Category Archives: Seattle Real Estate Stats

What's the Point?

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Brian Brady recently suggested that I explain how mortgage interest rates can be priced with or without a discount point since I’m now posting mortgage interest rates on Fridays here at RCG.  

One point is one percent of the loan amount.   Typically, but not always, one point equals 0.25% in interest rate.   You may hear lenders refer to discount points or origination fees…for me, they’re one in the same.   I’m paid eitiher way.  If you’re a buyer shopping rates, look on the Good Faith Estimate for the origination fee and discount points and add them together.   That’s how many points you’re paying to buy that interest rate for a certain period of time.
For example, if a 30 year fixed rate has a rate of 5.75% with paying 1 point, zero points would probably be 6.00%.   Whether or not someone pays for a point should be decided by how soon they will break even on the point as it is a significant cost.   A simple formula to determine when you break even is to divide the difference in payment between the 1 point and the 0 point scenario into the cost of the point paid.   The scenario below is based on a loan amount of $400,000.

Rate:  5.75% based on 1 point = $4,000
Principle and interest payment:   $2,334.29
Monthly savings over the 6% payment at zero points = $63.91
How long to break even on the $4000 = 63 months

Rate:  6.000% based on 0 points = $0
Principle and interest payment:  $2,398.20

If a borrower is planning on living in their home more than 5 years and not refinance during that time, then paying the point may be the right choice.  
A borrower can also have their loan priced to pay their closing costs. 

Rate:  6.125% = 0 points and approx. $2000 in rebate to cover closing costs (a.k.a. the “no cost mortgage

Zero Down Loan? You Better Have a 620 Credit Score or Higher

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Update 11/11/2008:  This is post is more of a reflection of the times.  Zero down loans are not available with convetional financing at this time.  Private or hard money may have zero down loans available.   FHA with a loan from family members is the closest to 100% financing that I’m aware of.   As with any posts about mortgage guidelines, be mindful of when they were written as guidelines have (and will continue to) change.

I’ve been working on a zero down rate quote for Jillayne, since she requested that two weeks ago when I did my posted my first Friday rate’s on RCG.   She was curious how 100% loan to value mortgages compare based on different credit scores.   At the company I work for, we have around 80 (woops…make that 78 now) lenders we work with.   A majority of our business is handled in our credit line (Mortgage Master is a Correspondent Lender) and some business is “brokered”.  Typically this is subprime or unique loans with added risk.   As a Loan Originator, you wind up selecting 3-5 of your favorite “a money” sources, a few “alt a” lenders and of course, and I like to have around 3-5 sub-prime lenders.   These are the lenders and representatives you rely on, get to know their products and trust their underwriting.   

Back to Jillayne’s request, last night I called my three preferred subprime resources for my rate quotes…what’s the lowest credit score they will lend to at 100% ltv and is the rate and program?  Thanks to RCG’s Tim, I’ve just learned that one of those resources I’ve relied on, New Century…and the only one that I work with who did quote yesterday an 80/20 with a 600 mid-score is facing troubling times to say the least.

“New Century Financial Corp. said it’s the subject of a criminal probe and Fremont General Corp. agreed to a cease-and-desist order with bank regulators in the biggest regulatory actions to emerge from the subprime mortgage meltdown.”   To read the entire article on Bloomberg, click here.

Every day I’m receiving memos from various subprime lenders with details of (much needed) tightening guidelines.  If you currently have clients shopping for a new home and they are using subprime financing (you might know this if they’ve told you their credit is not great, if the mortgage is a 80/20 with a prepayment penalty, etc.) you just might want to contact the Loan Originator to make sure the preapproval is still valid.  If that client has a credit score below 620, they may (1) not be approved any longer or (2) be approved for an entirely different rate (much higher). 

Subprime lenders are either eliminating their zero down products all together or are raising the credit score requirements.  Previously, a 580 – 600 mid-credit score was no problem for 100% financing.   They were beating down our doors to do these loans!  Now, the new standards for mid-score (with the lenders I work with) seems to be 620.  This is a significant jump that will delay some rentsers from buying homes until they improve their credit.   Which again, I think this is good.

I’ve mentioned this before, but this is so important.  If you have clients who have used subprime financing who have purchased homes in the past 1-2 years, this could be a good reason to pick up the phone and call them.   Hopefully they received good counseling from their Mortgage Planner AND they took the advice to heart…working on cleaning up their credit usage, managing their spending, etc.  With the subprime market tightening, if those subprime borrowers have credit scores below 620 when their prepayement penalty is up and their fixed payment is adjusting towards the sky, they may be are in a very tough situation.

Jillayne, this post is all ready a bit long… I promise I’ll have your zero down rates posted soon!

2007 Still looking like a Seller's Market

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I ran my stats this morning to track where the market is heading for 2007, based on properties For Sale, In Escrow and Closed so far since the first of the year. I use the stats for Bellevue, Redmond and Kirkland as the basis for my market research, as this area has a huge component of housing in almost every market segment,and represents are high expectations for market conditions. When this area turns weak, we need to take notice.

So far, it appears that my prediction that 2007 will meet or exceed that of 2006, appears to be on target.

The full data is on my site, with more graphs, but here are the quotes of particular relevance.

“…75% of the market will still be a SELLER”S MARKET in 2007, based on how the year is opening up so far. We do not begin to see inventory tipping over into a balanced or buyer’s market until we get over $800,000 in price, which only represents about 25% of the housing market, in the area I have chosen to examine.”

“The dominant portion of this market is between $200,000 and $600,000…which is by and large “the safer zone” representing 63.6% of all home buyers and sellers in the Bellevue, Kirkland and Redmond markets and the area most likely to rise at 15% to 25% or greater in value by the end of this year.”

 

“Statistics not compiled or published by NWMLS.” NWMLS is the data source I used to compile the data and I created and published the graph.  MLS rule to post this.

Low flow toilets and old houses

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A relative of mine just replaced the old high-flow toilets in all 5 units of his building with low flow toilets. The result: a water bill that is $100 a month lower – the replacements should pay for themselves in six months. The toilet of choice: Toto Drake. It’s approximately $200 and it gets rave reviews on the internet.

I live in an old house (1908) with the requisite sloping floors and rusty iron pipes that come along with it. We already have low flow toilets (usually excellent Sloan Flushmates) which were purchased on Consumer Reports rave reviews. See the second rave review above – the only toilet they liked better than the Toto has a flushmate system. HOWEVER! Consumer Reports clearly does not have an old house that has charmingly rust-flecked, low pressure water. See, the Flushmate system works by storing up pressure from the pipes in a sealed tank and uses that pressure to forcefully push water out when you flush. There is no need to rely on gravity to move water through Flushmate toilets, although there are no mentions of them being used in space on the internet. When you put one of these suckers in a house with rusty pipes, little bits of rust get into the workings of the tank and the flushes get progressively worse over time until you’re left with a toilet that pushes the tank water down about a half inch on the flush and then gurgles at you. When this happened, I found myself cussing (a lot) at an inanimate object.

So last Thursday I found myself doing a midnight toilet installation of a Toto Drake. It comes with excellent instructions which should be supplemented by these instructions. And now that it’s done, I very highly recommend it. In fact it’s amazing. For decency’s sake, I will not go into further details.

The moral of the story:

  • New house? Get a Flushmate
  • Old house? Get a Toto Drake
  • Hate money? Keep your high flow toilet

Redfin's First Year

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In a follow up to Dustin’s post, I started to examine Redfin’s numbers in a bit more detail.

Redfin released a report today (it was yesterday, but I am on vacation… I guess you can say Maui Time :)) that opens saying, “Finds .904% Negotiating Advantage, 1.952% Average Commission Refund, 95% Customer Satisfaction; The Most Common Type of Redfin Buyer is a First-Timer

The condo public offering statement/resale certificate

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As always, this post is not legal advice.  For a specific legal question, consult an attorney.

Buying a condo can make a lot of sense, particularly if you can purchase a unit close to work (e.g. downtown) and if your “lifestyle” is conducive to apartment-style living (e.g. no kids, no pets).  If you’ve decided to take the plunge, make sure you do your homework.  The Seattle Times had a good piece on the topic a couple of years ago.  That article notes several sources of information that you should review prior to purchasing, including the public offering statement (for new construction) or the resale certificate (for a previously owned unit).  In reality, your homework can begin and end with the public offering statement or resale certificate, as by law each of these must contain the information necessary to make an informed decision.

That said, don’t revert to your younger self and “forget” to do your homework.  The statement or certificate can be quite intimidating, often including hundreds of pages of information.  Nonetheless, you need to sit down and dedicate some time to reviewing it in detail.  Reading it in bed, before drifting off to sleep, is NOT sufficient (although you may find a cure for your insomnia).  The disclosures contain information about the financial and physical health of the devlopment, as well as the rules that will govern how you can use the unit (such as renting it out).  Ignore this information at your peril — you may find years later that you made a very poor decision, all because you did not take the time to review the provided information.

Finally, given that the disclosure contains hundreds of pages, many of them written in dense “legalese,” you may wonder whether an attorney should also review it on your behalf.  An attorney can explain the disclosure and answer any questions you may have.  Moreover, the attorney may be able to identify issues of concern that you did not appreciate.  On the other hand, the attorney does not and can not know everything that is important to you.  Therefore, while you may benefit from an attorney’s review, the key is that YOU must take the time to review the disclosure carefully.  If, after doing so, you decide that the condo is not for you, both disclosures create a right of rescission (7 days for a public offering statement, 5 days for a resale certificate) so you can cancel your purchase and sale agreement and avoid the mistake entirely.

Seattle Area Appreciation

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Brian Brady asked: “Off topic but I wanted to ask you a question, Ardell. Has Seattle been a rising market from Feb, 2005 through today?”

It would have been a lot easier to answer if you hadn’t said February 2005 🙂 I could have just said yes. But I remember the day. It was June 15, 2005. I could feel it. I could taste it. I could smell it. The ground was swelling. You could put your ear on the ground and hear it coming! LOL I happened to be in a complex called Sixty-01, which has its own idiosyncrases that I won’t go into since you are out of State, Brian. But here’s some stats to prove my blood boiling was on target. Hindsight is easy. Feeling it coming is an artform. I’m using Sixty-01 because I was there that day and also because it has a lot of “same product”/apples to apples for straight appreciation comparisons. They are all practically identical 2 bedroom – 1.5 bath townhomes in the stats below.
07/09/03 – $100,000

11/24/03 – $ 95,000

08/12/04 – $128,950

08/24/04 – $129,500

02/18/05 – $128,950

05/03/05 – $123,000

06/20/05 – $131,450

07/07/05 – $127,000

All of those were in contract before June 15. On June 15th one came on market with an asking price of $137,950. I practically begged a poor woman to get an offer in within an hour of it hitting the market, to grab it at full price. I could feel it in my bones! The prices were going to move right now! She could get it at full price today! But she couldn’t get her brain around it. She wanted to make an offer based on the average of the comps at $127,000. I was beside myself. I knew getting that townhome at $137,950 on that first day was going to be the best move she ever made. But I couldn’t convince her. Five days later it bid out and sold at $148,000. And here’s what happened after that.

07/19/05 – $148,000

07/22/05 – $167,950

07/29/05 – $166,000

11/29/05 – $178,950

03/30/06 – $177,000

06/07/06 – $205,450 (list at $199,900)

07/11/06 – $205,000

08/25/06 – $227,500

09/13/06 – $235,000

11/01/06 – $245,000

01/17/07 – $252,500

New on Market $269,900

So Brian, rephrase the question and ask me if it has been going up since 6/15/05, and I can answer yes. February 05 through June 05, not as much. I’ll have to do a new townhome comparison in Ballard to confirm Eastside vs. Seattle proper. Hard to find “like kind” in Seattle as there are very few “like kind” comparisons except splits and townhomes. Many of the homes were built in the early 1900s through 1930, and are all unique structures with massive modifications since 1905. But I’m pretty sure the stats will be about the same. Kirkland Condos…same story but harder to find “like kind” these days as newer equals higher ceilings, so “like kind” harder to track.

Hope that answers your question.

Inman has Gone Blog Wild

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and it is a good thing!

Looks like they just published the first of a 4-part series on real estate blogging (only by subscription after today!). Lots of good stuff from some of today’s heavy hitters!

It was great to see Todd of Lenderama get some exposure for his (very cool) REMBEX search tool.

Also want to say thanks to Greg… I think he’s running one of the best real estate sites on the web, so it means a lot to me when he gives credit to RCG for some of his inspiration.

While I’m talking about Inman, I thought I’d mention that, like many other real estate bloggers, I’ve been invited to participate in their Blogger’s Connect at the very end of July. I’m definitely looking forward to it as I had a lot of fun last year in San Francisco… From the overview:

The content, speakers and workshops are being designed in the blogosphere. We have invited 20 leading real estate bloggers to use their blogs to reach out to their readers to invent the program.
Imagine the first “user-generated program” including panels, topics and sessions. Could be silly, could be interesting — certain to be fun.

Bloggers Connect will begin on Tuesday, July 31 with a party and then all-day sessions on August 1. Fun and crazy events are being built into the program including the Dive Bar Tour, the Haight Asbury experience and the blogging romp.