Category Archives: Housing Market

Events and Festivals around Seattle

Eastside – A look at "affordable" housing

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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

Are Short Sales Affecting our Home Prices?

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This downturn in real estate is so much different than the one we ‘older than dirt’ agents experienced in 1980’s. Then, with inflation over 12% and interest rates over 20%, we knew why we were in so much trouble and saw only long term effects since it was a problem with our national economy. We were using rubies, horses, businesses, anything we could use for exchange for a down payment and doing ‘mushroom closings’ where the sale wasn’t recorded to avoid paragraph 17 of the note to kick in. (before you judge, let me mention that this was with attorney guidance!)

This time, it’s been very very confusing since our national economy is healthier, inflation appears under control and here in the Puget Sound area, there is low unemployment and signing bonuses are again being offered for qualified high tech employees.

So, the big question here in the northwest (I’m only referring to the NW, specifically King, Pierce and Snohomish County and of course, there’s Wenatchee), is, is this a short term or a long term correction.

And, is the effect of the short sale inventory going to be a drag on our home prices. There are phenomonal discounts right now in short sale properties. However, are they really affecting the price of normally marketed properties? Do buyers see these short sale properties as good homes for them to purchase, or are we only attracting fix and flippers and other investors to these properties.

The nwmls statistics show that in King County, there are 71 short sales, trustee, or foreclosures in the entire county. Of these, 27 are active, with an average price of $397,000 and average days on the market of 134.

21 are under contract either sti or pending and only 1 is sold in the last 6 months. So, with 27 active, and 22 sold or under contract in all of King County, compared to 8355 active, 1731 sti or pending and 10126 sold in the last 6 months, is there really a measurable effect? or is this just a temporary hiccup?

The Longest Season Ever – Spring Forward

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How much is the market influenced by the fact that it stays light longer on weekdays? 

We all know it’s true that people tend to look at property more on weekends, unless it gets dark later on weekdays.  We all know the second and third quarters of each year are stronger than the first and last quarters.  But how much does that have to do with it getting dark earlier and staying light later?

Well, this is a good year to test that, as tonight is the beginning of daylight savings time.  For the first time in, I guess my life, we will turn our clocks forward, one hour, tonight, March 11, 2007.

Compare that to April 6 in 2003, April 4, in 2004, April 3 in 2005 and April 2 in 2006, and we are adding about 36 days to the real estate high season.  Will be interesting to see how the March 2007 stats compare to previous years.  I think they will be stronger due to DST being pushed earlier.

Maybe that will transcend into April.  Maybe sellers who would have listed May 1, will be able to spruce up the home’s exterior earlier this year, with a few hours of daylight after work each night, and get their homes listed a couple of weeks earlier than expected.

I’m just happy that the daffodils are in bloom, I see pink trees everywhere, and starting tomorrow…it will get dark later.  One of Seattle’s main claims to fame, is our long, long spring and summer days.  And this year, we will have even more of it!  Enjoy!

Is Seattle Bubble Proof?

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Best I can tell so far, the answer to that question is a resounding YES, Seattle IS bubble proof, at least in the $300,000 and under market.

I am totally bugeyed, having spent the last 10 hours slicing, dicing and dissecting every single stat in the $300,000 and under market, in $100,000 increments, for 2005 and 2006 year to date on a month by month basis.

While we are seeing a teensy weensy weakness in October vs. August and September prices, the run up from January of 2005 to present has been insane. 72% of families have been squeezed out of the first time buyer market during that time in the $300,000 or under range. So even if we see prices dropping back, we will not soon see the day when the increase will be declared a bubble that is about to burst. In fact a modest correction is well warranted, but I do not see single family homes dropping in price back to where they were in January of 2005 for many, many…if ever…years. So yes, in the single family home market, anything decent in the lowest of price ranges should still be grabbed up. By March of 2007 the opportunity to get any bargains in the entry level single family home markets, will likely be gone for good.

For my neck of the woods, which would be from Green Lake up through Shoreline and beyond, around Lake Washington and into Kirkland and the Eastside, if it’s a single family home priced under $400,000…buy with care…but don’t wait for any of them to ever dip under $300,000 again. I don’t see that happening.

Condo markets in the same price range…entirely different story. I’d stay far away from the one bedroom condo market. the run up there has been as insane as it has been in the single family home market, BUT the one bedrooms are fast converging on the price of a much large two bedroom. So don’t assume you have to buy a one bedroom condo if you are starting out.

So many have overlooked the two bedroom opportunities, that the price growth of the one bedrooms has far exceeded the price growth of the two bedrooms. As fewer people can afford single family homes, more and more are buying condos in the under $300,000 price range. Hold out for the two bedroom units whenever possible, and let the one bedroom condos back off in price a bit. Some one bedroom units are tryng to sell at 79% more than they did 16 months ago! Pass them by. Hold out for a two bedroom, unless the one bedroom is reasonably priced for what and where it is.

I’m too worn out to go further than $300,000 today, but what I’ve written is worth studying. I have every single number broken down by $100,000 increments and split between condo markets and single family markets. I didn’t post them all, but I will keep my sheets of pencil notes for awhile, just in case anyone has any questions.

Kirkland Real Estate

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I find in my daily chats with people, that the public’s perception of Kirkland Real Estate is a far cry from its reality. So this morning, with one eye open drinking my coffee, I put together some stats for you to bring this point home. I think you will be surprised by this piece I will call “perception vs. reality” which also points out the “housing bubble” area of Kirkland.

For the purpose of these numbers, I have used the mls and not the tax records.

People ask me all of the time in passing, at parties, etc…”How can anyone afford to live in Kirkland?” General perception being that real estate prices in Kirkland are all over a million dollars. That is greatly because the consumer looks at what is for sale. Reality is in what has sold, not what is for sale. We call “for sale” that which has not sold and not particularly reflective of the marketplace.

We will be using an economic forecasting tool called the Rate of Absorption, which is further described in my blog.

Of the 2,042 properties sold in Kirkland (PO) in 2005, only 92, less than 5%, sold over a million dollars.

  • 616 (30%) sold for less than $300,000
  • 856 (42%) sold between $301,000 and $500,000
  • 349 (17%) sold between $501,000 and $750,000
  • 129 (6%) sold from $751,000 to a million dollars
  • Only 30 properties sold between a million and $1.2 million
  • Only 14 properties sold from $1.2 million to $1.3 million
  • And 48 properties sold higher than $1.3 million in 2005

Many people think that Kirkland is the town for millionaires. That is because they look at what is for sale creating this “perception vs. reality” issue. Only 2% of homes sold in Kirkland last year sold for $1.3 million or more BUT a whopping 26% of the homes currently for sale are priced over $1.3 million.

Now let’s get to rate of absorption before my client comes to my house to sign an offer on his way to work.

616 properties sold in 2005 under $300,000. 56 properties on market are priced under $300,000. That’s about a one month supply. If it takes a year to sell 616, it should take a month to sell 56.

856 properties sold in 2005 from $301,000 to $500,000. 63 properties are for sale in that range. That’s slightly less than a one month supply.

349 homes sold in 2005 between $501,000 and $750,000. 62 properties are for sale in that range. At a rate of 29 homes sold in a month, it will take about two months to sell 62 (two months supply on market).

Here’s where it gets very interesting (to me anyway).

While only 129 homes sold last year between $751,000 and a million dollars, there are currently 47 for sale. That’s a 4-5 month supply carrying over from last year. Add that to people who list their homes in the next 4-5 months and you have an oversupply.

While only 11 homes sold last year between a million and $1.2 million, there are currently 30 for sale. Let’s call that a 3 month supply.

21 sold from $$1.2 to $1.3 million and 14 are for sale that’s about an 8 month supply coming out the gate into the new year.

And now for the Piece de resistance! !! (apologies to the French)

While only 48 properties sold over $1.3 million…there are currently NINETY (90) N I N E T Y!! for sale!!! That is almost a TWO YEAR supply! I’m not shouting at you, but I find that incredible. Next they’ll be saying the bubble is bursting because there is pressure on this high end! Oh yeah, they already said that just yesterday in the King County Journal.

Yesterday one of my agents posed this question. Her client was buying a condo for $142,500 and was worried about “the bubble bursting”. I have a client today buying a condo for $99,900. Is HIS bubble going to burst? Of course not. Unless you are up in the air in “bubble territory” over a million dollars, you don’t have to worry about the air getting too thin.

Have a good day! If you would like me to find the bubble range in your neighborhood, just ask as a comment, or email me. While Dustin has “dubbed” me “the Kirkland Specialist”, I have actually sold more property outside of Kirkland than in it, at present. I have sold real estate in PA, NJ, FL, Sacramento and L.A. (kind of two states) Seattle and Eastside. So ask any question you like, about any place you like.

Housing Bubble- To Pop or not to Pop?

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[photopress:Bubble_boy_2.jpg,thumb,alignright]Talk to anyone today on the subject of real estate and soon it turns into a discussion about the impending housing bubble and whether or not it is going to burst all over your investment dreams. How worried should we really be?

This article in the Seattle PI explained the situation both nationally and locally rather well. It seems that the question is not really whether the housing bubble will pop (if it even exists) but rather what impact that would have on your housing investment if it happened. All investments are risks. Arm yourself with knowledge and make the best choice for you and your situation and hopefully you can avoid getting “bubble” all over your face!