Category Archives: General

Major Changes with Appraisals for Conforming Loans

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This morning it was announced from OFHEO that Fannie Mae and Freddie Mac have agreed to some major changes with regards to how appraisals will be ordered for conforming mortgages:

“…including eliminating broker-ordered appraisals, prohibiting appraiser coercion, and reducing the use of appraisals prepared in-house or through captive appraisal management companies in underwriting mortgages. The agreements also enhance quality control in the appraisal process and establish a complaint hotline for consumers. The agreements include a Home Valuation Code of Conduct that the Enterprises will apply to lenders selling mortgages to Fannie Mae or Freddie Mac. The Code becomes effective on January 1, 2009.”

It’s ironic to me this is eliminating “broker-ordered” appraisals and “reducing the use of captive appraisal management companies” when it was Washington Mutual’s actions with eAppraisal that caused New York Attorney General Cuomo to investigate.

The appraiser I use has been doing his job for over 30 years. I trust him and respect his work. Last year, when he had an appraisal come in low on a property that was in a bidding war with zero down financing, I didn’t doubt him. The agents were furious…even the homebuyer wanted a new appraisal. They wound up buying the home for the appraised value instead of the bid-up price. I wonder if they realize what a favor he did for them by providing a true appraisal? (He’s come in low on some refi’s too). I have to admit, I’m less than happy realizing that I may not be able to rely on using his services for appraisals once the new guidelines go info effect.

I’m concerned that obtaining a conforming appraisal will be very similar to how VA appraisals are done: a crapshoot lottery. This is all well and good as long the appraisers in the pool are all competent and efficient. However when there is no competition for business, will it breed complacency?

I’m also wondering what will happen with the cost of appraisals. Presently, I have a rate sheet from my appraiser and I know how much the cost will be for each transaction after we have loan approval. Unless Fannie and Freddie decide to control what an appraiser will charge, the fees can vary. How will loan originators be able to provide accurate Good Faith Estimates without knowing who the appraisal will be through?

More questions than answers right now…and more changes with mortgages are on the horizon with HUD’s announcement of what the median home prices are due in about ten days.

Update: Fannie Mae is accepting comments until April 30, 2008.

Warning to Thurston County agents – and this goes for FSBO folks too…

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February 25, 2008. The NWMLS has received information (Thurston County area) concerning a male individual who looked at homes with an agent — all of the information he provided about himself and his employment was false. He claims to be a buyer’s consultant with the Federal Government, a PhD in Physics, his wife a professor at the University of Washington and they live in Medina, WA. None of the information he provided, except his name, is correct.

The individual is a currently registered, Level 3 Sex Offender, male, about 54, white, 5’11″, about 220 pounds, gray/red hair, tattoos on each arm and may have a beard.

Other than providing false information during the preview of two homes, the individual did not demonstrate inappropriate behavior. Showing agent did not allow herself to be placed in a perilous situation. Individual has previously been a home inspector and appears to be familiar with the real estate industry.

Please be careful! If this man contacts you, contact your local authority.

This posting from the NWMLS came out a few days ago but I was out of town and didn’t see it till today. You can never be too safe when selling your home or acting as an agent to help someone buy or sell a house, so do be careful if you are contacted by a person matching this description.

Absorption Rates

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As of last night there were 9,176 Residential Properties for sale in King County and 3,261 condos. I personally feel that calculating absorption rate is better done in smaller segments and not the entire County. But since many are trying to calculate the number of months of inventory for all of King County, I’ll throw my hat into the ring with my opinion on that.

Based on sales for the months of March through June of 2007, it would take 3.79 months to sell off the current inventory.

If single family home sales are down this year by about 30% compared to last year, and I think they are and will continue to be so, then that 3.79 months turns into 5.6 months.

So it would appear in my opinion that we currently have a full season’s worth of inventory on market. Another way to say that is: I predict that between March 1 of 2008 and August 20th or so, 9,176 homes will sell in King County, that being equal to the inventory as of March 2nd.

Now let’s do the condos.

3,261 on market. For the months of March, April and May of 2007 the avg. number of sales per month was 919. For the months of June, July and August of 2007, the avg. number of sales per month was 965. The average then for the six month period is 942. 3,261 divided by 942 sales would be 3.46 months if sales were not down. But if condo sales are going to be say 35% fewer, and I think that’s generous for a couple of reasons, then avg. monthly sales would drop from 942 to 612 per month increasing the absorption rate of current supply from 3.46 months to 5.3 months.

So let’s say it will take until mid-August to sell off 3,261 condos, which is equal to the current supply. That’s pretty much the same as my single famile home prediction.

One of the factors to consider if you are using absorption rates to determine how long it may take for you to sell your home is age. Any area that is competing with new construction may find a higher number of sales being new homes. If you have a home built in 2004 and your primary competition is a builder of new homes, the absorption rates may not help you if 60% or more of the purchases in your immediate vicinity represent people buying new construction vs. resale.

If all of the properties in your immediate vicinity are homes built between 1960 and 1980, and there is little or no new construction or newer homes, then the absorption statistics will be more helpful.

Identifying who your competition is, cannot be done on a County-wide basis. If you have a home near Microsoft, for example, better to use absorption rates calculated specifically for that area. If you have a lake view home, then it is a bit more difficult. Lake view buyers are more likely to look at other view homes and be more open to where. So looking too close to your home to calculate rate of absorption would not be as accurate.

In any event, it looks like we are starting the year in King County for both single family homes and condos at a full season’s worth of inventory. Remember that townhomes on the Eastside are likely to be included in the condo stats and townhomes in Seattle, particularly North Seattle, will most likely show in the Residential/SFH statistics. That is a function of how the land is and is not subdivided.

Sunday Night Stats & YOY Results

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I’m actually on the edge of my seat awaiting the results of the end of month King County stats for February. I love posting in real-time as I see the data for the first time as I am posting it here.

Remember, not all agents post their closings in a timely manner, so there will be some updating in the next few days. In fact I will be showing January YOY as well to pick up any late entries there also.

I’ll do January first for 2006, 2007 and 2008 in graph form. I’m off to get the numbers and post them in the graph data field.

Median Home Prices King County 1

The median home price for January of 2008 for single family residences is up 9% comparing 2008 with 2006 and up 1% from January of 2007.

of homes sold king county

Total Number of Sales is down 35.6% compared to January of 2006 and down 31.8% compared to January of 2007.

Days on market increased from 33 days in 2006 to 53 days in 2007 to 61 days in 2008. So those reduced number of homes sold are taking longer to sell for slightly better prices.

Now let’s look at the condo sales for January YOY.

Median Prices King County Condo Sales

Prices up around 21% compared to 2006 and holding steady compared to 2007. Remember, these are the numbers for the month of January compared Year over Year (YOY)

of condos sold King County 1

34% fewer condos sold in January of 2008 compared to January of 2006. 37% fewer condos sold in January of 2008 compared to January of 2007. This repeats what I have been saying, that last year some people who didn’t buy single family homes, bought condos instead. But this year sales are down even further for condos than for single family homes, greatly due to financing issues introduced in the latter part of 2007.

Days on market for condos increased from 27 days in 2006 to 38 days in 2007 to 61 days in 2008. That’s a pretty dramatic increase in days on market and coincidentally identical in 2008 to the days on market for single family homes.

OK…let’s all hold our breath for the February reports. It’s only March 2nd, so there WILL be some late additions which I will post next Sunday night. But we also had an extra day, it being a leap year.

Median Home Prices King County 1 2 3

February Prices were up 11.5% from 2006 to 2007 and are holding to a hair under for 2008 compared to 2007.

Days on market have increased from 24 to 43 to 57 56. Again taking much longer to sell at these prices.

King County Home Sales 1

I’m going to guess that with late arrivals posting in the next week that the volume continues to be down at least the 32% or so that we saw last month, and not the 38% or so showing in that graph. But still, not seeing an improvement for sure. We’ll catch up on late postings next week, but the trend appears to be continuing as to volume.

**UPDATE** Late postings as of March 6 coming in better than expected for residential sales at 29% drop compared to February of 2007. Graph has been modified to reflect most recent stats.

I did the number of sales first on the condos, so I’m going to post it that way. All I can say is I sure hope there are a LOT of late postings out there, because volume appears to be down as much as 47% as of right now. Let’s guess that to be not more than 40% just so we can all sleep tonight, and hope for the best. I’ll repost this next week in a corrected version after picking up late postings.

**UPDATE** as of March 6 with late postings, # of condo sales down 39% compared with Feb 2007. Graph has been edited to reflect late postings. Median days on market 43, no change in median sale price.

King County Condo Sales 1

I had to go back and double check that one.

Median Prices King County Condo Sales 1 2

The slight downward affect on prices would suggest that the volume, while likely off for late postings is going to end up significantly down, and that is beginning to have a negative impact on prices.

On to the weekly Sunday Night Stats.

King County Residential Sales

Active/For Sale – 9,176 – UP 49 – median price $524,500 – UP $4,507

In Escrow – 2,584 – UP 27 – median price $449,950 – UP $50 (these are asking prices)

Closed YTD – 1,942 – UP 391 – median price $434,538 – DOWN $4,462

King Conty Condo Sales

Active/For Sale – 3,261 – UP 5 – median price $328,900 – UP $3,900

In Escrow – 868 – DOWN 14 – median price $308,500 – DOWN $6,500 (asking prices)

Closed YTD – 658 – UP 125 – median price $278,950 – DOWN $1,049

I feel like the 11 o’clock news tonight. Prices starting to trend downward and volume off significantly.

These stats are compiled and posted by ARDELL and NOT the NWMLS. This is a required disclaimer under current rules of membership.

During the week people should be posting more closings as of February month end and I will adjust the stats via strikeouts and corrections throughout the week.

“Statistics not compiled or published by NWMLS.

You may be the most impressive part of RCG

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I was just updating some of the stats that I use in my presentation in prep for this week’s event, when I noticed something that I thought RCG readers (and contributors) might appreciate.

The total number of visitors to RCG has always been impressive, but I found it wild that out of all the people who visited RCG in February 2008, over 2,800 of those people have visited the site more than 200 times! And almost 4,000 of February’s visitors have been to the site more than 100 times. Those numbers are an obvious tribute to the contributors and commenters who keep RCG interesting and relevant day-in and day-out!

ga rcg

Tam O'Shanter in Bellevue

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tam o shanterBesides being a Golf and Country Club, Tam O’Shanter is also a neighborhood. “The purchase of a home in the TOS Neighborhood is all it takes for newcomers to join in the fun.”

I recently sold a home there to buyer clients and hope that gets me an invite as a guest to hang out at the pool this summer 🙂 I don’t play golf, so I’m going to do some market stats.

In 2005, or as much of it as I can get which is beginning around this time but back in 2005, the median home price in Tam O’Shanter was $498,500 which was over the median list price and the median days on market was 15 days.

In 2006, the median price jumped up by about $100,000 to $600,500, still over list price, but with the median days on market increasing to 21 days.

In 2007, the median price went up another $100,000 to $699,950 which was equal to the median asking price and the median days on market was 20 days.

So no evidences of weakness here in the Tam O’Shanter neighborhood, and given the increase was about the same $100,000 in each year, that would be a 20.5% increase from 2005 to 2006 and a 16.6% increase for 2007.

One home that has closed in Tam O’Shanter sold for over $800,000 in 2008 and sold at 98% of asking price. It took about 9 weeks to go into escrow from the time it was listed. The only other property that sold/closed so far in 2008 is the one that I sold, as in I had the buyer client. It sold for about 89% of the original listing price and had one price reduction prior to it being sold. But that was a short sale property.

There are two properties in escrow waiting to close and past the inspection phase. So far so good in 2008. There are 5 properties on market. An interesting note that could account for longer days on market generally in 2008 is that one of the pending sales was initially contingent on the sale of another house. With buyers being less likely to buy outright before they sell their current home, we will see sales taking longer to get from list date to closed due to home sale contingencies. But the good news is that this one appears to reflect that the buyers WERE able to sell their other home and proceed with their purchase. So pretty good news all around on that one.

This is a good neighborhood to watch for signs of market changes as it had good appreciation in both 2006 and 2007 and is a neighborhood I would suspect to see fairing well in 2008 relative to King County as a whole. Of course the sale I participated in as the Buyer’s Agent is not going to help it’s stats this year. But as more houses come on market and sell, we should see this neighborhood outperforming King County as a whole.

I posted this as I was calculating the stats, so I did not pick this as a “good news neighborhood” to be a cheerleader 🙂 It just turned out that way while I was writing the post. I’ll try to do many of these mini snapshots of the market in areas where I work, to keep the Sunday Night Stats posts more focused on the neighborhoods affected, and those not affected, throughout 2008.

Greatest Real Estate Agent in the World

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I am studying the results of my own Greatest Real Estate Agent in the World blog posts to determine which of my blogs to focus on in 2008.

Greatest Real Estate Agent in the World blog post written here is at the top, no surprise, so writing on RainCityGuide.com is obviously my most productive place to blog in 2008, as usual.

The second post I wrote on RainCityGuide however doesn’t rank well at all. In fact I can’t even find it. So older posts must matter most. That brings into question the contest setup, as the first to know about it has the advantage and is ranking as #1, likely for that reason. Perhaps setting a start date that is not the same date as the announcement would be in order for future contests. I saw it the first day too, but maybe that is why Eric and I rank so well. Someone who saw it a few days later might have a harder time based on this Google aging factor.

I have to admit that I am surprised that Greatest Real Estate Agent in the World on my own blog at RealTown is ranking higher than the one I posted on ActiveRain.com. Since I post there more than on my own blog recently, that gives me food for thought. Google isn’t even picking the ActiveRain one up as far as I can tell. So spending so much time there may not be as productive as writing on my own blog.

I do Google well for Greatest Real Estate Agent in Seattle, even though I didn’t use those key words. I’m #2 behind Stan Mackey using those keywords.

It’s funny that Kevin’s Active Rain post Googles higher, but just two higher, than mine on a blog I never use. I only see those two when I add Ardell at the end as in Greatest Real Estate Agent in the World ARDELL.

True I’m having difficulty speaking with other participants in the contest, particularly those who are not real estate agents at all. But I am learning things that I need to know to adjust my time among my own blogging efforts. Sometimes we talk to ourselves and get the answers we need for ourselves in the process 🙂

Good advices are an imperative in a changing market

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I am having a very difficult time training some agents who still want to believe that “a house is worth what a buyer is willing to pay for it.” That is just SO not true. That runs more along the lines of “A sucker is born every minute.”

On the other hand I once fired an agent for saying, “I won’t let you pay a dime more than the property is worth!” If you are pretending that you can value a property “to the dime” you are just blowing hot air.

I spend two to three hours a week, outside of my normal real estate activities, training agents on a variety of topics. Many who have had their licenses for 2-3 years have never had to fine tune their home valuation skills, and find themselves feeling like they are rookies again. It’s a difficult change to embrace, but necessary. When there were five offers, buyer agent skills involved “how to win the bid” more than what is this house “worth”. When garnering an offer for a seller client, how to handle multiple offers was more important than how to price the property in the first place. That is no longer the case, and agents must spend time learning how to value property, with a reasonable degree of accuracy.

One of my mantras is “Agents are not allowed to use the word like”, unless they are referring to what a majority of buyers may like. “I like” coming from an agent, is like a stock broker recommending that you buy Target stock because he enjoys his shopping experience at that store better than at Fred Meyers. I often tell agents that they are not allowed to personally like or dislike properties. Whether or not you personally like a property is often a sign that you have not yet honed your valuation skills to the level of a true professional. When an agent stops saying “I like”, that is the day they begin to cross over from apprentice to professional.

This changing market leaves much less margin for error. Every week we go out and look at six to eight properties (Broker’s Opens) and come back and value them. To many this seems like a foreign exercise. Some still say “but I think my buyer would like…” or “I didn’t like”.

I don’t expect everyone to buy into the concept that an agent really can know what a property is worth. But I do think it’s odd that they all seem to know what it’s worth when a seller won’t list it at “the right price”, but then play dumb when the buyer wants to know what it’s worth. The conversation all too often turns to what it will take to “get it” vs. what it’s worth, when there is a buyer client in the room vs. a seller client.

Maybe this is just part of the 15 year old problem of a double standard for buyer clients vs. seller clients. Maybe it’s the conflict of interest involved in the agent needing the price to be fairly accuate in order to sell it for a seller, but not wanting to value it properly for a buyer client, because then they might have to say DON’T buy it.

We’re definitely “back to basics” with regard to real estate agent training classes. Those who refuse to accept any valuation technique beyond “it’s worth whatever a buyer is willing to pay for it”, will be left in the dust . If agents continue to refuse to accept the fact that property valuation is one of their duties as an agent, I may have to switch to holding these classes for people who are buying property vs. those charged with guiding them well through the process.

Licensing criteria does not involve training agents in an ongoing way in the art of home valuation. All to often, Brokers want to say “go out and SELL!”. Maybe it’s time for the buyers themselves to be able to access classes on home valuation techniques that go well beyond “price per square foot” and “the comps”. For now, suffice it to say that “comps” are not relevant to your valuation, unless you have at least driven by that “comp” to see if it had obvious differences beyond the photos available in the mls. “comps” are not properties “for sale”. “Comps” are properties that have SOLD.

And in this changing market, if it sold before August of 2007…it ain’t a comp, unless you make appropriate adjustments for what happened in the latter part of 2007.

Days On Market and a few other things

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In a comment to my Sunday Night Stats post, I was asked to report the days on market in addition to the regular Sunday night data being posted. The system won’t let me run stats for data that exceeds 10,000 homes, so I can’t do a full year at once. That is why it is broken down into quarters. I also can’t go back before February of 2005 in non-archive format. So we’ll end with 2nd quarter of 2005 for comparison purposes. The numbers are for median days on market.

I’m posting these in real time with two windows up as I gather the information, so I have no commentary regarding the data at this time.

YTD Residential King County – 62 days
YTD Condos King County – 58 days

1st quarter 2007 Residential – 40 days
1st quarter 2007 Condos – 28 days

2nd quarter 2007 Residential – 27 days
2nd quarter 2007 Condos – 22 days

3rd quarter 2007 Residential – 33 days
3rd quarter 2007 condos – 27 days

4th quarter 2007 Residential – 47 days
4th quarter 2007 Condos – 43 days

1st quarter 2006 Residential – 26 days
1st quarter 2006 condos – 20 days

2nd quarter 2006 Residential – 20 days
2nd quarter 2006 Condos – 17 days

3rd quarter 2006 Residential – 24 days
3rd quarter 2006 Condos – 19 days

4th quarter 2006 Residential – 33 days
4th quarter 2006 Condos – 27 days

I have to go backwards on 2005 as the beginning of the 1st quarter is archived, and the 2nd quarter residential sales exceed the 10,000 limit. So 2nd quarter 2005 residential sales volume exceeds any quarter reported above. While this post is not about #of sales, that seemed important to note.

4th quarter 2005 Residential – 24 days
4th quarter 2005 Condos – 19 days

3rd quarter 2005 Residential – volume exceeds 10,000 homes

3rd quarter 2005 Condos – 19 days

2nd quarter 2005 Residential – volume exceeds 10,000 homes
2nd quarter 2005 Condos – 24 days

Inadvertently we learned that the 2nd and 3rd quarters of 2005 were higher in volume of Residential says than any quarter since that time.

As to days on market, looking at the 4th quarter comparisons between 2005, 2006 and 2007 likely gives you the best information regarding the lengthening of days on market. It would appear from what we have seen so far YTD in 2008, that this trend will continue.

Stats not compiled or published by NWMLS. (Required disclosure)