Friday, February 24, 2017

Cowlitz County seeing a surge

Listed at $180,000
I have clients that are finding it increasingly difficult bordering on impossible to find a livable house under $200k in Clark County. Some of these clients are looking north to Cowlitz County including the Longview and Kelso area.

Longview was once a prolifically wealthy city. It was one of America's earliest planned communities. It is also a city along with its sister Kelso, that went through a tremendous economic crisis in the 1990s when changes in electric power helped lead to the demise of thousands of jobs when several large plants at the Port of Longview closed down. Just as the area was beginning to crawl out of that terrible hole, the big economic national crash happened in 2009.

Real estate in that area has remained quite affordable. For those considering a drive to Vancouver or Portland, Longview and Kelso are at exit 36 on I5 and that means it is 42 miles to Downtown Portland. That's a bit of haul but the silver lining in the commuter hell cloud is that most of that 42 miles will be at the limit of 70 mph. (60mph in Vancouver) In fact generally it is not until one reaches 39th street in Vancouver that the traffic becomes everyday heavy.

That said I was showing some charming homes in nice neighborhoods for under $200k. These weren't large or modern homes, but clean, well kept older 1940s and 50s homes with some upgrades and light remodeling and move in ready. Try to find a nice 1400 foot house in the 'Couv' for under $200k. The home pictured was listed at $180,000 and was located in a very nice neighborhood with well kept homes. In some of the neighborhoods where things have not yet recovered, there are homes listed under $100,000. These of course are in need of work and are in neighborhoods still suffering from depressed conditions.

Clark County hasn't seen prices like these since the bottom of the market in 2010-11. Cowlitz County can be a great place to get a starter house at a price even the most modest earners can afford. The monthly mortgage payment on a $180k house with $6300 down would be around $1200 or less than a typical 2 bedroom apartment in the 'Couv'.

Longview and Kelso, just up the road and still very affordable.

Friday, February 17, 2017

Median Home Price a Complex Metric

Median home price is a metric widely used in real estate as a bit of a benchmark for relative values in a particular area. Although many readers may already understand this unit of measure, for the benefit of those less familiar, I can provide a simple definition. Median is as basic as "middle". It defines the value at which half are higher and half are lower. This differs from average which takes the sum of all values and divides by the number of values. Average can be skewed more easily than median, especially in a localized setting where there are fewer than 1000 sales.

To show it in an ultra simplistic way take a look at the series below:
  1. 189,000
  2. 198,000
  3. 201,000
  4. 215,600
  5. 225,000
  6. 226,000
  7. 228,000
  8. 231,000
  9. 297,000
  10. 456,000
  11. 908,000
The average of these eleven home sales is $337,460 but the median is $226,000. Half the homes on the list are lower than the median and half are more. Most real estate markets will have way more than eleven sales, but the grouping is usually similar with a whole bunch of sales in one general price range and a handful of extremes often in the high end. In an average these high end sales can skew the average north of reality because the bulk of homes sold are near the bottom of the price range and there is theoretically no maximum limit to the price of a house. The median is a better measure of what is typical in a market as the extremes do not carry more weight than their proportion to the overall list. That is to say a $5,000,000 home will only move the median one sale up on the list but it could move an average way off the mark. For example if I add a $5,000,000 dollar sale to the list the average jumps to $726,005 but the median only moves up to $227,000 precisely in the middle of the list of sales. 

But median price can also be skewed by local demographics and local zoning, neighborhoods and other fixed issues. Generally real estate becomes more valuable in close to the city center and or center of jobs. People will pay more to avoid a long commute. But there are also limitations based on the existing conditions. For example, Vancouver, Washington has a lower median home price than the whole of Clark County. In theory it should be higher as Vancouver is by far the largest city in Clark County and the overwhelming center of jobs for Clark County and it is immediately adjacent to the core city for the metro area, Portland, OR. Yet its median is lower. Why is this?

Simple, Vancouver has a great mass of neighborhoods that are very old and contain thousands of older and smaller homes. These homes are very popular as they are affordable to first time home buyers. As one radiates away from Vancouver the homes are either new and larger or on acreage in the rural areas. These homes are often very expensive. But if one were to compare a 3000 square foot home on a 1/2 acre in Vancouver to the identical house in Ridgefield, the Vancouver house would be more expensive if all else is equal. Yet Ridgefield has a higher median home price than Vancouver. Ridgefield does not have a very large quantity of older and smaller homes. It also has a disproportionately high number of large country estate properties. 

Someone looking in at Clark County, Washington from the outside, might think Vancouver was a local value proposition based on its overall lower  median home price. But if that hypothetical outsider were looking for a large 3000 square foot home on a 12,000 foot lot in upper middle class neighborhood, they may find that Ridgefield or La Center have lower prices on those homes than Vancouver, despite the fact they have a higher local median. They will also find that there is a substantially longer drive into downtown Vancouver or Portland, OR. 

There are often trade offs when deciding to live "in close" versus a bit further out. Most often these neighborhoods in close to the city are more heavily populated with more traffic and other city type issues. They also have the upside to the city in the form of amenities like shopping, restaurants, etc. A simple median price comparison is rarely enough to determine whether a neighborhood is suitable for any one buyer. A local real estate professional can offer sound advice regarding the best home for each individual buyer's needs.

Median values can also change due entirely to trends in the market. For example the real estate market could be flat with only a slight year over year appreciation say 2% in actual values yet one local neighborhood could have a median moving way up to the tune of 10%. This could be trend in sales of larger homes. It could also signal a change in local neighborhood dynamics. Maybe a new city park was completed and many people want to live near it. 

Just because a communities local median home price has risen, it does not always translate directly to a specific house. If the local median has risen 8% in the last 12 months an individual home in that market may have only increased in value by 4% or perhaps it rose 12%. The market is a dynamic phenomenon with many variables.

There is a plethora of information flooding our senses from the Internet, but it can be very difficult to see all that data come together cohesively without a local real estate pro shedding context and perspective specifically tailored to an individual buyer or seller's concerns and needs. This is why a local Realtor® is such a valuable asset for anyone participating in the real estate market.

Friday, February 10, 2017

Market Still Needs Listings!

This market still needs listings. Anyone thinking about selling their home should be advised that the market is saturated with buyers struggling to find and secure a property to buy.

I don't believe that we have so much an unusual number of buyers, in fact recent trends are beginning to clip the number of eligible buyers through higher prices and higher interest rates. But inventory is so tight pressure remains on the market. We truly have a supply side problem and it appears homeowners seem inclined to stay put and keep their homes.

It is quite unusual to have such favorable conditions for sellers and yet sellers are not bringing properties to market. Sellers seem content to sit on their property. Of course it won't take a huge number of properties to get this market in balance so their truly is a narrow window of opportunity for sellers to capitalize on these conditions. Right now a seller that lists a property for sale in the under $500k price range here in Clark County, will likely see a quick series of offers with favorable terms for the seller. Once sellers start bringing more property to market, this sellers favor will quickly diminish into a more neutral market with a near equal number of buyers and sellers.

If interest rates do begin an upward trend that seems to have already started at the end of last year, then this market could transition from sellers to neutral and ultimately become a mild buyer's market.

Now is a great time to list property.

Friday, February 3, 2017

Washington Now 3rd Most Expensive in USA

The State of Washington has managed to climb its way to the upper echelon of home prices for America according to a report last year by the Seattle Times. The statewide median price of $307k last summer placed Washington State 3rd on the list of 50 US states behind #2 California and #1 Hawaii.

Here in Clark County we enjoy relatively inexpensive pricing compared to nearby Portland, OR and well under half what homes cost in Seattle. In fact Clark County remains one of the value propositions in the Northwest.

Affordability is not just based on median or average home prices, but also median or average incomes. For example if the median income in city A is $150,000 and the median home price in $1,000,000 then that city has more affordable housing than city B with a median home price of $200,000 and a median income of $30,000. This is why Seattle with its $700,000 plus median still has huge demand for real estate, they have a median income running close to $80,000 which is about $15k higher than the median here in Clark County.

We have an interesting dichotomy in real estate here in Clark County. Portland is just across the river and they have been built out for decades. They have a genuine shortage of housing, but they don't have the ultra high incomes seen up in Seattle. Portland in many ways is more expensive than Seattle. The median income in Portland is right at $60k and that is about $7000 higher than Vancouver or approximately 12% higher but Portland's median home price is a whopping 25% higher than Vancouver. This puts Vancouver in a high demand position as it offer close in proximity at a significant savings.

Clark County, unlike Portland and most of Multnomah County has a fair amount of build able land within the urban growth boundary. This will keep Clark County competitive on home pricing and that is good for us and very good for buyers.

2017 could be a great year of moderation for us in the market. I am deliberately using the word "great" to describe a moderate condition, because a rapid run up in pricing creates a climate for volatility. This market is pretty healthy right now.