Rising tide lifts all ships…

Posted on September 28, 2005 by Anna

Who benefits when housing prices rise? The sellers, of course… But also the local governments though increased property tax revenue. The Seattle PI has an article on how the mayor of Seattle has $15 million to spread around thanks to rising home prices:

In 2000 the average value of a residence in Seattle was $232,800, on which the property tax paid to state and local government was just under $2,832, according to the King County Department of Assessments. In 2005 the average home value had gone up to $368,700 with a property tax bill of just over $3,765.19.

The Seattle general fund budget proposed by Nickels for 2006 is $760 million, up from $717 million last year. It includes more money for street resurfacing and more money for sidewalks, police and firefighters.

“Thanks to a strong local economy, we can expect significantly more sales and business tax revenue,” Nickels said in his budget address Monday. “Strong real estate sales will also provide much more revenue for the city than initially forecast.”

I find the similarities interesting between this article and my post from Monday, where I note that the Federal government (IRS) benefits when flippers don’t pay attention to tax laws.

More In-depth Sale Price vs List Price Analysis

Posted on September 28, 2005 by Dustin Luther

If you were following the comments from my post from yesterday, I said I would follow up with another stab at diving into how the sales prices versus listing price changes over time. Seeing as how it is already getting late (and I’m tired!), I’m going to stop trying to make sense out of the numbers and present what I’ve found so far.

However, before I go any further, I’m going to rant at my fellow real estate agents! For the sake of all of us who actually care about data, please learn to double check your work before submitting listing information to the MLS! I spent more time cleaning up the database due to lazy real estate agents then I did actually creating the charts! Here are some things to look out for (but this list is by no means exhaustive): (1) Spelling: Fremont is spelled with only one “e”, (2) Location: South Lake Union is not a neighborhood located within Ballard and (3)Price: your home that sold for $345,000 probably should not have been listed for $34,500,000.

With that rant out of the way, I thought I would also mention that I’m not the only one surprised by housing numbers today… Hot Property had an article where Amey Stone says reading NAR’s press releases on sales levels “is starting to be a bit of a yawn — sales weren’t quite at record levels, but darn near close to it.” Unless you get tickled by trends and statistics, expect to sleep through the rest of this post…

When I look at the entire Ballard Area as defined by the MLS (this is a huge area that includes places like Greenlake, Blue Ridge, Wallingford, Fremont, Sunset Hill etc). We see the same seasonal trends over the past two years that I identified yesterday. But when we go back another season, the trend becomes much less pronounced.

Here are the things I found most interesting about the chart:

The seasonal variation is much less pronounced in previous years
There has been a steady trend up wards where the sale price is greater than the listing price
In terms of trends, it didn’t really matter whether I used the original list price or the adjusted list price.
The huge drop in 08/03 is due to some homes in Broadview that were listed way to high!

My speculation is that the patterns identified the above chart have a lot to do with evolving sales tactics by agents. It seems like it has become more and more common for agents to list a home below the value that they think it will sell for… This does two things: (1) It assures a quick sale and therefore a quick commission for the agent. (2) It has the potential to bring in more buyers and thereby raise the final sale price of the home.

When I went to analyze the data at a more local level, things got much messier… Rather than seeing clear seasonal patterns as I did in Loyal Heights, things simply got fuzzy. They got so fuzzy that I’m hesitant to even provide the next chart because it simply looks like an ugly mess…

My goal in creating the chart was to see if the same trend that held up in my analysis yesterday for Loyal Heights, would hold up for other neighborhoods. As the chart above demonstrates, it roughly holds up for all of Ballard, but as the chart below demonstrates, it does not hold up at the neighborhood level. I’ve done enough regression analysis for transportation planning studies to know that a chart like this is going to give meaningless trends.

By the way, if you’re interested in the raw data that I used to create these statistics, just email me, and I can send you the Excel file that has all the wonderful (?) pivot tables and charts I used in creating this post.

Also, please feel free to comment on other ideas you might have for exploring the wealth of information that is locked up behind the MLS database. Anna has the key that opens that door! 🙂

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.

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.”

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!

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.”

Home buying tips

Posted on September 14, 2005 by Anna

When I begin with a new client, I often work out a “road map” so that we can clarify a list of priorities. Along those lines, it is often important to layout a time-frame. I’ve worked with buyers who want to move into a new home in weeks and buyers who are planning ahead for months… Being realistic about when you can move into a place helps insure that everyone’s expectations are met! Also, keep in mind that it may take 30-90 days (or more) to locate the right home, secure financing, and complete the home-buying process.

Are you interested in more information? I’ve put together a Home Buying Packet (*.pdf) that lists a bunch of good information about the home buying process with sections on:

The Home-Buying Process
Home Search Criteria
Loan Application Checklist
Making an Offer
Contract Checklist
Home Inspection
Glossary of Real Estate Terms
and many more!

In filling out the form in the Home Search Criteria section it is important to distinguish between the “Need to Have

Seattle’s hot summer…

Posted on September 13, 2005 by Anna

This proved to be another hot summer in Seattle as the median home price rose over 15 percent during the past year. However, the hottest local market was the Eastside where the median sale price rose over 23 percent.

On one side, I’ve talked with a few sellers who are hesitant to sell for the reason of not knowing what will they be able to afford after that sale. And on the other, I’ve noticed a large influx of people relocating to Seattle for technology-related jobs, but maybe I’m just more aware of this subset of people now that I’m running a blog.

Skyping for Real Estate

Posted on September 13, 2005 by Anna

The New York Times reports that EBay bought Skype for $2.6 billion yesterday.

Are you familiar with Skype? It is a great service that I’ve been using extensively in the last few months to talk with people all over the world (and in particular my family in Russia!). The sound quality is at least as good as a land-line and definitely better than a cell phone!. And the best part is that it is free to talk to another Skype user! If you are interested in skyping me, just send me an email and I’ll happily pass along my Skype name!

One of the ways that I think Skype could be useful would be in connecting me to people thinking of moving to Seattle. If you are interested in learning more about Seattle real estate, then definitely consider connecting with me via Skype!

I know I’m not the only one thinking of using Skype for business purposes. According to NY Times their revenue is expected to grow from an estimate of $60M this year to about $ 200M in 2006. E-Bay sees this communication technology making on-line trading easier “particularly with transactions involving real estate, big-ticket purchases and services that require detailed conversations.”

“I’m a big believer in focusing brands and businesses that are in very large markets,” Ms. Whitman said by phone from London. EBay is “absolutely not” interested in developing a portal, she said. “You can be sure we’re going to focus on e-commerce.”
In addition to the basic service, about two million Skype customers have signed up for a pay service that allows them to use their computers to make calls to regular phone numbers as well as receive calls from landlines and cell phones. To complete these calls, Skype pays phone companies small per-minute fees.

They also give an interesting statistics as that only 13 percent of Skype’s users are in North America; nearly half are in Europe and another quarter are in Asia.

Some industry specialists said eBay’s purchase of Skype was a sign that voice calls would increasingly become one of many services that Internet companies would provide, rather than a stand-alone business.

“This turns the entire telecom industry picture on its head, and demonstrates that voice, presence, text messaging and other I.P.-based applications will be essential for the company of the future,” said Jeff Pulver, the chairman of pulvermedia, which promotes Internet-based phone services.

Minorities paying more for loans in Seattle?

Posted on September 12, 2005 by Dustin Luther

The Seattle Times analyzed loan applications for single-family, owner-occupied homes in 2004 from 25 of the nation’s largest lenders and concluded that minorities are paying more for loans in Seattle. The numbers show that black people in Seattle are more than four times likely to carry a high-rate mortgage than white people (13.2% vs 3.1%). However, the data also shows that black people in the rest of the country are even worse off as they are more than twice as likely to carry a high-rate mortgage than in Seattle (26.6% vs. 13.2%).

Also interesting is that the rates are not due to income differences as “low-income whites are far less likely than high-income blacks to wind up with high-interest mortgages (3.9 percent vs. 11.3 percent).” In looking for answers to why, the times speculates that differences “may be due to a variety of factors, ranging from the financial savvy of loan customers with differing backgrounds, to which lenders operate in which parts of town.”

I’m pretty sure that everyone reading this blog is aware that it is illegal for lenders to discriminate based on race and/or to discriminate against a neighborhood known as “redlining”. And I’m positive that all lenders are aware that this is illegal, so it makes me think that the difference must have something to do with the financial savvy of the loan customers.

What is the solution to this problem? It seems like educating the consumers of high-rate loans. Along those lines, here are some helpful links and organizations that I’m aware of:

Fair Loans, Fair Housing (*.pdf) by the City of Seattle that provides some advice on avoiding predatory loans.
Community Home Ownership Center (CHOC) (206-587-5641) CHOC provides seminars for first-time home buyers with links to statewide seminars, and also provides training for real estate agents.
El Centro de la Raza (206-329-7960) El Centro provides home buyer education classes in English and Spanish.
HomeSight (206-723-4355) HomeSight provides purchase assistance and other financial and educational information to home buyers (in Seattle, South King County and Snohomish County).
International District Housing Alliance (206-623-0122) Provides home buyer education and housing counseling in Vietnamese, Cambodian, Tagalog and several Chinese dialects including Cantonese, Mandarin and Taiwanese.
Urban League of Metropolitan Seattle (206-461-3792) Provides one-on-one counseling and monthly home buyers seminars.

If anyone is aware of any other local programs, I’d definitely be interested in hearing about them. In particular, I’d be interested in hearing about mortgage brokers that are working to educate minorities.

Thanks to Todd at Lendorama for highlighting the Seattle Times article.

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