lots of very pricey homes in that mix vs. Redmond and Kirkland)

Kirkland – MPPSF $268 in 08 vs. $286 in 07 prices down 6% volume down 25% from 32 to 24.  Median price up from $526,500 to $570,000.

King County – MPPSF $193 in 08 vs. $223 in 07 prices down 13% volume down 10% from 788 to 704.  Median price down from $449,975 to $382,884

Asking Prices of unsold homes on market today:

Redmond $260 asking vs. $233 sold; 6.5 months of supply.

Bellevue $311 asking vs. $332 sold; 8 months of supply.

Kirkland $284 asking vs. $268 sold; over 12 months of supply.

King County $210 asking vs. $193 sold; just over 8 month supply.

When you consider prices and volume, you see that the deep dip in price sold in Redmond (down 18%) is giving them an increased volume of sales, up by 25%, and a shorter timeframe on existing inventory at 6.5 months in Redmond vs. 12 months plus in Kirkland.

Volume up 25% in Redmond proves that when buyer’s perceive real value, they buy. Buyers with money for downpayments do exist, but they are very, very value conscious. Bellevue stats are a bit screwy, but Kirkland and King County as a whole show that when prices are down slightly the volume is down a lot.  When prices are down moderately, the volume is up somewhat.

So buyers appear to be “happy” at 18% down in price, OK with 13% down in price and not so happy about only 6% down in price.  Remember, I removed basement square footage to evaluate pure living square footage, and never buy without looking at 2008 assessed value.

Stats not compiled, verified or posted by NWMLS (Required disclosure)

Employers can provide affordable housing

Posted on by
28

I once represented a community of “affordable housing” sponsored by an employer.  For what it’s worth, I’d like to tell you how it functioned.

Once upon a time there was a University that was situated in the midst of a community of Million Dollar Plus homes.  At some point in the history of the University, they began having great difficulty getting Professors to come to teach at the University, because the Professors could not afford to live anywhere nearby.  What to do, what to do!?!

The University purchased a parcel of land and hired a developer to build a housing development of large, 2,500 sf homes.  These homes were attached at one party wall.  Two homes then a break two homes then a break, a whole community of what I call “twins” and most people call “duplexes”.  Large two story homes without basements that attached at the two car garage and were “mirror images” of one another.

The University maintained ownership of the land.  Unlike a “condo complex” where the owners of the houses jointly own the land, the land continued to be owned by the University to reduce the cost of housing for the professors.

The increase in value of the homes was controlled by a governing document and the increase in cost of the homes could only go up by the same % that the University used to increase salaries of the Professors.  The cost of the homes, which were purchased and not rented, was maintained at an “affordable” level and only Professors could buy them.  The gain at time of sale was controlled, but also went to the homeowner and not to the University.

The University received the original purchase price of the homes to offset cost of construction and sold them “at cost” not including the land value, since the buyers bought the houses and not the land.  There were a few problems in the ongoing complex of Professors…but not many. 

This is but one example that I have personally had first hand experience with, so I assume there are others.  When a single employer has thousands of employees, providing a means of good, affordable housing, could help keep salary costs down while giving their employees a place to live close to where they work.  Better productivity, less commute time, people tend to work longer hours because it is convenient to stop into the office and catch up on some work.

What do you think?  Too Utopian for a quiet Friday morning?

Eastside – A look at "affordable" housing

Posted on by
130

I need to take a look at “affordable housing” issues after a meeting I had this week on the subject, and in preparation for a meeting I have next week on the subject.  I’m primarily looking at Kirkland and comparing Kirkland to places people would move to from there.

While that is not the purpose of this post, this post will also give you some insight as to why there are “Bubble Blogs”.  Many of the young people who want to raise a family without moving to Tennessee, are impacted by the same factors I am raising in this post.  There was a time when I could (and did) tell them to buy condos and use the appreciation for downpayment on a home.  No longer the case in the near distant future.  Where are home prices going?  Well strip out exotic financing, including FHA 60% backend, and look at realistic financing, and you will immediately know what the “bubbleheads” already knew.  Prices have to come down considerably before a young family needing 3 bedrooms and 1,500 square feet can afford to live here.

Median incomes in the last census back in 2000 were $60,000 per household and $73,000 per family in Kirkland, but only 23% of households had children under 18 living with them.  The Powers That Be take this to mean they need more affordable housing for 1 and 2 person households, since that represents over 75% of the residents. I disagree. It is my contention that young people in condos move out of Kirkland once they have a child, because affordable homes for families are more prevalent elsewhere.  To me that means we need more housing for young people with children, otherwise you get overweighted in young professionals, wealthy empty nesters and “affordable housing” for lower earning singles.  That doesn’t diversify the base, and expand the number of households with children under 18 living in the household, up from 23%.

Rather than up the 2000 census incomes, I’m going to call median income $65,000 for a family, as in we want to attract that which we do not have.  Also, that number looks like the King County median and more appropriate for this study.  I’m going to use 4X annual income plus 20% down as the barometer for housing price and minimum 3 bedrooms and 1,500 sf. 

$65,000 times 4 equals a loan amount of $260,000 which is $325,000 with 20% down.  This is why the presidential candidates are incorrect when they say we have to get home values back UP.  They need to recognize that home values accelerated to the point were only Exotic Loans would make them attainable.  So a wish to shore up property values is like a wish for Exotic Loans to make a comeback.

Let’s do an FHA 31/43 ratio double check on that.  31% of Gross Monthly Income of $65,000 is a monthly payment of $1,680.  Lets back off $300 of that for taxes and insurance and call that payment 1,380 for principal and interest.  That gives us a loan amount of $230,000 plus 20% down is about $290,000.  So affordable housing for a family earning $65,000 would be priced at $290,000 to $325,000.

Now let’s look at property with at least 3 bedrooms and $1,500 square feet.  For this purpose I am using the Tax Records vs. the MLS. as I am looking for what exists vs. what is for sale or sold.  In the system I am using, the assessments for 2009 taxes are not in place, so I am using 1.17 times the assessment used for 2008 tax purposes.  That means we are looking for property in the County records assessed between $245,000 and $280,000 with 3 bedrooms and a minimum of 1,500 sf.

Kirkland 98033 comes up with 39 properties, many of which appear to be apartments at the same address.

Kirkland 98034 has 54 all centered in the same vicinity.

Bothell 98011 has 35

Kenmore has 64

Bellevue has 31

Redmond 98052 has 25

Duvall has 53

Monroe has 113

Bothell in Snohomish County vs. King has 76

Mill Creek has 34

Issaquah has 27

Sammamish has 20

Renton has over 1,000

Auburn has over 1,000

Kent has over 1,000

I don’t know how many over 1,000, because there is a pre-set max on the search function.  But you can readily see where a family making $65,000 a year working in Bellevue, Redmond or Kirkland  needs to go to get just 3 bedrooms and 1,500 sf of living space.  I didn’t put any bath requirments or lot size requirements or even separate condos out.  Just 3 bedrooms and 1,500 sf and look what your money doesn’t get you.

Seattle has over 1,000 of which

16 are in 98115

28 are in 98103

9 are in 98117

Shoreline has 170

So when you look at Joe Sixpack and his story, and wonder how he got in over his head, remember that very few homes or even condos exist for a family making $65,000 a year within a reasonable distance to where they are curently renting and working.  So before you blame Joe for his demise, take into consideration that he really didn’t have options available in the marketplace that would have made for a more conservative decision by his family.  This not based on “what is for sale” but “what exists”.

Areas that have housing that fits the $65,000 income, also have lower median incomes.

If the Powers That Be representing Affordable Housing concerns only target 1 and 2 person households, because that is the constituency, then they are doing nothing to solve the REAL problem of “Affordable Housing”.  We need more affordable households for 3 or more persons to impact the issue of “Affordable Housing.

If Kirkland only added 20 to 25 of these, they would be increasing affordable housing from 84 to 104 or 109, which would be a increasing affordable housing by 25%!  Adding more one and two bedroom units, or increasing the affordability of small one and two bedroom units, continues to force young families out of the demographic.

I was told “but the whole REGION has primarily 1 and 2 bedroom households” so that is why we are targeting that demographic.  I said look for WHY the region is primarily 1 and 2 bedroom households…and fix that why.

I need to look at a few more things in preparation for my meeting, if you don’t mind tagging along with me for a few more minutes.  I’m raising the assessed value to $280,000 -$375,000, which is like raising the sale price from $325,000 – $440,000 and I’m adding built since 1990 to see how the cities are progressing toward adding affordable housing.  It is my contention that Redmond via newer 3 bedroom townhomes is outpacing Kirkland.  I need to test my perception.

Kirkland 98033 – 104 (several of these are owned buy builders and developers.  Not sure what to make of that)

Kirkland 98034 – 53

Redmond 98052 – 147 (it is true that a lot of that is Rivertrail, which is where my perception comes from to some extent.  I need to research how that much land close to Downtown Redmond was available to build Rivertrail.  Wait a sec…no I don’t…it’s in a flood zone.

Belleuve – 194 (94 in 98005 – 67 in 98006 – 17 in 98008 – 15 in 98007 -3 in 98004

Seattle 98115 – 44

Seattle 98103 – 84

Seattle 98117 – 58

Shoreline – 219

Lynnwood – over 1,000

Bothell Snohomish – 588

Bothell King – 186

Issaquah – 669

Duvall – 428

Sammamish – 342

Kenmore – 173

Woodinville – 161

It’s about land values.  Thinking out of the box, if everyone on a 22,000 to 33,000 square foot lot was allowed to keep their house and shortplat off a couple of 5,000 sf parcels and put up two 1,700 square foot homes…

Thank you for letting me think out loud.  Your thoughts appreciated.

P.S. for Jillayne 🙂

Edmonds – 35 for the first group assessed at $245,000 to $280,000,  322 in the 2nd group built since 1990 and assessed at $280,000 to $375,000.  hmmm am I missing something by not looking under $245,000 assessed values with no age range?  23 in Edmonds,  Kirkland 62, 98052 – 120, Bellevue 43, Shoreline 68, Kenmore 51, Bothell King – 47, Duvall 27, Bothell Snohomish 37