Category Archives: Market

Remember When There Was No Bubble?

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It’s been 4 years – let’s reminisce for a moment, shall we?

I remember. I also remember incurring the wrath of the bubble blogger set with a slightly too subtle dig at the no bubble stance. For the record I said that saying there is no bubble was a “crazy statement.”

But my predictions (which I’m having trouble finding) were imperfect. I predicted a 10-25% decline in home values at the worst and thought the likely bursting of the bubble (which I fully acknowledged!) would actually be a persistent leak – that we would have flat prices for 10-15 years while inflation ate away values.

I thought the government would be so averse to home prices dropping that they would do everything to keep them stable – even at the expense of the economy. Apparently I underestimated the size of the problem. Or I overestimated the powers of the government. By a lot.

And we aren’t out of it yet. This crazy prediction is already true for parts of California (from this post):

>How much do you expect the $400,000 to $500,000 market to drop?

If we have a “soft landing

ING Bank suing under RICO statutes to recover losses by alleged local real estate fraud ring.

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Here is the article from the Seattle Times.

Excerpt:

In one deal, the bank loaned a borrower $935,000 to buy a Tacoma house for $1.35 million — a house that, according to the real-estate Web site Zillow, is valued higher than 99 percent of homes in its ZIP code. Nationwide Home Lending was paid nearly $30,000 in fees on that loan.

I’ve just dropped an entire commentary I wrote within this post regarding the fantasy idea some people believe that our local area is somewhat insulated from the garbage and degenerates destroying our markets and economy due to greed and fraud.

In essence, my post can be wrapped up in these questions:

  1. Ethically, is this industry too far gone to recover any resemblance of credibility, trust and moral foundation?
  2. How will the real estate brokers weed out the bad actors? We know DFI is going after loan officers and others.

Fortunately, I know and work with quite a few agents and loan officers who genuinely try to do their very best for their customers. Unfortunately, many of them and others who work in real estate are caught in the enormous wake of the problems the fraudsters have created.

Sunday Night Stats – Prices Improving?

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We all know that prices can’t go up in large leaps the same way that they can drop significantly in a short time.  It takes a lot longer to go up than down, due to appraisal issues.

It will take many weeks to build up enough data post Obama $8,000 Stimulus Credit to form any conclusions. But you have to start somewhere 🙂  Stats prior to the credit are somewhat irrelevant at the moment except to later see if in hindsight pre-credit was “bottom”.  We won’t know that until next 4th Quarter and January of 2010.  Until then, we’ll track week to week until we build up enough data to do larger market segments.

I am using MPPSF Pending Inspection King County SFH, as these are the most recent “went under contract” homes. The green columns are properties that went under contract pending inspection Monday March 2nd through Sunday the 8th.  The  purple columns went under contract pending inspection Monday the 9th through Sunday the 15th.

I broke the stats down into under $500,000 (2 columns on the left) and $500,000 to $1M (2 columns on the right). The lower priced segment is doing better, but both show slight improvements.  These are asking prices, so all this is telling us at the moment is that buyers seem to be making offers on houses that are not priced quite as low on a median price per square foot basis, as they were pre-homebuyer credit. We won’t know if actual prices close higher until we get at least 45 to 60 days in front of the credit passing.

Data is not compiled or posted by NWMLS (required disclosure)

King County Home Prices inching Upward?

King County Home Prices inching Upward?

 

Sunday Night Stats – Housing Market is “Stimulated”

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As you can see from the graphs below, there has been a 50% increase in the number of properties going pending in the last 7 days, compared to the week of 2/7 to 2/14 before the $8,000 “first time” homebuyer credit passed.

427 sales went pending in the first week in March. That’s a 50% increase over the 286 that went pending in the 2nd week in February.

The second graph shows the increase in the number of homes that are selling in 30 days or less.  Not sure if that increase is “normal”  for January through the first week in March though.  Still, worth reporting the positive trend upward.
I combined condos with single family homes in King County. I think it’s fair to say that the credit stimulated home sales.  It’s also fair to say that people waiting for the credit, depressed home sales in the previous period.  So the real stimulus may lie somewhere in between.
 
On a side note, I am hearing of a few pending sales falling out, because the owner/seller is now eligible for the new assistance that came out on 3/4, and may not “have to” sell after all.
King County Condo and Home Sales Improved by 50%

King County Condo and Home Sales Improved by 50%

% of homes and condos sold in 30 days or less improving

% of homes and condos sold in 30 days or less improving

 Statistics are not compiled or posted by NWMLS

How to Find Short Sales in the MLS

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It’s important for real estate agents to track the percentage of listings where the homeowner is in financial distress as well as REOs (real estate owned), compared to the overall number of listings in a given market area. When short sales, pre-foreclosures, and bank-owned property make up a larger percentage of the overall available number of homes for sale, this has a downward effect on home values in that area. Yes, neighbordhood to neighborhood there “may” not be any short sales or bank-owned listings…today.  However, we are on an upward trend with foreclosures and watching what’s ahead can help home sellers make good decisions about how to choose a more agressive listing price if they are truly motivated to sell. We’ve done some research in the past on this. Galen wrote a post about search terms that work on Estately.  A few months ago I taught a Short Sale class in Snohomish County and an agent remarked that he had a buyer in a specific price range, I believe it was between $200K and $250K and he was looking for home in Everett, North to Marysville. He said ALL the listings in that price range and area were short sales with only one exception. Yikes! More short sales and bank-owned REOs mean more downward pressure on home values as the short sales that don’t close turn in to REOs and banks bring more and more REOs on the market. At this time, searching for short sales is not an option on the public-side MLS (Multiple Listing Service) per rule. Perhaps this is because the commission is paid by the seller and many believe it’s not in the sellers best interest to disclose the short sale status because that may draw low-ball offers. Now that we’re in a buyer’s market, perhaps home sellers and voting members of the MLS rules board would see that it’s in everyone’s best interest to attract the right kind of buyer. Investors have poured into California scooping up low end REOs because the sales price is low enough to allow for the home to be rented for enough to cover the mortgage payment long term. At some point, when Seattle area prices are more in line with rents, investors will want to search for short sales and REOs here.   Until then, by doing keyword searches we can also keep track of possible “ghost inventory” (REOs being held off the market by the banks) making an appearance here in the Seattle market. 

Here are some possible short sale and REO search terms to use besides just “short sale” and “REO.”

foreclosure
preforeclosure
pre-foreclosure
short payoff
motivated seller
subject to lender approval
bank approval needed

bank owned
corporate seller
corporate owner
vacant
no repairs
fixer
instant equity

What search terms should we add to the list?

Is it possible we are at the bottom?

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***Updated/Revised 4:30pm 02/08/2009 PST:  Here is the link to the “Memorandum” (.pdf document) showing how this mortgage broker, in his own words, fraudulently originated millions in loans and how the fallout will plague our economy.  Big thanks goes to blogger “Scotsman” for the getting the document to me.

——————————————-

This is how is it possible………..we may not be at the bottom.

Ardell, I share your hope.   My hope for change is that real estate and lending industry comes to grips with how out of control the core players were that led us to the crisis we are in.   If we all point incriminating fingers to other people in our industry from escrow people to mortgage brokers to agents to Wall Street, pretty soon there’s nobody else to point to.  It circles back to all the players who participated.  Too simple of an explanation of a complex problem?  Maybe.  But, it’s fix has got to start with people in the trenches who are transacting the sales and arranging the financing.

But my hope and Country fight an uphill battle because of people such as Christopher Warren, the mortgage fraudster who wrote the above missive, “how is it possible”. Christopher Warren skipped out of the country on a private plane this past Monday.

See his incredibly clear picture of what is facing our markets by his “memorandum.” (.pdf document).

If one man’s expose of what went on in lending by one person does not make you pale, then I don’t know what will.

An excerpt from Christopher Warren’s  “how it is possible:”

  • That CITI Mortgage didn’t catch correspondents Mortgage Bank of California and Bondcorp Realty Services over-financing over $30,000,000 in bad mortgages with cash-back purchases for straw buyer groups?   How many of these loans are already now owned by our government, tax-payer subsidized, FNMA and Freddie Mac?
  • That GMAC Mortgage LLC., bought over $3,000,000 in mortgages secured in the Orlando Academy Cay Club aka “The Greens

7,200 sf lot West of Market Kirkland

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Awhile back, Dustin wrote a post about Pocket Listings, and we had a discussion about what “pocket listings” are, and why agents advertising them is generally against mls rules.

A pocket listing is someone who tells you they want to sell a property, but for some reason they either are not ready to, don’t want to, or can’t enter the property in the mls. 

I think this one may fall into the category of “can’t”, though I’m not totally sure.  I was recently contacted by someone who owns a 14,000 +sf lot with a house on it, West of Market in Kirkland which is zoned for 7,200 sf lots. It is a view lot, and the 7,200 sf vacant portion of the lot is on the view side (view of Lake Washington)  I believe it is unobstructable as to houses but not trees, across from Waverly Park.  Taking another walk over there today to study it further.

Back to the mls and “pocket listings”.  Clearly to put a property in the mls, you have to have an asking price.  Given current market conditions, do the builders want a 7,200 sf lot with a view West of Market in Kirkland?  There are lots of houses for sale over that way.  Might someone want to build their own custom house and get the lot cheaper by doing the short plat?

Since the lot is not two separate lots today, should the seller go to the time and expense of separating it into two lots and increase the cost of the lot accordingly?  Or in this day of the cheaper the better for a buyer, should they let the buyer of the lot participate in the short plat to save some money?

Given there is no current legal entity “7,200 sf lot” until after it is short-platted into two lots, can you even put the property in the mls, given it doesn’t exist as that legal description?

There is a note in the mls rules that you can list a property if it can not be put in the mls by reason of other mls rules, but you can’t use a NWMLS contract form to do so.  This one seems to fall into that category.

So to Dustin, since you asked, I guess there may be a “true” pocket listing…even here in the Seattle Area.  Maybe not.  Perhaps someone will shed some light on this in the comments.

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

Sunday Night Stats – Where's the market heading?

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Tonight I want to get an idea of where the market is heading as we go into July, as to prices.  I’m going to bulk together some Zip Codes that I personally follow, to have a large enough area to be meaningful, and yet zero in on local at the same time.

I’m getting the data as I am typing, so I have no idea how the numbers will fall.  We’ll find out together.

First Group: 98033, 98052, 98004, 98005, 98007 and 98008 on a combined basis.

Residential:

In January of 2008: median Asking Price of homes sold was $652,450 and the median Sold Price of those same homes was $625,000.  Median days on market of those sold homes was 68 days and 27.66% sold in 30 days or less.  Median Price Per Square Foot = $267.66

Lets jump to May 2008 and see where the market went by that time from the beginning of the year.  Median Asking Price $643,500.  Median Sold Price $630,000.  Median Days on Market 41 and 38.28% sold in 30 days or less.  Median Price Per Square Foot = $272.72

June 2008: median Asking Price $710,000.  median sold price $690,000. Median days on market 61 and 33.58% sold in 30 days or less.  Median Price Per Square Foot = $277.10

July month to date: Median Asking Price $650,000.  median sold price $639,000.  Median days on market 50 and 30.92% sold in 30 days or less.  Median Price Per Square Foot = $253.57.  Median type of house was a 4 bedroom 2 1/2 bath 2,520 sf home.

Some pretty large homes are in escrow with the median square footage of all homes in escrow at 2,660 and a medain price per square foot of $262.20.  Of course that $262.20 is asking price and not sold price, so prices are trending down from July 1 to present.

Let’s compare that to June of 2007: Median Asking Price $699,000.  Median Sold Price $685,000.  Median days on market 21 and 61.09% of homes sold in 30 days or less.  Median Price Per Square Foot = $292.73.  Median type of house was a 4 bedroom 2 1/2 bath 2,340 sf home.

Interesting July stats so far.  The size of home is larger, the price is lower.  More home for less money as I said last week.  Very Interesting.  But the numbers are so different from May and June. Fewer houses sold quickly.  This data is worth tracking week to week, especially as we head into fall.

Second Group Seattle 98115 and 98103 on a combined basis excluding townhomes (townhomes on Eastside automatically not included for the most part, as on The Eastside townhomes are condos and not residential). Trying to keep this apples to apples.

In January of 2008: median Asking Price of homes sold was $540,000 and the median Sold Price of those same homes was $522,500  Median days on market of those sold homes was 51 days and 29.57% sold in 30 days or less.  Median Price Per Square Foot = $253.64

Lets jump to May 2008 and see where the market went by that time from the beginning of the year.  Median Asking Price $595,000.  Median Sold Price $580,000.  Median Days on Market 20 and 61.97% sold in 30 days or less.  Median Price Per Square Foot = $277.51

June 2008: median Asking Price $550,000.  median sold price $546,000. Median days on market 29 and 54,02% sold in 30 days or less.  Median Price Per Square Foot = $265.04

July month to date: Median Asking Price $567,450.  median sold price $553,450.  Median days on market 23 and 56.90% sold in 30 days or less.  Median Price Per Square Foot = $261.67.  Median type of house was a 3 bedroom 1 3/4 bath 2,115 sf home.

Let’s compare that to June of 2007: Median Asking Price $567,000.  Median Sold Price $569,500.  Median days on market 13 and 75.93% of homes sold in 30 days or less.  Median Price Per Square Foot = $273.79.  Median type of house was a 3 bedroom 1 3/4 bath 2,080 sf home.

The median asking price of all pending sales is $535,000 and the median square footage is 2,085.  Looks like better “deals” are in escrow as we speak at $256.59 MPPSF as to ASKING prices with that number to be pared down further as to sold prices.

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


Unless someone asks for the regular weekly King County Stats, I’ll post them over on my blog tomorrow.  It’s been a long, back-breaking day for me.  I was more interested in finding out where the market was heading, than posting overall King County since last Sunday.  But I will post them on my blog tomorrow for the benefit of those who have been charting them on Excel Spreadsheets.

Goodnight!

*****************

You can find the regular weekly stats here.