As we approach the month of August many sellers and buyers are becoming nervous as they continue their efforts to either buy or sell a home. Worry not opportunity still knocks after the peak summer season subsides.
Originally posted August 15th, 2014
There is typically a nice little summer boost in the number of real estate transactions. June and July enjoy a robust seasonal perk up as many families prefer to move in the summer while kids are out of school, and while the weather is fair for moving. The summer month's totals are usually about 20% higher than the average month. Mid-August tends to see a slight slow down in activity that is most likely due to families with children in "back to school" mode.
This slight reduction in buyers, means a little less competition for the remaining listings. Buyers that have not found their ideal home or that have been outbid may find a reprieve from the craziness. Likewise, sellers that did not sell over the summer may be ready to take that slightly lower offer that would not have been accepted a month ago.
Sellers with homes that are not selling of course should consider evaluating the price but also other factors that might help sell. One problem that is all too common among sellers is the availability to show the home. Selling a house that is lived in is a difficult pain in the rear end. But the more easily an agent can show the house, the more buyers will be able to see it. More showings will directly translate into more or faster offers. The next 3-4 weeks will mark the end of our late summer sun and making listed properties available until 7 or 8 o'clock can be the difference between sold and sitting.
Buyers should revisit homes they passed over in June and July. If they are still on the market the price may now be reduced or the seller may be softened up and open to a lower price offer.
We continue to see appreciating prices but the rate of appreciation has slowed dramatically from the skyrocketing prices of 2013 to more modest upward trend in 2014. There is no guarantee that prices will continue to move up. The economy is fair and interest rates are a major factor in the recent real estate turn around. Sellers should not assume that they will get a better price next year. They might; in fact they probably will, but it is by no means set in stone. A good solid offer today that generates the cash needed to do what the seller wants to do should not be underestimated.
Don't worry if you missed out on the peak summer sales cycle, there is plenty of opportunity as the Autumn approaches.
Musings on the state of the market with tips, information and a little fun.
Showing posts with label houses. Show all posts
Showing posts with label houses. Show all posts
Friday, July 31, 2015
Friday, December 5, 2014
The Holidays are a 'Serious' Time for Real Estate.
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| image from www.azcentral.com |
Buyers that are out in the weather during a time they could be at office parties, visiting with family, shopping for the elusive perfect gift, etc. is very committed to finding a house in a timely fashion. Otherwise why wouldn't they just put it off until the New Year?
Likewise for sellers. They would probably rather not have people tromping through their home during the holidays, when guests are over, the decorations are up, etc. Yet there they are doing just that. Maybe they just really want to sell their house?
This is a great time to buy or sell. All of the classic "looky-loos" are on hiatus while the serious contenders are still in the game. I will likely close four transactions this month and that is as many as I closed in the summer months. Don't take the holidays off, you might just get everything you want in the month of December!
As always, seller's should be mindful of the basics of presented their home to prospective buyers. This might be the year to keep half of your holiday decorations in the attic. Too much clutter can be a negative. Keep baking all those yummy holiday goodies because buyers love the smell of fresh baked cookies. Keep the walkways clear of tripping or slipping hazards. Keep snow off the driveway and walkway.
Buyers are well advised to keep shopping during the holidays. Sellers are usually easier to negotiate with when they are busy with other aspects of their lives. At the point they have chosen to keep their home open during this month, they are motivated, whether they say so or not.
December is a win-win month for buyers and sellers so neither should shy away from the golden opportunity that December brings to real estate.
Friday, November 21, 2014
Higher Prices Push Houses Out of Reach
Home affordability is a big issue in many markets around the country, including ours here in the Portland/Vancouver Metro Area. I have posted an interesting article I found. Our local market is well above average in price and one of the less affordable when compared to the nation at large. We sit ranked at 192nd of 225 in affordability with 53% of homes within reach of the median income. But compared to cities like San Francisco, Los Angeles, New York and even Seattle; we are a relative bargain. Please enjoy the article and check out the link to visit their website.
By Les Christie @CNNMoney November 14, 2014: 3:42 PM ET
Affording a home is getting more difficult these days.
Of course, where you buy makes all the difference.While mortgage rates are near record lows, home prices are on the rise -- and incomes aren't keeping up.
Related: Best cities for Millennial home buyers
Short on cash? Steer clear of California, especially the Bay Area where tech money has sent home prices skyrocketing.
In San Francisco, the median home price is $875,000, making it the least affordable major U.S. city. Only 11.4% of homes sold in San Francisco during the third quarter were reasonably priced enough for the average family to buy, the index found.
Other major cities where home prices were out of reach included Los Angeles, Santa Ana, Calif., San Jose and New York.
Where home prices were most affordable was predominantly in cities that were hard hit during the recession.
Related: Mansions for under a million
In Youngstown, Ohio, for example, nearly 90% of all homes sold last quarter could be comfortably purchased by families earning the local median wage.
Syracuse, N.Y., Indianapolis, Ind., Harrisburg, Pa., and Dayton, Ohio, all recorded affordability rates of 84.9% or higher.
Despite the growing affordability gap, most buyers are still in a favorable position, said David Crowe, NAHB's chief economist. "Even with nationwide home prices reaching their highest level since the end of 2007, affordability still remains fairly high by historical standards," he said.
Related: Most Stressed Out Cities
Rose Quint, a vice president for survey research with NAHB, said conditions should remain favorable through at least next year. She believes home prices growth should slow while an improving economy should help people find jobs and boost their incomes.
One headwind could be rising mortgage rates, which could climb in the next year or so, said Tom Wind, executive vice president of home lending for EverBank.
Friday, February 28, 2014
Why Listing a Home in March Works
In most real estate markets there is a sales curve that peaks in the summer months and bottoms out in the dead dark of winter. I believe that this cycle is as mental as it is anything else. People tend to be less active in the winter, especially in northern latitudes with cold and miserable weather. It is no surprise that e-commerce performs well in the winter and bricks and mortar retail does not with the notable exception of December holidays.
Our real estate market locally has a modest sales spike in the summer months of roughly 10% above the annual monthly average and about 10% under in the middle of winter. That represents a total swing of roughly 20%. In some markets where winter weather is truly brutal, I would imagine the spread is significantly greater and in sunny SoCal it is probably a flatter curve. The chart above shows this annual trend with a notable exception in 2010 where the fall off came early. The 2013 curve was a more dramatic seasonal curve than the statistical average I compiled since 2001. The 2011 curve is very typical when compared to most of the years since 2001. The 2013 curve is more like one I would expect to see in severe winter climates like the upper Midwest.
I think the best way to wrap your arms around this is to break the home buyers into two very broad classes. Those highly motivated to buy with external pressure and those buying because they can. So the first group is motivated by things such as a job transfer, loss of job, a new baby on the way, divorce, etc. This is external pressure and that makes someone willing to trudge through a foot of snow in the cold misery of January to look at houses or deal with the inconvenience of listing at a time they would rather stay indoors and visit with family.
The latter category is someone with a new job with higher income and maybe they think, "Hey, we can finally afford that dream house on five acres". Or perhaps they are empty-nesters looking to downsize. These buyers and sellers are much more likely to list or start the buying process when it is convenient. They are less likely to brave the wild elements of January looking at houses.
Anther reason there is a spike in sales in the summer is that families with school age children prefer to move over summer vacation when the kids are out school. This is especially true if the children will be changing schools after the move.
In a real estate market like this one; the biggest driver has been lack of inventory in that under median price range. When inventory increases that will relieve some of the pressure and could stabilize prices. If a seller has a home that is a little less than ideal; this is the time to list. This market is driven right now by move in ready, clean condition, updated properties. If a listing is a little outside those ideal parameters, the best way to sell it is in a market with less competition. As more listings come on the market toward May, the house can lose value and or position against superior properties that become available. March is a great way to tap into the "spring fever" of home buying a little ahead of the market. This is the time to get that slightly out of favor listing in front of buyers before a wave of potentially more desirable properties arrive on the scene.
If a seller has that perfect updated, move in ready median priced listing, then sometimes waiting till April can be a smart move so as to tap the increase in buyers actively looking that occurs in mid to late spring. Of course one way to get it both ways is to list in March at a slightly high price, gauge activity, get feedback and either sell at a high price or build a strategy based on the feedback and activity in March and April to position the listing ideally for May and June.
March Madness is amazing for college basketball and can be equally so for real estate.
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| Information data and chart sourced from RMLS |
I think the best way to wrap your arms around this is to break the home buyers into two very broad classes. Those highly motivated to buy with external pressure and those buying because they can. So the first group is motivated by things such as a job transfer, loss of job, a new baby on the way, divorce, etc. This is external pressure and that makes someone willing to trudge through a foot of snow in the cold misery of January to look at houses or deal with the inconvenience of listing at a time they would rather stay indoors and visit with family.
The latter category is someone with a new job with higher income and maybe they think, "Hey, we can finally afford that dream house on five acres". Or perhaps they are empty-nesters looking to downsize. These buyers and sellers are much more likely to list or start the buying process when it is convenient. They are less likely to brave the wild elements of January looking at houses.
Anther reason there is a spike in sales in the summer is that families with school age children prefer to move over summer vacation when the kids are out school. This is especially true if the children will be changing schools after the move.
In a real estate market like this one; the biggest driver has been lack of inventory in that under median price range. When inventory increases that will relieve some of the pressure and could stabilize prices. If a seller has a home that is a little less than ideal; this is the time to list. This market is driven right now by move in ready, clean condition, updated properties. If a listing is a little outside those ideal parameters, the best way to sell it is in a market with less competition. As more listings come on the market toward May, the house can lose value and or position against superior properties that become available. March is a great way to tap into the "spring fever" of home buying a little ahead of the market. This is the time to get that slightly out of favor listing in front of buyers before a wave of potentially more desirable properties arrive on the scene.
If a seller has that perfect updated, move in ready median priced listing, then sometimes waiting till April can be a smart move so as to tap the increase in buyers actively looking that occurs in mid to late spring. Of course one way to get it both ways is to list in March at a slightly high price, gauge activity, get feedback and either sell at a high price or build a strategy based on the feedback and activity in March and April to position the listing ideally for May and June.
March Madness is amazing for college basketball and can be equally so for real estate.
Thursday, February 13, 2014
Quiet January...Not exactly
January was a quiet month on the real estate front here in Clark County. Just 264 units were sold and that is well off the mark even for the darkest depths of winter. But before you jump out that window... worry not the market is not roaring, but it is healthy. December had robust sales based on solid pending sales six weeks earlier.
December had a variety of of issue that effected sales in January. First December is not a busy house hunting month for most people. We also had an arctic deep freeze that kept many people from wanting to go outside. The number of units that went pending in December was very low, thus the closings in January we also low. The silver lining in this wintry dark cloud is in the pending sales data for January. 398 units went pending and that is nearly double the 228 that went pending in December. This bodes well for the end of February and the month of March.
Another uptick came in listed units. We have had a tight inventory over the last several months, but 580 new listings came on in January. Now in general increasing the inventory can soften prices. When the inventory is prohibitively tight, an increase can actually spur sales. By know means do we want to see a flood of new inventory, but a nice steady padding will help provide spring buyers with enough choices to make a decision and 'pull the trigger'.
The good news for sellers is that listings are fetching well above 97% of list price on average. Price a house right and the market will deliver buyers. This is good news. I look forward to a robust spring.
December had a variety of of issue that effected sales in January. First December is not a busy house hunting month for most people. We also had an arctic deep freeze that kept many people from wanting to go outside. The number of units that went pending in December was very low, thus the closings in January we also low. The silver lining in this wintry dark cloud is in the pending sales data for January. 398 units went pending and that is nearly double the 228 that went pending in December. This bodes well for the end of February and the month of March.
Another uptick came in listed units. We have had a tight inventory over the last several months, but 580 new listings came on in January. Now in general increasing the inventory can soften prices. When the inventory is prohibitively tight, an increase can actually spur sales. By know means do we want to see a flood of new inventory, but a nice steady padding will help provide spring buyers with enough choices to make a decision and 'pull the trigger'.
The good news for sellers is that listings are fetching well above 97% of list price on average. Price a house right and the market will deliver buyers. This is good news. I look forward to a robust spring.
Friday, January 24, 2014
Institutional Sellers are not all alike
Institutional sellers, such as banks and government agencies have been a large part of out real estate market. During the "crash" five years ago, many homes were foreclosed upon by the lenders. These homes have been sitting in various stages of either foreclosure or short sale attempts, etc. Now they continue to trickle onto the market sold by the institution that ultimately ended up with the property. As the title above says; not all institutional sellers are alike.
To understand the difference we first should look at the process. The following description of the process is intentionally simplistic just to keep it a light read. The actual processes are very sophisticated. I have a fair amount of experience in this arena but am by no means aware of every articulate detail in the foreclosure proceedings. This basic outline however can be helpful to understand why institutional sellers do what they do and how it can benefit buyers.
Conventional loans are typically "sold" to either Fannie Mae or Freddie Mac. These are the two large quasi-government companies that purchase mortgage paper from banks and package them as securities to be traded on the market. The system dates back to FDR which is a brilliant legacy piece of legislation. basically, a bank makes a loan for say $200,000. If that loan meets the criteria of Fannie Mae (Federal National Mortgage Association) or Freddie Mac (Federal Home Loan Mortgage Corporation) the bank can sell that note at a small profit to them and then they have another $200,000 to lend out again. It is this system of selling mortgage paper that allowed the American dream to become reality for two thirds of the population. Other loans that do not meet the criteria may be sold to other mortgage investor groups as well.
The other common type of loan is a government insured or government guaranteed loan. These are usually FHA, VA or USDA loans. These loans are similar in that a bank makes the loan and then sells the paper to investors not too different from conventional. These loans however end up differently if a foreclosure happens.
With a conventional loan the bank that issued the loan is initially responsible for servicing that loan. They collect payments and if necessary foreclose. In a foreclosure the bank must follow federal and state proceedings. the home is usually sent to auction by the local courthouse. If it does not sell at the court auction the servicing bank takes possession. That bank may buy the house back from the courthouse and sell it or it may end up going back to the investor that bought it (usually Fannie or Freddie).
When a government backed loan goes south, the government usually takes the house back. FHA foreclosed homes are sold by HUD (U.S. Department of Housing and Urban Development), VA foreclosed homes are sold by the U.S. Department of Veterans Affairs and the USDA foreclosed homes are sold by the U.S. Department of Agriculture.
To simplify there are broadly three types of institutional sellers that are commonly found in the market. They are Banks, Fannie/Freddie, Government.
Banks are the closest to traditional sellers. They often have a few legal addendums they ask to be a part of the sale agreement. The terms vary from bank to bank as to whether they are strictly selling the property "as is" or whether they will negotiate for repairs. For a bank it is always about their bottom line. They are cold and calculating. Once in contract bank owned properties typically close on normal time frame. Banks can be slow to respond to offers or inspection repair requests but generally the transactions are easy to manage. Sometimes banks will negotiate strongly on price so if the home is priced a little high buyers can come in soft and might make headway. Banks may act stupid, but they are not. In this market super low-ball offers generally will be ignored by banks or countered at full price..
Fannie and Freddie have been in a bit of a transition over the last few years. They used to sell "as is" with the homes often in sorry condition. Lately they seem to be taking the approach of fixing the house up and making it a "turn key" move in ready property. They still sell "as is" but all fixed up it is almost moot. These two institutions require the buyer to use their official sales package with terms that are very specific and non-negotiable. Fannie requires the buyer's agent to load the offer into their computer and await a response. Fannie also requires buyers to either use their appointed title and escrow service or choose a local company and pay all costs including the seller's costs. Freddie has the buyer's agent submit and offer traditionally to the listing agent but that agent then loads the offer into a computer similar to Fannie. Upon approval the Freddie required sales package is sent to the buyer for signatures. Fannie and Freddie can be frustrating in that they often will stand firm on a price only to lower the price a month later below that which they denied the previous month. They are very sluggish to respond during the transaction but generally speaking provide an opportunity for buyers to get a quality home at a good price. I have noticed that some properties listed by Fannie Mae lately have been priced high. They have a practice of lowering the price every thirty days and I find that about 20 days into a price reduction they are most negotiable on price. Like the banks, they will not entertain ridiculous low-ball offers.
Government is a whole different 'shebang'. Personally I have not yet sold a house that was owned by the USDA. I have sold houses owned by the VA and HUD. If owned by the VA and the buyer is a Veteran the transaction can be quite smooth. The VA is committed to getting Veterans into the homes they own. If they are unable to find a suitable Veteran the homes are available to non-veterans. HUD is probably the most common government seller. HUD has a bidding process. Most HUD homes are required to be offered for an initial period only to owner occupants, not investors. After that initial period of 15-30 days the property is open to all bidders. The process begins with a sealed bid auction. Usually the first ten days. The buyer's agent loads the offer into the HUD computer and at the end of that sealed bid period HUD will either accept the strongest offer or reject them all and continue on a daily bid process until they get an acceptable offer. I have not seen HUD take up the practice of fixing up the homes like Fannie and Freddie seem to be doing. HUD homes are often pretty rough. HUD sells "as is" and is difficult to negotiate with. Up until very recently all HUD transactions required using HUD's official closing agent. That process was slow and frustrating. Here in the great state of Washington, HUD has instituted a local closing program. This allows the buyer to choose a local title firm to handle closing procedures. This is awesome. Other than some anal retentiveness on the part of HUD to approve the final closing statements, this local process has been a wonderful improvement to the buyer's experience.
So there it is in a nutshell, albeit a large coconut-shell. Do not be afraid of institutional sellers; just be aware. The process will not always make sense and they will do things that seem, well... stupid. But in the end if the buyer gets the house of their dreams for the price they want; it is well worth the aggravation.
To understand the difference we first should look at the process. The following description of the process is intentionally simplistic just to keep it a light read. The actual processes are very sophisticated. I have a fair amount of experience in this arena but am by no means aware of every articulate detail in the foreclosure proceedings. This basic outline however can be helpful to understand why institutional sellers do what they do and how it can benefit buyers.
Conventional loans are typically "sold" to either Fannie Mae or Freddie Mac. These are the two large quasi-government companies that purchase mortgage paper from banks and package them as securities to be traded on the market. The system dates back to FDR which is a brilliant legacy piece of legislation. basically, a bank makes a loan for say $200,000. If that loan meets the criteria of Fannie Mae (Federal National Mortgage Association) or Freddie Mac (Federal Home Loan Mortgage Corporation) the bank can sell that note at a small profit to them and then they have another $200,000 to lend out again. It is this system of selling mortgage paper that allowed the American dream to become reality for two thirds of the population. Other loans that do not meet the criteria may be sold to other mortgage investor groups as well.
The other common type of loan is a government insured or government guaranteed loan. These are usually FHA, VA or USDA loans. These loans are similar in that a bank makes the loan and then sells the paper to investors not too different from conventional. These loans however end up differently if a foreclosure happens.
With a conventional loan the bank that issued the loan is initially responsible for servicing that loan. They collect payments and if necessary foreclose. In a foreclosure the bank must follow federal and state proceedings. the home is usually sent to auction by the local courthouse. If it does not sell at the court auction the servicing bank takes possession. That bank may buy the house back from the courthouse and sell it or it may end up going back to the investor that bought it (usually Fannie or Freddie).
When a government backed loan goes south, the government usually takes the house back. FHA foreclosed homes are sold by HUD (U.S. Department of Housing and Urban Development), VA foreclosed homes are sold by the U.S. Department of Veterans Affairs and the USDA foreclosed homes are sold by the U.S. Department of Agriculture.
To simplify there are broadly three types of institutional sellers that are commonly found in the market. They are Banks, Fannie/Freddie, Government.
Banks are the closest to traditional sellers. They often have a few legal addendums they ask to be a part of the sale agreement. The terms vary from bank to bank as to whether they are strictly selling the property "as is" or whether they will negotiate for repairs. For a bank it is always about their bottom line. They are cold and calculating. Once in contract bank owned properties typically close on normal time frame. Banks can be slow to respond to offers or inspection repair requests but generally the transactions are easy to manage. Sometimes banks will negotiate strongly on price so if the home is priced a little high buyers can come in soft and might make headway. Banks may act stupid, but they are not. In this market super low-ball offers generally will be ignored by banks or countered at full price..
Fannie and Freddie have been in a bit of a transition over the last few years. They used to sell "as is" with the homes often in sorry condition. Lately they seem to be taking the approach of fixing the house up and making it a "turn key" move in ready property. They still sell "as is" but all fixed up it is almost moot. These two institutions require the buyer to use their official sales package with terms that are very specific and non-negotiable. Fannie requires the buyer's agent to load the offer into their computer and await a response. Fannie also requires buyers to either use their appointed title and escrow service or choose a local company and pay all costs including the seller's costs. Freddie has the buyer's agent submit and offer traditionally to the listing agent but that agent then loads the offer into a computer similar to Fannie. Upon approval the Freddie required sales package is sent to the buyer for signatures. Fannie and Freddie can be frustrating in that they often will stand firm on a price only to lower the price a month later below that which they denied the previous month. They are very sluggish to respond during the transaction but generally speaking provide an opportunity for buyers to get a quality home at a good price. I have noticed that some properties listed by Fannie Mae lately have been priced high. They have a practice of lowering the price every thirty days and I find that about 20 days into a price reduction they are most negotiable on price. Like the banks, they will not entertain ridiculous low-ball offers.
Government is a whole different 'shebang'. Personally I have not yet sold a house that was owned by the USDA. I have sold houses owned by the VA and HUD. If owned by the VA and the buyer is a Veteran the transaction can be quite smooth. The VA is committed to getting Veterans into the homes they own. If they are unable to find a suitable Veteran the homes are available to non-veterans. HUD is probably the most common government seller. HUD has a bidding process. Most HUD homes are required to be offered for an initial period only to owner occupants, not investors. After that initial period of 15-30 days the property is open to all bidders. The process begins with a sealed bid auction. Usually the first ten days. The buyer's agent loads the offer into the HUD computer and at the end of that sealed bid period HUD will either accept the strongest offer or reject them all and continue on a daily bid process until they get an acceptable offer. I have not seen HUD take up the practice of fixing up the homes like Fannie and Freddie seem to be doing. HUD homes are often pretty rough. HUD sells "as is" and is difficult to negotiate with. Up until very recently all HUD transactions required using HUD's official closing agent. That process was slow and frustrating. Here in the great state of Washington, HUD has instituted a local closing program. This allows the buyer to choose a local title firm to handle closing procedures. This is awesome. Other than some anal retentiveness on the part of HUD to approve the final closing statements, this local process has been a wonderful improvement to the buyer's experience.
So there it is in a nutshell, albeit a large coconut-shell. Do not be afraid of institutional sellers; just be aware. The process will not always make sense and they will do things that seem, well... stupid. But in the end if the buyer gets the house of their dreams for the price they want; it is well worth the aggravation.
Friday, January 10, 2014
Curb Appeal is Buy Appeal
Yeah, yeah, I know that title is a cliche. But a cliche is often based in a hard reality. In my experience, people typically form strong opinions from their first impression. These can be difficult to change. There has been many a house that I have shown that looked horrible upon pulling up. I always tell my clients to give every house a chance. But over thirty five years of working with clients including fifteen in real estate, that first impression is hard to shake.
Sellers that have a rough looking front yard are well advised to take as many measures as they can afford or manage to perk up that curb appeal. Buyers should also learn to be forgiving when a house looks bad from the front. Ideally, the perspective should be very different depending on whether one is looking to buy a house or trying to sell their home.
Sellers need to maximize the number of people touring their home. They need to get the best price possible and curb appeal starts the tour off with a positive feeling. When a prospective buyer has a warm fuzzy experience as they pull up they are very likely to be more forgiving of minor defects inside. The tone has been set for a good showing when the curb appeal shines. This can add thousands of dollars to the value and that can lead to more and stronger offers.
As a buyer, one needs to learn to look past a rough looking exterior. Buyer's are often looking for a "deal". When the majority of prospective buyers have a tendency to have an unfavorable opinion of a house with bad curb appeal; a savvy buyer can see opportunity for a solid property at an under market value. This is true with interior issues such as bad paint and carpet or poor decorating choices. These are easy fixes for a new homeowner. The reduced competition means the seller will receive fewer offers and likely for lower amounts than a comparable, well staged home with broad curb appeal. That translates for buyers as a "good deal".
Sellers attempting to sell in the winter may have a difficult time building a strong curb appeal unless they are located in the southern half of the nation. Upper latitudes often have dark and dreary winters with dead grass, leafless trees and a general ugly yard syndrome. Keeping the home free of yard debris and greened up with some evergreen bushes or trees can help.In summary, sellers can not overlook curb appeal if they want the best price for their house. Our current market rewards turn key, move in ready listings, with multiple offers often at or above full price and a quick closing. Less desirable condition tends to benefit buyers. Houses that don't have that move in ready sharpness, lend to linger on the market. These homes are the ones that get discounted and sold for less than market. For buyers these can be that "deal" they have been looking for.
Friday, December 27, 2013
2014 Housing Outlook
Another year is perilously close to its end. The older you get, the faster they fly by. It's a cruel irony. When you are 7 years old it seems like an eternity from Thanksgiving to Christmas. Children can't wait, it takes soooooo long to arrive. Now it's like don't blink, Christmas is here; again. Slow down already!
2013 is essentially in the books. It was a strong year for real estate in our local market and in many markets across the fruited plain. The sales volume is up significantly over 2012 and the local median price is up nearly 14%. Final numbers will arrive from the MLS in the middle of January and I will be certain to post them when they arrive.
So in regards to the upcoming year; what might we expect? As much as I hate to try my hand as Nostradamus, I will endeavor to give an idea of where I think current trends in the real estate marketplace will take us in the new year.
There are many variables that effect the real estate market. Residential real estate or the "housing" market is affected mostly by the general economy and employment, as well as mortgage interest rates and the availability of lendable assets. There are dozens of other market indicators but those are the two big ones.
The economy and jobs market seems to be flat right now. We have a very soft economic growth and questionable job growth. This "soft" economy could be an inhibitor in 2014. 2013 already showed a market shift locally from the bottom/entry level to the lower to middle move up market. Pricing has been the biggest driver in the move up market as we hit bottom on pricing somewhere in 2011 and then saw the movement up as demand increased. In general I am quite bearish on the economy. I think we will continue to see a slow growth rate and that could pose problems for the housing market locally and in many of America's more expensive markets.
The real driver behind the robust numbers in 2013 has been interest rates. I believe that has been the largest contributor to this latest round of upward pricing over the last two years. Rates have been below 5% for quite a while and through the first half of 2013 they hit rock bottom as 30 year fixed rates were in the mid 3% range. The Fed has been backing these low mortgage rates and has shown every indication of slowly moving away from that position. So far I think the Fed has done a pretty good job of helping the housing market by keeping loan rates affordable. I feel that they will need to slow it down due mostly to legitimate budget concerns. As they back off, rates should creep up. As long as they stay below 6% the real estate market should remain healthy and strong. But the higher they go the fewer people qualify for loans. This could lead to more relaxed appreciation in 2014.
Looking at the data; my biggest concern is the middle section of the market. Many homeowners have been sitting in homes that are "under water". That is they owe more than the house is worth. This latest uptick in pricing is starting to free many of these people to sell as their home value climbs up above the debt they owe. I would like to see that upward trend continue. Although I don't expect to see 14% appreciation in the middle this year, I certainly am hoping to see 6-7%. This would help many people sell their middle market homes in the $250k to $300k range and either downsize or upgrade depending on where they are in their lives.
The entry level market right now is poised to continue upward pricing trends because there are two demand pressures on it. First is the traditional new family and first time home buyers looking to take advantage of favorable pricing and interest rates. Secondly is the retiring Baby Boomers looking to bail out of the big house they raised the kids in and move into to something smaller and more manageable. The Boomer generation is large enough that it is making a significant impact in pricing pressure in what is traditionally an entry level housing market.
I am seeing an interesting development as a result of these issues. There is a huge difference between 225k and 250k in terms of what one can buy. Anything under $225,000 is seeing high demand and strong appreciation. Conditions quickly begin to relax as the price moves up above $225k. We are seeing those garden variety three bedroom two bath homes nudging up against that $225,000 barrier but at a cool quarter million it's a spacious 2200 square foot four bedroom home.
That is really where the general economic conditions start to play a factor. With interest rates as low as they are, two $10-12 per hour workers can afford an entry level house in the $175-195k range. As we move up in price better jobs are required and that is what seems to be in short supply. If this economic trend continues and we see an increase in interest rates that will lead to a middle market pricing plateau. If the middle stagnates then the bottom will also feel negative pressure. This is why I feel like we will have less appreciation next year than in 2013.
Overall my outlook for 2014 is very sunny. Maybe not quite as sunny as 2013 in terms of activity and sales volume, but I do believe the middle market will perk up at least a little bit, this spring. As much as people love to see a roaring real estate market; it really is better to be the tortoise and not the hare. A nice and steady continuously northward march is healthy and secure. I think that is the trend for 2014.
So there it is; I am dangling out on the end of the wobbly limb of prognostication. In a nutshell, I am cautiously optimistic. There are too many variables to the housing market to really know with any certainty what will happen. All I can do is look at the data, make a few presumptions based on experience and hope for the best.
I wish you all a very happy new year!
2013 is essentially in the books. It was a strong year for real estate in our local market and in many markets across the fruited plain. The sales volume is up significantly over 2012 and the local median price is up nearly 14%. Final numbers will arrive from the MLS in the middle of January and I will be certain to post them when they arrive.
There are many variables that effect the real estate market. Residential real estate or the "housing" market is affected mostly by the general economy and employment, as well as mortgage interest rates and the availability of lendable assets. There are dozens of other market indicators but those are the two big ones.
The economy and jobs market seems to be flat right now. We have a very soft economic growth and questionable job growth. This "soft" economy could be an inhibitor in 2014. 2013 already showed a market shift locally from the bottom/entry level to the lower to middle move up market. Pricing has been the biggest driver in the move up market as we hit bottom on pricing somewhere in 2011 and then saw the movement up as demand increased. In general I am quite bearish on the economy. I think we will continue to see a slow growth rate and that could pose problems for the housing market locally and in many of America's more expensive markets.
The real driver behind the robust numbers in 2013 has been interest rates. I believe that has been the largest contributor to this latest round of upward pricing over the last two years. Rates have been below 5% for quite a while and through the first half of 2013 they hit rock bottom as 30 year fixed rates were in the mid 3% range. The Fed has been backing these low mortgage rates and has shown every indication of slowly moving away from that position. So far I think the Fed has done a pretty good job of helping the housing market by keeping loan rates affordable. I feel that they will need to slow it down due mostly to legitimate budget concerns. As they back off, rates should creep up. As long as they stay below 6% the real estate market should remain healthy and strong. But the higher they go the fewer people qualify for loans. This could lead to more relaxed appreciation in 2014.
Looking at the data; my biggest concern is the middle section of the market. Many homeowners have been sitting in homes that are "under water". That is they owe more than the house is worth. This latest uptick in pricing is starting to free many of these people to sell as their home value climbs up above the debt they owe. I would like to see that upward trend continue. Although I don't expect to see 14% appreciation in the middle this year, I certainly am hoping to see 6-7%. This would help many people sell their middle market homes in the $250k to $300k range and either downsize or upgrade depending on where they are in their lives.
The entry level market right now is poised to continue upward pricing trends because there are two demand pressures on it. First is the traditional new family and first time home buyers looking to take advantage of favorable pricing and interest rates. Secondly is the retiring Baby Boomers looking to bail out of the big house they raised the kids in and move into to something smaller and more manageable. The Boomer generation is large enough that it is making a significant impact in pricing pressure in what is traditionally an entry level housing market.
I am seeing an interesting development as a result of these issues. There is a huge difference between 225k and 250k in terms of what one can buy. Anything under $225,000 is seeing high demand and strong appreciation. Conditions quickly begin to relax as the price moves up above $225k. We are seeing those garden variety three bedroom two bath homes nudging up against that $225,000 barrier but at a cool quarter million it's a spacious 2200 square foot four bedroom home.
That is really where the general economic conditions start to play a factor. With interest rates as low as they are, two $10-12 per hour workers can afford an entry level house in the $175-195k range. As we move up in price better jobs are required and that is what seems to be in short supply. If this economic trend continues and we see an increase in interest rates that will lead to a middle market pricing plateau. If the middle stagnates then the bottom will also feel negative pressure. This is why I feel like we will have less appreciation next year than in 2013.
Overall my outlook for 2014 is very sunny. Maybe not quite as sunny as 2013 in terms of activity and sales volume, but I do believe the middle market will perk up at least a little bit, this spring. As much as people love to see a roaring real estate market; it really is better to be the tortoise and not the hare. A nice and steady continuously northward march is healthy and secure. I think that is the trend for 2014.
So there it is; I am dangling out on the end of the wobbly limb of prognostication. In a nutshell, I am cautiously optimistic. There are too many variables to the housing market to really know with any certainty what will happen. All I can do is look at the data, make a few presumptions based on experience and hope for the best.
I wish you all a very happy new year!
Friday, December 13, 2013
Ho Ho Ho, Real Estate is in the Holiday Spirit
The real estate market is healthy right now. We are enjoying modest growth in pricing and strong sales volume. This is the kind of sustainable growth that is better than the rampaging growth of the 2004-2006 period.
The Regional Multiple Listing Service here in Clark County has posted sales summary data through first nine months of this year. 4728 real estate transactions have closed in those first nine months and that compares quite favorably with the 3805 through the first nine months of last year. This reflects a 24% increase in closed transactions. There is no shortage of buyers out there. The median price for 2012 was $194,500 and through the first nine months of 2013 the median is up 14% at $223,600.
Numbers tell many tales and a healthy pinch of the proverbial salt is in order with statistics. Has the actual value of any given home in Clark County appreciated by 14% this year? Not necessarily. Last year the market was still being driven by sustained growth with first time home buyers and the entry level market as well as a lot of REO (bank owned) and Short Sale transactions with typically lower closed prices. This year has seen a nice progression into the mid level price range as homeowners can finally sell that formerly upside down home. So as more transactions occur in the mid level, the median price rises. Even if the actual appreciation was very modest the median can rise much steeper if there is a market transition to more expensive homes.
All of that said, there has clearly been appreciation in the marketplace this year. Those three bedroom two bath 1200 square foot 1950s move in ready homes that were readily available for sale in the $130-140k range a couple of years ago are now easily $160-170k this year. But homes in the middle to higher price range have had much more modest appreciation.
I decided to dive in a little deeper. I took two county wide but very narrow market segments and will show actual growth in volume and appreciation between 2012 and through yesterday's closings this year. The first is a batch of typical entry level family homes and the second a typical first move up house. These are fairly small segments but this helps to keep them all truly comparable with as little variance as possible but still providing a large enough pool of data to be statistically sound. These all have very similar lots, in town and very similar sized homes, etc.
Last year there were 47 detached single family, three bedroom homes with 1200-1400 square feet of living space, sold in Clark County that were on a small to medium city lot and were not bank owned or short sale transactions. The median price was $163,900 and 98.19% of original list price with an average time on market of 27 days. So far this year the numbers for the exact same search yielded 83 sales with a median price of $185,000 and 97.55% of original list price with an average of 22 days on the market. Well that is 13% appreciation in that segment and a unit sales volume growth of 77%. What about the move up market?
This time I ran sales of homes again, traditional sales, not short or REO. 2000-2500 square feet of living space, four bedrooms on a small to medium size city lot. 2012 had 71 sales with a median price of $232,000 and 95.79% of original list price and average time on market at 42 days. The numbers so far this year look like this; 170 sales at a median price of $251,125 and 97.01% of original list price with an average 39 days on market. This represents appreciation of 8% and a huge sales growth of 139%.
The overall synopsis follows the traditional model for market recovery. The bottom grows first and feeds growth to the middle of the market. With a 139% sales growth this year in the move up market, I foresee an opportunity for double digit appreciation in that segment for 2014. This of course depends on all the crazy variables in the real estate market and the economy at large. Marketing time continues to shrink and well priced homes get multiple above asking price offers. There is a segment of sellers that will "test the waters" with a high price and then end up reducing the price to sell. But 97% of original asking price is quite good.
Short sales in both of these segments were flat year over year. 23 sales in both 2012 and 2013 in the 3 bed segment. The 4 bed segment 31 in 2012 against 27 in 2013. I left out REO because the condition of the home varies so widely, banks often use auction methods and such, it is difficult to gauge those against traditional sales. If you look at the combined segments here, 2012 had a roughly 2:1 traditional vs short sale ratio and this year short sales remained flat while traditional sales skyrocketed so the ratio is now slightly more than 5:1. If this ratio carries through to the overall market it bodes well for our local market.
2014 is shaping up nicely for real estate. As the middle of the market begins to feel a surge so then the upper levels will enjoy favorable price movement as well.
The Regional Multiple Listing Service here in Clark County has posted sales summary data through first nine months of this year. 4728 real estate transactions have closed in those first nine months and that compares quite favorably with the 3805 through the first nine months of last year. This reflects a 24% increase in closed transactions. There is no shortage of buyers out there. The median price for 2012 was $194,500 and through the first nine months of 2013 the median is up 14% at $223,600.
Numbers tell many tales and a healthy pinch of the proverbial salt is in order with statistics. Has the actual value of any given home in Clark County appreciated by 14% this year? Not necessarily. Last year the market was still being driven by sustained growth with first time home buyers and the entry level market as well as a lot of REO (bank owned) and Short Sale transactions with typically lower closed prices. This year has seen a nice progression into the mid level price range as homeowners can finally sell that formerly upside down home. So as more transactions occur in the mid level, the median price rises. Even if the actual appreciation was very modest the median can rise much steeper if there is a market transition to more expensive homes.
All of that said, there has clearly been appreciation in the marketplace this year. Those three bedroom two bath 1200 square foot 1950s move in ready homes that were readily available for sale in the $130-140k range a couple of years ago are now easily $160-170k this year. But homes in the middle to higher price range have had much more modest appreciation.
I decided to dive in a little deeper. I took two county wide but very narrow market segments and will show actual growth in volume and appreciation between 2012 and through yesterday's closings this year. The first is a batch of typical entry level family homes and the second a typical first move up house. These are fairly small segments but this helps to keep them all truly comparable with as little variance as possible but still providing a large enough pool of data to be statistically sound. These all have very similar lots, in town and very similar sized homes, etc.
Last year there were 47 detached single family, three bedroom homes with 1200-1400 square feet of living space, sold in Clark County that were on a small to medium city lot and were not bank owned or short sale transactions. The median price was $163,900 and 98.19% of original list price with an average time on market of 27 days. So far this year the numbers for the exact same search yielded 83 sales with a median price of $185,000 and 97.55% of original list price with an average of 22 days on the market. Well that is 13% appreciation in that segment and a unit sales volume growth of 77%. What about the move up market?
This time I ran sales of homes again, traditional sales, not short or REO. 2000-2500 square feet of living space, four bedrooms on a small to medium size city lot. 2012 had 71 sales with a median price of $232,000 and 95.79% of original list price and average time on market at 42 days. The numbers so far this year look like this; 170 sales at a median price of $251,125 and 97.01% of original list price with an average 39 days on market. This represents appreciation of 8% and a huge sales growth of 139%.The overall synopsis follows the traditional model for market recovery. The bottom grows first and feeds growth to the middle of the market. With a 139% sales growth this year in the move up market, I foresee an opportunity for double digit appreciation in that segment for 2014. This of course depends on all the crazy variables in the real estate market and the economy at large. Marketing time continues to shrink and well priced homes get multiple above asking price offers. There is a segment of sellers that will "test the waters" with a high price and then end up reducing the price to sell. But 97% of original asking price is quite good.
Short sales in both of these segments were flat year over year. 23 sales in both 2012 and 2013 in the 3 bed segment. The 4 bed segment 31 in 2012 against 27 in 2013. I left out REO because the condition of the home varies so widely, banks often use auction methods and such, it is difficult to gauge those against traditional sales. If you look at the combined segments here, 2012 had a roughly 2:1 traditional vs short sale ratio and this year short sales remained flat while traditional sales skyrocketed so the ratio is now slightly more than 5:1. If this ratio carries through to the overall market it bodes well for our local market.
2014 is shaping up nicely for real estate. As the middle of the market begins to feel a surge so then the upper levels will enjoy favorable price movement as well.
Friday, November 22, 2013
Ho Ho Ho It's That Time of Year, Again.
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| Christmas 2008, Vancouver WA |
There are positives and negatives surrounding real estate transactions during the holidays. Sellers can be assured that nearly every buyer looking at their house during the next six or seven weeks is a serious buyer that is ready to purchase a home. Why else would the add the frenzied process of home hunting on top of the looney-bin mental state of America's holiday season? Seller's also have the advantage of a tighter inventory during the holidays. Many seller's choose to remove their home from the market in December so they can enjoy a quiet and uninterrupted season. Tighter inventory often means higher prices. Many people tend to dress up the house for holidays and that can also be a positive for selling it.
Buyers also have a bit of an advantage during the holidays in that sellers tend to be motivated to sell if they are willing to hang tough and show through the period.
In general real estate still happens in the month of December and I find that pending sales are only about 10-15% lower than the autumn.
For sellers the winter time in general requires some care. Walkways should be kept free of leaves and ice or snow. Any holiday decorations should be arranged without any cords or cables crossing those pathways. Sellers should be encouraged to decorate but careful not to have too much clutter. Clutter does tend to make a home feel cramped.
Here are a few tips from the HGTV's Front Door on real estate during the holidays:
Frontdoor-home-during-the-holidays
Monday, November 11, 2013
Jumbo Loans are Cheap, Think Big!
By NAR 2013 President Gary Thomas
If you’re considering how nice it would be to own a larger home, this may be the time to buy.For the first time in history, interest rates on jumbo mortgages actually fell below the interest rate of conforming 30-year fixed-rate loans.
As REALTORS® well know, jumbo loans are those over the local limit that can vary from $417,000 to $729,750, depending on the county.Traditionally, consumers who needed a home loan bigger than a conforming mortgage would pay a higher rate of interest for the privilege of borrowing more money—often a quarter of a percent or greater, and for a brief period it was nearly two percentage points. But with mortgage rates much higher than a year ago and declining profits from refinances, banks have become more aggressive in pricing mortgages. As a result, it is now cheaper to borrow in the jumbo market which is currently dominated by private lenders.
With interest rates at historic lows, more buyers are willing to stretch to buy bigger properties and more buyers are able to qualify for a jumbo loan. But even non-jumbo home buyers should look into the competitive rates at banks and credit unions.
There’s no telling how long it will continue, but this unusual circumstance may offer an opportunity for REALTORS®. Think big!
Published 10-2-2013. Source, National Association of Realtors "Super Size It"
Friday, November 1, 2013
Retire to Washington
Washington State is not the first state you think of when pondering the exodus of retirees to "fairer" locales. You might think of the warmer sun belt states like Arizona and Florida. But Washington offers a unique combination of favorable taxes for seniors, a variety of climates from dry to wet and mild to wild. Washington offers its qualifying seniors a significant reduction in property taxes. There is no state income tax. Southwest Washington really hits the spot, because for those who like to shop and spend money the very nearby Oregon has no sales tax. A trip to the Oregon coast is easy and inexpensive.
Many retirees in the area keep two inexpensive (or expensive depending on their finances) homes. One in Washington State and another in California or Arizona. They fly south for the winter in November and return to our more tolerable climate in the late spring. usually it is better to claim Washington as the "home" state since we have favorable tax conditions for seniors. Although Washington is not the TOP rated state for tax friendly status, it would be when considering the live in Washington, play in Oregon angle offered by Southwest Washington.
Vancouver offers the glorious beauty of the west side of the Cascades with a moderate amount of rain and very modest snow. East of the Cascades delivers much more sunshine but also has more drastic swings in temperature and much more snow in the winter. Southwest Washington also offers close proximity to the aforementioned Oregon Coast and the metropolitan Portland area.
Speaking of the coast, Southwest Washington has the lock on reasonably priced beach property. The Oregon coast is world famous, largely because the state of Oregon spends millions of dollars promoting it. The southern Washington coast is equally spectacular but offers amazing values in property and taxation. This is especially true when compared to Oregon which is very tax unfriendly according to several prominent sources such as Money Magazine and Kiplinger.
Our southern neighbor, Oregon is rated as "least tax-friendly" for seniors while we enjoy the "tax friendly" status. Our base property taxes are much lower than Oregon and many seniors qualify for one of four property tax reduction programs. Sales tax is a much less intrusive tax than income tax for middle and upper income seniors. Arizona rated higher than Washington for tax friendly status but actually depending on income and spending habits we might be better than them as well.
Many retirees in the area keep two inexpensive (or expensive depending on their finances) homes. One in Washington State and another in California or Arizona. They fly south for the winter in November and return to our more tolerable climate in the late spring. usually it is better to claim Washington as the "home" state since we have favorable tax conditions for seniors. Although Washington is not the TOP rated state for tax friendly status, it would be when considering the live in Washington, play in Oregon angle offered by Southwest Washington.
Vancouver offers the glorious beauty of the west side of the Cascades with a moderate amount of rain and very modest snow. East of the Cascades delivers much more sunshine but also has more drastic swings in temperature and much more snow in the winter. Southwest Washington also offers close proximity to the aforementioned Oregon Coast and the metropolitan Portland area.
Speaking of the coast, Southwest Washington has the lock on reasonably priced beach property. The Oregon coast is world famous, largely because the state of Oregon spends millions of dollars promoting it. The southern Washington coast is equally spectacular but offers amazing values in property and taxation. This is especially true when compared to Oregon which is very tax unfriendly according to several prominent sources such as Money Magazine and Kiplinger.
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| Sourced from Kiplinger.com |
Now that all this taxation benefits are out of the way, we can consider other factors. The well known fact that Washington state is absolutely gorgeous is a strong draw. We have four distinct seasons here in Clark County but none are severe. That is tough to find anywhere on Earth. It seems like the proverbial slam dunk for a retirees to move here. And many of them are moving here. So there you have it, Washington State is the best northern state to retire to. Start packing.
Thursday, October 24, 2013
Finding the Elusive Livable $100k Home
So the bank said they'd loan you a 100 large. Well then, let's find you a home. What was that? You are really hoping for a single family detached house? Hmm, you are not going to make this easy, are you?
My first question is this; How do you feel about central Alabama? The Crimson Tide is ranked number one in the AP football poll. Perhaps Greater Detroit, the Motor City? No, you really want to stay here in the 'Couv'. Yeah, I understand, America's Vancouver is pretty tough to beat. Do you have any money in the bank, say another 75 grand? No? OK.
I am helping a wonderful client right now to find a house that can be financed by the VA (which means livable BTW) and our budget is in the $100k range with maybe just a little bit of wiggle room. This is a challenging task, but not as impossible as you might think. I have already found several homes that would be a little tough to get FHA or VA financing on, but are livable and under that $100,000 price point. These mind you are very small houses. "Cozy", we like to say in the real estate world.
Vancouver USA has a nearly 200 year history and was quite robust during WWII. After the infamous attack on Pearl Harbor, the entire Fruit Valley neighborhood was erected in 1942 by the federal government to house civilian ship builders. These were small houses with roughly 700-1000 square feet. These homes can be had for reasonable prices. There are other areas with smaller homes, but I think Fruit Valley has the largest collection of affordable houses in the 'Couv'. The neighborhood has gone through a renaissance of sorts over the last ten years. There is the additional bridge over the rail yard at 39th Street. The park was renovated and quite a bit of modern new construction has been added.
Fruit Valley also offers close proximity to Downtown and the Port of Vancouver. My hunt for a $100k house definitely starts here. But Fruit Valley is not our only choice. One may prefer a more ancient home. There are 100 year old homes in Rose Village that can be had for a song. And if I look really close I may find a spattering of homes across many neighborhoods in that $100k range. Those are often hiding in pocket somewhere.
Once our general economy starts to really roll again, the $100,000 house will disappear. Maybe forever. The full mortgage payment with taxes and insurance on a house like this is around $700. That is still about $300 less than you would rent it for. I am amazed that we don't have an even larger rush of entry level home buyers snatching these up.
These types of homes may not be as comfortable and modern as a comparable sized condo, but they will have better resale in general and do not have HOA dues. A condo with $200 a month HOA dues is like adding $40,000 to the price. Yes I said 40 large! The mortgage payment on $40,000 is about $200 a month. So a $80,000 condo with $200 a month HOA dues has the same payment as a house that costs $120,000. These little charming homes in America's Vancouver have provided families with shelter for over 70 years. These are a great opportunity for first time home buyers or even a first time investor. All hail, the $100,000 house, the Holy Grail of Real Estate! Eureka!
My first question is this; How do you feel about central Alabama? The Crimson Tide is ranked number one in the AP football poll. Perhaps Greater Detroit, the Motor City? No, you really want to stay here in the 'Couv'. Yeah, I understand, America's Vancouver is pretty tough to beat. Do you have any money in the bank, say another 75 grand? No? OK.
I am helping a wonderful client right now to find a house that can be financed by the VA (which means livable BTW) and our budget is in the $100k range with maybe just a little bit of wiggle room. This is a challenging task, but not as impossible as you might think. I have already found several homes that would be a little tough to get FHA or VA financing on, but are livable and under that $100,000 price point. These mind you are very small houses. "Cozy", we like to say in the real estate world.
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| This was listed at $99,500, It sold really fast! Multiple offers over list price but still close to $100k |
Fruit Valley also offers close proximity to Downtown and the Port of Vancouver. My hunt for a $100k house definitely starts here. But Fruit Valley is not our only choice. One may prefer a more ancient home. There are 100 year old homes in Rose Village that can be had for a song. And if I look really close I may find a spattering of homes across many neighborhoods in that $100k range. Those are often hiding in pocket somewhere.
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| This is listed at $85,000. It is very nice and tidy inside. It needs siding, but is still financable |
These types of homes may not be as comfortable and modern as a comparable sized condo, but they will have better resale in general and do not have HOA dues. A condo with $200 a month HOA dues is like adding $40,000 to the price. Yes I said 40 large! The mortgage payment on $40,000 is about $200 a month. So a $80,000 condo with $200 a month HOA dues has the same payment as a house that costs $120,000. These little charming homes in America's Vancouver have provided families with shelter for over 70 years. These are a great opportunity for first time home buyers or even a first time investor. All hail, the $100,000 house, the Holy Grail of Real Estate! Eureka!
Friday, October 18, 2013
It's Getting Tough to Buy Condos with FHA or VA
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| 500 Broadway, Vancouver, WA Condos on the upper floors |
If the buyer is a veteran looking to use a VA loan or is intent on an FHA loan, they must be certain the condo is approved by HUD (Federal Government, Department of Housing and Urban Development). HUD has stopped approving condos on an individual basis and is requiring the entire complex to be approved. In the Clark County, Washington market I am finding that the overwhelming majority of condos are either expired or not approved at all.
If the condo is approved, the buyer and their agent ought be certain that the approval does not expire before the sale closes. This is paramount should the condo be a short sale. Short sales take much longer to close. Buyers should have at least 6 months and preferably a year of approval left is wise when offering on a short sale condo.
The good news for FHA buyers is that some banks are offering a 95% conventional loan. These loans do not require FHA approval on the condo unit or complex. They will however have some underwriting requirements that could pose problems. For example, most banks are looking for at least 50% owner occupied units in a condo project. These conventional loans require a slightly higher down payment than an FHA loan but offer superior terms regarding mortgage insurance. It is always a good idea for buyers to meet with a mortgage professional prior to home hunting.
When offering on a condo, buyers should be certain that their agent is thorough in vetting any potential issues with financing.
Since I am on the subject of condos, I will touch on HOA issues as well. Condo projects have HOAs that oversee the common areas and buildings. Since the unit owner only owns the space inside, the HOA owns the buildings and land. The HOA is a common ownership of all the unit owners. Essentially condo owners have two things they own. They hold title to the unit (interior space of their unit) solely as an individual and then they hold title to the whole complex property as a partial owner, usually held as tenants in common. They have an equal share with each of the other owners or possibly proportionate to the relative value or size of their unit.
HOAs are required to keep to state standards for financial disclosure and management. Before buyers commit to a purchase on a condo or other property with an HOA, they should be certain to check out the HOAs financial and legal status. There are times when an HOA is involved in litigation. They can be either the plaintiff or the defendant. In either case, financing is nearly impossible to obtain while there is an open litigation or a judgement is in force.
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| Attached Townhouse in Camas, WA This is not a condo |
Buyers should work with an experienced agent when considering a condominium home. They can be a wonderful opportunity for quality living, but they have a few quirks that require thorough care during the purchase process.
Friday, September 27, 2013
Rates up a FULL point over last year.
The all time record low rates of this past spring are now in the history books. We have seen them creep up by a full point over the last few months. But it is important to understand that historically speaking any rate under 6% is a good rate. That said 4.5% is a GREAT rate. If this upward trend continues however, this extended period of extra buying opportunity will finally come to a close.
Higher rates will eliminate some people from the dream of owning a home. For others it will limit the size, type or neighborhood of their next home. Yet there are still buyers out there waiting. Waiting for what? Even higher rates, bigger payments or worse another decade of renting?
Over the last thirty years rates have averaged much higher than today's rates in the mid 4s. The chart below shows the average mortgage rate on a 30 year fixed loan since 1975. Our current rates are still the best in over forty years.
The last three years have truly been a golden era for buyers in the American home market. Prices have been low as we recover from the "crash" of 2008-2009. Rates have been at or very near ALL TIME record lows for the last two years. This golden era has already lasted twice as long as I expected it to and something will have to give. Either rates will spike, prices will spike or a little of both. The bottom line remains that this is a great opportunity to take advantage of a rare combination of low rates and low prices. First time home buyers can get into a well priced home with payments lower than rent.
Higher rates will eliminate some people from the dream of owning a home. For others it will limit the size, type or neighborhood of their next home. Yet there are still buyers out there waiting. Waiting for what? Even higher rates, bigger payments or worse another decade of renting?
Over the last thirty years rates have averaged much higher than today's rates in the mid 4s. The chart below shows the average mortgage rate on a 30 year fixed loan since 1975. Our current rates are still the best in over forty years.
If an entry level homeowner has some equity, they can sell their small house and move up to a big house while prices are still low and rates are low. I think many home owners sitting on a house they bought in 2005-2007 are waiting for values to rise. Some have to, because they need equity. Others are sitting on equity and are waiting for a better price. The problem with the latter is that it may be seriously flawed logic. If prices rise 10% over the next year they will get an extra $15,000 for their current $150k home. But that move up larger house currently listed at $250k will likely rise $25,000. So in essence they are stepping over the proverbial quarter to pick up that proverbial dime. And as they wait, they run the risk of also having a higher interest rate next year on that new larger and more expensive home. If that happens they could spend tens of thousands of dollars in additional interest over the life of the new loan.
The empty nester looking to downsize can still take advantage of these low rates now. Even if they get a little less cash out of their larger home now, they may save tens of thousands in interest on that final home for retirement with our current low rates. I cannot over estimate this old saying, "You will feel the sting of high interest long after the joy of a low price has faded away." Conversely, you will enjoy the benefit of low interest, long after the sting of a high price has faded away. Price is fleeting, interest is forever, well at my age it is forever anyway.
Based on the chart above, some of us may not even be alive next time we have rates in the threes. These current mortgage rates are being suppressed by the federal government's willingness to buy the mortgages at the low rate. They are doing this to prop up the real estate market while the economy recovers. Once the fed backs away from that policy, and they will, rates will likely return to a more "normal" 6-7%.
This is a pivotal moment in the real estate for anyone considering a purchase, a sale or both. How many times have you looked back in life and said, "If I only had done this, or that..." You know, like buying Apple stock when it was five bucks a share in the mid 90s. Now is one of those times in real estate but the bottom has been revealed and things appear to be moving up. As I said in my book, 'Don't Panic', "Buy low and sell high, and that is right now, my friends."
Friday, August 23, 2013
Why Autumn is a good time to buy a house
Today I would like to offer up a good reason that frustrated buyers may find the proverbial light at the end of the tunnel as the fall season approaches.
During the summer months, most real estate markets enjoy a surge in sales activity. Many home buyers are families with children and the idea of moving in between school years is very attractive. It also does not hurt us locally that we have fabulous summer weather with which to enjoy touring homes. In any market the law of supply and demand is ever present. The summer months are yielding more buyers and thus the market experiences buyer pressure. If that sales pressure is not alleviated by increased supply (listings) then prices will nudge or even surge upward. We have seen this effect locally and around the nation this summer.
As our summer comes to a close many buyers have left the market. These buyers may only be out temporarily to get the family adjusted for the new school year or perhaps they feel that next year will be better for them to buy. Of course some of those buyers became purchasers. For the patient buyers this could be a small but significant bonanza. Those buyers that have left the market represent a relief of sales pressure. My experience has been that more buyers tend to leave the market in the fall than sellers. This creates an opportunity to buy that may not have been available in the height of the summer sales madness.
Some of the run up in price is caused by multiple offers becoming an auction like frenzy driving up the price. Sometimes its less exciting than that, but houses seemed difficult to find this summer. The autumn tends to soften that just a touch and that could be the edge a buyer needs to get the house they want at a price they can live with.
Buyers should not be discouraged as the cooler days of fall settle in. Rates have settled down a bit and still remain very low by historical standards. The Fed is indicating they will be backing off the support of these low rates as the year closes. This could be the opportunity some buyers have been waiting for to own the home they have always wanted. The window could close in the next few months as interests rise and buyers become panic prone bidders. Call your favorite Realtor® today and happy hunting.
During the summer months, most real estate markets enjoy a surge in sales activity. Many home buyers are families with children and the idea of moving in between school years is very attractive. It also does not hurt us locally that we have fabulous summer weather with which to enjoy touring homes. In any market the law of supply and demand is ever present. The summer months are yielding more buyers and thus the market experiences buyer pressure. If that sales pressure is not alleviated by increased supply (listings) then prices will nudge or even surge upward. We have seen this effect locally and around the nation this summer.
As our summer comes to a close many buyers have left the market. These buyers may only be out temporarily to get the family adjusted for the new school year or perhaps they feel that next year will be better for them to buy. Of course some of those buyers became purchasers. For the patient buyers this could be a small but significant bonanza. Those buyers that have left the market represent a relief of sales pressure. My experience has been that more buyers tend to leave the market in the fall than sellers. This creates an opportunity to buy that may not have been available in the height of the summer sales madness.
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| Current Listing in the Felida area of Vancouver $274,900 |
Some of the run up in price is caused by multiple offers becoming an auction like frenzy driving up the price. Sometimes its less exciting than that, but houses seemed difficult to find this summer. The autumn tends to soften that just a touch and that could be the edge a buyer needs to get the house they want at a price they can live with.
Buyers should not be discouraged as the cooler days of fall settle in. Rates have settled down a bit and still remain very low by historical standards. The Fed is indicating they will be backing off the support of these low rates as the year closes. This could be the opportunity some buyers have been waiting for to own the home they have always wanted. The window could close in the next few months as interests rise and buyers become panic prone bidders. Call your favorite Realtor® today and happy hunting.
Friday, August 16, 2013
July's MLS sales figures for Clark County were stellar
The numbers are in for July from our local multiple listing service and they look great. Looking back first at last year, July 2012 was healthy but not stellar. Inventory was starting to tighten up and demand was strong enough in certain segments to generate multiple offers. 499 transactions were closed in July 2012 for Clark County against this year's total of 696. We are still well off the frenzied pace of 2005-2007 but clearly the best we've seen since "the crash".
Evaluating numbers is never as easy as just looking at the one or two "big" stats. Often people, including some Realtors®, look at median price or total unit sales as an indicator that all market segments are moving equally. Just because the median price is up 21% by no means suggests that any random house that was sold last year is now worth 21% more this year. The real estate market is very complex with neighborhood fluctuations, locations, home size, price range, and styles often performing independent of each other based on market demand or supply.
The chart below shows the "big" over all county stats for this local market and then breaks the numbers down a little further to show some broad segment trends. The big question for John and Sally homeowner is often geared towards, "can I sell MY house right now"? If John and Sally own a condo they may not be much better off this year than they were last year in market appreciation. The condo market is almost always late to recover.
Last year the sales figures were heaviest in the entry level market. Those $125-150k three bedroom ramblers were being snatched up and as such, supply tightened up and prices soared. This year that market segment was priced high enough that demand slowed down a little, but the middle market surged with larger four bedroom houses seeing significant increases in unit sales. Those bigger mid sized homes saw a massive 59% increase in sales but a more modest 13% increase in median price.
Last year I said that the bottom has to tighten up first before the middle can take off. Well, the bottom did tighten up and now the middle is taking off this year. That is driving the increase in median price. The smaller two bedroom houses have peaked with only a 1.3% increase in median price despite a large surge in unit sales of 46%. Even the bread and butter three bedroom market that was red hot last year, is showing preliminary indications that the buyers are nearing their limits. The 18% increase in median against a large surge of 29% in units sold is still quite robust, however. The sellers in the entry level often move up to that bigger house and as they sell their 2 and 3 bedroom homes they move into the middle market. The 59% increase in unit sales in that segment will likely produce more impressive median increases when we check the numbers in a few months.
Of course this discussion has to hinge on keeping other complex variables favorable, such as the general economy, jobs and the ever critical mortgage rates.
The big takeaway for homeowners is the fact that their home that may have been upside down or too tight to sell, could in fact be a seller today. Contact your favorite Realtor® for a Comparative Market Analysis on your home. Most offer this service for no charge, I certainly will.
Evaluating numbers is never as easy as just looking at the one or two "big" stats. Often people, including some Realtors®, look at median price or total unit sales as an indicator that all market segments are moving equally. Just because the median price is up 21% by no means suggests that any random house that was sold last year is now worth 21% more this year. The real estate market is very complex with neighborhood fluctuations, locations, home size, price range, and styles often performing independent of each other based on market demand or supply.
The chart below shows the "big" over all county stats for this local market and then breaks the numbers down a little further to show some broad segment trends. The big question for John and Sally homeowner is often geared towards, "can I sell MY house right now"? If John and Sally own a condo they may not be much better off this year than they were last year in market appreciation. The condo market is almost always late to recover.
Last year the sales figures were heaviest in the entry level market. Those $125-150k three bedroom ramblers were being snatched up and as such, supply tightened up and prices soared. This year that market segment was priced high enough that demand slowed down a little, but the middle market surged with larger four bedroom houses seeing significant increases in unit sales. Those bigger mid sized homes saw a massive 59% increase in sales but a more modest 13% increase in median price.
Last year I said that the bottom has to tighten up first before the middle can take off. Well, the bottom did tighten up and now the middle is taking off this year. That is driving the increase in median price. The smaller two bedroom houses have peaked with only a 1.3% increase in median price despite a large surge in unit sales of 46%. Even the bread and butter three bedroom market that was red hot last year, is showing preliminary indications that the buyers are nearing their limits. The 18% increase in median against a large surge of 29% in units sold is still quite robust, however. The sellers in the entry level often move up to that bigger house and as they sell their 2 and 3 bedroom homes they move into the middle market. The 59% increase in unit sales in that segment will likely produce more impressive median increases when we check the numbers in a few months.
Of course this discussion has to hinge on keeping other complex variables favorable, such as the general economy, jobs and the ever critical mortgage rates.
The big takeaway for homeowners is the fact that their home that may have been upside down or too tight to sell, could in fact be a seller today. Contact your favorite Realtor® for a Comparative Market Analysis on your home. Most offer this service for no charge, I certainly will.
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