Friday, June 26, 2020

Solid News on Real Estate

Real estate activity remains positive across the broad American market. This runs in the face of a slowing economy and difficulties facing businesses as they cope with COVID -19 related restrictions. I mentioned in previous posts that pricing remains steady due largely to the fact that both buyers and sellers are in short supply and that has kept the relative inventory balance similar to conditions prior to the Corona Virus pandemic.

Real estate sales in Clark County are down but not because of a lack of demand, but rather a lack of inventory. Pricing is steady and buyers are still facing a multiple offer environment on homes priced well or nearly anything under the local median price.

This economic slowdown may go down in history as the weirdest recession ever. Buyers seem to think the slowdown has made their bargaining position stronger, but they are finding out the market is still rather tough on buyers in the sub $350,000 price range. Buyers need to be willing to lead with a strong offer when bidding for sub-median priced homes.

Meanwhile up at the other end of the pricing spectrum, buyers with more than $600,000 to spend are seeing more malleable sellers. A well priced high-end home will still attract multiple offers, but most pricing at the top of the range seems to be neutral or high and buyers can expect some room for negotiation on these types of listings.

Overall we are fortunate to have a warm market during an otherwise cool economy.

Saturday, June 20, 2020

Another revisit to Vancouver's Gentrification

originally published 11/30/2018, by Rod Sager

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 tend to produce less income and thus less taxes for local governments. They also typically 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 since 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 can become 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. In these rising value scenarios, renters have to move, owners choose to move. That is a big difference.

Friday, June 12, 2020

Buyers Leery of Future, Justified?

Some buyers seem to be a bit leery of the future with all the COVID-19, civil unrest, market volatility, and such some might think, :"of course they are!" But should they be, really? Perhaps, but this current situation we find ourselves in is more political than anything else. COVID-19 is a real threat, but governments are on it, taking precautions and things are at least stable for the moment on the health front. As for the civil unrest this will also settle down. Hopefully the people in government can turn to meaningful reforms to resolve these deep rooted problems and social conditions can start to heal. We have been down this road before.

Real Estate however is a commodity. Whether one rents or owns we all need a place to live. Real estate can weather the storms of health pandemics and even civil unrest. So long as our financial institutions are solvent and prepared to provide funding for development and loans for purchases the industry should be OK.

The inventory levels locally are still about as tight as they were right before the pandemic hit. As I have written several times over the last couple of months, listings are down and buyers are down in near equal numbers and that has left the market slower but steady on values. So long as the balance between buyers and sellers does not slip to far in favor of buyers the market should continue to be healthy. Economic conditions are not ideal, but they are still solvent and that means that buyers can buy with some confidence. Even if prices take a dip, which they could, owning real estate is still better than paying rent for the vast majority of people.

Buyers should bear in mind that during the last real estate crisis in 2009-2011, housing prices were low but rents skyrocketed. Once a buyer buys a house the "rent" ie. mortgage payment is fixed. No landlord to raise the rent. Should a buyer encounter difficulty with income, it is generally easier for a landlord to evict a tenant than it is a bank to foreclose. The decision to buy a house should not be put off due to fear of job loss or income reduction because that fear applies to renters and buyers alike.

The real estate market remains sound and the trend does not seem likely to change dramatically one way or the other in the short term. 

Friday, June 5, 2020

Mortgage Lending Seems to be Weathering the Storm

Mortgage rates have managed to stay low and in some cases dip a bit lower still. The combination of a pandemic and now civil unrest has not been too disruptive tot he local real estate market nor seemingly the lending aspect of real estate.

When rates dip low that reveals a wonderful opportunity for buyers to get a lower payment or to afford a larger or nicer home without paying more money for it. Generally low rates lead to an uptick in activity for buyers and thus a rising price condition. However, COVID-19 has managed to keep a lid on prices. The recent civil unrest may also help keep prices in check. For buyers this is good news a combination of low rates and stable pricing is always a good thing.

Buyers thinking about a home should get started now because rates will only remain low while investors are leery of equities. Furthermore as COVID-19 response restrictions are eased more buyers are likely to emerge and the market could potentially see a return to upward pricing.

Mortgage lenders seem to be handling the COVID-19 well in underwriting. The tendency in a downward job market is for lenders to become more tight with buyers. So far it seems only marginal. Other lending lines like credit cards and car loans are getting real stingy.

This is a strange set of conditions we see now so buckle up and enjoy the ride.