Friday, December 28, 2018

2019 Outlook

The stock market took a blow to the face this month and that may seem like trouble, but it is more than likely just a sell off to take profits off what has been a monumental rise in equity value since 2016. The red hot stock market has been a major factor in the Fed decision to tighten things up with interest rates and that has in turn led to some minor softening in the real estate market, particularly for the single family residential market.

The Wall Street blues could lead to a more robust interest in putting all that sell off cash into mortgages that are now bringing investors a decent 4.5% - 5.5% ROR. That bodes well for buyers as a stable lending market will settle in nicely to our near neutral market conditions.

Analysts continue to project that the next two years will see home prices outpace inflation but the media is painting a grim picture because the rate of growth is expected to slow substantially. But double digit housing inflation is not sustainable and the market is simply settling in to a more normal growth rate.

Buyers should understand that even though prices are not skyrocketing, they are still inching upwards and getting in sooner offers more opportunity for equity growth, equity growth is good. Don't be misled by media reports of a slowing market to mean that prices are reversing and getting lower, they are not. Some overpriced listings are being reduced to points they should have been at all along but the median continues to creep up.

It seems like interest rates are stabilizing and historically speaking a 5% mortgage is still a fabulous deal. Here's to 2019 and solid year for real estate! 

Friday, December 21, 2018

Happy Holidays!

Wow, 2018 is nearly done and it was a good year for real estate locally. Some say it was flat or 'softer' to which I say, "yes it was." But frankly, that is good. A crazy market that puts too much favor on one side of the transaction is great for the favored but terrible for the 'unfavored' side.

2018 brought us a transition into a near neutral market. Sellers are still favored a bit on the entry level price point and buyers tend to hold an edge at the high end. In the majority middle from 90% of median to 120% of median, we seem to have a solid neutral market and that keeps things fair, and dials back the intensity in a positive way.

Looking ahead to 2019 is a challenge as some variables for the coming year are unpredictable. Will mortgage rates remain flat? The stock market may play a role in that equation. The last six months has had a flat and volatile stock market and that tends to bring some money into the mortgage side. Should that continue then rates should remain relatively stable in 2019 and that bodes well for real estate.

The economy continues to move forward at a very healthy clip and that means that buyers feel good about making big financial decision like buying a house or upgrading their current home. One of the issues we are facing that may be playing a role in the move from seller's market to neutral is the segment of homeowners that bought a house around 2012 when rates were in the middle 3's. Home values were depressed and they are sitting on a sizable tank of equity. This is the point that historically they make the move up to the house they wanted back then but couldn't afford. But now rates are little higher averaging closer to 5%. Now let's be VERY CLEAR, 5% is still a remarkably low rate for a mortgage, but it is also remarkably higher than 3.75%. I wonder how many of those sitting on that 3.5% to 3.75% mortgage from 2012 are saying they will just stay put. It seems from an anecdotal viewpoint, that the pace of listings is steady but the pace of buyers has slightly softened. Data seems to suggest that is the case at the moment but it is not conclusive.

Will those 2012 homeowners make the move in 2019? That is the big question. 7 years has long been the standard average move rate for a homeowner. If they do, the entry level may get some much needed relief and the middle market might get a shot in the arm, so to speak. This is the scenario that I feel is best for the local market. If we keep pushing positive volume without exerting excessive pressure in any one segment, that is a sustainable situation.

Whatever the the economics deliver for 2019, it should be a good healthy market for real estate. Getting a 30 year loan at 5% is still a great deal for the buyer.

Friday, December 14, 2018

Minneapolis Eliminates Single Family Zoning

The New York Times reported that a serious proposal in Minneapolis to eliminate the single family housing zones in all or parts of the city has been passed. Apparently Minneapolis has a bit of a housing crisis and city leaders feel that allowing more multi-family in existing single family neighborhoods will resolve the problem.

This is dangerous and city leaders used the ugly history of racism and segregation to bring about the change. There is a sordid past time of cities using the power of zoning laws to keep specific ethic groups (among other groups) separated from others. By citing the racist history of zoning, are they admitting to having current racist policies in Minneapolis? I never would have pegged Minneapolis in that light in this modern age, who knows? I certainly hope not. Although zoning laws have a nefarious past, modern day zoning is designed to support all residents from all walks of life and to protect them from having a factory built next door, or a large apartment building being stuffed onto a lot that can't support the density. The dark past is just that, the past. Today, zoning is far more likely to aid citizens then harm them.

The real problem is multifaceted. First home owners of all ethic groups move into these single family neighborhoods for a variety of reasons, among which are quiet streets, large and private yards, lower crime, and a more suburban lifestyle. The trade off is that they often have a longer commute and find themselves needing to drive everywhere rather than walk or bike.

Often the homeowners have paid a bit of a premium for this quiet culdesac with the big back yard. Eliminating the single family designation allows home owners in the area to start packing in additional units on their land. This will eliminate the quiet and private aspects for some and likely reduce their property values. Furthermore the suburban infrastructure is almost certainly unable to support the increased density which will lead to traffic and heavy wear on streets. This further erodes the value of the property.

Rather than eliminate single family zoning, why didn't Minneapolis just make it more difficult to zone new areas in single family and thus make multi-family zoning easier for developers. A lack of new single family zoning would lead to strong property values for existing homes and the increased multi-family zoning would support more affordable housing in the future. That sounds like a win-win, but apparently not as far as Minneapolis officials are concerned.

People often pour their life savings into owning a home, and zoning, when done right is designed to protect those homeowners from a neighbor building something on their property that ruins the rest of the neighborhood. It is one thing to lighten the restrictions on adding a unit or subdividing an over-sized parcel. But wiping out the single family zoning altogether sounds like a serious case of overkill.

It will be interesting to see the fallout in Minnesota as this new legislation is absorbed into existing developments and future developments. My guess is that Minneapolis has opened Pandora's Box and God only knows what's lurking within.

Friday, December 7, 2018

Clark County Real Estate is Diverse and Priced Right

Here in Clark County we have a very diverse residential real estate market. Probably as diverse as anywhere in the USA. By diverse I mean the broad range of neighborhoods, types of properties, price ranges, rural, urban, suburban, mountains, lakes, rivers, views, etc. Like our neighbor to the South, Multnomah County, OR we have a scenario by which the county is dominated by one large city. Two out of three Clark County residents have a Vancouver address. But Clark County also has a rapid transition between urban, suburban and rural. One need not travel far to get to that 5 acres of rural paradise.

The price range is also very broad. Clark County is noted for having a less expensive alternative to Portland or even Washington County. To a point it is true, there are still excellent homes to be had in Vancouver in the upper $200k and low $300k range. But Vancouver and the rest of Clark County is a virtual cornucopia of real estate. Some of the most expensive homes in the whole metro area are along the Columbia River in Vancouver. Nearly a 100 homes are currently listed at $1 million or more and just as many are listed at less than $250k. In fact the second most expensive residential listing in the whole Metro Area is right here in Clark County.

Of the four primary counties in the Portland-Vancouver Metro Area, Clark has the lowest median home price according to recent MLS data. In fact on the surface we are a bargain. But the gross numbers often fail to tell the whole tale. Data for October 2018 shows the following median price for the four primary metro counties:

  • Clackamas County, OR: 542 sales, median $408,700
  • Washington County, OR: 695 sales, median $399,200
  • Multnomah County, OR: 874 sales, median $395,000
  • Clark County, WA: 634 sales, median $354,950
1942 2 bed 1 bath listed for $280k Fruit Valley, Vancouver
Back in the 1940s shortly after the start of WWII, Kaiser had a large shipyard in Vancouver that employed 38,000 people. Housing was scarce as Vancouver's population more than doubled during WWII, so thousands of simple 2 bedroom 1 bath cottages were built in a very short time. There are literally thousands of these little 600-900 square foot houses scattered around Vancouver. These were built quickly to support not only Kaiser Shipyards, but other large industrial companies along the Columbia River that ramped up production to support the war effort. 

On the Oregon side the city of Vanport was also constructed to house Kaiser Shipyard employees for both the Vancouver and Portland shipyards. Vanport was destroyed in an epic flood in 1948 along with most of the little houses.

These small and very simple homes served a great purpose during the war, and afterwords they continue to serve as excellent value opportunities for homeowners on a budget. Vancouver has the largest collection of these WWII public housing homes in the metro area. There can be little doubt that the median home price is affected by the sheer volume of activity in this popular price range.

Well that clearly affects Vancouver's median home price, but county-wide Clark still represents a relative bargain. When looking at 3 bed 1200-1500 sf homes Clark is still the best value but the order changes to Washington, Multnomah, Clackamas, Clark. When looking at larger 3-4 bed 1900-2100 sf homes Clark again is the value leader and the order is the same as the 3 bed list.

What about income? That often plays a role in the value of real estate. Clark is comparable to both Washington and Clackamas county income but those two are about 6-7% higher. Multnomah however is more than 10% less than Clark. Clark County also has the lowest poverty rate of the four counties in the metro area but only a tad better than Washington County.

So what is the deal then? I have a theory. Vancouver is as close to jobs in Portland as Clackamas or Washington counties. Washington County has its own sizable job market with two juggernaut employers in Nike and Intel. Clackamas not so much. Vancouver is in a different state and is limited to just two crossing points into Portland. Vancouver and Clark County are a bit of a bastard step-child in the metro area and there is this false pretense that Clark County is "far away." It's odd that Vancouver and Portland actually share a border and still there is this 'far-away' vibe even from people that live in places like Troutdale, Hillsboro, Oregon City, etc, all much further away from Downtown Portland.

So buyers have an opportunity to buy in a clearly superior area for less money because as they say, perception is reality. Superior? Yes, better rated public schools, better highways, lower crime. Buck the perception trend and get a great house, in close if you desire, for less money. 

Friday, November 30, 2018

Gentrification of Downtown

Gentrification has become a 'dirty' word in some circles. For those unaware of this term, it is used to describe the redevelopment of older run-down areas into more vibrant and affluent neighborhoods. There are always going to be growing pains when this type of real estate turnover happens.

The funny thing about it is this. When neighborhoods are run down they rend to produce less income and thus taxes for local governments and often have a higher drain on local services funded by those taxes. People are often complaining about all the issues associated with these types of neighborhoods, increased crime, vagrancy, drugs, etc.

After the neighborhoods start to get redeveloped the local area often becomes more expensive and sometimes people that live there can no longer afford the rents / prices. This creates a whole new layer of complaints from constituents.

When old industrial areas are converted to residential, this is less of a problem sine no one "lived" in the abandoned industrial areas. One might think of Portland's South Waterfront or Vancouver's new waterfront. But ultimately these areas create a sphere of affluence around them putting upward pressure on rents and property values in nearby neighborhoods.

It often becomes the classic scenario of pleasing one group by pissing off another. For local governments chasing tax revenue the choice is easy, gentrification benefits the community at large so long as the local elected officials use the new found tax wealth to benefit the community at large. Sometimes that happens other times not so much.

In general Vancouver USA will benefit from the gentrification of Downtown and surrounding areas. What is most important for those who feel they may be on the pricing bubble is to buy while you can. As values push upward, those who bought will benefit greatly where as those who continue to rent will find themselves on increasingly thin ice. Soon they who choose to rent will become the voices against gentrification. Yet often they were the voices against the run down, crime infested neighborhoods that are being fixed.

The moral of this tale is that if you want to be able to stay in an area that is rising up, you better buy while you can. Often in these rising value scenarios renters have to move, owners choose to move. That is a big difference.

Friday, November 23, 2018

A New Urban Living Site

I do hope you all had a wonderful thanksgiving, and now some of you may be in the thick of the Black Friday madness.

I have a new webspace setup with a blog about urban living opportunities in Vancouver USA. The last twenty years has seen a push locally to a more vertical downtown with mixed use and urban residential at the heart of it all. The new waterfront has been a bit of a culmination of this effort that began with the redevelopment of lower downtown and the Esther Short Park area.

The new site will focus primarily on urban condominiums in Uptown Village, Downtown, and the new Waterfront, as well as Columbia Shores and Shorewood.

Vancouver has a great urban vibe downtown with just enough vertical space to feel like a city but not so much to feel crowded. Sunlight still makes its way to the street and parking is still much better than larger cities like Portland. This is a real beautiful in between offering the best of both worlds between a major city and a mid-sized city.

Vancouver has evolved into a smallish large city and that is the porridge that is just right.

Please check out Urban Living in the 'Couv' here.

Friday, November 16, 2018

Are Condos Cool Again?

How about that condo life? Are they back in vogue or is the rental side taking over the scene? Well I did some digging into the data and Condos might just be cool again. We are selling about 40 units a month in Vancouver and that is about 10% of the local sales. The median price for Condos is trailing the overall median by about a hundred grand. But with most condos having association dues, that mean buyers are paying about the same monthly payment for the median condo as they are for the median home.

Here in America's Vancouver the luxury condos have started to come back. In each of the last 6 months at least one condo unit over $600,000 has closed and several seven figure units have gone as well. The most expensive unit was a darling at $3.1 million. That one was sold in September in the Tidewater Cove development. In fact two $3 million plus units at Tidewater have closed in that six month window. A few seven figure units have sold downtown as well including a 3000 footer on the 11th floor of Vancouver Center 3.

With the waterfront apartment buildings coming online right now and more on the way, and the under construction units in the new Kirkland Tower on the waterfront, a little action in the market bodes well. A fair bit of condo activity is happening in that critical $500k - $1M area that will help pave the way for more units on the new waterfront.

Overall I'd say condos are in fact cool again. Millennial buyers are definitely showing a high level of interest in both luxury apartments and condo units. It seems our young people are staying in the city more so than their predecessors in Gen X or Baby Boomers.

Friday, November 9, 2018

As the market softens, the classic rules apply

Yes the classic rules of location, location, location, and 'curb appeal' are back. Those rules never really went away, but when the inventory was so tight that buyers had to take what they could get, those rules were temporarily ignored.

Inventory levels are starting to return to a more healthy level and that means buyers have choices again. Classic issues like, facing a busy street, outdated, functionally obsolescent design, or bad location are now affecting the price in a more traditional fashion. Some sellers and even some agents, have yet to realize this.

Getting top dollar for a house requires several things to happen. The house must have broad appeal in the market. Great location, quiet street, well maintained, excellent curb appeal, fresh and updated feel, clean and tidy appearance, etc. This brings the most possible buyers to look at the house and then of those one will like it the most and reach a little deeper to buy it. When some of these appeal factors are missing, fewer buyers will look at it, of those that do many will pass on it, leaving a small demand left. That leads to a lower price.

The items I mentioned above are not the only factors, but most of those are controllable. The home owner can't control the location, nor the street, but the others are well within the sellers reach. This market will not tolerate a sloppy house, buyers have choices and they will either pick the nicer house or low-ball the ugly one. Sellers are well advised to spend some effort making their property look as warm and inviting, positive curb appeal, and as fresh as possible.

We are in the transition to a neutral market and neutrality is healthy and sustainable.

Friday, November 2, 2018

Sales are still strong, But Sellers Beware...

Sellers best take notice, the robust sales are still alive and well in our local market, but buyers have choices and they are not tolerating high prices. This recent uptick in rates has eliminated many buyers from upgrading their home or even buying a home at all. That has taken pressure off the market. There are still plenty of buyers and these rising rates are also helping them "pull the trigger" but with more choices, buyers can be a little more discerning about how much house they can get for what cash they have to play with.

Lenders are also sniffing out the soften demand, and that means appraisers are even more vigilant in finding true comps. Puffed up values are not going to fly in this market. Sellers may miss a golden opportunity to sell if they get too greedy and try a high price. As rates creep up buyers lose buying power and that overpriced listing sits on the market.

A trusted professional realtor® will pull comps and should offer a trend analysis to help sellers determine the effective price range for their property. Most agents want to help sellers get the best price possible, but they also know that sometimes sellers and the market are not on the same page. A year ago sellers could get away with a 10% bump as the market was a raging bull, but now the market is a butterfly, still flying, but not smashing everything in its path.

We are entering the rainy season here in the Pacific Northwest and that tends to soften the number of buyers out and about looking at houses. Sellers are advised to keep their property free of leaves and other autumn debris and keep that house tidy. The old adage is rings pure: you only get one chance to make a first impression.

Friday, October 26, 2018

Interest Rates Rising, But Still Relatively Low

I have discussed interest rates often as they tend to be a critical element in the real estate market. For younger buyers these higher rates may seem "high" but in reality our rates still remain well below the established 50 year average. A while back I published some charts and graphs showing the plight of rates over the last 50 years.

Today I have returned with more data from Freddie Mac and when we look at the broad picture and compare it to the recent data the rates we have right now are still super low. We had a fairly long period with rates that were at or near all time lows dating all the way back to before WWII. These super low rates were largely produced with subsidies from the federal government. The feds were buying up mortgages to keep the housing market from completely imploding after the severe beating it took in 2009-11.

The real issue is that our economy over the last 15 years has been much more fragile than previous economic cycles. Our national government continues to pile on debt and now it is beginning to become a heavy anchor on the economy. Despite seeing robust growth in the economy, the low rates are a major reason we have the growth. As rates return to "normal" the economy will start to drag again. I am not predicting a recession per se, but interest rates this low are generally not healthy for the financial sector over the long term.

As for housing, we have seen hot real estate markets with 30 year fixed rates in the 7s. The problem right now, especially in high cost markets like the Northeastern US and the West Coast is that many buyers are priced out when rates go up. In more affordable markets rates can continue to rise and buyers will still be able to buy. 

Home ownership is still one of the best ways that a middle income earner can build wealth. With rates low, that wealth builds faster. Equity is gained more quickly with lower rates than with higher rates because mortgages are amortized and the lower rates mean more principle is applied with each payment.

The media does not always present the facts in their entirety and home affordability has many variables. income, interest rates, housing prices are major players and all of them need to be accounted when determining affordability. In 1971 the median household income in the US was $10,383 average Freddie Mac mortgage rate of 7.3%, and median home price of $24,500. In 2016 the numbers looked like this: $83,143 median income, 3.75% mortgage rate, $213,700 median home price. The median home cost 2.36 times annual income in 1971 versus 2016 where it was 2.57 times annual income. Housing prices has outpaced income growth but not by the huge margins many people think. When we apply the interest rates however actual cost of ownership is lower today than it was back in 1971. Assuming zero down, the payment on the median home in 1971 at the average rate was, $168 a month against an monthly income of $865 for a principle and interest housing payment of 19.4% of gross income. 2016 median principle and interest payment of $990 against month gross income of $6,929 yields 14.3%. The median home is cheaper today than it was in 1971 because rates are low. These are national averages and generalizations, of course, but it is important to keep in mind that now is still a great time to buy a house. Someday we may look back at the last few years as the "good 'ole days".

Any rate under 6.5% is still, historically speaking, a low rate. Our government needs to stop overspending and that seems to be something that everyone agrees on yet regardless of which political party is in power, the feds can't seem to stop spending more than they take in.

Since 2010 mortgage rates have been volatile but have never gotten very high. Average Freddie Mac par rates have not been above 5% since 2010. Remember that par rates are based on top tier credit and no cash rebates from lender. Right now, Freddie has the national average rates at 4.86% but this is for a strong borrower with no rebate. Rebate is a term to describe a payment the mortgage investor pays back to the borrower used towards the closing costs. Typically rates paid by a buyer is a little higher than these published figures. So as rates have crept up all year, they are still lower than they were in 2010 and well below the established average since 1971 which is roughly 7%.

That stated, rates are sitting at around 5ish, and that is still pretty darn low. Buyers that are playing the waiting game may find themselves in a worse position next year than they are now even as prices are softening. Higher rates will erode purchasing power faster than rising prices. Higher rates also slow down the speed at which equity is gained.

Friday, October 19, 2018

Cash Offer. Means C A S H...

There has been a large number of cash offers being made over the last few years. I have definitely felt an uptick in my business and other Realtors® have expressed a similar vibe as well. But buyers making cash offers need to be very clear about what a CASH offer is. I ask my buyers that want to offer cash on a house, right up front. Do you have the cash on hand right now? That is, is the cash in the bank and accessible immediately. That my friends is the DEFINITION of cash. It is immediately accessible money. Some buyers are planning on drawing an equity line, or taking a loan on another property, or selling another asset. This is not cash until those transactions are complete.

A buyer making a cash offer that does not have the cash already liquid is in jeopardy of default should the source of the "cash" be delayed or for some reason made unavailable. Even more dangerous is the fact that a cash offer made without liquid cash on hand could be litigated by the seller as civil fraud should the deal fall apart. Cash is C A S H, not "I'm taking a line of credit," or "my uncle is lending me the cash." Buyers need to disclose to the seller the source of the cash if it is not already liquid and sitting in the bank. It is fine and well to make an all cash offer predicated on the arrival of cash from another transaction, be it a sale of another property, or loan, or gift, whatever the case is; but when that cash is on the way rather than in the bank, disclose, disclose, disclose.

Buyers in a tight market are often trying to make their offer stand out in front of other offers, but they must be cautious not to put themselves in legal trouble when making a soft cash offer. Buyers that want to play with the "big fish" in the hard cash arena, need to take the loan, sell the asset, or grab the gift, etc. BEFORE making the offer.    

Friday, October 12, 2018

Clark County Sales still Robust

Despite the general feeling of a market slow down, Clark County still pushed out nearly 700 sales last month (699). The median price including mannys and condos was 356k, but 3/4 of the units were between 250k and 400k the 'meaty' median range. There is little inventory in the sub 250k range and plenty of inventory above 500k so the market remains solid and close to neutral, if you are trading in the middle.

Buyers in the entry level will continue to struggle as rising rates and virtually no inventory make that sub 250k market a rough ride. That is not to say buyers should flee the market, in fact they simply need to be patient and willing to settle for a quality property even if it isn't exactly what they want. So long as jobs remain plentiful and wages continue to rise, demand remains for homes and prices will rise over time. Getting in now lets that entry level buyer enjoy some market appreciation so that later on they can make the move up with equity in the starter home.

Buyers at the other end can kick some tires and beat down sellers as inventory levels are actually pretty high. That doesn't mean that every upper end home is overpriced. In fact a well priced home in the 750k plus range will still find a buyer in a reasonably short time. It is the large homes that are dated, odd style, or otherwise non-traditional that are filling up the inventory and remain ripe for a discount.

Sellers in the upper price range should have no delusions about the value of their home. Price per square foot is nearly useless in the upper end. Upgrades, materials, build quality, neighborhood, design, age, and numerous other factors can dramatically effect high end homes causing widespread variance in price per foot.

This market remains healthy with modest appreciation, tight but manageable inventory levels in all but the very bottom, and interest rates that are still relatively low despite constant creep up all year long.

It's all good friends.

Friday, October 5, 2018

Road Trip

I am wrapping up my week long road trip with my youngest son who is out of the Army and we are headed home! Here is a post from the past that still has relevance:

Local Realtors are Invaluable Assets

October 28th, 2016

I am meeting with new clients this weekend about selling their lovely home. The odd thing is that they just bought this home a few months ago. I do not have all the details as of yet, but I do know that my new clients bought the house site unseen and moved here from 900 miles away. They utilized one of our national consumer real estate websites to buy the home and the listing agent's office was in Seattle 160 miles away from here.

I won't opine any further on this specific case, but in general my belief is that national websites such as Zillow, Redfin, Trulia, etc. are excellent tools for people searching for homes especially when looking at far away destinations. That is where their practical benefit ends however. There is no substitute for a local pro that understands the nuances of neighborhoods and the other important issues that face homeowners in a new region. 

Once a buyer thinks they have narrowed it down to a few homes they want to see, or even offer on, a local pro should be contacted other than the listing agent. It is important not only to have a local agent that understands the local market, but also an agent unaffiliated with the seller. A listing agents greatest obligation is to the seller for which he has a signed contract with statutory language. The listing agent will pay the buyer's agent commission so the buyer is in much better shape using their own agent.

It is important to take the time to ensure you are buying the best house for you at the best price possible and with favorable terms. Buying a home and then having to sell it three months later is rarely a profitable exercise. Buyers need to be sure they have all the proper information before buying a house.

If you find a home on one of the national websites, there are usually buyer's agents listed. Sometimes there will be a preferred or premier, et al. agent. These agents have likely paid the company money for placement. There may also be a few random agents listed that have a profile on the system and list that area as their area of expertise. Be sure to visit the agent's profile before contacting them.

There is no better asset to a home buyer than a local professional looking out for the buyer's best interests, not the seller's.

Friday, September 28, 2018

Waterfront Opens Tomorrow

The Grand opening for the Vancouver Waterfront Phase One is tomorrow. This is a very exciting event for our community as well as for the real estate business. The waterfront is both the conclusion and beginning of Vancouver's urban renassaince. It is the conclusion in that the waterfront was the cap to the efforts begun back in the 1990s. It was the end goal with fixing up the core downtown area up and then busting through to the waterfront.

The waterfront however is also a beginning point. It is a long project that will take many years to build out and it is already and will continue to reshape the skyline of Vancouver into a recognizable cityscape. That leads to companies moving in, conventions and other large events coming to town rather than south of the border, and an overall boost to the local economy.

All of that bodes well for real estate be it commercial, industrial, or residential. The city leaders have decided to push urban density throughout the city and that is good for resale on suburban properties. There will continue to be demand for suburbia and with so much energy going into urban properties that demand will be met in the resale market.

It's all good in the neighborhood.

Friday, September 21, 2018

Prepping for Fall

Autumn is here! Officially it starts tomorrow but hey pretty close, right? Those wonderful deciduous trees are just aching to drop a heaping mound of leaves all over your yard, roof, car, and lawn. Although autumn can provide a warm backdrop for you property it is wise to make sure you keep the leaves off the walkways to avoid slipping by you or the people thinking about buying your house.

Autumn is truly magnificent but homeowners need to keep those leaves out of the gutters and off the walkways. Even if you are not selling your home the plugged gutters can lead to damage on the roof, siding, gutters, and even the foundation as the ambulatory nature of water can lead to moisture in places you may not expect.

For home buyers, the fall can be an opportunity to take advantage of sellers that failed to sell in the summer and are ready to look at offers that may be a little less than asking. For sellers bringing a new listing to market, there may be a few less buyers in play but their is generally a lot less listings relative to summertime.

As we approach the holidays, both buyers and sellers tend to be serious about making a deal. Otherwise why would they bother during the hustle and bustle of the holidays?

Local market trends still remain flat. New listings are outpacing new buyers but not at a rate that will quickly turn the market from sellers to buyers favor. In fact I'd say there is still a slight leaning in favor of sellers across most local segments. I like these neutral to near neutral markets. Everyone really has to put their best foot forward on both sides of the transaction and that tends to favor all parties.

Enjoy the very last day of summer and get ready to watch nature's living fireworks. Autumn is on deck.

Friday, September 14, 2018

Millennials want in but pricing pushing them out

Apartments and Condos Overlooking
Esther Short Park, Vancouver, WA
The younger crowd is energetic about moving into the "city" but high pricing is pushing them towards the peripheral areas. It is a classic real estate scenario that has played out time and again. How far is one willing to commute to get a nice place they can own or even rent at an affordable price?

Portland and Vancouver have become expensive with rising rents and the gentrification of older areas once run down lead to some younger people seeking the urban lifestyle in a more affordable locale. Some people on the north side of the Columbia are being pushed all the way into Cowlitz County to find a place they can call home without being married to the landlord so to speak.

Generally, real estate prices in areas where there is good employment, high paying jobs, and lots of infrastructure are expensive and areas with less opportunity are more reasonable. This is not an absolute of course, but it does hold true most of the time.

Down in the San Francisco Bay Area before the big market crash in 2008, it was not uncommon for people to buy a house in California's Central Valley in cities like Lodi, Stockton, and Manteca and then commute into the Bay Area some 100 miles away. This of of course is a terrible drag on ones lifestyle.

Here in the Metro Portland-Vancouver area we haven't seen that kind of crazy. In fact people around here tend to think 20 miles out is the Moon. But more and more people seeking a house with a little elbow room are finding themselves a bit further and further away from the core city. Places like Longview and Kelso up in Cowlitz County have had depressed pricing for a long time, but they are starting to see a surge in activity as people seeking to own, move further North form Portland and Vancouver.

Vancouver WA Waterfront development including
apartments and condos overlooking the Columbia River
Millennials meanwhile are biting hard on the urban apartments going up in Downtown Vancouver, Vancouver Waterfront, Portland's Pearl District and other areas with urban gentrification happening. Hipsters have gobbled up all the classic 1920s houses in Portland and Vancouver pushing values out of reach for many.

If our city leaders do a good job and attract high paying employers to our clearly desirable area, we can all benefit from this surge. Keep that in mind when you vote for City Council and County Commission positions. 

Friday, September 7, 2018

Market Nearing Neutrality

Our market continues to see new inventory and this is softening the seller's advantage across a variety of price ranges. Even the median price range is offering a larger selection for buyers. Locally it is only the sub-median that remains a strong sellers market, but I am seeing some resistance to high prices even in that tight market.

Pressure in the Vancouver market is still largely external. Portland, OR is still a bit tighter on inventory and is seeing price pressure upwards albeit at a slower pace. Many would be Portland buyers are looking at Vancouver as a nearby alternative. Vancouver has a variety of neighborhood styles, many that resemble popular Portland neighborhoods.

Clark County also offers up a bit of suburbia as well as a bit of country living which is all but Absent in Multnomah County.

The external market forces are keeping Vancouver and Clark County on a modest pathway in median home price appreciation but things are relatively flat compared to the steep spike of a the last few years.

Many projections are flying about from the usual suspects about growth in pricing locally and many have revised things to a much more sustainable 3%-4% for the next year. Clark County continues to add new construction units in both the rental and sales inventory. Vancouver is adding thousands of units across the entire rental spectrum from luxury riverfront apartment properties at $5000 a month to more modest properties with income restrictions in the sub-$1000 range.

Some analysts are a bit concerned about the Millennial age group as that demographic seems more likely to prefer renting than owning and that is a new twist in America's age old "dream." This coupled with increasing inventory could soften the market even more for 2019 possibly throwing us into a full neutral sales condition in the first half of next year.

Business insider had a detailed article about Millennial home buying here. 

Friday, August 31, 2018

Cabins in the 'sticks' are reasonable!

I have a client that has been looking at cabins in a few remote locations. I am not talking about the moon or anything, but Goldendale, the Coast, and Packwood are among the locales considered. I am genuinely impressed with what one can find in a nice clean cabin on some land even 1/2 acre to 5 acres. I was looking in the $150-175k range and had no problem finding scores of properties meeting at least part of my client's criteria.

What a deal, for the price of a used Lamborghini you can have a cabin or beach house! The Lambo loses value as you drive it, the house gains value as you live in it.

The map shows the western half of Washington State and the check marks are the locations of the cabins/cottages/beach houses I showed my clients over the week. Sure these spots are not exactly in the thick of it all, but that's really the point of a cabin, right? Getaway from all those crowds and city issues and hang out in the wilderness or watch the waves crash on the shore.

Interest rates have been rising but they remain well below the 50 year average and that means buying a cabin is cheap right now! Talk to your tax pro and see if you can write off the interest on the "second home" and you might be pleasantly surprised to find out you can.

Washington State is chock-full of deals ob cabins in out of the way locations. As for the beach, we have the best beach house deals around. There is a tiny window here while rates remain manageable. If the cabin is not financable and you have a large chunk of equity in your home, you might be able to use some of that equity to pay cash for a cabin or other second home. 

Remote off the grid cabin... hmm... seems pretty legit :)

Friday, August 24, 2018

Top of the Market Still Buzzing

The bottom of the market is almost always hot, but the top is usually the softest of all. But these are strange times my friends, very strange indeed. The bottom is still ferocious with anything clean and tidy in the local market under 300k getting the spirited mob treatment of multiple offers and such. The middle has softened up a lot. In fact even the median price range in the 350-400k range suddenly has a fattening inventory. Sellers need to be prepared for picky buyers as the number of options has blossomed over the summer.

I figured it was a only matter of time before the sellers came back home to sell, but a strange thing is happening up top. The higher end homes in the 750k range are doing pretty well. Now lets be clear, we still have plenty of inventory in that price range relative to the pool of buyers, but clean quality properties in the 750 plus range are being challenged sometimes by multiple buyers.

Real estate has always been a game of location and quality. Curb appeal never goes out of fashion. Sellers that take the time to dress the home for success are reaping rewards while sellers that just park a sign out front are wondering where all the buyers are. At the height of a buyer spurt sellers can briefly get away with a sorry agent and lackluster effort, but friends I'm here to tell you that ship sailed, look closely you still see the top of the mast dipping over yonder the horizon.

Now it's time to get back to good practices and that means hiring solid realtors and taking the time to do the prep to get the house ready for market. Or you can get ready to slash your price, it's your call really.

I've written about the economy over and over, I'll mention it again here; this economy is too robust for a housing crash, so fear not. We are simply seeing an increase in sellers looking to capitalize on opportunities, some of which may have passed already. Overpriced listings are rarely successful but we did just have a 12-18 month period where they sort of worked, sometimes. That's done now, sellers need to just stop with the puffed up prices. Buyers are not biting, there is simply too many other choices for them.

This is a very healthy situation as the market is moving towards neutral conditions and that is sustainable.

Friday, August 17, 2018

Remodeling? Trendy is Short Term

I see many remodels happening out there. Many homeowners are flush with equity as our market has been solid for a number of years. Personally I have been taking care of some deferred maintenance on my own home. We recently painted our house which it really needed. We are also going to do some light remodeling.

I believe it is wise to be very cautious remodeling to trendy styles unless you are remodeling to sell or you tend to remodel often. Trendy is just that, a trend and trends change rapidly. The style market doesn't care how much you spent on that carpet or flooring, like all markets it is cold and unconcerned with your wallet or feelings.

If you are remodeling for the long haul, sticking to classic and timeless never hurts. The flashy color schemes and cabinet styles of today will look dated in a decade. Sometimes styles come back and sometimes they go away for ever. I don't think those 1980s parachute pants are ever coming back ;)

For those old enough to remember, the 1970s was the era of 'wall to wall' carpeting. Many homeowners carpeted over their beautiful hardwood floors to be in on the trend. Wall to wall carpet was sold in new homes as a positive feature when in reality it was a cheaper solution for the home builders. As we all know now, wood and wood laminate surfaces have been back in style for quite awhile and are likely to remain so. They also never really went out of style even in the 70s.

Think about enduring styles that never seem to go out of favor when remodeling your home for the long game. Trendy works very well for someone trying to sell, but trendy can fade away in short time. That parachute pants craze only lasted a couple of years, but everyone remembers them, for better or worse, mostly worse.

A few tips for maximum enjoyment and timeless style. Generous use of wood or wood laminate surfaces and don't skimp here. Don't use the cheap $1.29 a foot garbage. Step up to at least the $2.50/foot grade and preferably the best laminates are closer to $5/foot, the install labor is about the same for cheap laminate as it is for the good stuff. Avoid trendy wood patterns as that will look dated as well. remember the parquet floors of the eighties? Those are always in fashion on the basketball court, not so much in your home. Bamboo has been trendy but what will you think of it in 2025?Large area rugs rarely go out of style as long as they are in the classic vein.

In the kitchen white never goes out of style, especially here in the Pacific Northwest. White in the kitchen is actually coming in as trendy at the moment, but even several years ago when dark woods were the rage a white kitchen was still good. White is light and bright and most people prefer a bright kitchen.

In general light and bright is ideal in a home. An exception would be a classic 'library' style den or a movie room. Dark rooms are not inviting in any era.

Minimalism is always in fashion. Clutter is always clutter and few people want to living in a packed junk store. Having lots of 'negative' space gives the mind a chance to relax and relaxation is typically a good element of design for a home.

For the interior walls light and bright and neutral rules the day in any era. Off whites, taupe, or gray is always in fashion. Remember trendy comes and goes, but some things are always OK. In the late 1980s the rage was mauve and burgundy in the home. It was every where. But it went out of fashion and has not returned to favor some thirty years later. When I see a home with mauve and burgundy I immediately think of 80s "hair" bands like Twisted Sister and holy cow this place is dated. In all fairness the mauve and burgundy fad was a heck of a lot better than that 70s avocado and bright orange nonsense!

So in closing think about what you are trying to do. If you are remodeling with the intention of selling or remodeling again a few years, then hitting that latest fad in trendy home decorating is fine. If you are remodeling the home you intend to stay in for awhile stick to the classics and the timeless favorites because timeless is exactly that.

Friday, August 10, 2018

Kirkland Tower is Underway

After breaking ground in June and erecting a 'coffer dam' last month, Kirkland began digging a 30 foot hole in the ground this month. Over the next several weeks the crews will pour concrete into what will ultimately be a couple of levels of underground parking and other underground infrastructure for two new buildings on the Vancouver Waterfront. A tower crane should be erected shortly thereafter to aid in the construction of this exciting property.

Rendering from Kirkland website
Kirkland Tower is a 12 story residential building that will have 40 luxury condos with 1, 2, and 3 bedroom floor plans. The tower will be erected immediately adjacent to the new Indigo Hotel which will be an 8 story open atrium structure. The Kirkland condo owners will have access to some of the hotel's amenities and that is a unique arrangement here in America's Vancouver. 

Although Kirkland Tower is far from the tallest building planned at the waterfront, it is the tallest one so far under construction. The 12 story Timberhouse project has not broken ground yet. I wrote an article a few weeks back, about the potential value opportunity to buy a condo downtown as these new condo units start coming online over the next few years. Even waterfront properties further upstream such as the units in Columbia Shores may be vacated to take up residency in the new Waterfront Project.

11th Floor View, Kirkland website
Kirkland's website has renderings and other tidbits about the development including a view shot from every floor in three directions. This view is listed as the North View from the 11th floor. This viewpoint will offer a cosmopolitan view of downtown and even Mount St. Helens.

Although I don't see a glut of condos coming so long as the economy continues to chug along at a healthy clip. New jobs and higher pay will lead to real estate mobility and that leads to the move-up market enjoying success.

Rendering from Kirkland website
The waterfront properties such as Columbia Shores has always been hard to get as there are few units right on the water. The massive Vancouver USA Waterfront will add units to the list. Those looking for both an urban experience and a waterfront experience can do it all on the new waterfront. 

Although these condos at Kirkland are likely to be very expensive, other projects in this massive $1.5 billion development will be priced a little more in reach of upper middle class earners. Condos already built in developments such as Vancouver Center, may become available and some of those units are well priced especially in Vancouver Center 3 which overlooks Esther Short Park.

Things are looking up here in America's Vancouver and the real estate market is moving with a roar, particularly with these high density projects underway. 

Friday, August 3, 2018

Why Price per Square Foot Rarely Matters in Residential Real Estate.

So often I hear clients talking about the price per square foot on a residential listing. I even hear real estate agents talking that up. Why is this house $200/sf and this other one is 180/sf? Sometimes people are adamant about not paying more than "x" per square foot. My friends, in residential real estate, the price per square foot rarely matters as a comparative value. There are way too many other variables that affect the value of a residential property. Any property actually, but in residential there is a broad range of variables. The only time that price per square foot can really be comparative is if all other variables are identical or near identical.

For example to use the cliché of apples and oranges why is this Apple priced at 1.48 per lb and this Orange is .99 per lb? Why is a Red Delicious $2.99 per lb. and a Granny Smith is $1.99 per lb. Apparently Red Delicious Apples are in higher demand!

Well friends the only time this price per foot stat really matters is when you have two houses in the same neighborhood, same floor plan, same condition, same upgrades, hell, right next to each other in fact. Then if one is priced at a higher amount, you have to ask, why?

I think price per square foot is the most abused statistic in residential real estate. Ranch homes are always going to have a higher price per square foot. Small homes in expensive gated communities will have a higher P/SF than a large spacious home in a run down neighborhood. A brand new home will cost more per foot than an old house. Homes on acreage will often cost more because the land value is higher.

One simply cannot make any prudent decision based on price per square foot unless all these other variables match. Since that almost never happens, then we have to look at those other variables. In the end what really matters for a person buying a home that they intend to live in, is this: Do you like the house? Does it do what you need it to do? Can you afford it? If you answer yes to these, then you're done, pull the trigger and write it up!

Don't get caught up in price per square foot. I sold a 720 sf house last year for $255k all cash. It was nicely remodeled but nothing over the top. That is $354/sf. I sold a 4200 sf mansion with a breathtaking view of the Columbia River for 750k around the same time. That was only $179/sf and the house was decked to the nines with top grade trim, marble, soaring ceilings, the whole bit. Why such a dramatic difference. Simple, lots of variables. There is a massive demand for smaller affordable homes. Far more buyers than sellers. In the high end the opposite is true. Furthermore, there is a bit of the economy of scale when building a large house. Neighborhood plays a role as well but when comparing a very large house to a very small house you cross one of the rare times that location is not the number one variable. Demand is the number one variable here. When comparing similar homes across neighborhoods, location resumes its role as the primary variable driving values.

A 2000 sf home on a 10k lot next to a railroad yard might fetch $150/sf and the exact same house a few miles away in a nice neighborhood with a view might fetch $225/sf. Do not let the price per foot trap keep you from getting the right house. Understand that smaller one level homes will almost always have high per foot costs and larger homes on a small lot will have lower per foot costs. Here is a simplified example of why this is the case. Let's take a lot in a neighborhood that is 8,000 sf and fully ready to build. The city says the builder can put any house between 1200-2400 square feet, one or two levels. The following is an oversimplified hypothetical scenario:

The lot is 100k and the development costs (underground infrastructure, city required appurtenances, fees, permits, etc) are 35k. The builder is into this deal 135k before the first nail is hammered. The physical structure cost will vary depending on size and design dynamics. The landscaping and other costs will be more or less the same regardless, lets say 10k. So the hard costs fixed are 145k. Lets say the 1200 foot ranch costs 100k to build. That puts the net cost before marketing and other post build expenses at $245k Let's say the builder budgets 15% for marketing and other costs of sale (real estate commissions, taxes, staff, ads, etc). That makes the total cost of goods about $282k. Let's say builder makes a 10% profit. That makes the 1200 foot ranch home $309k. Now the same scenario with a larger and slightly more expensive 2400 sf two story trimmed out the same might cost 165k to build. Now the builder has a total cost of goods at 360k and a sales price at $395k. The cost per square foot on the ranch is $258/sf where as the equally built and trimmed 2400 foot home is only $165/sf.

There are many costs that are more or less fixed regardless of what type of house is put on the lot so the larger house is less expensive to build on a per/foot basis. The builder however makes only $28k profit on the little house where as he makes $36k on the larger house. The builder has a finite amount of land with which to build so he wants to maximize profit and thus larger homes become more profitable despite having a lower cost per square foot. The lack of new small homes puts even more pressure on the resale market for small homes and that is why you might find a 1940s 720 sf house at $354/sf. 

Friday, July 27, 2018

Economy Should Keep Demand up on Real Estate

The latest economic numbers are out and the second quarter produced a strong 4.1% annualized expansion rate. This is going to increase consumer and commercial confidence as well as job expansion. These kinds of economic conditions almost always benefit the real estate market.

Although interest rates have been creeping up all year long it cannot be overstated that rates remain well below the established 50 year average. Long term mortgages continue to offer excellent investment opportunity in both residential and commercial real estate with a cheap cost of money value proposition.

In our local market we still have a shortage of apartments and that shortage is being addressed with massive numbers of units under construction right now. More locally, Vancouver USA has a variety of apartments from luxury units to affordable units coming online to alleviate tremendous pressure on the rental market. That may make some of the owners of older complexes tear up as they may actually have to return to more market rates as these newer units come online.

In the resale homes market I am continuing to see more new listings than new pending sales and that indicates a trend towards more inventory. These things take time to develop especially when considering that the Portland - Vancouver Metro area has had one of the tightest inventories of rentals and resale properties in the whole country over the last few years. 

If the trend plays out to the end of the year buyers will have the upper hand across all price segments except the ultra tight sub $300k range. As long as the economy continues to produce strong gains and employment remains at or near full levels, the real estate market will enjoy success. I do hope we can continue with this trend of 3% or better growth quarter in and quarter out. It all bodes well for real estate and life in general.

Friday, July 20, 2018

Market Trends Continue to Favor Buyers

Complied by Rod Sager using data from RMLS
With each passing month the market tips a little more towards the favor of buyers. Some segments are still tight on inventory and heavy on buyers and thus remain in the seller's corner. But large swaths of the local market are showing signs of softening.

The chart shows both the last 24 months and the last 6 months of data. Charted are sold listings and new listings and the percentage of new listings relative to sold listings over the period.

Over 100% indicates that sales exceeded new inventory and less than 100% indicated inventory levels grew.

The chart separates price ranges Under $300k, $300-400k, $400-500k, $500-750k, and above $750k. A low percentage is not good and you can see that the upper price ranges had very slow inventory turn.

This is not unusual as the market for higher end homes is much smaller than the market for mainstream and entry level properties. But even the ultra tight sub $300,000 market is now adding inventory. It has been so tight that it will take several months of this trend to flip to a buyer's market. The shocker for many, but not me, is the $300-400k band that flipped to plus inventory in April of 2016! It was so tight in 2014-15 that it is just now settling in to neutral conditions. If the surge of inventory continues, the segment could flip to a buyers market before the end of summer. Above 400k buyers are already in control but some buyers don't realize it, and many seller's agents are scratching their heads. They shouldn't be, the data has been showing the trend for several months and you can't keep adding surplus inventory without buyers catching on.

At $400,000 in Clark County buyer's have lots of choices. Sure there are pockets where $400k remains hot and tight on inventory, and these hyper-localized sub-markets are just one reason buyers should use a quality and experienced LOCAL agent.

The economy remains strong, jobs are plentiful and incomes should start increasing. Rising rates has put a soft brake to the market, but the economy will keep us in strong real estate sales. I wrote about rates and purchasing power a few weeks ago, here.

Although I have tried to point out that the market is NOT the raging bull some still think it is, it is not on a bubble either. The economy is pushing forward with a heavy head of steam and that bodes well for real estate. I see a soft landing from the crazy run up 2014-16. Now we should see modest growth in inventory and a softer rate of appreciation. In fact 2018 could end up flat, the first six months here in Clark county have been pretty flat.

I am hoping this slowdown will move to a nice steady market and let this excellent economy push new buyers into the market with better wages.

I still have the same warning for buyers however, rising rates will kill you faster than rising prices, so take advantage of the pause and lock in your sweet new home soon.

Friday, July 13, 2018

Market Producing a Surge of Inventory

I have been helping several buyers in the $350-$400k price range which in our market is about 95% to 115% of median price for a detached home. I have seen a massive swelling in the listed units that is outpacing the pending units by a significant amount in this price area. This will lead to a flip in the market that should start favoring buyers as the summer closes.

Under 300k will likely remain RED-HOT for some time to come locally however, as there is no shortage of buyers at the entry level and inventory remains tight. But rising rates has put the squeeze on buyers in the above median price ranges. And sellers seem to be jumping in.

The median price has been dead flat all year long. The chart above shows the county wide median for all single family detached units this year. Many agents and sellers are living in a fantasy where they think prices are still skyrocketing. They are not. This market is healthy, just not out of control like it was from 2014-2017. The sky is not falling here friends, the economy is strong, employment is strong, the housing market remains stable. But it is NOT the red-hot craze that media types following trailing data suggest. Many agents fall into the trap as well. We are headed to a healthy neutral market.

The local market is absolutely prime for a seller sitting on a small house in the sub $300,000 range. They can get top dollar for that house while enjoying some choice and a neutral market in the above median price range such as a house in the $350-$400k range.

This is ideal conditions for sellers under 300k, yet they are not bringing inventory to market that fast. It is showing signs however of slight improvement on inventory. The chart above shows data for detached single family homes from $200k-$300k in Clark County. The sold units by month are in the big red bars. But the real data lies in the line chart above the red bars. This shows listed units and pending units. Look at January where there were substantially MORE pending units than new listings coming to market. Inventory was shrinking, the market was gobbling up new listings faster than they came online. In May things flipped a bit. Now you see a few more listings coming online and less pending units. This can likely be directly correlated with rising rates putting a bit of a damper on the buying pool. But if that chart continues to follow the trend line, inventory will still favor sellers to the end of the year and maybe into 2019. Under $300,000!

If you are a seller with a small house and want to make the move up to the next level, there is a window of opportunity to sell your current house quickly and for a great price, while having a little room to negotiate with the sellers above $350k. We had this same scenario when the market first emerged from the recession and we have it now that things are settling in. A 3 bed 1 bath starter house with 1100 SF in good shape can fetch $280k and that seller can upgrade to a similar quality two story  4 bed 2.5 bath home with 2000 SF for only 10-15% more money! This is GOLDEN!
Now look at this next chart above. This shows the same data from the price range of $350k-$400k. Many agents have not been paying attention! Look at the trend line. Listed units has outpaced pending units all year long and in May a massive spike in inventory began. Sellers trying to get King Midas prices for their homes in this range are seeing little success. Too many agents look at the sales bars which are TRAILING indicators, rather than the listed vs pending data which are LEADING indicators. Trailing data shows what already happened, leading data shows what is likely to happen. For example the pending units in the chart above shows a trend DOWN but sold data is UP. The pending line leads us to the conclusion that the next months closed sales will be either flat or down. If this data line trends out to the end of the year, we will see a complete change from this weak sellers market to a moderately strong BUYER's market in the above median price range. Again above 350k here, and it progressively softens the higher up you go in price range.

Sellers need to understand this. The ship full of overpriced listings sailed away. I showed several overpriced listings that even made my clients shrug their shoulders. They didn't even want to deal with the idiot trying to sell their house at that price. Nobody wants to enter a contract with an unreasonable person. In 2016-17 overpriced listings were fine in this price range because there was no inventory and prices were rising. But this year the market appreciation is flat. If a seller is waiting for the market to come to him, they are going to have to wait quite awhile.

Price the house right and it will sell. That is good advice in almost any market and it is absolutely gospel in this market. Sellers above the median could find themselves chasing the market down if they try to get greedy. Potential sellers sitting on a sub median starter house, you have a window right now! Interest rates will push that window of opportunity closed soon.

Friday, July 6, 2018

Rates and Purchasing Power

I have spared no lines of text on the issue of higher interest. Rising interest rates will severely effect buyers ability to purchase a home if they are not using cash. Buyers will enjoy a a flattening price market, but they will not enjoy having their dollars stretched thin by rising rates. 6 of one half-dozen of the other?

Let's say we offer $350,000 on a house now with rates at 4.5% FHA. Buyer will need $12,250 cash down. The PI payment (principle and interest) is $1,711 per month for 30 years. Now the property taxes and mortgage insurance will be added to the payment as well, but interest rates do not directly effect those values. If a buyer waits a couple of months to offer they may find a similar home priced at $355,000. Now if rates remained the same the down payment is now $12,425 and the new estimated PI payment is $1,736 per month for 30 years. That's not so bad, right just $25 a month more. Well, sort of, over thirty years that's $9,000! But this year rates have been slowly climbing so it is far more likely rates will have risen over the next couple of months and probably that 4.5% now will cost 4.75%. With the higher rate, the payment moves up to $1,787 per month. That's $76 per month MORE for 30 years which adds up to $27,360. 

Most importantly is that the rising rates was more damaging than the rising prices. The amount of additional monthly income required to qualify for an extra $76 a month payment is going to be $160-$230 depending on the loan type and credit profile. Many buyers get priced out on rates rather than actual home appreciation values.

It is important to remember that loan officers will give an approval based on the price of the house, but the underwriter is actually approving a monthly payment not a purchase price. The loan officer converts the payment into a price to make shopping a little easier for the buyer.

It is very important to understand that the average mortgage rate has been very low for nearly 10 years. In fact The 46 year average Freddie Mac 30 year fixed rate dating back to 1972 is over 8% So even as rates rise into the fives they are still historically low.

The chart below shows the loss of purchasing power as rates rise. Please note the chart is only looking at Principle and Interest and not the combined payment including taxes and insurance. Rising or falling rates won't directly effect the taxes and insurance. The chart shows an FHA loan with a maximum approved PI payment of $1,500. The actual payment on this loan with taxes and insurance would be closer to $2000. The moral of this story is buyers should take advantage of these low rates while they can.

Friday, June 29, 2018

Waterfront Real Estate will be Hot!

The waterfront project continues is forward march into the summer opening of the first restaurants and residential units. As this amazing project adds units there could be an buy opportunity in the Esther Short and Downtown areas as some may choose to sell there and move to the waterfront. In the long run I believe the waterfront will be much larger than the sum of its parts and will elevate the whole core downtown area.

Keep an eye on units in the following key buildings downtown. There could be a brief dip over the next few years as the new units come online.
  • Vancouver Center 2: Entry to mid-level condos floors 1-7
  • 500 Broadway: Luxury condos floors 5-6
  • Vancouver Center 3: Mid-level to luxury condos floors 8-11
  • Heritage Place: Mid-level condos floors 1-4 
I do not believe there will be any kind of crisis in these well established condo buildings in downtown Vancouver, just a chance that enough owners will want to upgrade or simply move to the waterfront that a brief surplus of downtown units may create an opportunity buying window.

A great many rental units are coming online right now from the brand new Uptown and Heroes Place projects to several other high density projects recently completed in Uptown and Downtown. But there hasn't been a lot of condo development just yet. Kirkland Tower on Block 4 of the water front will offer some 40 units on floors 2-12. These will range from 1000-3000 SF and that coincides well with the units downtown that range from as little as 600 SF all the way up to larger 3500 SF units in Vancouver Center 3 at 700 Washington Street. Kirkland broke ground recently and construction will begin starting with a giant hole in the ground similar to those we saw last year for blocks 6 and 8.

The City of Vancouver is working with Gramor Development to build out the city's Block Ten into a mid-rise mixed use building with a large grocery store on the main level. Downtown Vancouver should be seeing a serious increase in its 'city buzz' with these thousands of units adding to the local resident population. Instead of a downtown that buttons up after dark with the exodus of the business community, downtown is already starting to emit a more cosmopolitan community vibe. The city is also seeking a location downtown for an elementary school to educate the children of the thousands of new residents flocking to the area.

Below is a recent drone video produced by Dean Sorenson.

Friday, June 22, 2018

Overbuilt can be a problem...

The city of Vancouver has been pushing for infill development for many years but the high cost of development has home builders in a pinch. Building a luxury home in a neighborhood of starter homes tends to be counterproductive for the builder.

Buyers should always be aware of the location of their prospective property. Location has always been a cornerstone to real estate value. In general it is always better to buy the worst house on the street rather than the best house. I often have people ask me, "Why do I want the 'worst' house?" That sounds negative, but the reality is that neighborhoods drive value either up or down depending on what's happening in the area.

Buying the best house in the neighborhood is fine if all the houses in the area are similar and yours is just a tad bigger or on a larger lot. But an overbuilt house would be something like a 5500 foot English Tudor built on a street filled with 1950s 1200 foot ranch homes. That would be way over built and frankly the house would stand out in a negative way. The neighborhood of 1950s ranch homes might support values in the $300,000 range and the 5500 foot house could cost $500,000 to build. The market ceiling will tug the price down on the overbuilt property. That is counterproductive.

The opposite however can be quite favorable. A lone 1950s 1200 foot ranch surrounded by 5500 foot luxury homes allows the potential value to be very high on the little house. An addition or a serious remodel with the highest grade of materials would add more value to the home than it costs to do the work. The market ceiling in this neighborhood could be $600,000 and that leaves a great deal of potential upside for the 'underbuilt' house.

With the drive for infill development Vancouver USA is seeing this kind of neighborhood mix of properties more and more often. Development costs are so high the builders feel compelled to puff up the houses a bit with luxury designs and materials but sometimes they are pushing the neighborhood too far. There are curable problems and incurable problems and neighborhoods are often incurable. Having a house next to an interstate highway is an example of an incurable problem. Likewise there are good things about a neighborhood that could be lost in the future. For example a gorgeous stand of trees that fill an adjacent area to a neighborhood could someday be gone should that land be developed. A home next to that forest might look attractive and maybe experience a bump in value for the aesthetic value provided by the trees, but that is out of the homeowners control and may someday be gone. Paying too much of a premium for it is not wise.

I am seeing a lot of overbuilt homes for the area and buyers need to be cautious as these overbuilt homes are the first to slide in price in a down cycle. Buyers should always go in eyes wide open when considering a property. I have touched on this before including this article here.

Friday, June 15, 2018

Washington State Biggest YOY Increase in Nation

The Evergreen State indeed led all comers in real estate appreciation last year according to NAR reports circulating around. This is no surprise to locals but some relief for buyers in in sight as projections for 2018 by the typically optimistic NAR is more like 6% for this year. Sellers will still enjoy appreciation in the market but buyers can feel a little less exasperated as things are settling in.

Washington State had a 12.6% year over year increase only edging out Nevada by a fraction which was also 12.6%. Sellers looking to squeeze the most out of their resale may find a hilltop coming as rates continue to march upward and downward pressure on pricing is inevitable. Double digit market appreciation is never sustainable over the long term and we have had just about enough of it to stay healthy. I welcome a softer climb with modest average price growth in the 4-6% range as healthy and sustainable.

As reported right here recently, the market in the higher price ranges is already switching over to a buyer's advantage while the entry level sub-median range remains a sizzling hot plate of multiple offers and up-bidding. In the final analysis pricing homes properly yields the best results and sellers are well advised to not play games with over pricing or under pricing. Get it where it ought to be and the market will deliver a top dollar buyer in 30 days.

Friday, June 8, 2018

Dads, Grads, and Houses

June is often a big jumping in point in real estate. Typically the market sees a bit of an uptick in listing activity in late April and May which translates into buyer activity in late May and June. Well, hear we are on June 8th, sun is setting at 9 o'clock and things feel about the same actually. Inventory remains very tight under $400k, softens up a bit up to $600k, and up above that things turn in favor of buyers rather quickly!

This is HOT (less than 2 months inventory
In our local market, a seller with a home to sell under $400k that plans to move up to $600k; NOW is the time. You will get top dollar on your current house and be able to reasonably negotiate on the purchase of the new one. One of the recurring themes in my 2010 book, 'Don't Panic' was to buy low and sell high and sellers under $400,000 can sell high and above $600,000 they can buy low, well sort of low ;)
This is NOT more than 12 months inventory

This is a great move up opportunity that may evaporate if rates continue the upward march. rate pressure can soften the entry level market so this window of opportunity to sell in a seller's market and buy in a buyer's market at the same time may not last long.

You didn't see that coming... did you?

Friday, June 1, 2018

Market has become a mixed bag...

June is the start of the summer season for real estate and sellers that want to move out this summer in time for a new school year or just during the fair weather, now is the time to list. Typically the local market sees a modest boost in activity during the summer months and that can be good for both buyers and sellers. Sellers get a few more buyers looking and buyers get a few more houses to consider. It's a good thing all around in a market that has tightened up especially int he sub 400k range locally.

Despite what people may hear watching local and national news outlets, not every sector of our market is a raging seller's market. In the median to sub-median price ranges under $400k seller's are controlling the market with multiple offers and little room for negotiation by buyers. Seller's are still in a favorable position on homes priced up to $500k but above that inventory starts to get flush.

Clark County is sitting on 6-7 months of inventory in the $500 - 750k range which is neutral leaning a bit towards buyer's favor. From $750k - 1M things get worse for sellers with roughly a year's worth of inventory and buyer's are in control. Above one million dollars we have a bloated inventory that would take more than four YEARS to deplete if no new listings are added at the current rate of consumption. Seller's in this price range are truly at the mercy of buyers. 

News media outlets tend to focus on the entry level and mid range prices that are still very hot, but many sellers in the upper range are a bit disillusioned about the market and some are shocked to find unfavorable conditions. This bodes well for entry level and mid range sellers that can still get top dollar for their small house and capitalize on a flush inventory for their larger move-up home.

The real estate market is a moving target and sellers are wise to consult a local pro with experience in the neighborhood they live in. Real estate is a local market and conditions can vary widely between price ranges, housing type, and location.