Friday, July 30, 2021

Are Californians Really Driving up Values?

I hear this notion a lot from sellers and buyers. Typically this comes from anecdotal evidence like a buyer says... "I got outbid by a cash buyer from California." California has been the big bad boogeyman in the Northwest for decades now. For many years California real estate prices outpaced growth in the NW leading to an opportunity for Californians to sell or borrow against, their high priced properties and pay cash for similar properties in the NW often outbidding or displacing locals trying to buy the more 'traditional' way using a bank loan.

Much of it was perceived rather than reality, but there was some truth to the notion. The rapid rise in real estate values came to us because the Northwest is desirable. The Californians came here much like mid-westerners went there in droves during the Golden state's post-war boom. In the 1950s and 60s there was ample opportunity in California's booming economy and the weather and scenery was a lot better than most of the USA.

As a consequence to the demand and government actions, during the 1970s California real estate became very expensive. The state began to enact very strict building requirements and regulations that drove the cost of new homes up and demand continued to outstrip supple well into the 1990s. Many in the 31st state started to become unhappy with the crowds, high taxes, traffic, and escalating cost of living. Oregon and Washington among others, were natural targets for the aggrieved in California.

But how much of our housing costs are really being driven by exterior forces such as people coming from California? Maybe not as much as you think. Both Oregon and Washington have emulated to some degree the California regulatory atmosphere. A large chunk of a new home's expenses is permits and government mandates, engineering and such. This was one of the primary drivers in California's rapid housing rise in the 1970s and 80s. Now that the NW economy has become much more diverse than just logging and maritime industries, we too are in hot demand. Our land prices are rising as are the regulatory costs to build.

Washington State isn't even in the top five destinations for Californians moving out any more and hasn't been for years. One reason could be the fact that Washington State is the 4th most expensive housing market in the US and California is the 2nd. Washington is no longer a "bargain." In fact according to statistics from the National Association of Realtors®, King County Washington is more expensive than 52 of California's 58 counties. Yes only San Francisco, Santa Clara, San Mateo, Marin, and Santa Cruz counties are more expensive than King County, WA. Three of those five counties lost value over the last 12 months! King County as with most of Washington State is still seeing increases. Most residents of the Golden State can't afford to move here anymore. Even our local Clark County is about the same as Sacramento, County, CA.

Top Ten Counties on West Coast by Median Home Price Q2 estimate :

  1. Santa Clara County, CA population 1,927,000 (San Jose, Silicon Valley) $1,150,000 +4.1%
  2. San Mateo County, CA population 767,000 (Silicon Valley) $1,100,000 -6.5%*
  3. San Francisco City and County, CA population 875,000 $1,000,000 -6.9%*
  4. Marin County, CA population 260,000 (SF Bay Area) $965,000 -7.9%*
  5. Santa Cruz County, CA population 274,000 (Monterey Bay) $875,000 +4%
  6. King County, WA population 2,302,000 (Seattle) $800,000 +6.4%
  7. Orange County, CA population 3,168,000 (Anaheim) $795,000 +5.7%
  8. Alameda County, CA population 1,657,000 (Oakland) $775,000 -4.2%*
  9. Napa County, CA population 140,000 (Napa Valley) $725,000 +4.8%
  10. Los Angeles County, CA population 10,081,000 (Los Angeles) $705,000 +6.6%
* most of the year over year declines shown in the data have been recovered in a recent uptick in median home values.

The majority of California Counties are priced less than Clark County, WA (2020 data) :
  • Clark County, WA (Vancouver) $402,463
  1. Alpine County (High Sierra) $375,200
  2. Humboldt County (Eureka, North Coast) $366,400
  3. Stanislaus County (Modesto) $363,600
  4. Butte County (Sacramento Valley) $351,100
  5. Calaveras County (Sierra Foothills) $336,300
  6. Sutter County (Sacramento Valley) $333,200
  7. Amador County (Sierra Foothills) $330,200
  8. Mono County (Eastern Sierra, Mono Lake) $329,000
  9. Madera County (Central Valley) $318,400
  10. Yuba County (Sacramento Valley) $307,900
  11. Fresno County (Fresno, Central Valley) $306,400
  12. Tuolumne County (Yosemite) $304,500
  13. Trinity County (Siskiyou Mountains) $302,900
  14. Merced County (Central Valley) $300,700
  15. Shasta County (Redding, Shasta Lake) $297,700
  16. Mariposa County (Sierra Foothills) $290,200
  17. Inyo County (Eastern Desert, Death Valley) $283,300
  18. Colusa County (Sacramento Valley) $279,200
  19. Lake County (Clear Lake, Wine Country) $268,700
  20. Kings County (Central Valley) $265,200
  21. Tulare County (Central Valley) $260,300
  22. Tehama County (Sacramento Valley) $256,300
  23. Plumas County (Northern Sierra Foothills) $255,100
  24. Kern County (Bakersfield, Central Valley) $253,000
  25. Glenn County (Sacramento Valley) $245,500
  26. Imperial County (Desert South, Calexico) $244,300
  27. Sierra County (Sierra Foothills, High Sierra) $243,600
  28. Del Norte County (Crescent City, Redwood NP) $230,300
  29. Lassen County (Mt. Lassen NP) $213,700
  30. Siskiyou County (Mt Shasta, Siskiyou Mountains) $209,400
  31. Modoc County (Northeastern Corner) $148,000

The rising cost of housing is no longer about one "rich" group driving up values, but really our own state and local governments pushing of heavy and ever increasing regulatory requirements that drive up the cost to develop land and this is an AWESOME place to be and everyone wants to live here. This is what really drives the values up.  

So Californians may be a pain in the rear quarters, and don't get our more relaxed Northwest vibe, but they are not really the cause of our bloated real estate prices. That won't stop us from blaming them though... they messed up the Golden State pretty bad, so bad they are fleeing by the tens of thousands every year. We just don't want them screwing up our great state. The real boogeyman if we are honest, is King County and Seattle. They are buying up more Clark County homes than Californians at this point.

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.