Real Estate Geekiness…

Posted on September 27, 2005 by Dustin Luther

Tonight, I’ve been playing engaging the inner real estate geekiness along the likes of Tom Dozier’s Seattle Property News blog… I’ve been following (from a distance) Tom’s “Home Tracking” posts and not exactly sure where he was going until today. When he said “since one of the signs of the strength of a market is whether high demand is causing people to bid prices above the original amount the seller seeks,” I decided to test out his theory with a larger sample size…

So here is my method. I took all the homes that sold in my neighborhood (Loyal Heights) over the past year and calculated the “Net (Sale minus List Price) as a Percent of List Price”, or this calculation:

~~(Average Sale Price – Average List Price)/Average List Price~~
Average((Sale Price – List Price)/List Price)

The result is summarized in this chart:

(Click on the chart to see a larger version!)

The first thing I found interesting is the extent to which the “Gross Net as a Percent of List Price” varied seasonally… For two years running the % of List Price bottomed out around Feb/Mar and then quickly picked up to peak around May (with homes selling for 4% and 8% over the list price!). Note that February (the bottom) is also when the number of sales bottomed out over both of the last two years.

For reference, there were 182 homes sold between October ’03 and August ’04 in Loyal Heights with the average home selling for 1.2% over asking price. (I threw out September 03 and September ’05 data since I only downloaded data for the partial months…)

My conclusion is that Tom is wasting his time if he expect to see the health of the market by looking at whether or not homes are selling above or below the market price. As my chart demonstrates, there is way too much seasonal variation for a one or two home snapshot to be valuable. Even in the last two years where the value of homes in my neighborhood have consistently risen (quite substantially), there have been long periods (up to six months) where the average home has sold for less than the asking price. However, with that said, I want to say thanks to Tom for raising this intersting issue because you’ve given me an opportunity to learn about (and demonstrate) the huge seasonal variation in the local market!

I welcome anyones comments on my method if you have ideas on improving things (including the obvious improvement of adding more neighborhoods).

Update: I realized this morning in the shower that I was calculating the net (sale price minus list price) as a percent of list price, so I’ve corrected the text in the post (but not the chart!).

In the market for a condo?

Posted on September 26, 2005 by Anna

New condos are sprouting up like weeds in Seattle for a variety of reasons… The Seattle Times has an article worth reading if you are considering buying a condo. Keep in mind that owning a condo is legally very similar to owning a home:

“Most people see condo living as somewhere between owning your own home and renting an apartment, but it’s more like owning your own home. There’s a responsibility that each homeowner has, whether they accept it or not,” said Craig, a board member of the state chapter of the Community Associations Institute, a group that provides educational information about homeowners associations.

“The best advice I can give to anyone buying a condo,” she said, “is to educate themselves as to what they’re buying and to be involved in the maintenance and operation of the condominium.”

If you are in the market for a condo, do your research and try to think of all the potential issues that might arise. Here’s a summary of the advice given in the article:

Ask for the key data on the condo, such as the number of units and number of parking spaces.
Ask the board for copies of the association’s bylaws, rules and regulations to learn the rules that govern the association.
Ask for the Builders public offering statement, which includes valuable information such as a list of the builder’s five most-recent condominium projects, restrictions regarding renting, a list of common amenities and known assessments.
Ask the unit owners to provide resale certificates to potential buyers, which should include valuable information such as expected special assessments, ongoing litigation and the amount of reserves available for repairs.
Ask for minutes and agendas from past meetings.
Ask for a “reserve study” that can give clues on potential structural defects (note that this might not be available.

With a little help from Flexcar

Posted on September 26, 2005 by Dustin Luther

With gas prices seeming to rise on a daily basis it seems like a good time to mention a little bit about Flexcar.

The Seattle Times describes the idea behind the organization pretty well in this article: Fueled by Flexcar. In short, Flexcar provides cars at specified locations throughout the City of Seattle and the Eastside that members can rent by the hour. For people who don’t drive a lot, these cars could provide their sole form of auto transportation. For the rest of us who need at least one car in the house, we can use these cars as our “second” or “backup” cars.

If you are a Seattle resident and you are seriously considering getting rid of a car, then consider taking the One Less Car challenge. It is a program where the City offers some pretty substantial rewards to families willing to give up at least one of their cars!

Real estate ‘flips’ can backfire

Posted on September 26, 2005 by Dustin Luther

The PI had an interesting article this weekend about how flipping real estate can backfire for the less experienced… The crux of their argument has been said many times before, but is worth repeating: “if you’re not careful with your real estate flips, your investment strategy could produce a sizable payoff for an unintended partner: the Internal Revenue Service.”

spam filters, google ads and site statistics, oh my!

Posted on September 22, 2005 by Dustin Luther

I’ve made a few changes to the site recently and it seems like a good time to give some updates…

I added a new spam filter that has completely eliminated the amount of comment and trackback spam that I was getting. It worries me somewhat that I’ve not had one comment (besides my own test comments) since I added this filter. If you are trying to leave a comment and it does not work, please let me know via email!
I took down the google ads off the sidepanel and moved them to the bottom of individual posts. They seem more fitting there and hopefully you’ll find them more useful.
I added a site stat program, MapStats, that displays where site visitors are coming from via google maps. It is a really slick program and if you’re curious how many visitors that this site is getting (and where they are coming from), you can click on this tag to find out.

I think I’m done with tweaking the site for a while. Now it is time for me to get back to providing updates on the Seattle real estate market!

Fremont Oktoberfest this weekend…

Posted on September 22, 2005 by Anna

[photopress:Bridge_6871.jpg,thumb,alignright]
Fremont gives us another wonderful opportunity to celebrate the autumn, hear live music, have a glass of good beer, make some crafts and much more at the Fremont Oktoberfest September 23-25th

Autumn gets ushered in with the Fremont Oktoberfest. Historically, in old Germany, the brewing season began with the fall harvest of barley and hops and any beer left at harvest time had to be consumed before the new beer arrived. September was designated as the time to drink-up all of last season’s beer. It officially became Oktoberfest in 1810, when Ludwig I, the Crown Prince of Bavaria declared a 16-day celebration in commemoration of his wedding.

Inbox: What’s the best neighborhood for same-sex couples with children?

Posted on September 20, 2005 by Anna

Continuing on the theme of opening up some of the questions I get via email to my readers, I’ve listed another question and my response below. I’m definitely interested in hearing from anyone in the community who feels they can add something to my response.

Question: My partner and I are thinking of moving to Seattle. We both have professional jobs and would like to be somewhere with good schools for our two children. What neighborhoods do you recommend for families where both parents are the same-sex?

Answer: I’m of the option that just about any neighborhood in Seattle would be very welcoming of you and your partner. I’m aware of only a few gay parents in my neighborhood, but I would not be surprised to learn that there were many more who just blend in with all the other families.

In terms of schools, I would recommend checking out the school guide that is put out by the Seattle Times. Seattle has some really great schools and some schools that probably won’t meet your expectations. While high test scores probably shouldn’t be the only way a school is judged, knowing this information can help weed out the schools that you would find unacceptable.

In addition to finding an appropriate school, a very relevant question is how much you are willing to spend on a house. A starter home in most neighborhoods in the City start at around 350k-400k. If this seems reasonable to you, then you should have no problem finding an appropriate home in a wonderful neighborhood.

Do you have a better answer for this question? Are there any neighborhoods that this family should definitely be considering? Are there some special resources that might make the transition easier for this family should they move to Seattle? Please share your knowledge in the comments section!

Inbox: Where to Live Within Biking Distance of UW?

Posted on September 20, 2005 by Dustin Luther

I had someone email me the other day with an interesting question, and I thought I would share my response… and then see if anyone in the community could improve upon it.

Question: I’m moving to Seattle and interested in finding a neighborhood where I can bike to my work at the University of Washington (UW). Where should I be looking?

My Answer: There are a bunch of great places to live in North Seattle that are within biking distance to the UW. I would stay away from the south part of Seattle because there are not a lot of good north-south bike route through the downtown… (too many hills and not enough dedicated bike lanes).

Seeing as how I live in North Seattle and I bike a lot, I end up referencing the bike map put out by the City of Seattle quite often. Here is a direct link to the bike map of North Seattle (*.pdf), but note that this is a large file (1.5 MB). If you download the map, you’ll notice that the Burke-Gilman trail (a solid red line) goes through the UW campus. The Burke-Gilman is a wonderful commuting trail and has been recently expanded to the north-west all the way to the Golden Gardens Park. If you can find a place to live within a short ride to the Burke-Gilman, then you will have an easy ride to work!

By the way, if you follow this link, you can order a free hard-copy of the bike map: http://www.ci.seattle.wa.us/transportation/bikemapform.htm

Do you have a better answer for this question? Are there any neighborhoods that are particularly attractive for bicyclists? Please share your knowledge in the comments section!

It’s getting more expensive to borrow money

Posted on September 19, 2005 by Anna

The federal reserve has been raising interest rates for more than a year and that means that it is getting more expensive for homeowners to raise money by borrowing against their equity. For example, the prime rate is now at 6.5%, while it was only at 4% at the beginning of 2004. However, with the substantial increase in the value of nearly all homes during the past few years, home owners are still finding it convenient to refinance their mortgages and withdraw cash.

The Seattle Times had an article today about how this “cash-out” refinancing will have the largest influence on first-time home buyers, who used home-equity lines for “piggyback loans”: “Unable to foot a 10 percent or 20 percent down payment, many bought homes with little or no money down by taking a first-lien mortgage and one or two home-equity lines, according to Mary Boudreau, owner of Penfield Financial, a Fairfield, Conn., mortgage broker.”

The Federal Reserve and Mortgage Rates

Posted on September 14, 2005 by DRMiller

Consumers are often misled when it comes to the subject of the Federal Reserve and how it affects mortgage interest rates. Often the media is the culprit causing the confusion. In the last few years, the Fed has taken action that caused mortgage interest rates to move in a direction other than what consumers expected, because the media provided weak reporting on the subject.

The Federal Reserve affects short−term interest rate maturities, the Fed Funds rate, and the Overnight Lending rate. These factors have a direct impact on the Prime rate. If you took only this into consideration, you may mistakenly conclude that changes made by the Fed will cause a similar movement in mortgage interest rates. However, mortgage interest rates are dictated by the trading of mortgage−backed securities, which trade on a daily basis.

The real dynamic at the heart of interest rate movement is the relationship between stocks and bonds. Stocks and bonds compete for the same investment dollar on a daily basis. There is literally only so much money to be invested. When the Federal Reserve feels that interest rates need to be decreased in an effort to stimulate the economy, this reduction in rates can often cause a stock market rally. When the market becomes bullish, the money to invest in stocks comes from the selling of mortgage−backed securities. Unfortunately, selling mortgage−backed securities to fuel stock market rallies causes interest rates to go up, not down.

Historically, there have been many times when the Federal Reserve has increased interest rates. Stocks then sell off in fear that the increase will affect corporate profit margins, and the liquidated stock assets need a place to park until the next rally comes along. The safe haven is found in mortgage−backed securities which cause mortgage rates to drop. The daily ebb and flow of money is what matters most when it comes to the movement of mortgage interest rates. I make it a point to continuously monitor interest rates for my clients, and advise them of opportunities to manage their mortgage debt at a better rate. This is the foundation of my business model as a Trusted Advisor.

Rain City Guide

Your Guide to the Seattle Real Estate Market