Friday, July 23, 2021

Huge Surge in Listings, Boosts Inventory Levels

It seems the pandemic has subsided enough to bring out all those missing listings. The local MLS saw a massive surge in new listings over the last two weeks. This is good news for buyers as the tight inventory led nearly every transaction to a bitter bidding war with one lucky winner and half a dozen disappointed losers. Many buyers have become disenfranchised from the process after numerous failed attempts to land an accepted contract.

This buyers should come back as things have definitely cooled off a tad. The market still favors the seller, but buyers may find a little more options available and fewer offers on houses that are not top drawer. This plays right into the article I wrote last week about watering the lawn. Sellers need to keep the house and grounds looking sharp, because buyers have more to look at now that they have at anytime in the last half year or so.

I won't have to total stats until the MLS releases July's figures next month, but I am certain it will show a major surge in listings as preliminary data suggests. We needed this and it should tip the scales back a tad towards neutral offering buyers a little more opportunity to own their own home.

I listed a lovely three bed, two bath home last week for $435k and was shocked when the first two days had no showings. That's when I realized that a dozen new listings had come up at the same time within a mile of the property! Well by Monday showings picked up and the home was in contract by Wednesday. But this house had an advantage. It was dated but immaculate inside and out. The owner had that old girl shined up like new. Buyers in this day an age tend to favor move-in ready homes that do not require a lot of work. Our society today has become busy, houses have gotten so expensive that buyers often have to work long hours to afford them. So keep in mind that often the best looking house wins the day.

Friday, July 16, 2021

Even in this Tight Market, Water the Lawn!

With the market seeing a half dozen or more buyers for every listing, sellers may feel complacent and just let the front yard go this summer. Sure, you will sell the house and you may even get multiple offers, but you won't get top dollar if your house looks unkept.

No matter what the market conditions are, human nature doesn't change with real estate trends or whether buyers or sellers are favored. People have impressions that can be hard to overcome. The very first impression if the drive up to the house. A nice and tidy front yard and clean look is a positive start to the showing experience for the buyer. That should continue as much as possible. Ideally the first three impressions ought to be positive before the buyer starts looking closely. There are often going to be negatives for the buyer even if the house is emaculate because they may not like the layout or other fixed design elements. Having three positives before encountering any potential uncorrectable negatives sets the seller up for a better offer.

People are people and they tend to make decisions based on how they feel as much as the pure logic of the decision. Not every buyers agent is effective at mitigating the buyers emotional side of the decision making process or the logical side, and sometimes they are lousy at both. Setting up the buyers with mostly positive 'feelings' about the house will generate higher offers.

In short, sellers should still keep the yard up, keep the house clean and tidy, and show it often to ensure good market penetration.


Friday, July 9, 2021

Condos and Assessments can be quite the drag

Recently I noticed a large scale drop in listing activity and cancelations in a local condo tower. I decided to 'sniff' around and discovered that the building was originally plumbed with the dreaded Qest Polybutylene plumbing and a large scale assessment was likely for all the homeowners in order to get the building replumbed. This is a pretty large building and it looks like each homeowner is facing a sizable assessment from the HOA. Whenever I show a property my client seems interested in builtin the 1990s window, I check under the counters for that gray color pipe and fittings. If so my standard beware disclaimer is forthcoming. 

The piping has a tendency to abruptly fail in rather catastrophic fashion usually leading to a burst pipe or fitting and lots of water going everywhere. It is a problem that can be remedied but at a cost. Selling units that are facing this situation is not as hard as people might think, and there are strategies depending on the sellers financial disposition to make the process seamless. But for buyers looking at properties be it condos or houses, checking for polybutylene pipes is important, because it is not a matter of if, it is a matter of when the flooding will happen.

There could be opportunity for a "deal" if there really is such a thing right now, in this building because a certain percentage of buyers will simply run away from these because of the perceived problem associated with the assessment and the timeframe for remedy.

Sometimes a bad thing can be a good thing.  

Friday, July 2, 2021

Market Remains Tight but Not Hot, There is a difference.

Our market seems like it is hotter than Monday's all time record afternoon high temp, but digging into the numbers reveals our seller's market is only tenuous at best. Multiple listing service stats show Clark County over the last three months has only had about 150-200 transactions per month which is well under the 400-600 we are accustomed to seeing in the springtime. The culprit isn't a lack of demand but rather a lack of inventory. It looks like the pandemic left a chink in the armor of the real estate market. It seems few people want to sell their home. 

I get it, Clark County is a great place to live and this area routinely finds its way onto best place to live type articles in various national magazines. But sellers seem to be worried about their ability to buy another house when they get their current home in contract. That is a fair consideration but it is exasperating our dilemma with inventory. Sellers are in control of the market, they can easily dictate terms of sale to buyers including longer escrow periods and rent back after close clauses to allow them time to acquire a replacement home.

Personally I had by best year ever in closed volume in 2020 and one of my best in total units closed and this year I have been off to a rather sluggish start. Largely due to a lack of listings. Many of my clients that are in that 'sweet spot' 5-8 years since they bought their last home are not interested in selling. Everyone seems to be content, whether truly so or worried about an uncertain economic future, they are choosing to stay put.

The listings I am getting this year are almost exclusively people that are leaving the area to either retire or for an employment change. The "move up" market seems almost dead. Prior to the COVID 19 pandemic new home builders were making a killing by providing inventory to a very hungry market, but alas, they have run into high cost of materials and a flat out lack of materials to keep pace.

The bottom line is that this sizzling hot market is at least a bit of a mirage as it is completely supply side driven. The number of buyers is shrinking due to affordability, but the number of homes for sale is also shrinking and or flat. Prior to COVID we had a robust almost neutral market slightly favoring sellers and now we have a much smaller market with tight inventory and a bidding war on nearly every home that comes to market in the price ranges from $300k-$900k. 

Hopefully the materials shortage will ease up and allow home builders a chance to continue providing new home inventory. That could be the trigger mechanism for would be sellers as they would not have the concern of finding a replacement home when they sell their current home.


Friday, June 25, 2021

Listings Still Rare, But Inventory is Softening

Well, softening a little bit. Listing count is up and that is a good thing, but in most price ranges and market segments, buyers outnumber sellers in fair numbers. Buyers still need to bring their "A" game with offers lest they be outbid. Buyers need to understand that a house that is really nice and move in ready, modern design, etc will likely get bid up. Homes that are older or maybe a little bit of disrepair are less likely to be bid up.

As new construction ramps up with materials finally starting to retreat back on price and availability this will offer buyers options to resale homes that have been in tight supply of late. I see a soft landing in real estate over the next couple of years. As interest rates rise, which they likely will, due to aggressive spikes in inflation, real estate demand will see a slowing decline and begin to match the inventory. 

Some people fear the "bubble" and that is a real thing, but to burst the bubble we would need to see a major rise in listings and I don't see that happening.

Buyers should feel secure in the decision to purchase a home, and skeptical potential sellers should see more opportunity on the buying side over the next few months which may make them feel comfortable listing their home. 

Here's to a nice couple of years with modest increases in housing prices and a slow and low rate of interest rate rise.

Friday, June 18, 2021

Better Late, Than Never

Well the spring rush of listings was rather late this year, but inventory seems to be showing up at a more typical spring pace now that were are almost at summer. I'm seeing a serious bump in available inventory. Now to be clear we are still tight and sellers still hold the better hand. But with building materials coming down off the crazy pandemic high cost and people starting to relax a but on Corona-Fear, things are looking a little more promising for buyers, yet still good for sellers. 

Interest rates remain fairly steady and still low so buyers should be able to still the proverbial light at the end of the tunnel. My son is getting married this weekend and things are hectic around the house, so that's all I got this go round!

Friday, June 11, 2021

Could Midtown Vancouver be the Next Hot Location?

I recently listed a small cottage with a college from the office in Midtown Vancouver. Midtown Vancouver? you ask, well yes, this is not an official neighborhood but is actually a part of three neighborhoods, Esther Short, Arnada, and Hough. Like Uptown and Downtown it is a description of a specific part of the neighborhoods. In this case the strip of blocks touching the SR-501 corridor or Mill Plain and 15th street between Uptown and Downtown. Anyway the cottage is a typical house in the area, but the area is quickly moving towards high density development. This could transform this to a real estate hot spot. Arnada and Hough are already pretty hot, but the midtown strip could go to the moon.


There is currently and has been for about 5 years now significant development in the area. Two sizable urban apartment projects went in a few years back with hundreds of units, 13 West on West 13th and Columbia and the large 15 west project on West 15th Street. Just north of 15 West, Ginn is building a infill urban apartment building. At C Street and Mill Plain the entire block is now Al Angelo's mid rise mixed use building. New Seasons market is going in at 15th and Main and that should create a buzz in the area as a market is the only thing missing in the greater
Downtown area. The block just west of the New Seasons was purchased recently by an investor group intending to erect a mid-rise building that will cover the entire block. Some high end units in two mid-rise towers recently came to market, Our Heroes Place at Mill Plain and D Street. This corridor is seeing some serious action and that new market might just bring some condos or other high density residential to the area.

There is currently hundreds of millions of dollars in construction projects in the downtown area and more than a billion in proposed projects waiting in the wings. But the waterfront and lower Downtown areas are fairly expensive and the Mid-town area has a chance to provide some solid affordable urban high density housing with good access to amenities and the freeway for commuters. I'd keep an eye on this area it could be the next new thing.


Friday, June 4, 2021

State to Fully Open: Good for Inventory?

Part of me feels like the ultra tight inventory is at least partly due to a 'fear' of COVID and the decision by Governor Inslee to reopen the state this month may lead to some relaxation of anxiety that some sellers may have about strangers walking through their house during the listing period. But further exasperating the problem is a serious lack of building materials that is slowing the new construction slowdown and creating rising prices for new homes. This puts additional pressure on resale homes. Any seller thinking about making a move, right now the stars are aligned for sellers to dictate their terms.

Many sellers are concerned about "where will I go?" With inventory tight sellers can make rent back arrangements or other arrangements to soften the pressure about finding the replacement home. Once the building materials crisis ends, new homes will once again compete with resale and the window may close a bit on sellers.

So far this spring listings have been slow to materialize but they are picking up and I hope the reopening will bring out the remaining sellers that might be waiting for the pandemic to wane. 

Interest rates remain competitive and buyers can still get a fair bit of house for the money available to a median income family in Clark County. 

Friday, May 28, 2021

Vancouver Neighborhoods All Over the Board

Neighborhoods do matter. People will pay a premium to live in a neighborhood that offers something extra over another. Better schools, closer to services and shopping, views, access to highways or closer to major employment centers, and so on. Vancouver is a large enough city that it has a full range of neighborhoods across every urban and suburban subset. Just out side of town Vancouver even has some semi-rural neighborhoods with homes on small acreage.

But neighborhoods are hard to measure without a local real estate pro. Simply looking at a map or stat sheet with median prices will not tell the tale. Sometimes a better neighborhood has a lower median price. For example a neighborhood like Fairway Village in Vancouver has a lower median price than Felida. But pound for pound or foot for foot, Fairway Village is spendier. You see, Fairway village is a subset of Cascade Park East and it is entirely comprised of homes aimed at retirees and most are two bed units. These are smaller homes and thus tend to be a bit less expensive than the much larger homes typically found in Felida. 

Often times the median price of a neighborhood is driven by the fact that the area is confirming with lots of similar houses either big ones or smaller ones and thus one is lower than the other. Other times one neighborhood may have very similar styles of homes yet be priced very different, here is where the classic "location" issue arises. One mind find that lower priced areas are not always undesirable. The Esther Short neighborhood is one of the hottest neighborhoods in the city, yet the median price in that neighborhood is well below the citywide median at only $350k. What gives? Esther Short is downtown and the waterfront. The bulk of the homes in the area are mid-rise and high-rise condos or apartments with an average size of less than 1000 square feet. So the median price per square foot is really high at more than $350 per foot. Contrast that with the expensive Riverview area the most expensive area at a median price over $1,000,000 but an average home is around 3000 sf. That neighborhood averages about 300 per foot. I wrote about price per foot and how it is rarely a good indicator of real value, but it shows that median pricing alone is only part of the neighborhood equation. 

Below is a map of Vancouver with pricing as of last month for broad neighborhood areas in and around the city. The overall median price for Vancouver was $423,000 at that point. 




Friday, May 21, 2021

Despite Craziness in Market, Buyers Won't Bite on Overpriced Listings

The title says it all. Buyers are getting desperate in the market as any home that is priced near its market value is quickly inundated with offers often well above asking. Yet a home priced 5% over received market value sits for weeks without offers. This is a bit of an unusual situation as the bidding war often leads to a final price several points over ask anyhow. Buyers seeking to avoid the crazy auction style offer scenario should look at houses they "feel" are overpriced as these could be an opportunity to avoid giving up inspections and all of that in favor of a traditional negotiation with the seller. Maybe offer a little less than asking. Buyers should embrace homes that are priced a tad higher as they may end up with a better deal without the hassle of losing five or six deals being outbid before finally paying too much in a bidding war.  

A good buyer's agent can guide buyers through the process of evaluating value and suggesting offers that have a good chance of success. Buyers should not be afraid of writing an under ask offer on a home that is overpriced. Writing such an offer on a property that is priced well is a fool's errand. Too many buyers are giving up vital protections such as the important inspection contingency to strengthen their offer against a half dozen others and if they simply look at a home that is a bit overpriced, they have a stronger negotiation position with the seller and will not have to give up important protections.

Buyers should embrace slightly overpriced listings as an opportunity to avoid the crazy auction style offer systems and remember that if a buyer is using a loan product the bank will not allow them to overpay for the house. The purpose of the appraisal in a transaction using a mortgage loan is in fact to protect the bank's position. It also in effect protects the buyer from overpaying for a property. 

Buyers can navigate this challenging market under the good service and advice of a local expert agent.


Friday, May 14, 2021

Spring Listings are Here, but not in Typical Numbers

That classic spring perk in listings has definitely happened, I am noticing more and more new listings showing up on the MLS. However there does not seem to be that heavy load of inventory that traditionally hits the market when the sun starts shine each spring.

Spring is also when many buyers come to market and they may be disappointed to find little options. That said, I feel like the spring rush of buyers is also a tad lackluster and that could be a blessing in disguise. Buyers have had a hard go of it over the last year, a little less competition might help those frustrated with the situation to finally get their home.

This is not to suggest that things are not tight, they are as tight as I have ever seen it. According to the data we are measuring inventory not in months or even weeks but DAYS! 12 days of inventory for the classic 3 bed 2 bath home in Clark County. Yikes! I ran a report on the local MLS showing the last three months of homes that are classic starter homes. Three bedrooms, two bathrooms with 1200 to 1700 SF. All across the county. Take a look at the results:

You may notice that the gap between new listings and sales did widen just a bit suggesting that a little extra inventory is now available. Maybe we can start using weeks agin to describe inventory in the next month or so. The second chart shows that the average list price is a tick higher than the average sold price. That shows market pressure is high. Remember most closed sales are 30 to 45 days behind the current market. A classic starter home in Clark County will set the buyer back about $400,000 that's just where we are right now. It is hard to see but the closed price is a tad higher than the list price showing that market pressure is getting sellers more than asking in general.

Buyers looking for a "deal" are headed straight to disappointment. Having an experienced agent that can guide buyers has never been more important. Some sellers are overpricing their homes and some are pricing to move. Buyers need to know when to be aggressive with the offer and when there is some flexibility in price. A house priced for quick sale will have multiple offers in the first day and likely be in contract in a matter of hours or a couple days. Overpriced homes will still get a lot of looks but may not get multiple offers or may have multiple offers under asking. 

Buyers are well advised to use a local experienced pro to help guide them through this process. Even the best and most experienced Realtor® can't guarantee their buyer will win the day, but the best agents can give sound advice to ensure that if you don't win the offer you are possibly better off without it. There are many strategies buyers can use and some agents tend to focus on just one. I like to give my buyers the full range of options with a cost - benefit analysis and a "pros and cons" approach so the buyer can feel optimistic that they may lose a battle but they will win the war.


Friday, May 7, 2021

May is here, will the listings arrive with it?

The ultra tight inventory locally remains an issue for battle weary buyers. May is traditionally a month that see a boost in listings so let's hope that holds true in 2021. Buyers should continue their quest for the elusive home. But buyers should also be sure to look at home priced at least 3-5% lower than their maximum affordable price. With multiple offers the norm, buyers will have to bid properties up a bit to get their offer to the front of the sellers list. A buyer approved for a $400,000 house will need to consider shopping in the $380,000 to $390,000 price range so they have wiggle room in multiple offer scenarios. That strategy will help speed up the chance of landing a house, but it is no guarantee.

I have a few listings coming up this month so if that is true among my colleagues as well, then perhaps a wee bit of relief is on the way for beleagured buyers. Sellers in the mean time are comfortably perched in the proverbial 'catbird' seat. Sellers should also be mindful of trends in listing activity. If things begin to perk up for buyers the window for that top dollar opportunity may tighten.

Stay on top the news and don't get too greedy, the market can be fickle and the crazy state of world affairs means things could change direction at a moments notice. What is relief for buyers could be misfortune for sellers. Happy hunting.

Friday, April 30, 2021

Spring Listing Bump is Coming... How Big is the Bump?

I am seeing the traditional listing bump that often comes around every spring. Not just my business or our office, but across the board. Our market is a bit desperate for new listings, so buyers might be able to catch a breath. Springtime tends to bring out buyers however as well, so the question is what the title suggests... How big is the bump?

The COVID 19 pandemic has definitely shaped the current market. I had a record year in 2020 for volume, so I can't say I saw a slowdown in local real estate. The Regional Multiple Listing Service has reported that sales have been robust. But COVID 19 has altered some of the patterns in real estate as well as created in my opinion, a smaller number of fresh new listings. It. may be that some people simply don't want to invite people into their homes during the pandemic out of perhaps safety concerns regarding the virus. This seems reasonable, but at this point possibly more emotional than logical. 

With the vaccines now widely available and many governments pulling back on the lockdowns, some of that concern may be starting to wane. I believe that demand will continue to outstrip supply for the next several months, but this market has given us inventory levels measured not in months, nor even weeks, but DAYS! I have been in real estate for more than twenty years, I can't remember ever having an inventory tighter than two weeks, but that just happened!

I think some of that inventory pressure will lighten but we should remain firmly planted in a seller's market through the summer months. Sellers that make their home available will do better than sellers that limit exposure. This is a general rule even in a seller's market.

I have two new listings this month and I do not expect either to last long at all. This is a great time to sell your home, seller's are firmly at an advantage.

Friday, April 23, 2021

What makes a neighborhood "good?"

Neighborhoods are often the most important factor in a decision to buy real estate. But what really makes one neighborhood better than another? There are many things that impact neighborhoods, some are fluid and changeable over time and others are more permanent and fixed. Fixed conditions are topographic, geographical, or otherwise permanent. Fluid conditions can change through redevelopment, zoning, economics and other variables. 

Buyers are often limited by a budget and that means that some neighborhoods may be out of financial reach. But irregardless of ones budget be it below the local median or well above, a good decision is going to be based largely on neighborhood. Fundamentally there are several key factors in determining the suitability of a neighborhood:

  • Location: This is mostly fixed and based on proximity to transportation, shopping, schools, etc.
  • Crime: this is a fluid feature based on how much criminal activity is occurring in a neighborhood, this can ebb and flow with normal neighborhood transitions through the various cycle of real estate as well as local government policy.
  • Uniformity: This is semi-fixed based on the building and zoning type. Going from an eclectic mix to a uniform neighborhood takes years or decades. But having a consistent neighborhood with similar styles and values is generally a positive neighborhood feature.
  • Public spaces: Parks and natural public areas tend to enhance the value of a neighborhood
  • Infrastructure: Quality public infrastructure and improvements tends to increase the value of a neighborhood.
  • Ownership: The percentage of rental units to owner occupied units affects value in neighborhoods. Generally more owners increases value, unless the rental units are extremely well managed. An HOA controlled neighborhood tends to keep rentals well managed.
  • Relative proximity value: Neighborhoods with lower priced homes than those immediately surrounding it, tend to have the values pushed slightly upward on the 'coat tails' of the nearby more expensive properties. Likewise expensive homes surround by more modest homes tend to be dragged down a bit. This is a fixed condition.
  • Noise: This is typically fixed and is of particular importance in suburban and rural neighborhoods. The expectation in urban areas like Downtown, is that noise levels will be high so it is a little less of an issue in high density areas.
  • Traffic: This is semi-fluid. It is tied to infrastructure and location. It can be improved with infrastructure but can get worse with growth of population or additional development that over extends the existing infrastructure.
  • Prestige: Some people want to live in a neighborhood that is prestigious. Usually prestige comes at a very high price. Sometimes however middle-income neighborhoods are also prestigious in that they just happen to be really nice areas of modest homes. That ties into location nd infrastructure. Generally a prestigious neighborhood leads to overpriced homes and are not necessarily better places to live than other similar neighborhoods. Use caution when getting caught up in prestige, it can be a good thing, but not always the best thing.
  • Natural Disasters: Some areas are prone to flooding, fires, landslides, etc. Clark County Washington doesn't have a lot of issues with proximity base natural disasters. But buyers should consider the possible dangers of certain locations. Things like earthquakes and tornadoes are going to strike random areas and that is too unpredictable to worry about. Weather and seismic issues are also more of a construction issue, how well made is the house rather than neighborhood location.
The bottom line is simply that buyers should but the most house they can afford in the best neighborhood they can find in their price range. Commute distance and proximity to the things buyers like to do as well as have to do are strong motivators and that can trump the basic rules of neighborhood selection as well.

The market is tough on buyers now regardless of price range as inventory levels are at historic LOWS. Buyers have to be careful not to be too picky. Fluid conditions that are undesirable may be trending in a positive direction, fixed conditions are unlikely to ever change. Buyers should keep that in mind.

Friday, April 16, 2021

Is the Market Reaching a Ceiling?

Real estate markets locally can reach a ceiling on pricing that doesn't necessarily mean a change in the supply or demand but rather a cileing based on local incomes. Rising prices in our market and in most markets across the U.S. have been driven largely by a low supply of available properties combined with low interest rates. 

But at some point the entry level homes become so expensive that entry level buyers are priced out. During these times you might find a situation where a small 1200 SF house is fetching say $375,000 but just $50,000 more buys a home in the same neighborhood with wide the footage. As prices rise the bottom of the market gets very tight, and that can cause a disproportionate pricing pressure on that segment of the market. 

Furthering the problem is that small one level homes are in demand both by young people starting out and older people downsizing. Those that are downsizing often need the one level as stairs can become a problem for the elderly. This generally means that downsizing seniors will be willing to pay more for those types of homes. Downsizing usually leads to strong offers as the proceeds of a recent sale of a larger home give them a financial advantage over first time buyers as well.

To combat this first time buyers in the entry level market ought look at small two-story homes and townhouses as those are not coveted by the older buyers. There is less market pressure on a 1400 SF two-story house than a ranch style house of the same size.

As we roll into the peak spring listing period, the volume of new listings will be an important thing to monitor for buyers. So far in 2021 we are well under the typical number of listings, that continues to keep pricing pressure under a rapid boil. We may be near an income ceiling however as many buyers are being eliminated from qualifying. That may temper things a bit.

It remains a great time to sell.


Friday, April 9, 2021

Large Urban Construction Boom Starting Again

Vancouver USA is about to start another mini-boom after a slight slowdown in large scale urban projects due to COVID-19 and the associated economic slowdown, things are looking up locally. These larger projects tend to cost $25-100 million each and that brings a lot of jobs, economic growth, and general prosperity to the region. This is nothing new as Vancouver has been on a bit of a boom for a fair number of years now.

Downtown has a large project about to break ground at the Academy site. Phase one will be two buildings of 5 and 6 floors totaling 140 apartment units. Phase two will be a larger single building platform with 6 floors and about 200 units.

The Waterfront should see the Broadstone project get going as site prep is already underway on Block 17. Not sure when the Timberhouse will start on block 3 but it is in the same general time window as Broadstone.

Terminal One has signed a new 50 year ground lease with a development partnership that should bring rise to a full two block mixed use project with two buildings and substantial public space. the buildings should rise around 5-7 floors and that project could easily get into the $60-70 million range perhaps even $100 million.

Of course all these construction related jobs will bring higher demand for local residential real estate and that means it should continue to be a runaway success for sellers. You can follow all the latest on Vancouver's booming urban construction and the associated projects, services, amenities and more, visit urbanlivinginthecouv.com.

Friday, April 2, 2021

Don't get caught in the $/SF trap

I wrote this article a couple of years ago, and figured it is time to revisit this. The prices obviously are higher today than when this was written, but the mechanics of the article remain sound and relevant today.

Originally posted August 3rd, 2018, by Rod Sager

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, March 26, 2021

Sellers Nervous?

Sellers are a bit nervous. Not about the market but about their ability to acquire a new house once they sell their current house. This is more than just a local phenomenon. There is a serious shortage of resale housing nationwide. Seller however are likely overplaying this fear a bit.

Locally and in many markets across the country, sellers are FIRMLY in control of the market. Sellers can ask for a longer closing period of say 45-60 days (rather than a more traditional 30-45) and then ask for a 60 day rent back to get nearly four months to find and purchase their replacement home.

Sellers can also consider new construction which typically has a build out time and that give them time to prep and sell the current house before closing on the new house. Tactics like this can make a seller feel much more comfortable about the tension they may feel pondering the move and the process of finding and successfully entering contract on the next home.

Meanwhile for beleaguered buyers frustrated with multiple offers and a seemingly impossible uphill battle to buy there is hope. Buyers can offer sellers more time or other concessions to help seller make the transition. Buyers moving from a rental unit can simply stay month to month a little longer to accommodate a seller that needs extra time to finish the purchase of their next home.

These tight inventory markets can be stressful. Strategies for success can alleviate much of the pain of buying and selling in a hyper tight market.

Friday, March 19, 2021

Listings are in Short Supply

Here we are tickling the end of March and listings remain a rare commodity. I keep thinking our spring rush of new listings is just around the corner, but thus far no such rush. Every Realtor® in the area seems to have substantially fewer listings at the moment. This has placed significant price pressure on buyers that really have little bargaining room. 

Sellers are grinning all the way to the bank, but they should be advised that as prices creep ever higher buyers will fall out of the market and that can act as an equalizer. Now is a great time to sell, especially if you intend to move to a less expensive market. 

Buyers need to present the strongest offer they can. It's not just price, strong down, big earnest money, flexible closing terms to meet the sellers exit needs. It's a tough road to haul right now, but buyers that persevere will get a great house even in this tight market.      

Friday, March 12, 2021

Are Vancouver's High End Renters Going to Buy?

Vancouver has a significant community of high end renters. The Waterfront and other upscale Downtown apartment buildings seem to have no trouble renting small units well over $2,000 a month and some spacious units over $5000 a month. There is no shortage of high end renters. Incomes required to support these rents are plenty to support a rather nice condo or home purchase. So one might ask, why are these renters, renting? Will they soon become buyers?

I have spent a fair time contemplating this issue. Sometimes people rent because they can't buy. Perhaps they lack a downpayment, or the credit score to obtain a loan. But these people are not those that are renting the expensive luxury units on the waterfront of Downtown. Buildings like Holland's Coen and Columbia, the new Aria, Riverwest, and Rediviva all have strict income and credit requirements that likely match those of a mortgage lender, they might even be tighter. So these renters are clearly choosing to rent. 

Those that are capable of buying but choose to rent fall into a number of possible categories. 

  • Short term residents: Sometimes a highly paid person has a project they are overseeing in an area and want to live in a nice place while they finish the contracted project.
  • Leery of buying: There is a group of people that are old enough to remember the last hard crash in 2009-2011 but too young to remember the boom bust cycle of real estate and economics. real estate is nearly always a good long term investment, not so much short term.
  • Do not want the responsibility of ownership: There are people who simply do not want to invest the time and money into maintaining a home they own. Even condos have some interior maintenance issues, but honestly this one is tough to reconcile.
  • Mobility: This was an oft cited reason young professional millennials cited for not buying in a series of well reported studies over the last few years.
Short term residents will always be a piece of the equation.

The leery of buying crowd is an increasingly smaller group, but they are still out there. 

Responsibility of home ownership is curable. Many condos have HOA and building setups making the maintenance as low as renting or in some case lower.

The mobility crowd is still a thing, but I feel like that group is about to shrink substantially. The pandemic has created a new and potentially sizable group of remote workers. Some companies have embraced the idea of the remote worker. They have weighed the commercial real estate cost savings against any productivity losses and found the result favorable. Other companies have come to the opposite opinion and will likely return to traditional office work as soon as the pandemic is over. But those that have embraced will create a new group of buyers, some of which may find interest in high end real estate.

Kirkland Tower on the Waterfront will be the first test of this. Downtown Vancouver has a handful of very high end condos particularly those at Viewpoint in Vancouver Center. But most of the high end condo units are older now pushing twenty years. Kirkland will offer the first brand new modern luxury high rise condos in Vancouver since George W Bush was president. I feel like those 40 units are gonna go FAST!

Only time will tell and the time is coming soon. Kirkland will likely complete that project by summertime. You can follow all of the exciting activity in Vancouver's urban living seen here: www.urbanlivinginthecouv.com. 

Friday, March 5, 2021

Investment Value vs. Utility Value

I have written a fair bit about the utility value of your home and how that is more important for most people than the investment value. I dedicated a chapter of my 2010 book, "Don't Panic" to this idea. There are still a great number of people that tend to put too much emphasis on the investment value of a home they plan to live in. 

Part of the allure of home ownership versus renting is the investment potential. This should not be overlooked, however the primary purpose of your personal residence is utility. You own or rent a home primarily to provide shelter and safety for you and your family as well as a sense of personal place. This should supersede the investment potential of the property. 

I do recommend buyers consider the investment value as part of the equation, but not the primary driver. Nearly every home in any given region will have similar investment potential. There are some locations and or other external facts that can make one property a better investment potential as far as appreciation in concerned. But buyers of a personal residence rarely take advantage of the investment opportunity of their home. They tend to make the home their own to their personal taste rather than the neutral taste of the broad market. they tend not to rent out surplus space in the house. Yet investment value or potential is often something they stake a disproportionate level of concern over when buying the home.

Buyers should buy the house they can afford that offers the best living situation for those that will live in it. As a Realtor® I will take great care in checking the surrounding area for potential detrimental external problems, noise, crime, new development, proximity to essential services, etc. But in the end and short of a compelling external factor, the best home is the home one can afford that provides the best location, floor plan, proximity, and general utility for the buyer.

There are a few trends in real estate surrounding new homes. When buying a new home it is often sound advice to try and buy a house in an early phase preferably phase 1. The reason for this is that developers almost always raise prices in each new phase of development so buyers in the first phase have a quick uptick in value as comparable homes sold just a month or two later might be 5% or 10% more expensive. Barring a significant downtown in pricing, buying at the final phase of development is generally not a great idea. That said, if the house is right, the price makes sense and it's a good fit for you and your family, buy it!  

Friday, February 26, 2021

Is Tight Inventory a Product of the Pandemic?

It's hard to say why homeowners are choosing largely to stay put, but with interest rates still very low, the traditional case study suggest they would capitalize on substantial equity gains and move up. They are not doing it this time and the only real difference is the pandemic. 

Are homeowners nervous about the future economy, the persistent potential for lockdowns, or is it some other cultural shift in the mentality of homeowners. Are millennials taking a different approach to homeownership than their parents who on average bought a new one every seven years. Perhaps they will be more like their great grandparents? Are millennials going to be a generation that stays in their first house through retirement?

I hope not, as that would not be good for us Realtors® ;) A lack of resale homes leads to a tight market and higher prices for entry level buyers. If millennials end up a buy and hold generation, the market for Gen Z will be really tough.

Baby boomers were perhaps a little too 'loose' with their equity, but one can also be too tight with it as well. Using the equity to buy a larger home or a home in a better neighborhood, closer to work, or another life benefit is not a bad idea. As with all good things in life, just don't abuse them.


Friday, February 12, 2021

Listings Hard to Find

Listings are tight and that means the market will remain difficult for buyers and excellent for sellers. Our transition into the neutral market seems to be sliding back in favor of sellers. It seems that sellers are staying put. Vancouver and Clark County remain a hot destination as new people from Oregon and Seattle are flowing into the region. Meanwhile few Clark County people want to leave. A possible additional complication is that people in a position to move up may be uncertain about the economic future with COVID still raging and uncertainly in future governmental policy. If this is the case then that leaves even fewer new listings in a market filled with ready, able, and willing buyers.

I think the vaccine roll out and a slowdown in new cases later in the spring (hopefully) will ease the jitters of some local move-up sellers. This should help boost inventory in the traditional spring season.

If you are thinking about upgrading your home now could be the perfect time. You will get top dollar for your current home maximize its equity thus putting you in a stronger position ie. larger down payment, lower future payment, etc. when you offer on the next home. Interest rates remain extremely low, but that may not be the case in the future since the feds are printing massive amounts of dollars to combat COVID-19. Even if the housing market were to take a dip next year, the interest rates combined with he capture of a large equity pool would most likely carry you through any future downtown, grinning.

Reach out to me or your local trusted agent today to find out what your specific situation looks like.

Friday, January 29, 2021

Value Neighborhoods, in Vancouver

Vancouver has several neighborhoods that offer disproportionate value. When considering a home that is seemingly undervalued one must be cautious and rely at least in part on the counsel of a qualified local agent and their own good common sense. 

The standard price per foot model is unreliable. One must determine why the house is less. generally there is the actual property characteristics, condition, location, age, etc. But external conditions such as neighborhood crime, schools, accessibility to services and infrastructure can also be factors. Once these are evaluated and the property still seems like a deal, then it could be local perception. This is a very intangible thing that is as real at times as other more tactile facts. 

Perhaps a neighborhood was once very run down and filled with crime and other undesirable elements, but some improvements began in recent years that has transformed the area into a more moderate neighborhood. Things may even be continuing to improve. Many people will still hold on to past perceptions of the area and thus not offer higher values for otherwise excellent properties. This is once again where a true real estate professional can help. Many agents are guilty of holding on to past perceptions and the best among local pros are well studied and aware of these dynamics that can lead to a potential value opportunity for a buyer.

The opposite can be true as well. A neighborhood with a sterling reputation can be on the downward trend and fetch more for homes based again on local perceptions. It is not a bad idea to test your agent on general knowledge of neighborhoods and communities before writing offers. No agent knows every nook and cranny of a county like Clark with 625 square miles and 500,000 people. Good agents will know a great deal though. The best agents will help their clients see things they might not otherwise notice, either beneficial facts or derogatory items. In either case the buyer will make better decisions and quite possibly find a value property in this crazy tight market. 


Friday, January 22, 2021

New President, Same Market.

Joe Biden was inaugurated on Wednesday as the 46th President of the United States. Generally speaking changes in Presidential administrations has a nominal effect on local and regional real estate markets. Over time presidential policies can have a negative or positive impact on the economy and that can affect the real estate markets. 

Our local market continues to have a low level of resale inventory. Local builders are rather busy building brand new homes which are also having no problem selling. This makes the market very tight for buyers. One thing that buyers must understand is that budget and desire are more separated in this market than just about any other time. Picky buyers may get priced out of the market entirely if they try to find the "perfect house." At $400k the perfect house is probably non-existent and if it does exist it may be $450k before the buyer finds it.

Buyers may have to settle for something less than ideal, but a home is as much a utility device as it is an investment or luxury. Owning your own home comes with additional responsibility but in exchange offers you freedom and the opportunity to grow your net worth over time. The house you settle for will still give you the growth opportunity and utility and a few years down the road the buyer that settles today will have a much better position tomorrow to get much more house than they wanted this go round.

Buyer should be careful not to let the market pass them by. Many more people want to live in our area than want to leave. That is a strong indicator that absent an economic crisis, prices will continue their rapid ascension. 

Friday, January 15, 2021

2021 Trends

New consturction is playing a significant role in the real estate market for 2021. The shortage of resale homes is partially offset by a robust building boom led by 500 single family home building permits issued in 2020. Builders however are not really hitting that entry level price point much. about a 100 townhome permits were issued last year and those tend to tickle the bottom 300s but resale homes in the $300-350k range are definately super hot right now. With rates remaining very low and a likely COVID 19/New Administration economic slowdown, there is another potential opportunity for selelrs int he entry level market to sell at top dollar and perhaps buy a step up house at a less agressive price point as things settle in for the mid 2021 season. Generally the entry level has the longest lifespan of growth as there is nearly always demand at the low end. Mid level and high end homes tend to fall off first. This creates opportunity for the move up buyer. 2021 could be a banner year for the 3 bed 2 bath 1500 SF seller to exchange for a 5 bed 3 bath 2500 SF mid size move. Retiring baby boomers are bidding those smaller ranch homes up through the rood so younger people that are less sensitive to stairs can buy a 2 story hosue without competeing against the retirees and their big cash offers. I am looking forward to a solid real estate year but long term 2022 and beyond is a bit cloudy at the moment.

Friday, January 8, 2021

2021 Could Bring Mixed Bag

I think that we should see a strong real estate market for the first half of 2021 but likely a slowdown at least in the rate of price growth as economic conditions catch up and federal tax policies may change as well. Our market has had a deficiency in inventory for a couple of years now and that keeps prices on the rise, but the pandemic of 2020 and other contributing economic facotrs will likely catch up with us around summertime. At this point I am not suggesting a full correction but rather a bit of a slowdown in the rate of appreciation. There is still tremendous demand for real estate and new people are coming into the area from places like California and the East Coast but also from Portland just across the river. This should keep real estate values moving in the plus direction, but I do not see double digit growth year over year this time round. With interest rates remaining very low buyers are still in position to get a relative "value" in the market even if appreciation slows as rates in the 3s are a long term benefit that tends to outweight any short term pricing issues. Look for a robust spring followed by a seasonal typical summer and perhaps a near neutral market coming out of the autumn later this year.

Saturday, January 2, 2021

Happy New Year!

Well 2020 is toast; here's to a new year and hopefully an end to the COVID-19 pandemic. Although the Corona virus managed to cause a lot of mayhem and disruption in 2020, locally the real estate market just kept chugging along.  

Vancouver and Clark County saw nearly 10% appreciation in in 2020 and 2021 is forecast for low double digits! That is rather robust considering the pandemic led to the highest unemployment rate in decades. But despite our local stellar numbers there are some areas in the country that did even better!

Areas with lower median home values often have the most opportunity for dramatic growth. There are many lessons that corporate America learned from COVID and one of them is that some jobs can be as productive or more productive in a remote or work from home environment, others not so much. 

This potential shift in some economic zones could lead to some dynamic changes in commute patterns, living arrangements and employment. Vancouver USA has undergone an amazing transformation of the Downtown and Waterfront areas and now is attracting new jobs and people. Other cities in a similar demographic and geographic situation have also done so and often with brilliant results. The potential "new office universe" could lead to more people coming to Vancouver rather than staying ion Portland. The "commute" may have less impact if work at home model stays around after the pandemic.

You can see a similar dynamic occurring in other cities including some that have striking similarities to Vancouver-Portland. Covington, Kentucky is a small city on the south bank of the Ohio River and sits just opposite of Downtown Cincinnati, Ohio. Covington has only 1/5 the population of Vancouver but it is part of a group of cities on the Kentucky side of the river that are similar in size to us, collectively. Covington has the "downtown" and "waterfront" that attracts the locals for dining, urban living, and activities. There are three counties in Northern Kentucky that make up the Kentucky portion of the Cincinnati Metro area and they are combined about the same size as Clark County with roughly half a million people. Median home values there skyrocketed in 2020 nearly 15% and area expected to do so again in 2021. The renovations in Covington's downtown including high rise condos, restaurants, park space and events have made it an attractive alternative to the more expensive, neighboring Cincinnati. Hmm, sound familiar?

Covington is an example of a city on a similar path that Vancouver is on and with similar resulting improvements to quality of life, jobs, and incomes. Covington also enjoys a border economics and city symbiosis advantage with Cincinnati as does Vancouver with Portland. Covington was run down and pretty rough until the recent years when new development began to transform the city into a wonderful place that has a bright future.

City leaders here in America's Vancouver are wise to look at other successful cities as they ponder the pathway of our own city.